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Consult Construction

Consult Us For Construction

The construction industry is a delivery based Industry. The construction industry in India is not yet completely organised. These service providers have unique challenges faced by the industry and also the risks are unique in nature. This section is intended to highlight some of the significant challenges that the construction industry faces so as to enable the internal auditor to plan and perform the internal audit accordingly.


The internal auditor is required to perform such audit procedures specific to the entity as deemed necessary to ensure systematic evaluation of risk management, control and governance processes. Some of these challenges are given below:


(i)    Challenges of meeting time schedules, cost schedules and compliance with the scope of work has been key for success and, thus, meeting them has been the greatest challenge for any entity operating in the construction industry. The internal auditor can assess the business risk, and also brand and reputation risk of not complying with deadlines. The effectiveness of controls can also be assessed by the internal auditor


(ii)   The biggest challenge faced by an entity operating in the construction industry is availability of adequate manpower with appropriate skill sets at a reasonable cost. This is the most important factor to control for sustained growth of the entity. The internal auditor might analyse and assess the prospects of the business in future, apart from business risk.

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EPC contracts are those contract where in addition to the construction capability, one also has to possess necessary expertise in the area of Engineering & Design of structure and Procurement of Equipments. Normally EPC contracts are taken on a lumpsum basis instead of item rate basis. Thus the challenges and the risk involved in an EPC contracts are much higher as compared to a pure construction contract. As an auditor one needs to have a basic understanding of the challenges in EPC contracts which can be summed up as under: -


a)  Requirement of Design capability – Separate team is required for taking care of design and drawing aspects. If not in-house, then the same is to be outsourced to some reliable consultant. Further for Concept based EPC projects where the contractor himself has to envision the project, he might need services of some expert for proper design which may have an impact on the overall cost of the facility intended to be built. Thus there are costs to be incurred even at the tendering stage, and if the project is not received, then these would be sunk costs. Long term tie up’s with engineering consultants can be of great help in this regard.

b)  Considering that procurement is also in the scope of the contractor, he has to have clarity in supply schedule and also a network of approved stable vendors for various jobs.

c)  Since a lot of working capital is required in these contracts, one has to have adequate cash reserves to meet tough times. For e.g. there may be instances when there are last minute changes which delay the dispatch of equipments at the site. So the contractor should be in a position to absorb all such events in his working capital cycle.

d)  The contractor would be doing both construction as well as procurement, installation and commissioning of equipments, hence the construction team has to carry out the work in such a manner, that the other teams are able to carry out the next stages very smoothly and with proper co-ordination.

e)  One has to be ready for stringent third party checks at various points. As the client can only exercise controls by appointing third party quality consultants in various areas, so the contractor would have to satisfy the pre-certification requirements of these consultants.

f)   There may also be a case when procurement has to be made from overseas markets. In such cases the voyage time, marine insurance, custom formalities need to be complied with. Further in case of imports, the contractor has to ensure that the equipment represents latest technology and should not be dumped machineries by the developed nations.

g)  Since various nature of services and goods are being provided under EPC contracts, even the direct and indirect taxation at multiple points pose an extra challenge.

h)  The contractor also has to have proper logistics arrangements, as loading and unloading of heavy goods would be required at various places from the purchase location to the destinations where the equipments are to be installed. Thus planning for heavy trailors / cranes / forklifts needs to be proper.

i)   Normally it is considered that  when the project is finalized on a lumpsum basis, it may not be possible to claim any extra items. However even in a lumpsum contract the contractor has to document all the specifications based on which the contract price has been finalized. Thus if any deviation from the specifications is required during the course of the project, the same may be claimed as an extra item.

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  1. 1. Engineering:

As far as engineering role is concerned, tender is the first document to be properly studied and analysed so that the project revenue is structured so as to match the cash outflows involved in executing the project.


1.1. Study of Tender Terms & Conditions

Following points need proper study in order to give a proper quote:-


S. N

Details sought for



Work order Value – Permissible Variation / LD Clause

Variation Limits should not be more than 25%. Further LD clause should not have a upper limit of more than 10%. If LD clause exists , contractor may insist upon Incentive Clause for timely or early completion.


FIM - RMC / Cement / Steel?

Wastage Norms as per Standard, Debit Rates as per market rates


Work completion period

Delay to be ignored if the same is due to delay in availability of drawings and work front


Facilities from the Client - Labour colony, Land, Power & Water supply.

Whether Free / Chargeable. Availability at Single Point / Multiple Points


Billing period cycle, Bill certification period and advance payment percentage against bill submission and post certification

Third Party Certification should not be a necessary requirement for release of payment. Atleast 70% adhoc should be released against uncertified bills.


Check whether any prescribed format for client bill?

Compliance with laws – Formats permissible under VAT and service tax to be seen.


Whether the job is new or left over one?

Investigation required if it’s a left over job where the cost is expected to be higher.


Safety / Quality Norms

Impact on Time and Money as different clients have different ground level disciplines.


What are the requirements with each RA bill?

Agencies / Department involved in  Certification


What are the rates of principal items (like Excavation, RMC supply, Shuttering etc.)

Higher Margins may be kept in some of the initial items to take care of initial cost of set up.


What deductions shall be made by client from RA bill

Only those agreed as per WO. Adhoc deductions should not be entertained and clearly objected by way of written communication.


Service tax / VAT / WCT extra or inclusive?

Exemptions – Paper Work / State specific norms to be made clear


Whether running plant expansion or construction of new plant building?

Cost of doing a job in an already running plant i.e. plant expansion may be higher due to scarcity of space available for work execution.


Physical visit of the work locations

This is necessary to understand Local Material Rates / Terrain for Equipments / Labour colony area / Distance from the city.


Internal Logistics

Location of Porta Cabin where the office set up is to be done vis-a-vis Client office / Labour Colony / Batching Plant / Store


Bank Gaurantee

Amt / Performance / Time Validity


Mobilisation Advance

Normally 5-10% advance should be released. However advance recovery should not be in equal instalments but in proportion to the monthly bills.

1.2. Additional Points to be kept in mind mainly by sub-contractors

1.2.1. Ensure to avoid the Tendency of main contractor to pass on all the scope to the sub-contractors without proper rates.

1.2.2. Sometimes we may find that even fabrication is a part of the drawings and has to be done at no extra cost.

1.2.3. Linking the payment for the extra work with the corresponding payment to the main contractor is a pitfall.

1.2.4. Reduction in W.O duration without increase in rates is not acceptable.

1.2.5. Instead of specifications like best material or best quality, it is always advisable to specify the make or brand or give full specifications in the work order to avoid any dispute at a later stage.

1.2.6. If there is a clause for inspection by third party, then the third party will come at its on leisure. Payment should not be withheld for want of third party inspection and It should be routine exercise.

1.2.7. Unless actual inspection of the site is carried out, it should not be confirmed to have been done.

1.2.8. If any guarantee against any risk or damage is accepted, its better to find out if the risk is insurable. And if yes, then the cost needs to be factored into at the time of rate finalisation.

1.2.9. Liquidated damages should always be subject to a maximum overall cap.

1.2.10. Escalation clause is required if job duration is more than 9 months

1.2.11. If job extends beyond schedule for reasons/delay attributable to client or the main contractor, it is advisable to demand compensation for the same.

1.2.12. Future changes in tax laws should be considered.



1.3. Mobilization:

As a Project manager, one has to jot down the resources required to execute the project. Sometimes due to shortage or non availability of resources, project can suffer despite rates being good. Following resources should be taken care of and quantity assessed both initially and also at the time of peak months :-


1.3.1. Skilled and unskilled labour strength required.

1.3.2. Staff with designation required for the site at the time of startup.

1.3.3. Type of machineries and equipments required (Like – JCB & Loader, Batching plant capacity, Miller, Crane, etc.).

1.3.4. Types of vehicles required (Like – Staff Bus, Sumo, Utility, Trailer, Tractor & Dumper, Bike etc.).

1.3.5. Computer or Laptop systems, Printer/Scanner/Copier, Data card or Broad band required at the site.

1.3.6. Assessing which telecom service provider’s network is better in the local area(Vodafone / Airtel / Tata – Docomo / BSNL) and the number of connections  required.

1.3.7. Availability of portable cabin / readymade office at the site. Whether the company needs to build or arrange Container on its own is to be decided.

1.3.8. Staff Camp / Mess system and the expected cost. Further number of staff who shall be staying out of company accommodation and HRA decision to be done in their case.


1.4. Availability of Drawing, Front for Work:

After the site mobilization, the project manager needs to strongly follow up for drawings and work front  from the client. Many a times work is started without availability of drawings as a result of which the work could be delayed affecting the work performance and profit margins adversely. For any delay client needs to be communicated accordingly.





1.5. Understanding the rules and norms in the Client Environment:

It is very important to understand the procedures and requirements to perform work in client locations, like


1.5.1. Whether work location is required to be inspected by client’s safety department

1.5.2. Details of Personal protection equipments (PPE) required

1.5.3. What are the other safety norms to be taken care of? Client may have a mechanism of raising safety debit noted for safety violations. The same can be passed on to the sub-contractors accordingly.

1.5.4. Whether test or certified agency certificates are required to use Tools or equipments?

1.5.5. Cube Testing discipline, if the contractor has its own batching plant.



1.6. Work Planning Daily / Weekly / Monthly:

1.6.1. Without goals and planning, the work can never be completed within the agreed time frame i.e., “Where there is no goal & planning, no Achievement”. Goals need to be set on Daily / Weekly and Monthly basis after discussion with the staff and then everything has to go after that need to achieve the same. If the Work is being carried out without effective goal and planning, no effective output can be achieved.

1.6.2. Also it is necessary to review Daily / Weekly & Monthly Plans so as to ensure work completion within time.

1.6.3. When we plan for work – we need to keep in mind - client priority, availability of resources, availability of drawing & front, weather, Funds etc.


1.7. Pre planning for FIM / Own Material:

Pre planning (system and procedure) is required for FIM and Own material so as to make it available in time at the time of opening the work front.


1.8. Joint Measurement Report (JMR) – Work completion & Extra work:

Joint measurement report (JMR) needs to be signed by the Client / Consultant after completion of work. This is required in monthly client bill. Daily work progress report (DPR) needs to be prepared for all site locations from all concerned engineers and supervisors of client. This needs to be prepared sub contractor wise so that  monthly bills of client and sub contractor are prepared easily and within time frame.








1.9. Sub Contractor Work Order:

Sub Contractor work orders should be prepared with original at HO and a copy at site. Item codes and language should be as per client work order so that reconciliation becomes easy. If rate is revised, amendment paper should be prepared to avoid any dispute later on. Project Manager and Project commercial head / Project Director need to jointly approve any such amendment. Many a times it may happen that work allotted to the sub-contractors are broken down into various components. In such cases one may say that it is difficult to track the comparison between client qty and sub-contractor qty. Following example would make things clear:-


For example:

Item Code

As per

Item description





Providing reinforcement including cutting, bending, binding, fixing in position including the cost of channels, bars (Binding Wire is in your scope).



FIM or Raw Material shall be provided to contractor for work by Company:



Reinforcement Cutting





Reinforcement Bending





Reinforcement Fixing




Total Rate of item code-1234 is      ---->





1.10. Client & Sub Contractor billing and Certification:

Billing period / Frequency should be same for client & the sub contractor so that quantity reconciliation can be done at periodic intervals.

Client Running Accounting (RA) bill should be prepared and submitted in time frame so that its certification is done in time and funds are released timely otherwise once the cycle is disturbed, then it shall affect fund management adversely throughout the project.

Delayed client billing in turn shall affect sub contractor billing and quantity comparison of client with sub contractor. Many a times as a result of this delay excess quantity is given to sub contractor as compared to client billing which shall adversely impact the project profitability.


1.11. Reconciliation – FIM & Principal Material:

Wherever running accounting bill is prepared for the client, one needs to prepare reconciliation statements to match balance quantity for FIM and own purchases (Major Raw Materials only) to avoid discrepancies and revenue loss. The issue here is assessment of physical quantities lying at the site especially in case of steel, for which an experienced supervisor is required.


If material consumption by the sub-contractor goes beyond standard norms then the same needs to be passed on to the respective sub-contractor. However for this, material issue mechanism and the controls have to be set accordingly right from the start of the project. The only challenge that remains is regarding transfer of material from one contractor to another at the site, for which an experienced stores personnel is required.



1.12. Preventive action for Malfunctions:

S. N.



Preventive Action


Material procurement

Project Manager / Site Incharge or Commercial incharge can procure material at higher rates.

a)   Watch on MIS

b)   Monitoring the budget

c)   Purchase Rate Audit

d)   Major purchases to be handled centrally.


Misuse & Wastage of Material

Site Engineer may consume material more than the standard norms

example – Plywood and Batton etc.

a)      Monthly Reco of Material consumption.

b)      Watch on Budget


Pmt of excess quantity

Engineer can give excess quantity to contractor than claimed from client

Client vs Contractor Quantity MIS


Company resources

Theft / Pilferage at site


Timely physical verification by internal auditor.






  1. 2. Checklist for Project Completion

2.1. Final bill preparation and certification:

Final bill can be timely prepared If following issues are properly taken care of:-

  • Cumulative Executed Quantity.
  • All pending extra item claims should be included, if pending.
  • Necessary follow up for W.O amendment if Actual Qty > WO Qty.
  • Release of Qty on Hold for want of various reasons.
  • Fight for the incentive clause.
  • If any company asset is given on rental / hire basis to other party as per instruction from client, the same should be claimed in final bill.
  • If resources like equipment / manpower have remained ideal due to non availability of front, it should be claimed in the final bill.
  • NOC shall have to be obtained from various departments of the client

2.2. Final FIM and Raw Material Reconciliation with bill and balance qty.:


  • Total Material Inward
  • Less: Material Returned / Transferred
  • Less: Standard Consumption = Balance Quantity at Site / Store
  • Less: Standard Scrap Generation
  • In case this quantity is not available at site / store, there could be various possibilities:-

–        Excess consumption as compared to standard

–        Theft / Pilferage during the project

  • In case of excess consumption, some portion can be recovered from the measurement contractor, if not recovered till date.
  • Proper justifications are required from the project manager and appropriate action should be taken in case of abnormal difference between actual and standard balance
  • Balance FIM material which shall not be used needs to be returned with sign and stamp from the client.


2.3. Fulfillment of client work completion procedure:

In case of project completion, client to have checklist for the same so the contractor needs to ask the same from the client and compile each point accordingly.



2.4. Receivable & Liability Status Clearance:

Get status of project liability with break up of nature of creditor and special remark for local creditors. It is best suited if ledger confirmations for the same are obtained.

–        Follow up for payment receivable from client after bill certification

–        Clear local liabilities to avoid any demobilization harassment from them.


2.5. Statutory compliance:

Follow up and get pending WCT & TDS receivable certificates from client.

–                 Give all necessary details for VAT return filing to local sales tax consultant and other details, if any required for audit.

–                 Get any pending forms like C & F from the department, also reconcile with the forms issued till date.

–                 Clear o/s local pending liabilities like Road tax, Entry Tax, Employee Professional Tax etc.


2.6. Possible reasons for delayed submission of Final bill:

S. N.


Corrective Action


Non updation of FIM data with stores.

Physical verification of FIM with stores records.


Reconciliation of FIM

Required with each RA Bill.


Work order Amendment

Some foresightedness and Strong Follow up with the client.


Change in Project Manager / Billing Engg.

Regular documentation

Proper Back up practice at HO

Process Checklist


Proper compilation of Hard and soft copies of all the Running Bills

Data Control and Regular Audit.



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Posted by on in Internal Control

Sub Contractor Work Order:

Sub Contractor work orders are very crucial to keep the overall cost in control at a construction site. They should be prepared before commencement of work by the sub-contractor.


From control perspective, Item codes and language should be as per client work order so that reconciliation becomes easy, otherwise it can not be reconciled with the client.

Also if rate is revised, amendment paper should be prepared to avoid any dispute later on. Project Manager and Project commercial head / Project Director approval signs or mail required.


For example:

Item Code

As per

Item description





Providing reinforcement including cutting, bending, binding, fixing in position including the cost of channels, bars (Binding Wire is in your scope).



FIM or Raw Material shall be provided to contractor for work by Company:



Reinforcement Cutting





Reinforcement Bending





Reinforcement Fixing




Total Rate of item code-1234 is      ---->



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Posted by on in Internal Control




1.1. Stores – Physical Controls

1.2. Material Inward verification & Posting

1.3. Material Issue/Outward & Posting

1.4. Physical Stock Verification

1.5. Control over Fuel Consumption

1.6. Raw Material Analysis


Stores is a very important link in the organizational chain. Normally at a manufacturing location, since the location of stores and the area where the material is issued is pretty well defined, implementation of controls is relatively very easy. But that is not the case in the Construction Sector with a very different scenario.

Lets look at the different scenarios:-

  1. Location where the material is lying is not defined?
  2. Locations where the material is to be issued changes every now and then?
  3. There are difference organizations working in the same location?
  4. Single Material is lying at multiple locations.
  5. Cost of maintaining the systems is sometimes felt higher than the value of materials involved.


In such a scenario, the whole dynamics of stores management change drastically. And precisely this is what happens at a construction site. Thus implementation of controls at stores of a construction site is that much more challenging and needs careful watch.



1.1. Stores – Physical Controls:-

As mentioned above, and looking to the control points, the need is felt to give regard to the following physical controls to be implemented at the stores of a construction site:-


Store Location - Ideally Two store godowns are required - One for Cement storage and the second for items other than cement. Cement Store should ideally be built by Block / Brick work & Cement sheet or GI sheet with support of scaffolding pipes/wooden bamboo. The surface should be made even by laying PCC on the same.  Further following resources are required to be maintained at these godowns : -

  • Doors and Windows for Lights & Ventilation,
  • House keeping (cleanliness),
  • Fire extinguisher
  • Rack for proper stacking of material. The rack should ideally be made either of Iron / Plywood & Bamboo / Pipe
  • Weighing machine to weigh materials upto 100kg (This may depend on site to site)
  • Power connection
  • Computer system with keyboard, mouse, Printer & UPS.
  • Security guards in shifts (number of guards depends on size of store)


Steel Yard should be nearest to the store for proper supervision and control over stores. This would help in avoiding theft, misuse of Material (–e.g. Binding Wire), Machinery (e.g. Binding & Cutting Machine) & material wastages.


Stacking & Labeling


All Items should be stacked properly to ensure availability. Following points are required to be taken care of: -


  • Material should be kept at least 1ft above the ground surface, properly covered in order to avoid  spoilage / wastage due to Weather conditions (For example – Cement Bags, Plywood, Battan etc.);
  • Safety to be ensured;

(e.g. Heavy material to be kept on ground & light weighted material either in rack and or on top of the rack);

  • It should be easily moveable;
  • Arrangement should be made based on frequency of usage;
  • Single item to be kept at one defined location rather than multiple locations;
  • If stacking is proper the material is easily countable;
  • Labels should be affixed on the rack of each item with Material code (Additionally mention of item description is also desirable).

After completion of work / use, unutilized material should be taken back in store and should be kept at its place or at a secured place at work area with proper stacking.


1.2. Material Inward verification & Posting:

Normally an organization has a basic control of issuing Indents / Purchase Orders, which ultimately leads to purchases / inward movement of goods. The nature of inwards can be of varied nature like Purchases, Client Free Issue Materials (FIM), Intersite Transfer & Loan basis materials. As seen the control challenges at the construction site  are multifold. However it is felt that for any of the inwards following documents need to be generated and kept at the site level:-

  1. Documents required are Challan / Packing list / Organization Specific Format for material received from other sites / Excise Gate pass / LR / Weight slip / Royalty Challan / Test certificates / PO copy or PO references / Tax Invoice / Statutory forms (If any);
  2. Name & Address of Consignee and Consigner on challan / other documents;
  3. Unique reference number to be given to all the inward supplier documents;
  4. Since the client would be having their own check on the materials entering its premises, so it needs to be ensured that all material inwards follow the procedure mandated by the client. As any escape from the client procedures may lead to delay in project completion;
  5. In respect of material quantity and rate, it should be weighed and actual quantity should be mentioned in the challan and weight slip should be attached (for example Unit of Measurement in Kg or MT);
  6. Sand and Aggregate should preferably be purchased on CFT basis and it should be measured each time by store person;
  7. Bolder and Ruble should preferably be purchased on MT basis and it should be weighted each time by store person;
  8. To ensure exact quantity and quality verification, no material shall be dumped / allowed without pre intimation to store. This is a common problem found at the construction sites that the suppliers dump the material without getting the same verified by the company personnel. In all such cases the material needs to be rejected by the site incharge.
  9. Store needs to ensure whether all requirements of the Purchase Order from  their viewpoint have been fulfilled i.e. Brand / Quality / Technical Specification / Delivery Terms etc.;

10.  After verification of material and documents, Stores should put Material received stamp, received date and time, receiver signature and Name of site & location where material is received;

11.  Material GRN / Inward reference number from system or manual register should be mentioned on the challan / document after its posting.

12.  Comment / Remark required in case of discrepancies with regard to Quantity & Quality of Item by material receiver need to be communicated in presence of material carrier to supplier concerned to avoid any dispute later on.

13.  Reject Note required with detailed reasoning in case the material does not meet the PO standard with one copy to be given to the material carrier.

14.  Out time and date should be mentioned in the challan / other document by the security after verification of supplier’s / transporter’s vehicle.


1.3. Material Issue/Outward & Posting:

Material Issue at the construction site is an area prone to lot of control weaknesses. Various issues which arise in a practical scenario are as follows:-

  1. Material is issued without filling the issue slip due to work pressure / non-availability of stores personnel at the stores location.
  2. No records kept for materials issued on returnable basis like scaffolding pipes / cube moulds / testing equipments.
  3. Movement of material from one location at the construction site to another without any intimation to the stores personnel.
  4. Stocking of material at more than one location to facilitate the site operations.

Hence, similar to Inwards process, the various conditions that needs to be fulfilled for all kinds of issues / outwards like Material Sale, Client FIM return, Intersite & Loan basis materials are as follows:-


1.3.1. Before issuing a returnable material, clear instructions should be given to receiver that he is responsible to return the material to store and also to complete the documentation / clearance from store. In case of non-return of material, the cost shall be recovered from him.

It is also seen that valuable items like Scaffolding pipes are cut at the site by the sub-contractors to suit their requirements. Such behavior without authorization from the site incharge should not be entertained and should occasion recovery of damage charges from him. This should ideally be mentioned as one of the conditions in the work order.


1.3.2. Documentation in the form of Challan / Packing list / Any specific format followed for Inter-site material movement / LR / Weight slip /  Test certificates (If any) / Sales Order copy or references / Tax Invoice / Statutory forms (If any) should be available at the site along with the name & address of Consignee and Consigner, Transporter details etc.

1.3.3. Unique reference numbers needs to be allotted to all the issue slips.

1.3.4. In respect of material quantity, it should be properly weighed and  weight slip should be attached with the same with proper UOM.

1.3.5. After verification of material and documents, Stores should put Material Dispatch stamp, Dispatch date, time and signature;

1.3.6. In case of movement of material outside the security gate of the client, proper watch and authorization is required. In all such cases, normally client demands the date on which the said material was inwarded by the contractor, hence the relevant records need to be kept updated.

1.3.7. Material dispatch posting should be done in system or manual register.

1.3.8. Consumption entry for Cement, Reinforcement, Sand, Aggregate (All Grade), Boulder, Rubble, Admixture consumption and other such bulk materials should be passed along with the RA bill certification on fortnightly / monthly basis depending on the frequency at which the RA bills are raised.

1.3.9. In case of Inter-site transfer of material, one copy of Material received confirmation should be made available from the material carrier. It should be clearly informed to carrier / customer / Inter-site.

1.3.10. Proper policy should be designed to exercise Control  over daily usage and returnable basis materials like – Tagada, Pavda with Handle, Tikkam with Handle, Hammer and Safety Full & Half Body Belt etc. For these items, separate manual register should be maintained, in which issued and received transactions entry should be done on a daily basis. In case of material not returned at the day end, a memorandum debit should be raised to the concerned party, reversible only upon return of material.

1.3.11. In case of receipt of items issued on returnable basis, material document and its posting should be done with received sign / stamp. Further a reference also needs to be mentioned for the original challan no. against which the material was issued and current balance lying with the party, if the total stock is not returned. In case it is confirmed that material shall not be returned, debit note should be raised on the concerned contractor / party immediately.

1.3.12. Store person should physically visit the site at least once in a day if the locations are limited and atleast once in two days if the no. of locations are more, for proper control by way of :

i.      Identifying material lying idle or scattered at site,

ii.      Verification of material is lying in mud or in excavated holes, before back filing,

iii.      All unused materials should be taken immediately from site to store after discussion with the concerned site engineer / supervisor.


1.4. Physical Stock Verification:

Again unlike an normal scenario, when physical verification can be carried out in a controlled environment, under proper covered structures in a time bound manner, the scenario at the construction site is exactly opposite because of various hurdles in the form of open environment, multiple locations, items lying at heights not ordinarily reachable, various points need to be taken care of when the physical stock verification is carried out namely:-

  1. Stock Records should be updated till the last inward and outward movement immediately before the stock taking ;
    1. All audit queries related to Inward and outward vouchers should stand resolved especially the Quantitative and item code related ones.
    2. Negative items should be identified, reconciled and resolved.
    3. If one uses an ERP, then Clearance / Reconciliation of various system generated Exceptional reports needs to be done like –
      1. i.            Goods received but bills (Document) not received.
      2. ii.            Bills (Document) received but goods not received.
      3. iii.            Raw material / Goods given for job work but finished goods not received.
      4. Detailed printouts must be taken with mention of Opening, Inward, Outward and Closing Qty., with detailed Material groups along with Material code.
      5. To ensure proper and easy physical verification, material should be arranged / stacked, thus prior instructions need to be given to the stores personnel through the project manager;
      6. Stock Verification must be commenced keeping ABC analysis in mind and thus A Class items must be verified first;
      7. Quantities need to be mentioned on items by chalk / marker, column and row wise to facilitate recount and to avoid any confusion. Physical quantities should be mentioned beside the closing stock with exact location of rack / site and break up of column & row should be counted to avoid any error.
      8. Identify discrepancies with suitable justification and reconciliation;

10.  Physical stock of A class principal items should be taken on quarterly basis and the rest need to be covered atleast once in six months on a random basis.


1.5. Control over Fuel Consumption:

It may be noted that Fuel drives not only the vehicles at the construction site but also certain very important equipments like JCB, Miller, Excavator, Cranes, DG Set (for Power), Tractors and other site Vehicles, hence it is also stocked at the construction site in good quantities. Not only that a good amount of working capital is required to be allocated for daily fuel purchases at the site. And since we can equate fuel with cash in terms of liquidity, hence it needs proper control for which following points need to be complied with:-

  1. Stores should have resources like -
  • Fuel pipe, Filter & pump to fill fuel from one to another can,
  • Two standard size Barrels of 200Ltrs capacity,
  • Fuel small Can of 1ltr, 5Lts, 10Ltrs and
  • Scale to measure stock
  1. Lock and key of fuel tank should be in custody of store person
  2. All vehicle and equipment Meters should be in working condition.
  3. MRN or Authorisations are required in Log sheet of Project Manager & HR Incharge
  4. Physical meter reading should be verified at the time of fuel issue.
  5. Meter reading should also be mentioned in log sheet at the time of fuel issue.
  6. Received and issued signs are required on the fuel issue document with registration number of the equipment / vehicle.
  7. If fuel is issued for purposes other than vehicle/equipment usage then the purpose and  name of location is to be compulsorily mentioned.
  8. Fuel issued summary should be give to HR and Project Manger for the period required.

10.  Debit note should be issued to the concerned person / party in cases of fuel given on chargeable basis.


1.6. Raw Material Analysis:

Material is consumed at the construction sites on a progressive basis as the work is getting completed. Normally, standards can be fixed for the material consumption in most of the cases, but adherence to those standards is of significant importance and is a periodic exercise. Material Reconciliation of Principal items should be prepared on the basis of sales bill vs. Inward and Issued quantity duly authorized by Site engineer / Project Manager:-

  1. i.            Cement
  2. ii.            Steel
  3. iii.            Sand
  4. iv.            Aggregate
  5. v.            Admixture
  6. vi.            Binding Wire: i.e. 1Mt reinforcement work = 8 to 10kgs
  7. vii.            If any other (Specify Other Raw material):


Thus we see that the role of Stores Department at the construction site is very demanding. If the above points are properly complied with then it would improve the overall performance of the site.

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