Falsified documents, double-paid wages: Local subsidy fraud tops W14.7b

Case No. 1: Local subsidy recipient A, a residents' support council, falsified documents to claim it had purchased exercise equipment for 13 million won when the actual price was 10 million won ($6,720), and processed the inflated amount in its settlement records.

Case No. 2: Local subsidy recipient B, a cultural foundation, double-paid 10 million won in labor costs for film festival operations in September 2025, drawing from both local subsidies and festival revenue.

The cases illustrate a broader pattern of poor oversight — subsidy expenditures backed by fabricated receipts and labor costs claimed simultaneously under multiple budget lines.

The Ministry of Interior and Safety announced Thursday the results of a joint local subsidy fraud inspection conducted with local governments, finding a total of 605 fraudulent cases worth 14.72 billion won.

Of that total, provincial and metropolitan government field inspections uncovered 577 cases worth 9.67 billion won, while special joint inspections by the ministry and local governments detected 28 cases worth 5.04 billion won.

Earlier, the Ministry of Interior and Safety and local governments carried out a first-half sweep from April 20 to June 20 to root out fraudulent subsidy claims.

The effort was led by a local subsidy fraud inspection task force headed by the ministry's director general for local finance, working alongside 17 provincial and metropolitan inspection units — comprising 74 teams and 485 personnel in total — each led by their respective planning and coordination directors. The units identified 66 high-risk projects through manual verification of suspected fraud cases and conducted joint on-site inspections.

Previously, local government project departments reviewed only the specific expenditure items flagged as suspicious by the Botame detection system. Starting this year, however, provincial inspection units began examining entire flagged projects rather than individual line items — a tightened approach that drove the total amount detected sharply higher compared with 3.25 billion won in 2024.

The flagged cases will be referred to the relevant local government project departments for detailed fact-finding. Once fraud is confirmed, penalties will follow — including cancellation of subsidy grants, repayment orders and punitive surcharges.

Meanwhile, the Ministry of Interior and Safety plans to intensify its subsidy fraud monitoring in the second half of the year.

Provincial and metropolitan field inspections will run for two months from Sept. 7 to Nov. 6, while special joint inspections by the ministry and local governments will operate on a year-round, standing basis.

Alongside this, legal and institutional measures will be introduced to cut off fraud at the source — encouraging residents to participate in community oversight, speeding up the processing of confirmed fraud cases, and significantly stiffening penalties against offenders.

Whistleblower rewards, previously set at 30 percent of the repayment order amount, will be expanded to cover 30 percent of all funds actually recovered — including repayment orders, punitive surcharges and other clawbacks.

Punitive surcharges will also be raised from a maximum of five times the repayment order amount to eight times, toughening the financial penalties imposed on fraudulent recipients.

"Local subsidies are funded by taxpayers' hard-earned money, and not a single won of waste or fraud can be tolerated," Minister of Interior and Safety Yun Ho-jung said. "In the second half of the year, we will track down and expose every instance of fraud without exception — including minor regulatory violations — and take strict action against all offenders."