Strengthening Internal Financial Controls (IFC) for a Leading Fertilizer Manufacturer

From Compliance to Confidence :

How we Implemented a Strong IFC Framework for a Fertilizer Giant

Quick Highlights

End-to-End IFC Framework

Designed and implemented a full IFC framework across all business processes

Standardized Risk & Process Controls

Developed Risk Control Matrix (RCM) and SOPs for procurement, inventory, and finance cycles

System-Based Control Automation

Implemented system-based Maker-Checker controls and monthly IFC checklists

100% IFC Readiness Achieved

Achieved 100% IFC readiness and eliminated recurring audit observations

Client Overview & Requirement

A Fertilizers company , based in Uttar Pradesh, is a leading fertilizer manufacturer producing urea, DAP, and NPK fertilizers distributed through government agencies and agricultural cooperatives.

With operations across seven states and multiple depots, and an annual turnover exceeding ₹350 crores, the company had scaled rapidly. However, the growth brought increasing operational complexity — decentralized decision-making, high-volume transactions, and limited process standardization.

The Board had observed recurring audit remarks and control lapses in previous financial years.
The management sought PGAS & Associates to design and implement a robust Internal Financial Controls (IFC) framework compliant with the Companies Act, 2013 — with the goal of improving transparency, accountability, and governance.

Challenges Identified

During the initial IFC assessment, the PGAS team identified multiple systemic and procedural gaps. The company wanted not just a compliance checklist — but a sustainable control environment that enhances operational integrity and management confidence.

No formal control documentation

Core activities like purchases, dispatches, and stock transfers lacked written SOPs.

Weak authorization hierarchy

Especially in vendor payments and inter-depot transfers.

Manual journal entries

Without consistent review or approval tracking.

Inventory and production variances

Not linked to any control matrix, causing repeated audit qualifications.

Inadequate segregation of duties

Depot-level staff handling multiple conflicting roles.

No centralized risk register or testing mechanism

Creating gaps in accountability under Section 134(5)(e).

PGAS & Associates’ Approach

PGAS & Associates developed and executed a five-phase IFC implementation roadmap, balancing control strength with operational practicality.

01

Process Walkthroughs & Risk Identification

Conducted on-site walkthroughs across procurement, production, inventory, sales, HR, and finance.
Identified control weaknesses and designed a Risk Control Matrix (RCM) for each process.
Mapped existing vs. proposed controls to highlight gaps and risk ownership.

02

Control Design & Documentation

Drafted Standard Operating Procedures (SOPs) for vendor onboarding, stock dispatch, freight approvals, and expense authorization.
Created process flowcharts for better understanding and cross-departmental consistency.
Recommended system-based validations in Tally ERP and payroll modules to reduce manual dependencies.

03

Implementation & Training

Conducted IFC awareness workshops for finance, procurement, and depot teams.
Rolled out Maker-Checker approval mechanisms for journal entries and inter-branch transactions.
Introduced monthly internal control checklists for ongoing self-assessment at depots and plants.

04

Control Testing & Validation

Carried out design and operational effectiveness testing as per ICAI’s IFC guidelines.
Coordinated with the company’s statutory auditors to ensure seamless integration into the annual audit cycle.
Established a quarterly management review process to evaluate and strengthen controls continuously.

05

Monitoring & Governance Framework

Created a centralized IFC Dashboard to track control testing, exceptions, and remedial actions.
Assisted the Audit Committee in establishing a formal IFC reporting mechanism for Board oversight.
Documented all controls and validations to comply with Section 143(3)(i) of the Companies Act.

Results & Impact

Within six months, the company transitioned from reactive compliance to a structured and proactive control environment.

Beyond statutory compliance, the company saw significant improvement in data reliability, process discipline, and auditor confidence.The statutory auditors later rated the IFC framework as “robust and well-documented”, contributing to a clean audit opinion for FY 2023–24.

Parameter	Before PGAS	After PGAS Implementation	Impact
Control Documentation	Informal, Unstructured	Fully Documented & Approved by Board	✅ 100% IFC Readiness
Audit Observations	9 Recurring Issues	0 Recurring	📑 Clean Audit Report
Process Automation	Partial	Maker-Checker Implemented	⚙️ Reduced Manual Errors
Depot Control Gaps	Frequent	Closed via SOPs & Reviews	🏭 Improved Accountability
Compliance Reporting	Fragmented	Quarterly Review Integrated	🧾 Stronger Governance

Client Feedback

Our company was always compliant, but PGAS & Associates made us controlled. Their IFC implementation gave us structure, discipline, and visibility across every level — from plant to depot. The transformation wasn’t just in documentation, but in our mindset towards accountability.

— Chief Financial Officer

The Value of Strengthening IFC

Implementing Internal Financial Controls (IFC) goes far beyond compliance — it builds trust, accountability, and operational excellence.

Through its hands-on, industry-specific approach, PGAS & Associates.

PGAS & Associates — Transforming compliance frameworks into control-driven business cultures.