Financial reporting to improve governance and build trust: Developing countries perspective NIDA NAEEM, CHAIRPERSON, SUBCOMMITTEE FOR THE PUBLIC SECTOR, ACCA PAKISTAN
Quality of governance DEVELOPED COUNTRIES Developmental orientation of political leadership Established systems Functional check & balances System mutually reinforcing and self-correcting Knowledgeable and vigilant public DEVELOPING COUNTRIES Political leaders following powerful private interests Weak or absent systems Check and balance institutions bypassed Uneducated public
CASE STUDY: ZAKAT 1. Does the Pakistani public trust its government for effective Zakat administration? 2. Is disclosure of financial reports a significant factor in winning the public s trust?
ZAKAT Zakât is a portion of one s wealth that must be given to the poor and needy In Islam, it is obligatory for all those who are financially able Zakat constitutes a big welfare fund in Pakistan Can be given to government s programme OR privately
% of population living under $ 2 a day Globally = 40% In Pakistan (2009) = 60%
PHILANTHROPIC NATION Pakistan leads South Asia in philanthropic giving as % of GDP. Most funds disbursed privately
REASONS FOR PUBLIC S PREFERENCE FOR PRIVATE CHARITY Patron s integrity, charisma and fanfare Media portrayal Observation of achievements
Audited financial statements of SKMCH are publicly available. But not for EDHI: the largest private charity receiving organisation in Pakistan.
Edhi has strong media and civil society support based on his achievements on ground.
OBSERVATIONS FROM CASE STUDY Public perception affected by: Non financial indicators Financial reporting
The case for investing in financial reporting improvements must be based on evidence of its impact on public trust
Enhanced public trust Systems Improvement Common Man Visible improveme nt on ground Better Governance
How will improved financial reporting affect public perception? Improve financial reporting EXPERIENTIAL Observation Experiences EXTERNAL INFLUENCES Media Word of mouth Political affiliations PERSONAL Values & Beliefs Education Ability to interpret Educate users
KEY MESSAGES Research from countries which have advanced public financial reporting systems is required to prove link between improved financial reporting and enhanced public trust in order to make a stronger case for FR improvement initiatives in resource strapped developing countries. Reporting formats should include nonfinancial indicators to meet users needs.
References Naeem, N. (2013) Lessons from Pakistan. Accounting and Business Magazine, International edition, June 2013: ACCA. Pradhan, S. (2006) Improving governance in developing countries. Available from: <www1.worldbank.org/publicsector/anticorrupt/.../sanjaypradhan.ppt > [Accessed 27 November 2013]. Khan, G.M. (2013) Literacy and Pakistan [online]. Available from: http://x.dawn.com/2013/05/22/literacy-and-pakistan/ [Accessed 28 November 2013] Klugman, J., Human Development Report 2009: Overcoming barriers: Human Mobility and Development. 2009, United Nations Development Programme. Income share held by highest 10%. Indicators 2008 [cited 2012 December 14]. Available from: http://data.worldbank.org/indicator/si.dst.10th.10. Income share held by lowest 10%. Indicators 2008 [cited 2012 December 14]. Available from: http://data.worldbank.org/indicator/si.dst.frst.10. Poverty in Pakistan. Socio-Economic Issues in Pakistan 2012 30 November, 2012 [cited 2012 December 14]. Available from: http://en.wikipedia.org/wiki/poverty_in_pakistan. The World Factbook - Pakistan. The World Factbook 2012 5 December 2012 [cited 2012 December 13]. Available from: https://www.cia.gov/library/publications/the-world-factbook/geos/pk.html.
References Kahf, M. (1987) The principle of socio-economic justice in the contemporary fiqh of Zakah. Ahmed, H. (2004) Role of Zakat and Awqaf in Poverty Alleviation. Nasim Shah Shirazi et al. (2009) Prospects of Poverty Elimination through Potential Zakat Collection in OIC-member Countries : Reappraised. Candland, C. (2011) Faith and Philanthropy in Pakistan. Guest Lectures 14 June 2011 [cited 2012 14 December]. Available from: http://www.ahkrc.net.pk/christopher-candland.html. Bank, T.W., (1970) Pakistan: A Profile of Poverty. Shirazi, N.S. (1996) Targeting, coverage and contribution of Zakat to households' income: The case of Pakistan. Journal of Economic Cooperation Among Islamic Countries: 17(3-4), p. 165-168. Al-Abidin, T.Z., (2003) The Disbursement of Zakah. Islamic Studies: 42(1), p. 126-136. Bonbright, D. & Azfar, A. (2000) Philanthropy in Pakistan: A report of the Initiative for Indigenous Philanthropy. Aga Khan Foundation, Pakistan. Government of Punjab (2012) Zakat and Ushr Department. Available from: http://www.zakat.gop.pk [Accessed 28 November 2013]. AFP (2012) GEO-TV: Rs 8,500 bn corruption mars Gilani tenure.
Questions? EMAIL: NYDA.NAEEM@GMAIL.COM