MONROE ELLIS says even in instances in which financial statements were submitted by municipal corporations there were some glaring deficiencies.
January 20, 2025
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Municipal corporations flout financial reporting rules while spending billions of dollars
THE majority of Jamaica’s municipal corporations are spending vast amounts of taxpayers’ dollars with no clear account of their income or expenditure.
In the Auditor General’s Department 2024 Annual Report, tabled in Parliament last Tuesday, it was noted that, at the time it was prepared, the municipal corporations had not submitted a total of 85 financial statements, dating back several years, as required by the Local Government (Financing and Financial Management) Act.
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The worst offender was the St Ann Municipal Corporation (SAMC), which had 15 financial statements outstanding going back from 2009-2010.
To compound the matter there was no response from the SAMC to requests by the auditor general for an explanation of the outstanding statements.
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Other chronic offenders were the St Thomas Municipal Corporation with 11 outstanding statements and Westmoreland Municipal Corporation with 10.
Three corporations — Kingston and St Andrew, St Mary, and Clarendon — each had eight outstanding financial statements.
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The best performer was the Manchester Municipal Corporation, which had only the 2023-2024 financial statement outstanding.
In her report to Parliament Auditor General Pamela Monroe Ellis pointed out that even in instances in which financial statements were submitted, there were some glaring deficiencies.
For example, the Hanover Municipal Corporation (HMC) — which had five financial statements outstanding (2019/2020-2023/2024) — Monroe Ellis pointed out that she was unable to express an opinion on the those submitted (2015/2016 and 2016/2017) due to the pervasive absence of sufficient and appropriate audit evidence to support the transactions, account balances, and disclosures in the financial statements.
“The management of the HMC reported that the corporation was unable to provide majority of the accounting records to support the significant account balances, transactions, and disclosures in the financial statements due to the passage of time and an IT [information technology] system failure that occurred in December 2022, which resulted in the loss of accounting information for the periods under review.
“Consequently, they were unable to confirm the accuracy and completeness of the financial reports that were submitted for audit. As a result, I was unable to perform key audit procedures to determine whether the transactions, account balances, and disclosures were fairly presented in the financial statements,” said Monroe Ellis.
She noted that the HMC said it was unable to prepare accurate financial statements due to the inadequacy of the time that was given to provide documents and related information dating back to several years.
“All payment vouchers, for example, were available and would have been provided to the auditors were they conducting the audit on site. However, it was extremely difficult, given limited time and space to identify the different samples of payment vouchers, covering several years, among scores of payment vouchers,” Monroe Ellis quoted the HMC as responding.
“The HMC further indicated via letter dated March 27, 2023 that some records relating to the periods under review were in the custody of the Integrity Commission and, therefore, would not be available for audit. I subsequently advised the HMC, via letter dated April 12, 2023, to write to the Integrity Commission and inform it that the documents are urgently required to facilitate the statutory audit of the HMC’s financial statements.
“I later learnt, via the media in March 2024, that the Integrity Commission had returned all documents to the corporation. My office subsequently contacted the HMC, and the corporation agreed to deliver the records to my office by May 2024. However, the documents presented for audit were not sufficient and appropriate to support all the relevant transactions and balances selected for testing,” added Monroe Ellis.
It was a similar story for the Clarendon Municipal Corporation, which submitted financial statements to the auditor general for four financial years up to 2015, with eight outstanding.
“I was unable to express an opinion on the financial statements due to the pervasive absence of sufficient and appropriate audit evidence to support the transactions, account balances, and disclosures in the financial statements.
“Management indicated that due to the age of the financial statements there were significant challenges in providing some source documents within the time frame in which the audit needed to be executed. As a result, I was unable to perform key audit procedures to determine whether the transactions, account balances, and disclosures were fairly presented in the financial statements,” said Monroe Ellis.
In the case of the Trelawny Municipal Corporation, Monroe Ellis said the 2015/2016 and 2016/2017 financial years revealed weaknesses in the controls over accounting for staff costs and liabilities.
“Management has since indicated that steps will be taken to strengthen the relevant controls,” noted Monroe Ellis.
For the St Elizabeth Municipal Corporation (SEMC) Monroe Ellis reported that the audit of the 2013/2014 financial statements revealed material discrepancies between the draft financial statements submitted for audit and the corporation’s underlying records.
“Consequently, management resubmitted a revised set of financial statements and an updated general ledger. However, the corporation failed to provide the relevant journal vouchers to support the changes in its revised financial statements,” said Monroe Ellis.
She pointed out that while the SEMC provided some records during the audit, she was unable to determine whether several amounts were fairly presented, as the management did not provide sufficient appropriate evidence to support all the relevant transactions and balances selected for testing.
These included expenditure of more than $472 million and revenue totalling just over $236 million.
It was a similar story for other corporations highlighted in the report, with the repeated refrain from Monroe Ellis, “I was unable to express an opinion on the financial statements due to the pervasive absence of sufficient and appropriate audit evidence to support the transactions, account balances, and disclosures in the financial statements.”
The municipal corporations are financed mainly from the Parochial Revenue Fund, trade licence fees, building fees and fees from other regulatory functions, as well as grants from the central government in respect of capital and recurrent expenditure.
The building which houses the Hanover Municipal Corporation which had five financial statements outstanding (2019/2020-2023/2024)
