Speech of Minister of Finance Natalie Jaresko during verification project presentation on March 1, 2016

3/1/16

Good afternoon, dear citizens, journalists and representative of NGOs!

We have invited you today, in order to tell you in detail about the process of the verification of social safety net payments. Last year this process was initiated by the Ministry of Finance, and now – after all necessary amendments to the legislation and all necessary regulation have been adopted – we finally can start it. Please note that we are not going to report on what we have done so far to check the effectiveness of the use of public funds. Each ministry is obliged to examine permanently if its own expenses are correct and in line with the law. For instance, this is what the Ministry for Social Policy is doing now checking its social welfare payments to some of the recipients.We are asking you not to mix up this verification process with all measures which have been implemented before. Now the Ministry of Finance is launching quite a new process.

Why are we doing this?

First, it is about social justice. Today, Ukraine has limited financial resources and must treat them very prudently and provide them to citizens who really need this support. If we use these limited resources for citizens who are not really in need of them, this is not fair. Our aim is not to cut spending, but to increase its effectiveness and targeting.

Second, it is about justice in the distribution of taxes. Including the expenses of the State Pension Fund, Ukraine will spend UAH 356b in 2016 to finance all social welfare programs. These are funds which we receive from tax payers and re-distribute them to support other citizens. At the same time, we have no guarantee that these funds reach real citizens, real pensioners, real refugees…. Since Ukraine regained its independence, there has been no comprehensive verification to detect ghost recipients or cheaters receiving pensions and social welfare payments.

At the same time, experience of other countries shows that a significant part of the public funds assigned for social welfare (up to 30%) can be misused.

Third, verification can help us save funds which can be used for other public needs and, first and foremost, for the support of citizens who really needs it. Our estimate is that verification could save at least 5 billion hryvnas for the state budget in 2016.

Also, I would like to emphasize several important points when talking about verification:
First, verification in no way means cancellation of social safety net payments. It does not pose any risk to citizens who stick to the law. Our only target is to identify cheaters and those who are explicitly not entitled to receive social payments.

Second, verification does not mean any discomfort for citizens. The verification process only means the analysis of data received from official sources. In the course of verification we will simply collect a substantial amount of data, analyze it and inform the ministries in charge about detected data discrepancies.
This process can even become “invisible” to diligent citizens. The only ones who will be affected are cheaters who break the law receiving social payments (verification shall help identify and terminate such payments). The verification process will also be crucial for the state budget which will stop squandering the money of tax payers.
Why do I see myself in position to make such statements? Last year the Ministry of Finance implemented a pilot verification projects for social welfare payments assigned to the internally displaced citizens. My colleagues will be able to give you more details on this pilot project. I only want to say that it helped us save approximately 1 billion hryvnas a year for the country. This money was assigned to the internally discplased persons (IDPs), but it was just stolen by filing fake recipients. For example, we identified 1180 recipients who – as per their passports – were born 100 to 120 years ago which seems hardly possible for any country. At the same time, real IDPs who receive state support in line with the law did not even notice the verification. Last year, nobody in Ukraine heard about the verification of the IDPs – we did not have any negative reaction on that from the public as well as from the IDPs themselves.

Third, verification does not suppose any fines and penalties.

Fourth, it is important to understand why the Ministry of Finance is in charge for the complex verification.

The Ministry of Finance is the authority which is in charge of the revenues and expenses of the state budget. Among all state authorities, the Ministry of Finance is most interested in the effective use of taxpayers’ money which helps to increase funding for those areas which are really crucial for our country. Another important point is that the Ministry of Finance can integrate data from other sources and use them to identify all cheaters and prevent further payments to them.

Summing-up, I want to emphasize once again the key task of verification – it should help us to identify ghost recipients and cheaters. Thus, we would be able to significantly improve the effectiveness of the use of taxpayers’ money.

We will do everything in our power to avoid situations which make citizens worry in the course of the verification process which is so important for our country. We are open and ready to answer all your questions. We are already in lively talks with various interested parties including NGOs and will continue this communication for the whole period of the verification. We believe that this process is useful for our country and, first of all, for our citizens who will be sure that the state support is addressed to real people in need and that taxpayers’ money is used properly.

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