The Seoul government has provided the USKI with 2 billion won ($1.87 million) annually since its inception in 2006.

The sponsorship is administered by the state-run Korea Institute for International Economic Policy, which is supervised by the National Research Council for Economics, Humanities and Social Sciences under the Prime Minister's Office.

The KIEP plans to stop the funding from June. It cited the USKI's failure to meet the parliament's demand to improve the transparency of its operations and accounting and to make a report on any progress by March this year as the reasons for the decision.

In the AP interview, Gallucci claimed that the institute's financial reporting was "very thorough" and there was no mismanagement of funds. He said he had asked the Seoul government for evidence and had "gotten zero" from it.

Still, the KIEP reportedly plans to continue funding the Korea studies program at SAIS.

"The dean will have to negotiate a new agreement with KIEP regarding Korea studies," Ku said. "38 North needs to transition but should be okay."

South Korea's conservative parties and media outlets have accused the liberal Moon Jae-in government of trying to tame critical voices and of hampering independent studies. Ku is known to be close to members of the former conservative administration of Lee Myung-bak.

The presidential office, Cheong Wa Dae, has denied the claims.

"As the National Assembly has raised issues (regarding the USKI), the NRC has requested the replacement of Ku in the process of crafting reform measures for this institution," a Cheong Wa Dae official told reporters Saturday.

"There has been a perception on the part of the NRC that even though the USKI has received 2 billion won annually from our government, there have been problems such as a lack of transparency in its (research) achievements and accounting," he added.

 The USKI runs 38 North, a well-known website specializing in North Korea issues and with alternative sources of funding.

"Without commenting on the current controversy, I would like to assure our readers that 38 North will continue its operations despite the demise of USKI. More news on that front will be coming soon," the website's founder, Joel Wit, said in a statement. (Yonhap)