Berger Paints Bangladesh Limited Internal Audit Department

Special Audit Report on Vehicle Maintenance

Audit Period (1st October 2011- 31st March 2012)

April 2012
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TABLE OF CONTENTS

Contents
Executive Summary 1 Background 2 Objective 2.1 Primary Objective 2.2 Secondary Objectives 3 Scope 4 Methodology 5 Investigation 5.1 Interview with Concerned Person 5.2 Interview with Non Listed Vendor 5.3 Interview with Listed Vendor 5.4 Interview with Driver 6 Analysis of Information 6.1 Maintenance of Individual Car (Car Wise) 6.2 Maintenance of Individual Car (User Wise) 6.3 Fuel Cost of Individual Car (Car wise) 6.4 Fuel Cost of Individual Car (User wise) 6.5 Maintenance Cost of Pool Car 6.6 Fuel Cost of Pool Car 6.7 Month wise Maintenance Expense (User & Pool Car) 6.8 Month wise Fuel Expense (User & Pool Car) 7 Findings 7.1 General Findings 7.1.1 Rate of Spares differs very much between selected vendors & non listed vendors 7.1.2 Rate of service differs between selected vendors & non vendors 7.1.3 Same vendor is charging same spare and service at different rate at different times 7.1.4 Different vendors are charging different rate for same spare 7.1.5 User sign was missing in some vouchers

Page No.

7.1.6 Absence of Vendor Agreement 7.1.7 Absence of Requisition Form 7.1.8 No Competitive price list was prepared 7.1.9 No demarcation in the Vendors Invoice/Bill 7.1.10 Break up was not written regarding engine replacement 7.1.11 No record were kept regarding sales of old Spares 7.1.12 No Policy regarding Octane Consumption 7.1.13 Cash purchase of Spares 7.1.14 Vehicles except corporate remains out of Focus 7.2 Probable Findings 7 Internal Control Weaknesses 9 Recommendations Annexure-1 (Existing & Proposed format of Vehicle Maintenance) Annexure-2 Format of Requisition Form

Executive Summary
This special Audit was mainly conducted to find out whether vehicle maintenance cost is charging by vendors as competitive, weakness in vehicle management and finally recommendations for improving the internal control weaknesses as the same of Berger Paints Bangladesh LimitedCorporate Office. The scope of the audit was various reports generated from SAP and analysis, documents verifications (vouching), interview with Mr. Ashraful Alam, Officer-vehicle maintenance; vendors; non listed vendors and drivers. The analysis of data begins from analyzing fuel and maintenance cost for the last six months of both individual and pool cars. The analysis results that there are significant variations among users in both cases (Maintenance & Fuel). Analysis of fuel consumption of individual car mileage basis is not possible because Individual car log book is not maintained & if analysis done regarding expense then respective officials will take it as a humiliation. But the fact is fuel consumption of some particular individual car was very high, although those cars run on CNG. We verified vouchers (Sample Basis) of last Six months (October, 2011 March, 2012). In some cases same vendor was charging different rate for same spares or service at different times. User acknowledgement was also missing from some bills. Brand name or model number was also not written in the bill. So, it was tough to differentiate spares. On the basis of vouching interview was done with some non listed vendors. This interview was very much helpful for the audit. Because it revealed many silent aspects that is happening regarding maintenance of vehicle in corporate world. It was very much clear that drivers are controlling each and every thing regarding repairs and maintenance. The possible instances are, sometimes drivers exchange/resell new spares or mobil cans just after purchasing from vendor and attached the old spares into the cars. As because they work as a source of income for the vendors, so vendors can easily issue a fake bill regarding the service. Sometimes driver purchase unnecessary spares and resell them again. Driver sometimes request vendor for making extra bills. The main internal control weakness of Berger Paints (BD.) Ltd. is it has no agreement with vendor. Although there are some listed vendors. But because of lack of agreement with listed vendors sometimes same vendor is charging higher prices. Besides, no warranty is ensured regarding newly purchased spares. Before getting service, sometimes concerned official bargains. But this bargain is not become so much constructive because of lack of having competitive price list. No policy was formed regarding the limitation of monthly consumption of fuel. Now the question arises, whether concerned official is aware of this fact or not? The simple answer is, yes. But he cant impose strong control upon the driver. Because if he become strict then it will be difficult for him to sustain in Berger paints. Even drivers can easily harm the car. Drivers will accuse him by saying that; service provider that Mr. Ashraf has chosen is not giving proper service. Now the ultimate solution of this problem is strengthen the internal control. Respective users should be more cautious about the maintenance expenditure of their car. Management is also needs to stay concern about this fact. Strong internal policy is very much required. Although these unnecessary expenses cannot be eliminated totally but if it can be reduced to a certain tolerable level then it will be very much beneficiary for Berger Paints.
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1. Background

The investigation has been conducted in response to

2. Objectives i. To check whether vehicle maintenance charge is competitive or not. ii. To check internal control system of vehicle maintenance. iii. To compare and analyze the vehicle maintenance cost.

3. Scope The Scopes of the assignment are i. SAP generated general ledger regarding vehicle maintenance (01.10.2011 to 31.03.2012) ii. Interview with concerned persons, listed vendor. iii.Checking of Vouchers (26.32% vouchers were checked ) iv. Field visit ( non listed vendor interview, service provider interview)

4. Methodology i. Analysis of SAP generated general ledger. ii. Analytical and graphical presentation. iii. Verifications of bills on different MIS iv. Discussion with concerned officials. v. Discussion with vendors. vi. Review compliance with existing process regarding maintenance.
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5. Investigation 5.1 Interview with Concerned Person: First Interview To understand vehicle maintenance procedures Mr. Ashraful Alam, Officer- General Services, Corporate Office was interviewed on 03-04-2012. During the interview we understood the processes relating to the maintenance of vehicle regarding service, billing, documentation, payment etc. Second Interview Second interview was held with Mr. Ashraf on 16-04-2012. During the discussion we talked various issues that we get during our audit. Those points are discussed below: 1. Spares price may fluctuate on the basis of quality among vendors. 2. Some old spares are sold like scraps and amount is not collected or preserved. 3. Amount is kept by driver and it is work as a motivation factor. 4. Drivers mainly conduct all the process regarding change of spares or taking service with the knowledge .

5. Mr. Ashraf is well aware about this fact (Ref: 5.2, Interview with Non Listed Vendor) but he has to ignore this unless it will be difficult for him to sustain in Berger Paints. 6. Salary of driver is very low. 7. Analysis of fuel consumption is not possible because Individual car log book is not maintained & if analysis done then respective officials will take it as a humiliation. Comments Regarding Dhaka Sales: 8. To some extent vehicles of Dhaka Sales remains out of monitoring. 9. Fuel and maintenance cost of Dhaka Sales is comparatively high it is because in some cars there is no driver. User use it by own way so minor accident occurs

frequently. There are some cars which maintenance cost comes Tk.5000 average in every month. 10.Sales officials of Dhaka Sales are not aware of this fact i,e whether driver makes any fraud or not cause ultimately the expense will be beard by Berger Paints. 11.Sometime checking of damage of Cars is not possible because a sales official doesnt give so much time after the occurrence. That means they pressurized for servicing as quickly as possible. 12.Octane consumption of some cars of Dhaka sales is very high. The name of the user are given below: Mr. Jasimul Hasan Mr. Basak Kumar Mitra Mr. Mostafa Mr. Imranul Kabir Third Interview Third interview was held on 17.4.2012 with Mr. Ashraf for getting a clear idea that he told in previous discussion (Ref: No. 5, Second Interview). The outcome of discussion is given below: 1. Some cars are consuming huge quantity of fuel. 2. Mr. Ashraf made a report around 2 years ago about this fact and send report to his boss via e-mail. Then boss told him to inform particular user. Then Mr. Ashraf send mail to particular user. At present he doesnt generate any report. When we asked about those reports he told us that no back up copy is preserved in his mail. 3. 4. Some drivers are taking huge benefits form maintenance process. Mr. Ashraf is well aware about this fact but he cant impose tight control because then drivers will damage the cars. 5. It will tough for Mr. Ashraf to sustain because then driver will accuse him by saying that, service provider that Mr. Ashraf has chosen is not giving proper service. 6. Maximum service provider is well known (friend) to Mr. Ashraf. So he may fall in a false position.
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7. Sometimes authority of Sajid Motors, Sunny Motors informs Mr. Ashraf that, drivers want extra bills. When we asked for the name of those drivers, Mr. Ashraf told that he doesnt know the name, he requested us to find the name by visiting the vendors concern. 8. Mr. Ashraf generates a monthly report regarding fuel and gas purchase. From this report it can be easily identified that which cars are consuming more octane. But he never informs the user about this matter. 9. All cars are converted into CNG. Octane is refilled only to start the engine and keeping necessary parts fresh. A car must run at least 5 k.m. a day by octane. If all the procedure followed, than a car will consume at most 40 ltr. octane in a month. But some cars are consuming 2 or 3 times that the possible limit. 5.2 Interview with Non Listed Vendor: To find out the exact scenario and collect the price of all the selected (from vouchers) spares & services, we interviewed 2 non vendors on 15-04- 2012. Name of those vendors were: Isha Khan Motors, Iskaton, Dhaka Russel Motors, Iskaton, Dhaka From Isha Khan Motors we just collect the amount of selected spares & services that we collect from corporate office. But the owner of Russel Motors told us various common practices regarding this matter. The information that we got there are described below: 1. In some cases, driver exchange/ resell new spares or mobil cans just after purchasing from vendor and attached the old parts in its previous place. If the driver become able to show the bill then vendor will cut a lump some money and if cant be able to show the bill then it will depend upon bargaining or familiarity. Here, the key point is, this case never discovers in official environment because officials never inspect whether new spares were attached or not into the car. 2. Some times unnecessary spares/ parts are purchased. It may not be needed but drivers give requisition verbally that spares got damaged and needs to replace.
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Here, drivers take commission from vendor from the selling price of spares in a sense that, they are working as a source of income for the vendor. 3. Price of spares varies on the basis of quality. Driver in accompany with concerned officials sometimes purchased low quality spares by giving low price but by making collaboration with vendors, bills are made on high quality spares. Here the gap amount is enjoyed by all the three parties i,e vendor, driver and concerned officials. 4. Sometimes driver or concerned official purchased spares via cash. In this case, quite often the purchased spares do not went into the garage. If went then the bunch is not the same quantity as it was purchased. 5. If management becomes aware about this matter and can impose strict control then it will be able to reduce the maintenance cost huge.

5.3 Interview with Listed Vendor On 16-04-2012 we visited the premises of Siam Automobiles for collecting the price of spares and services & as well as for checking the spares whether they were exactly attached or not. We took a pool car, Number GM-GA 11-3493. Last service date was 1104-2012 from vehicle solution. We check all the spares that were mentioned into the bill of vehicle solution and got every part placed into right position. We also collect price regarding the selected spares & services. The information that we got there are described below:

1. Old engine are replaced while purchasing new engine. 2. Value of old engine is determined via bargaining between the concerned officials and

vendor personnel.
3. There is no practice of writing the part exchange value in the bill. But if customer

wants then vendor writes the amount. But customer never tells to write the value of old engine.
4. Sometimes Mr. Ashraf purchased spares by own and brought them into garage

physically.
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5. On the basis of familiarity sometimes garage authority reduces the bill verbally but

they do not provide any document regarding how much discount they actually provide. 5.4 Interview with Driver While going to visit the vendor we talked with the drivers. From there we got some information Discussion with Mr. Nasir (15-04- 2012) 1. After replacement of spares, those are relatively well brought back into corporate office. 2. Old spares are sold as like scrap (Kg.) 3. Old engine is replaced while purchasing new engine. 4. Mobil is filled after every 2 or 3 months. 5. No idea about the price of mobil. Discussion with Mr. Selim (16-04- 2012) 1. Mobil is changed after 2 or 2.5 months after running 2000 k.m. 2. After servicing vendor issue the bill then it is submitted to Mr. Ashraf by driver and then cheque is issued. 3. Not all but only the good parts (old) brought into the corporate. 4. Old spares are sold as like scrap (Kg.) 5. While selling old engine 3 party quotation system is followed. On the basis of quotation old engiene sold. All the quotations are kept by Mr. Ashraf. 6. Tyres are also brought back into corporate. 7. If needed, Mr. Ashraf contacts via telephone and determined the price.

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6. Analysis of Information: From the collected reports from SAP we generated various individual reports and graphs. The time frame of those graphs is 1.10.2011 to 31.03.2012. Those graphs can easily describe the expenses (month wise) of Individual and Pool Car.

6.1 Maintenance of Individual Car (Car Wise)

Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Users MD's Car-1 MD's Car-2 DF's Car-1 DF's Car-2 GM-BnCC GM- T & F GM-MFG GM-HR & Admin GM-SC-1 GM-SC-2 GM- S&M-1 GM- S&M-2 GSM-D GM- IA-1 GM- IA-2 Head-Mkt Head- IT Head- VAT Head-ADD Manager - HR Head-Cost Ac. Total

Maintenance (Tk.) 18034 8593 21338 20120 17735 31174 12183 29447 69557 114650 20477 132550 63799 20988 35080 23112 33460 78742 12053 120600 19756 903448

Reason for High Expense

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140000 132550

120600 120000 114650

100000

80000 69557 63799 60000

78742

40000 31174 21338 20120 17735 12183 8593 29447 20477

35080

33460

20000

18034

20988

23112 19756 12053

Chart 1: Maintenance of Individual Car (Car wise) 12

6.2 Maintenance of Individual Car (User Wise) Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Maintenance (Tk.) 26627 41458 17735 31174 12183 29447 184207 153027 62799 56068 23112 33460 78742 12053 120600 19756 902448 Reason for High Expense

Users MD's Car DF's Car GM-BnCC GM- T & F GM-MFG GM-HR & Admin GM-SC GM- S&M GSM-D GM- IA Head-Mkt Head- IT Head- VAT Head-ADD Manager - HR Head-Cost Ac. Total

13

200000

180000 184207 160000 153027

140000

120000 120600 100000

80000 62799 56068 41458 26627 20000 17735 31174 29447 12183 23112 33460

78742

60000

40000

12053

19756

Chart 2: Maintenance of Individual Car (User wise)

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6.3 Fuel Cost of Individual Car (Car Wise)

Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Users MD's Car-1 MD's Car-2 DF's Car-1 DF's Car-2 GM-BnCC GM- T & F GM-MFG GM-HR & Admin GM-SC-1 GM-SC-2 GM- S&M-1 GM- S&M-2 GSM-D GM- IA-1 GM- IA-2 Head-Mkt Head- IT Head- VAT Head-ADD Manager - HR Head-Cost Ac. Total

Maintenance (Tk.) 95770 91486 98662 68662 119576 67432 58609 42802 43838 15554 56227.8 22557.2 55413 39828.8 0 46296.7 58094 44558 55868 24569 49432 1155235.5

Reason for High Expense

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119576

98662 95770 91486

68662

67432 58609 56227.8 55413 58094 46296.7 39828.8 55868 49432 44558

43838 42802

22557.2 15554

24569

Chart 3: Fuel Cost of Individual Car (Car wise)

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6.4 Fuel Cost of Individual Car (User Wise)

Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Users MD's Car DF's Car GM-BnCC GM- T & F GM-MFG GM-HR GM-SC GM- S&M GSM-D GM- IA Head-Mkt Head- IT Head- VAT Head-ADD Manager - HR Head-Cost Ac. Total

Fuel (Tk.) 187256 167324 119576 67432 58609 42802 59392 78785 55412.65 39828.8 46296.7 58094 44558.8 55868.25 24569.4 49431.55 1151236

Reason for High Expense

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200000 187256 180000 167324 160000

140000 119576 120000

100000

78785 80000 67432 58609 60000 42802 40000 24569.4 20000 59392 55412.65 46296.7 39828.8 58094 55868.25 49431.55 44558.8

Chart 4: Fuel Cost of Individual Car (User Wise) 18

6.5 Maintenance Cost of Pool Car

Sl. No. 1 2 3 4 5 6

Car Number

Maintenance (Tk.) 55948 70463 12502 82088 96716 50 317767

Reason for High Expense

VGA-19-1905 (VIP) VGA-11-3493 (Dir.) VGA-17-4856 VKHA-12-1664 VKHA-1097N VGA -19-7423N Total

Engine Replace

120000

100000

96716

82088 80000 70463

60000

55948

40000

20000

12502 50

0 VGA-19-1905 (VIP) VGA-11-3493 (Dir.) VGA-17-4856 VKHA-12-1664 VKHA-1097N VGA -19-7423N

Chart 5: Maintenance Cost of Pool Car 19

6.6 Fuel Cost of Pool Car

Reason for High Expense

Sl. No. 1 2 3 4 5 6

Car Number

Fuel (Tk.) 53630 52049.4 56908.25 40363.8 27391.7 8794.6 239138

VGA-19-1905 (VIP) VGA-11-3493 (Dir.) VGA-17-4856 VKHA-12-1664 VKHA-1097N VGA -19-7423N

Total

60000 53630 50000 52049.4

56908.25

40363.8 40000

30000

27391.7

20000 8794.6

10000

Chart 6: Fuel Cost of Pool Car

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6.7 Month wise Maintenance Expense (User & Pool Car)

Maintenance (Tk.) 151,324 102,092 176,930 65,262 239,968 485,639 1,221,215 Reason for High Expense

Sl. No. 1 2 3 4 5 6

Month October, 2011 November, 2011 December, 2011 January,2012 February, 2012 March, 2012 Total Cost

485,639

239,968 176,930 151,324 102,092 65,262

October, 2011

November, 2011

December, 2011

January,2012

February, 2012

March, 2012

Chart 7: Month wise Maintenance Expense

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6.8 Month wise Fuel Expense (User & Pool Car)

Sl. No. 1 2 3 4 5 6

Month October, 2011 November, 2011 December, 2011 January, 2012 February, 2012 March, 2012 Total Cost

Fuel (Tk.) 197,986 230,422 407,308 226,857 166,537 165,264 1,394,374

Reason High Expense

for

407,308

197,986

230,422

226,857 166,537 165,264

Chart 8: Month wise Fuel Expense 22

7. Findings We divide the findings in 2 phases

General Findings are those findings that we got while conducting the audit. These points are happening regarding the maintenance of vehicle. These findings we got while inspecting vouchers, conducting interview with concerned officials, drivers and analyzing various reports regarding fuel and maintenance. Probable findings are those that may happen regarding vehicle maintenance. These are silent findings. We got these while making discussion with concerned officials, non vendor. Although we dont have any strong supporting in favor of our probable findings but these are the common practices that are happening. 7.1 General Findings:

7.1.1 Rate of Spares differs very much between selected vendors & non listed vendors On the basis of vouching we collected the common spares name that is use in vehicle. We then made a comparative list. In accompany with that list we visited 2 non vendors premises. There we found a huge discrepancy regarding the rate of spares. When we asked for the rate then they told us about the model of the car, brand, spares brand etc. Because, rate of spares vary according to the brand. Then we took the range of rate from lowest to highest. After analyzing the rate we found that, the rate at which Berger is paying is much higher than the range.

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Some Instances are mention below:

Serial Spare's Name No. 1 2 3 4 5 Head light switch 6 Door Switch ( Reconditioned) 7 AC Can Motor 8 Compressor denso 9 Block Vulve 9061 10 1,500 600-1200 800-1200 G Corolla 8720 29,500 14000-22000 25,000 3,000 1500-2500 1200-2500 1,000 500-600 3,500 2,500 Compressor OIL SRS Sensor 800 5,500 350 2,500 300-450 850-2000 Expansion Valve Molicon Filter Shock absorber Front & Rear Isha Khan Rate as Russel Motors Motors (Amount per Bill (Amount in Tk.) in Tk.) 1,800 1,400 22,000 400-1200 200-600 6000-14000/ pair 600-1200 100-600 3800-9000/ pair

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7.1.2 Rate of service differs between selected vendors & non vendors When we analyze the service rate between selected vendors and non vendors we discovered that service rate also differs. Some Instances are mention below:
Isha Khan Rate as Motors per Bill (Amount in Tk.) break 650 Adaptor 1,000 System 3,600 replacement 600 500 1,000 & 1,000 1,000 3,000 2,500 1000 200 100-200 300-600 150-250 500 500-1000 3000 300-400 300 250-500 300-500 200 250-1000 600-1000 200 600 1000 2400 (with labor charge) 500 300 200 400 400 1200 200-400 300 400 Siam Auto Russel Motors (Listed (Amount in Tk.) Vendor

Serial No.

Spare's Name

Both side servicing Rear Spring Fitting Suspension Overhauling Light charge

2 3 4 5

Plug repl. & engine tune

6
Waiper full set

7 8

Break adjusting greeze sup. Repairing of door lock

9 10

Motor repairing & wealding Full car inside & out wash & Polish

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7.1.3 Same vendor is charging same spare and service at different rate at different times During our analysis we found that, same vendor was charging different rate for same spares or service at different point of time. Vendor wise some analyses are mentioned below: Spares:
Name of Vendor: Vehicle Solution

Case 1: Brake Pad Serial no. 1 Spares Name Brake Pad Quantity Purchase Date 5.1.2012 3,500 Purchase Date 21.1.2012 4,500 Purchase Date 14.1.2012 4,800 Purchase Date 11.2.2012 4,200 Purchase Date 20.11.2011 3,200

1 set

Case 2: Air Filter Serial no. 1 Spares Name Quantity Purchase Date 1.1.2012 400 Purchase Date 21.1.2012 500 Purchase Date 14.11.2011 850

Air Filter 1 Pc

Case 3: Grove Belt Serial no. 1 Spares Name Grove Belt Quantity Purchase Date 29.11.2011 850 Purchase Date 1.1.2012 900

1 Pc

Case 4: Brake Shoe Serial no. 1 Spares Name Brake shoe Quantity Purchase Date 20.11.2011 1,900 Purchase Date 11.2.2012 2,500

1 Pc

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Case 5: Engine Oil Serial no. 1 Spares Name Engine Oil Quantity Purchase Date 21.1.2012 1,600 Purchase Date 28.1.2012 1,700 Purchase Date 11.2.2012 1,600

4 Ltr.

Name of Vendor: Sajid Motors Case 1: Air Filter Serial no. 1 Spares Name Quantity Purchase Date 11.9.2011 350 Purchase Date 12.9.2011 400

Air Filter 1 Pc

Case 2: Oil Filter Serial no. 1 Spares Name Oil Filter Quantity Purchase Date 12.9.2011 450 Purchase Date 19.9.2011 500 Purchase Date 7.12.2011 450

1 Pc

Name of Vendor: Sunny Motors Case 1: Air Filter Serial no. 1 Spares Name Quantity Purchase Date 22.8.2011 250 Purchase Date 20.9.2011 300 Purchase Date 29.12.2011 250

Air Filter 1 Pc

Name of Vendor: Green House

Case 1: Compressor Oil Serial no. 1 Spares Name Quantity Purchase Date 11.9.2011 500 Purchase Date 5.12.2011 400 Purchase Date 19.2.2012 400

Compressor 1 Pc Oil

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Service:
Name of Vendor: Vehicle Solution

Case 1: Groove Belt Replace Serial no. 1 Service Name Groove Belt Replace Service Date 1.1.2012 100 Service Date 29.11.2011 150

Case 2: Front break pad replacement & rear break Servicing Serial no. 1 Service Name Service Date 14.11.2011 Service Date 5.1.2012 700

Front break pad replacement & 650 rear break Servicing

Case 3: Brake Pad shoe replace Serial no. 1 Service Name Brake Pad shoe replace Service Date 20.11.2011 650 Service Date 11.2.2012 750

Name of Vendor: Green House Case 1: Gas Charge Serial no. 1 Service Name Gas Charge Service Date 15.10.2011 2,500 Service Date 5.12.2011 2,200

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7.1.4 Different vendors are charging different rate for same spare During our audit we found that different vendors are charging different rate for same spares. Instances are given below:

Serial no.

Spare's Name

Vehicle Solutions (Rate & Date) 800 25-9-11 1,600 15-12-11 600 15-12-11 400 29-11-11

Name of Vendors New Race Sajid Bara Siam Automobile Motors Aulia Auto (Rate & (Rate & (Rate & (Rate & Date) Date) Date) Date)

Sunny Motors (Rate & Date)

Modina Motors (Rate & Date)

1 2

Compressor OIL Engine Oil

1,650 22-9-11 380 22-9-11 350 22-9-11

500 19-92011

Green House (Rate & Date) 500 11-9-211 -

Oil Filter

Air Filter

300 12-92011 -

400 28-7-11 350 12-1-12

250 29-1211

5 6

Break Oil AC filter

200 20-2-12

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7.1.5 User sign was missing in some vouchers

During our audit we found that, in some bills user sign was missing. Because after service bills were not placed to respective user so it is not possible for the user to trace what type of service was done in his car, in other word, was the service done actually? Instances are given below: Sl. No. 1 2-1322 Voucher No. Voucher Date 7-3-12 HeadIT 2 2-120 5-1-12 GM-IA DM-GA27-8781 DM-GA31-2582 3 2-5741 13-10-11 GM-IA DM-GA31-2582 4 2-5741 13-10-11 GMMFG 5 2-1320 7.3.12 HeadADD 6 2-5348 25.9.11 VGA-117916 VGA-317608 Vehicle Solution Sajid Motors Sajid Motors Sajid Motors Siam Auto Sunny Motors Green House 1521 11.9.11 X 4743 22.8.11 X 2565 23.1.12 X 2265 11.9.11 X 1961 12.9.11 X 2492 7.12.11 X User IO Vendor Bill Service User Sign X

Number Date 8686 29.11.11

Head - DM-GAIT 27-8781 VGA-117916

2-5659

11.10.11

GMMFG

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7.1.6 Absence of Vendor Agreement During our audit we did not find any agreement with vendor. Because of this drawback fluctuations of price are occurring. Same vendor is charging same spare or service at different rate at different point of time. Beside this, warrantee is not ensuring by the vendor, if ensured it is possible that, vendor may refuse regarding this warrantee in future if need arise.

7.1.7 Absence of Requisition Form User requisition was absent in the whole process of vehicle maintenance. Effect: User concerns are not possible to identify regarding whether or not spares or service needs to change. Making cross check is not possible to done between user requirements and actual service. Unnecessary spares or service may purchase.

7.1.8 No Competitive price list was prepared No competitive price list was prepared regarding spares and service. Effect: Authority may purchase spares or service at a higher price. Bargaining is not happening in constructive way. 7.1.9 No demarcation in the Vendors Invoice/Bill During inspection of vouchers we didnt find brand name or model of the spares in vendors invoices. Just the names of the spares were written. So it was difficult to differentiate spares on the basis of rate. Because spares very much differs in rate and quality. 7.1.10 Break up was not written regarding engine replacement Concept of Part-Exchange or Trade-in-Value is occurring regarding the purchase of new engine. Old engine is replaced while purchasing new engine and the amount is determined by Mr. Ashraful Islam via bargaining in telephone. But while inspecting
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voucher of newly purchased engine no break up was found regarding the value of old engine. So it was not possible to trace actual price of old engine as well as new engine. 7.1.11 No record were kept regarding sales of old Spares During our audit we found that some old spares after the replacement are sold by driver as like scrap. No documents were found regarding how much scrap was sold. Berger paints doesnt preserve the amount rather the amount is kept by the driver.

7.1.12 No Policy regarding Fuel Consumption No policy was found regarding the monthly consumption of fuel in individual car. As because there is no policy (limitation) so individual user does not bother so much about the consumption of fuel. During our discussion with Mr. Ashraf on 17-04-2012, we came to know that fuel should be used while starting time of the car and average monthly consumption will be within 30-40 Ltr. During our audit we found that fuel consumption of some cars was very much high relating to the range from 30-40 Ltr. Some instances are given below: Reporting Month: March

Sl. No. 1 2 3 4 5

User

Car No.

GM-MFG GM-SC GM-BNCC GM-T&FA Head-Mkt

DM-GA-33-2172 DM-GA-33-2276 DM-KHA-12-7279 DM-KHA-12-7280 DM-VGA-27-8782

Actual Consumption (Ltr.) 85 85.28 150 79 50

Price Limit Range per Ltr. (Ltr.) (Tk.) 94 30-40 94 94 94 94 30-40 30-40 30-40 30-40

Date

Total Amount

29.02.2012 7990 29.02.2012 8016.32 29.02.2012 14100 29.02.2012 7426 29.02.2012 4700

Effect: Corporate is bearing extra expenses. Possibility of Misuse.

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7.1.13 Cash purchase of Spares: During the audit we found that sometime concerned officials purchased spares by using cash. Effect: Spares price may fluctuate. Spares may purchase but may not reach to garage. Possibility of writing higher price in bill.

7.1.14 Vehicles except Corporate remains out of Focus During our interview with Mr. Ashraf (Ref: 8, Second interview) we came to know that, vehicles except corporate remain out of focus or control to some extent. Concerned officials just sent the bill in corporate after the servicing for making the payment. So probability of happening misuse is possible.

7.2

Probable Findings:

1. Requisition in given by the driver verbally. Here, exaggeration of maintenance can be happen. Driver may give requisition for the spares or services that do not need on that time. 2. Drivers are engaged in reselling new spares or mobil just after purchasing. 3. Drivers are getting huge commissions after taking the service. 4. While cash purchasing spares may misused by the concerned person on the way while bringing it into vendors garage. 5. Whether needed or not unnecessary fuel are purchasing and selling. 6. Driver sometimes purchased low quality spares by giving low price but by making collaboration with vendors bills are charged at higher rate. 7. As because amount of old engine was not written in bills so higher amount may be written in the bill than the replacement value that was determined via bargaining. The gap amount will be enjoyed by the respective persons.

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Internal Control Weaknesses All the observations that we discussed above is mainly because of the Internal control weakness regarding the maintenance of vehicle. Because of this cause many effects or lop holes are emerging. We will describe the internal control weakness at a glance by using Fish Bone Diagram. It also knows as Ishikawa Diagram or Herringbone Diagram, developed by a Japanese University professor, Mr. Kaoru Ishikawa at 1968 Fish Bone Analysis: A diagram that represents the focus point on the head or in the main bone of the fish and the other bones represents the contributory effects that arise from the main cause. It is also known as Cause & Effect Diagram. This analysis assists management to focus into the exact point to solve the problem.

Internal Control Weakness

Figure: Fish Bone Diagram

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Recommendations Management should consider the following in order to reduce the maintenance cost of vehicle and strengthen the internal control system for the betterment in future.

1. Agreement with vendor must be done as soon as possible. 2. Concerned official must have a comparative price list of related spares. 3. Formal requisition system should be introduced. 4. Continuous monitoring and reporting (monthly) should be done. 5. Record regarding sales of old spares must be kept in Berger paints. Amount should also preserve. The amount is very few for a car. But, as a whole, for all the vehicles the amount is huge. 6. While replacing engine, break up value for both new and old engine must be mentioned in the invoice. 7. Policy should be regulated regarding the consumption of fuel. 8. Cash purchase should be discouraged. 9. Authority needs to focus on the vehicle expenses of Dhaka Sales. 10. Surprise physical verification is required in listed vendors premises.

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Annexure-1

Existing Format
Driver informed Driver informed verbally to Mr. Ashrahul Alam

Proposed Format
Requisition approved by the User Mr. Ashrahul Alam will investigate the case Car will sent to vendors workshop

Mr. Ashrahul Alam investigate the case

Car sent to vendors workshop

After service vendor will sent bill to driver

After service vendor sent bill to driver

Driver will provide the bill to Mr. Ashraf Driver will provide the bill to Mr. Ashraf

Driver sent bill to user

After acknowledging by user, bill sent to Mr. Ashraful Alam

Mr. Ashraf will check and send the bill to the user User will compare service with his/her requisition User will send the bill to Mr. Ashraf Entry in SAP

Judge by Mr. Ashraf about the perfection of the bill Entry in SAP PR Approved by GM PO Park & submitted to Finance Dept.

PR Will be approved by GM PO Will Park & submit to Finance Dept. 36 Dept. will issue A/C payee cheque to Vendor

Finance Dept. issue A/C payee cheque to Vendor

Annexure-2 Berger Paints Bangladesh Limited Requisition Form (Vehicle Maintenance)

To be filled by Requestor: Name: Designation: Department: Car Number: Problem:

Requisition Date:

.. Signature

To be filled by Officer (Vehicle Maintenance):

Problem Clear and Understandable: Nature of Service: Spares Replacing

Yes General Servicing

No Both

Last Servicing Date:

Selected Vendor for Servicing: . Officer Maintenance

Date:

GM-HR

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