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In terms of the appointment letter dated ___________ we were engaged to look into the affairs of M/s “ORION SECURITY SOLUTIONS” with respect to its operations of Uttar Pradesh through Lucknow Office for the period from 1 September 2009 to 31 October 2010 and conduct a review and special audit in terms of the scope of work as detailed in the said appointment letter. We hereby state and declare that our responsibility is limited to express an opinion on the overall affairs of Lucknow branch based on the records, documents, papers, certificates and information provided by the officials / management of “M/s Orion Security Solutions” and our Audit/Test Checks thereon. BACKGROUND OF BRANCH:
The Lucknow Branch started its operations in November 2008 where it handled the security and diesel filling in generator to operate concerned telecom towers of Wireless-TT Info. Services Limited in eastern Uttar Pradesh. M/s Orion Security Solutions provided above mentioned services till December 2009 and thereafter its services were limited to providing security services only for the towers of telecom operators. As per the confirmation given by management of branch during the period under review they were providing services to 600 sites which consisted following two types of tower sites:
CDMA Towers GSM towers.
There were total 309 CDMA Towers sites which were not vary in that period.
There were total 291 GSM Towers sites which could be varied time to time to the extent between 10 to 40 sites. Two security guards were employed on daily basis for each site viz. one guard for day shift and another for night shift. At some of sites the management had appointed only one guard for whole day including night such sites were called care taker site. One field officer was appointed for a group of 10 to 15 sites. All the security guards were controlled by field officer and the field officer were controlled by the branch manager. Vice president stationed at Lucknow was responsible for controlling overall affairs of the branch. OPERATIONAL PROCEDURE: The branch had mainly two heads of expenditure first was salary for site security guards and field officer and another was towards diesel expenses for running the generator power backup. It was explained that most of the salary and diesel expenses were incurred in cash. All the security guards use to receive their salary in cash only at site. The Field officers was responsible for supervising the guards of respective sites and to distribute salary etc. who used to collect cash as imprest from the Branch for payment of salary to the respective security guards. After payment of salary to the guards, the field officer gives the detailed account of his imprest at the Branch supported with the acknowledgement of receipts by the concerned guards. The diesel expenses are paid against the bill provided by the dealers/venders after authorization by appropriate authority. The revenue of branch was from the bills raised against security and management services for towers for various sites. The invoices raised to Telecom Companies are based on Management Information System (MIS) sheets approved by resident technician appointed by telecom operators. The Management Information System (MIS) sheets so approved by the resident technician contained details such as guards duty record, hours of power failure and running of generators etc. The most of the transactions of branch were in cash and the branch maintained only cash book to record the transaction. Only few payments are being made through bank account of branch. Appropriate Authority and sanctioning authority details>>>>>>>>>.
OBJECTIVE AND SCOPE OF AUDIT: The objective of the Audit is to review and report on the manner of cash handling, control its accounting and management in a timely manner and in accordance with the authorities delegated by the management. The objective of the audit is also to find out any intentional deviations from the guidelines and resultant discrepancy/misappropriation of funds on the basis of the documents/ records available for verification. During the course of audit, suitable analytical review of data and test check commensurate with the scope of audit were conducted. The audit scope also includes determination of financial impact on the company during the audit period in case non-compliance of procedure included above. The period of the audit was from 01 September, 2009 to 31 October, 2010. PROCEDURE/TECHNIQUES APPLIED FOR AUDIT: The procedures/techniques employed in the conduct of the audit is to review the available records/documents/statements/confirmation and also make the analytical review of data available on record for the period under consideration. The following procedures have been applied for Audit; 1. Vouching of cash books maintained and bank statement provided by the branch. 2. Matching payment made to all security guards and diesel dealers with details sheet prepared by Management Information System (MIS) approved by authorized technician appointed by telecom Company. 3. Some of payments were made directly by Head Office to branch bank account and diesel dealer therefore we had vouched and verified the payment made/transfer to diesel dealer/branch in accordance with the cash and bank books of head office. 4. Additionally, since proper accounts and records were not available at one place, we summarized all the details provided to us by branch and Head office. 5. Review of statements/confirmations given by the employee/ Diesel Dealers. 6. Review of complaints available on records.
OBSERVATION AND FINDING: It has been observed that the control over recording of transaction regarding payment made towards salary to security guards and diesel expenses were unconvery poor and it requires a lot of improvement/review. Similarly the branch did not follow proper rules and regulations for internal control operation such as not maintaining the records of invoices/bills from the dealers supplying diesel etc,. Pay roll register_____ proper payment to security guards for particular month/quarter, proper handling of cash transaction and issuance of cheque. The major observations/findings in our audit are as follows:
1. The audit also found that there was a lack of compliance with policies and
procedures, weaknesses regarding supervision, segregation of duties of management and Field Officer appointed for respective task. Policies, procedures, Rules etc. issued from the head office from time to time were not maintained in consolidated manner for easy reference. Management and Field Officer did not regularly review operations to ensure that deficiencies were detected and corrected efficiently.
2. We have found some vouchers which were not proper in respect to cash
imprest and other payments made to Field Officer, diesel dealers and staff. The above mentioned vouchers contained following types of irregularities: i. Some vouchers were signed by branch authorities on authorization side but there had no signed of receiver. ii. Some vouchers were signed by branch authorities on the behalf of receiver side as well. iii. Some of signatures on vouchers were not matched with original signature of receiver. The total amount of the above mentioned vouchers aggregating to Rs.67,01,234/as per Annexure-1 does not reflect its genuineness and appear to misappropriation of fund by the signatory of such vouchers in collusion with the sanctioning authority.
3. Some of complaints/statements made available to us by the branch which contains the following types of facts;
Field Officers complained that the Vice President insisted to sign on cash voucher for the excess amount i.e. more than the actual payment. As per the letter written by the Field Officer which was made available to us, it contained that the vice president of the branch Shr. R.P. Singh had given short payment for distribution of salary to security guards and for the purpose of handover and takeover of sites. He had threatened Field Officer to receive the short amount against actual amount written on voucher. One of those voucher was for distribution of salary to security guards amounted Rs.3,45,000/- out of this only Rs.275000/- was given to Field Officer (Vinay Shukla) and another was for the purpose of handover and takeover of sites total amounted Rs. 3,36,000/- out of this only Rs.2,36,000/- was given to him. Another Field Officer(Vipin Singh) also complained for short payment of voucher amounted to Rs.82,931/-The annexure of total of short payment given to above Field Officers are enclosed herewith as per Annexure-2.
We observed that in one case Mr. Naveen Tripathi (Operation Manager) complained against vice president R.P. Singh stating that he had received short payment for handover and takeover of sites for numbers of times. As per his letter the vice president used to give him security voucher for above balance payments stating that payment will be made later against those security vouchers. But he had not received any payment against that security voucher from Mr. R.P Singh during his tenure in the branch. The same facts were not reported by Mr. R P Singh to Head office which seems that there is misappropriation. Now the Operation Manager Mr. Naveen Tripathi wants to adjust the security voucher against his imprest amounted to Rs.22,88,556/Complain letter send by him to head office are enclosed herewith as per Annexure-3.
In addition to the above mentioned cases we also observed that one Field Officer, (Mr. Bechan Singh) complained that after
handover/takeover of sites he had sacked some of security guards at his own risk and paid compensation to security guards. As per his letter we found that he had right to receive total amount of Rs.5,69,000/- out of this he had received a part payment of Rs.2,00,000/- from the past vice-president Mr. R. P. Singh and not received balance amount of Rs.3,69,000. The same facts were not reported by Mr. R P Singh to Head office which seems that there is misappropriation. The letter available is enclosed herewith as per Annexure-4.
It has beeen observed that some of the security guards filed complaint through “Rashtriya Janadhikar Sanrakshan Sansthan” regarding nonpayment /short payment of salary for various months which were mentioned in their complaint letter as enclosed herewith as per Annexure-5. Additionally some guards complained directly to branch regarding unpaid salary. The same facts were not reported by Mr. R P Singh to Head office which seems that there is misappropriation. The details of those part payment and balance amount payable as per that letter have been enclosed herewith as per Annexure-6.
4. There were no supporting invoices provided by diesel dealer for cross
checking of payment voucher even though the management is responsible for receiving proper invoice, they did not take any serious action regarding the same.
5. we observed in our Audit that the branch had not reconciled any accounts
related to imprest and vendors.
6. On analytical review of data provided to us, we found that the branch made
excess payment towards purchase of diesel and salary of security guards as compared to the actual consumption of diesel and salary payable to security guards. As per our analytical review the total excess amount towards salary of guards and diesel expense were Rs. 2,02,93,937 during the period under review. The details regarding actual consumption of diesel, salary payable to
security guards and total payment made for diesel and salary to security guards are attached herewith as per Annuxure-7.
7. According to the agreement between company and client (i.e. Telecom
Company), the carrying cost of diesel will be paid by the company. As per that agreement the carrying cost can be ranged 600 to 800 per activity. But in actual transaction the branch had made payment exceeding the limit as per agreement in their own decision. As per details available the total excess amount is Rs. 13,39,568/-Details of amount approved and actual payable for every transaction are enclosed in our report herewith as per Annexure-8.
8. In our Audit we found that the bank transaction of the branch was not
maintained properly by the branch management. During the audit we have found that the branch management used to issue numbers of cheques without having sufficient balance in bank account.
9. 10.It was also observed that there are many imprest and advance account which are still to be settled. The followings are the summary of all the annexures stated above : S.N. Annexure Particulars 1 1 Improper voucher made by Vice president 2 2 Short payment of voucher to F.O.(Vinaya Shukla and Vipin Singh) 3 3 Short payment during handover/takeover to operation manager.(Naveen Tripathi) 4 4 Non-payment of salary and other amount to Field Officer (Bechan Singh) 5 5 Excess payment made towards diesel and salary to security guards 6 8 Amount misappropriated in carrying charges Total Amount 67,01,234/2,52,931/22,88,556/3,69,000/2,02,93,937/13,39,568/3,12,45,226/-
RECOMMENDATION: The company management should:
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Take appropriate action to ensure that policies, procedures, directives and guidelines for the management of cash and other operations are comprehensive, up to date and easily accessible for quick reference; and clearly define the Branch’s cash management roles and responsibilities. Take appropriate action to maintain proper books of account. Since the branch has not maintained any books of account except cash book, the actual position of branch has not been available for any decision and timely control for misappropriation. Continuously review the procedure regarding receiving of invoice from diesel dealers. Specify rights and duties of Field Officer and other staff/employees. Check periodically the reconciliation statement of bank, imprest cash accounts, etc. Supervise proper functioning regarding cash handling. Control and supervise the procedure at the time of handover and takeover of sites. Review payment made to security guards by Field Officer with proper authority and receiving signature. Organize a team for periodical checking of internal control of the branch including surprise check. Give guidance to branch management for making proper report on overall activities of branch in systematic manner. Control over banking transactions. Clearly guide the branch management to take care of the all agreement between company and client (i.e. Telecom company) and make ensure that whether proper communication has been made or not. Timely settlement of imprest and advance account Timely Reconciliation of branch with Head office book Timely reconciliation of vendor account
For GOEL MINTRI & ASSOCIATES
CHARTERED ACCOUNTANTS PLACE: NEW DELHI DATE: SANJAY KUMAR GOEL (PARTNER) M.NO:92305 FIRM REG NO: 13211N