State Audit Service disrupts defense procurement

Supplier companies in the security and defense sector began to face a “nightmare” through the State Audit Service: through government agencies they are demanding the return of profits from defense procurement for 2022.

I wrote several times about the absurd situation. In short, officials of the State Audit Service conducted an audit of the Ministry of Defense and decided that the profits of defense enterprises, suppliers of the Ministry of Defense and other security and defense forces for 2022 should be considered state losses. That is, for example, an enterprise that produces weapons must now return all profits for the past year to the state.

The Ministry of Defense filed a lawsuit against the State Audit Service to cancel the audit findings. It is clear that private companies that cooperate with the ministry and other departments cannot operate without profit. Since profits are often reinvested in production. And they may simply refuse orders from the Ministry of Defense, which will lead to catastrophic consequences for the front.

The State Audit Service began sending letters to government agencies demanding the return of profits from private enterprises from which they purchased goods or equipment in 2022. And now this schizophrenia began to come true.

One of these letters was received by Industrial Company Pozhmash LLC. She sold three fire trucks to the State Emergency Service of the Lviv region, each at a price of 16 million UAH. The contract stated the profit of the enterprise - 1.95 million UAH. The Western office of the State Audit Service conducted an inspection and, through the regional State Emergency Service, is demanding the return of UAH 1.3 million for each fire truck. For three cars, UAH 3.4 million must be returned to the regional State Emergency Service within a month. Otherwise, the State Audit Service threatens to sue.

This is the first precedent when government bodies, based on the conclusion of the State Audit Service, require a private company to return profits.

What is the government doing? Conducts meetings of Verkhovna Rada committees, where they develop a “road map” to resolve this issue! And Minister of Justice Denis Malyuska suggests waiting for the court’s decision (one of the suppliers filed a lawsuit against the State Audit Service)

As it turned out, back in August the deputies appealed to the prime minister. Shmygal responded: take immediate action by the Cabinet of Ministers regarding the legal uncertainty of pricing in the field of defense procurement...” But today is September 8, and the issue has not been resolved. Auditors continue to send “chain letters” to defense companies, and those to private companies.

Hey Minister of Justice! Mister Prime Minister! New Minister of Defense! Resolve this issue today at the Government level, or tomorrow supplies to the front will stop. And this, in turn, will lead to undermining the country’s defense capability!