RISKY BUSINESS

The absence of sufficient and appropriate audit evidence to verify $295.5 million in journal adjustments at the Export Division of the Ministry of Agriculture, Fisheries and Mining has been flagged as a concern by the auditor general.

Auditor General Pamela Monroe Ellis said audits of the 2014-2015 and 2015-2016 financial statements for the Export Division had unearthed several matters of concern.

In the Auditor General’s Department’s annual report, Monroe Ellis said the division was at risk of undetected errors and irregularities owing to a lack of segregation of duties in the journal entry process.

Journal entries are used to record transactions, correct any discrepancies or errors in the initial recording of transactions, ensuring the financial statements reflect the true financial position of an organisation.

Public sector rules (Financial Instructions 5.9.1.1) state that different officers should handle authorising, certifying and checking of journal entries. However, Monroe Ellis said without these internal controls and with transactions totalling $156 million that lacked proper documentation, and $137.5 million in journal vouchers not available for audit scrutiny, the audit scope was limited and prevented her department from verifying the authenticity of these transactions.

At the same time, the Export Division came under sharp scrutiny for writing off $40.4 million in inventory loss without approval or documentary evidence of the write-off for the period under review.

The Ministry of Finance circular number 15, dated June 10, 2013, on the write-off of loss of public money (including inventory loss) stipulates the level of approval and reporting requirements for the writing off of public money. “However, the Export Division did not provide the requisite approval and formal report for this write-off,” the auditor general stated.

“Therefore, in the absence of the aforementioned evidence, we could not determine whether the write-off represented bona fide inventory losses. We are also of the view that the deficiencies in the control environment could contribute to concealment of irregularities,” Monroe Ellis said.

Further, the auditor general said without a detailed report outlining the circumstances and preventive measures, there was no assurance that similar losses would be prevented in the future.

The auditor general also revealed that the Export Division’s management of investments was not in keeping with the requirement of the Financial Instructions, which stipulates that accounting officers should implement adequate controls to include proper accounting records and monthly reconciliation of the investment accounts.

She reported that for the period ended March 31, 2015, the Division did not provide documentation to support investments totalling $75.32 million, as well as details on the encashments and interest related to these investments.

“Additionally, there was no evidence of monthly reconciliation between supporting documents and investment records. These deficiencies heighten the risk of undetected fraud, misappropriation, and errors,” she said.

The auditor general recommended that the Export Division should be proactive in administering its accounting procedures, by ensuring that the appropriate internal controls are in place and working effectively to manage the accounting functions and ensure compliance with government guidelines and accounting standards.

edmond.campbell@gleanerjm.com