Monitoring and Audit Department to crack down on debtors, the bankrupt, and graft

This year the Central Monitoring and Audit Department (CMAD), aside from its main duties, plans to trace the movement of all the money that has anything to do with the state. Although the law granting more extensive powers to the CMAD did not pass the parliament last year, apparently this will not help those on the wrong side of the law. The department has instructed all of its divisions to keep a close watch on government-guaranteed loans, dubious bankruptcies, enterprises that are losing money or whose liabilities or receivables are growing, government purchases, and various funds allocated from the state budget to support political parties that have won the elections. Although monitoring of the latter item will begin only next year, the nation’s auditors have been instructed to prepare to monitor the expenditure of these funds.

Thus, the CMAD and all its regional divisions will no longer keep a low profile. The push has come from the president addressing those attending the recent Consultations on Combating Organized Crime and Corruption and Protecting Human Rights. It has been long since Pres. Kuchma last made so many critical remarks addressed to all of those present. In any case, the first result of president’s criticism was the CMAD collegium held the following day. Since CMAD Chairman Petro Hermanchuk summed up all of the results of the previous year last December, the only item on the agenda — what to do in 2004 — should alert anyone who has anything to do with budget funds as well as money that were to be channeled to the budget. And while until recently CMAD auditors had been constrained by obvious legislative shortcomings, now, with the president’s unspoken blessing, the legal technicalities of what the CMAD can or cannot do will not stand in the auditors’ way.

Until now, in view of the absence of direct jurisdiction over entities to be inspected, inspections had been ordered by the Presidential Administration, Cabinet of Ministers, and Finance Ministry, or pursuant to motions from the parliament or a people’s deputy. Last year, the Presidential Administration, government, and Finance Ministry ordered 968 inspections and audits. Some of their results were reflected in the behavior of high officials and personnel changes in the government. Verkhovna Rada, which has thus far failed to pass an adequate law on the CMAD, has also been active, evidence of which are 117 inspections and audits ordered on motions from the parliament and deputies. One need not explain the words of the CMAD chairman addressing the personnel and chiefs of regional CMAD divisions: “There can be no more objections that we are not authorized to do this.” At the very least, chiefs of these divisions will have more sway with the authorities in their respective regions.

Industrial enterprises will be in the focus of the inspectors this year. Growing liabilities or even receivables will be a signal for the CMAD inspectors, who have now been given a free hand to perform such inspections, much like audits of enterprises whose bankruptcies look even slightly dubious. According to the president, forcing state enterprises into bankruptcy is practiced on a nationwide scale, and something must be done to stop this. Answers to the question of what must be done will follow from audits at each individual enterprise. Enterprises that are losing money should expect to undergo similar comprehensive audits. Statistics suggest that nearly 40% of the nation’s enterprises are losing money. And while until recently this only raised eyebrows and went no farther than reprimands to the regional authorities, now punishment will be used on a wide scale. Preliminary debriefings have been scheduled for the end of the year, when the nation’s top executives will receive explanations of who is to blame and what is to be done.

Those who have received government-guaranteed loans and failed to repay them will be hit hardest. According to CMAD Chairman Petro Hermanchuk, only one such recovered loan is more effective than thousands of inspections of village councils. In all, there is $1.7 billion worth of such bad debts in Ukraine. The CMAD intends to review and take tougher measures against such debtors.

Also a separate item in the plans of each division will be inspections to trace the expenditure of budget funds allocated to support agriculture.

There is good news not only for major state funds but also for rank-and-file citizens. This year the CMAD will scrutinize various funds in executive and local government bodies. It intends to work relentlessly to reveal and fight graft. Thus, dear citizens, should you be required to make a certain contribution to some charity, investment, or any other fund so as to grease the bureaucratic machinery, report this to the local CMAD division. Now the inspectors’ career will depend on how fast they respond to such pleas.