Audit reveals significant financial violations at Ukraine’s state-owned Ukroboronprom

During the inspections of the State Enterprise Ukroboronprom, the State Audit Service revealed financial violations and inefficient resource management amounting to hundreds of millions of hryvnias, as indicated in the State Audit Service letter to the Ministry of Economic Development and Trade of Ukraine, as reported by Ekonomichna Pravda.

It is noted in the letter that during 2014-2016, state financial audits and check-ups of twelve of Ukroboronprom’s enterprises were held. Based on the results of these inspections, financial violations and inefficient resource management totaling 557.8 million hryvnas was revealed.

"The first violation was the manipulation of financial results to minimize tax payments and deductions to the budget," noted the State Audit Service letter. As noted, there were cases of products sales being made at prices below cost and where contract duties were not fulfilled, which led to the creation of debts and the issuance of fines.

The totals in the audit service report could be much larger, but the State Audit Service could not verify the data of some enterprises due to lack of accounting information.

"The audit of the financial activities of the State Enterprise, Kharkiv State Aviation for 2013-2016 that was to be conducted in April 2017 was not completed due to the lack of accounting records. There were only financial statements prepared for the third quarter of 2016. The National Anti-Corruption Bureau of Ukraine (NABU) and the police have been informed," the letter states. 

The biggest violations were found in Ukrspetsexport and its subsidiaries: Promoboronexport, Ukrinmash, Tasko-Export, Progress, Spectechnoexport, and Ukroboronservice.

The service also found violations that resulted in the loss of assets and inefficient resource costs for more than 685 million hryvnias in total.

As indicated in the State Audit Service letter, the subsidiaries of Ukrspetsexport and the company itself in incurred expenses in 2016 that were not foreseen by the financial plans and the State Enterprise, Tasko-export in particular spent more than 533 million hryvnias outside of the financial plans.

In addition, in 2014-2015, the State Financial Inspection conducted audits of Ukroboronprom twice and found financial violations and inefficient use of resources for more than 500 million hryvnias in total.

The enterprise is almost completely managed by people appointed by the President of Ukraine, Petro Poroshenko.

Since 2014 the enterprise has been headed by Roman Romanov. A physicist by education, before his appointment to Ukroboronprom, Romanov was a dealer with Bogdan in the Kherson region, and during the presidential election in 2014, he headed Poroshenko's headquarters in the region.

Poroshenko’s former business partner and first deputy of the National Security and Defense Council, Oleg Gladkovsky has a big influence on the enterprise.

  Ukraine, Ukroboronprom