EITI's Technical Director Sam Bartlett blogs about the importance of timeliness in EITI reporting.
Timeliness is best in all matters – Hesiod
The number of EITI Reports has increased substantially over the last 18 months. Additionally, the timeliness of EITI data has significantly increased, making it more informative and useful in public debate. However there is still wide scope for improvement and several multi-stakeholders groups are exploring opportunities to implement “real-time” EITI reporting.
In May, the EITI multi-stakeholder group in Indonesia published its first EITI Report. The report provides unprecedented insights into the oil, gas and mining industries that are playing a pivotal role in Indonesia’s rapid economic development, and dragging many millions out of poverty. The reported tax payments of over US $24.2 billion represent approximately 24% of total government revenue. For the first time ever, this data is broken down by payment type, company and project allowing readers to explore in detail how the government extracts value from the oil, gas and mining sectors. This includes insights into how the government monetises its entitlements from production sharing contracts in the petroleum sector, which accounts for a majority of revenues.
The Validation of EITI implementation in Indonesia is underway, with the final report expected shortly. However, one weakness in the process is already apparent. The Report is based on data from 2009. As Indonesia debates the merits of foreign investment and takes contentious steps to reduce costly fuel subsidies, 2009 data is of limited value. The Indonesian multi-stakeholder group is now working to issue reports covering 2010 and 2011 by year-end. This will provide more recent data, and enable readers to explore trends in tax and revenue collection over time.
This case highlights the importance of regular and timely EITI Reporting. Citizens want timely, comprehensive and reliable data about their country’s extractive industry. This kind of data is essential if the EITI is to contribute to meaningful and informed public debate. Evaluations of the EITI in several countries, such as Nigeria and Peru, have highlighted the timeliness of EITI data as a key issue. An overview of the timeliness of EITI reporting is available at http://www.eiti.org/reports, with links to all the reports published to date.
The EITI Rules agreed in 2011 established clear requirements for regular and timely EITI reporting. According to Requirement 5(e) in the EITI Standard, EITI Reports should be published annually, and no later than two years from the end of the financial period. The deadlines for timely reporting are determined by adding two years to the last day of the reporting period. For example:
Countries with calendar financial years
Countries with non-calendar financial years
1 Jan 2010 - 31 Dec 2010
31 December 2012
1 Jul 2010 - 30 Jun 2011
30 Jun 2013
1 Jan 2011 - 31 Dec 2011
31 December 2013
1 Jul 2011 - 30 Jun 2012
30 Jun 2014
1 Jan 2012 - 31 Dec 2012
31 December 2014
1 Jul 2012 - 30 Jun 2013
30 Jun 2015
The “two year rule” was developed to allow companies and government agencies to complete their end of financial year reporting (and associated audits) before disclosing data for reconciliation and publication. Companies are typically required to file their audited financial reports within six months after the end of the fiscal year (much sooner in many jurisdictions). Most government agencies have similar deadlines. This allows 18 months to finalise the EITI Report, which is a considerable period of time.
When these requirements were established, a transition period was agreed to allow implementing countries to make adjustments to their reporting schedules. Several countries had a backlog of EITI Reports that would need to be cleared. Compliant countries were required to meet this requirement by 31 December 2012. Candidate countries were required to meet this requirement by the end of their maximum candidature period. In February, the EITI Board began to enforce these requirements, and in doing so, developed procedures that have now been incorporated into the EITI Standard.
The “two year rule” for timely EITI Reporting has been retained and given greater emphasis (see Requirement 2). Countries that do not meet this requirement may be suspended, and ultimately delisted from the EITI:
If the EITI Report is not published by the required deadline, the country will be suspended. The suspension will be lifted if the EITI Board is satisfied that the outstanding EITI Report is published within six months of the deadline. If the outstanding reports are not published within six months of the deadline, the suspension will remain in force until the EITI Board is satisfied that the country has published an EITI Report that covers data no older than the second to last complete accounting period (Requirement 2). If the suspension is in effect for more than one year the EITI Board will delist the country (see Requirement 1.6).
The case of Mauritania illustrates how these procedures work in practice. In February, the Board agreed to temporarily suspend Mauritania for failing to meet the requirement for timely reporting. Mauritania had published a 2009 report in 2011, and on the strength of the report was designated EITI Compliant. However, Mauritania did not meet the deadline of 31 December 2012 to publish a 2010 report. The suspension was recently lifted, following the publication of the 2010 and 2011 EITI Reports. Yemen was also temporarily suspended in February for failing to produce 2008 and 2009 reports as agreed when a previous suspension was lifted. Yemen has just published its 2008, 2009 and 2010 reports and is working on delivering the 2011 report by the end of the year.
These cases are significant in that they highlight the importance the Board places on timely EITI data. But they are also exceptions to an otherwise encouraging trend. In the last two years there has been a significant improvement in the timeliness of EITI reporting. At the 5th EITI Global Conference in Paris in 2011, the most recent data from nine out of 22 reporting countries was from 2006 or older. The most recent data now shows that 16 countries have produced reports for 2011, and most countries have cleared their backlog of EITI Reports.
This is welcome, but there is still wide scope for improvement. Multi-stakeholder groups are increasingly scheduling their work so that it closely follows the corporate and government financial reporting calendar. Several countries have demonstrated that EITI Reports can be published relatively quickly following the end of the financial year. The corporate and government reporting entities typically welcome this, as they have the necessary data close at hand, and can quickly respond to any questions or discrepancies that may arise. Compiling older EITI Reports is often fraught with difficulties. Companies may have merged, or left the country. Government systems may have been updated and restructured. Determining the source of discrepancies can be time-consuming and expensive.
Several multi-stakeholder groups have begun to explore the potential for “real-time” EITI reporting. One option is based on the approached used in corporate reporting, whereby government agencies would release aggregated, unaudited and unreconciled revenue data immediately following the end of the financial period, with the disaggregated and reconciled data (the EITI Report proper) to follow once all of the audited data has been collated. The MSG would need to take care that this preliminary data is presented with appropriate caveats. It would, however, provide stakeholders with useful current data, and generate interest in the forthcoming EITI Report which would provide details regarding the composition, comprehensiveness and reliability of the data. It would, for example, be of particular interest to the media and parliamentarians who are interested in “of the moment” news.
This is consistent with a broader shift towards multi-stakeholder groups issuing several inter-linked reports throughout the year, each focussing on different aspects of EITI implementation covered in the new EITI Standard (such as licensing, contract transparency, and beneficial ownership). This leads to a more dynamic EITI process, and a steady stream of timely, comprehensive and reliable data, that can contribute to better informed public debate.