Forensic Audit Report Prepared without Bank Statement, says PwC

Written by on April 29, 2015

The forensic audit report on Nigerian National Petroleum Corporation (NNPC) compiled by PricewaterHouseCoopers (PwC) was done without bank statements, the report said.

PwC stated in the revenue section of the report that “up till the time of writing this report, our request for bank statements from CBN was not responded to.

PwC stated in the revenue section of the report that “up till the time of writing this report, our request for bank statements from CBN was not responded to.

The Central Bank of Nigeria (CBN), according to the report, shunned the auditors’ request for the bank statements.

PwC stated in the revenue section of the report that “up till the time of writing this report, our request for bank statements from CBN was not responded to,” PwC said in the revenue section of the report, which depicts the NNPC as an organization with chaotic procedure.

As a result of this “limitation”, PwC said it “relied on the account statements obtained from other stakeholders to carry out our independent check on the remittances made”.

PwC was engaged to carry out the forensic audit with a letter dated 5 June, 2014 by the Ministry of Finance in the wake of the missing $20 billion allegation by the former governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, who is now the Emir of Kano.

The audit report, though called “forensic”, may not be considered a detailed financial audit of Nigeria’s carbon deposit industry activities because PwC was quick to state that it  “examined crude oil production records only rather than crude oil and gas as per the signed contract”.

This review addressed three key areas, namely the outcome of the Senate Committee hearings, the total crude oil liftings by NNPC from all terminals in the period and the total revenue generated from crude oil from January 2012 to July 2013.  The audit report disclosed that the activities of the NNPC led to the under-valuation of $32,909,590 relating to 13 liftings (equity and domestic crude) during the review period.

These differences, the report noted, resulted in value loss to the federation. One of such differences is the under-valuation of $1,503,540.

PwC stated that “of the $33 million, Crude Oil Marketing Division  (COMD) of the NNPC agreed that for two liftings (with an under-valuation of $1,503,540), they had made valuation errors by computing the amounts due using a different pricing option in one case and a wrong Official Selling Price (OSP) in the other”.

The auditors added that there was another under reporting to the Federation Account Allocation Committee (FAAC) of $2,107,275. According to the report, ”for four other liftings with differences totaling $2,107,275, the unit prices on the schedule received did not agree with our recomputation. We checked the liftings to COMD’s valuation documents and observed that the prices agree with our recomputation but were just different on the schedule provided. However, the different valuations on the schedule were also used in the monthly FAAC reports; as such, the errors resulted in lower remittances to FAAC”.

There were other accounting infractions discovered by the auditors. According to PwC, “the total cash remitted into the Federation accounts from crude oil liftings for the period under review amounted to $50.81 billion”. “We were able to trace $49.33bn of this amount to the FGN bank accounts. The balance of $1.48billion was also traced to the FAAC report for subsequent months. $3.81billion is the difference between $50.81billion and the $47billion amount reported by the Senate Reconciliation Committee. This difference was as a result of the following:

FIRS remittance – We verified additional $1 billion revenue generated by FIRS, which was not reported by the Reconciliation Committee. We also traced the payment of this amount to the CBN/FIRS JP Morgan account.

Other third party financing remittance – $1.37billion was received from the third party financing arrangements. The arrangement with TEPNL resulted in the payment of $211million to the Federation from the USAN Field TMP project which represents Royalty and Profit oil, while the sum of $1.16billion was received from MPNL from the Satellite Field and Reserve Development projects.

NPDC remittance – Cash payments of $1.7billion representing Petroleum Profit Tax and Royalties had been remitted.

Equity crude and DPR royalty oil remittance – The remittance received from Equity crude sales, and in favour of DPR royalty oil, was $0.16 billion higher and $0.42billion lower than the Senate Reconciliation Committee figures respectively.”

The forensic audit report noted that “Mobil Producing Nigeria Limited, in its submission to the Senate, reported revenue figures of $518million and $859million in respect of the Reserve Development Project (RDP) and Satellite Field Development Project (SFD) respectively. Total E&P reported a revenue figure of $1.053 billion7 in respect of the USAN project. These amounts represent royalty and profit oil due to the Federation Account from these third party financing arrangements. The total revenue generated from third party financing arrangement was $2.43billion and not $2 billion reported by the Reconciliation Committee.”

With regards to undisclosed remittance to the Federation Account, out of the total revenue reported by MPNL, $1.158billion had been remitted to the Federation Account as at November 2013. This was confirmed by the Office of the Accountant General of the Federation at the presentation to the Senate Committee.”

However, PwC traced these payments to the CBN/NNPC JP Morgan account. The total of $858,750,972 relating to SFD had been remitted while $300,000,000 out of the $518,069,354 relating to RDP had been remitted. The balance of $218,069,354 was withheld to service the project finance cost and subsequent remittance of the net amount, in accordance with the contract terms.

In respect of the USAN project handled by Total E&P Nigeria Limited, $193,478,061.15 and $17,943,616 totaling $211,421,677, being Royalty and Profit Oil was remitted to the Federation account.

There were cash payments of $863 million by NPDC to FIRS not captured by Reconciliation Committee. PwC noted that “NPDC was yet to be assessed for tax by the FIRS. However, the company made several cash payments during and after the period which amounted to $863million. These payments were confirmed by FIRS to have been received. We also traced the payments to CBN/FIRS bank statements with JP Morgan.”

“For the period under review, NPDC made several payments to DPR based on self-estimated royalty. We traced several cash payments made by the company to CBN/DPR JP Morgan account statement,  to the tune of $839 million but this was also not captured by the reconciliation committee.

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