Jersey Enterprise Board Limited - proposed establishment (P.194-2007) – second amendment.

STATES OF JERSEY

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JERSEY ENTERPRISE BOARD LIMITED: PROPOSED ESTABLISHMENT (P.194/2007) – SECOND AMENDMENT

Lodged au Greffe on 15th January 2008 by the Public Accounts Committee

STATES GREFFE

JERSEY ENTERPRISE BOARD LIMITED: PROPOSED ESTABLISHMENT (P.194/2007) – SECOND AMENDMENT

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After paragraph (b) insert the following new paragraphs –

" (c ) to agree that the Comptroller and Auditor General shall have the same powers in respect to the Jersey Enterprise Board and all its subsidiaries as if the Jersey Enterprise Board and its subsidiaries were a States Funded body, as defined in the Public Finances (Jersey) Law 2005, as amended;

(d  ) to agree that the Comptroller and Auditor General shall examine and certify the accounts, and

copies thereof together with the report of the Comptroller and Auditor General thereon shall be laid as soon as may be before the States;

( e) to agree that any proposed changes in the Memorandum and Articles of Association of Jersey

Enterprise Board shall be brought to the States for approval;".

PUBLIC ACCOUNTS COMMITTEE

REPORT

This proposition will effectively transfer States' Assets, of a significant value, out of the direct control of the States and into the ownership of the new company.

Although the sole shareholder will be the States, as represented by the Chief Minister and the Minister for Treasury and Resources, the company will be controlled by a Board on which the States Members will not be in the majority.

Whilst the Chief Minister may issue directions to the Directors, the Directors will have all the powers of a normal Board of Directors, including the powers outlined in paragraph 45 of the Memorandum and Articles of Association. This paragraph allows the Company to mortgage or charge its undertaking, property and uncalled capital or any part thereof, and to issue debentures and other securities, whether outright or as security for any debt, liability or obligation of the Company or of any third party. These are normal powers for a company. However this company will be receiving assets of an extremely high value which are the property of the Public of the Island.

It is understood that there will be occasions when commercial sensibilities will prevent complete transparency regarding the details of the activities of the company. It is also probable that if there are financial problems, then commercial partners will look to the States rather than to the company.

The argument might be made that this organisation should be treated as an "independently audited States body". The main organisations to which this applies are the Jersey Electricity Company and Jersey Water. These however, are constrained by the strict rules of the London Stock Exchange, as they are publicly quoted companies. The proposed company will not be listed.

Moreover, this particular activity is not one in which the States has professional experience. It follows that the States is reliant on the Board of Directors. Whilst the Public Accounts Committee has no doubts about the levels of probity which will be required in such an organisation, it is always advantageous to be able to call on an independent opinion.

The Public Accounts Committee considers that it would be prudent and entirely common sense that the company and its subsidiaries should come within the remit of the Comptroller and Auditor General. This would give assurance to the Public that there will be an independent oversight of the Jersey Enterprise Board (JEB) and its activities and would provide additional assurance to the Council of Ministers.

The first paragraph  (c) of the amendment gives the Comptroller and Auditor General the powers to review JEB and its subsidiaries as specified in paragraph  3 of Article  46.

Paragraph  (d) will require the Comptroller and Auditor General to oversee the audit, engaging the auditors and reporting on the audit to the States.

The third part, paragraph  (e) of the amendment, ensures that there can be no change to the constitution of the company without referral to the States Assembly. Whilst the Public Accounts Committee has no doubts of the competence of a Chief Minister or a Minister for Treasury and Resources, this represents a commonsense check and balance in the operation of the company.

APPENDIX

EXTRACT FROM PUBLIC FINANCES (JERSEY) LAW 2005 Duties of Comptroller and Auditor General

46 C omptroller and Auditor General to ensure compliance with Law

1. It  is the duty  of the Comptroller and Auditor  General  to  provide  the  States  with independent assurance that the public finances of Jersey are being regulated, controlled and supervised and accounted forin accordance with this Lawand that theprovisions of this Lawareotherwisebeing duly compliedwith.
2. T hatdutyshallbe taken toinclude,inparticular,assuring the States –

1. t hat moneywithdrawn from the consolidated fund, the strategic reserve fund orthecurrency fund was used for the purpose for which it was authorized to bewithdrawn;and
2. t hat all incomedueto the States has been collected or otherwise duly accounted for.

3. I t shallalsobetakento require the Comptroller and Auditor General toconsiderandreport to the States on –

1. t he effectiveness of the internal financial controlsof States funded bodies and the internal auditing ofthose controls; and
2. t heeconomy, efficiency and effectiveness in the way they usetheirresourcesof States funded bodies, independently audited States bodies (other than those that are companiesownedor controlled by the States), and Statesaided independent bodies; and
3. t he general corporate governance arrangements of the States andof States fundedbodies, independently audited States bodies and States aided independentbodies,

and, in each case, to make recommendations to bring about improvement where improvement is needed.