Councils and taxpayers’ money

AMONG THE urgent matters that must be at the top of the agenda of the new municipal councils after next week’s elections is transparent accounting for taxpayers’ money.

And it matters naught which political party ends up in control of any council. For what the auditor general Pamela Monroe Ellis report for 2022-2023 has revealed is that whoever is in charge is equally bad at keeping records – especially with respect to money they spend.

Indeed, what the auditor general specifically noted is that for various years between 2010/11 and 2017/18, five of the parish governments – Manchester, Portland, Clarendon, St Thomas, St James – plus that for the city of Portmore, spent over $10 billion for which there was an absence of “adequate supporting documents”. The same applied to $5.6 billion in revenue.

“As a result, I was unable to perform key audit procedures to determine whether the financial statements were prepared, in all material respects, in accordance with the applicable financial reporting framework,” Ms Monroe Ellis reported.

The upshot: 22 disclaimer opinions with respect to these municipalities, meaning that Ms Monroe Ellis couldn’t vouch for the accuracy of the information in those statements. Two others received lower “except for” qualifications, because of insufficient information to support balances in financial statements.

These qualifications do not necessarily represent the full extent of the failure of parish governments and the Portmore municipality to keep good, accurate accounts. For according to Ms Munroe Ellis, during the review period her office audited 46 statements, of which six, at the time of her report, were still “work in progress”. Twenty-four were certified, a dozen were being reviewed, and four were “with management for signature and resubmission”.

GOOD BET

It is a good bet that by the time the outstanding financials are completed, they will show that billions more dollars were not properly recorded, or accounted for.

And yet, this may be merely the tip of the proverbial iceberg. Another 81 statements requested by the auditor general from 13 municipal corporations, plus Portmore, weren’t delivered on time, or in keeping with accounting standards.

But these are not the only findings by the auditor general that highlight a lack of oversight and accountability in the local government system that puts taxpayers’ resources gravely at risk.

The Local Governance Act, which governs the operations of the municipal corporations, was passed in 2016. Contemporaneous with the legislation was the Local Government (Financing and Financial Management) Act, which, as Ms Monroe Ellis pointed out, mandates that municipal authorities adopt the International Public Sector Accounting Standards (IPSAS) in recording and reporting their finances. That includes the use of accrual accounting, which books expenses and income when they occur, rather than when the bills are actually paid or cash is received.

“Notwithstanding the statutory requirement, the corporations have not yet implemented full accrual-based IPSAS accounting,” Ms Monroe Ellis noted.

This may not be entirely the fault of the municipal corporations, given the central government’s explanation that the appropriate software is being acquired. Nonetheless, the failure to implement this system, especially with respect to expenditure, provides loopholes and crevices through which bad financial behaviour can slip or hide.

BREAKDOWN OF SYSTEMS

Fundamentally, the problems highlighted by the auditor general points to a breakdown of systems and the absence of oversight at several levels.

For example, chairmen of the municipal councils are the top bosses of the corporations, to whom designated chief executive officers report. The CEOs are, in law, the chief accounting officers of the corporations. That places on them a special fiduciary obligation. They, too, ought, along with the chairmen, to be held accountable for the shortcomings highlighted in Ms Monroe Ellis’ report.

But the failures are not theirs alone. Each corporation is obligated to hire a chief financial officer, among whose job is the preparation of the bodies’ accounts. They, too, are accountable.

Additionally, the councils are required by the Local Governance Act to appoint finance committees, among whose responsibilities is to oversee “the management of the financial affairs” of the corporations and city municipalities.

Up to half of these committees can be noncouncil members, who have a voice, though not a vote. It is not clear how many of the councils have exercised this option, and if they have, what has been the experiences and/or impact of the non-council members. This is in need of analysis.

Further, the councils are required to have Local Public Accounts Committees (LPAC), up to half of whose members can be non-elected persons. Or, alternatively, outside membership can fall to a third if the same proportions of majority and minority councillors are on the committees. Critically, the chairperson of the LPAC must be a non-elected member.

A key obligation of this group is to review the performance of the authorities “to determine whether accountability, transparency and ethical standards are being observed”. The names of their members should be known and their findings published.

The opinions on this page, except for The Editorial, do not necessarily reflect the opinions of The Gleaner.