China's top auditing authority announced on Wednesday the recovery of around 2.7 billion yuan ($428.57 million) that was embezzled from affordable housing funds in 2011.

Authorities have also canceled about 7,000 households' rights to stay in the housing, according to a report released by the National Audit Office.

China has been working to build subsidized houses for low-income earners due to widespread complaints about housing costs. The government plans to build and renovate 36 million houses during the 12th Five-Year Plan (2011-15).

In June, the National Audit Office released a report on the central government's 2011 budget in which it disclosed the embezzlement of 2.96 billion yuan that had been allocated for affordable housing.

Experts said some local governments are now in a dilemma: They cannot disobey the central government's policies yet are reluctant to pay for the increasingly expensive projects.

Caught in those circumstances, some have resorted to giving the impression that their projects are progressing faster than they really are, lowering the quality of the projects or earmarking the project money for other purposes.

Earlier media reports citing local auditors said Chuxiong prefecture, in Yunnan province, took 1.77 million yuan meant for low-rent housing and earmarked it for an office building in 2010.

A branch office of the property management bureau in Jingzhou, Hubei province embezzled more than 96,000 yuan in affordable-housing money to buy cars and air conditioners.

Tang Jun, a social policy researcher with the Chinese Academy of Social Sciences, said the embezzlement cases will affect the public's confidence in government, and audit offices should reveal where the money has gone.

Construction and discipline authorities in many provinces, including Fujian and Jiangxi, waged special campaigns in 2012 to crack down on embezzlement.

Fujian province's housing and urban-rural development authority, for instance, has imposed a monitoring system to track the money and the progress of projects, and asked those performing the work to publicly release information about affordable housing.

The National Audit Office's report on Wednesday said its audit has canceled about 7,000 unqualified households' rights to benefit from subsidized housing.

The audit work has resulted in notices being sent to more than 1,600 households, asking them to move out or informing them they may no longer benefit from the projects.

It has also frozen or terminated 1,410 attempts that households have made to illegally sell the residences.

The report said the office's investigation into the 2011 budget had, by October, helped the government recover 105.6 billion yuan in mishandled money.

About 660 people involved in the misconduct have been punished, it added.

"The cause of some of these problems, which repeatedly emerge despite the use of regular audits, is complicated," an official with the top audit authority said on Wednesday.

The official said the role, scope and goals of audits are set by laws and regulations, a fact that results in the same sorts of issues being discovered again and again.

For that reason, the issues can come to seem "familiar and chronic".

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