SYNOPSIS
AUDITOR GENERAL'S REPORT
FOR THE YEAR
2011
ON THE AUDIT OF THE FEDERAL GOVERNMENT'S
FINANCIAL STATEMENT, FINANCIAL MANAGEMENT, ACTIVITIES OF
THE FEDERAL MINISTRIES/DEPARTMENTS AND MANAGEMENT
OF THE GOVERNMENT COMPANIES
NATIONAL AUDIT DEPARTMENT
MALAYSIA
ii
SYNOPSIS
AUDITOR GENERAL’S REPORT
FOR THE YEAR 2011
ON THE AUDIT OF THE FEDERAL
GOVERNMENT’S FINANCIAL STATEMENT,
FINANCIAL MANAGEMENT, ACTIVITIES OF
THE FEDERAL MINISTRIES/DEPARTMENTS
AND MANAGEMENT OF THE GOVERNMENT
COMPANIES
NATIONAL AUDIT DEPARTMENT
MALAYSIA
ii
CONTENTS
iv
CONTENTS
PAGE
CONTENTS
v
SECTION I
THE FEDERAL GOVERNMENT’S FINANCIAL STATEMENT AND
FINANCIAL MANAGEMENT OF THE FEDERAL
MINISTRIES/DEPARTMENTS
7
PREFACE
Synopsis
PART I - Certification Of The Federal Government’s Financial Statement
For The Year Ended 31 December 2011
13
PART II - Financial Management Of The Federal Government
- Overall Financial Management Performance
- Financial Management Of The Federal Ministries/Departments
13
13
13
POSTSCRIPT
17
SECTION II
ACTIVITIES OF THE FEDERAL MINISTRIES/DEPARTMENTS AND
MANAGEMENT OF THE GOVERNMENT COMPANIES
25
PREFACE
Synopsis
PART I - Implementation Of Activities By The Federal Ministries/Departments
29
PRIME MINISTER’S DEPARTMENT
Legal Affairs Division
Malaysia Department of Insolvency
1. Management Of Bankruptcy And Company Winding Up Cases
29
Federal Court Chief Registrar’s Office
2. Maintenance Of The Kuala Lumpur Court Complex
30
Public Private Partnership Unit
3. Management Of Tourism Development At Corridor Economic Region
31
v
MINISTRY OF FINANCE
Housing Loan Management Division
4.
32
Management Of Housing Loan
Inland Revenue Board Of Malaysia
5.
Management Of Information On Fees And Commissions Recipients
6.
Management On Income Tax Of Property Owners
7.
Management Of Desk Audit Activity At The Non-Resident Branch
8.
Management On Tax Activity For Individuals With Business Income
32
33
34
35
Royal Malaysian Customs Department
9.
Management Of Import Duties Assessment
10. Management Of Quarters
11. Procurement Of Working Tools For Enforcement Activities
12. Management Of Seized And Forfeited Goods
36
37
37
39
MINISTRY OF AGRICULTURE AND AGRO-BASED INDUSTRY
13. Management Of Parliamentary Area Agriculture Project
14. Management Of Rice Subsidies To BERNAS And Private Manufacturers
15. Management Of The Seaweed Industry Development
16. Permanent Food Production Park Programme
39
40
41
42
MINISTRY OF RURAL AND REGIONAL DEVELOPMENT
17. Agropolitan Project Under Rural Quantum Leap Programme
18. Construction And Upgrading Of Rural Road Projects In Sarawak
43
44
MINISTRY OF NATURAL RESOURCES AND ENVIRONMENT
Department Of Irrigation And Drainage Malaysia
19. Management Of Dam Operations
20. Management Of Urban Drainage Project
45
46
MINISTRY OF INTERNATIONAL TRADE AND INDUSTRY
21. Student Entrepreneurship Programme
48
MINISTRY OF WORKS
22. The Construction Of Sultan Yahya Petra Second Bridge, Kota Bahru,
Kelantan
23. Management Of The Registration Of Contractors By The Contractor
Service Centre
48
MINISTRY OF TRANSPORT
24. Contract Administration
25. Electrified Double Track Project Between Ipoh And Padang Besar
26. Electrified Double Track Project Between Seremban And Gemas
50
51
52
MINISTRY OF SCIENCE, TECHNOLOGY AND INNOVATION
27. Technology Application Programme For Community
(TAPMOSTI@COMMUNITY)
53
The Malaysian Meteorological Department
28. The Construction Of Quarters, Stations And Offices
54
vi
49
MINISTRY OF TOURISM
29. Management Of Providing/Upgrading Tourism Facilities Programme
30. Upgrading Of Penang Hill Railway Project, Penang
55
56
MINISTRY OF FEDERAL TERRITORIES AND URBAN WELLBEING
Kuala Lumpur City Hall
31. Management Of Integrated Transport Information System Project
57
MINISTRY OF EDUCATION MALAYSIA
32. Solar Hybrid System Project For Rural Schools
33. Management Of Quarters
34. Procurement Of Equipment For Vocational Subjects At
Technical/Vocational Secondary Schools
35. Management of Cooked Food Supply To Boarding Schools,
Technical/Vocational Secondary Schools And Government Assisted
Religious Schools
MINISTRY OF HEALTH MALAYSIA
36. Management Of Medical And Non Medical Supplies
37. Registration, Licensing And Enforcement Activity Of Pharmaceutical
Product
38. Management Of Hospital Equipment
39. Construction Project Of The Kluang Hospital, Johor
40. Linen And Laundry Service Management
41. Maintenance Services Of Hospital Information System
42. Management Of Flying Doctor Service Programme In The State Of Sarawak
58
59
61
61
62
63
64
65
66
67
68
MINISTRY OF HUMAN RESOURCES
Manpower Department
43. Construction Management And Equipment Procurement At Advance
Technology Training Centre
69
MINISTRY OF INFORMATION COMMUNICATION AND CULTURE
National Department Of Heritage
44. Conservation And Preservation Of Heritage Programme
70
MINISTRY OF WOMEN, FAMILY AND COMMUNITY DEVELOPMENT
Department Of Social Welfare
45. Social Assistance Programme
71
MINISTRY OF HIGHER EDUCATION
46. Academic Training Scheme For Institution of Higher Education
71
MINISTRY OF DEFENCE
47. Married Quarters Facilities For Malaysian Armed Forces
72
National Service Training Department
48. Management Of National Service Training Programme
73
vii
MINISTRY OF HOME AFFAIRS
49. Construction And Management Of Johor Ministry Of Home Affairs
Complex
74
Anti-Smuggling Unit
50. Management Of Enforcement Activities
75
Royal Malaysian Police Force
51. The Management Of Undeveloped Land
52. Construction Of The Marine Police Base Lahad Datu, Sabah
76
76
Department Of Civil Defence, Malaysia
53. Management Of Emergency Relief Equipment Procurement
78
PART II - Management Of The Government Companies
54. Institut Terjemahan Dan Buku Malaysia
55. SIRIM Berhad
56. Pengurusan Aset Air Berhad
57. Rangkaian Pengangkutan Integrasi Deras Sdn. Bhd.
58. UDA Holdings Berhad
59. Malaysia International Franchise Sdn. Bhd.
60. Indah Water Konsortium Sdn. Bhd.
78
79
80
81
82
83
83
POSTSCRIPT
87
viii
SECTION I
1
2
SYNOPSIS
AUDITOR GENERAL’S REPORT
FOR THE YEAR 2011
AUDITOR GENERAL’S REPORT 2011
ON THE FEDERAL GOVERNMENT’S
FINANCIAL STATEMENT AND
FINANCIAL MANAGEMENT OF
THE FEDERAL MINISTRIES/DEPARTMENTS
NATIONAL AUDIT DEPARTMENT
MALAYSIA
5
6
PREFACE
7
8
PREFACE
1.
Articles 106 and 107 of the Federal Constitution and the Audit Act 1957 require the
Auditor General to audit the Federal Government’s Financial Statement, financial
management, activities of the Ministries/Departments as well as management of the
Federal Government companies and submit his reports to His Majesty, Seri Paduka
Baginda Yang di-Pertuan Agong and obtain his assent before tabling them in
Parliament. To fulfil these responsibilities, the National Audit Department needs to carry
out 4 types of audit as follows:
1.1.
Attestation Audit - to give an opinion as to whether the Federal Government’s
Financial Statement for the year concerned shows a true and fair view as well as its
accounting records are maintained properly and kept up to date.
1.2.
Compliance Audit - to evaluate whether the financial management of the
Federal Ministries/Departments is in accordance with relevant financial laws and
regulations.
1.3.
Performance Audit - to evaluate whether Federal Government’s
activities/programmes/projects have been carried out efficiently, economically and
achieved its desired objectives/goals.
1.4.
Government Companies’ Management Audit - to evaluate whether the
Federal Government companies have been managed in a proper manner.
2.
My report on the Financial Statement and Financial Management of the Federal
Government’s Ministries/Departments for the Year 2011 consists of the following:
Part I
:
Certification Of The Federal Government’s Financial
Statement For The Year Ended 31 December 2011
Part II
:
Financial Management Of The Federal Government
Part III
:
National Audit Department’s Involvement In
Various
Activities
Towards
Enhancing
Accountability Of Public Financial Management
Part IV
:
General Matters
7
3.
Audit on the Federal Government’s Financial Statement for the Year 2011
revealed that the Statement as a whole reflected a true and fair view on the financial
position of the Federal Government as at 31 December 2011, its operational income
and cash flow for the year concerned as well as its accounting records were being
maintained properly and kept up to date. As for financial management, audit findings
revealed that several Ministries and Departments still did not follow financial regulations
fully. Among others, these weaknesses were due to insufficient manpower, lack of
training in financial management, inadequate supervision and lax in monitoring.
4.
All the matters reported in this report
Heads of Department for their confirmation.
several approaches to help the Federal
improve their financial management. Among
as follows:
had been brought to the attention of the
The National Audit Department also took
Government’s Ministries/Departments to
the approaches that had been taken were
4.1.
Implementing a rating system based on Accountability Index (AI). Through
this rating system, marks will be given for compliance with financial regulations for 6
main elements. These elements are management control, budgetary control,
receipts control, expenditure control, management of trust funds and deposits as
well as management of assets and stores. The Federal Ministries/Departments
which have been rated as excellent become role models. This will motivate others to
diligently improve and enhance their financial management.
4.2.
Treasury Instructions require all Heads of Ministry/Department to ensure that
responsible officers safeguard public money, stamps or other valuable items in
safety boxes, vaults, cash boxes or other receptacles. They must ensure that
records kept are complete, up to date and periodically checked by senior officers. In
order to ascertain to what extent this has been complied with, the National Audit
Department had also carried out surprise checks in 301 Federal offices throughout
the country.
4.3.
The National Audit Department also continued to implement the Adoption
Programme which was introduced in 2003. Under this programme, several
Government offices which had been identified as being weak in financial
management were selected and given advice to assist them in rectifying
weaknesses especially in maintenance of accounting records. In 2011, the National
Audit Department carried out the Adoption Programme in 11 Federal offices across
the country. Generally, financial management at these offices had improved after
being given guidance and training.
4.4.
The National Audit Department continued to be involved in the evaluation of
the performance of Premier Grade Officers on financial management as part of their
confirmation exercise. A total of 60 Heads of Department were evaluated from
January to April 2011. These evaluations have indirectly contributed towards the
8
enhancement of the financial management as promotion of Heads of Department
would only be considered by the Public Service Department after the National Audit
Department confirmed that corrective actions on the weaknesses raised had been
taken by the officers.
5.
I would like to express my thanks to all the officers in the various Federal
Ministries/Departments who have given their full cooperation to my officers during the
audit. I would also like to record my appreciation and thanks to my officers who have
shown total commitment and worked diligently to complete this report.
( TAN SRI DATO’ SETIA HAJI AMBRIN BIN BUANG )
Auditor General of Malaysia
Putrajaya
12 June 2012
9
10
SYNOPSIS
11
12
SYNOPSIS
PART I
-
CERTIFICATION OF THE FEDERAL GOVERNMENT’S FINANCIAL
STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2011
1.
The Federal Government’s Financial Statement for the year ended 31 December
2011 as a whole reflected a true and fair view of the financial position of the Federal
Government and the accounting records were also properly maintained and kept up-todate.
PART II
-
FINANCIAL MANAGEMENT OF THE FEDERAL GOVERNMENT
Overall Financial Management Performance
2.
For the year 2011, the Federal Government received revenue totalling
RM185.42 billion, which was an increase of RM25.77 billion (16.1%) as compared to
RM159.65 billion for the year 2010. This was the highest income in 5 years since 2007.
The Inland Revenue Board of Malaysia alone managed to collect revenue of RM109.61
billion in 2011, which was an increase of 26.7% as compared to RM86.50 billion in
2010. In the meantime, the Royal Malaysian Customs Department had also successfully
collected revenue totalling RM30.38 billion in 2011, which showed an increase of 7.9%
as compared to RM28.15 billion in 2010. In the same year, the Government had
approved allocation of operating expenditure amounting to RM177.98 billion, which was
the highest approved allocation in 5 years. However, the allocation was insufficient to
cover the operating expenses amounting to RM182.59 billion. On 30 May 2012, an
additional allocation was approved by the Parliament to cover the deficit. As for the
development expenditure, Federal Ministries/Departments had spent RM46.42 billion
(93.9%) out of RM49.42 billion of the approved allocation.
Financial Management Of The Federal Ministries And Departments
3.
The National Audit Department had audited 25 Federal Ministries and 42
Federal Departments in 2011 in order to ascertain whether their financial management
was in accordance with established laws and financial regulations. Audit findings
revealed that the overall financial performance at Ministries/Departments’ level for 2011
had improved as compared to 2010 and previous years. In 2011, the performance of 19
Ministries and 21 Departments in their financial management was rated as excellent,
which was an increase of 2 Ministries (11.8%) and 8 Departments (61.5%) as compared
to 17 Ministries and 13 Departments in 2010. On the other hand, 6 Ministries and 20
Departments were rated as good and one Department was rated as average. Besides
13
that, the Headquarters and 14 state branches of the Royal Malaysian Police, as well as
14 Malaysian Missions Overseas under the Ministry of Foreign Affairs were also
assessed.
4.
As required under the Treasury Instructions, all Controlling Officers/Heads of
Department must ensure that the responsible officers safeguard public money, stamps
or other valuable of any kind in safety boxes, vaults, cash boxes or other receptacles.
They must carry out periodic inspections and maintain complete and updated records.
In order to ensure that such duties were carried out by the Controlling Officers/Heads of
Department, the National Audit Department had carried out surprise inspections in 301
Federal Departments/Offices at state and district levels. Audit findings revealed that
there were some instances where public money and other valuable items were not kept
safely, delays in banking-in collections and cash balances in hand differed from records.
The report on the findings had been submitted to the relevant heads of department/state
for further action.
5.
Besides conducting mandatory audit as provided under the law, the National
Audit Department also implemented the Adoption Programme and carried out special
evaluation on the financial management performance of Premier Grade Officers in
various Ministries/Departments/Agencies. In 2011, the National Audit Department had
carried out the Adoption Programme at 11 Federal Offices whereas from January 2011
to April 2012, a total of 60 Premier Grade Officers had been evaluated.
14
POSTSCRIPT
15
16
POSTSCRIPT
In general, the financial management of Ministries/Departments in 2011 showed a better
performance as compared to 2010. This was evident with 19 Ministries being rated as
excellent in 2011 as compared to 17 Ministries in 2010. The financial management at
the Departments’ level was also very encouraging with 21 Departments being rated as
excellent as compared to 13 Departments in 2010. However, such performance could
still be further enhanced if the Controlling Officers/Heads of Department not only take
action to rectify the weaknesses as highlighted by Audit but also take preventive actions
to ensure that the same weaknesses do not recur. With regard to this, the followings are
recommended to further strengthen the performance of financial management:
a. Controlling Officers/Heads of Department should conduct a comprehensive
check to determine whether the weaknesses highlighted by Audit also occur in
other areas and thereafter take corrective actions since audits conducted by the
National Audit Department are based on samples and specific scopes.
b. Ministries/Departments should enhance the effectiveness of Internal Audit Units
(UAD). Among others, they should ensure that the UAD staff get sufficient
training and guidance, prepare the annual audit plan so that auditing could be
carried out according to priorities, evaluate objectively and independently not
only on internal controls but also on risk management and organizational
governance, report on significant findings as well as giving recommendations
that give impact to the organization.
c. In order to enable issues highlighted by Audit to be discussed with greater focus,
Audit Committees should be set up in all Ministries in accordance with Treasury
Secretary General’s Directive dated 5 May 2009 requiring corrective and
preventive actions to be taken. The Audit Committee should report the results of
its discussion to the Financial Management and Accounts Committee chaired by
the Controlling Officer.
d. In order to further improve financial management, the involvement of Controlling
Officers/Heads of Department should be increased. They should be involved
hands-on on financial matters.
e. Secretary Generals/Heads of Department should chair every Exit Conference
together with the officers from the National Audit Department so that they could
know Audit issues beforehand and urgently take positive actions apart from
making improvements.
17
f.
In the implementation of eSPKB, the payment transactions are done at
Responsibility Centres and the supporting documents are kept at the respective
offices. In order to ensure that payment is done properly, supported by sufficient
documents and approved by authorised officers, the Accountant General
Department needs to ensure that its Inspectorate Unit carries out inspection on
Responsibility Centres as planned.
g. All Department’s policies, instructions and delegation of powers should be done
in written form so that they are more transparent and accountable. The
Department’s Client Charter should be reviewed and updated constantly so that
services are delivered as promised.
h. Heads of Department should establish a check and balance system, supervise
closely and conduct surprise checks, conduct periodic assessment on skills and
capabilities of officers and give training to officers who are involved with financial
management so as to improve their efficiency. This is to avoid officers who are
less experienced and skilled from using their discretion when making decisions.
i.
Records on asset and inventory should always be updated by the
Ministries/Departments in preparation for the Federal Government to move
towards accrual accounting in 2015.
j.
Impose surcharge on those who failed to collect revenue/make improper
payment. Surcharge should also be imposed on Heads of Department/Division
for failing to take action against their staff who failed to carry out their
responsibilities.
National Audit Department
Malaysia
Putrajaya
12 June 2012
18
SECTION II
19
20
SYNOPSIS
AUDITOR GENERAL’S REPORT
FOR THE YEAR 2011
ON ACTIVITIES OF THE FEDERAL
MINISTRIES/DEPARTMENTS AND
MANAGEMENT OF THE GOVERNMENT
COMPANIES
NATIONAL AUDIT DEPARTMENT
MALAYSIA
21
22
PREFACE
23
24
PREFACE
1.
Articles 106 and 107 of the Federal Constitution require the Auditor General to
audit the Federal Government’s Financial Statement, financial management, activities
as well as management of Federal Government Companies and submit his reports to
His Majesty, Seri Paduka Baginda Yang di-Pertuan Agong and obtain his assent before
tabling them in Parliament. To fulfil these responsibilities, the National Audit Department
needs to carry out 4 types of audit as follows:
1.1.
Attestation Audit - to give an opinion as to whether the Federal
Government’s Financial Statement for the year concerned shows a true and fair
view as well as its accounting records are maintained properly and kept up to date.
1.2.
Compliance Audit - to evaluate whether the financial management of the
Federal Ministries/Departments is in accordance with relevant financial laws and
regulations.
1.3.
Performance Audit - to evaluate whether Federal Government activities
have been carried out efficiently and economically to achieve its desired
objectives/goals.
1.4.
Government Companies’ Management Audit - to evaluate whether the
Federal Government Companies have been managed in a proper manner.
2.
My report on the implementation of activities of the Federal
Ministries/Departments and the management of Government Companies for the year
2011 consists of 3 parts as follows:
Part I
:
Implementation
Of
Activities
Ministries/Departments
Of
The
Federal
Part II
:
Management Of Federal Government Companies
Part III
:
Status Of Follow-Up Actions Which Have Not Been Taken
By The Ministries/Departments/Government Companies
On The Recommendations Highlighted In The Auditor
General’s Report For 2009 And 2010
3.
Section 6(d) of the Audit Act 1957 requires the Auditor General to carry out audit
to evaluate whether Government activities have been managed efficiently, economically
and in accordance with their stated objectives. The audit encompasses various activities
such as construction, infrastructure, maintenance, asset management, law enforcement,
procurement, revenue management, education, health, agriculture, human capital and
socio-economic upgrading programmes. This report contains observations from the
audit of 58 activities/projects of 28 Federal Ministries/Departments and management of
7 Government Companies. Generally, weaknesses observed are such as improper
25
payment; work/procurement did not follow specifications; unreasonable delays;
wastage; weaknesses in revenue management and management of Government’s
assets. The said weaknesses were due to negligence when complying with
Government’s rules/procedure; programmes/projects and scopes/specifications were
not planned and identified properly; work of contractors/vendors/consultants was not
monitored and supervised closely; poor project management skills; decisions on
procurement were made late; information systems of the Departments/Agencies were
incomplete and not updated; outcome/impact of programmes/projects was not given
due attention; shortage of funds for asset maintenance; and insufficient officers to
collect revenue.
4.
Apart from that, this report also highlights the financial performance of 47
Government companies for the period 2008 to 2010 based on the analysis done on the
data obtained from their audited financial statements. A total of 23 companies recorded
profit before tax for 3 consecutive years amounting to RM255.834 billion while 9
companies suffered accumulated losses amounting to RM2.446 billion for 3 consecutive
years. However, from the 23 companies which recorded profits, only 10 companies paid
dividend amounting to RM109.364 billion to the Government for 3 consecutive years
while 4 companies only paid dividend in specific years. A total of 20 out of the 25
companies paid tax amounting to RM81.382 billion to the Government for 3 consecutive
years.
5.
In order to help the Ministries/Departments/Government Companies to rectify the
weaknesses which were highlighted in the Auditor General’s Report 2009 and 2010, a
total of 547 recommendations were made. Until 30 April 2012, follow up Audit revealed
that appropriate actions had been taken on 241 (96.4%) from 250 recommendations
made in the 2009 Auditor General’s Report. As for 2010, action had been taken on 220
(74.1%) from the 297 recommendations made. In 2011, a total of 356 recommendations
were
made
in
the
Auditor
General’s
Report
to
the
related
Ministries/Departments/Government Companies for corrective actions or to prevent the
same weaknesses from recurring. The National Audit Department will monitor
continuously to ensure appropriate actions will be taken by the relevant parties and will
report the updated status in the 2012 Auditor General’s Report.
6.
I would like to express my thanks to all the officers of the
Ministries/Departments/Government Companies who have given their cooperation to my
officers during the audit. I also wish to express my appreciation and thanks to my
officers who have given their commitment and worked diligently to complete this report.
( TAN SRI DATO’ SETIA HAJI AMBRIN BIN BUANG )
Auditor General of Malaysia
Putrajaya
25 July 2012
26
SYNOPSIS
27
28
SYNOPSIS
PART I
-
IMPLEMENTATION
OF
ACTIVITIES
MINISTRIES/DEPARTMENTS
BY
THE
FEDERAL
PRIME MINISTER’S DEPARTMENT
Legal Affairs Division
Malaysia Department of Insolvency
1. Management Of Bankruptcy And Company Winding Up Cases
a. Malaysia Department of Insolvency (MdI) is responsible for the operation,
administration, service, compliance and enforcement of insolvency law in Malaysia.
The number of resolved cases and total revenue collection from insolvency
administration showed a significant increase for the years 2009 to 2011 resulting
from the comprehensive implementation of the Organisational Transformation
Programme since April 2009 by MdI. However, Audit findings revealed that the
management of bankruptcy and company winding up cases at the offices visited
was unsatisfactory and needed further improvement. Among the weaknesses
identified were as follows:
i. process/work flow chart was not updated with rules/instructions/time norms;
ii. delay in taking further action;
iii. insufficient training in insolvency management to enhance skills/competencies of
officers; and
iv. storage/maintenance of files/documents of winding up cases of the company
was not in order.
b. It is recommended that MdI takes the following actions:
i.
update the process/work flow chart in accordance with Acts and instructions set
by the Department and set time norms for recording bankruptcy cases into Case
Management System/preparation of indexes/issuance of First Notification
Letter/issuance of reminder
Affairs/instalment payments;
letters
on
attendance/filing
Statement
of
ii. conduct site visits to the premises so that the process of property disclosure
could be done immediately;
iii. establish a monitoring system for the issuance of First Notification
Letter/reminder letters on attendance to the bankrupts/directors, filing Statement
of Affairs/instalment payments so that the application of Warrant of Arrest could
be done;
29
iv. provide adequate training in order to enhance skills and competencies of
officers/staff who are involved in the management of bankruptcy and company
winding up cases; and
v. keep/organise files and documents relating to company winding up cases
properly and systematically to facilitate reference and monitoring purposes as
well as to ensure the physical safety of documents.
Federal Court Chief Registrar’s Office
2. Maintenance Of The Kuala Lumpur Court Complex
a. The Kuala Lumpur Court Complex (KMKL) was built in February 2007 and started
operation on 3 May 2007. It was necessary for maintenance to be carried out to
maintain, restore and repair building facilities and surroundings. The Federal Court
Chief Registrar’s Office (PKPMP) was responsible for implementing and supervising
maintenance of the KMKL building. Kemuncak Facilities Management Sdn. Bhd.
(KFM) was appointed by the Ministry of Finance through direct negotiation to carry
out the maintenance works. The maintenance agreement was signed on 14
September 2007 for a period of 3 years (1 July 2007 to 30 June 2010) for a contract
sum of RM30.28 million. This agreement was extended for another 2 years (1 July
2010 to 30 June 2012) for a contract sum of RM20.19 million. The scope of
maintenance works carried out at KMKL was for building conservation that was
comprehensive maintenance operation covering works on mechanical, electrical,
civil and structure as well as general works. Audit findings revealed that
maintenance works at KMKL was satisfactory. However, there were weaknesses as
follows:
i.
there were some aspects in maintenance works which needed improvement in
order to increase maintenance effectiveness and to ensure that KMKL buildings
were in good condition;
ii. physical performance of maintenance works was unsatisfactory since there were
cracks and leakages in the buildings; and
iii. terms of contract were not clear, for example, value for each type of work was
not in detail and there was no provision of quality measurements, penalties and
Key Performance Indicators (KPIs).
b. It is recommended that PKPMP and responsible parties take the following actions:
i. periodically monitor maintenance works conducted by KFM to ensure good
quality, works done are effective and in accordance with specifications and
maintenance plans;
ii. provide penalty clauses, quality measurement mechanism and KPIs in future
maintenance agreements;
iii. repair cracks immediately before they worsen and ensure that leakages do not
recur;
30
iv. request for technical advice from JKR to identify causes of continuous cracks
and leakages;
v. ensure that value of works is prepared in detail to avoid lump sum payments in
future maintenance contracts. This includes payment claims that are more
detailed and clear; and
vi. appoint technical officer immediately to monitor verification and certification of
works.
Public Private Partnership Unit
3. Management Of Tourism Development At Corridor Economic Region
a. The Public Private Partnership Unit (UKAS) of the Prime Minister’s Department is
the central agency which is responsible for coordinating privatisation projects and
public-private sector collaboration projects that have impact on the economy and is
eligible to receive the Facilitation Fund. Among the UKAS functions are to analyse,
plan, supervise, control, facilitate and evaluate the implementation of corridor
development programme. The development of the Corridor Economic Region is one
of the Government initiatives under the Ninth Malaysia Plan to improve the
relationship of all states by reducing the gap between differences in structure and
socio-economy within the regions. The objectives of the Tourism Development
Programme at the Corridor Economic Region were to increase the number of tourist
arrivals by providing world class facilities and to narrow the gaps between the
regions. Audit findings revealed that the overall management of tourism
development at the Corridor Economic Region was satisfactory in terms of strategic
planning for Corridor Authorities (PBK) and studies were carried out before project
implementation. However, there were several weaknesses as follows:
i.
Rhinoceros Breeding Project at Lahad Datu, Sabah was completed late with 2
Extensions of Time of 252 days;
ii. low quality in construction works;
iii. performance evaluation was not carried out; and
iv. information on allocation/expenses was not updated.
b. It is recommended that UKAS and PBK take the following actions:
i.
monitor rectification works of construction and upgrading projects;
ii. monitor project implementation to ensure success of programme;
iii. emphasize on project achievements by evaluating the outcome so that the
performance of the implementation authority (PBK) could be assessed more
effectively and could assist in future project planning; and
iv. update financial information and project implementation status to ensure
effective monitoring and supervision on the programme.
31
MINISTRY OF FINANCE
Housing Loan Management Division
4. Management Of Housing Loan
a. In 1971, the Government had established a Housing Loans Fund (KWPP) through
Housing Loans Fund Act 1971 (Act 42) which was managed by Housing Loan
Management Division (HLMD) with the aim of providing housing loan to public
servants. By the end of 2011, KWPP had a balance amounting to RM1.908 billion.
The objective of HLMD was to manage public sector housing loan with
professionalism, integrity and prudence in line with the Government’s policy to assist
public servants to have own houses. Audit on HLMD’s activity revealed that the
objective had been achieved. However, there were several weaknesses in the
management of housing loan as follows:
i. data on number of borrowers and loan balance could not be verified;
ii. non-compliance with loan application requirements;
iii. delay in remitting payment to developers/lawyers;
iv. arrears in loan repayment; and
v. delay in taking action against loan defaulters and problem in releasing title
documents.
b. It is recommended that HLMD takes the following actions:
i.
ii.
iii.
iv.
v.
develop an integrated computer system which could generate accurate report on
housing loan;
ensure that work processes are done properly and establish an effective
monitoring mechanism to ensure borrowers abide by all the loan requirements;
ensure that repayment of the loan is made within the stipulated time frame;
seek legal advice on prolonged cases of arrears in loan repayment; and
ensure that all title documents are kept in safe custody and return to the rightful
owner after full settlement of loan.
INLAND REVENUE BOARD OF MALAYSIA
5. Management Of Information On Fees And Commissions Recipients
a. The Inland Revenue Board of Malaysia (IRBM) has the power under Section 81,
Income Tax Act (ITA) 1967 to request certain agencies to provide information on
recipients of income from those agencies. The information relates to payments
made to individuals or companies such as payment of commissions to insurance
agents/representatives, distributors/wholesalers/dealers/stockists and remisiers/
brokers and other payment of fees such as royalties to authors/writers, part-time
instructors, suppliers/consultants and others. The Detection Unit Information System
(SMUP) was developed to enable efficient compilation of taxpayers’ information
where every information providers will be registered to facilitate monitoring. Audit
findings revealed some weaknesses as follows:
32
i.
information providers did not submit information on the recipients of fees and
commissions;
ii. taxpayers did not declare/under declare amount of fees or commissions received
in the Income Tax Return Form for the year of assessment under review;
iii. taxpayers did not submit Income Tax Return Form although they received fees
and commissions income; and
iv. taxpayers were not selected for tax audit.
b. It is recommended that IRBM takes the following actions:
i.
make it compulsory for information providers to submit information on the
recipients of fees and commissions within the stipulated time;
ii. prosecute information providers who fail to comply;
iii. ensure that the SMUP which has been developed could be used as a reliable
source of information; and
iv. conduct desk audit or field audit on recipients of substantial fees and
commissions who fail to report their correct income to ensure level of tax
compliance.
6. Management On Income Tax Of Property Owners
a. Section 13 of the Real Property Gains Tax Act 1976 requires that every person who
acquires asset to notify such acquisition to the Inland Revenue Board of Malaysia
(IRBM). At IRBM, information on real property ownership captured through stamping
process of the Sales and Purchase Agreement at IRBM Stamping Office is uploaded
to IRBM data warehouse through the Detection Unit Information System (SMUP).
This information will be used by the Detection Unit to detect individuals who do not
have income tax file in order to broaden the tax base. As for information on cars
ownership, it is handled by the Road Transport Department (RTD). Audit findings
revealed some weaknesses as follows:
i. some property owners did not have income tax file;
ii. information was not uploaded into the Enterprise Taxpayer Profile (ETP);
iii. actions were not taken to track down the property owners;
iv. selection of cases for tax audit either by field audit or desk audit on property
ownership was not given due attention; and
v. restriction orders from leaving the country were not issued and civil suit actions
were not taken against property owners with tax arrears.
b. To improve the management of income tax on property owners, it is recommended
that IRBM takes the following actions:
i.
cooperate with Government/private agencies in the sharing of information in
order to broaden the tax base and strengthen tax collection;
ii. enhance action to identify individuals who evade tax;
33
iii. extend the criteria for the selection of cases for tax audit to include property
ownership in order to avoid any incorrect tax returns, loss of revenue and also to
prevent tax evasion; and
iv. issue restriction orders to prevent property owners with tax arrears from leaving
the country and take civil suit actions against them.
7. Management Of Desk Audit Activity At The Non-Resident Branch
a. According to the Malaysian Income Tax Act (ITA) 1967, non-resident individuals are
those who stay less than 182 days in Malaysia in a year, regardless of their
citizenship or nationality. In general, the chargeable income of a non-resident
individual in Malaysia is taxed at the flat rate of 26% with effect from year of
assessment 2010 with no deduction for personal tax reliefs and rebates. Whereas
non-resident companies are companies which carry out business through a
permanent establishment in Malaysia and assessable on income accruing or
deriving from Malaysia. In general, the chargeable income of a non-resident
company in Malaysia is taxed at the flat rate of 25% with effect from year of
assessment 2009. The Non-Resident Branch of the Inland Revenue Board of
Malaysia (IRBM) manages the income tax of non-resident companies and
individuals in Malaysia. Under the Self Assessment System (SAS), tax audit
becomes an essential activity of IRBM to enhance voluntary compliance with the
laws. IRBM carries out two types of tax audit, namely desk audit and field audit.
Audit conducted by National Audit Department on the desk audit activity of the NonResident Branch of IRBM revealed that the overall management of the desk audit
activities was satisfactory where performance had improved from non-achievement
of target in the year 2010 to over-achievement of target in the year 2011. However,
from the implementation aspect of its activities, there were some weaknesses as
follows:
i. delay in the registration of cases;
ii. weaknesses in the management of tax collection resulting in tax arrears of
RM3.36 million within the period of one month to 132 months;
iii. tax increase was not raised/under imposed; and
iv. restriction orders from leaving the country were not issued and civil suit actions
were not taken against taxpayers with tax arrears.
b. It is recommended that IRBM takes the following actions:
i.
enhance monitoring of the management of desk audit activity to ensure that
every cases is registered and settled within the stipulated time period;
ii. enhance the awareness campaign on taxpayers to increase tax compliance;
iii. ensure that tax increase on tax arrears are correctly imposed; and
iv. issue restriction orders to prevent tax payers with tax arrears from leaving the
country and take civil suit actions against them.
34
8. Management On Tax Audit Activity For Individuals With Business Income
a. The Inland Revenue Board of Malaysia (IRBM) implemented the Self-Assessment
System (SAS) for individuals with business income with effect from year 2004. The
purpose of implementing this system is to encourage taxpayers to declare and pay
tax voluntarily. In order to confirm the accuracy of income tax declared by
individuals with business income through SAS, IRBM conducted tax audit activity
through Field Audit and Desk Audit to trace the level of taxpayer’s compliance with
tax rules and inculcate continuous voluntary compliance in taxpayers. Audit
conducted by National Audit Department revealed that 12 (70.6%) out of 17
branches managed to achieve/exceed their Key Performance Indicators (KPI) target
of files set on audit activity of individuals with business income. However, the KPI
achievement of Field Audit Officers need to be improved since only one branch had
all its Field Audit Officers achieving KPI for the years 2010 and 2011. As for 5 other
branches, Field Audit Officers only managed to achieve the KPI either for year 2010
or 2011. Audit conducted by National Audit Department on the management of tax
audit activity revealed several weaknesses as follows:
i.
1,244 (7.3%) of 17,085 individuals audited have their cases closed without audit
findings because there was no evidence of tax evasion even though their cases
were selected by the risk analysis methodology;
ii. 1,073 (57.3%) of 1,873 individual files checked at 17 IRBM branches showed
that additional tax raised and penalties imposed amounted to RM33.24 million
were resolved late between 6 to 941 days;
iii. additional taxes raised as a result from field audit findings as well as estimated
assessment amounted to RM1.21 million were not issued to 36 taxpayers; and
iv. increase in tax was not imposed on cases of tax arrears and failure to comply
with tax instalment payment scheme resulting in loss of revenue to the
Government.
b. It is recommended that IRBM takes the following actions:
i.
benchmark against the standards set in neighbouring countries to determine the
percentage of individuals with business income that need to be carried out field
audit and to set an appropriate percentage as yearly target;
ii. determine the number of Field Audit Officer post that is needed in line with the
increase in target on field audit activity;
iii. ensure the accuracy of taxpayers information so that the selection of field audit
cases based on the risk analysis methodology is correctly done;
iv. propose to the Department of Statistics Malaysia from time to time on the type of
business/service which needs to be given specific business code to ensure that
the business code is complete and updated. The Malaysian Income Tax Act
1967 should provide a section that allows penalty to be imposed on taxpayers
who do not fill in their business code or who fill in incorrect business code;
35
v. Notice Of Additional Tax Assessment should be issued immediately for cases
completed which have been approved by senior officer to ensure prompt
collection of tax; and
vi. enhance the capability of the computer system such as ensuring the existing
Self-Assessment System to automatically generate estimated assessment and
also tax increase on tax arrears and failure to comply with tax instalment
payment scheme.
ROYAL MALAYSIAN CUSTOMS DEPARTMENT
9. Management Of Import Duties Assessment
a. Through laws and regulations, the Royal Malaysian Customs Department (RMCD) is
responsible for the collection of indirect taxes such as import/export/excise duties,
sales/service tax and also levy imposed on commercial and industrial transactions
carried out in Malaysia. In order to carry out such responsibilities, RMCD had also
issued Customs Standing Orders, Departmental General Orders and State Work
Procedures detailing the work process of assessment of import duties. Overall, Audit
conducted from May to October 2011 revealed that the management of import
duties assessment was satisfactory where the customs declaration forms had been
properly processed and duties were correctly collected. In 2011, RMCD collected
import duties amounting to RM8.704 billion, an increase of RM2.739 billion as
compared to RM5.965 billion in 2007. This represented the highest revenue
collected for the last 5 years. However, there were some weaknesses in the
management of import duties assessment as follows:
i.
forwarding agents could still hand over customs declaration forms (K1 forms)
from one custom process to the next;
ii. out of 19 container scanners procured from 2001 to September 2010, three had
been written off and only 6 from the remaining 16 could produce a clear image;
iii. verification on K1 forms was not carried out by 3 State Customs Offices and
there were delays in reconciling import manifest;
iv. shortage of officers in the Post Clearance Audit Branch; and
v. poor performance on the collection of under-collected duties/taxes by Post
Clearance Audit Branch and the Verification and Profiling Branch.
b. It is recommended that RMCD takes the following actions:
i.
ensure that all registered K1 forms are only handled by Customs officers and
supervise/monitor as well as taking action against Customs Stations that still
allow forwarding agents to personally hand over K1 forms from one custom
process to the next;
ii. ensure that all scanners could function properly and consider the acquisition of
new scanners for all Customs Stations that process the imports of critical goods;
36
iii. ensure reconciliation of import manifest are carried out within the stipulated
period to properly control all imported goods; and
iv. strengthen the Post Clearance Audit Branch and improve the performance on
the collection of under-collected duties/taxes.
10. Management Of Quarters
a. The Royal Malaysian Customs Department (RMCD) had provided housing facilities
for its staff according to officers’ grades as spelt out in General Orders (Chapter E).
From 2009 to 2011, RMCD had spent a total of RM43.56 million for the maintenance
of quarters. Audit findings revealed that housing facilities provided for 58.3% of
RMCD employees did not achieve its objectives where 2,000 (31.6%) from 6,320
departmental quarters were not occupied as at December 2011. Among them were
33 units that had not been occupied since its completion in 2000. In addition, there
were weaknesses in the management of quarters as follows:
i.
no action was taken against officers who vacate quarters and left them in a
mess;
ii. damaged quarters were not repaired or preventive maintenance not done as
there was no specific allocation provided; and
iii. weak enforcement in collection of rental arrears and no monitoring on the State
Housing Committee to ensure that meetings were held according to schedule
and matters discussed were reported.
b. It is recommended that RMCD takes the following actions:
i.
ensure that the occupants of quarters comply with General Orders (Chapter E)
and the quarters are always in good condition;
ii. implement the operation and maintenance of assets as stipulated in the
Government Total Asset Management Manual. In addition, establish a
scheduled maintenance plan that includes preventive and corrective
maintenance of all quarters as required by General Circular No. 2 of 1995.
Adequate allocation for maintenance of quarters should be applied to the
Treasury;
iii. take prompt action to collect rental arrears to ensure that Government revenue is
collected effectively; and
iv. ensure that all State Housing Committees meet and report on a regular basis.
11. Procurement Of Working Tools For Enforcement Activities
a. To address the problem of smuggling, the Enforcement Division of the Royal
Malaysian Customs Department (RMCD) is responsible for the planning and
carrying out of enforcement operations such as roadblocks, patrolling the sea/land,
raids and surveillance at major ports and border entry points. From 2009 to 2011,
37
the Enforcement Division seized goods valued at RM1.371 billion with unpaid taxes
and duties amounting to RM1.318 billion. Operations and patrols conducted by the
Enforcement Division involved the usage of equipment such as weapons and
ammunition, drug sniffer dogs and other working tools. For the purpose of procuring
such equipment, the Government had approved a development expenditure
allocation of RM20.20 million under the Ninth Malaysia Plan. Audit findings revealed
that procurement of working tools for enforcement activities was not carried out
satisfactorily as it was not managed efficiently, economically and properly. Among
the weaknesses identified were as follows:
i.
incidents of improper payment such as procurement through operating
expenditure for RM9.94 million worth of working tools without the approval of the
Controlling Officer and procurement of working tools valued at RM2.25 million
without adequate allocation which resulted in payment through Treasury
Instruction 59;
ii. receiving officers could not confirm the specifications and quality of working tools
received as relevant information (such as brand, model and specification) was
not stated in the catalogue, invoice or Local Purchase Order;
iii. improper registration of assets and as a consequence a total of 21 units of
working tools valued at RM109,700 could not be detected; and
iv. working tools valued at RM4.44 million were not utilised optimally.
b. It is recommended that RMCD takes the following actions:
i. establish a special committee to investigate cases of improper payment;
ii. ensure that all Local Orders and invoices from supplier come with detailed
information such as type, brand, model and specification of working tools to
facilitate the Receiving Officer in confirming the actual quality and specification
of equipment received. A special team should also be established to investigate
the procurement of working tools under the Ninth Malaysia Plan and to ensure
that the type, brand, model and specification of equipment received and paid for
were based on stipulated quality and specification. A report on the investigation
should then be submitted to the Secretary General of the Ministry of Finance and
the National Audit Department;
iii. ensure that all assets are registered properly and if assets are distributed to
State Customs Offices, the relevant registration cards (KEW.PA-2/KEW.PA-3)
must be sent together;
iv. ensure that the usage of working tools is properly recorded in KEW.PA-6 and
take proactive actions to ensure that all working tools are fully utilized, and
v. carry out immediate physical examination of all working tools and submit initial
reports for cases of loss of working tools.
38
12. Management Of Seized And Forfeited Goods
a. The Customs Act 1967 empowers Customs officers to seize any goods suspected to
have contravened the Customs Act. Goods seized will be kept in Enforcement
Stores under the custody of Customs officers. Whereas forfeited goods comprise all
kinds of items seized and forfeited to the Government. The Enforcement Division
seized goods ranging from high-risk commodities such as cigarettes, liquor, vehicles
and textiles. From 2009 to 2011, the Division seized goods valued at RM1.365
billion involving unpaid taxes and duties amounting to RM1.316 billion. Audit
conducted at the Headquarters of the Enforcement Division and 5 states (Malacca,
Pahang, Perak, Perlis and Federal Territory of Kuala Lumpur) revealed the following
weaknesses:
i.
in general, the management of seized and forfeited goods had achieved the
objectives set. Proceeds from the sale of forfeited vehicles and goods had
increased by 388.9% from RM3.15 million in 2009 to RM15.40 million in 2011;
ii. inefficient disposition of investigation cases;
iii. weaknesses in maintenance of registers/records, cleanliness and safety of
stores; and
iv. ineffective enforcement and monitoring.
b. It is recommended that RMCD takes the following actions:
i.
set a time frame for the disposition of investigation papers, especially for cases
involving arrests by taking into account the complexity of such cases;
ii. set a specific time for long outstanding investigation papers to be completed so
that the relevant seized goods could be immediately disposed of;
iii. ensure that the Register of Goods Seized and Monthly Statement on
Confiscation of Goods are maintained in accordance with the regulations;
iv. ensure that the stores and goods/vehicle seized are clean and well maintained
to retain the quality of seized goods/vehicles; and
v. ensure that equipment for the security systems (CCTV) are placed in a more
suitable location so that they can function effectively.
MINISTRY OF AGRICULTURE AND AGRO-BASED INDUSTRY
13. Management Of Parliamentary Area Agriculture Project
a. Two out of 4 components under the Parliamentary Area Agriculture Project are
Small-scale Parliamentary Area Project (PKPP) and Agriculture Project of
Parliamentary Area Agriculture Development Committee (MPPP). Each
parliamentary constituency was allocated a sum of RM100,000 per annum to
implement each component of the project. The objectives of PKPP were to involve
members of parliament in planning and monitoring the implementation of small-scale
agriculture project and to aid target group specifically farmers, livestock breeders
and fishermen in improving their income. Whereas the objectives of MPPP
39
establishment were to obtain ideas through forum, identify arising problems,
promote opportunities and facilities of agriculture projects. Audit conducted on these
2 components revealed that the project had been implemented as planned.
However, there were several weaknesses in the implementation as follows:
i.
ii.
iii.
iv.
v.
vi.
the effectiveness of the project could not be determined due to incomplete
project records maintained by the Ministry of Agriculture And Agro-based
Industry (Ministry);
one of the objectives of this programme which is to help target groups in
improving their income has not been fully achieved;
a total of RM11.39 million (35.5%) out of RM32.09 million allocated for four
states from 2009 to 2011 was not yet spent by the implementing agency;
there was no clear and comprehensive guideline;
unsatisfactory infrastructure/supplies;
underutilised project/equipment; and
vii. ineffective monitoring system.
b. It is recommended that the responsible parties take the following actions:
i.
the Ministry/implementing agency should assess the outcome and impact of the
project/programme;
ii. the Ministry should improve the existing guideline so that it is more
comprehensive;
iii. the implementing agency should ensure that this programme benefits the target
group and is fully utilised by the aid recipients to avoid wastage of Government’s
spending; and
iv. the Ministry should conduct periodic monitoring on the projects to ensure that
they are implemented according to specifications and of quality.
14.
Management Of Rice Subsidies To BERNAS And Private Manufacturers
a. The Rice Subsidy Programme of 15% broken rice which was implemented since 1
September 2008 was to ensure a controlled supply and price of the said rice to the
low income group. The objectives of the programme are to supply Super Tempatan
ST15% rice (Peninsular Malaysia) and S15% rice (Sabah and Sarawak) to meet
rising consumer demand, maintain controlled subsidised rice price at RM1.65 to
RM1.80 per kg by zone and cover losses incurred by subsidised rice manufacturers.
The programme started with Phase I and continued to Phase II until now. Audit
findings revealed that the objectives of the programme were not fully achieved
where there was no proper mechanism to ensure that the target group benefited
from this programme. Besides that, there were several weaknesses as follows:
i. targeted group/consumer in Peninsular Malaysia was not attainable;
ii. insufficient allocation to pay subsidy claims;
40
iii. unclear and incomprehensive guideline;
iv. delay in signing the contract between the Ministry of Agriculture and Agro-based
Industry (Ministry) and BERNAS and there were also contracts signed after the
contracts had expired; and
v. insufficient officers to monitor the programme.
b. It is recommended that the Ministry takes the following actions:
i. re-evaluate the Rice Subsidy Programme based on its existing objectives;
ii. assess the needs to collaborate with the Department of Social Welfare to ensure
the effectiveness of distribution of subsidised rice to the poor;
iii. sign agreement with BERNAS and wholesalers immediately. The Ministry should
also clearly outline the responsibilities and actions to be taken against
wholesalers who breach the agreement; and
iv. the Ministry should provide a clear and comprehensive guideline to ensure that
the programme achieves its objectives.
15. Management Of The Seaweed Industry Development
a. The seaweed industry in Malaysia has started since 1978 in Sabah and currently
active in the district of Semporna, Kunak, Lahad Datu, Banggi, Kudat and Tawau.
The sea water in these areas is suitable for seaweed cultivation. The seaweed
industry is listed in the Entry Point Project (EPP) 3 under the National Key Economic
Areas (NKEAs) to enhance profit of Small and Medium Enterprises (SMEs) by
emphasising on modernisation, big-scale production and increase in productivity
through latest technologies as well as more efficient methods. The objectives of the
Seaweed Industry Development are to produce seaweed for upstream and
downstream industry which is led by private sectors, reduce dependency on
imported seaweed and improve quality as well as controlling the seaweed price.
Under the Ninth Malaysia Plan, the Government has approved RM7.20 million to
develop the seaweed project including procurement of equipment as well as building
and upgrading of platforms. Meanwhile, under the Tenth Malaysia Plan, a total of
RM46.07 million has been approved under the Economic Transformation
Programme (ETP) for mini estate development, research programme, apprentice
manufacturing plant and operational expenses. Audit findings revealed that the
Department/NKEA’s targeted increase in the production of dried seaweed from 2009
to 2011 had been achieved. However, the mini estate project under NKEA was still
underdeveloped. Besides that, there were several weaknesses in the project
management as follows:
most of the allocation for seaweed development was not yet spent;
ii. construction of seaweed processing/drying platforms was unsatisfactory; and
i.
iii. equipment supplied were underutilised/damaged.
41
b. It is recommended that the Ministry of
Industry/Department takes the following actions:
Agriculture
and
Agro-Based
i.
improve work progress of the implementing agency so that the desired
output/outcome could be achieved;
ii. ensure that projects are carefully planned by taking into account user needs so
that projects could be completed as scheduled;
iii. ensure that the contractor rectifies all defects immediately;
iv. distribute the remaining boats/sampan to the operators as soon as possible to
avoid wastage; and
v. conduct impact assessment study to ensure sustainable outcome.
16 Permanent Food Production Park Programme
a. The Permanent Food Production Park (TKPM) Programme was introduced in 2000
to improve the internal food production sector. TKPM was also a strategy developed
under the Third National Agriculture Policy to transform agriculture sector by
encouraging big-scaled agriculture project, commercialisation and high technology
by the entrepreneur and private sector. As at 2011, 55 TKPM which covered
7,631.90 hectares were established with 964 participants. Production output by end
of 2011 had reached 58,504 metric tonne worth RM63.5 million. The objectives of
the programme were to establish permanent food production zone, produce food
production entrepreneurs, increase participation of entrepreneurs and private sector
in food production, enhance sustainability and quality of national food production
and improve net income of participants/farmers to at least RM3,000 a month. In
order to achieve the objectives, the Ministry of Agriculture and Agro-based Industry
(Ministry) had planned a few strategies such as development based on zoning
approach, cluster food industry and market driven as well as establishing food chain
in crop industry. Audit findings revealed the following weaknesses:
i. gazette and title of the TKPM land were not yet finalised;
ii. improper management of participant agreements;
iii. project implementation was not according to plan;
iv. unsatisfactory utilisation of facilities by participants;
v. targeted income for participants was not fully achieved; and
vi. improper records management.
b. It is recommended that the responsible parties take the following actions:
i.
the Ministry should periodically and continuously evaluate the output and
outcome of the TKPM;
ii. monitor the production performance in a more effective manner;
iii. the Ministry and State Government should take immediate action to finalise the
status and title of land to ensure smooth planting activities by participants;
42
iv. agreement between the Government and participants should be duly signed and
the Ministry should monitor compliance of terms and conditions of the
agreement;
v. the Ministry should ensure that the appointed anchor company duly signed an
agreement with the Government and complies with its terms and conditions to
ensure TKPM programme objectives could be achieved effectively; and
vi. the Ministry should ensure that project implementation is in accordance with the
business plan and monitor its implementation so that the participants
performances are in line with the objectives and targets of TKPM programme.
MINISTRY OF RURAL AND REGIONAL DEVELOPMENT
17. Agropolitan Project Under Rural Quantum Leap Programme
a. The Rural Quantum Leap Programme was an integrated and comprehensive
programme under the Ninth Malaysia Plan and its implementation continued under
the Tenth Malaysia Plan. The objectives of this programme were to eliminate rural
poverty through increment of income and to bring them out from the poverty threshold
as well as to accelerate development of less developed, isolated and abandoned
areas. In order to achieve these objectives, the Ministry of Rural and Regional
Development (Ministry) had implemented the Agropolitan Project with three main
components. Eleven Agropolitan Projects had been implemented targeting a total of
4,445 participants who were below the poverty threshold. An allocation of
RM289.35 million under the Ninth and Tenth Malaysia Plans was given to FELCRA
Berhad, Rubber Industry Smallholder Development Authority (RISDA) and Kedah
Regional Development Authority (KEDA) which were appointed by the Ministry as the
implementing/paying agencies. Audit findings revealed that management of the
Agropolitan Project was satisfactory. However, there were some weaknesses as
follows:
i.
ii.
iii.
iv.
v.
development allocation had been disbursed to the implementing agencies
without taking into account the progress of the projects;
projects implemented under the economic component were not
viable/sustainable;
late preparation of guidelines for projects implementation;
agreements between the participants and implementing agencies were yet to be
signed; and
development of the physical components of the project was
unsatisfactory/problematic.
b. It is recommended that the Ministry takes the following actions:
i.
ensure that development allocations are disbursed to implementing/paying
agencies based on the progress of project and ensure that the initial target is
achieved with the expenditure incurred;
43
ii. review the implementation of economic component projects to ascertain whether
it is viable, resilient and able to generate revenue as planned so that its aims to
pay dividend to the participants could be achieved. In this regard, each
participant should be identified and selected before any economic component
project is implemented;
iii. ensure that the agreement between the Government and participants is
finalised/signed to safeguard the interests of each party involved with the project.
Hence, conditions stipulated in the agreement could be taken against
participants who do not comply with the terms of participation;
iv. ensure that infrastructures/facilities provided are maintained and fully utilised
according to its objectives; and
v. prepare short/long term plans for maintenance of Agropolitan Project’s
settlement areas and provide the areas with modern and quality facilities to
improve the well-being of participants.
18. Construction And Upgrading Of Rural Road Projects In Sarawak
a. The construction and upgrading of rural road projects were approved during the
Ninth Malaysia Plan and from 2010, the projects were continued under the National
Key Result Area (NKRA) in order to speed up the construction of more rural roads to
meet the needs of the rural community. From 2006 to 2010, the Ministry Of Rural
And Regional Development approved an allocation of RM1.727 billion for the
implementation of 175 road projects. Out of the 175 projects, 146 projects costing
RM1.104 billion were implemented by the Public Works Department Sarawak and
the remaining 29 projects costing RM622.84 million were implemented by the
Drainage and Irrigation Department Sarawak. The actual expenditure for these road
projects as at 31 December 2011 amounted to RM1.024 billion. Audit findings
revealed that in general, the construction and upgrading of rural roads projects in
Sarawak were not satisfactory. The following were several weaknesses being
observed:
i.
projects implementation performance was rather unsatisfactory because 38
projects (37.6%) costing RM178.94 million out of 101 completed projects
amounting to RM437.57 million were delayed in completion ranging from 15 to
242 days from the original schedule;
ii. 13 projects (17.6%) out of 74 projects costing RM229.27 million under
construction were behind schedule by more than 20%;
iii. construction and upgrading of roads did not follow contract specifications; and
iv. customer feedback results indicate that road users were not satisfied with the
quality, safety and comfortability aspects of the roads.
44
b. It is recommended that the responsible authorities take the following actions:
i.
the Ministry of Rural and Regional Development should ensure that road
construction and upgrading projects are properly planned to avoid unnecessary
disruption;
ii. the implementing agencies should have holistic planning for road construction
and upgrading projects to include all aspects of road construction to achieve
value for money and positive outcome (impact) to users;
iii. the implementing agencies should ensure that road construction and upgrading
projects strictly follow specifications, standard and quality of works as stipulated
in the contract agreements so as to provide comfortability to road users and to
rectify poorly built roads; and
iv. the implementing agencies and consultants should strictly supervise and monitor
the implementation and construction process to ensure that the quality control is
in place until the Certificate Of Practical Completion (CPC) is issued.
MINISTRY OF NATURAL RESOURCES AND ENVIRONMENT
Department Of Irrigation And Drainage Malaysia
19.
Management Of Dam Operations
a. Dams have various functions and needs such as providing flood mitigation, water
irrigation to agricultural areas, raw water supply, power generation and sediment
retention. A completed dam structure requires the operation, maintenance,
monitoring and inspection to be properly conducted in accordance with procedures
set by the Dam Manual. As at 31 December 2011, there were 16 dams which were
completed between 1906 to 2004 and operating under the purview of the
Department of Irrigation and Drainage (DID) in Peninsular Malaysia. Dams are
classified based on the level of potential hazards which they face in the event of
dam failure. Under the Ninth Malaysia Plan, a total of RM34.41 million was spent on
surveillance and rehabilitation activities of the dam whereas no budget was
approved for the first Rolling Plan under the Tenth Malaysia Plan. Audit findings
revealed that as a whole the management of the dam was satisfactory where
monitoring and minor maintenance works had been performed accordingly,
submission of instrumentation data and the Periodic Safety Inspection Report were
carried out according to the stipulated time. However, there were some weaknesses
in the management of the dam operations, maintenance and monitoring as follows:
i. delay in updating the Operations and Maintenance Manual;
ii. absence of Standard Operating Procedure for handling of equipment/hydraulic
components and the existing Emergency Action Plan was not comprehensive;
iii. emergency training had not been implemented;
iv. water surface of reservoirs and flood regulating outlets were not maintained,
routine maintenance was not carried out according to the stipulated period,
45
reservoir pool areas and catchment areas of the dam had been encroached,
monitoring of sediment had not been implemented since 2000;
v. instrumentation at the dam could not be detected, 46.4% instrumentation at the
visited dam were damaged and not repaired;
vi. gazetting of the land and the conversion of land titles for the acquired reserved
lands were not fully made, and
vii. absence of a regulatory body to monitor and control the management of dam
operations of all dams.
b. It is recommended that the responsible parties take the following remedial actions:
i.
the Government should provide sufficient financial and human resources to
ensure proper operation of dams;
ii. the Ministry of Natural Resources and Environment should establish
policies/procedures relating to the responsibilities and roles of DID at the
headquarters and the State in matters relating to the operation, maintenance
and monitoring of the dams;
iii. the Government should review the eligibility criteria of security guards and
consider to place armed security personnel to control the dam operation areas
and the dam catchment areas;
iv. DID should ensure that monitoring and supervisions are carried out more
effectively to overcome the problem of encroachment on the land of DID and
quickly resolve problems related to the impaired instrumentations;
v. DID should promote public awareness programmes through electronic and mass
media about the implications of encroachment activities in reservoir pool areas
and catchment areas of the dams;
vi. the Ministry should update information on land ownership and also coordinates
matters related to gazetting of land and land ownership;
vii. the Government should assess the needs to establish a dam regulatory body to
ensure that all dams are managed efficiently and effectively to ensure the
integrity of the dams; and
viii. the Government should hold discussions with the State Government, State DID
and water supply companies to provide some budgets for maintenance and
rehabilitation of the dams.
Department Of Irrigation And Drainage Malaysia
20. Management Of Urban Drainage Project
a. Urban drainage system is implemented by the Department of Irrigation and Drainage
Malaysia (DID) through 2 methods which are conventional system (rapid disposal)
and storm water management system which addresses environmental impact.
Under the Ninth Malaysian Plan, the Federal Government spent a total of RM130.79
million on urban drainage projects throughout the country. Audit findings revealed
46
that the projects in few locations were able to achieve the objectives set for storm
water management problems such as reducing flood (quantity control) and
controlling the water from contamination (quality control). However, there were some
locations having problem in controlling the water quantity and quality. Among the
weaknesses identified were as follows:
i.
ii.
iii.
iv.
v.
vi.
some drainage components which were installed/constructed such as detention
ponds, conveyance as well as rubbish and sediment control components were
not functioning as intended because flooding still occurred at the project sites;
quality of water was contaminated;
some components were not utilised and left obsolete;
insufficient capacity of the detention ponds;
some modified/replaced components were not suitable to be used;
conveyance could not make the water flow properly and some components
which had been paid were not used; and
vii. Master Plan which had been prepared was not fully beneficial.
b. It is recommended that the responsible parties take remedial actions as follows:
i.
DID should plan and ensure that the Master Plan is prepared based on the
priority of critical locations and projects are implemented based on the Master
Plan;
ii. DID should take immediate actions to identify the maintenance requirements of
each urban drainage project which has been built. Information such as type of
maintenance, frequency of maintenance, maintenance costs, required labour
and the implications if maintenance work is not carried accordingly should be
provided in order to serve as a guide to the DID/local authority;
iii. the Ministry of Finance should provide adequate maintenance budget to ensure
that each Government project could be fully utilised by the target group for a
justified period of time;
iv. the Ministry and DID should prepare integrated policies relating to the
management of drainage operations which include jurisdiction and
responsibilities of parties in terms of operation and maintenance of drainage,
type of costs to be incurred and required manpower;
v. the Ministry and DID should adopt the Blue Ocean Strategy by establishing a
coordination committee between the Government and other responsible
agencies to discuss problems related to the management of the drainage
operations and should supervise and monitor the projects effectively; and
vi. DID should plan carefully in determining the projects costs in order to ensure
that all critical components of the project are taken into account.
47
MINISTRY OF INTERNATIONAL TRADE AND INDUSTRY
21. Student Entrepreneurship Programme
a. The National Entrepreneurship Institute (NEI) is an agency under the Ministry of
International Trade and Industry (MITI) which is responsible for implementing
Student Entrepreneurship Programme (SME). The main objective of the programme
is to provide exposure and generate interest in entrepreneurship among university
students. Students are given exposure to business opportunities, preparation of
business plans and business foundation. To date, a total of 19 Public Institutions of
Higher Learning (IPTA) and a Private Institute of Higher Learning (IPTS) have been
involved in this programme. Programmes under the SME consist of Basic Student
Entrepreneurship Student Course, Student Mall, Student in Free Enterprise and
Graduate Entrepreneurship Scheme. Audit findings revealed that the objectives of
this programme in term of efforts to cultivate entrepreneurship among university
students have been achieved. However, there were some weaknesses in the
implementation of the programme as follows:
i.
targets set in terms of number of series of Basic Student Entrepreneurship
Course were not fully achieved in 2009 and 2010;
ii. performance of the development of construction/acquisition of Student Mall kiosk
was unsatisfactory because the university took a long time between 1 to 4 years
to start construction/acquisition after receiving funds from NEI;
iii. as for the Graduate Entrepreneurship Scheme, the percentage of participants
who applied for and was approved financing from Student Entrepreneurship
Fund was low which was at only 26.3%; and
iv. there were some weaknesses in the management of the programme as
conditions/terms of reference of the programme were not fully complied with;
allocations were not fully utilised and accounts/records were not properly
maintained.
b. It is recommended that MITI and NEI take the following actions:
i.
plan carefully and identify the real needs before allocation of funds is made.
Allocation should be given in stages according to the needs/development of
programmes;
ii. perform continuous monitoring to ensure that allocations given to universities are
fully spent in order to achieve the objectives of the programme; and
iii. create a comprehensive and constantly updated database of programme
participants to evaluate the effectiveness of the programme and facilitate
monitoring.
MINISTRY OF WORKS
22. The Construction Of Sultan Yahya Petra Second Bridge, Kota Bahru, Kelantan
a. Sultan Yahya Petra Bridge is a major link between Kota Bahru Town and Tumpat.
The economic and social activities of Tumpat and part of Pasir Panjang is very much
48
dependent on the bridge which was constructed in 1967 with a design capacity of
only 11 tonnes. A new second bridge had been approved under the Ninth Malaysian
Plan as an alternative to reduce traffic congestion as well as to provide safety and
comfort to users. Public Works Department (PWD) was the implementing agency of
this project. Konsortium I.S Resources Sdn. Bhd. – RIS Capital Sdn. Bhd. was
appointed through direct negotiation to implement and complete the project in 30
months from 18 June 2007 to 17 December 2009 at a cost of RM143 million.
However, this project had been re-assigned to Aneka Prestij Sdn. Bhd. in March
2010 to complete the remaining works after approval by PWD. As at 31 December
2011, the work progress was only 76.5%. Overall, the construction of this project
was not satisfactory due to weaknessess in the project planning and
implementation. Among the weaknesses identified were as follows:
i.
failure to complete the works on schedule where 4 Certificates of Delay And
Extension of Time totalling 891 days had been approved until 30 August 2012;
ii. current value of contract was expected to increase to RM177.76 million
representing a total increase of RM34.76 million (24.3%) from the original
contract value of RM143 million;
iii. problems with the design of bore pile system took 2 years to be resolved which
contributed significantly to the delay of the project and increase in cost;
iv. works at the river side could not be completed on schedule due to the delay of
construction of the temporary bridge; and
v. appointment of an inexperienced contractor.
b. It is recommended that the Ministry of Works/PWD take the following actions:
i.
ensure that the problems arising at work site are immediately resolved so that
works could be implemented according to schedule;
ii. improve coordination between Local Authority, utility providers and other
agencies involved so that problems at work site could be resolved immediately
and effectively;
iii. ensure that problems on design of bore pile system are resolved immediately to
avoid any delay in construction works;
iv. appoint a lead consultant to ensure better implementation of the project; and
v. PWD should ensure that the contractor build the temporary bridge on schedule
as works at the river side is the most critical component of this project.
23. Management Of The Registration Of Contractors By The Contractor Service
Centre
a. The Contractor Service Centre (PKK) was established on 30 June 1981. It was then
known as the Contractor Service Coordination Centre (PUSAKABUMI) and was
placed under the Implementation and Coordination Unit of the Prime Minister’s
Department. Effective from 1 January 1987, it was renamed as Contractor Service
49
Centre (PKK) in line with the expansion of its functions and authority. In April 2009,
PKK was placed under the Ministry of Works. As at 30 June 2011, the number of
contractors registered with PKK stood at 44,630, which consisted of 41,006 civil
works contractors and 3,624 electrical contractors. The roles and responsibilities of
PKK include being a registration centre for contractors at Federal and State level,
awarding Bumiputera status to qualified contractors, being a reference centre for
contractors and providing advisory services to Bumiputera contractors in
implementing contracts. This is limited to contracts for services at Government
departments/agencies that do not have such advisory services. Audit findings
revealed that the management of the registration of contractors was not satisfactory
due to the following weaknesses:
i. Client Charter was not achieved;
ii. fees charged and the registration validity period were not in accordance with the
Fees (Registration of Contractors) Order 1984;
iii. the classes of contractors stated in the Fees (Registration of Contractors) Order
1984 were not consistent with the classes of contractors stated in the Treasury
Instructions;
iv. Contractors Information System was not accurate; and
v. information on contractors’ capital was not updated in the system.
b. It is recommended that PKK takes the following actions:
i.
adopt a more practical and achievable Client Charter to ensure contractors’
satisfaction;
ii. refer to the Finance Minister to make amendments on the fees charged to Class
F Contractors and their registration validity period;
iii. adopt the advice of the Attorney-General’s Chambers with regard to the
amendment to the fees so that all legal requirements are fulfilled;
iv. take action to correct the discrepancy between the Fees (Registration of
Contractors) Order 1984 and the Treasury Instructions;
v. coordinate with the Information Management Division to ensure the accuracy
and timeliness of the information; and
vi. provide training to all the processing officers on the method of calculation of
capital to ensure that only qualified contractors are registered.
MINISTRY OF TRANSPORT
24. Contract Administration
a. A binding contract exists between the Government and the tenderer after the Letter
of Acceptance (LOA) is signed and returned by the tenderer to the Government.
Further, the contract document which outlines in writing the rights and
responsibilities of the parties signing the contract is prepared by the office who calls
for tender. Administration of the contract should be managed properly and in
50
compliance with regulations effective from LOA until preparation of the final
accounts. From 2008 to 2011, the Ministry of Transport (Ministry) had managed a
total of 149 contracts worth RM3.684 billion. Audit findings revealed that
administration of contracts at the Ministry and its Departments/Agencies was
generally satisfactory. The Ministry and Departments/Agencies had complied with
requirements of contracts in relation to preparation of contract documents, roles and
responsibilities of Superintending Officer (SO) and his representative, advance
payment, Certificates of Delay and Extension of Time, Liquidated and Ascertained
Damages imposition for delay in completion and issuance Certificates of Practical
Completion. However, there were several weaknesses as follows:
i. improper management of stamping;
ii. contract documents were signed late; and
iii. non-compliance with the contract conditions such as late submission of
Performance Bonds.
b. It is recommended that the Ministry takes the following actions;
i.
ensure that each contract in Ministry/Departments/Agencies is stamped so that
the contract documents could be used as evidence in court should there be any
breach or dispute by any party;
ii. ensure that each contract in Ministry/Departments/Agencies is signed properly
within 4 months after the issuance of LOA; and
iii. ensure that all contract terms are complied with such as submission of
Performance Bonds.
25. Electrified Double Track Project Between Ipoh And Padang Besar
a. The Electrified Double Track Project from Ipoh to Padang Besar (Ipoh to Padang
Besar Project) was an extension to the Electrified Double Track between Rawang to
Ipoh. The 329 Kilometer Ipoh to Padang Besar Project aims to reinforce the rail
system’s ability and its competitiveness as well as developing the rail network in
Malaysia. The main contractor of this design and build project was MMC Gamuda
Joint Venture Sdn. Bhd. (MGJV). which was appointed on 13 December 2007
through direct negotiation. The project cost (both infrastructure and system
packages) was RM12.485 billion and the project completion period was 60 months
from 8 January 2008 to 7 January 2013. Keretapi Tanah Melayu Berhad (KTMB)
was appointed as the Superintending Officer's Representative and Konsortium Kinta
Samudera-Emenea-Techart (KSET) was appointed as the Project Management
Consultant (PMC) on 24 February 2009 with a ceiling cost of RM256.96 million.
Audit findings revealed that in general, the project implementation was not
satisfactory because there were several weaknesses as follows:
51
i.
ii.
iii.
iv.
v.
two Extensions of Time of 669 days had increased the overall cost of the project
due to increase in consultant fees;
Audit could not determine whether the financial advisory fee of RM1.06 million to
CIMB Investment Bank Bhd. and Maybank Investment Bhd. was at competitive
rates because the Ministry of Transport (Ministry) did not invite other banks to
bid;
delay in the land acquisition between 82 to 1,227 days;
appointment of contractor was not done through competitive bidding;
contract terms did not protect the Government interest; and
vi. construction work did not comply with specifications/of low quality.
b. It is recommended that the Ministry takes the following actions:
i.
finalise immediately the consultant fees due to the extension of time of the
project. The Ministry should get the view of its legal advisor regarding the effects
of limiting KSET’s services during the defects liability period;
ii. invite other banks to participate in competitive bidding for future projects so that
charges levied (such as processing fee for interim payment and payment for
financial advisory services) could be compared;
iii. provide longer period (at least one year) from the date of application to the Land
Administrator on land acquisition matters for future Ministry’s projects;
iv. appoint contractors through competitive bidding for future projects to get the best
value for money and ensure that contract clauses protect the Government
interest; and
v. instruct MGJV and KSET to conduct regular monitoring and repair works that did
not comply with specifications/of low quality.
26. Electrified Double Track Project Between Seremban And Gemas
a. The Electrified Double Track Project from Seremban to Gemas (Seremban-Gemas
Project) involved upgrading of railway infrastructure and facilities between
Seremban and Gemas. The project was implemented by IRCON International
Limited India (IRCON) which was appointed through direct negotiation to implement
the project through design and build at a contract value of RM3.450 billion. There
were two completion dates which were 17 July 2010 for Section Seremban To Sg.
Gadut and 17 January 2012 for Section Sg. Gadut To Gemas. KLIA Consultancy
Services Sdn. Bhd. (KLIACS) was appointed as the Project Management Consultant
on 22 January 2009 at a cost of RM71.49 million. Audit findings revealed that the
implementation of the Seremban To Gemas Project was satisfactory. The project
was completed on schedule with 3 Extensions of Time. Besides that, Section
Seremban To Sg. Gadut had been completed with a 10 month’s extension of time
and had started operation on 1 May 2011. However, there were several weaknesses
in the project implementation as follows:
52
i.
ii.
iii.
iv.
v.
extension of time of the project had resulted in the project time overrun of 18
months;
delay in the process of land acquisition and transfer of squatters;
the contract terms on reduction of the rate of the Liquidated and Ascertained
Damages and having a maximum limit for liability period did not protect the
interest of the Government;
delay by IRCON in resolving Non-Conformance Reports (NCR) issued by
KLIACS;
non-compliance with the approved terms of Environmental Impact Assessment;
and
vi. construction works did not comply with specifications and inappropriate design
had resulted in flash floods.
b.
It is recommended that the Ministry of Transport takes the following actions:
i.
ensure that the process of land acquisition and transfer of squatters for future
projects is given a longer reasonable and practical period during the planning
phase to avoid additional costs due to extension of time.
ii. ensure that there should not be any condition stipulating reduction in Liquidated
and Ascertained Damages (LAD) in future contracts unless the Government is
allowed to take over part of the project through Certificate of Partial Occupation;
iii. monitor and take stern action against IRCON so that the problems/defects
identified in NCR are rectified within the stipulated period. The Ministry should
also ensure that IRCON complies with the approved conditions of EIA; and
iv. provide contingency plans in line with the Department of Irrigation and Drainage
Malaysia (DID) requirements to solve flood problems in Sg. Gadut Station until
Sg. Simin Flood Mitigation project is completed. Advice from DID and the Public
Works Department should be obtained for further action.
MINISTRY OF SCIENCE, TECHNOLOGY AND INNOVATION
27. Technology
Application
Programme
For
(TAPMOSTI@COMMUNITY)
Community
a. The Technology Application Programme (TAPMOSTI@COMMUNITY) has been
implemented since June 2009 with the intention to increase income, provide
employment opportunities, improve quality of work as well as improve quality of life
and at the same time increase awareness of science and technology among
communities. The target groups of this programme include communities (entities)
such as Non-Government Agencies (NGOs), Community Clubs, Town Safety and
Development Communities (JKKK), schools and Mosques Committees focusing
mainly on disabled people, single mothers, elderly people, native communities,
youths and students. This programme had been funded with a sum of RM139.90
million from the Innofund Scheme and a sum of RM30 million from the Economic
53
Stimulus Package 2. Seven agencies were appointed to implement this programme.
In general, Audit findings revealed that the planning for this programme was
satisfactory. However, the implementation was unsatisfactory due to the following:
i.
weaknesses in approvals, payments to contractors and project distribution to the
communities;
ii. projects were not utilised by communities; and
iii. insufficient project monitoring.
b. It is recommended that the responsible parties take the following actions:
i.
ii.
iii.
iv.
v.
the Ministry of Science, Technology and Innovation (MOSTI) and appointed
agencies should ensure that the projects are distributed to appropriate
communities and not to a certain community/person only. MOSTI should use the
information from the eKasih database in planning, implementing and monitoring
poverty projects;
implementing agencies should ensure that payments to contractors are made
accordingly;
implementing agencies should ensure that distribution of equipment to
communities is made within a proper period so that they could benefit from using
the equipment and any damage found could be repaired within the warranty
period;
MOSTI/implementing agencies should do a preliminary study before
implementing any project and evaluation should be conducted to ensure that the
implementation of project is in line with its objectives; and
MOSTI/implementing agencies should conduct periodic monitoring on project
site and ensure that any problem arising is addressed immediately.
The Malaysian Meteorological Department
28. The Construction Of Quarters, Stations And Offices
a. Under the Ninth Malaysia Plan, the Malaysian Meteorological Department planned
to build quarters, stations and offices as well as procure equipment in improving its
services/facilities offered to customers and officers. The budgeted ceiling was
RM156 million for 47 projects inclusive of 30 (63.8%) physical projects involving 12
locations in the entire country with total allocation costs of RM62.35 million and the
remaining amount for procurement of equipment. MOSTI decided that all physical
projects should be done conventionally and the Public Works Department (PWD)
was appointed as the implementing agency. All projects were handed over to PWD
and the tender process was done at PWD Headquarters and State PWD while
State/District PWD acted as Superintending Officer/Representative of
Superintending Officer. Audit findings revealed that management of the construction
of Malaysian Meteorological Department quarters, stations and offices was
satisfactory and achieved its objectives. However, there were few weaknesses as
follows:
54
i. weaknesses in project planning;
ii. Certificate of Practical Completion was issued before the works were completed;
and
iii. works done by contractors were inappropriate/incomplete/not complying with
specifications/of low quality.
b. It is recommended that PWD takes the following actions:
i.
strictly enforcing the contract agreement and take action against contractors for
breaching the conditions of contract;
ii. ensure that the contract is signed by relevant parties within the stipulated time so
that Government interest is protected; and
iii. monitor and supervise work progress by contractors and ensure that works are
done appropriately/completely, complying with specifications and of good quality.
Actions should be taken to rectify works which have not been done according to
specifications, inappropriate and of low quality.
MINISTRY OF TOURISM
29. Management Of Providing/Upgrading Tourism Facilities Programme
a. The objectives of the Providing/Upgrading Tourism Facilities Programme were to
provide and increase basic/tourism infrastructure and repair as well as upgrading
tourism facilities. The Ministry of Tourism Malaysia (Ministry) had allocated a sum of
RM795.14 million under the Ninth Malaysia Plan and the Economic Stimulus
Package for the programme. The allocation was to implement 846 infrastructure and
maintenance projects covering a total of RM548.81 million for 210 infrastructure
projects and RM246.33 million for 636 maintenance projects. As at December 2011,
a total of RM772.41 million (97.1%) was already spent. In general, Audit findings
revealed that the number of projects completed was satisfactory where 742 (87.7%)
of 846 projects had been completed. However, Audit on projects based on samples
revealed the following weaknesses:
i. improper project planning;
ii. payment had been made for construction works/supplies that were not
done/delivered;
iii. construction works and supplies were not according to specifications and of low
quality/not fulfilling tourism requirements;
iv. projects were not being optimally utilised; and
v. unsatisfactory maintenance of projects and ineffective project monitoring.
b. It is recommended that the responsible parties take the following actions:
i.
the Ministry should evaluate the outcome and impact of all projects within this
programme so that the Government achieves value for money for all expenses
incurred;
55
ii. the Ministry/State Office of Ministry of Tourism Malaysia should take into account
the suitability of location/land/design so that the tourism facilities could be
used/utilised safely, comfortably and conveniently thereby ensuring objectives
are achieved effectively;
iii. the Ministry/State Office of Ministry of Tourism Malaysia should monitor closely
the implementation of the entire project to ensure that it is completed properly
and take stern action against those who fail to perform as stipulated;
iv. the Ministry/State Office of Ministry of Tourism Malaysia should ensure
responsible parties take immediate action to rectify damages and defects,
enhance security, monitor vandalism/theft cases and conduct periodic
maintenance so that projects could be used optimally and continuously; and
v. the Ministry/State Office of Ministry of Tourism Malaysia should review the needs
and workload of supervising officers so that they correspond to the number of
projects implemented.
30. Upgrading Of Penang Hill Railway Project, Penang
a. Under the Ninth Malaysia Plan, the Ministry of Tourism Malaysia (Ministry) had
planned to upgrade the Penang Hill Railway in Penang to provide efficient, effective
and viable train services as an attractive tourist destination. Alam Langkawi Sdn.
Bhd. had been appointed as the contractor for the project through open tender for a
contract period of 48 weeks with a contract value of RM59 million. The project was
completed on 31 January 2011 and the Defects Liability Period expired on
31 January 2012. Audit findings revealed that generally project management was
satisfactory. However, there were some weaknesses as follows:
i. delay in completing the project;
ii. some upgrading works were of low quality and there were weaknesses in service
operations after handing over to Penang Hill Corporation (PHC) especially on
human resource management;
iii. weaknesses in preparation of the operations manual which was
incomprehensive;
iv. failure to carry out maintenance for the train operations as scheduled; and
v. management of used train assets by the Public Works Department (PWD) and
PHC was not done properly.
b. It is recommended that the responsible parties take the following actions:i.
PWD should check more closely and ensure that all construction works are
complete and defects are rectified properly by the contractor;
ii. the Ministry and PWD should take appropriate actions on the failure of PHC to
carry out maintenance for the train operations as scheduled as it could affect the
safety of passengers;
56
iii. PHC should ensure that officers responsible for the operation were provided
training, exposure and experience in hands-on operation so as to ensure smooth
operation and prevent accidents; and
iv. PWD and PHC should enhance the control on the storage and maintenance of a
complete and updated list of used assets as they are of high value.
MINISTRY OF FEDERAL TERRITORIES AND URBAN WELLBEING
Kuala Lumpur City Hall
31. Management Of Integrated Transport Information System Project
a. The Integrated Transport Information System Project (ITIS) represented an
alternative to develop and integrate the information system relating to traffic and
transportation to overcome the traffic congestion problem in the Klang Valley. The
objectives of ITIS were to create a traffic information collection system in a
systematic and advanced manner so that it could be beneficial for planning and
management of traffic flow as well as to improve efficiency of incident management.
The ITIS Project was implemented by a consortium company with a cost of
RM365.74 million for a period of 32 months (1 August 2002 until 31 March 2005)
and another company was appointed as the Project Consultant with a fee totalling
RM7.31 million and reimbursement cost of RM0.68 million. The Project Director was
the director from Department of Urban Transportation, Kuala Lumpur City Hall
(KLCH). The total cost of this development project was fully borne by the Federal
Government. The three fundamental components of the ITIS Project were external
equipment, Traffic Management Centre building (TMC) and system application. At
the same time, KLCH created an ITIS Call Centre at TMC and also provided Early
Assistance Services. Audit findings revealed that the management of the ITIS
Project on the whole was unsatisfactory. Among the weaknesses found were as
follows:
i.
the percentage of usability of the external equipment such as CCTV, Automatic
Incident Detection and Variable Message Signs costing RM136.65 million was
less than 50%;
ii. out of 1,600 Automatic Vehicle Location System purchased costing RM11.37
million, only 1,408 (88%) had been utilised and the utilisation was terminated 3
years after the date of supply;
iii. the application for lease of land for the construction of TMC building was
rejected by the Department of Director General of Land and Mines because the
lease was already awarded to Technology Park Malaysia (TPM). As a result,
KLCH was compelled to pay RM8.49 million to TPM for the sub-lease with a
leasing period of 30 years and lost the rights to the ownership of the TMC
building which was worth RM36.87 million;
iv. a total of 10 out of 18 computer hardware at the workstation for the ITIS
application operation were damaged;
57
v. the achievement of the objectives could not be determined because KLCH has
not conducted a cost-benefit analysis before and after the development of the
ITIS Project.
b. It is recommended that the responsible parties take the following actions:
i.
KLCH should increase monitoring on the work of the contractors to ensure that
they comply with the fixed frequency schedule set for maintenance;
ii. the Government should ensure that the planning and design of the system are
not based on proprietary concept (characteristics which are closed and limited to
changes) but should be based on open architecture concept (characteristics
which are open and more flexible to changes) for the development of other
transportation information system projects in future; and
iii. the Government should carry out a thorough cost-benefit analysis on the viability
of the transportation information system project such as ITIS before
implementing it.
MINISTRY OF EDUCATION MALAYSIA
32. Solar Hybrid System Project For Rural Schools
a. The Ministry of Education Malaysia (Ministry) is responsible for ensuring that all
schools in the rural and remote areas have 24 hours electricity supply by the end of
2007. However, due to budget constraints, the Ministry targeted to achieve this goal
not later than by the end of the Ninth Malaysia Plan. Three methods were designed
to supply electricity to rural schools in Peninsular Malaysia, Sabah and Sarawak
which were solar hybrid, generator set or power grid line. At present, the Solar
Hybrid System Project (SSH Project) was already carried out in Peninsular Malaysia
and Sabah only. In Sabah, it was implemented in two phases which were Phase 1
involving 78 schools and Phase 2 involving 101 schools. In Peninsular Malaysia, a
SSH Project involving 48 schools was implemented by Tenaga Nasional Berhad’s
subsidiary which was TNB Energy Services Sdn. Bhd. (TNB-ES) through direct
negotiations. Audit findings revealed that in general the project met its objective to
provide 24 hour electricity to rural schools. However, there were several
weaknesses as follows:
i.
all the SSH Projects were not completed on the dates as originally stipulated in
the contract and extensions of time were approved between 232 to 272 days;
ii. weaknesses in project planning where there were overlapping between the solar
hybrid system and the power grid lines system and buildings built were not used;
iii. poor work quality such as water pipe connections were not in order, cracks on
the walls of buildings and distribution of electric power supply was not
comprehensive;
iv. maintenance of a hybrid solar system was not satisfactory as the frequency of
periodic inspections as scheduled was not enough, the vicinity of the hybrid solar
58
stations were not properly maintained, projects with expired defect liability period
suffered damages and not functioning, Register of Damage Complaint was not
maintained and equipment were not registered;
v. safety aspects were not given due attention as solar hybrid system in Sabah was
not equipped with fire detection and suppression system compared with SSH
project in Peninsular Malaysia, grease trap systems were not included in the
design and flammable materials were not stored in a safe place; and
vi. project monitoring was not satisfactory because all projects failed to be
completed within the stipulated time and were given extension of time, some
installation, construction and maintenance works were of poor quality.
b. It is recommended that the Ministry takes the following actions:
i.
plan in a comprehensive manner by taking into account the coordination
between ministries/agencies, weather factor and difficulties of access so that the
projects could be completed according to the schedule and overlapping of
projects could be avoided;
ii. review SSH projects which are not used anymore because they already received
electricity supply or overlap with grid lines so that the equipment could be
transferred to other schools which are in need or be used as a replacement tool
or disposed of;
iii. discuss with the responsible parties to determine the actual needs of the building
components before implementing the project;
iv. ensure that all construction defects are rectified properly by the contractor within
the stipulated period in order to avoid losses to the Government from incurring
the related costs;
v. study the increase of frequency of periodic maintenance as preventive measure
to ensure that the components of the solar hybrid system are in good condition,
the surroundings are also clean and damaged equipment are repaired
immediately for use by students and schools;
vi. provide a standard Register of Damage Complaints and Maintenance for
school’s use to evaluate the performance of contractors in handling the
complaints; and
vii. improve safety in the area around the hybrid solar system stations particularly in
respect of fire detection and suppression system, oil and grease trap system and
the storage of oil to avoid fire, pollution, theft and vandalism.
33. Management Of Quarters
a. The quarters for the Ministry of Education Malaysia (Ministry) comprise of quarters
complexes and quarters with institution/school building complex. Among the types of
quarters are bungalows, detached houses, terrace houses, apartments and houses
of mutual assistance. Until December 2011, the Ministry had 31,759 units of
quarters complexes, Day Schools/Religious Schools/Technical or Vocational
59
Secondary Schools quarters and Aminuddin Baki Institute. The maintenance of
quarters is managed and supervised by the Ministry/Responsibility Centres with
given allocations of expenditure. From 2009 to 2011, expenditure for maintenance
amounted to RM3.138 billion. Audit findings revealed that in general the Ministry
was successful in providing quarters’ facilities in rural and remote areas and also in
towns. However, there were some weaknesses in the management of quarters as
follows:
i. specific allocations were not provided for maintenance of quarters;
ii. the Ministry did not have accurate data on the total number of quarters that were
owned by the Ministry and asset records were not properly maintained;
iii. there was no standard guidelines which resulted in inconsistent management of
quarters at District Of Education Office (DEO)/school level;
iv. deduction and payment of allowances/utility bills were improper;
v. quarters were not well maintained and misused; and
vi. control and monitoring of management of quarters were not consistent in the
Ministry/State Education Department/Institute of Teacher Education/DEO/school.
b. It is recommended that the Ministry takes the following actions:
i.
apply for allocation for preventive maintenance and provide specific allocation for
repairs and maintenance of quarters including public facilities and a database of
quarters;
ii. provide comprehensive guidelines so that quarters are managed more
efficiently, effectively and on a timely basis;
iii. ensure that application forms and agreements/undertakings to occupy quarters
are completed before officers are being allowed to occupy quarters. A
Committee to process the application and distribution of quarters should be
established to evaluate the application and approval to occupy the quarters;
iv. ensure that safety of quarters should be considered especially for vacant
quarters. Declaration Letter of Exit to be issued after residents pay
compensation for damages (if any) and to evacuate and clean the quarters;
v. standardise the deduction of residents allowance and set policy on deduction of
community house allowance and ensure that all residents of quarters are
charged at the appropriate rate for water consumption by installing water meters
on an individual basis and registered in the name of the resident;
vi. ensure that residents take care of the cleanliness of the quarters and their
surroundings and encourage the Quarters Committees to be more active in
assisting the Government to manage public facilities of the quarters; and
vii. improve the monitoring aspects at all levels so that the management and
maintenance of quarters are managed more efficiently and systematically as well
as for the satisfaction of the residents.
60
34.
Procurement Of Equipment For Vocational Subjects At Technical/Vocational
Secondary Schools
a. The Government had approved an allocation of RM76.83 million under the Ninth
Malaysia Plan for procurement of equipment for Vocational Subjects (MPAV).
A total of 1,293 units of equipment amounting to RM63.02 million had been procured
through open tender involving 14 companies.
The remaining allocation of
RM13.81 million was given to 85 Technical Secondary Schools (SMT)/Vocational
Secondary Schools (SMV) for procurement through quotation and/or direct
purchase. Audit findings revealed that in general, procurement of MPAV equipment
was satisfactory. However, there were several weaknesses as follows:
i. a company failed to provide two types of equipment worth RM1.50 million;
ii. a total of 139 units of equipment worth RM2.21 million did not follow
specifications;
iii. a total of 30 units of equipment worth RM337,077 were paid before the test run;
iv. claim for MPAV equipment supply worth RM1 million was doubtful;
v. a total of 2,447 units of equipment worth RM7.39 million were not yet/not used
when Audit was carried out; and
vi. reports on physical monitoring conducted either at the Ministry or State level
were not prepared.
b. It is recommended that the Ministry takes the following actions:
i.
enforce the law and take action against contractors who breach conditions of
contract;
ii. inform and provide schools with a copy of the contract specifications for
reference purposes upon receipt of MPAV equipment;
iii. investigate cases of payment to the supplier who did not perform a test run on
the equipment;
iv. conduct follow up inspection on the usage level of MPAV equipment in
SMT/SMV and take action to solve the related problem;
v. improve the receipt, usage and storage of MPAV equipment; and
vi. carry out periodic monitoring at the Technical and Vocational Education Division/
Asset Procurement and Management Division/Asset Management Office. The
monitoring results should be reported to the management of the Ministry so that
immediate action could be taken to overcome any weakness that arises.
35. Management
of
Cooked
Food
Supply
To
Boarding
Schools,
Technical/Vocational Secondary Schools And Government Assisted Religious
Schools
a. The Ministry of Education Malaysia (Ministry) supplies food to students who live in
boarding schools. As at June 2011, the Ministry managed the procurement of
cooked food supply to 1,010 schools throughout the country. The supplied food was
61
prepared according to the menu fixed by the Ministry. Meals were served 5 times a
day and payments to contractors were based on the number of students, number of
days and price per person per day as specified in the contract. Allocation of
RM271.23 million was approved in 2011 and a total of RM270.78 million (99.8%)
was distributed. Audit findings revealed that the overall management of cooked food
supply to 30 schools visited was unsatisfactory. There were several weaknesses as
follows:
i.
contracts were not signed or signed late, the Performance Bonds were not
submitted or submitted late and tender documents/contracts were not kept
properly;
ii. contract terms were not complied with such as food specifications, change and
modifications of orders, contractors’ employees as well as cleanliness and safety
in the dining hall; and
iii. Monthly Contractor Performance reports were not prepared by schools and
monitoring on the cooked food supply at the Government Assisted Religious
School was not carried out.
b. It is recommended that the Ministry takes the following actions:
i.
ii.
iii.
iv.
v.
ensure that Government procurement agreements are signed to protect the
interests of both parties;
take stern action against contractors who failed to submit the Performance Bond
within the stipulated period by withdrawing the offer;
increase supervision and enforcement to ensure that contractors comply with
contract terms and cleanliness/safety in the kitchen, dining hall and its
surroundings are not being compromised;
ensure that Principals and Hostel Supervisors have control over any modification
and change of specifications and menu by contractors; and
use only prescribed report forms so that activities and performance of
contractors could be evaluated and monitored effectively.
MINISTRY OF HEALTH MALAYSIA
36. Management Of Medical And Non Medical Supplies
a. The Ministry of Health Malaysia (Ministry) is responsible to ensure that medical and
non medical supplies or consumables such as oxygen masks, syringes and reagent
could be provided to meet the needs of hospitals and clinics. At the hospital, the
Department of Pharmacy is responsible for the procurement of medical and non
medical supplies. Procurement is made through tenders, quotations and direct
purchases besides through concession agreements of the Approved Price Product
List while the Main Store of the Department of Pharmacy is responsible for the
receipt, storage, distribution and disposal of medical and non medical supplies. Audit
62
findings revealed that the management of medical and non medical supplies was not
satisfactory. Among the weaknesses were as follows:
i.
basis of calculation for the Performance Bond amounting to RM45 million was
not accurate;
ii. delay between 30 to 240 days in implementing the terms of the agreement on
the development of the Pharmaniaga Information System (PHIS)/Clinic
Information System (CPS);
iii. supplies valued at RM0.41 million were received between 8 to 161 days in
advance of the order;
iv. supplies valued at RM0.27 million were received between 3 to 589 days after the
payment was made; and
v. inadequate space for storage and irregular layout of stock.
b. It is recommended that the Ministry takes the following actions:
i. ensure that the Performance Bond charged is accurate;
ii. ensure that the development of PHIS and CPS is completed as scheduled and
fines are imposed for any delay;
iii. conduct in-depth investigation in the case of payment made before supplies
received and Local Orders issued after the supplies are received or improper
payment by taking appropriate actions against the officers involved; and
iv. provide effective training on store management procedures to the officers.
37. Registration, Licensing And Enforcement Activity Of Pharmaceutical Product
a. The Pharmaceutical Services Division (BPF), Ministry of Health Malaysia (Ministry)
is responsible for enforcing the law in pharmaceutical areas including traditional
medicine, health supplements and cosmetics. The objective of enforcement
activities is to ensure that pharmaceutical and health products in the market are of
high quality, safe and effective, regulated in accordance with relevant legislation and
are used rationally. From 2009 to 2011, a total of RM285.38 million (100.7%) was
spent compared to the allocation of RM283.29 million. At the same time, revenue
amounting to RM34.95 million was generated from the registration and licensing
activities. Audit findings revealed that in general, the performance of registration,
licensing and enforcement activities was satisfactory because issues highlighted in
2009 and 2010 did not recur in 2011 as improvements had been taken by the
Ministry. However, there were several weaknesses as follows:
i.
Licensing and Enforcement Branch (CPPF) focused more on the Licensed and
Registered Premises (47.4% to 89.9%) compared with Unlicensed Premises
(10.1% to 52.6%) even though cases of violation of the act charged in court were
rampant among the Unlicensed Premises (70.4% to 89.2%);
ii. reports on 93 cases of complaint, surveillance and investigation were prepared
late between 7 to 420 days;
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iii. seized products had not been disposed of;
iv. the development of Enforcement Management System (SPPF) and Pharmacy
Management System (SPF) worth RM4.36 million failed to be completed; and
v. different work procedures for the same activity among the states.
b. It is recommended that the responsible parties take the following actions:
i.
CPPF should carry out more enforcement on Unlicensed Premises and
coordinate more frequently with the Ministry of Domestic Trade, Co-operatives
and Consumerism (KPDNKK) to carry out integrated inspections. A Master
Register of Unlicensed Premises should be prepared;
ii. the Ministry should immediately finalise the draft Guidelines for Importation
Screening Customs Gateway so that disposal action could be implemented
quickly;
iii. BPF, Information Management Division and the Legal Adviser of the Ministry
should plan carefully and thoroughly to ensure the continuity of development of
the computer system and take appropriate actions against the contractors
involved; and
iv. the Ministry should ensure that enforcement procedures are being complied and
monitored by the Internal Auditor.
38. Management Of Hospital Equipment
a. Procurement of equipment (medical and non medical) is done at hospital level, State
Department of Health and the Ministry of Health Malaysia (Ministry). In order to
ensure that the equipment are always in good condition, the Ministry had appointed
three concession companies for maintenance of equipment namely Faber MediServe Sdn. Bhd. (Faber); Pantai Medivest Sdn. Bhd. (Pantai) and Radicare (M) Sdn.
Bhd. (Radicare). From 2009 to 2011, the Ministry had allocated a total of
RM1.328 billion for the procurement of hospital equipment and RM2.876 billion for
maintenance of equipment. Audit findings revealed that the management of hospital
equipment was unsatisfactory. Among the weaknesses were as follows:
i.
ii.
iii.
iv.
v.
procurement of 41 units of imported equipment worth RM2.10 million was done
without approval from the Ministry of International Trade and Industry even
though the value per unit exceeded RM50,000;
five contracts worth RM27.25 million were signed late between 9 to 74 days;
equipment worth RM1.03 million was supplied late between 34 to 92 days and
penalty was not imposed on the contractor as penalty clause was not stipulated
in the quotation documents/Government local orders;
eProcurement was not used at responsibility centres causing an excess
payment of RM1.01 million to contractors;
a total of 119 units of equipment worth RM4.04 million supplied since July 2010
were not used in Kuantan Hospital;
vi. long repairing period of equipment between 16 to 229 days;
64
vii. cost of repairing 57 assets exceeded their purchase cost between 1.0 to 14.5
times; and
viii. assets which were not at their location, not being used anymore and were
damaged were not removed from the assets maintenance list.
b. It is recommended that the Ministry takes the following actions:
i.
enhance monitoring to ensure that suppliers deliver equipment on time and
comply with prescribed specifications as well as include penalty clauses in the
agreement so that they could be imposed on suppliers who fail to discharge their
responsibility;
ii. take action against officers who make payment before the supply is
received/partially received or prior to testing and commissioning;
iii. claim any excess payment from the company and revise contract procedures.
Officers who are in charge of contracts and payments should refer to the
contract before making payment;
iv. plan carefully on the needs to procure equipment to avoid wastage;
v. records of equipment should be kept up to date to ensure that the equipment are
fully utilised and properly maintained to facilitate control and reference;
vi. review the agreements with the concession companies to ensure that the
Government gets value for money;
vii. ensure that obsolete, damaged and unused equipment are removed immediately
from the maintenance list of the concession companies to avoid maintainence
payments being made on those equipment; and
viii. provide continuous training on procurement management to all Government
hospital staff.
39. Construction Project Of The Kluang Hospital, Johor
a. The Ministry of Health Malaysia (Ministry) had signed an agreement with Kluang
Health Care Centre Sdn. Bhd. (Kluang HC) to construct the Kluang Hospital, Johor
with a capacity of 256 beds to replace the existing hospital. The project was
implemented through design and build method. The Secretary General of the
Ministry acted as Project Director and the Director of Engineering Services was
appointed as the representative of the Project Director. This project was completed
on 12 October 2011 and commenced operations on 30 December 2011. Audit
findings revealed that the overall construction project of Kluang Hospital was not
satisfactory. There were some weaknesses as follows:
i. appointment of consultants was improper which took up to 66 months;
ii. professional consultant fee was overstated by RM0.74 million and RM0.62
million had been paid;
iii. consultant fee amounting to RM0.75 million was paid before the contract was
signed;
65
iv. the basis of approval for Certificate of Delay and Extension of Time (EOT) 2 and
EOT 3 was questionable;
v. low quality of construction work;
vi. acquisition of 385 imported equipment worth RM11.64 million was made without
the approval of the Ministry of Trade and Industry even though it exceeded
RM50,000; and
vii. a total of 158 units completed quarters were not yet occupied by the hospital
staff.
b. It is recommended that the Ministry takes the following actions:
i.
consider taking action against officers certifying and authorizing payment to the
consultant before the agreement is signed.
ii. collect back the over payment of consultancy fee from the contractor.
iii. monitor contractor works and ensure that works which do not follow
specification, not proper and incomplete are rectified immediately so that the
new hospital could operate at its optimum level. Actions should be taken against
contractors if they fail to carry out the said works; and
iv. open to other Government agencies if the hospital staff are not interested to stay
in quarters to avoid wastage.
40. Linen And Laundry Service Management
a. Linen and laundry services were privatised through an agreement with three
concession companies on 28 October 1996. This Agreement was for a period of 15
years until 27 October 2011. Sistem Awasan Hospital Taraf Sdn. Bhd. (SIHAT) was
appointed to monitor the performance of the concessionaire services from 27
October 1997 to 1 October 2011. After the contract expired, the Division of
Engineering Services, Ministry of Health Malaysia (Ministry) took over the role of
SIHAT while Procurement and Privatisation Division was responsible for
procurement especially on tender and contract management. The Ministry had spent
a total of RM513.50 million for the procurement of linen and laundry services from
2009 to 2011. Audit findings revealed that the overall management of linen and
laundry services was satisfactory. However, there were some weaknesses in the
management of these services as follows:
i. 25% to 81.8% of the linen received were torn, faded and spoilt;
ii. Laundry Centre operated without the approval of the Ministry and violated
environmental regulations;
iii. payment for a total of 36 bills for services performed by the companies
amounting to RM7.06 million was delayed between 18 to 270 days;
iv. bills were not recorded in the Register of Bills causing the Late Bills Report
submitted to the Ministry of Finance not to reflect the actual position; and
v. additional Agreement was signed late by 8 to 66 months.
66
b. It is recommended that the Ministry takes the following actions:
i.
ensure that the quality of the linen delivered is in accordance with the standards
and ensure that the cleanliness of the linen store is at the maximum level in
consistent with established Standard of Procedures (SOP);
ii. monitor the laundry centres and ensure that work performed by a third party is
approved by the Ministry;
iii. ensure that financial regulations are complied with. Further investigation and
disciplinary action should be taken against officers who violate financial
regulations; and
iv. expedite the process of signing the agreement that is before services received
for the purpose of enforcing the rules and contract specifications to protect
Government interest.
41. Maintenance Services Of Hospital Information System
a. The Hospital Information System (HIS) was implemented at 13 hospitals in March
2002 (Phase 1) under the design and build (turnkey) concept with a total cost of
RM588.11 million. The implementation of Phase 2 involved only the maintenance of
system for 12 hospitals with a contract value of RM334.02 million. Audit findings
revealed that generally, the overall HIS maintenance services were not satisfactory.
There were some weaknesses in the management of maintenance services as
follows:
i.
ii.
iii.
iv.
v.
price difference of RM15 million between the contract awarded through direct
negotiation and open tender;
overpayment of RM0.54 million to the contractor for claim of vacant/absent HIS
project team members;
estimated difference of up to RM23.95 million between payment claims made to
the Ministry and actual payment incurred by the contractor;
hardware which did not require maintenance were included in the list of
hardware maintenance causing an increase of RM1 million in maintenance cost;
and
maintenance cost exceeded the purchase cost of hardware up to 72.5 times.
b. It is recommended that the Ministry of Health Malaysia (Ministry) takes the following
actions:
i.
check the accuracy of the amount claimed by the contractor and collect back the
amount overpaid to the contractor;
ii. in order to avoid the matters from recurring in other hospitals, the Ministry should
review the contents of contract especially in relation to terms relating to staff
leave and the actions/penalties imposed on the contractor for any default/breach
of contract;
67
iii. enforce provisions in the contract and take action against contractors who
breach contractual obligations; and
iv. fix the estimated HIS hardware maintenance base price and ensure that the
element of maintenance price is carefully checked in future HIS maintenance
services before signing the contract. Execution of maintenance services by the
contractor should also be monitored from time to time.
42.
Management Of Flying Doctor Service Programme In The State Of Sarawak
a. The Flying Doctor Service (FDS) Programme in the state of Sarawak aims to deliver
basic health services for people living in remote areas which are not accessible by
land or river transportation. As at 31 December 2011, there were 10 FDS teams
based at all Divisional Health Office (DHO) except at DHO Betong. Audit findings
revealed that the performance of FDS programme was satisfactory since the
objective to provide basic health services to the rural population had been achieved.
However, there were some weaknesses that need to be improved as follows:i.
FDS team only managed to cover 3,279 (69.93%) visits compared to 4,689 visits
as planned for the period 2008 to 2011;
ii. due attention was not given to health promotion activities and there was no
schedule prepared for the period 2008 to 2011;
iii. no medical officer was specially assigned for the FDS team. The medical officers
who were selected to join the FDS team also have their own core tasks either in
hospitals or health clinics. As a result, medical officers only managed to join 262
(14.6%) visits as compared to 1,794 visits for the period 2008 to 2011;
iv. FDS safety management programme was not satisfactory because the safety
aspect was not included in the contract and training on emergency landing was
never carried out;
v. some landing pads were not safe for landing and taking off of the helicopter; and
vi. the screening and treatment areas were uncomfortable and unsuitable.
b. It is recommended that the Ministry of Health Malaysia (Ministry) and the Sarawak
State Health Department take the following actions:
i.
ensure that FDS programme is implemented fully by the contractor as per
contract especially regarding the cancelled visiting schedule due to helicopters
mechanical problems so that the patients/rural population will be able to receive
the basic health services;
ii. more attention should be given to health promotion activities by the Sarawak
State Health Department since this activity plays a very important role in
providing basic knowledge on health management to the rural population and
also acts as a guide for them to prevent contagious diseases;
iii. ensure that medical officer is available for every FDS team during every visit
made. This is to ensure that patients/rural population receive similar standard of
68
care and expertise given to patients/residents in urban area. Hence, there is a
need to emplace permanent medical officers for FDS programme;
iv. ensure that the safety requirements are included in the new contract upon the
expiry of the current contract in 2013. Safety training including the usage of
communication tools provided in the helicopter should be given to all the FDS
team members;
v. suitable landing pad must be provided to ensure the safety of landing and taking
off of helicopters; and
vi. provide conducive and comfortable screening and treatment areas so that the
FDS team is able to carry out appropriate screening and treatment to the
patients.
MINISTRY OF HUMAN RESOURCES
Manpower Department
43. Construction Management
Technology Training Centre
And
Equipment
Procurement
At
Advance
a. As at 2011, the Ministry of Human Resources (Ministry) had established 8 Advance
Technology Training Centres (ADTEC) throughout Malaysia including the 4 newly
constructed between 2009 to 2011. Under the construction contract, the scope of
work involved construction of buildings as well as procurement of office and quarters
equipment. The procurement of equipment for the purpose of learning was not
included in the scope of construction work. For the procurement of learning
equipment, a total of RM228 million had been allocated by the Ministry of Finance
and procurement was made through direct negotiations. Audit findings revealed that
in general, performance of the construction of 4 ADTEC namely Taiping, Kemaman,
Bintulu and Jerantut was satisfactory. However, there were several weaknesses that
could jeopardize the objectives of the construction as follows:
i.
four ADTEC were not completed within the original contract period and were
approved between 1 to 6 Extension of Time involving a time period between 90
to 706 days. ADTEC Jerantut recorded the longest delay of up to 706 days (23
months);
ii. procurement of learning equipment was unsatisfactory due to delay in the price
negotiation process resulting in the inability to supply the learning equipment
immediately once the building was completed; and
iii. some works did not conform to specifications/poor quality/improper. However,
the Ministry had pledged to improve the weaknesses raised where immediate
action was taken on a number of weaknesses/defects in the work reported.
b. It is recommended that the responsible parties take the following actions:
i.
Manpower Department (JTM) should expedite to accelerate the procurement
process of learning equipment to ensure that student enrolment will be made
according to original plans and learning equipment can be tested in conjunction
69
with educational equipment before the end of the Defects Liability Period.
However, JTM is also responsible to ensure that the procurement process of
learning equipment made by the Government is in order to avoid losses;
ii. the Ministry/Public Works Department should blacklist the contractor/consultant
who fails to perform construction work in accordance with the contract; and
iii. for other projects implemented in the future, the Ministry/JTM should ensure that
construction work is performed within the stipulated period and re-evaluate the
ability of the contractor in carrying out the project in order to avoid losses and
achieve the objectives. In addition, work performed by contractors and
consultants should be monitored with strict supervision to ensure that projects
are implemented according to specifications and quality.
MINISTRY OF INFORMATION, COMMUNICATION AND CULTURE
National Department Of Heritage
44. Conservation And Preservation Of Heritage Programme
a. The National Department of Heritage (NHD) is responsible for conserving and
preserving the nation’s heritage. An allocation of RM82.30 million was approved to
NHD under the Conservation and Preservation of Heritage Programme (CPHRP).
The objectives of this programme are to research, collect, conserve, revive and
develop national inheritance either cultural or natural heritage as well as movable or
immovable heritage. Audit findings revealed that in general, CPHRP was not
satisfactory. Among the weaknesses in the management of the programme were as
follows:
i. complete information on the implementation status was not maintained;
ii. conservation work was not of quality;
iii. completed projects have not been put to adaptive reuse;
iv.
v.
vi.
vii.
lack of supervisory control over expenses;
no official guidelines on conservation work;
management of information and records was not regularised; and
lack of conservation programme monitoring mechanism.
b. It is recommended that NHD takes the following actions:
i.
enforce the concept of historic building conservation measures, working
principles, framework and standards of conservation of historic buildings as
stated in the UNESCO World Heritage Convention and as set out in the Burra
Charter by Australian International Charter for The Conservation and Restoration
of Monument and Sites (ICOMOS);
ii. document, update and complete all data and information with regard to the
implementation stage of the historic building conservation work before, during
and after conservation;
iii. enforce financial management control mechanism to ensure that financial
regulations are complied with;
70
iv. conduct further investigations and take disciplinary actions against public officers
who are negligent in discharging their duties; and
v. develop a monitoring and evaluation mechanism to assess the effectiveness of
programme in terms of achieving programme objectives and targets set.
MINISTRY OF WOMEN, FAMILY AND COMMUNITY DEVELOPMENT
Department Of Social Welfare
45. Social Assistance Programme
a. The Department of Social Welfare (JKM) of the Ministry of Women, Family and
Community Development (Ministry) is responsible for implementing Social
Assistance Programme. There are 10 schemes under the provisions of the Federal
Government in the form of financial assistance provided to individuals or families
who qualify. Audit findings revealed that there were weaknesses in the management
of this programme in which the issue that was raised in the 2009 Auditor General's
Report have yet to be fully addressed as follows:
i.
ii.
iii.
iv.
v.
investigation process for 114 (33.4%) out of 341 applications was not settled
according to the time stipulated in the Client Charter;
notification of results was not made according the time stipulated in the Client
Charter where 275 (57.1%) out of 482 applications were informed late between 8
to 910 days;
review on cases of existing aid recipients was not carried out within the
stipulated time frame;
e-Bantuan system was not fully utilised; and
workload problem due to increase in number of cases/review cases per year
have yet to be overcome.
b. It is recommended that the Ministry/JKM take the following actions:
i.
identify appropriate mechanisms to address the weaknesses that occur in the
process of investigating, approving, reviewing case and distributing aid money.
The Ministry/JKM should rectify weaknesses of the e-Bantuan System so that
the usage of this system could achieve 100%.
ii. ensure that Social Welfare Department District/Village/Division maintain proper
and up to date records and documents to avoid duplication of approval and
payment.
Ministry Of Higher Education
46. Academic Training Scheme For Institution of Higher Education
a. Academic Training Scheme for Institution of Higher Education (SLAI) was approved
by the Government with an allocation of RM1.006 billion under the Ninth Malaysia
Plan. The objective of this programme was to improve the quality of academic staff
of the Public Institutions of Higher Education (IPTA) with doctorate (PhD)
qualification or its equivalent. Audit findings revealed that generally the objective of
71
SLAI under the Ninth Malaysia Plan was not achieved as the Ministry of Higher
Education (Ministry) only sponsored 3,517 academic staff against its target of 6,103
staff for the period 2006 to 2008. Apart from that, the implementation of the scheme
was also not in order because of the following weaknesses:
i.
the Training Information System was not up to date resulting in inaccurate
payment to the sponsored recipients;
ii. a total of 99 sponsored recipients who had reported themselves at IPTA have
not submitted their thesis, still writing thesis or waiting for viva (oral examination
for thesis) results.
iii. no evidence that the extension of the study period was approved and there were
cases of approval by unauthorised officers; and
iv. lack of monitoring by the Ministry on the study progress of the sponsored
recipients.
b. It is recommended that the Ministry takes the following actions:
i.
update the personal file of sponsored recipients by identifying sponsor cases
where studies had been terminated. Besides that, the record in the Training
Information System should be complete and updated;
ii. review allowance received by other sponsored recipients to ensure that there is
no over/under payment;
iii. review authority of officers in approving the extension of study period by taking
into account the workload and increase in annual sponsorships; and
iv. enhance monitoring through cooperation and effective coordination of
information with Study Leave Unit at IPTA.
MINISTRY OF DEFENCE
47. Married Quarters Facilities For Malaysian Armed Forces
a. The Ministry of Defence (MOD) provides Married Quarters facilities to Armed Forces
comprising four services namely Navy, Air Forces, Army and Joint Forces. Under
the Ninth Malaysia Plan, MOD had completed 38 Married Quarters projects with the
initial cost of RM1.740 billion. As at December 2011, 46,880 units of various class
Married Quarters had been built for the four services. Audit findings revealed that
the overall construction performance of 12 Married Quarters projects built within the
Ninth Malaysia Plan and management of Married Quarters were unsatisfactory.
Among the weaknesses found were as follows:
i.
contractors failed to complete construction within the initial contract period and
were given extension of time from 94 to 1,240 days;
ii. completed Married Quarters projects comprised of a number of construction
defects and damages and contractors failed to make good all defects/damages
within the stipulated period;
iii. increase in project cost of RM174.43 million (15.5%) to RM1,297.18 million
compared to initial project cost of RM1,122.75 million;
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iv. weaknesses in management of Married Quarters facilities provided such as
Married Quarters units were not fully occupied, furniture supplied were of low
quality and the level of satisfaction among the armed forces towards the Married
Quarters facilities was less than satisfactory; and
v. contract administration and management of maintenance were also less than
satisfactory.
b. It is recommended that the Ministry of Defence takes the following actions:
i.
ensure that eligible and capable contractors are appointed for construction works
and supply Married Quarters facilities;
ii. inspect and ensure that the contractor makes good all defects/damages
immediately within the stipulated period before releasing the performance bond.
Adjustment of project cost for works not carried out by the contractor should be
made;
iii. impose value management for all projects that cost RM50 million to obtain value
for money in terms of the Ministry’s expenditure;
iv. ensure that all available Married Quarters units are occupied optimally and take
proper action to fill up vacant Married Quarters units and repair those Married
Quarters units which are damaged; and
v. ensure that contract conditions are enforced to protect Government interest and
to avoid financial implication that could result in losses to the Government.
National Service Training Department
48. Management Of National Service Training Programme
a. Based on the National Service Training Act 2003, those aged between 16 to 35
years old need to undergo National Service Training. This training is conducted in
camps approved by the Government for 3 months and it comprises of physical
module, nationality, character building and community service. National Service
Training Department is responsible to provide the programme curriculum based on
the components set. As at 31 December 2011, the Ministry of Finance had
approved 87 camps that operate under National Service Training Department. About
596,604 trainees had successfully attended this programme for the period 2004 to
2011. Audit findings revealed that overall, the management of National Service
Training in 7 camps visited was less than satisfactory. Among the weaknesses were
as follows:
i.
camp facilities such as trainee accommodation blocks, accommodation blocks
together with rest rooms for trainers and training facilities did not comply with the
Schedule of Compliance (SOC) as stipulated in the contract document;
ii. bus services were not utilised optimally; and
iii. claims for ration payment were not done accordingly.
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b. It is recommended that National Service Training Department takes the following
actions:
i.
monitor National Service Training Programme camps that do not comply with the
stated terms and conditions and state in detail the penalty for Service A. Stern
action should be taken against camp operators who fail to comply with the SOC.
National Service Training Department should consider whether to extend the
contract of camp operators who deliver unsatisfactory services;
ii. ensure that every National Service Training Programme camp utilises bus
services optimally to get value for money in terms of bus rental expenditure; and
iii. revise clause 8.6 of contract agreement by specifying guidelines and procedures
for ration claims used in all National Service Training Programme camp to avoid
confusion and improper payment.
MINISTRY OF HOME AFFAIRS
49. Construction And Management Of Johor Ministry Of Home Affairs Complex
a. On 22 December 2006, the Ministry of Finance had given approval to the Ministry of
Home Affairs (MOHA) to implement the construction of Johor Ministry of Home
Affairs Complex (Complex) through design and build direct negotiation by Syarikat
SP Setia Berhad. The construction of this Complex was to facilitate public dealings
with MOHA Departments/Agencies under one roof besides providing a comfortable
and safe working environment to officers and employees of the Ministry. The
Complex valued at RM190.43 million was built on an area of 16.7 acres of land in
Kempas, Johor Bahru and completed on 18 March 2011.
Eight
Departments/Agencies of MOHA had been housed in this Complex. Audit findings
revealed that the overall management of the construction of the Complex was
satisfactory and had met the Ministry’s objectives. However, there were some
weaknesses in the implementation and construction of the Complex as follows:
i.
weaknesses in the management of construction such as delay in submitting
extended Performance Bonds and the management of Provisional Sums;
ii. construction work/supply of equipment was improper or of low quality;
iii. facilities provided were not suitable; and
iv. maintenance programme was not prepared and training programmes to take
over Complex were attended by inexperienced officers.
b. It is recommended that MOHA takes the following actions:
i.
ensure that the best offer is accepted to protect the interests of the Government
so that supplies and services received under the Provisional Sums are of best
quality;
ii. ensure that Project Director/Representative submits instructions in writing to the
contractor to take remedial actions immediately on defects, imperfections or
damages identified/found within the stipulated period;
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iii. take into account the requirements set out in the next construction project and
ensure that supervision and monitoring are carried out during construction so
that the quality of construction works is in accordance with contract
requirements;
iv. ensure that storage facilities provided meet the prescribed safety requirements;
and
v. training programmes are carried out to ensure successful transfer of technology.
Officers and employees involved in the training must be experienced, skilled and
hold permanent posts so that handing over of the Complex is done smoothly and
achieved the goals set.
Anti-Smuggling Unit
50. Management Of Enforcement Activities
a. Anti-smuggling Unit (UPP) was established on 28 June 1976 as a single unit action
(strike force) to combat smuggling and illegal entry of foreign migrants at the
Malaysia-Thailand border. The main enforcement activities of UPP involved
operations (roadblocks, patrols and intelligence) and surrender of confiscated
goods/arrested illegal immigrants (illegals) to the main agency. Audit findings
revealed that the performance of enforcement activities was satisfactory. However,
there were some weaknesses as follows:
i.
the Committee Against Smuggling Activities Coordinating Team (JPAMP) at
Federal and State levels did not hold meetings as scheduled;
ii. failure to comply with related regulations and orders;
iii. problems in filling vacant posts and supervising officers’ grades are lower than
the officers supervised; and
iv. logistics and facilities requirements were not well managed.
b. It is recommended that the Ministry of Home Affairs and other responsible parties
involved take the following actions:
i.
ii.
iii.
iv.
v.
JPAMP at Federal and State levels should meet as scheduled to ensure that the
coordination of anti-smuggling enforcement activities could be performed
effectively and regular monitoring carried out;
comply and implement all the proposed amendments to MKN Instruction No. 15
in order to strengthen the administration and management of UPP;
review the possibility of UPP being established as a department so that staffing
is governed solely by UPP and its integrity as a strike force team in Malaysia is
guaranteed;
UPP management should take immediate action to repair damaged houses as
well as conducting periodic maintenance on other houses; and
increase the number of vehicles which are suitable for conducting enforcement
activities, transportation and unloading of confiscated goods so that the role of
UPP could be carried out more efficiently and effectively.
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Royal Malaysian Police Force
51. The Management Of Undeveloped Land
a. Section 4, Federal Lands Commissioner Act 1957 empowers the Federal Lands
Commissioner (PTP) to act as the federal landowner. The implementation of duties
and functions as PTP is under the jurisdiction and control of the Department of
Director General of Land and Mines (JKPTG). The Land Unit under the
Development Division, Ministry of Home Affairs (Ministry) and the
Departments/Agencies under the Ministry are responsible for managing the land
development under its ownership efficiently. Audit findings revealed that the
management of undeveloped land in Royal Malaysian Police Force was not
satisfactory. Among the weaknesses identified were as follows:
i.
same issues had been raised in the 2007 Auditor General's Report where there
were still undeveloped land which had been trespassed for squatters settlement
and agricultural activities;
ii. agreements for leased land lots were not renewed;
iii. rental was not collected; and
iv. discrepancies between land records kept by JKPTG and the Ministry/
Departments/Agencies
b. It is recommended that the responsible parties take the following actions:
i.
the Ministry may consider renting out undeveloped land temporarily. In addition,
continuous monitoring should be done and reports should be made to JKPTG for
cases of trespassing so that appropriate actions could be taken immediately;
ii. enhance enforcement at JKPTG and the Land Administrator with the support
and assistance from the Ministry, Departments and Agencies;
iii. ensure that tenancy agreements are signed for all rented land and payment
data/Tenants’ Subsidiary Accounts are properly maintained. JKPTG also needs
to take appropriate action against tenants who violate the terms of agreement;
and
iv. federal land records between JKPTG, Ministry and Departments need to be
reconciled so that the enforcement, controlling and monitoring of federal land
could be done effectively.
Royal Malaysian Police Force
52. Construction Of The Marine Police Base Lahad Datu, Sabah
a. Marine police base in Lahad Datu, Sabah is the most strategic base in enforcing
maritime law and to monitor and protect our waters from external threats and
attacks, especially in the "Ops Pasir” east coast of Sabah. The Construction of The
Marine Police Base Lahad Datu, Sabah was approved by the Economic Planning
Unit of the Prime Minister’s Department under the Eight Malaysian Plan to be
implemented by the Ministry of Home Affairs (Ministry) for the use of the Marine
Police of Royal Malaysia Police. The project was divided into 2 phases: land
reclamation (Phase I) and building construction (Phase II). The contract value for
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Phase I amounted to RM21.96 million whereas Phase II amounted to RM68.80
million. The project was completed on 31January 2011 and had been occupied
since April 2011. Audit findings revealed that the implementation for the construction
of this project was satisfactory where the project was completed and had achieved
its objectives. However, there were weaknesses as follows:
i.
ii.
iii.
iv.
v.
the project took 2 years 5 months to start from the date approved by the Ministry
of Finance which was 12 August 2002 until the date of the actual possession of
the site;
the project was delayed and approved with 2 extension of time totalling 299 days
for Phase I and 3 extension of time totalling 528 days for Phase II;
Work Variation Orders were approved after the contract had expired;
design/specifications were not suitable and construction works were
unsatisfactory/incomplete; and
the Ministry did not plan and prepare contract for cleaning services of the
construction site after the project was handed over to users.
b. To ensure that the weaknesses highlighted are rectified and to avoid the same
weaknesses from recurring in the future, it is recommended that the Ministry and
responsible parties take the following actions:
i.
ii.
iii.
iv.
v.
vi.
the Ministry of Home Affairs/ Ministry of Finance should take immediate action to
rectify the problems that exist in the project planning and implementation. This is
to ensure smooth implementation of the projects and objectives to be achieved
according as planned. It is also to ensure that the Contractor is not affected by
deferred Government decision from complying with the prescribed schedule of
project implementation;
the Ministry should ensure that approval from relevant authorities is obtained
before any construction work is being offered;
the Ministry should take action against consultants who fail to take into account
the specific needs when preparing building design which cause prolonged
discomfort and inconvenience to users by blacklisting them from participating in
any Government construction projects in the future;
the Ministry through the appointed consultants should ensure that work
performed by the Contractors comply with the specifications and quality set to
ensure quality of construction;
the Ministry/Royal Malaysian Police should plan and prepare contract for
cleaning and maintenance services after delivery of project by the contractor so
that the building and facilities are in good and satisfactory condition for future
projects; and
the Ministry and consultants should ensure that remedial actions are taken on all
damages/defects within the stipulated period. If the contractor fails to repair the
damages/defects reported, actions should be taken to deduct the remaining 50%
of the Performance Guarantee Bond and adjust the final accounts.
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Department Of Civil Defence, Malaysia
53. Management Of Emergency Relief Equipment Procurement
a. The Department of Civil Defence, Malaysia is equipped with the latest emergency
relief equipment to enable it to carry out emergency relief services. The procurement
of emergency relief equipment was done through tender by the Ministry of Home
Affairs whereas procurement made through quotations and direct purchases were
carried out by the Department Of Civil Defence, Malaysia. Audit findings revealed
that overall the management of emergency relief equipment procurement in the
Department of Civil Defence, Malaysia was satisfactory. However, there were still
some weaknesses as follows:
i.
the purchase of 60hp ELPT 4-Stroke Mercury boat engines in 13 State Civil
Defence Department Offices made through direct purchases was not in order
because the total purchase value was more than RM50,000;
ii. the officer responsible for receiving equipment in the State Civil Defence
Department Office, Kedah was not authorized in writing;
iii. some equipment were not registered; and
iv. the storage place for equipment was not suitable/not safe because it was not
fitted with iron grille.
b. It is recommended that the Department of Civil Defence, Malaysia takes the
following actions:
i.
ii.
iii.
iv.
v.
ensure that procurement of emergency relief equipment is made in accordance
with Government rules and procurement rules and regulations;
plan in detail before making any procurement for any particular year to ensure
that cases of breaking down or splitting of procurements do not occur;
appoint officer who is qualified and has the expertise to receive and examine
emergency relief equipment;
ensure that all emergency relief equipment are properly registered including
those in the state offices which have not been visited by the Audit team; and
evaluate the suitability of stores used for storing boat engines in all the
Departments of Civil Defence, Malaysia offices.
PART II – MANAGEMENT OF THE GOVERNMENT COMPANIES
54. Institut Terjemahan Dan Buku Malaysia
a. Institut Terjemahan Dan Buku Malaysia (ITBM), formerly known as the Institut
Terjemahan Negara Malaysia prior to 16 December 2011 was established on 14
September 1993 with a paid up capital of RM29.41 million. ITBM acts as a lead
agency for Malaysia’s translation industry and is also responsible for publishing the
translation of original works of young writers. Audit findings revealed the following:
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i.
overall, the company's financial performance was sound because ITBM was able
to generate profit from operations and showed a positive cash flow position for
three consecutive years from 2008 to 2010;
ii. performance of the business activities was generally good where there was
increasing output from year to year in terms of translated documents, courses
held and activities involving interpretation services;
iii. there were weaknesses in the project management of e-Dictionary and e-Book
projects, the utilisation of company’s management information system and
handling stock of books; and
iv. weaknesses in updating the register of company assets.
b. To further improve the performance of business activities and governance of the
company, it is recommended that the parties involved take the following actions:
i.
ITBM Board of Directors should closely monitor the projects undertaken by ITBM
from time to time to ensure objectives and benefits targeted are achieved;
ii. the management of ITBM should ensure optimised utilisation of modules in the
Total Management Information System so that ITBM gets value for money from
it; and
iii. ITMB Board of Directors should ensure that guarantee clauses which protect the
interest of ITBM are included in the contract for future ICT projects such as eDictionary and e-Book.
55. SIRIM Berhad
a. Institute of Standards Malaysia (SIM) was established as a Government Department
under the Ministry of Commerce and Industry in early 1966. In 1974, SIM had
merged with the National Institute for Scientific and Industrial Research (NISIR) to
form a statutory body under the name of SIRIM through the SIRIM (Corporatisation)
Act, 1975 which came into force on 15 September 1975. SIRIM was corporatized on
1 September 1996 and became known as SIRIM Berhad (SIRIM) and operated with
a paid up capital of RM70 million from RM500 million approved. As at 31 December
2011, SIRIM had four wholly owned subsidiaries. Audit findings revealed the
following:
i.
SIRIM recorded an increase of RM15.64 million in net profit in 2009 compared to
RM1.16 million in 2008. However, the net profit declined to RM6.91 million in
2010 and RM6.62 million in 2011;
ii. management of activities are generally good but there were weaknesses such
as the absence of important clauses in the agreement/memorandum of
understanding signed, non-compliance with regulations, responsibility for
handing over project was not clear and project outputs were not used optimally;
and
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iii. financial management and corporate governance were good except for certain
aspects of asset management.
b. It is recommended that SIRIM takes the following actions:
i.
identify the factors that cause the KPI for each strategic objective could not be
achieved and a more comprehensive action plan should be developed to
enhance the performance of each KPI. In addition, SIRIM should also set targets
and achievements based on their activities;
ii. ensure that the signed agreement includes matter such as maintenance,
provision of training to the user and preparation of manual for the product
produced as well as closely monitor compliance with guidelines for the
preparation of memorandum of understanding and agreements;
iii. provide continuous training to officers to increase and enhance their skills; and
iv. create a standard register of assets, generate reports according to
division/department, register and label all its assets and perform checks to
ensure that the location of assets is the same as recorded in the register.
Register for the movement of assets should also be maintained to prevent loss
and misuse of assets.
56. Pengurusan Aset Air Berhad
a. Pengurusan Aset Air Berhad (PAAB) was established on 5 May 2006 with a paid-up
capital of RM410 million. PAAB is the owner and the developer of the nation's water
assets who is responsible for developing the country's water infrastructure and all
assets associated with the water system for Peninsular Malaysia and Labuan
Federal Territory. Audit findings revealed that the financial performance and
management as well as corporate governance of PAAB were satisfactory. For the
period 2008 to 2010, PAAB had recorded an increase in profit after tax which was
from RM2.31 million in 2008 to RM47.41 million in 2009 and further increased to
RM70.78 million in 2010. As at the end of 2010, retained earnings amounted to
RM120.05 million. The significant increase in 2009 was due to rental income of
water assets received beginning 2009. However, the activity performance and
management were not satisfactory which were as follows:
i.
as at to date only 5 of the 12 states participated in the National Water Services
Industry Restructuring Programme. However, only 153 (9.7%) of the 1,581 sites
of water assets ownership had been transferred to PAAB;
ii. delay in the implementation of water infrastructure projects and weaknesses in
the supervision of maintenance work carried out by the water operators; and
iii. Alternative Water Supply Projects To KLIA worth RM84.21 million which should
be completed by 15 December 2011 was still not fully operational due to the
capacity of the KLIA water tank and the existing distribution pipes which could
not accommodate the production capacity of treated water from the plant.
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b. To ensure that PAAB achieves the main purpose of its establishment, it is
recommended that PAAB and responsible parties take the following actions:
i.
follow up immediately with the State Governments with matters relating to land
ownership transfer;
ii. monitor and review the role of water operators in the implementation of projects
to ensure projects are completed according to schedule;
iii. monitor the water operators to ensure safety of water assets so that they are
maintained consistently and in good condition; and
iv. the Ministry of Energy, Green Technology and Water (KeTTHA), National Water
Services Commission (SPAN), PAAB and related parties should take immediate
action to ensure that the Sg. Labu Water Treatment Plant which is known to be
the potential source of alternative water supply to KLIA be fully operational.
57. Rangkaian Pengangkutan Integrasi Deras Sdn. Bhd.
a.
Rangkaian Pengangkutan Integrasi Deras Sdn. Bhd. (RapidKL) was established on
26 July 2004 with a paid up capital of RM300 million. On 30 June 2009, Syarikat
Prasarana Negara Bhd. (SPNB) took over RapidKL from the Minister of Finance Inc
(MKD) with 100% equity stake. RapidKL is the main operator of transit train system
for Ampang and Kelana Jaya line and bus transportation in Kuala Lumpur and part
of the Klang Valley. Audit findings revealed that in general, RapidKL operated the
train and bus services in accordance with the mandate given. However, there were
some weaknesses in terms of financial performance and management of its
activities as follows:
i.
RapidKL's financial performance was not satisfactory where the company
suffered losses in 2008 and 2010 despite recording profits in 2009. As at 31
December 2010, accumulated losses amounted to RM293.82 million;
ii. differences in cash collection records for train and bus services due to weak
management of financial documents and internal control system;
iii. the number of buses for the four models (Dong Feng 120, Iveco, Dong Feng 75
and King Long Suzhou) which could be used was less than 50%; and
iv. bus operations did not reach 100% due to insufficient drivers.
b. It is recommended that responsible parties take the following actions:
i.
RapidKL Board must ensure that the performance of the company is reviewed
from time to time to ensure that the objectives are achieved as well as improve
the quality of public transport services;
ii. improve monitoring of the counter collections and reconcile the records of the
travel ticket and the teller returns to streamline cash receipts record;
iii. expedite the process of repair and maintenance to improve the readily available
bus services;
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iv. the driver schedules should be structured to ensure that there is no shortage of
driver on duty which could disrupt the smooth running of bus services; and
v. SPNB as a company that manages RapidKL’s finance, administration, human
resources, procurement and maintenance of system should closely monitor the
operations and financial management.
58. UDA Holdings Berhad
a. On 18 November 1999, UDA Holdings Sdn. Bhd. was listed on Bursa Malaysia as
UDA Holdings Berhad (UHB) and on 4 April 2003, Malaysian Resources Corporation
Berhad took over the UHB shares and management. On 14 October 2004, the
shares of the Minister of Finance Incorporated (MKD) in UHB were sold to
Khazanah Nasional Bhd. (Khazanah). UHB was officially delisted from the Stock
Exchange on 31 May 2007. Subsequently, on 17 January 2008, the Ministry Of
Finance agreed that MKD acquired the entire UHB’s share of 176,577,186 units of
ordinary shares of RM3.00 each from Khazanah with a total value of RM529.73
million. The objective of the company after it was delisted from the Stock Exchange
was to ensure the success of Bumiputera agenda in line with the Government's
aspirations to play an important role in the urban development sector. Audit findings
revealed that the overall financial performance of UHB was satisfactory. UHB
recorded a total of RM2.03 million increase in profit in 2010 achieving a total of
RM30.84 million compared to RM28.81 million in 2008 with a loss of RM6.47 million
in 2009. UHB’s activity performance was also satisfactory where the annual
performance increased from 77% in 2009 to 88% in 2010 and continued to grow to
100% in 2011. However, the management of activities of UDA Urban Division was
not satisfactory. Among the weaknesses noted were as follows:
i.
planning and implementation of housing development were not in order where
the company failed to deliver houses within the stipulated time;
ii. projects development was not implemented as planned; and
iii. financial management and corporate governance were not satisfactory where
there were weaknesses in expenditure control with regards to the use of credit
card, payments of dividend and weaknesses in the management of assets
(asset register was not updated, assets could not be traced and not registered
with a registration number).
b. It is recommended that the responsible parties take following actions:
i.
UHB Board Of Directors should ensure that UHB management complies with
prescribed tender procedures to avoid delay in project completion;
ii. UHB Board Of Directors should ensure that UHB management focuses on
property development that has been planned to generate profit in the long term;
and
iii. the Ministry of Finance through its representative should ensure that UHB
management complies with the Companies Act 1965 and all circulars issued to
UHB management so that its management is transparent, orderly and prudent.
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59. Malaysia International Franchise Sdn. Bhd.
a. PNS Francais Sdn. Bhd. (PNSF) which was established on 2 August 2001 changed
its name to Malaysia International Franchise Sdn. Bhd. (MyFranchise) on 18 June
2007. MyFranchise is a wholly owned subsidiary of Perbadanan Nasional Berhad
(PNS) with an authorised capital of RM50 million and paid up capital of RM27
million. MyFranchise was set up as a tool to increase profits by investing in franchise
business overseas and in the country so as to generate income and improve
profitability. Audit findings revealed that the company’s financial performance for the
financial year 2008 to 2010 recorded losses for three consecutive years. Overall,
activity management, financial management and corporate governance of
MyFranchise were not satisfactory. Among the Audit findings were as follows:
i.
all investment in subsidiaries and associated companies suffered losses except
investment in Piagam Maju Sdn. Bhd. (PSMB) and part of the investment was
sold or disposed of;
ii. implementation of JomMakan prototype was not thoroughly planned, proponent
of JomMakan in Japan did not submit financial reports, investment objectives
were not met, investment was not done properly and non-compliance with terms
and conditions of the agreement; and
iii. financial management and corporate governance did not comply with regulations
such as rental agreement was not renewed, poor file management, delay in
disposal of assets and shop lot acquired was not utilised.
b. It is recommended that the responsible parties take the following actions:
i.
MyFranchise management should ensure that all investment made are in
accordance with investment policies and guidelines set;
ii. MyFranchise should ensure that all regulations stipulated in the agreement are
complied with. Without effective monitoring, it is difficult to take immediate
corrective actions should any problem arises;
iii. MyFranchise management should ensure that files related to activities are
maintained properly and updated to facilitate monitoring and easier reference of
activities as well as to enhance accountability and transparency; and
iv. MyFranchise Board should ensure that monitoring of subsidiaries is based on
achievement of targets and therefore should set appropriate achievable
performance indicators.
60. Indah Water Konsortium Sdn. Bhd.
a. Indah Water Konsortium Sdn. Bhd. (IWK) is the national sewerage company that
has been entrusted with the task of developing and maintaining a modern and
efficient sewerage system. In June 2000, the Government through the Minister of
Finance Inc. (MKD) took over the entire equity of IWK worth RM100 million from the
previous private owners at a price of RM192.54 million. At present, 99.9% of IWK’s
83
shares are owned by MKD and RM1 share is held by the Federal Lands
Commissioner (FLC). As at 31 December 2011, IWK had only one subsidiary, Indah
Water Operations Sdn. Bhd. which was dormant. As a whole, Audit findings
revealed that IWK had successfully developed a better sewerage system in the
country after 17 years of handling. However, there were some weaknesses as
follows:
i.
IWK's financial performance was not satisfactory as the company could not
generate profit and was too dependent on Government subsidies to cover rising
operating expenses. This resulted in continuous losses and until the end of
2010, IWK’s accumulated losses amounted to RM888.81 million;
ii. there were weaknesses in the operations and maintenance of sewerage
systems such as cases of theft at the sewage treatment plant involving an
estimated loss of RM25.40 million; sewage water was not treated according to
standards; damage to the structure of plant and violations of effluent standard
that resulted in a charge of license fee amounting to RM1.554 billion;
iii. project was not properly planned and Certificate of Completion was issued for
the project which failed its main component testing and commissioning.
b. It is recommended that the responsible parties take the following actions:
i.
the Board Of Directors should ensure that the company's achievements are
reviewed from time to time and continuously monitor the operational and
financial management to achieve company objectives as well as improving the
quality of services;
ii. the Ministry of Energy, Green Technology and Water, Ministry of Finance and
National Water Services Commission should support IWK application on the
country’s sewerage tariff to ensure that the rate is compatible with current
situation;
iii. IWK should strive to ensure that waste water is treated before being discharged
into the drains/public drainage; and
iv. refurbishment and upgrading of sewerage assets that are not capable of treating
sewage to the standards set must be expedited so that the effluent discharged
does not pollute the environment.
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POSTSCRIPT
85
86
POSTSCRIPT
In general, Ministries/Departments/Government Companies had good plans to
implement programmes/activities/projects. However, in terms of implementation, there
were still several weaknesses that need to be overcome immediately to ensure that
each programme/activity/project is implemented in an efficient, economical and effective
manner and achieve the stated objectives. In this regard, the following
recommendations are made to overcome the weaknesses from recurring:
a. As audits conducted by the National Audit Department are based on samples and
certain scopes, Secretary Generals of Ministry/Heads of Department/Chief
Executives should carry out thorough examination to ascertain whether other
activities have the same weaknesses and thereby take corrective actions and make
improvements. In relation to this, other than carrying out evaluation on internal
controls, the Internal Audit Unit should carry out performance audit on the
management of programmes/activities/projects to ensure that they are carried out
efficiently, economically and the stated objectives are achieved.
b. Based on Audit conducted, there were several weaknesses in the implementation of
programmes/activities/projects due to lack of monitoring/supervision by responsible
parties, insufficient technical expertise and relying completely on consultants/
contractors, no coordination among agencies involved as well as internal problems
faced by contractors. These weaknesses caused the programmes/activities/projects
not to be completed within the stipulated time, unsatisfactory works quality, increase
in cost of programmes/activities/ projects and the Government not getting value for
money for the expenditure incurred. The objectives of the programmes/activities/
projects were also not fully achieved and did not give any impact on targeted
groups. In this regard, it is recommended that:
i.
The implementation of Government design and build projects should be
reviewed as it requires higher costs compared to conventional projects. As such,
it is recommended that only complex projects which require specific expertise
are allowed to use the design and build method. The Ministry of Finance is
required to issue guidelines on the implementation of design and build projects.
Other than that, in order to safeguard Government’s interest, consultants of
design and build projects need to be appointed by the Government.
ii. A detailed study on Government projects needs to be carried out before it is
approved for implementation. For this purpose, in line with the Treasury
Instruction 182.1, agencies need to submit complete information such as status
of project site, project summary, project ceiling, annual allocation and project
schedule to the technical department. This is to ensure that the project is
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implemented according to schedule and the Government achieves value for
money.
iii. Integrated planning among agencies needs to be carried out at the early stage of
project implementation especially for big projects. For example, Tenaga Nasional
Berhad, Water Supply Department, Department of Town and Country Planning,
Department of Irrigation and Drainage, Fire and Rescue Department as well as
local authorities need to be consulted before projects are implemented so that all
basic facilities could be provided and projects could run smoothly.
iv. Ministries/Departments need to comply with Guidelines for Planning and Building
Regulations issued by the Standards and Cost Committee for the reference of
the National Development Planning Committee so that buildings are built
according to standard and cost set.
v. In order to curb the problem of failed Government programmes/activities/
projects undertaken by incapable contractors either in terms of financial or
expertise, it is recommended that companies that wish to participate in
Government’s procurement should be requested to submit information on paidup capital and its financial position for the last three years and a list of past and
present Government/private contracts involved. Companies are also requested
to inform their experience in the field that they wish to offer. All information
submitted should be supported by the companies’ declaration. This information
should be taken into consideration during the selection of contractors.
vi. With regard to the issue of equipment procured but not utilised whether due to
incomplete building/unsuitable equipment/purchase of equipment in excess/not
required, it is recommended the following:
-
View of the users must be taken into account when preparing the contract
specifications relating to equipment procurement.
Procurement of equipment should be coordinated with the progress of the
building construction. For this purpose, the schedule of equipment supplied
should be done beforehand to prevent unused equipment from being
exposed to damage and theft as well as the expiration of its warranty period
before being utilised.
vii. Controlling Officers/Heads of Department should enhance Government asset
management to avoid wastage and take serious view on maintenance,
monitoring and supervision tasks. Records on asset and inventory should always
be updated by the Ministries/Departments in preparation for the Federal
Government to move towards accrual accounting in 2015.
viii. Stern actions such as disciplinary action or surcharge should be taken against
officers who are found to be negligent or fail to discharge their duties without
reasonable justification thereby causing losses to the Government.
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ix. Stern action should also be taken against consultants who failed to discharge
their responsibilities in monitoring/supervising programmes/ activities/projects
such as imposing penalty/blacklisting them from other Government projects. In
this regard, the agreement with consultants should include provisions relating to
action that maybe imposed against them for failing to perform their duties as
specified.
c.
In addition to fulfilling the legal requirements, I hope this report will form a basis for
improving the weaknesses, strengthening efforts and enhancing accountability and
integrity. This report is also important in the Government’s effort to increase
productivity, creativity and innovation in the public service as well as a work culture
which is fast, accurate and has integrity. Indirectly, this will also contribute to the
achievement of the National Transformation Programme in fulfilling the slogan of
“People First, Performance Now” as well as the needs, interests, and aspirations of
each Malaysian.
National Audit Department
Malaysia
Putrajaya
25 July 2012
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