Management of Public Institution Safes Becoming Transparent

- ACRC recommended improvements of the management system for public institution safes to the Ministry of Economy and Finance, Ministry of the Interior and Safety, Ministry of Education, and Financial Services Commission, minimizing cooperation project costs received from banks through safe designation

(April 18, 2024, ACRC)

In the future, it is expected that public institutions will establish criteria for selecting safes* and cooperation project costs received through safe designation will be transparently disclosed.

* Typically referred to as “main bank,” which is a financial institution designated by the head of a local government through a form of contract to handle tasks, such as the receipt and disbursement and storage of cash and securities, collection of revenues, and payment of expenses

On April 17, the Anti-Corruption and Civil Rights Commission (ACRC, Chairperson Ryu Chul Whan) formulated measures to “enhance the transparency in the management of public institution safes” and recommended them to the Ministry of Economy and Finance, Ministry of the Interior and Safety, Ministry of Education, and Financial Services Commission.

According to the results of a fact-finding survey conducted by ACRC, state-owned enterprises and local state-owned enterprises, unlike offices of education and local governments, have concluded long-term private contracts of up to 7 years without grounds for the designation of the institution’s safes and selection criteria.

※ 17 out of 30 state-owned enterprises and 12 out of 24 local state-owned enterprises that submitted materials designated safes through private contracts.

Some state-owned enterprises and local state-owned enterprises have designated the same safe as the local governments where the institution is located without legal or internal regulatory grounds or received preferential interest rates for employees, condominium stay vouchers, and scholarships in the name of cooperation project costs.

Meanwhile, the scale of cooperation project costs received in exchange for safe designation by 41 local governments and 18 national or public universities that submitted materials to ACRC amounted to approximately 900 billion won over the past 4 years.

If the competition for the payment of cooperation project costs among banks becomes overheated, it may act as a factor raising costs, leading to increased loan interest rates and usage fees, which could be passed on to the burden of general customers.

In particular, university safes can attract freshmen as lifelong customers, making competition even fiercer. The criteria for allocating cooperation project costs in the selection process of safes of national or public universities were twice as high as those of local governments, exerting a greater influence on safe selection.

In addition, although public institutions have an obligation to transparently disclose the details of cooperation project costs received from safes, it was found that they continue not to disclose the details on the grounds of confidentiality clauses in their contracts with banks.

Moreover, in cases where cooperation project costs provided by banks exceed 1 billion won over 5 years, the details must be disclosed in accordance with Article 29-3 of the Regulation on Supervision of Banking Business. However, the names of the institutions receiving them were not specified, making it difficult for outsiders to recognize them.

In this regard, ACRC recommended that the Ministry of Economy and Finance and the Ministry of the Interior and Safety guide and supervise public institutions, including state-owned enterprises, to establish and operate criteria for transparent selection of safes.

Furthermore, the Commission recommended minimizing the proportion of cooperation project costs received by public institutions and prohibiting their use for private interests, such as the welfare of internal staff and executive members. ACRC also recommended gradually reducing the evaluation points for cooperation project costs received by local governments through their designation of safe banks to encourage interest rate-oriented competitions.

In addition, ACRC recommended that banks specify the names of institutions receiving cooperation project costs provided to public institutions when disclosing them, ensuring that citizens can easily understand.

ACRC Vice Chairperson Kim Tae Gyu said, “With this institutional improvement recommendation, we anticipate that various benefits obtained by depositing precious taxes paid by the people can be transparently operated and return to the public interest.”