Audit Template

BLENDING PLANT OPERATIONS CONTROL CONCERN/EXPOSURE SCENARIO 1. Determine whether facility, operating procedures and internal controls relating to lube blending plant operations are adequate to ensure that: Satisfactory controls exist for the receipt of raw materials into production and the usage of raw materials in blending operations Usage of blended products in filling operations is controlled Records of all production activities are maintained Records of all transfers of finished products to bulk storage tanks or packaged product warehouses are controlled Shipments of products blended to customer orders are satisfactorily controlled Optimizes use of raw materials and blended products is achieved and downgrading and waste minimized Accounts accurately for all transactions and inventories in storage Operates safely and optimizes operating costs. CONTROL PERFORMANCE INDICATORS Satisfactory bulk inventory control achieved through: Accurate measurement of both quantity and specification for Receipts into production Blending Filing Transfers to finished product inventory/shipment of products blended to customer orders Downgrading and waste Effective storage and physical controls Safety and security Accurate inventory accounting
CONTROL STEPS List of control procedures necessary to achieve the control objective. DESCRIBE EXISTING CONTROL PRACTICE Briefly explain what is the (current) local control procedure, or reference documentation where the existing practice can be found. CONTROL TEST(S) Each control procedure has an associated test(s) to be performed that verifies the adequacy and effectiveness of the control procedure. IDENTIFIED GAP Is there a control gap? If yes, indicate the information or data that lead to that conclusion and the likely cause (if known).

Lubricants

1. Receipts into Production The receiving into production are adequately controlled Are all receipts into production of bulk/packaged raw materials supported by authorized requisition/blending orders? Are all receipts accurately measured and details verified against requisitions/blending orders?

Contractual Proposal March 2006

Audit Template
based on approved formulae? Are formulae adjusted for changes in specifications of base stocks oils to be used? Have relative priorities for customer orders and the maintenance of optimum inventory levels been established? Are all required materials in stock for each blending order issued? Blending variations are identified, controlled, evaluated and authorized Are finished product quantities for each blend batch measured accurately? Are finished product quantities compared/reconciled to inputs on a consistent basis to identify blending variations?

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Audit Template

CONTROL STEPS List of control procedures necessary to achieve the control objective.

DESCRIBE EXISTING CONTROL PRACTICE Briefly explain what is the (current) local control procedure, or reference documentation where the existing practice can be found.

CONTROL TEST(S) Each control procedure has an associated test(s) to be performed that verifies the adequacy and effectiveness of the control procedure.

IDENTIFIED GAP Is there a control gap? If yes, indicate the information or data that lead to that conclusion and the likely cause (if known).

2. Blending Are flushing and other waste oil (slop) produced included in the calculation of blending variations? Are blending variations calculated for each type of blended product? Are blending variation standards calculated for each type of blend 9taking into account of clingage, evaporation, waste etc)? For each batch, are significant variations from standard identified, investigated, explanations documented and approved within delegated limits? Are blending variations summarized monthly for review? Are blending variations valued and reviewed prior to processing in the accounting records? Adequate quality control procedures are in force Are the specifications of all finished blends verified and approved by the Laboratory prior to filling or transfer from the blending tanks Are results of analyses of samples documented?

Contractual Proposal March 2006

Audit Template
CONTROL STEPS List of control procedures necessary to achieve the control objective. DESCRIBE EXISTING CONTROL PRACTICE Briefly explain what is the (current) local control procedure, or reference documentation where the existing practice can be found. CONTROL TEST(S) Each control procedure has an associated test(s) to be performed that verifies the adequacy and effectiveness of the control procedure. IDENTIFIED GAP Is there a control gap? If yes, indicate the information or data that lead to that conclusion and the likely cause (if known).

2. Blending Is laboratory approval for release evidenced and issued on a timely basis? Are samples retained for appropriate periods? Are off-spec (rejected) batches identified and controlled? Are corrections to off-spec batches recorded on the blending orders? Are adequate efforts made to re-work or otherwise utilize off-spec batches that cannot be corrected? Are finished blends which exceed specifications identified, investigated to determine the reason and to enable corrective action to be taken for future blends? Are finished blends pumped into compatible storage tanks? Are all finished blends released as good, but outside required specifications, approved in writing? Equipment used for measuring the input and/or output from blending tanks is verified for accuracy Where meters are used: Are they calibrated in accordance with manufacturers recommendations?

Contractual Proposal March 2006

Audit Template

CONTROL STEPS List of control procedures necessary to achieve the control objective.

DESCRIBE EXISTING CONTROL PRACTICE Briefly explain what is the (current) local control procedure, or reference documentation where the existing practice can be found.

CONTROL TEST(S) Each control procedure has an associated test(s) to be performed that verifies the adequacy and effectiveness of the control procedure.

IDENTIFIED GAP Is there a control gap? If yes, indicate the information or data that lead to that conclusion and the likely cause (if known).

2. Blending Is their accuracy periodically verified by alternative measurements, e.g. tank gauging? Are all movements in cumulative totalizers accounted for?

Where automated mechanical tank gauging equipment is used, is the accuracy of the equipment periodically verified? Is the accuracy of thermometers periodically tested? Where weigh-scales are used: Are they recalibrated in accordance with manufacturers recommendations and Weights and Measures Department?

Is their accuracy periodically tested by comparison with other scales? 3. Filling Filling activity is adequately approved Are filling operations supported by an approved filling order?

Contractual Proposal March 2006

Audit Template
CONTROL STEPS List of control procedures necessary to achieve the control objective. DESCRIBE EXISTING CONTROL PRACTICE Briefly explain what is the (current) local control procedure, or reference documentation where the existing practice can be found. CONTROL TEST(S) Each control procedure has an associated test(s) to be performed that verifies the adequacy and effectiveness of the control procedure. IDENTIFIED GAP Is there a control gap? If yes, indicate the information or data that lead to that conclusion and the likely cause (if known).

3. Filling Containers are filled to the correct volume/weight For filling by weight, is account taken of varying tare weights? For filling performed utilizing automatic filling scales: Is the filling equipment recalibrated periodically in accordance with manufacturer recommendations or Weights and Departments Department and results recorded? Is test weighing of filled containers performed and the results documented to ensure the continuing accuracy of the filling equipment between calibration tests? Are scales used for test weighing regularly checked for accuracy?

For filling controlled on a volume basis, are test checks made in accordance with an established program and the results adequately documented?

Contractual Proposal March 2006

Audit Template

CONTROL STEPS List of control procedures necessary to achieve the control objective.

DESCRIBE EXISTING CONTROL PRACTICE Briefly explain what is the (current) local control procedure, or reference documentation where the existing practice can be found.

CONTROL TEST(S) Each control procedure has an associated test(s) to be performed that verifies the adequacy and effectiveness of the control procedure.

IDENTIFIED GAP Is there a control gap? If yes, indicate the information or data that lead to that conclusion and the likely cause (if known).

3. Filling Have tolerances been established for the guidance of filling machine operators as to acceptable levels of variations from the required fill volume/weight? Are deliberate overfills periodically reviewed to ensure minimum contents rules are met? Are deviations from planned filling identified on filling reports and when significant, reviewed? All output from filling activities is accurately measured, properly controlled and accounted for Are containers filled accurately counted and recorded? Are empty containers issued to Filling reconciled to containers filled? Are containers filled reconciled with receipts booked into the Finished Product Warehouse according to the perpetual inventory records? Are part-filled containers at the end of filling runs recorded and accounted for?
CONTROL STEPS DESCRIBE EXISTING CONTROL PRACTICE CONTROL TEST(S) IDENTIFIED GAP

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List of control procedures necessary to achieve the control objective. Briefly explain what is the (current) local control procedure, or reference documentation where the existing practice can be found. Each control procedure has an associated test(s) to be performed that verifies the adequacy and effectiveness of the control procedure. Is there a control gap? If yes, indicate the information or data that lead to that conclusion and the likely cause (if known).

3. Filling Are empty containers damaged during filling written off? Is product in damaged containers repackaged and properly accounted for? Are numbers of damaged containers accumulated and reported monthly? Filling variations are identified, controlled, evaluated and reported monthly Are bulk products received for each fill run measured accurately? Do recorded quantities received by Filling agree with quantities reported by Blending? Are filled quantities compared/reconciled to inputs to identify filling variations? Are filling variation standards calculated for each type of filled product? Are deliberate overfills taken into account in establishing standards? For each fill run, are significant variations from standard identified, investigated, explanations documented and reviewed?

Contractual Proposal March 2006

Audit Template
CONTROL STEPS List of control procedures necessary to achieve the control objective. DESCRIBE EXISTING CONTROL PRACTICE Briefly explain what is the (current) local control procedure, or reference documentation where the existing practice can be found. CONTROL TEST(S) Each control procedure has an associated test(s) to be performed that verifies the adequacy and effectiveness of the control procedure. IDENTIFIED GAP Is there a control gap? If yes, indicate the information or data that lead to that conclusion and the likely cause (if known).

3. Filling Are filling variations summarized and reviewed monthly prior to processing in accounting records? Adequate quality control procedures are in force Have sampling procedures for filled packages been established and are being followed? Are laboratory tests and approvals documented? Is laboratory approval obtained prior to shipment? Are quality control inspections made after filling to ensure correct packaging and detection of damaged or leaking containers? Filling performed by outside parties is controlled and properly accounted for Does a written agreement exist detailing the agreement and the responsibility of each party? Are quantities of products sent for filling reconciled with the number of packages filled? Has responsibility for filling variations been determined?

CONTROL STEPS

DESCRIBE EXISTING CONTROL PRACTICE

CONTROL TEST(S)

IDENTIFIED GAP

Contractual Proposal March 2006

Audit Template
List of control procedures necessary to achieve the control objective. Briefly explain what is the (current) local control procedure, or reference documentation where the existing practice can be found. Each control procedure has an associated test(s) to be performed that verifies the adequacy and effectiveness of the control procedure. Is there a control gap? If yes, indicate the information or data that lead to that conclusion and the likely cause (if known).

3. Filling Have filling variation standards been developed? Are filling variations identified and reported to the oil marketer? Are filling variations in excess of standard investigated and the results reported to the oil marketer for review? Where appropriate are excessive variations billed to the filling contractor? Where the outside party stores bulk products on consignment from oil marketers and dispatches packaged products on oil marketers behalf as well as performing filling operations: Are perpetual inventory records maintained? Are physical inventories taken with appropriate frequency by an oil marketer employee? Is periodic confirmation made of quantities held and numbers of packages filled?
CONTROL STEPS DESCRIBE EXISTING CONTROL PRACTICE CONTROL TEST(S) IDENTIFIED GAP

Contractual Proposal March 2006

Audit Template
List of control procedures necessary to achieve the control objective. Briefly explain what is the (current) local control procedure, or reference documentation where the existing practice can be found. Each control procedure has an associated test(s) to be performed that verifies the adequacy and effectiveness of the control procedure. Is there a control gap? If yes, indicate the information or data that lead to that conclusion and the likely cause (if known).

3. Filling Are outside party confirmations reconciled to the perpetual inventory records? Is the reconciliation of the perpetual inventory records reviewed? Are empty containers sent to outside parties reconciled with containers filled? Decanting operations are adequately controlled and reported Are inputs to and output from decanting correctly reflected in the perpetual inventory records? Are empty containers issued to decanting reconciled to filled containers? Are part-filled containers at the end of decanting recorded and accounted for? Are decanting variations calculated for each decanting operation? Are variations compared to standard and those in excess of standard adequately investigated and reviewed?

CONTROL STEPS

DESCRIBE EXISTING CONTROL PRACTICE

CONTROL TEST(S)

IDENTIFIED GAP

Contractual Proposal March 2006

Audit Template
List of control procedures necessary to achieve the control objective. Briefly explain what is the (current) local control procedure, or reference documentation where the existing practice can be found. Each control procedure has an associated test(s) to be performed that verifies the adequacy and effectiveness of the control procedure. Is there a control gap? If yes, indicate the information or data that lead to that conclusion and the likely cause (if known).

3. Filling Are drums used as inputs to decanting taken into the perpetual inventory records? 4. Transfers to finished product inventory/shipments of products blended to customer orders Transfers/shipments are satisfactorily controlled Are bulk products transferred from blending tanks to finished product storage tanks accurately measured at both locations? Are quantities of bulk products received into storage tanks reconciled with quantities transferred from blending tanks? Are filled containers dispatched to the warehouse counted, agreed to filling reports and recorded on inventory transfer documents? Are receipts into the warehouse counted and verified to inventory transfer documents and this count/verification is evidenced? Are differences immediately investigated and followed up until satisfactorily resolved? Are all transfer documents controlled and recorded?

CONTROL STEPS

DESCRIBE EXISTING CONTROL PRACTICE

CONTROL TEST(S)

IDENTIFIED GAP

Contractual Proposal March 2006

Audit Template
List of control procedures necessary to achieve the control objective. Briefly explain what is the (current) local control procedure, or reference documentation where the existing practice can be found. Each control procedure has an associated test(s) to be performed that verifies the adequacy and effectiveness of the control procedure. Is there a control gap? If yes, indicate the information or data that lead to that conclusion and the likely cause (if known).

4. Transfers to finished product inventory/shipments of products blended to customer orders For bulk products blended to customer order, are blended products produced reconciled to bulk shipments? For packaged products blended to customer orders, are blended products produced reconciled to packages shipped and filling variations? If blending variations are not separately identified for blends to customers orders, are raw materials inputs reconciled to bulk shipments and packages filled? 5. Downgradings and Waste Downgradings and waste are all controlled Are downgradings analyzed between waste oil and products for re-use in blending? Are downgradings for reuse controlled and followed up to ensure their utilization whenever possible? Are downgradings to waste oil resulting from the following identified and recorded: Rejected blend batches Rejected filling runs Package filling flushings and ends
CONTROL STEPS DESCRIBE EXISTING CONTROL PRACTICE CONTROL TEST(S) IDENTIFIED GAP

Contractual Proposal March 2006

Audit Template
List of control procedures necessary to achieve the control objective. Briefly explain what is the (current) local control procedure, or reference documentation where the existing practice can be found. Each control procedure has an associated test(s) to be performed that verifies the adequacy and effectiveness of the control procedure. Is there a control gap? If yes, indicate the information or data that lead to that conclusion and the likely cause (if known).

5. Downgradings and Waste All waste oil movements are measured accurately and accounted for Bilk loading flushings Customer returns Repackaging ends Bulk tank truck flushings Line flushings Obsolete/unusable raw material stocks Separator pits

Are transfers of waste oil within the facility accurately measured (meter, tank gauging, tank truck gauging, weighbridge) and accounted for? Are regular physical inventories of waste oil taken? Are waste oil perpetual inventory records maintained? Are waste oil physical inventories reconciled too perpetual inventory records to ensure that all waste oil generated, downgradings, sales and usages are recorded? Are sales and own use of waste oil accurately measured?

Downgradings to waste oil are minimized

Are downgradings to waste oil summarized by cause on a monthly basis for review?

CONTROL STEPS

DESCRIBE EXISTING CONTROL PRACTICE

CONTROL TEST(S)

IDENTIFIED GAP

Contractual Proposal March 2006

Audit Template
List of control procedures necessary to achieve the control objective. Briefly explain what is the (current) local control procedure, or reference documentation where the existing practice can be found. Each control procedure has an associated test(s) to be performed that verifies the adequacy and effectiveness of the control procedure. Is there a control gap? If yes, indicate the information or data that lead to that conclusion and the likely cause (if known).

5. Downgradings and Waste Are flushings controlled and minimized? Are product compatibility tables available to all operators and used to avoid unnecessary line or tank flushing? Downgradings are evaluated and reviewed Are downgradings valued at the intended stock price and reviewed prior to processing in the accounting records? Are the costs of all downgradings accounted for during tax and duty payments? Sales of waste oil are adequately controlled and reviewed Are all sales of waste oil authorized in writing? Are all waste oil sales invoiced? Where sales prices depend on the quality/oil content of waste, is the quality/oil content verified? 6. Containers Operations All movements of containers are recorded and accounted for Are all new containers purchased subject to normal receiving procedures? Are all drums received as containers for additives purchased recorded and taken into the perpetual inventory records?
CONTROL STEPS DESCRIBE EXISTING CONTROL PRACTICE CONTROL TEST(S) IDENTIFIED GAP

Contractual Proposal March 2006

Audit Template
List of control procedures necessary to achieve the control objective. Briefly explain what is the (current) local control procedure, or reference documentation where the existing practice can be found. Each control procedure has an associated test(s) to be performed that verifies the adequacy and effectiveness of the control procedure. Is there a control gap? If yes, indicate the information or data that lead to that conclusion and the likely cause (if known).

6. Containers Operations Are empty containers included in the perpetual inventory records? Are regular physical counts performed for each type of empty container? Are physical count differences investigated and explanations documented prior to adjustment? Are all issues of containers to the filling line recorded? Sales of used drums are adequately controlled and authorized Are all sales of used drums authorized in writing? Are all used drums sales invoiced? Are used drum inventories recorded in the perpetual inventory record? Are regular physical inventories of used drums performed and reconciled to the perpetual inventory records? Are differences investigated and reviewed monthly?

CONTROL STEPS

DESCRIBE EXISTING CONTROL PRACTICE

CONTROL TEST(S)

IDENTIFIED GAP

Contractual Proposal March 2006

Audit Template
List of control procedures necessary to achieve the control objective. Briefly explain what is the (current) local control procedure, or reference documentation where the existing practice can be found. Each control procedure has an associated test(s) to be performed that verifies the adequacy and effectiveness of the control procedure. Is there a control gap? If yes, indicate the information or data that lead to that conclusion and the likely cause (if known).

6. Containers Operations Are perpetual inventory records correctly updated for the receipt and sale of used drums? 7. Accounting Controls All blending and filling operations are properly recorded and accounted for Are all documents supporting receipts into production, blending and filling activities, transfers to finished product inventory and direct shipments to customers adequately controlled to ensure all are processed? Are accurate perpetual inventory records maintained for use by production planning, blending and warehouse units? Are perpetual inventory records adjusted on a timely basis for bending and filling activities? 8. Safety and Security Dangerous materials are adequately controlled Are persons handling dangerous materials aware of the required level of protective clothing? Is adequate protective clothing available? Are dangerous materials securely stored?
CONTROL STEPS DESCRIBE EXISTING CONTROL PRACTICE CONTROL TEST(S) IDENTIFIED GAP

Contractual Proposal March 2006

Audit Template
List of control procedures necessary to achieve the control objective. Briefly explain what is the (current) local control procedure, or reference documentation where the existing practice can be found. Each control procedure has an associated test(s) to be performed that verifies the adequacy and effectiveness of the control procedure. Is there a control gap? If yes, indicate the information or data that lead to that conclusion and the likely cause (if known).

8. Safety and Security Have disposal procedures been established for surplus and contaminated dangerous materials?

Contractual Proposal March 2006