Kaieteur News – Vice President, Bharrat Jagdeo, is the representative of government. He is not the representative of Exxon within the government. His first and foremost responsibility therefore is to secure the interests of the government and not that of the oil companies.
Judging from his comments, on 23rd December 2020 on Kaieteur Radio (99.1, 99.5 FM), the Vice President needs to be reminded of these facts, especially as they relate to the auditing of pre-contract and other costs.
The Vice President is confused about what his government is required to do in relation to these audits. And, if he is confused, imagine the muddle in which the government finds itself.
In answering a question posed to him by Kiana Wilburg, he conceded that there is much work to be done in relation to building capability for conducting oil audits. But like the APNU+AFC he commits the error of believing that it is the Guyana Revenue Authority’s (GRA) mission to undertake such audits.
The GRA is not the government’s auditor. The GRA is a tax collection agency. And while Exxon’s agreement with the government grants it sweeping exemptions from taxes, the GRA still receives some taxes, little as it may be, from Exxon’s operations.
Exxon expenses are required to be audited by the government. The GRA would be in a conflict of interest if it were to be the government’s auditor and at the same time the assessor of taxes from Exxon. The Coalition, APNU+AFC, and now the PPP/C, seem unable to grasp this fundamental principle.
The GRA therefore, while a government agency, should refuse to be involved in undertaking audits for the government, the same audits upon which it will be required to pronounce upon for tax purposes. The GRA has to build its own capability to undertake audits of oil operations but not as the government auditor.
Jagdeo needs to reread the Petroleum Agreement, which was signed with the oil companies. Then, he needs to revisit some of the ill-informed comments he made on Kaieteur Radio on 23rd December, 2020.
Among those comments was one in which it was stated that the audit firm, contracted by the APNU+AFC, is required to submit three audit reports – a interim report, an intermediate report and a final report. According to Jagdeo, the interim report was submitted but the intermediate report was bypassed and a final report submitted. According to Jagdeo, the intermediate report has to be sent to Exxon for their explanations before the final report is issued and as such the final report, which was prepared, has been treated as draft report and sent to Exxon.
This three-prong process reveals the source of Jagdeo’s confusion. He is confusing the audit process of the oil operations with the audits, which are usually done, of government accounts, by the Auditor General.
The Audit Act of Guyana empowers the Auditor General to conduct audits of government accounts. The Act itself requires the Auditor General, at the conclusion of any audit, to provide the agency audited with a draft report, including his findings and recommendations. This requirement provides the agencies with a right of response.
The government agency is given 30 days to provide such a response. Most agencies do respond and when they do, the Auditor General is statutorily required to incorporate the responses in the Report, which he submits to the National Assembly.
The Production Sharing Agreement signed between the Government of Guyana, Esso Exploration and Production Guyana Limited (EXXONMOBIL), CNOOC Nexen Petroleum Guyana Limited and Hess Guyana Exploration Limited makes no provision for any draft audit report to be submitted to the oil companies.
The Production Sharing Agreement gives to the Petroleum Minister the right to audit the accounts of the petroleum operations in accordance with laid-down accounting procedures within Annex C of the Agreement. Article 1.5 (b) of the said Annex requires that at the conclusion of the audit, a written report will be issued to the contractor. This report shall include all claims arising from the audit.
There is no requirement for an interim audit report to be sent to the oil companies. Jagdeo therefore is hopelessly at sea when he believes that Exxon is required to give explanations before the final audit report is completed.
The legal procedure is that on the basis of the audit, the government generates a report, which must include its claims. This constitutes a legal demand. The oil companies are then given two months to indicate either their acceptance or rejection of the government’s claims and, where there is a rejection, to explain why they are contesting the specific demands.
This idea therefore that there has to be three audit reports is unfounded. The government audits and then generates its report including any claims. The oil companies then have two months to either accept or reject the demands made and, if so, to say why.
(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)
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