Au­dit Re­port: PAYE of Se­cu­rity Per­son­nel, Abuja Res­i­dents Not Remit­ted to Trea­sury…

Picks holes in FAAC re­mit­tances, IPPIS Trans­ac­tion Ac­count, oth­ers

THISDAY - - FRONT PAGE - Ndubuisi Fran­cis in Abuja

The fi­nan­cial state­ment on the ac­counts of the fed­er­a­tion for the year ended De­cem­ber 31, 2015, has shown that the per­sonal in­come taxes of Armed Forces per­son­nel, the Nige­ria Po­lice Force, Min­istry of For­eign Af­fairs and res­i­dents of the Fed­eral Cap­i­tal Ter­ri­tory (FCT) Abuja, were not cap­tured in the Con­sol­i­dated Rev­enue Fund (CRF) for that year.

This was the po­si­tion of the An­nual Re­port of the Au­di­torGen­eral of the Fed­er­a­tion on the Ac­counts of the Fed­er­a­tion of Nige­ria for the year ended De­cem­ber 31, 2015, the sec­ond part of which was sub­mit­ted to the Na­tional Assem­bly by the Au­di­tor-Gen­eral of the Fed­er­a­tion, Mr. An­thony Mkpe Ayine, re­cently.

THISDAY had ex­clu­sively re­ported the sub­mis­sion of the sec­ond part, the first hav­ing been sub­mit­ted ear­lier be­fore Ayine’s ap­point­ment early this year.

Parts 1 and 2 of the au­dit re­port cov­ered 87 min­istries, de­part­ments and agen­cies (MDAs) of the fed­eral gov­ern­ment, which sub­mit­ted their ac­counts for scru­tiny.

In the re­port ob­tained by THISDAY, the au­di­tor-gen­eral ob­served in Note 4 of the fi­nan­cial state­ments that ‘NIL’ rev­enue was paid in re­spect of per­sonal in­come taxes.

“It means that all per­sonal in­come taxes paid by the per­son­nel of the Armed Forces of the fed­er­a­tion, the Nige­ria Po­lice Force, the min­istry or depart­ment of gov­ern­ment charged with re­spon­si­bil­ity for For­eign Af­fairs, and res­i­dents of the FCT Abuja were not remit­ted to the Con­sol­i­dated Rev­enue Fund,” the au­dit re­port said.

Ac­cord­ing to the re­port, “This non-dis­clo­sure of per­sonal in­come taxes re­ceived dur­ing the year con­tra­venes Sec­tion 162 (1) of the Con­sti­tu­tion of the Fed­eral Repub­lic of Nige­ria, 1999, which states that ‘the fed­er­a­tion shall main­tain a spe­cial ac­count to be called the Fed­er­a­tion Ac­count into which shall be paid all rev­enues col­lected by the gov­ern­ment of the fed­er­a­tion, ex­cept the pro­ceeds from the Per­sonal In­come Tax of the per­son­nel of the Armed Forces of the fed­er­a­tion, the Nige­ria Po­lice Force, the min­istry or depart­ment of gov­ern­ment charged with re­spon­si­bil­ity for For­eign Af­fairs, and the res­i­dents of FCT Abuja’.”

The Fed­er­a­tion Ac­count and CRF are two dif­fer­ent ac­counts.

The Fed­er­a­tion Ac­count be­longs to the en­tire fed­er­a­tion, but is how­ever kept in trust on be­half of the three tiers of gov­ern­ment by the fed­eral gov­ern­ment.

On the other hand, the CFR is the main ac­count of the fed­eral gov­ern­ment into which all rev­enues are paid and is ex­clu­sively man­aged by it.

Due to this con­sti­tu­tional breach, the Ac­coun­tant-Gen­eral of the Fed­er­a­tion was re­quired to ex­plain why the pro­ceeds from the per­sonal in­come tax of the per­son­nel of the Armed Forces, the Nige­ria Po­lice Force, the Min­istry of For­eign Af­fairs and the res­i­dents of the FCT was not paid into the CRF Ac­count.

The re­port also pointed to sev­eral other in­frac­tions, in­clud­ing omis­sions and dis­crep­an­cies in clos­ing bal­ances, non-in­clu­sion of vital de­tails and doc­u­ments, among oth­ers, and di­rected the ac­coun­tant-gen­eral to ex­plain.

For in­stance, the re­port picked holes in the non-dis­clo­sure of fed­eral gov­ern­ment for­eign re­serves and Fed­er­a­tion Ac­counts in the fi­nan­cial state­ments.

It noted that the value of the fed­eral gov­ern­ment and Fed­er­a­tion Ac­count for­eign re­serves were not dis­closed in the fi­nan­cial state­ments as part of the as­sets of the fed­eral gov­ern­ment.

Also, the omis­sion and dis­crep­an­cies in clos­ing bal­ances in the Trust and Spe­cial Funds were flawed.

The au­dit re­port re­vealed that an ex­am­i­na­tion of the records in­di­cated that the clos­ing bal­ances of the Trust Fund Ac­counts (as listed in the Trial Bal­ance) of N201,589,195,828.25 dif­fered from the fig­ure of N208,573,367,707.90 cap­tured by records pro­vided by the ac­coun­tant-gen­eral, re­sult­ing in a dif­fer­ence of N7,351,388,476.22.

Such trust funds in­cluded Na­tional Ex­port Su­per­vi­sion Scheme (NESS) Oil Pool Ac­count, 2% Ed­u­ca­tion Levy, Ce­ment Levy Pool Ac­count, and 65% Wheat Flour Levy.

Ac­cord­ing to the au­dit re­port, the omis­sion and dis­crep­an­cies in clos­ing bal­ances re­sult­ing in the dif­fer­ence of N7,351,388,476.22 im­plied that the fig­ures dis­closed in the fi­nan­cial state­ment were doubt­ful.

The ac­coun­tant-gen­eral was there­fore re­quired to rec­on­cile the fig­ures in or­der to ar­rive at the true po­si­tion of the fig­ures that should be re­ported in the fi­nan­cial state­ment.

On the CRF, the re­port said from avail­able records for au­dit, the sum of N2,530,677,683,299.78 was com­puted as Statu­tory Rev­enue Al­lo­ca­tion for the year 2015, while the bud­get for the same year was N2,867,539,000,000.00, thereby re­sult­ing in a neg­a­tive vari­ance of N336,861,316,700.22.

It also com­mented on the four per cent cost of col­lec­tion to the Fed­eral In­land Rev­enue Ser­vice (FIRS), not­ing that in the fi­nan­cial state­ment, no fig­ure was given in re­spect of the four per cent cost of col­lec­tion for FIRS as well as fig­ures for ex­pen­di­ture in re­spect of the ser­vice per­son­nel and overhead costs, be­cause the fi­nan­cial re­port of the or­gan­i­sa­tion was not avail­able for con­sol­i­da­tion.

“Fur­ther ex­am­i­na­tion of al­lo­ca­tion from 2015 Fed­er­a­tion Ac­count and Value Added Tax (VAT) ac­count by Fed­er­a­tion Ac­count Al­lo­ca­tion Com­mit­tee (FAAC) re­vealed that a to­tal of N41,603,967,673.02 and N31,149,117,659.90 were al­lo­cated to the FIRS as four per cent cost of col­lec­tion from Fed­er­a­tion Ac­count and Value Added Tax re­spec­tively in 2015.

“This fig­ure did not in­clude other sources of four per cent cost

of col­lec­tion en­joyed by FIRS, such as four per cent on FCTA and oth­ers. This same sit­u­a­tion oc­curred in the 2010, 2011, 2012, 2013 and 2014 fi­nan­cial state­ments, and no ac­tion had been taken to have com­plete trans­ac­tions of the fed­eral gov­ern­ment agency’s rev­enue and ex­pen­di­ture.

“This ac­tion has re­sulted in the un­der­state­ment of the fi­nan­cial state­ment by N72,753,085,332.92. This re­sulted in the non­com­plete­ness of trans­ac­tions in the fi­nan­cial state­ments con­trary to IPSAS full dis­clo­sure re­quire­ments,” the au­dited re­port noted.

The non-re­port­ing of the re­ceipts and ex­pen­di­ture of FIRS in the fi­nan­cial state­ments, the re­port fur­ther ob­served, was very ma­te­rial and there­fore called for im­me­di­ate ac­tion by the af­fected au­thor­i­ties.

“Also in the com­pu­ta­tion of four per cent cost of col­lec­tion, fig­ures should be holis­tic to in­clude other sources out­side the share from Fed­er­a­tion Ac­counts and VAT,” the re­port added.

The ac­coun­tant-gen­eral was there­fore re­quested to pro­vide ex­pla­na­tions on why the fund­ing and cor­re­spond­ing ex­pen­di­ture of the FIRS were not re­ported in the fi­nan­cial state­ments.

Au­dit ex­am­i­na­tion of records re­lat­ing to re­pay­ments of ex­ter­nal loans also re­vealed that the de­duc­tions by FAAC from 2015 fed­eral gov­ern­ment shares of rev­enue al­lo­ca­tions in re­spect of ex­ter­nal debt ser­vic­ing was N67,705,546,712.47 “whereas, Note 36 re­ported N74,679,041,429.59 and schedule of to­tal ex­ter­nal loans of the FGN re­ported N74,694,520,000.00 (be­ing to­tal loan re­pay­ment of N20,543,160,000.00 (US$104,280,000.00) plus exchange loss dif­fer­ence of N54,151,360,000.00 (US$274,880,000.00)”.

Sim­i­larly, the re­port also high­lighted the fail­ure of the Of­fice of the Ac­coun­tant-Gen­eral of the Fed­er­a­tion to pro­vide un­der­ly­ing records cov­er­ing the sum of N2,978,801,068.64 un­der the In­te­grated Pay­roll and Per­son­nel In­for­ma­tion Sys­tem (IPPIS) Op­er­a­tion Trans­ac­tion Ac­count.

IPPIS is un­der the purview of the Of­fice of the Ac­coun­tan­tGen­eral.

Ac­cord­ing to the au­dit re­port, the bank state­ments, cash book, man­dates and state­ment of af­fairs of IPPIS Op­er­a­tion Trans­ac­tion Ac­count in the Cen­tral Bank of Nige­ria (CBN), were not pro­vided for au­dit, in spite of re­peated de­mands, “ex­cept the last page of the bank state­ment show­ing the clos­ing bal­ance of N2,978,801,068.64 as at 31st De­cem­ber 2015”.

The re­port fur­ther pointed out that the in­abil­ity of the ac­coun­tant-gen­eral to pro­duce these doc­u­ments de­spite of­fi­cial re­quests vide the let­ters ref­er­ence No OAuGF/TAD/VOL.1/166 dated Au­gust 16, 2016 and ref­er­ence No OAuGF/TAD/ VOL.1/169 dated Au­gust 25, 2016, which had de­nied au­dit in form­ing an opin­ion about the true po­si­tion of the op­er­a­tion of the ac­count.

Ac­cord­ing to the re­port, there was also fail­ure to deduct with­hold­ing tax of N378,879,674.99 from Webb Fon­taine Ltd.

“In the pay­ment for Des­ti­na­tion In­spec­tion Ser­vices fees of N3,788,796,749.91, ex­am­i­na­tion of the man­dates for pay­ments of ser­vice fees in re­spect of five com­pa­nies on a sam­ple ba­sis re­vealed that four of the com­pa­nies had with­hold­ing tax de­ducted at source be­fore pay­ments, with the ex­cep­tion of Webb Foun­tain Ltd.

“The sum of N3,788,796,749.91 was paid to Webb Foun­tain Ltd vide man­date no. FD/ED/ LS/0177/11/6941/DF of 3rd March, 2015, with­out de­duc­tion of with­hold­ing tax. This ac­tion led to the loss of tax rev­enue of N378,879,674.99 and pos­si­bly more from com­pa­nies not cov­ered by the sam­pled test,” the re­port added.

The re­port also ob­served that there was a non-pro­vi­sion of the fed­eral gov­ern­ment’s Sig­na­ture Bonus Ac­count.

It pointed out that the bank state­ments, cash book and man­dates in re­spect

of the FGN’s Sig­na­ture Bonus Ac­count for the year 2015 were not pro­vided for au­dit.

Sig­na­ture Bonus rep­re­sents fees and charges col­lected by the Depart­ment of Pe­tro­leum Re­sources (DPR) from com­pa­nies that are prospect­ing for hy­dro­car­bon re­sources in Nige­ria be­fore a fi­nal min­ing con­ces­sion is granted to those com­pa­nies that won the bid round.

The fund is for the de­vel­op­ment of the pe­tro­leum in­dus­try and the man­power (ca­pac­ity build­ing) and other re­quire­ments of the in­dus­try.

The main ben­e­fi­ciary of the sig­na­ture bonus is the Pe­tro­leum De­vel­op­ment Trust Fund (PTDF) and it is often used to fund the an­nual bud­get through trans­fers to the CFR.

Sim­i­larly, the re­port stated that the ex­am­ined records from the FAAC sec­re­tariat re­vealed that the to­tal rev­enue in­flows to the Fed­er­a­tion Ac­count from the var­i­ous col­lect­ing agen­cies as per CBN com­po­nent state­ments amounted to N6,001,031,479,562.62 for the year 2015.

It re­vealed that the anal­y­sis of the records re­vealed that from the to­tal rev­enue of N2,442,895,781,050.53 payable to the Fed­er­a­tion

Ac­count by the Nige­rian Na­tional Pe­tro­leum Cor­po­ra­tion (NNPC), the cor­po­ra­tion de­ducted the sum of N865,448,552,694.78, rep­re­sent­ing the Joint Ven­ture Cash Call (JVC) be­fore pay­ing the re­sult­ing net fig­ure of

N1,577,447,228,355.75 to the Fed­er­a­tion Ac­count.

“The net fig­ure of N582,932,3,582.84 was paid to the Fed­er­a­tion Ac­count from the to­tal amount of N608,083,591,121.01 col­lected by the Depart­ment of Pe­tro­leum Re­sources (DPR) after de­duct­ing N25,151,211,538.17 as ex­cess pro­ceeds on roy­al­ties.

“From the sum of N2,403,882,419,922.32 payable to the Fed­er­a­tion Ac­count by the Fed­eral In­land Rev­enue Ser­vice, a sum of N26,150,008,184.05 be­ing ex­cess pro­ceeds from PPT (Pe­tro­leum Profit Tax) was de­ducted to ar­rive at the net fig­ure of N2,377,732,411,738.27 paid into the Fed­er­a­tion Ac­count.

“It should be noted that NNPC made de­duc­tion of the sum of

N865,448,552,694.78 from the rev­enue col­lected con­trary to the pro­vi­sions of Sec­tion 162(1) of the 1999 Con­sti­tu­tion which stip­u­lates that ‘all rev­enue pro­ceeds should be paid to the Fed­er­a­tion Ac­count’.”

The re­port added: “These had been a reg­u­lar sub­ject of the au­di­tor -gen­eral’s pre­vi­ous years’ re­ports with­out any pos­i­tive re­sponse, from NNPC man­age­ment.”

IT there­fore rec­om­mended that the man­age­ment of NNPC should hence­forth de­sist from fur­ther vi­o­la­tion of Sec­tion 162 of the Con­sti­tu­tion.

“In this re­gard, the man­age­ment of NNPC is to en­sure that all money ac­cru­ing to Fed­er­a­tion is promptly paid to the Fed­er­a­tion Ac­count with­out any de­duc­tion in line with above con­sti­tu­tional pro­vi­sion.

“The fed­eral gov­ern­ment should agree on a per­cent­age to be given to NNPC as cost of col­lec­tion as it is be­ing done to NCS (7%) and FIRS (4% of non-oil rev­enue).

“The cost of col­lec­tion and any other de­duc­tions be­ing made presently by NNPC should only be ad­min­is­tered monthly by FAAC as it is be­ing done to other rev­enue col­lect­ing agen­cies,” the au­dit re­port rec­om­mended.

It also noted that an ex­am­i­na­tion of the record of col­lec­tions into the Non-Fed­er­a­tion Ac­count by Nige­ria Cus­tom Ser­vice (NCS) re­vealed a net dif­fer­ence of N28,139,988,122.85 be­tween amount col­lected into Spe­cial Ac­counts by the NCS and amount stated in the trial bal­ance.

“The im­pli­ca­tion is that the rev­enue record of the Ac­coun­tant Gen­eral has been un­der­stated by the above amount. In his re­sponse, the ac­coun­tant-gen­eral main­tained that the dif­fer­ence was as a re­sult of the cut-off date be­tween Nige­ria Cus­toms Ser­vice and CBN; that Rev­enue and In­vest­ment Depart­ment of OAGF re­lied on the bal­ances from CBN’s bank state­ment.

“How­ever, due to the fact that the dif­fer­ence is a rea­son­able amount, au­dit is con­strained to re­port on it,” the re­port stated.

The ac­coun­tant-gen­eral was equally re­quired to give rea­sons for the non-col­lec­tion of levies into the Po­lice Re­ward Fund, 10% Co­coa Levy, Ser­vice Charge Pool Ac­count, IMPL Com­mit­tee on FGN Landed Prop­erty, Cheque Op­er­a­tional Ac­count, Moneti­sa­tion (Mo­tor Ve­hi­cle) and Pri­vati­sa­tion Pro­ceeds Ac­count.

On the fed­eral gov­ern­ment share of trust funds for the pe­riod be­tween 2011 and 2015, the re­port noted that the in­flows into the funds had recorded mixed for­tunes, even as it ques­tioned the non-in­vest­ment of the amounts in Eco­log­i­cal, Sta­bil­i­sa­tion and De­vel­op­ment of Nat­u­ral Re­sources as re­quired by law.

“It has been ob­served over the years that the amounts in the fol­low­ing funds i.e. Eco­log­i­cal, Sta­bi­liza­tion and De­vel­op­ment of Nat­u­ral Re­sources were never in­vested.

“Au­dit ev­i­dence showed that the funds al­ways have favourable bal­ances at the end of each year. It will be eco­nom­i­cally ben­e­fi­cial to in­vest the amounts in these funds and the in­ter­est ac­cru­ing there from would re­duce the level of do­mes­tic debts that had es­ca­lated to tril­lions of naira.

“In the same vein, if these funds were in­vested, the amounts of fed­eral gov­ern­ment bonds floated with the ac­crued charges and the ef­fect on CRF bal­ances would have also re­duced; also, the in­ter­est ac­cru­ing from in­vest­ing the bal­ances

would re­sult in more funds for the three tiers of gov­ern­ments,” the re­port ob­served.

It also al­luded to the non-es­tab­lish­ment of an agency to ad­min­is­ter the Eco­log­i­cal Fund, say­ing the au­dit re­vealed that amounts to­tal­ing N596,137,481,709.94 were de­ducted from the Fed­er­a­tion Ac­count to the Eco­log­i­cal Fund be­tween June 1999 and De­cem­ber 2015.

“Mean­while, con­trary to the pro­vi­sions of Sec­tion 5(4) of Rev­enue Al­lo­ca­tion Act which re­quires that an agency be es­tab­lished to man­age the funds, no agency had been es­tab­lished.

“Cur­rently, the Na­tional Com­mit­tee on Eco­log­i­cal Prob­lems (NCEP) is the body re­spon­si­ble for han­dling eco­log­i­cal prob­lems in the coun­try.

“This com­mit­tee is lo­cated in the Of­fice of the Sec­re­tary to the Gov­ern­ment of the Fed­er­a­tion (SGF) and its chair­man is the hon­ourable Min­is­ter of En­vi­ron­ment, Hous­ing & Ur­ban De­vel­op­ment.

“This ob­ser­va­tion has been a sub­ject of the Au­di­tor Gen­eral’s re­port over the years with­out any pos­i­tive re­sponse,” the au­dit re­port said.

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