State Enterprise Behind Closed Doors: Why Auditors Failed to Inspect Nauchna Agrofirm
17 March 21:04
Specialists of the Eastern Office of the State Audit Service planned to conduct a financial audit of the state-owned enterprise Scientific and Production Research Agrofirm Naukova, which is subordinated to the National Academy of Agrarian Sciences (NAAS), but failed to conduct it. The inspection was aimed at finding out why the company, which has significant assets, is in a state of decline and does not bring any benefit to the state, "Komersant Ukrainian" reports, citing the State Audit Service of Ukraine (SASU).
The state of the agricultural company and its assets
Since 2011,Nauchna Agrofirm has been in the process of liquidation due to a court decision to declare it bankrupt. For 14 years, it has been managed by arbitration managers, and the National Academy of Agrarian Sciences itself has gradually lost all control over the company’s assets. As a result, the state receives neither profits nor other economic benefits from the activities of the agricultural company.
This is especially problematic because the company still owns a significant amount of resources:
- 159 land plots with a total area of 14.5 thousand hectares – mostly arable land that could be used for agricultural production;
- 7 trademarks that could provide the company’s products with certain recognition;
- 2 real estate objects – warehouse, production or administrative premises;
- 5 vehicles that could be used in business activities.
However, despite this potential, the agricultural company continues to exist only formally, without carrying out any active activities.
Resistance to the audit
During the audit, representatives of the State Audit Service faced open resistance from the company’s management. When the auditors arrived at the facility, it turned out that the director of the agricultural company was absent from his workplace. The company’s chief accountant refused to sign the documents required to start the audit and did not provide access to financial and accounting documents.
This situation is a violation of the law, as the management of a state-owned enterprise is obliged to cooperate with auditors and ensure transparency of its financial activities. As a result, the State Audit Service was forced to draw up an Act on the Impossibility of Conducting a State Financial Audit dated March 3, 2025.
Reasons for the audit
The main purpose of the audit was to determine who could have used the bankruptcy of the agricultural company in their own interests and whether there were risks of non-transparent privatization of its assets. Given the company’s significant land holdings, it is likely that certain entities may be interested in covertly transferring these resources to private hands.
The audit also aimed to establish how the company, which has more than 14,000 hectares of land at its disposal, managed to bring itself into a state of complete decline and who is responsible for the loss of state control over its activities.
Further actions and legal consequences
As the audit was not possible, the State Audit Service turned to law enforcement agencies. A corresponding appeal was sent to the Main Department of the National Police in Dnipropetrovs’k region. Now it is the police who will investigate the circumstances of the audit blocking and identify possible abuses in the management of the company’s assets.
It is important to note that according to Article 351-1 of the Criminal Code of Ukraine, obstructing the activities of a state financial control body is a criminal offense that is punishable. This means that the management of an agricultural company may face not only administrative but also criminal consequences for their actions.
The situation around the Naukova agricultural firm is indicative of many state-owned enterprises that have been left without proper management and control. It demonstrates problems in the management of state property, possible corruption risks in the agribusiness sector, and the unwillingness of some managers to provide information to government agencies about the financial condition of their companies.
Further developments will depend on law enforcement agencies, which must conduct a thorough investigation to determine whether the company was deliberately forced into bankruptcy and who might benefit from its liquidation.
