KPMG not the best to audit shady SML contract — CSO activists

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Two leading activists in the natural resource sector have opposed the selection of a tax audit firm, KPMG, to investigate the questionable revenue assurance contract the Ministry of Finance and the Ghana Revenue Authority (GRA) have signed with Strategic Mobilisation Ghana Limited (SML).

Bright Simons of IMANI Africa and Benjamin Boakye of the Africa Centre for Energy Policy (ACEP) say KPMG, which also provides services to the GRA might be caught in a conflict of interest situation and may not have the right powers to conduct a thorough audit.

For Bright Simons, vice president of IMANI, the firm should reject the president’s request to save its reputation.

“KPMG’s practice oversight bosses should prudently preserve the firm’s reputation and drop this assignment. This issue is a hot political potato right now. The nature of the allegations requires an in-depth look by state bodies with the right powers and independence. KPMG has neither,” Mr. Simons stated on X(formerly Twitter).

The Executive Director of the African Centre for Energy Policy, Ben Boakye, also cast doubts on KPMG’s ability to do an independent work.

“KPMG has its integrity at stake if it accepts this job. It is a client of GRA and its investigation against the leaders of one of its large portfolios is exceedingly suspicious. Simply unethical,” Mr Boakye stated.

Meanwhile, the minority leader in Ghana’s Parliament, Dr. Cassiel Ato Forson, has criticised the appointment of KPMG to audit the contract. He had earlier said the deal in its “current shape is not valid.”

“The whitewashing attempt by the president in the name of an audit will not dissuade Parliament from looking into this matter to stop the siphoning of state resources into the private pockets of government officials and their crony business partners” the minority leader said.

The intervention of the President is in response to The Fourth Estate‘s investigation of how the GRA and the Ministry of Finance signed a shady deal with SML, an offshoot of a timber company in Ghana. The downstream petroleum sector contract gives SML up to GH₵24 million a month.

The investigation also revealed that SML has been awarded an expanded consolidated contract worth nearly US$100 million a year for revenue assurance that will now include the upstream petroleum and gold mining sectors.

The Fourth Estate investigations also showed that SML had made false claims that it was checking under-reporting, diversion and dilution in the country’s downstream petroleum sector. When The Fourth Estate team pointed the false claims to the company, the Managing Director, Christian Tetteh Sottie, admitted the company was not into those services.

“Oh no, we are not involved in diversion. We are only at the depots. If the thing [petroleum product] is lifted, we don’t know if [it is diverted],” Mr. Sottie said.

KPMG’s history in public sector audits

KPMG has not always been all successful with public sector consulting work around the world. The company’s failure is largely attributed to pressures of the political economy, systemic conflicts of interest, and the relaxation of standards to meet unrealistic project goals and timelines, according to Bright Simons.

Aside from consulting for the GRA, the firm is the only advisor to the government on its pandemic relief package for small businesses and the recruitment of technical and other staff to boost delivery capacity to the GRA, according to information available to The Fourth Estate. It also manages the ESLA tax vehicle on behalf of the government of Ghana.

According to Bright Simons, KPMG is a technical advisor to the GRA in some of the very areas; audit, accounting, assurance/compliance and consulting that it is being asked to investigate. This makes KPMG a competitor to SML, he says.

In South Africa, KPMG was accused of whitewashing the Gupta cabal. The company was fined and its top management resigned, according to Accountancy Age, a UK-based accounting news portal.

In a detailed opinion piece on the president’s directive, Bright Simons cites other examples to support his position that KPMG may not be the right candidate in this scandal

Outside the shores of Africa, media reports said KPMG had to step down over conflict of interest issues in the UK’s politically sensitive ” Tower inquiry.  Again, Euronews reported in June 2023 that the UK’s Financial Reporting Council fined the auditing firm £21 million for failing to uphold accounting standards which led to the collapse of two financial institutions.

“The number, range, and seriousness of the deficiencies in the audits of Carillion during the period leading up to its failure was exceptional and undermined that credibility and the public trust in audit,” said Elizabeth Barrett, executive counsel for the Financial Reporting Council, said in a statement.

The firm, according to Scottishfinancialnews.com also suspended its work with the UK government for a period. In Australia, Former KPMG partner, Brendan Lyon, told the country’s Legislative Council inquiry that a report he authored for the New South Wales government (NSW) was more about ensuring a valuable client got what it paid for: a pre-determined answer. The investigation by the Sydney Morning Heralds in 2021 revealed how the “NSW Treasury pressured accounting giant KPMG to delete or amend aspects of a report commissioned by Transport for NSW that found the plan could end up costing the state’s coffers more than it saved.”

In a related development, former Auditor-General, Daniel Domelevo, has said that the Office of the Special Prosecutor should have been made to investigative the shady SML contract.

Mr Domelevo says the office was established to look into such matters.

“… the issue has been reported already to the OSP, so he sits with the case,”case,” he said in an interview on Joy FM. “I don’t know why we will not allow the OSP to do the audit instead of engaging KPMG to do what state institutions are mandated to do.”

“I have also heard that parliament has requested or authorised the finance committee to do this audit. I think that as much as we are worried about corruption, we must also be worried about the waste of public resources.”

“We have institutions given this mandate to protect the public purse. We should use them instead of engaging KPMG.”

 

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