AUDIT COMMITTEE MINUTES MEETING NUMBER 72 MEETING DATE

Transcription

1 AUDIT COMMITTEE MINUTES MEETING NUMBER 72 MEETING DATE MEETING TIME MEETING PLACE AM KOLKATA PRESENT 1. Shri S.C.Gupta : Chairman 2. Shri Anup Mukerji : Member 3. Shri Gautam Barua : Member 4. Mrs. Rashmi Aggarwal : Member (Director, MOP&NG) SPECIAL INVITEE 5. Shri B.N. Talukdar : D (E&D) PERMANENT INVITEE 6. Shri S. Rath : Director (Operations) OTHER INVITEES: 7. Mrs. R. S. Borah : Executive Director (F&A) 8. Shri R. Bhattacharjee : GM (F&A) 9. Shri B.K. Mohanty : GM (RM) 10. Shri Sanjay Choudhuri : Head (AP) 11. Shri Rupam Barua : Head (IA) I/c 1 P a g e

2 STATUTORY AUDITORS 12. CA S. K. Saha : M/s Saha Ganguli & Associates 13. CA P.R. Paul : M/s. B.M. Chatrath & Co. 14. CA Anand Chatrath : M/s. B.M. Chatrath & Co. COST AUDITOR 15. Shri Dinesh Sha : M/s. Mani & Co. IN ATTENDANCE 16. Shri S. R. Krishnan : Secretary QUORUM The requisite quorum being present, the proceedings of the Meeting commenced WELCOME ADDRESS Chairman, Audit Committee welcomed the members of the Committee and the invitees for the meeting. Committee observed that Shri T.K. Ananth Kumar, Director (Finance) shall be superannuating on 30 th September, 2013 after putting service of more than 6 years as Director (Finance) in OIL. His period as Director (Finance) is a tale of achievements. Chairman appreciated the initiatives taken by Shri T.K. Ananth Kumar, D (F) towards better future of OIL. During his tenure, he contributed towards OIL s maiden public offer in 2009, bonus issue 2012, acquisition of Oil assets abroad, better financial management, treasury management etc. 2 P a g e

3 To strengthen the internal audit, he has taken initiative for development of audit universe. Thereafter, Committee placed on record its appreciation for Shri T.K. Ananth Kumar, Director (Finance) and suggested that an Appreciation letter from the Audit Committee may be sent to Shri T.K. Ananth Kumar, D(F) MINUTES OF THE 70 TH AC MEETING ( ) The minutes of 70 th Audit Committee meeting held on were confirmed MINUTES OF THE 71 ST AC MEETING ( ) The minutes of 71 st Audit Committee meeting held on were confirmed. While confirming the Minutes Committee desired that a presentation by the official of OIL on the Supplementary Report as submitted to C & AG by the Statutory Auditors pursuant to directions issued by the C & AG of India under section 619(3) (a) of the Companies Act 1956 for review on regular basis. Chairman, Audit Committee drew the attention of the members on the following point : A list of proposed calendar for Audit Committee, having 30 items (attached) were made available to the company. Internal Audit Department to attend on those areas. It was further informed that Companies Act, 2013 has been introduced. The said Act seeks to empower the audit committee and define the matter which are to be looked into by the Committee besides other matters required to be placed to Audit Committee under various 3 P a g e

4 provisions of various statute viz. SEBI. Committee noted the above and desired a presentation on relevant provisions of Companies Act, PRESENTATION BY M/S. DELOITTE HASKINS & SELLS ON AUDIT UNIVERSE M/s. Deloitte gave a presentation on Audit Universe covering the following contents : Life Cycle Audit Universe Proposed manpower Things to do Approach methodology Team Structure Current status It was briefed to the committee that: 1) In developing audit universe, key risks are identified through the process of interaction with employees of OIL. After identification of risk, Risks are categorized and ranking is awarded thereto. Then these are mapped to arrive at Audit Plan. 2) Consultant has suggested different periodicity for different audit ranging once in year to once in 3 years. The Committee was informed that there is need to equip the Internal Audit and Technical Audit Department. These departments should be headed by ED / GGM level. M/s. Deloitte projected that Internal Audit and Technical Audit together should have 31 persons including 2 persons from IT & ERP. 3) It was informed that M/s. Deloitte is required to carry out the following things : Update Audit manual Update Audit Checklist Update Risk Control Matrix Training & Auditee s Awareness program 4 P a g e

5 Handholding of six audits. DISCUSSIONS 1) Committee observed that reservoir is a highly technical area for which expertise is not easily available. Therefore, it should not be covered under Audit Universe. 2) With respect to taxation, periodicity of Audit should be once in a year rather than Once in 2 years, since huge amounts are in appeal. 3) The 64 items listed for once in year should be categorized division wise for effective monitoring. However, since the issues involve multiple departments, categorization is acceptable. 4) Committee further suggested that IA & TA should be headed by GM / ED level executive and they should report to CMD for administrative matters and to Audit Committee for functional matters including submission of internal audit report. 5) Committee noted the manpower requirement for IA & TA department and suggested that the manpower requirement may be outsourced on contractual basis rather than keeping on regular rolls of the company. 6) List of statutory requirements and their compliance should be informed. The committee desired that legal compliance certificate placed before the Committee / Board should include reference to the provisions of the Acts for which compliance is reported. DECISION Permitted to proceed keeping Discussions points in view COST AUDIT REPORT Cost Accounting Records of the Company namely; Cost Accounting Records (Petroleum Industry), Cost Accounting Records (Telecommunication Industry)& Cost Accounting Records (Electricity) required under Section 209(1) (d) of the Companies Act 1956 (1 of 1956) for the year , have been prepared and audited by the Cost Auditor appointed by the Ministry of Corporate Affairs, 5 P a g e

6 Government of India. These Cost Accounting Records are prepared in terms of applicable rules and Cost Audit Report along with Annexures thereto as per Companies Cost Audit (Report) Rule, 2011 for the financial year and Compliance Report along with Annexures thereto as per the Companies (Cost Accounting Records) Rules, 2011 are hereby placed before the Audit Committee for its review. Committee discussed the records in details and observed that: 1) Net margin from crude oil and condensate has decreased by Rs.891 Crores mainly on account of increased cost of sales and increase in cess rate. 2) With respect to Natural gas and LPG, net margin has increased by Rs.139 Crores and Rs.100 Crores respectively. 3) Pipeline transportation consist of two parts i) crude transportation ii) Product transportation In case of crude transportation revenue has decreased due to decreased volume and also on account of decrease in tariff resulting in decrease in realization of Rs.10 Crores. Further, cost has marginally up by Rs.2 Crore. Thus leading to decrease in net margin by Rs.12 Crore. 4) Committee was informed IOC / NRL are not agreeing for increase in cost of transportation. 5) Revenue from pipeline telecommunication business decreased by Rs.3 Crores and cost decreased by Rs.2 Crore and net effect is decrease by Rs.1 Crore. 6) Net margin from electricity (wind mill) Rs (-) 7 per unit and company has posted loss of Rs 15.6 crores from wind mill in Rajasthan 7) Committee also discussed per unit cost of crude, Natural gas and LPG. 8) While deliberating on finding cost, Committee observed that G&G expenses and exploratory drilling expenses both have increased in Discussion 6 P a g e

7 1) Committed noted that cost audit is using word Branch whereas Internal Audit is referring to it as Sphere, it desired that uniform termology may be used. 2) The committee suggested that the allocation of old cost during cost audit be reviewed and revised accordingly. 3) Committee observed that Rs Crores has been booked as drilling expenditure for NELP / JVC / OVC without any meterage. 4) Committee observed that average drilling cost per unit in case of NELP / JVC has increased from Rs 4,43,332/- in to Rs 6,10,317/- in in Domestic Area. In this context Committee desired detailed analysis of the drilling Cost. 5) Committee was informed that company has incurred losses in bottling of LPG and price revision is due. Committee advised the company to raise the issue during the quarterly review meeting with MOP&NG. 6) In respect of G&G expenses it was observed by the committee that survey cost should be further divided in 2D & 3D and presented accordingly. 7) Committee noted that cost auditor has nil observations in its report. However, cost auditor has following suggestions: Maintain uniformity in collating information element-wise in respect of survey and drilling exploration for JV to enable comparative monitoring of similar elements of expenses in different JV. Company should in respect of JVC endeavor to fully adhere to the line items as given in Proforma B for survey cost and Proforma C for exploratory and development drilling cost. Company should capture the composite rig cost per hour / day to monitor efficiency of different rig. Charges of rig of operated JV should be more scientific and auditable basis. Benchmarking should be done for drilling expenses per meter for onshore drilling, offshore drilling and deep water drilling for domestic and overseas operations separately. This exercise shall help in monitoring drilling cost. 7 P a g e

8 8. While noting the suggestions of the cost auditor, committee desired that cost should be compared with national and international companies for benchmarking and variation should be analyzed in detail in order to reduce the cost of production. RECOMMENDATION Audit Committee is requested to adopt and recommend to the Board of Directors, the Cost Accounting Records for the year along with Annexure to Cost Audit Report and give necessary approval for making suitable amendments if any, required, while filing the Report as per XBRL format in accordance with Cost Taxonomy. DECISION Permitted as Recommended RESOLUTION RESOLVED THAT Cost Accounting Records for the year along with annexure to Cost Audit Report be and is hereby recommended to the Board for its approval and if required to make minor amendments to enable XBRL filing. The meeting ended with vote of thanks to the Chair. Date : Place : Noida (S.C. Gupta) Chairman 8 P a g e