State municipal companies? Monitoring report from Watchdog Polska

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We checked the transparency of companies responsible for the quality of life of commune residents. Which companies publish and what will the company not tell you? We present the most important results of the analysis conducted on the website Czekamyjakjest.pl.

In 2021, we monitored the transparency of municipal companies. We also asked 1842 organizations. how they communicate their activities. We wanted pre-pandemic information for 2019. 768 municipal companies answered 16 questions.

Users of the social data analysis service –Checkamyjakjest.pl – were involved in reading the answers. These analyzes were summarized by analysts Michał Grzechowiak and Paulina Tańska from MGBI sp.Zo.

Thanks dr hab. Renata Przygodzka, Professor at Białystok University, Public Sector Economics Specialist, for comprehensive advice on our monitoring.

YOU WILL SEE THE WHOLE REPORT HERE

What were we asking about?

Below we present the questions and the most important results of the analysis.

Does the company keep a Public Information Bulletin?

Although municipal companies do not belong to the public financial sector, they are obliged to disclose public information (according to Article 61, paragraph 1 of the Constitution of the Republic of Poland and Article 4, paragraph 1 of the Law on Access to Public Information). Therefore, they should keep a Public Information Bulletin (BIP) in which they publish information about their activities. We wanted to check if the companies were meeting this obligation and find out what they were publishing.

Eighty-five percent of the companies surveyed publish a Public Newsletter, not 13%, and 2% find it difficult to say. The quality of BIPs is highly desirable – more than 90% in each of the selected income subcategories, regardless of the company’s wealth (small company – revenues less than 5 million, medium companies – from 5 million to 20 million, many companies – more than 20 million)) for example, it does not publish mandatory information on internal controls in the BIP. There is very little “better” with external management. 78% of companies do not publish them.

Does the company maintain and publish a contract register?

Contract registers allow you to see with whom and for what amounts the company has signed a contract. It is important that such a register is public, so we asked if it was published in the BIP or on the company’s website.

Most of the companies participating in the study maintain a register of contracts. 75% of respondents make such a decision, and only 21% of municipal companies do not see the need to maintain such a register. In the remaining 4% of cases, we did not receive such information. The larger the company, the more often it maintains a register of contracts.

Unfortunately, the vast majority of companies (70%) have not yet decided to publish a contract register. Only 4% of municipal companies surveyed declare publishing registries. When checking websites and Public Information Bulletins, we found that this percentage was even lower.

Grants / donations / scholarships / sponsorship

This is an area not regulated by any legislation. Therefore, we asked if companies have internal rules governing the issuance of grants or sponsorships and publish them somewhere. We also asked if they provide subsidies. These are extremely important questions.

The non-transparency of this area of ​​activity allows to create political support and kinship, as well as to hide expenses that cannot be covered from the commune’s budget due to the rules of transparency.

The vast majority of companies responding to our application do not have subsidy procedures (667 out of 768 enterprises). Only 66 companies answered this question in the affirmative – almost every tenth company and in 3% of cases, our reviewers assigned them to the category “Hard to say”.

Although half of the companies surveyed reported subsidies, donations or scholarships in 2019, 9 out of 10 companies do not publish information about their subsidies. 6% of companies responded to the request to publish such information.

Does the company publish financial statements?

We believe that the reports should be included in the company’s Public Information Bulletin, but up to 79% admitted that they were not included. Interestingly, medium-sized enterprises perform worse than small and large companies.

What was the company’s loss in 2019?

The municipal company does not have to be profitable. But with another question – the ratio of the implementation of management objectives and the fixed part of the management’s reward (ie salary) to the variable part (ie a kind of bonus), this will allow companies to focus. worth paying special attention to.

56% of companies did not suffer, 10% lost 1 million PLN or more, and 18% lost up to 1 million PLN, most of which are up to 500,000 PLN. In 16% of cases, it was not possible to determine whether there was a loss

Salary and “bonuses” of the board and the implementation of management objectives

We asked about the salaries of the company’s board members (fixed part of the salary), as well as some “bonuses” (variable part of the salary). according to Act on the principles of determining the salary of persons managing certain companies, Board members could receive 1 to 3 times the average monthly salary in the enterprise sector in the fourth quarter of the previous year, announced by the President of the Central Statistics Office, without additional payments. However, they could also get the so-called part, which varies depending on the level of achievement of management objectives, for example, net profit, loss reduction, cost reduction. During our monitoring, we did not check for compliance with the law, but rather to find out if the changing part was frequently seen and if we had any questions about the relationship with management objectives. This general picture would allow us to deepen the subject in the future.

In the companies we audited, the amount of fixed remuneration paid to board members is closely linked to the company’s revenue (Table 15). This is not a surprise. But if you look at it without dividing it into subgroups, 38% of the entire population earns up to 150,000 a year. 30% of the total PLN and between 150 and 300 thousand. Total PLN, 12.5% ​​from 300 to 500 thousand. PLN gross and 6% above 500 thousand.

We decided to look at the companies that suffered losses, but a variable part of the reward is paid. As we wrote earlier, a loss in a municipal company does not mean bad management, we have looked at extreme cases, ie the payment of a variable part of the reward, although the management goals are achieved at a lower level. 50% (Table 1).

Table 1. Companies that paid the variable part up to 50% (N = 129) despite the loss due to the amount of the variable part and the achievement of management objectives

Ads

There are no laws regulating utility companies’ advertising. On the one hand, they can advertise like any other business entity, but on the other hand, it is difficult not to see that their activities are different from those of other organizations. Because are the services you monopolize worth advertising? Then aren’t we wasting public funds? It seems advisable to use advertising space to inform residents about significant changes in the activities of the company that serves them. Sometimes the publication of paid advertising can also increase the quality or effectiveness of the services provided by the company. In our monitoring, we asked whether municipal companies have decided to buy advertising and how often.

Our research shows that in 2019, a little more than half of respondents, or 52%, decided to invest in advertising.

Often, high-income companies with more than 20 million PLN invest in advertising – 71% of them decide to take such a step (Figure 5). Among medium-sized companies (revenue between 5 and 20 million), this percentage is lower – 51% of purchased ads or sponsored texts. As for small companies (revenues below 5 million), 32% of such companies benefited from advertising.

Are council members exercising their powers and are they interested in municipal companies?

In 2018 Law on Municipal Self-Government (Article 24 (2)) Additional rights were granted to members of parliament. They have access to information and materials, access to buildings that contain this information and materials, and access to the company’s activities. We wanted to check whether it worked and whether the members of parliament used these powers. We know from the only signals that sometimes they want to use it, but they are not allowed to do so. Therefore, when asked in 2019 whether members of parliament exercise the rights provided for in Art. 24 sec. We wanted to remind you of these provisions with Article 2 of the Law on Municipal Self-Government.

However, as can be seen from the answers to our survey, in 2019, inspections were not carried out often. The data of the companies answering this question show that only 30% (231) of them exercised these rights, and 65% (500) did not. In 5% (37) the answer was difficult or unanswered. Consultants used their rights in the company a little more in larger companies.

Recommendations

Analysis of the data provided by companies shows that the overall level of transparency of companies is low. Public Information Bulletins often do not have audit documents, in many cases the bulletins are rarely updated, and several companies publish reports and documents on the work of government agencies and grant procedures. Very few people have such procedures.

But at the same time, we found that most companies maintain a register of contracts, and we found companies that publish decisions of shareholders’ meetings, orders of the supervisory board or board, rules for granting subsidies, as well as reports – although they are available in the National Court Register. This shows us that companies can be more transparent, and we do not expect the impossible.

Therefore, in our opinion, we are preparing recommendations on areas that require change. We send them to companies and their owners (municipalities) individually, Art. In accordance with Article 241 of the Code of Administrative Procedure. Article 63 of the Constitution. Depending on the individual situation of a particular company, we will present the selected elements.

We will recommend:

  1. Registration of the Company’s Public Information Bulletin.
  2. For example, updating the Public Information Bulletin by providing mandatory information on vacancy announcements or the publication of current income and loss information.
  3. Update and add future information on all controls in the company – internal and external.
  4. Publication of a decision or decisions (if any) on the principles of determining the remuneration of members of the governing body.
  5. Publication of information on the annual salary of the board – a fixed and variable part.
  6. Publication of information on annual achievements of the company’s management goals.
  7. Also, publication of the Resolutions of the Shareholders’ Meeting, other decisions of the Supervisory Board and orders of the Management Board in the Public Information Bulletin.
  8. Maintaining a register of concluded contracts.
  9. Publication of the register of concluded contracts in the Public Information Bulletin.
  10. Implement procedures for grants / donations / scholarships / sponsorships.
  11. Publication of grants / donations / scholarships / sponsorship procedures in the Public Information Bulletin.
  12. Publication of the register of all awarded grants / donations / scholarships / sponsorships in the Public Information Bulletin.

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