2 more municipal enterprises of Mykolaiv have passed «integrity checks», but auditors' reports are not publicly available

EUACI inspected two Mykolaiv MEs: electric transport scored 407 points (below average), and heat and power - 285. Photo: NikVesti

Mykolaiv City Council presented the results of the Integrity Assessment of municipal enterprises «Mykolaivelectrotrans» and «Mykolaivoblteploenergo». However, the media did not provide the audit reports.

The presentation took place on Wednesday, 20 August, according to NikVesti.

The audit was conducted by PricewaterhouseCoopers (PwC). Allan Pag Christensen, Head of the EU Anti-Corruption Initiative in Ukraine (EUACI), addressed the audience of officials and heads of utility companies before the presentation. He said that the organisation cooperates with 6 cities of Ukraine, but Mykolaiv is the leading city for them.

The Head of the EU Anti-Corruption Initiative in Ukraine. Photo: NikVesti

«We are currently working with six cities in Ukraine. Mykolaiv, I would say, is our flagship city, our leading city — it is where we are most involved. We cooperate with utility companies and have a good understanding of the problems with corruption in Mykolaiv — both the risks and the approaches to overcoming them. That is why we are here today, and this is an important part of our work. Today we have come for the presentation. We have to go through this process, and during the last test, it helped us to check a number of things. This particular assessment is not the end result. The final goal is to improve the validation plans, where we identify specific actions to be taken on behalf of the city. All of these actions are aimed at the future development of business in Ukraine,» said the Head of the EU Anti-Corruption Initiative in Ukraine.

For his part, the Mayor of Mykolaiv reminded that a similar risk assessment had been carried out previously at the municipal enterprise «Mykolaivvodokanal». As a result, risk mitigation and new procurement rules are being implemented, as well as audits.

Mayor of Mykolaiv Oleksandr Sienkevych. Photo: NikVesti

«We decided not to stop and go further. There are companies that will receive a large amount of budget money. These are «Mykolaivelectrotrans» and «Mykolaivoblteploenergo». This does not mean that we plan to stop at these two companies, we plan to move forward. Not completely, not 100%, but I can say that both companies represented Mykolaiv at a good enough level, and I was not ashamed. Of course, there is always room for growth. We plan to stimulate this growth. In the near future, I will approve a risk minimisation plan by my order, and we will start transforming the enterprises. Moreover, legislation is also changing following our example. In the near future, the law will regulate the establishment of supervisory boards at utility companies. We are participating in this process together with the EU Anti-Corruption Initiative,» said Mayor Oleksandr Sienkevych.

The presentation began with the results of the Integrity Assessment of the municipal enterprise «Mykolaivelectrotrans». It was presented by Olha Balytska, Partner at PwC Ukraine.

Olga Balytska, Partner of PwC Ukraine, presented the Integrity Assessment of the ME. Photo: NikVesti.

The main objectives of the project were to develop a methodology for assessing the current state of the MEs' activities, to directly assess the current state of the MEs' activities, to identify potential risks and factors, and to develop a risk mitigation plan.

The total score given to the company by the auditors was 407.

«Alan has already said that this is not a beauty contest. We all understand that it is difficult for a city, especially Mykolaiv, to function in the current environment and to carry out its activities in general, especially given not only the war, but also the fact that not many years have passed since the post-Soviet period. That's why there was rather a rock on which we made the assessment, and it was not adapted to the war. An objective, one hundred per cent scale, of an average city, not only Ukrainian, but also European in non-war times,» said Olha Balytska.

The evaluation criteria included 8 areas with 47 indicators. In particular:

• General management — 48 (minimum possible — 1, minimum benchmark — 51, maximum benchmark — 85)
• Asset management — 82 (minimum possible — 1, minimum benchmark — 75, maximum benchmark — 125)
• Public procurement — 67 (minimum possible — 1, minimum benchmark — 57, maximum benchmark — 95)
• Ethics and corporate culture — 15 (minimum possible — 1, minimum benchmark — 15, maximum benchmark — 25)
• Services provided — 72 (minimum possible — 1, minimum benchmark — 69, maximum benchmark — 115)
• Corporate governance issues — 43 (minimum possible — 1, minimum benchmark — 45, maximum benchmark — 75)
• Communication — 24 (minimum possible — 1, minimum benchmark — 24, maximum benchmark — 40)
• Assessment of specific features — 56 (minimum possible — 1, minimum benchmark — 48, maximum benchmark — 80).

In particular, Olha Balytska advised the company to switch to automated systems for both tactical and strategic planning, and to modernise its production workshops. She also advised the company to streamline its work with international donors.

Yuriy Smetana, Head of Municipal Enterprise «Mykolaivelectrotrans». Photo: NikVesti.

After the presentation, Yurii Smetana, head of the municipal enterprise «Mykolaivelectrotrans», thanked for the objective assessment.

«To sum up, it was interesting. I thank both the people of Denmark and the organisations for the fact that we can train people and provide jobs for those who are interested. There is room for growth and improvement. There are things we have been arguing about. We will work on it,» he said.

Afterwards, the auditors presented the integrity assessment of «Mykolaivoblteploenergo». The company scored a total of 285 points out of a maximum of 435.

It was assessed as follows:

• General management — 59 (minimum possible — 1, minimum benchmark — 51, maximum benchmark — 85)
• Asset management — 77 (minimum possible — 1, minimum benchmark — 75, maximum benchmark — 125)
• Public procurement — this area was not assessed, therefore, the scores for this section were not taken into account when determining the overall score received by the CMO
• Ethics and corporate culture — 15 (minimum possible — 1, minimum benchmark — 15, maximum benchmark — 25)
• Services provided — 36 (minimum possible — 1, minimum benchmark — 33, maximum benchmark — 55)
• Corporate governance issues — 49 (minimum possible — 1, minimum benchmark — 45, maximum benchmark — 75)
• Communication — 28 (minimum possible — 1, minimum benchmark — 24, maximum benchmark — 40)
• Assessment of specific features — 21 (minimum possible — 1, minimum benchmark — 18, maximum benchmark — 30).

The auditors' recommendations include the need for further automation: to improve the system for recording emergency calls and provide systematic staff training, switch to electronic document management, develop a long-term strategy, and optimise certain processes. In addition, the experts ask the company to implement a modern corporate governance system.

Mykola Logvinov, Head of ME «Mykolaivoblteploenergo». Photo: NikVesti

However, in response to this analysis, the head of the utility company, Mykola Lohvinov, stressed that the company has a specific type of activity. In addition, the state has a debt to «Mykolaivoblteploenergo» in the amount of more than 1 billion hryvnias.

«All these stories are interesting, but they cannot end well, because, firstly, since 1991 we have not understood that we need to deal with energy efficiency. When we started implementing the World Bank's story here, it resulted in 35% gas savings per year. A World Bank loan with a stable currency will pay off in 5 years. But our tariff has not been paid, and we have no money. That is why planning is interesting. We know what planning is, I have three degrees. But we don't know what will happen tomorrow, whether there will be enough money for this whole story, whether there will be people. We can use this experience to attract investment and grants. There can be no loans in the heat and power sector, only grants, because there is no source of repayment. Secondly, all utilities should have economically justified tariffs. We dream about it. But on paper, there should be a lot of money, but it won't be available, because the tariff is twice as high as the one that is applied. People will not be able to pay. Therefore, our task is to reduce production costs as much as possible by using less gas and electricity. Automation is interesting, but it must be healthy. But money comes first. This is the mechanism you use to complete the task,» said Mykola Lohvinov.

The official criticised, in particular, the fact that the audit did not take into account the current parameters of activity, process automation and system upgrades, because the experts involved in the assessment did not come to Mykolaiv and did not visit the utility company.

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«What your experts did not say. The most important thing is production. Your expert, unfortunately, did not see the heat production, boilers, automation, how large boiler houses operate without staff. He lives in Kyiv and hasn't walked around Mykolaiv. Therefore, to make a fair and correct, objective assessment, because we are open, you need to come here and see it all. This can be used to get donors to give money. This is for the vision of Kuleba, ministers, deputy ministers, and the president. We are constantly on the verge of bankruptcy,» he added.

In conclusion, Mayoral Advisor Yuliia Mincheva said that based on the results, the city would prepare a resolution to approve risk mitigation plans for both enterprises.

The editorial board of NikVesti has asked the press service of Mykolaiv City Council to provide the audit reports and is waiting for them to be made public.

A year ago, the international company «Deloitte», which is one of the four largest auditors in the world, presented the results of the integrity assessment of the utility company «Mykolaivvodokanal». However, the media immediately provided the auditors' reports.