SMG's Statement on Financial Audit of Corvette Program’s Implementation


On Wednesday, 13 September 2017, the State Audit Service of Ukraine communicated a message where it expressed its surprise that their auditors were not admitted to Chernomorsky Shipyard (ChSZ) in order to audit the use of the public financing by the company in the framework of the Corvette Program’s implementation. In this regard, SMG considers it necessary to comment on the situation.

On Monday, 11 September 2017, the auditors of the Southern Office of the State Audit Service in Nikolaev region arrived at the shipyard. According to the provided documents, the auditors intended to study "certain aspects of financial and economic activities of Chernomorsky Shipyard for the period from 1 January 2015 to 30 September 2017" related to the implementation of the above-mentioned state program. In their turn, representatives of the plant's administration notified the auditors that the audit was not possible due to the fact that ChSZ did not receive any state funding for implementation of the program in the specified period (January 2015 – September 2017), and therefore could not be the object of the audit. Since there were no legal grounds for the audit, the representatives of the State Audit Service were not admitted to the guarded area of the company. In their turn, the auditors made a report on the impossibility to make the audit for the above reasons.

The company received the last tranche in the framework of the public financing for the construction of Vladimir the Great Corvette in 2013. The audit of the use of the program funds since 2011 on carried out by state auditors in spring of 2015 in the Ministry of Defence and a counter audit in Chernomorsky Shipyard did not reveal any financial irregularities.

As for UAH 85 million mentioned in the message of the State Audit Service, received by the company, and for which the Defence Ministry currently reports arrears, we are talking about advance payments under foreign economic contracts for the supply of equipment and weapons for the corvette under construction. As financing of the construction has not been provided by the government since 2014, the company could not make full payments to foreign partners and receive contracted products. Because of this, penalty sanctions were imposed on the company by both contractors and the Ministry of Economy. Therefore, the state program in question, as well as the company itself, in fact became hostages of the financial policy of the state.

We repeatedly urged the authorities to decide on the future of the Corvette Program. Currently, ChSZ and the Defence Ministry are in the discussion of changes to the program. We are convinced that the most realistic scenario for implementation of the project is the construction of the corvette at the facilities of ChSY, which is a specialized enterprise of military shipbuilding, which has the necessary technological base and highly qualified staff.