It’s Not a Subsidy for Private Kindergartens, but Payment of Tuition on Parents’ Behalf

Private kindergarten directors are being branded as thieves. The education authorities have treated cases in which private kindergarten directors bought luxury handbags and took overseas trips with kindergarten funds as occupational embezzlement. Their logic is that because they used a tuition account—a public fund—for private purposes, it constitutes embezzlement.

The judiciary has ruled the same cases not guilty. In 2012, the Ulsan District Court, in its appellate ruling on a private kindergarten director, found the charge of embezzling tuition funds not guilty. In 2015, the Seoul Western District Prosecutors’ Office and the Seoul Northern District Prosecutors’ Office each decided not to indict in cases accusing private kindergarten directors of embezzling tuition funds. If money collected under the name of meal expenses is used for another purpose, fraud may in some cases be recognized, but using general funds in a tuition account for private purposes is not embezzlement.

This discrepancy arises because there is a different understanding of who owns the tuition account. Prosecutors and judges viewed the tuition account as belonging to the private kindergarten director who had been accused of embezzlement. Even if that person took and used money from the tuition account, it was ultimately his or her own money, so it could not be called embezzlement. By contrast, the education authorities assume the money belongs to someone other than the kindergarten director. It is not clear whose money they think it is, but they seem to be assuming that it is the state’s money. That is nonsense. Once payment has been completed to a private kindergarten, it is no longer the state’s money but the private kindergarten’s property. I believe the education authorities are making a forced and unreasonable argument.

They know perfectly well that actions they themselves identify as embezzlement can end up being found not guilty when scrutinized closely in court. So, whenever possible, they do not file criminal complaints with prosecutors and instead engage only in “media play.” Through this, they humiliate private kindergarten directors while acting as though they are crusaders for justice. This is a modern-day people’s tribunal. If innocent people are being turned into criminals through a people’s tribunal, then the ones committing wrongdoing are the education civil servants and the members of the National Assembly themselves.

It seems they, too, were embarrassed by a situation in which they flagged conduct as occupational embezzlement but could not actually secure criminal punishment. So they came forward saying they would change the law and make what is not embezzlement into embezzlement after all. Specifically, that is what their announcement about changing support funds into subsidies amounts to.

At this point, it is necessary to clarify what is meant by support funds and subsidies. Many people think the money the government pays to private kindergartens is government support funding or a subsidy given to help educate children properly, but that is a misunderstanding. To understand why, one must understand the nature of the “I-Happiness Card.” Article 24 of the Early Childhood Education Act provides that “the cost of free... early childhood education... shall be borne by the state and local governments, but in principle shall be provided to the child’s guardian.” In other words, it mandates that the cost necessary for free childcare be paid not directly to the kindergarten but to the child’s guardian. That means the government is saying it will pay, on behalf of the parents, the kindergarten tuition that the parents would otherwise bear. In practical terms, the government could either give cash to the guardian or issue a card, and our government chose the card method. The “I-Happiness Card” is a mechanism created so that the government can pay on behalf of parents the kindergarten tuition they are supposed to pay. When a parent goes to the kindergarten and pays with the I-Happiness Card, the fixed monthly amount of 220,000 won or 290,000 won is paid to the kindergarten. This money is not “support funding” for private kindergartens. Although the money is ultimately paid directly by the government to the private kindergarten, the nature of the transaction is that the government is paying on behalf of the parents for tuition the parents would otherwise owe.

In other words, the money the government pays to private kindergartens through the I-Happiness Card is neither support funding nor a subsidy. If it must be called support funding, it is support funding for parents. That is why, even if a private kindergarten director uses that money for personal purposes, it is not embezzlement of state funds. The reasoning of the Supreme Court also supports this view. In 2014, regarding fraudulent payments made with the I-Sarang Card in daycare centers, the Supreme Court held: “Because the person who receives the funds necessary for childcare from the government and local governments is not the daycare center operator but the infant or young child’s guardian, the amount paid by the I-Sarang Card [the early name of the I-Happiness Card] cannot be regarded as a daycare center subsidy.” Just as it cannot be a crime for a private kindergarten director to use kindergarten tuition received from parents in whatever way he or she chooses, it should not become a problem merely because money paid on behalf of parents by the government is used privately. It is frustrating that even the private kindergartens themselves, the parties directly concerned, do not understand this fact.

The education authorities are quietly suggesting that the current so-called “support funds” will be converted into subsidies. If they become subsidies, that means the government will designate the use of the money and pay it directly to kindergartens, and that would be the worst possible choice. From that point on, private kindergartens will gradually begin to recognize that their customer’s customer is no longer the child and the parents but civil servants. After all, income will depend on currying favor with officials. The reason Article 24 of the Early Childhood Education Act provides that the cost of free childcare be paid to parents rather than to private kindergartens is to guarantee parents’ freedom of choice. Converting the funds into subsidies would push parents to the margins of private kindergartens. I hope they do not marginalize children and parents in order to force criminal punishment on private kindergarten directors. The only people who would benefit from that are civil servants.

Most importantly, changing the funding into subsidies will not eliminate the root of the problem. A new law may make it possible to bring private kindergarten directors into court and obtain guilty verdicts, but it cannot improve early childhood education. It will probably only accelerate the closure of private kindergartens. How many people would endure a situation in which they invested their entire assets yet could not take even a single won beyond their own labor costs?

I believe transparent accounting is necessary. It is needed to help parents make choices. But what is needed above all is to recognize an appropriate return on the investment of private kindergarten founders and directors. And even if accounting is made transparent, spending itself should not be controlled. In other words, transparent profits and transparent freedom of management must be guaranteed. Which kindergarten is better is for parents to judge, not Ministry of Education officials or civic groups.

Jeongho Kim / Head of Jeongho Kim’s Economy TV, former specially appointed professor at Yonsei University

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Original title: 사립유치원 지원금이 아니라 원비대납이다

Author: Jeong-ho Kim

Date: 2018-10-24

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=16&idx=11175