The Bhutanese Leading the way.
Under the category of fraud and corruption the Royal Audit Authority (RAA) has listed four issues against the Pendent Cement Authority Limited (PCAL)
The PCAL had cases of its 3 employees working in the Finance and Procurement Division deploying vehicles registered in their names or in the name of their family members to the company Stockists (private distributors) during the period under audit.
There was a direct conflict of interest based on their current duties and responsibilities since the payments to the stockist including monthly commissions were routed through the above Divisions.
Similarly, employees’ vehicles were also involved in the supply of raw materials such as fly ash and slag to the company under the guise of other parties.
RAA said the Procurement Head had deployed her private trucks under the stockists where the stockists were involved in supply of the raw materials such as fly ash and slag to the company under the name of Rajendra Parsad Agarwal and Sushil Kumar Agarwal
RAA said similar issues were also pointed out in the past and reoccurrence is a sheer sign of non-compliance to audit observations and lack of stringent actions from the management against the defaulting officials.
RAA said that the payment of ineligible incentives to stockists by backdating the sales can be well linked to the deployment of the vehicles by the above mentioned officials by the stockists.
The PCAL had made irregular payment amounting to Nu. 12.516 million (mn) as performance-based incentives and Nu. 2.442 mn as monthly commissions to two stockist without meeting the set target. The Sales Department had manipulated the dates of the sales challans to make the stockist eligible for incentives and commissions.
The PCAL during its 22nd Production and Sales Committee Meeting convened on 9th November 2019, resolved to pay incentive-based performance to the stockists Sushil Agarwal and Aman Agarwal apart from their monthly commission for the 4th quarter of the financial year 2019. The management ascribed the payment of such incentives to boosting the sales.
The minimum quantity to be achieved by each stockiest during the 4th quarter in order to qualify for the incentive as resolved in the meeting was Nu 250 per metric ton if sales was 25,000 MT.
Pursuant to the decision of the management, PCAL paid incentives of Nu.12.515 mn to the two stockists, Aman Agarwal and Sushil Agarwal during the financial year 2019 saying they met the 25,000 MT target.
However, contrary to the above disbursement, the scrutiny of the sales record viz-a-viz actual quantity lifted from the plant revealed that several sales challans had been backdated to December 2019 to make the stockists eligible for the incentives.
The Sales Department had backdated 107 challans involving 2,340 metric tons of cement to Aman Agarwal and 131 challans comprising 2,701.00 metric tons of cement to Sushil Agarwal.
The backdated challans were issued towards the end of December 2019, but the actual lifting were done between 1st Jan 2020 and 10th Jan 2020
The total quantity lifted by Aman Agarwal and Sushil Agarwal during the final quarter were 22,701.00 metric tons and 22,320.00 metric tons respectively against the stipulated quantity of 25,000.00 MT.
It was further disclosed that the journal adjustment had been passed by the sales department on January 10, 2020 soon after the stipulated quota were lifted.
In view of the above, going by the modus operandi of how the sales had been backdated, the audit team could not rule out the collusion between the stockists and the dealing officials in payment of performance incentives.
RAA said given that both the stockists had failed to lift the stipulated quantity, the payment of incentives remains inadmissible. The inadmissible payment of Nu.12.515 mn shall be recovered with 24% penal interest from the date of payment.
The backdating of challans tantamount to willful manipulation of record thereby incurring a huge loss to the Company.
Instead of checking and balancing, the vehicles of the PCAL dealing officials were deployed with the stockists.
Pursuant to the observation on the illegitimate payment of incentives to the stockists by backdating sales during the financial year 2019, the audit team reviewed the payment of commission for the financial year 2020.
The review of the sales vis-à-vis actual quantity lifted revealed similar cases of backdating sales challans to allowing the stockists earn higher monthly commission rates during the month of January 2020 and October 2020.
Close scrutiny of the documents revealed that the sales department had backdated 88 challans consisting 1,770 metric tons of cement to Aman Agarwal and 83 challans consisting 1,761 metric tons of cement to Sushil Agarwal for the month of January 2020. Similarly, 14 challans consisting 285 metric tons of cement were backdated in the name of Aman Agarwal in the month of October 2020. The challans were backdated apparently to make the stockists eligible for the higher commission. The backdating of challan resulted in inadmissible and illegitimate payment of Nu. 2.742 mn to the stockists.
RAA said in view of the above, going by the modus operandi of how the sales had been backdated, the audit team could not rule out the collusion between the stockists and the dealing officials in payment of monthly commissions.
Given that both the stockists had failed to lift the monthly stipulated quota for the month of January and October 2020, the payment of commission remains inadmissible and shall be recovered with 24% penal interest from the date of payment.
The back dating of challans tantamount to willful manipulation of records. It asks that appropriate actions shall be initiated against the dealing officials for the manipulation of records.
RAA also found that PCAL had made irregular appointments of two accountants by tailoring the recruitment process to suit the selected candidates. The RAA found that of the 17 applicants who responded to the vacancy announcement, only two were shortlisted despite nine others fulfilling the criteria. The two shortlisted candidates were selected through written tests and face-to-face interviews.
Further, the selected candidates were placed in higher grade than the position announced, contravening the prescribed clause of the Term of Reference of the Vacancy announcement and the Internal Service Rule 2018 of the company.
PCAL, Gomtu, had made inadmissible payment of salaries amounting to Nu. 1.418 million to its employees engaged with the contractor of the company. The company had initiated an Autoclaved Aerated Concrete (AAC) Blocks project which was awarded to the contractor as a turnkey project. It was noted that 26 employees of PCAL were engaged in the day-to-day manual work of the contractor where as of May 2021 till the date of audit on February 2022, to expedite the completion of the project.
Since AAC Blocks project was awarded as a turnkey project to the contractor, engagement of the company’s manpower in the contractor’s work without any charges or fees tantamount to undue favour to the contractor and misuse of human resources.
