AWPS NoControl ObjectivesRiskWork plan / Test ProcedureNature of Work StepSampling BasisNature of Control1.0BDJV1.1Dashboard review1.1.1To verify that all annual targets are being met as per planNon-completion of annual plan may lead to non-achievement of business objective1. Obtain previous year Annual Plan and achievement for the department 2. Compare plan vs. physical achievement for the department3. Note the variances and seek explanation for the same4. Perform root-cause analysis and identify the reasons for the deviationsAnalysisDashboard Review1.2Marketing strategy1.2.1To verify that all short and medium term goals are in line with the long term goalsNon achievement of business objectives1. Obtain the short and medium term goals of ONGC2. Validate that the same are in line with the Long term goals3. Make note of deviations if anyAnalysisReview the medium and short term goals1.2.2To verify that a formal mechanism of periodic monitoring of business development plansAbsence of a formalized mechanism to periodically monitor and evaluate the effectiveness of BDJV group1. Review the process of periodically monitoring the effectiveness of the BDJV planAnalysisReview the business development process1.2.3To verify presence of a formal mechanism to perform market surveysAbsence of formalized plan to periodically perform market surveys which may lead to non adherence of long term plan1. Review the process of performing market surveys to ensure all BDJV opportunities are being tracked by the BDJV groupAnalysisReview the market survey process for BDJV1.3Partner selection1.3.1To verify if criteria for partner selection has been definedJV with partner who is not eligible which may lead to damage of reputation or finances1. To verify that approved criteria for JV partner selection is in place2. Make note of deviations if anyAnalysisReview the criteria for partner selection1.4DOA1.4.1To verify that adequate approvals have been taken as per DOANon compliance of BDP1. Obtain a list of all the JVs entered in the audit period2. Validate that adequate approvals have been taken as per BDPAnalysisReview the approvals for XX% of the total JVs1.5Capex tracking1.5.1To verify that all CAPEX vs. actual expenditure for projects are being monitored and trackedNon monitoring of project cost may lead to excess capital expenditure1. Obtain a list of all the JVs entered in the audit period2. Validate that monitoring of approved CAPEX vs. actual project cost is being monitored on a continuous basisAnalysisReview the approved CAPEX vs. Actual spent

&"Arial,Regular"&10Oil & Natural Gas Corporation LimitedInternal Audit Volume 2Audit Work Program: BDJV&G

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JVOGS NoControl ObjectivesRiskWork plan / Test ProcedureNature of WorkstepsSampling BasisNature of Control1Joint Venture (Non-Operating)1.1Compliance to JOA and PSC1.1.1To review the compliance of a) Production Sharing Contracts (PSC)b)Joint Operating Agreement (JOA) and draw out the salient features and conditions that the operator needs to comply withNon compliance to PSC and JOA may lead to:a. Dis qualification of JVb. Heavy penalty to JVc. Cancelation of exploration license

1. Prepare detail list of compliances under PSC and JOA:Compliance of JOA / PSC will include following:a. Requirements of the operating / Management committeeb. Approvals in budgeting processc. Compliance to reporting to DGH & JV partnersd. Basis of computation of various reporting's to DGH & JV partnerse. Measurement of Petroleumf. Recovery of cost for Oil and Gas g. Production sharing of Oil and Gash. Valuation of petroleumi. Assignment of interestj. Payment of fee to Governmentk. Bank Guarantee submission (Basis & Timely submission)l. Cost allocation basism. Approvals thereofCompliance to JOA / PSC accounting procedures a. Government / License and assistance b. Certificates and notices2. Obtain details of the Joint Operating Agreements 3. Compare with the physical documents maintained.4. Document and report on anomalies observed in reporting and complianceAnalysisObtain PSC and JOA1.1.2To verify that the management committee and the operating committee approves/reviews all the joint venture related issues and documentsNon compliance to internal policiesmay lead to disputesVerify procedure around approval & review of following by Operating & management committee:1. Minimum work program2. Annual Beget3. Revision of Budget4. Authorization for Financial Expenditure (AFE)/ Authorized Expenditure Request5. Progress of the work6. Cash call7. Costing basis8. Preparation & Circulation of MISAnalysisObtain OC and MC approvals, MOMs etc1.1.3To verify that all statutory payments like Royalty, Cess TDS etc. are being made regularly and there are no defaults on the same.Non compliance of statutory regulations1. Obtain all data records for the JV during the review period.2. Classify JV name, account number, amount currency (INR) and amount in USD.3. Verify entries posted in the TDS accounts 4. Document and report in cases of anomalies observed.AnalysisObtain dump of data records for JV1.1.4To verify compliance to ONGC HSE PolicyNon compliance to ONGC HSE Policy may lead to financial and legal penalties1. Verify whether the JV has a documented HSE manual.2. Verify that the JV is adhering to the other statutory compliance like Safety, Environmental laws etc.3. Document and report in cases of anomalies observed.AnalysisObtain statutory approvals for HSE1.1.5To verify whether the operator functions in a good operational and financial probity.Inadequate financial and operation probity may lead to financial misstatementReview :1. Recoverability of debts2. Movement of Inventory3. Working capital management4. Funds management5. Procedure for cash calls 6. Analysis of cash calls as against approved work program7. Escrow account maintained for the work program (if applicable)8. Deployment of cash call received 9. Application of time writing rates10. Time writing and allocation policies11. Time writing charges for Non-Joint venture activity 12. Time writing rates, including revisions thereof13. Procedures for monthly accounts closure14. Contracts and materials management15. Procedure for arriving at the Value of Work Done16. Well cost reconciliation17. Payment of duties, taxes, cess and other statutory payments on time 18. Engineering, Procurement, Installation and Commissioning reconciliation.19. Structuring of contracts20. Application of contractual rates in invoice payments21. Commitment reporting22. Replies to DGH and Government audits23. Accounting structure Prepare a detailed process flow on each of the above and examine the compliance to the SOP, if in existence.In cases of control weakness observed, report the issues with its perceived impact on the cost recovery and its financial / operational impact.1. Verify whether the management has an established internal control structure and a procedure for financial reporting. 2. Document and report in cases of anomalies observed.AnalysisObtain information about recovery of debts, inventory management, working capital management, funds management, cash calls etc1.2Tendering1.2.1To verify that the tender committee is formed as per guidelinesNon compliance to BDP & MM Manual in this respect may result ina. unauthorized procurement of material / servicesb. selection of incompetent vendors which may result in low quality material / service, non fulfillment of delivery commitmentc. finalization of order on uncompetitive terms & conditions

Above may further result in blockage of working capital & / or inefficient utilization of entity's resources, disruption in operations1. Obtain list of order raised during the review period 2. Check if the tender committee is formed as per the guidelines defined in JOA/MM Manual3. Obtain the reasons for exceptions and report the same.TransactionObtain list of orders & select 20 no. of ordersAutomated1.2.2To verify that the Bid Evaluation Criteria is appropriately approved & adhered to.1. Finalization of order on uncompetitive terms & conditions2. Selection of incompetent vendors which may result in low quality material / service, non fulfillment of delivery commitment1. Get the list of tenders issued.2. Check whether duly approved bid evaluation criteria was provided along with the requisition.3. Obtain the reason for exceptions and report the same.TransactionTake dump of tenders & 40 no. of tendersManual1.2.3To verify that standard clauses are clearly mentioned in the tender document 1. Delay in finalization / execution of orders, which may further result in disruption of operations2. Disputes may arise at later stage3. Unclear terms & conditions may result in non availability of financial recourse against the vendor in case of any failures by vendor1. Obtain the list of tenders issued.2. Check sample of tenders sold to the vendors whether standard clauses are mentioned in detail as per approved BEC. relating to the following: a. Warranty and Guarantee b.Penalty/Liquidated Damages/Cancel Clause c.Failure and Termination Clause d.Fall Clause e.Inspection and reject of Materials f.Subletting and Assignment g.Earlier Delivery h. Bulk Inspection (where applicable. etc.3. Verify whether terms & conditions of orders are vetted by legal department to protect bets interest of the company4. Obtain the reason for exceptions and report the same.TransactionTake dump of tenders & 40 no. of tendersManual1.2.4To verify that the tender is properly & timely advertised.Finalization of order on uncompetitive terms & conditions1. Obtain the list of tenders floated2. Tender type used signifies the purchasing method like open tender, single tender, limited tender etc3. Analyze the tenders in line with MM Manual in respect to advertisement & public notice requirements4. Check whether all the detailed tender documents are published (as per MM manual)5. Discuss the reasons for any non compliance & report any observationsTransactionTake dump of tenders & 40 no. of tendersManual1.2.5To verify that inquiries have been sent to requisite number of vendors (in case of limited tenders)1. Finalization of order on uncompetitive terms & conditions2. Increased dependency on limited no. of vendors1. Obtain a list of limited tender orders 2. Check the number of RFQs / enquiries sent to parties.3. Identify instances where RFQ / enquiries have not been sent to requisite number of vendors as per MM Manual4. Analyze and discuss the cases with MM Department & IndenterTransactionTake dump of tenders & 40 no. of tendersManual1.2.6To verify whether RFQ to registered vendors is sent on rotational basis1. Finalization of order on uncompetitive terms & conditions2. Increased dependency on limited no. of vendors1. Obtain a list of limited tender orders2. Identify instances where RFQ has been sent to the same vendors on regular basis3. Analyze and discuss the cases with MM Department & Indenter TransactionTake list of limited tenders & select 40 no. of limited tendersManual1.2.7To ensure whether the adequate follow up has been done with the prospective vendors who have purchased the tender documents1. Finalization of order on uncompetitive terms & conditions2. Increased dependency on limited no. of vendors1. Verify whether the sale of tender document is recorded in the tender register along with their address, cheque number.2. Check whether the adequate follow up is done with the vendor purchasing the tender documents and not participating in bidding process.3. Discuss the reason with MM department.TransactionTake dump of tenders & 40 no. of tendersManual1.3Accounting and record maintenance1.3.1To verify that appropriate records are maintained by the JV for costs (Developmental, cumulative costs etc.)a. Over / under statement of expenditureb. Risk of under cost recovery1. Obtain line items wise JVA and JV billing totals with the accounting document number2. Verify the accounting documents posted in the system and check that all costs are appropriately accounted for.3. Compare it with the monthly Joint Interest Billings and with the DGH correspondence.4. Document and report on anomalies observed in reporting and compliance5. Check appropriate cost recovery / depreciation made in ledger.TransactionsObtain dump of JV billing and select 40 samples , Monthly JIBs and DGH correspondenceManual1.3.2To verify that the financial statements of the Joint Venture have been audited regularly by the audit firm defined in the PSC/JOA.Non compliance to internal policies1. Obtain process of appointment of auditor and whether the same has been followed. Take audited reports and check the same with PSC and JOA figures2. Obtain Joint Operating Agreementsa. Compare with the physical documents maintained3. Obtain all data records for that JV.4. Sort JV name, account number, amount in company code currency (INR) and amount in USD.5. This is ledger wise balances for the JV 6. Compare these figures with the JOA and PSC.7. Inquire and report into abnormalities, if any8. Correctness of cost booked under WBS structureAnalysisObtain dump of data records for JV and audited reports of Jvs1.3.3To verify whether the Joint Venture expenditure has been booked with accuracy and whether they are legitimateInaccurate booking of expenditure may lead to financial mis statementReview the financial statements for accuracy and appropriateness. Review specifically:1. Payments of customs duty (since all imports are exempt from customs duty)2. Items that are specifically not cost recoverable.3. Foreign Exchange gains and losses4. Acquisition of assets and vesting of title5. Marketing expenses and appropriateness6. Services procured by the operator from other companies including its own affiliated companies7. Standardized agreement/BEC customized to the joint venture 8. Commitment reporting and Continuous monitoring of agreement clauses to verify correct payment9. Time writing and debit advises / charges from the Head Quarters of the operating joint venture.10. Application of Parent company overhead11. Drilling and production activities in detail. The study should cover all major payments made to drilling contractors/ production services like completion/ testing and procurement of drilling and production chemicals; the study should also cover payments made for logistics support and optimum utilization of boats and choppers.12. Document and report on anomalies observed in reporting and complianceAnalysisObtain financial statements of JVs1.3.4To verify whether the operator has obtained adequate Insurance coverage.Inadequate cover against risk for assets1. Check the Insurance chapter of the PSC and detail out the requirements to be met by the operator2. Check item by item compliance for the insurance coverage and report on the under / over / co/ non insurance.3. Check provision of Insurance made under BudgetAnalysisObtain Insurance policies1.3.5To verify that allocation of revenue and costs to the joint venture is being made appropriately, as per the PSCInaccurate allocation of cost and revenue may lead to disputes in settlements1. Obtain all data records for that JV.2. Sort as per JV name, account number, amount in amount in local currency (INR) and amount in USD.3. This is ledger wise balances for the JV 4. Compare these figures with the JV records maintained outside the system5. Inquire and report into abnormalities, if anyAnalysisObtain ledger wise balance for JVs1.3.6To verify FOREX revaluationsInaccurate valuation of forex may lead to financial mis-statement1. Check whether the monthly FOREX revaluation of liabilities & assets activity is carried out and the rates used are as specified in the JOA2. Obtain list of assets and liabilities for which Forex revaluation has been done.3. Verify whether the rates have been charged appropriately or not.4. Document in case of abnormalities, if any.AnalysisObtain list of assets and liabilities which needs forex revaluation and month end rates1.3.7To verify that the cash calls made by the operator are duly supported and the amounts advanced are compared at the end of the yearExcess payment/ short recovery of expenses1. Obtain the cash calls raised in the JV and cash calls which are settled against the bank receipts documents.2. Verify the amounts for which the cash calls were raised.3. Verify that all supporting documents are appropriately maintained.4. Verify whether previous cash call is reconciled prior to release of next cash call.5. Document and report on anomalies observed in reporting and complianceTransactionsObtain cash call raised and 6 sample supporting documentation for cash calls Manual1.3.8To verify that payments to ONGC are being:Made on time and as per PSC.Delay in payments may lead to working capital blockage1. Obtain cash calls raised the JV and cash calls which are settled against the bank receipts documents.2. Verify the dates on which the cash calls were raised.3. Check the date on which cash call was received.4. Compare dates of actual receipts as against those specified by JOA.5. Inquire into abnormalities and document the reasons thereof.TransactionsObtain Cash calls raised for 6 cases and corresponding actual receiptsManual1.4Material Consumption & Records1.4.1To verify that materials procured are being actually consumed and recorded accuratelyInaccurate consumption tracking may lead to over-statement of expenses and/or mis-appropriation of funds1. Seek details of the procurements done during the review period.2. Verify whether any process exists for consumption booking for the materials.3. Seek detailed consumption report of the materials during the review period.4. On a sample basis verify whether material procured have been consumed or not.5. Note the cases and physically verify the stock where the materials have been procured and not been consumed during the review period.6. Seek explaination in case of abnormalities.TransactionsObtain procurement and consumption report and check 40 materials on a sample basisManual1.5Sales1.5.1To verify if the price maintained in the invoice for a given billing period is correct. Incorrect price in the invoice may lead to short-payment and subsequent loss to the organizationIncorrect price in the invoice may lead to delay in payment due to the dispute1. Obtain invoices for the review period.2. Verify on a sample basis whether the prices have been charged as prescribed in PSC or not.AnalysisMinimum Sample size 40 Sales DocumentsAutomated

Oil & Natural Gas Corporation LimitedInternal Audit Volume 2Audit Work Program: Corporate Services JVOG (Non-operating)&G

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