Former Auditor General Anand Goolsarran says that both Vice President Bharrat Jagdeo and Minister of Natural Resources Vickram Bharrat have explaining to do in relation to the scandalous reduction in disputed oil audit costs from US$214m to US$3m which has seen blame being cast in several directions.
Jagdeo on Thursday told a press conference that President Irfaan Ali has ordered a swift probe of who in the Ministry of Natural Resources engaged in illicit talks with ExxonMobil to cut the figure but up to yesterday there was no word from Ali’s office on who would be investigating and the timeframe.
Goolsarran told the Sunday Stabroek that it was perplexing that Jagdeo had announced that the sums were reduced to US$11 million only to then say that he did not know that unauthorized persons at the ministry had entered into discussions with ExxonMobil. He said that the Vice President has always had his pulse on all matters relating to governance and finance of the country.
“One does not expect the Vice President to publicly state that the disputed costs have been reduced to US$11 million without first ascertaining who was responsible for agreeing to such a reduction and whether they had the authority to do so. This is especially so, considering that: (i) the auditors issued their final report more than two years ago after a series of comprehensive and exhaustive reviews by the Guyana Revenue Authority (GRA), notwithstanding that GRA might have acted outside of its mandate; and (ii) it was not possible for Exxon to now submit additional documentation in support to the disputed expenditure. The Vice President also did not indicate who told him of the reduction of the disputed costs by about US$203 million,” Goolsarran posited.
And zooming in on the Minister of Natural Resources, Goolsarran said that it is strange that he said he didn’t know what staff at his ministry was doing given that a key letter on the matter from the GRA had been addressed to him.
“But, did the Minister not receive a letter earlier from the GRA stating that it had no objections to the auditors’ report that identified US$214.4 million in disputed costs? How could the Minister then state that he and the Vice President were under the impression that the GRA was involved in a reduction of the disputed expenditure?” he questioned
And where Bharrat said that upon learning of the actions of his staff that corrective action was taken immediately and staff were instructed to cease such engagements and deliberations. Goolsarran said he should be asked certain questions. “Should the services of those responsible not be terminated with immediate effect? And, should the Minister not be held responsible? After all, the buck stops with him. And what of the Vice President who, in all probability, would not have accepted information from the Ministry without verifying its accuracy with the Minister?”
“It is not a case where the Vice President is paying a passing interest as regards this matter. Rather, he is integrally involved in all matters relating to the oil and gas industry, as if he is the overarching Minister,” he added.
And while ExxonMobil has steered clear of addressing how it entered into discussions with persons not authorised by the Government of Guyana concerning the US$214 million in questionable expenses cited in an IHS Markit audit report, but stated that it acted in “good faith” and cooperated with consultants, Goolsarran said that the company needs to frontally address the issue.
“We have supplied responses and documents to the issues raised in the draft audit report prepared for the Government by their consultant (IHS Markit). We now await a formal response from the Government, after which we will enter into further dialogue as necessary,” the company statement said.
Stabroek News had on Tuesday formally reached out to the company seeking answers to a number of questions on the matter. Its Public and Government Affairs Advisor, Kwesi Isles, had on Thursday said that he was awaiting a “sign off” on a response to the email sent.
However, on Friday afternoon the company issued a statement to the public but did not address key concerns such as how it engaged in unauthorised deliberations with the Ministry of Natural Resources.
“Auditing an oil and gas joint venture operator’s expenses is a standard process by co-venturers and governments to ensure only appropriate costs are charged. It’s normal for auditors to highlight focus areas by sharing a draft report that is later addressed with additional documentation. Our experience is that typically, very few, if any, costs are ultimately rejected, reflecting the integrity and quality of our accounting activities,” the statement said.
“The Government has audit rights under Article 23 and Annex ‘C’ of the Stabroek Petroleum Agreement. We have acted in good faith and co-operated with the Government and their consultants appointed for the cost recovery audit of the 1999-2017 years,” it added.
Bell the cat
“And who is to bell the cat as it relates to Exxon’s engagement with the staff of the Ministry in what the Minister considered unauthorised reduction of the disputed costs? The US oil giant ought to have been aware that the auditors’ report on the disputed costs is final, and that the matter ought not to have been re-opened,” Goolsarran said.
He agrees, like Chartered Accountant Christopher Ram, that a comprehensive investigation is needed to probe the “unauthorized” reduction in the disputed costs after the auditors have pronounced conclusively on the matter.
But additionally, he reiterated his call for the auditors’ report to be released to the public to enable citizens to understand what really happened.”
Two weeks ago, the Stabroek News reported that the GRA had offered a no-objection to the US$214 million in questionable claims by ExxonMobil’s subsidiary in a move that would have likely raised the question of arbitration on a matter which is pivotal to whether this country is being denied more profits.
Sources had told Stabroek News that the GRA had been first asked in November last year to provide a no-objection to the IHS Markit report but had replied that it was in no position to do so as it was not a party to the discussions and agreements between EEPGL, IHS Markit, and the Ministry of Natural Resources. The GRA had followed up in February this year but never subsequently received any information that would enable it to conduct a review and provide an opinion and this was what led to the letter last month to Minister of Natural Resources Bharrat stating that given the time that had elapsed, the audit be finalised and the finding in relation to the questioned US$214 million should stand.
After the damning audit by UK firm, IHS Markit, was kept from the public for two years, Stabroek News reported on its findings on April 2 this year. The audit firm had said that there was US$214 million in questionable claims. Of that amount, the report said that some $34.3 million is considered ineligible, while $180.1 million lack adequate supporting documentation.
Stated too was that almost 50 per cent of inter-company charges was included in the cost recovery statement and that the cost recovery statement had limited transparency and fell short of the expected level of accounting documentation.
IHS Markit said that despite several requests for clarification in relation to the inter-company charges, EEPGL unable to provide adequate justification for these charges.
Amounts totalling $31.43 million were included in the cost recovery statement but were not reflected in the main accounting record, the General Ledger, the audit had stated. These amounts relate to payments made by the Co-Venture partners, many of which were incurred prior to the Co-venture partners being signatories to the PSA.
‘Not available’
And according to IHS Markit, EEPGL had confirmed that data prior to 2004 was not available as it was purged in accordance to their internal data retention policies. As a result, a summary of costs incurred during this period was used for inclusion in the cost recovery statement.
ExxonMobil told the Opposition, according to Shadow Minister on Petroleum, David Patterson, that its costs were down to US$3 million and that government had agreed to the sums.
Last week Thursday, government finally accepted the findings of the UK auditor and blame was shared for an apparent unauthorised attempt involving the American oil company to slash the disputed figure to their stated US$3 million.
Jagdeo absolved himself of any role in discussions, as he laid blame on the Ministry of Natural Resources for entering into discussions with the US oil major, knowing that the GRA had provided its view on the matter and said it had no-objections to the US$214 million audit figure.
Last Thursday, Jagdeo said “Somebody has to give explanation how they engaged with Exxon and we have to have a policy with people who are at the technical level, and who engage with executives, that they must seek explicit clearance from the Ministry and report back on the nature of the engagement; almost a Disclosure Policy,” he said.
Stating that the investigation will be detailed and that he will disclose the names of the persons who were involved, Jagdeo said that while Minister of Natural Resources, Bharrat has direct oversight, he has also said that he did not know that the US$3 million figure was not given by the GRA but his own staff.
“I would await the full report. Then we will be able to identify who all the people are with Exxon and when [those meetings] took place,” he stressed.
