The South Korean government provided 500 million won (about $360,000) in research and development funding to a startup through TIPS, a private-led tech startup support program, and failed to detect that the money had been wrongfully obtained until the project was completed, according to data obtained by a lawmaker. Clawback decisions worth more than 13 billion won have been issued since last year under government programs that include TIPS, but only 6.9% of that amount has actually been recovered, fueling calls for a full review of the oversight system.
Data submitted by the Korea Technology and Information Promotion Agency for SMEs (TIPA) to Rep. Choi Soo-jin of the People Power Party, a member of the National Assembly's Trade, Industry, Energy, SMEs and Startups Committee, showed on the 15th that the startup in question secured 200 million won in early-stage investment from a TIPS operator on the basis of falsified sales figures, then received 500 million won in government R&D funding in four installments.
Under TIPS, private operators evaluate a startup's technology, growth potential and sales, invest in the company first and then recommend it to the government, which conducts a separate review before providing R&D funding. The government is expanding both the scope and the size of the program this year, raising the number of newly supported R&D companies to 800 from 700 last year and lifting the maximum grant to 800 million won from 500 million won.
The startup was selected for TIPS support and received government funds in four installments between August 2023 and January 2025. TIPA became aware of allegations that the company had obtained the funding on the basis of fake sales only in September last year, more than three months after all of its R&D projects had ended. Even then, the discovery came through an external public-interest whistleblower report rather than the agency's own monitoring.
An inspection conducted by TIPA with the Korea Angel Investment Association and outside experts found inadequate documentation across the company's research results, personnel management and spending of project funds. The company reported a 99.24% achievement rate against its R&D targets but lacked objective supporting evidence, the inspection found. Most of its prototypes were assembled from modules supplied by other companies, making it difficult to distinguish technology the company had developed itself from parts it had purchased. After the inspection, TIPA referred the company to investigators on May 18 this year on suspicion of fraud and issuing false tax invoices.
Amid repeated questions about lax management of government support programs worth tens of billions of won, the National Assembly has also raised concerns that TIPS lacks an adequate oversight framework. In a June 2024 report evaluating the program, the National Assembly Budget Office noted that TIPA had entrusted program operations to the Korea Angel Investment Association since 2013 but did not sign a formal agreement with the association until 2023. The office called for changes to the system, citing a lack of specific rules governing oversight of operating institutions.
The report also pointed to weak management of research funds. Since 2016, 133 TIPS R&D projects had been classified for special inspection over failure to submit reports, failure to settle accounts or breaches of agreements. While a significant number of projects showed potential problems in how research funds were spent, actual recovery has lagged. Data TIPA submitted to Choi's office showed that clawback decisions for the startup growth technology development program, which includes TIPS, totaled 13.465 billion won from last year through August this year, but only 935 million won, or 6.9%, was actually recovered.
With TIPS funding continuing to grow, critics say the government should review the entire oversight framework, from screening in the selection of startups to the spending of R&D funds and follow-up management.
"Because TIPA is the agency that oversees program evaluation, management and the disbursement of government funds, responsibility for managing the selection, spending and evaluation process lies with TIPA," Choi said. "It must present its management responsibilities at each stage, the status of recovery and sanctions, and measures to prevent a recurrence."