President Akufo-Addo orders review of GRA-SML contracts

Kweku Zurek Apr - 24 - 2024 , 09:16

In response to an audit conducted by KPMG regarding the transactions between the Ghana Revenue Authority (GRA) and Strategic Mobilization Ghana Ltd (SML), President Nana Addo Dankwa Akufo-Addo has directed that the upstream petroleum audit and minerals audit services by the latter may be terminated.

A press release issued by the Communications Directorate of the Jubilee House said the President acted based on the findings and recommendations of KPMG and has, by letter dated Thursday, April 18, 2024, given directives to the Ministry of Finance and the Ghana Revenue Authority.

The President also directed that the transaction audit and external price verification services may also be terminated because the GRA obtained only partial value or benefit from these services, partly due to a lack of monitoring.

"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," the statement said.

The President further noted that although there is a clear need for the downstream petroleum audit services provided by SML, the fee structure needs review, directing a shift from a variable to a fixed fee structure and a review of other contract provisions.

Finally, the President directed that any renegotiated contracts with SML must undergo periodic monitoring and evaluation to ensure compliance and performance.

The Ministry of Finance and the Ghana Revenue Authority are tasked with immediately implementing these directives and providing the Office of the President with updates on the progress made.

President Akufo-Addo expresses his gratitude to KPMG for their thorough audit, reaffirming his commitment to transparency and efficiency in government operations.

Audit

The audit by KPMG followed a Fourth Estate publication that alleged the Ghana Revenue Authority had awarded a 'questionable' contract to SML.

The GRA together with the Ministry of Finance, signed a consolidated contract with SML to monitor and audit the Downstream Petroleum Sector in 2019, Upstream Petroleum Production in 2023, and the Minerals and Metals Resources Value Chain in 2023.

The GRA maintained that the contract is designed to operate for five years contrary to the ten years published by The Fourth Estate. The contract was entered into to enhance revenue assurance in the downstream petroleum sector, the upstream petroleum production and minerals and metals resources value chain.

Following the publication, the President directed an audit into the SML/GRA contract and asked for a suspension of the performance of the contract, pending the submission of the audit report, including any payments presently envisaged under its terms.

KPMG audit

The findings in the audit conducted by KPMG shed light on critical oversight issues in the transactions between the GRA and SML. The findings suggested a lack of due diligence and procedural lapses in several key areas.

One of the key findings of the audit was the absence of a technical needs assessment prior to engaging SML, although this was not legally required. Despite this, subsequent reports by industry bodies and audit firms highlighted potential underreporting and revenue loss, raising concerns about the initial engagement process.

Furthermore, the audit revealed that GRA sought approval on multiple occasions to engage SML through single-source procurement, which was not granted by the Public Procurement Authority (PPA). This led to a series of subcontracting arrangements and service expansions without proper approvals, including the addition of external price verification and downstream petroleum audit services.

The change of leadership at GRA prompted efforts to regularize contracts with SML, culminating in the 2023 Revenue Assurance Services Contract. However, issues such as the lack of parliamentary approval for multi-year contracts and the absence of board discussions and approvals for certain services were flagged by KPMG as governance deficiencies.

Regarding the performance of SML, KPMG's assessment found partial delivery on service requirements in various areas. While downstream petroleum audit services showed substantial revenue increments and qualitative benefits, other services like transaction audit and external price verification were deemed to have delivered only partially on expected benefits.

One significant observation was the pricing model based on a variable fee structure, which KPMG noted as unusual for transaction monitoring services. The total fees paid under the contracts until suspension amounted to GH¢1,061,054,778.00, with additional fees estimated under the 2023 Contract