European Commission appoints Audit Board to oversee Ukraine’s use of €50 billion under the Ukraine Facility reform programme

The European Commission has appointed three auditors for Ukraine to monitor the allocation and use of loans and grants to Ukraine under the Ukraine Facility programme, which involves implementing reforms.

The European Commission announced the formation of the Ukraine Facility Audit Board, appointing 3 specialists in financial control and management. It will operate until the end of June 2028.

Its primary task is to ensure the transparency and effectiveness of the financial assistance provided to Ukraine as part of the implementation of the Ukraine Facility Plan. The programme provides for the allocation of €50 billion to the Ukrainian budget for the period between 2024-2027, subject to the implementation of a number of reforms, including anti-corruption and judicial reforms.

The Board consists of:

Professor Marek Belka (Chairman), a former President of the National Bank of Poland, macroeconomics and financial management expert.

Gijs de Vries (Vice-Chairman), expert in audit and control, with many years of experience in EU financial institutions.

Gunnar Wälzholz (Board member), specialist in financial management, who has worked in international organisations.

“The completion of formation of the Audit Board marks an important step in ensuring the transparency and effective use of EU financial support. As the national coordinator for the programme’s implementation, the Ministry of Economy of Ukraine remains open to cooperation with our European partners. Together, we are working to fulfil our obligations and ensure the timely funding of the Ukraine Facility programme,” stated Oleksiy Sobolev, First Deputy Minister of Economy.

The Board’s working format includes regular visits to Ukraine and ongoing cooperation with the Ukrainian government and international partners, aimed at enhancing trust in the Ukraine Facility programme. The Audit Board’s activities will be supported by a Secretariat in Kyiv, comprising specialists in management, control, and auditing.

The Board will soon begin assessing the financial control system.

The European Commission will regularly report on the Audit Board’s performance, publishing its findings and recommendations.

As Sudovo-Yurydychna Hazeta reported earlier, the European Commission published Decision No. 2024/1697 on 17 June 2024, establishing the Audit Board to monitor the use of funds under Ukraine’s financing programmes within the Ukraine Facility Plan. This Plan includes, among other things, the establishment of a Higher Administrative Court, amendments to the Criminal Procedure Code concerning pre-trial investigation deadlines, and increased staffing for the Specialised Anti-Corruption Prosecutor’s Office and the High Anti-Corruption Court. The Ukraine Facility mechanism facilitates the mobilisation of €50 billion from 2024 to 2027, conditional upon the successful implementation of Ukraine Plan. The majority of these funds are loans. In accordance with the Framework Agreement, Ukraine undertakes to ensure a high level of transparency in the use of funds.

According to Sudovo-Yurydychna Hazeta, a dedicated ‘auditor’ will monitor how Ukraine spends EU funds allocated for reforms. This is stipulated in the Framework Agreement between Ukraine and the European Union, which concerns specific implementation mechanisms for Union financial support to Ukraine under the Ukraine Facility instrument (draft law 0276), ratified on 6 June 2024.

Under this Agreement, European institutions have the right to raise issues not only about the cessation of payments but also about the return of funds.

The Framework Agreement mandates the establishment of an Audit Board, comprising professional auditors, financial control experts, and anti-corruption experts. Under the agreement, Ukraine is obliged to cooperate with the Audit Board and provide relevant documents to facilitate investigations in case of detection of violations.

Specifically, Article 11 of the Agreement establishes that agents from the European Commission, the European Anti-Fraud Office (OLAF), the European Court of Auditors (ECA), the Audit Board, and the European Public Prosecutor’s Office (EPPO), along with their authorised representatives, have the right to conduct ‘any investigative or audit actions’, including technical, financial, or systemic checks, to protect the EU’s financial interests. This includes visits to sites and premises whose activities are financed under the Plan.

Ukraine is required to provide all requested information and documentation, including any electronic data.

Should ‘private devices; not owned by the economic operators under audit be used, such devices may be subject to OLAF inspections.

OLAF and EPPO are also authorised to ‘conduct all appropriate investigative actions’, including on-site checks and inspections. Ukraine, for its part, is required to designate a service or services with law enforcement powers to conduct criminal investigations and assist OLAF. Should the person or entity under audit resist the audit, investigation, or on-site inspection, Ukraine is required to provide OLAF and EPPO with the necessary assistance to conduct the audit or inspection. Furthermore, with each payment request, Ukraine is required to provide a summary of audit and verification results, guaranteeing the proper use of funding.

The European Commission may request further evidence. Payments will only be made if the European Commission provides a positive assessment. If the Commission considers Ukraine’s assessment of the implementation of measures to be negative, the payment will be delayed. It is also stipulated that the European Commission may reduce the amount or recover any amount owed to the EU budget in cases of fraud or corruption.

The Audit Board assesses, among other things, Ukraine’s systems for preventing, correcting, reporting on, and effectively addressing, investigating, and prosecuting potential cases of fraud, corruption, conflicts of interest, and other irregularities related to any expenditure financed under this mechanism.

The Audit Board has the right to request information and make inquiries of competent authorities, and to conduct, including through its Secretariat, its own verifications and on-site inspections of Ukraine’s management and control system, as well as procedures and expenditures for implementing steps under the Mechanism.

The Audit Board submits reports to the Commission at least once every three months. These reports provide an opinion on the performance and effectiveness of Ukraine’s management and control system. Information on any detected cases or serious concerns about the mismanagement of expenditures financed under the Mechanism must be immediately communicated to the European Commission.

The Audit Board makes recommendations to Ukraine whenever, in its opinion, the competent Ukrainian authorities have not taken the necessary measures to prevent, detect, correct, investigate, and prosecute fraud, corruption, conflicts of interest, and irregularities that affect, or seriously risk affecting, the sound financial management of expenditures financed under the Mechanism. It also makes recommendations whenever it identifies weaknesses in the structure and functioning of the control system established by the Ukrainian authorities.

Author: Natalia Mamchenko