Seoul City Conducts Special Audit of 'Nodeul Island Complex Cultural Space'... Operating Company Reported for Embezzlement and Breach of Trust of Consignment Funds

Seoul City "Operational Failures Due to Non-Expertise of Nodeul Island Complex Cultural Space Operator"... 6 Measures Notified

[Asia Economy Reporter Lim Cheol-young] Seoul City announced on the 15th that problems in the operation of Nodeul Island were revealed through a special audit of the Nodeul Island complex cultural space, including the detection of inexperienced representatives operating commercial facilities and embezzlement and breach of trust allegations involving private consignment funds by the operating company.

Seoul City decided to develop Nodeul Island as a complex cultural space through a public contest in November 2015 and selected a winner. However, due to amendments in private consignment regulations preventing contracts with winners who did not possess patents or new technologies, the current operating company was selected as the entrusted institution through a private consignment contest from February to May 2018.

Accordingly, the Audit Committee evaluated that "the Nodeul Island complex cultural space has deteriorated into a space with low usage by the general public because a consortium with insufficient experience and low expertise in the relevant field was selected during the selection process."

This special audit was initiated to identify problems arising during the selection and operation of the operating company and to restructure the space into a popular area easily accessible to citizens.

The main audit findings include ▲reporting the operating company for embezzlement and breach of trust of private consignment funds and notifying contract termination ▲poor operation of entrusted duties caused by the withdrawal of a commercial facility specialist company from the consortium ▲improper contract signing with an unregistered construction company, among others.

The Audit Committee uncovered that while the operating company was conducting business, it falsely prepared a contract despite no rental of performance equipment in April 2020 and spent a contract payment of 22 million KRW in December 2020, embezzling and breaching trust of approximately 56 million KRW. The operating company was reported on October 13. The Audit Committee also judged that although the operating company formed a consortium of three companies at the time of the agreement in June 2018, one company withdrew in December of the same year without adding new members, causing poor operation and citizen inconvenience.

Furthermore, the operating company was pointed out for violating local contract laws by signing construction contracts with unregistered construction companies that did not meet qualification requirements during the project execution. Specifically, in August 2019, the operating company signed contracts exceeding 15 million KRW with C Architecture Office, an unregistered construction company, among a total of four contracts over 15 million KRW, thereby violating local contract laws.

Accordingly, the Audit Committee instructed the supervising department to notify the consortium violating related laws or guidelines of contract termination and held the supervising department accountable for negligence in settling private consignment funds, failing to detect embezzlement and breach of trust, resulting in institutional warnings and other measures. The final audit results will be disclosed after a one-month reconsideration period.

Lee Gye-ryeol, Seoul City Audit Officer, stated, “We will continue to take strong actions such as reporting if illegal activities like embezzlement of project funds occur in subsidized businesses or private consignment institutions, and we plan to strengthen guidance and supervision to prevent unethical misconduct.”

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