Justice in the life and conduct of the State is possible only as first it resides in the souls of the citizens.
Greek philosopher Plato
In our article of 13 March 2024, we began a discussion of the Guyana Extractive Industries Transparency Initiative (EITI) 2021 Report which was issued on 29 December 2023. It will be recalled that Guyana was suspended from EITI’s membership because of the delay in compiling and publishing the 2020 annual report. The delay was attributed to a disagreement between the National Coordinator and certain members of the Multi-Stakeholder Group (MSG) over the terms of reference for the Independent Administrator responsible for compiling the report. The report was eventually published in July 2023. As a result, Guyana’s membership to that body was restored.
So far, we have discussed: (i) revenue generated from extractive sector; (ii) status of audit of government agencies; (iii) non-payment by the Guyana Geology and Mines Commission (GGMC) to the Amerindian Development Fund; and (iv) financial distress of the Guyana Gold Board. Total revenues received from the extractive sector in 2021 amounted to G$127.66 billion, compared with G$93.78 billion in 2020, an increase of $33.88 billion, or 36.1 percent. This increase was mainly due to the receipt from the oil and gas industry of $112.43 billion, compared with G$65.83 billion in 2020, a 70.8 percent increase. However, there was an unreconciled difference of G$2.23 billion between the amounts shown as having been received by government agencies and the amounts the extractive entities reported as having been paid to these agencies. A similar observation was made in relation to the mining industry where the unreconciled difference was G$1.05 billion.
As regards the status of the audit of government agencies, the report noted that the Guyana Revenue Authority (GRA) as an entity was last audited to 2018 while the Guyana Geology and Mines Commission (GGMC), a key agency in the oil and industry, was last audited in 2012. A similar observation was made in respect of several other government agencies, most notably the National Industrial and Commercial Investments Ltd. (NICIL) which has not been audited since 2013.
The GGMC is required to pay 20 percent of the royalties collected from mining on Amerindian Village lands to the Amerindian Development Fund. However, no payment was made in 2021. According to the report, the Guyana Gold Board was insolvent at the end of 2021 with a net deficit of G$1.09 billion. Net assets accounted for G$9.02 billion, while current liabilities amounted to G$10.11 billion. There was also a long-term liability to the Ministry of Finance of G$8.732 billion in respect of advances given prior to 2012 to purchase gold.
In today’s article, we conclude our discussion of the main points of the 2021 Guyana EITI report.
Audited financial statements
All companies incorporated under the Companies Act are required to file audited financial statements with the Commercial Deeds Registry. However, the Registry was unable to provide information on the proportion of companies filing accounts. As regards the companies reporting for EITI, audited accounts for the fiscal year 2021 were provided for 12 out of 22 companies. Oil and gas companies provided audited accounts in most cases, thereby providing greater assurance for their figures. However, mining companies generally did not provide audited accounts, resulting in less independent assurance of the amounts they reported as having been paid to government agencies.
Of the seven gold dealers included in the reconciliation, four operated as companies while three were not incorporated. There are no audit requirements for unincorporated businesses. As a result, reliance had to be placed on declarations from the owners, supported by a copy of the unaudited accounts for their businesses.
The state-owned enterprise NICIL was incorporated under the Companies Act on 18 July 1990. The last set of audited accounts was in respect of 2013. Request was made for draft accounts for 2021. However, NICIL declined to provide the accounts on the ground that the company was not authorised to release this information. The Minister responsible for NICIL is the Minister of Finance. In view of the period since audited financial statements were produced, the assurance environment at NICIL was considered very weak.
Refundable deposits held by GGMC
Monies held by GGMC, whether as cash or a bond, against future contingent expenditure on rehabilitation of mines should be identified and ring-fenced to ensure their proper use. However, the Commission did not maintain a separate bank account. Rather the monies were paid into the general bank account, and the amounts recorded separately in the accounting records.
On 6 December 2023, GGMC provided a schedule of refundable deposits totalling $1.18 billion, comprising a list of balances analysed by companies and individuals. According to the Independent Administrator, further information was needed to understand the information, including: (i) date of receipt of the cash; (ii) licence/permit to which it relates; (iii) conditions attaching to the cash (e.g. what it may be used for); and (iv) date of repayment. In view of the timing of receipt of the schedule and the need for further information, it was not possible for the Independent Administrator to carry out the necessary analysis for inclusion in the report.
Review of licences and permits for the mining sector
Prospecting permits and licences are renewed annually. However, examination of the list of permits and licences indicated that a number of permits and licences had expired. Additionally, some mining entities held a number of licences, which when taken together are comparable in size to large mining entities.
Amerindian Development Fund
GGMC is required to transfer 20 percent of the royalties from mining activities on village lands to the Amerindian Development Fund. In this regard, the Commission paid some $42 million into the Fund as the first payment in 2012, covering a period of around 4-5 years. A subsequent payment of $1 billion was made following a Cabinet decision as a further advance. However, no further payments were made. The Fund is held in a separate bank account which reflected a zero balance at the end of 2021.
Following the publication of our article of 13 March 2024, we received an e-mail from Dr. Janette Bulkan, an expert in forestry matters, indicating that in accordance with Article 51(3) of the Amerindian Act 2006, the amount of payment to the Fund is not limited to 20 per cent of royalties. We hope that the Independent Administrator reads this column so that the issue can be revisited in the next round of GEITI evaluation.
Recommendations
Having regard to the findings contained in the report, the Independent Administrator has made the following recommendations:
(a) With support from the Ministries of Finance and Natural Resources as well as other government agencies, the MSG approaches the Audit Office and the responsible Ministries to promote a timetable for bringing the government audits up to date and into compliance with the legislation in the short term, to be maintained on a current basis thereafter. This is especially so regarding the audit of NICIL’s accounts.
(b) The GRA and the Ministry of Natural Resources engage with Guyana Gold Board to clarify the position as regards exemption from corporate and property taxes as well as the payment of employment costs on behalf of the Ministry so that transparency in government accounting is improved.
(c) The Audit Office reviews the resources needed to put into effect a programme to bring government audits up to date, especially as regards training of auditors to carry out audits of entities operating in or exposed to the oil sector. Following such review, the Audit Office should include any additional financial costs in its budget submission to the National Assembly.
(d) The MSG engages with the Audit Office to keep abreast of its activities relating to the EITI implementation.
(e) The Guyana Gold Board issues licences for gold dealers only to companies incorporated in Guyana, appropriately supported by any legislative changes necessary, and ensuring the requisite TIN and beneficial ownership information is in place and included within the Board’s records.
(f) The Authorities amend the Regulations relating to oil and gas, mining and gold dealerships to enable the holders to participate in EITI reporting to the extent determined by the MSG and in compliance with the EITI Standard.
(g) The GYEITI website be brought and kept up to date.
(h) Data held by the National Secretariat on contact details, tax disclosure waivers and other matters relevant to EITI reporting be confirmed and kept up to date so that prompt and efficient contact may be made with extractive entities by the Secretariat, Independent Administrator, and other persons with a legitimate interest in GYEITI.
(i) The MSG increases engagement with the mining sector to improve reporting compliance, to ensure that all mining entities making material payments to government are included in future EITI reconciliations, and to promote a review of the classification of mining licences in issue.
(j) The MSG obtains information on how extractive industry revenues are distributed and utilised and assess how there might be reporting on how these revenues are applied for the benefit of local communities, social programmes, and environmental needs within the context of national development goals.
(k) Government agencies to consider how the tracking and reporting of data could align with the scope of EITI reporting.
(l) The systems at the Commercial Deeds Registry be overhauled and upgraded so that enquiries such as those made by the Independent Administrator can be dealt with promptly.
(m) Oil and gas companies and the GRA engage the sub-contractors to ensure that payments are correctly applied, including the conduct of a full investigation into the variances reported.
(n) Revenue collection and distribution from mining activities on village lands to be followed up and discussed by GGMC, the Ministry of Amerindian Affairs and village councils. In the interim, GGMC should make disclosures based on the information it has on hand. The MSG should also include these matters in its workplan as part of increasing engagement with the mining sector.
Prior year recommendations
Of the seven sets of recommendations made in the previous years’ EITI, four remained unimplemented while the remaining three were recorded as on-going. The unimplemented recommendations relate to the following:
(a) Inclusion of Taxpayer’s Identification Numbers in the Register of Licences to facilitate the corroboration of data on the payments as well as communication between government agencies.
(b) Distribution of reporting templates well in advance to allow reporting entities to prepare, sign and certify them.
(c) Review of all relevant existing legislation and identify areas relating to confidentiality issues, and list any restrictions observed.
(d) Formulation and submission of recommendations to the Ministry of Natural Resources and Ministry of Finance to remove any existing restrictions that hinder the full satisfaction of the EITI 2019 Standard.
(e) Keeping records of Taxpayer’s Identification Numbers by government agencies as required by the Income Tax Act, rather than using names or different reference numbers for identifying taxpayers.
(f) The Multi-Stakeholder Group to study existing revenue collection system and make recommendations on the use of a unique identification numbering order for all Government Agencies.
The recommendations that have been recorded as on-going are:
(a) Systematic disclosure of EITI data.
(b) Guyana Geology and Mines Commission to ensure that the link to the online cadastre is kept functional and up to date and all data on licences are systematically recorded therein.
(c) Building capacity of the reporting entities to raise their awareness on the importance of the EITI data they provide and ensuring due care and attention are paid during the preparation of the reporting templates.
