NATIONAL TRANSMISSION AND DESPATCH COMPANY LIMITED (NTDC) > INTERNAL AUDIT FUNCTIONS AND ITS PERFORMANCEINTERNAL AUDIT DIVISION (NTDC) It was established in 2001 as a result of Wapda restructuring. Internal Audit performs an independent on going appraisal of the Company's financial, operational and control activities. Internal Audit is primarily responsible for assisting management in their operational responsibilities through independent audit and consultation designed to evaluate and promote the system of internal control. Internal Control is a process designed to provide reasonable assurance regarding achievement of objectives in the following categories. Effective and efficiency of operations. Compliance with applicable regulations, laws, procedures, and policies of company. Reliability of financial reporting.NATIONAL TRANSMISSION AND DESPATCH COMPANY (NTDC) ORGANOGRAM OF INTERNAL AUDIT DIVISION TOTAL NO OF SANCTIONED POSTS = 59 Manager Audit (NTDC) oo Deputy Manager (Head Office) . Payments) Driver “1 AAO=2 CKDR =I (Audit Cell) Boch Aw PANT gyaie pany Audi Party Audit Party-IVSHORT FALL INMANPOWER AS PER SANCTIONED STRENGTH Nomenclature of the post | BPS Sanctioned | Working | Short Fall Strength | Strength ‘Manager Audit (NTDC) 19 1 1 Dy. Manager Audit (NTDC) 18 2 2 Audit Officer 17 5 4 1 Assistant Audit Officer 16 9 8 1 ‘Stock Verifier 14-16 5 2 3 ‘Audit Assistant 14-15 28 20 8 Steno 14 1 1 - Junior Clerk 7 2 > 2 Driver 7 1 : 1 ‘Chockidar 2 1 1 : ‘Naib Qasid 1 4 3 1 Total 59 42 17 Noof E mployees Field Staff = H ead Office TotalFUNCTIONS OF INTERNAL AUDIT REGULAR OCCASSIONAL 1. [Annual Financial Audit. Special audit assigned by PEPCO, Chief Executive NTIDC/BOD 2. [Audit of payments to Consultants. Participation in high powered & middle order inquires. 3. |Post Audit of payments to IPPS. Participation in Auction of store material, Tender Opening Committees & other Allied Activities. 4. [Expenditure Audit of capital projects. Post Audit of Amounts written off by the competent authority. 5. | Stock Verification of Warehouses, stores and Office T&P. 6. |Concurrent check of Warehouses. 7. |Liaison with Government Audit, D.G Audit, Wapda.AUDIT PLAN An audit plan is prepared every year before the commencement of the ensuing financial year and presented to the BOD for its approval through NIDC Audit Committee. After approval of BOD the plan is ready for implementation and serves as a guide line for execution of Internal Audit function, ALLOCATED AND AVAILABLE RESOURCES AS PER AUDIT PLAN SR.# ACTIVITY TOTAL MANDAYS ALLOCATED SHORT FALL AVAILABLE MAN DAYS MAN DAYS. Financial Audit of GSO Formations (86 Nos) (4X 4X 205)=3280 Consultants Audit (19 Nos) (1X 4X 224)=896 Projects Expenditure Audit (19 Nos) Ni Stock Verifications (123 Nos) _(3 X 230)=690 Concurrent Check Auditors (4 Nos)KEY PERFORMANCE INDICATORS BASED ON AUDIT FUNCTIONS PERFORMED DURING 2009-10 Sr] Audit Activity | Auditable ] Audit Financial ‘Amount | Amount | Settled “Amount + Completed | Irregularities | Recovered | Agreed | after | Outstanding for _ | verification recovery | of record (No) (Wo) (Rs) (Rs) (Rs) (Rs) (Rs) Million Million _| Million | _ Million Million T. [50 co cy 126.02 0.29 5.81 8.77 114.15 Formations including supervisory offices 2, | Consultancy 18 5 113.27 125 63.50 752 Payments 3. | Post Audit of 15 15 7066.00 4086.00 IPPS Payments 7, [EHV Projects e 5 262.59 262.59 Expenditure (Monthly Review) ©. | Special Audits z z 107.74 26.66 81.07 78.65 USS - 78.65 USS, 6. | Stock 13s 73 99.44 (Surplus) %.06 | 94.88(Surplus) Verification of 43.76 (Short) 0.59 | 43.17(Short) Ware Houses, Stores & OfficesANNUAL FINANCIAL AUDIT During the year 2009-10, Internal Audit has carried out annual financial audit of 84 No NTDC formations comprised of Grid Stations, Transmission Lines Divisions and other NTDC offices. Four Audit teams and two additional Adhoc Parties completed this, assignment by exercising 100% checking of one detail month and general scrutiny of 11 months transactions appearing in the books of accounts. A brief of the observations involving financial irregularities of worth Rs.126.026 million is as under:- ‘Nature of Observations | Amount Settled] Recovered | Agreed for Pending pointed out Recovery fs) Rs) Rs) Bs) Rs) Non recovery of WapdaTaolities, services from employees 2.651.592 349.010 38.799 629.339 1,617,690 Excess or over payment Yo sail against | pay @ allowance 13.076.484| 1,540,526 32.260 1.702.143, 9.601.555 Excess payment of Traveling Allowance sosz1si| 2.201.729 79.791 241,001 5.499.560 on recovery of shortage of are T0314 500 To.014 Less or non recoveries from contractors or suppliers 38.s30.402| 1.028.198 87.179.022, Tess recovery on account of deposit ork 937.309 - 937.309 ‘Gash embessloment oF excess payment dive to tempering of record 45.651 3,000 : 12,400 30.281 Standard rent" recoverable Tom companies employees 35.970.044| 1.052.510 2.806.789 31,920.745, Proft/Interest not credited by bank 3.073.578 : 3.073.578 ‘Wrong deduction of withholding tax Om | prontby banks 303.318 : 14.750 268,508 Store handling charges not _charged from companies other then NIDG. 1,262,007, 1,262,007, Miscellaneous 2.373.795 aaa. 1905 Saar 1,360.603 Total: 126,026,825 | 5,776.703| _297,049| 5,816,423 | 114,136,650AUDIT OF CONSULTANCY PAYMENTS Internal Audit carried out 100% scrutiny of payments made to consultants engaged for technical services for construction of NTDC projects. During the year 2009-10 payments made to the consultants M/S NESPAK & M/S BARQAAB for 5 No projects were examined, Financial irregularities worth Rs, 183.275 million were reported. The serious observations of Rs.113.275 million were discussed with the client (C.E EHV-I in presence of the Consultant's representative. The Financial status of these observations are as under Total Amount | Principally | Recovery Under jecti Detected | Agreed by | Agreed by | finalization sr# Nature of objections ecient Consultant (Rs) (Rs) Rs) (Rs) T, [Excess bilig rates worked out in appendices | 3,352,000] 2,607,537 =P o5at0s against the contract clause 2 [Amount claimed for lapsed Teave. 10,365,000 | 10,165,000 = 3. [Claims for higher grades than agreed in] 82,338,000 | 82,338,000 - - contract agreem« TZ PDitlerence of amount claimed & amount] 3,164,000} 1,238,000 53,000] 1,296,000 actually paid to employees for salary & benefits. 5__| Unjustified claim/reimbursement of social cost §280,000| 1,597,000 =|“, 000 6._| Un-due retention of vehicle by consultants, “400,000, 700,000, 7. [Excess claim of annual increase more than 89] 14,042,000 | 14,042,000 - as per contract Expenditure incurred against rent a car than] 5,608,000 =| 3.808,000 purchase of vehicle by EHV. 3. |Un-due free supply and medical Gaims Tor) 1,561,000] 1,536,000 25,000 Wapda retired employees, TO. [Overhead charges of contract employees of the | 31,056,000 ST,556,000 consultants, TI, [Estimated billing rate charged instead of actual] 5,671,942 <[ Se7T aa billing rate. T3_ [relevant claim of man month not supported in TORTS TOBE contract being last invoice. Total (Rs) 113,275,790 | 63,508,837 1,258,000 | 48,508,953POST AUDIT OF PAYMENTS MADE TO IPPS In 2002 Wapda Authority established an Internal Audit cell in the office of G.M (WPPO) under the administrative control of Manager Audit (NTDC). The Audit Cell comprising of 3 officers have assigned the job of Audit of Payments made to 15 IPPS. During the period 07/2009 to 06/2010 payments of Rs.232 Billion Appox came under review and financial irregularities worth Rs.4066.69 million were pointed out as unde: Sr# ‘Nature of Audit Observations ‘Amount Present Status (Rs) Million 1. | OVER PAYMENT OF FUEL COST The matter was discussed with G.M COMPONENT (FCC) DUE TO HIGHER 3808.588 | (WPPO) but consensus could not be CONSUMPTION OF RFO achieved due to difference of opinion between the Auditors and Auditee. 2. | EXCESS PAYMENT OF TRUE-UP AMOUNT ‘The reply furnished by the DGMF (WPPO) vide letter dated 03.04.2010 112.192 |was not convincing. Audit issued further remarks on 20.04.2010 but final outcome is still awaite: 3. | UNJUSTIFIED PAYMENT OF HOT START 25.467 [Reply to re-audit remarks issued by CHARGES Audit Cell is awaited. 4, [OVER PAYMENT OF INTEREST ON A/C OF The issue has been discussed with the DELAYED PAYMENTS management of WPPO but the matter 76.918 |remained unresolved due to non consensus between the WPPO and Audit. 5. _| FINANCIAL LOSS ON A/C OF PARTS LOAD 42.069 | Reply to re-audit remarks issued by ADJUSTMENT CHARGES Audit Cell is awaited. 6. | OVER PAYMENT OF CAPACITY & V O&M 0.894 Recovery action on the part of WPPO CHARGES is still awaited. 7. | OVER PAYMENT DUE TO TWO DIFFERENT Reply not found convincing and the CLOSING EXCHANGE RATES 0.469 __| excess amount is still recoverable. &. | EXCESS PAYMENT OF INTEREST AGAINST 0.096 Recovery made by WPPO vide letter DELAYED PAYMENT dated 26.03.2010 and para is settled. TOTAL (RS) Million 4066.693AUDIT OF EXPENDITURE ON CAPITAL PROJECTS ‘The BOD NTDC included the audit of Construction activities in the scope of Internal Audit in Its 31° meeting held on 26.07.2007. Under the SOP which became effective from 01.07.2009 Internal Audit has entrusted the task of post audit of bills of Contractors and Suppliers on monthly basis and regular annul financial audit of all EHV offices dealing with Construction activities. The Internal Audit during monthly review of C.E (EHV-1) and P.D (EHV), Lahore has pointed out the following Financial irregularities of Rs.262.59 million which have not been attended/responded by the concerned formations. DETAIL OF OBSERVATIONS POINTED OUT DURING MONTHLY AUDIT OF CHIEF ENGINEER EHV4 LAHORE & P.D EHVLAHORE DURING THE PERIOD FROM 07/2009 TO 06/2010 sr.# Description Amount I nvolved (Rs) Excess Payment of works/supply of material against approved BOG of 20 137,296,834 footings. 2. |Loss due to delayed payment in foreign exchange after increase in Currency 1,107,306 rates. 3.__[Non deduction of Liquidated damages for late supply of material. 283,090 4. [Non deduction of Liquidated damages for late completion of work. 2,054,502 5. | Irregular payment to supplier after validity period of Letter of Credit. 5,556,264 6. [Irregular refund of Liquidated damages charges to the supplier. 2,422,345 7.__[Over payment than approved/agreed rates. 56.666 8. | Execution of work before issuance of work order by the competent authority. 996,737 ‘9. [Irregular payment of crops compensation without proper documentation. 32,469,522 10, [Non recovery pf cost of material from contractor. 13,784,091 I1. [Less deduction of Liquidated damages. 21,228 12. [Irregular release of withheld amount to supplier without obtaining certificate 66,548,945 from consultants. Total 262,597,530DETAIL OF SPECIAL AUDITS CARRIED OUT DURING 2009 -10 Total Amount | Outstanding Sr.# [Name of Project | Amount | Agreedby | amount Objected | Consultant BPI, Lid Remarks Million) | (Million) | CMillion) Consultancy of Preparation of Sub ‘The amount 1. | Projects under 28.63(Rs) | 26.66 (Rs) 1.97 (Rs) | was agreed in Power distribution dispute enhancement settlement projects stage -II. Tranch-It Replies 2. |G.E Rental, 75.65 (USS) 75.65 (USS) | awaited, Sheikhupura 79.10 (Rs) 79.10 (Rs) | matter referred to Chief Auditor PEPCO.PHY SICAL STOCK VERIFICATION In discharge of duty to safeguard NTDC assets, Internal Audit has carried out physical stock verification of Warehouses, Stores formations and other assets like office T&P and line T&P were also physically verified. As a result of this exercise surplus of Rs.99.44 million and shortage of RS.43.76 million has been pointed out. The discrepancies pointed out in respect of 73 formations are under consideration with store management for resolution or recovery. SHORTAGES/SURPLUSES OF STORE MATERIAL & T&P DETECTED DURING THE PERIOD 07/2009 TO 06/2010 Total No of | Total No of ; i Ponations | fonnatone Pointed Out Settled Out Standing Completed (Rs) (Rs) (Rs) ‘Surplus Shortage | Surplus |Shortage| Surplus ‘Shortage 123 73 |99,444,175 | 43,769,753 | 5,068,888 |591,990 | 94,375,287 | 43,177,763