More Transparency and Control over Data on Public Funds Use

The main changes that MPs propose to introduce to the Law on the Openness of the Use of Public Funds in this draft law are:

1. Adding fines for untimely publication of information on the use of public funds and publication of false information.
2. Increasing the period of storing information in the public domain from 3 to 5 years.
3. Granting the State Audit Service the right to collect personal data of persons who committed violations to conduct proceedings against them.

Given that auditors currently do not have access to the personal data of violators, they cannot bring them to justice. It would also be advisable to provide automated access for auditors to this data if there are grounds. As an alternative to the obligation to disclose information on public finances, it is worth considering the idea of opening up the data that the treasury bodies already have so that spending units will not have to report to several systems.

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Funds of the national and local budgets, state and municipal enterprises, and trust funds are public funds. Information on how they are spent is open and is necessarily published on official state websites. Such requirements have been mentioned in the Law of Ukraine on the Openness of the Use of Public Funds (hereinafter referred to as the Law on Openness) for almost nine years. It enables the E-data platform to operate, which combines such key resources as spending.gov.ua, openbudget.gov.ua. In particular, it provides information about payments and contracts concluded by spending units. This is a great opportunity for public oversight, provided that the information is complete and reliable.

Liability for violation of the right to information, including public finances, is provided for in Article 212-3 of the Code of Ukraine on Administrative Offenses (hereinafter referred to as the Code). It provides for a fine for failure to publish information under the Law on Openness.

However, MPs have recently proposed to consider draft law 10255, to strengthen liability in the use of public funds. This initiative covers not only the issue of public access to information, but also offers additional leverage for the State Audit Service.

New violations and liability

Today, a fine of UAH 425 to 850 is imposed for non-disclosure of information on the use of public funds under the Law on Openness; such liability is provided for in Article 212-3, part 1 of the Code.

In draft law No.10255, MPs propose to establish fines for other violations in this area:

• for non-disclosure, untimely disclosureof information, it is proposed to impose the same fine from UAH 425 to 850;
• and for the disclosure of unreliable, inaccurate, or incomplete information, which the official was obliged to publish under the Lawon Openness—a fine of UAH 850–1,190.

If a person has already been fined for any of these violations during the year, their repeated commission will result in a fine of UAH 1,020–1,360.

Accordingly, it is proposed to reflect the full list of violations in Article 2 of the Law on Openness. According to it, liability for these violations will still be borne by the managers of spending units and recipients of funds from the national and local budgets, enterprises, Pension Fund bodies, as well as compulsory state social insurance funds.

Entities to impose fines

Currently, cases under Article 212-3 of the Code are heard by the courts. Instead, in draft law No.10255, MPs propose to remove offenses related to non-compliance with the Law on Openness from their competence. Instead, such cases will be considered by the bodies of the State Audit Service. 

The authors of the draft law do not propose to amend Article 255, part 1, clause 8-1 of the Code. It stipulates that reports on violations of Article 212-3 of the Code may be drawn up by authorized officials of the Secretariat of the Commissioner for Human Rights of the Verkhovna Rada of Ukraine or its representatives (except for violations related to the legislation on the bar).

According to the logic of the Code, failure to publish information on public funds not only complicates control over their spending, but also violates a person’s right to information. Therefore, the idea of transferring the consideration of these violations to the State Audit Service looks debatable.

If such a decision is made, the Commissioner’s team will no longer be able to draw up protocols in these cases. The fact is that Article 255, part 1 of the Code, which gives the Commissioner’s team the right to draw up protocols, applies to cases considered by courts, executive committees, and administrative commissions. If cases are transferred to the competence of the State Audit Service, they will be withdrawn from this category. The reference to Article 212-3 of the Code will remain unchanged for the Commissioner. To avoid a conflict, it will be necessary to clarify Article 255, part 1, clause 8-1 of the Code, adding exceptions that are not covered by the protocols drawn up by Commissioner’s team.

Violation as a basis for inspection

In addition to the fine, the consequence of violations of the Law on Openness may be an inspection of the controlled institution by public auditors. If an official is brought to justice for these violations, their institution may be included in the plan of measures for state financial control.

The proposed provision obviously needs to be finalized, in particular, it lacks the subject matter: what exactly is the basis for including the inspection in the plans is not formulated specifically; the connection between an individual-offender and the controlled institution is not spelled out. An inspection as a control measure is regulated primarily by the Law on the Basic Principles of State Financial Control in Ukraine (hereinafter referred to as the Law on the Principles of Financial Control).

5 years of information openness and other guaranties

In addition to increasing the liability for improperly informing citizens about the use of public funds, draft law No.10255 proposes to enhance the availability of this information in other ways.

First of all, to extend the period of storing the published information in the public domain. Currently, information on the use of the national and local budgets is published quarterly and stored for 3 years. Instead, according to the idea of the draft law, this period should be 5 years. This is precisely the information that is published under the Law on Openness.

To further guarantee that information on public finances will continue to be open, draft law No.10255 proposes to include it in the list of information, access to which is prohibited to restrict. Such a list is contained in Article 21, part 4 of the Law of Ukraine on Information, and now it includes, in particular, information on the activities of state and municipal unitary enterprises, economic companies with a state/municipal share of more than 50%, provided that the legislation requires their mandatory publication. Draft law No.10255 proposes to specify that it is impossible to restrict access to information on the use of public funds by spending units and recipients of funds from the national and local budgets, state and municipal property entities, and compulsory state social insurance funds, in particular, regarding the activities of the entities already referred to in this provision. 

There is a risk here because information about the activities of state/municipal enterprises, companies with a state/municipal share of more than 50%, is not only information on the use of public funds. Therefore, if this provision is specified exclusively to match the issue of the use of public funds, we may lose some information. It is more expedient to provide for new requirements in separate clauses.

Public auditors to be granted access to personal data and more

For more than one year, the State Audit Service has been reporting obstacles to its work on the part of persons who commit violations. Apart from the non-admission to the site, it is not provided with personal data for drawing up reports of violations.

To solve this problem, draft law No.10255 proposes amendments to the Law on the Principles of Financial Control and the Law on Personal Data Protection. In particular, the right to collect and receive personal data of persons in cases provided for by law to conduct proceedings in cases of administrative offenses is to be added to the list of rights of the state financial control bodies.

It is also planned to clarify that the state financial control bodies have the right to receive not only documents, materials, information, but also information with limited access. 

Currently, there is a general rule that the procedure for access of third parties to personal data in the possession of the public information administrator is determined by the Law of Ukraine on Access to Public Information. Draft law No.10255 proposes to add an exception to this rule, which will not apply to the state financial control bodies during the proceedings in cases of administrative offenses.

Moreover, as far as the Law on Openness is concerned, the heads of administrators and recipients of funds from the national and local budgets, other institutions will be obliged to provide the state financial control bodies with information on ensuring compliance with the requirements of the Law on Openness within 5 working days from the date of receiving the request.

Remarks of the Main Scientific and Expert Department

On January 18, the Verkhovna Rada Committee on Law Enforcement issued a conclusion on consideration: this means that the draft law will one day be considered in the first reading. The Main Scientific and Expert Department of the Verkhovna Rada of Ukraine (hereinafter referred to as the Main Department) pointed out a number of its shortcomings, and most of the comments can be agreed with. 

1) Proposals to record violations of the Law on Openness as grounds for an inspection, establish a deadline for responding to the requests of the state financial control bodies, do not belong to the subject of regulation of the Law on Openness. After all, the grounds for an inspection, the powers of the state financial control bodies are determined by the Law on the Principles of Financial Control. 

The proposed changes need to be in line with the existing ones. For example, the Law on the Principles of Financial Control does not apply the concept of “inspection measures,” “plans for conducting state financial control measures.” It uses other terms.

The Law on the Principles of Financial Control has no mechanism to form plans for the work of state financial control bodies, so an additional reason to include an institution subject to inspection in such a plan does not make legal sense. In addition, the basis for the inspection should not be the bringing of a certain person to administrative liability, but the establishment of the very fact that a violation exists.

2) The Main Department calls the provisions of the draft law, according to which the state financial control body receives the right to collect and receive personal data, debatable. Doubts are caused by the fact that in Ukraine such actions are allowed only in cases specified by law and only in the interests of national security, economic well-being, and human rights. According to the practice of the Constitutional Court, if there are no limits on further actions with information, this makes even minimal protection of an entity of personal data impossible, and the application of the provisions becomes unpredictable.

The Department also notes that the proposed amendments to the Law of Ukraine on Personal Data Protection go beyond the scope of this draft law. The provisions on access to data can be applied not only in cases of violation of the Law on Openness, but also in other proceedings, such as violations of legislation on financial issues. That this may also apply to violations of the legislation on public procurement.

3) The title of the draft law is primarily devoted to amendments to the Code of Administrative Offenses, but in fact it also proposes amendments to a number of Laws that needed to be set out in separate draft laws. Both the title of the draft law and the number of parts that supplement Article 212-3 of the Code of Administrative Offenses require editorial clarification.

From the perspective of building provisions, the Main Department emphasizes that they should be as universal as possible. Therefore, it proposes to group the most common violations of the right to information and the right to a request in the Code of Administrative Offenses while indicating “other violations provided for by law” and distinguishing between the lower and upper limits of fines. It is difficult for us to agree with this proposal since the inexhaustible nature of the list may provoke abuse. It will be necessary to differentiate the powers regarding proceedings under a part of an article between different bodies, depending on the scope of the Law under which access to information is violated. The question will also arise as to which body will then consider “other violations provided for by law.”

Conclusions and suggestions

1. TI Ukraine recognizes that information on the use of public funds should be as open and accessible to the public as possible, and it should be actively used by control bodies to identify violators and bring them to justice. We support the idea of extending the period of storing this information in the public domain.

However, the proposals of the draft law No.10255 on the introduction of liability for untimely publication of information, publication of unreliable, inaccurate, or incomplete information neglect the fact that budget managers are forced to report three times on the expenditure of public funds under procurement contracts.

In November 2022, TI Ukraine presented the report Three Times Less: How to Improve Reporting on Contracts. Procuring entities report under contracts to three independent systems: Prozorro, Spending, Treasury Client — Treasury. Almost the same information is submitted to each system, for which the state spends an extra 1.2 million working hours per year. But there is no consolidated information about each contract in one source. In addition, there are cases when information in these systems differs or is unreliable.

In the study, we proposed to create a unified reporting system for contracts. However, if there are no resources to introduce it under martial law, it is worth considering the possibility of disclosing the information that the state already possesses. Thus, to make a payment at the expense of budget funds, the clients of the Treasury provide it with the relevant information and documents that stipulate such a payment. Consequently, the state already possesses a significant amount of information on the spending of public finances. The mechanism for disclosing this information could at least partially replace triple reporting.

Instead, the introduction of additional liability for delay, publication of incomplete, inaccurate, or unreliable information only preserves the current situation with reporting. It needs to be changed.

2. The question of transferring the authority to impose a fine for failure to publish, untimely publication, publication of inaccurate, unreliable, or incomplete information under the Law on Openness to the State Audit Service remains open.

According to the concept, which can be traced in the draft law No.10255, violations of the Law on Openness seem to be on the verge between the violation of a person’s right to access information and the violation of processes, compliance with which is controlled by the State Audit Service. But among the main tasks of the state financial control bodies, which are defined in the Law on the Principles of Financial Control, there is no task to control how the budget managers ensure public access to information on the use of public funds. Therefore, we consider it necessary to determine conceptually what the object of this offense is, and hence to distinguish legislatively which bodies will consider these cases and based on which tasks. 

In addition, under martial law, it is necessary to determine whether the Law on Openness requires the settlement of exceptions due to security risks.

3. We agree that public auditors should not have a problem of accessing personal data of persons who have committed offenses.

However, the draft law No.10255 does not contain the procedure for automated access of the state financial control bodies to personal data if there are grounds.

The provisions proposed by the draft law on this issue contain references to “cases established by law” and remove access to data from the general procedure for the state financial control bodies. But instead, they do not offer another, exhaustive order. To solve the problem completely, we propose to supplement the Law on the Principles of Financial Control with a section on the procedure for access of the state financial control bodies to personal data, including automated access. It is imperative to establish limits and safeguards against abuse to avoid recognizing the provisions as unconstitutional. These issues are beyond the concept of the draft law No.10255 and require a separate draft law or a package of them.

4. Most of the comments of the Main Scientific and Expert Department of the Verkhovna Rada of Ukraine seem to be correct. Therefore, we consider it necessary to take them into account before considering draft law No.10255. The option of replacing it with a package of draft laws of the appropriate direction should also be considered. Their provisions shall be consistent with the existing conceptual apparatus, the powers of the state financial control bodies provided by law, the practice of the Constitutional Court, etc.

5. To facilitate public control over the spending of public funds, it would be advisable to consider the idea of extending the status of full managers of public information, for example, to state-owned and municipal enterprises. This will free inquirers who apply to state and municipal enterprises from the need to prove each time that the requested information is included in the narrow list, the managers of which the enterprises are now considered to be.

The legal analysis was prepared within the USAID UK aid project Transparency and Accountability in Public Administration and Services / TAPAS.