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Research Report

A Study on the Legal Aspect of the Resident Participation System in Local Finance
  • Issue Date 2022-08-31
  • Page 164
  • Price 8,000
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Ⅰ. Backgrounds and Purposes
○ It has been 30 years since the local autonomy system was implemented in Korea. Meanwhile, the size of the finance that local governments can operate is increasing year by year.
- In such a situation, the need to find appropriate control measures for local finances for efficient fiscal management is also increasing.
○ In seeking control measures for increased local finance, there can be two methods: control by central government and internal control by local governments, depending on the controlling entity.
- Among them, this study focused on local fiscal control by resident participation.
○ With the amendment of the Local Autonomy Act in 2021, the legislator clearly defined resident participation as a right of the residents.
- In this context, this research report examines what kind of institutionalized residents' participation in the area of ​​local finance exists, what problems those systems have, and how to improve them in the future.
Ⅱ. Major Content 
○ Meaning of resident participation system in local finance
- Local autonomy is divided into resident autonomy and collective autonomy. ‘Resident autonomy’, which handles local administration according to the will of the residents, complements traditional representative democracy through the revision of the Local Autonomy Act in 2021, and is getting closer to the practical realization of local autonomy.
- In this research, the 「Local Autonomy Act」, 「Local Finance Act」, and 「Act on Public Sector Audits」 are divided according to the underlying laws that stipulate the resident participation system in local finance.
○ Current status of resident participation system in local finance
- As the resident participation system for local finance stipulated in the Local Finance Act, this research mentions the following three systems. First, local financial information disclosure system, second Residents’ Participation in Budget Process, and third Residents’ Surveillance of Illegal Disbursement and Dissipation of Budgets and Funds.
- As the resident participation system for local finance stipulated in the Local Autonomy Act, this research mentions the following six systems. First, the resident participation system in the settlement inspection process, the second citizen auditor system, the third resident voting system, the fourth resident audit request system, the fifth resident lawsuit system, and the sixth summon system by resident.
- Article 27 of the Act on Public Sector Audits stipulates that the head of an auditing organization may have an external professional institution or an external expert participate in the audit when auditing fields that require specialized knowledge or practical experience, such as accounting.
○ Problems and improvement measures of the resident participation system in local finance
- It is necessary to expand the scope of disclosure of local financial information. Also it is necessary to establish a system that can more encourage the determination of special disclosure matters through the Local Financial Disclosure Deliberation Committee.
- It is necessary to expand the resident participation in the budget process to the entire budget process and to improve the system so that the actual participation of the general public can be guaranteed. Changes to the system should be preceded so that the settlement system itself can be operated more substantively. In the case of audit committee members, it is necessary to reorganize the related regulations in a unified way, and it is necessary to expand the scope of private experts rather than limiting them to accountants or tax accountants.
-Resident monitoring and auditing systems for local finances are scattered and stipulated in various laws, and it is necessary to regulate them uniformly. Regarding the issue of the exclusion period for a resident audit request, it is necessary to extend this period as it cannot be claimed after two years from the end of the administrative process.
- Regarding the resident litigation system, under the current system, an audit request must be made first and a lawsuit can be filed. However, it is also necessary to allow a lawsuit to be filed immediately without a request for an audit.
- Currently, Article 7 of the Residents` Voting Act excludes the possibility of a resident voting at all in matters related to the budget, accounting, property management, and independent financial resources of local finance, which are the core of local finance. Regarding local finances, the law needs to be amended in the direction of allowing resident voting. A realistic mechanism is needed to ensure the exercise of the right to resident voting.
- Unlike the Residents` Voting Act, the Act of Summons by Resident does not specify the actions subject to summon. It is reasonable to specify such things as financial corruption of local politicians as the acts subject to summons in the Act of Summons by Resident.
Ⅲ. Expected Effects
○ Until now, most of the preceding studies on the resident participation system for local finance have focused on individual systems such as the resident participatory budgeting system.
○ Since this study individually points out the problems of the system and suggests directions for improvement in relation to the various systems targeted, it is expected that it can be used as a prior research paper when legislators attempt legislative improvement on the system.