synopsis lkan2012 siri 1 - website

8/12/2019 Synopsis Lkan2012 Siri 1 - Website

1/94

i

AUDITOR GENERAL REPORTACTIVITIES OF THE FEDERAL MINISTRIES/DEPARTMENTS

AND MANAGEMENT OF THE GOVERNMENT COMPANIES

SERIES 1

NATIONAL AUDIT DEPARTMENTMALAYSIA


2/94

ii


3/94

iii

CONTENTS


4/94

iv


5/94

v

CONTENTS

PAGE

PREFACE xi

SYNOPSIS 1

PART IIMPLEMENTATION OF ACTIVITIES BY THE FEDERALMINISTRIES/DEPARTMENTS

PRIME MINISTERS DEPARTMENT

Malaysian Mari t ime Enfo rcement Agency

1. Management On The Acquiring Of Movable AndImmovable Assets 5

Department Of Nat ional Unity And Integ rat ion

2. Management Of Grant, Payment Of Activities AndData Collection Of Rukun Tetangga 8

MINISTRY OF FINANCE

Inland Revenue Board Of Malaysia

3. Construction Of The Processing, Production AndWarehouse Centre Project In Bangi 11

4. Management On Company Instalment PaymentScheme (CP204 Form) 14


6/94

vi

ROYAL MALAYSIAN CUSTOMS DEPARTMENT

5. Management Of Export Activities 16

6. Risk Management On Clearance Of Air CargoImports 19

MINISTRY OF WORKSPubl ic Work s Department

7. Contract Administration Of PWD Projects 21

MINISTRY OF TRANSPORT8. Upgrading Of Kota Kinabalu International Airport

Project, Sabah 23

MINISTRY OF FEDERAL TERRITORIES ANDURBAN WELLBEINGKuala Lumpur City Hal l

9. Management Of Recreational Facility Projects InKuala Lumpur City 26

MINISTRY OF EDUCATION MALAYSIA10. Management Of 1Malaysia Milk Programme 29

11. Construction And Equipment Procurement OfPreschool Project 32

12. Management Of Building And Compound CleaningServices At Schools/Educational Institutions 36

MINISTRY OF HEALTH13. Management Of Nursing Training Programme 39

14. Management Of Ambulance 42


7/94

vii

MINISTRY OF HOUSING AND LOCAL GOVERNMENTFire And Rescu e Department Of Malaysia

15. Management Of Fire Vehicles And Equipment 45

MINISTRY OF WOMEN, FAMILY AND COMMUNITYDEVELOPMENT16. Management Of Financial Assistance To

Non-Governmental Organisations 48

MINISTRY OF DEFENCE17. Management Of Dry Ration Supply For Royal

Malaysian Navy 50

MINISTRY OF HOME AFFAIRS18. Construction Of CIQ Complex And Jetty At Melaka

River Mouth, Melaka 52

Royal Malaysian Pol ice Force

19. Procurement Of Beechcraft King Air 350 Aircraft ForAir Operation Force 54

The Registry Of Soc iet ies Malaysia

20. Management Of Societies Registration Activity 57


8/94

viii

PART IIMANAGEMENT OF THE GOVERNMENT COMPANIES

21. Pendinginan Megajana Sdn. Bhd. 60

22. Sarawak Hidro Sdn. Bhd. 64

23. Halal Industry Development Corporation Sdn. Bhd. 67

24. Technology Park Malaysia College Sdn. Bhd. 70

POSTSCRIPT 75


9/94

ix

PREFACE


10/94

x


11/94

xi

PREFACE

1. Articles 106 and 107 of the Federal Constitution

require the Auditor General to audit the Federal

Governments Financial Statement, financial

management, activities 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. Beginning 2013, the Auditor

Generals Report will be tabled at each sitting of the

Parliament or three times a year in line with the

Government Transformation Programme 2.0 in fighting

corruption under the National Key Result Areas. 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 Governments FinancialStatement 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/


12/94

xii

Departments is in accordance with relevant

financial laws and regulations.

1.3. Performance Audit - to evaluate whetherFederal Government activities have been carried

out efficiently and economically to achieve their

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

2012 consists of 2 parts as follows:

Part I : Implementation Of Activities Of The

Federal Ministries/Departments

Part II : Management Of Federal Government

Companies

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,


13/94

xiii

asset management, law enforcement, procurement,

revenue management, education, health, agriculture,

human capital, contract administration and socio-

economic upgrading programmes. This report contains

observations from the audit of 21 programmes/

activities/projects of 15 Federal Ministries/

Departments and management of 4 Government

Companies. Generally, weaknesses observed are

such as improper payment; work/procurement did not

follow specifications/was of low quality/was unsuitable;

unreasonable delays; wastage; weaknesses in

revenue management and management of the

Governments assets. The said weaknesses were due

to negligence when complying with the Governments

rules/procedures; programmes/activities/projects and

scopes/specifications were not planned and identifiedproperly; 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 Ministries/

Departments/Government Companies were

incomplete and not updated; outcome/impact of

programmes/activities/projects was not given due

attention; shortage of funds for asset maintenance;

and insufficient officers to collect revenue.

4. In order to help the Ministries/Departments/

Government Companies to rectify the weaknesses

which were highlighted in the Auditor Generals Report


14/94

xiv

for the years 2010 and 2011, a total of 653

recommendations were made. In the 2012 Auditor

Generals Report Series 1, a total of 143

recommendations were made to the 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 2013 Auditor Generals Report.

5. 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 giventheir commitment and worked diligently to complete

this report.

(TAN SRI DATO SETIA HAJI AMBRIN BIN BUANG)

Auditor General of MalaysiaPutrajaya

25 March 2013


15/94

1

SYNOPSIS

AUDITOR GENERAL REPORTFOR THE YEAR 2012

ON ACTIVITIES OF THEFEDERAL

MINISTRIES/DEPARTMENTS ANDMANAGEMENT OF THE

GOVERNMENT COMPANIES

NATIONAL AUDIT DEPARTMENTMALAYSIA


16/94

2


17/94

3

SYNOPSIS


18/94

4


19/94

5

SYNOPSIS

PART I- IMPLEMENTATION OF ACTIVITIES BY THE

FEDERAL MINISTRIES/DEPARTMENTS

PRIME MINISTERS DEPARTMENTMalaysian Mari t ime Enforcement Agency

1. Management On The Ac qui r ing Of Movable

And Immovable Assets

a. The Malaysian Maritime Enforcement Agency

(MMEA) was formed after a maritime management

studies conducted by the Government in April1999. The result of the study showed that the

maritime enforcement was not very effective

because there were over 12 departments/agencies

responsible for the management of maritime. This

resulted in duplication of functions and

responsibilities and uneconomic use of resources.

In August 2002, the Federal Government agreed to

the establishment of MMEA as an integrated team

through merging existing maritime enforcement

agencies. The Government decided that MMEA

took over the function of the coast guard from the

maritime agencies involved such as the Marine

Operation Force of the Royal Malaysian Police, the


20/94

6

Royal Malaysian Customs Department, the

Department of Fisheries Malaysia, the Marine

Department of Malaysia and the Royal Malaysian

Navy. Based on the decision of the Government,

all agencies involved should hand over their assets

related to maritime enforcement. Audit findings

revealed that, in general, the management on the

acquiring of movable and immovable assets of

MMEA was satisfactory. However, there were

some weaknesses as follows:

i. age of ships/boats received exceeded their

useful life;

ii. immovable assets received were damaged and

left idle;

iii. immovable assets were not fully received;

iv. jetty/office that was handed over/shared was

not suitable for use/could not be used;

v. the jetty in Tawau District Maritime which was

handed over to MMEA was uneconomical to

repair;

vi. assets handed over could not be modified;

vii. KEW. PA forms for movable assets

(ships/boats) were not prepared; and

viii. staffing for ships/boats handed over were not

provided.


21/94

7

b. It is recommended that MMEA considers the

following actions:

i. take prompt measures on immovable assetswhich were damaged and left idle by repairing

or disposing them;

ii. hold discussion with the parties involved such

as the Marine Operation Force, the Royal

Malaysian Customs Department and the

Department of Fisheries so that they couldjointly use the jetty. In addition, adequate office

space should be provided to MMEA staff.

Among the things that could be discussed are

choosing a suitable area for jetty operation and

application for additional operational office

space for enforcement operations;

iii. construct a new jetty in Tawau District Maritime

to ensure smooth enforcement operations of

MMEA;

iv. find a solution so that the building in Kuala

Kedah base could be repaired and renovated

for use;

v. expose the staff involved to MMEA asset

management based on relevant circulars to

ensure proper implementation; and

vi. urgently provide additional MMEA staff as

intake offers to members of the Marine


22/94

8

Operation Force and the Royal Malaysian

Customs Department received no response.

MMEA operations could be affected due to

insufficient staff to operate ships/boats

delivered.

Department Of Nation al Unity And Integrat ion

2. Managemen t Of Grant, Payment Of Ac t ivi t ies

An d Data Col lect ion Of Rukun Tetangg a

a. The Rukun Tetangga was established by the

Government in 1975 under the Essential (Rukun

Tetangga) Regulations 1975 (PU (A) 279/75) for

security purposes through mandatory patrols by

residents due to the threat of subversive elements

at that time. The function of the Rukun Tetangga

Area (KRT) has been expanded by the Department

of National Unity and Integration (DNUI) from time

to time by encouraging KRT to organise activities

focusing on elements of unity, community, charity,

education, economy or activities which are

beneficial to the local community. The objective of

Rukun Tetangga activities is to preserve, enhance

and strengthen national unity and integration in line

with the Governments policies/rules.Audit findings

revealed that generally, the management of

grant/payment and data collection of Rukun

Tetangga by DNUI were unsatisfactory and needed


23/94

9

further improvement. Among the weaknesses

found were as follows:

i. the amount of grant distributed was not uniform;

ii. grant distribution/payment of Rukun Tetangga

activities was not done accordingly;

iii. reports/statistics of KRT activities generated

from DNUI Information System were not up to

date;

iv. records/reports of KRT activities/finance were

not up to date;

v. the number of activities performed by KRT as

stated in the form that was used to obtain

Rukun Tetangga information could not be

verified;

vi. justification for the assessment of KRT

activeness level could not be verified;

vii. vacant posts at DNUI district level were not

being filled/filled through administrative

means/task performed through One Man Show;

and

viii. limited number of vehicles for supervision

purposes of KRT.

b. It is recommended that DNUI takes the followingactions:


24/94

10

i. fix the amount of grant to be distributed to KRT

based on its activeness level for uniformity

purposes. Justification should be provided in

writing by state DNUI if the amount of grant

distributed is more/less than the fixed amount;

ii. clearly state in writing the need for KRT to

comply with the Guidelines on Rukun Tetangga

Account and Inventory Control (Panduan

Pengendalian Akaun Dan Inventori Rukun

Tetangga) in financial management. Adequate

training relating to the Governments financial

management should also be provided. In

addition, monitoring on KRTs financial

management should be enhanced;

iii. evaluate the level of acceptance/accessibility/

feasibility for KRT to key in the required

information into the e-RT modules in the DNUI

Information System;

iv. organise the reports relating to Rukun Tetangga

activities in files and issue reminder/warning

letter to KRT which did not submit theinformation required;

v. ensure that the KRT Performance Evaluation

Form is prepared and could be cross

checked/supported with the activity reports

submitted by KRT;


25/94


26/94

12

i. project was not completed within the original

contract period where 2 Extensions of Time of

643 days were approved. The approved

extension of time had exceeded the original

contract period;

ii. the main consultant has yet to obtain approval

from the Fire and Rescue Department of

Malaysia even though the project had been

completed in October 2011;

iii. the Processing Centre in Pandan Indah, Kuala

Lumpur has not been shifted to the Processing,

Production and Warehouse Centre in Bangi.

The delay in shifting the Centre to the new

building has caused IRBM to incur rental cost of

RM4.70 million as calculated from the issuance

date of the Certificate of Practical Completion

on 28 October 2011 till February 2013.

Meanwhile, as at February 2013, utility and

security service fees totalling RM505,600 had

been charged as project cost since the

completion of the building in October 2011;

iv. payment to 4 consultants appointed in 2003

amounting to RM529,733 was an extravagance

as the reports produced by them could not be

used;


27/94

13

v. 8 Variation Orders with an additional cost of

RM3.27 million which involved changes/addition

to the initial works stipulated in the contract

were not approved by the Economic Planning

Unit (EPU);

vi. the building design was unsuitable/impractical

and the quality of construction works was not

satisfactory; and

vii. planning on the location of Customer ServiceCentre was not satisfactory because IRBM took

a period of one year and 9 months to decide on

the location.

b. In order to address the weaknesses highlighted

and to prevent them from recurring in otherprojects, it is recommended that IRBM and the

Public Works Department (PWD) take the following

actions:

i. IRBM should plan carefully when preparing the

project brief;

ii. IRBM and PWD should ensure that the main

consultant is responsible for the overall

planning, design, management and

coordination with other consultants/agencies;

iii. IRBM should obtain approval from EPU on any

addition/changes to the scope of the project;


28/94

14

iv. PWD should take action against the main

consultant for lack of supervision on the project

which resulted in poor quality of works that did

not comply with the standard set; and

v. PWD should closely monitor on the works

performed by the contractor to prevent any

major works defects.

In land Revenue Board Of Malaysia

4. Managemen t On Company Ins talment Payment

Scheme (CP204 Form )

a. Under the Self Assessment System, a company is

responsible to declare and pay income tax

voluntarily. The Inland Revenue Board of Malaysia

(IRBM) will issue Tax Estimation Form (CP204Form) by stages according to companies account

closing date. A company is required to furnish the

tax estimate not later than 30 days before the

beginning of the basis period for the year of

assessment. Each instalment of estimated tax

shall be paid on or before the due date beginningfrom the second month of the basis period for the

year of assessment, which is on the 10th every

month. The Notice of Instalment Payment (CP205

Form) will be issued to taxpayers who fail to submit

the CP204 Form. Failure to comply with the

schedule of estimated tax instalment payments will


29/94

15

result in a tax increase of 10% which will be

imposed on instalments not paid. Tax increase of

10% also applies if the difference between the

actual tax payable and revised tax estimate or the

original tax estimate exceeds 30% of the actual tax

payable. Failure/delay to furnish the tax estimate is

an offence under the Income Tax Act (ITA) 1967.

Audit findings revealed that the overall

management on company tax instalment payment

scheme was satisfactory. However, there were

several weaknesses as follows:

i. CP204 Form issued to companies not liable to

tax;

ii. increase in tax amounting to RM136,335 under

subsection 107C(9) ITA 1967 was not imposedon companies for failure to pay tax estimate

declared in the CP204 Form;

iii. increase in tax amounting to RM41,193 under

section 103 ITA 1967 was not imposed on tax

arrears;

iv. action was not taken to prosecute against 5,181

companies that failed/late in paying the CP204

compounds;

v. delay in instituting legal proceedings against 61

companies which failed to pay CP204

compounds; and


30/94

16

vi. delay in taking action to prosecute against 245

companies which failed to pay CP204

compounds due to time taken in allowing

reminder letters to be sent.

b. In order to further improve the management on

instalment payment scheme, it is recommended

that IRBM considers the following:

i. identify the status of tax payable for eachcompany before the CP204 Form is issued;

ii. apply for additional officers in IRBM

Department/Branch so that delay in

prosecutions against companies which fail to

pay CP204 compound could be overcome;

iii. ensure that IRBM Department/Branch takes

immediate prosecution against companies that

failed to pay CP204 compound within the

stipulated period. In this regard, supervision

should be carried out by IRBM Headquarters;

and

iv. ensure that prosecution is not delayed because

of issuing reminder letters to companies. For

this purpose, duration for issuance of reminder

letters and the waiting time for companies to

respond should be determined.


31/94

17

MINISTRY OF FINANCE

Royal Malaysian Custom s Department

5. Managemen t Of Expo rt Ac t ivi t ies

a. The Royal Malaysian Customs Department

(RMCD) is responsible for the collection of indirect

taxes such as import duties, export duties, excise

duties, sales tax, service tax and also levy imposed

on commercial and industrial activities carried out

in Malaysia. RMCD also provides customsfacilitations to the trading and industrial sectors as

well as ensuring regulatory compliance to curb

revenue leakage. Generally, Audit findings

revealed that export activities were properly

managed by RMCD. However, there were some

weaknesses that should be addressed by RMCD

as follows:

i. the Standard Operating Procedures (SOP)

relating to management and operation controls

on the export of crude oil was incomplete and

not clear, resulting in unsatisfactory physical

controls on the export of crude oil;ii. there were cases where forwarding agents

could still hand over customs declaration forms

to the Assessing Officer;

iii. a total of 9,444 K8 customs forms were still

outstanding due to weaknesses in monitoring


32/94


33/94

19

Royal Malaysian Custom s Department

6. Risk Management On Clearanc e Of Air Cargo

Impor ts

a. Clearance of imported goods by the Royal

Malaysian Customs Department (RMCD) is subject

to the laws set by the Government and the

guidelines set by World Customs Organisation

(WCO). RMCD is responsible to ensure that the

movement of vessels, vehicles, aircrafts and

consumer goods across national borders is in

compliance with Customs laws and trade

regulations. Among the strategies identified to

assist RMCD in implementing its functions and

duties is the enhancement of trade facilities on

legal trade movement by creating an Integrated

Risk Management System. Risk management canassist RMCD in identifying high-risk

transactions/importers with the objectives of

carrying out detailed document checks, physical

inspections or post import audits to curb revenue

leakages and prevent the imports of prohibited

goods into the country. For the period 2010 to

2012, the total value of trade imports to Malaysia

was RM1,627.411 billion and RM337.594 billion

(20.7%) was via air cargo. Audit findings revealed

that risk management on clearance of air cargo

imports was not widely used by RMCD. Among the

weaknesses found were as follows:


34/94

20

i. the risk management framework of RMCD was

not sufficient as well as not in line with the risk

management guidelines and standards issued

by WCO;

ii. risk management systems and procedures

were neither comprehensive nor updated;

iii. insufficient personnel trained in the latest

techniques of risk management as training in

countries with advanced risk managementsystem was discontinued in 2009;

iv. the concept of risk management has not been

fully applied as physical inspections were still

conducted regularly on imported goods not

identified under the risk category by the

Customs Verification Initiatives (CVI) Branch;

and

v. monitoring programmes/reviews for continuous

improvement of the risk management

framework were not prepared/implemented.

b. It is recommended that RMCD gives dueconsideration to the following:

i. establish a risk management framework and

structure in line with the guidelines and

standards issued by WCO;

ii. provide comprehensive and updated risk

management systems and procedures;


35/94


36/94

22

officer to ensure that the Government gets value

and maximum benefit for payment made. For the

procurement of work, it should cover the scope of

work specified and agreed to in the offer/contract.

In addition, the work must be completed within the

time specified in the contract. If contractors do not

complete the work on schedule, penalties should

be imposed. Based on the SKALA Statistical

Report, Public Works Department (PWD) managed

633 projects under the Ninth Malaysia Plan worth

RM36.740 billion. Audit findings revealed that

overall, contract administration of PWD projects

was not satisfactory due to weaknesses in

compliance with the rules. Among the weaknesses

identified were as follows:

i. contract clause was not in line with the

Treasury Circular;

ii. inconsistency in the use of PWD standard

contract forms;

iii. inaccurate validity period and rate of

Performance Bond/Performance GuaranteeSum;

iv. insurance policy was not managed properly;

v. delay in approving Extension of Time; and

vi. delay in making good defects.


37/94

23

b. It is recommended that PWD takes the following

actions:

i. ensure consistency between contract clauses

and the Governments rules.

ii. instruct all PWD offices in the country to be

consistent in using new standard contract forms

so that new rules could be applied to protect the

interest of the Government and contractors;

iii. enhance supervision and monitoring to ensure

accuracy of all documents in order to protect

the Governments interest;

iv. appoint third party to repair the defects which

were not repaired by the defaulting contractor.

The cost involved could be charged to thePerformance Bond/claim which has not been

paid to the defaulting contractor; and

v. provide training to officers involved in contract

administration to improve their knowledge.

MINISTRY OF TRANSPORT

8. Upgrading Of Kota Kinabalu Internat ional

Airp ort Project, Sabah

a. The Upgrading of the Kota Kinabalu International

Airport Project (KKIA Project) which was situated in

the district of Penampang, Sabah was to enable


38/94

24

better handling of passengers and aircrafts

operation. KKIA Project involved 2 packages.

Package 1 was to upgrade the Terminal 1 Building

in terms of increasing the floor area; passenger

loading bridge; reclaim baggage carousel; open

vehicle parking and aircraft parking bays. Whereas

Package 2 was involved with upgrading airside

improvements; Terminal 2 (LCCT) and air traffic

control tower as well as the administration building

of Department of Civil Aviation. The cost of

Package 1 was RM720 million with a 36 month

completion period starting from 21 May 2006 until

20 May 2009. Meanwhile the cost of Package 2

was RM720 million with a 36 month completion

period starting from 21 April 2006 until 20 April

2009. Audit findings revealed that in general the

upgrading of KKIA Project was not satisfactory

because there were several weaknesses in the

project implementation. However, the overall work

progress of Package 1 was on schedule with 3

Extensions of Time totalling 290 days while for

Package 2, the actual work progress as at 31 May2012 was 94.3% compared to 94.2% as scheduled

after taking into consideration 5 Extensions of Time

totalling 1,106 days and a Supplemental

Agreement of 8 months. Among the weaknesses

identified were as follows:


39/94


40/94

26

Sdn. Bhd. failed to complete and ensure that a

new contractor is appointed immediately to

complete Package 2 as well as to repair low

quality work; and

iv. ensure that the objectives of KKIA Project are

achieved based on the master plan. Among the

criteria in the master plan was focusing on

expansion of infrastructure in the vicinity of

Terminal 1 which was the KKIA Main Terminal.

Therefore, the Ministry should firmly ensure that

all actions are taken systematically including

urging AirAsia to move from Terminal 2 to

Terminal 1.

MINISTRY OF FEDERAL TERRITORIES ANDURBAN WELLBEING

Kuala Lumpu r Ci ty Hal l

9. Managemen t Of Recreat ion al Faci l i ty Projects

In Kuala Lum pu r City

a. The objective of having Recreational Facility

Projects in Kuala Lumpur City is to provide a

beautiful, clean and tidy urban landscape with

beautification design characteristics which are

dynamic and comprehensive for the satisfaction of

all city dwellers and tourists. These projects include

maintenance of public parks, maintenance of open

land space and children playgrounds as well as

maintenance/trimming of trees and upgrading of


41/94

27

existing landscapes. For the period 2010 to 2012,

an amount of RM182.76 million has been allocated

for the management of Recreational Facility

Projects but only a total of RM123.32 million

(67.5%) was spent till December 2012. The

Department of Landscape and Recreation (JLR) of

Kuala Lumpur City Hall (DBKL) is responsible for

the planning, management and maintenance of

urban landscapes in Kuala Lumpur City. The main

components of these projects include Soft

Landscape (Softscape), Hard Landscape

(Hardscape) and Buildings. Audit findings revealed

that the physical performance of 4 out of 5 projects

audited was not satisfactory because of failure to

complete the projects on schedule. The contractors

involved were approved between one to threeExtensions of Time with a duration period of 174 to

617 days. In addition, the management of the 5

projects was also not satisfactory due to the

following weaknesses:

i. no initial investigation/assessment of project

sites was done;

ii. the completed projects still cannot be utilised or

enjoyed by the public and tourists;

iii. the implementation of projects was not in

accordance with the terms, conditions and

specifications of the contracts;


42/94

28

iv. JLR did not fully use the Landscape Guidelines

issued by the National Landscape Department

and other related regulations as a guide for best

practices;

v. JLR did not maintain inventory records for living

assets; and

vi. JLR did not satisfactorily manage the

maintenance of landscape and recreational

facilities.

b. To improve the weaknesses highlighted, it is

recommended that DBKL considers the following:

i. initial investigation/assessment of project site

should be done in advance for each future

project undertaken;

ii. the completed facilities should be utilised fully

to avoid wastage;

iii. monitoring should be enhanced during project

implementation to ensure that work done is in

accordance with terms, conditions andspecifications stipulated in contracts; and

iv. periodic maintenance should be implemented

according to fixed schedule to ensure that the

project could be utilised optimally. In addition,

monitoring should also be undertaken to reduce

vandalism and theft cases.


43/94

29

MINISTRY OF EDUCATION MALAYSIA10. Managemen t Of 1Malaysia Milk Prog ramme

a. 1Malaysia Milk Programme (PS1M) is acontinuation of the School Milk Programme (PSS)

which was initiated in 1983 and implemented by

the Ministry of Education (Ministry) to improve the

nutritional level of primary school students,

particularly in rural areas. The purpose of this

programme is to build a generation which is

brilliant, stronger, healthier and mentally more

dynamic in the future. Under PS1M, school

students will be given Ultra High Temperature

(UHT) milk, which can be enjoyed by more than

3 million pupils throughout the country involving

7,733 primary schools. In early 2011, the Ministry

of Finance Malaysia had approved procurement forPS1M amounting to RM188.33 million through 4

contractors. However, the actual value of the

contract was RM170.93 million after the Ministry

revaluated the eligibility of the milk recipients. The

contractors were fully responsible for the whole

process of milk supply and its safe consumption bystudents. Audit findings revealed that generally, the

management of PS1M was not satisfactory based

on the performance from January 2011 until July

2012 where supply was only 21.9% and

expenditure already reached 39.7%. Other

weaknesses were as follows:


44/94

30

i. some terms of the contract were not complied

with especially the absence of Person In

Charge (PIC) or contractors representative at

each milk drinking session; disposable items

(milk cartons) were not disposed of; handbook

was not supplied; posters were not displayed at

the appropriate places; and training as well as

explanation to teachers and pupils were not

carried out;

ii. inappropriate storage space for milk stock; and

iii. delay in milk supply to few schools.

b. In order to rectify the weaknesses highlighted and

further improve the quality of PS1M management,

the parties involved should give consideration to

the following:

i. the Ministry should monitor closely on the milk

handling by contractors so that the milk

supplied is always in good condition and safe

for consumption by the school children. The

Ministry should also ensure that contractorscomply with terms of the contract and schools

are not burdened with tasks outside their

responsibilities;

ii. the Ministry should review the terms and

conditions of the contract which are

unreasonable and vague by taking into account


45/94

31

the number and location of the primary schools

in the programme, the ability of contractors to

provide the PIC at each milk drinking session in

each school as well as logistics and facilities for

milk storage, thereby enabling contractors to

plan more effectively their financial strategies,

human resources, equipment and logistics as

well as comply with the terms of the contract;

iii. the contractors should provide information and

education on a regular basis to teachers/

students involved with PS1M. For example,

visual training (CD) could be presented during

the milk drinking session. Appointment of PIC

should be proper and valid for effective

supervision and monitoring. In addition, posters

should be prepared and displayed at

appropriate places so that they could be easily

seen by pupils and teachers;

iv. the Ministry should prepare standardised and

up-to-date record for all milk stock received and

distributed for control and monitoring purposes;

v. the Ministry should identify safe and appropriate

space for milk storage in schools to prevent

milk contamination and theft; and

vi. the Ministry should impose fines for delay in

milk supply and claim from the relevant

contractor.


46/94

32

11. Cons truct ion An d Equipment Procu rement Of

Presch oo l Project

a. Education is one of the 6 National Key ResultAreas (NKRA). The aspirations of Education NKRA

are to improve students performance and to widen

access to quality education. The Ministry of

Education (Ministry) has set 4 focus areas under

the Education NKRA and one of them is preschool

education. The Ministry has identified 7 thrusts to

strengthen the governance and delivery of quality

preschool education. One of the thrusts is to

increase the number of preschool classes in areas

of high demand, urban slums, rural and remote

areas. For this purpose, the Ministry has embarked

on an Preschool Expansion Project to build and

complete the preschool buildings and other relatedfacilities including procurement of preschool

equipment. The project was implemented in three

phases involving 1,237 schools and 1,330 classes.

Implementation of the project includes three

categories namely New Build, Renovation, and

Complete Build. Audit findings revealed that theperformance of the Preschool Expansion Project

for the New Build category was less than

satisfactory because 19 (82.6%) of the 23 projects

were delayed between 44 to 571 days. Meanwhile,

the performance of 7 Renovation projects audited

was good because the projects were completed on


47/94

33

schedule. However, there were still weaknesses in

the management of this project which could affect

its objectives as follows:

i. there were weaknesses in the project planning

such as distribution of the number of projects to

contractors which did not take into

consideration the distance between the

locations of projects under a same sub package

and the stipulated completion period of projectswas not suitable;

ii. selection of site and project category was not

done with care, thereby affecting project cost

and its completion period;

iii. building design for the New Build Phase 1

projects and procurement of equipment werenot in accordance with the guidelines issued by

the Curriculum Development Division in 2008;

iv. there were preschool equipment/works which

did not comply with specifications and were of

low quality;

v. 26 units/sets of equipment were not supplied to

9 preschools, 250 units/sets of equipment were

not completely supplied to 7 preschools and

equipment were not supplied to 5 preschools as

the preschool buildings were not completed yet;

and


48/94

34

vi. poor contract management for 8 out of 19

contracts as they were signed late between 34

and 146 days. In addition, the rules pertaining

to the Integrity Pact were not fully complied

with.

b. In order to overcome the weaknesses of the

Preschool Expansion Project as well as to ensure

that the Government obtains value for money, it is

recommended that the parties involved take the

following actions:

i. the Ministry should review the method used in

the distribution of projects to contractors so that

it is more reasonable and projects could be

completed on time. The time lag could beshortened if the planning, implementation and

distribution of the number of projects to

contractors take into consideration the ability of

contractors, project location connection

difficulties, weather and completion period of

project. In addition, close monitoring and

effective coordination among the Ministry,

consultants and contractors in managing this

project could also ensure that it is completed as

scheduled;

ii. the Ministry should ensure that all preschool

classes were designed according to

specifications prescribed so that teaching and


49/94

35

learning sessions could be conducted in a

conducive environment and all teaching and

learning space could be fully utilised. The floor

plan of the renovation and construction of

preschool buildings and the equipment

specification list should be forwarded to the

State Education Department (JPN) and District

Education Office (PPD) involved for reference;

iii. consultant/JPN/PPD should ensure that the

work performed by the contractor complies with

the scope of work/contract specifications.

Works which have been paid but not performed

or not in accordance with specifications should

be carried out or rectified immediately or action

should be taken to deduct the cost of these

works from the final payment to contractor;

iv. the Ministry should ensure that all defects and

unsatisfactory construction works are identified

and rectified within the stipulated period. This is

to prevent the Government from incurring

losses relating to the repair costs. While for

projects with expired Defects Liability Period,

the Ministry should take proactive steps to

provide adequate funds and appoint contractors

for maintenance work;

v. the Ministry should ensure that all equipment

are tested and commissioned by consultants,


50/94

36

contractors and JPN/PPD/school during the

project handover. List of supplied equipment

specifications should be provided to enable the

school to ascertain that equipment received

meet the required specifications, in good

condition, complete and safe to use. It is also to

enable the school to maintain equipment

records as prescribed in the Treasury Circulars

No. 5 of 2007 and No. 5 of 2009; and

vi. the Ministry should expedite the signing of

contracts and complete them with dates.

Regulations on Integrity Pact should also be

fully complied with to protect the Governments

interest.

12. Management Of Bui ld ing And CompoundCleaning Services At Schools/Educat ional

Inst i tu t ions

a. The Ministry of Education Malaysia (Ministry) hired

private companies to perform Building and

Compound Cleaning Services (KBK) at

schools/educational institutions so that good quality

cleaning services could be provided in the

premises. Among others, its objective is to form a

school environment which is clean, cheerful and

healthy for teachers and students so that a

conducive teaching and learning atmosphere could

be created. Audit findings revealed that the


51/94

37

management of KBK was not satisfactory. Among

the weaknesses found were as follows:

i. improper contract management where 6 out of

20 contracts audited were signed late between

28 to 81 days and 13 companies were late

between 3 to 145 days in submitting their

Performance Bonds;

ii. terms of the contract were unclear/incomplete

when the number of machines/equipment did

not follow the standard norms; employees

profile information was provided only upon

request and there was no scheduled monitoring

by supervisors;

iii. companies did not comply with the terms and

conditions of the contract resulting in poor and

unsatisfactory service;

iv. improper payment was made for cleaning

services where deductions were not made for

absent workers; and

v. periodic monitoring was not carried out.

b. To overcome the weaknesses highlighted and to

enhance efficiency in the management of KBK

services, it is recommended that all parties

involved take the following actions:


52/94

38

i. the Ministry should procure KBK services in

accordance with the regulations set by the

Government. Warning or revocation actions

should be taken against companies which failed

to submit the Performance Bonds within the

stipulated period;

ii. the Ministry should review the contract clauses

which are not clear and not in favour of the

Government. Details should be provided toavoid confusion and misinterpretation so that

enforcement could be implemented more

effectively;

iii. the Ministry should prepare video documentary

to provide better understanding for the District

Education Offices (PPD)/schools on how KBKservices should be rendered by companies;

iv. the Ministry/State Education Department

(JPN)/PPD/school should take stern actions

against companies which do not comply with

the terms and conditions of the contract by

imposing fine and reporting low quality serviceto the authorities. The Ministry may then

terminate and blacklist companies that still fail

to comply with the contract and improve the

performance of their services;

v. the Ministry should investigate all claims made

by companies and in the event of reduction of


53/94

39

working time, deduction should be made. In the

case of excess payment, refund claims should

be made to companies and appropriate action

should be taken against those responsible;

vi. the Ministry should devise a more efficient

claims processing mechanism and ensure that

payments could be made within the time

stipulated. Guidelines on the imposition of fines

in case of breach of terms and conditions of

contract should be issued as reference for

JPN/PPD/school for uniformity of

implementation; and

vii. JPN/PPD should perform scheduled and

surprise checks to ensure that companies

perform their services satisfactorily. Monitoring

on schools may also clarify any confusion that

may arise in the interpretation of contract at

school level.

MINISTRY OF HEALTH

13. Management Of Nursing Train ing Programme

a. The Ministry of Health Malaysia (Ministry) was

responsible for implementing the nursing training

programme to meet requirement of current and

future Government hospitals and clinics. In 2012,

the Ministry had 11 Nursing Colleges and 5


54/94

40

Colleges of Allied Health Sciences with a total of

8,489 students. Whereas from 2001 to 2012, a

total of 3,409 nursing students were stationed at

Private Nursing Colleges through outsourcing

programmes with MAHSA College, SEGI,

PUSRAWI and MASTERSKILL costing RM194

million (excluding scholarships and student

allowances). Two training programmes were

offered at Nursing College which were basic

nursing programme (diploma programme) that was

conducted within 3 years for appointment of nurses

and specialization programme (advanced diploma)

that was conducted within 6 to 12 months for

serving nurses. Audit findings revealed that the

overall nursing training programme conducted by

the Ministry was satisfactory. However there were

several weaknesses as follows:

i. vacant posts were not filled and appointment of

instructors did not comply with the Nursing

Board of Malaysia guidelines;

ii. payment for sewing uniforms and allowances ofoutsourcing students were not according to the

contract;

iii. there was no guidelines on debtors control;

iv. no approval was given by the authorities for

sewing fees, uniform allowances and student

travelling claims;


55/94

41

v. facilities and teaching aids were obsolete and

inadequate, and

vi. weaknesses in the contract for security control.

b. In order to overcome the weaknesses and ensure

that the nursing training programmes are carried

out properly and efficiently, it is recommended that

the Ministry considers the following actions:

i. take immediate action in allocating and posting

of instructors;

ii. ensure that conditions on the appointment of

instructors are consistent with the requirements

of the Civil Service Commission and the

Nursing Board of Malaysia to ensure standard

quality teaching for all institutions that offer

nursing programmes in Malaysia;

iii. require the Private Nursing Colleges involved in

outsourcing programme to repay the value of

the uniform that did not comply with the

provision of the contract;

iv. establish latest guidelines and procedures on

debtor management and take appropriate

action to address the outstanding debt;

v. ensure that allowances and benefits provided to

students are approved by the authorities;


56/94


57/94


58/94

44

b. In order to overcome the weaknesses highlighted,

it is recommended that the Ministry considers the

following actions:

i. study on a more appropriate mechanism of

performance measure including the need to

achieve KPI on time taken to reach accident

scenes so that patients safety and health could

be assured;

ii. ensure that procurement and rental for

ambulance are properly managed as well as

draw up a more comprehensive agreement;

iii. create a formal contract and expedite the

signing process of the agreement to protect the

Governments interest as well as complying

with the financial regulations on procurement

procedure;

iv. ensure that the amendments to contract are

done properly and checked by the Attorney

General or the Legal Advisor;

v. enhance collaboration with relevant parties toensure that accident cases are solved

immediately to facilitate repairs, insurance

claims and disposal process; and

vi. monitor on the maintenance of ambulance.


59/94

45

MINISTRY OF HOUSING AND LOCALGOVERNMENT

Fire An d Rescue Department Of Malays ia15. Managemen t Of Fire Vehic les And Equ ipment

a. Fire vehicles and equipment are crucial in ensuring

successful rescue operations. All fire vehicles and

equipment should always be ready for use, utilized

optimally as well as maintained properly, efficiently

and effectively in providing fire rescue services.

Fire vehicles and equipment of the Fire and

Rescue Department of Malaysia (FRDM) include

fire engines, special vehicles, utility vehicles,

marine and aircraft vehicles. As at September

2012, FRDM had a total of 3,164 units fire vehicles

and equipment with various functions which were

worth RM1.397 billion. For the period 2009 to2012, a total of RM1.005 billion was spent on

procurement of fire vehicles and equipment while

RM206.76 million was spent on the maintenance of

fire vehicles and equipment. Audit findings

revealed that the overall management of FRDM fire

vehicles and equipment was satisfactory. However,there were still some weaknesses as follows:

i. performance of air service and turn out of

ground service did not achieve the norms set;

ii. fire vehicles and equipment of 53 (96%) Fire

Stations did not meet the standard

requirements;


60/94

46

iii. distribution of fire vehicles and equipment was

not in accordance with the initial plan;

iv. Bertam Air Base was not fully utilised and thequality of construction was not satisfactory;

v. weaknesses in controlling the movement of

operation equipment in state FRDM and fire

stations;

vi. management of operation/scuba equipment and

spare parts of fire vehicles and equipment was

not satisfactory;

vii. maintenance of vehicles and equipment was

not satisfactory; and

viii. disposal of fire vehicles/equipment/spare parts

of aircrafts was not satisfactory.

b. In order to ensure that the objectives of the

management of fire vehicles and equipment are

achieved and the Government obtains value for

money, it is recommended that FRDM takes the

following actions:

i. review the turn out norms and requirements

based on factors such as limited storage space,

existing staff posts, fire stations with outworn

vehicles and their coverage areas;

ii. ensure that each application for construction of

new air base/fire station corresponds to


61/94

47

applications for staff and facilities so that

facilities provided could be used optimally;

iii. provide a suitable mechanism for controlling themovement of operation equipment and scuba to

facilitate detection and avoidance of loss;

devise a suitable mechanism to control the

movement of operation equipments and scuba

appliances to facilitate tracking and prevent

loss;iv. monitor and carry out periodic checks to ensure

that all distribution, registration, maintenance of

records and disposal are properly done;

v. provide sufficient storage space for all assets/

inventories;

vi. set a time frame for repairs so that vehicles/

equipment/appliances are always in good

condition and ready for optimal use;

vii. conduct periodic training for officers of state

FRDM, Zone offices and Fire Stations on

assets management and storage procedures;

and

viii. provide sufficient posts for mechanic to ensure

that all repair and maintenance works could be

carried out properly in accordance with the

prescribed norms.


62/94

48

MINISTRY OF WOMEN, FAMILY AND COMMUNITYDEVELOPMENT

16. Management Of Financial As sistanc e To Non -Governm ental Organisat ions

a. The Ministry of Women, Family and Community

Development (Ministry) through three agencies

namely the Department of Social Welfare (JKM),

the Department of Women's Development (JPW)

and the National Population and FamilyDevelopment Board (LPPKN) was responsible for

providing a variety of social development-oriented

programmes related to welfare, protection, care-

giving, community recovery, family and training.

Recognising the fact that the Ministry was unable

to implement its own programmes of social

development due to several constraints

encountered, the cooperation and participation of

Non-Governmental Organisations (NGOs) were

required for the success of these programmes.

Among the incentives provided by the Ministry to

encourage NGOs to undertake social welfare

services was to give financial assistance consistingof grants and Special Treasury Assistance (BKP).

A similar Audit was conducted and its issues were

raised in the 2006 Auditor GeneralsReport. Audit

findings revealed that providing financial

assistance to NGOs in general was in line with the

Government's intention to allow NGOs to assist the


63/94

49

Government in strengthening family institution and

addressing social ills. However, the management

of providing financial assistance to NGOs was poor

as the weaknesses raised in 2006 were not fully

resolved. Among the weaknesses noted were as

follows:

i. distribution of grants/BKP did not meet the

conditions set where payment was made to

NGOs before the agreement was signed;ii. usage of Ration Grant, Administration Grant

and Special Students Allowance (Persons with

Disabilities) by NGOs did not comply with the

conditions stipulated in the agreement and the

guidelines issued by the Department of Social

Welfare; andiii. surplus of grants/BKP which was not used by

NGOs was not recouped as stipulated in the

agreement.

b. To overcome the weaknesses highlighted and to

prevent it from recurring in the future, it isrecommended that the Ministry and the agencies

involved in the management of Government

funding to NGOs take the following actions:

i. enhance monitoring based on the mechanism

set to ensure that NGOs comply with all the


64/94

50

conditions stipulated and avoid misuse of

financial aid;

ii. enforce fully the terms of agreement and takestern action against NGOs which fail to comply

with the prescribed conditions;

iii. recoup the balance of the financial aid which

was not spent by NGOs in accordance with the

terms of agreement; and

iv. review the main resolutions of this activity such

as scope of allowable expenses so that the

objectives of providing financial assistance to

NGOs are fully achieved.

MINISTRY OF DEFENCE

17. Management Of Dry Ration Supp ly For Royal

Malays ian Navy

a. Supply of rations for the Malaysian Armed Forces

includes the supply of dry/fresh ration and food

catering. Based on the Food Supply Technique

Instruction, ration is defined as the food entitlement

of a person for a period of 24 hours beginning

midnight on that day until midnight the next day.

The Royal Malaysian Navy (NAVY) prepares and

cooks its own food and its supply of ration is based

on the Military Ration Measure as stated in the

Malaysian Armed Forces Council Order Vol. 7 Year

2003. The Procurement Division of the Ministry of


65/94

51

Defence is responsible for managing the contract

on supply of dry ration needed by NAVY. Audit

findings revealed that the management of dry

ration supply for NAVY was not satisfactory.

Among the weaknesses identified were as follows:

i. contract value was very high compared to

actual needs;

ii. contract was signed late;

iii. terms and conditions of contract were not

complied with/executed;

iv. a ration store has not been constructed;

v. cleanliness and arrangement of ration at the

user store/galley were not suitable;

vi. stock of ration had expired; and

vii. maintenance of ledger records and adherence

to the financial regulation were not satisfactory.

b. In order to ensure that the management of dry

ration supply for NAVY is done properly, efficiently

and prudently, it is recommended that the parties

involved take the following actions:

i. revise the contract value for the supply of dry

ration for NAVY because actual payment made

was much lower compared to the value of the

contract;


66/94

52

ii. ensure that contracts are signed within the

stipulated period to ensure that the

Governments interest is protected and the

contractors involved are legally bonded to fulfil

the contract terms and conditions;

iii. take prompt actions against contractors who do

not adhere to the terms and conditions of

contract so that the supply of ration is based on

the predetermined quality;

iv. construct a ration store and fill up the vacant

posts at 3rd Area Logistic Depot (DLW3) to

ensure that it functions efficiently and

effectively;

v. ensure that cleanliness, safety and storage of

ration are according to the needs; and

vi. ensure that financial regulations are always

complied with. Further investigation and

necessary action should be taken against

officers who violate financial regulations.

MINISTRY OF HOME AFFAIRS

18. Cons truct ion Of CIQ Complex A nd Jet ty At

Melaka River Mou th, Melaka

a. The construction of CIQ Complex and Jetty at

Melaka River Mouth (Muara Sungai Melaka) was

a project under the Ninth Malaysia Plan. The

objective of the project was to build a new


67/94


68/94

54

i. MOHA should ensure that the acquisition of

construction land is settled before implementing

the project to prevent any future complications;

ii. PWD should ensure that the required IBS score

is fulfilled so that the construction quality and

productivity could be improved;

iii. PWD should ensure that the requirement of

Class F Contractor Involvement Programme is

met so that its objective could be achieved; andiv. PWD should ensure that contractor works are

satisfactory and carried out in accordance with

specifications and regulations.

Royal Malaysian Pol ice Force

19. Procu rement Of Beechc raft King Air 350Aircraf t For A ir Operat ion Forc e

a. Royal Malaysian Police Air Wing Unit was

established in February 1979 through a Cabinet

decision that all Police Air Wing aircraft should be

registered as civilian aircraft. The primary purpose

of this Unit is to carry out patrols on Malaysian

waters; search and rescue; sending small teams to

the crisis areas and provide air services to all

departments under the Ministry of Home Affairs

(MOHA). On 1 March 2012, the name of Royal

Malaysia Police Air Wing Unit was officially

changed to Air Operation Force (PGU). At the

beginning stage of its inception, PGU used single


69/94

55

engine aircraft for its police operations. However,

the aircraft had several weaknesses such as the

flight patrol range and flight operations at night

were limited. There was also no pressurised cabin

that could expose the flight crew to oxygen

deficiency. In September 2005, PGU agreed to the

proposal made by MOHA for the acquisition of

Beechcraft King Air 350 which were more powerful

and sophisticated. This procurement was made

through direct negotiations with Hawker Pacific

Airservices Ltd via its agent EZ Aviation Sdn. Bhd.

The contract price for the purchase of 5 units

Beechcraft King Air 350 was USD58.25 million.

Audit findings revealed that the overall

procurement of Beechcraft King Air 350 was less

than satisfactory. Among the weaknesses identifiedwere as follows:

i. breach of conditions in the contract;

ii. delay in supplying aircrafts;

iii. the objectives of providing training to pilots and

engineers were not met; andiv. shortage of manpower especially pilots and

engineers.

b. It is recommended that MOHA/PGU considers the

following actions:


70/94

56

i. ensure that payments made to the contractor

comply with the conditions as stipulated in the

contract;

ii. ensure that clauses in contract relating to

Ownership Take Over And Risk protect the

Governments interest to avoid losses in the

procurement process;

iii. impose Liquidated and Ascertained Damages

against the supplier for late delivery of specialoperations aircraft and equipment in

accordance with the conditions as stipulated in

the contract. Action should also be taken to

terminate the contract if the supplier fails to

deliver the aircrafts as required;

iv. ensure that detailed information on thecost/pricing of each procurement is clearly

stated so that the actual price of acquired

goods or services rendered could be identified;

v. ensure that the supplier gets recognition from

the Department of Civil Aviation (DCA) for pilots

who have attended training as pilot instructor;

vi. take proactive action to ensure that PGUs

engineers and mechanics pass additional

modules that have been set by DCA;

vii. ensure that plans are set for engineers to

acquire and possess necessary qualifications


71/94

57

so that they can carry out and certify aircraft

maintenance works; and

viii. study the needs of posts for pilots andengineers and ensure that relevant parties give

due attention to such posts.

The Registry Of Societ ies Malays ia

20. Managemen t Of Soc iet ies Regist rat ion Act ivi ty

a. The Registry of Societies of Malaysia (ROS) was

established on 1 September 1949 with the

enforcement of Societies Ordinance 1949. This

department took over the duties of registration and

enforcement of societies which were carried out by

the Trade Union Office prior to this. The functions

of ROS, among others, are to administer andenforce the Societies Act 1966, Societies

Regulations 1984 and policies pertaining to

societies; control and supervise the activities of

societies so as not to become incompatible with

peace, welfare, security, public order, decorum or

morality; and to offer advisory and counselling

services related to the management of societies as

well as on how to manage and keep registration

records of registered societies. In line with these

functions, ROS is responsible for registering and

monitoring the movement and activities of societies

throughout the country. This is to ensure that

societies do not contravene their constitutions


72/94

58

which can compromise security and public order

and also the laws of the country. Audit findings

revealed that the overall management of the

activities of societies was less than satisfactory.

Among the weaknesses identified were as follows:

i. delays in approving applications and

registration;

ii. the Registry of Societies Electronics System

which was developed could not be fully utilised;

iii. lack of monitoring and control in the submission

of annual returns and inspections with/without

notice;

iv. the record of complaints was not accurate and

updated and there were delays in conducting

investigations on complaints received; and

v. delays in gazetting deregistered societies.

b. It is recommended that ROS gives due

consideration to the following actions:

i. take immediate action to deregister thosesocieties which contravene the Societies Act

1966 or their own constitutions;

ii. make a decision on the status of applications

and approve the applications for registration of

societies within the stipulated time frame;


73/94

59

iii. ensure that the system which has been

developed is capable of helping the department

to manage societies more efficiently;

iv. issue orders and instructions based on the

Societies Act 1966 to those societies which fail

to send their annual returns or send their

annual returns after the due date;

v. prepare a planned schedule and conduct

inspections with and without notice onregistered societies;

vi. conduct investigations on complaints received

within the stipulated time frame;

vii. gazette societies which have been

deregistered within the stipulated time frame;

viii. re-examine the job structure in all states so that

control and monitoring of societies could be

further improved; and

ix. emphasize on courses and training related to

the management of societies for officers and

staff directly involved.


74/94

60

PART II- MANAGEMENT OF THE GOVERNMENT

COMPANIES

21. Pend ing inan Megajana Sdn. Bhd.

a. Pendinginan Megajana Sdn. Bhd. (Megajana) was

established on 1 September 1998 and is a

subsidiary of Cyberview Sdn. Bhd. (Cyberview)

with an authorised capital of RM50 million and paidup capital of RM26.42 million. Previously, the

shareholders of Megajana were Seseni Energy

Services Sdn. Bhd. (51%) and TNB Energy

Services Sdn. Bhd. (49%). On 1 March 2007,

Cyberview signed a Share Sale and Purchase

Agreement with the previous shareholders to

acquire 100% of Megajana shares at RM2.

Subsequently Cyberview sold 49% stake in

Megajana to Cofely Malaysia Sdn. Bhd. and signed

a Sale and Purchase Agreement on 23 November

2012 and Shareholders' Agreement on 17

December 2012. Megajana is the only district

cooling service provider in Cyberjaya and its mainactivity is to conduct business in developing,

owning, operating, maintaining, promoting, selling,

managing and servicing the District Cooling

System. The Town and Country Planning

Department of Peninsular Malaysia in its Physical

Planning Guidelines for Multimedia Super Corridor


75/94

61

encouraged the usage of District Cooling System

(DCS) concept in Cyberjaya to make it a world

class Cyber city. Megajanas major income is from

payment of bill issued to building owners on a

monthly basis based on Chilled Water (CW)

consumption and declared capacity. Audit findings

revealed that the companys financial performance

for the financial years 2009 to 2011 was good as

the company recorded profit for 3 consecutive

years. Overall, the performance of its activity was

also good whereby the company was able to meet

the customers' needs based on the feedback

received from its customers. However, there were

weaknesses in the management of its activities,

financial management and corporate governance

as follows:

i. measurement used to evaluate the

performance of key performance indicators

(KPI) was different for the years audited. This

complicated the yearly comparison on the trend

of achievement for each element/measure;

ii. weaknesses in the management of activities

such as record on maintenance works carried

out was not complete; Chill Water Purchase

Agreement (CWPA) was not renewed;

customer complaints were not recorded

systematically; no Certificate for Machinery

Inspection from the Department of Occupational


76/94


77/94

63

i. the management should set a consistent

element/method of measurement to assess the

actual performance of Megajanas KPIs each

year;

ii. the Board should ensure that Megajana

management complies with SOP and maintain

a complete record to ensure ongoing quality

service to customers;

iii. the management and Board of Megajana/Cyberview should ensure that the supply of

33kV power is carried out as planned so that

the national agenda in Cyberjaya could be

achieved;

iv. the Cyberview Audit Committee should set an

agenda relating to Megajana and otherCyberview subsidiaries in its Audit Committee

meetings as well as ensuring that the

Cyberview Internal Audit Unit plans and

implements a comprehensive audit on

Megajana on a regular and periodic basis;

v. the management should set training policies,plan annual training and prepare relevant SOPs

to improve employees knowledge and skills on

an ongoing basis;

vi. the management should ensure that Megajana

procurement process is carried out as

prescribed by issuing written appointment to its


78/94

64

officers to represent in any committee so that

the interest of the company could be protected;

vii. the management and Cyberview Internal AuditUnit should regularly monitor the payments and

expenses process so that internal controls

could be improved; and

viii. the management should set a more

comprehensive guideline for the control of

assets; perform asset inspection/verification;ensure that asset records are regularly

updated; assets are appropriately labelled to

avoid loss so that company assets are

safeguarded.

22. Sarawak Hidro Sdn . Bh d.

a. Sarawak Hidro Sdn. Bhd. (SHSB) was known as

Bakun Hidro Sdn. Bhd. prior to April 2000. It was

established on 24 January 1994 with a paid up

capital of RM1.156 billion. A 99% wholly owned by

the Minister of Finance Incorporated, SHSB was

entrusted to develop and manage the Bakun

Hydroelectric Project (Bakun Project) after the

Government decided to acquire this project in

November 1997 from Ekran Berhad which was not

interested in pursuing the project due to the

economy downturn. The principal activities of

SHSB include the development of the Bakun


79/94

65

project and being an environmentally friendly

energy supplier. The Bakun project was

implemented under 3 main packages which were

civil work (CW), electro-mechanical (EM) and

transmission line (TR). In August 2011, Bakun

project began generating power after the Power

Purchase Agreement was signed between SHSB

and Syarikat Sesco Berhad (SESCO) on 1 June

2011. Audit findings revealed the following:

i. overall financial performance was satisfactory

where the company generated profit and

showed a positive cash flow position for 3

consecutive years (2009 to 2011). However, the

net profit in 2009 and 2010 was contributed by

other income, of which 95% was generated

from interest earned on short term deposits.

Financial ratios were satisfactory and the

company carried out the activities with external

funding;

ii. performance of activities was not satisfactory as

there was delay in 4 major work packages

where the contractor was approved one to 3

Extensions of Time ranging from 555 to 1,403

days. In addition, 4 units turbine under Electro-

Mechanical work package (EM2) could not be

completed on schedule as stipulated in the

Power Purchase Agreement and there was


80/94

66

consumption shortfall for the months of

January, July and August 2012;

iii. weaknesses in the project management suchas delay in signing the contract; risk of loss due

to extension of time and expired performance

bond. In addition, delay in completing the Civil

Works Package 2 (CW2) caused various claims

from Electro-Mechanical contractors due to

increase in cost of materials and labour. As at

December 2012, SHSB had paid a total of

RM375 million (86.9%) from the total claims of

RM431.59 million which had been approved by

the Board of Directors and the Ministry of

Finance; and

iv. financial management and corporate

governance were satisfactory except that the

companys strategic planning and standard

operating procedures for contract management

were not prepared yet. There were also

weaknesses in updating the company asset

register;

b. In order to further improve the performance of

business activities and corporate governance, it is

recommended that the parties involved take the

following actions:

i. the Board of Directors of SHSB should regularly

and closely monitor the projects undertaken


81/94

67

from time to time so that objectives and benefits

targeted are achieved;

ii. the management of SHSB should ensure thatshort and long term strategic plans are

prepared so that the direction of the company

could be determined; and

iii. the management of SHSB should urgently

prepare the standard operating procedure to

ensure its contract/project management is donein a consistent and proper manner.

23. Halal Ind us try Development Corpo rat ion Sdn .

Bhd.

a. Halal Industry Development Corporation Sdn. Bhd.

(HDC) which was established on 18 September

2006 was wholly owned by the Ministry of Finance

Incorporated, Malaysia (MoF) with a paid up capital

of RM95 million. The authorised capital was

RM100 million. The Federal Government through

MoF held the majority share with 99.9% stake

while the Federal Lands Commissioner had 1share of RM1. HDCs main objectives were to

integrate the halal industry of the country as the

foundation of a global halal community; improve

the certification process; set up the Halal Support

Centre and introduce the concept of Halal

Malaysia. HDC was established to lead all the


82/94

68

Government's initiative in coordinating the

development of the halal and economic growth as

a whole and to promote Malaysia as an

international halal hub. The roles and

responsibilities of HDC as set by the Government

were divided into three strategic divisions namely

the Halal Industry Development, Halal Integrity as

well as Halal Branding and Promotion. Audit

findings revealed the following:

i. revenue performance in 2011 improved after

experiencing a significant decline in 2010

compared to 2009. The main income was

deposit interest from banks/financial institutions

and rental from exhibition booths. The

expenditure also showed a declining trend from2009 to 2011. HDCs cash flow position

indicated a downward trend. This was mainly

due to the fact that HDC did not generate cash

flow from operating activities from 2009 to

2011;

ii. performance of activities as a whole was notsatisfactory and should be given due attention

by the Board of Directors as the development of

the halal industry could not be implemented as

planned; activities were not properly planned;

part of the work under the Government

assistance programmes could not be


83/94

69

implemented within the period stipulated;

activities undertaken did not achieve the

objectives set; expenses for organising halal

activities were not done properly; lack of

monitoring and part of the work was not fully

documented; and

iii. there were still weaknesses in the financial

management and corporate governance which

needed to be resolved in particular weakness inpayment even though the same issue was

raised in 2009.

b. In order to ensure that HDC achieves the

objectives of its establishment, it is recommended

that parties involved consider the following actions:

i. the management of HDC should create or

review processes, procedures and mechanisms

of implementation for all halal programmes to

ensure that they could be executed efficiently

and effectively as well as protect the interests of

the Government;ii. the management of HDC should comply with all

established financial regulations in order to

have good governance;

iii. MoF should review HDCs status as a

Government company as HDC is not profit-

oriented and requires funds from the


84/94

70

Government to implement its principal activities;

and

iv. the Ministry of International Trade and Industryshould continuously enhance monitoring on the

distribution of allocations and expenditures

performance as specified in the service

agreement with HDC so that the development

budget is spent according to plan.

24. Technology Park Malaysia Col lege Sdn . Bhd .

a. Technology Park Malaysia College Sdn. Bhd.

(TPMC) was established on 18 August 1998 with a

paid up capital of RM15 million. TPMC is wholly

owned by Technology Park Malaysia Corporation

Sdn. Bhd. (TPM) with the mandate to form a

college. The main activity is to provide a place oflearning for higher education in biotechnology and

biomedical science, engineering as well as

business management. Courses offered are

twinning degree programmes with foreign

universities; diplomas; certificates; and short

courses. TPMC also carries out high qualitytechnical training such as human capital

development and industry skills enhancement

programmes. Audit findings revealed the following:

i. the company's financial performance was

satisfactory with operating profit for 3

consecutive years;


85/94

71

ii. TPMC activities were in accordance with the

mandate given except that there were not

enough students pursuing studies in the

college; delay in developing the College

Management System (CMS) and the Loan

Fund was used for other purposes; and

iii. the management and corporate governance of

TPMC were generally satisfactory.

b. In order to ensure that TPMC achieves the mainpurpose of its establishment which is providing

learning for higher education, it is recommended

that the management of TPMC considers the

following:

i. take proactive action to ensure that students

graduated are marketable and employable;

ii. review and set marketing strategies to attract

more students as planned; and

iii. increase the number of students pursuing

studies in the college to create a good image

for the college and to help reduce the operating

costs.


86/94

72


87/94

73

POSTSCRIPT


88/94

74


89/94

75

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 to 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 oninternal controls, the Internal Audit Unit should carry

out procurement and performance audits on the

management of programmes/activities/projects to

ensure that they are implemented efficiently,

economically and the stated objectives are achieved.


90/94

76

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 g

synopsis lkan2012 siri 1 - website

Documents