The State Audit Office of Georgia (SAO) has studied the process of management and disposal of state owned enterprises and assess its effectiveness and extent of proper functioning. For this reason, SOE management regulatory framework and issues of accountability, transparency, remuneration, privatisation and dividend mobilisation process were studied. The Audit covers period from 01.01.2012 to 01.11.2014.
Studying and analysing the regulatory documents of the enterprises has revealed that the policy and strategy of the state, as a managing partner, with clearly defined vision and goals, is not established, therefore, criteria for establishing SOE’s is not developed and implemented and the list of significant enterprises is not defined. Moreover, there is no corporate governing code for SOE’s, which would lay out main principles and basics of managing the enterprises.
Analysis of the existing situation has revealed that the management system of SOE’s is decentralized. Reporting and performance appraisal system are not comprehensive and uniform. Therefore, there is no aggregate data about the assets and performance of the enterprises. Notably, The SAO have discovered 75 state owned enterprises, which are not in the records of the NASP, as a result of comparison between the databases of registered enterprises in the Agency and in LEPL Registry of Commercial and Non-commercial Entities under the National Agency of Public Registry and LEPL Revenue Service.
It is worth noting that effective and fair remuneration and incentives system is not developed for the enterprises’ employees, which is important due to the materiality of wage expenses and low profitability of the SOE’s (approximately one third of the enterprises are at a loss).
Assembly of the Commission, which is a decision-maker for profit distribution of cost-effective enterprises is not regular (in the audited period the Commission have assembled only once, in 2013). Hence, state dividends are determined with a delay. Moreover, there are no measures for timely mobilization of the dividens that are to be transferred to the budget, which decreases the benefits the state derives from them.
The present Performance Audit Report reviews the existing circumstances of the SOE management system and as a result of comparing it with the selected criteria, presents the corresponding recommendations, elaborated from conclusions of conducted study and analysis. Taking these recommendations into consideration would be reasonable, in order to improve the present situation.
