Tuesday, February 10, 2015

Okonjo Iweala Releases Highlights of Forensic Audit Into NNPC Missing N20Billion



Posted in: , , ,

Minister of Finance and Coordinating Minister of the Economy, Dr Ngozi Okonjo-Iweala has released the 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. It was posted on her official Facebook page and signed by the Auditor-general of Nigeria. Read below...


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




AROUND THE WEB




No comments:

Post a Comment

Click Post a Comment to share your thoughts, I'll love to hear from you. Thanks!

*Comments on old posts are moderated and may take sometime to be shown. That's just because I want to see them and respond to you if necessary.