Energy

President Akufo-Addo adopts KPMG recommendation to halt upstream petroleum and minerals audit services provided by SML for GRA

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President Nana Addo Dankwa Akufo-Addo has accepted the recommendation of KPMG to discontinue the upstream petroleum and minerals audit services previously provided to the Ghana Revenue Authority (GRA) by Strategic Mobilisation Limited (SML).

This follows an initial audit report provided by the accounting and advisory firm, KPMG.

According to the president, “the upstream petroleum audit and minerals audit services have not yet been commenced, and no payments have been made in respect of those services; therefore, they may be terminated.” 

In a press statement signed by the Director of Communications at the office of the president, Mr Eugene Arhin and issued on Wednesday 24th April 2024, the president indicated that the upstream petroleum audit and minerals audit services could prevent significant revenue leakages.

As a result, the President has directed that the Ministry of Finance and GRA conduct a comprehensive technical needs assessment, value-for-money assessment, and stakeholder engagements before implementing such services.

“The transaction audit and external price verification services may also be terminated. According to KPMG’s findings, GRA obtained partial value or benefit for those services. This was also due to a lack of monitoring on the part of GRA to ensure that SML performed the services as stipulated in the contracts. KPMG’s investigation found that GRA has introduced external price verification tools as part of ICUMS, among its other functions. This renders the reliance on SML for external price verification redundant,” he said.

President Akufo-Addo stated that there was a clear need for the downstream petroleum audit services provided by SML and the GRA and the State have benefited from these services since SML commenced providing them.

“There has been an increase in volumes of 1.7 billion litres and an increase in tax revenue to the State of GHS 2.45 billion. KPMG also observed that there were qualitative benefits, including a 24/7 electronic real-time monitoring of outflow and partial monitoring of inflows of petroleum products at depots where SML had installed flowmeters and six levels of reconciliation done by SML,” he said. 

He further explained that it minimises the occurrence of under-declarations which makes it important to review the contract for downstream petroleum audit services, particularly the fee structure. 

“Given the experience and proficiency of SML over the last four years of providing this service, the President has directed that the fee structure be changed from a variable to a fixed fee structure. Other provisions of the contract worth reviewing include clauses on intellectual property rights, termination, and service delivery expectations,” the president directed. 

Furthermore, the president directed that the performance of SML in any renegotiated contracts should be monitored and evaluated periodically to ensure that it meets expectations adding that “any renegotiated contract should be compliant with section 33 of the PFMA.”

“The Ministry of Finance and the Ghana Revenue Authority are to give effect to the above directives of the President immediately, and provide the Office of the President with an update on the steps taken,” he said.

Background

A report by the Fourth Estate alleged irregularities in a multi-million dollar contract awarded to SML by the Ghana Revenue Authority (GRA).

Both the GRA and SML vehemently denied any wrongdoing in response to the allegations.

In reaction to the accusations, SML has initiated legal action against the Fourth Estate, alleging defamation.

Following concerns raised regarding the contract between the GRA and SML, President Akufo-Addo instructed KPMG to conduct an audit into the matter.

On March 27, he received the report from KPMG on the audit conducted.

 

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