Auditors uncovered RMB 1.79 billion ($267 million) in misappropriation of funds and false reporting by managers of 34 enterprises that manage the grain reserves in China's Hainan Province.
According to the news report from Hainan, the grain officials came up with all sorts of accounting chicanery to steal money meant for purchasing and maintaining grain reserves. Several tricks were used to inflate subsidies for rotating grain reserves. Six granaries conspired to sell old grain as new grain, thus collecting subsidies for acquiring new grain. Other grain rotation schemes referred to as "air for air" and "bring in a little, add a lot" suggest trading nonexistent grain and inflating reports of grain procurement. The cheating on grain transactions cost the government 13.25 million yuan (about $2 million) in fraudulent subsidies involving 130,700 metric tons of grain.
The big money came from siphoning money into personal bank cards and cash via "serious" accounting fraud. The managers hid or transferred income, faked expenses, appropriated money for personal use, reported phony financial losses, and exaggerated reports of spoiled or wasted grain and oils.
This article from a distant corner of the empire was widely posted on web sites, perhaps a shot across the bow to warn grain reserve managers all over the country. The National Grain Bureau is planning a nationwide check-up of accounting and statistical reporting for grain enterprises from August to October. The activity will check to ensure accounts are timely, accurate, and complete; look for false reporting of grain information; and make sure that past instances of fraud have been included in "honesty records" of perpetrators.
The widespread fraud once again reveals the fallacy behind the efforts to build a Chinese "national team" in the grain marketing industry. There is no reason to expect that managers of state-owned companies will be more inclined than managers of foreign companies to act in the national interest of China.