Draft Audit Report on the Accounts of Gujarat Maritime Board, Gandhinagar for the year 2009-2010. -----------------------------------------------------------------------------------------------------1.

Introduction:

The Gujarat Maritime Board (Board) was constituted on 5 th April, 1982 under the Gujarat Maritime Board Act, 1981. It is vested with the functions of Administration, Control & Management of Minor Ports in Gujarat State. As per section -88(2) of the Act, the accounts of the Board are required to be audited once every year by the auditor appointed by the State Government in consultation with the Comptroller & Auditor General of India. The Audit of the accounts of the Board has been entrusted to the Comptroller & Auditor General of India for a period of five years from 1st April 2002 to 31 st March 2007 under section 20(1) of the Comptroller & Auditor General's (Duties, Powers & Conditions of Service) Act, 1971. 2.

Audit Mandate

The audit of the accounts of the Board has been entrusted to the Comptroller & Auditor General of India for a period of five years from 1st April 2007 to 31st March 2012 under section 20(1) of the Comptroller and Auditor Generals (Duties, Powers and Conditions of service) Act, 1971.

Comments on Accounts
3 Balance Sheet Liabilities. 3. 1

3.1.1 Reserve & Surplus (Schedule-B) Premium Grant & Capital Receipts Rs. 150.94 crore Mention was made in the Audit Report for the Year 2003-04 to 2008-09 regarding nontransferring of premium receipt on allotment of waterfront/Jetties/plots on lease to revenue income and fixing of policy for treating capital receipt as revenue in the succeeding years. According to accounting standard No.5 read with item No. 17 & 18 errors in the preparation of Financial statement of previous years, or errors which occurred as a result of applying accounting policies, misinterpretation of facts or oversight is required to be disclosed separately in the statement of profit and loss in the manner that their impact on the current P & L can be perceived. Despite the Board having adopted commercial system of accounting Rs. 150.94 crore was neither transferred to Revenue Account nor disclosed separately as required as per AS 5. Action taken to frame appropriate policy in this regard may please be stated. Board replied that the entire premium received on plots and from the private jetty owners are being credited to Revenue Account since last two financial years. The reply is not tenable as the same is not reflected in Income and Expenditure Account of the Board as Income of the Board.

3.2 Current Liabilities Rs. 214.93 crore (Schedule-L) 3.2.1 Sailing Vessels account Rs.0.79 This represented liability towards Fisheries Department on account of un-disbursed loan, insurance amount and recovery of loan given to beneficiaries. However, the outstanding recovery of loan(Rs.4.85 Crore) and interest thereon(Rs.4.82 Crore) in respect of 74 individuals as at 31 March 2010 were not shown on both sides of the balance sheet as amount recoverable from individuals (Assets) and amount payable to Government (Liabilities) resulting in under statement of both liabilities and assets to the extent of Rs. 9.67 Crore. Scrutiny of Schedule L of the Balance Sheet for the year 2009-10 revealed that the Board had not shown the amount recoverable from 74 individuals and payable to GOG on both the sides of the balance sheet as pointed out in earlier audit reports. The Board replied that there were 139 beneficiaries and outstanding loan and interest thereon amounted to Rs. 4.18 crore and Rs. 10.81 crore respectively. The incorrect presentation of Vessel Account resulted in understatement of amount recoverable from individuals (Assets) and amount payable to Government (Liabilities) to that extent.

3.3 Assets. 3.3.1 Investment Rs. 187.78 crore Bond and deposit with Bank and other institution, Ahmedabad Urban Co-operative Bank and Ahmedabad Mahila Nagrik Bank Rs. 5.17 croe This included deposits of Rs.2.92 crore with Ahmedabad Urban Co-operative Bank and Rs. 2.25 Crore with Mahila Nagrik Bank. Both the banks have defaulted in making the payment. Despite a decree from the civil court, Ahmedabad in favour of the Board in February-1998 no payment has been received. Since the repayment is doubtful provision for bad and doubtful debts needs to be made. Non-provision represents over statement of asset to the extent of Rs. 5.17 crore. Board replied that Honourable Court has passed the verdict in favour of GMB and recovery is in progress as such provision for doubtful payment has not been made. The reply of the Board is not tenable as the Banks are under liquidation.

3.3.2 Capital reduction of Equity Investment in GCPTCL Gujarat Chemical Port Terminal Company Limited was initiated with the participation of IPCL(RIL), GMB, GIDC, GIIC, GNFC, GACL and GSFC in the year 1995. GMB held Rs.50.90 crore worth of equity shares on which no dividend was received by GMB. The notional dividend for the previous 5 years at a simple interest of 8% resulted in an opportunity loss of Rs.20.36 crore as worked out by GMB. The face value of equity share plummeted from Rs.10 to Rs.1, resulting in the erosion in the net worth and total capital reduction of GMB estimated at Rs.45.81 crore.

Further, the issue of Rs.13.07 crore as outstanding interest from GCPTCL on ICD (short term deposit) remained unresolved. As GCPTCL was unable to generate profit since long, GMB approached the Government for write off the financial loss of Rs.58.88 from the books of accounts. The investment shown in the account at cost, however, in case of permanent reduction in value the same had to be accounted. Due to non-provision of the same, the investment account and interest receivable account was overstated to the extent of Rs.45.81 crore and Rs.13.07 crore respectively. Board replied that matter has been taken up with the Government for their approval in reduction of investment and interest account and the same will be reduced from investment and interest account on receipt of approval. The reply is not tenable as this do not present fair picture of the state of affairs in the absence of the provision for the same under Doubtful debts.

3.3.3 Sundry Debtors and Receivables Rs. 290.57 crore 3.3.3.1 Group Insurance Rs. 5.16 Crore As per provisions of Group insurance scheme 1981, made applicable to Board's employees, 70 percent of monthly subscription collected from the employees was required to be credited to savings fund account and balance 30 percent to insurance fund. The insurance amount was payable to the family of deceased employee from the insurance fund account and employee's share of 70 percent along with due interest from savings fund account. It was however, seen that instead of following the above procedure, the Board was crediting entire subscription deducted from its employees to a single Group Insurance Account and payment towards insurance/terminal benefit made there from. Entire subscription of Rs. 5.16 crore collected from the employees was credited to Group Insurance account and payment made to deceased employees as well as retiring employees was not debited either to insurance fund account or savings account resulting in overstatement of liabilities to that extent. Board agreed to take necessary corrective action from next year. 4.1 Fixed Assets 4.1.1 Deletion of capital work resulted in understatement of fixed assists The Government of Gujarat in Ports and Transportation Department accorded (June 2007) Administrative Approval to the work "Construction of Peripheral Road near IPCL Area" at Dahej. According to condition no. 4(4) after completion of work, responsibility of maintenance of the road was to be handed over to GIDC. The work was completed on 3009-2009 at a total cost of Rs.21.72 crore. Scrutiny of balance sheet for the year 2009-10 disclosed that amount of Rs.21.72 crore deleted from the fixed assets schedule E and cost of work amounting to Rs.21.72 crore added in schedule 11 - Repairs and Maintenance. Since the construction of road is a capital work carried out by GMB and only responsibility of maintenance of road has been handed over to GIDC, deletion of cost of Rs.21.72 crore from fixed assets and addition of

same to repairs and maintenance was irregular and resulted in understatement of said amount in fixed assets and over statement in repairs and maintenance. Board replied that once the road is handed over to GIDC, it does not remain the capital asset of the Board and Board cannot claim any depreciation for such asset as such the same has been treated as addition to the repairs and maintenance. The reply is not tenable as the Government Memorandum specifically states that after completion of the road work responsibility of the maintenance of the road may be handed over to GIDC. 4.1.2 Over statement of fixed assets (land) and under statement of Sundry Debtors Audit scrutiny revealed that GMB has paid Rs.31,45,00,000 on 31-03-2007 to Dahej SEZ Ltd. for requirement of 39 hectares land for Solid Cargo Port Terminal at Dahej. The expenditure incurred was booked under Fixed Assets (land) accounts. Subsequently the land requirement was reduced to 12 hectares and same was transferred by GIDC on 02-072009. The cost of 12 hectares land worked out to Rs.7,30,50,000 and Ex. Eng. Privatisation Cell, Gandhinagar requested GIDC on 26-11-2009 for refund of balance amount. GIDC has not paid balance Rs.24,14,50,000 to GMB till date of audit. It was seen that required reverse entry was not incorporated in the Accounts of 2009-10 which resulted in overstatement of fixed assets (land) and understatement of sundry debtors to the extent of Rs.24,14,50,000. Board replied that GIDC has been requested to refund the balance amount of Rs. 24.14 crore. Further, it was stated that GIDC has informed the Board that matter will be taken up during the impending board meeting of GIDC. 5. Effect of Audit comments on accounts The impact of the of the comments given in preceding paragraphs is that as on 31-032010 liabilities were overstated by Rs.5.16 crore, assets were understated by Rs.21.72 crore and expenditure by Rs. 64.08 crore.

Response to audit.

Draft Audit Report was issued to the Board on 15-03-2010. Reply to the Draft Separate Audit Report has been submitted to the Accountant General by the Board on 13-04-2010. .

Place-Rajkot Date: Accountant General (civil Audit) Gujarat, Rajkot

Annexure Risk Analysis of Gujarat Maritime Board, Gandhinagar for Financial (Transaction) Audit 2009-10. I Expenditure H (6) 12776.4 2 6653.44 --------(Rs. In lakh) M (4) L (2) -----------

Weight age (a) Expenditure on works/Project/Programme and other development expenditure. (b) Salaries and other establishment expenditure. (c) Deposit in PD Account and PL Account. (d) Percentage increase of total expenditure over previous year. II

----------------

---------23.94%

Previous Audit Observations M (4) -----L (2) Less than 30% ------

Weight age H (6) (a) Money value of Part-II-A -----Paragraphs in I.R. compared to total money value of IRs in last three years. (b) Outstanding IR Paras ----III

Internal Control and Internal Audit System. M (4) ---------------L (2) Satisfactory Satisfactory Satisfactory

Weight age H (6) (a) Budgetary procedure and -----expenditure control. (b) Maintenance of records -----and Accounts. (c) Internal Audit ------

IV

Performance evaluation. H (6) -----M (4) -----L (2) Satisfactory

Weight age Performance of units as per Administrative Report of the department/Compliance to PACs recommendation/Evaluation reports on projects/Works/Department etc. if any/Press reports/Complaints.

Total Score:[I(a+b+c+d)+II(a+b)+III(a+b+c)+IV]/10=X

Units Category: I( 6+6+0+2)+II(2+4)+III(2+2+2)+IV(2)= 14+6+6+2/10=2.80

EFFECT OF AUDIT COMMENTS Para 3.1.1 Understatement of Assets by Rs. 21.72 crore Para 2.3.3 Understatement of Liability by Rs. 5.16 crore Para 2.3.1 & 2.3.2 Expenditure was understated by Rs. 64.05 croe

Rs. in crore Liabilities Para No Understatement Overstatement -

Net understatement Rs 5.16 crore. Income Rs in crore

Income Para A (e) A (f) A (g) B (a) B (b)

understatement

overstatement -5.17 -0.27 0.83-

-0.22

2.90 0

Total

0.22

Rs 9.39

Net overstatement Rs 8.95 crore.

PROFORMA