In a decisive move to safeguard Ghana’s financial interests, President Akufo-Addo has accepted and acted upon the comprehensive recommendations presented by KPMG concerning the Strategic Mobilization Limited (SML) contract with the Ministry of Finance and the Ghana Revenue Authority.
Eugene Arhin, the Director of Communications at the Office of the President in a statement indicated that the President’s directives on the controversial matter aimed at optimizing revenue collection while ensuring accountability, and addressing various aspects of the contract’s implementation.
Mr Arhin began by stating that President Akufo-Addo has instructed the Ministry of Finance and the Ghana Revenue Authority (GRA) to conduct a thorough assessment, including technical needs, value-for-money analysis, and stakeholder consultations, before proceeding with the upstream petroleum and minerals audit services.
He noted that while such services hold the potential to curb revenue leakages, their initiation requires careful consideration and preparation.
Touching on the transaction audit and external price verification services of the Strategic Mobilization Limited contract with the Ministry of Finance, the Director of Communications at the Office of the President stated that the KPMG’s findings revealed that the transaction audit and external price verification services provided by SML may be terminated due to GRA’s limited monitoring and partial value obtained.
“According to KPMG’s findings, GRA obtained partial value or benefit for those services. This was also due to a lack of monitoring on the part of GRA to ensure that SML performed the services as stipulated in the contracts.
“KPMG’s investigation found that GRA has introduced external price verification tools as part of ICUMS, among its other functions. This renders the reliance on SML for external price verification redundant”.
Eugene Arhin, Director of Communications, Office of the President
Downstream Petroleum Audit Services
Furthermore, the Director of Communications at the Office of the President, Eugene Arhin indicated that President Akufo-Addo has expressed the need to maintain Strategic Mobilization Limited’s services in the downstream petroleum due to significant benefits accrued from SML’s downstream petroleum audit services, including increased volumes and tax revenue to the country.
However, Mr Arhin underscored President Akufo-Addo’s urgent call for the Ghana Revenue Authority and the Ministry of Finance to revise the contract’s fee structure from variable to fixed term, considering Strategic Mobilization’s expertise over the past four years.
Other provisions of the contract which according to the Director of Communications at the Office of the President worth reviewing include clauses on intellectual property rights, termination, and service delivery expectations.
Again, Eugene Arhin, the Director of Communication at the Office of the President underscored President Akufo-Addo’s urgent call for the Ghana Revenue Authority and the Ministry of Finance to conduct periodic monitoring and evaluation of SML’s performance in any renegotiated contracts to ensure compliance with the Public Financial Management Act (PFMA) Section 33.
This proactive approach, he explained aims to uphold transparency and accountability in future contractual agreements.
Mr Arhin also noted that President Akufo-Addo has directed the Ministry of Finance and the Ghana Revenue Authority to promptly implement these directives and provide the Office of the President with progress updates.
He concluded by extending President Akufo-Addo’s appreciation to KPMG for its thorough audit, underscoring the commitment to safeguarding Ghana’s financial integrity.
Details of KPMG’s Report
The KPMG report on Strategic Mobilization Limited’s controversial contract with the Ministry of Finance and the Ghana Revenue Authority unearthed several critical issues surrounding the engagement, procurement processes, and service delivery by SML.
One of the striking findings of the report is the absence of a technical needs assessment prior to the engagement of SML, despite indications of underreporting and potential revenue leakages in various industry reports and audits.
Per the KPMG’s report, although the technical assessment prior to the SML contract was legally not required, the lack of such an assessment raises questions about the thoroughness of the procurement process.
Moreover, the report highlighted the irregularities in the procurement method used to engage SML, stating that despite three unsuccessful attempts to obtain approval from the Public Procurement Authority (PPA) for single-source procurement, SML was eventually engaged as a subcontractor to West Blue.
The report also noted that subsequently, SML assumed full responsibility for services at the port without PPA approval, until 2020, following a change in leadership at the Ghana Revenue Authority (GRA), that PPA retroactively ratified the procurement processes.
The KPMG’s report also scrutinized the contractual agreements between the Ministry of Finance, the Ghana Revenue Authority, and Strategic Mobilization Limited.
It revealed that while the 2023 Contract expanded SML’s services to include upstream petroleum and minerals audit, the absence of parliamentary approval for multi-year contracts, as mandated by the Public Financial Management Act, is a significant concern.
In terms of service delivery, KPMG’s assessment revealed mixed results as it revealed that while SML partially delivered on transaction audit and external price verification services, GRA may not have realized all expected benefits due to a lack of monitoring and evaluation mechanisms.
Notably, the KPMG’s report revealed that Strategic Mobilization Limited’s downstream petroleum audit services yielded significant incremental volume and tax revenue, along with qualitative benefits such as real-time monitoring and reconciliation efforts by SML.
However, the KPMG’s report also noted that SML’s failure to implement upstream petroleum and minerals audit services underscores potential areas of significant revenue leakages.
KPMG thus emphasized the necessity of conducting comprehensive needs assessments to justify the provision of such services.
Another point of contention highlighted by KPMG’s report is the pricing model used in the contracts. KPMG noted discrepancies between the variable fee structure utilized and the more common fixed-fee model for transaction monitoring services.
In terms of financial implications, the fees paid to SML under the contracts from 2018 to the date of suspension according to the KPMG’s report amounted to GH¢1,061,054,778.00.
The report estimated total fees for the 2023 Contract span five years, totaling GH¢5,173,091,857.00, raising eyebrows with an average annual expenditure of about GH¢1 billion.
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