Board of Audit and Inspection: "SH Corporation, Unfair Cost Estimation in Magok Development"... Issued 'Caution' Notice

[Asia Economy Reporter Baek Kyunghwan] SH Corporation (Seoul Housing and Communities Corporation) has been found to have improperly calculated part of the development cost for the Magok Urban Development Project. The amounts over- or under-calculated for charges and project costs alone reach hundreds of billions of won.

According to the audit report disclosed by the Board of Audit and Inspection on the 31st, SH Corporation improperly calculated the developer charges for the Metropolitan Transportation Improvement Plan, the sewerage cause-based charges, and new project costs for smart city construction during the process of estimating the development cost for the Magok Urban Development Project, which is worth 7.2806 trillion won as of 2019.

Among these, the developer charges for the Metropolitan Transportation Improvement Plan were reduced by 16.19 billion won after completion of 7 out of 10 projects, and the payment was completed accordingly. However, SH Corporation reflected the originally estimated amount without considering this reduction.

Conversely, the sewerage cause-based charges were underestimated. Although Seoul City imposed a charge of 37.15 billion won, SH Corporation incorrectly applied the sewerage generation volume in October 2019 and calculated it as 19.38766 billion won, then reflected this amount in the development cost and finalized it. Additionally, the new project costs for the smart city construction project were improperly reflected as 31.01783 billion won despite the absence of specific development and implementation plans.

Accordingly, the Board of Audit and Inspection notified the president of SH Corporation to recalculate the development cost for the Magok Urban Development Project by adjusting the over- and under-reflected amounts for these three project costs and to apply this recalculated cost in settlements with tenant companies. Furthermore, they requested strict attention to ensure that various charges are not incorrectly or improperly reflected when estimating development costs for future urban development projects.

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