By: Paul Emanuelli
This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its December 2019 report Caribbean Maritime University (CMU): Governance, Procurement and Resource Management, Jamaica’s Auditor General found that weak internal governance practices led to a series of procurement irregularities at the new Caribbean Maritime University (CMU). The special annual report noted that “in some instances, questionable decisions by the President resulted in expenditures that created no apparent value for the University.” More specifically, the report found that the CMU’s governing Council needed to “develop adequate internal controls and it did not have in place a functioning Audit Committee and an Internal Auditor,” which “deprived the Council of independent audit assurance to assist in its oversight responsibilities.” The Auditor General also found that the CMU’s president “acted unilaterally in the engagement of employees, consultant and an advisor by not obtaining Council’s approval in keeping with the CMU Act.”
Turning more specifically to procurement activities, the report noted that “CMU procured good and services totalling $217.7 million and US$989,485 without undertaking a competitive bidding process as required by the Government’s Procurement Guidelines,” which included “an aggregate $46.7 million to 15 lunch suppliers over the period January to December 2018,” and that these purchases “exceeded the allowable threshold of $1.5 million based on Government Procurement Guidelines.” The Auditor General also found that “CMU paid a logistics company $10.6 million to supply computer equipment and other peripheral items without a formal contract or provision of warranty” and that “there was no evidence that the fixed assets were included in CMU’s inventory records and we were unable to identify the existence of the assets.”
The Auditor General called on the university to revisit its procurement practices to ensure that appropriate procurement methods, including open tendering, are used where appropriate and that proper due diligence is applied in the award and monitoring of contracts:
In order to promote good governance practices and the receipt of value for money, CMU’s Council should immediately review its procurement practices, with a view to ensure that: (i) the appropriate method of procurement is utilised that meets the criteria stipulated in the Government of Jamaica’s Procurement Guidelines; (ii) procurement opportunities are open to all eligible suppliers and project and contract management systems are strengthened to ensure that appropriate due diligence is conducted prior to the execution of all projects and (iii) there is ongoing monitoring to enable the achievement of expected deliverables.
The Auditor General also called on better oversight practices, including regular meetings of oversight boards to better ensure compliance with appropriate procurement practices:
Limited Oversight by CMU’s Council and Management
Corporate governance is the system by which an entity directs and controls its resources to ensure that its strategic objectives are achieved. It also seeks to ensure that there are effective mechanisms in place to promote transparency, independence, accountability and fairness in the operations of an organisation. In light of this, the Cabinet approved the GOJ Corporate Governance Framework for Public Bodies and the Accountability Framework for Senior Executive Officers. It was envisaged that these frameworks would aid in the establishment of an effective corporate governance structure within all public bodies.
According to the Revised Corporate Governance Framework, every public body should be headed by an effective Board, which is collectively responsible for the strategic management and oversight of the organization. Additionally, the Corporate Governance Framework dictates that each Board must have a Charter which defines the roles and responsibilities of the Board including its responsibilities for corporate governance and its code of ethics. In order to fulfil its roles, the board should also establish sub-committees in areas such as Human Resource, Finance, Audit and Risk Management, to obtain assurance that business objectives are achieved. CMU is governed by a Council, which has general control over the conduct of the University’s affairs and is responsible to provide the strategic direction and guidance to ensure that the University’s objectives are achieved and risks are appropriately managed. The Council, in executing its oversight function, is responsible for reviewing management decisions, risk assessment and the ongoing monitoring of corporate business performance, plans and strategies. However, we noted that the University Council’s Charter has been in draft since October 2015 and the Terms of Reference for all the subcommittees were also in draft since February 2019.
Whereas within the last seven months, April to October 2019, CMU’s Council has convened 11 meetings, the Council met only 12 times in three years between April 2016 and March 2019. Of note, no meetings of the Finance and Audit Committee were held in 2017-18 financial year. Further, since April 2016, only nine and four meetings of the Finance Committee and Human Resources Committee meetings were held, respectively.
As this report illustrates, new public institutions should quickly establish proper procurement oversight practices since they will ultimately face significant criticism and reputational risk if they fail to ensure that they are meeting the standards of transparency and accountability required in the stewardship of public resources. These measures include the creation and enforcement of proper procurement practices and effective oversight and internal accountability mechanisms.
