Legal Loopholes for Scandalous Enrichment: What’s behind Excessive Bonuses to Officials

Wartime does not contribute to the openness of the processes, which officials hardly discussed even before February 24. One of these almost closed processes is granting bonuses. 

Scandals over granting the bonuses to officials bothered the public even before February 24, but during the full-scale war, they have caused real indignation.

One of the latest stories about the conflict of interest when granting bonuses was the news about the National Agency for Corruption Prevention (NACP) drawing up an administrative protocol regarding Serhii Nadal, the current mayor of Ternopil. According to the NACP, the amount of the bonus could be 2.5 times higher than the official salary. 

Does the case of Nadal fall under the conflict of interest? What kind of responsibility can an official bear for it? What can the State Anti-Corruption Program, adopted in March, change? Let’s find out.

How can a bonus lead to a conflict of interest?

A bonus is an incentive, a payment of money, additional to the salary of an official. The private interest of the official is to increase its size based on the results of work, whereas the legislation requires that officials act not in their private interests, but objectively and impartially. 

However, it is hardly possible to objectively evaluate your work and assign the amount of the bonus. This is where the contradiction comes in. If the official grants themselves bonuses in the amounts determined by them — this is a conflict of interest.

A part of the NACP’s mandate is to monitor and control how officials comply with legal requirements to prevent and resolve conflicts of interest. In case of violations, the National Agency draws up relevant protocols and refers them to the court. And then the court decides whether the violation did actually take place.

However, even after the court approves the protocols, there is no criminal liability for such a real conflict of interest. That is, an official cannot be imprisoned, even despite the loud discussion of individual cases — the legislation provides only for an administrative sanction, that is, a fine from UAH 3,400 to 6,800 by a court decision. 

If the official acts or makes decisions in conditions of a real conflict of interest for the second time in a year after such a fine, the subsequent fine will increase — from UAH 6,800 to 13,600. In such repeated cases, the official can even be removed from office for 1 year.

But, as we saw the result of the decision on Serhii Nadal, the court may adopt another decision. It can state the absence of a real conflict of interest if the size of the bonus — at least the maximum and minimum limit — is not set by the official. 

By the way, the example of the mayor of Ternopil is a very common practice. Quite often, the maximum amount of bonuses to the mayor is set by the relevant local council. Sometimes, to this end, a special commission on bonus issues is even created, which can assess the work of an official on a monthly basis. 

If the court establishes the absence of a real conflict of interest, there will be no administrative liability. 

However, does society support such a practice of dealing with budget money? How do residents of cities, towns, and villages feel about such bonuses? Do they believe in the full independence and objectivity of such a commission?

It is here that the responsibility can catch up with the mayor, and no longer administrative, but reputational. 

So far in Ukraine, the institution of reputation is not as developed as in Western countries. But the damage that the official will do to their image may emerge in the future — even if the violation turns out to be “imaginary” from the perspective of the legislator and the court. For example, such negative, according to citizens, stories can affect their chances of successfully passing an integrity interview when competing for a senior position. Or they will prevent getting a sufficient number of votes from fellow citizens in the elections. 

To date, we have only occasionally seen cases when, due to damage to the reputation, officials left their posts. But for the Ukrainian society that goes through communication scandals quite often, the destruction of the reputation even before obtaining some important position in the state apparatus is a matter of time.

Therefore, officials should remember one more interest: to keep a clean reputation and not to trade it for money, conflicts of interest, and actions, though legitimate, but those that do not meet public expectations.

What is a conflict of interest?

The conflict of interest does not only cover the issue of granting bonuses to officials. “Nepotism,” the conclusion of beneficial contracts with familiar contractors, work under the guidance of relatives — all of us are outraged by such facts, and they all belong to the same type of offense. 

By the way, the State Anti-Corruption Program (SAP) has a special subsection on further progress in resolving conflicts of interest. However, unfortunately, the SAP does mention the problem that different laws define conflict of interest in different ways. And this, in turn, affects the understanding and interpretation of such a phenomenon by both officials and judicial institutions. This, of course, will also need to be decided, accordingly amending the SAP.

However, the law, for its part, cannot cover all the little things that relate to the regulation of conflicts of interest. For example, the NACP itself, which should monitor compliance with anti-corruption legislation, lacks a mandatory procedure for monitoring and controlling conflict of interest requirements. 

That is, the Agency’s employees are not limited to the terms of verification of cases with a possible conflict of interest. In general, the powers of NACP employees to identify this problem are extremely vague and wide, which creates additional opportunities for abuse. Instead, there are methodological recommendations that do not define clear rules for such checks. 

In addition, the NACP does not have an automatic distribution of such checks between employees. Thus, the human factor can directly influence the monitoring of possible violations of the conflict of interest. And since the NACP does not provide most reports for such control, it is extremely difficult to determine how objective and impartial the verification was. 

As we can see, the issue of excessive bonuses for officials is only the tip of the iceberg called “conflict of interest.” And although such an offense may not seem severe in consequences because there is no criminal responsibility, it should still be treated with all due attention. 

Today, many officials still have enough loopholes to avoid responsibility for seemingly blatant, but quite legal things. And this should be corrected and controlled. 

Fortunately, we already have a document that can help a lot with this — the State Anti-Corruption Program. Unfortunately, without the necessary changes, it will not be able to patch all the holes. And, as always, the necessary changes require motivation. In our case, this is the motivation of MPs and the NACP because who knows how much more news about bonuses we will have to read.

The article was prepared by Nataliia Sichevliuk, legal advisor to Transparency International Ukraine.