REPORTING STANDARD ON OPPORTUNITY LOSSES

Working in the public sector environment evoke my soul many times about the need of financial reporting standard for discloser requirements with regard of the opportunity loss(es) if any pointed out by the management/auditors (whether internal auditors or external auditors).

It is a serious issue especially in case of state owned enterprises that are not subjected to legislative scrutiny by Auditor General of Pakistan (AGP) or the Public Accounts Committee (PAC) relating to the effective use of public fund. The Board of Directors (BOD) should consider about the need of the Accounts Committee consisting of board of directors, whose report along with minutes of meting should be submitted to Board of Directors and AGP or Public Accounts Committee for review in good gesture for good governance.

In the public sector it could also been observed that effective fund management is missing. Public taxes/funds are usually been placed/invested with lower rates of return although the opportunity of higher yield fulfilling the organizational need as well as according to the corporation policy is available.  Beside the culprits this credit goes to our bureaucratic attitude to obliged others and use the public fund in personal interest.

As a policy matter it must be decided and instructed to all public owned entities that placement could only be made to the highest return yielding financial institution, for contrary prior approval from accounts committee / Board of Directors is required. The board of the corporation must also give guidelines in regard of minimum credit rating of the financial institution for secure placement.

The commercial audit wing of the Auditor General of Pakistan should also perform a monitoring role for compliance for adopted standards and good practices by state-owned enterprises. Monitoring role for Public sector entities need to be improve. There is currently no Public sector Enterprises Monitoring Boards as established in other countries. This role is performed by the corporate wing of the ministry of finance. There is little or no involvement of Auditor General in the selection of internal auditors and external auditors of the state-owned enterprises. There is a need to first reform the individuals or participants in the process of decision making, identified person(s) must be charged with authority and responsibility for implementation.

Integrity and objectivity comes with the fear of the Accountability, Openness in front of public would also play an important role in this regard. Financial Statements / Statement of Expenditure and revenue must be opened for public (may be uploaded in website etc) so that independent opinion could be obtain for better prospective. Holder of public offices should be as open as possible about all the decision and actions that they take. They should give reason for their decision and restrict information only when the wider public interest clearly demands.