Last week’s article was the second on an examination of the Guyana 2018 Extractive Industries Transparency Initiative (EITI) Report. So far, we have dealt with revenues received by government agencies; production data; data collection and reconciliation; and reconciliation of cash flows. We also began to examine the extent to which there was compliance with the EITI Standard. Today, we conclude our coverage of the report by looking at other areas of compliance with the Standard.
Accuracy and comprehensiveness of data
Reporting templates from extractive entities and government agencies were not adequately prepared, as several weaknesses were noted during the reconciliation process. In particular, detailed payment flows are to be reported by receipt number. However, in some cases extractive entities reported aggregated figures without providing the required level of breakdown. The Guyana Gold Board did not include any receipt numbers for several revenue flows as requested by the instructions for completing the reporting templates. Similarly, extractive entities did not report receipt numbers but referred to internal payment references instead. Additionally, several reporting templates submitted by extractive entities did not include detailed information on beneficial ownership as well as production and export details.
According to the report, these shortcomings led to material unreconciled differences. A similar observation was made in the previous report where it was recommended that future reconciliation exercises should allow extractive entities and government agencies to devote ample time to prepare their respective reporting templates in accordance with the instructions agreed by the Multi-Stakeholder Group (MSG). All reporting entities should be made aware of the importance of the EITI data they provide and as such due care and attention should be paid during the preparation of these templates.
Waiving legal confidentiality provisions
The Guyana Revenue Authority (GRA) Act does not allow the GRA to disclose information on individual taxpayers to unauthorized persons. The Authority received revenues from over 700 taxpayers operating in the extractive sector but did not disclose their identities, except as mentioned below. Its recording system was also not integrated with that of the Guyana Geology and Mines Commission (GGMC).
As a result of the above, the Independent Administrator was unable to determine whether the statement of GRA’s revenues from the extractive sector corresponded with all payments made from active license holders. Additionally, given the lack of TIN and the identity of the taxpayers in GRA’s statement of revenues, it was not possible to match the list of taxpayers with that of license/permit holders in order to ensure comprehensiveness of the revenues collected by the GRA from the extractive entities.
In order to overcome the legal confidentiality constraints during the EITI reconciliation, extractive entities were asked to sign waivers to allow the GRA to submit reporting templates. In this way, the GRA was able to submit reporting templates for 11 out of the 59 extractive entities during the reconciliation exercise. A similar observation was made in the previous report which highlighted the need for the Government to amend Section 23 (1) of the Revenue Authority Act and Section 4 of the Income Tax Act to allow the information required for EITI reporting to be disclosed.
Data quality and assurance
The EITI Standard requires an assessment of whether the payments and revenues are subject to credible, independent audit in accordance with international auditing standards. It also requires companies to publicly disclose their audited financial statements, or the main items where financial statements are not available. In this regard, reporting entities were requested to provide copies of their audited financial statements for 2018.
Several government agencies and extractive entities did not, however, provide the requested information. A similar observation was made in the previous report where a recommendation was made that the instructions for 2018 reporting emphasize the importance of complying with the requirement for proper signature and certification of templates by auditors.
Enhancing reporting entities’ participation
There is no law that makes EITI reporting mandatory. A training workshop was nevertheless held in January 2021 to assist in the submission of reporting templates. However, 41 of the 59 extractive entities selected for reconciliation did not submit their reporting templates within the set timeframe. It was therefore not possible to ensure the comprehensiveness of the revenues collected from the extractive entities.
A similar observation was made in the previous report where it was suggested that the MSG liaise with their constituency groups to raise awareness of the importance of participation amongst reporting entities and to ensure reporting templates are submitted within the set deadline. The MSG should also agree on a clear open data policy for access, release and re-use of EITI data. At the same time, government agencies and extractive entities would be expected to publish EITI data under an open license and make users aware that the information can be re-used without prior consent. In the long-term, the Mining Regulations should be reviewed to provide for EITI reporting to include, among others, (i) reporting obligations for extractive entities, specifying the level of disaggregation of the data to be submitted; and (ii) sanctions for non-compliance or for false declarations. In the short term, application and renewal forms for mining licenses and permits should explicitly include a declaration of consent to disclosure of information required for compliance with EITI reporting. Such information should be made available in a disaggregated, project by project, format.
Accuracy of export data
The EITI Standard requires the disclosure of export data, including total export volumes and the value of exports by commodity, and when relevant, by state/region of origin. However, the records of government agencies on exports were different from one another as well as from the extractive entities’ records. In particular, the Guyana Gold Board did not systematically cross-check export data against the GRA’s records to identify discrepancies. As a result, several instances of discrepancies between government and companies’ records were noted.
The report recommended that the GRA and the Guyana Gold Board implement automated controls to ensure the comprehensiveness of export data reported by mining entities and develop analysis tools to ensure consistency of export data. This may include: (i) having in place a computerised system for recording exports; (ii) collecting data from mining companies on a common and accessible IT platform for the relevant government agencies; and (iii) performing monthly control of export data collected from government agencies in order to identify discrepancies.
Accuracy of production data
The EITI Standard requires the disclosure of production data, including total production volumes and the value of production by commodity. The Guyana Gold Board and the GGMC are responsible for collecting production data to assess extractive entities’ liability for the payment of royalties on production and for monitoring payments to the Government. However, these two responsible agencies did not have their own procedures to collect and monitor production data reported by mining companies. As a result, the minerals production data declared by the Guyana Gold Board did not match production values and quantities declared by these companies.
The GGMC is responsible for enforcing the legal obligations of miners to report production and to avoid illegal mining on mineral properties without the approval of the Commissioner. The legislation allows the Commission to use administrative measures to address non-compliance. The challenges for ensuring compliance with the legal provisions include: (i) lack of resources to implement an information system that allows real-time access to an updated database to determine the status of mining claims; (ii) unavailability of transport fleet for officials to facilitate inspections and communication with mining entities; and (iii) low staff number to carry out monitoring using non-computerised information.
The report recommended that the Guyana Gold Board and the GGMC ensure monthly follow-up and reconciliation of production data declared by the mining entities. They should also be adequately equipped to enable them to effectively monitor production and reporting by the extractive entities. Additionally, these two government agencies should: (i) set up a control mechanism on the data collected or provided by the mining entities; and (ii) implement a computerised system to monitor and update the data on a monthly basis to ensure the comprehensiveness of the production data reported by these entities. This would assist in the reconciliation of royalties, other tax payments, and production data as well as investigating any discrepancies arising from these reconciliations.
Allocation of licences and permits
The EITI Standard requires disclosure of information relating to the award or transfer of licences. This includes: (i) description of the process for transferring or awarding the licence; (ii) technical and financial criteria used; (iii) information about the recipient to whom the licence has been transferred or awarded, including consortium members, where applicable; and (iv) any non-trivial deviations from the applicable legal and regulatory frameworks governing licence awards and transfers.
The previous report highlighted the granting of several mining permits to the same applicant covering plots in the same location. The total combined acreage of several mining permits awarded to a same applicant exceeded 1,200 acres which is the maximum for a medium scale mining permit. In addition, the Mining Act allows the GGMC to conclude agreements with applicants through direct negotiation without any requirement to follow any tendering procedures. It was suggested that the Commission consider performing an inventory of the active permits and licences in order to provide a clear definition and distinction between large scale licences and medium scale permits. Further, in order to address the under-exploitation of mining licenses covering large plots by investors who may not have the required technical and financial capacities, the GGMC should apply a tendering process for awarding mineral agreements to ensure that any risks of failure by the investor is mitigated and that the government benefits from the most advantageous offers.
Follow-up of previous recommendations
The report includes a table showing the status of implementation of the recommendations made in the first EITI report. In total, 14 sets of recommendations were made. However, none of the recommendations were fully implemented. Some were pending while in respect of the rest, either little or some progress was made.
Conclusion
This is the second report of its kind since Guyana became a member of the EITI. Most of the findings and recommendations were, however, similar to those contained in the earlier report, indicating little progress or no progress to implement the Independent Administrator’s recommendations.
Given the discovery of large amounts of oil resources and the anticipated enhanced flow of oil revenues from such resources, the Guyana EITI is likely to play a pivotal role in the extractive industry. It may therefore be necessary for the watchdog body to be governed by its own legislation, including provision for independent funding for its operations. Currently, funding is provided by the Ministry of Natural Resources, and staffing is not adequate to discharge its mandate. The legislation should make it mandatory for government agencies and extractive entities to provide in a timely manner information necessary to secure compliance with the EITI Standard.
