Forensic Audit Report reveals… GEA operates illegally with current accounting system

Mar 23, 2016 News

By Kiana Wilburg
As if the astonishing scales of corruption within the departments of the Guyana Energy Agency (GEA) weren’t enough to leave forensic auditors disturbed, they stumbled onto evidence which showed that the entity was illegally operating an accounting system.
The forensic auditors of Nigel Hinds Financial Service noted in its recently released report on GEA that the entity was using an accounting software called “Peachtree” to automate and manage its accounting functions.
However, the agency does not have a licence to use Peachtree Accounting Software. The auditors found the use of the software in this manner to be illegal.
They recommended that the agency immediately purchases a licence to legalize the current use of its Peachtree accounting software.
There were also a number of other irregularities found within GEA’s financial systems. The auditing team noted for example that GEA has been incorrectly recording funds that it collects from oil companies on behalf of the Government of Guyana as revenue on its financial statements.
The auditors noted that the International Accounting Standard #18, Paragraph eight states that, “In an agency relationship, the gross inflows of economic benefits include amounts collected on behalf of the principal and which do not result in increases in equity for the entity. The amounts collected on behalf of the principal are not revenue. Instead revenue is the amount of commission.”
The report of the forensic auditors said that the monies paid to GEA for fuel imported by GEA on behalf of the Government of Guyana should be treated as Accounts Payable instead of Revenue.
It said that when GEA remits the monies to the Government bank account, it is incorrectly recorded on the agency’s financial statements as “Office and Administration” expenses, instead of as an offset to accounts payable.
The audits also found that GEA accepts payments for fuel from Rubis Guyana Inc., Sol Guyana Inc., and Guyana Oil Company Limited. It noted however that premium charges were granted to the Guyana Oil Company Limited.
The team of highly qualified forensic auditors emphasized that there was no basis for this premium financial package.
The current premium charges are as follows: US$1.995 per barrel of gasoline, US$0.21 per barrel of diesel, $US0.525 per barrel of Kerosene and for fuel used by aircraft.

…Invoices were kept out of accounting system
Forensic auditors have found that the Guyana Revenue Agency (GEA) has been using a highly compromised manual system to prepare and issues invoices for licences. These include wholesale, retail, import, export, bulk transportation carriers, and storage licences.
The auditors noted that the annual revenues generated from licensing fees averaged $25 Million for the years 2011 to 2014; amounting to over half of GEA income, when fuel marking fees are not considered.
They asserted that the generating and issuing of invoices for licencing fees are not governed by a standardized system and are not integrated in the agency’s accounting system. “For example, an invoice is only issued when requested by customers or when management elects to issue.”
The auditors in their report emphasized that this undermines the accounting department’s ability to effectively and efficiently monitor the financial transactions pertaining to revenue generated from licensing fees.
In their report, it was recommended that the invoicing process of the Licencing Division be computerized in such a way that it is integrated with the accounting system of GEA. The forensic auditors of Nigel Hinds Financial Services said that the integration will allow for improved recognition of revenue, accounting of receivables and the monitoring of licence holders.
The auditors also stressed that customers should not have the option of determining whether they want an invoice or otherwise. Instead, they said that invoices should be issued to all customers as a standard policy.

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Forensic Audit Report reveals… GEA operates illegally with current accounting system

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