GRA terminates 2 SML contracts

Adinkra Multimedia New YorkMay 4, 2024

120 9 minutes read

The Ghana Revenue Authority (GRA) in compliance with the recent directives given by President Akufo-Addo on its deal with Strategic Mobilization Ghana Limited (SML), has terminated the transaction Audit and External Verification Service Contract (AEVS) with SML.

The GRA has further directed that the Upstream Petroleum and Minerals Revenue Audit portions of the contract be suspended pending further review of the contract details.

GRA has also decided to amend the measurement Audit for the Downstream Petroleum Products Contract by revising the fee structure to a fixed fee structure. The Authority also says it will thoroughly review other provisions such as service delivery expectations, termination, and intellectual property rights.

The GRA disclosed this in a letter entitled “Compliance with Presidential Directives on Recommendations in KPMG Report on the Transactions Between GRA and SML,” dated Friday, 3 May 2024, signed by its Commissioner General, Ms Julie Essiam, and addressed to the Managing Director of Strategic Mobilization Ghana Limited (SML)

The GRA letter is copied to the Vice President, Dr Mahamudu Bawumia, the Chief of Staff, Mars Akosua Frema Osei Opare, Secretary to the President, Nana Bediatuo Asante, the Finance Minister, Mohammed Amin, the Director of Legal at the Ministry of Finance and the Deputy Commissioner in charge of Legal Affairs at the GRA.

“This is about the presidential directives dated 18 April 2024 on the recommendations of KPMG concerning the Contract for Consolidation of Revenue Assurance Services between the Government of Ghana acting per the Ministry of Finance, Ghana Revenue Authority (GRA) and Strategic Mobilisation Ghana Limited (SML).

“Following the directives of the President, GRA has undertaken a thorough review of the Consolidation of Services (Transaction Audit and External Verification Services) contract dated 3 October 2019, the Measurement Audit for Downstream Petroleum Products Contract dated 3 October 2019, and the Contract for Consolidation of Revenue Assurance Services (Upstream and Minerals Audit) contract dated 25 October 2023,” the GRA letter read.

“Based on the review, the following actions are to be taken: First, The Transaction Audit and External Verification Services Contract will be terminated. Secondly, the Measurement Audit for Downstream Petroleum Products Contract will be amended.

“Specifically, the fee structure will be revised to a fixed fee structure. In addition, other provisions such as service delivery expectations, termination, and intellectual property rights will be subjected to a thorough review.

“Thirdly, the Upstream Petroleum and Minerals Revenue Audit portions of the Contract for Consolidation of Revenue Assurance Services cannot take effect until a comprehensive technical needs assessment, value-for-money assessment, and relevant stakeholder consultations have been achieved,” the GRA letter to SML further read.

GRA-SML investigations

President Akufo-Addo received the KPMG report on 2 April 2024, 3 months after tasking the audit firm to investigate the GRA-SML deal. The government after reviewing the report, issued a press statement adopting the recommendations of KPMG in full. By the adoption, the government directed the GRA to review the deal among other directives.

President Akufo-Addo on 2nd January 2024, appointed and tasked KPMG, a leading audit, tax, and advisory services firm, to conduct an immediate audit of the transaction between the Ghana Revenue Authority (GRA) and Strategic Mobilization Ghana Ltd (SML), a contract which was entered into to enhance revenue assurance in the downstream petroleum sector, the upstream petroleum production, and minerals and metals resources value chain.

The President’s directive was contained in a statement issued by the communications directorate of the Jubilee House and signed by the director of communications at the presidency, Eugene Arhin. The terms of reference of the audit ordered by the president were six-fold.

First is for KPMG to conduct an audit to ascertain the rationale or needs assessment performed before the contract approval by GRA, and to assess how the arrangement aligns with specific needs, and secondly, assess the appropriateness of the contracting methodology, verifying compliance with legal standards and industry best practices in the procurement process for the selection of SML.

Third, evaluate the degree of alignment between current activities and the stipulated contract scope, identifying any deviations and fourthly evaluate the value or benefit that SML has so far offered to the GRA through this engagement.

The fifth is to review the financial arrangements, including pricing structures, payment terms, and resolution of any financial compliance issues; and lastly, submit a report on your findings on the above, together with appropriate recommendations.

“President Akufo-Addo further tasked KPMG to complete the assignment in two weeks and submit appropriate recommendations to him. The President also directed the Ministry of Finance and GRA to provide KPMG with whatever assistance they will require for the conduct of the audit and has also directed the Ministry of Finance and the Ghana Revenue Authority to suspend the performance of the contract, pending the submission of the audit report, including any payments presently envisaged under its terms,” the Jubilee House statement further read.

Background

Strategic Mobilization Limited (SML) in a statement on Tuesday, 19 December 2023, rejected claims by journalist Manasseh Azure Awuni and his two other colleagues, Evans Aziamor-Mensah and Adwoa Adobea-Owusu, that it is involved in a shady deal that has resulted in the government paying “hundreds of millions” to it without doing any work.

In an online publication on Monday, 18 December 2023, on its website, www.thefourthestate.com, Manasseh Azure Awuni and his associates, published the following;
“In a control room in Tema in the Greater Accra Region, officials of Strategic Mobilization Ghana Limited (SML) tried to convince The Fourth Estate of its wild claims that it had helped to save Ghana billions of cedis that would have been lost in the downstream petroleum sector but for its intervention.

“The company also tried to justify why it receives up to GH₵24 million monthly payments from the government of Ghana in a questionable contract it signed with the Ministry of Finance and the Ghana Revenue Authority (GRA).

“A year-long investigation by Evans Aziamor-Mensah, Adwoa Adobea-Owusu and Manasseh Azure Awuni of The Fourth Estate, however, revealed that the company, with the help of a section of Ghana’s media, had made false and unsubstantiated claims of its operations that have served as the basis for the payment it received.

“It appears the Ministry of Finance and the GRA were aware the claims were false, for some officials of the GRA said they had confronted the company about its claims of savings and volumes on two separate occasions”.
However, in a two-page statement issued by the public relations unit of SML, on Tuesday, 19 December 2023, entitled; “Statement by SML on the documentary by the Fourth Estate on the yet-to-be-operationalized contract on upstream petroleum production and minerals and metals resources value chain, SML says it has taken note of a documentary that has been aired by the Fourth Estate’s team and response as follows;

“The documentary represents a set of misrepresentations, false claims, and a general lack of understanding of the entire operations of the company. We challenge the Fourth Estate to produce any contract anywhere that is for 10 years. The 5th PPA Board at its 46th Board meeting in a letter referenced PPA/CEO/09/2286/23 approved a contract duration of five (5) years.

“Again, it’s NOT TRUE that SML takes $100 million annually from its contract. The contract, which is yet to be paid risk-rewarded per their projections leading them to that claim. The Upstream operations of the company have not yet begun, and no revenue has been realized. No monies have been paid: the $100 million per year payment to SML that has been alleged is purely a figment of the author’s imagination and not factual.

“SML’s engagement with GRA is solely a risk-reward contract. GRA invests nothing in the entire investment chain. There is no cost commitment from the GRA. SML is not exempted from the payment of duties and taxes. Again 31% of SML’s monthly earnings goes to GRA as taxes per the law. A good-intentioned and professional investigation would have established SML’s investment cost and compared it to its earnings to make an informed position.

“Again, we challenge him to produce any evidence of wrongdoing in this contract arrangement. SML’s charging formula is standard in the industry and the same is being used by other service providers in the industry. SML’s work forms the base data at the depots for revenue assurance and auditing. They declare the base volumes upon which any gap or deficit in the eventual volumes declared will expose those in the chain.

“The downstream petroleum sector’s reported figures have significantly increased because of SML over time; from an average of 350 million liters per month in 2018 and 2019, to 450 million liters per month as of June 2020. This indicates a rise of more than thirty-three percent (33%) in volume reporting and an average of an extra 100 million liters per month which translates into revenue,” the SML statement read.

SML further explained that “scrutiny of the work of NPA in terms of taking account and reporting the transactions using ERDMS within the downstream petroleum sector would show that it was not adequate and suited to giving revenue assurance to GRA. The NPA system was designed for its operations and was not suited for providing revenue assurance for tax purposes.

“SML installed ultrasonic flow meters to check the volumes of petroleum products loaded at the gantries from the depots to reconcile in real time with the volumes recorded in ICUMS. This system additionally assures Customs that no loading activities occur in the depot in their absence. The installed metering system is designed to detect and record the movement of petroleum products at the depots.

“SML’s work is designed to culminate in the checking of the products in the tank using an automatic tank gauging system. This aims at replacing the current system of Custom Officers climbing the tank using a dipstick to measure fuel volumes.
“By utilizing this, the GRA can calculate the overall quantity of petroleum products in depots nationwide to gauge revenue, provide Customs with data for reconciliation, and facilitate the tracking of oil movements during inter-depot and inter-tank transfers. Moreover, it aids in identifying leaks and notification of overfills.

“SML takes pride in its committed and highly skilled technical team, whose combined expertise propels our success in delivering innovative solutions. The team consists of seasoned professionals with diverse backgrounds, ensuring a comprehensive approach to addressing the most intricate technical challenges.

“The SML technical team comprises Ghanaian-trained engineers and expatriates from the United States, with work experience ranging from 5 to 25 years in the petroleum industry and the instrumentation and controls sector. The team’s expertise spans petroleum engineering, process engineering, IT System Engineering, Cybersecurity Engineering, instrumentation, and controls, as well as Electrical and Mechanical Engineering.

“We are aware of the heightened efforts by the Cartel in the oil ring whose illegal trade is being collapsed and is fighting to undermine the Government’s fight against illegalities in the petroleum sector” the SML statement further read.