The saga of the audit creates more confusion

Every Man, Woman and Child Must Become Oil-Minded (Part 61)

Introduction

In an advertisement appearing in the national media yesterday, the Ministry of Natural Resources, on its own behalf and that of the Government of Guyana, invited expressions of interest by Consultants desirous of providing services to the Project Execution Unit, presumably of the Ministry, to “conduct an audit of the Recoverable Contract Costs as called for in the signed Production Sharing Contract(s).” It also requires the successful person or Firm to provide on-the-job training to the staff of the Guyana Revenue Authority (GRA) and the Office of the Auditor General (OAG) on cost recovery auditing, “with a particular focus on value for money.”

The advertisement sets out the scope of the consultancy to include:

1.  Working together with a designated joint GRA/OAG team as coordinated by the Department of Energy (DoE), toaudit, examine and verify all available documentation and records ……and determine if any required documents are yet to be submitted.”

2.  Determining:

a)  If the Contract Costs have been properly assigned to the correct cost category, in the correct amount and with adequate transparency level;

b)  If Contract costs are eligible for cost recovery (including determining the fiscal year of incurred expenses and consequences for potential future uplift); and

c)  If, in the opinion of the Consultant, costs submitted by the Contractor have been incorrectly categorised and/or should be disqualified from Cost Recovery.

3.  Assist the relevant authorities in communicating the findings of the audit to the Contractor and, if  requested, represent or accompany the relevant authorities in meetings with the Contractor.

4.  Assess the impact of the audit on future Profit Oil and Profit Gas, its subsequent petroleum tax implications and if relevant tax entitlements are optimized in the interest of the Government of Guyana.

5.  Provide on-the-job training to the staff of the GRA and OAG as they are working jointly with the Consultant as well as other agencies aimed at building the capacity of these agencies.

 The World Bank, again

Funding for the consultancy will come out of financing received by the Government from the World Bank towards the cost of the Guyana Oil and Gas Capacity Building Project. The procurement of the services is being done in accordance with the Bank’s “Procurement Regulations for IPF Borrowers”  and is open to Consultants who provide information demonstrating that they have the required qualifications and relevant experience to perform the Services.

The most polite words to describe this advertisement and proposed engagement are uninformed, amateurish and short of knowledge and understanding of what an audit of a contractual arrangement is and how it is carried out. The writer of the advertisement does not appear to have any familiarity with the constitutional nature of the Office of the Auditor General; the statutory powers, functions and duties of the Revenue Authority; and the relevant provisions of the Petroleum Agreements issued under the Petroleum Exploration and Production Act, and in particular Article 9 – Records, Reports and Information, Article 11 – Cost Recovery, Article 13 – Valuation of Crude Oil or Natural Gas, Article 14 – Disposal of Production, Article 15 Taxation and Royalty and Annex C – Accounting Procedure.

Silent confusion

Of course, there is now an unhealthy silence from the policy makers and officials in the petroleum sector but would someone please direct the poor Guyanese citizen where value-for-money has any focus, let alone a “particular focus” in the Petroleum Agreement. It just does not exist. As a Guyanese accountant and auditor for more than forty years, it is painful to witness the mediocrity of the advertisement which excludes some of the most fundamental issues that an audit of this nature should address.  

Oh, and how come the Ministry of Natural Resources is still engaged in petroleum matters? Perhaps that Ministry has not received their copy of the Official Gazette which has removed any responsibility of that Ministry for petroleum operations, transferring them to the Minister of State Mr. Joseph Harmon. I entertained genuine hope that Dr. Mark Bynoe would bring some clarity and sanity to this Government’s total confusion and ineptitude in its management of the sector but my optimism has taken a hit with this conceptually and constructionally flawed advertisement and proposed engagement.

The use of a few smart-sounding terms like “fiscal year of incurred expenditure” and “potential future uplifts” may impress the novice but does little to prise out the overcharges and the financial shenanigans of which many international oil companies have been found guilty. Yet, the most serious penalty which these companies face is a fine, never a suspension of their licences and the termination of their Agreements.    

The advertisement assumes that there is no difference between pre-contract costs or how these are to be dealt with, pre-production costs, and post-production costs. Nor does it give any hint of the audit which the GRA has announced it is carrying out, apparently as a result of delegation by the Minister under paragraph 1 of Article 6. Maybe the writer himself does not know.     

Conclusion

It is elementary that if the Terms of Reference or the scope of the Engagement are deficient, then the work will be deficient and the objectives not met. With these Terms of Reference as poor as they are, Guyanese must sadly and inevitably brace themselves for the oversight and regulation of the sector to be as bad, if not worse, than Trotman’s negotiation of the Petroleum Agreement.

Local content has been a major concern for Guyanese and you might think that the Government would become more sensitive to this concern. The Advertisement at best further undermines such a policy. It notes that only firms with a wide geographic spread will be shortlisted, which raises the question whether a single applicant must have a wide geographic spread, i.e. operate internationally, or that, overall, the applicants must be drawn from that wide geographic spread, though whether this means by continent, hemisphere or region is anyone’s guess.

The advertisement does limit the number of eligible bidders to two from any country! Just when you think that we have exhausted all absurdities!

 See you next week.

Around the Web

Comments