Audit Board Reveals Poor Management of Public Property in Seoul Metropolitan Area
"Annual Public Property Omissions Reach 3.5 to 5.8 Trillion Won"
Ministry of Interior and Safety Notified to Prepare Prevention Measures
The Board of Audit and Inspection confirmed that the city of Guri suffered a loss of 1.74 billion won after accepting a performance guarantee insurance policy worth approximately 2 billion won, issued by an unauthorized company, during the process of leasing the Guri Distribution Complex Market and collecting annual lease payments in installments. The Board requested disciplinary action of at least a minor level against three responsible officials.
On August 5, the Board of Audit and Inspection announced that, despite annual surveys of public property, cases of property omission continue to recur, and there are also problems in the management and utilization of public property, such as the failure to disclose information about idle public assets. The Board released the results of its inspection into the acquisition, sale, and management practices of public property in the Seoul metropolitan area.
The company that leased the Guri Distribution Complex Market from the city of Guri for five years starting in April 2021 submitted an insurance policy issued by Seoul Guarantee Insurance to the city for the second-year installment payment in April 2022. However, in 2023, when Seoul Guarantee Insurance refused to issue a policy due to the company’s deteriorating financial situation, the company reported to the city of Guri that it was possible to submit a policy from an unauthorized company and proceeded to extend the contract.
The Board of Audit and Inspection stated, "The city of Guri extended the contract based solely on a copy of the insurance policy, which was issued by an unauthorized company listing Gyeonggi Province and Pyeongtaek City as the insured parties, without verifying whether Gyeonggi Province and Pyeongtaek City had actually received the policy or whether the insurance company had received management approval from the Financial Services Commission." The Board further explained, "The financial company in question had not received approval from the Financial Services Commission and therefore had no authority to issue insurance policies, and neither Gyeonggi Province nor Pyeongtaek City had any record of receiving such a policy in connection with this case."
The city of Guri did not win a lawsuit to claim the insurance payout from the unauthorized financial company until April 2024. However, it failed to recover the unpaid lease payments totaling approximately 1.74 billion won from June 2023 until the contract was terminated in February 2024. As a result, the Board of Audit and Inspection requested that the mayor of Guri impose disciplinary action of at least a minor level against three officials involved, as they accepted a guarantee insurance policy issued by an unauthorized company, in violation of Article 4 of the Insurance Business Act, resulting in financial loss.
Additionally, the Board of Audit and Inspection notified three officials in the city of Gimpo of personnel record reporting and issued a warning after finding that the city changed land designated for schools to sites for cultural and quasi-residential facilities to support a city development association, and acquired land for cultural facilities worth approximately 19.9 billion won without establishing a basic plan.
Gimpo City changed land designated for schools and public sites within a city development project area to land for cultural and quasi-residential facilities (from general type 1 to quasi-residential) in May 2020. Without establishing a basic plan, the city conducted an internal investment review and acquired land for cultural facilities worth approximately 19.9 billion won in July 2021, which remained unused for an extended period.
According to Article 54 of the Urban Development Act, the costs of urban development must be borne by the project implementer. In addition, Article 41 of the Enforcement Decree of the Local Finance Act stipulates that local government investment projects must undergo investment review after establishing a basic plan and estimating total project costs, and especially, new construction of government offices and cultural facilities must undergo investment review by higher-level authorities.
In particular, during the city planning committee's review process for changing the development plan, Gimpo City provided committee members with review materials that omitted the fact that the land use change was intended to address a project budget shortfall. The Board of Audit and Inspection stated that all 11 committee members testified that, had they known this fact, they would have either rejected or reconsidered the proposal.
Furthermore, the Board of Audit and Inspection found that the city of Siheung conducted an incorrect appraisal of industrial land in a free economic zone, resulting in sales at prices 800 million to 1.8 billion won below market value, or proceeded with additional sales based on business plans that did not reflect the facts. The Board instructed the city to establish appropriate measures in accordance with the sales contract and issued warnings to three officials involved.
Meanwhile, the Board of Audit and Inspection reported that, during the annual public property surveys conducted by local governments nationwide, between 3.5 trillion and 5.8 trillion won worth of public property has been omitted from public property registers. The Board notified the Ministry of the Interior and Safety that it is necessary to establish measures to prevent such omissions, including improvements to the management system.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
