Interview with the BRDO Head: what inspections will businesses face with next year?


A year and a half ago, Ukraine took the first step towards a complete reorganization of the system of business inspections – the relative regulatory framework was adopted. 2018, they finally started to implement the changes. The BRDO Head explained what business owners should expect from inspections in 2019.

A year and a half ago – in November 2016 – the Verkhovna Rada adopted a law on the liberalization of state supervision. The document, in particular, ordered to launch a single online system of inspections that would contain information on legal entities and individual entrepreneurs who are subject to inspections, annual audit plans and reports on their implementation in Ukraine. The State Regulatory Service is responsible for this task. The Better Regulation Delivery Office (BRDO) funded by the European Union as part of the EU4Business initiative developed a pilot module of the online inspection system together with the State Regulatory Service. Delo.UA interviewed the BRDO Office Head Aleksey Goncharuk who explained how things worked with this reform in general and the online system of inspections in particular.

Can entrepreneurs know for sure when officials will visit them with inspections?

In Ukraine, there is a moratorium, which prohibits government agencies to visit businesses with scheduled inspections. But the Cabinet of Ministers determined a list of agencies-exceptions to the rule, which can carry out scheduled inspections in spite of the moratorium. In particular, this list includes the State Fiscal Service, the State Architectural Inspectorate, the State Labour Service, the State Service for Medicines, the State Service of Geology and Subsoil, the State Aviation Service, the State Environmental Inspectorate and partially the State Emergency Service.

Last year, a pilot module of an integrated system of business inspections (IAS) was launched. You can find there the inspection plans for 2018 from almost all government agencies. That is, the business can check whether it is exposed to a scheduled inspection of any government agency this year by using the online portal. The only inspections that businesses will not be able to find in the system at this point are tax audits. We are working on this.

In Ukraine, in addition to scheduled inspections, there are other control measures that businesses will not be able to find in the integrated system at this point.

Each and all government bodies can conduct unscheduled inspections. For example, some individual complained of violations at some enterprise. If the State Regulatory Service considers that this complaint is justified, the government agency should respond and carry out an inspection. The business can not find out about this inspection until it starts.

The situation with scheduled and unscheduled inspections remains more or less clear. All of them are at least coordinated within the relevant agency and documented.

However, there are all kinds of documentary audits, regular special inspections and various monitoring activities. And in this case, not everything goes smoothly. Some agencies pretend that they are not control bodies at all, or they assure that individual inspections are in fact not supervisory and control measures. For example, the Water Resources Agency says that they are not a control agency at all, they say, their functions were fully transferred to the State Environmental Inspectorate. This is not entirely true. After all, they continue to monitor and inspect water public services and pump stations. there are an endless number of such examples.

We believe that all the actions of government bodies to check the compliance with legal provisions are supervision and control measures. Therefore, information about all actions in relation to businesses should be in the single system of inspections. We try to cope with the hybrid control measures, identify them and make a list. Then we will prohibit them, if such inspections are illegal, or will specify requirements to keep them within the scope of the law.

Should there be sudden inspections, which entrepreneurs are not informed about in advance?

The first position: all questions of the state to businesses should be documented. When an official comes to the business, they should document this before an inspection in the form of intention and record its results when it is carried out.

All control measures should be as transparent as possible.

But there is a big nuance. Different risks should be managed in different ways.

There are risks, the management of which by using scheduled inspections is the same as catching the wind in a net. It is nonsense. There are risks, for example, unreported employment, which can be identified not by scheduled inspections, but only in other ways. By means of test purchases, surprise inspections, monitoring and analysis of some company’s performance indicators for a long period. All this is not related to scheduled inspections.

But it is crucially important that all control measures – both scheduled and unscheduled ones as well as other inspections – should be aimed at the idea of reducing a risk.

Not the idea of penalizing, punishing an entrepreneur, adding taxes or replenishing the budget, but reducing a specific risk.

For example, reducing the number of fires, the number of accidents, injuries in the workplace, etc.

What will be changed in inspections for businesses next year?

By the end of this year, we would like to bring matters in the inspections of key government agencies under control. We will focus on the work of 33 agencies. This is, in particular, the State Environmental Inspectorate, the State Labour Service, the State Service for Medicines, the State Service of Geology and Subsoil, the State Agency for Fisheries, the State Emergency Service and the State Service for Consumer Protection.  15 of these state agencies are already working in the integrated system of inspections. This means that their employees have the access to it, publish orders-directions for inspections and upload all information about the results of inspections. This year we want to ensure maximum publicity of the information on inspections of these 33 agencies. By the end of the year, we want to be able to tell the business: guys, every scheduled inspection conducted in 2018 is already available online.

Another task for this year is to bring matters in the list of regulatory bodies under control and understand their functions and what they control and why.

Recently, we asked the State Service on Food Safety and Consumers Protection to clarify all the areas of their control. According to our information, there are 14 areas. For example, this is veterinary and sanitary control, control over the protection of consumers’ rights, control over compliance with sanitary legislation, control in the area of plant quarantine and protection. But the State Service on Food Safety and Consumers Protection got stuck on this inquiry, since they do not have an exclusive list of what they control and why.

It would be normal that the scope of control should directly depend on the risks that these bodies are trying to prevent.

That is, everyone should understand why we keep this or that agency, what bad things do not happen due to the activity of this agency.

For example, some agency works to prevent dying from fires. This is a clear risk, which is managed by the agency, and a clear task. Each agency should have such tasks.

Now we are going to analyze the reports of 33 agencies on the inspections carried out last year. To be honest, these are poorly worked out documents at first glance. Something like “last year we planned 18 activities, implemented 18 of them, so the agency is 100% effective”.

We will analyze them and come up with a list of specific risks for each body and what determines their occurrence or non-occurrence by autumn.

In autumn, the agencies will plan the inspections for 2019. It is important for us that they do it better.

The agencies should answer two questions: “why do they conduct inspections?” and “who should be inspected first to prevent these risks?”