According to Director of Oxfam America, Ian Gary, petroleum risk assessment skill sets will be essential if audits by Guyana’s Audit Office or Revenue Authority are going to be effective.
During an interview with the Guyana Standard today, Gary explained that risk assessment is the process of identifying, evaluating, ranking, and quantifying fiscal compliance risks.
Gary said that it is a process that depends on sector-specific knowledge, as well as information from companies, government agencies, and other jurisdictions.
He said, “There is very limited capacity and resources at the revenue authority and Audit Office to handle risk assessment…If they leave this unaddressed, they risk wasting time, wasting effort investigating minor issues…Tax auditors who have no knowledge of the industry make the mistake of looking at everything, an approach that reduces the efficiency and effectiveness of the audit and makes it difficult for companies to cooperate…”
The Oxfam Director added, “Risk Assessment Specialists that Oxfam America interviewed revealed that they look for certain red flags which the regular auditor does not look for. These include costs separately incurred by non-operator JV partners such as finance expense, insurance, marketing, and transportation; JV partners’ reporting a higher portion of shared costs than their equity allocation; intangible assets, which can be hard to value such as patents and trademarks; and technical staff charged to inappropriate phases of the project.”
Gary said that these risks are drawn from audit experience, the kind that Guyana is desperately in need of.
Further to this, he said it is vital that risks identified during audits feedback into a risk matrix to ensure it is up-to-date with industry practices. This approach he said may be strengthened by the development of a natural resource database.
In closing, Gary added, “Guyana needs to make use of the opportunity it has now to acquire the sector-specific expertise and skills to detect and mitigate revenue risks in the petroleum sector. It needs to hire the right people now who can start checking the books early. Time is of the essence…”