Solutions to improve poor financial function at pg company

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UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business DANG THI VY NGOC SOLUTIONS TO IMPROVE POOR FINANCIAL FUNCTION AT PG COMPANY MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2021 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business DANG THI VY NGOC SOLUTIONS TO IMPROVE POOR FINANCIAL FUNCTION AT PG COMPANY MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: DR DOAN ANH TUAN Ho Chi Minh City – Year 2021 Table of Contents Abstract Company overview 1.1 Industry overview 1.2 Company profile 1.3 Organization structure 1.4 Mission, Vision and Values 1.5 Accounting Department Symptoms 10 2.1 Negative cash flow in operating activities 10 2.2 Very long collection period 12 2.3 High debt ratio 14 Problem identification 15 3.1 Potential problems 15 3.1.1 Unclear sales objective 16 3.1.2 Recruiting issue 17 3.1.3 Poor financial function 18 3.2 Validating problems 19 3.2.1 Sales head’s perspectives 21 3.2.2 Human resource head and Recruiting manager’s perspectives 23 3.2.3 Chief accountant’s perspectives 24 3.2.4 Vice Director’s perspectives 24 3.3 The importance of main problem 25 Cause exploration 27 4.1 Potential causes 27 4.1.1 Lack of financial control 28 4.1.2 Unskilled employees 28 4.1.3 Lack of teamwork 29 4.1.4 Ineffective task allocation 29 4.2 Validating causes 30 Alternative solutions 31 5.1 Solution 1: Create budgeting process 32 5.2 Solution 2: Execute training programs 43 5.3 Outcome expectation and measurement 46 Supporting information 46 6.1 Interviewees’ Demographic 46 6.2 Interview Guide 47 Reference 49 Appendices 53 Appendix 1: Accounting Department’s internal information 53 Appendix 2: Transcript summary 54 List of abbreviations AR Accounts Receivable AP Accounts Payable BOD Board of directors CFO Chief finance officer CEO Chief Executive Officer CF Cash flow F&A Department Finance and Accounting Department HR Human resource KPI Key indicators performance PIC Person in charge P&L Profit and loss SBU Strategic business unit List of figures Figure PG's Organization Structure Figure PG's mission, vision and values Figure Accounting Department Structure 10 Figure Net cash provided by operating activities 11 Figure Comparation between PG and industry about collection period 13 Figure Dept ratio of PG and Industry 14 Figure PG’s sales performance (percentage) 22 Figure Project chart 34 Figure Format for bottom-up budgeting 37 Figure 10 Format for bottom-up profit & loss statement 41 Figure 11 Format for top-down budgeting 42 List of diagrams Diagram Initial cause and effect map of Accounting Department 16 Diagram Official cause and effect map of Accounting Department 27 Diagram Updated cause - effect map of Accounting Department 27 Diagram Fish bone analysis diagram of the poor finance function problem 31 Diagram Suggestions for dealing with validated causes 32 List of tables Table Cash Flow in operating activities 11 Table PG and Industry's collection period (days) 13 Table Dept ratio of PG company and Industry 14 Table PG's sales objectives dashboard 22 Table Roles and responsibilities of participants in budgeting plan 35 Table Project management plan to run the budgeting process 40 Table Plan to execute training program 45 Table Interviewees’ Demographic 47 Abstract In recent years, the board of directors of PG business has recognized that the firm is experiencing several financial management challenges This study was then carried out at PG, starting at data gathering and the discovery of three symptoms in PG's finance department: negative cash flow in operating activities, very long collection period and high debt ratio After gathering more evidence from literature, in-depth interviews, and internal data sources; the study discovered that the firm is now experiencing issues with poor financial function In the long term, this will pose numerous challenges in managing and expanding the business As a result, this research focuses on presenting the entire process of identifying symptoms, severe problems that need to be addressed in the company, and ultimately providing solutions to assist the organization in achieving more sustainable development Company overview 1.1 Industry overview Electronic products have progressively gained popularity in the Vietnamese market, which is diverse in categories, with numerous items of audio-visual equipment, entertainment, communication services, public services, jobs, or household electronics The variety of forms, product quality, origin, and pricing of these items provide customers with a wide range of options for selecting and satisfying their requirements Furthermore, the majority of people's economic lives have substantially improved, making access to hightech items no longer unique, and the introduction of new technologies has resulted in items that attract an increasing number of customers, increasing their purchasing power Major and big companies and corporations in this industry are Nguyen Kim Trading Joint Stock Company, The Gioi Di Dong, FPT, Tran Anh Digital World Joint Stock Company, TIE Joint Stock Company, etc The electronic products market in Vietnam is a fertile ground for manufacturers and distributors; and when there are many major, well-known distributors constantly extending the chain of stores, the rivalry is no longer only in pricing but also in the service offered to clients 1.2 Company profile PG Co., Ltd was established in 2007 in the field of civil electronics, car audio, cinema system and smart home system, Household Appliances and Kitchen Equipment PG is committed to deliver to customers a modern and convenient lifestyle with many highend quality products that promote efficiency and integrated designs originating from Italy, Turkey, Europe and the United States Products are represented and distributed by PG in Vietnam: Harman Kardon, JBL, JBL Pro, AKG, Wharfedale, TEAC, VV PG specializes in importing and distributing products for home audio equipment, supporting music devices for iPhone, iPod, iPad and car audio equipment In addition to distribute audio products, PG also operates in the field of electronics and household appliances with product lines such as Hitachi LED/ LCD TVs, washing machines, dryers, gas stoves, hoods, Ariston refrigerator PG's headquarter is located in Ho Chi Minh City and the company has many offices, agents and galleries throughout Vietnam PG owns a team of experienced staff and mission to always provide customers with the best quality speakers and headphones, as well as the best after-sales and customer care services The most important thing that distinguishes PG is always investing time in training its employees to ensure they are equipped with the best, most professional skills The company's next marketing strategy will focus more on customer experience, try to understand customers more and more to create demand and serve customers better and better With a system of stores and agents nationwide with enthusiastic and regularly trained staff, PG has quickly won the trust of customers and partners that are expressed by the number of Customers are constantly increasing in time Below is brief information about the company: • Good track record with 15 years in electronics distribution and 10 years in Home Appliances distribution • Product Brands: Ariston, Beko, Harman Kardon, JBL, Innity, AKG, Teac, Luxman, Wharfedale, Lexicon • Products Lines: White goods, Home Appliances, Home Audio and Visual, Car Audio, Lifestyles • Employees: Over 1300 staffs, experienced in both Sales and Technical • Headquarter is in Ho Chi Minh and 100 branches and dealers which is spreading nationwide 1.3 Organization structure Figure PG's Organization Structure Source: PG’s internal information The structure of PG is quite clear All activities of the company are mainly run by Mr D – General Director and Mr L - Deputy director The company has a large number of employees and the number is increasing in recent years for the purpose of developing and expanding market share Most employees at the management level have more than 7-yearexperience in electronic industry and over years working at PG Personnel management method of the company always aims to the following criteria: • 2-way communications • Operate effectively - Process information faster - Save time - Increase benefits • Information exchange and working environment, easy for employees Table Plan to execute training program No Course Objectives Action PIC Discussion among high-level managers about critical features of the current/ new system that needed to be trained for all employees Employees should be trained to be familiar with their work Simultaneously, instruct them on how to use a budgeting plan to improve the company's financial efficiency Resolve the issue of a shortage of qualified personnel and competent applications Acknowledge the significance of the training program and budgeting strategy to all divisions Hold a meeting to discuss the purpose of the training and how to get it started Assistant Raise the company's current developments and challenges for obtaining input from employees Management team to choose new software, such as AMIS or MISA Connect accounting software statistics and parameters into financial management Create a training program with a schedule and an approximate cost Obtain feedback on the program from Human Resource Management Determine the responsibilities of each department and how to implement the strategy, as well as the latest software for the F&A Department (used to Accounting Department) Outline the key content of the course that will provide both the trainer and the learners with the necessary information Request permission from the Director and CFO Ensure that the training curriculum is of high quality, and that employees, in particular, are able to use advanced technologies to add data and prepare the budget Jan Feb Mar May Before meeting with employees, summarize the key points List the challenges and difficulties that units face when there is no training program or budgeting strategy in place Furthermore, a meeting will be held to discuss with all staffs in order to obtain input from them, as well as collect all feedback from staffs The accountant identifies and measure the cost of purchasing new software, and the Director makes the final decision Show the basic steps for training the F&A Department and other supporting departments as required, then submit to HR for review and comment Assistant Employees' main roles must be defined in order to facilitate job execution and task completion in accordance with the relevant requirements The HR department creates a training schedule and submits it to the Director and other high-level management for acceptance and signature There are full contents in this plan such as: updating their main knowledge, addressing each employee's concerns, announcing qualified subjects and contents, making the budget, and adding notes such as time, place, process, Assistant, HR Director, Assistant, Chief Accountant Assistant, HR Director, Departmental leaders, Assistant, HR 45 Execution Examine the consistency of results to determine the quality of the obtained program Implementation based on the plan: step-by-step practice to complete the training program to improve employees' talents, awareness, and skills Evaluation of the training program results in order to sustain or change the direction of the entire business, specifically the F&A Department and person or unit in charge of training sections The training course will be conducted in accordance with the authorized schedule The person in charge of the training program reports the results to the Director and organizes a conference to go over the training lessons All individuals are requested to join the training Director, Department leaders, Assistant, HR 5.3 Outcome expectation and measurement Another critical aspect to consider in order to assist the firm in resolving the existing problem is to re-evaluate the plan based on the company's expectations and enhance through fresh and more upgraded strategies Here are some criteria that can assist management in conducting a review of the suggested implementation plan, designing a new radical alternative if necessary, and making future development plans 1) Align finance with the overall business and organizational goals 2) Centralize financial transaction processing to free up resources for commercial partnerships 3) Develop a single standard for end-to-end financial procedures 4) Establish strict process governance 5) Apply finance-specific organizational development strategies 6) Ensure that financial professionals are equipped with the essential new skills to flourish 7) Develop a solid bench of financial executives 8) Provide company self-service tools 9) Use digital technologies to automate tedious processes and make analytics easier 10) Keep track of and benchmark performance Supporting information 6.1 Interviewees’ Demographic 46 Table Interviewees’ Demographic Name Gender Mr L Male Ms C Female Ms H Female Mr R Male Ms S Female Position Vice Director Chief accountant HR head Recruiting manager Sales and marketing director Year of experience Year of service 15 years 10 years 13 years years years years years years 10 years years Interview date January 25, 2021 January 25, 2021 January 25, 2021 January 25, 2021 January 25, 2021 Interview place PG office and phone PG office PG office PG office PG office 6.2 Interview Guide Introduction - Greetings and introduction - Clarify the intent of the interview and ensure the conversation is confidential - Full name, job title and background of interviewees Warm-up questions How many years have you worked in this industry (working experience)? How long have you worked at PG? What are your impressions of working at PG? What you think about your work at PG? (Happiness or dissatisfaction, satisfaction or non-satisfaction, effectiveness or non-effectiveness, and so on.) What is the reason for this? Your overall impression of present situation How you feel about your roles in general Probe: May you give me a few examples of your work experience? Prompt: Workplace, supervisors and other workers, commissions, compensation, job prospects, work assignments, and so on Main body of interview What are your thoughts on the PG and Account Department's recent performance? Why is it successful or unsuccessful? What parts of the enterprise should be improved or changed? What about (prompt) in your office? Prompts: Productivity, task distribution, fairness, connectivity, and appreciation 47 What are your thoughts on the company's cash flow/ very long collection period/ high dept ratio? Why is it negative? Prompt: Cash flow management, finance control When will the reports related to financial management is implemented? What effect these factors have on the company's performance? 10 Does the company have any difficulties in recruitment? Please share more details 11 What solutions you think it can help company to improve current situation? 12 Do you have something else you'd like to say? Thank you and close the interview 48 Reference Acharya VV, Almeida H, Campello M Is cash negative debt? 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Explaining labour productivity effects from schooling and training International Journal of Manpower 2001;22(1):158 33 Acton T, Golden W Training the knowledge worker: A descriptive study of training practices in Irish software companies Journal of European Industrial Training 2003;27(2-4):137-146 34 Shenge NA, PhD Training Evaluation: Process, Benefits, and Issues Ife Psychologia 2014 03;22(1):50-58 35 Argyris C Integrating the Individual and the Organization Routledge 2017 36 Ahmad K Z., Bakar R A The association between training and organizational commitment among white-collar workers in Malaysia International Journal of Training and Development 2003, 7(3), 166-185 51 37 Chew J, Christopher C.A Chan Human resource practices, organizational commitment and intention to stay International Journal of Manpower 2008;29(6):503-522 52 Appendices Appendix 1: Accounting Department’s internal information Currency: million VND 2017 Net cash provided by operating activities 2018 (750,633) 2019 (6,995,558) (38,736,131) 2020 (175,855,482) Data 1: Net cash provided by operating activities from 2017 to 2020 Index (days) PG 2018 2019 2020 282.7 264.9 281.1 Industry 74.5 37.0 41.8 Data 2: Collection period from 2018 to 2020 Index 2018 2019 2020 Dept ratio 76% 74% 74% Industry 61% 47% 45% Data 3: Dept ratio from 2018 to 2020 Source: Internal report 53 Appendix 2: Transcript summary Question and Answer Coding Full name, job position and job description of interviewees Category Job Position Mr L: My name is L and I am a Vice Director Vice Director Ms C: My name is C and I am a Chief accountant of Accounting department Chief accountant Ms H: My name is H and I am a Human resource head HR head Mr R: My name is R and I am a recruiting manager in Human resource management department Recruiting manager Ms S: My name is S and I am a Sales and marketing director Sales and Marketing director Q1 & Q2: How many years have you worked in this industry (working Job tenure experience)? How long have you worked at PG? Mr L: 15-year experience and 10 years working for PG Ms C: I have been working as accountant for years before moving to PG since early 2013 I have 7-year experience in total at PG Ms H: I have worked here since 2017 so I have been working at PG for years and I have –year experience Mr R: I have 4-year experience in recruiting function at PG Ms S: 10 years and years working for PG Employees’ Q3: What are your feelings of working at PG? What you think about your work at PG? Mr L: My work is difficult and complicated because I have many feelings and Difficult, responsibilities and accountability; as a result, I often feel overburdened complicated, and unable to concentrate on the most important tasks overburdened viewpoints Ms C: Right now, my work is causing me a lot of discomfort Many experienced workers are leaving their positions at the moment, so the work of the discomfort, remaining employees is very difficult But, since they are interns, I not difficult, feel comfortable allowing them to handle As a result, the remaining senior stressed staff must perform other people's jobs while trying to their own They are probably inexperienced with certain assignments and are feeling stressed Ms H: Actually, the human resource management job is relatively simple, all Simple, procedures and processes have been done well by the system and my difficult, subordinates The most difficult thing and always facing the most recruitment challenges is probably the recruitment segment, it is affected by many segment, it is external and internal factors, so the HR department is not in control affected by many 54 external and internal factors Mr R: I feel the job here is good, the working environment is favorable and I am quite attached to the team Everyone on the team regularly helps each other The work itself has many obstacles, but Ms H has always supported me since she joined the company Good, favorable, attached, supported Ms S: The sales consultant team is considered the key human resource that brings in revenue for the company, so as a Sales head, I have a lot of pressure Sometimes I just have to meet the expected sales targets set by the company, that is to promote the sales team, and I also have to understand whether my employees are facing any difficulties or obstacles Pressure, don't have enough time Although my title is the director, the main task is to manage the sales team, but sometimes the employee does not have enough sales, then I sell products by myself I manage the whole marketing segment, so sometimes I don't have enough time to deal with both sides Q4: What are your thoughts on the PG and Account Department's recent Performance performance? Mr L: In general, the operation of the Company in recent years is relatively stable, except for the period 2020 up to now, it is affected by Covid so relatively stable, profit will be affected It seems to have bad business situation The bad business company is also facing difficulties in financial management, especially situation, cash During regular management meetings, this issue is also receiving difficulties in attention from management Of course, this is not the accounting financial department's fault, it is affected by many factors In which, it can be management, debt mentioned that the company's debt collection is not good, leading to the collection, Company lack of cash to reinvest and have to borrow The accounting lack of cash department does not have many employees and so far, the accounting department focuses on recording and storing data, not specializing in financial management Ms C: Through the recording of company data, I know quite well the company's operations Even though company revenue has increased, its profits have negative cash flow, declined in 2020 As you can clearly see in the cash flow report, the employees are company has a consecutive negative cash flow from operating for years retired As I have shared with you, there is a time when employees are retired so the rest of them have to handle other people's work, so it can partly affect the operation of the department Ms H: Apart from the daily workload, I believe the efficiency is a little weaker than in the past so several workers have retired and some lack experience efficiency is a little The company generally has no problems in the short term However, in weaker, lack the near future, the company also has big projects If the current situation experience is, the company may have to delay project implementation Q5: What are your thoughts on the company's cash flow? Why is it negative? Cash Flow 55 Mr L: As shared with you before, company management team is paying negative cash flow, attention to the negative cash flow In my opinion, maybe the reason that low sales, the company has a bad business situation is not only because the sales team not operating is not operating effectively, but also because the marketing department is effectively, weak The current marketing department of the company lacks in-depth marketing knowledge and has not kept up with the market about methods to bring department is weak, products to consumers This has made the company lag behind other lacks in-depth competitors Currently, talking about the marketing team, up to now the knowledge management Problem Reason company is looking for personnel with better skills, but this audience on the market seems scarce, or maybe Companies need to pay higher wages to attract human resources This needs to be understood more carefully with the HR department about the process, recruitment method, finding potential candidates, whether the salary of the HR department is in line with market benchmarks, is attractive enough for potential candidate yet Moreover, if the current employees are not working effectively, what plans does the company have to train, reevaluate Ms C: In terms of accounting, when it comes to negative cash flow, I simply sales are low, think the company is earning less than it spends This means the company's spending too much, sales are low or the company is spending too much Personally, this is due staff has not worked to both problems Low sales revenue is because the consulting staff has effectively, too not worked effectively, the company has hired many employees, but the many tasks at the business situation has not increased sharply while the company has to pay same time, not have more for staff hiring Part of the reason is also because the consultants have clearly work to too many tasks at the same time, they not have division of work allocation and and detailed goals detailed goals Ms S: During the monthly meetings between management, I am also aware that the company's cash flow is negative, as the Sales Director, I also agree that recently, has been affected generally by Covid pandemic on the whole general situation, market, so the company's sales have decreased compared to the previous months and the same period of previous years However, it is not because low rate of that the sales consultant team has not worked effectively PG Company resignation or not only focuses on the wholesale segment, selling by order, but also dissatisfaction selling directly at the storefront, competing with The Gioi Di Dong, electronic brands Therefore, this can be considered as the general situation of the electronics and household industries In the past the company was still operating the same way, the consulting staff did many different jobs to optimize the use of personnel for the company, and no problem happened In addition, the consulting staff also has low rate of resignation or dissatisfaction in the company because they have to handle many jobs at the same time Ms H: The negative cash flow may come from bad business due to the recent appearance of the Covid epidemic, which has caused difficulties for the sales team 56 Q6: What are your thoughts on the data showing that company has long Long collection collection period/ high debt ratio? period Mr L: In addition to the reason that the business situation is not good, leading to low sales volume, at the same time, with sold products, customers will customers pay late, pay late Late payments here have many causes Part of it can be said that debt the debt collection policy of the Company is not strict, there is no high policy, flexible, commitment to partners as well as customers In case if the customer pays not the money not on time, the company is flexible, can extend the debt for debt collection, wholesale customers, and has had a long-term relationship with the not allocate work company The second reason can be mentioned, I think that the Company properly High debt ratio collection standardized has not developed a standardized debt collection process Sometimes, the negotiation of the payment time, the time of receiving goods is mainly for the consultant to discuss with the head of the department and then make it depending on the customer and the potential level of the order Finally, because the company does not allocate work properly, the sales teams are doing all tasks related to consulting, negotiating and preparing the contract, and finally, the person who monitors the payment process and reminds customers complete payment As this happens in a company, it will gradually create a long collection period Regarding the problem of high debt due to support for short-term money shortage, the company has increased its debt in recent years Ms C: One of the things that I see is because company has to import more import more inventories than necessary to get a preferential price without having inventories, business and financial plan This is also one of the main reasons why the without company has a high debt ratio due to lack of cash business having and financial plan Q7: When will the reports related to financial management is Financial implemented? Report Mr L: The accounting department only prepares financial statements for the company when requested by Mr D - General Director, and these numbers By requested are usually limited to financial statements, no further analysis yet Ms C: Since the PG's accounting department does not have a financial workforce, I will delegate tasks based on each employee's ability and ad-hoc tasks experience, or I will perform those tasks myself This assignment is disorganized, and all financial assessments are treated as ad-hoc tasks Q8: What solutions you think it can help company to improve current Solution situation? Mr L: One of the options that I have come to think of is to increase the ability increase the ability to recover debt from customers, which means to shorten the time that to recover debt from customers have to pay debts with PG However, fast collection period may customers, not always be beneficial as it simply means the company has strict the payment rules The rules may work for some customers However, stricter management collection requirements may cause some customers to look for other control of corporate financial and companies with the same goods or services but with more flexible payment 57 rules or a better payment term From my perspectives, the financial management and control of corporate is more important to take action as soon as possible, which will be essential for the company in the coming years and long-term future Ms C: I believe that if the company builds and develops a separate financial function for the company, it will bring many long-term benefits to the builds and develops company and solve most of the money problems the company is facing a separate financial Of course, it will be difficult and effortless in the beginning to establish function and build the process, but it will be a solid foundation for the company to have stronger growth steps This absolutely can be done if the company management team has focused on internal controlling Ms H: Since Ms C does not have total control over the workload, a separate finance department operation is needed for PG's current scale a separate finance Furthermore, she lacks the requisite experience to provide the organization department with the required financial analysis and judgement The lack of a financial operation reporting function in the business gives Ms C, as well as the entire accounting department, a great deal of difficulty in recording and spending Ms S: If this issue related financial management is solved, the business will get financial planning, greater managerial advantages because financial planning for the firm is avoid crucial It not only helps the business avoid unnecessary risks, but it also risks unnecessary helps the business have a defined roadmap and goals that are supported by data Q9: Does the company have any difficulties in recruitment? Please share Recruitment more details Ms H: As I said before, the company also has many difficulties in recruiting company's However, I think the problem is not only with the recruitment team but operational because of the company's operational structure In terms of recruitment, it structure, includes a lot of impact factors If the company wants to recruit high- difficult to manage quality and highly skilled employees, it must also pay commensurate salary and staff benefits, professional training courses, career development orientation, If there is only limited funding for a position and the manager does not have plans, not present projects, and requirements to develop the staff, the HR department is also very difficult to manage all without cooperation from others Mr R: The difficulty in recruiting can be due to the company’s policy, the current recruitment department is only in charge of about 60% of the recruitment process, the rest relied on the specialized department that will a policy, be consider and select potential candidates Therefore, to deal with this recruitment process problem, it is necessary to have cooperation from other teams ” Ms S: The company needs to focus more on finding potential candidates for key positions of the company If the company does have problems with 58 recruitment or the hiring process, this is extremely important to address hiring process, low However, regarding the problem of low-skilled human resources, the skilled HR, company can completely focus on scheduling training sessions for existing scheduling training workers, who already have expertise and understanding of the organization Q10: What effect these factors have on the company's performance? Impact Mr L: The two biggest impacts that I share are that the company's ability to invest in the future will be negatively affected In addition, if the negative invest in the future, cash flow situation persists, the company will find it difficult to pay off its difficult to pay off debts its debts Ms C: With professional knowledge, I find that the problems facing the company will lead to many serious consequences that can be said to be the most dangerous of bankruptcy This is because when all three things are: Bankruptcy, the firm's cash flow is negative, the firm has a high debt ratio, and its high ability to recover debt is low; simultaneously, the company will face high payment, risks in payment, putting pressure on the cash flow Not only is it difficult on the cash flow, for a company to invest in new developments, but it can also easily fall invest into bankruptcy developments risks in pressure in new 59 ... of financial function is to ensure that all financial records are accurate and up to date If managers use inaccurate and outdated information, they can make bad decisions Financial information... the company not fall into high debt relative to its existing assets Creditors would charge high interest rates to compensate for the increased company risk, making it increasingly difficult to attract... of financial function at PG The current director of the accounting department can hardly complete all the work related to finance PG' s Deputy Director agreed that the recruitment issue and financial
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