OJSC "KIM" did not fulfill the conditions for granting state support - KGC

November 11, Vitebsk / Diana Kurilo - BELTA /. The Committee of State Control for the Vitebsk region has identified violations of tax legislation at the open joint-stock company "Classics of the Fashion Industry" (KIM), the regional State Control Committee informed BELTA. The OJSC received significant state support, including for the purchase of raw materials for production. This allowed the company, which incurred losses from sales in 2008, to make a profit from sales in 2009 and reduce its net losses. However, the enterprise failed to meet all the conditions for receiving state support, such as achieving the set performance indicators. In addition, violations of tax legislation were identified: payment orders submitted to the bank for income tax payments were for amounts less than the amounts of tax withheld from accrued wages. The State Control Committee also noted the low level of wages and high staff turnover: the annual replacement rate of workers, specialists, and managers is 20%. The OJSC made monthly wage payments in the form of finished products upon employee requests, which accounted for 4% to 7% of the accrued payroll fund for the month. The share of products made from tolling raw materials remains significant, despite being less profitable than producing items from own raw materials. Cases were noted where the cost of yarn supplied by tolling parties as payment for services was 17-30% higher than the cost of their tolling yarn. Despite a severe shortage of its own working capital, the company had overdue accounts receivable from Russian Federation enterprises. As of August 1 of the current year, this amounted to Br1.2 billion. According to the State Control Committee specialists, a significant factor limiting the production of competitive products is the high level of wear and tear of technological equipment. At the same time, the enterprise did not take effective measures for the timely commissioning of new equipment. This led to inefficient use of budget funds allocated for its acquisition. The company used outdated heating equipment, which is morally and physically worn out and requires replacement; however, energy-saving measures were not implemented. Significant amounts of working capital were diverted monthly into inventories of finished products, which exceeded the norm set by the "Bellegprom" concern. The fulfillment of the inventory target on reporting dates – January 1 and July 1 – was ensured by supplying significant volumes of products to its own branded stores in the preceding two months. Thus, in November of last year, shipments were 8 times higher than the average monthly supply volume for January-October, and in December – 9 times higher. In May and June of the current year, shipment volumes exceeded the average monthly volumes for January-April by 3 and 2.5 times, respectively, while in July, the stores returned products worth Br380 million. Following the inspection, two individuals were brought to administrative responsibility, and a directive was issued to eliminate the violations. -0-