08 March 2020

(STRICTLY CONFIDENTIAL)
RANKS PETROLEUM LIMITED
Internal Audit (IA) Review Outcome (Initial Draft)
For the month of November and December 2019
__________________________________________________________________________________

As part of regular Audit work, Internal Audit (IA) has reviewed the transactions (Payment) of RKPL for
the month of November2019 – December 2019. We have thoroughly reviewed the payment voucher
and try to confirm the accuracy, authenticity, justification, compliance, processed and other controls
RKPL daily transactions, and noted following irregularities for management consideration. During the
review, Audit team has noted the following point for management attention and reduce the gap in
future;

1.0 Utility bill paid but no proven documents found of the payment:

We observed that Utility bill paid for the month of Oct’19 through cash cheque but receiver’s signature
was not available anywhere even paid seal was not available on the electricity bill which was not
proven that bill has been paid. Moreover, receiver’s signature was not available on the voucher.
Following gaps are observed from this bill: (Ref: Vr # PAY -002030, dated: 12/11/2019 tk. 12,694/- &
002057-63,321, dated 26/11/2019, Amount)

 Cash cheque used instead of bearer cheque/Account payee cheque;

 No advance treatment when cash cheque issued;
 Directly treated as expenses without proof of payment;
 No receiving on cheque photocopy & voucher, even any documents;

Management response:

2.0 ASTRA product taken through EMI facility only by RkPL employees’ of the “Super Cool
offer”

RKPL employees taken Astra products through EMI facility but this facility specially circulated only for
RKPL employees, where other SBU’s taken products through cash. Moreover in an official
communication they informed to all employees’ of RkPL that only RkPL employees may enjoy months
installment on only 1 pcs of each type of product but we have seen that one employees taken three
(3) Micro oven through EMI. (Ref: Vr. 002194, dared 31/12/2019)

Management response:

3.0 Operating expense increased by 23% and some expenses increased abnormally high:

The HR & Personnel Expenses and other selling, marketing distribution has increased by 12% and
40%
respectively and administration expense has increased by 2% and in comparison, to the 5%
increasein sales revenue. Huge increase in delivery Expenses (3506%) Business Dev. Expenses
(876%), monthly sales meeting (212%), internet bill (129%), Legal expenses (97%) WASA, Gas and
Electricity Bills (92%) insurances (80%), and Travelling Conveyance-Selling (22%) expense was main
contributor for the increase.

Other Income has decreased by 283%

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 08 March 2020
Non-operating income has decreased by 283% in the year 2019.

Finance cost increased 51% in the year 2019

Finance cost has increased 51% this year in line with increase in interest on Bank loan

Management response:

4.0 Port Demurrages paid against various L/c:

We have reviewed November and December 2019 payment voucher and observed that Tk. 51,456/-
paid for port demurrages against various L/C in case of lubricant import. Details are given in annexure
–“A”

Management Comments:

5.0 Review of Bank Reconciliation :

During our verification some long pending issues are observed in the bank reconciliation. Details are
given below:

Bank: Bank Asia, A/c # 00733002737, and Branch: Scotia Branch

Credited by Bank but not yet debited by RkPL:

Date: Particulars Amount (Tk.)

29/08/2019 TA/DA advance for the month of July 4,375
2019
Total Tk. 4,375

Credited by RkPL but not debited by Bank

Date: Vr. # Particulars Amount (Tk.)

21/11/2016 BV # 427 Security 22,886
Money/3825868
21/11/2016 Pay # 941 Cheque no. 6367421 1,816
Total Tk. 24,702

Bank: Premier Bank, A/c # 1077600002066, and Branch: Kwaran Bazar Branch

Debited by RKPL but not credited by Bank:

Date: Vr. # Particulars Amount (Tk.)

30/9/2018 JV -003510 Deposited in transit 1,334,780
(Details not mentioned)
Total Tk. 1,334,780

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 08 March 2020

Management Comments:

6.0 Employee Advance:

We have reviewed employees advance as on 29 Feb 2020 and observed that total balance was near
about Tk 12 Lac. Some significant dues are found which are of left employees. We asked the
respective HR personnel he couldn’t answer specific man to man. Details significant long outstanding
are given below:

Date Employees Name Amount Ageing Remarks

days
12-Jun-18 Abul Bashar Mossaddeque 7,000 632 Yet to be final settlement
Ahmed
14-May-18 Abul Bashar Mossaddeque 7,000 661 Yet to be final settlement
Ahmed
21-May-15 Abul Bashar Mossaddeque 10,000 1750 Yet to be final settlement
Ahmed
2-Oct-19 Md.Hafizur Rahman Milky 4,000 155 Yet to be final settlement
30-Jun-19 Md. Mustafizur Rahman 7,115 249 Yet to be final settlement
14-May-18 Md. Shakhawat Hossain 7,000 661 Yet to be final settlement
4-Apr-19 Md. Shariful Islam 1,000 336 Yet to be final settlement
1-Mar-17 Akbar Ahmed Khan 19,800 1100 Yet to be final settlement
7-Dec-15 Ershadul Hasan 5,000 1550 Yet to be final settlement
15-Nov-15 Humayun Kabir Assist. Manager 20,000 1572 Yet to be final settlement
6-Jan-16 Md. MokhlesurRAhman 20,000 1520 Yet to be final settlement
17-Nov-15 Navil For Expenses 15,000 1570 Yet to be final settlement
15-Jun-17 ShakwatCtg 20,000 994 Yet to be final settlement
12-Jan-20 Shahed Mohammad Yousuf 112,500 53
2-Oct-18 Ahmed Noman 8,000 520 Yet to be final settlement
14-Jan-20 Mostofa Kamal 49,500 51
22-Jan-20 Abdullah Al Mamun 200,000 43
26-Jan-20 Abdullah Al Mamun 200,000 39
Total 712,915

Management Comments:

Other Observations:

 Company name & address and amount in words is not mentioned in the supporting
bills. Paid seal is notput on the voucher (Ref: Vr # PAY -002196, Date-Dec 31, 2019, Vr.
Amount Tk. 17,035/-)
 Details information is not mentioned in the bill:

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 08 March 2020
Lunch bill paid but for whom these lunch bill is paid, not mentioned on the bill. (Ref: Vr # PAY
-002028, Date-Nov 12, 2019, Amount Tk. 29,565/-)

Management Comments:

7.0 Revenue recognition:

Revenue is recognized when the entity satisfies a performance obligation by transferring a promised
goods or service to customer. If performance obligation satisfies at a point in time, the entity should
recognize the revenue when customer has accepted the goods or risk and reward of goods has been
transferred to customer.

As per contract with customer, company has the responsibility to deliver the goods to customer place
at own cost. While reviewing sales contracts, we noted that, revenue recognizes of the following
customer before receiving acknowledgment or any proof of goods receipts by the customer.

Invoice no Invoice Name of Challan date/date Types of Amount

date customer of customer (TK)
acknowledgment
IV--007839 30-Dec-19 Bangladesh Gas 7-Jan-20 B2B 1,442,100
Fields Company
Limited
IV--007855 30-Dec-19 Lube Mart (Wari, 14-Jan-20 B2C 320,000
Dhaka)
IV--007900 31-Dec-19 Nawas Traders 2-Jan-20 B2C 128,326
IV--007781 26-Dec-19 Desh Energy 1-Jan-20 B2B 5,130,500
Chandpur Power
Company Ltd

Total 7,020,926

Management response:

8. No singed or approved budget for business development expenditure:

A budget is an estimation of revenue and expenses over a specified future period of time and is
usually compiled and re-evaluated on a periodic basis. When reviewing the business development
expenditure, we noted that, current year business development expenditure is 1.35 crore BDT in
comparison to previous year 0.13 crore BDT. Which is 876 % higher in comparison to previous year
while sales only increased 5 % from last year.

Management response:

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 08 March 2020

9. Trade credit period not availed:

Trade credit opportunity is considered as cheapest external source of working capital provided by
suppliers. Best practice of procurement process suggest that company should avail the available
facility to efficient and cost effective use of working capital.

In following cases payments made to suppliers without enjoying the credit period offered by the
suppliers.

Date and Particul Paid Credit Bill Approx. Date of Early

vouch. Ref. ars amount period submissi date of settlemen settle
(TK) on date settlemen t ment
t (days)
04-Nov-2019 Payment 1,913,933 60 17-Oct-19 15-Dec-19 11-Nov-19 34
PAY-001985 of freight days
bill
12-Nov-2019 Payment 1,660,626 60 23-Oct-19 21-Dec-19 21-Nov-19 30
PAY-002026 of freight days
bill
12-Nov-2019 Payment 3,177,976 60 16-Oct-19 14-Dec-19 24-Nov-19 20
PAY-002029 of freight days
bill
25-Nov-2019 Payment 1,989,250 60 9-Jan-20 3-Dec-19 37
PAY-002050 of freight days 11-Nov-
bill 19
02-Dec-2019 Payment 448,553 60 19-Nov- 17-Jan-20 8-Dec-19 40
PAY-002089 of freight days 19
bill
17-Dec-2019 Payment 1,468,068 60 28-Nov- 26-Jan-19 05-Jan-19 21
PAY-002134 of freight days 19
bill
Total 10,658,406

Management response:

10. Sister concern loan

Intercompany loans are commonly used by treasurers as a balance management tool where lending
entity pays the loan principal to the borrowing entity at the start of the loan, and then the borrowing
entity repays the principal plus interest.

However, during our transaction review, we noted that, Rangs Petroleum Ltd paid short term loan 35
lacs to Rangs Electronics Ltd. For which no interested has been charged.

Management response:

11. Contract agreement has not been renewed:

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A written contract plays a vital role in any business transaction. Apart from making the agreement
between concerned parties legally binding, contracts can also serve as future references, part of the
business’ policies, as well serve as proof in the event of misunderstandings, complaints or disputes
needing litigation proceedings.

While we reviewing contract, agreement, we noted that dealership agreement with New Jamuna
Motors expired on 30 May 2019, which has not been renewed.

Management response:

12. Unrealized Receivable:

While reviewing accounts receivable ledger, we noted that lack of proper monitoring by accounts and
finance department several receivable remained unrealized over a longer period of time.

Types of Party name Amount (TK) Date of Credit Aging till

customer receivable period 31.12.2019
(Days)
B2C RD 417,050 22-Feb-18 15 180
B2C Retail 353,000 21-Jan-18 15 180
B2C RD 348,245 29-Nov-17 15 180
B2C RD 423,045 22-Oct-17 15 180
B2C RD 619,560 16-Nov-17 15 180
Fleet Rancon Motors limited 437,044 13-Dec-17 90 180
Fleet Rangs Motors Workshop 689,700 20-May-19 90 180
Ltd.
Fleet Rangs Motors Workshop 229,900 20-Jun-19 90 180
Ltd.
B2B Banco Energy 385,312 15-Jul-17 7 899
Generation Ltd
B2B Confidence Power 1,223,812 16-Oct-18 7 434
Bogra Limited
B2B Abdul Monem Ltd. 360,000 18-Apr-17 37 950
B2B Aggreko Arohati 386,600 7-Jun-18 7 565
Keranigonj
B2B Creative Wash Ltd 250,800 42677 37 1116

Management response:

13. Absence of comparative statements (CS):

Date Vch. No. Amount Details of Procurement

25-Nov-2019 PAY- 94,023 Sales team meeting and outing at
002055 Fantasy Kingdom (Concord
Entertainment Co Ltd.)
26-Nov-2019 PAY- 77,197 Maintenance work for benefit car
002058 provided to employees done at DHS
Motors
26-Nov-2019 PAY- 54,800 Air ticket fare & visa processing fees
002067 for ABP meeting at Singapore.

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As per standard practice of Rancon, CS must be prepared before any procurement of product or
service. But it was observed that RKPL has procured services and product without preparing CS.
Some instances are given below:

Management response:

14. Utility expense directly booked to expense without recording advance and without proof of
payment to authorities:

In order to pay electricity bill of RkPL head office cash cheque has been issued. As per standard
practice in such instances advance to employee (employee receiving the cheque) is recorded
however, no advance was recorded and the amount was directly booked to utility expense. Moreover,
no paid copy of the bill or any other proof of payment being made to the authorities has been attached
and signing of cheque received is also missing on voucher and cheque copy. (Ref. – Date: 26-Nov-
19, Vch. No.- PAY-002057, Tk. 63,321)

Management response:

15. lack of formal credit policy and documentation requirements:

Currently RkPL does not have a formal credit policy. Credit limits are assigned to RkPL clients as per
recommendation of RkPL - Head of Sales and approval from RkPL - Managing Director. Moreover,
given no formal credit policy exists no standard documentation is maintained or required to be
maintained against providing the credit facility/limit. As current general practice, mandatorily only
undated cheques are obtained as documents for providing credit facility. (Ref. – Date: 27-Nov-19,
Vch. No.- PAY-002072, Tk. 4,180)

Management response:

16. Business development expense booked as sales commission:

Expense has been mentioned as sales commission and booked as such by RkPL whereas, in
essence the amount is actually a business development expense. Moreover, cheque has been

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 08 March 2020
issued to Mr. Arif Billah whereas booked in dealer expenses as sales commission to Shofiq
Trades. (Ref. – Date: 27-Nov-19, Vch. No.- PAY-002072, Tk. 4,180)

Management response:

17. Lack of approval from RHL for recurring business development expense arrangement:

As per standard practice of Rancon approval from RHL is to be taken for business development
expenses of recurring nature. RkPL management went into a recurring arrangement with Mr. Arif
Billah in which RkPL was to pay him Tk. 10 per Ltr of sales to Shofiq Trades, however no approval
from RHLwas taken for this arrangement. (Ref. – Date: 27-Nov-19, Vch. No.- PAY-002072, Tk. 4,180)

Management response:

18. Several policies have not been updated or reviewed since long:

Policy Subject Effective Policy Key Points

from
     
‘Evening Snacks 01 Policy allows up to Tk. 500 for executives staying after
Allowance of December 7 p.m.
Executive’ 2015
‘Sales Person Daily 23 October Company contribution will be Tk. 100 and personal
Food Allowance’ 2015 contribution will be Tk. 33 for meals of D.M – Officers
‘Supply Chain 01 March Company contribution will be Tk. 100 and personal
Management 2016 contribution will be Tk. 33 for meals of D.M – Officers
Person’s Daily Food (only based out of office)
Allowance’
RkPL has a number of policies which have not been reviewed or updated since long. Some instances
are given below:

Management response:

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19. Employee engagement food being sourced from outside:

As per circular, dated 07 January 2020 from RHL – MD, all employee engagement food and snacks to
be sourced/purchased from Rancon Hospitality. However, RkPL still sources evening snacks and
occasional snacks for its employees from local nearby stores. (Ref. – Date: 26-Nov-19, Vch. No.-
PAY-002069, Tk. 17,284)

Management response:

20. Allowance provided to employee not as per employment terms:

RkPL is currently providing two of its employees – Mr. Md. Julcar Nien and Mr. Md. Selim Mia with a
monthly allowance of Tk. 5,000 each as ‘Disturbance Allowance’. The allowance is basically an
allowance being given because of the fact that RkPL management has asked the employees to move
to Gazipur. However as per the offer letters of the employees their services are transferrable at any
time to any place in Bangladesh. (Ref. – Date: 27-Nov-19, Vch. No.- PAY-002076, Tk. 10,000).

Management response:

21. Weak control and absence of proper documentation for distribution of marketing items:

As part of a general query by IA regarding all the marketing activities done in the last quarter of 2019,
it was found that on 22 October 2019, RkPL has conducted a Nation-wide T-shirt distribution event in
which 5000 pcs of T- shirt has been distributed nationwide. However, details of the event could not be
provided by RkPL marketing team and they claimed that they have only provided the budget and
sales have done the rest of the planning.

As per discussion with sales, sales claimed to have distributed the items to the sales team members
(area manager, TSO etc.) however, no formal planning documents (such as detailed list of places
where the T-shirts will be distributed) or formal receipt documents of T-shirts by the sales team
personnel or proper evidence of distribution and monitoring of distribution was provided or available.
Given such, weak controls have been observed to be in place to ensure proper distribution of
marketing items.

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Management response:

22. Several discrepancies observed in ta/da bill supporting:

IA has reviewed the TA/DA claim supporting submitted by several personnel for the month of October
19 and found the following: (Ref. – Date: 28-Nov-19, Vch. No.- PAY-002080, Tk. 220,744)

a. Tour bill claimed for travelling to Savar, Dhaka.

b. Fictitious bill supporting for local bus travel between Rajshahi and Nator.
c. Hand written photocopy bill submitted as supporting.
d. No approval on claim of lost hotel bill
e. Weak control over bill being claimed for monthly team and dealer meeting. Bills
are submitted without a list of meeting attendees and any other evidence of the
meeting. As such these bills are vulnerable to misrepresentations and fraud.
f. DA claimed is not as per group policy. In several instances DA is not being
claimed at all (rather conveyance bill is being provided) or being claimed at an
amount less than approved by policy.

Management response:

23. Other observations:

a. Maintenance work for benefit car provided to employees, being done from DHS motors
rather than from Rangs workshop without CS comparison. (Ref. – Date: 26-Nov-19, Vch.
No.- PAY-002058, Tk. 77,197)
b. Amount being paid to Mr. Tariqul Kader (Tk. 66 per meal) is not as per policy amount.
(Ref. – Date: 25-Nov-19, Vch. No.- PAY-002054, Tk. 32,052)
c. Top management meeting purpose bill from Takeout of Tk. 2250 mentioned, however no
list of attendees attached nor concerned admin person was able to clarify properly who
availed the refreshments. (Ref. – Date: 26-Nov-19, Vch. No.- PAY-002069, Tk. 17,284)
d. Approval note format is not as per standard. Approval note only bears the sign of HR
business partner. (Ref. – Date: 27-Nov-19, Vch. No.- PAY-002076, Tk. 10,000)

Management response:

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24. In house facility is not taking from sister concern of RANGS Group:

As per Group policy (Ref: RG/Corporate/08/09, dated January 2009), If any service or product is
available within our sister concern, we should not avail these from outside companies. Our review
revealed that RKPL has procured and received following service from third party instead of our sister
concern:

 Printing service taken from outsource though we have in-house company Romask Limited so
RkPL should be taken the service from Romask Limited. (DV: Pay-001975, 03-Nov-2019,
Tk.27, 600/- and Dv.Pay-001977, Date: 03/11/2019 Tk. 8004.)

Management Comments:

25. Comparative Statement prepared long time ago, and some time lowest bidder are not being
selected:

As per group practice comparative statement should update after every three months but we found
that the RKPL transport related CS prepared in 2018, 2 years ago. Instance is given below:

 08 ton covered van transport service taken from Rasel transport where Noor transport quoted
rate lower than Rasel transport (Dv. Pay-001967, Date. 03 November 2019. Amount.
4,76000/-)

Management Comments:

26. Approved details budget were not found in following case:

Payment Voucher Date Particulars Amount Remarks

# (Tk)
Advance for Approved details
1996 07.11.19 Expenses (Sales 90,000 budget was not found
Meeting) with bill and quotation
was not duly signed.

Management Comments:

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Annexure- A given in the next page:

Anexure:

Vr: Pay-002183 , 29 DEC 2019, Vr Amount:4,80,557

Port rent by Ctg port

Total Demurrage
SL # L/ C # L/C Date B/L Number B/E # C/L Date Total Amount
From To
days rent
1 141819010361 22/9/19 SGSIN0000112860 1732935 8-Nov-19 12-Nov-19 13-Nov-19 2 1,171
2 141819010372 1/10/2019 THBKK0000044139 1732776 8-Nov-19 12-Nov-19 13-Nov-19 2 1,171
3 141819010372 1/10/2019 THBKK0000043805 1685802 29-Oct-19 2-Nov-19 6-Nov-19 5 2,927
4 141819010368 29/09/2019 SGSIN0000112445 1674750 29-Oct-19 2-Nov-19 2-Nov-19 1 585
5 141819010348 17/09/2019 THBKK0000043802 1674652 29-Oct-19 2-Nov-19 2-Nov-19 1 585
6 141819010341 11/9/2019 THBKK0000043445 1623735 20-Oct-19 24-Oct-19 26-Oct-19 3 1,754
7 141819010341 11/9/2019 THBKK0000042660 1586146 11-Oct-19 15-Oct-19 20-Oct-19 5 3,509
8 215319010234 8/8/2019 INBOM0000039684 1591977 11-Oct-19 15-Oct-19 16-Oct-19 2 1,170
9 141819010320 29/08/2019 SGSIN0000111238 1586123 9-Oct-19 13-Oct-19 16-Oct-19 4 2339
10 215319010198 9/7/2019 INBOM0000040029 1586179 10-Oct-19 15-Oct-19 16-Oct-19 2 1,170
11 215319010221 6/7/2019 THBKK0000042047 1530614 5-Oct-19 9-Oct-19 11-Oct-19 3 1754
12 215319010221 6/8/2019 THBKK0000042347 1530480 4-Oct-19 8-Oct-19 11-Oct-19 4 2,339
Total Tk 20,474

Pay-002025 , Dated 12 Nov 2019, Vr amount 4,67,664/-

Port rent by Ctg port

Total Demurrage
SL # L/ C # L/C Date B/L Number B/E # C/L Date Total Amount
From To
days rent
1 215319010200 10-Jul-19 THBKK0000039595 1331652 15-Aug-19 19-Aug-19 27-Aug-19 9 17,567
2 215319010193 4-Jul-19 SGSIN0000108397 1326408 20-Aug-19 24-Aug-19 27-Aug-19 4 2,332
3 215319010193 4-Jul-19 SGSIN0000108386 1326569 20-Aug-19 24-Aug-19 27-Aug-19 4 2,332
4 215319010214 28-Jul-19 SHSIN0000109008 1402734 4-Sep-19 8-Sep-19 8-Sep-19 1 583
Total Tk. 22,814

Pay-002093 , dated :3 DEC 2019, Vr # 494, 721/-

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08 March 2020
Port rent by Ctg port
Total Demurrage
SL # L/ C # L/C Date B/L Number B/E # C/L Date Total
From To Amount
days rent
1 215319010228 4-Jul -19 THBKK0000040281 1334142 28-Aug-19 1-Sep-19 3-Sep-19 3 1,749
2 215319010200 10-Jul-19 THBKK0000040019 1335841 28-Aug-19 1-Sep-19 3-Sep-19 3 1,749
3 215319010222 6-Aug-19 SGSIN0000109600 1477785 19-Sep-19 23-Sep-19 23-Sep-19 1 583
4 215319010214 28-Jul-19 SGSIN0000109599 1479237 28-Jul -19 23-Sep-19 19-Sep-19 -3 2,332
5 215319010221 6-Aug-19 THBKK0000042051 1539454 5-Oct-19 9-Oct-19 9-Oct-19 1 585
6 215319010221 6-Aug-19 THBKK0000042053 1530447 5-Oct-19 9-Oct-19 9-Oct-19 1 585
7 215319010221 6-Aug-19 THBKK0000042049 1530424 5-Oct-19 9-Oct-19 9-Oct-19 1 585
Total Tk. 8,168

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