The Accounting Chamber confirmed the financial reporting for the Loan provided by the IBRD for social protection of Ukrainians
On May 27, the Accounting Chamber approved the Report* based on the audit of special purpose financial statements under the Project “Investments in Social Protection for Increased Coverage, Sustainability and Effectiveness (INSPIRE)” of the Ministry of Social Policy of Ukraine. The Head of the Accounting Chamber is responsible for the audit.
The INSPIRE Project is financed by a Loan from the International Bank for Reconstruction and Development (IBRD) in the amount of 1.2 billion US dollars. According to the terms of the Loan, these funds can be used for social payments to Ukrainians who need support the most, as well as to support reforms in the field of social protection. Currently, the entire amount of funds under the INSPIRE Project has been used, however, its implementation is ongoing.
The audit confirmed that the special purpose financial statements under the INSPIRE Project as of the reporting periods (12/31/2023 and 06/30/2024) faithfully reflect in all material aspects information on the use of budget funds for 29 types of social payments, eligible expenditures of the INSPIRE Project, as well as the status of fulfillment of conditions related to the achievement of results, in accordance with the established rules for compiling such reporting.
The Ministry of Social Policy ensured the achievement of six conditions related to the results, which were necessary prerequisites for the allocation of Loan funds within the INSPIRE Project. By the way, among such results – approval by the Cabinet of Ministers of Ukraine of regulatory legal acts that introduced verification of the financial and property status of internally displaced persons and limited the period of granting assistance. These steps made it possible to increase the effectiveness of the program through a more thorough approach to selecting beneficiaries. In order to implement the above decisions, the Ministry of Finance verified data on IDPs' stay abroad and their property status, etc.
However, during the audit, the Accounting Chamber also identified certain shortcomings in reporting under this Loan. It was found that the Manual regulating the formation of financial reporting under the INSPIRE Project does not contain a sufficient description of the principles of its formation and a detailed list of expenses that are not included in the program of eligible expenses of the INSPIRE Project. The sources of information used to compile such reporting are not indicated.
Also, at the level of the Ministry of Social Policy, the PFU, regional social protection bodies and structural units for social protection of the population, auditors recorded individual cases of overstatement or understatement of financial reporting indicators. However, they were insignificant.
Among other things, facts of unjustified payments or non-receipt of funds due to citizens were recorded. These violations were not material and did not affect the reliability of the special purpose financial reporting to the IBRD.
«The irrelevance and imperfection of the PFU's accounting policy, the procedures for developing, approving and implementing its budget, and inadequate internal control generally led to violations and shortcomings in the field of accounting and reporting (for 2023 - by 5.3 million UAH; for the first quarter of 2024 - 10.7 million UAH).
The elimination of violations identified by the auditors will allow to improve the reporting process to the IBRD and will help to avoid unjustified expenses», – noted Olga Pishchanska.
According to the audit results, the Accounting Chamber provided a total of 10 recommendations aimed at improving reporting procedures to the IBRD, in particular, it recommended:
To the Cabinet of Ministers of Ukraine:
– instruct the relevant institutions, together with the Ministry of Social Policy, to work out the issue of introducing liability for managers of apartment buildings, associations of co-owners of apartment buildings, and utility service providers (service providers) for providing unreliable (false) information necessary for calculating the amount of benefits for payment of housing and communal services.
Ministry of Social Policy:
– in order to increase the accuracy, consistency and transparency of management reporting, develop methodological recommendations for its formation for all payments of budget programs of the INSPIRE Project;
– determine a single accounting policy for the PFU, taking into account the specifics of its activities.
The representatives of the Ministry of Social Policy present at the meeting generally agreed with the comments and recommendations provided to them. The report and decisions of the Accounting Chamber will be sent to the Cabinet of Ministers and the Ministry of Social Policy, as well as published on the website of the Accounting Chamber.
* Please note that the corresponding Report on the Results of the Financial Audit was prepared in an updated form that meets international standards. This form of the Report is currently being tested by the Accounting Chamber.
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