GOJ AUDIT COMMISSION’s Annual Report · 2015 GOJ AUDIT COMMISSION’s Annual Report Financial...

2015

GOJ AUDIT COMMISSION’s Annual

Report Financial Year 2014 - 2015

.

M I N I S T R Y O F F I N A N C E A N D P L A N N I N G 3 0 N A T I O N A L H E R O E S C I R C L E , K I N G S T O N 4

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Audit Commission Members:Leighton McKnight, CD – Chairman; Collin Greenland – Deputy Chairman; Marjorie Johnson; Delores Linton-Williams

;Hope Blake; Dwight Moore; Catherine Williams

Table of Contents

OVERVIEW .................................................................................................................................................................. 3

FUNCTIONS AND POWERS OF THE COMMISSION ............................................................................................. 4

OFFICE OF THE COMMISSION ................................................................................................................................ 5

STAFF ........................................................................................................................................................................... 5

VISION & MISSION .................................................................................................................................................... 5

Vision Statement ....................................................................................................................................... 5

Mission Statement .................................................................................................................................... 5

MEETINGS ................................................................................................................................................................... 5

ACTIVITIES ................................................................................................................................................................. 6

FINANCIAL STATUS .................................................................................................................................................. 7

Stipend ...................................................................................................................................................... 7

Financial Statement ................................................................................................................................. 8

TRAINING .................................................................................................................................................................... 8

AUDIT COMMITTEE UPDATES ............................................................................................................................... 8

Issues Affecting the Effectiveness of the IAU ........................................................................................... 8

Issues Affecting the Effectiveness & Efficiency of the Systems of Control ............................................... 9

CONCLUSION ........................................................................................................................................................... 10

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THE AUDIT COMMISSION APPOINTED UNDER THE PARLIAMENT FINANCIAL ADMINISTRATION AND AUDIT (FAA) ACT

REPORT FOR THE FINANCIAL YEAR ENDED 31STMARCH 2015

OVERVIEW The Government of Jamaica (GOJ) Audit Commission was reconstituted July 1, 2011 and is a

body corporate vested with the responsibility of overseeing the corporate governance

structure of the public sector through the provision of continued monitoring and support of

the Audit Committees in compliance with appropriate regulation.

During the financial year 2014-2015 there were seven (7) meetings convened by the

Commission. There are currently thirty-two (32) fully functioning Audit Committees under

the purview of the Commission.

This report reflects the activities of the Commission for the financial year ended 31st March,

2015.

MEMBERS:

Mr. Leighton McKnight – Chairman, Senior Member of the Institute of Chartered

Accountants of Jamaica.

Mr. Collin Greenland – Deputy Chairman, Senior Member of the Institute of Internal

Auditors – Jamaica Chapter.

Mr. Dwight Moore – Inspector General, Public Accountability Inspectorate Division,

Ministry of Finance and Planning (MoFP).

Mrs. Hope Blake –Deputy Financial Secretary, Public Expenditure Policy Coordination

(PXPC) Division, MoFP.

Mrs. Delores Linton-Williams – Senior Director, Auditor General’s Department.

Mrs. Marjorie Johnson – Chief Technical Director, Office of the Cabinet

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Miss Catherine Williams,- Assistant Crown Council- The Solicitor General’s nominee

effective January 1, 2015 who replaced Mrs. Ayisha Richards-McKay who had resigned

from the Solicitor General’s Office.

FUNCTIONS AND POWERS OF THE COMMISSION

1. The functions of the Commission are to:-

i. Appoint Audit Committees and their chairmen as per the FAA Act.

ii. Review the audit committees’ annual reports and take necessary action.

iii. Review and approve the audit committees’ charters.

iv. Maintain files of charters, reports and other correspondence for each

committee under its purview.

v. Monitor and evaluate the performance of the audit committees against

their charters and the relevant guidelines to ensure their continued

effectiveness.

vi. Act as temporary custodian of audit committee’s records during the

transition of an audit committee.

vii. Submit a report annually to the Minister of Finance and Planning and

Parliament on the general activities of the Commission.

viii. Promote best practices in the operations of the committees through

training and timely dissemination of relevant information.

2. The Commission has authority to:

i. Seek and obtain information from any entity to resolve outstanding

issues presented by the audit committees.

ii. Summon officers of the entity or other persons to appear before the

Commission as it deems necessary.

iii. Remove members of an audit committee subject to Paragraph 7 of the

First Schedule of the FAA Act.

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OFFICE OF THE COMMISSION The Office of the Commission is located at 30 National Heroes Circle, Kingston 4. The postal address being: GOJ Audit Commission

c/o Ministry of Finance & Planning G Block, 3rdFloor, West Wing 30 National Heroes Circle, Kingston 4.

STAFF The approved staff structure of the Commission is currently an Executive Director and a

Secretary; however, these posts are presently vacant. Notwithstanding, the

Commission is supported by the Internal Audit Directorate (IAD) of the MoFP, which

acts as the Secretariat for the Commission.

VISION & MISSION

Vision Statement The promotion of good corporate governance ideals within the public sector through an effective and efficient audit function.

Mission Statement To provide expert guidance to the Government of Jamaica’s Audit Committees through

careful selection and appointment of members, capacity building and monitoring; in

order to improve the management, transparency and accountability within

Government.

MEETINGS The Commission held seven (7) meetings between April 1, 2014 and March 31, 2015.

The attendance record of members is as follows:

Meetings

Mr. Leighton McKnight, Chairman 7

Mr. Collin Greenland, Deputy Chairman 4

Mr. Dwight Moore 3

Mrs. Hope Blake 6

Mrs. Delores Linton-Williams 5

Mrs. Marjorie Johnson 6

Mrs. Ayisha Richards-McKay 5

Ms. Catherine Williams 1

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ACTIVITIES During the period the Commission discharged its functions in accordance with the

mandate of the FAA Act. The following activities were undertaken:

i. Appointment of additional members to audit committees. During the

preceding period several active committees experienced challenges with

their membership due to resignations, migration, death and non-

attendance at meetings by a few appointed members. This necessitated

the immediate appointment of new members in accordance with the FAA

Act. To this end, twenty two (22) members were appointed to ten (10)

committees.

ii. A Gleaner Supplement on the roles and objectives of the GOJ Audit

Committees was published on July 3, 2014. The publication was in

support of the GOJ Audit Commission’s third anniversary since its re-

constitution. The theme of the publication was, ‘Enabling Greater

Governance and Accountability in Government, through Effective Audit

Committees’.

iii. The Commission hosted a full day Conference on November 13, 2014

which featured presentations and a panel discussion from noted

professionals within the public and private sectors. The theme for the

conference was “Governance, Accountability and Effectiveness”.

iv. The Commission hosted one appointment briefing and provided material

to assist newly appointed Audit Committee Chairmen and members to

properly execute their functions. This meeting was held at the Office of

the Cabinet. Also, a special meeting with the chairmen and vice chairmen

was held on January 29, 2015, in an effort to re-emphasize the need for

managing the audit committees effectively, topics such as: conducting

meetings, meeting report, annual report, financial statements and

evaluation of internal audit were discussed.

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v. The preparation and submission of the Annual Budget and Operational

Plan for the financial year 2015/2016.

vi. The Commission met with Consultants from the Cabinet Office on

February 24, 2015 to discuss a comprehensive review of the

implementation of the Executive Agency (EA) Model in Jamaica.

vii. The Commission had a number of meetings with Audit Committees,

Accounting Officers and Chief Internal Auditors to facilitate improvements in

the functioning of the committees, especially in the area of conflict resolution

which is an area of concern for a few entities.

FINANCIAL STATUS

The Commission requested $3,727,993.00 to execute its activities, however only

JA$1,194,000.00 was approved for the financial year April 1, 2014 to March 31, 2015.

This allocation was just enough to cover expenses which included the stipend paid to each

Commissioner for attendance at meetings and the training session for audit committees

held on November 13, 2014. The actual expenditure for this period was a total of

JA$987,713.37, leaving an unexpended amount of $206,286.63; however, this amount was

not sufficient to cover the other training needs that had been identified. Notwithstanding,

the Commission intends to give these areas priority in the ensuing financial year.

Stipend During the year, the seven (7) members of the Commission were provided a stipend

at the following approved rates:

Chairman - $7,000 per meeting

Members - $3,500 per meeting

The overall amount paid was JA$150,500.00 (before statutory deductions) for the financial

year. (See attached Commissioners’ Compensation Schedule)

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Financial Statement

The Audit Commission’s finances were administered by the Ministry of Finance and

Planning; that is, all expenses were met from an activity under the Ministry’s Recurrent

Head of Expenditure. Hence, the details of its financials were extracted from the Ministry’s

audited financial statements for the year ending March 31, 2015.

TRAINING The Audit Committee Conference was held on November 13, 2014, with attendance

from both Audit Committee members and Accounting Officers. In addition, for the first

time, students from the Universities of Technology and West Indies who were enrolled

in the study of auditing and management, attended the conference. Based on the

evaluation from the participants, the Conference was well planned and executed. Also,

the panel discussion was very informative and the information and advice given was

important and relevant to the work of the government.

AUDIT COMMITTEE UPDATES There were thirty-two active audit committees as at March 31, 2015. To-date, twenty nine

(29) of the thirty-two (32) committees or approximately 91% have submitted their annual

reports to the Commission as stipulated by the Act.

The audit committees highlighted several issues in their annual reports. These included:

Issues Affecting the Effectiveness of the IAU Staffing - Four (4) Internal Audit Units (IAUs) experienced grave challenges due to

inadequate staffing. Staffing issues within the MDAs have been as a result of the

unattractive remuneration for the internal audit function, compared to its counterparts

in the Auditor General’s Department and Accounting Function. This impacted the IAUs’

ability to provide appropriate audit coverage based on their respective entity’s risk

exposure and vulnerability. For example, as was reported in the previous year, the

situation continues where there still remains one internal auditor for the Child

Development Agency (CDA), an entity which has island-wide operations, and for the

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Ministry of Foreign Affairs, which has representation overseas through resident

diplomatic missions and consular posts operating around the world.

Timeliness of management response. The reports from the committees showed

some improvement in this area as, of the total, only 34% reported poor management

response compared to 80% in the previous year. Improvements were mainly within the

Executive Agencies. Notwithstanding, where there are significant delays in obtaining

management responses as well as implementing audit recommendations, will result in

repeated breaches and waste of government resources. This is an area that needs to

be immediately addressed by the Accounting Officers and senior management as a lack

of appropriate action by management will result in the perpetuation of the risk

exposure, which will have significant financial implications on the entity.

Financial Statements Certification. It was reported that the ministries/agencies were

tardy in presenting their annual financial statements to the internal auditors for

certification as stipulated in the FAA Act Regulations, section 73. Committees report

showed that 57% of the MDAs had financial statements outstanding for the 2014/15

period.

Issues Affecting the Effectiveness & Efficiency of the Systems of Control Lack of accountability from process owners and the lack of enforcement of

sanctions to ensure accountability- This has in effect contributed to weak or

ineffective systems of internal controls resulting in a proliferation of non-compliance

and breaches within some entities. For example, the manual nature of the processes

within some entities, such as Accountant General’s Department (AGD), has over time

presented a source and opportunity for fraud and misappropriation. The processes are

usually tedious and voluminous in nature, and it is easy for circumvented steps in the

current control mechanism to go undetected. The implementation of an appropriate

information technology system to manage these processes would reap great benefits in

the reduction of control breaches. For example, an IT system that can properly manage

preparation of the different types of statements in a timely manner and properly

account for pension transactions, would greater reduce fraudulent activities.

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Conclusion The GOJ Audit Commission has made concerted efforts in ensuring that GOJ’s governance

mechanism is supported by functioning audit committees that provide effective oversight

to the internal audit function. Improvements were seen in the monitoring and support

provided by the Audit Committees based on discussions held with the Accounting Officers,

Chairmen of Audit Committees and appointing volunteers with expert knowledge and

experience to ensure better performance and effectiveness.

Notwithstanding these efforts, the issues noted in this report could erode our progress and

increase the risk of breaches of the FAA Act and its attendant regulations. Of note is the

need to improve the working relationships between the major stakeholders (Audit

Committees, Accounting Officers and Chief Internal Auditors) for a few committees as

misunderstandings and conflicts are at times undermining audit committee effectiveness.

The Commission is committed to its mandate and will continue to engage the responsible

accounting officers to mitigate the risks by improving and/or addressing where necessary,

the governance issues reported and internal control weaknesses/deficiencies observed.

Our Report is respectfully submitted to The Honourable Minister of Finance and Planning

this 1st day of October 2015.

SIGNED:

__________________________

Mr Leighton McKnight CD,

Chairman

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