Administration of Thieves: Who and How Drains Money from Kyiv’s Budget?
Corruption Schemes in the Kyiv City State Administration (KCSA)
Corruption schemes within the Kyiv City State Administration (KCSA) cause significant losses to the city budget and undermine public trust in government institutions. According to the State Bureau of Investigation (SBI), annual budget losses in Kyiv due to corrupt actions by KCSA officials may reach approximately 10 billion hryvnias.
Corruption Mechanisms Through Municipal Enterprises
One of the primary mechanisms for embezzling funds is the inefficient and uncontrolled redistribution of finances among 128 municipal enterprises (MEs) under the jurisdiction of KCSA. The administration directs budget funds to these MEs, which, instead of directly performing the work, subcontract external commercial entities. This leads to inflated costs for services and projects, with the difference being pocketed by corrupt officials.
Example: The Department of Information and Communication Technologies
Let’s examine the activities of the KCSA's Department of Information and Communication Technologies (DICT). Instead of maintaining its own staff of specialists, such as programmers and engineers, the department creates a subordinate municipal enterprise, which receives budget funding. This ME, rather than carrying out the work itself, announces tenders through the "Prozorro" system and engages third-party companies. Officially, this is justified as a cost-saving measure, as the ME allegedly cannot afford to maintain expensive specialists. In reality, however, the cost of services provided by commercial firms includes not only the actual work but also their profit margins, leading to additional budget expenditures.
Consequences for the City and Its Residents
These corrupt practices not only inflict financial damage but also create risks for urban infrastructure. The involvement of multiple intermediaries in project implementation increases vulnerabilities and reduces the quality of completed work. When problems arise, the city is forced to allocate additional funds for repairs or the creation of new systems, which may once again be subject to corruption schemes.
The Corruption Scheme Algorithm in KCSA’s Municipal Enterprises
The corruption model implemented through municipal enterprises under KCSA’s leadership is based on the creation of additional intermediaries between budget funds and the final execution of works or services. This allows for significant price inflation and the embezzlement of public money in a formally "legal" manner.
1. Initial Stage – Identifying Needs
A department (e.g., the Department of Information and Communication Technologies – DICT) receives budget funding for city projects.
The city’s needs for infrastructure improvements or IT developments (e.g., electronic services, transportation solutions, urban management systems) are determined.
Formally, the department could fulfill these tasks internally by hiring the necessary specialists, which would significantly reduce costs.
2. Creating an ME – An Intermediary to "Legalize" Cost Inflation
Instead of performing the work directly, the department creates or engages a controlled municipal enterprise (ME).
The ME receives budget funding from the department, supposedly to be used for executing projects.
Key point: Unlike the department, an ME can engage in commercial activities, meaning it can act as a legal entity that contracts with private companies.
The ME formulates project tasks and technical requirements.
3. Tender Process and Artificial Price Inflation
The ME announces a tender through the "Prozorro" system, creating the illusion of a fair competition.
The tender is typically won by pre-selected companies affiliated with officials.
The project’s execution cost is deliberately inflated, as it includes:
The ME’s markup (usually 30-50% of the initial budget).
The commercial "winner’s" markup (another 20-40%).
A portion of funds returned as "kickbacks" to officials.
4. Work Execution – Cost Minimization
The winning company either delivers low-quality work or outsources it to even cheaper subcontractors.
In many cases, the real cost of work is 2-3 times lower than the allocated budget.
A portion of the funds is simply "laundered" through fictitious contracts.
5. Generating New Expenses – Sustaining the Scheme in the Long Run
Implemented systems are often intentionally designed to be complex, requiring continuous budget injections for maintenance.
Artificial problems (e.g., unexpected failures, cyberattacks, technology obsolescence) are created, justifying further budget allocations.
A new cycle begins:
The need for modernization is declared.
A new tender is held via the ME.
Budget funds are siphoned off again using the same scheme.
6. Legalization and Protection of the Scheme
Kyiv City Council (KCC) deputies approve budget expenditures through voting, failing to challenge corruption mechanisms.
When faced with journalistic investigations or public pressure, officials justify expenses as "ensuring transparency," while tenders are presented as "competitive and open."
All documentation is arranged to ensure that the scheme does not formally appear corrupt.
Systemic Corruption in Kyiv’s Municipal Sector
This scheme is widespread across most municipal enterprises in Kyiv and is employed in various sectors, from IT projects to construction, healthcare, and transportation. As a result, the city’s budget loses billions of hryvnias annually—funds that could otherwise be used to improve infrastructure and services for residents.
Corruption schemes in KCSA, based on the involvement of municipal enterprises and intermediaries, lead to significant financial losses and the deterioration of urban services. To combat this problem, it is essential to implement transparent mechanisms for budget oversight, reduce the number of intermediaries, and ensure that KCSA divisions directly execute projects.