The Korea Local Administration Review

In the wake of often-cited accounting fraud practices in Eubari City in Japanand recent reports of fiscal stresses in Korean local governments are arisingconcerns about a possibility of fiscal crisis due to fiscal mismanagement andcover-up of fraudulent accounting practices.Some of the heads of Korean local governments in Korea are reported tohave engaged in fraudulent accounting practices in reporting net surplus of theirlocal governments. They tried to conceal their budget deficit by reporting thatthey recorded budget surplus although they were under budget deficits. Primaryreasons of budget deficit arose in pursuing their ambitious campaign pledges inmost cases.This study utilized local fiscal mismanagement and fraudulent accountingpractices. This paper argues that local governments must introduce effectiveinternal and external control mechanisms to avoid any potential fiscalmismanagement and fraudulent accounting practices.To be specific, local governments need to enhance governmentprofessionalism. Second, a real name system(i.e investment screen system) ingovernment programs and projects must be introduced to hold politicians andgovernment officials accountable. Third, a comprehensive system must beintroduced to hold major actors of public policy accountable. Fourth, a periodicprogram evaluation, auditing, and financial condition analyses should beconducted to avoid any wrong-doings in government. Finally, an introduction ofbond referendum for large-sized infrastructures projects could be considered inorder to avoid inefficiency in government programs and projects.
□ Keywords: Accounting Fraud, Real Name System, Investment Screen System,Auditing of Closing Report, Bond Referendum