NICIL refused to reveal 2018 financial records to EITI

Sep 14, 2022 News

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– had requested “get-out” letter from Finance Ministry

Kaieteur News – The International Secretariat of the Extractive Industries Transparency Initiative (EITI) has observed that one of Guyana’s key state agencies, the National Industrial and Commercial Investments Limited (NICIL), is not interested in revealing aspects of its financial records for scrutiny.

According to a 2022 report by the Secretariat, NICIL is the Government’s asset management company that holds state equity in companies in all sectors, including minority participations in at least two mining companies. While it remains unclear from public documents whether NICIL’s primary activities are in the extractive industries, the Secretariat said the country’s 2018 EITI Report lists NICIL as a significant state enterprise for EITI reporting purposes.

It said, however, that the materiality of transactions involving NICIL in 2018 remains unclear given its lack of submission of reporting templates and the lack of publication of its audited financial statements.

Importantly, it was noted by the Secretariat that there is no information in the 2018 report on the value of transactions involving NICIL given its lack of participation in EITI reporting for 2018. In fact, the Secretariat said stakeholders consulted explained that “NICIL had refused to participate in the 2018 EITI Report as they had requested an official letter from the Ministry of Finance directing them to do so, which had not been provided.”

It was further explained that NICIL holds the Government’s interests in extractive companies, collects dividends from at least two mining companies in which it holds equity interests, but is statutorily allowed by the Companies Act (1991) to decide its own dividend to Government. The transparency body said this implies that NICIL is allowed to retain a share of mining companies’ dividends from its transfers to the Government. Further to this, the EITI Secretariat said the value of these retained earnings is not publicly disclosed, adding that there do not appear to be any publicly accessible financial reports describing NICIL’s financial management of extractive revenues not recorded in the Government budget.

The Secretariat was keen to note that a financial report describing how NICIL manages the extractive revenues it collects as dividends from mining companies needs to be disclosed so that Guyana can be properly assessed for compliance with its transparency standards.

CORRECTIVE ACTION/RECOMMENDATIONS
Requirement 2.6 of the EITI Standard requires that, where state participation in the extractive industries gives rise to material revenues for the State, the following information should be reported: an explanation of the prevailing rules and practices regarding the financial relationship between the Government and state owned enterprises, and the level of ownership by the Government and state entities in mining, oil and gas companies operating in the country, including those held by subsidiaries and joint ventures.

To be in compliance, it was advised that Guyana provides public disclosure of an explanation of the role of state-owned enterprises in the sector and prevailing rules and practices regarding the financial relationship between the Government and State-owned-Enterprises (SOEs). The Secretariat said this should include disclosures of transfers, retained earnings, reinvestment and third-party financing related to SOE joint ventures and subsidiaries.

It was also noted that Guyana should ensure public disclosures from the Government and SOEs of their level of ownership in companies operating within the country’s oil, gas and mining sector, including those held by SOE subsidiaries and joint ventures, and any changes in the level of ownership during the reporting period. EITI has said this information should include details regarding the terms attached to their equity stake.

Where the Government and SOEs have provided loans or loan guarantees to mining, oil and gas companies operating within the country, the Secretariat said details on these transactions should be disclosed.

Furthermore, state owned enterprises are expected to publicly disclose their audited financial statements. To strengthen implementation, Guyana was encouraged to ensure public disclosure of descriptions of the rules and practices related to SOEs’ operating and capital expenditures, procurement, subcontracting and corporate governance.
The Secretariat said too that Guyana should consider further efforts to address any gaps, inconsistencies and irregularities in the information disclosed.

REPORT
On April 28, 2022, Guyana was found to have achieved a fairly low overall score (52 points) in implementing the 2019 EITI Standard.
The 2022 Validation Report outlines the full assessment of Guyana’s compliance performance based on extensive stakeholder consultations and a review of three templates that reflect the components of EITI Validation, namely ‘Outcomes and impact’, ‘Stakeholder engagement’ and ‘Transparency’. The Board decision, including corrective actions needed before Guyana’s next validation, is published in the decisions register.

The validation of Guyana’s compliance with the EITI 2019 Standard commenced on October 1, 2021. The finalised report was completed on January 31, 2022 and released.

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