Who Monitors and How: Oversight of Spending Under the Ukraine Facility

In April, the European Commission transferred another €3.5 billion tranche to Ukraine under the Ukraine Facility financial support program. According to the government, the total amount Ukraine has received under this program since March 2023 already amounts to €19.6 billion.

The Ukraine Facility is a program that provides for €50 billion in macro-financial assistance to Ukraine from the EU by 2027. The funds are intended to support economic stability, reforms, and the country’s recovery. At the same time, the bulk of the funding — €30.37 billion — will be disbursed by the European Commission only if Ukraine meets the reform benchmarks set by the program. For example, by the end of 2025 Ukraine must strengthen the State Audit Service’s monitoring of procurement procedures, and by 2027 align its public procurement regulations with EU law.

In addition to the fact that this assistance will only be provided if reform progress is made, the program also includes oversight of how the funds are used — both by Ukraine and by the European Union. Who will carry out this oversight, and how — we explain below.

Oversight by the EU

The framework agreement between the EU and Ukraine, which sets out the terms of the Ukraine Facility, provides for three key oversight bodies on the European side: the European Commission, OLAF, and the Audit Board.

Ukraine, for its part, has committed to cooperating with them. In particular, it must grant access to information, documents, databases, and registers — everything related to the implementation of the Ukraine Facility.

European Commission — general oversight and decision-making

The European Commission itself is primarily responsible for assessing the implementation of the measures set out in the Ukraine Facility Plan (the Ukraine Facility Plan). In other words, it must determine whether Ukraine has made sufficient progress on reforms to receive the next funding tranche.

In addition, the European Commission will also assess whether Ukraine’s management and control system for using this support complies with the requirements of the agreement. In practice, this means verifying whether the funds are being used efficiently and effectively.

A third key oversight area for the Commission is whether Ukraine is adequately preventing and investigating corruption and other violations related to the use of Ukraine Facility funds.

In short, the European Commission is responsible for the overall oversight of the Ukraine Facility. It has the authority to carry out verifications, reviews, inspections, and audits, and to request additional information. If necessary, independent experts or audit firms may be involved in these checks. Based on these results, the Commission will prepare reports that may be used to decide whether to continue, suspend, or adjust the amount of funding under the program.

OLAF — investigating violations

A key component of the financial oversight system for implementing the Ukraine Facility is the European Anti-Fraud Office (OLAF). Its main role is to investigate possible violations related to the use of EU funds.

OLAF has the power to conduct administrative investigations if there are suspicions of fraud, corruption, or any other unlawful use of funds provided under the Ukraine Facility. To carry out checks and inspections on Ukrainian territory, OLAF must notify the Ukrainian side in advance.

Although OLAF is not a judicial or punitive body, the results of its investigations may serve as grounds to terminate or reduce Ukraine Facility funding.

Audit Board — identifying systemic issues

To ensure proper management of the funds provided under the Ukraine Facility, the European Commission has established a dedicated body — the Audit Board. Its independent experts are appointed by the Commission.

The main task of the Audit Board is to identify systemic problems in how Ukraine uses the funds provided through the Ukraine Facility and to report these issues to the European Commission. This includes shortcomings in the management and control of funding, as well as vulnerabilities in systems for preventing fraud, corruption, and conflicts of interest.

In addition to its supervisory functions, the Audit Board also has the right to provide recommendations to Ukraine. These may relate to the inactivity of Ukrainian bodies in addressing financial violations, or to systemic shortcomings in managing EU funds.

Importantly, the Audit Board’s recommendations are not merely declarative — Ukraine, represented by the Ministry of Economy, is obliged to respond to each one in writing. The response must include either a detailed plan for implementing the recommendation or a detailed justification explaining why implementation is not possible.

As with OLAF, the Audit Board’s reports can have serious consequences — they may serve as grounds for reducing or suspending EU funding.

Oversight on the Ukrainian side

On Ukraine’s side, two main bodies are responsible for oversight — the Ministry of Finance and the State Audit Service. The former is mainly responsible for overall control, while the latter focuses on financial oversight and combating corruption and fraud.

Ministry of Finance — strategy and audits

Under a government decision, the functions of an independent audit body for implementing the Ukraine Facility in Ukraine have been assigned to the Ministry of Finance (MoF).

Among the Ministry’s key, clearly defined tasks under this program is to develop an audit strategy for the Ukraine Facility. This strategy must set out audit methods, their frequency, and priorities.

According to the Ministry, a draft Audit Strategy has been prepared and, as of early July, is under discussion with the Secretariat of the Ukraine Facility Audit Board.

Based on this strategy, the Ministry is to carry out audits of each component of the program. The goal is to mitigate risks of fraud, corruption, conflicts of interest, and double funding.

Despite not yet having an approved strategy, the Ministry of Finance reported that, as of early July, it had audited the steps in the Ukraine Facility Plan that were to be implemented in 2024. However, this report has not been published.

It is worth noting that, in parallel with performing the functions of an independent audit body, the Ministry of Finance is solely responsible for meeting 50% of the Ukraine Plan’s benchmarks in the area of public financial management. Accordingly, it may seem questionable that the Ministry will be auditing what it is also responsible for delivering. However, it is likely that different structural units within the Ministry will handle implementation and oversight separately.

Another area of work is cooperation with the Audit Board established by the European Commission to assess management and oversight of funding under the Ukraine Facility. To facilitate information exchange, a memorandum was signed between the institutions at the end of March 2025.

State Audit Service of Ukraine — financial oversight and tackling violations

The State Audit Service is tasked with two main functions — conducting state financial oversight of the program’s implementation and coordinating efforts to combat fraud and irregularities.

Oversight of expenditures is primarily focused on public procurement. The Ukraine Facility introduces several specific aspects that auditors will now check as part of their procurement monitoring under the program:

–       Whether participating companies are subject to EU sanctions

–       Whether the participant and/or its goods originate from a country deemed acceptable by the European Commission.

These requirements come in addition to the standard procedure for monitoring compliance with national procurement legislation.

Beyond monitoring, auditors may also conduct other routine oversight activities: inspections, reviews, and audits. Overall, the State Audit Service is already fulfilling this part of its mandate, reporting that it has carried out 95 such activities since the beginning of 2025.

Also, under the program, the auditors must develop and submit for approval a methodology for monitoring Ukraine Facility spending. This document will define risk assessment methods and set priorities and parameters for determining control measures. According to the State Audit Service, the draft methodology has been developed and forms part of the Ministry of Finance’s Audit Strategy, which is currently under discussion.

Another area of the State Audit Service’s work within the Ukraine Facility framework is auditing the implementation of the Ukraine Plan, in cooperation with the Ministry of Finance. In this context, auditors are expected to participate in verifying whether measures in the Plan have actually been implemented, including assessing the effective use of funds and compliance with the requirements set out in the Framework Agreement.

Ukraine has committed, under the Ukraine Facility, to amend its legislation by the end of this year to strengthen the State Audit Service’s capacity to protect the EU’s financial interests — this means harmonizing practices with international standards and improving the effectiveness of procurement monitoring measures.

In parallel with financial oversight of the Ukraine Facility, the State Audit Service also performs the functions of an Anti-Fraud Coordination Service (AFCOS). This status brings several responsibilities.

First and foremost, the State Audit Service is the main contact point for cooperation with OLAF. This includes:

–       Exchanging information

–       Assisting OLAF in carrying out administrative investigations and inspections

–       Ensuring coordination between OLAF and Ukrainian anti-fraud bodies.

However, there is a legislative issue: the State Audit Service’s inspectors do not have sufficient powers to access documents and information held by businesses and individuals that may be needed to investigate Ukraine Facility-related violations. Without changes to the legislation, investigations into potential misuse of EU funds could be significantly hampered.

It is also important to enshrine in law the State Audit Service’s status as AFCOS and set out general provisions on cooperation with OLAF, including the collection and transfer of information.

As an anti-fraud coordination service, the State Audit Service must provide methodological guidance on combating fraud and organize relevant training for staff. It must also develop and implement a national strategy for protecting the EU’s financial interests. As of early July 2025, according to the Service, the draft strategy is at the stage of internal approval.

In summary, much remains to be done on the Ukrainian side to ensure proper oversight of Ukraine Facility funds. This includes developing several strategic documents and methodologies, as well as improving legislation.

This material is funded by the European Union. Its content is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.