Chapter 2. Misappropriation of parental contributions to schools and pre-schools in Ukraine

This chapter examines parental donations to schools and pre-schools, an important source of education financing in Ukraine in which 90% of parents with school children report they have participated. Parental donations to schools are at high risk of misuse through fraudulent invoicing, which permits the difference between misstated and actual prices to be captured for personal benefit. This risk arises from strong incentives for education providers to bypass formal requirements for management of parental donations – combined with weak budget oversight of schools, and the absence of a parental right to require an account of how school funds are used. The chapter recommends expanding the legal rights of parents to oversee how donations are managed and used; improving the transparency of budget allocations and strengthening internal audit on local level of governance; strengthening the role and capacity of the School Inspectorate to reduce opportunities for misappropriation; and widening opportunities for schools to make flexible use of extra-budgetary resources from parental contributions.


Regulatory and policy background

Sources and destination of school and pre-school funding

Public pre-schools and schools in Ukraine are budget organisations (бюджетні установи): non-profit entities that are funded by their founders and owners - state and local governments. In 2014/15, the majority of pre-schools and schools were owned and funded by local authorities (rayons and cities), which also provided most of the funding for these levels of education (Table 2.1). There were also 200 private pre-schools and 167 private schools.

Table 2.1. Pre-school and school institutions by ownership and primary source of funding (2014)

Founder and owner

Primary source of funding

Pre-school education

School education

Number of institutions

Spending ()

(UAH million)

Number of institutions

Spending ()

(UAH million)

State government

Central budget





Local governments

Local budgets

14 705

15 121

17 111

42 229

Private entities

Private sources





.. : not available

1. Data on expenditure in current prices for 2014. Public expenditure only.

Source: SSSU (2015a), General Education Institutions in Ukraine in the Beginning of the School Year 2014/15, State Statistics Service of Ukraine, Kyiv; SSSU (2015b), Pre-school Education in Ukraine in 2014, State Statistics Service of Ukraine, Kyiv; SSSU (2016), National Education Accounts of Ukraine, State Statistics Service of Ukraine, Kyiv; MoES (2016), Statistical Data for General Education Schools in Ukraine for 2014/15 and 2015/16,

The Budget Code stipulates that the education funding obligations state and local authorities are contingent on the availability of resources. In Ukraine, this conditionality is commonly introduced in periods of crisis (CEDOS, 2015) and at the time of this integrity review was still in force. To ensure that budget resources meet funding needs, the legislation sets a hierarchy of spending priorities that is binding on decisions about resource allocations for publicly funded (budget) organisations, irrespective of their origin (public or private). Salaries and salary-related expenses are protected expenditure items: they have the highest allocation priority and are guaranteed by the state. Next in priority are the communal and other operating expenses of schools and pre-schools such as water and electricity, followed by maintenance and other current expenditure items, and finally capital expenditure.

Local authorities can receive support from the central budget if local revenues, comprising of personal income tax, land payments, non-tax revenues, local taxes and levies, are insufficient to meet budget needs and ensure compliance with these allocation priorities. Central government support for education is provided through targeted transfers to the local budgets in the form of educational subventions. The subvention is earmarked primarily for salaries and the current (running) expenses of general education schools of all types. Its amount is calculated according to a formula that takes into account the number of students enrolled, the class size, and correction coefficients for factors such as location, type of school, and special categories of students. When introduced in 2015, the subvention accounted for 41% of total public spending on education (UAH 43.4 billion) and for 48% of all targeted transfers from the central to the local budgets (Annex 2.A1, ref. 1). For comparison, in 2014/15, local authorities spent a total of UAH 65 billion on education, 88% of which was spent on pre-school and school education (SSSU, 2016).

Schools and pre-schools are also allowed to accept support from private sources of funding. These include parental and other charitable contributions (allowed for both schools and pre-schools), money for meals (allowed for pre-schools only), revenues from fee-based education services (allowed to schools only), and renting of premises and leasing of equipment (allowed to schools only). In 2014/15, private sources accounted for 5.4% of total expenditure on public primary and secondary schools (UAH 2 419 million) and 3.5% of total expenditure on public pre-schools (UAH 547 million) (Table 2.2).

Table 2.2. Private expenditure on pre-school, primary and secondary education (2014/15)

Private expenditure

Permissible sources

UAH million

Percentage of total expenditure

Public pre-schools

Parental and other charitable contributions



Public schools

Parental and other charitable contributions

Fee-based services

Lease of equipment and premises

2 419


Source: SSSU (2016), National Education Accounts of Ukraine, State Statistics Service of Ukraine, Kyiv.

Parental contributions to schools and pre-schools are defined as charitable donations of natural or legal persons that can be provided in cash or in kind (services, goods), and are a widespread form of private support for education in Ukraine. According to surveys of 357 parents in 2014 and 1 001 parents in 2015, over 90% of respondents in each survey reported providing regular donations to the schools of their children (ERA, 2014; IED, 2015).

Funds may be solicited for the benefit of the school or of the student’s class. A survey from 2014 revealed that the family donations were used primarily for repair and maintenance of classrooms and school buildings, procurement of a wide range of equipment and materials, and other amenities, including gifts to teachers (Figure 2.1).

Data on private expenditure on education obtained through household surveys in the official statistics of Ukraine confirms that households invest predominantly in the operating expenses of education institutions. This suggests that public funding in this area is not sufficient to meet all needs. Table 2.3 presents spending on education by expenditure groups defined in the national statistical classification and shows that in 2014/15, over 71% of household expenditure on education was absorbed by the current (or operating) costs of education providers, including for materials and inventory (Table 2.3).

Budget process and management of extra-budgetary funds

The budget process in Ukraine follows four main stages: preparation of draft budgets; drafting and adoption of the Law on the State Budget and of the local budgets; execution and budget adjustments; and performance review.

As part of the annual process of the preparation of local budgets and the national budget, all budget organisations (including schools and pre-schools) are requested to prepare a draft budget estimate (кошторис) of their expenses and revenues ahead of the fiscal year, and send it to the financial department of the local authorities responsible for their funding. The estimates by the schools are then used to prepare a budget projection of local funding needs in education for further use by the Ministry of Education and Science (MoES) when negotiating the sector budget with the Ministry of Finance.

Figure 2.1. Services and items procured with parental contributions by share of parental survey responses

Source: ERA (2014), School Funds: Peculiarities of Establishment and Expenditure, European Research Association, Kyiv.

Table 2.3. Household spending on public education by national expenditure group (2014)

Expenditure items and groups

Household expenditure on public education

In UAH million

As share of total (%)

Salaries, salary charges, materials and inventory, R&D

11 035


Medication and medical materials




2 550


Communal expenses, loans, travel, capital expenditure



Payment of services (except for communal services)

1 225


Other expenditures



Textbooks and office materials



Subsidies and current transfers, financial aid, scholarships, etc.



Source: Order of the Ministry of Finance (MoF) No. 495 of 25 November 2008; Order of the MoF No. 333 of 12 March 2012; SSSU (2016), National Education Accounts of Ukraine, State Statistics Service of Ukraine, Kyiv.

On the expenditure side of their budget estimates, education institutions declare their forecast of payroll expenses (тарифікаційні списки) by describing their teaching workforce: number of staff, professional categories, workload (teaching hours) and compensation payments. They also include cost estimates along the lines of expenditure groups presented in Table 2.3: for maintenance and repair works, purchase of equipment and materials, communal expenses and capital investment needs.

Typically, the financial department can propose adjustments to certain expenditures to bring the draft estimate in line with the availability of funds, after which the education institution amends the draft and, upon approval of its board, submits the final estimate to the local financial department (Shukevich, 2012). This permits school and pre-school authorities to anticipate costs that will not be covered by the authorities to which they are subordinated.

Regulations on managing monetary contributions to the school and pre-school budget

The obligations of education providers regarding the use and management of parental contributions vary, depending on whether the contributions are provided in cash or in kind.

Schools and pre-schools are obliged to register and handle parental contributions in cash as “designated amounts” (суми за дорученням) – extra-budgetary funds received from natural and legal persons for a specific purpose. Extra-budgetary funds must be kept and tracked separately from revenues coming from the public education budget and are thus accredited to a separate part of the school and pre-school budget. The Budget Code of Ukraine requires that revenues from public sources be accounted for in the so-called “general fund” (загальний фонд) part of the budget, while parental contributions are to be listed in its “special fund” (спеціальний фонд).

Schools and pre-schools that wish to collect/generate extra-budgetary income must not only register the extra revenues in the special fund section of their budget but also deposit them in a dedicated account with the State Treasury. They can do this either by requesting their own account with the local branch of the State Treasury, in which case they must take responsibility for the accounting and budget-conforming use of the resources and hire a school accountant, or by delegating responsibility to the local education authorities, which provide them with centralised accounting services and manage the budget resources on their behalf (including approval of how they are spent). In both scenarios, the principal of the education institution is responsible for the proper use of funds in conformity with the laws and regulations, and the intended use of funds must be recorded in the budget estimate of the school or pre-school and approved by the financial department of the local education authorities.

Regulations on managing in-kind contributions to schools and pre-schools

In-kind contributions from natural and legal persons are subject to the rules and regulations applicable to goods and services purchased with funds from the public budget. They must be marked in the budget estimates of schools and pre-schools and appear in their balance sheets, with an indication of the value of donations. The monitoring of receipt and use of in-kind donations is the responsibility of the local education authorities, as described in the next section.

Budget control and audit

The budget control and audit of schools and pre-schools is a shared responsibility between the education institutions themselves, the local financial authorities (in this case – the financial departments of the local education authorities) on behalf of the Ministry of Finance, the State Treasury, the State Financial Control, and the Accounting Chamber of Ukraine. The national audit and control arrangements also include an obligation for all executive authorities and their local subsidiaries (budget organisations, local authorities and line ministries), to establish units of internal audit and define procedures for their functioning.

The principals of education institutions vouch for the correctness of their school budget and use of school assets, which includes funds disbursed by the education authorities as well as donations. They are also responsible for the initial authorisation of expenditures from the special accounts with the State Treasury in case the school or pre-school has one, as well as for concluding and monitoring the execution of contracts with service providers.

The equivalent of internal audit in schools and pre-schools takes place in the form of meetings of school boards and boards of trustees, members of which are the school leadership, teachers, the local authorities, representatives of parents, civil society, supporters of the school and, in secondary education, also students. The mandate of a school board can vary depending on the statute that each institution adopts for itself, but among its main tasks (Shukevich, 2012) is to discuss, agree on, and monitor the funding and other material needs of the institution, including the annual budget estimate and requests for extra-budgetary support, that is, from parental contributions.

Local financial departments are responsible for ensuring that education institutions are in compliance with the budget regulations on behalf of the Ministry of Finance at all stages of the budget process. They are also in charge of assessing the functioning of internal control and audit in the budget organisations and local executive bodies.

The State Treasury is responsible for verifying the correctness of accounting records format used in the local budgets and whether spending is in line with the commitments in the budget. The State Treasury is also in charge of monitoring and evaluating the work of chief accountants of budgetary organisations. The State Financial Control on the other hand is tasked, among other things, with the control of effectiveness and purposefulness of spending, which includes the credibility of funding need estimates in the budget proposals, the purposefulness of long-term spending obligations, and the effectiveness and focus of internal audits. Finally, the Accounting Chamber exercises overall control of compliance with the budget legislation, including the use and effective management of budget resources on all levels of governance, which encompasses the targeted transfers to the local budgets, that is, the education subvention.

A. Description of integrity risk and violation

Misappropriation is an offence that can be broadly defined as the embezzlement of assets (funds) by someone who does not own them but is entrusted with their management or control (Theoharis, 2015). Defined as a crime in the Criminal Code of Ukraine, this offence is commonly perpetrated through trickery and deceit with the help of misappropriation schemes1 (Albrecht et al., 2010).

Despite a complex and seemingly comprehensive legislative framework, the management of extra-budgetary resources from parental contributions is an area plagued by irregularities and at risk of misappropriation. The range of problems reported in public discussions across the country and described to the review team in meetings with parents and civil society organisations include arbitrary (unjustified) requests for donations by schools and pre-schools, lack of transparency and absence of reporting on the use of these donations, and subsequent misappropriation.

Comments made during site visits (one of which is described in Box 2.1) suggest that procurement fraud schemes, such as the use of parental contributions for procurement at inflated prices in order to take and/or give kickbacks, are possibly among the most common forms of misappropriation. The integrity review team was repeatedly told of cases where schools and pre-schools appear to have engaged or recommended suppliers who will:

  • present parents with bills for more than the actual cost of the goods and services they supply, and pass on (some of) the difference to the school; or

  • present parents with bills for the full retail price of goods on which a discount is normally offered, and pass the value of the discount to the school; or

  • present parents with bills for goods or services that were not delivered at all (or, if delivered, had already been paid for from the school budget allocated by the local financial department), and pass (some of) the parental payment back to the school.

Box 2.1. First-hand account of a vendor of foreign-language handbooks for school use

Our company sells authentic textbooks for foreign language teaching, published by leading European publishing houses. Authentic means that the books are produced by publishing houses from the country where the language taught in the handbook is an official language. Most of these books are sold to pupils and students of state educational institutions – schools, HEIs, colleges. The demand is high because, compared to handbooks for foreign language teaching published in Ukraine, which are cheaper, the quality of the authentic ones is better.

In recent years the sale of books to primary and secondary public schools became an area developing in a wrong direction. Even though the final consumer is the pupil (represented by his/her parents), in most of the cases the key contact person for the sale is a representative of the school – teacher or school principal/deputy principal. Because the purchase is a wholesale purchase, a discount on the retail price of 10% to 20%, which is a unified rate in all of Ukraine, can be offered. We noticed that this discount almost never reaches the final customers. Instead, the parents pay the full retail price, while the discount remains with the school staff representative who organised the purchase. The average value of a purchase for all classes of a school for one year of study is USD 5 000 to USD 10 000, which means that the amount of discount can be around USD 500 to USD 1 000. This money is de facto being embezzled by the school.

For the last year, we have been trying to find ways to change this situation. It was clear that the first step should be to have the representatives of parents’ councils as key contacts instead of school representatives. This was difficult to implement, among other things because teachers cannot be entirely ignored in the process of purchase as they are the ones who decide which book is appropriate and needed, and communicate their expert suggestions to the parents. Without the prospect of financial gains and direct involvement, teachers were, however, reluctant to select and recommend our books. Therefore, we have been working on rebuilding our relationship with them, offering non-monetary benefits, such as methodological aid – seminars, additional materials etc. – instead of accepting their involvement in the purchase process as agents. Another major obstacle we have is that, for fear of losing business, the majority of other companies are not willing to follow our example and change their usual ways.

Our main achievement so far is creating an online resource ( where parents can get all the information about the textbooks they need (adapted for a person without professional knowledge), receive information about discounts available to wholesale purchasers and additional materials available for free, and place their order directly. Though it is possible to order books through this website, it is not meant to be primarily an online store. We see it rather as an instrument to help parents obtain a full picture of the process of handbook purchase and have an insight into its real cost.

Nationwide, the market of authentic handbooks is organised as follows: there are companies which import books (mostly based in Kyiv), and regional distributors that buy books from them and resell in their regions. We are one of those regional distributors, representing only the western region of Ukraine (Lviv Oblast). The baseline is the same for all the local distributors, as are the ways these businesses were developed over the years. So you can say that the problem described here is the same anywhere else in the country.

Source: Written account of a bookstore owner in the capital of a major region in Ukraine.

In resorting to such schemes, all of which involve false invoicing and are therefore unlawful, education institutions employ common forms of procurement fraud (Kramer, 2012) in which the primary recipients of diverted funds are the school administrators negotiating the kickbacks and receiving the money contributed by the parents, as well as the vendors supplying the goods and services purchased with the parents’ money.

Local and central education authorities have also expressed concern that parental contributions to school and class funds are not recorded or used. For instance, an instruction by the authorities of the city of Kyiv to the heads of education departments and school principals from June 2016 condemns the joint actions of those collecting charitable contributions and principals of education institutions, which “harm the reputation of education professionals” and “push the schools towards money-making” (Kyiv City Council, 2016). Among the reasons for concern stated in the instruction letter were numerous complaints by parents, misappropriation of over UAH 2 million in undeclared parental contributions by a public pre-school, and the discovery of money from parental contributions in the safe of a school principal. In response to allegations of irregularities and misappropriation, some oblasts, such as Kherson oblast, have put a temporary ban on the collection of parental contributions and initiated the creation of special commissions for monitoring the proper handling of donations to education institutions.

The misappropriation risk is acknowledged also by the MoES, which wrote in 2012 to heads of local education departments, schools and pre-schools, expressing concern about the misuse of parental contributions. It called the failure to register and use the contributions in accordance with the laws a “gross violation” of regulations resulting from the weakness of compliance control, and recommended that the management of donations be brought in conformity with regulations.

B. Factors that create opportunities for the violation

No proper documentation and management of parental contributions

An essential factor that facilitates the misappropriation schemes described in the preceding sections is the failure of schools to acknowledge and properly record the receipt of parental donations.

Parents typically contribute to school and class funds in cash, and the funds that they provide are not recorded in ways that conform to legal requirements and provide a basis for public accountability. Some 72% of parents reported that their contributions for the class were collected in cash during the parent-teacher meetings, and 25% of them gave the money to their children to transmit to their teachers (ERA, 2014). Around 51% of the 1 001 parents of school children surveyed in 2015 stated that their donations to the schools were not officially registered and countersigned, as the law requires them to be (IED, 2015).

These findings reflect reluctance by education providers to declare the extra income, which is confirmed through another, earlier survey on school autonomy in 542 schools across Ukraine. Only 5% of these schools reported to have opened an account for extra-budgetary funds with the State Treasury. According to the survey analysis, the low share suggests unwillingness of school authorities to raise and manage extra income in the way prescribed by the legislation (Barmatova et al., 2013).

Because schools do not register the parental contributions – and because regulations do not define parental rights and obligations – parents cannot compel the schools to provide them with information about the exact way funds they have donated have been used. The information they might be receiving at class meetings, or meetings of the school boards of which they are members, is not official.

Limited parental responsibility and involvement

The Law of Ukraine, On Charitable Activities and Donations, stipulates that benefactors and beneficiaries are the two key roles in the process of giving and accepting donations. Parents can fundraise and give donations to schools and pre-schools as individuals (benefactors) or through charitable organisations, and public education institutions can receive them as the beneficiaries.

Each of these roles comes with responsibilities concerning the management of donations. Many laws and bylaws define the responsibilities and obligations of education providers as recipients of donations, and those of authorities in charge of oversight. They put the burden of responsibility for the proper handling of charitable contributions on the education institutions, and do not define responsibilities and rights of parents as benefactors.

The role of parents is mentioned in only a few of these laws and bylaws, and is limited to a description of options: benefactors can indicate the purpose of donations if they wish to (Annex 2.A1, ref. 2 and 3); parents are recommended to organise themselves in charitable organisations (Annex 2.A1, ref. 4) and as benefactors they have a legally guaranteed possibility to do so (Annex 2.A1, ref. 3); they could also conclude donation contracts for monetary donations that exceed a certain threshold (which is set higher than the average annual parental contribution reported in surveys (ERA, 2014).2 In 2013, only 14% of the schools participating in the school autonomy survey were receiving their donations through a parental charity organisation. The remaining ones were relying on individual parental donations (Barmatova et al., 2013), which are difficult to record and track.

The principal focus of regulations is the recipients of donations, not the donors. This limits the ability of authorities to hold parents accountable as benefactors - for instance, to require that they properly document their donations in a contract with schools and pre-schools and state a purpose for their donation. Furthermore, the legislation does not provide parents with any rights vis-à-vis the education providers they support – for example, the right to request information from schools about the use of contributions. The only right donors have is to redirect their donation to another beneficiary.

This situation may encourage a culture of ignorance and disengagement among parents. Many of them, for instance, are unaware of basic details concerning their contributions to schools. For instance, in the parental survey of 2015, some 65% of respondents did not know whether they as parents were organised in a charity or are contributed as individuals (IED, 2015). Some 42% stated that they had never heard of rules and regulations governing school funds and parental contributions. Additionally, 40% responded that they were not (or not really) interested in learning how to make school funds and parental donations more transparent and accountable (Figure 2.2).

Impunity and fragmentation of oversight

The responsibility for oversight of schools and pre-schools in Ukraine is shared between multiple institutions, which leads to a fragmentation of control and allows irregularities with parental contributions to remain undetected. The principal division is between the budget and educational aspects of school and pre-school oversight. Educational oversight centres on compliance of schools and pre-schools with the state educational standards and the norms of education provision. Budget oversight is about compliance with budget regulations, which schools as budget organisations are obliged to respect. Different institutions are responsible for these two oversight dimensions. The bodies in charge of overseeing the work of schools are not charged with the control of their budgets and have limited competence to exercise such control. In turn, the bodies mandated with budget oversight and competent to exercise it have limited exposure and access to the sector of education.

Educational oversight is in the competence of the MoES, which exercises control of the education process through the State Inspectorate (Державна інспекція навчальних закладів України - ДІНЗ) and local education authorities acting on its behalf. The main instrument of control is the attestation of education providers that takes place every ten years. Routine and extraordinary inspections are possible as well but have the same focus on compliance with educational norms and standards.

Figure 2.2. Parental awareness of charity regulations and interest in transparency

Source: ERA (2014), School Funds: Peculiarities of Establishment and Expenditure, European Research Association, Kyiv.

Theoretically, the direct involvement of oversight authorities in education is possible on a case-by-case basis through the State Inspectorate, which has the right to reach out to any state body in the course of its inspection activities. However, since its work is primarily focused on compliance with educational norms and standards, it does not typically look into the administrative and budgetary dimension of school and pre-school operations, and its staff might not have the training and/or experience required to perform such a task.

Ensuring compliance with budget regulations is a responsibility shared among the financial departments of local authorities, the State Treasury, the State Financial Control and the Accounting Chamber. Financial oversight bodies other than local financial departments, which are directly involved with the schools when they assess and approve the annual school budgets, have little or no exposure to the education sector. They perform their control functions on the basis of aggregate information on education spending on local level that is not meant to provide detail on daily budget-related activities in individual schools and pre-schools. This prevents financial oversight bodies from detecting whether schools are handling extra-budgetary resources in the way they should. In addition, as parental contributions rarely appear in the official accounts with which these bodies work – such as budgets, account statements, contracts for goods and services – misappropriation goes undetected.

Lack of transparency in decisions about allocating local budgets for education

Schools justify the collection of parental contributions with a narrative about shortage of public funding for education in general and for certain budget items in particular. When asked to identify the main obstacles to improving education, 71% of 311 school principals and 56% of 499 teachers stated that a decline in maintenance and maintenance supplies is among the biggest problems facing education in the country (IED, 2015). Representatives of schools and some pre-schools during the site visits also explained the need for school funds by pointing to a lack of public funding and an alleged tendency of education authorities to increasingly marginalise the sector by not investing in it.

National data from 2012 on education expenditure show that Ukraine spends a considerable proportion of its national wealth and government budget on education, above the average of OECD countries (MoF Ukraine, 2014; SSSU, 2016; OECD, 2015b). Primary, secondary, and post-secondary non-tertiary education in 2014, for instance, claimed the equivalent of 4.3% of GDP (SSSU, 2016), compared to 3.7% of GDP in the OECD on average (OECD, 2015b).

Despite generous allocations on national level, at the local level there are perceptions of funding shortages for schools and pre-schools. The local financial departments can play an important role as providers of information in this respect, but their contribution is hampered by weaknesses in mechanisms (i.e. internal audit) that are meant to safeguard the reliability and independence of information they collect and provide (OECD, 2015a). Recent legislative amendments have kept the local budgets “off limits” for independent audit control (OECD, 2015a).

Schools and pre-schools do not seem to request information about the allocation decisions of local education authorities. In-depth discussions with principals of two elite schools from different parts of Ukraine suggest that, from a school leader’s point of view, it is quicker, easier and more promising to point to resource shortages and seek parental donations than to negotiate funding needs with the local authorities, inquire about their allocation decisions or improve their school’s efficiency (for instance by clearing up the payroll of obsolete or unnecessary compensation payments and bonuses).

C. Factors that create incentives for the violation

Administrative burden and limits to school autonomy

Complying with budgeting requirements about parental funds poses administrative challenges for schools, and many schools have chosen to avoid declaring the parental contributions in the way prescribed by the laws.

For schools and pre-schools, the management of extra-budgetary income in conformity with the regulations means to declare the income by including it in their budget estimate as revenue, committing the revenue to expenditures, depositing the revenue on a special account with the State Treasury (directly or through the accounting office of the local education authorities) and spending it in accordance with that expenditure commitment. Introduced in 2011 as an important step towards more school autonomy in the management of resources, these requirements pose a considerable administrative challenge for the education providers and provide them with reasons to avoid declaring the parental contributions in the way prescribed by the laws.

Limited capacity for school autonomy

The first administrative challenge is that most schools lack the accounting capability needed to open a dedicated account with the Treasury. Two years after the introduction of the autonomy reform of 2011, 83% of the schools did not have an accountant, the accounting functions of 77% were still managed centrally, by their local education authorities rather than at the school level (Table 2.4), and on average, 71% of school principals have never participated in training or any introductory activities on school autonomy (Barmatova et al., 2013).

Table 2.4. Schools with centralised accounting surveyed in 2013, by school type

School type

Centralised accounting (%)

General education schools (Levels I-III)


General education schools (Levels I-II)


Specialised schools


Gymnasiums, Lyceums, Collegiums


Source: Barmatova, I.V. et al. (2013), Management of Education and School Autonomy: The School Perspective,

Rigidity of budget commitments

The second administrative challenge is the rigidity of commitments in the school and pre-school budgets. Whether a school or pre-school has a centralised or autonomous accounting, their budget estimates are prepared once a year, with the exception of payrolls costs, which are updated before each school term. Schools and pre-schools must declare budgetary and extra-budgetary amounts in the special funds of their budget estimates, and these estimates must be approved by their founders and primary funders, typically local authorities. Once approved, the commitments are supposed to hold throughout the school year and be spent “strictly in accordance with the commitments” (Annex 2.A1, ref. 5). For schools that have declared their income from parental donations, this arrangement restricts flexibility in using the resources for school needs that might emerge after the school budget has been approved. In addition, education providers with centralised accounting must have the accuracy of their spending certified before left-overs in the special funds can be carried over to the next fiscal year (Annex 2.A1, ref. 5).

Furthermore, the use of parental contributions is subject to the hierarchy of spending priorities that is binding also for the use of public resources. When planning their budget allocations and the use of extra-revenues from the special fund, schools and pre-schools are obliged to give priority to outstanding payments related to the core functions of their institutions – protected expenditure items (salaries) and other costs for which the resources in the general fund are insufficient. In practice, however, education providers have little incentive to comply. Failure to plan and use extra revenues in this way does not jeopardise the payment of core items such as salaries, because they are guaranteed by the state. By not disclosing their extra revenues, schools and pre-schools benefit in two ways: they have added flexibility in the use of resources, and an opportunity to have the public budget of the central government cover unmet payroll expenses.

Burdensome procurement approval procedures

Finally, education providers that wish to procure goods and services with money from their special funds must go through a public procurement procedure if the value of intended purchase is above a certain amount and is at least partially financed from public sources. As some principals during the site visits for this review admitted, the approval of procurement plans and the procurement itself can be a cumbersome and slow process with an unclear outcome. It is better to “arrange things” directly – thereby obtaining flexibility through informal procurement that comes with funds managed outside the stipulated school budget and accounting rules.

D. Policy options

Closing of opportunities

Parental contributions dominate public discussions about irregularities in education, and there are conflicting interpretations of what the problem is and what should be done to address it. During the site visits, almost every interview counterpart with stakes in pre-school, primary and secondary education had strong views on the issue, as well as proposals for change. This integrity review adopts a practical approach to parental contributions: they are longstanding and widespread, and recommendations should focus on helping design regulations that are more successful at achieving transparency and preventing their misuse.

Promote parental involvement in oversight

Parental involvement in oversight of how parental donations are managed and used should be expanded. An important step in this direction is to define their rights of access to information about donations and the conditions of participation in decisions about their collection and use (for instance by strengthening the role of school boards and making parental organisations obligatory). It is also essential to create conditions for shared responsibility for donations, including parental liability for irregularities.

These revisions should be accompanied by capacity-building campaigns to raise awareness about parental rights and obligations, the significance of regular parental involvement in decisions about the use of resources and parental competence to understand the relevant regulations.

Improve transparency of budget allocation decisions on local level

As previous OECD monitoring activities have advised, mechanisms of control and audit should be made more relevant and effective at local level. This means, for instance, extending the powers of the Accounting Chamber to encompass audit of local (city and rayon) budgets. Transparency should be increased also by publicly disclosing audit findings and recommendations. If the broader public and the media have access to this information on a regular basis, they can help create additional pressure in favour of more transparency about resource allocations at local level. This in turn should help to reveal the extent to which demand for parental support for schools and pre-schools is driven by shortages or inefficient allocation decisions.

As part of a broader reform of the public finance control system in Ukraine, a new generation of financial inspections and audit is planned to help address such concerns and tasks (OECD, 2015a). This requires a strong and genuinely independent infrastructure for internal audit, capable of detecting irregularities in “real time” and reporting on risk. It also requires commitment and co-operation from the public officials being inspected and audited.

Reduce fragmentation of oversight by strengthening the role and capacity of the School Inspectorate

The current split between administrative and educational oversight is counterproductive and should be replaced by a stronger and explicit mandate for the School Inspectorate to be involved in administrative and budget oversight of schools, if necessary in partnership with the national bodies in charge of public finance control. This will require an increase in the capacity of the School Inspectorate that allows it to further develop and strengthen the co-ordination role that it can (and should play) in efforts to prevent irregularities and corruption in education. The two distinct types of inspections should nevertheless be retained: administrative inspections for compliance with regulations and educational inspections for improvement of educational processes.

Eliminating incentives for malpractice

Allow and support more flexible use of extra-budgetary resources

Simplify the administrative burden on education providers for the management of extra-budgetary revenues from parental contributions. Do this by reducing the number of laws and bylaws that apply to this area, and by allowing schools and pre-schools to manage monetary donations outside of the State Treasury system. Education institutions should be able to open their own bank accounts in commercial banks, in exchange for stronger accountability and external control through independent audits and clear penalties for abuse. Such accounts could be under the joint auspices of the school board (for instance, parents and school administration) and would allow for more flexibility to respond to needs that emerge in the course of the school year.

Decisions in this direction will require at least two further reforms.

First, promote and support a gradual shift away from the currently prevalent centralised accounting arrangements. In the long run give permission for schools that wish to do so, to step away from the principle of hierarchy of resource allocations and have full freedom to manage their budgets, including autonomy to decide on their own which expenditure items (except base salaries) should be given priority.

Secondly, the successful transition to more school autonomy will require training and capacity-building for school leaders and administrators. The training programmes must be designed and offered only after there is a decision on the shape and extent of the next generation of school autonomy reforms, and they should be offered both as pre-service and in-service training.


Albrecht, C., M.J. Kranacher and S. Albrecht (2010), Asset Misappropriation Research White Paper for the Institute for Fraud Prevention, Institute for Fraud Prevention, Morgantown.

Barmatova, I.V. et al. (2013), Management of Education and School Autonomy: The School Perspective, International Renaissance Foundation, Kyiv,

CEDOS (2015), The Budget for Education and Science in 2015: What Did Members of Parliament Adopt, CEDOS,

ERA (2014), School Funds: Peculiarities of Establishment and Expenditure, European Research Association, Kyiv.

IED (2015), Середня освіта в Україні: думка вчителів та батьків [Secondary Education in Ukraine: Attitudes of Teachers and Parents], Institute for Education Development, Kyiv,

Kramer, M.W. (2012), “The Most Common Procurement Fraud Schemes and Their Primary Red Flags”, IACRC,

Kyiv City Council (2016), Instruction letter of the Kyiv City Council No. 063-5293 of 9 June 2016,

MoES (2016), Statistical Data for General Education Schools in Ukraine for 2014/15 and 2015/16,

MoF Ukraine (2014), The Budget of Ukraine 2014, Ministry of Finance of Ukraine, Kyiv.

OECD (2015a), Anti-Corruption Reforms in Ukraine: Round 3 Monitoring of the Istanbul Anti-Corruption Action Plan, OECD Publishing, Paris,

OECD (2015b), Education at a Glance 2015: OECD Indicators, OECD Publishing, Paris,

Shukevich, Y. (2012), Економіка школи: прозоро, чесно, легально [The Economics of School: Transparent, Legal, Fair],

SSSU (2016), National Education Accounts of Ukraine, State Statistics Service of Ukraine, Kyiv.

SSSU (2015a), General Education Institutions in Ukraine in the Beginning of the School Year 2014/15, State Statistics Service of Ukraine, Kyiv.

SSSU (2015b), Pre-school Education in Ukraine in 2014, State Statistics Service of Ukraine, Kyiv.

Theoharis, M. (2015), Misappropriation of Funds,

ANNEX 2.A1. References of legal sources
  1. Law of Ukraine on the State Budget for 2015, No. 5 (80-VIII), of 28 December 2014, Supreme Council of Ukraine.

  2. Order of the Cabinet of Ministers of Ukraine No. 1222, of 4 August 2000.

  3. Law of Ukraine on Charitable Activities and Organisations No. 25 of 5 July 2012.

  4. Letter of the Ministry of Education and Science of Ukraine No. 1/9-272 of 9 April 2012.

  5. Order of the Ministry of Finance No. 63 of 11 August 1998.

References cited as source of Table 2.3:

Order of the Ministry of Finance (MoF) No. 495 of 25 November 2008.

Order of the Ministry of Finance (MoF) No. 333 of 12 March 2012.


← 1. Misappropriation scheme is a fraud in which a perpetrator employs trickery or deceit to steal or misuse an organisation’s resources. Assets of the organisation are taken to directly benefit the individuals committing the fraud, and are taken through trickery or deceit, rather than by force (Albrecht et al., 2010).

← 2. The threshold is the fifty-fold of the minimum taxable income - Article 719.5 of the Civil Code of Ukraine No. 40-44 (435-IV) of 16 January 2003. The average annual parental contribution is between UAH 100 and UAH 500. According to the Law of Ukraine on the State Budget 2016, the minimum taxable income in 2016 was UAH 18 528 per year.