On December 17, the president signed a new law aimed at improving the operation of the Accounting Chamber, the supreme audit institution of Ukraine. It provides for important changes for the institution’s development, in particular, an updated procedure for the competitive selection of its members, as well as the strengthening of financial and administrative independence. The law expands the powers of the Chamber to audit local budgets and improves the planning of audits and their process. A detailed overview of these and other changes can be found in the legal analysis.
The European Commission again pointed to the limited capabilities of the Accounting Chamber in the field of financial control in its latest report. Interestingly, the new law, which considers most of the recommendations of our partners, was adopted precisely on the day of the publication of this report. However, it is crucial that these changes be not declarative. It is not enough just to adopt the law; its implementation needs to begin immediately. At the same time, over the next year, we should also focus on the problems that the law has not solved.
Transparency International Ukraine highlights four key steps that need to be at least partially implemented in 2025 for the successful launch of the Accounting Chamber reform.
Select 6 members of the Accounting Chamber under the new rules
The new law reduced the number of the Accounting Chamber members to 11, so, 6 positions in the body remain vacant. In order for the Accounting Chamber to perform its functions efficiently, the parliament must address this personnel issue as soon as possible. The law contributes to this: it stipulates that the competition shall start automatically from the date of its entry into force.
At the first stage, the Verkhovna Rada, with the assistance of the Cabinet of Ministers, shall appoint 6 members of the advisory group of experts within 30 days, who will select candidates for the position of the Accounting Chamber members. In the first 8 years, three of them will be determined based on proposals from international organizations that have assisted Ukraine for at least 5 years in the fields of financial control, corruption prevention, or the Accounting Chamber reform. Such an advisory group will be appointed each time a new member or members of the Accounting Chamber are selected. Its powers will remain in effect until the vacancies it is appointed to cover are filled.
After the announcement of the competition is published, potential candidates will have 30 days to submit their documents for participation. Then they will be handed over to the advisory group and the main selection stage will begin, which can last up to 9 months. During this time, experts, based on the results of tests, interviews, and background checks, must select at least two candidates for the post of the Accounting Chamber member and submit a list of recommended candidates for appointment to the parliament.
Overall, the appointment of new members of the Accounting Chamber may last for 11 months. It is important that this process be not delayed at any stage. The prolonged absence of a full body of members weakens its ability to properly perform its functions.
At the same time, it is essential that the competition be transparent, and what is defined in the law is observed in practice:
- the procedure for the work of the advisory group, the procedure for the preliminary selection of candidates, as well as the criteria and methods for assessing candidates are published before the start of the selection;
- meetings of the advisory group are streamed;
- the results of tests and interviews and a list of recommended candidates for appointment are published.
Harmonize the powers between the Accounting Chamber and the State Audit Service
One of the issues that remained unresolved after the adoption of the law is the overlapping the functions of the Accounting Chamber and the State Audit Service of Ukraine.
These bodies have similar powers in the areas of control over the management and use of public funds. In particular, the state financial audit of the State Audit Service contains features inherent in the audit of compliance and efficiency conducted by the Accounting Chamber. At the same time, the scope of activities of both bodies extends to the same entities: ministries and other executive bodies, extra-budgetary funds, budgetary institutions, and state-owned enterprises. It is inefficient to finance two bodies with duplicative powers.
In addition, the new law added another point of intersection of the bodies’ functions, as it entrusted the Accounting Chamber with the authority to audit the funds of local budgets.
The issue of overlapping functions of control bodies must be eliminated. The authors of the law agree, and the European Commission emphasizes this. Therefore, we expect that in 2025, steps to coordinate the activities of the Accounting Chamber and the State Audit Service will begin to be taken. It is important that this process take place with the participation of all stakeholders—parliament, government, as well as representatives of the control bodies, so that the changes meet both legislative requirements and practical needs of the field.
Plan audits for 2025
In mid-November this year, the Accounting Chamber approved a list of audit topics for the next year. These include audits of the use of funds for defense, protection and restoration of critical infrastructure, social protection, the reform of public administration and a number of bodies (Supreme Court, HACC, BES, SSU, State Committee for Television and Radio-Broadcasting of Ukraine).
However, these topics need to be compared with the real capacity of the body, given the limited composition, and the audit plan for 2025 should be approved.
The new law prohibits unscheduled audits, both by parliamentary decisions and upon the initiative of the Accounting Chamber. Therefore, we expect that a risk-based approach will finally be used to plan audits in 2025. Interestingly, this aspect was already standardized by the body in the Procedure for the Annual Planning of the Accounting Chamber’s Activities back in December 2023. However, according to the head of the body, it was to be applied only when planning activities for 2025.
We are waiting for the approval and publication of the plan because this will show the priorities of the Accounting Chamber for the coming year.
Establish a system for monitoring the implementation of recommendations
Until recently, neither the law nor the Rules of Procedure of the Accounting Chamber provided for the body’s constant monitoring of how the recommendations provided by it to the entities under control are implemented. As a result, stakeholders, in particular the parliament and the public, did not have access to objective information about the implementation of the decisions and recommendations of the Accounting Chamber. This limited the possibility to properly assess the effectiveness of both the institution and the entities under control.
The new law solves this problem by obliging the entities under control to inform the Accounting Chamber on a quarterly basis about the implementation of recommendations, and the body is obliged to constantly monitor and analyze the implementation of its decisions, as well as publish information on the results of these activities. An open system for monitoring the implementation of the Accounting Chamber’s recommendations might be of help.
It will allow not only to monitor the progress of recommendation implementation, but also to respond promptly to their improper implementation or non-implementation. In this case, the Accounting Chamber will be able to appeal to the committees of the Verkhovna Rada to respond to the actions or inaction of the entities under control. At the same time, the public system will ensure the accountability of the body to all stakeholders, including parliament, government, and the public. It will also help to identify systemic problems in the areas of control of the Accounting Chamber that may need to be improved not only at the level of specific entities, but also at the regulatory level.
The improvement of such a system is one of the tasks of the body’s Development Strategy for 2019–2024. According to the interim implementation report, the Accounting Chamber approved documents last December that defined the principles of the system, its components, streamlined procedures for monitoring and informing stakeholders about its results for appropriate response. Almost a year has passed, yet the system has not been implemented.
Therefore, we expect that the Accounting Chamber will soon complete the deployment of a system for monitoring the implementation of recommendations, which will be an important step towards increasing transparency not only in its activities, but also in the field of external public audit in general.
Conclusion
The adoption of the new law on the Accounting Chamber was a long-awaited change. However, it is not a reform per se; it is only the start of a long journey to improve the operation of the body. Currently, we require that all the innovations of the law be put into practice and the issues that the law did not cover be regulated.
Over the next year, we expect specific primary steps from both the parliament and the government, as well as from the Accounting Chamber itself:
- Conduct a competitive selection of members of the Accounting Chamber under new transparent rules to enhance the independence and professionalism of the body.
- Start harmonizing the functions of the Accounting Chamber and the State Audit Service so that the state does not finance the activities of two bodies with duplicated powers.
- Apply a risk-based approach to audit planning to concentrate resources on critical and risky areas to ensure effective management of public finances in wartime.
- Introduce a system for monitoring the implementation of the recommendations provided by the Accounting Chamber to increase the accountability of the entities under control and the effectiveness of the institution itself.
The implementation of these priorities will be the cornerstone of successful reforming and enhancing confidence in the Accounting Chamber. We will actively monitor the implementation of innovations, providing recommendations and analyzing key stages, because the supreme audit institution of the country is an integral part of the democratic system, which shall ensure the efficiency, accountability, effectiveness, and transparency of public administration.
The article was co-authored with Andrii Shvadchak, legal advisor at TI Ukraine
This publication was prepared as part of the Digital Transformation Activity, funded by USAID and UK Dev.