'Prevention of Local Subsidy Fraud' Amendment Bill Approved at Cabinet Meeting... Ministry of the Interior and Safety "Systematic Management of Subsidies"

Expansion of Exclusion from Local Subsidy Projects for Fraudulent Receipt of Local Subsidies
Establishment of Legal Basis for 'Local Subsidy Integrated Management Network'

[Asia Economy Reporter Lim Cheol-young] The Ministry of the Interior and Safety announced that the amendment to the "Act on the Management of Subsidies by Local Governments," aimed at preventing fraudulent claims of local subsidies and systematically managing local subsidies, was approved at the Cabinet meeting on the 30th.

This amendment was prepared in recognition of the need to enhance transparency and accountability in the operation of local subsidies, as the scale of local subsidies exceeded 50 trillion won this year and increased by 15 trillion won over the past five years. The amendment is scheduled to be submitted to the National Assembly in early September after presidential approval.

The amendment expands the scope of exclusion from performing local subsidy projects in cases of fraudulent claims from the current local subsidy project operators and recipients to include fraudulent contractors, and clarifies the period and scope of exclusion to ensure accountability. It also expands the scope of punishment by stipulating penalties (imprisonment for up to 10 years or fines up to 100 million won) for those who fraudulently receive local subsidies and those who knowingly disburse them. Furthermore, it imposes a disclosure obligation on local government heads regarding significant assets formed by local subsidy project operators using local subsidies and establishes sanctions for violations of the obligation to process local subsidy management information to ensure the effectiveness of information processing obligations.

In addition, to secure transparency in the management of local subsidies, the "Integrated Local Subsidy Management Network" will be launched in January next year, and legal grounds for its operation will be newly established. The Ministry of the Interior and Safety plans to receive and process information such as financial and credit data from heads of related agencies to verify the qualifications of local subsidy project operators and prevent fraudulent claims, and to integrate the management of local subsidy execution details through linkage with other systems. Through the integrated management network, the method of local subsidy disbursement will shift from the current "advance disbursement and execution, followed by settlement" to an online execution and real-time verification system of "prior evidence submission, followed by disbursement and execution," thereby preventing fraudulent claims in advance.

Minister Lee Sang-min stated, "This amendment aims to enhance accountability and transparency in the management of local subsidies, which are often perceived as 'blind money.' Since local subsidies are inherent resources of local governments, we will continue to cooperate with local governments to prevent fraudulent claims and strengthen the management system."

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