Former Auditor General Anand Goolsarran is standing by his assessment that the report by VHE Consulting on US$7.4b in expenses by Exxon and its partners is deficient.
In his accountability column in last Monday’s edition, Goolsarran said “We maintain our previously stated position that the report by VHE Consulting on the audit of the Cost Recovery Statement for the period 2018-2020 lacks basic structure, rendering it difficult for the average reader to go through the report to ascertain what the findings and conclusions are.
“The combined report, comprising 190 pages, is too long and unwieldy. There is a significant amount of unnecessary quoting from the PSA (Production Sharing Agreement), and the report is badly in need of editing to ensure conciseness and user friendliness. Additionally, the auditors had stated that the documentation and process of transferring materials out of inventory could not be examined but gave no reasons why this was so. This is a major shortcoming of the audit since the value of materials issued from inventory to production over the period under review would have constituted a significant portion of the total amount shown in the Cost Recovery Statement”, he said.
Examining sections of the report, Goolsarran stated that Exxon’s subsidiary charged to the Cost Recovery Statement 100 percent of the construction costs of the Ogle Office Complex in the year in which they were incurred, instead of amortising such costs over a period of time, as provided for the PSA as well as generally accepted accounting principles. The auditors, VHE Consulting, expressed disagreement with this treatment and stated that: Allocation of costs should follow operational usage, regardless of the size of the different operations…By charging 100% of the construction costs as incurred, the Contractor is essentially having the Government of Guyana fund the construction of EEPGL’s expansive Ogle office complex; that does not align with usage for Petroleum Operations.
Goolsarran said that Exxon’s subsidiary included on the Cost Recovery Statement the actual costs of affiliate employees performing work for the Stabroek Block, plus a profit margin ranging from one percent to 15 percent.
“The actual amount charged was US$3.314 million. Accord-ing to the auditors, the profit element is not a recoverable cost. (Exxon’s subsidiary) argued that it is a “transfer pricing” mechanism imposed by some countries. (Exxon’s subsidiary) agreed to credit the Cost Recovery State-ment with amounts totalling US$2.203 million.
Goolsarran noted that the amounts queried by the auditors totalled US$65.194 million, representing 0.88 percent of the total expenditure of US$7.435 billion shown in the Cost Recovery Statement. However, Exxon’s subsidiary accepted only US$10.319 million which was credited back to the Statement, leaving an amount of US$54.874 million unresolved. Table I gives a summary of the major items that the auditors queried.
The Guyana Revenue Autho-rity has to issue its position on the audit.
This second audit follows the long-running controversy over the first audit by the IHS Markit which is still to be settled.
