Tag: Auditor General of the Federation

The just released audit report on Federal Government’s Consolidated Financial Statement for the year ended 31st December 2021 has indicted the Nigeria National Petroleum Company Limited (NNPCL), the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) and the Nigeria Downstream, Midstream Regulatory Authority for huge financial infractions and non-remittance of revenue to the federation account during the year under review.

The report, prepared by the Office of the Auditor General of the Federation and submitted to the Clerk to the National Assembly ,cited cases of unauthorised deduction from the federation revenue, irregular deduction from domestic crude sale, warehousing of the federation’s miscellaneous income, unsubstantiated payment of shortfall from the sale of MT Cargo of PMS, outstanding royalties due from NNPC-COMD/MCA/PSC, and unjustified deductions from Joint venture royalty by NNPC before remitting to DPR.

Also mentioned as financial irregularities in the report are outstanding royalties on oil concession rentals and gas flaring payable by operators to the federation’s account, outstanding bridging allowance from NNPC Retail, outstanding bridging claims from other major oil marketers, irregular balance in  marketers’ indebtedness and non-payment of indebtedness by some DAPPMAN marketers.

The Auditor General for the Federation, Shaakaa Kanyitor China, who signed the report said the actions of the three state owned agencies were in violation of paragraph 213(ii) of the Financial Regulations (FR) and paragraph 217 of the FR 2009.

While Paragraph 213 (ii) precludes withdrawal from the revenue account other than for the purpose of transfer to the consolidated account, Paragraph 217 stipulates that it is the duty of the Accounting Officer responsible for the collection of revenue or other monies due to government are correctly and promptly brought to account, whether such collections are payable direct to him or to a Sub-Accounting Officer or through any other channel.

In the case of NNPCL, the report said the company’s payment records for the period 2020 and 2021 revealed that N82,951,595,510.47 was deducted by it  from the sale of Crude Oil and Gas (Federation Revenue)  for “purported Refineries Rehabilitation”

It said there was no evidence of authorization and approvals before the deductions were made. The Auditor General attributed this kind of action to weaknesses in the internal control system at NNPC which could leave room for possible misappropriation of funds, diversion of revenue meant for the Federation or loss of Revenue.

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It also reported that the management of the agency did not respond to audit query, adding that “since the Management failed to respond to the issue raised, the findings remain valid until the Management implements the recommendations.”

It recommended that the Group Chief Executive Officer of NNPCL be requested to provide reasons to the National Assembly for the deductions being proceeds from the sale of Crude Oil and Gas.

Besides, it said that henceforth, the management of the NNPCL should avoid making any deduction from monies due to go into the federation account and violation should attract punishment as specified in paragraphs 3106 and 3129 of the Financial Regulations 2009.

It also cited the deduction of N343,642,598,726.51 from the gross domestic crude sales in the name of NNPC Value shortfall, Strategic Stock Holding Cost, Crude Oil and Products Pipeline Losses, as well as the pipelines maintenance and management costs.

The report said since details of each of the cost components deducted were not provided for audit review, the Auditor General could not understand the justification for the deduction.

The OAuGF also said that N83,659,813,739.99 being miscellaneous income from the NNPC joint venture operations from year 2016 to 2020 went into the CBN/NNPC sinking fund account instead of the Federation Account, adding that warehousing of the miscellaneous income of 2016 to 2020 meant for the Federation Account in the CBN/NNPC Sinking Fund Account led the government  to resort to borrowing to fund public  activities

It said the shortfall should be recovered and remitted to government treasury and evidence forwarded to the Public Accounts Committees of the National Assembly.

In another instance, a sum of N3,748,581,281.27 was said to have been paid to a company as shortfall on the sale  of MT cargo of PMS, adding that details of the transaction between the NNPC, PPMC and the company were not provided for audit.

It said whereas the sum of US$1,655,352,328.14 was supposed to have been paid  by NNPC  to the CBN account of the Department of Petroleum Resources (DPR) in respect of Production Sharing Contracts (PSC), Repayment Agreement (RA) and Modified Carry Arrangement (MCA) liftings as at 31st December, 2021, the DPR received only  US$1,401,399,635.07, leaving a shortfall of US$253,952,693.07.

It said further that records obtained from NNPC JV schedules and other documents showed that the NNPC deducted N204,853,744,047.39 from the Oil Royalty assessed by the Department of Petroleum Resources (DPR) for 2021 for alleged priority project, strategic holding cost, crude oil and product losses without any justifiable reasons.

It quoted the NUPRC as saying “the NNPC makes deductions for Government priority projects at source before remittance of royalty to NUPRC with the latter having no control over this. Thus, NNPC is in better position to provide necessary approvals to justify these deductions.

“The office of the Accountant General of the Federation has been duly written on the payment of 4% Cost of Revenue Collection to NUPRC for money deducted at source by NNPC for Government priority projects.”

The Auditor General said the Management failed to address the issue raised and therefore should provide reasons why the sum of N204,853,744,047.39 was deducted by NNPC from Federation Account revenue proceeds, while recovering the said amount and remit same into the Federation Account.

It said that a review of revenue ledgers for 2021 revealed that oil royalty amounting to US$1,742,280,008.32 remained unpaid by some oil companies as at the end of December, 2021, while an additional US$13,805,135.46 for revenue relating to Royalty on Gas Sales (Foreign) remained unsettled as at 31% December, 2021 in addition to N48,218,163, 192.67 for Gas Royalty (Local) for the same period.

The office of the Auditor General of the Federation has reported an over draw of over N17.105 trillion from the consolidated revenue fund of the federal government in the year ended 31st December, 2021.

There was also a debit balance of N4.694 trillion recorded in various accounts of the FGN such as OAGF (Office of the Accountant General of the Federation) Cash Balance, TSA Sub Recurrent Account, Contingency Fund, Cash Balance, Capital Cash Balance, Personnel Cash Balance, Overhead Cash Balance and Revenue Cash Balance, among others.

These are some of the highlights of an audit report from the office of the Auditor General on the Consolidated Financial Statement of the government for 2021 submitted to the Clerk to the National Assembly and signed by the Auditor General, Shaakaa Kanyitor Chira.

It was dated 31st July, 2024.

The report said the presentation of the overdrawn balance as current asset in the Consolidated Statement of Financial Position was misleading.

It said: “These were net off from the credit balance of N17,105,111,709,523.00 in the CRF thereby leading to a negative amount of N12,410,938,609,491.50. This negative balance was further added to a positive Cash Transfer balance of N44,768,530,594.22 to give a net negative Cash & Cash Equivalent of N12,366,170,078,897.30 presented in the Consolidated Statement of Financial Position.

“The sum of N786,818,807,214.24 was the accumulated uncorrected material misstatements identified during the audit of the Federal Government of Nigeria Consolidated Financial Statements. This resulted from the Understatement of Liability amounting to N494,164,433,050.00, Understatement of Assets amounting to 97,947,680,608.03 and Overstatement of Liability amounting to 8194,706,693,556.21 in the FGN Consolidated Financial Statements (CFS).

“The details of this information were communicated to the Accountant General of the Federation.

“The consolidation of unaudited trial balances of MDA instead of their audited stand-alone financial statements prevented the evaluation of the basis of measurement, recognition and disclosure of the elements of the financial statements as well as auditors’ report thereon before consolidation by the Accountant-General of the Federation

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“The Federal Government took advantage of certain transitional exemptions available to first time adopters on 1st January, 2016 when the FGN adopted IPSAS accrual basis of accounting. The exemption allows first-time adopters three years to recognize specified assets and liabilities.

“However, the consolidated financial statements of the FGN for the year ended 31st December 2021 were still prepared under transitional exemptions as disclosed within the Summary of Significant Accounting Policies to the effect that ‘…some existing assets acquired prior to commencement of IPSAS accrual basis of accounting are yet to be valued and brought into the books.’

“With this perpetual exemption, Legacy Assets of the FGN such as Roads, Bridges, Dams, Airports, Power Plants, Rail, Public Buildings, etc were not valued and recognised in the FGN CFS for the year ended 31st December 2021. Consequently, the exemptions in respect of accounting for revenues and assets beyond the transitional timeline affect the fair presentation of the FGN CFS for the year ended 31st December, 2021.”

According to the report, the liquidity risk, currency risk and other risk exposures of the FGN arising from its financial instruments such as long-term borrowings amounting to N31,205,430,550,936.70 in the FGN Consolidated Statement of Financial Position and Note 45 to the FGN CFS were not qualitatively and quantitatively disclosed in the CFS.

“The strategies adopted in managing the risks and servicing the external debt portfolio which will have a material effect on the liquidity of the FGN amidst unstable foreign exchange rate should have been presented in the FGN CFS for the year ended 31st December, 2021,” the Auditor General said.

He drew the attention of the Accountant General of the Federation to the FGN Consolidated Statement of Financial Position which “showed a negative Net Assets of N39,949,387,999,335.50 as at 31st December, 2021.

“The FGN total current liabilities of N6,591,685,023,130.88 and the current assets of Negative amount of N11,869,233,843,826.70 gave  rise to a total negative amount of N18,460,918,866,957, an indication that the FGN will not be able to meet its current commitments as they fall due as a result of cash flow challenges.

“The FGN total assets recognised was negative amount of $1,239,626,436,908.62 while the total liabilities was N38,709,761,562,427.00, giving a negative net assets of N39,949,387,999,335.50.

“I am concerned that the FGN is faced with a high debt burden that makes the Government’s finances vulnerable and could face unsustainable obligation, which can eventually hamper the development of key infrastructures in the economy.”

On Non-Disclosure of Events After the Reporting Date, the Auditor General said “there was no disclosure of Events After the Reporting Date in the FGN CFS for the year ended 31st December, 2021. Events after the reporting date, adjusting or non-adjusting, even where none existed, should have been disclosed in accordance with the provisions of IPSAS 14.

“There was no disclosure of contingent liabilities in the FGN CFS for the year ended 31 December, 2021 in spite of numerous litigations against the FGN, and commitments by the FGN among others. There was no disclosure of ongoing litigations against the FGN in the FGN CFS for the year ended 31% December, 2021. Contingent liabilities, especially of material amount, should have been disclosed in accordance with the provisions of IPSAS 19. My opinion is not qualified in respect of other matters,

“Pursuant to the provisions of Section 85(5) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended), Section 24 of Finance (Control and Management) Act, Cap F26 LFN 2004 and Section 49 of the Fiscal Responsibility Act of 2007, the Accountant-General of the Federation is responsible for the preparation and presentation of the FGN CFS, in accordance with the IPSAS Accrual Basis.

“The AGF has thus prepared and submitted to me for audit, the FGN CFS for the year ended 31st December, 2021 as reproduced in Section 5 of my Report, in compliance with Extant Regulations under reference.

“My responsibility as the Auditor-General for the Federation (AUGF) is to express an opinion on the FGN CFS for the year ended 31st December, 2021 based on the audit which | conducted in accordance with the International Standards of Supreme Audit Institutions (ISSAIs).

“Those standards require that I comply with ethical requirements, plan, and perform the audit to obtain reasonable assurance as to whether the FGN CFS for the year ended 31st December, 2021 are free from material misstatements.