Togrul Mashalli

Economist

"AZERISTILIKTEJHIZAT" OJSC: INVISIBLE STATE-OWNED COMPANY

30.01.2018 / The state company's unnecessary expenditures and its reluctance to be subject to international audit

Some time ago, in the official website for the Chamber of Accounts of the Azerbaijani Republic, information was placed on the audit of "Azəristiliktejhizat" OJSC. It is a state company with insignificant media coverage, despite that its services cover 10 to 20% of the population. Officially, it is the only state company-operator of heating in the country. People have long been accustomed to the life without heating for months followed by sudden restoration. Accordingly, people are using alternative methods to provide heat (however, in recent years that have been some positive changes in this area, and heating services are resumed more quickly).

The absence of information on this company’s activities (many people do not even know how payments to the company are made) resulted from the lack of interest regarding it, which is not the case with other state companies such as "Azersu" OJSC or "Azerishiq" OJSC. By exploiting this situation, the company apparently does not have any intention to publish reports, even on their official website. The last report on the website dates back to 2011. Therefore, right now, we cannot discover what is going on in the company. Nevertheless, we are able to obtain information on main indicators of the company through the audit of the Chamber of Accounts.

Subsidies from the Budget

As with a number of other state companies, "Azeristiliktejhizat" OJSC receives subsidies from the state budget, in one form or another. The main reason for this is that the company operates at a loss. Since the beginning of its operation, the company's expenses have been higher than its revenues. However, while it was possible to cover its losses with the subsidies in the past, the subsidies are no longer sufficient today.

The following information is obtained from the budget documents on the amounts of the subsidies which were allocated to the company from 2011 to 2016:

- 2011 – 19.66 million AZN
- 2012 – 20.2 million AZN
- 2013 – 28.4 million AZN
- 2014 – 21.6 million AZN
- 2015 – 22.6 million AZN
- 2016 – 18 million AZN

As we can observe, in 2011-2016, the subsidies the company received from the state budget amounted to 123 million AZN. What, then, is the relation of these subsidies to the company's revenues and expenses? The Chamber of Accounts audit shows that the company's losses exceed its profits several times. Thus, according to the "Azeristiliktejhizat" OJSC financial report, in 2015 the company's revenues from providing heating services amounted to 8 109.0 thousand AZN (without VAT); the actual expenses, however, constituted 46 148.2 thousand AZN (including 45702.1 thousand AZN of production costs, and 446.1 thousand AZN of indirect costs). While the company's actual losses in 2015, according to the financial results, was equal to 38039.2 thousand AZN.

The financial report of 2016 says actual income was equal to 10839.2 thousand AZN (not including VAT) when actual costs for the same year amounted to 50243.3 thousand (including 49699.1 thousand AZN of production costs and indirect costs of 544.2 thousand AZN). Hence, actual losses in 2016 constituted 39404.1 thousand AZN in 2016, 38039 in 2016, the actual result of the actual losses are coming. Compared with 2015, in 2016, the company's revenue was 2730.2 thousand AZN more, while expenses, again compared to 2015, increased by 4095.1 thousand AZN or 1.5% more than 2016's revenue. Thus, as the result of the organization's financial activity, its actual losses in 2016 increased by 1364.9 thousand AZN or by 3.6%, compared to 2015.