Korean Institute of Certified Public Accountants "Welcomes Seoul Metropolitan Council's Decision to Mandate Audit for Private Commissioned Projects"

Seoul Metropolitan Council Passes Ordinance Amendment
"Enhancing Public Financial Transparency"

The Korean Institute of Certified Public Accountants (KICPA) expressed a welcoming stance on the 10th regarding the passage of an ordinance mandating accounting audits for Seoul's private consignment project expenses, which amount to approximately 1 trillion KRW annually.

The Seoul Metropolitan Council passed the "Partial Amendment to the Ordinance on Private Consignment of Administrative Affairs of Seoul Special City" at the plenary session on the 7th. Among the 62 members present, 37 voted in favor, 2 against, and 23 abstained. This ordinance mandates accounting audits on the usage details of private consignment project expenses.

The KICPA stated, "This amendment by the Seoul Metropolitan Council is consistent legislation aligned with policy directions such as strengthening accounting transparency in the public sector, including private consignment project expenses and subsidies, and preventing tax leakage. The KICPA will continue to actively cooperate with government and local authorities to enhance transparency in the public and nonprofit sectors and ensure that taxpayers' money is used properly."

Since 2014, Seoul has operated an accounting audit system for private consignment affairs involving public funds. However, in April 2022, the Seoul Metropolitan Council changed the accounting audit to an inspection of the project expense settlement statement, allowing tax accountants and others to conduct inspections. Subsequently, the Mayor of Seoul filed a lawsuit with the Supreme Court seeking invalidation of the ordinance for violating the Certified Public Accountant Act, but the Supreme Court dismissed the case in October last year. The reason was that, under the Local Autonomy Act, accounting audits for private consignment affairs are not mandatory, and thus local councils have discretion in choosing the audit method.

Even after the Supreme Court ruling, concerns were raised within the accounting industry and elsewhere that relaxing the verification level for private consignment project expenses could undermine the transparency and reliability of public finances. They argued that simplified inspections could lead to misuse of project funds and reduce the reliability of private consignment project expense settlements.

Choi Un-yeol, President of the Korean Institute of Certified Public Accountants