Significant Findings of Internal Audit Southern Region

1
Significant Findings of Internal AuditSouthern
Region
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Southern Region

• Finding Contractual material lying at store -
  RJY
• During inspection of the material, it was found
  that some of the items, belonging to M/s. Cairn
  Energy India Pty Ltd, have been received in the
  store during 15.04.2006 to 19.04.2006 and the
  same are lying in the store without any use.
  These items are casings, well head, pin, float
  shoe, bow centralizer, pup joints, nipple etc.
  These materials were shifted from Kakinada. (As
  informed by warehouse, 10 trailors and about 10
  trucks of material is stored approximately 200
  250 T) Area Occupied by the material Covered
  Sheds 870 Sqm and Open Shed 2714 Sqm

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Southern Region

• Finding Non Moving Inventory - RJY
• While checking the non moving inventory, it has
  been found that a total Rs.
  256,036,287 (Net Stock Value (Total-(Insurance
  Surplus)) as on 13.07.2009) amount of non
  moving inventory is lying in the store. Some of
  the items lying in the store have been received
  during 90s and the same has not been used for a
  quite long time.Some of these items are lying in
  the open pipe yard and due to environmental
  effect some of these items seem to be corroded
• The total inventory shows an increasing trend
  
• Non Moving Inventory as on 13.07.2009 for
  Rajahmundry is outstanding as
  Rs 25.60 Cr implying the cost of carrying non
  moving inventory as Rs 4.86 Cr per annum _at_ 19
  of the inventory value on hand.

As on 31.03.2007 Rs. 1,75,88,33,560
As on 31.03.2008 Rs. 2,33,09,14,884
As on 31.03.2009 Rs. 2,80,99,85,776
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Southern Region

• Further it is pertinent to note that some of the
  items, lying in non moving category for the last
  5 years, have further been procured during
  2008/2009 inspite of the material lying in the
  stock. Some of the items are as follows (checked
  on sample basis)

Mat No Mat Desc Plant Qty Amount Remarks
165106006 X-MAS TREE 3-1/16"X 2-1/16"-15M 41B1 1 NO 3,648,931.37 Material lying since 06.02.2007 and 6 new material bought in 15.07.2009
221409161 PERMANENT PACKER BI84X32 7" 41W1 17 NO 2,277,618.11 Material last issued on 30.07.2005 after that same material is purchased during 2008 / 2009 and used but these items are not used
221019084 LATA 6-SEALUNIT 2.7/8"EUBOX 41W1 16 NO 2,175,150.90 Material last issued on 30.07.2005 after that same material is purchased during 2008 / 2009 and used but these items are not used
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Southern Region

• Finding Disparity in Completion date (RJY)
• The following are some of the cases, where there
  is a disparity in completion date as given by the
  Engineering Services and the date of
  Capitalization as per the System
• Though the depreciation as per Companies Act is
  being posted manually, the date of capitalization
  for Income Tax purpose is being taken wrongly by
  the System.
• For example Installation of HSD Bunk at Narsapur
  Asset No. 104016404 was completed on 02-09-2008,
  but the date of capitalization given in the
  system is 31.03.2009. Depreciation for 210 days
  amounting to 1,02,929 was manually posted, but in
  the Statement Addition to Fixed Assets for Income
  tax giving Bifurcation of Fixed assets used for
  more than or equal to 182 days and less than 182
  days, the capitalization date is coming as
  31.03.2009 resulting in claiming only 50 of the
  eligible depreciation.

6
Southern Region

• Finding Rentals paid for Office Building and
  Bachelor accommodation (RO Chennai)
• Based on the audit observation on the hired
  office buildings in various locations, now it has
  been informed that proposal has been approved to
  build office complex with a value of 67.04 Cr on
  the land available in ONGC colony. It will
  include all various office building at various
  rental premises and bachelor accommodation. This
  will generate recurring annual saving of 3 Cr per
  annum which is being paid on today's date

7
Southern Region

• Finding Encashment of BG (KKL)
• As per details reviewed it is observed an amount
  of Rs.94 lakhs  was encashed against non payment
  of MGO dues by the party M/s MM Steel Power. 
  The non payment was around Rs.217.49 lakhs.  It
  is seen that the amount is kept under deposit
  where audit feels amount should have been taken
  to revenue for ONGC as it is against the non
  payment of MGO charges by the party  as per
  contract.
• It is also observed from noting that encashment
  of the BG is taken place without concurrence of
  associate Finance and directly by the indenting
  department.
• After en-cashing BG present supplies are
  continuing without any security  deposit or bank
  guarantee for future default of the party

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Southern Region

• Finding VAP Project Benefit (KKL)
• During Engineering Services Audit, it was advised
  by audit to take up the matter with HQ regarding
  Tax Holiday Benefit under section 80 1A for VAP
  Project. The cost of the project is about Rs 40
  Cr. As per the message dated 10.07.2009, central
  accounts KKL has taken up the matter to Corporate
  Accounts Section to take up the case as advised
  by Audit