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

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.

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