Nonbudgetary funds in SOEs to be examined

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.