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20 billion for 10 million beneficiaries
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In recent years, the issue of social benefits verification has been constantly arising in the context of the social sector reform. Somehow, the Ministry of Finance has not managed to conduct this verification yet. Automated detection of fraud and error could save up to 20% of budget funds allocated for social payments, which is 80 billion hryvnias a year. The progress of this reform was monitored by the public and Ukraine’s international partners, while MPs held briefings on it.

Let me remind you that during 2016 the Ministry of Finance reported on the skyrocketing volumes of the detected violations. The analysis of bank transactions of subsidies recipients revealed people who bought planes, elite real estate in Kyiv, as well as land, elite cars, business-class flights, who paid in foreign casinos, whose transactions were recorded from the Maldives, and much more. In Kyiv alone, more than a hundred people who received subsidies for housing and communal services while having an income of 4 million hryvnias per year and more were revealed. Journalistic investigations clearly showed those people. This situation is possible, since in order to get a subsidy you only need to show a certificate of small income to a local employee of the social protection department. Theoretically, this employee has to verify the certificate in the tax office, but in practice this has not been done. Apparently, it was not difficult to forge the certificate. And even registered millionaires received subsidies, not to mention those with shadow incomes, for the sake of identification of which it is necessary to check their expenses rather than incomes, and social employees obviously cannot do that. There was also information about the regular payments for about 400,000 invalid passports and identification codes. Our state pays to a whole city of nonexistent beneficiaries.

In general, the Ministry of Finance has reported on the shadiness of payments at a rate of 21 billion hryvnias per year and has forecast an even greater potential for optimizing costs. But even such a sum means that 1,700 hryvnias was stolen from every pensioner in a year! The corruption in social funds significantly harms every Ukrainian. In order to say for sure whether payments are fraudulent, it was necessary to take several steps, in particular, to create a single register of social payments (which will be discussed below). The issues of the lack of other major registries (of individuals, addresses, etc.) in the country and of the low quality of the existing registries were raised as well.

For example, if in the list of subsidy recipients you see an address which does not exist, if there is no home with such a number, where do you go in this case? In Ukraine there is no place where it would be possible to get an exhaustive list of all the addresses in the country. Though, in developed countries this is a common practice.

The verification process was also marked by the disapproval of the government’s social bloc. Mr. Rozenko and Mr. Reva, being annoyed, kept on insisting that the problems were greatly exaggerated, and the search for scammers was successfully carried out by the Ministry of Social Policy itself.

At the end of 2016, the Minister of Finance announced about the actually saved state funds in the amount of 10 billion hryvnias and about 19 criminal cases against the officials of the social sphere, which were opened by the law enforcers on the basis of the information of the Ministry of Finance. At the same time, the team that had been working on the verification from the very beginning left the Ministry of Finance. Samopomich faction truly hoped that those actions were an attempt to preserve the achievements and correct the shortcomings of the reform.

However, it is already the middle of March, and there has not been a single statement on the state of affairs in this area from the Ministry of Finance. Who is in charge of the processes now, what is the action plan of the new team, what exactly will be done in the context of the announced cooperation with the social bloc of the government, how will the 20 million hryvnias envisaged for verification in 2017 be spent?!

The questions had remained without answers until the last weeks, when the news came, which, it seems, gave answers to all the questions at once. The Ministry of Finance eliminated the verification department. Now the Ministry does not even have a relevant unit.

The situation seems to be even more complicated, since according to the latest information, creation of a single register of social payments by the Ministry of Finance will be one of the requirements of the new memorandum with the IMF. It is difficult to overestimate the absence of a national register of all social payments recipients. With its help, we would finally see who receives the same payment in several regions at once (since presently the regional payment registries are not synchronized at all), why in different regions the percentage of pensioners or subsidy recipients varies so much, etc. The absence of this registry is the fundamental cause of such abuses.

Since 2006, the Ministry of Social Policy has taken out loans in the amount about $400,000,000 for creating such a register. And for more than ten years it has been struggling to create it and plans to go on creating it for many more years, claiming that it is not easy. In 2012, the Ministry of Social Policy created a system, though not a national system, but one divided into regions and districts. In 2014, legislative obstacles and obsolete information protocols were eliminated, but the technical implementation was not carried out. As a result of this negligent attitude towards the unified system, Ukraine turned to be on the verge of a social catastrophe. Information on thousands of families from the east of Ukraine remained unattainable. And the state machine had to solve the problem caused by the state machine itself in the first place: a separate ministry was created, a number of departmental orders were produced, a new post of vice prime minister was introduced, control mechanisms were launched. How many extra man-hours of officials, experts, volunteers have been spent; how much discontent and desperation of displaced persons have been there only because Ukraine has twice drawn funds for the establishment of the single base, but has never created the very base. Even Bangladesh has such a base, while European Ukraine has none.

And when the Ministry of Finance finally has the desire and opportunity to do this in a matter of months, it turns out that the Ministry of Finance is not working efficiently and it is necessary to get rid of its relevant unit.

Despite the disappointing news, the Samopomich faction continues to insist on the inadmissibility of social funds plundering. Creation of registers of individuals and recipients of social benefits was the requirement of Samopomich to the state budget for 2017, which, unfortunately, was not heard. The paragraph 2.2., in particular, says there are about 100 registers and databases that contain information about citizens, but are not synchronized with each other, which opens the possibility for abuse and significantly increases the costs of administration and technical support.

The faction deputies, together with the public and foreign partners of Ukraine, will continue to defend the need for these steps.

The effectiveness of verification is officially recognized by the government, saving tens of billions of hryvnias every year might be real, and this is exactly what the society expects from the authorities. Officials should stop frightening the society with the ideas to raise the retirement age, pretending there are no other ways for pension reform, but to use the tools that they have always had. Optimization of public spending will create the necessary resource for liberalization of the tax system for improvement of the business environment.

It is worth noting that receiving these billions does not provide for trade relations with terrorists. The only thing needed is the desire to stop the multibillion plundering. We have got everything else – technologies, knowledge, foreign experience, qualified specialists, even foreign financing for the implementation of the system.

I expect Minister Danyliuk to provide explanations (in the form of an official answer to my deputy request, which has already been sent), how the social payments verification will be conducted now, who is responsible for it and how the Ministry of Finance plans to build a single register of social payments, and whether it plans at all. In addition, I am sending a letter to Prime Minister Hroisman asking how the government is going to coordinate the work of the Ministry of Social Policy (since they have already spent a lot of time and taxpayers’ money) and the Ministry of Finance in the process of establishing the register.

Tetiana Ostrikova

People’s deputy of Ukraine, member of the Verkhovna Rada Committee on Taxation and Customs Policy

Tetyana Ostrikova
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