Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: BDJV

S No 1.0 1.1

Control Objectives BDJV Dashboard review

Risk

Work plan / Test Procedure

Nature of Work Step

1.1.1

To verify that all annual targets are being met as per plan

1. Obtain previous year Annual Plan and achievement for the department Non-completion of annual plan may lead 2. Compare plan vs. physical achievement for the department to non-achievement of business objective 3. Note the variances and seek explanation for the same 4. Perform root-cause analysis and identify the reasons for the deviations 1. Obtain the short and medium term goals of ONGC 2. Validate that the same are in line with the Long term goals 3. Make note of deviations if any

Analysis

Marketing strategy To verify that all short and medium term goals are in line 1.2.1 with the long term goals To verify that a formal mechanism of periodic 1.2.2 monitoring of business development plans 1.2 To verify presence of a formal 1.2.3 mechanism to perform market surveys 1.3 1.3.1 1.4 Partner selection To verify if criteria for partner selection has been defined

Non achievement of business objectives Absence of a formalized mechanism to periodically monitor and evaluate the effectiveness of BDJV group

Analysis

1. Review the process of periodically monitoring the effectiveness of Analysis the BDJV plan

Absence of formalized plan to periodically 1. Review the process of performing market surveys to ensure all perform market surveys which may lead BDJV opportunities are being tracked by the BDJV group to non adherence of long term plan JV with partner who is not eligible which may lead to damage of reputation or finances

Analysis

1. To verify that approved criteria for JV partner selection is in place 2. Make note of deviations if any

Analysis

DOA To verify that adequate 1.4.1 approvals have been taken as per DOA 1.5 Capex tracking

Non compliance of BDP

1. Obtain a list of all the JVs entered in the audit period 2. Validate that adequate approvals have been taken as per BDP

Analysis

1

actual project cost Analysis is being monitored on a continuous basis 2 . Non monitoring of project cost may lead 1. Obtain a list of all the JVs entered in the audit period 2.Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: BDJV S No Control Objectives Risk Work plan / Test Procedure Nature of Work Step To verify that all CAPEX vs. Validate that monitoring of approved CAPEX vs.5.1 actual expenditure for projects to excess capital expenditure are being monitored and tracked 1.

Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: BDJV Sampling Basis Nature of Control Dashboard Review Review the medium and short term goals Review the business development process Review the market survey process for BDJV Review the criteria for partner selection Review the approvals for XX% of the total JVs 3 .

Actual spent 4 .Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: BDJV Sampling Basis Nature of Control Review the approved CAPEX vs.

1 Compliance to JOA and PSC To review the compliance of a) Production Sharing Contracts (PSC) b)Joint Operating 1. Dis qualification of JV b. Approvals in budgeting process c. Revision of Budget 4. Government / License and assistance b. Cancelation of exploration license To verify that the management committee and the Non compliance to internal policies 1. Document and report on anomalies observed in reporting and compliance Verify procedure around approval & review of following by Operating & management committee: 1. Payment of fee to Government k. Certificates and notices 2. Prepare detail list of compliances under PSC and JOA: Compliance of JOA / PSC will include following: a. Requirements of the operating / Management committee b. Cost allocation basis m. Minimum work program 2. Obtain details of the Joint Operating Agreements 3. Annual Beget 3.2 operating committee may lead to disputes approves/reviews all the joint venture related issues and documents 1. Costing basis 8. 4. Heavy penalty to JV c.Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: Corporate Services JVOG (Non-operating) S No Control Objectives Risk Work plan / Test Procedure 1 Joint Venture (Non-Operating) 1. Preparation & Circulation of MIS Page 5 . Compare with the physical documents maintained.1.1. Valuation of petroleum i. Basis of computation of various reporting's to DGH & JV partners e.1 Agreement (JOA) and draw out the salient features and conditions that the operator needs to comply with Non compliance to PSC and JOA may lead to: a. Measurement of Petroleum f. Progress of the work 6. Compliance to reporting to DGH & JV partners d. Cash call 7. Authorization for Financial Expenditure (AFE)/ Authorized Expenditure Request 5. Recovery of cost for Oil and Gas g. Bank Guarantee submission (Basis & Timely submission) l. Assignment of interest j. Approvals thereof Compliance to JOA / PSC accounting procedures a. Production sharing of Oil and Gas h.

Inadequate financial and operation probity may lead to financial misstatement Page 6 . Time writing and allocation policies 11. Environmental laws etc. Accounting structure Prepare a detailed process flow on each of the above and examine the compliance to the SOP. Replies to DGH and Government audits 23. 19. Application of contractual rates in invoice payments 21. To verify whether the operator functions in a 1. Working capital management 4.1. 1. 1. Verify that the JV is adhering to the other statutory compliance like Safety. Application of time writing rates 10. Cess TDS etc. Recoverability of debts 2. Document and report in cases of anomalies observed.3 are being made Non compliance of statutory regulations regularly and there are no defaults on the same. Obtain all data records for the JV during the review period. Engineering. Movement of Inventory 3. Review : 1. Procedures for monthly accounts closure 14. Verify whether the JV has a documented HSE manual. Funds management 5. account number. 3. if in existence.4 1. Installation and Commissioning reconciliation. Commitment reporting 22. including revisions thereof 13. amount currency (INR) and amount in USD. To verify compliance to Non compliance to ONGC HSE Policy may lead to ONGC HSE Policy financial and legal penalties 1. cess and other statutory payments on time 18. Time writing rates. Procedure for arriving at the Value of Work Done 16. Procurement.Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: Corporate Services JVOG (Non-operating) S No Control Objectives Risk Work plan / Test Procedure To verify that all statutory payments like Royalty. Escrow account maintained for the work program (if applicable) 8.5 good operational and financial probity. Verify entries posted in the TDS accounts 4. Deployment of cash call received 9. 2.1. Document and report in cases of anomalies observed. Contracts and materials management 15. taxes. Payment of duties. Well cost reconciliation 17. Analysis of cash calls as against approved work program 7. Classify JV name.1. Time writing charges for Non-Joint venture activity 12. 3. Procedure for cash calls 6. Structuring of contracts 20. 2.

1 committee is formed as 2. non To verify that the tender 1. Check if the tender committee is formed as per the guidelines defined in JOA/MM Manual c. 1.Fall Clause 1.Penalty/Liquidated Damages/Cancel Clause To verify that standard may further result in disruption of operations c. 2. 3. Check whether duly approved bid evaluation criteria was provided along with the requisition.3 mentioned in the tender 3. disruption in operations 1.2.Subletting and Assignment in case of any failures by vendor g. fulfillment of delivery commitment 1. Obtain the list of tenders issued. Finalization of order on uncompetitive terms & To verify that the Bid conditions Evaluation Criteria is 1. Disputes may arise at later stage d. Page 7 . Check sample of tenders sold to the vendors whether standard clauses are mentioned in detail as per approved BEC. 2. Warranty and Guarantee 1. Get the list of tenders issued.2. Unclear terms & conditions may result in non e. finalization of order on uncompetitive terms & per guidelines 3. relating to the following: a. unauthorized procurement of material / services b. conditions Above may further result in blockage of working capital & / or inefficient utilization of entity's resources.2.Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: Corporate Services JVOG (Non-operating) S No 1.Failure and Termination Clause clauses are clearly 2.2 2. Delay in finalization / execution of orders. Bulk Inspection (where applicable. non & adhered to. 3. Obtain the reason for exceptions and report the same. selection of incompetent vendors which may result in low quality material / service. Selection of incompetent vendors which may appropriately approved result in low quality material / service.Earlier Delivery h.Inspection and reject of Materials document availability of financial recourse against the vendor f. Verify whether terms & conditions of orders are vetted by legal department to protect bets interest of the company 4. Obtain the reasons for exceptions and report the same. etc.2 Control Objectives Tendering Risk Work plan / Test Procedure Non compliance to BDP & MM Manual in this respect may result in a. which b. Obtain the reason for exceptions and report the same. Obtain list of order raised during the review period fulfillment of delivery commitment 1.

of vendors MM Manual 4.2. Obtain a list of limited tender orders 1. Increased dependency on limited no. Check appropriate cost recovery / depreciation made in ledger.5 requisite number of vendors (in case of limited tenders) 1. Increased dependency on limited no. To verify that inquiries have been sent to 1. single tender. Discuss the reason with MM department. Check the number of RFQs / enquiries sent to parties. Check whether the adequate follow up is done with the vendor purchasing the tender documents and not participating in bidding process.) Page 8 . Tender type used signifies the purchasing method like open tender. 3. Identify instances where RFQ / enquiries have not been sent to requisite number of vendors as per 2. 1. 4. of vendors who have purchased the tender documents 1.3 Accounting and record maintenance 1.4 is properly & timely conditions advertised. Analyze and discuss the cases with MM Department & Indenter To ensure whether the adequate follow up has 1. cumulative costs etc. Increased dependency on limited no. 2. Finalization of order on uncompetitive terms & 1.2. conditions 3. Compare it with the monthly Joint Interest Billings and with the DGH correspondence. Identify instances where RFQ has been sent to the same vendors on regular basis sent on rotational basis 2. Verify the accounting documents posted in the system and check that all costs are appropriately accounted for. Discuss the reasons for any non compliance & report any observations To verify that the tender Finalization of order on uncompetitive terms & 1.3.2. Obtain the list of tenders floated 2. Risk of under cost recovery costs (Developmental. Verify whether the sale of tender document is recorded in the tender register along with their address.6 to registered vendors is conditions 2. cheque number.Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: Corporate Services JVOG (Non-operating) S No Control Objectives Risk Work plan / Test Procedure 1. Document and report on anomalies observed in reporting and compliance 5. limited tender etc 3. Analyze the tenders in line with MM Manual in respect to advertisement & public notice requirements 4. of vendors 3. To verify that appropriate records are a.2. Finalization of order on uncompetitive terms & been done with the 1.7 conditions prospective vendors 2. 3. Over / under statement of expenditure 1.1 maintained by the JV for b. Finalization of order on uncompetitive terms & 2. Obtain line items wise JVA and JV billing totals with the accounting document number 2. Check whether all the detailed tender documents are published (as per MM manual) 5. Obtain a list of limited tender orders 1. Analyze and discuss the cases with MM Department & Indenter To verify whether RFQ 1.

Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: Corporate Services JVOG (Non-operating) S No Control Objectives Risk Work plan / Test Procedure 1. Correctness of cost booked under WBS structure Review the financial statements for accuracy and appropriateness. Take audited reports and check the same with PSC and JOA figures 2.2 Non compliance to internal policies been audited regularly by the audit firm defined in the PSC/JOA. Inadequate cover against risk for assets 1. 10. Check item by item compliance for the insurance coverage and report on the under / over / co/ non insurance. 3. 4. Drilling and production activities in detail. Acquisition of assets and vesting of title 5. Review specifically: 1. Payments of customs duty (since all imports are exempt from customs duty) 2. Check the Insurance chapter of the PSC and detail out the requirements to be met by the operator 2. To verify whether the Joint Venture expenditure has been 1. the study should also cover payments made for logistics support and optimum utilization of boats and choppers. Foreign Exchange gains and losses 4. Time writing and debit advises / charges from the Head Quarter’s of the operating joint venture. if any 8.4 adequate Insurance coverage.3. 5.3. Standardized agreement/BEC customized to the joint venture 8. Commitment reporting and Continuous monitoring of agreement clauses to verify correct payment 9. The study should cover all major payments made to drilling contractors/ production services like completion/ testing and procurement of drilling and production chemicals. Check provision of Insurance made under Budget Page 9 . 7. Obtain process of appointment of auditor and whether the same has been followed. amount in company code currency (INR) and amount in USD. 3.3. Inquire and report into abnormalities. 12. Compare with the physical documents maintained 3.3 booked with accuracy and whether they are legitimate Inaccurate booking of expenditure may lead to financial mis statement To verify whether the operator has obtained 1. account number. Services procured by the operator from other companies including its own affiliated companies 7. Items that are specifically not cost recoverable. Sort JV name. Obtain Joint Operating Agreements a. Marketing expenses and appropriateness 6. This is ledger wise balances for the JV 6. Document and report on anomalies observed in reporting and compliance To verify that the financial statements of the Joint Venture have 1. Compare these figures with the JOA and PSC. Obtain all data records for that JV. Application of Parent company overhead 11.

3. 1. 3. Check whether the monthly FOREX revaluation of liabilities & assets activity is carried out and the rates used are as specified in the JOA 2.8 Made on time and as blockage per PSC. Compare dates of actual receipts as against those specified by JOA.3. Obtain the cash calls raised in the JV and cash calls which are settled against the bank receipts documents.3. Obtain all data records for that JV.6 To verify FOREX revaluations Inaccurate valuation of forex may lead to financial mis-statement 1. Verify whether the rates have been charged appropriately or not. 2. Check the date on which cash call was received. Obtain cash calls raised the JV and cash calls which are settled against the bank receipts documents. 4. Verify whether previous cash call is reconciled prior to release of next cash call. Page 10 .4 Material Consumption & Records 1. account number. 3. Document and report on anomalies observed in reporting and compliance 1.Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: Corporate Services JVOG (Non-operating) S No Control Objectives Risk Work plan / Test Procedure To verify that allocation of revenue and costs to the joint venture is Inaccurate allocation of cost and revenue may lead 1. Compare these figures with the JV records maintained outside the system 5. Verify the amounts for which the cash calls were raised. 5. 4. as per the PSC 1. 2. Inquire and report into abnormalities.7 supported and the Excess payment/ short recovery of expenses amounts advanced are compared at the end of the year To verify that payments to ONGC are being: Delay in payments may lead to working capital 1. Verify that all supporting documents are appropriately maintained. if any. Verify the dates on which the cash calls were raised.3. Document in case of abnormalities. if any 1. amount in amount in local currency (INR) and amount in USD. Inquire into abnormalities and document the reasons thereof.5 being made to disputes in settlements appropriately. 3. 4.3. This is ledger wise balances for the JV 4. Obtain list of assets and liabilities for which Forex revaluation has been done. 5. Sort as per JV name. 2. To verify that the cash calls made by the operator are duly 1.

Sales 1. Verify whether any process exists for consumption booking for the materials.Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: Corporate Services JVOG (Non-operating) S No Control Objectives Risk Work plan / Test Procedure 1.5. Seek explaination in case of abnormalities. Note the cases and physically verify the stock where the materials have been procured and not been recorded accurately consumed during the review period. 2.5 To verify if the price maintained in the 1. procured are being 1. Incorrect price in the invoice may lead to shortpayment and subsequent loss to the organization Incorrect price in the invoice may lead to delay in payment due to the dispute 1. 2. Seek detailed consumption report of the materials during the review period.3. actually consumed and funds 5. Page 11 . Obtain invoices for the review period. 6.1 statement of expenses and/or mis-appropriation of 4. On a sample basis verify whether material procured have been consumed or not. Verify on a sample basis whether the prices have been charged as prescribed in PSC or not.4.1 invoice for a given billing period is correct. Seek details of the procurements done during the review period. To verify that materials Inaccurate consumption tracking may lead to over.

Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: Corporate Services JVOG (Non-operating) Nature of Worksteps Sampling Basis Nature of Control Analysis Obtain PSC and JOA Analysis Obtain OC and MC approvals. MOMs etc Page 12 .

working capital management. funds management.Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: Corporate Services JVOG (Non-operating) Nature of Worksteps Sampling Basis Nature of Control Analysis Obtain dump of data records for JV Analysis Obtain statutory approvals for HSE Analysis Obtain information about recovery of debts. cash calls etc Page 13 . inventory management.

of tenders Manual Take dump of Transaction tenders & 40 no.Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: Corporate Services JVOG (Non-operating) Nature of Worksteps Sampling Basis Nature of Control Obtain list of orders Transaction & select 20 no. of orders Automated Take dump of Transaction tenders & 40 no. of tenders Manual Page 14 .

of tenders Manual Obtain dump of JV billing and select 40 Transaction samples . of tenders Manual Take dump of Transaction tenders & 40 no. of tenders Manual Take list of limited Transaction tenders & select 40 Manual no. of limited tenders Take dump of Transaction tenders & 40 no.Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: Corporate Services JVOG (Non-operating) Nature of Worksteps Sampling Basis Nature of Control Take dump of Transaction tenders & 40 no. Monthly s JIBs and DGH correspondence Manual Page 15 .

Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: Corporate Services JVOG (Non-operating) Nature of Worksteps Sampling Basis Nature of Control Analysis Obtain dump of data records for JV and audited reports of Jvs Analysis Obtain financial statements of JVs Analysis Obtain Insurance policies Page 16 .

Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: Corporate Services JVOG (Non-operating) Nature of Worksteps Sampling Basis Nature of Control Analysis Obtain ledger wise balance for JVs Analysis Obtain list of assets and liabilities which needs forex revaluation and month end rates Obtain cash call raised and 6 sample Transaction supporting s documentation for cash calls Manual Obtain Cash calls Transaction raised for 6 cases s and corresponding actual receipts Manual Page 17 .

Oil Natural Gas Corporation Limited Internal Audit Volume 2 Audit Work Program: Corporate Services JVOG (Non-operating) Nature of Worksteps Sampling Basis Nature of Control Obtain procurement and consumption Transaction report and check 40 Manual s materials on a sample basis Analysis Minimum Sample size 40 Sales Documents Automated Page 18 .

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