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Southern Power Distribution Company of AP Ltd.

BSE: 511519 Sector: Infrastructure
NSE: N.A. ISIN Code: N.A.
BSE 05:30 | 01 Jan Southern Power Distribution Company of AP Ltd
NSE 05:30 | 01 Jan Southern Power Distribution Company of AP Ltd

Southern Power Distribution Company of AP Ltd. (SOUTHERNPOWER) - Auditors Report

Company auditors report

SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED ANNUAL REPORT 2008-2009 AUDITORS' REPORT To The Members of The Southern Power Distribution Company of A.P. Limited 1. We have audited the attached Balance Sheet of THE SOUTHERN POWER DISTRIBUTION COMPANY OF A.P.LIMITED as at 31st March, 2009 and also the Profit and Loss Account for the year ended on that date annexed there to and the Cash Flow Statement for the year ended on that date. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An Audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As the Company is governed by the Electricity Act, 2003, the provisions of the said Act have prevailed wherever it has been inconsistent with the provisions of the Companies Act, 1956. 4. As required by the Companies (Auditor's Report) Order, 2003, as amended by the Companies (Auditor's Report) (Amendment) Order, 2004, issued by the Central Government in terms of Section 227 (4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order. 5. Further to our comments in the Annexure referred to in paragraph (4) above, we report that: (i) Consequent upon amendment to second transfer scheme vide G.O.Ms.142 dt. 29.09.2001 and the third transfer scheme vide G.O.Ms. 396 dt. 09. 06 2005, the Company adopted the assets & liabilities and the balances against Power Purchase, loan liabilities, and receivables from Govt. of A.P at values stipulated in the respective government notifications, which are provisional and subject to further adjustment as may be determined by the State Government and audit. In the absence of relevant information, we are unable to express our opinion on the closing balances of such assets / liabilities transferred to the company under the aforementioned transfer schemes. (ii) Balances in Loan Funds' pertaining to PFC and Govt. of AP are subject to confirmation by the respective lenders. (iii) Confirmations in respect of Cash & Bank balances have not been provided for verification. We are therefore unable to express our opinion on correctness of these balances. (iv) Receivables others and current liabilities others include Rs.15.15 Crores and Rs.3.24 Crores respectively transferred from APTRANSCO under transfer schemes and outstanding since 01.04.2000. The said amounts remain unadjusted and the probability of its recovery 1 payment is meager due to non-availability of party wise break-up figures. Since the amounts have not been written off/ written back, the profit for the year is therefore overstated by Rs.11.91 Crores and the receivables and Current liabilities are respectively overstated by Rs.15.15 Crores and Rs. 3.24 Crores. (v) The power purchase cost and Discom to Discom and interstate sale of power is booked as per figures provided by the APPCC constituted to regulate the power purchase and sale in the state. We are therefore unable to express our opinion on the correctness of power purchase cost. (vi) Certain balances under Sundry Debtors, Receivables, Loans & Advances, Sundry Creditors, other liabilities are subject to confirmation /reconciliation /adjustments. (vii) Depreciation on additions to certain assets charged for half year irrespective of its date put to use and no depreciation is charged on deletion of assets during the year, instead of charging depreciation for period used during the year as provided in AS-6 issued by ICAI. (viii) Provision for pension & Gratuity, leave encashment and other retirements benefits made does not comply with requirements as per AS-15 issued by ICAI. (ix) Income from temporary investments of borrowed funds is showed as other income instead of deducting from interest on such borrowed funds capitalized during the year as required by AS-16 issued by ICAI. (x) Deferred Tax asset / liability has not been recognized in the accounts which is not in conformity with AS-22 issued by ICAI (xi) Particulars of dues outstanding to micro, small and medium enterprises as required by schedule TAI of the companies Act, 1956 have not been disclosed separately. (xii) In the absence of relevant information the impact on the net profit with regard to our comments mentioned in paras (vii), (viii) (ix) and (x) above, could not be quantified. 6. Subject to our comments in Annexure referred to in Paragraph (4) above, and paragraph (5), we report that: (i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our Audit. (ii) In our opinion, proper Books of Accounts as required by law have been kept by the Company, so far it appears from our examination of those books. (iii) The Balance Sheet, Profit and Loss Account and cash flow statement dealt with by this report are in agreement with the Books of Accounts maintained. (iv) In our opinion the Profit and Loss Account, the Balance Sheet and the cash flow statement comply with the Accounting Standards referred to in Section 211(3C) of the Companies Act 1956, except those mentioned in paragraph (5) above. (v) In view of the clarification issued by the Department of Company Affairs vide its General Circular No.8/2002 dated 22.03.2002, we are of the opinion that the provisions of section 274(1)(g) of the Companies Act 1956, does not apply to the Directors of this company, as they are appointed by the State/Central Governments. (vi) In our opinion and to the best of our information and according to the explanations given to us, the said Financial statements read together with the Significant Accounting policies and other notes thereon give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: a. In the case of Balance Sheet, of the State of Affairs of the Company as on 31st March 2009. b. In the case of Profit and Loss Account, of the profit for the year ended on that date and c. In the case of Cash Flow Statement, of the cash flows for the year ended on that date. For RAJU & PRASAD CHARTERED ACCOUNTANTS (PADMAKANT J.MEHTA) PARTNER M.No.015652 Place: Hyderabad Date : 27-07-2009. ANNEXURE TO AUDITOR'S REPORT TO THE MEMBERS OF THE SOUTHERN POWER DISTRIBUTION COMPANY OF A.P.LIMITED (Refer Para 4 of our report of even date) i. a) The Company has started maintaining proper records of Fixed Assets showing full particulars including quantitative details and situation of fixed assets from 01-042008. b) We were informed that the Fixed Assets have not been physically verified by the management during the year and hence we are unable to comment on the discrepancy, if any between the physical balance and book records. c) As per the information & explanations given to us, the company has not disposed off a substantial part of fixed assets during the year and the going concern status of the company is not affected ii. a) The inventory of stores & spares has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable. b) According to information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business. c) The company is maintaining proper records of inventory. As explained to us material discrepancies noticed on physical verification of inventory as compared to the book records have been properly dealt with in the books of accounts. iii. The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. As the Company has not granted/taken any loans, clauses (iii)(b), (iii)(c), (iii)(d), (iii)(f) and (iii)(g) of Paragraph 4 of the said Order are not applicable to the Company. iv. According to the information and explanation given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchases of inventory and fixed assets and for the sale of goods. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control systems. v. According to the information and explanations given to us, there are no transactions that need to be entered in the Register maintained under Section 301 of the Companies Act, 1956. vi. According to the information and explanations given to us, the Company has not accepted any deposits from the public within the meaning of section 58A and 58AA of the companies Act, 1956. vii. The Company has an Internal Audit system but the same, in our opinion, requires to be strengthened and its scope enlarged, to commensurate with the size and nature of its business. Viii. The Central Government has prescribed maintenance of cost records under section 209 (1) (d) of the companies Act, 1956 and the same are maintained by the company as provided therein. ix a) According to the information and explanation given to us, the undisputed statutory dues including Provident Fund, Investor Education and Protections Fund, Employees' State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and any Other Statutory dues have been regularly deposited with the appropriate authorities. b) According to information and explanations given to us there are no disputed dues relating to Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess which have not been deposited as at 31st March 2009 other than those indicated below: Nature of Unpaid Period to which Forum where pending dues (Rs.) the amount relates Service Tax From July 2003 to Commissioner, Central on wheeling 625310/- October 2007 excise Customs (Appeals), charges Guntur x. The company does not have any accumulated losses as at the end of the financial year under reference and the company has not incurred any cash losses in the financial year under reference and in the financial year immediately preceding such financial year. xi. The company has not defaulted in repayment of its dues to banks. The company did not have any outstanding dues to any financial institutions or debenture holders during the year. xii. The company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. xiii. According to the information and explanations given to us, the company is not a chit fund or nidhi/mutual benefit fund/society. xiv. According to information and explanations given to us, the company is not dealing in or trading in shares, securities, debentures and other investments. All Shares, Securities and Other Investments have been held by the company in its own name. xv. According to information and explanations given to us, the company has not given any guarantee for loans taken by others from banks or financial intuitions. xvi. According to information and explanations given to us, the term loans taken by the company were applied for the purpose for which they were taken. xvii. According to information and explanations given to us, funds raised on short term basis have not been used for long term investments. xviii. The company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the companies Act, 1956. xix. The company has not issued any debentures during the year. xx. The company, during the year, has not raised money by public issues during the year. xxi. According to information and explanations given to us, fraud aggregating to Rs.5.51 Crores has been reported, as detailed here under, on the company Nature of Fraud Amount involved (Rs. Crores) 1. Theft of Energy 3.90 2. Theft of materials 1.61 Total 5.51 According to information and explanations given to us no fraud by the company has been reported during the year. For RAJU & PRASAD CHARTERED ACCOUNTANTS (PADMAKANT J. MEHTA) PARTNER M.No:015652 Place: Hyderabad Date : 27.07.09 SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED AUDITORS' REPORT: 1. Consequent upon amendment to second transfer scheme vide G.O.Ms.l42 dt.29.09.2001 and the third transfer scheme vide G.O.Ms. 396 dt. 09. 06.2005, the Company adopted the assets & liabilities and the balances against Power Purchase, loan liabilities, and receivables from Govt. of A.P at values stipulated in the respective government notifications, which are provisional and subject to further adjustment as may be determined by the State Government and audit. In the absence of relevant information, we are unable to express our opinion on the closing balances of such assets / liabilities transferred to the company under the aforementioned transfer schemes. Replies of the Company forming part of the Director's Report to the members under Section 217(3) of the Companies Act, 1956.: The Company has taken over the bulk supply of power business from APTRANSCO. The bulk supply business consists of payables to generators, receivables from DISCOMS and some loans taken on behalf of DISCOMS. There are no other assets and liabilities for bulk supply business. The balances transferred under G.O.Ms.No.142 dt 29.09.2001 and third transfer scheme are authenticated by APTRANSCO and this will be considered as final. AUDITORS' REPORT: 2. Balances in Loan Funds' pertaining to PFC and Govt. of AP are subject to confirmation by the respective lenders. Replies of the Company forming part of the Director's Report to the members under Section 217(3) of the Companies Act, 1956.: Balances confirmation from PFC is already been received and a letter has been addressed to Govt. of Andhra Pradesh for confirmation of balances. AUDITORS' REPORT: 3. Confirmations in respect of Cash & Bank balances have not been provided for verification. We are therefore unable to express our opinion on correctness of these balances. Replies of the Company forming part of the Director's Report to the members under Section 217(3) of the Companies Act, 1956.: The confirmations have been obtained from the respective banks as at 31-03- 2009 and during the year the balances are tallied. AUDITORS' REPORT: 4. Receivables-others and current liabilities others include Rs.15.15Crores and Rs.3.24 Crones respectively transferred from APTRANSCO under transfer schemes and outstanding since 01.04.2000. The said amounts remain unadjusted and the probability of its recovery / payment is meager due to non-availability of party wise break-up figures. Since the amounts have not been written off/ written back, the profit for the year is therefore overstated by Rs.11.91 Crones and the receivables and Current liabilities are respectively overstated by Rs.15.15 Crones and Rs. 3.24 Crones. Replies of the Company forming part of the Director's Report to the members under Section 217(3) of the Companies Act, 1956.: This will be reviewed and necessary action will be initiated in the year 2009-10 AUDITORS' REPORT: 5. The power purchase cost and Discom to Discom and interstate sale of power is booked as per figures provided by the APPCC constituted to regulate the power purchase and sale in the state. We are therefore unable to express our opinion on the correctness of power purchase cost. Replies of the Company forming part of the Director's Report to the members under Section 217(3) of the Companies Act, 1956.: M/s Sagar & Associates has been appointed as Internal Auditor of APPCC. The firm has been doing internal audit in respect of Bills received from the Generators. AUDITORS' REPORT: 6. Certain balances under Sundry Debtors, Receivables, Loans & Advances, Sundry Creditors, other liabilities are subject to confirmation /reconciliation /adjustments. Replies of the Company forming part of the Director's Report to the members under Section 217(3) of the Companies Act, 1956.: The Process of getting confirmation has already been started in the year 2009-10. AUDITORS' REPORT: 7. Depreciation on additions to certain assets charged for half year irrespective of its date put to use and no depreciation is charged on deletion of assets during the year, instead of charging depreciation for period used during the year as provided in AS-6 issued by ICAI. Replies of the Company forming part of the Director's Report to the members under Section 217(3) of the Companies Act, 1956.: Up to 2008-09, the records are maintained manually and it is difficult to obtain the date of put in to use, hence half year depreciation has been charged on additions that can be used directly. From 2009-10 onwards, the SAP ERP Package is being implemented. The depreciation on direct additions is charged from the date the asset is put in to use. AUDITORS' REPORT: 8. Provision for pension & Gratuity, leave encashment and other retirements benefits made does not comply with requirements as per AS-15 issued by ICAL Replies of the Company forming part of the Director's Report to the members under Section 217(3) of the Companies Act, 1956.: M/s Hewitt has been appointed as an actuary to get actuarial valuation report. Hence the standard will be complied during the year 2009-10. AUDITORS' REPORT: 9. Income from temporary investments of borrowed funds is showed as other income instead of deducting from interest on such borrowed funds capitalized during the year as required by AS-16 issued by ICAI Replies of the Company forming part of the Director's Report to the members under Section 217(3) of the Companies Act, 1956.: As per AS-16 Borrowing Costs, paragraph 12 To the extent that funds are borrowed generally and used for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalisation should be determined by applying a capitalisation rate to the expenditure on that asset. The capitalization rate should be the weighted average of the borrowing costs applicable to the borrowings of the enterprise that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs capitalized during a period should not exceed the amount of borrowing costs incurred during that period. So there is no necessity to deduct income earned on temporary investments of borrowed funds as per the Accounting Standard - 16 Borrowing Costs. AUDITORS' REPORT: 10. Deferred Tax asset / liability has not been recognized in the accounts which is not in conformity with AS-22 issued by ICAI. Replies of the Company forming part of the Director's Report to the members under Section 217(3) of the Companies Act, 1956.: The company is in the process of recognizing Deferred Tax Asset/Liability. AUDITORS' REPORT: 11. Particulars of dues outstanding to micro, small and medium enterprises as required by schedule TAI of the companies Act, 1956 have not been disclosed separately. Replies of the Company forming part of the Director's Report to the members under Section 217(3) of the Companies Act, 1956.: It has already been stated vide point No. 19 of Schedule No. 18 Notes to Accounts that there are no dues pending as at 31' March 2009 to suppliers/contractors/service providers who are registered under the Micro, Small and Medium Enterprises Development Act, 2006. M/s RAJU & PRASAD Chartered Accountants Sd/ (Padmakant J. Mehta) Partner Place: Hyderabad Date : 27-07-2009 For and on behalf of the Board Director (Finance) (Chairman & Managing Director) Place: Tirupati Date : 27-07-2009 ANNEXURE TO THE AUDITORS' REPORT SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED This is the annexure referred to in our report of even date (Reference clauses in Annexure to the Auditors' Report): i. (b) We were informed that the Fixed Assets have not been physically verified by the management during the year and hence we are unable to comment on the discrepancy, if any between the physical balance and book records. Replies of the Company forming part of the Director's Report to the members under Section 217(3) of the Companies Act, 1956: Noted for future compliance. This is the annexure referred to in our report of even date (Reference clauses in Annexure to the Auditors' Report): vii. The Company has an Internal Audit system but the same, in our opinion, requires to be strengthened and its scope enlarged, to commensurate with the size and nature of its business. Replies of the Company forming part of the Director's Report to the members under Section 217(3) of the Companies Act, 1956: Necessary controls are available and the company is in the process of establishing better control systems. M/s RAJU & PRASAD Chartered Accountants Sd/- (Padmakant J. Mehta) Partner Place: Hyderabad Date : 27-07-2009 For and on behalf of the Board Director (Finance) (Chairman & Managing Director) Place: Tirupati Date : 27-07-2009 CONFIDENTIAL To The Chairman & Managing Director, Southern Power Distribution Company of Andhra Pradesh Limited, Tirupati. Sir, Sub: Comments on the accounts of Southern Power Distribution Company of Andhra Pradesh Limited, Tirupati for the year ended 31 March 2009. I am to forward herewith Comments of the Comptroller and Auditor General of India under Section 619 (4) of the Companies Act 1956 on the accounts of your company for the year ended 31 March 2009 for necessary action. 2. The date of placing of Comments along with Annual Accounts and Auditors' Report before the Shareholders of the Company may be intimated and a copy of the proceedings of the meeting furnished. 3. The date of forwarding the Annual Report and the Annual Accounts of the Company together with the Auditors' Report and Comments of the Comptroller and Auditor General of India to the State Government for being placed before the Legislature may also be communicated. 4. Ten copies of the printed Annual Report for the year 2008-09 may be furnished in due course. The receipt of this letter along with enclosures may please be acknowledged. Yours faithfully, Sd/- Dy Accountant General (Commercial) Encl: As above COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619 (4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED, TIRUPATI FOR THE YEAR ENDED 31 MARCH 2009. The preparation of financial statements of Southern Power Distribution Company of Andhra Pradesh Limited, Tirupati for the year ended 31 March 2009 in accordance with the financial reporting framework prescribed under the Companies Act, 1956 is the responsibility of the management of the company. The statutory auditor appointed by the Comptroller and Auditor General of India under Section 619(2) of the Companies Act, 1956 is responsible for expressing opinion on these financial statements under section 227 of the Companies Act, 1956 based on independent audit in accordance with the auditing and assurance standards prescribed by their professional body the Institute of Chartered Accountants of India. This is stated to have been done by them vide their Audit Report dated 27 July 2009. I on behalf of the Comptroller and Auditor General of India have conducted a supplementary audit under section 619(3)(b) of the Companies Act, 1956 of the financial statements of Southern Power Distribution Company of Andhra Pradesh Limited, Tirupati for the year ended 31 March 2009. This supplementary audit has been carried out independently without access to the working papers of the statutory auditors and is limited primarily to inquiries of the statutory auditors and company personnel and a selective examination of some of the accounting records. Based on my supplementary audit, I would like to highlight the following significant matters under section 619(4) of the Companies Act, 1956 which have come to my attention and which in my view are necessary for enabling a better understanding of the financial statements and the related Audit Report and the effect of these comments resulted in the 'Profit after Tax' of Rs.18.67 crore turning into Loss of Rs.19.85 crore. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED, TIRUPATI FOR THE YEAR ENDED 31 MARCH 2009: A. Comments on Profitability: Profit & Loss Account Income Revenue from Sale of Power (Sch.10) Revenue from Sale of Power - HT Supply: 1225.92 crore 1. The above is overstated by Rs.1.47 crore due to non-accountal of demand withdrawn and excess billing. This has resulted in overstatement of 'Net Profit before Tax' and 'Sundry Debtors' by Rs.1.47 crore. REPLIES OF THE COMPANY FORMING PART OF THE DIRECTOR'S REPORT TO THE MEMBERS UNDER SECTION 217(3) OF THE COMPANIES ACT, 1956: It is to submit that withdrawl of excess demand during disconnection period is a routine process. Soon after the receipt of letter from Assistant Engineer/Operation stating meter removals, the services will be bill stopped and the unnecessary demand raised after 4 months from the date of disconnection will be withdrawn as per B.P.Ms.No.151. The letters of Assistant Engineer/operation received in march, 2009 were effected in April 2009. Due to delay in respect of revised Test Report and Agreements for limiting the CMD from 1510 KVA to 1100 KVA duly countersigned by the Divisional Engineer/ Operation/Rural/ guntur and obtaining the note order from the higher authority, the RJ was not proposed during the financial year 2008-09 and the same was taken vide RJ.No.9/May-2009 in the year 2009-10.The Audit observation is correct and necessary steps will be taken in future to avoid such occurrences. It is to submit that the bills issued without adjustment of 3rd party units in respect of SC.No. 147/ OGL for the period from 1.9.08 to 2/09 are correct since the open access agreement is not in force from 1.9.08 as per Lr.No. CE/IPC/121/F.IGWells-Jayavenkatramal D.No. 240/08, dt. 23.01.2009 received from Chief Engineer/IPC, APPCC. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED, TIRUPATI FOR THE YEAR ENDED 31 MARCH 2009: 2. The above is understated by Rs.36.86 lakh due to non-accountal of short assessment of CC charges in respect of two HT consumers. This has resulted in understatement of 'Net Profit before Tax' and 'Sundry Debtors' by Rs.36.86 lakh. REPLIES OF THE COMPANY FORMING PART OF THE DIRECTOR'S REPORT TO THE MEMBERS UNDER SECTION 217(3) OF THE COMPANIES ACT, 1956: It is to submit that any shortfall pointed out by the Internal Audit has to be confirmed by the field officer (AE/ADE/Operation). After receipt of the confirmation, demand will be raised and taken in the books of accounts. The procedure is being followed to avoid disputes with the consumers. In the present case, the field confirmation is received in the Month of May, 2009 and the same is billed in May, 2009 bill and accounted during the year 2009-10. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED, TIRUPATI FOR THE YEAR ENDED 31 MARCH 2009: Expenditure Purchase of Power: Rs.4228.55 crore 3. The above is understated by Rs.22.21 crore due to incorrect accountal of refund of income tax by National Thermal Power Corporation (NTPC) in June 2009 as reduction in power purchase cost. Since the refund neither pertains to 2008-09 nor was it received in that year, accounting of the same in 2008-09 is not correct. This has resulted in understatement of 'Current Liabilities - for Power Purchase' and overstatement of 'Net Profit before Tax' by Rs.22.21 crore. REPLIES OF THE COMPANY FORMING PART OF THE DIRECTOR'S REPORT TO THE MEMBERS UNDER SECTION 217(3) OF THE COMPANIES ACT, 1956: It is to submit that the refunds mentioned in the audit para pertains to APDISCOMS for the period prior to 2001-02 and already more than 8 years have been lapsed for refund and accounting the same. Hence it was accounted in the year 2008-09. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED, TIRUPATI FOR THE YEAR ENDED 31 MARCH 2009: 4. The above is understated by Rs.12.04 crore due to non-accountal of Thermal incentive for which claims were made by APGENCO. This has resulted in understatement of 'Current Liabilities - for Power Purchase' and overstatement of 'Net Profit before Tax' by Rs.12.04 crore. REPLIES OF THE COMPANY FORMING PART OF THE DIRECTOR'S REPORT TO THE MEMBERS UNDER SECTION 217(3) OF THE COMPANIES ACT, 1956: The bill was submitted by APGENCO during the year 2009-10. There was no mention of the date of coming in to force of the Regulation No. 1 of 2008 based on which incentive was claimed by APGENCO and further APPCC had taken time to verify the details (incentive bills) furnished by APGENCO to authenticate the payment. Hence the same was not provided in the books of accounts for the year 2008-09. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED, TIRUPATI FOR THE YEAR ENDED 31 MARCH 2009: 5. The above is understated by Rs.14.95 lakh due to non-accountal Unscheduled Interchange (UI) charges payable to Southern Regional Power Committee, Bangalore. This has resulted in understatement of 'Current Liabilities - for Power Purchase' and overstatement of 'Net Profit before Tax' by Rs.14.95 lakh. REPLIES OF THE COMPANY FORMING PART OF THE DIRECTOR'S REPORT TO THE MEMBERS UNDER SECTION 217(3) OF THE COMPANIES ACT, 1956: It is to submit that the audit observation is correct and the same is treated as prior period expenditure (AH 83.100) in the accounting year 2009-10. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED, TIRUPATI FOR THE YEAR ENDED 31 MARCH 2009: 6. The above is overstated by Rs.1.43 crore due to non-accountal of credit towards Fuel Cost Adjustment (FCA) relating to 4th quarter of 2008-09, passed on by APGENCO. This has resulted in overstatement of 'Current Liabilities - for Power Purchase' and understatement of 'Net Profit before Tax' by Rs.1.43 crore. REPLIES OF THE COMPANY FORMING PART OF THE DIRECTOR'S REPORT TO THE MEMBERS UNDER SECTION 217(3) OF THE COMPANIES ACT, 1956: The credit of (-) Rs.6,40,93,449/- passed on by APGENCO (Lr.No.FA&CCA(Res)(PB)/D.No. 71,dt.2/5/09) towards FCA claim for the 4th quarter of 2008-09 not taken to account as the credit proposed by APGENCO after the cutoff date adopted by APSPDCL. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED, TIRUPATI FOR THE YEAR ENDED 31 MARCH 2009: Expenditure Capitalised Sch. 12 13 and 15 7. A check of figures relating to expenditure capitalised under various heads as adopted in the accounts and corresponding figures in SAP system revealed discrepancies, which resulted in overstatement/understatement of the respective account heads as detailed below: (Rupees in crore) Particulars Seh. No. Amount as per Actual Excess/ SAP to be Amount (Short) adopted adopted 1. Employee cost 12 44.31 43.28 (1.03) 2. Administration 13 7.82 7.64 (0.18) and General Expenses 3. Interest and 15 11.39 14.47 3.08 Finance charges Net Excess 63.52 65.39 1.87 Thus, there is net excess capitalisation of expenditure to the extent of Rs.1.87 crore, which resulted in overstatement of 'Capital Work-in- Progress' and 'Net Profit before Tax' and net understatement of expenditure by the said amount. REPLIES OF THE COMPANY FORMING PART OF THE DIRECTOR'S REPORT TO THE MEMBERS UNDER SECTION 217(3) OF THE COMPANIES ACT, 1956: It is to submit that the audit observation is correct regarding expenses capitalization (Employees cost capitalisation, Administration & General Expenses Capitalisation and Interest Capitalisation). It has been verified with the SAP Transaction and reasons for the difference is that there are certain amounts in these accounts which were not considered/netted off from the total capitalization amount. However, the same will be rectified during the year 2009-10. The difference in depreciation as per SAP and as adopted in the Accounts is due to the calculation of depreciation on direct assets manually for the half of the year irrespective of date of put to use as stated in Note No. 10(ii) of the Notes to Accounts and the same has been qualified by the Statutory Auditor vide point 5 (vii) of the Audit Report. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED, TIRUPATI FOR THE YEAR ENDED 31 MARCH 2009: Administration and General Expenses (Sch.13) Repairs and Maintenance to - Plant and Machine : Rs.54.33 crore 8. The above is understated by Rs.30.52 lakh due to non-accountal of the amount payable towards Manning of substations for the year 2008-09. This has resulted in understatement of 'Current Liabilities - For Others' and overstatement of 'Net Profit before Tax' by Rs.30.52 lakh. REPLIES OF THE COMPANY FORMING PART OF THE DIRECTOR'S REPORT TO THE MEMBERS UNDER SECTION 217(3) OF THE COMPANIES ACT, 1956: The Audit observation is correct and necessary care will be taken in future so as to avoid these types of occurrences. 9. The above is overstated by Rs.12.42 lakh due to inclusion of expenditure incurred towards erection of Tower for 33 KV line and 33 KV Bay extension at 132/33 KV substation, which are of capital nature. Inclusion of capital expenditure under revenue resulted in understatement of 'Fixed Assets - Lines and Cable Network' and 'Net Profit before Tax' by Rs.12.42 lakh. REPLIES OF THE COMPANY FORMING PART OF THE DIRECTOR'S REPORT TO THE MEMBERS UNDER SECTION 217(3) OF THE COMPANIES ACT, 1956: It is to submit that the AH-74.101 has been misclassified to a tune of Rs.12,41,894/instead of AH-14.6 Lines & Cable Networks. The same is herewith rectified by passing EJ No.S/ August -2009. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED, TIRUPATI FOR THE YEAR ENDED 31 MARCH 2009: E-Seva Collection Char es: Rs.2.28 crore 10. The above is understated by Rs.20.97 lakh due to non-accountal of amount payable towards ESeva collection charges for the year 2008-09. This has resulted in understatement of 'Current Liabilities - For Others' and overstatement of 'Net Profit before Tax' by Rs.20.97 lakh. REPLIES OF THE COMPANY FORMING PART OF THE DIRECTOR'S REPORT TO THE MEMBERS UNDER SECTION 217(3) OF THE COMPANIES ACT, 1956: The Audit observation is correct and necessary care will be taken in future so as to avoid these types of occurrences. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED, TIRUPATI FOR THE YEAR ENDED 31 MARCH 2009: Other Expenses (Sch.14) Miscellaneous losses and write-offs: Rs.7.89 crore 11. The State Government directed (November 2008) the DISCOMs to withdraw theft of energy cases against Domestic Consumers up to 1000 watts connected load. The company has written off Rs.72.20 lakh against total theft demand of Rs.189.64 lakh leaving a balance of Rs.117.44 lakh yet to be written off. This has resulted in understatement of 'Other Expenses - Miscellaneous Losses and write offs' and overstatement of 'Net Profit before Tax' and 'Sundry Debtors' by Rs.1.17 crore. REPLIES OF THE COMPANY FORMING PART OF THE DIRECTOR'S REPORT TO THE MEMBERS UNDER SECTION 217(3) OF THE COMPANIES ACT, 1956: It is to submit that the audit observation is correct. An amount of Rs.72.20 lakhs has written off during the year 2008-09, due to delay in process the balance amount could not be written off. However the same is accounted during the financial year 2009-10. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED, TIRUPATI FOR THE YEAR ENDED 31 MARCH 2009: Balance Sheet Fixed Assets Capital Work-in-Progress (Sch.S): Rs.748.70 crore 12. The above includes Rs.25.83 crore being the value of capital works already completed and commissioned by the end of March 2009. Noncapitalisation of the completed works resulted in overstatement of 'Capital Work-in-Progress' and understatement of 'Fixed Assets' by Rs.25.83 crore (Plant and Machinery: Rs.3.62 crore and Lines and Cable Network: Rs.22.21 crore). This has also resulted in understatement of 'Depreciation' and overstatement of 'Net Profit before tax' by Rs.1.01 crore. REPLIES OF THE COMPANY FORMING PART OF THE DIRECTOR'S REPORT TO THE MEMBERS UNDER SECTION 217(3) OF THE COMPANIES ACT, 1956: The Audit authorities have pointed out noncapitalisation of Rs.13.76 crores as being works already completed and charged. It is to submit that an amount of Rs.10.14 crores pertaining to JBIC-I&II workorders was closed and capitalized during the year 2008-09 as the works are completed in all aspects and charged during the year 2008-09 and for the balance Rs.3.62 crores pertaining to other than JBIC I & II, though the charging was made before 31-03-2009, the line works and other connected works are in progress as at 31-03-2009 and hence capitalization could not be made during the year 31-03-2009. The expenditure amount of Rs.23.34 crore relates to 17 No's Work orders Out of the 17 Nos work orders, expenditure relating to 6 No,s work orders Rs.1.14 crores as given below are already capitalized during the year 2008- 09. The balance 11 No.s Work orders Rs.22.20 Crores are not capitalized because lines, cable and other connected works are in progress as at 31- 032009. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED, TIRUPATI FOR THE YEAR ENDED 31 MARCH 2009: B. Comments on Financial position: Balance Sheet Fixed Assets Capital Work-in-Progress (Sch.5): Rs.748.70 crore 13. The above is understated by Rs.3.05 crore due to non-accountal of the value of works completed and check measured before 31 March 2009 relating to various capital works and cost of SAP licenses. This has also resulted in understatement of 'Current Liabilities Others - Liability for Others' by similar amount. REPLIES OF THE COMPANY FORMING PART OF THE DIRECTOR'S REPORT TO THE MEMBERS UNDER SECTION 217(3) OF THE COMPANIES ACT, 1956: It is to submit that the Audit observation is correct and necessary care will be taken in future years so as to avoid these type of occurrences. It is to submit that the payment is made for getting licences for NEW E. C. C 6 version. Since the company is still operating the earlier version (4.70) and the process of shifting/upgrading to ECC 6.0 version will take another one year, the company is planning to capitalize the expenditure incurred towards E.C.C. 6.0 version during the year 2009-10. Hence there is no understatement of AH-17.210: SAP and no understatement of AH-43-100: Liability for supply of Material/Works (O&M) by Rs.111.61 lakhs and there is no overstatement of profit. It is to submit that the audit observation is correct and necessary care will be taken in future so as to avoid these type of occurrences. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED, TIRUPATI FOR THE YEAR ENDED 31 MARCH 2009: Current Assets, Loans & Advances Receivables (Sch.7d) From GOAP: Rs.1525.78 crore 14. The above is overstated by Rs.13.61 crore due to error in accounting of Subsidy received from the Government of Andhra Pradesh (Subsidy received and to be adjusted: Rs.15.11 crore (-) actually adjusted: Rs.1.50 crore) towards waival of arrears of energy charges in respect of SC/ST consumers. This has also resulted in overstatement of 'Current Liabilities - Inter unit account' by similar amount. REPLIES OF THE COMPANY FORMING PART OF THE DIRECTOR'S REPORT TO THE MEMBERS UNDER SECTION 217(3) OF THE COMPANIES ACT, 1956: It is to state that the audit observation is correct. The TCA received in respect of Subsidy amount of Rs.15.00 crores received from the government of A.P. was wrongly accounted as Rs.1.50 crores instead Rs.15.00 crores thereby resulting in non-clearance of Rs.13.50 crores in AH 28.837 - 'Subsidy Receivable towards SC/ST Waivers' and also non-clearance of inter unit account by the same amount. Necessary rectification entry will be passed in the year 2009-10 by crediting '28.837 Subsidy Receivable towards SC/ST Waivers' and debitin 'inter unit account' for Rs.13.50 crores. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED, TIRUPATI FOR THE YEAR ENDED 31 MARCH 2009: C. Comments on Disclosure: Notes to Accounts Sch.18 15. In Note No.10(i) Capital Work-in-Progress pertaining to Rajiv Gandhi Grameen Vidyutikaran Yojana Scheme was erroneously shown as Rs.42.26 crore against the correct amount of Rs.29.79 crore. REPLIES OF THE COMPANY FORMING PART OF THE DIRECTOR'S REPORT TO THE MEMBERS UNDER SECTION 217(3) OF THE COMPANIES ACT, 1956: The Audit Observation is correct the amount should have been disclosed as Rs.29.79 crores instead of Rs.42.26 crores, Further it is to state that there is no financial impact on P&L Account and Balance Sheet for the financial year 2008-09. COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF SOUTHERN POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED, TIRUPATI FOR THE YEAR ENDED 31 MARCH 2009: 16. APGENCO claimed Rs. 1.23 crore towards cost of Infirm power supplied from Jurala Hydel Project in their monthly bills, which is being contested by the company. The company has neither provided for the liability in the accounts nor disclosed the same under Contingent Liabilities. REPLIES OF THE COMPANY FORMING PART OF THE DIRECTOR'S REPORT TO THE MEMBERS UNDER SECTION 217(3) OF THE COMPANIES ACT, 1956: The Audit observation is correct and necessary care will be taken in future so as to avoid these types of occurrences. For and on the behalf of The Comptroller and Auditor General of India Sd/- (P.J. MATHEW) Accountant General (C&RA) Place: Hyderabad Date : 25.09.2009 For and on behalf of the Board A. VENKATA REDDY P. GOPAL REDDY Director (Finance) (Chairman & Managing Director) Place: Tirupati Date : 25.09.2009