Day 3 Participant Note

Transcription

1 Day 3 Participant Note CAPITAL EXPENDITURE AUDIT Capital expenditure implies the expenditure which will add on the earning capacity of the organization. Normally, the nature and item head of capital expenditure varies sector to sector in contrary to Revenue Expenditure which are mostly common in every organization/sector. In Telecom Sector the capital expenditure are generally incurred on providing telephone connections to the subscribers. All the relevant activity like cable laying, exchange (A&P) commissioning, creation of transmission network etc. and the necessary required infrastructure are the major items. Details/Documents to be collected : - Schedule of WIP and capitalization forming part of final accounts be obtained. Any addition/deletion will get reflected from the statement. Addition to Land : Examine the requirement/need to justify the procurement of land, the area, location etc.-planning section. Study the rules and guidelines applicable to BSNL about procurement of land. Whether BSNL is supposed to purchase land only from Govt. or Semi Govt. agencies like municipal bodies or housing and land development boards or from common manner as well. Whether any open tender or direct purchases made. Whether the land title deeds got registered in favor of BNSL. Examine the rates, terms and conditions of payments etc. and the agreement with the seller is free from all encumbrances. Ensure that no disputed land is purchased by BSNL. Whether the land purchased in the earlier years have been used for the planned purpose or diverted to different purpose.

2 DAP New Mumbai construction of Admn. Bldg. Instead of planned exchange building Building Normally BSNL does not purchase ready or built up building. BSNL has its Civil Wing which constructs building on the land already procured as per design and specification prepared by the planning wing. The detailed audit of building construction expenditure will be discussed in Civil Expenditure Audit, however, the following points need to be examined. Whether after completion of construction of building, all the required clearances from Municipal bodies (NOC), water board, electricity board etc. were obtained in time (Water supply through tankers for 1 ½ years in Mumbai Juhu Danda, BSNL office at very high rates) avoiding the idleness of the building. Whether the building has been put to use for the stated purpose or lying vacant implying faulty planning of the requirement. Examine the expenditures incurred on furnishing/partitions etc. of the building. Collect the detail of how many agreements were finalized and check them thoroughly. Examine that no maintenance exp. are charged to the cost of building. A & P : Mainly this includes commissioning of exchanges. The following points may be examined: New Exchange This may be done as a project review as well.

3 Examine the Planning: What is the need to open the exchange? Whether any demand existed in that area? How the assessment of demand and utilization of capacity of the new exchange was analyzed. Whether the calculation of Rate of Return was as per norms fixed by DOT. The viability of project was properly analyzed and got approved by the competent authority. Examine the procurement of exchange equipment. Whether procurement of equipments was done as per the planned schedule or procurement was delayed? Examine the commissioning schedule: Whether the exchange was commissioned as per the schedule planned or delayed. If delayed this was on account of avoidable/unavoidable reasons. The probable reasons of delay in exchanges are : Delay in receipt of equipments. Delay of civil/electrical work. Lack of coordination of different wing like Transmission wing, switching equipments wing. Examination of expenditure for capital projects: There are two kind of expenditures i)cash ii) Stores. i) Examine all the payments of cash vouchers so as to ensure that no over payments have taken place. ii) Stores: All the stores issued by Stores section have been taken into consideration and the remaining unused portion has been returned to the stores. - There are different types of technology exchange available examine the type of technology procured with reference to area and the kind of facility required for the long

4 run. For example Procurement of E 10 B exchange which became obsolete very soon. While auditing ensures that no obsolete/old technology exchange was commissioned. - Whether exchange capacity has been utilized in the planned period or lying idle. If idle the audit objection may be on in fructuous exp. - Under A&P there are several items commissioning of RSU, RLU, DLC, WLL Exchange, mobile exchange, VPT etc. Expansion of capacity : As per DOT norms, the expansion of capacity should take place only when 94% capacity is already utilized or this percentage have been flexible in view of competitive environment and with a target of telephone on demand : The assessment of number of connections, capacity, and addition should be based on proper analysis of forecast demand, available waiting list, and future projections by market research agencies etc. While doing audit, most of LAP invariably have taken objection on unwarranted expansion of capacity on potential loss of revenue. However, one general mistake observed by me is that the LAPs collect the MIS report for the whole SSA which gives the detail of total equipped capacity and working connections. Audit takes overall figure of idle capacity and reaches to the conclusion of over expansion which is a wrong audit judgment. The audit has to analyze the exchange wise expansion whether the expansion in that particular location/exchange was unwarranted. Further to that the projections made while planning might go wrong because of fast changing environment as well. All the factors needs to be integrated before making comment on unwarranted expansion.

5 Sometimes the expansions have taken place just to utilize the push over procurement of H.Qrs. which needs to be checked at HQrs. level about the assessment of requirement and then procurement. Cables & Ducts : BSNL has two items of cables: 1. Long distance cable a) Procurement b) Laying 2. Distribution Network This is a substantial item of capital cable laying exp. in telecom sector. CONTRACTS : Contract is an agreement which is enforceable in Law as per the INDIAN CONTRACT Act, Law of Contracts : The terms and conditions of any Contract / Tender should not contravene the provisions of Indian Contract Act. Otherwise the Govt.,/BSNL/MTNL may end up with legal complications and may incur financial loss. Hence the terms and conditions of any Contract should be in tandem with the provisions of the Indian Contract Act. The Act may be called the Indian Contract Act, It extends to the whole of India except the State of Jammu & Kashmir, and it had come into force on the first day of September, 1872.The Act has been amended from time to time. The important among them are the Indian Contract (Amendment) Act, 1899 inserting Section 19A in the Act, and amending Section 74 to provide for stipulations in the nature of penalty. When a contract has been broken, and if a sum is named in the contract as the amount to be paid in case of such breach or if the contract contains any other stipulation by way of compensation, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby to receive from the party who has broken the contract reasonable amount not exceeding the one so named or, as the case may be, the compensation stipulated for. According to Clause 5 of the agreement, all letters of extension of time to be issued to the contractor should be over the signature of Engineer-in-charge as he is the only officer so empowered contractually to grant extension of time. Similarly, all letters intending to impose compensation or to recover liquidated damages under Clause 2 of the agreement should be issued over the signature of SE as he is the only

6 officer competent to do so under Clause 2 of the agreement in order to fulfill contractual obligation. 2. Contracts Administration in BSNL : In BSNL the Headquarters Directorate will finalize the contracts/tenders in respect of certain items and authorize the circles to procure/issue Purchase Orders at their level for the quantity allotted to the respective Circles. The payments will be made as per the Purchase Orders at Circle level. In respect of decentralized items the circle heads will finalize the contracts/tenders. In Maharashtra Telecom Circle different planning sections will finalize the tenders i.e., Transmission Planning, Switching Planning, Material Management, Cable Planning, Mobile etc. The different planning sections will forecast the requirement separately as Transmission Planning Section will work out the requirement of Transmission Equipment and SP Section for switching equipment, CP section cable items and MM Section will deal with line and wire items and some common items. Based on the targets/yearly requirement as per DoT norms/requirement with the approval of the IFA and CGMT. On receipt of supply payments will be made at Circle Office/at SSA level based on the Purchase Order clauses. The SSA wise utilisation aspect will be watched by planning section. A report on this procurement of decentralized items is required to be sent to headquarters every year. 3. Forecasting and parameters of forecasting : The requirement of line and wire material and cables etc. will be worked out based on the yearly circle s targets fixed by the DoT as per norms prescribed including maintenance and spares. Regarding transmission media etc., based on DoT orders issued from time to time, the requirement will be forecasted at circle level.

7 1. Types of tenders : Based on the estimated cost, the types of tenders to be floated Will be decided. i. Open tender : Where estimated cost is above Rs. 2 crore, open tender. ii. Limited tender : Where restricted to parties who have proven expertise in manufacturing and supply of these items and has prototype approval & production clearance. iii. Single tender : Where the item is a propriety one & that no other manufacturer available or other makes not acceptable for stated reasons. iv. Educational/Developmental tender: Orders placed on new suppliers having type approval certificate subject to conditions. 1. Type of tender selected is justified. 2. Approval of the CGM & Financial Advisor obtained. 3. If it s an Educational/Development Tender, the cost should be restricted to a maximum of 1% of total requirement of the year or Rs. 25 Lakh which ever is less. 2 Notice Inviting Tender : NIT will be published in news papers and it should certain the following details :

8 a) Date of issue of NIT. b) Tender No. c) Date & time of receipt & opening of tender. d) Details of quantity to be procured. e) Specifications of the material. f) Amount of bid security/earnest money. g) Date & time of sale of bid documents. h) Price of bid documents. i) Name of competent authority. 1. Approval of the competent authority. 2. Tender documents/conditions are vetted by IFA. 3. Register of NIT 4. Whether sales tax is charged on the sale of bid documents. 5. Whether price of the bid documents is as per the DoT rates 6. Whether wide publicity is given where necessary. 7. Whether national level publicity is given where unnecessary. 3. General conditions of bid documents : All the terms and conditions of the contracts will be included in the bid documents such as i. Documentary proof to establish technical and financial eligibility of the bidder will be insisted upon. ii. All the clauses will be incorporated in the bid document to safeguard any loss to the department. iii. Clause on special conditions of the contract as (a) Delivery Schedule. (b) No. of bidders to be selected (c ) performance security. iv. Clause on termination of contracts on various grounds. v. Conditions regarding the security deposit, whether in card or Bank guaranted. 1. Bid security collected. 2. Specification prescribed in the tender is the latest at the time of calling of the tender. 4. Opening & evaluation of bids :

9 i. 4 weeks time will be given in case of advertised tender & 8 weeks for limited tender. ii. iii. iv. All the representatives should attend the bid opening meeting. All the queries received from bidders will be replied. Minutes of bid opening meeting will be prepared with details of No. of bids received, out of which No. of bids opened & not opened with reasons, number of representatives, if any, attended the opening process etc. 1. Whether bid was opened as per time schedule. 2. Whether all the representatives attended the meeting. 3. Bid security received, as per tender. 4. Whether the reasons mentioned for not opening of a bid justified. 5. Whether any alterations were allowed by the competent authority. 5. Formation of Evaluation Committee : (I) Tender Evaluation Committee (TEC) i. TEC will be constituted as per DoTs order comprising of 3 members representing technical, financial & commercial wings. ii. TEC will first open technical bids and give reasons for rejection of any bid. iii. After examination of technical bid financial bid will be opened and a comparative statement will be prepared in a uniform manner taking all taxes & duties and other relevant conditions regarding advance etc. iv The rates quoted by the bidder will be compared with previous procurement/headquarter approved rates, if any. v. TEC will prepare its final minutes in detail either to accept the L1 rates or go for a negotiation with L1 bidder etc. (As per the latest CVC instructions, negotiations can be held with the first lowest (bidder) 1. TEC constituted as per DoT s order. 2. Whether reasons for rejection of any bid are justified. 3. Whether L1 rates compared with estimated rates. 4. Whether final recommendations of the committee is justified. (II) Stores Purchase Committee :

10 1. In SPC IFA & CGM should be represented as members compulsory 2. SPC will go through the TEC recommendations. 3. Decides quantity to be procured. 4. Final report will be prepared either to accept the L1 rates or negotiated rates with reasons or to go for a further negotiation or to cancel/go for a retention etc. 1. SPC constituted as per DoT s order. 2. Whether the Committees report is justified in respect of rates & quantity etc. 3. Whether No. of bids to be selected is as per conditions mentioned in the bid documents. If any variations, the reasons for the same. 4. Whether Technical bid is evaluated property. 5. Whether Financial bid evaluation takes care of all the conditions various bidders 6. Acceptance & Evaluation report : 1. The TEC & SPC reports should be again submitted to the CGMT for final approval of rates, quantity to be procured. 2. Approval will be obtained for CGMT for reasons APOs. & DPOs. 3. Any reservations for HTL & ITI, Telecom Factory were existing and whether they have been compiled with. 1. Whether approval of the CGMT is obtained for placing the APO/DPO s. 2. Whether Purchase Orders are vetted by the IFA. 3. Whether EMD received is as per order. 4. Whether the rating of bidders is appropriated. 5. Whether all the conditions published in NIT have been compiled with the successful bidder. 6. Details of Scheduled Date of Delivery, Consignee, Paying Authority, Arbitration Clauses are properly included in the Purchase Orders issued. 7. Whether required action taken in respect of reserve quotas. 7. General & Special Conditions of the Contracts : All the General & Special conditions included in the bid documents should be included in APOs./DPOs. to safeguard the departmental interests. Example ; Scheduled Date of Delivery, Liquidated Damages, any reduction of taxes/duties or rates in subsequent tenders, payment terms, warranty period etc.

11 1. All the clauses to safeguard the departmental interests are to be taken care of. 8. Earnest Money Deposit, Security Deposit, Financial/Performance Bank Guarantee : (a) Bid Security : 1. Bid security of 2% of the estimated cost will be collected at the time of submission of bid documents. 2. The Bid Security will be released after finalisation of tender /issue of Purchase Orders to all the bidders whether accepted or rejected the offer. (b) Bank Guarantee : 1. The amount of Bank Guarantee will be 5% of 1 st Rs. 4 Crores of the contract value + 2 % of every extra Rs. 1 Crore maximum limit is Rs. 1 Crore. 2. The period of validity of Bank Guarantee will be based on the delivery period. If delivery period is up to 6 months 2 Years If delivery period is up to 6 months 1 year - 2 Years & 6 Months. If delivery period is more than 1 year - 3 years. 3. Collection of Bank Guarantee will be exempted on production of a Certificate of Registration as National Small Industrial Corporation. 4. On successful performance of contract, the Bank Guarantee will be released. 5. If for any reasons attributed to the supplier, if contract/tender is cancelled due to non performance, the Bank Guarantee will be forfeited. 6. If any time extension was sanctioned with or without penalty, and if the Guarantee expires, the same will be asked for revalidation. 1. Amount of Bid Security/Bank Guarantee is collected as per rates prescribed by the DoT 2.Timely action taken in case of release of Bank Guarantee/Forfeiture of Bank Guarantee and for revalidation of Bank Guarantee. 3.Collection of bank guarantee in liew of cash is to be checked. 4. Amount of bank guarantee is sufficient or not in case of award of additional quantity for procurement from the same contractor.

12 9. Supply of materials & payments : 1. Supplies should be received as per scheduled date of delivery. 2. Liquidated damages as per clause of the purchase order should be charged. 3. If supplies are received after opening of a tender for the next year, the rates of the new tender are less than the existing, the quantity should be restricted. 4. Bills should be prepared in standard forms and marked original and should contain authorized signatures % of payment should be made on proof of receipt by the consignee and balance 5% within 6 months % payment on delivery will be made if an undertaking is received from the supplier, the goods supplied are free from damages. 10. How to check whether items purchased for a particular project are properly utilized. 1. Supplies received as per specification. 2. Supplies received within schedule date of delivery / in time for the project. 3. The project is completed within the time frame. 4. The justification of materials procured, norms etc. i.e., Stock balance of materials, if any at the beginning of the project, materials procured for the project and materials available in stock balance at the completion of the project.if the stock balance is more, then the reasons for the same i.e., whether the requirement was shown more or field units not used it as per norms etc., should be highlighted. 5. If the project is having a direct revenue earning it required to be compared with the estimated revenue etc., 6. Whether any slow moving, nonmoving items are there in the stock due to unnecessary procurement. 7. Whether adequate action is taken to dispose of such stocks to other needy projects/units. 8. Whether materials have been procured for projects which have been scrapped/abandoned. 9. Whether defective materials received have been rectified or repaired. 10. No payment is made a materials supplied in excess of requirement