In the spirit of transparency, President Nana Addo Dankwa Akufo-Addo has been told to form a 3-person implementation team to study the KPMG report on the deal between the Ghana Revenue Authority (GRA) and the Strategic Mobilisation Limited (SML) and suggest a way forward, including clear directions on disgorgement (legally mandated repayment of ill-gotten gains imposed on wrongdoers by the courts), civil penalties, and criminal prosecutions.
A United States-based Ghanaian Professor Kwaku Asare who made the call to the president said that the statement that was issued by the presidency on the KPMG report raises many questions and suggests more actions are needed to be taken.
Prof Asare notes that there is evidence of multiple violations of the Public Procurement Authority (PPA) the GRA Acts, and other laws.
The president’s statement on Wednesday, April 24, indicated that portions of the KPMG report were captured stating that “No technical needs assessment was done prior to the engagement of SML. However, such an assessment was not legally required for engaging SML. After SML was engaged, a Chamber of Bulk Oil Distributors’ industry report, a 2021 Ernst & Young audit report commissioned by GRA and a report by the Revenue Assurance and Compliance Enforcement of the Ministry of Finance all found that there might be underreporting, under-declaration and potential revenue leakages.
“On three occasions (between June 2017 and September 2017), GRA sought approval
from the Public Procurement Authority (“PPA”) to use the single source procurement
method to engage SML to provide transaction audit services. PPA did not grant approval.
Subsequently, GRA engaged SML as a subcontractor to West Blue which was already
providing services to GRA at the port. SML eventually took over the services provided by
West Blue when the latter’s contract came to an end on 31st December, 2018. GRA then
added external price verification to the services offered by SML and signed a downstream
petroleum audit agreement with SML.
GRA-SML deal: No technical needs assessment was done prior to engaging SML but… – KPMG report
“All these were done without PPA approval. Following a change of leadership at GRA, the new leadership sought to regularise the contracts with SML and on 27th August, 2020, PPA ratified the procurement processes used to engage SML. In 2023, the Ministry of Finance (MoF), GRA, and SML entered into a Revenue Assurance Services Contract (“2023 Contract”). The 2023 Contract extended the scope of SML’s services to include upstream petroleum and minerals audit. PPA approval was obtained for this contract, which is now the governing agreement for the services offered by SML to GRA. Another issue raised by KPMG is the absence of parliamentary approval for the contracts, given that they are multi-year contracts. Under section 33 of the Public Financial Management Act, 2016 (Act 921) (“PFMA”), such contracts must have ministerial and parliamentary approval. KPMG also found that there was no evidence that the 2018 and 2019 contracts (transaction audit services, external price verification, and downstream petroleum audits) were submitted to the GRA Board for discussion and approval contrary to the GRA Act, Corporate Governance Manual for Governing Boards/Councils of the Public Services, and sound and accepted corporate governance practices. The GRA Board approved the extension of SML’s services to cover the auditing of the upstream petroleum and minerals sectors, as specified in the 2023 Contract.
“Regarding the transaction audit services, KPMG concluded that SML partially delivered on
the service requirements. However, given the observations made during the investigations, GRA may not have obtained all the expected benefits from the service. This is also partly due to GRA’s lack of instituting monitoring and evaluation processes to
assess the performance of the service and hold its personnel and SML accountable for
non-performance.
“Regarding the external price verification services, KPMG concluded that SML delivered
partially on the service requirements and that, given the observations made during the
investigations, GRA may not have obtained all the expected benefits from the service. It
was noted that ICUMS has inbuilt capabilities of external price verification among other
functions. Regarding the downstream petroleum audit services, KPMG determined that there was an incremental volume of 1.7 billion litres and an incremental tax revenue of GHS 2.45 billion for the period under review.
“There were also qualitative benefits, including a 24/7 electronic real-time monitoring of the outflow and partial monitoring of inflows of petroleum products at depots where SML had installed flowmeters. This serves as a deterrent for under-declarations. Other qualitative benefits include six levels of reconciliation done by SML to prevent revenue losses to GRA and the sharing of discrepancy reports with GRA to follow up.
KPMG’s report confirms we haven’t been paid $100m – SML
“SML had yet to implement the upstream petroleum audit and minerals audit services, and therefore, there could be no assessment as to whether GRA would derive value or benefit from that service. KPMG noted, however, that those are areas that could have significant
revenue leakages and, thus, suggested, among other things, that a comprehensive needs
assessment be conducted to establish a need for those services.
The pricing model used in the contracts was based on a variable fee structure. During its
investigation, KPMG noted that such transaction monitoring services are usually priced
using a fixed fee pricing model. The total fees paid under the contracts from 2018 to the date of suspension amount to GH¢1,061,054,778.00. No fee has been paid for the upstream petroleum audit and minerals audit services. The total fees estimated to be paid to SML under the 2023 Contract for five years is GH¢5,173,091,857.00, which averages to about GH¢1 billion per year.”
Commenting on this in a post on his Facebook page, Prof Aare said “The white paper on SML raises many questions and suggests more actions are needed. There is evidence of multiple violations of the PPA, GRA Act, and other laws. Even mere Board approvals were not obtained on some key contracts. Further, there is evidence of absence of parliamentary involvement in multi-year contracts with billions of dollars at stake.
“Finally, KPMG appears to have raised questions about value for money. Even where the white paper suggests that there has been an increase in volume of petroleum or tax revenue, there is not enough information to allow one to determine the source of these increases. Such increases, without a volume and revenue expectation model, cannot be unequivocally attributed to the SML contracts.
“In light of these questions raised by the white paper, I call for an immediate release of the KPMG audit. Moreover, I call for the formation of a 3-person implementation team to study the report and suggest a way forward, including clear directions on disgorgement, civil penalties, and criminal prosecutions.
“It’s important to state that we seek no witch-hunting in this enterprise but only seek complete transparency, accountability, and protection of the ever shrinking public purse.”