More than 16.9 billion yuan (2.8 billion U.S. dollars) raised through China's lotteries was embezzled or misused by lottery management and sellers between the start of 2012 and October 2014, the country's top auditing authority has found.

The "problematic" money constituted more than a quarter of the 65.8 billion yuan of lottery funds reviewed in an audit conducted in November and December, according to a report published on Thursday by the National Audit Office (NAO).

It said the sampled funds were 18 percent of the nation's total lottery sales revenue in the period.

According to China's Regulations on Lottery Management, the money raised through lotteries is divided into three parts: the jackpot for lottery winners, lottery management expenses and fees paid to sales distributors, and funds handed over to the state for social welfare causes.

The Ministry of Finance, Ministry of Civil Affairs, and the General Administration of Sport are the lottery sector's top regulatory bodies.

The NAO said irregularities found during the audit included embezzlement, fraud, illegal subsidies for staff, procurement of fancy offices, and unauthorized online lottery sales.

The audit covered a total of 228 provincial and municipal-level lottery sales organizations, and 4,965 projects funded by lottery sales.

The NAO said 14.5 billion yuan of misused funds had been recovered as of May 31, while authorities are investigating 90 cases of suspected law violations.