THE cost recovery audit of ExxonMobil Guyana’s expenses has recently generated significant public interest and for good reason. Guyanese deserve a full accounting of the expenses the Stabroek consortium are seeking to recover as this has a direct impact on Guyana’s earnings and ultimately the monies available to meet ambitious goals on education, agriculture, and health as an example. There are, however, misconceptions around audits that often lead to claims of secrecy and misguided conclusions.

It is important to understand there are two audits that are currently the subject of discussion. The first is a cost audit by global consultancy IHS Markit looking at ExxonMobil’s 1999-2017 costs for its Stabroek Block pre-contract costs such as expense of extensive seismic and geologic surveys and early- stage exploration beginning in the 1990s that led to the eventual discoveries and the costs for developing Liza Phase One.

The second and most recent cost recovery audit covers expenses by ExxonMobil Guyana for 2018-2020 and is being done locally by a consortium of Guyanese companies including Ramdihal and Haynes Chartered Accounting and Professional Services Firm, Vitality Accounting and Consultancy Inc., and Eclisar Financial & Professional Services in partnership with partnered with the Oklahoma-based Martindale Consultants Inc. and Swiss technical company SGS.

Audits are just one of the tools available to the Guyanese regulators to ensure the terms of the production sharing agreement (PSA) are being properly followed. They are far from simple exercises, however, and require significant investments of time and capital. The cost recovery audit is being done under the 2016 PSA governing the Stabroek Block with a goal to verify the legitimacy and validity of costs claimed and recovered against revenues generated from oil production.

The initial cost recovery audit by IHS Markit has been faulted by the Guyana Revenue Authority (GRA) for lacking in key areas and continues to be the subject of negotiations. Recently, a copy of the IHS Markit Interim Audit Report covered in the press has stirred claims that the results are being deliberately withheld from the people and have been available for more than two years. However, the Commissioner General of the Guyana Revenue Authority (GRA), Godfrey Statia has emphasised that the “leaked” report is not final and is still being reviewed by the GRA.

It is understandable how claims of secrecy can arise due to the complex nature of the audit process which can be tedious, detailed, and lengthy and often requires multiple rounds of consultations which require companies, regulators, and auditors to flag areas of concern, provide explanation and continue that process until all areas are addressed. Governments frequently go back to consultants and auditors to request more, leading to multiple draft reports. That process continues in earnest. While the public pressure to provide details on those findings to the Guyanese people is understandable, draft reports may not convey the full picture.

Cost recovery audits are a routine and necessary part of production contracts globally and help to verify costs and ensure that governments and companies are aligned on the best way to categorise expenses. The concept of an audit can have a negative connotation in Guyana, long associated with investigations of corrupt government deals and shady business practices but it is critical to understand that such audits in large international business deals are routine, not punitive.

The audit process is a good-faith arrangement between the government and companies and an important pillar of transparency and governmental oversight of the oil and gas industry. It is just one of many activities taking place under the Ministry of Natural Resources Guyana Oil and Gas Capacity-Building Project.

Additionally, this process has also been an opportunity for a wealth of knowledge-building as the contract for the second cost recovery audit done by the local consortium included provisions for knowledge transfer. This lets local accounting firms learn auditing best practices from international partners about the complex cost recovery audit process. The GRA is also steadily improving its own capacity to conduct cost audit reviews internally for the oil sector.

Understandably, a delay in the availability of audit results can unfortunately be fertile ground for false conclusions. However, some misconceptions are mere cases of misinterpretation. For example, the Minister of Natural Resources, Vickram Bharrat during his budget presentation this past February speaking to the concerns around timing of the second audit report said, “I think from the inception when the contract was signed there was a bit of misunderstanding. In the contract it says 120 working days and I think there was a lot of misconception…that it would be 120 running days or calendar days, but its 120 working days.”

As we wait for the final reports, it is worth emphasising that once the audits are completed, they’ll be made public and submitted to the Auditor General’s Office for public inspection. Some things take time, including a transparent and diligent auditing process. Until then, Guyanese should take pride in our ability to consistently maintain international standards.