Natural Resources and Violent Conflict - WaterWiki.net

who gets the money? 85Figure 3.1 Lines of Accountability in the State Oil Fund ofAzerbaijanPresident• Can establish and dissolve the Oil Fund• Issues decrees approving all rules of the Oil Fund• Appoints and can dismiss the Oil Fund’s executive director• Chooses or approves the Oil Fund’s auditor• Decides how to spend the Oil Fund• Appoints members to the Supervisory CouncilSupervisoryCouncil• Defines the rules for compilation of reports on the useof SOFAR’s assets• Reviews and comments on SOFAR’s annual report,auditor’s report, and proposed budgets• Supposedly meets quarterly but has met once• Is to be composed of representatives of government andcommunity-based organizations, but no communitybasedorganizations are currently represented• Can hold off-schedule meetings at the request of one-halfof the members or SOFAR’s executive directorExecutive directorof SOFAR• Exercises operational management, hires staff, anddevelops annual investment strategy• Responsible for investment and management ofSOFAR’s assets• Together with Ministry of Economic Development,prepares the program for expenditures from the Oil Fund• Submits quarterly and annual reports, and estimatesoperational expenses to the president• Cooperates with the auditor selected by the presidentand publishes the results of the audit and annual reportNote: SOFAR State Oil Fund for the Azerbaijan Republic.Source: Tsalik (2003).SOFAR has an executive director and a supervisory board (seefigure 3.1). However, the president has virtually unfettered power toappoint and dismiss both. Thus, in practice, “the ultimate authorityover all aspects of the Oil Fund’s activities rests with the President,who is empowered to liquidate and re-establish the Fund, approve theFund’s regulations, identify its management structure, etc.” (Petersenand Budina 2002).Caspian Revenue Watch similarly notes that SOFAR is “subordinateddirectly to the President and lacks sufficient mechanisms foroversight.” It points out that a major weakness in the governancestructure is the fact that SOFAR has been established on the basis of apresidential decree, which in practice will probably limit Parliament’sability to play any political oversight role (Tsalik 2003).