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Report title Auditors Start of Audit Review of PS04 – Fazilpur Station Activities Umair Asghar, Muhammad Yousuf Nasim October 27, 2011
Close out Meeting November 02, 2011 Draft Report December 22, 2011 Final Report Follow-up
No part of this document may be reproduced or transmitted in any form or by any means including photocopying, recording and electronic transmission to a party external to PARCO, without permission in writing from the Managing Director. Internally it may only be copied with discretion and on a "need to know" basis.
TABLE OF CONTENTS
1. 1.1 2. EXECUTIVE SUMMARY Summary of Observations DETAILED OBSERVATIONS, RISKS AND RECOMMENDATIONS
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Summary of Observations
1 2 3 4 5 6 7 8 9 “In-Effective Control” on Imprest Fund. Security Controls are in a “Perilous Position”. ‘Plant Maintenance Module’ of SAP should be “fully implemented”. Maintenance Department should ‘‘Considerably Improve’’ record keeping and monitoring of material and manpower consumption on equipment. HSE - Smoke Detectors and Multi-Gas-Monitor “not present” at the station. Inventory Items lying in open area behind NMPT residence have apparently been “abandoned” by the Warehouse. Scrap Declaration Practice “lacks” firm controls. Inventory Management needs “Substantial Improvement” at the Warehouse. Fixed Asset Register “does not match” with assets present at the station.
High High High High High High High High High
For ease of reference, the risks have been rated as:
These issues involve a substantial and direct exposure to loss of assets, loss of revenue and / or substantially negative impact to operating efficiency and / or effectiveness;
These issues involve moderate exposure to loss of assets or revenue and / or negative impact on operating efficiency and / or effectiveness; and
These issues do not appear to have a substantially negative impact on operations or the control environment, but have been brought to Management's attention for informational purposes and consideration.
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20 11 30. Payments and Advances: Total payments as per station record were PKR.205 which matches with SAP balance.000 17.000 35. 150.437 09.000 997 Settleme nt (in days) 16 12 9 8 22 16 51 5 of 32 Internal Audit Department Name Khan Mohammad Khan Mohammad Khan Mohammad Khan Mohammad Khan Mohammad Khan Mohammad Ghulam Jilani .000 14.20 11 35.2.20 11 9.718. 381.174 while MCB bank statement shows the balance of PKR. RISKS AND RECOMMENDATIONS 2.000 12.200.974. Station maintains an Imprest Fund of PKR.09.601 however SAP balance was PKR.10. Following is a list of cases where cash advances have been extended to staff without prior settlement of outstanding balances falling outside the 7 days period.10.000 Nil 25. Cash at Bank: Station record shows bank balance of PKR. Monies Recovered from Oil Theft Case: As per station record amount of PKR. 765.20 11 3.000 11. 1. 771. 383.07.840 05. 2009 in the form of cash. 1.200 is withholding tax appearing on the bank statement.08.08. however there appears to be no control in place to ensure this rule is being enforced properly.20 11 40. Difference of PKR.20 11 20.000 to meet its daily financial requirements.937 10.883 could not be substantiated with approved vouchers.1 Finding “In-Effective Control” on Imprest Fund. Cash advances extended to station staff without settling outstanding balances: Cash advances to staff should be settled within 7 days of being extended. This amount appears to be ‘part of’ the station Imprest fund.20 11 50.437 12. DETAILED OBSERVATIONS.07. Advances to Staff in PKR Outstandi ng Date PKR Balance 21. Difference of PKR. 2011.000 has been recovered by Station Security from oil culprits. Internal Audit made the following observations on physical cash count at the station as of October 27. 5. • • • • Cash in Hand: Physically counted cash in hand was PKR. however it was deposited into PARCO bank account Rajanpur dated February 18. 195. 2010.000 18. this amount was sitting with Station Accountant since August 07.
• Payments and Advances made through Cash Journal of SAP are also recorded in a manual register.10. advances falling outside the 7 days range should be chased for timely recovery and flagged up to Station InCharge if there is an issue.000 10. Accountant cannot run Management Information Report in SAP to monitor and control the status of Outstanding Advances extended to staff falling outside the 7 days period. 150. Risk / Impact • • • Recommendation • • In-effective use of company ERP system .20 11 24. • • Priority Management Comments Manager Responsible Implementation Date High Manager Finance 6 of 32 Internal Audit Department . SAP should be fully implemented with training given to Station Accountant. E.000 10. • Receipts from CHQ are updated in the Cash Journal however a manual register is also maintained for the same.10. Manual booking keeping should be discontinued by fully implementing SAP. Internal Audit made the following observations regarding the implementation and usage of SAP by Station Accountant: • There appears to be limited training of SAP for Station Accountant to do more than posting a simple transaction entry.20 11 50.Suffian Qureshi Syed Azhar Hussain 18. Cash advances to staff should be monitored by Station Accountant using “Outstanding Balance Report” generated by SAP.g.570 26 2 Observations on implementation of SAP FI Cash Module at the station: SAP enables recording of movement of Imprest cash using Cash Journal of FI module. Duplication of Work in absence of full implementation of SAP. Imprest Fund ‘exposed to abuse’ in absence of proper monitoring and controls on finances at the station.585 13. Monies worth PKR. Expense summary is prepared manually to claim reimbursements from CHQ.SAP.000 recovered from oil theft case should be deposited with relevant authorities in PARCO.
KPID KPID & SEC-SI001 KPID SEC-SOP-004 SEC-SOP-002 SEC-SOP-002 7 of 32 3 4 5 6 7 8 Internal Audit Department .2 Finding Security Controls are in a “Perilous Position”.2. instead a paper slip for SEC-SOP-010 days between 10-20 days is issued with which staff can move in and out of the station premises ‘easily’. There is no ‘Automated Barrier Gate’ at the station. There is ‘no record’ of a Weapons Register at the station. Main Gate Security Guards ‘do not search’ staff working on the station for prohibited devices like mobile phones. Watch Towers are ‘not manned’ by armed guards at the station at any given time. cameras and firearms assuming that this checking will be conducted on the ‘Plant SEC-SOP-004 Area Gate’ by ‘Safety Team’ however it was & SEC-SI-001 observed that this gate remained wide open during daytime working hours ‘without’ any hindrance and checking of people entering and leaving the ‘Plant Area’. These are listed below: Non-Compliant Practices: N o Non-Compliant Practices Noncompliance of SOP/KPID** 1 2 Contractual labour hired for less the 3 months time period is not given a ‘Visitor Card’ to be displayed on the chest. Patrolling ‘does not’ take place along the boundary wall of the station both from inside and outside. Arms License is ‘not in the custody’ of Station Security In-Charge. Internal Audit made observations on Security Practices at the station which are “not in compliance” with “Standard Operating Procedures” and ‘Key Point Intelligence Division’ directives. There is no CCTV camera installed at the station.
10. North East Watch Tower and Main Gate. Barbed wire on the station boundary wall broken between: South West and South East Watch Tower. out of which 1 had entry missing from the InOut Register for material.201 0 08.201 1 01. 2 out of 10 Amano Watch Patrolling Devices are ‘dysfunctional’ on the following locations: Grid Station. whereas there should at least be 2 guards present at the main gate at all times. however their debris still lying inside the tower with no apparent use at present. in one case guard on duty was found wearing Shalwar Kameez. however record of Gate Pass and Dispatch Advice was found on the main security gate. which is the required frequency. SEC-SOP-004 SEC-SOP-004 **Key Point Intelligence Division SOP Description Security Measures for Stations & Terminals Security Instructions for Stations & Terminals Weapons Inspection for Station & Terminals Contractor Movement Control for Security for Stations and Terminals Doc No SEC-SOP004 SEC-SI001 SEC-SOP002 SEC-SOP010 Rev No 2 1 1 1 Rev Date 10. Risk of a ‘Security Breach’ resulting in damage/loss to PARCO property and operations. WOPP Main Gate. Security Guards ‘do not wear’ proper uniform.201 0 21. On ‘night shift duty’ one security guard goes on patrol while the other stays at the main entrance gate. Safety and security of station staff ‘at risk’. 8 of 32 Internal Audit Department • • • • • • • • • Risk / Impact .9 1 0 It has been observed that certain PARCO and contractual staff ‘do not wear’ and ‘display’ their Employee Cards while on duty.201 0 Observations: • 10 gate passes randomly tested. including Security Guards. Dummy human figures erected on South East and South West watch towers during summer of 2011. Patrolling of station premises during night is "not" taking place 4 times per night.09.03.03. 1 out of 3 search lights used for patrolling is dysfunctional. 2 No’s Walkie Talkie used for communicating between security guards is not functional. instead communication while on patrol is relied upon ‘personal mobile phones’.
All staff (PARCO and contractual) present at the station premises ‘should display’ their Employee Cards on chest during duty hours.Recommendation Recommendations are based on observations made to ensure compliance with Security SOP’s and Key Point Intelligence Division directives. both inside and outside. An ‘Automated Barrier Gate’ to be installed at the Main Gate. • • • • Contractual labour hired for less than 3 months should be issued a proper ‘Visitor Card’ for work inside the station premises. Daily patrolling along the boundary wall of station should be enforced. Proper and complete uniforms to be worn by security personals while on duty with ‘Employee Card’ clearly displayed on the chest. • • • • Priority Management Comments Manager Responsible High Manager Security 9 of 32 Internal Audit Department . Watch Towers should be “manned” with armed guards at ‘all times’. Security Guards at the Main Gate should ‘thoroughly search’ all people coming inside and leaving the station premises for prohibited items. Damaged barbed wires on boundary wall of the station should be repaired. Weapon’s Register and Arms License should be maintained at the station. Key Point Intelligence Division Instructions should be fully implemented at the station for compliance with Ministry of Interior requirements. The following equipment should be fixed on priority basis: Qt y 2 2 1 • • • Equipment Name Amano Watch Patrolling Devices Walkie Talkies Patrolling Search Lights • A minimum of 4 patrols per night shift should be enforced with at least 2 Security Guards present on the Main Gate at all times. vehicles and personnel coming in and leaving station premises. There should be a CCTV camera installed at Main Gate to monitor the movement of material.
Work Order List printed by ‘Station Maintenance Staff’.Implementation Date 2.3 Finding ‘Plant Maintenance Module’ of SAP should be “fully implemented”. Metho d SAP SAP Manual Manual Manual Manual Manual SAP Manual Locatio n PS01 PS01 PS01 PS04 PS04 PS04 PS04 PS04 PS04 10 of 32 Internal Audit Department . Equipment Maintenance History Card updated ‘manually’ on paper Work Order completed and closed in SAP Monthly ‘Work Order Completion Summary’ signed by Station In-charge sent to Manager S&T Maintenance PS1. step-wise: Plant Maintenance Process ‘Notification’ issued by Planning Engineer at CHQ. ‘Work Order’ raised by Planning Engineer at CHQ. Work Permit form is ‘updated manually’ on paper. the ‘Plant Maintenance Process’ is following. Planning Engineer from PS01 Korangi ‘emails’ Work Order list to Maintenance Staff. Tools. As it stands. consumable material and spare parts usage is recorded on manually paper.
Maintenance Supervisors execute work orders report at stations & terminals. • Plant Maintenance Module of SAP should be ‘fully implemented’. Medium Letter has been sent to Department Heads for arranging Training Sessions at Station for Staff on “Optimal Use of SAP.Moreover. Inefficient usage of SAP. Internal Audit made the following observations on implementation of SAP: • • Risk / Impact • • • Recommendation • • Priority Management Comments Maintenance Staff do not generate or use any reports via SAP. Not getting ‘Value for Money’. Plant Maintenance Module of SAP should be ‘fully implemented’. Complete SAP training should be given to the Maintenance Staff with particular focus on “how to generate and use” Management Information Reports. Details of rights are as under Create / Change / Print Notification Create / Change / Close / Print Work Order Execute Work Orders Report & History Create / Change / Print Material Reservation Create / Change / Print Purchase Requisition Material Stock Overview • Complete SAP training should be given to the Maintenance Staff with particular focus on “how to generate and use” Management Information Reports. There appears to be a ‘lack of’ Proper Training and Practice on SAP usage. Maintenance Supervisors have been assigned rights as per their job responsibility and they exercise rights when required. especially report generation”. Manager Manager S&T / Manager IT 11 of 32 Internal Audit Department . However other reports are executed by Planning Engineer for management review. Information from SAP ‘cannot be relied upon’ for Decision Making. Agreed. IT department should conduct trainings on regular basis for further improvement.
Responsible Implementation Date June 2012 12 of 32 Internal Audit Department .
g. however Maintenance 13 of 32 Internal Audit Department .g.2. Smoke Tester Spray has been consumed for testing Smoke Detectors. • Inventory items are being shared between Maintenance Departments of PS04 and PS01 effectively ‘by-passing’ their respective warehouse’s E.g. Instrument Maintenance: • Entire equipment is replaced with a new one due to ‘unavailability of spares’ at the warehouse ‘increasing’ the cost of maintenance. E. E.Rotary Motion Type (Instrumentation) Smoke Detectors (Instrumentation) Subsequently on further probing the Instrument Technician confirmed that the reason for “zero” consumption of parts and materials is that “The whole equipment is replaced instead on equipment breakdown”. Following are 3 sample: Station Case Pressure Transmitter (Instrumentation) Wire Position XMTR .Rotary Motion Type (Instrumentation) Smoke Detectors (Instrumentation) • There appears to be ‘little oversight’ of Maintenance Supervisor on the rest of Maintenance Team’s working and record keeping.2008) however for following equipment a different format of card is in use: Mainline Pump GM-002 (Mechanical) Station Case Pressure Transmitter (Instrumentation) Wire Position XMTR . Internal Audit made the following observations on “Manual” Plant Maintenance Practices at the station: Combined Issues of Plant Maintenance: • Different formats of Maintenance History Cards are being used E. Standard card appears to be (HSEQ-F-45.12. in following cases spare part consumption is not being updated on card: Station Case Pressure Transmitter (Instrumentation) Wire Position XMTR .4 Finding Maintenance Department should “Considerably Improve” record keeping and monitoring of material and manpower consumption on equipment.g. Rev Date: 01.Rotary Motion Type (Instrumentation) Smoke Detectors (Instrumentation) • In some cases Spare Part Consumption on Maintenance History Card is not been updated properly. Internal Audit noted that there is “zero” consumption of material and spare parts for maintaining equipment.
Important information on the consumption of ‘Material’ and ‘Man-hours’ should be uploaded in SAP. Comments related to the Maintenance Job have not been updated at the bottom of form. Cost of Maintenance should be ‘monitored’ to assess which factor of the following is pushing it up: Material consumption Man hours consumption Maintenance Tool cost Workmanship cost • Materials shared between different stations should be ‘routed’ through their respective Warehouses.History Card for this equipment shows NIL consumption. Instrument. • Electrical Maintenance: • 5 samples of Work Orders randomly tested from September and October 2011 out of which all 5 have information and signatures of Maintenance Technician ‘Missing’. • Record keeping needs ‘consistency’ and ‘completion’ amongst all four sections of Electrical. 2 samples of Work Orders randomly tested from October 2011. Mechanical Maintenance: • Mechanical Maintenance ‘does not return’ partially consumed items issued by Warehouse for example pipes. Maintenance record keeping is not consistent. • Maintenance Supervisor should ‘randomly check’ the record keeping and work Internal Audit Department 14 of 32 Risk / Impact • • Recommendation • • . Instrument Technician confirmed that these were not printed. ‘Type of Work used is not tick marked on the form. • 5 samples of Work Orders randomly tested from September and October 2010 out of which record of 2 work orders was found missing at the station. Mechanical and Power Generation. Risk of ‘high cost of maintenance’ if Management Information is not readily available for Decision Making via SAP. however these have now been received by Internal Audit via email. For example: ‘Actual Work Hours’ have not been updated on the form. similarly Warehouse is not bothered either to identify or recover these items from User Department. however Work Permits for same were available at the time of checking. both of which were missing from file.
• Maintenance supervisors are already in practice to check record keeping of technical staff.g. However for materials. Man-hours and workmanship cost is not possible as the SAP PM module is not integrated with HR module.for their record updating.completed by technicians on site for ‘quality assurance’. Representatives to record consumption of spare parts. will be monitored after issuance of material and hiring of tools against work order. • • • Maintenance Representatives have been advised to update their Records on the current HSEQ Formats. maintenance supervisor and performer are same. Material consumption cost and some special tools e. The material is transferred warehouse to warehouse as a standard practice however in case of emergency when transport is delayed / unavailable. IT personnel should visit all stations & terminals to provide required training. accordingly. • Partially Consumed Material issued from Warehouse should be ‘timely returned’ by User Department if it is of no further use. Further more they have been advised for consistency in record keeping. wherever applicable 15 of 32 Internal Audit Department . training is required. cranes etc. Priority Management Comments High • • Planned and actual Man-hours are uploaded against each work order. • Spare parts of these Instruments are not available. Maintenance staff needs training for issuance of material against work order. All Maintenance staff is maintaining Equipment maintenance record on history cards as well as SAP. In this regard. However. The information should be communicated to Material’s dept. Replacement of the whole equipment is advisable and economical. separate MRs are generated. the material is shifted through Courier / goods transport Company. However. at some stations. • The concerned staff at station shall be advised to return the partially consumed items to Warehouse against Zero Value items. it has been advised to Maint.
5 Finding HSE . Internal Audit made the following observations related to HSE at the station: • Smoke detectors are ‘not installed’ on the following locations: Station House MPT residence NMPT residence • • • PS-04 Fazilpur Station’s Multi-Gas-Monitor is sitting with PS-1 Warehouse (Korangi) on Dispatch Advice (DA) ‘since November 11.• Manager Responsible Implementation Date Manager S&T SEP.2012 2.10. 2010’ for calibration.Smoke Detectors and Multi-Gas-Monitor “not present” at the station. Monitor takes a sample of the air and gives reading of the details as below: Plant Area: For detection of permissible fumes levels for Lower Explosive Limit (LEL). As per Dispatch Advice record. Welding Area: For detection of fumes levels of Pipeline. Multi-Gas-Monitor Usage/Purpose: The monitor is used for detection of any gas and fume leakage.10. Confined Space: For detection of oxygen level in below ground or excavation to ensure safe working condition of staff. Audit Team observed that contractual labour working on ‘Safety Warehouse Building’ inside Plant Area premises were “not wearing” the following Personal Protective Equipment: Safety Shoes 16 of 32 Internal Audit Department .2011. No Multi-Gas-Monitor replacement was physically verified by Audit Team at the station. HSD tank cleaning and maintenance. • Moreover. a Multi-Gas-Monitor was loaned from WOTS-3 between 05.2011 – 28.
There was no safety briefing given to Internal Audit Team at the station during the course of audit. Priority Management Comments Manager Responsible Implementation Date High Manager HSE 17 of 32 Internal Audit Department . MPT and NMPT residence. Risk / Impact • Risk of injury to contractual staff for not wearing PPE’s. Recommendation • • • Smoke detectors should be installed at the Station House. Protective Gloves • • Internal Audit noted Instrument Technician wearing “Shalwar Kameez” inside Maintenance Workshop Area during daytime working hours. Multi-Gas-Monitor sent for calibration to PS01 Korangi should be “clawed back” on urgent basis. however a safety brochure each was handed over 2 days before departure. • Fumes and gas leakage intensity might not be detected in the absence of the MultiGas-Monitor at the station and may result in loss of life and property. HSE standards should be enforced for “all” contractual staff at “all times”.
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19 of 32 Internal Audit Department .2.6 Inventory Items lying in open area behind NMPT residence have apparently been “abandoned” by the Warehouse.
0.6MM.Finding Internal Audit observed that there are a number of items lying in open area behind NMPT residence. Pipe 1/2" G.5 Kg/Drum Quantity 270 Mtr 65 Mtr 115 Mtr 68 Mtr 124.6/1KV Cable. Pipe 3/4" G. 4Core.5" G. 4 Core. lists were prepared by respective departments of items in their “custody”.5" G. 6.I. • These include useable. Pipe 1/2" G. and scrap items.5 MT* 10 Drums** 210 Kg 88.I.I.88 Kg Status Useable 20 of 32 Internal Audit Department . Power. High Voltage. 1 2 3 4 5 6 7 8 Item Description Cable.I. Pipe 03" G. 120 mm. Telephone. 50 Pairs Coaltar Enamel 105/8. S/95 Cable. similarly scrap has not been handed over to Warehouse for timely disposal. Pipe 2. Following are the list of items lying in open area department wise: Mechanical Maintenance Quantity Item Description in Feet G.I. Pipe 04" 84 20 6 140 80 10 150 30 50 20 20 Sr.35/11KV XLPE.I. project leftover. 0. Pipe 1" G. Pipe 3/4" G.I. 10MMSQ.I. Project leftover and Useable items in User Department custody are excluded from Warehouse Inventory.4" G.I. However on Internal Audit request.I.I. Pipe 2" G. • No record was available for these items with the Warehouse. Pipe 1. 600/1000V Cable. 1 2 3 4 5 6 7 9 8 10 11 Status Project Leftover Useable Scrap Warehouse Sr . Pipe 1. BS4164 Corrosion Inhibitor DCI-6A> (this is issued once and consumed as required) Foam Compound Protein 3% (Local) Foam Compound AFFF CF 3% * 821 Tubes of 50 Kg each ** 190.
Assets/Inventory items lying in open area behind NMPT residence should be returned by User departments to the Warehouse. Items lying under open sky without protection.Risk / Impact • Practice of storing items/inventory for undefined periods by User Department ‘without the knowledge and custodianship of Warehouse’ is fraught with ‘risks of misappropriation’. • Moreover. as and when required basis. all the concerned staff has been advised to return the partially consumed items to Warehouse. Henceforth. purchased from local market. Items lying in open are that are exposed to “risk of corrosion’ should be properly protected. the PG items have not been handed over to Warehouse. PG Representative has been advised to prepare list of such items so that Finance Tags may be obtained. for example pipes and motor operated valves are ‘at risk’ of corrosion. these items may be handed over to Warehouse • CP Representative has been advised to return the issued (Extra / bulk) items to Warehouse and issue these items. SOP on Project Left Over items should be implemented. Manager (Material) to advise on return of partially consumed items. • Items (under heading of “Administration”) have been returned back to Warehouse as E-grade on Dispatch Advice. Manager Responsible Implementation Manager S&T June 2012 21 of 32 Internal Audit Department . • Letters has been sent to Manager (Finance) & Manager (Materials) to incorporate the option of “Consumption” in SAP for partially consumed items. • Due to non availability of Finance Tags. Warehouse should ‘take ownership’ and ‘proactively identify’ items lying about at the station without proper accountability. • Recommendation • • • • Priority Management Comments High • Lists of equipment lying in open yard have been prepared.
1 2 3 Mechanical Maintenance Quanti ty in Item Description Feet G.I. Warehouse to take ownership and pro-actively identify items which are lying about at the station without accountability. 1 2 3 4 5 6 7 9 8 10 Item Description Revolving Chair (Damaged / Broken) Table for Table Tennis (Broken) Carom Boards (Broken) Wooden Racks (Broken) Wooden Table (Broken) Steel Cot (Broken) Dining Chairs (Broken) Easy Chairs (Broken) Exhaust Fan (Corroded) Iron Chair (Broken) Quanti ty 3 1 3 2 1 1 20 12 1 1 Status Scrap Sr. Administration Sr. Recommendation Priority High 22 of 32 Internal Audit Department . Warehouse does not take any initiative with the user department to identify items which may be scrap and are of no further use. These items are lying in open area behind NMPT residence.I. Pipe 04" 20 Status Scrap Risk / Impact • • • • Scrap is ‘not being identified timely’ by Warehouse for disposal.Date 2. Internal Audit made the following observations regarding scrap declaration: • • There is no SOP at the station to determine ‘on what basis’ User Department declares an item to be “scrap”.7 Finding Scrap Declaration Practice “lacks” firm controls. Project Leftover and Useable items may be declared scrap by mistake or deliberately in absence of SOP. Pipe 3/4" 50 G. Scrap Declaration SOP should be implemented at the station. Following is the list of items declared scrap by User Department without the knowledge / custody of Warehouse. Pipe 1/2" 20 G.I.
Management Comments Manager Responsible Implementation Date Manager Materials 23 of 32 Internal Audit Department .
There appears to be a lack of ‘Proper Training’ and ‘Practice’ on SAP usage. On further probing it has been confirmed by Materials Department that “TS02 Warehouse is ‘in-active’ due to a “lack of” SAP license. in some instances User Department had to directly chase PS1 Warehouse for urgent delivery of items. 24 of 32 Risk / Impact • • • Recommendation • Internal Audit Department . Duplication of work. Inventory items are searched physically by warehouse staff using old codes. Warehouse does not generate and use any reports via SAP to maintain inventory at “optimum level”. Inventory items are being shared and used directly between User Departments of different stations effectively “by-passing” their respective Warehouses. but without proper sequencing. Increased cost of maintaining inventory in absence of proper reporting and monitoring via SAP. There appears to be no monitoring and reporting of ‘carrying costs’ of inventory and how to manage ‘dead stock’ lying in the Warehouse. SAP should be ‘fully implemented’ at the Warehouse. SAP implementation and usage appears to be “non-existent” at the Warehouse except for when an entry is made while issuing an item out of stock.094 Material 65-23-09-0071 • • • • • • • • • Warehouse “does not” monitor inventory “re-order levels” in SAP to ensure timely availability of spare parts and consumables at the station.8 Finding Inventory Management needs “Substantial Improvement” at the Warehouse. Changes in inventory volumes are recorded “manually” on paper history card in addition to the entry made on SAP. In-efficient use of company ERP system – SAP. Warehouse at PS04 Fazilpur is being used “jointly” by PS04 and TS02. although SAP codes are written on the cabinets. Internal Audit made the following observations on Warehouse activities: • Audit Team physically verified 24 items (5 high value items) randomly at the Warehouse out of which 1 discrepancy was found in a high value item: Item Description Circuit Breaker 2-Pole P/N 41420-69-57 SAP 03 Physically Verified 02 Total Value (PKR) 419.2.
New SAP codes should be used for physical searching of inventory in the Warehouse instead of old ones. Manager Materials 25 of 32 Internal Audit Department . Warehouse should ‘manage’ inventory re-order level using SAP. SAP license should be given at TS02 Warehouse. SAP should be used to record changes in inventory volumes.• • • • • • Priority Management Comments Manager Responsible Implementation Date High SAP Training should be given to the Warehouse Staff with particular focus on how to “generate and use” Management Information Reports. while paper history card to be made ‘redundant’. Warehouse should maintain inventory at “optimum level” by using SAP.
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2.9 Fixed Asset Register “does not match” with assets present at the station. 27 of 32 Internal Audit Department .
Following 3 computers were in excess. 1 2 3 Asset 102-5131-152 102-5131-074 C-7520-1034711 Asset Description HP Compaq with Monitor IBM Net vista with Monitor IBM Net vista with Monitor Location PL Maintenance Room Control Building HSE Engineer Room Following 5 computers did not have an asset tag affixed. Discrepancies noted are listed below asset class wise: Computers • FAR record shows 11 computers. Core 2 Duo. however asset description did match with FAR record. 1 2 Asset 102-5144-065 102-5144-038 Asset Description HP Laser Jet 1200 Series HP Laser Jet 1000 Series Location PL Maintenance Room Warehouse Office Following 2 printers did not have an asset tag affixed. with LCD Monitor HP Intel. Sr . however asset description did Internal Audit Department 28 of 32 . Sr . Core i3. 1 2 3 4 5 Asset No Tag affixed No Tag affixed No Tag affixed No Tag affixed No Tag affixed Asset Description HP Intel. Following 2 printers were in excess. with LCD Monitor HP Intel. Sr .Finding Internal Audit observed a number of discrepancies between Fixed Asset Register (FAR) maintained in SAP and physically verified / available assets at station. whereas 14 computers were found at the station. P IV with Monitor IBM PC 300 HP Intel with Monitor Location Operation Engineer Room Telecom Room Telecom Room Telecom Room PA to Station In-charge Printers • FAR shows 5 printers whereas 7 printers were found at the station.
• List of air conditioners is being reviewed so that missing tag may be obtained from CHQ via Finance representative. • Letters to concerned department Heads have been sent. Fixed Assets Register in SAP does not represent the ‘actual statuses’ of assets present at the station. Station In-charge in co-ordination with Manager Finance should take “initiative” to verify all assets present at the station so that Fixed Asset Register can be updated. Materials& Finance Departments at PS-4. Manager Finance / Manager S&T Manager Responsible Implementation Date May 2012 29 of 32 Internal Audit Department . High • Activity has been started for updating the Fixed Asset Register as per physical assets available. accordingly.Risk / Impact Recommendation Priority Management Comments Risk of “misappropriation of assets”. jointly by S&T(OPS). • Finance Representative has been advised to arrange missing Finance Tags from CHQ.
ANNEXURE I Pipeline Sr . 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Item Description ADJUSTABLE (18") ADJUSTABLE (15") NOSE PLEIR MONKEY PLEIR WIRE BRUSH PLEIR PIPE WRENCH BLADE CUTTER HAMMER SCREW DRIVER L – KEY BLADE CUTTER STAR SET SCISSOR CYLINDER KEY TEFLON TAPE EMERY PAPER CYLINDER FITTING CYLINDER FITTING DEPOXY OPEN SPANNER RING SPANNER CHIESEL RUBBER PACKING COTTON GLOVES SURF PENCIL CHIESEL IROM BAR (BARI) STRAIGHT DRIVER MONKEY PLEIR Qty 1 1 2 3 1 1 1 1 1 3 2 3 1 1 2 6 2 20 5 10 14 9 1 5 2 1 1 8 1 1 1 30 of 32 Internal Audit Department .
1 2 3 4 5 6 Item Description GUIDE DISCS SEALING DISCS SPACERS BRUSHES BOLTS NUT UNUS ED 41 2 8 70 220 200 USED 12 24 0 30 0 0 KMK BRUSH PIG ITEMS: Pipeline Sr . 1 2 3 4 5 6 Item Description GUIDE DISCS SEALING DISCS SPACERS BRUSHES BOLTS NUT UNUS ED 20 22 0 6 5 5 USED 10 6 13 7 0 0 31 of 32 Internal Audit Department .32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 HAMMER HAMMER WOODEN PEG COTTON GLOVES EMERY PAPER FITTING GREASE GUN WIRE BRUSH HAMMER PLASTIC GLOOVES SAFETY GLOOVES SAFETY CLAMPS SAFETY CLAMPS HOSE PIPE HOSE PIPE BRUSH BUCKET WATER COOLER CYLINDER BRUSH 1 3 10 1 2 10 1 3 2 2 2 9 3 1 2 15 3 1 29 78 WOP PIG ITEMS: Pipeline Sr .
KMK MAGNETIC PIG ITEMS: Pipeline Sr . 1 2 3 5 6 Item Description GUIDE DISCS SEALING DISCS SPACERS BOLTS NUT UNUS ED 13 14 1 5 5 USED 16 20 13 0 0 32 of 32 Internal Audit Department .
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