BP Migas legalizes 'entertainment' costs
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.