BPK to review financial reports of SOEs

Dadan Wijaksana, Jakarta

The House of Representatives is expected to approve on Monday a draft law on state financial accountability, which requires all state-owned enterprises (SOEs) to submit their audited financial reports to the Supreme Audit Agency (BPK).

The bill forms the final part of a three-law package proposed by the government in 2000 on the management of state finances -- the first legislation of its kind since the country's independence. Two other laws on national finance and the treasury have already been passed.

A House special committee together with Ministry of Finance and BPK representatives have taken more than three years to deliberate the bill, which could not be approved until the national finance and treasury laws were passed.

Debate on the bill was also slowed by a disagreement about the role of the BPK in auditing state companies.

The BPK had previously demanded a role in auditing all state companies -- both non-listed and publicly listed -- even in cases where the government had become a minority stakeholder in the firms following divestment or privatization.

The agency argued the BPK audit was necessary to protect the interests of the public and ensure good corporate governance.

However, other officials and legislators said the proposal would put the law at odds with Law No. 8/1995 on Capital Markets, which stipulates listed companies be audited by public accountants, not the BPK. Others doubted whether the BPK had the resources to audit all state firms.

A compromise was then reached where the BPK was given the authority to review all state firms' audited financial reports. It would then submit this review to the House.

"I'm satisfied (with the law) because it guarantees the public access to information about the financial conditions of state companies," BPK chairman Satrio B. Joedono said last week.

"What's important to us is not our authority to audit but protecting the public's right to know about state finances," he said.

Minister of Finance Boediono has repeatedly said the passage of the three bills would mark a milestone in the reform of public funds management, which could prevent further corruption and minimize state losses.

Many surveys and reports have shown the misuse of public funds is rampant in state institutions and companies nationwide. However, these reports have rarely been followed up with legal action and most of those responsible for misusing funds have gone unpunished, many still serving in their government posts.

Irregularities are defined as any differences in the use of state funds between the figures set out in the estimated budget and the amount used at the implementation stage, which are not properly accounted for.