“Gentle” Control. Work of Auditors in Public Procurement

The State Audit Service should oversee public procurement, but for some reason it is less than enthusiastic about these functions.

When ProZorro was introduced, violations and corruption in public procurement became visible to everyone.

If the government immediately started getting things in order and punishing those guilty of violations, it would immediately become an effective injection against further “fails.”

Instead, it has been three years, and those who enter into agreements with favored suppliers in spite of ProZorro or buy goods at blown-up prices are only getting reassured that they are untouchable.

How Did This Happen and Can We Change It?

To answer this, let’s take a look at supervisory and law enforcement agencies. Starting with the State Audit Service of Ukraine.

Two years ago, I already wrote an article about the “unbiased and independent” work of this agency. Has the situation improved? In theory, it should have, since recently, the auditors have been tasked with procurement monitoring on top of the regular control measures.

However, the State Audit Service has been very… gentle with its supervision. And it seems that the current management of the State Audit Service is in no way interested in doing things differently.

Monitoring Effort

Monitoring is a truly powerful tool. It helps to identify violations and stop budget money from getting spent at the stage of bidding, before anything irrevocable happens.

Monitoring by the State Audit Service was stipulated by the law as long ago as in 2015 in the first version of the Law “On Public Procurement.”

And now you will see a remarkable example of wasting precious time.

A year and a half after the law was adopted, the auditors just didn’t start the monitoring. They explained it by the absence of a formalized monitoring procedure.

In December of 2017, with active support from the public, the law containing a monitoring procedure was finally adopted.

But the auditors developed the regulatory base and tested the online monitoring for another ten months.

And finally, at the end of 2018, the procurement monitoring started. The State Audit Service recruited more people, got a special profile in the ProZorro system to monitor procurement, it even got a system of risk indicators that automatically identify suspicious tenders.

What is important is that the monitoring process by itself is open and transparent, and anyone can see the results.

The DOZORRO community just had to use the opportunity and analyzed the auditors’ performance.

First of all, their sheer number. During half a year, the State Audit Service of Ukraine performed monitoring of over 3,000 tenders.

And we calculated that this number makes for three (!) monitorings per employee from the monitoring department per month.

Secondly, the reasons why monitoring is initiated. Instead of relying on risk indicators, the Audit Service prefers identifying violations manually.

The auditors started over 70% of the monitored tenders at their own initiative, as opposed to those flagged by the risk indicator system, which constitute just 10% of the monitoring – even though the risk indicator system was created precisely to facilitate the auditors’ work and make it impossible to check tenders arbitrarily.

Recently, auditors have been complaining about the low effectiveness of risk indicators, but the violations are confirmed in 70% of cases. It is actually normal that automatic systems need to be improved and updated, and the risk indicator system is no different.

The fact that the auditors keep complaining and yet don’t do anything about the methodology is strange, frankly.

Nonexistent Punishment

The number of monitored tenders or inspections is not the be-all and end-all.

There is a more significant aspect – real responsibility. All this impunity in the sector of public procurement is usually precisely what impedes effective development of this sector.

There were violations identified but not eliminated in 1000 monitored tenders out of 2400 in the first half of 2019.

Despite this, the auditors attempted to fine the procuring entities only in 48% of cases, and actually fined only 6 of them.

So even when violations are identified, it comes to an actual fine less than in 1% of cases.

In fact, auditors are supposed to play a crucial role in court proceedings against procuring entities that commit violations.

Why are the numbers so low? There are a few objective obstacles.

Absence of personal data. To draft a protocol, the auditors have to identify the individual that committed the violation. For this, they request personal data from the procuring entity.

The procuring entities, on their end, ignore the auditors. Moreover, some procuring entities have admitted that the auditors themselves recommend them not to disclose personal data.

Stalling with court proceedings. The court gives three months from the date when the violation was identified to bring the perpetrator to liability.

If the auditor stalls, it is highly likely that the case will end up closed.

Few reasons for liability. There are, unfortunately, a lot of violations that happen in public procurement a lot, but where auditors cannot bring procuring entities to justice even if they want to. The situation should change in the near future if a new version of the Law “On Public Procurement” is adopted.

No cooperation with law enforcement. Public procurement includes not only administrative liability, but also disciplinary and criminal. So where are the convictions? Of course, this question should be addressed to the police, the prosecution, the NABU, the entire judicial system, but all law enforcement agencies usually base their activity on materials provided by auditors.

There is actually a special order on cooperation in effect between auditors and agencies of prosecution, law enforcement and the Security Service of Ukraine. It has not been updated since 2006. Obviously, it does not include the NABU, but there is no updated law, for some reason.

When Can We Expect Effective Control?

There is a nagging thought that the State Audit Service perceives any bureaucratic obstacles not as a challenge to be tackled but as an excuse why they don’t need to do anything to control public procurement.

Why doesn’t the State Audit Service, which is supposed to be the best at relevant legislation, advocate all the possible changes that would make the legislation more effective?

Why is the monitoring more about the process than about the result? The State Audit Service and its employees should know all the details and fix all the problems not covered by the current law.

It seems we can only wait for the SASU management to change. It seems, we won’t have to wait very long.