How to Improve the Financial Oversight of Public Corporations

IMF How To Notes, November 23, 2016

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How to Improve the Financial Oversight of Public Corporations

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Bibliographic details

• Authors: Richard I Allen, Miguel A Alves
• Published: November 23, 2016
• Series: IMF How To Notes
• DOI: https://doi.org/10.5089/9781475551983.061

Overview

• Many studies have highlighted how failures of public corporations (otherwise known as state-owned enterprises) can result in huge economic and fiscal costs.
• To contain the risks associated with these costs, an effective regime for the financial supervision and oversight of public corporations should be put in place.
• This note discusses the legal, institutional, and procedural arrangements that governments need to:
  • oversee the financial operations of their public corporations,
  • ensure accountability for their performance, and
  • manage the fiscal risks they present.

Key findings and surveillance focus

• Governments should concentrate surveillance on public corporations that:
  • are large in relation to the economy,
  • create fiscal risks,
  • are not profitable,
  • are unstable financially, or
  • are heavily dependent on government subsidies or guarantees.

Legal, institutional, and procedural arrangements

• The note examines the arrangements governments need to:
  • define legal frameworks for oversight,
  • assign institutional responsibilities for financial supervision,
  • establish procedural mechanisms to monitor and manage risks,
  • ensure accountability for performance through governance structures.

Policy recommendations (summary)

• Establish an effective regime for financial supervision and oversight of public corporations.
• Prioritize oversight resources on entities that pose the greatest fiscal and economic risk, as listed under "Key findings and surveillance focus."
• Implement legal, institutional, and procedural reforms to improve monitoring, accountability, and fiscal risk management for public corporations.

Content in this bundle

• Fiscal Policy: How to Improve the Financial Oversight of Public Corporations; How-to Note No. 5
  • Fiscal Policy: How to Improve the Financial Oversight of Public Corporations; How-to Note No. 5 (Markdown version)
  • Fiscal Policy: How to Improve the Financial Oversight of Public Corporations; How-to Note No. 5 (PDF)