Auditing directorate sets a record

“This money is enough to keep all Ukrainian Army conscript soldiers well-fed for at least two years,” said Denys Krasnikov, deputy chairman of the State Financial Inspection of Ukraine. In his words, the State Auditing Service inspected 3,317 businesses and institutions in the first three months of this year and found nine billion hryvnias-worth of irregularities — at almost 96.2 percent of them. The state suffered losses worth more than 1.7 billion.

“This is an all-time high in our work,” Krasnikov emphasized. “For the first time in the history of our service, we found returnable losses that exceed a billion hryvnias.” Last year the auditing service caused about 1.8 billion hryvnias to be returned to the state.

One of the “most inveterate” violators is Rodovid Bank Plc. This “black financial hole” of Ukraine, into which the state keeps funneling money, agreed in November 2009 to pay off the debts of its borrowers by taking over their collateral (a 113-ha plot of land in Kyiv’s Obolon district) worth 3.77 billion hryvnias. But it turned out that, as of April 16, 2010, this area was in fact still owned by a debtor. So this, now state-run, bank struck it off its balance sheet, without good reason — more than 3.5 billion hryvnias worth of debts and interest, as well as the 300 million hryvnias that a law firm received for its legal assistance. Only last January did the bank rectify this irregularity at the auditing directorate’s insistence, when it received a governmental permit for this land.

Another recipient of governmental assistance, Ukrhazbank, issued 42 loans in 2008-2009 without duly analyzing the financial condition or assessing the borrower’s creditworthiness. As a result, the bank’s losses exceeded 2.3 billion hryvnias. At the auditors’ demand, the bank began to file suits and managed to pay off 363.8 million hryvnias of problem-debts.

A lot of financial irregularities were found at the facilities of the now defunct Industrial Policies Ministry. For instance, the audit of the state-run Zoria-Mashproject enterprise revealed illegal insurance expenses worth almost three million hryvnias. At the auditors’ demand, the funds were returned as part of the enterprise’s revenues, out of which 1.5 million hryvnias were paid to the state budget.

Yet the real “champion” is the State Motorway Service. Together with its regional branches, it is responsible for 7.5 billion hryvnias worth of financial irregularities in 2008, 2009 and the first quarter of 2010, with 0.5 billion accounting for material and financial losses. Only 15 million have been returned so far.

This country has suffered grave moral damage due to irregularities unearthed in the course of the auditing of budgetary funds earmarked for overcoming the consequences of the 2008 flood in western Ukraine. Officials had no scruples about cashing in on human sorrow: the losses the budget sustained during the food relief operations exceed 200 million hryvnias.

Funds were also overspent in the course of Euro-2012 preparatory work. For example, 3.5 million hryvnias worth of irregularities were committed at the Yahodyn customs office while establishing cross-border checkpoints. The state budget lost over 0.5 million there.

This means mass-scale embezzlement is rife in this country’s state-run entities. In this connection, The Day asked Krasnikov what the auditing directorate advising the government should do about the results of its inspections? “Following an audit, we send demands not only to the entity we have inspected but also to the relevant ministry and cabinet. These messages eventually help alter the law, take some officials to task, and dismiss some enterprise managers. Our demands evoke, albeit not always, a proper response, and the cabinet and ministries have to take some action in each concrete case,” Krasnikov answered.

But Petro Andreiev, chairman of the General Auditing Directorate of Ukraine, expressed a slightly different opinion in an interview. “We have identified concrete individuals, managers of state-run businesses, who were engaged in an activity that was highly detrimental to the state but beneficial to certain commercial entities,” he says. “But, unfortunately, our recommendations about the necessity to dismiss the managers who sullied their name remain unheeded in most cases.”

Which of the two prospective chairpersons of the State Auditing Service, now being formed instead of the Auditing Directorate, is saying the truth? We will know this after the upcoming staff replacements because very few in this country like to face the truth.