Introduction

This report involves the main activities carried out by State Supervision Service of the Republic of Armenia in the first semester of 2019.

Carried out main activities

The State Supervision Service of the Republic of Armenia has carried out monitoring and studies in the field of hemodialysis equipment acquisition. A number of violations of the procedures for the purchase of hemodialysis equipment have been identified as a result of oversight activities. As a result, on December 26, 2018 relevant letters were sent to the RA Regional administrations and the Ministry of Health by the State Supervision Service of the Republic of Armenia suggesting to make appropriate modifications in the hemodialysis equipment purchase procedures which were aimed at liberalizing the field. The necessity of liberalizing the field was derived from the circumstance revealed during the monitoring according to which in 2015-2018 hemodialysis equipment and supplies were imported by 8 organizations 2 out of which were “Frezen” and “Natali Pharm” LLCs that imported 82.9% of the total, with 41.7% and 41.2% accordingly. At the same time, 3 out of 9 state medical centers operating in the Republic of Armenia («St. Gregory the Illuminator Medical Center», «Vanadzor Medical Center», «Kapan Medical Center») were supplied hemodialysis equipment by «Frezen» LLC, and the rest by Natali Pharm LLC. As a result of examination of the tender procedure for the purchase of hemodialysis equipment carried out by State Supervision Service at «St. Gregory the Illuminator Medical Center» CJSC, a number of violations of the RA Law on Procurement have been revealed. The results of the examination that started upon the assignment H/001-19 of the Head of the Service as of February 11, 2019 were summarized with the relevant reference and sent to the RA Prosecutor’s Office for a legal assessment of the circumstances recorded during the examination and as a result criminal cases were instituted.

According to the assignments of the Head of Service H/017-18 as of October 1, 2018 and H/003-19 as of March 19, 2019 examinations were carried out at “Armavir”, “Echmiatsin”, “Artashat” and “Ararat” Water Users Companies. The result of examinations mainly reported unreasonable expenses, less reflected revenues, non-real receivables, poor repair work, statutory and legal violations. An examination conducted at “Armavir” Water Users Company revealed that the damage caused as a result of violations amounted about 1099.2 million AMD, in “Echmiatsin” Water Users Company it was 1123.9 million AMD, 1071.2 million AMD was in “Artashat” Water Users Company and 644.2 million AMD in “Ararat” Water Users Company. References about the registered violations were formed and were presented to the RA Prime Minister, afterwards they were sent to RA Prosecutor’s Office for legal assessment of registered violations. Based on the provided reference criminal cases were instituted.
Based on the assignment H/026-18 of the Head of the Service as of November 28, 2018 an examination was conducted at “Yerevan State Medical University after M. Heratsi” Foundation. As a result of the studies, problems were identified in the organization of procurement procedures, calculation of additional salaries, and implementation of construction works. In addition, 222.0 million worth property was obtained without any procurement procedure and with higher prices as compared to the market price. Staff members holding high administrative positions at the University have always been charged an additional salary that exceeds their salaries several times. The findings of the studies were summarized in the relevant reference and sent to the RA Prosecutor’s Office. The RA Prosecutor’s Office sent the reference to the RA National Security Investigation Department to verify the circumstances mentioned in the statement within the framework of the criminal case under investigation. The RA Prosecutor’s Office sent the reference to the Investigation Department of the RA National Security to verify the circumstances listed in the inquiry of the criminal case under the investigation of the Department.

Based on the assignment H/026-18 as of October 08, 2018 an examination was conducted at the Penitentiary Service of the Ministry of Justice of the Republic of Armenia. The scope of the examination covered the supervision over the legality and effectiveness of the procurement process organized by the Penitentiary Service of the RA Ministry of Justice. The results of the examination state that a number of procurement processes by the Penitentiary Service of the RA Ministry of Justice during 2016-2018 were carried out with violations of the legislative norms regulating this field. In particular, in a number of cases, procurement items and their technical characteristics have not been objectively justified and adequate to the need for which the purchase was made. Often the requirements for technical specifications were complicated, as a result of which the Penitentiary Service of the Ministry of Justice of the Republic of Armenia had not provided equal conditions for potential participants in the procurement process, causing unjustified barriers to competition.At the same time, in some cases high-quality products were obtained at obviously lower prices as compared to the market price, resulting in a risk that the suppliers brought to the Penitentiary Service of the Ministry of Justice products that did not comply with the technical specifications.Violations have also been registered in the field of healthcare, in particular in procurement and planning of medicines and other medical supplies, their registration, distribution, preservation and sanitary and hygienic conditions. In some Penitentiary Service there were also poor quality and expired drugs.

In the procurement process, which was organized by the RA Penitentiary Service in 2016-2018, and was subjected to examination by the RA State Supervision Service, violations of a number of norms prescribed by the RA legislation regulating the given field were registered which have caused the risks of inefficient use of state funds.

The reference of the findings of examination was reported to the Prime Minister and was sent to the RA Prosecutor’s Office for a legal assessment of the registered circumstances.

Based on the assignment H/018-18 of the Head of the Service as of October 08, 2018 an examination was carried out in “Support to the Convicted Person” foundation of the RA Ministry of Justice which was summed up in a respective reference. As a result of the examination carried out by the Service it was found out that the foundation has actually deviated from its main goals stipulated in its Statute approved by the RA Government. It was registered that in a number of cases the profit got by the Foundation as a result of entrepreneurial activities was not directed to the fulfilment of statutory goals of the Foundation and for many years effective and structural projects directed to the improvement of educational and other social issues of convicts and inmates were not implemented. Moreover, often while carrying out entrepreneurial activities expenditures of Foundation exceeded its profit and the Foundation did not operate effectively, resulting in approximately 110 million USD debt accumulated as of December 01, 2018. It was stated in the reference that there is a risk of about 125 million AMD damage caused to the Foundation and to the State and about 75 million AMD risk of inefficient expenditure. The reference was reported to the Prime Minister then it was submitted to the RA Prosecutor’s Office for a legal assessment of the violations recorded during the examination.
Based on the assignment H/005-19 of the Head of the Service as of May 07, 2019 an examination was carried out in the RA Police. The subject area covered purchase of registration numbers as well as the legality and effectiveness of the transactions implemented between the RA Police and “Bill Stone” LLC. The results of the examination were summarized in a relevant reference and sent to the RA Special Investigation Service, a criminal case was instituted. The criminal case was instituted pursuant to the attributes of Articles 308 (abuse of official authority) and Article 310 (unlawful participation in entrepreneurial activities) of the RA Criminal Code. It is also noteworthy that after the completion of the above mentioned examination the RA Police organized a new tender procedure on June 06, 2019 to obtain registration numbers during which “Bill Stone” LLC that has always been the tender winner since 2008 suggested about 40% lower price as compared to the price offer presented previously.

Based on the assignment H/025-18 of the Head of the Service as of November 19, 2019 an examination was carried out at the Youth Foundation of Armenia. The examination revealed violations of the legality of the Foundation’s inflows and the effectiveness of their use. The findings of the investigations were summarized in a relevant reference and sent to the RA Special Investigation Service, a criminal case was instituted. The criminal proceeding was initiated on the basis of abuse of official authority and was sent to the RA Investigation Committee for further investigation.
Based on the assignments of the Head of the Service H/006-19 as of May 22, 2019, H/004-19 as of April 22, 2019 and H/002-19 as of March 19, 2019 examinations were accordingly carried out in Talvorik and Zartonk municipalities of Armavir region and in Ranchpar municipality of Ararat region. The results of examination mainly revealed violations of the requirements of the RA legislation on procurement, calculation of land taxes for some areas and imposition of levies with deficiencies. As a result of the examination relevant references were compiled and presented to the RA Prime Minister. The references about the examinations carried out at Zartonk municipality of Armavir region and at Ranchpar municipality of Ararat region were submitted to the RA Prosecutor’s Office for a legal assessment of the registered violations and accordingly criminal cases were instituted. The reference made based on the examination results of Talvorik municipality of Armavir region was sent to the Governor of Armavir region to eliminate such deficiencies in the region.

Based on the assignments of the Head of the Service H/024-18 as of 2018 an examination was conducted in the “National Institute of Health after Academician S. Avdalbekyan of the RA Ministry of Health” CJSC. During the examination it was found out that though being accredited, the laboratory does not correspond to the requirements of the RA Law on Accreditation and to a number of key points of ISO/IEC 17025 standards which cause doubts in the reliability of any conclusion provided by the laboratory. It was also recorded that the protocols provided by the laboratory were not numbered sequentially, allowing the laboratory to provide backdated protocols when needed. The results of the examination were summarized in a relevant reference and were sent to the RA Prosecutor’s Office for a legal assessment of the registered circumstances.
Based on the assignments of the Head of Service H/022-18 as of 2018, an examination was carried out at the “National Accreditation Agency of the RA Ministry of Economic Development and Investments” State Non-commercial Organization. The results of the examination were summarized with a relevant reference and sent to the RA Prosecutor’s Office for a legal assessment of the circumstances recorded during the examination. On the basis of the provided reference a criminal case was initiated by the RA Police.

Based on the assignments of the Head of Service H/014-18 as of 2018 an examination was carried out at the “Football Federation of Armenia” Union of Legal entities. The results of the examination were summarized with the relevant reference and sent to the RA Prime Minister.
Based on the assignment of the RA Prime Minister 6 monitorings have been carried out in “Nubarashen”, “Vardashen” and “Sevan” Penitentiary Institutions in order to evaluate the effectiveness of the ongoing construction works. The monitoring revealed that in the above mentioned Penitentiary Institutions the construction works envisaged with relevant contractual agreements signed between Penitentiary Service and a number of contracting organizations in December 2018 started with numerous violations of the norms and rules set out in the draft cost estimate documents. As a result of monitoring it was recorded that there is a risk of failing to implement the contractual work envisaged in the agreements signed between Penitentiary Service and contracting organizations in the defined timeframe and with the specified quality. Besides there is a probability that the urgent problems presented in the justification which served as a ground for the decision of the RA Government No 1291-N as of 15.11.2018 will not be resolved and that approximately 160 million AMD from the Reserve Fund of the RA Government will not serve its purpose even in case of no financial loss. After conducting the monitoring, a reference was prepared and presented to the RA Prime Minister.
The RA State Supervision Service has monitored the processes of purchasing and using fuel by the Compulsory Enforcement Service of the RA Ministry of Justice for the period of 2013-2018. As a result, it was found out that during the mentioned period, according to the preliminary evaluation, the Compulsory Enforcement Service had obtained about 143.9 million AMD of fuel not derived from its need and without justifying its further expense. The reference and the attached materials developed as a result of the monitoring were provided to the RA Special Investigation Service. In order to verify the circumstances identified in the reference, the provided documents were attached to the criminal case on the abuse of official authorities of by the staff of Compulsory Enforcement Service which was under the investigation of the RA Special Investigation Service.

Based on the assignment of the RA Prime Minister during the first half of 2019 the Department of Monitoring and Analysis of the RA State Supervision Service carried out analysis of the activities of “Seeds Agency” State Non-Commercial Organization for the period of 2013-2018. The reference of the results and attached documents were sent to the RA Prosecutor’s Office to make them subject for investigation of the relevant criminal case under the provision 1 of the 3rd part of Article 179 and 2nd part of Article 315 of the RA Criminal Code.
In the reporting period, 489 citizens’ applications-complaints were addressed to the RA State Supervision Service. 222 applications were put under control.
Reception of 95 citizens was organized in the Service, during which 62 citizens were given clarifications and written answers to the questions raised by them.
Examination at “Yerevan” Water Users Company based on the assignment of the Head of the Service H/017-18 as of October 01, 2018 is currently in process.
Examination at “Armenian National Polytechnic University” Foundation based on the assignment of the Head of the Service H/008-19 as of June 11, 2019 is currently in process.
Examinations at the RA Police based on the assignments of the Head of the Service H/009-19 and H/010-19 as of June 13, 2019 are currently in process.

ON THE RESULTS OF MAIN ACTIVITIES CARRIED OUT BY STATE SUPERVISION SERVICE OF THE REPUBLIC OF ARMENIA IN 2018

Yerevan, 18.01.2019

Introduction

State Supervision Service (hereinafter referred to as the Service) is a body of the newly established Government operating under the supervision of the Prime Minister and the Head of the Service was appointed according to the decree N 533-A of the RA Prime Minister as of May 21, 2018. Since the mentioned date until the end of 2018 based on the violations discovered as a result of the examination carried out by the Service in total 761.064.000 AMD was restored.

Implemented main activities

1. Based on the order N H/001-18 of the Head of the Service as of July 3, 2018 as a result of the examination in “BETS” CJSC:

• For the activities carried out in 2017, 152.500.000 AMD was discovered and returned to the account of “High Voltage Electric Networks” CJSC and during the upcoming months 157.775.000 more AMD should be paid;
• The total amount envisaged by the agreement “BETS-BMASHDZB-17/34” signed between “High Voltage Electric Networks” CJSC and “Montajtrnasshin” CJSC for the implementation of contractual works was reduced by 40.000.000 AMD;
• The damage caused to the state because of the acquisition of land plots by the Head of the Tsakkar Community has been compensated to the Service account with the amount of 14.773.000 AMD;
• During the examination in “High Voltage Electric Networks” CJSC it was discovered that for the period 2002-2014 as a result of the activities of Sahak Abrahamyan, the Chief Director of High Voltage Electric Networks” CJSC a damage of about 134.000.000 AMD was caused to “High Voltage Electric Networks” CJSC and a reference about this will be sent to the RA General Prosecutor’s Office for appropriate legal proceedings.

2. Based on the assignment of the Head of the Service N H/004-18 as of 6 July, 2018 as a result of the examination in “Homeland-Diaspora Center” State Non-commercial Organization of RA Ministry of Diaspora 100.000.000 AMD was restored.
3. Based on the assignment of the Head of the Service N H/008-18 as of 23 July, 2018 an examination of the activities of “Lusanshan” State Non-Commercial Organization for the period 2014-2018 was carried out. As a result of the examination it was found out that in 2016-2018 the State Non-Commercial Organization caused a damage of 209.787.000 AMD which was fully restored to the RA state budget. According to preliminary data, during the 2014-2015, a pecuniary damage of around 135.000.000 AMD was caused to the state which, however, the Director of the State Non-Commercial Organization for the reporting refused to restore, and a criminal case was initiated in RA Investigation Committee on the basis of the materials submitted.
4. Based on the assignments N H/009-18 and N H/010-18 of the Head of the Service as of July 24, 2018 an examination was conducted on the supervision of legality and effectiveness of 3 contracts signed in 2018 by the RA Police and «Ukrinvest» LLC with the amount of about 1.000.000 AMD. As a result of the examination, it was found out that the above mentioned 3 contracts were signed with violations of a number of laws regulating procurement in the Republic of Armenia. Additionally, the study of the actual work has shown that they are incomplete and with poor quality, and the supervision of the authorized body responsible for the work, the RA Police, is inadequate and is purely formal. In order to determine the expediency of further activities of «Ukrinvest» LLC, the reference prepared by the Service was sent to the Prime Minister’s Staff with the accompanying letter E/303-18 as of October 25, 2018 but no information is available about processing the reference.
5. Based on the assignment N H/018-18 of the Head of the Service as of October 8, 2018 an examination was carried out in “Support to the Convicted Person” foundation of the RA Ministry of Justice on its activities for 2016-2018. As a result of the examination carried out by the Service it was found out that the foundation has actually deviated from its main goals stipulated in its Statute approved by the RA Government. As a result of ineffective management, large-scale material damage was caused to the state and the foundation the detailed information on which will be presented to the Prime Minister in the near future, taking into account that the reference about the examination results is in the final stage.
6. Based on the assignment N H/018-18 of the Head of the Service as of October 8, 2018, an examination is currently being conducted in the Penitentiary Service of the Ministry of Justice to oversee the legality and effectiveness of the procurement process. By the assignment, the deadline for the examination is March 20 of the current year.
7. Based on the assignment N H/013-18 of the Head of the Service as of August 9, 2018, an examination was carried out at the National Agrarian University of Armenia foundation, the results of which were presented to the responsible party. The latter expressed readiness to pay damages of 350.000.000 AMD, of which 284.000.000 AMD has already been restored, and the remaining amount is planned to be restored by January 25, 2019.
8. In order to eliminate the discrepancies and risks identified during the examinations for the conduction of which the Service was authorized by the legislation of the Republic of Armenia, the Service has proposed to suspend 7 competition procedures, with only one contract with the amount of 1,000,000,000 AMD. As a result of the monitoring conducted during the reporting period, the amounts in the contracts have already been reduced with AMD approximately equal to 1,500,000 USD.
9. From 29 May, 2018 until the end of the year 1374 citizens have been admitted to the Service. 1003 applications, complaints and suggestions have been addressed to the Service from individuals and legal entities with the issues on the below mentioned fields:

• state-juridical issues -354,
• territorial governance and infrastructural issues- 197,
• social issues -139,
• economic issues- 47,
• public service issues- 266.

10. Based on the assignment of the Head of the Service N H/019-18 as of 15 October, 2018, an examination was carried out in Ani community of Shirak region, within the framework of which it was found out that in 2010-2018, the total amount of taxes, penalties and fines that was not charged from legal entities is 21.085.200 AMD. As a result of the analysis of information requested by the orders of the Head of the Service, it was found out that in 2013-2017 expenses of 4.327.300 AMD of salaries and fuel costs of 11.700.000 AMD are not justified and reliable.
11. Based on the assignment of the Head of the Service N H/023-18 as of 22 October, 2018 an examination was conducted in Azatamut community of Tavush region, within the framework of which it was found out that in 2010-2018, the total amount of taxes, penalties and fines that was not charged from legal entities is 688.000 AMD. As a result of the analysis of information requested by the orders of the Head of the Service, it was found out that:

• at the expense of state funds 182,696,500 AMD was spent inefficiently,
• with a violation of the procurement process, without the procurement procedure, a contract with the amount of 3.500.900 AMD was signed,
• the damage caused to the community budget during the study period is 2.530.000 AMD, the unjustified expenditure is 384.000 AMD, and the amount that was less entered into the community budget is 2.505.100 AMD.
• the total fuel costs that were withdrawn extra is 3.447.000 AMD.

12. Based on the assignment of the Head of the Service N H/028-18 as of 18 October, 2018 an examination was conducted in Nor Geghi community of Kotayk within the framework of which it was found out that in 2010-2018 the total amount of taxes, penalties and fines that was not charged from legal entities is 3.971.100 AMD and the municipality has not taken any measures to ensure revenues for taxes and penalties of 5.108.700 AMD from physical persons. As a result of the analysis of information requested by the order of the Head of the Service, it was found out that,

• in 2013-2017 municipality has made an unjustified expense of AMD 140.618.000 AMD.
• with a violation of the procurement process, without a procurement procedure, a contract with the amount of 724,000 AMD was signed.

13. Based on the assignment of the Head of the Service N 012 as of 31 July, 2018 an examination was carried out in Ejmiatsin (Vagharshapat) community of Armavir region to assess the reliability of information provided as a basis for state funds and the legitimacy of management of state funds. Relevant materials on the results of revealed violations were submitted to the RA Investigative Committee and a criminal case was initiated. According to the information published by the RA Investigative Committee, the damage caused to the community as a result of recorded violations, according to preliminary calculations is 590.000.000 AMD in total.
14. Based on the assignment of the Head of the Service N H/020-18 as of 15 October, 2018 an examination was carried out at “Maralik Craftsmen State College” SNCO it was found out that concerning the cost of tuition fees for 2015-2017, the amount exceeding the state budget makes 30.782.700 AMD.
15. Based on the assignment of the Head of the Service N H/017-18 as of 1 October, 2018 a number of violations were registered during the examination in the Artashat Water Users Company, which resulted in a large amount of property damage caused to the state. The results of the examination were presented to the Prime Minister of the Republic of Armenia.
16. The Service has provided relevant information to the RA law enforcement bodies regarding the circumstances known to it within the framework of the supervision by the Service, which include the features of the alleged crime and on some criminal proceedings have already been initiated.

Deputy Head of the State Supervision Service of the Republic of Armenia

He was born on May 30, 1986.

In 1993-2003 studied in “Mkhitar Sebastatsi” Educational Complex

In 2003-2008 studied in Armenian State University of Economics, in the Chair of National Economics and got the qualification of an economist.

In 2008-2009 he worked in “RADFIN” LLC as an economist

In 2009-2010 he worked in “INECOBANK” CJSC, in the Department of Protection of Bank’s Interests

In 2011-2016 he worked in the RA Ministry of Finance, in the Tax Policy Division of the Department of State Revenue Policy and Administration Methodology as a junior and later as a leading specialist.

In 2016-2018 he worked in the RA State Revenue Committee in the Department of Organization and Control. First he was a Chief Tax Inspector later he was appointed as a Deputy Head of the Department.

In 2018-2019 he worked in KPMG Armenia international audit company as a tax adviser

On February 12, 2019 according to the decree of the RA Prime Minister Nikol Pashinyan he was appointed as a Deputy Head of the State Supervision Service of the RA

He is married and has two sons.

Date and Place of Birth

December 18, 1983, in Vanadzor

Education

2008 — Graduated from the Armenian State University of Economics, faculty of management. An economist-manager by profession.

Work Experience

2008-2018 — worked in various private organizations, holding leading positions as well.

2018-2019 — held the position of Deputy Chief of the RA State Control Service.

December 9, 2018 — was elected a deputy of the National Assembly from the nationwide electoral list of the bloc of parties “My Step”.

October 6, 2020 – was appointed Deputy Chief and Acting Head of the RA State Control Service by RA Prime Minister’s decision.

January 15, 2021 – was appointed Head of the RA State Control Service by RA Prime Minister’s decision.

Since 2015 — a founding member of the Civil Contract Party.

2003-2005- served in the armed forces of the RA.

Marital Status

Married, with 5 children.

The RA State Supervision Service summed up the results of the examination conducted at the Penitentiary Service of the Ministry of Justice of the Republic of Armenia. The scope of the examination covered the supervision over the legality and effectiveness of the procurement process organized by the Penitentiary Service of the Ministry of Justice of the Republic of Armenia.

The results of the examination state that number of procurement processes by the Penitentiary Service of the Ministry of Justice of the Republic of Armenia during 2016-2018 were carried out with violations of the legislative norms regulating this field. In particular, in a number of cases, procurement items and their technical characteristics were not been objectively justified and adequate to the need for which the purchase had been made. Often the requirements for technical specifications were complicated, as a result of which the Penitentiary Service of the Ministry of Justice of the Republic of Armenia had not provided equal conditions for potential participants in the procurement process, causing unjustified barriers to competition.

At the same time, in some cases high-quality products have been obtained at obviously lower prices as compared to the market price, resulting in a risk that the suppliers have brought the Penitentiary Service of the Ministry of Justice products that does not comply with the technical specifications.

Looking through the construction works contracts signed between the Penitentiary Service of the Ministry of Justice of the Republic of Armenia and contractor organizations, it should be stated that in some cases the work was carried out in violation of the design and estimate documentation requirements, as a result of which the works were performed poorly and the materials used did not comply with the criteria set by the contract.

Violations have also been registered in the field of healthcare, in particular in procurement and planning of medicines and other medical supplies, their registration, distribution, preservation and sanitary and hygienic conditions. In some Penitentiary Service there were also poor and expired drugs.

Summarizing the above mentioned, it should be noted that in the procurement process, which was organized by the RA Penitentiary Service in 2016-2018, and was subjected to examination by the RA State Supervision Service, violations of a number of norms prescribed by the RA legislation regulating the given field were registered which have caused the risks of inefficient use of state funds.

The reference of the findings of examination was sent to the RA Prosecutor’s Office to verify the existence of crime traits in the reference.

The examination carried out at the “Yerevan State Medical University after M. Heratsi” foundation. As a result of the examination carried out at the university, problems were identified in the procurement procedures, the calculation of additional salaries, and implementation of construction works.

In addition, 222.0 mln. worth property was obtained without any procurement procedures and with higher prices as compared to the market price. There are strong doubts that property has been used for commercial purposes by persons not affiliated with the university.

It is noteworthy that those holding high administrative positions at the University have always been charged an additional salary that exceeds their salaries several times. In the following context, the highest average monthly salary was 5.1 million, 3.8 million. and 3.3 million AMD.

In order to verify the existence of crime traits, the developed reference was sent to the RA General Prosecutor’s Office. The RA Prosecutor’s Office sent a later note informing that the reference was sent to the Investigation Department of the RA National Security to verify the circumstances listed in the inquiry within the criminal case under the investigation of the department.