Stung by opposition criticism that its subsidy program to help small businesses reeling from the COVID-19 pandemic is a huge waste of money, the economy ministry has switched to a new company to handle the program’s paperwork.
Opposition lawmakers had complained that the original entity commissioned to handle the job, Service Design Engineering Council, had outsourced it to advertising giant Dentsu Inc., which had a hand in establishing the council.
On Aug. 14, the ministry signed a new contract with consulting company Deloitte Tohmatsu Financial Advisory LLC, based in Tokyo, to handle the administrative paperwork for subsidies to be paid out under the second supplementary budget for the current fiscal year.
The company will take over from Service Design Engineering Council, which had been in charge of payments from the first supplementary budget.
The plan is to switch to Deloitte Tohmatsu by early September. But Service Design Engineering Council will handle payments to companies that have submitted applications until then.
The contact awarded to Deloitte Tohmatsu is worth 42.7 billion yen ($404 million), with 41.6 billion yen to be used to assess the applications and 1 billion yen to offset fees for the bank transfers of the subsidies to the companies.
In the second supplementary budget, the economy ministry had set aside 85 billion yen to commission the paperwork, but no clear explanation was given by ministry officials over why the contract with Deloitte Tohmatsu was signed for less than half the budgeted amount.
When Service Design Engineering Council won the first contract for the job, it was paid 76.9 billion yen. But it paid Dentsu 74.9 billion yen to handle the actual paperwork.
Opposition lawmakers said there was a lack of transparency about how the council won the contract and why it was allowed to outsource the work.
The economy ministry initially sought to ask the council to handle the paperwork under the second supplementary budget, but had to change direction in the face of opposition criticism.
Sources said the council did not submit a bid to handle the paperwork under the second supplementary budget.
Around 3.03 million applications had been received from small businesses as of Aug. 16, according to ministry officials.
The total amount of the subsidies is about 3.9 trillion yen.
The total amount set aside for subsidies in the two supplementary budgets is roughly 4.2 trillion yen, but because more applications are expected, Prime Minister Shinzo Abe’s Cabinet on Aug. 7 approved an additional 915 billion yen from the reserve fund.
(This article was written by Ayumi Shintaku and Hiroki Ito.)