Ircon audit report flags concerns over Rs 422 cr payment to foreign agents

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An independent audit report has flagged some serious concerns over payment of Rs 422.43 crore to foreign agents by railway PSU IRCON International in respect of projects in two countries.

Stating that such transactions would have an adverse effect on the functioning of the company, the audit report has observed that the appointment of and payments to foreign agents was not approved by the audit committee or by the board of directors of the state-run engineering and construction company.

According to the audit report of IRCON for the year 2014-15, the company as a practice has been appointing and paying commission to foreign agencies/agents in order to secure orders and provide other services for foreign projects, being implemented in foreign countries.

The report indicates that the total sum of Rs 422.43 crore has been paid by IRCON to foreign commission agents registered in Singapore (for project in one country) and Hong Kong (for project in another country).

The report states that the process followed for selection and appointment of commission agents, documents in respect of their identity, expertise and experience were not “satisfactory” and that no evidence had been provided to the auditors in respect to legal compliances followed for such payments.

It further adds that the genuineness of services received by IRCON comes into question in the absence of any satisfactory evidence or communication in respect of services rendered by these agents.

Mohan Tiwari, CMD, IRCON told FE: “IRCON completely denies the alleged discrepancy of funds. We want to make it very clear that the cumulative payments made were over the span of 10 years and have been used for the successful completion of approximately 12 projects. We had also approached the C&AG after the auditor’s adverse observation and even the C&AG has not taken an adverse view on this issue, which is clear in the annual report.”

“All the appointments have been made according to the process laid down by the company and entering into such agreements and release of payments do no require the approval of the board of directors or the audit committee, this is in accordance with the companies delegation of power,” he added.

What is interesting is that the audit report of IRCON for the year 2013-14, under ‘Emphasis of Matter’, had flagged the same issue.

“The internal control and documentation in respect of process of selection of the commission agent, documentation in respect of their KYC, due diligence and the evidence about the services received by the company, are not commensurate with the size and volume of business of the company,” the report said.

“The matter has been brought to the notice of the audit committee and the top management. The board of directors has recently confirmed the delegation of power in this regard in favour of the CMD,” it added.

Source: The Financial Express

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