LAW OF UKRAINE ON THE NATIONAL AUDIT OFFICE IN UKRAINE Dated January 26, 1993 #2939-XII (VVR 1993, #13, p. 110) This Law identifies the status of the National Audit Office in Ukraine, its functions and legal framework of its operation. CHAPTER I GENERAL Article 1. Structure of the National Audit Office The National Audit Office shall consist of the Chief Audit Directorate of Ukraine, Audit Departments in the Republic of Crimea, regions, cities of Kyiv and Sevastopol, audit units (divisions, groups) in districts, cities and city districts. Article 2. Principal Objectives of National Audit Office The key objective of the National Audit Office is exercising the state oversight of the funds and material values spending, safe storage of same, as well as of the condition and credibility of the accounting and inventory at ministries, agencies, state committees, state funds, budget-dependent institutions, as well as at enterprises and organizations financed from budgets of all levels and state foreign exchange funds; development of proposals with respect to ensuring remedy of the detected faults and violation, and avoidance of same in the future. The state oversight shall be carried out in the form of audits and verifications. An audit is a technique of documentary oversight of financial and economic activity of an enterprise, institution, organization, and of compliance with laws regulating financial matters, of the credibility of accounting and inventory, a means of documentary detection of shortfalls, misappropriations, embezzlements and pillages of funds and material values, prevention of financial abuses. An appropriate act shall be drawn up based on the audit's results. A verification is the examination and study of individual areas of financial and economic activity of an enterprise, institution, organization or their structural units. The verification results shall be executed in a certificate or a memorandum. Article 3. Laws Governing National Audit Office The National Audit Office's operation shall be governed by the Constitution of Ukraine, this law and other statutes and acts of the President and the Cabinet of Ministers of Ukraine. Article 4. Subordination of National Audit Office and Coordination of its Activities with Other Controlling Agencies The National Audit Office functions within the structure of the Ministry of Finance of Ukraine and shall be accountable thereto. The Audit Departments in the Republic of Crimea, regions, cities of Kyiv and Sevastopol shall be subordinate to the Chief Audit Directorate. The regional audit departments shall incorporate audit units (divisions, groups) in districts, cities and city districts. The National Audit Office shall coordinate its activities with local Councils of People's Deputies and executive power authorities, financial agencies, other controlling organs, prosecutor's office, internal affairs authorities, security service. Article 5. Appointment of Officials of National Audit Office The Chief Audit Directorate shall be headed by the Deputy Minister of Finance, a Department Director appointed by the Cabinet of Ministers of Ukraine upon the submission of the Minister of Finance of Ukraine. The Audit Departments in the Republic of Crimea, regions, cities of Kyiv and Sevastopol shall be headed by Directors appointed by the Director of the Chief Audit Directorate of Ukraine subject to approval of the Council of Ministers of the Republic of Crimea, regional state administrations and City State Administrations of the Cities of Kyiv and Sevastopol. The Directors of Audit Departments in the Republic of Crimea, regions, cities of Kyiv and Sevastopol shall appoint and discharge heads of audit units (divisions, groups) in districts, cities and city districts. Article 6. Funding of National Audit Office The costs associated with the National Audit Office operation shall be determined by the Cabinet of Ministers of Ukraine and shall be funded from the state budget. Article 7. Status of National Audit Office The Chief Audit Directorate of Ukraine, Audit Departments of the Republic of Crimea, regions, cities of Kyiv and Sevastopol shall be legal entities keeping their individual balances, payment and other bank accounts, official seals bearing the State Emblem of Ukraine. The audit units (divisions, groups) in districts, cities and city districts being structural units of Audit Departments in the Republic of Crimea, regions, cities of Kyiv and Sevastopol, shall have their seals and letterheads. In individual cases, the Chief Audit Directorate of Ukraine shall have the right to decide upon rendering rights of a legal entity to individual audit units in districts, cities and city districts. A Regulation on the National Audit Office shall be approved by the Cabinet of Ministers of Ukraine. CHAPTER II MAIN FUNCTIONS OF NATIONAL AUDIT OFFICE Article 8. Main Functions of National Audit Office of Ukraine and of Audit Departments in the Republic of Crimea, Regions, Cities of Kyiv and Sevastopol The Chief Audit Directorate of Ukraine, Audit Departments in the Republic of Crimea and of the cities of Kyiv and Sevastopol shall perform the following functions: 1) organize the operation of audit units of the Republic of Crimea, regions and cities of Kyiv and Sevastopol with the view to holding verifications and audits, summarize the results of the documentary audits and verifications and, in the cases provided for by the law, report same to executive power authorities; 2) conduct audits and verifications of financial performance, status of funds and material values, as well as of the condition and credibility of the accounting and inventory at ministries, agencies, state committees, state funds, budget-dependent institutions, as well as at enterprises and organizations financed from budgets of all levels and from state foreign exchange funds; 3) audit and verify the appropriateness of the state funds spending for sustaining local executive power authorities, institutions and organizations acting abroad and funded from the state budget; 4) audit and verify the completeness of profit reporting, appropriateness of spending and keeping foreign exchange funds; 5) oversee the process of eliminating faults and violations detected by previous audits and verifications; 6) develop directives and other regulatory acts governing audits and verifications; 7) provide methodological guidance and supervision of the subordinate audit units, summarize the experience of audits and verifications and extend it to audit offices, develop proposals with respect to control procedures improvement. The audit authorities shall consider letters, applications and complaints filed by citizens and revealing facts of financial laws infringements. All notices containing information about pillages, embezzlements, shortfalls or other grave violations shall be immediately forwarded to respective law enforcement agencies for their proceeding according to the law. Article 9. Responsibilities of Audit Units (Divisions, Groups) in Districts, Cities, City Districts Audit units (divisions, groups) in districts, cities and city districts shall perform responsibilities as defined by Article 8 hereof (except for Paragraphs 1 and 7). CHAPTER III RIGHTS, OBLIGATIONS AND LIABILITY OF NATIONAL AUDIT OFFICE Article 10. Rights of National Audit Office The Chief Audit Directory of Ukraine, Audit Departments of the Republic of Crimea, regions and cities of Kyiv and Sevastopol, audit units in districts, cities and city districts shall have the following rights: 1) to audit and verify financial and accounting documents, reports, balances and other documents confirming receipts and disbursements of funds and material values by ministries, state committees and other executive power authorities, carry out verifications of the actual availability of values (monetary amounts, securities, raw and other materials, finished products, equipment, etc.); 2) unimpeded access to warehouses, storage sites, manufacturing and other facilities for the inspection thereof and clarification of issues associated with the audit or inspection; to terminate operations at settlement and other accounts with banks and other financial and lending institutions in the event that the management of the facility subject to the audit or verification obstructs the due performance of responsibilities by a National Audit Office official; 3) to engage, on a contractual basis, competent personnel of respective ministries, state committees and other executive power authorities, state funds, enterprises, institutions and organizations for conducting checking measurements of construction, erection, repair and other works, trial production run of raw and other materials, tests of raw and other materials and finished products, as well as other checks paid for from specially designated funds; 4) to require from managers of enterprises being audited or verified to carry out inventories of main assets, goods and material values, monetary assets and payments, if need be, to seal cash desks and offices, warehouses, archives. Should any forgeries or other abuses be detected, to withdraw relevant documents for the period until the audit or verification is finished provided that an act of the documents withdrawal be drawn up and attached to files along with copies or registries of withdrawn documents; 5) receive from the National Bank of Ukraine and its institutions, commercial banks and other lending entities all and any necessary information, copies of documents, notices of banking operations and remainders of funds at accounts of enterprises and organizations being audited or verified; to receive from other enterprises and organizations (including same of non-state ownership) certificates, notices and copies of documents concerning transactions and settlements with enterprises, institutions, organizations being audited or verified; 6) receive from officials and responsible persons of enterprises and organizations undergoing audits and verifications written explanations referring to issues arising in the course of audits or verifications; 7) to require managers and other officials of enterprises and organizations undergoing audits and verifications to remedy the detected violations of laws governing keeping and use of the state property, to withdraw to the national budget concealed or understated foreign exchange and other payments identified in the course of audits and verifications, submit to proper authorities proposals on terminating budgetary funding and crediting if determined that the funds and loans received by enterprises and organizations have been used in breach of the effective laws; 8) to collect to the national budget the funds received by ministries, agencies, state committees, state funds, enterprises, institutions and organizations under illegitimate agreements, without established legal grounds and in breach of the effective laws; 9) in the cases provided for by the law, to apply administrative sanctions to managers and other officials of enterprises, institutions and organizations; 10) to apply to enterprises, institutions, organizations and other business entities financial penalties established under paragraph 7 of Article 11 of the Law of Ukraine On the State Tax Service in Ukraine. Article 11. Conduct of Audits and Verifications An audit or verification shall be conducted based on a document signed by the Director of the Audit Office, Director of the Department, their deputies or head of an audit unit in a district, city or city district. Upon the initiative of the National Audit Office, an audit or verification of an enterprise, institution or organization may be conducted not more frequently than once a year. An audit or verification order by a law enforcement agency may be conducted at any time. Officials of the National Audit Office must present to managers of a relevant enterprise, institution or organization a document authorizing the conduct of an audit or verification. Article 12. Duties and Responsibility of Officials of National Audit Office Officials of National Audit Office must strictly comply with requirements of the Constitution of Ukraine, laws of Ukraine, rights and interests of citizens, enterprises, institutions or organizations being protected by law. The failure to comply or undue compliance of officials of audit bodies with their duties shall entail their disciplinary or criminal liability subject to provisions of applicable laws. In the cases of detected abuses or violations of effective laws, officials of audit bodies must refer to law enforcement agencies materials of audits, and advise state authorities and state property managing organs of the detected abuses or violations of laws. At withdrawing documents in connection with their forgery or detected violations, an audit official must immediately notify law enforcement agencies of such withdrawal. The withdrawn documents shall be stored until the end of an audit or verification following which said documents shall be returned to an enterprise, institution or organization in question, unless appropriate law enforcement agencies resolve on these documents sequestration. Officials of National Audit Office shall be responsible for adhering to commercial and service secrets. Article 13. Consideration of Complaints against Actions of Officials of National Audit Office Complaints against actions of officials in districts, cities and city districts as well as those of officers of audit departments shall be considered and acted upon by heads of those departments. Complaints against actions of officers of the Chief Audit Directorate of Ukraine and heads of audit departments of the Republic of Crimea, regions and the cities of Kiev and Sevastopol shall be considered and acted upon by the head of the Chief Audit Directorate of Ukraine. Complaints shall be considered and relevant decisions taken not later than within a month from the date of their receipt. In case of disagreement of legal entities or individuals with such decisions they may be appealed against to a court of law or arbitration. The filing of a complaint shall not terminate the action by officers of the national audit office that is being appealed against. CHAPTER IV LEGAL PROTECTION OF OFFICERS OF NATIONAL AUDIT OFFICE Article 14. Relations of National Audit Office with Law Enforcement Bodies Regardless of the form of ownership, bodies of the National Audit Office shall conduct audits and verifications of subjects of entrepreneurial activity based on a prosecutor's or investigator's order issued in the course of criminal proceedings. At the directive of the Prosecutor's Office, the Ministry of Internal Affairs, the security Service of Ukraine and tax inspectorates in cases provided for by the law, bodies of the National Audit Office shall conduct audits and verifications at any enterprise, establishment and organization of all forms of ownership that may fall within their jurisdiction. At the request of law enforcement bodies, audits and verifications may also be conducted in other cases provided for by legislation in force. Workers of law enforcement bodies shall assist officers of the National Audit Office in their fulfillment of their duties. Should officers of the National Audit Office be denied entry to the territory of an enterprise, establishment or organization, or access to documents for audit or verification purposes, or become the object of any illegal action, the police shall, at the request of such persons, take immediate action to stop such opposition, ensure normal conduct of the audit or verification and protection of the audit officers and the documents and materials being checked, as well as take measurers to take responsible persons to account. Article 15. Legal Status of Officers of National Audit Office Officers of the National Audit Office are representatives of the executive branch of the Government. Lawful demands of officers of the National Audit Office shall be obligatorily complied with by officials of the entity under audit or verification. In fulfilling his duties, an officer of the National Audit Office shall be governed by the legislation in force and the orders of his superiors. No other person except for cases provided for by the law shall be entitled to interfering into the activity of an official of the National Audit Office. Interference into activity of an officer of the National Audit Office shall entail liability provided for by relevant legislation. Article 16. Legal Protection of Officials of National Audit Office In fulfilling his duties, an official of the National Audit Office shall be protected by the law. The State shall guarantee protection of life, health, honor, dignity and property of an officer of the National Audit Office and his family members against criminal infringements and other illegal acts. Discharge of an official of the National Audit Office from his position owing to his committing a crime in the course of fulfilling his duties shall not be admissible other than upon the passing by court of a verdict of guilty and its taking effect. Article 17. State Insurance and Compensation of Damage in the Event of Death or Crippling Injury of an Official of the National Audit Office In the event of death of an official of the National Audit Office in line of duty, his family or dependents shall be paid one-off pecuniary allowance in amount of ten annual salaries of the deceased at the last position he held, from the state budget with subsequent collection of the money from the guilty. In the event of bodily harm an official of the National Audit Office sustains in line of duty and which prevents that official from pursuing his professional activities, he shall be paid a one-off allowance in amount of five annual salaries at the last position he held, from the state budget with subsequent collection of the money from the guilty, and a disability pension shall be instituted for him according to established procedure. In the event of bodily harm an official of the National Audit Office sustains in line of duty and which does not prevent him from pursuing his professional activities, he shall be paid a one-off allowance in amount of one annual salary at the last position he held, from the state budget with subsequent collection of the money from the guilty. Damage done to property of the official of the National Audit Office or his family members in connection with his fulfillment of his duties shall be compensated in full from the state budget with subsequent collection of that money from the guilty. The annual salary of an official of the National Audit Office taken to calculate the size of the one-off allowance shall include all kinds of pecuniary compensation received by that official during his service at the National Audit Office throughout the year that preceded the year of his death or loss of health. One-off allowances and compensation of property damage shall be exempt from tax. All officials of the National Audit Office shall be entitled to mandatory state insurance at the expense of the state budget: against death - in amount of ten annual salaries the last position; against a wound, concussion, injury or maim, disease or disability that have occurred in line of duty - in amount of six months' to five years' salaries at his last position depending on the degree of disability. The order and terms of insurance of officials of the National Audit Office shall be laid down by the Cabinet of Ministers of Ukraine. President of Ukraine L. Kravchuk Kiev, 26 January 1993 #2939-XII