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A Foreign Ministry panel of outside experts on Tuesday urged the ministry to reduce the amount of secret diplomatic funds and strengthen its inspection system in order to regain public trust in the wake of a fraud scandal involving a former ministry official.

In a set of recommendations submitted to Foreign Minister Yohei Kono, the panel said the discretionary funds, the use of which the ministry is not obliged to disclose, should be used strictly for secretive information-gathering activities and must be checked by inspectors.

Nonclandestine expenses, such as the money used by the government’s overseas missions to entertain visiting politicians and other VIPs, should be disclosed and placed under the general account. As a result, the diplomatic discretionary funds should be reduced from the fiscal 2002 budget on, the panel said.

The fiscal 2001 budget allocates 5.57 billion yen in such funds, unchanged from fiscal 2000.

The panel also said the ministry should introduce inspections for accounting and other works at the ministry’s headquarters in Tokyo, in addition to those currently held at the overseas establishments.

The ministry should invite outside experts for inspection activities and carry out the inspections without prior notice, it said.

Katsutoshi Matsuo, who has been indicted for defrauding the government of 42 million yen and arrested for additional fraud charges of some 120 million yen, allegedly diverted part of such discretionary funds for private purposes when he headed a ministry division supporting prime ministers’ overseas visits between 1993 and 1999.

No system was in place to check for misuse of the money, and Matsuo was made solely responsible for handling the discretionary funds.

Akira Saito, chairman of the panel and president of the Mainichi Shimbun newspaper, said the ministry will release its own report on its reform in May, based on the panel’s recommendations.

“What counts is whether the Foreign Ministry will actually carry out the reform on its own,” Saito told a news conference. “If they want to regain public trust, they must cut back on the discretionary funds.”

According to Saito, Kono said the ministry is ready to “shed its own blood” to realize the reforms recommended by the panel, indicating that all the recommendations would be included in the ministry report.

The panel did not touch on how the discretionary funds at the Cabinet Secretariat, which Matsuo allegedly used, should be handled except to say that all the necessary funds for prime ministers’ overseas visits should be accounted for in the Foreign Ministry’s budget.

Other recommendations included the downsizing of prime minister’s overseas visit delegation and introducing an open candidacy system for vacant posts in the ministry.

The seven-member panel held 10 meetings since Feb. 21.

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