May 16, 2016 News
Even though they have unearthed numerous illegal practices at the Guyana Energy Authority (GEA), the forensic auditors noted that the possibility still exists that other instances of fraud went undetected.
The forensic auditing team from Nigel Hinds Financial Services faced several stumbling blocks during its audit of GEA.
The auditors said that the findings expressed in their report were based on documents, explanations and information supplied to them. They noted however that these were verified only to a certain extent and in accordance with the audit’s objectives and scope, despite the inherent limitations.
The forensic auditors outlined that some of these limitations faced included their own “inevitable misjudgment” in the identification of audit risks. They also had issues with the selection of appropriate auditing procedures and the interpretation of the evidence emerging from such a crucial audit.
Among other issues identified, the auditors recorded that sampled instead of detailed testing of transactions and balances were done. They said, too, that there were misrepresentations by management which were relied upon as they were not deemed at the time to warrant corroboration.
Due to the aforementioned, the auditors noted that there could be undetected fraud despite the application of its methodology and procedures. As a result of this, the forensic audit report on GEA may be modified, if additional information and explanations become available.
The forensic auditors of Nigel Hinds Financial Service have since exposed that GEA was using an accounting software called “Peachtree” to automate and manage its accounting functions.
However, the agency does not have a licence to use Peachtree Accounting Software. The auditors found the use of the software in this manner to be illegal.
They recommended that the agency immediately purchases a licence to legalize the current use of its Peachtree accounting software.
There were also a number of other irregularities found within GEA’s financial systems. The auditing team noted for example that GEA has been incorrectly recording funds that it collects from oil companies on behalf of the Government of Guyana as revenue on its financial statements.
The auditors noted that the International Accounting Standard #18, Paragraph eight states that, “In an agency relationship, the gross inflows of economic benefits include amounts collected on behalf of the principal and which do not result in increases in equity for the entity. The amounts collected on behalf of the principal are not revenue. Instead revenue is the amount of commission.”
The report of the forensic auditors indicated that the monies paid to GEA for fuel imported by GEA on behalf of the Government of Guyana should be treated as Accounts Payable instead of Revenue.
It stated that when GEA remits the monies to the Government bank account, it is incorrectly recorded on the agency’s financial statements as “Office and Administration” expenses, instead of as an offset to accounts payable.
The audits also found that GEA accepts payments for fuel from Rubis Guyana Inc., Sol Guyana Inc., and Guyana Oil Company Limited. It noted however that premium charges were granted to the Guyana Oil Company Limited.
The team of highly qualified forensic auditors emphasized that there was no basis for this premium financial package.
The current premium charges are as follows: US$1.995 per barrel of gasoline, US$0.21 per barrel of diesel, $US0.525 per barrel of Kerosene and for fuel used by aircraft.
The auditors have also found that the Guyana Energy Agency has been using a highly compromised manual system to prepare and issues invoices for licences. These include wholesale, retail, import, export, bulk transportation carriers, and storage licences.
The auditors noted that the annual revenues generated from licensing fees averaged $25 Million for the years 2011 to 2014; amounting to over half of GEA income, when fuel marking fees are not considered.
They asserted that the generating and issuing of invoices for licencing fees are not governed by a standardized system and are not integrated in the agency’s accounting system. “For example, an invoice is only issued when requested by customers or when management elects to issue.”
The auditors in their report emphasized that this undermines the accounting department’s ability to effectively and efficiently monitor the financial transactions pertaining to revenue generated from licensing fees.
In their report, it was recommended that the invoicing process of the Licencing Division be computerized in such a way that it is integrated with the accounting system of GEA. The forensic auditors of Nigel Hinds Financial Services said that the integration will allow for improved recognition of revenue, accounting of receivables and the monitoring of licence holders.
The auditors also stressed that customers should not have the option of determining whether they want an invoice or otherwise. Instead, they said that invoices should be issued to all customers as a standard policy.
Oil money vanishing in thin air
Jan 30, 2023– Winners announced at gala ceremony last night Kaieteur News – The country’s top-performing athletes and officials were in the spotlight last night at the National Sports Awards,...
Jan 30, 2023
Jan 30, 2023
Jan 30, 2023
Jan 29, 2023
Jan 29, 2023
Kaieteur News – There is a certain person in the government who can be caustic criticizing members of the Opposition.... more
By Sir Ronald Sanders (The writer is Antigua and Barbuda’s Ambassador to the United States of America and the Organization... more
Freedom of speech is our core value at Kaieteur News. If the letter/e-mail you sent was not published, and you believe that its contents were not libellous, let us know, please contact us by phone or email.
Feel free to send us your comments and/or criticisms.
Contact: 624-6456; 225-8452; 225-8458; 225-8463; 225-8465; 225-8473 or 225-8491.
Or by Email: [email protected] / [email protected]