Editorial | An absence of transparency
The malefaction of the governors of Petrojam, laid bare by the auditor general in her report on the state-owned oil refinery, has again underlined the need for transparency into the financial management of public agencies, to which few adhere, in accordance with the law. Too often they, like Petrojam, play by their own rules, enabled by ministers who, perhaps, find value in this opaqueness.
Under the Public Management and Accountability Act, QUANGOs, or quasi-non-governmental organisations, such as is Petrojam, are obligated to produce quarterly and half-yearly financial statements as well as annual audited accounts. With respect to quarterly and half-yearly financials, they should be ready within one or two months of the respective periods.
The law does not lay out a definitive timetable for the production of annual reports and audited statements of accounts, but the generally accepted rule is that these should be ready within three to six months of the end of the financial year and sent to the portfolio minister for review and tabling in Parliament.
The reasons for law codifying the principles by which state-owned companies should behave are precisely enshrined in the title of the act and came as part of broader reforms to improve public-sector management, and highlight the duty of care and fiduciary responsibility the managers of these firms and agencies owe to their owners - the taxpayers of Jamaica.
This newspaper is not sanguine that there is either a deep appreciation, or firm embrace, of these obligations on the part of managers, the governors of these institutions, or worse, by the ministers to whom they report. Petrojam, beyond the nepotism, reckless spending, and incompetent technical management of the company highlighted by the auditor general, is a prime example of this failure.
Petrojam is a big business
By any measure, in the context of Jamaica, Petrojam is a big business. For the financial year up to the end of March 2016, its turnover was approximately US$953 million, or more than J$121 billion, at the current exchange. That's a lot of money; albeit, in US dollar terms, it represented a 39 per cent reduction on the previous year. The company in 2016 returned a profit of US$35 million, against a loss of US$13 million in 2015.
In so far as the real owners of Petrojam, citizens of Jamaica, are concerned, but for the specific issues highlighted in last week's auditor general's report, March 31, 2016 is the last period for which they are privy to the detailed accounts of the oil refinery. Petrojam's auditors, PricewaterhouseCoopers, if they still have the job, would have verified the company's accounts for the last two years. None, however, is posted on the company's website, nor has any been tabled in Parliament. This rot is not only in the branch. It extends to the root. And it's worse there.
Petrojam is a subsidiary of the Petroleum Corporation of Jamaica (PCJ), a government entity that also owns Petrojam Ethanol Limited, Wigton Windfarm and Jamaica Aircraft Refuelling Services. But PCJ's last publicly available annual report is to the financial year ending March 31, 2015 - a year later than Petrojam's - when its consolidated income was J$156.5 billion and its after-tax profit was J$936 million.
BLAME NOT SOLELY WHEATLEY'S
The managers of Petrojam and the PCJ will probably claim that the audited reports were delivered in reasonable time to the minister, who, in this case, was the lamentable Andrew Wheatley, who was forced to leave his job in the face of the scandal at Petrojam and at other agencies in his portfolio. If they are right, the blame is not only Dr Wheatley's. His boss, Prime Minister Andrew Holness, promised a new era of transparency and public accountability when he came to office in 2016, just around the time when the last available audited accounts for Petrojam were being finalised.
Mr Holness' rhetoric hasn't been matched by concrete action on the part of the Government. A message we delivered in 2014 to Peter Phillips, when he was finance minister, remains apt. We now commend it to Prime Minister Holness: "If Dr Phillips is serious about public-sector transparency, he should, by law, have QUANGOs adopt the system of listed firms, which have to publish quarterly financial statements and full audited accounts within a prescribed period from the end of their financial year on the pain of penalties. "