AUDITOR GENERAL’S DEPARTMENT SPECIAL AUDIT REPORT AMAICA CUSTOMS AGENCY ...

AUDITOR GENERAL'S DEPARTMENT SPECIAL AUDIT REPORT

JAMAICA CUSTOMS AGENCY ? BUNKERING OPERATIONS & PRIVATE BONDED WAREHOUSES

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The Auditor General is appointed by the Governor General and is required by the

Constitution, Financial Administration and Audit Act, other sundry acts and

letters of engagement, to conduct audits at least once per year of the accounts, financial transactions, operations and financial statements of central

government ministries and departments, local government agencies, statutory bodies and government companies.

The Department is headed by the Auditor General, Pamela Monroe Ellis, who

submits her reports to the Speaker of the House of Representatives in accordance with Section 122 of the Constitution of Jamaica and Section 29 of the Financial Administration and Audit Act.

This report was prepared by the Auditor General's Department of Jamaica for presentation to the House of Representatives.

Auditor General of Jamaica Auditor General's Department

40 Knutsford Boulevard Kingston 5, Jamaica, W.I. .jm

Document No.:

Date Submitted

AuGD 466 ? 1601. 22.2 2021, November 16

`A better Country through effective audit scrutiny'

Table of Contents

AUDITOR GENERAL'S OVERVIEW............................................................................................................................. 5 EXECUTIVE SUMMARY............................................................................................................................................. 6

WHAT WE FOUND.................................................................................................................................................... 7 RECOMMENDATIONS ............................................................................................................................................ 10 PART ONE .............................................................................................................................................................. 11 BACKGROUND ....................................................................................................................................................... 11

Sufferance Wharves ...................................................................................................................................... 11 Import Procedures for Goods at Sufferance Wharves ..................................................................................... 12 Private Bonded Warehouse ........................................................................................................................... 12 Monitoring of Bunkering Operations ............................................................................................................. 12 Other Regulators of the Bunkering Industry ................................................................................................... 13 Special Economic Zones................................................................................................................................. 14 Rationale for the Audit .................................................................................................................................. 15 Whistle Blower Information........................................................................................................................... 16 Audit Limitation ............................................................................................................................................ 16 PART TWO ............................................................................................................................................................. 18 AREAS OF CONTROL WEAKNESSES ........................................................................................................................ 18 Up to three Years Delay in Processing Import Entries ..................................................................................... 19 Inaccurate information provided to support usage of fuel Imported in the SEZ ............................................... 20 Local fuel Sales by Petrojam Treated as Exports ............................................................................................. 21 765 Export Entries from the SEZ not validated ............................................................................................... 23 Import Declarations accepted by JCA without independent verification.......................................................... 24 PART THREE........................................................................................................................................................... 26 FINANCIAL EXPOSURE ........................................................................................................................................... 26 Late Processing of Application for Provisional Clearance documents .............................................................. 26 Discrepancies and unaccounted for HFO, ULSD and MDO .............................................................................. 26 Late Processing of Export Entry Declaration................................................................................................... 27 Private Bonded Warehouse Operators allowed to owe Duties in excess of their Authorised Bonds .................. 29 PART FOUR ............................................................................................................................................................ 32 NON-TRANSACTIONAL ISSUES ............................................................................................................................... 32 The IM7 Regime Automatically Gives Petrojam 365 days to Submit................................................................ 32 Bond Security Check Turned off in ASYCUDA .................................................................................................. 32 ACRONYMS AND ABBREVIATIONS......................................................................................................................... 35

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Special Audit Report on

Jamaica Customs Agency Bunkering Operations & Private Bonded Warehouses

KEY DATA

- JCA monitors goods flowing through 3 international Airports, over 13 Major Seaports of call, 17 Sufferance Wharves and 111 Private Bonded Warehouses.

- JCA Total Annual expenditure budget for the period 2015 to 2021 totalled $53.285 billion. - JCA handled 135.22 million Metric Tonnes of Cargo handled at Jamaican Ports. - Total Cargo overall handled at all Sufferance Wharves amounted to 13.939 million Tonnes.

MAIN FINDINGS

- Deficiencies in JCA's controls led to $2.1 billion in financial exposure related to duties payable for fuel imports..

- Import entries for 50.08 million litres of Bunker Fuel processed up to 3 years after being imported.

- JCA failed to ensure that exports from BFO1's SEZ are authentic - Deficiencies in internal controls led to a combined $664.24 million in arrears by three private bonded warehouse operators.

CONCLUSION & RECOMMENDATION

Our audit identified omissions and significant delays in the processing of import and export declarations resulting in the potential revenue losses to the Government of Jamaica. JCA must take immediate steps to identify the reasons for these ommissions and delays and institute the necessary systems and procedures to prevent a recurrence.

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