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ON THE MAIN ACTIVITIES CARRIED OUT BY STATE SUPERVISION SERVICE OF THE REPUBLIC OF ARMENIA IN THE FIRST SEMESTER OF 2019

18.09.2019

Yerevan

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.

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