Ukraine's Audit Office confirms food procurement fraud went on in Defence Ministry during Reznikov's tenure

The Accounting Chamber approved the results of an audit of the Defence Ministry, which fully confirmed the data of a journalistic investigation into the significant overestimation of food prices for the military. 

Source: This was reported by journalist Yurii Nikolov, who was the author of a high-profile investigation published in Dzerkalo Tyzhnia newspaper in January 2023. 

The Accounting Chamber’s report was conducted at the request of the Anti-Corruption Committee of the Verkhovna Rada (Ukrainian Parliament – ed.) and concerns the first half of 2023. 

The report, in particular, states the following: 

• At the end of November 2022, the Defence Ministry informed potential suppliers about the planned procurement of food services for 2023 and offered to submit price proposals. At the same time, the Ministry of Defence did not monitor food prices and did not independently determine the cost of food services. Determination of the expected cost of food kits was carried out by mechanically multiplying the cost of the kit for the past year by the inflation index.
• The contracts concluded did not take into account the real need for the food supply of the Armed Forces of Ukraine determined by the Rear Command of the Logistics Forces of Ukraine’s Armed Forces.
• At the end of 2022, the Ministry of Defence signed ten agreements on food for soldiers in 2023 for 42.05 billion hryvnias (more than US$1.1 billion). Following an investigation into overpricing, additional agreements were made to halve the prices of some products.
• After the adoption of the law, which returned the non-armed purchases of the Ministry of Defence to "Prozorro", the prices of the products were reduced once again at the auction. According to the signed contracts, the annual cost of providing food for servicemen and feeding staff animals amounted to UAH 37.98 billion (about US$1 billion), which is UAH 8.19 billion (about US$226 million) less than the amount that was expected before the investigation.
• The cost of food for the Ministry of Defence was significantly higher than the prices of other law enforcement agencies. By applying such prices, the Ministry of Defence could save from 3.2 billion (about US$88 million)  to 7.0 billion (about US$193 million) hryvnias of budget funds.
• The auditors indicated that "out of 409 names of products in the catalogue (of Ministry of Defence, – ed.), almost 75% have no practical application, both for cooking in stationary canteens and in field conditions, but affect pricing and the final cost of the kit." 

The generalised results of the audit proved the unproductive use of budget funds in the amount of UAH 7.439 billion (about US$205 million). 

The most used food products were purchased at prices that were, on average, 30% higher than market prices. 

The cost of food for a soldier of the Armed Forces per day determined by the Ministry of Defence exceeded the cost of such food in other units of the security and defence sector, from UAH 3.17 billion (about US$87 million) (National Guard) to UAH 7.04 billion (about US$194 million) (Security Service of Ukraine). 

Reminder: 

• In January 2023, Yurii Nikolov published an article on ZN.UA – "The rear rats of the Ministry of Defence during the war "earn" on food for the Armed Forces more than during peacetime", about the purchase of products for the military at inflated prices. 
• In the investigation, it was said that the Ministry of Defence signed an agreement for UAH 13 billion (about US$359 million) with a company with a charter capital of one thousand hryvnias. That is, a shell company was created for that purpose.
• Among the discovered abuses were such facts as the purchase of eggs at the price of UAH 17 per piece, etc. 
• At first, the Ministry of Defence claimed that the information published by ZN.UA allegedly had "signs of intentional manipulation and was misleading." Later, Reznikov admitted mistakes in the contract for the purchase of products but called the investigation "an information attack under a false pretext." 
• However, after the investigation was released,  noticeable resignations took place in the Ministry of Defence. In addition, the National Anti-Corruption Bureau opened criminal proceedings on the fact of abuses in the procurement by the Ministry of Defence.

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