UPDATE 05

Status Update
Altair Project
16th November 2020

1
Agenda – Update meeting – 16 November 2020
(1) Status of the Project Completion
(2) Contractual Assessments
(3) Assessment of Balance Tasks, Cost and Time to Complete
(4) Analysis of Payments against cost to completion
(5) Analysis of payments during SAO appointed period
(6) Assessment of the Interim Payment Applications
(7) Assessment of the BOQ and Variation Order Payments
(8) Assessment of the payments to Interim Payment Certificates
(9) Assessment of the Variation Order Proposals with the Payments
(10)Assessment of the Gifts Offered to Apartment Holders
(11) Internal Controls Introduced by the SAO

2
(1) Status of the Project Completion

3
 Status of project completion – 16 November 2020
Status
Deliverables
Report compilation and
Drafting the Report
review

Assessment of the cost to completion Completed In progress

Analysis of main contractor payments and the sub contractor payments Completed In progress
Status of the Project Completion

Assessment of receivables from apartment holders Completed In progress

Assessment of sources of funds available Completed In progress

Assessment of gap in fund flow In progress In progress

Drafting the cashflow forecast In progress In progress

Process review Completed In progress

Review subcontractor agreement Completed In progress

Review of SPA Completed In progress

Review of variation orders Completed In progress

Assessment of the compensation payments to apartment holders Completed In progress

4
(2) Contractual Assessments

5
 1 Main contract with SPLL Risk
Low High

The following contractual risks were observed, based on the foregoing which was a general failure to observe due process.
Summary assessment of Main Contract

 Variations : Main Contract is a re-measurement contract, therefore actual quantity of executed works under each BOQ item shall be jointly
measured and valued the BOQ rate for the payment. However, for the work items in a Variation and Adjustments which are not described in the
BOQ, the rates are evaluated by the Engineer of the Contract according to the terms and conditions of the Contract. IDPL has not followed the
variation procedure as per the contract terms and timeline.

 EOT claims : Project Director has the authority to approve Extension Of Time (EOT) claims. It was observed that Project Director has been
authorized to give approvals based on relationship with the contractors, and no supporting board resolutions were provided. As such, high value
EOT claims have been approved with no further approval or assessment procedure.

 Delay Damages Analysis : Delays caused in the completion of the project have not been properly analyzed, if the delay has been caused by the
main contactor, SPLL or the employer (IDPL). Delay damages have not been claimed as yet. But according to the contract terms, delay damages
should be 0.05% of the final contract price per day and maximum amount of delay damages is 5% of the Final contract price. Although this may
have been a source of income or reduction of loss based on EOT for IDPL, it may now be too late and IDPL could be estopped at law from
claiming the delay damages.

 Project Management Consultant : The project monitoring consultant claims that the services to be provided have been narrowed down from time
to time since 2018. As a result, independent project management is not visible in the project and did not provide a check or balance for decision
making.

6
 Variation process analysis
2 KPMG has identified situations in which the following process may not have been met.
• Payments have been released before the variation has been duly approved or whilst in the process of being approved. However, Variation
programme was not available and/or attached to the VOPs.
Summary assessment of Main Contract

• Further, modifications to the Main Programme and Time for Completion should be included if the Variation would alter either of these

The contractor's
If the contractor fails to give entitlement for additional
The Contractor shall payment pursuant to
notice within such period of
submit a description variation shall be
28 days, the Time of
of the proposed subjected to the
completion shall not be
work, any Employer's approval.
extended and the contractor
necessary 7
shall not be entitled to
modifications to the
additional payment.
Programme and the
Engineer Risk
evaluation of the 5
requests a variation
proposal, 3
prior to Low High
instructing a
Variation
1
8
6 Additional
Payment for
The Engineer shall, as soon approved
as practicable after variations
4 receiving such proposal,
respond with approval,
2 The Contractor shall give notice disapproval or comments.
of his intention to the Engineer;
The contractor within 28 days after the
shall respond in instruction or requesting
writing as soon proposal to claim any additional
as practicable payment pursuant to variation

7
 The
2 following findings were observed by KPMG.
• For SPLL, VOPs numbered from VO-01 to VO-184 were identified. However numbering is not in serial order (e.g. approved variations to VOs would be numbered
A,B,C (e.g. see VO no.82A-82C). KPMG reviewed 194 in total.
• Of the above, documentation for 84 were unavailable. According to the IDPL data sheet, only one VOP [VO-101] is rejected among the 84 unavailable VOPs . All
Summary assessment of Main Contract

the other VOPs are approved and in-processing.

• According to the documentation of VOPs that IDPL provided, there are 10 VOPs that have been marked as revise and resubmit. However, according to the data
sheet, most of them have been partially approved and payment has been made thereon.

STATUS OF VOPS
52 payments have been made against the Unavailable VOPs according
to the IDPL QS work sheet

Missing, 84
Approved, 110

Revised and
Resubmit, 10

8
 Area
2 of focus Gap observed
 KPMG identified that 84 unavailable Variation Order Proposals approved and in-processing and Intention to Claim (ITC)
Absence of VOP documents notifications also not available in the documentation.
Summary assessment of Main Contract

Examples for Unavailable VOPs

 VO-77  VO-95  VO-129  VO-150  VO-168

 VO-78  VO-96  VO-130  VO-151  VO-169
 VO-80  VO-97  VO-131  VO-152  VO-171 Risk
 VO-82A  VO-99  VO-134  VO-154  VO-172
 VO-135 Low High
 VO-82B  VO-101  VO-157  VO-174
 VO-82C  V0-102  VO-138  VO-158  VO-175
 VO-83  VO-104  VO-139  VO-159  VO-177
 VO-85  VO-105  VO-141  VO-160  VO-178
 VO-88  VO-106  VO-142  VO-161  VO-179
 VO-89  VO-110  VO-144  VO-162  VO-180
 VO-90  VO-120  VO-145  VO-163  VO-181
 VO-91  VO-122  VO-147  VO-164  VO-182
 VO-92  VO-125  VO-148  VO-166  VO-183
 VO-93  VO-127  VO-149  VO-167  VO-184

Recommendations

• IDPL stated that all the intention to claim (ITC) applications have been approved, but those ITCs are also not available in documentation.

9
 Area
2 of focus Gap observed

Absence of VOP hard copies KPMG identified that the QS Team has not consider the updating of contract programme in line with the
Variation Order Proposals.
Summary assessment of Main Contract

Contractual Obligation

Clause 13.3 of PCC - Variation Procedure

Risk
The Variation proposal should contain a description of the proposed work to be performed and a programme for its execution. Low High

Recommendations

• However, the contract programme was not attached to the VOPs. Further, modifications to the Main Programme and Time for Completion should be included if the
Variation would alter either of these.

10
 • Name - Subcontract for the supply
• Name - Design, supply and installation of
and application of internal painting
modular kitchen and accessories for
on sloping tower for Altair
Altair residential project - work package
residential project - work package
25a of main building (MB-WP-25a)
22a-S of main building (MB-WP-22a-
Summary assessment of JAT Contracts

S)
• Agreement date – 28th November 2017
• Agreement date – 12th December
• Accepted Subcontract Amount - EURO
2017
2,325,000.00
• Accepted Subcontract Amount -
(including all applicable taxes)
USD 374,833.91
(including all applicable taxes)
KPMG has reviewed
5 tripartite
subcontract
agreements
between JAT, IDPL
• Name - Design, supply and and SPLL.
installation of wardrobes for • Name - Supply and Installation of
Altair residential project - work Aluminum Perforated ceiling
package 26 of main building system for Altair Residential
(MB-WP-26) Project- work package 43 of main
• Agreement date – 31st of January building (MB-WP-43)
2018 • Agreement date - 18th October
• Accepted Subcontract Amount - 2017
EURO 2,274,567.16 • Accepted Subcontract Amount -
(excluding all applicable taxes) USD 40,260
(Including all applicable taxes but
excluding NBT and VAT)

• Name - Supply and Installation of Vanity for Altair

Residential Project - Work Package 44 of Main Building
(MB-WP-44)
• Agreement date - 04th May 2018
• Accepted Subcontract Amount - Euro 633,000
(Including all applicable taxes but excluding NBT and VAT)
11
 Currency mismatch
1 Risk
The currencies of the JAT contracts have been mentioned below. Low High
• Internal painting - USD
• Wardrobe - Euro
Summary assessment of JAT Contracts

• Vanity - Euro
• Ceiling system - USD
• Modular kitchen - Euro

Advance Payment of subcontracts needed to be paid in two installments ;

1) 50% after the Employer receives the Advance Payment Guarantee and Subcontract Performance Security.
2) 50% after signing the Subcontract Agreement

KPMG has identified that the payments to JAT have been made in LKR apart from the agreed currencies (USD & Euro) as per the subcontracts. There
are no documents related to the change of foreign currency back to LKR. It is also unclear on what basis foreign currency payments have been
agreed for local works (legal tender for two local entities would be LKR).

Ceiling System contract has fixed exchange rate as 1 USD Equal to LKR 155.00. However we observed that:
• Fixing exchange rate was not consistently applied to all contracts. The main risk here would be the exchange rate risk to IDPL.
• Further, the IPCs have carried a higher exchange rate (market rate), causing a drain on finances.

VAT related issues of JAT Contracts

2
KPMG has identified that additional VAT payments will need to be paid on some of the foreign currency contracts of JAT as per contract terms.
• Internal painting : USD 374,833.91 including all applicable taxes Risk
• Wardrobe: Euro 2,274,567.16 excluding all applicable taxes
Low High
• Vanity : Euro 633,000 including all applicable taxes but excluding NBT and VAT
• Ceiling system : USD 40,260 including all applicable taxes but excluding NBT and VAT
• Modular kitchen: Euro 2,325,000.00 including all applicable taxes

However, IDPL has not paid VAT on the invoices. As IDPL has undertaken to pay, they may need to indemnify JAT for the VAT component.
The disputes related to VAT and other taxes is termed high risk because of the IRD usually being proactive about suing for back taxes, although it is
not clear whether any IRD actions have commenced. 12
 1 Main issues with SPAs Risk
Low High

 Sales and Purchase Agreements: It was observed that most SPAs were standard form contracts.
• The main anomaly observed was that some of the SPAs had not been registered at the Land Registries
• IDPL has informed us that these have been sent for registration and have not been received.
• Some SPAs lacking the registration seal date to 2017, whilst the general timeline (pre Covid-19) for registration at a Land Registry would be a
maximum of 3 months).

 Buyback Agreements: There are buyback agreements within a short period after the initial SPAs.
Sales and Purchase Agreements

• Whilst the parties are free to contract, we observe that the buybacks have been at a mark-up and may have a detrimental effect on the finances
of IDPL.
• We observed that most of the Buyback Agreements were with A&A Synergies Ltd, which we understand is a related company.

Example of a Buy Back: Apartment 36C

Deed of
Assignment
• Initially sold to Mr 04/09/2020 • SPA dated 02/08/2017
Amitabh Goenka for Apartment 56F
• SPA dated 14/02/2017 • A&A Synergy • By Deed of
• Buyback dated purchases Apartment Assignment,
20/02/2017 56F swapped apartments
• SPA dated 29/03/2019 to 36C
We have not seen proof that the • SPA later cancelled
Buyback (not yet registered)
buyback agreement was New owner C.
Agreement
fulfilled. Halwathura
fulfilled?

13
(3) Assessment of Balance Tasks, Cost and Time to Complete

14
 Cost & Completion Progress
Risks on Cost to Complete

 We identified the following to force a risk in the Cost to Completion, for which a change to the cost to completion is envisaged.
Balance Tasks, Time and Cost to Completion

 USD 5 Mn has been settled to the main contractor from an EoT of USD 21 Mn. We have been advised by IDPL that the figure has been
negotiated from USD 21 Mn to USD5 Mn. However, there is no documentary evidence indicating that the main contractor SPLL will not
request for the balance 16 Mn in the future.

 From an order of EUR 300,000 worth Vanity cupboards from JAT Holdings is damaged. We have been advised by IDPl that insurance claim
has been submitted. If insurance proceeds are not received in the future the following will be a cost to the employer/ IDPL. Re-ordering of the
same goods at a value of EUR 290,000 will also be an added cost.

 JAT contracts were quoted in EUR thought the in the Cost to Complete sheet these figures have been converted into USD. In the process of
exchange conversion, there can be exchange gains or losses which will have to be adjusted accordingly.

15
 Completion Progress
Completion Progress
Vertical Tower According to the Completion Progress report dated 28th August 2020, the Vertical Tower had recorded an average
completion rate of 97.76%. The tower had snagging activities being carried out.
Balance Tasks, Time and Cost to Completion

Sloping Tower The Sloping Tower had an average completion rate of 87.75%. There were wardrobes kitchens and vanity being
installed in different levels of the sloping tower. Snagging activity was also happening.

Levels 5, 62, 63 Level 5 had most of the work to be done, as witnessed during the site visit on 3rd September 2020. The gym area
had to be totally constructed. The swimming pool also needed to be finished whilst the walking path and
landscaping was to be completed as well. On average 46.72% had only been completed on Level 5 according to the
completion report. Level 63 had a completion rate of 95% since it only had the pool area to be completed. Minor
finishes were to be carried out on two function halls on Level 63.

Basement 1 & 2 Basement areas were also being completed with external paint work being carried out.

16
Balance Tasks, Time and Cost to Completion Images of Development

Swimming Pool – L63 L 5 – Swimming, Pool, Walking Path, Floor area

Lobby Area

*Images captured by KPMG team during site visit on 3rd September 2020

17
(4) Analysis of Payments against Cost to Completion

18
 Analysis of the total construction Cost
Cost to completion as at 30th April 2020 (USD Cost to completion as at 31st August 2020 (USD)

Description Amount (USD) Description Amount (USD)

Contractors cost 3,477,047 Contractors cost 4,195,888
Various 658,743 Various 455,631
To be finalized 165,192
Analysis of the Payments

Selling Gondola (500,000)

Consultancy Cost 101,194 Authority Charges 414,352
Tax 913,943 Others 225,795
Total Construction Cost 4,650,926 Consultancy Cost 85,838
Tax 402,500
Total Construction Cost 5,945,196

Contractor Costs consist of Contractor Costs consist of

75% of the total Construction 71% of the total Construction
Costs Costs

19
 Analysis of the Contractor Costs and Payments
Description Amount (USD)
Payments disbursed Vs Cost to
Total Contractors cost 3,477,047
completion sheet as at 30th April
Payments to Contractors (2,039,354)
2020 (USD)
Balance to be paid to contractors 1,437,693
Analysis of the Payments

Balance to be paid for

contractor costs

41% Payments disbursed for

contractor costs

59%

Although payments amounting to USD 2,039,354 have been disbursed for Contractors, Contract
costs as per the cost to completion sheet as at 31st August still remains at USD 4,195,888.
20
 Analysis of the Contractor Payments in detail
KPMG carried out an analysis of the payments disbursed to main contractor and subcontractors for the work certified and compared with the
cost to completion.

Cost to cost to
Payments % of IPC
completion completion
made from payments Balance to be Difference
Contractor Name sheet 30th sheet 31st % Change
June to Oct with the cost paid (A-C) (B-C)
April 2020 August 2020
2020 (C) to completion
(USD) - A (USD) - B

Akzo Nobel India Limited 10,570 24,379 131% 27,619 261% (17,049) (41,428)
Nitson & Amitsu (Pvt) Ltd 131,733 204,158 55% 175,919 134% (44,186) (248,344)
Analysis of the Payments

Jat Holding (Pvt) Ltd - ward robe 315,510 717,421 127% 333,305 106% (17,795) (735,216)
Shapoorji Pallonji Lanka (Pvt) Ltd 1,074,623 1,259,555 17% 1,018,696 95% 55,927 (1,203,628)
Maxaire (Pvt) Ltd 75,853 102,480 35% 57,851 76% 18,002 (84,478)
Colours & shade (Pvt) Ltd 232,976 140,000 -40% 121,479 52% 111,497 (28,503)
Kent Engineers (Pvt) Ltd 178,550 94,551 -47% 81,090 45% 97,460 2,909
Jat Holding (Pvt) Ltd- ceiling 17,000 17,000 0% 7,386 43% 9,614 (7,386)
Jat Holding (Pvt) Ltd - Internal Painting 60,000 60,000 0% 25,768 43% 34,232 (25,768)
Creations Master Builders (Pvt) Ltd 33,354 12,371 -63% 12,582 38% 20,772 8,401

21
(5) Analysis of Payments during SAO appointed period

22
 Analysis of the Total Payments and the Source of Funding
Below is a summary of the total payments made by IDPL for the period 24.05.2020 to 26.10.2020 and the sources of funds.

Source of Funding Amount (LKR)

1. BOC syndicated loan (LKR and 587,278,315.66
USD)
2. PAN Asia Bank loan 16,827,106.42
Payments
3. Funding provided by Jaideep 1,300,000.00
Halwasiya
Foreign
Payments and Source of Funding

Total Payments 605,405,422.08 material , 8%

Admin , 2%
IDPL Staff Sharpooji
Payment Category Total Amount % salary Payment Pallonji , 22%
(LKR) (May month
Shapoorji Pallonji Payments Balance &
135,332,931.81 22%
June), 3%
Sub Contractors Payments 181,332,726.17 30%
Consultant Payment 12,646,822.00 2%
Customs Payments 82,639,751.00 14% Local supplier ,
Clearing Agent Payments 31,036,185.27 5% 14%
Local Supplier Payments 82,845,829.66 14%
IDPL Staff Salary Payment (May
18,925,097.00 3%
Month Balance & June) Clearing agent,
Admin Payments 14,792,361.34 2% 5%
Foreign Material Payments 45,853,717.83 8%
Total Payments 605,405,422.08
Subcontractor
Customs, 14% , 30%
Consultant, 2%

23
 Analysis of the Total Payments and the Source of Funding
A breakdown of the total amounts paid to the respective payment categories and the source of funding is given below.

Payments Done
Payments Made
Payments Made from BOC from Mr. Jaideep Total Amount Paid
Payment Category from PAN Asia Bank
A/C
LKR USD LKR LKR LKR
Shapoorji Pallonji Payments 129,632,931.81 - 4,700,000.00 1,000,000.00 135,332,931.81
Sub Contractors Payments 179,672,725.42 - 1,360,000.75 300,000.00 181,332,726.17
Payments and Source of Funding

Consultant Payment 12,646,822.00 - 12,646,822.00

Customs Payments 82,639,751.00 - 82,639,751.00
Clearing Agent Payments 31,036,185.27 - 31,036,185.27
Local Supplier Payments 81,677,483.20 - 1,168,346.46 82,845,829.66
IDPL Staff Salary Payment
(May Month Balance & June) 18,925,097.00 - 18,925,097.00
Admin Payments 5,193,602.13 - 9,598,759.21 14,792,361.34

248,988.48*184.61
Foreign Material Payments - 248,988.48 =46,413,942.56
Total 541,424,597.83 248,988.48 16,827,106.42 1,300,000.00 605,405,422.09

Exchange rate = 184.61

24
 Analysis of Payments disbursed for Main and Subcontractors based on the work done period
It was observed that majority of the payments made to main and sub contractors from June to October 2020 was for work done in the previous
year up to May 2020.

Total amount paid as at 30.10.2020 to main and sub contractors for the work done = LKR 316,665,657.98
Analysis of Payment to Subcontractors

Amount and percentage paid for work done before SAO appointment = LKR 228,296,552.91 (72%)

Amount and Percentage paid for work done after SAO appointment = LKR 86,081,496.51 (27%)

**LKR 2,287,609.19 amounted to an advanced payment to Creations Master Builders (1%)

Payments for work done to main and subcontractors

Advance
Payment ,
1.00%

Payments for
work done
after May
2020 , 27%

Payments for
work done
before May
2020 , 72%
25
 Analysis of Payments to Main contractor
It was observed that majority of the payments made to the main contractor from June to October 2020 was for work done after May 2020.

Total amount paid as at 30.10.2020 to main contractors for the work done = LKR 135,332,931.81
Analysis of Payment to Subcontractors

Amount and percentage paid for work done before SAO appointment = LKR 66,913,277.21 (49%)

Amount and Percentage paid for work done after SAO appointment = LKR 68,419,654.60 (51%)

Payments for work done to main contractor (SPLL)

49%
Payments for work done
51% before SAO
appointment (47%)
Payments for work
done after SAO
appointment (53%)

26
 Analysis of Payments to Subcontractors
It was observed that majority of the payments made to subcontractor from June to October 2020 was for work done in the previous year up to May 2020.

Total amount paid as at 30.10.2020 to subcontractors for the work done = LKR 181,332,726.17
Analysis of Payment to Subcontractors

Amount and percentage paid for work done before SAO appointment = LKR 161,383,275.08 (89%)

Amount and Percentage paid for work done after SAO appointment = LKR 17,661,841.91 (9.7%)

**LKR 2,287,609.19 amounted to an advanced payment to Creations Master Builders (0.3%)

Payments for work done to subcontractors

Advance Payment
Payments for , 0.30%
work done after
May 2020 , 10%

Payments for
work done before
May 2020 , 89%

27
(6) Assessment of the Interim Payment Applications

28
 Name of the Procedure Sample selection of payment vouchers
Approach for the Selection of the Sample

KPMG selected interim payment applications of the four Interim payment

Interim Payment Applications
certificates which KPMG selected when verifying the contractor payments.

Date of the
Name of the Contractor IPC Number Amount (LKR)
payment
6/22/2020 Shapoorji Pallonji Lanka (Pvt) Ltd IPC 63 16,132,366.24
6/30/2020 Shapoorji Pallonji Lanka (Pvt) Ltd IPC 64 45,080,910.97
6/24/2020 Maxaire (Pvt) Ltd IPC 46 4,715,114.21
6/24/2020 JAT Holdings (Pvt) Ltd IPC 05 19,401,237.18

29
 13 Approvals for Interim Payment Application
Risk
KPMG identified that Surath Wickramasinghe Associates (SAW) who is the project monitoring consultant has not
Low High
approved the Interim Payment Applications. However, SWA has approved the Interim Payment Certificates for
payments.
Example :
1. Shapoorji Pallonji (Pvt) Ltd – IPC 63, IPC 64
2. Maxaire (Pvt) Ltd – IPC 46 (Ad- hoc Payment)
3. JAT – Wardrobe (Pvt) Ltd – IPC 05

As per the discussions held with SWA, SWA stated that their scope of work reduced from 2018 November
onwards.
Interim Payment Application

After that SWA did not provide their approval for the verification for the Interim payment applications of the
Nominated Sub Contractors.
Further SWA did not verify the Interim Payment Certificates of the main contractor.
SWA has provided their signature for the IPC, after SAO appointment as the Bank requested the signature of the
Project Consultant to release the payment to Contractors.

2 Variations Order payment to Maxaire (Pvt) Ltd

Risk
KPMG observed a difference in the cumulative paid in the QS work sheet and the IPC 46 work executed of
Low High
variations figure.
Amount in the IPC – USD 1,600, 000
Amount as per the QS work sheet – USD 1,531,537
Difference – USD 68,463

30
 3 Revised JAT wardrobe rates
Risk
KPMG noted price variations in JAT wardrobe when observing IPA and working of the IPC 05 by the QS team.
Low High
Management Comments
Contracts Manager stated that due to the change in site conditions, height of the wardrobes has been changed
from the initial BOQ. As a result price revision was executed. Further Contract Manger stated that there is an
addendum to the Contract and this has been decided by marketing team and QS team couldn't find a document
in this regard in writing yet.

4 Recognition of Value Added Tax

Interim Payment Applications

Low High
KPMG analyzed all the VAT calculation for payments disbursed for JAT holdings after initiating to disburse
payments from the LKR BOC syndicated loan.
KPMG identified that IDPL has not calculated Value Added Tax (VAT) for the payments to the package Vanity and
Modular Kitchen after initiating to disburse payments from the LKR portion.
Example – Sub contractor IPC no.
4
Contractual terms related to the JAT (Pvt)- Modular Kitchen
5
• EURO 2,325,000.00 including all applicable taxes as mentioned in the SCT ("Accepted Subcontract Amount") JAT - Vanity 6
7
8
Contractual terms related to the JAT (Pvt)- Vanity
6
• Euro 633,000 Including all applicable taxes but excluding NBT and VAT 7
JAT - Modular Kitchen 8
10
11

31
 3
5 Maxxaire – Advance Loan
Risk
KPMG noted that although the work done has reached more than 80%, advance loan granted has not been
Low High
recovered from Maxxaire. However, guarantee on the advance loans are available.

Advance loans granted in IPC 05 (USD)

Accumulative Deduction of the

Advance Loan Remaining balance
certified paid advance loan
Against labor component 111,084 65,464 45,620
Additional 77,383 77,383 -
Advance loan 264,639 52,444 212,195
Total 257,815
Interim Payment Applications

Advance loans guarantees in IPC 05 (USD)

Description Amount (EUR)
Advance Payment Gurantee 45,620
Advance Payment Guarantee for advance loan 131,943
Advance Payment Guarantee for advance loan 80,252
Total 257,815

32
 Shapoorji Pallonji Lanka (Pvt) Ltd | Time line as per the Contract
IPC Number IPA Submission date Date of issuing the IPC Date of the payment

63 20.01.2020 12.03.2020 22.06.2020

64 24.02.2020 26.06.2020 30.06.2020

Submission of Interim Issuing the Interim

Payment Application (IPA) Payment Certificate (IPC)

21 Days
Interim Payment Application

IPC 63 52 Days

IPC 64 123 Days

35 Days

IPC 63 154 Days

IPC 64 156 Days

Making the Payment

33
 Maxxaire (Pvt) Ltd | Time line as per the Contract
IPC Number IPA Submission date Date of issuing the IPC Date of the payment

46 25.02.2020 13.01.2020 24.06.2020

KPMG noted that IPC maintained

Submission of Interim
Payment Application (IPA)
14 Days
Interim Payment Application
Issuing the Interim
internally is having Director Mr.
Payment Certificate (IPC)
Harendran’s signature on 13th
January 2020 that is before the

submission of the IPA that is on 25th

February 2020.
IPC 46 ?

14 Days

IPC 46 163 Days

Making the Ad- hoc Payment

34
 JAT (Pvt) Ltd - Wardrobe (Pvt) Ltd | Time line as per the Contract
IPC Number IPA Submission date Date of issuing the IPC Date of the payment

05 24.12.2019 24.06.2020 24.06.2020

KPMG noted that IPC maintained

Submission of Interim
Payment Application (IPA)
14 Days
Interim Payment Application
Issuing the Interim
internally is having the Director
Payment Certificate (IPC)
Harendran’s signature on 23th July 2020
that is after the payment made while for

the payment Director Jaideep has

signed on 24th June 2020.
IPC 05 182 Days

14 Days

IPC 05 Same Day

Making the Payment

35
(7) Assessment of the BOQ and Variation Order Payments

36
 Name of the Procedure
Approach for the Selection of the Sample
Payments to BOQ and Variation Orders
Sample selection of payment vouchers
KPMG analysed the approved Bills of Quantity and Variation Order with
the payment details using the QS working sheet for the IPC’s.
• This is because IDPL is not making the full payment that is requested by
the Contractor through the IPA.
• QS team of IDPL is preparing the payment by considering the
measurement summaries and inspection reports sent by the contractor.
• IPA sent by the Sub contractor is verified by the main contractor and
Working of the IPC payment is prepared. The amount claimed in the IPA
will be different to the payment based on the QS verification done.
• As a result, KPMG analysed the working of the QS team when analyzing
the payments to the BOQ and variation orders.
KPMG analysed the following contractors.
1. Shapoorji Pallonji (Pvt) Ltd
2. Nawaloka (Pvt) Ltd
3. Maxxaire (Pvt)Ltd
4. JAT (Pvt) Ltd – Vanity, Ward Robe, Ceiling, Internal Painting and
Modular Kitchen
37
 1 BOQ excel work sheet of Maxxaire (Pvt) Ltd
Risk
KPMG noted that the initial contract BOQ excel working for Maxxaire is not available. Excel workings of BOQ
preliminaries and variations are available only for IPC 28.
Low High
After the issue of IPC 28 up till IPC 46, ad-hoc payments have been made.
Management Comments
Contract Manager stated that, QS team of IDPL shall provide the IPC excel work sheet as the team is in the
process of preparing the working. Further Contracts Manager stated that no IPC has been issued and excel
calculation is preparing for the current IPC, but not for the past which is not required for the ad-hoc payment.
BPQ and Variation Order Payments

2 BOQ excel work sheet of JAT (Pvt) Ltd (Ceiling)

Risk
Low High
KPMG observed that the payments can’t be identified separately with the approved BOQ since the approved
BOQ amount and the quantity is not mentioned in the bill summary for each BOQ item. (Refer Bill summary)

Management Comments
Contracts Manager mentioned that they have agreed for total square feet value in the BOQ and the contract is
on remeasurement basis. Contracts Manager stated that there is only one BOQ item available with Quantity
and amount in the BOQ while for others quantity and amount is not required.

38
 BPQ and Variation Order Payments

39
 3 Variations identified in the Bills of Quantity
Risk
KPMG identified the following variances in the approved BOQ amount and quantity with the cumulative payment.
Low High

Shapoorji Pallonji (Pvt) Ltd Total discrepancies identified -- 16

Approved Approved Actual paid Exceeded Exceeded amount

Item Ref. Description Actual quantity
quantity amount (USD) (USD) quantity (USD)
3.3 Reinforcement Steel
Diameter 8 mm, 10 mm, 12mm, 16 mm, 20 mm, 25 8,407,300 kg 9,781,141.14 12,749,343 kg 14,832,719.58 4,342,043 kg 5,051,578.44
BPQ and Variation Order Payments

mm, 32 mm and 40 mm
3.9.12 50mm average thick screed concrete in basement and
18,283 m2 175,151.14 29,440.69 m2 282,041.81 11,157.69 m2 106,890.67
podium
3.5.2 Precast planks for balcony (80mmthk) 640 m2 53,760.00 7949.44 m2 667,752.96 7,309.44 m2 613,992.96
3.2.11 PT slab 7433 m3 1,139,999.21 9372.1 m3 1,437,398.977 1,939.10 m3 297,399.77
3.2.1 In Rafts 8393 m3 1,409,688.28 9041.76 m3 1,518,654.01 648.76 m3 108,965.73

Nawaloka (Pvt) Ltd Total discrepancies identified - 44 -

Exceeded
Approved Approved Actual Actual paid Exceeded
Item Ref. Description amount
quantity amount (USD) quantity (USD) quantity
(USD)
Hi Wall Mounted Fan Coil Units - 1.25 TR
8.3.1.3 57 nr 1171.92 305.91 nr 6289.51 248.92 nr 5,117.5896
Capacity
Ducted Hi-static Fan Coil Units - 3.0 TR
8.3.1.7 4 nr 85.4 203.94 nr 4354.119 199.94 nr 4,268.72
Capacity
1368.18
8.3.7.5 20mm Dia 876 nr 7577.4 11834.76 492.18 nr 4,257.36
nr
Supply, erection, testing & commissioning of
Grilles, Diffusers with plenums, Dampers to 385.83
8.3.13 75 m2 1134 5833.784 310.83 m2 4,699.78
be constructed from extruded Al. powder m2
coating section
286.605
8.5.14.4 300mm MB 6.3 mm thk. 150 m 7630.5 14579.6 136.605 m 6,949.10
m 40
 3 Discrepancies identified in the Bills of Quantity
Risk

KPMG identified the certain discrepancies in the approved BOQ amount and quantity with the cumulative payment. Low High

JAT (Pvt) Ltd – Internal Painting Total discrepancies identified - 2 -

Approved Actual Actual paid Exceeded Exceeded

BPQ and Variation Order Payments

Description Approved quantity (m2)

amount (USD) quantity (m2) (USD) quantity (m2) amount (USD)
Up to filler coat- (50% x 4.18) 17,600.00 36,784.00 24,993.07 52,235.51 7,393.07 15,451.51
Up to 1st paint coat - (50% x
17,600.00 18,392.00 24,993.07 26,117.75 7,393.07 7,725.75
2.09)

JAT (Pvt) Ltd – Vanity Total discrepancies identified - 5 -

Approved Actual paid Exceeded Exceeded

Description Approved quantity Actual quantity
amount(EUR) (EUR) quantity Amount (EUR)
1000X513mm Single Bowl Double Door 46 nr 16,213.34 135 nr 47,582.64 89nr 31,369.3

Management Comment
Contracts Manager stated that all the contracts which we have taken in to consideration are re-measurement contracts
and quantities and amounts in the payments could be changed.

41
 4 Variations identified in the Variation Orders
against payments Risk

KPMG identified the certain variations in the approved Variation Order amount with the cumulative payment.

Low High

Shapoorji Pallonji (Pvt) Ltd Total discrepancies identified - 10 -

Approved amount Paid amount Exceeded amount

BPQ and Variation Order Payments

Sequence no
(USD) (USD) (USD)
ATR-SPLL-QS-ITC-0048 5,250 11,594.002 6,344.002
ATR-SPLL-QS-ITC-0088 - R1 44,415.00 55,437.13 11,022.13
ATR-SPLL-QS-ITC-0119 26,160.74 29,261.1 3,100.36
ATR-SPLL-QS-ITC-0130 R-1 294 4,813.61 4,519.61

Maxxaire (Pvt) Ltd Total discrepancies identified - 3 -

Approved amount Exceeded

Sequence no Paid amount (USD)
(USD) amount(USD)
ATR-SPLL(MAX)-QS-VOR-0028 25,174.24 28,026 2,851.76
ATR-SPLL(MAX)-QS-VOR-0042 4,207 8,638 4,431.00

Management Comment
Contracts Manager stated that all the contracts which we have taken in to consideration are re-measurement contracts
and quantities and amounts in the payments could be changed.

42
(8) Assessment of the Interim Payment Certificates

43
 Name of the Procedure Sample selection of payment vouchers
Approach for the Selection of the Sample

KPMG selected the payments considering the value which comprises 90%
Interim Payment Certificate of the total amount as the sample, from the list provided by IDPL for the
period of June 2020 to August 2020 (three months) .

Month Total payment Sample taken as a % Sample

(LKR) (LKR) Coverage 90%
June 140,669,015.54 128,316,631.04 91.22 14
July 2,287,609.19 1,999,009.74 87.38 vouchers
August 10,350,420.20 8,379,753.30 80.96

Total 153,307,044.92 138,695,394.07 90.47

44
 1 Incomplete forms
Risk
KPMG identified the following observations when analyzing the payment vouchers.

1. KPMG identified that certain payment vouchers did not comprise of the Approved by Finance Manager
Internal Audit and Corporate Planning and/or Reviewed by Finance Manager signatures. Low High

Exampl Payment Type of Payment Approved

IPC Number Value (LKR) Reviewed By
e date By

1 6/22/2020 Kent Engineers (Pvt) Ltd 28 6,634,396.15  

2 6/22/2020 Access Projects 03 4,559,404,76  

Interim Payment Certificates

Colors & Shades Private

3 6/22/2020 24 5,377,780.40  
Limited
Colors & Shades Private
4 6/22/2020 25 4,786,191.57  
Limited
5 6/22/2020 Sharpoorji Pallonji (Pvt) Ltd 63 16,132,366.24  
Colors & Shades Private
6 6/24/2020 26 6,650,771.05  
Limited
SLP Engineering Lanka (PVT)
7 6/24/2020 29 7,682,463.83  
LTD

SAO Office Comments

SAO Office stated the following comments for the payment vouchers that has not been reviewed by the Finance Manager.
1. Kent Engineers (Pvt) Ltd – Finance Manager stated that Finance Manager did not review the payment voucher since Finance Manager
Internal Audit and Corporate Planning has not signed the payment voucher.
2. Colors and Shades (Pvt) Ltd - Finance Manager stated that payment has been disbursed and has signed on the payment summary.
3. SLP engineering (Pvt) Ltd – Finance Manager stated that payment is on hold. Assistant Accountant stated that pay order has been raised
but due to an expiry of a guarantee, pay order has not being released.

45
 1 Incomplete forms
Risk
2. KPMG identified that certain Interim Payment Certificates attached to the payment vouchers did not contain
the signature of the Project Director. However, signatures were available in the documents sent to the bank.
Mr. Harendran. Low High
Payment IPC Director
Example Type of Payment Value (LKR)
Date Number Signature
1 6/22/2020 Access Projects 03 4,559,404,76 

2 6/24/2020 Enterprise Technology (PVT) LTD 06 2,580,880.92 

3 6/24/2020 Colors and Shade Private Limited 26 6,650,771.05 

4 6/24/2020 SLP Engineering (PVT) LTD 29 7,682,463.38 

Interim Payment Certificates

3. KPMG also identified that certain Interim Payment Certificates had been signed by Mr. Jaideep Halwasiya
instead of Mr. Harendran.
Exam Payment IPC Director Low High
Type of Payment Value (LKR)
ple Date Number Signature
1 6/22/2020 Colors & Shades (PVT) LTD 24 5,377,780.40 Mr. Jaideep

2 6/22/2020 Colors & Shades (PVT) LTD 25 4,786,191.57 Mr. Jaideep

4. KPMG further identified that Mr. Pradeep has signed on the Interim Payment Certificate on behalf of Mr.
Jaideep although Mr. Harendran’s signature was required.
Low High
Example Payment Type of Payment IPC Number Value (LKR) Director
Date Signature

1 6/24/2020 JAT Holdings (PVT) Ltd 05 19,401,237.18 Mr. Pradeep

46
 1 Incomplete forms
Risk
5. KPMG identified that certain Interim Payment Certificates (IPC) attached on the payment vouchers did not
comprise of the verification by Surath Wickramasinghe Associates. However, these verifications were found on
the scanned copies sent to the Bank. Low High
Signed
Exam
Payment Date Type of Payment IPC Number Value (LKR) by
ple
SWA
1 6/22/2020 Kent Engineers (Pvt) Ltd 28 6,634,396.15 

2 6/22/2020 Access Projects 03 4,559,404,76 

3 6/24/2020 Maxaire (Pvt) Ltd 46 4,715,114.21 

4 7/1/2020 Creation Master Builders (Pvt) Ltd 01 1,999,009.74 

Interim Payment Certificates

5 8/4/2020 Nitson and Amitsu Private Limited 30-R1 3,310,676.72 

6 8/20/2020 Akzo Nobel India Limited 01 5,069,076.58 

6. KPMG identified that certain IPC attachments did not comprise of the Prepared by Quantity Surveyor signature.
However the Prepared by signature had been introduced into the Interim Payment Certificate format after the Low High
appointment of SAO.

Example Payment Date Type of Payment IPC Number Value (LKR)

1 6/24/2020 Enterprise Technology (Pvt) Ltd 06 2,580,880.92

2 6/24/2020 Colours & Shades Private Limited 26 6,650,771.05

SLP Engineering Lanka (PVT)
3 6/24/2020 29 7,682,463.38
Ltd
4 6/24/2020 Maxaire (Pvt) Ltd 46 4,715,114.21

5 7/1/2020 Creation Master Builders (Pvt) Ltd 01 1,999,009.74

6 8/4/2020 Nitson and Amitsu Private Limited 30-R1 3,310,676.72

7 8/20/2020 Akzo Nobel India Limited 01 5,069,076.58 47

 1 Incomplete forms
Risk
7. KPMG identified that an irrelevant payment voucher was found attached to a payment voucher.
A payment to Securi-Fire International was found attached along with the payment voucher for Enterprise Low High
Technology (PVT) LTD.
Exam
Payment Date Type of Payment IPC Number Value (LKR)
ple

1 6/24/2020 Enterprise Technology (PVT) LTD 06 2,580,880.92

Attached voucher
1 6/24/2020 Securi-Fire International (Pvt) Ltd 1,597,163.75
Interim Payment Certificates

Low High
8. KPMG also identified that the IPC for sub-contractor Maxaire PVT LTD was not found when verifying the
scanned copy of the documents sent to the Bank.

Exam
Payment Date Type of Payment IPC Number Value (LKR)
ple
1 6/24/2020 Maxaire (Pvt) Ltd 46 4,715,114.21

48
 2 Segregation of Duties
Risk
KPMG identified that certain payment vouchers had been Checked by an Assistant Accountant and the payment
voucher was also being Prepared by an Assistant Accountant.
Low High
Exam IPC
Payment Date Type of Payment Value (LKR)
ple Number
1 6/22/2020 Kent Engineers (Pvt) Ltd. 28 6,634,396.15
2 6/22/2020 Access Projects (PVT) LTD 03 4,559,404.76
3 6/22/2020 Colors & Shades Private Limited 24 5,377,780.40
4 6/22/2020 Colors & Shades Private Limited 25 4,786,191.57
Interim Payment Certificates

5 6/22/2020 Shapoorji Pallonji Lanka (Pvt) Ltd 63 16,132,366.24

6 6/24/2020 Maxaire (Pvt) Ltd 46 4,715,114.21
7 7/01/2020 Creations Master Builders (Pvt) Ltd. 01 1,999,009.74

3
43 Approvals of IPC
3 Risk
KPMG identified that a payment voucher had contained 2 IPC attachments which was found to be signed by 2
Low High
different directors; Mr Pradeep Morais & Mr Chelvadurai Harendran on each of the attachments.

Exampl
Payment Date Type of Payment IPC Number Value (LKR)
e
1 8/04/2020 Nitson and Amitsu PVT LTD 30-R1 3,310,676.72

49
(9) Assessment of the Variation Order Proposals with Payments

50
 Name of the Procedure Sample selection of payment vouchers
Approach for the Selection of the Sample

KPMG analysed the approved amount in the variation order proposals and
the IDPL QS summary approved amount and the cumulative paid amounts
for each variation.
Payments to BOQ and Variation Order
KPMG analysed the variation order proposals of the following contractors.
Proposals
1. Shapoorji Pallonji (Pvt) Ltd
2. Nawaloka (Pvt) Ltd
3. Maxxaire (Pvt)Ltd

Limitations –
• Please note that KPMG has considered only the available Variation
Order Proposals in files for the analysis.
• Incomplete information in the available Variation Order Proposals also
caused to reduce the number of variation order proposal taken for the
analysis.

Name of the Contractor Number of discrepancies

identified
SPLL 21
Maxxaire 10
Nawaloka 7

51
 1 Payments to Variation Order Proposals
Risk

KPMG identified that the amount and quantity approved in the Variation Order Proposals have exceeded during the Low High
actual payment to the contractors.

Difference
Estimated between Difference
Cumulative
Approved amount as Estimated between the VOP
Paid as per
VOP date and Amount/Rate per IDPL QS amount QS approved amount
IDPL VO
VOR no. no. Description as VOP VO VO and and cumulative
Summary
(USD) summary Approved as paid as per QS
(USD)
a (USD) per VOP summary (USD)
c
b (USD) a-c
a-b
Interim Payment Certificates

Maxxaire

Additional cost for installing one power code

ATR-SPLL(MAX)-QS- 32 extension with a plug top for one ADB point inside
VOR-0072 17-12-2019 apartments in VT & IT 1652 5159.18 5159.18 3,507.18 3,507.18
ATR-SPLL(MAX)-QS- 34
VOR-0047 19-12-2019 additional cost for laying 25mm PVC conduit 31672 35,732.40 35,732.40 4,060.40 4,060.40

Shapoorji Pallonji

ATR/SPLL/QS/VOP/00 35
35 20/08/2016 Reinforcement block wall 63764.62 250,719.00 247,903.06 186,954.38 186,954.38
ATR/SPLL/QS/VOP/01 115A Coast proposal for installation of tiles in common
15A 17/11/2018 areas 420,552 545,000.00 518,090.10 124,448.00 97,538.10
ATR/SPLL/QS/VOP/01 111
11 31/8/2018 Supply installation of access panels 83,855 135,000.00 133,620.41 51,145.00 49,765.41
Nawaloka

ATR-SPLL(NMC)-QS- 19
VOR-0021 12-09-2019 variation for installation of flow meter 9,619 20,755.00 15,111.85 11,136.00 5,492.85
ATR-SPLL(NMC)-QS- 20 supply, fabrication and installation od GI duct at
VOR-0026 14-03-2019 B1, B2,L1,L1M,L4,L4M,L72,L62 88,037 157,291.00 98,727.79 69,254.00 10,690.00

52
(10) Assessment of Gifts Offered to Apartment Holders

53
 Apart from the compensation payments made, KPMG has identified that IDPL has committed the following items as New year & Christmas gifts.
(Presented based on the eligibility criteria levels that are stated in the emails been sent to apartment holders)
• Microwaves – For all the apartment holders (Christmas Gift – committed through an email on 27th December 2018)
• Washing Machines – For apartment holders who have settled the dues between 50% -74% (New year Gift - committed through an
email on 12th April 2019)
• Dishwashers - For apartment holders who have settled the dues between 75% - 84% (New year Gift - committed through an email
on 12th April 2019)
• Washing Machines, Dishwashers & Fridges - For apartment holders who have settled the dues over 84% (New year Gift - committed
Gifts Offered to Apartment Holders

through an email on 12th April 2019)

The offering of these items was based on the percentage settled by each apartment holder and that has been communicated as to be delivered
at the stage of handing over the apartments.

1 Board Resolution on Special Offerings Risk

• A resolution which has been agreed and signed by 3 directors on taking measures to counter, mitigate & Low High
address rapidly mounting customer dissatisfaction was available.
• A proper board resolution on special offerings as to how the Board of Directors has decided what are the
items to be offered, the budget that has been allocated, at what prices to be purchased, the quantities to be
purchased could not be found.

54
 The Christmas Gifts
• An email has been sent to all apartment holders on 27th December 2018 communicating that a Microwave is being offered as a Christmas gift.
• A Purchase order has been raised to purchase 401 microwaves to be fixed in all the apartments.
• These items have been purchased through Hafele India(Pvt) Ltd amounting as follows.
Gifts Offered to Apartment Holders

As at PO date 12 July 2018

Microwave Unit Price (USD) 140
Number of Units 401
Total Purchase Price (USD) 56,140

Fully Paid in LKR (160.82) – 23th August 2018 9,028,435

55
 The New Year Gifts
6
• As per the email dated on 12th April 2019 which has been sent to apartment holders, a refrigerator, a washing machine and a dishwasher
have been committed as New Year gifts based on their due percentages as follows;

• Washing Machines – For apartment holders who have settled the dues between 50% -74%
• Dishwashers - For apartment holders who have settled the dues between 75% - 84%
• Washing Machines, Dishwashers & Fridges - For apartment holders who have settled the dues over 84%
Gifts Offered to Apartment Holders

2 Procedure of Ordering the Items

Risk

An approved list of apartment holders who are eligible for this gift items to raise the Purchase Orders Low High
could not be found. KPMG has identified the number of apartment holders who were eligible to receive
these items based on the MIS as at 30th April 2019. A purchase order has been raised particularly for
these gift items to purchase through JAT Holdings. Following variations were identified.;

Special Offerings (New Year Gifts)

Items Qty to be ordered based on In the Purchase Order Difference
MIS as at 30th April 2019
Double Door Fridge 116 150 34

Dishwasher 138 150 12

Washing Machine 180 262 82

56
 The New Year Gifts

Total Purchase Price in EUR 362,774

Payments made(20%) in EUR (LKR 14,307,081) – 25th Jul 2019 72,554
Payments made(50%) in EUR (LKR 35,767,703) – 09th Oct 2019 181,387
Payment to be made(30%) in EUR 108,833
Gifts Offered to Apartment Holders

Payment to be made(30%) in LKR (EUR 1 = LKR 222.92 -15th Sep 2020) 24,261,052
Items that have been ordered more than the list
Description Rate - Euro Quantity ordered Value -EURO
more than the list
Double Door Fridge 1050 34 35,700
Washing Machine 302 82 24,764
Dishwasher 841 12 10,094
Total in EUR 70,558
Total in LKR (EUR 1 = LKR 222.92 -15th Sep 2020) 15,728,789
57
 3 Purchase Orders & Supporting Documents Risk

Low High
KPMG has identified the following with regard to the documentation and approval process of purchasing the items
that have been committed to apartment holders as Christmas/New Year gifts;
1. Quotations from different suppliers and approval to purchase from Hafele India(Pvt) Ltd and JAT Holdings could not be found
2. An approved list of quantities to be ordered to raise the purchase orders could not be found.
Gifts Offered to Apartment Holders

58
(11) Internal Controls Introduced by SAO

59
 Observed
Not in KPMG scope
Not available during the review

Process Issue Controls Introduced KPMG Observation

1. Preparation of Financial Statements
2. Documentation forwarded for
processing the Loan Disbursement
Internal Controls - SAO
Books of accounts were updated using Quick
Ledger accounts completely not written Books as a temporary measure.
from November 2019 onwards as the ERP Financial Statements were prepared up to 31st
has been stopped due to internal March 2020, and continued to produce Monthly
Management issues. Management Accounts up to July 2020.
Reconciliations of many accounts are not Account reconciliations are to be supported with
updated. the payment voucher (large amounts /Disputed
Contracts) as a check and balance control before
making progress payments to Main contractor
and some of the NSCs.
The disbursements have been requested SAO to scrutinize all the documents that is being
by the Company based on the approved forwarded for the request of the Disbursement,
documents by Contracts Manager. emphasizing on the list of payments to be made
together with the stage of work involved at the
site.

60

Process
3. (A) Payment Process – (Pay Orders) for
contract payments.
Internal Controls - SAO
3. (b). Payment process –(Pay orders)
Administration expenses
Observed
Not in KPMG scope
Not available during the review
Issue Controls Introduced KPMG Observation
All payments are vetted by Special Authorized
Officer before submission to Bank.
Certain payments being made and informed All cheque books are under the custody of SAO
the Finance Department Subsequently. –FM and taken for use by Director.
All payments are scrutinized by one
representative each from Indocean Developers
(pvt) Ltd. And South city.
Payments have been made using the Source Created a standard payment voucher format
Document as the payment voucher when the and check the compliance on each payment
ERP was not in use. that is forwarded for processing.
Segregation of duties not evident when Attributes of prepared by, checked by and
payments are forwarded for processing. approved by introduced in each payment
voucher that is processed with the signatures.
Payments are forwarded without adequate With appropriate notes the Finance Department
supporting documents as a practice. returns the payment vouchers to the point of
initiation.
Expenses are scrutinized to see whether
incurred directly in connection with the
Company affairs and payments made
Administration expenses being paid without accordingly.
a strict policy. 50% of marketing salary was slashed.
Directors Expenses were not paid unless valid
approvals are forwarded.
61
 Observed
Not in KPMG scope
Not available during the review

Process Issue Controls Introduced KPMG Observation

Payments had been made for Extension of Time (EOT) to
the main contractor and retentions have been released
when the work is yet progressing.
Recoveries not made from the advance payments that had Deductions for advance recoveries to be made when
been made.
IPCs being sent for payments without Mr. Harendran’s
(Director -project) signature.
IPCs were proceed for payment without the availability of valid Performance Guarantee.(PG)
Performance Guarantee or when the Guarantees are
expired.
4.Interim payment certificates (IPC)
Variations were not backed by Variation orders and
approval for same from the Project Director.
Internal Controls - SAO
Payments on EOT were not made and retentions were
not released to the main contractor.
Request contract manager to submit all calculations, all
documents and related agreement details when submit
an IPC for payments.
IPC’S are raised.
All IPC’s need to be signed by Mr.Harendran before
submitting to accounts department.
No payments to be processed without the availability of a
c
Certain deductions are to be made in the absence of a
valid PG.
All variations are to be supported with approved
variation list.
Random checks on VOPs and Consultant’s certificate to
be attached before the payment.

Payments made on behalf of Contractors/NSC’S Contractual obligation requirements are to be checked

when payments are made on behalf of Contractors and
wherever necessary Bank Guarantees are to be obtained.

5. Non-Compliances with VAT ACT &
Exchange Control Act.
Payments made outside the contract without a risk SAO reviews the payments that are to be made outside
mitigation process the contractual scope to ensure the impact on the
completion of the project and the related financial risk
Instance where the IPC had been marked as superseded Streamline the process by discussing with contract
subsequent to the release of the payment order by the manager and accounts department to overcome that kind
Bank. of unlawful practices.
Some variations have been approved in 2017, 2018 & 2019 Checked the appropriateness of the variations by
and coming up for current payment. discussing with contract manager and by checking VOPs.
Certain IPC’S have been raised without imposing proper Clauses in the contract agreement were perused and
taxes in terms of the VAT Act of Sri Lanaka. payments were released in compliance of prevailing VAT
Act.
There has been a practice of settling one NSC’ in foreign Obtained the instructions of the Commissioner Exchange
currency when the entity is a registered Company in Sri Control and payments are to be made only using
Lanka. domiciled currency.
62

Process Issue
When goods are ordered in some instances the
quantity required in the BOQ does not agree with
ordered quantity. There are no systems in place for
ordering partial quantities and monitoring same
There are no quotations, good received notes,
purchase orders attached when sending for
6. Local Material Purchases.
payment processing.
Internal Controls - SAO
Material Inspection Report (MIR) from Consultant is payments for signatures.
missing for some payments although required as
per the PO.
Quantity changes in GRN, purchase order and
supplier original invoice.
Petty cash records not maintained in the absence of All transactions to be recorded and update
an ERP System
There was no proper petty cash voucher been used. Proper petty cash vouchers designed and
7.Petty cash
Defined petty cash float was not in use. Time to time
Float has increased.
Observed
Not in KPMG scope
Not available during the review
KPMG
Controls Introduced
Observation
Material requisition form to be matched with
the BOQ and partial quantities ordered. If
there are any changes, request for comments
and proof for those changes from
procurement officer.
Set a control to attach all required
documents before sending for signatures.
All local purchases must be supported with a
signed Purchase order.
Procurement officer and admin manager to
provide reasons if PO, Material Requisition,
GRN Invoice not forwarded together with the
voucher.
Request SWA certification before send that
Observations are noted in case of non-
submissions and reasons to be obtained.
Obtain explanations for differences from the
procurement officer.
and to agree with the physical cash balance.
implemented.
Float was decided.
Maximum limit that could be paid through
Petty cash was introduced. 63
Thank You

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