Public enterprises in the United Arab Emirates (UAE) are of recent origin. Their establishment was encouraged after national independence in 1971 to provide more efficient and effective services, promote economic growth and help in generating State revenue.
In UAE, public enterprises take two forms:
Examples of such companies are Emirates Telecommunication Corporation Ltd, Emirates Industrial Bank, Abu Dhabi National Oil Co. and National Bank of Abu Dhabi.
Public enterprise in UAE are generally managed by Boards of Directors. The Board determines the policy and is responsible for the general administration of the enterprise. The Chairman of the Board of Directors is usually a minister. Members of the Boards of Directors of the government owned corporations are appointed by the government, while the Boards of the jointly owned companies are appointed by the shareholders at the annual general meeting.
The general management and senior employees are usually appointed by the Board of Directors. Other personnel are recruited by the management.
There is no difficulty facing public enterprises in UAE in recruiting qualified personnel as they offer attractive terms of salary and conditions of service.
Training of the staff within the country and overseas is provided as and when needed. Institutions such as Administration Development Institute, Banks Training Institute and Telecommunication Training Center also help in providing training to the staff of public enterprises.
The capital of the corporations is financed wholly by the government, while in the case of jointly owned companies, the capital is financed by the government and the private sector.
Public enterprises derive funds from internal resources generated, subsidies and borrowings. In most cases, the income generated by the public enterprises is sufficient to meet operational costs and generate profits. However, some of the government owned enterprises require ongoing financial assistance.
The rates, fees and prices are, to a large extent, controlled by the government.
Boards of Directors of public enterprises in UAE always include government representatives, and the appropriate Minister is generally the Chairman of the Board. Consequently, the relevant ministry exercises control over the general performance of public enterprises in accordance with their respective laws and regulations.
There are no specific central agency controls over public enterprises in UAE. Their general performance is monitored through suitable control measures by the respective Boards of Directors.
Public enterprises in UAE enjoy a good deal of autonomy and have sufficient flexibility regarding the management of their daily operations. The limits of this flexibility and independence from government are set out in the respective regulations and laws governing the enterprises.
The Board of Directors exercises a large measure of control over the functions of the public enterprise in accordance with the laws and regulations establishing the enterprise. It is generally responsible for the setting and execution of the general policy and the approval of the annual budget of the enterprise.
Public enterprises normally submit periodical reports to their respective Boards of Directors. These reports contain information in respect of financial matters, progress of development projects and general performance of the enterprise. After discussion, the Boards may issue corrective directions whenever necessary. Annual reports are submitted by public corporations to the relevant ministry and the Council of Ministers. Companies present the annual reports to the shareholders in the annual general assembly. Some public enterprises have computerised management information systems.
Public enterprises maintain their accounts in accordance with the accounting standards contained in their respective laws and regulations. Normally, public enterprises prepare their financial statements on historical cost basis and in accordance with internationally accepted accounting principles.
Parliament does not exercise any direct control over the budgets of the individual public enterprises.
There is no direct control by Parliament - the Federal National Council (FNC) over public enterprises, but the FNC may establish committees to review the activities of these enterprises.
The FNC also secures accountability of public enterprises through discussion of reports on financial performance submitted to it by the State Audit Institution, the Supreme Audit Institution of the UAE.
The State Audit Institution has been set up as an independent authority attached to the Federal National Council (Parliament) by Federal Law Number 7 of 1976. Article Number 4 therein specifies the entities which are subject to the audit control of the State Audit Institution. Accordingly, all federal public corporations and all companies or bodies in which the State may have a share capital of not less than 25%, or for which the State guarantees a minimum limit of profit, or offers a financial subsidy, are subject to audit by the SAI. If the State equity participation is less than 25% it need not be audited by the SAI except upon a written request from the Supreme Union Council or the President of the State or from the Council of Ministers.
The SAI does not audit public enterprises in any Emirate except upon a written request from its ruler. This rule is in harmony with the federal nature of the SAI and its attachment to the federal legislative authorities.
The SAI carries out concurrent audit and post audit of all financial operations relating to jointly-owned public companies. Such companies are not subject to the pre-audit of contracts. However, public corporations are subject to pre-audit, as a general rule, although the laws establishing some of these corporations include an article to relieve them from pre-audit depending on the nature of contracts. Examples of these are Central Bank, Emirates General Petroleum Corporation and Estate Property Bank.
The SAI also conducts performance audits including aspects of efficiency, economy and effectiveness. The annual performance of all public enterprises is assessed to establish whether they have achieved their objectives and whether their resources have been utilised in the most productive manner.
The general objective of the SAI in conducting the audit of public enterprises is to assist these enterprises in achieving their objectives in the most efficient, economic and effective ways. The SAI particularly ensures the safety and legality of managing the funds of the State and other authorities and, the implementation of development projects.
The SAI determines the scope of its audit in such away as to help in fulfilling the objectives of the various types of its audit.
Each public enterprise has an internal audit department reporting on financial and other matters directly to the top management represented by the general manager, executive committee or the Board of Directors in accordance with their organisational structure. The SAI, as part of its audit, examines the work and the reports of the internal audit departments of these enterprises.
There are no restrictions in the UAE on the employment of commercial auditors by public enterprises. Actually, in each public enterprise, the external auditors are appointed each year either by the general assembly or the Board of Directors. The appointment and remuneration of these auditors is not required to be approved by the SAI, but their audit work and reports are subject to the review of the SAI.
The SAI undertakes audit and inspection based on complete or sample check according to its annual work plan.
The audit of public enterprises is carried out by a special division in the SAI in accordance with the annual audit plan and the directives issued for this purpose.
The SAI is required to audit and report on the operational activities and the financial statements of public enterprises annually. Transaction based audits and systems based audits are carried out continuously in most cases in major public enterprises. In some cases where there is a special need, auditing can be carried out any time during the year.
The SAI prepares interim and final audit reports on the accounts and operational activities of the public enterprises. A final audit report is also prepared annually on the accounts and the general performance of these public enterprises and submitted as part of the SAI annual report to the Federal National Council and which also goes to the Federal Supreme Council, the State President and the Council of Ministers.
The audit reports of the SAI are followed up by the general assembly of each public enterprise, the Council of Ministers and the Federal National Council.