Ending local govt misspending / Govt must review system for granting subsidies to prefectures
Written by Writer on Wednesday, October 29th, 2008
Ending local govt misspending / Govt must review system for granting subsidies to prefectures
Akihisa Aoyama / Yomiuri Shimbun Staff Writer
The central and prefectural governments are under pressure to thoroughly review the state subsidy system for local authorities following the discovery by the Board of Audit that 12 prefectural governments have used such funds for purposes other than those for which they were originally intended.
In Iwate Prefecture, people were upset that their prefectural government was found to have misused 115 million yen in state subsidies. One resident said he felt betrayed by the prefectural government, while another said he suspected such a questionable practice had been a long-standing one.
The Iwate prefectural government had used enigmatic terms to describe its inappropriate purchases as “deposits,” “replacements” and “lump-sum payments.”
“Deposits” were subsidies the prefectural government deposited in advance in companies with which they did business. The local government had those companies deliver goods as required.
“Replacements” referred to purchases of goods other than those stated in expense documents.
“Lump-sum payments” referred to the practice in which the Iwate prefectural government had goods delivered in advance and paid a lump sum for an invoice for other goods.
Prefectural leaders should know that decentralization cannot move forward unless local authorities ensure that they are trusted by residents. All governors should try to end this entrenched practice.
However, it also is important to review from various angles the rigid state subsidy program.
The Board of Audit specifically inspected state subsidies for public works projects provided by the Construction and Transport Ministry and the Agriculture, Forestry and Fisheries Ministry–which were not downsized even during the reform carried out by former Prime Minister Junichiro Koizumi when he was in office.
The central government usually provides half of the funding for such projects, with 10 percent of subsidies used for administration expenses, such as purchases of goods, payment for temporary employees and expenses for employees’ business trips. Each ministry has guidelines to regulate the use of such funds.
Under a law enacted in 1995 to ensure appropriate use of state subsidies, the Board of Audit in this case examined whether office expenses had been used for purposes other than those stated.
Leaving aside senseless purchases, the problem is, for example, business trip expenses used for purposes other than the original intent.
For example, some prefectural governments admitted they used state subsidies that should have been used for public works projects funded by the central government for travel expenses for employees to inspect the prefectural governments’ own construction projects.
However, prefectural governments said their employees also had inspected road construction financed by state subsidies, adding that it would be inefficient to differentiate between prefectural construction projects and state-subsidized projects.
The board said that in one case, prefectural governments had temporary employees hired with state subsidies work on their own projects.
The prefectural governments fingered in this controversy have argued it was natural that temporary employees were asked to help when they were not busy.
If what these governments said is true, they have a point.
Obviously, it is outrageous if subsidies for a specific project or policy are used for other purposes, but many prefectural governments insist that some subsidies allocated by the bureaus and divisions of the ministries do not reflect local realities and thus are inefficient.
In addition, if such subsidies are not spent within a given fiscal year, the amount of subsidies for the next fiscal year may be reduced.
The central government annually provides subsidies of 4 trillion yen for public works projects by prefectural governments, 2 trillion yen for education and 12 trillion yen for social security programs.
Some experts believe that prefectural governments do not make good use of state subsidies because the funds do not come from their own area.
Eventually, it is hoped that local authorities will reform their handling of public funds, eliminate subsidies strictly allocated for a single unbending purpose and transform such funds into financial resources they can use freely and responsibly.
To this end, the central and local governments must carefully check what types of subsidies are wasteful.
(Oct. 29, 2008)
