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Internal REPORT



of auditing the performance of the Ukrainian project office

(Odessa, Ukraine) and proposals

for changing its performance


Philipp Weller, Director, WWF Danube Carpathian Programme Office

Hartmut Jungius, Director, WWF Easten Europe/Central Asia Programme


Grigori Mazmaniants, Managing Director, WWF Russian Programme Office

Moscow-Odessa, March 2001


The critical situation with administrative and financial management was found in the course of analysis of the Odessa Project Office operation. In particular worrying are facts like: penalty sanctions can be imposed by the state at any time due to tax nonpayment by the project office.

General conclusions based on the results of the audit are as following:

(i) significant changes in administrative and financial management are absolutely needed;

(ii) a number of changes to address “external threats” (penalty sanctions, contradictions with the Ukrainian Law, etc.) have to be carried out as soon as possible;

(iii) a mid-term strategy for organisational development of Odessa Project Office has to be agreed.

Recommended model for these is a “turnaround” strategy.


1. Introduction.

2. General information

3. Description of the organization’s problems.

4. Situational analysis

5. Changes strategy - Turnaround

6. Terms and method to appraise successfulness of the changes implemented

7. Project Office (PO) further work

8. Possible RPO assistance

I. Introduction.

Following te request of Philipp Weller, Director of the WWF Danube Carpathian Programme Office (DCPO) in the frameworks of partner assistance to DCPO Grigory Mazmaniants, Managing Director of the WWF Russian Program Office, has analyzed the work of DCPO Project Office (hereinafter referred as PO) in Ukraine, Odessa.

Terms of references for analysis:

1. To assist the “Partners for wetlands” Project Manager and Odessa office staff in reviewing financial procedures and structures to ensure adequate financial reporting to WWF and in meeting Ukraine legal requirements.

Particular attention will be given to procedures for

- international transfer of funds to Ukraine

- Legal reporting in Ukraine

- Bookkeeping systems

- Staff Salaries

- Contracts with Ukraine

2. The review will include an assessment of the legal status of WWF in Ukraine and recommendation on possible changes to this structure based on the experience in operating the Russian Programme office.

3. To review the structure and management arrangements in the Odessa Project Office and to recommend attentive structures or operations, the delegation of authorities and intern communication and communication to the DCPO + “Partners for wetlands” Project Coordinator.

4. To meet with key staff and review their existing responsibilities and ToR and to suggest possible training or assistance that might help them collectively or individually improve their skills and job performance.

5. The assessment should include a more detailed analyses of the management situation (shortcomings, constraints, problems etc.) and it should come up with clear recommendations to decide upon by WWF DCPO and WWF NL.

6. The assessment should provide a proposal for further development and improvement of the management situation for the next financial (extension) year;

The analysis was conducted during 28 February – 4 March 2000 by interviewing PO staff, studying foundation documents and contracts, ToRs, financial and technical as well as other documents related to the PO’s performance.

II. General information

PO was established by DCPO in order to implement “Partners for wetlands” project in Danube Delta (Ukraine) in 1998. PO is now implementing 3 projects:

“Partners for wetlands” (PfW- the basic project),

“Carpathian Ecoregion Initiative” (CEI), and

a small Moldavian project – NB! no documents concerning this project were found that’s why it was not assessed.

In September 1999 the PO was registered as an Ukrainian Charity Fund named “Project Office of WWF” (registration date – September 09, 1999, date when the status of a charity non-profit organization was obtained – July 07, 2000). Despite the fact that WWF International is the Fund’s founder, according to the legal Fund’s Charter the founder (as an institution) has actually no rights to run/manage the Fund. The managing body of the Fund is the Council consisting of 4 persons: Hurtmut Jungius, Philipp Weller, Natalia Goriap (former PO’s director) and Anna Galizkaia (leader of large NGO “Danube Delta”). The Council is divided into the Fund’s Board (Natalia Goriap и Anna Galizkaia) and Supervisory Council (Hurtmut Jungius и Philipp Weller). 23 permanent employees work for the PO and about 20 persons are contracted to fulfil particular tasks. In January 2001 the PO’s director Natalia Goriap has decided to send in her resignation (March - April 2001).

III. Description of the organization’s problems

Basing on the results of the audit the problems listed below were identified and ranked against the following criteria:

  • financial reporting in Ukraine, violation of which might cause penalties;

  • legal status in Ukraine (including contracts with Ukraine, legal set-up,etc.), where violations of legal norms might cause institutional closure;

  • financial reporting to donors, where there are indications of inadequate reporting;

  • project performance;

  • WWF image in Ukraine and WWF’s family policy;

  • human resources, organisational climate;

  • further organisational development.

Ranking is given to problems basing on the level of potential threat as following:

high – H, medium – M, low – L.

Financial reporting in Ukraine (potential penalties)

Legal status in Ukraine (institutional danger)

Financial reporting to donors (inadequate reports)

Project performance

WWF image in Ukraine ;WWF’s family policy

Human resources, organisational climate

Organisational development

Ukranian Law - general


From September 1999 to July 2000 the foundation’s documents weren’t registered properly. As a result, WWF funds obtained within that period of time are to be levied profit taxes. PO didn’t pay the tax - this can cause penalties to be imposed as well as criminal prosecution against the organization’s managers (under the Ukrainian law).







There is no property inventory. For the time being it is illegal to keep computers, furniture, etc in the office, since there are no documents which define owner of this property. This property does not even record in the accounting balance. This might cause penalties according to the Ukrainian law.





The existing labour contracts do not contain information on payment terms, the parties responsibilities, vacations etc. There are only general ToRs in the contracts. The Fund doesn’t make annual appraisals or set particular tasks to employees. The form of the contract doesn’t comply to the Ukrainian laws and the document can’t be used in legal proceedings.






The vacations’ situation is unclear. As the most of employees say, the vacations are only permitted by the PO Director in August. However, since it’s impossible for the project performance to let everyone go on holidays at the same time, many employees haven’t been on holidays for several years. This situation contradicts the Ukrainian Labour Code.







The Odessa PO assumed the right on WWF logo (the panda trademark) without the WWF International authorization have registered it as its own trademark in Ukraine.





There is a very serious gap in communications between DCPO and the Odessa PO. The PO staff don’t really know what reports and when they have to present to the DCPO. Clear contracts with the DCPO are nonexistent. It appeared that nobody at the PO knows when money is to be transferred for a next project.






The modules leaders (except for Oleg Dyakov, module A leader) don’t have plans of further project performance and don’t know how much money they need for the project realization according to Logframe of the project.






Due to the lack of contracts, funds remitted to the PO from the DCPO are not considered as “a charitable donation for particular purpose”. This means that according to the Ukrainian law these kinds of funds have to be divided as following: 20% for organisational purpose (meaning in this case office expenses) 80% for actual operations (meaning in this case projects activities). Since staff salaries according to the Ukrainian Law have to be included into 20% (organisational costs) this results in artificial increase of the project’s expenses share simply in order to stick to 20/80% ratio.






Employees don’t get salaries for 3-4 months due to the fact that the DCPO remits funds irregularly.







Serious systematic problems are found in accounting records. The PO’s accountant doesn’t have the required qualification. (According to his own words, he was chosen for the position “because of his love for numbers and his experience in environmental issues”.) It should be noted though that for the preparation of the annual report a professional accounting organization was appointed. Yet, it does look like a good systematic solution.






In prepayments reports the amounts accounted for by executants often do not correspond to the initial documentation presented. For example, the Danube reserve’s report on repair expenses (са. 1000 EURO) does not comply with the presented documents.





Analysis of the accounting books showed that there is “a minus” in the PO’s cash office. The situation can’t be explained either from accounting or from common sense viewpoints. The director and the accountant said that this happened due to the significant delay in transfer of funds from the DCPO followed by the PO Director’s decision to take a loan from a foreign citizen – still this loan was not registered whatsoever.





There is no budgetary control in project implementation – all expenses depend on a personal decision of the PO’s Director based on her assessment of importance of this or that project’s task. The managers do not have any idea of the budget available for “their” project’s tasks, neither do they understand the fact that unexpended funds shall be returned to WWF NL at the end of FY.








The PO structure presented by the director differs from the structure portrayed by the most of staff rapidly (see Annex 1). The director is a key figure in the PO decision making process and therefore is unable to run the organization as a whole, because all time is wasted to resolve minor issues.





The PO staff don’t know their own responsibilities and responsibilities of their colleagues. Employees pointed at the director always when asked about individuals responsible for certain processes.





Wages and salaries vary from $ 60 to $ 300 depending on the staff category. The category and salary rate are being determined by the PO Director. However, there is no clear policy on salary’s grades and the personnel don’t understand the grounds of staff grading.





Unlike control over the projects related performance (which is practically nonexistent), the working hours system is strictly regulated. Coming to the office, each employee has to sign his/her name in the special book, they have to mark their temporary leavings for any reason during the working day. In the end of day they have to register time of leaving. As the interviews with the staff showed this system is hardly understood/appreciated by anybody. Since this policy (or any other policy) is not written anywhere and not related to the job’s results it creates unnessesary tension and confusion in the team.





IV. Situational analysis.

Because of weak organizational skills and too strong power centralization of the former PO director, the PO is now in crisis and performance of the main project (Wetlands) is jeopardized. If the issues of the PO tax debts, the quarterly accounting reporting to the state, the project financing and works’ planning aren’t resolved in the nearest future, the PO closing is the most probable. It will result in a scandal with the Ukrainian authorities (due to tax problems) and failure in the main project implementation.

It is also essential to restructure the organization, to create a normal working climate, personnel changes, legal support, staff motivation and so on.

Having in mind that a new director of the PO has to be hired, the transition period shall be minimum as the project shall be finished before the end of FY02. The PO changes are expediently to be conducted until June 30, 2001; the problems shall be resolved simultaneously with the organizational changes.

Unfortunately, long-term gradual strategies like “Organizational Development” (OD) or “Systems Intervention Strategy” (SIS) can not be accomplished for this particular situation, therefore “Business process re-engineering” (BPR) or “Turnaround approach” appear to be more preferable (See: Stuart Slatter 1984 Corporate Recovery, Penguin, Harmondsworth.; for more information, please, refer to Att.2.)

The Turnaround approach allows to change the organization’s work in the shortest period of time and to decide on the most of the problems listed. However, DCPO will have to take an active part in the PO activities within the period of changes. In the course of the Turnaround the weekly reports can be justified, but for the normal time it is too bureaucratic. During the Turnaround period the monthly visits of the DCPO Director to Odessa are desirable. Close working cooperation will be beneficial not nly in terms of a sort of “on-job-training” for a new director, but it will also give additional grounds and information to the DCPO director to appraise a new PO director at the end of the turnaround period.

V . Changes strategy - Turnaround.

Time period for the Turnaround – 20 march – 30 June 2001. The steps could be used as guidelines for the new director during this period.

Step 1. (Transition period)

  • The old director is to be dismissed immediately. If needed to speed up/smoothen the process – possibly with reimbursement from the DCPO.

  • The PO new director is to be selected until mid-end April.

  • Until then an Acting director shall be appointed. His/her responsibilities for this period are to be as follows:

  1. to freeze any steps not related to those projects’ tasks which are to be carried out until end April; to concentrate exclusively on current activities which are underway;

  2. to list the urgent tasks and to define corresponding volume of urgent payments (from mid-March to end-April); to present the list to the DCPO; after the approval the DCPO shall ASAP remit the required funds for this period of time. Participation of the Acting director in allocation of further funding (until the end of FY01) should be limited.

  3. To urgently involve legal counsels to study the profit tax situation and offer alternatives of decisions to DCPO.

The most preferred candidates to the director’s post are Oleg Dyakov, module A Wetlands project leader, and Tatiana Galuytkina, module D leader.

Step 2. Gain management control - a new director

The new director major responsibility for the period until the end of FY01 are as following:

  1. to review and analyse (in consultations with the staff) the current activities and identify those which can be completed until the end of FY01. List these activities and define the budget which will be spent. (Detailed correction of the project budget does not seem to be a realistic task within this period – it is rather recommended to focus on actual activities).

  2. Submit the list to the DCPO for approval. After the approval the required funds should be transferred by the DCPO. It should be noted that according the audit analysis the sum will be less, than the current budget available for this FY. Therefore, NO LATER THAN MAY this budget changes should be agreed with WWF Netherlands. (Otherwise, the remaining funds will have to be returned to WWF Netherlands and “lost” for the project)

  3. to elaborate a simple and clear temporary procedure on financial decision-making within the office. The staff should be informed on the procedure and format for internal financial requests. This procedure should be reviewed later and turned into a PO’s internal policy.

  4. legal actions shall be taken to replace the old director in organization’s Council. In coordination with the DCPO and WWF International a new composition of the Council has to be agreed – additional member from WWF International is recommended to guarantee a proper institutional control. All changes have legally fixed with the help of professional legal company.

Step 3. Establish and communicate credibility with stakeholders

  1. The umbrella agreement shall be worked out between the PO and the DCPO, including procedure, format and timetable of reporting to the DCPO; use of WWF logo, rights and responsibilities of parties etc.

  2. This agreement should not include obligations for certain projects – as a rule a separate contract should be signed for every project. It is recommended to agree a certain standard format for projects contracts between the DCPO and the PO.

  3. It is recommended to clearly identify responsibilities of the DCPO project administrator (Anna Koch) and of the DCPO Director (Philipp Weller) with regards to the PO. It is extremely important for further operations of the PO that the PO’s director has a clear picture of who is responsible for making particular decisions in the DCPO.

Step 4. Evaluate the conservation projects

  1. Together with modules’ leaders the PO director should review objectives of the main project until the end of the project. (Other project can be reviewed later). All changes and reviewed working plan should be presented to the DCPO and after the approval agreed WWF Netherlands.

  2. NB! It is recommended to carefully assess the existing Logframe against project actual achievements and performance and future potential. The project tasks could be extended in some modules (for example, module A) as there is no sense to build sluice systems at Danube mouth’s islands without working out the management plan of these systems. On the other hand, modules B and C could be diminished to a reasonable size.

Step 5. Assess existing managers and replace if necessary

  1. The performance of the PO employees is to be appraised and basing on the revised project workplan the temporary structure of the PO is to be formed*.

  2. The chief accountant shall be replaced. It is highly recommended though to involve Alexandr Fedorchenko in the PO’s operations – it is resulted from the interviews that he has got experience and motivation, he simply was put not to the right position. As an option – position of a project’s administrator can be offered to him. A professional chief accountant has to be hired or another option is to engage in a specialized accounting firm to keep PO books.

*The temporary structure is formed for a transition period. The structure can be changed significantly when a longer-term vision for mission and development of the PO is agreed.

Step 6. Action plan

  1. basing on the steps 4,5 a clear mid-term plan for the PO’s organisational development has to be agreed with the DCPO.

  2. Principal component of this plan is an agreed office structure with the clear set of ToRs for principal staff.

  3. According to this structure and basing on the results of staff appraisals a certain plan on hiring new people and firing existing staff members should be agreed

  4. In particular, need to hold many translators shall be considered as they translate no more than 7 000 words per month. The disengaged funding can be used to conduct English language training for PO employees. See training.

Step 7. Implement organizational change

  1. After the approval by the DCPO of the projects workplan and structural action plan, the staff members should be informed about the “new guidelines”. With preferably limited discussion at this stage the plans should be presented as an “imperative for action”.

  2. Responsibilities to implement the plan should defined and clearly communicated.

  3. It is important though to encourage the staff to openly discuss the POs problems, yet the focus should be strictly – implementation of the agreed plans.

  4. The main projects budget and PO’s budget shall be discussed for July’01 – June’02 period. Yet, at this stage it is NOT recommended to consider new projects. This might even undermine the new director’s authority, especially if he/she is a Ukrainian citizen – there might be a perception that the new director is simply looking for recourses for his own ideas rather than concentrating on improvement of organisational management, which is a priority.

Step 8. Installation budgetary system

  1. Basing on previous steps a contract between the PO and the DCPO on the main project implementation should be signed. The contract has to include the project’s budget, new Logframe of the project, payment schedule and sums of installments.

  2. The contract has to be reviewed by lawyers to comply with the Ukrainian laws and to avoid 80/20 ratio problems.

  3. At this stage the budgetary control of modules must be brought in and rights of modules’ leaders concerning budget usage shall be determined. For example, a module’s leader is entitled to spend up to 1 000 grivnas at his/her own or all expenses shall be approved by a director in writing and so on.

  4. General financial procedures shall be developed. In fact, they have to be directly related to budgetary control of project modules. Financial reports shall be a work component and be approved by modules’ leaders in advance. Mechanisms to report to DCPO shall also be provided for, including differentiation between payments actually made and prepayments to executants. For example, advance payments can be separately allowed for before a full financial report is received from an executant. Requirements and a form of such reports shall be worked out and implemented.

  5. The ITC budgetary system used in RPO can be taken as a basis.

9 Step Legal basis of activities

  1. The PO legal basis shall be reviewed. In particular, PO reestablishment as WWF International representative office shall be studied.

  2. The opportunity to remit cash from DCPO to personal bank accounts as purposeful charity grants to the Ukrainian individuals shall be examined as well.

In Russia RPO has come to the agreement with a number of banks. WWF transfers funds to the banks once per month, the banks open temporary personal accounts to WWF project executantss and allocate funds according to the list of executants and sums of disbursements. This scheme can allows to evade salary taxes which consist about 75 % in addition to all payments to individuals in Ukraine.

iii) The WWF trademark has to registered by WWF International according to the Ukrainian law.

VI. Terms and method to appraise successfulness of the changes implemented

While implementing all step of strategy proposed, regular reporting to DCPO and coordination of dates are required. In my opinion, all tasks can be achieved within 1,5 month, i.e. until July 2001. The key criteria that the changes implemented are successful are as following:

  1. Tax offenses are eliminated and there is no treat of penalties from the state.

  2. The work schedule is revised and modules’ leaders realize what they have to do to solve project tasks successfully.

  3. PO budget is controlled and it’s the main instrument for managers and staff to make financial decisions.

  4. On July 5, 2001 DCPO will receive financial and technical reports in the format required.

  5. PO is aware of dates and sums of next installments. Accordingly, DCPO strictly carries out its obligations under the contract irrespective to funds spent within a quarter.

  6. PO staff attitude to their work has changed. Every employee is able to answer the following questions

  • What are doing now and what are you going to do tomorrow?

  • How much do you need to implement your plans and how much do you have?

  • What is your colleague responsible for?

  • What’s the organizational structure?

  • How much is the whole project success?

  • What difficulties have you met? How is PO overcoming them?

Apart from that the review of the list of problems at the end of the transition period would give an idea of the success achieved.

VII. PO further work.

1. The human recourses policy for the PO shall be worked out. It can be based on RPO HR policy, except for wages size which are to be in correspondence with salaries of other Odessa non-profit organizations. A standard labour contract shall be drafted with lawyers assistance. The annual appraisals of employees are desirable according to a Year Appraisal form of WWF International.

2. Certain attention should be given to more openness and cooperative help from the DCPO. The DCPO should come up and at a certain point agree with WWF International a long-term vision for the PO’s future development. This then will be the basis for project-related fundraising (if needed) as well as for the institutional development of the PO.

3. Training

a) If translators’ positions are to be cut down, it is advisable to conduct English training for key employees or to stimulate interest of staff by partial payment for classes or by providing time for attending classes.

b) Training on budgetary planning and performance planning are desirable as modules leaders don’t have experience of working with budget and Logframe.

c) Training on team working, roles’ allocation etc. can be essential factor for unifying the group.

VIII. Possible RPO assistance

  1. ITC system which allow to control budget of project modules and keep accounting records.

  2. PRO HR policy worked out according to WWF International guidelines and adapted to the Russian laws (the laws of Russia and Ukraine are similar). The RPO policy includes a standard contract draft and so on.

Attachment 2

Main factors for comparison of the later two strategies – the Turnaround strategy has been chosen:



Existing situation


The need for and possibility of radical change in performance

The need for decisive action including the replacement of senior managers

Replacement of director, chief accountant and other key managers is required.


Focuses on a cross-functional business process

The organization as a whole

The task is to build a new organization with staff and financial history we’ve got.



Intense; initially directive and decisive with little scope for interaction

Need for urgent actions.



Impending bankruptcy

Due to potential tax problem, the organization is almost to be liquidated.


Varying, but probably not the IS department

New chief executive

When the organization was audited, the decision to dismiss the director had been made so a new director has to be hired.

Attachment 1

The present office structure


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