Internal Review and Auditing of Payments

Data validation

• Are oil and gas companies required to provide supporting evidence or independent verification of their royalty returns?
• Is volume data collected from pipeline operators and processing facilities compared with volumes reported at the well by oil and gas producers?
• Is there guidance for staff on how to validate data provided by companies?
• Is there a list of indicators staff can use to assess the accuracy and completeness of information provided in received returns? Is this list used to identify cases that warrant further verification?
• Is the responsible organization making use of revenue streams models to forecast revenues and analyse declared revenues against predictions?
• Is the data provided by oil and gas companies reviewed and validated (for example, exchange rate, oil prices, royalty rate, production data and exports)? Are royalties recalculated based on data provided? Are those reviews documented?
• Are there electronic systems to facilitate the review, recalculations, and analysis of production data and royalties provided by resource extraction companies?
• Are there timeliness standards for completing reviews and data validation?
• Is there a backlog of reviews and reconciliations to complete?

Audits of payments

• Are audits conducted to validate that payments made by companies are accurate? If so, are returns audited every year or only in some years?
• Is there a risk-based audit strategy?
• Are audits conducted to assess whether transfer mispricing is practiced to reduce declared profits?
• Are planned audits conducted? Are audits completed in a timely manner?
• Is there up-to-date audit guidance and documented audit procedures (including on how to audit transfer pricing)?
• Have recent audits indicated the existence of systemic risks affecting the completeness of revenues?
• Is the entity obtaining all the evidence it is entitled to from the audited companies?
• Is the information requested by auditors provided in a timely manner?
• Are the access rights of public sector entities to private sector financial information for royalty audit purposes clearly set out in laws, regulations, or special agreements?

Inspections of production measurement equipment

• Are inspections required by regulation to provide assurance on production data provided by resource extraction companies?
• Are there controls to ensure that:
  • All oil and gas passes through designated meters (no by-pass)?
  • Meters are properly calibrated to ensure accurate production data is collected?
  • No tempering with calibrated meters takes place?
• Is the frequency and coverage of inspections fixed by regulation?
• Is there a risk-based inspection strategy?
• Are all planned inspections conducted? Is there an inspection backlog?
• Are the results of inspections documented?

Quality management system

• Is the data validation/audit/inspection process subject to a periodic performance assessment?
• Are adjustments made based on findings?

Staffing and training

• Are all auditor/inspector positions staffed?
• Are there sufficient qualified auditors/inspectors to conduct all planned audits/inspections?
• Is specialized training provided to auditors and inspectors? Is there a record of training provided?
• Is there a hiring and retention strategy for auditors and inspectors?
• Are there clear independence requirements for auditors and inspectors? Have these requirements been communicated to staff?
• Are annual independence declarations required from auditors and inspectors? Are all required declarations on file?

Coordination

• Where more than one organization is auditing a private sector company, are there coordination arrangements in place to share information and reduce duplication of efforts?