audit report- 2012 of f-10 markaz branch islamabad

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Audit Report of F-10 Markaz Branch, Islamabad (2269) – Islamabad Region

Name of Branch Manager: Mr. Hassan Aurangzeb Abbasi

Date of Posting of Branch Manager: 09.12.2011

Name of Auditors M/s Aslam Rais-Team Leader,

Raja Usman Abdullah & Faisal Mahmood (Team

Members)

Audit Period: 01.07.2011 to 30.03.2012

Audit Category: “B”

Financial Highlights (Rs. in Mn)

Total

Deposits

Finances Imports Exports

Total Classified

As of Audit Date 30.03.2012 1032.947 9.975 0.293 - -

As of 31.12.2011 684.444 16.009 0.290 - -

As of 31.12.2010 624.856 9.000 0.289 - -

Scope & Objectives Audit covered entire operations of the branch on sampling basis including Cash, ATM, Collections,

Remittances, Deposits, Staff & General, FINCON, Clearing, Income & Expenditure, FC Transactions, IT

operations and Compliance of previous audit. Audit coverage was limited to the transactions that were

recorded in books of the branch.

Management & Staff Staff strength of the branch consisted of 07 personnel including Branch Manager, Manager Operations, Manager Teller, Teller Remittance, CSO and two Tellers. CSO and Manager Teller were working in

branch for 4 to 6 months without posting orders. Two outsourced security guards were also provided to

the branch. Staff needs training to enhance their skills for better understanding of contents of MISYS output reports and standard operating procedures.

Assessment Summary Based on audit findings, internal working of the branch was below the desired levels. However, on the basis of representation/assurance by the regional management for having strengthened internal controls,

the audit category is upgraded to “B”-Satisfactory”. The serious irregularities noted during the course of

audit are enumerated below for immediate attention of branch management and controlling office.

Three incidents of fraud / cash shortage totaling Rs.0.430mn were occurred in the branch during the audit

period due to weak controls and branch staff involvement; however, entire amount has since been recovered / settled and necessary action was taken against the staff at fault.

Effective controls were not in place for safe custody of important items / record as observed on 1st day of

audit; duplicate set of cash safe and strong room door keys were kept in the branch instead of depositing with another branch. Cash safe and strong room door keys of Branch Manager were in custody of

Manager Teller without recording that fact in the key register. The custodian of ATM combination lock

was unable to apply the code correctly; resultantly ATM was opened by the branch manager by applying that code. A cheque of Rs.11K, received for online transfer could not be processed due to difference in

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customer‟s signature, was lying in table drawer of CSO and not returned to the customer. Duplicate keys

lodgment receipt was illogically kept in cash safe instead of at a place easily accessible in case of need.

Supervisory controls over cash/ATM management of the branch were quite unsatisfactory; nine ATM

cards and 04 PIN codes were missing since no evidence / record of destroying the same was available

with the branch. Customers‟ signatures were not being verified at the time of delivery of ATM cards and PIN codes as matter of practice involving risk of unauthorized delivery. Three ATM PIN codes were

lying open / unsealed with the branch and in one case withdrawals through ATM were also observed. On

one occasion a cash receipt voucher of Rs.11100/- was left un-posted and excess cash Rs.11000/- was accounted for on next day less by Rs.100/-. The mistake was corrected after 15 days by recovering

Rs.100/- from the cashier. Checking of entire cash on hand once in a month was not done by the Branch

Manager as a matter of practice.

Various lapses of serious nature were noted in branch operations; on one occasions a cheque for

Rs.2.000mn was wrongly debited as Rs.20.000mn to the customer account by giving credit in another

account of the same customer and entry was reversed with delay of 03 days. Stamps on hand were short by Rs.200/- as on audit date and relevant head of account was not periodically balanced. 14 undelivered

cheque books were lying with the branch as back as 25.10.2011 but not destroyed after expiry of

prescribed retention period. Withholding tax deducted at source was not deposited in govt. treasury on weekly basis; resultantly tax amounting to Rs.0.905mn accumulated for the last three months was still

outstanding in branch books. Tax Rs.4,694/- on branch electricity bill was also paid to the debit of tax on

profit GL which resulted in less tax deposit with government exchequer and mistake remained unidentified till pointed out by audit. Quite contrary to HOK instructions regarding payment of branch

rent on monthly basis, rent amounting to Rs.1.100mn was not paid to the landlord since August, 2011

which affected the bank‟s profit position for the year 2011 as well as excess payment of tax Rs.0.241mn

(@ 35%) on bank‟s profit. On one occasion proceeds of cancelled Banker‟s Cheque for Rs.0.959mn was wrongly credited in a 3

rd person‟s account and correction was made after 11 days. On 08.07.2011 while

expensing out balance of Rs.47386/- of advance deposit head that amount was wrongly debited to it

instead of crediting as a result it was still running with double balance of that amount. The amount of a credit voucher for Rs.0.122mn parked in Routing GL was wrongly credited to customer‟s account twice

and reversal of excess amount was made after 4 days. Rs.0.181mn being insurance claim regarding ATM

damage during an unsuccessful theft attempt was remitted to GAD without any justification instead of

appropriating to branch‟s own expense. Misys system users were not in practice to sign off their terminals while leaving their seats temporarily during working hours. Outward remittances up to Rs.8.000mn were

made without obtaining source and purpose of remittance. Stop payment instructions of three A/cs

received as back as 23.07.2011were not marked in the system.

Weak supervisory controls were observed over clearing operations of the branch; on two occasions

inward clearing cheques for Rs.0.100mn and Rs.0.054mn were cleared in the morning against insufficient balance in accounts instead of returning to the presenting bank and respective accounts were debited after

3 days despite sufficient funds were received in those accounts in the evening of the same day;

resultantly, sundry assets head remained unbalanced for the interim period. 19 outward clearing returns up

to Rs.4.400mn were marked with the delay up to nine days involving risk of withdrawal against undue credit.

On different occasions unauthorized TRFs up to Rs.85K were allowed for a maximum period of 14 days but post facto confirmations were not obtained e.g. proceeds of an OBC of Rs.0.100mn were wrongly

credited thrice in a customer account and amount was withdrawn by the customer resulting in concealed

TRF of Rs.80K in the account for two days. On one occasion withdrawal of Rs.85K was allowed against uncleared clearing effects; later on the clearing cheque was returned unpaid and TRF of Rs. 85K was

created in A/c which was adjusted after 14 days. TRFs totaling Rs.0.293mn were outstanding in 52

CD/SB A/cs but effective efforts were not made for adjustment despite the fact that 09 TRFs involving

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Rs.0.292mn have been classified as NPL. TRFs totaling Rs.30K created in 114 accounts on account of

ATM fee recovery were adjusted by debiting Income GL without any justification; during that process TRFs created on account of recovery of other charges were also adjusted which was illogical and loss to

bank.

Different anomalies were noted in account opening of the branch; an account of a government entity was opened without completing documentation and later one IPD for Rs.119.699mn was also booked through

that account. An account of an NGO was opened without completing requisite formalities. Five BBA

A/cs were opened against the customers‟ requests for opening PLS/SB A/cs. CNIC copies of customers were verified without meeting regulator‟s requirements as a matter of practice. Copy of CNIC of a partner

was not placed on record in case of a partnership account. Proof of profession was not obtained in case of

06 salaried persons accounts. Two accounts of illiterate persons were opened without obtaining their photographs.

Customer service of the branch was not up to the mark; during audit it was observed that branch ATM

remained out of service most of the time resulting in frequent customer complaints. An advantage account deal for Rs.0.200mn was booked with delay of 05 days, on roll over basis instead of payment on maturity.

Proceeds of 31 HMTs / OBCs up to Rs.13.250mn were credited in customers‟ a/cs with the delay up to 16

days after receipt of funds / fate. Monthly standing instructions of a customer were not complied in time. In violation of SOBC clearing cheque returned charges were recovered @ Rs.500/- per instrument instead

of Rs.464/- during the 2nd

half of 2011.

Short Recovery

Short recovery of Rs. 55,162/- was detected by audit and entire amount was recovered.

d

Team Leader

ASLAM RAIS SM

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High Risk Issues The observations classified by Audit as High Risk are considered more serious in nature and warrant

immediate attention of Senior Management for resolution.

1. Incidents of Fraud / Cash Shortage totaling Rs.0.430mn Three incidents of fraud / cash shortage totaling Rs.0.430mn were occurred in the branch during the audit period due to weak controls and branch staff involvement; case wise detail is given below:

a. A fraudulent cash withdrawal of Rs.200,000/- was made by Mr. Omair Hassan RBO with the help of

Mr. Kanjlas Bhatti a credit card resource person (employee of M/s. People) from customer A/c # 22697000252603 titled Muhammad Ali by stealing a cheque from the cheque book of the customer

on 09.02.2012. The amount involved was recovered from Mr. Omair on 27.02.12 and credited to

aggrieved customer‟s account. The culprits M/s. Omair and Kanjllis were removed from the branch

and presently sitting in RHQ. Mr. Omair Hassan AM-I P # 484330 has also been placed under suspension till further order. Findings of the investigation were as under: P-22

Both M/s. Omair Hassan AM-I (P # 484330) and Kanjllis Bhatti (P # 41531) of Credit Card staff

hired from M/s. People are responsible for making fraudulent cash withdrawal from the customer

account.

Mr. Imran Majeed (P #459327) Cash Teller and supervisor (not known due to non availability of

Supervisor‟s JRC) proved negligent in passing the cheque carrying forged signature of the

customer also not tallying with the specimen on bank record.

Ms. Noreen Tahira (P # 441820) Manager Operations failed in safe keeping / maintaining of

record properly as JRC of the relevant transaction was missing.

Mr. Hassan A Abbasi BM proved negligent in not securing CCTV/DVR as culprits managed to

switch off the device due to lack of proper control.

And recommended that;

Disciplinary action be taken against Mr. Omair Hassan

Explanation of Mr. Imran Majeed, Ms. Noreen Tahira & Mr. Hassan A Abbasi be called for as

discussed under “Fixation of Responsibilities” and further action be taken in the light of their

replies.

The services of Mr. Kanjllis Bhatti Credit Card staff should be surrendered to his employer M/s.

People with the advice to initiate necessary action against the incumbent.

b. Fraudulent cash withdrawals of Rs.360000/- took place from a customer A/c # 22737900484603

titled Mr. Ahsan Azad maintained at G-10 Markaz Commercial Centre, Islamabad through cheques for Rs.160,000/- and Rs.200,000/- carrying forged signature of the customer, paid by G-10 Markaz

Commercial Centre and F-10 Markaz Branch Islamabad respectively. However, the account holder

subsequently withdrew his complaint as his real brother was reportedly involved in the incident. Necessary investigation of the case was conducted and necessary action was taken against the staff at

fault. P-20

c. An incident of cash shortage of Rs.30K in ATM was occurred in the branch in Sept, 2011 which was

made good through contribution from staff. Investigation of the case was conducted and recommended that explanation of the staff concerned be called for and necessary action be taken in

the light of their replies. P-20

Risk: Occurrence of such type of incidents involved financial and reputational risks. Recommendation: Management should implement stringent controls to avoid happening of such

incidents.

Management Response:

a. Show cause notice issued to Mr. Omer Hassan and explanation letters were served to Mr. Hassan Aurangzeb Abbasi, Ms. Noreen Tahira and Mr. Imran Majeed and decision of the case is not yet

communicated to the branch.

RHQ Comments: Amount recovered fully from the responsible. Inquiry held & investigation report is awaited. There is no loss to the bank & the Officer involved is under suspension.

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Auditors’ further comments: Per. # 459327of Mr. Imran Majeed Teller was incorrectly mentioned

against the name of Branch Manager Mr. Hassan Aurangzeb instead of 495640 but HR Operations was not informed accordingly.

b. Case of Ms. Noreen Tahira was closed by HR, HOK. Ms. Sidra Ejaz was strictly warned vide HR

Oprns. & Relationship Management letter # HJ/479087 dated 21.10.2011

RHQ Comments: The complaint has since been withdrawn by the complainant & investigation has also been completed taking action against the responsible.

c. Explanation of Ms. Noreen Tahira was called and she was warned to be more careful in future vide

HR Oprns. & Relationship Management HOK vide letter # HJ/441820 dated 06.01.2012. RHQ Comments: IT engineers were involved in the incident; however, loss was covered by the staff

without any loss to the bank.

Auditors’ further comments: As per Manager Operations statement explanation Mr. Imran Majeed Teller was not called although recommended in investigation report # (M-145) dated 23.11.2011.

2. Safe Keeping of Record

Effective controls were not observed for safe custody of important items / record as observed on 1st day of

audit; refer below detail:

i. Duplicate set of cash safe and strong room door keys were kept in the branch for more than a week

time instead of depositing with another branch. P-11 ii. Cash safe and strong room door keys of Branch Manager were in custody of Manager Teller without

recording that fact in the key register. P-1

iii. As on 1st day of audit ATM combination lock code could not be applied correctly by the custodian

(Manager Teller) for checking of ATM cash by audit. Later on ATM was opened by applying

combination code by the Branch Manager showing that actually that code was in the knowledge of

BM. P-1

iv. A cheque for Rs.10744/- bearing branch transfer stamp received for online transfer in A/c # 22697000232103 on 29.03.2012 was lying in table drawer of CSO. Cheque was posted without

verifying drawer‟s signature which differed with the specimen on bank record; the posting was

reversed but the cheque was not returned to the customer. P-1 v. Duplicate keys lodgment receipt was illogically kept in cash safe instead of keeping it in separate

almirah. P-1

Risk: Weak controls leading to operational and financial risks.

Recommendation: Management should follow bank procedure and resolve the pointed out issues.


i. Installed locks were having problem in operating, vendor was again called for the resolution RTD

30.04.2012 RHQ Comments: Locks were not properly working after replacement, vendor was again called

for the change of locks, now it‟s working properly and the keys have been deposited with F-11

branch. ii. Now recorded in key register; non repetition assured.

iii. Manager Teller was confused due to that could not open the lock.

RHQ Comments: Combination lock has been changed & now its with Mr. Shahid, Manager

Teller & services iv. Now returned to the customer

v. Now kept at a safe place

3. Cash/ATM Management Supervisory controls over cash/ATM management of the branch were quite unsatisfactory; refer below

detail. i. Nine ATM cards and 04 PIN codes were missing as the same were neither destroyed nor

available with the branch.P-6,7

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ii. Customers‟ signatures were not verified at the time of delivery of ATM cards as well as PIN

codes as matter of practice involving risk of wrong / unauthorized delivery. P-5, 7 iii. Three ATM PIN codes pertaining to A/c # 22697000224001, 22697000245503 &

22697000043603 were lying open / unsealed with the branch.

iv. Unsealed PIN Code envelope of A/c # 22697000043603 was kept on record and withdrawal

through ATM was also found made from the account. P-8 v. On 06.10.2011 cash receipt voucher of Rs.11100/- was delivered to the depositor without posting

and excess cash of amount Rs.11000/- was accounted for to excess cash head instead of 11100/-

on the next day. Amount reversed to customer‟s A/c after 15 days by recovering Rs.100/- from the cashier without issuing him warning. P-9

vi. Checking of entire cash on hand once in a month was not done by the Branch Manager as a

matter of practice. P-2 Risk: Non adherence to bank‟s laid down procedure involved financial risk.

Recommendation: Management should ensure proper implementation of bank‟s procedure and

resolve the pointed out issues.

Management Response: i. RTD 30.04.2012

RHQ Comments: Receiving of ATM card and PIN codes is available in branch

ii. Correct practice adopted now. RHQ Comments: Now verified

iii. For obtaining satisfaction letter from the customers RTD 30.04.2012

RHQ Comments: Now sealed and satisfaction letters have been obtained from the customers. iv. Customer has given the request for replacement of ATM pin code after that we received the PIN

code which he has applied earlier; during tear offing the pin code seal got opened. However

delivered to the customer & satisfaction letter obtained

v. Non repetition assured, now explanation of staff called for the said matter. vi. Non repetition assured.

4. Serious Operational Lapses Following serious lapses were noted in operations of the branch;

i. On 25.11.2011 a cheque for Rs.2.000mn of A/c # 22697000077103 was wrongly debited as

Rs.20.000mn by giving credit in same customer‟s A/c # 11657900110903 and entry was reversed

on 28.11.2011 after 03 days. P-43 ii. Stamps on hand were short by Rs.200/- as on audit date and relevant head of account was not

periodically balanced. P-41

iii. 14 undelivered cheque books were lying with the branch as back as 25.10.2011 but not destroyed after expiry of prescribed retention period. P-36

iv. Withholding tax deducted on profit as well as cash withdrawals was not deposited in govt.

treasury on weekly basis; resultantly tax amounting to Rs.0.905mn accumulated for the last three months was still outstanding in branch books. P-41

v. Tax Rs.4694/- on branch electricity bill was also paid to the debit of tax on profit head which

resulted in less tax deposit with government exchequer and mistake remained unidentified till

pointed out by audit. P-41 vi. Quite contrary to HOK instructions regarding payment of branch rent on monthly basis, rent

amounting to Rs.1.100mn was not paid to the landlord since August, 2011 which affected the

bank‟s profit position for the year 2011 and resulted in excess payment of tax amounting to Rs.0.241mn(@ 35%) on bank‟s profit. P-51

vii. On 28.11.2011 a banker‟s cheque for Rs.958500/- was cancelled on request of purchaser

maintaining A/c # 22697000228403 by wrongly crediting proceeds in a 3rd

person A/c # 2269700084303 and correction was made after 11 days. P-11

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viii. While expensing out balance of advance deposit head Rs.47386/- to the debit of Centralized IT

Expenditure GL on 08.07.2011 the said head was wrongly debited instead of crediting making its balance double and mistake remained unidentified till pointed out by audit. P-41

ix. The amount of a credit voucher of Rs.122166/- pertaining to a blocked customer‟s A/c #

22697000242801 posted in Routing GL on 22.12.2011 was wrongly reversed twice to the credit

of customer‟s A/c on 23.12.2011 and reversal of excess amount was made after 4 days. P-42 x. An unsuccessful attempt of ATM theft was made by some unknown culprits at the branch on

18.07.2011 by damaging the same but no financial loss/ cash theft was occurred and branch

informed RHQ accordingly. As per statement of Manager Operations damaged ATM was got repaired during the month of July 2011 for which GAD debited Rs.251082/- to branch‟s Exp.

A/c- titled Maintenance Office Equipment, GL 918026 on 21.10.2011. Subsequently, insurance

claim of Rs.181398/- received from NJI was credited to Fixed Assets Purchased GL 901329 of GAD on 30.11.2011 without obtaining guidance from controlling offices for the disposal of this

amount. Moreover, it could not be ascertained that where that amount was appropriated by GAD.

P-53

xi. During audit it was observed that Misys system users were not in practice to sign off their terminals while leaving their seats temporarily during working hours. P-58

xii. Outward remittances up to Rs.8.000mn were made without obtaining source and purpose of

remittance. P-15 xiii. Stop payment instructions of three A/cs # 7000188903, 7000076803 & 7000197812 received as

back as 23.07.2011were not complied by the branch. P-36

Risk: Weak controls involved operational and financial risk. Recommendation: Management should ensure effective controls and resolve the pointed out issues.


i. Non repetition assured.

ii. Now balancing started, Rs.200/- recovered from the staff on 03.04.2012. iii. RTD 30.04.2012

iv. Henceforth, tax will be deposited on weekly basis. Above noted tax now deposited on

02.04.2012. v. Reversal voucher passed on 04.04.2012

vi. RTD 30.04.2012

RHQ Comments: Rent paid, delay regretted, In future rent will be paid on monthly basis.

vii. Non repetition assured. viii. Now reversal voucher passed on 04.04.2012.

ix. Regretted. Non repetition assured.

x. RTD 30.04.2012 xi. Now onward correct practice assured.

xii. Non repetition assured.

xiii. Regretted. Now marked.

5. Clearing Operations Weak supervisory controls were observed over clearing operations of the branch;

i. On two occasions inward clearing cheques of Rs.0.100mn and Rs.0.054mn were cleared in the morning against insufficient balance in customers‟ A/cs # 22697000248303 & 22697000179303

instead of returning to the presenting bank. Although sufficient funds were received in these A/cs

in the same day evening, however A/cs were debited after 3 days; resultantly sundry assets head remained unbalanced for the interim period. P-45

ii. 19 instances were noted where outward clearing returns upto Rs.4.400mn were marked with the

delays up to nine days, involving risk of withdrawal against undue credit. P-44 iii. Three instances were noted where inward clearing cheques were debited to customers‟ A/c #

2269700017903, 22697000163303 & 22697000136203 with excess amount upto Rs.14500/- and

adjustment was made after 02 to 04 days. P-43

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Risk: Weak controls involved operational and financial risks.

Recommendation: Management should look into the matter and ensure to implement the laid down procedure.

Management Response: Non repetition assured.

6. Unauthorized TRFs i. Proceeds of an OBC of Rs.100000/- were wrongly credited thrice in customer‟s A/c #

22697000192901 on 19.09.2011, 22.09.2011 and 04.10.2011 and the amount was withdrawn by

the customer but reversal was made after 13 days; resultantly, TRF upto Rs.80K was concealed for two days which was not reported for post facto confirmation. P-12

ii Withdrawal of Rs.85K was allowed from A/c # 2269700089703 on 30.08.2011against un-cleared

clearing effects of Rs.0.185mn. Later on, cheque was returned unpaid and TRF of Rs. 85K was created in A/c which was adjusted after 14 days; post facto confirmation was not obtained. P-55

iii. TRFs totaling Rs.0.293mn were outstanding in 52 CD/SB A/cs but no effective efforts were made

for adjustment despite the fact that 09 TRFs involving Rs.0.292mn have been classified as NPL.

Post facto confirmation was also not obtained from the competent authority in case of TRFs created due to deduction of withholding tax. Three such cases upto Rs.3477.94 were noted in

working papers. P-54

iv. ATM fee from customer accounts was recovered through system during the audit period by creating TRFs in those accounts; later on 114 TRFs were adjusted by debiting the amount totaling

Rs.30366.48 to Income GL without any justification. During that process it was further noted that

different TRFs created on account of recovery of other charges like stop payment charges were also adjusted by debiting Income GL 912097 ATM Charges GL without any justification. The said

practice seems illogical e.g. TRF amounting Rs.425.85 created in A/c # 22697000093803 on

account of withholding tax and TRF Rs.35/- created due to deduction of service charges in A/c #

22697000135503. P-54 Risk: Unauthorized acts / concealment of facts exhibit breach of trust of higher management which also

involves financial risk.

Recommendation: Higher management should look into the matter and take action accordingly. The

branch management should resolve the pointed out issues and ensure non repetition of the same.

Management Response: RTD 30.04.2012

7. Anomalies in Account Opening Being the primary contract between the banker and customer, the accounts are to be opened after fulfilling all the requisite formalities. However, following anomalies were noted in this activity of the

branch:-

i. A/c # 22697000250401 was opened for a government entity without completing documentation and an IPD for Rs.119.699mn was also booked to the debit of this A/c on 24.01.2012. A/c #

22697000240501 of an NGO was opened without completing requisite formalities. P-17, 27

ii. BBA A/cs # 7000261403, 7000262903, 7000263003, 7000263603 & 7000264103 were opened

against the customers‟ requests of opening PLSSB A/cs. P-28 iii. „Original seen and compared‟ stamp was not affixed on copy of CNIC of A/c holders as a matter

of practice. Copy of CNIC of a partner was not available in A/c # 7000240403. P-27, 31

iv. Proof of profession was not obtained in case of 06 salaried persons accounts. P-28 v. A/c # 7000264503 & 7000244501 of illiterate persons were opened without obtaining their

photographs. P-31

Risk: Chances of opening of unscrupulous accounts and regulatory risk as well. Recommendation: Management should follow bank‟s laid down procedure and resolve the pointed out

issues.

Management / RHQ Response:

i. Documents obtained ii. Letter of satisfaction has been taken from the customers

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iii. Now verified & CNIC copy obtained

iv. Obtained v. Photos now obtained.

8. Customer Service

Customer service of the branch was not upto the required standard as following irregularities were noted in this regard;

i. During audit it was observed that branch ATM remained out of service most of the time and

customers were annoyed of this situation and complained for resolution. P-10 ii. MPD deal # 2269/2012/001 for Rs.0.200mn was booked with delay of 05 days, also on roll over basis

instead of payment on maturity. P-17

iii. Proceeds of 19 OBCs up to Rs.13.250mn were credited in customers‟ a/cs with the delay upto 12 days after receiving fate. P-12

iv. Proceeds of 12 HMTs upto Rs.1.113mn were credited in customers‟ A/cs with delay upto 16days. P-

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v. Standing instruction of a customer for remitting Rs.10,000/- pm was not complied in time. P-39 vi. In violation of SOBC clearing cheque returned charges were recovered @ Rs.500/- instead of 464/-

during the period July to Dec‟2011 resulting in total excess recovery of Rs.1368/-. P-44

Risk: Weak supervisory controls, non meeting of laid down criteria and non provision of efficient service to clients involved financial and reputational risks.

Recommendation: Management should look into the matter and resolve the pointed out issues and

ensure proper control.


i. Above observation is already in the knowledge of RHQ, Machine is serviced by the technician even

then issue has not been resolved, matter pertains to RHQ RTD 30.04.2012

ii. to v. Non repetition assured. vi. Delay regretted payment on maturity amendment now sent to COPC.

9. Posting of Staff Mr. Shahid Bacha Manager Teller and Mr. Mohammad Hussain Farooqui CSO were working in the

branch since 13.09.2011 and 01.12.2011, respectively, but their posting orders were not available with the

branch; on enquiry it was informed that no orders of their posting were received from RHQ / HR, hence it

could not be ascertained that on which branch / office payroll were these incumbents as per HR, HOK. P-19

Risk: Deployment of staff without posting orders is an act of indiscipline and their responsibility could

not be fixed in case of need. Recommendation: Controlling office should follow bank‟s laid down procedure and resolve the pointed

out issue.


10. Short Recovery

Short recovery Rs.55162/- was detected by audit out of which Rs.51739/- were recovered and Rs.3423/-

as per below detail were still recoverable. P-12, 13, 16, 38, 39, 44, 50, 56

Risk: Leakage of income is direct loss to the bank.

Page # O/s Rs Head

12 43/- Markup on TRF

16 1,044/- BC cancellation charges

44 2,236/- Cheque returned charges

50 100/- Courier charges

Total 3,423/-

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Recommendation: Management should recover the pointed out amount and ensure proper monitoring

of charges recovery. Management Response: RTD 30.04.2012

RHQ Comments: All the recovery has been done

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Medium Risk Issues

The observations classified by Audit as Medium Risk are considered less serious in nature and need to be resolved early by the management of auditee branch under close supervision and monitoring of Senior

Management.__________________________________________________________________________

11. Expenditure Control Effective control and monitoring were not exercised on branch expenses as a result various expenses

incurred without approval and wrong / mispostings were observed in different expenditure heads.

Detail is given below: i A steel trunk costing Rs.6500/- was purchased on 01.03.2012 for vouchers preservation without

approval of competent authority. P-47

ii Branch electricity bill for Rs.55034/- of July, 2011 was paid to the debit of Income A/c Courier charges head instead of GL 917502 and mistake remained undetected; by doing so lighting

charges expenditure of the branch was also understated for the like amount. P-47

iii On 09 occasions branch‟s Printing & Stationery GL 917901 was debited with a sum of

Rs.49498.22 by Stationery Department HOK through cross branch transaction but relevant bills / invoices were not available with the branch. Same was the position of Phoenix charges

amounting to Rs.24735/- for two months and Maintenance charges office equipment totaling

Rs.301854.26. P-49, 50 iv Expenditure vouchers totaling Rs.8412/- pertaining to different expenditure GLs were posted in

wrong heads. P-47, 48, 50

v Courier charges bills were paid without checking, Rs.100/- charged extra in bill for the month of June, 2011 were paid by the branch. P-50

Management Response: i. ii. iv. Omission regretted; non repetition assured iii. v. RTD

30.04.2012

12. Keys Control

Mr. Shahid Bacha Manager Teller availed two days leave on 21/22.11.2011 but change of hands of

his cash safe key was not recorded in key register. P-4 Management Response: Non repetition assured.

13. Staff Finance

In case of staff car finance of Ms. Noreen Tahira Manager Operations o/s Rs.0.423 the hire purchase agreement meant for clerical staff was wrongly obtained. P-55


14. Delay In Mark Up Recovery

Markup Rs.207075/- of last quarter 2011 of RF limit Rs.7.000mn of M/s. MAASID Developers Pvt.

Ltd. was recovered even as late as 09.02.2012 instead of within 7 days from the due date causing opportunity loss of Rs.1997/-. P-54

Management Response: Henceforth we shall pursue the borrower for in time recovery of markup.

15. SBP Inspection SBP inspection team carried out inspection of branch cash on 01.03.2012 and noted following

discrepancies. P-24

a. Vault was used as record room for other purpose. b. Fresh notes were issued against expired CNICs.

c. Cash movement register was not maintained.

d. Public information notice was not displayed. e. Cash safe in limit required to be enhanced.

f. Note banding machine was not available.

Management Response: a. to d. Now regularized e. f. RTD 30.04.2012

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16. Account Maintenance i. Special condition 127 meant for joint A/cs was not fed in system in case of 12 A/cs. P-34

ii. A/c # 22697000011103 & 22697000080301 were maintained in staff customer type but no

salary or pension received in these A/c. P-40

iii. Nine A/cs of business concerns having balances upto Rs.11.493mn were allotted low risk category instead of moderate or high. P-34

iv. KYC profiling of customers was not maintained in case of 30 A/cs. P-32

Management Response: i. iv. Now regularized ii. & iii. RTD 30.04.2012

17. Security / IT Issues

i. The switch of CCTV was accessible to each branch personnel involving risk of switching off the same for non availability of recording about any misdeed / fraudulent activity. P-58

ii. The branch management does not have adequate knowledge of operation of CCTV devices and

monitoring. P-58

iii. DVR was not password protected and it was lying open instead of keeping at a concealed / secured place. P-58

iv. The environment of I.T room was quite warm due to non working of its air conditioner; hence

I.T inventory of the branch was at stake. P-58 Management Response: i. RTD 30.04.2012 for proper placement. ii. We will train the personnel to

enhance their knowledge regarding the matter. RTD 30.04.2012. iii. iv. RTD 30.04.2012

18. Security Stationery

Despite repeated exception security stationery was kept in a wooden cabinet instead of fire proof

almirah. P-25

Management Response: Wooden almirah is fixed in strong room where SS is kept.

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Low Risk Issues

The observations classified by Audit as Low Risk are of routine and procedural in nature and need to be

resolved by the management of auditee branch.

19. Staff matters

a. Branch was not maintaining updated record of leaves of staff received from CPD. Record for

t he months July, Aug, Oct, 2011 to Dec, 2011 was missing. Record received for the months of Jan & Feb, 2012 indicated that data not sent to CPD. P-24

b. Power of attorney documents of 06 outgoing officers were lying with the branch while power

of attorney was not got issued for three officers of branch. P-26 Management Response: RTD 30.04.2012

20. HOK Circulars

Contents of HOK circulars were not got acknowledged by the staff. P-18 Management Response: Now practice started.

21. Islamic Banking This is a spoke branch for Islamic Banking but no record was maintained regarding IB accounts

opened by this branch and acknowledgement of cheque books delivered to customers.P-24

Management Response: Henceforth record shall be maintained.

22. Cash Counter Protection Cash counter of the branch was not protected with glass sheet and accessible from outside as its

height was very low and customers can see the cash lying on counter. P-10 Management Response: Matter would be referred to RHQ for the resolution of the same, RTD

30.04.2012

23. Security Guards a. Mr. Mohammad Pervaiz guard of safety & Security Services Pvt. Ltd. and Mr. Mohammad

Siddique guard of Shahzada Security Services Pvt. Ltd. were posted in branch since 24.11.2011

and 13.01.2012 but their CNIC and police verification reports were not available. P-24 b. Daily attendance record of security guards deployed at the branch was not maintained. P-24


24. Vouchers keeping

Vouchers were neither sealed nor kept under lock & key. Vouchers movement register not

maintained. P-42 Management Response: RTD 30.04.2012

25. Registers Maintenance Branch was not maintaining complaint and Zakat Exemption registers. P-25, 40

Management Response: Henceforth, registers will be maintained.

26. Executive Visit Book Executive visit book was not made available for audit review. P-25


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27. Furniture & Fixture

Following furniture/fixtures items were not in working condition but not disposed of. P-42

Inventory # Item PBV Rs.

2269-00-6 P.C 1

2269-00-7 P.C 1

2269-00-9 Printer (Laser) 2.45

2269-00-20 Printer (Dot Matrix) 2654.86
