1,865 Cases of Fraud and Corruption in Private Organization Subsidies Detected... 31.4 Billion Won of Public Funds Leaked (Update)

Presidential Office Announces Results of Comprehensive Audit on Ministry Subsidies
Despite 2 Trillion Won Surge Under Moon Government, Poor Management and Oversight Lead to Public Fund Leakage
Over 500 Billion Won Cut from Next Year's Subsidies... Full Recovery of Fraudulent Payments

As a result of a comprehensive audit conducted on government subsidies across 29 ministries, it was revealed that there were 1,865 cases of fraud and corruption in projects totaling 1.1 trillion KRW. The confirmed amount of misused funds alone reached 31.4 billion KRW, and the government plans to take strong measures such as recovering subsidies, filing criminal charges, and requesting investigations.

[Image source=Yonhap News]

On the 4th, the Presidential Office announced the results of a comprehensive audit conducted over four months since January under the coordination of the Office for Government Policy Coordination, targeting government subsidies to private organizations across 29 ministries, and stated that necessary legal actions will be taken.

Previously, in December last year, the government had announced plans to investigate the scale and issues of subsidies as part of the Yoon Seok-yeol administration’s national agenda to enhance transparency in subsidies to non-profit private organizations. This investigation covered approximately 68 trillion KRW in government subsidies paid to about 12,000 private organizations over the past three years.

The audit found 1,865 confirmed cases of fraud and corruption. Among projects totaling 1.1 trillion KRW, 86 cases involving serious misconduct such as subsidy embezzlement, bribery, and falsification of documents were referred to judicial authorities for criminal charges or investigation requests. Additionally, over 300 cases involving misuse of funds for purposes other than intended and internal transactions will be subject to further audits by the Board of Audit and Inspection. The Presidential Office also stated that each ministry is continuing to verify whether there are additional cases of misconduct or fraud, and the number of investigations or audit requests may increase depending on the results.

Using Subsidies to Lecture on 'Yoon Administration Resignation Movement' and Spending Business Expenses at Entertainment Establishments

Examining the fraud and misconduct cases uncovered in this audit, Organization A, a unification movement group, received 62.6 million KRW under the pretext of discovering buried national heroes and conducted political lectures such as "Social Agreement to Presidential Candidates" and "Diagnosis and Prescription of Government Dysfunction 100 Days after Yoon Seok-yeol Administration’s Inauguration." The content included plans to participate in the movement to oust the Yoon administration. This organization paid manuscript fees nearly three times the limit to individuals who were not even the original authors.

Organization D, related to separated families, promoted family reunion exchange projects but spent 5.41 million KRW on purchasing mobile phones for former executives, unpaid communication bills, and communication expenses used by current executives’ family members. They also misappropriated 15 million KRW for renting office space in China owned by a company owned by an executive.

Executives including the chairman of Federation F used 18 million KRW in business promotion expenses across 245 cases to purchase alcoholic beverages, spend at industries where subsidies are prohibited (such as entertainment establishments), or during weekends and late-night hours while promoting family organizations in the unification sector.

When job support projects were excessively expanded under the previous administration, making it difficult for organizations to recruit eligible candidates, cases were uncovered where unqualified individuals such as already employed persons, entrepreneurs, or those already receiving other job support funds were selected, and documents were falsified to make it appear as if payments were made to unemployed individuals.

A director of a local children’s center forged transfer certificates using Photoshop to embezzle operating funds, and cases of fraudulent subsidy claims were confirmed where an event held only once was claimed to have been held multiple times by manipulating banners in photos. During this process, attendees’ arrangements and clothing were changed and re-photographed at the same location to falsify different dates.

Significant Strengthening of Supervision over Private Organization Subsidy Projects... Transparent Disclosure to the Public

Based on the results of this investigation, the government plans to implement strong institutional improvements to fundamentally block fraud and corruption and enhance transparency in subsidies to private organizations.

First, management and supervision of private organization subsidy projects will be significantly strengthened. For government subsidies, not only the primary recipient organizations but also subordinate organizations that receive delegated or re-delegated funds and actually execute the budget must all be registered in the government subsidy management system "e-Naradoom." Accounting documents, settlement reports, and various proofs will also be fully registered and inspected to ensure transparent disclosure.

A new subsidy system will be established for local governments. Until now, local governments have managed subsidies with paper receipts and manual ledgers without a dedicated system, but going forward, they plan to build and operate an electronic evidence-based subsidy management system similar to that for government subsidies.

External verification of project results will also change. The threshold for external verification of government subsidy settlement reports will be lowered from projects over 300 million KRW to those over 100 million KRW, and the scope of accounting firm audits will be expanded from projects over 1 billion KRW to those over 300 million KRW.

Additionally, through amendments to the Local Subsidy Act, a five-year exclusion period from project participation will be stipulated for cases of subsidy fraud. Furthermore, the management system, previously left to ministry discretion, will be entrusted to the "Subsidy Execution Inspection Task Force," which includes all 44 ministries under the overall supervision of the Ministry of Economy and Finance.

Scale of subsidies for non-profit private organizations (Unit: 100 million KRW). [Data provided by the Presidential Office]

Initiating Restructuring... Cutting Private Organization Subsidies by 500 Billion KRW... Full Recovery of Fraudulent Subsidies

A large-scale restructuring of the private organization subsidy budget will also be pursued. This measure responds to the nearly 2 trillion KRW surge in subsidies to private organizations during the previous administration despite widespread fraud and corruption.

First, the Ministry of Economy and Finance and each ministry plan to re-examine the private organization subsidy budget from a zero-based perspective. Projects identified in this audit, those that have recently increased excessively, those habitually budgeted, and populist projects will be subject to restructuring. The plan is to reduce private organization subsidies by more than 500 billion KRW starting next year, and the subsidy restructuring will not be a one-time effort but will continue over the next four years.

Separately, if subsidies were fraudulently received through false information during the application process, the government will recover the entire amount paid to the organization. Even if there were no issues in the selection process but some fraud or corruption was found during execution or use, the corresponding amount will also be recovered.

A Presidential Office official stated, "We hope that this audit and institutional improvement of subsidies to private organizations will serve as an opportunity for non-profit private organizations, which are based on autonomy and transparency, to regain public trust and fulfill their original roles in accordance with their founding purposes."