From the Ministry of the Interior to the National Tax Service... Accounting of Jeongui Gieok Yeondae and Civic Groups Under Scrutiny

Possible Deregistration of Recruitment for Serious Accounting Violations
Civil Groups Monitoring 'Compliance' Face Crisis

Lee Nayoung, Chairperson of the Justice Memory Solidarity, is addressing the position regarding the donation controversy at a press conference held at the People Human Rights Foundation in Mapo-gu, Seoul, on the morning of the 11th. Photo by Kim Hyunmin kimhyun81@

[Asia Economy reporters Jo In-kyung and Lee Kwang-ho] The National Tax Service and the Ministry of the Interior and Safety have begun verifying the appropriateness of accounting practices across the Justice and Memory Foundation (Jeonguiyeok) and civic groups in general. This issue, which originated from conflicts with the surviving comfort women victims, is taking an unexpected turn. Since smaller civic groups often lack accounting professionals and have relatively less systematic management structures, if serious illegal activities are found, their very existence could be at stake, making the developments noteworthy.

The Ministry of the Interior and Safety and the National Tax Service have shown a cautious stance, stating that this investigation did not start with the intention of actively uncovering illegal activities. However, if accounting document errors raised by some parties are confirmed, administrative sanctions seem inevitable in some form.

In particular, for Jeonguiyeok, the worst-case scenario is losing the ability to solicit donations. According to the "Act on the Solicitation and Use of Donations," if a fundraiser solicits or uses donations contrary to the solicitation and usage plan, fails to disclose the results of donation usage, or discloses false information, serious violations can lead to the cancellation of the "solicitation registration." In such cases, already collected donations must be returned. However, it is reported that no donation solicitation organization registered with the Ministry of the Interior and Safety has ever had its solicitation registration canceled.

This measure does not dissolve the organization itself, but the inability to receive donations could shake the very foundation of a civic group. Of course, if the violations are minor, the matter may end with a request for correction.

The Ministry of the Interior and Safety has stated it will review whether Jeonguiyeok’s donation solicitation and expenditure activities were conducted with proper administrative procedures and legality. They have officially requested submission of the cashbook containing details of donation solicitation and expenditures by the 22nd. According to the donation usage plan submitted to the Ministry, Jeonguiyeok declared it would spend 265 million KRW on victim welfare projects from 2018 to 2019, but the actual amount spent over two years was only 47.84 million KRW. However, since the execution period according to the plan extends to 2020, the spending may not yet be fully completed.

The Ministry explains that this request for document submission is merely to check the documents that donation solicitation organizations must have, not to scrutinize specific donation usage or receipts. A ministry official said, "Since suspicions have continued in the media, we requested document submission as part of an inspection. We want to verify whether the funds were used legally for each project and whether the required administrative procedures and documents are in place."

The National Tax Service plans to conduct inspections not only on Jeonguiyeok but also on nearly 10,000 civic groups, requiring correction disclosures if deficiencies are found. Failure to comply may result in a penalty tax of 0.5% of the corporation’s total assets. The controversial issue regarding expenditures at a pub is also expected to be clarified during this process. Jeonguiyeok claimed to have spent about 33 million KRW divided among 50 places but recorded it as spent at a single representative pub, causing controversy.

Jeonguiyeok explained that this was done following tax authority instructions, but a National Tax Service official said in a phone interview on the 13th, "We never gave such guidance." If any expenditure at the 50 places exceeds 1 million KRW, it must be separately itemized. Some parties are pressuring Jeonguiyeok to disclose expenditure details beyond the pub, but Jeonguiyeok has expressed no intention to comply.

A National Tax Service official said regarding the pub accounting error controversy, "Since we are not requesting the submission of the receipts, we will first review the correction disclosure and then make a judgment. If errors are found in other corporations besides Jeonguiyeok, we plan to order correction disclosures as well."

However, the National Tax Service issued a statement on the same day clarifying some reports that described this action as a tax audit, saying, "We perform routine annual tasks under regulations that allow us to request corrections if financial statements are not disclosed or contain errors. We do not conduct direct investigations targeting civic groups, etc."