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Practice Guide to Auditing Mining Revenues and Financial Assurances for Site Remediation

The Processing of Payments

This area includes the routine systems and processes to identify all leaseholders, process their royalty returns, and collect their payments, including arrears and any penalties applicable for late payments. However, this area does not include additional internal controls over payments, like audits and inspections, which are covered in the next section.

The audit focus for the collection and processing of payments could also include questions related to internal capacity (skilled personnel and information technology systems) and coordination between responsible organizations. Table 6 includes examples of knowledge of business questions about the processing of payments that auditors can ask during the planning phase. Examples of related audit objectives and criteria are provided in later sections of the Practice Guide.

Table 6 – Processing of Payments: Examples of Knowledge of Business Questions


Knowledge of Business Questions

Controls over receipt of payments

  • Is there a database of leaseholders that are expected to pay royalties? If so, is this database regularly reviewed for completeness and updated? (For example, is it reconciled with other government information about resource extraction activities?)
  • Is there an electronic system that mining companies can use to produce and submit their royalty returns?
  • Are there systems and procedures to determine what is owed, to identify late returns or payments, and to ensure amounts owed are paid?
  • Is there an “audit trail” in the royalty system to track entries and revisions to entries posted to the system?
  • Is the government maintaining a payment schedule and ensuring that mining companies comply with this schedule?
  • Is there guidance for staff on how to collect royalty payments and manage payments in arrears?
  • Is follow-up action promptly taken in cases of late payment or underpayment (above a certain percentage of the amount due)? Are penalties applied? Are there increased penalties for persistently late payers? Are penalties sufficiently high to deter non-compliance?
  • Is interest collected on underpayments and late payments?
  • Are actual revenues compared with projected revenues and significant variations explained?
  • Is there a performance measurement framework to assess the department’s performance in assessing and collecting royalties (complete with annual targets)?
  • Are surveys of mining companies used to supplement the assessments of performance?
  • Have internal audits identified persistent issues with payment collection?

Staffing and training

  • Are there staff dedicated to administering royalty returns and staff dedicated to auditing returns? (In other words, are they separate jobs, therefore giving auditors more time for conducting audits?)
  • Are there challenges related to ensuring there is always sufficient qualified staff to handle royalty returns and payments?
  • Is relevant training provided to staff?
  • Are there policies on conflicts of interest, ethics, and independence?


  • Where there is more than one responsible organization, is there a formal coordination agreement in place (memorandum of understanding or other)?
  • Are the roles and responsibilities of all parties clearly documented?
  • Are the information needs of each responsible organization defined and met?

Once auditors have obtained answers to their knowledge of business questions, they can better assess the risks related to the processing of payments made by mining companies for the extraction of publicly owned natural resources.

Auditors should consider including the processing of payments for the extraction of minerals in their audit plan if their preliminary audit work indicates the following:

  • There is a lack of internal guidance on how to collect royalty payments (and other fees) and manage payments in arrears.
  • There is evidence that internal rules are not applied properly and consistently.
  • Penalties for late payments are not applied and interest is not being collected.
  • Internal audits have identified persistent issues with the collection of payments.
  • In cases where responsibilities for collecting payments are shared between two or more organizations, there is no formal agreement that defines the respective roles and responsibilities of each organization and the information they need to share with each other.
  • The collection and processing of royalty payments or other fees is performed by a service provider on behalf of the government.

This list of potential audit issues is indicative, not exhaustive. It is the responsibility of audit teams to review and analyze the information they collect in the planning phase to identify and assess significant risk areas. Only after conducting this work will auditors be able to decide whether to include the processing of payments for the extraction of minerals in their audit plan.