PwC Report: Financial Analysts Spearhead Calls for NNPC Restructuring

operation be urgently reviewed suggests that there are areas that will definitely require sanitising.

“As stated by PWC, the exercise is not a standard audit exercise and hence will not necessarily lead to the usual audit opinion. However, the qualification of the report is enough to put us on enquiry about its effectiveness. While the findings by the auditors may be credible, the proviso suggests that they may not have received all needed information hence the findings may not be total.

“The report is a good starting point for the incoming administration. I will expect a thorough analysis of the report and possible engagement of the auditors to provide further information on the assignment. There may be need to conduct further targeted investigations on areas not fully covered or where necessary cooperation was not obtained during the earlier exercise,” he said.

A review of the 199-page PwC report by THISDAY showed that it did not deviate from the highlights of the report released by the Auditor-General of the Federation (AuGF), Mr. Samuel Ukura, on February 4, 2015 and the recommendation that NPDC should remit $1.48 billion to the Federation Account.

The highlights of the PWC report were as follow:

•That the alleged unremitted funds could be explained mainly by NNPC’s operational and subsidy expenses which were directly charged against domestic crude revenue resulting in potential excess remittances by NNPC. A review of the charges and proceeds by PwC further revealed some anomalies resulting in an updated expected refund by NNPC/NPDC to the FGN of $1.48 billion, far from the $49.8 billion or $20 billion that created a stir.

•PwC, however, was unable to provide an opinion, or attestation to the numbers provided nor did it claim it had done an examination in accordance with generally accepted auditing standards.

The review was in many ways limited and relied significantly on provided information.

•There are material differences in numbers (for both domestic crude oil revenues and cash remitted) between PwC’s report and the reconciliation committee suggesting unacceptably weak accounting systems, given the extremely high value of the transactions.

•NNPC was said to operate an unsustainable model of operation of which 46 per cent of proceeds were spent on sustaining its operations and subsidies ($9.9 billion). Monthly remittance expectations to FAAC cannot possibly be met if NNPC’s operational costs are to have a first line charge on oil receipts. The way NNPC works must be reviewed urgently.

•According to PwC, many costs not directly attributable to crude oil operations were also charged; NNPC believes the 1997 NNPC Act gives it a carte blanche to spend “without limit or control”.

•The make up of the $1.48 billion to be refunded poses even more questions, even as much as $1.29 billion was attributed to “duplicated subsidy claims, computation errors, over-claim of subsidies, etc. Again, this suggests very weak controls over the subsidy process during the period under review.

•NNPC needs to be more accountable and to disclose the consolidated position of the group including all its subsidiaries and then the costs that are allowable should be pre-agreed by all relevant parties.

The situation where NNPC seems to have a blank cheque should be discontinued.

•PwC recommended that proceeds from FGN crude oil sales should be remitted intact to the Federation Account. Commissions for the corporation’s services can then be paid based on agreed terms.

•Errors in computation of crude oil prices also led to shortfalls of $3.6 million to the Federation Account.

•PwC recommended that the accounting and reconciliation systems for crude oil revenues used by government agencies be significantly overhauled.

•PwC auditors were unable to meet with the management of NPDC and had to rely on information made available to them by NNPC officials, thus raising questions about the legitimacy of the information provided on operations and remittances or lack thereof by the E&P subsidiary to the government treasury.