Chinese auditors said it found no embezzlement or misappropriation of construction fund in the ongoing Three Gorges project, however, they also detected some problems and flaws in the project management.

The National Audit Office (NAO) said the overall quality control of the project was fine and total investment were kept under control.

All 11 major projects were up to the standards, as were main materials such as steel and cement, said an audit report by the NAO.

It said total inflation-adjusted investment, expected to be 78 billion yuan, could be more than 35 billion yuan less than planned in 1994. By the end of 2005, the country had spent 64.2 billion yuan on the project.

The NAO, however, also detected extra construction costs of 488 million yuan, most of which was incurred by project construction contractors who exaggerated their expenditure.

The office also found 20.4 hectares of land illegally used without governmental permission, while another 110 hectares approved for use had been left idle.

"The problems are largely due to lack of laws and regulations and imperfection in internal control," said Pan Xiaojun, senior official with the NAO.

The company said it had already corrected the use of 139 million yuan of fund involving violation of rules, and a total 17 measures had been adopted to improve management over the project.

The office said 21 power station construction projects, most of which involved a single contract value of less than 10 million yuan were not put out to tender.

A few construction companies were discovered to have subcontracted their projects against regulations and obtained illegal charge of 53.45 million yuan.

About half of the 1,448 supervisors sampled were found to have no licenses for the work.

The China Three Gorges Corporation said it had strengthened the implementation of public bidding to ensure the fairness of the results and avoid the influence of people, and it also added detailed terms about contracting in contracts to prevent illegal contracting.

The unlicensed supervisors had been fired and supervision over the project supervisors were enhanced, according to the company.

The report said that the project across the Yangtze River, the construction of which began in 1993, had played a "better-than-expected" role in flood prevention, power generation and shipping.

"It's possible to put the project into full operation by 2009 as planned, and the project is running a bit ahead of schedule," it said.

The fourteen generators in a power plant had been put into operation a year earlier than planned in 2005, the office said.

Upon its completion, the Three Gorges dam will produce 85 billion kwh of electricity annually for supply to central and eastern China.

The dam, which is 2,309 meters long and 185 meters high, will be installed with 26 turbo-generators, each with a generation capacity of 700,000 kilowatts.

The audit, which took 150 auditors more than six months to complete, covered areas including fund raising, management and use, construction management as well as benefit of the project.