Ask ZiVA 728x90 Ads

 

OPINION: 2019 AUDIT REPORT: HOW KYARI CAME TO EQUITY WITH CLEAN HANDS

The Group Managing Director of the NNPC Ltd, Mele Kyari
The Group Managing Director of the NNPC Ltd, Mele Kyari
THEWILL APP ADS 2

“Transparency is the antidote to hypocrisy.” –Britt Merrick.

The major headline last week was “Auditor-General queries NNPC GMD over failure to remit N663.89 billion to Federation Account” and “Audit Query: Reps summon heads of 17 NNPC subsidiaries”

According to media reports, the Group Managing Director (GMD) of the Nigeria National Petroleum Company (NNPC) Limited, Mal. Mele Kyari was asked to explain the company’s “failure” to remit N663.89 billion into the federation account.

The query issued to the NNPC GMD was part of the recommendations made by the Accountant-General of the Federation (AuGF) in the 2019 audit report, which was submitted to the National Assembly.

The report noted that the schedule of transfers to the Federation Account by the company was not provided for scrutiny.

The AuGF recommended that the NNPC should remit the difference to the Federation Account and forward the evidence to the public accounts committees of the National Assembly.

But Mal, Mele Kyari in line with his promise, has introduced the programme, popularly known as Transparency, Accountability, and Performance Excellence (TAPE), which involves the opening up of the books of the company in a way no other GMD has done before.

No wonder the Nigerian National Petroleum Company Ltd faulted the queries raised by the Auditor-General for the Federation, Adolphus Aghughu, in its Audit Report for 2019 that it failed to account for about 107,239,439 barrels of crude oil lifted for domestic consumption in 2019.

The Company also faulted the observation made by the Auditor-General in the Report that it could not account for 22,929.84. litres of Premium Motor Spirit valued at N7.06bn pumped to two depots (Ibadan-Ilorin and Aba-Enugu) in June and July 2019.

The clarifications are contained in a letter written by the Nigerian National Petroleum Company Limited to the Auditor General for the Federation dated March 18 2022.

The letter seeks to provide additional facts and clarity to the Auditor General for the Federation on the audit issues raised on the inflows and outflows into the federation account by the NNPC for the year ended 31st December 2019 including the alleged 107 million barrels ‘Missing/unaccounted’ crude oil.

It was learnt that when the audit queries were initially raised and brought to the attention of the NNPC management, a series of engagements were held between officials of the NNPC and those of the Office of the Auditor-General.

For reasons best known to the Office of the Auditor-General, they decided to conclude their reports without final clarification from the NNPC Limited.

On the Auditor-General’s observation about the unaccounted 22,929.84 litres of PMS, worth N7.06bn pumped to two depots (Ibadan Ilorin & Aba Enugu) in June and July 2019, the NNPC in its response clarified that 22,929.84 litres were PMS losses attributable to various reasons.

It said there were 37 points of pipeline vandalism in July 2019 which led to product losses, adding that there was a major fire incident at Kom Kom during pumping operations due to valve insertions and leakages.

Other reasons for the PMS losses are the insertions of 24 valves from illegal tapping, while seven weld failures occurred from the old saddle weld.

It added that there were failures of two old pegs from previously pegged points, while 11 old valves also failed.

Furthermore, the NNPC urged the Auditor-General to note that PMS was introduced to the line after many months of inactivity, adding that figures quoted for the 3-pipeline segment should be in m3 and not litres but valued in litres.

The document further explained that 496.84m3 of PMS pumped on this axis was in July 2019 and not June 2019, stating that 4619m3 of PMS was however received at Aba in September 2019 from that batch pumping.

It stated further that the total amount from the transaction was N7,056, 137,190 as against the N7,056, 137,180 quoted by the Auditors.

On the N663,896,567,227.58 discrepancies between the amount reported by the NNPC as remittances to Federation Account in 2019 and what was reported by the Accountant General of the Federation, the document stated that the NNPC maintains proper records of transfers to the Federation Account.

It added that the actual reconciled balance as per the OAGF and NNPC was N1,146,493,281,781.26 as against the N1,272,606,864,000 which was being quoted.

From the document, it was revealed that NNPC FAAC Reports and NAPIMS Annual Reports showed the total remittance to Federation Account which included NNPC Profit Oil, JV Royalty and JV Tax; while the OAGF Report showed the above as a separate line item.

It added that based on the NNPC figure per transfer mandate, the remittance amounted to N568,269,416,640.86 as against N519,922,433,918.46.

From the document, it was revealed that the schedule of transfers that the NNPC made to the Federation Account was in alignment with the records provided as per the OAGF FAAC Report.

For the difference between NAPIMS Financials and the OAGF report, the document revealed several reasons, such as a timing difference as a result of the basis of accounting of the revenue/receipt due to the Federation.

The document added that while the NNPC accounts for the federation revenue on an accruals basis, the OAGF account is on the actual month of collection (cash basis).

The difference between NAPIMS Financials and OAGF Report, according to findings, was also due to funding of pre-export financing in line with appropriation which was classified as remittance to the federation in the financials. This, it added, has been adjusted appropriately.

The discrepancy also arose as a result of CBN’s reversal of overpayment of Cash Call arrears which, according to the NNPC’s submission had been appropriately adjusted.

“Based on these responses, no amounts are to be remitted. NNPC maintains proper records of transfers to the Federation Account, “the document added.

On the Auditor-General’s observation that the NNPC effected deductions from Federation Revenue before remittances to Federation Accounts, investigations further revealed that the NNPC duly complied with the provisions of the Constitution.

By the provisions of the constitution, Joint Venture Cash Call is regarded as a production cost and the first-line charge from Federation Revenue upon which government priority projects and pipeline maintenance expenses are budgeted for.

According to the findings, the NNPC is only acting as an agent of the Federation, a responsibility that enables it to transfer the balance of this charge to the Federation Account for distribution to the three tiers of government.

The document also noted that the production cost deduction (JV Cash Call amount) by NNPC and other deduction incidental to Crude Oil and Gas activities does not contradict the 1999 Constitution or any other Act and is in line with the provisions of NNPC Act Section 7(4){b).

On the observation of irregular transfer of the sum of N4,572,844,962.25 to the Federal Inland Revenue Service, the document showed that the NNPC is obligated on behalf of the Federation, to pay Petroleum Profit Tax from Crude Oil proceeds and Companies Income Tax from gas proceeds on JV operations.

It stated further that the total sum of N29,470,250, 296.88 was for both PPT and CIT for the period under review,

“Accordingly, the payments were made from the two revenue streams of the JV operations in the sum of N24,897,405,334.33 plus N4,572,844,962.25 from the Crude Revenue Account and Gas Revenue Account, respectively.

“The amount was paid to FIRS for subsequent remittance to the Federation as appropriate,” it added.

I would like to end this article with the words of Kirsten Gillibrand

“I find that when you open the door toward openness and transparency, a lot of people will follow you through.”

***Adewole Kehinde is a public affairs analyst based in Abuja. He can be reached at 08166240846. Email: kennyadewole@gmail.com