The Cuban government's initiatives to loosen communist controls and encourage quasi-capitalist liberalization in the burgeoning state sector have revealed major accounting flaws that may point to large-scale misappropriation of funds.

Reports of "problematic" accounting practices at state-controlled companies, many earmarked for restructuring and privatization, followed opposition criticism that lack of accountability had bred corruption and other malpractices in the operations of Cuba's biggest employer, the state.

Cuba is sensitive to any criticism of its communist ways of working but in recent months has relented, if only to save runaway costs, and allowed Cubans to become self-starting traders, own property and even employ other Cubans in new business ventures.

The developing scenario is likened by critics to the early days of capitalist experimentation in former Soviet republics in Europe and the Caucasus where communist oligarchs became capital overlords overnight.

Results of President Raul Castro's experimentation with "socialist capitalism" remain shrouded in mystery except where thousands of people are threatened with job losses and tough options to go it alone as entrepreneurs in a fledgling market economy.

Comptroller General Gladys Bejerano revealed the extent of questionable accounting practices in her latest report which said the accounts were either deficient or problematic -- both seen by critics as euphemisms for financial irregularities.

Bejerano's report said 37 percent of state enterprises scrutinized by auditors had problems with the way they handled state funds. She gave scant details but called for an end to corruption and opportunism.

"Of the 750 state companies audited in April and May we found deficient or problematic accounting practices in 37 percent of them," Bejerano said in an interview with the state-run Trabajadores weekly newspaper, also reported by the Granma newspaper.

Bejerano was tasked by Castro with a sweeping mission of eliminating corruption and so far has enjoyed his support. She's vice president of the ruling Council of State and therefore mindful of comments that could be exploited by the opposition.

She tempered her report with comments that despite the high ratio of accounting flaws the audit result showed an improvement over 2010, when 40 percent of the audited public entities were found to be wanting in their accounts procedures.

Bejerano said those found to have unsatisfactory performance results could expect to be asked to go through a "rectification process" which in the past has included dismissals and demotions or transfers of personnel from positions seen to be financially lucrative.

This month Cuba received material and political support from China for its reforms. Ten new agreements will give China access to the underfunded Cuban energy industry and other economic sectors targeted for reforms.

The Chinese are teaching Cubans how to switch from communism to capitalism and stay communist -- in a manner of speaking -- Chinese-style, published comments showed.

Castro met with Chinese Vice President Xi Jinping and together they declared the new accords "reflect the political will of both parties and governments to continue deepening their ties."

China gave Cuba a new line of credit and agreed to restructure two previous loans and also gave a donation. Neither side revealed the figures for the loans or the economic agreements.

China will help Cuba modernize an oil refinery in the southeastern city of Cienfuegos, build a new liquid gas plant and refurbish the city port -- all part of its overall global strategy to secure sources of energy and new trade opportunities.

Xi was the first Chinese leader to visit the island after the Cuban Communist Party met in April and approved a package of more than 300 economic reforms.

The Cuban state media didn't say if China also offered advice on fighting corruption and state inefficiencies, problems that Beijing is confronting at the moment.

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