internal audit report – bay exploration & kgb project ......internal audit report - q4 / fy...

Internal Audit Report - Q4 / FY 2013-14

Internal Audit Report – Bay Exploration & KGB Project

Report No. IA/BEP&KG/2013-14/4

Period Covered – Jan ’14 to Mar’14

Report date: 26.05.2014


General Manager (KGB & BEP)

Sub: Draft Internal Audit Report for the period Jan 2014 to Mar 2014 of KGB & BEP Project

1.0 The Internal Audit Department has conducted the audit of the KGB Project at Kakinada for the period fromJan 2014 to Mar 2014. Internal Audit of BE Project has also been conducted partly, based on theinformation & record made available at Kakinada. The audit has been conducted on the basis of generallyaccepted audit standards in India.

2.0 The audit observations, based on the documents produced and the explanations received, are reportedunder chapter 3, along with the management’s views, duly incorporated there against.

3.0 Implementations of the recommendations of the audit should be completed as early as possible, unlessotherwise mentioned in the Management’s comments, as incorporated in the aforesaid report.

4.0 The Team Internal Audit is pleased to acknowledge the cooperation received from all concerned inconducting the internal audit of the above projects.

(Rupam Barua)Head (Internal Audit), i/c

For Director (Finance)Date: 26.05.2014

CC: CMD / D (E&D)/ D(HR&BD)/ D(O)/ D(F)/ GM(F&A)/ Head(Finance),Corporate/ Head (F&A),Kakinada

Internal Audit Report - Q4 / FY 2013-14 Page 2










Internal Audit Report - Q4 / FY 2013-14 Page 2











Report No. IA/BEP&KG/2013-14/4

CONTENTS:-Chapter 1 Introduction …………………………………………………….......... 4Chapter 2 Scopes& Road Map of Audit…………………………………......... 5Chapter 3(a) Executive Summary ………………………............................... 6Chapter 3(b) Detailed Audit Observation................................................ 11Chapter 4 Annexure.......................................................................... 31Chapter 5 Follow up Status of Previous Internal Audit…………………. 35

up to Q3 (2013-14)


Chapter 11.0 Introduction :1.01 OIL INDIA LIMITED (OIL) is having participating interests in the following NELP blocks in the State of Andhra Pradesh

and the Union Territory of Pudducherry.

a) KG-ONN-2004/1 –OIL is the Operator. Major part of this Block is situated under the administrative jurisdiction ofthe Union Territory of Pudducherry.b) KG-DWN-2002/1 –ONGCL is the Operator and it is in the State of Andhra Pradesh. (Relinquished)c) KG-DWN-2004/5 –ONGCL is the Operator and it is in the State of Andhra Pradeshd) KG-DWN-2004/6 – ONGCL is the Operator and it is in the State of Andhra Pradeshc) KG-OSN-2009/4 – ONGCL is the Operator and it is in the State of Andhra Pradesh.d) MN-ONN-2000-1- OIL is Operator and it is in the State of Orissa. (Relinquished)

1.02 OIL is having its office at Bhubaneswar (BEP) in the state of Orissa and at Kakinada (KG Project) in the state of AndhraPradesh to monitor the operations of these blocks.

1.03 The BEP & KG Project is presently headed by a General Manager , who operates from the Project Office at Kakinada andreports to the Director (E&D).

2.0 Background of conducting Internal Audit:The Internal Audit of BEP & KG Project, for the period from Jan’14 to Mar’14 of financial year 2013-14, has been

conducted by Internal Audit Department. The Audit has been conducted based on the audit areas as approved by competentauthorities. A team comprised of Shri J Bhattacharya, Sr. Manager, IAO and Shri Ashish Pathak, Sr. IAO and Sri B.K. Borasikia,IAO conducted the audit. The audit for the aforesaid period has been conducted within 6 working days, between 21st April’14 to26th April’14, at Kakinada office. The Audit Report includes observations and recommendation of Team Internal Audit, relatedrisk, and the corresponding management’s comments received against thereon. The audit also includes review of the compliance ofthe previous audit reports.3.0 Audit Objectives: The objective of the internal audit has been to review the overall adequacy and effectiveness of theinternal controls systems and procedures to safeguard the assets and expenses in compliance with laid down operating policies &procedures.

4.0 Date of Management’s Comment received –The management’s comment against the audit observations from the projects were received on 25.05.2014.


Chapter 2Scopes & Road Map of Audit

2.01 Scope and Approach2.01.1 Scopes: The internal audit was conducted for the period from Jan’14 to Mar’14 and covered the following audit

areas/ functions:1) Review of JV Blocks –a) operated b) non operated2) Scrutiny of GLs3) Year end closing entries4) Cash & Bank5) Follow up of significant observations of previous internal audit report up to Q3 of 2013-14.

It may be worthwhile to mention that the Review of Purchase and Contracts and Proposals could not be carried out in this quarterdue to paucity of manpower, shortage of time and ensuing Annual closing of accounts. Hence it is proposed to be conductedduring the subsequent quarters by the IA team. Further the review of operation of the only Operated block by the Project hasalready been done up to Quarter ending 31st December, 2013. Since the drilling activities has commenced only on 16th April,2014, it is therefore suggested to carry out similar exercise of the block review in subsequent quarters.

2.01.2 Approach:It was a Risk based audit and accordingly the risks associated with the observations made on the above audit areas are measuredand quantified wherever found justifiable. Approach to the internal audit commenced with an overview of activities anddocumentation of the existing systems and procedures. The adequacy, efficiency and effectiveness of internal controls wereevaluated & tested by checking a sample of transactions for the period covered by the audit. Adherence to the laid down standardpolicies and procedures (wherever applicable) for each of the audit areas were examined. The balances referred in audit report weretaken from SAP during the course of our audit.

2.02 Risk Based Internal Audit:The concept of Risk based audit has been followed considering the following areas of risks:

1) Financial Risk: An event is recognised as a financial risk if there be any possibility of occurrence of financial loss to theCompany due to that event of transaction.

2) Compliance Risk: A risk is identified as compliance risk if there be any deviation in legal or procedural obligations.3) Operation Risk: A risk is identified as operational risk if any technical operation of a system is not done as per the norms

or standard rules of operation.


Chapter 3 (Part a)Executive Summary of Observations

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Observation Recommendation ImplementationResponsibility /Timeline

1 Provisions entries passed needs to be reviewed /modified-

i. Excess provision for Rs. 35.56 lakh taken in the GL- 200504Sundry creditors - Outstanding Liabilities Trade Payable A/Cfor year-end closing of books of account.

ii. Provision created without including Statutory Liability-

Short provision of expenditure made for Rs. 1.92 crore due tonon- inclusion of Service Tax liability for the expenditure takenunder different contracts

i. Since the amount mentioned in thetable has already been charged to therespective job when the SESs wereraised, therefore provision entry will leadto double booking of the cost and shouldbe reversed.

ii. Provision made against the differentcontracts should revised including theService Tax Liability

Head (F&A)

Immediatecompliance

2 Review of GR/IR A/C (G/L-Stores & Spares-220000) andInsurance claim lodged-

A) While reviewing the GR/IR A/c of Stores & Spares thefollowing audit points were noted

i. PO -7202218 Vendor-102697 TENARIS GLOBALSERVICES S.A. –An amount of Rs. 6.30 crore (Cr. Balance) lying as open itemunder the respective PO against which LIV is pending.Whereas, in the vendor account a debit balance of Rs. 16.73crore is appearing as on 31.03.2014.

Immediate steps should be taken toreconcile the GRIR account

Head (F&A) / CMM(Material)

Immediatecompliance


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ii. PO-7202231 Vendor- 100079 VALLOUREC &MANNESMANN

An amount of Rs. 2.73 crore (debit balance) lying as open itemunder the respective PO against which GRN is pending.Whereas, in the vendor account a credit balance of Rs. 1.16lakh appearing as on 31.03.2014.

B) It was also found that against the PO 7202218 & 7202231materials were received in the damaged condition and henceProject has filed the Insurance claim with the Insurancecompany. Further the claim has been made with theTransporter also. Project has lodged insurance claim ondifferent dates, therefore the exact amount of claim madeagainst the Insurance company & transporter couldn’t beascertained by the audit , since there was , no entry in booksof accounts has been made for claims lodged.

The project is advised to pass necessaryentries for the insurance claim lodgedand as well as claim lodged against theTransporter in the books of accounts ason 31.03.2014

3 Review of Contract Payment-Contract no. 6205068 Dt.05.11.2013 Amount- Rs. 17.50 Cr.Vendor-KAZAKHSTANCASPISHELF JCS (KCS)Scope of Work- 2D Data Acquisition

LOA was issued to the contractor and the total amountpayable is aprrox. Rs.14.50 crore excluding S. Tax & otherStatutory liability against the job completed.However, till the date of audit the payment was not releasedsince the Contract is yet to be signed with vendor, due to someissue regarding payment terms with the vendor.

The matter should be discussed with theLegal department and a legal opinionshould also be taken on issue to finalizethe contract with the vendor and toupload the same in SAP to release thepayment.

CMM (Materials) /Head (F&A)

Immediatecompliance


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4 List of SES lying Open in the System-

It is found that SES’s with total value of Rs. 1.48 lakh and Rs.4.05 lakh is lying open in the system under Kakinada and BEPbusiness area respectively created at different dates.

List of SESs needs to be reviewed in thesystem and should be deleted which is ofno use in future

CMM (Materials) /Head (F&A)

Immediatecompliance

5 NON-OPERATED BLOCKSKG-OSN-2009/4 – operated by ONGCL.(KGOS03

i. Lower achievement of actual work vis-à-vis MWP as per PSCleading to Risk of payment of LD for Unfinished MWP

ii. There is a difference of US $ (-)58,240.99 in “Expenditurein USD” in SAP as compared to the “Statement of Expenditure”provided by the Operator till 31stMarch, 2014.

iii. Audited Accounts for the year 2013-14 of the block has notbeen received from the Operator, nor any ProvisionalUnaudited Accounts containing “Sources & Application ofFunds”, having other relevant schedules been obtained andaccounted for by the Project. This has resulted nonaccounting of Balance Sheet items and other disclosures,information forming part of the accounts.

iv. There is a difference of Rs.5,48,907/- between the SAPbalance and as per the provisional unaudited accountsreceived from the Operator as on 31.03.2014.

i. The matter should be immediatelyaddress and take up with the Operator(ONGCL) so as to avoid the possibility ofpayment of LD for unfinished MWP, ifany.

ii. Difference in expenditure shouldimmediately be reconciled before yearend closing.

iii. Audited /Un-audited accounts fromthe Operator should be obtained & allthe items of the balance sheet have to beincorporated as a line item wise.

iv. Difference in Cash call account has tobe reconciled and necessary rectificationentries should be passed immediately tomatch the expenditure with theOperator.

Head (F&A)

Immediatecompliance


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6 FINANCIAL REVIEW OF OPERATED NELP VI BLOCK :

KG-ONN-2004/1 (Operator – OIL 90%, GGR – 10% )

i. An Operating Committee Meeting was held on 18.11.2013 atCorporate Office, Noida and GGR was also requested to sign anOC Resolution as per the proforma given to them. HoweverGGR has not signed the OCR as per the said proforma andmodified the OCR by deleting the word “Upon withdrawal fromthe block w.e.f.15th February, 2013” on 4th February, 2014 bysigning the OCR. This matter was again pointed out byProject Management to M/s GGR requesting them to sign theOCR as per the format approved by Head (Legal) of OIL. It isobserved that till the date of Audit the same is not received.

ii. No cash call has raised on M/S GGR during the F.Y 2013-14. However the transfer of PI(10%) from M/s GGR to OIL isyet to take place as on 31st March, 2014.

iii. There is a difference of Rs.2,80,73,203 between the SAPbalance and as per Audited books of accounts as on31.03.2014 regarding the Cash call receivable from GGR.

iv. Trial balance of the block as at 31st March, 2014 is nottallied by USD 2,437,532.69 eqv. INR 15,70,10,251.68. JVauditor has also pointed out in its report dated 16/09/2013,

i. Project Management should have takensuitable action earlier as per provisionsof PSC and JOA to avoid this kind ofsituation.

ii. Audit suggests to raise the cash callstatement on a regular basis, till the timethe PI is transferred from GGR to OILand amendments of PSC and JOA takesplace.

iii. Immediate Reconciliation of Cash Callhave to be made on or before Finalisationof accounts and inform CorporateManagement accordingly for ratificationof the earlier figure wrongly reported.

iv. Difference in Trial balance andaudited accounts may be looked into andnecessary entries, if required to bepassed immediately.

OC/MC Member/Head (F&A)

Immediatecompliance


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that there was a difference of Rs.2,54,51,116/-(USD 397,798)for the year ended 31st March, 2012 due to reallocation ofentries in SAP.

v. GGR’s share (10%) of the BG amounting USD 2,493,806 wasneither given by GGR nor given by OIL. This is a violation ofPSC provision for non submission of BG.

v. Necessary action should be initiatedfrom project regarding the submission ofBG so that provision of the PSC is notviolated.

7 Internal audit has gone through the various provisions of PSCand JOA of the Operated block: KG-ONN-2004/1 and observedthat few of the provisions of PSC were deviated.

It is always suggested to monitor thevarious activities of the blocks as per thetimeline prescribed in the PSC

OC/MC Member/GM(KG) Basin /Head (F&A)Future compliance

8 NON-OPERATED BLOCKSKG-DWN-2002/1 (Operator – ONGCL 70%, OIL 20%, BPRL10%)-i. The reconciliation of cash calls requisitioned, paid andactual amount due so far was not made available to audit. TheInternal Audit had recommended for preparation of the samein its earlier reports also. A large no. of debit and credit entriesare lying open in the vendor account without text ,rendering itvery difficult to comment upon the actual amount due to/fromthe vendor.

ii. Further, only the provisional expenditure has beenconsidered for booking of expenditures for all the quartersincluding Q4 ending 31st March, 2014. However, “Sources andApplication of Funds” as at 31st March, 2014 should also besought from the Operator by the OC Member/concernedFinance Manager for accounting of the same although theblock is being relinquished.

i. Immediate reconciliation is required bythe Project as per the books of accountsof the Operator (ONGC).

ii. Audited /Un-audited accounts fromthe Operator should be obtained & allthe items of the balance sheet have to beincorporated as a line item wise in blockaccount.

Head (F&A)

Immediatecompliance


Chapter 3 (Part b)Detailed Audit Observations

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Observations Risk Recommendations Management Comments/ImplementationTimeline&Responsibility

1 Provisions entries passed needs to be reviewed /modified-

The team IA has reviewed the List of provision created underthe G/L- 200504 for year-end closing and observed thefollowing :-

i. Excess Provision Taken-

The following Provisions entry for total value Rs. 35,58,789were passed against the Contracts as given in Table below -

contract Amount (Rs.) VendorAuditRemarks

6106568 6,33,201 Devi Engg & Const Provisioncreated

forRetention

MoneyHold

6106583 2,88,342 Devi Engg & Const6106627 8,17,522 Devi Engg & Const6106564 11,40,610 Devi Engg & Const6107587 6,50,000 Devi Engg & Const6107408 29,114 Devi Engg & Const

35,58,789

It was found and told to audit by user department thatamount of provision created as above are retention moneyheld up against the payment made to the contractors .

High /

Financial Risk Since the amountmentioned in thetable has alreadybeen charged to therespective job whenthe SESs wereraised, thereforeprovision entry willlead to doublebooking of the costand should bereversed.

a) Managementcomment-

The excess provisiontaken has been reversedref doc. no. 2613002376,2613002377,2613002363respectively.


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ii. Provision created without including Statutory Liability-

It was observed from the table given below that Provisionswere made in the books of accounts without considering theamount of Service Tax liability to be payable, which leads tounder-provision of the expenditure.

ContractNo.

Vendor Amount ofProvision(Rs.)

Remarks

62050682D DataAcquisition

KAZAKHSTANCASPISHELFJCS(KCS)

14.5 crore Provision takenwithoutincluding theService Tax i.e.Rs.1.79 croreapprox and CD,if any

6106952&

Shivani Oil &Gas

1.00 crore Provision takenwithoutincluding theService Tax i.e.Rs.12.36 lakh

6204673 Polydrillengineers pvt.Ltd.

4. Lakhs Provision takenwithoutincluding theService Tax i.e.Rs.49.44thousand

Therefore, theprovision made asmentioned in thetable should bemade including theService Tax Liabilityand accordinglyrevised.

The provision on servicetax part as been done videdoc. no. 2613002239 &2613002361 respectively.

b) ImplementationTimeline:

Immediate compliance

c) Implementationresponsibility:

Head (F&A), KGB &BEP


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2 Review of GR/IR A/C (G/L-Stores & Spares-220000) andInsurance claim lodged

A) While reviewing the GR/IR A/c of Stores & Spares thefollowing audit points were noted-

i). PO -7202218 Vendor-102697 TENARIS GLOBALSERVICES S.A.

Value of open item in GR/IR a/c - Rs. -62,982,375.96

It was observed that an amount of Rs. 6.30 crore (Cr.Balance) lying as open item under the respective PO againstwhich LIV is pending. Whereas, in the vendor account a debitbalance of Rs. 16.73 crore is appearing as on 31.03.2014.

ii. PO -7202231 Vendor- 100079 VALLOUREC &MANNESMANN TU

Open Item in GR/IR clearing a/c – Rs.2.73 crore

It was observed that an amount of Rs. 2.73crore (debitbalance) lying as open item under the respective PO againstwhich GRN is pending. Whereas, in the vendor account acredit balance of Rs. 1.16 lakh appearing as on 31.03.2014.

iii). PO -7202236 Vendor- 101196 SUMITOMOCORPORATION ASIA & OCEANIA.Open Item in GR/IR clearing a/c – Rs.23.34 lakhIt was observed that an amount of Rs. 23.34 lakh (credit

Financial Risk

Wrong MIS

Immediate stepsshould be taken toreconcile the GRIRaccount

Therefore, theproject is requestedto arrange toprovide to the auditthe total amount ofinsurance claimfiled with Insuranceco and claim raised


P.O.no. 7202218,7202231, 7202236 has ondate is cleared.

Further Audit Comment-

(B) The audit has foundthat, subsequently afteraudit observation theproject has passed theentry for Provision forInsurance claim in thebooks of account as on31.03.2014 for thefollowing P.Os whichwill be reviewed by theaudit in the subsequentperiod.

P.O-7202231 Rs.1.6 crore

P.O-7202218 Rs.7.1 crore

Total Rs. 8.7 crore


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balance) lying as open item under the respective PO againstwhich GRN is pending. Whereas, in the vendor account adebit balance of Rs. 89.60 lakh appearing as on 31.03.2014.

B). It was also found that against the PO 7202218 &7202231 materials were received in the damaged conditionand hence Project has filed the Insurance claim with theInsurance company. Further the claim has been made withthe Transporter also. Project has lodged insurance claim ondifferent dates, therefore the exact amount of claim madeagainst the Insurance company & transporter couldn’t beascertained by the audit , since there was , no entry in booksof accounts has been made for claims lodged.

Therefore, the project is requested to arrange to provide to theaudit the total amount of insurance claim filed with Insuranceco and claim raised with the transporter till the date of audit.

with the transportertill the date ofaudit.

The project is alsoadvised to passnecessary entriesin the books ofaccounts to bookthe insuranceclaim lodged and aswell as claim lodgedagainst theTransporter as on31.03.2014.

b)ImplementationTimeline:


c)Implementationresponsibility:

CMM (Materials) / Head(F&A), KGB &BEP

3 Review of Contract Payment-

Contract no. 6205068 Dt.05.11.2013 Amount- Rs.17.50crore

Vendor-KAZAKHSTANCASPISHELF JCS (KCS)Scope of Work- 2D Data Acquisition

It was observed that the above contract was awarded to the

The matter shouldbe discussed withthe Legaldepartment and a

a)Management comment-As the Party wanted thatthe payment has to bereleased to their Indiansubsidiary, it has been put


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contractor for 2D Seismic Data Acquisition and Processing of320 Sq.km. Till 31.03.2014, the contractor has completed thedata acquisition of 266.32 sq.km. The Total amount payableagainst the same is aprrox. Rs.14.50 crore excluding S. Tax &other Statutory liability.However, till the date of audit the Contract has not beensigned with vendor and is not uploaded in the SAP system,therefore no work order has also been raised in SAP.

Further, it was observed that no payment has been made tothe party since contract is not yet signed due to some issue inpayment terms. It was informed to the audit that vendor whois a foreign vendor requested OIL to make the payment to itsIndian subsidiary in India, which may attract different taxand legal issues.Accordingly, a provision for Rs.14.5 crore is made for 266.32sq km.

Financial Risk legal opinion shouldalso be taken onissue to finalize thecontract with thevendor and toupload the same inSAP to release thepayment. Since dueto delay inpayment, thevendor may claimthe interest onoutstanding duesfrom OIL.

to the CBC for theirapproval. Accordingly,CBC has asked for opinionon the legality of acceptingthe payment terms to bemade to Indian subsidiaryof the foreignvendor before formallyapproving it.As soon as the same isapproved, contract will beentered into.b) ImplementationTimeline:Immediate compliancec)Implementationresponsibility:CMM (Materials) / Head(F&A), KGB &BEP

4 List of SES’s lying Open in the System-The audit has reviewed the List of Service Entry sheets (SES)created by the user department at Kakinada and BEP sphereand it is found that SES’s total value of Rs. 1.48 lakh and Rs.4.05 lakh is lying open in the system under Kakinada andBEP business area created at different dates.A detailed list is given vide ‘’Annexure-I’’

Financial Risk

List of SES’s needsto be reviewed inthe system andshould be deletedwhich is of no usein future.


The deletions of a few ofthese old entries are notbecoming possible fromour end due certain ERPproblem in the initial stage


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of implementation of SAP.However, in other cases allthese open SES have beendeleted. In case of theitems which could not bedeleted the same has beenflagged to ERP core teamand shall be corrected in1st Quarter.




CMM (Materials) / Head(F&A), KGB &BEP

5. NON-OPERATED BLOCKSKG-OSN-2009/4 – operated by ONGCL.(KGOS03)

BEP/KGB Project, Kakinada Office is looking after theactivities of the block: KG-OSN-2009/4 operated by ONGC.The participating interests of all the partners are as follows:-(A) ONGC: - 50% (Operator), (Vendor No-JVONGCOS)


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(B) OIL : - 30%(C) NTPC: - 10%(D) Andhra Pradesh Gas Infra. Corp Pvt. Ltd (APGIC) - 10 %

PEL Validity of the block : 02/08/2010 to 01/08/2014

The total Financial Commitment for the block as per PSC isUSD 97.8 MM of which OIL’s stake is 30% i.e. USD29.8 MM.It is noticed that DGH vide its letter dated 19.09.2012 hasstopped all the exploration activities of the block as the blockfalls close to the DRDO launching pad. Thereafter, M/sONGCL, being the operator of the block has applied for “ForceMajeure” vide its letter dated 25.09.2012 due to non-availability of MoD clearance as per Article 31 of the PSC.However till date, no response has been received for grantingthe said “Force Majeure” neither any MoD clearance hasreceived by the Operator. The Operator has applied for 510days excusable delay on 09/10/2013 due to non- availabilityof MoD clearance of the block.

Audit therefore observed the following :-

1. Lower achievement of actual work vis-à-vis MWP as perPSC leading to Risk of payment of LD for UnfinishedMWP-

If the MoD clearance is not at all received, the block may haveto be relinquished with a huge unfinished MWP with apossible risk of payment of LD for the same.

FinancialRisk./ComplianceRisk / LegalRisk

1. Concerned OCMember/ Projectmanager shouldimmediatelyaddress the issueand take up thematter with theOperator (ONGCL)so as to avoid thepossibility ofpayment of LD forunfinished MWP, ifany.

a) Management comment-1. The Operator has gotconditional clearance forpart of the area andaction plan has alreadybeen drawn by theoperator for furtherprogress.


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2. Difference in Expenditure ( SAP vs Operator’sstatement)-

As per the “Statement of Expenditure” provided by theOperator, OIL’s share(30%) of actual expenditure up to31.03.2014 was USD 706,062.00 eqv. Rs.3,62,11, 947/-.However, as per OIL’s accounts (SAP GD 20 REPORT) theactual expenditure works out to USD 764,302.99 eqv.Rs.3,62,11,947/--. Thus there is a difference in “Expenditurein USD” in SAP as compared to the “Statement ofExpenditure” provided by the Operator till 31stMarch, 2014which is explained with the help of the following table :-

OIL’S SHARE (30%) OFEXPENDITURE

Inception to 31st March,2014

Actual Expenditure ------------>>>>>

USD INR

As per Statement by Operator(ONGCL)

706,062.00 3,62,11,947

As per our accounts( SAP GD20 report)

764,302.99 3,62,11,947

Difference (-)58,240.99 -

From the above it is observed that reconciliation of actualexpenditure with the ”Statement of Expenditure” sent by theOperator has not been carried out in SAP by KG Basin in spiteof observations and recommendations made by Internal Auditearlier.

2. Difference inexpenditure shouldimmediately bereconciled beforeyear end closing.

2. The differences havebeen reconciled and arematching with theunaudited Accounts. Thebalances will be matchedonce the Audited accountis received and necessaryentries if any will bepassed in the firstquarter.


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3. Audited / Provisional Unaudited Accounts notconsidered :

Moreover it is also observed that till the date of Audit, neitherthe Audited Accounts for the year 2013-14 of the block hasbeen received from the Operator, nor any ProvisionalUnaudited Accounts containing “Sources & Application ofFunds”, other relevant schedules have been obtained andaccounted for by the Project. This has resulted nonaccounting of Balance Sheet items and other disclosures,information forming part of accounts.

4. Difference in Cash Call Account-Further while checking and scrutiny the Cash Call Account inSAP GD 20 (GL 203500 to 203502), it is observed that anamount of USD 246,965.46 eqv. Rs.90,73,170/- is payable toONGC (JVONGCOS). However, as per the provisionalunaudited accounts received from the Operator the total CashCall balance payable by OIL as on 31st March, 2014 is shownas Rs.96,22,077/-. Thus there is a difference ofRs.5,48,907/- which needs to be reconciled and matchedwith the Operator’s balance. In this regard it is also observedthat no Balance confirmation has been received from theOperator by the Project. Therefore Audit is not in a position tocomment on the Cash Call payable as at 31st March, 2014 for

3. Audited accountsfrom the Operatorshould be obtainedand incorporated.If Audited Accountsis not available, atleast Un- auditedActual accountsneed to beincorporated. Allthe items of thebalance sheet haveto be incorporatedas a line item wise.

4. Difference inCash call accounthas to be reconciledand necessaryrectification entriesshould be passedimmediately tomatch theexpenditure withthe Operator.

3. Reply is yet to bereceived.

FurtherAuditComments:

Project has neitherobtained theinformation from theOperator nor accountedfor any of the balancesheet items of the blockas OIL’s PI(30%) as onthe date of Audit.

4. The cash call has beenreconciled with theexpenditure.


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this block. Internal Audit has already pointed out in theearlier Audit Reports regarding the difference between CashCall and Expenditure booked by OIL in this block.

5. Contingent Liability, provisions and CapitalCommitment-

Since a substantial portion of the MWP has not yet beencompleted by the Operator, it is therefore obligatory by theOperator to show the following three items :-

Estimated amount of Capital Commitment as per MWPunder the PSC ;

Disclosure for Contingent Liabilities and Assets , if any ; Provisions involving substantial degree of estimation

where there is any present or past obligation.

In this connection, it may be noted that the Internal Audit hasalready pointed out in the previous year audit reports that atotal review of Contingent Liability for USD22,00,500 providedin the Audited Accounts of the block submitted in the form ofBank Guarantee by OIL pertaining to its share of MWP isrequired to be carried out. Moreover, since there is an OCResolution (24/01/2014) towards downward revision of MWPof Initial Exploratory Period(IEP) to 1 exploratory well withnow MWP commitments of 2D/ 3D API, the Capitalcommitment has to be obtained from the Operator at thisjuncture for showing true and fair view in the books ofaccounts of the company.

5. ContingentLiabilities needs tobe reviewed also.Provision, if any,CapitalCommitments arealso required to beobtained from theOperator andinformation has tobe sent to MainAccounts forfinalisation.

5. The reduction in MWPis yet to be accepted byDGH. Once the same isdone revised workprogram shall be carriedout and accordingly thecapital commitment canbe re-ascertained as perthe revised work program.




Head (F&A), KGB &BEP /MFA


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6. FINANCIAL REVIEW OF OPERATED NELP VI BLOCK :

KG-ONN-2004/1 (Operator – OIL 90%, GGR – 10% )

The above block is in Andhra Pradesh and being operated byOIL with 90% PI. M/s Geo Global Resources Inc (M/s GGR))being the other partner with 10% PI. A part of this Block issituated under the administrative jurisdiction of the UnionTerritory of Puducherry.

1. Non signing of OCR by M/s GGR, a Defaulting Party

The JV partner of the block, M/s GGR has not been makingpayments against cash calls raised on them since 10.05.2011despite repeated reminders verbally as well as in writing.The amount of outstanding cash calls (Rs.13.58 Crores as on31st March, 2013) is a matter of serious concern andaccordingly the matter was taken up by the OIL managementwith M/s GGR for clearing of their dues. However M/s GGRvide their letter dated 15th February, 2013 has expressed theirinability to pay the outstanding cash calls and informed OILmanagement to take further suitable action for continuationof exploratory efforts. Further an Operating CommitteeMeeting was held on 18.11.2013 at Corporate Office, Noidawherein resolutions was taken to transfer GGR’s participatingInterest (10%) to OIL’s favour. M/s GGR also agrees totransfer it s PI in the said block. Accordingly GGR was also


1. ProjectManagementshould have takensuitable actionearlier as perprovisions of PSCand JOA to avoidthis kind ofsituation. Howevernecessary strategyhas to be framed torealise theoutstanding duesfrom M/SGGR.GGR has notonly defaulted inthis block but huge

a) Management comment-

1. Despite vigorous followup with GGR in recoveringthe cash call, they havedefaulted in making thepayment. Variousassurances have beengiven by them that theyare going for financialrestructuring, selling oftheir stake etc. However,physically no paymentcould come except theinitial two payments.


Sl.No


requested to sign an OC Resolution as per the proforma givento them duly vetted by Head (Legal) of corporate office.However GGR has not signed the OCR as per the saidproforma and modified the OCR by deleting the word “Uponwithdrawal from the block w.e.f.15th February, 2013”on 4th

February, 2014 while signing the OCR. This matter wasagain pointed out by Project Management to M/s GGRrequesting them to sign the OCR as per the format approvedby Head (Legal) of OIL. It is observed that till the date of Auditthe same is not received. Moreover the procedure for transferof PI is yet to be done.In this regard, Audit is of the opinion, that the Project

Management in consultation with Corporate Managementcould have taken suitable action as per provision underArticle 7.7 of JOA apart from charging of interest as perclause 7.6.2 of JOA. It is also noticed that M/s GGR hasnever responded to any of the Cash Call request along withInterest. Moreover, there was no invocation of the provisionof the Article 7.7.2 for continuous default and non-payment ofCash Calls by M/s GGR from the project management. Thishas resulted in a substantial amount of financial loss to theCompany. The Internal Audit had raised this point in itsearlier reports also and suggested to take action against thedefaulting partner under the provisions of PSC/JOA whichwas not done.

amount is also duefrom them for theother block, namelyRJ-ONN-2004/2.

Since GGR is acompanyincorporated inforeign land, thecompetentauthorities may liketo decide to seekassistance from theembassy of therelevant country inIndia for realisationof outstandingdues.


Sl.No


2. Non Raising of Cash Call on GGR till the transfer of PI(10%)

As on 31st March, 2013, an amount of Rs.13.58Croresremained outstanding from M/s GGR as per the books ofaccounts of the company. However the transfer of PI(10%)from M/s GGR to OIL is yet to take place as on 31st March,2014. Since the PI transfer has not yet been done, thenecessary amendment in PSC and JOA has also not beendone. Therefore, the changes of PI in the SAP record havealso not been done. As a result of the same, during the entirefinancial year 2013-14, the booking of expenditure, assetsand liabilities have taken place based on the existing PI (i.e.OIL 90%, GGR 10%). Cut back procedure at the variousquarter ends have also been done based on the existing PI (i.e.OIL 90%, GGR 10%). It is observed that as at 31st March,2014 , a staggering amount of USD4,933,951.30 eqv.Rs.27,97,77,687.62 remained outstanding from GGRtowards cash call receivable. No cash call statement hasbeen sent to GGR during the entire financial year 2013-14 inthe absence of amendment of PSC and JOA.

3. Reconciliation of Cash Call Account not carried out-As per Audited accounts of the block KG-ONN-2004 dulycertified by M/s M.R.Narain & Co, Chartered Accountant,Chennai, the Net Cash call amount due from M/s GGR wasRs.10,78,07,972 (USD 1,685,026) as at 31st March, 2013.Moreover the JV auditor has mentioned in the Audited

2. Audit suggests toraise the cash callstatement on aregular basis, tillthe time the PI istransferred fromGGR to OIL andamendments of PSCand JOA takesplace.

3. ImmediateReconciliation ofCash Call have tobe made on orbefore Finalisationof accounts andinform CorporateManagement

2. The suggestion ofAuditors for raising cashcalls on GGR is acceptedfor passing accountingentries. However, forraising the cash call, theyhave already withdrawnfrom the block from 16th

Feb, 2013. Therefore,raising cash calls on themwould be futile exercise.However, Cash Call entrieshave been passed vide DocNo 9213004399,9213004523

3. The Cash Call accounthas been reconciled andmatching with the Shareof Partner’s Expenses.


Sl.No


Accounts of the block as at 31st March, 2013 that therealisation of the cash call amount from GGR is doubtful andaccordingly necessary provision has been made in the booksof OIL. However it is observed that a provision has beentaken in the JV books as “Provision for Doubtful debts” forRs.13,58,81,175 (USD2474616.19). Thus there was adifference of Rs.2,80,73,203 which needs to be reconciled atthe earliest.Thus the reconciliation of Cash Call Account as per SAP withthe Actual Cash Call working has to be carried out, if notdone, immediately.

4. Provision for Cash Call Account to be taken -As pointed out by M/s M.R.Narain & Co, CharteredAccountant, Chennai , the JV auditor of previous year,necessary provision for doubtful debt, if any, has to be takefor the amount due from GGR towards Cash Call Receivable.As on 31.03.2014, an amount of Rs.27.98 Crores remainoutstanding from GGR, which is to be provided in the books ofOIL and not in the books of JV, since the amount is receivablefrom GGR by OIL. It may be worthwhile to mention thatduring the previous year, a provision has been taken forRs.13.58 Crores in the JV books which have resulted overstatement of expenditure of the JV block.

accordingly forratification of theearlier figurewrongly reported.As the managementis contemplatinglegal action againstthe defaulted JVpartner, it is all themore essential toarrive at theaccurate amountoutstanding fromthem including theinterest.

4. Provision forCash Call fromGGR is required tobe made in thebooks of accountsof the company(OIL’s books) ratherthan JV books.Necessary entriesmay be passedaccordingly.

4. There is no duplicationof expenses in JV aspointed out by Audit. TheProvision was made in JVbooks under the categorycost ‘’not recoverable’’.However, the provision onOIL Books is a soundpractice and action istaken to account for in OILbooks in discussion withMain Accounts, Duliajan.


Sl.No


5. Difference in Trial Balance/ Audited Accounts -While going through the books of accounts under GD20, SAPstatement, it is observed that the Trial balance of the block asat 31st March, 2014 is not tallied by USD 2,437,532.69 eqvINR 15,70,10,251.68. This needs to reconcile at the earliest.Moreover, the JV auditor has also pointed out in its reportdated 16/09/2013, that there was a difference ofRs.2,54,51,116/-(USD 397798) for the year ended 31st March,2012 due to reallocation of entries in SAP. This hasoverstated the Sources and Applications of funds . Hence athorough reconciliation is required to address the differencesand pass necessary entries as at the end of March’14.

6. GL Reviewa. GL no.780020An amount of Rs.8,78,958.76 (USD 14,454.18) was charged

towards charges for issuing Bank Guarantee during the year2013-14 in the books of Joint Venture as a BR (BillableRecoverable) item. As per the PSC, the same is not costrecoverable.b. GL no.731051An amount of Rs.15,03,577/- (USD 24,792.79) was chargedto the block without any WBS/ Budget Head. The same isrequired to be rectified.

5. Difference inTrial balance andaudited accountsmay be looked intoand necessaryentries , if requiredto be passedimmediately.

6. Necessary entriesfor rectification arerequired to bepassed for thesame.

5. The difference in trialbalance has beenreconciled and there is adifference of Rs 49,606.00USD 813.46. Though thecause of difference hasbeen identified, therectification will requirethe involvement of SAPCore team and the samehas been flagged off forthem who are looking into.Follow up action is takenfrom our side to resolvethe same.

6. Rectification entry hasbeen passed in GL 780020and 731051 as suggestedby Audit.


Sl.No


7. Bank GuaranteeThe budget BE for the block 2013-14 was approved for

USD71,251,533 of which OIL’s share is 90% (USD64,126,379) and GGR (remaining 10% i.e. USD 7,125,153).Originally the BG valid up to 31/03/2014 was issued on08/03/2013 for USD 22,444,233 towards OIL’s share (35% of64,126,379) from M/s Indusind Bank , New Delhi. Furtherthe said BG was again amended on 26/03/2014 for theperiod from 01/04/2014 to 31/03/2015 with a claim periodupto 30/05/2015. However GGR’s share(10%) of the BGamounting USD2,493,806 was neither given by GGR norgiven by OIL. This is a violation of PSC provision for nonsubmission of BG.

7. BG for GGR’sshare to be sent toMOPNG forcompliance of PSCprovision

7. As regards thesubmission of BG for GGRand its validity we arelooking into after obtainingthe information fromNoida office and shallrevert shortly.

b)ImplementationTimeline:Immediate compliancec)Implementationresponsibility:OC/MC Member /Head

(F&A), KGB &BEP / MFA

7. Non Compliance of PSC Provisions for KG-ONN-2004/1

Internal audit has gone through the various provisions of PSCand JOA of the Operated block: KG-ONN-2004/1 andwherever provisions of PSC were deviated, the same areindicated in Annexure –II.

ComplianceRisk

It is alwayssuggested tomonitor the variousactivities of theblocks as per thetimeline prescribedin the PSC.

a) Management comment-The suggestions are notedand shall be implementedforthwith.

b)ImplementationTimeline:Future compliancec) Implementationresponsibility:

OC/MC Member /GM(KG)Basin / Head (F&A)


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8. NON-OPERATED BLOCKSKG-DWN-2002/1(Operator – ONGCL 70%, OIL 20%, BPRL 10%)-

i ) Reconciliation of Cash Calls with Actual expenditurenot done -The reconciliation of cash calls requisitioned, paid and actualamount due so far was not made available to audit. TheInternal Audit had recommended for preparation of the samein its earlier reports also. As pointed out earlier, a large no.of debit and credit entries are lying open in the vendoraccount without text ,rendering it very difficult to commentupon the actual amount due to/from the vendor since all thedetails of all cash call were not available. Till date nocompliance with audit observation has been made towards thereconciliation of the same although the same has beenpointed out on numerous occasions. As at 31st March, 2013,based on the Audited Accounts received from the operator ofthe block, an amount of Rs.9,77,00,213/-was excess paid byOIL for which the Operator has shown pending Cash call as“NIL”. Thereafter an amount of Rs.9,31,43,479/- wasreceived from the Operator on 01/10/2013 vide SAPdocument no.2613001696. Therefore a balance ofRs.45,56,734/- was still receivable as at 31st December,2013. However it is observed from SAP GD20 that as at 31stMarch, 2014 an amount of Rs.14,18,28,606.66 is still payableto ONGC (Vendor Account JV ONGCHH) which appears to be


i. Immediatereconciliation isrequired by theProject as per thebooks of accountsof the Operator(ONGC).

a) Management comment-

i. All reconciliation as perthe unaudited accounts ofthe Block has beencarried out.


Sl.No


very high and abnormal since no activities has taken placeduring the year and the block was relinquished long back.Moreover a provision of USD1,110,382 has also been takenseparately towards the differential LD on unfinished MWP ofPhase –I by the project towards OIL’s share of 2nd and 3rdextension LD. Thus a thorough reconciliation is required tomatch the cash call account of OIL payable to ONGC as perthe books of accounts of operator.

ii) Accounting for actual Financial Position includinginformation for LD, BG not yet completedThe information on Liquidated Damages(LD) and the BankGuarantees (BG) so far paid and issued by OIL for its PI havealso to be timely informed to the Operator for the purpose ofinclusion in the Audited Accounts of the block, which has notbeen done for the year FY2011-12 and FY 2012-13respectively. For the present year 2013-14, it is observed thatonly the provisional expenditure on the basis of e-mailinformation from the Operator (M/s ONGCL) has beenconsidered for booking of expenditures for all the quartersincluding Q4 ending 31st March, 2014. Therefore Audit is ofthe opinion, “Sources and Application of Funds” as at 31stMarch, 2014 should also be sought from the Operator by theOC Member/concerned Finance Manager for accounting ofthe same although the block is being relinquished.

Audit is further of the opinion that the project management

ii. Information onpayment of LD is tobe informed to theoperator. OILshould insist theOperator to showthe LD paid by OILand BG issued byOIL in the AuditedAccounts of theblock. The samewas also pointedout in the NOPaudit.

ii. The block wassurrendered in the year12-13 and there is noactivity. However, it is yetto be closed as DGH is yetto accept the surrender asthey claimed someshortfall in LD amountpaid to them previously.During the year there isno activity in the blockexcept for some follow upaction with DGH and itsAudit. Therefore, nobudget in the blockduring the year. As suchthe suggestions of the


Sl.No


should always seek the “Financial statements” of the JVblock from the Operator for the purpose of annual accountsclosing as at 31st March, 2014 which prima facie includesthe followings :-

The Statement of “ Sources and Application of Funds “ ; Details of “Exploration Expenditure” ; Other Schedules forming part of “The statement of

Sources and Application of Funds” ; Details of Contingent Liabilities and other notes on

accounts forming part of accounts , if any

iii) Necessary action for reply to NOP Audit queries -It may be noted that while conducting the Non OperatingPartner’s Audit of the block at the office of ONGCL, Chennaiduring August, 2012 observations made therein by OIL andBPRL( the other partner with 10% PI) were also sent to the

iii. OIL as non-operator shouldalways make aregular follow up for

audit cannot be applied.However, the same hasbeen noted.

Further AuditComments- It is essentialto obtain the Auditedbalance sheet and otherFinancial Statements asat 31st March, 2014. Atleast the unaudited fullset of accounts should beobtained from theoperator as at 31st March,2014 & necessary entriesshould have been made inthe books of accounts toreflect true and fair viewand also as percompliance of as per AS-27.

iii. As regards the NonOperator’s Audit queriesaction is being taken tocall an OC meeting of the


Sl.No


Project for the attention of the concerned OC Member. M/sONGCL, however defied the observations made therein bytheir letter reference no. KG-Offsh-NELP-IV/KG –DWN-2002/1/Audit /2012-13 dated 28th January, 2013. In replyto the said letter, Internal Audit is seeking additionalclarification and information from the Operator inconsultation with the Project to arrive at a final conclusion.But till date no reply has been received from the Operator onthe said additional clarification and information.

replies/managementcomments from theOperator on thequeries /clarifications raisedduring NOP auditand resolve theissues at theearliest.

block to resolve the issue.

b)ImplementationTimeline:Immediate compliance

c)Implementationresponsibility:

Head (F&A), KGB &BEP /MFA


Annexure-ILIST OF SES LYING OPEN IN THE SYSTEM FOR BEP SPHERE AS ON 31.03.2014

Created on Entry Sh. WO VENDOR VENDOR NAME Sh. Text E/SheetNet Value of Entry(Rs.)

22.09.2006 1000026629 8101708 206582 JAICO ELECTRONICS (P) LTD. 023.09.2006 1000026779 8101708 206582 JAICO ELECTRONICS (P) LTD. Qtrly. chargs. of EPABX 4,000.00

23.09.2006 1000026787 8101708 206582 JAICO ELECTRONICS (P) LTD.Copy from REN/002/05-07 OF5.09.06EPABX 4,000.00

23.09.2006 1000026788 8101708 206582 JAICO ELECTRONICS (P) LTD.Copy from Copy from REN/002/05-07OF5.09 4,000.00

15.05.2006 1000012844 8101823 206580EQUIPMENT SALES & SERVICESPVT. LTD Copy from AMC OF FIREEXTINGUISHER 0

06.11.2006 1000030780 8101825 206586 TOUR EAST Monthly hire charges for the month Sep.2 27,082.5808.11.2006 1000031067 8101825 206586 TOUR EAST Copy from Monthly hire charges for the m 27,583.9206.07.2007 1000055550 8102485 206785 B C PATRA Copy from Part payment against our W/O 009.03.2007 1000043840 8102728 206895 SIDDHARTH SYSTECH LIMITED payment towards AMC charges of computers 17,958.4015.02.2010 1000163135 8103512 206586 TOUR EAST Car hiring Bill for the month of Jan.010 30,868.3609.04.2010 1000171606 8103512 206586 TOUR EAST Car hiring Bill for the month of Mar.010 26,522.8022.12.2009 1000155299 8103535 403720 INDUSTRIAL SECURITY AGENCY Watch & ward bill for the month Nov.09. 26,137.7905.06.2008 1000091008 8103980 404555 ALAXY RESOURCE Quarterly payment for computer maint. 8,100.0026.08.2008 1000099756 8104244 403720 INDUSTRIAL SECURITY AGENCY Watch & ward bill for May,June&J. 2008. 69,071.7322.12.2008 1000112233 8104524 300125 RPS ENERGY LTD INVOICE NO. ESI018378 dtd. 25.07.2008 018.05.2009 1000127916 8104711 206586 TOUR EAST Car hiring Bill for the month of April09 10,579.3806.05.2011 1000221283 8108512 405923 IMMADI BHIMESWARA RAO InvNoIBRAO/OIL/CON/DEC10 date15.03.2011 006.05.2011 1000221330 8108512 405923 IMMADI BHIMESWARA RAO IBRAO/OIL/CON OF 15.03.2011 009.05.2011 1000221628 8108517 405801 NAVAL MARITIME ACADEMY Invoice no. 069/2011,119/2011,154/2011 006.01.2014 1000347570 8109598 403720 INDUSTRIAL SECURITY AGENCY Watch & Ward bill for monthDec.13. 005.04.2012 1000264796 8109630 406286 GANAPATHI GARDENS OIL/KGB/CONT/42 3,500.0010.04.2012 1000266031 8109681 300340 DOLPHIN GEOPHYSICAL PTE LTD. 2D Data Acquisition Charges( Prime) 1,369.4813.03.2013 1000307659 8109861 406355 VARAGHU MULTI SERVICES 17,109.10

02.05.2012 1000267336 8109991 406186MAPPING EARTH RESOURCES' NINFORMAT Topographycal Survey 0

11.10.2012 1000288183 8110590 406584 DAMISETTY JANAKI RAMAM OFFICE RENT FOR OCT.2012 128,091.0005.02.2014 1000351240 8112511 406587 SRI KRISHNA OIL FIELD SUPPORT SERVI monthly rental charges for hydra Jan14 0

405974.54


LIST OF SES LYING OPEN IN THE SYSTEM for KAKINADA SPHERE AS ON 31.03.2014

Createdon Entry Sh. AccIn Sh. Text E/Sheet

Net Value ofEntry Sheet

(Rs.)

22.12.2008 1000112233 8104524 300125 RPS ENERGY LTDINVOICE NO. ESI018378 dtd.25.07.2008 0.00

05.04.2012 1000264796 8109630 406286 GANAPATHI GARDENS OIL/KGB/CONT/42 3500.00

13.03.2013 1000307659 8109861 406355 VARAGHU MULTI SERVICES 17109.10

02.05.2012 1000267336 8109991 406186 MAPPING EARTH RESOURCES' N INFORMAT Topographycal Survey 0.00

11.10.2012 1000288183 8110590 406584 DAMISETTY JANAKI RAMAM OFFICE RENT FOR OCT.2012 128091.00

05.02.2014 1000351240 8112511 406587 SRI KRISHNA OIL FIELD SUPPORT SERVImonthly rental charges for hydraJan14 0.00

148700.10


Annexure-II

NON COMPLIANCE OF PSC PROVISIONS IN OPERATED BLOCK : KG-ONN-2004/1 BY KAKINADA PROJECT

SL.NO. PARTICULARS PSCreference

TimelineAs per PSC

Due date Actual date of Submission to MC/Govt.by KG Basin

Remarks

2011-12 2012-13 2013-141 Submission of

Adoption ofAuditedAccounts forMC Approval

Article 25,Para25.4.3

Within 60days afterthe end ofeach year

30th May 17thSeptember,2012

Notsubmittedforadoption atMC; onlyAuditedAccountssent toDGH on5thNovember,2013

To besubmittedby 30thJune

Delay by 4 months for FY2011-12 ; For FY 2012-13,not even submitted for MCAdoption

2 Submission ofCopy ofAuditorsReport to Govt.after MCapproval

Article 25,Para25.4.4

Within 30days afterMCapproval

30th June Notsubmitted

Notsubmitted

To besubmittedby 30thJune

Not submitted for last 2 years

3 Submission ofWorkProgramme &Budget relatingto ExplorationOperation toDGH

Article 5,Para 5.9

Within 90days priorto Start ofF.Y.

31st December 17thSeptember,2012

30thDecember,2011

23rdJanuary,2013

For 2011-12, delay insubmission

4 Submission ofBankGuarantee(BG)towards WorkProgramme &

Article 29Para29.3(a)

30 daysbefore theexpiry oftheguarantee

28th February 8th March,2013


Budget to DGH period i.e.before aparticularFY forwhich BG issought

5 PhysicalVerification ofInventories &Assets

Appendix -C Section4 Para4.2.1

Once inevery 12months formovableassets andonce inevery 3years forimmovableassets

Movable assets -by 31st March ofnext FY ;Immovableassets by 31stMarch offollowing 3rd FY

Not done Not done Physicalverificationpartiallydone.Howeverthe taggingin SAP isyet to bedone.

Not complied for last 2 years

6 QuarterlyStatement ofCost,Expenditureand Receipt toGovt.

Appendix -C Section7 Para 7.2

Not laterthan 30days afterthe end ofsuchquarter

30th April, 31stJuly, 31stOctober and 31stJanuary

Notsubmitted

Notsubmitted

Required tobe done


7 Quarterly CostRecoveryStatement

Appendix -C Section8 Para 8.2

Within 30days afterthe end ofsuchquarter

30th April, 31stJuly, 31stOctober and 31stJanuary

Notsubmitted

Notsubmitted

Required tobe done

Annual Cost Recoverystatement sent to DGH for2012-13.

8 Submission ofLocalProcurementStatement

AppendixC, Section10, Para10.2

Within 60days afterthe end ofeach year

30th May Notsubmitted

Notsubmitted

Required tobe done

A statement from Inception to2012-13 has been submittedto CEMG group on

9 End of YearStatement toGovernment

Appendix -C Section11 Para11.2

Within 90days of theend of suchyear

30th June Notsubmitted

Notsubmitted

Required tobe done



Follow up Status of Audit Observations of Previous Internal Audit Reports (Excluding closed issues)FOLLOW UP/COMPLIANCE REPORT OF AUDIT OBSERVATIONS OF Q3 F.Y 2013-14

AuditreportRef.no

Observations Recommendations Reply given in 3rd

Quarter reportStatus as on 20.05.2014

2 Review of Operation of the block-KG -ONN-2004/1-

5. It is understood from the project management that a proposalhas already been sent to DGH to reduce the number of wellsfrom existing 12 to 7(seven) for drilled in Phase – I. Till thedate of audit no response from DGH has been received.

6. The audit has already pointed out in earlier quarters andendeavoured to work out the anticipated payment of penalty /Liquidated Damages(LD) due to unfinished MWP even if therequest of OIL for reduction of MWP from 12 wells to 7 wells areacceded to by DGH/ MoP&NG

Follow up lettersshould be sent toDGH to grant thereduction of wellfrom 12 to 7 nos.

Our proposal forreduction in thenumber of wells ispending withDGH/MoP&NG.

It is being carriedout.

The Proposal is pendingfor approval with CCEA fortheir approval forreduction in MWP as perthe letter of DGH dated10th April, 2014. Approvalof DGH still in thepipeline.

6 Reconciliation of GR/IR Clearing Account-

i. Clearing Acct-GRIR-Capital Goods A/c 220002 (KGB)

GRN was not yet raised against PO. No. 7905849 dated14.02.2013 for Rs. 8,51,127/-issued to M/s Sara Sae (p) Ltd.,Dehradun for the materials to be delivered within 28.04.2013.The matter was also reported in the last Qtr Audit, but no actionwas taken so far.

ii. Reconciliation of clearing account-On Scrutiny of the following Clearing A/c it was found that someof the old items were lying unadjusted against different Purchase

The list of openPOs/WOs should beperiodically (say oncein every quarter/sixmonths) generated &scrutinized

This is paid anadvance as on datePart materials yet toreceive, mostly itwill be clearedwithin the qtr.

GRN has been raised andthe GIT against PO No7905849 has beencleared.

The clearance of GL220000 is centrallycleared at Duliajan by


Orders for long time:

At KGB sphere-

GL AmountOutstanding(Rs)

220000- Clearing Acct-GRIR-Stores AndSpares

-17,75,71,074.19

222000 Clearing Acct-Inland Freight -Revenue

-3,06,53,971.41

222001 Clearing Acct-Inland Freight -Capital

12,193.00

222010 Clearing Acct-Overseas Freight –Revenue

-1,57,99,827.72

222030 Clearing Acct-Agency Commission –Revenue

-25,12,921.35

222050 Clearing Acct-Port Charges &Insurance – Revenue

-2,95,21,676.37

At BEP officeGL Amount Outstanding

(Rs)221000- Clearing Acct-SR / IR-Services

-2,45,483.72

ERP-FI Core team and thesame is cleared as on31.03.2014. However, GLNo 222000, 222001,222010, 222030 and222050 is being cleared inthe current quarter.

7 Debit Balance Lying in Vendor Account at KGB Sphere-

It was observed that debit balances were appearing againstfollowing Vendor accounts as on 31.12.2013

Vendor Balances (Rs.)100234- CHINA PETROLEUMTECHNOLOGY

4027138

102444 NOV DOWNHOLE EURASIA 2366605.32

The vendor accountsneeds to be checkedand reconciledimmediately

Vendor code 100234 is notrelated to KGB project andthe entry is passed byKolkata office. But theentry has been passedunder KGB profit center.

Vendor Code 102444 &201201 for both the


LIMITED201201 WESTERN CARRIERS (INDIA)LIMITED

1404193vendors the matter isfollowed up with Kolkataoffice from where theentries have been made forclearance in the Firstquarter of the currentyear.

9 Cash Verification

i. Cash Acct-Imprest Cash -BEPCash in hand amounting to Rs.54,870/- was physically verifiedon 10.02.2014 ( on date of audit).However, the balance under the respective GL (A/c no- 529505)was Rs. 55,141.50 and the balance as per FBCJ wasRs.52,341.50.So , there is a difference appearing between the balancephysically verified and the balance appearing under respectiveGL head and FBCJThe above difference may be reconciled immediately

ii. Cash Acct-Imprest Cash -BEP-JVC GL A/C- 529627-

It was found that an amount of Rs.21, 863.00 is appearingin the Imprest Cash GL a/c – 529627 and as well as in FBCJas on 10.02.2014, however no cash was physically foundavailable.

Appropriate actiontherefore should betaken to reconcile thedifferenceimmediately.

Further Auditcomments-

No reply receivedagainst the point noii .

On scrutiny it wasfound that some olditems are parked inthe imprest cashjournal this will bediscussed with FICore team and willbe cleared withinthis qtr.

Excess amount is creditedto the misc incomeaccount.

The amount of Rs21863.00 is beingaccounted for by debitingthe personal account ofthe officer handling theImprest and the same isdone in the 1st Qtr of thecurrent year.

12 Miscellaneous Observation- As on 31.12.2013there is credit

As on date there is a creditbalance in this account


i. Liability to Other Security Deposit A/c 205021 at KGBSphere

A credit balance Rs. 9,71,009.70 as on 31.12.2013 was lyingunder the respective ledgers which included one Cut back entryof Rs.3,27,460.30 (Dr).

The account needs tobe reviewed andreconciled onquarterly basis

balance of12,98,470 regardingthe cutback issuesthis being takencare by FI core team

amounting to Rs.29,43,470.There are also severaldebit entries pertaining tocutback documents whichshould not normallyappear in this account.The Issue of these Cutback entries have beentaken up with SAP FI Coreteam to resolve.

FOLLOW UP/COMPLIANCE REPORT OF AUDIT OBSERVATIONS OF Q2 F.Y 2013-14Sl. Observations Recommendations Reply received in Q2

ReportStatus as on 20.05.2014

1 BLOCK: KG-ONN-2004/1

Non-submission of Quarterly Expenditure statementBlock is not complying the provision of quarterlysubmission of Statement of cost, expenditure andreceipts to government as per section-7 of PSCagreement

As an operator strict complianceshould be made to the PSCguidelines. This is being donewith effect from thecurrent quarter. All returns on the progressof MWP along with allother information arebeing sent to Regulator atmonthly intervals. Thenext Financial informationwill be sent for June, 14quarter.2 BLOCK: KG-ONN-2004/1There is mismatch of Rs. 2.80 crore between the CashCall receivable from GGR as per SAP record and balance

Necessary action needs to betaken to reconcile the differencesbetween the balance shown asper SAP record and auditedThe balance in theAudited Accountsamounting to Rs 10.78cr. is the correct

The balances have beenreconciled as on 31stMarch, 2014 and the cashcall account is matchingwith the debit balance in


shown in Block Audited accounts as on 31.03.2013 accounts. balance.Further AuditComment-The amount shown inthe audited accountsneeds to beimmediatelyreconciled with thebalance shown in SAPin order to representthe correct picture

Vendor’s account.

3 BLOCK: KG-ONN-2004/1

Charging of Main Office Expenditure (MOE) to blockMOE has been charged @ 4.51 approx. provisionally toblock accounts for F.Y 2012-13. However, differentialamount @0.31 % (4.82-4.51) between the amountcharged and amount to be charged to block as per DFcircular has not been taken in the block accounts for F.Y2012-13 and for the 1st Quarter of 2013-14.

Necessary rectification entriesshould be passed immediately toreflect the actual position in theaccounts and accordingly for thebalance amount cash callrequired to be raised.Appropriatecorrection is beingdone so that the sameis charged in the thirdquarter accounts.

Action already taken

4 Physical verification of Inventory and Fixed Assets –Project office has not physically verified the inventory ofFixed Assets as per Section -4.2.1 of the PSC as well asthe inventory of the of the block till the date of audit.Project should immediately takeup the physical verification as perthe Company’s Policy and as perthe PSC terms.

The fixed assets havebeen verified andhave been numberedas well.Further AuditComments-The project is

Complied


requested to providethe status on Physicalverification ofinventory5 Non-raising of cash call on Partner i.e. M/s GGR

from 01.04.2013-It has been observed that no cash call has been raised byoperator on partner i.e. M/S GGR after 31.03.2013.The Cash call should be raised onpartner regularly till PI of GGR istransferred to OIL and PSC & JOAgets amended.

Raising of furthercash call wouldincrease thecomplicacy of writingoff as the partner haswithdrawn from theblock and arbitrationproceedings havebeen initiated.Further AuditComments-The Cash call shouldbe raised on partnerregularly till PI of GGRis transferred to OILand PSC & JOA getsamended.

Appropriate accountingentries against cash callraised have been passed inthe Accounts.


Sl. Observations Recommendations Reply received in Q2Report

Status as on 20.05.2014

6 GL- 200000 Scrs - Materials (Foreign)-Recon A/C-Payment made to vendor by Kolkata branch was notreconciled and still appearing as credit balance inVendor account under Kakinada Business AreaNecessary reconciliation needs tobe carrying out immediately withthe co-ordination with Kolkatabranch to avoid any duplicatepayment.

The matter is underreconciliation. The same is covered inthe para no. 7 of previousqtr.8 Huge balance appearing in G/L Account - 220000

Clearing Acct-GRIR-Stores And SparesAn amount of Rs. 1,298,424,894.02(Dr.) appearing asbalance as on 30.09.2013 in the GL- GRIR-Stores AndSpares (GL-220000).Necessary action to be taken tominimise the GIT balancesappearing in the books. The GITs againstorders 7202218 and7202231 have beencleared now and

against 7202236,the same is yet to bedone as somereversals have to bemade by ERP team.

As on 31.03.2014 there areno open items in GRIR A/C

10 An amount of Rs. 10.03 Lakh is appearing as balance inthe GL-220002 Clearing Acct-GRIR-Capital Goods Rigorous follow up should bemade with the vendor for thedelivery of the materials As on date for GL220002 only Rs. 8.51lakh is pendingagainst P.O.No.7905849 which willbe cleared once GRNis raised from MMDept

Cleared in May 2014 ason date there are no openitems in capital GIT

11 Miscellaneous Observation-Difference is appearing between the Schedule balanceand balance shown under the ledger -Liabilities toother security deposit a/c -205021 as on 30.09.2013due to Cut Back entry.

The matter should be taken upwith ERP team and necessaryrectification entry may be passed. . As on 31.12.2013 GLBalance is Rs.12.98lakh for cut backentries the same wasinformed to ERP-FICOfor implementation.Reply already covered inpara 12 of the previousqtr.


FOLLOW UP/COMPLIANCE REPORT OF AUDIT OBSERVATIONS OF Q1 F.Y 2013-14Sl. Observations Recommendations Implementatio

n Time lineStatus as on25.01.2014

Status as on20.05.20141 REVIEW OF OPERATED NELP BLOCKS (BLOCK:

KG-ONN-2004/1)-iii. First well has been planned to be drilled, isready. Butthe Rig couldn’t have been mobilised by8th Aug 2013and as on the date of audit it isuncertain when the rig will be mobilised by theContractor, M/s Shivani.iv. Since the drilling for Location 11 has not yetbeen commenced with an uncertainty inmobilisation of the Rig Package by the contractorthere will be delay in completion of shallow nonHPHT wells also. Considering the timeline givenin the MC approved Budget for 2013-14mentioned above, there is also a chance of noncompletion of drilling of one of the well within theyear 2013-14 which may attract the penalty /Liquidated Damages due to unfinished MWP.

iii & iv. The Project Managementshould take all necessary steps sothat the approval from DGH isreceived for reduction of MWP from12 wells to 7 wells. The Managementshould also endeavour to accomplishthe revised MWP, if approved byDGH.

For futurecompliance/Immediate M/s Shiv Vani has startedmobilising and most oftheir vital equipment’shave already reached thesite and are under testing.On test of all the vitalequipment’s they will beallowed to spud the wellas soon as possible.

Already status hasbeen highlightedherein before.


8 Amount recoverable from contractor for DriftTesting & Visual inspection of 20 joints of 13 3/8”X 68 PPF X N 80 Casings which fell down onground while unloading from TrailersAction taken by the Project to recoverthe amount from the concerneddefaulted party may be furnished tothe Audit

Immediate Provisional Insuranceclaim has been made andthe same is underfinalisation by the InsurerM/s United IndiaInsurance.The manufacturer ofcasing has beenrequested to sendtheir technicalperson to identify ifthe casings havebeen damaged sothat it can besubmitted to theSurveyor of theInsurance Companyfor settlement of theclaim. Meanwhile thethe amount of claimto be made has beendebited to theInsurance claimaccount.9 Apprising of action initiated against the reportsubmitted by contractor against theassessment/design of Multi Axle Transport andSurvey / identification of the location for bridge tocarry cargo of max. 40 tons over VevekanandaVaradih Bridge

Alternative means of transportationmay be finalised to avoid any furtherdelay, once the drilling activitiesstart.For futurecompliance Out of several alternativesthe suggestion of thetransport contractor isbeing explored if feasibleshall be applied.

The matter isreviewed by theProject Managementand Other optionsare looked into.


Sl. Observations Recommendations ImplementationTime line

Status as on25.01.2014

Status as on20.05.201410 Verification of Bid Securities and Performance

Guarantee Bonds related to Tenders and theContracts respectivelyBank guarantees, as listed in Annexure-II, hadexpired, but neither renewed further nor returnedto the concerned parties

It must be ensured that the validity oftenure and the enforceability of thebank guarantees are not expired tillsuch time the purposes for whichthese are held in custody.For futurecompliance The details of bankguarantees have beensent to ERP FI Team forputting in SAP where apackage has beendeveloped recently tomonitor the Guarantees.The same is underexecution.

SAP team at Duliajanis followed up forcompliance.

13 Difference between Imprest Cash Journal (FBCJ)and respective GL Account Reconciliation should be carried outon regularly basis to avoid suchdifference and wrong MIS Immediate Reconciliation Completed(The balance is notreconciled as on31.01.2014)

Already covered inour earlier reply18 There is a difference between the Systems and theSchedule Balances as on 30.06.2013.Thedifference due to Cutback Entry. Necessary entries may be passed torectify the difference and appropriateCash Calls should be made. Immediate Necessary entries can bepassed after taking overof the share of GGR forwhich is under theapproval process of themanagement.

Follow up actionbeing made fromtime to time.


Follow up Status of Audit Observations of Previous Internal Audit Reports (Excluding closed issues)FOLLOW UP/COMPLIANCE REPORT OF AUDIT OBSERVATIONS OF Q4 F.Y 2012-13

It is observed that Service Tax has been Creditedin A/c. nos.201110,201111, 201112 in differentProfit Centres i.e. DELDLP0001 & JVCCP0000instead of Kakinada Profit Center ORAFESBR01.Manual rectification entry passed for correction ofProfit Centre booked under Noida profit centerinstead of KG basin and deposited the Servicetax at the beginning of the following month

Suggested to pass the rectificationentry in same month of credit forproper and correct accountingThe discrepancy in Profit Centresshould be taken up with SAP atDuliajanThe audit observed that issue hasalso repeated in Q2’13

Immediate The issues are underwith the ERP-CORETEAM and they are inthe process ofupdating the same.But booking ofexpenses is going toproper cost/ profitcentre. Accordinglythe tax is depositedand clread the saidGL on monthly basis.

Sl. Observations Recommendations ImplementationTime line

Status as on 25.01.2014 Status as on20.05.20143 KG-OSN-2009/4 – operated by ONGCLi. Lower achievement of actual work vis-à-vis MWPas per PSC leading to Risk of payment of LD forUnfinished MWP.ii. Audited Accounts for the year 2012-13 of theblock has been received from the Operator, nor anyProvisional Unaudited Accounts containing“Sources & Application of Funds.iii. An amount of USD 111792.71 eqv. Rs.775252.00is payable to ONGC (JVONGCOS). However, neitherthe Cash Call information from the Operator as at31st March, 2013 nor any Balance confirmation hasbeen received from the Operator by the Project.

i. The matter should be take upwith the Operator (ONGCL) so asto avoid the possibility of paymentof LD for unfinished MWP, if any.ii. Audited accounts from theOperator should be obtained andincorporatediii. Difference in Cash call accounthas to be reconciled and necessaryrectification entries should bepassed immediately to match theexpenditure with the Operator

Note for MC approval is putup for next course of action. The figures arematching with theunaudited accounts.After receipt ofAudited Accountsdifferences if any willbe considered andappropriateaccounting entrieswill be done.


5 FINANCIAL REIVIEW OF OPERATED NELP VIBLOCK : KG-ONN-2004/1 :i. A large amount of Rs. 13.58 crore approxoutstanding from other partner M/S GGR andhas never responded to any of the Cash Callrequest along with Interest.ii. Main office expenditure has been excess chargedby 0.11% from as per the rate approved by themanagement.iii. Revised Estimate for the FY2012-13 andBudget Estimate for the FY 2013-14 wereprepared and approved by OC at 3.87% insteadof actual of 4.40%. This will lead to Shortprovision of Budget

i. Necessary strategy has to beframed to realise theoutstanding dues from M/S GGR.ii. Adjustment of MOE has to becarried out in the books ofAccounts of the block immediately.iii. Budget for both the years i.e.2012-13 RE and 2013-14 BEhave to be ratified with the newapproved rate of MOEiv. Follow up with DGH forimmediate appointment of JVAuditor to complete the AuditedAccounts.

Immediate Action taken notes havealready been completed. Complied

6 i. The audit has observed that Bank charges foropening L/c, amendment charges not accountedfor the block.ii. No GRN was raised so far although the materialhas been received and accepted at sighti. All bank charges for LCopenings; amendments;extensions; cancellationspertaining to operated block areto be booked under the KG01business area and subsequentlytransferred to the block.ii. GRN entry should be passed bythe Project as soon as anyconsignment arrives antransferred to block ac/.

Immediate This shall be completed in 4thQuarter Accounts closing Complied

9 Block-MN-ONN-2000/1 (Relinquished Block)-An amount of Rs. 13.03 Crores remained outstandingfrom JV Partners and became overdue since June2011 and suitable action to ensure receipt of LDpayments from the partners has to be initiated toavoid further penalty and accrued interest if any asper PSC provision

Since the block has beenabandoned expedite action needsto be taken for early settlement ofthe issues regarding realisation ofoverdue cash calls from JVPartners and payment of LD forunfinished MWP by the partnershave to be made to avoid furtherpenalty and accrued interest asper PSC

Immediate OC meeting has alreadytaken place. As per the OCminute, OC member got theBlock audited for the year2009-10 and the cash callhas been sent to ONGC andSuntera. But, there arecertain formalities to betaken care of before wereceive cash call amountfrom M/S ONGC. There is alegal battle is going on with

Follow up actionbeing made with thepartners to recoverthe pending cashcalls.


M/s Suntera and as suchreceipt of the cash call fromthem will depend on thelegal course of action. We arestill discussing certain issueswith GAIL and will raise cashcall with them accordingly.13 Rs. 8.50 is appearing as advance deposit with GovtAuthority in OIL accounts since Mar’10. i. This need to be reviewed andnecessary action should be takento recover 30.06.2013 For GL 550200 no govt.deposit from KGB project.For BUS.AREA OR01.LEGALAND PENDING CASE undersub judice.Reviewedperiodically.

14 Review of Vendors A/cAdvance balances appearing in the vendor accounts Necessary action should beinitiated to recover the amountdue from vendor or reconcile theaccount.Immediate It is a general practice allvendor Accounts arereviewed at periodicintervals. In the instant casethe specific Vendor list maybe provided so that we canagain review the position.

Audit Comments-Vendor- 404607 Rs.8.5lakhVendor-502190 Rs. 50000Vendor-404649 Rs. 15847

Complied

16 An amount of Rs. (182,420.00) is lying open in theClearing Acct-SR / IR-Services as on 25.04.2013. Such cases need to be reviewedand necessary action needs to betaken. 30.06.2013 The SES are lying forcompany code OIL which iscentrally cleared at Duliajan.Audit comments- SES arereconciled at respectivesphere.

The matter has beentaken up with MMCore team fordeleting as the sameis not becomingpossible from ourside.18 All the bills related to Hiring motor vehicles andHotel bills of BEP office are made through Direct FI A formal contract should beentered in to the system to stop FI 30.06.2013 Our requirement of vehicleat BEP is minimal which isrestricted to handling of complied


FOLLOW UP/COMPLIANCE REPORT OF AUDIT OBSERVATIONS OF Q3 F.Y 2012-13Sl.No.

Observations Recommendations ImplementationTime line

Status as on 25.01.2014 Status as on20.05.20145 NON-OPERATED NELP BLOCKS -

Gap in Co-ordination in Block activities consideringthe Financial Commitment.Changes in Working Capital at the end of the quarter isnot being accounted for and the books of accounts ofthese blocks do not reflect true and fair view at the endof 31st December, 2012.

Statement of sources and applicationof fund has necessarily to beobtained from the operator at theend of the Quarter.As early aspossible

It is being received fromthe operator Periodicalinformation isreceived and thesuggestions havebeen Complied14 PF and ESI on Manpower services.

Contract No-6106844, 6106576 & 6106587.Contract 6106844, PF deduction is being made takingthe basic as 30%, whereas in contract 6106567, PFdeduction is being made taking the basic as 60% of thepayment. Therefore the basis of deduction of PF bycontractors is not clear.

It is suggested that proper careshould be taken to ensure that thecorrectness of PF. 31.03.2013 This is being looked into byAdmin Department The matter ofpayment andrecovery of labourrelated payments aremonitored by AdminDept from time totime on a regular

payment. A formal contract should be entered tomake the payment through MM module. payment. leagal cases, visiting to court,lawyers etc apart fromvisiting officers whichhappens occasionally.Considering the minimal use, no Vendor will enter into aContract. Therefore thesuggestions cannot beimplemented.Audit comments-A formal contract can beentered & contract no. can beuploaded in the system tostrengthen the internalcontrol & avoid duplicatepayment.


Sl.No.

Observations Recommendations ImplementationTime line

Status as on 25.01.2014 Status as on20.05.2014basis.

22 Review of Open PO and PR in BEP & KG as on02.03.2013A large number of POs are lying open, where either theGRNs have not been raised or the LIVs have not beendone or both of these have not been complied with.

Open Item needs to be cleared onregular basis. 31.03.2013 May be reviewed while theAuditors visit BEP forinternal Auditing.Audit comments-The audit has reviewed thesame during BEP audit &found the a large no. Posare lying open on thesystem & details areprovided in Q3 audit also.

Already covered inearlier para.

23 SESs created but not finally released in the system.There are a number of SESs lying open in the system.These SESs are very old and need to be scrutinised asthese are lying open for considerable period of time.Open Item needs to be cleared/closed. Immediate May be reviewed while theAuditors visit BEP forinternal Auditing.

Further Audit comments-The audit has reviewed thesame during BEP audit &found the status same.

All have been deleted

24 SRIR reconciliation of BEP and KG.BEP- An amount of Rs 2,00,208 is lying open in thesystem. There are a large number of items, havingmatching debits and credits, are lying open in thesystem in both BEP and KG.

Item having matching debit andcredit item should be cleared. 31.03.2013 May be reviewed while theAuditors visit BEP forinternal AuditingAudit comments-The audit has reviewed thesame during BEP audit &found the a large no. Posare lying open on thesystem & details areprovided in Q3 audit also

Covered in an earlierpara.

FOLLOW UP/COMPLIANCE REPORT OF AUDIT OBSERVATIONS OF Q2 F.Y 2012-13


Sl Observations Recommendations ImplementationTime line

Status as on 25.01.2014 Status as on20.05.201410 Manual system is followed for e paymentinstead of SAP APPsystem in KG Project The manual intervention during epayment should beavoided andAutomatic payment Program(APP)methodology should befollowed.

Immediate FI core team is developingappropriate package toeliminate the risk. Apartfrom that an Account hasbeen opened in Kotak Bankfor E-payment which ishaving better securityfeatures in e-payment

Follow up action istaken with SAP coreteam for developingthe APP system andthe same is underdevelopment by Coreteam. Once done thesecurity threat will beeliminated.16 Expenditures have been booked withoutgiving WBSelements of Block KG-ONN-2004/1) of Rs. 39,66,359/- WBS elements should be incorporatedagainst the booking. Concerned executives(CMM) has been advised forcompliance This is booked underprofit centreorafesbr01 kg-jvcplantFOLLOW UP/COMPLIANCE REPORT OF AUDIT OBSERVATIONS OF Q1 & Q2 OF F.Y 2011-12Sl Observations Recommendations Implementation

Time lineStatus as on 25.01.2014 Status as on

20.05.20141 Block-MN-ONN-2000/1Block has been relinquished w.e.f 24.02.2010incurring Liquidated Damages and cost ofUnfinished MWP of amounting to the US $2707940 was approved by GOI. It has beenobserved that some of Partners (ONGC) has notpaid the said amount to the DGH.

Claim for the short bookedamount should be lodgedagainst the JV Partners andcorrect account balance ofthe JV partners’ accountshould be ascertained afterproper reconciliation

31.01.2012 The matter is looked by CEMG office,Noida. The matter is lookedby CEMG office, Noidaand is covered in anearlier para.2 KG-DWN-2002/1 – In Andhra Pradesh and isbeing operated by ONGCL; (ONGC-70%, OIL-20%, BPCL -10%)2. An amount of ` 56,15,45,827.17 (debitbalance) is lying open in the system as on06.12.2011

ii. Reconciliation should bemade for open lying item. Earliest possible Balance of Rs 132, 354,730.66 ason 20.01.2014.still appearing – This is beinglooked into

All balances havebeen reconciled.

Miscellaneous :ii.In BEP there are two nos. of godownsi.e 1) i. Since the Materials atParadeepgodown appears 1. These are imported material andno customs duty has been paid. Ifdisposed off the department will These are importedmaterial and nocustoms duty has been

Internal Audit Report - Q4 / FY 2013-14 FOLLOW UP/COMPLIANCE REPORT OF AUDIT OBSERVATIONS OF F.Y 2010-11

Mancheswargodown and 2) Paradeepgodownand total expenditure incurred was `10.28lakh for half year ended on 30.09.11.iii. There are variations in Lease rent paid toFlat owners for Accommodations of variousexecutives posted at Kakinada Project byabout 60% which is very high.

to have become obsoleteand unusable. The Projectmanagement may look intothe necessity ofmaintaining two godownsat BEP.impose high amount of customsduty, disposal of which is unviableand cumbersome. Therefore, to bekept till suitable opportunityarises.

paid. If disposed off thedepartment willimpose high amount ofcustoms duty, disposalof which is unviableand cumbersome.Therefore, to be kepttill suitableopportunity arises.5 iii. One of the executives occupied guest houseroom from 18th July’11 to 30th Nov, 11 eventhough he has been provided Leaseaccommodation from July, 2011 at Kakinada.ii. A committee should beconstituted comprising 3executives from differentdepartments for hiring ofhouses at lease.iv. Proper justification insupport of this could notbe furnished to Audit.

Earliest possible 2. Implemented3. This is being ascertained and shallbe intimated to the Audit.


Sl Observations ImplementationTime line

Compliance Status as on 25.01.2014 Status as on 20.05.20142 Refund of security money: A sum of 10,500/-deposited as security money for nitrogen cylinders,required for OIL’s operation, on 14.11.2008 withM/s Paradeep Oxygen is lying in GL 550510.Further, an amount of `49,997/- is lying as creditagainst the same vendor(207994)

30th June 2011 Not yet implemented.Balance as on 01.03.2013In JVC company code Debit balance ofRs34,426, in OIL Company Code CreditBalance of Rs49,997.00, net balance ofthe vendor Rs.15, 571.

Action has already been takenand balance as on date is nill.

4 Earnest money deposit & Security deposit :EMD and security deposits ( GL205022 & 205021)amounting to `237,000.00 and Rs. 2,13,450/-respectively are lying un-reconciled. The detail ofthe same is also not readily available.30th June 2011 Not yet Implemented.

Balance as on 01.03.2013205021(KG) OIL Co Code –Rs NIL205021(BEP)OIL Co Code-Rs 2,31,060205021(KG) JVC Co Code –Rs NIL205021(BEP)JVC Co Code-Rs NILBalance as on 01.03.2013205022(KG) OIL Co Code –Rs NIL205022(BEP)OIL Co Code-Rs 55,000205022(KG) JVC Co Code –Rs NIL205022(BEP)JVC Co Code-Rs NIL

Individually the cases are beinglooked into the details are notavailable since the matter hasbecome very old , further it maynoted that that balance are creditedbalance in both the GL of businessarea or01.

FOLLOW UP/COMPLIANCE REPORT OF AUDIT OBSERVATIONS OF F.Y 2009-10


Sl Particulars Status as on 25.01.2014 Status as on 20.05.20141 Service agreements / contracts not monitored. (Point 10 of Q3report, 2009-10)Services were being availed without renewing/entering into agreementswith the agencies.Current Status: The agreement with Industrial Security Agency forsecurity service at BEP office was lying expired since April 15,2010though the service was continued and rent agreement with IDCO Towerswas not renewed since June 30, 1999.Management Action Plan: Action has been taken and the renewal isunder process.Revised Timeline: ImmediateResponsibility: Mr. S.K Patnaik (Officer – Materials)Status / comment as on 12.04.2011 : Agreement is to be signedshortly.

To be reviewed by CMFA Complied

2 Long pending balance in Deposit Accounts (Point 15 of Q2 report,2009-10)Long pending balances were lying in the deposit account.Current Status: The amount of` 11.78 lacs paid to customs on March 31,2006 has still not been recovered and the security deposits amounting to` 0.39 lacs received from 2 discontinued vendors not yet returned.Management Action Plan: We are planning to meet the customsauthority personally and the outcome will be communicated. For securitydeposits of discontinued vendors, since the party has not asked for refundthe same is lying with us.Revised Timeline: May 31, 2010 and Not applicable.Responsibility: Mr. S.K Patnaik (Assistant Officer – Materials)Status / comment as on 12.04.2011 : Matter will be resolved by 30June 2011.

To be reviewed by CMFAStill Rs. 8.50 lakh appearing

Matter is being followed up withthe customs authority for clearanceof the amount paid against scrapwhich is yet to be cleared from theCustoms Bonded area of PardeepPort premises.

internal audit report – bay exploration & kgb project ......internal audit report - q4 / fy...

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