Say NO to corruption. It hurts us all. The economic consequences for countries with high levels of corruption are indeed very grave. Goods and services become more costly, thereby affecting the quality of life and the standard of living of citizens, especially the poor and vulnerable, the unemployed, the disadvantaged, and the sick and elderly. Trade is distorted since preference is given to goods and services that offer the greatest bribes to the corrupt politician and bureaucrat. Infrastructure development programmes are favoured over those relating to basic health care, education delivery, agriculture and housing, among others. Corruption flourishes where there are weak democratic institutions, lack of transparency, vague, archaic and cumbersome rules, and the exercise of significant bureaucratic discretion. Corrupt governments often accumulate high levels of long-term public debt because loans from international financial institutions are usually taken to finance these programmes.
In November 2024, the Guyana Extractive Industries Transparency Initiative (GEITI) released its 2022 annual report which was compiled by the Independent Administrator, BDO Professional Services Inc. It is the sixth report that BDO has compiled since Guyana became a member of the EITI in 2017. In today’s article, we discuss the main points of the 2022 Guyana EITI report, as reflected in the Executive Summary.
Some background information
In October 2017, Guyana was admitted to the membership of EITI. The EITI Standard outlines 12 principles that provide the cornerstone of the Initiative, as well as the requirements that EITI implementing countries are expected to follow. These principles relate mainly to: (i) the prudent use of natural resource wealth for economic growth that contributes to sustainable development and poverty reduction; (ii) the importance of transparency by governments and companies in the extractive industries and the need to enhance public financial management and accountability; and (iii) public understanding of government revenues and expenditure over time that could help public debate and inform choice of appropriate and realistic options for sustainable development.
One of the requirements of EITI Standard is the publication of an annual report indicating, among others, how licences are allocated; how much tax and social contributions are being paid and where they end up in the government; and how much revenue is being generated, where it ends up and who it benefits. The first three annual reports, i.e., 2017, 2018 and 2019, highlighted significant deficiencies and instances of non-compliance with the EITI Standard. These have led BDO to conclude that it was unable to determine that all significant contributions made by extractive entities to the revenues of Guyana were included in the reports.
The 2019 report made it clear that continued inaction on some of the recommendations previously made: (i) stymies progress in meeting the requirements of the EITI Standard; (ii) impedes preventative actions to correct and address discrepancies between declarations by government agencies and the extractive entities; (iii) adversely affects the data quality and comprehensiveness of the disclosures, which may reduce the public’s confidence in the report’s data; and (iv) compromises the fundamental purpose of EITI open data as a tool for government to improve policy making and sector management.
In the 2020 report, BDO concluded that the report covered all significant revenues made by extractive entities to the revenues of Guyana and that ‘the significant revenues declared by reporting entities and included in this report were subject to independent audits that have been performed in accordance with international standards’. This is notwithstanding that the findings were similar to those contained in his 2019 report and that BDO had stated that it was not possible to determine that the financial data submitted by reporting entities and included in the report were subject to audits that have been performed in accordance with international standards.
It is also noteworthy to mention that Guyana scored poorly in its first Validation carried out by the EITI Secretariat in April 2022 to assess progress in meeting the EITI Standard and in promoting dialogue and learning at the country level. In the three broad areas considered – stakeholder engagement, transparency, and outcomes and impact – Guyana scoring 60.0, 53.5, and 42.0, respectively. The EITI Board expressed concern, especially over the low score on the outcomes and impact component. It attributed this to ‘an ad hoc approach to outreach and dissemination, failure to follow-up on EITI recommendations to deliver reforms and insufficient attention to the annual review of outcomes and impact’. The Board has warned that the failure to take the necessary corrective actions in the 20 areas identified may result in temporary suspension. The next Validation was due in April 2024, but it is not clear whether the exercise was undertaken and what was the outcome.
Unlike the previous reports, the 2021 report did not draw any overall conclusions based on the findings contained in the BDO report. It is not clear whether the terms of reference for the assignment precluded BDO from drawing any conclusions. 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 newly appointed National Coordinator and certain members of the Multi-Stakeholder Group (MSG) over the terms of reference for the assignment. The report was eventually published in July 2023. As a result, Guyana’s membership was to that body was restored.
Notwithstanding the above, the 2021 annual report did make several recommendations, as discussed in our articles of 11 and 13 March 2024. It also highlighted the absence of meaningful progress in relation to the implementation of prior year recommendations. Of the seven sets of recommendations made, four remained unimplemented while the remaining three were recorded as on-going.
We now turn to the highlights of the 2022 Guyana EITI report.
Revenue generated from extractive sector
The extractive sector comprises oil and gas, mining, forestry and fisheries. Total revenues received from the extractive sector in 2022 amounted to $331.52 billion, compared with $127.66 billion in 2021, an increase of $203.86 billion, or 260 percent. This increase was mainly due to the receipt from the oil and gas industry of $281.04 billion, compared with $86.02 billion in 2021, 327 percent increase. Oil revenues accounted for 85 percent of the revenues from the extractive sector. However, there was a net unreconciled difference of G$196.7 million between the amounts shown as having been received by government agencies and the amounts the oil and gas entities reported as having been paid to these agencies.
In terms of the mining industry, government receipts amounted to $13.170 billion whereas the related reports from the mining companies indicated that sums totalling $7.858 billion were paid to government agencies, giving a difference of $5.311 billion. In particular, the Guyana Gold Board reported receiving $3.303 billion more than what the mining companies declared as having paid over to the Board. These differences were mainly due to the failure of entities to submit reporting templates.
Government receipts from the forestry sector amounted to $1.353 billion. The Multi-Stakeholder Group decided that individual companies should not be asked to report the amounts paid over to government agencies. The same arrangement pertained to the fisheries sector where government receipts amounted to $163.32 million.
Status of audit of government agencies
According to the report, the revenue of the Guyana Revenue Authority (GRA) has been audited up to 2023 as part of the audit of the public accounts. However, as an entity, there was no indication when it was last audited. In our review of the 2020 EITI report, we referred to a media release from the GRA which stated that: (i) the last set of audited financial statements of the GRA was in respect of 2018; (ii) draft accounts have been submitted to the Auditor General for the years 2019, 2020, 2021 and 2022; (iii) the audit of the 2019 accounts were being finalized; and (iv) responses to audit queries were submitted in relation to the accounts for the years 2020; and (v) responses to queries were being prepared for the 2021 accounts. The GRA acknowledged that ‘this inherited state of affairs must be immediately addressed’ with both the Audit Office and the GRA to ensure compliance with the GRA Act. We also bemoaned the practice of the Audit Office accepting several years of draft financial statements from entities. In principle, only one year’s accounts should be dealt with at a time. It is only when the audit is completed that the next year’s accounts are submitted, amended as necessary to reflect the results of the audit, especially as regards opening balances.
While the financial statements of the Guyana Gold Board have been audited to 2023, the same cannot be said of the Guyana Geology and Mines Commission (GGMC), a key agency in the oil and industry. GGMC was last audited in 2016. A similar observation was made in respect of several other government agencies, most notably being the National Industrial and Commercial investments Ltd. that has not been audited since 2013. The Independent Administrator once again commented as follows:
Delay in carrying out the audits both contravenes the legislation governing the agencies and also reduces the assurance that the reported government receipts are reliable. Whilst the Auditor General has examined the submissions of the agencies for EITI reporting, if the underlying records and systems have not been independently audited there is a lower degree of assurance on the government reporting. Many of these government agencies have some legal independence and their accounts are not subject to the direct scrutiny of Parliament as part of its review of the National Accounts; it is important therefore that independently audited accounts are prepared and published on a timely basis in accordance with the requirements of the law.
The above statement continues to be a serious indictment on not only the management of the government entities involved but also the Audit Office that has in its possession several years of draft accounts of numerous non-central government bodies waiting to be audited and reported on. It will be of public interest if the Auditor General were to publish the list of entities for which he has audit responsibility and the status of the audits, including the draft accounts in the Audit Office’s possession and how long they have been with that office. In 1992, the Auditor General released to the public the status of the audit of all entities for which he had audit responsibility.
And what is the Public Accounts Committee doing about all of this, considering that by Article 223 of the Constitution, the Committee is required to exercise general supervision over the work of the Audit Office? The Audit Office’s Rules, Policies and Procedures Manual elaborates on this by requiring the PAC to review the annual budget of the Audit Office, including its work plans and procedures as well as to place ‘special attention on the effective operation of the Human Resources Management and Development System in the Audit Office’. Reports emanating from the Audit Office indicate that all is not well with its human resource management, especially in the area of recruitment and promotion of officers.
To be continued –
