Mechanisms and Findings Indicating Corruption

7.3.1 Mechanisms and Findings Indicating Corruption

Due to the low followup by law enforcers on BPK reports indicating criminality and corruption, BPK provided new mechanisms to improve this situation. The first new mechanism was the signing of a joint agreement between BPK and KPK concerning cooperation and efforts to prevent and eradicate corruption (KPK and BPK RI 2006) 107 . The agreement covers the coordination of information exchange, personnel assistance, education and training, and further investigation. The Chairman of BPK explained (Eksekutif January 2007:18-23) that BPK only report to the KPK findings that indicate fraud and corruption as preliminary evidence. KPK has to follow up the reports by conducting further investigations to prove whether the corruption exists or not.

Article 3 of this agreement focuses on the exchange of information between KPK and BPK in relation to the duty and authority of each party. BPK reports audit findings and

107 The agreement was signed by the Chairman of BPK and the Head of KPK on 25 th September 2006 in Jakarta.

information that is required by KPK to investigate or handle any cases that indicate corruption. On the other hand, BPK can obtain information from KPK in regard to any complaints or information from the public indicating corruption, and other information required by BPK to conduct an investigative audit. All confidential information to or from BPK and KPK must be given in writing and is signed by the respective heads of BPK and KPK.

The second new mechanism was an agreement signed between BPK and the Centre for Reporting and Analysis of Financial Transactions (PPATK) to more effectively prevent and eradicate criminality related to money laundering (PPATK and BPK RI 2006). The purposes of this agreement between BPK and PPATK are to exchange of data and information, to assist in promoting system against criminality related to money laundering,

and to provide trainings and education 108 . For the transfer of information, both parties agreed that BPK could provide to PPATK information in audit reports that indicates

money laundering. On the other hand, PPATK provides information to BPK in regard to abuses of authority and contempt of regulations related to money laundering. Although cooperation among BPK, KPK and PPATK has occurred before, the joint agreements show that further efforts are being undertaken to prevent money laundering and to strengthen more effective cooperation.

The third new mechanism was a joint agreement signed in 2006 between the Attorney General and the police (Kep-019/A/JA/03/2006) to improve the effectiveness of coordination to eradicate corruption (Saleh 2007: 16). However, this cooperation has not

108 This agreement was executed in the head office of BPK, on 25 th September 2006 and was signed by the Chairman of BPK and the head of PPATK.

run effectively due to different perceptions between the laws enforcers regarding the definition of state finances. The Attorney General (Saleh 2007: 4) indicated this as follows:

The detailed information on the definition of state finances and state loss are stated in two administrative laws, the Law on State Finances and the Law on BPK. For criminal activities, the definition of state finances which are relevant to corruption shall be based on general provision of Law on Corruption (No. 31/1999). The definition of state finances mentioned in State Finance and BPK Laws is more detailed compared to Law on Corruption that is more general. Yet, Law on State Finance is in the range of administrative law. If it is related to a criminal case, law enforcers use the definition of state finances based on the Law on Corruption. In criminal cases, the principle of lex specialis derogat lex generalis (the specific laws overrule the general laws) prevails. Consequently, in handling the case of corruption, the definition of state finances is based on the specific and special definition mentioned in Law on Corruption.

This statement means that the definition of state finances stipulated by the Law on State Finances (GOI 2003b) and the Law on BPK (GOI 2006b) provides the scope of public finance administration. Considering that state finance has close links with criminal cases of corruption, the definition of state finances is based on the Law Number 31 of 1999 on Eradication of Criminal Corruption is:

All government property in any forms, separated or not separated, including all the state property and all the rights and the responsibilities because they are, (1) under the authority, management and responsibilities of state institution officials, at both central and local levels (2) under the authority, management and responsibilities of SOEs/ROEs, foundations, law boards and enterprises that involve state capital or companies that involve capital from a third party based on the agreement with the state.

The Attorney General has argued for a different perception or definition of state finances in SOEs, which is still under discussion (as stated earlier in Section 5.1.1).

The fourth new mechanism is an agreement between BPK and the Attorney Generalmade on 25 July 2007 (Kejaksaan Agung and BPK RI 2007) to support the The fourth new mechanism is an agreement between BPK and the Attorney Generalmade on 25 July 2007 (Kejaksaan Agung and BPK RI 2007) to support the

results to the Attorney General ‘s office, law enforcement on BPKaudit findings that indicate corruption, and their cooperation in education and training.

The joint agreement between BPK and the law enforcers in this example is with the Attorney Ge neral as depicted in Figure 7.5 (below), which shows the coordination in following up BPK reports that indicate criminality. BPK submits these audit findings to the law enforcers, including the Attorney General. If the preliminary audit findings from BPK provide sufficient evidence, the Attorney General has to follow up that case by undertaking further investigation. On the other hand, if the preliminary evidence is insufficient, the Attorney General can ask BPK to audit further in order to obtain the required evidence. After BPK audit findings are submitted to the Attorney General, the results of the investigators have to be reported within two months. The agreement also includes the provision of BPK experts or auditors to the Attorney General and vice versa. Appointed officials must propose their requirements in writing. For assistance from BPK auditors in calculating state finance losses, Article 7 of the joint agreement stipulates that not more than two months after accepting the requirement for state finance loss calculation, the result of this calculation must be presented to the Attorney General. Moreover, BPK and the Attorney General conduct joint education and training for BPK auditors and Attorney Generalofficials on the requirements for investigative audits.

109 This is based on Chapter I, Article I, point ‗E‘ of the joint agreement between BPK and the Attorney General, Law enforcement is the activity of investigation, prosecution, auditing at court and conducting

decision (Kejaksaan Agung and BPK RI 2007). 110 This agreement was signed by the Chairman of BPK and the Attoney General on 25 th July 2007.

Figure 7.5 Coordination between BPK and the Attorney General Indicating Corruption

BPK auditors calculate state finance loss BPK’s audit findingsindicating corruptior fraud

Presentation and discussion

Attorney General

(1) Sufficient

BPK Followup

Evidence Auditors

Apparatus of the Attorney General

Authorised

Joint education

Investigators

andtraining

(2) Insufficient evidence Auditing of state

Lawarea

finance

Furtheraudit Evaluation and investigation reports in writing

Source: Adapted from the joint agreement between BPK and the Attorney General , 25 th July 2007, Jakarta (MOU Kejaksaan Agung and BPK RI 2007).

To implement this joint agreement, as stipulated in Article 10, BPK and the Attorney General respectively appoint and place at least two coordinators, one in the central office of BPK or the Attorney General and the other in a representative office of BPK or the Attorney General.

The head of Parliament 111 emphasised the significant role and functions of law enforcers and BPK for eradicating corruption. Further investigation and handling of the corruption cases are the commitment of law enforcers. Since the agreement, support from

111 Keynote Speech at theOne Day Seminar of Public Sector Auditing, on 9 th January 2007, Jakarta Convention Centre, Jakarta.

the Attorney General in following up BPK reports has improved. For example, in 2006, the Attorney General followed up four cases of BPK findings that indicated corruption to a value of Rp.85,11 billion and US$4.23 million 112 (equal to Rp.38 billion) on SOEs and state institutions (Bisnis Indonesia 1 st December 2006). Moreover, KPK and the Attorney General are following up the BLBI case seriously (Pelita 9 th January 2008; Seputar

Indonesia th 9 January 2008).