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INTERNSHIP REPORT PREPARED BY AREESHA FAROOQI FINANCE DEPARTMENT

INTERNSHIP REPORT

PREPARED BY

AREESHA FAROOQI

FINANCE DEPARTMENT

ACKNOWLEDGEMENT

At the completion of this report, I’m first thankful to the One and Only Almighty ALLAH who gave me ability to make this report, who gave me the courage, motivation, power and eagerness and with his grace; today I am able to prepare my report on internship at Sui Southern Gas Company Limited.

It is a pleasure to acknowledge my debts and express my special thanks to Mr. Ameen Muhammad (Funds), Ma’am Saima (Funds), Mr. Shakeel (Project), Ma’am Priya (Payroll), Mr. Saif-Ur-Rehman (NLO), Mr. Iqbal (NLO), Mr. Noman (NLO), Mr. Gulzar (LO), Mr. Waqar (Insurance), Mr. Nadir Rafiq (insurance), Mr. Kamran (Cost & Budget), Mr. Nooh (Cost & Budget) and Mr. Owais (Cost & Budget). I would also like to thank Mr. Fareed (imports), Mr. Ahad (imports), Ma’am Misbah (Loans), Ma’am Mahelaqa (Reconciliation), Ma’am Madeeha Somroo (Revenue Control Account) and Mr. Sheharyar (Non-Gas Revenue) for providing their immense support and unwavering guidance during conduct and completion of this internship report on SSGC and it became possible for me to complete this work within short time.

I am also thankful to my Parents who cooperated with me and understood my roblems and work schedules throughout the report.

TABLE OF CONTENTS

1. INTRODUCTION

4

2. COMPANY’S VISION

4

3. COMPANY’S MISSION

4

4. MAIN FUNCTIONS OF SSGC

4

5. DEPARTMENT OF FINANCE

5

6. DIVISION OF FINANCE DEPARTMENT

5

7. FINANCE SECTION

5

8. FUNDS SECTION

6

9. NON-LOCAL ORDER (N.L.O)

8

10. LOCAL ORDER (L.O.)

9

11. PAYROLL SECTION

10

12. INSURANCE SECTION

10

13. TREASURY FUNCTION

11

14. REVENUE CONTROL SECTION

12

15. GAS SALES SECTION

13

16. NON-GAS REVENUE SECTION

13

17. IMPORTS SECTION

15

18. LOANS SECTION

16

19. BANK RECONCILIATION SECTION

17

20. ACCOUNTS SECTION

18

21. COST & BUDGET SECTION

18

22. BUDGET PLANNING PROCESS

19

23. CONCLUSION

19

24. RECOMMENDATIONS

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1. INTRODUCTION

Sui Southern Gas Company (SSGC) is Pakistan's leading integrated gas Company. The company is engaged in the business of transmission and distribution of natural gas besides construction of high pressure transmission and low pressure distribution systems.

SSGCL transmission system extends from Sui in Baluchistan to Karachi in Sindh comprising over 3,200 KM of high pressure pipeline ranging from 12 - 24" in diameter. The distribution activities covering over 1200 towns in the Sindh and Baluchistan are organized through its regional offices. An average of about 378,468 million cubic feet (MMCF) gas was sold in 2007-08 to over 2.040 million (industrial 3,448, commercial 22,192 and domestic 2,014,827 consumers) in these regions through a distribution network of over 31,877 Km. The company also owns and operates the only gas meter manufacturing plant in the country, having an annual production capacity of over 550,150 meters.

The Company has an authorized capital of Rs.10 billion of which Rs6.7117 billion is issued and fully paid up. The Government owns the majority of the shares which is presently over 70%.

The Company is managed by an autonomous Board of Directors for policy guidelines and overall control. Presently, SSGC's Board comprises of 14 members. The Managing Director/Chief Executive is nominee of GOP and has been delegated with such powers by the Board of Directors as are necessary to effective conduct the business of the company.

The Company in its present shape was formed on March 30, 1989 following a series of mergers of three pioneering companies, namely Sui Gas Transmission Company Limited, Karachi Gas Company Limited and Indus Gas Company Limited.

Sui Gas Transmission Company Limited was formed in 1954 with the primary responsibility of gas purification at the Sui field in Baluchistan and its transmission to the consumption centers at Karachi. Two distribution companies were established in 1955 and were responsible for the distribution of gas to consumers in Karachi and in other towns along the route of the transmission pipeline between Sui and Karachi. In 1985, these two distribution companies were merged to form Southern Gas Company Limited and later, in 1989, Southern Gas Company Limited and Sui Gas Transmission Company Limited were merged to form the Sui Southern Gas Company Limited.

Today, half a century of professionalism and progress has made the SSGC one of the largest integrated natural gas transmission and distribution companies in Pakistan, serving the entire Southern region of the country, comprising the provinces of Sindh and Baluchistan.

2. COMPANY’S VISION

To be a model utility, providing quality service by maintaining a high level of ethical and professional standards and through the optimum use of resources.

3. COMPANY’S MISSION

To meet the energy requirements of customers through reliable, environment-friendly and sustainable supply of natural gas, while conducting company business professionally, efficiently, ethically and with responsibility to all our stakeholders, community and the nation.

4. MAIN FUNCTIONS OF SSGC

The Company is organized into four functional divisions -Transmission, Distribution, Meter Plant & the Head Office. The Board of Directors has the overall responsibility for the management and control over the Company. The management enjoys operational autonomy. The major portion of the work force consists of technically qualified and skilled personnel.

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SSGCL TRANSMISSION DISTRIBUTION METERPLANT
SSGCL
TRANSMISSION
DISTRIBUTION
METERPLANT

As I did my internship in the Finance Department of SSGC, I’ll be discussing its different sections & their sub-sections in this report.

5. DEPARTMENT OF FINANCE

Finance department is one of the distinct departments in an organization or company. The primary purpose of the Finance Department is to monitor and report on the financial position of the company and to provide an excellent level of service to their customers and customers in other departments. The financial department deals with everything that concerns finances in the company.

6. DIVISION OF FINANCE DEPARTMENT

Department of Finance at SSGC is divided into three major sections that are as follows:

DEPARTMENT OF FINANCE FINANCE TREASURY FUNCTION ACCOUNTS
DEPARTMENT OF FINANCE
FINANCE
TREASURY FUNCTION
ACCOUNTS

And now I would further discuss these department section in detail by mentioning their sub- sections, their purpose & their functions.

7. FINANCE SECTION

Finance section is one of the distinct departments in an organization or company. The primary purpose of the Finance Department is to monitor and report on the financial position of the company and to provide an excellent level of service to their customers and customers in other departments. The financial department deals with everything that concerns finances in the company.

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FINANCE SECTION FUNDS NLO LO PAYROLL INSURANCE
FINANCE SECTION
FUNDS
NLO
LO
PAYROLL
INSURANCE

8. FUNDS SECTION

This section of finance department deals with the reserves or accumulation of money which is set aside for specific purpose and the final settlement of the payments to the employees in relation with Payroll Section. The criteria of payment for the final settlement include:

Retirement.

Death.

Resignation.

Dismissal/ termination.

There are separate rules for each case. Each payment is done accordingly.

The funds which Sui Southern Gas Company Limited deals with are:

1.

Pension Fund.

2.

Provident Fund.

3.

Gratuity Fund.

4.

Benevolent Fund.

8.1.

PENSION FUND

Literally, the term pension means, ‘Regular payment given to people who have crossed a certain age limit to enable them to carry out their living expenditures without working’.

Company provides 20% of the basic salary each month in the pension fund of the

employee.

On the death of an employee, 50% of the pension goes to the person’s widow.

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In the case where widow is also expired, 10% pension is given to the children under the age of 18 years.

8.2. BENEVOLENT FUND

The term benevolent means, ‘Showing goodwill, doing welfare or help to others’.

This is another kind of retirement benefit given to executive employees after their

retirement.

After being the member of this fund, employees need to pay 1.1% of their basic salary until a minimum number of five years as a contribution.

The benefits of benevolent fund include:

Executives receive the money till 5-years after their retirement.

If person dies, and he is a member of benevolent fund, then his/her family receives this money till 5- years.

This is an additional benefit, excluding pension, gratuity and provident fund.

8.3.

GRATUITY FUND

Gratuity fund refers to, ‘Amount of money given for services rendered.’ Or ‘Monetary award given for meritorious services rendered without claim or obligation’

Company provides 8% of the basic salary each month in the Gratuity fund of the employee. This appears as a cost to the company.

On the death of the employee, gratuity of 40 days’ basic salary is given to the widow along with 50% of the pension.

No gratuity will be paid if employee is dismissed from the company.

On retirement, if the employee opts for pension, then 20 days’ gratuity will be given.

On retirement, if the employee opts for full gratuity of 50days, no pension will be given.

Service exceeding six months is counted as a full year for service and calculation of gratuity. For less than six months, gratuity shall not count.

8.4. PROVIDENT FUND

The term literally means, ‘Providing carefully for the future’

The provident fund grants the employees retirement benefits. It enables the employees to save fraction of their salary to be used in a situation when the employee is no longer able to work. The provident fund primarily applies to retirement, but it also covers sickness, physical or mental disability or death.

The moral is to give monetary security to employees when they retire.

For non-executives, 8.33% of the basic salary is deducted from the payroll and is put into

the provident fund.

For executives, 7.5% of their basic salary is deducted and is put into the provident reserve.

This section holds the money from the employees’ payroll and puts it in the A account which is called ‘Employee Contribution”. The company puts exactly the same amount in B account, also known as ‘Company Contribution.”

The person can withdraw the money from the fund as loan to acquire property, for marriage expenses etc. Mr. XYZ handles the loan payments and installment deductions from the employees’ salary.

The loans provided to the employees by Sui Southern Gas Company are of two kinds:

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1.

Refundable loan

2.

Non-refundable loan

8.5.

REFUNDABLE LOAN

The employee will be able to get amount equals to his/her 6 basic salaries.

17% markup is implied.

5 years’ service is necessary to qualify for the loan.

The interest deteriorates each month in refundable loan.

On returning the amount taken as a loan, the money in the fund again increases and the

employee will be given a profit on whatever the fund amount totals to.

For general staff and non-executives, the loan is to be returned in 30 monthly installments or 205 years.

For executives, the loan is to be paid in 48 monthly installments or 4-year time period.

8.6.

NON-REFUNDABLE LOAN

The employee will be able to get amount equals to his/her 18 basic salaries.

No markup implied.

Applying for non-refundable loan is like the employee is permanently withdrawing the

money form his/her fund.

The profit which a person gets on keeping that fund will vanish.

The employee needs to put the property papers as collateral to acquire non-refundable

loan.

At 50 years of age, the employee can withdraw 60% money from his/her fund without any markup. In this case, there is no need to give any collateral.

8.7. INVESTMENTS

The cash present with the FUNDS SECTION is then invested in:

Defense Saving.

National Saving.

Mutual Funds.

Shares.

Financial institutions/ Banks.

Pakistan Investment Bonds (PIB).

Federal Investment Bonds (FIB).

These short-term and long-term investments produce profits which are then given to the employees on the basis of their contribution in the funds and the investments.

9. NON-LOCAL ORDER (N.L.O)

Non-local order deals with all the bills, which don’t involve the purchase order of goods. It consists of all the expenses, which does not deal with the utility section of employee (i.e. electricity, telephone, etc.).

The most common expense heads that non-local order deals with are hospitals, chemists, repair and maintenance of cars, emergency expenses of company e.g. stationary, contractors for laying down pipelines, etc.

The core function of the department is registration of liability, which is done by Bank Payment Voucher. It includes name of company/supplier, issue date, invoice no, term date, amount, withholding tax etc.

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The process is followed in N.L.O

Step 1:

Receipt of bills/invoices from various departments duly verified and approved by competent authority.

Step 2:

Scrutiny of Bills/Invoices.

Step 3:

Verification of job numbers, Basic Head and Budget provision.

Step 4:

Processing of Payment Voucher.

Step 5:

Authorization of Payment as per Financial Powers.

Step 6:

Payment Vouchers sent top Cash & Bank Section for issuance of Cheque.

Step 7:

Processing Statements for Income Tax deducted from suppliers.

Step 8:

Depositing Income Tax into SBP on weekly basis.

Step 9:

One copy of Challan to be provided to the Supplier/Contractor.

Step 10:

Submission of monthly Tax return with the Income Tax Authorities.

Step 11:

Reconcile supplier wise ledger cards in monthly basis.

Step 12:

Passing necessary Journal Entries at the end of every month.

10. LOCAL ORDER (L.O.)

The local order section is one of the most important sections of finance department. The local order section is entirely responsible for the payment of bills to various suppliers and vendors. This section is only responsible for make payment to the material suppliers. This section prepares the voucher for only tangible goods not for intangible goods (services).

This section deals with material management department, R&D (store) and the suppliers. LO section uses the Oracle application software to print a voucher after punching data into system. The advantage of this software is that, if the wrong data is punched in to the system, the voucher will not be printed.

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LO section does not go through the payment process if any of the required documents are missing just like, purchase order, receiving statement and the invoices.

In LO, payment system under go though some steps and procedures.

10.1. FUNCTIONS OF LOCAL ORDER

The core function of the department is to arrange payments against purchase orders issued by the procurement department of Unit “A” & “C” in respect of the following purchases.

In this regard LO verifies invoices quantities and rates against Receiving Slip and Purchase Order (PO) and ensure that the authorized person has approved these.

It is also the responsibility of LO to ensure that goods and services are recorded correctly i.e. capitalized or charge to revenue account.

It is the practice of LO to reconcile their Bankbook Record with LO-Day Book and with their register on monthly basis in addition to daily reconciliation.

11. PAYROLL SECTION

Payroll is one of the important sections of the finance department. It main functions include preparation of SSGC Staff and Executive salaries every month, keeping record of all existing employees and updating in case new appointments. Payroll section is divided into two main parts. One deals with the Executive payroll while the other deals with the Staff. Salaries vouchers, Income tax deductions, job wise summaries are all prepared by the Payroll Department. Flow of Data from Different Departments into Payroll Section.

Payroll is the one of the most important section of Finance department. Its main activities include preparation of SSGC Staff and Executives’ salaries every month, keeping record of all existing employees and updating in case of new appointments. Payroll section is mainly divided into two parts. One deals with Executives payroll while other deals with staff. I was assigned to Executives section that performs the following duties: such as salaries vouchers, Income tax deduction, job wise summaries etc.

11.1. PAYROLL FUNCTION RELATED TO SALARY ACTIVITIES

Data punching.

Compiling.

Summarizing.

Preparing bank advices.

Bank voucher.

Signing in payroll.

Issued to cash & bank.

In cash & bank make cheque & send to payroll.

Covering letter attach in payroll.

Issued to bank.

Generalization.

12. INSURANCE SECTION

12.1. INSURANCE POLICIES MAINTAINED BY SSGC

There are following types of insurance policies maintained by SSGC:

1. Fire policies.

2. Accident policies.

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3.

Marine policy.

4.

Motor Vehicles policies (M.V).

5.

Employees benefit policies.

Group life insurance.

Personal accident policy.

6.

Voluntary insurance.

12.2.

PROCESS FOR THE CLAIM OF INSURANCE POLICIES

When there is a damage or loss, the process of insurance starts. The first step is taken by the location in charge who informs Finance either or through concerned G.M. Further steps to be taken are narrated below:

1. On receiving report of damage or loss, Insurance Section will enter the loss in Insurance

Register and allot a file no. this file no will be the reference no. of that claim for further process.

2. Immediately, a formal notice of claim will be served upon the Insurers.

3. On receiving formal notice of claim, the Insurer allots their claim no. (Reference no.) That

will be their reference in future and till finalization. A surveyor is also appointed at the same time by the Insurer.

4. Insurance Section makes liaison with the appointed surveyors and arrangements are

made to take him to the place of survey in consultation and co-ordination with the concerned department.

5. After completion of survey, the surveyor asks Finance Dep’t. To provide documents.

6. Usual documents required are:

Claim Form: This form is completed and signed by department concerned and forwarded to finance for onward submission to the surveyors and insurers.

Copy of FIR where required.

Statement of loss.

Departmental Enquiry Report.

Details of repair works.

Documents in support of expenses incurred such as cash memo, receipts etc.

Any other document as required by surveyors/insurers.

7.

Documents are prepared and arranged by concerned department and are provided to

finance for onward submission to surveyors/insurers.

8. Documents are prepared in duplicate sets one each for the Surveyors and the insurers.

9. Insurance section always keeps strong and constant liaison with concerned department

for arranging /preparing claim documents.

On completion of claim document with the insurers, Insurance keeps pursuing insurers for settlement.

13. TREASURY FUNCTION

The Treasury Function Department of the finance department basically deals with the disbursements, collection, receipts, management of funds, payment of foreign or domestic loans, revenue control and reconciliation of bank and customer accounts. In short, treasury functions deal with the flow of money either in the form of inflows or outflows. An important task of the Treasury function department is to keep a check on the company’s current liabilities account and make sure that their current liabilities do not exceed their current inflows of cash.

The treasury function department can be further subdivided into five major categories, which are somewhat interrelated. The division is as follows:

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TREASURY SECTION LOAN REVENUE CONTROL BANK RECONCILIATON GAS SALES CASH & BANK NON-GAS REVENUE IMPORTS
TREASURY SECTION
LOAN
REVENUE
CONTROL
BANK
RECONCILIATON
GAS SALES
CASH & BANK
NON-GAS
REVENUE
IMPORTS

14. REVENUE CONTROL SECTION

One of the major sections of Treasury Functions, Revenue Control Section us responsible for proper management of sales, revenue and collection. The major responsibilities of this section are:

1. To check whether the collection of bills was within due date or after the due date.

2. As different things can be demanded from consumer in the bill, this section takes care

whether proper accounting is done under the required heads.

3. As, there is a separate accounting procedure for domestic, commercial and industrial

consumers, this section makes sure that one category consumer is not treated under the head of

other category.

4. To check whether the data is punched properly in the computer or in the day book and

that the proper accounting entries are made or not.

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14.1. THE PROCESS

The tasks assigned to this section need to be done with close observation and concentration. There is a proper process of work, which is to be followed by the people working in this section in order to manage the things accordingly and satisfactorily. The process starts from the collection of bills in different branches of SSGC’s recommended banks that are authorized to carry out their collection of bills.

14.2. DATA ENTRY

All the stubs are then sorted out bank-wise and are then punched in the computer. The consumer- wise data is also maintained with the help of the consumer numbers mentioned in the stubs. That consumer number represents, whether the consumer is industrial commercial and domestic consumer.

15. GAS SALES SECTION

As SSGC is a distribution company and they are not the producers. Therefore, their main concern is the distribution of gas to Domestic, Commercial and Industrial users. Gas Sales Accounting department is responsible for the accounting of the above mentioned three type of consumers. As the rates charged from these three types of consumers are different so they make different accounting entries for them. Every consumer has been given a consumer number, which gives the indication that whether the consumer is domestic, commercial or industrial consumer.

If the 1st digit of the consumer number is 9 then it is an industrial consumer.

If the 3rd digit of the consumer number is 9 then it is a commercial consumer.

Other than this are all domestic consumer numbers.

15.1.

THE PROCESS

After the distribution of gas to these three types of consumers, there is a step-by-step process of accounting for the gathered data.

The process starts from meter reading.

After the meter reading is done, the bills are then formed and then are raised to the

consumers.

Daybook is then formed, related to the sale of gas. Data is punched on daily basis in the

daybook. This daybook contains the complete record of every consumer including the volume of gas

sold, meter rent, quantity etc.

Any kind of customer complaints is dealt with including wrong billing adjustments.

All the data is then updated in General Ledger and the adjustments are the made related to customer complaints.

The data is then recorded in the computer system. The system is monthly updated on the

basis of fixed price approved by Government of Pakistan. The system automatically calculates the consumer’s bills on the basis of units shown by the meter reading.

General Sales Tax is then paid to the Government of Pakistan on the overall collection of

the month.

16. NON-GAS REVENUE SECTION

Non-gas revenue is also important and fundamental department of Treasury functions. Non-gas revenue means income from other than sell of gas.

SSGC earns a huge income from the sale of other materials and services. The four major sources of non- gas revenue are:

1. Condensate sell.

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2. Sell of gas to JJVL for extraction of LPG.

3. Gas meter sell.

4. Pipeline rental income.

16.1. CONDENSATE SELL

Condensate sell means the sale of liquid oil which is mixed up with some type of natural gases. One of the most important field Badin gas field in Hyderabad. The gas which is extracted from Badin gas field contains some quantity of liquid oil. Before transmission of gas, oil is separated from that gas. SSGC has installed separators for the separation of oil from the gas. After separating the oil from gas, that crude oil, on the directions of government is sold entirely to Attock Refinery ltd Attock Refinery LTD uses the crude oil in production of gas line.

16.2. SALE TO JJVL (JAMSHORO JOINT VENTURE LTD)

SSGC LTD has also made an agreement with JJVL for under which JJVL by SSGC is SSGC LTD daily supplies up to 200MMCF in JJVL plant from Badin field which is located in Hyderabad. The gas of Badin gas field contains a large amount of liquid petroleum gas (LPG). JJVL extracts the LPG from gas. This gas is then transmitted to consumers for domestic or commercial use. Liquid petroleum gas is then filled in the cylinders and is sold in the market. The revenue generated from the sale of LPG is received by JJVL.

The volume and heating value is reduced after the separation of LPG. This difference of in and out is called gas shrinkage. JJVL also pays royalty and transportation charges to SSGC LTD, which is the income of SSGC LTD.

16.3. GAS METERS SALE

Gas meter sell is also an important source for SSGC for generating income. In 1976-meter plant was installed for manufacturing of domestic gas meters. Previously the gas meters were imported from foreign countries. But still industrial and commercial meters are being imported; only domestic meters are produced by meter plant. Meter plant produces two types of meters. One is G-16 having low capacity and others are G4 domestic meters which have large capacity. These meters are used in the province of Baluchistan because of too much cold.

16.4. SELLING PROCESS

Meter plant has mainly two customers. One is SSGC LTD and other one is SNGPL LTD. Price for the sale of meters to the SNGC LTD is negotiated between the two parties. Meter Plant transfers meters at cost price to SSGC. Therefore, no profit no loss exists in the transaction of selling. SSGC LTD and SNGPL charge meter rent to domestic consumers. Hence, it becomes a huge source of income.

16.5. PIPELINE RENTAL INCOME

SSGC LTD is also striving hard to generate their income by renting pipelines. SSGC LTD mainly constructs two types of pipelines.

Transmission pipeline.

Distribution pipeline.

Transmission pipelines are used to transmit the gas from gas fields to another. While distribution pipelines are used to distribute the gas to different consumers. SSGC LTD has given on rent the four gas transmission pipelines to different companies.

Pirkoh Gas Field.

Hasan Gas Field.

Zamzama Gas Field.

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Bhit Gas Pipeline.

17. IMPORTS SECTION

Import section is also a fundamental operation of treasury function. This department or section is mainly responsible to deal with all types of imports of SSGC LTD. import order is mainly comprised of chemicals, component parts, pipelines, fillings, screws, bolt sets. SSGC LTD mainly carries its imports transactions with Germany, France, Belgium, China, and America.

17.1. ORDER PROCEDURE

Those who needs material or any type of machinery sends an indent to procurement department for material requisition, this document indicates the quantity and quality of material for which the order is being placed for.

17.2. INVITATION OF TENDERS

Upon receiving the indent, procurement department issues tender among public and then, quotations are received from various contractors. Then, the contract is given to that contractor which offers lowest bid.

17.3. OFFER FOR OPENING (L/C)

The main procedure of import starts in favor of that particular contractor. Procurement department sends all those legal documents of quotations, commercial evaluation to import section for further procedure which includes application of letter of credit, purchase order, evolution report and some other legal papers and, also approval of competent committee. The import section then contacts different banks to open letter of credit (L/C) in favor of SSGC.MCB opens L/C in favor of SSGC, which is sight L/C. sight L/C used in SSGC means payment is made to contractor on sight or presentation of documents without any discrepancy.

17.4. SHIPMENT OF ORDER

After opening of L/C in favor of contractor, the goods are shipped by shipping agency too Karachi dockyard which issues bills of lading to the head of Material Management department that goods are being shipped as on the required order.

17.5. CLEARANCE OF GOODS

Clearing agents cleans the goods on the port. A document known as bill of entry is prepared by clearing agent which includes custom duty, general sales tax, income tax, and federal excise duty etc. These al costs together re called landed cost. The clearing agent gets cleared all thee payment and order is shipped to store and all the necessary shipping documents are send to bank by the supplier.

17.6. ISSUANCE OF RECEIVING STATEMENT

The goods are stored after received in a proper way, a receiving statement is issued to the head office which is prepared item wise. Item cost is allocated in receiving statement on CNF basis.

17.7. PRICING PROCESS

Treasury function department on getting receiving statement carries on pricing procedure. Pricing of order is valued on the basis of its ratio cost.

17.8. MATERIAL REQUISITION PROCEDURE

When the goods are in store then any department who needs any type of goods from the store send a material requisition document (MR) which indicates the quality and type of material. Store

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transfers goods by giving “debit adviser.’ If the material is required for revenue, then revenue job is depicted and, if it is required for capital expenditure, then capital job is debited.

The whole process of financial side of imports starts and ends on this department. SSGC LTD has given the particular bank a ‘Debit Authority’ to pay and clear all the dues.

17.9. MARGIN AGAINST SHIPPING GUARANTEE

When the shipment documents are misplaced or get lost due to any mishaps, margin against shipping guarantee is issued by bank PNSC or Supplier bank to a particular bank to pay all the dues and clear the goods from the shipping port.

18. LOANS SECTION

Most of the organizations borrow loan from different banks to meet their capital expenditures and working capital requirements. SSGC LTD is also involved in the activity of borrowing loans from high profiled bank organizations. Loans are offered by banks in two categories.

1. Short term borrowings.

2. Long term borrowings.

18.1. SHORT TERM BORROWING (FINANCING)

Short term borrowings are that kind of loans which are settled or which are paid off within one year. Short term borrowings are mainly carried by SSGC LTD to meet its working capital requirements. Working capital is defined as the money which is borrowed from different banks to meet its day to day expenditures. Short term borrowing may be facilitated through much market or overdraft facility. Overdraft facility may be renewed on yearly basis.

18.2. LONG TERM BORROWING (FINANCING)

Long term borrowings are that type of loans whose tenure is more than one year and maximum limit of time period for the retirement for long term loans is 25 years. Long term borrowings are mainly used to fulfill capital expenditure requirements. SSGC LTD normally makes 5-10 years’ capex plan and borrows finance from banks through proactive plan.

18.3. CLASSIFICATION OF LOANS

Banks in two classes mainly classify loan. One is a conventional loan, means with interest. SSGC LTD has to pay a certain rate of interest on conventional loans, which are decided after negotiations are held between the two parties. Most probably SSGC LTD has to pay 25% on principal amount.

The other kind of loans is Islamic loans which doesn’t basically include any interest. In this case SSGC LTD sells its anyone of the asset to a particular bank and receives money against it. At the same time, SSGC LTD purchases the same asset from that bank. But now, the bank will sell it back to the SSGC at some higher rate. So this higher rate, which has been received by bank against that particular asset, is the profit, which is retained by the bank.

18.4. PROCESS OF BORROWING LOANS

The management of SSGC LTD informs the loan section department for the requisition of loans and current ratios and, equity ratios, which is also called finance covariance ratio. Loan department on behalf of SSGC LTD sends invitation letters to different parties for the sanctioning of particular amount of loan and get them approved by senior employees.

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18.5. SECURITY EXCHANGE COMMISSION OF PAKISTAN (SECP)

SSGC LTD notifies the security exchange commission of Pakistan that they are going to take loan from

a particular bank. They send the letter of charge to SSGC LTD and give them charge of their assets, current

assets are given as security for short term financing while for long term financing fixed assets are given as

security to SECP.SSGC LTD also gives insurance facility to SECP.

18.6. KIBOR

Benchmark is basically learned as KIBOR by State Bank of Pakistan. It was introduced in 2005.KIBOR is a fixed amount of interest which can’t be negotiate. Total amount of interest which is paid by SSGC includes KIBOR rate and interest rate. KIBOR rate changes upon agreement, means that if loan is borrowed for one year and State Bank has applied 3 months KIBOR, then after 3 months KIBOR rate changes while interest rate remains the same throughout the year. State Year Bank of Pakistan also regulates prudential regulations regarding different policies.

19. BANK RECONCILIATION SECTION

This section of Treasury Functions Department is responsible for making a bank reconciliation statement. This statement identifies the amounts that were not included in the Bank Book maintained by the company with the help of Bank Statement which is issued by the Bank. This statement is made in order to rectify the discrepancies in the Bank Book maintained by the company. This is a kind of matching the amount shown in the Bank Book maintained by the company with the original amount present in the Bank Account. It deals with four types of different discrepancies.

Amount Debited by the Bank, not yet credited by the company.

Amount Credited by the Bank, not yet debited by the company.

Cheque issued but not presented in the bank.

Amount deposited, not yet Credited by the bank.

19.1.

AMOUNT DEBITED BY THE BANK, NOT YET CREDITED BY THE COMPANY

This includes the different type of amounts debited by the bank, but the company has not yet lessoned

it from its bankbook. Some of the examples are; Bank Charges, Commission, penalties etc. Sometimes, it

so happens that the company gets late in receiving the debit advice of different sorts of charges from the bank. In this situation, this discrepancy normally occurs.

19.2. AMOUNT CREDITED BY THE BANK, NOT YET DEBITED BY THE COMPANY

Same is the case with delayed credit advices. Company debits its bankbook after receiving the credit advice from the bank. So, if the company gets late in receiving that credit advice, this sort of discrepancy occurs. The Bank statement sent to the company shows the amount transferred in the company’s account of which the company is not aware.

19.3. CHEQUE ISSUED BUT NOT PRESENTED IN THE BANK

The company issues a large number of checks every day. At the time of the issuance of checks, the company credits its bank book which shows that this much amount has been lessoned by the company’s account from a specific branch. But some of these issued checks are not presented in the bank by the check holders and the company earns unnoticed profit on that money which is still in its bank account. As the company does not become aware of the time, that when the issued checks will be presented in the bank, therefore company cannot make exact profit calculations. Bank statement is then issued to rectify such kind of discrepancies.

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19.4. AMOUNT DEPOSITED, NOT YET CREDITED BY THE BANK

Another type of discrepancy occurs in case of Bank deposits. For example, SSGC deposits certain amount of money in some of its bank account by the issuance of deposit slip. At the time of issuance of deposit slip, the company debits its bank book and considers that money as their current asset. But sometimes, it so happens that banks take little time to credit that amount in the bank amount. At that time, such type of discrepancy occurs.

After a certain period, the banks send “the bank statement” to the company, so that the company can update its books according to the bank statement. Here is the sample of the Bank Reconciliation made by the Company of its account in ABL (Civic Centre Branch, Karachi) based on the bank statement issued by the bank.

20. ACCOUNTS SECTION

Accounting department provides accounting services and financial support to the organization it belongs to. The department records, accounts payable and receivable, inventory, payroll, fixed assets and all other financial elements. The department's accountants review the records of each department to determine the company's financial position and any changes required to run the organization cost effectively.

ACCOUNTS SECTION COST & BUDGET GDS GENERAL LEDGER FIXED ASSETS STORES ADMIN
ACCOUNTS
SECTION
COST &
BUDGET
GDS
GENERAL
LEDGER
FIXED
ASSETS
STORES
ADMIN

21. COST & BUDGET SECTION

21.1. FUNCTION

The major function of cost and budget section is cost controlling and maintaining of revenue expenses and also accumulation of revenue cost which is incurred during the period, and planning for allocating the budget to the individual department. And another function of this section is to calculate the cost of operating and administration section.

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21.2. PURPOSE

To minimize the extra cost.

To operate the organization effectively and efficiently.

Closely watch t the individual department.

To run the organization smoothly.

To control the cost of operating and administration.

22. BUDGET PLANNING PROCESS

Cost & Budget is one of the hub sections of finance department. This section is indispensable because planning & cost both are the backbone of every successful organization and this section is first and foremost responsible for the budget planning. Budget planning begins before the distribution of budget for the new fiscal year. The SSGC provide the authority to every department to make their budget likewise, it means department wise and it is controlled and maintained by the cost and budget section in finance department. The 1st step of budget scheduling is “Proposal”. This section send proposal to every department of company in order to know the requisite budget by the departments. Every department suggest their required budget for the new fiscal year along with the details where they want to spend budget and send the proposal back to cost & budget section. The section checks their budget proposal and compare with previous budget. In case of big difference between the current and previous budget the budget will not approved before the justification of respected department.

Then this section brings together these proposals according to organizations wise and sends these proposals to the board for the approval. The board makes necessary changes and approves the compiled budget and report will send to every department. And approved proposals are loaded in ERP system (Oracle Financial). The budget is to be made according to year wise but it is issued quarter wise. After that we are uploading the budget.

22.1. ADDITIONAL BUDGET & RE-APPROPRIATION

This Re-appropriation form will use due to shortfall in budget or the departments spend their budget before the specified period or that project is not mentioned in their budget for whom they are sending the requisition. In order to solve this problem which are occurred due to shortfall in budget, 1st the required department sends the appeal for Additional Budget or Re-appropriation to CFO for approval of required material. After the approval from CFO they sent that request to cost and budget section for further procedure.

The cost and budget section checks that from which department the required department to take budget and also checks that is that department budget is available or not and also check the required department is really needed for that material or not.

After checking and confirmed these things the cost and budget section transfer the budget from the required department is needed through ERP.

23. CONCLUSION

SSGC is playing a leading role in the energy sector of Pakistan and is on its track of meeting its strategic goals and objectives over the past 56 years. The company has made momentous progress and has brought the fruits of clean, low cost and environment friendly natural gas within the reach of millions of domestic, commercial and industrial customers all over Sindh and Baluchistan. As a result, the company has emerged as a leading fully integrated utility company that continues to play a major role in fueling national progress.

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24.

RECOMMENDATIONS

There should be a proper schedule given to internees for their internship so that it will be easy for them to cover important areas and to give proper time to each section.

There should be an introduction session given to internees about the SSGC and their

related department which will help internee develop good understanding of Company and their

department.

I hope these actions to be taken as soon as possible, and our very own SSGC shines among every other company in Pakistan.

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