The scale of projects delegated by local governments to private entities is growing every year. In Seoul alone, as of 2024, 942.4 billion won was invested in 345 delegated affairs. As resident self-governance spreads and administrative demands diversify, more projects are being entrusted to private organizations with specialized expertise. The types of facilities vary widely, including sports facilities, social welfare facilities, and water recycling plants. However, it remains questionable whether this massive budget is being used transparently and properly. In one elderly welfare center in Gyeonggi Province, the director embezzled 1 billion won in subsidies to repay personal debts. Meanwhile, an accounting officer at a comprehensive child care support center was found to have misappropriated over 1 billion won in delegated funds across 137 instances to purchase foreign-made cars and cover travel expenses. Ulsan City also discovered improper cost execution and unauthorized use of subsidies in its audit of privately delegated projects and decided to recover the relevant amounts.
The root cause of these problems lies in the lack of a systematic monitoring system for privately delegated projects. Merely checking receipts after costs are incurred is insufficient to detect intentional fraud such as false transactions, forged documentation, inflated prices, or family-based transactions. To systematically verify whether budgets are being executed appropriately according to project plans and operational standards set forth in delegation contracts, the introduction of accounting audits is necessary. Accounting audits analyze internal control structures of entrusted institutions, identify risk factors through analytical reviews, and comprehensively verify the authenticity of transactions and the completeness of ledger amounts.
Currently, local governments decide at their discretion whether to conduct accounting audits on privately delegated projects through ordinances, as there is no legal basis for such requirements. The Seoul Metropolitan Council initially relaxed its requirement in 2022 to a "project expenditure settlement statement inspection," but later determined that this approach had limitations in fiscal control and reinstated the full accounting audit system in March 2025. Relying solely on settlement statement inspections makes it difficult to detect fraud or achieve effective fiscal oversight. While some local governments, such as Yeongdeungpo-gu and Seongdong-gu, have recently mandated accounting audits for privately delegated projects, other local governments have instead relaxed the requirement to "simplified settlement statement inspections," creating shadow zones in project monitoring.
Currently, a bill amending the Local Autonomy Act to mandate accounting audits for privately delegated projects has been introduced in the National Assembly. The purpose of this legislation is to enhance financial transparency in privately delegated projects, prevent improper acquisition of budgets, and ensure consistency in oversight systems between national/local subsidies and privately delegated projects. Under the current Subsidy Act, accounting verification is required for national subsidies exceeding 1 billion won and local subsidies exceeding 300 million won, and submission of an accounting audit report is mandatory for annual subsidies totaling over 1 billion won.
The National Assembly should expedite passage of the Local Autonomy Act amendment to mandate accounting audits for privately delegated projects above a certain scale. Additionally, supervisory authorities—local governments—should encourage entrusted institutions to improve their internal controls to enhance budget execution transparency and establish an oversight system to monitor external auditors' accounting audits. Wherever public tax funds are used, appropriate verification must inevitably accompany it. The National Assembly and local governments must take seriously their fiduciary duty toward taxpayers.
in OPINION
