[Chatham House Roundtable] "Political Funding and Accounting Transparency Must Be Secured to Change Political Culture"

Flawed National Assembly Members' Financial Reports Undermine Representative Democracy Trust
Need to Find Transparency Measures Like Real-Time Expense Disclosure
Misuse of Funds Leads to Nomination Loss...Urgent Need for Political Culture Change
Explore Alternatives Such as Incentives and Credits for Members Nearing End of Term

Editor's NoteAsia Economy reported on the use of political funds by lawmakers nearing the end of their terms through the planned series . While some lawmakers spent their remaining political funds in line with public expectations, there were cases where ambiguous regulations and lax standards for verifying accounting reports were exploited to spend funds like petty cash. Following the series, Asia Economy held a Chatham House Rules roundtable discussion on the theme of ‘The Actual Operation of Political Funds and Institutional Improvements.’ The aim was to expand the discussion beyond sponsorship funds to explore ways to ensure transparency in lawmakers’ political funds.

The roundtable included Professor Seongjin Yoo from Ewha Womans University’s Scranton School, Secretary-General Kwangjae Lee of the Korea Manifesto Practice Headquarters, Secretary Changsool Lee of the Yongin-si Giheung-gu Election Commission (author of 'Understanding the Political Funds Act'), and former lawmaker Hyeyoung Jang. Participants exchanged views on the opacity and management issues of political fund accounting. They agreed on the need for institutional improvements to enable lawmakers to use political funds fairly, such as allowing real-time access to expenditure details, and emphasized that political culture must also change. Various measures were proposed to ensure that transparent political fund spending could influence voting decisions in upcoming elections. The roundtable followed the Chatham House Rule, disclosing the list of participants but keeping individual remarks anonymous.

Moderator= Jongseop So, Political and Social Managing Editor

Experts attending the Chatham House roundtable held on the 26th at Asia Economy in Jung-gu, Seoul, are sharing their opinions on the transparency of political funds. From the left, former lawmaker Jang Hye-young, Professor Yoo Sung-jin of the Scranton Department at Ewha Womans University, So Jong-seop, Political and Social Managing Editor, Lee Chang-sul, Secretary General of the Yongin-si Giheung-gu Election Commission, and Lee Kwang-jae, Secretary General of the Korea Manifesto Practice Headquarters. Photo by Yoon Dong-ju

What is the biggest problem with political fund expenditures used for lawmakers’ political activities?

A: The accounting related to lawmakers’ political funds is too lax. The preparation standards are unclear, and the verification is ambiguous, so lawmakers feel it’s convenient for them. Corporate accounting standards are very strict. The regulations are detailed, and because the reports are public, they serve as important criteria when evaluating companies. However, lawmakers’ accounting reports are managed by the Election Commission, but since very detailed regulatory guidelines are not provided, each lawmaker’s style is very different. Even for something like a meeting, some lawmakers’ offices write very simply and broadly about how political funds were spent, while others write in great detail. This diversity itself shows how loosely structured the system is. It means there is a lot of discretion.

There is no minimum legal requirement for public audits, so the Election Commission only oversees it. If civic groups or the media do not cover political fund accounting reports through investigative reporting, citizens cannot see how carelessly or loosely the funds are managed. Experienced lawmakers or staff know the limits of political fund usage. Especially for lawmakers in the National Assembly, the political fund accounting can be untraceable. It’s a structure where an underground world inevitably forms, and there is no way to detect what happens there. We cannot know how truly bad things happen, how illegal political funds are spent, or their scale.

B: The problem is not the political fund regulations themselves. If every regulation were strictly followed, it could create confusion about what is right or wrong. The bigger problem is that voters have no way to know. Politicians spend political funds here and there, but access to and disclosure of this information is very limited. Although the legal framework for political fund income and expenditure exists, it is often not followed because voters cannot access or easily verify the information. Accessibility and disclosure are major constraints, making it structurally difficult for the law to be properly enforced. Many political fund researchers have repeatedly called for reforms, but nothing has changed. Even the Election Commission has continuously proposed amendments, but the National Assembly has not acted. It has become a black box. Voters’ right to know is severely infringed, and even if reports exist, they cannot be trusted or verified. The value of the information is low, so the reporting process itself becomes very lax.

C: The Election Commission faces a serious dilemma. There are criticisms that the accounting standards under the Political Funds Act are unclear. But political funds are, after all, political funds. The law itself does not define what constitutes political funds; it is interpreted through precedents. It would be simpler if ‘legislative activity expenses are political funds’ was defined, but political activity is too broad in essence. There are institutional and practical operational issues, but the Political Funds Act is often seen as a regulatory law, whereas I believe it should be a facilitative law. In the past, the Political Funds Act was associated with secretive and corrupt political areas, so political funds were perceived as ‘black money,’ but as the purpose of the law states, political funds should guarantee appropriate provision.

Next is transparency. Lawmakers with sponsorship committees can ensure much transparency in their accounting reports. The amounts reported are not as large as expected, but those who conduct political activities without sponsorship committees have no legal mechanism to regulate them. There is no obligation to report accounting to the Election Commission when using personal funds for political activities outside of election periods. There is asymmetry in political funds. Flexible approaches are needed in fundraising. In a capitalist democracy, financial support is a natural expression of will, like voting. Such a culture should naturally form, but due to past perceptions like ‘chataegi’ (illegal money collection), it is viewed negatively even on the ground. It would be good if this perception improves.

Former lawmaker Jang Hye-young. Photo by Yoon Dong-joo

D: In 2004, the so-called ‘Oh Se-hoon Law’ (amendments to the Political Funds Act, Political Parties Act, and Public Official Election Act, mainly abolishing district parties and banning corporate political donations) was passed to strongly block the entrance. But now, society needs to accept that money is necessary for legislative activities. Accounting transparency is linked to trust in representative democracy. Punishments should be as strong as the ‘Kim Young-ran Law’ (Improper Solicitation and Graft Act), but there are too many discretionary elements. Upgrades are needed, but there are no clear principles and too much discretion.

Also, there has never been an effectiveness analysis of political funds. There is no analysis of where the money goes, how it is used, and how well it is spent. Transparency is very low, and there are no specialized personnel. Political funds need to be clarified because the confusion over whether it is governance funds, petty cash, or legislative activity support funds leads to most being treated as petty cash. If legislative activity expenses were clearer, it would help systematize accounting. Revising the categories would be good. The Oh Se-hoon Law followed corporate accounting standards in many ways. The nature of the money needs to be clarified. Some lawmakers say privately, ‘I’m walking on the prison wall today as well.’ If caught, it’s over; if not, they can live comfortably. Both those monitoring and those spending know this, and it happens tacitly.

There seems to be a need to foster a healthy culture through frequent disclosure of accounting reports and public access to political fund transparency. But is more time still needed?

C: Transparency is a prerequisite for facilitation. Individuals can use cards in real time, but lawmakers’ sponsorship committees report their account details with a big time lag. Ultimately, expenditures made through accounts are written in accounting reports. These reports are usually submitted once a year or within 30 days after elections. Because of the time lag, reports are prepared retrospectively by tracing records. Real-time disclosure or shortening the reporting period to monthly could be a solution. Shortening the reporting period might prevent retrospective receipt processing.

A: I want to add about the role of political parties. Korea adopts a system where parties are supported by public funds. If taxes are collected to support parties for democratic development, parties should also bear responsibility for accounting transparency, but there are no such regulations. It should not be left solely to accounting officers; there should be an internal standard where party members are not ashamed. Culturally, we should work with the mindset of proving that we are a respectable organization. Historically, vote-buying existed, so although the Political Funds Act is a regulatory law, it is understood as a hurdle to prevent buying votes with money and to formalize the process.

However, from the perspective of promoting fundraising, parties receive funds for women’s development, youth, and disabled purposes. How to spend these funds politically meaningfully requires comprehensive judgment. Spending transparently should be politically advantageous. Although the single-member district system is operated, it has effectively become similar to proportional representation. It is not about individuals but about candidates nominated by parties who have absolute influence on voters’ choices in constituencies. Therefore, parties must make cultural and institutional efforts to solve transparency issues. But since lawmakers make the laws, it is a question of who will bell the cat. Various demands from the media, academia, and civil society are emerging, so I hope public discourse on political funds grows.

Political reform is closely related, but voices calling for institutional improvements of political funds at the National Assembly level seem relatively small.

D: It is impossible under the personal aide system. Unlike the U.S., where funds and personnel increase with legislative activities, it is difficult to raise voices at the parliamentary level. Civil society has discussed digitization and regularization since the early 2000s, but among 300 lawmakers, few would survive if they strictly followed these rules. The Political Funds Act does not fit reality well. Political funds are treated like business entertainment expenses. We need to clearly state that the money is for legislative support and redesign from there.

Also, various conditions are imposed when giving subsidies to parties, such as for women, disabled, and youth. Although subsidies could be sufficiently incentivized, there is no consensus on their use yet. Now is the time to discuss the next step after the Oh Se-hoon Law contributed to eliminating black money. Securing accounting transparency would increase public trust in representative democracy.

Seongjin Yoo, Professor at the Scranton Division, Ewha Womans University. Photo by Dongju Yoon

C: To add, there are sponsorship funds and government subsidies. Subsidies are strictly regulated, but even subsidies are only accounted for in income and expenditure accounts without tracking cash flow. For example, incentive-type subsidies like women’s development funds are being expanded. Practically, women’s political activities mostly mean personnel expenses. Many parties spend women’s activity funds as personnel costs. Whether personnel costs count as women’s political activities is debatable. There is a dilemma in interpreting how to execute this. Therefore, rather than government regulation, civic groups and media should inform and publicize through reporting. This allows voters to judge lawmakers’ spending in the next election, even if it is not illegal. Police investigations alone could shrink political funding. It is a delicate balance and practically difficult.

B: It is clear that personal fundraising and public subsidies to parties should be distinguished. Public subsidies to parties should be regulated. Since only wealthy people should not do politics, personal fundraising needs a system for fairness. But regulating it is problematic. Few countries impose public regulations on political funds. Legislative activities are vague, and lawmaking is not the only thing lawmakers do. There are many political activities, and limiting to legislative activities makes the concept vague. Constituency management is also necessary. It is appropriate to allow fundraising for such purposes. But now, public regulations are imposed on every detail, making definitions unclear and implementation difficult.

Other countries treat political funds not as regulated but as disclosed. Voters can check how their local lawmakers raise and spend funds. The UK and U.S. allow real-time access. The Election Commission website provides information. The U.S. has a dedicated site for political funds. Lawmakers need motivation to use funds cleanly. If voters watch closely, they cannot misuse funds. If voters use this information to judge in elections, funds will be used cleanly. Currently, disclosure happens only after elections, which is strange. Disclosure should be routine, and it is not technically difficult but not done. The Constitutional Court ruled that limiting access to political fund accounting data to three months is too short, but the National Assembly only extended it to six months. This restricts voters’ right to know and weakens accessibility and disclosure.

C: Now everything is possible with smartphones, and political funds should be no exception. The Election Commission has repeatedly proposed legislative amendments to disclose income and expenditure online in real time. The problem is that Article 42 of the Political Funds Act (inspection and copy provision of accounting reports) is too complicated. Legally, disclosure includes inspection and copies, but copies of receipts, proof documents, and bankbooks are not allowed. Even if information is disclosed, only content can be seen. All are in PDF, making it hard to view. The Election Commission converts all data upon receipt. In the U.S., electronic files are available immediately, saving administrative costs and allowing easy public access. The system should have gone that way, but the recent unconstitutional ruling led only to a six-month extension, which is regrettable.

D: Political civic awareness must also change. The reason why sponsorship fund disclosure works well in the UK and U.S. is that it is as effective as public opinion polls in Korea. If disclosure causes electoral disadvantages, lawmakers will pay attention. Evaluating and publishing indicators is very important. If an institution discloses regularly, data accumulates and influences change, possibly leading to legal amendments. Aides want to work hard but struggle without precedents. It will take time to fix nearly 60 years of problems. Evaluations of accounting transparency should be considered.

Lee Chang-sul, Secretary General of the Yongin-si Giheung-gu Election Commission. Photo by Yoon Dong-ju

How should remaining sponsorship funds be used at the end of a term?

A: Being part of a progressive party itself is culturally regulated. Since aides are party members, rumors spread quickly if something strange happens. So accounting transparency and oversight work well, preventing misconduct. However, there is a big difference between winners and losers. Winners spend funds considering future plans after elections, but losers often spend irresponsibly. Aides feel they deserve some reward for their hard work, which is natural, but excessive spending is problematic. Although parties and individuals should be separated, the funds are closely linked. There are no checks on sponsorship funds during terms, and after terms, some divide funds arbitrarily or launder them into illegal political funds. Some say it is unrealistic to attribute funds to parties.

D: We need to face reality to find solutions. Even legitimate funds require double bookkeeping in political activities. If funds were disclosed online immediately, no one could sustain lawmaker activities. We must start from the current situation. It is time to upgrade the Oh Se-hoon Law and discuss using political funds to promote proper political activities.

A: Political donations receive tax deductions, but this is unequal. Since deductions require taxable income, I suggested giving ‘credits’ instead. Since the tax is returned to voters anyway, we should promote political donations by giving a 100,000 won credit, allowing people to support politics as naturally as voting. Sponsorship committees formed this way could adopt completely different disclosure methods. We cannot overhaul everything at once, but pilot programs for newcomers could be tried. A different cultural layer is needed.

C: Losers have no incentive to use political funds properly. Those who fail to get nominations or lose elections have no inducement during the last two months of their term, unlike incumbents. They find it hard to spend on political activities and hesitate to justify spending, so they often deduct past political activity assets or donate to colleagues. Losers should be allowed to continue political activities and prove themselves similarly to incumbents. Transparency must be maintained. Whistleblowing is currently absent. The Public Official Election Act has a self-reporting special provision, but the Political Funds Act does not. The Election Commission has repeatedly requested adding this. Also, lawmakers, local councilors, accounting officers, and party members should be required to receive Political Funds Act and Public Official Election Act education, just like the Improper Solicitation and Graft Act education is mandatory.

Kwangjae Lee, Secretary General of the Korea Manifesto Practice Headquarters. Photo by Dongju Yoon

A: Evaluating the performance of existing systems is very important. Secondly, it is a cultural issue. People must learn that misuse of funds leads to losing nominations. Without this, no regulation is foolproof, and many will find loopholes. If criticism continues but loopholes persist, people will give up, thinking it is normal. We should build a foundation to experience a completely new culture of political fund accounting. The Yoon Suk-yeol administration raised issues about accounting transparency in labor unions and civic groups, and also examined improper accounting in religious and private educational institutions. It is important to raise awareness that accounting transparency is crucial for corporations and organizations operated for public purposes nationwide.

B: Among political funds, sponsorship funds act as lubricants for political activities. Without them, only wealthy people would do politics. The sponsorship culture should be broadened, but imposing public regulations leads to loopholes. Political fund details need to be brought from the shadows to the light. Ultimately, if voters can scrutinize and judge, they will value how sponsorship funds are used more than what laws were made. Since the National Assembly is the institution closest to the people, it should serve as a pilot and model to gradually spread good practices.

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