OREANDA-NEWS. February 04, 2011. The audit of public finance in Ukraine in 2008-2009 and the first quarter of 2010 conducted by a specialized service of control over the legality of budget operations – the Audit Office of Ukraine, which is legally responsible for the results of this audit, exposed the abuse of public finances of unprecedented scale - the amount of questionable transactions reaches 93 billion UAH (about USD12 billion).

State auditors found that the amount of damages caused to the state – the taxpayers' money that were blatantly embezzled – exceeds 35 billion UAH (USD 4.4 billion).

The report of public auditors is the official document, which is the basis for making a decision on the legal classification of exposed facts of abuse. Under the Ukrainian legislation, the investigating authorities must take appropriate measures in response to the facts discovered by the auditors. In accordance with this norm about 1500 criminal cases were opened in 2010, which are currently being investigated.

All audit conclusions are backed by evidence, which show illegal use of the State Budget funds in 2008-2009 and in the first quarter of 2010.

For example, auditors have a record of the videoconference with the participation of heads of regional offices of the State Treasury, in which the head of the Treasury gave direct instructions to distribute billions of hryvnas from state budget funds for purposes that were absolutely not envisaged by the Law "On State Budget of Ukraine".

This resulted in a situation, where instead of the 25 billion of liquid funds, which should have been in the Treasury accounts as of 1 January 2010, the actual amount based on the analytical accounts and records of the Treasury was only 1.7 billion UAH.

While such an enormous amount having disappeared from the accounts, some mandatory budgetary programs were not funded, for example: education and health care workers did not receive their salaries in the total amount of  143.5 million. Food for children and hospital patients was not paid for (the total of 65 million UAH). Medications were not purchased for hospitals (53 million UAH). 

Alongside such a critical shortfall in the funding of social programs, Tymoshenko government, in gross violation of existing legislation, placed  more than 6.4 billion UAH, 1.2 billion U.S. dollars and 97 million euro on bank deposits, on terms favorable to commercial banks. All of this occurred despite the fact that the Government incurred short term debts on the domestic market at 29% APR - extremely disadvantageous terms to for Ukrainian taxpayers. Ukraine's state debt in 2009 increased by 96 billion UAH and on 1 January 2010 amounted to 227 billion UAH. That is 33.9 billion more than the public debt threshold, which was established by the Law On State Budget of Ukraine for 2009.

Systemic abuse was encouraged by Prime Minister Tymoshenko, who made the following statement: "Dear friends, if we literally followed the letter of every law, word for word, then we would not have moved an inch." (quoted from the transcript of meeting of the Cabinet of Ministers of Ukraine).

Transcripts of government meetings indicate that Tymoshenko personally imposed scam schemes abusing public funds. Thus, the ambulances purchased under government guarantees  and the medical helicopter were registered as medical equipment (medical products) in order to avoid paying VAT, excise and customs duties.

Issuance of free state titles of land ownership was financed from funds allocated for oncology clinics. The Commercial Corporation UkrAvtoDor was granted a short-term loan from the State Budget General Fund so that the corporation could pay off its external debts.

It must be said that such fraud was resisted even by some members of the Cabinet. As recorded in CMU meeting transcripts, the Minister of Health Care Knyazevich tried to raise objections against the obvious fraud in the procurement of EMS vehicles and helicopters. The Minister of Justice Onischuk directly warned that such solutions are problematic from the standpoint of their legality.

The fraud schemes were implemented only under direct pressure from the head of government. The gravity of threats to those, who disagreed with Prime Minister Tymoshenko is shown in a quote from the transcripts of CMU meetings, when Tymoshenko instructs: “I request the Interior Ministry to set up special teams, which will simply exert severe pressure on businesses. File criminal proceedings, lock people up for 3-4 days.”