Audit-Report-on-NNPC
Audit-Report-on-NNPC
Audit-Report-on-NNPC
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Investigative Forensic audit of crude oil revenues and remittances by <strong>NNPC</strong> (January 2012 – July 2013)<br />
Comments<br />
remittance/under-remittance can <strong>on</strong>ly be arrived at if all revenues and all costs of the<br />
Corporati<strong>on</strong> and all its subsidiaries are accounted for in a c<strong>on</strong>solidated positi<strong>on</strong>. A detailed<br />
review of this was bey<strong>on</strong>d the scope of our mandate.<br />
We therefore recommend that <strong>NNPC</strong> be required to disclose the c<strong>on</strong>solidated positi<strong>on</strong> of the<br />
Group and its subsidiaries, and expected remittances to the Federati<strong>on</strong> accounts be<br />
determined from the available c<strong>on</strong>solidated net revenues. Furthermore, the nature of costs<br />
that are allowable should be pre-determined by all relevant parties.<br />
We also recommend that the <strong>NNPC</strong> act be reviewed as the c<strong>on</strong>tent c<strong>on</strong>tradicts the<br />
requirement for <strong>NNPC</strong> to be run as a commercially viable entity. It appears the act has given<br />
the Corporati<strong>on</strong> a "Blank" cheque to spend m<strong>on</strong>ey without limit or c<strong>on</strong>trol. This is untenable<br />
and unsustainable and must be addressed immediately. The Corporati<strong>on</strong> should be required<br />
to create value, and meet its expenses entirely from the value created. Proceeds from the<br />
FGN’s crude oil sales should be remitted entirely to the Federati<strong>on</strong> accounts. Commisi<strong>on</strong>s for<br />
the Corporati<strong>on</strong> services can then be paid based <strong>on</strong> agreed terms.<br />
I. We did not obtain any informati<strong>on</strong> directly from NPDC, but in accordance with NPDC<br />
former Managing Director's (Mr Briggs Victor) submissi<strong>on</strong> to the Senate Committee<br />
hearing <strong>on</strong> the subject matter, for the period, NPDC generated $5.11billi<strong>on</strong> (net of<br />
royalties and petroleum profits tax paid).<br />
We have relied <strong>on</strong> the Legal Opini<strong>on</strong> provided to the Senate Committee by the<br />
Attorney General (AG) <strong>on</strong> the subject of the transfers of various <strong>NNPC</strong> (55%) porti<strong>on</strong><br />
of Oil leases (OMLs) involved in the Shell (SPDC) Divestments which impact crude oil<br />
flows in the period. The AG's opini<strong>on</strong> indicated that these transfers were within the<br />
authority of the Minister to make. Thus, these assets were validly transferred to<br />
NPDC. The same AG's Legal Opini<strong>on</strong> also indicated that NPDC was to make<br />
payments for Net Revenue (dividend) to <strong>NNPC</strong>, which should ultimately be remitted<br />
to the Federati<strong>on</strong> Account. A sale will mean the following should be due to be<br />
remitted to the Federati<strong>on</strong> accounts<br />
1. Petroleum Profit Taxes (PPT)<br />
2. Royalties<br />
3. Signature b<strong>on</strong>us payment<br />
4. Dividend from profit for the period (according to dividend declared in<br />
line with NPDC’s dividend policy)<br />
Vanguardngr<br />
We have not obtained any informati<strong>on</strong> that suggests that NPDC has been assessed for<br />
PPT and Royalty for the review period. However, as disclosed by the former MD of<br />
NPDC at the senate hearing, NPDC had d<strong>on</strong>e a self assessment of PPT and Royalty<br />
and had unpaid self assessed PPT and Royalty to the tune of $0.47 billi<strong>on</strong> related to<br />
the review period.<br />
In January 2015 (subsequent to our initial reported c<strong>on</strong>clusi<strong>on</strong>s), we were availed<br />
with copies of Deeds of Assignment for OML’s 26,30,40,42. We were not provided<br />
with copies of Deeds of Assignment for OML’s 4,38,41,34. We were also provided<br />
C<strong>on</strong>fidential informati<strong>on</strong> for the sole benefit and use of the <str<strong>on</strong>g>Audit</str<strong>on</strong>g>or-General for the Federati<strong>on</strong>.<br />
PwC 16