Tuesday 28 April 2015

NNPC SPENT N3.65TN WITHOUT APPROVAL. - FORENSIC AUDIT REPORT.


The report of the forensic audit of the accounts of the Nigerian National Petroleum Corporation (NNPC) released yesterday showed that the Corporation spent no less than N$18.53billion (or N3.65 trillion) as operational costs without a duly approved budgetary allocation.

The forensic audit report conducted by , showed that the total gross revenues generated from the federal government crude oil liftings between January 1, 2012 and July 31, 2013 was $69.34 billion and not $67 billion as earlier stated by the federal government’s Reconciliation Committee.

Out of this, total cash remitted into the Federation Accounts in relation to crude oil liftings was $50.81 billion and not $47billion as earlier stated by the Reconciliation Committee for the period from January 2012 to July 2013.
Read full report here.

PwC was engaged the office of the auditor-general for the federation (AuGF) to investigate any and all crude oil revenues generated by the NNPC that was withheld or unremitted to the Federation Accounts between 1 January 2012 and 31 July 2013.

The auditing firm also indicted the NNPC of lack of transparency and recommended full disclosures of third-party liabilities.

“The analysis above and resulting potential excess remittance suggest the existence of liabilities to third parties incurred by the Corporation. We recommend the Corporation be required to disclose details of all existing liabilities and impact on proceeds of future crude oil sales.”

As indicated by the report, the NNPC drew monies directly from revenues generated from crude oil liftings to fund its operations directly rather than remit same into the Federation Accounts for disbursement and allocation.

The report shows that 46 per cent of proceeds of domestic crude oil revenues for the review period was spent on NNPC’s operations and subsidies.

The auditing firm also faulted the NNPC’s current model of operations, describing it as unsustainable due to the resulting potential excess remittance. The auditing firm stressed that with the drop in oil price, the NNPC would be unable to make any remittance into the Federation Accounts if the current model was not changed.

“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 has had to incur third party liabilities to bridge the funding gap.

“Furthermore, the review period recorded international crude oil prices averaging $122.5 per barrel. By the time of concluding this report, international crude oil prices average about $46.07 per barrel, which is about 62 per cent reduction when compared to the crude oil prices for the review period. If the NNPC overhead costs and subsidies are maintained (assuming crude oil production volumes are maintained), the Corporation may have to exhaust all the proceeds of domestic crude oil sales, and may still require third party liabilities to meet costs of operations and subsidies, and may not be able to make any remittances to FAAC.

The NNPC said it incurred a cost of $12.23 billion, paid $8.70 billion for verified Premium Motor Spirit (PMS) and DPK (kerosene) subsidy, despite the absence of a properly defined framework for kerosene subsidy during the period.

Other costs incurred by the Corporation included demurrage claims by counterparties on product-exchange arrangements, $0.14 billion; verified crude oil and product losses, $0.83 billion; verified pipeline maintenance and management costs, $0.49 billion.

However, the report showed that the NNPC also incurred costs of $2.81 billion not directly attributable to domestic crude.

The resulting potential excess remittance indicates that the Corporation operates an unsustainable model.

PwC, in the report, also said it was unable to ascertain the exact unremitted revenues accruing to the Federation Accounts as it did not have access to NPDC’s full account. The Nigerian Petroleum Development Company is a subsidiary of the NNPC.

“We did not have access to NPDC’s full accounts and records and we have not ascertained the amount of costs and expenses which should be applied to the US$5.11billion Crude Oil revenue (net of royalties and PPT paid) per the NPDC submission to the Senate Committee which should be considered as dividend payment by NPDC to NNPC for ultimate remittance to the Federation Account.”

“Between 12 January and 29 January 2015, 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 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. If these are deemed not to be valid deductions, then the amount due from NNPC would be estimated at $2.07 billion (without considering expected known remittances from NPDC) or $4.29 billion (if expected known remittances from NPDC are considered).”

The forensic audit became necessary following a letter in September 2013 by the former governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi, to President Goodluck Jonathan stating that from January 2012 to July 2013, NNPC lifted $65 billion worth of crude on behalf of the federal government but remitted only $15.2 billion into the Federation Accounts, with $49.8 billion as outstanding to the federal government.

On December 13, 2013, the NNPC responded that no money was missing. A Reconciliation Committee comprising representatives of the CBN, NNPC, Department of Petroleum Resources (DPR), Federal Inland Revenue Service (FIRS), Office of the Accountant General (OAGF), the Budget Office of the Federation, Federal Ministry of Finance and the Federal Ministry of Petroleum Resources was set up.

On December 18, 2013, the Reconciliation Committee, in its report, estimated the unremitted funds at $10.8 billion while the CBN said it was $12 billion.

The CBN on February 4, 2014 informed the Senate Committee on Finance that the NNPC needed to account for $20 billion as the CBN could only confirm receipt of $47 billion of $67 billion revenue.

On February 13, 2014, the NNPC provided explanations of the $20 billion shortfall while the finance minister and coordinating minister for the economy recommended an independent forensic audit.

On June 5, 2014, PwC was appointed by the office of the Auditor General of the Federation (OAuGF) to conduct a forensic audit into the allegations.

Though the report of the forensic audit was submitted in November, nothing was said about it until February 2015 when a press briefing was held by the Office of the Auditor General of the Federation to announce that the NNPC was to remit only $1.48 billion to the Federation Accounts.

Probe me if you like, Jonathan tells Buhari
Apparently reacting reports credited to the president-elect, General Muhammadu Buhari (retd), that he (Buhari) would re-visit the alleged missing $20 billion oil money when he comes on board, President Goodluck Jonathan yesterday ordered the immediate release of the forensic audit report on the account of the Nigerian National Petroleum Corporation (NNPC).

Jonathan further asked the incoming Buhari government to probe the activities of the outgoing government, saying his administration had nothing to hide concerning the alleged unremitted money.
Following the president’s directive, the presidency yesterday evening released the report of the forensic audit of NNPC’s account which was conducted after former governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi, alleged that over $20 billion was missing.

The said forensic audit report by PricewaterhouseCooper (PWC) had indicted the Nigerian NNPC and recommended that the corporation refunds $1.48bn to the federation account.

President Jonathan, who spoke through his special adviser on media and publicity, Dr Reuben Abati, also refuted the allegation by the All Progressives Congress (APC) that his administration had been engaged in last-minute looting of the public treasury, rushed privatization and hurried recruitments into federal agencies.

He described the statement by national publicity secretary of the APC, Alhaji Lai Mohammed as unfair and combative.

Jonathan said the incoming administration of Buhari had the liberty to review all the actions of his government the way it wanted, adding that his government would continue to discharge its duties of governance until the May 29 handover date.

On the missing $20 billion, Abati who addressed journalists at the presidential villa, Abuja said, “President Jonathan is deeply concerned by the continuing suggestions that his administration still has anything to hide about the unproven allegation that about $20 billion is unaccounted for by the NNPC during his tenure.

“To lay the matter to rest, President Jonathan, in line with Section 7(2) of the NNPC Act, has directed that the full report of the PWC forensic audit of the NNPC accounts be released immediately to the public so that all Nigerians will be properly informed on the matter,” Abati said.

He said, however, that the incoming administration of Buhari had the liberty to review all the actions of his government as it may deemed fit, adding that the incumbent government would continue to discharge its duties of governance until the handover date.

On APC’s allegation that his administration was engaging in last minute looting of the public treasury, rushed privatization and hurried recruitments, Abati said: “We also consider as most unfortunate and uncharitable the suggestion by Alhaji Mohammed that the Jonathan administration is trying to “tie the hands” of the incoming government merely by continuing to discharge its constitutional responsibilities until the end of its tenure.

“The Jonathan administration, which continues to do its best to ensure a smooth and peaceful handover over of power to the president-elect, General Muhammadu Buhari, deeply regrets the unfairness and combative frame of mind reflected in Alhaji Mohammed’s statement.”

Noting that the incoming government was at liberty to probe the outgoing government, Abati said, “Without any prejudice whatsoever to the freedom of the incoming administration to do as it pleases within the confines of extant laws when it assumes office, the Jonathan administration will continue to discharge its responsibility to govern until May 29, 2015.

“In continuing to fulfil the obligations of his office however, President Jonathan has not, and will never condone any form of unscrupulous conduct on the part of state officials.

“President Jonathan will also never authorise any attempt to create any problems for the incoming administration as the APC spokesperson, who ought to know that the outcome of the March 28 presidential elections does not imply a cessation of governance, unjustly alleges.

“As Alhaji Mohammed threatened in his statement that the incoming administration will be perfectly within its rights to review all actions of the present government as it may deem fit.

“We see nothing wrong with that. After all, the present administration reviewed the actions of previous governments on assumption of office with resultant benefits for policy and project implementation.”

Source: Leadership Newspaper.

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