Check List for

Sub Contract System & Accounting

System
Areas Check Points
Identification of
Items and Source
- How it is decided that a particular item is to be sub contracted -
Whether fully sub contracted or partially sub contracted.
a. whether make or buy decision is made (MPD!
- Identification of Supplier
a. how Source is identified
b. whether the Suppliers" facilities # capability to meet $
re%uirements is studied
c. whether appro&al of 'orporate (uality is a&ailable
d. In case the sub contract )ets some processes done thru
their sub contractors* whether such parties capability #
facilities are also studied and appro&ed by '(+
,orms -i.ation
and /ther
'ommercials
- Whether norms ha&e been finalised by SS for all part numbers
sub contracted and updated in the master.
- Whether access to update norms )i&en only to SS or any other
department0
- Whether norms are similar for same part numbers sub contracted
in case of multiple sources. In case of difference* what are the
reasons for the same
- Whether rates ha&e been finalised for all sub contract items 1 is
there any pro&isional rate. In case of any such rates* check for
a)ein) of the same
- Whether Purchase /rders specifyin) the terms and conditions
are a&ailable
Schedule &s.
Supply
- Whether schedules are sent to parties* whether it is manual or
throu)h +2P
- Whether parties are meetin) the schedule as )i&en by $ week-
wise. If not* check the impact for production loss.
sset Protection
Measures
- Whether commercial aspects like a)reements* bank )uarantees
and ,o lien certificates are a&ailable from all sub contractors.
- Whether insurance co&era)e is a&ailable for the stock with the
sub contractors.
e. 'heck whether co&era)e includes for stock di&erted by
sub contractors to third parties.
f. 'heck whether the stock holdin) with the parties is within
the limit declared for insurance purposes
Despatch of
Material
- who raises M2M # M3,* who appro&es them
- whether it can be raised only for re%uired %uantities (i.e linkin) to
stock a&ailable with the party and production re%uirement!
- whether raw materials are despatched immediately by Stores
- in case of M3, whether physical mo&ement from ori)inal sources
to sub contract parties* takes place alon) with M3,s
- In case of debitable M2Ms* the basis of determinin) the
%uantities to be sent and rates to be char)ed.
2eceipts of
-inished 4oods
- whether all receipts are accompanied by appropriate documents
- whether any finished materials are di&erted to other parties
without &alid documentation
- in case of finished stock brou)ht in by buyers personally* due to
ur)ency* whether they are entered and re)ulari5ed
2e6ection
- Whether sub contractors acknowled)e the raw materials and
confirm to $ in case of materials re6ections. Whether such
material re6ections are returned immediately to $ in case of
M2M and to ori)inal suppliers in case of M3,.
- Whether the cost of materials is debited to ori)inal suppliers0
- Who bears the transport cost for such despatches and whether it
is reco&ered from ori)inal supplier0
- In case of process re6ections* whether they are returned to unit
re)ularly* whether such returns are properly documented
- Whether scrap#end cut bits are returned to unit re)ularly by sub
contractors. In case if the same is not returned and retained by
suppliers* check whether the cost of the same is suitably
considered in basic price.
7endor (uality
2atin)
- Whether 7(2 for deli&ery and performance are sent to all sub
contractors
- Whether business is )i&en to sub contractors who ha&e been
rated poorly (D # +!. If so* reasons for the same.
- ction taken to impro&e the %uality of &endors.
3oolin)s with sub
contractors
- 'heck the details of tools )i&en to sub contractors
- Monitorin) system for calibration of tools
- re there any non mo&in) tools0 Whether there is a
monitorin) system to retrie&e such tools0
- re there any cases where the component for which tool is
)i&en but the item is not procured from the source and it is
procured from another source* for whom a)ain tool is
)i&en.
Stock Holdin) with
Parties
- whether le&el # norms for stock to be held with each party is
finalised
- (normally stock holdin) with party at any time should not e.ceed
two months billin) &alue 8 bank )uarantee amount!
- if so* whether they are monitored and stock le&els are controlled
- is there any e.cess stock with parties* the reason for such build
up0
Accounting
9pdation#
4eneration of Sub
'ontracts" $ed)er
- Whether M2M # M3, copies are recei&ed by -inance in time
- What are the controls to ensure that all the documents raised by
Purchase are recei&ed at -inance
- Whether they are updated in the system without any delay
- Study the process of )eneration of sub contract led)er and
hi)hli)ht in case of any systemic issues
- 2e&iew how the supply of finished )oods to other units is
captured in the sub contract led)er. What are the controls to
ensure that all such despatches are considered:
2eceipt of Material
ccountin)
Statement and
2econciliation
- Whether Material ccountin) Statements are recei&ed from
parties on a monthly basis. In case of non receipt* whether
payment is withheld
- Whether 2econciliation has been done re)ularly* what is the
periodicity
- Whether reconciliation is done based on I reports on physical
&erification and action is taken0
- Whether the sub contractors are ad&ised the details of
reconciliation and whether they are resol&ed
2e&iew of +.cise
Duty aspects
- 3reatment of e.cise duty (where&er is +D is applicable in case
of M3,s and debitable M2Ms!.
- Whether e.cise challans are returned within ;<= days* if not
debitin) action is done0
2e&iew of supply
of materials on
debitable basis
- In case of debitable M2Ms#M3,s* what are the controls to
ensure that sundry in&oice is raised for all debitable
M2Ms#M3,s.
- 7alidate the commercials in the in&oice i.e e.cise duty* handlin)
char)es* sales ta. etc. Whether it is reco&ered immediately from
parties0
- In case of non reco&ery # delay in reco&ery* the reasons for the
same.
2e&iew of debitin)
action for process
scrap
- How process scrap is worked out
- Whether debit notes for process scrap beyond prescribed limit*
is raised on a %uarterly basis and amount is reco&ered. If not*
what are the reasons0
2e&iew of >ank
)uarantees
- Who is holdin) the custody of bank )uarantees
- Whether they are renewed on due dates
- Whether it is re&oked in time in case of any disputes
- 2e&iew the ade%uacy of bank )uarantee amount
In&entory 'ontrol
- How the stock le&els with the parties are monitored:
- Whether )uide line issued by 'orporate in monitorin) the stock
with the parties (eff =;.=?.=@!* is followed. (s per this )uideline
if stock held with parties beyond ;<= days* debitin) action is to
be initiated includin) handlin) char)es of ;=A.!
2e&iew of ,on-
'urrent Stock
- In case of non current parties (i.e with whom there ha&e been no
transactions! what are the action taken to retrie&e materials #
reco&er the amount.
- +fforts taken to a&oid non current stock in future0
/ther controls
- In case of con&ersion of a party from Sub contract to >/-*
whether all pendin) issues are resol&ed before startin) >/-
transactions
- 2e&iew stock ad6ustments made* study the reasons for
ad6ustment* appro&al and amount of impact
- Is there any ne)ati&e stock reflected in led)er* reasons for the
same* action taken to set ri)ht it.
- Whether insurance premium amount (in case of )lobal insurance
arran)ed by $! is debited and reco&ered
- Whether payments to parties are released in as per credit limits*
is there any delay* reasons for same
- Whether necessary statutory reco&ery like 3DS is done for all
parties. 7erify deduction of 3DS for P> type (partially sub
contract and partly >/-! orders.
- 'heck whether all labour char)es are debited to processin)
char)es (a#c P;B;!.