The Gifu Prefectural Government in central Japan has been rocked by a scandal involving, in a sense, all of the prefectural government and its workers. It came to light earlier this month that the prefecture had systematically generated, hid and used a large amount of off-the-book funds over many years. There are strong indications that this kind of practice has been carried out by the central government and other local administrations, too. Thorough scrutiny and investigations are called for.
A monthlong internal examination has found that various sections of the Gifu government had squirreled away as much as 466 million yen in off-the-book funds by fiscal 1994 — a peak year. Prefectural government workers generated the funds by claiming compensation from prefectural coffers for fictitious business trips, taxi fares, and official meetings accompanied by wining and dining. The money “saved” was then used for purposes such as wining and dining public servants from other organizations, parties for high-ranking prefectural government officials and monetary offerings for weddings and funerals of prefectural government workers.
The egregious aspect of the existence of these slush funds is that high-ranking officials were aware of them and were actively involved in hiding them. Mr. Tsuneo Morimoto, a former bureaucrat of the now-defunct Home Affairs Ministry who served as Gifu vice governor from 1996 to 1999 (now a Liberal Democratic Party member of the Upper House), instructed various sections of the prefectural government to transfer some of the funds into bank accounts of the prefectural government workers’ union, as it was feared that a large-scale organizational shakeup in the prefectural government, scheduled for fiscal 1999, might lead to disclosure of the funds.
A similar move was made in fiscal 2001 ahead of the introduction, the following year, of a ceiling on the deposit amounts guaranteed if a bank went bankrupt. The whole process smacks of collusive relations between high-ranking officials and union members.
The dubious practice involving off-the-book funds started while Mr. Taku Kajiwara was governor of Gifu Prefecture. Serving four terms (16 years) after being elected in 1989, he was known for actively pushing financial reform. At first he denied having been aware of the existence of the off-the-book money. He later admitted that he learned of the practice in 1989. But he insisted that he had had no knowledge of where the money was kept or moved. He denied Mr. Morimoto’s allegation that he had approved a decision not to publicly acknowledge the existence of the secret money.
Around 1995, the issue of public servants wining and dining other public servants came to the fore. According to a 1997 study of off-the-book funds by a Nagoya-based liaison organization of citizens’ groups monitoring irregularities involving public servants, instances of questionable payments totaling 43.66 billion yen had been detected in 25 prefectural governments. When the organization inquired of Gifu Prefectural Government, it was told that Gifu had no intention of carrying out an investigation of whether prefectural government sections maintained secret funds. Former Gov. Kajiwara said recently that he thought at the time that the problem of off-the-book money had already been solved, adding that there was no excuse for his poor judgment.
Gifu’s case shows how serious and widespread the practice may be. Even the secretariat of the prefecture’s audit committee and the revenue and expenditure management department were among the sections engaged in keeping slush funds. The internal scrutiny report says that several prefectural government workers, not knowing what to do with one cache of secret money, burned or discarded as garbage a total of 5 million yen.
Of the 256 million yen moved to the union’s bank accounts, about 100 million yen was used as loans to union members or for wining and dining expenses. At present, off-the-book money amounts to 265 million yen — part of it held in the union’s bank accounts and the rest held by different sections of the prefectural government. The report of the internal probe concluded that the union and various sections of the prefectural government had used about 200 million yen of the secret money.
The anger expressed by citizens of Gifu Prefecture is not surprising. The prefectural government has received nearly 3,000 protests in the form of e-mail messages and telephone calls. Legally empowered authorities should be mobilized to check the dubious use of public money by the central and local governments. What is more important is to step up efforts to create an atmosphere and mechanism in public offices that will not tolerate a lax attitude toward the use of tax money.
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