Criticising SML deal from a narrow legal perspective limits govt’s role in citizens’ lives – Ahiagbah

The Director of Communications of the New Patriotic Party (NPP), Richard Ahiagbah has asked the main opposition National Democratic Congress (NDC) to consider the broader picture while criticising the contract between the Ghana Revenue Authority (GRA) and the Strategic Revenue Mobilisation (SML).

Mr Ahiagbah intimated that one of the primary roles of the government is to ensure national defense, provide essential public services, and promote economic stability.

These responsibilities require funding, he said.

He added that criticizing the focus on revenue assurance with SML in the downstream petroleum sector ‘from a narrow legal perspective limits the government’s role in citizens’ lives’

It is recalled the National Communications Officer of the NDC Sammy Gyamfi heavily raised issues against the agreement.

Sammy Gyamfi said at a press conference “We in the NDC are appalled but unsurprised, by the decision by the corrupt Akufo-Addo/Bawumia NPP government to allow SML to continue the performance of their illegally-procured downstream petroleum audit services, while merely recommending the termination of the other unlawful contracts.

“This is the greatest abetment of crime yet again by the ruling New Patriotic Party, and goes to fortify our suspicions that this scandal was cooked at the highest echelons of power.”

But in a post on his X platform, Mr Ahiagbah said “The NDC must consider the bigger picture in criticizing the SML downstream audit contract. One of the primary roles of the government is to ensure national defense, provide essential public services, and promote economic stability. These responsibilities require funding. Criticizing the focus on revenue assurance with SML in the downstream petroleum sector from a narrow legal perspective limits the government’s role in citizens’ lives.

“It’s important to note that SML’s involvement in the downstream sector has generated GHC2.45 billion in state revenue, according to the KPMG report. This agrees with findings from the audit report by Ernest & Young commissioned by GRA, the Revenue Assurance and Compliance Unit of the Ministry of Finance, and the industry report by the Chamber of Bulk Oils Distributors.”

The presidency has released the report on the audit conducted by KPMG into the deal between the GRA and the SML.

This follows pressure mounted by anti-corruption civil society organisations and individuals.

Initially, the presidency declined to release the report with the explanation that “The KPMG report comprises opinions, advice, deliberations, and recommendations that are integral to the President’s deliberative process and, therefore, qualifies as exempt information under section 5 (1) (a) and (b) (i) of the Right to Information (RTI) Act.

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However, a press release dated May 22 signed by the Director of Communications, Eugene Arhin said, “the President, in the interest of full transparency in governance, openness, and honesty with the public, has decided to waive the privilege under section 5 of the RTI Act and has directed the publication of the KPMG report in full.”

Read Summary of KPMG’s Key Findings on Needs Assessment 

Rationale for Procurement of Services without Needs Assessment

Section 21 of the Public Procurement Act, 2003 (Act 663) as amended with Act 914 (“Act 663 as amended”) requires a procuring entity to prepare a procurement plan to support its approved programme. The Act does not explicitly require a needs assessment to be performed by the procuring entity. Nevertheless, the World Bank Guide to Assessing Needs (2012) and the Chartered Institute of Procurement and Supply’s 13-point Procurement Cycle recommends that entities should:

1. Conduct a needs assessment, i.e., a systematic study of a problem or innovation, incorporating data and opinions from varied sources, to make effective decisions or recommendations about what should happen next

2. Define the problem to be solved, which may be part of an entity’s procurement plan or may be a collection of source materials used to build the procurement requirements.

We enquired from MoF and GRA to ascertain and understand policy directions, needs assessment/ feasibility studies/ proposals that were performed or submitted, enabling GRA to execute contracts with SML

The responses we received from MoF and GRA were premised on the case that, independent third-party monitoring of liftings would enhance petroleum revenue, given prevailing operational inefficiencies, particularly in price verification of imported goods and the monitoring of downstream petroleum products liftings, payment reconciliation and general sense of tax leakages.

This same perception of revenue loss from leakages in the upstream petroleum and the minerals sectors prompted the expansion of the scope of the contracts to cover these sectors as well.

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• Full Report: KPMG audit of GRA-SML deal

These concerns and challenges that influenced the various contracts with SML were however not technically analysed, documented, nor discussed by GRA with relevant state agencies if any, to adopt a common solution to address the perceived lapses in the classification and valuation of imported goods, price verification of imported goods, downstream, upstream petroleum and minerals sectors, for an inter-ministerial/ agency approach towards a coordinated resolution.

Rationale for Procurement of Services without Structured Needs Assessment

In the absence of a specifically commissioned and purposed needs assessment report, we sighted pockets of standalone industry analysis and reports, which were issued post-GRA’s contracting date with SML that provided elements of expressed needs. These reports, which highlighted the existence of challenges and tax revenue losses in the petroleum downstream sector included:

a) The 2018 Ghana Chamber of Bulk Oil Distributors (CBOD”) industry reports indicated under-reporting of revenue in the downstream sector

b) Ernst and Young (EY”) audit report issued in May 2021, which was commissioned by GRA to study potential revenue leakages in the downstream petroleum sector for the period 2016 to 2018, established key findings on revenue shortfalls within the downstream sector. The EY report highlighted key findings such as:

i Inconsistencies in reported petroleum liftings by the National Petroleum Authority (NPA”)GRA and Depots

ii. No interface of GRA (GCNet) and NPA systems

iii. Lack of a computerised data collection system at the point of petroleum lifting

iv. Lack of a standardised reconciliation reporting of petroleum imports to petroleum sales.

c) The Revenue Assurance and Compliance Enforcement (“RACE”) of the MoF, whose 2023 report cited under-declaration of taxes in the downstream petroleum and mining sectors.

In respect of the need to extend monitoring services to the upstream and minerals sector, there was no evidence that a technical needs assessment was performed by GRA, nor was an evaluation of the performance of SML at the downstream petroleum sector carried out to inform the expansion of services to those sectors.