Since its establishment in 2006, the Audit Board of the Republic of Indonesia (Badan Pemeriksa Keuangan or “BPK“) has been regularly auditing state-owned enterprises (“BUMN“) and regional government-owned enterprises (“BUMD“) for indications of corruption. As part of this auditing authority, Article 12 of Law No. 15 of 2006 on the Audit Board of the Republic of Indonesia (“BPK Law“) also mandates the BPK to regulate further the exercise of its authority to evaluate and determine state losses that result from the actions of the following parties: (i) a treasurer; (ii) a member of the management of a BUMN and BUMD; and (iii) any other related company or institution that manages the state’s finance.
This ability to further regulate also encompasses the authority to recover state losses by requiring the abovementioned parties to compensate the state losses.
However, to date, BPK has yet to issue a regulation to address and accommodate the above mandate specifically relating to the persons listed in points (ii) and (iii), despite already enacting BPK Regulation No. 3 of 2007 on Settlement of State Losses against Treasurers. As a result, there is no clear mechanism on how recovery efforts can be carried out against a member of the management of a BUMN or BUMD and related companies or institutions. In fact, there are different practices on how the state (including via the relevant BUMN, BUMD, or related company and institution) can carry out settlement or recovery efforts. From the information that we have gathered, BPK is currently drafting a regulation to accommodate the mandate under the BPK Law.
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