Key Findings And Recommendations: Special Audit Of The PAJ

Auditor General Pamela Monroe Ellis
Auditor General Pamela Monroe Ellis

On Tuesday, July 26 a Special Audit of the Port Authority of Jamaica carried out by The Auditor-General’s office was tabled in Parliament. As reported by The Jamaica Gleaner, the findings of the report revealed millions of dollars in improper payouts, lack of proper authorisations and due diligence checks. The Government of Jamaica has since announced Prime Minister Andrew Holness’ intentions to address the breaches brought to light by the audit.

Below we take a look at the audit’s findings and recommendations and provide the full text of the report.

The major finding of the report was that the Port Authority of Jamaica’s Governance Practices were inconsistent with the Public Bodies Management and Accountability Act and Ministry of Finance Circulars. Inconsistencies included:

1. Proper approvals for payment of retirement benefits were not sought from the requisite authority.

“The employment contracts for 14 senior officers provided for the payment of a retirement benefit, at the discretion of the Board. However, the requisite approval was not sought from the Ministry of Finance and Planning, in breach of MoFPS guidelines.”

2. The PAJ overpaid 14 senior officers to the tune of $15.05 million.

“Fourteen (14) senior officers were overpaid gratuity totalling $15.05 million between April 2011 and March 2015. The senior officers’ contracts provided for gratuity of 25 per cent of gross taxable emoluments. However, MoFPS Circular stipulates that gratuity should be paid on basic pay only. In April 2015, PAJ wrote to MoFPS requesting a waiver for existing senior officers whose contracts were in breach of the Circular. The MoFPS responded that PAJ’s request to continue the practice could not be supported. MoFPS noted and accepted that the provisions in the current contracts are legally binding on the Authority, but indicated that the Ministry cannot grant approval for provisions which are contrary to those detailed in the Circular.”

3. The PAJ did not observe the applicable salary scale for a senior officer.

“A senior officer was paid basic salary and motor vehicle allowance in excess of the maximum of the applicable MoFPS scale. The senior officer’s engagement was approved at a lower level by the Portfolio Ministry. The MoFPS did not approve the engagement and employment benefits.”

4. There was no evidence that investments made in Navy Island and Titchfield Hill were properly assessed for viability.

“PAJ invested US$2.7 million and J$40.1 million to acquire Navy Island and ten lots on Titchfield Hill respectively, between 2001 and 2007. PAJ indicated that the investment in Navy Island was undertaken to augment its existing marina development and facilities, to encompass a first class resort. The Titchfield properties were acquired to facilitate cultural tourism. We saw no evidence that prior to making these investment decisions, PAJ had conducted feasibility studies to assess the viability of the projects. Accordingly, we were unable to assess whether PAJ had determined the expected cash flow and rate of return on the investments. Further, the investment decisions appeared not to be in line with the Authority’s mandate, which does not include the development of properties for tourist attractions. To date, the proposed tourism developments have not materialised. ” 

The Auditor General also found that since acquisition these properties have remained idle with no development or restoration activities undertaken.

Recommendations from the audit are as follows:

  1. In the absence of explicit approval from the MoFPS, PAJ should take steps to recover amounts overpaid in respect of retirement benefit and gratuity payments.
  2. The responsible officer (s) who approved the unauthorized benefits should be advised that they could be subjected to administrative action in accordance with the Public Bodies Management and Accountability Act.
  3. In keeping with its responsibility under Section 6 of the PBMA Act, the Board should take the necessary steps to enhance its risk management framework, including conducting the necessary due diligence, which should include, at a minimum, the cash flow impact and the expected rate of return on proposed investments.

The full audit can be seen here – PAJ Special Audit July 2016