Inspection reform: what will change for business and control agencies

A year and a half ago, Ukraine took the first step towards a complete reorganization of the business inspection system – a legislative framework was adopted. In 2018, the changes finally started to be implemented. The Head of BRDO told what business should expect from inspections in 2019.

A year and a half ago, namely, in November 2016, the Verkhovna Rada adopted the law on the liberalization of state supervision. The document, in particular obliged to launch in Ukraine a single online inspection system, which will store information on legal entities and private entrepreneurs who are subject to inspection, annual inspection plans and reports on their implementation. The State Regulatory Service is responsible for this. The Better Regulation Delivery Office (BRDO), which is funded by the European Union within the EU4Business initiative, together with the service, developed a pilot module of the online inspection system. Delo.UA talked to the Head of Office Oleksii Honcharuk, who told about the general progress of this reform and the online inspection system in particular.

Can an entrepreneur know for sure when an official comes to him with an inspection?

In Ukraine, there is a moratorium, which prohibits public authorities to come to business with scheduled inspections. However, the Cabinet of Ministers has determined the list of agencies, which are exceptions to the rule, which can perform scheduled inspections regardless of the moratorium. This includes, in particular, the State Fiscal Service, State Architectural Inspection, State Labour Service, State Service on Medicines, State Geology Service, State Aviation Service, State Environmental Protection Inspection, and partially the State Emergency Service.

Last year, a pilot module of the unified business inspection system (IAS) was launched. There are plans to inspect almost all public authorities in 2018. It means that the business can check whether it is subject to a scheduled inspection by any of the public authorities this year through the online portal. The only inspections that the business will not see in the system for now are tax inspections. We are working with them on it.

In addition to scheduled inspections, there are other control measures that the business will not see in the unified system in Ukraine.

All public authorities, without exception, can conduct unscheduled inspections. For example, some individual complained of violations at an enterprise. If the State Regulatory Service believes that the complaint is justified, the public authority must respond and inspect this enterprise. The business cannot find out about this check until it starts.

There is at least some order with scheduled and unscheduled inspections. All of them are at least coordinated within the authority and documented.

But there are all kinds of documentary checks, raids and different monitoring. Everything is not so smooth here. Some agencies pretend that they are not supervisory authorities at all, or they assure that individual inspections are in fact not supervisory and control activities. For example, the Water Resources Agency says that it is not a supervisory authority at all and its powers have fully been transferred to the State Environmental Protection Inspection. This is not entirely true. After all, it continues to monitor and check water utility enterprises and pumping stations. Such examples are endless.

We believe that all the actions of public authorities on verifying the implementation of the norms of law are the supervision and control measures. Therefore, information on all actions relating to business should be in a single inspection system. We try to cope with hybrid control measures, identify them and make a list of them. After that, we will prohibit, if such inspections are illegal, or specify requirements to “drive” them under the law.

Should there be sudden inspections, which an entrepreneur does not know in advance?

Position one: all questions of the state to the business should be documented. When an official goes to the territory of the business, he must document it before the inspection in the form of intention and record its findings upon its completion.

All control measures should be as transparent as possible.

But there is an important “but”. Different risks need to be managed in different ways.

There are risks that can be controlled by scheduled inspections – the same as to scoop using the hand net. It is nonsense. There are risks, in particular the informal work, which can be detected only in the ways different from scheduled inspections. For example, with the help of a control procurement, sudden inspection, monitoring and analysis of some company’s performance indicators for a long period. All this is not about scheduled checks.

But it is fundamentally important that all control measures both scheduled, unscheduled and all other checks should pursue the idea of risk mitigation.

Not to penalize, not to punish an entrepreneur, not to additionally accrue taxes, not to replenish the budget but to reduce the specific risk.

For example, reduce a number of fires, number of accidents, injuries at production, etc.

What will change for the business in the inspections next year?

Before the end of this year, we want to put things in order in the inspections of key public authorities. We will focus on the work of 33 agencies. These are, in particular the State Environmental Protection Inspection, State Labour Service, State Service on Medicines, State Geology Service, State Agency for Fisheries, State Emergency Service and the State Service for Food Safety and Consumer Protection. 15 of these public authorities are already working in the single inspection system. It means that their officers are connected and publish inspection orders, upload all information about the inspection findings.

This year we want to ensure maximum transparency of information on inspections of these 33 agencies. By the end of the year, we want to be able to tell the business: guys, every scheduled inspection, which was conducted in 2018, is already available online.

Another task for this year is to put things in order in the list of supervisory authorities, understand their functions, what they control and why.

Recently, we asked the State Service for Food Safety and Consumer Protection to clarify all their spheres of control. According to our information, there are 14 of them.  For example, they are the veterinary and sanitary control, control of consumer rights protection, control over compliance with sanitary legislation, control in the field of quarantine and plant protection. But the State Service for Food Safety and Consumer Protection procrastinated. It does not have an exclusive list of what they control and why.

In a normal way, the scope of control should directly depend on the risks that these agencies are trying to prevent.

It means that everyone should understand why we keep this or that agency and that bad things do not happen in the country due to the fact that this body is operating.

For example, some agency operates so that people do not die from fires. This is an understandable risk, which is managed by the agency, and a clear task. Each agency should have such tasks.

Now, we will analyze the reports of 33 agencies on the inspections conducted last year. At first glance, to be honest, these are very superficial documents. Like, “last year we planned 18 events and delivered 18 of them, meaning that the agency is 100% effective”.

We will analyze them and closer to autumn come up with a list of specific risks for each agency and on what their occurrence or non-occurrence depends.

In autumn, authorities will schedule inspections for 2019. It is important for us that they do it with better quality.

Authorities must answer the following two questions: “why do they inspect?” and “who is the first to be checked in order to prevent these risks?”