Two faces of private kindergartens

Kim Won-bae
The author is a national news editor of the JoongAng Ilbo.

Parents were surprised to learn where their kindergarten tuitions have gone. Audits found that some of the money was used to buy luxury goods and for the personal expenditures of teachers. The scandal is the result of both accounting fraud and poor bookkeeping.

For instance, the dean of a kindergarten in South Gyeongsang province was tried for misappropriating 400 million won ($351,877) from school accounts to pay insurance premiums. She was fined 10 million won in a lower court, but found not guilty in higher and final Supreme Court rulings. The appeals noted that she had paid teachers and transferred substantial amounts of money to the kindergarten from her own bank account.

According to the Private School Act, income from a school account cannot be used for non-school purposes — except in the case of loan repayments. The accounts suggest that the kindergarten founder took money from tuitions to pay her insurance premiums.

But the appeals court judged that the funds taken were previously lent to the kindergarten. Although she had erred in commingling personal and official accounts, the court ruled that she did not intend to commit a crime.

Other Supreme Court precedents indicate that the court views tuitions paid by parents as well as Nuri Curriculum dues — the state monthly day care subsidy for each child between the ages of three and five — become the facility owner’s as soon as they enter the account. As a result, embezzlement charges cannot be applied in cases involving these funds. It is similar to the cases in which parents paying extra tuition to English-language kindergartens registered as private academies instead of formal education facilities cannot know where their money ends up.

Parents are enraged, but the court is satisfied as 87 percent of independent kindergartens are privately owned, with books kept blurry since money shifts back and forth from personal to official accounts.

An independent kindergarten is both a for-profit entity and an educational institution. It can seek profit for undertaking activity that should be the responsibility of the state. In its measures to address the problems in preschool institutions, the Ministry of Education said it would sharply raise the ratio of public kindergartens because independent facilities cannot be punished on embezzlement grounds.

Amidst the turmoil, many of the independent kindergartens could be nationalized. The government and the ruling party plan to revise the Nuri Curriculum bill to formally define it as a state subsidy and to punish any misappropriation. They also plan to drop the provision that allows kindergartens to use school accounts to pay off the debts of owners.

Once the new regulations kick in, proprietors of independent facilities will not be able to withdraw profits made by a kindergarten. Any businessperson purchasing a building valued at 2 billion won would hope to reap at least 100 million won, or 5 percent, off the investment in lease income. But a founder of a kindergarten cannot charge rent on a facility on his or her property. As a result, the founder would want to be compensated by other means. Few would want to start such a business if it makes no money.

The Ministry of Education’s plan to encourage the incorporation of private kindergartens is not so easily done. When a company becomes an incorporated entity, the founder would have to donate the land and the building that houses the kindergarten. Who would willingly hand over these assets unless one is genuinely devoted to child care and education?

The Education Ministry has vowed to raise the ratio of state and public kindergartens to 40 percent by 2022. Even if it meets the goal, 60 percent will remain independent, which means that independent institutions will still dominant preschool education.
Even public employees get bonuses and incentives for outstanding performance these days.

While the enforcing of accounting clarity and public commitment are important, independent kindergartens should be able to reap rewards for services children and their parents appreciate.

Private kindergartens must not be pressured into strictly committing to their educational role alone. According to Article 23 of our Constitution, the state must provide adequate payment for assets acquired for public needs. In line with new regulations, authorities, educators and society should discuss the exact role of our kindergartens and the compensation for their contributions.

JoongAng Ilbo, Oct. 29, Page 27