Validations & Audits on Oil & Natural Gas Transactions
Oil and natural gas transactions reported in B.C. are reviewed through two processes: validations and audits.
Validations are performed on oil, natural gas and natural gas by-product royalty and tax transactions in B.C. This post-transaction review verifies the data submitted by oil and natural gas producers against information available from other sources.
If you are contacted for further information, you must provide the reports and information we have requested. If needed, we will work with you to deem appropriate volumes and pricing before issuing an amendment through regular invoicing.
If we ask you to submit amended reports and you don’t respond within 60 days, we will process an amendment based on available data from other sources and issue you an amended invoice. Interest applies on all late payments. You will also be audited in the next audit cycle.
Once the validation review is complete, you have 60 days to respond if you disagree with the outcome.
You may, at any time, be subject to an audit that may result in an assessment or reassessment of your royalties and taxes.
An audit is an examination of your business’ records to ensure that you're correctly reporting and paying royalties and taxes, and to identify any areas where you may be doing this incorrectly.
What Happens During an Audit?
If your business has been selected for an audit, the auditor will contact you to arrange a convenient time for a pre-audit meeting with you or your accountant.
At the pre-audit meeting, the auditor will explain the general audit process. The auditor will also go over the Taxpayer Fairness and Service Code with you to ensure that you know what to expect as far as service standards and conduct are concerned.
It is important that you maintain records for at least six years (72 months) as you will be asked to produce records for the audit, such as:
- accounting records
- contracts and agreements
- schematics and flow diagrams
You may want to prepare and retrieve records ahead of time so that the audit can be completed as quickly as possible. In the case of records stored off-site, it’s a good idea to ask the auditor which records are needed to avoid wasting time and money.
What Happens After an Audit?
When the audit is complete, the auditor will provide you with copies of the audit report and fully explain the findings. The auditor will also make you aware of your options if you disagree with the results.
After 72 months, you must have written permission from the Minister before you dispose of your records.
If your records aren’t available when they are requested under an audit, the royalty collector is authorized to deem a price or amend volumes and then reassess based on information available from other sources.