FSC FREE-FOR-ALL
Auditor general’s special audit reveals widespread irregularities in state agency
AUDITOR GENERAL (AuG) Pamela Monroe Ellis has confirmed that the Financial Services Commission (FSC) incurred a $163-million loss when Jamaica hosted the International Organization of Securities Commissions (IOSCO) conference in 2017.
Additionally, she said the agency failed to recover $4.7 million in statutory obligations for a former executive director and paid US$28,000 to a consultant without an approved contract and terms of reference.
The findings are contained in a 22-page special audit report of the FSC’s human resource and administration practice and procurement transactions executed between March 2015 and September 2022.
The report is in response to a slew of allegations against the state agency that supervises and regulates the securities, insurance and private pensions industries.
The report said the FSC department was accused of creating posts without the approval of Ministry of Finance and the Public Service; filling vacancies without being advertised; placing friends and related persons in positions for which they are not qualified; presiding over a $150-million loss on the staging of the International Organization of Securities Commissions (IOSCO) conference; spending $160 million on training over four years to include overseas trips which were unauthorised by the finance ministry; approving payment to a contractor without evidence of the work that was done; and presiding over faulty disciplinary procedures to victimise unfavoured persons.
Regarding the financial loss for the staging of the IOSCO conference, Monroe Ellis said the FSC’s audited financial statements for 2017-18, revealed that total revenue earned for the conference was $155.401 million, while expenses amounted to $319.047 million, resulting in a loss of $163.646 million.
MAINTAINING COUNTRY’S REPUTATION
The auditor general said board minutes for July 2017 indicated that matters relating to the conference were discussed and the board agreed that there were missteps in the management of the contracting and other arrangements relating to the conference but that in the interest of maintaining Jamaica’s reputation, efforts will be made to make the conference a success. At the time, former Minister of Finance Audley Shaw said the hosting of this conference provided a prime opportunity for Jamaica and the wider Caribbean to be recognised as pivotal stakeholders in the global securities market regulatory landscape.
Further, the AuG said the FSC did not demonstrate proper fiduciary responsibility when it accepted liability for the payment of $4.76 million in the statutory obligations of a former executive director.
She said that this was in a context where FSC did not withhold statutory payments of the sum from separation payments of $11.1 million to the former FSC senior personnel but as instructed by the board chairman, opted to classify the $4.76 million as ex-gratia payments. Monroe Ellis said the FSC also paid the former executive director an amount of US$1,000 on the instruction of the chairman for which there was no evidence that both payments were brought to the attention of the board.
The said former executive director, the auditor general and team also found, engaged a consultant for the period February 2015 through to September 2015 who the FSC paid US$28,000.
The FSC did not have any terms of reference in place to govern payments to the consultant, Monroe Ellis said.
“We saw no documentation indicating the nature of the services to be provided, as required by the GOJ Procurement Guidelines,” she said.
She said at a meeting of the board of commissioners on September 11, 2015, the former executive director asked that the board approve the contract of $23 million for payment of invoices already submitted.
However, she said the chairman disagreed with the payment“as the contract was not presented to the board for approval”.
She said on March 9, 2016, the former executive director was directed by the board to have the consultant revise the invoices “so that the paperwork stands up to scrutiny”.
“We saw invoices totalling US$28,000 and we noted a formal request was made to the bank on June 10, 2016, for a draft in the similar amount to be paid to the consultant. The FSC did not provide a response to this finding,” Monroe Ellis said.
On the matter of excessive expenditure, the AuG said her department saw no instance where travel was not related to the respective officer’s work at the FSC and further, email correspondence corroborated that travels related to official business of the FSC.
Regarding posts being created without the approval of the finance ministry, the AuG said whereas 71 positions costing $363 million per annum – including emoluments and allowances – at the FSC were not on the ministry’s list of established posts, her department found no evidence of intention to circumvent government policy.
Monroe Ellis said her department observed instances where officers were either employed, promoted without the positions being advertised or being interviewed.
She has recommended that the FSC seeks to resolve with the finance ministry outstanding matters related to its establishment and recruitment practices and improve transparency in its human resource processes.
In addition, she said the FSC should seek to recover the overpayment of $4.76 million in statutory obligations.