KBS Accused of Inflating Actor Fees by $4.5 Million

The Board of Audit and Inspection has revealed that an outsourced production company contracted by the Korean Broadcasting System (KBS) inflated actor fees by 4.5 billion won ($4.5 million), resulting in financial misconduct. The Board has notified KBS to report the company and prepare for a damage claim.

On October 7, the Board released the results of its regular audit of KBS. The audit identified a total of 17 instances of illegal or inappropriate practices requiring improvement in areas such as drama production and investment, personnel and welfare, and disaster broadcasting infrastructure.

The audit specifically examined 54 outsourced dramas aired on KBS 2TV from 2021 to last year, finding that all contracts were signed without specifying the basis and amounts for production costs, including actor fees, script fees, and staff expenses.

Among these, 43 dramas changed the requirement for submitting production cost documentation to a discretionary clause and did not submit actual execution data. The remaining 11 dramas also failed to provide documentation or verify the appropriateness of the costs, despite having contractual obligations.

In the last two years, of the 10 dramas produced, six spent a total of 6.7 billion won less than the contracted production costs. One drama reportedly executed 9 billion won less than the contracted amount of 5.8 billion won for actor fees and other expenses.

The audit also confirmed allegations of financial misconduct by the outsourced production company. KBS had signed contracts worth 9.5 billion won with two companies, including Company A, and paid an advance of 2 billion won to Company A.

Company A reported that it paid 5.5 billion won of the total 10 billion won actor fee to the actor's agency, while the remaining 4.5 billion won was paid to Company B, which had received the fee claim. However, the agency stated that the actual actor fee was 5.5 billion won and that it had neither signed a contract for 10 billion won nor transferred any claims to Company B. Company B also canceled the tax invoice for 4.5 billion won on the same day it was issued and returned 4.9 billion won to Company A three days later, including value-added tax.

The Board concluded that Company A committed fraud by inflating actor fees, causing KBS a loss of 4.5 billion won. It has instructed KBS's president to file a complaint against Company A and prepare for a damage claim. The National Tax Service has been notified to take appropriate action against Companies A and B for issuing and receiving false tax invoices.

The audit also highlighted an imbalanced workforce structure, with 57.4% of KBS's 3,738 general employees holding positions at G2 level or higher as of last year. In contrast, only 42.6% were in mid- to lower-level positions (G3 and below).

KBS had previously submitted a plan to the Korea Communications Commission to reduce the proportion of higher-level positions to 48.8% by 2025, but the actual percentage increased from 56.3% in 2021 to 57.4% last year. This has led to operational disruptions, such as understaffing in assistant director roles that should ideally have two personnel, as well as shortages of reporters and maintenance staff.

Despite operating at a deficit, KBS has been criticized for maintaining excessive employee benefits. In 2024, the per-employee welfare cost at KBS is projected to be 3.99 million won, which is 1.93 times the average for public institutions.

KBS has provided all employees with a monthly communication allowance of up to 50,000 won, resulting in total expenditures of 10.75 billion won from 2020 to 2024, regardless of necessity. Additionally, KBS has retained 397 timeshare memberships for condos and resorts purchased for 8.87 billion won, despite an average usage rate of only 31.5%. In 2024, KBS extended the contracts for 25 memberships by 20 years, incurring an additional 175 million won in facility maintenance costs.

The audit also noted that KBS has continued to lease facilities through direct contracts, despite a recommendation in 2017 to switch to competitive bidding. KBS has leased 20 facilities, including parking lots, wedding halls, and coffee shops, to a mutual aid association through direct contracts, which generated profits of 7.78 billion won from 2020 to 2024 for use in congratulatory funds and scholarships.

The disaster broadcasting system was also found to be inadequate. As of the end of last year, nine regional headquarters and two regional offices had not properly implemented redundancy for disaster subtitle transmission systems, raising concerns that equipment failures could prevent subtitle broadcasts. Furthermore, 16 critical broadcasting facilities identified as lacking seismic performance are scheduled for reinforcement work only after 2028.

The Board has instructed KBS to establish redundancy for disaster subtitle transmission systems, implement an automatic alarm transmission system, and expedite seismic reinforcement work. Additionally, KBS has been urged to thoroughly verify the basis for outsourced production costs and expenditures, address the imbalance in higher-level positions, reduce communication allowances, sell condo memberships, and transition leased facilities to competitive bidding.