Auditors Work to Reclaim Brazil’s Plundered Treasury : Graft: Their mission is a novel one. The team is attempting to keep taxpayers’ money away from corrupt legislators, federal employees and government contractors.

Deep within the maze of flourescent-lit corridors with dozens of numbered cubicles in the Finance Ministry basement, a Brazilian revolution is under way.

Computers, calculators and printers are humming, clicking and coughing out reams of public works contracts, ministry expense sheets, bank statements. It is the sound of the government’s new scam busters.

Their mission is a novel one in a country riddled by graft: to keep taxpayers’ money away from corrupt legislators, federal employees and government contractors.

The rot runs deep, from phony farm insurance claims to mayors skimming kickbacks from padded public works contracts to legislators channeling treasury money to ghost charities run by family members.

More than $47 billion has been wasted or purloined since 1988, according to a 10-page treasury report submitted to President Itamar Franco last April. In another report, the Federal Accounting Board said a partial audit found that at least $2.9 billion vanished the last three years.

“Something had to be done,” said Carlos Atila, a director on the accounting board. “The government had nearly lost complete control over its own finances.”

From July to September, the new Internal Control Secretariat canceled $16 million worth of public works contracts because of serious accounting errors, said Domingos de Poubel de Castro, head of the auditing team.

“The frightening thing is that this is just the beginning,” said Poubel de Castro. “We only monitor 5% of the budget and we’ve saved $16 million. Imagine what we could save if we did more.”

His auditors already are doing more. They discovered municipalities were late or never offered receipts for 19,556 of 46,800 federally financed projects. The secretariat is moving to cancel those projects, which are worth $122 million, Poubel de Castro said.

Corruption in Brazil is as old as the 16th-Century Portuguese conquest, when bribing officials became the way to cut through baroque regulations and intricate laws.

This century’s nationalist governments made graft a large-scale enterprise by expanding and later centralizing state power in Brasilia--the newly built capital that became an enclave of a vast, coddled bureaucracy on an isolated central prairie.

Auditors were brought to Brasilia to keep tabs on the government, but they lost touch with the fraud percolating in their home states.

One favorite was for legislators to peddle fat public works contracts to businessmen for kickbacks. The schemes left remote, unpopulated regions dotted with white elephants. About $33 billion in half-built bridges, schools, dams and roads sit deteriorating across Brazil, according to a 1993 study by SEPLAN, a Cabinet-level planning commission.

Then, in 1990, President Fernando Collor de Mello took office and, under the pretext of reducing a bloated administratiion, fired hundreds of federal auditors--while leaving the rest of the bureaucracy intact.

When Collor slashed controller salaries from $2,500 a month to $260, hundreds more quit. The ranks of people guarding the federal coffers had dropped from 5,100 to 1,700 a year later.

“The president basically threw open the doors of the henhouse so the wolves could raid it,’ said Elvia Castello Branco, president of the Federal Accounting Board.

Worse, Collor was one of the wolves.

A congressional investigation found he took at least $6.5 million from an influence-peddling ring that extorted bribes and stole federal money to the tune of $100 million in his first two years of office.

Ten months after Collor resigned in disgrace in December, 1992, another scheme unraveled that apparently had enabled dozens of legislators to pocket hundreds of millions of dollars since 1989--the year Congress won expanded power over the budgetary process.

Franco, Collor’s successor, finally acted last July. He created by official decree the Internal Control Secretariat--known as Cisetao--as part of an “institutional revolution” to reduce official waste.

About 3,000 auditors went to work, and it didn’t take long to find suspicious dealings.

One of their first probes is an investigation into why 51 executive and legislative bodies spent millions of dollars citing “secret expenditures for national security” without proper congressional authorization.

Among those agencies are the labor ministry, the National Indian Foundation, the education ministry, the public transportation ministry and the land reform ministry, government records show.

The list of scams goes on and on: a farm insurance fraud totaling $500 million; a scandal in which judges, lawyers and prosecutors in Rio de Janeiro embezzled more than $1 billion in social security funds; a scheme in which millions of dollars worth of unemployment compensation was skimmed by agency workers.

Poubel de Castro admits the Cisetao is far from perfect. Auditors still earn a paltry $500 a month, leaving them susceptible to bribes and kickbacks.

The government aims to increase the Cisetao staff to 7,000. But it will take a lot of money and at least two to three years to train new auditors, Poubel de Castro said.

The president-elect, Fernando Henrique Cardoso, said he will reorganize Cisetao after he takes office Jan. 1 so the bulk of the staff will monitor federal projects directly in the field.

“The state apparatus cannot be a parasite any longer,” said Poubel de Castro.