[Exclusive] Financial Information Service, Knowing Illegality, Processes 'Reallocation of 460 Trillion Won Expenditure Budget' Instead

Illegal Reallocation of Expenditure Budget in Q2 and Q3 This Year Despite Awareness
Assemblyman Kim "Legal Grounds Must Be Established, Including Revision of Enforcement Decree"

Kim Jae-hoon, Director of the Financial Information Service, attended the comprehensive audit of the Ministry of Economy and Finance held by the Planning and Finance Committee at the National Assembly on the 29th, listening to the members' questions with a tightly closed mouth. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Jang Sehee] It has been revealed that the Korea Fiscal Information Service (KFIS) handled the reallocation of expenditure budgets on behalf of the relevant ministries despite being aware of the illegality. This proxy handling of expenditure budget reallocation lacks legal grounds and raises concerns that the budget execution plans could be disrupted. KFIS conducts fiscal statistics production and research activities, as well as projects entrusted by the national government, local governments, and public institutions.

According to data submitted by KFIS to Kim Ju-young, a member of the National Assembly's Planning and Finance Committee from the Democratic Party of Korea, KFIS has proxy-handled expenditure budget reallocations a total of 37 times over the past 12 years (excluding the first quarter) from the third quarter of 2008 to the third quarter of this year.

When the government drafts the budget, each ministry’s financial officer is supposed to access the KFIS digital budget accounting system (Dbrain) quarterly to perform the task of reallocating expenditure budgets. However, the KFIS operator has been performing this task on their behalf for over 10 years. According to Article 17 (Budget Reallocation) of the Enforcement Decree of the National Finance Act, each central administrative agency must directly carry out quarterly expenditure budget reallocations for each fiscal year.

The problem is that during the proxy handling of expenditure budget reallocations, rapidly changing project budgets may not be reflected in a timely manner, potentially causing excessive carryover and lapse amounts. Expenditure budget reallocation is a task to execute the budget with an appropriate cycle considering fund management efficiency, and the responsibility for each project’s progress lies with the relevant ministry.

In particular, KFIS continued proxy handling of expenditure budget reallocations even after recognizing through legal consultation in March of this year that such proxy handling was illegal. The amounts of proxy-handled expenditure budget reallocations by KFIS for the second and third quarters of this year were KRW 262.451063 trillion and KRW 207.08382 trillion, respectively, totaling KRW 469.534865 trillion.

Previously, KFIS requested legal advice from the Government Legal Affairs Corporation through the Budget General Affairs Division of the Ministry of Economy and Finance. According to the response obtained by Asia Economy from the Government Legal Affairs Corporation, "Under the National Finance Act, it appears difficult to allow KFIS to exercise the authority of budget allocation and reallocation of each central administrative agency head," and "It is appropriate to establish legal provisions regarding delegation and entrustment of authority under the National Finance Act before amending the enforcement decree."

Meanwhile, the Ministry of Economy and Finance notified each relevant ministry last month to directly perform expenditure budget reallocations starting from the fourth quarter of this year. However, financial officers who were unable to process reallocations by the specified date were instructed to contact KFIS directly to proceed with the reallocation.

There are calls to strengthen budget transparency and accountability through thorough expenditure budget reallocations. Representative Kim stated, "KFIS experienced internal turmoil due to unauthorized access to unapproved information on Dbrain previously, yet their handling of tasks remains immature," and urged, "In cooperation with the Ministry of Economy and Finance, establish legal grounds through amendment of the enforcement decree."