A decision by the Factories Corporation of Jamaica (FCJ) to employ five board members in key managerial positions paying them a sum total of $25 million has been reported to Parliament by Auditor General Pamela Monroe Ellis.
The Government oversight body said that prior to the decision to engage these five members, FCJ sought legal advice from the company secretary, who is an attorney on the FCJ board. The company secretary's opinion supported the action, citing the Articles of Association dated October 9, 1987.
But the Monroe Ellis-led Auditor General's Department argued that the provisions of the Articles of Association are in conflict with the Government of Jamaica's Corporate Governance Framework.
The auditor general also referenced Section 6 (1) (a) of the Public BodiesManagement and Accountability (PBMA) Act which indicates that the legal framework for public bodies requires every board to take the necessary steps to ensure the accountability of all persons who manage the resources of the public body.
Monroe Ellis said that in keeping with good governance practices and the PBMA Act, the board is responsible for the strategic direction of the FCJ and the monitoring of the managing director's performance.
She noted that the managing director is accountable to the board for the performance of the FCJ and implementation of the board's strategies and policies.
"By virtue of the board appointing its members to carry out the day-to-day operations of the corporation, the process of accountability was compromised and an environment of conflict of interest would have been created."
"In one instance, retroactive approval was received from the Ministry of Finance and the Public Service for the engagement of one member," she said.
Monroe Ellis said the company secretary also benefited from the arrangement and received payments amounting to $7.3 million for human resource and secretarial services between September 2012 and August 2013.
However, the auditor general said despite a request from her department the FCJ did not present the engagement letter setting out the terms and conditions of the arrangement.
In its response, the FCJ indicated that the board took the decision to implement a temporary management oversight team to achieve speedy implementation of the scrap metal trade; obtain first-hand information on critical areas, and oversee corrective action deemed threatening to the performance of the company.
The corporation also stated that the outcome of these arrangements was increased performance, where profit moved from $329 million at end of 2010 to $627 million at the end of 2015.
However, a review of the audited financial statements by the auditor general revealed that the reported net profits at the end of financial year 2009/10 and financial year 2014/15 were largely the result of revaluation adjustments in respect of properties.