ESTMA: It’s time to act on the Act

April 20, 2017

If you are in the mining (or extractive) sector and are falling behind on preparing your first ESTMA report – perhaps due to a lack of time, resources, or expertise – or even worse, if you haven't even started, then this primer is for you.

The inaugural reporting deadline for most companies of May 30th is fast approaching, and the risk of non-compliance is severe: penalties of up to $250,000 per day can be imposed, and Senior Management can be held personally liable if their firms are proven to have been making any false or misleading statements or disclosures.

We'll get to some recommended steps for affected firms in a moment, but first some background:

The Extractive Sector Transparency Measures Act, commonly referred to as ESTMA, was enacted almost two years ago as part of a global effort to raise standards of transparency in the extractive sector. In short, it requires businesses to disclose any payments over $100,000 CAD made in connection with commercial development to any level of Canadian or foreign government in a variety of categories during their fiscal year. Reports are publically disclosed and housed on the Government of Canada website for a minimum of five years.

What is ESTMA?

The Extractive Sector Transparency Measures Act (ESTMA) was enacted with the objective to deter corruption in the mining and extraction sector by making government revenues received from natural resources transparent to the public. It came into effect on June 1st, 2015. For more information, please visit the Government of Canada's ESTMA website.

Who needs to be in compliance?

Any corporation, trust, partnership, or other organization engaged in the commercial development of oil, gas or minerals needs to register with the federal government and receive an ESTMA identification number in order to report. An entity must submit its annual report within 150 days following the completion of its financial year (May 30th, 2017 for the majority of our clients and prospects with a January-December fiscal year).

When ratified into law, organizations were given until 150 days following their financial year - beginning with payments made during 2016 - to learn the nuances of the legislation and ensure compliance. Anecdotally, we've found that a majority of our clients and prospects have run into questions about how best to compile their reports and are resultantly playing catch up.

What now? A Checklist of Suggested Steps to Ensure Compliance with the Act

  • Review the ESTMA requirements and confirm how it influences your organization
  • Identify the key players required for compliance at corporate offices and each mine site
  • Review processes and controls at your organization with regards to the collection of information on payments to any applicable governments
  • Identify any potential gaps on controls and data collection processes, and develop and implement any new processes and controls required to guarantee appropriate data collection
  • Develop and execute a plan to be able to consolidate all data required to comply with the Act
  • Obtain attestation from Directors and Officers involved in the reporting process from each site
  • Complete filing and post on corporate website (if applicable)
  • Review any implemented internal controls to ensure consistency in tracking and reporting payments made to governments on a global basis, to comply with other countries' regulations

How BDO Can Help

If you have any questions about the steps above or require any assistance, we'd be happy to ensure your ESTMA filings are as thorough as necessary, while at the same time being as painless as possible for your stakeholders.

Apart from extensive knowledge in the procedures, BDO offers several other advantages to businesses:

We can provide global reach, but also local knowledge: we have over 1,408 offices with 67,731 staff in 158 countries around the world. This global footprint can be useful in the collection and consolidation of materials: Not only can we work with multi-lingual stakeholders, but often times a local resource will have an easier time imparting urgency and thoroughness for materials than someone several time zones away.

Secondly, we can act as the hub for compliance, and work with all of your different sites and stakeholders to bring together the required information, create templates for future years, and perform completeness assessments on the reporting.

Lastly – and most importantly, we can provide peace of mind so that Senior Executives can sign the attestation letter on behalf of the company with confidence that it meets all ESTMA requirements, and get back to focusing on their businesses.

To learn more, contact your local BDO office or:

Bryndon Kydd
Partner, National Natural Resources Leader

Joe Filippelli
Senior Manager, Advisory Services

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