By Kim Jae-kyoung
Staff Reporter

Two state agencies _ the Korea Asset Management Corp. (KAMCO) and Korea Deposit Insurance Corp. (KDIC), were reprimanded on Thursday for squandering more than 823 billion won in taxpayers’ money for the past three years to 2003.

The Board of Audit and Inspection (BAI) also announced yesterday the Woori Bank and other unspecified state-controlled financial companies for diverting 250 billion won in taxpayers’ money for hiking wages for employees.

All in all, the government lost more than one trillion won in public funds for the past three years due to mismanagement, embezzlement and moral hazard of public servants.

The BAI also reprimanded the Ministry of Finance and Economy and the Financial Supervisory Service for their neglect of duty in supervising the KAMCO, KDIC and Woori Bank.

The loss of the public funds was caused mostly by the moral hazards of public servants, it said, after concluding a five-month inquiry into the management of public funds.

According to the BAI, the government recouped a total of 37.5 trillion won in public funds between 2001 and 2003, while injecting 26.7 trillion won in new public funds to help banks clean their balance sheets.

But the BAI found that the government could have recovered additional 823.1 billion won in taxpayers’ money, unless they had abused, embezzled and mismanaged the public funds.

For example, the KAMCO inflated its income by converting 355.8 billion won in earnings from selling insolvent assets into its own account.

And the government lost 330 billion won in public funds because of mismanagements, such as bargain sales of secured assets and unreasonable debt write-offs for insolvent companies.

The government oversupplied 9.2 billion won in taxpayers’ money due to incorrect due diligence on assets and liabilities, while 800 million won was embezzled by public officials.

Also, the government failed to trace 127.3 billion won in assets concealed by those responsible for the mismanagement of insolvent financial companies.

In addition, the BAI found that state-funded financial companies, including Woori Bank, diverted around 250 billion won in taxpayers’ money for improving welfare of employees rather than for normalizing management.

Through its special inspection, the auditing agency uncovered 77 illegal cases regarding the management of public funds. It reprimanded one case and issued warnings against 44 cases.

According to the Ministry of Finance and Economy (MOFE), the government recouped a total of 3.5 trillion won in public funds for the first four months of this year, while injecting 3.4 trillion won in new public funds.

As a result, 40.4 percent of the 164.5 trillion won the government has so far spent to bolster failing financial institutions following the 1997 financial crisis or 66.4 trillion won were recouped at the end of April, up 39.4 percent in March.

The amount of the public fund retrieval stood at 13 trillion won in 2002 and 9.1 trillion won in 2003.

The government plans to allocate another 3 trillion won ($3.11-3.97 billion) in public funds to clean two ailing investment trust companies _ Korea and Daehan, which have been put up for sale.

kjk@koreatimes.co.kr