ARMA is undergoing its first independent external audit: why it didn’t happen sooner and what’s next
A decade of systematic inaction and deliberate disregard for the mandatory legal requirements regarding the annual independent assessment of ARMA’s effectiveness has come to an end with the launch of a procedure whose legitimacy is met with justified skepticism. An independent commission has been formed, and it (not without ARMA’s own assistance) has begun the audit. Let us analyze the expected outcomes and likely legal consequences of the audit.
Control That Failed
The specific nature of ARMA as an agency dealing with assets derived from corruption and other crimes has always generated heightened public interest and a demand for strict safeguards. After all, the management of seized property is prone to conflicts of interest and misconduct: decisions on asset transfers, the selection of a manager, terms of sale, and oversight of asset preservation… It is therefore not surprising that the agency’s leadership has regularly been the subject of public controversy over the years, with certain incidents escalating into scandals involving criminal investigations.
At the same time, the model of external oversight was established from the outset. Already in the initial version of the 2015 ARMA Law, Article 12 provided for an annual independent assessment of the agency’s performance. It was to be conducted by an external oversight commission consisting of three members, appointed annually by the President, the Verkhovna Rada, and the Cabinet of Ministers. The law set fairly high selection criteria: ten years of experience, an impeccable professional reputation, and restrictions on individuals associated with public service. This commission was granted tools for genuine access to information: the right to review documents held by the agency, conduct confidential interviews with ARMA staff, other agencies, and any individuals possessing the necessary information.
Such an audit was to be conducted by an international or national auditing firm with a strong professional reputation, and the report was to be submitted to the Cabinet of Ministers and ARMA and included in the agency’s own annual report.
Subsequently, the mechanism was modified and “strengthened.” Almost immediately, a direct personnel link was established: in Part Four of Article 3, among the grounds for dismissing the ARMA head, the presence of an external assessment conclusion regarding the agency’s ineffectiveness and the improper performance of duties by its head was enshrined. The procedure was also updated; in particular, the details regarding the inclusion of the conclusion in the annual report were specified, the approach to approving the form and content of the audit report was changed, and budgetary reimbursement of expenses related to the commission’s work was established.
It is clear that this model of implementing the law allowed the procedure to remain stalled for years.
Why now?
According to the Transitional Provisions of Law No. 4503-IX of June 18, 2025 (regarding strengthening the institutional capacity of ARMA), the formation of the Commission for Independent External Evaluation was required to begin on July 30, 2025.
Once again, the updated audit procedure is no longer annual. It has been tied to specific milestones following the appointment of a new chair: one year and three years in office.
The mechanism for forming the Commission was also revised: now the Cabinet of Ministers approves the membership based on proposals from development partners identified in the context of international technical assistance, with fixed deadlines for the government and partners and a mandatory reserve of replacement candidates.
However, the Cabinet of Ministers did not get around to implementing the law’s requirements until late January of this year, when Order No. 71-r of January 28, 2026, approved the Commission’s composition, to which Ukraine included four international experts (one alternate) from the Netherlands, Romania, the United Kingdom, and Poland with specialized experience in criminal law and sanctions policy, anti-corruption, and asset recovery.
On March 2, ARMA reported on an inaugural meeting with them and the agreement on the future format of work, schedule, and stages of the assessment. The press service also noted that the audit is being conducted with the support of the international technical assistance project “Supporting Ukraine’s Approximation to the EU in the Field of the Rule of Law (3*E4U),” implemented by the German Society for International Cooperation (GIZ) and the International Development Law Organization (IDLO).
ARMA stated that it expects to receive an “assessment of its work” and “clear recommendations for further changes” based on the audit results. Such expectations for guidance from abroad effectively indicate that within the agency, they consider their current work to be far from ideal.
And it must be acknowledged that there is every reason for such a sentiment.
Concealed Violations
In 2024, the State Audit Service conducted a scheduled state financial audit of ARMA. The audit concerned the implementation of budget program 6431010, “Leadership and Management in the Field of Asset Tracing and Management,” in 2022–2023. A report was compiled based on the findings, but it was never made public.
At the time, officials cited a provision of the Criminal Procedure Code prohibiting the disclosure of information regarding pre-trial investigations, as the audit materials had been transferred to the Department for the Protection of National Statehood of the Security Service of Ukraine and included in criminal proceedings under Part 1 of Article 388 (Illegal actions regarding property subject to seizure, pledged property, or property that has been described or is subject to confiscation) of the Criminal Code.
However, the auditors’ key claims were already known from public reports. These included the absence of decisions regarding the further transfer of a significant number of assets (for management or sale), problems with the actual transfer of assets to managers, loss of value of short-term storage assets due to untimely sale at auctions, as well as instances of property loss due to unauthorized use by third parties and the accumulation of utility debts. But, as is well known, when it comes to the inefficient management of large enterprises’ assets, in practice this translates into hundreds of millions in losses and, consequently, expenditures from the State Budget of Ukraine.
Nevertheless, it seems quite strange that a financial control tool, which should provide an objective picture of violations and management conclusions, is effectively concealed behind a classification of secrecy within the framework of criminal proceedings.
In this regard, the question arises: will the foreign members of today’s independent commission even learn about the violations that occurred in ARMA’s operations if the state restricts access to such information?
A Reality Check
The Accounting Chamber also warned in 2024 about the risks of budget losses and the need for immediate reforms at ARMA. It also conducted an audit and identified serious shortcomings. The focus of this audit was specifically the organization of the management of seized assets and the mechanisms for preserving their economic value, which revealed that over eight years of operation, the agency had failed to establish an effective system. Indeed, only 1% of over 100,000 court rulings on asset seizure resulted in the transfer of assets to management. As a result, assets worth 39.4 billion UAH (approximately $940 million at the time) remained unmanaged.
Against this backdrop, in its public communications, the agency’s leadership at the time emphasized the “unprecedented nature” of the audit and the growth in revenue from asset management, although the Accounting Chamber, on the contrary, focused on the lack of procedures and data, without which asset management becomes a series of random decisions.
As a result, the recommendations outlined steps that directly address the root causes of the problems: regulate interaction with the prosecutor’s office, pre-trial investigation bodies, and foreign authorities; conduct an inventory of court rulings and assets, cross-checking data with the Office of the Prosecutor General; establish transparent criteria for the competitive selection of managers and appraisers; and improve electronic auction procedures for the transfer of assets into management or their sale. Was all of this implemented? Hardly. As is often the case, law enforcement problems were attributed to imperfect legislation, after which efforts were made to enhance institutional capacity.
Three months for ten years
Therefore, the external audit of ARMA, which recently began, is important not as just another inspection, but as a test of the state’s ability to utilize its own safeguards in a sector with high corruption risks. And the questions of this test are as follows: will the commission gain real access to documents and explanations; will it publish a clear methodology and evaluation criteria; and will the work conclude with an open, reasoned conclusion containing recommendations that can be verified and implemented?
And although the independent assessment was conceived as a procedure with direct legal consequences for the head of ARMA, the “transitional” audit began at a time when the agency is headed by an acting director. Consequently, the “personnel” function of the mechanism is neutralized, turning the audit itself into a technical exercise without personal accountability.
Another cause for concern is the tight timeline. The law on strengthening ARMA’s institutional capacity stipulates that the work must be completed by May 30, 2026, with the adoption of the conclusion of an external independent evaluation (audit) of the National Agency’s performance. Will international experts be able to complete this in three months? How thoroughly can the agency’s ten-year history be assessed without guidance from the agency itself? And how independent is an external evaluation if the auditors hold kick-off meetings with ARMA’s “team” and coordinate their format, schedule, and stages with them? But these are no longer test questions—they are rhetorical ones.
