Valentyn SYMONENKO on the benefits of accounting and comparison

Valentyn Symonenko, the first and so far the only head of the Ukrainian Accounting Chamber, has a rich political life story. Vice Premier in one of the first governments of independent Ukraine and a people’s deputy for several terms, he knows very well not only the Ukrainian political kitchen but also the ways of the largest financial flows that determine the political climate. But this current politician has not only political experience to be proud of. Mr. Symonenko is also a prominent mountaineer who has climbed the world’s highest peaks. This is why his views of politics and the economy and his assessment of Ukraine’s realities of today seem to be based on the mountaineering ethics, which hold no place for the faintest falsehood, let alone deceit. In your far-off wanderings, where there are countless opportunities for comparison and the word patriotism acquires its original meaning free from cynicism, you feel especially embittered over the years and the chances your Fatherland has lost. This is what Mr. Symonenko began with in his interview with The Day

“I have returned recently from Seoul, which hosted a meeting of representatives of the top oversight bodies of most countries. South Korea is ten times smaller than Ukraine in terms of area and 27 times in terms of cultivated land. There are almost no strategic deposits of mineral resources. The population is almost the same as in Ukraine. In its modern history, that country has had two wars, three coups d’etat, and four constitutions. Nevertheless, pensions far exceed the subsistence level, while the last year’s gross domestic product was $452 billion against our $32 billion.

“Last April I visited Katmandu as part of a Ukrainian mountaineering team intent on scaling the Himalayan peaks in honor of the tenth anniversary of our independence. There was a long-awaited reception by the king of Nepal. I proudly told him about Ukraine and its natural resources and economy, including the size of the Ukrainian GDP. It turned out that our GDP is almost the same as in Nepal, where the population is small, where there is neither the industry nor arable land, while our two countries stand next to each other in poverty rankings. And I heard the same question later asked in Korea, where we were received by the president, ‘But why do you, in spite of such wealth, show such a low economic level?’ When answering, I had to turn for help to Confucius and his saying about living in a time of changes... But, in reality, the answer to this question should be sought in the way our budget is formed and executed and in the fact that nobody is held responsible for it. Let us not forget that the state budget is a concentrated expression of our economic policies.”

“Mr. Symonenko, let us start with the process of adopting the budget, the most pressing issue of today. You have been watching these processes for years. Do you think the 2002 budget will be fulfilled?”

“Throughout the ten years of our state’s independence, the budget has consistently displayed unreality as a steady and repeating feature. The budget has never been fulfilled in independent Ukraine. Verkhovna Rada officially admitted this three times by passing corresponding resolutions, but nobody was even admonished, let alone punished, for this. Let it be my introduction to our conversation.”

“Has the current budget campaign learned from the lessons of past years? What are the main risks here?”

“Unfortunately, we are bad students, we don’t learn the lessons of the past. The government memorandum enclosed with the budget and signed by Prime Minister Anatoly Kinakh claims that the state budget was formulated on a new basis by the program-targeted method of planning. But let us try to find at least one true specific program there. We find none. I mean here the programs of public-sector funding. Where are controllable programs based on the logical pattern of ways, means, and resources aimed at improving our economy and the life of common people?

“We talk very much about taxation and are constantly beefing up our fiscal bodies so they collect taxes better. But I am deeply convinced the point is by no means in increasing the number and powers of the taxmen. We must change the tax system, but not only by reducing tax rates, because this is a double- edged sword for the budget: if you reduce the rates, you can leave all public-sector organizations and the already undernourished pensioners in dire straits. What must be changed is the system of forming the tax rates. I can say quite officially that only every other legal entity pays taxes today. And moreover the UAH 46.8-billion tax exemptions inflict revenue losses worth 30 billion, which accounts for almost half the revenues planned for 2002. This is why the budget proclaimed on the day of passage as realistic becomes unrealistic three days later. Passing and fulfilling a budget are two entirely different things. The latter calls for a reliable system of managing public funds and personal responsibility for fulfilling the budget as a law.

“Can this be achieved without a proper system of oversight? I have to answer, no! Who monitors budget revenues in this country? The Accounting Chamber only analyzes them. Nor does the Ministry of Finance monitor them. They have a department eleven people who with just analyze Tax Administration data.”

“Does the Tax Administration really exercise oversight? Do you think Mykola Azarov really monitors budget revenues?”

“No, he is a person who obeys orders and his agency is really fulfilling this task, while it is the Ministry of Finance that must do the monitoring. To this end, the tax administration should be subordinated to the ministry in the course of the administrative reform, as is the case in all civilized countries. The Accounting Chamber should also perform some controlling functions. For example, there are about thirty state-run holdings and national companies in this country. They run up an over UAH 10 billion debt to the state budget. Yet, they have been allowed to own public property worth nine billion. On the other hand, dividends received from them last year and expected to receive this year account for 40% and 35% of the planned 275 million and 200 million hryvnias respectively. Who oversees this? Who’s responsible? Nobody! There can be no budget fulfillment and management system without a system of oversight. These are the two most important interconnected points. And if budget revenues are out of control, this brings about irreversible changes in the state’s financial system and makes any realistic budget unrealistic. Suffice it to recall the story of the Donbasenerho Power Plant. Five huge thermal power stations worth at least UAH 1.2 billion were sold for 200 million. And Bila Tserkva’s Rosava? Costing an estimated 100 million or more, it went for four million hryvnias.”

“Do you by chance know who bought it? For instance, State Property Fund Director Oleksandr Bondar says he doesn’t know. So does Oleksiy Kostusiev, the Antimonopoly Committee chairman, although he promised to name the buyers.”

“Unfortunately, I don’t. This must be a big secret. I am sure this became possible because state property is out of control and, what is more, because the system of public information doesn’t work here as it does in the civilized world. For example, in Korea, every hotel room has a computer input. You take a notebook from the receptionist, and in a minute or so you know what the budget has received from a certain corporation. This is their attitude toward public money, the money of taxpayers — that’s what transparency is all about.”

“And when will we come to the time when the taxpayer can be informed about budget fulfillment and take part in controlling process?”

“This depends on when the system of independent financial and economic oversight will stand firmly on its feet. This is, first of all, the Accounting Chamber vested by the Constitution with certain powers. We will enjoy success only if we indeed put our work across to the public. And here is the answer to your question: we count the taxpayers’ money, and they have the right to know about as much as we do. For example, in France, the reports of a similar authority are freely on sale. We don’t have enough funds for this yet. The UN Development Program once helped us, and we used to put out small brochures. This is the limit of our transparency.

“But what we really lack is sufficient power. Look: before resuming the issue of loans, the international financial organizations obliged the government to streamline its financial system and, in particular, the subsystem of financial control. The Cabinet of Ministers, trying to get the millions it needs, cooked up (I can’t say it any other way) a financial oversight bill, which I think has nothing to do with either analogous foreign laws or what this country needs. The same opinion was expressed by representatives of international financial organizations who talked with me. They agreed that this draft would be useless. I think it can only serve as legal cover for the existing system of squandering public funds.”

“The Viktor Yushchenko cabinet constantly gave the press information on successful fulfillment of the 2000 budget. Is it true that they even managed to over-fulfill it?”

“The 2000 budget was actually not fulfilled in terms of any item. And the point is not at all in different methods of calculation. The simple reason is that our system allowed interpreting, not counting, information on budget fulfillment or shortfalls. As we know, our budget is divided into the general and special funds. The general fund was 95.3% fulfilled. The special fund was over-fulfilled. But the common people should know that the sole purpose of the latter is to keep up the bodies of public administration. So they spent for these purposes 13 times as much as was planned. The government trumpeted that the budget was fulfilled with a UAH 697 million revenue surplus but forgot to say that the planned budget expenditures fell short by 649 million. Moreover, instead of having the surplus utilization issue approved by Verkhovna Rada, the government solved this problem on its own, spending the lion’s share of these funds on clearing the public debt. What did this false surplus and the concurrent under-funding of budget items result in? Today, the arrears of budget-supported organizations have reached three billion hryvnias.”

“A recent presidential decree on irregularities in state- run holding and national joint-stock companies also mentioned Naftohaz Ukrayiny. What’s in store for it?”

“This monopoly enterprise owes seven billion hryvnias to the treasury. Can one possibly develop the gas and oil transport system with a burden like this? Being almost fully state-run, this national joint-stock company neither disburses dividends nor makes the payments due on Russian gas transit revenues. What the company needs is a routine independent audit. Then everything will become clear.”

“Could and did the Audit Chamber foresee the collapse of Ukrayina and Slovyansky banks?”

“With Slovyansky being a private bank, we can have nothing to do with its story. But we did foresee the Ukrayina affair. Mr. Yushchenko, National Bank governor at the time, was twice invited to our board meetings, where he told his version of what was going on. In reality, everything was a little different. The National Bank gave Ukrayina a stabilizing loan on, let us say, insufficiently sound grounds and bending the law. This loan not only failed to bring about stabilization but also contributed to Ukrayina’s UAH 500-million debt which the bank was unable to pay off. In its 2000 budget, the National Bank planned to partially write off this loan at the expense of its revenues to be channeled to the budget.”

“In any other country, this kind of action would be frowned upon, but here the perpetrator becomes premier. Any comments?”

“No, a silent scene. We once raised this officially.”

“What new occasions for financial scandals do you forecast today?”

“I think the danger lurks in the shadow of our so-called economic successes. The International Monetary Fund and the World Bank have been giving us loans since 1993. We have received a total six billion dollars and returned two billion, while the accrued interest has already reached 1.1 billion. This leaves us with four billion. What was this money used for? For stabilizing the hryvnia and backing the balance of payments... But! In reality, this is payment to the government and the Ministry of Finance for their unprofessional conduct. Only 300 million out of six billion were used for investment, for example, in seed or for restructuring the coal-mining industry. But even there, half the funds were utilized for a wrong purpose and the other half ineffectively. We are again being given a loan, and again it will be the wages of the lack of professionalism.”

“Do you forecast new problems in foreign debt service?”

“Without doubt. Owing to deferments, the debts being serviced have increased by 600 million dollars. This money will have to be taken from the budget. Besides, we have to take out new loans today in order to clear the old ones: foreign debt payments almost equal a third of our budget revenues.

“The few dry bullets still left in the clip of reforms most often prove, unfortunately, to be blanks. Take, for instance, the pension reform so much talked about. Administrative expenditures for maintaining the Pension Fund have risen eight-fold from three hryvnias per pensioner in 1993 to 25 hryvnias now. We are establishing a UAH 250-million system of the personified accounting of pension contributions, but if this system does not become part of the budget National Program of Informatization, disbursements will again have to be effected at the expense of contributions made by those who work. Also on the rise are expenditures for maintaining fiscal bodies, while the Audit Chamber has had its powers curtailed.”

“Are you going to demand that Verkhovna Rada restore these powers?”

“Our territorial branches have recently been nipped in the bud. The president did it at the request of the governors. They said in a collective letter they needed no additional financial oversight bodies. The result is we are not in a position to fully monitor the state’s budgetary resources. I think this wrong situation must and will be changed. The Budget Code has a clause to this effect, and I think this matter will be settled in practice in due time. Of course, one must establish control over state budget revenues, now the weakest link in the chain of our budgetary system. I say again that nobody controls them now: even the prime minister has no appropriate mechanism to do so. We began to do this work but were not allowed to finish it, so the taxpayers still don’t know where their money goes.”

“What can an individual do in this situation to protect his interests?”

“This problem is simple to solve. We need a free press and the truth. And while we have neither the former nor the latter, we have corruption but not corrupt individuals.”

“Did you ever have to make decisions that could cost

you more than a career? Were you afraid? And if so, when: at work or while scaling the mountain peaks?”

“I have totally lost any instinct of self-preservation. I was brought up in the spirit of the Soviet slogan, First the Fatherland, then yourself. The Communist Party membership card, which I still keep, lists four reprimands. I even find pleasure today in reading it: for ignoring the decisions of a higher-placed Party organization. But today it is somewhat out of fashion to put the fatherland first. Unfortunately, the following principle now reigns: grab more, cheat more. Why is the budget not being fulfilled? Tell me the truth. Why are people being denied truthful information about what caused the Ukrayina bankruptcy? Because many in this country live by the proverb, the truth is good but happiness is better. I can affirm on the basis of many indirect indications that those who extended credit to the Ukrayina Bank knew only too well that it could not pay it back. So the country is again running up debts. What’s the use of these $100 million foreign loans under such humiliating conditions?”

“But what causes the greatest chagrin is the way the previous loans were spent.”

“The more so that 14,000 people are employed in our State Treasury. Look: while the question is about the treasury-related fulfillment of the budget, the Savings Bank is being entrusted to cater to the energy market. As we have already created this juggernaut of a treasury, as we are setting European standards, then what does this have to do with the Saving Bank?”

“Many problems could be solved if we had a parliamentary majority that could make decisions to guarantee their fulfillment. Do you think it will be possible to form such a majority in the next parliament?”

“It will be possible, of course. And, God willing, let it be so.”

INCIDENTALLY

Valentyn Symonenko’s complaint about scanty powers of the Accounting Chamber has been corroborated by another oversight body. According to Verkhovna Rada Human Rights Ombudsman Nina Karpacheva, the chamber should also monitor the distribution of food-procurement funds intended for the detained and arrested. Ms. Karpacheva has long insisted that these funds be allotted as a separate item of Ministry of Internal Affairs needs. Now, UNIAN reports, this issue has been also raised at a session of the Verkhovna Rada committee for law- enforcement legislation. Ms. Karpacheva points out it is not only the human rights ombudsman but also the Accounting Chamber that should monitor whether police properly utilize these funds and whether the detained and arrested starve, because (according to UNIAN information) human rights inspections of pretrial cells and police detention rooms have found this year that inmates are usually not adequately fed. At the same time, Ms. Karpacheva claims that in 2000 alone UAH 1,318,900 have been spent on foodstuffs for police academies and hospitals, while no money at all has been allocated for the nourishment of the detained. According to the human rights ombudsman, this is simply an unfair distribution of funds.