They even made money on dogs: what Accounting Chamber found in procurement of food by Ministry of Defense
In the first half of 2023, the Ministry of Defence procured food at prices 30% higher than consumer prices, did not analyze prices, did not control the quantity of products supplied, and 75% of the items in the food catalog were not provided to units.
These are the results of an audit conducted by the Accounting Chamber at the Ministry of Defence. The report is available to Censor.NET, and the publication considers it necessary to publish its data. After all, the previous leadership of the Ministry of Defence lost their positions due to two scandals - with eggs at 17 UAH and Turkish jackets.
Lack of price analysis and suppliers without offers
One of the first conclusions of the Accounting Chamber was that the process of planning the provision and organization of meals for the Armed Forces personnel and staff animals was purely formal.
"As a result, the contracts did not take into account the real need for the food supply of the Armed Forces of Ukraine, as determined by the Armed Forces Logistics Centre," the report says.
The editorial team will not provide figures, but in some cases, they have sold thousands and in some cases millions of units.
And the number of catering services under the Catalogue for personnel of military units, institutions and educational establishments of the Armed Forces of Ukraine in inpatient and field conditions (hospital standard (excluding VAT)) is 43,802 units, which is 273,753 units less than the amount specified in the Procurement Volume List - 317,555 units.
In order to provide food for the Armed Forces of Ukraine in 2023, the Department of Public Procurement on 30.11.2022 notified 29 potential suppliers of the planned procurement of catering services by the Ministry of Defence for 2023 and offered to provide information on the cost of services.
Price proposals were submitted by 12 suppliers who offered the cost of one set of products according to the Catalogue from UAH 149.2 to UAH 164.2 including VAT, per unit of catering service: for personnel of military units - from UAH 37.15 to 45.78 including VAT, for personnel of higher education institutions - from UAH 60.26 to 63.96 including VAT.
Based on "monitoring the level of market prices and taking into account the inflation rate for 2023 (28%)", the Department determined the cost per unit of food set at UAH 153.6 including VAT, and per unit of catering service: UAH 40.48 including VAT for personnel of military units and UAH 56.02 including VAT for personnel of educational institutions of the Armed Forces of Ukraine.
However, later, due to a lack of budgetary funds, these prices were reduced to UAH 145.8 and UAH 36.0, respectively.
The department selected 8 business entities to conclude contracts: VT Development LLC, Archimagir LLC, Rektan LLC, Trade Granit Invest LLC, Active Company LLC, Garna Strava LLC, Uniorproduct LLC and S-Rostok LLC.
The Accounting Chamber also found that no price proposals were received from VT Development LLC, Garna Strava LLC, Uniorproduct LLC and S-Rostok LLC, and there were no supporting documents for determining the winners of the economically attractive price proposal.
At the same time, almost all companies showed signs of risk, from the size of their authorised capital to existing criminal proceedings.
The Accounting Chamber's audit also found that Trade Granit Invest LLC is not a VAT payer, while the contract for the supply of catering services and food packages with it sets the same price (namely UAH 36 and UAH 145.8, respectively) as other suppliers who are VAT payers.
And while the price of catering services according to the Catalogue for personnel of military units in stationary conditions under 8 agreements is UAH 36 including VAT, the price for Trade Granit Invest LLC under 2 agreements with educational institutions is UAH 55.98 including VAT.
Eggs for 17, buckwheat for 108, and everything is more expensive than in the GUR and the National Guard
After the egg scandal, the relevant department of the Ministry of Defence is known to have reviewed a number of prices in supplier catalogues, but this was done in an arbitrary manner and without any system.
For example, the price of a chicken egg from the notorious Active Company LLC was reduced from UAH 17.0 to UAH 9.0 by an additional agreement, the price of other suppliers is within UAH 9.0, and the price of the Taras Shevchenko National University is UAH 5.5.
The price of fresh potatoes was reduced from UAH 27 to UAH 16.8 by Garna Strava LLC, from UAH 24 to UAH 14.88 by Junior Product LLC, and from UAH 22.0 to UAH 14.23 by Active Company LLC. However, the NAU purchased potatoes at UAH 10 per kg.
Junior Product LLC reduced the price of buckwheat groats from UAH 108.9 to UAH 87.48, while Garna Strava LLC reduced the price from UAH 105 to UAH 88. The lowest procurement price was UAH 65.0 under the contract with NAU.
However, according to the Accounting Chamber, even such a random price reduction under 10 contracts reduced budget expenditures by UAH 1,570.58 million.
"The above indicates that the Ministry of Defence does not ensure proper monitoring of market prices for food at the stage of concluding contracts for the provision of food to the Armed Forces of Ukraine," the Accounting Chamber report says.
At the end of May, food procurement was transferred to Prozorro, resulting in 18 contracts totalling UAH 17,144.53 million.
As a result, the annual cost of services to provide food for servicemen and feeding staff animals amounted to UAH 37,985.8 million, which is UAH 8,192.8 million less than the estimated cost that was budgeted.
But that's not all. The Accounting Chamber found that even the reduced prices for the Ministry of Defence's meals were significantly higher than those of other law enforcement agencies.
Although servicemen are provided with food according to the norms of nutrition for servicemen of the Armed Forces of Ukraine, the daily allowance for one serviceman is UAH 92.45 in the SSU, UAH 94.98 in the SBGSU, UAH 101.57 in the DIU and UAH 118.61 in the NGU.
"According to the auditors' calculations, the Ministry of Defence's use of the mechanism of providing food through the procurement of services to provide food packages according to the Catalogue in the first half of 2023 led to uneconomical spending of budget funds, estimated at UAH 7,041.0 million," the report said.
The main reason for the difference in the daily cost of meals was the overstatement of prices in the catalogue.
"Thus, according to the contracts concluded by the Ministry of Defence with these business entities, the purchase price of beetroot was 18.4-20.0 UAH per kg, compared to the purchase price of beetroot in the security and defence sector - 10.25-15.38 UAH per kg; cabbage - 22.08-25 UAH/kg, against 19.97-20.0 UAH/kg; potatoes - 14.23-17.7 UAH/kg, against 7.76-11.04 UAH/kg; buckwheat - 83.0-87.6 UAH/kg, against 50.57-56.96 UAH/kg; bread from wheat flour - 31.5-37 UAH/kg, against 21.33-30.63 UAH/kg; chicken eggs - 9.0 UAH/each., against 5.23-5.46 UAH/unit, etc.", the report says.
UAH 8 margin on a loaf of bread
The Accounting Chamber representatives also compared prices with consumer prices in the region and found significant overpricing here as well.
For example, during January-June 2023, UNIORPRODUCT LLC supplied (at a price of UAH 32.4 per 1 kilogram): rye bread (sliced) in the amount of 11,317.96 kg for the amount of UAH 366.7 thousand and bread made from first-grade wheat flour in the amount of 22,450.715 kg for the amount of UAH 727.4 thousand. At the same time, according to the documents of the manufacturer of the products, ROMA, the price of bread is UAH 23.68 (Kozatskyi sliced) and UAH 23.76 (Slobozhanskyi sliced), which is lower than the delivery price by UAH 8.72 and UAH 8.64, respectively. As a result, the cost of bread was overstated by a total of UAH 292.67 thousand.
Prices for other foodstuffs were also higher in relation to purchase prices for: eggs - 36%; beetroot - 44%; potatoes - 34%; carrots - 27%; onions - 15%; buckwheat - 32%; wheat - 54%; millet - 22%; sugar - 22%; vegetable oil - 27%; apples - 31%.
If we compare the prices of Aktiv Company LLC, it supplied chicken eggs 2.8 times more expensive. The story with other products is not better.
"According to the contract, the price of a chicken thigh was set at UAH 120.0 per kilogram. At the same time, according to Internet resources, the price of chicken thighs increased from December 2022 from UAH 97.0 per kg to UAH 109.57 per kg in June 2023, but did not reach the limit of UAH 120.0 per kg as stipulated in the contract," the report says.
In principle, the significant overstatement of prices in the catalogue is not new, and journalists have repeatedly drawn attention to it. However, the Ministry of Defence has always justified this by citing expensive logistics.
In fact, it turned out to be a lie. Members of the Anti-Corruption Council at the Ministry of Defence and now the Accounting Chamber have already verified this. The audit revealed that the goods were delivered to the units on the basis of invoices and expense bills issued by the direct manufacturers of the products.
For example, when the primary documents for June 2023 were examined, the following suppliers were listed in the invoices for food receipts:
- Batkivsky Hlib LLC (USREOU code: 41370127, address: 80 Luzanivska St., Odesa; customer: VT DEVELOPMENT LLC, recipient: A2756);
- Globinsky Meat Processing Plant LLC (EDRPOU code: 25167451, loading point according to the Consignment Note: 5 Novomoskovskaya Road, Odesa, the buyer and consignee: VT DEVELOPMENT LLC, unloading point: A2756);
- LLC "Kryvoozerska Food and Drink Factory" (EDRPOU code: 05467783, address: Mykolaiv region, Kryvoozerskyi district, Kryve Ozero village, Industrialna str. 2, delivery address: А2756);
And only then did the company in question hand over its invoices to the unit.
And of course, the analysis of the prices of certain dairy products purchased by VT DEVELOPMENT LLC from MO LK OM LLC and the prices of these products indicated in the invoices of VT DEVELOPMENT LLC for military unit A27** showed a significant difference.
"For example, Sour cream 15-20% was purchased at UAH 87.09 per kg and delivered at UAH 144.0 per kg, which is UAH 56.91 or 39.52 per cent more expensive, Ultra-pasteurised milk 2.5% was purchased at UAH 33.00 per kg and delivered at UAH 45 per kg, which is UAH 12.0 per kg (26.67 per cent) more expensive.); Yoghurt with additives from 1.5% - 61.04 UAH/kg, delivered for 78 UAH/kg, which is 15.91 UAH/kg (20.4%) more expensive, Creamy Fanny dessert - 99.20 UAH/kg, delivered for 150.0 UAH/kg, which is 50.8 UAH/kg (20.4%) more expensive," the Accounting Chamber report says.
Who is 75% of the product catalogue for?
That's not all.
The audit found that almost 75% of the 409 items in the Catalogue were not supplied. In March 2023, the Armed Forces Logistics Logistics Department summarised information on the regularity of the Armed Forces' orders of the Catalogue items in 2022.
An analysis of information on the regularity of ordering items from the Food Catalogue in 2022 revealed discrepancies between the actual volume of food supplies and the quantity of food corresponding to the Catalogue's indicators.
In particular, the supply of canned pork stew and canned beef stew of the highest grade, canned meat and vegetable products (pearl barley with beef) to the Armed Forces of Ukraine exceeded the quantitative indicators of the Catalogue by 11,002, 6,809 and 1,343 times, respectively. Nevertheless, 28 items of food provided for in the Catalogue, including turkey carcass, chilled sturgeon, frozen headless cod, frozen cod fillet, chilled headless catfish, chilled boneless veal shoulder, etc. were not supplied to military units at all.
In the first half of 2023, the audit at the controlled facilities found that the volume of products from the Catalogue was used to provide food for the Armed Forces of Ukraine, ranging from 27% to 40% of the catalogue.
The largest share in the total volume of products supplied is made up of: cereals (about 66%), pasta (60%), vegetables (about 54%), spices and sauces (51%), dairy and fermented dairy products (50%), and frozen vegetables (46%).
The smallest share in the total volume of products supplied is made up of instant cereals (1%), fish (16%), meat and meat products (28%), beverages (32%), honey, jam and chocolate (33%).
There is one more item - feeding service animals, but there are no price determination factors established here either.
They even made money on dogs
As a result, in only one of the inspected units, the cost of food supplied for feeding one dog was overstated by more than UAH 60, which totalled UAH 30.87 thousand.
In addition, the Accounting Chamber pointed out that Procedure No. 140 only provides for the procurement of product sets from a catalogue, and does not provide for the procurement of services to provide product sets. At the same time, the total value of such procurement in the first half of the year was UAH 20,841.29 million.
There is one more important nuance. The Ministry of Defence pays suppliers for the so-called daily rations, or daily meals for the military. But in reality, the unit receives individual products.
But they write off the cost of one set of products.
For example: in February 2023, TRADE GRANIT INVEST LLC supplies 260 kg of food worth UAH 39,180.0 to the military unit A13** (frozen chicken fillet 180 kg worth UAH 30,780.0, frozen chicken thigh 80 kg worth UAH 8,400.0), the military unit determines the number of food sets - 268.72428 units (UAH 39,180.0 / 145.8 price per set).
"As a result, the information on the supplied food contained in the primary documents accepted for accounting was reflected as a set of products, while according to the warehouse accounting data, the food was reflected in quantitative terms by item," the Accounting Chamber report says.
In addition, in the first half of 2023, the Ministry of Defence paid UAH 20.8 billion for food for the military, but in reality, they will not know what the suppliers have delivered for a long time.
When asked to give the number of eggs purchased at 17 UAH, the author of the article was told by the SPS that these figures would be compiled in about a year.
"As of 30.06.2023, the accounting of the Ministry of Defence does not include accounts payable under contracts concluded with business entities to provide food for servicemen and staff animals of the Armed Forces of Ukraine in the first half of 2023, despite the termination of the service provision on 01.07.2023. This indicates that the Ministry of Defence does not have information on the actual fulfilment of the terms of the contracts by business entities," the Accounting Chamber report says.
The auditors also noted the low efficiency of the claims process. The MoD usually explains this by the fact that the military orders food late, and suppliers use this to avoid responsibility for supplying the wrong products, and of poor quality.
From the author: This report of the Accounting Chamber is important for understanding how corrupt the system of food procurement in the MoD is. Unfortunately, the situation cannot be solved by simply putting tenders on Prozorro. Even if the number of lots is increased in the short term, it will only lead to well-known players entering under unknown signs. Whereas it is important to bring a national producer to the auction. At the very least, bread supplies can be put up for separate lots now, so that suppliers do not earn a margin of UAH 8 per loaf. And then other commodity groups should be included, the food menu should be approved, so that the military is not fed only barley and sausages, and the supply should be separated from the price of the goods.
The food tender will be the first test for the new team at the ministry to see if they are ready to change anything.
Tetiana Nikolayenko, Censor.net
