E-Declarations: Homework Assignment for Ukraine’s Anti-Corruption Policy

E-Declarations: Homework Assignment for Ukraine’s Anti-Corruption Policy

Ukraine carries out in 2017 an ambitious experiment aimed to combat corruption and hold state officials accountable through developing a Public Register of asset declarations of persons authorized to perform functions in state and local self-government bodies. According to the National Agency for Prevention of Corruption, about 1,500,000 officials are obliged to annually file publicly accessible electronic income and asset declarations. E-declarations of public servants should have become one of the largest Ukraine’s anti-corruption initiatives comparable with electronic public procurement and contactless administrative services provision.

For e-declarations and out of the shadow

It should be recalled that amendments to the anti-corruption law “On Prevention of Corruption” dated 14 October 2014 have made it possible to launch the e-declaration system as an element of financial control of persons authorized to perform functions in state and local self-government bodies. The new law was adopted under the pressure of anti-corruption NGOs and actively supported by the European Union and United States as a powerful anti-corruption step (as is known, the passage of the e-declarations law was one of the conditions for visa free regime between Ukraine and the European Union).

The law of 14 October 2014 obliged Ukrainian lawmakers and members of their families to electronically report their income, expenditures, property, assets (including cash holdings and valuables), and other financial liabilities. Earlier, paper declarations of public servants were kept in closed envelopes in their personal records (the content of paper declarations was secret). Under the new law, income and asset declarations of officials should be made publicly accessible on the Internet in the Unified State Register of declarations of persons authorized to perform functions in state and local self-government bodies.

In 2016, only 120,000 officials, including the President of Ukraine, deputies of the Verkhovna Rada, heads of government agencies, and other public servants, submitted previous year’s electronic declarations. In 2017, e-declarations for 2016 should be filed by all officials, lawmakers, local deputies, and other categories of public servants. According to the law, the National Agency for Prevention of Corruption (NAPC) manages and verifies e-declarations of officials.

Difficulties

However, effective financial control of persons authorized to perform functions in state and local self-government bodies is not yet available in Ukraine. This concerns both reporting of income, expenses, property, other assets and financial obligations, and verification of declarations.

First of all, there are some outdated procedures that complicate the process of income reporting. In particular, assets and income of public servants are entered in e-declarations in the same manner as in paper declarations. To avoid responsibility for miscalculated income, a declarant files a request (often on paper) with bodies of the State Fiscal Service (SFS) and receives an answer indicating the amount of his or her income for a relevant period to be entered in an income declaration. Over 1,000,000 state officials submitted their asset declarations as of 3 March 2017. This means that many SFS officials spent a lot of time and efforts for providing information on public employees’ income. Yet, this procedure is completely unnecessary under the e-declaration system because information on income of declarants could be entered in their e-declarations automatically. Declarants should only add information about their revenues, which is not available to the SFS (for instance, return on bank deposits).

Other problems of e-declarations in 2017 were a significant expansion of the database of declarants, and a change in the format of declarations, with almost no advocacy work among the “new” groups of declarants. Most of declarants did not even know about the need to file e-declarations. Specifically, under the amended law “On Prevention of Corruption”, elected officials of local, including village and settlement, councils are obliged to submit their income declarations. This is a large category of public servants because according to data of the Central Election Commission, there are more than 150,000 deputies of local councils. However, e-declarations were filed by less than 1,000 local officials as of 20 March 2017, and by over 50,000 as of 3 April 2017. This evidences that the authors of the law have failed to provide for measures to raise awareness among new declarants about their duties and the procedure for reporting their income. Awareness-raising activities are particularly needed for local self-government officials and the above-mentioned deputies of local councils (since these bodies do not have a vertical of power).

In general, the list of persons authorized to perform functions in state and local self-government bodies, expended in compliance with the law “On Prevention of Corruption”, sometimes is, to put it mildly, not justified. In particular, it is difficult to explain the need for income declarations of all officials of budget-funded institutions and organizations, servicemen, and deputies of village councils (except for villages within the recreation area or within 50-70 km of Kyiv and regional centers). The income of this group of declarants is very modest. This and other deficiencies had to be urgently eliminated.

Later, the 23 March 2017 law No. 1975 “On Amendments to Certain Legal Acts of Ukraine Regarding the Specifics of Financial Control of Certain Categories of Officials” has exempted “rank and file conscription servicemen, sergeant, sergeant corps, and junior officers (with the exception of servicemen who do their military service in military commissariats)” from the obligation to file e-declarations “for the period of their conscription, special or contract military service.”

In compliance with the Final and Transitional Provisions of the law “On the Higher Council of Justice”, the law “On Prevention of Corruption” has been supplemented with a rule that exempts almost all officials of institutions and organizations engaged in the provision of social services for the population, social and professional rehabilitation of disabled persons and children, social protection of war veterans and participants in the Anti-Terrorist Operation, health care, education, scientific, cultural and artistic activities, restoration and preservation of national memory, physical culture, sports, as well as national and patriotic education from the obligation to report their income and expenses. Only heads of health facilities at a variety of levels, heads and deputy heads of higher education institutions, senior officials of the National Academy of Sciences of Ukraine and branch academies of sciences, directors of research and other scientific institutes are obliged to declare their income.

The inability of the government to decide on whether hundreds of thousands of state and municipal officials should or should not declare their assets and income decreases the quality of control of activities of public servants and lawmakers who often abuse office, while performing their functions. In our opinion, the law should establish clear criteria for determining positions that are in a corruption risk area, including those of public sector employees and servicemen – financially accountable and other persons. It is recommended that a special body should be set up based on these criteria, preferably by the NACP, to make and approve an exhaustive list of positions that are particularly vulnerable to corruption so that to oblige officials holding these positions to annually file their income and asset declarations. This would help remove many problems faced by state and municipal servants.

Yet another problem that needs to be regulated by the law is information about income, expenditures, property, assets, and other financial liabilities entered in declarations of public employees’ family members. In our viewpoint, the SFS should freely provide this information to declarants (this information should not be confidential).

This absolutely self-defeating trend in financial control is apparently caused by amendments made by the 23 March 2017 anti-corruption law No. 1975, under which income declarations should be filed by individuals who “receive funds and assets as part of the implementation of technical (or other) assistance programs (projects) in Ukraine, including irrevocable assistance in the field of preventing and combating corruption (either directly or through third parties or in any other way provided for in a relevant program (project).” Even if this rule is believed fair, it in no way contributes to the fight against corruption. In other words, although the signing by the President of the law No. 1975 in the current wording was justified (otherwise hundreds of thousands of public servants and some 160,000 servicemen would have been punished after 1 April for a failure to submit their e-declarations, often at no fault of their own), the Verkhovna Rada should revise the document in the near term, and exclude non-governmental organizations and those who cooperate with them from the list of individuals obliged to declare their assets and income.

Check everything

Technical inability of the system to process the huge number of e-declarations of officials should not be perceived as a serious challenge. It is rather caused by problems linked to personnel decisions on top officials of the state-run agency that manages the publicly accessible database, Ukrainian Special Systems, and the State Service for Special Communications and Information Protection, as well as the need to enhance efficiency of their work. The top challenge faced by Ukraine in the field of financial control is check of e-declarations. It is not the problem to change the composition of the NAPC because it is possible to make amendments on its status regarding the early termination of powers of NAPC members in case of a failure to effectively perform their duties. The problem is the development and legal enshrinement of methods and principles to manage and verify e-declarations submitted by officials. In our viewpoint, a relevant law should require the use of software that would automatically detect declarations with significant differences between income and expenses of persons authorized to perform functions in state and local self-government bodies, as well as differences in their declarations for different years. Depending on the amount of differences between income and expenditures, the law should establish a special procedure for verifying e-declarations of public servants.
RU 11 By Svitlana Gorobchyshyna and Andriy Duda,
Ukrainian Center for Independent Political Research
28 March 2017

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