Highlights of Investigative Forensic Audit done by Pricewaterhouse Cooper

February 11, 2015 8:39 am

For
those who care for this, found it on the Facebook page of Minister of
Finance and Coordinating Minister of the Economy, Dr Ngozi

Highlights

of Investigative Forensic Audit done by Pricewaterhouse Cooper into the
allegations of unremitted Funds into the Federation Accounts by the
NNPC for the period
January 2012 to July 2013.

Highlights of PwC Findings. Based on the work conducted by PwC, their conclusions are as follows; Total
gross revenues generated from FGN crude oil liftings was $69.34 billion
and NOT $67 billion as earlier stated by the Senate Reconciliation
Committee for the period from January 2012 to July 2013. 

Within the
$69.34 billion, $28.22 billion was the value of domestic crude oil
allocated to NNPC. Total amount spent as subsidy for PMS amounted to $5.32 billion

Total amount spent as subsidy for DPK (Not appropriated) amounted to $3.38 billion
Total other third party financing arrangement, and equity crude oil processing costs amounted to $1.19 billion
Total cost directly attributable to domestic crude oil amounted to $1.46 billion
Other costs incurred by the Corporation not directly attributable to domestic crude oil is $2.81 billion
Revenue
attributable to NPDC as submitted by the former NPDC Managing Director
to the Senate hearing (less PPT and Royalty paid) is $5.11 billion. PwC
stated that this amount needs to be incorporated into the financial
statements of NPDC from where dividend should be declared to the
Federation accounts.


Signature bonus, PPT and Royalty yet to be paid by NPDC is $2.22 billion
Total
cash remitted into the Federation accounts in relation to crude oil
liftings was $50.81 billion and NOT $47 billion as earlier stated by the
Senate Reconciliation Committee for the period from January 2012 to
July 2013
Based on the information available to PwC, and from the
analysis above, the firm submitted that NNPC and NPDC should refund to
the Federation Accounts a minimum of $1.48billion.

PwC recommendations:
The PwC report centered on the following three (3) key areas;

NNPC Costs
Ownership of NPDC revenues
DPK subsidy

Below are the highlights as extracted from the report.

NNPC Costs
“The
Corporation operates an unsustainable model. Forty six percent (46%) of
proceeds of domestic crude oil revenues for the review period was spent
on operations and subsidies. The Corporation is unable to sustain
monthly remittances to the Federation Account Allocation Committee
(FAAC), and also meet its operational costs entirely from the proceeds
of domestic crude oil revenues, and have had to incur third party
liabilities to bridge the funding gap”.

NNPC
provided transaction documents representing additional costs of $2.81
billion related to the review period, citing the NNPC Act LFN No 33 of
1977 that allows for such deductions. Clarity is required on whether
such deductions should be made by NNPC as a first line charge, before
remitting the net proceeds of domestic crude to the federation accounts.

PwC
therefore recommended that the NNPC model of operation must be urgently
reviewed and restructured, as the current model which has been in
operation since the creation of the Corporation cannot be sustained.

Ownership of NPDC revenues

PwC stated that:


According to NPDC former Managing Director’s (Mr Victor Briggs)
submission to the Senate Committee hearing on the subject matter, for
the period covered by their mandate, NPDC generated $5.11billion (net of
royalties and petroleum profits tax paid).


They relied on the legal opinion provided to the Senate Committee by
the Attorney General (AG) on the subject of the transfers of NNPC’s
(55%) portion of Oil leases (OMLs) involved in the Shell (SPDC)
Divestments which impacted crude oil revenues in the period. The AG’s
opinion indicated that these transfers were within the authority of the
Minister of Petroleum Resources to make.


NNPC’s (55%) portion of Oil leases (OMLs) involved in the Shell
Divestments related to the eight (8) OML’s were transferred to NPDC for
an aggregate amount of US$1.85billion. So far, only the amount of
US$100m had been remitted. PwC also added that they had expected a
transfer basis higher than the US$1.85billion aforementioned


NPDC had done a self assessment of PPT and Royalty and had unpaid self
assessed PPT and Royalty to the tune of $0.47 billion related to the
review period. PwC added that they did not obtain any information that
suggested that NPDC has been assessed for PPT and Royalty for the review
period.


PwC also stated that NPDC should remit dividend to NNPC and ultimately
to the Federation accounts, based on NPDC’s dividend policy and
declaration of dividend for the review period.

Kerosine Subsidy
PwC
determined from information obtained from PPPRA that $3.38 billion
relating to DPK subsidy cost was incurred by the NNPC for the review
period. They obtained a letter, dated 19 October 2009 written by the
Principal Secretary to the President, to the National Security Adviser,
confirming a Presidential directive of 15 June 2009 instructing that
subsidy on DPK be stopped. PwC also obtained a letter dated 16 December
2010 from the Executive Secretary PPPRA to the CBN Governor clarifying
that PPPRA had ceased granting subsidy on Kerosine since the
Presidential directive of 15 June 2009. Furthermore, Kerosine subsidy
was not appropriated for in the 2012 and 2013 FGN budget.

However, the Presidential Directive was not gazetted and there has been no other legal instrument cancelling the subsidy on DPK.

PwC
therefore recommended that an official directive be written to support
the legality of the kerosene subsidy costs. This should also be followed
by adequate budgeting and appropriation for the costs.


Ukura T. Samuel, JP, OFR, FCA
Auditor General for the Federation
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