AuGD flags use of Equilisation Fund to purchase Prado in local gov’t ministry

The Ministry of Local Government and Rural Development breached government policy by inappropriately using funds from the Equalization Fund to purchase a 2021 Toyota Land Cruiser Prado.

Auditor General Pamela Monroe Ellis also reported that despite repeated requests, the management of the Police Department failed to present nine payment vouchers totalling $10.2 million for audit review.

These were among a number of concerns in the 2022 annual report by the Auditor General’s Department (AuGD), which was tabled in Parliament last Tuesday.

The following are excerpts from the report, which highlights several issues flagged during the audit of the ministries, departments and agencies.

Ministry of Local Government and Rural Development

Unauthorised transfer from Equalisation Fund

The Ministry of Local Government and Rural Development advanced $97.8 million from the Equalisation Fund during the period 2016 to 2018 to provide budgetary support to the ministry.

Up to January 2022, amounts totalling $23.4 million remained outstanding. Additionally, the ministry made transfers or payments totalling $12.5 million from the Equalisation Fund to facilitate the purchase of a 2021 Toyota Land Cruiser Prado on November 19, 2020. The money was transferred from the Equalisation Fund and placed in the ministry’s deposit account.

The Government of Jamaica guidelines prohibits the borrowing and use of deposits as temporary budgetary support, which we noted was a feature of the ministry over the period 2018-2019 to 2020-2021. Also, Section 14(2) of the Local Government (Financing and Financial Management) Act, 2016 sets out the purpose for which the Equalisation Fund is to be used.

Though we verified that the $12.51 million was subsequently reimbursed on February 8, 2021, the ministry’s practice is in breach of the aforementioned act as the Equalisation Fund was not being used for the intended purpose. Further, this reflects weaknesses in the ministry’s cash management process.

The ministry accepted the findings and advised that steps are being taken to correct the identified weakness.

Ministry of Economic Growth and Job Creation – National Works Agency

Private entities failed to settle outstanding obligations

The National Works Agency (NWA) did not collect outstanding monies totalling $16.3 million from private entities for periods spanning April 2012 to March 2020. ... The long-outstanding receivable balances become increasingly difficult to collect with the passage of time and will impact negatively the agency’s cash-flow requirements. Consequently, this may result in the NWA relying more on funding from the Consolidated Fund. The Government may not have the necessary resources to facilitate the cash-flow requirements.

Performance incentives review

As at March 31, 2021, the agency’s records reflected unpaid performance incentives, totalling $149.52 million, for the period 2010-11 to 2020-21.

We found that the NWA was tardy in completing the agency’s audited key performance indicator (KPI) reports, which contributed to the delay in the performance incentive payment. The KPI reports for the fiscal years 2017-2018 to 2020-2021 were not submitted in a timely manner.

Additionally, NWA delayed the finalisation of its annual report, which is due three months after the financial year. Our review revealed that the agency’s last annual report was for FY 2014-2015, while the following years – 2015-2016 to 2020-2021 – have not been finalised for tabling in keeping with Section 13 of the Financial Instructions to Executive Agencies (FIEA) 1999. As such, the non-submission/tabling of the annual reports may hinder the effective oversight of the Agency’s operations by denying stakeholders information to determine whether key policy decisions were implemented. NWA has since advised that draft annual reports for 2015-2016 to 2018-2019 have been prepared, submitted to, and reviewed by portfolio ministry and steps are being taken to finalise the agency’s reports by the end of financial year 2022-2023.

Recommendations

The National Works Agency should take the necessary actions to formalise the recovery of the long-outstanding aged receivables by aggressively following up with clients and pursuing legal forms of resolution where necessary. NWA should further consider reviewing the payment terms for services rendered to private entities, to allow payments prior to performing the service.

Police Department

The audit of the Police Department revealed the following areas of concern:

APPROPRIATION ACCOUNTS – 2017/2018

• Excess Expenditure on Objects 21 and 24

There was a breakdown in the Police Department’s commitment planning and control system, resulting in excess expenditure for Compensation of Employees (Object 21) and Utilities and Communication Services (Object 24), totalling approximately $212 million and $189 million, respectively. Management indicated that “the frequent transfers of police personnel to meet operational demands islandwide results in a related movement of compensation expenditure within object 21 across approved budget activities”.

The Police Department subsequently sought approval for virement from the Ministry of Finance and the Public Service (MoFPS), however, the MoFPS did not approve the request.

• Unpresented Vouchers

Despite repeated requests, management failed to present nine payment vouchers, totalling $10.2 million, for audit review. I was, therefore, unable to verify the authenticity of these transactions. The absence of relevant vouchers and supporting documents to corroborate the expenditure recorded in the accounts increase the risk of errors or irregularities going undetected. The responsible officers may be subject to surcharge action in keeping with Section 27 of the Financial Administration and Audit Act if the relevant records cannot be located and presented for audit review.