Document 6RxZjgKda6D827xB1RrwzK013

FILE NAME THAN THAN DATE 1978 Apr 18 DOC THAN030 DOCUMENT DESCRIPTION Memo RE Dallas Audit with Results TO Gene Herndon FROM Rex Wood DATE April 18 1978 SUBJECT Dallas Audit The Dallas branch was audited the week of March 27 1978. cooperation was received the visit The following is a listing of major exceptions noted during - Extension errors CONFIDENTI found on C.O.D. sales orders payments CONFIDENTI CONFIDENTI from CONFIDENTI CONFIDENTI CONFIDENTI - Credit limits were exceeded CONFIDENTI CONFIDENTI out better CONFIDENTI approval procedures and CONFIDENTI needste limits ~ Tax CONFIDENTI certificates need CONFIDENTI - Truck leasing CONFIDENTI CONFIDENTI CONFIDENTI CONFIDENTI contracted CONFIDENTI CONFIDENTI from the - Caustic CONFIDENTI CONFIDENTI CONFIDENTI CONFIDENTI CONFIDENTI CONFIDENTI properly - Better CONFIDENTI CONFIDENTI CONFIDENTI CONFIDENTI reping CONFIDENTI CONFIDENTI CONFIDENTI - Driver's CONFIDENTI CONFIDENTI CONFIDENTI CONFIDENTI ~ Truck CONFIDENTI CONFIDENTI CONFIDENTI CONFIDENTI CONFIDENTI CONFIDENTI - Several CONFIDENTI CONFIDENTI CONFIDENTI CONFIDENTI DetailCONs FIDENTI CONFIDENTI CONFIDENTI CONFIDENTI CONFIDENTI CONFIDENTI CONFIDENTI CONFIDENTI CONFIDENTI REVIEW Rex Rex Wood Subj to Stipulation of & Confidentiality Order Sowie et al v A.P. Green Refrea t ac l Jt acko sonrCoi unte y MsO Case No 207056 HAR 000014 SUMMARY OF REVIEW i, : I. FINANCIAL REVIEW Branch Operating Statements for 1976 1977 and the first quarter compqauraertder were reviewed and major income and expense categories were follows . Descriptions 12/31/77 Y.E. 12/31/76 Y.E. Z Reg 000 $ Sales 000 $ 1978 Sales Regular Sales Direct & Inter Co. Sales 5,668 cr 2,971 cr 100.0 6,125 - 3,275 cr 100.0 1,023 cr - Total Sales 8,639 cr - 9,400 2,581 cr - Gross Profit Margin 1,522 cr - IDEN IDEN 462 cr - - 17.9 Expenses Freight Out Total Selling Expense Total D Expense Total L & O Applied Net W Expense Total Office Expense Total Operating Expense Total Operating Profit Managed Return on Assets Managed IDEN IDEN IDEN IDEN IDEN IDEN - 2.0 4.4 7.1 IDEN Cr 1.3 IDEN 5.6 IDEN 1.2 IDEN IDEN -- 24.7 12.7 11.1 A- 32 2.17 81 5.2 97 6.2 24 Cr 73 = 1.5 4.7 17 206 1.1 * 13.2 207 cr 13.3 7.43 - Regular sales incred Margin increased 109 a percent of regular due to freight 5087 between 1976 and 1977 and the Gross Profit major expense categories have shown a decline as sales except freight out which has increased companywide Teases - It appears that 2 date branch is financially sound and has shown some grooth to II f all open cash and C.O.D. sales at 3/21/78 was reviewed and cash Tepedures were examined There were 6 extension errors on C.O.D. sales orders which made the payment amount differ from the invoiced amount All the errors noted involved TMD customers customers Order Stipulation Subj of Confidentiality & A.PA.P Green Refractoreit eusl Jackson CountCouynty MOMO CaseNo 207056 HAR 000015 page two ... Dallas Audit 164-016-8 Recommendation A procedure should be set up to double check extensions on C.O.D. sales orders A final check of extensions should be made by a second leased to the warehouse person before the sales order re- is se III CREDIT AND COLLECTION The Aged Trial Balance of 3/1/78 and credit approval profeures , at the branch profeures were reviewed tk The Aged Trial Balance accounts were over the customers did not list had 14 accounts with no cre printed credit limits Karde the credit limits f^r all limits and 43 used to reference Recommendation The Branch Manager limits from the Kansas City Credia no credit limits or those accoun Kardex files for all customers approved credit FIDE Request updated credit for all accounts with need a higher limit nclude the updated and IV CREDIT SALES ORDERS A procedural review was FIDE orders FIDE the issuance of credit sales It was noted that some retires that full cylinders were clerk to determine if F return report FIDE FIDE 150 pound chlorine cylinders noted FIDE customers It was difficult for the FIDE FIDE merchandise credit was due on the cylinders the ment returned fit Return reports should be noted whether or not is due and the reason for the return Ware- AL should be instructed to include this information Sorts Report was not being prepared for full 150+ chlorine which merchandise credit is given Since the credit puts back into inventory and it is subsequently sniffed these ders should be deducted from inventory Recommendation The clerk preparing credits for returned cylinders should bring the credits involving merchandise returns to the attention of the clerk preparing quantity changes so that they may be written off It was also suggested that 150 chlorine cylinders be included on the next monthly cycle count so inventory can be corrected Soule al County HAR HAR 000016 page three Dallas Audit 164-016-8 V. DEBIT SALES ORDERS proper The sales order procedures at the branch were reviewed for granted exempt status controls Of the 65 customers granted exempt status on file at the branch 7 had no exem Recommendation Tax exemption certificate to assure that all customers granted exemp on file fuld be updated have a certificate VI IMPREST CHECKS . Imprest checks written in 1978 were reviewed propriety and proper coding It was found that Hudgins Truck Rental vehicles per the lease agreement ratesten billed rates on the regular units appeare while the billing for mileage on sub in most cases The billed rates ENT the branch for leased ENT ENT 1 1978. The ENT ENT the contract price units appeared to be excessive Contract rates are as follows Unit CONFI 2051 2052 CONFI 2479 2480 CONFI 2888 AMed Mileage Rate .087 .1020 .0840 Per Contract Monthly Rate Mileage Rate 191.00 123.00 | .090 .1050 204.55 .0880 Substitute CONFI for 2051 CONFI CONFI for for for 2479 CONFI CONFI CONFI 117.00 196.55 .0970 .1140 .0970 .1140 .1140 191.00 123.00 123.00 204.55 .090 .1050 .1650 .088 Ecommendation The clerk paying leasing invoices should check the invoices to assure that they are priced per the contract This exception was brought to the Branch Manager's attention Imprest check stock was stored in an unlocked storeroom Recommendation Blank avoid easy access imprest checks should be locked up to Subj Orderto ConfidofeCnontfiideantliailittyy& Sow et ue l vA.P. Green Refractories et al Jackson County MO Case No. 207056 HAR 000017 page four Dallas Audit 164-016-8 VII PRODUCTION ORDERS A review of production order procedures was performed to determine con- trols were adequate es Bleach and acid filling operations performed plant the plant worker comes to the office to report the productio There is the possibility that plant personnel might neglect neglect production tht en hen % Formed Aport some Recommendation No production should be parmed duction order number being assigned in aduanplank orders should be given to the warehouse is performed the office should assign and duction When production is complete and the production order should be outc fog log without a pro- aduanplank production , before production number to the proshould be noted A shortage of 44,030 pounds of 50 Caustic tory in 1977 The product was cycle contest found that again this product was shore inventory in 1977. The storage tank this could account for the sizeable is developing due to failure to rehe 20 Caustic pn February 1978 and it was 31 pounds since physical kg but it is doubtful that - We feel that the shortage Recommendation measured before Useage from the the 20 tank to 50 Caustic showcycled further losses recommended that the 50 Caustic tank be hould be compared to useage reported on f if the amounts are comparable Also VIII TRANSPORTATION A. Truck Inspections apertion was performed on the vehicles the branch exceptions were noted during the vehicle inspections Exceptions ; Turn signals and brake lights inoperative Right turn signal inoperative fire extinguisher needed a recharge Recommendation These exceptions were pointed out to the Branch Manager for correction Confidemiality & Stipulation Subj Stipulation al lackson County MO Case No.207056 HAR 000018 page five Dallas Audit 164-016-8 B. Driver's Logs Driver's logs for January 1978 were examined for proper preparation exceptions logs The following were noted on driver's driver's a Drivers Exceptions William Calhoun No safety inspection noted for ( during the month driving Martin Braswell No logs had been prepared Chester Duke No logs had been prepared Orville McKim 1-6-78 showed 210 miles average of 60 mph 1-7-78 showed 140 mil average of 70 mph 1-26-78 showed 365 3.5 hours for an IL 2.0 hours for an driven in 5.0 hours for an Sherman Weatherford Failed to note order numbers nspections and list sales B for the entire month Recommendations FILFIL they drive per FIL FIL ceptions noted FIL FIL corrected we prepared for each driver each s letter of November 18 1977. discussed with each driver so they can day Ex- be IX TRUCK TRIF REPORTS Truck trip reports fora preparation FIL FIL February 1978 were reviewed for proper Truck trip reports quired per Mr. hot being prepared for each unit each day Npley's letter of November 18 1977 as re- If port Useage of each vehicle for each day must be rea vehicle is not used on a particular day a truck : should be prepared and noted Not Operated Files for required OSHA reports were reviewed and a safety inspection was performed at the branch The following exceptions were noted 1 One fire extinguisher was missing at a marked extinguisher station 2 A leaking drum of Aqua Ammonia had not been repacked Subj to Stipulation of Confidemtishty & Refractones Refractones al Jackson County MO Case No. 207056 000019 HAR 000019 page six Dallas Audit 164-016-8 . 3 There was no warning sign in the asbestos storage area Shrink packs had been removed on 12 skids of asbestos from a damaged 4 "- Required tests of the air in the asbestos storage area -been taken _ oo) 5 There was trash and dented drums of material on the warehouse Pero ds around Recommendation These exceptions were point CONFIDENT for CONFIDENT to the Branch XI PERSONNEL A listing of branch personnel CONFIDENT CONFIDENT branch roll and checked to personnel CONFIDENT CONFIDENT brain It was found CONFIDENT CONFIDENT CONFIDENT CONFIDENT CONFIDENT ment for all CONFIDENT at CONFIDENT CONFIDENT CONFIDENT by Kansas City PayCONFIDENT CONFIDENT the Payroll Depart- CONFIDENT CONFIDENT CONFIDENT CONFIDENT CONFIDENT CONFIDENT CONFIDENT Kansas CONFIDENT CONFIDENT CONFIDENT CONFIDENT CONFIDENT CONFIDENT CONFIDENT CONFIDENT CONFIDENT CONFIDENT CONFIDENT attendance records cen CONFIDENT stated CONFIDENT the forms had been CONFIDENT CONFIDENT to Kansas CONFIDENT Suby 10 ConfidofenCotnfiideantliailittyy& Order, Suule aStipulaltion JAa.cPks.onGreCenounty HAR 000020 .