PSM suffers Rs 898.8m loss due to mishandling

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ISLAMABAD: Auditor General of Pakistan (AGP) has revealed that Pakistan Steel Mills (PSM) suffered a loss of Rs 896.8 million due to mishandling of stock and lack of due vigilance by the management.In this mishandling four types of material was carried out by management against average rate that caused loss of Rs 896.8 million, said audit report 2011-12. The report said that in PSM, a physical verification of various raw material was carried out by the management as on June 30, 2010, as shortages valuing Rs 896.865 million on average rate basis were noticed. The shortages were indicative of mishandling of the stock and lack of due vigilance by the management, said audit report. On it, the matter was taken up with the management through audit inspection and the management in its reply dated May 05,2011 stated that the differences between book balances and physicals balances had already been investigated and adjusted as per recommendations of the committee constituted for the purpose.

The reason for difference had been identified and measures for their adjustment had been recommended. The management added that the difference between book balances and physical balances were not shortages but it was reporting of lesser consumption during the year as per provisional activity reports. In its clarification, the management further added that as the differences between book balances and physical balances were not shortages no loss was incurred by Pakistan Steel.However, the reply as per the observation of audit was not tenable as the shortages in stock revealed after physical verification were tantamount to loss of stores in terms of rules which provides holding of detailed inquiry in such cases. The mere adjustment of reported shortages on the recommendations of the concerned departmental committee needs review to save losses. Audit also suggested investigation into the matter to find out causes of the differences in the book and physical balances and taking remedial measures.

Moreover, the DAC was not satisfied with the management's reply and directed the management to submit a revised reply by incorporating the product wise benchmark (allowable limit) for booking the differences of the shortages, which were basis for adjustment of the shortages.The DAC also directed the management to direct all its wings to prepare a detail working paper for placement the matter before board of directors for the approval. However, the progress was awaited till the finalisation of this report.It is pertinent to mention here that according to para-7 of the Work Instructions of Pakistan Steel Mills (PSM) issued in September 2002, stores department is responsible to record the consolidated transaction through Stores Requisitions (SRs) provided by consuming complexes and would feed the data. They will also check validity and reconcile the data side by side with store accounts every month. No un-reconciled balance will be carried forward to the next month.

End.