GEORGETOWN, Guyana, CMC – The Guyana Revenue Authority (GRA) has defended its decision regarding the prolonged delay in releasing the findings of an audit that allegedly found more than US$200 million in questionable claims.
“It is therefore mischievous and misleading to intimate that the Government of Guyana needs to be actively pursuing the closure of the Audit and, by extension, the necessary adjustments to the Cost Bank.
“It is also reckless and unnecessarily inciting for a known and reputable news outlet to feature and quote a leaked and unvalidated document, without seeking a response from the responsible parties,” the GRA said, calling for “responsible journalism” while continuing to “play its role despite its scarce resources in ensuring that Guyana receives its fair share of profit petroleum and taxes.”
The government has denied the Stabroek News newspaper report, which had suggested that it was hiding the information.
“That report has been with the staff of the Ministry and with the GRA (Guyana Revenue Authority) and all their technical people for the last several years. Nobody is hiding the report,” Vice President Bharrat Jagdeo said about the United Kingdom-based 2021 IHS Markit audit report.
Jagdeo told reporters that if the ExxonMobil-controlled Esso Exploration and Production Guyana Limited (EEGPL) could not provide additional information, there would have to be an adjustment to profit oil.
Stabroek News reported last weekend that the Audit found that cost claims from 1999 to 2017 amounting to US$34,346,312 are ineligible, and US$180,065,682 need documentation taking the total to US$214,411,994.
In a lengthy statement issued here, the GRA Commissioner Godfrey Statia said, given the views expressed in the newspaper article, “It is behooving of the Revenue Authority to apprise the public of the efforts made and progress realized to date, in substantiating the contractors’ expenditure claims for the Stabroek Block…while at the same time putting to rest, any claim that the intention is to keep the report hidden”.
He said that in November 2019, the Guyana government entered into a contractual arrangement with IHS Markit (IHSM) to provide Consultancy Services to execute the country’s inaugural Cost Recovery Audit.
He said the audit scope entailed examining all pre-contract costs and all exploration and development costs as of December 31, 2017.
The GRA Commissioner said that given the paucity of resources nationally, several agencies collaborated to form Guyana’s Audit team, including the GRA and the Guyana Geology and Mines and Commission (GGMC). However, the Auditor General’s Office, which was also requested to have its team be a part of the Audit, declined to do so.
“The Guyanese representatives were expected to shadow and understudy the IHSM Experts during the audit to facilitate the transfer of knowledge and technical ‘know-how’ and, generally, to build capacity to conduct cost oil audits locally. They were also expected to execute the Audit with IHSM jointly,” Statia said, adding that in keeping with the agreement with the UK-based company, there “were three distinct reports which were delineated as deliverables, these were, the Initial Audit Report, the Intermediate Audit Report, and the Final Audit Report.”
He said intense auditing followed, leading to the development of various detailed audit reports. On July 31, 2020, IHSM submitted a compiled report called the ‘Final Audit Report,’ along with the words for each work stream.
“However, the Guyana Revenue Authority noted that there was a breach of contractual terms, as well as Audit Standards and good practices when IHSM attempted to bypass the Interim Audit Report requirement,” Statia said.
He said that IHSM was told that “a Final Audit Report cannot be compiled until the Contractor (or Esso Exploration and Production Guyana Limited, in their capacity as the Operator, of the Stabroek Block) is issued with a ‘Written Report’…
“This means that by the stipulations of the PSA and Audit standards, the contractor must be allowed to respond to the ‘Written Report’ or Draft Audit Report. The response of the Auditee, along with the additional evidential material provided, must be considered while compiling the Final Audit Report.”
Statia said the GRA pointed out that it was its firm opinion that a Final Audit Report should only be issued after the Auditee is allowed to respond to the initial findings of the draft report officially.
“After that, their response(s) and the evidential material submitted should be considered before drafting a Final Audit Report. Similarly, as in the law of equity where “he who asserts must prove,” the Auditee has a “right to be heard.”
He said after that, two iterations of the ‘Audit Report’ were issued by IHSM between July 2020 and November 2020.
He said the GRA reviewed the respective reports, submitting official comments, and in particular, in early 2021, it penned its concerns to IHSM regarding “major deficiencies that recurred throughout its report.”
According to the GRA Commissioner, there needed to be more recommendations in the report, a failure to refer to industry standards and good practices for specific findings, inaccuracies related to analyzing and reviewing the financials, and general inconsistencies and inconsistencies deficiencies.
The report also failed to “adopt suggestions and recommendations, as well as address concerns emanating from Government of Guyana Representatives.
“The GRA further advised that the preceding, in its opinion, had significant adverse effects on the quality of the report and its ability to attain the desired outcomes of arresting unsound financial practices on the contractor’s part and improving Governmental controls.”
Statia said the GRA further requested IHSM to revise the Draft Audit Report to take account of the issues highlighted in and attached Guyana government report, which spanned 31 pages.
“It also instructed IHSM that given the urgency of the long outstanding matter, the Government expected this request to be addressed with the celerity it warrants and that IHSM would submit the resultant ‘Draft Audit Report’ on or before Wednesday, February 3, 2021, for onward transmittal to the Contractors.”
Statia said that during 2020 and 2021, legal advice was also solicited by the government and obtained as it relates to significant issues arising during the Audit and the forms of recourse available to the government.
“Premised on the advice of the Guyana Revenue Authority, the Ministry of Natural Resources presented the Audit Report to the Esso Exploration and Production Limited (EEPGL) on July 2, 2021, in its official capacity as Operator of the Stabroek Block to facilitate the Contractor’s response.”
Statia said to conclude the Audit in November 2022, the Ministry of Natural Resources reached out to GRA to obtain its no objection to the Cost Audit Report. “Nonetheless, there were legal, procedural and accounting concerns which deterred the Authority from granting its No Objection,” Statia said, adding that the GRA and the MNR continue to actively liaise and review the “Final” Audit Report and all Subsidiary Reports for the period 1999 to 2017.
“Upon completion of its review, its findings shall be made public,” Statia added.
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