SNG PILLAR: INTERGOVERNMENTAL FISCAL RELATIONS
Scores by Dimension
Overall Indicator Score
HLG-1 Transfers from Higher Levels of Government
D+
Notes:
HLG-1.1 Outturn from higher-levels of government
D
Notes:
The analysis shows that aggregate outturn of transfers from central and oblast governments to the City Government were below 15% in one out of the three years under review.
HLG-1.2 Transfers composition outturn
D
Notes:
In all three years under assessment, transfer composition variance exceeded 15%. As shown in Table HLG.2 below (with detailed calculation in Annex 4), actual composition variances were 116%, 28.3% and 24.8% in FY2018, FY2019, and FY2020 respectively.
HLG-1.3 Timeliness of transfers from higher-levels of government
A
Notes:
At the beginning of each fiscal year, the higher-level governments agree on a disbursement schedule with the City Government. In all three years (FY2018-FY2020) under assessment, there were no delays in the transfer of actual disbursements from central and oblast governments to city governments. All (100%) planned disbursements were transferred within the month of disbursement requests.
HLG-1.4 Predictability of transfers
D
Notes:
There were no medium-term subvention projections within the assessment period FY2018-FY2020; therefore, there was no information on transfers for the following fiscal year.
HLG-2 Fiscal rules of monitoring of fiscal position
A
Notes:
HLG-2.1 Fiscal rules for subnational governments
A
Notes:
Articles 72 and 74 of the Budget Code of Ukraine set out the fiscal rules for local governments. The law sets a 10% limit for debt servicing from general fund expenditures.
HLG-2.2 Debt rules for subnational governments
A
Notes:
The debt rules of sub-national governments, including oblasts (regions), oblast cities, and rayons, are outlined under Articles 18 and 74 of the Budget Code of Ukraine.
HLG-2.3 Monitoring of subnational governments
A
Notes:
The law provides for the submission of annual financial statements up to three months after the end of the previous financial year.
I. BUDGET RELIABILITY
Scores by Dimension
Overall Indicator Score
PI-1 Aggregate expenditure out-turn
B
Notes:
PI-1.1 Aggregate expenditure out-turn
B
Notes:
As shown in Table 1.1 below (with detailed calculations in Annex 4), aggregate expenditure outturn was between 90% and 110% of the approved original budget in two out of the three fiscal years assessed.
PI-2 Expenditure composition outturn
D+
Notes:
PI-2.1 Expenditure composition outturn by function
D
Notes:
Expenditure composition outturns by functional classification exceeded 15% in two out of the three years under review but were below 10% in one out of the three years.
PI-2.2 Expenditure composition outturn by economic type
D
Notes:
The analysis shows that expenditure composition outturn by economic classification exceeded 15% in all three years under review.
PI-2.3 Expenditure from contingency reserves.
A
Notes:
As shown in Table 2.1 below (and Annex 4 for detailed calculation), expenditures charged to contingency budget averaged 0.5%.
Notes:
PI-3.1 Agregate revenue outturn
C
Notes:
As shown in Table 3.1 below (with details in Annex 4), revenue outturns were between 97% and 106% in one out of the three years under review and between 92% and 116% in two out of the three years.
PI-3.2 Revenue composition outturn
B
Notes:
As depicted in Table 3.2 below (with detailed calculations in Annex 4), revenue composition outturns were less than 10% in two out of the three years under review.
II. TRANSPARENCY OF PUBLIC FINANCES
Scores by Dimension
Overall Indicator Score
PI-4 Budget Classification
D
Notes:
PI-4.1 Budget Classification
D
Notes:
The budget classification is close to the standards of the IMF Government Finance Statistics.
PI-5 Budget Documentation
D
Notes:
PI-5.1 Budget Documentation
D
Notes:
As shown in Table 5.1 below, the Lviv City Government meets two (2) out of four (4) basic elements and two (2) out of eight (8) additional elements.
PI-6 Subnational government operations outside financial reports
A
Notes:
PI-6.1 Expenditure outside financial reports
A
Notes:
As shown in Table 6.1 below, the ratio of extra-budgetary expenditure of healthcare institutions to total City Government expenditures was 0.84% in FY2020. These expenditures are not included in the budget and financial reports of the City Government.
PI-6.2 Revenue outside financial reports
B
Notes:
As indicated in Table 6.1 below, the total extra-budgetary revenues outside the City Government budget and financial reports represent 1.7% of total City Government revenue for FY2020.
PI-6.3 Financial reports of extrabudgetary units
A
Notes:
Based on evidence adduced by the Department of Health of the City Government, the deadline for preparation and submission of annual financial reports (which is two months after the end of the previous financial year) is complied with as shown in Table 6.2 below.
PI-7 Transfers to subnational governments
NA
Notes:
PI-7.1 System for allocating transfers
NA
Notes:
This dimension is not applicable, as there is no first-tier lower-level government.
PI-7.2 Timeliness of information on transfers
NA
Notes:
This dimension is not applicable, as there is no first-tier lower-level government.
PI-8 Performance information for service delivery
B+
Notes:
PI-8.1 Performance plans for service delivery
B
Notes:
Order No. 836 dated 26 August 2014 of the Ministry of Finance directs key spending units of local governments to prepare and publish annual action plans with key performance indicators (KPIs) on outputs and outcomes to be achieved for the following fiscal year.
PI-8.2 Performance achieved for service delivery
B
Notes:
Presently, the City Administration and its spending units prepare and publish outputs of performance achieved for service delivery as shown in Table 8.1 below; there are no outcomes achieved.
PI-8.3 Resources received by service delivery units
A
Notes:
Available evidence suggests that each spending unit (budgetary and extra-budgetary) prepares monthly reports on all the resources disaggregated by source of funds.
PI-8.4 Performance evaluation for service delivery
B
Notes:
There is no independent evaluation of service delivery programs. That said, each key spending unit evaluates the effectiveness and efficiency of its service delivery performance.
PI-9 Public access to fiscal information
A
Notes:
PI-9.1 Public access to fiscal information
A
Notes:
As indicated in Table 9.1 below, the sub-national government makes available to the public four basic elements within the specified PEFA timeframe.
9bis Public consultation
D+
Notes:
9bis.1 Public consultation in budget preparation
C
Notes:
The Lviv City Government consults its citizens during the budget preparation process in the part of the development budget, which is 34% of the total budget expenditure for FY2020.
9bis.2 Public consultation in the design of service delivery programs
C
Notes:
During 2018-2020, the Lviv City Government considered petitions in the design of service delivery programs which covered 34.4% of the total budget expenditure for FY2020.
9bis.3 Public consultation in investment planning
D
Notes:
Public consultations are not conducted during the investment projects preparation process based on the key results of the economic analysis.
III. MANAGEMENT OF ASSETS AND LIABILITIES
Scores by Dimension
Overall Indicator Score
PI-10 Fiscal risk reporting
B
Notes:
PI-10.1 Monitoring of public corporations
B
Notes:
The analysis of the data (based on the 10 largest by value of public corporations) indicates that 94.5% by value of public enterprises publish their audited financial statements on their respective websites within 6 months after the end of the previous year (please refer to Table 10.1 below).
PI-10.2 Monitoring of subnational governments
NA
Notes:
This dimension is not applicable, as there is no first-tier lower-level government.
PI-10.3 Contingent liabilities and other fiscal risks
NA
Notes:
This dimension is not applicable. There are neither PPP arrangements nor contingent liabilities.
PI-11 Public investment management
C
Notes:
PI-11.1 Economic analysis of investment proposals
C
Notes:
The Lviv City Government has no public investment management guidelines. That said, each key spending unit prepares a project appraisal document (which includes an economic analysis) for any capital investment project intended to be financed.
PI-11.2 Investment project selection
C
Notes:
The selection of investment projects is not based on any established public investment management guidelines or standard criteria.
PI-11.3 Investment project costing
C
Notes:
Costing of investment projects is done only on the basis of total capital cost together with a three-year spending projection (i.e., capital cost for the budget year plus the following two years).
PI-11.4 Investment project monitoring
C
Notes:
Presently, investment project monitoring is not based on any standard criteria. That said, each implementing key spending unit is responsible for monitoring and evaluating its investment project(s).
PI-12 Public asset management
B
Notes:
PI-12.1 Financial asset monitoring
C
Notes:
Available evidence obtained from the consolidated annual financial statements of the City Government indicates that bank balances as of 31 December 2020 stood at UAH387.4 million.
PI-12.2 Nonfinancial asset monitoring
C
Notes:
Evidence obtained from sampled budgetary units (Departments of Education, Health, Finance, Infrastructure) indicates that each budgetary unit maintains a comprehensive list of all fixed assets (buildings, vehicles, furniture & fittings, computers, office equipment, etc.) with information on the date of purchase (age), original cost, status of asset (usage), custodian, and location.
PI-12.3 Transparency of asset disposal
A
Notes:
The legal and regulatory framework for asset (financial and non-financial) disposal and transfer in Ukraine is well-established. The law on “Privatisation of State and Municipal Properties” Number 2269-VIII dated 18 January 2018 (applicable at all levels of government) guides all asset disposal and/or transfer.
Notes:
PI-13.1 Recording and reporting of debt and guarantees
A
Notes:
The Financial Policy Department of the City Government of Lviv maintains complete and accurate information on all its borrowings (domestic and foreign debts) as well as guarantees issued to municipal enterprises.
PI-13.2 Approval of debt and guarantees
A
Notes:
The Budget Code of Ukraine (Article 74) grants authorization for local governments to borrow and issue loan guarantees for the city public enterprises. Thus, the Financial Policy Department of the Lviv City Government is the single responsible debt management entity.
PI-13.3 Debt management strategy
D
Notes:
The Lviv City Government does not prepare a medium-term debt management strategy. The legislation does not mandate the preparation of such strategy.
IV. POLICY-BASED FISCAL STRATEGY AND BUDGETING
Scores by Dimension
Overall Indicator Score
PI-14new Medium term budget strategy
D
Notes:
PI-14new.1 Underlying forecasts for medium-term budget
C
Notes:
For FY2021, estimates of revenue and expenditure for the budget year and the two following fiscal years were presented at the aggregated level only and were based on historical information on transfers, revenue, and expenditure assignments as well as on key demographic indicators and medium-term macroeconomic indicators.
PI-14new.2 Fiscal impact of policy proposals
D
Notes:
The Financial Policy Department does not prepare estimates of the fiscal impact of proposed changes in revenue and expenditure policy.
PI-14new.3 Medium-term expenditure and revenue estimates
D
Notes:
While the annual budget for FY2021 covers expenditure estimates by administrative, economic, and programme (as well as functional) classifications for the budget year and the following two years (please refer to Table 14.1 below), there are no revenue estimates by type.
PI-14new.4 Consistency of budgets with previous year's estimates
D
Notes:
The budget documents do not provide any explanations of changes to expenditure forecasts between the current year’s medium-term estimates and the second year of the last medium-term projections, even though differences arise.
PI-14 Macroeconomic and fiscal forecasting
NU
Notes:
PI-14.1 Macroeconomic forecasts
NU
Notes:
PI-14.2 Fiscal forecasts
NU
Notes:
PI-14.3 Macro-fiscal sensitivity analysis
NU
Notes:
Notes:
PI-15.1 Fiscal impact of policy proposals
NU
Notes:
PI-15.2 Fiscal strategy adoption
NU
Notes:
PI-15.3 Reporting on fiscal outcomes
NU
Notes:
PI-16 Medium term perspective in expenditure budgeting
NU
Notes:
PI-16.1 Medium-term expenditure estimates
NU
Notes:
PI-16.2 Medium-term expenditure ceilings
NU
Notes:
PI-16.3 Alignment of strategic plans and medium-term budgets
NU
Notes:
PI-16.4 Consistency of budgets with previous year estimates
NU
Notes:
PI-17 Budget preparation process
C+
Notes:
Notes:
The annual budget calendar is clear and adhered to. KSUs had four weeks to complete their detailed estimates and all of them completed their budget requests on time.
PI-17.2 Guidance on budget preparation
C
Notes:
The Financial Policy Department issued budget instructions (circular) with expenditure ceilings for administrative classifications to each KSU for the preparation of FY2021 budget.
PI-17.3 Budget submission to the subnational council
C
Notes:
As shown in Table 17.3 below, the Executive Committee (local cabinet) submitted the budget estimates one month and three weeks before the start of the fiscal year for all three years under review.
PI-18 Legislative scrutiny of budgets
C+
Notes:
PI-18.1 Scope of budget scrutiny
C
Notes:
The budget review covers aggregate and detailed revenue forecasts (by types), expenditures by economic and program classifications, as well as the analysis of past trends (performance) of both revenues and expenditures. There are no fiscal policies to be reviewed by City Council.
PI-18.2 Legislative procedures for budget scrutiny
B
Notes:
The Lviv Council Regulations are approved by Lviv City Council and established as procedures of budget scrutiny. The regulations and procedures are respected.
PI-18.3 Timing of budget approval
A
Notes:
In practice, budget decisions were approved by the Lviv City Council one month before the start of the fiscal year in each of the last three fiscal years (please see Table 18.1 below).
PI-18.4 Rules for budget adjustments by the executive
B
Notes:
The rules for in-year budget adjustments are clear; however, they allow extensive administrative (Executive Committee) reallocations without limits. The rules are respected in most cases.
V. PREDICTABILITY AND CONTROL IN BUDGET EXECUTION
Scores by Dimension
Overall Indicator Score
PI-19 Tax administration
NA
Notes:
PI-19.1 Rights and obligations for tax measures
NA
Notes:
This dimension is not applicable, because the City Government relies on revenue from non-core taxes.
PI-19.2 Property tax register and value assessment
NA
Notes:
This dimension is not applicable, because the City Government relies on revenue from non-core taxes.
PI-19.3 Tax risk management, audit and investigation
NA
Notes:
This dimension is not applicable, because the City Government relies on revenue from non-core taxes.
PI-19.4 Tax arrears monitoring
NA
Notes:
This dimension is not applicable, because the City Government relies on revenue from non-core taxes.
PI-20 Accounting for revenue
A
Notes:
PI-20.1 Information on revenue collections
A
Notes:
Each month, the Finance Office of the City Government receives a revenue report on total tax collections from the local office of the State Tax Service according to tax type.
PI-20.2 Transfer of revenue collections
A
Notes:
The City Government of Lviv uses the national Treasury Single Account (TSA) framework. The local office of the State Tax Service (STS) does not maintain a separate transit bank account.
PI-20.3 Tax accounts reconciliation
NA
Notes:
This dimension is not applicable, as it assesses core tax which is the responsibility of STS.
PI-21 Predictability of in-year resource allocation
B
Notes:
PI-21.1 Consolidation of cash balances
A
Notes:
The legal framework that regulates cash management is Order 122 of June 26, 2002, issued by the State Treasury Service of Ukraine. The law directs all sub-national governments to use the central government Treasury Single Account (TSA) framework.
PI-21.2 Cash forecasting and monitoring
C
Notes:
Once the annual budget is approved by the City Council, the City Finance Department prepares a consolidated cashflow plan with information from all key spending units regarding their annual cash needs.
PI-21.3 Information on commitment ceilings
A
Notes:
The City Government office issues annual expenditure commitment limits to each key pending units; these limits are reliable.
PI-21.4 Significance of in-year budget adjustments
C
Notes:
The Lviv City Government budget adjustments within the year are frequent and partially transparent; these adjustments are done in line with documented procedures for budget virements which are known to key spending units.
PI-22 Expenditure arrears
A
Notes:
PI-22.1 Stock of expenditure arrears
A
Notes:
Evidence adduced by the City Government officials in addition to information obtained from Departments of Education, Health, and Infrastructure indicates that in each of the last three completed fiscal years FY2018-FY2020, there was no stock of expenditure arrears for employee remuneration/salary, pension payments, suppliers, contractors (work completed and certified) and loan creditors.
PI-22.2 Expenditure arrears monitoring
A
Notes:
The City Treasury, after receipt of monthly statement on outstanding expenditure commitments (Form No.7m), prepares a consolidated quarterly report within two weeks after the end of the quarter. This report is submitted to the Lviv Oblast Treasury. The report is age-profiled with composition of arrears.
Notes:
PI-23.1 Integration of payroll and personnel records
B
Notes:
Presently, there is no direct integration between payroll and personnel records. Personnel records are manually kept, while payroll records are kept electronically.
PI-23.2 Management of payroll changes
A
Notes:
All changes to personnel and payroll records are processed within 48 hours based on approved official documentation authorised by the head of each institution.
PI-23.3 Internal control of payroll
B
Notes:
Each spending unit maintains HR paper records of staff, securely kept in a safe, with access granted to authorised personnel only. The movement of HR files has no audit trail. The payroll system used by each spending unit is computerised, with a payroll management software.
Notes:
In June 2021, the State Audit Service (SAS) undertook a comprehensive payroll audit of the Lviv City Government covering the period FY2017-FY2020. The audit included physical verification of staff.
Notes:
PI-24.1 Procurement monitoring
A
Notes:
With reference to Table 24.2 below, 64.5% by value of public procurement goes through a competitive method in the national electronic system (prozorro.gov.ua); the data is complete and published in real time indicating the purpose of the contract, the entity or person who won the contract and the value of the contract awarded.
PI-24.2 Procurement methods
C
Notes:
The Procurement Department of the City Government consolidates all procurement data from budgetary and extra-budgetary units. According to the data (verified by the procurement authority), 64.5% by value of all public procurement activities within the City Government go through a competitive method. The remaining 35.5% of procurement activities are non-competitive. Please refer to Table 24.2 below.
PI-24.3 Public access to procurement information
A
Notes:
Table 24.3 below summarises the PEFA requirements for public access to procurement information. All six PEFA elements have been met.
PI-24.4 Procurement complaints management
B
Notes:
As shown in Table 24.4 below, the procurement complaints mechanism meets all criteria but those (ii) of the PEFA requirements.
PI-25 Internal controls on nonsalary expenditure
B+
Notes:
PI-25.1 Segregation of duties
A
Notes:
The procedures for the segregation of duties are clear and appropriate, as they prescribe who is responsible for generating an expenditure, who authorises such expenditure, and who approves and pays expenditures.
PI-25.2 Effectiveness of expenditure commitment controls
C
Notes:
For spending units (budgetary and extra-budgetary units), the financial management system does not limit expenditure commitments to cash (please refer to Table 25.1 below).
PI-25.3 Compliance with payment rules and procedures
A
Notes:
The legislation ensures a high degree of compliance with payment rules and procedures. All expenditure commitments initiated by each spending units (budgetary and extra-budgetary units) go through prescribed financial management procedures.
Notes:
PI-26.1 Coverage of internal audit
D
Notes:
The internal audit unit is not independent. The internal audit unit is constrained by the limited number of staff, currently at 10 out of 17 staff positions, to effectively carry out its mandate. Available evidence indicates that only 33.5% of City Government expenditures (for both budgetary and extra-budgetary) were covered by the internal audit unit.
PI-26.2 Nature of audits and standards applied
C
Notes:
Internal audits cover the financial aspects as well as the effective use of budget funds and the compliance with rules of internal control, in particular whether the audited entity complies with the rules prescribed by the Budget Code, Public Procurement Law, other legislation and internal documents.
PI-26.3 Implementation of internal audits and reporting
A
Notes:
The Financial Control Department (internal audit unit) prepares annual audit programs. As shown in Table 26.2 below, all planned and requested audits are completed and reports are submitted to audited entities.
PI-26.4 Response to internal audits
A
Notes:
There is a high level of responses to internal audits. In FY2020 funds were reimbursed and responses to audit recommendations were provided at the 95% of issued recommendations as of September 2021.
VI. ACCOUNTING AND REPORTING
Scores by Dimension
Overall Indicator Score
PI-27 Financial data integrity
A
Notes:
PI-27.1 Bank account reconciliation
A
Notes:
Extra-budgetary units (healthcare institutions) have their own separate bank accounts; these are fully reconciled within a week after the end of the previous week.
PI-27.2 Suspense accounts
NA
Notes:
Not applicable. There are no suspense accounts
PI-27.3 Advance accounts
A
Notes:
There were no outstanding balances on staff advances for salaries and official travel as of the time of the fieldwork (October 2021). All advances are reconciled and cleared timely.
PI-27.4 Financial data integrity processes
B
Notes:
The financial management software has password features and restricts access to unauthorised personnel. It also generates an audit trail. There is no separate and/or special unit or body responsible for checking the integrity of financial data.
PI-28 In-year budget reports
D+
Notes:
PI-28.1 Coverage and comparability of reports
D
Notes:
The in-year budget execution reports have no administrative classifications. That said, they show detailed revenue classification by code as well as expenditure category (recurrent and capital) according to program, functional, and economic classifications. The reports classification does not allow for a direct comparison to the original budget.
PI-28.2 Timing of in-year budget reports
A
Notes:
As shown in Table 28.2 below, in-year budget execution reports are prepared and issued within two weeks after the end of the previous month.
PI-28.3 Accuracy of in-year budget reports
C
Notes:
In-year budget execution reports prepared and submitted during the year include planned and actual expenditures at the payment stage, but not at the commitment stage.
PI-29 Annual financial reports
D+
Notes:
PI-29.1 Completeness of annual financial reports
D
Notes:
As shown in Table 29.1 below, the annual financial statements are complete as they present information on revenues and expenditures according to programme, functional and economic classifications, cash balances and receivables, tangible assets, payables and long-term liabilities, guarantees, plus a reconciled cash flow statement. Nevertheless, the annual financial statements (AFS) are not comparable with the approved budget.
PI-29.2 Submission of reports for external audit
D
Notes:
The Lviv City Government has not submitted the FY2020 annual financial statement to the Accounting Chamber of Ukraine (ACU) for external audit. Annual financial statements of previous years (2018 and 2019) have also not been submitted to ACU.
PI-29.3 Accounting standards
B
Notes:
In each of the last three completed fiscal years under review (FY2018-FY2020), the City Government’s annual financial statements were prepared in accordance with the National Public Sector Accounting Regulations.
VII. EXTERNAL SCRUTINY AND AUDIT
Scores by Dimension
Overall Indicator Score
Notes:
Notes:
Currently and within the last three completed fiscal years 2018-2020, the Accounting Chamber of Ukraine (ACU) did not audit the financial records of the City Government of Lviv.
PI-30.2 Submission of audit reports to the subnational council
D
Notes:
Within the assessment period FY2018-FY2020, the Accounting Chamber of Ukraine (which is the Supreme Audit Institution in Ukraine) did not conduct any external audit of the financial statements of the Lviv City Government (both budgetary and extra budgetary units); therefore, it also did not submit audit reports to the Lviv City Council (legislature) for scrutiny.
PI-30.3 External audit follow-up
NA
Notes:
This dimension is not applicable, as there are no external audit reports for follow-ups of audit recommendations.
PI-30.4 Independence of the public audit institution in charge of subnational governments
D
Notes:
ACU’s staff are subjected to the same public/civil service rules and controls, except for the Chairperson and his/her deputies and board members – this undermines ACU’s independence.
PI-31 Legislative scrutiny of audit reports
D
Notes:
PI-31.1 Timing of audit report scrutiny
D
Notes:
The City Council (local parliament) did not receive any external audit reports of the Lviv City Government for scrutiny within the last three completed fiscal years 2018-2020.
PI-31.2 Hearings on audit findings
NA
Notes:
The City Council (local parliament) did not hold any hearings on the conclusions/findings of the external audits within the last three completed fiscal years 2018-2020. Therefore, this dimension is not applicable.
PI-31.3 Recommendations on audit by subnational council
NA
Notes:
The City Council (local parliament) did not provide any recommendations on external audit reports of the city government. Therefore, this dimension is not applicable.
PI-31.4 Transparency of legislative scrutiny of audit reports
NA
Notes:
The City Council (local parliament) did not conduct any public scrutiny of external audit reports for FY2020. Therefore, this dimension is not applicable.