The Auditor General, John Muwanga on Wednesday told the ad hoc committee on oil that there are several inconsistencies affecting the smooth operations in the oil sector.
On taxes, Muwanga noted that there have been frequent changes in the tax laws for the oil and gas sector. Tax provisions in the different Production Sharing Agreements are not consistent. The office also found out that there is no prescribed format for income tax computation besides lack of clear transfer pricing rules. In all these, however, the AG did not identify the exact changes in the laws or inconsistencies.
Muwanga was also able to establish that there are no guidelines on the format for minimum requirement for the work plans and budgets. This has led to inconsistencies among the oil companies in drawing out their work plans and budgets. Muwanga also noted that there is also absence of the action to be taken in the event an oil company deviates from the approved budget.
Production sharing agreements provisions indicate that labour and associated labour costs are recoverable irrespective of the salary structures and levels including bonuses. According to the AG, there is no cap on the level of labour and associated labour costs that are recoverable, nor are there requirements to have salary structures approved by government.
This therefore means that Ugandans will have to foot the bills of these companies when the oil venture makes profit. This also poses another danger where the oil companies are not motivated to pay reasonable and competitive labour costs given that the costs are recoverable without limit.
So far, the AG says the recoverable costs that have been audited amount to 492.5 million US Dollars. The amount is shared between Heritage Oil and Gas Ltd, Tullow Oil, Dominion, Hardman Petroleum Resources (now Tullow) and Neptune Petroleum.
MPs Steven Tashobya for Kajara, Julius Junjura for Buhaguzi and Joseph Matte for Bughendera were concerned that Ugandans will be footing some of the bills. Junjura questioned whether the social responsibility costs will also be met by the tax payers. The AG noted that such costs were rejected and could not be included as part of the recoverable costs.
The Office of the Auditor general also raised concerns on the composition of the advisory committee. The PSAs empower the committee to make most of the decisions related to the exploration activities. This means that the meeting minutes of the committee act as evidence of the decisions taken.
During the review however, the AG found out that government is only represented by two officials from the ministry of energy: the permanent secretary, Kabagambe Kaliisa and the commissioner of petroleum exploration. Besides, the minutes of the meetings are delayed and lack evidence of detailed review of the budgets and forecasts by oil companies. This was further evidenced by the fact that the oil companies could not prove that the tender procedures used were approved by the committee.
Muwanga recommended the expansion of the committee to include other institutions like the Bank of Uganda and Ministry of Finance.
