Findings of US$7.3B audit of ExxonMobil justify full-fledged forensic audit – OGGN

Nov 26, 2023 ExxonMobil, News, Oil & Gas

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Kaieteur News – The Oil and Gas Governance Network (OGGN) is urging the Government of Guyana (GoG) to conduct a full-fledged forensic audit of U.S oil giant ExxonMobil expenses, racked up between 2018 and 2020.

An audit of the company’s US$7.3 expenses was conducted by a local consortium, VHE Consulting which is a registered partnership between Ramdihal & Haynes Inc, Eclisar Financial, and Vitality Accounting & Consultancy Inc. The Local Consortium was supported by International firms – SGS and Martindale Consultants.

The team found that the company blatantly misused revenues generated in the Stabroek Block.

OGGN members, Alfred Bhulai, Andre Brandli, Janette Bulkan, Kenrick Hunte, Darshanand Khusial, Rueben Khusial, John Palmer, Joe Persaud and Mike Persaud published in Saturday’s edition of this newspaper highlighted that the audit encompassed 260,000 transactions, totaling US$7.3 billion, for the Stabroek Block and was expected to be completed in four months.

OGGN raised concerns over the size of the audit team, which included a few Guyanese, likely with no prior experience in reviewing oil and gas transactions.

According to the body, “It is almost impossible for such a team, in that short time period, to verify 260,000 transactions thus they sampled transactions and ignored small transactions, where small transactions seem to be anything less than US$1,000.”

The citizens added, “It appears no materiality, an accounting criterion, was formally defined by the auditing team which raises concerns about the quality of the audit. What is not clear is what percentage of the 260,000 transactions were sampled and how many fell into the bucket of too small to audit. We know more than 40% of Guyanese live on US$5.50 per day thus US$1000 is not small to them.”

The Oil and Gas Network went on to note that in the series of articles highlighted in the press, there was no mention of the ‘big ticket’ engineering items of the offshore expenses. Instead, the group said the audit report exposed “simpler cake shop accounts”.

It pointed out that the “big-ticket engineering items” need to be scrutinized with as much, or more care as the go-karting and Zumba lessons have been in the recent cost-recovery audits, since those expenses could potentially have a great effect on the money flows to Guyana.

OGGN noted that a thorough forensic audit will cost more and take longer, but is necessary, since a review of Exxon’s US$1.7 billion expenses, incurred between 1999 and 2017 flagged US$214 million in questionable costs.

“Whether the team did or did not have such expertise, for the 2018 to 2020 audit (is unknown); clearly the time and money allowed for this sample cost-recovery audit was not enough for a thorough investigation.  The findings of this limited-scale audit have easily paid for the cost of the audit,” OGGN said.

The team noted that what the auditors discovered during the review process of the 2018-2020 bills are enough to justify a full-scale forensic audit. To this end, the OGGN members urged government to commission a forensic audit of the company. It said such a review such also be required for all subsequent years.

“The Auditor-General and the Guyana Revenue Authority should be in close contact with the US Security & Exchange Commission and the US Internal Revenue Service to check on transfer pricing and other means by which the ExxonMobil Guyana may be trying to inflate costs and reduce legitimate taxes,” the organization said.

Financial Analyst and Certified Accountant, Floyd Haynes said that the audit of costs incurred by ExxonMobil in the Stabroek Block was not a forensic audit or a witch hunt.

Haynes said that, “a forensic audit is done with the aim of identifying fraud and embezzlement with the goal of gathering evidence to be used in a court.”

He said, contrarily, a cost recovery audit of ExxonMobil’s bills was done pursuant to the parameters of the 2016 Production Share Agreement (PSA) governing the Stabroek Block.

“The goal is to verify the accuracy or rather the legitimacy and validity of costs claimed…there is a huge difference…,” he said.

OGGN in its letter reminded that it had proposed a Gross-Split-Model to replace the lopsided Production Sharing Agreement with ExxonMobil. This alternative would allow for Guyana to receive 55 out of every 100 barrels of oil produced offshore and would eliminate the need for time-consuming audits which are complex and costly.

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• Audit, ExxonMobil, forensic, OGGN, oil

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