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Why state land cadastre does not work


      Main Control and Revision Office of Ukraine on July 27, 2009, reports:

     Main Control and Revision Office of Ukraine (MCROU) reports that during the second quarter of 2009 it was performing checks at the state enterprise “Center of State Land Cadastre” (CSLC) which is subordinate to the State Committee of Ukraine on Land Resources (SCLR).
    Checks and control measures covered the period of 2007-2008 and the first quarter of 2009. Auditors revealed significant problems and drawbacks in organization of functioning of CSLC and in some instances – violations of laws which led to material damage.
    The main conclusion is that within 11 years of the CSLC work it failed to reach its primary goal – functioning of the automated system of state land cadastre and land registry.
    One has to remember that as early as in 2003 a loan agreement was signed between Ukraine and the World Bank for Reconstruction and Development. The agreement provided for allocation of USD 85.8 million for the establishment of automated cadastral system. In addition, the state budget of Ukraine contributed USD 6.4 million to cover expenses for taxes incurred in the process of creation of the automated cadastral system.
    Remarkably that over 4-year period CSLC managed to spend only USD 2.7 million; because of endless delays with works on establishment of the automated cadastral system the World Bank suspended further funding in 2006.
     For the sake of fairness one has to point out that one of the major obstacles in the work of CSLC has always been the lack of basic legal acts on cadastre.
     In particular, the law on state land cadastre is still missing, despite the fact that its draft was submitted to the Parliament in 2004.
     There are also other regulations missing: on functioning of the State Registry of Rights in Real Estate and Restrictions Thereof, on payments for the services rendered by the said Registry, on forming and functioning of the Guarantee Fund for covering damages incurred by the state bodies of registration of rights etc.
    From the financial point of view, CSLC is also looking poorly: 2007 it ended up with nett loss of UAH 2.1 million, 2008 – UAH 0.1 million. The first quarter of 2009 brought loss to the tune of UAH 1.3 million.
    The principal reason of weak financial position of CSLC is poor quality of management.
    Managers of CSLC violated financial plans of the enterprise and concluded contracts on detrimental conditions, with enslaving and unfair obligations. That led to losses of UAH 3.6 million.
    Managerial decisions taken by the officials of CSLC were ineffective and led to unproductive growth of expenses. For example, branches of CSLC accommodate departments of the SCLR in their premises which were leased and paid for by CSLC. Thus Cherkassy Branch (accommodated Cherkassy City Department of SCLR) spent during the control period UAH 300 thousand for the rent. Odessa Branch “gave up” 33% of its leased premises to Odessa Oblast Department of SCLR and spent UAH 1.2 million to cover ground rent.
     There was revealed that officials of CSLC were successfully applying different schemes for draining money out of CSLC.
    For example, despite the fact that CSLC is itself provider of consulting and legal services, almost every branch concluded contracts with company Promtech-2005 (Dniepropetrovsk), on the basis of which the said company had to provide legal services to branches. During 2007-2008 branches paid to the company almost UAH 1 million. Auditors did not find any documents proving actual provision of legal services; managers explained that all consultations were provided over the phone. The state tax service of Ukraine informed that the main activity of Promtech-2005 was wholesale operations; it has chartered fund of UAH 100 (USD 12.5).
    Out of the total volume of services provided by CSLC land surveying services make up 4-35% at the average.
    It is obviously so because of existence of “blood” links between managers of branches of CSLC and commercial land surveying companies. As a result, branches are “giving up” market of the said services to commercial companies and missing additional proceedings which could be spent for the purposes of automated cadastral system creation.
     For example, in Cherkassy Oblast heads of some Rayon Departments of CSLC Oblast Branch are at the same time private entrepreneurs in the field of land surveying.
     The same “blood” links were revealed in Mykolaiv and Khmelnitsky Oblasts; such private entrepreneurs holding positions of heads of Rayon Departments got over UAH 500 thousand as salaries at CSLC (MyLand: to our knowledge, this situation is more than typical, it is a rule).
     According to the current laws, CSLC is a single provider of all services related to administration of State Land Registry. But all tariffs on such services were approved by a joint order of SCLR, Ministry of Finance and Ministry of Economy in 2002 and since then have never been reviewed. That is the reason why CSLC are constantly having losses as a result of its operations, despite the fact that net income is steadily growing.
    For example, in 2008 CSLC gained UAH 235.5 million of net income (or 109% of what was planned), in the first quarter of 2009 – UAH 56.9 million (125% of planned income). But losses of CSLC grew from UAH 0.1 million in 2008 to UAH 1.3 million in the first quarter of 2009.
    Some of the branches of CSLC in 2007-2008 had even more remarkable losses: Crimean and Donetsk Branches – UAH 3.8 million each; Zaporizhzhya Branch – UAH 2.3 million; Vinnytsya Branch – UAH 2 million, Ivano-Frankivsk Branch – UAH 0.9 million, Chernigiv Branch – UAH 0.7 million, Kirovograd Branch – UAH 0.5 million.
     One of reasons of losses growth was expenses without sources to cover. That is so in respect of expenses for salaries; in 2008 total salaries and emoluments amounted to UAH 107.3 million and grew by 48% to the level of 2007 (UAH 72.5 million). Salaries-related taxes grew respectively - from UAH 26.2 million in 2007 to UAH 38.5 million in 2008. The year 2009 follows this trend.
    Despite lasting running at a loss, the management of CSLC did not take any measures to optimized costs. That is true for salaries and emoluments expenses also.
    For example, average monthly salary of the Director General of CSLC in 2008 was UAH 22143, in the first quarter of 2009 – UAH 17356 (in March – UAH 33835). Such salary was formed as a result of violation of regulations on salaries of managers and employees of state-owned enterprises; in particular, there were illegal bonuses paid. Such bonuses were mostly paid in the central office of CSLC.
    CSLC is constantly heavily indebted. During 2007-2008 CSLC has UAH 20 million in accounts receivable and UAH 80 million in accounts payable. More then 70% of accounts payable is explained by delays with provision to citizens of surveying services, valuation services, production and registration of land titles.
    Personnel is one of the most acute problems. In some cases positions of engineers-surveyors are hold by hair-dressers, sales managers, teachers; registrars are having qualifications of nurses, psychologists, nannies or just certificates about completion of high-school course.
    Till July 2008 the issue of filling in (completion) of land titles were undecided; therefore land titles were filled in by braches of CSLC as well as by private land surveyors. For example, in Cherkassy Oblast in 2007-1st quarter of 2009 the Department of SCLR transferred to private land surveyors 57010 sets of land titles. If those titles were filled in (completed) by the Oblast Branch of CSLC, it would earn over UAH 8 million.


    Source: Main Control and Revision Office of Ukraine, 2009
    Translation: Center for Land Reform Policy in Ukraine / MyLand, 2009

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