Going forward, local governments will face limits on the number and amount of discretionary contracts they can sign with the same company. System controls will also be strengthened to prevent accounting officials from arbitrarily changing a vendor's account information to siphon off public funds.
After allegations surfaced that some local council members benefited from discretionary contract favoritism and that accounting officials at local governments embezzled public funds, the government moved to overhaul the discretionary contract system and tighten controls on public money management.
The Ministry of the Interior and Safety (MOIS) said on the 13th it will introduce a cap on single-quote discretionary contracts with the same company to prevent funneling contracts to specific firms.
From now on, basic local governments will be barred from signing discretionary contracts with the same company more than five times a year or exceeding 2 billion won, and metropolitan local governments will be barred from exceeding seven times a year or 3 billion won. Sejong and Jeju will follow the basic local government standard.
For general corporations, single-quote discretionary contracts with an estimated price of 20 million won or less are subject to the restriction. Youth startups, women-owned, and disability-owned corporations are included for contracts up to 50 million won.
However, if there are unavoidable reasons such as a shortage of local companies, an exception may be made after review by the contract review committee.
Each local government may set its own cap within the maximum set by the Ministry of the Interior and Safety (MOIS). The results of the contract review committee that recognized exceptions to the cap must be disclosed on the website and reported quarterly to the higher authority.
Disclosure of discretionary contract information will also be strengthened. Currently, local governments disclose discretionary contract information such as the company name, representative, and address on their websites. However, some local governments omit required information or make it difficult to identify companies. The Ministry of the Interior and Safety (MOIS) plans to clearly define all items that must be disclosed and add the business registration number to the disclosure list.
The Local Council Act, which is being pushed for enactment within the year, will include provisions to block local council members' evasive discretionary contracts. An ethics review advisory committee composed of civilian members will review the connection between a local council member's concurrent job report and for-profit activities, and may recommend a leave of absence from the concurrent position or prohibit assignment to the relevant standing committee.
Referring to the National Assembly Act, local council members will also be required to register and disclose private stakeholders. If a local government signs a discretionary contract with a local council member's private stakeholder, the member must report it in advance to the ethics review advisory committee, and if the committee finds the contract inappropriate, it may recommend the local government reconsider it.
Management of public funds by local governments will also be strengthened. Earlier, at a Community Service Center in Yeongcheon, North Gyeongsang, an accounting staff member allegedly manipulated the computer system more than 230 times from Nov. last year to Jun. this year to siphon off 2.5 billion won from local government finance. At a township office in Geochang, South Gyeongsang, an accounting staff member is suspected of making more than 150 false expenditures from the second half of 2024 to Feb. this year to divert public funds.
In this regard, the Ministry of the Interior and Safety (MOIS) on the 4th asked local governments nationwide to conduct a full inspection of public fund management and ordered checks in the order of eup, myeon, and dong offices and agencies—where internal controls are relatively weak—followed by cities, counties, and districts. Based on methods identified in recent embezzlement cases, the ministry plans to focus on mismatches between vendor names and account holder names, transactions that include the responsible official's name, and fraudulent use of ordinary deposits accounts in the local government's name.
Vice Minister Kim Min-jae of the Ministry of the Interior and Safety (MOIS) said, "Through these measures, we will detect abnormal transactions early and build a tight public fund management system that blocks arbitrary account changes and abnormal public fund expenditure within the system in advance," adding, "We will do our utmost to ensure that the people's precious taxes are managed more safely and transparently."