BP Migas legalizes 'entertainment' costs
Riyadi Suparno, The Jakarta Post, Yogyakarta
When an oil or gas production sharing contractor (PSC) receives a visit by a high-ranking government official, the PSC normally pays the official's expenses.
Most PSCs cover the cost of airfare, accommodation and meals. Some PSCs even give officials a daily per diem, while others provide additional "entertainment" for the visiting official.
All these expenditures are incorporated into a PSC's "entertainment" spending, and is recoverable under a cost recovery scheme.
According to Bangun Usman Harahap, deputy chairman for general affairs at upstream oil and gas authority BP Migas, any expenditures under the cost recovery scheme would be considered using "public money", as the bulk of the cost would eventually be shouldered by the government.
Therefore, BP Migas, as an institution tasked with supervising the operation of PSCs, is now drafting standard operating procedures (SOP) to govern PSCs' entertainment spending, or what BP Migas terms "community relations (CR) programs".
"Every PSC has entertainment or CR spending, but this kind of spending never appears in their annual budget as they normally put it under an emergency fund.
"We know about this kind of spending. Even auditors recognize this spending. So with this draft SOP, we want to make it more accountable," Bangun said during a meeting with PSCs' general affairs officers here over the weekend.
According to the draft SOP, PSCs will have to incorporate their community relations programs into their work, program and budget (WP&B) planning, which has to be endorsed by BP Migas.
During implementation, PSCs will be given the authority to spend up to Rp 25 million (US$3,000) per community relation program.
To prevent bribery, PSCs will not be allowed to extend their community relations assistance in the form of cash.
PSCs will then be required to report regularly to BP Migas on the implementation of their community relations programs. Any spending on community relations programs that violates procedures will be considered a non-recoverable cost.
The threat of excluding community relations spending from the cost recovery scheme has alarmed a number of general affairs officials at PSCs.
Joang Laksanto and Aji Setijoprodjo from Unocal, for instance, proposed that the stipulation that community relations assistance may not be extended in the form of cash be reviewed.
They said many guests of the PSCs, especially those from low- income groups, preferred receiving a per diem in cash for transportation and meals.
"When we invited farmers or fishermen to our operation areas in East Kalimantan for a meeting, for example, they expect us to give them per diem money at least equal to their daily income from fishing or farming," Aji told Bangun during the meeting.
Bangun said that in a number of developed countries, giving money to a guest, particularly a visiting government official, could be classified as bribery.
"What will they say if we allow such cash payments? They will consider us as legalizing corruption," he said.
Should BP Migas succeed in making entertainment spending legal and transparent, it would set a precedent for other sectors to follow.
BOX
Main points of BP Migas' draft regulation on Community Relations programs
* Mission of Community Relations: Community Relations programs aim to support the smooth operation of PSCs and improve partnerships with government agencies, institutions and/or society. * Goal: To maintain harmonious relations between PSCs and government agencies, institutions and the people. * Community Relations principles: The assistance may not be given in the form of money; the assistance may not be given based on political, ethnic or religious considerations; the assistance must be given transparently, and be well-documented; the assistance may not be continuous, but incidental. * Stages of Community Relations implementation: Analyzing Community Relations indicators of success; incorporating Community Relations programs in the Work, Program and Budget, which needs to be endorsed by BP Migas; implementing Community Relations programs, with PSCs given authority to spend up to Rp 25 million per Community Relations program. Reporting regularly the implementation of Community Relations programs to BP Migas. * Sanctions: If BP Migas finds irregularities in the implementation of Community Relations programs (not in accordance with BP Migas guidelines), the costs for the said programs will be declared unrecoverable under the cost recovery scheme.