40% of regional funds fall victim to corruption: House

Berni K. Moestafa, The Jakarta Post, Jakarta

The House of Representatives urged the government on Monday to audit the use of regional decentralization funds, suspecting that almost 40 percent of the funds, worth some Rp 60 trillion (about US$5.71 billion), had fallen victim to corruption.

Chairman of the House's state budget committee Benny Pasaribu said that reports of widespread corruption affecting the funds, which are drawn from the government's General Allocation Fund, were circulating among legislators.

"The abuse happens in almost every region, and so far amounts to nearly 40 percent of the total funds (allocated for 2001)," Benny told reporters following a meeting between the budget committee and Minister of Finance Boediono.

He fell short of detailing the source of the reports, saying only that they came from regional governments across the country. The time frame for the 40 percent leakage was also unclear.

The budget committee, he said, would urge the Supreme Audit Agency (BPK) to conduct an investigative audit to determine the amount of public funds that might have been misused. He hoped the BPK could start its audit next January.

Under the General Allocation Fund (DAU) system, the central government pays subventions to the regions to help them finance their budgets.

A 40 percent leakage rate in DAU allocations would come at the expense of routine and capital spending.

Worries that unscrupulous officials in regional governments are siphoning off the funds have long been felt by central government officials.

This adds to the concerns over the sustainability of some local budgets, given that the regional autonomy scheme allows the central government to shift some of the responsibility for routine spending to the regions.

Regions hit by budget shortfalls could end up with poor public services and bad infrastructure, deterring the investments needed to stimulate their local economies.

Benny said that some of the DAU allocations had been misused by dishonest local officials to purchase luxury cars and houses.

"What is most worrying is that apparently some legislators are involved as well," he added without elaborating.

He deemed a BPK audit to be vital as, according to him, no one was in charge of overseeing the use of the DAU funds.

Reports of abuses involving DAU payments have surfaced amid tighter scrutiny by international lenders over wastage of public funds through corruption.

Earlier this month, Indonesia's sovereign creditors demanded that the government do more to tackle rampant corruption in the country.

One large donor, the World Bank, has tied its loan programs to the efforts made by the government to stamp out corruption.

Although many consider the current government to be clean, it has yet to back up its reputation with strong action against corruption.

Separately, Director General for Decentralization Machfud Sidik was unable to confirm the reports of misuse involving DAU subventions.

"We have people overseeing the use of the funds, but I haven't received any reports from them," Machfud told The Jakarta Post.

He said that those charged with supervising the usage of DAU funds were the inspector generals of each ministry and an institution called the Regional Government Supervisory Agency.

The two, he said, reported to the provincial legislative assemblies. Their oversight role was provided for by government regulation No. 20/ 1999, Machfud said.

He agreed that a special BPK audit might be necessary, but added that any such decision was up to the finance ministry and the ministry of home affairs.

"Any audit outside of the ones provided for needs the approval of the Minister of Finance and the Minister of Home Affairs," he explained.

Under the autonomy scheme, the regions have been granted greater powers to manage their own affairs and are entitled to a greater share of the natural resources found within their respective jurisdictions.

Under Law No. 25/1999 on Intergovernmental Fiscal Equity, a region must have reached a certain level of economic self- sufficiency before it may be granted autonomy.

The government uses the DAU to redistribute wealth from the country's richer regions to the poorer ones.

The fund comprises payments from regions with natural resource-based revenues, such as royalties from the mining sector.

Local administrations are free to use the funds in accordance with their budgetary requirements.

In this year's state budget, the central government earmarked Rp 60.15 trillion for the DAU.

In total, the government is holding ready some Rp 81.47 trillion under this year's fiscal balance financing arrangements to help less well-off regions fund their new-found autonomy.