Measures to Enhance Accounting Transparency in Nonprofit Organizations and the Public Sector
Calls for Mandatory Audits of Local Government Outsourcing Projects
Kim Bumjun: "Supervisory Bodies Must Be Led by Accounting Experts"
There have been calls to enhance accounting transparency in nonprofit organizations and the public sector, where large amounts of taxpayer money are invested. Proposed measures include making accounting audits mandatory for local government outsourcing projects and establishing a supervision system led by professionals.
Professor Bumjun Kim of the Department of Accounting at Catholic University is giving a lecture on "Accounting Transparency in the Nonprofit and Public Sectors" at the Accounting Issues Seminar held on the 12th at the Kensington Hotel Yeouido in Seoul. Provided by the Korean Institute of Certified Public Accountants
Professor Bumjun Kim of the Department of Accounting at Catholic University pointed out at the Korean Institute of Certified Public Accountants' Accounting Issues Seminar held on the 12th at the Kensington Hotel Yeouido in Seoul, "Although accounting audits are being strengthened in nonprofit sectors such as multi-unit buildings, local government subsidies, and private schools, various incidents such as embezzlement and misuse of funds continue to occur." He emphasized, "Unlike corporations, stakeholders in the nonprofit sector include citizens, taxpayers, and donors, so active intervention by supervisory authorities and enhanced accounting audits are necessary." He argued that, since the providers of funds (taxpayers) and the beneficiaries do not coincide, there must be more rigorous oversight to ensure that resources are used appropriately.
However, Professor Kim pointed out that some local governments are moving in the opposite direction. For example, the Seoul Metropolitan Council passed an amendment to the Seoul City Ordinance in 2022 that changed the requirement for accounting audits of outsourcing projects to a review of the project expense settlement report. This review is a simpler process than an accounting audit, as it does not verify the authenticity of supporting documents or the appropriateness of expenditures. In October last year, the Supreme Court ruled that local government heads have the discretion to choose this method, siding with the Seoul Metropolitan Council. Regarding this, Professor Kim stated, "The purpose of accounting audits for outsourcing projects is to detect and recover funds used for unauthorized purposes, false transactions, forged documents, or inflated prices, but this cannot be achieved through a simplified review." He further pointed out, "This is inconsistent with the government's ongoing efforts to strengthen oversight of project subsidies in order to prevent fraudulent claims at the source."
Professor Kim stated, "To improve accounting transparency in nonprofit organizations and the public sector, accounting audits should be made mandatory for local government outsourcing projects above a certain scale, and accounting reporting and internal controls should be strengthened." He added, "Related accounting and auditing standards also need to be further advanced." He further emphasized, "Supervisory bodies for accounting audits, such as local governments, the central government, and local councils, need to establish a supervision system composed of accounting audit experts in order to effectively carry out oversight duties and strictly manage the quality of accounting audits."
Choi Unyeol, chairman of the Korean Institute of Certified Public Accountants, is delivering a greeting at the accounting issues seminar held on the 12th at the Kensington Hotel Yeouido in Seoul. Provided by the Korean Institute of Certified Public Accountants
The Korean Institute of Certified Public Accountants has stated that it will continue its efforts to maintain the accounting audit system in nonprofit organizations and the public sector. At the seminar, Choi Unyeol, chairman of the Korean Institute of Certified Public Accountants, said, "We are currently in discussions with the Seoul Metropolitan Government and the National Assembly to restore the accounting audit system for outsourcing projects, and once the Seoul Metropolitan Council convenes this month, we will actively pursue a re-amendment of the Seoul City Ordinance." He added, "Based on our experience improving accounting transparency in the for-profit sector through the introduction of the new External Audit Act, we will play an active role in advancing public sector accounting policy."
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