N1.4bn Foreign Loan Scandal: Cross River State Auditor General’s Rebuttal Opens More Loopholes

In Breaking News, Business & Economy, CrossRiverWatch Podcast, CrossRiverWatch TV, Investigation

By Ekemini Simon, TheMail Newspaper

Listen To The Report

The Auditor General of Cross River State Government has said that the Government of Cross River State did not procure any foreign loan in 2020 contrary to the report by TheMail newspaper.

An extensive investigation which lasted for eight months and was published last month revealed that the Government of Cross River State procured an unapproved foreign loan of N1.4bn for” AFD CRS National Programme for Food Security”,  in the 2020 fiscal year even as the State Government could not account for how the loan was used.

The office of the Auditor General of Cross River State and the Ministry of Agriculture refused to give clarification on the loan when they were contacted. The Ministry for International Development Corporation could not also give an explanation about the loan.

However, in reaction to our report, the Auditor General of Cross River State, Mr. John Odey on Monday, June 6, 2022, issued a press statement where he noted that the said loan is a result of exchange rate variation occasioned by a loan procured in 2013 but captured in 2020 as additional loan owing to the reporting template of the State Accountant General.

He said “The loan facility originated on the 16th of August, 2013, valued at FUA7,000,000.00;

“As of 31st December, 2019, the loan which was valued by the Debt Management Office (DMO), Abuja at N2,337,668,298.00 increased to #3,719,797,550.00 as of 31st December, 2020.

“The difference of N1,382,129,252.00 is as a result of the exchange rate variations which impacted on the principal loan amount. This effect culminated in the total amount of N3,719,797,550.00 as of 31st December 2020.

“The exchange variance of N1,382,129,252.00, being a liability to CRSG, was thus rightly captured in the 2020 Financial Statements as an additional loan due to the reporting template of the State Accountant General.”

Rejoinder by Auditor General of Cross River State.

However, analysis of Odey’s claim vis-a-vis the financial documents of the State opens more loopholes.

Odey Shoots Self On The Foot

Contrary to the Auditor General’s rebuttal, the Auditor-General in his published report submitted to the Cross River State House of Assembly on July 15, 2021, queried the procurement of the N1.4bn external loan, noting that it was not budgeted for. He stated, “The Accountant-General’s published statement indicated that Cross River State Government obtained the sum of N1.382,129,252.00 as External Loan for the period under review whereas there was no budgetary provision for it.”

Auditor General’s query of the loan submitted to the House of Assembly.

What is more? Two months after sending his report to the House of Assembly, on September 28, 2021, the Office of the Auditor General published Citizens Accountability Report (CAR), wherein he noted among the top 10 queries from his office that the State Executive obtained N1.4bn external loan when there was no budgetary provision made for the loan.

Another query of the loan by the Auditor General in CAR.

We had earlier in the investigative report noted that when TheMail newspaper contacted the Auditor General for comments on his query about the loan, he declined to comment. ” I don’t talk to journalists about the account of the State,” he said.

Besides, the Auditor-General’s claims that the loan recorded for the year is a result of the exchange rate variations which impacted the principal loan amount leaves more gaps. A year earlier (2019), when the external debt stock of the State rose to N94bn from N47.26bn in 2018, neither the Accountant General nor the Auditor General recorded a fresh loan for the fiscal year.

CRS financial document showing External Debt Stock of CRS from 2015 to 2021

Rather, the Auditor-General in his 2019 report stated” The Accountant General’s published statement indicated that Cross River State Government did not obtain any external loan for the period under review but records made available by the Debt Management Department of the Governor’s Office showed that the outstanding External debt stock of the State as at 31st December 2019 stood at N94, 032,206,676.”

Financial Documents Of Cross River State Records N1.4bn Loan As Revenue 

Although the Auditor-General’s rebuttal notes that the N1.4bn external loan is a liability to Cross River State from the 2013 transaction, the Accountant General’s Report, the Auditor-General’s Report, and Citizens Accountability Report prepared by the office of the Auditor-General for the fiscal year records the loan as revenue received for 2020 under the revenue subhead of Capital Development Fund.

Analysis of the report by the Accountant General which was more elaborate shows that the loan was among the funds that made up the N50.66bn the State got as Capital Development Fund. The breakdown shows that the State got N10.4bn as opening balance, N18bn as a transfer from Consolidated Revenue Fund, N12.78bn from Aid and Grants, N1.4bn from External Loan, and N8.06bn from Internal Loan.

The report from the Accountant General further showed that the State made a total Capital Expenditure of N49.86bn for the year leaving a Closing Balance of N802.66 million. The above financial report of the Accountant General leaves more questions as to where the State got funds to finance its capital expenditure leaving a balance of N802.66 million if the N1.4bn was not included among the N50.66bn revenue received for the year as claimed by the Auditor-General.

Accountant General’s report showing the loan among revenue for year 2020.

IPSAS Accounting System Knocks Off Claims 

The Auditor-General in his rebuttal noted that the reporting template of the State Accountant General was the reason a loan procured in 2013 was captured in 2020. Yet, this claim by the Auditor General has been found to be misleading. 

According to the Accountant General’s Report of 2020, Cross River State is using the International Public Sector Accounting Standards (IPSAS) as its reporting template.

Under the heading” IPSAS Cash Basis of Accounting”, the Accountant General in his report notes that this basis of accounting provides readers with information about the sources of cash for the State.  The report states “The IPSAS Cash Basis of Accounting recognizes transactions and events only when cash (including Cash Equivalents) is received or paid by the MDAs.

This provision points to the fact that the State must have received the said amount, during the fiscal year hence the reason the transaction was recognized in the accounting books of Cross River State for 2020.

The report further adds “General Purpose Financial Statements (GPFS) prepared under the IPSAS Cash Basis provide readers with information about the sources of cash raised during the period, the purposes for which cash was used, and the cash balances at the reporting date.”

Analysis of both reports by the Auditor-General and Accountant General did not reflect the claims the Auditor-General gave in his rebuttal thus raising concerns that if the version of his explanation as contained in his rebuttal were factual, then the clarification should have been considered in their report.

Again, Auditor-General and Accountant General Fail to Clarify Loopholes In Rebuttal

Meanwhile, neither the Auditor General of Cross River State, Mr. John Odey nor the Accountant General, Mr. Joseph Adie gave an explanation for the loopholes identified in the Auditor General’s refutation when TheMail newspaper made attempts to reach them after the rejoinder.

Adie did not respond to calls, texts, and WhatsApp messages. TheMail newspaper specifically asked him why the loan was recorded as revenue for the fiscal year in his report and if it was actually a transaction undertaken as a liability in 2013.

Also, Odey did not respond to calls put across to him. He, however, in a reply to a text message from TheMail newspaper insisted our reporter should visit his office if there are issues that must be clarified. “Please visit the State Auditor-General’s office, if you have issues”, he said.

TheMail Newspaper, which did not see the visit at this time to the office as expedient, requested the information to be passed through phone or mail. This was not obliged at the time of filing this report. 

The Newspaper had requested information on the reason the Auditor-General had earlier queried the loan in his reports but now contradicts that same report.

TheMail also asked for his reaction on why the loan was reported as part of the revenue the state received for the 2020 fiscal year whereas in his counterargument he described it as a liability that stemmed from a 2013 transaction.

Other requests for information to Odey was the reason this said exchange rate variation was not raised in preceding years but only in 2020, why the new information contained in his rejoinder was not included in the reports from the two offices and references on other liabilities transferred as revenue to the fiscal year.

Rejoinder An Afterthought, Product Of Compromise – CSO Insists

A Civil Society coalition, Niger Delta Open Government Observatory (NOGO) has described the refutation by the Auditor General of Cross River State as an afterthought and a product of compromise.

 In an interview with TheMail newspaper, the moderator of the coalition, Tijah Bolton-Akpan, noted that for the Auditor-General to defend what he called illegality and a violation of the rules of public finance management, it is glaring that the Auditor General’s audit function has become badly compromised.

He said “The Auditor-General’s rebuttal is evidently an afterthought. In any case, it is not his place to make those explanations. The Office of the State Auditor-General is an accountability ombudsman that ought not to be drawn into everyday transactional debates such as this.

“It was the place of the Accountant General of the State to make the needed explanations. How can an accountability watchdog rush to eat his own words? What happens to the power of the Auditor General’s next due report which ought to be submitted to the House Public Accounts Committee?

“What we see here is a case of an audit function that has become so badly compromised that it deems it necessary to defend what is clearly an illegality and a violation of the rules of public finance management.”

Read the Investigative report here: Investigation into Cross River State Debt Misery: How N1.4bn Illegal Loan cannot be accounted for.

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This follow-up investigation is supported by Policy Alert

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