The state-owned Luch Design Bureau has repeatedly appealed to the government and political leadership of the country over the actions and conclusions of the State Audit Service. The design bureau reported that a new audit was launched 10 days after the first public appeal "regarding the erroneous conclusions of the State Audit Service and related threats".
This audit of certain aspects of the bureau's activities concerns, in particular, the inclusion of profit in the cost of the bureau's products. The State Audit Service had earlier requested that the Ministry of Defence recover the profits made by the enterprises, according to the Luch Design Bureau.
"The State Design Bureau Luch uses its own working capital to develop new weapons systems, eliminate the effects of missile strikes, restore and replace damaged equipment and products, relocate production and increase production capacity. These working capital funds are generated by profits, including from government contracts. The permitted amount of profit is expressly provided for by Resolution No. 363 of 3 March 2021, which is still in force," the bureau said.
It added that the State Audit Service's requirement to return the profit "is critical for the company's operations and calls into question the survival of the defence industry".
"The third inspection by the SAS during martial law is surprising and distracts human resources from the development and production of weapons," the company said.
The design bureau believes that the SAS's actions to seize resources from defence companies are contrary to state policy and will lead to critical consequences.
"The State Design Bureau Luch publicly appeals to the Cabinet of Ministers of Ukraine and the Verkhovna Rada of Ukraine to impose a moratorium on inspections of defence companies, including by the State Audit Service, until the end of martial law in Ukraine," it added.
In its conclusions, the State Audit Service sees the profits made by private and state-owned companies cooperating with the Ministry of Defence during martial law as violation. The service made this conclusion on the basis of Government Resolution 335. At the end of June, the State Audit Service audited the Ministry of Defence's contracts and reported violations worth UAH 2.5bn. According to the service, Ukrainian producers cooperating with the ministry should not include profit in contracts with the state. The SAS is demanding the return of this UAH 2.5 billion.
Then Minister of Defence Oleksiy Reznikov said that the provision of the resolution banning profits contradicted the Civil and Commercial Codes and a number of other legislative acts. In September, the Ministry of Economy rejected the State Audit Service's conclusions that defence suppliers had no right to profit.
On 21 September, parliament passed a resolution cancelling the provisions of Government Resolution 335 and guaranteeing that MoD contractors will be compensated for economically justified expenses.