Maintenance fees slip away from many apartment complexes

By Choi Sung-jin

One in five apartment complexes in Korea has improperly managed its maintenance money collected from residents, government officials say.

An anti-corruption squad under the Office of the Prime Minister released Thursday the result of an interagency auditing of the apartment complexes’ financial management.

Of the 8,310 apartment complexes, 1,610, or 19.4 percent, were considered to have inappropriate accounting, the report said.

This is an extremely high rate when compared with the 0.1 percent of listed companies that are classified similarly in financial audits. For companies listed on the KOSDAQ market, a similar diagnosis could mean delisting, corporate financial analysts said.

Officials at the Prime Minister’s Office acknowledged it does not mean all apartment complexes that received “unsuitable” grades have violated laws because some committed simple accounting mistakes.

By region, Gangwon Province had the largest share of poorly run apartment complexes with 36.8 percent, followed by North Chungcheong Province (32.2 percent), Seoul (27.6 percent) and Incheon (26.9 percent), the report said.

The biggest reason for their poor grading was a failure to make cash-flow statements. A cash-flow statement can look into the income and expenditure of management fees and other money, a prerequisite for financial auditing.

“Apartment complexes that do not have cash-flow tables were lacking in transparency of money flowing in and out of them,” said Chang Byeong-chae, head of the anti-corruption team. “Some complexes might have not submitted cash-flow tables intentionally to hide irregularities.”

Other central and local administrative agencies also conducted special probes into 429 apartment complexes and ferreted out 1,255 cases of irregularities in 312 of them, or 72.7 percent of complexes investigated, officials said.

In many cases, heads of management offices (in 35.3 percent of irregularities) and residents’ representatives (in 41.4 percent) have squandered maintenance fees.

A management office head in South Chungcheong Province, for example, spent 2 billion won ($1.6 million) without evidential documents between 2011 and 2014. A representative of residents in North Gyeongsang Province embezzled 61 million won over the past three years. A bookkeeper in North Jeolla Province diverted 150 million won over the past seven years, spending the money to repay interest on bank loans, give pocket money to his children and buy groceries.

Another problem was they have selected builders and subcontractors without legal grounds. A resident representative in Gyeonggi Province took 30 million won from a builder after selecting the company to build an athletic facility, without an open bidding.

Kim Bu-seon, a one-time movie star who recently became famous for a scuffle with an allegedly corrupt resident representative of her apartment complex in Seoul, wrote on her blog: “My god, I feel like crying with joy. These officials have fnally begun to move after turning deaf ears to my pleas for years.”