Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Audit Blasts $880M City Charity Scheme

The city's budgetary watchdog on Thursday blasted the way City Hall conducts its finances and said it should "improve without delay" a fraudulent system by which the city gave $880 million — 12 percent of its revenues — to "charity" in 2000.

City Audit Chamber Chairman Viktor Dvurechenskikh said he was shocked by the way the city runs a scheme that grants tax exemptions to organizations that agree to spend money in a certain way, such as on social and cultural programs.

Dvurechenskikh said some 25 billion rubles ($880 million at the average exchange rate for 2000) was spent this way last year.

"The hair on the back of my neck just stood up when I discovered how this [$1 billion] was spent," he said.

He said there were numerous instances of City Hall granting money to charity programs that "were then spent on trips abroad, cars, office furnishings and even loans to commercial structures."

He criticized the city for "not using selective methods when choosing organizations to carry out the city's charity program."

"This year we are insisting on a 10 billion-ruble annual limit on the city charity program and it must be approved by the Moscow Duma now," Dvurechenskikh added.

The chamber also said in a report released Thursday that $22 million went missing from City Hall's budget in 1999 and nearly $360 million was wasted.

The chamber found that the city collected 3.3 billion rubles less than the 1999 budget projected and estimated a loss of some 2 billion rubles due to financial mismanagement.

The chamber found "abnormalities and violations" in 25 billion rubles' worth of transactions in and out of the budget. "The system of financing and planning city programs must be brought into line with planned expenditures," the chamber said in its report.

The chamber found "significant violations" involving the use of budgetary funds by the food resources and industrial policy departments.

Between January and June last year the food department lent 21 percent of its 1.37 billion-ruble budget to organizations already in debt, for example. And the industrial policy department spent 1 billion rubles in a way it wasn't supposed to, Dvurechenskikh said. He didn't elaborate, but said "vexation is aroused when officials manage budget money commercially."

"The city finance department applies no proper measures that would call to account the heads of organizations and enterprises for spending city money earmarked for a special purpose," the report said.

When asked about the report, city finance department spokesman Yevgeny Shibanov said in a telephone interview Thursday that the department "is going to improve its job."

"The budget procedures will be reconsidered soon," said Shibanov.

The City Audit Chamber is now turning its attention to "a very large project" of inspecting the budget funds of 20 Moscow neighborhoods and all 10 administrative districs, Dvurechenskikh said.