Citizen Groups Increasing by 500... Voices Calling for 'Accounting Improvement'

Citizen Groups with Growing Social Influence
Demand Transparent Accounting
to Promote Donation Culture

On the 13th, amid ongoing controversies regarding the accounting of donations to the Justice and Memory Solidarity, Inayeong, the director of Justice and Memory Solidarity, spoke at the 1,439th regular Wednesday demonstration for the resolution of the Japanese military sexual slavery issue, held on Peace Road in front of the former Japanese Embassy in Jongno-gu, Seoul. Photo by Moon Honam munonam@

[Asia Economy reporters Lee Gwan-ju and Jeong Dong-hoon] Amid various allegations related to the civic group 'Jeong-ui Giyeok Yeondae (Justice Network),' which has supported the victims of Japanese military sexual slavery, there are growing concerns that this issue is not limited to Jeong-ui Yeon alone. Every year, more than 500 new nonprofit civic organizations are established, and there is a consensus that transparent accounting and oversight are necessary to promote a proper donation culture.

According to the Ministry of the Interior and Safety, the National Tax Service, and the Korea Guide Star Foundation, an organization that analyzes and evaluates public interest corporations, South Korea's civil society sector has experienced quantitative growth in recent years. The number of nonprofit private organizations registered with government ministries and local governments was 10,889 in 2012, just over 10,000, but as of the first quarter of last year, it rose to 14,404, an increase of about 32% over seven years. This means that more than 500 private organizations were newly established each year during this period. This also indicates that the social influence of civic groups has increased accordingly.

However, questions remain as to whether qualitative growth has accompanied this quantitative expansion. A representative issue is the transparency of accounting. Public interest corporations required to disclose financial statements on the National Tax Service website are those with total assets exceeding 500 million KRW and annual income and contributed assets totaling over 300 million KRW. Last year, 9,663 organizations fell under this category, which accounts for about 67% of all nonprofit private organizations.

The problem is that most civic groups rely on donation income and government subsidies for their operations. While government subsidies are subject to subsequent verification and external audits by the relevant authorities, donations are not obligated to undergo external audits. Despite the fact that donations come from the goodwill of many donors and thus require even more transparent accounting, only 3,814 of the 9,663 public interest corporations subject to National Tax Service disclosure (39.5%) underwent external audits, which is less than half.

The poor overall environment of civic groups also encourages inadequate accounting. Except for some representative civic groups such as People's Solidarity for Participatory Democracy, many civic groups operate with just about ten members. Jeong-ui Yeon, which recently faced issues, has only nine full-time employees according to its disclosures. It is difficult to have dedicated accounting personnel, and it is rare to find civic groups that disclose who conducts internal audits. Professor Bae Won-gi of the Taxation Department at Hongik University Graduate School of Business pointed out, "If there is no dedicated accounting staff and internal controls are weak, the likelihood of errors in accounting processing is high."

Last year, donations to public interest corporations reached about 6.3 trillion KRW. Including non-disclosing corporations, domestic donations are estimated to be even higher. Voices are growing that transparent accounting in civil society is essential to promote a culture of giving. Professor Bae suggested, "To increase transparency, external accounting audits are necessary," adding, "The cost of external accounting audits is around 5 to 10 million KRW, and it is necessary to consider this cost when conducting fundraising activities."

Meanwhile, there are opinions that poor accounting disclosures cannot be immediately linked to fraud by specific civic groups. Kim Deok-san, CEO of the Korea Public Interest Corporation Association (and a certified public accountant), said, "There are limitations to fully examining the internal affairs of public interest corporations based solely on accounting information," and added, "It is difficult to conclude that errors in some form submissions are necessarily embezzlement or misuse."

This content was produced with the assistance of AI translation services.