Board of Audit and Inspection Regular Audit Released
"Internal Control Lacking... Widespread Moral Hazard"
It has been revealed that 135 Grade 5 officials at the Financial Services Commission (FSC) fraudulently received overtime pay amounting to approximately 46.61 million KRW over the past three years. Additionally, the FSC was found to have continuously engaged in illegal practices such as establishing director-level positions not stipulated in the organizational chart and unofficially dispatching employees from financial institutions.
On the 16th, the Board of Audit and Inspection (BAI) disclosed the full report of the "FSC Regular Institutional Audit," revealing these findings. This audit was conducted because the FSC had failed to review basic operations such as organization and personnel for seven years since the 2016 "Institutional Operation Audit."
The audit results showed that the FSC's internal controls were insufficient, leading to problems not being corrected early on, becoming systemic, and widespread moral hazard.
In particular, fraudulent receipt of overtime pay was carried out on a large and organized scale. Among 182 Grade 5 officials at the FSC, 135 (74.2%) were found to have fraudulently received overtime pay 2,365 times over the past three years (April 2020 to March 2023), totaling approximately 46.61 million KRW.
Entering Work Hours as if Working After Drinking or on Weekends
The BAI explained that these officials continued this practice over three years by inputting overtime work hours as if they had worked at the office after weekday dinners or drinking sessions on their way home, or by visiting the office on weekends without any special duties. The severity of the misconduct worsened each year.
According to regulations on public official allowances, fraudulent receipt amounts of 1 million KRW or more are subject to salary reductions up to dismissal (for amounts under 1 million KRW: reprimand up to dismissal), full recovery of the fraudulent amount, and an additional penalty of five times the amount recovered.
However, in November 2021, following the Prime Minister's directive, the FSC conducted a sample inspection and detected fraudulent receipt by seven employees but only recovered the fraudulent amounts without imposing disciplinary or personnel measures, nor did they apply the additional penalty.
Accordingly, the BAI demanded that the FSC Chairman recover and collect a total of 216.32 million KRW, including the fraudulent amounts and penalties, and thoroughly strengthen internal controls to prevent recurrence of similar cases.
Operation of Non-Established Senior Positions... Illegal Dispatch to Private Institutions
Furthermore, despite parliamentary criticism in 2016, the FSC maintained 14 irregular departments, about 46% of its 33 regular departments, and illegally and improperly operated its organization and personnel by dispatching 53 personnel, about 16% of its authorized staff of 333, from private institutions.
As a result, senior positions not stipulated in the organizational chart (1 director-level, 14 manager-level) were operated, leading to an additional expenditure of 200 million KRW on position performance expenses and department operating costs from 2017 to May 2023. In particular, private institution employees were dispatched to understaffed departments such as the Corporate Accounting Team, with a total of 329 dispatched since 2017, of which 44 were unofficially dispatched without proper procedures.
The BAI stated, "The FSC Chairman has been instructed to immediately abolish irregular departments, regularize the organizational chart, and prepare improvement plans for inappropriate dispatches such as administrative support purposes and long-term dispatches. The Minister of the Ministry of the Interior and Safety has been notified to prepare measures to conduct organizational diagnosis and staffing audits of the FSC."
Additionally, the FSC has introduced and operated a technology finance system that provides loan limits and interest rate benefits to startups and small and medium enterprises (SMEs) with excellent technological capabilities. However, it was confirmed that nearly half of the technology evaluation reports (TCB) for these companies did not meet the conditions for recognition as technology finance targets. The FSC also inflated technology finance performance by including all loans accompanied by TCB evaluation reports in the technology finance statistics, claiming that the number of cases increased by 59 and the loan balance increased 36-fold from 2014 to 2022.
Moreover, the Bank of Korea supports policy funds at about 2% for technology finance loans by commercial banks, recognizing them as technology finance loans solely based on TCB evaluation reports without restrictions on industry or appropriateness verification. This includes support for sectors such as clinics and service industries, which do not align with the purpose of technology-based startups, leading the BAI to demand improvements to the system.
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