Challenges with Revenue allocation (EITI)

Distribution of revenues: Chad

Chad´s 2007-2009 EITI Report identified major gaps in the monitoring of payments by oil companies to the state treasury account.

Chad agreed with its creditors for the Chad-Cameroon pipeline that all direct and indirect government revenues from oil and gas companies would transit through an account held at Citibank in London. After the international creditors were paid, the remaining revenues were moved to the government’s treasury account. The 2007-2009 EITI Report found that there has not been any record keeping systems in the country monitoring the flow of oil revenues from companies to these government accounts, and it was not possible to report on company payments made into the London transit account. This lack of oversight represented a significant risk of corruption and mismanagement as the government was not able to monitor the extent to which companies paid what they were supposed to pay in accordance with their contractual obligations.

The 2007-2009 EITI Report recommended that relevant ministries should improve the monitoring of extractive revenues, particularly from the oil sector. To follow up on this recommendation, the government has taken several actions to improve monitoring of oil payments, such as:

  • The establishment of a revenue-tracking unit at the Treasury with a robust mechanism for recording and monitoring payments from all oil and gas companies.
  • The launch of a project to computerize the record keeping system for government revenues and expenditures to ensure real-time monitoring of the budget. This has also led to improvements in the record keeping and audit system at the customs office to ensure that customs duties are correctly declared, assessed and paid in a timely fashion.

 


Subnational transfers: Philippines

The Philippines’ 2012 EITI Report found that local governments were not able to quantify how much they receive from the extractive companies.

The 2012 EITI report recommended that the relevant government agencies and the Department of Budget and Management should monitor and report on such transfers, disaggregated by local government and revenue streams.

To follow up on this recommendation, the government agencies, coordinated by the Cabinet-level Mining Industry Coordinating Council (MICC), have taken actions to ensure disclosure of information about the share of revenues that local governments are entitled to:

  • The Department of Budget and Management has committed to disclose disaggregated information to local governments to enable local governments to see how much they are receiving from each company.
  • Rules for streamlined disbursement of local government funds starting with the 2016 Budget should both quicken disbursements and improve local governments’ oversight and planning capacity.

 


Revenue management and expenditure: Ghana

Ghana’s 2004-2011 EITI mining reports documented misapplication of extractive revenue by local authorities and a lack of proper accounting and reporting on the use of these funds.

The report also found that irregular transfers made budgeting challenging, as the OASL did not always forward the full amount due to districts and municipalities and payments were made in instalments, which made planning and budgeting difficult for the District Assemblies. In addition, it appeared that there was a misapplication of funds by local authorities, as much of the revenue was spent on recurrent expenditures such as waste management, purchase of fuel and vehicles instead of economic development projects.

In light of these findings, the Ghana 2004-2011 EITI Report recommended that:

  • The revenue authority should regulate the timeliness of royalty transfers from companies.
  • Transfer of royalty from government to District Assemblies should be made in full and not in tranches.
  • Monthly royalty payments should be regularized for efficient calculation of royalty based on production.
  • Guidelines for the utilisation of royalty receipts by District Assemblies should be implemented to avoid recurring expenditure.

To follow up on these recommendations, the Government of Ghana and the multi-stakeholder group have taken several actions to ensure improved management of the local government funds from extractives. The OASL have ensured that the correct amounts of mining royalties are passed on to districts and municipalities; District Assemblies have established dedicated bank accounts for the revenues being transferred from central government; and the Minerals Commission has developed policy guidelines for the use of mineral revenues at the subnational level. The guidelines were developed alongside tracking mechanisms to ensure that the guidelines are being followed.

Source: eiti.org