Banjir Ambarita, Camelia Pasandaran & Markus Junianto Sihaloho – Officials in Papua on Monday defended the decision to deposit development funds worth Rp 1.25 trillion ($145 million) at a state bank and denied allegations that the money had been misused.

Ahmad Hatari, head of the provincial asset and finance management agency, said a 2007 decree by the Ministry of Home Affairs made it legal for state funds to be deposited in a bank.

"The deposit wasn't made in the name of an individual, but in the name of the provincial administration, and the interest accrued went straight to the provincial treasury," he said.

Previously, Rizal Djalil, a member of the Supreme Audit Agency (BPK), said his office had found indications special autonomy funds from the 2008-10 period might have been misused after being deposited in a bank.

He said trips to Europe by local officials were specific expenses that should be looked into.

Hatari said the Papua administration had already explained to the BPK and the Corruption Eradication Commission (KPK) that the money had been deposited at the end of the year because "we couldn't have spent such a large amount on development programs in just one or two months."

Home Affairs Minister Gamawan Fauzi also defended the decision, saying it was allowed as long as it did not disrupt the flow of funds to the province's development programs.

However, Velix Wanggai, the presidential adviser for regional autonomy, said the incident had prompted the president to call for improvements in the way special autonomy funds were used.

"There should be a clear scenario for the special autonomy budget to be used for education, health care, infrastructure and the economy," he said.

Velix said the president believed the way the special autonomy budget had been spent since 2009 was ineffective.

Priyo Budi Santoso, a deputy speaker at the House of Representatives and head of the House team monitoring special autonomy in Papua and Aceh, said he had been notified by the BPK of the possible misuse of funds.

"It's really shocking. The central government is spending trillions of rupiah to develop the province," he said.

"The Papua administration must clarify this, and we'll summon them immediately. If the allegations prove to be true, we'll urge the KPK to investigate."