Guest editorial: That elusive oil contract audit

Dec 04, 2022 Editorial

Kaieteur News – The audit of the operations of the oil contract with ESSO and its partners for the years 2018 – 2020 appears to be heading nowhere. The contract for the award by the Ministry of Natural Resources for US$700,000 audit was awarded in May 2022 to a group of Guyanese firms – Ramdihal & Haynes Inc., Eclisar Financial, and Vitality Accounting & Consultancy Inc. – supported by two international firms- SGS and Martindale Consultants.

The audit was expected to be completed in September of this year which means that its report is now overdue by months. The Ministry has offered the public no explanation for the delay and whether in fact the contract was extended beyond the agreed four-month period. This newspaper is concerned that like the previous audit done by IHS Markit of one element of the pre-contract costs incurred by the oil companies, this audit is going nowhere, will be a waste of money, at best an expensive waste and worst, a total whitewash. In February 2022, Petroleum Minister told the press that there were some queries arising out of the IHS audit which should have been “wrapped up” within two to four weeks. There has been silence since.

Guyanese, it seems are once again being taken for a ride. The spokesperson for this audit is the US-based Guyanese Certified Public Accountant Mr. Floyd Haynes who during the course of the unfinished audit was successful in his application for a licence to operate an Investment Bank in Guyana. Haynes who is known to be a friend of Vice President Bharat Jagdeo is not known to have an audit practice certificate in Guyana or any interest in an investment bank in the US. Indeed, only one of the persons who are involved in the audit is known to hold an audit practice certificate in Guyana.

Mr. Haynes was again in the media last week and sought to dampen expectations about the audit, suggesting that his group had been contracted to undertake a cost recovery audit “pursuant to the parameters of the 2016 Production Share Agreement (PSA) governing the Stabroek Block.”

Mr. Haynes is dead right about the audit being undertaken under the PSA but is totally wrong about the scope of the audit. It is not only about costs, but about the entire financial operations of the 2016 Agreement. The right of the Government to have an audit is provided for under article 23 of the Agreement as being “the right to audit their counting records of the Contractor in respect of petroleum operations in accordance with accounting procedure.” This right is further amplified in section 15 of Annex C – Accounting Procedure, which forms part of the Agreement.

Mr. Haynes and his team must be aware that production ran for a full year in 2020 and all the records pertaining to the production, allocation of production share, costs incurred, recoverable and non-recoverable expenditure and costs to be carried forward all form part of the records of the oil companies. It goes without saying that all these costs are subject to audit. The suggestion by Mr. Haynes that this is merely a cost recovery audit is dangerously wrong.

This newspaper never thought it would be necessary to point out to a team of Chartered Accountants that they have a duty to familiarise themselves with the technical details of the Agreement under which they have undertaken a professional engagement. That costs are classified defined and allocated across six specific heads. That claims for recoverable expenses must satisfy three conditions. That records have to be maintained to allow for the preparation and submission of seven Statements to the Government.

We repeat: this is far more than a cost recovery audit. If Haynes and his team do not understand this simple fact, then Guyanese are headed for the same kind of mess that the APNU+AFC caused with the pre-December 2015 inflated expenditure, and the mystery surrounding the IHS audit.

Guyana seems to have added a new dimension to the Oil Curse – one of continuing incompetence all around.

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