Newly elected Head of the Supervisory Board of "Ukroboronprom" Aivaras Abromavicius: main tasks – audit and reforming

The main tasks for the nearest future for the State Concern "Ukroboronprom" are the conducting an international audit of its financial activities and implementation of reforms. This was discussed during the meeting of the updated membership of “Ukroboronprom” Supervisory Board, during which the management of the Concern reported on the preparation process for the audit, the implementation of relevant reforms, etc. The situation was also shared with the management of the Ministry of Economic Development and Trade of Ukraine, the Independent Anti-Corruption Committee on Defense and representatives of the US Embassy in Ukraine. In addition, the new Head of the Supervisory board – Aivaras Abromavicius was elected at that meeting.

"I believe that in the last few years “Ukroboronprom” has made several successful reforms in the reformation field, but at the same time, some other Ukrainian state-owned companies made more. Therefore, we have many tasks that we must accomplish as soon as possible. And one of the first priority of them – is carrying out an audit of "Ukroboronprom", – said the newly elected head of the Supervisory Board.

Taking into account the limited funds, allocated by the Cabinet of Ministers of Ukraine and the necessity to carry out an operational analysis of “Ukroboronprom” activities, the Supervisory Board decided to conduct an international audit of financial activities of all State Concern enterprises for 2018-2019 years.

In order to select an auditor a new position will be created for the procurement of services at the Prozorro electronic platform. The definition of the winner of the tender will be conducted according to the "open bidding" procedure. The head of the Supervisory Board Aivaras Abromavicius will head the tender committee for conducting an international audit.

"We expect that the winner of the bidding will be selected in September, and will start the audit of “Ukroboronprom”. According to our estimates, it will last for 6-9 months. This will allow us to get the detailed information on the real state of affairs at each Concern enterprise. At the same time, we can’t conduct an audit that will cover a longer period. First, if you take the analysis period from 2014, not to mention the period from 2011, then the results of this audit will be expected for years, and second, the Government allocated just 32.5 mln UAH for this which is not enough ", – said Aivaras Abromavicius.

He added that after the results of the financial audit, a procedure for conducting the strategic audit and the audit of corporate governance will be initiated – the expenses for that will be proposed to get foreseen in the State Budget draft for 2020.

Aivaras Abromavicius also proposed to put on the agenda of the next Supervisory Board meeting the issue of holding a forensic audit of the Concern companies.

During the meeting of the Supervisory Board, the Director General of the Concern, Pavlo Bukin, reported on the achievements in the reform of “Ukroboronprom” for the period 2018-2019. In particular, during this time the significant steps have been taken in order to improve the efficiency of the State Concern enterprises, to implement the principles of transparency and maximum openness of the defense-industrial complex in general.

Thus, at the moment, 5 production clusters and a cluster of special exporters have already been formed in the “Ukroboronprom”. This allowed to provide a clear cooperation between the enterprises, to create an effective system of management and interaction, and accelerated the introduction of innovative technologies into production.

In addition, the corporatization process of the State Enterprise "Repair Plant of Radio Engineering Equipment" and PJSC "Kherson Shipyard Sudmash" were completed.

Alongside, the first 10 enterprises that are not specialized in the defense products manufacturing, were transferred from the State Concern to the State Property Fund of Ukraine, and currently they are waiting for the corresponding decision of the Cabinet of Ministers of Ukraine.

Since 2018 the significant improvements have been achieved in the area of maximum transparency of the enterprises and of their procurement activity control. In particular, a single public electronic platform for all “Ukroboronprom” enterprises was selected and the supplier qualification procedure was canceled. The public platform Prozorro.Prodazhi was used to realize the property of the enterprises, which allowed to make an absolutely open activity of the enterprises in these spheres and to prevent any abuse.

Upon the initiative of the State Concern, the area that was in a state monopoly for a long time, was considerably liberalized: it is about the special exporters institution who had an exclusive right to conduct the export-import operations with the products of defense and dual purpose. As of today, four private companies with the right to export-import operations already operate in Ukraine.

Instead, the main negative factor slowing down the process of reforming the “Ukroboronprom” is the restriction of legislation, which preserved numerous atavisms and rudiments of the USSR times.

"The State Concern is the initiator of the changes in legislation, which blocks its reform not for the first year. Dozens of the initiatives have been developed and directed to state bodies by “Ukroboronprom”. From some of them depends as the fate of “Ukroboronprom” as of the entire defense industry of Ukraine. This is about the new edition of the Law of Ukraine "On State Defense Order", the task of which is to make the defense orders for the Ukrainian Army as open as possible. We are talking about the necessity to unlock the possibility of corporatization of some state-owned enterprises. The order of price formation for the of defense products by the Ministry of Defense of Ukraine, which today does not meet the conditions of the modern economy and is a "legacy" of the USSR, needs to be reviewed. We advocate a change in the standardization system, which still use the outdated GOSTs of 40 years old. However, unfortunately, these initiatives "got lost" in the corridors of the Verkhovna Rada and other government agencies, "- said Pavlo Bukin.

In turn, Aivaras Abromavicius assured that the “Ukroboronprom” Supervisory Board would meet as often as possible and make all the efforts to resolve the key issues of “Ukroboronprom” reformation as soon as possible.

As it is known, the President of Ukraine Volodymyr Zelensky changed the membership of the "Ukroboronprom" Supervisory Board, appointing to it Aivaras Abromaviciu on June 12, and on July 9 – David Arakhamia and Andriy Zagorodniuk.

Thus, the membership of the Supervisory Board is currently the following: Aivaras Abromavicius (Head of the Supervisory Board), Anthony Tether, David Arakhamia and Andriy Zagorodnyuk. Another position of a Supervisory Board member, which belongs to the quota of the Cabinet of Ministers of Ukraine, is currently vacant.

It should be noted that the Supervisory Board is the supreme management body of the State Concern “Ukroboronprom”. Among its competences are the approval of the development strategy and activities of the Concern, the control over the State Concern and its participants implementation of the tasks entrusted to them in the field of defense-industrial complex and military-technical cooperation, the approval of the activity directions of the State Concern, the definition of investment policy.

In addition, the Supervisory Board carries out control over the effective use and preservation of state-owned objects transferred to the management of the State Concern, the conduct of financial and economic activities of the Concern and performs other tasks in accordance with the “Ukroboronprom” Statute.