MINISTRY PAPER - tI L nSCALSERVICESLIMcrTED

ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED MARCH 31 2011

10 INTRODUCTION

11 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

20 OVERVIEW

21 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 ofFinance and Planning (MoFP) chiefly its revenue departments and other government entities Services include software amp hardware development network communication quality assurance and testing as well as technical support Costs including those related to capital requirements are fundedmiddot primarily by the Government of Jamaica (G01) via subventions and grantallocations

30 DISCLOSURES

31 Auditors Report

311middotmiddot The Auditors PricewaterhouseCoopers (PwC) in their unqualified report indicated that their audit of the Companys 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 bull 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 ofthe Company as at March 3 I 2011

32 Compensation to Senior Executives

321 Pursuant to the Second Schedule (part 1) of the Public Bodies Management and Accountability Act (Amendment 2011) details of the compensation packagesmiddotfot senior executivesmiddot are enclosed and attached at Appendix I For the period under review these emoluments totalled $3591 million a decrease of $352 million or 89 compared to $3943 million in the previous financiaI year The enclosed schedule shows that individual packages ranged from $021 million to $801 millionmiddot The total accounted for approximately 60 oftotal staff costs compared to 74 in the previous year

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40 OPERATIONAL IDGHLIGHTS

41 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 201011

Tax Portal System The tax portal system was enhanced to facilitate a single payment for all payroll statutory deductionscontributions (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

Traffic Ticketing System (TTS)

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 ofcourt proceedings related to traffic offences and collection of paytnents made attheCourts formiddot traffic offences

Integrated Computerized A new feature was added to the ICTAS to facilitate the deshyTax 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 Information System (LMIS)

During the review perioda major enhancement was developed and implemented to reduce the time taken to process and print road licences

2

50 FINANCIAL mGHLIGHTS

Table 2 FiDaneialHigblights Sm

Income

Qta1 Expenses

Net Working Capitalmiddot

Current Asset Ratio

5715

93751

-94744

3059

481

-101350

27669

18

1695

-25571

6606

-229

2104

-6~5

51 Table 2 fudicatestbat FSL realised an after tax deficit of$056 million a significant decline of $16216 million on the $16160 million surplus earned for the 2009110 financialmiddotyear This resulted primarily from a net decrease of $23876 million or 21 in operational subvention and grant funding compared to the prior year

52 -Income and Expenses -c

521 -Operational subvention and grants (for projects) from MOFP are FSLs major sources of incomekand accounted for approximately 94 of the entitys total income However subvention and grants fell by $23875 million during the year and was the major contributor to the decline in total in~ome by $25571 million or 214 to $93751 million (200910 $119322 million)

522~ The reduction in revenue necessitated changes in certain administrativecontractual 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 $10530 million in consultancy and profession31 fees However the positive variance was offset partially by an increase of $6850 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 $3013 million in 2009110 to $9841 million in 2010111 The aforementioned contributed to FSL recording net savings of $6606 million in its total costs which amounted to $94744 million

53 Balance Sheet

531 The Companys total assets declined by approximately 37 or $28953 million from $78345 million in 2009110 to $49392 million in 2010111 The primary contributor was a reduction of $24150 million in accounts receivable (chiefly from the government) which caused current assets to fall to $38623 million from $62180 million recorded at March 31 2010 Funds collected facilitated a net decline of $238 million in accounts payable as software licensing fees

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40 OPERATIONAL IDGHLIGHTS

41 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 201011

Tax Portal System The tax portal system was enhanced to facilitate a single payment for all payroll statutory deductionscontributions (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

Traffic Ticketing System (TTS)

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 ofcourt proceedings related to traffic offences and collection of paytnents made attheCourts formiddot traffic offences

Integrated Computerized A new feature was added to the ICTAS to facilitate the deshyTax 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 Information System (LMIS)

During the review perioda major enhancement was developed and implemented to reduce the time taken to process and print road licences

2

50 FINANCIAL mGHLIGHTS

Table 2 FiDaneialHigblights Sm

Income

Qta1 Expenses

Net Working Capitalmiddot

Current Asset Ratio

5715

93751

-94744

3059

481

-101350

27669

18

1695

-25571

6606

-229

2104

-6~5

51 Table 2 fudicatestbat FSL realised an after tax deficit of$056 million a significant decline of $16216 million on the $16160 million surplus earned for the 2009110 financialmiddotyear This resulted primarily from a net decrease of $23876 million or 21 in operational subvention and grant funding compared to the prior year

52 -Income and Expenses -c

521 -Operational subvention and grants (for projects) from MOFP are FSLs major sources of incomekand accounted for approximately 94 of the entitys total income However subvention and grants fell by $23875 million during the year and was the major contributor to the decline in total in~ome by $25571 million or 214 to $93751 million (200910 $119322 million)

522~ The reduction in revenue necessitated changes in certain administrativecontractual 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 $10530 million in consultancy and profession31 fees However the positive variance was offset partially by an increase of $6850 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 $3013 million in 2009110 to $9841 million in 2010111 The aforementioned contributed to FSL recording net savings of $6606 million in its total costs which amounted to $94744 million

53 Balance Sheet

531 The Companys total assets declined by approximately 37 or $28953 million from $78345 million in 2009110 to $49392 million in 2010111 The primary contributor was a reduction of $24150 million in accounts receivable (chiefly from the government) which caused current assets to fall to $38623 million from $62180 million recorded at March 31 2010 Funds collected facilitated a net decline of $238 million in accounts payable as software licensing fees

3

50 FINANCIAL mGHLIGHTS

Table 2 FiDaneialHigblights Sm

Income

Qta1 Expenses

Net Working Capitalmiddot

Current Asset Ratio

5715

93751

-94744

3059

481

-101350

27669

18

1695

-25571

6606

-229

2104

-6~5

51 Table 2 fudicatestbat FSL realised an after tax deficit of$056 million a significant decline of $16216 million on the $16160 million surplus earned for the 2009110 financialmiddotyear This resulted primarily from a net decrease of $23876 million or 21 in operational subvention and grant funding compared to the prior year

52 -Income and Expenses -c

521 -Operational subvention and grants (for projects) from MOFP are FSLs major sources of incomekand accounted for approximately 94 of the entitys total income However subvention and grants fell by $23875 million during the year and was the major contributor to the decline in total in~ome by $25571 million or 214 to $93751 million (200910 $119322 million)

522~ The reduction in revenue necessitated changes in certain administrativecontractual 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 $10530 million in consultancy and profession31 fees However the positive variance was offset partially by an increase of $6850 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 $3013 million in 2009110 to $9841 million in 2010111 The aforementioned contributed to FSL recording net savings of $6606 million in its total costs which amounted to $94744 million

53 Balance Sheet

531 The Companys total assets declined by approximately 37 or $28953 million from $78345 million in 2009110 to $49392 million in 2010111 The primary contributor was a reduction of $24150 million in accounts receivable (chiefly from the government) which caused current assets to fall to $38623 million from $62180 million recorded at March 31 2010 Funds collected facilitated a net decline of $238 million in accounts payable as software licensing fees

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were paid Therefore notwithstanding the decline in current assets FSLrecorded growth in its working capital which moved from $27669 million to $30590 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 4811 compared to 1801 recorded at March 31 2010

54 Cash Flow

541 FSLsoperating activities generatedmiddot cash of $20~1 OmiIlion for the yearmiddot 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

60 CONCLUSION

61 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 FSLs activities reSulted in benefits to the taxpayer and facilitated improvement in Governments revenue collection and related activities FSLs future plans are geared towards the continued modernisation upgrading and computer 4ltegration of all the governments 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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