Draft Internal Audit Report of Ked For The Period April 12 July12

SOUTHCO LTD Internal Audit Report MKPS & ASSOCIATES
KORAPUT, Electrical Division (April, 2012 to July, 2012) Chartered Accountants
SOUTHCO LTD.
PURUSHOTTAMPUR ELECTRICAL DIVISION
DRAFT INTERNAL AUDIT REPORT FOR THE PERIOD FROM APRIL’2012 TO JULY’2012
PART – I OTHER THAN HIGH VALUE

Sl. No. Auditor’s Perception Audi tee’s Perception
1. Verification of agreement, initial power supply, computation of security deposits as
well as service connection deposit work charges
A Observation:
During the course of our audit we have verified the agreement for new service connection
including computation of Security deposit as well as service connection deposit charges on sample
basis and found that the same has been properly calculated and no deviations have been
observed. The details should be provide on Annexure- from17A to 17G
B Recommendation: Nil B. View on Recommendation.
C Risk grade: N.A C. Agreed Action:

D Risk & Implication; D. Implementation Responsibility:
2. Verification of billing of 3 Phase consumer’s through proper sampling
2.1 Consumer having huge outstanding but not yet collected.

a. Sub-juiced cases
A Observation: A. Cause:
During the course of audit we were informed by AFM that there is no sub-judiced case in the
division. Refer Annexure –‘1’ annexed.

D. Risk & Implication: D. Implementation Responsibility:
E. Target:
b. Disputed cases
During the course of audit we were informed by AFM that there is no Disputed case in the
division. Refer Annexure –‘2’ annexed.
B Recommendation: N.A B. View on Recommendation.
D. Risk & Implication; D. Implementation Responsibility:
E. Target:
c-1 Review of collection of arrear without any dispute

A Observation:
There are several no’s of consumers against whom huge arrears are outstanding but no action has A. Cause:
been taken for recovery the arrear amount. Details are furnished in Annexure-3.
B Recommendation: B. View on Recommendation.

Immediate step should be taken to recover the arrear amount as early as possible. DC notice to
be issued. Responsibility to be fixed.
C Risk grade: Medium C. Agreed Action:
Loss of revenue
E. Target:
D Disconnected Consumer
We have noticed that there are many PDC consumers having huge outstanding. No action has
been taken for recovery of their outstanding balance. SD has not been adjusted. Few such cases
are reported in Annexure –4.
Steps should be taken to recover the arrear amount, adjust SD
C Risk grade: Medium C. Agreed action:

Loss of revenue. Unless collected the arrear might become bad and doubtful of recovery.
E. Target:
2.2 Average Billing cases
During the course of our audit, we have observed that in some cases the consumers are billed on
average basis for a long period. The details of few such cases are reported in Annexure-5.
Reason for average billing for a long period should be ascertained and efforts should be made to
bill the consumers on actual consumption.
E. Target:
2.3 Provisional Billing cases
We have noticed few consumers are getting provisional bill since long but the division has not
taken any action to raise bills on actual consumption. Disconnection notice also has not been
served to these consumers. Details of some cases where provisional bills are raised for a long
period has been furnished in Annexure-6.
Immediate notice should be sent to consumers and action should be taken to raise the bill on
actual consumption.
D. Risk & Implication D. Implementation Responsibility:

The company is loosing revenue on this account.
E. Target:
3. Review of collection of arrear with emphasis on higher arrear amount
A Observation:
During the course of our audit we have observed that there are many consumers with high
amount of arrear outstanding for collection, but no action has been taken by this division for
collection of arrear. The details of some of the cases where huge arrears are outstanding are
furnished in Annexure-3.
B Recommendation: - B. View on Recommendation.
Necessary action should be taken to collect the arrears as soon as possible.
C Risk grade: Major C. Agreed Action:
E. Target:
4 Review of Temporary Connection incl final bill preparation and adjustment
Observation:
There is no temporary connection during the period of audit.
Recommendation: Nil B. View on Recommendation.
Risk grade: N.A C. Agreed Action:
Risk & Implication; D. Implementation Responsibility:
E. Target:
5 Low Consumption
Observation: A. Cause:
On test check basis, we found that actual consumption as compared to the contract demand is
very low in case of few consumers. Division has not taken any action against these consumers.
Details are enclosed in Annexure –7.
Recommendation: B. View on Recommendation.
Reason for the low consumption should be analysed.
Risk grade: Minor C. Agreed Action:
Risk & Implication; D. Implementation Responsibility:

Loss of revenue
E. Target:
6. Review of control of part payment cases and the authority matrix for allowing
part payments
No part payment allowed to the consumers. As explained to us, the register has also not been
maintained.
D. Risk & Implication; N.A D. Implementation Responsibility:
E. Target:
7 Review of Disconnection & Reconnection of consumers
A Observation:
During the course of audit, we found that the cases where the reconnection has been effected
after disconnection all the arrears has been paid.
E. Target:
8 Negative Arrear cases
We have noticed there are consumers who have paid more than their bill amount and there are
credit balances against them. Few cases of negative arrear cases are reported in Annexure – 8
.
These amounts should be checked whether actually they have paid excess or they are results of
mis-posting in ledgers. Reconciliation of these accounts should be done.

Wrong classification of consumer/mis-posting of amounts.
E. Target:
9 Review of payment rejection cases

A Observation:
During the course of audit, the details of payment rejection cases against energy charges could
be furnished in Annexure – 9
The details of payment rejection cases should be furnished in soft copy rather than the print outs
which is very voluminous.

Wrong posting of amounts.
E. Target:
10 Review of Bill Revision at the Division
A Observation:
During the course of audit, we check the register and we found bill revision is made in proper
authenticity
B Recommendation: nil B. View on Recommendation.
E. Target:
11 Review of customer complaint
A. Observation:
The register for the customer complaint was updated. We found that there were no pending
complaints.
The register should be updated on a continuous basis.
C Risk grade: Minor C. Agreed Action:
E. Target:
12 Review of Penalty Bills and control over collection:
A. Observation:
As explained to us, the same is dealt at the sub-division level. Hence, the same will be reported in
the sub-division report.
The data for the penalty bills should be maintained at the division also.
E. Target:
13 Review and reconciliation of Electricity Duty
A Observation
The reconciliation of the electricity duty collected and paid to the State Govt may be referred at
Annexure –‘10’.

The electricity duty should be paid as per collection as short payment may lead to levy of interest
and penalty.
E. Target:
14 Physical Verification of Cash
There is no revenue cash at the division.
15 Review of daily collection at Division & deposit of the collection in Bank
A Observation
During the course of audit, we found that the sub-division paid cash directly to the bank.
B Recommendation: N.a B. View on Recommendation.
E. Target:
16 Review of Observation on vehicle utilization
A Observation
During the course of audit, we have checked the utilization of vehicle and the details may be
referred at Annexure –‘19’.

In our opinion, there should be a limit fixed for the maximum km of a vehicle to have control over
the utilization of the vehicle.
E. Target:
16 Review of blockage of funds in Escrow Account
A Observation
During the course of audit, we found that the balance is maintained in the escrow account which
is nearly Rs.2 lakhs without being transferred to the Head Office. The details may be referred at
Annexure –‘12’.
The interest should be claimed from the bank for the non transfer of amount to the head office.
E. Target:
17 Review of Legal Cases
A Observation
As explained to us, there is no disputed case with the division.

E. Target:
18 Review of Annual Claim of ASD
A Observation
During the course of audit, we have carried out test check of ASD claimed from the consumers.
The details may be referred at Annexure –‘13’.
The follow up for the collection of ASD needs to be strengthened as the payment is not coming
forth.
E. Target:
19 Review of enforcement of all policies / circular / directives as received from corporate

office / Circle office.
A Observation:
During the course of our audit, we have checked that the division has followed the policies/
Circulars/Directives as received from Corporate office/Circle office.

In our opinion, a copy of the same should be forwarded to the auditors or else a separate file
should be maintained wherein the same is kept for easy accessability.
C Risk grade: Minor C. Agreed Action:
E. Target:
20 Reconciliation of Monthly Energy Bill Collection posted in Billing Database vis-à-vis

Collection Entry posted in Revenue Cash Book
A Observation:
During the course of our audit, we checked and found as per their record that there is huge
amount of difference arise. we unable to find proper difference due to missing the payment
rejection of MIS of april’12. The detail should be refer to Annexure –‘14’.
The file should be maintained correctly
E. Target:
PART II EXPENSES
1. Statutory compliances
TDS :
TDS on contractors bills and on salary has been deducted at appropriate rate and the same has
been deposited in time into Govt. accounts
Professional tax:
Professional Tax has been deducted at appropriate rate and the same has been deposited in time
into Govt. account.
Works Contract Tax:
The works contract tax has been deposited within the due date.
C Risk grade: N.A C. Agreed action:
E. Target:
2 Review of Pay Roll, Leave, Arrear Payments, Pension and Recoveries
A. Observation:
During the course of audit, we have checked on test basis, the above payments and found the
same to be in order.
C Risk grade: N.A C. Agreed action:
E. Target:
3 Physical Verification of Cash
A. We have physically verified the cash on 09.01.2013 and found the same to be tallied with the
rough cash book. The main cash book has been maintained upto 29.12.2012. The cash found on
verification is given below:
Denomination Nos. Total

1000 1 1000.00
100 9 900.00
20 1 20.00
10 7 70.00
Coins 6.00
Total 1996.00

The cash book should be maintained on a day to day basis.
C Risk grade: High C. Agreed action:

There are chances of misappropriation of cash.
E. Target:
4 Report on Status of half yearly/quarterly/monthly BRS, Accounts, Scrutiny Trial

Balance, Unadjusted advanced, Inter Unit Reconciliation.
A. Observation
During the course of audit, we found that the books of account has not been updated. The status
of the same may be referred at Annexure –‘15’.
The accounts should be maintained on continuous basis and kept updated.

E. Target:
5. Review of Receipt of materials at site and capitalization thereof.
The material at site account has been received from the section offices upto March’2012. The
same may be referred at Annexure –‘16’.
The material at site account should be obtained from the sub – division on a monthly basis.
D. Risk & Implication; D. Implementation Responsibility :

The accounting of materials and capitalization is delayed resulting in delayed finalization of
accounts. E. Target:
6. Review of disbursements including imprest accounts
A. Observation
We have reviewed the disbursements on test check basis and found the same to be in order. As
regards imprest account the same is reimbursed on the submission of the bills.
C Risk grade: -N.A C. Agreed action:
E. Target:
7 Review of Purchase Orders/ Work Orders
A. Observation
During the period of audit, no purchase order has been issued. As regards the work order we have
checked on sample basis and found the same to be in order except that there has been alteration
in the date of completion which has not been initialed by the concerned person.
Any alteration to the work order should be through amendment instead of correcting the original
work order. Or else the alteration should be noted at the bottom of the order duly signed by the
competent authority.

There may be loss to the company due to non completion of work and non collection of liquidated
damages. E. Target:
8. Review of amounts booked under “ Material found Short / Excess, pending

investigation”.
A Observation:
During the audit, no such amount is booked in the division.
C Risk grade: C. Agreed action:
E. Target :
Purushottampur- SUB-DIVISION
Sl.
No. Auditor’s Perception Auditee’s Perception
1. Verification of billing and collection from LT single phase consumers through proper
sampling
1.1 High Consumption
A Observation: A. Cause .
During our course of audit we have observed that some consumers are consuming huge power
as compared to their contract demand. Their CD has not been enhanced. Details of such cases
have been reported in Annexure- 18A.

The contract demand/ connected load of these consumers’ needs to be enhanced & additional
security deposit to be collected.
C Risk grade: Medium C. Agreed Action :
Loss of Revenue.
E. Target :
1.2 Low Consumption
A Observation: A. Cause ;
Actual consumption of some single-phase consumers was taken randomly, shows abnormally
lower units as compared to the contract demand/connected load. Details of cases of low
consumption are furnished in Annexure -18B.

The reason of such low consumption should be investigated.
C Risk grade: Minor C. Agreed Action :
Loss of Revenue
E. Target :
1.3 Provisional Billing
A Observation: A. Cause :
We have noticed few consumers are getting provisional bills since long but the sub-division has
not taken any action to regularize the same. Details of a few cases where provisional billing is
continuing since long has been furnished in Annexure-18C.
Immediate notice should be sent to consumers and action should be taken to raise the bills on C. Agreed Action :
actual consumption.
C Risk grade: Minor D. Implementation Responsibility :
E. Target :
D. Risk & Implication
The company loosing revenue on this account. Steps should be taken immediately to bill the
consumers on actual basis.
1.4 Average Billing

A Observation: A. Cause :
According to OERC code 2004 clause 93 (8) average billing shouldn’t continue for more than one
meter reading cycle, but in some cases, we have observed that average billing is continuing for
more than one meter reading cycle. Details of few such cases where average billing is continuing
for more than one billing cycle is furnished in Annexure –18D.

All average bills should be checked and reviewed. Steps should be taken to bill on the basis of
actual consumption.
Loss of revenue.
E. Target :
1.5 Huge outstanding against Consumer without any dispute.
A Observation:
During our course of audit we have found large numbers of consumers having huge outstanding, A. Cause
They are not paying though there is no dispute but no action has been taken for collection of
their arrear amount. DC notice not sent. Details of few cases where huge arrear are outstanding
against consumers without any dispute have been furnished in Annexure –18E.

Immediate steps are required to be taken to recover such dues on priority basis. Dc notice to be CORRESPONDENCE TO THE CONCERNED SDO
sent immediately. Responsibility to be fixed. FOR DISCONNECTION OF POWER SUPPLY
VIDE LETTER NO-2577/2.3.12
C Risk grade: Major C. Agreed Action :
Loss of Revenue
E. Target :
2 Verification of initial power supply, collection of applicable security deposit as well as
service connection deposit work charges.
A Observation: A. Cause
No discrepancy was found in initial power supply and collection of security deposit.
C Risk grade: C. Agreed Action :

E. Target :
3. Verification of reconciliation of test reports
On verification of test report we found that there is no test report pending under the sub-
Division which are coming to billing fold through LTB.
C Risk grade: C. Agreed Action:

E. Target:
4. Verification of control of money Receipts.
The sub division is maintaining a register for the money receipt books and the utilization there
of.
Action should be taken to remit the used MR to Division. The data on unused/cancelled MR
should be provided in the register.
E. Target :
5 Bill Revision effected, but balance arrear after bill revision is not realize
During the audit period we found that the bill revision effected but the balance arrear not paid.
The same Should provide on Annexure –18F.

The bill revision should be effected only after the collection of the balance arrears.

E. Target :
6. Verification of control over remittance of Revenue collection of division office

On verification of remittance register it was found that generally, the funds collected at sub-
division office is deposited directly in the bank account on a day to day basis.

E. Target:
7. Verification of action taken on the reports of spot billing Agency

During the course of audit , as per said by sub division there is no report of spot billing Agency.
Annexure –18G.
E. Target :
8. Review of disconnection & reconnection including maintenance registers
During the period of audit we found that there is no reconnection maid before payment of the
arrear. Annexure –18H.
B Recommendation: nil B. View on Recommendation.
C Risk grade: N.A C. Agreed Action :

It leads to increase in the Sundry Debtors for defaulted Consumers. E. Target :
9. Verification of bill delivery & action taken for undelivered bills

On verification of bills delivery, it was observed that bills are distributed by own staff and the
undelivered bills are returned to concerned JE. The Sub-division has no track to find out the
undelivered bills pending with the concerned JE.

A list of undelivered bills should be forwarded to the Sub-division.

It leads to unnecessary increase of book debts and non realization of cash from the consumers.
E. Target :
10. Review of control over permission for availing Temporary Service connection and
process of preparation of final bills.
A Observation:
During our course of audit we verified that final bill for all temporary connection has been made
the same should provided in Annexure –18K.

E. Target :
11. Review of data up-dation in the Meter management System (MMS) module and
control over un – Metered supply
Meter management System has not been implemented in this sub-division.
Necessary steps should be taken to implement Meter Management System (MMS) module.
C Risk grade: Major C. Agreed Action :

Management and control, Lack of efficiency. E. Target :
12 Payment Rejection Cases (Only against collection of Energy Charges

A Observation:
During our course of audit we found the payment rejection cases the same should provided in
Annexure –18K.

E. Target :
13 Penal Bill Not Collected / Part Collected
A Observation:
During our course of audit we verified and the same should provide in Annexure –18J.
.

E. Target :

Draft Internal Audit Report of Ked For The Period April 12 July12

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Draft Internal Audit Report of Ked For The Period April 12 July12

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SOUTHCO LTD Internal Audit Report MKPS & ASSOCIATES

KORAPUT, Electrical Division (April, 2012 to July, 2012) Chartered Accountants

PART – I OTHER THAN HIGH VALUE

B Recommendation: Nil B. View on Recommendation.

C Risk grade: N.A C. Agreed Action:

2. Verification of billing of 3 Phase consumer’s through proper sampling

2.1 Consumer having huge outstanding but not yet collected.

C Risk grade: N.A C. Agreed Action:

D. Risk & Implication: D. Implementation Responsibility:

C Risk grade: N.A C. Agreed Action:

D. Risk & Implication; D. Implementation Responsibility:

c-1 Review of collection of arrear without any dispute

B Recommendation: B. View on Recommendation.

Steps should be taken to recover the arrear amount, adjust SD

C Risk grade: Medium C. Agreed action:

D. Risk & Implication: D. Implementation Responsibility:

C Risk grade: Medium C. Agreed Action:

D. Risk & Implication: D. Implementation Responsibility:

B Recommendation: B. View on Recommendation.

D. Risk & Implication D. Implementation Responsibility:

3. Review of collection of arrear with emphasis on higher arrear amount

Necessary action should be taken to collect the arrears as soon as possible.

C Risk grade: Major C. Agreed Action:

D. Risk & Implication; D. Implementation Responsibility:

4 Review of Temporary Connection incl final bill preparation and adjustment

There is no temporary connection during the period of audit.

Recommendation: Nil B. View on Recommendation.

Risk grade: N.A C. Agreed Action:

Risk & Implication; D. Implementation Responsibility:

Recommendation: B. View on Recommendation.

Reason for the low consumption should be analysed.

Risk grade: Minor C. Agreed Action:

Risk & Implication; D. Implementation Responsibility:

C Risk grade: N.A C. Agreed Action:

D. Risk & Implication; N.A D. Implementation Responsibility:

7 Review of Disconnection & Reconnection of consumers

C Risk grade: N.A C. Agreed Action:

D. Risk & Implication; D. Implementation Responsibility:

8 Negative Arrear cases

C Risk grade: Medium C. Agreed Action:

D. Risk & Implication; D. Implementation Responsibility:

9 Review of payment rejection cases

D. Risk & Implication; D. Implementation Responsibility:

10 Review of Bill Revision at the Division

C Risk grade: N.A C. Agreed Action:

D. Risk & Implication; D. Implementation Responsibility:

11 Review of customer complaint

B Recommendation: B. View on Recommendation.

The register should be updated on a continuous basis.

C Risk grade: Minor C. Agreed Action:

D. Risk & Implication; D. Implementation Responsibility:

12 Review of Penalty Bills and control over collection:

B Recommendation: B. View on Recommendation.

C Risk grade: Medium C. Agreed Action:

D. Risk & Implication; D. Implementation Responsibility:

13 Review and reconciliation of Electricity Duty

B Recommendation: B. View on Recommendation.

C Risk grade: Medium C. Agreed Action:

D. Risk & Implication; D. Implementation Responsibility:

14 Physical Verification of Cash

There is no revenue cash at the division.

15 Review of daily collection at Division & deposit of the collection in Bank