First External Audit of NACP Is Done! Assessment of the Agency’s Work

On July 26, 2023, the commission published a report on the first external independent evaluation of the NACP performance for 2020-2021.

The members of the commission checked the effectiveness of the NACP in all 9 areas of its activities: independence, the effectiveness of the institution in fulfilling its mandate, the quality of the NACP’s interaction with state authorities, local self-government, international organizations, and the public, as well as the management and organizational capacity of the Agency.

Let us remind you that the audit of the NACP began on January 24, 2022, but due to the full-scale invasion of Ukraine by russia, it was suspended until early summer.

The assessment was conducted by a commission consisting of three international experts appointed by the Cabinet of Ministers. This selection took place on the basis of proposals from donors who had provided Ukraine with international technical assistance in the field of preventing and combating corruption.

How was the quality of the rebooted NACP determined? According to the law, the work of the NACP is recognized as ineffective unless the Agency meets more than two thirds of the criteria for more than half of the assessment objects or half of the criteria for each assessment object. Recognition of the Agency’s activities as ineffective is the basis for the termination by the Cabinet of Ministers of the powers of its Head.

As a result, the Agency’s work during 2020-2021 was not found to be ineffective. However, neither was it recognized as effective.

According to the results, the NACP complied with 148 (72%) of the 206 criteria that were considered in the assessment. The Commission did not consider other criteria, either because it did not receive enough information to draw a conclusion about them, or because the NACP could not fulfill them due to external factors.

The NACP did not fulfill 58 criteria (28%). It is in view of this non-fulfillment that the report contains 120 recommendations — 46 high-priority ones and 74 others. The implementation of these recommendations should further enhance the efficiency of the Agency.

Quoting the Commission, in the summary of the Report, it noted: “The Commission’s evaluation of all criteria under Evaluation Objects showed that cumulatively the activity of the NACP during the assessment period did not reach the threshold of ineffectiveness. However, the Commission refrained from concluding that the NACP was effective because of the Commission’s assessment of NACP compliance with the criteria and the Commission’s general opinion on the NACP’s performance during the specified period.”

What does it mean?

In general, the Commission noted that during the assessed period, the NACP satisfactorily performed most of the tasks assigned to it. It also indicated that the rebooted NACP managed to correct many of the deficiencies of its predecessor.

However, the auditors highlighted that in several aspects, the NACP failed to deliver high-quality results, which was related mainly to the insufficient level of transparency of the Agency’s work, serious mistakes in the approach chosen towards the development of legal acts regulating the work of the NACP staff in key areas, deficiencies in the organizational structure and staffing decisions, and operation of the internal control function.

Below, we will cover all 9 sections of the report (assessment objects) and find out in more detail what exactly the Commission meant.

Ensuring Independence and Providing the NACP with the Necessary Resources

The effective fulfillment of this assessment object depended primarily on external actors that should provide the Agency with resources and guarantee its independence — the Verkhovna Rada, the Cabinet of Ministers, the Constitutional Court.

The Commission noted the fact that during the evaluation period, the NACP’s operating environment was seriously affected by several decisions of the external actors. In particular, the report notes that the decision of the Constitutional Court of Ukraine of October 27, 2020, seriously undermined the legal framework in the fight against corruption. It resulted in the termination of numerous criminal and administrative proceedings of alleged corruption or related offenses, including pending NACP cases.

Auditors were negative in noting the suspension of the obligation of political parties to submit financial reports during the COVID-19 pandemic, which also seriously affected the ability of the NACP to exercise its powers. The limitations imposed on the level of remuneration of the NACP staff due to COVID-19 restrictions had also negatively impacted the NACP’s operation. However, the Commission did not see as justified the NACP’s practice of keeping the agency’s vacancies not filled for an extended period to increase the funds to be spent on the remuneration of the existing staff.

The Commission also drew attention to the delay in the approval of the national anti-corruption strategy by the Verkhovna Rada, which, let us remind you, was in the process of adoption by MPs for more than 2 years. This neither contributed to the more effective operation of the Agency.

The Commission’s key recommendation under this block was that legislation regulating the activities of the NACP should be more stable and consistent. Any changes should provide for a transition period not to significantly limit the powers of the NACP and not to impose restrictions on its ability to effectively perform its functions.

Anti-Corruption Policy Development, Co-ordination, and Monitoring

In this block, the Commission, first of all, drew attention to the fact that the NACP failed to comply with half of the criteria due to a significant delay in the adoption of the new Anti-Corruption Strategy of Ukraine. And this is justified.

The Commission noted that in drafting the strategy and the subsequent State Anti-Corruption Program, the NACP comprehensively considered findings of sociological surveys and other research, including recommendations and analysis by Ukrainian and international non-government organizations. The Report indicates that the Agency ensured an inclusive and participatory process when developing the draft strategy and action plan, a notable achievement considering that in many other cases of drafting its regulations, the NACP failed to engage with the public transparently.

At the same time, the Commission rightly noted that even when faced with the absence of a formal anti-corruption strategy adopted by the Parliament, the NACP could have taken specific and transparent measures, independent of external stakeholders, to ensure accountability in its performance, build public confidence, and promote understanding of and support for its mission. The NACP could have improved its public outreach to explain its priorities, establish benchmarks for measuring effectiveness, and identify short-term and long-term objectives. The Commission also indicated that the NACP did not fulfill the legal requirement to publish its findings concerning the corruption level and the perception of anti-corruption institutions.

The Commission recommended, as a matter of priority, that the NACP comply in a timely manner with all the requirements of the law regarding the publication of information relating to its powers. We have also repeatedly stressed the problem of the Agency not publishing a number of important documents.

The auditors also pointed out that the NACP should create a clear basis for accountability, which would not depend solely on external stakeholders. To this end, the Agency should develop and make publicly available self-defined benchmarks, priorities, time-bound objectives, and results measurement methods so that internal and international stakeholders can better understand and evaluate strategic planning and progress in the work of the NACP.

The Organization of Corruption Prevention and Detection Measures

The Commission positively noted the proactive position of the NACP in guiding the corruption risk management process in public institutions, in particular, by updating a Methodology for corruption risk assessment and preparation of the institutional anti-corruption programs.

However, the Commission noted the problem of “conventionality” of anti-corruption measures for state bodies. After all, mechanical application of the prescribed algorithms may not allow considering the specific circumstances of each organization.

The Commission did not quite positively note the legislative requirement to coordinate the institutional anti-corruption programs by the NACP because it was not responsible for the effectiveness of such a program. It should be the responsibility of the head of the state institution.

The auditors drew attention to the fact the NACP did not approve its own anti-corruption program for 2020, which did not lead to any disciplinary measures or other consequences.  The NACP, which approves anti-corruption programs of other state bodies, failed to act as a model in this regard.

Compliance with Conflict of Interest and Other Anti-Corruption Restrictions

The Commission found that the NACP did not meet several important criteria.

The challenges are not new: the NACP should improve the accuracy, consistency, and transparency of its activities. The Commission noted the opinion of civil society concerning the quality and impartiality of the NACP’s actions, and the NACP should take steps to enhance public trust in this regard. In particular, the report states that representatives of civil society drew attention to the refusal of the NACP to extend the automated system of random allocation of cases to monitor conflicts of interest. Then the NACP justified its refusal, referring to its own too narrow technical distinction between the duties of “monitoring” and “verification.”

The auditors called on the Agency, instead of looking for an excuse to exclude a significant part of its compliance mandate from the application of an important accountability mechanism and to avoid improving the efficiency of its operating systems, to seek to fully demonstrate a commitment to promoting transparency and accountability.

The Commission also noted that the NACP did not update the methodical recommendations, information, explanatory, and training materials in a timely manner, did not conduct a comprehensive periodic review of internal procedures for monitoring and controlling compliance with the law. The NACP did not demonstrate the ability to apply to court in each case when the violation of the requirements for a conflict of interest was the basis for canceling decisions and acts. The NACP did not implement transparent procedures for handling petitions and notifications of natural and legal persons on alleged offenses.

According to the Commission, there is a systemic deficiency in certain areas of the Agency’s work that can be attributed to the approach introduced by the NACP Head in 2020. During the evaluation period, the NACP revoked its regulations on preparing the administrative protocols concerning violations related to conflict of interest and other anti-corruption restrictions (for example, gifts and incompatibilities). Instead, the Agency issued three separate “methodical recommendations” as non-binding documents that described how the NACP’s authorized officials should detect relevant offenses, collect evidence, and prepare administrative protocols on the infringements.

Regulating such proceedings through “recommendations” deprives the affected public officials of legal certainty and may result in abuse of the powers on the part of the NACP. This practice also appears to contradict the principle of legality that should govern the conduct of public authorities.

In the opinion of the auditors, which coincides with ours, this approach may be explained by the reluctance of the NACP’s leadership to follow regular legal drafting procedures that require a public discussion, as well as the desire to avoid the review of the act in question by the Ministry of Justice and the publication of the document.

Another explanation, an even more concerning one, could be that such an approach may be used to avoid potential liability for improper performance of the NACP functions in the respective area. The Commission called on the NACP to urgently reverse this approach.

Verification of Asset Declarations and Lifestyle Monitoring

According to the Commission, the NACP performance in this area presented a mixed picture during the evaluation period.

The NACP further streamlined its procedures to verify asset declarations and simplified the process of the asset declaration submission by providing comprehensive explanations on how to fill out the declaration forms. Compared with the previous composition of the NACP, the Agency no longer created obstacles for law enforcement agencies to investigate false declarations or illegal enrichment effectively. The NACP also improved access to government data and its use for verifying asset declarations.

Transparency International Ukraine has repeatedly criticized the NACP’s approach to engaging the public in the development of regulations and other documents in the field of financial control. In the Report, the auditors cite specific issues related to this.

Thus, the Commission notes that in several cases, contrary to the requirements of the law, the NACP did not publish draft documents. The NACP also failed to ensure a sufficient timeframe for stakeholders to provide feedback or engage in a meaningful discussion of draft documents. The new rules of logical and arithmetical control contained major deficiencies and received negative feedback from stakeholders. Following this criticism, the NACP restricted access to the rules altogether.

The Commission also mentioned “fast” checks, which Transparency International Ukraine criticized together with the Anti-Corruption Action Centre. It marked this innovation as follows: “The NACP introduced a new procedure of the so-called ‘fast’ checks of declarations instead of proper control of correct and complete filling-in of declarations, which went beyond its legal mandate and caused duplication.”

The problem of regulating the procedure for monitoring the lifestyle of declarants, which we at Transparency International Ukraine covered in our 2021 study, also got the attention of auditors.

The Commission sees the motivation for such a step on the part of the Agency in the same way as in the case of regulating a conflict of interest — an attempt to avoid public scrutiny and mandatory registration with the Ministry of Justice. The auditors noted that the practice raised concerns and legal risks concerning the performance of the financial control mandate of the NACP. This, in turn, undermines trust in the NACP.

The NACP failed to establish a transparent and accountable approach to verifying asset declarations of intelligence officers and classified personnel of other agencies. The relevant regulations were not made public and did not undergo public scrutiny when developed.

The NACP Head assigned the verification function for these declarations to the NACP’s Internal Control Unit, which does not correspond to the unit’s mandate as articulated in the Law. The Commission was rightly concerned that the head of the Internal Control Unit was a former Security Service officer, which implicated a possible conflict of interest. Moreover, the NACP refused to provide the regulations on submitting and verifying such declarations to the Commission for evaluation.

The Commission provided almost the largest number of recommendations regarding this area of activity of the NACP. Most of them are aimed at neutralizing the above deficiencies and are a priority.

Control of Political Party Finances

The Commission acknowledged the progress achieved by the NACP in controlling the financing of political parties during the assessment period.

The Agency, within its competence, objectively verified the compliance of the political parties’ activities with the legal requirements. However, the assessment in this area has limited relevance because, in April 2020, the Verkhovna Rada suspended the submission of political parties’ reports on the property, income, expenses and financial liabilities. Therefore, the NACP’s mandate in this area was suspended during most of the assessment period.

The Assessment Commission called on the Parliament to restore, without any further delay, the full mandate of the NACP and all obligations of political parties related to the submission of financial reports. TI Ukraine, together with partners from the public sector, also advocated the full restoration of political parties reporting.
The Commission also recommends restoring public access to the Unified State Register of Political Party Reports on Property, Income, Expenditures and Financial Liabilities.

The auditors negatively noted that the NACP failed to develop and launch the POLITDATA electronic system for the submission and publication of financial reports of political parties by the deadline set in the legislation. Neither did the Agency apply timely and appropriate measures to sanction persons guilty of violating the deadlines for submitting such reports.

Protection of Whistleblowers

The members of the Commission noted that the NACP made significant strides in implementing the provisions of the Law on Corruption Prevention which established the rights of whistleblowers, the requirements for providing confidentiality, and the process for reporting corruption offenses. For example, the NACP provided state authorities with comprehensive guidance on whistleblower protection and informed whistleblowers of their rights and protection options, as well as took appropriate measures to represent whistleblowers in court as required by legislation.

However, there were also weak spots. The NACP did not meet the requirement to create its internal secure channels to ensure the confidentiality of anonymous whistleblowers. It did not provide evidence of specific instances where corruption or corruption-related offenses detected by whistleblower reports resulted in the liability of offenders.

The Commission stressed the need for the NACP to raise awareness about the essential role whistleblowers play in preventing and detecting corruption, as well as about channels for reporting and the extent of appropriate protections. Further, the Commission recognizes the need for the NACP to improve cooperative relationships with state authorities to prevent retaliation against whistleblowers in the first instance and promptly take corrective actions when required.

The NACP’s focus on the relevance of whistleblower-reported information was almost exclusively on detecting, investigating, and resolving discrete allegations against identified individuals. The auditors concluded that as a result of this approach, the NACP neglected the opportunity to use whistleblower reports to mitigate the negative impact of corrupt acts and prevent future violations more effectively.

Co-operation with Stakeholders

The Commission positively noted how the NACP engaged the public in the development of the Anti-Corruption Strategy. It also notes that the Agency effectively managed the process related to the pilot 5^th round monitoring of the implementation of the OECD Istanbul Anti-Corruption Action Plan in Ukraine and the GRECO evaluations.

The NACP developed a sound methodology for the standard survey on the corruption level in Ukraine, with the involvement of NGOs. The Commission also commended the Office of Educational Work and Training Programs of the NACP, which performed its functions effectively.

The creation of a “research library” on the NACP’s official website is an example of commendable practice. Despite the fact that the accumulation of important research on the website is a significant step, we would like to point out the fact that the website itself is not sufficiently user-friendly.

We agree with the opinion of the Commission that the NACP managed to ensure an open and transparent selection of the members of its Public Council, which, due to the martial law, is still operating, despite the expiration of 2 years of office. At the same time, the Commission noted that communication between the NACP and the Public Council was sometimes suboptimal.

The Commission detected serious shortcomings in the NACP’s approach to publishing some of its draft bylaws and holding consultations on them. Thus, the auditors note that in several instances, the NACP failed to comply with the Law on Access to Public Information. Transparency International Ukraine, for its part, encountered such NACP practice and considers this problem to be systemic.

Transparency International Ukraine, for its part, also noted that the NACP must comply with the requirements of the Law On Prevention of Corruption in terms of its annual reporting, for example, providing information on the results of reviews of administrative protocols drawn up by NACP employees.

Although the NACP often complains about the low level of interaction with international partners, which hinders financial control or control over the restrictions of anti-corruption legislation and the resolution of conflicts of interest, the Commission noted the lack of MoUs concluded by the NACP with foreign competent authorities during the evaluation period, in particular, regarding the information exchange. No progress was made in the cooperation between the NACP and NGOs.

As a matter of priority, the Commission recommended that the Agency establish such cooperation, as well as actively advocate the need to implement the recommendations of international monitoring mechanisms before the responsible authorities at the national level.

Management and Organizational Capacity of the NACP

Management and organizational capacity is the area in which the Assessment Commission found that the NACP had not met the highest percentage of assessment criteria (48%).

The auditors criticized the organizational structure of the NACP, with some acting heads performing their duties for an unreasonably long term. The measures prescribed under the institutional development strategy did not match the strategic objectives and were not accompanied by measurable indicators. The competitive selection of the NACP staff lacked openness, transparency, and impartiality.

The Commission noted that some legal acts of the NACP had serious deficiencies in terms of their quality and compliance with the law. It once again stressed the problem of the Agency’s adoption of “methodological recommendations” or similar documents instead of binding, statutory regulations.

The adoption of such documents was often not based on public consultations, and in some cases, the documents were not available for public scrutiny even after their approval. The NACP cancelled some required legal acts that existed before (and did not replace them with new ones) or did not adopt them at all.

The use of the automated allocation of inspections to authorized persons of the NACP, which did not cover all inspections falling under the NACP mandate, was also criticized. In addition, there were deficiencies in the procedure, which created the risk of potential interference in the automated allocation.

Operation of the Unified State Register of Persons Who Committed Corruption or Corruption-Related Offences raised concern because the NACP included in the register those persons who committed offenses not classified as corruption or corruption-related by the legislation. The Commission noted that the NACP should address the issue of the absence of specification of the maximum period during which persons remain on the register, which may be seen as a disproportionate interference with their rights.

Among the achievements, the Commission members noted the following: the implementation of the e-case management system and the e-document management system, improved interaction and information exchange among structural units of the NACP, active participation of the Public Council members in the NACP staff selection procedures, the transfer of the ownership of the hardware and software of the Unified State Register of Declarations of Persons Authorized to Perform the Functions of the State or Local Government to the NACP.

The Commission expressed serious concern in the internal control function within the NACP, including the corruption prevention unit, which contradicted the Law on Corruption Prevention. The auditors also noted problems in regulating the integrity checks and lifestyle monitoring of NACP employees, which the Agency did not resolve despite public criticism.

There were no effective internal channels for NACP authorized persons to report cases of internal or external interference in their activities. Neither was there any special procedure for processing such reports. The Commission also notes that the available disciplinary procedures could have been applied more effectively.

According to the auditors, the NACP Head showed a proactive approach to public communication, a strong commitment to work, and leadership in attracting talent to work in the Agency. There were no allegations of corruption regarding the NACP Head.

However, the Commission noted that significant deficiencies outlined above happened under the direct supervision of the NACP Head and within his mandate. Such practices undermined the institutional accountability of the NACP and the principle of legal certainty. Considering all the above achievements and shortcomings, the Assessment Commission could not conclude that, during the assessment period, the Head of the NACP had reached the standard of demonstrating a high degree of expertise and professionalism.

The first independent external audit of the NACP has finally been completed. The members of the Commission did a lot of work and studied in detail all aspects of the Agency’s activities.

As we can see, the NACP still has a lot to work on. Transparency International Ukraine supports the recommendations set out in the Audit Report to improve the effectiveness of the NACP and hopes that they will be implemented as soon as possible. We will definitely continue monitoring it.