Date: 13/07/2019

EXECUTIVE SUMMARY FOR THE INTERNAL AUDIT REPORT

Company Name: Arunachala Logistics Private Limited
Period: Quarter ended 31st March 2019

Scope:

The areas covered during the audit were Operations, Procurement, Driver Payments, Maintenance, C & F
Operations, Pending Insurance Claims, broad verification of certain statutory compliances such as Employees
Provident Fund, Employee State Insurance, Professional Tax, Goods and Service Tax, and Income Tax, Finance
& Accounts, Unit Visit and Other Areas (Punctual Incentives, Vigilance Incentives, Driver settlements, RCL
ledger Reconciliation, Diesel Reconciliation, Security Incentives).

Key Business Statistics (Transportation) for Q4 of FY 2018-2019:

Particulars January February March

No of Trips 3,775 4,151 4,571
Transport Revenue 23.83 24.81 29.36
₹ in Crores

Diesel Expenditure 9.49 10.65 10.42

Driver Expenditure 2.83 3.15 3.70
Maintenance Expenditure 1.66 2.08 3.02
Trip expenditure 1.92 2.23 2.58

Key Business Statistics

35 64,236.00 65
` in Crores

Revenue per Trip (` in Thousands)

30 64
63,134.00
63
25
62
20
61
15 59,768.00
60
10
59
5 58

- 57
January February March

Transport Revenue Diesel Expenditure Driver Expenditure

Maintenance Expenditure Trip expenditure Revenue per Trip
 Key Business Statistics (Transportation) for FY 2018-19:

Particulars Q1 Q2 Q3 Q4
No of Trips 14,345 14,098 12,811 12,497
Transport Revenue 78.47 75.44 75.43 78.01

₹ in Crores
Diesel Expenditure 36.87 36.25 33.59 30.56
Driver Expenditure 8.43 10.08 9.03 9.68
Maintenance Expenditure 8.47 7.39 7.05 6.77
Trip expenditure 6.68 6.46 6.28 6.73

Key Business Statistics

90 64
62,419.00
` in Crores

Revenue per Trip (` in Thousands)

63
80 62
70 61
58,877.00 60
60 59
58
50 57
40 54,699.00 56
53,509.00 55
30 54
53
20 52
10 51
50
- 49
Q1 Q2 Q3 Q4

Transport Revenue Diesel Expenditure Driver Expenditure

Maintenance Expenditure Trip expenditure Revenue per Trip

Major Observations:

The issues identified are summarized below and are detailed in the Internal Audit report issued along with.

Operations:

• There are instances of short/excess diesel recoveries from the driver. In effect, an amount of
` 43,062/- was excess recovered and there is excess payment of incentives of ` 24,626/- to the
drivers.
• In case of Trip Expenditure, the net variance is ` 75,660/- excess of budget over actual
expenditure. Specifically, in case of Toll Gate expenditure the budgeted amount is higher than
what is actually incurred. The budgets need to be reviewed.

Purchases:

• Regular updating issues have been observed and the same have been repeated over many
quarters. Though such instances are being reduced. The issues being:
o Delay in raising of GRNs
o GRN Prior to Security Inward
o Security Inward prior to Purchase Order
o Invoice being raised by Vendor prior to our Purchase Order
o Absence of Security Stamp
 o Mismatch in GRN value and Cost on Invoice

Driver Performance Payments:

• An amount of ` 76,514/- was short paid to the drivers during the quarter. Short payments are
mainly in relation to Return Load Commission. The OAs are not getting updated in the Web
Portal for computing RL Commission. Also, in few cases the system is making incorrect
calculations.

Maintenance:

• No major issues have been identified

C & F Operations:

• An amount of ` 5,297 /- is excess billed to RCL/Short paid to Labour contractors.

Insurance Claims & Accidents:

• There were 24 claims raised during the quarter out of which 9 claims are yet to be settled.
• There were 24 accidents during the quarter vis-à-vis 14 accidents during the previous quarter.

Statutory Compliances:

• The PF contributions by the company that ought to have been made has been worked out and
it has resulted in short contribution of ` 835/- for the quarter.
• The ESI contribution by the company that ought to have been made has been worked out and it
has resulted in short contribution of ` 124/- for the quarter.
• An amount of ` 7,350/- is short paid towards Professional Tax at other than Tamil Nadu, whereas
amount of ` 58,620/- is short paid for the state of Tamil Nadu.
• Goods and Service Tax:
o There is a mismatch between GST paid on income as per books and income as per
GSTR3B. GST of ` 1,41,639/- is excess reported in GSTR 3B vis-à-vis Books of accounts
for the year 2018-19. Further, an amount of ` 12,97,887/- of exempt income is excess
reported in GSTR 3B vis-à-vis Books of accounts.
o An amount of `2,134/- is short paid towards GST Output.
o There is short input claim of ` 3,838/- as per GSTR3B filed vis-à-vis Input entries as per
Books of account.
o There is Excess input claim of `2,340/- as per GSTR3B filed vis-à-vis Input entries as per
Books of account.
o GST input of ` 1,01,493/- is accounted under incorrect ledger account head i.e. input
under IGST is accounted as CGST/SGST and vice versa. Necessary rectification entries
need to be passed.
o GST input claim of ` 69,443/- is technically ineligible for the reason that the
goods/services are supplied under GSTIN of one state and the claim is made under
another state. For example, vendor’s invoice of Telangana has ALPL’s GSTIN of
Telangana and has levied CGST & SGST. But the input claim is made in GST return of
Andhra Pradesh as IGST input. Further, in respect of input claim of GST on insurance
premiums of vehicles, it is observed that for vehicles located in Andhra Pradesh records,
the input claim is made in Telangana.
o GST input of ` 10,120/- is not recorded in the books of accounts as the accounting entry
has been passed for the total value of the invoice without bifurcating between basic
value and GST component. No claim is also made while filing the GST returns.
• TDS amounting to ` 8,332/- is excess deducted in return as compared to books.
 • There are few payments in excess of ` 10,000 in cash which attracts disallowance u/s 40A(3) of
Income Tax Act.

Finance & Accounts:

• During the course of audit we have observed certain entries amounting to ` 4.93 lakhs are
passed in the provision for Freight Income ledger. The adjustment entries are on account of
short/excess posting of revenue. Also in many cases the closing balance in the provision ledger
is transferred to RCL/Other Customer’s account. The trip wise/DC wise details are not available
for the same and could not be verified.

Unit Visit:

• During the course of audit we have visited all the units, we have noticed the following:
o Cash has been accounted properly in all the units except for Basavakalyan where there
was an excess cash of Rs.364/-.
o Diesel stock was found short, the summary of short stock is as follows:

Unit (Short)/Excess stock in ltrs

Unit 1 (14,620)
Unit 2 (15,128)
Unit 3 (3,311)
Unit 4 1,034
Unit 7 (5,702)
Other Areas:

• Punctual Incentive to Maintenance, P & A and Tyres Department amounting to ` 1,250/- is

Excess paid to employees.
• Discrepancies found in diesel closing stock as on 31/12/2018 as per books and books closing
stock as per certified copies received from the units.

Overview:

Upon audit verification we have observed that the company’s internal controls and other related procedures
with regards to operations are effective and by and large are being followed.