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    Today's lead editorial in the Nikkei is headlined "Accounting improprieties by regional governments cause trouble with separation of powers."

    After the Board of Audit conducted a nationwide investigation of 12 prefectures, it came to light that federal subsidies exceeding 500 million yen had been used improperly. Cases in which slush funds were eked out through fabricated orders to suppliers were also discovered. Each entity should, at the same time as it returns the misappopriated portion of funds to the federal government, do its own thorough investigation that includes how the slush funds were used.

    ...

    The accounting improprieties indicated by the Board of Audit are largely of two types. One was the MO of "deposit," in which orders for purchasees of office supplies and things were fraudulently generated, and the capital accumulated in the account of the relevant supplier. Because subsidy money left over must be returned to Tokyo, the method was to move it into suppliers' accounts at the end of the fiscal year, and from the next year on, to make payments from that account when goods were actually purchased.

    Another was the allocation of subsidies. There were cases in which temporary employees hired for the work of allocating subsidy money were rotated to other jobs, and funds for their business travel were obtained from subsidies that were unrelated to it.

    ...

    Increasing the transparency of administration and use of public funds is one of the minimum conditions for moving forward with regional separation of powers. Even those entities that were not subjects of the current investigation should do their own investigations and clear out all the corruption ["drain out all the pus," in the evocative Japanese phrasing--SRK].

    That accounting improprieties were left unattended in each prefecture until the Board of Audit pointed them out is also a problem. Even if we allow that the tricks used were clever, what on earth were the prefectural assemblies and the auditing committees, which were supposed to verify budgeting and book-closing, doing? We call on everyone from the employees of the regional entities to the audit committees to do some hard soul-searching.


    Aichi Prefecture apparently took (the biggest slice of) the cake, with diverted subsidies and dodgy expenditures totaling 130 million yen. Bear in mind that only a quarter of Japan's prefectures were studied, too.

    The "separation of powers" part is, of course, the long-standing argument over what and how much Tokyo should be giving back to prefectural (and municipal) governments. I can see the point that giving more power to regional governments that are busy creating slush funds is a bad idea. On the other hand, the sense of assurance that Tokyo is far, far away and not looking too hard makes it easier to get crafty. And pouring so much tax and revenue from around Japan into one federal pool makes the resulting funds seem to come from big, abstract Tokyo rather than living, breathing taxpayers in local officials' own communities. It's inexcusable that they regard the subsidy system as an open tap, but it's not really hard to see how they get that way.
    Posted by Sean on 2008-10-22 13:13:23

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