Public fund misuse rampant in local govts
Written by Writer on Thursday, October 30th, 2008
Public fund misuse rampant in local govts
Sonosuke Sakamoto, Go Kojima,and Takashi Sakinaga / Yomiuri Shimbun Staff
A recent scandal involving misuse of state subsidies by local authorities highlights the prevailing practice of creating slush funds by placing bogus orders to suppliers and asking them to pool the money.
Earlier this month, it was learned that the Board of Audit had discovered through a sample inspection that 12 prefectural governments misused part of subsidies granted to them by the central government in this manner.
In Aichi Prefecture, a total of about 66 million yen in public funds held by the prefecture was found to have been pooled in a bank account of a company that received fake orders from the prefecture’s branch offices. A female employee at a branch office was arrested on suspicion of misappropriating part of the pooled money. Slush funds created in this way could become hotbeds for embezzlement.
The practice apparently stems from a government office custom that dictates secured budgets should be used within a fiscal year.
Kenji Kojima, 55, is an executive member of the Japan Citizen’s Ombudsman Association. He has worked on public funding misappropriation cases for many years.
“It’s impossible to detect the existence of the method of placing false orders to make slush funds in official documents if there aren’t extremely unusual discrepancies on paper,” Kojima said.
Because local government accounting ledgers examined by Kojima contained purchase records–albeit bogus ones–he was unable to detect wrongdoing, he added.
Meanwhile, a spate of scandals over local governments entertaining central government officials were revealed nationwide in 1995 and 1996. In these cases, information disclosure requests were effective.
As many local governments recorded such expenses as food expenses, it was possible to find evidence of wrongdoing by investigating the food expense-related documents and other papers local governments disclosed. As a result, a series of cases in which public funds had been misused–including wining and dining of government officials–were revealed through information disclosure requests.
However, such requests will not effectively uncover details of recent scandals as government documents do not show any evidence of the malpractice.
Cases involving entertaining expenses recorded as food expenses have not been seen since the mid-1990s. Since then, however, many cases in which slush funds were created by placing fake orders for goods have been discovered across the nation.
Over the past 10 years, similar methods were found to have been used to create slush funds in several prefectures including Kagawa, Saga, Gifu, Nagasaki and Miyazaki.
It seems as if the slush fund method has replaced the practice of entertaining central government officials under the guise of food expenses.
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Frauds, embezzlement
In Aichi and Iwate prefectures, where about 66 million yen and 36 million yen, respectively, were found to have been pooled in slush funds through the method, senior officials at both prefectural governments said they pooled public funds in bank accounts of supplier companies with which they had business relationships in order to buy necessary supplies. They also claimed the pooled funds had never been misused for activities such as wining and dining for local government officials.
In Aichi Prefecture, however, an experienced female employee at the prefectural government’s branch office was arrested Wednesday on suspicion of taking 1.6 million yen out of slush funds pooled in a bank account of a stationery dealer that had received fictitious orders from the branch office. In the prefecture, other officials were arrested in 2006 and 2007 on suspicion of embezzlement over separate cases involving slush funds created through the same method. While the slush fund practice was known at the time, the prefectural government neglected to address the issue.
In addition to local governments, other public bodies also have been involved in the slush fund practice.
The Board of Audit found that employment associations under the umbrella of Japan Organization for Employment of the Elderly and Persons with Disabilities (JEED) misused money provided by the JEED using slush funds.
(Oct. 31, 2008)
