Sat | May 25, 2019

Auditor general urges stronger management of public bodies

Published:Wednesday | December 5, 2018 | 12:34 AMPaul Clarke/Gleaner Writer
Monroe Ellis

The auditor general’s report into the systemic breakdown in resource management practices at the Petroleum Corporation of Jamaica (PCJ) and Petrojam, which was tabled in Parliament yesterday, outlines a series of recommendations that should guide the entities going forward.

“The report contains our findings from audit examination of the governance framework, resource, procurement and contracts management at the Petroleum Corporation of Jamaica and Petrojam Limited,” said Auditor General Pamela Monroe Ellis.

The audit was undertaken in response to public concerns about allegations of malpractice at Petrojam. A comprehensive audit was conducted using the performance audit, special investigation and financial statements analysis approach, the auditor general said.

The report noted that the audit sought to assess whether the operational activities, governance and monitoring framework at both PCJ and Petrojam were consistent with the principles of good financial management and whether the procurement and contract management practices accorded with the Government of Jamaica’s guidelines to attain value for money.

Monroe Ellis said that given that boards of public bodies are appointed by, and accountable to, the portfolio minister and not the permanent secretary (PS), the PS’s responsibility is limited to advising the portfolio minister of any significant issues pertaining to that board.

“In that regard, the permanent secretary has no authority to take action against a board. Accordingly, the permanent secretary’s responsibility under this arrangement is the establishment of relevant control mechanisms to effectively monitor and inform the portfolio minister about significant matters in relation to the operations of public bodies. Failure by a permanent secretary to carry out his/her functions, in relation to the accountability framework, undermines the minister’s monitoring responsibilities,” the report said.

The accountability framework cites Section 93 of the Constitution to reinforce the minister’s responsibility, which state that where any minister has been charged with the responsibility for a subject or department of government, he shall exercise general direction and control over the work relating to that subject and over that department; and, subject as aforesaid and to such direction and control, the aforesaid work and the department shall be under the supervision of a permanent secretary.

“Therefore, it is the portfolio minister’s responsibility, upon being advised by the permanent secretary of adverse matters of significance to hold boards accountable and take the appropriate action. It is clear from the results of the audit, that the permanent secretary and boards of PCJ and its subsidiary, Petrojam, have not faithfully ensured compliance with the accountability and corporate governance frameworks,” said the audit report.

The result being, the lack of timely interventions to mitigate the risk of improper and/or unauthorised actions and loss of financial resources.

The Auditor General’s Department is recommending that:

1. In keeping with the accountability framework, the Permanent Secretary should ensure that an appropriate arrangement is established to effectively monitor the respective public bodies. This arrangement should include a system that ensures that board minutes and other specified reports are faithfully received by the permanent secretary.
Permanent secretaries should ensure that such board minutes are reviewed and the portfolio minister is formally apprised of significant issues therein that may affect the performance of the entity so as to allow the portfolio minister to take appropriate actions regarding the performance of the board.

2. The boards of PCJ, Petrojam and all public bodies should develop a framework document in keeping with the corporate governance framework, to strengthen the governance and management arrangements in their respective entities, over which they have been charged with governance responsibilities.

3. The Ministry of Finance and the Public Service should make it a prerequisite that the boards of all public bodies establish a governance subcommittee to monitor and review governance arrangements.

4. The Government of Jamaica should commission an immediate review of key functional areas of PCJ and Petrojam.

5. Petrojam needs to conduct a robust risk assessment in the planning, execution and monitoring of high-risk projects.

6. In order to promote good governance practices and the receipt of value for money, Petrojam’s board of directors should initiate a review of its procurement practices, with a view to ensure that: the appropriate method of procurement is utilised that meets the criteria stipulated in the Procurement Guidelines. Procurement opportunities are open to all eligible suppliers by the submission of the requisite competitive quotes or advertisement in keeping with the Procurement Guidelines.