NPL's Resource Management for School Meals
NPL's mandate is to provide nutritious meals to designated school children at the lowest cost. This audit assesses if NPL's procurement practices align with value-for-money principles and if resources are managed effectively.
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G GOVERNANCE OVERNANCE & R M MANAGEMENT ANAGEMENT N NUTRITION UTRITIONP PRODUCTS RODUCTS L LIMITED & RESOURCE ESOURCE IMITED (NPL) (NPL) September 2021
NPLs Mandate NPL s Mandate To produce and distribute a nutritious meal to designated school children at the lowest possible cost, utilizing local resources whenever possible . The achievement of NPL s mandate is a significant outcome for Vision 2030 Jamaica NDP which identifies nutrition as one of 6 essential elements needed to enhance quality of life for all Jamaicans; nutrition being important to the health of school children.
Rationale for the Audit Rationale for the Audit The audit of NPL was identified in the AuGD s annual strategic audit planning process as a high-risk area, given NPL s role to support GoJ s objective of adequate nutrition in schools under Vision 2030 Jamaica NDP. The audit was also considered necessary given the adverse findings from our audit of NPL, published in November 2012, recent concerns about resource management at NPL, and the requirement to conduct follow-up audits. The audit could provide Parliament and other stakeholders with an indication of whether NPL is managing its resources to enable maximum value from monies spent, and if there is compliance with applicable laws and regulations.
Objective of the Audit Objective of the Audit To determine if NPL s procurement practices were consistent with value for money principles. To determine if NPL was effectively managing its operations in keeping with good governance practices. Including adherence to good human resource management practices.
Audit Scope Audit Scope The audit focused on four key questions relating to production and distribution, procurement, quality standards and strategic oversight of NPL s operations. Focus To determine how well NPL was managing its resources to provide meals to schools in keeping with its mandate. Aim
Key Audit Question Key Audit Question Is NPL managing its resources to provide meals to school Is NPL managing its resources to provide meals to school children in keeping with its mandate children in keeping with its mandate?
General Principles of Good Governance in Public Procurement to attain Value for Money
Key Data Key Data $5.5B in subvention, 2015-16 to 2020-21 Production cost per unit increased to $111 in 2019- 20 from $18 in 2015-16 Production level reduced to 4.9M units in 2019-20 from 43M units in 2015-16 Number of students fed reduced to 18,732 in 2019-20 from 156,291 in 2015-16
What we found What we found
Shifting strategic directions regarding NPLs divestment since 2011 2011 2018 2012 2019 2021 MoEYI agreed with original recommendation to outsource NPL services MoEYI new plan to upgrade and rebrand NPL 5th June 2019 DBJ recommended outsource of NPL services Cabinet Decision to divest NPL New Cabinet Decision 20/18 to divest NPL September 3, 2019 MoEYI contemplated to retain NPL as a logistic centre MoEYI memorandum indicated Cabinet ratified Decision No. 20/18 and approved establishment of Enterprise Team and for DBJ to execute privatization
Reduction in MoEYI Subvention to NPL Decline in number of students fed In 2017-18, MoEYI reduced NPL s subvention by approx. 50% , reducing number of students fed to 3810, based on scaled down of production level. Numbers fed rose to 18,732, after reversal of MoEYI decision in Oct. 2018 and reopening of Saint Mary plant.
Delivery Costs Increase Delivery Costs Increase Meals produced at NPL Westmoreland, and St. Mary plants are transported to Kingston plant, for island wide distribution. Meals delivered to 550 schools at a cost of $69M in 2017-18 Meals delivered to 477 schools at a cost $100M in 2018-19 No evidence of process by which NPL solicited the services of delivery contractors and method used to evaluate, select, and assess their performance Increased delivery cost based on NPL s decision to centralize the delivery of meals from its Kingston plant and implementation of new rate
Related Party Transactions $143M Related party transactions are not prohibited by law, but the nature is likely to create potential conflict of interest. $124.9M paid to individuals and companies connected to the former Board Chairman However, some board members failed to disclose connected party relationships. The former Chief Executive Officer was a Director and shareholder of a printing and office supplies company that received $4.2M
NPLs Maintenance practices NPL did not assess the cost effectiveness of using external service providers. NPL spent $379.8M to engage various external service providers to repair and maintain its buildings & machinery. The process to select service providers was not always consistent with good procurement practices. Many of the repairs should be carried out by internal maintenance technicians.
NPLs Employment & Recruitment Practices NPL s recruitment & selection process not always consistent with its Employment & Recruitment policy and related MOFPS circulars. NPL upgraded some positions without the requisite approval of MoEYI and MoFPS, resulting in unauthorised payments. NPL employed Human Resource Manager, who did not possess required qualification and who thereafter presided over employment of other individuals who did not possess the required qualifications and experience. NPL paid HR consultant $3.3M to undertake similar functions assigned to the Human Resource Manager and to assist with a proposed reorganization; no evidence provided of how the consultant was engaged.
No evidence that NPLs strategic plans were reviewed to provide guidance on the way forward, considering the pending divestment process. NPL Board of Directors provided minimal oversight of NPL s strategic and risk management processes. Strategic oversight Board allowed the same individual to perform roles of internal auditor and financial controller at various intervals, which compromised the effectiveness of NPL s internal control mechanisms. No evidence of risk assessments to devise strategies to address threats to NPL s financial and operational activities
What should be done What should be done
Decisive Policy Directives Monitoring & Oversight Disclosure Strong Board required to promote good governance & procurement practices; MoEYI should consult with Development Bank of Jamaica (DBJ) to devise a plan for the future of NPL s operation. MoEYI should immediately call for full disclosure of connected party transactions. To implement system to assess & monitor NPL s operational effectiveness.
