ISLAMABAD: The Ministry of Finance has directed all state-owned enterprises (SOEs) to adopt standard regulations and reporting manuals for their operational protocols, business plans, board appointments and financial audits to reduce financial risks for the state.
The ministry’s Central Monitoring Unit (CMU) issued directives to meet the deadline of the IMF. The Fund has directed to ensure that SoEs comply with the SOEs (Governance and Operations) Act 2023 and the SOEs Ownership and Management Policy 2023.
The Shehbaz Sharif government had made promise for adopting the standards in 15 largest commercial SOEs by the end of October. The first quarterly review of the Fund’s programme is due during the current month. Both parties are discussing to set dates for the review meeting.
Under these requirements, the CMU has issued guidelines to the SOEs for taking important steps and necessary components of their business plans, strategic goals, performing environmental analysis and framework for effective monitoring and evaluation.
As per another directive, the SOEs have to fulfill ‘Public Sector Obligations (PSOs) Costing Guidelines’ and methodologies in estimating and managing the fiscal requirements of fulfilling PSOs.
The Govt and IMF has agreed to give standard ‘Regulations on Audit Committee, Risk Management and Internal Control to all SOEs for ensuring strong governance, transparency and accountability system. The audit committees would be responsible to implement a robust risk management framework.
The ministries and divisions are also responsible to ensure transparent and effective appointment, induction and evaluation of the board of directors of the SOEs.
The country had made commitment to issue these four operational manuals to provide guidance on the implementation of the PSO framework and overall implementation of SOEs Policy by end of October. It has made commitments for adoption and publication by the 15 largest commercial SOEs by assets of externally audited, International Financial Reporting Standards (IFRS)-compliant financial statements and annual reports for last fiscal year by the end next month.
The Shehbaz Government has also promised with IMF for identifying, costing and contracting PSOs in the seven commercial SOEs with the largest government claims, with PSO agreements to be in present by end of the current fiscal year.
The SOEs’ boards have to setup audit committees. An independent member will lead the audit committee. The chairman/CE of the company will not lead the audit committee to make sure independence of the committee.
The Audit committees will review interim financial results before board approval. They will also hold meetings with external auditors in the absence of the CFO and CIO of the company.
Under the IMF program, the authorities are responsible to complete the development of an electronic database so that the CMU can fully meet its reporting obligations by end of the current fiscal year.