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Key Findings and Recommendations

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Summary

The Institute">Caribbean Maritime Institute (CMI) is a tertiary institution that specializes in maritime education and training for professional seafarers, allied industry personnel and the wider industry covering land, sea and air. CMI was originally established as the Jamaica+Maritime+Institute">Jamaica Maritime Institute (JMI), a joint project between the Jamaican and Norwegian Governments in September 1980. The Institute became a statutory body under the laws of Jamaica on January 4, 1993, and was renamed the Caribbean Maritime Institute in 2001.

CMI’s main operation is carried out through three schools. The main facility, the School of Marine and Profession Studies currently provides training in seafarers, which is delivered in accordance with the International Marine Organization Standards. The School of Academic Studies provides training in allied courses supporting the shipping industry, while the School of Advance Skills caters to industry needs.

The scope of the audit covered the period April 2010 to March 2015. The audit aimed to determine whether the institute had adequate systems, policies and procedures in place to effectively manage its core function in accordance with its mandate.

The key findings are outlined below.

Key Findings

Financial and Operational Performance 1. CMI did not conduct a resource audit to ascertain the impact of its planned strategy to increase

enrolment. This impacted CMIs ability to engage qualified lecturers to deliver the curriculum and

resulted in CMI being unable to achieve the planned reduction in its dependence on government

subvention. We noted that between the periods 2010-11 to 2014-15, CMI enrolment increased by

105 per cent, moving from 1,090 to 2,236 students. However, CMI did not conduct any resource

audit to inform management of the financial, human and physical resources capacity of the

Institution to respond to the increase student enrolment. CMI indicated that by March 2015, 90 per

cent of its total revenue should be earned from tuition fees, while the remaining 10 per cent would

be obtained from Government subvention. However, by March 2015, CMI still did not achieve its

target as tuition fees comprised 77 per cent of total revenue, and Government subvention the

remaining 23 per cent. CMI contends that the strategy is deliberate to seek resources after

enrolment. However, this may result in CMI over extending its resources, thereby causing

reputational risk and breach of the International Marine Organization (IMO) standards of operation.

Despite the anticipated increase in enrolment, CMI did not seek Ministry of Finance’s approval for

any consequent increase in its staffing level. As a result, CMI employed 253 part time adjunct

lecturers at a cost of $135.6 million, without approval from the Ministry of Finance. Further, CMI

employed six assistant lecturers who did not possess the requisite three year post qualification

teaching experience or formal training, contrary to CMI’s policy. CMI’s decision to employ

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Special Audit Report Caribbean Maritime University (CMU) Page 2

December 2019

Table of Contents

EXECUTIVE SUMMARY ........................................................................................................................................... 10

WHAT WE FOUND ............................................................................................................................................................................................. 10

GOVERNANCE AND OPERATIONS MANAGEMENT ............................................................................................................................................ 10 PROCUREMENT AND CONTRACTS MANAGEMENT ........................................................................................................................................... 12

PART ONE .............................................................................................................................................................. 14

INTRODUCTION .................................................................................................................................................................................................. 14 Background .......................................................................................................................................................... 14 Rationale for the Audit ......................................................................................................................................... 14

PART TWO ............................................................................................................................................................. 16

GOVERNANCE AND RESOURCE MANAGEMENT ............................................................................................................................................... 16 LIMITED OVERSIGHT OF CMU BY SUCCESSIVE PORTFOLIO MINISTRIES ......................................................................................................... 17 SOURCE: INFORMATION PROVIDED BY CMU ....................................................................................................................... 17 LIMITED OVERSIGHT BY CMU’S COUNCIL AND MANAGEMENT ..................................................................................................................... 18

PART THREE ........................................................................................................................................................... 22

PROCUREMENT AND CONTRACTS MANAGEMENT ........................................................................................................................................... 22 PROCUREMENT AND PROJECT MANAGEMENT PRACTICES UNDERMINED VALUE FOR MONEY OBJECTIVE ...................................................... 23

Universal Service Fund –CMU Programmes ......................................................................................................... 25 Career Advancement Programme ........................................................................................................................ 28 Caribbean Maritime University (CMU) - Construction Works .............................................................................. 29

CMU EXPANSION PROJECT (BLOCK E) ............................................................................................................................... 30

PART FOUR ............................................................................................................................................................ 38

ACCOUNTS MANAGEMENT ............................................................................................................................................................................... 38 EXPENDITURE UNDER THE JAMAICA MARITIME INSTITUTE TRUST FUND ....................................................................................................... 38 ACQUISITIONS OF SOLAR PANELS ..................................................................................................................................................................... 41

UNAPPROVED BANK ACCOUNTS ....................................................................................................................................................................... 42 UNSUPPORTED BANK WITHDRAWALS TOTALLING J$9.6 MILLION AND US$223,112 .................................................................. 43 DIRECT DEPOSITS OF $268 MILLION MADE TO OFF THE BOOKS ACCOUNTS ................................................................................................... 44 CANTEEN ACCOUNTS USED FOR NON-CANTEEN RELATED TRANSACTIONS ....................................................................................................... 45

PART FIVE .............................................................................................................................................................. 50

HR PRACTICES AND RESOURCE MANAGEMENT .............................................................................................................................................. 50 ENGAGEMENT OF CONSULTANTS, ADVISORS AND KEY EMPLOYEES ............................................................................................................... 51 MANAGEMENT’S OVERRIDE OF CMU’S INTERNAL CONTROL SYSTEM ............................................................................................................ 59 OVERLAPPING PAYMENTS MADE FOR ACCOMMODATION FOR EXECUTIVE DIRECTOR.................................................................................... 61 UNAPPROVED EMOLUMENTS & BENEFITS ....................................................................................................................................................... 63

APPENDICES .......................................................................................................................................................... 70

Appendix I General Principles of Good Governance in Public Procurement to attain Value for Money ............... 70 Appendix II Feasibility Assessment ....................................................................................................................... 71 Appendix III Payments to Logistics Company 2 for computers and other equipment .......................................... 72

Appendix IV Payments Made from JMITF Bank Account ..................................................................................... 73 Appendix V - JMITF Payments: No Supporting Documents provided ................................................................. 75 Appendix VI Overseas Consultant Deliverables .................................................................................................... 76

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Executive Summary

Special Audit Report Caribbean Maritime University (CMU) Page 11

December 2019

2. CMU improperly operated the bank accounts of Jamaica Maritime Institute Trust Fund (JMITF). The

JMITF was established in 19971 to receive donations and grants for the development of the then

Jamaica Maritime Institute. We saw no evidence that the CMU’s Council took the necessary legal steps

to transfer the assets of JMITF to the CMU Foundation and wind up the JMITF. Further, the JMITF

board has not met since April 2015. We identified four bank accounts in the name of JMITF with an

aggregate balance of $1.6 million as at March 31, 2019. We noted that CMU improperly transferred

$145 million from one of CMU’s bank accounts to the JMITF main bank account on March 29, 2018.

3. Information obtained directly from a bank with CMU’s approval, revealed that three cheques

amounting to $2.4 million, drawn on the JMITF account were encashed on May 18, 2018 at the same

branch of a financial institution. However, CMU’s accounting records did not reflect these

transactions but our investigations revealed that the recipients were related parties. In all instances,

transfers from the trust fund account were signed off by the President of CMU and a trustee who is a

CMU Council member and chairman of CMU Council’s finance sub-committee. CMU made a wire

transfer of US$621,132 from the JMITF account, to the supplier of sandwich panels for the Block E

building project (key findings no. 6). The reason for the execution of transaction from the two bank

accounts was not evident. All transfers from the trust fund account were signed off by the President

of CMU and Chairman of the finance sub-committee of the CMU council. We also identified payments

totalling $332.9 million and US$293,445 from various bank accounts for which the necessary

supporting documents were not presented2.

4. The President acted unilaterally in the engagement of employees, consultant and an advisor by not

obtaining Council’s approval in keeping with the CMU Act3. The process used to engage the

consultant/advisor lacked transparency and due diligence. CMU paid an overseas-based consultant

$13.95 million or 72 per cent of the contract sum despite unfulfilled deliverables and honoured claims

totalling US$12,038 without obtaining evidence of the expenses incurred. The President also engaged

an independent advisor for three years with effect from April 1, 2018 at $5.1 million per annum. The

advisor received family health and life insurance benefits amounting to $253,808 for the period May

2018 to January 2019; these benefits are not normally afforded to non-employees. The President also

approved the engagement of four officers with combined emoluments of $12.2 million per annum, in

breach of CMU’s Human Resources Policy.

The President was reimbursed US$10,440 for expenses associated with an international award. The

MoEYI indicated that the President was nominated by “unknown sources as an international

recognition of his leadership”. However, this award appeared to be of a personal nature and we noted

that the Council did not grant approval for CMU to absorb the cost of the President’s participation at

the award ceremony in Oxford England. It has come to our attention by way of articles in the overseas

1 According to the Articles and Memorandum of Association for the Jamaica Maritime Institute. 2 For $332.9 million ($9.6M, $14.1M, $41.2M & $268M) and US$293,445 (US$70,333 & US$223,112) 3 Caribbean Maritime University Act Section 6(1): The Council shall appoint and employ, or may authorize the appointment and employment of, at such remuneration and on such terms and conditions as it thinks fit, such officers and academic staff, administrative and technical staff, ancillary staff and other employees of the University as the Council considers necessary for the purposes of the University.

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Special Audit Report Caribbean Maritime University (CMU) Page 38

December 2019

Part Four

Accounts Management

At A Glance

Systems and Practices

Criteria

Key Findings Assessment

Against Criteria

JMITF accounts Section 7 of the JMITF’s Memorandum of Association: true accounts to be kept for money received and expended by the Trust. The balance sheet to be ascertained by one or more properly qualified auditors.

JMITF did not have current financial statements or records. The last audited financial statements for the JMITF was for the year ending December 31, 2008.

Documentation and Disclosures

CMU Act 13 (1)- Keep proper accounting records in relation to functions in accordance with established accounting principles and the FAA Act.

No documentary support for J$332.9 million and US$293, 445. Transactions totalling $268 million not disclosed or reflected in the general ledger.

Opening of bank accounts

FAA Act Instructions (2017)- Section 5.5 and MoFPS circular (September 2015): Approval of Financial Secretary is required to open and operate official bank accounts.

Five bank accounts unapproved -including two canteen accounts and the Absorptive Capacity bank account. Transactions were undertaken via RTGS by employees not signatories to the accounts.

MET the criteria

Met the Criteria, but improvements needed Did not meet the criteria

Expenditure under the Jamaica+Maritime+Institute+Trust+Fund">Jamaica Maritime Institute Trust Fund

4.1 The Jamaica+Maritime+Institute+Trust+Fund">Jamaica Maritime Institute Trust Fund (JMITF) was set up to provide support for the Jamaica

Maritime Institute (JMI)27. The JMI was renamed Caribbean Maritime Institute (CMI) in 2001 and

subsequently converted to Caribbean Maritime University in September 2017. The Jamaica Maritime

Institute Trust Fund was established in 1997. The objectives as set out in the trust deed were as follows:

(a) To assist the JamaicaJMI Appeal Committee and others in raising funds for the development of

the Jamaica Maritime Institute;

(b) To receive donations and grants for the development of the Jamaica Maritime Institute;

(c) To make donations, loans and grants to the Jamaica Maritime Institute for its development-including

faculty development and the strengthening of research capability- and for specific projects agreed

by the JamaicaJMI Appeal Committee;

(d) To award scholarships, exhibitions, bursaries, or maintenance allowances tenable at the Jamaica

Maritime Institute;

27 Previously, the Jamaica Maritime Training Institute which was formed in 1980

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Part Four Accounts Management

Special Audit Report Caribbean Maritime University (CMU) Page 39

December 2019

(e) To invest the monies of the Fund not immediately required for its purposes in or upon such

investments, securities or property as may be thought fit, subject nevertheless to such conditions (if

any) as may for the time being be exposed or required by law and subject also as hereinafter

provided.

4.2 Further, the Trust Deed specified that the Trust Fund should establish a Scholarship Fund to be

called the Jamaica Maritime Scholarship Fund, to hold the investments upon the trust with and subject to

the powers and provisions contained in the deed. The scholarship fund shall be used as follows:

(a) 80 per cent of the proceeds of the investment shall be available each year to fund scholarships;

(b) The balance of 20 per cent shall be retained in perpetuity and shall not be expended unless, in the

opinion of the Directors of the trust fund, it is deemed necessary and a special resolution is passed

at an extraordinary general meeting of the Trust Fund allowing for such expenditure;

(c) Source of funds as set out in the investment schedule should be as follows:

i. Proceeds of Noel Hylton scholarships

ii. Duke Fuller Scholarships

iii. Powda Tail

iv. Any other contributions and donations

4.3 Despite the fact that the Jamaica Maritime Institute had transitioned to a university, CMU

continued to operate and maintain JMITF bank accounts. Further there was no evidence that the JMITF

trustees took into consideration the evolving nature of CMI to determine whether the terms and conditions

of JMITF required review, to ensure continued applicability to CMU. In all instances, transfers detailed

below from the trust fund account were signed off by the President of CMU and a trustee who was a CMU

board member and Chairman of the finance sub-committee of CMU council. We saw no evidence that the

JMITF board had taken the necessary legal steps to transfer the assets of JMITF to the CMU Foundation

and wind up the JMITF, as the Committee had not to have met from the period April 2015 to date. CMU’s

legal officer indicated:

“the intention was to transition the JMITF to the CMU foundation and proceed with the suspension and

dissolution.” Further CMU stated that the action would have required the existing board of JMITF to make

relevant resolution regarding board appointment for the foundation, transfer of assets, etc. at a formal

sitting of the board which had not taken place”.

4.4 Even though, there were no board meetings being held which would enable us to ascertain the

decisions taken at the board level, we saw where CMU transferred significant amounts and made payments

relating to construction projects, inclusive of the acquisition of solar panels and related items funded

exclusively by CMU. In fact, JMITF undertook no fund raising activities nor received any donations over the

last six years. Further, there is no evidence that JMITF made disbursements to needy students or CMU in

furtherance of its mandate as outlined in the Trust Deed.

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