In recent years, the Korean government has expanded voucher programs,  which stimulate competition among service providers and increase consumer choice. In a voucher program, the government provides targeted subjects with a right to purchase specific goods or services in the form of coupon or a gift card with a certain monetary value and pays the supplier for the goods or services purchased by the subjects.

    In 2009, the volume of voucher programs run by the government stood at KRW 2,342.3 billion and grew to KRW 6,866.9 billion in 2013, having nearly doubled in four years. During the same period, the number of voucher recipients also showed a significant increase of 87.2% from 3.07 million in 2009 to 5.75 million in 2013. As of April 2013, as many as 18 voucher programs are in operation.

    This report explores the operating status of the current voucher programs and evaluates their performances. To this end, this report looks first at the overall status of the voucher programs, then evaluates the planning, implementation, and performance of individual voucher programs, and finally suggests improvements.

    Voucher programs run by the government have increased sharply in volume from 2012 to 2013. They recorded a KRW 1.8652 trillion year-on-year increase in 2012 and a KRW 1.3619 trillion year-on-year increase in 2013. This steep rise was primarily due to the recent significant expansion of two voucher programs: the "Financial Assistance Program for Preschool Education" run by the Ministry of Education (formerly the Ministry of Education and Science Technology) and the "Financial Assistance Program for Child Care" run by the Ministry of  Health and Welfare. By type of funding sources, the general account budget and the general educational grants from local education authorities account for the largest shares.

    More specifically, as of 2013, the general account budget amounts to KRW 3.454 trillion, which is 50.3% of the nation's total voucher volume of KRW 6.8669 trillion. The general educational grants from local education authorities amount to KRW 2.8962 trillion or 42.1% of the total volume of voucher programs.

    In order to enhance consumer choice, there is a need to conduct studies to identify voucher demands. Among the 18 current voucher programs, the government only conducted demand studies on nine programs. The main focus of most of these demand studies was not on what type of services a voucher program really needed to provide, but on the program's status check and the estimation of its future service supply. Hence, it is necessary to conduct demand studies focusing on measures to increase recipient choice.

The voucher recipient selection criteria should be revised to add more clarity. It is ironic that under the Small and Medium Business Administration's "Support Program for Joint Utilization of Research Equipment," small and medium sized companies of more than five years in operation receive more benefits than those with less than five years in operation. In the case of the Ministry of Health and Welfare's "Elderly Care Service Program," the selection criteria were revised to mainly cover individuals with cerebral palsy and Alzheimer's disease, driving most of the existing recipients off welfare and causing a significant backlash. Therefore, the subjects targeted by each voucher program should be further clarified, and when amending or revising the selection criteria, thorough business planning is necessary to avoid any possible confusion.

There is also a need to better manage programs which have not been sufficiently prepared and planned. Take, for example, the "Community Social Services Investment Program" run by the Ministry of Health and Welfare. The program's budget has been significantly increased, but preparation for program implementation was not sufficient and nearly 50% of its increased budget was left unused. This is because funding was provided even before local governments were fully prepared to implement the program in the expanded scale and scope. In order to enhance the effectiveness of voucher programs, preparation for their implementation should be made in line with financing plans.

In order to prevent fraud and abuse in a voucher program, it is necessary to implement rigorous management procedures to prevent, detect, and deter such practices. In the last four years from 2009 to 2012, fraudulent activities have occurred in eight of the 18 voucher programs, and their amount reached KRW 559.18 million in total. In the case of the “Elderly Care Service Program" of the Ministry of Health and Welfare, there were fraudulent cases in which a user received elderly care services from his or her family member, not a third-party caretaker, and paid the e-voucher amount to the family member.

There is a need to improve the management of voucher programs through enhancing program execution. In the case of the "Free After-school Voucher Program" run by the Ministry of Education (formerly the Ministry of Education and Science Technology), the execution rate has been on a steady decline from 92.0% in 2010 to 85.3% in 2011 and 79.4% in 2012. The "Disability Assistance Voucher Program" run by the Ministry of Health and Welfare showed only a 66.8% execution rate in 2011. The "Unemployment Career Development Program" run by the Ministry of Employment and Labor showed an execution rate of 73.2% in 2012. 

More efforts should be made to improve performance by way of rigorously managing the financial performances of voucher programs. In the case of the "Career Development Card Program for the Unemployed" of the Ministry of Employment and Labor, the achievement rate of performance goals stood at a mere 65.7% (the general account budget) and 68.6% (the employment insurance fund). In the case of the "LPG Vehicle Assistance Program" run by the Ministry of Patriots and Veterans Affairs, the achievement rate of the performance indicator 'fraudulent beneficiary ratio' stood at only 37.5% in 2010 and 41.5% in 2011. In some programs, performance indicator targets are set low to easily attain high rates of achieving the targets. The "In-home Housekeeping and Caregiving Service Program" run by the Ministry of Health and Welfare and the "Career Development Card Program for the Employed" run by the Ministry of Employment and Labor have not set up their own performance indicators, thus failing to accurately assess their performances.

It is necessary to draft institutional measures to prevent fraud in voucher programs. The government needs to consider various ways to deter fraudulent acts including checking the integrated social welfare management network on a regular basis, strengthening on-site inspections, linking the e-voucher system to the resident registration system, and bolstering incentives for whistle-blowers.

There is also a need to conduct a demand study in relation to voucher service development and usage. When such a demand study is conducted insufficiently, a voucher program cannot fully provide the services that consumers need. In this regard, efforts should be made to identify what type of services consumers need through a thorough demand study prior to rolling out the program and to develop and provide more useful and effective services.

Each voucher program needs to clearly define its target subjects and carefully draw up its selection criteria. More clarity should be provided with regard to who is eligible for the voucher program. As changes in the selection criteria may cause confusion and disruption to the services, the business of each voucher program should be carefully designed in detail when determining its selection criteria.

For poorly executed voucher programs, more efforts should be made to boost their performances. To improve the execution rate of the "Free After-school Voucher Program," the Ministry of Education (formerly the Ministry of Education and Science Technology) needs to consider allowing certain students to take more after-school lessons in excess of the maximum amounts if necessary or opening the program to other needy students above the low-income brackets. In the case of the "Disability Assistance Voucher Program," the Ministry of Health and Welfare took some measures to raise the program's execution rate, such as expanding the eligibility and coverage for assistance services, and it now needs to assess whether such measures were really useful in raising the program's execution rate.  For the "Career Development Card Program for the Unemployed," the Ministry of Employment and Labor should strengthen PR activities and review application qualifications to raise the program's execution rate.

For voucher programs which have shown weak performances, there is a need to strengthen performance management and thereby improve their performance systems. In the case of the "Career Development Card Program for the Unemployed" run by the Ministry of Employment and Labor, various measures should be drafted to link job training to employment. Setting performance targets low to secure a high achievement rate should be avoided. The "In-home Housekeeping and Caregiving Service Program" of the Ministry of Health and Welfare and the "Career Development Card Program for the Employed" of the Ministry of Employment and Labor need to set clear performance indicators and assess their performances more accurately. 

For voucher programs with poor business preparations, efforts should be made to improve their business management. In the case of voucher programs implemented by local governments, it is desirable to check whether the governments have made adequate preparation efforts for program execution before providing budget support for the programs.