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An Overview of the Federal Mineral Royalty Audit Process

F. David Loomis, Federal and Indian Oil & Gas Royalty Valuation and Management (2004)

Since the inception of the United States Department of the Interior's Minerals Management Service (MMS) in 1982, various forms of audit activities have been performed of companies submitting royalty payments for mineral lease production on Federal, Indian, and Outer Continental Shelf leases. The purpose of the audits has been to ensure compliance with applicable federal and Indian lease terms, regulations, policies, and laws governing the reporting and payment of revenues derived from the production and sales of oil, gas, and other minerals.

The purpose of this paper is to present and explain the audit process with particular emphasis on:

• How it is decided who will be audited?

• How are the audits conducted?

• What can a company do to prepare for and facilitate an audit?

• What are some of the current audit issues?

The presentation of the audit process and clarification of company responsibilities during the entire audit process will improve the efficiency and accomplishment of audit goals and objectives.