25 July 2005 06:59
Corruption in Russian armed forces

Corruption in Russian armed forcesAuditors have identified a number of areas of corruption in the Russian armed forces, Russian newspaper Moskovskiy Komsomolets has reported. The paper explained in detail how expenses relating to transportation and freight shipments were falsified or inflated by corrupt officials.

The Audit Chamber has ascertained how money is stolen in the Russian army. Until an instance of embezzlement of state funds has been proved in court, it is usually referred to as "misuse of funds".
When auditors discover that millions were spent on something that could have cost thousands, they state the following in their report: Misuse of funds took place as a result of insufficient examination of the services market and the incompetence of leaders. Judging by these reports, incompetence is all around us, wherever we look. Surprisingly, however, the incompetent people despite their ineptitude know how to rake in millions.
At the beginning of the summer, the Audit Chamber referred to the Main Military Prosecutor's Office the findings of an audit into "the effectiveness of the use of funds allocated to the Defence Ministry for transportation services". The audit was carried out last autumn, and the audited period was 2002-2004. [Passage omitted]
The so-called military travel documents are a gold mine for officials of the transportation service. [Passage omitted]

Transport corruption

In particular, the Central Directorate of Military Transportation (TsUP VOSO) has developed a liking for concluding agreements for transportation of servicemen with specific carriers. Let us say it reaches agreement with some Propeller-Avia private airline, which envisions that the latter will provide, without charge, a certain amount of seats for servicemen and members of their families, whereas the Defence Ministry will transfer the money for the tickets to the company.
It is clear that the Central Directorate concludes agreements personally and solely with the carriers it likes. The right to conclude such agreements is never transferred to military districts. What matters is the kickback. It is clear that the carrier pays a kickback to the officers who conclude an agreement with it on behalf of the state, and it would be stupid of the officers to let somebody else take this money. As the Audit Chamber managed to ascertain, the selected carriers are not the cheapest ones - far from it. Their fares are more expensive and it is not taken into account that, after all, there happen to be different tariffs and discounts. Competitive bidding tenders are not held, and the very agreements are officially registered with violations - as some kinds of working meeting protocols.
Around R7bn-worth [0.24bn dollars] of such agreements with air carriers were concluded in 2002 - 2004. The standard kickback is 20 per cent.
Military transportation vouchers are another component of free transportation. Based on a military transportation voucher a serviceman purchases a railway ticket and the Defence Ministry pays for it on a noncash basis.
Military transportation vouchers are sold on the black market at a much lower price than tickets themselves. They leak into the market directly from military units. It is very easy to issue a "blank" transportation voucher. A Xeroxed voucher form is filled in through carbon paper and immediately discarded. The carbon copy remains in the financial department, whereas the intact original form is sold on the market.
In 2002-2003, in the Far East Military District alone the losses sustained by machinations involving military transportation vouchers reached R9.3 million. As little as R1.7 million (18 per cent) was recovered; R1.5 million was written off. The remaining sum stuck to the hands of dealers and financiers working in the military transportation system.
Curiously, Maj I. V. Frolov was the chief of the Far East Railway Directorate of Military Transportation financial-economic service from 2000 to August 2003. In August 2003, he was transferred to the post of senior inspector-auditor of the Directorate of Military Transportation financial inspectorate and in May 2004, was sent on an inspection trip from Moscow to the Far East to examine his own work despite the fact that prior audits had exposed the theft of military transportation vouchers in the region under his supervision. This is clever, isn't it?
Within two and a half years the military prosecutor's office opened 280 criminal cases over the theft of military travel documents. Most of them had been stolen in the Far East and Siberian Military Districts.
Blatant theft of military transportation vouchers must not be called "misappropriation" in any circumstances. However, it is clear that the very system of military travel documents has become desperately obsolete. Without going into detail one can generally say that the entire system from the top to the bottom is one big misappropriation of funds, huge funds. After all, billions of roubles are at stake.

Abuse over freight shipments

However, transportation services for the Defence Ministry do not boil down to the refund of travel expenses of servicemen going on leave or on temporary duty trips. They also include freight shipment. It is also a very profitable business providing a lot of loopholes for "misappropriation."
The loading and unloading of rail cars is just a small example. The defence minister's order sets the time norms for these operations. If the norm is not observed, the ministry has to pay extra for the time rail cars and containers occupy the tracks.
It is clear that the norm is rarely observed. The Navy alone paid R2,351,000 for exceeding the loading-unloading time in 2002, almost R2m in 2003, and more than R500,000 in the first half of 2004. Ineffective use of funds for these operations reaches 64 per cent at the Northern and Pacific Fleets. This leaves 36 per cent for effective expenditures. All the indications are that this is the actual correlation between the funds embezzled in the Defence Ministry and those actually used as intended.
However, the sweetest "misappropriation" is the selection of civilian contractors to do work vitally important for the country's security.
The "Arabian Sea episode" described in detail in the Audit Chamber report is a wonderful illustration for this thesis.
In 2003, in line with the Russian president's decision, a flotilla of ships from the Pacific and Black Sea Fleets sailed off to the Arabian Sea "to fulfil combat service tasks and demonstrate the Navy's presence in the region". God knows whether it really was so necessary to demonstrate force in the Arabian Sea, particularly since it was not a cheap operation. However, since the decision was made, naturally, the money could not be spared. And it was not spared. First of all, it became clear that the fuel carried by the navy tankers taking part in the exercise would not last through the exercise. The navy has few tankers, their capacity is insufficient, and therefore, it was necessary to lease a civilian tanker to deliver 15,000 tonnes of diesel fuel and 2,000 tonnes of water to the Arabian Sea towards the end of March after loading it aboard in Tuapse [Black Sea port].
Admiral [Viktor] Kravchenko, chief of the navy Main Staff, conducted market research and decided that the most preferable solution would be to lease the Tuapse tanker from Novoship OAO [open joint-stock company] for around R13m. He sent a relevant letter to Lt-Gen Sokolovskiy, chief of the Defence Ministry Central Directorate of Military Transportation, and asked him to allocate not R13m, but R15m for the lease of the civilian tanker. However, the R15m was just the beginning. On 17 April 2003, the Navy Transportation Service concluded an agreement with Novoship, however, not for R15m, but for R33,075,000. The fuel for the Arabian Sea exercise was worth its weight in gold. If the ships had been refuelled in ports along their way the costs would have probably been lower.
Why did the price for the lease of a civilian tanker increase so dramatically? Audit Chamber auditors attribute this to the "ineptitude of Navy Transportation Service officials in the economic evaluation of cost components included in the cost estimates". While concluding the agreement they calculated that the loading and unloading would take 10 days. In reality, it took as little as five days (the navy overpaid R2,745,000). The sailing time was estimated at 32 days, whereas in reality it was 21 days (the navy overpaid R6,040,000). Therefore, the tanker needed less fuel: The Defence Ministry overpaid R1,891,000).
"The cost estimates also included the cost of fuel consumed by an empty tanker, which was not confirmed by the tanker captain's reports." Around R2,077,000 was overpaid for the "empty run".
A penny here and a penny there resulted in a hefty sum - the total of R12,754,000 in "misappropriation."
Even very superficial familiarization with the principles of army life gives confidence that the people drafting the agreement knew perfectly well how much time was needed for particular operations. The ministry, represented by generals and admirals in charge, leased a tanker from Novoship OAO. As a reciprocal gesture, Novoship agreed to include an additional R12,754,000 as particular components of cost estimates, and when the payment for the agreement was transferred from the Defence Ministry's bank account, Novoship gave back the money to the generals and admirals in charge.
The sum of R12,754,000 was a nice chunk earned on the Arabian cruise itself. "The costs of the delivery of diesel fuel to the Indian Ocean region (R33,075,000) made up 78 per cent of the navy's total funding for sea and river shipments (R42,176,800)," the Audit Chamber report stated with amazement. And we state that the president's task was fulfilled with an "excellent" mark. The navy demonstrated the presence of its forces in the Arabian Sea and nobody even blushed.

Source: Moskovskiy Komsomolets, Moscow
BBC Monitoring

http://www.gateway2russia.com/st/art_280804.php