— practicality and reality of situation ignored by commentators

THE APNU+AFC opposition member Roysdale Forde was quoted in the print media, earlier this week, lambasting the government for its failure to conduct the audit for the Stabroek block bill, which amounts to US$9.5 billion. Forde argued that had the PPP/C Government conducted a rigorous audit, at the very least, the country could have secured enough savings to cover the citizens’ personal income taxes at the 2020 level for nearly 56 years. He was further cited by a certain media house that “by his calculations, Guyana could have recouped approximately US$1.1 billion or GY$235 billion.”

Let’s understand the facts surrounding this situation. The APNU+AFC formed the government in May 2015 just when it was announced that Guyana discovered oil in commercial quantities. It was the APNU+AFC Government that renegotiated the contract with the two-year limit for the audit to be done, whereas the requirements for audits by the Guyana Revenue Authority (GRA) in keeping with Guyana’s tax laws is eight years.

With this in mind, the onus rested upon the APNU+AFC Government to have ensured this audit was done since 2015-2018 in the first place.
Be that as it may, for the past five years, the previous administration of which Forde is a part did nothing to build local capacity to carry out these audits locally and never even commenced the process to do so. Now, we are five years behind with lots of catching up to do.

Did he, Mr. Forde, conduct the audit? Does he, a lawyer by profession possess the competence to do so? Or is he simply propagating an unfounded and absurd fallacy to mislead the nation? Does he have the moral authority to pronounce on this matter? It was Forde and his team who were party and aided the attempted perpetuation of the election rigging in 2020, his rigorous defending of the fraudulent Mingo declaration at the 2020 elections.

One wonders how Forde would have derived that US$1.1 billion figure when the audit has not been done. What exactly did he calculate and how? Needless to say, the whole world knows of Forde’s and his party’s infamous reputation on calculation which cost taxpayers tens of millions all the way to the Caribbean Court of Justice to tell an entire nation the majority of 65 is 33. Forde, and his ilk are intellectually challenged on small numbers and simple mathematics such as 33 versus 32. Imagine, he is now venturing to do calculations on oil expenditure and on substantially larger numbers, beyond his ability to comprehend the mechanics of such large numbers.

It would appear that having exhausted his competences as a lawyer, he seems to be venturing into the field of accounting. Lord help us.

For the sake of clarity, let’s consider Forde’s proposition for a moment. He is of the view that had the PPP/C Government conducted a rigorous cost audit, Guyana could have recouped approximately US$1.1 billion or GYD$235 billion. However, even if this is the case, the existing fiscal framework of the PSA would not permit Guyana to benefit unconditionally from the supposed US$1.1 billion in savings. According to our PSA, there is a two per cent royalty on top of oil production. Of the remaining balance, 75 per cent goes to cost recovery. The balance is then shared 50/50 between the government and the operator.

A deduction of US$1.1B from the cost bank would essentially mean that the operator would eventually have to foot these costs. A direct corollary of this on the cost bank would be in the form of a reduced payback period. However, while the government’s take would undoubtedly increase, so too would be the operator’s. In the long run, the operation would remain economically viable insofar as revenue exceeds costs.

Therefore, by deduction, Guyana would only receive a fraction of the supposed savings, not the full amount as indicated by Forde. Clearly, Forde is oblivious of how the O&G sector operates.

Forde was joined by a prominent chartered accountant who echoed similar sentiments and sought to trivialise the issue of local content while blasting the Vice-President’s explanation as to why the audit has not been done yet. At no point, though, did the Vice-President said that the audit will not be done.

On top of that, what’s stopping the local firms from partnering with international firms to build capacity on their own to ready themselves for when the opportunity arrives?
With respect to the other aspect of the criticisms leveled by the Chartered Accountant, the gov’t cannot issue a tender with qualifications for a project to suit the qualification we have in country; rather, it must be tailored to suit the qualification that is required. So, it is for the local firms to know strategically that they would have to enter strategic partnerships to build capacity and to win these tenders locally.

The issue of local content ought not to be trivialised. The Vice-President is well in order to champion local content and, as he said in his press statement, only two local firms applied but they are not fully qualified to do the audit. However, if they partner with an international firm, this is how we as a country can build local capacity.

If we don’t seize the opportunity now to build local capacity to do these kinds of audits, despite we are late by a few years, then when will we do it? It is understood that an audit like this, if a local consortium of accounting / audit firms were to come together by partnering with an international firm, where for an audit of this nature 100 per cent audit will have to be conducted – the cost would be anywhere around US$2M – US$5M. So, this would mean that local firms and Guyanese professionals will be losing an opportunity to work on a G$1 billion audit project which would perhaps be the first of its kind if we are to just go ahead and bring in an international firm to get the job done.

Moreover, not because we are late by a few years means this is a crime. An audit is a post-mortem exercise so it’s not like we are losing anything, or we have lost something. Whatever discrepancies that the audit is likely to uncover can still be dealt with because Exxon is here for a long time. They are not going anywhere.

As far as the legal provision is concerned that the chartered accountant referred to, we know that those legislations will be amended, and that the two-year limit is also likely to be amended. This can be easily brokered, simply because there are several additional benefits the gov’t under the stewardship of the Vice-President has managed to get Exxon to agree to that is outside of the PSA that a certain chartered accountant so religiously use to justify his assertions. For example, the financing of the gas-to-shore pipeline infrastructure is an example of one of the many things the government managed to get Exxon to do, that it, perhaps, was not even comfortable doing, the US$100 million GGI initiative is another one, and the list goes on.

Having said all of this, one can safely conclude that the practicality and the circumstances surrounding the failure to audit to date, are ignored by some commentators and politicians on the other side. In contrast, it might serve the country better if these energies were directed towards the practicable solution rather than working against progress and development.

In fact, should I question why the prominent chartered accountant who criticised the government for failure to audit, did not participate in the bidding process for the job? It appears his firm did not. Question is why? And if he did, does his firm have the full capacity? If not, why speak wildly on the matter?
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The views expressed are exclusively of the author and do not necessarily represent those of this newspaper. The author of this column possesses more than a decade experience in research and analysis.