MINISTRY PAPER .
-# ;t'I/ /:L.
nSCALSERVICESLIMcrTED
ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED MARCH 31, 2011
1.0 .
INTRODUCTION
1.1 'ne matter for tabling in the Honourable Houses of Parliament is the Annual Report for Fiscal Services Limited (FSL) for the financial year ended March 31, 2011. 2.0
OVERVIEW
2.1 FSL was incorporated in Jamaica under the Companies Act as a limited liability company on. April 15, 1985 but commenced operations in April 1986. The Entity provides a full range of computer services to the Ministry of Finance and Planning (MoFP), chiefly its revenue departments and other government entities. Services include software & hardware development, network communication, quality assurance and testing, as well as technical support. Costs, including those related to capital requirements, are funded· primarily by the .Government of Jamaica (G01) via subventions and grant allocations. . 3.0
DISCLOSURES
3.1
Auditors' Report
3.1.1·· The Auditors, PricewaterhouseCoopers (PwC), in their unqualified report, indicated that their audit of the Company's financial statements for 2010111 was conducted in accordance with International .Standards on Auditing. PwC noted that the financial statements were prepared in accordance with International Financial Reporting Standards (!FRS) and complied with the provisions of the Jamaica Companies Act•. The auditors also indicated that proper accounting records were kept and that the financial statements prepared, give a true and fair view of the financial position of the Company as at March 3 I, 2011 3.2
Compensation to Senior Executives
3.2.1 Pursuant to the Second Schedule (part. 1) of the Public Bodies Management and Accountability Act (Amendment 2011), details of the compensation packages·fot senior executives· are enclosed and attached at Appendix I. For the period under review, these emoluments totalled $35.91 million, a decrease of $3.52 million or 8.9% compared to $39.43 million in the previous financiaI year. The enclosed schedule shows that individual packages ranged from $0.21 million to $8.01 million.· The total accounted for approximately 6.0% of total staff costs, compared to 7.4% in the previous yea,r..
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4.0
OPERATIONAL IDGHLIGHTS
4.1 During the year, FSL continued. to provide its services to the various departments and agencies of the Government ofJamaica. Major projects are highlighted in Table 1.
Table 1:
Major Projects Undertaken in 2010/11
Tax Portal System
Traffic (TTS)
Ticketing
Integrated
The tax portal system was enhanced to facilitate a single payment for all payroll statutory .deductions/contributions (PA YElIncome Tax, Education Tax, NIS, HEART and NHT). In addition, entities other than corporations and self-employed individuals, can now file their returns online and include the uploaCiing of schedules (supporting documents) to those returns. The successful deployment of the latest enhancements, reportedly improved customer service and. operational efficiencies within Tax Administration.
System The Traffic .Ticketing System, comprising the Traffic. Ticket Issuing System (TrIS) and the Traffic Ticket Management System (TIMS) was. implemented in September 201 O. Of note, the ms was developed by a third party and integrated with the TTMS. The system was designed to facilitate the management of traffic tickets issued by the, police. Major features include, matching of tickets with payments; reporting on outstanding tickets; calculating and managing demerit points; recording of court proceedings related to traffic offences and collection of paytnents made attheCourts for路 traffic offences. "
Computerized A new feature was added to the ICTAS to facilitate the de颅
Tax Administration System registering of taxpayers, who no longer meet the criteria for the (lCTAS) payment of a tax and lor filing of a return for a particUlar tax type. The system also enables automated re-registration of de-registered taxpayers.
Licen~e
Management . During the review period,a major enhancement was developed and Information System (LMIS) implemented to reduce the time taken to. process and ,print road licences. .
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5.0
FINANCIAL mGHLIGHTS
Table 2: FiDaneialHigblights
Income .... Qta1 Expenses
Net Working Capital路 Current Asset Ratio
Sm
57.15
16.95
-22.9
937.51 -.947.44
-255.71
..,2104
30.5.9 . 4.81 ...
-1,0.13.50.
66.0.6
-6~5
276.69 1:8
5.1 Table 2 fudicatestbat FSL realised an after tax deficit of$0.56 million, a significant decline of $162.16 million on the $161.60 million surplus earned for the 2009110 financial路year. This resulted primarily from a net decrease of $238.76 million or 21% in operational subvention and grant funding, compared to the prior year. 5.2
. -.:Income and Expenses -c: 5.2.1 -Operational subvention and grants (for projects), from MOFP are FSL's major sources of incomekand accounted for approximately 94% of the entity's total income. However, subvention and grants fell by $238.75 million during the year and was the major contributor to the decline in total in~ome by $255.71 million or 21.4% to $937.51 million, (2009/10: $1,193.22 million). 5.2.2~
The reduction in revenue necessitated changes in certain administrative/contractual arrangements. Particularly, FSL did not renew the contract with the consulting company which usually performed its outsourced IT services. Instead, works were undertaken in-house and this facilitated a reduction of $105.30 million in consultancy and profession31 fees. However, the positive variance was offset partially by an increase of $68.50 million in staff costs. Of note, a revaluation of the retirement benefit pension scheme (in keeping with International Financial Reporting Standards) effected a rise in pension expenses from $30.13 million in 2009110 to $98.41 million in 2010111. The aforementioned, contributed to FSL recording net savings of $66.06 million in its total costs, which amounted to $947.44 million. 5.3
Balance Sheet
5.3.1. The Company's total assets declined by approximately 37% or $289.53 million from $783.45 million in 2009110 to $493.92 million in 2010111. The primary contributor was a reduction of $241.50 million in accounts receivable (chiefly from the government), which caused current assets to fall to $386.23 million, from $621.80 million recorded at March 31, 2010. Funds collected, facilitated a net decline of $238 million in accounts payable as software licensing fees 3
were paid. Therefore, notwithstanding the decline in current assets, FSLrecorded growth in its working capital, which moved from $276.69 million to $305.90 million at March 31, 2011. The Company also improved significantly, its ability to pay current liabilities as evidenced by its liquidity ratio which rose to 4.81:1 compared to 1.80:1 recorded at March 31, 2010. 5.4
. Cash Flow
5.4.1 FSL'soperating activities generated路 cash of $20~ 1OmiIlion for the year,路 which compares negatively with the $207 million generated in 201 O. It is reiterated that FSL is fundedchiefiy from the Consolidated Fund, and reduced allocations from the government, as well as the payment of software licencing fees ($238 million), effected the decline in cash flow from operations.
6.0
CONCLUSION
6.1. FSL continued the implementation ofseveral systems at various revenue centers and other government agencies. In addition, other systems were enhanced to increase operational efficiencies. Hence, FSL's activities reSulted in benefits to the taxpayer and facilitated improvement in Government's revenue collection and related activities. FSL's future plans are geared towards the continued modernisation, upgrading and computer 4ltegration of all the government's revenue collecting agencies and other related entities. In addition to improving revenue collection, these activities are expected to widen the tax base and ericouragetax compliance.
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