Nonbudgetary funds in SOEs to be examined

Rendi A. Witular, The Jakarta Post/Jakarta

The state enterprises ministry is probing reports that nearly all state-owned enterprises (SOEs) are creating off-budget funds worth trillions of rupiah to fund political parties and bribe law enforcers, politicians, and journalists.

These funds, which had yet to be quantified, came from an abuse of the SOEs' discretionary budgets, State Minister of State Enterprises Sugiharto said recently.

"We still don't know the exact figure yet. But we are currently investigating and registering such funds. We will require all SOEs to put such funds on their balance sheets," he said.

Sugiharto refused to elaborate further, but a source at the ministry said the budgetary funds at SOEs could reach more than Rp 2 trillion (US$222 million), including those owned by listed state companies.

The source said that such funds were derived from the improper use of discretionary funds -- a funding post used by a company to spend on goods, services and grants that does not support its business activities but is legally acceptable.

The abuse of such funds occurred when most of the SOE managements invested the money in stocks and bonds via fund managers, but on their company's balance sheet they reported that the funds were invested in bank deposits, the source said.

"The management obtains some 13 percent yields from their investment in stocks or bonds. But in the report they said the investment only yield 6 percent from bank deposits, meaning that they stole 7 percent of the yields," said the source.

The government has issued regulation in 2000 for all state institutions to report any off-budget funds. However, several state institutions, such as the Directorate General of Taxation, the Directorate General of Customs and Excise and SOEs, are reportedly unwilling declare them.

In its hearing with the House of Representatives Commission XI for financial affairs last week, the Development Finance Comptroller (BPKP) expressed its concerns over the existence of three sets of off-budget funds worth Rp 512.83 billion, US$8.71 million and DM 765,287. The agency, however, refused to disclose the institutions responsible for the funds.

Minister of Finance Jusuf Anwar has also pledged to recoup such funds from state institutions to help finance the ballooning deficit in this year's state budget.

Elsewhere, lawmaker Dradjat Wibowo of the National Mandate Party (PAN) said off-budget funds were at the root of corrupt practices at SOEs

"The government should make a serious effort to recoup such funds. SOE executives who are involved in such practices must be discharged and investigated by the police for criminal offenses," said Dradjat, a former economist.