Financial Management and Internal Control – Follow Up

Background

Effective financial management and internal control are essential underpinnings for the delivery of economic, efficient and effective public services.

Sound financial management is vitally important for government organisations. In the public sector, financial management is pivotal in meeting policy aims, monitoring progress against goals and objectives, and ensuring scarce resources are utilised effectively. A lack of sound financial management increases the risk that the States of Jersey will not set the right priorities, deliver on their responsibilities to provide good value for money and exercise their responsibilities to the taxpayer, as set out in the Public Finances (Jersey) Law 2019.

Good internal control ensures that operations are efficient, effective and in line with laws and policy objectives. Internal control processes can protect the States of Jersey from fraud, corruption, waste and abuse of resources and help in measuring value for money, assessing risk, and ensuring compliance with laws, regulations and policies.

Financial management and internal control processes – when done well – enable the States of Jersey to:

• make timely and well-informed decisions
• unlock efficiencies and drive better ways of working; and
• improve financial resilience and enhance their ability to adapt and respond to shocks and disruptions.

In September 2019, the then Comptroller and Auditor General (C&AG) issued a report Financial Management and Internal Control. The report followed up on findings from a number of previous reports and evaluated the progress made in implementing agreed recommendations, the extent to which the recommendations as implemented addressed the improvement areas identified and the adequacy of plans for the implementation of any outstanding recommendations. The report contained 33 recommendations.

At 3 April 2024, the Government of Jersey’s Recommendations Tracker assessed that only one of the recommendations remained outstanding. Since publication of the report in 2019, the Public Finances (Jersey) Law 2019 has been introduced, supplemented by the Public Finances Manual. These provide the framework within which all States transactions must take place.

Effective risk management is a significant element within an effective internal control framework.

In October 2022, the C&AG issued a report Risk Management – Follow Up. The review followed up recommendations made in 2017 and looked at corporate arrangement as well as arrangements within departments. The report contained ten recommendations, four areas of planned work that should be prioritised and seven areas for consideration.  The Government of Jersey has assessed that all of these recommendations have been implemented.

Scope

This follow up review will consider:

• the progress made in implementing agreed recommendations from the 2019 and 2022 C&AG Reports, taking into account the introduction of the Public Finances (Jersey) Law 2019 and the Public Finances Manual
• the extent to which the recommendations as implemented have addressed the improvement areas identified in the Reports; and
• the adequacy of plans for the implementation of any outstanding recommendations.

In doing so, the review will evaluate:

• the effectiveness of the States’ overall arrangements to ensure sound financial management including:
  • leadership, governance and culture
  • financial planning
  • financial monitoring and forecasting; and
  • financial reporting
• the effectiveness of the key elements of the internal control environment with a particular focus on the Public Finances Manual (PFM) in terms of:
  • ongoing development of requirements; and
  • compliance with requirements
• the effectiveness of risk management arrangements following implementation of previously agreed recommendations; and
• the arrangements to ensure that the internal audit function is operating effectively.

The review evaluates the effectiveness of, and compliance with, the arrangements put in place by the States of Jersey to establish and maintain effective financial management and internal control.

It will evaluate overall arrangements as well as undertaking a more focussed review of how these arrangements operate within the Health and Community Services Department.