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Colin Greenland | PCs need fraud-risk assessment

Published:Sunday | June 12, 2016 | 12:00 AM
Collin Greenland
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The alleged shenanigans now under investigation at the Hanover Parish Council are the kind of scenarios that contributed to the perception of survey respondents that all government organisations in Jamaica are corrupt, according to research conducted and reported by the Caribbean Policy Research Institute (CaPRI) in 2007.

CaPRI's survey found that the three agencies perceived to be the most corrupt in Jamaica were the police force, the parish council offices, and the Customs Department, respectively.

Maybe we are just continuing a legacy inherited by our former colonial leaders in the UK who themselves have grappled with many acts of corruption over the years. Emma Kane, chairman of the Hook Norton Parish Council, for example, reported to The Telegraph on February 20, 2015, that "parish councils, we all know, are hotbeds of intrigue, corruption, and passion, those who sit on them, a colourful mixture of oddballs, bullies and idiots."

 

CANNOT IGNORE FINDINGS

 

Whereas it may be unfair to broad-brush all our parish councils in the manner suggested by Mrs Kane, the findings of our corruption fighters such as the contractor general and the auditor general, plus CaPRI's research, cannot be ignored.

We should respond, however, not with the emotive utterances spewed by Minister of Local Government Desmond McKenzie, but instead apply established and proven best practices not just to the Hanover Parish Council, but, indeed, all parish councils across the island.

Ideally, conducting forensic audits on all our parish councils would be revealing, but cost-wise, plus time constraints, may cause this to be prohibitive. However, conducting fraud risk assessments (FRAs) on all the councils would be a judicious way to start.

Fraud risk assessments, according to the universally recognised Committee of Sponsoring Organizations of the Treadway Commission (COSO), is the organisation that develop and standardise controls worldwide and is made up of five influential associations: The American Accounting Association, The American Institute of CPAs, Financial Executives International, The Association of Accountants and Financial Professionals in Business, and The Institute of Internal Auditors. COSO is dedicated to providing thought leadership through the development of frameworks and guidance on enterprise-risk management, internal control, and fraud deterrence. They have, for example, established and promoted a COSO five-step fraud-prevention methodology that stipulates control environment, fraud risk assessment, control activities, information, and communication monitoring.

At present, there exist myriad government regulations that guide the control environment and control activities of public-sector agencies such as parish councils, with the Financial Administration and Audit Act, the Contractor General Act, and the Corruption Prevention Act being some of the most important. FRAs are designed to develop effective, business-driven fraud-risk management approaches that will identify potential fraud threats and weaknesses in controls that create opportunities to create fraud, focusing specifically on control measures aimed at deterring, preventing, or detecting fraud.

The international firm Deloitte acknowledges that organisations need to realise the growing importance of addressing and controlling the risk of fraud in a comprehensive and integrated manner, which would, in turn, benefit them in a number of ways.

Implementing effective FRAs in Jamaican parish councils would involve activities such as organising the assessment, determining the areas to assess, identifying potential schemes and scenarios, assessing the likelihood of fraud, assessing the significance of risks, linking anti-fraud controls, and providing continuous updates and maintenance to the organisation.

 

MINISTRY MUST LEAD

 

The Ministry of Local Government must lead the way and ensure that it has a good understanding of the potential for fraud that exists throughout its various parish councils. Well-conducted FRAs will entail studying and analysing parish council exposures, by size and type, to frauds that could occur.

Without having well-considered and documented understanding of fraud risk through FRAs, the Ministry of Local Government will be reactive instead of proactive and will not be able to efficiently and effectively mitigate its risk of loss due to fraud.

Without FRAs, the alleged atrocities at the Hanover Parish Council may not only continue to permeate other councils, but remain undetected and unpunished.

-  Collin Greenland is a forensic accountant.

Email feedback to cgreeny.collin@gmail.com and columns@gleanerjm.com