Thu | May 19, 2022

BILLIONS AT RISK - Inefficient controls at ministries, agencies exposing public funds to fraud or abuse

Published:Sunday | January 17, 2021 | 12:15 AMJovan Johnson - Senior Staff Reporter
The Karl Samuda-led Ministry of Labour and Social Security has been flagged for its lack of appetite to fix long-standing issues.
File The Karl Samuda-led Ministry of Labour and Social Security has been flagged for its lack of appetite to fix long-standing issues.
JAMP Executive Director Jeanette Calder.
JAMP Executive Director Jeanette Calder.
PAC Chairman Julian Robinson admits that Parliament needs to strengthen its oversight to ensure losses are curbed and gaps in accountability plugged.
PAC Chairman Julian Robinson admits that Parliament needs to strengthen its oversight to ensure losses are curbed and gaps in accountability plugged.
Auditor General Pamela Monroe Ellis.
Auditor General Pamela Monroe Ellis.

Poor decisions at dozens of government departments have exposed more than $40 billion of taxpayers’ money to loss or misuse, an analysis of the last two auditor general annual reports has shown.

And with the Ministry of Labour and Social Security (MLSS) emerging as the poster case of the cost of almost wilful failure to implement corrective measures, there’s a call for Parliament to do more than just talk when its key committees make recommendations to improve the administration of public resources.

Last Tuesday, the Auditor General’s Department (AuGD) report for the 2019/2020 financial year was tabled in the House of Representatives which included 44 audits that focused on 20 government ministries or offices.

Auditor General Pamela Monroe Ellis’ findings centred around billions at risk in areas of procurement, resource and project management and governance.

Very few entities – such as the Kamina Johnson Smith-led Ministry of Foreign Affairs and Foreign Trade – received a clean bill of health as the 2020 report lamented the troubling breakdown of internal controls in government departments.

Nowhere was the picture more stark than in Karl Samuda’s MLSS, which the auditor general argued has been persistent in ignoring recommendations over the years to improve its stewardship of public funds.

That ministry alone accounted for the exposure – what the AuGD calls “unresolved monetary risks” – of $3.3 billion.

“Recurring violations of established guidelines” undermines transparency and accountability in financial management, the auditor general pointed out in an instance where the ministry failed to seek approval for reallocation of money to pay excess expenditure for the period 2016- 2018.

Tardiness was a constant adjective used to describe several of the alarming revelations at the ministry, which has been served a budget of more than $36 billion in recurrent and capital funds since 2018.

In another instance, transactions amounting to $173 million could not be verified because of inadequate supporting documents.

Then there was what appears to be the ministry’s disregard for its own internal audit reports and recommendations based on the AuGD’s review of those done between March 2017 and December 2019.

The internal audit unit of the ministry identified “significant internal control deficiencies”, but up to the time of reporting, the ministry “was yet to respond” to 60 issues of systemic weaknesses stretching back to 2017.

The lack of appetite to fix the problems at the ministry has been flagged over the years not just by the internal auditor but also by the auditor general going back even as far as 2011.

Since 2011, Derrick Kellier, Dr Fenton Ferguson, the late Shahine Robinson, and for a few months, Mike Henry, have presided over the ministry which has responsibility for some of the most vulnerable populations in the country – pensioners and some of the poorest citizens.

Samuda took over the reins in the new Cabinet formed after the September general election last year.

The labour and social security ministry administers the National Insurance Fund (NIF), which is supported by national insurance contributions and is the source from which pensions and other benefits under the National Insurance Scheme are paid.

In a damning 2018 audit, Monroe Ellis found that in 2017, without permission, the NIF spent $27 million to purchase company shares owned by the spouse of a senior executive.

Alleged $600m fraud

There was also a case of alleged fraud involving more than $600 million that was uncovered in 2018.

Other issues raised in the 2020 AuGD report include $10 million in overpayments under the Programme of Advancement Through Health and Education, a cash-transfer poverty alleviation programme; poor procurement highlighted in 2017 in the payments of $50 million for janitorial and security services without valid contracts.

There was also the inability to properly account for $99 million in goods; tardiness in having bank reconciliation of $11 million.

All of those helped to push the exposure of taxpayers’ money to near $35 billion, based on the 2020 report. For 2019, the figure was at least $5 billion. The data for previous years could not be immediately ascertained.

Sunday Gleaner questions sent last week to the ministry’s permanent secretary, Colette Roberts Risden, and copied to Samuda, are yet to be acknowledged.

... Stemming the haemorrhage

The continued disregard for recommendations to stem losses could have been caught at several points along the state’s accountability chain.

This includes what Parliament does with reports that go before its two main oversight committees – the Public Administration and Appropriations Committee (PAAC) and the Public Accounts Committee (PAC) – to which AuGD reports are mainly referred.

The PAAC and the PAC are also the two busiest, having met a combined 206 times between 2012 and 2020.

However, except for the more than a dozen reports on the Budget, which have to be considered for the estimates to be approved, the House of Representatives rarely debated recommendations from either committee.

“I agree that there is a problem with that,” said a senior Holness administration official, who spoke on condition of anonymity.

“But think about it. [Would] a ruling party have any interest in debating a report that speaks to maladministration at an agency under a cabinet member’s leadership? You’re not likely to get that.”

In the last 15 years, none of the PAC’s annual reports have been debated by the Parliament, the Jamaica Accountability Meter Portal (JAMP), a local transparency lobby which tracks recommendations, has noted.

“They have been tabled, but they have never made it to the agenda,” argued JAMP’s executive director, Jeanette Calder. “So, the business leader of the House is going to have to begin to explain to the people of Jamaica what is it about these reports and the magnitude of the losses that has not ... once for the last 15 years triggered it appear on the agenda of the House for the Parliament to discuss and debate.”

The advocate argued that this lack of action by the Parliament creates the environment for entities like the labour ministry to routinely ignore reports both from their internal watchdogs as well as external ones.

“We’re in a matter of COVID now, where every single penny of the people’s purse matters,” Calder lamented, noting that the particular findings of the labour ministry warrant a special enquiry.

The MLSS noted in response to the AuGD that units on procurement and property management have been established, matched with the usual promise to address findings.

A deeper examination of the ministry is required, however, Calder said.

“We need an audit commission of enquiry to be done on the Ministry of Labour and Social Security to tell the people of Jamaica what exactly is happening,” she said.

The Opposition’s Julian Robinson, who took over as PAC chairman last year, admits that Parliament needs to strengthen its oversight to ensure losses are curbed and gaps in accountability plugged.

“It’s the responsibility of the full House once reports are received to discuss, deliberate, but more importantly to ensure that we hold the ministers, agencies and departments accountable to implement what is recommended,” he told The Sunday Gleaner.

The imposition of surcharges to penalise officers for the loss of money and the delegation of disciplinary powers to permanent secretaries are also among the arsenal of accountability.

JAMP and the Zahra Burton-led investigative newsletter 18 Degrees North have produced data acquired through access to information requests suggesting that surcharges have been underutilised.

The financial secretary, who can require public officers who incur losses to pay it back (surcharged), has not recommended surcharges for almost eight years, Burton’s probe last December revealed.

The Financial Administration and Audit Act stipulates that recommendations for surcharges should come from the auditor general or the accounting officer, who are mostly permanent secretaries.

The question of holding people accountable for things you do not oversee directly is a major concern, said one permanent secretary, who did not want to be named.