Draft bill #10044-d of September 16, 2024 

Cosponsors: MPs Roksolana Pidlasa and Pavlo Frolov from the Servant of the People faction 

Who is affected: the Accounting Chamber of Ukraine (AC), Cabinet of Ministers, and Ministry of Finance 

Status: adopted in the first reading 

Summary: 

Operations of the Accounting Chamber 

  • the bill provisions that the AC is the highest financial control body that applies the fundamental principles and standards of the International Organization of Supreme Audit Institutions (INTOSAI) and the INTOSAI Framework of Professional Pronouncements (IFPP) in its work 
  • the financial independence of the Accounting Chamber will be strenghtened: it will send its budget request directly to the Ministry of Finance, specifying how much funding it needs to operate. The Cabinet will report on the consideration of the AC’s proposals simultaneously with reporting on the draft government budget 
  • salaries for the members of the AC and most of the officials in its apparatus will be set at the following rates: 
    • head of the AC – 55 living wage for able-bodied persons (currently 166,256 UAH) 
    • deputy head of the AC – 50 living wages (151,150 UAH) 
    • member of the AC – 48 living wages (145,104 UAH) 
    • secretary of the AC – 40 living wages (120,920 UAH) 
    • head of the audit department – 30 living wages (90,690 UAH) 
    • head of the audit unit – 25 living wages (75,575 UAH) 
    • state auditor – 18 living wages (54,414 UAH) 
  • for all listed positions, additional payments of 20 to 50% of the salary and bonuses of up to 30% will be possible 
  • the Accounting Chamber will check how local authorities and state institutions receive and spend money. It will thus control all public finances: 
    • how funds from local budgets are used 
    • whether state and municipal enterprises operate effectively 
    • what the funds from social and pension funds are spent on 
    • the income and expenditures of the National Bank 
    • how foreign loans, grants, and aid allocated to government and local budgets are spent. 

Competition for positions in the Accounting Chamber 

  • composition of the AC will be reduced from 13 to 11 members 
  • the procedure for conducting competitions for the position of AC member will be changed 
  • within 30 days after the competition begins, the Verkhovna Rada will form an advisory expert group consisting of six members. They will be nominated based on proposals from parliamentary factions. One faction or group can propose no more than six candidates 
  • the advisory expert group will conduct a preliminary selection of candidates. Then it will submit lists of candidates recommended for appointment to the parliamentary budget committee. Candidates not recommended by the experts will be removed from further participation in the competition 
  • the Verkhovna Rada will appoints a person to the position of AC member in two stages: 
    • MPs will vote for each candidate separately 
    • based on the results of the first stage, MPs will compile a list of candidates who received the highest number of votes according to the number of vacant positions. They then will vote on the compiled list. If the number of votes is insufficient for the list, a repeat vote will be held 
  • an 8-year transitional period will be established, during which the advisory expert group will consist of six members: 
    • three members appointed by the Cabinet based on proposals from international organizations that help Ukraine with financial control, auditing, countering corruption, or reforming the Accounting Chamber 
    • another three will be appointed based on proposals from parliamentary factions following a ranking vote 
  • to adopt a decision, at least four members of an advisory group will have to vote for them, including at least two members nominated by international organizations 
  • if votes are split evenly or someone abstains or does not vote, a repeat vote will be conducted 
  • if consensus cannot be reached within 24 hours after the first vote, a decision will be considered adopted if at least three members, including two from international organizations, vote in favor 
  • all ongoing competitions for the positions of AC members initiated in the Verkhovna Rada will be terminated 
  • candidates for AC membership will have to provide copies of documents confirming proficiency in the Ukrainian language according to the level defined by the National Commission on Standardization of the State Language, as well as proficiency in one of the official languages of the Council of Europe (English or French). 

Composition and activities of the Accounting Chamber after the reform 

  • committing a significant disciplinary offense, gross or systematic neglect of duties will be grounds for the Verkhovna Rada to dismiss the head or another member of the AC before the end of their term of office 
  • the age of 65 will no longer be grounds for dismissing the head or member of the AC 
  • the Verkhovna Rada will appoint and dismiss the head of the AC only based on the decision of the parliamentary budget committee 
  • a position of state auditor will be introduced. Ukrainian citizens aged 25 or older who have higher education (at least a master’s degree) and meet qualification requirements and criteria will be eligible for this position 
  • the position of deputy secretary of the Accounting Chamber will be introduced. They are appointed and dismissed by the head of the AC with the consent of the entire chamber. By order of the AC secretary, the deputy will exercise specific powers. They will also perform duties if the secretary is unable to do so or absent 
  • the secretary of the AC, their deputy, state auditors, and advisors to AC members will be officials, but not civil servants. However, they will be subject to anti-corruption obligations and required to submit asset declarations 
  • decisions of the AC will not require state registration and take effect in accordance with the procedure established by the AC 
  • relevant committees of the Verkhovna Rada will be required to consider the findings of the AC during checks. They will also discuss cases where AC’s recommendations are not enforced with or are implemented incorrectly 
  • external evaluations of the AC’s work for compliance with international audit standards will be conducted once every five years. The review will be carried out by one of the leading members of the International Organization of Supreme Audit Institutions (INTOSAI) at the request of the AC. 

What is right: 

  • the bill expands the mandate of the AC to all public finances (local budgets, funds of state enterprises, and off-budget funds) 
  • formal parliamentary procedures for reviewing reports and monitoring the implementation of AC recommendations will be introduced 
  • a transparent competition for the appointment of the head and members of the AC will be introduced 
  • the AC will have more financial independence due to the establishment of salary rates, the creation of independent auditor positions, and the introduction of a special procedure for considering the budget request of the Accounting Chamber (similar to the judicial branch of government). 

What is wrong: 

  • the powers of the AC and the State Audit Office will overlap. The most obvious example is the audit of local budgets. Both bodies conduct checks, discover violations, and provide recommendations. This can lead to additional costs and bureaucratic confusion 
  • the excessive influence in appointments of the head of the AC will be consolidated. Previously, the secretary of the AC was elected by its members, but this draft bill proposes that the head appoints the secretary unilaterally 
  • currently, there are 5 members of the AC who are performing their duties. They were appointed under the old legislation. The draft bill does not clarify how their powers will be terminated. 

Alternative solution: 

  • to establish effective cooperation between the Accounting Chamber and the State Audit Office, including through information exchange and the establishment of joint work programs. Consider the possibility of merging some functions or delineating powers regarding audits or creating joint working groups 
  • to restore the appointment of the AC secretary by a vote of all members. Otherwise, the independence of chamber members in carrying out administrative duties is lost, as the AC secretary performs the functions of the head in his or her absence 
  • to clarify the status of the previously appointed AC members. 

Why this is important: the independence of the Accounting Chamber is key to effective control over public finances, increasing transparency, and combating corruption. Reforming the Accounting Chamber is also included in the list of milestones outlined by the IMF and other partners for receiving financial assistance.