The government will launch a probe this month into the outsourcing of administrative work related to a coronavirus relief package that was later subcontracted to Dentsu Inc., the nation’s largest ad agency, industry minister Hiroshi Kajiyama said Monday.
The move comes amid questions over a program to provide cash benefits of up to ¥2 million each to small and midsize businesses that have been hit hard by the pandemic.
The Ministry of Economy, Trade and Industry contracted a group called the Service Design Engineering Council to implement the program for ¥76.9 billion, only to have the group subcontract the task to the advertising agency for ¥74.9 billion. The ¥2.3 trillion scheme is financed by the first supplementary budget for fiscal 2020.
The ministry has decided that it will not be able to gain the understanding of the public or opposition parties on the huge planned spending on coronavirus measures unless it carries out strict checks.
Opposition lawmakers and other critics have accused the group of being a front to siphon off taxpayers’ money without providing any actual services.
Prime Minister Shinzo Abe, however, denied that there was anything shady about the arrangement, saying in the Diet there was “no possibility” that improper gains were being made.
The ministry will enlist independent auditors to conduct the probe in order to verify the legitimacy of the contract, a process that usually occurs at the end of the fiscal year in March, Kajiyama told a news conference. A separate panel will also be set up to improve the transparency of any future contracts.
“Some have voiced skepticism about the program, so we decided to hear from some people from the outside. If anything needs to be fixed or goes against common sense, we have to work to remedy that.”
“We’ll request the full return of wasted money, if there is any,” Kajiyama said, stressing that the ministry will act strongly against any improper spending.
The ministry hopes to release the results as soon as possible after looking into various expenses, including personnel costs. The panel will put together its findings by year-end, which will be reflected in the ministry’s operations from the next fiscal year.
Dentsu was tasked with processing online applications for the cash benefits, a massive undertaking that it further subcontracted parts of to temporary staffing firm Pasona Group Inc. and Transcosmos Inc., which provides integrated marketing, outsourcing and call center services.
All three companies were involved in the 2016 establishment of the Service Design Engineering Council, which is staffed by fewer than two dozen people.
The program, which launched at the beginning of May, has been dogged by issues including many complaints from businesses that have still not received the cash. The group has also come under fire for failing to make its earnings public, which is required under the law.
“We regret not fulfilling our responsibility for explaining” the recommissioning of the relief program-related work, said Yuichi Okubo, the group’s new chief, on Monday.
However, he stressed that there was nothing inappropriate about how the work had been subcontracted to Dentsu.
“We are handling the coordination and management as well as the payment side of the program. … This is a very difficult job and also at the root of the service we provide,” he told a news conference.
He said the organization will try to improve transparency, including by establishing the post of a board member in charge of public relations and utilizing an auditing firm, and will work toward the speedy distribution of the benefits.
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