Audit-Report-on-NNPC

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Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) Other Findings For the period reviewed, we identified possible errors in the computation of crude oil prices at the NNPC that resulted in a $3.6 million shortfall in incomes to the Federation account. The major beneficiaries were Fujairah Refinery - $805,545, NNPC (KRPC/WRPC) – $697,995 and NNPC (COMD) - $2,107,275. Subsequent to our identification of this issue, NNPC has amended the errors, and have reflected the amendments in the remittances to FAAC in October 2014. Our review of the DPK sales process revealed that NNPC sells DPK to bulk DPK marketers in Nigeria at N40.90 per litre at a location on the coastal waterways (off shore Lagos). The expected/official regulated retail price of DPK in Nigeria is N50 per litre. This retail price of N50 comprises the Ex-depot price of N34.51 and a Margin of N15.49. NNPC should be required to explain the reason for selling DPK at N40.90, rather than the regulated Ex-depot price of N34.51. The Corporation should also be required to explain the reason for selling DPK to bulk DPK marketers at a location on the coastal waterways (off shore Lagos) rather than at the in-country depots. NNPC explained that the contract the Corporation executes with the kerosene marketers confirms NNPC (PPMC) is responsible for the delivery of DPK to marketers at their assigned depots on shore. The Corporation further explains that the kerosene marketers however opt to receive the product off shore Lagos. The Corporation further explains that the DPK sales price per litre off shore Lagos includes the following: Naira Approved sales price 34.51 Bridging allowance 5.85 Marine Transportation Allowance 0.15 PPPRA Admin Charge 0.15 Total 40.66 Unexplained charge 0.24 Sales price off shore Lagos 40.90 The accounting and reconciliation system for crude oil revenues used by Government agencies appear to be inaccurate and weak. We noted significant discrepancies in data from different sources. The lack of independent audit and reconciliation led to over reliance on data produced from NNPC. This matter is further compounded by the lack of independence within NNPC as the business has conflicting interests of being a stand-alone self-funding entity and also the main source of revenue to the Federation account. Vanguardngr Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 18
Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) 2.2. Our approach to this mandate It is important to note that although PwC has reviewed documents submitted by the key stakeholders involved, our work was conducted independently, and our findings are based on the review of documentation, analytical reviews of data, and interviews conducted. Due to this approach, our findings and the way we presented them in this report may not necessarily reflect the formats of the various submissions made by the different stakeholders. In certain instances where we were not provided with information or access to key stakeholders (Section 6.3.2 ) we leveraged on external and available sources of information to reach our conclusions. These external and available sources of information are clearly highlighted in the relevant sections of this report. Any information and/or documentation which may come to our attention subsequent to the date of this report may alter our findings. We have also listed some of the limitations to our scope in Section 3.2. The procedures performed and specific limitations to scope are also discussed under the various work stream sections. Based on specific instructions from the <strong>Audit</strong>or General for the Federation, we returned to do additional work, after NNPC had represented that our initial process did not provide an opportunity for formal discussions of our findings with top management, in the form of an exit interview. With the exception of the Deputy Group Managing Director/ Group Executive Director Finance and Accounts of NNPC, the <strong>Audit</strong>or-General for the Federation, and the Honourable Minister of Petroleum Resources, we have not discussed the findings of this report with any stakeholder. Our work was split into two work streams as follows; 1. We estimated how much revenue is due to the FGN from crude oil liftings; and 2. We reconciled the revenues due to the FGN against the actual cash received by the federation. Vanguardngr Our findings and conclusions considered the impact of some matters which require legal opinion to be sought by the FGN. Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 19
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Audit-Report-on-NNPC

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