1,865 Cases of Fraud and Corruption in Private Organization Subsidies Detected
Fraudulent Usage Amounts to 31.4 Billion Won... Recovery and Other Measures
Lee Gwansub Chief "Nonprofit Organizations Must Restore Public Trust"
A unification movement organization was caught conducting lectures on the regime resignation movement and receiving subsidies under the pretext of a 'National Hero Discovery Project.' This organization also improperly paid manuscript fees exceeding three times the regulated amount to individuals who did not write the lecture manuscripts. Since early this year, the government has conducted a comprehensive audit targeting over 12,000 private organizations, uncovering cases of fraudulent and corrupt subsidy use. In response, President Yoon Suk-yeol instructed, "Operate a reward system where the public directly monitors the use of taxpayers' money."
On the afternoon of 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, involving 29 ministries auditing subsidy projects for private organizations. The government stated it would take necessary legal actions.
Previously, in December last year, the government had announced plans to investigate the scale and issues of subsidies as part of the Yoon Suk-yeol administration's national agenda to enhance transparency in subsidies for non-profit private organizations. This investigation covered approximately 68 trillion KRW in national subsidies paid to over 12,000 private organizations over the past three years. The audit revealed 1,865 cases of fraud and corruption in projects totaling 11 trillion KRW. The confirmed amount of misused funds alone was 31.4 billion KRW. The government plans to take strong measures including subsidy recovery, criminal prosecution, and investigation requests.
Lee Gwan-seop, Senior Secretary for National Planning at the Presidential Office, stated in a briefing, "We want to ensure that taxpayers' money is not wasted and that non-profit organizations regain public trust," adding, "We hope this serves as an opportunity for them to faithfully fulfill their original role of contributing to the public good."
Executive Communication Expenses Used at Entertainment Establishments... Cases of Date Manipulation and Fraudulent Subsidy Receipt
Among the fraud and misconduct cases discovered in this audit, a unification movement organization, under the pretext of discovering buried national heroes, received 62.6 million KRW and conducted political lectures such as "Social Agreement to Presidential Candidates" and "Diagnosis and Prescription of Government Dysfunction 100 Days after Yoon Suk-yeol Administration's Inauguration." These lectures included content about the movement to oust the Yoon Suk-yeol administration. The organization paid manuscript fees nearly three times the limit to individuals who were not the actual authors.
A separated family-related organization spent 5.41 million KRW on purchasing mobile phones and unpaid communication bills of former executives, as well as communication expenses used by current executives' families. It also misappropriated 15 million KRW for renting office space in China owned by a company owned by an executive.
Executives including the chairman of the F Federation used business promotion expenses amounting to 1.8 million KRW across 245 cases to purchase alcoholic beverages, spend at industries where subsidies are prohibited (such as entertainment establishments), or use them during weekends and late-night hours while promoting family support projects in the unification sector.
When job support projects were excessively expanded under the previous government, making it difficult for organizations to recruit eligible candidates, cases were uncovered where unqualified individuals?such as those already employed, entrepreneurs, or recipients of other job support funds?were selected, and documents were falsified to make it appear as if subsidies were paid to unemployed persons.
A regional children's center director forged transfer certificates using Photoshop to embezzle operating funds, and a case was confirmed where a single event was fraudulently claimed as multiple events 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.
Presidential Office: "Strong Institutional Improvements... Transparent Disclosure to the Public"
Based on the investigation results, the government plans to implement strong institutional reforms to fundamentally block fraud and corruption and enhance transparency in subsidies for private organizations. First, management and supervision of subsidy recipients will be significantly strengthened. For national subsidies, not only the primary recipient organizations but also subordinate organizations that execute the budget through delegation or re-delegation must all register in the national subsidy management system, ‘e-Naradoom.’ Accounting documents, settlement reports, and various proofs will be thoroughly registered and inspected to ensure transparent disclosure.
A new subsidy system will also be established for local governments. Until now, local governments 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 the national subsidy system.
External verification of project results will also change. The threshold for external verification of national 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, the exclusion period for project participation due to subsidy fraud will be set to five years. Furthermore, the management system, previously left to individual ministries' discretion, will be entrusted to the ‘Subsidy Execution Inspection Task Force,’ involving all 44 ministries under the overall coordination of the Ministry of Economy and Finance.
5 Trillion KRW Cut from Private Organization Subsidies... Serious Misconduct Cases to Face Criminal Prosecution and Investigation
The government will also push for a major restructuring of the private organization subsidy budget. This is a response to the nearly 20 trillion KRW surge in subsidies to private organizations during the previous administration despite widespread fraud and corruption. The Ministry of Economy and Finance and relevant ministries plan to re-examine the subsidy budget for private organizations from a zero-based perspective. Projects identified in this audit, those that have increased excessively recently, those habitually budgeted, and populist projects will be subject to restructuring. The plan is to reduce private organization subsidies by over 5 trillion KRW starting next year, with restructuring efforts continuing over the next four years rather than being a one-time measure.
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 fraud or corruption was found during execution or use, the corresponding amount will also be reclaimed.
Meanwhile, among the cases confirmed in projects totaling 11 trillion KRW, 86 cases involving serious misconduct such as subsidy misappropriation, embezzlement, rebates, and false statements will be criminally prosecuted or referred for investigation to judicial authorities. Additionally, over 300 cases involving misuse of funds, internal transactions, and others will be referred to the Board of Audit and Inspection for further audits. The Presidential Office explained that ministries are continuing to check for additional fraud and misconduct, and the number of investigations or audit requests may increase depending on the results.
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