AUDITOR GENERAL REPORT

AUDITOR GENERAL REPORT
FEDERAL STATUTORY BODIES
FOR THE YEAR 2010
NATIONAL AUDIT DEPARTMENT
MALAYSIA
AUDITOR GENERAL’S REPORT
FEDERAL STATUTORY BODIES
FOR THE YEAR 2010
SYNOPSIS
ON THE AUDIT OF FINANCIAL
MANAGEMENT AND ACTIVITIES OF
FEDERAL STATUTORY BODIES AND
MANAGEMENT OF SUBSIDIARY COMPANIES
NATIONAL AUDIT DEPARTMENT
MALAYSIA
CONTENT
ii
CONTENT
Page
PREFACE
vii
PART I
FINANCIAL MANAGEMENT OF FEDERAL STATUTORY BODIES
xiii
PART II
IMPLEMENTATION OF ACTIVITIES BY FEDERAL STATUTORY BODIES
1. MALAYSIAN HIGHWAY AUTHORITY
-
Project Management On Senai Desaru Highway
2. NATIONAL SPORTS COUNCIL
-
xv
Management of Sport Grants
3. INDIGENOUS PEOPLE’S TRUST COUNCIL
-
xxii
Management Of Procurement
7. THE CENTRAL TERENGGANU DEVELOPMENT AUTHORITY
-
xxiii
Management Of Housing Aid Programme Under The First
Economic Stimulus Package
8. RUBBER INDUSTRY SMALLHOLDERS DEVELOPMENT
AUTHORITY
-
xx
Management Of Procurement On Advertising And Promotion
Support Activities
6. PILGRIMAGE FUND BOARD
-
xviii
Project Management On Total Hospital Information System
5. MALAYSIA TOURISM PROMOTION BOARD
-
xvii
Management Of Courses For The Hard Core Poor Under The
Second Economic Stimulus Package
4. UNIVERSITY MALAYA MEDICAL CENTRE
-
xiii
xxv
Management Of Housing Aid Programme Under The First Economic
Stimulus Package
iii
Page
9.
KEMUBU AGRICULTURAL DEVELOPMENT AUTHORITY
-
Management Of Agriculture Entrepreneur Development Programme
10. UNIVERSITY MALAYSIA PAHANG
-
xxviii
Management Of Permanent Campus Construction Project
Phase 1A
11. LANGKAWI DEVELOPMENT AUTHORITY
-
xxxii
Management Of Sport Complex Amenities
13. FEDERAL TERRITORY ISLAMIC RELIGIOUS COUNCIL
-
xxxvi
Management Of Contraceptive Supplies and Medical Equipment
16. MALAYSIAN HEALTH PROMOTION BOARD
-
xxxv
Management Of Equipment
15. NATIONAL POPULATION AND FAMILY DEVELOPMENT BOARD
-
xxxiii
Management Of Building Maintenance
14. UNIVERSITY TECHNOLOGY MARA
-
xxx
Management On The Construction Of Extension Of Kota Mahsuri
Additional Building
12. MALAYSIA STADIUM BOARD
-
xxvii
xxxviii
Management Of Grants To Non-Government Organisation
PART III
MANAGEMENT OF FEDERAL STATUTORY BODIES SUBSIDIARY
xxxix
COMPANIES
17. MANAGEMENT OF MAJUIKAN PTE. LIMITED
(Subsidiary Of Fisheries Development Authority Of Malaysia)
iv
xl
PREFACE
vi
PREFACE
1.
The Statutory Bodies Act (Accounts and Annual Report) 1980 (Act 240) requires
all Federal Statutory Bodies to submit their annual financial statements to the Auditor
General to be audited. The respective Minister is required to table in Parliament as soon
as possible the audited financial statements together with the annual report. To fulfill
these responsibilities, the National Audit Department needs to carry out 3 types of audits
as follows:
1.1. Financial Statement Audits – to give an opinion as to whether the financial
statements of the Federal Statutory Bodies for the year concerned show a true
and fair view as well as its accounting records have been maintained properly
and updated accordingly.
1.2. Financial Management Audits – to determine whether the financial
management at the Federal Statutory Bodies have been carried out in
accordance with relevant financial laws and regulations.
1.3. Performance Audits – to ascertain whether Federal Statutory Bodies activities
have been carried out efficiently, economically and achieved its desired
objectives and goals.
2.
Audit findings on Financial Management and performance audits on the
implementation of activities of the Federal Statutory Bodies are reported separately from
the audit on the Financial Statement audits of Federal Statutory Bodies. The report on
the certification of Financial Statements and Financial Performance can only be
prepared after all Federal Statutory Bodies’ financial statements have been submitted
for audit and after the Audit Certificates have been issued. My report on the financial
management and activities of Federal Statutory Bodies and Management of Subsidiary
Companies for the year 2010 have been prepared in 5 parts as follows:
Part I
Part II
Part III
Part IV
-
Part V
-
Financial Management of Federal Statutory Bodies
Implementation of Activities By The Federal Statutory Bodies
Management of Subsidiary Companies
Status of Follow Up Actions Taken By The Federal Statutory
Bodies On Recommendations In The Auditor General’s
Report For The Years 2008 till 2009
General Matters
vii
3.
Beginning 2007, the National Audit Department has implemented the star rating
system based on Accountability Index. Federal Statutory Bodies which were selected
will be evaluated objectively on its level of financial management based on measurable
criteria. The Federal Statutory Bodies rated as excellent can become a role model to
others. This will motivate Federal Statutory Bodies to diligently improve and enhance
their financial management. In 2010, this audit covers 39 Federal Statutory Bodies
selected on a rotational basis and based on the 8 main elements in financial
management. However only 31 Federal Statutory Bodies were rated while 8 others were
not rated because they were small, just established and several of the financial
management main elements were not applicable to them.
4.
Generally, the financial management performance of Federal Statutory Bodies
for the year 2010 has improved compare to 2009. In 2010, 10 Federal Statutory Bodies
attained excellent performance, compare to 2 Federal Statutory Bodies in 2009. From
the audit findings, Federal Statutory Bodies have satisfactory management structures,
clear objectives, efficient management of human resources, proper planning in filling up
posts including succession planning and career development through continuous
training programmes for their officers. Systems and work procedures are in order and
complete. Federal Statutory Bodies have also formed important committees such as the
Audit Committee, Financial Management and Accounts Committee, Integrity Committee
and Internal Audit Units. However, audit findings revealed that several financial
regulations were not fully complied with.
5.
Section 6(d) of the Audit Act 1957 requires the Auditor General to conduct
performance audit to ascertain whether the activities of the Federal Statutory Bodies
have been managed efficiently, economically and in accordance with the objectives of
these activities. The audits were conducted on various activities among others
procurement, project construction, loan management, investment, asset management,
as well as socio economic enhancement programmes. This Report contains matters
observed from the audits on 23 activities. Generally, the Federal Statutory Bodies have
planned well for their activities. However, there were several weaknesses in the
implementation of activities due to lack of close supervision, ineffective monitoring,
insufficient funds, shortage of manpower and expertise.
viii
6.
As in previous years, auditing has also been carried out on companies which the
Federal Statutory Bodies owned more than 50% equity. The audit has been conducted
to ascertain whether the management, financial management and activities of subsidiary
companies of Federal Statutory Bodies had carried out its activities effectively, prudently
and in accordance with established objectives. Analysis was also made on the financial
performance of subsidiary companies. This Report comprises the financial analysis of
99 subsidiary companies of Federal Statutory Bodies based on their Financial
Statements for the years 2006 to 2009. Matters observed from the audit of
management, financial performance analysis, financial management and activities of 16
subsidiary companies were also reported.
7.
Overall, profit before tax for 99 subsidiary companies and 55 sub subsidiary
companies for the year 2009 amounted to RM439.56 million. Audit analysis revealed
that 32 subsidiary companies earned pre tax profit for 4 consecutive years amounting to
RM656.83 million while 6 subsidiary companies incurred losses totalling RM79.65
million for the same period. A total of 34 subsidiary companies and sub subsidiary
companies paid dividends amounting to RM190.18 million for the years 2006 to 2009
while 5 subsidiary companies paid dividends for 4 consecutive years. Subsidiary
companies of Federal Statutory Bodies under the financial and hotel sector paid the
highest taxes. Besides that, 36 out of 99 subsidiary companies paid taxes amounting to
RM58.05 million to the Government and State Religious Council. In addition, 23
subsidiary companies and sub subsidiary companies were inactive while 4 of them did
not commerce operation since established. Overall, the management of subsidiary
companies was good. Nevertheless, there are still weaknesses in the implementation of
activities that need to be addressed so as to ensure activities are implemented
efficiently, properly and achieved its stipulated objectives.
8.
The National Audit Department has submitted a total of 82 recommendations to
assist Federal Statutory Bodies and Subsidiary Companies to rectify its weaknesses
raised in the Auditor General’s Report for the year 2009. Follow - up audits conducted
up to 1 April 2011 revealed that the respective Federal Statutory Bodies and Subsidiary
Companies have taken action on 70 (85.4%) out of the total recommendations while 12
(14.6%) of the recommendations, actions are either being undertaken or has not been
carried out yet.
9.
All matters to be reported have been brought to the attention of the respective
Chief Executives of the Federal Statutory Bodies and Subsidiary Companies concerned
for their confirmation. The feedbacks received have been taken into consideration in
finalising this Report.
ix
10.
I wish to express my thanks to all the officers in the various Federal Statutory
Bodies and Subsidiary Companies who have given their cooperation during the audit. I
also wish to record my appreciation and thanks to my officers who have worked
diligently and have given their total commitment to complete this Report.
(TAN SRI DATO’ SETIA HAJI AMBRIN B. BUANG)
Auditor General Malaysia
Putrajaya
16 June 2011
x
SYNOPSIS
xii
SYNOPSIS
PART I
- FINANCIAL MANAGEMENT OF FEDERAL STATUTORY BODIES
The National Audit Department carried out financial management audit at 39 Federal
Statutory Bodies in the year 2010. The objective of this audit is to ascertain whether
financial management at these Federal Statutory Bodies were being managed
according to established laws and financial regulations. The result of the audit showed
that generally the financial management at these Federal Statutory Bodies were good.
The rating system based on Accountability Index for financial management started in the
year 2007. The Federal Statutory Bodies rated as excellent can become a role model to
others. The audit covers aspects of management control, budgetary control, revenue
control, expenditure control, management of trust funds and deposits, asset and stores
management, management of investments, management of loans and submission of
Financial Statements. From the assessments carried out in 2010, the financial
management performance of 10 Federal Statutory Bodies were rated as excellent, 19 as
good and the 2 others as satisfactory. Eight others were not rated because they were
small, just established and several of the financial management main elements were not
applicable to them. As compared to 2009, 2 Federal Statutory Bodies were rated as
excellent, 27 are good and 4 others as satisfactory. This shows that the financial
management performance for the year 2010 is better as compared to 2009.
PART II
- IMPLEMENTATION OF ACTIVITIES BY FEDERAL STATUTORY BODIES
MALAYSIAN HIGHWAY AUTHORITY
- Project Management On Senai Desaru Highway
The Malaysian Highway Authority (MHA) was established under the Malaysian Highway
Authority Act 1980 (Act 231) and regulated by the Ministry of Works. MHA serves as a
regulatory agency following the implementation of privatization policies by the Malaysian
Government since 1983 that resulted in most of the functions of MHA being taken over
by concession companies. Government has approved the implementation of the Senai
Desaru Expressway Project in Johor through privatization by appointing the concession
company to build, collect tolls, operate and maintain the highway during the concession
period. The purpose of this project is to link Johor Bahru to Desaru tourist areas, reduce
congestion at the Pasir Gudang Highway, linking Johor Port and Senai International
Airport, develop the corridor along the highway and accelerate the development of the
East Coast of Johor. The construction agreement of the Senai Desaru Expressway
xiii
Project worth RM1.37 billion to build the highway that stretches 77 kilometres was
signed between the Federal Government and the concession company on 31st July
2004. An Audit carried out revealed the following matters:

Cost of land acquisition has increased from RM365 million to RM740.60 million
due to payment for compensation that exceed the market price, high injurious
affection and severance payments and interest payment of 8% due to payments
not made within the stipulated period.

Preliminary estimates and feasibility studies were prepared by the concession
company without a detailed follow-up by the Central Agency and MHA that had
resulted in the initial planning cost to be much lower compared to actual costs.

Traffic forecast made by the concession company was approved by the Road
Planning Division, Ministry of Public Works in December 2001. However, the
statistics prepared by the MHA shows that the actual number of vehicles using
the highway is less than the traffic forecasted with the achievement of only 1.9%
for the period of three months in 2009 and 8.3% in year 2010.

The project completed by the concession company was not in accordance with
specifications causing damages to the road surface and endangering road users.
Although the project for package 3 was 100% completed in April 2011, the road
surface is undulating and river protection has not been built on the Sungai Selat
Mendana, Sungai Layang, Sungai Papan, Sungai Semenchu and Sungai
Chemaran. Revetment protection has yet to be constructed along the Pulau
Juling Highway causing soil erosion along the area and pollution to the
mangrove swamps.

The concession company has failed to complete the construction work in
accordance within the stipulated period. The concession agreement did not
specify any liquidated and ascertained damages to be imposed in the event the
project completion is delayed. Consequently, MHA is unable to impose any
liquidated and ascertained damages if the project has failed to be completed
within the stipulated contract period.

Highway maintenance is unsatisfactory and the concession company has yet to
take action to resolve the non-compliance reports issued by the MHA.

Delays in completing the Senai Desaru Expressway Project have resulted in
delays for the Government receiving the income of 20% from the profits of toll
collection revenue.
xiv
Audit recommended that the Central Audit Agency and the MHA to conduct studies on
land suitability and accuracy of the alignment of the highway. The process of land
acquisition should be based on the highway alignment and planned road design. In
addition, the MHA should review the feasibility studies made by the concession
company to ensure that the facts presented are accurate and taken into account the
land acquisition costs that are realistic to avoid unnecessary significant cost increases.
MHA should ensure that the concession agreement is reviewed thoroughly and take into
account all necessary clauses in relation to the construction and maintenance of the
project to protect the interests of the Government and public safety. In addition, MHA
should impose clauses on liquidated and ascertained damages against the concession
company in the event of delays in completing highway projects and non-compliance with
terms of the agreement. All agencies involved should evaluate the traffic study prepared
by the concession company in detail before approval is given. MHA and the consultants
should monitor the project closely to ensure that the construction is carried out in
accordance to specifications, desired quality and within the stipulated period.
NATIONAL SPORTS COUNCIL
- Management Of Sports Grant
National Sports Council (NSC) was established under the National Sports Council Act
1971 and amended by 1979 Act. The function of NSC is to assist and streamline the
sports associations and organizations at the national, state and district level. NSC has
been implementing various well-planned, sustainable and comprehensive development
programmes for athletes with the cooperation of the National Sports Association (NSA).
In line with its function, NSC provides sport grants to every NSA to be used for sports
development. The Ministry of Youth and Sports has provided allocations for the athlete
development programme under the Sport Trust Fund amounting to RM236.50 million to
NSC from 2008 to 2010. NSC has spent RM208.30 million or 88.1% of the total
allocation received. An audit carried out revealed the following matters:

Application procedures for sport grants were briefly outlined in the payment
procedures and it was based on the practices adopted since the first grant was
released and there was no agreement signed. The Sports Grants Guidelines
was incomplete to ensure that processing of grant can be implemented in an
efficient and proper manner.

The balance of advances paid to NSA after completion of every tournament was
based on NSA’s claims. The existing allocations of NSC’s sports grant were not
sufficient to meet the total expenditure requested. Payment to 6 NSA amounting
to RM1.63 million was delayed between 109 to 350 days for the year 2007 to
2009.
xv

Appointment of chief secretariat and other members of the secretariat for the
World Endurance Championship (WEC) 2008 programme were not stipulated in
writing and the authorised limit for spending was also not specified.

Acquisition of 23 horses amounting to RM5.66 million was made through direct
negotiations without prior approval from the Ministry of Finance. Acquisition of
horses was made without any offer letter or agreement which requires to
stipulate the responsibility of the supplier. Payment was also made under the
name of an individual.

Five out of 23 horses purchased were eligible and have competed in the WEC
2008. The remaining 18 horses purchased at a cost of RM3.94 million do not
qualified because they failed to meet the requirements set by the Federation
Equestre Internationale.

All of the 23 horses costing RM5.66 million did not continue to compete in the
WEC 2010 and Asian Games 2010 as recommended by the Youth and Sports
Ministry because the horses have been donated to the Government and NonGovernment Agencies.

NSC has allocated RM470,000 to the Persatuan Sukan Berkuda Lasak Malaysia
(PSBLM) for organizing the circuit 5. However, the circuit 5 has been cancelled
and PSBLM has returned RM170,000 while the remaining RM300,000 was spent
on technical management fees. PSBLM handed RM300,000 to the NSC’s officer
in cash but the officer did not have a written authority to receive and spend the
money.

NSC provides RM3.65 million under the Athlete Development Programme.
However, this provision was not spend for its original purpose but RM2.25 million
or 61.6% of the total allocation was spent for advertising to promote core sport
through television, radio, newspapers and magazines.

NSC did not monitor the programme performance and expenditure of the sports
grant to ensure the grant was spent in accordance with the approved application.
Some of the NSA did not submit their performance report and the expenditure
statements to NSC.
Audit recommended that the allocation of sports grant should be planned based on the
sports programme that will be implemented by NSC and NSA to ensure the allocation
are adequate. Guidelines and procedures on sports grant should be prepared to assist
the officers or others in performing their tasks efficiently and systematically. NSA should
also submit their claim as soon as each tournament has been completed. NSC should
ensure that procurement through direct negotiations must be approved by the Ministry of
xvi
Finance. In addition, NSC should ensure that every NSA must submit their audited
financial statements in order to monitor the programme implemented in accordance with
the allocations given.
INDIGENOUS PEOPLE’S TRUST COUNCIL
- Management Of Courses For The Poor And Hard Core Poor Under The Second
Economic Stimulus Package
Indigenous People’s Trust Council (also known as MARA) has been given allocation
amounting to RM54 million under the Second Economic Stimulus Package (PRE 2)
which was channelled through GIATMARA Pte. Limited (GIATMARA) to conduct
courses for the poor and hard core groups. The aim of this course is to provide
opportunities for the poor and hard core groups to generate income and to get job
through skills training. As at December 2010, GIATMARA has implemented 1,090
courses and programmes under PRE 2 costing RM53.99 million. An audit carried out
revealed the following matters:

Procurement worth between RM5,040 to RM402,775 amounting RM38.97 million
was made through purchase order or direct negotiations without quotation or
tender proses and without approval from the Ministry of Finance.

Management fees of 10% has been imposed on 1,086 programmes
implemented amounting to RM4.93 million and was credited from the total
expenditure as an income to GIATMARA without the Ministry of Finance’s
approval.

The Standard Operating Procedures which was used for implementing the
programme was not presented to the Board of Directors for approval.

A total of 660 GIATMARA Dekat Rakyat’s programmes amounting to RM4.95
million have been used for different scope apart from the approved programme
by the Ministry of Finance which was meant for Courses to the Hard Core
Groups.

From 61 participants or 47.3% interviewed, showed that they failed to generate
income and therefore the programme objectives were not fully achieved.

About 11 courses carried out with the total expenditure of RM1.22 million were
not suitable with the participants because of their residence location, they have
no access to electricity and need large capital to start business.
xvii

The income of 18 out of 140 participants or 12.9% had exceeded the poverty
level as the condition of their houses, vehicles owned and furniture and having
swiftlets industry indicate that participants were not poor or hard core.

About 94 participants or 72.9% of 140 selected participants were not listed in the
register of e-Kasih, while 12 other participants were excluded from the list
because their income level was above the poverty line prescribed.

The market price of 10 types of equipment has a lower market price than the
price supplied between 71.9% to 400%.

Some of the equipments supplied were not suitable because there was no
electricity supply to the residence of participants, low capability of the
equipments and difficult to operate.

There were differences in price offered to the Technology Provider even though
the type of courses, number of participants and period of courses were the
same.

The first follow-up on the 45 out of 140 participants to evaluate the efficiency of
the courses was delayed between 3 to 9 months.
Audit recommended that GIATMARA’s Standard Operating Procedures should be
approved by the Board of Directors before adopting it. Approval from the Ministry of
Finance must also be obtained for exemption from quotation and tendering, charging of
management fees and conducting a programme different from the approved scope.
GIATMARA should assess the suitability of programmes and equipments supplied to the
participants so that they can generate income from the skills training and equipments
provided and ensure the programme objectives are achieved. In addition, market
research on the price of equipments shall be conducted in order to get a reasonable
price. Payments to the Technology Provider should be controlled so that there is no
significant difference in price and save costs. GIATMARA should carry out monitoring in
accordance with the stipulated period to obtain the status of the participants and take
appropriate follow-up actions so that the objectives of the programme could be
achieved.
UNIVERSITY MALAYA MEDICAL CENTRE
- Project Management On Total Hospital Information System
University Malaya Medical Centre (UMMC) was established under the Universities and
University Colleges Act 1971 and regulated by the Ministry of Higher Education. The
objective of UMMC is to construct, operate and develop a world-class medical centre to
xviii
cooperate with the Faculty of Medicine, University of Malaya in providing medical
education, training, research, practice and consultancy.
Based on the UMMC’s 2006 ICT Strategic Plan, UMMC will be transformed into a
hospital that uses ICT to its maximum level by implementing fully the Total Hospital
Information System (THIS) through tele-health technology and being paperless within
the next five years. As a move towards achieving its objectives, UMMC has
implemented a total of 17 ICT projects since 2006 with an estimated total cost of
RM63.84 million. A sum of RM50.91 million of the total cost is the cost of 4 THIS
projects which was funded under the RMK9. The THIS project which is also known as
PPUMiCARE was first developed in 2006. The project comprises of 26 clinical and nonclinical modules, clinical support including integration and technical requirements. The
PPUMiCARE project was approved by MAMPU in 2003. An audit carried out revealed
the following matters:

This project which began on 8th April 2006 with an expected date of completion
on 7th April 2009 had encountered delays between one to 36 months with two
extensions. The first extension was granted until 30th June 2009 and the second
extension was until 7th October 2009. The extension period with a penalty sum
of RM1.55 million to resolve all outstanding work had been imposed on the main
contractor starting on 8th October 2009 till 31st December 2009. Among the
factors causing delays in project implementation is the changing of partners,
products for the clinical module, clinical support and delay in implementation of
integration.

UMMC uses the Virtual Backup method as a backup to the system that has been
developed. This Virtual Backup method, also known as Virtual Tech Library, is
unpopular because the operating system and database is stored virtually in the
same server. In the event of damage to the server, the original system could not
be achieved and virtual backup system will also be affected.

Disaster Recovery Plan prepared on 23rd July 2010 was not complete. The plan
only provided the information of the officer involved, existing inventory and
restore. A Disaster Recovery Plan should describe in detail how to start the
process and update information that was stored in backup tapes before the
disaster.

Maintaining patient information which is the fundamental basis of all information
systems developed in iSOFT Patient Manager was not fully utilized. Patient
record module is a basic network relation to integration between modules in the
development of THIS project.
xix

Some doctors gave prescriptions through the system and some wrote it
manually. Manual prescriptions brought to the counter by patients caused the
Pharmacy Division inability to print the prescription through the system. In order
to overcome this problem, the Pharmacy Division had to provide pharmacists
dedicated to input the data through the system.

The Drug Charges Schedule set by UMMC could not be captured into the
Revenue Collection System. Setting of drug prices are still done manually.

Revenue collection in the Pharmacy Division was done manually and no official
receipt was issued, otherwise, information was stored based only on the audit
roll issued from the cash register. At the end of the day, the Pharmacy Division
will submit a Statement of Cash Surrender which recorded the collection of each
counter for the day to the Finance Division for the input to UMMC’s financial
system. However, this form was recorded based on the fraction of the total cash
proceeds received and the audit roll from the machine. No information on the
charges was attached to this statement.
Audit recommended that UMMC implements a Post Implementation Review of the
completed modules to identify the cause of failure of part of the modules in
PPUMiCARE system so as not to be repeated in future systems development.
Computerisation plans to be implemented should take into account the weaknesses
raised. All systems developed should be used by every user to ensure that the delivery
services to patients are effective. In addition, UMMC needs to benchmark successful
systems in other hospitals in order to address existing problems. Disaster Recovery
Plan and Disaster Recovery Centre should comply accordingly to the Malaysian Public
Sector Information & Communications Technology Management (MyMIS) to ensure
continuity of UMMC’s operations in the event of a disaster.
MALAYSIA TOURISM PROMOTION BOARD
- Management Of Procurement On Advertising And Promotion Support
Activities
Malaysia Tourism Promotion Board (MTPB) was established under the Malaysia
Tourism Promotion Board Act (Act 481) in 1992 and it is under the responsibility of
Ministry of Tourism Malaysia in 2004. The objective of MTPB is to increase the number
of foreign tourists into Malaysia as well as to encourage domestic tourism growth and
also to increase the national income. The MTPB mission is to promote Malaysia as an
excellent tourism destination in the region.
xx
In consistent with the above mission, MTPB has established Advertising Division and
Promotional Support Division to encourage the advertising and promotion activities such
as publishing pamphlets, audio visual and souvenirs. This is to promote Malaysia to
domestic and foreign tourists. An Audit carried out revealed the following matters.

The advertising projects have to be cancelled even though the Advertising
Division and Promotional Support Division are having surplus balances in their
financial allocation. This is due to the management’s decision to utilize surplus
balances for the year 2009 to meet the deficits of other divisions.

For the year 2009 and 2010, MTPB has purchased advertising spaces via direct
booking amounted to RM194.31 million or 72.1% which is higher compared to
the purchases made through tender process of RM75.38 million.

The purchase made for 1,000 units of Visit Malaysia 2007 pamphlet rack
amounted to RM1.95 million was made through direct booking without any
approval from the Ministry of Finance. There was no agreement made among
the Ministry of Tourism, MTPB and the supplier to specify the terms and
conditions of the goods and the delivery period.

The process of procurement, receiving and storing the souvenirs was managed
by the Ministry of Tourism but payments made by MTPB.

The installation of billboard in Indonesia was made without talking into
consideration the comments from the Director of MTPB Indonesia, regarding the
proposed location of installation that was not suitable.

During the audit visit to the advertising location in Johor Bahru, Penang, Kuala
Lumpur and Klang Valley the billboard location was found to be not strategic.
Furthermore, there were cases of stolen and damages on the billboard lamps.

The procurement on advertising and promotion activities carried out under the
instruction of the Ministry of Tourism was not tabled to the Board of Directors.
Audit recommended that MTPB follows the procurement regulations so that the
procurements can be examined and evaluated by the Technical Committee and
Financial Committee to ensure good return and value for money to MTPB. Furthermore,
MTPB should carry out market surveys in order to get the best offered price. The
Ministry of Tourism and MTPB should conduct an investigation on procurements that
were carried out not in accordance to financial procedures. If there is any fraud and
abuse of power, it should be reported to the related parties and disciplinary action
should be taken. In addition, MTPB should ensure that agreements with suppliers are
signed and goods received are confirmed before any payment made.
xxi
PILGRIMAGE FUND BOARD
- Management Of Procurement
Pilgrimage Fund Board (also known as LTH) was established under the Hajj Pilgrim’s
Fund Act 1995 (Act 535) effective on 1st June 1995. The main objective of LTH is to
enable Muslims to save for pilgrimage and provide services and facilities during hajj. In
line with its objective, LTH has made procurement on works, supplies and services for
development, operation and provide services to depositors and pilgrims. The
management of LTH procurement is centralised under the Procurement Unit,
Administration and Procurement Division LTH. The unit is responsible in managing
procurement activities including maintenance, tenancy and consulting services. In the
year 2009, LTH has made procurement worth RM254.25 million through tender,
quotation and direct purchase whereas in the year 2010 the amount involved was
RM164.52 million. An audit carried out revealed the following matters:

LTH has renovated Tabung Haji Complex in Bayan Lepas, Penang by
constructing an additional roof structure at the back of the hall, changing the
location of maintenance elevator as well as constructing walls and partitions in
blocks A and B without the approval of the Municipal Council of Penang.

A total of 97 Variations Order amounting to RM2.21 million or 20.5% of the
contract value has been issued for the renovation and upgrading of Tabung Haji
complex, in Bayan Lepas. However, the Variation Order no. 76 to 97 has not
been approved as the main contractor did not agree and refused to sign the
Variation Order.

Payments to contractor were delayed between 48 to 539 days from the date of
submission of their claim.

As of December 2010, Certificate of Making Good Defects and Final Completion
Certificate of Tabung Haji Complex in Bayan Lepas has not yet been issued
even though the defect liability period has expired and the complex has been
used since 2008.

A total of 13 procurement in 2009 amounting to RM7.35 million and 72
procurement in 2010 amounting to RM27.02 million has been awarded to LTH
subsidiaries through direct negotiations without the approval from the Ministry of
Finance.
Audit recommended that LTH should plan its procurement process and obtained
approval from the relevant authorities to ensure that the project can be implemented
efficiently and properly. The procurement should be made through an open tender to
ensure that only competent companies that can provide competitive prices and offer the
xxii
best value for money will be selected. If the procurement is made through direct
negotiations, approval from the Ministry of Finance must be obtained. The management
also needs to present Project Performance Report to the Board of Directors periodically
for their attention and to resolve problems arising.
THE CENTRAL TERENGGANU DEVELOPMENT AUHORITY
- Management Of Housing Aid Programme Under The First Economic Stimulus
Package
The Central Terengganu Development Authority (also known as KETENGAH) was
established in the year 1973 under The Central Terengganu Development Authority Act
(Act 104) and was regulated by the Ministry Of Rural and Regional Development
(Ministry). One of the main objectives of KETENGAH was to focus precisely on the
entrepreneurial developments with the aim of increasing the income of each head of the
household to at least RM1,000. KETENGAH has implemented Housing Assistance
Programme (PBR) under The First Economic Stimulus Package covering the district of
Dungun, Kemaman and Hulu Terengganu. The objective of the Housing Assistance
Programme was to provide financial and management aids to enable the well-being of
the targeted group to occupy a safer and more comfortable homes comparing to the
previously dilapidated condition. The aim of this programme was to improve the living
quality of the poor and the hard-core poor. The targeted group comprises of the poor
and the hard core poor who were registered with e-Kasih or People’s Welfare
Development Scheme System (SSPKR) and also included the elderly, the disable and
single mothers with many dependents. The types of the housing assistance provided
were new constructed houses with 3 rooms costing RM33,000 each and repairs to the
existing houses costing RM11,000 each. An audit carried out revealed the following
matters:

The newly constructed PBR houses in Mukim Tebak, Kemaman dan Bukit Besi,
Dungun, Terengganu were found not suitable sites because the contractors
faced difficulty in connecting the supply of electricity and water to these houses.

In the year 2009, a total of 327 from the 341 recipients or 95.9% of the PBR
assistance were not registered in SSPKR or e-Kasih but yet were given the
housing aid. As of December 2010, these recipients were not registered in the eKasih which consisted of 128 recipients for new houses and 199 recipients for
repairs to their existing houses.

From the listing in the e-Kasih, it was found that 22 out of the 251 participants
were eligible for the assistance, but only 1 participant received new house
assistance. The balance of the 21 participants consisting of 6 participants under
the hardcore poor category, and 15 others under the poor category were not
given any PBR assistance. In addition, it was found that another 3 participants
xxiii
from the list of e-Kasih who had exceeded the poverty line income were given
PBR assistance in the form of repairs to their existing houses.

Visits made to the houses of the PBR assistance recipients comprising of 73
recipients for new houses and 37 recipients for repairs to their existing houses in
Dungun, Kemaman and Hulu Terengganu District found that the recipients were
not poor because some of them owned cars and had renovated their PBR new
houses.

The PBR house construction’s plans and specifications for 83 unit new houses in
Phase II and 1 unit new house in Phase III which were constructed in June 2009
was not in accordance with the PBR Guideline No. 1 of 2009 (GP 1/2009)
because PBR Guideline No. 1 of 2008 (GP 1 / 2008) was still being used. The
differences observed between the 2 guidelines were in the construction of the
pillars and the walls of the rooms. According to GP 1/2009, the construction of
the pillars were concrete in-situ and the walls of the rooms were cement bricks
whilst GP 1/2008 stated the construction of the pillars in precast and the walls of
the rooms as 2 feet cement brick cum 8 feet plywood.

The construction works for 73 unit new houses were not in accordance with the
contract plans and specifications. Among them were the fixed ram window with
iron shield was replaced by bricks vent, 2 position adjustable vane glass
windows was modified to the left and the roof was replaced with asbestos roofing
from the original asbestos free roofing. Besides, the quality of the construction
works was found to be poor such as cracks occurred on the walls, the house
sinking, leaks in the roof and paint work pealing.

All the 89 application forms for Phase III PBR assistance were not verified by the
enumerators, not checked and approved by the supervisors from the
KETENGAH’s Poverty Eradication Division. Thus, Audit was unable to ascertain
whether the distribution of the PBR assistance was given to the targeted group.
In addition, it was also found that a total of 17 forms relating to authority given to
use the land were not signed by the authorised witness namely the District
Officer or the Land District Administrator.
Audit recommended that KETENGAH should take appropriate action to ensure that the
site chosen for the construction of PBR houses were suitable so that the houses could
be occupied according to schedule and also provided with the basic infrastructure needs
such as water and electricity. KETENGAH should also give priority to participants who
were eligible and registered with e-Kasih in the selection of PBR participants.
KETENGAH should ensure that the list of newly proposed participants was registered
with e-Kasih and those who had received the assistance be updated. Participants
selected by KETENGAH had to comply with the criteria set. The Chairman of the Village
xxiv
Development and Security Committee has to be transparent in recommending the PBR
participants and ensure that the participants recommended were truly eligible for the
assistance. In addition, KETENGAH had to adopt the latest guidelines issued by
Ministry in its implementation of PBR and also to ensure that the construction work
carried out by the contractors were of quality and comply with the contract plans and
specifications.
RUBBER INDUSTRY SMALLHOLDERS DEVELOPMENT AUTHORITY
- Management Of Housing Aid Programme Under The First Economic Stimulus
Package
Rubber Industry Smallholders Development Authority (RISDA) was established on 1st
January 1973 under the Rubber Industry Smallholders Development Act (Act 85) to
develop smallholders and rural community in line with the National Development Policy.
Based on that function, Government through the Ministry of Rural and Regional
Development has allocated a sum of RM500 million under the First Economic Stimulus
Package and a sum of RM116.66 million has been allocated to RISDA to implement the
Housing Aid Programme. The goal of this programme is to enable the target groups to
live in the safer and comfortable house compared to the previous residence as well as
to improve the quality of life.
This programme targeted rural and urban poor who have income less than a specified
Income Poverty Line in Peninsular Malaysia. Monthly income for the rural poor is
RM700, urban poor is RM740 while rural hard-core poor is RM440 and urban hard-core
poor is RM420. As of 31st December 2010, RISDA has built 2,609 units of new houses
and renovated 2,780 units of houses at a cost of RM116.66 million under this
programme. An Audit conducted revealed the following matters:

Aids were given to the ineligible targeted groups. An Audit visit to 75 new built
houses and 62 renovated houses in Selangor and Terengganu in August and
October 2010 revealed that the recipients are able to own cars and subscribe to
Astro.

Recipients of new built housing aids are required to demolish the old houses
after the new house was completed. During Audit visit carried out in Selangor
and Terengganu it was found that the old houses have not been demolished due
to recipient's request and contractors do not want to incur the cost of demolition
of old houses.

The houses given under housing aid were not occupied by aid recipients. Eight
houses out of 75 new built houses are unoccupied involving cost of RM264,000
based on the electricity meter reading and the date the houses were completed.
xxv

Based on the date handing over Letter of Works Completion, it was found that 19
houses were delayed in receiving electricity and water supply. This delay causes
the recipients late in occupying the houses that have already been built.

The completed recipients houses were built not according to specifications set
out by the Guidelines To Implement The Housing Aid Programme among them
were the table top not according to the measurement, cracked walls, leaking roof
and door sizes are not in accordance with the actual measurements.

Letters of Acceptance were not returned by the contractor within one week from
the date of the offer letter issued by RISDA. Audit review on 242 Letters of
Acceptance, it was found that 16 contractors were late in returning the Letters of
Acceptance to RISDA.

Construction of all newly built and renovated houses need to be completed
within two months from the date of the Letter of Acceptance. Based on the Letter
Of Handing Over Completion Work, it was found that 104 contractors late in
completing newly built and renovated houses.

A total of 237 contractors did not applied written approval from RISDA to extend
the period of construction. The fines of RM227,250 were not imposed on
contractors who fail to apply for extension of time for construction.

Audit review on 518 Certification of Work Completion revealed that 91 new built
houses and 80 renovated houses receive Certification of Work Completion late
from RISDA. The delay in confirmation resulting contractors late in receiving
payments from RISDA.

Audit review found that a total of 293 local orders were issue late to 133
contractors and a total of 11 local orders were issued in advanced before Letter
of Undertaking were returned by the contractors.
Audit recommended that RISDA should select the eligible participants and comply with
the criteria to achieve the objectives of Housing Aid Programme. In addition, RISDA
should also comply with the financial regulations particularly in signing of Letter of
Acceptance and the issuance of Local Order to the contractor. Confirmation of Work
Completed by RISDA should be made according to stipulated period so as to avoid late
payments made to contractors. RISDA should also monitor the work implemented by the
contractors to ensure that they comply with the specifications, quality and within the
stipulated period.
xxvi
KEMUBU AGRICULTURAL DEVELOPMENT AUTHORITY
- Management Of Agriculture Entrepreneur Development Programme
Kemubu Agriculture Development Authority (also known as KADA) was established on
30th March 1972 under the Kemubu Agriculture Development Authority Act, 1972 and
regulated by the Ministry of Agriculture and Agro-Based Industry (Ministry). The main
objective of KADA is to be an agency of excellence towards increasing the socioeconomic standards of farmers and food production in the country. The Agro-Based
Industry Entrepreneur Development Programme (IAT) was introduced in 2003 by the
Ministry with the objective to increase the farmers’ income through the growth of value
added activities to the agricultural product. The programme has been continuously
carried out under the Ninth Malaysian Plan with the objective to create 10,000 IAT
entrepreneurs earning net income of RM2,000 per month by 2010. Agro-Based
Industries set for the entrepreneurs to ventures into are based on crops, livestock,
fisheries and agro-crafts. In line with the objectives of the Ministry, KADA has come out
with the IAT programme in 2006 by focusing on 5 main activities namely construction of
product stall; product collecting and packaging centre as well as procurement of
equipments; food processing and craft workshop as well as procurement of equipments;
entrepreneur training and promotion of entrepreneur products. The Government has
allocated a total of RM6.60 million for the IAT programme from 2006 to 2010 and a total
of RM6.10 million or 92.4% was spent up to December 2010. An audit carried out
revealed the following matters:

KADA has successfully created a total of 430 agro-industry entrepreneurs
whereby 65 entrepreneurs earned an average gross income of RM2,000 per
month and the number has exceeded the target of 200 registered entrepreneurs.
A total of 50 entrepreneurs are targeted to reach gross income of RM2,000 per
month or RM24,000 per year. However, the targeted income set by KADA was
not in line with the Ministry that is to achieve net income of RM2,000 per month.

The Product Collecting and Packaging Centre namely Catfish Sausage Factory
which was completed on 22nd January 2010 with a total cost of RM392,000 has
not commenced operation. The equipments purchased in 2008 and 2009 have
yet to be used due to no potential entrepreneur to carry out the processing,
packaging and marketing activities of catfish products. The warranty period for 5
equipments worth RM488,000 has expired while the warranty period for 4
equipments worth RM237,000 cannot be ascertained.

The member of Aid Approval Committee that was established in 2010 has yet to
be officially appointed to approve the aid provided to the entrepreneur. The
committee met in August 2010 and has approved aid to be provided to 66
entrepreneurs. However, the total cost of aid for each entrepreneur was not
decided in the meeting.
xxvii

KADA did not specify the procedures during signing the Letter of Agreement with
the entrepreneurs who received the aid resulting in their failure to carry out agrobased business as stated in the application.

Audit was unable to verify the entrepreneurs who received the aid and the types
of aid as no records were maintained. In addition, KADA does not update the
register of entrepreneurs.

Monitoring by KADA was poorly implemented since no monitoring report was
prepared and the site visit was not extensively carried out involving all
entrepreneurs.
Audit recommended that KADA should plan all its activities comprehensively and
identify potential entrepreneurs in order to achieve targeted net income of RM2,000 per
month set by the Ministry. KADA should also update the registration of entrepreneurs
and ensure all entrepreneurs who received the aid were registered with KADA. Letter of
Agreement should be prepared for all aid provided and signed by the entrepreneurs to
ensure that the aid will be used in line with the programme objectives. The promotional
and marketing activities should be intensified to include all registered entrepreneurs.
KADA should ensure that monitoring carried out included all activities under the AgroBased Industry Entrepreneur Development Programme and carry out a periodic visit to
all entrepreneurs’ premises.
UNIVERSITY MALAYSIA PAHANG
- Management Of Permanent Campus Construction Project Phase 1A
University Malaysia Pahang (also known as UMP) was established on 1st February 2002
under the Universities and University Colleges Act 1971 and commenced operations on
1st May 2002. UMP has started operations by renting and renovating the Malaysia
Electric Corporation (MEC) building as a temporary campus in Gambang, Kuantan,
Pahang. UMP's permanent campus construction project was then planned in an area of
642 acres in Pekan, Pahang which can accommodate 10,000 students. The
development project of UMP’s permanent campus Phase 1A was approved by the
Ministry of Finance during the Eighth Malaysia Plan from the year 2001 until 2005
encompassing Faculty of Mechanical Engineering (FKM), Faculty of Electrical
Engineering and Electronics (FKEE) and dormitory building that can accommodate
2,000 students. However, the student’s residential building has been removed from the
scope of work due to changes in government policies that require dormitory building
should be implemented by Built, Lease, Maintain and Transfer package. In 2002, the
Ministry of Finance has approved the implementation of permanent campus project
Phase 1A through direct negotiations under the design and built method. The project
commenced with earthworks package valued at RM191 million and the construction of
two faculties as well as related infrastructure valued at RM161.16 million. Project Phase
xxviii
1A was completed in June 2009 and currently under defect liability period by the
contractor for two years ended in September 2011. An audit carried out revealed the
following matters:

Price negotiation for the construction of permanent UMP campus Phase 1A has
been negotiated for 9 times which took 28 months that is from December 2004 to
April 2007. As a result, the project cost has been drastically reduced from
RM632.33 million to RM161.16 million and several project scope were changed.

The earth work preparation was delayed by 14 months because the price
negotiation was only held after 9 months from the letter of intent issued while the
Ministry of Finance took another 5 months to finalise the price after the price
negotiation process was held.

The elimination of students’ residential building from the scope of Phase 1A
project has resulted in delays of the project price determination. UMP had also
modified some functions in the FKM and FKEE building in order to provide
conducive environment to students and officers.

UMP has spent a total of RM116.48 million on rental since operating in a
temporary campus in Gambang. If construction of Phase 1A was completed on
schedule, UMP could save about RM26.31 million including RM11.77 million for
renting residential building and another RM14.54 million for renting building for
administrative, lecturing and academic purposes.

The delay in construction of students’ residential building also caused UMP to
hire 25 buses from July 2009 for the purpose of transporting students from
temporary campus in Gambang to permanent campus in Pekan. Transportation
cost of RM5.26 million was paid from July 2009 to December 2010.

UMP has overspent a total of RM1.87 million from Phase 1A project ceiling price
of RM181.60 million compared to the total cost of RM183.47 million.

Technical engineering consulting services agreement was only signed on 22
April 2009 even though the date of commencement of Phase 1A work had began
on 11 June 2007.

A total of RM477, 300 was spent on plant nursery but plants were damaged and
did not grow well.

Late submission of application by UMP to the Ministry of Finance for approving 4
of the 5 variations order. However, UMP has performed the work in advance.
xxix

The quality of construction works by contractor was not satisfactory because the
finishing was not tidy and many defects.
Audit recommended that for the next phase, UMP should plan precisely the statement of
needs by taking into consideration the user requirements and obtain adequate allocation
for construction projects. The scope of the project and the scope of work shall be
determined during planning stage to avoid any changes in project scope that can cause
additional costs and delays in the project completion. UMP and consultants should
monitor closely the projects to ensure construction implemented in accordance with
specifications, quality and completed within the stipulated period. In addition, UMP and
consultant shall identify all damages and defects and corrective action taken by the
contractor during defects liability period. Soil feasibility studies should be carried out to
ensure trees and grass planted grow well to avoid incurring additional costs in
maintaining the landscape.
LANGKAWI DEVELOPMENT AUTHORITY
- Management On The Construction Of Extension Of Kota Mahsuri Additional
Building
Langkawi Development Authority (LADA) was established to spearhead the socioeconomic development, infrastructure and tourism development, providing opportunities
to develop economic and tourism sectors; encourage community participation in socioeconomic and cultural activities and to promote Langkawi as an international tourism
destination. In line with this objective, Kota Mahsuri Complexes was built as a tourist
attraction in Langkawi. In February 2005, LADA has approved the construction of Kota
Mahsuri additional buildings, that are an auditorium that serves as a theatre for cultural
performances and silat teachers' house to increase the uniqueness of Kota Mahsuri
Complexes. LADA has allocated a sum of RM4.50 million under the Ninth Malaysia Plan
for the construction of the buildings. An Audit carried out revealed the following matters:

The application for approval for Planning and Construction Work was submitted
late to the Local Authority. LADA had been fined a total of RM19,500 by
Langkawi Town Council because construction was carried out before obtaining
permit.

The architect firm has taken into consideration loan that has not been approved
in the tender construction.

Contractor’s CIDB Registration Certificate has expired during the tender
evaluation and has not been renewed.
xxx

No comprehensive soil investigation made to identify the suitability of the land
before the auditorium and silat teachers' house design was made. This causes
high water retention in the auditoriums’ orchestra pit.

The contractor has installed the structure of auditoriums’ roof by using wood
instead of steel as specified in the agreement. The wood used was not in
accordance with approved standards. Audit visits found that the auditorium roof
trusses were slanting and might not be able to withstand the weight of the roof.

LADA has approved two extension of time totalling 396 days with a delay of
approval of 320 days even though the contractor has submitted an application
for extension of time before the date of completion.

Certificate of Completion was issued 77 days after the expiry of the second
Extension of Time.

LADA has deferred payment for the claim under 15 and 16 progress payment
amounted to RM189,100 until the issue of roof trusses and adjustment of interim
progress claim is finalized.

Work Stop Order has been issued by LADA on 4th January 2010 and the project
has been listed as sick project by the Ministry of Finance (MOF) on 13 March
2010. Public Works Department has agreed to take over the project for
completion after discussion with LADA and Ministry Of Finance.

Quality of construction is unsatisfactory and not in accordance to the
specifications such as roof trusses not according to the design, honeycomb at
the main door and steel beams are exposed and rusty.

Monitoring carried out by LADA was ineffective and had caused delay in taking
action to determine the status of the project. This has caused Certificate of Non
Completion to be issued late and the project has to be stopped and listed as a
sick project.
Audit recommended that LADA should plan and ensure that planning approval obtained
before the commencement of the development project. The design and specifications in
the agreement should be finalised before the agreement signed and a comprehensive
soil investigation should be conducted to avoid delays in project completion. LADA
should ensure that the contractors appointed are experienced and with strong financial
position. LADA and the consultants appointed should monitor the construction project
closely to ensure the quality of the construction work are in accordance to specifications
and the project complete within the stipulated period.
xxxi
MALAYSIA STADIUM BOARD
- Management Of Sport Complex Amenities
Malaysia Stadium Corporation (also known as PSM), formerly known as
Merdeka Stadium Corporation was established under the Malaysia Stadium Corporation
Act 2010 (Act 717) and regulated by the Ministry of Youth and Sports (Ministry). The
function of PSM is to manage, maintain, prepare, promote and manage events at the
Bukit Jalil National Sports Complex, Bukit Kiara National Sports Complex, Shah Alam
Panasonic National Sports Complex and Jalan Duta National Sports Complex. In line
with its functions, PSM has been approved an allocation of RM28.70 million in 2008 and
a total of RM30 million each for the years 2009 and 2010 for utility expenses and
maintenance of sports complexes. PSM has also been allocated RM36 million for the
development expenditure under the Ninth Malaysia Plan (9MP) and RM10 million under
the Economic Stimulus Package to carry out upgrading project, repairs and
maintenance, the turf replacement project at the National Hockey Stadium and
renovation of office and changing room. An audit carried out revealed the following
matters:

Damages to the roof at the Bukit Jalil National Stadium requires immediate
repair. In addition, there are also damages at the Putra Stadium, Pedestrian
Walkway and the National Aquatic Centre in Bukit Jalil and the Stadium Juara in
Bukit Kiara as follows:
-
The guarantee period to the roof at the Bukit Jalil National Stadium has
expired in 2008. However, the roof is still being used even though most of
the parts were torn and the screws of the cable were loose. PSM has been
allocated a total of RM30 million under the 9MP in December 2010 to replace
the roof. PSM through the Ministry has handed over the project to the Public
Works Department in April 2011 as PSM has no technical expertise.
-
Rusted iron on the roof of the Putra Stadium in Bukit Jalil has caused the
roof to leak. An amount of RM6 million has been allocated in January 2011
under the 10th Malaysian Plan to replace the roof. PSM through the Ministry
handed over the project to the Public Works Department as PSM has no
technical expertise.
-
The guarantee period to the roof at the National Aquatics Centre has expired
in 2008. The roof is still being used even though most of the parts was torn.
The roof of the walkways from the Bukit Jalil National Sports Complex to the
Light Rail Transit System Station was torn due to heavy rains and storms. In
addition, there was also a leakage at the roof of Stadium Juara but the
stadium was still being used. Allocation for the replacing or repairing the roof
xxxii
of the National Aquatic Centre and the pedestrian walkways in Bukit Jalil and
the Stadium Juara has yet to be approved.

There was a delayed in completing the turf replacement project at the Bukit Jalil
National Hockey Stadium that caused the stadium to be closed. This has
resulted PSM to incur losses amounting to RM36,000 for the period from
January to June 2011.

Land lease agreement which was signed on 18th July 2006 for the development
of motoring sport at the Bukit Jalil National Sports Complex is invalid. The
reason was that PSM has signed an agreement with the company three years
prior to the land lease agreement signed with the Federal Land Commissioner
on 1st June 2009. The development work that was started in early 2010 has
been postponed since August 2010 to an indefinite date.

The outstanding rental income for the sports complex as at January 2011
amounting to RM9.11 million involving 627 debtors.

Lawn Tennis Association of Malaysia has not paid the office rental amounting to
RM118,800 per annum since March 2009. In addition, the association has yet to
remit the estimated income of RM189,580 in respect of 26 tournaments held at
the Jalan Duta Tennis Complex to PSM.
Audit recommended that PSM plans its financial requirements for maintenance and
repairs to ensure that the sports complex remains in good condition and safe. Besides
that, PSM should prepare its business plan, particularly the strategies to improve the
management of sports complex rental income so as to reduce its reliance on the
government. PSM also need to prepare scheduled maintenance plan that includes
preventive and corrective maintenance in respect of the entire sports complex so that its
facilities can be used in the long term. Follow-up actions should be taken to ensure that
the tenants and organisers settle their outstanding rents before using the stadium for
their subsequent event.
FEDERAL TERRITORY ISLAMIC RELIGIOUS COUNCIL
- Management Of Building Maintenance
Federal Territory Islamic Religious Council (also known as MAIWP) was established in
February 1974 under the Enactment of State of Selangor Administration of Islamic Law
and incorporated in July 1993 by the Administration of Islamic Law (Federal Territories)
Act 1993 (Act 505). The function of MAIWP is to set the policy and act as the main body
for overseeing the development and expansion of Islam in the Federal Territory of Kuala
Lumpur, Putrajaya and Labuan. In line with its functions, MAIWP has 296 buildings in
Federal Territories until the end of 2010, consisting of 59 mosques, 66 surau, 26 primary
xxxiii
religious schools, 112 terrace houses, 18 shop houses and 15 other buildings. MAIWP
is responsible for maintaining the building except for the mosques, surau and primary
religious schools. In 2009 and 2010, a total of RM6.57 million was spent for building
maintenance which includes residential buildings, offices, training institutions, hotel and
hospitals. An audit carried out on the building maintenance revealed the following
matters:

Sewage and sewerage system at Taman Pelangi has been maintained by
MAIWP since 1995 and not being handed over to Indah Water Konsortium Pte.
Limited. (IWK). The reason is the sewerage plant does not meet the
specifications set by IWK. MAIWP has to bear the full cost of maintenance
without charging any cost to the residents of Taman Pelangi. Monthly
maintenance schedule for the sewerage plant has not been prepared by MAIWP
and maintenance was carried out based on complaints made by the residents of
Taman Pelangi.

Project of upgrading Wisma Baitulmal should be completed on 23rd December
2010 but was not completed on time. Besides, the contractors did not apply for
extension of time for the delays. MAIWP has imposed Liquidated and
Ascertained Damages (LAD) of RM29,440 or RM460 per day due to the delays
for the 64 days.

Rental agreement between MAIWP and Kolej Sains Dan Kejururawatan Pusrawi
Pte. Limited has not been prepared even though the company has occupied
Wisma Baitulmal since May 2009. Rental payment of RM179,800 was not
collected for the period of 20 months from that college.

There were damages to the ceilings, walls, windows and electrical wiring in the
dormitories and classroom in Kompleks Darul Kifayah due to vandalism caused
by students. MAIWP has to incur additional cost to repair the damages which
has been recurring.

There were effects of water moisture on the ceiling at the Multipurpose Hall and
Engineering Workshop in Institut Kemahiran Baitulmal caused by the leaking
roof. The ceiling in the toilet of Sewing Class Building was also damaged due to
vandalism caused by the students.

Periodic inspection by the Maintenance Unit has not been carried out but the
maintenance and repair will only be made after getting reports of damage from
the occupants.
xxxiv
Audit recommended that MAIWP expedites the handing over of sewage and sewerage
system at Taman Pelangi to the IWK to solve the sewerage problems faced by the
residents immediately. MAIWP should ensure the upgrading or renovation of buildings
undertaken by the contractors must be completed according to specifications and within
the prescribed period. The rental agreement with the tenant must be prepared
immediately and ensured that the monthly rental payment collected to avoid loss of
revenue. Scheduled maintenance programme should be implemented to ensure that all
the buildings are safe, conducive and comfortable to the occupants.
UNIVERSITY TECHNOLOGY MARA
- Management Of Equipment
University Technology MARA (also known as UiTM) was established under the ITM Act
1976 (Act 173) and is regulated by the Ministry of Higher Education. Among UiTM’s
main objectives is to be an excellent organisation to ensure an effective and efficient
management of human resources, financial and equipments in order to achieve UiTM’s
vision. UiTM has a main campus in Shah Alam, 15 branch campuses, 3 satellite
campuses and 21 allied colleges in Malaysia. UiTM has allocated RM355.18 million for
the year 2008, RM402.83 million for the year 2009 and RM268.59 million for the year
2010 for the procurement of equipments. Until the end of 2010, UiTM has spent
RM893.45 million or 87% from the total allocation. An audit carried out on this project
revealed the following matters:

A total of 49 equipments worth RM1.16 million were still unused because the
related courses have been transferred to other campus, no research requirement
and the clinic is not in operation yet.

UiTM has procured 41 equipments valued at RM909,886 but were not used
optimally. Among the equipments identified are 3 units of Local Area Network
Trainee valued at RM164,007, 4 units of Spectrum Analyze valued at RM99,824
and 13 types of other equipments valued at RM605,588 which were not being
used for more than a year. This has resulted in students were not able to use
the equipments optimally and could affect their studies.

Facilities Management Office in Shah Alam campus and Kuala Terengganu
campus procured air conditioners through quotation instead of tender even
though the totalled value exceeded RM500,000 per annum for the year 2009 and
2010. This is because there is no proper planning for the procurement of air
conditioners for each year.

UiTM rented computer equipments such as desktops HP Compaq 6005 Pro
worth RM24.96 million in the year 2009 for the main campus and branches.
However, there was a delay in signing the agreement and stamped duty was not
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paid. The branch campus could not ascertain whether the supplier has abided by
the terms of the agreement because a copy of the agreement was not given to
them by the main campus.

UiTM has also rented furniture worth RM2.55 million in the year 2009 for College
Melati in UiTM Shah Alam usage. A copy of the agreement was not provided to
the management of the College to ensure that all furnitures were delivered in
accordance with the specifications. There is no evidence shown whether
inspection was carried out by the supplier because UiTM did not maintain
records of damages/lost/stolen furniture.

Action has not been taken to dispose unused equipments worth RM3.07 million.
Besides that, the disposal process took between 2 to 6 years and this has
caused UiTM to have serious storage problem.

A total of 147 cases of missing equipments worth RM1.74 million from the year
2008 to 2010 did not comply with the Treasury Circular No. 2 of 2009 where
there was no police report, initial and final reports not prepared within the
stipulated period. Besides that, the register for missing and written off
equipments was not updated and delays in adjustments to the accounting
records.
Audit recommended that UiTM should have a comprehensive planning for the academic
programmes, faculties’ facilities development and equipments’ procurement according
to its current needs to ensure maximum utilisation of equipments. UiTM should plan its
procurement according to needs in order to avoid wastage and procurement should be
carried out according to financial regulation to get value for money. Equipment rented
from suppliers should be monitored to ensure the equipments were delivered according
to the agreed terms and conditions. Disposal procedures should be adhered to ensure
the disposals of damage, obsolete and uneconomical to repair equipments were carried
out in a timely manner. This will also avoid diminution in value and utilisation of storage
space.
NATIONAL POPULATION AND FAMILY DEVELOPMENT BOARD
- Management Of Contraceptive Supplies And Medical Equipment
National Population and Family Development Board (also known as LPPKN) was
established under the Family Planning Act 1966 and amendments to the Family
Planning Act (Amendment) Act 1984. It was regulated by the Ministry of Women, Family
and Community. The objective of LPPKN is to enhance awareness, knowledge and
practice of family values among community leaders, parents, prospective parents and
youth, to strengthen and improve family well-being through the collaborative and
efficient programmes so as to create a quality population. LPPKN spent a total of
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RM11.56 million from 2006 to 2010 of its allocation for the procurement of medical
equipments and contraceptive supplies. An audit carried out revealed the following
matters:

A total of 5 units autoclave machines amounting to RM65,000 for LPPKN clinic in
Dungun, Ampang, Kuala Lumpur, Bentong and the University Malaya Medical
Centre were not installed within the stipulated period. Delays in installation of
autoclave machines have caused equipments not being fully utilised and
warranty period expired.

A total of 6 units autoclave machines amounting to RM78,000 which were
supplied in 2007 and 2008 to LPPKN clinic in Tanjung Malim, Bidor, Kampar,
Taiping, Mentakab and Kuala Terengganu were used before receiving the
certificates of accreditation.

A total of 31 types of medical equipments were not used at LPPKN clinic in
Kampar, Sri Manjung, Kuala Terengganu and Klang because these clinics were
supplied with new equipments even though the old equipments could still be
used. This causes the equipment supplied in excess of requirement.

Distribution of contraceptives were not in accordance with the clinic requirements
which led to expired stocks amounting to RM192,574 were disposed in 2009 and
2010 involving the states of Selangor, Terengganu, Penang, Pahang, Kedah,
Johor, Malacca, Perlis, Kelantan, Sabah and Sarawak.

A total of 39 medical equipments purchased from 1981 to 2004 amounting to
RM300,133 in the Division of Human Reproduction has yet to be disposed even
though approval has been obtained twice that is in March and August 2010.

Medical equipment register in LPPKN clinics was incomplete because
information such as the official order number, purchase price, signatory of the
Head of Department and equipment location was not recorded.
Audit recommended that LPPKN plans its procurement of equipments and distribution of
contraceptive supplies based on requirement for optimum usage. LPPKN should
dispose its medical equipments and contraceptives immediately after obtaining approval
from the Board of Asset Examiners. A complete and updated record should be
maintained for easy detection of medical equipments and to facilitate monitoring.
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MALAYSIAN HEALTH PROMOTION BOARD
- Management Of Grants To Non-Government Organisation
Malaysian Health Promotion Board (LPKM) was established on 1st April 2007 under the
Health Promotion Board Act 2006 (Act 651) and regulated by the Ministry of Health.
LPKM was established with the purpose of becoming a centre of excellence in health
promotion at national and international level. Pursuant to its function, LPKM has been
planning and implementing programmes on health promotion activities for the benefit of
the community to achieve excellence health. Among the objectives of health promotion
activities are to finance activities carried out by sports recreational and cultural
organization and to promote healthy way of life and environment. Until December 2010,
a total of RM9.39 million grants were approved to 197 non-governmental organizations
(NGOs) involving 233 activities. An audit carried out revealed the following matters:

LPKM did not prepare the annual plan that includes grant expenditure allocation,
activities to be funded, targeted groups, number of grant applications, monitoring
schedule and evaluation of the effectiveness on the use of grants by NGOs.

Ministry of Health has approved RM77.88 million operating grant to LPKM for the
year 2008 to 2010. A total of RM50.42 million grants have been allocated to
NGOs to implement health promotion activities. By the end of 2010, only RM9.39
million or 18.6% from RM50.42 million has been given out to the NGOs.

Grant application must use the LPKM application forms and supported by
certificate of registration of organisation, its constitution, the implementation
schedule of activities, details expenditure of activities and bank account
statements of NGOs. A total of nine NGOs that received grants amounting to
RM800, 000 failed to submit their grant application forms even though seven of
the projects had received special approval from the Minister of Health to
implement the health activities.

LPKM has approved a grant of RM45,000 on 26th October 2008 to the
Recreational Celebrities Club to perform health activities of Together For Health.
However, this grant application was not submitted and evaluated by the
Committee For Giving Small Grant.

Sam Wong Kong Devotees Association has signed an agreement with LPKM on
13th January 2009 for the Lion Dance Championship activities in 2008 with the
approved grant amounting to RM341, 950. LPKM has paid 4 times amounting to
RM307,755 or 90% of the approved grants. Until February 2011, the said
Association has not refunded the excess grant of RM49,857 even though LPKM
has sent reminders in September 2010.
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
Grants given are not in accordance with the stages of payment and the rate
prescribed. Payments should not be more than 3 stages and a total of 3 NGOs
have received the first stage between 50% to 90% of approved grants.

Under the agreement, NGO should submit their Final Report on projects
including the Financial Report that have been certified within two months after
the activities have been carried out in order for LPKM to release the final
payment of 10% of grant approved. A total of 28 NGOs did not submit their Final
Report of projects even though the activities had been implemented.
Audit recommended that LPKM get initial information about activities and projects of
NGOs to be implemented in accordance with the direction and objectives of LPKM.
LPKM needs to plan the annual activities with information from NGOs. LPKM should
ensure all interested NGOs to submit their applications forms in order for LPKM to
evaluate the viability of the proposed activities and projects. Besides that, LPKM should
review its guidelines pertaining to health promotion grants so that it can be implemented
properly and more efficiently. LPKM’s enforcement officers need to plan its enforcement
schedule so that the visit covers all NGOs that received grants. This is to ensure health
promotion activities and projects are carried out effectively and achieved the desired
objectives.
PART III
- THE MANAGEMENT OF FEDERAL STATUTORY BODIES SUBSIDIARY
COMPANIES
Currently there are 204 subsidiary and sub-subsidiary companies of Federal Statutory
Bodies which have been gazetted to be audited by the National Audit Department. The
objectives of incorporating these subsidiaries are for business activities, investments
and socio economic. The business activities are profit oriented so as to obtain a
reasonable return and to provide more efficient and effective services to the public. As
at May, 2011 a total of 99 Federal Statutory Bodies Subsidiary Companies and 55 subsubsidiaries financial statements were received for the year 2006 to 2009. These
subsidiaries and sub-subsidiaries were analysed in respect of their financial status and
performance, dividends, bonuses and tax payments. The analysis showed that the
Federal Statutory Bodies had a total investment of RM3.74 billion in these subsidiaries
as at 2009. Overall, profit before tax for these 154 subsidiaries and sub-subsidiaries for
the year 2009 amounted to RM439.56 million which showed a significant increase as
compared to RM322.62 million for the year 2008. Audit analysis revealed that 32
subsidiaries recorded profit before tax for 4 consecutive years amounting to RM656.83
million while 6 other subsidiaries recorded losses totalling RM79.56 million for the same
period. Meanwhile 24 subsidiaries paid dividends to their respective Parent Bodies
totalling RM156.46 million and 4 of which paid dividends for 4 consecutive years.
Subsidiary companies under the financial and hotel sectors paid the highest tax.
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Besides that, 36 out of 154 subsidiaries and sub-subsidiaries paid taxes amounting to
RM181.70 million to the Government. There are also 23 inactive companies out of which
4 had not commenced operation since incorporated. Management audit was conducted
on 17 subsidiaries in 2010 and 1 of the audit findings were reported in full while 2 of
which were reported in summary form. Generally, the management of the Federal
Statutory Body’s companies was good. However, there are several financial
management weaknesses which need improvements particularly on the internal
controls. The Federal Statutory Bodies companies had in fact planned its’ activities well.
However, in the implementation of activities there are still several weaknesses which
need to be addressed so as to ensure that they are implemented efficiently, properly
and achieved its objectives.
MANAGEMENT OF MAJUIKAN PTE. LIMITED
(Subsidiary Of Fisheries Development Authority Of Malaysia)
The Fisheries Development Authority of Malaysia (LKIM) had incorporated Majuikan
Pte. Limited (Majuikan) on 7th April 1997 with an authorised capital of RM15 million and
a paid up capital of RM8.92 million. Majuikan also incorporated 7 subsidiaries and had
investments in 3 associate companies. The objective of Majuikan is to serve as a
business branch and to carry out LKIM’s fishery commercialising function. In the year
2005, Majuikan recorded a profit after tax of RM1.99 million. This profit was recorded
through the collection of import duties of RM1.25 per kilogram of fish imported into
Malaysia. However, beginning 2006 until 2009 Majuikan showed losses of RM3.64
million to RM5.82 million a year. This is due to the withdrawal of the import duties
imposed by Majuikan by LKIM beginning on January 2006. As a result, the accumulated
losses of Majuikan as at 31st December 2009 were RM12.08 million. Majuikan has also
taken advances from LKIM totalling RM27.10 million as at the end of 2009 to finance its
operations, investments and advances to 7 subsidiaries.
From 1994 to 2010 Majuikan had invested RM12.88 million in 7 subsidiaries. All the 7
subsidiaries had recorded a drop in their shareholders funds and had accumulated
losses totalling RM7.68 million as at the end of 2009. However 3 subsidiaries have
begun to show positive results recently. Asas Ombak Sdn. Berhad and Majuikan
Forwarding Sdn. Berhad showed profits after tax from the year 2008 and Majuikan
Engineering & Maritime Services Sdn. Berhad from 2007. A management Audit had
been carried out on Majuikan’s wholly owned subsidiary that is Asas Ombak Sdn.
Berhad (AOSB). AOSB was incorporated on 6 April 1995 under the Company’s Act
1965 with an authorised and paid up capital of RM5 million. AOSB main activity is to
carry out deep sea fishing and selling of fishery equipments. An audit carried out in
Majuikan and AOSB revealed the following matters:

The financial performance of Majuikan and its group was not satisfactory as
shown in the high accumulated losses and RM27.10 million owing to LKIM.
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
AOSB fishing vessels are too old that is between 7 to 25 years. This caused the
vessels to break down frequently and require very high maintenance costs. From
2007 to 2009, AOSB spent on the average RM951,503 a year to maintain the 10
fishing vessels.

Majuikan Board of Directors rejected a proposal to appoint a contractor
recommended by a consultant to construct 4 steel vessels. Instead the Board
appointed another company which does not have experience in building steel
fishing vessels. This resulted in the failure to complete the construction of the
vessels within the time and specifications stipulated. In consequence, as at the
end of December 2009 AOSB still owes Agro Bank RM2.49 million out of RM5
million loans approved. AOSB also failed to pay interests amounting to
RM54,541 to Agro Bank. The 4 steel vessels are rusty and abandoned in an
open area.

AOSB had paid a total of RM914,500 to a contractor to construct fibre glass
vessels. Out of that amount, a sum of RM309,750 is for the engines which were
already delivered by the supplier. The purchase of the engines was made
through direct purchase and not through quotation as required under Majuikan
Financial Management And Accounting Manual.

The AOSB Board had signed an agreement to construct the fibre glass vessels
before getting Agro Bank’s approval. This has caused AOSB to change the
agreement which had already been signed and to sell 2 of its existing vessels for
RM750,000.

AOSB had rented out fishing permits to Vietnamese fishermen at RM3,500 a
month for a trawler permit and RM2,000 for a rawai permit. Apart from that, the
Vietnamese vessels enjoyed subsidised diesel by paying 10 cents commission
per litre to AOSB.

There is no contract or agreement between AOSB and the vessels captains to
protect both parties interests because the captains are normally foreigners.
Audit recommended that AOSB should have a mechanism to set target revenue for
deep sea fishing and also the landing frequency of fishing vessels at LKIM jetties. AOSB
should also ensure their activities do not contravene with the existing laws and only
local fishermen are entitled to diesel subsidies. Apart from that, Majuikan should also
ensure the selection of contractors is based on experience, expertise and financial
capabilities in the construction of their fishing vessels. A comprehensive plan need to be
in place for the procurement and construction of fishing vessels taking into account
budget, vessels replacement and the maintenance costs involved. AOSB should have
xli
detail standard operating procedures for its daily operations in order to improve its
financial management. Majuikan should monitor AOSB activities so that it remains
competitive and have a strong financial footing.
xlii