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2007 Assessment

Ecuador: Integrity Indicators Scorecard

Ecuador: Integrity Scorecard Report > Sub-Category: State-Owned Enterprises
Indicators		Score
64	In law, is there an agency or equivalent mechanism overseeing state-owned companies?	100
65	Is the agency or equivalent mechanism overseeing state-owned companies effective?	80
66	Can citizens access the financial records of state-owned companies?	65

Indicator and sub-Indicator Details

In law, is there an agency or equivalent mechanism overseeing state-owned companies?

64: In law, is there an agency or equivalent mechanism overseeing state-owned companies?

Score:

YES

Comments: The Superintendent of Banks (SB--Superintendencia de Bancos) controls and to regulate banks; independently if they are public or private. The Contraloría General del Estado (CGE), is the supreme agency that audits the Institutions of the State. The article 211 second clause indicates that the Contraloría General del Estado (CGE) will carry out audits to the companies and agencies of the public sector and its servants, and will be pronounced on the legality and transparency norms.

The Controller General of the State (CGE-- Contraloría General del Estado) investigates institutions of the state or public agencies in which the public resources are not used in a correct manner. The Art. 146 of the National Constitution enacts La Superintendencia de Compañías será el organismo técnico y autónomo . The Superintendencia de Compañías (SCB), controls and to regulate public companies too.

Additionally in the oil sector, the organism that regulates and controls is the Dirección Nacional de Hidrocarburos (DNH).

References: National Constitution Article 222-223; Article 172.Ley General de Instituciones del Sistema Financiero; and Article 143. Artcicle 211 CN. Article 146 CN. (Superintendencia de Compañías) [ LINK ] (Direccion Nacional de Hidrocarburos).

Peer Review Comments: The agencies responsible for overseeing state-owned companies are the National Comptroller and the National Companies Intendency (Superintendencia de Compañías).

Peer Review Comments: The minister of the pertinent portfolio theoretically is responsible for oversight of the companies within it. Almost all such companies have been accused of major corruption over many administrations, especially the petroleum company that produces most of the public revenues.

Is the agency or equivalent mechanism overseeing state-owned companies effective?

65a: In law, the agency or equivalent mechanism overseeing state-owned companies is protected from political interference.

Score:

YES

Comments: The Superintendent of Banks (SB--Superintendencia de Bancos) and the Controller General of the State are free of political interference by law, nevertheless the manner of appointment less their independence. The agency overseeing state-owned companies is free from political interference.

The Superintendent of Telecommunications, Companies and the Oil Direction, has a political appointment.But in the law, they have independence.

References: National Constitution: Article 211, Independencia de la Contraloría.

Ley s/n, publicada en Registro Oficial Nro. 120 1997/07/31. Art.145 La Superintendencia de Bancos será el organismo técnico y autónomo Art. 146 La Superintendencia de Compañías será el organismo técnico y autónomo Art. 146a La Superintendencia de Telecomunicaciones será el organismo técnico.

Peer Review Comments: The social scientist commented only on banking. The non-financial companies have no real oversight. The Comptroller General does not really do oversight, and should do post-audits.

65b: In practice, the agency or equivalent mechanism overseeing state-owned companies has a professional, full-time staff.

Score:

100

Comments: The Superintendent of Banks (SB--Superintendencia de Bancos) and Contoller General of the State (CGE--Contraloría General del Estado) supervise the state-owned companies.

The CGE oversees municipal companies and companies in which the government has shares. Both possesses a full-time staff that carries out their goals.

The Superintendencia de Compañías (SC) and the Dirección de Hidrocarburos (DNH) have a profesional and full-time staff too.

References: Interview with Modesto Santos (Contraloría General del Estado)

[ LINK ] [ LINK ]

Peer Review Comments: There are several superintendencies besides banking (the head of which was recently fired arbitrarily); these include companies, telecommunications, and others. They have some professional staff and many political appointees.

65c: In practice, the agency or equivalent mechanism overseeing state-owned companies receives regular funding.

Score:

100

Comments: There are not reported cases of a lack of resources for either the Superintendence of Companies, Superintendence of Banks, Superintendence of Telecomunications, or Oil National Direction.

References: Interview with Modesto Santos (Contraloría General del Estado)

Peer Review Comments: All oversight agencies are underfunded in general.

65d: In practice, when necessary, the agency or equivalent mechanism overseeing state-owned companies independently initiates investigations.

Score:

100

Comments: The Superintendent of Banks (SB--Superintendencia de Bancos) and Contoller General of the State (CGE--Contraloría General del Estado) are able to carry out investigations.

The heads of the agencies do not have entire independence.

References: Interview with Modesto Santos (Contraloría General del Estado)

Peer Review Comments: They may do so at their own peril.

65e: In practice, when necessary, the agency or equivalent mechanism overseeing state-owned companies imposes penalties on offenders.

Score:

100

Comments: The Controller General of the State (CGE--Contraloría General del Estado) can request explanations from the state-owned companies. If it is demonstrated that the state-owned company is at fault, the state-owned or the state-owned company's official is sanctioned.

When there are cases of civil responsibility, the CGE can request explanations from the state-owned company. If it is demonstrated that state-owned company or the state-owned company official has a civil responsibility, the case is sent to the Tribunal Administrativo de los Contencioso (Administrative Tribunal of the Contentious).

References: Interview with Luís Bonaño (Projusticia)

Peer Review Comments: The superintendencies have the power to penalize, and do so on occasion.

Can citizens access the financial records of state-owned companies?

66a: In law, citizens can access the financial records of state-owned companies.

Score:

YES

Comments: However, article 88 of the General law of Institutions of the Financial System (Ley general de Instituciones del Sistema Financiero) establishes the "sigilo bancario," which is the prohibition to give financial information.

References: National Constitution: Article 94, Habeas Data. (otorga el derecho a acceder a información)

Article 88 Ley general de Instituciones del Sistema Financiero.

Peer Review Comments: This is questioned even though the new FOI law covers th entire public sector.

66b: In practice, the financial records of state-owned companies are regularly updated.

Score:

100

Comments: Yes, the stated-owned companies update the financial records. In the case that some state-owned companies do not fulfill with this requirement, the Controller General of the State (CGE--Contraloría General del Estado) makes suggestions and the state-owned companies have to upgrade the financial records, so that the CGE carries out the audits.

References: Interview with Modesto Santos (Contraloría General del Estado)

Peer Review Comments: True professionally reporting of financial information in accordance with generally accepted accounting principles is not happening. Contraloria reviews are often limited in scope.

66c: In practice, the financial records of state-owned companies are audited according to international accounting standards.

Score:

100

Comments: The Controller General of the State (CGE--Contraloría General del Estado) performs the audits according to international accounting standards. In the case that the financial records of the stated-owned companies do not fulfill these requirements, the CGE makes suggestions so that they fulfill the international accounting standards.

The Contraloria General del Estado (CGE) applies International Standards of audit, these are called (Normas Internacionales de Auditoría, NIA´s). According to these norms, the (CGE) adapts them and they shelter in Ecuadorian Norms of Audit (Normas Ecuatorianas de Auditoria, NEA´s). The NEA´s are adapted in the pure Public Sector, these norms are know like NAGAS (Normas Gubernamentales de Auditoría). The public companies with private management like Andinatel, Pacifictel apply the NEA´s.

References: Interview with Modesto Santos (Contraloría General del Estado)

Peer Review Comments: Audits should be performed in accordance with generally accepted auditing (not accounting) standards. The CGE does not currently have the capacity to do this.

66d: In practice, citizens can access the financial records of state-owned companies within a reasonable time period.

Score:

100

Comments: Some state-owned companies have the financial records on their Web sites; other companies do not have them in their Web sites.

Having contacts the citizen can access to them within reasonable time period. But the common citizen must visit the company several times.

References: Interview with Modesto Santos (Contraloría General del Estado)

Peer Review Comments: Records are usually late in being prepared and made available.

66e: In practice, citizens can access the financial records of state-owned companies at a reasonable cost.

Score:

100

Comments: The information is free, however not all information is available.

References: Interview with Modesto Santos (Contraloría General del Estado)

Peer Review Comments: Citizens do not normally have the competence to review financial records unless they have professional advice, which is costly.