'Nonprofit Corporation Accounting Expert' Professor Baewon Ki: "Urgent Civil Law Revision Needed to Prevent 'Second Jeonguiyeon Incident'"

Interview with Accounting Expert Professor Baewon Ki on Nonprofit Corporations

Need to Amend Civil Law for Integrated Management of Nonprofit Corporations

Government Tasks Related to Nonprofit Corporations Are Scattered Across Multiple Ministries, Reducing Expertise and Failing to Provide Oversight Like with Jeonguiyeon

Small Organizations Lack Accounting Skills, Requiring a Slower Pace for Transparency Efforts

Wonki Bae, Professor, Department of Taxation, Graduate School of Business, Hongik University

[Asia Economy Reporter Donghoon Jeong] Amid the accounting irregularities of nonprofit organizations such as Jeongui Gieok Yeondae, Bae Won-ki, a professor in the Department of Taxation at Hongik University Graduate School of Business, an expert in this field, suggested that "the government should unify the management of nonprofit organizations."

According to the National Assembly on the 18th, since the opening of the 21st National Assembly, about 20 bills related to nonprofit organizations have been proposed, including 10 bills on the Act on the Collection of Donations, 3 bills on the Act on Support for Nonprofit Private Organizations, 6 bills on the Act on the Establishment and Operation of Public Interest Corporations, and 1 bill on the Community Chest of Korea Act.

Professor Bae pointed out that amending the Civil Act should come first to resolve accounting irregularities like those of Jeongui Gieok Yeondae. He said, "Jeongui Gieok Yeondae is not a foundation corporation under the Public Interest Corporation Act but a foundation corporation under the Civil Act," adding, "The Jeongui Gieok Yeondae issue cannot be resolved solely by amending the Public Interest Corporation Act."

Professor Bae has maintained a steady interest in the accounting issues of nonprofit organizations, serving as a part-time auditor for 4 to 5 nonprofit organizations for over 15 years. During the 2017 political scandal involving the K-Sports Foundation and Mir Foundation, he raised his voice for reform whenever accounting irregularities and fraud issues in nonprofit organizations surfaced.

He explained, "Article 32 of the Civil Act stipulates that 'the establishment of a nonprofit corporation requires approval from the competent authority,' but this law was enacted in the late 19th century during Japan's modernization period." He criticized, "If the Civil Act is not amended and only the Public Interest Corporation Act is revised, the authority to approve the establishment of nonprofit corporations will remain with each competent authority as it is now, making integrated management of nonprofit and public interest corporations, which the amended Public Interest Corporation Act aims for, impossible." He emphasized, "Reports required by each competent authority, the Act on the Collection of Donations, and tax laws should also be integrated."

Japan abolished the 'provisions related to public interest corporations' in the Civil Act in 2006 and established the so-called 'three public interest corporation laws.' The establishment of nonprofit corporations that do not pursue public interest was made similar to establishing a stock company, allowing anyone to establish them without approval from the competent authority. Public interest corporations pursuing public interest were fundamentally reformed to require certification from the Public Interest Recognition Committee. Professor Bae pointed out, "In Korea, all nonprofit corporations are exempt from corporate tax on their unique purpose business, but this tax exemption should be changed so that nonprofit corporations without public interest do not receive tax benefits."

He said, "The work related to nonprofit or public interest corporations is scattered across various ministries, resulting in a lack of expertise and insufficient supervision and management," and added, "It is necessary to create a government body, tentatively called the 'Public Interest Committee' or 'Citizen Public Interest Committee,' to unify these tasks." There were many criticisms that the accounting irregularities of Jeongui Gieok Yeondae were due to the division of management and supervision among the competent ministry, the donation accounting management department, and the national subsidy payment department.

He said, "Looking at the proposed amendments, it seems like the law is being revised in a 'patchwork' manner, fixing bugs as holes appear," and argued, "It is desirable that the Act on the Collection of Donations under the Ministry of the Interior and Safety, the Act on Support for Nonprofit Private Organizations, and the Basic Act on Cooperatives under the Ministry of Strategy and Finance be amended simultaneously," adding, "Reports required by each competent authority, the Act on the Collection of Donations, and tax laws should also be integrated."

He also emphasized the need for 'speed control' in enhancing accounting transparency of nonprofit organizations. Professor Bae said, "There is a discussion in the National Assembly about punishing public interest corporations that do not appoint an audit committee and conduct audits, but this is done without understanding the realities of nonprofit organizations," and stated, "The urgent task is for accountants to assist small organizations in preparing financial statements in accordance with public interest corporation accounting standards."

He also pointed out the issue of 'checks and balances' within nonprofit organizations. He criticized, saying, "Checks and balances are essential in any organization or group," and questioned whether the 29 registered directors in Jeongui Gieok Yeondae and the 5 in Jeongdaehyeop fulfilled their duties as directors, suggesting a need for reflection."

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