EITI Findings Validated by Auditor General’s Report

By Sherwin Long, Head, TTEITI Secretariat

Both the latest EITI and Auditor General Reports point to the need for long term reform in the way that the operations of the oil, gas and mining sectors are monitored in Trinidad and Tobago. Poor revenue controls, unlicensed mining operations and the failure of state-owned energy enterprises to submit timely audited financial statements are some of the major issues raised that affect the quantum of tax revenues collected. The Minister of Finance, Colm Imbert, in his mid-year review of the economy to Parliament last week, underscored that need for reform generally when he said ‘The Government will intensify efforts on improving tax administration and compliance …… we have to see a quantum leap in the performance of our revenue collection agencies;since tax leakages and avoidance is widespread in T&T, resulting in a loss of billions of dollars in revenue.’ How we go about addressing these issues in the extractive sectors is the challenge. If we undertake structured reforms, we will improve transparency and accountability in the sectors, collect increased revenues and ensure effective management of the exploitation of the country’s natural resources.

The Auditor General’s Report noted several obstacles that limit the amount of revenue that the Government collects from oil, gas and mining companies. This has major implications for the country given the need to collect extra monies in the current financial crunch. According to the Auditor General (AG), there is room for improving the way in which the Ministry of Energy and Energy Industries (MEEI) verifies the oil and gas production data that is used to calculate the revenues owed to it. In 2013, the EITI Independent Administrator found that there was a mismatch in production data reported by companies and the Government. This meant that in some instances oil and gas companies were reporting that they produced more, and sometimes less, than what was recorded by the MEEI. To close this gap, the TTEITI Steering Committee and the MEEI harmonized data sources using oil impost payments and other sources of MEEI data. Although the gap was closed significantly between the EITI Reports for fiscal years 2013 and 2014/2015, the AG identified challenges in giving assurance to the data reported due to manpower shortages and a lack of measurement training by auditing staff. The AG Report also noted that several oil and mining companies had outstanding royalty payments due to the Government.

Trinidad and Tobago’s EITI Report 2014/2015, like the AG Report, identifies some of the issues that affect revenue collection. Among them is the issue of unlicensed mining operations which has also been on the TTEITI’ Steering Committee’s radar.  Of 103 operating quarries, only seven (7) operate with valid licenses while the others operate with expired licenses (76), without licenses (19) or are applying for a new license (1). Not only do unlicensed quarry companies not pay the Government royalties owed, but also it is difficult for inspectors to ensure that they adhere to certain environmental regulations (e.g. proper land rehabilitation practices). The impact of this unregulated activity is a loss of State revenues as well as increased environmental degradation. Fortunately, the MEEI has taken steps to make the licensing process more streamlined and efficient. Added to this, the Minerals (General) Regulations 2015 document laid in Parliament in June 2015 aims to correct these shortcomings while also improving revenue collection, state oversight and administrative and regulatory efficiency.

These regulations focus on the procedures and conditions for obtaining quarry licences, the duties and expectations of licensees after licences have been granted and financial obligations.  The duties relate to the conduct of mining operations, disposal of waste water, reporting requirements, training of employees and even site maintenance.

A common thread in previous AG Reports is the tardiness of state-owned energy companies in submitting audited financial statements. The EITI Administrator noted that Lake Asphalt of Trinidad and Tobago and National Quarries Company Limited (NQCL) had stated that their last audited financial statements were prepared for fiscal year ending September 2010.  NQCL planned to commence auditing their 2011-2015 financial statements in November 2016 with a date of completion of February 2017. Lake Asphalt planned to complete their 2011, 2012 and 2013 by December 2016 and complete their 2014 and 2015 audits by March 2017. More information on the status of these reports will be provided in EITI Report 2016 due for publication by 30 September 2017.

The TTEITI Steering Committee and Secretariat look forward to continuing their work on reform of the extractive sectors with the Office of the Auditor General, the Government and civil society. The TTEITI relies on its champions within the MEEI, the Board of Inland Revenue and other state agencies to implement the reforms necessary to achieve the shared goal of increased transparency and accountability and greater revenue collections.

(Business Guardian Article, Thursday 18th May, 2017)