The audit process needs auditing

Apr 10, 2023 Features / Columnists, Peeping Tom

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Peeping tom…

Kaieteur News – The President of Guyana should be petitioned to order an immediate inquiry into his government’s response (or lack of) into the audit of the oil expenses incurred and claimed by the oil companies for the period 1999 to 2017. The government has a political responsibility to the parliament to ensure the proper management of the oil sector and parliament should at least pass a motion urging such an inquiry.

It was Stabroek News which landed the scoop of the year when it reported on details of that audit, details which the government did not see fit to make known to the public or to act upon. The excuses which have since been made by the government, including trying to involve the Guyana Revenue Authority, are grounds enough to justify a commission of inquiry.

Since 2021, it was being reported that the report into the audit for the period 1999 to 2017 had been submitted to the government. Questions were asked as to why the government was not reporting on the findings of the audit. The public was provided with reassurances that a report would have been forthcoming.  But up until a few days ago, there was little response on the matter.

Then there emerged the bombshell report by the Stabroek News indicating that the audit report, in the possession of the government, had raised red flags about some 12.8% or some US$214.4M of the US$1.67 B in expenses claimed by ExxonMobil and its affiliates. It was this release which prompted a response from the government.

It sought to involve the Guyana Revenue Authority (GRA). But the GRA has limited locus standi on this issue. The GRA is and cannot be held responsible for the audit of the oil expenses. The government, and particularly the Ministry of Natural Resources, is responsible for ensuring the audit and for the follow-up action if necessary.

The Guyana Revenue Authority is a tax collection agency. It may undertake its own audit in order to assess taxes owed. But it cannot and should not be responsible for any audit by the government of oil expenses. Whatever the GRA does is of mere academic value since the company is not subject to much taxation anyway.

Yet despite knowing this, the Vice President indicated that the GRA would address the issue. It did. But the GRA should extricate itself from this issue, lest it finds itself having to assume responsibility for any negligence on the part of the Ministry of Natural Resources.

As things now stand, the public is being told that the audit report which was submitted to the government two years ago is a preliminary report. The government it is said is awaiting the final report from the audit company before taking action to recover nay amounts wrongfully claimed.

Presumably, the audit company is required to submit the findings to the oil companies who will then provide the relevant explanations. It is doubtful that this process should take two years.

The final audit report should have already been ready. As such questions need to be asked as to what action the government has taken to ensure that the final report is submitted so that the necessary claims and objections can be made by the government, thereby recovering more money for profit oil.

So far, the government has been mum on what action it took to ensure the submission of the final report. But other questions also need to be asked in terms of the statutory period for completing the final report and for submitting objections to the expenses.

Even though the audit covered the period prior to the signing of the Production Sharing Agreement (PSA), it is possible that the same audit terms of the PSA covers that earlier period. After all, did the Coalition government not indicate that the pre-PSA contract and the PSA were not much materially different?

The existing PSA provides that the government, not the audit company, has to submit a report to the oil companies within sixty days of the completion of the audit. The oil companies then have another sixty days to respond to the audit queries.

The key question that arises therefore is whether these provisions apply to the pre-PSA contract and specifically to the period 1999-2017. And if it does then what action did the government take to ensure compliance with the sixty days period for submission of queries and for receipt of the oil companies’ explanation.

These are the issues which require an explanation from the government. But given its historic secrecy and reversion to confidentiality clauses, real or imagined, it is not likely that the PPPC government will answer those questions unless it is mandated to do so by a commission of inquiry.

There have been calls for the government to release the audit report. But these calls are misplaced because you cannot make public a preliminary report. That would be just as reckless as not taking sufficient and sustained action to have the final report submitted.

But the demand for the report to be made public must be understood in context of the government’s previous failure to have some US$9.5B in expenses audited within the statutory period. At the time, the explanation was that it was difficult to find persons to do the auditing.

The key question this time is what prevented or is preventing the completion of the final audit report into the period 1999-2017. And, more importantly, what action the government took to ensure that this report is completed.

 

Disclaimer: The opinions expressed in this column are those of the author. They do not purport to reflect the opinions or views of Kaieteur News.

 

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