Before the second reading, the draft law considered some of our recommendations on improving the procedure for competitive selection of candidates for members of the Accounting Chamber. In particular, requirements and restrictions in regard to members of the advisory group of experts were added; their rights and obligations were determined; and the openness of meetings and the publication of the methodology for assessing candidates and the results of the selection stages were provided for.
The updated draft law also limits direct interference with the activities of the body: the provisions on the implementation of unscheduled control measures by the Accounting Chamber in accordance with the decisions of the Verkhovna Rada are excluded. However, such important issues as enhancing the political independence of the Accounting Chamber and coordinating its powers with other bodies remained unresolved.
Therefore, Transparency International Ukraine recommends that MPs correct certain shortcomings during the voting for the draft law in the parliament. This provides for supporting the submitted proposals that exclude the provisions of the draft law on reducing the number of members of the Accounting Chamber and the possibility to appoint a deputy secretary of the body and an unlimited number of deputy heads of the Chamber.
On October 25, a comparative table was published on the website of the Verkhovna Rada before the second reading of the draft law No. 10044-d, designed to improve the operation of the Accounting Chamber. The document includes more than 1,200 submitted proposals and amendments, as well as the final version of the draft law proposed to the parliament for voting.
The meeting of the budget committee, which considered the proposals and amendments to this legislative initiative, had been held before that, on October 24. According to the results of the discussion, in which, in addition to MPs, representatives of the Ministry of Finance and the Accounting Chamber took part, the parliament was recommended to adopt this draft law as a whole.
Analyzing the text of the draft after the first reading, TI Ukraine recommended eliminating a number of risks before the next vote. They concerned the issues of competitive selection of candidates for the positions of members of the Accounting Chamber, its political independence, and the delineation of powers with other bodies. However, the existing shortcomings were only partially corrected before the second reading.
Improving the competitive procedure for selecting members of the Accounting Chamber
In the original version, the draft law did not consider certain important aspects related to the competitive procedure for selecting candidates to the positions of the Accounting Chamber members:
- lack of requirements for members of the advisory group of experts (hereinafter referred to as the advisory group);
- failure to define their rights and obligations in the law;
- setting too short a period for the competition;
- lack of requirements for its openness and transparency.
The revised draft law eliminates some of these shortcomings. It provides for establishing the requirements for the business reputation of the advisory group members, their high professional and moral qualities, as well as at least five years of experience in the field of public control (audit), economics, finance, or law.
Persons who have an unexpunged and outstanding conviction, have been prosecuted for committing a corruption-related offense in the past year, or are authorized to perform state or local government functions, will not be able to qualify for members of the advisory group.
The advisory group will be competent if it is approved in its entirety of six people. The draft law was also supplemented with grounds for early termination of powers of the advisory group members, which reduces the risk of blocking the competitive procedure.
Members of the advisory group will have the right to receive information about candidates from state registers and databases free of charge, as well as to contact candidates or any other individuals or legal entities with a request for explanations, documents, or information about candidates. They will be obliged not to disclose personal data and restricted information that became known to them in connection with participation in the activities of the advisory group and to refuse to consider issues relating to the candidate in the event of a conflict of interest.
The meetings of the advisory group will be open to representatives of the media, the public and will be broadcast online. Information on the decisions of the advisory group, including the results of tests and interviews separately for each candidate, will be published on the website of the Budget Committee of the Verkhovna Rada.
However, some risks associated with the competitive selection procedure remained.
Our recommendations for the extension of the competitive selection period were considered only in part; the advisory group will have nine months to form a list of candidates recommended for appointment only for the period of participation of international experts. After the end of the transitional period of 8 years, the competition will be limited to four months.
This period is too short for the entire selection procedure, including the preparatory stage (determining the group’s procedure and regulations, the procedure for conducting the competition, the criteria and methodology for assessing candidates), all selection stages, voting, and formation of the final list of candidates. Therefore, there is a risk that to comply with the deadline provided by law, the advisory group will be forced to limit the time for collecting and analyzing information about candidates or refuse certain stages of the test, which will adversely affect the results of the competition.
There are still risks in terms of access to participation in competitive procedures. The draft law does not mention holding competitions both for the positions of members of the Accounting Chamber and state auditors on an open basis. At the same time, the draft does not provide for any restrictions on participation in them, which should neutralize these risks. However, the conditions for the competitive selection of candidates for the positions of the Accounting Chamber members will be additionally determined by the advisory group of experts, and for state auditors—by the Accounting Chamber itself. The lack of requirements for the openness of these competitive procedures in the draft law preserves the possibility for abuse at this stage.
Ensuring the independence of the Accounting Chamber
One of the main changes in the draft law before the second reading is the exclusion of the provisions on unscheduled control measures by the Accounting Chamber, in accordance with the decisions of the Verkhovna Rada. The legislators thus followed the recommendations of international partners to limit any direct interference with the activities of the body.
As for other guarantees of the Chamber’s independence, whose introduction we support—the withdrawal of officials, including state auditors, from under the scope of the Law of Ukraine on Civil Service and determining their official salaries and surcharges at the level of the law—all of them have been preserved in the draft.
However, in terms of ensuring the political independence of the institution, all the risks contained in the first version of the draft law remained.
In accordance with the transitional provisions of the current Law on the Accounting Chamber, the meeting of the Chamber is competent if it is attended by at least two-thirds of the effectively appointed number of the Accounting Chamber members. The draft law proposes to enshrine such an approach.
There is a high probability that not all vacant positions in the body (it is expected that there will be 6 of them) will be filled in the near future after the adoption of the new law. Analyzing the results of the past competition to the Accounting Chamber, we noted a rather low level of professionalism of the candidates and the failure of the vast majority of them to comply with the requirements of the law regarding the knowledge of one of the official languages of the Council of Europe. In addition, the competition for vacant positions can take up to 9 months.
Under such conditions, the reduction in the number of members of the Accounting Chamber to 11 and the preservation of the powers of previously appointed members of the body (5 people) leaves the possibility of a shaky majority of members elected under the new procedure.
The new version of the draft law does not propose changes to the selection of a candidate for the position of the Chair of the Accounting Chamber. Currently, the speaker of the parliament is responsible for selecting a candidate; thus, there are still risks of political influence on the potential leader of the Chamber. We recommended that lawmakers provide the Accounting Chamber with the opportunity to independently choose a candidate and submit a proposal for their appointment to the Verkhovna Rada, but this proposal was not taken into account.
Changes introduced to the legislation that jeopardizes the independence of all members of the Accounting Chamber were neither considered. The parliament wants to retain its powers for the period of martial law to express no confidence in officials whose appointment and dismissal are the prerogative of the Verkhovna Rada, which might result in the dismissal of such an official. The relevant mechanism has already been used before, and therefore the possibility of early terminating the powers of the Accounting Chamber members on grounds not provided for by the specialized law remains.
Expansion of powers of the Accounting Chamber
Before the second reading, the updated list of powers of the Accounting Chamber had been preserved and proposed to be expanded through the implementation of control (audit) measures regarding appellate and local courts, as well as consolidated financial statements of public sector entities and budgets. Such financial statements should include data from the key spending units, all state-owned enterprises and banks, as well as information on the assets and financial liabilities of the state.
However, the issue of functions of the Accounting Chamber and the State Audit Service of Ukraine overlapping remained unresolved, in particular in terms of the audit of local budgets. This may entail funding for two bodies with overlapping powers, which is inefficient in terms of using public funds.
Given the need for additional consultations to coordinate the activities of the Accounting Chamber and the State Audit Service and the short time frame for preparing the draft law for the second reading, we recommended that the parliament postpone the entry into force of the provisions that provide for the expansion of the powers of the Accounting Chamber to audit local budgets until at least the end of 2025. The relevant proposal also considers the current situation with the lack of more than half of the members of the Accounting Chamber and the holding of a competition for vacant positions, which can last up to 9 months. But our recommendation was ignored.
In the analysis of the draft law after the first reading, we also drew attention to the need to prevent duplication of powers between the Accounting Chamber and the National Agency for Corruption Prevention to control the legal and targeted use of funds by political parties.
The draft law proposes to clarify the provisions of the Law on Political Parties in Ukraine, according to which the Accounting Chamber will exercise public control over the “lawful and targeted use of funds allocated from the national budget to finance the statutory activities of political parties.” At the same time, according to representatives of the parliamentary committee on the budget, such a formulation will limit the powers of the Accounting Chamber only in terms of the possibility of auditing the activities of the NACP in this area as the body responsible for distributing funds allocated from the national budget to finance the statutory activities of political parties. But this interpretation does not seem unambiguous, and the possibility of the Accounting Chamber carrying out control measures regarding political parties in parallel with the NACP persists.
Evaluation (audit) of the Accounting Chamber
The draft law expands the subject of external evaluation of the Accounting Chamber, removing in Article 43 the mention of compliance with international standards. However, in clause 4-6 of the Final and Transitional Provisions, it has been preserved as a temporary provision.
It is proposed that the external evaluation will continue to be carried out by representatives of the International Organization of Supreme Audit Institutions (INTOSAI) at the request of the Accounting Chamber. During the first 10 years from the date of entry into force of the law, it will be done every three years.
However, the draft law has no requirements for specialists who will conduct such an evaluation, and it does not provide for any consequences for the Accounting Chamber based on the results of such an evaluation, including a negative one, which casts doubt on the effectiveness of such a mechanism. Moreover, the draft law gives the right to the International Organization of Supreme Audit Institutions to cancel the next evaluation altogether after six years from the date of entry into force of the law if, according to the results of the evaluation, the activities of the Accounting Chamber are recognized as consistent with the principles of INTOSAI activities.
Other changes and risks of the draft law
The draft law provides for the possibility to appoint an unlimited number of deputy chairs of the Accounting Chamber instead of one. According to the current version of the Law of Ukraine on the Accounting Chamber, the deputy chair of the Accounting Chamber temporarily exercises the powers of the head of the body in case of their absence or inability to exercise their powers.
Given that neither the current law nor the draft law provides for any additional powers or responsibilities for the deputy chair of the Accounting Chamber, the possibility of expanding their number seems unreasonable.
In addition, the draft law provides for a higher official salary for the deputy chair of the Accounting Chamber than for other members of the body. As a result, an increase in the number of deputies will entail an increase in budget expenditures to ensure the remuneration of their work.
A similar remark applies to the introduction of the post of deputy secretary of the Chamber. This practice is not applied in other public authorities, where during the absence of the public secretary or the impossibility of exercising their powers, their duties are performed by one of the heads of independent structural units. Given the lack of other functionality, except for the temporary exercise of the powers of the secretary, as well as the need for financial support at the expense of the budget, establishing a separate position of the deputy is unreasonable.
Conclusions and recommendations
Reform of the Accounting Chamber became one of the key priorities for lawmakers in late 2024. The adoption of a new law to improve the operation of the body was one of the US requirements for direct budget assistance in the amount of USD 1.5 billion, which subsequently appeared as a structural beacon in the updated revision of the IMF program, which is to be implemented by the end of the year.
And although the IMF requirement concerns only certain issues related to the Accounting Chamber (updating the competitive procedure with the granting of a decisive right to vote to international experts, expanding the scope of the body’s powers, and ensuring its financial independence), it opened up prospects for improving other aspects of the Accounting Chamber’s activities.
Undoubtedly, the introduction of an updated competitive procedure for the selection of members of the Accounting Chamber is a significant step forward to increase the efficiency of the body’s operation and increase the level of trust in it. However, such important issues as enhancing the political independence of the Accounting Chamber and coordinating its powers with other bodies remained unresolved.
A significant part of the proposals of TI Ukraine were not considered in the draft law before the second reading. But some shortcomings can still be rectified in the course of voting. Therefore, we recommend that MPs at least support the submitted proposals, which exclude the provisions of the draft law on:
- reduction in the number of members of the Accounting Chamber;
- the possibility to appoint a deputy secretary of the Accounting Chamber and an unlimited number of deputy chairs of the body.
This publication was prepared as part of the Digital Transformation Activity, funded by USAID and UK Dev.
