[Editorial] Prodigal municipalities

The moratorium declared by a fiscally strained Seongnam City in June 2010 prompted the Board of Audit and Inspection to look into the books of 49 local administrations. Its findings, made public earlier this week, showed that Seongnam was not the only spendthrift municipality. Some of the municipalities, if no action were to be taken, would undoubtedly follow the footsteps of Seongnam in the near future.

No less alarming is that officials cooked the books to produce non-existent surpluses. A case in point is Hwaseong City in Gyeonggi Province, which misreported income and expenditures in 2009 and 2010 to turn 124.4 billion won in actual deficits to 28.2 billion won in bogus surpluses.

The state watchdog pressed charges of falsifying official documents and abusing authority against the mayor while demanding that eight errant accounting officials be reprimanded or given warnings. But the action taken by the state watchdog is nothing but a slap on the wrist, given that a corporate accountant guilty of falsifying financial statements would be subject to up to five years in prison.

It was not just municipalities that were accused of window dressing. Some metropolises were found to be culpable as well. For instance, the Incheon metropolitan government reported that it had 28.2 billion won in surpluses in the 2007-2010 period when it actually had 916.2 billion won in deficits during the period.

Deficits were snowballing, mainly because elected mayors were pushing for spending on the big-ticket projects that were their campaign promises. A good example was Incheon’s projects related to the 2014 Asian Games, which its mayor won the right to host. The metropolitan government underreported expenditures on the projects and overstated the revenues from them. As the state watchdog said, the Ministry of Public Administration and Security has its share of responsibility for the ballooning liabilities of local administrations, which increased from 19 trillion won at the end of 2008 to 29 trillion won at the end of 2010. The ministry was lax in its oversight.

The ministry will have to demand that fiscally unstable local administrations cut their payrolls and take other measures to balance their budgets. It will have to cut its subsidies, transfers and grants for those local administrations that refuse to toe the line. It goes without saying that it needs to take stricter disciplinary measures against accounting officials found to have doctored the books.