The damning report blames the Russian firm, UC Rusal for the stripping.
A damning 2011 financial statement prepared by audit firm, KPMG, for the Aluminium Smelter Company of Nigeria, ALSCON, has revealed massive asset stripping of the plant, and cooking of the books by UC RUSAL, the Russian firm recently ordered by the Supreme Court to quit as managers of the plant.
The report says several components of the plant, including spare parts, were missing at the time of its review, having been sold off by the Russian managers on claims they were obsolete.
UC RUSAL has been in charge of the plant since February 2006 when the company was handed over by the Bureau of Public Enterprises, BPE, after BFIGroup, the Nigerian-American consortium that emerged the preferred bidder in 2004, was disqualified in controversial circumstances.
A review of the KPMG financial statement, which includes the auditor’s report, shows that N5.9billion worth of new machineries and spare parts, which remained unused in the company’s storeroom for several years were declared obsolete and disposed of by UC RUSAL management during the year.
The audit firm said the spare parts, shipped in at the completion of the plant by Reynolds of America in 1998, to keep the company running, were curiously declared depreciated and obsolete in the 2011 and disposed of. Most of them were reportedly still intact in their containers until the plant was sold to UC RUSAL in 2006.
Ironically, the serial decimation of the company appears to have occurred under the watch of an eight-member board of directors, including three Nigerians, who received hefty remunerations to look the other way.
The Russians on the board include the managing director, Anatoly Polovov, Alexey Amautov, Sergey Chestnoy, Viktor Mann and Denis Polyakov; while the Nigerians included the former Director General of the Bureau of Public Enterprises, BPE, Bolanle Onagoruwa, Mohammed Dikko and Baba Mohammed.
KPMG said its evaluations, however, contained a qualified opinion because UC RUSAL management refused to provide the auditors with sufficient appropriate evidence about the physical quantities of the items before they were disposed. They said they were also not allowed to use alternative procedures to obtain the evidence by physically verifying the quantity and state of obsolescence of the items.
Qualified opinion is often given where integrity of the information at the disposal of the auditing firm is not sufficiently reliable as a true reflection of the reality in the company’s situation.
“Included in stocks are storeroom supplies carried at N5.9 billion as at 31 December, 2011. We were not provided with sufficient appropriate audit evidence as to the need to recognise a provision for stock obsolescence irrespective of the fact that some of the items have remained unused for several years,” the report said.
In addition, the auditors said they were “also unable to carry out alternative audit procedures to obtain sufficient appropriate audit evidence due to the inability of the company to determine stock obsolescence. Consequently, we were unable to determine whether any adjustment to this balance is necessary”.
Evaluation of the company’s profit and loss account for the year showed that turnover declined from N4.61billion in the previous year to N3.95billion, due largely to the inability of UC RUSAL to fire more than an average of 20 of the 432 pots production lines, while operational cost remains unusually high at N4.19billion. It was N6.026billion in 2010.
But, despite operating at grossly below installed capacity, staff cost which was N1.89billion in 2010, fell to about N1.57billion in 2011; depreciation of N1.71billion in 2010 rose to N1.92billion in 2011; raw materials cost of N3.44billion (2010) and also fell to N1.632billion in 2011.
The maintenance expenses plummeted from N737.12million in 2010 to N485.03million in 2011, while miscellaneous expenses took N86.93million in 2010 and N91.16million in 2011.
Operational losses of N4.57billion in 2010, and N2.66billion in 2011 consisted of administrative expenses of N3.16billion in 2010 and N2.43billion in 2011, the report says.
Those administrative costs were made up of office expenses & periodicals N209.02million (2010); and N118.5million (2011); travels & freight expenses N177.6million (2010) and N126.8million (2011); professional & consultancy fees N261.5million (2011) and N213.18million (2010).
It is not clear how much from the N1.57billion personnel cost for 2011 went to the directors who looked away. However, the report suggests that several millions of naira was spent cumulatively as remuneration for the senior officials.
With ALSCON’s current liabilities exceeding current assets by about N7.2billion, it is relying on various short-term loans totaling N21.35billion for survival, including N18.17billion from the parent company, Dayson Holding; N455million from Sea Chaika Corporation; N2.71billion from RUAL Limited, and N2.86billion from RTI Limited, all subsidiaries of the RUSAL Group.
One of the workers recently sacked by RUSAL, who pleaded anonymity, said RTI Limited, which is the exclusive supplier of raw materials from RUSAL’s alumina plant at Republic Guinea, receives huge payments from inflated prices each time it supplies. Also, the staff, who has an extensive knowledge of how the plant works, said Sea Chaika, which is the trading and transportation subsidiary of RUSAL is often paid for services not rendered.
“Most of the storeroom item that were declared obsolete may have been brought back as fresh supplies to the company, while huge bills submitted for payment are passed on to ALSCON as loans from these subsidiaries. It’s all part of the scam,” the former staff said.
UC RUSAL spokesperson, Smirnova Tatiyana, who dismissed the report as false, and refused to provide further details.
Spokesperson for BPE, Joe Anichebe, told PREMIUM TIMES the privatization regulator was in no position to react to audit queries as it would appear to be “micro-managing” ALSCON. He referred enquiries to UC RUSAL. “They would be in a better place to respond since they are the managers of the plant,” he said.