In two separate reports, the National Audit Office announced it found evidence of improper activity in one of the country's major natural gas pipeline projects as well as earthquake reconstruction efforts in Yushu, a prefecture in Qinghai province.

A report released by the office on Friday showed that the 8,645-km project purchased material and equipment worth a total of 837 million yuan ($133 million) through substandard bidding.

Fraud has also been detected in the sourcing of the pipeline's components. Poor-quality flanges, a compressor part, were found in 31 compressors installed along the pipeline, according to the report. Of a total of 242 flanges, sourcing agents supplied 147 of them ordered from two unlicensed domestic factories, it said.

Auditors also uncovered unqualified construction workers and supervisors employed in the 142.2-billion-yuan pipeline project.

For example, contractors for the Shanghai portion of the pipeline promised to dedicate 69 professionals to the project.

But auditors found that 48 of the listed professionals were replaced with unqualified personnel.

Also in the Shanghai portion, earthwork worth 6.5 million yuan was subcontracted to an unlicensed construction team.

Another company working on the Guangzhou-Shenzhen leg was found to have breached its contracts and subcontracted welding work worth 4.96 million yuan to a Henan-based company. The report said that corrections were made after the problems were revealed.

"Three cases have been handed to judicial departments for further investigation," the audit report said.

In a separate report, auditors said unqualified construction teams were also found in the reconstruction of Yushu, a prefecture in Qinghai province.

Yushu was devastated by a 7.1-magnitude quake on April 14, 2010. More than 2,200 people were killed and thousands of homes were destroyed.

During a random inspection, auditors found unqualified construction supervisors working on four of the 47 reconstruction projects of hospitals, schools and homes. Supervisors in seven of the projects failed to fulfill their obligations.

In addition, two construction companies rebuilding a stretch of damaged highway in Yushu subcontracted earthwork and roadbed projects worth a total of 34 million yuan to teams of unqualified workers.

Auditors also found that some projects started construction without receiving clearance from the Ministry of Environmental Protection, and 278 million yuan of funds allocated to the province for reconstruction were left unused.

"This year is crucial for Yushu's reconstruction. We will continue to focus on quality issues and strengthen inspection of project quality," said Xu Aisheng, chief of the fixed assets investment audit department at the National Audit Office, on Friday.

The reconstruction of Yushu is forecast to cost 31.65 billion yuan. A total of 21,294 homes for farmers and herdsmen and 11 schools have been reconstructed as of October.

Xu said that the reconstruction projects will continue to be audited this year.