Auditors issue 'disclaimer of opinion' on IBRA

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA)'s 2000 financial report gets from auditors a "disclaimer of opinion", which may further damage the reputation of the agency.

IBRA's new chairman I Putu Ary Suta said on Monday the disclaimer of opinion was issued because the auditors doubted the figures in the financial report due to the unclear status of Bank Indonesia's liquidity support (BLBI), the government placement in banks under IBRA, unresolved legal cases as well as the impact of the current economic crisis.

Ary Suta said he would immediately set up a special task force to resolve the above problems so that the disclaimer of opinion could be removed within six months.

Public accountants Hans, Tuanakotta and Mustoffa audited IBRA 2000 financial report.

The agency also previously received a disclaimer of opinion over its 1999 financial report, which prompted legislators to criticize the agency.

IBRA, a unit of the finance ministry, was set up in early 1998. The agency received various assets from troubled domestic banks and indebted bank owners. It has a mandate to restructure the assets, including non-performing loans (NPLs), and sell them to raise cash to help finance the state budget deficit, which is the result of the huge bank recapitalization shouldered by the government.

The government via Bank Indonesia has injected some Rp 144.5 trillion (US$12.67 billion) in BLBI funds between 1997 and 1999 to help ailing banks stay afloat. In return the banks surrendered their assets to IBRA to cover the government's emergency loan.

But the Supreme Audit Agency (BPK) revealed in its audit report that around Rp 138 trillion of the BLBI emergency loan had been misused by the recipient banks, mostly owned by the family and friends of the country's former authoritarian leader Soeharto.

BPK also said the misuse was primarily caused by weak supervision of the central bank.

The government initially refused to cover the BLBI funds, putting Bank Indonesia at risk of bankruptcy if it had to cover the emergency loan.

The finance ministry and Bank Indonesia finally agreed last November that the central bank would only have to cover about Rp 24 trillion, while the remainder would be covered by the government. In return, several members of Bank Indonesia's board of governors tendered their resignation. President Abdurrahman Wahid demanded at the time that Bank Indonesia Governor Sjahril Sabirin resign.

But until now, the House of Representatives has yet to approve the finance ministry-Bank Indonesia agreement, casting doubts on the BLBI figures in the IBRA 2000 financial report.

"The legal aspect of the BLBI transfer to IBRA is questionable," Ary Suta said.

Ary Suta said the other reasons for the disclaimer of opinion included the Rp 8.7 trillion revenue figure received by IBRA from unidentified debtors, and the government placements in Bank Central Asia (BCA), Bank Danamon, Bank PDFCI and Bank Tiara Asia which had yet to be approved by the finance ministry. The latter two banks had been merged into Bank Danamon.

He also said the public accountants could not confirm the value of IBRA's claims on 50 top debtors which together accounted for 38 percent of the total bank NPLs managed by the agency.

Elsewhere, Ary Suta said according to the auditors, the fair value of assets under IBRA at the end of 2000 was estimated at Rp 167.7 trillion, much lower than the 1999 estimate of Rp 645.8 trillion.

He said the calculation of the fair value of the assets was made using IBRA's methods.

But he said the above value estimate was only for the purpose of internal reporting, not for assets sales or negotiations with third parties.

"If this (fair value) figure is used as a benchmark, then the potential recovery rate from the IBRA assets is only 26 percent," Ary Suta said.

The House has earlier demanded a 70 percent recovery rate.

New Finance Minister Rizal Ramli had earlier said the quality of the assets under IBRA had continued to deteriorate both due to poor management and the prolonged economic crisis.

Rizal has therefore called on the agency to speed up the sale of the assets, pointing out that the agency had so far only sold 20 percent of the assets.

The government plans to dissolve IBRA by February 2004.

On his inauguration, Ary Suta vowed to accelerate asset sales. He said he would revamp the organization, and shorten the decision making process within the agency.

IBRA is targeted to raise around Rp 27 trillion in cash this year. By the end of June the agency had raised around Rp 11.25 trillion.

There has been concern that amid the current economic woes and domestic political instability, IBRA may fail to meet the cash target for 2001.

The government has issued about Rp 430 trillion worth of bonds to help finance the recapitalization of ailing domestic banks. The interest cost of the bonds is covered by the state budget. (rei/bkm)