13 August 2018

Ukraine has the longest defence housing queue in the world. As the current system is corrupt and ineffective, it could take more than 600 years to satisfy defence housing needs.

To help resolve this dire matter, the Independent Defence Anti-Corruption Committee (NAKO) at the request of Ukraine’s Minister of Defence Stepan Poltorak carried out the research “Defence Housing in Ukraine: poor governance and corruption risks”. On July, the19th NAKO’s clear recommendations on how to improve the system were given to the Minister. Two weeks after that the Ministry of Defence is breaking contracts with 6 construction companies who defaulted on contractual obligations which led to delays and unjustifiable costs to Ukrainian tax-payers.

NAKO commends the Ministry on its move to eliminate construction-related waste in the defence housing sector. Yet, if the Ministry of Defence fails to improve its capability to properly assess the integrity of the new companies which will be engaged into construction as contractors, then the similar corruption risks will remain in place. Thus, the question remains open, how to work with the contractors to eliminate the replay of the old scenario.

Moreover, construction is but one area within the defence housing system suffering from poor governance and corruption risks. Other actors and activities deserve scrutiny as well. This is what the Accounting Chamber stated in its report on the results of the audit of the effectiveness and use of costs by the Ministry of Defence for the construction (acquisition) of defence housing for the servicemen and women of Ukraine’s Armed Forces.

The Accounting Chamber noted, “the impunity and unaccountability of personnel of the Ministry of Defence, responsible for the resolution of the defence housing problem, has once again, led to ineffective use of budgetary funds.”

The Main Quartering Directorate (MQD) is responsible for the construction of military facilities, maintenance and renovation of housing in garrison towns and use of land plots. It is a military management agency funded by the Armed Forces of Ukraine (AFU) and subordinated to both the Deputy Minister of Defence and, The Deputy Chief of the General Staff.

However, the distribution of financing between housing supply mechanisms (i.e. construction/reconstruction/rent/compensation for sublet etc.) is not formalized. As a result, it stands open to opaque and subjective decision-making by the Head QD management. This large, post-Soviet institution is made up of about 13, 000 employees and has an unfortunate performance record.

As a result of the subjective decision-making, transfer of land which periodically takes place without strict regulation and in terms of questionable classification, not only an astounding number of servicemen/women remain without adequate defence housing, the Ministry of Defence loses control over its land. Markedly, the Accounting Chamber’s recommendation that lands transferred for defence housing construction, which was never realised, be returned to the MoD also remains unrealised. In fact, it has been noted that the MoD does not fully have information about how much land has been transferred out during the past years.

Similarly, is not even known, exactly, how many Ukrainian servicemen/women are on Ukraine’s defence housing queue. Estimates range between 47,000 and 60,000. This is a wide margin, which will need to be narrowed down. Each number not only represents tens of thousands of dollars, it represents living men and women, who whilst serving their country remain waiting for their defence housing system to serve them.

NAKO understands and supports the need to eliminate current ambiguities which lead to subjective decision-making of Capital Construction and Reconstruction planning within the Ministry itself. Perhaps a good place to start is by inventorising and auditing not only the defence housing queue, but MoD land and real-estate as well.

Dr. LADA L ROSLYCKY, Research and Advocacy Manager at the Independent Defence Anti-Corruption Committee (NAKO) for Kyiv Post