The Office of the Auditor General is mandated to carry out audits of all public institutions in Jamaica. It has been observed that the same observations and recommendations are made each year in the Auditor General’s Reports concerning increased misuse and misapplication of public funds. Following the establishment of new parish councils in some parishes around the country four years ago, there is concern that the trend of misuse and misapplication of public funds may be experienced in these newly established councils just like is the case with the existing councils. The Ministry responsible for local government has decided that consultants should be engaged to hold workshops with the controlling officers of the newly established councils on the importance of transparency and accountability in the use of public funds and the importance of internal controls systems. You work for a consultancy firm that has been engaged to run these workshops and all the new districts around the country. The lead consultant in your firm has asked you to prepare the materials that you will use in these workshops. You have been provided with the following information about one of the old parish councils. The main source of funds for this Council are the grants received from the central government. In addition, the council collects different levies from local businesses operating in the parish. The Council maintains financial records and prepares financial statements annually which are subject to audit by the Office of the Auditor General. The Council has an internal audit department which carries out financial audits. Due to understaffing, and inexperienced staff, the financial statements for the previous three years have not been audited by the internal auditors. The Council received a grant of US$12 million for the construction of ten community centers, one each in the ten communities under the control of the Council. This is part of a grant from a donor received by the Ministry. The Council as a sub recipient signed an agreement committing to adhere to the grant conditions. The maximum amount that was supposed to be spent on each center is US$1.2 million but the average cost of each of five finished/constructed centers amounted to US$1.8 million, totaling US$9 million. The balance of US$3 million from the grant was spent on paying salaries to Council employees who were in arrears. The following information was established concerning the centers constructed: 1. Only three of the centers met the design specifications and were going to be commissioned for use. The works on the other two centers were substandard. 2. The award of the contract to build the centers was not done through competitive bidding contrary to the grant conditions and agreement. Award was through single sourcing and the basis for doing so was that the contractor selected was going to be cheaper because he is based within the district and needed no mobilization funds. A review of the previous working papers of the last audit of this Council revealed that the risk of material misstatement was assessed to be high. During the audit it was established that the controls over large volumes of inventory were poor and that there has been no inventory count at the year-end for many years. A. Using respective sections of the laws/Acts applicable to Jamaica, discuss the roles, functions and powers of the Office of the Auditor General in carrying out its duties for the benefits of the Parish Council and the Jamaican Government. B. Using the information in the scenario, explain with the aid of computation and/or example(s) the value for money audit. C. Explain three (3) matters that the Office of the Auditor General will consider in deciding the extent of the work of the internal auditors of the Council. D. Due to the current state of the Internal Audit department of the Council, the Minister responsible for Local Government believes that outsourcing its functions instead of maintaining an IA department would yield better results and save on overhead. The lead consultant of your firm asked you to identify and explain five (5) advantages and five (5) disadvantages of “Centralizing the Internal Audit Functions” of the Council, as he believes these will assist the Minister with his final decision.
The Office of the Auditor General is mandated to carry out audits of all public institutions in
Jamaica. It has been observed that the same observations and recommendations are made each
year in the Auditor General’s Reports concerning increased misuse and misapplication of public
funds.
Following the establishment of new parish councils in some parishes around the country four
years ago, there is concern that the trend of misuse and misapplication of public funds may be
experienced in these newly established councils just like is the case with the existing councils.
The Ministry responsible for local government has decided that consultants should be engaged to
hold workshops with the controlling officers of the newly established councils on the importance
of transparency and accountability in the use of public funds and the importance of internal
You work for a consultancy firm that has been engaged to run these workshops and all the new
districts around the country. The lead consultant in your firm has asked you to prepare the
materials that you will use in these workshops.
You have been provided with the following information about one of the old parish councils.
The main source of funds for this Council are the grants received from the central government.
In addition, the council collects different levies from local businesses operating in the parish.
The Council maintains financial records and prepares financial statements annually which are
subject to audit by the Office of the Auditor General. The Council has an internal audit
department which carries out financial audits. Due to understaffing, and inexperienced staff, the
financial statements for the previous three years have not been audited by the internal auditors.
The Council received a grant of US$12 million for the construction of ten community centers,
one each in the ten communities under the control of the Council. This is part of a grant from a
donor received by the Ministry. The Council as a sub recipient signed an agreement committing
to adhere to the grant conditions. The maximum amount that was supposed to be spent on each
center is US$1.2 million but the average cost of each of five finished/constructed centers
amounted to US$1.8 million, totaling US$9 million. The balance of US$3 million from the
grant was spent on paying salaries to Council employees who were in arrears.
The following information was established concerning the centers constructed:
1. Only three of the centers met the design specifications and were going to be
commissioned for use. The works on the other two centers were substandard.
2. The award of the contract to build the centers was not done through competitive bidding
contrary to the grant conditions and agreement. Award was through single sourcing and
the basis for doing so was that the contractor selected was going to be cheaper because
he is based within the district and needed no mobilization funds.
A review of the previous working papers of the last audit of this Council revealed that the risk of
material misstatement was assessed to be high. During the audit it was established that the
controls over large volumes of inventory were poor and that there has been no inventory count at
the year-end for many years.
A. Using respective sections of the laws/Acts applicable to Jamaica, discuss the roles,
functions and powers of the Office of the Auditor General in carrying out its duties for
the benefits of the Parish Council and the Jamaican Government.
B. Using the information in the scenario, explain with the aid of computation and/or
example(s) the value for money audit.
C. Explain three (3) matters that the Office of the Auditor General will consider in deciding
the extent of the work of the internal auditors of the Council.
D. Due to the current state of the Internal Audit department of the Council, the Minister
responsible for Local Government believes that outsourcing its functions instead of
maintaining an IA department would yield better results and save on
consultant of your firm asked you to identify and explain five (5) advantages and five (5)
disadvantages of “Centralizing the Internal Audit Functions” of the Council, as he
believes these will assist the Minister with his final decision.
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