(For use by the Officials of the Indian Audit and Accounts Department only)

Office of the Principal Accountant General (Audit) Gujarat, Ahmedabad

MANUAL OF COMMERCIAL AUDIT WING (PART II)

Issued by Pr. Accountant General (Audit) Gujarat, Ahmedabad

2003
COMPTROLLER AND AUDITOR GENERAL OF INDIA

Table of Contents
PAGE No.

Preface
CHAPTER SUBJECT

4 -5

SECTION I I II III IV V VI . VII Introduction Commercial Audit HQrs. Section Commercial Audit (Report) Section Local Audit General outlines Govt. Companies Efficiencycum-performance Audit and Planning for Audit Energy Audit 6-19 20-30 31-41 42-46 47-77

78-82 83-84

SECTION - II

VIII IX X XI XII XIII XIV XV XVI XVII XVIII

Gujarat Small Industries Corpn Ltd. Gujarat Mineral Deve. Corpn. Ltd. Gujarat State Export Corpn. Ltd. Gujarat State Textile Corpn. Ltd. Gujarat State Handicrafts Dev. Corpn. Ltd. Gujarat State Construction Corpn. Ltd. Gujarat Communication & Electronics Ltd. Tourism Corporation of Gujarat Ltd. Gujarat Tractor Corpn. Ltd Gujarat State Petroleum Corpn. Ltd. Gujarat Rural Industries Marketing Corporation Limited.

85-89 90-96 97-102 103-111 112-116 117-121 122-129 130-134 135-145 146-152

153-158

XIX XX XXI XXII XXIII XXIV XXV

Gujarat State Handloom Deve. Corpn. Ltd. Gujarat State Civil Supplies Corpn. Ltd. Gujarat Tarns-Receivers Ltd. Gujarat Analgesics Ltd. Gujarat Women Economic Deve. Corpn. Ltd. The Film Deve. Corpn. of Gujarat Ltd. Gujarat State Leather Industry Deve. Corpn. Ltd. Gujarat Growth Centres Deve. Corpn. Ltd. Gujarat Fintex Ltd. Gujarat Siltex Ltd. Gujarat Tex fab Ltd. Alcock Ashdown (Gujarat) Ltd. Gujarat Industrial Investment Corpn. Ltd. Gujarat State Investments Ltd. Gujarat State Financial Services Ltd. Gujarat Scheduled Castes Economic Deve. Corpn. Ltd. Gujarat State Police Housing Corpn. Ltd. Sardar Sarovar Narmada Nigam Ltd. Gujarat Water Resources Deve. Corpn. Ltd. Gujarat Agro Industries Corpn. Ltd. Gujarat Sheep & Wool Deve. Corpn. Ltd. Gujarat Fisheries Deve. Corpn. Ltd. Gujarat Dairy Deve. Corpn. Ltd. Gujarat State Seeds Corpn. Ltd. Gujarat State Forest Deve. Corpn. Ltd. Gujarat State Rural Deve. Corpn. Ltd. Gujarat State Land Deve. Corpn. Ltd. Gujarat Insecticides Ltd. Agrocel Pesticides Ltd.

159-164 165-174 175-183 184-186 187-190 191-194

195-202 203-205

XXVI XXVII XXVIII XXIX XXX XXXI XXXII XXXIII XXXIV

206

207-211 212-218 219-221 222-224

225-228 229-233 234-244 245-252 253-262 263-268 269-274 275-282 283-289 290-299 300-304 305-309 310-320 321-325

XXXV XXXVI XXXVII XXXVIII XXXIX XXXX XXXXI XXXXII XXXXIII XXXXIV XXXXV XXXXVI XXXXVII

XXXXVIII XXXXIX L

Gujarat Leather Industries Ltd. Gujarat State Machine Tools Corn. Ltd. Gujarat Industrial & Technical Consultancy Organization Ltd. Gujarat State Fertilizers & Chemicals Compny Ltd. The Ahmedabad Electricity Company Ltd. Gujarat Power Corporation Ltd.

326-345 346-348

349-351 352-356 357-363 364-366

LI LII LIII

SECTION -III

LIV LV LVI LVII LVIII LIX

Gujarat Electricity Board Gujarat State Road Transport Corporation Gujarat State Financial Corporation Gujarat State Warehousing Corporation Gujarat Industrial Development Corporation Organizational Chart of Commercial Audit Wing of I.A & A.D. List of Books suggested for reading

367-385 386-398 399-405 406-410 411-416

417 418-419

LX

PREFACE

This is the first edition of Part-II of the Manual of Commercial Audit Wing of the Office of the Pr. Accountant General (Audit) Gujarat, Ahmedabad. The Manual contains, in brief, the various procedures and practices being followed at present during local audit of various auditee organizations and by the C.A.D.(Headquarters) and C.A.D.(Report) Sections of the Commercial Audit Wing of this office and in three Resident Audit Offices at Gujarat Electricity Board (GEB), Baroda, Gujarat State Road Transport Corporation (GSRTC), Ahmedabad and Sardar Sarovar Narmada Nigam Limited (SSNNL), Gandhinagar.

The Manual broadly outlines the various operational aspects, accounting systems and policies and the auditing methodology and audit techniques etc., applicable to each Government company and each Statutory corporation under the jurisdiction of this office. Besides, the broad principles to be followed in conducting the audit of a commercial auditee organisation and the special points which are material for audit of a particular organisation have also been incorporated in the Manual. The basic principles of the audit of various Commercial Public Undertakings such as, Government companies and Statutory corporations, are not reproduced in the Manual. The structure of the various Government companies including "deemed Government companies" and Statutory corporations including one Statutory corporation (GIDC) whose audit is conducted by this Office at the request of the management, duly approved by the Comptroller and Auditor General of India, i.e. on "consent basis" is dealt in Part II-B of the Manual.

As far as possible, the important instructions of the Comptroller and Auditor General of India or an extract from those instructions have been included in the Manual, wherever considered necessary. In drawing out individual chapters on each Government company and Statutory corporations, the guidelines contained in the circular letter No.8-CA/O&M(R.C)9-80 Volume-II dated 20th January, 1984 of the Comptroller and Auditor General of India have been generally followed.

The objective of the Manual is to provide necessary guidance and directions to the staff of the Commercial Audit Wing in carrying out audit of accounts of the companies and corporations. Besides, it will serve as a broad check-list dealing with the steps to be taken and stimulating the inquiry for audit.

Suggestions for modifications and improvements or changes in the Manual are most welcome.

Place: Ahmedabad Date:04 June 2003

(RAGHUBIR SINGH) Pr. Accountant General (Audit) Gujarat

SECTION - I CHAPTER I ORGANISATION AND FUNCTIONS

1.1 Introduction The public undertakings, the accounts of which are subject to audit by the Comptroller and Auditor General of India (CAG) may be classified as Statutory Corporation formed under the specific Acts of the Legislature, Companies registered under the Companies Act, 1956 in which not less than 51 percentage of paid-up share capital is held directly by the Government of Gujarat or with one or more combinations mentioned under Section 619-B of the Companies Act, 1956; and Departmentally managed commercial undertakings.

The Commercial Audit Department (CAD) of the Office of the Accountant General (Audit) I, Gujarat, Ahmedabad is responsible for the aforesaid audit. The audit of the departmentally managed commercial undertakings of the State Government are conducted by the Office of the Accountant General (Audit)-II, Rajkot.

The Commercial Audit Department (CAD) in Gujarat comprises the following: 1. 2. 3. 4. 5. 6. CAD-Headquarter (General) Section CAD-Headquarter (Report) Section Resident Audit Office, Gujarat Electricity Board Resident Audit Office, Gujarat State Road Transport Corporation Resident Audit Office, Sardar Sarovar Narmada Nigam Limited, Local Audit Parties

The detailed functions of these sections/RAOs/Field Parties have been dealt in Chapter-II.

1.2 (i) Guiding principals in the audit of Public Enterprises. Audit of public enterprises covers financial compliance and regularity audit ; it also extends to examination of efficiency, economy and effectiveness of their operations and fulfillment of their objectives and goals. The stress of audit of public enterprises except during supplementary audit/certification audit is however, more on the audit of three "E"s rather than checking of regularity of expenditure. Audit also examines the propriety of the expenditure directed towards examinations of management decisions in sales, purchases, and contracts etc., to ensure that these have been taken in the best interest of the enterprise and conform to accepted principals of financial propriety.

(Ref:CAD's letter No.625/CA-IV/8 dtd 22.11.1969) 1.2 (ii) Audit checks to be exercised with reference to the Statutory Audit and internal audit

The public enterprises have generally a well-defined financial and accounting organisation along with an internal audit system. In Government Companies as well as in some Statutory Corporations, the accounts are audited by the Statutory Auditor appointed by the Ministry of Law, Justice and Company Affairs, Department of Company Affairs on the recommendations of the CAG. In such organisations, our audit may not cover the same field as covered by the internal audit or Statutory Auditors and may be limited to some percentage of audit checks on various types of transactions. The routine checks are exercised by the accounting and internal audit wings of the undertakings. However, it has to be seen that the internal audit adequately covers the entire field of operations that it is functioning effectively, that, its reports are properly considered as appropriate level and that necessary action is taken on them. In such cases, the main purpose of routine audit would be to see how far internal checks operates effectively. Our audit in this regard should be confined to efficiency-cum-propriety audit, the broad principles of which have been laid down in the Manual of Standing Orders (Audit).

The Comptroller and Auditor General's (DPC)Act, 1971 defined the mandate and responsibility of CAG which extend to Public Sector audit practices and principles evolved in the Department. Manual of Standing Orders (Audit) contains the principles, practices and procedure of audit to be followed in the Indian Audit and Accounts Department. Section-II to VII of M.S.O. (Audit) set out the general principles and instructions that are to be observed in Auditing and reporting the results of audit and preparation of Audit Report. In Chapter -7, Section-II of the M.S.O. (Audit) main principles of "Audit of Commercial Accounts" have been included in abridged form. The detailed procedures of audit have been prescribed in this Commercial Audit Manual. A copy of Chapter-7 of Section-II-Audit of Commercial Accounts" of M.S.O. (Audit) is included as Annexure-A to this Manual.

The relevant provisions of the Companies Act, 1956 constitution of India and CAGs (DPC) Act, 1971 are also included in the Annexure.

These apart, the Statutory Auditors are required to submit a special report, on completion of their audit of a Government Company, on the various points, covered by the directions of the CAG issued to them under section 619(3) of the Companies Act, 1956. The report not only gives information on various matters but also secures that the Statutory Auditors have discharged their functions well and with reasonable degree of efficiency. In view of this, there is no necessity to cover the entire field again during routine audit checks.

The annual accounts of these concerns viz., Balance Sheet, Profit & Loss Account and Subsidiary Schedules are certified by the Statutory Auditors. Since, the routine checks have already been exercised by the internal audit/Statutory Auditors, it is not necessary that similar checks should be exercised by our audit; however, for certifying the correctness of annual accounts, certain checks will have to be conducted. It will be necessary to see that the annual accounts have been properly drawn up on the basis of the records, already checked.

(Ref:CAG's letter No.216-CA/61-1965, dtd.2-21966)

To improve the Audit of accounts of Public sector Undertakings following decision were taken by HQrs. as communicated in CAG's letter No.14/3-CA-III/183493 dt.14th December 1994. (A) Audit of Annual Accounts of Government Companies/Corporations.

1 Use of check lists A detailed check list (Annexure B has been prescribed for adoption as a guide for the comprehensive checks to be exercised during such Audit. The field parties may use this as an illustrative list during such audit which must be conducted with reference to the following :

(a)

Provisions of the Companies Act, 1956(or the relevant statutes governing the Corporation concerned) Memorandum and Articles of Association of the Company. Instructions of the Government of India. ICAI's following pronouncements: (i) (ii) (iii) Accounting standards Guidance Notes and Opinions Statements on standard Auditing practices (SAPs)

(b) (c) (d)

(e) IA & AD's Auditing standards. (f) International Accounting standards and International Auditing Guidelines wherever ICAI's standards/ guidelines are not available.

2. Scrutiny of Auditor's report The Auditor's Report should be pursued by the field party. The statement included in the Auditor's Report in compliance of the Manufacturing and Other Companies (Auditor's report) Order 1988 is a constituent part of the Auditor, s Report and should be scrutinised in the same manner as the rest of the Auditors' Report. In respect of every reservation, qualification or adverse remarks contained in the Auditor's Report which is not accepted as correct by the Management, the Management may be asked to offer their explanation so that the field party can examine the matter with reference to the records and determine whether the reservation, qualification or adverse remark which is contested by the management needs to be commented upon.

3 Pre-audit analysis The audit planning process should include analysis of the accounts of the auditee for the earlier two years together with Statutory Auditors' report (including the supplementary report). An Audit plan should be prepared by the Sr.A.O. incharge of audit and this plan should be approved by the Group Officer/AG before commencement of detailed substantive checks.

The analysis should be used to decide the possible areas for intensive scrutiny and for formulation of sub-direction under Section 619(3) of the Companies Act, 1956 for issue to the Statutory Auditors. 4 Meeting with Statutory Auditors There is need of holding regular meetings with statutory Auditors before the commencement of Audit During such meeting AG should bring to the notice of the Auditors, the areas of weakness to be enquired into by the auditors before they take up the audit and written sub-directions should be issued in time. In such meeting, the distribution of work among the auditors should also be ascertained and kept on record to ensure their accountability and assess their performance.

5 Allocation of work The Group Officer should record special checks to be exercised by the audit party. The Sr.Audit Officer shall be responsible for allotting the work to the individuals members, supervising the execution of the work, for documentation of work done and any time of work not allotted specifically shall be deemed to be the work of the Sr.AO/AO and on completion of the work for sending the list of checks not exercised.

6 Review of accounting polices in advance While conducting the audit, it should be ensured that accounting policies of auditee should be reviewed for conformity with accounting Principles, Standards etc. While such review it should be kept in view that disclosure is not a substitute for proper accounting and that the use of improper or unsound method is not cured for disclosure.

10

In several number of cases it was noticed that auditee has departed from accepted accounting principles by introducing an accounting policy which covered the erstwhile practice they were following and Auditors did not comment on it. Such cases if noticed, should be commented upon even if disclosure exists. These instructions are applicable to "Notes on accounts" also.

7 After the Audit The Statutory Auditors may be requested to submit the report under section 619(3) of the Companies Act 1956 within one week of certification of the accounts of the Company. During meeting with Auditor, the importance of Auditors submitting replies to the audit observations within the time schedule fixed should be stressed so that the comments on the accounts can be finalised within time and the delay in submission may be considered for their poor performance.

Assessment of the performance of Statutory Auditors CAG has issued following guidelines (Vide CAG DO letter No 21-CAV/11-93 dated 6th January 1995) which may be considered for assessment of performance of Statutory Auditors.

These are: 1. Has his report been drafted with due regard to the requirements of the Companies Act? Does his report contain errors and omissions? Has he completed the audit work promptly? Has the Supplementary Report been delayed without justifications? Has he responded promptly to the draft audit comments ? Were any of his qualifications found to be incorrect?

2. 3. 4. 5. 6.

11

7.

Were there any major comments made under section 619(4) on his report or supplementing it ? Has he maintained cordial relations with the Management ? Has he complied with the sub directions given by PDCA/AG? Has he attended the Meetings convened by PDCA/AG ?

8. 9 10.

8 Miscellaneous other instructions. (A) Interaction with staff In order to ensure uniformity of approach in conducting the audit of Annual accounts the A.G's should hold periodical meeting with their Group Officers and Sr.AOs/AOs/AAOs/SOs, at least once in a year regularly in order to improve the efficiency and functioning of that office and use this opportunity to exchange the experiences and informations based on the last cycle of accounts audit and with reference to latest developments like new International or ICAI standards. opinions. Government Instructions or notifications (for example recently for depreciation). For such meetings HQ sections in the office should prepare a digest of important and interesting cases noticed during the last cycle of audit. These meetings should be utilised to draw attention of field parties to and discuss the implications of new standard, ICAI opinions, Government Notifications, instructions from HQ Office etc;

B.

Maintenance of Data Bank for Audit. At HQ Sections following data bank records should be maintained:

(a) A Register of Important points and an Audit Note Book in respect of each auditee organisation should be maintained for handing over to the field party. (b) A Data Bank of each auditee organisation containing inter alia annual accounts for the last three years, Memorandum and Articles of Association of the Auditee company, Audit Report (including supplementary reports from statutory auditors) relating to the Auditee and week areas of accounting as assessed from past experience.

12

(c) A compendium of all orders applicable to an auditee organisation i.e. instruction issued by the Administrative Ministry and the department of Public Enterprises. (d) Latest copies of the ICAI's compendium of statements and standards of Auditing and Accounting. (e) Other relevant guidance Notes and opinions and some standard text books relating to ratios and financial statements analysis.

This Data bank will form a prime document based on which the audit plan for the year can be drawn up.

9. Sole Audits (i) Audit of Accounts of Statutory Corporations The instructions relating to the audit of Government Companies such as are: planning, maintenance of Data Bank, preparation of check list, documentation of checks exercised during audit, periodical meetings by the AGs and Group Officers/Sr.AOs/AOs/AAOs/SOs, except those relating to interaction with the statutory auditors, will also apply, mutatis mutandis, to the audit of PSUs/SEBs where CAG is the sole auditor. In addition, ICAI's "Guide to Company Audit" should be available as a reference document with the audit party.

(ii) Directions to audit parties Where CAG is the sole auditor, there is need to prepare a questionnaire similar to that issued by way of directions under Section 619(3) of the Companies Act, 1956 and get the response of the party conducting the audit on similar points so that such points which get covered in the audit of Government Companies are not lost sight of in the audit of organisations where the CAG is the sole auditor.

It has, therefore, been decided that AGs should issue a questionnaire to their parties, akin to directions under section 619(3) of the companies act, where CAG is the sole auditor, so that the weak or grey areas in the working of the organisation noticed can be probed/examined in detail.

13

(iii) Separate audit report (SARs) The SARs on the accounts of Statutory Corporations should contain comments on account as well as review of accounts which should indicate operational performance as well as the working results. Points of purely propriety nature should not be included in the SARs and should be taken up as draft paras. Specimen formats for SARs for State Electricity Board and State Road Transport Corporations are indicated in Annexure II & III which should be followed strictly. The SARs on the accounts of State Electricity Boards and other Statutory Corporation should be sent to the HQrs office for approval before issuing to the State Govt./SEB.

(iv) Quantum of Checks The quantum of checks for bodies for which CAG is the sole auditor will depend on (a) soundness of the internal control, (b) our past experience and familiarity with strong and weak points of the organisations, and (c) the relative importance of an area of operation to the organisation. The Quantum of checks to be exercised during the audit of accounts of Statutory Corporations under their audit control should be determined by the AG in the light of the above factors.

(v)

Adverse reports on the accounts of Statutory Corporations

In case where CAG is the sole auditor it will be our primary responsibility to express an opinion about the truth and fairness of the financial statements being certified. If irregularities of a serious nature persist year after year, these should be brought to the notice of the highest authority of the organisation as well as of the Government for rectification. If such irregularities persist, adverse opinion or a disclaimer can be considered and the case should be brought to the notice of the HQrs Office for auditable direction.

14

10 General Matters (a) Advice sought by statutory auditors

Under Section 619(3)(a), CAG has the power to direct the manner in which the accounts shall be audited and to give instructions in regard to any matter relating to the performance of the Auditors' functions. If AG is approached by any of the auditors for advice on any problem area during the course of audit; AG should seek the query in writing and furnish the reply also in writing.

(b) Revision of Accounts CAG office circular letter No.58-CA-IV/89-79 dated 4.2.1988 provides that suitable comments should be taken under section 619(4) of the Companies Act, 1956 in case the auditor does not disclose the full impact of revision of accounts in the notes/auditors reports on the account. Where accounts are revised at the instance of CAGs audit, the gross or full impact of CAG's observations should be disclosed in the notes on accounts by the company or audit; else, a comment should be made to bring out the full impact. (c) Arrears in Accounts of State Government Companies The AG should brief the Chairman of the Committee on Public Undertakings about arrears in finalisation of the accounts of the companies so that COPU could call the Chief Secretary to explain the action taken by the Government in tackling and overcoming the arrears.

1.3 Special Audit The Accountant General may receive request from the State Government or Management of the Government Companies/Corporations to undertake special audit. The following principles may be followed in such cases.

15

State Government Companies In terms of Section 233-A of the Companies Act, 1956 Where the Central Government is of opinion (a) that the affairs of the Company are not being managed in accordance with the sound business principles or prudent commercial practices; or (b) that any company is being managed in a manner likely to cause serious injury or damage to the interest of trade, industry or business to which it pertains; or (c) that the financial position of any company is such as to endanger its solvency; the Central Government at any time by order, direct that a special audit of the companies account for such period or periods as may be specified in the order, shall be conducted. However, audit in depth of the transaction can be conducted by this office under Section 619(3)(b) of the Companies Act, 1956. In the course of this audit, it should be possible to cover any particular transactions referred to by respective Government or the management of the company for special audit.

Normally, request for special audit as such need not be entertained. If such request is received and pressed for it should be examined on the merits and the proposal for conducting audit in depth of the concerned company under Section 619(3)(b) of the Companies Act 1956 be referred to CAG for approval.

Statutory Corporation The position varies from corporation to corporation. In certain corporation, audit conducted by the statutory auditors while in others CAG is the sole auditor. The request if any for special audit relating to corporation are required to be examined with reference to the provisions contained in the relevant Acts and after taking into account other relevant factors. In such case, CAG will be approached for prior approval with recommendations of A.G.

(Ref: CAGs letter No.119/ca-IV/Tech/1-80 dated 25.1.1980)

16

1.4 Scrutiny of Minutes of Board Meetings Major decisions in Government Companies/Corporations are taken in the meetings of the Board of Directors. The decisions and deliberations in brief are incorporated in the minutes of the meetings. The CAG has decided that the copies of the minutes together with connected agenda papers (where separately prepared) for submission to Directors, should be sent by the company/corporation to the Officer in charge of Audit Office concerned by name in a "Confidential cover". In respect of Companies, audit is entitled to get copies of Minutes, agenda etc, in terms of Section 619(3)(b) of the Act. The Officer receiving these documents should keep them in custody and review them and issue necessary instruction for detailed examination of selected items to be made locally.

Where the agenda papers are not separately prepared and the relevant files and documents are put up to the Board of Directors, the authorities concerned should not be asked to compile separate information for being supplied to Audit. In such cases it may be possible to trace the relevant documents from other minutes of the Board Meetings.

(Ref: CAG letter No.185-CA/87-RCA/63 dtd.14.7.1963)

The copies of the minutes and agenda papers from the date of commencement of audit or the date of incorporation may be called for from the companies/corporations. A review of minutes/agenda would give not only a clear picture of state of affairs of the company/corporations, but also enable audit to appreciate the difficulties faced by the company/corporation, from time to time as well as steps taken or proposed to be taken to rectify them. Major decision taken in respect of purchases, sales, capital investment, projects undertaken, availability of funds, profitability analysis, etc., should be examined in detail to the extent possible and specific points should be marked for detailed examination during local audit.

17

1.5 Audit Fee As authorized under respective Acts/Orders audit fees are realisable from Gujarat State Road Transport Corporation, Gujarat Electricity Board and Gujarat Industrial Development Corporation for the party days utilised in connection with audit of these Statutory Corporations. The rate of audit fee is ascertained from the A.G. (Audit)-II, Gujarat. By application of such rate audit fees are calculated by the Audit Officer, CAD HQrs (General) Section and collected as receipts of Audit Department under the appropriate head of account. No audit fees is levied in respect of audit of Government Companies, conducted under the provisions of the Companies Act, 1956 and in respect of those Statutory Corporations where the audit by CAG is supplementary (i.e. in addition to that of the Statutory auditors).

The rates of the audit fees for recovery from the above mentioned Statutory Corporations is calculated by the A.G. (Audit)-II, Gujarat, Rajkot on the basis of the formula laid down from time to time by the office of the CAG, the average cost of audit, calculated at the time of each revision of the time-scale of various categories of staff such as, AO, AAO, SO, Sr.Auditors and Auditor etc. is made applicable to the staff utilised during a particular year for the audit work conducted in the Resident Audit Officers at GEB, Baroda and GSRTC, Ahmedabad.

The local audit in respect of Head Office and various field offices of these corporations is conducted by this office. Further, the daily rates of audit fees calculated as per the Headquarters office formula by the Accountant General (Audit)-II, Rajkot are made applicable to the staff utilised for local audit of various units of above mentioned three Corporations.

A register for watching recovery of the audit fees is maintained in CAD (Headquarters) Section to ensure timely recoveries from the respective Statutory Corporations. The audit fees recoverable is intimated to the respective Corporation by 15th March every year and recovery of Audit Fees is effected by 31st March every year.

18

1.6 State Audit Committee An Audit Committee was formed on 27th July 1988 in Gujarat State as per CAG's suggestion for the purpose of expeditious settlement of outstanding inspection reports and paragraphs containing the audit objections on various activities of Government Companies and Statutory Corporations in Gujarat State.

(Ref: CAG's Circular letter No.292-CA-IV/92-85 dated 7-7-1988, Government of Gujarat, Finance Department D.O.No.JNV-1088/3230/A dtd.27-7-1988)

The following members are to act as members of the audit committee,

1. 2. 3. 4.

Director, Bureau of Public Enterprises Deputy Accountant General Representative of the respective Public Undertaking Representative of the Administrative Department in case of major issues.

19

CHAPTER - II COMMERCIAL AUDIT (HEAD QUARTERS) SECTION

2 Constitution and Control At the Headquarter Commercial Wing of A.G.(Audit)-I there are two controlling sections CAD (General) and CAD (Report) which functions under the supervisory charge of Group Officer(Commercial). Each Section is under the direct charge of an Audit Officer(Commercial). The duties and responsibilities of CAD HQrs, Report is dealt with in Chapter-III. This chapter deals with duties and responsibilities of CAD HQrs.(General) Section

2.1 CAD Head Quarter (General ) Section. Peripatetic audit parties of the commercial audit department are controlled by CAD (General) Section. The Administrative control of all the Resident Audit Offices located in the Head offices of Gujarat State Road Transport Corporations, Ahmedabad, Gujarat Electricity Board, Baroda, and Sardar Sarovar Narmada Nigam Limited, Gandhinagar also lies on this section.

2.2 Duties and Responsibilities The Commercial Audit( HQ) section is entrusted with the following duties and Responsibilities: (i) Arranging audit of Government companies and Statutory Corporations

The section is responsible to arrange audit of accounts received from the Companies/Corporations and to arrange propriety audit so as to complete the audit work as per prescribed time schedule and taking follow up action for issue of comments on accounts of audit of annual accounts of Government Companies.

20

The audit of accounts of Government Companies under Section 619(4) of the Companies Act, 1956 is selected by the Accountant General keeping in view the various Guide lines issued and criteria prescribed from time to time by the CAG. A "Non review " certificates may be issued by the Accountant General in case of companies not selected for audit. However such certificates may not be issued consecutively for three years an audit should be conducted at least once in three years.

As a result of supplementary audit under section 619(4)(b) of the companies Act 1956 of the accounts, the draft comments should be issued to the Management and the Statutory Auditors with prescribing time limit for their reply. On receipt of their reply an aid memoir should be prepared with further audit remarks and submitted to CAG for approval. On receipt of approval, the same may be issued to the company for placing it before the Annual General Meeting, at the same time and manner in which Statutory Auditors Report is placed in accordance with Provisions of Section 619(5) of the Companies Act 1956. In case where no comment on the accounts is noticed as a result of audit under section 619(4) of the Act a "NIL" comment certificate may be issued by the AG to the Company.

In the light of the draft comments issued by the AG after conducting the audit of its accounts under section 619(4) of the Act. If the Management of a Government Company decides to revise its annual accounts and specific disclosure regarding the revision of the accounts in the light of the AG's comments is made by the Management and the Statutory Auditors of the Company by way of a note to the revised accounts, a `Nil Comment certificate' may be issued by the AG after receipt of the revise accounts duly audited by the Statutory Auditors from the company. A copy of such certificate may be forwarded to the CAG for his informations as is done in the case of "Non Review Certificate" and "Nil comment certificate" on the accounts.

(CAG's instructions vide Confidential letter NO.58-CA-IV/89-39 dated 4-2-1988)

21

As per CAG's circular letter No 625-CA-IV/91-81dated 3rd September 1982, a review on the accounts of Government Companies (excluding in case of companies u/s 619(b) of the companies Act 1956 vide CAG's letter No 75-CA IV/156-75 dated 27-1-1976)alongwith the comments u/s 619(4) of the companies Act 1956 has to be issued to the companies who are required to publish as an annexure to the Directors Report as per instructions issued by the State Government in respect of Companies under their control. The review of accounts need not be sent to CAG Office for approval. In case of non-agreement by a Company to publish the review of accounts as an annexure to Directors Report, comment to that effect may be issued u/s 619(4) of the Companies Act 1956.

Thus duty of CAD General section include -

(i)

To edit and issue the draft comments on the annual accounts of Government Companies (including deemed Government Companies (under 619(b) u/s 619 (4)/read with section 619(3)(b) of the companies Act 1956 and also to check and issue the review of accounts, received from the local audit parties, with the relevant instructions of the CAG in this regard.

(ii)

To scrutinize the replies to the draft comments as furnished by the Statutory Auditors and the Management of the Government Companies and to finalise the comments on the annual accounts and to forward the same to the CAG for its approval. To verify and issue the comments on the annual accounts of Government Companies, as approved by the CAG, to the Managing Director of the Company. To furnish a copy of the issued comments to CAD (Report) Section

(iii)

Efficiency -cum-propriety audit

(i)

To edit, process and issue the inspection reports as a result of efficiency cum Propriety Audit conducted and to pursue the same with the Management till the Inspection reports are finally settled/closed.

22

(ii)

To check the Statutory Auditors report on the accounts of Government Companies under section 619(4) of Companies Act and to send the recommendation of the Accountant General regarding the performance of the Statutory Auditors, to the CAG, for the purpose of their appointment in future by the Department of Company Affairs for audit of the Company.

(iii)

To watch the receipts of printed annual accounts of Government Companies after completion of audit and to forward two copies of the annual accounts to the Comptroller and Auditor General (CAG). To select from the issued inspection reports of Government Companies, the Potential Draft Paragraphs and to furnish copies of "PDP" alongwith the key documents relating thereto, to CAD(Report) Section for its further processing, and finalisation for inclusion in the Audit Report(Commercial) of the CAG.

(iv)

General (i) To furnish the required material in respect of Government Companies and summarised Financial Results of each Government Company to CAD(Report). To inform to the CAG as and when paid up capital of the Government Company exceeds Rupees One Crore for issue of the directions under section 619(3)(a) of the Companies Act 1956 and to keep watch over the receipts of special reports from the Statutory Auditors of those Government Companies and to issue sub directions of the AG to the Statutory Auditors. To review such reports, select the important deficiencies pointed out by the Statutory Auditors in respect of the accounting system and other procedures of the company and intimate the same to CAD (Report Section) for inclusion in the Audit (Report) Commercial

(ii)

(iii)

To scrutinize the Memorandum and Articles of Association of newly formed Government Company. To scrutinise the accounting manuals of Government Companies, on its receipt from them. To scrutinise minutes of the meetings of the Board of Directors and Executive Committee of Government Companies including "deemed Government Companies." To deal with all general matters relating to Government companies and Statutory Corporations of Government of Gujarat. Prepare Annual Audit Plan as per CAG Office instructions for submission to the AG who will compile for the entire office for submission to CAG Office.

(iv)

(v)

(vi)

23

(vii)

To finalise tour programme of the local audit parties and resident audit parties and issue them to the Inspecting Officers and Resident Audit Officers. To issue audit intimation letters to Government Companies and Statutory Corporations to be visited by the audit parties. To supply the audit parties with the records relating to auditee organisation viz. outstanding inspection report files, Audit Note Book, register of minutes/agenda papers selected for detailed audit and office orders etc., as may be required by them for the purpose of audit.

Staff Matters: (a) To finalise the staff proposals and submit the same to the CAG.

(b)

To check the T.A. bills of the Commercial audit parties with their approved tour programmes and weekly diaries of work done and other records maintained at CAD(Head Quarters) Section and to forward the same to the Bills Section of the office for its sanctioned disbursement.

(c)

To arrange for the maintenance of Guard files of the circulars received from the CAG of India and arrange for their circulation to the commercial audit parties and Resident Audit parties and also to Audit Officers/Inspection Officers to serve as their guide for the audit work.

(d)

To act as a controlling and coordinator section in respect of CAD (Report) Section, various Resident Audit Officers and local/resident audit parties working in Commercial Audit Department.

2.3

Framing of Audit Programmes: (i) Periodicity

On receipt of the accounts from the companies/ corporations, audit programmes is framed by CAD General section. After approval of this programme by the Group Officer this is issued to Audit parties and Resident Audit Officers.

24

(ii) Duration of audit There are no well-laid down norms for fixing the duration of audit. The time allocation is closely reviewed to decide the duration of audit keeping in view the availability of audit resources and increase in the volume of activities of the auditee units.

The Inspecting Officers may indicate their suggestions for increase in the duration of audit for future audits in the Title sheet while forwarding the draft inspection reports. In consideration of these aspects duration of audit may be decided by CAD General Section. However, as decided by the C&AG, the duration of audit should not exceed 50 working days at a time.

The composition of local audit party may normally be one AAO/SO and two Auditors or two AAO/SOs and one Auditor keeping in view the nature, and complexity of the work of auditee organisation. The audit party may, before proceeding for audit, study the working of the company and details from data bank created. Besides, the supervision at Sr.DAG/DAG and AOs level may be done closely for important audits. Duration for supervision may also be provided after review of availability of audit resources and volume/ importance of activities of auditee organisation.

(iii) Communication of Programme An intimation of audit should be sent to the management of the concerned auditee unit at least two weeks in advance. Monthly/ Quarterly tour programmes as approved by the Group Officer(Commercial) should be intimated to the Inspecting Officers and local audit parties well in advance. A programme register shall be maintained by CAD(Headquarters) Section which should contain the following information: a) b) c) d) e) List of institutions to be audited : Period of audit Periodicity of audit Date of Commencement of audit Date of completion of audit.

25

f) g)

Names of officers who conducted audit Sanctioned mandays for the audit.

The names of new institutions as and when formed, may be entered in the programme register. Any deviation in the tour programme is required to be approved by the Sr.DAG(C). 2.4 Verification of outstanding paras of old IRs

The local audit parties shall strive to settle as far as possible, all the outstanding paras of previous inspection reports after verification of their compliance by the management. If necessary the paras may be settled after discussion with the head of the office audited.

The results of verification may be recorded in the verification sheet of Inspection Reports which may be submitted to the Group Officer(CAD) for final orders of settlement of the paras in the following format: Sr. No. Ref. to minute Item No. Subject in brief Points to be scrutinised by LAP Verification results Further remarks by CAG H. Qrs.

2.5 Receipt of documents from local Audit parties After the audit is completed the draft Inspection Report and other records are required to be submitted to Group Officer CAD) through CAD HQ General/CAD HQ report or Resident Audit Office, GEB/GSRTC/SSNNL as the case may be for further action. The draft Inspection Report is required to be issued within one month of its receipt. The potential PDP approved by the DAG(C) may be sent to CAD(R) section for further process.

26

2.6

Processing of materials after completion of Audit

The following documents received from the Local audit Party are to be processed as detailed below:

(i) (ii) (iii)

Title sheet and Inspection Report Review sheet of settlement of paras of previous Inspection Reports Preliminary audit observation memos issued to the management by local audit party and the replies thereto, if any Any entries made by Local Audit Party in the Audit Note book Results of verification of items of minutes and agenda notes selected, recorded by LAP in the register of Minutes Entry made on the first page of the draft Inspection Report regarding its discussion with the head of the auditee unit

(iv) (v)

(vi)

The draft Inspection Report duly edited/vetted is to be submitted to the Sr.DAG(C) for approval and issued within one month. The potential Draft Paragraphs cases if any are required to be sent to the CAD(Report) Section alongwith a copy of the para of the Inspection report and all its related papers for its further processing for Audit Report(Commercial) Government of Gujarat.

2.7 Issue and pursuance of Inspection Report After obtaining approval of the Inspection Reports from the Group Officer it should be issued to the Head of the institution concerned with instructions to furnish replies thereto within one month. In case of non-receipt of replies, the periodical reminders may be issued at appropriate level till it is settled. 2.8 Register for watching the receipt and issue of inspection reports is maintained. The following time schedule should be followed in this regard: Number (in days) i) Submission of report by LAPs/IRs after completion of audit to RAOs in case of GEB and ST and CAD HQrs.in case of Government Companies. 5 days

27

ii) iii) iv)

Examination at RAO/CAD HQrs. Editing and approval etc., by AO/CAD HQ/Sr.DAG(C) Typing comparison and issue

8 days 7 days 7 days

The issue of inspection report must in no case be delayed beyond one month from the date of completion of audit.

2.9

Special Report of Statutory Auditors under Section 619(3)(a ) of the Companies Act, 1956

A register shall be maintained in CAD Headquarter Section to watch the receipt of Statutory Auditors' reports under Section 619(3)(a) of the Companies Act, 1956 prepared as per the directions issued by the C&AG in case of the Companies whose paid up share capital exceeds rupees one Crore.

2.10 Accounting Manuals Each Government Company and Statutory Corporation is required to prepare a separate Manual describing its organisational set-up, its financial and accounting arrangement, general systems and procedures followed in running the day-today administration and so on. In case, the Manual is not prepared, the necessity of such manuals should be impressed upon by audit. However, vetting of Manual by audit is not necessary unless it is specially requested by the Company/Corporation.

2.11 Review of Balance Sheets of Companies The Companies other than Government Companies in which the State Government either individually or alongwith other State Government Central Government have invested more than 25% of the paid-up Capital Rs.5 lakhs whichever is less. Their Annual Report any observation of statutory auditors should be obtained and examined to ascertain the financial stability of the concern and adequacy of the return on the money invested by the Government.

28

In case where the Companies are continuously running at loss for several years, the position should be brought to the notice of Government and commented upon in the Audit Report if necessary.

2.12

Miscellaneous Duties of CAD(Headquarters) as controlling section

(i) Progress Report of Issue of Inspection reports To watch the prompt disposal of draft inspection report received from the field parties and the RAO(GEB), RAO(GSRTC, a return is to be submitted to the Sr.DAG(C) on 5th of every month. The Branch Officer incharge of the Section should ensure its submission.

(ii)

Inward Register

An Inward Register to watch the disposal of important correspondence received from CAG and Govt. etc., will be maintained in CAD HQrs. section A weekly report of outstanding letters are to be prepared and submitted to the Sr, DAG and once in a quarter to AG

(iii) Monthly Arrears Report The Monthly Arrears report received from RAOs, GEB and GSRTC are reviewed and consolidated with the monthly arrears report of CAD(HQrs & Report) Section. The consolidated monthly arrear report(MAR) is submitted to the Sr.DAG(C) by 5th of every month and to the A.G.(Audit)-I, Gujarat, Ahmedabad by 10th of each month.

(iv)

Staff proposals

Every year during June the proposals for continuance and/or increase of staff at CAD Hrs. and Report Section, Resident Audit Offices in GEE, GSRTC and SSNNL and Peripatic Audit parties will be prepared by the CAD HQrs, section and the same are furnished to the Admn. Section.

29

(v) Dealing with General Matters CAD HQrs. Section shall deal with all general matters relating to the C A Wing and necessary instructions in the form of circulars etc., are issued after getting approval of Group Officer. The calendar of returns shall be maintained by the CAD(HQrs.) and the various returns may be submitted on due date to the Group Officer, AG & C&AG etc.,

(vi) Register of Weekly diaries A register to watch the receipt of weekly diaries from LAPs should be maintained by CAD HQrs. The weekly diaries on receipt, may be entered in the registered with shall be put up to be a AO/CAD HQrs. for approval. In case of supervised audits, the weekly diaries are to be countersigned by the Inspecting officers. The LAPs are required to submit these diaries in form SY 324 on each Monday to the CAD Headquarters.

(vii) Register of TA Bill The register is intended to record the receipt of the TA Bill from Sr.Auditors and SOs /AAOs posted in the LAPs. The T.A. Bills shall be verified with reference to the tour programmes, dairies and leave account etc. and forwarded to the AO/Bills section for sanction and disbursement to the employees. The Inspecting Officers may submit the TA Bills directly to AO/Bills.

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CHAPTER - III COMMERCIAL AUDIT (REPORT) SECTION 3.01 GENERAL

The Commercial Audit (Report) Section works under the charge of Group Officer (Commercial). This Section is directly supervised by an Audit Officer (Commercial).

Duties and responsibilities of the Section : (i) Preparation, finalisation, printing and issue of Audit Report (Commercial) as per the prescribed time schedule. Selection of the topics (Government Companies and/or Statutory Corporations) for attempting comprehensive appraisal reviews for its incorporation in the Audit Report (Commercial) and obtaining the approval of Comptroller and Auditor General for this selection. Finalisation of Draft Paragraphs and Comprehensive Reviews for inclusion in the Audit Report (Commercial) and to make related correspondence with the State Government and Comptroller and Auditor General of India. Attending to the C & A.G's queries and remarks on the Draft paragraphs and Reviews and preparation of annotated copies of the material of Audit Report for submission to the C&AG within the prescribed time schedule. Vetting of the replies to the paras of Audit Report forwarded by the COPU secretariat and preparation of questionnaire for discussion of the Audit Reports by the Committee on Public Undertakings. Assisting A.G./Group Officer in attending COPU meetings for discussion of Audit Report and framing Report thereon. The Section should function as Bureau of Research and Vigilance while Reviewing the Reports of COPU and Audit Reports (Commercial) of other states.

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

(viii) To deal with editing issue and pursuance of S.A.R's and I.Rs in respect of all Statutory Corporations.

31

3.02

Selection of topics for Review

The Section should prepare and submit the proposals for selection of Companies/Corporations for review to be incorporated in the Audit Report(Commercial) every year. For the purpose necessary proposals may be called for from the RAO's (GEB)/(GSRTC)/ (SSNNL) and the various administrative offices of Government of Gujarat who control the various Government Companies and Statutory Corporations.

The Comptroller and Auditor General has decided that while sending proposals for selection of topics for review the information in the prescribed proforma annexure _____ should be forwarded.

(CAG's letter No.135-CA-II/271-81 dated 25.1.92)

Management of Review audit parties After approval for selection of topics for review by the C & A.G. the audit parties may be formed. Thereafter, detailed guidelines with audit plan, audit objection and steps to be taken to achieve them may be prepared. The actual review work should proceed thereafter.

AUDIT PLAN As a part of planning for audit clear-cut guidelines/instructions should be issued to the Audit Parties by the Accountants General before they take up local audit. The essential aspect of planning for comprehensive appraisal is to consider it as a project which may be divided into convenient working components by the Accountant General as per their requirement. For each component of the project detailed audit programme should be prepared. This audit plan will serve as complete guidelines for the audit personnel and should be prepared after the survey of audit entity. The audit plan should also contain the manpower requirement, division of work among the audit personnel, periodicity of report to Group Officer and Accountant General. Time allowed for field work, drafting, issue of preliminary observations, discussion with management, first and final draft should also be specified. A sample copy of the audit plan for the Review pertaining to Gujarat State Civil Supplies Corporation Limited adopted for the Audit Report (Commercial) 1992-93 is enclosed in Annexure.

32

The CAD (Report) Section should closely watch the progress of Review work and should initiate steps so as to adhere to the prescribed time for finalising the draft Review/Paras/ other Report materials by the Comptroller and Auditor General.

3.03. (a)

Instructions on collection of Information for DPs and Reviews.

The parties undertaking Review work should collect all incidental information/data during their first visit to the concerned company so that any supplementary question from the HQrs. office may be replied without having reexamined the records. The data may be analysed and presented in tabular form. Purely descriptive material should be reduced to the minimum and more emphasis is to be given to the Audit Comments on specific irregularities.

Reporting Style The reporting style should be direct, simple and precise. Long and complicated sentences should be avoided. Legal jargons and complex words may be avoided as far as possible. The parties have to adhere to the audit guidelines and objectives. The `Auditing Standards' of IAAD contains detailed guidelines regarding the reporting style of the Department.

Quality of Reports The relevance and quality of material included in the appraisals draft paras and comments which constitute the final product of the views of the Department in Commercial Audit, is of utmost importance. The high standards expected and maintained by the Department have to be continuously updated and should not only be directed at improving the functioning of the Commercial undertakings, but should also serve as aid and guidelines to the Management. The C&AG office issues instructions in this regard from time to time. This should be taken into account and followed scrupulously by field offices in their day to day functioning.

33

(b)

Time schedule for Draft material of Audit Report (Commercial)

The material of Audit Report (Commercial) should be sent to the C&AG's office in convenient batches within the time schedule fixed therefor. The C&AG's comments may be attended promptly within a fortnight. The Annotated Chapters need not be sent to C&AG in batches.

c)

Procedure for finalisation of Reviews.

The Reviewing Officer is required to submit the review materials complete in all respects to the Group Officer by due dates for approval. The Draft Paragraphs are to be submitted to the Group Officer by the Audit Officer (Report). The review/DPs received in CAD(R) Sn. are entered in the register of DPs and the disposal of the same is watched.

3.04

Issue of Draft Review/Paragraphs

The Reviews/DPs proposed for inclusion in the Audit Report (Commercial) should be sent to the Secretary of the respective Administrative Department by name and he may be requested to furnish his remarks/replies within six weeks of issue of copies of the DPs. The copies of the DPs should be endorsed simultaneously to the Finance Secretary to the Government and the Chief Executive of the concerned Company by name.

3.05

Layout of Audit Report (Commercial)

The layout of the Audit Report (Commercial) for inclusion of CAG's approved material shall be as under :

Preface Overview

34

Chapter - I General view of Government Companies and Statutory Corporations. INTRODUCTION Government Companies General view Statutory Corporations - General aspects Chapter - II Reviews relating to Government Companies Chapter - III Reviews relating to Statutory Corporations Chapter - IV Miscellaneous topics of interest relating to Government Companies and Statutory Corporations ANNEXURES Annexure `A' : List of Companies in which Government has invested more than Rs.25 lakhs but which are not subject to audit by the Comptroller and Auditor General of India.

Annexure `B' : Annexure `C' : Annexure `D' :

Statement showing particulars of up-to-date paid-up capital, outstanding loans, amount of guarantees given, etc. Summarised financial results of Government Companies for the year for which accounts were finalised. Summarised financial results of all Statutory Corporations for the year for which accounts have been finalised.

The prefatory remarks include a mention about certain Companies whose accounts are not audited by the CAG. The format, get up and printing style of the C&AG's Audit Report (Commercial) for the State of Gujarat for 1993-94 may be followed as far as possible as a model for the Audit Reports.
35

3.06

Procedure for the Finalisation of Draft Audit Report

Draft paras on important financial irregularities and cases of losses etc., are to be sent to CAG's office in convenient batches, as soon as they are ready, irrespective of whether they have been accepted by the Management or not. Three copies of each Draft Paragraphs should be sent in each batch consisting 5 or more draft paras for approval of CAG.

All DPs and reviews to be sent to CAG should be typed in half-margin with double space between the lines and atleast one copy should be on thick paper. On receipt of comments of CAG on the DPs/Reviews action should be taken to finalise the same by revising, modifying or amplifying them wherever necessary. The Draft Audit Report should be got typed in 4 copies and sent to CAG for approval after incorporating the Government's remarks on DP s if received by that time. Out of 4 typed copies of the Draft Audit Report, 2 copies should contain replies to the queries of the CAG. Copies of the DPs containing CAG's observations should also be returned alongwith the Draft Audit Report. The marginal remarks if any on the approved Audit Report may be attended promptly and their reply may be sent to the CAG's office after verification.

3.07

Printing of Audit Reports

(i) The Audit Report is printed in Government Press, therefore, AG should keep close contact with the Government for getting the Report printed expeditiously. The entire expenditure on the printing of Audit Reports will be borne by the State Government. Out of 1600 copies of the Audit Report, 25 copies may be bound in rexine, of which 10 copies without facimal signature of AG/CAG and 15 copies with card board title cover. The number of ordinary copies with paper title cover are to be decided by the A.G.. Overview should be printed in light colour papers prescribed by CAG. Detailed instructions have been issued by CAG's office regarding the font, letter size and the word processing of the texts of the Report at the Bond Copy stage.

Proof reading of the Audit Report should be done carefully to ensure that all errors are avoided in the final copies of the Audit Report.

36

(ii) After a bond copy of the Audit Report (Commercial) Government of Gujarat, approved by the CAG is received, the printing thereof is to be got done in the State Government Press. A period of two months is considered reasonable for printing of the Audit Report. Time schedule for printing the Report should be worked out in such a way that Audit Report is presented to State Legislature during the budget session of the next year. As far as possible photo offset method in printing may be adopted for saving time. In order to save time, Accountant General may also explore the possibility of the State Government getting the Audit Report printed in private presses without compromising the confidentiality of the Report.

3.08

Despatch of printed copies of approval

Nineteen printed copies of the Audit Report (12 ordinary copies and 7 copies bound in rexine) should be forwarded to CAG. 4 rexine bound copies should be dated, signed by Accountant General and space for counter signature of Comptroller and Auditor General left blank. 2 rexine bound copies, countersigned by CAG, when received back by AG are intended for submission with a Confidential letter addressed to the Finance Secretary to the Government. AG has to arrange for the delivery of the cover containing Audit Report to the Government. One rexine bond copy countersigned by CAG should be preserved for record of the Accountant General's Office and may be kept under safe custody of AG's Secretary. The date of signatures of the AG and CAG on the Audit Report is to be incorporated in the final copies of Audit Report by means of dated rubber stamp. A Press brief on Audit Report should be prepared strictly based on the overview and no separate approval of CAG to it is necessary. In this connection detailed instructions contained in 1321-Rep(s)/97-87 Circulated vide CAG's letter No.General Circular No. 25-Rep(5)/88 dated 30th November, 1988 must be followed.

3.09

Correction to the Final Audit Report

The CAG has ordered that the correction slips on the Audit Report should be issued in exceptional cases after the Audit Reports have been submitted by the CAG to the Finance Department but before these are presented to the State Legislature.

37

3.10

Placing of Audit Report before Legislature :

The Commercial Audit (Report) Section should keep a liaison with the Finance Department and Legislature Secretariat regarding the receipt of assent of the Governor for placing the Audit Report before the Legislature. A copy of the press brief should be handed over to the Finance Secretary for necessary action. The date of placing of the Audit Report before legislature should be intimated to the CAG promptly.

3.11

Action on the copies of Audit Reports received from other Audit Officers.

On receipt of Audit Reports from other Audit Offices, these should be carefully studied and important comments from these Reports should be circulated to the Inspecting Officers and Staff. In order to watch the receipt of copies of Audit Report, a register should be maintained in the following format.

Sr. No.

From whom received

Date of receipt

-(1)

---------(2)

----------(3)

Date of submission to A.G suggesting paras for circulation -------------(4)

Initials of A.O.

--------------(5)

Date of receipt of intimation of presentation of the Report to Legislature from the A.G. concerned (6)

Date of submission of note to A.O regarding circulation of paras approved (7)

Initials of A.O.

Remarks

(8)

(9)

38

The register should be reviewed by the Audit Officer and reminders for nonreceipt of the Audit Report wherever necessary may be issued.

3.12

Distribution of Audit Repot

The copies of Audit Report (Commercial) of Government of Gujarat may be supplied to other States A.G. Offices as soon as these are formally submitted by CAG to the Secretary, Finance Department (These should be sent Confidentially to the A.G. by name until their presentation to the State Legislature to avoid breach of privilege of the Legislature).

3.13

Committee on Public Undertakings.

The Committee on Public Undertakings (COPU) of Gujarat Legislature was constituted on 30th March 1968. The Committee consist of a Chairman and fourteen other members elected by the Gujarat State Legislative Assembly from amongst its members according to the principle of proportional representation by means of a single transferable vote. The functions of the Committee shall be : (a) To examine the reports and accounts of the Public Undertakings specified in the Third Schedule and such other undertakings as may be decided by the House from time to time. To examine the reports if any, of the C&AG of India on the said undertakings. To examine, in the context of autonomy and efficiency of the Public Undertakings, whether the affairs of the Public Undertakings are being managed in accordance with sound business principles and prudent commercial practices. To perform such other functions vested in the Public Accounts Committee and Estimates Committee in relation to the Public Undertakings specified in the Third Schedule as are not covered by clauses above or (a) to (c) as may be assigned to it by the Speaker of the House from time to time. Provided that the Committee shall not examine and investigate any of the following matters namely ;

(b) (c)

(d)

39

(i) (ii) (iii)

Matters of Major Government Policy as distinct from business or Commercial functions of the Public undertakings ; Matters of day to day administration ; Matters of the consideration of which, a machinery is established by the statute under which the Public Undertaking is established.

The Committee also takes up on its own independent examination of investigation into the State of affairs of a Company/Corporation. The Accountant General is generally requested by the Committee to attend the meetings when matters pertaining to such examination are taken up. He can also assist the Committee in pursuing such investigations, if asked to do so. 3.14 Rules of Procedure.

Rules of Procedure (Internal Working) of the Committee on Public Undertakings were framed and adopted by the Committee (COPU) on 12th August, 1968.

3.15

Preparation of Memo on Important Points :

Under Rule 14-A ibid, the Committee may request the Accountant General to assist them during oral evidence when Audit Paras relating to various undertakings are examined. The A.G. attends the meetings of COPU by special invitation on every occasion and helps members to understand the importance of a paragraph or an irregularity and what exactly can they do in dealing with difficult issues.

In order to help the COPU to deal with the important points, A.G.'s Office may prepare a memo of important points dealt with in the Audit Report, and send sufficient copies thereof Confidentially to the Legislative Assembly for distribution among the members of the COPU. Audit is not entitled to disclose to COPU any discussion between Audit and Government on matters not referred to in the Report.

40

The Secretariat of COPU can not call for particulars and documents regarding the irregularities etc., direct from audit for scrutiny and inspection by members of the Committee.

3.16

Watching progress of action taken on recommendation of COPU

(i)

It is the duty of the Legislative Secretariat to watch the action taken or proposed to be taken by the Government on the recommendations of the COPU arising out of the Audit Reports. A register is maintained in the Report Section to monitor the progress of action taken by the Department on the recommendations of COPU. The action taken by Government on the recommendations of COPU has to be reported to the Committee.

(ii)

Recommendations of High Powered Committee under the Chairmanship of Sh.S.L. Sakhder. On 1-8-1992 the CAG constituted a High Powered Committee to study the response of the State Governments (and their public enterprises) to his Audit Reports, and to the recommendations of the concerned Public Accounts Committee and Committees on Public Undertakings in the context of those reports.

3.17

Statutory Corporations - Matters to be dealt with in the Conventional Audit Reports and Separate Audit Reports :

The Separate Audit Report for the Statutory Corporations, to be placed before the Legislature will contain important points arising out of the Audit of the Annual Accounts - of Statutory Corporations, which are considered essential to bring to the notice of Legislature and the Government. This report will be distinct from the Conventional Audit Report which will contain such material falling under propriety Audit as is considered necessary to be brought to the notice of legislature. Any important matter in regard to which audit considers it necessary to express a view critical of the Administration should be reserved for the Conventional Audit.

41

CHAPTER - IV LOCAL AUDIT

4.01 (i)

Duties and responsibilities of Local Audit Parties. Local audit of Government Companies is taken up for audit of Annual Accounts under Section 619(4) of the Companies Act, 1956 and for efficiency-cum-propriety audit. Local audits arrange by CAD(HQ) General Section :

(ii)

(a)

Efficiency-cum-propriety audit of Government Companies, Statutory Corporations viz. Gujarat Industrial Development Corporation, Gujarat State Financial Corporation, Gujarat State Warehousing Corporation, unit offices of Gujarat State Road Transport Corporation and unit offices of Gujarat Electricity Board. Audit of records maintained at Head Offices of Gujarat Electricity Board and Gujarat State Road Transport Corporation is conducted by the respective Resident Audit Officers. Audit of Annual Accounts of Gujarat State Road Transport Corporation which are centrally finalised at its Head Office is done by Resident Audit Officer, GSRTC. In case of Gujarat Electricity Board, Trail Balance is prepared at its various circle offices and consolidated at its Head Office. Audit of Trial Balance at Circle units is done by Audit parties departed by CAD(HQrs.) and consolidated Annual Accounts are audited by Resident Audit officer, Gujarat Electricity Board.

(b)

Audit of Annual Accounts of Government Companies including deemed Government Companies and other Statutory Corporations viz. Gujarat State Financial Corporation, Gujarat Industrial Development Corporation and Gujarat State Warehousing Corporation is conducted by deputing Audit parties by CAD(HQrs.) General Section.

42

(iii)

The Resident Audit Officer (GEB) conducts the audit of final accounts and various records maintained at GEB Head Office located at Baroda. Audit parties are provided local Audit of various field offices of GEB and also audit of Government Companies in case such need arises. Similarly RAO, GSRTC conducts the audit of records maintained at GSRTC Head Office except the audit of the unit offices (including those locates in the premises of Head Office at Ahmedabad) The CAG has prescribed the quantum of audit checks for audit of accounts and other records of GEB and GSRTC. AG is authorised to issue Audit Certificates on the final Accounts of these Corporations after obtaining approval of CAG for the separate Audit Reports on the accounts of GSRTC and GEB

(iv)

The audit of Gujarat State Financial Corporation and Gujarat State Warehousing Corporation is conducted on supplementary basis. The Statutory Auditors in these Corporations are appointed in accordance with the provisions of the Statutes governing them. The audit party conducts the audit in the Head Office of each Corporation and also audit of certain Units selected by Local Audit Party and approved by the CAD(HQrs.) Section. The separate Audit Reports are issued by A.G. after obtaining the approval thereto from the C.A.G.

(v)

The audit of Gujarat Industrial Development Corporation is entrusted to the Accountant General by the Government of Gujarat under the provisions of Gujarat Industrial Development Corporation Act, 1962. Presently this audit is entrusted for the period upto 1996-97. The Local Audit Party conducts the audit of annual accounts and efficiency-cum-propriety audit in the Head Office of the Corporation and also conducts audit of selected field office's after obtaining the approval of the Group Officer. The Separate Audit Report is issued by the A.G. after it is approved by the Comptroller and Auditor General.

4.02

Procedure for Local Audit : The annual accounts present the financial pictures of a Company/ Corporation. The audit party should apply its mind to appreciate any transaction in its proper perspective. The party should study the systems of internal check and control, budget manual, administrative orders and annual report and should also review the agenda and minutes to form an idea of the institution as a preclude to commence the audit.

43

The purpose of checks to be exercised by local Audit Party may be summarised as under : (i) (ii) (iii) To ascertain the authorities competent to sanction expenditure to receive or pay money or to incur liabilities on behalf of the institution. To understand the system of accounts followed by the institution. To check as far as possible, the accuracy of original records viz., Cash book, Cash Vouchers, Receipt and Issue Vouchers of Stores, Bin Card, Stores ledger posting in financial ledgers etc.; To see that all transactions are in accordance with the decisions contained in the minutes of the meetings of Board of Directors ; To investigate unusual items of expenditure ; To review the procedure of stock taking and of the pricing of goods on hand ; To check the final results of working of the institution through the annual accounts ; To check the compilation of annual accounts from the original records and to suggest the corrections in the classification of transactions.

(iv)

(v) (vi) (vii)

(viii)

During the course of audit, the audit observations may be communicated/issued to the Head of the office by way of "Preliminary Observations Memo", a copy of which should be kept by the Audit Party. This is done with a view to obtain the reply of the Department to the audit observations. The acknowledgement of the person receiving the Memo should be obtained and kept in a systematic and chronological order on record by the Audit Party. Every effort may be made to get the replies to the audit queries. However, the drafting of inspection report should in no case be delayed due to non-receipt of replies to Preliminary Observations Memo. It is the primary responsibility of the Management to satisfy audit by furnishing replies to the audit observations. The inforamtions/figures required during audit may be compiled by the Audit Party from the files, records and reports. However, a confirmation of the figures compiled should be obtained from the Management. No objection should be dropped without the specific approval of the Audit Officer incharge of the party or the Audit Officer Incharge of CAD(HQrs.) Section. If any objection has been dropped from the draft Inspection Report during its discussion with the head of the office, the minutes of such discussion should be kept to enable Headquarters to understand the circumstance under which the objection has been dropped.

44

4.03

Audit Note Book :

The Comptroller and Auditor General has now decided that the maintenance of Audit Note Book may be discounted. (CAG Circular letter No.120-CA IV/69-81 dated 18th March 1988)

4.04

Inspection Report

The Inspecting Officer would examine and verify the replies to the Preliminary Observations Memos (POMs) received from the institution and decide the matters to be included in the inspection report. The draft Inspection Report(DIR) may be prepared and finalised after discussion with the head of the office. The party should forward to CAD(HQrs.) Section the D.I.R./ certified annual accounts and draft comments of the accounts, title sheet (in revised form as per Annexure) and rough notes etc., with a covering list immediately after the audit but in any case not later than five days after completion of audit.

4.05

Conduct of Staff during Inspection ;

All the members of the audit inspection party should conduct themselves professionally and try to avoid any misunderstanding or friction with the members of the auditee institution. They should not indulge in verbal criticism and avoid frivolous objections.

4.06

Attendance of Audit Party

The AAO/SO of each Local Audit Party is supplied with an Attendance Register which should be submitted, after having signed by each member of the party, to the Inspecting Officer when he visits the Party.

The Casual Leave (CL) may normally be availed by members of the Audit Party after its prior sanction by the sanctioning authority. The CAD (HQrs.) Section should maintain the C.L. account of Local Audit Party (LAP) members.

45

4.07

Quantum of Checks :

The Inspecting Officers (SO/AAO/AO/Sr.AO) while doing the original work are required to supervise the work of Auditors/Sr.Auditors.

In compliance with the instructions of the CAG, the CAD(HQrs.) has then fixed and circulated the duties of RAO/AO/AAO/SO and Auditors/Sr.Auditors in Headquarters Section and in LAP/RAO etc. which should be followed in discharging duties by the officers of the Audit Party.

The special points to be seen during a specific audit have been dealt with separately in this manual which should be kept in view by the LAPs during the concerned audit.

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CHAPTER - V GENERAL OUTLINE OF GOVERNMENT COMPANIES

5.01

INTRODUCTION

Government Company means any Company in which not less than fifty one percent of the paid-up share capital is held by the Central Government or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments and includes a Company which is a subsidiary of a Government Company. (Section 617 of the Companies Act).

The following special features are applicable in the case of a Government Company : (i) The auditor of a Government Company shall be appointed or re-appointed by the Ministry of Law Justice and Company Affairs, Department of Company Affairs of the Government of India on the advice of the Comptroller and Auditor General of India (Section 619(2) of the Act ibid) (ii) The C.A.G. shall have power to direct the manner in which the Company's accounts hall be audited by such auditors; and to conduct a supplementary or test audit of the Company's accounts by such person or persons as he may authorise in his behalf (Section 619(3) of the Act.).

(iii) The auditor of a Government Company shall submit a copy of his audit report to C.A.G who shall have the right to comment upon, or supplement the audit report (Section 619(4) of the Act). (iv) It is obligatory on the part of the Company to place the C.A.G's comments under sub-section (4) of Section 619 alongwith the audit report before the annual general meeting of the Company (Section 619(5) of the Act.). (v) The Central Government/State Government or both (as the case may be, by virtue of share-holding in the Company) shall cause an annual report on the working and affairs of that Company to be prepared, within three months of the Annual General Meeting, to be laid before the Parliament/State Legislature alongwith the audit report and C.A.G's comments referred to above (Section 619 of the Act).

47

(vi) The Central Government is empowered to modify any of the provisions of the Act (other than Sections 618, 619, and 619 A) by notifications, as agreed by both Houses of Parliament, specifying in the notification that any of the provision shall not apply ; or shall apply, with modification, to any Government Company (Section 620 of the Act).

5.02

Memorandum of Association and Articles of Association.

The Memorandum of Association is the principal document, which, upon registration, gives the Company its legal existence (with the Certificate of Incorporation) and defines the scope of its activities. Articles of Association are the rules relating to the management of the internal affairs of a Company. Unlike Memorandum of Association, Articles are only the subsidiary document dealing with the manner in which the objects for which the Company has been formed are to be carried out. Nature of Scrutiny when a new Company is incorporated On receipt of intimation of incorporation of a new Government Company, Memorandum of Association and Articles of Association should be called for and examined in the C.A.D.Headquarters Section or by the party undertaking the first audit of the Company to see that it has no contradictory provisions than of the Companies Act, 1956 ; and to see that

The Governor/State Government has reserved to themselves sufficient powers in the Memorandum and Articles in respect of the matters specified below ;

(i) (ii) (iii) (iv) (v)

Power to issue mandatory direction/instructions to the Company Power to appoint vis-a-vis remove Managing Director and other Directors. Power of sanctioning of posts carrying pay exceeding a specified limit. Power of incurring capital expenditure on schemes over a specified limit. Sale, buy or dispose of or otherwise part with the whole or substantially the whole of the undertaking of the Company.

48

(vi)

Power of formation of a subsidiary Company.

After completion of scrutiny, the documents are forwarded to the C.A.G. with the remarks of A.G. If, as a result of the scrutiny, it appears that the Memorandum and/or Articles require some amendments, the question of such amendments can be taken up with the State Government only after obtaining the instructions of C.A.G. in this regard.

5.03

Books : Statutory/Optional

Every limited Company, whether large or small is required to maintain books for the purpose of recording financial transactions, as well as other happenings in the life of the Company. These books can be grouped under two heads : A: B: Statutory or Compulsory Books Statutory or Optional Books

Statutory Books are those which a Company is required to keep under the provisions of the Act. Non-maintenance of these books exposes the management of the Company to penal action. The following are the Statutory books for Companies :

(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix)

Register of Members and Index thereof. Register of Debenture holders and Index thereof Register of Mortgages and Charges Register of Directors, Managing Director and Secretary Register of contracts, Companies and firms in which Directors are interested Register of Company's investment in Companies in the same group Register of Company's investment not held in its own name Register of Director's Share holding Minutes Book

49

(x) (xi)

Accounts Book Branch Register, if any and its duplicate at the Registered Office

(xii) Register of investments made in shares and debentures of bodies corporate in the same group Optional Books are those which a Company is not bound, under the law, to keep. But all Companies find it desirable to maintain for the purpose of keeping proper records. These books are termed as non-statutory books. The following are the optional books generally maintained by Companies : 1. 2. 3. 4. 5. 6. Register of Transfers Register of Documents sealed Share certificate Books Register of Probates and letter of Administration Director's Attendance Book Log Book.

Register of Company's Investments (Section 372) A Company is required to maintain a register called Register of Company's investments and when it makes investments in Shares, debentures of a Company or companies in the same group, it has to enter therein within three days of making of investments, the following particulars : (a) (b) (c) Name of the Company in which investments is made Date on which made Nature and extent of investment.

Accounting Books In terms of Section 209 of the Act, every Company must keep at its registered office or any other place in India, as the Board of Directors think fit, books of accounts in respect of : (a) (b) (c) All sums of money received and spent by the Company together with details as to receipts and expenditure. All sales and purchases of goods by the Company ; and All assets and liabilities.

50

In case of a Company which has a Branch Office, whether in or outside India, it is required that proper books of accounts pertaining to transactions at that branch office must be kept at that office and summarised returns of the same, prepared quarterly sent to the registered office or any other place as decided by the Board. A Company may keep the books of accounts of the Company at any other place in India other than the registered office of the Company ; but in that case, the Company must file with the Registrar a notice in writing giving the full address of the other place, within seven days of the decision of the Board. The Act has not prescribed what exact books of accounts should be maintained by a Company, except what have been enumerated supra. It is for the accountants and auditors of the Company to decide what books should be maintained. However, the following books are commonly in use in any Company :

1.

Journal

This books is to record opening and closing entries rectifying entries and other transactions which can not commonly be passed through any other books.

2.

Cash Book

This book is to record all transactions in which cash is either received (Debit) or paid (Credit) by the Company.

3.

Ledger

This is the book in which all business transactions finally find their place under their respective account heads. The transactions are entered either on debit side or on credit side as per nature of transactions.

For the convenience of posting and for classification, ledgers are divided into :

(i) (ii) (iii)

Sales ledger for recording personal accounts of debtors ; Purchases ledger for recording personal accounts of creditors; General ledger or Impersonal ledger for recording nominal accounts and real accounts ; and Private ledger for recording such accounts as are to be kept confidential.

(iv)

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4.

Sales Book

In this Book are entered particulars of goods sold on credit from day to day as well as the names of those to whom goods have been sold.

5.

Invoice or Purchases Book

This book is used for recording all credit purchase of goods. This book is to record both the particulars of invoices received for goods and expenses incurred thereon. 6. Inward Returns Book

This book is used to record particulars of all goods which are returned to the Company. 7. Outward Returns Book This book is used for recording all goods returned by the Company.

8.

Bills Receivable Book This book is to record the particulars of all bills of exchange for which the Company is to receive payment.

9.

Bills Payable Book

This book is to record the particulars of bills of exchange for which the Company is to make payment. 10. Seals of Company/Register of sealed Documents.

Every Company is required under the Companies Act to have its name engraved on a hard substance (say steel or copper or brass) called the seal of the Company. This is the official signature of the Company. The documents which are required to be stamped with the common seal are : 1) 2) 3) 4) 5) 6) Share certificates Debentures Trust Deed Power to use foreign seal Power of attorney Contracts and other important documents

52

A Company is required to maintain a seal book to record particulars of all documents on which Company's seal has been affixed. 11. Log Book

This Book is useful for recording miscellaneous important matters affecting the Company. e.g. erection of a new business premises, opening of a new branch, etc.

5.04

Scope of Audit.

The audit of transactions and accounts of a Government Company is conducted by the Indian Audit and Accounts Department under sub-section (3) (b) and (4) of Section 619 of the Act,

The sub-section (3) (b) refers to the supplementary or test audit of the Company's accounts and records by or on behalf of C.A.G. This is generally known as efficiency-cum-propriety audit. The results of such audit are communicated to the Management of the Company or the State Government

Important Matters are brought to the notice of the State Legislature through Audit Report (Commercial). Under sub-section (4) of Section 619 of the Companies Act, 1956 the C.A.G. is empowered to comment upon or supplement the report of the Statutory Auditors of the Company. This is in addition to the test audit under subsection (3) (b) of Section 619 referred to above. The comments under sub-section (4) are required to be placed before the annual general meeting under sub-section (5) of Section 619 ibid.

The comments under sub-section (4) of Section 619 may have a direct bearing on the accounts or any lacunae in the statutory auditor's report. Major irregularities having financial significance arising out of supplementary or test audit under Section 619 (3) (b) may be included in the comments under Section 619 (4).

5.05

Appointment of Auditors.

The auditor of a Government Company shall be appointed or reappointed by the Central Government on the advice of the C.A.G. The auditor is required to submit a copy of his audit report to the CAG, who has a right to comment upon or supplement to the report under Section 619(4).

53

In the case of appointment of auditor of a Government Company for the first time, the Company itself is to take up the matter with the Central Government (i.e. Department of Company Affairs), who would appoint the auditor in consultation with the C.A.G. To help rendering advice by the C.A.G. to the Central Government (Department of Company Affairs) it is necessary that the A.G. must initiate action in respect of appointment of auditors for the second and subsequent accounting years by evaluation of the performance of auditors appointed previously. The evaluation is made to see whether auditors should be given re-appointment or not. (a) Where there are no correction to accounts or comments on accounts on the auditor's report or both, the performance of auditors may be considered satisfactory. When there is correction/comment, but this is not of a serious nature, the performance is considered satisfactory. When comments and corrections are of serious nature, the performance may be unsatisfactory, which calls for any of the four measures as detailed in Annexure-I (Proforma on appointment of auditors.)

(b)

(c)

The performance report of the auditors and recommendations for the reappointment should receive personal attention/approval of the A.G. Guidelines for assessment of the performance of Statutory Auditors issued by Headquarters are included in the Annexure. The evaluation of performance of auditors should the communicated to the C.A.G. at the same time, when the draft comments under Section 619(4) of the Act are forwarded to the C.A.G for approval. The following details should be forwarded to the C.A.G. in connection with the evaluation of performance of auditors. 1. 2. 3. Instructions in the prescribed proforma. Replies of the Management and Auditors in respect of draft comments proposed. Where the performance of auditors is considered unsatisfactory, the proforma should be accompanied by a self contained note on the important errors of commission and omission taking into account the explanations or clarifications given by the auditors. A statement of corrections made in the accounts and the auditor's observations in regard to each of these items should also be sent in cases where there are no comments but the accounts were revised based on the observations of audit.

4.

54

5.06

Power to issue directives.

The Comptroller and Auditor General is empowered under Section 619(3)(a) of the Act to "direct the manner in which the accounts shall be audited" and to give such auditor instructions in regard to any matter relating to the performance of his functions as such. The C.A.G. has decided that such directions should be issued to the Statutory auditors of Government Companies having paid-up capital of rupees one Crore and above. Whenever a State Government Company has paid-up capital of rupees one crore and above, the C.A.G. may be approached for issue of directions.

The replies/answers to the various matters specified in the directions should be prepared in the form of a report and the report should be submitted by the Statutory Auditors to the C.A.G. alongwith certified copies of Balance Sheet and Profit and Loss Account as soon as possible after certification of the accounts but not later than two and half months from the date of certification. A copy of the Report to be endorsed to the A.G. The report submitted by the statutory auditors as per directions under Section 619(3) (a) of the Act is in addition to the report furnished by him under Section 227 of the Act. The matters referred to by the Statutory Auditors in their special report may be taken up with the Management/Government, if felt necessary. A summary of the remarks of the auditors relating to deficiencies in accounting, internal control, etc., may be incorporated in the CAG's Conventional Audit Report (Commercial).

5.07

Balance Sheet and Profit and Loss Account

At every General Meeting of a Company held in pursuance of Section 166, the Board of Directors of the Company shall lay before the Shareholders a Balance Sheet as at the end of the period specified in sub-section (3) of Section 210 and a Profit and Loss Account for the period (Section 210(1) of the Act).

The Balance Sheet of a Company may be drawn up in vertical form in pursuance of notification issued by the Central Government on 23rd December, 1978 in exercise of powers conferred under sub section (1) of the Act.

55

A Company should file three copies of Balance Sheet and Profit and Loss Account within thirty days of the holding of Annual General Meeting (the date in terms of Section 166 of the Act), irrespective of the fact whether the annual general meeting has been held or not on the said date or audited accounts have been laid or not before the annual general meeting (Section 220 of the Act.)

Part I of Schedule VI of the Companies Act and instructions therein provide the form and the manner in which Balance Sheet and Part II of the same Schedule specify the requirements in which Profit and Loss Account should be drawn up with relative disclosures to be made. As per sub-section (3) of Section 210 of the Act, it is mandatory for every Company to prepare a Profit and Loss Account from the date of its incorporation. The intention is that every Company should render expenditure and income account even though it may have incurred such expenditure or received income during the period of construction. There will be no objection if such account is called "development account" or "expenditure during construction" or by any other suitable name within the meaning of Section 210 (3) of the Act and there would be adequate compliance of statutory requirements. There is no objection to the Company transferring the entire expenditure during construction to an account "Expenditure during Construction" which could be shown on the asset side of the Balance Sheet to be adjusted in future years as and when the Company earns profit. Such Profit and Loss Account should be an "account" by itself and not a schedule to the Balance Sheet.

A comment under sub-section (4) of Section 619 of the Act should be made, when either no Profit and Loss Account has been prepared by a Company or Profit and Loss Account is shown as Schedule to the Balance Sheet.

5.08

Statutory Auditor's Report :

In preparing their report to the members, the Statutory Auditors shall take into consideration the provisions/matters contained in sub-sections (1A) and (3) of Section 227 of the Act. Under sub-section (4A) of Section 227 of the Act the Central Government has issued the "Manufacturing and other Companies (Auditor's Report) Order, 1975". In terms of this order, the auditor is required to report on specified matters.

The auditor's report must state whether, in their opinion, and to the best of information supplied to them and explanations given to them the accounts of the Company give all information required under the Companies Act in the manner so required and whether the accounts give a true and fair view of:
56

a)

the state of the Company's affairs as at the end of its financial year (in the case of the Balance Sheet) ; and the profit or loss for its financial year (in the case of the Profit and Loss Account).

b)

The report must also state whether the auditors have obtained the information and explanations which to the best of their knowledge and belief were necessary for the purpose of audit and whether, in their opinion, proper books of accounts as required under the Companies Act, have been kept by the Company, so far as it appears from an examination of the books of the Company and proper returns adequate for the purpose of their audit have been received from branches not visited by them, and whether the Company's Balance Sheet and Profit and Loss Account dealt with by the report are in agreement with the books of accounts and returns where any of the matters is answered in the negative, or with any qualification, the report of the auditors must state the reason for the answer. The term "True and Fair" in Section 227(2) of the Act has increased the responsibility of the auditors in the matter of verification of assets and liabilities of a Company for Balance Sheet purposes. Mere arithmetical accuracy is not enough. The true and fair position of the Company must depend upon very careful consideration of such problems as the valuation of stock-in-trade, inadequacy of, or excessive provisions for depreciation, existence of secret reserves, etc.

The failure of the Statutory Auditors to bring out deficiencies in the accounting which results in the Balance Sheet and Profit and Loss Account not rendering a true and fair view should automatically be considered for a comment under Section 619(4) of the Companies Act.

5.09

Selection for audit under Section 619(4)

All Companies are not selected for audit under Section 619(4) of the Act. The following criteria have been laid down for selection of State Government Companies for audit under Section 619(4) of the Act :

a) i)

Annual audit will be conducted in the case of : All Central Government Companies having a paid-up capital or turnover of Rs.20 crores or above. All State Government Companies having a paid-up capital or turnover of Rs.5 crores or above.

ii)

57

iii) b)

Any Company selected for appraisal or review. Any other Company could also be selected for audit annually at the discretion of Accountant General/Pr. Director of Commercial Audit subject to reasons being recorded and intimated to Comptroller and Auditor General of India.

c)

Audit will be conducted once in three years in the case of all other Companies (Central, State and 619-B Companies).

d)

In the case of units of Companies allocated to a field office other than the Principal Audit Officer in respect of the concerned company, the selection of units will also be made by the Principal Audit Officer and intimated to the concerned field officer. The selection of Companies/units for review under Section 619(4) of the Companies Act, 1956 may be made by the A.G./Pr. Director of Commercial Audit in the beginning of each financial year. The list of Companies and units selected should be kept in the personal custody of the Principal Director of Commercial Audit / Accountant General.

e)

f)

The Review of Accounts should be prepared only in respect of such Companies which qualify for selection annually. In respect of Companies selected for audit under Section 619(4) on a rotational basis and for all 619-B Companies no review of accounts should be prepared.

Review of Accounts will also be prepared in respect of Companies which are selected for comprehensive appraisal/review.

5.10

Procedure for issue of Comments under Section 619(4).

The audit queries/enquiries on the audit under Section 619(4) of the Act are issued by the Inspecting Officer to the Management for immediate reply. On receipt of their replies, the draft comments are finalised by the Inspecting Party. An aidememoire incorporating audit queries, replies of the management, replies of the auditors and further observation of Accountant General, alongwith the finally proposed comments, is sent to the C.A.G. On receipt of approval of the C.A.G the final comments/nil comments, as the case may be, under Section 619(4) of the Act are issued.

58

In the case of a Company not selected for review for the year under Section 619(4) of the Act, a non-review certificate may be issued to the Company on receipt of certified accounts.

In case Accountant General has no comments to offer under Section 619(4) of the Act, a nil comment certificate may be issued to the Company by the A.G. without reference to C.A.G. The following information should be supplied at the time of forwarding draft comments both in the case of original and revised accounts and including the cases where nil comments are issued : a) b) c) Date of approval of accounts by Board of Directors Date of certification by Statutory Auditors Date of receipt of accounts : 1) 2) d) Provisional Approved

Date of : i) commencement of audit ii) completion of audit

e)

Date of issue of draft comments/queries to : i) ii) Management Auditors

g) 5.11 a)

Proposed date of annual general meeting. Form for communication of comments under Section 619(4) The nil comments certificate should be issued in the following form : "I have to state that the Comptroller and Auditor General of India has no comments upon or supplement to the auditor's report under Section 619(4) of the Companies Act, 1956 on the accounts of __________________________ for the year ended_______.

59

b)

The Non-review Certificate shall be issued in the following form : "The Comptroller and Auditor General of India has decided not to review the report of the auditors for the year _________ on the accounts of _____________ and as such he has no comments to make under Section 619(4) of the Companies Act, 1956".

c)

The statement of comments issued under Section 619(4) of the Companies Act should contain the heading : "COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF ......................... FOR THE YEAR ENDED ........"

N.B. :- The nil comments certificate/non-review certificate/comments under Section 619(4) of the Companies Act should be issued under the signature of the Accountant General.

5.12

Revision of Certified Accounts :

When certified accounts are amended they are re-approved by the Board of Directors and are also re-certified by the Statutory Auditors. The amended accounts usually contain disclosure of having revised the accounts and in the absence of such disclosures, the statutory auditor's report makes a reference to the revision of the accounts.

Where the revision of accounts substantially affect the working results or bring out important points of significance having bearing on the accounts, the fact of revision of accounts together with its impact on the accounts, if substantial, should be disclosed in the financial notes or in the auditor's report. Audit should not be satisfied with a mere mention of the fact that the accounts have been revised in the financial note or in the statutory auditor's report. In the event of failure of the Company/auditor to make a proper disclosure, it would be desirable to make a succinct comment to bring out the effect of the revision made in the accounts. In case of any doubt as to whether the impact of revision was substantial or not, the matter may be referred to the Comptroller and Auditor General before issue of comments under Section 619(4) of the Companies Act.

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5.13

Re-Opening of Accounts :

Normally Companies which had already adopted their Balance Sheet in their Annual General Meetings in terms of Section 210 of the Act, should not be allowed to amend the same at a subsequent date. However, there should be no objection to such a course where there are special circumstances to re-open the accounts like wrong calculations and the resultant inaccurate provisions of Development Rebate Reserves, which, if not rectified, would result in loss to the concerned Companies. It should, however, be ensured that such amendments in accounts should be adopted by Companies only in Annual General Meeting held pursuant to provisions of Section 210 and 166 of the Act and not in the Extraordinary General Meetings. The amendments to the adopted accounts by a Company may be reported to the Comptroller and Auditor General and not to the Department of the Company Affairs.

5.14

Review of Accounts

A review of accounts or financial review is prepared by the Inspecting Party at the time of audit of accounts of a Company under Section 619(4) of the Act. The review is intended to bring out in summarised form certain key data and financial highlights of the Company's operation and performance indicating trends for three consecutive years. As the review has to cover comparative data for three consecutive years, this should be prepared only in respect of such Company which qualifies for audit under Section (4) of the Act as referred to in paragraph 5.09 supra.

In cases where it is proposed to supplement the auditors report, the review of accounts may be issued by A.G. alongwith comments under Section 619(4) of the Act with the prior approval of the C.A.G .

In cases where there are no comments under Section 619(4) of the Companies Act, the review of accounts may be issued by A.G. without reference to the C.A.G. The review of accounts may be published as an annexure to Director's Report indicating that review has been prepared by the C.A.G. In the event of any company not accepting the arrangement, the review will form part of comments under Section 619(4) of the Act. The review of accounts of financial institution shall be done in a separate format. 5.15 Preparation of Review - Instructions :

61

The review of accounts is a financial analysis evaluating and interpreting a Company's financial position, operation and performances. The broad outline, various items and grouping on which review is to be prepared are indicated below :

Financial position : A table summarising the financial position of the Company under broad headings for three years upto the year of review is to be prepared. The total of liabilities and assets shown in the table should agree with corresponding total in the Balance Sheet. Liabilities : a) Paid-up Capital : If there is advance for shares or shares or share suspense account, such amount must be merged and exhibited under the head as a "paidup capital (including advance for share, etc.)".

b)

Reserves and Surplus : Any subsidy for fixed assets and grants etc., must be grouped under the head. Borrowings : This includes long-term and short-term loans, deferred credits and cash credits. However loans due for repayment within the next one year and "Interest accrued and due on loans" included under this head in the Balance Sheet should be excluded from borrowings for the purpose of review and grouped under "Trade dues and current liabilities".

c)

62

d)

Trade dues and other liabilities : This includes provisions also. The portion of loan and interest accrued and due excluded from borrowings should be included in this head. Ways and means Advances, if any, not repaid within one year of the drawl of such advance may be treated as long-term loan for the purpose of review.

Assets : a) Gross block : The original cost of assets taking into account all additions, deletions and adjustments shown under Fixed Assets Schedule should be shown in this head. Less depreciation : The accumulated depreciation up to the end of the year shown under Fixed Assets Schedule should be taken. Net Fixed Assets : The results of (a) - (b) be exhibited under this head.

b) c)

d)

Capital works-in-progress : Capital work-in-progress may be shown against this head.

e)

Investments : Investment should not be merged with current assets but be shown as a separate item against this head. Current assets, Loans and Advances : The various Current assets, Loans Advances shown in the Balance Sheet should be grouped together and shown against this head.

f)

g)

Fictitious assets : Under this head "Accumulated loss" should be shown as a separate item. Other fictitious assets must be merged and shown as "Miscellaneous expenditure".

N.B. Capital employed for Companies other than financial institutions : This represents net fixed assets plus/minus working capital.

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For reckoning, the following items should be excluded. (i) (ii) (iii) (iv) Capital work-in-progress Development expenses Investments unless the Company trades in investment Provision for gratuity and pension under Trade dues and other liabilities.

For financial institutions : The capital employed is worked out taking the mean (Opening balance plus closing balance divided by two) of the following items. Paid-up Capital Free Reserves (those not funded) All borrowings (long-term finance, short-term borrowings, Debentures, Bonds etc.) Deposits : (A Financial Institution for the purpose of review is one whose major source of revenue in Profit and Loss Account is from financial business. The declaration as "Financial Institution" by the Reserve Bank of India need not be considered for the purpose.) Net worth : This represents paid-up capital plus reserves and surplus minus intangible (fictitious) assets.

ii)

2.

Capital Structure : To work out debt equity ratio debt should included long-term loans, Public deposit and deferred payment liabilities without netting them off with deferred debts extended by the Company. Equity should include paid-up equity share capitals and free reserves (C.A.G. Circular No. 38-CA - IV- 15-88 CAIV/ Tech 5/89 dated 6.2.90)

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3.

Reserves and Surplus :

Under this head, the reserves and surplus accumulated at the end of each year (of the three years ) as shown in the table (financial position) should be given in narrative form and the percentage of "Reserves and Surplus" to total liabilities during the three years to be worked out and indicated. However, committed Reserves should be excluded in the calculation here, although those were included in the figures in the table (financial position).

4.

Liquidity and Solvency :

a) The percentage of current assets to total net assets should be worked out and indicated here. The term "net assets" represents the total of assets side shown in the Balance Sheet. (Accumulated losses and intangible assets should not be excluded while working out "net assets".

b) The percentage of current assets to current liabilities should be worked out and indicated here. This is known as current ratio. The figures in the table are taken for this calculation. The ratio measures the ability of the Company to pay debts as they become due over the year. A ratio of 2 : 1 or higher is often preferred for Manufacturing Companies.

c)

The percentage of "quick assets" to current liabilities should be worked out and incorporated here. This ratio indicates the ability of a business to meet its immediate commitment. Generally the ratio should be 1 : 1 and can be a very realistic guide to solvency.

i)

Quick assets may include cash and bank balances, Sundry debtors (excluding bad and doubtful debts), Loans and Advances and Deposits. Quick assets should exclude items like suspense, Advance payment of Income tax/Sales Tax, Prepaid expenses or other payments which are not recoverable, etc :

ii)

From Current liabilities and provisions the provisions for Income Tax and gratuity should be excluded.

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5.

Working capital : This is worked out by deducting current liabilities including provisions (but excluding gratuity provision and staff security deposits) from the current assets, loans and advances as shown in the table (financial position). Investments should, however, be included under current assets only in case of Companies trading in investments, if the net result is a minus balance, for all the three years, this item need not be included in the review. The quantum of working capital during each of the three years should also be related to the value of production at cost (excluding depreciation) in terms of months. The value of production at cost excluding depreciation is to be worked out as follows : Value of production (Item 9 of the review) Add : Loss .......... Deduct profit ......... ............... ............... ............... TOTAL

-----------------------------

Less depreciation for the year ............... Value of production at ............... cost The sources from which the working capital requirements were met should also be indicated in a narrative form.

6.

Sources and uses of funds :

The total resources and how they are distributed should be brought out in respect of the current year and not for all the three years as in the case of other ratios. The difference between the previous year's figures and current year's figures of the sources have to be worked out and shown in the review for the current year. Sources include both external and internal, the details of which are given below :

Internal sources Reserves & Surplus Provisions Depreciation Sale of investments/ fixed assets

External sources Capital Borrowings Current liabilities Decrease in net current assets

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Utilisation of the sources to be indicated as : i) ii) iii) iv) v) Gross fixed assets Investments Capital work-in-progress Current assets, loans and advances Miscellaneous expenditure including accumulated loss.

In the case of utilisation also difference between previous and current year's figures have to be worked out and shown in the Review. It has been decided that a para on sources and uses of funds should be incorporated in the review of accounts if the aggregate of funds available from both internal and external sources works out to a plus figure. On the other hand, if the total sources work out to a minus figure no para on this is to be included.

7.

Working results

The working results of the Company for three years up to the current year should be given : i) Profit/Loss as per accounts Add/deduct : prior period adjustments shown above the line Add ii) : Development Rebate Reserve, Investment Allowance etc.

Profit/Loss for the year________ Add/deduct prior period adjustments shown above the line.

iii) Profit/Loss before tax iv) v) Tax provision Profit/Loss after tax

Note :- The adjustments relating to past periods will occur either under item (i) or item (ii) as the case may be. One of these columns will have to be eliminated depending upon the facts of the case.

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Percentage of profit before tax to a) b) c) Sales (including rebate if any allowed ; gross fixed assets ; capital employed.

Percentage of profit after tax to a) b) c) net worth ; equity capital ; capital employed

The percentage need not be worked out if the Company has incurred loss during the period of review. (CAG letter No. 155 CA IV/8-88 (CAIV/Technical 1/90) dated 10-4-90).

8.

Cost trends This should be given in the following form :

Sales Less profit : before tax Add loss : Cost of sales Percentage of cost of sale to sales

Year ..... .... ... .....

Year .... .... .... .....

Year ... ... .... ....

Sales should include only that part of the revenue which has been earned by the Company in the course of the trade that is being carried out. In other words revenue earned on miscellaneous items, sale of assets, interest, income etc. need not be taken for computing sales. (CAG's letter referred to in Para 8 above may be referred to)

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9. Production performance The value of production for three years should be given in the following form : 1. 2. 3. 4. Sales Closing stock of finished goods and work-in-progress Opening stock of finished goods and work-in-progress Value of Production (1 + 2 + 3)

The percentage of value of production to net worth and total net assets (total of the asset side of the Balance Sheet) should be worked out and indicated for all the three years for which the review is prepared. Accumulated losses and intangible assets should not be excluded while working out net assets.

10.

Inventory and Production :

The comparative position of inventory and its distribution for the three years should be given as below : 1. 2. 3. 4. 5. Raw materials and components (including in transit) Stores and materials (including in transit) Goods in progress Finished goods Other items (eg. Other tools and equipments to be specified)

The following further details should be indicated :

(i)

Stock of raw materials, stores, spares and loose tools in terms of production requirements, (for so many months) Calculated as : Raw materials, stores and spares held X 12 months -------------------------------------------------------------Raw materials and stores consumed

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(ii)

Goods in process in terms of months' value of production at cost. Calculated as : Goods in Process X 12 months ---------------------------------------Value of Production

(iii) Finished goods in terms of months sales : Finished goods X 12 months -------------------------------------Sales

11.

Sundry debtors and Turnover A table indicating the volume of book debts and sales for the three years should be given in the following form :

As on (date)

Book debts ---------------------------------considered ---------------------------------Good Doubtful Total (Rupees in lakhs)

Sales Percentage of debts to sales

Another table in the following form : The agewise break-up of book debts as on (date) ............ is indicated below : Debts outstanding (i) (ii) for less than one year between one and two years ............. ............. ............ ............. ------------TOTAL -------------(Rs. in lakhs)

(iii) between two and three years (iv) Over three years

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C.A.G has prescribed a separate proforma as regards review of accounts relating to financial/investing Companies.

It is seen that some of the Companies change the classifications of some of the items of income and expenditure from year to year or recast the figures of previous year to suit the classification adopted in the later year. It has, therefore, been decided that the review of accounts should be based on the classification in the latest accounts and earlier year's comparative figures should also be recast and made comparable.

In the performance indicates brought out in the review, if there is nay violent fluctuation in any particular ratio for a particular year, the same should be suitably explained through an explanatory note to help the reader to draw an appropriate conclusion :

Approval of Review of Accounts : It has been decided that Review of Accounts need not be sent to C.A.G for approval alongwith the comments. The A.G. may ensure the correctness of the review prepared in the office and issue it alongwith "Nil" comments or approved comments.

5.16

Companies falling under Section 619 B

By virtue of Section 619 B of the Act, the audit of certain companies is covered by the provisions of Section 619 of the Act. The Companies covered are those in which not less than fifty one percent of the paid-up Share capital is held by one or more of the following or any combination thereof, as a result of which the Company receives the same treatment as if it were a Government Company :

a) b) c) d) e)

the Central Govt. and one or more Government Companies any State Govt. or Governments and one or more Government Companies ; the Central Govt., one or more State Governments and one or more Govt. Companies. the Central Govt. and one or more Corporations owned or controlled by the Central Govt.; the Central Govt. , one or more State Governments and one or more Corporations owned or controlled by the Central Govt. ;

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f) g)

one or more Corporations owned or controlled by the Central Govt. or the State Government ; more than one Govt. Companies

The following institutions or Corporations are regarded as owned or controlled by the Central Govt. for deciding whether a Company comes under the purview of Section 619 B of the Act. (i) (ii) (iii) (iv) (v) Nationalised Banks General Insurance Corporations of India Life Insurance Corporation of India Industrial Development Bank of India Industrial Financial Corporation

The Co-operative Institutions, the Unit Trust of India and Industrial Credit and Investment Corporation of India are not considered as institutions owned or controlled by the Central Government for the purposes of Section 619 B of the Act. The C.A.G. had decided that from the accounts for 1979-80 onwards, all the 619 B Companies shall be subject to audit for comment under Section 619 (4) of the Act every year. No review of accounts shall be prepared for the present in respect of such Companies. The examination of Memorandum of Association and Articles of Association of these Companies for suggesting alteration etc., need not be made. The Ministry/Department of Company Affairs held the view that the C.A.G. has all the powers of Statutory Auditors as stated in Section 227 (1) of the Act by virtue of provisions of Section 619 of the Act which have been made applicable to such Companies. However, the CAG has decided in respect of such 619 B Companies which have been selected for efficiency-cum-propriety audit need alone be called for scrutiny of agenda and minutes in Central audit. In case any Company does not agree to send the agenda and minutes, the case may be reported to the C.A.G for being taken up with the Department of Company Affairs.

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The extension of efficiency-cum-propriety audit to 619 B Companies is approved by the C.A.G. on selected basis on the recommendation of various field offices. Headquarters office has clarified vide Circular letter No. 2-CA II Commercial/13 dated 15th March 1993 that for paucity of staff such audit of deemed Government Companies had not been conducted so far except with approval of CAG office but since staff position is no longer a constraint and considerable flexibility exists with the A.G. to decide on priority of auditees prior permission of C.A.G. office for such audit is no longer required and may be taken up by A.G. according to own priority so as to discharge A.G's audit responsibilities more effectively and for that no request of additional staff will be entertained. This audit in the beginning be limited to examination of systems, procedures, financial controls, major contracts etc. and Inspection Reports be issued only after they are approved by the A.G. The propriety audit could be extended to other spheres at a later stage.

The Draft paragraphs pertaining to 619 B Companies should be processed in the same manner as in the case of Government Companies. The Administrative Department which deals with that Company should be identified and the copy of the Draft Paragraphs be forwarded to the integrated Finance/Finance Department of the State Government. In case such identification is not possible, the Draft paragraphs may be issued to the Finance Department of the State Government. In the event of any difficulty being experienced in regard to acceptance of the D.P. by the Administrative Department/Finance Department, the case may be referred to the C.A.G. (C.A.G's letter No. 124/O & M(RC)/43-81 dated 31.7.71)

C.A.G. Office vide letter No.1575/CA-II/310-89 dated 20-9-90 clarified that as the `deemed' Government Companies have not been placed under the administrative control of any ministry, the provision under Section 619(A) of the Companies Act, 1956 are not applicable to them. The Annual Reports on the working of `deemed' Government Companies are also not laid before the Parliament/State Legislature, consequently, these Companies do not fall within the purview of Committee on Public Undertakings.

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Subsequently, further clarified (C.A.G. Office D.O. letter No.956 CA-II/31089 dated 4th August 1992) for the purpose of audit which do not fall within purview of COPU that the Govt. is contemplating amendment of Section 619(B) of the Companies Act, 1956 and the matter would be examined a fresh after changes contemplated in the Act ibid are made.

5.17

Instructions on Audit under Section 619(4)

In the course of audit under Section 619(4), Government Audit need not conduct the routine check carried out by the Statutory auditors in respect of receipts and payments to ensure that no money has been misused or embezzled. The following instructions should be kept in view :-

1.

Maintenance of Accounts on Cash basis :

The maintenance of accounts on Cash basis by a Company is violable of the provisions of Section 209 of the Act. When a Government Company switches over to Cash system of accounting, a suitable comment under Section 619(4) of the Act should be made about this violation. 2. Review of Cost Audit Report :

While conducting the supplementary audit under Sub-Sections 3(b) and (4) of Section 619 of the Act, the requirement of the Cost Audit Rules as notified by the Government of India, Department of Company Affairs should be kept in view. The review of Cost Audit Reports arises only in cases where the Central Government have issued directions to the Companies which are required to maintain cost accounts in terms of Section 209(1)(d) of the Act.

3.

Non-production of Records :

While conducting audit under sub-section (3) and (4) of Section 619 of the Act, relevant books and papers should be called for. Documents may not be called for unnecessarily and be restricted to requirements of audit. In case there is any difficulty in getting the papers , the matter should be brought specifically to the notice of C.A.G when comments under Section 619(4) are forwarded.

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4.

Negative report of Statutory auditors

In cases where results of supplementary audit conducted under Section 619(4) of the Act do not bring out any substantive comment which would affect or supplement the position stated in the Auditors' Report or our comments do not substantially alter the profit or loss or various items of assets and liabilities materially, a Nil comment certificate in the prescribed form may be issued. For instance, if an auditor has qualified that he could not certify the correctness of closing stock of stores and spares or the balance under the loans and advances, sundry debtors, sundry creditors etc., for the reasons mentioned in the report, it will not be necessary to issue a comment that a particular items of stores had been overvalued by Rs.4000 or certain liabilities has not been provided for. As it is not possible to visualize and codify all the situations for the purpose, each case may have to be decided on merits and utmost care should be taken in deciding whether a comment taken by us is material in the context of the negative report issued by the auditors. Doubtful cases may be referred to the C.A.G.

The areas of major deficiencies in accounts mentioned in statutory auditors' report may be brought to the notice of the Government for appropriate remedial action. If necessary, these may also be discussed with the Secretary of the Administrative Department controlling the Government Company. In case, remedial action is not taken or action taken is inadequate, these may be developed into draft paragraph for inclusion in the Conventional Audit Report.

5.

Violation of Section 619 (5) of the Act.

The following procedure is applicable while the annual accounts of the Company have been adopted without considering the comments of the C.A.G :

(i)

The violation of provisions of Section 619 (5) of the Act need not be commented upon under Section 619(4).

(ii)

When cases of violation of Section 619 (5) are noticed, the matter may be reported to the State Government, the Department of Company Affairs and the Registrar of Companies simultaneously. The C.A.G should also be informed of the case.

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(iii)

A consolidated record of all such violations should be kept and a comment on the violations of the provisions of the Section 619(5) of the Act may be made in the Audit Report (Commercial).

6.

Auditors' Report on Section 619 (3) (a) :

Defects/Short comings have been appearing year after year in the supplementary reports submitted by Statutory auditors in pursuance of the directions issued by C.A.G. under Section 619(3)(a) of the Act and in certain cases these have been persisting since inception of the Company.

It is possible that the Companies may have certain inherent difficulties in introducing the systems or removing the shortcomings or it might be that the introduction of requisite systems are not commensurate with the advantage to be gained. Such cases are to be examined with a view to seeing whether it is really necessary to follow certain procedure or the systems as commented upon by the Company Auditors in their reports and if so, what are the consequences of the failure of the Company to do so.

7.

Provision for Gratuity :

If no provision for gratuity is made in the accounts according to accrual basis or if an inadequate provision is made, a note should be given in the accounts disclosing the total accrued liability for the gratuity and the amount provided for.

In case the Company does not provide for the gratuity liability or does not state the quantum of gratuity liability by way of a note and the auditors also do not qualify their report, a suitable comment on this aspect may be made under Section 619(4) of the Act.

8.

Accounting Standards :

During the course of audit of annual accounts of the Government Companies including the Companies under Section 619 B of the Companies Act, 1956, the Commercial audit parties conducting such audit may ensure that the various "Standards on accounting" (A.S.) issued by the Institute of Chartered Accountants of India (Please refer to the "Compendium of Statement and Standards of Accounting) are followed by the Government Companies.

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In brief, the Accounting Standards issued by the above Institute, till January, 1994 are mentioned here under :

A.S.NO. AS + 1 AS + 2 AS + 3 AS + 4 AS + 5 AS + 6 AS 7 AS 8 AS 9 AS 10 AS 11 AS 12 AS 13

Subject in Brief Disclosure of Accounting Policies Valuation of Inventories Changes in Financial Position Contingencies and events occurring after the Balance Sheet Date Prior period and Extra ordinary items and Changes Depreciation Accounting Accounting for Construction Contracts Accounting for Research and Development Revenue Recognition Accounting for Fixed Assets Accounting for the effects of changes in foreign exchange rates. Accounting for Government Grants Accounting for investments

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CHAPTER - VI Efficiency-cum-performance Audit and Planning for Audit

The Concept and practice of audit of expenditure in Government Departments and Public Enterprises has undergone a radical change in the wake of the growth and development of parliamentary democracy and introduction of successive Five year plans for national development - social, economic and industrial involving massive investment by the Governments at the centre and in the States. As a result the scrutiny of individual transactions appear inadequate, as it tended to mistake the tree for the woods. It became essential and necessary for audit to ascertain whether the various development programmes and welfare activities, which formed part of a whole plan, are being executed and their operations conducted economically and whether they are producing the results expected of them.

The concept of efficiency audit was introduced to meet this changing requirement in the pattern of Government expenditure. The introduction of successive appraisal of the public sector undertakings and evaluation of the mechanism of Audit Boards for Public Sector Undertakings of Central Government with built-in external expertise was another extension of technique of efficiency-cum-performance audit to a major area of massive investment by the Central and State Governments.

The efficiency-cum-performance audit is a technique of Audit adopted to assess and evaluate the economy, efficiency and effectiveness of development schemes / projects / organisation. (i) (ii) (iii) The economy means the operation at the lowest possible cost, Efficiency is effective output without unnecessary waste of resources including adherence to time schedule ; and Effectiveness is achieving programmed objectives and goals and ensuring that intended benefits arise in real terms.

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The approach of audit has therefore been re-oriented and comprehensive review of the working of the projects, organisations etc. in terms of their goals, objectives and programmes is conducted to assess how far the results were achieved effectively from the use of available resources of men, material and money. Efficiency-cum-performance Audit is directed to examination of systems, procedures, planning, implementation and operational performance of programmes, activities etc. and bringing out, among other things, weakness and deficiencies as also lapses of various types including those relating to individual transactions for appropriate action.

Audit of public enterprises in India is not restricted to financial and compliance audit ; it extends also to efficiency, economy and effectiveness with which these operate and fulfill their objectives and goals. Another aspect of audit relates to questions of propriety; this audit is directed towards an examination of management decisions in sales, purchases, contracts etc. to see whether these have been taken in the best interests of the undertakings and they conform to accepted principles of financial propriety.

Audit is an instrument of accountability. But an equally important purpose of audit of public enterprises in India is to help the Government and the enterprise management improve their efficiency and effectiveness. In view of all-embracing nature of this type of audit it is also known as Economy, Efficiency and Effectiveness audit or Audit of 3 EEEs. The audit envisages a comprehensive review of project/scheme/ activity. The main phases of the performance reviews are : i) ii) iii) Development of Audit Plan Conducting the substantive and compliance tests and collection of evidence ; Preparation of Review report and its approval by HQrs.

A detailed plan of audit is chalked out indicating the guidelines for investigation, marking out the offices/field units to be visited and overall strategy for collecting relevant data and the time allotment for completing the review. Necessary format and questionnaire are also prepared for collection of important data relating to the various aspects of the scheme not only from offices of units proposed to be visited but also from other units for being made use of for consolidation and processing while framing the review. Man-power planning for carrying out the detailed review is equally important.

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In regard to the execution of review, the process involved in such review is as under : A. Plan : i) ii) iii) Understanding the topic to be reviewed. Planning and conducting the preliminary survey. Identifying important points for investigation.

B.

Execution : iv) v) vi) vii) viii) ix) Preparing the background note, the guidelines and questionnaire for review. Clearance from Headquarters alongwith suggestions for conducting review. Preparing detailed audit plan, audit criterion, audit steps and audit programmes. Conducting tests and obtaining audit evidence and issue of audit notes to heads of offices inspected. Preparing points for report. Finalising draft report.

C.

Reporting x) Reporting - first draft to A.G.- A.G.'s draft para to Government. - A.G.'s draft para to Headquarters.

xi)

Revision of report by Headquarters/A.G.

xii)

Finally approved report for inclusion in the Audit Report.

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Sources : A) A book on Government Auditing - Forward by Shri T.N.Chaturvedi, former Comptroller and Auditor General of India. (1) (2) B) Article on Efficiency-cum-Performance Audit - a comprehensive approach by Shri R.K.Chandrashekharan. Audit of Public Enterprises in India by Shri R.C.Suri. Audit Guide Series No. 3 & 4.

Creation of Data Bank Appraisals are conducted periodically for which either the State Government Public Companies as a whole or an important and significant area of the working of a Company are selected. Accountant General of the States are required to prepare Audit Plan personally for a minimum period of three years.

For the purpose of framing appraisals, data bank should be established in every Accountant General's office where all relevant material from the inspection reports, phase audit reports, audit under Section 619(4) of the Companies Act is preserved. The data bank should also collect material coming to notice through other sources like review reports, media, coverage, other literature and technical papers and magazines, articles and publications from professional bodies like Institute of Chartered Accountants, the Budget papers, schedule of new expenditure, the annual administrative reports of the Departments, the annual reports of the Companies and their annual accounts and audit appraisal prepared by other State Governments as well as Central Government for Central Government Undertakings, reviews conducted by the concerned Secretary and Minister, examination by the Committee of Public Undertakings, the professional magazines bringing out comparative studies of the industry as a whole as well as interest between the different undertakings of the same States or other States from MIS Reports, the agenda items and the Board Meeting minutes, the international profiles prepared by the World Bank, IMF, ADB as well as by various International agencies like the United Nations and Common Wealth Secretariat on appraisal prepared for the financial institutions and other feasibility studies and reports of various consultancies, publication analysis by Bureau of Public Enterprises of the Government of India and the State Government etc.

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The above list is only illustrative and not exhaustive. The idea is to have as much material with the data bank as possible and also to update it so that as and when it is decided to conduct an appraisal, most of the background material is available with the State Accountant General to prepare the background paper and guidelines. The guidelines are required to be sent to the Headquarters office where they will be examined and suggestions would be made by Headquarters so as to make the appraisal pinpointed and relevant.

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CHAPTER VII ENERGY AUDIT

The Government of India has been concerned with energy conservation for quite some time. The agencies like Petroleum Conservation Association and National Productivity Council etc., have been propagating the measures to be taken for conservation of energy. In cost Accounting Record Rules framed under Section 209(1) (d) of the Companies Act, 1956 for various classes of Companies, adequate provisions have been made requiring the maintenance of cost records, interalia in respect of energy consumed in various forms the cost of energy consumption per unit of the output and analysis of reasons for variation from standards etc.

The Companies Act, 1988 introduced Section 217(1) (e), according to which the Board of Directors of every Company is required to disclose in their Annual Report the following particulars regarding conservation of energy, technology absorption, foreign exchange earnings and out go in such manner as may be prescribed. In exercise of the powers conferred by the above amended Section, Ministry of Industry, Department of Company Affairs has issued Notification (G.S.R 1029 dated 31-12-1988) entitled Companies (Disclosure of particulars in the Report of Board of Directors Rules). This notification contains the rules for the Companies to make disclosure of particulars relating to the following matters : (a) (b) (c) Conservation and consumption of energy Technology absorption ; and Foreign Exchange Earnings and outgo.

The above mentioned rules came into force from the 1st April, 1989. However, the Government has issued a clarification through a Press Release dated 23rd June 1989 that these rules will apply to the Companies whose annual accounts have closed on or after 1st April 1989.

These rules apply to all Companies irrespective of whether there is manufacturing activity or not, and whether the Company is in project stage or operational stage. The measures taken by the Company for energy conservation and :

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(a) (b)

additional investments and proposals if any during the year under report, for energy conservation may be spelt out in narrative form in the Report of the Board of Directors of the Company.

The Comptroller and Auditor General of India, vide Circular letter No.3/D(Cost)/EN Audit/ 90 dated 27th February 1992 has circulated the following :

(a) (b)

Guidelines for Energy Audit dealing with interalia the salient features of the G.O.I. Notification dated 31/12/1988 and A Model Questionnaire on Energy dealing.

The copy of above referred Circular of C & A.G. has been circulated vide No.CAD/B/G(Genl)/Vol.IV/Tr.36 dated 1-6-92 which may be referred to by all the Commercial Audit Parties and Audit Officers (Commercial) during the course of local audit of Government Companies and Corporations in Gujarat.

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SECTION II CHAPTER-VIII Gujarat Small Industries Corporation Limited.

1. Introduction:The Gujarat Small Industries Corporation Limited was incorporated on 26th March 1962. The authorised share capital of the Company as on 31-3-95 was Rs.10 crore divided into one crore equity shares of Rs.10 each.

1.2 Main Objects The main objects are, (a) to aid, counsel, assist, protect and promote the interests of the Company, Small industries in the State and to provide technical and managerial assistance in procurement of raw materials, machinery, equipment, tools and appliances etc..

(b) to provide such industries with the assistance in the procurement of rawmaterials, machinery, equipments, tools and appliances etc.

1.3 Present activities of the Company. The Company is at present engaged in the distribution of raw materials such as Pig iron, iron and steel, plastic raw materials, chemicals, natural rubber, Titanium Dioxide etc. to Small Scale Industries Units, assisting such Units in the import of raw materials and other materials. It also renders marketing assistance to them to increase their turnover. It provides financial assistance by way of bills discounting to them.

2. Applicability of Acts and Rules:The Companies Act, 1956 is applicable to the Company. 3. Details of books and records maintained:The Company maintains Raw materials Purchase book, Sales book, General ledger, Revenue ledger, Personal ledger, Journal book, Bank payments book. The Main Cash book, Petty Cash book, Debit/Credit notes ledger and Stock ledger etc.. 4. Organisational Set-up The management of the Company is vested in the Board of Directors including Chairman and the Managing Director. The Directors of the Board are appointed by

85

the Government of Gujarat. The Managing Director looks after the entire working of the Company under the superintendence of the Board of Directors. He is assisted by two Dy.General Managers, Financial Controller(Finance and accounts) and the Secretary and Personnel Manager etc..

5. Accounting Organisational Set-up The Finance and Accounts Department of the Company is headed by the Financial Controller who is assisted by a Dy.Manager, Sr. Executive/Executive, three Junior Executives and other staff members.

6. Managerial information system The Company follows a system of collection of information regarding daily cash/credit sales, daily collection and position of bank balance etc. and the same is reviewed by the management. 7. Delegation of powers The Board of Directors have delegated the powers of purchases to various branch managers, Dy.General Manager, Financial Committee and the Purchase Committee etc. which may be referred to during audit.

8. Inventory Control System The Company is keeping constant watch to see that the inventory turnover ratio is maintained low. Slow moving and non-moving items are identified by analysing the age of inventory and such items are sold out to reduce the inventory holdings. The daily stock position is reviewed. The monthly stock statement is prepared and the decision for sale of materials lying in stock since long is taken.

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9. Budgetory Control System The Company prepares sales budget and the actual sales are monitored daily/weekly/monthly to see that the budgeted target is achieved. The meeting of all the departmental heads and branch managers in Head Office is held every month to review the sales position and the performance of each branch/department for the previous month and necessary instructions for increasing the sales are issued to them.

10. Purchase procedure and repairs and maintenance procedure The purchases are centralised in the Company. The raw materials like pig iron, iron and steel and plastic etc. are purchased as per the quota fixed by the Joint Plant Committee from the main producers viz. SAIL and TISCO etc..

The repairs and maintenance of office equipments like air-conditioners, computers, typewriters and water coolers etc. is arranged by awarding maintenance contracts. The Committee is formed to arrange the repairs and maintenance of office building and vehicles by inviting quotations and submit the necessary proposal for approval by Managing Director/Board of Directors.

11. Provident Fund and medical benefit extended to employees The Provident Fund at the rate of ten percent of basic pay is deducted from the salary of each employee. The employer's matching contribution is clubbed with the employee's Provident Fund and the total amount is deposited with the Provident Fund authorities.

The medical benefit upto Rs.1250/- per year as reimbursement of medical expenses is allowed to each employee in the normal course. However, the special request for reimbursement of huge expenditure is considered by the management as per State Government rules. 12. Internal Audit:The internal audit of the Company done by an outside agency over and above the pre-audit being carried out by the Company's personnel. Further, the Company has introduced a system of Management Audit and Revenue ledger Audit by an outside Chartered Accountants

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13. Service books/Leave account:These service books and leave accounts are maintained by the Company for each employee, at its Head Office at Ahmedabad.

14. Sales and Pricing policy: The pricing policy is fixed by the Joint Plant Committee for Iron and Steel materials, whereas for plastic, Titanium Dioxide, etc. Company is the sole selling agent working on commission basis on behalf of the prime producers like IPCL, etc.. The sale of Iron and Steel are made as per party's off-take. The departmental heads are empowered to fix the sale price and extending credit and rebate etc. to customers.

15. Promotion of industries and financial assistance The Company provides financial assistance to Small Scale Industries for purchase of raw materials. The `Company also provide financial assistance under bills discounting scheme. 16. Preparation of Manuals:The Company has prepared the Accounting manual which may be referred to during audit.

17.

Details of branches of the Company and records maintained by them.:-

The Company is having branches at Ahmedabad, Rajkot, Baroda, Udhana, Bhavnagar, Nadiad, Ankleshwar, Vithal Udyognagar, Surendranagar, Bilimora and Halol. The sales records, collection records, customer ledger, goods receipt register, stock ledger etc. are maintained at each branch.

18.

Special Points to be seen during audit of the Company.:-

(i) See that the allocation of expenditure between capital and revenue has been made in accordance with the accepted principles of commercial accounting. (ii) See that proper accounts have been kept in respect of the funds received from State Government and verify whether the same have been spent for the purpose for which these were received. Report on the deviation if any.

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(iii) Review the policy of the fixation of sale prices of raw materials Sold to S.S.I. units.

(iv) Review the sale of raw materials to small scale units and see that the terms and conditions of sale orders are implemented properly.

(v) Review the cases where the supplies of raw materials were made without receiving advance from the S.S.I. units; see that adequate steps have been taken for realisation of the dues

(vi) Review the inventory control procedure and see that there is no over stocking of materials and the slow/non moving stores are disposed off in time.

(vii) Review the cash credit arrangements made by the Company and see whether the cash credit was at all necessary, whether the limit fixed therefor is exceeded by the Company if so analysis the reasons for the same.

(viii) Examine the quantum of handling loss of materials and see that such loss is not in excess of the norm fixed there. See that the orders of appropriate authority have been obtained for regularisation of such loss.

(ix) Review the scheme of financial assistance being extended to the SSI Units by the Company and verify its results and its impact on the interests of the company.

(x) Review the internal audit reports and the action taken on them by the company.

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CHAPTER-IX GUJARAT MINERAL DEVELOPMENT CORPORATION LIMITED

1. Introduction: Gujarat Mineral Development Corporation Limited was incorporated on 15th May 1963. It is a wholly owned Gujarat Government Company. The authorised share capital of the Company as on 31st March 1995 was Rs. 50 crore divided in 49 lakhs equity shares of Rs. 100 each and one lakh preference shares of Rs. 100 each.

2. Applicability of Acts & Rules. The Company is governed by the provisions of the Companies Act, 1956.

3. Books and records maintained by the Company. The Company maintains the following books and records: (i) Cash book and Bank book. (ii) Financial ledgers Comprising of General ledger, Expenses ledgers and parties (suppliers and buyers) account. (iii) Stores ledger and other registers as may be required to be maintained for production and sales etc. at various projects.

4.1 Organisational set-up. The Corporation is managed by a Board of Directors and the day-to-day management vests with its Chairman, Managing Director, and Joint Managing Director. The Managing Director is the Chief Executive of the Company. The Chairman, Managing Director and Joint Managing Director are Board of Directors appointed by the State Government. The management is supported and assisted by the General Managers and company Secretary and Project Managers in charge of various projects of the Company. 4.2 Accounting Organisation set-up. The Accounts Department of the Company is headed by the General Manager(Finance). Who is assisted by the Dy.General Managers and Assistant Managers(Finance) in Head Office and the Project Officers.

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5. Main Objects of the Company. The main objects of incorporation of the Company are:

(i) To purchase, take on lease or in exchange or under amalgamation, licence or concession, or otherwise acquire mines, beneficiation and mineral dressing, concentration and refining plants, lands, buildings, work-shops, power-houses, plants and equipments, machinery, sidings, lucos, works and any rights and privileges or interest there in and to explore, prospect, work, develop administer, manage or control and to turn to account the same.

(ii) To acquire by lease, grant, assignment, transfer or otherwise any grants or concessions of any mineral field, mines, mineral and mine contracts, works and premises from any person.

(iii) To search for, prospect, get, win, work, raise beneficiate, make merchantable, sell, dispose of and deal in all minerals and substances and to manufacture and sell all product obtained therefrom.

(iv) To carry on in Gujarat or elsewhere the trade or business of mine proprietors, merchants, miners, generation, transmission and sale of electricity, in all its branches.

(v) To develop generally the resources of any lands, properties and rights or privileges to be at any time acquire by the Company.

(vi) To undertake business of: (a) Consultations and advisers, (b) Promotional activity for development and exploitation of mineral resources, minings, ore beneficiation, processing of minerals and mineral based industries etc..

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6. Present activities of the Company. The present activities of the Company are

(i) Lignite Projects: (Panandhro, Akrimota, Matano- made in Kutch District and Rajpardi, Baroda District.)

The Corporation has been mining lignite at the above mentioned projects and has been supplying the same to various industries. The Corporation has fully mechanised the mining operations of lignite at its Panandhro Lignite Mone by introducing a technology of mining known as "Bucket Wheel Excavator technology(B.W.E.T.) " the Corporation has undertaken semi-mechanised mining operations at its other lignite projects. (ii) Fluorspar Project: The corporation carries out the activity of the beneficiating the low grade raw fluorspar at village Kadipani and manufactures fluorspar powder and briquettes for supply to customers. For this purpose the fluorspar beneficiation plant is installed by the Company.

(iii) Bauxite Projects at Bhuj, Bhatia and Ghadhshisa. The Corporation holds mining base of bauxite at two places in Kutch district and at Bhatia in Jamnagar district. At above mentioned places, the corporation has undertaken mining operations. At Ghadhshisa the Bauxite calcinate plant is installed by the Company for supply of calcinised bauxite to customers in open market.

The products manufactured by the Company are fluorspar powder and briquettes, calcined bauxite lignite and raw bauxite.

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7. Purchase procedure. The technical Department of the Company scrutinises the proposals for purchase of the capital items taking into consideration the budget provisions. After receipt of the requisitions from the Project Managers, the Purchase Department floats inquiries either through open tenders or limited tenders taking into consideration the value of the material to be purchased. After receipt of the tenders the Comparative Statements are prepared after scrutiny of the tenders and after review received in sealed covers. The purchase order are placed to the suppliers. The regular review of pending requisitions is made. Furnace oil is purchased from the Indian Oil Corporation Bharat Petroleum and Hindustan Petroleum. The explosives are purchased directly from the manufacturers. The mining steel castings spares are prepared from M/s. Steel Authority of India.

The Board/Tender Committee has powers to make purchases above the value of Rs. 2 lakh

The Managing Director can make purchase upto Rs. 2 lakh value. A SubCommittee constituted of General Manager (Tech.), General Manager(P & A) and General Manager(Finance) has been formed to assist the Managing Director in exercising of his powers purchases.

8. Budgetory Control. The Company prepares annual budget and targets for production/sales are fixed every year. 9. Inventory Control. The stock inventory relating to receipt and issue of materials and the records are maintained in independent stores working under the stores officers in project offices.

10. Sales Management. The Company sells its products directly to the customers in the open market at the prices as decided by the management. The prices of products are revised from time to time on the basis of cost of each product.

11. Delegation of powers. The Board of Directors has delegated various financial and Administrative powers to Managing Director and various Committees.

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12. Managerial information system and cost control system. The Company prepares monthly progress reports and cost reports. A Cost Accountant has been appointed as consultant who prepares these reports. The progress reports and cost reports are submitted to the management and Board of Directors for review.

13. Repairs and maintenance procedure. The Company's General Manager in head office looks after overall maintenance of all the project offices. Besides, the independent managers posted in the projects look after the repairs and maintenance of the machinery in the Company's workshop installed there. 14. Provident Fund and medical benefit extended to the employees. The Company extends the Provident Fund and medical benefit to all its daily rated/monthly rated employees as per the rules and regulations framed by the management from time to time.

15. Maintenance of service books and leave accounts. The Company maintains individual file containing the details of service of each of employee. The leave record of each employee is also maintained by each unit of the Company. 16. Internal audit system. The Corporation has engaged an outside agency of Chartered Accountants for internal audit. The functions of the internal auditors are an independent audit of books of accounts physical verification of stores, assets and raw materials and finished goods of the projects. The periodical reports of internal auditors are submitted to the management.

17. Special Points to be seen during audit.

(i) Examine whether the land on which mining operations are carried out, has been taken on lease by the Company and verify the correctness of the payment of lease rent and royalty. (ii) Examine the various terms and conditions of the lease agreement and to see that these are properly complied by the Company.

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(iii) Examine critically the developmental expenditure incurred by the Company for the exploitation of the minerals in the State, Comment upon the expenditure rendered infructuous due to erratic planning of the Company.

(iv) Review the ratio of minerals to ore mined as also the ratio of minerals to over burden maintained from time to time and examine it with respect to the norms as per the Project report.

(v) Review the utilisation of mining equipments such as drills, shovel and dumpers etc. and the rate of consumption drill bits, explosives etc. with reference to the norms fixed by the Company. (vi) Review the payments made to the labour contractors and see that the payments are in accordance with the terms of the contract.

(vii) Review the production and sale of various minerals in each project with reference to the targets fixed and the utilisation of the installed capacity of fluorspar beneficiation Plant and Bauxite Calcination Plant etc.

(viii) Review the payments made as nominal muster rolls and see as to whether proper checks are exercised to avoid fraudulent payment.

(ix) Examine whether the important minerals are qualitatively analysed before taking the same to stock (x) Examine the working of the internal audit with reference to the scope of the internal audit and review the action taken on the internal audit reports by the management.

(xi) Verify as to whether the advances paid to the contractors and employees etc. are properly accounted for and adjusted in time.

(xii) Examine the terms and conditions of the consultancy agreement entered into and verify that the terms and conditions of such agreements are properly followed.

(xiii) Examine the system of sales, despatches and invoicing in respect of the products sold and see that it is full proof.

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(xiv) Examine the pricing policy of the Company to verify as to whether it absorbs all fixed and variable costs of production as well as all the overheads.

(xv) Review the system of repairs and maintenance of the plants and machineries and buildings of the Company. See that the mining activity does not suffer due to frequent breakdowns of plants and machinery attributable to improper maintenance thereof.

(xvi) Review the monthly progress reports and cost statements and see as to whether these are reviewed by the management.

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CHAPTER-X GUJARAT STATE EXPORT CORPORATION LIMITED

1. INTRODUCTION. Gujarat State Export Corporation Limited was incorporated on 2nd February 1979 with the object of increasing exports by giving philip to export trade, by change of the name of erstwhile company viz., "Gujarat Export Corporation Limited".

The authorised share capital of the company as on 31st March 1995 was Rs.50 lakh divided into 50000 equity shares of Rs.100 each. 2. APPLICABILITY OF ACTS AND RULES ETC. The company is governed by the following Acts and Rules publications etc:

(i) Companies Act 1956, (ii) Sale of Goods Act, (iii) Contract Act, (iv) Income Tax Act and rules framed thereunder, (v) Gujarat Sales Tax Act, (vi) Maharashtra Sales Tax Act, (vii) Professional Tax Act, (viii) Central Excise Act, (ix) Customs Act, 1962 and rules and regulations made thereunder. (x) Central Excise and Gold control Act, (xi) Handbook of Imports and Exports policy of Government of India, (xii) All Industrial Laws except Factories Act, (xiii) All Government Rules except the rules regarding staff bonus, gratuity, Family pension which are paid as per the relevant Acts,

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3. BOOKS AND RECORDS MAINTAINED BY THE COMPANY. The Company maintains the following books and records : (i) Columnar Cash book (ii) Columnar Bank Book (iii) Sales journal (iv) Purchase journal (v) Columnar expenses journal (vi) C.C.S. register. (vii) General Ledger (viii) Drawback register (ix) Subsidiary ledger (x) Travelling expenses register (xi) Stationery register (xii) Import sundry debtors' ledger (xiii) Sundry creditors' ledger (xiv) Import expenses journal (xv) Sundry debtors-export ledger (xvi) Sundry Advances register.

4.1. MAIN OBJECTS OF THE COMPANY. The main objects of the company are to:

(i) Organise and effect exports and to import such goods and commodities as the company may determine from time to time, (ii) purchase, sell and undertake general trade in goods and commodities, (iii) arrange the finance and supply of raw materials to exporters and manufacturers to enable them to process export orders and to act as financiers, agents, etc; for the same; and
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(iv) arrange participation by manufacturers in fairs and exhibitions in India and abroad.

4.2. PRESENT ACTIVITIES OF THE COMPANY. The company promotes exports of the products manufactured and procured by small scale Industries and other tiny units in Gujarat. It arranges the requirement of raw materials of the units engaged in exports as well as the manufacturing of the export-worthy as well as other products. It organises study tours, conferences and seminars etc and participates in national and international trade fairs and exhibitions. The company conducts survey of foreign markets for booking export orders . It also acts as a custodian of Air Cargo complex to clear all the items exported and imported by Air from Ahmedabad Airport

5.1. ORGANISATIONAL SET UP. The management of the company is vested with Board of Directors, consisting of not more than twelve directors including the chairman and the Managing Director. One-third of the total number of directors in the Board including the Chairman and the Managing Director, are nominated by the Government of Gujarat. The Managing Director is assisted by a private Secretary, senior Manager Marketing(I&A), Manager (PR), Manager (Market Engineering), Manager (Marketing Chemicals), Manager (Market Survey and research) and a Branch Manager at Bombay. Further, Personnel and Administration department is also working in the company

5.2. ACCOUNTING ORGANISATIONAL SET-UP. The head of the Accounts Department is Manager(Finance & Accounts) who is assisted by three Deputy Managers and five Senior/Junior Assistants. The accounting function includes claims and recoveries also.

6. DELEGATION OF POWERS. The Board of Directors have given a Power of Attorney to its various executives to exercise various financial, administrative and legal powers, in its meeting dated 27th June 1990, for management of day-to-day affairs of the company.

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7. MANAGERIAL INFORMATION SYSTEM. The company is having a system of preparing monthly progress reports detailing the orders booked, executed and those pending, for submission to the Board of Directors and to the Chief Secretary and Principal Secretary, Industries and Mines Department, Government of Gujarat.

8. PURCHASE PROCEDURE. The Company, for the purpose of export of goods, purchases the same from the party whose product is approved/accepted by the overseas buyer. The purchase of the assets and other items is made after inviting tenders/quotations, while placing the orders for purchase, the directives given by the Government of Gujarat are followed from time to time.

9. REPAIRS AND MAINTENANCE PROCEDURE. The company execute annual maintenance contracts with reputed concerns for repairs of valuable items. The minor repairs are carried out through small Craftsmen

10. INTERNAL AUDIT PROCEDURE. The company has appointed a firm of the Chartered Accountants as their Internal Auditors who conduct audit of all the transactions.

11. SERVICE BOOKS AND LEAVE ACCOUNTS. The company maintains the service books and leave accounts of its employees in the prescribed form.

12.

PROVIDENT FUND AND MEDICAL BENEFITS EXTENDED TO THE EMPLOYEES OF THE COMPANY.

The company has framed its own "Gujarat State Export Corporation Limited (Staff) Service Rules, 1968. The company's and the employees' contribution to the Contributory Provident Fund, at a fixed rate of 8 percent of the basic pay and dearness allowance of each employee is deposited with the Regional Provident Fund Commissioner.

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The company has adopted a system of reimbursement of the medical expenses upto annual limit of Rs.1200 to its employees. This benefit can be carried forward to next year also.

13. FINANCIAL MANAGEMENT SYSTEM. The Corporation does not receive Government Grant or subsidy. The main source of its income is the service charges @ 3 to 5 percent of F.O.B. value of the goods exported and also the handling charges in respect of the Air Cargo handled by it at Air Cargo Complex, Ahmedabad. It also handles money on behalf of the exporters and importers. The company assists them to avail finance through their bankers. It also assists the manufacturers by providing prototype samples, drawings & designs of their products and technical know-how.

14. BRANCHES OF THE COMPANY. The company is having two branch offices ; one at Air Cargo complex, Ahmedabad and the other at Bombay. These branches maintain cash book, vouchers and other records 15. SPECIAL POINTS TO BE SEEN DURING AUDIT OF THE COMPANY. (i) Examine the various activities undertaken by the company to see that the adequate income is derived therefrom to cover the administrative and other expenses, incurred by the company.

(ii) In depth examination, of the various contracts entered into with foreign buyers especially these for rejection, replacements, guarantees, payment, penalty, transit insurance, inspection etc. to see that the financial interests of the Company are properly safe guarded. (iii) Verify that the service charges and Air Cargo handling charges once fixed are revised by the company from time to time so as to avoid any loss due to non revision of such charges.

(iv) Review the debtors' position as at the end of each financial year and verify the age wise analysis of the debtors to see that the debts do not become time-barred and proper follow-up action is taken timely for recovery of the debts. Verify the justification of the debts written off by the company. Specific cases of disputes and lapses leading to write off/losses should be analysed in depth.

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(v) Review the policy regarding participation by the company in national and international Trade Fairs and the Exhibitions. The objectives of such participation may be studied Verify <a> as to how much expenditure is incurred, <b> how many small scale units have participated in such fairs and exhibitions, <c> how much foreign exchange is earned by the company from international fairs and exhibitions. <d> check the sales during the fairs <e> Verify the supply orders received and executed by the company during such fairs and exhibitions, (vi) Verify the Commission earned by the company on the export of goods and see as to whether it recovers all the expenses. (vii) The mode of assistance rendered by the management to small scale industries in developing the marketing facilities of their products, may be studied to see that proper/adequate steps are taken by the company in this regard. (viii) See that the management has taken effective steps and has also devised a policy to promote the export of various products of small scale industries (ix) Review the performance of the Internal Auditors of the company . Verify as to whether the scope of the Internal audit is prescribed by the company and the reports of Internal Auditors are reviewed periodically by the Board of Directors and suitable action is taken thereon. Analyses in detail the major irregularities brought out by internal auditors.

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CHAPTER - XI GUJARAT STATE TEXTILE CORPORATION LIMITED, AHMEDABAD.

1. Introduction. The Gujarat State Textile Corporation Limited (GSTC) was incorporated on 30th November 1968 as a fully owned Government Company. After its incorporation, the Company managed 8 mills under Industries (Development and Regulation) Act, 1951 (IDR Act) till nationalisation in June 1974 and also operated one mill on lease between February 1970 and April 1972. subsequently, management of 3 mills, viz., Priyalaxmi Mills, Vadodara(PLM), Shri Shubhlaxmi Mills, Khambhat(SLM), and Kanti Cotton Mills, Surendranagar(KCM) taken over under IDR Act, and one mill viz., New Jahangir Vakil Mills (NJVM), Bhavnagar was taken on lease in ordinance on 30th June 1986 nationalising all the 3 managed mill and one leased mill and have transferred these mills to GSTC w.e.f. 1st January 1986. The Company had also set up one joint-sector project Gujarat spinners Limited(GSL) in April 1984. The authorised capital of the Company is Rs.500 lakh divided into 5 lakh equity shares of Rs.100/each. The issued and paid-up capital as on 31/3/1991 was Rs.392.50 lakh.

2. Organisational set-up. The management of the company is vested in a Board of Directors which consisted of 11 Directors including a Chairman and a Managing Director who is the Chief Executive. Each mill is managed by a General Manager.

Organisational chart: Board of Directors Personal Committee Supervision and Sales Committee Purchase and Disposal Committee Managing Director Personal Secretary to Managing Director Cotton-purchase sub- Committee Project Development Committee

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3. Main objects of the Company. (i) To carry on the business of textile mills in all its branches and to manage any such business or undertaking of any person or a Company entrusted to it either by the Central Government or by the State Government.

(ii) To manage and control any textile mill in Gujarat State which may be taken over by the Government of India under the Industries (Development and Regulation) Act, 1951 and the management of which may be entrusted to the Company.

(iii) To lend money to or guarantee loans secured by the Textile mills from financial institutions. (iv) To take over and run as an unemployment relief any textile mill in the State of Gujarat which is closed or likely to be closed or has gone into liquidation or other wise.

4. Present activities of the Company. (i) Revives and nursed sick textile mills of Gujarat. (ii) Runs 11 composite textile mills nationalised by the Government of Gujarat and 2 Co-operative mills as administrator. (iii) Manages the operation of more than 7000 looms and about 4 lakh spindles. (iv) Provides employment to over 20,000 workers per day. (v) Daily produces 30,000 kgs. of quantity yarn for sale and 5 lakh meters of quality cloth both cotton and blended like shirtings, suitings, sarees, dress materials, bed sheets etc. for common man at reasonable rate. (vi) The Company has a plan for large-scale modernisation programme costing about Rs.70/-crore. (vii) Caters to the requirements of the public sector organisation of Gujarat State.

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5. Products manufactured. The Company manufacturers cotton poplin, cambric, bed sheets, petto, etc. and also blended shirting, dress material, suiting, sarees, etc. it is supplying cloth to the institutions like police Department and other Government Corporations as per their requirements.

6. Raw materials used and its Sources. The Company is procuring cotton fibre mainly from Gujarat, Maharashtra and Punjab and man-made fibre and filament yarn from various indigenous manufacturers. The cotton is procured from cotton Corporation of India and the various Co-operatives and other man-made fibres from the manufacturers as far as possible.

7. Method of buying. The Company has a list of parties registered with it. Quotations are asked for from the registered parties and the tenders are opened in the presence of Company's officers and a comparative chart is placed before the Purchase Committee for its consideration. Generally, taking into account the quality, the Purchase committee placed order with the party, who has quoted lowest price. According to the requirement and convenience for Central purchase items, necessary contracts are entered into on monthly, quarterly, half-yearly and yearly basis. In case of purchases by the mills if the value of purchase exceeds Rs.10,000, the General Manager is required to obtain approval from the Head Office under Central Purchase Procedures.

8. Manufacturing Process. The manufacturing process in brief as follows: (a) Conversion of natural fibre i.e. cotton or man-made fibre into cotton or blended yarn which is called spinning process; (b) Conversion of spun yarn or, filament yarn into cotton or blended cloth which is called weaving process; (c) Conversion of grey cloth into bleached, dyed or printed cloth being wet process.

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In grey unit, only grey cloth is sold in the market whereas, in the composite units, dyed or printed cloth is sold in the market.

9.1 Channel of distribution of the product. The Company has adopted a practice of various channels for distribution of the goods. The main distribution channel is the sales through the wholesalers and semi-wholesalers. In addition, the sales are effected through retail shops of the Company, which are located in various places of the State. The Company has also appointed agents for selling of yarn. The sale of clothes is mainly handled by the Chief-Sales Executive and Sales Executives of the Company for most of the mills. In addition, the Company is also making direct sales to the institutions. Thus, there is a combination of various channels for distribution.

9.2. Sales and pricing policy. The Committee of the Directors of the Company fixes the pricing policy for various types of yarn and various sorts of cloth etc.. The Committee's recommendation based on the floor prices of above items fixed before hand are considered and approved by the Managing Director. The sale prices are reviewed and revised from time to time based on the market trend.

10. Accounting System. The Company follows the centralised system of accounts. Monthly accounting returns/production statements are obtained from the various Units and complied at the registered office. The Company has been covered under Section 209(1)(d) of the Companies Act, 1956. Hence, the required cost accounting records are maintained and the outside, Cost auditors carry out necessary audit at each Unit. There is a full fledged Costing Department in each mill which is assisted by the Management Service Department working at the Head Office of the Company.

11. Procedure of Internal audit. The Company has appointed the various firms of Chartered Accountants for its restarted mills the Scope of audit and extent of such audit has been prescribed by the Company and accordingly the firms of Chartered Accountants are required to carry out the internal audit and they have to submit their quarterly/half-yearly reports to the Company. The Company has its own Internal Audit department, which carries out the audit of Head Office books of accounts, closed mills and also of two retail shops.

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12. Manufacturing Units. The Company is running 11 grey/Composite units in Gujarat. These are as follows: (i) Priyalaxmi Mills, Vadodara. (ii) New Swadeshi Mills, Ahmedabad. (iii) Manjushri Textile, Ahmedabad. (iv) Sarangpur Cotton Mills, Ahmedabad. (v) Monogram Mills, Ahmedabad. (vi) Ahmedabad Cotton Mills-III, Ahmedabad. (vii) New Jahangir Vakil Mills, Bhavnagar. (viii) Shree Subhlaxmi Mills, Cambay. (ix) Kanti Cotton Mills, Surendranagar. (x) Sahayog Textiles, Ahmedabad. (xi) Silver Cotton Mills, Ahmedabad. Besides the Company administers two Cooperative Spinning Mills. 13. Special books and records maintained. At Head Office. (a) Accounting records such as Cash book, Bank book, Journal and Ledgers etc.. (b) Cost Account records such as: (i) Millwise MRP report for each month, Consolidated reports of the Constituent mills, (ii) Millwise data for sales meeting, (iii) Millwise ....................data, (iv) Millwise monthwise unit cost, (v) Comparative statements of cloth and yarn. (c) Purchase records such as; copy of the contract, itemwise list of registered parties, Consumption register of Central purchase items in Mills.

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(d) Secretarial records such as; register of members/directors register of charges, Minutes' book of Annual General Meeting of Shareholders, Minutes' Book of the meetings of the Board of Directors and various committees of Board of Directors, Attendance register for the meetings of Board of Director and Annual General Meeting of shareholders and the register showing the shareholdings of the Corporation/its Constituent Mills in different Companies. (e) Personal records such as; register showing the dates of joining increment and date of superannuation in respect of each employee of the Head Office of the Company as well as its constituent Mills, Roster register per various cadres of Head Office and for certain cadres of the Mills. At Mills. (a) Varietywise and monthwise cotton consumption report, (b) Spinning production, productivity and machine shift worked, each countwise report, (c) Weaving cloth production together with loomshifts worked, (d) Processing production reports, (e) Departmentwise wages, stores, and spares etc., (f) Power utility consumption report, (g) Various types of sort costing report, (h) Goods inward/outward register, (i) Comparative chart of the cost, (j) Order forms files, (k) Stock register.

14. Management information system. The Company has a full fledged management information department. The various types of information are collected from the mills as well as from other concerned departments at the Head office of the Company in connection with the production, inventory, sales, etc.. Depending upon the types of information, these are regularly collected either on daily basis or on monthly basis. These details are scrutinised and tabulated in proper formats for submission to the senior officers and the Managing Director of the Company as well as to the Director's Committee and also in the meeting of the Board of Directors.

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15. Financial Management. The Corporation has mainly three sources of finance: (i) Government of Gujarat, (ii) Generation of funds through its products mainly from the sale of fabrics and yarn, (iii) Sale of fixed assets of the Mills. 16. Service Books/leave accounts. The Company has framed its rules indicating the important service conditions of its employees. The service books indicating the details of date of joining, confirmation, increment, home-town, Leave Travel Concession etc. are maintained by the Company. The records of leave are maintained in the service books. The casual leave account is however, maintained separately.

17. Provident Fund/Medical benefits. The Company has adopted its own Provident Fund Trust who manages the Provident Fund Contribution at the monthly rate of 8.33 percent of the basic pay plus Dearness allowance of each employee. The Company also contributes to Provident Fund at the same rate.

The Company has followed a system of reimbursement upto a limit of Rs.500 per year in respect of actual expenses on medical treatment of each employee and or the members of his/her family. In special cases, additional amount of Rs.500/- is sanctioned by the Managing Director. The exceptional cases of reimbursement of hospitalisation charges and operation charges etc. are also approved by the Board of Directors.

18. Inventory Control/Budgetary Control. The various information regarding production, sales and inventory etc. are collected by Head Office from the Company's Constituent Mills. The Corporation has adopted a system of preparation of annual budget for each Mill keeping in view the past performance, existing trend and future potential etc.. The actual performance is watched periodically by supervision and Sales Committed headed by the Managing Director and also by the Board of Directors. The steps for the improvement in the performance are also envisaged in the meeting of Board of Director.

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Audit report of re-started mills submitted by the Chartered Accountants are being scrutinised by the Internal Auditor of the Company.

19. Special points to be seen in audit. (i) Scrutiny of files relating to purchase of assets like looms, motors, generator sets etc.. (ii) Review of the purchase of yarn for Powerlooms. (iii) Review the sizing/beaming arrangements of the Company with the private mills. Ensure that the reconciliation of the quantity of yarn sent for sizing and beaming is done periodically. (iv) Review the utilisation of looms and other machineries and the loom efficiency for ascertaining loom efficiency, the following formula may be adopted. RPM of Loom x 480 x 0.9144 36 x Pick of the cloth (RPM = Resolutions per minute)

(v) Review the production performance of powerloom companies with special reference to raw material consumption and value loss on seconds, short-length and rejections. The Company has incorporated Gujarat Spinners Ltd. (GSL) during April 1984 as the joint sector project. The authorised share capital of the Company is Rs.500 lakh which is divided into Rs.5 lakh equity shares of Rs.100 each. The issued and paid-up capital was Rs.392.50 lakh as on 31 March 1991.

(vi) Review the sales performance with special reference to the accumulation of stock, performance of indenting agents, payment of agency commission etc. (vii) review the processing arrangements of grey cloth with outside processors. Test-check the elongation obtained or shrinkages allowed with reference to the construction of cloth. Ensure that the Company's stock is not held up with the processors beyond a reasonable period.

(viii) Identify quality complaints/rejections if any, to the processors and ensure that proper follow-up is made for recovery of damages/losses thereon.

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(ix) Examine critically the loan transactions; whether the terms and conditions have been clearly spelt out and adhered to in respect of both the looms availed of by the Company and granted to the Textile Mills. In respect of the latter, ensure that the interest of the Company is safeguarded by incorporation of suitable provisions in the loan agreements for hypothecation/mortgage of properties of the loanee mills and that suitable follow-up actions are taken in cases of default in payment of principal and interests.

(x) Review the cases filed by the Financial Institutions for the liabilities of the Mills relating to the pre-nationalisation period.

(xi) Review the performance of Management Service Department, Cost Accounting Department and the Internal Auditors of the Company.

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CHAPTER-XII Gujarat State Handicrafts Development Corporation Limited

1. Introduction. Gujarat State Handicrafts Development Corporation Limited was formed on 7th September 1989 by change of name of erstwhile Government Company namely; Gujarat State Handicrafts and Handloom Development Corporation Limited which was incorporated on 10th August 1973. The authorised share capital of the Company as on 31st March 1995 was Rs. 5 crore divided into 5 lakh equity shares of Rs.100 each It is a Government Company which is wholly owned by the Government of Gujarat.

2. Applicability of Acts & Rules. Companies Act 1956 .

3. Main objects of the company. (i) To aid, counsel, assist, protect and promote the interests and /or to manufacture, sell, propagate and deal in all kinds of handicrafts, and products of village Handicrafts Industries in the State of Gujarat and to provide technical and managerial assistance,

(ii) To organise and establish emporia and sales depots for handicrafts and products of village handicrafts industries, produced or otherwise available in the State of Gujarat or otherwise available in the country at selected places in Gujarat and other places in India.

(iii) To establish, provide, maintain and conduct or otherwise subsidise research laboratories and experimental workshops for scientific and technical research and experiments and to provide for the award of exhibition, scholarship, prizes and grants to students or to otherwise;

(iv) To employ technicians and others as may be found necessary for efficient handling and carrying on the business of the corporation, and

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(v) To undertake exports of handicrafts and products of village handicrafts industries from India as supplement to private voluntary efforts, to establish trade connections, sales depots, selling agencies, offices for distributing agents etc to undertake directly or in collaboration with specialised domestic or foreign agencies, market surveys to explore possibilities of Indian Handicrafts and products of village Handicrafts industries in foreign markets, to open publicity cum information centers, showrooms, sales depots and warehouses at suitable places in foreign countries, exchange delegation of foreign buyers and domestic exporters to participate in foreign fairs and exhibitions and to undertake special promotional measures in countries where import potential for Indian Handicrafts and products of village Handicrafts industries has not been adequately tapped.

4. Present activities of the company The company is mainly engaged in purchase and sale of handicraft items. The company is having the procurement centres in Vadej and Vatva in Ahmedabad and in Bhuj, Patan, Rajkot, Jamnagar and Surendranagar etc, through which the development of various crafts such as ariwork and embroidery work etc is done.

The sale of handicrafts items is done through various emporia located in Ahmedabad, Bombay, Banglore, Delhi, Madras, Calcutta, Hyderabad and Lucknow etc; Thus, the activity of franchise sales is developed to increase the sales by the company.,

5.1 Organizational set up. The management of the company is vested with the Board of Directors headed by the Chairman. The Managing Director is the Chief Executive of the company and he is assisted by the Deputy General Manager(Marketing), Company secretary cum Financial Controller, Chief designer and various Deputy/Assistant Managers.

5.2 Accounting Organizational set up The Accounts department is headed by the Company secretary cum Financial controller who is assisted by two Assistant Managers((Finance) and one Assistant Manager(Audit). 6. Books and records maintained by the company. (i) Purchase Journal (ii) Cash Book (iii) Petty cash book

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(iv) Daily sales register. (v) Journal book (vi) Bank book (vii) Ledger (viii)Sales journal (ix) Sub purchase Book. 7 Management information system. The company has introduced management information system under which the monthly performance report in the prescribed format is received from each procurement centre and sales emporia. The consolidated performance report is reviewed by the management and the remedial measures taken for improvement in the performance of the company. 8. Delegation of powers. The various officers of the company have been delegated various operational powers regarding establishment and contingencies etc; by the Board of Directors.

9. Purchase procedure The company is having a purchase committee consisting of top level managers from finance, marketing, quality control and stores departments. The samples of raw materials like cloth, wood, and metal etc; are collected from the suppliers and are submitted to the purchase committee for its approval to the design and cost etc. The raw materials are purchased from the open market by inviting tenders and through the rate contracts. After purchase, the raw materials are given to the artisans for manufacturing handicrafts items. This procedure is also followed if there is any revision/increase in the cost of raw materials.

10. Internal audit. The internal audit of the company is entrusted to a firm of chartered Accountants who conduct the audit of each Unit. The scope of internal audit is decided by the Head office of the company.

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11. Provident Fund and Medical benefits extended to the employees of the company. The contributory provident fund scheme is applicable to the employees of the company. The monthly contribution to the fund in respect of each employee and the company's contribution are remitted to the Regional Provident Fund Commissioner who manages the C.P. Fund.

The Company follows the Gujarat State Service (Medical Attendance) Rules 1964 under which the expenditure upto the limit of Rs.500 per year is reimbursed. Moreover, the company has approved a policy to extend the additional facility to reimburse the medical expenses upto Rs. 2000 in a block of 3 years to its employees on the basis of bills of reimbursement of medical expenses.

12. Maintenance of service books and leave accounts. The company has not yet introduced the system of maintenance of service books and leave accounts. The records pertaining to personnel matters are mainly kept at Head Office. All kinds of leave except casual leave, are sanctioned by the Head Office. The permanent employees are posted at eight sales emporia and the procurement centers of the company.

13. Sales and pricing policy The company sells handicraft items through sales- outlets by organizing various exhibitions and fairs etc; The sale price is fixed by the head office before despatching goods to sales-outlets and after taking into consideration the actual cost, transportation expenses and margin of profit etc. The sales authorities are not authorized to change the sales price. 14. Financial Management. The company is obtaining funds for various handicrafts' developments schemes from the State Government in the form of grants and subsidy. The Company has introduced system of analytic review of the financial data.

15. Special points to be seen during audit of the company. (i) Review the financial management of the company and see that the funds especially grants / Subsidies received from Government are utilized for the purpose for which these are received. Verify the implementation of the various schemes to see that these have been useful in providing the employment prospects to the artisans in rural areas and has achieved the objectives.
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(ii) Examine the purchase procedure of the company and see that the procurement of handicrafts is made economically. Analyse the position of closing stock with reference to the year of its procurement.

(iii) Study the inventory control procedure with reference to the turnover and the stock held. (iv) Examine the working of various sales emporia for the last three years and see that their income covers all its expenditure and these earn profit to the company.

(v) Check the system of discount allowed in the sale price of old, damaged and obsolete items of stock and critically examine it.

(vi) Review the sales policy and the basis of fixation of selling price of each product and comment upon the cases of loss due to wrong fixation of selling price. (vii) Compare the actual sales with the targets fixed therefor and analyses the variations if any.

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CHAPTER XIII

Gujarat State Construction Corporation Limited,

1. Introduction: The Company was incorporated on 16-12-1974. At the time of its formation, the Company was supposed to undertake some of the important and major construction works of the State Public Works Department as well as the works for which the contractors were not forthcoming or the works in respect of which the rates quoted by the contractors were considered to be unreasonably high. The Company was to undertake the Construction works through competitive bidding procedure. The authorised share capital of the Company as on 31.3.95 was Rs.5 crore divided into 5 lakh equity shares of Rs.100 each. Applicability of Acts and Rules etc..

The company is governed under the provisions of the Companies Act, 1956.

2. Organisational set-up The management of the Company is vested in a Board of twelve Directors, including the Chairman and Managing Director who are appointed by the State Government. The Managing Director is the Chief Executive and he has been vested with the powers of the day to day management of the Company's affairs. The Managing Director is assisted by the General Manager (F & A), General Manager(Tech), Company Secretary and Dy.General Manager (Admn) etc.. The accounts department is headed by the General Manager (F&A) who is assisted by the Senior Manager (A/cs), Manager (A/cs) and Assistant Manager (A/cs) . 3. Main objects of the Company

(i) To Construct, execute, carry out, improve, work, develop, administrate, manage or control in Gujarat or outsideworks and conveniences of all kinds;

(ii) To provide accommodation and facilities for industries and/or business of all types and kinds including industrial shades, factories, buildings, warehouses, godowns, services, flats and garages etc.

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(iii) To assist financially industrial or commercial enterprises, housing projects and engineering works. 4. Present activities of the Company The construction of buildings, roads, bridges, dams, radial gates and irrigation works etc. is done by the Company.

5. Managerial information system The quarterly performance reports of each project is received from every unit in Head Office of the Company.

6. Delegation of powers The Board of Directors have delegated various powers to Managing Director and other officers of the Company.

7. Accounts & Audit i) Accounts: The Company maintains the accounts on mercantile basis. The accounts records are kept at its branches. Every unit maintains separate accounts and on the basis of final trial balances received in Head Office from each unit, the final accounts are compiled and finalised at the head office of the Company. The Company has prepared a Compendium of circulars relating to the accounting matters and financial procedures.

ii) Internal Audit The Company has, from time to time been appointing the firms of Chartered Accountants, for internal audit of its various accounting and other records maintained at its head office and its various branches of the Company.

8. Purchase Procedure The Company purchases cement, steel, wooden items, bricks and other construction materials by inviting quotations from the suppliers and manufacturers, for its various projects. The Company procures these items as and when required by its project offices and thus bulk inventory is not maintained.

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9. Repairs and Maintenance Procedure The repairs of the construction machinery is got done by the Company from the authorised repairers. 10. Provident Fund and Medical benefit extended to the employees The Company has C.P.F. scheme and C.P. fund is managed by a trust. The Company makes monthly payment of medical allowance @Rs.100/- to its employees. The Board of Directors sanctioned the cases of medical expenses incurred for major illness.

11. Maintenance of service books and leave accounts The Company has framed its own service Rules and Recruitment and Discipline Rules for its employees.

The Company maintains the service book and leave account of its employees as per State Government rules.

12. Branches of the Company The Company has its branches at Ahmedabad, Baroda, Rajkot, Surat, Bharuch and Bhuj. These branches maintain the following books and records; (i) (ii) (iii) (iv) 13. Cash Book Bank Book Journal Book Ledger

Special Points to be seen during the audit of the Company.

(i) Review the contracts entered into by the Company and the Schedule of rates quoted for the works to be executed and see as to whether the quotations are prepared properly and these are realistic.

(ii)Examine the system of control over the imprest account maintained with the field offices, and the System of local purchases made by various project offices.

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(iii)Review the arrangements made for transportation of various materials to the site of work and also for fabrication of steel items and see that these are working efficiently. (iv) Ensure as to whether all the expenditure incurred on a Civil work (including allocation of Common expenditure) is booked properly and the profit/loss on the execution of contracts worked out on realistic basis.

(v) Examine the system of revaluation of tools and tackles and valuation of centering materials and the system of disposal of unserviceable materials, if any. (vi) Compare the actual consumption of various stores items with the requirement of stores as per the contracts or as per the specifications of the work and ascertain the reasons of variation, if any in consumption.

(vii) Ensure that the depreciation on the plant and machinery used on the works is properly accounted for and that its written down value adequate. Idle hours of each plant and machinery may be ascertained and the measures taken by the management to minimise such idle machinery hours, may be verified to ensure the optimum utilisation of the plant and machinery.

(vii) Review the quarterly financial Statements received from the branches of the work with reference to the ledgers maintained at head office, to verify proper booking of the expenditure on each work.

(ix) Review the progress of execution of different works and compare the same with the specifications as per the contract. (x) Analyse the reasons for the delay, if any, in completing the work with reference to the cost/time over run; to ascertain the consequent loss incurred by the Company. (xi) Review the scope of work of internal auditors and see that their reports are reviewed by the management and suitable action on the serious irregularities pointed out by them, is taken by the company

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Annexure Gujarat State Construction Corporation Limited.

Statement showing the accounting records maintained.

1. Cash book/Bank book 2. Ledger 3. Journal 4. Assets register 5. Stores records 6. Subsidiary registers such as; TA bills register, Medical register, Advances register 7. Debit/Credit/Journal Vouchers 8. Receipt books 9. Other books and records as per the provisions of the Companies Act.

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CHAPTER-XIV Gujarat Communications and Electronics Limited, Baroda.

1. Introduction. The Gujarat Communication and Electronics Limited was incorporated on 30th May 1975 with a view to accelerating the development of electronics industry in Gujarat State through the establishment of manufacturing and research and development facilities for professional grade electronics equipments. It started functioning from July 1975. The Company is wholly owned by the State Government. The authorised share capital of the Company as on 31st March 1995 was Rs. 20 crore, divided into 20 lakh equity shares of Rs. 100/- each.

2. Applicability of Acts and Rules. i) Companies Act, 1956. ii) Gujarat Sales Tax and Central Sales Tax Act. iii) Income Tax Act, 1961. iv) Factories Act, 1948. v) Central Excise Duty Act, 1985. vi) Customs Act, 1962 and vii) All other Commercial and Labour Laws. 3. Main objects of the Company. i) To promote and develop the electronics industry and its ancillary units in the State.

ii)

To carry on all kinds of business connected with the electronics industry; including research, development, pilot production and systems engineering etc.. To provide service centres common facilities and testing and standarisation units for various products and to arrange for education and training of skilled personnel and

iii)

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iv)

To carryout market surveys, prepare project profiles feasibility, Study reports and other preinvestment investigation work. To undertake the setting up of new electronic industrial estates etc.

v)

4.Organisational set-up. The management of the Company is vested in the Board of Directors. The Managing Director is the Chief Executive who look after the day-to-day management of the Company, with the assistance of four Executive Directors, Company Secretary, Chief General Manager(Finance), Assistant General Manager(Gandhinagar unit) and General Manager(Delhi Office) etc.

5.Accounting Organisational set-up: The Finance and Accounts department is headed by the Chief General Manger(Finance),C G M (Finance) is assisted by the Senior Manager(Finance) five Dy.Manager Sr. Accounts Officers & Accounts Officers etc..

6.Books and Record, maintained. i) Main books of accounts such as; cash/bank book, ledger, sales journal, journal vouchers register and foreign and indigenous purchase journals. Subsidiary books such as; Debtors ledger/Creditors Ledger (foreign and indigenous) Staff Advances Register, Fixed assets/Fixed Deposits register and Investments Register , General Ledger and advance from Customers register.

ii)

iii) Costing records.

7.Present Activities of the Company. The Company produces and supplies professional grade electronic equipments that may be classified under that heads; Navigational aids, Communication Equipments and video equipments etc. The Company also undertakes turnkey projects involving system engineering right from conceptual stage involving integration of various equipments. The Company either (a) purchases technology from abroad or (b) acquires it from national laboratories and research institutions in India, or (c) it is generated by its own developments and engineering group.

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8.Management information system. Various reports are prepared and analysis thereof is made by Production, Finance, Administration and Materials Management departments of the Company and the reports are submitted to the Managing Director for taking suitable action thereon.

9.Delegation of Powers. The Board of Directors have delegated various powers to the Managing Director in respect of the following matters:

(i) Contractual and legal; (ii) Financial; (iii) Purchase; (iv) Works; (v) Establishment; and (vi) Miscellaneous.

Various Executives of the Company including the Executive Director, Additional General Managers, Chief General Manager(Finance), Company Secretary & Chief (Corporate Affairs), Additional General Manager(P & A) have been delegated various powers through various office orders issued from time to time, with a view to speed up the decision making process. 10.1 Processing Plants: The Company has manufacturing units at Baroda and Gandhinagar. 10.2 Manufacturing Process. The Company is manufacturing and supplying professional grade electronics equipments. The basic design is either developed in Design & Engineering division of the Company or it is received from foreign collaborators or Indian research agencies. The Design department prepares various drawings and release the same to the Production department. The manufacturing activities start after receipt of customer's order or in anticipation of customer's order. Production control section prepares various bills of materials after studying the design documents and takes action to purchase the raw materials and fabrication of the parts. The parts are fabricated either in house or at sub-contractor's place. The production control section prepares various kits of components and parts, etc. for two sub-assemblies viz. Printed circuit Board Assembly and Coil Winding Assembly. The sub-assemblies are sent for testing to the Testing Department. The tested sub-assemblies are further assembled into final equipments which are finally tested and offered for customer's inspection.

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10.3 Products manufactured. The Company is manufacturing the following products. (i) Navigation Aids (a)Instrument Landing System(ILS); (b)Skopograph; (c)Ceilograph; and (d)Extended range V.H.F. communication equipment. (ii) Communication Equipments (a)Radio Relays; (b)Telephone instruments; (c)PCM Multiplexer; and (d)Multi access radio telephone (iii)Video Equipments (a)Low cost TV Studio Equipments; and (b)Video tape-recorders. Raw materials. The components (both electrical and electronics) the ferrous and non-ferrous metals in different sizes and shapes are used as raw materials. These are procured locally as well as from abroad. 11. Purchase procedure. For procurement of materials the work order is prepared. Based on the work order, a schedule of required materials is prepared by the Production department. The schedule of materials is submitted to (a) Indigenous purchase cell; or (b) Import purchase cell and (c) Finance - Audit Cell . The Purchase department takes further action, vize to float enquiries, to negotiate the terms with the parties, to issue purchase orders, etc. and to purchase the material mentioned in the schedule of materials. The Company enters into rate contract wherever possible. The Company has issued the guidelines for purchase of materials vide DO.No.PP/10/89 dt.1st March 1989.

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12. Inventory/Budgetory Control Systems. (i) Inventory Control. The Company has classified its inventory as per A B C analysis and the supply orders are placed for further requirements only after reviewing the stock available in the stores and the possibility of not interrupting the Productions cycle. Periodically a list of non-moving and obsolete inventories are prepared and after proper study/scrutiny the decisions are taken for re-use, modification and disposal. Inventory accounting is computerised. The procurement of materials are based on supply orders only.

(ii) Budgetary Control. The Company is preparing annual budget in respect of Capital expenditure and Revenue expenditure. The capital budget includes the investment required on land, building, Plant & Machinery and other capital assets. The sources of finance is also indicated in the budget. The budget approved by the Board of Directors. The Company is having three committees viz Construction Committee,. Instrument Committee and Machinery Committee, for ascertaining and advising the management regarding additional investments, if any, required for the development and expansion activities . The Company keeps a constant watch on working capital movements by taking the following actions:

1.Preparation of monthly cash flow statements: 2.Continuous monitoring of debtors outstanding by deputing the personnel for collection of dues. 3.Continuous watch on despatches in respect of various items; 4. Searching the alternative source of finance at cheaper rate of interest, such as Public deposits, inter-corporate loans, long term debentures, etc.. 5. Overall production activities are reviewed to ensure that the funds are not blocked in the inventory; and 6. Investments of surplus funds viz inter-corporate deposits, short term bank deposits etc..

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13. Repairs and maintenance procedures. The Production, maintenance and Utility Service Sections are responsible for attending maintenance activities, viz. break-down, preventive maintenance and renovation/modification of inhouse machines/equipments and facilities etc..

The maintenance Department is having two Sections as under:

(i) Production Departments maintenance-breakdown and preventive (ii) Utility Services-mechanical, electrical, Air-conditioning and Civil maintenance of the department's other than Production Department.

14. Internal Audit System. Internal audit is conducted by firm of the Accounts from January 1996. Prior to January 1996, the internal audit cell of the Company was functioning from 1989-90 The internal audit of assets transactions, revenue transactions and audit of various systems devised by prevailing the organisation is done by the internal auditors. The internal audit reports are placed before the Board of Directors for consideration/discussion and for suitable decisions for improvement in the systems/procedures etc..

15. Provident fund/Medical benefits. The employees are covered under the employees' Provident fund and Miscellaneous Provisions act, 1952. The employees drawing pay upto Rs.3000 are covered under Employees' State Insurance Acts. Those employees who are not covered under ESI scheme are covered under the medical rules of the Company issued vide Admn order No. F/16 dt.3.10.93. Under PF scheme, ten percent of wages of employees and equivalent share of employer are contributed. Under ESI scheme 2.25% of employee's wages and 5% of wages as employees' share contributed. The employees get medical treatment and other benefits in this scheme.

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16. Service books/Leave accounts. The Company maintain personnel files and Leave ledgers of all its employees. The leave book is issued to each employee for applying leave.

17. Sales and Price Policy. The Company's products are mostly custom-built rather than standard equipments. The Company undertakes turnkey-projects to suit the customer's requirements. The Company has introduced a corporate marketing cell for promoting sales, both within and outside India. The pricing is normally done on case-to-case basis.

18. Cost accounting system and records. The Company has a system to issue work order with distinct series specifically allocated to different activities to be undertaken such as; production development & engineering, installation & commissioning, After sales, capital expenditure, bought out items, etc.. Different elements of costs are recovered and analysed and charged to the respective work orders. The Costing Department maintains work orders/product issue sales records etc..

19. Promotion of Industries and Financial Assistance. The costing procedure for a typical product consists of first maintaining the raw materials (both imported and indigenous) content and direct labour content based on the recommendation of collaborator or past experience. In case of imported materials, associated costs such as, custom duty, insurance and freight etc. are added on actual basis. Then, the element of overheads is worked out by taking into consideration the percentages of all its sub-elements such as indirect wages, factory overheads Administrative and selling overheads depreciation, interest and Knowhows fees etc.. It is customary to add a mark-up of 1.5 percent on the total cost of a product. In case of increase in the cost of raw materials, labour cost, custom and other duties etc., the same to the extent feasible are separately charged to the customer and to this extent, an appropriate price escalation formula is decided and incorporated in the contract. The company sometime undertakes fixed price contracts in view of competitive situation.

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In case of turnkey projects undertaken by the Company, the manpower requirements are ascertained in advance and an appropriate pricing structure is drawnup incorporating the variation clause.

20. Special points to be seen during audit of the Company. (i) Review the production performance of the Company with reference to the installed capacity and the targets, fixed for production by each operator/trainee/machine and see as to whether the production targets are achieved by them. In case of variation if any analysed the reasons thereof.

(ii) See whether purchase/import of raw materials and equipments is made after observing the purchase procedure and import regulations.

(iii) Ensure that the proper procedures for purchase, receipt, issue, custody, condemnation, sales and stock-taking of raw materials equipments, components and finished products; have been framed and the same are strictly followed.

(iv) Review the foreign collaboration agreements and see as to whether the terms and conditions of the contracts are properly adhered to and those are in the interest of the company.

(v) Review the sales and pricing policy with reference to the cost of production and prevailing market conditions; and see that the sale price is revised from time to time.

(vi) See whether the consumption of major components are within the norms fixed therefor and there is no abnormal wastages of raw materials in the manufacturing processes.

(vii) Review the working of internal auditors of the Company and the action taken by the management in the internal auditor reports.

(viii)Review the inventory control system and verify that inventory is not unnecessarily blocked for a longer period. (ix) Review the cost accounts system and the various records, maintained therefor and see that the system is efficient.

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CHAPTER: XV Tourism Corporation of Gujarat Limited

1. Introduction. Tourism Corporation of Gujarat Limited, Gandhinagar was incorporated on 10th June 1975 for the systematic exploration and development of tourism on Commercial basis. The authorised share capital of the Company as on 31st March 1995 was Rs.10 crore divided into 10 lakh equity shares of Rs.100/- each. It is a wholly owned Government of Gujarat Company.

2. Applicability of Acts and Rules. The Company is governed under the provisions of the Companies Act, 1956.

3. Books and records maintained by the Company. (1) Cash book (2) Bank book (3) Ledger (4) Advances registers (5) Journals and (6) Party register etc.. 4. Main objects of the Company. The main objects of the Company are. (i) To take over establish, develop, improve, manage and organise places of tourist interest including pilgrimage centres, hill resorts, beaches, health resorts, dam sites, picnic spots etc.. (Computerised) (Computerised)

(ii)

To carry on the business as tourist and travel agent and contractors, by providing facilities of all kinds for tourists and travellers and

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(iii)

To take over, manage, promote and develop, existing hotels and/or improve, run and maintain hotels, motels, canteens, cafeteria and restaurants.

5. Present activities of the Company. The Company provides tourism facilities in the form of accommodation transport and catering etc.. Besides, as per State Government policy, the Company has started privatisation of various tourist resorts.

6.1. Organisational Set-up of the Company. The management of the Company is vested in a Board of directors which also includes Chairman and Managing Director. The Managing Director is the Chief Executive and is assisted by a General Manager, three Sr.Managers, Managers, Company Secretary, Advisor and various Unit Managers etc.. The Board has constituted three committees i.e. Personnel committee, Project committee and Tender committee to approve the matters relating to Personnel, Project and Purchases etc..

6.2. Accounting Organisational Set-up. The accounts department is headed by the Accounts Officer, who is assisted by three Assistant Managers and three Sr.Assistants (Accounts) etc..

7. Delegation of Powers. The Board of Director of the Company vide its resolution passed in 64th meeting held on 19th February 1988 has delegated w.e.f. 1st April 1988 the various powers in respect of personnel and Administration, purchase and works expenses, publicity and Sales and Miscellaneous items etc. to the Managing Director and various Executive Committees etc. certain purchase powers were revised vide 93rd meeting of Board of Directors held on 31st August 1993 which may be referred to during audit of the Company.

8. Internal Audit. The internal audit of the Company is entrusted to the Chartered Accountant for the year 1995-96. Till 1994-95, the Company had arranged internal audit work departmentally.

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9. Method of buying. The purchases of capital nature are made by the Head Office level. The Managers incharge of various Tourist Resorts are empowered to make purchases from the Departmental Stores/Co-operative Stores as per State Government Rules.

10. Repairs and Maintenance Procedure. The major repairs and maintenance work is arranged by giving the contract after inviting the competitive offers through local Newspapers and through negotiations with suppliers/contractors. The delegation of powers by the Board of Directors are taken into consideration by the competent authority while finalising the contracts. For minor repairs, the work orders are finalised after collecting limited quotations from the open market. Sometimes, the minor repairs work is done departmentally looking to the urgency of the work and after following the established procedure of Government.

11. Managerial Information System. The Company's Head Office collects the information regarding monthly income and expenditure from its various branch offices, units and holiday-homes which, duly complied, is submitted to the Managing Director and the Board of Directors. 12. Inventory Control System. The Company exercises the inventory control by monitoring the stock register in respect of various items purchased by the unit offices. The stock is also checked/verified by the internal auditors of the Company.

13. Provident Fund/Medical benefits extended to the employees of the Company. The Company has formed its own Trust called "The Tourism Corporation of Gujarat Employees' Provident Fund Trust." The Company is deducting Provident Fund from the employees' wages @ ten percent of their basic pay and D.A. and is contributing equal amount as its share. The employee's and employer's contribution to the Provident Fund are remitted to the C.P.F. Trust. The medical benefit is extended to the employees according to Medical Attendance Rules of the State Government. The medical claims of the employees are reimbursed by the Company looking to the nature of disease.

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14. Maintenance of Service books/Leave accounts. The Company maintains the Service books and Leave accounts in respect of each employee as per its own Service Rules - 1986.

15. Sales and Pricing Policy. The Executive Committee and the Board of Directors of the Company decide and review the Sales and Pricing Policy.

16. Financial Management. The Company obtains loans, share capital and grants from the State Government. 17. Branches and units of the Company. The Company has 10 T.I.B.'s and 14 Units. 18. Annual Accounts. The Company has fallen in arrears from 1992-93 onwards.

19. Special points to be seen during audit of the Company. (i) Review the present activities of the Company such as, accommodation, transport and catering services etc. and examine as to how far the Company has achieved its main objects enumerated in its Memorandum of Association. (ii) See that the Company is having an appropriate licence for catering service and it is renewed from time to time.

(iii) Verify the accommodations capacity available and verify the occupancy ratio. Investigate the cases for wide variations in occupancy ratio from year to year.

(iv) Check the rent receipts with reference to the accommodation occupied, check the entries in the rent receipts register, check the cash collections accounted for in the cash book.

(v) Verify the system of reservation of accommodation and see that it is free from discrimination and there is no loss of revenue due to wrong reservations.

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(vi) Check the system of fixation of room rent and catering charges and see that it is adequate. (vii) Examine the various contracts for civil construction of Company's buildings and see as to whether the various terms and conditions of contracts are executed properly by the contractors. Further the terms and conditions of contracts are in the interest of the Company.

(viii) Review the performance of internal auditors of the Company and see as to whether the internal audit is commensurate with the volume of work. Verify their scope of work.

(ix) Review the system of Budgetary control, inventory control, purchase procedure and Managerial information system and see that these are efficient and useful to the Company.

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CHAPTER:- XVI Gujarat Tractor Corporation Limited.

1. Introduction. Gujarat Tractor Corporation Limited was incorporated on 31st March 1978 as a wholly owned Government Company to take over the business of Hindustan Tractors Limited which was being managed since March 1973 by the Gujarat Agro Industries Corporation Limited under Industries (Development and Regulations) Act, 1951. The authorised share capital of the Company as on 31st March 1995 was Rs.20 crore divided into two crore equity shares of Rs.10 each.

2. Applicability of Acts and Rules. (i) Companies Act, 1956; (ii) Hindustan Tractors Limited(Acquisition and Transfer of Undertakings) Act, 1978 as amended; (iii) Factories Act, 1948; (iv) All labour laws. 3. Main objects of the Company. (i) To acquire and take over from Government of Gujarat, the undertakings of Hindustan Tractors Limited vesting in Government of Gujarat after coming into force of the Hindustan Tractors Limited (Acquisition and Transfer of undertakings) Act, 1978; (ii) To manufacture, sell, hire, lease and deal in agricultural tractors, ploughs, harrows, cultivators, seed drills, harvesters, threshers, movers, locomotives, wagons, tractors and truck trailers, rough terrain vehicles and all other kinds of Agricultural and industrial equipments, tools and machinery and components, spare parts, accessories and auxiliary and ancillary goods thereof;

(iii) To manufacture, sell, hire, lease and deal in road rollers, pneumatic and vibrating as well as other types of rollers, dumpers, motor-graders, pavers, concrete and tar macadam mixers, scrapers, dozers, loaders, excavators, cranes and material handling equipment, detachers, graders and all other earthmoving, land shaping and road making machinery and components, accessories and spare parts and auxiliary and ancillary goods thereof;

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(iv) To carry on the business of mechanical and electrical engineering, metallurgy, contracts and job works, manufacturing and dealing in all kinds of machinery, tools and tackles, jigs and fixtures, patterns, dues, instruments and gadgets, castings and mouldings, forgings, machined components and fabrication and heat treatment of metallic and non metallic items;

4.1. Organisational Set-up. The management of the Company is vested in the Board of Directors. The day-to-day management is looked after by the Managing director who is nominated by the State Government. He is assisted by the Executive Director (Technical), Financial Controller and five Divisional Managers, who are heads of the following six divisions: (a) Personnel and Administration; (b) Engineering; (c) Production; (d) Materials; (e) Marketing and (f) Finance and Accounts. 4.2. Accounting Organisational Set-up. The Financial Controller is the head of finance and Accounts division and he is assisted by (i) Manager - Main Accounts; (ii) Manager - Stores Accounts.

5. Books and records maintained by the Company. (i) Purchase Book; (ii) Sales Book; (iii) Expense Book; (iv) Purchase Ledger; (v) Sales Ledger; (vi) Bank Book; (vii) Cash Book; (viii) Journal Voucher Book; (ix) Debit/Credit Books; (x) Expenses Ledger; (xi) Daily bank position Book; (xii) Cheque inward Register; (xiii) Site Draft record Book; (xiv) Investment Register; (xv) Petty Cash Book.

6. Present Activities of the Company. The Company manufactures agricultural tractors, D.G.sets, engine blocks and components etc..

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7. Processing Plants. 8. Manufacturing Process. 9. Products manufactured. The Company is engaged in the manufacture of agricultural tractors. Each tractor comprises of 2500 to 3000 individual parts and components. The manufacture of tractor involves assembly of various components some of which are manufactured by the Company while other components are purchased. The Company has its own Foundry where critical castings of the parts like engine blocks, gear box, clutch box, cylinder heads are manufactured. The Company has also machines where machining of critical castings, forgings and bar stock items are done. Machining operations are carried out to turn raw material and raw castings into finished components. Heat treatment shop with electrical furnaces gives heat treatment to the components. The painting of components and chassis is done in Paint shop. The assembly of engines, chassis and tractors is carried out in Assembly Shop.

The raw materials like pig iron, steel castings and forgings etc. are procured from various sources for manufacture of tractors etc..

Tractor manufacturing is an assembly process like engine assembly, Gear box assembly etc. and after all sub-assemblies are completed and other items like tyres, tubes, rims, batteries and electrical items are fitted and colour painting is done in paint shop then tractor becomes ready for sale.

The Company also manufactures tractor engine blocks, gensets and components. 10. Managerial Information System. The Board of Directors in its quarterly meeting reviews the performance relating to production, sales, closing stock of tractor, cash flow position, cost of production, position of outstandings, profit estimated during the month and availability of critical components and raw materials etc. is monitored by the Board.

11. Inventory Control System. The Company places the purchase orders in advance on the basis of annual targets of the production. The requirement of the components is reviewed every month in the light of orders booked/expected delivery, as per monthly production programme. The periodical verification of stock is done by the team at the end of the year. The stock-verification report is test-checked by the internal Auditors. Necessary instructions are issued to stores personnel and the stock verification team.

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12. Repairs and maintenance procedure. The electrical maintenance work and the preventive and break down maintenance of machines is done by the Company's personnel. However, for special type i.e. C.Nc Machines, the maintenance work is entrusted to the machine manufacturers. 13. Delegation of Powers. The Board of Directors has delegated various purchase powers to Purchase Committee and various officers of the Company which may be referred to during audit. 14. Raw Materials and their sources of procurement. The Company is processing Pig Iron, Steel and Coal against quota allotted by the Government of India. When the quota allotted is not adequate, then the Company is purchasing from the local market.

15. Purchase Procedure. The Company appointed in July 1978 a Purchase Committee. Executive Director is the Chairman of the Committee. The persons in charge of various departments viz. finance, production, planning, engineering and quality control etc. are the members of the Committee. The Company has prescribed guidelines for functioning of Purchase Committee. The Company purchases raw materials through enquiries and tenders and also after holding negotiations with the suppliers wherever necessary.

The negotiations are held for procurement by critical - monopoly items.

16. Internal Audit. The Company has appointed a firm of Chartered Accountants as Internal Auditors. The scope of work of the internal auditors is mentioned in the Annexure. Besides pre-payment checks are being exercised by two officers on Special Duty in regard to the following: (a) All final claims relating to salary, wages, gratuity, compensation on retirement, resignation of employees. (b) All indents of stores and purchase proposals including comparative statements.

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(c) Warranty claims. (d) All invoices of sale of tractors and spare parts. (e) Dealers' claims of discount and other payments to them. 17. Provident Fund/Medical benefits extended to employees. The Company has extended the membership of the Employees' Provident Fund to all employees. The Company is making a matching contribution of ten percent of basic pay to the Employees' Provident Fund Account every month. The medical benefits are given to the Employees under Employees' State Insurance Act, 1948.

18. Service Books/Leave Accounts. The Company maintains the service books and leave accounts of its employees. 18.1 Cost Accounting System and Cost Records.

The Company maintains the cost records (Annexure) under the instructions of the cost auditor appointed by the Ministry of Finance. 19. Sales and Pricing Policy. The sales and pricing policy is decided at the top management level by the Company. 20. Promotion of Industries and Financial Assistance. The Company has set-up 8 to 10 Co-operative societies for doing job work on behalf of the Company and they have been given infrastructure facility such as sheds and machines. A mini industrial estate has started for jobs. 21. Financial Management. The Company enjoys cash credit facility from State Bank of India. All sale proceeds are credited on receipt in cash credit account. 22. Branches/units of the Company. The Company is having Branch Office at Bombay for liaison work mainly connected with the procurement of raw materials and components. The Company has also opened branch offices at Bhatinda, Nasik Road, Allahabad, Hyderabad Madras and Bhopal to look after the sales. The Branch Offices render the accounts of the expenditure incurred by them to the Account Division at head office for its incorporation in the accounts of the Company.

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23. Special points to be seen during audit of the Company.

(i) Review the guidelines framed for the purchase of various raw materials and components etc. by the Board of Directors and verify its implementation. (ii) See whether the items like pig iron, steel and coal have been procured as per quota allotted by the government of India. (iii) See that there is proper control over consumption of the materials issued to the Co-operative Societies for manufacture of the components. See that the materials issued to the Co-operative Societies do not remain idle for long time and the same is utilised immediately by them. (iv) Review the payments made to Co-operative Societies towards labour charges for manufacture of Components. (v) Review the Management Information Reports and see that the concerned departments have taken the corrective action as proposed by the Board of Directors. (vi) Review the Reports of the Internal Auditors and see that the Company has taken remedial action in respect of deficiencies pointed out by the Internal Auditors. (vii) Review the Provident Fund Accounts of the employees and see that the Company is contributing every month ten per cent of basic pay of each employee to the Employees Provident Fund Account. See that the medical benefits are extended to the employees as per provisions of Employees' State Insurance Act, 1948. (viii) Review the personal files of the Employees. To see that the leave account of the employees is properly maintained. (ix) Review the Cost Accounting System and see that the cost of production of the tractor is worked out periodically. (x) Review the sales and pricing policy and see whether the Company has revised the sales price from time to time in view of the increase in the cost of production.

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Annexure The system of Internal Control in Gujarat Tractor Corporation Limited, Baroda.

The scope of internal audit is large enough to cover not only financial accounting records kept by Accounts and Finance Division but also of other Divisions. The Internal Auditors cover by their scrutiny among other matters, the following items of work. (a) (b) (c) (d) Audit of comparative statements, particularly in respect of purchases of high value items. Check of job order rates and spares prices. Check of contractor's bills, transportation bills with reference to terms of contract. Check of payments on accounts of supplier's bills, deductions of advances from their bills, penalty etc. from their bills with reference to payment terms of Purchase Orders. Check of expenditure on account of emergency purchases to verify whether the expenditure could not have been avoided and whether extra cost is involved, and Check of recovery of dues and other outstandings.

(e)

(f)

Besides enlarging the scope of work of internal auditors, certain pre-payment checks have been introduced. This work is done departmentally and is attended to by two officers on special duty of the rank of Managers. They are responsible for; (a) (b) (c) (d) (e) Check of all final claims before payment, relating to salary, wages, gratuity, compensation etc. on retirement/resignation etc. of the employees. Audit of all indents of stores and purchase proposals, including checks of comparative statements. Check of warranty claims. Check of all invoices of sale of tractors, and spare parts, and Check of dealer's claims of discount and other payments to them.

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Annexure - I <Referred to in Para - 18.1 The Costing department maintains the following records to determine the cost of self manufactured components and that of the tractors.

(1)

Records of Direct Material Issues:

Separate registers are maintained for each production shop to record material issue vouchers component wise and tractor model wise for each material class. (2) Production Records:

(a)

Manufactured Components:

Finished Product Stores documents indicating production of components are posted in a register component wise and monthly total quantity is posted in the register.

(b)

Foundry Casting Production:

Daily foundry casting production is recorded casting wise in terms of kilograms and quantity.

(c)

Heat-treatment Production Register.

Production of each different heat treatment process is recorded component-wise in terms of kilograms and quantity.

(d)

Tractor Production Register.

Daily production reports of Assembly shop are recorded date-wise for each tractor model indicating quantity of rolled out, completed, despatched and lying in stock. (3) Salaries and Wages Records:

Monthly actual salaries and wages which are worked out on computer show department-wise strength and their element-wise emoluments. Monthly figures are summarised department-wise and element-wise in a register. These are allocated on suitable basis to arrive at factory, administration, selling and distribution overheads and Research and Development cost centres.

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(4)

Overhead analysis Register:

Actual overhead expenses incurred are posted and analysed for production, production service, administration and selling and distribution departments.

(5)

records for Rejections:

Rejection vouchers of each production shop are posted on day-to-day basis shop-wise and component-wise to work out rejection percentage and its cost.

II

PROCEDURE FOR ACCOUNTING OF EACH ELEMENT OF COST: (a) Material Cost

Issued quantities as per material requisition notes are priced at weighted average rate of each class of material furnished by Store Accounts Department and material consumption is worked out for each component used for different models of tractor manufactured.

Job charges paid to the societies for machining of the components are added in the rate working of the components.

(b)

Direct Labour: (1) Foundry Shop: Total actual wages of the shop are allocated to each casting produced on the basis of the process time of the casting produced. (2) Machine Shop: Actual direct labour spent for each operation is posted component-wise and operation-wise indicating operators ticket number from daily work reports of the machine shop. Actual hourly rates for each grade of workers are worked out every month on the basis of the actual wages paid for the month. These rates are applied to actual time spent for each operation and total labour for each component is worked out.

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(3)

Heat-Treatment Shop: Heat-treatment production of each different process is converted into equivalent production by applying weightage factor of the process time cycle. Based on actual wages of the shop and equivalent production, rate per kg. is worked out for each process which is applied to actual production of each component to arrive at the labour of each component, heat treated.

(4)

Assembly Shop: Assembly shop wages are allocated to each tractor model on the basis of completed tractors and rolled out tractor duly converted in terms of equivalent tractors.

(c) Depreciation: ] Depreciation is worked out on reducing balance method, Allocation of depreciation on building is done on the basis of sq.feet area occupied by each department and that on Plant & Machinery on the basis of estimated value of plant installed in each department, whereas depreciation on furniture and vehicles is entirely charged to administration.

For the purpose of computing cost of self manufactured components, depreciation relating to works is included in works overheads and that relating to administration is included in administrative overheads and charged on the basis of percentage on direct labour. But for tractor cost, depreciation as a whole is shown as a separate item and as such works overheads and administrative overheads are exclusive of depreciation cost.

No depreciation has been provided on the assets physically transferred to the societies. Pending finalisation of formal agreement with the societies they are treated as assets of the Company.

(d)

Over-heads:

Overheads expenses are analysed and classified under four categories viz. (i) Production shops, (ii) Production Service Departments, (iii) Administration and, (iv) selling & Distribution.

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Overheads relating to production service departments are allocated to production shops on suitable basis and thus works Overheads for each production shops are worked out.

Works Overheads and administration Overheads are absorbed in production cost on the basis of percentage of direct labour cost. Administrative Overheads relating to sales and selling & distribution Overheads are absorbed in the cost of sales of tractors.

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CHAPTER:- XVII Gujarat State Petroleum Corporation Limited, Ahmedabad.

1. Introduction. Gujarat State Petrochemical Corporation Ltd., Ahmedabad was incorporated on 29th January 1979. Later on name of the Company was changed to Gujarat State Petroleum Corporation Limited, w.e.f.10th November 1994. The authorised share capital of the Company as on 31st March 1995 was Rs.35 crore divided into 35 lakh equity shares of Rs.100/- each. It is a deemed Gujarat Company; w.e.f. 16th March 1995.

2. Applicability of Acts and Rules etc. (i) Companies Acts 1956. (ii) Mining Act. (iii) Foreign Exchange Regulations, etc..

3.1. Main objects of the Company. The main objects of the Company are detailed in the Annexure.

3.2. Present activities of the Company. The Company is mainly engaged in the activities of exploration and exploitation of oil and gas from different fields awarded by the Ministry of Petroleum.

4.1. Organisational set-up. The management of the Company is vested in a Board of Directors which also includes Chairman and Managing Director who is the Chief executive looking after the day-to-day management of the Company. The Managing Director is assisted by Director(Finance and observations) and General Manager (F. & A.) etc..

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4.2. Accounting organisational set-up. The accounts department is headed by the General Manager(Finance and Accounts) who is assisted by an Assistant.

5. Books and records maintained. (1) Cash book. (2) Ledger. (3) Bank book. (4) Journal book.

6. Delegation of Powers. The Managing Director of the Company has been delegated various operational powers by the Board of Directors.

7. Managerial information system. The Company follows Managerial information system (MIS) in which the following information are collected. (i) Daily gas production report. (ii) Daily oil production report. (ii) Weekly bank position. (iv) Weekly statement of outstandings. (v) Fortnightly report of despatch of oil. (vi) Fortnightly report of sale of gas. (vii) Monthly trial balance. (viii) Quarterly Profit and Loss Accounts.

8. Internal Audit. The internal audit of the Company is entrusted to a firm of Chartered Accountants. The cent percent audit of expenditure and receipts is done by the internal auditors. The Company has prescribed detailed procedure for audit of cost oil and profit oil.

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9. Manufacturing process, raw materials used, products manufactured and channel of distribution etc.. The process of production of oil and gas is detailed in the Annexure. The saline water and diesel are used for production purpose and these items are purchased from the market. The purchase procedure is being designed by the Company in consultation with the Director General of Hydrocarbons, Government of India (GOI) as per the terms and conditions of the contract between the GOI and the Company. The oil produced by the Company is sold to the Ministry of petroleum, Government of India and it is delivered to ONGC. The Company sells the gas to Gujarat Gas Company Limited as it is free to sell the gas to any customer.

10. Inventory control system. The Company has not set-up the inventory control system as it does not keep any inventory of finished goods. The gas is sold to Gujarat Gas Company Limited at well-head point. However, the detailed system for inventory of capital goods and the stores used for exploration is being designed by the Company.

11. Repairs and maintenance procedure. The Company has undertaken the activities of exploration and exploitation of oil and gas, in consortiums with a foreign collaborator and all the repairs and maintenance of plants and equipments including preventive maintenance schedules are undertaken by the foreign partner.

12. Provident Fund and medical benefit extended to the employees. The Provident Fund @ ten percent of monthly basic pay and D.A. of each employee and the matching contribution of the Company forms part of the Provident Fund. The Company pays interest @12 percent on the Provident Fund annually. The Company extends the benefit of reimbursement of medical charges of Rs.900 in financial year to each employee. The Managing Director is empowered to sanction an interest-free loan upto Rs.5000 in each exceptional case and the loan is recoverable in 3 years. The Board of Director decides the cases of further expenditure depending upon its merits.

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13. Service books/Leave accounts. The concept of maintenance of Service books in respect of each employee is being introduced by the Company. The detailed procedure of maintenance of Leave accounts is adopted by the Company.

14. Financial Management System. The Company follows the system prescribed by the Government of India in respect of the financial management.

15. Sales and pricing policy. The selling price of the oil is determined by the Government of India to whom the Company sells the oil. The Company is free to sell the gas to any customer. The gas is at present sold to Gujarat Gas Company Limited at 180 percent of the prevailing sale-price charged by the Gas Authority of India Limited.

16. Special points to be seen during audit of the Company. (1) Review the activities undertaken by the Company and see that the production targets fixed from time to time are achieved by the Company. Analyse the shortfall if any. (2) Review the scope of work of the internal auditors and see that it is adequate in view of the financial transactions of the Company. (3) Review the agreements executed by the Company with the Government of India and foreign partner and see its terms and conditions are strictly followed by the concerned parties. (4) Review the purchase procedure and inventory control system being followed by the Company and see that the purchase of saline water and diesel is made at reasonable rates. (5) Collect and review the accounting manual and service regulations manual of the Company as and when finalised.

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ANNEXURE

1. "To explore, exploit, manufacture, synthesize, produce, prepare, extract, process, finish, manipulate, improve, treat, preserve, reduce, render, merchantable, import, export, buy, sell, install, estimate, transport, refine, store and generally carry on the business or deal or traffic in hydrocarbons like crude oil and natural gas and processing thereof into its components for production of products such as light distilliants like fuel, gas, LPG, Middle distilliants like Kerosene, naphtha, motor spirit, diesel, aviation turbine fuel, heavy distilliants like fuel, oil, LSHS, Wax, Heavy ends, Methane, Ethane, Propane, Butane and NGL and also cracking of petroleum fraction and hydrocarbon gases, with the object to obtain the basic building blocks such as olefins like ethylene, acetylene, propylene, butylene, butadiene, aromatics like benzenes toluene Xylenes and to deal in these items."

2. To manufacture, synthesize, produce, prepare, extract, process and finish, manipulate, improve, treat, preserve, reduce, render merchantable, import, export, buy, sell, install, estimate, transport, refine, store and generally carry on the business or deal or traffic in Polymers, elastomers, resins and plastics of all types and grades, copolymer formulations and in all forms such as powder, flakes, laminates or as processed goods, and including polyethylene, polypropylene, polystyrene, polyvinyl chloride, polyvinyl acetate, polymethyl methacrylate, epoxy resins, alkyd resins, melamine, polycarbonates, polyamides, polyimides, polymethanes, polyacrylo-nitrile, polyesters such as polyethylene terephthalate and polyethylene isophthalate, ethylene oxide, ethylene glycol, propylene oxide and polyols, glycol esters and glycol ethers, dodecyl benzene and other types of Alkyl Benzenes, etc., derived from the building blocks such as methane, ethane, ethylene, propane, propylene, butane, butylene, LPG etc..

3. To carry on in India and elsewhere the business of processing, converting, producing, manufacturing, formulating, using, buying, acquiring, importing, storing, packaging, selling, transporting, distributing, exporting and disposing etc..

(a) All chemicals derived from hydrocarbons including those from petroleum sources, elements, chemical compounds and products of any nature and kind whatsoever including by products, derivatives and mixtures thereof.

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(b) Special types of petroleum and petroleum products, including specifically crude oil, associated and free gases refinery gases, reformer and cracker gases, naphtha, reformat, middle distillate fractions, residual fuel oil, slack wax, tank bottoms and any by-products or waste products therefrom.

(c) All petrochemical building blocks and derivatives thereof, whether liquid, solid fluid or gaseous and including benzene, toluene, ortho xylene, para xylene, ethyl benzenes, ethylene, propylene,, propane, ethane, butanes, butenes, butadiene, isoprene, oxides, glycols and polyglycols of ethylene, propylene and butylene, aliphatic and aromatic alcohols, aldehydes, ketones, acids, acid anhydrides, acetates, acrylics, cyanates and isocyanates and reaction products of various organic synthesis like halogenation, sulfonation and sulfation, nitration, amination, oxidation, reduction estlification, alkylation, hydrolysis, phosgenation, hydrogenation, etc. and any other process developed or likely to be developed.

(d) Polymers, elastomers, resins and plastics of all types and grades, copolymer formulations and in all forms such as powder, flakes, granules, films, sheets, tubes, pipes, fibres, laminates or as processed goods, and including polyethylene, polypropylene, polystryrene, polyvinyl chloride, polyvinyl acetate, polymethyl methacrylate, epoxy resins, alkyd resins, melamine, polycarbonates, polyamides, polyimides, polymethanes, polyacrylonitrile, polyesters such as polyethylene teraphthalate and polyethylene isophthalate etc.. (e) Polymer processing chemicals and additives of all types and for all purposes and including plasticisers, fillers, antioxidants, retarders, colouring chemicals etc..

(f) Elastomers, reclaimed rubber and synthetic rubber of all types, grades forms and copolymer formulations, including polybutadiene, polyisoprene, butyl rubber, nitrile rubber, EP rubber, speciality rubbers and including rubber processing chemicals such as accelerators, antioxidants, retarders and fillers, synthetic rubber coated and laminated articles etc..

(g) Synthetic fibre and fibre intermediates of all types, grades formulations and blendings and including polyester fibre, polyacrylonitrile, polyvinylacetate, polypropylene, nylon and other synthetic and cellulosic fibres etc..

(h) Solvents of all types, grades and formulations, essences flavours, perfumery materials, surface coatings and laquers etc..

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(1) Synthetic detergents and detergent intermediates of all types and surface active agents, including dodecyl benzene, propylene tetramer and bio-degradaple detergents. (i) Pesticides, micronutrients and related intermediates of all types and formulations, including insecticides, pesticides, weedicides, rodenticides, fungicides etc.. (j) Refrigerants of all types.

(k) Single cell and multi cell proteins from hydrocarbons.

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CHAPTER No.:- XVIII Gujarat Rural Industries Marketing Corporation Limited.

1. Introduction. Gujarat Rural Industries Marketing Corporation Limited was incorporated on 16th May 1979. The authorised share capital of the Company as on 31st march 1995 was Rupees Four Crore divided into 40 lakh equity shares of Rs.10 each. It is a Government Company registered under the Companies Act, 1956.

2. Applicability of Acts and Rules etc.. The Company is governed under the provisions of the Companies Act, 1956. Besides the Income Tax Act, 1961, Sales Tax and Central Sales Tax Act, Shops and Establishment Act and State Government Service Rules (B.C.S. Rules) etc..

3. Organisational Set-up of the Company. The management of the Company is vested in the Board of Directors headed by the Chairman appointed by the State Government. The Managing Director is the Chief Executive of the Company for looking after day-to-day affairs of the Company. The Managing Director is assisted by the Manager (Finance), Manager (Administration), Manager (Projects), Company Secretary Leather experts and various Dy.Managers etc..

4. Accounting Organisational Set-up of the Company. The Accounts and Finance functions of the Company are looked after by the Manager (Finance) with the help of the Accounts Officer, Dy.Manager, Accountant and Sr./Jr.Clerks etc..

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5. Main objects of the Company. The main objects of the Company are as under :(1) To promote the marketing of the products of rural industries of Gujarat and to provide technical and managerial assistance to rural artisans. (2) To generate employment for rural artisans. (3) To uplift economic living standard of poor rural artisans. (4) To impart practical training to artisans for quality products. (5) To extend, Financial, Technical and other assistance to rural artisans. (6) To check inflow of rural population to urban areas. (7) To organise production through individual artisans and various production centres.

6. Present activities of the Company. The Company has undertaken the manufacture of footwear, garments, wooden and steel furniture, leather articles, pickles, spices, papad and other trading activities through rural production centres. These centres provide technical assistance and raw materials to rural artisans and in turn collect the products from them.

7. Books and Records maintained by the Company. (i) Journals (ii) Ledgers (iii) Cash and Bank Book (iv) Purchase Register (v) Sales Register (vi) Petty Cash Register (vii) Charges Register (viii) Fixed Assets Register (ix) Board's meetings' minutes Books (x) Sales tax/Income tax Records (xi) Various voucher files and all other statutory records which the Company is required to maintain under the Companies Act.

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8. Delegation of Powers. The Company has delegated various powers to its officers at various levels through the Board's Resolutions issued from time to time.

9. Products manufactured. The Company is engaged in the manufacture of leather foot-wear, wooden furniture, steel furniture and garments etc. through its rural Production Centres.

10. Raw materials and their sources of procurement. Raw - semi- finished leather, Timber logs, Plywood, Laminated sheets, Steel, and Cotton/Viscose fabrics are purchased by the Company from open market by floating an open tender inquiry based on the market survey and on receipt of the requirement from the rural artisans. The Company follows the Government rules with regard to purchase of raw materials.

11. Channel of distribution. The Company has its own seven retail outlets at various places in Gujarat, which sell the Company's various Products. The Company arranges exhibitions. The sales are made through the mobile van of the Company.

12. Inventory Control System. The Company exercises control over its stock inventory at all the manufacturing centres, by maintaining various records of receipt & issue/consumption of raw materials and finished goods. The managers of centres exercise such control.

13. Cost Control System. The Company exercises the cost control by preparing the cost sheets for each supply order. All the expenses and a profit margin from 5 to 30 percent is added to the cost for arriving at the total cost of a product.

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14. Repairs and Maintenance Procedure. The Company arranges the repairs of small machinery and vehicles, at various centres and Head Office, by inviting the quotations from accredited firms.

15. Internal Audit. The Company has appointed the firms of Professional Chartered Accountants on contract basis for internal audit of its various records on payment of a fixed remuneration. The scope of work of internal auditors is prescribed at the time of their appointment. The internal auditors submit their periodical reports to the management.

16. Provident fund/Medical Benefits extended to the employees. The Company follows the Contributory Provident Fund Scheme of C.P.F. for its employees. The amount deducted from their salary is remitted to the Regional Provident Fund Commissioner.

The Company also extends Medical benefits to its employees in the form of fixed medical allowance paid every month.

17. Maintenance of Service Books and Leave Accounts. The Company maintains Service Books and Leave Accounts of each employee separately.

18. Sales and Pricing Policy. The sale of the products of the Company is effected at its retail outlets as well as by submission of tenders to Government departments and the private parties. the prices are fixed by the Managing Director, in consultation with the respective Manager of concerned activity.

19. Manuals. The Company has prepared its own service regulation called "Gujarat Rural Industries Marketing Corporation Limited Classification, Recruitment and Promotion Regulations 1989."

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20. Branches/Units of the Company. Under the State Government's guidelines, the Company operates various Production Centres at the following places.

(a) Carpentry (i) Thaltej, Ahmedabad (ii) G.I.D.C., Gandhinagar (iii) Idar, Sabarkantha (b) Leather (i) Bavla, Ahmedabad (ii) Narol, Ahmedabad (c) Garments (i) Chhota Udepur, Baroda (ii) Narol, Ahmedabad (iii) Limkheda, Panchmahals (d) Stores: At Narol

All the centres and sales outlets maintain the following records : (a) Stock Register (b) Cash Book (c) Bill Book (d) Challans

21. Position of finalisation of annual Accounts. The Company's annual accounts have fallen in arrears since 1993-94.

22. Special points to be seen during audit of the Company.

(i) Review the manufacturing activities undertaken by the Company and see that the finished stock is not held up for a longer time and it is sold promptly. Review the Company's policy for allowing discount to the customers.

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(ii) Review the system of budgetory control followed by the Company and see that the performance is reviewed periodically by the management with reference to the budgetted production and sales of its various products.

(iii) Review the purchase procedure followed in respect of purchase of raw materials and semi-finished goods etc. and see that the same is done at economical rates and the production activity is not hampered for want of the raw materials.

(iv) See that the raw materials and semi-finished goods sent to the rural artisans by the production centres are fully utilised and there is no loss on any account. See that proper quantity and value accounts are maintained at various centres for raw materials and semi-finished goods.

(v) See that the quality of the finished goods received from the artisans is checked and the stock is not held-up on account of poor quality of finished goods.

(vi) Verify the system followed for payment of wages to the artisans and see that there is no payment to idle labourers.

(vii) Review the cost-sheets and see that all the elements of cost are accounted for and the prescribed profit-margin and expenses are added to the cost of each product.

(viii) Review the reports of internal auditors and see that proper action is taken thereon by the management.

(ix) Review the sales and pricing policy and the financial management system of the Company.

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CHAPTER-XIX Gujarat State Handloom Development Corporation Limited.

1. Introduction. The Company was incorporated on 12th November 1979 under the companies act, 1956. The authorised share capital of the Company as on 31st March 1995 was Rs.500/- lakh divided into 5 lakh equity shares of Rs.100/- each.

2. Applicability of Acts and Rules etc.. The Company is governed by the Companies Act, 1956, as amended from time to time and Income Tax Act, 1961. For internal matters, the Company follows Memorandum of Association, Articles Association, Service Rules and Recruitment and Promotion Rules of the Company.

3. Books and records maintained by the Company. The Company maintains in its head office bank book, cash book, ledgers, purchase/sales book and Journal book etc..

At Company's production centres weavers' accounts ledgers, yarn stock ledgers, equipment stock ledger, loan ledger, finished goods stock ledger, cash book and bank book etc. are maintained.

At sales emporia, finished goods stock ledgers, cash book and bank book etc. are maintained.

At Central Stores, cash book, finished goods stock ledger and processing ledger etc. are maintained.

4. Organisational set-up and delegation of powers. The management of the Company is vested with a Board of Directors which consists of Seven Directors including the Chairman and the Managing director who is the Chief Executive and looks after the day-to-day management of the company.

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The various powers relating to Administration and Financial matters etc. were delegated during June 1989 by the Board of Directors to the Managing Director and other officers of the Company. The accounts Department is run by a Dy.Manager(Finance). 5. Main objects of the Company. The main objects of the Company are:

(i) To aid, comment, assist, protect and promote the interests or/and to manufacture, sale, propagate and deal in all kinds of handloom products, Khadi and products of Village Industries in the State of Gujarat and to provide technical and managerial assistance.

(ii) To organise and establish Emporia and Sales Depots for handloom products, Khadi and products of village industries produced or otherwise available in the State of Gujarat or otherwise available in the country, at selected places in Gujarat and other places in India. (iii) To establish, provide, maintain and conduct or otherwise subsidise research laboratories and experimental workshops for scientific and technical research and experiments and to provide for the award of exhibition, scholarship prizes and grants to students or to otherwise.

(iv) To undertake exports of handloom products, Khadi and products of village industries from India as supplement to private voluntary efforts, to established trade connections, sales depots, selling agencies, offices for distributing agents etc. to undertake directly or in collaboration with specialised domestic or foreign agencies market surveys, to explore possibilities of sale of Indian handloom products, Khadi and products of village industries in foreign markets, to open publicity-cuminformation centres, show-rooms, sales depots and warehouses at suitable places in foreign countries, exchange delegation of foreign buyers and domestic exporters, to participate in foreign fairs and exhibitions and to undertake special promotional measures in countries whose import potential for Indian handloom products, Khadi and products of village industries has not been adequately tapped.

(v) To employ technicians and others as may be found necessary for efficient handling and carrying on the business of the Corporation.

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(vi) To organise the production through Co-operative artisans or its own production centres.

6. Present Activities of the company. The production of controlled and De-controlled cloth is organised by the company with the help of the weavers. The Corporation purchases yarn from Cooperative Spinning Mills, Gujarat State Textile Corporation Limited and other yarn dealing agencies and supplies the same to Handloom weavers scattered in different villages of Gujarat and takes back the cloth from them. The Company provides employment to the weavers through its sixty district offices and sells the handloom cloth produced by them through 19 sales emporia and 22 franchise shops which are spread all over Gujarat, Jaipur(Rajasthan) and Calcutta(West Bengal). The Production and Marketing Department of the Company looks after the above mentioned activities.

7. Products manufactured. The Company sells Janta dhoti, Janta sarees, bed sheets, woolen shawls, Cushion covers, Carpets, Aasans Towels, Nepkins, Dress materials, Durries, Bandhni shawls, Panetar, Patola and Gharchola etc.

8. Method of buying/Purchase Procedure. The Cotton yarn being the raw material for the handloom cloth is procured by the Company from Gujarat State Textile Corporation Limited a Government Company, Co-operative societies and also directly from the Co-operative Mills, as per the requirement of the materials mentioned in the annual production plan. The Corporation enters into annual rate contract for purchase of stationery etc. and for processing job. the company has adopted a barter system under which handloom goods are received from other States' handloom Corporations.

The Corporation invites every year the tenders from the processors for processing textile fabrics and enters into annual contracts with them. Then Board of Directors and processing contractors are competent to approve such contracts.

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9. Sales and pricing policy. The Company fixed the sale price of own product and procured products taking into account ten percent shortages which are loaded on the cost price of each item. The sale price is reviewed and revised after every three years taking into consideration the increase if any, in the cost of the procurement/manufacture. The pricing policy is decided by the Board of Directors and Marketing Committees.

10. Various branches of the Company. The Company has the sales emporia at the following places: (i) Ahmedabad-Ashram Road. (ii) Ahmedabad-Kamdhenu. (iii) Gandhinagar. (iv) Surat. (v) Baroda-Alkapuri. (vi) Baroda-Mandvi. (vii) Bharuch. (viii) Shamlaji. (ix) Ambaji. (x) Surendranagar. (xi) Bhuj.

11. Position of finalisation of annual accounts: The annual accounts of the Company are in arrears. The Company has finalised the accounts for the period upto 1992-93.

12. Procedure for internal audit. The Company has appointed a firm of Chartered Accountants who conduct internal audit of various records of the Company at its head office and various sales emporia and production centres. The report of the internal auditors is received and it is reviewed by the management.

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13. Provident Fund and medical benefit extended to the employees. The Company follows the rules of the State Government in respect of Provident Fund and medical benefit.

14. Maintenance of service books and leave accounts. The Company maintains the service book and leave account of each employee.

15. Financial Management System. The Company receives loans subsidies and grants from the Central/State Government for execution of various schemes. The Company also avails cash credit facility from the scheduled banks against hypothecation of its stock to meet with its working capital requirement. An action plan indicating the requirement of funds is prepared every year by the Company.

16. Management information system: The Company has a separate wing or branch called Managerial information system (MIS) Department which collects various information regarding production sale and inventory etc. from district offices and from sales emporia. The information so received is reviewed by the management and remedial measures are taken for improvement in the performance. The Company is having a separate division to collect and provide various information required by the Central/State Governments.

17. Special points to be seen during audit of the Company.

(i) Review the receipt and utilisation of the loans/subsidies and grants received from Central/State Government by the company and see that proper accounts thereof are maintained.

(ii) Examine the procedure for submission of the utilisation certificates to the Central/State Government in respect of grants.

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(iii) Review systems of purchase distribution of cotton yarn. See that the quantity and value accounts are maintained by the Company. In the case of participation in exhibitions examine as to whether the proper accounts for sale and discount allowed if any have been maintained.

(iv) Review the performance of MIS Department of the Company.

(v) Review the internal auditors' reports to verify that the internal audit is commensurate with the volume of activities of the Company.

(vi) Review the Inventory control and Budgetary control systems of the Company. (vii) Review the purchase procedure of the Company. Examine the barter system and verify the arrangements made with other State level handloom Corporations for receipt of the handloom goods.

(viii) Review the sales and pricing policy of the Company and see that it is reviewed and revised from time to time, based on the procurement price of handloom goods.

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CHAPTER-XX Gujarat State Civil Supplies Corporation Limited, Gandhinagar.

1. Introduction. The Gujarat State Civil Supplies Corporation Limited was incorporated on 26th September 1980 with the object of purchase storage and distribution of various kinds of foodgrains and food stuff and to strengthen the " Public Distribution System". The authorised share capital of the Company as on 31-3-1995, was Rs.25 crore divided into 2.5 lakh shares of Rs.1000 each.

2. Organisational set-up of the Company. The management of the Company is vested with a Board of Directors consisting of a chairman and four other directors, including the Managing Director. All the members of the Board are appointed by the State Government. The Managing Director is the Chief-Executive and is assisted by four General Managers, one Dy.General Managers, Liaison Officer at Delhi and four Regional Managers etc..

In February 1984, the Corporation had formed the business committees for planning procurement, storage, distribution and sale of foodgrains, oil and other items. As per the decision of the Board, the business committees were to meet at least once in a month and submit regular reports to the Board of Directors of the Company.

The General Manager(Finance) is the head of the Finance and Accounts Department and he is assisted by various Managers and Dy./Assistant Managers etc..

3. Main Objects of the Company. The main objects of the Company are to : (i) engage it self in purchase, storage, processing, movement, transport, distribution and sale of foodgrains, foodstuffs and any other articles whether declared essential or not; (ii) provide services and assistance of all kinds for the aforesaid purposes; and (iii) undertake any activity regarding civil supplies as directed by the State Government from time to time.

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4. Present activities of the Company. The Company undertakes the following activities:

(i) On Government account: This activity involves the procurement, storage and distribution of essential commodities including coarse grains such as wheat, rice and pulses and edible oils through the Public Distribution System(PDS)

(ii) On Company's account: This involves the purchase and distribution of sugar, cement and petroleum products including liquified petroleum gas and operation of petrol pumps. The Company procures, stores and distributes the essential commodities such as; rice, wheat, coarse grains, etc. through a vast network of about 13000 Fair Price Shops (FPS) run by private traders, co-operative societies and others spread over the entire State.

(iii) Other activities (a) Operation of seven departmental stores under the name of "Kalpataru";and (b) distribution of wheat and rice at subsidised rate to unemployed textile workers of closed textile mills of Ahmedabad. (c) Mid-day meals scheme of State/Central Government.

5. Managerial Information System. The Company has a "MIS branch" since April 1984 which consists of two sections. (A) Statistics; and (B) Electronics Data Processing (EDP). Statistics section collects and complies the following information:

(i) Stock position for every 10 days; (ii) Monthwise allotment details;

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(iii) Monthwise issue details and its graph; (iv) Price and its graph; (v) Miscellaneous statistics; (vi) News pertaining to activities of the Corporation published in daily newspapers. Electronics Data Processing (EDP) section performs the following activities: (i) Inventory Management System; (ii) Price Equalisation Fund Accounts; (iii) Personnel Management; (iv) Pay bills, (v) Provident Fund Accounting; (vi) Departmental Stores; (vii) Bank reconciliation; (viii) Budget; (ix) Edible oil's allotment, despatch and transportation; (x) Operative account for Districts; (xi) Petrol pump accounts; (xii) Computer training; and (xiii) Stock position statements; (xiv) Railway freight and forwarding charges claims. 6. Special Acts/rules applicable. The Company follows the Acts and Rules as detailed in Annexure

7. Details of books/records maintained. The Company maintains the books and records detailed in Annexure

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8.

Inventory control Budgetary control and Cost control Systems. (i) Inventory Control System

The Company has developed a computer-based information system of inventory which provides detailed information the inventory of all the commodities stored at various Godowns of the Company. The information covers position of stock of various commodities, age-wise analysis of inventory, turnover ratios and details of damaged/unserviceable goods, etc..

(ii) Budgetary Control System The Company prepares operational budget for the whole year covering all the activities of the Company and also items of income and expenditure and presents its projected budget to the Board of Directors for their approval. As against the budgeted targets, the actual quarterly performance is watched and the variances if any are analysed and reported to the Board of Directors for their perusal and for taking remedial measures for improvement in the performance.

(iii) Cost Control System The Company has introduced marginal costing system for each commodity under which each commodity's contribution towards the Company's profit or loss is arrived at. As against this, based on the previous year's performance the itemwise actual cost of all commodities are arrived at on "historical cost" basis. The actual cost of commodities is then watched and controlled. The Company is having a monitoring system of comparison of actuals with budget with the help of this system, if controls the expenses, such as administrative expenses, financial charges, transportation & labour charges etc. and through competitive tenders and other control methods.

9. Fixation of selling price The Company is dealing in the essential commodities, purchase price and selling price of which are fixed by the Government of India and State Government.

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10. Internal Audit The work of internal audit of the records of the Company is entrusted to a firm of Chartered Accountants. The internal auditors audit all the transactions taking place at godown level and district office level. The scope of the internal audit is decided by the Company from time to time.

Further, the Company appoints every year Central Internal Auditors(C.I.Ars.) under the Companies Act.

11. Provident Fund/Medical facilities extended to employees: (i) Provident fund The Company has formed its own Trust called "The Gujarat State Civil Supplies Corporation Employees' Provident Fund Trust". The Company is deducting P.F. from the wages of employees and contributing equal amount as its share of contribution. The employers and employee's contribution to Provident Fund are remitted to the Trust. Which has framed its own Rules.

(ii) Medical benefits The Company has framed Medical Benefit Rules, 1985 under which the following benefits are extended to its employees; (a) Rs.75/- p.m. as medical allowance; or (b) upto Rs. 1250/- p.a. towards reimbursement of medical expenses; (c) Reimbursement of medical expenses in special cases as determined by the Medical Committee and approved by the Managing Director.

The Medical Benefit Rules, 1985 may be referred to during audit.

12. Service books & Leave accounts The Company is maintains Service book and Leave accounts in respect of each employee.

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13. Financial management system The Company sells the essential commodities through 180 godown centres scattered throughout the state. The sale-proceeds are credited in non-operative collection accounts, opened with 225 branches of various banks at district and taluka levels. The amounts lying in these collection accounts transferred by various banks to their counter parts at Gandhinagar, as per the standing instructions given to them by the Company, for crediting to Company's collection account, maintained at Gandhinagar. The funds, thus, collected by various banks in the collection accounts are transferred to the "Cash credit account opened with State Bank of India".

The Companies sources of receipt of finance are Share capital and loans from State and credit facilities from banks. 14. Accounting/cost accounting and stores management Manual The Company has prepared its accounting manual. The Company has also prepared its Service Rules-1985.

15. List of Regional Offices/District Offices Regional Office District Office

1.

Ahmedabad

(i) Ahmedabad City Office (ii) Ahmedabad District Office (iii) Sabarkantha District Office (iv) Banaskantha District Office (v) Mehsana District Office (i) Baroda District Office (ii) Panchmahal District Office (iii) Kheda District Office (i) Surat District office (ii) Valsad District Office (iii) Bharuch District Office (iv) Dang District Office

2.

Baroda

3.

Surat

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4.

Rajkot

(i) Rajkot District Office (ii) Bhavnagar District Office (iii) Surendranagar District Office (iv) Amreli District Office (v) Jamnagar District Office (vi) Junagadh District Office (vii) Kutch-Bhuj District Office

All the above mentioned district offices are attached with the godowns which are more than 486 in the State.

16. Special points to be seen (i) Review the periodical physical verification reports of the stores items and properties and regularisation reports of shortages and compare the abnormal shortages, if any, with reference to the norms fixed therefor.

(ii) Review the working of fair-price shops.

(iii) review the position of dues/overdues from co-operative societies to whom supplies of commodities are made by the Corporation. (iv) Review the price fixation/pricing policy of the corporation.

(v) See whether the subsidy due from the Government (difference between the retail price and economic price) has been received periodically.

(vi) Critically analyse the "pool price difference account" with the Central Government in connection with the procurement of sugar.

(vii) Review the transport agreements and examine the movement of merchandise and ensure that there is no avoidable movement of goods involving infructuous expenditure. (viii) Examine whether the consumption of fumigants disinfectants is according to the prescribed norms.

(ix) Review the contracts of purchase of wheat, pulse oil, sugar etc. and see that the purchase is made at economical rates.

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(x) Examine the storage and transit losses incurred by the Corporation and compare the same with the norms fixed for the same.

(xi) Examine the cash credit arrangements of the Corporation and the funds arrangement made with the banks in the various regions for transfer of funds and its reconciliation to minimise the burden of interest etc..

(xii) Review the performance of the internal auditors to see as to whether the scope of internal audit is commensurate with the volume of various activities of the Company.

(xii) Examine the working of MIS Department and see that it is efficient and useful.

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Annexure Applicability of Acts and Rules (i) Prevention of food Adulteration Act, 1954; (ii) Essential commodities Act, 1955; (iii) Weights and Measures Act, 1958; (iv) Indian Explosives Act, 1984 (v) Shops & Establishment Act, 1948; (vi) Contract Labour (Regulation & Abolition) Act, 1972; (vii) The Income Tax Act, 1962; (viii) The Sales Tax Act, 1961; (ix) The Professional Tax Act, 1976; (x) Employees' Provident Fund & Miscellaneous Provisions Act, 1952; (xi) The Bonus Act, 1965 (xii) The Companies Act, 1956; (xiii) Bombay Civil Service Rules; (xiv) Payment of Wages Act, 1948; (xv) Payment of Gratuity Act, 1972.

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Annexure

Details of books and records maintained The following books and records are maintained: (i) Cash book, bank book, Journal book and Ledger; (ii) Purchase and Sales register; (iii) Other Subsidiary registers, such as Deposits, advances, unpaid salary, travelling expenses, stock, claims, shortages, Godown rent, labour charges, transport charges, etc.;. (iv)Goods Receipt register, transfer of goods register, Transport Contractors' Bill register, Claims Register and Register of moveable properties etc.

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CHAPTER-XXI GUJARAT TRANS RECEIVERS LIMITED.

1. Introduction Gujarat Trans Receivers Limited was incorporated on 26th March 1981. It is a subsidiary of Gujarat Industrial Investment Corporation Limited, a Government Company which is wholly owned by Government of Gujarat. The authorized share capital of the company as on 31st March 1993 was Rs. 40 lakh divided into 10,000 cumulative preference shares of Rs. 100 each and 3 lakh equity shares of Rs.10 each

2. Applicability of Acts and Rules. (i) Companies Act 1956,, (ii) Factories Act, 1948, (iii) Provident Fund Act, (iv) Industrial Development act and (v) All Statutory Acts and Rules applicable to larger scale unit.

3. Main Objects of the company. (i) To carry on the business of manufacturers and dealers in Electronic Industries in the State of Gujarat. (ii) Establishing Companies, associating for starting and taking or conducting Electronic Industrial enterprises of any description Operating as agents of the State Government in schemes designed to develop the electronic industry in Gujarat.

(iii) To carry on all kinds of business relating to research, development, pilot production, systems' engineering, manufacture, assembly, fitting-up, repairing, converting, overhauling, maintaining, and rendering services of all and every kind and description, buying, selling, importing, exporting, exchanging, altering, hiring, improving, dealing in radio and electronic systems, apparatus, equipments relating to the field of electronics.

(iv) To undertake setting-up of new electronic estates

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(v) To carry out market surveys with a view to develop electronic Industries; to undertake preparation of project profiles, feasibility studies or detailed project reports in respect of electronic Industry.

(vi) To provide service centers, common facilities and testing and standardization units in respect of various products for the development of electronic industry.

4.1 Organizational Set up The Managing Director is the Chief Executive who is assisted by the Chief Engineer, Production, Engineer, Marketing Manager, Materials Manager, Account Co-ordinator and Personnel Secretary. In addition to the Managing Director, the Company is having a whole-time Director. Who is responsible for the financial management. Accounts-Co-ordinator also looks after the financial affairs of the company.

4.2 Accounting Organizational Set-up The Accounting Organizational Set up of the Company is as under; Accounts Co-ordinator - accountant - Accounts Assistant.

5. Books and Records Maintained. (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) Cash expenses register.(columnar) purchase journal Sales journal Debit note/credit note register Journal proper Bank Book Ledger Fixed Assets Register. Stock sheets. Personnel records and Attendance register of employees.

6. Present Activities of the company Manufacture of two way radio communication and Allied equipments.

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7. Management Information system The company prepares quarterly reports on management information system

8. Delegation of powers The Board of Director of the Company had delegated in July, 1985 various powers to the Managing Director, as detailed in the Annexure.

9. Processing Plant The company is having processing plant at 1/A GIDC Estate, Halol, DistrictPanchmahals in Gujarat State.

10. Manufacturing process The company is acquiring printed circuit boards (PCB's), discrete components are procured and mounted on PCB's by flow/wave soldering machine. These populated PCB cards are rested and mounted on the Mother Boards. The mechanical parts are supplied by the company's back-up work shop. The complete equipments are then rested on the bench in company's Laboratory.

The equipments are finally despatched after conducting quality control tests. Thus, the main process is the assembly of components

11. Products manufactured. The company is manufacturing the following products. Two way Radio Communications and allied equipments; mainly the Mobile, Base and Handheld Multi-channel VHF/HF Equipments, pagers, selective call systems; Power supply unit, Battery chargers, Security Alarm Systems; VHF Repeater Stations.

12. Raw Materials and their Sources of procurement.

(i) Raw materials; Electronic Components such as, Microcircuits, Micro computers, Resistors, Capacitors, diodes, Transistors, Crystals and such semi-conductor devices, Mechanical parts including brass, aluminium, and Plastic materials.

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(ii) These components are mainly procured indigenously (80% approximately), balance 20% components are imported from Singapore, Taiwan, Korea, Japan, United Kingdom, United states of America, France and other EEC countries.

13. Method of buying The Company invites quotations from various manufacturers and calls for their technical details. The technical experts in Research and Development wing i.e., Engineers examine and test the samples with reference to the quality and specification. The samples are then cleared for evaluation

14. Channel of distribution of finished goods The company has appointed its representatives in most of the States to arrange for the marketing of the products of the company.

15. Purchase procedure Based on the Engineers' specifications/ requirements, the company is floating enquiries and then placing orders with the following main considerations; (a) Technical parameters and the credentials of the manufacturers,. (b) Prices offered, and (c) Credit terms.

16. Inventory/Budgetary/Cost control systems

(i) Inventory control The requirement of material is indented to have the maximum commercial advantage and certain minimum quantity of materials is maintained so as to cater for the "after sales" service. (ii) Budgetory control Monthly and quarterly cash-flow is prepared. The projections are adhered to.

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(iii) Cost control. The Computer has been programmed for cost control so as to cover almost all direct costs.

17. Repairs and maintenance system The testing and measuring equipments and the workshop machinery are serviced at regular intervals.

18. Internal audit The company has appointed a firm of Chartered Accountants as its Internal Auditors.

19. Provident Fund/Medical benefits The company extends the benefits of Provident Fund and Medical benefits to its employees.

20. Service Books and Leave Accounts The company is maintaining service books and leave accounts of its employees. 21. Sales and Pricing Policy The company has appointed Marketing representatives in Gujarat and other States. A Uniform Pricing Policy is followed by the company.

22. Cost Accounting system and records maintained therefor The Company's computer is programmed for costing at components' level. Based on the direct inputs and overheads, the cost of the product is arrived at, through the additional software programme in the computer. The cost sheets and direct input records are also maintained by the company.

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23. Financial Management System The company was promoted by Gujarat Industrial Investment Corporation Limited (51% share) and Ramaiya Electronics Limited(49% share) The company has availed a term-loan of Rs 49 lakh from GIIC Limited. The State Bank of India, Baroda is providing financial assistance for the working capital of the company. In addition to the Managing Director, the company is having a whole-time Director who is responsible for the financial management. Accounts Co-ordinator also looks after the financial affairs of the company.

24. The accounts of the company are in arrears since 1993-94.

25. Special points to be seen during audit of the company (i) Review the production programme of the company and see that the installed capacity is fully utilised. The reasons for the under-utilisation of the capacity if any, may be ascertained alongwith the remedial action taken therefor.

(ii) Review the procurement programme of the materials and components and see that it is conductive to development. Special stress is needed in cases where proprietory items are involved. The methodology of finalisation of tenders and decisions should be closely examined to see that value for money spent is received and quality is not disturbed of finished product is maintained.

(iii) See as to whether there is any Research and Development wing, if so, review the working of the same. See to what extent the expenditure on R & D activity has been fruitful.

(iv) Review the sales promotion programme and examine as to whether it has helped in promoting the sales of the company.

(v) Examine" after sales" service and readiness of the company to attend to the customers' complaints.

(vi) Review the price fixation policy of the company and see that it covers all the elements of the costs. Also see that the sale price of the finished products is reviewed from time to time.

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(vii) See as to whether the company is incurring losses, if so, whether the company has analysed the reasons for the losses. Review the steps taken by the company to overcome the losses / effect economy.

(viii) Review the credit sales procedures and see that the company realises its dues as and when they fall due. Undue concessions need critical study.

(ix) Review the project estimates and see that any deviation from the estimates has been properly accounted for. Investigate / analyse the upward revision of the estimates, and major changes to see whether the estimates were defective

(x) Review the supply orders received by the company and see that the delivery schedules as per the supply orders are strictly adhered to. See as to whether the customers have imposed any penalty for not adhering to the delivery schedule or defective supplies, failure during guarantee period etc.

(xi) See that the allocation of expenditure between capital and revenue has been made in accordance with the accepted principles of Commercial accounting.

(xii) Review the reports submitted by the Internal Auditors and as to whether adequate action is taken thereon by the management.

(xiii) See that the company is properly maintaining the service books and leave accounts of its employees.

(xiv) See that the Contributory Provident Fund accumulations are deposited timely with the CPF Trust by the company. Cases of penalty imposed should be scanned.

(xv)See adherence to other satutes and any financial implications or losses due to non adherence should attract closer study.

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ANNEXURTE Delegation of Powers to Managing Director.

"RESOLVED THAT Shri D.K.Ramaiya, Managing Director be and is hereby authorised to perform functions and exercise powers as follows:

1. The Managing Director will generally conduct and manage the company's business and affairs subject to the supervision of the Board of Director of the company. 2. The Managing Director shall exercise the following power viz:

(a) To manage the affairs of the company and exercise all powers embodied in this resolution of which articles or Director or General Meeting may give him from time to time. (b) To enter into, sign, execute, all deeds, instruments, contracts receipt etc.,

(c) To make, sign, draw, accept, endorse and negotiates, all cheques, bills of exchange, drafts, delivery orders etc., subject to conditions that cheques upto value of Rs.25000/- will be signed and endorsed by Shri D.K.Ramaiya, Managing Director singly, whereas cheques above Rs.25000/- will be signed by Shri D.K.Ramaiya jointly with Mr.T.B.Shah, Director of the Company.

(d)

To become party to and ensure registration of documents.

(e) To institute, debend, prosecute, refer to arbitration, abandon and compromise, legal and other proceedings claims and disputes.

(f)

To give receipts releases, and discharges.

(g) To convene, meetings of Board of Directors, Committee meetings, ordinary and Extra ordinary General Meetings.

(h) To purchase, sell import and export all machinery raw materials, finished goods etc.

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(i) To take on item, hire, rent, movable and immovable properties for the purpose of the business of the Company.

(j)

To acquire buildings and immovable properties.

(k)

To erect, maintain, after and extend works, factory, building etc.,

(l) Subject to provisions of Section 293 and limits or conditions as may be prescribed by the Board of Directors to sell transfer and dispose off movable or immovable properties of the Company. (m) (n) To let or hire out properties of the Company. To insure the Company's properties

(o) (p)

To open and operate accounts with Banks and others. To attend and to vote at bankruptcy, insolvency and liquidation proceedings.

(q) To appoint and remove officers and employees and agents etc., and fix their remuneration, provided however that remuneration payable in any of these appointments shall not exceed Rs.25,000/- per month.

(r)

To exercise rights of the Company as a holder of any investments.

(s) To attend meetings or appoint proxies to attend meetings on behalf of the Company.

(t) And generally to do all that may be necessary in the management of business which are not expressly forbidden by the Act, and memorandum and articles, or are not required to be done by the Board of Directors or in general meeting. (u) He shall not exercise powers to make calls on shareholders or to issue debentures or except to the extend of delegations made by him under Section 292 by the Board to exercise powers to invest funds or make loans and borrow moneys".

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CHAPTER-XXII

GUJARAT ANALGESICS LIMITED

1. INTRODUCTION. Gujarat Analgesics Limited was incorporated on 17th August 1982. It is a subsidiary of Gujarat Industrial Investment Corporation limited a Government Company which is wholly owned by the State Government. The authorised share capital of the company as on 31st March 1995 was Rs.1 crore which comprised of equity share capital of Rs.90 lakh divided into 9 lakh shares of Rs.10 each and preference share capital of Rs.10 lakh divided into 10,000 shares of Rs.100 each.

2. APPLICABILITY OF ACTS & RULES ETC.. (i) Companies Act 1956 (ii) Income Tax Act (iii) Various Rules as mentioned in the Annexure

3. MAIN OBJECTS. The main objects of the company are detailed in the annexure.

4. NOTE ON THE WORKING OF THE COMPANY. Though the company was incorporated during August 1982, it has not under taken so far any business activity as mentioned in the "objects clause" of its Memorandum and Articles of Association. There is no employee on the pay roll of the company. The company's future plan of business is also not known.

The company has informed that it maintains the Secretarial records such as, Minutes Books of meeting of the Board of Directors and Annual General Meeting of the share holders, Register of members, Register of directors and the attendance register. Further, the work of writing and preparation of the annual accounts of the company is entrusted to the company is entrusted to a consultant on payment of the annual fees of Rs.500.

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ANNEXURE

DETAILS OF THE RULES APPLICABLE TO THE GUJARAT ANALGESICS LIMITED. 1. Companies (Central Governments) General Rules and Forms 1956. 2. Company Law Board Regulations, 1991 3. Company's Regulations, 1956. 4. Companies(Fees or Applications) Rules 1968 5. Company Law Board(Fees on applications and petition) Rules, 1991. 6. Companies ( Appointment and qualifications of Secretary) Rules, 1988. 7. Companies (Acceptance of Deposits) Rules, 1975 8. Companies(Applications for extension of time of exemption under subsection(8) of 58 A) Rules, 1979. 9. Companies (Issue of share certificates) Rules, 1960 10. Companies(Preservation and disposal of records) Rules, 1966. 11. Companies(Transfer of profits to reserves) Rules, 1975. 12. Companies (Declaration of dividend out of reserves) Rules, 1975. 13. Companies(Disclosure of particulars in the report of Board of Directors) Rules, 1988. 14. Companies (particulars of employees) Rules, 1975. 15. Manufacturing and other companies(Auditors report) order, 1988.

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ANNEXURE

MAIN OBJECTS TO BE PURSUED ON INCORPORATION

1. To manufacture, process, produce, prepare, transport, refine, recover, improve, make, recycle, reprocess, utilise, extract and finish, import, buy, sell, market, install, survey, undertaking labour job work, research and deal with fine and heavy chemicals colours, dyes, drugs, pharmaceuticals, surgical, medicinal, chemical industrial and other preparations and compounds, cements, oils, paints, pigments and varnishes, paints, surgical and scientific apparatus and materials.

2. To manufacture, process, produce, prepare, transport, refine, recover, improve, make, recycle, reprocess, utilise, extract and finish, import, export, buy, sell, market, install survey and generally carry on business as manufacturer of all kinds of machineries and equipments, apparatus, machinery parts and component parts of machinery, accessories and stores for all kinds of fine chemicals dyes, medicines, pigments, paints.

3. To promote and operate schemes for development of all kinds of chemicals industries in the state of Gujarat and to carry on business in dyes, chemicals, acids, organic and inorganic chemicals and similar materials for small scale industries and heavy industries, pharmaceutical industries, agricultural and community use and consumption as well as for export.

4. To aid, counsel, advise, finance, promote, establish, develop, research in all kinds of chemicals, dyes and generally to deal in all kinds of natural and synthetic chemicals, paints.

5. To organise common facility centers for collecting, compiling, providing, selling, utilising, furnishing information on process formulas for manufacturing various kinds of dyes and fine chemicals.

6. To collect, compile, analyse market information and conduct market research surveys and to provide marketing services to manufacturers, dealers, merchants, retailers of chemicals of all kinds as well as machinery and its lay-out for the same.

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CHAPTER-XXIII GUJARAT WOMEN ECONOMIC DEVELOPMENT CORPORATION LIMITED

1. INTRODUCTION Gujarat Women Economic Development Corporation Limited was incorporated on 16th August 1988. The authorised share capital of the Company as on 31st March 1992 was Rs.10 Crore divided into one Crore equity shares of Rs.10 each. It is a Government Company owned by the Central Government and State Government.

2. APPLICABILITY OF ACTS AND RULES The Company is governed under the provisions of the Companies Act, 1956.

3.MAIN OBJECTS OF THE COMPANY (i) To promote activities for the welfare, upliftment and advancement of women.

(ii) To promote literacy, talent, skill, know-how, enterprise, spirit of entrepreneurship and business acumen among women.

(iii)To undertake all types of activities in trade, commerce, business and industries generally to provide employment opportunities for women.

(iv) To provide financial assistance to women by way of cash credit, margin money and/or subsidy. (v) To purchase raw materials, machineries, equipments, spare parts, tools and implements for supplying to self employed women and women entrepreneurs at reasonable rates and also to undertake and organise marketing activities for sale and distribution of products manufactured by them and services rendered by women entrepreneurs.

(vi) To identify trades, occupation and industries which can be taken up by women.

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4.PRESENT ACTIVITIES OF THE COMPANY For the economic development of the women, the Company has taken up the schemes for income/employment generation. For social justice and women's equality, schemes for spreading awareness and organising workshops/seminars etc. are implemented. The Company grants subsidy to women entrepreneurs engaged in cotton industries sector. The subsidy is granted out of the grants received from the State Government.

The following schemes are implemented at present; (i) Loan and subsidy for Bankable schemes. (ii) Training schemes. (iii)Margin money assistance to women co-operatives. (iv) Demonstration of fruit preservation/cottage industries. (v) Surveys and Research. (vi) Organise exhibition cum sale for women entrepreneurs.

5.1 ORGANISATIONAL SET-UP. The management of the Company is vested with the Board of Directors consisting 10 Directors including Chairman and Managing Director. The Managing Director is assisted by one General Manager, two Managers, one Accounts Officer, four Development Officers, one Project Officer and other officers and subordinate staff etc..

5.2 ACCOUNTING ORGANISATIONAL SET-UP The accounts department is headed by the General Manager and he is assisted by one Accounts Officer, two Deputy Accountants, one senior clerk cum accountant, one clerk cum typist and peon etc..

6.BOOKS AND RECORDS MAINTAINED BY THE COMPANY. (i) Cash book, (ii) Ledger, (iii)Journal voucher book, (iv) Fixed assets register, (v) Minutes books of Board of Directors and Share-holders, (vi) Share-holders' register, (vii)Attendance register of Directors and Share-holders.

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7.DELEGATION OF POWERS. The Managing Director of the Company has been delegated with the powers of administration and finance etc. by the Board of Directors. He can exercise financial powers upto Rs.one lakh. He has to seek the Board's approval in respect of the proposals of expenditure beyond Rs.one lakh.

8.MANAGERIAL INFORMATION SYSTEM. The Company has adopted a managerial information system (M.I.S.) under which the performance of staff in field is collected monthly for review.

9.INTERNAL AUDIT. The Company has engaged a firm of practising Chartered Accountants as its internal auditors on contract basis.

10.PROVIDENT FUND/MEDICAL BENEFIT EXTENDED TO EMPLOYEES. The Company has extended the benefit of Provident Fund Scheme to its employees under the provisions of Provident Fund and Miscellaneous Provisions Act. The Provident Fund is maintained by the Provident Fund Commissioner. The Company also extends the medical benefits to its employees as per the State Government Rules.

11.SERVICE BOOKS AND LEAVE ACCOUNTS. The service books and leave accounts of the employees are maintained by the Company as per the State Government Rules.

12.ANNUAL ACCOUNTS. The annual accounts of the Company are in arrears since 1992-93.

13.SPECIAL POINTS TO BE SEEN DURING AUDIT OF THE COMPANY.

(i) Review the achievements of the Company in respect of various schemes undertaken for economic development of women and analyse the shortfalls if any, with reference to the targets of performance.

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(ii) Review the financial management system of the Company and see that the funds received from the Central/State Government and Government Agencies like District Rural Development Authority etc. are utilised for the purpose for which the funds were received.

(iii) Review the scope of the work of the internal auditors and see that it is commensurate with the volume of financial transaction of the Company.

(iv) Review the Contributory Provident Fund Scheme and see that the employees' contribution and Company's contribution to the fund are regularly remitted to the Regional Provident Fund Commissioner.

(v) Review the Managerial Information System being followed by the Company and see that it is working efficiently.

(vi) The various schemes drawn by State Government and Central Government for the benefit of women and their upliftment, the details of grants, aids subsidies given the terms and conditions, their compliance, the modus operandi of disbursement MIS developed and systems devised to ensure that the benefits reached those to whom they are meant should be critically seen in audit.

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CHAPTER No.:XXIV The Film Development Corporation of Gujarat Limited.

1. Introduction. The Film Development Corporation of Gujarat Limited was incorporated as a Government Company on 4th February 1984. The authorised share capital of the Company as on 31st March 1995 was Rupees one crore divided into one lakh equity shares of Rs.100 each.

2. Applicability of Acts and Rules etc.. The Company is governed under the provisions of the Companies Act, 1956.

3. Books and records maintained by the Company. The Company maintains the following accounting books. (i) Cash book (ii) Bank book (iii) Journal register (iv) Ledger (v) Vouchers (vi) Fixed Assets register (vii) Fixed Deposits register (viii) Dead Stock register 4. Main objects of the Company. The main objects of the Company are as under.

(i) To carry on the business of cinematograph trade and industry particularly the business of construction and running of studios, laboratories, theaters, production of films, television programmes, sound and music recordings, re-recording and mixing special sound and photo effects. (ii) To make provision for industrial, technical and social activities for the development of film industry on modern lines.

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(iii) Giving of awards, subsidies and holdings of film festivals. (iv) To encourage Gujarati films and to provide infrastructure facility to Film and Television producers.

5. Organisational Set-up of the Company. The Company is managed by a Board of Directors which consists of the Chairman, Managing Director and other Directors. The Managing Director is the Chief Executive of the Company who looks after the day to day affairs of the Company. The Managing Director is assisted by the General Manager, Dy.Manager and other staff members. There is no separate accounting organisational set up of the Company. The Dy.Manager looks after the Finance and Accounts matters of the Company. 6. Present activities of the Company. The Company has undertaken the production of T.V.documentary films. The Company also arranges the production of Dhara Gurjari video magazine. The Company organizes film festivals also.

7.

Delegation of powers.

The Board of Directors have delegated various administrative and financial powers to the General Manager of the Company.

8.

Repairs and Maintenance procedure

The Company follows the rules of the State Government in respect of repairs and maintenance of the equipment of the office.

9.

Internal audit

The Company has engaged a firm of Chartered Accountants for its internal audit work.

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10.

Provident Fund and medical benefits extended to the employees of the Company.

The Company extends the Provident Fund and medical benefits to its employees as per rules of the State Government.

11.

Maintenance of Service books and leave accounts

The Company maintains the service books and leave accounts of its employees as per the rules of Gujarat Government.

12.

Position of finalisation of the annual accounts

The Company's annual accounts for the year 1994-95 are in arrears. It is reported by the Company that those accounts are under scrutiny of the Statutory Auditors.

13.

Special points to be seen during audit of the Company.

(i)

Review the activities undertaken by the Company in respect of the film festivals organised, T.V. and film documentaries produced etc. and see that the Company earns adequate income out of it, to cover the administrative and other expenses.

(ii)

Examine the estimates of expenditure on production of T.V. and Film documentaries and for arrangement of film festivals and see that the estimates are prepared on `realistic basis' and the expenditure incurred is not far in excess of the estimate. Analyse the deviation in expenditure and see that the same is regularised. Verify that the rules of the State Govt. are followed scrupulously by the Company with regard to maintenance of Service books and leave accounts, medical benefits and repairs and maintenance work.

(iii)

(iv)

Review the reports of internal auditors with reference to the scope of their work and see that reports are reviewed by the management and remedial action is taken on audit observations.

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(v)

Review the system of financial management of the Company and see that the funds received from the State Govt. and other agencies are utilised for the purpose for which it is received.

(vi)

Verify that the expenditure is allocated to capital and revenue according to accepted principles of commercial accounting.

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CHAPTER-XXV GUJARAT STATE LEATHER INDUSTRY DEVELOPMENT CORPORATION LIMITED.

INTRODUCTION

The company was incorporated on 9th March 1990 with the object of rapid development of leather industry in Gujarat State. The authorised share capital of the company as on 31st March 1994 was Rupees Five Crore divided into 50 lakh equity shares of Rs.10 each. It is wholly owned Government company. 2 APPLICABILITY OF ACTS AND RULES ETC.

The company is governed by the Companies Act, 1956, Income Tax Act 1961, Industrial laws, Sales Tax Act, Shops & Establishments Act, Gujarat pollution Act, Bombay Civil Services Rules and Professional tax Act etc..

3.

BOOKS AND RECORDS MAINTAINED BY THE COMPANY

The company maintains the books and records as per the details in ANNEXURE.

4.1

ORGANISATIONAL SET-UP OF THE COMPANY

The management of the company is vested with the Board of Directors including chairman and Managing Director. The Managing Director is the Chief Executive of the company who is assisted by the General Manager and four Managers (Administration, Production, Marketing and Finance), Company Secretary and Accountant, etc.

4.2

The accounts Department is headed by the Manager(Accounts)

5.

MAIN OBJECTS OF COMPANY. The main objects of the company, are as under;

(i) To aid, counsel, assist, finance, protect and promote the interests and/or to manufacture, process sell, propagate and deal in all kinds of leather and leatherproducts and to provide technical and administrative assistance to charmkars,

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(ii) To organise and establish Emporia and Sales depots for leather products,

(iii) To establish, provide, maintain and conduct or otherwise subsidise research laboratories and experimental workshops on leather,

(iv) To provide capital, means, resources and technical and administrative assistance to the people engaged in the activity of leather goods production.

(v) To enter into contracts with and take-up intents from Government of India and State Government, Companies, firms or individuals for fabrication, manufacture, assembly and supply of leather and leather products, etc.,

(vi)

To undertake export of the products of leather industries, from India,

(vii) To organise production through the cooperatives, industrial artisans or company's own production centres,

(viii) To organise common facility centres for compiling information on designs, pattern and colour, etc.

PRESENT ACTIVITIES OF THE COMPANY.

The company has undertaken the following schemes to help the leather industry by engaging itself for availability of raw materials, use of modern techniques, for leather, development of market and training to people etc,

(i) Rural Tannery development scheme. (ii) Common facilities and procurement centre scheme. (iii) Training to cobblers (iv) Purchase and sales centres (v) Poverty removal programme. (vi) Establishment of common facility centre at Idar.

MANAGEMENT INFORMATION SYSTEM.

The company collects monthly details of production, sales and purchase from its units and the same are reviewed by the Managing Director,

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8.

DELEGATION OF POWERS.

The Managing Director has been delegated powers to make purchases upto Rs 2 lakh, by the Board of Directors. The Manager(production) is empowered to make purchases upto Rs 10000.

9.

PURCHASE PROCEDURE

The company follows the tender system for purchase of raw materials such as, finished leather, grinderies and solutions for its tanneries and for production of footwears and leather articles in its production centres.

10

MANUFACTURING PROCESS, RAW MATERIALS USED AND PRODUCTS MANUFACTURED ETC,

Footwears and leather goods are manufactured from finished crane and sole leather. After cutting of the components as per the pattern, upper is prepared and the same is fixed with the bottom or sole to complete the shoe or chappals with the help of various tools and equipments. The leather goods are assembled by the sewing machine and the finishing work is done by hand.

The raw materials such as, chrome leather, sole leather, rubber sheet, cotton drill, rexines, speetts, solutions, nails, thread, wax, fittings and grinderies etc are used for manufacture of footwears and leather goods. These raw materials are procured from open market and also from the manufacturers in Ahmedabad, Rajkot, Bharuch, Junagadh, Bombay, Madras, Calcutta, Kanpur and Agra.

The products manufactured are footwears for gents and ladies, leather purses for gents and ladies, belts, hand bags and Wallets etc.

The raw materials and machinery are sold to artisans in the centres. The finished goods are purchased at the centres and are distributed to sales emporia and melas and exhibitions for sale.

11.

REPAIRS AND MAINTENANCE PROCEDURE.

Minor repairs are carried out in the centres by the company. However, for major repairs, the quotations are invited from the repairers and after its finalisation, the repair work orders are issued / executed.

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12.SALES AND PRICING POLICY The company sells the finished goods through its sales outlet at Gandhinagar. The company participates in Melas, exhibitions and various other programmes conducted in Gujarat and other States.

For working out the sale-price of a product, the purchase price of the raw materials used, overheads and labour charges, five percent service charges and 15% to 25% as profit margin are considered.

13.

FINANCIAL ASSISTANCE GIVEN TO INDUSTRIES.

As per the State Government Scheme, the company has sanctioned loans and subsidy to 25 tanneries for its upgradation and the work is completed.

The company invests its surplus funds in the nationalised banks and personal ledger account of the State.

14

INVENTORY CONTROL/ BUDGETORY CONTROL/ COST CONTROL SYSTEMS

The company prepares every year the budget which is approved by the Board of Directors. The Managing Director of the company exercises inventory control and cost contest.

15.

PROCEDURE OF INTERNAL AUDIT.

The company has appointed a firm of charted Accountants to carry out the internal audit work.

16. MAINTENANCE OF SERVICE BOOKS, & LEAVE ACCOUNTS, PROVIDENT FUND AND MEDICAL BENEFITS IN RESPECT OF THE EMPLOYEES. The company follows the rules of Government of Gujarat for maintenance of service books and leave accounts and for providing provident fund and medical benefits to its employees. The Contributory Provident Fund accumulations are deposited with the nationalised banks.

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17

ANNUAL ACCOUNTS The company has not finalised its annual accounts for the year 1994-95.

18

BRANCHES/UNITS OF THE COMPANY. The company has production centres at following places:

(i) Dhrol District, Jamnagar. (ii)Tharad District, Banaskantha (iii)Idar District, Sabarkantha (iv) Limbdi Dist Surendranagar There are following sales/purchase centres. (i) Dhrol Dist. Jamnagar (ii) Tharad District, Banaskantha (iii) Idar District, Sabarkantha (iv) Limbdi District, Surendranagar (v) Ahmedabad. (vi)Gandhinagar. The following records are maintained at the centres' level: (i) Stock register (ii) Cash book (iii) Sales register.

19. SPECIAL POINTS TO BE SEEN DURING AUDIT OF THE COMPANY.

(i) Review the various schemes undertaken by the company and see that its execution is done as per the targets. (ii) Review the purchase orders for supply of raw materials, machineries and see that the delivery schedule as per purchase order is adhered to by the suppliers.

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(iii) See that the allocation of expenditure between capital and revenue has been made in accordance with the accepted principles of commercial accounting. (iv) See that proper accounts have been kept in respect of the funds received from the State Government and the Central Government and the same have been spent for the purpose for which the funds were received. Report on the deviations if any. (v) Review the working of the tanneries and common centres and see that appropriate steps have been taken to make them working at break-even point facility. (vi) Review the working of production centres and sales/purchase centres to see that these are helpful to generate the self-employment for artisans after completion of their training, Verify that targets fixed for production and sales are achieved by the centres. (vii) Examine the purchase procedure of the company and see that the purchase of leather and other raw materials is made economically. (viii) See that the company has adopted a systems of inventory control budgetory control and cost control and these are working efficiently. (ix) Review the scope of work of the internal auditors of the company. Verify as to whether their reports are reviewed by the management (x) Review the sales management and the system of fixation of selling price by the company. (xi) Examine the maintenance of service books and leave accounts and see that these are properly maintained. (xii) Examine the terms and conditions of government grants its receipt, banking of surplus terms ,utilisation of grants for the purpose for which it was sanctioned the system of evaluations / assessment to ensure that the benefits reach to those to whom they are meant, irregular diversion of grants for other purpose etc.

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ANNEXURE VARIOUS BOOKS AND RECORDS MAINTAINED BY GUJARAT STATE LEATHER INDUSTRY DEVELOPMENT CORPORATION LIMITED.

(A) ACCOUNTS BRANCH (i) Cash Book (ii) Bank book (iii) Cheques register (iv) Ledgers. (v) Vouchers of receipts and payments. (vi) Journal entries register. (vii) Salary register. (viii) Advance register. (ix) Fixed Deposit receipts register (x) Files for various subjects.

(B)

ADMINISTRATION BRANCH

(i) Minutes Book in respect of the meetings of the Board of Directors. (ii) Minutes Book of Annual General Meeting of the share-holders. (iii) Purchase Committee minutes. (iv) Service books of employees (v) Muster (vi) Log Book of car (vii) History sheet register (viii) Stationery Stock register. (ix) Share certificates (x) Dead Stock register (xi) Shares register (xii) Casual leave register. (xiii) Library register. (xiv) Files for various subjects.

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(C) PRODUCTION BRANCH (i) Loans register (ii) Employment-Generation register (iii) Training register (iv) Interest-provision register (v) Expenditure register. (vi)Scheme-wise targets/achievements register (vii) Files for various subjects.

(D)

MARKETING BRANCH

(i) Purchase register (ii) Sales register. (iii) Delivery challans (iv) Bills books (v) Files for various subjects.

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CHAPTER-XXVI GUJARAT GROWTH CENTRES DEVELOPMENT CORPORATION LIMITED. INTRODUCTION Gujarat Growth Centres Development Corporation Limited was incorporated on 11th December 1992 with the object of setting-up of growth centres in Gujarat. The authorised share capital of the Company as on 31st March 1995 was Rs.100 crore divided into 6 crore equity shares and 4 crore unclassified shares of Rs. 10 each. 2. APPLICABILITY OF ACTS AND RULES ETC. The Company is governed by the provisions of the Company Act, 1956.

3. BOOKS AND RECORDS MAINTAINED BY THE COMPANY The Company maintains the books of accounts as per the provisions of the Companies Act. 4.MAIN OBJECTS AND PRESENT ACTIVITIES OF THE COMPANY The main objects of the Company are as under:

(i) To set-up and promote the growth centres in Gujarat and in other States/Union Territories in India or in any country outside India.

(ii) To promote industrialisation of backward and other areas by setting-up/promotion of the growth centres so as to bring about balanced growth in such areas.

(iii)To provide the infrastructure facilities in the growth centres for attracting industries in the areas having potential for industrial development.

(iv) To prepare the Project Reports for growth centres as per the guidelines given by the Government of India from time to time.

(v) To provide or cause to be provided for each growth centre all incentives available from time to time.

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(vi) To promote and assist in the rapid and orderly establishment, growth and development of growth centres.

The Company has undertaken the work of setting-up of growth centres at Vagra, Palanpur and Gandhidham and setting-up of integrated infrastructure development centre at Miyani District Porbandar. The Company also provides consultancy services in preparing feasibility reports of infrastructure.

5.ORGANISATIONAL SET-UP The management of the Company is vested with the Board of Directors, Chairman and Managing Director, Chief Executive, Accounts Officer and subordinate staff. The accounts department is headed by an Accounts Officer.

6.MANAGERIAL INFORMATION SYSTEM. The Company has computerised the bank transactions and drafting of agenda and minutes in respect of the meetings of the Board of Directors.

7.DELEGATION OF POWERS The Board of Directors had delegated various powers to the Chairman and Managing Director who in turn, has sub-delegated the same to the Chief Executive of the Company.

8.PROCEDURE OF INTERNAL AUDIT The internal auditors are appointed every year by the Board of Directors of the Company.

9.PROVIDENT FUND AND MEDICAL BENEFITS EXTENDED TO THE EMPLOYEES All the employees except the Chief Executive of the Company are on deputation. The provident fund and medical benefit as applicable to the employees of Gujarat Industrial Development Corporation (GIDC) is extended to the employees of the Company.

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10.MAINTENANCE OF SERVICE BOOKS AND LEAVE ACCOUNTS The Company maintains service books and leave accounts of its employees as per the G.I.D.C. Rules.

11.SPECIAL POINTS TO BE SEEN DURING AUDIT OF THE COMPANY (i) Review the various activities undertaken by the Company and see that these are, as mentioned in the "object clause" of the Memorandum of Association.

(ii) Review the progress of the execution of the various schemes of development of growth centres as undertaken by the Company and analyse the time over-run/cost over-run if any and economic viability of development.

(iii)Review the scope of work of the internal audit, as mentioned in their appointment letter and see that it is adequate in view of the volume of financial transactions of the Company. Also see that the internal audit reports are submitted to the management for review and suitable action thereon. Examine in depth the important irregularities projected in the reports of Internal audit.

(iv) Review the contracts awarded by the Company to GIDC, for development of growth centres from time to time and see that proper account of expenditure duly audited by the Chartered Accountants is obtained from GIDC and the same is properly accounted for in the books of accounts of the Company. Examine the contracting system to ensure that it is done advantageously.

(v) Review the systems of maintenance of service books and leave accounts and also providing the facility of Provident Fund and medical benefits to the employees by the Company and see that the same are working properly.

(vi) Review the managerial information system being established by the Company and see as to whether the progress reports of various schemes undertaken by the Company are reviewed periodically by the Board of Directors. Moreover examine whether the MIS's analysed and put these by the Company.

(vii)Examine each unit area development taken up to see how it progress and drop in point draw backs.

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CHAPTER XXVII to XXIX

Gujarat Fintex Limited Gujarat Siltex Limited Gujarat Tex Fab Limited

The above mentioned three Companies were incorporated on 28th September 1992 and are the subsidiaries of Gujarat State Textile Corporation Limited (G.S.T.C.Ltd.) , Ahmedabad which has gone into winding up in pursuance of Gujarat High Court's Order dated 6th February 1997.

As informed by the G.S.T.C.Ltd., no employee is working in these subsidiary Companies. As such, the accounting and other systems being followed by the G.S.T.C. are also being followed by these Companies.

A reference is invited to Chapter XI - G.S.T.C.Ltd. for guidance during the accounts and Propriety audit of these Companies.

The annual accounts of all the three Companies are in arrears since the year 1995-96 onwards. The Propriety audit since the date of their incorporation (28th September 1992) is also pending.

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CHAPTER No.: XXX ALCOCK ASHDOWN (GUJARAT) LIMITED.

1. Introduction. Alcock Ashdown (Gujarat) Limited was incorporated on 5th September 1994. The Authorised Capital of the Company as on 31st March 1995 was Rupees five hundred lakh divided into 49 lakh equity shares and 1 lakh preference shares of Rs.10 each. It is a Government Company.

2. Applicability of Acts and Rules. The Company is governed under the Companies Act, 1956. In addition, the Company follows the following Acts.

(a) Merchant Shipping Act and Rules framed there under (b) Coasting Vessels Act (c) International Convention such as, safety of life at Sea, Marine - Pollution Prevention etc. (d) Industrial Disputes Act. (e) All other Commercial Acts. 3. Main objects of the Company. (i) Construction of various types of ships made out of steel. (ii) Construction of various types of Boats made from fibre glass mouldings. (iii) Manufacture of FRP Antenna for satellite communication. (iv) Repairs of Marine vessels. 4. Organisational Set-up of the Company. The Company is managed by Board of Directors. The Managing Director is the Chief Executive of the Company and he is assisted by the middle management level officers, General Manager, Sr.Manager, Managers and various Dy.Managers, Assistant Managers (viz. Production, Purchase, Quality Control, Marketing, Personnel, Accounts and Security etc.).

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5. Accounting Organisational Set-up of the Company. The Accounts and Finance functions of the Company are controlled by the Sr.Manager (Finance) who is assisted by the Dy.Manager (Accounts), Sr.Officers in Costing and Accounts Department.

6. Books and records maintained by the Company. (1) Journal Register (2) Various job- wise Cost Registers (3) Purchase Registers (4) Stores Purchase (Import) Register (5) Cash Book (6) Bank Books for each bank (7) Sales Register (8) Expenses Register

7. Managerial Information System. The Company has devised a system of managerial information in respect of day-to-day Production and Financial activities,. The reports are submitted by middle management officers to the Managing Director and the Board of Directors. The Company has computerised its annual accounts. 8. Delegation of powers. The Company has delegated various financial powers to its managers.

9(i). Processing plants. The Company undertakes ship- building work which is an fabrication assembly job.

9(ii). Products manufactured. The Company is engaged in manufacture of steel/FRP marine vessels, fibre glass boats and FRP Antenna etc. The Company also undertakes repairs of boats, vessels and ships etc..

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9(iii). Raw materials used and sources of their procurement. The basic raw materials viz. Steel, Chopped Strand-Mat and Resin is procured either from SAIL or is imported from M/s. Fibre Glass Pilkington Limited. It is also purchased from M/s. Satyen Chemicals Bombay and other suppliers after making purchase inquiries, obtaining quotations and placing the supply orders. 10. Channel of distribution of products. The Company takes up the manufacture of ships after entering into the contract with prospective buyers.

11. Inventory Control System. The Company exercises inventory control through ABC analysis made at periodical intervals and accordingly the ordering position is reviewed.

12. Cost Control System. The Company exercises effective cost control through periodical reviewing of the cost incurred on construction of various ships and takes remedial measures to Control the cost.

The Company follows Job costing method and maintains Job-wise-labour, Materials and expenses registers. The Company prepares monthly progress report indicating the status of each job in terms of percentage. The Company also prepares monthly cost sheets showing head-wise details of cost of the ship building and other works.

13. Repairs and Maintenance Procedure. The repairs and maintenance of buildings, plant and machinery etc. are carried out by the Company with the approval of the Managing Director/General Manager. The day-to-day maintenance work is carried out under effective control of Dy.Manager (Production/Electrical).

14. Internal Audit System. The Company has entrusted the work of internal audit to a firm of Chartered Accountants. The scope of Internal audit work is decided by the Company and it is communicated to the internal auditors through the appointment letter.

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15. Provident Fund/Medical Benefits extended to the employees. The Company extends the benefits of Provident Fund and Medical reimbursement to its employees under Group Health Insurance policy of New India Assurance Company, taken by the Company. The Company also pays medical allowance to its employees @ Rs.85/- P.M. to the non-supervisory staff. The Company deposits the Provident Fund with the Regional Provident Fund Commissioner, Ahmedabad. 16. Maintenance of Service Books and Leave Accounts. The Company maintains personal-file and Leave account ledger in respect of each employee.

17. Financial Management System. For better financial management and control, the Company maintains following records : (i) Statement showing daily cash inflow/outflow statement. (ii) Provisional monthly Profit and Loss Account. (iii) Statement of sundry creditors/debtors etc. (iv) Statement showing the details of due' dates of Letter of Credit (L/c) and payments due to creditors etc..

18. Special Points to be seen during audit of the Company.

(1) Review the activities undertaken by the Company and its progress made from time to time to verify that the Company's activities fetch reasonable profit to it.

(2) Review the various contracts executed for construction of ships, boats and Antenna etc. and see that the terms and conditions of the contract are in the interest of the Company. Verify that the contracts are executed by the Company and the terms and conditions of each contract are fulfilled efficiently and the delivery of the products is given to the customers within the stipulated time.

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(3) Review the proposal of the Company for change in the location of the shipbuilding yard and its modernisation and expansion project and its usefulness. Whether the Company hopes to work efficiently at the new location (Pipavav). Ascertain the economic viability of the proposed change of location of work.

(4) Verify the scope of work of internal auditors and also review their reports. Whether their reports are reviewed by the management and remedial action is taken thereon.

(5) Ascertain the policy of the Company for fixation of sale-price and see that the Company, while fixing the sale-price, keeps sufficient margin of profit after ascertaining the total cost of each product.

(6) Collect the details of various financial and administrative powers delegated by the Company to its Managing Director and officers and see that the powers are utilised in the interest of the Company and officers do not exceed their powers.

(7) Review the system of purchase of raw materials by the Company and see that the purchases are made economically. Also verify the consumption of raw materials for construction of ships and boats etc. and see that the standards thereof are fixed in advance and these are adhered to strictly.

(8)Review the expenses incurred on repairs due to quality defects before final inspection and expenditure incurred on items which are not as per contract and items where specifications have been raised subsequent to signing a contract.

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CHAPTER - XXXI Gujarat Industrial Investment Corporation Limited, Ahmedabad.

1. Introduction The Gujarat Industrial Investment Corporation Limited (GIIC) was incorporated on 12th August 1968 with the objective of acting as a catalyst for industrial development in the State. As a catalyst, it plays a dual role of development banker and entrepreneur. In the role of development banker, it functions as a industrialists' bank, providing financial assistance for setting-up medium and large scale ventures. As an entrepreneur, it promotes the projects both individually and in the joint and associate sectors. The authorised share capital of the Company as on 31st March 1995 was Rs.150 crore divided into 1500 lakh equity shares of Rs.10/- each. It is a wholly owned Company of Government of Gujarat

2. Applicability of Acts and rules The Companies Act, 1956 and is applicable to the Company. Besides State Financial Corporations' Act, 1951 and all industrial laws/rules are also applicable.

3. Main objects of the Company

(i) To invest the capital of the Company and moneys raised or borrowed by the Company in and to hold, sell and deal in the stock, shares, bonds, debentures/debenture-stock and securities of the industrial enterprises in the State of Gujarat and Union territory of Dadra and Nagar Haveli.

(ii) To assist, by way of investment an industrial enterprise carrying on the business of manufacture and dealing in implements machinery and tools etc. which would help promotion, expansion and modernisation of industries.

(iii) To assist works, undertakings, projects or enterprises carrying on industrial activities in their expansion and modernisation by making investments therein the form of equity shares, participation, preference shares, participation debenture issues, sponsoring and underwriting new issues of shares, debentures and securities. (iv) To invest in lands and buildings with a view to promote development of the industries.

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(v) To receive the shares, stocks, debentures, bonds or security of any description held by Government of Gujarat Government of India and Union territory of Dadra and Nagar Haveli. (vi) To encourage and to promote generally the investment climate in the State of Gujarat and Union Territory of Dadra and Nagar Haveli.

4.1. Organisational set-up The management of the Company is vested with the Board of Directors which includes Chairman and Managing Director. The Managing Director is the Chief Executive looking after the day to day management of the Company. The Managing Director has been delegated various powers by the Board of Directors. The Managing Director is assisted by the General Managers and other officers posted in Development Banking Division, Finance Division, Project Division and Liason Officers at Bombay and Delhi, Secretarial Division and Computer Division etc..

4.2. Accounting Organisational set-up The accounts department is headed by the General Manager who assisted by a team of Dy.General Managers, Senior Managers, Managers and Dy.Managers etc..

5. Books and records maintained by the Company (i) Cash book and bank book (ii) Journal and General ledger; and (iii) Loan ledgers

Apart from the above, the Company also maintains subsidiary ledgers like TA advance register, General Scheme Technicians' Scheme, NES Scheme, Vehicle advance register, Consumers' loan ledgers, House building Advance, Festival advance and Provident fund registers etc..

6.1. Present activities of the Company

(i) To assist by giving term-loan for setting up medium and large scale industries individually and in associate and joint sectors in the State of Gujarat,

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(ii) To promote various projects by contributing to their equity capital,

(iii) To act as agent of Government of Gujarat, Government of India and IDBI(Industrial Development Bank of India) and give liberal incentive by means of subsidy, interest-free sales tax loan and seed capital assistance to the industries,

(iv) To raise funds through borrowings from Government of Gujarat, Financial institutions, banks and fixed deposits etc..

6.2. Financial assistance rendered by the Company (i) Term loan under IDBI Refinance Scheme, (ii) Seed capital assistance under IDBI Seed Capital Scheme (iii) Participation in equity capital (iv) Disbursement of State Subsidy under State Subsidy Scheme (v) Disbursement of term loan under Large Engineering & Electronic Projects Scheme(LEEP Scheme)

7. Delegation of powers The Company has delegated in March 1993 various administrative and financial powers to its officers.

8. Management Information System The Company has three divisions for promotion of various projects, sanction of loans and recovery of its dues etc.. These are as under: (i) Project Division; (ii) Development Banking Division; and (iii) Operations & Resources Department.

The Project Division deals with the promotion of new projects in association with a private promoter, by participating in their equity capital. The steps involved are as under:

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(i) Conception; (ii) Signing of MOU(Memorandum of Understanding); (iii) Preparation of market survey; (iv) Obtaining projects approval from Government.

The follow-up and recovery of loans from the loanee units is monitored by the Regional Managers with the Co-ordination from operation and Resources Department. The review of recovery performance is done periodically and further action is initiated on case-to-case basis. The accounts department prepares agreement statement and sends quarterly position of dues on account of interest and installments to the loanees. Follow-up action is taken on the basis of arrears' statement. The department has introduced the single window concept for recovery and follow up. A rehabilitation cell looks after the cases under BIFR & rehabilitation.

9. Purchase procedure and repairs and maintenance procedure. The Company invites tenders in the prescribed format from the suppliers of stationery items and also for various maintenance services, by giving advertisement in the newspapers. After receipt and evaluation of the tenders and after obtaining the approval of the competent authority for the lowest tenders the annual rate contract is entered into with the parties.

10. Budgetary Control System The Company prepares annual budget based on its performance of the previous year and fresh activities to be taken up during the current year. This budget is approved by the Board of Directors. Periodically, the budget estimates are compared with the actual and corrective action is taken. The budget is also used for preparation of Company's Business Plan and Resources Forecast for the next year. It is also used as advice to control the Non-Plan expenditures

11. Managerial Information System The Company follows a Managerial information system in the areas of sanctions, disbursements, and recovery of loans from the loanees as well as in respect of the cash management etc..

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12. Internal Audit The internal audit of the Company is entrusted to a firm of Chartered Accountants, who have been retained as Internal Auditors. The scope of work of internal auditors is prescribed by the Company.

13.Provident Fund The provident fund at the rate of ten per cent of basic pay plus D.A. and family pension contribution is being deducted from the salary of each employee. A recognised E.P.F trust is formed and E.P.F. collection alongwith the Company's contribution is remitted to the Regional Provident Fund commissioner every month. The employees are also furnished with the E.P.F. statements at the end of each financial year.

13.1. Medical benefits extended to employees The Company is reimbursing Rs.3000/- per annum to each employee towards the reimbursement of medical charges under normal circumstances. However, such benefit is also extended in case of Chronic diseases like diabetics, High blood pressure, heart ailment, tuberculosis, etc. without any monetary ceiling. The Company is also reimbursing full amount of expenses in case of major surgery undertaken either by the employee or his dependent family members.

14. Financial Management The day to day position of bank balances with the commercial banks is obtained and the surplus funds lying in the current account are either transferred to "Overdraft account in order to bring down the same or surplus funds are invested in short-term deposits with reputed Companies. In case of disbursement of term loan, immediate payment is made to avoid loss of interest income due to delay in disbursement. The Company also borrows funds from other State Government undertakings/co-operative banks. Government of Gujarat also provides long-term loans to the Company at 19 percent interest rate as project finance.

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15. Service Rules Manual The Company has framed its own Service Rules, 1960. Which may be referred to during audit. It is also maintaining the Service books of its employees.

16. Special points to be seen during audit of the Company (1) Planning Scrutinise the resources' planning, budgeter and cash in/out flow prepared by the Company.

(2) Term-loan under IDBI Re-finance Scheme (i) Review the receipt and disposal of applications for loans; (ii) Examine the procedures of sanction and disbursement of loans; (iii) review the pre/post appraisal of assisted units; (iv) Examine the loan lending terms and adherence thereof by the loanees; (v) Review the reports of recovery review committee and the screening committee; (vi) Review the extent of assistance to units in backward areas and industrywise disbursement of loans; (vii) Review the recovery performance of the company.

(3) Seed Capital Assistance (i) Whether the eligibility criteria laid down by the Company has been fulfilled; (ii) Whether the limit fixed for the assistance has been extended; If so, to what extent (iii) Whether the reports on technical feasibility and viability of the project have been obtained.

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(4) Project promotion (i) Whether the viability study of the project has been made; (ii) Whether the Company has collected the dues from the entrepreneurs, as laid down by the Board; (iii) Examine the terms and conditions of M.O.U. entered into between the Company and co-promoters and see that those are not pre-judicial to the interest of the industry and the Company; (iv) Examine the circumstances of the disinvestment of shares in associate units.

(5) Interest-free sales tax loan (i) Whether the investigation fees as per the norms fixed by the company is recovered; (ii) Whether the recovery of loan is effected as per the conditions laid down by the Board. (6) Review the activities of Kandla Free Trade Zone (KFTZ).

(7) Review of the performance of MIS Department and internal Auditors.

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CHAPTER-XXXII Gujarat State Investments Limited.

1. Introduction Gujarat State Investments Limited was incorporated on 29th January, 1988. The authorised share capital of the company as on 31 March 1994 was Rs. 400 crore divided into 350 lakh equity shares of Rs. 10 each and 50 lakh preference shares of Rs. 100 each. The Company is wholly owned by Government of Gujarat.

2. Applicability of Acts and Rules 1) Companies Act, 1956 and the rules framed thereunder and 2) Income Tax Act, 1961 and the rules framed thereunder.

3. Main objects and present activities of the Company The main object of the company is to look after portfolio management of investment in shares and securities of the State Government with a view to see that the budgetary support is not required for subscribing to the right issues of the Companies in which Government is having substantial stake.

The Company also undertakes underwriting business, leasing business, and at times the surplus funds are given as inter-corporate deposits to Government companies. 4. Organizational setup The Company is managed by the Managing Director under the superintendence, control and directions of the Board of Directors. The Manager (Accounts) maintains the accounts of the Company.

5 Books and records maintained by the Company 1. Cash book 2. Ledger 3. Bank book 4. Petty cash book, etc. 5. Investments register 6. Journal 7. Assets register, etc.

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6 Management Information System Informal and formal management information system is followed by the Company.

7 Delegation of powers The Company Secretary has been authorized by the Board of Directors to sanction the expenditure upto Rs. 10,000 and Managing Director has been delegated powers to sanction expenditure in excess of Rs. 10,000. The capital expenditure is approved by the Board of Directors.

8 Method of buying and sale of securities The transactions relating to the purchase of securities and its disposal are done directly with the mutual funds and at times through the brokers of the Bombay Stock Exchange.

9 Details of Purchase Procedure The Board decides the limit upto which the transactions of purchase/sale of securities are to be done. The actual transactions are done at the best prevailing price at the Bombay Stock Exchange.

10 System of budgetary control. Further, the budgetory control is exercised through the, identification of the areas of the profit and by concentrating on such areas.

11 Procedure of Internal Audit The Internal Audit of the Company is done by a firm of Chartered Accountants. 12 Provident Fund and Medical benefits extended to the employees The Company has established a Contributory Provident Fund Trust with whom the provident fund at the rate of ten per cent of monthly basic pay plus dearness allowance of each employee as well as equivalent contribution towards C.P.F., of the Company are deposited.

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The Company reimburses the medical expenses up to Rs. 500 per annum to its employees. Managing Director is authorized to approve the medical expenses in excess of Rs. 500 which is also finally approved by the Board of Directors.

13 Maintenance of Service books and Leave accounts The Service books and Leave accounts are maintained for each employee of the Company. The Company follows service rules as applicable to the employees of other Government Companies.

14 Financial Management System The Board of Directors reviews the fundflow position of the Company and huge investment proposals are approved by the Board. The Managing Director is authorised to take suitable decisions about short term adjustments in fundflow.

15 Special Points to be seen during audit of the Company

(i) Review the various activities undertaken by the Company as detailed in the aforesaid paragraph - 3 under the heading " Main objects and present activities of the Company " and verify that these activities are profitably done to maximise the profit of the Company. Analyses the reasons for the loss, if any, incurred by the Company in the financial transaction regarding purchase and disposal of securities. (ii) Review the investments made by the Company in other Companies to see that such investments fetch profit to the Company. The cases of disinvestment may also be examined to verify that no loss is incurred by the Company in such transaction.

(iii) Review the reports of the Internal audit to verify as to whether the scope of internal audit commensurate with the volume of the transactions done by the Company (iv) In respect of trading in securities, the systems developed for market survey, fluctuations in share market and delegations of powers to clinch each transaction and the transparency of records maintained to sufficiently explain each transactions and efficiency of the system etc. are to be received to see that proper judgement about the corrections of transactions is appeared

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CHAPTER - XXXIII GUJARAT STATE FINANCIAL SERVICES LIMITED.

1.INTRODUCTION Gujarat State Financial Services Limited was incorporated on 20th November 1992. The authorised Share capital of the company as on 31st March 1995 was Rs.50 crore divided into Five Crore equity shares of Rs 10 each. It is a Government Company wholly owned by the Government of Gujarat. 2. APPLICABILITY OF ACTS AND RULES

The Companies Act, 1956, Income Tax Act and Non-Banking Financial Companies - Directions 1977 are applicable to the company.

3. BOOKS AND RECORDS MAINTAINED BY THE COMPANY. The company maintains the following books of accounts; (i) General Ledger (ii)Bills discounting ledger. (iii)Hire purchase ledger. (iv)Lease Assets Ledger (v)Inter- Corporate deposits ledger. (vi)Income and expenses ledger. (vii)Journal vouchers register.

4.1

ORGANISATIONAL SET-UP OF THE COMPANY.

The Company is managed by the Board of Directors consisting of Chairman and four Directors including the Managing Director who looks after the day-to-day management of the company. The Managing Director is assisted by the company Secretary, Manager (Deployment), Dy Manager (Finance) and Deputy Manager (Business Development). The respective departmental heads are assisted by five Assistant Managers, three Executives and Assistants etc;

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4.2

ACCOUNTING ORGANISATIONAL SET-UP

The Accounts department of the company is headed by the Deputy Manager(Finance) who is assisted by an Assistant Manager(Finance), Executive(Finance) and the assistants.

5.

MAIN OBJECTS OF THE COMPANY

The company provides financial services like leasing, hire- purchase, Bills discounting and merchant-banking. The company also mobilises fixed deposits.

6.

MANAGEMENT INFORMATION SYSTEM.

The company has a Management information system through the computer from which the details of all the transactions made with various clients are available. Besides, the details of background of the promoters, industrial analysis and financial analysis are also kept to assess the various clients. The company has a software package called "CAPITAL LINE" which gives information regarding different companies.

7.

DELEGATION OF POWERS.

The Managing Director of the company has delegated powers to all the managers to take decisions related to their departments.

8.

INTERNAL AUDIT SYSTEM

The company has appointed a firm of Chartered Accountants for internal audit work. The internal audit of all the books of accounts is conducted by the internal auditors who submit their report to the Managing Director of the company, for its review and to take corrective action.

9.

PROVIDENT FUND AND MEDICAL BENEFITS SCHEMES

The company has adopted a Provident Fund Scheme for the benefit of its employees. The company follows its own Service Rules-1993 in respect of medical benefits extended to its employees.

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10

MAINTENANCE OF SERVICE BOOKS AND LEAVE ACCOUNTS. The company maintains service file and leave account of each employee.

11.

FINANCIAL MANAGEMENT SYSTEM

The company exercises daily working capital management and prepares cash flow statement. The company also follows a procedure for its receivables.

12.

PREPARATION OF MANUALS.

The company has framed its Service Rules-1993 which may be referred to during its audit.

13 SPECIAL POINTS TO BE SEEN DURING AUDIT OF THE COMPANY. (i) Review the present activities of the company and see that the company earns sufficient income out of its activate to meet with its administrative and other expenses.

(ii) Review the financial management system of the company and see as to whether the requirement of the working capital is properly assessed so as to avoid blocking-up of the funds received by it. Ascertain the details of the procedure being followed for receivables and see that it is effective and the dues of the company are recovered promptly.

(iii) Review the reports of the internal auditors and the action taken by the Management on their reports.

(iv) Review the maintenance of Service files and leave accounts of the employees of the company.

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CHAPTER-XXXIV Gujarat Scheduled Castes Economic Development Corporation Limited,

1. Introduction: Gujarat Scheduled Castes Economic Development Corporation Limited was incorporated on 29th November 1979. The Authorised share capital of the Company is Rs. 1500 lakh divided into 15,00,000 equity shares of Rs.100 each. It is a Government Company registered under the Companies Act, 1956.

Applicability of Acts and Rules.

The company is governed by the provisions of the companies Act, 1956 and Rules made by the Government of Gujarat.

3.

Main objects of the Company.

The main objects of the Company is to provide financial assistance through the nationalised banks to the Scheduled Castes beneficiaries living below the poverty line through bankable schemes for identified economic projects so as to enable them to cross the poverty line. The Company plays role of catalyst in the overall economic upliftment and elimination of the poverty of the Scheduled Caste people.

4. Present Activities of the company. The Company implements the following schemes of Central/State Government for extending financial assistance to the Scheduled Castes : (i) (ii) (iii) (iv) (v) (vi) (vii) (vii) Bankable Scheme Subsidy Scheme Margin money deposit scheme Bamboo subsidy scheme Ambar Charkha Scheme Scavengers Scheme Trysem Scheme Scheme of National Scheduled Castes and Scheduled Tribes Finance and Development Corporation, New Delhi

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5. Organisational Set-up of the Company The management of the company is vested in the Board of Directors headed by the chairman appointed by the State Government. The Managing Director is the Chief Executive and looks after the day to day activities of the company with the help of General Manager (Plan, Finance and Admn.) Chief Accounts Officers district Managers and Asstt. Managers etc.

6. Accounting Organisational Set-up of the Company. The Accounts and Finance Department of the Company is headed by the Chief Accounts Officer and he is assisted by the Manager (Finance), Asstt.Manager, Cashiers and Clerk. the Chief Accounts Officer is reporting to the Managing Director. 7. Books and Records maintained by the Company The company maintains all the following accounting records (i) Journals (ii) General Ledgers (iii) Main Cash Book (iv) Classify Register (v) Vouchers (vi) Fixed Assets Register (vii) Fixed Deposit receipts Register and (viii) beneficiaries register etc.

8.

Managerial Information System

The Company has set-up Managerial Information System to obtain periodical returns at Head Office from various District Managers stating the quantum of financial Assistance rendered Targets achieved expenditure accrued and details of the staff etc. and these returns are submitted to the Managing Director for taking necessary decision thereon, for improvement in the working of the Company.

9.

Delegation of Powers.

The Company has delegated various financial and other powers to the Managing Director and other officers of the Company vide various Circulars issued from time to time which may be referred to during audit.

10.

Internal Audit :

The Company has engaged a firms of Chartered Accountants, on contract basis for internal audit work.

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11.

Provident Fund and Medical benefit extended to the Employees

The Company follows the Contributory Provident Fund Scheme for its employees. The Company deducts 8.33 percent of basic pay of each employee from their salary and contributes an equivalent amount towards C.P.F. The Company adopted a medical rules of the Government of Gujarat for its employees.

12.

Maintenance of Service Books, Leave Accounts.

The company maintains the service books and leave accounts of its each employees. The Company has framed its own Service Rules - 1982. 13. Financial Management System.

The main source of the Company's finance is budgetory allocation received from the State Government and it is initially credit in the Distt., Treasuries and withdrawals are made therefrom. on the basis of Government sanction. The Funds received/withdrawn are placed at the disposal of various Distt. Managers for disbursement of administrative grants/subsidy to the Scheduled caste beneficiaries.

14.

Branches/Units of the Company.

The Company is having 18 District Offices under charge of the District Managers who maintain the relevant records at District level.

15.

Special points to be seen during audit of the Company.

(i) Review the various Schemes being implemented, by all Company and see that those Schemes have been planned and implemented properly so as to fulfill the social needs of the Scheduled Castes beneficiaries and Social-cast-benefit is extended to them for their economic upliftment to bring them above the poverty line.

(ii) Review the system of financial management of the Company and see that funds placed by the Central/State Governments at the disposal of the Company are promptly deposited with District Treasury in P.L.Account. Besides, the funds withdrawn from the P.L.Account are promptly disbursed to the scheduled caste beneficiaries and the funds are not kept unutilized for a long time. Comment upon the cases of loss of interest on idle funds if any.

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(iii) Review the system of appraisal and sanction of margin money loans to the beneficiaries and see that the repayment capacity of the prospective loanees is taken into account before sanction of the loan . Also verify that the loanees fulfill all the criteria for sanction of loan. Further, the Company has evaluated procedures for timely disbursement of loans and for recovery of the principal and interest etc. from loanees.

(iv) Review the progress reports in respect of recovery of loans and examine all the cases of overdue principal and interest etc.

(v) Examine the various securities obtained from the beneficiaries of loans and verify its adequacy so as to ensure that the entire amount of loan is secured by way of hypothecation of the properties of beneficiaries.

(vi) Examine the case off of written of loans and interest due thereon to verify that the loans are written off by the Company in exceptional and genuine cases only after obtaining the proper documents from the beneficiaries.

(vii) Examine as to whether the interest levied/recovered from the loanees is sufficient to cover the administrative cost .

(viii) Review the scope of work of internal auditors and see that their reports are submitted to the Management and remedial action is taken thereon.

(ix) Ascertain as to whether the Company remits the C.P.F.accumulation the R.P.F. Commissioner regularly.

(x) Ascertain the purchase procedure repairs and maintenance procedure and inventory control system of the Company and see that the same are Scrupulously followed in the interest of the Company.

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CHAPTER:XXXV GUJARAT STATE POLICE HOUSING CORPORATION LIMITED,

1. Introduction. Gujarat State Police Housing Corporation Limited, Ahmedabad was incorporated on 1st November 1988. The authorised share capital of the Company is Rs.30.00 crore. It is a Government Company registered under the Companies Act, 1956.

2. Applicability of Acts and Rules. The Company is governed under the provisions of the Companies Act, 1956 and all rules framed by the State Government. The Company has framed its own Service Rules - 1993.

3.

Main objects of the Company. The main objects of the Company are as under :

(i) To undertake, co-ordinate, organise, finance, establish, develop, investigate, design, construct, execute, carry out maintain, equip, improve modify, work or purchase or otherwise acquire, lease, administer or control and engage in the business of builders, contractors, engineers, architects surveyors, estimators, designers in respect of construction of all types of police building, office accommodation, residential buildings, administrative offices, Police stations, prisons, Jails, fire stations, Training institutions, Stadiums, hostels, scientific laboratories, Forensic Science laboratories, dormitories, schools, hospitals, health centres, stores, shops, clubs, auditoriums, maternity homes, and all other kinds of constructions and allied works required for Gujarat Police, Prisons, Homeguards, Fire force departments and for others in the State of Gujarat and also for Policemen to undertaken construction of any type of building entrusted to it by the State Government from time to time and also to undertake works like, water works Reclamation, sewerage, drainage, sanitary waterways, roadways electric lighting, poles, factory building hotels work houses, markets and buildings on behalf of State Government/Government Undertakings partnership firms, individuals and other body corporate or association of persons and generally to carry out, construct execute, improve, work, develop, administer manage or central works of all kinds departmentally and or through approved contractors.

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(ii) To formulate and execute various housing schemes for serving and retired employees in the Police Department, Government of Gujarat.

(iii) To undertake acquisition, construction sale, allotment of lands, dwelling houses, apartments, flats of ownership, hire purchase on rental basis including construction and sale on lease or hire purchase or an ownership basis or rental basis of the residential accommodations so constructed or acquired and to promote the formation of residential townships, colonies, co-operative housing societies, trusts or other association or organisation for owning any of the properties movable or immovable for policemen.

(iv) All such Activities incidental to main objects such as, Banking transactions Bills discounting, Borrowing, lending forming partnership and joint venture etc. for sharing of profits.

4.

Present activities of the Company.

The Company is engaged in construction of residential Quarters for personnel of police Department of the State Government. The Company also undertakes construction of checkpost outpost, police chowki, aerial craft etc. under Border Area Development programme of the Central and State Government where the Company receives' cent percent grants. The Company also undertakes deposit works such as construction of Community hall, training school, residential buildings and modernisation work of jails etc.

5. Organisational set-up. The management of the Company is vested in the Board of Directors headed by the Chairman appointed by the Government of Gujarat. The day to day management of the Company is looked after by the Managing Director in the Chief Executive capacity and he is assisted by the Superintendent engineer, Executive Engineer, Dy.Executive Engineer, Asstt.Engineer at projects and manager (finance) Manager (Admn.) Company Secretary, Manager/Dy.Manager, Accounts etc.

6. Accounting organisational set-up. The Accounting and finance functions of the Company are looked after by the Dy.Manager(Accounts) and he is assisted by the Dy.Accountant, Assistants/Clerks Data-Entry Operator) etc.

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7. Books and records maintained by the Company. The Company maintains all the registers and other books of accounts prescribed under the Companies Act, 1956 further the Company also maintains records relating to its construction activity such as: (i) Cash Books (ii) Bank Book (iii)J.V.Book/file (iv) Petty Cash Book, Project cost Register Ledger, Measurement Book, R.A.Bill files and Establishment records.

8. Managerial Information System The company has devised a system of collecting the information in respect of its various construction projects. The Company receives in H.O. the progress reports in respect of its ongoing projects from its various field offices for better monitoring control of the projects. In the area of finance and Accounts the Company prepared the monthly cash flow, and fund flow statements, Which are submitted to Managing Director for better control and planning.

9. Delegation of Powers The Company has delegated certain powers relating to technical matters to its M.D., Superintending Engineer and Executive Engineer vide office order No. 105 dated 28th December 1995 which may be referred to during audit of the Company.

10. Purchase Procedure. The Company normally makes purchases at Government approved rates wherever available,. The furniture and fixtures purchase from Ghadi Bhavan or from the Jail Department. In cases where the approved rates are not available, the purchases are made after inviting the quotations and tenders. The statutory items are purchases from Gujarat State Civil Supplies Corporation Ltd., a Government Company

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11. Repairs and Maintenance procedure. For repairs and maintenance of office equipments the Company enters into Annual rates contracts with the manufactures/dealers or Agents. All major repairs and maintenance works are carried out with the prior approval of the Managing Director. The repairs and maintenance works divisional/field offices are carried out with the approval of head of the office/competent authority..

12. Internal Audit. The Company has engaged a firm of Chartered Accountants for conducting internal audit work at regular internal and their reports are also submitted to the management. The scope of Internal audit is predetermined and cent percent audit of all cash/book transactions contractors payments and financial charges is conducted by the internal audits.

13 Provident fund/Medical benefits extended to the employees of the Company. The Company follows the Contributory Provident Fund scheme and C.P.Fund by a trust This scheme has been executed w.e.f 1st April 1990 onwards .

The Company extended medical benefits to its employees as per State Government Rules in the form of fixed medical allowance. The reimbursement of medical expenses upto the limit of Rs.5000/- per annum is made to those employees who want to avail the same. This is subject to submission of necessary documents.

14. Service book/Leave Accounts. The Company is maintains the service books and Leave accounts of its employees separately at its Head Office.

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15. Financial Management System. The Company's administrative expenses are met from by funds allocated by the State Government through its annual budget. The Company raises finance equivalent to 70% of project cost from the various financial institutions, the repayment of principal and interest is made from the Budgetory allocation received from the State Government.

16.Branches/Units of the Company. The Company has four Divisional offices at Ahmedabad, Rajkot Baroda and Bhuj. Three sub-divisional offices at Nadiad, Nalia (Kutchh) and Mehsana are working under the Divisional offices. The accounts of the Divisional and subdivisional offices are maintained at Head Office . The field Officers are granted imprest for day to day expenditure and they submit account of expenditure incurred therefrom at regular intervals, to the Head office for accounting purpose.

17. Special points to be seen during audit of the Company.

(i) Review the activities undertaken by the Company and see that the are run effectively. (ii) Review the various civil contracts and civil construction works undertaken by the Company with reference to the sanctioned estimates of work measurement books, works bills and work completion reports etc. See that the work are completed in time and these are properly handed over to the Police Department etc. (iii) Review the reports of internal auditors and to see that the prescribed quantum of work is completed by them. Also see that their reports are reviewed by the management and remedial action is taken thereon. (iv) Review the system of financial management of the Company. See that the grants are received promptly from the Central and State Government before the commencement of the Civil works being 'deposit works' and the grants are utilised on the works for which these are received. (v) Ascertain the budgetory control and inventory control systems of the Company.

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CHAPTER:XXXVI

Sardar Sarovar Narmada Nigam Limited.

1. Introduction. The Company was incorporated on 24th March 1985 as a wholly owned Company of Government of Gujarat, for implementation of Sardar Sarovar (Narmada) Project which is a joint venture of four states i.e. Gujarat, Madhya Pradesh, Maharashtra and Rajasthan.

The authorised share capital of the Company as on 31st March 1995 was Rs.4000 crores divided into 400 lakhs equity shares of Rs.1000 each.

2. Applicability of Acts and Rules etc.. The Company follows the following Acts and Rules: (i) Companies Act, 1956. (ii) Acceptance of Deposits Rules. (iii) Income Tax Act, 1961. (iv) Inter-State Water Disputes Act. (v) Employees' Provident Fund and Miscellaneous Provisions Act, 1952. (vi) Sales Tax Act. (vii) Gujarat Budget Manual of Government of Gujarat. (viii) Bombay Civil Service Regulations.

3. Main objects and Present activities of the Company. The main object of the Company is to undertake the execution of the Sardar Sarovar Project under the supervision of the Sardar Sarovar Construction Advisory Committee, Narmada Control Authority and Review Committee appointed by the Central/State Government.

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The Company is at present engaged in the implementation of Sardar Sarovar (Narmada) Project which also involves construction of 1210 meters' long concrete gravity dam, which on completion would rise to 163 meters above the deepest foundation level. It also includes installation of 200 M.W. Hydro Power House on the right bank upstream of main dam, consisting of four conventional turbine units with a capacity of 50 M.W. each. A 458.3 km. long concrete lined main canal will also be constructed under this Project.

4. Books and records maintained. The Company maintains the following books and records.:

<A> At Head office. (i) General ledger. (ii) Detailed book unit-wise/Group-wise. (iii) Control ledgers for divisional offices. (iv) Monthly accounts of all the divisions alongwith the original vouchers for an amount exceeding Rs.1000/-. (v) Journal entry vouchers. (vi) Assets register. (vii) work-wise register. (viii) Register showing distribution to beneficiary States. (ix) World bank reimbursement claims files. (x) E.P.F. register. (xi) P.L. Accounts and Loan Accounts registers.

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<B> At various field offices. (i) Cash book and Bank book (ii) Duplicate vouchers file. (iii) Register of various advances. (iv) Register of deposits. (v) Contractors ledger. (vi) Abstract of monthly expenditure. (vii) Dead stock register. (viii) Stock Account.

<C> Various records maintained in Pay and Accounts Branch in Head Office.

5.1. Organisational Set-up. The management of the Company is vested with a Board of twelve Directors including the Chairman and two Vice Chairman cum Managing Directors who are the Chief Executives of the Company. They are assisted by four Directors. All the Directors of the Company are nominated by the Government of Gujarat.

5.2. Accounting Organisational Set-up. The Vice Chairman and Managing Director (A.& E.F.) is overall incharge of the Finance and Accounts Departments of the Company. He is assisted by the Director (Finance) under whom the Chief General Manager (Accounts), General Manager (Fund), Managers, Dy.Managers etc..

6. Delegation of Powers. The various powers regarding works, Administration, Financial and allied matters have been delegated by the Company to its various officer in the Board of Directors' 34th meeting held on 17th August 1992, The Booklet titled "Delegations of Powers - SSNNL." may be referred to during audit of the Company.

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7. Managerial Information System. The success of a gigantic Sardar Sarovar Project, a multipurpose inter state project would depend upon a well administered management information system with a precisely reliable and easily retrievable data-base which is a primary requirement for success of any management - private, Government or public sector.

Having accepted the great importance of sound project management information system, the Sardar Sarovar Narmada Nigam has set-up the PMIS for ensuring and monitoring completion of the various components of the Project as per schedule within the projected cost estimates and quality parameters.

The existing management information system has been planned to be divided into seven groups as follows:

(1) (2) (3) (4) (5) (6) (7)

Centralised MIS group headed by the Director General (MIS) who is assisted by a General Manager (MIS) with his supporting staff. MIS Group for dam complex. MIS Group for Hydro power. MIS Group for main Canal. MIS Group for Branch Canal and Distribution system. MIS Group for cost projection and expenditure. MIS Group for the Rehabilitation and Land Acquisition.

The primary function of above mentioned Groups, both at the corporate level and at the field level, is to assist the line managers in the preparation of detailed plans of outputs and associate inputs, conforming to the overall project plan.

MIS and Computer. The role of MIS and computers as an aid of effective planning and decisionmaking in systematic management of the project has been accepted by the Nigam and accordingly Nigam has established, the computerised system which has proved to be a very useful tool for MIS. The system comprises of the following:

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(a) Hardware: Nigam has at present three main computer centres located at Gandhinagar, Vadodara and Kevadia with hardware. The geographical disposition of the centres for the implementation of the distribution system has necessitated establishing computer centres scattered over an area. Six such stations are functioning namely: at Dakor, Vaghodia, Bodeli, Bharuch, Radhanpur and Rajkot and further five sub centres are planned in near future viz., at Halol, Kalol, Tharad, Kapadwanj and Ahmedabad.

(b) Software: The Nigam intends to purchase Microsoft software and operate the system under the file management shell called windows. The software developed by the Nigam officials are for PMIS (Project Management Information System), PIS (Personnel Information System), NPRS (Narmada Pay Roll system), CES (Canal Estimate and Optimisation package), Inward/outward register, VIS (Vehicle Inventory System), FDS (Fixed Deposit Schemes Reports and certificates), Monthly, quarterly, semi-annual, yearly Physical and Financial Reports and Graphical representation etc..

To assist the staff with the latest informations and techniques in the field of management and computer soft-wares development, the Nigam has appointed two consultants i.e. one for MIS and other for computerised systems.

The Nigam is planning to develop MIS for more effective monitoring by installing FAX modem cards at the three centres i.e., Kevadia, Vadodara and Gandhinagar. Nigam has also planned computerised accounting system and the CMC Limited has developed the software for centralised accounting system. Nigam has also decided to create a cost control cell under the MIS to monitor the cost of the project.

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8. Financial Management. The Company is following a centralised drawing account system for release of funds to various divisions and other field offices, since 1st August, 1990. The field officers are declared as drawing officers. The system is operated through five banks viz. State Bank of India, Dena Bank, Bank of India, Bank of Baroda and the State Bank of Saurashtra by opening a current account with the headquarter branch of each bank located at Gandhinagar. The funds received from State Government by way of share capital contribution and also from other sources are transferred to the respective banks according to the total amount of letters of credits authorised in each month to the field officers after obtaining from the monthly requirement of funds for each item of expenditure such as; works expenditure, office expenses, ordinary tools and plant and refund of deposit etc.. The field officers are required to submit the requirement of funds in such manner so as to reach the head office before 20th of the preceding month.

Thereafter, the letters of Authority which are valid for the month of its issue, are issued to the field divisions. The limits of drawal of the funds are also intimated to the respective branch of the Bank with which the division has kept an account and also to Gandhinagar branch of the respective bank. The field officers draw cheques on the banks for withdrawal of funds as and when required during the month. All the cheques encashed are forwarded to the headquarters office of respective bank at Gandhinagar every day for adjustment in the Company's current account. Thereafter, the details of the adjustments carried out will be intimated by the bank to the head office of the Company. Similarly the receipts of the Company deposited by various field offices in the banks are transferred and accounted for in the account with the headquarters office of the bank at Gandhinagar.

Each bank submits in the first week of each month a monthly statement of cheques drawn, date and amount of drawal to the head office of the Company for reconciliation of Bank accounts.

9. Purchase procedure. The company is engaged in the construction project for construction of Sardar Sarovar Dam. The Board of Directors have appointed a Committee in its 48th meeting for incurring expenditure on purchases, printing, repairs and maintenance of equipments. The Board's minutes may be referred to during audit.

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10. Repairs and maintenance Procedure. The repairs to the equipments, machinery and furniture is carried out with the approval of the Committee appointed by the Board of Directors.

11. Budgetary Control. The budget of the company is prepared mainly on the expenditure to be incurred under the following heads of account: (i) (ii) (iii) (iv) Direction and Administration. Works expenditure. Machinery and Equipments. Suspense and Stock etc..

The budget of the Company is prepared in its head office, after collection of the details of expenditure incurred on various existing works and the expenditure to be incurred on new works, from the field officers and it is approved by the Board of Directors. The State Government provides for the share capital contribution to the Company as per the provisions made therefore in the Annual Budget Estimates of the State Government. This contribution is adjusted by the Company towards the authorised share capital by issue of fully paid-up equity shares to Government. The Budget estimates of the State Government also provide for the amount of share recoverable from other beneficiaries of Sardar Sarovar Project - i.e. Madhya Pradesh, Maharashtra and Rajasthan States.

The Company has informed that it has prepared the Budget Manual which may be referred to during its audit. 12. Inventory Control System. The inventory of stores materials like cement, steel and explosives etc. is maintained by the Executive Engineer, Narmada Project Stores Division, Kevadia Colony. The respective divisions maintain the stock of other Miscellaneous materials, T. & P. articles, S.I.D.M. articles and Stationary items etc..

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All steps for verification of stock inventory are taken by the Company, as prescribed in paras - 452 and 453 of C.P.W.D. manual volume - I.

In order to exercise control over the stock inventory; the Nigam has created a stores verification and disposal cell in its Head Office headed by the General Manager (NM) who conduct regular and surprise stores verification and also arranges disposal of machinery and vehicles etc. by observing the rules and regulations.

13. Cost Control System. The Company has created a cost control cell at its Head Office at Gandhinagar to monitor effectively the cost of the Project, through the various authorities like Chief Engineers and Superintending Engineers.

The cost control cell compiles information in the prescribed formats about the Projects estimated cost, tendered cost, revised estimated cost, additional expenditure, price difference in respect of the steel, cement, explosives and power supply etc.. The data regarding the work-wise expenditure is also collected by the cell from the field offices.

The estimated cost of the Project was revised from Rs.6406 crores to Rs.13180 crores based on the price level of the year 1991-92. Further revision in the cost based on 1996-97 price level is also under consideration of Nigam.

14. Internal Audit. The internal audit wing in the Nigam is the overall incharge of audit of various wings of Head Office and field offices of the Company. It consists of two branches namely; (i) Departmental Audit parties conducts procedural audit including scrutiny of documents and correspondence etc. with reference to rules and regulations governing various transactions, audit of all works' payments including stores purchases and mechanical works and also audit of service matters in all the offices of the Company.

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(ii)

Financial audit conducted by the Chartered Accountants includes vouching, checking of classification given to the vouchers, vouching maintenance of accounting records and certification of the Company's annual accounts Administrative records etc..

The internal audit wing is having the control over the programme of audit, arrears in audit, disposal of objections etc. during the audit by the Departmental Audit parties. The compliance of audit objections is being obtained as far as possible on the spot and the objections are settled. The objections which cannot be settled on the spot, are being pursued from the Head office of the Company.

The major points of interest i.e. regarding misappropriation and theft etc. are being brought to the notice of the director (Finance), Vice Chairman and Managing Director quarterly in the note form and their orders for taking further necessary action are obtained.

15. Provident Fund and Medical benefit. (i) The Company deducts in every month the contribution towards General Provident Fund from the salary of the employees who are on deputation to the Company from various Government Departments and Government Institutions. This General Provident Fund contribution is credited to Government account through the treasury challans by the Company. The employees of the Company engaged on "contract basis" are governed under E.P.F. Act(Central). E.P.F. Account Number is allotted to each employee by the Employees Provident Fund Commissioner, Ahmedabad,. The Company, deducts the E.P.F. contribution from the monthly salary of such employees.

(ii) All the employees of the Company are covered under the State Government Medical Rules. The medical allowance and/or medical reimbursement is allowed to the employees as per the option exercised by them.

16. Service books and Leave accounts. The Company maintains the service books and leave accounts in respect of all its employees whether on "deputation" or on "contract basis", as per State Government Rules. The Company follows the Service Rules framed by the State Government for its employees.

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17. Details of branches/units under the Company. The different segments of Sardar Sarovar Project, being executed by the Company are Administration, Accounts and Finance, Rehabilitation/Environment, Dam-power and design and canal system etc. are headed by the directors under whom the Chief Engineers, Superintending Engineers and Executive Engineers are working. The divisions working under the control of E.Es., are the accounting units and they maintain various accounting records on the C.P.W.D. Manual.

In Head Office of the Company, Budget, Reimbursement, Fund, Pay and Accounts, C.P.F. Accounts and M.I.S. branches are working under various departmental heads. The annual accounts are finalised by Head Office.

18. Special points to be seen during audit of the Company. (1) Review the progress of various works under progress in respect of Sardar Sarovar Project and see as to whether the original/revised cost estimates and schedules of work is being adhered to strictly and there is no cost over-run and/or time over-run. If so, the reasons thereof may be analysed. The remedial measures taken if any, by the Company to avoid delay in completion of the Project may be reviewed and commented if necessary.

(2)

Review the progress of implementation of the Managerial Information System through the computerisation and review its utility for the Company.

(3)

Review the performance of internal auditors by reviewing their reports and the action taken thereon by the management.

(4)

Review the financial management by the Company to ascertain that the funds are not kept unutilised in the pipeline for a longer period so as to avoid the loss of interest on blocked up capital. Also examine the decisions regarding investment of surplus funds taken by the management.

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(5)

Scrutinise the works contracts and purchase contracts awarded by the Company and the payments of various kinds of advances etc. to the contractors/suppliers. Also check the final bills of contract works and supply of materials to see that there is no excess payment to the parties. See that the various terms and conditions of the contract are adhered to strictly and no undue favour is extended to the contractors/suppliers.

(6)

Review the steps taken by the Company for recovery of their share of the expenditure incurred by the Company but recoverable from other States like Madhya Pradesh, Maharashtra and Rajasthan. See the position of recoveries due from those States.

(7)

Review the steps taken by the Company for conservation of energy against possible environmental hazards and also for rehabilitation of the public affected by the Project.

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CHAPTER:XXXVII Gujarat Water Resources Development Corporation Limited, Gandhinagar.

1. Introduction. The Gujarat Water Resources Development Corporation Limited was incorporated under the Companies Act, 1956 on 3rd May 1971. The authorised share capital of the Company as on 31/03/1991 was Rs.40 crores divided into 40 lakhs equity shares of Rs.100/- each. The Company is wholly owned by the State Government.

2. Applicability of Acts and Rules. (i) The Companies Act, 1956, (ii) The Income Tax Act, 1961, (iii) Gujarat Sales Tax Act, (iv) Central Sales Tax Act, (v) Revision of Pay (R.O.P.) and other rules of Government of Gujarat, (vi) Public Works Department Manual.

3. Main objects of the Company. (i) To drill new tubewells and to maintain the same for irrigation and other purposes; (ii) To undertake Lift Irrigation Scheme and to maintain the same for irrigation and other purposes; (iii) To maintain and administer the tubewells transferred from Government and from Panchayats; (iv) To cover all aspects, regarding underground water such as, its investigation, protection, development, inspection either independently or with the Co-operation of other agencies; (v) To undertake deposit works for the objects mentioned in (i) to (iv) above.

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4. Organisational Set-up of the Company. The management of the Company is vested in the Board of Directors. The Managing Director is the Chief Executive looking after the day-to-day management of the Company with the assistance of four Superintending Engineers for Quality Control, Mehsana Tubewell Circle, Baroda Tubewell Circle and Ground Water Development, Financial Advisor, Administrative Officer and Director Ground Water Irrigation.

The Financial Advisor is the head of the Finance and Accounts Department and he is assisted by five Accounts Officers, four Audit Officers (Accounts, Budget and Audit) and various Divisional Accountants in Head Office and also in Field Divisions.

5. Books and records maintained. (i) Main books of accounts such as; Day(cash) book, Bank current account ledger, consolidated General ledgers and Journal book; (ii) Subsidiary books of such as; Miscellaneous advance register, Un-paid register for un-paid salary, Pay, T.A., Medical reimbursement and Staff advance registers, Work-in-progress register, Maintenance and repairs to tubewells and L.I.S. expenditure register, Stationery register, A.T.D./A.T.C. REGISTER, Fixed Assets register, Loan, Deposit, A.B.I., Demand and collection registers, Water charges collection register in Sub Divisions.

6. Present activities. The present activities of the Company cover all the aspects regarding underground water such as, its investigation, protection, development and inspection either independently or with the Co-operation of other agencies. The Company also looks after the maintenance and operation of completed tubewell and lift irrigation schemes.

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7. Management information system. The Company has devised various formats of MIS by means of which the information as regards the details of expenses and incomes and the progress made in respect of execution of various schemes is collected at Sub-Divisional/Divisional level and it is sent to the Head Office periodically for review by the management.

8. Delegation of powers. The Company has delegated various Administrative and Financial etc. powers to its various officers in the 84th meeting of Board of Directors held on 17th August 1990, which may be referred to during audit.

9. Method of buying. (i) The competitive purchase of materials are invited from the manufacturers/suppliers by the Divisional offices by giving tender notice in the news papers. The purchase procedure prescribed by the Government is mutatis-mutandis followed by the Company. Various purchase powers have been delegated to various officers of the company.

(ii) Channel of distribution:- The Company supplies water directly to the farmers at the subsidised rates through tubewells and lift irrigation schemes designed and approved by NABARD.

10. Inventory control system. (a) The records are maintained to depict the physical quantity at all levels; (b) Procedure regarding receipt and issue of materials is devised; (c) Physical verification of stock is conducted twice in a year; (d) Requirement analysis is carried out properly to ascertain proper quantity and time; and (e) Proper inspection of inventory is conducted at the time of its receipt. The Company has a Centralised Stores Division. Proper control on stock inventory is exercised by the Superintending Engineer and Executive Engineer.

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11. Budgetary control system. The Company prepares annual budget which is submitted to Government. The revised budget estimates are also prepared and approved by Government. The funds received from the State Government are distributed to field officers on receipt of their demand.

12. Cost control system. The water charges recoverable from the farmers are fixed by the State Government. These charges are controlled by the State Government.

13. Repairs and maintenance procedure. The repairs and maintenance are classified as under: Repairs and Maintenance to (a) tubewells; (b) vehicles; and (c) machineries. The following procedure is followed for incurring the repairs and maintenance expenditure; (i) Every year the repairs and maintenance estimates are prepared as per the norms laid down from time to time; (ii) The need for repairs is reported to the concerned authority; (iii) Estimates for repairs are prepared and approved by the competent authority; (iv) Actual repairs is carried out and recorded; (v) The departmental workshops carry out the repairs to pumps and motors etc. of tubewells; and (vi) The payment for the repairs is made by the competent authority.

The Company has issued during March 1994 the directives to its field officers for arranging the repairs of machineries installed in the tubewells.

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14. Internal Audit. The internal audit of the Company is carried out by a firm of Chartered Accountant who are appointed every year by the Company.

The Scope of the internal audit is determined by the Company from time to time after taking into consideration the volume and variety of the activities of the Company. The scope of internal audit is periodically revised, and enlarged. The internal auditors check the record, kept at the divisions and head office and submit their report to the management. The internal audit report is reviewed and remedial action taken at divisional and Head office level.

15. Provident fund and medical benefit extended to the employees of the Company. The Company has followed the Contributory Provident Fund Scheme for its employees. The Company's contribution towards C.P.F. is 10% of basic, salary plus dearness allowance. The Company's Provident Fund Rules and Regulations-1976 may be referred to during audit.

The medical allowance is given to every employee at the rate of Rs.75/- per month or alternatively, medical reimbursement is given at its rate of Rs.500/- per annum. However under exceptional circumstances, the reimbursement of medical expenses is given in excess of the aforesaid monetary limit under proper authority. The Company follows the State Government Rules in the regard.

The Company has framed its own Service Regulations-1977.

16. Service book/Leave account. The service book is maintained in respect of each employee of the Company. In the service book, leave account of the employee is also maintained as per State Government Rules.

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17. Sales and pricing policy. The Company is providing water for irrigation and other purposes for which water charges are collected through the banks as per the procedure. The rates of water charges are controlled by the State Government. The difference between the water charges charged by the Company and the economic rates is given as subsidy by the State Government to the Company.

18. Financial management system. The Company has adequate system of resources mobilisation for funds and application of funds. The main sources of funds are: (i) Water charges (ii) Funds provided by Government towards: (a) Share capital; (b) Loans; (c) Grants for the purchase of machinery and equipment and for construction of tubewells; and (d) Subsidy for Geological wing activities.

(iii) Cash credit facilities with the banks to meet short-term financial needs of the Company. The main application of the funds are: (i) Construction of tubewells and undertaking lift irrigation schemes; (ii) Maintenance and repairs to tubewells under LIS machinery and vehicles, etc.; (iii) Payment of employees' salary, electricity bills and office and other administrative expenses of the Company exercises control over expenditure in its Head Office.

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19. Details of branches/unit offices. The head office of the Company is situated at Gandhinagar. It has branches at various places throughout the State, which are as under:

(i) Ahmedabad, (ii) Deesa, (iii) Baroda, (iv) Rajkot, (v) Bhavnagar, (vi) Palanpur, (vii) Ukai, (viii) Mehsana, (ix) Nadiad and (x) Bhuj. Besides, Director G.W.I. Circle, Ahmedabad, Superintending Engineer, G.W.D. Circle, Ahmedabad, Superintending (Quality Control), Gandhinagar, Superintending Engineer, Vadodara T.W. Circle and Superintending Engineer Mehsana T.W. Circle etc. are also working as field Divisions.

20. Annual Accounts. The annual accounts of the Company are in arrears since 1991-92.

21. Special points to be seen during audit of the Company. (i) Examine the progress of completion of works with reference to the targets fixed and analyse the reasons for delay in its completion and review the remedial action taken for such delays.

(ii) Review the civil works entrusted to the contractors, by the Company with reference to the estimates, measurement books and work final bills etc.. (iii) Review the rate of consumption of consumables like diesel, oil, drill bits, etc. with reference to the norms fixed for maintenance of tubewells etc.. (iv) Examine whether the pump sets are installed and energised in all the wells and if there is delay, analyse the reasons thereof and comment upon the controllable factors leading to delays.

(v) Examine whether the Company recovers the centage charges for the deposit works and whether the charges so collected are adequate to cover its establishment and other expenditure on such works.

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(vi) Analyse the system of maintenance of tubewells and find out whether the pump sets are attended promptly in case of the break down.

(vii) Examine whether the purpose of the tubewells is achieved and whether the Company gets necessary feed-back information from the field units for optimum utilisation of the tube-wells.

(viii) Examine the system of recovery of water charges and see whether the recovery is effected, promptly and analyse the reasons for delayed/non-payment of water charges, if any. Verify that the water charges subsidy is claimed and received from Government. (ix) Review the performance of the internal auditors with respect of the scope of their work and see that corrective action is taken by the management on the audit objections.

(x) Review the inventory control system and see that the materials are not kept unutilised for a long time. (xi) Review the purchase and repairs and maintenance procedures of the Company and see that it is efficient.

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CHAPTER XXXVIII GUJARAT AGRO INDUSTRIES CORPORATION LIMITED

1.

Introduction :

Gujarat Agro Industries Corporation Limited was incorporated on 9th May 1969 as a joint venture with the Government of India. As on 31st March 1995, the Company had the following subsidiary Companies. (a) Gujarat Insecticides Limited. (b) Agrocel Pesticides Limited The authorised share capital of the Company as on 31st March 1995 was Rs.10 crores divided into 10 lakhs equity shares of Rs.100/- each.

The paid-up Share capital is contributed by Central Government and also by Gujarat Government.

2.

Applicability of Acts and Rules (i) Companies Act, 1956 (ii) Commercial and Mercantile Acts (iii)Rules regarding Admn. as prescribed by the State Government.

3.

Main objects of the Company. The main objects of the Company are:

(i) (ii) (iii) (iv)

To, finance, protect and promote agricultural activities and industries To manufacture, to trade, to export and import and to distribute the goods and items related to agriculture, machineries, equipments, agro-imputs etc. To promote, establish administer and run agro industry and projects To carry on the business as Noddle Agency on behalf of the Government.

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4.

Present activities of the Company. The present activities of the Company are as follows : (i) to purchase and sale agricultural machineries, fertilizers, equipments, spares and seeds etc. (ii) Manufacture and distribution of pesticides oil and oil cakes, canned fruit and sattu. (iii) To provide services as implementing agencies for Bio-gas Plant Scheme and as Noddle agency for various schemes run by the Agricultural Department, Government of Gujarat.

5.1

Organisational set-up.

The management of the Company is vested in Board of nine directors, onethird of which (including the Chairman and the Managing Director) is nominated by the State Government. The Managing Director is the Chief Executive and looks after the day-to-day management of the Company. He is assisted by two Executive Directors, Six General Managers/Asst.General Managers various divisional Managers etc.

5.2

Accounting organisation set-up.

The General Manager (Finance) is the head of the Finance and Accounts Department. He is assisted by Divisional Managers etc.

6.

Books and records maintained. The following books and records are maintained by the Company. : (i) Sub-ledgers (ii) Books of accounts (iii) Cash book and bank book (iv) Ledgers (v) Stock records

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The above mentioned records are maintained through the computers at Ahmedabad based offices and manually at other small centres.

7.

Delegation of powers

The Board of Directors have delegated all the operational powers regarding revenue and capital expenditure etc. to the Managing Director. The Managing Director, in turn, has delegated specific powers to Sr.Executives of the Corporation looking to their accountability and responsibility.

8.

Purchase procedure.

The Company maintains mailing list of basic manufacturers of various items and rates are invited either by making local enquiry or inviting rates through the tender notices advertised in daily news papers. In case, the purchase value exceeds Rs.25,000/- after receipts of the rates the comparative tax statement of rates is prepared and submitted to the central Purchases Committe for sanction. The rate contracts, taking into consideration the requirement of materials either for whole year or after obtaining sanction of the committee.

The divisional heads are authorised to purchase upto Rs.25000/- after calling for quotations and after negotiating the rates with the tenderers.

The raw materials for maintenance of insecticides, trading goods and packing materials etc. are procured through public notice inviting tenders. The orders at lowest rats are placed after negotiation, for quality materials . The fruits, oil seeds and rice grain etc. are procured from agriculture markets at their rates prevailing at the time of procurement.

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9.

Processing plants, products manufactured and manufacturing process

The Company has following Divisions, dealing with the manufacturing activity : (i) Agro chemicals Division deals with the formulations of various pesticides at two units located at Naroda and Gondal. The insecticides are diluted by adding and mixing filler chemicals to get pesticides in liquid and grannual forms.

(ii) Food processing units are located at Gandevi and Junagadh and one energy food unit is located at Bavla, where tomato ketchup fruit drinks and sattu food etc. are processed . For processing Sattu, wheat, Gram/Gram dal Sugar and Groundnut cakes are raw materials which are cleaned through machines and roasted at the required temperature. The roasted materials are once again mechanically cleaned and are then pulversised to the required size. Similarly, groundnut calee is roasted and pulversised to the required size, Sugar is also grinded. The powdered raw materials are then fed to the blenders and the finished product (Sattu) is obtained

(iii) Rice Bran Oil extraction Plant is located at Barja where calee (byproduct) and oil are produced Rice-Seeds processed after adding castor oil. Unit is located at Jagana (Palanpur) where the crushing of caster seeds rapeseeds through expeller is done and cakes by products as well as oil is produced.

(iv) Rice Castor Seeds Oil unit is located at Jagana (Palanpur) where the crushing castor seeds through expellers is done and cakes as well as oil is produced.

10. Channel distribution of products. The Company is selling its various products through a marketing network on all India basis. The Company has appointed distributors and dealers. It has 22 Service Centres for distribution of agricultural inputs and equipments live tractors, fertilizers and pesticides etc. Around 400 Agro Service in Gujarat and eight branches in other States are run by the Company. The Service centres are run by the unemployed technicians. The Company has a marketing Division which undertakes exports of processed foods and Castor Oil etc.

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11.

Inventory Control system :

The control purchase committee considers the purchase proposals after reviewing the stock position and movement of inventory in the past. The divisional heads review the inventory levels to avoid blocking up company's funds.

12.

Budgetory Control system.

All the units of the Corporation prepare annual budgets of their estimated performance. After review of the actual performance for the current year and the estimated performance for the next year by the Managing Director, a consolidated annual budget is prepared by Head Office of the Company. The monthly performance is reviewed by the Managing Director with reference to the estimate.

13.

Cost Control System.

The divisional heads of the Company have set the standards for consumption of raw materials for each unit of production. The actual consumption is watched with reference to the standards, daily/monthly.

14.

Repairs and Maintenance procedure.

The repairs and maintenance cell under the Project Division of the Company is arranging the R&M works internally and by engaging the contractors. The proposals for such works are scrutinised by a technical team.

15.

Preparation of Manuals.

The Company has informed that it has prepared the accounting manual, Manual for internal checks, Controls and also Admn. Manual which may be referred to during audit of the Company.

16.

Position of annual accounts. The Company's annual accounts for the years 1993-94 and 1994-95 are in

arrears.

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17.

Internal Audit

The Company has appointed a firm of Chartered Accountants as their internal auditors.

The scope of internal audit is detailed in the Annexure.

18.

Provident Fund/Medical benefits.

The Company has extended provident fund facilities to its employees. The contribution of the employees and the contribution of the Company are clubbed and are deposited with the Regional Provident Fund Commissioner. The Company is paying the medical reimbursement charges upto Rs.750/- p.a.to each employees.

19.

Service Books/Leave accounts

The Company maintains individual personal file and Leave accounts registers of its employees.

20.

Sales and pricing policy.

The sales and pricing policy is decided by the General Manger (Marketing) and Divisional Manager (Marketing) through the consultations made with the Manager (Finance) and concerned unit manager, with the help of the cost sheet and market price of the same product of other manufacturer. The same is approved by the General Manager (Finance) and the Managing Director. The discount policy is decided from time to time on the basis of the market trend with the approval of the Managing Director.

21.

Management Information System.

The Company follows the information system under which quarterly performance report of each pertaining units is submitted to Board of Directors. The following reports are received at H.O. for review and decision.

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(i) Monthly profit and loss statement with turnover, expenses and production performance. (ii) Statement of outstanding debtors with its agewise analysis. (iii) Working capital, inventory of raw materials and finished goods and bank balances etc. The monthly performance report is submitted to Managing Director for review.

22.

Branches/Units of the Company.

The Company has a Agro service Division at H.O.Ahmedabad. besides, there are four Agro Service Complexes at Ahmedabad, Surat, Mehsana and Gondal. There are 15 Agro service Centres in Gujarat which are managed by the above mentioned complexes. Besides there are two Division Energy Division and Export and Trading Division. Further, the Company has cold storage at Deesa.

23.

Special points to be seen during audit of the company.

(i) Review the purchase procedure of the Company and examine various supply orders placed for raw materials, capital items and consumable items etc. See that the delivery schedule as per contract is strictly adhered to by the suppliers.

(ii) See that proper accounts have been kept in respect of the funds received from Central/Governments and the funds have been spent for the purpose for which those were released by the respective Government.

(iii) Review the policy of fixation of selling price for each product and specially examine the cases resulting in loss due to wrong fixation of selling price

(iv) Review the annual production targets fixed for each unit of the Company and work out the activity ratio. Ascertain the under utilisation of if any installed capacity of each processing plant and analyses the reasons for the same.

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(v) Review the production performance and examine the reasons for the variation if any in actual production fixed by the Company for each year with reference to the targets fixed therefor

(vi) Review the progress of sales with regard to the sales programme. Account sales for the variations if any, in the sales. Examine cases, if any in respect of delay in adhering to the delivery schedule.

(vii) Review the actual cost of production per unit and investigate the variation if any in the cost as compared to the cost fixed by the Company.

(viii) Examine the action taken by the Management in realising the arrears in respect of the dues of sale of its various products.

(ix) Review the working of biologic plants installed by the Company under the Centrally Sponsored Subsidy Scheme. Examine the utilisation of subsidy received by the Company from the Central Government. (x) Review the procedure of the repairs and maintenance being followed by various manufacturing units of the Company and see that it is working effectively.

(xi) Examine the contracts for exports of the Company's products and see that the terms and conditions of the contracts are in the interest of the Company.

(xii) Review the performance of internal auditors of the Company and ascertain the action taken thereon by the management.

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Annexure SCOPE OF INTERNAL AUDIT 1. Audit of all financial records viz. Party Cash Book, Bank Book Sales Registers, Purchase Registers and other Financial records/registers, This interalia would includes :-

i)

Verification of all payments made by cheques with the paid cheques, (returned by the banks) & supporting vouchers/bills and to verify that these payments are authorised by the competent authority as per the powers delegated by the Corporation.

ii)

Verification of all cash payment with the supporting vouchers and ensuring that the person; authorising the payment has necessary power to do so.

iii)

checking of sales invoices with the sales registers with particular emphasis on the prices charged, discount allowed which should be in line with the price list approved by the Management.

iv)

Checking the suppliers bills for purchases made by the corporation with the purchase registers. To verify that these purchases are in agreement with the purchase order duly executed by the competent authority and to ensure that the laid down procedure is followed.

2.

Verification of bank reconciliation statements atleast once in a quarter, Bank advices for interest calculations on the Cash Credit accounts must be verified for the quarters ending March, June, September and December. Other Bank advices for charges etc. be verified at random.

3.

Records maintained at Godowns, stores and Plants must be audited with emphasis on meticulous recording of all inventory entries for the receipt of the material as also the issues for consumption. Verification must be of all the quantitative accounts and to ensure that these are reconciled with the financial accounts during the course of the year.

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4.

Internal Auditors must associate themselves with the physical stock taking to be carried out twice in a year namely half year ending and at the and of the year. Statement of reconciliation of physical and book stocks must be verified as also the valuation of raw materials, stores, work in process and finished goods/trading goods be checked at the end of the year.

5.

Physical verification of cash on hand, bills and security on hand twice in year viz. half-year ending and at the end of the year.

6.

To report on the quarterly performance - statement regularly be placed before the Board. While auditing the financial records, an indepth audit for a selected period be made tracing transactions from its beginning to the end. Ledger scrutiny be carried out to check the opening and closing balances. Verification of postings in the ledger from the sub-ledgers and the Journal vouchers be carried out, atleast once in six months. Examination Of Trial Balances drawn up from various ledgers on a random sample basis. The year end Trial balance must be examined. To review the present system of internal checks and controls and to report on its inadequacies as also to suggest ways and means to strengthen the system of internal controls/checks. To review compliance under the Social Audit Order viz. Verification of fixed assets registers. whether the PF and other dues of the Government are paid in time. review of the procedure for the determination of unservicable or damaged stores. other items which are covered under the Social Audit Order.

7.

8.

9.

10.

11. a) b) c) d)

General remark. The above audit work shall comprise of all Divisions of the Corporation and would inter-alia include activity/special jobs which may be carried out by the Corporation from time to time during the course of the year. .

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CHAPTER XXXIX GUJARAT SHEEP AND WOOL DEVELOPMENT CORPORATION LIMITED.

1. Introduction: Gujarat Sheep and Wool Development corporation Limited was incorporated on 9th December 1970. Since the Company was incurring losses year after year and private sector collaborators were not subscribing to the capital, Government converted the Company into a Government Company in 1977. The authorised share capital of the Company as on 31st March 1991 was Rs.250 lakhs divided into 2.50 lakhs equity shares of Rs.100 each. The paid up capital of the Company as on 31st March 1991 was Rs.53.96 lakhs divided into 53,960 equity shares of Rs.100 each.

2. Applicability of Acts and Rules. (a) companies Act, 1956. (b) Rules of Government of Gujarat. (c) Service Rules, 1976 of the Company. 3. Main Objects. (i) To establish, extend and/or re-organise sheep breeding farms. (ii) To produce wool of a quality suitable for Worsted/Woolen/Carpet. (iii) To import, breed, sell, export sheep and sheep products. (iv) To assist Government in taking up and/or take up Cross breeding programme. (v) To establish, extend and/or re-organise sheep and wool extension centres for improving the quality and increasing the production of wool per sheep. (vi) To finance, promote, establish, administer, assist institutions to take up sheep shearing and wool grading/marketing of wool. (vii) To render technical assistance to undertakings carrying on any sheep and wool development.

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(viii) To take over, administer or execute sheep and wool development schemes related to research, breeding, extension and wool grading. (ix) To manufacture and sell sheep/cattle feeds. (x) To produce, sell and manufacture agricultural products of all kinds.

3.1 Organisation set-up. The Management of the Company is vested in the Board of Directors. The Managing Director is Chief Executive who is assisted by the Company Secretarycum-Finance Manager, General Manager(Project) and General Manager(Marketing). The Organisation chart of the Company is placed as Annexure.

3.2

Accounting Organisational Set-up.

Company Secretary-cum-finance Manager is head of the Accounts Department. He is assisted by the Accounts Officer, Accountant, Assistant Accountant, Sr./Jr. Clerks.

4.

Books and Records maintained. The Company is maintaining the following books and records :

(A) (B)

Details of Books : Cash Book, Bank Book, Ledger, Journal. Details of records. (i) (ii) (iii) (iv) Accounts Records ; Agriculture Operation Records ; Live-stock records Stores Records.

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5. (i) (ii) (iii) (iv) (v)

Present Activities. To up-lift the economic condition of sheep breeders by purchase of wool directly from them and through their co-operative societies ; Running of sheep breeding farm for production of better rams for breeding purpose. Activities regarding sheep health care. wool grading and marketing of wool and sheep. To run carpet weaving training centres for providing employment in rural sector.

6.

Management Information (Service) System.

The head office of the Company prepares monthly reports of performance, based on the information received from the field offices. Thereafter, the data is complied on quarterly and yearly basis and the comparative position of performance is reviewed and remedial measures are taken to improve the performance.

7.

Delegation of powers. Delegation of powers is as per Rules of Government Gujarat.

8.

Processing Plant.

The Company is having Wool Carding Plant where carding of wool from raw wool is done to produce carded wool.

9.

Manufacturing Process.

The Company is having Wool Carding Plant where carding of wool from raw wool is done to produce carded wool.

10.

Product Manufactured. The Company is having Wool Carding Plant where carding of wool from raw wool is done to produce carded wool.

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11.

Raw materials and there sources Raw wool is purchased by the Company from the markets.

12.

Method of buying

The Company is buying the material through the Company's sheep extension centres located in the villages.

13.

Channel of distribution

Carded wool is distributed directly to Khadi Gram Udhyog Centres or such other agencies.

14.

Purchase procedure.

The Company purchases the material required in small quantity by inviting the tenders/quotations and by making inquiries from the suppliers.

The bulk purchase of material is finalised by the Purchase Committee of the Company.

15. (i)

Inventory/Budgetory Control Inventory Control is exercised by departmental officers and by Internal Auditors.

(ii)

Budgetory Control is exercised by departmental officers and by Government.

16.

Repairs and Maintenance

Repairs and Maintenance is being done by the Company as per State Government System.

17.

Internal Audit

The Company appoints Internal Auditors who conduct quarterly audit of the books of account and furnish their Reports to the Management.

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18.

Provident Fund/Medical benefits.

The Company is having its own Contributory Provident Fund Trust duly approved by the Income-Tax Department. The medical benefits are extended to the employees as per services rules of the State Government.

19.

Service Books/Leave Accounts

The Company is maintaining Service Books and leave records of all employees in terms of State Government rules i.e. Bombay Civil Service Rules.

20.

Manual The Company has adopted Bombay Civil Service Rules.

21.

Branches/Units

The Company is having units at Jasdan( District : Rajkot), Bhavnagar, Jamnagar, Bhuj and Aseda (District : Banaskantha). These units are maintaining records as mentioned in Sr. No. 4 above.

22.

Special points to be seen

(i)

Review the cases of up-liftment of the economic condition of sheep breeders. See that the wool purchased from the sheep breeders or from their co-operative societies is of good quality. Verify whether the purchase of wool is made at economical rates. Review the operations of sheep breeding farms.

(ii)

(iii)

See whether any targets of work have been fixed for sheep breeding farms in respect of production, purchase, sale and export of sheep. Compare the actual with the targets and see whether there are shortfalls.

(iv)

See whether the Company has analysed the reasons for shortfall if any and has taken remedial action therefor to improve the working of such farms.

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(v)

Review the import of `Rams' from other countries. See whether the terms and conditions of purchase of rams were satisfied by their suppliers before the export of Rams to India, especially whether Rams were to undergo veternary and fertility test before export to India.

(vi)

See what is the maturity age of Rams purchased and ensure that the age of Ram purchased was not more than the maturity age.

(vii)

Ascertain the mortality rate of various types of sheep such as, Marinos, as mentioned in the Project Report. Find out what is the actual mortality rate. Ascertain the reasons for higher mortality rate as compared to mortality rate mentioned in the Project Report and the remedial action taken by the Company.

(viii)

See whether proper medical care was taken for Marine sheep.

(ix)

Review the purchase of shearing machines and see that they are profitably used. Review the performance of Training-cum-Production centres.

(x)

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CHAPTER XXXX Gujarat Fisheries Development Corporation Limited.

1.Introduction The Company was incorporated on 11th October 1983 by change of name of erstwhile Gujarat Agro Marine Products Limited which was till then a subsidiary of Gujarat Agro Industries Corporation Limited.

The authorised share capital of the Company as on 31st March 1994 was Rs. 500 lakhs divided into 5 lakhs equity shares of Rs.100 each. The paid-up share capital as on 31st March 1994 was Rs.12192300 divided into 121922 equity shares of Rs.100 each. The share capital of the Company is held by Government of Gujarat and its nominees.

2.Applicability of Acts and Rules etc.. The Company follows the following Acts & Rules etc. : (a) Companies Act, 1956. (b) Employees Provident Fund & Miscellaneous Provision's Act, 1952 (c) Bonus Act, 1965. (d) Indian Explosives Act, 1984. (e) Shops and Establishment Act, 1948. (f) Income Tax Act, 1961. (g) Sales Tax Act, 1961. (h) Professional Tax Act, 1976. (i) Merchants' Shipping Act.

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3.1 Main objects of the Company. The main objects of the Company are:

(i) To carry on the business of surveying, Prospecting and catching all varieties of fish, marine products like shrimps, prawns, lobsters, pearls and sea-weed etc..

(ii) To carry on the business of dealers in fish, marine products and other products in wholesale and/or retail and importers and exporters of fish, marine products, other products and/or their by-products

(iii) To carry on the business of manufacturing, servicing, repairing, marketing, purchasing, selling, importing, exporting, dealing, hiring, acquiring and renting of boats, trawlers and other equipments.

(iv) To carry on the business of manufacturing, marketing, selling, processing, preserving, developing and dealing in ice and other cooling agents.

3.2 Present activities of the Company. The Company's present activities are as under: (i) Commercial capture fishing by four deep sea fishing trawlers, (ii) Reservoir fishery through Adivasi fisherman, (iii) Fish seed production, (iv) Manufacture of boats of different sizes, (v) Supply of sales-tax and Excise free diesel to fisherman, (vi) Supply of fish meal and food.

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4.1 Organisational set-up The management of the Company is vested with the Board of Directors which consists of ten directors including Chairman and Managing Director. The Managing Director is assisted by Stenographer cum Personal Assistant, Company Secretary, three Divisional Managers(Finance, Marketing and DSP) and Manager(Fin & P)

4.2 Accounting Organisational Set-up The head of the Finance Department is the Divisional Manager who is assisted by the Manager, Assistant Manager and Junior Officer.

5. Books and records maintained The Company maintains the following books and records: (a) Cash book and Bank book (b) Journal book (c) Purchase register (d) Sales register (e) Ledger (f) Incentive register (g) Salary register (h) Stock register per stores, spares & diesel (i) Vessels log book. 6. Delegation of powers The Corporation has delegated financial, Administrative and purchase powers to the heads of the branches and various officers in the Head Office of the Company.

7. Processing plants The Company is having one fish pulveriser unit at Mangrol which is simply a grinding machine. The Company manufactures boats at Boat building yard at Mangrol.

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8. Manufacturing process, raw materials used and products manufactured The Company, in its boat building yard manufactures fiberglass boats from specific sizes of the moulds by applying C.S.M., Resin and other Chemicals. The fish-feed for poultry and fish is manufactured by mixing the ingredients like oil-cakes, fish meal and rice bran etc. through pulverisers.

9 Purchase procedure The raw materials like wood and chemicals are purchased by inviting tenders, quotations and after assessing its quality and price and also after physical verification of the wood other stores/spares are purchased locally after obtaining quotations. The spares for trawlers are imported through the letter of credit. The quantum of wood is decided on the basis of its availability against the past orders. The annual production and sales made in the past is the criteria for deciding the requirement of the chemicals.

10. Repairs and maintenance procedure The major repairs of trawlers is carried out by the Company as per the requirement of American Bureau of Shipping and Indian Registry of Shipping classification and Mercantile Marine Department by adopting the purchase procedure.

11. Procedure of internal audit The Company has appointed a firm of Chartered Accountants as its internal auditors for its head office and all branches. The internal auditors' reports are submitted to the Managing Director and the Board of Directors for taking remedial action.

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12. Sales and pricing policy The Company sells fish catch of Deep Sea Fishing activity at "Vijay" (Vishakhapattanam) to the highest bidder "on voyage to voyage basis". In land fishing catch consignments are despatched to Delhi, Calcutta and Ahmedabad. Fish seed is sold at the prices fixed by the commissioner of Fisheries, Government of Gujarat. The selling price of F.R.P.wooden boats are fixed keeping in view such factors as competition and market demand. The cost estimates for boats are prepared.

13. Branches/Units The Company has the following branches: (a) Boat building yard at Mangrol (b) Diesel sale outlets are located at Okha, Aditra, Rupen, Porbandar, Mangrol, Veraval, Jafrabad, Salaya and Ja-khau (c) Kadana Main center for seed production at Nanikakrad and Pathari (d) Vishakhapattanam for deep sea fishing.

14 Provident Fund and Medical benefit The Company's employees are governed under "Provident Fund and Miscellaneous Provisions Act, 1952." The Company has framed its own "Service Rules-1985." The employees contribute 8.33 percent of basic pay plus D.A. to the Provident Fund. The Company also contributes at equivalent rate to the P.F..

The reimbursement of medical expenses upto Rs.750/- per annum is made by the Company to its employees.

15 Service books/leave accounts The Company maintains the records of service of a each employee. The details of entitlement and availment of various kinds of leave are kept in a register.

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16 Special points to be seen during audit

(i) Review the activity wise performance of the Company to see that the loss is not incurred in any activity. (ii) examine the contracts for purchase of trawlers, wood and chemicals etc. and see that the various terms and conditions of the contract are strictly adhered to. (iii) Review the internal audit reports to see the effectiveness and adequacy of internal audit system. (iv) Review the price fixation policy and fixation of sale prices for each product and examine the cases of loss due to wrong fixation of sale prices. (v) Review the process of sales and sales volume achieved with reference to sales programme. (vi) Review the inventory control procedure of the Company. (vii) Review the cases for award of civil works and see that every possible effort has been made to get the work done at minimum cost and there is no loss due to delay in execution of the work.

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CHAPTER - XXXXI GUJARAT DAIRY DEVELOPMENT CORPORATION LTD.

1.Introduction : The Gujarat Dairy Development Corporation Limited was incorporated on 29th March 1973. The Authorised Share capital of the Company as on 31st March 1995 was Rs. 12 crores divided into 12 lakhs equity shares of Rs. 100 each.

2. Applicability of Acts, Rules etc.: The Company follows the following Acts and Rules(i) Company's Act, 1956 (ii)Income Tax Act, 1961 and Income tax Rules, 1962 (iii) Factories Act, 1948 (iv) Employees' State Insurance Act, 1948. (v) Payment of Bonus Act. (vi) Employees Provident Fund Act, 1952 (vii) Prevention of Food and Adulteration Act, 1954 (viii) Arbitrary Act, 1972 (ix) Industrial Disputed Act (x) Contract Labour Arbitrary Regulation Act.

3.

Books and Records maintained.

The Company maintains various registers and records as required under the Companies Act, Income tax Act and Sales tax Act. The service books and leave record etc. employees are maintained as per Government of Gujarat (B.C.S.R.) rules and Factories Act. Various accounting records as detailed in Annexure.

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4.

Main objects of the Company The main objects of the Company are to :

(i) Promote and develop Cattle husbandry for increasing production and quality of Milk by improved and scientific means of cross breeding.

(ii) Promote, develop, organise and finance units, farms and agencies in the field of dairy farming.

(iii) Produce, buy, collect, sell and distribute milk and all kind of milk products.

(iv) Assist, promote and encourage the establishment and formation of cooperative primary societies and enter into agreements with them for the purpose of channelising milk production, collection and distribution etc.

5.1

Organisation set-up.

The management of the Company is vested with the Board of Directors, consisting of not more than 12 Directors including the Chairman and the Managing Director. All the Boards' members are appointed by the State Government. The Managing Director is the Chief Executive and is allotted in his day-to-day work by two Joint General Managers (admn. and D & PPF) ,Financial Controller, Deputy General Managers(Coop) and Animal Husbandry) Consulting Company Secretary, Two Managers (ADMN.& PF) and various project Managers incharge of various units of the Company and Dy.Managers etc.

5.2

Accounting Organisational set-up

The Financial Controller is the head of the Finance and Accounts department. The Deputy General Manager (Finance) is the head in Finance and Accounts department of ABAD dairy and the Deputy Manager (Accounts) is the head of Accounts department in other units. These Officers are assisted by various Assistants and Senior Accountants etc.

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6.

Delegation of powers

The Board of Directors of the Company had delegated various powers relating to purchase of Plant Machinery etc. Job works, contingent expenditure and general matters etc. to the Business Personnel Committee and Managing Director, vide various Circulars issued during July, 1990, October 1992 and December 1993.

7.

Processing plants

The Company has 7(seven) dairies at Ahmedabad, Junagadh, Bhavnagar, Surendranagar, Chalala, Madhopur(Kutch) and Jamnagar, Cattle Feed Factory at Khandheri(Rajkot district) and chilling Centres at 10 places in Gujarat. The Company maintains all the records of purchase, production, consumption of raw-material and Sale etc. in its units.

8.

Products Manufactured and Manufacturing process. Main products are as under; (i) Milk- a) whole (b) standard (c) tonned (d) double tonned (ii) Josh Milk

The Companys'

(iii) Milk products (a) Ghee (b) Cream (c) Butter (d) sweets (f) skimmed milk powder (g) Cheese (h) Curd etc. (iv) Cattle feed- Marketed as Rajdan The Milk and Milk products are processed through milk which is the raw material for these products. The Cattle Feed Rajdan is manufactured from the raw material such as, rice Bran, Rice, polished, cotton-seed cakes groundnut-cakes, maze, wheat, Dhania-husk, bajra, Jowar and Molasses.

9.

Purchase procedure :-

The Milk is purchased from Milk Co-operative Societies and District Milk Unions at the prefixed prices on kilo-Fat basis after testing FAT and SNF. The raw materials for Cattle-Feed are purchased from the manufactures. On the prices fixed after holding negotiations with them through the brokers in the open market. Molasses is allotted by the Industries Commissioner and is procurred from various sugar factories. The sources of raw-material, are solvent extraction plants, oil millers, Grain Merchants and other suppliers.

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10.

Sales and Pricing Policies

The sale of milk and milk products is made through various centre and distributors on commission basis. The sale price of the milk is fixed by ABAD dairy management, after taking into consideration the taxes, excise duty and commission paid to the centre and distributors also the selling price of other competitors in the market. Further, the sale price is also based on availability of commodities, market price and season etc. systems.

11.

Inventory control\Budgetory control :-

The dairy projects purchasing maintenance stores items as and when required and efforts are made to keep minimum inventory. The Company prepares Revenue Budget and the quarterly performance report against the targets fixed and it is reviewed by the Board, to improve the performance.

12.

Repairs and Maintenance procedure.

The Company is having trained staff for operation and maintenance of the machinery and equipments at 18 various dairy units, who attend the normal breakdown. However, major repairs of machinery and equipments is got done through outside contractors.

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13.

Managerial Information System.

The Company has MIS Section which collects monthly financial and operational data of performance, in the prescribed formats, from its various projects and the same is compiled in Head office and it is submitted to the Management for its review and taking decision thereon. Besides, the Annual Financial and Operational figures in respect of the performance of various projects are compiled, analysed and submitted to the Board of Directors for evaluating the performance of each project. The comparison of actual performance with the operational budget and variance analysis are also done and the results thereof are reported to the management. Thus, the decisions like fixation of sale of the milk and milk products may be taken by the management. MIS Section also does liason work with Government and other organisations like NDDB, GCMMF. These are two 'PC' used for payrolls processing and PF accounting. The advertisement functions like releasing tender notices and marketing advertisements are also looked after by MIS Section.

14.

Procedure of Internal Audit

The Company has engaged a firm of Chartered Accountants who carry out the internal audit of all the projects except the audit of Head Office, ABAD dairy,. Jamnagar, and Surendranagar dairies is conducted by the internal audit staff of the Corporation. However, the Internal Audit Report of the Companys' staff and these the Chartered Accountants are periodically reviewed by the Chief Internal Auditor of the Company and the results therefore reported to the Management for taking decision thereon. The Company has prescribed the format of Internal Audit Report.

15.

Service Books/Leave Accounts

The Company maintains Service Books and leave records in respect of its employees working at Head Office and in its various units.

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16.

Provident Fund/Medical Benefits extended to the employees.

The Company has framed its own service rules, called Gujarat Dairy Development Corporation Limited Service Rules 1975. The Company contributes to the Contributory Provident Fund at the rate of 8.33% apart from the equivalent amount deducted every month from the salary of each employee. The reimbursement of expenses upto Rs. 500/- per year, is made to each employee in production of the money receipts from the Registered Medical Practitioner by the employees.

The Company follows the State Government Rules for providing medical benefit to its employees.

17.

Annual Accounts. The Companys' Annual Accounts for the year 1994-95 are in arrears.

18.

Special points to be seen during Audit.

(i) Review the working of ABAD dairy and other dairies of the Company and see that the installed capacity of each plant is fully utilised. The deviations if any, are analysed and remedial measures for improvement in their performance, are taken by the management.

(ii) Review the production, sales and inventory data, to verify the operational performance of the Company.

(iii)Review the purchase orders for supply of plant and machinery and raw materials and see that the terms and conditions of the orders are not against the interest of the Company. Further, see that the delivery schedule of the orders is strictly adhered to.

(iv) See that proper accounts have seen kept in respect of the Fund received from Central/State Government and are spent for the purpose for which the Fund were released.

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(v) Review the price fixation policy and the fixation of the sale price for each product and specially examine the cases resulting in loss due to wrong fixation of the sale price.

(vi) Review the system of control for issue of materials to the production department and examine the reasons for excess utilisation if any, of raw materials during production.

(vii) Review the policy for appointment of agents and see that no undue advantage has been awarded to someone in preference to others.

(viii) Review the policy of transport of Company's various products and for transportation of milk.

(ix) Review the performance of MIS Section and Internal Audit department of the Company.

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ANNEXURE Books of records maintainted by Gujarat Dairy Development Corporation Ltd 1. Cash Book 2. Journal Book 3. Sales Journal 4. Purchase Journal 5. Main Ledger 6. Sundry debtors Ledger 7. Sundry creditors Ledger 8. Debit/Credit Notes register 9. Stores inward register 10.Stores outward register 11.Postage register 12.Fixed Assets register 13.Leave records 14.Share holders register 15.Minutes Book 16.Loans register

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CHAPTER No.XXXXII Gujarat State Seeds Corporation Limited. 1. Introduction. The Company was incorporated on 16th April 1975. The authorised share capital of the Company as on 31st March 1995 was Rs.400 lacs divided into 400 lacs equity shares of Rs.100 each. It is a wholly owned Company of the Government of Gujarat

2.Applicability of Acts and Rules etc.. The Company follows the Provisions of Companies Act 1956 and the following Acts and Rules. (i) The Seeds Act 1966 (ii) Seeds Rules 1968 (iii) Seeds central order 1983 (iv) The essential commodities Act 1955 (v) The standard of weight and measures Act 1985 and its Rules 3. Main objects of the Company. The main objects of the Company are as under. (i) To finance, protect, promote and develop seeds production activities (ii) To ensure that the seeds are available to the farmers at reasonable rates (iii) To provide technical and other assistance to the farmers for seeds production (iv) To carry on the activities which will help the preservation, protection, growth and modernization of seeds production. (v) To promote the healthy seeds industry in the State reducing improved seeds.

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4. Present Activities of the Company. The Company is dealing with the production, purchase, processing improved seeds of about more than 30 crops and 110 varieties. The Company undertook the seeds production and distribution programme from Rabi 1975.

5. Delegation of Powers. The Company has delegated various powers to the Manager(Production), Manager(Marketing), Assistant Manager(Admn.), Company Secretary, Cum Manager(Finance), Manager (Godowns) and Production specialists etc. in various branches. These powers relate to the various matters dealt with by them in respect of their departments. The powers have been delegated through various officers and are issued between 1990 to 1993.

6.1. Organisational Set-up. The management of the Company is vested with the Board of Directors consisting of Chairman, Managing Director and other Directors. The Managing Director is the Chief Executive of the Company, and he is assisted by two managers (Production and Marketing), Assistant Manager (Admn.), Planning Officer and Company Secretary cum Manager (Finance) etc.

6.2. Accounting Organisational Set-up. The Company Secretary cum Manager (Finance) is the head of the accounts department who is assisted by the Assistant Manager (Accounts), Office Superintendent and other staff members in branch offices.

7. Purchase Procedure. The Company purchases seeds of different crops from the farmers under central programme. It also purchases quality seeds from the State Seeds Corporation of other States. The seeds are also purchased from the open market. The procurement cost is fixed by a Committee consisting Directors of the Companies. The packing and processing materials are purchased from open market after inviting tenders, incase of bulk requirement.

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8. Repairs and maintenance procedure. Mostly the repairs work of buildings vehicles, machinery and furniture etc. is got down from the Government institutions. When there is no such agency, the Company floats tender inquiries and after comparing the tender rates received the work order is issued to the lowest tenderer.

9. Inventory control and budgetary control. The Company prepares annual budget in respect of seeds inventory, purchase, sales, administration, selling expenses and packing, processing and consumption etc. on the basis of the past experience and considering the agroclimetic situation of the State. 10. Financial assistance to Co-operative societies. The Company allows the commission to the Co-operative societies on sale of the seeds. Further the transportation subsidy for purchase of seeds above two tons is also allowed. 11. Sales and Pricing policy. The Board of Director of the Company decides the Sales and Pricing policy considering the Market situation. The sales price is fixed after adding the processing and packing charges and Admn. overheads to the procurement price. Most of the seeds are distributed through the Co-operative societies, outlets of Gujarat Agro Industries Corporation and sales outlets of the Company.

11.1. Procedure of Internal Audit. The Company has engaged a firm of Chartered Accountant as its Internal Auditors. They conduct the Audit of various records maintained at Head Office and branches of the Company. The scope of work of internal auditors is furnished in the Annexure. 12. Books and Records Maintained by the Company. The Company maintains the following books and records. (1) Cash book, (2) Bank book, (3) General ledger, (4) Journal books, (5) Seeds testing Register, (6) Sales Register, (7) Seeds productions programme, (8) Register for purchase in respect of seeds and other items, (9) Stores Register in respect of seeds and other items, (10) Fixed Assets Register.

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13. Managerial Information System. The Head Office of the Company collects daily, weekly, quarterly and annual reports of performance from its Production, Marketing, Administration and Finance branches. Various formulas of Managerial informations regarding production, sales and finance are prescribed by the Company in consultation with the Central Government.

14. Provident Fund/Medical benefits extended to Employees. The Company has extended the benefits of Provident Fund to its Employees under the Provision of Provident Fund and Miscellaneous Provision Act, 1952. The General Provident Fund accumulation are remitted to Regional Provident Fund Commissioner. Company has framed its own Service Rules called GSSC Ltd. Service Rules, 1985. The Provident Fund at the minimum rate of 10% of the Basic Pay plus D.A. is deducted from the salary of the employees and the Company also contributes an equivalent amount towards the General Provident Fund.

The Company allows to its employees the medical benefits as per the rules of the State Government.

15. Maintenance of Service Books and Leave Accounts. The Company maintains Service books and Leave Accounts of its employees as per the rules of the Government of Gujarat.

16. Financial Management. The Company has framed cash management and funds management policies in order to utilise the funds in the business activities. 17. Branches/Units of the Company. The Company is having eight branches located at Junagadh, Amreli, Rajkot, Mehsana, Himatnagar, Baroda, Vyara, Godhra, Nadiad, Bhuj, Shihor and Palanpur. Besides, the Company is having processing plants for processing of seeds at eight branches.

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18. Special points to be seen during Audit.

(i) Review the activities of productions processing and sale distribution of seeds and see that it is conducted profitably. (ii) Review the purchases of seeds and packing and processing materials, to see that these purchases are made economically. (iii) Review the working of various processing plants and see that their installed capacity of production is fully utilised. Comment upon the under-utilisation if any of the plants. (iv) Examine the utilisation of Funds received from the State Government and the Banks and see that these are utilised for the purpose for which it is received. Also examine the cash/funds management policy of the Company. (v) Review the performance of Internal Auditors to see that it is effective looking to the volume of financial transactions of the Company. (vi) Review the policy of the fixation of sale price and examine that no loss incurred by the Company due to wrong fixation of sale price. (vii) Examine the various contracts for transportation of seeds and other materials and see that the terms and conditions are in the interest of the Company.

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Annexure Gujarat State Seeds Corporation Limited. Scope of Internal Auditor's Work:-

1. 100% Checking of financial records viz. Vouchers, receipts etc. to verify classification of expenditure and income heads. Test Check (25% checking) of cash memos.

2. 100% audit of stock records with account records with account records including consumption of packing processing materials and other than seed items.

3. To take the physical verification of stock of seeds and packing and processing materials at the end of the year and test check (i.e.) minimum 2 times during the year (of this stock of few varieties at any time during the course of Audit of any day as surprise check. 4. Verification and checking of quarterly trial balance. Head Office A/c. Bank reconciliations, Journal vouchers, Debit-Credit notes, Stock Statements and also to help in finalisation of annual accounts.

5. Checking and valuation of closing stock at the end of the year. 6. To conduct a complete review of internal check and Internal control procedure of following operating system (1) Purchase (2) Sales (3) Processing of seeds (4) Investment in Capital assets (5) Bank and cash transactions (6) Sanction of loans and advances (7) Transfer of goods and to make suggestions for improvements.

7. Verification of loan and advance in the nature of loans. A. Test check of pay rolls including supplementary bills, arrear bills, recovery bills etc.

B. Review of price fixation policy and verification of costing procedure. C. Verification of log books of vehicles and telephone registers with vouchers.

8. Verification of fixed assets register including new purchases. 9. Review of procedure for determination of unserviceable and damaged stores.

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10. To scrutinise the important records maintained by technical section regarding allotment of loss procurement of seeds, sanction for shortage production of crops and its' report issued by certification agency regarding passed/fail seeds.

11. Verification of provision of income tax and also to held in preparing estimates of advance income-tax.

12. To give half yearly reports on the internal audit for each branch and to give guidance for compliance to audit objections. Minor changes may be made in the above scope of work on the basis of the suggestions received from the statutory auditors.

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CHAPTER - XXXXIII Gujarat State Forest Development Corporation Limited.

1. Introduction. Gujarat State Forest Development Corporation Limited was incorporated on 20th August 1976. The Company is owned by the State Government. The authorised share capital of the Company as on 31st March 1995 was Rs.6 Crores divided into 6 lakhs equity shares of Rs.100 each.

2. Applicability of Acts and Rules. (i) The Companies Act, 1956; (ii) The Gujarat Minor Forest Produce Trade Nationalisation Act, 1979; (iii) The Gujarat Sales Tax Act and Rules; (iv) The Income Tax Act, 1961 and Rules; (v) The Central Sales Tax Act and Rules; (vi) The Shop and Establishment Act; (vii) The Factories Act, 1948; (viii) The Employees Provident Fund and Miscellaneous Provisions Act, 1952; (ix) Service Rules-1976 of the Company; (x) Central Excise Act.

3. Main Objects.

(i) To undertake proper and scientific exploitation of forest products for the purpose of improving qualitative and quantitative yield of forest products and for development of industry based on forest products;

(ii) To carry on the business of collecting, processing and marketing of various forest products and to explore new markets;

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(iii) To deal in all forest products and to undertake promote and participate in research in forestry techniques, silvicultural and biological research of forest species;

(iv) To produce, collect, process, export and import improved varieties of forest seeds of all kinds.

4. Organisational set-up.

The management of the Company is vested in the Board of Directors consisting of fifteen Directors including the Chairman and the Managing Director who are appointed by the State Government. The Managing Director is the Chief Executive and is assisted by the Chief General Manager, General Manager, Financial controller, Company Secretary, Manager(North), Manager(South), Manager(Sales and Purchase) and Manager(Administration). In the Project Offices, Divisional Mangers are appointed for holding overall charge of the Divisions. These Divisional Managers are working under the control of the Managing Director.

4.2. Accounting Organisational set-up. The accounts department is headed by the Financial Controller who is assisted by the Dy.Financial Controller, Manager(Accounts), Senior Accountants, Accountants and Jr./Sr. Accounts Assistants at Head Office. In the Project Offices, Project Accountant assisted by the Accounts Assistants Supervises the accounting work.

5. Books and records maintained by the Company. (a) Main books of accounts such as; Cash/Bank Book, Ledgers, Purchase/Sales Journals, Salary Sheet etc.. (b) Subsidiary books such as; Debtors' Ledger, Creditors' Ledger, Staff advances register, Employees' Provident Fund Account register. (c) Secretarial books such as; Minutes' Book, Directors' attendance register, Register of Members, Share Transfer register, Register of Charges, Share Transfer Book, Register of Directors' Share holding etc..

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6. Present Activities of the Company.

(a) Collection, processing and marketing of various minor forest products viz. timru leaves, mahuda flowers, mahuda seeds, gum, etc.. (b) Raising plantations on commercial basis on forest area assigned to the Company. (c) Manufacture and marketing of wooden furniture and doors, windows frames and shutters. (d) Manufacture of Charcoal and leaf cups and dishes, distillation of rosha oil and processing and purification of honey. (e) Manufacture and marketing of Ayurvedic Medicines.

7. Management Information System. The Company is preparing quarterly activity wise performance report and the same is submitted to the Board of Directors for review. The Managing Director is briefed on all the important issues by the concerned Managers.

8. Delegation of powers. The Company has delegated various powers relating to establishment, purchase and contingencies and general powers etc. to the Managing Director.

9. Processing Plants. The Company is having following processing plants for:(a) Distillation of Rosha Oil; (b) Extraction of Doli Oil; (c) Purification of honey; (d) Chemical treatment and seasoning process to timber.

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10. Manufacturing process.

(a) Rosha Oil is distilled in the Company's plant from Rosha glass. (b) Doli Oil is extracted in expeller machine from Doli. (c) Charcoal is manufactured by burning wasteful wood pieces of "Prosopis Julli Flora" Tree. (d) Leaf-cups and dishes are prepared from Khakhara leaves both manually and through the machines. (e) Ayurvedic medicines in the form of Churans and Avleh are prepared from various medicinal items. The Company is planning to manufacture tablets. (f) Round timber is sawn in Saw Mill converting it into scantling and planks. battens and saw dust and end-cuts. Scantling and plank and battens are used in the manufacture of furniture items and doors, window frames and shutters.

11. Products manufactured. The Company is manufacturing the following products: (a) Wooden doors, window-frames and shutters and furniture articles; (b) Rosha Oil; (c) Doli Oil; (d) Ayurvedic medicines.

12. Raw materials and their sources of procurement. The raw materials being used by the Company and their sources of procurement are as under: (a) Minor Forest Products. These are collected from forest areas through Adivasis; (b) Indigenous round timber. This is prepared from Forest Labour Cooperative Societies and State Forest Department. (c) Medicinal items. These are prepared from the traders.

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13. Purchase procedure. The Company adopt the following methods of purchases:

(a) The Government of Gujarat has entrusted to the Company a right to collect minor forest products from the forest areas in the State. The Company undertakes collection of minor forest products through the Adivasis at a pre-determined specific collection rate. Such collection charges are fixed by the Technical Committee constituted by the management, for this purpose.

(b) Round timber is procured from Forest Labour Co-operative societies and Forest Department at scheduled rates as decided and fixed by the Forest Department. The Company has been allowed an access to select and purchase the timber lots before they are put to auction by the concerned Forest Labour Co-operative Societies and the forest Department. This system ensures availability of good quality timber to the Company.

(c) Major part of other purchases is effected by a Purchase Committee after following the purchase procedure as under: (i) By inviting Tenders; (ii) Preparing the comparative position of bids received; (iii) Selecting the lowest bidder after considering the aspects such as; Taxes, delivery period, delivery terms, etc. and (iv) Issuing formal purchase order. 14. Channel of distribution of the products. The Company is marketing products without any distribution Channel. The sales are made directly to the traders or the users.

With a view to increase the sales of wooden products, the Company has appointed Selling Agents who procure the sale orders. The agreement detailing the terms and conditions is executed with the selling agents.

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15. Inventory Control and Budgetary Control.

(a) Inventory Control. The details of receipts and issues etc. in respect of raw materials, consumable items and finished products are recorded in Stock register by the Company. The entries are made regularly in this register, at the time of each receipt and issue. the physical verification of stock is conducted at the end of every year and excess/shortages in stock are ascertained and regularised. It is ensured that the minimum stock of slow/non moving items is held.

(b) Budgetary Control. The Company prepares annual budgets which is approved by the Board of Directors. The actuals are compared with the estimates and variations if any are analysed to ascertain reasons for such variations and remedial action is taken by the Company.

16. Repairs and Maintenance procedure. The Minor repairs works in respect of Company's own buildings and godowns are carried out departmentally. The vehicles are got repaired from the authorised service stations. The office equipments are also regularly serviced by awarding the "Service Contracts."

17. Internal Audit System. The Company has appointed a firm of Chartered Accountants to work as its Internal Auditors. The Company has adopted a centralised accounting system whereby the monthly accounts of all its branches and units are received in the head office and the same are incorporated in the books maintained by head office. The periodical reports of internal auditors are reviewed by the management.

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18. Provident Fund/Medical Benefits extended to employees. The employees of the Company are governed by the Employee's Provident Fund and Miscellaneous Provisions Act, 1952. The State Government servants who are on foreign service with the Company are covered by General Provident Fund Scheme of the Government. The Company has also extended medical benefits to its employees who may exercise one of the following options:

(a) To draw a fixed medical allowance of Rs.75/- per month. OR (b) To avail the reimbursement of medical expenses incurred by them, upto Rs.1500/- per annum in case of ordinary ailment. There is no limit in case of special ailment cases as specified in Rule -8I(c) of the Medical Rules 1983 of the Company. Which are decided by the management individually.

19. Service books/Leave accounts. The Company maintains Service Books and leave accounts of all its employees, as per State Government rules. The Company has framed GSFDC Ltd. Service Rules 1976 for its employees.

20. Sales and Pricing Policy. Sales are effected by inviting tenders without any intermediary. Certain kinds of minor forest products such as; gums, charoli, honey, aritha, amla, etc. are sold in retail also so as to cater the needs of the ultimate consumers. Up set price of each item is fixed taking into consideration the direct cost, overheads and the profit margin at pre-determined rate. As far as possible tenders offering the highest rate above the upset price are accepted by the company.

21. Promotion of Industries and financial assistance. The Company is promoted integrated wood working units- Vanil Udyog and Dhanvantari Project(for manufacture of Ayurvedic medicines) and both these units are run through the finance of the company.

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22. Financial Management. The Company is preparing anticipated Cash/Fund flow statements and balance sheet annually for the current year vis-a-vis the projections for next year for efficient management of cash and funds operations.

23. Banches/Units. The Company is having its branches/units at following places in Gujarat. (i) Himatnagar; (ii) Godhra; (iii) Devgarh Baria (iv) Chhota Udaipur; (v) Baroda; (vi) Bansda; (vii) Rajkot; (viii) Bhuj; (ix) Vanil Udhyog Navtad. The following records/registers are maintained at branches/units except Vanil Udyog. (1) Stock Register; (2) Staff Advance/Imprest Register; (3) Cash/Bank Books; (4) Sales Register; (5) Stationary Postage Register;

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24. Special points to be seen during audit of the Company. (i) Review the System of Collection of minor forest product through the Adivasis and see that the payments made to them are as per the rates fixed by the Technical Committee of the company.

(ii) System of procurement of Review the Round Timber from Forest Labour Co-operative Societies and Forest Department and see that the payments made to these agencies are as per the rates decided by the management. See that the round timber is procured after its inspection by the Company and also before the lots are put to auction.

(iii) Review the cases of purchases in respect of other items made by the Purchase Committee and see that the purchases we made as per the purchase procedure of the Company and also at economical rates.

(iv) Review the working of various Processing plants of the Company and see that the raw material is utilised as per the norms fixed and its wastage is not beyond the limits if any, fixed by the Company. See that the optimum utilisation of the production capacity of each processing plant.

(v) See that the sales are made directly to the Traders or the users and there are no intermediaries so as to avoid the payment of commission. (vi) Review the pricing policy of the Company and see that the prices are fixed after taking into consideration all direct costs, overheads and a pre-determined rate of profit margin.

(vii) See as to whether there has been loss in any transaction. If so, see whether the Company has analysed the reasons for such losses and has taken steps to avoid such losses in future.

(viii) See that the Company is exercising proper control over the stock inventory. Whether the annual physical verification of stock has been carried out and the reasons for shortages/excesses have been analysed and the action is taken for regularisation of the same.

(ix) review the reports of the Internal Auditors and see that the Company has taken proper action on the irregularities pointed out by the Internal Auditors. (x) See that the Company is properly maintaining the service books and leave accounts of its employees.

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(xi) See that the payments of fixed medical allowance and also reimbursement of medical expenses made to the employees to verify that there is no irregular/excess payment made in this account.

(xii) Review the system of Provident Fund being followed by the Company and see that it is working properly.

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CHAPTER:XXXXIV

GUJARAT STATE RURAL DEVELOPMENT CORPORATION LIMITED.

1. Introduction. The Company was incorporated on 9th July, 1977. The authorised share capital of the Company as on 31st March, 1991 was Rs. 200 lakhs divided into Rs.2 lakhs equity shares of Rs. 100 each. It is wholly owned Company of Government of Gujarat.

2. Applicability of Acts and Rules etc.:The Company follows Companies Act, 1956 and all other commercial laws.

3. Main objects of the Company:The main objects of the Company are as under:

(i) To undertake, take over or acquire and implement the projects and works of D.P.A.P. agencies established by Government of Gujarat as per agreement executed between the State Government and the Company.

(ii) To undertake the programmes of development of drought prone areas as decided by the Government of Gujarat.

(iii)To promote and develop horticultural by teaching farmers and cultivators and by supplying agricultural input, implements, seeds, fertilizers and pesticides etc.. (iv) To promote, develop, undertake and organise farm forestry and arable grass and pasture land.

(v) To promote, develop, undertake and finance cattle and sheep husbandry, to establish and maintain cattle camps and live stock farms and breeding centres.

(vi) To assist and make available credit facilities to the farmers landless labourers.

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4. Present activities of the Company:The Corporation takes-up Government waste land and village 'Gaucher' land for its development by undertaking soil conservation, followed by growing of fodder and fuel-wood trees and by establishing fodder-farms. The pulses of local importance are produced to improve the texture and fertility of the soil. The Company also provides employment to the unemployed rural poor of the surrounding areas. It publishes quarterly magazine "RACHANA" and distributes it to 13500 village panchayats in the state. This magazine contains latest information regarding Government policies of rural development. Every year the Corporation supplies various "SEED-KITS" and "TOOL-KITS" to District Rural Development Agencies. The Company has undertaken the following schemes of State Government.

(i) Integrated waste land development project. (ii) Watershed development project. (iii) Welfare scheme for salt workers. (iv) Gokul Grame Yojana.

5. Delegation of Powers :The Company has delegated various financial, administrative and purchase powers etc, to its various officers vide Circulars dt.21.7.93, 30.9.93 and 6.10.94 which may be referred to during audit.

6.1 Organisational set-up :The management of the Company is vested with the Board of Directors of 12 Directors including the Chairman, Vice-Chairman and Managing Directors. The Managing Directors is assisted by two personal Assistant, Manager incharge "RACHNA" magazine etc..

6.2 Accounting Organisational Set-up. The head of the Accounts department of the Company is Manager (Finance). He is assisted by Accounts Assistant, Cashier and two Junior Clerks in Head Office.

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7. Purchase Procedure and Repairs and Maintenance Procedure:The Company procures material for use in the farms. The tenders are invited for various purchases. The repairs of vehicles, typewriters and farm equipments etc. is got-done by awarding rate contract after inviting quotations.

8.

Sales and Pricing Policy :-

The Company's agricultural products are sold at local level after ascertaining local prices. The priority in sale of the products is given to local rural poors.

9.

Procedure of Internal Audit :

The Company has engaged a firm of Chartered Accountants for Internal Audit of various records being maintained at its head office and various regional/project offices once in three months.

10

Books and Records Maintained :-

The Company maintains the following books and record Cash book, Bank book, General ledger, Fixed Assets register, Fixed deposits register, Sundry debtors' register, Sundry Creditors' register, Earnest Money deposits/Security deposits register, Staff advances register and Unpaid wages register etc.

11.

Managerial Information System :-

The Company has a system to collect into the reports in respect of various schemes from its regional project offices. These reports include area taken-up for development, Crops down, trees planted, Mandays generated and expenditure incurred etc. on each scheme. The performance reports are reviewed by the Board of Directors in its monthly meetings.

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12. Provident Fund/Medical Benefits extended to Employees :The Company follows Provident Fund and Miscellaneous Provisions Act. It has also created a CPF Trust of the employees. The Company reimburses medical expenses upto Rs.30/- per month or Rs.500 year. An employee can accumulate such benefit from year to year upto the limit of Rs.1000/-. This limit may be relaxed in special cases by the Managing Director. The Company follows the State Government resolutions in respect of the medical benefit.

13.

Service Books/Leave Accounts :-

The Company has framed its own Service Regulations called (Recruitment, Seniority and Promotion) GSRDC Regulations 1977. The Service Books are maintained as the rules of the State Government. The Leave Account of each employee is also maintained as per the leave rules of the State Government.

14.

Financial Management :-

The funds as per schemes approved by the DRDA's (State Government Agencies) are received which are disbursed by the Company to various project Branch. Managers as per their requirement.

15.

Branches/Units of the Company :-

The Company has eight projects located at Bhuj (Dist. Kutch), Patan (Dist. Mehsana), Ahmedabad, Surendranagar, Baroda, Mandavi, Amreli and Navsari which are working under Ahmedabad, Baroda and Kutch-Saurashtra regional offices. The records in respect of the funds received from the regional offices are maintained by the project offices. The regional offices maintain the records of fund received from Head Office and DRDA's.

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16. Special points to be seen during Audit of the Company :-

(i)

Review the various activities of the Company and ascertain the performance in respect of each activity the performance with reference to the targets fixed by the District Rural Development Agencies and the Commissioner of Rural Development, Gandhinagar and comment upon the shortfall in performance of any.

(ii)

Review the production and sale of grass, fodder and agricultural produce and see that the loss is not incurred in this activity.

(iii)

Examine the various contracts for purchase/sale and see that its terms and conditions are in the interest of the Company.

(iv)

Examine the utilisation of funds received by the Company from DRDA's and State Government and see that the funds are utilised for the purpose of which these were received.

(v)

Review the performance of the Internal Auditors and MIS Section of the Company.

(vi)

Review the publication of "RACHNA" by the Company and analyse the expense incurred on this activity.

(vii)

Review the system of financial management by the Company and see that the funds are not blocked up unnecessarily in transit from Head Office to regional officers.

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CHAPTER - XXXXV GUJARAT STATE LAND DEVELOPMENT CORPORATION, LIMITED.

1.

INTRODUCTION

Gujarat State Land Development Corporation Limited, was incorporated on 28th March 1978. The authorized share capital as on 31-3-1995 was Rs 300 lakhs divided into 30,000 shares of Rs. 1000/- each. It is wholly owned Government company.

2. APPLICABILITY OF ACTS & RULES ETC The Companies Act 1956 is applicable to the company.

3.

BOOKS AND RECORDS MAINTAINED BY THE COMPANY. The following books and records are maintained by the company. (i)Cash Book/Bank Book. (ii)General Ledger. (iii)Journal Entry Book. (iv)Advances Register/Loans Register. (v)Salary Register. (vi)Muster Roll (vii)Measurement books (viii)Schemewise Account Register.

4.

ORGANISATIONAL SET-UP OF THE COMPANY.

The management of the company is vested with the Board of Directors, including Chairman and Managing Director. The Managing Director is looking after day to-day management of the company and he is assisted by three Joint Directors, Manager(Finance), Deputy Directors and Assistant Directors working in the Corporate Office and also in field offices, Special Inquiry Officer and Company Secretary etc;

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The Accounts Department of the Company is headed by the Manager(Finance) who is assisted by the Deputy Manager(Finance) and Finance & Accounts Officers etc ;

51

MAIN OBJECTS OF THE COMPANY. The main objects of the company are:

(i) To undertake a systematic assessment of lands in the State of Gujarat which can be reclaimed for cultivation by better treatment, as well as cultivated lands, which by suitable reclamation and soil conservation and other land development measures, can be prepared for optimum agricultural production and use. (ii) To prepare economically feasible and technically sound plans for such reclamation or development.

(iii)To develop studies and work of soil conservation and land reclamation techniques relevant to the natural conditions of the region of the State of Gujarat.

(iv)To develop and run institutional arrangements for imparting training on soil conservation and other land development methods.

(v) To undertake contour surveys in the areas to be taken-up for land development and land reclamation. (vi)To undertake ravine reclamation programme. (vii) To undertake reclamation programme for water-logging and coastal areas and other Khar lands.

(viii)To undertake reclamation programme for any uncultivated land which can be developed for cultivation.

(ix) To undertake programme for Soil and moisture conservation measures in agriculatural lands.

(x) To undertake "on-farm" development works in irrigation command areas such as, construction of field canals, field drains, Land-levelling and Kyari-making etc.

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(xi)To utilise the ravine land for production purposes of agriculture, horticulture, development of grass land and forest etc;

(xii)To check further spreading of ravines to prevent damages to the valuable lands.

5.2 PRESENT ACTIVITIES OF THE COMPANY. The present activities of the company are to carry out soil and Moisture Conservation activity throughout the state, from the funds provided by the State Government,Central Government as well as other foreign agencies under various plan and non plan schemes.

6.

DELEGATION OF POWERS

The Managing Director has delegated powers to the officers of the company to deal with various fainancial, Administrative and technical matters, for management of day-to-day affairs of the company, vide office order No. Estt-1/26(powers)/17240 dt; 19-7-1995.

MANAGEMENT INFORMATION SYSTEM

The company is having a system of preparation of monthly report of expenditure and schemeswise progress report by various Divisional and SubDivisional officers, which are collected in Head Office and submited to the Board of Directors.

8.

PURCHASE PROCEDURE

The spare parts of machinery and vehicles are purchased from the authorised dealers of the respective company. The Company procures tyres and tubes as per the D.G.S.& D rate contract.

9.

INVENTORY CONTROL AND BUDGETORY CONTROL SYSTEMS.

The company has adopted inventory control system for its Engineering Division. The grants are received from the State Government and the budget is prepared for its utilisation. The expenditure against the grants is kept within the budget provision.

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10

REPAIRS AND MAINTENANCE PROCEDURE

The company is having two workshops at Baroda and Rajkot for repairs and maintenance of Bulldozers and its supporting vehicles. However, if necessary, the repairing work is got done from the outside parties after obtaining the quotations from them and also after executing the annual rate contract.

11.

INTERNAL AUDIT SYSTEM.

The Compaany has appointed a firm of chartered Accountants as their Internal Auditors. Moreover, the departmental audit system is also followed by the company for audit of the accounting records of soil conservation works.

12.

MAINTENANCE OF SERVICE BOOKS AND LEAVE ACCOUNTS. accounts of its

The company maintains the service books and leave employees as per Bombay Civil Service Rules.

13.

PROVIDENT FUND AND MEDICAL BENEFITS, EXTENDED TO THE EMPLOYEES. The company has adopted Contributory Provident Fund for its employees.

The company is paying medical allowances @ Rs.75 per month to its employees, as per Government Rules. Besides the reimbursement of medical charges, upto Rs.1250/- per year is made by the Company.

14

FINANCIAL MANAGEMENT SYSTEM

The main source of the receipt of funds by the company is Government grants and loans from other agencies for its various activities.

15.

PREPARATION OF MANUALS

The company has prepared its accounting manuals. It has also framed its own service rules, which may be referred to during audit.

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16.

BRANCHES OF THE COMPANY The company is having 59 Units all over Gujarat State.

17

SPECIAL POINTS COMPANY.

TO

BE

SEEN

DURING

AUDIT.OF

THE

(i) Review the progress of various schemes of soil conservation works undertaken by the company, with reference to the targets of the work fixed as per the scheme and see that the work in respect of each scheme is progressing as per the schedule and there is no time-over-run & cost over-run.

(ii) See that the expenditure booked in repect of various schemes does not exceed the grants/subsidy received from the Central/State Government and other financial institutions. In case of the shortfall if any, the claims for additional grants are preferred promptly and the same are received by the company.

(iii) Scrutinise the works accounts maintained by the company to see that the expenditure on works is booked correctly.Examine the measurement books and see that these are properly maintained by the company.

(iv) Review the purchase procedure followed by the company. Scrutinise the purchase orders to see that the purchases are made at economical rates.

(v)Review the performance of the internal auditors, and departmental auditors with reference to the scope of their work and the action taken by the management on their reports.

(vi) Ascertain the reasons for the annual accounts having fallen in arrears and verify the action taken for the clearance of such arrears by the company.

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CHAPTER - XXXXVI GUJARAT INSECTICIDES LIMITED

1.

Introduction

Gujarat Insecticides Limited was incorporated on 30th August 1980. It is a subsidiary of Gujarat Agro Industries Corporation Limited, a State Government Company. The authorised capital of the company as on 1st March 1995 was Rs.125 lakhs divided into 12.50 lakhs equity shares of Rs.10 each.

2. (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) (xiii) (xiv) 3.

Applicability of Acts and Rules. Companies Act,1956 Central Sales Tax Act Trade Unions Act Factories Act,1948 Indian Central Act Industrial Disputes Act 1947 Gujarat Sales Tax Act Central Excise and Salt Act Income Tax Act,1961 Payment of Bonus Act Provident Fund Act Gratuity Act E.S.I. Act,1948 Payment of Wages Act Main Objects of the Company

(i) To carry on the business of manufacturing, rocessing,importing/exporting, buying,selling,dealing in and preparing for market pesticides, insecticides, fungicides, weedicides, acaricides, organic and inorganic chemicals used primarily as intermediates for pesticides, pharmaceuticals and other industries.

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(ii) To carry on the business of manufacturing, processing, importing/exporting, buying/selling/dealing in various basic dyes, various chemicals used primarily as intermediates for pharmaceuticals, dyestuffs, textile, rubber processing and other industries.

(iii) To carry on the business of manufacturing, refining, importing/exporting, buying/selling/dealing in all kinds of chemicals organic and mineral intermediates, acids, gases, salts, alkalies, fertilizers and chemicals, industrial and other preparations, articles and compounds. 4.1. Organisational set up of the Company

The management of the Company is vested in the Board of Directors. The Managing Director is the Chief Executive. He is assisted by a Director (Operations), General Manager (Finance),General Manager (Tech.Comm.& Prod.) Sr.Manager (P&HRD) and various executives, Managers, Engineers, Operators and Staff members etc.

4.2

Accounting Organisational Set up of the Company

General Manager (Finance) is incharge of the Finance and Accounts Department and he is assisted by the Manager (Finance), Executives, Officers and Staff members etc.

5.

Books and Records maintained

(i) Petty Cash Book (ii) Bank Book (iii) Sales and Purchase Books (iv) Journal Book/Vouchers (v) General ledger (vi) Parties

6.

Present Activities

The company is manufacturing technical grade pesticides and its intermediates. The company's main products are: (i) Qunialphase (ii) Carbenzin (iii) Fenavalerate (iv) Cyperminthen (v) Carbenzin 50% WR (vi) Meta Phynexoy Benzaldhyede

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7.

Management Information System

The Board of Directors reviews in its meetings the details of periodical production, Production problems, maintenance informations, research and development results and the financial position about overall performance of the company.

8.

Delegation of Powers

The Boards of Directors have delegated the powers of opening of bank account and its operation

9.

Processing plants/manufacturing process products manufactures.

The Company has three manufacturing plants i.e. Plant-A,B & C. The plantwise products manufactured are as under :

Plant A : Fenvalerate (Technical) Cyperwetrin (Technical) and Meta Phenoxy Benzaldehyde.

Plant.B :

Quinalphes (Technical) and Carbendazin (Technical)

Plant C:

Meta phenoxy Benazaldehyde (MPB) and Monocrolophes(Technical)

The Company's plants are multi-products plants and reshuffling of products one plant to another is possible.

The manufacturing products of the Company products are detailed in the Annexure

10. Raw material used and this sources of its procurement The details of major raw materials and names of the suppliers from whom the Company is procuring the same, are given below :

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Name of the Raw material

(i) Dithyl Thiophosphoy IDETC) Name of the Suppliers This raw material is procured directly from the manufacturers after calling competitive tenders. (ii) Para Chlro Tolueme(PCT) Occidental Chemicals, Occidental Towr, 5005, L.B.J Freeway, Dallas(U.S.A)

(iii) Orthop Phenyl kkDiamine(OPDA) IND.

(iv)

Cypermethrin Acid Chloride/Mythyl Ester.

Gharda Chemicals Ltd. 48, Hill Road, Bandra, Bombay-400050. This raw materials are procured either from manufacturers or from tenders on competitive basis.

(v) Benzaldehyde Gwalior Chemicals(P) Ltd. Birlagram-456331, Nagda (Madhya Pradesh)

(vi) Phenol Aroma Chemicals, 106 Krishna Bhavan, 22/B Shivaji Devshi Marg, Deonar, Bombay-400 088.

(vii) Liquid Dramine(Ind.) S.Dave & Company, 'Kamalasana' Raopara, Vadodara-390001

(viii) Mythyl Chloro Formate (Ind.) Atul Product Ltd. At Atul, Dist- Valsad-396 020(Gujarat)

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(ix) Aluminium Chloride Shivshakti Industries, Plot 2103, GIDC, Panoli, National Highway No. 8, Ankleshwar, Dist- Bharuch (Gujarat)

(x) Calcium Cyanide AKI kshokai, 404, Lion Plaza, Shiba, Minatoka, Tokyo-105(Japan)

The raw materials maintained at Sr. No. (v) to (x) are purchased from manufacturers/dealers on Competitive basis.

11. Method of buying/purchasing procedure. The Company is procuring raw materials directly from indigenous market. The Company obtains competitive offers from the suppliers and selects the best out of them. For imported raw materials, the Company contacts the Indian agents of foreign suppliers. The Company has not made any arrangements with any agents for procurement of raw materials. Generally, the annual rate contracts are entered into with the manufacturers by the Company for purchase of raw material.

12. Channel of distribution, sells and pricing policy. The Company's technical grade pesticides are directly sent to various formulators to make formulations of the said products and sell it under the brand name to the farmers. The Company also various depots at Daman, Parvan, Delhi and for sale of its products The Company's materials are directly going from its works/deptt. The sales prices are fixed by the Managing Director and are subject to review periodically from time to time to cover the changes in the cost structure.

13. Cost control system. The Company has adopted historical costing system. For the purpose of controlling the cost, the Company is drawing out quarterly cost sheet giving the details of cost of production of each product as compared with the standard norms. The Company maintains stores ledger, Goods Receipt Notes register, cost sheets and finished Goods Ledger.

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14. Repairs and maintenance procedure The Company follows the following procedure :

(i) Day to day maintenance is complaint from the production deptt.

carried out on regular basis. On receipt of

(ii) Scheduled maintenance of equipments/system is carried out to check wear and tear/corrosion. Based on the requirement of the material is requisitioned from material department. Since the job of repairs and maintenance vary in nature wise by and special services are required for equipment/machinery/system, these are fixed out and used as per the requirement. The budget allocation for repairs and maintenance of equipments, machineries is also made every year.

The major repairs are carried out by project department.

15. Internal Audit System The Company has retained a firm of Chartered Accountants which carries out Internal Audit carrying all the financial transactions, the purchase and sales of record, time office records and physical verification of inventory etc.

16. Provident Fund/Medical benefits extended to the employees The Company contributes 10% of the Salary (basic pay plus dearness allowance) towards the Provident Fund of all the employees covered under Provident Fund Act. The Company is having mediclaim policy for all its employees. Further full time dispensary is also run by the Company.

17. Maintenance of Service books/leave accounts The Company follows Gujarat Factory Rules, 1963 for its workers.

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The Company maintains Leave with Salary Register for recording the details of their leave and service etc.

18. Financial Management The Company is at present enjoying single banker working capital finance from Bank of Baroda which the bank fixes the borrowing limits for utilisation during peak\non-peak period, based on the details furnished by the Company to the bank. The Company has also availed unsecured transferable Notes for one year from Unit Trust of India. A sum of Rs.112 lakhs is also borrowed from I.D.B.I.

19. Special points to be seen during audit of the Company.

(i) Review the weekly report of procedure etc. submitted to the Managing Director.

(ii) Ascertain the reasons for purchasing particular raw materials from the particular supplier. Whether this procedure is as per any trade agreement. Verify that the purchase made are economical.

(iii) Review the sales orders booked by various branches of the Company. See that the Company's products are being supplied as per the sales orders.

(iv) Review the system marketing, of the Company's products, and all that the sale orders and promptly complied.

(v) See that the sale prices are being revised consequent upon the increase in the cost of production, from time to time.

(vi) Review the working of various processing plants of the Company, by comparing with actual production. If the actual production of the plant is less than the installed capacity, then ascertain the reasons for under utilisation of installed capacity. See as to whether the reasons for the under utilisation of the capacity of the plant have been reviewed by the management.

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See whether the remedial action has been taken to improve the utilisation of the capacity of the processing plants. if so review the improvements done if any.

(vii) Review the Inventory Control System and see that the inventory is kept at minimum level as of requiring per production.

(viii) Review the Cost Accounting system and see that the cost of each product is worked out after taking into consideration all overheads. Review the quarterly cost sheets and verify the reasons for variation rate if any, of the actual with the standards fixed therefore remedial action taken.

(ix) Review the rate contracts entered into by the Company for Repairs and Maintenance of equipments/machineries etc.

(x) Review the reports of the Internal Auditors and see that the company has taken remedial action in respect of the deficiencies pointed out by them.

(xi) Review the Cash management system and see that the funds are proprerly and promptly utilised by the Company.

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GUJARAT INSECTICIDES LIMITED ANNEXURE MANUFACTURING FENVALERATE (TECHNICAL)

Para Chloro Toluene is taken into glasslined reactor and is chlorinated with chlorine in presence of PCL3 in the presence of Benzoyl Peroxide. The resultant chlorinated mass is then cyanated in presence of Tri-ethyl-amine and Sodium Cyanide and thus formed cyanated derative is alkylated with Iso Propyl Bromide (made from Iso Propyl alcohol Sodium Bromide and Sulphuric Acid) which shall give Alkyl cyanide which is distilled resultant mass which is molten is added into N-Hexane and chlorinated with Thionyl chloride in present of Dimethyl Formamide. To the chlorinated mass Meta-Phenoxy-Benzaldehyde is added and the mixture is then cyanated using Sodium Cyanide and benzyl chloride + Tri-ethyl-amine. The solvent is distilled out and thus formed Fenvalerate is paced into 200 Litre capacity M.S.Drums.

MANUFACTURING CYPERMETHRIN (TECHNICAL)

In S.S. Reactor Sodium Cyanide solution in water is prepared. Appropriate quantities of Cypermethric Acid Chloride and Meta Phenoxy Benzaldehyde are charged gradually at low temperature. The mixture is allowed to be cooked in solvent for about four hours to get Cypermethrin (Techincal). solvent is recovered by distillation and Cypermethrin (Technical) 92% weight/weight minimum is packed in M.S.Epoxycoated drums.

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MANUFACTURING META PHENOXY BENZALDEHYDE

Benzaldehyde is charged first and into it slowly Aluminium chloride is added at minimum temperature, mass is then cooled. Requisite of Liquid Bromine is charged and requisite amount of chlorine is then passed over a period of 10-12 hours at low temperature. After washing with water and fractionation this mass is then condensed with Phenol and KOH mixture in presence of catalyst to give N-Phenoxy benzaldehyde. This crude MPB is washed with water to remove impurities. Aqueous part is transferred to effluent plant and organic part is fractionated to get Meta Phenoxy Benzaldehyde.

MANUFACTURING QUINALPHOS (TECHNICAL)

Acetic Acid is chlorinated in a glass-lined reactor to get Mono Chloro Acetic Acid. Mono Chllro Acetic Acid is converted into its Sodium Salt with the help of Sodium carbonate and Sodium Salt of Mono chloro Acetic acid is then allowed to get condensed with Ortho Phenylene Diamine to get Di Hydroxy Quinoxalinol in in crude form. Di Hydroxy Quinoxalinol is added to Caustic Soda Lye in a reactor and is oxidised with the help of compressed air to get Quinoxalinol. Quinoxalinol and Diethyl thio Phosphoryl chloride are then allowed to react in solvent media in presence of Potassium Carbonate and Xylene. Resultant Quinalphos (Technical) is further processed and purified to get 30-35% w/w quinalphos in Xylene. Finally, by distilling out xylene, 70% w/w/ of Quinalphos in xylene is produced and packed in 200 litre capacity M.S.epoxy coated drums.

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MANUFACTURING CARBENDAZIM (TECHNICAL)

Calcium Cyanamide and water in appropriate proporation is charged into S.S. Reactor and Methyl Chloro Formate is gradually added to form Cyano Methyl Carbonate (CMC). The CMC solution is then condensed with Ortho Phenylene Diamine in presence of Acetic Acid and Hydrochloric Acid to form Carbendazim. Final product is dried and packed as Carbendazim Technical.

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CHAPTER No.:XXXXVII

AGROCEL PESTICIDES LIMITED.

1. Introduction. Agrocel Pesticides Limited was incorporated on 16th January 1985. The authorised share capital of the Company as on 31st March 1995, is Rs.200 lakhs divided into two lakhs equity shares of Rs.100 each

The Company is a subsidiary of Gujarat Agro Industries Corporation Limited and it is registered as a Government Company under the Companies Act, 1956.

2. Applicability of Acts and Rules etc.. The Company is governed under the Minimum Wages Act, Income Tax/Sales Tax Act, Companies Act, 1956 and being manufacturing concern also follows the Factories Act and all other rules made by the Government.

3. Main objects of the Company. The main objects of the Company are as under. (a) Integrated Services to the farmer's from service centre near Mandvi (Kutch). (b) Manufacturing of organic manure from the garbage of Ahmedabad city at Ahmedabad. (c) Marine Chemicals Production at Plant/Project Set up in Kutch. (d) Trading of all Agricultural requirements.

4. Organisational Set-up of the Company. The Management of the Company is vested with the Board of Directors. The Managing Director of Gujarat Agro Industries Corporation Limited (G.A.I.C.) is also the Managing Director of this Company by virtue being subsidiary of G.A.I.C.. Besides the day-to-day activity of Company are looked after with the assistance of Site-Manager, Accounts Officer, Sales, Administration and Accounts staff.

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5. Accounting Organisational Set-up. The Accounts and Finance functions of the Company are controlled by the Accounts Officer. He is assisted in day-to-day activities by a team of Personnel viz. Financial Accountant, Cost Accountant, Accounts Assistants and Cashier etc..

6. Books and Records maintained by the Company. (i) Journal, (ii) Ledger, (iii) Columnar Cash Book, (iv) Bank Book, (v) Register of Sales, (vi) Register of Purchases, (vii) Production, (viii) Stock and Inventory Register etc.. 7. Managerial Information System. The Company has devised a Managerial information system through which the periodical reports of its performance are received in its meetings, with various site managers.

8. Delegation of Powers. The Company has delegated powers to its officers at various levels, who are responsible for specific jobs and works.

9. Processing Plants and manufacturing process. The Company is having two manufacturing plants one each at Ahmedabad and Kutch. The organic manure is manufactured from Ahmedabad city garbage through auaerobics process.

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10. Products manufactured. The Company manufactures -

(i) Organic manure from city-garbage at its Ahmedabad plant and

(ii) It also manufactures marine chemicals at its Plant located in Kutch.

11. Raw Materials and their sources of procurement. For its manufacturing activities the Company uses the following raw materials.

(a) City garbage: City waste (Green waste) is supplied by the Ahmedabad Municipal Corporation (A.M.C.) from selected places.

(b) Buttern is procured from big desert of Kutch area.

12. Channel of distribution. The Company sells its products directly to the customers.

13. Purchase Procedure. The Company issues inquiries to various suppliers. Quotations are obtained from them and the selection of suitable suppliers for materials and parts is done and the purchase orders are placed.

14. Inventory Control System. The Company follows Cardex system of inventory control by maintaining the Stores Bin-cards and Stores Books.

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15. Cost Control System. The Company follows the process cost method and by comparison and reduction of the cost of each process for manufacture of the product.

16. Provident Fund and medical benefits extended to the employees. The Company extends the benefits of Provident Fund and medical facilities to its employees.

17. Maintenance of Service Books/Leave Accounts. The Company maintains leave records of each employee.

18. Sales and Pricing Policy. The Company, after ascertaining the cost of production of each product in its Costing Department adds to it suitable percentage of Profit and thus the sale price is arrived at as per the Company's policy.

19. Financial Management. The promoter of the Company i.e. Agro Industries Corporation Limited extends its expertise for better financial management of the Company.

20. Branches/Units of the Company. (A) Mandli (service centre) Marine Chemical Project at Kutch. (B) Celrich (Ahmedabad) Project for manufacture of organic manure from the garbage.

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21. Special points to be seen during audit of the Company.

(i) Review the progress of various activities of the Company and see that these are run efficiently and profitably.

(ii) Review the utilisation of the production capacity of each processing plant of the Company and verify as to whether there is any under-utilisation of the capacity. If so, raise comment thereupon.

(iii) Review the policy of sales and fixation of the sale price by the Company and the cost control and inventory control being exercised by the Company.

(iv) Review the purchase procedure of the Company and see that the purchase of raw materials is made economically.

(v) Review the arrangements made by the Company for internal audit of its various records and the internal audit reports.

(vi) Ascertain the repairs and maintenance procedure of the Company.

(vii) Ascertain as to whether the Company has prepared the Accounting manual, Materials management manual and Administrative manual. If so, collect copies thereof. (viii) What were the down time of major machineries its cause and remedial measure taken thereof.

(ix) Review quality control measures adopted . How the quality of raw material is specified & established. Compare the rejection rate in raw material and finished goods over the last few years.

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CHAPTER-XXXXVIII GUJARAT LEATHER INDUSTRIES LIMITED

1.

INTRODUCTION

Gujarat Leather Industries Limited was incorporated on 18th April 1978. The Company is jointly owned by a Government Company (Gujarat Industrial Investment Corporation Limited) and others. The authorised share capital of the Company as on 31st March 1995 was Rs.200 lakhs divided into 20 lakhs equity shares of Rs.10 each. It is a 619-B i.e. a deemed Government Company.

2.

APPLICABILITY OF ACTS AND RULES

(i) Companies Act, 1956. (ii) Income Tax Act, 1961 and Rules. (iii)Factories Act, 1948. (iv) Industrial Disputes Act, 1947. (v) Shops and Establishment Act. (vi) All Commercial and Labour Laws.

3.

MAIN OBJECTS OF THE COMPANY

(i) To manufacture, fabricate, produce, prepare, process and carry on business as fabricator and manufacturer in all kinds of semi-tanned and fully tanned and finished leathers, all kinds of fur leathers and similar materials.

(ii) To carry on business as fabricator and manufacturer in all kinds of industrial requirements such as; belting leather, pickers and other industrial products made either wholly or partly out of leather or fully or partly in combination with rubber and canvas, required by industries like Cotton textile, Jute, Ginning mills and such other industries.

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(iii) To carry on business as fabricator and manufacturer in all kinds of fat-liquors, grease, tallow, soaps, tanning extracts and such other materials as are required for leather and leather goods industries.

(iv) To promote and operate schemes for development of leather industries in the State of Gujarat and to carry on business in hides, skins, finished and semi-finished leathers for personal/domestic and office consumption as well as for its export.

(v) To collect, compile and analyse market information and conduct market research surveys and provide market services to dealers, merchants and retailers in leather industry.

(vi) Tanning/manufacturing of finished leather from raw hides skins.

4.

ORGANISATIONAL SET-UP

The management of the Company is vested in the Board of Directors including the Chairman and Managing Director. The Managing Director is the Chief Executive of the Company and he is assisted by the Deputy Chief Production Manager, Senior Manager(Purchase), Assistant Manager(Engineering), Stores Officer, Senior Manager(Accounts/Finance and Admn.), Technical Divisional Officer, Senior Commercial Officer, Assistant Manager(Marketing) and Purchase Officer etc..

5.

ACCOUNTING ORGANISATIONAL SET-UP

The Accounts Department is headed by a Senior Manager. He is assisted by the Cashier, Accounts Officer, Senior Assistants and Junior Assistant.

6.

BOOKS AND RECORDS MAINTAINED

(i) Main books of accounts, such as; Cash and Bank book, General Ledger, Journal, Purchase/Sales Journals and

(ii) Subsidiary books such as; Debtors/Creditors Ledgers, Staff advances Ledger, Expenses Journal and Sores & Stock register.

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(iii)Secretarial books such as Minutes books, Directors' Attendance register, Register of members, Shares transfer register, Register of charges, Share transfer book, Register of Directors' shareholdings.

7.

PRESENT ACTIVITIES OF THE COMPANY

(i) Manufacturing of finished leather from raw hides and skins; (ii) Trading of leather goods/articles and shoes etc.; (iii)Export of finished leather, shoes etc..

8.

MANAGERIAL INFORMATION SYSTEM

The Company is preparing quarterly report for the current quarter, previous quarter and next quarter in respect of plan/projection of working and achievements made there-against.In case, the shortfalls are noticed, the steps are taken for rectification and improvement.

9.

DELEGATION OF POWERS

The Board of Directors has delegated full powers to the Managing Director for management of the Company. The Managing Director, in turn, has delegated powers to the Deputy Chief Production Manager, Senior Manager(Purchase), Manager(Engineering), Purchase Officer, Stores Officer and Manager(Accounts/ Finance and Administration) in their respective areas, subject to the overall supervision and control of the Managing Director.

10.1

MANUFACTURING PROCESS

There are various stages in processing raw hides to finished leather. The stagewise important processes are as under.

(i) Raw hides; (ii) Liming and Tanning; (iii)Wet blue; (iv) Shamming and Shaving;

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(v) Dyeing; (vi) Ironing and Embossing; (vii)Full finished leather.

10.2.1 PRODUCTS MANUFACTURED The Company is manufacturing finished leather from raw hides of cows, buffs, katta, sheep and goat etc..

10.2.2 RAW MATERIALS AND SOURCES OF ITS PROCUREMENT The basic raw materials being used by the Company are raw hides and skins which are procured within and outside Gujarat State.

10.3 METHOD OF BUYING/PURCHASE PROCEDURE The Manager(Purchase) alongwith the Chief Assorter/Selector visits the places where raw hides are available. They inspect the raw hides and depending upon the selection/rejection, the prices are negotiated on the basis of fittage and weightage. The average price of raw hides within the country, in respect of imported hides, are quoted in the magazine "Leather", published by the council for Leather Export which is a Central Government body. The prices are offered by the Company on the basis of the rates quoted in the "Leather" magazine.

The purchase procedure in respect of raw hides/skins and other materials is furnished in annexure.

10.4 CHANNEL OF DISTRIBUTION The Company markets its products through the agents at various places/cities like Bombay, Banglore, Bharuch, Ahmedabad, Surendranagar(Saurashtra), Erode(Tamil Nadu) Delhi and Agra (U.P.) etc to monitor the sale.

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11.

INVENTORY CONTROL/BUDGETORY CONTROL The Company is maintaining Stores and Stock register. At the time of every purchase and issue of materials, entries are made in the register. The stock of finished goods, stores, spare parts and raw-materials are physically verified by the management at the end of each year. The inventory control is exercised by the Purchase Officer.

The Company is preparing quarterly budgets. The budget estimates are compared with the actual and variations found, if any, are reviewed. The reasons for variations are analysed and remedial action is taken.

The budgetory control and cost control are exercised by the Managing Director through the Senior Manager(Accounts).

12.

REPAIRS AND MAINTENANCE PROCEDURE

The repairs and maintenance of plant and machineries are undertaken with the help of Company's Manager(Engineering Services) and full-fledged workshop. In extra-ordinary circumstances, this job is got executed through outside parties on "contract basis".

13.

INTERNAL AUDIT SYSTEM

The Company has appointed a firm of Chartered Accountants to look after the internal audit work. The scope of internal audit is furnished in annexure.

14.

PROVIDENT FUND/MEDICAL BENEFITS EXTENDED TO THE EMPLOYEES

The employees of the Company are governed by the Employees Provident Fund and Miscellaneous Provisions Act, 1952. The Provident Fund is deducted from the monthly salary of the employees and it is deposited with the Assistant Regional Provident Fund Commissioner, Surat. The Company has also extended medical benefits to all its employees as per the Employees State Insurance Scheme. In addition, Rs.500 per year are paid with the salary to the employees. The Company has also taken personal accident insurance policy in respect of its employees who are not covered under Employees State Insurance Act. The Company has also taken group insurance policy from United India Insurance Company Limited, Bharuch.

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15.

SERVICE BOOKS AND LEAVE ACCOUNTS

The Company maintains the service books and leave accounts of all its employees, as per the provisions of the Factories Act.

16.

SALES AND PRICING POLICY

The Company reviews its sales and pricing policy after every fortnight, month and quarter according to the prices paid for raw hides and skins. The sale prices are being reviewed quarterly and revised suitably by the Managing Director on the basis of the data available for raw hides and skins.

17.

COST ACCOUNTING SYSTEM AND RECORDS

The Company is not statutorily required to maintain the cost accounting records. However, the cost is worked out on the basis of cost of raw-material, chemicals and other overheads.

18.

FINANCIAL MANAGEMENT SYSTEM

The Company's promoters viz. Gujarat Industrial Investment Corporation Limited, Gujarat Agro Industries Corporation Limited and Larson and Toubro Ltd. provide long/short term loans and advances to the Company. The working capital is provided by the State Bank of India, Ankleshwar. The finance is also managed by the Company by its own accruals.

19. SPECIAL POINTS TO BE SEEN DURING AUDIT OF THE COMPANY.

(i) Review the purchase of raw materials viz. raw hides, skins and chemicals etc. by the Company. (ii) Examine the agreements for sale of finished leather and leather goods etc.. (iii) Review the working of the factory with reference to its installed capacity and actual production. Analyse the under utilisation of capacity if any.

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(iv) Examine the contracts for export of finished leather and ensure that the Company claims the export incentives admissible to it. (v) Review the sales and pricing policy and the fixation of sale price for each product and specially examine the cases resulting in loss due to wrong fixation of sale price. (vi) See that the service book is complete and leave account is properly maintained. (vii) Review the internal audit reports and action taken on these reports by the Management of the Company.

(viii) Examine the inventory control procedure being followed by the Company to verify that it is perfect and fool-proof.

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ANNEXURE PROCEDURE FOR PURCHASE OF RAW HIDES & SKINS

The following procedure shall be adopted for the purchase of raw hides & skins and payment thereof:

A. Procurement Programme & Delegation of General Purchase Powers:

The Company shall prepare a three monthly production and procurement programme. This programme shall be finalised by Managing Director a month in advance each quarter.

Based on procurement programme, Managing Director shall delegate general powers to such Executives as he deems fit for the overall procurement of hides and skins. The delegation of general powers shall specify the period, quantity, specifications and broad price range of hides and skins to be procured. A copy of such Delegation of general powers shall be sent to Accounts Department. General powers are meant for the overall guidance.

B. Delegation of specific powers Managing Director shall from time to time delegate specific powers for procurement, to such Executives as he deems fit. The delegation forms for specific powers shall specify the following: - Market for procurement - Quantity - Material specifications - Prices - Payment terms

A copy of such specific powers shall be sent to Accounts Department in prescribed form.

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C. List of approved Vendors: A comprehensive list of approved vendors shall be prepared by the purchase department based on the applications received from parties, market informations as well as on the past experience. In case of the material from a party does not turn out to be as per specifications and norms, consequently such parties shall be black-listed and no purchase shall be made from them unless he makes up the loss so incurred.

D. Negotiations and Purchase Order/Contract: Authorised Executives shall contact as many parties as possible either in writing or in person and keep a detailed record note of the discussions. Based on the negotiations, contract/order form shall be prepared and acceptance shall be obtained from the party. The contract in prescribed form must specify the following very clearly:

Material specifications viz. size(in case of skins & buff cals) range or weight(8-10 kgs per hide etc.)

- Quantity for each of above category - Price for each quality - Delivery terms (whether Ex-parties' Godown or delivered at GLIL)

Payment term: Cash/credit and whether payment by cheque/DD. In the case of DD specify who will bear the bank charges.

A copy of the purchase order shall be sent alongwith Lorry to GLIL. The order must bear signatures of all the Executives if the powers are delegated in the joint names.

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E.Selection & Stamping: After negotiations, Hides/Skins will be selected by the authorised selector (Shri Afsar Ali) of the Company under the supervision of authorised executives completely. All the hides must be stamped with GLIL mark either on neck or on buff portion in the presence of executives, so that there is no question of mixing of hides. The material should be despatched under the supervision of selector.

F. Inspection of Factory: When the goods arrive at Factory, Stores Officer/Production Manager or his duly authorised assistant shall collect a copy of order and LR/MTR from the Truck driver and check the following:

- whether the quantity received is as per purchase order (to be done by Stores Officer) - whether the quality of all the hides is as per purchase order and whether each hide/skin bears GLIL mark.

Based on this inspection, Stores Officer, Production Manager shall issue MRIR in the prescribed form for this purpose and send it to Accounts Department along with the copy of LR/MTR and purchase order copy received with the truck.

G. Payment: Accounts Department shall check general authorisation/ specific purchase powers/purchase order/MRIR/LR/MTR and submit the bills to Managing Director for payment in accordance with purchase contract.

H. Review: From time to time Managing Director shall review the procurement programme/purchases effected to ascertain progress.

I. Raw/Wet Blue selection procedure & Reporting: This shall be followed as per annexure attached hereto.

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ANNEXURE RAW & WET BLUE SELECTION PROCEDURE

1.

GLIL RAW SELECTION: FIRSTS / SECONDS / GARH(LOT) / REJECTS(NOT TO BE PURCHASED AT ALL).

Normal: In case of Cow hides the following defects are noticed:

Finely stitched flay cuts with Nylon thread Flay cuts / Tick marks / Warble holes / Fox marks / Goad marks / Brand marks / Makrs - Like cob-web - formation due to disease / Rib marks /Leoprasy(kodhi) healed up wounds / Claw marks

Category of selection would depend upon the number and type of defects and its location on the raw hides. Broadly the raw hides can be categorised into three grades viz. FIRST, SECONDS AND THIRD (LOT).

GARH is nothing but combination of firsts and seconds in all sizes; but does not contain any rejects(throw outs). Broadly selection, seconds, garh and rejects can be defined as under:

FIRSTS: The hides would be free from all the above on the main portion i.e. buff which is important for cutting value for the Shoe Manufacturers.

In selection, we can accept hides having maximum three flay cuts not above 3" in length on the periphery of hides. i.e. around necks, bellies and median line. There may be one or two other defects but not on main portion of leather. Hide would be free from yoke mark, horn mark, tick marks, warble holes.

In nutshell, the defect can be accepted either on the periphery of the hides or on median line only.

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SECONDS: In seconds we can accept upto two on the butt portion and upto 2/3 defects on the other side. But hides should have at least 60% cutting value to the Shoe Manufacturers. Basically difference between the first and the seconds is that second may have 1/2 defects on butt portion but it should provide minimum 60% cutting value. GARH(LOT): In Garh lot there can be combination of First & Seconds only.

REJECTS: Rejections are absolutely throw outs, which will have defects like putrifaction rich hair slip and damaged grain on hide. Hides with reddish spots on the flesh side is throw outs. Further if the hide has more than 3-4 flay cuts in the main area of the leather, it should be rejected. If the hide has excessive goad mark or warble holes, it should not be accepted. In nutshell hides which has less than 60% cutting value is classified under 'Rejection' category.

Based on raw selection, the % wet blue selections should come out as under: Wet Blue selection in relation to Raw selection:

Raw Selections

WET BLUE SELECTION(%) 1-IV V VI VII Rejects

Firsts:.......... Seconds: Garh

15

30 10

35 50 35

Not above 15 Not above 40 Not above 25

10

25

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After each lot of wet blue processing the production department would maintain record and intimate the executives concerned the result of wet blue selection of each lot. Difference should be pointed out. A copy may be endorsed to Managing Director.

'Productwise Relationship between wet blue selection & finished leathers should be maintained as under normally:

Wet Blue selection

Finished leather grading

A OR

1-IV

-Full grain Upholstery 1 or 11 -Full Grain Nappa 1 or 11 -Aniline/Semi Aniline softy I/II ICG First grade 1

B....OR.........V

C OR.........VI

ICG II Grade

OR VII

Cow ICG-111 grade Cowprinted leather cow Suede/Lining Cow ICG 1V Cow printed Cow Apron

OR Rejects

These standards can be revised from time to time by the Management.

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GUJARAT LEATHER INDUSTRIES LIMITED PURCHASE PROCEDURE; (OTHER THAN RAW HIDES/SKINS)

1. All Departments shall raise indents in Triplicate in the specifically provided purchase indent form. Indents shall be checked by Purchase Department ensuring that all the entries are proper and necessary signature of the authorities are available before registration into purchase register.

2. One copy of indent with registration number and date on it shall be returned to indenter. This number will be master control number and all further correspondence shall bear this number. eg. Indent No. Registration No.50 Production/5 dated..... dated.....

This registration number shall be used in all the correspondence such as enquiry purchase order, expediting etc as under:

Enquiry GLIL/ENQ/50 dated 3.8.1983 Order GLIL/PUR/50 sr no. of order dated Letter //50/ dated.....

3. Items whose value does not exceed Rs 1000/- and which are not required to be purchased within three months, can be purchased on cash basis and all other indents/items whose value is more than Rs. 1000/- shall be purchased as follows:

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4.

The indents received can be classified in one of the following categories:

a. Proprietary item

.. Equipment, Spares, Accessories etc.

b. Patent items or with brand preference i.e B.D.H.,S.M., Corning etc. The orders for such items shall be placed immediately on the authorised stockists of such items situated in Ankleshwas/Bharuch or Baroda on the basis of latest price list and the usual agreed terms. However, offers from all Stockists/Dealers in that particular brand/item shall be obtained. List of all Patented items should be got approved from M.D. by the concerned Department.

c. consumables like Kerosene, Castor oil, Diesel, Petrol etc be procured from authorised dealers on the basis of price list or Government notified prices.

d. Other items shall be purchased after floating tender enquiry, within three days on receipt of indent and ascertaining competitive prices.

5. REGISTRATION OF VENDORS. For floating enquiry purchase department shall prepare a list of vendors based on the past experience for each category of items. The list shall be up-dated constantly with additions as per the experience gained and informations received.

a. For indent of value upto Rs 1,000/- enquiry shall normally be sent to the dealers/stockist situated in Ankleshwar/Bharuch or Surat unless the suppliers are only situated outside this region.

b. For all the indents having value more than Rs.1,000 enquiry would be sent to the suppliers/stockists/situated in Bombay/Ahmedabad over and above Ankleshwar/Surat/Bharuch/Baroda.

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Enquiries should be issued in rotation to at least 4 to 6 parties. This will depend on product and total value. However, enquiry should be sent to 2/3 Suppliers who have supplied the material in the past and remaining suppliers should be new in rotation as per the approved vendor list.

c. For very high value indent, enquiry shall be sent to all the vendors on our list.

6 All the details about enquiry shall be noted in the purchase register, immediately.

7. Whenever, quotations against the enquiries are received, they shall be kept with Assistant Manager(Purchase).

8. On due date, the quotations shall be opened to assess response against the enquiries. The quotations shall be opened by purchasing committee formed of a. for indent of value upto Rs 5,000/- A.M.(P) + b..for indent of value over Rs 5,000/-: A.M.(P) OR P.O. in presence of M.D.

9.

For major capital purchase, approval of M.D. shall be taken

10.

All the offers after opening shall be signed by all the members of committee.

11. Comparative statements(including transport charges, taxes etc) should be prepared by the Purchase Department immediately and A.M.(P)/P.O. shall verify initial and put date on statement and statement should be initialled by the clerk as well as AM(P).

12. The offers and the comparative statement shall be sent to indenter if required, for technical approval and review of quantity and then put up for approval of Managing Director. On getting sanction by M.D. the purchase order shall be prepared for the lowest or on the approved vendor.

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13.. Draft purchase order shall be prepared by purchase department and shall be checked by A.M.(P)/P.O and get it typed.

14.. Typed purchase order duly checked by purchase department and signed by A.M.(P)/P.O. and put for signature - orders shall be signed as per the powers delegated to them.

15. Two copies of order to be sent to vendor/one copy to Accounts/one copy to Stores/one copy of Master file/one copy to order file(Indent file).

16..Corresponding entries would be made in the purchase register.

EXPEDITING & FOLLOW-UP

17. Out of two copies of order, vendor should return one copy to us after countersigning in token of acceptance, it shall be filed in the indent file properly.

18..Some parties have a system of sending their order acknowledgement. Whenever, such acknowledgement is received, purchase department shall check with respect to the specifications as well as other terms & conditions of order and if descrepancies are observed, the same should be taken up with the supplier. 19..Whenever the orders are placed on local parties i.e. Ankleshwar or Bharuch, the material shall be collected by Stores Department. Purchase Department shall intimate the details and co-ordinate for the same.

20. For the parties situated out-station such as Baroda/Ahmedabad/Surat/Bombay etc. purchase department shall follow-up for timely delivery.

21..Normally payment through bank should be discouraged. However, in case of reputed manufacturers or authorised agents payments through bank may be considered. In such case party should give advance intimation to us for despatch of goods & negotiate the documents through bank. Purchase department shall verify the documents with order and forward the same to Accounts Department duly authorising them to retire the documents from bank.

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22 In some cases, documents through Angadia shall be accepted if agreed in advance and shall be retired as above by issuing cheque or demand draft as agreed.

23. All the documents received for the order either through bank or Angadia shall be checked properly. Purchase department shall enquire with transporters for arrival of goods and if the goods have arrived in their godown, the L.R.shall be handed over to Stores for collection of goods.

24. INSPECTION. On receipt of the goods, the Stores Officer shall invite authorised representative of Indenting Department to carry out inspection. After getting clearance of the indenting department, that the goods received are per purchase order, MRIR entries shall be made in the purchase register and indent file shall be closed when all the items for that indent are received.

25. All the invoices for the goods received shall be handed over to Accounts Department for release of payment as per the terms of purchase order on receipt of MRIR from stores.

26. If any material is rejected or received short, purchase department shall followup with the Supplier for early replacement.

27.

Negotiation in case of sub-standard goods.

In case, if the goods are found to be sub-standard and still indenting department is interested in its purchase, it shall clearly indicate on MRIR or by a separate note the following: a) Purchase Order specifications; b) Specifications of goods received. c) Reasons for acceptance and

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d) Clear cut recommendation regarding price deduction' whether it is to be on proportionate value of the lower strength or otherwise. While recommending such deductions the additional cost to the company by the use of the substandard goods should be the criteria.

28. If any special remarks for payment or deduction of money, exist purchase department shall inform Accounts Department accordingly. If part goods are rejected, then payment shall be deducted accordingly.

29. All the papers pertaining to the indent shall be filed properly in the respective indent file so that it is complete. It shall have copies of invoices, payment advice, MRIR etc.

30. Review & Contract. Purchase Department shall review the status of pending indents with M.D. every week. For delayed indents(lying more than 6 weeks) a separate statement shall be prepared. Similarly, purchase order delayed after due date, shall be recorded in separate statement and more attention shall be given for its follow-up.

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Annexure SCOPE OF INTERNAL AUDIT

01. 02. 03. 04. 05.

Vouching: 100% routine all cash, petty cash and bank Opening balances to be verified from previous year Bank Reconciliation of all the branches of S.B.I. Salary & wages to be verified with Attendance Register. Stock a)

vouchers. Balance Sheet.

Purchases to stock, sales to stock & closing stock(movement)

b) Physical verification of closing stock for the year ended 31st March 1995 along with valuation. 06. Fixed Assets: Verification and depreciation calculation to be checked. and

07. Ledger scrutiny of Debtors, creditors, Staff advances General Ledger. 08. 09. Debtors/Creditors more than & less than 3/6 months bill Outstanding liabilities for expenses. other wise.

10. Internal control/procedures for purchases/sales and miscellaneous etc. 11 12 13. 14 . Inter Branches reconciliation of Agra & Delhi with H.O. Quantitative data from Raw Hides to Warehouse.

Ensuring various compliances of Companies Act & Income Tax Act etc. Helping out for preparation/casting of Balance Sheet.

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CHAPTER-XXXXIX Gujarat State Machine Tools Corporation Limited

1. Introduction The Gujarat State Machine Tools Corporation Limited was jointly promoted by Hindustan Machine Tools Limited (HMT Ltd.), a Government of India undertaking and Gujarat Industrial Investment Corporation Limited(GIIC Ltd.) and it was incorporated on 15th February 1975. The Company had commenced its business from 28th February 1979, The authorised share capital of the Company as on 31st March 1995 was Rs.5.25 Crores divided into 52.50 lakhs equity shares of Rs.10 each. It is a 619-B company under the Companies Act, 1956.

2.

Applicability of Acts and Rules etc The Company follows the Companies Act, 1956 and other Acts and Rules.

3.

Details of Books and Records maintained by the Company The Company maintained the accounting books and other records

4.

Delegation of powers

The Board of Directors have delegated various Administrative and other powers to the Managing director of the Company vide Board's resolution passed in the Meeting held on 28th June 1976. The Managing Director had re-delegated certain financial powers to officers of the Company

5.

Inventory control and repairs and maintenance Procedures. The Company has prescribed the procedures for indenting of materials, for issue of work requisitions and for functioning of stores vide office order No. 30 to 32 issued during November/December 1982 which may please be referred to during audit.

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6.

Product manufactured The Company manufactures "Vikram" centre lathe machines.

7. Raw materials used and sources of procurement and Purchase Procedure. The castings and steel is a special item required as per drawing and the same is procured from H.M.T.'s units and other foundaries. The steel is procured by inviting quotations from the suppliers. The bearings are procured from S.K.F. and F.A.G.. The motors are purchased from N.G.F.F. Crompton and A.B.B. etc.. The purchase policy and procedures are outlined in Company's office order No.0003 dt.19-10-81.

8. Manufacturing process. The castings and steel etc. are machined on various machines as per the drawings and then the lathe machine is assembled.

9. Channel of distribution and pricing. The Company has made an agreement with HMT Ltd. and HMT(I) Ltd. for the sales of its products both within and outside India.

10. Internal audit. The internal audit of the Company is entrusted to a firm of Chartered Accountants which is carrying out the audit of the accounts and stores' accounting records including physical verification and certification of inventories etc.. The internal auditors are required to submit half yearly and Annual reports to the management.

11. Service books/Leave Accounts. The Company is maintaining the service books and annual leave records of its employees.

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12. Financial Management. The Company is preparing "Operating plan" every year indicating the cash flow and the funds are managed accordingly. The Company avails cash credit facility upto Rs.50 lakhs each from State Bank of Saurashtra and Bank of Baroda.

13. Provident Fund and medical benefits extended to the employees. The Company follows the provisions of Provident Fund and Miscellaneous Provisions Act as regards C.P.F. of employees. The Company extends the medical benefits to its employees.

14. Special points to be seen in audit of the Company.

(i) Review the production with reference to the capacity installed of the plant, the targets fixed for production and examine the reasons for shortfalls if any, in actual production and the remedial action taken for increasing the production. (ii) See that the consumption of raw materials is not excessive in relation to the output and that a proper system of analysis exists to see that the supply of raw materials are according to the specifications. (iii) Review the extent of use of capital mechanical equipments and ascertain the reasons for its failures and idle time if any. (iv) Review the purchase contracts for the purchase of castings and steel etc. with reference to the terms of payment and weighment of materials etc.. (v) Review the sale price fixation policy of the Company and see that it covers all elements of cost and a reasonable margin of profit. (vi) Review the credit control procedure and see that the Company realises its dues promptly. (vii) Review the purchase orders for supply of plant and machineries and see that delivery schedules are strictly adhered to by the suppliers thereof. (viii) Review the internal auditors' report to see that it covers each aspect of their work and necessary action is taken thereon by the management.

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CHAPTER-L Gujarat Industrial and Technical consultancy Organisation Ltd. (GITCO)

(1)

Introduction:-

Gujarat Industrial and Technical consultancy Organisation Ltd., Ahmedabad (GITCO) was incorporated on 28th December, 1978. The authorised Share Capital of the Company as on 31st March, 1995 was Rupees Thirty lakhs divided into 30,000 Equity Shares of Rs.100 each. This is a company registered under Section 619-B of the Companies Act, 1956.

(2)

Applicabality of Acts and Rules :-

The company is governed under the Companies Act, 1956 and the rules of the State Government.

(3)

Main objects and present activities of the Company :-

The main objectives of the Company are to provide industrial and technical consultancy to the existing as well as prespective entrepreneurs. The Company is engaged in providing industrial and technical consultancy in the areas of preparing Project Report, Market Study Report, Special Studies, Project appraisal, Market assistance, term loan and Working Capital appraisals, etc.

(4)

Organisational Set-up:-

The management of the Company is vested in the Board of Directors. The day to day management of the company is looked after by the Chief Executive with the help of the executives/ professionals and support staff.

(5)

Accounting Organisational Set-up:-

The Accounts and Finance department of the Company is headed by the Manager (Accounts) who reports to the Chief Executive He is assisted by the support staff.

349

6.

Books and Records maintained by the Company:The Company maintains the following records:-

(1) (ii) (iii) (iv) (v) (vi)

General ledger Bank Book Cash Book Fixed Assets Register Petty Cash Book Income Register

(7)

Managerial Information System:-

The Company has devised a managerial information system under which the professionals submit monthly progress report for the assignments received, completed and those on hand.

(8)

Delegation of Powers:-

The Board of Directors has delegated various financial and other powers to the Chief Executive of the Company.

(9)

Internal Audit:-

The internal audit is done by a firm of Chartered Accountants appointed by the Company on "contractual basis". The cent percent audit of the accounting records is carried out on Quarterly basis and the quarterly audit reports are submitted to the management for their consideration. The internal audit also looks after the taxation matters of the Company and also advise the Company for developing various systems of internal control.

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(10)

Provident fund/Medical benefits:-

The Company is regulated by the "Employees Provident Fund Act" and it contributes to the Fund @ 8.33 percent of the basic pay plus D.A. of each employee. The company also extends the benefits of medical reimbursement upto a ceiling of Rs.5,000/- per annum, in case of hospitalisation or the surgery. This is in addition to monthly reimbursement of Rs.1000/- to each employee.

(11)

Service Books/ Leave Accounts:The Company maintains personal files and leave records of each employee.

(12)

Pricing policy:-

The Pricing policy is decided on assignment to assignment basis, considering the nature of work and mandays involved, in each assignment.

(13)

Special Points to be seen during audit of the Company:-

(1) Review the Consultancy Contracts undertaken/executed by the Company and the Pricing Policy followed for each assignment and see that the administrative and other expenses incurred are reimbursed alongwith an adequate profit-margin.

(2) Review the reports of the internal auditors of the Company and verify that remedial action, as suggested by the internal auditors, is taken by the management for improvement in the working of the Company. Review the internal control exercised by the management

(3)

Verify that the C.P.Fund accumulations are remitted regularly to the R.P.F. Commissioner.

351

CHAPTER-LI GUJARAT STATE FERTILIZERS & CHEMICALS COMPANY LIMITED

1. Introduction. The Company was incorporated on 15th February, 1962 in joint sector viz, the participants in the share capital of the company being Government of Gujarat, Financial institutions and farmers with a view to produce chemical fertilizers for increasing agricultural production in Gujarat.

The authorised share capital of the company as on 31st March 1995 was Rs.15000 lakhs divided into 3 lakhs redeemable cumulative preference shares of Rs.100 each and 1470 lakhs equity shares of Rs.10 each. It is a 619-B Company.

This Chapter is meant to be used if propriety audit is taken up.

2. Applicability of Acts and Rules etc. The company is "a deemed Government Company" under Section 619-B of the Companies Act 1956 Besides, Income Tax Act, 1961 and Central Excise duty and Customs Duty Acts/Rules. Factories Act, Workmens Compensation Act are also applicable to the company.

3. Main Objects of the company. The company has the following main objects:-

(i) To manufacture and market chemical fertilizers, heavy chemicals and industrial gases,

(ii) To venture into basic products which are vital for industrial development of the State and Country at large.

(iii) To spread more and more awareness for use of chemical fertilizers amongst farmers; and

(iv) To achieve better growth rate in establishing capacities, production, market, profit and equity base etc.

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4. Present Activities of the Company. The company is having various fertilizers plants located at Fertilizernagar in District Baroda. Besides, Di-ammoniaum phosphate plant is located at Sikka in Jamnagar District. For the products such as, Caprolactum, Filament yarn, melamine and Oxo-syn gases etc., the company has installed various plants. The polymers plant located at Baroda produces Acrylic Pellets. The Fibre Unit of the company manufactures Nylon Filament yarn and it is located near Surat. Further, 50 M.W. Cogeneration of steam and Power Plant Phase III has been commissioned in January 1995.

5.Organisational Set-up(including accounting Organisation ). The management of the various departments of the company is done by the Managing Director who is assisted by two Directors viz. Director (Technical) and Director(Finance). These directors are assisted by various General Managers, Assistant General Managers, Company Secretary and Chiefs in Finance and Audit Departments. The organisational chart of the company is furnished as Annexure.

6. Books and Records maintained by the company. The various accounting books and other records being maintained by the purchase, sales, materials, management and establishment departments of the company, are detailed in the relevant chapters of the "Finance and Accounts Manual", prepared by the company.

7. Delegation of various powers. The company has issued a circular No. Pers/MD/122 dated 18th January 1993 which may be referred to.

353

8. Management information system. The company has developed a management information system for finance and accounts departments. The details of MIS are mentioned in the chapter-3 of the "Finance and Accounts Manual" of the company. Various reports are prepared periodically by cash and bank, inventory accounting, costing, projects, Finance, Sales, Budget and Internal Audit Sections etc. and these are submitted and circulated among various management levels to apprise them, for quick decisions-making and exercising a closer control over various operational areas.

9. Products manufactured and processing plants. The company manufactures types of products as detailed in the Schedule annexed to its annual accounts. The chapter-17 of the Finance and Accounts Manual of the company details the various plants, products manufactured and the raw materials used therefor.

10. Purchase procedure. The company floats inquiries for limited tenders for procurement of materials for production, from the approved parties and on receipt of their offers, the comparative statements of the rates are prepared. Thereafter, the purchase proposals are approved by the appropriate authority. The purchase orders are placed thereafter.

11. Inventory control system. The company's Fertilizernagar unit at Baroda has adopted an "on-line computerised inventory control/accounting system". The inventory functions from the indenting stage to the placing of the purchase order, receipt and consumption of materials are carried out through the above mentioned computerised system. The inventory of raw materials is kept to minimum possible, in line with the consumption, lead time, storing capacity, shipping constraints and voyage uncertainties etc.. Besides, the company has adopted the A.B.C. analysis system which helps in valueoriented inventory control. The perpetual physical verification of stores and spares is conducted by an independent agency appointed and working under the control of Internal Audit Department. The shortage or excess of stores as reported by the agency is adjusted in the books of accounts after following the prescribed procedure. The chapter-8 of the "Finance And Accounts Manual" deals with the Inventory Accounting System.

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12. Cost Control System, Cost accounting system and records. The costing department of the company prepares monthly cost and production performance reports. These reports provide plant wise/centre wise cost of production during the month, previous month and cumulative upto the month of reporting. It also analyses variation in cost during current month over previous month.

The Fertilizernagar unit of the company at Baroda has adopted a computerised production information system under which daily production and consumption data of individual plant is maintained. A computerised integrated accounting system has been devised for annual stock valuation of finished goods and the work-in-process. The computer programme is so devised as it provides the weighted average process cost of various products. The chapter-17 of the "Finance and Accounts Manual" deals with the cost Accounting System.

13. Budgetary control, Internal Audit and Financial Management etc.. The "Finance and Accounts Manual" prepared by the company deals with the above mentioned subjects 14. Provident Fund and medical benefits extended to the employees of the company. The company's service Rules-1962 (Chapter-A thereof) deal with the C.P.F. Rules under which the G.S.F.C employees C.P.F. Trust is formed to extend P.F. benefit to them. The Company's and the employes' contribution towards the C.P.F every month, is deposited with the Trust.

The medical expenses ranging from Rs.1600 to Rs.1950 according to various cadres of the employees, are reimbursed every year. These expenses from Rs.4000 to Rs.4200 ceiling, incurred for long term diseases are reimbursed on receipt of the certificate of the doctor. The hospitalization expenses on medical treatment are reimbursed in full. However, room facilities are provided according to the rank of each employee. The x-ray charges, pathological charges, cardiogram charges and consultation charges etc are reimbursed provided these are incurred on the advice of the doctor

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15. Maintenance of Service books and Leave accounts of the employees. The company has computerised the leave record of each employee and a leave-book is provided to Grade III, IV & V employees. A casual leave card is also provided to each employee. The company has framed its "service Rules, 1962" which deal with the conditions of service, pay and allowances, working hours, holidays and leave, conduct, discipline and appeals, provident fund and gratuity etc of the employees.

16. Branches/units of the company. The company is having area offices at Junagadh, Nadiad, Mehsana, Valsad, Bharuch, Jamnagar, Godhra, Bhavnagar, Rajkot, Surat and Ahmedabad in Gujarat. The company is also having a number of area offices in other States such as, Uttar Pradesh, Hariyana, New Delhi, Maharashtra and Assam etc;

17. Special points to be seen during audit of the company. (i) Review the production, sales and inventory of each plant of the company to see that the installed capacity of the plant is fully utilised, sales are as per the targets fixed and the loss in sale of various products is not incurred due to accumulation of stock of finished products or else due to wrong fixation of the selling price.

(ii) Examine the managerial information system to see that it is adequate and prompt in submission of the reports to the management.

(iii) Examine the internal audit system being followed by the company to see that it is adequate looking to the volume of various activities undertaken by the company. Review the internal audit reports and the action taken on them by the management. (iv) Review the physical and financial progress of various activities undertaken by the company and ascertain the adequacy of the action taken on their progress reports by the management.

(v) Examine the various purchase orders, works contracts and sale orders etc. to see that its terms and conditions are not against the interests of the Company and these terms and conditions are followed properly.

(vi) Verify the observance of the various instructions contained in the "Finance and Accounts Manual", by various departments of the Company.

356

CHAPTER - LII THE AHMEDABAD ELECTRICITY COMPANY LIMITED.

1.

INTRODUCTION

The Ahmedabad Electricity Company Limited was incorporated on 28th May 1913. The authorised capital of the company as on 31st March 1995 was Rs.80.00 crores divided into 5 lakhs cumulative Redeemable Preference Shares of Rs 100 each and 750.00 lakhs equity shares of Rs 10 each. This is a 619-B Company.

2.

APPLICABILITY OF ACTS AND RULES

The company is governed by the Electricity(supply) Act, 1948. Companies Act,1956 is also applicable. However, the provisions of the Electricity (supply) Act, 1948 prevail wherever they are inconsistent with the provisions of the Companies Act 1956. Indian Electricity Act, 1910 and the rules made thereunder are also applicable to the Company.

3.

Main objects of the company. (i) To generate, electrical power and to transmit, distribute and supply such power throughout the licence areas of Ahmedabad & Gandhinagar. (ii) To carry on the business of electric power, light and supply company and to construct power stations, laying of lines; cables and wires etc. (iii) To carry on business of electricians, mechanical engineers, suppliers of electricity and manufacturers of and dealers in apparatus required for generation and distribution of electricity. (iv) Manufacturing of building materials from fly-ash. (v) Electrical assignments. installation contract and operation and maintenance

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4.

ORGANISATIONAL SET UP

The management of the company is vested in the Board of Directors. The Managing Director is Chief Executive and he is assisted by the Executive Director, General Manager (Finance), General Manager (Commercial), General Manager (Admn) and Company Secretary, General Manager (Personnel and Industrial Relations), Sr Manager (Project), Senior Manager (Power Station),Senior Manager(Training and Technical services) and Senior Manager(Materials) The organisational chart of the company is furnished as Annexure - 1.

ACCOUNTING ORGANISATIONAL SET UP

The Accounts and Finance functions of the company are controlled by the General Manager ( Finance). He is assisted by the Managers Finance, costing and Accounts section. The accounting functions at various zones and power generating stations are managed by the Senior Accounts Officers who report to the Deputy Manager (Finance) and Deputy Manager(Internal audit) at the corporate office. The Accounts Officers and Assistant Accounts Officers, staff members also work in the Accounts Department.

6.

BOOKS AND RECORDS MAINTAINED BY THE COMPANY. (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) Journal Cost Books Petty cash book Kardex for stores Sales Journal Purchase Journal Control Ledger Bank Book. Fixed Deposits register. All statutory records as per the Companies Act 1956.

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7.

MANAGERIAL INFORMATION SYSTEM

The company has devised a system of managerial information in respect of consumer-oriented activity and also finance and accounting matters. The company has computerised its accounts and other data.

DELEGATION OF POWERS.

The company has a system of delegation of powers. The Officers and Managers at various levels are delegated with different authorities

PROCESSING PLANTS

The Company has four coal-based power generating stations having installed capacity of 374 M.W. Besides, one gas-based power station of 100 M.W is located at Vatwa.

10

product manufactured.

The electricity generated is the main product of the company. Besides, the manufacturing of bricks and other building materials from fly-ash is also done by the Company.

11

RAW MATERIALS AND THEIR SOURCES OF PROCUREMENT

The basic raw materials for generation of electricity are coal and gas which are procured from South Indian Coal fields Bilaspur and Gas Authority of India respectively by the Company.

12

CHANNEL OF DISTRIBUTION OF POWER

The company distributes the electricity generated through its transmission system.

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13.

PURCHASE PROCEDURE.

The company invites quotations and tenders from the suppliers of equipments and stores and after its evaluation, the proposals of the procurement are submitted to the Board of Directors or local Central Purchase Committee or purchase committee as per their financial competence. After the approval, the purchase orders are placed with the suppliers.

14

INVENTORY CONTROL SYSTEM

The company maintains `Kardex' for all the Stores items. Further, ABC analysis of materials consumed is done and it is monitored by the Managing Director, Executives and General Managers.

15

BUDGETORY CONTROL

The company has a system of preparation of capital budget and revenue budget every year and these are approved by the Board of Directors. Further, the actual performance with reference to the targets fixed is compiled and it is submitted to the Board of Directors.

16.

REPAIRS AND MAINTENANCE PROCEDURE

The company has the regular repairs and maintenance procedure whereby every year, the generating plants are closed for its complete overhauling. The company has installed the modular programmer on P.C. at Sabarmati Power Station to take care of repairs and maintenance jobs quickly and efficiently. The repairs and maintenance jobs are mostly carried out by the company. The company invites tenders from outside agency in respect of repairing jobs which it cannot execute.

17.

INTERNAL AUDIT.

The company has its own Internal Audit Department. The Internal Audit covers various areas like purchase,sales, physical inventory, job costing, Accounts and Finance etc.

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18

PROVIDENT FUND/MEDICAL BENEFITS EXTENDED TO THE EMPLOYEES..

The Provident Fund and Medical Benefits are extended to the employees and officers of the company. The company has its own provident Fund Trust and it contributes to the employees' provident fund scheme. The company provides medical benefits to its employees through its clinics. The reimbursement of medical expenses is made as per company's rules.

19

SERVICE BOOKS /LEAVE ACCOUNTS The company maintains service books and leave accounts of its employees.

20

SALES AND PRICING POLICY

The Company is governed by the Electricity(Supply)Act, 1948 as amended from time to time. The Act provides for revision of the tariff of the company once in a year with the prior approval of the State Government. The power is generated as per the system demand and it is sold to various consumers.

The pricing policy of building materials manufactured from the Fly-Ash is determined by the Management of the company.

21

COST ACCOUNTING SYSTEM AND RECORDS

The company follows job costing system for providing new service connections. The capital and repairing job cost sheets for various jobs are maintained.

22

FINANCIAL MANAGEMENT SYSTEM

The company obtains financial assistance from various financial institutions of India and also from International Financial corporation(Washington).

The following monthly statements are prepared for better financial management/ review of the company's activities.

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(i)Billing M.I.S(Managerial information system). (ii)Zonal MIS (iii)Book debts MIS iv) Inventory MIS (v) Reporting of monthly revenue and expenditure to the Board of Directors. (vi)Preparation of estimated cash flow once in three months. (vii) Monthly actual cash flow position.

23.

MANUALS.

The company has prepared its service regulations Manual which may be referred to during the audit.

24.

BRANCHES/UNITS OF THE COMPANY.

The company has a Power Service Division which carries out various Electrical Operation and Maintenance works and also a Fly-Ash Division at Sabarmati. Besides, the company is having a branch in Bombay(Maharashtra). The accounting and other records as required by the Companies Act,1956 are maintained by the company's branches also.

25. SPECIAL POINTS TO BE SEEN DURING AUDIT OF THE COMPANY.

(i) Review the various activities undertaken by the company and see that its execution is remunerative. (ii) See that the manufacturing of building materials from Fly-Ash is remunerative for the company. See that the products manufactured from fly-ash have adequate demand in the market and the profit is earned by the company in this activity. (iii) Review the system of billing and collection of revenue from the consumers. See that the dues are not unduly accumulated. See that undue concession is not granted to the consumers.

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(iv) Review the system of execution of various civil, electrical, operation and maintenance works by the company and see that the works are completed within the time schedule so that the time-over-run may not result into avoidable loss of revenue to the company. (v) Review the managerial information system being followed by the company and see that it is efficient and effective. (vi) Review the internal audit system of the company and the scope of the internal audit and see as to how far it has been effective in the improvement of the working of the company. See as to whether the reports of internal audit are submitted to the management if so, suitable remedial action is taken thereon.

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CHAPTER - LIII GUJARAT POWER CORPORATION LIMITED

1. INTRODUCTION. Gujarat Power Corporation Limited was formed on 25th June 1990 with the main object of identifying the Power Projects based on various fuels in Gujarat. The authorised share capital of the company as on 31st March 1995 was Rs 200 Crores divided into one Crore equity Shares of Rs 100 each and one Crore unclassified shares of Rs. 100 each. It is a 619-B Company.

2. APPLICABILITY OF ACTS AND RULES ETC. The company is governed by the provisions of the companies Act 1956 as amended from time to time.

3. BOOKS AND RECORDS MAINTAINED BY THE COMPANY The company maintains following accounting books and records. (i) (ii) (iii) (iv) Cash Book Bank book General Journal General ledger etc

4. MAIN OBJECTS OF THE COMPANY. The company acts as an apex organisation promoted by the Government of Gujarat and Gujarat Electricity Board for the development of energy sector in Gujarat. The main object of the company is :

(i) To identify the power projects based on various fuels,

(ii) To prepare tenhno-economic feasibility reports for identified power projects,

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(iii) To identify suitable private sector parties and to implement the power projects jointly with the selected private sector parties or on its own if no private parties come forth.

5 ORGANISATIONAL SET-UP OF THE COMPANY. The Company is having following four divisions : (i) Technical division (ii)Mining division (iii)Finance and Accounts division. (iv)Company affairs and Administration division.

The qualified professionals having experience in public and private sector are engaged in Finance and Accounts and other Divisions.A cost Accountant is also working in Finance Division.

6. MANAGERIAL INFORMATION SYSTEM. The Corporation has a managerial information system(MIS) which is supported by the system Analyst.The accounting system and pay rolls system are fully computerised.

7. DELEGATION OF POWERES. The corporation has delegated various powers at all levels.

8. COST CONTROL SYSTEM. The Corporation has established a cost control system.

9. PROVIDENT FUND AND MEDICAL BENEFITS EXTENDED TO THE EMPLOYEES. The Corporation has extended Provident Fund and Medical benefits to its employees.

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10. MAINTENANCE OF SERVICE BOOKS AND LEAVE ACCOUNTS. The Corporation maintains Service books and leave records of its employees.

11. SPECIAL POINTS.TO BE SEEN DURING AUDIT OF THE

COMPANY.

(i) Review the various activities undertaken by the company to see that the main objects mentioned in the Memorandum of Association have been achieved efficiently. Analyse the deviations if any. (ii) Review the internal control measures undertaken by the company and see as to how far it has ben effective. Ascertain the reasons for non adoption of an internal audit system by the company. (iii) Review and analyse the effectiveness of the managerial information system being followed by the company. (iv) Review the Company's activities of leasing of assets and earning signature bonus on transferring the power projects to other companies/organisations and see that these are remunerative and are covered under the"object clause"of the Memorandum of Association. (v) Ascertain the details of delegation of various powers to various officers of the corporation and see that its implementation is done properly.

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SECTION - III CHAPTER:- IV GUJARAT ELECTRICITY BOARD

1. Introduction. Gujarat Electricity Board was constituted on 1st May 1960 under Section 5 of the Electricity (Supply) Act 1948 on bifurcation of Bombay State under the Bombay Reorganisation Act 1960 to provide for the rationalisation of the production and supply of the electricity, for taking measures conducive to electrical development and for all matters incidental thereto. In terms of Section 18 of the Act, ibid, the main function of the Board is to promote co-ordinated development of the generation, supply and distribution of electricity within the State in the most efficient and economic manner with particular reference to under-developed areas. The capital structure of the Board consists of funds received from the State Government as loans and from the financial institutions and members of the Public by issue of bonds with or without guarantee from the State government (Sections 64 to 66 of the Act ibid.) 2. Acts and Rules etc. applicable. The following Acts and Rules are mainly applicable to the Boards' Head Office and its various subordinate offices including all the power houses: (i) The electricity (Supply) Act, 1948. (ii) The Indian Electricity Act, 1980. (iii) Gujarat electricity (Supply) Rules, 1966. (iv) Administration of Properties Regulations of the Board. (v) Contributory Provident Regulations. (vi) Gujarat Electricity Board's Employees Service Regulations. (vii) All industrial and commercial laws.

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3. Books and records maintained by the Company. The following books and records are maintained: (a) Accounting books. (i) Cash book (ii) Bank book (iii) Suspense Account register (iv) Journal register (v) Fixed Assets register (vi) Temporary imprest register (vii) Permanent imprest register (viii) Advances to staff register (ix) Vehicle Expenses register (x) Stock Ledgers for stores (xi) Consumers' General Ledgers (xii) Control Ledger for various Accounting Heads (xiii) Subsidiary ledgers for each Circle/Division. (b) Construction Division. (i) Tender register and comparative statement of rates (ii) Contractors ledger (iii) Register of works (iv) Work charged Establishment register (v) Muster Roll register/statement (vi) Measurement books (vii) Cash book/Bank book (viii) Various suspense register account head wise (ix) Journal register (x) Ledger (xi) Bills register/Purchase order wise records (xii) Service records of employees.

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(c) Hydel/Thermal Power House. (i) Generation (kwh) record (ii) Transmission (kwh) record (iii) Auxiliary consumption (kwh) record (iv) Running hours/operation record (v) Shut-down records (vi) Log sheet of plant and machinery of the power house (vii) Persuance of plant record along with the details of plant and machinery (viii) Turbine oil Stock Account/Fuel register (ix) Overtime register.

(d) Operation and Maintenance Division/Sub-division. (i) Cash book/Bank book (ii) Petty Cash book/register (iii) Log books of vehicles (iv) Service books and Leave record of employees working in the Division (v) Consumers' General Ledgers (vi) Register of service connections (vii) Priority register for applications received for providing power supply (category wise) (viii) Meter cards (ix) Demand register (x) Disconnection and reconnection of power supply register (xi) Consumer's file (xii) Fuse call charges register (xiii) Records of meter under working and those burnt (xiv) Register of agreements executed with consumers (xv) Suspense registers (account head wise) (xvi) Account's ledgers (xvii) Stock ledgers and bin cards for stores (xviii) Quadruplicate Money receipts books.

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(e) O & M/Transmission Circle. Besides all accounting records as detailed in (a) above, except consumer's ledgers, the ledgers of contributory Provident Fund Account of employees working in the circle.

(f) Consumers' deposits register.

(g) Contributory Provident Fund General/Personal ledgers.

4. Organisational Set-up. The management of the Gujarat Electricity Board is vested in a Board of Directors including a Chairman and three other wholetime members who are appointed by the State Government. Besides, the Secretary of the Board is also appointed by the Government.

Three Executive Directors are working in the head office of the Board and they report to the Chairman through the Member (Technical). Various heads of the Department are designated as Chief Engineers and General Managers who are assisted by a number of officers such as, Additional Chief Engineers, Superintending Engineers, Executive Engineers and Dy.Executive Engineers etc. working in the Head Office and in the field offices.

The Chief Engineers/Additional Chief Engineers are incharge of three Zonal Offices and various Power Houses. Who are assisted by the Superintending Engineers and other officers.

Three General Managers (Finance, Commerce and Accounts) are working in the Accounts Department in the head office of the Board. They are reporting to the Member (Finance). The General Managers are assisted by six Chief Finance Managers and various controllers of Finance/Accounts, Dy.Chief Accounts Officers and Accounts Officers etc. working in the head office and in the field offices such as various Circles and Divisions in the O & M/Transmission Department.

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Government Audit Circle. Residential Audit Officers are stationed at Head Office of the Board. They are assisted by five Assistant Audit Officers/Section Officers/Supervisors and a number of Sr./Jr. Auditors/Clerk cum Typists etc.. The Resident Audit Officer conducts concurrent of various accounting and other records maintained by various departments in the head of the Board. The purchase orders placed by the Stores Purchase Department Project and Planning Department, O & M Generation and Transmission Department are regularly examined by the Resident Audit Officers. The Minutes and agenda of Board's meetings and those of Stores purchase and other Committees of the Board are also examined by Resident Audit Officer. The inspection reports of various field offices of the Board are received in Resident Audit Office after completion of local audit vetted and got approved/issued and also pursued by the Resident Audit Officer. The Establishment work of the staff working in Resident Audit Office is also done in the Resident Audit Office.

The annual accounts of the Board are audited by the Resident Audit Officer.

In case of need, the Resident Audit Officers, Section Officers/Assistant Audit Officers and other staff working under them are entrusted the local audit work also by the Sr.Dy.Accountant General(C)./Accountant General (Audit)-I, Gujarat, Ahmedabad.

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5. Generation of electrical energy. The Board is having the following power stations.

Sr.No. Name of Power Station Installed Capacity (in M.W.) ----------------------------------------------------------------------------------------------1. (a) Steam (Thermal) (b) Gas 2. 3. 4. 5. 6. 7. 8. 9. Ukai (T.P.S.) Gandhinagar (T.P.S.) Wanakbori (T.P.S.) Sikka (T.P.S.) Panandhro (KL T.P.S.) Utran (T.P.S.<OLD>) Ukai Hydro Kadana (Hydro) and Panam 10. Utran Gas Based P.S.<New> 135 4345 M.W. 534 54 850 660 1260 240 140 45 305 122

6. Transmission and Distribution. The Board is having a large T & D net work in which there are 563 Nos. Substations, 24355 Env Circuit kms of transmission lines and 276789 Circuit kms of Distributions lines supplying a power to 56.72 lakhs consumers all over Gujarat State.

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7. Stores and Purchase wing. The Stores and purchase wing of the Board is under the charge of Chief engineer (Materials) in the head office of the Board. He is assisted by Superintending Engineers (Materials), Executive Engineers, Regional Stores Officers and a Chief Finance Manager. The Chief Engineer (Material) is entrusted with the responsibility of purchase of centralised purchase items such as, conductors, transformers, meters, steel and cement etc.. The supply of materials is received in the first stance in the various Regional Stores of the Board from where various Construction/O & M Divisions draw the materials on the basis of material requisitions. the Regional Stores Officers deal with the suppliers on behalf of the Chief Engineers (Materials).

The Chief Engineers (Materials) looks after the overall work of his Department. He supervises the job of receipt, issues and handling of stores, disposal of unserviceable and scrap materials held by the Regional Stores Officers in the field. He also deals with the receipt of settlement of the claims from Insurance Companies, Railways and other Departments.

The Board vide its General Standing Orders No.310 and 311 have delegated various stores purchase powers and the powers for execution of various works to the Purchase and Disposal Committee and various officers of the Board. The Stores purchase and accounting procedure in respect of various stores/works transactions are detailed in the Chapter-III of the Accounts Manual of the Board. The various accounting entries are detailed in the Accounting Manuals Volumes - I to IV made effective w.e.f. 1st April 1985 under the new Commercial Accounting System.

8. O & M Distribution and Commercial Departments. The Distribution Department of the Board in the Head Office looks after the operation and maintenance of various sub-stations for distribution of electricity, energy to various high tension and low tension. The Head of Distribution department is the Chief Engineer who is assisted by various Additional Chief Engineers in three zonal office stationed at Surat, Mehsana and Rajkot. Under the Zonal Offices the Superintending Engineers incharge of circles and Executive Engineers incharge of O & M divisions are working.

As on 31st March 1995, the Board had 1193 Nos. power transformers having 42828 MVA capacity. These transformers are installed in various sub-stations from where the electricity is distributed through various Distribution lines to the consumers.

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The Commercial Department of the Board is headed by the general Manager (commercial) in the Head Office and who looks after the work of giving of new service connections to high tension consumers and also deal with all other commercial matters of the Board. The tariff of electricity charges recoverable from the consumers is finalised by this Department. In the field, the various Executive Engineers incharge of O & M Divisions execute the work of providing power supply to H.T./L.T. consumers and also recover the electricity charges periodically from them. In certain areas of Gujarat the computerised billing system for both H.T. and L.T. consumers is introduced in 1988 by the Board through the Inhouse computers installed in Head Office of the Board and also through the computers of private parties.

As on 31st March 1994 the category wise number of consumers was as under:

------------------------------------------------------------------------------------------Sr.No Category of consumer Number ----------------------------------------------------------------------------------------1. Domestic/Commercia l,43,49,234/6,20,214 2. 3. 4. 5. 6. Industrial (H.T. & L.T.) Public Lighting installations Water works Agricultural Others i.e. Railway, Traction 1,96,340 18,364 17,251 4,70,220 17

. Bulk supplies and outside supplies. ------------------------------------------------------------------------------------------. . 56,71,640 -------------------------------------------------------------------------------------------

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9. Testing of equipments. The Chief engineers (Transmission) in the Head Office of the Board arranges the testing and calibration of various transmission lines and various electrical equipments/installations in the sub-stations of the Board.

The testing of the plant and machinery installed in various power stations of the Board is arranged by the Chief Engineer incharge of each power station.

10. Communication. The Chief engineer incharge of Load Despatch Centre at Jambuva (near Baroda) looks after the erection, testing, commissioning repairs and maintenance of Power line carrier communication equipments of the Board. He reports to the Member (Technical).

11. Research and Development activities. The Research and Development (R. & D.) activities undertaken by the Board are as under:

(i) Study of system losses in inter connected system wheeling power. (ii) Study on failure of H.T./L.T. cables and cable joints. (iii) Reliability study of power station auxiliary drive motors. (iv) Economical designing of foundation of transmission line towers. (v) Use of H.T. capacitors with automatic switching devices. (vi) Use of amorphous core distribution transformers. (vii) Use of fail safe distribution transformer with control module. (viii) Use of vaccum auto sectionalisers. (ix) Economical design of various earthing system. (x) Use of H.T. capacitor with automatic switching devices.

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12. Computerisation. The Board is having an EDP centre under the charge of a Superintending Engineer in its Head Office. The Upgraded system of computerisation became operative w.e.f. January 1990. The following activities were undertaken till March 1994 by the centre:

(a) L.T. billing system is computerised in 347 billing centres in Gujarat.

(b) Post analysis of electricity charges bills issued manually to High Tension consumers by various O & M Divisions. Besides, the H.T. bills were prepared in the computer since 1989-90 for Baroda city circle, Rajkot Zone and divisions around Baroda.

(c) Pay bill accounting system for various offices located at Baroda, Gandhinagar, Dhuvaran Thermal Power Stations, Surat O & M Circle.

(d) Computerised system was installed for purchase activities and to ascertain the status of stock at Regional Store Office (R.S.O.) Baroda. There is a plan to extend the facility in other R.S.Os in phased manner.

(e) The computerised information system for agricultural consumers is developed in Head Office to ascertain the basic data being maintained by 389 O. & M. Subdivisions in the field.

(f) General ledger accounting system was implemented during 1989-90 in Ukai T.P.S., Baroda, Sabarmati and four other O. & M. circles.

(g) Computer systems for other areas such as, inventory Financial accounting, spares inventory, Transformers' information system etc. were also operational. (h) Computerised system meant for drafting of drawings in Civil engineering Department.

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13. Rural Electrification Work. The Board has undertaken various schemes of rural electrification in Gujarat State mainly with the loan assistance from the Rural Electrification Corporation, a Government of India Undertaking. These schemes are meant for electrification of inhabited villages and energisation of pumpsets. The schemes also cover:

(i) Energisation of pumpsets and tubewells for agricultural purpose. (ii) Electrification of villages. (iii) Electrification of Tribal villages. (iv) Electrification of Harijan Bustees.

The Board also executes such schemes with the finance available under State Plan from National Bank for Agriculture and Rural Development (NABARD).

The Board had achieved at the end of 1993-94 the electrification of 17985 villages in the State. Besides, 531546 pumpsets were electrified till 1993-94.

14. Accounting Wing. As already mentioned in the preceding paragraph. In "Organisational Set-up", the Member (Finance) of the Board looks after the Finance and Accounting matters of the Board. The ultimate accounting Units are the Divisions and the Circles where monthly accounts are maintained. The Trial balance is prepared at the close of the financial year with the help of control ledger by each Division and Circle. The Board has introduced a Commercial accounting system based on "Double entry system of Book keeping" w.e.f. 1st April 1985 and has finalised the following Accounting Manuals under the new system:

(a)

Volume - I dealing with the accounting entries to be made for stores and cash transactions and also closing journal entries to be made at the time of finalisation of annual accounts.

(b)

Volume - II dealing with the procedures and journal entries for consumers' accounting at Divisional and circle level.

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(c)

Volume - III dealing with the accounting policies and procedures and standard journal entries for coal, oil, gas and fuel accounting.

(d)

Volume - IV (A & B) dealing with the capital expenditure fixed assets (A), and materials Accounting system (B).

All subsidiary accounting books and records are maintained in the formats prescribed under new accounting system.

The trial balance for each financial year is audited annually by the Accountant General's Audit Party in respect of the circle and divisions with respective circle office. The annual accounts of head office and the consolidated annual accounts of the Board are audited by the Resident Audit Officer. The Audit Certificate on the annual accounts of the Board is submitted alongwith the Separate Audit Report by the Resident Audit Officer and it is finalised and issued by the Accountant General (Audit) - I, Gujarat, Ahmedabad.

15. Internal Audit System. The Chief Finance Manager (Internal Audit and Inspection) is the head of the Department. The chapter VII of the Accounts Manual deals with the internal audit and inspection procedures.

The internal Audit and inspection parties conduct audit of the electricity charges bills in the O & M Sub-divisions and in the divisional offices after every five months. The Department also deals with Audit Report (Commercial) and other COPU matters.

16. Provident Fund. The Board has created a Provident Fund Trust for the management accumulations under the Provident Fund under the "Gujarat Electricity employees' Contributory Provident Fund (C.P.F.) Regulations." The contributes to the C.P.F. Account of each employee an amount equal contribution made by the employee. of the Board Board to the

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The audit of the C.P.F. account has been entrusted to the Accountant General (Audit) - I, Gujarat, Ahmedabad under Section-20(I) of the Comptroller and Auditor General's (Duties, powers and conditions of service) Act, 1971 by the Comptroller and Auditor General. the annual accounts of the C.P.F. Trust are audited by the Resident audit Officer, Gujarat Electricity Board on behalf of the Accountant General and a Separate Audit Report is issued to the Board.

17. Budgetary Control System. The annual Budget is prepared by the Board as "Annual Financial Statement" in the format prescribed by the State government. The Budget deals with the estimated capital expenditure revenue income and expenditure for ensuing year i.e. from 1st April to 31st March. the Budget is submitted to gujarat State Electricity Consultative Council. After taking into account the comments of the council on the Budget, the Board forwards it alongwith the comments of the council to the State Government in February every year. the State Government thereafter lays the Budget on the table of Gujarat Legislature for its open discussion but not subject to vote. After getting the approval of the Legislature, the same is implemented by the Board. The budget allocations are closely monitored and it is ensured that the actual expenditure is not exceeded than the budget allocations.

18. Cost Control System. The Board has not introduced any system of costing for the purpose of cost control. The Board ascertains the cost of fuel like coal and oil etc. used in generation of electricity, for the purpose of billing fuel surcharge to its various consumers. The cost of generation is complied for each power station and it is submitted to the Central Electricity Authority every year. Periodical reviews are made by the management on the basis of various reports received from Head Office and various field offices for the purpose of cost control.

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19. Tariff. The Board in order to minimise the loss of operation and/or lessen the extent of Government subvention required to defray the expenses on account of increase in the prices of plant, equipment, and materials etc. and also owing to rising cost of operation and maintenance including salary and wages of employees, the Board undertakes revision of tariff periodically. Each revision of tariff requires the approval of the State Government to make it effective.

The booklet of tariff is got printed and circulated by Head Office of the Board to its various O. & M. divisions/Sub-divisions and other offices in the field. Separate tariff is prescribed for each category of consumers like domestic/commercial, industrial and agricultural etc..

20. Repairs and Maintenance Procedure. The damaged distribution transformers are repaired by the "Transformers' Maintenance gang" of the Board. The major repairs of damaged Transformers is arranged through various repairing agencies after awarding contracts to them by inviting tenders. the regular maintenance of transformers is carried out annually in rural area and biennially in urban areas.

Every year, each power station machineries are overhauled and inspection of boiler is also conducted. The capital overhauling of each Power Station is carried out after every four years.

21.

Purchase of Fuel for generation of power.

The coal is used as fuel for generation of power in thermal power stations, which is procured from various collieries in Madhya Pradesh, Bihar and Maharashtra. The lignite required for Kutch Lignite Power Station is purchased from Gujarat Mineral Development Corporation Limited. the other basic input is water which is drawn from the nearly dams and Borewells.

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22.

System of Transmission of Power.

The power generated at various Power Stations is transmitted to the consumers through the help of various sub-stations 400 kv or 220 kv or 132 kv or 66kv or 11kv transmission Distribution lines and various transformers installed in the sub-stations through which the power is stepped down to 11 kv in order to transmit it to the consumers.

23. Medical benefits extended to the employees. The Board follows a scheme of reimbursement of medical expenses to employees on submission of medical certificate. The Estt.Circular No.564 and G.S.O.-249 & 576 may be referred to in this connection. the Su`perintending Engineers are competent to sanction medical advance upto Rs.10000 in case of accident of employees while on duty. The Board is having its own dispensaries at Baroda and at all the Power Stations.

24.

Maintenance of Service books and Leave accounts.

The Board maintains the service book in respect of its regular employee. As regards leave entitlement chapter-V of the Service Regulations of the Board may be referred to.

25.

Financial assistance to various consumers.

In order to promote industrial growth in Gujarat the Board is giving following concessions in the tariff to its consumers: (i) Concession to new industrial consumers. (ii) Rebate in power factor. (iii) Concession for use of electricity during night hours. (iv) Relaxation in demand charges to H.T. consumers in case of observation of power cut by them. (v) Relaxation in the billing demand during initial load development period of 3 months. (vi) Concession in service line charges.

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26. Scope of Government audit. The various financial transactions, annual accounts and other records of Gujarat Electricity Board are audited in accordance with the quantum of checks prescribed by the Comptroller and Auditor General of India. If the internal audit of Gujarat Electricity Board is inadequate, Accountant General may increase the quantum of checks with the approval of Comptroller and Auditor General.

The annual accounts prepared by Gujarat Electricity Board in prescribed format are audited and certified by the Accountant General after getting approval of the Comptroller and Auditor General and are forwarded to the State Government for being placed before the State Legislature under Section-69 of the Electricity (Supply) Act, 1948.

The following procedure is followed in order to expedite the certification of annual accounts.

(i) Trial Balances of each field unit i.e. Power Stations, O. & M. and Transmission Circles are received and audited by Local Audit Parties.

(ii) After the close of the financial year the provisional annual accounts alongwith the various statements and schedules thereto are received and the scrutiny thereof is taken up by the staff of Resident Audit Office, Gujarat Electricity Board. The Head Office account is also audited by the Resident Audit Officer.

(iii) As soon as the final accounts duly adopted by the Board are received, the checking of the same should be taken up on top priority basis so that the accounts can be certified within a month of their being made available to Accountant General.

The important points having a vital bearing on the annual accounts may be incorporated in the Separate Audit Report.

(iv) All other points of financial impropriety may be incorporated in the conventional Audit Report (Commercial) of the State. Two copies each of the printed annual reports/accounts of Gujarat Electricity Board may be forwarded to the Comptroller and Auditor General of India.

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27. Special points to be seen during audit.

(i) Review the procedure for allocation of expenditure between revenue and capital heads and see that the allocation is done according to the accepted principles of commercial accounting.

(ii) See that proper accounts are kept in respect of the funds received from the State Government, Rural Electrification Corporation, financial institutions and the public etc.. Report on the diversion of funds meant for Capital Expenditure to Revenue heads.

(iii) Review the working of various power stations and see that their installed capacity is fully utilised. Review the frequency of shut-down of power plants. Analyse and classify the causes of shut-down. Comment on the policy of the Board to contact the problem of under utilisation of plants.

(iv) Evaluate the performance of the Board as a public utility agency and comment on the failure of the Board in supplying constant/uninterrupted power to the consumers and its effect on the Economy of the country.

(v) Examine the procedure of preparation of the Annual Budget of the Board and see as to whether the faulty budgeting has led to accumulation of materials in excess of its requirement. Examine the steps taken if any, by the Board, for plugging the loopholes that resulted in blocking-up of capital and deterioration in the quality of materials etc..

(vi) Examine the performance of Internal Audit Department of the Board with reference to its scope on its works periodicity of audit, authority to hold executives responsible and corrective measures suggested by audit and its implementation by the management.

(vii) Examine the steps taken by the Management to minimise the theft/malpractice of power and assess the performance of the installations checking squads of the Board.

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(viii) Review the procurement programme of materials plant and machineries and spare parts etc.. See that the suppliers adhere to the delivery schedules and that there is no interruption/stoppage in construction works for non-availability of the required materials of requisite quality and quantity.

(ix) Review the arrangements of supply of coal and Light Diesel Oil (L.D.O.) etc. to various Thermal Plants and see that the shortage of fuel does not account for the shutdown or operation of plants at derated capacity. Review the joint sampling arrangements made in respect of coal with the western Coal Fields and Coal Authority of India.

(x) Assess the cost of manual handling of fuel and other stores for breakdown of mechanical devices and compare the differential cost.

(xi) Calculate the quantum of overtime paid to the operational staff in the Power plants and see the steps taken by the management to minimise such cost, if the trend of overtime wages is upward.

(xii) Review the clearance procedure of imported materials and see that the management has taken appropriate steps for getting advantage of exemption if any, of custom duty on import of power plant and machineries.

(xiii) Examine the cases to see whether timely action for realisation of the claims from the Insurance Company, Ports Authority, Railways, Transport Agencies and others was taken.

(xiv) See that failure on the part of the officers concerned did not lead to making payment of demurrage or penalty while clearing the materials from the Railways, Transport and Shipping Companies etc..

(xv) Review the position of the dues against the H.T./L.T. consumers to see the trend of its recovery and the steps taken by the management for recovery of the dues.

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(xvi) Examine the various contracts for works and see that the completion schedule of works is strictly adhered to. Examine the final bills of the contractors with reference to various works records such as measurement books and works abstract etc.. Examine the reasons of variation in the cost of work executed with their estimated cost.

(xvii) Review the working of computer centre to see how far it has proved as a tool for control by the management.

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CHAPTER-LV

GUJARAT STATE ROAD TRANSPORT CORPORATION

1.

INTRODUCTION.

Gujarat State Road Transport Corporation (GSRTC) was formed with effect from 1st May 1960 under Section-3 of Road Transport Corporation's Act, 1950 with an object to provide economic and efficient passengers' transport service to the entire State as well as in the areas of the neighbouring States.

Under the provisions of the sections-23 and 24 of the aforesaid Act; the capital of the Corporation is provided by the Central Government and the State Government in the proportion of 1:2 and interest on the capital is paid to the two Governments by the Corporation.The balance of the capital contribution made by the Central Government and State Government as on 31st March 1995 was Rs 295.10 crores and Rs. 101.36 crores respectively.The Corporation also borrows money from the financial institutions,banks and leasing companies to meet with the capital expenditure.

APPLICABILITY ACTS AND RULES ETC.

The Corporation is governed as per the provisions of Road Transport Corporations' Act,1950 and Gujarat State Road Transport Corporation Rules, 1971.

3.

MAIN OBJECTS OF THE CORPORATION. The main objects of the Corporation are as under:

(i) To provide the advantages offered to the public,travel and industry by the development of road transoport,

(ii) To co-ordinate any form of road transport with any other form of transport,

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(iii)To extend and improve the facilities for road transport in any area and to provide an efficient and economical system of road transport service in such areas. The G.S.R.T.C. may,by notification in the official Gazette, establish a road transport corporation,for the whole or any part of the state, under such name as may be specified in the notification.

4.

BOOKS AND RECORDS MAINTAINED BY THE CORPORATION.

The Corporation has finalised a Manual of Accounts Department which deals with the various accounting books and other records maintained in the Central Office of the Corporation as well as in its fifteen operating units(Divisions) and 136 depots.

At depot level, the cash book for accounting of revenue receipts and payments is maintained . Besides,the Stores accounts for receipt and issue/consumption of spare parts of the vehicles are also maintained.

At the divisional office,the records relating to income and expenditure are maintained. Besides, cash book, journal, ledger, cheques' issue register, Divisional revenue register,sub-ledgers of advances to suppliers and exmployees and deposits and establishments accounts in respect of payment of pay and allowances etc. to the employees,are also maintained. At the central(Head)office, cash book, cheques issue register, ledger to record the transactions of central office,General ledger for posting of monthly debits and credits statements received from various units, register for accounting the receipt of capital contributions from central/State Government and register of fixed assets etc.are maintained.

5.SCOPE OF C & A.G'S AUDIT. The various transactions and accounting records of the Corporation are audited in accordance with the quantum of audit checks prescribed by the C & A.G of India and also by the AG (Audit)-1 Gujarat from time to time.

The itemwise details of the quantum of audit checks prescribed by the C & A G are frunished in the Annexure.... The C & A G's audit is conducted in the following manner.

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(i) Resident Audit Office(RAO) The Resident Audit Officer mainly conducts audit of the annual accounts of the Corporation compiled and submitted every year by the Central office. Besides, the work of scrutiny of the resolutions of the Board and various committees of the corporation, various rate contracts finalised by the All India Association of Road Transport undertakings(ASRTU)Delhi and checking of various payments made by the central office and also other items as detailed in the Annexure are also done.

The RAO also does the work of issue and pursuance of inspection reports of various units of GSRTC. The Seperate Audit Report on the annual accounts of the corporation is also prepared by the Resident Audit Section and is issued to the State Governemnt and the Management of GSRTC.

(ii) Local audit The commercial audit parties are sent from the CAD Head quarters section to conduct efficiency-cum-propriety audit of the following units of the corporation On Annual basis

(a) Central workshop at Ahmedabad (b)Controller of Stores at Ahmedabad (c)Controller of purchase at Ahmedabad (d) Contributory Provident Fund accounts at Ahmedabad. (e)Gratuity Fund Accounts in respect of Class I, III & IV enployees at Ahmedabad. (f)Gratuity Fund accounts in respect of Class II employees at Ahmedabad (g) Printing press at Ahmedabad

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On Biennual basis Sixteen units/divisions located at Ahmedabad, Nadiad,Surat, Baroda,Mehsana, Rajkot, Junagadh, Bhuj, Bhavnagar, Himatnagar, Bulsar, Godhra, Palanpur, Amreli and Broach and Chief Civil Engineering Department in Central Office, Ahmedabad.

The above frequency will vary depending upon availability of man power for local audit.

6.1 AUDIT OF ANNUAL ACCONTS OF THE CORPORATION The annual accounts of the Corporation are to be prepared in such form as may be prescribed by the State Government in consultation with the Comptroller and Auditor General of India under Section-33(1) of the Road Transport Corporations' Act,1950. These accounts comprise of P & L Account,Net revenue and appropriation account and the Balance Sheet. The annual accounts of the corporation are audited by the Comptroller and Auditor General under Section - 33(2) of the Road Transport Corporations' Act 1950.

While auditing the annual accounts of the corporation, the checks that are generally exercised by the commercial auditors in respect of P & L Account and Balance sheet are to be applied by audit parties. The entries from the cash book, journal and purchase day book etc. are traced in the ledgers for the prescribed number of months. The closing journal entires are checked, the totals of the ledgers are then checked and the accuracy of the trial balance is verified. The annual accounts are then checked with reference to the trial balance and various subsidiary ledgers/records. It should be ensured that the entire income and expenditure including those relating to consumption of stores/fuel for the entire year have been accounted for.Further, it should also be ensured that the depreciation on fixed assets has been fully provided for in the accounts.

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The annual accounts of the corporation are received initially as" Tentative Accounts" in Resident Audit Office. After its audit, the draft comments on the accounts duly approved by the Deputy Accountant General(Commercial) are issued by RAO to the Management. Lateron, the annual accounts duly adopted by Board of Directors of the corporation rectifying the defects/mistakes pointed out on tantative accounts are received by the RAO who, after its audit and also after considering the replies to the draft comments on tentative accounts from the corporation, prepares the Draft Audit Report/Seperate Audit Report which is issued to the State Government and the Corporation after obtaining approval thereto from the AG/C &AG. While issuing the Seperate Audit Report, a copy of the certified annual accounts is also attached therewith. The audit certificate is enfaced as per approved format. The State Government is requested to place the Seperate Audit Report before the State Legislature under the provisions of Section - 33(4) of the Road Transport Corporations' Act 1950. A copy each of the SAR and certified accounts is forwarded to the State Government, vice Chairman-cum-Managing Director of the corporation and C& A G of India. Two printed copies of the SAR and certified accounts are also sent to the C & A.G.

6.2 FORMAT OF AUDIT CERTIFICATE The form of Audit certificate to be furnished on the annual accounts of the corporation is as under.

AUDIT CEERTIFICATE

I have examined the foregoing accounts and balance sheet of Gujarat State Road Transport Corporation. I have obtained all the informations and explanations that I have required and subject to the observations in the Seperate Audit Report, I certify, as a result of audit that,in my opinion these accounts and balance sheet are properly drawn-up so as to exhibit a true and fair view of the state of affairs of the Corporation according to the best of information and explanation given to me and as shown by the books of the Corporation.

Ahmedabad Dated__________

ACCOUNTANT GENERAL(AUDIT)

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7.EFFICIENCY-CUM-PROPRIETY AUDIT OF THE CORPORATION.

Every year, the review of selected activity of the corporation is conducted by our office The review, duly approved by the C & A.G of India, is incorporated in the Audit Report(Comml) of Government of Gujarat..

The audit of the corporation is mainly directed to ascertain as to how efficiently and effectively the men, machines and vehicles etc have been utilised. The audit may have to rely on the operational statisics collected and maintained by the corporation, for the purpose of audit. However,before utilisation of the statistical figures, for framing audit comments, it should be satisfied by the test-check as to whether the method of collection of data and the accuracy of data collected are reliable.

The following important aspects of the working of the corporation may be looked into at the time of efficiency-cum-propriety audit; (i) Fleet acquisition and the system of its scrapping and replacement, (ii) Fleet utilisation, (iii)Analysis of growth and operations, (iv)Profitability analysis, (v)Performance analysis of the central workshop and Divisional/Depot workshops, (vi) Consumption analysis of various materials, (vii) Manpower anlysis, (viii)Analysis of inventory of materials, (ix)Working results, (x)Internal control systems.

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The Resident Audit Officer/GSRTC maintains Audit Note Book in respect of Central Office and each unit of the corporation which details various items of work to be checked in audit,the procedure of checking of these items and also the prescribed quantum of audit checks to be exercised during the course of audit. The Audit Note Books are sent to the Commercial audit paries conducting the audit of various units of the Corporation before the commencement of an audit programme, for their guidance. The members of the audit parties put their signatures in support of having checked each item of the work, in the Audit Note Book.

8.

ORGANISATIONAL SET-UP

The organisational/administrative set-up of the corporation is furnished in Annexure.

The organisational set up of the Accounts Department of the Corporation and the duties and responsibilities of various officers working in it is mentioned in Chapter III of the Accounts Manual.

PURCHASE PROCEDURE

The purchase procedure of the corporation is dealt in Chapter XIII of the Accounts Manual of the Corporation.

10.

INVENTORY CONTROL

The Corporation has adopted of a system of inventory control under which the various items of stores are classified as A,B & C on the basis of its consumption value. These items are further grouped as fast-moving, slow-moving and non-moving. The inventories are kept under control by constant review and monitoring. The chapter-XII of the Accounts Manual deals with the Stores Accounting Procedure.

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11.

COST ACCOUNTING SYSTEM/COST CONTROL.

The Statistical Department in Central Office of the Corporation collects from operating divisions and other units, periodical reports relating to productivity, efficiency,quality and size of operations, profitability and public amenitiies etc, and submits after its analysis, to the management for current as well as future planning. It provides basic information system for control of operations through regular analysis of cost and various operational indices. The monthly notes showing cumulative results of operational indices and cost analysis are prepared by this Department and the attention of Divisional Controllers is drawn periodically for improvement in the operations.

The Chapter XV111 of the Accounts Manual deals with the cost accounting procedure to be followed by the Central Work shop,Ahmedabad.

12.

BUDGETORY CONTROL SYSTEM.

The Annual Budget prepared by the Corporation presents a broad financial picture of the estimated receipts and estimated expenditure for a financial year under the major,minor,sub and detailed heads of accounts and it is submitted before the Corporation on or before the first day of December of the previous year and after its approval by the Corporation,it is forwarded to the State Government for its approval on or before the 15th December. On receipt of the approval of the State Government by 15th January ,the Budget grants are allocated and communicated to the spending Departments. Budgetory control on expenditure is exercised in accordance with the prescribed procedure,as dealt with in Chapter X and paragraphs 50 to 52 of the Chapter XV1 of the Accounts Manual.

13

DELEGATION OF POWERS.

As per the provisions of Clause-12 of the RTCs Act,1950, the Corporation has delegated from time to time various financial,administrative and other powers to its various Committees and Officers for smooth and more effective running of the administration and to quicken the process of decision-making.

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14.

MANUFACTURING PROCESS AND REPAIRS AND MAINTENANCE PROCEDURE.

The corporation does not undertake any manufacturing activity.The central workshop builds bodies on the bare-chasis for new vehicles as well as builds new bodies on old chassis with the help of various components fabricated in various shops of the work shop. The workshop also undertakes the jobs of reconditioning of engines and retreading of tyres. A tyre retreading plant is installed in the workshop. The reconditioning of engines is done in engine/machine shop of the workshop.The following processes are involved in the reconditioning of the engines.

(i) Stripping of engines received for reconditioning,from operating units. (ii) Inspection of various components of engines. (iii) Repairs to components (iv) Assembling of components. (v) Testing of engines on test-bed.

Besides,the tyres are retreaded in the tyres' retreading plants located at Rajkot, Bharuch, Bulsar, Palanpur, Amreli and Godhra operating units.This work is done through hot or cold process.

The repairs and maintenance procedure as devised vide GSO-521 is to be followed by fifteen operating units and 136 depots of the corporation.

15.

SALES AND PRICING POLICY.

The primary sale effected by the corporation is the sale of service. It is in the form of sale of tickets to the travelling public, providing its vehicles on hire basis under"casual contract service", parcel traffic,building of bus bodies on behalf of Government Departments, providing the space on the operating vehicles for advertisement and sale of scrapped vehicles, scrap materials and obsolete/non moving spare parts etc.

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The scrap materials are disposed-off by auction for which the advertisement inviting the bidders for attending the auction is given in the news-papers. The corporation has recently switched over to the disposal of scrap of major groups by inviting tenders and then enter into annual rate contract. The upset price of scrap items is fixed by a committee and any offer received above the up-set price will form the selling price over which the sales tax applicable is also charged from the purchaser.

The bus tickets are printed in the printing press of the corporation. The tickets are handed over to the divisions who in turn, hand it over to various depots working under the division for its use by the conductors on the scheduled routes.

16.

INTERNAL AUDIT.

The Chief Accounts Officer and Financial Adviser(CAO & FA) of the corporation has been entrusted with the work of internal audit of various accounting books and other records maintained in Central Office and various divisions/depots.The internal audit is conducted by two paripatetic Audit Parties and inspectors of accounts in the manner and to the extent determined by the CAO and FA from time to time. The internal audit procedure is detailed in paragraph-1 of Chapters X1,Chapters XV and XV1 of the Manual of Accounts Department Vol-1.

17.

MAINTENANCE OF SERVICE BOOKS AND LEAVE ACCOUNTS.

The service books and leave accounts of employees of the Corporation are maintained by Head Office and various divisions and depots where the employees are working.

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18.

PROVIDENT FUND AND MEDICAL EXTENDED TO THE EMPLOYEES.

BENEFITS

FACILITIES

The regulations governing the "Bombay State Road Transport Corporation Contributory Provident Fund" are contained in Chapter-VII of the State Transport Employees Service Regulations. A Provident Fund section is working in the Central Office of the Corporation. The Corporation's monthly matching contribution to the CPF,equivalent to the employees' Contribution at the rate of 10 percent of their pay plus DA, is accumulated and is invested in Government securities.

The Corporation has extended the facility of reimbursement of medical expenses incurred by its employees for treatment taken from GSRTC dispensaries, Government Hospitals and Municipal hospitals and dispensaries etc registered under Trust Act.

19.

SPECIAL POINTS TO BE SEEN DURING AUDIT OF THE CORPORATION.

(i) Review the purchase procedure of the corporation and see that it is followed strictly.See that the purchases are made at economical rates and the suppliers fulfil their commitments. Analyse the cases where the purchase orders have been placed at higher rates on the suppliers who could not fulfil their earlier commitments made in the past.

(ii) Review the purchase policy of awarding of rate contracts and see that the rate corresponds to the rate as per the rate contracts awarded by the All India Association of State Road Transport undertakings (ASRTU).New Delhi.

(iii)Analyse the number of vehicles off-road with reference to the fleet of vehicles and ascertain the reasons for keeping the vehicles off the road. Whether the claim for the refund of the road tax paid if any, in advance to the Regional Transport Authority(RTA)in respect of off-road vehicles has been preferred in time and such claims are got settled expeditiously

(iv) See as to whether the norms for the average number of the vehicles remaining under breakdown at a time have been fixed, if so these norms are strictly followed. Analyse the variation if any, with reference to the norms fixed.

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(v) Review the ratio between the dead kilometers and effective kilometers from year to year and see that the ratio does not show an upward trend. Analyse the variations if any.

(vi) Account for the causes for the accidents and see as to whether the mechanical causes of the accidents are the result of bad repairs and maintenance of the vehicles. Review the repairs and maintenance facilities available with the Corporation and see that the facilities are adequate with reference to the fleet position.

(vii) Review the activities of the Central Stores, Divisional Stores and Depot stores and see that the non-availability of the spares/materials in any store is not responsible for holding-up of the vehicles from operation for a longer period in the work shops.

(viii)Review the account of receipt and consumption of tyres and see that proper accounts have been kept. Further, the management has analysed the reasons for the over-run tyres and has taken adequate action for such tyres. Further, the tyres are sent for its retreading in the tyres retreading plants. See that the capacity of tyres retreading plants is fully utilised.

(ix) Review the rate of consumption of fuel and see that it is not more than the norms fixed. Also see that the excess consumption of fuel has been analysed and the remedial measures have been taken in this regard. See that the scheme of incentive for saving of fuel is strictly implemented and no irregular payment is made on this account.

(x)Compare the budgetted revenue with the actual revenue realised and analyse the variations if any.

(xi) Review the results of surprise-checking of the vehicles on route to plug the leakage of revenue if any. Also see that adequate action is taken on the delinquent operating staff.

(xii)Review the action taken by the Management for the control of the increase in the administrative cost of the services. (xiii) See that the management has introduced/followed a proper system of costing as regards the operation of the services and for various jobs undertaken in the workshops.

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(xiv)See as to whether the investment has been made in respect of the accummulations under contributory Provident Fund as per the provisions of the Service Regulations (xv) Resident Audit Officer/GSRTC may constantly monitor and follow up to ensure that the annual Accounts of the Corporation are received in time and after its audit, the Seperate Audit Report is issued to the State Government, within the time scheduled prescribed.

(xvi) Check the account of printed tickets and see that it is properly maintained and there are no lost tickets.

(xvii)Review the system of reconciliation of revenue realised with the tickets issued to the conductors from time to time. (xviii)Review the utilisation of the workers and the workshops and see that the idle time payment has been justified. Also review the overtime wages and honorarium paid if any,despite under utilistation of the capacity of the workshops.

(xix) Review the execution of various jobs undertaken by the Central Workshop, Ahmedabad and analyse the progress made. Verify that the annual targets fixed in respect of the building of bodies of vehicles,utilisation of installed capacity of the machines and productivity of labour are achieved.Analyse the variations if any. Analyse and comment the cases of excess consumption of materials if any.

(xx) Review the internal audit system being followed by the corporation. Ascertain as to whether the Internal Audit is adequate with reference to the volume of financial transactions. See as to whether the internal Audit reports are submitted to the management and proper remedial action is taken thereon.

(xxi) Analyse the reasons for uneconomic routes,the operation of which is continued by the corporation inspite of the loss incurred on such routes

(xxii) Review the system of award and execution of various civil works and ascertain that the targets of completion are achieved. Analyse the variations if any.

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CHAPTER-LVI GUJARAT STATE FINANCIAL CORPORATION

1. INTRODUCTION Gujarat State Financial Corporation was established on 1st May 1960 under Section-3 of the State Financial Corporation Act, 1951. The authorised share capital of the Corporation as on 31st March 1995 was Rs 100 crores divided into one crore shares of Rs 100 each.

2. APPLICABILITY OF ACTS AND RULES ETC The Corporation follows to State Financial Corporations Act 1951 and its rules framed thereunder.

3. MAIN OBJECTS OF THE CORPORATION The main objects of the corporation are as under. (i) To grant loans and advances or to subscribe to the debentures of industrial concerns. (ii)To underwrite and to subscribe to the shares, bonds and debentures of industrial concerns. (iii)To guarantee loans and deferred payments raised by industrial concerns in the open market or from the scheduled banks or State Corporation banks and (iv)to act as an agent of the Central or State Government or Industrial Development Bank of India or Industrial Finance Corporation of India or other financial institutions, in respect of the matters connected with or arising out of the grant of loans and advances or subscription to the debentures of industrial concerns.

4.1. ORGANISATIONAL SET-UP The management of the corporation is vested with a Board of twelve Directors including the Chairman and Managing Director,who are nominated by the State Government, Reserve Bank of India, Industrial Development Bank of India Insurance Companies and LIC of India etc;

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Besides, the Executive Committee, Personnel Committee and Staff Selection Committees have been constituted by the Board of Directors. The Managing Director is the Chief Executive Officer of the Corporation who has been delegated specific powers to sanction loans and to write off or re-schedule the loans, granted to various assisted industrial units. The Managing Director is assisted by the General Manager(A&D), Joint General Manager(Rec), Joint General Manager(PLG & Sec-B), Joint General Manager(Legal), Joint General Manager(FR &A/c) and Joint General Manager(R & A). The organisation chart of the corporation is furnished herewith

4.2. ACCOUNTING ORGANISATIONAL SET UP The Joint General Manager (Finance Resources and Accounts) is the head of the Accounts Department. He is assisted by a number of Managers/Joint Managers.

5. DELEGATION OF POWERS The Board of Directors had delegated vide circular No. GSFC/PER:POL:OS4:11(93-94):16487 dated 5th November 1993. Various personnel, Administrative and Human resources Development Powers to various officers of the corporation.

6. BOOKS AND RECORDS MAINTAINED BY THE CORPORATION The Corporation maintains the following Books of Accounts and Records. 1. Cash Book 2. Bank Book 3. Journals 4. General Ledger. 5. Fixed Assets Register. 6. Sub Ledger for each loanees' Account

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7. MANAGERIAL INFORMATION SYSTEM The Corporation has a well established system of compiling and obtaining through the computer various reports regarding sanction, disbursement and recovery of loans from the assisted units, from its various departments in the Head Office and the regional offices located at Ahmedabad, Rajkot, Valsad, Baroda, Surat, Bhavnagar and Mehsana and sub regional office at Surendranagar in Gujarat and Bombay in Maharashtra. Besides, various other items of work as per the details in the Annexure are done in Managerial Information System by the Corporation.

8. PROCEDURE OF INTERNAL AUDIT The Corporation has engaged a firm of Chartered Accountants who carry out the Internal Audit work.

9. FINANCIAL MANAGEMENT Apart from the share capital, the corporation has obtained loans from the State Government and Industrial Development Bank of India. The Corporation has also availed long term borrowings in the form of bonds, debtentures, and fixed deposits from the State Government,

Industrial Development Bank of India and others. A "Resources Cell" is working under Joint General Manager( F &A)who prepares business plans of the Corporation and uptodate fund-flow position.

10. PROVIDENT FUND AND MEDICAL BENEFITS EXTENDED TO THE EMPLOYEES. The Corporation has framed its own service Regulations called" GSFC (Staff) Regulations, 1961 "under section 48 of the State Financial Corporations (GSFCs) Act 1951.

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The Corporation has its own Provident Fund Trust. The Managing Director and Joint General Manager (P& A) are its administrators. The Corporation deducts every month 10% of monthly emoluments of its regular employees and an equivalent amount is contributed to the Provident Fund by the Corporation also. The C.P.F. amount is invested by the Corporation in the approved Government Securities and bonds. The withdrawal from CPF upto 90% is allowed to retiring employees before one year of their retirement. Further, the loans(refundable and non refundable) are also sanctioned to the employees from the Fund

The medical expenses upto Rs 500 per year are reimbursed by the Corporation to each employee. This benefit may be accumulated upto two years i.e. upto the limit of Rs 1000. The special cases, as detailed in rule 109 of the Staff Regulations 1961 may be sanctioned by the Board of Directors.

11. SERVICE BOOKS/LEAVE ACCOUNTS The Corporation maintains the service books and leave accounts ledgers of its employees in Personnel Department in Head office at Ahmedabad and also at various regional offices.

12. PURCHASE AND REPAIRS/MAINTENANCE PROCEDURES. The Administration Department of the Corporation procures annually the stationery articles after assessing its requirement on the basis of previous years consumption and the stock on hand etc. These articles are procured by inviting tenders from various suppliers through advertisement in newspapers and orders are placed at the quoted lowest rate. The purchase of water cooler and other small items is made under " D.G.S & D rate contract.

The corporation enters into annual maintenance contracts for upkeep of certain facilities. The following areas/activities are covered under annual maintenance contracts:

(i) Computers (ii)Air-conditioners (iii) Type writers (iv) Water Purifiers (v) Water coolers (vi)Computer Stationery.

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The annual maintenance contracts are entered into after floating quotations inviting the rates etc. from various leading contractors and if required, discussions are held with them before placing the rate contract.

13. SPECIAL POINTS TO BE SEEN DURING AUDIT.

(i) Examine the criteria for grant of loans by the Corporation and see that it is in the interest of the Corporation

(ii) Examine various schemes of the Corporation for grant loans and see that there is no avoidable delay in sanction and release of the loan.

(iii)Examine cases of the margin of security for grant of loans and see that the security is adequate to safeguard the interest of the Corporation in realising their dues.

(iv) Examine the cases relating to the defaulting loanees to see that there is any failure of the management in initiating appropriate and timely action for recovery of outstanding instalments of principal and interest etc.

(v) Assess the performance of Recovery Department of the Corporation and see that the Corporation is not forced to write off dues on the plea of their nonrealisability and/or insufficient security.

(vi) Examine the cases of refinance received by the Corporation from IDBI and see that there is no disparity between the interest and principal repaid by the Corporation to the loanees under refinance scheme.

(vii) Examine the investments of the Corporation in the shares/debentures of other companies and see that these are remunerative

(viii) Examine the Internal Audit Reports and see that timely action on the audit observations is taken by the management. Analyse and comment upon the major lapses of the management as brought out in these reports.

(ix) Check the hypothecation/mortgage deeds and see that proper valuation has been made in respect of land, building and sheds etc.

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(x) Scrutinise the cases where the loan has been sanctioned/released for the second time though the loanee was either defaulter or irregular in payment of the instalments of principal/interest.

(xi) Enlist the cases where outstanding dues have exceeded the depreciated value of the securities.

(xii) Review the annual budget and the target fixed for performance and critically analyse the variance, if any. Review the annual business planned performance review by IDBI.

(xiii) Ascertain as to whether the separate Audit Report of the C & AG of India and issued to the State Government/Management by our office has been placed on the floor of the State Legislative Assembly.

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Annexure DETAILS OF WORKS DONE IN MANAGERIAL INFORMATION SYSTEM IN GUJARAT STATE FINANCIAL CORPORATION

1.

Compiling of various statements. a) b) c) d) e) 22 different monthly MIS statement. Monthly statement to be submitted to Board. Various quarterly statements for IDBI / SIDBI, banks etc. Monthly SC/ST statement 21 statements for Annual Report.

2. Publicity work viz. releasing advts. in various newspapers/magazines.

3.

Preparation of Annual Report(Text &Ptrg.)

4.

Compilation & maintenance of various statistical data.

5.

Preparation of product Study Reports

6.

Arranging seminars,participating in Industrial Exhibitions etc.

7.

Publishing of quarterly magazine.

8.

Furnishing required details when Assembly is in session(round the clock).

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CHAPTER-LVII GUJARAT STATE WAREHOUSING CORPORATION

1.

INTRODUCTION

Gujarat State Warehousing Corporation was established on 5th December 1060 under section 28 of the Agricultural produce(Development and Warehousing)corporations Act,1956 (replaced by the Warehousing Corporations Act 1962).

The authorised share capital of the Corporation as on 31st March 1995 was Rs Six crores. The paid up share capital as on that date was Rs.four crores which is subscribed equally by the central Warehousing Corporation and the Government of Gujarat. 2.APPLICABILITYOF ACTS AND RULES. The Warehousing Corporations Act,1962 and Gujarat State Warehousing Corporation Rules,1964 are applicable to the Corporation also follows the following rules and regulations.

(i) G.S.W.C. Employees Gratuity regulations. (ii)G.S.W.C. Employees Provident Fund Rules and (iii)G.S.W.C. Employees Housing regulations.

3. BOOKS AND RECORDS MAINTANED BY THE CORPORATION. The Corporation maintained the following books and records. (a)Main Cash Book (b)Petty cash book (c)Journal (d)Profit and loss account Ledger (e)Balance sheet Ledger. (f)Security deposits and Centres accounts ledger. (g)Bank Ledger. (h)Warehouse charges register

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(i)Bank Deposits register (j)Pay sub-Account Register (k)T.A. sub-Account Register (l)Rent Sub-account Register. (m)Detailed contingent expenses account register. (n)Telephone Expenses register

The books of accounts are audited by the internal auditors of the corporation before Statutory Auditors

4.1

ORGANISATIONAL SET-UP OF THE COMPANY.

The management of the Corporation is vested with the Board of eleven Directors including Chairman and Managing Director.Five Directors are nominated by the Central Warehousing Corporation,New Delhi and another five Directors are nominated by the State Government. The Chairman of the Board is appointed by the State Government.in consultation with C.W. C., New Delhi. He is assisted by Deputy General Manager, Secretary ,the six Managers(port)Inspection, storage,Engineering and commerce and Accounts Officer. The Warehousing Managers and their subordinate are working in the field in various Warehousing.set up.

4.2. ACCOUNTING ORGANISATIONAL SET UP The Accounts Officer is the head of the Accounts Department in the head office and he is assisted by the Sr.Accountants,internal auditors, junior Accountant cum-cashier and clerks/.Assistant,

5.

MAIN OBJECTS OF THE CORPORATION.

As per Section-24 of the Warehousing Corporations Act,1962,the functions of the State Warehousing Corporation are as under:

(a) To acquire and build godowns and Warehouses at such places within the State as it may decide with the prior approval of the Central Warehousing Corporation.

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(b) To run Warehouses in the State for the Storage of agricultural produce,seeds,manures,fertilizers, agricultural implements and notified commodities.

(c) Arrange facilities for the transport of agricultural produce, seeds, manures,f ertilizers,agricultural implements and notified copmmodities to and from warehouses;

(d) To act as an agent of the Central Warehousing Corporation or of the Governemnt,for the purpose of the purchase ,sale,storage, and distribution of agriculatural produce,seeds,manures,fertilizers,agraicultural implements and notified commodities and (e) To carry out such other functuions as may be prescribed by the Central/State Government through amendment in the Act.

PRESENT ACTIVITIES OF THE CORPORATION.

The Corporation carries out Warehousing Activities of the storage handling and transport of "Centre for American Relief Everywhere" W.F.P(World Fund Programme). The Corporation has also undertaken the public bonded warehousing activity and creation of a network of rural godown under the National Civic of Rural Godowns Scheme" It is also Containers Freight Station Department at Dashrath near Baroda.

7. DELEGATION OF POWERS. The Board of Directors has constituted an Executive Committee consisting of Chairman,Managing Director and other three Directors. The Committee shall be competent general and special directions of the Board of Directors. For day today management the Managing Director is empowered to sanction all major payments.A.O may issue the cheques for payments upto Rs 10,000, However beyond this limit,and one of that M.D.,Manager(storage),Manager(Port) and Deputy General Manager may sign the cheques jointly with the Accounts Officer.

8.

MAINTENANCE OF SERVICE BOOKS AND LEAVE ACCOUNTS.

The Corporations Administration branch maintains the service books and leave accounts of its employees

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9.

PREPARATION OF MANUAL BY THE CORPORATION.

As informed the corporation has prepare its Accounting Mannual and storage Manual dealing with various accounting policies and procedures and maintenance of stores accounts which may be referred to,during audit,

10.

REPAIRSS AND MAINTENANCE PROCEDURE.

The Corporation follows the rules and regulations of Public Works Department with regard to the repairs and Maintenance of own warehousing and other buildings and vehicles etc.

11. PROVIDENT FUND AND MEDICAL BENEFITS EXTENDED TO THE EMPLOYEES. The Corporation extends Provident Fund benefit to its employees as per the rules of the Corporation.

The Medical benefit is also extended to the employees as per rules of the Government of Gujarat.

12.

BRANCHES OF THE CORPORATION.

The Corporation is having 49 centres which are spread over the entire State of Gujarat for Warehousing and other activities. The centres maintain stock register,Depositors register,Warehouse crecipts,cash receipts and cash book etc.

13. SPECIAL POINTS TO BE SEEN DURING AUDIT.OF THE CORPORATION. (i)Review the storage capacity of various warehouses of the corporation and see that it has been properly utilised. Account for the reasons of under utilisation of capacity of warehouses.

(ii) Determine the ratio between own storage capacity and hired storage capacity and account for the variation.

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(iii) Review the quantum of storage transit loss and stored handling loss and compare it with the norms of storage.

(iv) Review the cases for award of civil works and see that every possible effort has been made to get the work done at minimum cost and there is no loss due to delay in execution of work.

(v) See that proper accounts have been kept in respect of the funds received from the Central and State Governments and the funds are spent for the purpose for which the funds are received.

(vi) Review the policy of fixation of warehousing charges and see whether it covers all the operational cost and the rates of warehouse charges are revised from time to time.

(vii) Review the expenditure budget of the Corporation and see that budgetary control is exercised properly.

(viii) Review the performance of internal auditors and ascertain the action taken on their objections.

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CHAPTER:LVIII

Gujarat Industrial Development Corporation.

1. Introduction. Gujarat Industrial Development Corporation was established on 4th August 1962 under the Gujarat Industrial Development Act, 1962 (XXIII of 1962) with the object of securing and assisting in the rapid and orderly growth and organisation of small and large industries in Gujarat State.

The audit of the accounts of G.I.D.C. was entrusted to the Comptroller and Auditor General of India under Section-19(3) of the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971 initially for a period of five years w.e.f. 24th June 1977. However, it was later on extended from time to time upto 1991-92. The Government of Gujarat vide its Resolution No.DAP/1084(2)/1967/GL dated 6th March 1992 has now entrusted the audit again to the Comptroller and Auditor General for a period of five years from 1992-93 to 199697.

The Corporation obtains grants, loans and subsidies from the State Government for development of Industrial Estates.

2. Applicability of Acts and Rules etc.. The following Acts and Rules etc. are applicable:

(i) Gujarat Industrial Development Act (G.I.D. Act), 1962. (Gujarat Act No.XXIII of 1962).

(ii) Gujarat Industrial Development Rules, 1963.

3. Books and records maintained. The Corporation maintains all accounting records such as; Cash book, Bank book, General ledger, subsidiary ledger and recovery ledger etc..

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4. Main objects and present activities of the Corporation. As per Section 13 (Chapter-III) of the G.I.D. Act, 1962, the functions of the Corporation are as under:

(i) Generally to promote and assist in the repaid and orderly establishment, growth and development of industries in the State of Gujarat, and

(ii) In particular and without prejudice to the generality of clause(i) to

(a) Establish and manage industrial estates at the places selected by the State Government;

(b) Develop industrial area selected by the State Government for the purpose and make them available for undertakings to establish themselves;

(c) Develop land on its own account or for the State government for the purpose of facilitating the location of industries and commercial centres thereon;

(d) Assist financially by loans to the industries to move their factories into such estates or areas, Undertake schemes for providing industrial units and commercial establishments with such structures and facilities as may be necessary for their orderly establishment, growth and development;

(e) Promote, organise, sponsor or undertake schemes or works, either jointly with other Corporate bodies or institutions, or with Government or local authorities, or on an agency basis, in furtherance of the purposes for which the Corporation is established and all matters connected therewith.

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5.1. Organisational Set-up. The management of the Company is vested with the Board of Twelve Directors including the Chairman, Vice Chairman and Managing Director. Most of the Directors are nominated by the State Government, Gujarat Electricity Board and Gujarat Housing Board each appoints one director on the board of Directors of G.I.D.C.. The Vice Chairman and Managing Director is assisted in day-to-day management by Joint Managing Director, five General Managers (Allotment, Finance and Accounts, Land, Development and Recovery etc.), Chief Accounts Officer, Chief Engineer, Chief Project Manager (C.P.M.) and Superintending Engineer etc.. In field General Managers are administrative heads and Superintending Engineers are the technical heads who are assisted by various subordinate officers and staff. The Corporation has various regional and divisional officers all over Gujarat.

5.2. Accounting Organisational Set-up. The Chief Accounts Officer is the head of Finance and Accounts Department who is assisted by two Dy.Chief Accounts Officers (Cost and Finance). Besides, Sr.Accounts Officer (Revenue) and three Accounts Officers also assist the Chief Accounts Officer in day-to-day work.

6. Delegation of powers. The Corporation has delegated various Financial, Administrative and Miscellaneous powers to its various officers vide Booklet on delegation of powers which may be referred to during audit.

7. Managerial information system. The Corporation complies various data regarding capital expenditure, recovery, resources-mobilisation, planning and allotment etc. on monthly basis and the same is submitted to the management. The details are obtained from various field offices.

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8. Purchase procedure/Inventory control. The stores branch of the Corporation is procuring the stationery and furniture etc. after assessing the requirement of various materials. The rates are invited through the inquiries issued to the suppliers or through public notices depending upon the amount of the purchases. The rates are compared and proposal for purchase is submitted to the appropriate authority for approval. The purchase orders are placed on the basis of the approval. After inspection of the material received, it is entered in the stock register and issued as per the requirement.

9. Sales and pricing policy. The sales policy of the Corporation is that the plots/sheds as well as other buildings are allotted on "hire purchase basis" where 25 percent of the cost is received as down-payment and the balance amount is recovered in eight years after allowing moratorium period of first two years during which the interest only is recovered quarterly.

The pricing policy is decided by the Board of Directors on the basis of estimated cost of land and expenses incurred for its development. Interest and other overheads are added to the cost. the general policy of the Corporation is based on "No profit no loss".

10. Procedure for internal audit. The Corporation has engaged the services of professional internal auditors for internal audit of its various records.

11. Inventory control system. The inventory of plots, sheds, quarters and other buildings of the Corporation is reviewed in the meeting of Heads of various Departments and necessary steps for control of inventory is taken by the management.

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12. Budgetary/Cost control systems. The Corporation prepares Annual Financial Statement which is submitted by 1st February every year to the State Government for approval. This statement (Form "A") is accompanied by Forms "B & C" dealing with the annual plan of work on various schemes, pay and allowances of the Board's members, officers and staff members etc..

The Corporation prepares cost sheet for sheds, canteens, godowns and shops etc..

13. Provident Fund/Medical benefit. The Corporation has framed "The G.I.D.C. Contributory Provident Fund Regulations 1970" and "G.I.D.C. Employees (Medical reimbursement) Regulations 1972" which may be referred to during audit for ascertaining the rules regarding Provident Fund and Medical benefits extended to the employees.

The Corporation pays every year Rs.500/- as medical relief and medical reimbursement upto Rs.900/- each year to each employee.

14. Service Books and Leave accounts. The Corporation maintains service books and leave accounts of its employees as per the provisions of "The G.I.D.C. (Staff) Regulations, 1963."

15. Repairs and maintenance procedure. The Corporation has fixed norms for normal maintenance of water supply components like overhead tank, sumps, water supply pipe lines, pumping machineries and other allied structures, roads and storm water drainage and Buildings/sheds, quarters and godowns etc.. The Executive Engineers may arrange such repairs and maintenance. In case the repairs charges exceed Rs.10,000 the contract is awarded after inviting tenders. For special repairs, the regional managers and Divisional Managers are empowered to do so with the concurrence of Concerned Industries Association.

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16. Special points to be seen during audit.

(i) Review the project estimates and see that the deviation from estimates is properly analysed to ascertain the avoidable reasons and remedial action is taken by the management.

(ii) Examine the contracts for civil construction works and see that the final bills have been paid/adjusted . Check the final bills with reference to the terms and conditions of the Contract and Measurement books etc..

(iii) Review the purchase procedure and purchase orders for supply of materials and see that the delivery schedules as per the purchase orders are strictly adhered to and there is no loss due to delayed or sub standard supplies of materials.

(iv) Review critically the method of allotment of plots/sheds/houses/Godowns etc. and see that the procedure adopted fulfils the objectives envisaged in the schemes.

(v) Ascertain as to whether the Separate Audit Report is placed every year on the floor of the State Legislative Assembly.

(vi) Review the cases for award of civil works and see that every possible effort has been made to get the work done at minimum cost and there is no loss due to delay in execution of the works.

(vii) Review the scope of work of the internal auditors and see that it is adequate with reference to the volume of financial transactions of the Company.

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CHAPTER LIX ORGANISATIONAL CHART OF COMMERCIAL AUDIT WING OF IA & AD

Comptroller and Auditor General of India

Addl. Dy.CAG (State Audit Report)

Director (Comml.) & Member Secretary Audit Board

Dy. CAG & Ex.Officio Chairman Audit Board (Central Public Sector (undtertaking)

Pr. Director (Commercial)

Admn. Officers I/C C.A. I to C.A. V Sections Accountant General (Audit), Ahmedabad

Dy. Accountant General (Inspection Commerciual)

Audi Officer I/C. Comml. Audit Deptt.. Head Quarters Sections

Audit Officer (C) I/C. Comml.Audit Deptt. Audit Report (Comml.) Section

Audit Officer I/C. Comml. Audit Field Parties

Resident Office Gujarat Electricity Board Gujarat State Road Transport Corpn. Sardr Sarovar Narmada Nigam Ltd.

AAO/SO

AAO/SO

AAO/SO

AAO/SO

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CHAPTER-LX

Books suggested for reading.

1. Bare Acts. i) ii) iii) iv) Companies Act, 1956. * Income-Tax Act, 1961. All Commercial and Taxation Laws. All Labour Laws.

2. Department publications.

i) ii)

Comptroller and Auditor General's Manual of Standing Order (Audit). * Manual of commercial Audit Procedures relating to Commercial Audit Wing States - Published by Comptroller and Auditor General (CAG). *

iii) iv) v)

Auditing Standards Published by C & AG. * Audit Reports (Commercial) of Gujarat and Other States. Recommendations of the Committee to suggest measures to improve methodology of audit of Public Sector Undertakings.

3. Publications of ICAI/ICWA.

("Guide to Company Audit" Published by ICAI.) *

i)

Compendium of statements and standards on Accounting published by ICAI.

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ii)

Compendium of Auditing Standards published by ICAI. *

iii)

Chartered Accountant Magazine. *

4. Reference books. i) ii) iii) iv) Government auditing - by Ashish Publication. Auditing Transport Services-Publishers-Ashish Publishing House. Audit of Public utilities. -Ashish Publishing House. Audit Guide by Stoyhayward Publishers-Butter worth. Chapters - 1,4,5,6,16. *These publications should be considered as essential reading by all Staff and Officers of CAD Wing. Books suggested for reading. 1. The Companies Act, 1956 as amended from time to time. 2. Compendium of Statements & Standards on Accounting - published by the Institute of Chartered Accountants of India. 3. Income Tax Act, 1961. 4. All Commercial and Taxation Laws. 5. All Labour Laws. 6. Accounting Manuals, Operational Manuals and Service Rules/Regulations etc. of Government Companies and Statutory Corporations wherever finalised and available. 7. Government Auditing - issued by Ashish Publication. 8. Comptroller and Auditor General's Manual of Standing Orders (Technical) Volumes I & II. 9. The Chartered Accountant magazine published by the Institute of Chartered Accountants of India. 10. Audit Reports (Commercial) of Comptroller and Auditor General of India in respect of Gujarat and other States.

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