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Page 51

Part Six – Corporate Governance - INSPORTS

51 Auditor General’s Department Special Audits - March 2017

Internal Control Weaknesses Section 6(1)(b) of the PBMA Act requires that every board develop adequate information, control, evaluation and reporting systems within the body. Further, Section 6(1)(a)(i) of the PBMA Act require Boards to take such steps as are necessary for the efficient and effective management of the public body. 6.15 Consistent with the Law, we expect that the INSPORTS Board should provide strategic

direction to ensure that adequate systems are in place for the efficient and effective management of government resources and ensure that management:

i. Develop appropriate SOPs and procedural manuals to guide the management and

efficient utilisation of financial, human and other resources;

ii. Implement internal controls over all assets, such as fixed assets, inventory and cash; iii. Prepare Accounting records, such as Payment and Journal Vouchers, Receipt/Ticket

Books, Cash Book, General Ledger and Accounts Receivables and Payables.

INSPORTS failed to implement strong internal controls over its operations

6.16 We found that INSPORTS failed to employ strong systems of internal controls over its accounting, financial and operational practices to safeguard the Institute’s assets from misuse. The prolonged weaknesses in the control systems, opens the Institute to material errors and other irregularities, which may go undetected for a considerable period. In addition, these weaknesses in the control system also impaired the proper oversight by the Board and the portfolio Ministry.

Absence of appropriate SOPs and procedural manuals

6.17 INSPORTS failed to develop and implement adequate standard operational procedures (SOPs) and procedural manuals to guide the administration of its financial and human resource management activities.

The Financial Policies and Procedures Manual to aid in improving the controls processes at the Institute has since been updated. Further, the Human Resource Manual has been prepared and is awaiting review and approval. Source: Letter from MCGES (Portfolio Ministry) in response to AuGD draft report dated May 24, 2016.

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Page 7

Auditor General’s Department – Information Technology Audit Report of FSL 7

the Public Bodies Management and Accountability (PBMA) Act and FSL’s Human Resources Policy Manual. FSL should also engage the Ministry with responsibility for the Public Service to regularize the current situation where individuals are employed to posts that are not on FSL’s approved establishment. Additional safeguards should also be implemented to prevent a recurrence of these breaches.

4. The FSL management should ensure that it complies with its personnel clearance procedures in relation to the verification of academic qualifications submitted by employees/prospective employees in order to reduce the risk of employing individuals who provide fictitious qualifications.

5. Information system security best practice requires organisations to determine the value of their information systems as part of their information systems security risk assessment. The value of each information system and the information contained within them directly influences an organisation’s decision-making process. We therefore recommend that the management of Fiscal Services Ltd as part of its information systems security risk assessment include an information systems value assessment mechanism in order to increase their ability to effectively assess the business impact of security threats and related risks.

6. The completion of a comprehensive information security policy and the assignment of a designated information security function within FSL with the appropriate staff should be treated as a matter of priority in order to reduce the reliance now being placed on the experience of certain key personnel to drive information system security.

7. Consistent with best practice and international standards, FSL should implement a system of periodic reviews of all network/system logs and ensure that the activities of privileged users and administrators are monitored. The company should also urgently implement the necessary automated network access control system to prevent unauthorized individuals from accessing its IT resources.

8. Given the sensitive nature and the critical importance of the data being managed by Fiscal Services Limited, all visitors should be required to provide proof of identification in order to gain access to the premises. This will serve to strengthen the controls over physical access to the organization’s facility.

9. As part of its environmental control mechanism, FSL should ensure that its premises are properly equipped with fire prevention, detection and suppression systems especially at locations that are susceptible to fires such as their canteen and kitchen. The company should, therefore, as a matter of priority take the necessary steps to install an appropriate fire alarm and fire suppression system in its kitchen and canteen in order to reduce the impact of a fire.

10. FSL should conduct periodic tests of backup media and business continuity plans to ensure that its systems can be effectively recovered and shortcomings adequately addressed prior to a disaster occurring. The results of these tests should also be documented for analysis and review.

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Page 89

CASE STUDIES PCJ

Page 88 Compendium of a Review of Aspects of Petroleum Corporation of Jamaica

(PCJ) and a Comprehensive Audit of Petrojam Limited December 2018

time of confirmation, four months later on August 22, 2018, that PCJ interviewed the officer. However,

the interview was conducted soley by the HR Manager instead of a required panel of three members as

outlined in the HR Policy.

Section 8(iii)(c) of revised (March 2017) HR policy states: All job applicants will be interviewed by a panel

of suitable internal resource personnel. Panel will comprise a minimum of three (3) persons to include: the

Head of the Department in which the vacancy exists (or his/her designate); the Manager of the HRAD (or

his/her designate); and any other resource person(s) elected by the Manager of the HRAD. The PCJ is at

liberty to conduct such number of interviews as it deems necessary.”

7.1.4. In another instance, a Business Intelligence Support Officer was engaged on July 3, 2017 with

emoluments of $7 million without the approval of the MoFPS. PCJ indicated that the officer was hired

based on a request from the Group Chief Financial Officer (GCFO) to provide assistance to the

Organization’s Strategic initiatives with specific responsibility to drive Strategic Planning, Performance

Monitoring and Business Analysis. Our review of an email dated June 2, 2017, revealed that the Group

General Manager (GGM) instructed the GCFO to meet with the HR Manager to devise a method to bring

a named individual on board. This arose out of a meeting between the GGM, GCFO and the Chairman. The

GGM also indicated that the HR Manager would require a justification and a job description to start the

process. We also noted that the Business Intelligence Support Officer was employed without an interview,

reference check and further the post was not advertised.

7.1.5. PCJ breached Section 20 of the Public Bodies Management and Accountability (PBMA) Act, which

states: “In the exercise of any powers conferred on a board by a relevant enactment or any constituent

documents in relation to (a) emoluments payable to the staff of a public body; (b) any other policies and

guidelines applicable. The board shall act in accordance with such guidelines as are issued from time to

time by the Minister responsible for the public service and the Minister, respectively.”

Unapproved Allowances and benefits

7.1.6. As at September 2018, PCJ had 143 employees receiving an aggregate annual salary of

approximately $390 million. While we observed that MoFPS approved salaries and benefits for PCJ, there

was no evidence that MoFPS approved the Performance Incentive and the Reimbursement of Gym fees

to employees. In addition, PCJ paid travelling allowances to 29 officers without the approval of MoFPS.

This resulted in unapproved payments totaling $48.4 million over the 2015-16 to 2017-18 period (Figure

6).

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Page 14

Auditor General’s Department – Information Technology Audit Report of FSL 14

(d) The Chairman of the Board and the Head of the Procuring Entity shall not sit on the Procurement Committee.

2.6 We however, found that FSL does not have an appropriately constituted Procurement Committee in accordance with the GoJ Procurement Procedures outlined above. The functions of the Procurement Committee were instead being undertaken by a sub- committee of the Board+of+Directors">Board of Directors – the Technical and Research & Development sub- committee. This sub-committee is made up entirely of Board members including the acting Managing Director. We were able to identify procurements totalling US$ 6,025,816.64 and JA$100,126,659.71 that were approved by this committee over the last three years [2008- 2010].

2.7 This level of involvement by the Board and the MD in the procurement process may lead to possible conflicts of interest especially in relation to the MD since certain procurements will require his specific approval and authority. FSL should therefore reconstitute its Procurement Committee in keeping with the provisions of the Government of Jamaica Handbook of Public Sector Procurement.

2.8 The management of FSL subsequently informed us that they have recognized the breach and will take the necessary steps to establish a Procurement Committee in accordance with the procurement guidelines.

FSL Issues Multi-million Dollar Employment Contracts without the Ministry of Finance’s Prior Approval 2.9 Fiscal Services Limited, as a public body, is subject to the directions of its portfolio ministry

as well as to the provisions of the Public Bodies Management and Accountability (PBMA) Act. Section 20 of the PBMA Act requires that in relation to emoluments the board shall act in accordance with such guidelines as are issued from time to time by the Minister responsible for the public service. Additionally, FSL’s Human Resources’ Policy Manual requires that for fixed term employment contracts at the level of Department Head and above, approval must first be obtained from one of the following:

a. Portfolio Ministry; b. Ministry of Public Services; c. Attorney General.

2.10 We found that despite having a formal policy and other guidelines relating to fixed term

employment contracts, FSL was guilty of engaging persons on fixed term employment contracts without the prior written approval of the Ministry of Finance and the Public Service (MoFPS). We noted the engagement of at least seven individuals at senior levels within FSL on fixed term employment contracts without the prior approval of the Ministry of Finance and the Public Service costing approximately $33.7M per annum.

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