Private University Basic Assets Regulation Eased... Relaxation of Usage Change Criteria

Allowing Change of Educational Property from School Fund Account to Income-Generating Use Without Preservation
Expanding Use of Disposal Funds When Exceeding Income Property Acquisition Standards
Converting Permissible Businesses for Vacant School Facilities to 'Negative' System
Enabling Construction of Income-Generating Buildings on School Land

[Asia Economy Reporter Han Jinju] The Ministry of Education is easing regulations related to basic assets to help private universities overcome financial difficulties. When converting educational basic assets into revenue-generating assets, the conditions for preserving the school fund accounting will be relaxed, and if the acquisition of revenue-generating basic assets exceeds the standard, they will be allowed to be used for various purposes.

On the 14th, the Ministry of Education announced that it will revise the "Guidelines for Managing Basic Assets of Private Universities (Corporations)." This reflects the Supreme Court ruling last April that rejecting the conversion of educational basic assets into revenue-generating assets was illegal, as well as the demands of private universities.

The Ministry of Education first relaxed regulations on asset management for private universities that do not require legal amendments. In line with the government's national task to innovate university regulations, it also plans to undertake a comprehensive overhaul of the university establishment and operation regulations.

First, the Ministry of Education will ease the approval criteria when private universities convert educational basic assets into revenue-generating basic assets. Until now, when converting idle educational basic assets into revenue-generating assets, the market value of the assets had to be preserved in the school fund accounting.

Going forward, educational basic assets that exceed the standard and are not used for education or research can be converted without preserving the school fund accounting. However, if the conversion causes disruption to school operations or if the school principal requests preservation of the school fund accounting, preservation measures will be taken as an exception.

The Ministry of Education explained, "By converting land, buildings, etc., that are not used for education or research into high-quality revenue-generating basic assets, universities can generate income and reinvest the increased revenue into improving the educational environment, thereby enhancing the quality of university education."

If the acquisition of revenue-generating basic assets exceeds the standard, the proceeds from disposal can be used for various purposes beyond preserving the school fund accounting or paying taxes. Private universities (corporations) will be able to use the proceeds from disposing of idle revenue-generating basic assets to improve their management situation. However, school corporations must invest at least 80% of the income generated from revenue-generating basic assets in university education, and if it is judged that the school corporation is not sufficiently fulfilling its financial contribution obligations, approval may be restricted.

The regulation on industries allowed to occupy idle school facilities will be changed to a 'negative' system, allowing all industries except prohibited ones to move in. Until now, private universities have attracted various facilities such as banks and convenience stores to idle facilities for member welfare or revenue generation, but the Ministry of Education regulated this by specifying allowed industries in a 'positive' system. From now on, except for facilities or industries prohibited within the school, occupancy will be allowed without restrictions. Prohibited facilities and industries include private academies and entertainment bars.

Revenue-generating basic asset buildings can also be constructed on school grounds. Although the current university establishment and operation regulations do not restrict this, in practice, construction has been limited to buildings or facilities for educational purposes. Therefore, the Ministry of Education will clearly guide that revenue-generating basic asset buildings can be constructed if the school land acquisition rate standard is met and the school corporation bears appropriate costs. For example, a building with stores on the 1st and 2nd floors and classrooms on the 3rd to 5th floors can be constructed.

The Ministry of Education explained, "In the future, private universities will be able to build revenue-generating basic asset buildings on school grounds for income generation purposes, or buildings that are partly educational and partly revenue-generating."

Restrictions on the use of borrowed funds by private school corporations will also be eased. Various situations that could worsen the financial condition of private universities and school corporations will be recognized as unavoidable operational reasons, and borrowing for operating expenses will be allowed if there is a sufficient repayment plan and ability. Although the financial and accounting rules for private educational institutions specify that borrowing is possible if unavoidable for operations, the guidelines did not recognize temporary operating fund shortages as unavoidable reasons, effectively restricting borrowing. Universities facing temporary management difficulties such as wage arrears, tax delinquency, or debt repayment are expected to be able to secure emergency funding.

Additionally, the Ministry of Education will ease related approval procedures so that private universities and school corporations can proceed with the disposal of basic assets. For public interest project expropriation or leasehold rights registration of basic assets, if there is no separate response within 14 days from the date of notification, it will be considered automatically accepted. For basic assets difficult to dispose of within the approval validity period, the validity period will be extended or re-approval will be facilitated by relaxing standards.

Furthermore, the Ministry of Education will form and operate a "Private University Financial Condition Improvement Consultative Body" with the Korea Private School Promotion Foundation, school corporation officials, and others to promote institutional improvements for private university financial conditions and to identify related financial improvement tasks.

Kim Ilsu, Director of Higher Education Policy at the Ministry of Education, said, "The new government plans to introduce a statutory committee that can discover and improve university regulations, creating a systematic and continuous system for university regulation innovation. We hope that improving regulations related to asset management will help private universities overcome financial crises caused by declining student numbers and the COVID-19 situation."

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