World Bank, Discos Meet Today over Forensic Audit

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Peter Uzoho

Investors in the power distribution companies will today make a presentation in a meeting with the World Bank over the controversial forensic audit of Discos’ accounts ordered by the National Economic Council (NEC) following alleged poor investment by Discos after the federal government’s N1.7trillion investment in the last three years.

The Discos are seeking World Bank’s understanding of their position on the forensic audit as they said the audit was supposed to be an industry-wide exercise capturing all the value chains of the nation’s electricity sector, rather than just singling out the Discos for the audit.

The presentation document obtained by THISDAY yesterday ahead of the meeting detailed Discos’ grouses with the forensic audit, the causes of liquidity crisis in the electricity sector as well the proposal for the way forward of the forensic audit.

The World Bank had said that the Discos forensic audit was a precondition for the $500million loan that it was planning to lend to them for capital investment, insisting that the audit was an assessment to determine the Discos’ areas of deficiencies, a precursor to identifying the areas of need and investment.

The Discos said they are not averse to forensic audit but that their position remains that there should be a system audit for the entire power sector value-chain, and that the World Bank should make a clarification on the exact type of audit required for its intervention in the Nigerian power sector.

The Discos also demanded for an exploration of alternative options of due diligence for the distribution sub-sector, relative to the World Bank’s potential loan to same.

According to the document, “Discos are not averse to NERC’s audits, given that NERC periodically conducts annual and open book audits of their financial books. However, of utmost concern to the Discos is the connotation associated with a forensic audit.

“At a minimum, the definition of forensic audit conveys the following: a wide range of investigative activities, that is conducted to prosecute a party for fraud, embezzlement, or other financial crimes; a process where an auditor may be called to serve as an expert witness during trial proceedings for financial fraud, disputes related to bankruptcy filings and business closures; an examination and evaluation of a firm’s or individual’s financial records to derive evidence that can be used in a court of law or legal proceeding.”

It added that “beyond the criminal connation of the forensic audit is a failure, seemingly, to acknowledge the illiquidity of the market is directly related to historical policy and regulatory inconsistencies, as well as the commercial and technical misalignment that have bedeviled the market.”

The Discos noted that an audit of their accounts without a complete system audit of the value chain would not necessarily yield the desired sector market discipline, transparency and improved governance.

They added that the PSRP Financing Plan and the Distribution Recovery Operations are unlikely to succeed without a commercial and technical alignment of the Nigerian Electricity Supply Industry (NESI) value chain.

The Discos further argued that the forensic audit creates a criminal narrative against them, pointing out that the audit sends the wrong signal and perception of government’s scapegoating of the Discos’ investors and operators for the purpose of other malicious intent.

“Promotes perceived political bias against Discos’ investors and potentially worsens the lack of investment interest in the sector; ignores that fact that Discos are subject to annual audits, as well as periodic open book audits; validity of any such audit must be based on the neutrality of auditors; projects the singling out of the Discos and resultant persecution of Discos investors and operators,” the Discos added.