REPORT ON INTERNAL CONTROL

Mr. President of
TELAM ANONYMOUS SOCIETY, INFORMATIVE AND ADVERTISING
Bolivar 531 - Capital Federal

In exercise of the powers conferred by Article 118 of Law 24156 the

THE GENERAL AUDIT OFFICE OF THE NATION proceeded to conduct an examination in the scope of the
company TELAM SOCIEDAD ANONIMA, INFORMATIVE AND ADVERTISING, with the purpose
as detailed in section 1 below.

1- AUDIT OBJECT

General assessment of the existing internal control environment in the entity with
the purpose of knowing the degree of reliability of it and thus establish the scope,
nature and the opportunity of the audit procedures to be applied in the review of the
financial statements for the fiscal year ended 12-31-96.

2 -SCOPE OF THE AUDIT

Our audit was conducted in accordance with the auditing standards approved by the
General Audit of the Nation through resolution No. 145/93, issued by virtue of
the powers conferred by article 119 subsection d) of law 24.156. These regulations
are compatible with those adopted by the Professional Council of Economic Sciences of the
Federal Capital.

The work carried out has basically consisted of evaluating the controls that
they have an effect on the accounting information generated by the Company and can, as for
thus, affecting the final balances of the financial statements. This examination concluded on 12-20-97

Based on the defined objectives, the content of this report regarding the
evaluation of internal control, covers only those aspects that have arisen during the
development of our exam and therefore does not include all those comments and
recommendations that a specific study aimed at this purpose could reveal

3- COMMENTS AND RECOMMENDATIONS

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3-A) ASPECTS THAT REMAIN PENDING FOR IMPLEMENTATION OF
PREVIOUS EXERCISES

I) ORGANIZATION OF THE COMPANY

COMMENTS

1) Existence of established lines of responsibility and authority that do not arise from a
Updated Organization Manual. The only progress on the matter is that as of the 14th of
February 1997 by Board Act No. 814, the 'new operational diagram of' is implemented.
the Company" from which the dissolution of the Legal Affairs and of
Creativity, leaving the Legal area as a Department within Management of
Management and that of Creativity is directly dependent on the General Manager.
arising from the deed as the Department.

2) The location of the Legal area depending on the Administrative Management is

observable given that the issues generally addressed are of an administrative nature.
the financial reporting and monitoring level would correspond to a higher level such as the
Directory.

3) Non-existence of a register of authorized signatures indicating the level and authority of each
one of the managerial level officials to carry out certain operations.

RECOMMENDATIONS

1) Elaboration of an Organizational Chart supported by its corresponding Manual

of
Organization, Procedures, and Functions open to the level of
Department

2) Relocate the Legal area depending on the

Directory

3) Create a record of authorized signatures for both types of operations

financial as commercial with explicit establishment of extension levels.

COMPANY RESPONSE
2
1) Regarding the suggestion at hand, it is worth highlighting that the definition of the
the structure of any organization can and should be considered a relevant aspect,
being able

3
likewise and as a consequence of this, to be classified as high complexity all the
action that must be taken for such purposes.

For this reason, it should be mentioned that it does not escape perception of
The management of this company sees the need to double efforts aimed at achieving reactivation.
the measures already adopted, so that they are gradually and sustainably realized
in the shortest time possible the tasks of analysis, design, approval and implementation
of an organizational structure that meets the expectations and aspirations of said Management,
as well as, those recommendations that in this regard may be made
by the GENERAL AUDIT OFFICE OF THE NATION and by the GENERAL AUDITORY
THE NATION.

2) In this regard, it is appropriate to refer to the concepts expressed when addressing

the treatment of the recommendation stated as point 1

3) In this regard, it is noted that the relevant instructions will be provided to the
in order to satisfy the extremes contained in the suggestion under examination

II) AUTHORIZATION, EXECUTION, AND VERIFICATION OF OPERATIONS.

COMMENTS

1) There are no procedure manuals or sequence diagrams by category or

administrative areas

2) The substantial recommendations that arise from the reports prepared by the
The Internal Audit Unit of the Society should be addressed in the Board meetings.

3) Budgets are not prepared by areas of responsibility.

RECOMMENDATIONS

1) Develop a procedures manual

2) The substantial recommendations made by the Internal Audit Unit of

The Society should be addressed in the Board meetings, which should also
should promote the mechanisms aimed at achieving its implementation.

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3) Prepare budgets by areas of responsibility

COMPANY RESPONSE

1. Regarding this, it should be mentioned that although to date, it has not been structured in
a single body known as the Manual of Standards and Procedures, regarding the
the theme 'Standards and procedures' should be highlighted that:

A. Standards y Procedures
elaborated

Starting in June 1994, Standards were developed and

Procedures related to the following topics:

1. Contracts made in the scope of TELAM SAIyP

2- Fixed funds

3. Staff attendance control

4. Reception, Filing, and Claim of signed receipts by the Department

of
Personal

5. Wealth Affidavits

6. Certifications issued by the Personnel Department

7. Pending cash settlements - Human Resources Department -

8. Signed pay slips - Signature comparison

9. Hiring of production work

10. Collections

b) Standards and procedures in process of

elaboration

In this regard, it is expected to carry out the drafting and subsequent approval of
the following Regulations:

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Hiring of advertising spaces on behalf of and at the request of the Client Organization

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 2. Advances of expenses to
to render

3 Marketing of the information service of TELAM

SAIyP

4. File
journalistic

5. Goods for use

6. Internal transfers of
personal

7. Receipt of supplier invoices, their compliance and their subsequent

accounting.

8. Request for issuance of

passages

Obviously, the decision to implement measures aimed at

elaborating the above-mentioned norms must be understood as the starting point of a
global and more complex process, which will have:

a) As the first phase, the definition and approval of the norms and procedures
that contemplate the most important and neural operational circuits of this Company.

b) As a second phase, the provision of information by the involved areas

of the rules and procedures in treatment, their implementation and the follow-up aimed at
to determine its effective implementation, as well as the need to have
if applicable, the changes that are deemed appropriate.

c) As a third phase, the incorporation and regrouping of the different standards

and procedures outlined and approved in a single body.

2) In this regard, it is worth referring to the terms expressed on various occasions by the
own Internal Audit Unit, and from which it is possible to highlight the
important degree of acceptance and implementation of the recommendations made by the
same, this fact from which the will and decision adopted by the Management arises
this Company, to gradually and permanently achieve the realization of a goal
primordial, which is to achieve day by day, higher levels of efficiency, effectiveness, and economy
in everything related to the application of both human and material resources with which
Currently TELAM SAIyP accounts.

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 Finally, regarding the subject at hand, it is worth highlighting the decision
order from the TELAM Directorate to double the efforts made so far, having
present the need to meet all requirements that are
formulated by

8
NATIONAL GENERAL AUDIT and by the GENERAL AUDIT OFFICE OF
NATION.

3) Regarding this matter, and in relation to the topic 'Budget', it is worth noting that they have been
instructions aimed at enhancing the actions taken so far,
such a way to achieve:

a) At first instance, obtain the final approval of the budgets

corresponding to the years 1996, 1997, and 1998, by the MINISTRY OF
ECONOMY AND PUBLIC WORKS AND SERVICES.

b) En una segunda instancia, adoptar las medidas tendientes a presentar en tiempo y

forma el presupuesto correspondiente al año 1999, y de obtener la aprobación
respective by the aforementioned Ministry.

c) Outline the guidelines that allow for the fastest possible completion of the
extremes contained in the sub-examine suggestion.

III) HUMAN RESOURCES DEPARTMENT

COMMENTS

1. There are no rotation programs for

personal

RECOMMENDATIONS

1. Establish a rotation plan in the areas

administrative.

COMPANY RESPONSE

1. It will be entrusted to the Human Resources Department to adopt the necessary measures to
start the respective analysis process, all of this with the aim of determining feasibility of
implement, as quickly as possible, measures that allow for compliance with the suggestion
in treatment.

IV. FINANCIAL DEPARTMENT - SALES AND ACCOUNTS SECTION

COLLECT

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COMMENTS

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1. There is no manual of standards and procedures for this sector; however, it is used.
the standard AF 003/94 related to collections management

2. The advertising files are not

folian.

3. New advertising orders with check deductions for those orders are accepted, no.
despite the existence of outstanding balances; when in reality they should be applied to the
previous balances.

RECOMMENDATIONS

1. Adopt the necessary precautions in order to draft a precise regulation on the

operation of the sector under analysis.

2. The concept of a file implies the compilation of documentation that must be

incorporated following an order that must be recorded through foliation.

3. It should include in the recommended standard in point 1 an instruction manual that contemplates
the authorization pathways for exceptional cases.

COMPANY RESPONSE

1/3 The implementation began during the course of the year 1997
Measures aimed at remedying the shortcomings under analysis regarding files related to
hiring of production work on behalf of and at the request of third parties. This decision has been
received in the Norm and procedures approved during the course of the year 1997 and that
find in force.

In terms of advertising and publicity files, the implementation of

similar measures to those mentioned in the previous paragraph, noting that it is found
in the process of developing the respective Standard, which will contain specific guidelines regarding
the subject is under examination.

V. BILLING SECTION

COMMENTS

1. The file of registration certificates with the DGI of the clients is incomplete.
Missing receipt of signed Form 576.
11
 RECOMMENDATIONS

1. Since the tax regulations require the filing of the registration certificate
In the various taxes, with monetary penalties for their omission, they must be enforced.
the case checks and complete the file.

COMPANY RESPONSE

1. During the course of the year 1998, the Billing area has begun the implementation.
of measures that will allow to comply with the suggestion in question.

VI. TAX AREA

COMMENTS

1. For the Company, the taxable event occurs with the issuance of the invoice even if it indicates
that the provision of the service was prior, this is justified for practical reasons given that
until I receive the invoice from the supplier with the certification of the advertising, it will not be issued
receipt by the Company.

2. The company issues internal credit notes and/or debit notes to adjust the
billing of the supplier to the advertising guidelines and consequently to the billing to the Client,
this creates differences in the taxable base according to the legislation of the Value Added Tax
Added.

RECOMMENDATIONS

1. and 2. Adopt the necessary measures aimed at complying with the regulations established by the
D.G.I.

COMPANY RESPONSE

1) Regarding this matter, it is worth noting that the Standard is in the process of being developed.
related to the contracting of advertising spaces on behalf of and for the account of Organizations
Clients, and from which guidelines will be established to streamline the task of
billing by TELAM, in such a way as to significantly reduce the period that
media between the provision of services and the billing of the same, by this Company.

2) The replacement of the documents mentioned in this point will be implemented shortly.
for documents that comply with the formalities required by R.G. D.G.I. 3419 in an orderly manner
12
manuals, referred to as 'Debit and/or Credit Notes - adjustments to suppliers'. Likewise, it
wants to leave

13
It is clarified that although the current procedure involves a formal breach of the Standard before
cited, this is not liable to generate substantial differences in the Value Added Tax
Added, whenever they are treated in the same way as credit notes.
y/o debit that suppliers must issue.

VII. DEPARTMENT OF GENERAL ACCOUNTING

1) The department does not have a Procedures Manual, nor an accounts manual.
countable and there is a lack of rules that establish, for example: activation criteria
of Use Goods

2) As of the date of our review, commissions are still pending settlement.

carried out in previous years, In addition, new amounts are assigned without settling the previous ones.
violating the rule to make the settlements within 48 hours.

RECOMMENDATIONS

1. Create a procedure manual that includes the registration mechanics.

of the specific operations of the activity.

2. Implement a strict policy with staff who do not comply with the submissions in
time and form.

COMPANY RESPONSE

1- Please refer to the terms stated when addressing the treatment of the
RECOMMENDATION No. 1 of Chapter II) "AUTHORIZATION, EXECUTION AND
OPERATION VERIFICATION.

2- In accordance with previously expressed concepts, it is worth noting that it is found in

process of developing the relevant standard, which will basically be aimed at outlining
procedures related to the request and approval of Advances for Expenses to be Justified,
agreed upon by agents of this Company based on the need to carry out commissions to the
inside the country or abroad, the deadlines for submitting the respective accounting and its
after approval, as well as the measures that must be taken in the event of absence
submission of the advances in question on time and in the proper form.

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 On the other hand, it is worth emphasizing the gradual and steady favorable evolution achieved.
starting from the year 1994, regarding the rendering of advances to be accounted for, being able in that sense
It is noteworthy that from Report No. 50/98 produced by the Internal Audit Unit, it follows
that the balances to be settled in the concept of advances amounted to the sum of:

$ 401,115.86 as of 31/08/94;
$ 237,202.86 as of 31/03/96
$ 122,058.08 as of 11/30/96; and
$ 117,712.08 as of 31/12/97.

3-B) ASPECTS ARISING DURING THE 1996 EXERCISE AUDIT

I. BILLING

COMMENTS

1. The Company does not invoice in many cases in the name of the legal entity or name and
client's last name as established by RG 3419 of the DGI but the name is used
commercial or fantasy.

Examples:

according to receipt number billed to the name of business name

leaf
[Link]
119 FC B55314 CHANNEL 9 [Link].83 TELEARTE S.A.
119 FC B55307 DIARY THE VOICE OF THE INTERIOR
INTERIOR S.A.
120 FC 55381 INDEPENDENCE RADIO BROADCASTER
LV 12 INDEPENDENCE SRL
122 FC 55488 RADIO LA RED RED, SKY BLUE AND WHITE
S.A.
125 FC 55652 CLARÍN DIARY GRAPHIC ART
ARGENTINE EDITORIAL
S.A.

2. There are differences between the billing database and its correlation with the database of
registration data and in the client's tax categorization. For example:

15
a) Cases with differences in categorization:

Fecha Folio Base Doc. Nª Fc. [Link]. Razón Social [Link]

7/8/96 125 Lº Sales B55639 20 [Link]. Cons.F. 30-5719837-5
Invoice Exempt from media secretary

7/8/96 125Lº Vtas B55641 20 Sales vs. Photographs. Consumption.

Invoice 20 Sec. Exempt means 30-5719837-5

7/8/96 125 Lº Sales B55640 20 Sales. Vs. Photos. Cons. F
Invoice 20 Secret. Exempt means 30-5719837-5
August 22, 1996 127 Lº Vtas
B55748 3365 [Link]. Cons. F
Invoice 3365 [Link]. exempt 30-54421333-0

b) Cases with differences in Tax ID number and/or business name

Date Folio Base doc Nª Invoice [Link] Company Name CUIT

1/8/96 118 Lª Ventas B55261 548 Marques R - 23-04316539-9
Invoice FM Bahia
548 Prod. Bahia Urquiza30-68517656-0
SRL
1/8/96 121 Lª Ventas B55412 369 Telefe 30-63652916-4
Invoice 369 Produfe S.A. 30-64470429-3
1/8/96 123 Lª Ventas B55547 279 M. de Ushuaia 30-54666243-4
Invoice 279 Gob. de T. Del 30-54666243-4
Fire

RECOMMENDATIONS

1- Invoice according to the legal status of the client, whether it is a business name or personal name.
and surname as it appears from the updated form 576.

2- Adopt the necessary measures aimed at unifying and updating the database.
of billing and registration.

COMPANY RESPONSE

16
1- During the course of the year 1998, the Billing area has begun its implementation.
of measures that will allow to fulfill the suggestion in question.

2- The case instructions will be provided in order to comply as soon as possible,

the suggestion that concerns us.

II. REGISTRATION

COMMENTS

1. It is necessary to detail in the VAT Sales Book for operations with final consumers the name and
last name or business name and/or CUIT and/or DNI for amounts greater than $1000 (according to article 19 inc.
1.1.2. of the RG 3419 of the DGI

Examples:

FC B 55639 folio 125 Sales Book

FC B 55640 page 125 Sales Book
FC B 55641 page 125 Sales Book

2. The justification of the effects of a subsequent control appears to be insufficient.

accounting entries regarding the supporting legend of them, (the receipts
generally lack support) especially in those non-routine ones and that
involve adjustments or reclassifications of accounts that, if not clearly supported
they hinder the validation of the same during the audit process.

RECOMMENDATIONS

1 Adopt the necessary measures aimed at complying with the standards provided by
DGI.

2. We reiterate the comment regarding the need to develop standards and procedures.
in the accounting area.

COMPANY RESPONSE

1 Due note has been taken of the matter in question, for the purpose of detailing in the I.V.A. book.
Sales operations with final consumers for amounts greater than $1,000.00.

17
2 It is necessary to clarify that in many cases the journal entries lack
documents that support them based on the primary premises of administrative economy, to
to reflect the adjustments in the respective account analyses that the Department of
General accounting is carried out and is also delivered in binders and by categories to the
General Audit of the Nation. From this, it follows that although the validation of some
adjustments involve the relevant consultation with the aforementioned Department, it remains of
manifesto in the verification of the balance composition presented in the analyses of
accounts. Notwithstanding the above, the comment in question will be observed hereafter.
effects of providing greater clarity to the entries made.

III. Tax and social security obligations

COMMENTS

1. The Society has paid overdue social security debts on several occasions
in the period under analysis, what it brings about the non-compliance with provisions
current laws, with possible sanctions, and puts the reduction of employer contributions at risk.

Examples:

period concept Expiration Paid import

5/96 contributions 7/6/96 23/1/97 220802.36
6/96 contributions 8/7/96 23/1/97 333880.40
7/96 contributions 6/8/96 23/1/97 216213.88
8/96 contributions 6/9/96 23/05/97 210532.53
11/96 contributions 9/12/96 4/01/97 211467,07
11/96 social work 9/12/97 4/01/97 108255.68

2. The society has paid tax obligations after the deadline, according to the
next detail:

a) Withholdings of the Income Tax

Example:

18
period concept paid expiration
11/96 payment on account 26/11/96 2/1/97

b) VAT withholdings.

Examples:

period concept paid expiration

11/96 payment on account 26/11/96 2/1/97
11/96 balance 15/12/96 2/1/97
12/96 payment on account 23/12/96 2/1/97
12/96 balance 13/1/97 23/1/97

c) Monthly VAT positions

position due paid

3/96 19/4/96 23/5/97
6/96 19/7/96 23/5/97
7/96 20/8/96 23/5/97
8/96 20/9/96 23/5/97
9/96 21/10/96 23/5/97
10/96 21/11/96 28/5/97
11/96 19/12/96 28/5/97
12/96 21/1/97 27/6/97

d) Moratorium Decree 316/95, which implied the expiration of the plan of

payments. Examples:

due payment paid

10 18/1/96 13/2/96
12 18/3/96 19/3/96
13 18/4/96 10/5/96
14 20/5/96 14/6/96

19
18 18/9/96 22/10/96
19 18/10/96 22/10/96
21 18/12/96 2/1/97
22 20/1/97 23/1/97

RECOMMENDATIONS

1. and 2. Adopt the necessary precautions in order to avoid the recurrence of situations such as
the mentioned ones, which imply non-compliance with the current legal provisions.

COMPANY RESPONSE

1 and 2The situations of delays in the fulfillment of tax obligations

the issues addressed in these comments were motivated by the difficult situation
economic-financial situation that the Company went through during the mentioned periods. From the
regularization made in the year 1997 of all social security debts and
overdue tax obligations, the Society makes and has made the payments of such obligations in
time and form.

IV. PURCHASES AND ACCOUNTS PAYABLE

COMMENTS

1. Adequate controls are not carried out for the payment of advances to
suppliers

Example:

Payment Order No. 38223 of 01/22/97 MLG & PARTNERS LLC

According to what is stated in said Payment Order,

paid: "Advance of invoices 15, 16, 17" from
that signature, on 01/23/97. The invoices presented in that payment order 'have an issue date
February 3rd and 4th, 1997

20
RECOMMENDATIONS

21
1. Carry out appropriate controls for the payment of advances to suppliers.

RESPONSE FROM THE COMPANY

Measures will be taken to prevent the occurrence of similar circumstances.

those that motivated the sub-examine suggestion, especially considering the need for
part of TELAM to satisfy the scope of the current regulations, being able to cite as an example
for example, the provisions of Law No. 24769.

V. HIRINGS

COMMENTS

From a sample of contracts for goods and services, the following have emerged
following aspects:

1. Cases of direct hiring were detected that corresponded to the amount

search and/or request a quote from at least three firms, according to what is indicated
the internal regulations of TELAM

examples:

a) Direct Hiring
Subject: Recording service for commercials and notes related to advertising
official. Period: 11/01/95 to 04/30/96
Awardee: Thales
Total amount: $ 36,300
.
b) Direct hiring
Object: Medical services
Perìodo: 09/09/95 al 1/8/96
Contractor: Science
SRL Monto total : $ 89100

RECOMMENDATIONS

22
1. Adopt the necessary precautions to avoid the repetition of situations like
the commented ones and frame the hiring within the current regulations.

COMPANY RESPONSE

In this regard, it is necessary to highlight the clear decision made by the

The direction of this company is to prevent the recurrence of similar events to those analyzed here.
way to fulfill the requirements set forth by Standard No. VS 2/94 in force at the
scope of TELAM, as well as any other suggestion or requirement that may be
formulated by the NATIONAL GENERAL AUDIT OFFICE and by the MONITORING OFFICE
NATIONAL GENERAL.

For the purpose of better provision, it is worth noting that in the matter of contracting services
doctors in question, it should be noted that once the contract signed with the firm has ended
Sciense SRL was arbitrated during the period that spans between the last quarter of 1996.
and in January 1997, measures aimed at carrying out the price contest
corresponding to the purposes of awarding the contract for the aforementioned services.

BUENOS AIRES, 8 de mayo de 1998

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