List of issues Broilers Sector:

Sales Core Process:

Pricing Mechanism:
Pricing process of Broiler Chicks is not automated, since it is not linked
with Central Data Base.
Certain discounts granted to customers, are not timely approved.
Instances noted for incorrect application of discounts, understated sales
proceeds.

Operational/Control System:
Sales orders are booking/reflected into the system subsequent to the
accomplishment/execution of sales that were taken place at night, also orders
may be taken over the phone.
Consider should be given to various factors and KPIS upon/prior to sale as
such i.e. Flock healthy condition, weight, Mortality,etc. however, sales
decision in light of cost/benefit lack proper documentation.
Sales supervisor is reporting to Supply Chain Manager.

Annual Plan:

Annual sales plan does not reflect implemented sales strategy, that shows
greater reliance on external sales to third party in lieu of sales to affiliated
Slaughter Houses, which inflated GP accordingly.

Credit:

Excess Credit limits is not timely approved and documented since it is

authorized after sale via the Finance Manager.
Accounts Receivable-Related party is not periodically reconciled and
confirmed.
Advance Payment to Suppliers:
As per our examination, we noted that payments were made in advance to variouse
vendors and supplierss in early 2017 for spare parts of approx LE 400K,that have
not yet received.The Sector however,does not obtain gurantee for payments made.

The purchase Dep. Does not comply with contractual articles, that provides for
payments to be made upon delievery and fines to be charged upon delay.

Medicine/Medical Supplies:

Poor control over utilization of medicineswhich aggregated LE m per annum that

is,process owner for supervising and controlling usage also approves and authorizes
purchases, this raises the concern of weaken control and the suscpitious
manner/behavioe of usage evidenced by releasing all O/S balance of certain items
directly before the expiration, enhaced by the increase of average cost per KG by
apprx 40 m .

The sector as well did not provide us with annual procurement budget that
aggregates LE m although required several time.

Capex cost benefit studies

The sector mobilized construction of water station and wells at ALAhud Broiler
Farms to save the needs of water rather than outsourcing. Forecasted savings were
overstated, since LE 700 K was approximated to be saved per annum, assuming 6 K
M/Ton on monthly basis, whereas reasonable estimation of monthly consumption
does not exceed 2 K M/ Ton accordingly, increased actual overheads to reach LE
13.75 in addition to depreciation and maintenance as against before construction.
The decision appears to be taken based on studies lack accuracy and appropriate
techniqual feed back that does not adequately consider cost benefit methodology.

Fire Insurance claims:

One of Broiler farm land was exposed to fire accident during Feb.2017
that destroyed all PP&E in addition to the value of the flock, replacement
Property costs aggregated LE 1.5m in addition to estimated loss of
revenues of LE 2 m. The sector however, does not raise insurance claim
so far and did resume operations at the yard. Furthermore,Bio
safety/security requirements in respect to construction of fire net work
was not satisfied/fulfilled.
Undue professional Care:

In late 2015Broiler sector acquired equipment for erection of Pyrolysis Power Plant,
which use the litter out for generating both electricity and heat. Aggregating cost of
Euro 500 k was fully transferred to vendor. Upon delivery. It was revealed that
purchased equipment were not in conform to specification, as against the
contractual agreement.

In light of the above :

The machine is out of service since late 2015, date of arrival.

The concerned department does not obtain adequate guarantees, collateral
i.e. retention or L/G.
Contractual agreement as well as related studies are not in place and
procurement was individually executed via project manager.

The aggregate costs of equipments- LE 4.1m - was charged to the companys

Profit &Loss A/C.

Lease payment in advance:

The Sector paid in advance the lump sum amount of full lease installments for 11
years for Shurbagui Farm Land since 2008 amounted to LE 400K, rather than
quarterly installment as per business norm.
Land Registiration:
Certain parcel lands are registered in the name of the seller, old Land Loard. The
issue may threaten ownership in light of the government initiatives to this effect.

Conflict of Interest-Related Party:

Broilers activity is managed through two main Zones, the operational manager of
both is the brother of the Poultry Group Manager, this represents a departure from
policies and regulations.

Updated Sales Discount:

We noted apparent delay in updating sales discount list that is, discounts granted to
customers were not properly approved/documented. List of issues -Parents Sector

Absence of Co-ordination- Lack of Uniform Policy:

The Sector does not follow a uniform policy in respect to by product sales -Litter
of rearing periods-that was generated from the operational process thus, two
different prices for the same byproduct sold, caused understatement of sales by LE
1 m annually.

Sales Agreement for Regua Zone, the lower contract price, was done via direct
order and not updated since 2009. However, Agreement for Sadat Zone, the
higher contract price, was properly processed through approved tenders and
quotations.

Improper Segregation-Quality Control Process:

Fertile eggs produced are rating and sorting in relation to quality condition, used to
determining sales price. The relevant committee is dually responsible for conflict
functions of both quality control and setting selling prices that could lead to
probable override.

Burden of poor documentation quaility:

local tax law provides for unsupported documents in excess of 7% of A&G to be
taxable, total unsupported expenses of 2016 aggregated LE 3.1m,that was increased
tax charges accordingly.
Receiving Process Control:

The sector activates utilization of weight equipment, used to verify weight of selling
chicks receiving materials, nine months prior to standardization and stamping
equipment therefore, inadequately safeguarding of control, since weight accuracy
and validity are questionable.

Parents Importation:

Parent Sector suffers incremental importation charges, as a result of the shortfull

of production due to failure of enhancing GP operational capacity,the fact
resulted in minimizing overall GP%.

PP&E
The sector does not periodically reconcile physical observation take of PP&E to
Fixed Assets Register thus,in light of the absence of Bar Coding System, niether
existence is verified nor accountability is enhanced.
Hasabo Parcel of Land:
The sector fully provided for payment in advance of LE 5m made to
Hasabo,Landloard, since 2010, for the purchase of Farm land.The land
however,was not delivered to the sector and the outcome of legal action filed is
infavourable.
Capex Implementation:
Capex projects amounted to LE 16 m,are not accomplished to match strategic needs
of the business.