BEIJING - A report by the National Audit Office on Wednesday revealed 530.9 billion yuan ($84.3 billion) in questionable transactions among China's 10.7 trillion yuan in local government debts in 2010.

The State auditor reported violations including 46.5 billion yuan worth of credit with irregular guarantees, 73.2 billion yuan worth of loans secured against irregular collateral, 132 billion yuan worth of expenditure not made by its approved deadline and 35.1 billion yuan worth of investment illegally diverted into equities, property and polluting plants.

The largest amount of misappropriated money, consisting of 244.15 billion yuan, involved local government financing vehicles. In these cases, the financing vehicles pledged to invest in various construction projects, but they either paid less than they promised or paid nothing at all, the report on the central government website showed.

Of the total 530.9 billion yuan in problematic local debt, less than half, or 259.2 billion yuan, had been resolved by the end of October 2011, the auditor said.

Methods of resolution included repayment of misused funds, penalties against offenders, negotiations with banks or promised funds actually being delivered.

The nationwide audit of China's local and national budget implementation for 2010 resulted in 139 criminal cases. In those, 699 offenders received "administrative punishments" and another 81 were arrested or went to jail, the report showed.

"The central government has moved to 'rectify' through tighter management, regular reviews and financial support for cash-strapped local governments," the auditor said.

"Meanwhile, it is studying proposals to enhance management of these debts and to address fiscal and financial risks," it said.

Local governments have long been banned from borrowing directly from banks. Thus, many set up financing vehicles to pay for infrastructure and other projects. However, growing debts have fuelled concerns about a potential explosion in bad loans.

Although steps have been taken to clean up the problem, these debts are still seen by analysts as a large difficulty for the stability of China in 2012.

A report on domestic financial conditions for 2012 by the Bank of China Ltd said about 30 percent of the 10.7 trillion yuan in local debt originated from the stimulus package in 2008 and 2009, which the government undertook to counter the global downturn.

The bank said most of these debts were in the form of three-year bonds. As a result, 4.46 trillion yuan in local debt is scheduled to mature this year.

In October 2011, the central government lifted the 17-year ban on direct local government debt, and it allowed a small number of cities and provinces to issue bonds directly to improve their finances.

But the bank's report said the 22.9 billion yuan quota for these first borrowers was "utterly inadequate" compared with the total debt scale. It warned that an expansion of direct bond issues could drive up local governments' borrowing costs.

"The current stringent policies have resulted in financial strains for some of the projects under construction, which forced local governments to borrow new loans to repay old ones and even caused debt defaults in some areas," the report said.

Reuters contributed to this story.