Expand budget transparency system (UA0087)

Implementing the principles of transparency and openness in the budget process sets the foundation for an effective system of key performance indicators and public awareness mechanisms regarding setting, reviewing, approving, and executing local budgets; and also provides control over execution thereof by publishing documents and information associated with setting, approving, and executing a budget and managing efficiency indicators. In accordance with the Action Plan for implementing the Open Government Partnership Initiative in 2018–2020 (as approved by the Cabinet of Ministers of Ukraine ordinance No. 1088 on 18 December 2020), the Budget for Citizens module in the ‘Transparent Budget’ Information and Analytical System, and also the sub-system Register of Projects of Economic and Social Development of Ukraine Supported by the International Financial Organizations, were put into operation. At the same time, there is a need to expand the capabilities of the information and analytical system. Further developing the Budget for Citizens module (openbudget.gov.ua) of the ‘Transparent Budget’ Information and Analytical System software would allow for the creating a new sub-section, Budget Program Indicators, containing information on budget requests, the budget program passports of main local spending units, and budget program passport execution reports. This information will facilitate better understanding by taxpayers of the way their taxes are spent, from the local budget planning stage. Developing and introducing an electronic Contract module in the integrated automated platform will provide an interface for creating, agreeing, signing, processing, transferring, and publishing electronic contracts and reporting on execution thereof. Such a module will make it possible to create procedures for contract development and administration, and expand the capacity of the liquidity management system. The availability of an electronic contract will make it possible to obtain structured contracts and enable additional opportunities for creating analytical instruments based on the data from the electronic procurement system. The objective would beto both improve the quality of public governance in the sphere of procurement and to exercise state financial and public control over the application of public funds. An e-Contract module will improve access to information on procurement and minimise risks for all participants in the procurement process. Implementing the above measure will secure the transparency and publicity of Ukraine’s budget system by way of publishing information on budget requests, budget programme passports, and their execution reports by all main local budget spending units; improving public governance in the sphere of public procurement; and, applying the mechanism for feedback and discussion of issues relating to the application of budget funds. 5

Steps Responsible persons Time-frame Partners Performance indicator 1. Developing legal and normative acts Ministry of Finance State Institution “Open Public Finance” (by agreement) January–June 2021 NGO Centre for Political Studies and Analysis “Eidos” (by agreement) Government and Civic Initiative “Together Against Corruption” (by agreement) other civil society institutions (by agreement) amendments to legal and normative acts regulating openness of the indicators of all spending unit budget programmes have been made 2. Preparing functional requirements to complete the ‘Transparent Budget’ Information and Analytical System software and the Budget for Citizens module (openbudget.gov.ua) —“— July–September 2021 —“— technical specifications for developing the new subsection Budget Programme Indicators of the ‘Transparent Budget’ Information and Analytical System software, the Budget for Citizens module (openbudget.gov.ua), has been created and the respective services have been procured 3. Completing the ‘Transparent Budget’ Information and Analytical System software, the Budget for Citizens module (openbudget.gov.ua) —“— September– December 2021 —“— a new sub-section Budget Programme Indicators of the ‘Transparent Budget’ Information and Analytical System software, the Budget for Citizens module, (openbudget.gov.ua) has been developed to reflect local information 6 Steps Responsible persons Time-frame Partners Performance indicator 4. Implementing the improved ‘Transparent Budget’ Information and Analytical System software, the Budget for Citizens module (openbudget.gov.ua) Ministry of Finance State Institution “Open Public Finance” (by agreement) January– December 2022 NGO Centre for Political Studies and Analysis “Eidos” (by agreement) Government and Civic Initiative “Together Against Corruption” (by agreement) other civil society institutions (by agreement) the ‘Transparent Budget’ Information and Analytical System software, the Budget for Citizens module (openbudget.gov.ua), has been modified and improved during pilot operation; based on testing and the active participation of civil society institutes, the software has been put into commercial operation 5. Developing the requirements for the eContract module Ministry of Finance Ministry of Economy State Treasury State Institution “Open Public Finance” (by agreement) State Enterprise ProZorro (by agreement) January–June 2021 NGO Transparency International Ukraine (by agreement) NGO Centre for Political Studies and Analysis “Eidos” (by agreement) other civil society institutions (by agreement) requirements for an eContract module have been created with the involvement of civil society institution representatives 6. Developing the eContract module Ministry of Finance State Treasury State Institution “Open Public Finance” (by agreement) January–July 2022 NGO Transparency International Ukraine (by agreement) NGO Centre for Political Studies and Analysis “Eidos” (by agreement) other civil society institutions (by agreement) The e-Contract module intended for obtaining contracts in a structured and machine-readable format has been developed; the module has been put into pilot operation 7 Steps Responsible persons Time-frame Partners Performance indicator 7. Integrating the eContract module into the electronic procurement system and the State Treasury’s automated system e-Kazna Ministry of Finance Ministry of Economy State Treasury State Institution “Open Public Finance” (by agreement) State Enterprise ProZorro (by agreement) July–December 2022 —“— information exchange between the e-Contract module, the electronic procurement system, and the State Treasury’s automated system e-Kazna has been effected

Action Plan Review

Commitment 1: Improve budget transparency and implementation of e-contracts [1]

(Ministry of Finance, State Treasury, Open Public Finance, ProZorro, Transparency International Ukraine, and Eidos)

For a complete description, see Commitment 1 in Ukraine’s 2021–2022 action plan: https://www.opengovpartnership.org/documents/ukraine-action-plan-2021-2022/

Context and objectives:

International institutions, organizations, and donors have encouraged and supported Ukraine for a number of years to increase transparency in managing public finances. [2] Ukraine has developed public finance management strategies to strengthen state financial control and prevent financial abuse and fraud vis-à-vis public and local resources. [3] Since 2016, Ukraine’s open government action plans have introduced budget transparency reforms supporting these aims by better informing the public in an accessible format about national, regional, and local budgets and spending. [4]

The 2018–2020 action plan included a commitment adding a citizens’ budget module on to openbudget.gov.ua, which greatly increased access to state, regional, and local spending information via open formats. [5] The 2021-2022 commitment builds on these advances by developing and introducing two new sets of information on the openbudget.gov.ua platform – budget program indicators (criteria for monitoring budgets) and e-contracts. The first of the two activities would publish budget program indicators containing more detailed information that would facilitate the public’s understanding of how their taxes are spent via local budgets.

The second activity would create an e-contracts section on openbudget.gov.ua, which would digitize the process of signing contracts with public institutions and bodies. This aims to improve public procurement governance and enable better state and citizen oversight of public funds. This activity could have substantial results in making contracts more transparent and open to public oversight.

Government and civil society developed this commitment jointly, having collaborated on developing and improving the openbudget.gov.ua platform since 2016. The activities were also included in the latest draft of the Strategy on Public Finance Management Reform. [6]

Potential for results: Substantial

The first activity in this commitment builds upon the citizens’ budget module on openbudget.gov.ua to include local state budgets in machine readable formats. [7] Currently, budget information is available on local government websites (scanned and in formats like PDF) but it is not machine readable. [8] Technical terminology and coding accompanies this data. The ambition of the commitment is to publish the technical information so that citizens can more easily understand budget information. [9] This may increase understanding of the information available, but not necessarily increase the scope or depth of budget information being published. As only the technical information will be newly available, this activity has modest, rather than substantial, potential for enhancing access to budget information.

However, the second activity has substantial potential for results. The e-contract module would digitize signing and registering contracts, make them publicly available, and make them machine readable. Contracts available as open data would therefore allow analysis within institutions and by civil society and watchdogs.

Government institutions have stated that they would find the new data from the e-contracts tool useful in tracking and forecasting payment flows. Currently, contract data are manually uploaded and not machine-readable. Open, digital contracts would therefore automate a large part of this process and make forecasting payment flows more efficient. [10]

Civil society said that the digitalization and opening of contracts would make it easier, and to an extent, automate the identification of risks such as noncompetitive payments or clauses that pose a corruption risk. [11] An API for the contracts that are open data would allow governments and watchdogs to create tools that automatically analyze and identify corruption or other risks. Civil society also posited that the API could lead to businesses being able to analyze final contracts from public institutions and judge if it is worth applying for public tenders. [12] There is strong reason to expect contract data to be used because previous examples of opening data in Ukraine has enabled investigative journalists and other watchdog organizations to analyze the data for suspicious transactions. [13]

The government also said that digitalization would make the process of signing contracts more transparent. [14] The current process of signing paper contracts means some institutions can delay the process to such an extent that they must legally reopen procurement. Ministry and CSO representatives say that there are examples of this happening so that institutions can give contracts to preferred contractors rather than the original winners. [15] Not only may institutions and contractors find the e-contract process more transparent, but that it is also quicker.

Opportunities, challenges, and recommendations during implementation

This commitment presents opportunities for improved and more efficient internal procedures for processing procurement contracts. Digitalization of e-contracts can reduce opportunities for institutions’ manipulation and speed up the process of public contract signing in Ukraine.

Digitalization and publication of contracts in open data formats would provide further opportunities for data analysis by government and civil society watchdogs. The government has already signaled that this would improve their forecasting of payment flows.

The publication of budget program indicators has more modest opportunities in enabling greater understanding of budget information for citizens.

However, there are challenges to implementing this commitment, particularly in relation to contracts. Success of the digital process and its automated integration into other databases for analysis requires the information be inputted accurately. This requires institutions to ensure that public officials are effectively trained in using the system and that there are also measures in place to detect potential errors or verify the information before it is confirmed in the system. The system should also include, and alert users to, subsequent changes to contracts (e.g., due to unforeseen changes in contract specifications or cost overruns) as these sometimes can indicate mismanagement and corruption, even though they may occur for legitimate reasons.

The government and civil society working on this commitment expect that this newly-available data would be used. [16] While civil society are confident that past examples of investigations enabled by newly opened data would be repeated with contract data, there must be awareness raising and encouragement for civil society and the media to use and analyze this data. Doing so could encourage long-term changes in public institutions to ensure that contracts do not include suspicious payments, anticompetitive clauses, or other risky elements.

To overcome some of these challenges and make the most of opportunities from this commitment, the IRM recommends:

Results Report

Commitment 1. Improve budget transparency and implementation of e-contracts

This commitment aimed to improve the Budget for Citizens module on the openbudget.gov.ua platform to publish information on budget program indicators in machine-readable format. It also planned to launch an e-contracting module for all transactions with public institutions and state bodies.

In December 2020, Ukraine’s Budget Code was supplemented with a list of data subject to mandatory disclosure on the official websites of territorial communities or through other channels as per the Law on Access to Public Information. [1] The Ministry of Finance piloted the new openbudget.gov.ua module, which allows publication of new local budget data such as budget requests, revisions and executions of budget program passports, [2] local budget forecasts, draft and final decisions on local budget by state administrations and local councils, and amendments to these decisions. [3] According to the Ministry of Finance, as of July 2023, the portal holds information on 1,153 local budget documents in JSON and PDF formats, whereas more than 72% of local governments publish budget program indicators. [4] The budget program indicators allow users to compare revenues and spending in comparison to planned amounts in percentages. However, few territorial communities publish budget requests or decisions on the platform. [5] Although these decisions are available in PDF format on territorial community websites, the legislation does not mandate their publication on the platform.

The e-contracting module was not completed. The Ministry of Finance came to an agreement with stakeholders that only procurement contracts—not all transactions—would be processed electronically as a first step. [6] Prozorro took on the implementation and piloted a module of the e-procurement system. [7] According to the government report, the first stage of the system has been implemented as of June 2023, namely the option to use agreement templates for certain categories of goods in the ProzorroMarket electronic catalog. Alongside the Ministry of Economy, Prozorro is improving these templates so that they can be automatically filled out with information from the e-procurement system and signatory details. After the finalization of the templates, the e-contract module will be integrated into the e-procurement system and the State Treasury’s automated system. [8]

With the support of the EU for Integrity Programme for the Eastern Partnership, Transparency International Ukraine analyzed public procurement legislation and exchanged data between Prozorro and the State Treasury Service and launched the Business Intelligence module to facilitate analysis of public procurement contracts. Transparency International Ukraine then presented its recommendations on improvements to the Prozorro platform, particularly ways of filling in gaps left by missing data. [9]

After martial law announcement, the Cabinet of Ministers initially adopted a resolution allowing procurers to conduct procurement without tenders. Further amendments reinstated procurement through Prozorro, so that only defense-related procurement could be conducted without tender procedure. [10] In May 2023, the government adopted additional legal acts to improve procurement transparency in the defense sector and require publication of all relevant procurement reports after the end of martial law. [11] Full restoration of procurement transparency once martial law ends would be key to the implementation of e-contracting.

The IRM assessed the commitment results as marginal. While the new module of the open budget platform was launched, not all territorial communities provide machine-readable budget information through it. The template agreements for e-contracting, prepared for procurement contracts, were not introduced. Legislative amendments are still needed to require local governments to publish their budget information and decisions on the open budget portal, and to introduce e-contracting for all public procurement transactions.