Government of Jamaica

Financial Instructions to Executive

Agencies – April 1, 1999

Amended January 2009

11.8.3 below00

Ref EAU-2
Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

Contents
1 Introduction 1-1
1.1 Background to these Instructions 1-1
1.2 Updating these Instructions 1-1
1.3 Supplementary documents 1-2
1.4 Compliance with the Instructions 1-3

2 Executive Agencies 2-1

2.1 Defining Executive Agencies 2-1
2.2 Full cost accounting 2-3
2.3 Financial management models 2-4

3 Financial management (Model A) 3-1

3.1 Model A Executive Agencies 3-1
3.2 Funding regime 3-1
3.3 Financial delegation 3-2
3.4 Capital 3-2
3.5 Loans 3-3

4 Financial management (Model B) 4-1

4.1 Model B Executive Agencies 4-1
4.2 Funding regime 4-1
4.3 Financial delegation 4-3
4.4 Capital 4-4
4.5 Loans 4-4
4.6 Executive Agencies investment 4-6
4.7 Surplus 4-6

5 Financial management (Model C) 5-1

5.1 Model C Executive Agencies 5-1
5.2 Funding regime 5-1
5.3 Financial delegation 5-3
5.4 Capital 5-4
5.5 Loans 5-5
5.6 Executive Agencies Investment 5-5
Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

5.7 Surplus 5-6

6 Planning and budgeting 6-1

6.1 Principles of planning 6-1
6.2 Roles 6-2
6.3 Content of corporate plan, business plan and budget 6-3
6.4 Planning and budgeting process 6-5

7 Income 7-1
7.1 Revenue categories 7-1
7.2 Fees 7-2

8 Assets and procurement 8-1

8.1 Assets 8-1
8.2 Asset management 8-1
8.3 Procurement 8-2

9 Cash and bank 9-1

9.1 Working capital 9-1
9.2 Cash requirements 9-1
9.3 Bank Accounts 9-2

10 Basis of accounting 10-1

10.1 Adherence to commercial style accounting 10-1
10.2 Accounting concepts 10-1
10.3 True and fair view 10-4

11 Accounting policies 11-1

11.1 Introduction 11-1
11.2 Property, plant and equipment 11-1
11.3 Government grants & grants in aid 11.4
11.4 Accounting policies, changes in accounting estimates & errors 11.5
11.5 Employee benefits 11-7
11.6 Inventories 11-10
11.7 Development expenditure 11-11
11.8 Provisions, contingent liabilities & contingent assets 11-12
Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

11.9 Events after the balance sheet date 11-12

11.10 Effect of changes in foreign exchange rates 11-13
11.11 Creditors 11-14
11.12 Provisions 11-14
11.13 Commitments 11-15
11.14 Reserves 11-16
11.15 Leases 11-17
11.16 Presentation of budgeted information in financial statements 11-18
11.17 Debtors 11-19

12 Reporting arrangements 12-1

12.1 Monthly reporting 12-1
12.2 Quarterly Performance Report 12-1
12.3 Quarterly Cash Report 12-3
12.4 Quarterly performance reviews 12-3
12.5 Information provided by MoFPS and Portfolio Ministry 12-4

13 Annual report and accounts 13-1

13.1 Executive Agencies’ annual reporting requirements 13-1
13.2 Financial statements 13-2
13.3 Notes to the financial statements 13-3

14 Audit and control 14-1

14.1 Audit Committee 14-1
14.2 Internal audit 14-3
14.3 Internal controls 14-4
14.4 External audit 14-5
14.5 Portfolio Ministry auditors 14-7

15 Miscellaneous 15-1
15.1 Transitional arrangements 15-1
15.2 Trust funds 15-1
15.3 Taxes and duties payable 15-2
15.4 Private sector funding 15-2
15.5 Market testing and contracting out 15-3
15.6 Insurance 15-3
Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

Appendices
A1 Relevance of International Public Sector
Accounting Standard (IPSAS) to Executive
Agencies

A2 Format of the financial statements

A2.1 Introduction
A2.2 Income and expenditure statement
A2.3 Balance sheet
A2.4 Statement of cash flow
A2.5 Statement of changes in Net Assets/Equity
A2.6 Monthly non-Tax Revenue Report
A2.7 Staffing activity
A2.8 Approved contracts

A3 Index
Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

Record of updates

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

Glossary of terms
“Appropriations-in-Aid” are revenues that have been designated as appropriations-in-
aid in accordance with section 8A of the Financial Administration and Audit Act which
states:
“(1) The Minister [of Finance] may in writing direct that any revenues received
by an accounting officer by way of fee, penalty, proceeds of sale or by way of extra
or unusual receipt shall be included as an appropriation-in-aid in the annual
estimates of revenue and expenditure required by section 115 of the Constitution.
(2) Any revenues to which subsection (1) applies shall be lodged without any
deductions being made therefrom into an appropriate bank account established
pursuant to regulations made under section 24A.
(3) Such revenues shall be applied for the purposes approved by Parliament
and, so far as they are not in fact so applied, shall be paid into the Consolidated
Fund Principal Bank Account.”
“Gross basis” refers to the method of financing whereby Parliament continues to
appropriate the total level of expenditure of the Executive Agency (that is the gross
expenditure). In this situation the Agency may not spend more than the gross amount
appropriated without further approval, even if the Agency has generated income to offset any
additional expenditure. This is in contrast to the net basis of funding.
“Minister” refers to the Minister of the Ministry which is responsible for the overall
direction of the relevant Executive Agency.
“Net basis” refers to the method of financing whereby the amount appropriated by
Parliament is the amount required to cover expenditure of an Executive Agency after taking
into account income which it is anticipated will be generated by the Agency (that is the net
expenditure). In this situation the Agency may be able to incur additional expenditure
without further approval provided that the expenditure is offset by additional income.
“Specialist assets” are assets which are of such a nature that they are unlikely to be of
significant value to another entity and which do not easily fall into any of the other
categories of fixed asset.
Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

1 Introduction
1.1 Background to these Instructions

1.1.1 Purpose of these Instructions

These Financial Instructions to Executive Agencies are designed to provide a clear and
concise set of Instructions to Executive Agencies concerning all aspects of their financial
arrangements.

1.1.2 Application
These Instructions will apply to all Executive Agencies established in accordance with
section 4 of the Executive Agencies Act, 2002, except where explicitly stated.

1.1.3 Effective date

These Instructions shall come into force on 1 April 1999. All amendments subsequent to this
shall be implemented in the financial year following the current year in which the
amendments are made or on any other date as specified by these instructions.

1.1.4 Status of these Instructions

These Financial Instructions to Executive Agencies are issued by the Financial Secretary in
accordance with section 51 of the Financial Administration and Audit Act and with section
14 (1) (a) of the Executive Agencies Act, 2002.

1.2 Updating these Instructions

1.2.1 Authority to amend

The Financial Secretary has authority to amend these Instructions.

1.2.2 Review by Executive Agencies Monitoring Unit

An Executive Agencies Monitoring Unit (EAMU) has been established in the Ministry of
Finance & the Public Service (MoFPS). The Director of the Executive Agencies Monitoring
Unit (Director, EAMU) reports to the Deputy Financial Secretary, Public Expenditure Policy
Coordination Division (DFS, PXPC).
These Instructions will be reviewed periodically by the Public Expenditure Policy
Coordination (PXPC) Division of the Ministry of Finance. The DFS, PXPC will make
recommendations to the Financial Secretary for possible changes to these Instructions from
time to time so as to comply with new developments in International Financial Reporting
Standards and Legislation In particular, the DFS, PXPC will consider all references to a
specific monetary value in these Instructions and will make an explicit recommendation as to

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

whether each value should be amended. The DFS, PXPC may recommend to the Financial
Secretary that changes be made to these Instructions at any time.

1.2.3 Issue of update sheets

When an amendment is made, the Financial Secretary will issue the amended pages of these
Instructions under cover of a Ministry of Finance and Planning Circular. Whole pages, as
amended, will be issued. When an amended page is issued the old version should be removed
and replaced with the new one.

1.2.4 Recording inclusion of updates

It will be the responsibility of the officers allocated the copy of these Instructions to ensure
that they are kept up to date. To maintain a record of all amendments, the responsible officer
will initial the front page in the appropriate space each time these instructions are updated.

1.3 Supplementary documents

1.3.1 Documents to supplement these Instructions

Other documents will be developed to supplement these Instructions, including:
Executive Agencies (Financial Management Regulations);
procedure notes.
good practice guides; and
reference documents.

1.3.2 Procedure notes

Each Executive Agency will need to draw up its own procedure notes. These notes will
describe in detail the various financial procedures to be followed. They will be different for
each Executive Agency but they must comply with the provisions of the Executive Agencies
(Financial Management Regulations) and with these Instructions.

1.3.3 Good practice guides

Good practice guides will be issued by the Ministry of Finance as soon as they are
developed. These will provide guidance to Executive Agencies on various aspects of their
operation and financial management.

1.3.4 Reference documents

There are a number of key documents that should be referred to. These include:

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

■ Executive Agencies Act;

■ Agency’ s specific Laws and Regulations;
■ Financial Administration and Audit Act, Regulations, Instructions and Ministry of
Finance Circulars;
■ Framework Document; and
■ Corporate and business plans.

1.4 Compliance with the Instructions

1.4.1 Requirement to comply

Executive Agencies must comply with the provisions of these Instructions. Any instances of
non-compliance should be brought to the attention of the Ministry of Finance as soon as
possible. In cases of doubt about compliance, the advice of the Ministry of Finance should be
sought.

1.4.2 Chief Executive Officer’s role

The Chief Executive Officer of the Executive Agency must be familiar with, understand, and
comply with these Instructions.

1.4.3 Government of Jamaica procedures and guidelines

Executive Agencies are required to follow all Government of Jamaica procedures and
guidelines except where specific allowance is made in the Instructions for an Agency to
devise its own procedures and guidelines or for different procedures and guidelines, which
have been specifically designed for application to Executive Agencies, to apply.

1.4.4 Chief Finance Officer’s role

The Chief Finance Officer of the Executive Agency must be familiar with, understand, and
comply with these Instructions

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

2 Executive Agencies
2.1 Defining Executive Agencies

2.1.1 Formal definition of Executive Agencies

An Executive Agency is a government entity, which has been formally designated as an
Executive Agency in accordance with the provisions of section 4 of the Executive Agencies
Act 2002. The process for establishing Executive Agencies is set out in section 4 (2) of the
Executive Agencies Act, 2002.

2.1.2 Description of Executive Agencies

Executive Agencies are government entities which focus primarily on the delivery of
services with a results oriented approach to governance. In exchange for delegated
managerial autonomy, the Chief Executive Officer of each Executive Agency is held
accountable for achieving stated results economically, efficiently, and effectively.

2.1.3 Activities of Executive Agencies

An Executive Agency is an organisation where operational activities can be performed
separately from policy activities and where improvements to economy, efficiency,
effectiveness and customer service delivery can be achieved by granting greater financial and
human resource management responsibilities to a Chief Executive Officer whose actions are
governed by a performance contract.

2.1.4 The key principles governing Executive Agencies

The establishment of Executive Agencies is based on three fundamental principles:
■ delegated authority, which would incorporate a certain level of autonomy,
■ accountability, and
■ transparency.

2.1.5 Transition Agency

Entities identified as likely candidates for Executive Agency status will be designated
“Transition Agencies”. Before a Transition Agency can be granted full Executive Agency
status it will, during its transition period, be expected to have put in place:
■ corporate and business planning processes;
■ budgeting procedures;
■ appropriate key performance indicators (KPIs) which must be discussed and agreed
with the Portfolio Minister;

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

■ financial systems (not necessarily computerised) including:

- accruals financial accounting and management information systems;
- payroll;
- income;
- purchasing;
- cash control; and
- cost and management accounting (to establish the full costs for all the goods and
services it provides);
■ proper controls in all systems (manual and computerised); and
■ policies to establish the degree of cost recovery for all goods and services;
■ an adequate and effective internal audit function.
Once these are established, and other criteria set out in the Executive Agencies Act are met,
the Transition Agency will be eligible for progression to full Executive Agency status. When
an entity is subsequently granted Executive Agency status it will be designated as being one
of the three types of Executive Agency model: A, B, and C; each having progressively more
autonomy.

2.1.6 Criteria to determine status

The Cabinet Secretary, in consultation with the Financial Secretary, will determine:
■ which entities are to be designated Transition Agencies;
■ when a Transition Agency should be granted Executive Agency status;
■ which model a particular Executive Agency should comply with; and
■ how an Executive Agency moves from one model to another.

2.1.7 Financial factors

Some of the factors taken into consideration when determining the status of an Executive
Agency as described in Instruction 2.1.6 will be finance related and include the following:
■ appropriate financial staff are in place and trained;
■ an accruals based accounting system is in place;
■ appropriate systems and mechanisms are in place to enable the Executive Agency to
identify the full costs of its services and products; and
■ the Auditor-General is satisfied that the financial systems in operation are reliable.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

2.1.8 Date of establishment

Transition Agencies and Executive Agencies will only be formally established as such on 1
April of any year.

2.1.9 Financial year

The financial year for all Executive Agencies will run from 1 April of one year to 31 March
of the next year.

2.2 Full cost accounting

2.2.1 Requirement for full cost accounting

The Executive Agency must ensure that systems and procedures are in place to identify the
full cost of:
■ all its key services and products;
■ activities or cost centres;
■ improvement projects (such as efficiency projects or new business processes).
Full cost means the total economic value of resources consumed in producing a product or
service. This is important to help identify what should be the fee or charge levied for a
particular good or service. Traditional cost accounting, as used by the Government of
Jamaica, ignores many costs which are not readily identifiable in cash terms, for example the
cost (or value) of a building built many years ago.

2.2.2 Items to include

Full costs should include all direct and overhead costs of the resources consumed by the
organisation to provide its services and products. The costs should include:
■ rent;
■ leases;
■ depreciation;
■ auditor’ s fees;
■ interest charges;
■ charges from other government departments;
■ insurance; and
■ bank charges.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

2.2.3 Costing outputs

The Executive Agency should match its inputs (the resources used such as costs of people,
facilities, equipment, utilities, fixed assets) to its outputs (services, products). The outputs
will be measured by performance indicators and targets covering volume and quantity,
quality, time, and cost.

2.2.4 Purpose
The purpose of full costing information systems is:
■ to manage resources cost effectively;
■ to inform strategic and day-to-day management decision making;
■ to identify the true costs of delivering services and products;
■ to determine the full costs to be recovered by fees where practical;
■ to understand the relationship between operational costs and capital costs;
■ to identify the fixed and variable costs of activities and how they move with changes in
levels of demand;
■ to assess the costs and benefits of investment decisions;
■ to identify potential and actual efficiency improvements.

2.3 Financial management models

2.3.1 Different models of financial management

There are three models of financial management which have been established within the
overall regime for Executive Agencies. Each Executive Agency will be designated as fitting
one of these models. The key elements of each model are summarised in the table shown on
pages 2-6 and 2-7. The detailed instructions applicable to each model are given in chapters 3
(Model A), 4 (Model B), and 5 (Model C).

2.3.2 Common features of the financial management models

As provided for elsewhere in these Instructions, Executive Agencies, regardless of whether
they are Model A, Model B, or Model C, are required to:
■ manage their businesses with a focus on outputs;
■ aim to achieve set key performance indicator targets;
■ comply with an established process providing for approved corporate plans, business
plans, and budgets;
■ seek to introduce fees and charges to recover full costs in accordance with enabling
legislation;

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

■ charge all customers, including the public, Portfolio Ministry, and government
departments, for the goods and services provided;
■ prepare annual reports and accounts which will include financial statements prepared
on an accruals basis;
■ prepare monthly financial reports and accounts;
■ prepare quarterly performance reports;
■ prepare monthly cash flow forecasts and requirements;
■ maintain an effective and adequate internal audit function;
■ have their annual accounts audited by an auditor approved by the Auditor-General;
■ establish an Audit Committee;
■ have initial capital investments equal to the value of the fixed assets in the opening
balance sheet;
■ finance additional fixed assets from budgetary allocation;
■ remit collected revenues or portion thereof to the Consolidated Fund in accordance
with the operating financial model;
■ make payments to the Consolidated Fund of interest and principal on all loans; and
■ borrow, when necessary, only from GoJ.

2.3.3 Comparison of models

The table on the next page compares and contrasts various features of the three financial
management models as an overall indication of the nature of the models. Detail is provided
in the following three chapters.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

Comparison of the different Executive Agency financial management models

Features Model A Model B Model C

Will the Executive Agency have to operate Yes Yes Yes
within its Framework Document and agreed
corporate and business plans?
Will the Executive Agency be subject to Yes Yes Yes
rigorous and regular performance
measurement based on a range of key
performance indicators?
Will the Executive Agency remain part of Yes Yes No
the Consolidated Fund?
Will expenditure be controlled on a gross Yes, but levels of income Partially, expenditure not No
basis? will be considered when covered by appropriations-
setting gross expenditure in-aid will be controlled on
limits. a net basis.
Will appropriations-in-aid be used No Yes No
What will Parliament appropriate? Total gross expenditure. Appropriation-in-aid plus, Loan payable to Executive
if necessary, ordinary Agency, if any.
appropriation.
Will the Executive Agency have budget Yes, it will have one: Yes, it will have one: Yes, it will have one:
heads?
■ recurrent (including ■ recurrent (including ■ recurrent (including
capital A). capital A). capital A).
■ ■

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

What ability to vire funds will be given to Executive Agency can vire Executive Agency can vire Executive Agency can vire
Executive Agency? funds from recurrent to funds from recurrent to funds from recurrent to
recurrent or from capital to recurrent or from capital to recurrent or from capital to
capital, but not from capital capital but not from capital capital but not from capital
to recurrent or vice versa so to recurrent or vice versa so to recurrent or vice versa so
long as the total allocation long as the total allocation long as the total allocation
made for the head is not made for the head is not made for the head is not
exceeded exceeded exceeded
Will the Executive Agency be encouraged to Yes Yes Yes
levy fees and charges?
Should it generally set its fees and charges Yes Yes Yes
on a full cost basis?
Can the Executive Agency retain any income No Yes Yes
(excluding taxes) it generates
Can the Executive Agency retain any No Partially Yes
amount unspent, having achieved its KPIs?
Will assets be assigned to the Executive Yes Yes Yes
Agency?
Will the Executive Agency be able to write No Yes Yes
off and dispose of assets?

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

3 Financial management (Model A)

3.1 Model A Executive Agencies

3.1.1 Features of Model A

Model A Executive Agencies are to be allowed the least degree of flexibility of the three
models. In summary, a Model A Executive Agency will:
■ remain part of the Consolidated Fund;
■ have its expenditure controlled on a gross basis;
■ have its income taken into consideration when determining its gross expenditure
requirements;
■ not be able to carry forward amounts unspent or surpluses;
■ will not be able to write off or dispose of assets;
■ earn fees of less than 40% of its gross expenditure;
■ will remit gross earnings to the Consolidated Fund;
■ be set up as a separate budget head;
■ be allowed greater ability to vire funds than a government department; and
■ have initial capital equal to the value of the fixed assets assigned.

3.2 Funding regime

3.2.1 Funding position

The Executive Agency will remain part of the Consolidated Fund. The expenditure of Model
A Executive Agencies will be controlled on a gross basis. However, in proposing an overall
budget ceiling for a year the Financial Secretary will take into account the likely levels of
income the Agency expects to generate during that year, that is, the Financial Secretary will
take into account the net funding position of the Executive Agency.

3.2.2 Underspending against budget

In cases where the Executive Agency spends less than the budgeted amount whilst achieving
its KPIs, the Executive Agency will not be able to retain the amount unspent. Instead, the
amount unspent will be used to offset outstanding loans in accordance with Instruction
3.4.10.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

3.3 Financial delegation

3.3.1 Budget head

Each Executive Agency will be allocated one Head of Estimates:
■ recurrent
to cover recurrent expenditure and also GoJ funded capital expenditure (this type of
capital expenditure is called “Capital A”).

3.3.2 Virement
The Chief Executive Officer will generally have the ability to vire funds within a particular
class of expenditure. Funds can be vired from one type of recurrent to another or from one
type of capital to another but not from recurrent to capital or vice versa provided that such
virements can be accommodated without increasing the total allocation made for the Head of
Estimates.
Where funds are approved by Parliament for use by an Executive Agency to achieve a
specific output those funds should be accounted for separately and should not be used for
any other purpose without the necessary Parliamentary approval.

3.3.3 Reallocating funds provided by external funding agencies

In cases where funds are provided by external funding agencies no variation from the agreed
budget is allowed without the approval of the Financial Secretary and such other approval(s)
as the agreement with the funding agency may require.

3.4 Capital

3.4.1 Initial capital investment

There will be an initial capital investment equal to the value of the fixed assets in the
opening balance sheet. The Executive Agency will remit all revenues collected to the
Consolidated Fund on a monthly basis as its return on the assets invested by GOJ. “Fixed
assets” is defined in Instruction 11.2.2; it does not include stock or debtors.

3.4.2 Further fixed assets

The acquisition of further fixed assets will be financed from the budget of the Executive
Agency by way of yearly budgetary allocation from GoJ.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

3.5 Loans

3.5.1 Restrictions on borrowings

Executive Agencies may only borrow from the Government; they are not permitted to
borrow from any other source.

3.5.2 Conditions of loans

The term of the loan will be determined by the average life of the assets acquired with the
loan and the conditions of the loan set by the Financial Secretary. The loans will only cover
capital investments and not recurrent costs. Executive Agency loans will not count against
the Portfolio Ministry’ s budget for the year and all loans will be unsecured.

3.5.3 Interest rates

Subject to Instructions 3.5.4 and 3.5.5, the rate of interest applied to the loans will be the six
monthly average Treasury Bill rate in effect on the date of the loan agreement plus one half
percent. The rate to be used will be notified by The Financial Secretary on (or as soon after
as is practicable) each April 1st and October 1st. The notified rate will be used for all
deemed loans incurred from the date of the notification until the next date of notification.

3.5.4 Initial rates

Where, in the opinion of the Financial Secretary, the rates specified in Instruction 3.5.3
would be too onerous for an Executive Agency to bear, he/she may reduce such interest rate
charged by as much as he/she thinks fit and for as long a period as he/she may determine.

3.5.5 Loans from external funding agencies

Where a loan is provided by an external funding agency for a specific asset that is assigned
to an Executive Agency, the loan will be advanced to the Executive Agency at the rate
charged by and in the currency used by the external funding agency.

3.5.6 Loans management

The financial management of the loans to Executive Agencies will be the responsibility of
the Accountant-General.

3.5.7 Accounting for debt charges

The Executive Agency must account for the interest and capital repayments monthly. These
charges are to be budgeted and remitted to the consolidated Fund.
The transactions will be recorded in the accounts in line with commercial style reporting
requirements. The income and expenditure statement will show the interest payments and a
note to the balance sheet will show the balance of the long term loans remaining as due

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

within one year, due between one and two years, due between two and five years, and due
after more than five years.

3.5.8 Early redemption

The Executive Agency will be able to repay part or all of the debt early if it has sufficient
resources. No penalties will be imposed for early redemption of debt.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

4 Financial management (Model B)

4.1 Model B Executive Agencies

4.1.1 Features of Model B

Model B Executive Agencies are to be allowed considerably more flexibility than Model A
Executive Agencies. In summary, a Model B Executive Agency will:
■ remain part of the Consolidated Fund;
■ be funded in part on a net basis through appropriations-in-aid;
■ be able to carry forward 50% of annual net profits/surplus subject to the provisions of
Instruction 4.2.4;
■ be set up as a separate budget head;
■ be allowed greater ability to vire funds than a government department;
■ have greater authority to write off losses and deficiencies;
■ have authority to dispose of assets;
■ earn between 40% and 90% of budgeted expenditures from fees;
■ remit at least 50% of annual net profits/surplus to the Consolidated Fund; and
■ be able to invest surplus cash in an approved financial institution .

4.2 Funding regime

4.2.1 Control of net expenditure

The Executive Agency will remain part of the Consolidated Fund. The expenditure of Model
B Executive Agencies will be controlled on a net basis through the use of appropriations-in-
aid. Parliamentary approval will be sought for appropriation-in-aid. The additional funds
needed to supplement the Model B Executive agency will be made through ordinary
appropriations of expenditure.
Each Model B Executive Agency will remit at least 50% of its annual net profit/surplus to
the Consolidated Fund.

4.2.2 Banking receipts

All income of the type or type(s) classified as appropriation-in-aid will be banked in a
separate “appropriations-in-aid bank account”. Transfers will be made to other accounts
from time to time to fulfil the obligations as approved by Parliament.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

4.2.3 Meeting expenditure

Expenditure for the routine management and operation of the agency will be met from either:
■ appropriations-in-aid; or
■ the Consolidated Fund.

4.2.4 Retained profits/surplus

Where an Executive Agency earns a profit/surplus, it will be allowed to retain 50% of that
profit/surplus provided that:
■ the Agency has substantially achieved its KPI targets; and
■ the expenditure to be financed by the retained profits/surplus is in accordance with the
approved corporate plan.
The Chief Executive Officer will prepare a statement showing the amount of profits/surplus
which has been earned and to be carried forward. This statement will form a part of the
financial report and will be certified by the Auditor General and will then be submitted to the
Financial Secretary.
Authorisation to spend the retained profits/surplus will be given by way of the estimates of
expenditure that will be laid before Parliament during the next financial year immediately
following the year in which the profit/surplus was earned.

4.2.5 Investment of surplus

Any amounts held above that required to finance additional expenditure in accordance with
4.2.4 may be invested in an approved financial institution subject to 4.6 and will remain the
property of the Executive Agency. .

4.2.6 Need to achieve Key Performance Indicator targets

Executive Agencies are required to substantially achieve all of their Key Performance
Indicator targets. If, in any year, they do not, the Financial Secretary may review the level of
transfer effected in relation to that year and may require the Executive Agency to repay, in a
subsequent financial year, such proportion of the transfer as he/she thinks fit. Such
repayments may be effected by reducing the level of transfers made in a subsequent financial
year or years. Before determining the level of repayment, if any, the Financial Secretary will
consult the Chief Executive Officer of the Agency and allow him/her the opportunity to
make representations which the Financial Secretary will take into account.

4.2.7 Excessive cash holdings

Where the Financial Secretary considers that the cash balances held by an Executive Agency
are excessive compared to its needs, he/she may require the Agency to pay to the

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

Consolidated Fund such amount as he/she may specify. In determining whether cash
balances are excessive the Financial Secretary will take into consideration:
■ the Agency’ s need for cash for its working capital purposes;
■ projected expenditure on capital items as shown in the Agency’ s approved corporate
plan;
■ the likely level of cash surpluses accruing in the future; and
■ such other factors as he/she considers appropriate.
Before finally determining whether cash balances are excessive, the Financial Secretary will
consult the Chief Executive Officer of the Agency and allow him/her the opportunity to
make representations which he/she will take into account.

4.3 Financial delegation

4.3.1 Budget head

Each Executive Agency will be allocated one Head of Estimates:
■ recurrent
to cover recurrent expenditure and also GoJ funded capital expenditure (this type of
capital expenditure is called “Capital A”).

4.3.2 Virement
The Chief Executive Officer will generally have the ability to vire funds within a particular
class of expenditure. Funds can be vired from one type of recurrent to another or from one
type of capital to another but not from recurrent to capital or vice versa provided that such
virements can be accommodated without increasing the total allocation made for the Head of
Estimates. Where funds are approved by Parliament for use by an Executive Agency to
achieve a specific output those funds should be accounted for separately and should not be
used for any other purpose without the necessary Parliamentary approval.

4.3.3 Reallocating funds provided by external funding agencies

In cases where funds are provided by external funding agencies no variation from the agreed
budget is allowed without the approval of the Financial Secretary and such other approval(s)
as the agreement with the funding agency may require.

4.3.4 Repairs to motor vehicles

Chief Executive Officers are authorised to make whatever arrangements they consider
appropriate to commission any repairs to the motor vehicles that have been assigned to the
Agency provided that they comply with the relevant policies established by the Financial
Secretary.

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

4.3.5 Losses and deficiencies

Chief Executive Officers are authorised to write off losses and deficiencies of any assets
assigned to the Executive Agency, including allocated stores and fixed assets but must
comply with established GoJ policies.
Where the Chief Executive Officer considers that a person who is or was an officer is or was
responsible for any deficiency in, or for the loss or destruction of, any public moneys,
stamps, securities, stores or other Government property then he/she must submit a report on
the matter to the Financial Secretary in accordance with section 49 (1) of the Financial
Administration and Audit Act.

4.3.6 Disposal of assets

Chief Executive Officers are authorised to dispose of any assets which have been assigned to
them if they consider that such assets:
■ are no longer required for the purposes of the Executive Agency; or
■ should be replaced.
Disposal of such assets should be in accordance with the Executive Agency’ s procedures for
disposing of assets as required by Instruction 8.2.4. Any significant disposal would need to
have been approved as part of the corporate planning process and should be reflected in the
annual report.

4.4 Capital

4.4.1 Initial capital investment

GoJ will make an initial capital investment equal to the value of the fixed and other assets in
the opening balance sheet. The Executive Agency will remit 50% of its annual net
profit/surplus to the Consolidated Fund as its return on the assets invested by GoJ. “Fixed
assets” is defined in Instruction 11.2.2.

4.4.2 Further fixed assets

The acquisition of further fixed assets will be financed from the budget of the Executive
Agency by way of normal budgetary allocation from GoJ.

4.5 Loans

4.5.1 Restrictions on borrowings

Executive Agencies may only borrow from the Government; they are not permitted to
borrow from any other source.

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Financial Instructions to Executive Agencies – April 1, 1999
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4.5.2 Conditions of loans

The term of the loan will be determined by the average life of the assets acquired with the
loan and the conditions of the loan set by Accountant-General. The loans will only cover
capital investments and not recurrent costs. Executive Agency loans will not count against
the Portfolio Ministry’ s budget for the year and all loans will be unsecured.

4.5.3 Interest rates

Subject to Instructions 4.5.4 and 4.5.5, the rate of interest applied to the loans will be the six
monthly average Treasury Bill rate in effect on the date of the loan agreement plus one half
percent or any other such lower rates agreed on by the parties to the loan. The rate to be
used will be notified by The Financial Secretary on (or as soon after as is practicable) each
April 1st and October 1st. The notified rate will be used for all deemed loans incurred from
the date of the notification until the next date of notification

4.5.4 Initial rates

Where, in the opinion of the Financial Secretary, the rates specified in Instruction 4.5.3
would be too onerous for an Executive Agency to bear, (s)he may reduce such interest rate
charged by as much as he/she thinks fit and for as long a period as he/she may determine.

4.5.5 Loans from external funding agencies

Where a loan is provided by an external-funding agency for a specific asset which is
assigned to an Executive Agency, the loan will be advanced to the Executive Agency at the
rate charged by and in the currency used by the external funding agency.

4.5.6 Loans management

The financial management of the loans to the Executive Agency will be the responsibility of
the Accountant-General.

4.5.7 Accounting for debt charges

The Executive Agency must account for interest and capital repayments monthly. The
Executive Agency must budget for and pay interest and make principal repayments annually
to the Consolidated Fund until the loan is fully repaid.
The transactions will be recorded in the accounts in line with commercial style reporting
requirements. The income and expenditure statement will show the interest payments and a
note to the balance sheet will show the balance of the long term loans remaining as due
within one year, due between one and two years, due between two and five years, and due
after more than five years.

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

4.5.8 Early redemption

The Executive Agency will be able to repay part or all of the debt early if it has sufficient
resources. No penalties will be imposed for early redemption of debt.

4.6 Executive Agencies Investment

4.6.1 Executive Agencies Investment

Model B Executive Agencies may invest cash which is surplus to their usual day to day
requirements in an approved financial institution that is regulated by the Banking Act, the
Financial Institutions Act, the Building Societies Act or the Financial Services Commission
Act. Money shall only be invested in the following investment instruments:
■ GOJ Treasury Bills
■ GOJ Local Registered Stocks
■ GOJ Debenture and Bonds
■ GOJ Repos
■ Demand Deposit Accounts
■ Certificate of Deposits
■ Any other investment instruments authorised by the Ministry of Finance & the Public
Service
■ The Executive Agency shall not at any time have more than twenty-five percent (25%)
of its total portfolio of investment invested in a single security type or with a single
financial institution except where the investment is secured by Government of Jamaica
securities.
Investment instruments held by the Executive Agency is subject to the treatment prescribed
by IPSAS 21 – Non-Cash Generating Assets.

4.6.2 Interest earned

Interest earned from investment during the financial period must be recorded as Interest
Income. The interest earned can be rolled over until redeemed or lodged to the agency’ s
bank account as required.

4.7 Surplus

4.7.1 Appropriation of Surplus

Fifty percent (50%) of any surplus earned by the agency will be remitted to the Consolidated
Fund no later than three months after the end of the financial year in which it is earned and
based on the results contained in financial statement of the last month of the financial year

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

prepared by the agency. An adjustment for the correct amount will be made in the current
financial year after the Auditor General has certified and issued the audited financial
statements for the year in which the appropriated surplus was earned.

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

5 Financial management (Model C)

5.1 Model C Executive Agencies

5.1.1 Features of Model C

Model C Executive Agencies are to be allowed the greatest degree of flexibility of the three
models. In summary, a Model C Executive Agency will:
■ be fully funded from fees earned and will operate independently of the Consolidated
Fund;
■ be allowed to vire funds within the approved budget limits;
■ be able to carry forward amounts unspent, or surpluses;
■ be able to retain cash;
■ have greater authority to write off losses and deficiencies;
■ will earn in excess of 90 % of budgeted expenditure from fees;
■ will remit at least 50 % of annual net profit/surplus to the Consolidated Fund;
■ have authority to dispose of assets;
■ have to repay deemed loans in respect of its fixed assets; and
■ be able to invest surplus cash in the Executive Agencies Investment Fund.

5.2 Funding regime

5.2.1 Establishment of Executive Agency Special Fund

An Executive Agency Fund (EAF) will be established for each Executive Agency, the EAF
will be independent of the Consolidated Fund.

5.2.2 Transfer of funds

Parliament will approve, as part of the usual budget process, the appropriation and transfer
from the Consolidated Fund to the EAF, or vice versa, of a subsidy, loan or grant which may
be nil. This transfer will be effected in full during the year or at such other times as the need
arises.
This means that Parliament will not only approve the level of any transfer (that is the net cost
of the Executive Agency); Parliament will also need to approve the gross level of
expenditure.
Each Model C Executive Agency must remit at least 50% of its net profits/surplus to the
Consolidated Fund.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

5.2.3 Financial target

The Executive Agency has an overall financial target to match income with expenditure
taking one year with another, after any transfers to or from the Consolidated Fund have been
taken into account. This means that the total income generated by the Executive Agency plus
any subsidies to be transferred from the Consolidated Fund should be about equal to the total
expenditure of the Executive Agency over the three-year period of the corporate plan.

5.2.4 Need to achieve Key Performance Indicator targets

Executive Agencies are required to substantially achieve all of their Key Performance
Indicators targets. If, in any year they do not, then the Financial Secretary may review the
level of transfer effected in relation to that year and may require the Executive Agency to
repay, in a subsequent financial year, such proportion of the transfer as he/she thinks fit. Any
such repayments may be effected by reducing the level of transfer made in a subsequent
financial year or years. Before determining the level of repayment, if any, the Financial
Secretary will consult the Chief Executive Officer of the Agency and allow him/her the
opportunity to make representations which he/she will take into account.

5.2.5 Unspent cash balances

Any cash held by the Executive Agency at the end of the financial year will remain under the
control of the Executive Agency.

5.2.6 Excessive cash holdings

Where the Financial Secretary considers that the cash balances held by an Executive Agency
are excessive compared to its needs, he/she may require the Agency to pay to the
Consolidated Fund such amount as he/she may specify. In determining whether cash
balances are excessive the Financial Secretary will take into consideration:
■ the Agency’ s need for cash for its working purposes;
■ projected expenditure on capital items as shown in the Agency’ s approved corporate
plan;
■ the likely level of cash surpluses accruing in the future; and
■ such other factors as he/she considers appropriate.
Before finally determining whether cash balances are excessive, the Financial Secretary will
consult the Chief Executive Officer of the Agency and allow him/her the opportunity to
make representations which he/she will take into account.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

5.3 Financial delegation

5.3.1 Use of resources

The Executive Agency may utilise its resources, including cash, as it thinks fit but must give
due regard to the economy, efficiency and effectiveness of the use of those resources.

5.3.2 Reallocating funds provided by external funding agencies

In cases where funds are provided by external funding agencies no variation from the agreed
budget is allowed without the approval of the Financial Secretary and such other approval(s)
as the agreement with the funding agency may require.

5.3.3 Repairs to motor vehicles

Chief Executive Officers are authorised to make whatever arrangements they consider
appropriate to commission any repairs to the motor vehicles that have been assigned to the
Agency provided that they comply with the relevant policies established by the Financial
Secretary.

5.3.4 Losses and deficiencies

Chief Executive Officers are authorised to write off losses and deficiencies of any assets
assigned to the Executive Agency, including allocated stores and fixed assets but must
comply with established GoJ policies.
Where the Chief Executive Officer considers that a person who is or was an officer is or was
responsible for any deficiency in, or for the loss or destruction of, any public moneys,
stamps, securities, stores or other Government property then he/she must submit a report on
the matter to the Financial Secretary in accordance with section 49 (1) of the Financial
Administration and Audit Act.

5.3.5 Disposal of assets

Chief Executive Officers are authorised to dispose of any assets, which have been assigned
to them if they consider that such assets:
■ should be replaced; or
■ are no longer required for the purposes of the Executive Agency.
Disposal of such assets should be in accordance with the Executive Agency’ s procedures for
disposing of assets as required by Instruction 8.2.4.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

5.4 Capital

5.4.1 Initial capital investment

GoJ will make an initial capital investment equal to the value of the fixed and other assets in
the opening balance sheet. The Executive Agency will remit 50% of annual profits/surplus
made to the Consolidated Fund as its return on the assets invested by GoJ. “Fixed assets” is
defined in Instruction 11.2.2.

5.4.2 Further fixed assets

The acquisition of further fixed assets will be financed from the budget of the Executive
Agency by way of normal budgetary allocations from GoJ.

5.5 Loans

5.5.1 Restrictions on borrowings

Executive Agencies may only borrow from the Government; they are not permitted to
borrow from any other source. Model C Executive Agencies may enter into lease agreements
subject to any regulations established by the Ministry of Finance and Planning; such leases
must be accounted for in accordance with Instructions 11.15.1 to 11.15.4.

5.5.2 Conditions of loans

The term of the loan will be determined by the average life of the assets acquired with the
loan and the conditions of the loan set by Accountant-General. Executive Agency loans will
not count against the Portfolio Minister’ s budget for the year and all loans will be
unsecured.

5.5.3 Interest rates

Subject to Instructions 5.5.4 and 5.5.5, the rate of interest applied to the loans will be the six
monthly average Treasury Bill rate in effect on the date of the loan agreement plus one half
percent or any other such lower rates agreed on by the parties to the loan. The rate to be
used will be notified by The Financial Secretary on (or as soon after as is practicable) each
April 1st and October 1st. The notified rate will be used for all deemed loans incurred from
the date of the notification until the next date of notification

5.5.4 Initial rates

Where, in the opinion of the Financial Secretary, the rates specified in Instruction 5.5.3
would be too onerous for an Executive Agency to bear, (s)he may reduce such interest rate
charged by as much as he/she thinks fit and for as long a period as he/she may determine.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

5.5.5 Loans from external funding agencies

Where a loan is provided by an external funding agency for a specific asset which is assigned
to an Executive Agency, the loan will be advanced to the Executive Agency at the rate
charged by and in the currency used by the external funding agency.

5.5.6 Loans management

The financial management of the loans to the Executive Agency will be the responsibility of
the Accountant-General.

5.5.7 Accounting for debt charges

The Executive Agency must pay interest and capital repayments annually to the Consolidated
Fund. The transactions will be recorded in the accounts in line with commercial style
reporting requirements. The income and expenditure statement will show the interest
payments and a note to the balance sheet will show the balance of the long term loans
remaining as due within one year, due between one and two years, due between two and five
years, and due after more than five years.

5.5.8 Early redemption

The Executive Agency will be able to repay part or all of its debt early if it has sufficient
resources. No penalties will be imposed for early redemption of debt. Given that it would
result in a reduction in interest charges, Executive Agencies are encouraged to consider early
redemption of debt as a sensible use of any spare cash resources.

5.6 Executive Agencies Investment

5.6.1 Executive Agencies Investment

Model C Executive Agencies may invest cash which is surplus to their usual day to day
requirements in an approved financial institution that is regulated by the Banking Act, the
Financial Institutions Act, the Building Societies Act or the Financial Services Commission
Act. Money shall only be invested in the following investment instruments:
■ GOJ Treasury Bills
■ GOJ Local Registered Stocks
■ GOJ Debenture and Bonds
■ GOJ Repos
■ Demand Deposit Accounts
■ Certificate of Deposits
■ Any other investment instruments authorised by the Ministry of Finance & the Public
Service

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

■ The Executive Agency shall not at any time have more than twenty-five percent (25%)
of its total portfolio of investment invested in a single security type or with a single
financial institution except where the investment is secured by Government of Jamaica
securities.

5.6.2 Rates of interest

The terms of the investment, including the rate of interest to be paid and the method of
calculating the amounts payable, will be ascertained by all Chief Executive Officers.

5.6.3 Restrictions on investment

Executive Agencies are not permitted to invest their cash in any entity other than those
stipulated in 5.6.1.

5.7 Surplus

5.7.1 Appropriation of Surplus

Fifty percent (50%) of any surplus earned by the agency will be remitted to the Consolidated
Fund no later than three months after the end of the financial year in which it is earned and
based on the results contained in financial statement of the last month of the financial year
prepared by the agency. An adjustment for the correct amount will be made in the current
financial year after the Auditor General has certified and issued the audited financial
statements for the year in which the appropriated surplus was earned.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

6 Planning and budgeting

6.1 Principles of planning

6.1.1 Key principles

The key principles supporting planning and budgeting are:
■ The planning and budgeting process should be integral such that the plans and budgets
inform and reflect each other. The budget statements are part of the business plan and
should be shown in the format required by the Financial Secretary.
■ Corporate plans are high level, addressing the key organisation-wide issues, and
reflecting an outward focus on customers, users, beneficiaries, and outputs. They set
out the corporate objectives, key performance indicators and targets, key strategies, and
resources required to achieve the stated objectives.
■ Corporate plans cover a period of no less than 3 years and no greater than 5 years
depending on what is appropriate for the organisation. These are rolling plans, updated
and presented for endorsement annually. The budgets set out in the corporate plans
cover the same 3-5 year period.
■ Budgets are prepared on an accruals basis and are based on the corporate plan.
■ Business plans cover one year and contain the key performance targets for the year,
other key deliverables, and service standards agreed with the Portfolio Minister and
must be so evidenced as being agreed. These targets form the Performance Contract
with the Chief Executive Officer. The business plans contain a greater level of detail
than corporate plans for management in terms of the strategies and budget information.
The targets (if applicable), activities and budgets are phased monthly. Internal
operational targets are also set out in the business plan.
■ The plans and budgets are primarily for managing the operations of the Executive
Agency, but are also used by the Portfolio Minister to set KPIs and endorse the
proposed budgets.
■ Executive summaries of the Executive Agency corporate plan will be published and
made available to the public. These will include the key performance indicators and
targets. The plans will be produced at low cost.

6.2 Roles

6.2.1 Portfolio Minister

The role of the Portfolio Minister in the planning and budgeting process is to:
■ set policy;
■ provide strategic direction;

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

■ agree the key objectives, key performance indicators (KPIs), and performance targets;
■ endorse the corporate plan, business plan and budget;
■ evaluate the policy outcomes to which the Executive Agency will contribute; and
■ evaluate the performance of the Chief Executive Officer and the Executive Agency
against targets and agree rewards, or penalties, based on that evaluation.

6.2.2 Chief Executive Officer

The role of the Chief Executive Officer is to:
■ prepare a proposed corporate plan, business plan and budget, based on the budget call
requirements;
■ propose a set of key performance indicators and targets for the coming year;
■ propose the fee changes for the coming year; and
■ discuss with any advisory boards the proposed plans and budget.

6.2.3 Permanent Secretary

The role of the Permanent Secretary in respect of an Executive Agency is to advise the
Minister on:
■ policy for the Executive Agency;
■ the performance of the Chief Executive Officer and the Executive Agency, based on
the quarterly performance reports, discussions with the Chief Executive Officer, and
the quarterly performance reviews;
■ the proposed corporate plan, business plan, budget, performance indicators and targets;
and
■ key issues that may affect the Executive Agency.
The Permanent Secretary will also facilitate the achievement of the Executive Agency
objectives by developing and managing the policy programmes effectively, and seeking
advice from the Chief Executive Officer on the impact of policy on the Executive Agency
and its customers/beneficiaries.

6.2.4 Public Expenditure Division in Miinistry of Finance & the Public Service
The role of the Public Expenditure Division in MoFPS is to:
■ provide planning and budgeting assumptions to the Executive Agency;
■ discuss with the Portfolio Minister, Portfolio Permanent Secretary, and Chief
Executive Officer the financial implications of the Executive Agency plan (in the
context of the overall policy, plan and budget for the Ministry), challenge assumptions
and negotiate an agreed budget;

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

■ assess the Executive Agency’ s plans and budgets by focusing on the Key Performance
Indicators (KPIs) (including efficiency measures), proposed targets and trends, plus the
total net funding requirement (income net of expenditure); and
■ assess the fee proposals set out in the plan to consider the implications for full cost
recovery and the impact of the proposed fees on customers and beneficiaries.

6.3 Content of corporate plan, business plan and budget

6.3.1 Best practice

The Executive Agency will follow best practice in the formulation and presentation of the
plans, as set out in any Ministry of Finance Good Practice Guides, which may be issued from
time to time.

6.3.2 Content of the corporate plan

As a minimum, the Executive Agency corporate plan will include:
■ mission and objectives;
■ key performance indicators and targets over the three years of the plan;
■ key strategies for operations, information technology, human resources, facilities,
finance, customer service, and fees;
■ resources required (recurrent and capital);
■ staffing levels; and
■ costs.

6.3.3 Financial and budgetary information

The financial and related information required for the financial part of the corporate plan
will be:
■ volumes, workload, statistics for all major outputs;
■ key performance indicators and targets;
■ fee proposals including change date and percentage change;
■ revenue by type, product, or service;
■ efficiency analysis, showing baseline costs, outputs, cost savings, or output
improvements;
■ for each cost centre: key activities and milestones, plus project costs (recurrent and
capital);
■ direct costs and full costs for whole organisation by object code;

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

■ full costs of the organisation split into delivering the business services and products,
and change projects;
■ direct cost recovery and full cost recovery by product/service/outputs;
■ headcount summary;
■ capital expenditure (by quarter);
■ income and expenditure statement;
■ balance sheet;
■ cash flow statement (by month).

6.3.4 Content of the business plan

The business plan for the first year will contain more detailed supporting information for the
performance indicators, strategies, and resources. The financial information will include that
listed above by month. The phased business plan will be the basis of the quarterly
performance reports to the Minister.

6.3.5 Flexible plans and budgets

The Executive Agency must produce the plans and budgets such that it can readily identify
where reductions in the resources required could be made and the impact on targets. The
plans must be flexible to match the availability of funds from government.

6.3.6 Budget call and planning information

The budget call for the Executive Agency will be issued directly to the Executive Agency
and copied to the Portfolio Ministry. It will set out the planning and budgeting assumptions
and parameters and an indication of the information or presentational format required. It will
provide guidance on the likely budget limits.

6.3.7 Timetable
The planning and budgeting timetable will be that set for all Ministries. It is for the Chief
Executive Officer to determine how far in advance he/she should start the internal process of
formulating the plans.

6.4 Planning and budgeting process

6.4.1 Key stages

The key stages of the process are:
■ Chief Executive Officer initiates planning and budgeting process within the Executive
Agency;

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

■ Executive Agency staff, in particular the top management team, formulate the plans
and prepare a proposed corporate and business plan and budget;
■ The Chief Executive Officer seeks guidance and advice from the Minister, Permanent
Secretary, Non-Executive/Advisory Board (where one is established), as appropriate on
planning issues, such as new services, fees, and performance targets;
■ Where a Board is established - The Chief Executive Officer presents the draft plans
and budget to the Board for their advice and comments;
■ The Chief Executive Officer sends a copy of the proposed corporate and business plan
and budget to the Minister and Permanent Secretary;
■ The Permanent Secretary reviews the plans and takes advice from the Principal Finance
Officer;
■ The Chief Executive Officer presents the plan and budget to the Minister and
Permanent Secretary;
■ The Permanent Secretary advises the Minister;
■ The Minister endorses the plans, budget and targets;
■ The endorsed Executive Agency business plan is consolidated into the one-year
corporate plan and budget of the Portfolio Ministry. (Note: large Executive Agencies
will dominate the Ministry plan but small ones may not have a significant budget
impact. The Ministry plan will only summarise the Executive Agency one year plan
and budget);
■ The Ministry sends its one-year consolidated plan to the Budget Officer in the Ministry
of Finance & the Public Service;
■ The Budget Analyst - Ministry of Finance & the Public Service reviews the Ministry
plan and budget, and therefore the Executive Agency plan and budget, in the context of
the overall Ministry strategy and policy;
■ Ministry of Finance & the Public Service, the Minister, Permanent Secretary, Principal
Finance Officer and Chief Executive Officer discuss and justify the Executive Agency
section of the Ministry plan and budget. After negotiation, agreement is reached;
■ Ministry of Finance & the Public Service issues an agreed indicative budget (This
could be a reduction on the endorsed budget) and informs the Chief Executive Officer
directly, copy the Ministry Permanent Secretary;
■ Where there is a budget cut required of the Executive Agency, the Chief Executive
Officer decides where and how the cuts should be made to the budget and the impact
on the performance targets. Where the targets need to be changed, the Chief Executive
Officer renegotiates these with the Minister;
■ Ministry of Finance & the Public Service sends the indicative budgets to Cabinet for
approval;
■ Parliament approves the budgets;

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

■ Ministry of Finance & the Public Service issues the budget allocations and notifies the
Executive Agency and the Ministry;
■ Where at later stages the approved budgets have been cut, the Chief Executive Officer
decides where to make the changes and where necessary renegotiates the targets;
■ The Executive Agency amends the business plan and re-phases the allocated budget as
required;
■ The Executive Agency prepares a cashflow statement analysed by month and sends it
to the Ministry of Finance & the Public Service;
■ The Executive Agency prepares and submits Implementation Plan to MoFPS.

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

7 Revenue
7.1 Revenue recognition

7.1.1 Revenue type

Executive agencies may derive revenues from exchange or non-exchange transactions. An
exchange transaction is one in which the executive agency receives assets or services, or has
liabilities extinguished, and directly gives approximately equal value (primarily in the form
of cash, goods, services or use of assets) to another party in exchange. A non-exchange
transaction is one in which an entity either receives value from another entity without
directly giving approximately equal value in exchange or without directly receiving
approximately equal value in exchange.

7.1.2 Definition of revenue

Revenue is defined by International Public Sector Accounting Standard 9 (IPSAS9) as the
gross inflows of economic benefits or service potential received and receivable by an agency
on its own account. Revenue includes the following exchange transactions and events:
■ The rendering of services;
■ The sale of goods; and
■ The use by others of entity assets yielding interest, royalties and dividends.
■ Fees or charges are the amounts paid by customers for services or products provided by
the Executive Agency. These fees and charges are defined as “income”.
Income does not include that which is collected on behalf of a third party (in the case
of Executive Agencies this third party will usually be GoJ) such as taxes, duties, fines,
and penalties as they are not economic benefits or service potential that flows to the
agency that would result in increases in its assets or decreases in its liabilities.

7.1.3 Receipts for purchase of Plant, Property and Equipment

Income does not include amounts received by the agency for the procuring of property
plant and equipment. Amounts received for the procuring specified property, plant and
equipment is recognised as government grants and must be credited to a Government
Grants Reserve. Amounts received for procuring general property plant and equipment
is recognised as grants in aid and should be credited to Income and Expenditure
Reserve (See 11.3).

7.1.4 Distinction between different types of revenue

This distinction is important because the Agency will not be able to offset its operational and
capital costs by using taxes, duties, fines or penalties. Where there is any confusion about

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

whether a particular item of revenue is to be classified as such the advice of the Financial
Secretary should be sought and he/she will determine the proper treatment.

7.1.5 Taxes collected by Executive Agencies

The Executive Agency must account separately for the taxes, duties, fines, and penalties
which it collects. These amounts must be paid into a bank account which is specified by the
Accountant-General and which is separate from the account into which the Executive
Agency’ s own income is paid. These taxes, duties, fines, and penalties cannot be used by the
Executive Agency to fund its own activities and as such should not be shown in the income
and expenditure account. Collection performance against budget and key performance
indicator targets, however, should be disclosed.

7.1.6 Analysis of income

All reports produced by the Executive Agency, including the annual financial statements,
will report income in the income and expenditure statement according to the following
classification;
■ fees and charges (from the public or other non Consolidated Fund government entities);
■ fees and charges (from Consolidated Fund government entities);
■ funding agency funding or grants by source to cover recurrent costs;
■ Portfolio Ministry subsidy to cover any net loss incurred by the Executive Agency
(note that this is separate from the payment for services by the Portfolio Ministry);
■ other income; and
■ interest.
Funds generated by loans are not to be included in income but will be accounted for
separately.

7.1.7 Analysis by type of fee or charge

The Executive Agency will show separately in an annex to its corporate and business plans
income from fees and charges analysed by each different type of fee or charge related to each
service or product.

7.1.8 Relationship with government purchasers

Wherever possible the relationship between the Executive Agency and the Portfolio Ministry
or other government bodies will be along commercial purchaser/provider lines. Portfolio
Ministries or other government bodies should establish a clear contractual relationship with
the Executive Agency for the delivery of products or services to them. In these cases
payments will be made to the Executive Agency for those products or services calculated on
the same basis as the charges paid by non government customers.

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

7.1.9 Costs of collecting taxes

Where taxes, duties, fines, penalties are levied, the cost of collection will be reimbursed to
the Executive Agency by the Portfolio Ministry through the budget allocation process. The
Executive Agency must show in an annex to its corporate and business plan an analysis of
the full costs relating to these collection services, separate from services which attract fees
and charges.

7.2 Fees

7.2.1 Recovering costs

Where practical and appropriate, the Executive Agency will charge the public and other
government bodies, including the Portfolio Ministry, for the services and products it
provides. The Agency should generally aim to recover full costs, unless the agreed corporate
plan, Framework Document, or specific Acts relating to the Agency state otherwise.

7.2.2 Systems
Fees are not a means of passing on inefficiencies or creating new taxes and therefore the
Agency must have transparent and auditable systems:
■ to identify full costs of all key activities, services and products;
■ to identify all income by services, products, and customer or beneficiary groups;
■ to identify future demand levels and the Agency’ s capacity to meets those demands;
■ to identify the impact of fee proposals on demand levels, or the social or economic
impacts on customer/beneficiary groups or society;
■ to ensure timely proposals for new fees or changes to fees; and
■ to ensure timely implementation of changes to fees.

7.2.3 Value added services and products

There may be opportunities for the Agency to offer premium or priority services or products,
where the standards of delivery are higher than those specified in the standard service, for
example regarding timeliness, accessibility, and quality of presentation. These are value
added services and products and must recover full costs. The services should be offered at a
price higher than that applying to the standard service and products and should generally be
set by reference to market demand.
Value added services and products are not essential to the Executive Agency’ s attainment of
its mission, but enhance the range of services and products on offer to ensure maximum
utilisation of existing resources. The Framework Document or Agency specific Acts will
state any limitations imposed on the extent to which the Agency may offer value added
services.

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Financial Instructions to Executive Agencies – April 1, 1999
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7.2.4 Basis for setting fees

In establishing an Executive Agency, the Portfolio Minister, in consultation with the CEO
and the Financial Secretary, will determine whether in principle fees and charges should
apply to some or all of the services and products and to what extent those fees and charges
should recover full cost. This information will be set out in the Framework Document.

7.2.5 Proposing fee changes

Proposals for fee changes will be made as part of the annual planning and budgeting process.
The corporate plan of the Agency must set out the proposed pricing strategy and underlying
assumptions about the services, products, markets, customer groups, demand levels,
elasticity of demand, fee trends, and social and economic implications. A pricing annex
must be provided to identify the proposed changes, analysed between the following
categories:
■ no fees for current services and products;
■ reductions in fees for current services and products;
■ no increases in fees for current services and products;
■ increases at or below inflation for current services and products;
■ increases above inflation for current services and products; and
■ new services and products.
The annex must also show the timing of the proposed changes, the percentage of full cost
recovery, and the social/economic impact of contentious fee proposals.

7.2.6 Initiating fee changes

Agreement to the fees will be given as part of the planning and budgeting approval process.
It is the responsibility of the Chief Executive Officer to ensure that the fees are published in
the Gazette or any changes necessary to the Act or Regulations are initiated The Agency
must give 30 days notice to the public prior to implementation of the changes.

7.2.7 Cross-subsidisation
In principle, the Portfolio Minister will be expected to set fees to recover full cost for the
Agency overall, except where he/she considers it socially or economically unacceptable and
where this is agreed as part of the budget process. In achieving the overall target, an
Executive Agency is able to cross subsidise services or products where this has been agreed
as part of the corporate plan. For example, statutory or core services could be charged below
full cost or given free and value added services charged above full cost.

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

8 Assets and procurement

8.1 Assets

8.1.1 Assigning assets to the Agency

The assets under the day-to-day control of the entity immediately before it is established as
an Executive Agency that are owned by the Government will be assigned to the Executive
Agency.

8.1.2 Valuation of assigned assets

Of the total assets assigned, the fixed assets assigned will be valued as at the day the
Executive Agency is established in accordance with a methodology specified by the
Financial Secretary. The total value of the fixed assets assigned will be the value of the
initial capital investment (see Instructions 3.4.1, 4.4.1, and 5.4.1).

8.1.3 Land and buildings

Land and buildings will not be assigned to the Agency, except where the entity prior to
becoming an Executive Agency owned such assets and a relevant act so authorizes. The
Commissioner of Lands will retain ownership and control of those assets where the
exception does not apply. Where the Agency occupies land and buildings owned by the
Government, the Agency will book amounts for notional lease charges at a rate equivalent to
that which would be paid in the market as estimated by a person appointed by the Financial
Secretary. The amounts booked will be written back at the end of each accounting year thus
eliminating the lease/rental liability of the agency.

8.1.4 Rejection of assets by an Agency

In cases where an Executive Agency notifies the Accountant-General that it does not wish to
take control of particular assets then those assets will not be assigned to the Executive
Agency but must be handed over to the Accountant-General. Notification must be given not
later than one month before the Executive Agency is scheduled to be established. In such
cases the value of those assets will not be included when calculating the amount of initial
capital debt. The assets will be the responsibility of the Accountant-General who will re-
assign them to other government departments in due course.

8.2 Asset management

8.2.1 Exercising proper control

The Chief Executive Officer must establish appropriate systems and controls to ensure that
the assets assigned to the Agency are properly controlled, used only for the purposes for
which they were intended, maintained in good working order, and held securely.

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Financial Instructions to Executive Agencies – April 1, 1999
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8.2.2 Investment appraisal

The Executive Agency will be responsible for preparing a cost benefit analysis for all
proposed fixed asset investments, taking into account all recurrent costs associated with the
fixed assets. The Executive Agency must take account of any guidelines on investment
appraisal issued by EAMU.

8.2.3 Securing alternative land and buildings

The Executive Agency will be able to negotiate alternative accommodation in commercial or
other government premises which offer better value than its current premises (having taken
into account rent and other running costs) and where the corporate and business plans
identify the business need and include a full cost benefit analysis.

8.2.4 Disposal of assets

Chief Executive Officers of Model B and Model C Executive Agencies are authorised to
dispose of assets assigned to those Executive Agencies. The Executive Agency must
establish proper procedures for the disposal of assets; these procedures must comply with
established GoJ policies and must provide for:
■ the proper documentation of all disposals;
■ the disposal by auction or tender of any asset with an estimated sale value of J$50,000
or more;
■ the disposal of any asset by private treaty only if an auction or tender fails to reach the
reserve price;
■ the maintenance of the fixed assets register and inventory to reflect all disposals; and
■ a requirement that all disposals are approved by the Chief Executive Officer.
When an asset is disposed of in accordance with these procedures any proceeds may be
retained by Executive Agency for reinvestment in performance improvement projects, the
replacement of derecognised assets or the early redemption of debt.

8.3 Procurement

8.3.1 Procurement procedures

Executive Agencies must comply with the GOJ procurement policies and procedures for the
procurement of all goods, services and construction work; in doing so they must comply with
the requirements contained in the Government of Jamaica Handbook of Public Sector
Procurement Procedures issued by the National Contracts Commission (NCC) and are bound
to such requirements.

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

8.3.2 Procurement Committee

Each Executive Agency shall have a Procurement Committee. The Committee shall have not
less than four members appointed by the Chief Executive Officer from amongst the staff of
the Executive Agency except that the Chief Internal Auditor may not be appointed a member.
The Procurement Committee shall have the following members:
■ Chairman;
■ Senior Financial Management Personnel;
■ Secretary; and
■ Procurement Officer (non-voting member)

8.3.3 Requirement to comply with certain provisions

In the procurement of goods, services and construction works, the Executive Agency is
obliged to comply with the GOJ procurement policies and procedures including the use of
GOJ standard Forms and Contracts and must observe the limits as are outlined in GOJ
Handbook of Public Sector Procurement Procedures.

8.3.4 Functions of the Procurement Committee

The Procurement Committee shall:
■ Ensure compliance with relevant policies, guidelines and procedures;
■ Effect objective evaluation processes regarding quotations, tenders and request for
proposals;
■ Facilitate response to contractor enquiries;
■ Maintain proper record of Committee meetings, including records of the procurement;
■ Ensure compliance with reporting obligations; and
■ Report to the Chief Executive Officer recommending the acceptance, or not, of one, or
more, of the quotations, tenders or request for proposals received and making such
other recommendations in compliance with the procurement guidelines and procedures.

8.3.5 Selecting tenders

Whilst considering which, if any, tender or tenders to recommend to the Chief Executive
Officer for acceptance, the Procurement Committee shall only take into account:
the ability of tenderers to supply the goods or services to the required standard;
the tender price submitted by each tenderer;
such other criteria as may have been determined by the Committee in advance of receipt
of the tenders and recorded in the minutes of the Committee; and

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

all such other criteria outlined in section 6 of GOJ Handbook of Public Sector
Procurement Procedures, May 2001.

8.3.6 Conditions of contract

In making contracts Executive Agencies will comply with the standard conditions of
Government contracts for supplies as contained in section 6 of GOJ Handbook of Public
Sector Procurement Procedures.

8.3.7 Documenting actions

All actions taken to procure any good or service shall be fully documented and such
documentation may be reviewed by the Auditor-General and/or the Chief Internal Auditor.

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

9 Cash and bank

9.1 Working capital

9.1.1 Definition of working capital

Working capital is the net value of current assets and current liabilities and is an indication
of the level of financial resources available to meet current and future expenditure. The
purpose of working capital is to ensure that the Executive Agency has sufficient funds to
enable it to meet expenditure until sufficient receipts are generated to fund current and future
expenditure.

9.1.2 Initial availability of cash

The Agency will not have an opening cash balance in the balance sheet on its first day of
Agency status; however, sufficient cash will be made available through the warrant and cash
requisition system from the first day of the new accounting year to enable expenditure to be
met.

9.1.3 Unspent cash when an Executive Agency is established

Any unspent cash balances relating to prior years held on the day the Executive Agency is
established will be retained in the Consolidated Fund; they will not be available to the
Executive Agency. The bank account(s) relating to the prior year will continue to operate
until all receipts and payments relating to the prior year are completed and the bank
account(s) reconciled. None of these prior year transactions will be recorded in the
Executive Agency accounts.

9.2 Cash requirements

9.2.1 Cash flow profile

The Agency will receive cash to meet its requirements as agreed in its budget and set out in
its quarterly cash reports depending on available financial resources. It is the responsibility
of the Agency to ensure that an accurate profile of cash flow is prepared to ensure that
payments can be met from income or appropriated funds, as appropriate.

9.2.2 “Overdraft” facilities

Model B and Model C Executive Agencies may seek a temporary advance from MoFPS to
cover any short term cash deficiency in anticipation of the receipt of income. As soon as cash
is available the Executive Agency must repay any advance which was received.

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

9.2.3 Cash transfers

The cash transfers under the warrant system from the Accountant-General to the Agency will
be made at the start of the month for that month, based on agreed cash requirements.

9.3 Bank Accounts

9.3.1 Types of account

The Executive Agency subject to the written approval of The Ministry of Finance and
Planning may have the following bank accounts:
■ an operational account;
■ control accounts to facilitate the proper management of funds (for example a salaries
control account);
■ an appropriation-in-aid account (for Model B Executive Agencies - see Instruction
4.2.2);
■ a Trust Fund account (for Executive Agencies which administer trust funds - see
Instruction 15.2.1);
■ a tax revenue account or accounts (for Executive Agencies which collect taxes, duties,
penalties and fines - see Instruction 7.1.3).
Other bank accounts may only be established with the prior written approval of MoFPS.

9.3.2 Collection of taxes

Where taxes, duties, fines, or penalties are collected on behalf of Government, the Executive
Agency must pay such receipts on a timely basis into a separate account as specified by the
Accountant-General.

9.3.3 Deposits
Where deposits are held that belong to customers or beneficiaries of the Executive Agency,
these must be held in a separate account (see section 15.2 for the accounting arrangements
relating to trust funds) so designated for this purpose.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

10 Basis of accounting
10.1 Adherence to commercial style (accrual) accounting

10.1.1 Accounting requirements

In general the annual financial statements published by an Executive Agency will follow
Jamaican Generally Accepted Accounting Practice (GAAP), which is based on International
Public Sector Accounting Standards (IPSAS) and International Financial Reporting
Standards (IFRS) issued by the International Public Sector Accounting Standards Board
(IPSASB) and International Accounting Standards Board (IASB) respectively and adapted
by the Institute of Chartered Accountants of Jamaica (ICAJ).
There are a number of areas where International Public Sector Accounting Standards are not
appropriate to the financial statements of the Executive Agencies and in those areas
departure from GAAP is acceptable where it has been permitted by these Instructions.

10.1.2 Application of existing GAAP

A checklist of existing IPSAS and IFRS is given in Appendix 1 indicating which are relevant
to Executive Agencies.

10.1.3 Applicability of ICAJ pronouncements

Whenever there is a new IPSAS or ICAJ pronouncement that is relevant to the preparation of
financial statements the Executive Agencies Monitoring Unit will issue a guidance note
advising on the applicability of that pronouncement to Executive Agencies. If necessary this
guidance will be followed by a revision or addition to these Instructions.

10.2 Accounting concepts

10.2.1 Compliance with accounting concepts

The financial statements produced by Executive Agencies will be based on the various
accounting concepts set out in this section.

10.2.2 Going concern

Financial statements will be prepared on the assumption that the entity is a going concern,
that is, that the activity of the entity will continue in the foreseeable future and that there is
no intention or necessity to curtail it significantly.

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

10.2.3 Accruals
Financial statements will be prepared on an accruals or matching basis, which requires that
income and expenditure be:
■ accrued (that is, recognised when they are earned or incurred); and
■ matched (that is, expenditure is matched with the income it has helped to generate).
Accrued means that transactions and events are recognised when they occur and they are
recorded in the accounting records and reported in the financial statements of the period to
which they relate, for example when an item to be purchased has been delivered, and not
when there is an actual transfer of cash, that is when the invoice is actually paid.
Matching means that if money is spent on an item then that cost should be spread over the
period in which it helps generate income, deliver services, or produce goods. For example, a
computer is likely to last a few years and will provide economic benefit over that period of
its useful life. The cost of that computer should be spread over the period of its useful life;
this cost is called “depreciation” and is different to the treatment under cash accounting
where the full cost is charged when cash is handed over regardless of when the item was
purchased.

10.2.4 Consistency
Financial statements should be prepared on a consistent basis, that is, similar items should be
treated similarly within a single period and also from one period to the next.
This means that if a computer is treated as a fixed asset and is to be depreciated, a similar
computer should be treated in the same way. It is not acceptable to treat similar items in
different ways, as this would make understanding the financial statements difficult.
In addition, if a certain accounting treatment has been adopted this year then it should be
adopted next year. For example, it would be inconsistent if stock were to be valued based on
one method this year and a different method next year. If a different treatment is adopted,
year on year comparisons would be undermined. It is acceptable to change accounting
policies but only if the change will result in a more appropriate presentation of events or
transactions or the change is required to comply with IPSAS, and the impact on the financial
statements is clearly identified.

10.2.5 Prudence
Wherever there is uncertainty, such that judgement has to be used, in preparing financial
statements a degree of caution must be used. In general this means that assets must not be
overstated and liabilities must not be understated.
Prudence requires that preparers of financial statements do not take an unreasonably
optimistic view of events, as that might be misleading. Prudence demands that financial
statements be prepared making realistic judgements but that where there are two equally
likely courses it should be assumed that the less favourable one will happen.

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

10.2.6 Materiality
An item is material if it is of sufficient size as to influence the opinion of a reader of the
financial statements. Similarly, the misstatement or omission of an item would be a material
error if the reader of the financial statements would have reached a different opinion on the
accounts had the error been corrected. When preparing financial statements materiality must
be considered in terms of which items need to be disclosed and what margin of error would
be tolerable in valuing a particular item in the statements.
For example, if an Executive Agency had stock of J$100,000 compared to a gross
expenditure of J$100 million then it would not really matter in terms of the presentation of
the financial statements whether the stock were incorrectly stated by, say, 10%. This is a
matter of judgement which the external auditor would need to reflect on. This is not to say
that errors of 10% are acceptable or that Chief Executive Officers should not exercise proper
control over their assets regardless of value.

10.2.7 Substance over form

Financial statements should be prepared so as to reflect the economic substance and financial
reality of transactions rather than only their formal legal character.
An example of this is the legal ownership of assets. Executive Agencies are to have assets
assigned to them. The ownership of those assets legally rests with GoJ but the financial
statements of the Executive Agency will show the assets in the balance sheet as that reflects
the reality of the situation where Executive Agencies will, for day to day purposes, act as
though they do own those assets.

10.2.8 Conflict of concepts

Whenever there is a conflict between accruals and prudence it is prudence which takes
precedence. For example, if there is some doubt about whether a debt which is due at the
balance sheet date will be paid, the accrual concept would mean that the income is reflected
in this year’ s statements. However, as there is doubt, prudence would suggest that the debt
should be provided for and so not be counted as income this year, although it may be counted
next year if the debt is paid. In this case prudence would determine the correct accounting
treatment.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

10.3 True and fair view

10.3.1 Over-riding requirement

The over-riding requirement of the financial statements of the Agency is to give a true and
fair view of the financial position of the Agency and of its income and expenditure. Given
this, where complying with any accounting concept or following any accounting policy as
required by these Instructions would lead to the financial statements not giving a true and
fair view, it is acceptable for the financial statements not to comply with that accounting
concept or policy provided that this non compliance is clearly noted in the financial
statements and, wherever possible, the effect of the non compliance quantified.
This means that the financial statements are intended, above everything else, to give a true
and fair view of the position of an entity. They are not intended simply to follow accepted
accounting practice where this would lead to a misleading presentation.
Of course, GAAP is drawn up to ensure that financial statements do give a true and fair view
so extreme caution would be needed in instances where it was felt that to follow GAAP
would not result in a true and fair view being given.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

11 Accounting policies
11.1 Introduction

11.1.1 Following prescribed policies

The policies set out in this section will be followed by Executive Agencies in preparing their
financial statements except where:
■ a particular policy or policies is or are irrelevant; or
■ to do so would result in those statements not giving a true and fair view.

11.1.2 Definition
Accounting policies are the specific principles, bases, conventions, rules and practices
applied by an entity in preparing and presenting financial statements.

11.1.3 Disclosure in the financial statements

Details of the accounting policies followed in preparing the financial statements should be
given in those statements.

11.2 Property, Plant and Equipment

11.2.1 Application of IPSAS17

IPSAS17 “Accounting for Property, Plant and Equipment” applies to the financial
statements of Executive Agencies. Land and buildings are not assigned to Executive
Agencies and so should not be shown as assets in those financial statements except where an
entity prior to becoming an Executive Agency owned land and buildings and a relevant act
so authorises.

11.2.2 Definition of Property, Plant and Equipment

Property, Plant and Equipment are tangible assets that:
(a) are held by an entity for use in the production or supply of goods or services, for rental
to others, or for administrative purposes; and
(b) are expected to be used during more than one reporting period.

11.2.3 Capitalisation of expenditure

All expenditure on the acquisition, creation, or enhancement of property, plant and
equipment should be capitalised. In this context enhancement means works which are
intended to either lengthen substantially the useful life of the asset (beyond that conferred by

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

routine repairs and maintenance) or to substantially increase the operational capacity of the
asset.

11.2.4 De minimis expenditure limits

Expenditure of $50,000 or more on any one item or on several items of the same type bought
at the same time should be capitalised. The capitalising of non-recurrent expenditure of less
than $50,000 on any one item or several items of the same type bought at the same time will
be determined by the accounting policies of the agency. Guidance can be sought from the
EAMU, the Auditor General or the Audit Committee to determine if the items should be
capitalised, based on the nature of the items.

11.2.5 Maintenance work

Expenditures relating to routine maintenance work to restore or maintain the future economic
benefits or service potential that an entity can expect from the most recently assessed
standard of performance of the asset should not be capitalised.

11.2.6 Asset categories

In analysing fixed assets in the financial statements the following categories should be used:
■ leasehold improvements
■ plant, machinery, and equipment;
■ computers;
■ computer software;
■ furniture and office equipment;
■ fixtures and fittings;
■ vehicles; and
■ specialist assets.
A category for freehold land and buildings has not been included as such assets are generally
not assigned to Executive Agencies except where the Agency prior to becoming an Executive
Agency owned land and buildings and a relevant act gives it such authority.

11.2.7 Property, plant and equipment register

All items which have been capitalised should be recorded in a Property, Plant and Equipment
register which shall be maintained by each Executive Agency and which should show:
■ item;
■ plant, property and equipment category;
■ date of purchase;

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

■ cost;
■ depreciation;
■ revaluation
■ expenditure on enhancement (and date of such expenditure);
■ net book value; and
■ reference number.

11.2.8 Inventory of assets

In addition, Executive Agencies are expected to maintain an inventory of all items which
have been assigned to them and over which they must exercise proper control; this will
include items below the threshold value for plant property and equipment. The purpose of
this register is to effect proper control whereas the Property Plant and Equipment register is
largely for accounting purposes.

11.2.9 Accounting
A note to the balance sheet should analyse the value of plant property and equipment
showing (by category):
■ historic cost or revalued amounts;
■ additions;
■ disposals;
■ increases or decreases resulting from enhancements, revaluations or impairment losses;
■ depreciation for the year;
■ accumulated depreciation; and
■ net book value.

11.2.10 Donated assets

Items of plant, property and equipment acquired with funding agency support will be
included in the balance sheet at cost or market valuation, irrespective of whether they are
provided by way of a loan or are donated. Where such plant, property and equipment are
wholly or partly funded by an external donor agency (including Government of Jamaica)
with no loan attached then there must be a corresponding credit to the Donated Assets
Reserve (see Instruction 11.14.4).

11.2.11 Depreciation
Depreciation will be provided on all fixed assets at rates calculated to write off the cost
(historic or revalued as appropriate) of each asset evenly over its estimated useful economic
life (that is on a straight line basis). Executive Agencies should determine the useful

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Amended January 2009

economic lives of each of their assets. However, the length of life determined for each
category of asset must not exceed:
■ plant, machinery, and equipment 10 years
■ computers 5 years
■ furniture, office equipment, fixtures and fittings 10 years
■ vehicles 5 years
■ specialist assets 20 years.
■ leasehold improvements duration of lease

11.2.12 Depreciation period

Depreciation of an asset commences when it is in the location and condition that enables it to
be used in the manner intended. Depreciation ceases at the earlier of its de-recognition (sale
or scrapping) or its classification as being held for sale. Temporary idle activity does not
qualify as de-recognition.

11.2.13 Commencement of depreciation

Depreciation of an asset should commence in the month during which the asset is acquired,
that is, one month depreciation in the month of acquisition and ceases in the month prior to
that in which the asset is disposed of. That is, no depreciation for the month during which
the asset is disposed of.

11.2.14 Revaluation of, property, plant and equipment

The value at which property, plant and equipment are included in the balance sheet should be
reviewed periodically and where an asset’ s value has changed materially the valuation
should be adjusted accordingly. When an item of plant, property and equipment is revalued,
the entire class of property plant and equipment to which that asset belong should be
revalued. Such revaluations will be in accordance with a method agreed to by MoFPS.

11.3 Government grants and grants in aid

11.3.1 Recognition and treatment

Grants and Grants in Aid received should be recognised as contributions from controlling
parties giving rise to a financial interest in the residual interest of the body, and hence should
be accounted for as financing for them by crediting them to the income and expenditure
reserve. If it can be proven that the grants or grants in aid are provided in return for goods
and services they should be accounted for as income.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

Executive agencies should account for grants or grants in aid received as a contribution
towards the cost of a fixed asset as follows:
1. grants (i.e. for the purchase of a specific asset) – whether from the sponsor department or
from other sources – should be credited to a government grant reserve (not to deferred
income) and released to the income and expenditure account over the useful life of the
asset in amounts equal to the depreciation charge in the asset and any impairment.
2. grants in aid (i.e. for the purchase of fixed assets in general) should be credited to the
income and expenditure reserve. It will not be necessary to release amounts to the income
and expenditure account to offset the depreciation charge.
On disposal of an asset financed by a grant, the profit or loss is taken to the income and
expenditure account/operating cost statement and is offset by a transfer from the government
grant reserve of the same proportion of the profit or loss that the amount of the grant bears to
the original acquisition cost of the asset. The balance on the government grant reserve in
respect of that asset should be transferred to the income and expenditure reserve/general fund
representing that same proportion of the proceeds. If the asset has been financed by a grant
in aid, the profit or loss on disposal is simply taken to the income and expenditure
account/operating cost statement.
Revaluation gains are to be credited to Revaluation reserve where the corresponding grant in
aid has been credited to general reserves or to the Government Grant Reserve where the
grant had been credited to that reserve.

11.4 Accounting Policies, Changes in Accounting Estimates and Errors

11.4.1 Application of IPSAS3

The aspect of IPSAS3 that relates to change in accounting policies that is applicable to
public sector entities, should not fundamentally affect the financial statements of Executive
Agencies.

11.4.2 Changes in Accounting Policies

IPSAS3 states that an entity shall change an accounting policy only if the change:
1. is required by IPSAS: or
2. results in financial statements providing reliable and more relevant information about the
effects of transactions, other events and conditions on the entity’ s financial position,
financial performance or cash flow.

11.4.3 Determining accounting policy change

The following are deemed to be changes in accounting policies:
■ A change from one basis of accounting to another basis; and

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

■ A change in the accounting treatment, recognition or measurement of a transaction,

event or conditions within a basis of accounting.
The following are not deemed to be changes in accounting policies:
■ the application of accounting policies for transactions, other events or conditions that
differ in substance from those previously occurring: and
■ the application of a new accounting policy for transactions, events or conditions that
did not occur previously or were immaterial.

11.4.4 Accounting Errors

The section of IPSAS3 that relates to prior period errors will apply to the financial
statements of Executive Agencies.

11.4.5 Definition
IPSAS3 defines prior period errors as:
“...omission from, and misstatements in, the entity’s financial statements for one or more
prior periods arising from failure to use or misuse of, reliable information that:
1. was available when financial statements for those periods were authorised for issue: and
2. could reasonably be expected to have been obtained and taken into account in the
preparation and presentation of those financial statements”
Such errors include the effects of mathematical mistakes, mistakes in applying accounting
policies, oversights or misinterpretation of facts and fraud.

11.4.6 Correcting prior period errors

An Executive Agency shall correct material prior period errors retrospectively in the first set
of financial statements authorised for issue after their discovery by:
1. Restating the comparative amounts for prior period(s) presented in which the error
occurred; or
2. If the error occurred before the earliest prior period presented restating the opening
balances of assets, liabilities and net assets/equity for the earliest period presented.

A prior period error shall be corrected by retrospective restatement except where it is

impracticable to determine either the period specific effects or the cumulative effect of the
error.

When it is impracticable to determine the period specific effects of an error on comparative

information for one or more prior periods presented, the entity shall restate the opening
balances of assets, liabilities and net assets/equity for the earliest period for which
retrospective restatement is practicable (which may be the current period).

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

When it is impracticable to determine the cumulative effect, at the beginning of the current
period, of an error on all prior periods, the entity shall restate the comparative information to
correct the error prospectively from the earliest date practicable.

The correction of a prior period error is excluded from surplus or deficit for the period in
which the error is discovered. Any information presented about prior periods, including
historical summaries of financial data, is also restated as far back as is practicable.

When it is impracticable to determine the amount of an error (e.g., a mistake in applying an

accounting policy) for all prior periods, the entity will restate the comparative information
prospectively from the earliest date practicable. It therefore disregards the portion of the
cumulative restatement of assets, liabilities and net assets/equity arising before that date.

When it is impracticable to correct an error for one or more prior periods, all adjustments for
errors will be included in the income and expenditure statement of the current year, that is,
the opening balance of reserves will not be adjusted as a result.

11.4.7 Disclosure of prior period errors

An entity shall disclose the following:
1. The nature of the prior period error;
2. For each prior period presented, to the extent practicable, the amount of the correction for
each financial statement line item affected;
3. The amount of the correction at the beginning of the earliest prior period presented; and
4. If retrospective restatement is impracticable for a particular prior period, the
circumstances that led to the existence of that condition and a description of how and
from when the error has been corrected.

Financial statements of subsequent periods need not repeat these disclosures.

11.4.8 Changes in accounting estimates

The use of reasonable estimates is an essential part of the preparation of financial statements.
An estimate may need revision if changes occur in the circumstances on which the estimate
is based or as a result of new information or more experience. When there is difficulty in
distinguishing a change in accounting estimate from a change in accounting policy the
change is treated as a change in accounting estimate. Changes in accounting estimates shall
apply prospectively to the extent that it gives rise to changes in assets and liabilities or
relates to an item of net asset/equity in the period of change or future periods. To the extent
that a change in an accounting estimate gives rise to changes in assets and liabilities, or
relates to an item of net assets/equity, it shall be recognized by adjusting the carrying amount
of the related asset, liability or net assets/equity item in the period of change.
An entity shall disclose the nature and amount of a change in an accounting estimate that has
an effect in the current and/or expected future periods. If it is impracticable to estimate the
amount of the effect in future periods, the entity shall disclose that fact.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

11.5 Employee-Benefits

11.5.1 Application of IPSAS25

IPSAS25 “Accounting for employee benefit” issued by IPSASB which accounts for
employee benefits in the financial statements of employers applies to the financial statements
of Executive Agencies. A liability will be recognised when benefits are earned, not when
they are due to be paid. Gains and losses arising on the initial recognition of items in
the financial statements that is attributable to prior year benefits should be dealt with
as a prior period adjustment and written off against retained earnings.

11.5.2 Definition
IPSAS 25 defines employee benefits as
“all forms of consideration given by an employer in exchange for service rendered
by employees”.
There are five categories of employee benefits:
■ Short term employee benefits including wages, salaries, paid annual leave, paid sick
leave, profit sharing and bonuses (if payable within twelve months of the end of the
period) medical care, cars and free or subsidised goods or services for current
employees;
■ Post employment benefits including pensions and other retirement benefits, post life
insurance and post employment medical care;
■ Other long term benefits such as long-service leave, sabbatical leave, long term
disability benefits and deferred compensation payable twelve months or more after
period end;
■ Termination benefits; and
■ Equity compensation benefits.

11.5.3 Annual leave

Annual leave due but not taken is to be recognised as a liability. Calculation is made on the
basis of an employee’ s salary at the date when the leave is to be taken. Leave taken in the
next financial year will be classified as current whilst leave taken in all subsequent years will
be classified as non-current.

11.5.4 Sick/Departmental/Compassionate Leave

Sick, departmental or compassionate leave will not be recognised as a liability or expense
until the time of absence.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

11.5.5 Pensions
Pensions are of two types:
1. defined contribution plan where the agency’ s legal or constructive obligation is limited to
the amount that it agrees to contribute to the fund; and
2. defined benefit plans where the agency’ s obligation is to provide the agreed benefits to
current and former employees and where the actuarial risk and investment risk fall, in
substance, on the agency.

The liability (the unfunded component) arising in respect of a defined benefit plan is
to be accounted for in accordance with International Public Sector Accounting
Standard (IPSAS) 25, Employee Benefits.

The amount recognized as a defined benefit liability is to be the net of the following
amounts:
■ the present value of the defined benefit obligation as at the end of the reporting period
(after taking account of any payments against the liability during the period);
■ plus any actuarial gains (less any actuarial losses) to the extent that they are recognized
in accordance with IPSAS 25;
■ less any past service cost not yet recognized as an expense; and
■ less the fair value at the end of the reporting period of plan assets out of which the
obligations are to be settled directly.

The liability is to be assessed by an actuary. It is to be calculated based on the latest

actuarial assessment once every three years or from more recent data if available.

A liability for contributions payable to a defined contribution plan is to be recognized

only if the contribution paid during the period is less than the contribution required.

11.5.6 Severance/Termination
A liability for severance/termination payments is to be recognized only when the
agency is demonstrably committed to either:
- Terminate the employment of any employee(s) before their normal retirement date; or
- Provide termination benefits as a result of an offer made in order to encourage
voluntary redundancy

An agency is demonstrably committed when it has a detailed formal plan that has no realistic
possibility of being withdrawn. The liability is recognized only if at the reporting date the
preceding conditions are met.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

11.5.7 Further guidance

The Financial Secretary will provide further guidance on the accounting for retirement
benefits pursuant to any changes in the pension arrangements for the staff of Executive
Agencies.

11.6 Inventories

11.6.1 Application of IPSAS12

IPSAS12 Accounting for inventories prepared in the context of the historical cost system
applies to the financial statements of Executive Agencies.

11.6.2 Categories of inventories

The following categories of inventories should be used:
■ consumables and finished goods;
■ goods or other assets purchased for resale or distribution in the normal course of
business (for example, if an Executive Agency were involved in tourist promotion it
may buy and then sell maps and guidebooks);
■ consumable stores;
■ raw materials and components purchased for incorporation into products for sale;
■ finished goods produced;
■ goods purchased or produced which are for distribution to other parties for no charge
or for a nominal charge;
■ the cost of service for which the entity has not yet recognise the related revenue;
■ products and services in intermediate stages of completion; and
■ long term contract balances.

11.6.3 Valuation
Inventories (or stocks) will be valued at the lower of cost and net realisable value. Net
realisable value is the actual or estimated net income that could be generated by selling an
item of stock. Net realisable value is likely to be relevant in instances of:
■ physical deterioration of inventory;
■ inventory obsolescence; or
■ errors in purchasing such that inventory has little or no value.
Where inventories are acquired through non-exchange transaction it shall be measured at fair
value as at the date of acquisition. Fair value reflects the amounts for which the same

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

inventory could be exchanged between knowledgeable and willing buyers and sellers in the
market place.
Inventories shall be measured at the lower of cost and current replacement cost where they
are held for:
■ distribution at no charge or for a nominal charge; or
■ consumption in the production process of goods to be distributed at no charge or for a
nominal charge

11.6.4 Basis of determining cost

The historic cost of inventories should be accounted for using either the first-in-first-out
(FIFO) method or the weighted average cost method.

11.6.5 Inventory control systems

Chief Executive Officers are required to establish systems of control to ensure that:
■ regular inventory checks are held;
■ inventory holdings are reasonable and that they do not become excessive;
■ proper records are maintained of inventory holdings; and
■ inventories are kept in appropriate conditions to prevent their theft or deterioration.

11.7 Development expenditure

11.7.1 Application of IFRS38

IFRS38 “Intangible Assets (Accounting for research and development activities)” issued by
the IASB applies to the financial statements of Executive Agencies, (this in the absence of an
IPSAS). However, it is likely to be relevant only in a few instances. Care must be exercised
in capitalising development expenditure, a note in the financial statements for all
development expenditure capitalised will suffice.

11.7.2 Criteria for capitalisation

An intangible asset arising from development expenditure should only be capitalised if and
only if it meets the following criteria:
■ there is a clearly defined project;
■ it will generate probable future economic benefits;
■ the related expenditure is separately measurable and identifiable;
■ the outcome of the project has been assessed with reasonable certainty as to:
- its technical feasibility; and

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

- its resulting in a product or service that will eventually be brought into use or sold; and
■ adequate technical, financial and other resources exist, or are reasonably expected to
exist, to complete the project.
For example, if an Executive Agency were developing its own computer system it might be
reasonable to capitalise that expenditure in the financial statements.

11.7.3 Failure to meet criteria

If any expenditure relates to a project that fails to meet any of the criteria set out above, it
must be recognised as research expenditure and written off in the year it is incurred and must
not be capitalised.

11.8 Provisions, Contingent Liabilities and Contingent Assets

11.8.1 Application of IPSAS19

IPSAS19 “Provisions, Contingent Liabilities and Contingent Assets” applies to the financial
statements of Executive Agencies.

11.8.2 Definition of contingencies

A contingency is a possible asset or liability that arises from past events and whose ultimate
outcome will be confirmed only on the occurrence, or non-occurrence, of one or more
uncertain future events not wholly within the control of the enterprise.

11.8.3 Treatment of contingent assets

Contingent assets should not be accrued in the financial statements as to do so would be
contrary to the concept of prudence. Where the inflow of an economic benefit is probable it
should be disclosed by way of a note. However, when the gain is virtually certain then it is
no longer a contingency and so should be accrued.

11.8.4 Treatment of contingent liabilities

Contingent liabilities should only be accrued when it is probable, that is, more likely than
not, that there will be a loss to the Executive Agency. If the event is not probable, but the
chances are greater than remote that it will occur (or not occur) then the amount should not
be accrued but should be disclosed by way of a note.

11.9 Events after the Reporting Date

11.9.1 Application of IPSAS14

IPSAS14 “Events After the Reporting Date” applies to the financial statements of Executive
Agencies.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

11.9.2 Definition of events after the reporting date

IPSAS14 defines events after the reporting date as:
“those events, both favourable and unfavourable, that occur between the reporting
date and the date on when the financial statements are authorised for issue.”

11.9.3 Conditions at the reporting date

If the event provides further evidence of a condition that existed at the reporting date the
accounts should be adjusted.

11.9.4 Conditions arising after the reporting date

If the event relates to conditions arising after the reporting date the financial statements
should not be adjusted unless the event is of such significance that non disclosure would
affect the ability of the users to make proper evaluations and decisions and likely to change
the opinion of a reader of the accounts then it should be disclosed by way of a note to the
accounts as to:
(a) the nature of the event; and
(b) an estimate of its financial effect, or a statement that such an estimate cannot be
made.

11.10 The Effects of Changes in Foreign Exchange Rates

11.10.1 Applicability of IPSAS4

IPSAS4 “Accounting for the effect of changes in foreign exchange rates” applies to the
financial statements of Executive Agencies.

11.10.2 Currency for financial statements

The Financial Statements of Executive Agencies will be prepared in Jamaican Dollars. In
IPSAS4 this is referred to as “the functional currency”, that is, the currency of the primary
economic environment in which the entity operates. Jamaican Dollars is also the
“presentation currency” that is, the currency in which the financial statements are presented.

11.10.3 Exchange rate for income and expenditure items

Income or expenditure items should be translated from the foreign currency to Jamaican
Dollars at the prevailing exchange rate on the day the transaction occurred, except that where
the transaction is to be settled at a contracted rate, that rate should be used.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

11.10.4 Monetary items

At the balance sheet date foreign currency monetary items resulting from unsettled
transactions (for example debtors and creditors) should be translated using the closing rate
on the balance sheet date, except where there is a contracted rate in which case that rate
should be used. For example, a foreign currency debtor could arise if MIND had run a course
elsewhere in the Caribbean and the fee was outstanding, in full or in part. A foreign creditor
could arise where an Executive Agency acquired a computer directly from a supplier in the
USA.

11.10.5 Gains and losses

Any gains and losses arising from the effect of changes in foreign currency rates should be
taken to the income and expenditure account.

11.11 Creditors

11.11.1 Types of creditors

There are three types of creditors:
■ trade creditors, sundry creditors, and loans - generally contractual obligations to
transfer known amounts;
■ accrued expenses - obligations to pay for goods and services that have been received
but which have not been invoiced; and
■ deferred income - an obligation to transfer economic benefits by providing goods or
services for which payment has been received in advance.

11.11.2 Analysis of creditors

Creditors should be analysed between those amounts falling due within one year and those
falling due after more than one year. The former should be shown as current liabilities in the
balance sheet and the latter as long term liabilities.

11.11.3 Valuation of creditors

Creditors should be shown at contractually agreed amounts or, where they are not available,
at realistic and prudent estimates of the amounts to be paid.

11.12 Provisions

11.12.1 Definition of provisions

Provisions are a subclass of liabilities and not a separate element of the balance sheet.
IPSAS19 defines a provision as “Liabilities in respect of which the amount or timing of the
expenditure that will be undertaken is uncertain”. Provisions can be distinguished from other

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

liabilities such as trade creditors and accruals. The distinguishing feature for provisions is
that there is uncertainty over either the timing or amount of the future expenditure.

11.12.2 Amount provided for

The amount recognised as a provision should be a realistic and prudent estimate of the
expenditure required to settle the obligation that existed at the balance sheet date.

11.12.3 Accounting treatment

Provisions should be charged immediately to the income and expenditure statement.
Expenditure incurred to settle the obligation should be debited direct to the provision.
Provisions must only be used for the purpose for which they were established.

11.12.4 Provisions no longer required

A provision that is no longer required should be credited to the income and expenditure
account.

11.13 Commitments

11.13.1 Definition of a commitment

A commitment is an obligation to make a payment at some future date for which provision
has not been made in the accounts. Commitments relate to expenditure to be incurred on
contracts which have been entered into at the balance sheet date and where there are
unperformed obligations.

11.13.2 Capital commitment

Capital commitments should be disclosed by way of a note to the balance sheet. The value of
the commitment should be the amount of capital expenditure contracted for or approved to
the extent that it has not been provided for in the accounts. For example, where, at the
balance sheet date, an Executive Agency has placed an order for a new computer system
which it will finance from its own funds or using a funding agency loan, the cost of that new
system should be disclosed by way of a note.

11.13.3 Non capital commitments

Other commitments should only be shown when they are:
■ significant in terms of their value;
■ non cancellable (or only cancellable at significant cost); and
■ do not relate to the routine business of the Agency.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

It is unlikely that Executive Agencies will have any non-capital commitments which meet all
of these criteria. For example, commitments relating to staff salaries would not be shown as
they relate to the routine business of the Executive Agency.

11.14 Reserves

11.14.1 Types of reserve

Each Executive Agency may establish the following three reserves:
■ General Reserve;
■ Revaluation Reserve; and
■ Donated Asset Reserve.
Executive Agencies are not permitted to establish any other reserves.

11.14.2 General Reserve

The General Reserve represents the accumulation of the retained surpluses of the Agency.
The following items will be credited to the General Reserve:
■ any operating surplus made by the Agency (after any transfers to or from the
Consolidated Fund have been effected);
■ any surplus made on the sale of fixed assets; and
■ disposal proceeds of donated assets.
Any operating loss made by the Agency (after any transfers to or from the Consolidated
Fund have been effected) will be debited to the General Reserve.

11.14.3 Revaluation Reserve

The Revaluation Reserve reflects the unrealised increase in the value of fixed assets (see
section 11.2). Where an asset is revalued the accounting entries will be:
debit the asset account by the amount of the revaluation; and
credit the Revaluation Reserve by the same amount.
Any downward revaluation of a fixed asset should be reflected first by reversing the above
entry insofar as the particular asset has been revalued; any further downward revaluation
would need to be shown as a charge to the income and expenditure account.

11.14.4 Donated Asset Reserve

The Donated Asset Reserve reflects the net book value of assets which have been donated to
Agencies (either by the Government or by an external funding agency). Donated assets are
treated in the same way as purchased assets except that:

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

■ the Donated Asset Reserve is credited with the value of the original donation and with
any subsequent revaluations;
■ each year an amount equal to the depreciation charge is transferred from the Donated
Asset Reserve to the operating cost statement; and
■ on disposal of an asset:
- the profit or loss is charged to the operating cost statement;
- an equal amount is transferred from/to the Donated Asset Reserve to/from the
operating cost statement so that there is a net nil effect on the operating cost statement;
and
- the balance on the Donated Asset Reserve in respect of the sold asset is transferred to
the General Reserve.
Where an asset is only partially funded in this way only that part which is so funded should
be treated in accordance with this Instruction.

11.14.5 Government Grant Reserve

The Government Grant Reserve reflects the value of property, plant and equipment received
as grant in aid.

11.15 Leases

11.15.1 Application of IPSAS13

IPSAS13 “Accounting for leases” applies to the financial statements of Executive Agencies.

11.15.2 Definition
A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or
series of payments the right to use an asset for an agreed period of time.

11.15.3 Finance lease

A finance lease is one that transfers substantially all the risks and rewards of ownership of an
asset to the lessee. A finance lease should be reflected in the balance sheet by recording an
asset (that is the asset which is being leased) and a liability reflecting the future stream of
lease charges. In the income and expenditure statement there will be charges for both
depreciation of the asset and finance charges. For example, if an Executive Agency were to
lease a computer which it had to maintain, could hire out to other users, and at the end of the
lease the Executive Agency could acquire the computer then such a lease would be a finance
lease.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

11.15.4 Operating leases

A lease is classified as an operating lease if it does not transfer substantially all the risks and
rewards incidental to ownership. This will include service based contracts where the
Executive Agency pays for a stream of services where the amount paid relates directly to the
services consumed and where the other partner controls the asset and carries the risks and
rewards of ownership. An operating lease should not be reflected in the balance sheet;
instead the lease charges should be charged directly and fully to the income and expenditure
account. For example, if an Executive Agency were to lease part of a building and it did not
have to meet the cost of major maintenance it is likely that such a lease would be an
operating lease.

11.15.5 Seeking advice

Lease accounting is a difficult area that is continually developing. Chief Executive Officers
should seek the advice of the Ministry of Finance or the Auditor-General on the presentation
of all leases in their accounting statements.

11.16 Presentation of budgeted information in Financial Statements

11.16.1 Application of IPSAS 24

IPSAS 24 “Presentation of budgeted information in Financial Statements” applies to
Executive Agencies. The standard applies to all public entities that make their approved
budgets publicly available.

11.16.2 Presentation and disclosure requirements

An Executive Agency shall present a comparison of budget and actual amounts as additional
budget column in the financial statements where the financial statements and the budget are
prepared on a comparable basis or may be presented separately in a “statement of
comparison of budget and actual amounts” or a similarly titled statement.
The financial statements of executive agencies should include:
■ A comparison of actual amounts with budgeted amounts
■ An explanation of material differences between budget and actual amounts; and
■ A reconciliation of actual budget amounts and actual amounts presented in the
financial statements where the basis for preparation of both statements differ.

11.16.3 Changes from original budget

An entity shall present an explanation of whether changes between the original and final
budget are a consequence of reallocations within the budget, or of other factors:
(a) By way of note disclosure in the financial statements; or
(b) In a report issued before, at the same time as, or in conjunction with the financial
statements, and shall include a cross reference to the report in the notes to the financial
statements.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

11.17 Debtors

11.17.1 Definition of debtors

The item “Debtors” in the balance sheet includes amounts receivable as at the balance sheet
date no matter when they fall due for payment.

11.17.2 Transactions giving rise to debtors

Most Executive Agency goods and services which are not provided to GoJ will be paid for at
the time they are received by the customer so no debtor would arise. A debtor will arise
where a good or service is provided and an invoice is raised for payment. For example, the
cost of a course run by MIND for a private company may be recovered by raising an invoice.
To qualify as a receivable, the collection of a debt must be legally enforceable. For example,
the unfunded portion of a Warrant from GOJ that remain outstanding would not qualify as a
debt because its collection is not legally enforceable.

11.17.3 Staff loans and advances

The outstanding balance on all staff advances and loans should be included in the value of
debtors shown in the balance sheet. A note to the balance sheet should analyse the debtors
figure and should show separately the value of staff loans and staff advances.

11.17.4 Allowance for bad and doubtful debts

Debtors should be stated at their net realisable value after allowance for bad and doubtful
debts. The allowance for bad and doubtful debts should be a prudent estimate of the value of
debts which are likely not to be collected. The allowance should be the sum of:
■ an allowance for specific debts which are not likely to be collected because of their
age, nature, or the debtor involved; and
■ a general allowance based on a proportion of debts outstanding - the proportion being
estimated by management based on previous experience and future expectations.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

12 Reporting arrangements
12.1 Monthly reporting

12.1.1 Monthly reporting

On a monthly basis the Chief Executive Officer and management team will, as a minimum,
be expected to review and report on their performance against:
■ the business plan;
■ budget (recurrent, capital, and revenue);
■ key performance indicators and targets (those which can be measured monthly); and
■ internal operational performance targets.

12.1.2 Other internal reporting

Other than that specified in Instruction 12.1.1, Chief Executive Officers can establish
whatever procedures for internal reporting that they think fit. They shall be guided by
relevant legislations and any relevant good practice guides issued by the Ministry of Finance.

12.1.3 Submission of report

The Chief Executive Officer shall submit copies of monthly financial statements (income
and expenditure, balance sheet and cash flow statements) detailing budget and corresponding
prior year income statement amounts, no later than fourteen days after the end of the
reporting month to:
■ Financial Secretary;
■ Auditor-General;
■ Deputy Financial Secretary (Public Expenditure Division); and
■ Deputy Financial Secretary (Public Expenditure Policy Coordination Division)

12.2 Quarterly Performance Report

12.2.1 Quarterly reporting of performance

At the end of each quarter the Chief Executive Officer will produce a report which
summarises the performance of the Executive Agency up to the end of that quarter and
projections of future performance. The report shall be known as “the Quarterly Performance
Report”.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

12.2.2 Contents of the Report

The Quarterly Performance Report shall include:
■ actual performance for all Key Performance Indicators measured against the target for
the quarter and the year to date, together with full year projections measured against
the annual target;
■ a brief report on the key performance issues, progress, and current topics of note;
■ workload or demand levels against budget and variance, for the quarter and full year
projections;
■ summary income and expenditure statement against budget and prior year, and variance
for the quarter and full year projections;
■ a balance sheet showing the financial position of the Executive Agency at the end of
each quarter;
■ a statement of cash flows for each quarter;
■ details of accounting policies applied in preparing the financial statements;
■ summary capital expenditure statement against budget and variance, for the quarter and
full year projections;
■ summary of cash position measured against the approved cash budget, investments,
deposits and loans;
■ summary of all procurement contracts over Two Hundred Fifty Thousand Dollars
Jamaican (J$250,000) or any amount prescribed by GOJ Procurement Handbook that
the agency entered into;
■ summary of key efficiency improvement projects against budget, variance for the
quarter and full year projections;
■ summary of key capital or improvement project milestones and costs, against budget,
variance for the quarter and full year projections; and
■ such other information which the Portfolio Minister or Chief Executive Officer
consider significant or helpful in aiding the understanding of readers of the report.

12.2.3 Submission of the report

The report will be submitted by the Chief Executive Officer, not later than one month after
the end of the appropriate quarter, to the Portfolio Minister. Copies will also be sent to:
■ Portfolio Permanent Secretary;
■ Cabinet Secretary;
■ Financial Secretary;
■ DFS (Public Expenditure Division);
■ DFS (Public Expenditure Policy Coordination Division); and

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

■ Auditor-General.

12.3 Quarterly Cash Report

12.3.1 Monitoring cashflow monthly

Not later than fifteen days before the start of a quarter year, the Chief Executive Officer will
produce a report which summarises the cash position of the Executive Agency and
projections of cash requirements for the quarter and will submit the report to MoFPS.

12.3.2 Contents of the Quarterly Cash Report

The Quarterly Cash Report will show:
■ cashflow projections by month for the quarter and cash requirements, analysed between
recurrent and capital;
■ total cash and bank balances held at the date the report is prepared, analysed by
account; and
■ total recurrent and total capital cumulative cash expenditure, accruals, prepayments,
commitments, earmarked funds, cumulative warrant allocation, and balance on warrant,
all compared to budget.

12.3.3 Format of the report

The Deputy Financial Secretary (Public Expenditure) may specify the format in which the
report is to be submitted.

12.4 Quarterly performance reviews

12.4.1 Consideration by Portfolio Ministry

The Portfolio Ministry will conduct quarterly performance reviews chaired by the Portfolio
Permanent Secretary, to monitor performance and provide feedback on policy issues arising.
The Chief Executive Officer will attend for part or all of the review as appropriate. The
Chief Executive Officer will be ready to answer queries on his/her performance and the
implications for policy delivery. The DFS (Public Expenditure) and DFS (Public
Expenditure Policy Coordination) will be represented at the meetings.

12.4.2 Discussion with Boards

Where an advisory board exists, the quarterly performance report will also be discussed with
the members at the quarterly board meetings.

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

12.5 Information to be provided by MoFPS and the Portfolio Ministry

12.5.1 Ministry of Finance & Public Service

Information will be sent directly to the Agency and copied to the Portfolio Ministry.

12.5.2 Expenditure warrants

The Executive Agency will consult the Accountant General who will provide the following
information to the Agency:
the monthly warrant for recurrent and capital funds; and
notice of when the funds are available in the bank.

12.5.3 Cash requisition

The Accountant General will fund the Agency to the full extent of the warrant given the
availability of financial resources. Only where the Cabinet determines that the Executive
Agency is a priority will funds be guaranteed.

12.5.4 Public Expenditure Division

The Public Expenditure Division of the Ministry of Finance & the Public Service will:
■ make available the approved budget (recurrent and capital) of the Executive Agency
and any changes to the budget;
■ issue the budget call; and
■ request any required revisions to the budget during the year by way of supplementary
estimates.
The budget call will be issued to the Executive Agency directly, and will contain any
Executive Agency specific Instructions. The budget call will provide guidelines for assumed
budget levels and a summary of Cabinet decisions on relevant policy.

12.5.5 The Portfolio Ministry

The Portfolio Ministry will provide policy direction and policy decisions relating to the
Executive Agency.

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

13 Annual report and accounts

13.1 Executive Agencies’ annual reporting requirements

13.1.1 Preparation of annual report and accounts

In respect of each financial year, and within a period of three months after the end of such
financial year, the Chief Executive Officer of an Executive Agency shall prepare an annual
report and accounts relating to the Executive Agency and transmit them to:
■ the Minister of Finance;
■ the Portfolio Minister; and
■ the Auditor-General.

13.1.2 Content of the annual report and accounts

The annual report and accounts will include:
■ the Chief Executive Officer’ s annual report; and
■ the Executive Agency’ s financial statements.

13.1.3 Annual report

The Chief Executive Officer’ s annual report will be in such form as he/she may determine
but must include:
■ a commentary on the Executive Agency’ s overall performance for the year, including
performance measured by the key performance indicators and a comparison of actual
achievements with those forecast in the business plan;
■ a summary of the level of activity undertaken by the Executive Agency during the year;
■ details of significant developments which are likely to affect the Executive Agency’ s
performance in subsequent years, in particular any initiatives to improve quality, value
for money, customer satisfaction, and income generation; and
■ an outline of the organisational and managerial structure of the Executive Agency.

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Financial Instructions to Executive Agencies – April 1, 1999
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13.2 Financial statements

13.2.1 Presentation of the financial statements

Chief Executive Officers must ensure that the financial statements referred to in Instruction
13.1.2:
■ give a true and fair view of the Executive Agency’ s financial position as at the balance
sheet date and of income and expenditure for the financial year;
■ have been prepared on the basis of accounting set out in chapter 10 of these
Instructions;
■ comply with the accounting policies set out in chapter 11 of these Instructions; and
■ are in the format prescribed by Instructions 13.2.4 and 13.2.5.

13.2.2 True and fair view over-ride

Wherever there is any conflict between the requirements given above, the first requirement
shall take precedence, that is, the primary requirement of the financial statements is that they
give a true and fair view.

13.2.3 Laying statements before the House of Representatives

Within four months after the end of the financial year or as soon as practicable thereafter, the
Auditor-General will issue the certificate in accordance with Instruction 14.4.5. (S)he will
submit a signed set of the financial statements and the Chief Executive Officer’ s annual
report, with his/her certificate appended, to the Speaker of the House who will cause the
statements/reports to be laid on the Table of the House of Representatives.

13.2.4 Content of the financial statements

The financial statements of each Executive Agency shall include:
■ an income and expenditure statement (statement of financial performance) for the
financial year;
■ a balance sheet (statement of financial position) showing the financial position of the
Executive Agency at the end of the financial year;
■ a statement of cash flows for the year;
■ a statement of changes in net assets/equity
■ a comparison of budget and actual amounts either as separate additional financial
statement or as a budget column in the financial statement;
■ notes, comprising a summary of significant accounting policies applied in preparing the
financial statements and other explanatory notes;
■ a statement on internal control as required by Instruction 14.3.4;

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

■ a statement of Key Performance Indicators;

■ such other notes as the Chief Executive Officer considers helpful to readers of the
statements; and
■ the Auditor-General’ s certificate issued in accordance with Instruction 14.4.5.

13.2.5 Format of the financial statements

The balance sheet, income and expenditure statement, and cash flow statement will be in the
format set out in Appendix 2. The headings shown in the prescribed format must be used
although additional headings may be used if they are necessary to ensure that the statements
give a true and fair view of the Agency’ s financial affairs.

13.2.6 Comparative figures

With the exception of the financial statements relating to the first financial year of an
Executive Agency’ s existence, financial statements should show corresponding figures for
the preceding period.

13.3 Notes to the financial statements

13.3.1 Disclosing emoluments over J$2 million per annum

A note to the income and expenditure account must be included which identifies the number
of staff who have received total emoluments in excess of J$2 million during the financial
year (this should be included even if the number of such employees is nil). The number of
such employees should be analysed in bands of J$250,000: the first band will be J$2 million
to J2.25 million; the second will be J$2.25 million to J$2.50 million and so on as far as is
necessary.

13.3.2 Disclosing procurement activities

A note to the financial statements will also include a summary of all contracts entered into by
the agency valued over Two Hundred Fifty Thousand Dollars Jamaican (J$250,000) during
the year or any other minimum sum as prescribed by the GOJ Procurement Handbook from
time to time.

13.3.3 Additional information to be included

The statements will also include such additional information as necessary to ensure that the
statements comply with section 19A (5) of Financial Administration and Audit Act.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

14 Audit and control

14.1 Audit Committee

14.1.1 Requirement to establish an Audit Committee

In accordance with section 33 of the Financial Administration and Audit Act the Minister of
Finance requires each Executive Agency to establish an Audit Committee. The Committee
will act in an advisory capacity and has no executive powers.

14.1.2 Membership of the Audit Committee

The Audit Committee will have not less than five (5) and no more than seven (7) members
comprising the following:
■ at least one but not more than two suitably qualified and experienced members
appointed by the Portfolio Permanent Secretary to represent the interests of the
Portfolio Ministry and the users of the services provided by the Executive Agency;
■ at least one but not more than two suitably qualified and experienced members
appointed by the Financial Secretary to represent the interests of the Ministry of
Finance and Planning;
■ one suitably qualified and experienced member appointed from the agency by the Chief
Executive Officer to represent the interests of the Agency; and
■ at least one but not more than two qualified and experienced independent member
appointed by the Chief Executive Officer in consultation with the Ministry of Finance
& the Public Service and the Portfolio Ministry.

14.1.3 Appointment of members

The establishing of the Audit Committee shall be the responsibility of the Chief Executive
Officer of the agency acting through the Office of the Cabinet Secretary.
■ Appointment of members to the committee shall be made in accordance with
instruction 14.1.2 and the appointment of Chairman in accordance with instruction
14.1.5.
■ A list of all nominees for appointment shall be sent to the Financial Secretary for
evaluation and recommendation for appointment.
■ The Financial Secretary shall submit the list of nominees recommended for
appointment to the Cabinet Secretary who will cause a meeting of the selection panel to
be convened to appoint a chairman in accordance with instruction 14.1.5.
■ Internal auditors or accounting personnel employed to the Executive Agency are not
eligible for appointment to the committee.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

14.1.4 Functions of the Audit Committee

The Audit Committee shall be responsible for:
■ assessing the adequacy and scope of the arrangements for the internal and external
audit of the Executive Agency;
■ examining the reports of the internal and external auditors;
■ considering any special reports submitted by the Chief Internal Auditor in accordance
with Instruction 14.2.6;
■ ensuring the co-ordination, relationship and scope of the internal and external audit
work, and any other value for money or non-financial studies by other consultants;
■ reviewing and recommending for approval, or otherwise, the Agency’ s major
accounting policies, principles and practices;
■ ensuring the independence and objectivity of auditors and reviewing with management
any areas of disagreement between management and the auditors;
■ ascertaining what action has been taken in respect of the recommendations contained in
such reports; and
■ reviewing the Chief Internal Auditor’ s strategic and operational plans.

14.1.5 Operation of the Audit Committee

The method of operation and procedures of the Audit Committee shall be determined by the
Committee itself except that:
■ the Chairman of the Committee shall be appointed by an appointment panel the
members of which shall be at least three members of the Audit Commission and the
Chief Executive Officer of the agency . The Cabinet Secretary or his/her representative
shall act as chairman of the appointment panel;
■ the quorum for any meeting of the Committee shall be not less than two thirds of the
members;
■ the Committee shall meet at least once in every three month period;
■ decisions taken by the audit committee shall be communicated in writing to the Chief
Executive Officer no later than thirty days after the sitting of the most recent audit
committee meeting at which the decisions were taken..
■ committee members appointed by the Ministry of Finance & the Public Service, the
Portfolio Ministry and the Agency shall be limited to personnel employed on a
permanent basis in these entities;
■ persons employed on a contractual basis for a period of not less than three years are
deemed to be employed on a permanent basis for the purposes of this committee;
■ termination of employment with the Ministry of Finance & the Public Service, the
Portfolio Ministry or the Agency is interpreted as termination from membership of the
Committee;

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

■ the Committee members shall be appointed for a minimum period of five years in the
first instance;
■ each Committee member demitting office in the first instance shall be eligible for
reappointment;
■ no member shall be appointed to the Committee for a period exceeding seven years
consecutively.
■ any member who is absent from three consecutive meetings without just cause shall be
deemed to have abandoned the position and is thus disqualified;
■ the chairman shall write to the Cabinet Secretary, the Financial Secretary and the Chief
Executive Officer notifying them of the disqualification;
■ the chairman may replace disqualified member(s) by inviting recommendations through
the office of the Cabinet Secretary from the entity whose interest was represented by
the disqualified member(s); and
■ every Audit Committee shall establish a Charter to guide its operations.

14.1.6 Other parties to attend

The Chairman of the Committee may ask other parties to attend, supply information, or to
advise on specific matters from time to time to enable the committee members to carry out
their duties.

14.1.7 Annual audit report

The Committee will prepare an annual report in respect of each financial year and it will be
submitted, no later than six months after the end of that financial year, to the Portfolio
Minister. Copies will also be sent to:
■ Financial Secretary;
■ all members of the Committee;
■ Chief Executive Officer;
■ Auditor-General;
■ members of the Advisory Board; and
■ The Audit Commission.

14.2 Internal audit

14.2.1 Requirement for internal audit

Each Chief Executive Officer must establish an effective and adequate internal audit function
within the Executive Agency.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

14.2.2 Chief Internal Auditor

The head of the Executive Agency’ s internal audit function shall be designated the Chief
Internal Auditor. The Chief Internal Auditor need not be a permanent member of the staff of
the Executive Agency.

14.2.3 Modes of delivery

The structure of the internal audit function and the arrangements to ensure its effectiveness
are to be determined by the Chief Executive Officer on the advice of the Audit Committee.
There are a number of possible methods by which internal audit services may be secured,
these include:
■ direct provision by the Executive Agency;
■ provision by an internal audit consortium of Executive Agencies (that is an internal
audit function servicing a number of Executive Agencies who would jointly manage
and finance the consortium);
■ contracting out the provision to a firm of accountants; or
■ provision by the Portfolio Ministry (for a fee).
This list is not exhaustive.

14.2.4 Reporting arrangements for internal audit

The Chief Internal Auditor shall report directly to the Chief Executive Officer.

14.2.5 Submission of internal audit reports

A copy of each report issued by the Chief Internal Auditor shall be submitted to the
Chairman of the Audit Committee for presentation to the Committee as soon after the report
is issued as is practicable.

14.2.6 Special investigations

The Chief Internal Auditor may undertake a special investigation of any matter coming to
his/her attention which he considers to be significant, important, and relevant to the finances
of the Executive Agency although such investigation may not have been included in his/her
operational plan. Following a special investigation the CIA may submit a special report
directly to the Audit Committee regarding the investigation. In such circumstances he/she
may submit his/her report without first consulting the Chief Executive Officer.

14.2.7 Preparation of quarterly reports

At the end of each quarter the Chief Internal Auditor shall prepare a report summarising the
activities undertaken by the Internal Audit function during the quarter together with a
summary of all significant findings and recommendations. The Chief Internal Auditor shall
submit this quarterly report to the Chief Executive Officer and, in accordance with section 34
(3) of Financial Administration and Audit Act, the Financial Secretary.
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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

14.2.8 Access given to the Auditor-General

The Auditor-General will be given access to all files, working papers, reports, and plans,
whether held physically or electronically, for the purpose of completing his/her audit or for
reviewing the effectiveness of internal audit.

14.2.9 Duties of the Chief Internal Auditor

The Chief Internal Auditor shall:
■ liaise closely with the Auditor-General to ensure that maximum benefit is derived from
the use of audit resources;
■ review and report upon the operation of all financial and other systems operating in the
Executive Agency, in particular he/she should consider and comment on the
effectiveness of any controls contained in those systems;
■ investigate and report to the Chief Executive Officer upon any instances of alleged
misappropriation or fraud which come to his/her attention by whatever means;
■ review the arrangements made by the Chief Executive Officer to secure value for
money in the use of resources by the Executive Agency;
■ prepare quarterly reports and submit them in accordance with Instruction 14.2.7;
■ carry out such special investigations in accordance with Instruction 14.2.6 as (s)he may
determine; and
■ carry out such other investigations as the Chief Executive Officer may require from
time to time that is consistent with the duties and responsibilities of personnel
operating in a similar capacity internationally.

14.3 Internal controls

14.3.1 Internal control system

The internal control system is the whole system of controls, financial and otherwise,
established by the management of the Agency in order to undertake its business in an orderly
and efficient manner, ensure adherence to management policies, ensure transparency and
accountability, safeguard assets, and secure as far as possible the completeness and accuracy
of records.

14.3.2 Scope of internal control

The system of internal control will embrace:
■ financial and operational control systems and procedures, including, amongst other
controls, physical safeguard of assets, segregation of duties, authorisation and approval
arrangements, and information systems;

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

■ management control including setting objectives and plans, monitoring financial and
non-financial performance indicators, anticipating changing circumstances, and
correcting poor performance;
■ internal audit review, undertaken by staff independent of the functions it reviews,
which is objective, and has direct access to top management and the Audit Committee;
■ Audit Committee review by independent members, who include non-executive
directors where applicable, which can give independent advice to executive
management on internal control issues.

14.3.3 Responsibility for internal control

It is the responsibility of the Chief Executive Officer to ensure that there is an effective and
comprehensive system of internal control in the Executive Agency.

14.3.4 Statement on internal control

In the interests of public accountability, the Chief Executive Officer should include a
statement in the Annual Reports and Accounts of the Agency on internal control, but need
not comment on its effectiveness. The statement should:
■ acknowledge the responsibilities of management for the system of internal control;
■ describe the limitations of any system of internal control;
■ describe the key procedures designed to provide effective internal control; and
■ confirm that the senior management have reviewed the effectiveness of the system of
internal control (the Chief Executive Officer need not comment on the outcome of that
review).

14.4 External audit

14.4.1 Auditor-General’s freedom

These Instructions are not binding on the Auditor-General and in no way restrict his freedom
of action. Where these Instructions state or imply that the Auditor-General will take any
action it is because he/she has indicated his/her intention so to do.

14.4.2 Functions of the Auditor-General

The annual financial statements published by an Executive Agency shall be audited by an
auditor appointed by the Chief Executive Officer and approved by the Auditor-General. The
appointed auditor shall also review the procedures for calculating the value of key
performance indicators of each Executive Agency and carry out value for money studies of
the use of resources by the Executive Agency.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

14.4.3 Appointed firms of accountants

The Auditor-General may, if he thinks fit, appoint a firm of accountants to undertake the
audit of the Executive Agency on his/her behalf. In cases where he has so appointed a firm of
accountants, reference to the Auditor-General in these Instructions shall be construed to
include reference to an appointed firm of accountants.

14.4.4 Audit work

The Auditor-General shall carry out such audit work, as he considers necessary to enable
him/her to fulfill his/her functions and duties.

14.4.5 Duties of the Auditor-General

The Auditor-General shall:
■ give his/her opinion on the annual statement of accounts and whether it gives a true and
fair view of the financial position of the Executive Agency at the financial year end and
its income and expenditure for the financial year;
■ give his/her opinion on the key performance indicators shown in the annual statement
of accounts and whether they properly present the Executive Agency’ s performance
for the year;
■ give his/her opinion on whether the Executive Agency has made proper arrangements
to secure value for money in the use of its resources;
■ certify that he(she) has completed the audit of the Executive Agency for the year in
accordance with Auditing standards, Executive Agencies Act, Financial Administration
and Audit Act, and these Instructions.

14.4.6 Review of Transition Agency systems

For a Transition Agency, at a time agreed with the Chief Executive Officer, the Auditor-
General shall review the systems in place and give his/her opinion as to the adequacy of such
systems for the purposes of enabling a Transition Agency to be designated an Executive
Agency (see Instruction 2.1.7).

14.4.7 Fees to be charged

The Auditor-General may levy a charge upon the Executive Agency to reflect the full costs
incurred in undertaking the audit of the Executive Agency in accordance with these
Instructions.

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

14.5 Portfolio Ministry auditors

14.5.1 Right of access

The Chief Internal Auditor of the Portfolio Ministry has the right to undertake an audit
review in the Executive Agency and to inspect the books, records, and vouchers of the
Executive Agency only if (s)he is authorised so to do by:
■ the Portfolio Minister in consultation with the Portfolio Permanent Secretary; or
■ the Financial Secretary; or
■ the Chief Executive Officer.

14.5.2 Reporting arrangements

In cases where the Chief Internal Auditor of the Portfolio Ministry is authorised under
Instruction 14.5.1 to undertake an audit review and then undertakes such a review, he/she
shall produce a written report of his/her findings and, where appropriate, recommendations
and shall submit that report within 30 days of the completion of the audit review to:
■ the Portfolio Minister;
■ the Portfolio Permanent Secretary;
■ the Financial Secretary; and
■ the Chief Executive Officer.

14.6 The Audit Commission

14.6.1 Establishment
The Cabinet Secretary will appoint an Audit Commission to monitor the performance and
guide the activities of audit committees.

14.6.2 Members
The Audit Commission will be an independent body comprising five (5) members from
Government and executive members from the Jamaican Accounting and Internal Auditing
profession as stipulated in the Government of Jamaica Audit Committee Policy document.

14.6.3 Role and Responsibilities

The responsibilities of the Audit Commission include but are not limited to the following:
■ The Audit Commission should keep copies of the charters of Audit Committees and
perform annual reviews to determine their pertinence;
■ The Audit Commission should review the annual audit committee report to identify and
resolve outstanding issues;

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

■ The Audit Commission should evaluate the performance of the Audit Committees; and
■ The Audit Commission will act as temporary custodian of audit committee records
during the transition of an audit committee.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

15 Miscellaneous
15.1 Transitional arrangements

15.1.1 Accrued holiday

Upon transfer to an Executive Agency, where an employee has accrued holiday relating to
previous service as a civil servant the cost of buying out that accrued holiday will not fall
upon the Executive Agency but will be borne by the Government; as such, any related costs
should not be reflected in the financial statements of the Executive Agency.

15.1.2 Cost of severance or outplacement

Where any civil servants who are employed in a Transition Agency do not become
employees of the relevant Executive Agency on vesting day, for whatever reason, any costs
which may be incurred as a result, including any costs of severance or outplacement, will not
fall upon the Executive Agency but will be borne by the Government; any such costs should
not be reflected in the financial statements of the Executive Agency.

15.1.3 Pension liability for service as a civil servant before becoming an Executive
Agency employee
An employee of an Executive Agency will, if eligible, receive a pension upon retirement in
accordance with the standard Government civil service pension scheme in relation to his/her
service as a civil servant before he/she became an employee of the Executive Agency. This
does not relate to service as an employee of the Executive Agency and so represents no
liability to the Executive Agency; as such it should not be reflected in the financial
statements of the Executive Agency. Instead GoJ will fund the costs of any pensions relating
to qualifying periods of employment before employment by an Executive Agency.

15.2 Trust funds

15.2.1 Separate bank accounts

Some Executive Agencies look after cash, or other assets, on behalf of a third party in the
capacity of a trustee (for example the Administrator-General administers the assets of some
orphaned minors). In such cases the trust funds’ cash must be deposited in a bank account
which is separate from those accounts which are used to hold the Executive Agency’ s cash.

15.2.2 Presentation in the financial statements

The accounts of trust funds should not be consolidated in the financial statements of the
relevant Executive Agency. Instead, financial statements for the trust funds administered by
an Executive Agency should be shown by way of a note to the financial statements of the
Executive Agency.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

15.3 Taxes and duties payable

15.3.1 Position of Executive Agencies

Executive Agencies are to be considered to be in the same position regarding the payment of
taxes and duty as a department of government.

15.4 Private sector funding

15.4.1 Seeking funding from the private sector

The Executive Agency may seek private sector funding through an agreement with a
commercial entity. The nature of the funding will be in the form of a joint venture, risk
sharing arrangement, where the private sector contributes, partially or wholly, to the costs
(whether or not those costs are subsequently reimbursed by the Executive Agency) of:
■ acquiring a fixed asset;
■ developing or delivering an activity or service (including through the contracting out of
the delivery of a service);
■ joint product development and sale; or
■ subsidising a product or service for advertising or promotional reasons.

15.4.2 Notification of exploratory discussions

In cases where private sector funding is to be sought the Executive Agency must notify in
writing, as soon as possible after exploratory discussions have commenced, the:
■ Portfolio Minister;
■ Portfolio Ministry Permanent Secretary; and
■ Financial Secretary.

15.4.3 Details to be notified

The notification required by Instruction 15.4.2 must give details of:
■ the nature and scope of the funding;
■ the commercial organisation(s) involved;
■ the benefits and rewards;
■ the basis of profit allocation;
■ ownership of intellectual property rights and patents; and
■ the level of risk to the Government and the value of any guarantees which would be
required.

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Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

15.4.4 Approval to enter formal negotiations

The Executive Agency cannot enter any formal negotiations relating to private sector funding
without the prior approval in writing of the Minister of Finance.

15.4.5 Approval to enter an agreement

The Executive Agency cannot enter any binding agreement involving private sector funding
without the prior approval in writing of the Minister of Finance.

15.5 Market testing and contracting out

15.5.1 Permission to market test and contract out

Executive Agencies may market test or contract out any of their services (except those which
are core services or of a regulatory nature as determined by the Financial Secretary) provided
that it is reflected in their corporate plan and that it helps them achieve their key performance
targets.

15.5.2 Making fair comparisons

When market testing or contracting out, Executive Agencies must make comparisons fairly
and on a consistent basis.

15.5.3 Private sector funding Instructions

Any agreement to contract out a particular service will have to comply with the provisions
concerning private sector funding set out in section 15.4.

15.6 Insurance

15.6.1 Requirement for insurance

Executive Agencies are required to consider making appropriate arrangements for insurance
in relation to:
■ loss of or damage to their assets;
■ public liability; and
■ professional indemnity.

15.6.2 Safe custody

In accordance with section 36 of Financial Administration and Audit Act, accounting officers
shall be responsible, inter alia, for the “safe custody” of all government property. In this
context “safe custody” is interpreted as including making appropriate arrangements for
insurance of property.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

15.6.3 Meeting the cost of premiums

Where the risks involved are borne by the Government then the Executive Agency must pay
to the Government an amount equivalent to the premium that would have been charged for
similar cover as estimated by the Accountant-General. Where insurance is arranged through
an insurance company, the premiums which are payable in respect of that insurance cover
will be a proper charge to the income and expenditure account.

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Government of Jamaica
Financial Instructions to Executive Agencies – April 1, 1999
Amended January 2009

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