Gray utilities Cardinals: who and how spends money communities

Fiscal decentralization has increased local budgets and at the same time improved the appetites of municipal officials and local deputies. Utilities attract dealers because there is still possible to organize a scheme of theft.


The supply of water to homes, removal of debris, construction of parks, funeral, road repair, almost unnoticeable things for most people.

In addition to funds that pay residents for services received, utility companies receive a lot of money from local budgets.

Usually local councils join the authorized capital of these companies in the tens of millions of hryvnia. However, to control the movement of such funds, not everyone can.


Often utilities provide services through contractors, which were selected without tenders from the number of friends or political partners.

So the enterprise community become a tool for corruption and paying political dividends to the partners as payment for the “right” vote.

According to the city councils only in the regional centers created more than 800 utilities that accumulate assets worth billions of hryvnia. All they need to provide quality services, or to make money for companies.


Mysterious utility company

How to reduce the risks of corruption in the utilities and make them more effective? Publicity is the most effective move. However, as the Ukrainian public utilities?

To find out, the Institute of political education, the Ukrainian independent centre for political studies, Center for political studies and analysis (Ivano-Frankivsk), in partnership with the “Transparency International Ukraine” in July 2016, a study conducted by public utilities.

In the study, were selected eight regional centers: Chernivtsi, Ivano-Frankivsk, Uzhgorod, Ternopil, Khmelnytsky, Lviv, Lutsk and Rivne. The study involved the analysis of work of communal enterprises according to 20 indicators of transparency and accountability.

The indicators were different: the presence of a company website, the publication of the Charter, the Declaration on incomes of the head, contacts, publication of annual financial plans and reports, audit reports, information on tariffs and agreements on contracts.

Also analyzed the documents regulating the procedure of work of the enterprise, in particular, the appointment of a Director and fill vacant positions on a competitive basis.

The company could receive a maximum of 40 points, but so much not gained any of them. Became the leader of “Municipal investment management company” Ivano-Frankivsk – 23 points. Most of the other barely 15 points.

The average rating in each city is quite depressing. The lowest average score – in Uzhgorod – four points, the largest is 12.2 – in Ivano-Frankivsk.


What can you learn about utilities of any city? Usually boils down to the fact that the company exists and it does nothing.

If we analyze the sites of city councils and municipal enterprises and to make formal requests, it is possible to get information about the list of companies, established in the city, the decision on their establishment, their regulations and legal address.

Sometimes the utility company will publish the information on management and staffing. Get a copy of the contract with the Director of the enterprise, the size of his salary and the terms of calculation of premiums and allowances is not easy. Such closeness is called the mystery company.

In addition, the company will publish annual financial plans and reports on their implementation. However, these data are usually story. In the report there is also information on shareholders ‘ equity, net income, the financial result from operating activities, long-term and current liabilities, items of operating expenses.

Conclusion from the documents is that earned little, spent more, and therefore give money from the city budget to replenish the share capital.


region of darkness

The biggest fear of utilities – a report on the money. On the external independent audit companies with vast budgets can only speak in a whisper, because such a procedure in 2015 have been only two companies.

To get the same available information about the formation of tariffs for services of only professionals and sometimes the deputies for the citizens of such data is not made public.

Utilities could more effectively use funds from the local budget and own funds, if carried out, Dorogova procurement (goods and services in the amount of 200 thousand UAH, and works – UAH 1500000 less) through ProZorro.

However, for example, in Ivano-Frankivsk it for subthreshold procurement does not use either utility company. This may indicate an attempt to leave the corruption opportunities in procurement through direct contracts.

To make the work transparent KP would of the Declaration on property, incomes, expenses and financial obligations of managers. The Directors are required to submit them to the personnel Department, but the information they usually do not publicize. Thus, only five of the leaders of the Lviv municipal enterprises published the declarations.

Even worse is the case in the segment of personnel competitions. To find out who, when and on what criteria workers in gaining leadership positions in the utilities, nobody can. Only when several companies established Advisory boards. However, this is generally only Advisory, Advisory bodies, not the governments.

Managers of municipal utilities are appointed by the mayor without competition, based on their own preferences. Selection criteria are often the same party cards, friendship, the experience of the organization of corruption schemes or loyalty. This mechanism allows the destination to strengthen the administrative vertical of city hall.

Mostly neither deputies nor journalists nor the public do not have easy access to information and mechanisms of control over public utilities. Acts on execution of works and project documentation – also marked “secret”, so often the results of work of the enterprises is only noticeable on paper.


what is the solution

The only chance to break a mutual guarantee of secrecy and corruption – to choose leaders for the contests. Now the way it works in Lutsk and Kiev city councils.

Need to establish an effective Supervisory boards in the enterprises, to attract independent professionals and MPs. In particular, the Supervisory boards began to create Ivano-Frankivsk and Chernivtsi city Council, and only as Advisory bodies.

It is also important to determine the list of information that must be obligatorily published on the official websites. This is already done in Ivano-Frankivsk and Rivne city councils. The list of information should be broad: from contracts Directors contracts of contracts, acts of work performed, a detailed financial report.

The new standard for town councils should become the independent external audit of the largest utility companies. MPs, journalists and citizens should have information about the real situation at the enterprises of the companies.

In particular, in Ivano-Frankivsk city Council has conducted the purchase of such services for the largest enterprise via ProZorro.

Goods, services and works even on a small Dorogova amounts must be procured through ProZorro. This will not only save money, but also increase their effectiveness and improve the quality of work performed.


instead of a conclusion

Fiscal decentralization has increased local budgets and at the same time improved the appetites of municipal officials and local deputies. Closed tools of the administrative resource and utility companies – bring in local politicians, because there still can be easily and discreetly organize theft schemes.

The repair of roads, supply of children in schools, upgrading parks to occur in the future. However, the effectiveness of these services, the quality of work and the level of corruption depends on the reform of the management utilities.


Ivan Lukerya, expert of the Ukrainian independent center for political studies, Taras Sluchyk, the expert of Institute of political education

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