Analysis. Public finances. Budget of Kiev Articles.

Open Society Foundation Address on the "Anti-Corruption and Budgetary Policy Roadmap for the Kyiv Government”

Thursday, 03 July 2014 730
The text of the public address was generally supported by the participants of the round table "Anti-Corruption and Budgetary Policy Roadmap for the Kyiv Government". Open Society Foundation experts had finalized the address based on the discussions and further consultations.

In accordance with the Law of Ukraine "On Citizens Addresses”, we address the following officials:

The Mayor of Kyiv,

Head of Kyiv City State Administration

Vitaliy Klitschko

 

Deputy Mayor –

Secretary of Kyiv City Council

Oleksiy Reznikov

 

Chairpersons of the Kyiv City Council commissions

Heads of factions and groups in the Kyiv City Council

with the proposals to improve the municipal policies implemented by the Kyiv City State Administration (KCSA). These proposals are based on the relevant study, the discussions at the round table "Anti-Corruption and Budgetary Policy Roadmap for the Kyiv Government", held on June 24, 2014, and the consultations held after the roundtable with the interested parties.

Public monitoring and assessment of the Kyiv budgetary policy, carried out by the "Open Society" Foundation revealed corruption risks and improper execution of the current legislation, in particular:

1. Persistent non-fulfillment of the city budget in 2007-2013;

2. Significant increase in Kyiv city debt;

3. Inefficient use of communal property of the capital city, corruption risks for Kyiv public utility companies;

4. Withdrawal of 50% of revenues from personal income tax payable in the city of Kyiv to the state budget;

5. Failure to conduct an adequate inventory of land resources of Kyiv. KCSA failure to sign the land lease contracts with more than 1,000 individuals and entities, causing significant budgetary losses and the dominance of non-competitive and non-transparent procedures for allocation of land in the city;

6. Unsatisfactory performance of municipal target programs, in particular the Program for use and protection of land in Kyiv in 2011-2015;

7. Poor Management by Objectives by KCSA and Rayon State Administration (RSA) units;

8. Violation of terms of reporting on implementation of municipal target programs;

9. Non-inclusion of the Kyiv territorial community in full-scale participation in the capital city budgetary process;

10. The lack of effective implementation of energy efficiency policies in Kyiv;

11. The unfavorable business climate for small and medium enterprises (SMEs) in the capital city and the signs of KCSA simulating cooperation with organizations representing SMEs in Kyiv;

12. The lack of publicly available (on KCSA website) city target anti-corruption program and the reports on the implementation of action plans to prevent corruption in the KCSA.

In view of the above, being aware of our responsibility for increased transparency of the city government, to improve the efficiency and effectiveness of budgetary funds and public finances, exercising the right to public monitoring and assessment, understanding the necessity of cooperation between the authorities and civil society in the formulation, implementation and reporting on budget and anti-corruption policies we address you with the following proposals:

In the area of budgetary policy

1. Ensure proper implementation of the requirements of Articles 28, 77, 116, 118, 121 of the Budget Code of Ukraine regarding the timely reporting on budget execution and discussion of the draft budget, the responsibility of officials in determining the amounts of unreliable budget costs while planning budget parameters and for violations of the current budget legislation.

In the area of implementation of the medium-term strategic planning and municipal target programs

2. Audit all municipal target programs in Kyiv and report on their performance in compliance with Management by Objectives method involving the general public.

3. Unify the software and reporting standards for municipal programs.

4. Publish (on KCSA webpage) the detailed report on the Program for the use and protection of land in Kyiv in 2011-2015 (The Program) implementation, prepare the Program factsheet, develop the performance measurement indicators and evaluate the results/impact of the Program as required by Management by Objectives method and relevant guidance by the Ministry of Economy of Ukraine, ensure public involvement in Program updating and reporting.

In the area of anti-corruption policy

5. Develop Kyiv municipal target anti-corruption program by the means of think-tanks and NGOs in cooperation with the KCSA.

6. Involve the think-tanks and civil society organizations to develop annual action plans to prevent corruption in the KCSA and arrange public hearings on the reports on action plan performance.

7. Publish the reports on implementation of annual action plans to prevent corruption in the KCSA on the official webpage.

8. Ensure proper response of KCSA relevant departments and law enforcement/controlling authorities on the facts of corruption.

9. Review of the structure and size of KCSA units to optimize their number, increase efficiency with simultaneous increase of the salaries of employees out of the released funds. In particular, reform of the structure of the KCSA; provide the Center for Administrative Services Provision (CASP) the status of the structural unit of the KCSA.

10. Ensure the establishment and effective operation of advisory bodies in the KCSA structural units; hold their meetings at least once a quarter. Enable their transparent staffing. Each candidate should formulate clear and measurable goals for his/her participation in the advisory body.

11. Adopt the Regulations on registration of land plots.

In the area of tax administration

12. Initiate the amendments to Art. 29 and Art. 65 of the Budget Code of Ukraine regarding the transfer of 100% of personal income tax to the budget of Kyiv.

13. Initiate the amendments to Art. 9, paragraph 9.1.2 and Art. 10 of the Tax Code of Ukraine regarding the shift of personal income tax to the list of local taxes and fees.

14. Initiate the amendments to Art. 268, paragraph 268.4 of the Tax Code of Ukraine to establish a framework for collecting tourist tax as the income of tax agents, as defined in Art. 268, paragraph 269.5.

15. Publish the lists of businesses and individuals who refuse to enter into land lease agreements with Kyiv City Council (and therefore do not pay 3-12% of the normative monetary evaluation to the budget). At the same time, ensure that these businesses/individuals have the possibility of public retraction or explanations at the moment and place of publication.

16. Introduce Kyiv City Council Decision № 89/9146 as of February 28th, 2013 on the application of Art. 288 of the Tax Code on the signing of the lease agreements with the owners of land plots.

17. Approve the decision the new regulatory monetary value of land in Kyiv on the session of Kyiv City Council before June 15th 2014 and publish the decision in “Khrechantyk” newspaper, pursuant to the Art. 18 of the Law of Ukraine "On the evaluation of land plots”.

18. Consider substantial (several times) increase in revenue to the city budget from fees for land use (land tax and rent payments) and develop an appropriate action plan. In September 2014 hold a public expert discussion on the adequacy of the existing normative monetary value of land and its correspondence with the prevailing market value of. Bring the values in line with the market by reviewing the normative monetary evaluation, the existing factors, tax rates and exemptions for the payment of the land fees (land tax and rent payments). Introduce competitive procedures for land lease and sale. Publish the sufficient amount of planning documentation on the webpage of the KCSA.

19. Consider significant increase in revenue from personal income tax. In September-October 2014 hold public expert discussion on the possibilities for substantial (several times) increase in revenue due to the single tax revenues, payments from the sale of property and land plots, the funds of investors (developers).

In the area of communal property

20. Lease or sale the property that is used inefficiently, on a competitive basis.

21. Impose the maximum transparency in informing companies and organizations about the availability of vacant space and of the relevant calls. Publish the call results on the official website of the KCSA.

In the area of management of public utility companies

22. Audit the work of public utility companies (PUC) with public participation and report on the results of the relevant Commission set up by the previous Kyiv City Council.

23. Clearly define the quantity of the PUC and the required number of employees.

24. Transparent and public reporting by PUC management on the results for six and twelve months.

25. Define the PUC performance indicators according to the municipal target programs.

26. Provide full disclosure of financial and other activities of PUC in case they rely on the resources of the city budget. Currently PUCs, as economic agents, receive a payment for the use of municipal property. Restrict PUC functions to the administration of such payments only. Secure the payment of appropriate fees directly to the city budget; ensure public involvement in the implementation of control functions.

For small and medium businesses

27. Conduct a discussion on the implementation of the Program to promote small and medium enterprises in 2013-2014 and take into account the results of public assessment, which was provided by the "Open Society" Foundation in 2013.

28. Develop the municipal target program to promote small and medium enterprises for 2015-2016 by the means think-tanks and business associations in cooperation with the KCSA.

In the area of debt management

29. Undertake the effective measures to reduce the cost of debt service and provide full and transparent information about the debt of the city budget and its administration.

In the field of energy efficiency policy

30. Reduce energy consumption by 10% in 2014 through the introduction of energy saving measures.

31. Introduce the incentives for energy savings (half the saved costs to remain at KCSA unit or PUC, and half to be transferred to the budget of Kyiv city).

32. Introduce of energy-saving practices, approved by the Council’s decision 11/9599 as of October 2, 2013 "On Approval of the procedure for energy saving projects within the energy service contracts in Kyiv."

33. Conduct an inventory and audit of communal property objects and amend outdated regulations on energy consumption.

34. Eliminate abuses associated with pre-payment for utility services by businesses, renting communal areas.

In the field of publicity, transparency and efficiency of the Kyiv City Council

35. Ensure compliance with the Rules, provide the on-line broadcast of the sessions of Kyiv City Council, and ensure the availability of transcripts of the meetings of Kyiv City Council commissions on the webpage of the Kyiv City Council.

36. Prohibit the hearing of draft decisions of Kyiv City Council without their social and economic justification.

37. Ensure the publication of all draft resolutions and decisions adopted by the Kyiv City Council, Kyiv City Administration on the official websites of the Kyiv City Council and Kyiv City Administration.

38. Provide the opportunities for the general public to participate in the sessions of Kyiv City Council and the activities of its commissions.

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