AUDITOR GENERAL’S REPORT GENERAL’S REPORT 2015 NATIONAL AUDIT DEPARTMENT MALAYSIA GOVERNMENT’S...

AUDITOR GENERAL’S REPORT 2015

NATIONAL AUDIT DEPARTMENTMALAYSIA

GOVERNMENT’S FINANCIAL STATEMENT, FINANCIAL MANAGEMENTFOR THE YEAR 2015 AND ACTIVITIES OF THE

FEDERAL MINISTRIES/DEPARTMENTS AND MANAGEMENT OF THE GOVERNMENT’S COMPANIES

SERIES 1

NATIONAL AUDIT DEPARTMENT MALAysIANo. 15, Level 1-5Persiaran Perdana, Presint 2Pusat Pentadbiran Kerajaan Persekutuan62518 Putrajaya

www.aud i t .gov.mywww.aud i t .gov.my

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SYNOPSIS

AUDITOR GENERAL’S REPORT FOR THE YEAR 2015

THE AUDIT OF THE FEDERAL GOVERNMENT’S FINANCIAL STATEMENT,

FINANCIAL MANAGEMENT, ACTIVITIES OF THE FEDERAL MINISTRIES/DEPARTMENTS AND MANAGEMENT OF THE GOVERNMENT COMPANIES

NATIONAL AUDIT DEPARTMENT MALAYSIA

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CONTENTS


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CONTENTS

PAGE CONTENTS v SECTION I THE FEDERAL GOVERNMENT’S FINANCIAL STATEMENT AND FINANCIAL MANAGEMENT OF THE FEDERAL MINISTRIES/DEPARTMENTS

PREFACE 5 SYNOPSIS 13 PART I CERTIFICATION OF THE FEDERAL GOVERNMENT‟S FINANCIAL STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2015

1. Certification Of The Federal Government‟s Financial Statement For The Year Ended 31st December 2015 15

PART II FINANCIAL MANAGEMENT OF THE FEDERAL GOVERNMENT

2. Overall Financial Management Performance 15 3. Financial Management Of The Federal Ministries And Departments 16 4. Public Accounts Committee Meeting 17

CONCLUSION 19


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SECTION II ACTIVITIES OF THE FEDERAL MINISTRIES / DEPARTMENTS AND MANAGEMENT OF THE GOVERNMENT COMPANIES PREFACE 29 SYNOPSIS 35

PART 1 IMPLEMENTATION OF ACTIVITIES BY THE FEDERAL MINISTRIES/DEPARTMENTS PRIME MINISTER’S OFFICE National Disaster Management Agency

1. The Management Of Home Construction And Refurbishment For Flood Victims 37

PRIME MINISTER’S DEPARTMENT/MINISTRY OF HOME AFFAIRS Malaysia Civil Defence Department

2. Management On Procurement Of Supplies And Services 41

MINISTRY OF FINANCE Inland Revenue Board Of Malaysia

3. The Management Of Company Civil Suit 43 Royal Malaysian Customs Department

4. Controls Of Licensed Warehouse For Liquors And Cigarettes 46

MINISTRY OF RURAL AND REGIONAL DEVELOPMENT 5. Rural Water Supply Programme In Sabah 50

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MINISTRY OF RURAL AND REGIONAL DEVELOPMENT/ PUBLIC WORKS DEPARTMENT 6. Construction Of The Subang UniKL Malaysian Institute

Of Aviation Technology (MIAT) Campus, Selangor 53

MINISTRY OF WORKS/ PUBLIC WORKS DEPARTMENT 7. Construction Of A New Way Project From Seremban

Hi-Way PD-FR5 In Pasir Panjang And Upgrading FR5 From Pasir Panjang To Linggi, Negeri Sembilan (Section 1) 55

MINISTRY OF WORK MALAYSIA / MINISTRY OF WOMEN, FAMILY AND COMMUNITY 8. Project Management Reconstruction Quarters Welfare

Department 58

MINISTRY OF TRANSPORT 9. The ERL Extension Project From KLIA To klia2 62

MINISTRY OF ENERGY, GREEN TECHNOLOGY AND WATER / MINISTRY OF FEDERAL TERRITORIES Sewerage Services Department 10. Sewerage Projects Under The River Cleaning

Components For “River Of Life” Program 65 MINISTRY OF HEALTH MALAYSIA 11. Management Of Orthopedic Treatment Activities 67 12. Management Of Private Security Services Company

In Hospital 70 MINISTRY OF HEALTH MALAYSIA / MINISTRY OF WORKS MALAYSIA 13. Construction Project Of New Tampin Hospital, Negeri

Sembilan 73


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MINISTRY OF URBAN WELLBEING, HOUSING AND LOCAL GOVERNMENT National Solid Waste Management Department 14. Solid Waste Disposal Sites Management 77

National Housing Department 15. Construction Of The People's Housing Programme,

Lembah Subang 2 80 MINISTRY OF DEFENCE 16. The Management Of Jiwa Murni Project In Sarawak 82

MINISTRY OF WORKS / MINISTRY OF HOME AFFAIRS Prison Department of Malaysia 17. Management Of Construction Project Penjara Reman

(Tegar) Johor Bahru, Johor 85 MINISTRY OF HOME AFFAIRS Immigration Department of Malaysia 18. Implementation Of The Malaysian Immigration System

(myIMMs) 87

MINISTRY OF EDUCATION MALAYSIA 19. Management Of Private Security Services Company

In Schools 91 20. Management Of Supplementary Food Programme 93

PART II MANAGEMENT OF GOVERNMENT COMPANIES

MINISTRY OF TOURISM AND CULTURE MALAYSIA 21. Malaysia Convention & Exhibition Bureau 97

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MINISTRY OF EDUCATION MALAYSIA 22. Management Of Perbadanan Kota Buku 100

MALAYSIA OF FINANCE MALAYSIA 23. Management Of Multimedia Development

Corporation Sdn. Bhd. 102 24. Management Of Malaysian Agrifood Corporation

Berhad (MAFC) 104 25. Sepang International Circuit Sdn. Bhd. 107

CONCLUSION 111


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SECTION 1

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SYNOPSIS


THE FEDERAL GOVERNMENT’S FINANCIAL STATEMENT AND FINANCIAL MANAGEMENT OF

THE FEDERAL MINISTRIES/DEPARTMENTS


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SYNOPSIS


THE FEDERAL GOVERNMENT’S FINANCIAL STATEMENT AND FINANCIAL MANAGEMENT OF

THE FEDERAL MINISTRIES/DEPARTMENTS


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PREFACE

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PREFACE

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PREFACE

1. Article 106 and 107 of the Federal Constitution and the Audit Act 1957 require the Auditor General to audit the Federal Government‟s Financial Statement, financial management, activities of the Ministries/Departments as well as management of the Federal Government companies and submit his reports to His Majesty, the Supreme Head of Malaysia and obtain his assent before tabling them in Parliament. To fulfil these responsibilities, the National Audit Department needs to carry out 4 types of audit as follows:

1.1. Attestation Audit - to give an opinion as to whether the Federal Government‟s Financial Statement shows a true and fair view as well as its accounting records are properly maintained and updated accordingly;

1.2. Compliance Audit - to evaluate whether the financial management of the Federal Ministries/Departments is in accordance with relevant financial laws and regulations; 1.3. Performance Audit - to evaluate whether the Federal Government‟s activities/programmes/projects

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PREFACE


1.1. Attestation Audit - to give an opinion as to whether the Federal Government‟s Financial Statement shows a true and fair view as well as its accounting records are properly maintained and updated accordingly;

1.2. Compliance Audit - to evaluate whether the financial management of the Federal Ministries/Departments is in accordance with relevant financial laws and regulations; 1.3. Performance Audit - to evaluate whether the Federal Government‟s activities/programmes/projects

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3. Audit on the Federal Government‟s Financial Statement for the Year 2015 revealed that the Statement as a whole reflected a true and fair view on the financial position of the Federal Government as at 31st December 2015, its operations and cash flows for the year ended 31st December 2015 as well as its accounting records were properly maintained and updated accordingly. Meanwhile, the audit of financial management revealed that several Ministries and Departments did not fully comply with financial regulations. Among others, these weaknesses were due to negligence in compliance with stipulated financial rules/procedures, insufficient manpower, lack of training in financial management, inadequate supervision and close monitoring. 4. Heads of Department had been informed earlier and confirmed all the matters reported in this report. In addition, The National Audit Department undertook several initiatives to assist the Federal Government‟s Ministries/Departments mitigate weaknesses in their financial management. Among the initiatives that had been taken were as follows:

4.1. Implementation of a rating system based on Accountability Index (AI). This system rates the compliance of financial regulations in 8 main elements. These elements are management control, budgetary control, receipting control, management of procurement, expenditure control, management of trust funds/accounts and deposits, management of assets

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have been carried out efficiently and economically to achieve their desired objectives/goals; and 1.4. Government Companies’ Management Audit - to evaluate whether the Federal Government Companies have been managed in a proper and efficient manner as well as achieving their objectives.

2. My report on the Financial Statement and Financial Management of the Federal Government‟s Ministries/Departments for the Year 2015 consists of the following:

Part I : Certification Of The Federal Government’s Financial Statement For The Year Ended 31st December 2015

Part II : Financial Management Of The Federal Government

Part III : National Audit Department’s Involvement In Special Evaluation Towards Enhancing Accountability Of Public Financial Management

Part IV : General Matters

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3. Audit on the Federal Government‟s Financial Statement for the Year 2015 revealed that the Statement as a whole reflected a true and fair view on the financial position of the Federal Government as at 31st December 2015, its operations and cash flows for the year ended 31st December 2015 as well as its accounting records were properly maintained and updated accordingly. Meanwhile, the audit of financial management revealed that several Ministries and Departments did not fully comply with financial regulations. Among others, these weaknesses were due to negligence in compliance with stipulated financial rules/procedures, insufficient manpower, lack of training in financial management, inadequate supervision and close monitoring. 4. Heads of Department had been informed earlier and confirmed all the matters reported in this report. In addition, The National Audit Department undertook several initiatives to assist the Federal Government‟s Ministries/Departments mitigate weaknesses in their financial management. Among the initiatives that had been taken were as follows:

4.1. Implementation of a rating system based on Accountability Index (AI). This system rates the compliance of financial regulations in 8 main elements. These elements are management control, budgetary control, receipting control, management of procurement, expenditure control, management of trust funds/accounts and deposits, management of assets

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have been carried out efficiently and economically to achieve their desired objectives/goals; and 1.4. Government Companies’ Management Audit - to evaluate whether the Federal Government Companies have been managed in a proper and efficient manner as well as achieving their objectives.

2. My report on the Financial Statement and Financial Management of the Federal Government‟s Ministries/Departments for the Year 2015 consists of the following:

Part I : Certification Of The Federal Government’s Financial Statement For The Year Ended 31st December 2015

Part II : Financial Management Of The Federal Government

Part III : National Audit Department’s Involvement In Special Evaluation Towards Enhancing Accountability Of Public Financial Management

Part IV : General Matters

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officers. To ascertain its compliance, the National Audit Department carried out surprise inspection at 244 Federal government offices. 4.4. Implementation of the financial management performance of Premier Grade Officers. The National Audit Department constantly involved in evaluating the performance of Premier Grade Officers on financial management as one of the essential elements for their confirmation exercise. For the year 2015, National Audit Department evaluated 29 Heads of Ministry/Department/Agency. These evaluations indirectly enhanced the financial management of Ministry/Department/Agency as the promotion of Heads of Ministry/Department/Agency can only be considered by the Public Service Department after the National Audit Department and Federal Treasury of Malaysia verified that the relevant officers had taken corrective actions on all weaknesses raised.

4.5. Meetings of the Public Accounts Committee (PAC). PAC was formed to examine and monitor national financial affairs in ensuring national finances are governed properly, efficiently and transparent. PAC meetings were also attended by representatives from the National Audit Department, Ministry of Finance, Public Service Department, Accountant General‟s Department as well as the Economic Planning Unit. For the year 2015, PAC conducted 33 meetings.

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and stores as well as management of government vehicles. Federal Ministries/Departments with excellent rating are suggested to be benchmarked (role model). Thus motivating other Federal Ministries/Departments to further improve and enhance their performance of financial management. 4.2. Implementation of financial management audits at Malaysian Diplomatic Missions Abroad. For the year 2015, the National Audit Department audited 8 Malaysian Diplomatic Missions Abroad. The exercises of financial management audits are to evaluate its compliance with relevant financial laws and regulations. These financial management audits focused on 5 elements namely management control, receipting control, expenditure control, management of trust funds/accounts and deposits as well as management of assets and stores. These audits also included The Overseas Accounting System (Sistem Perakaunan Luar Negeri). 4.3. Implementation of surprise inspections at Federal government offices throughout the country. The Treasury Instructions stipulated that Heads of Ministry/Department are responsible to safeguard public money, stamps or other valuable items in safety boxes, vaults, cash boxes or other repositories. Heads of Ministry/Department must ensure that records kept are complete, up to date and periodically checked by senior

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officers. To ascertain its compliance, the National Audit Department carried out surprise inspection at 244 Federal government offices. 4.4. Implementation of the financial management performance of Premier Grade Officers. The National Audit Department constantly involved in evaluating the performance of Premier Grade Officers on financial management as one of the essential elements for their confirmation exercise. For the year 2015, National Audit Department evaluated 29 Heads of Ministry/Department/Agency. These evaluations indirectly enhanced the financial management of Ministry/Department/Agency as the promotion of Heads of Ministry/Department/Agency can only be considered by the Public Service Department after the National Audit Department and Federal Treasury of Malaysia verified that the relevant officers had taken corrective actions on all weaknesses raised.

4.5. Meetings of the Public Accounts Committee (PAC). PAC was formed to examine and monitor national financial affairs in ensuring national finances are governed properly, efficiently and transparent. PAC meetings were also attended by representatives from the National Audit Department, Ministry of Finance, Public Service Department, Accountant General‟s Department as well as the Economic Planning Unit. For the year 2015, PAC conducted 33 meetings.

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and stores as well as management of government vehicles. Federal Ministries/Departments with excellent rating are suggested to be benchmarked (role model). Thus motivating other Federal Ministries/Departments to further improve and enhance their performance of financial management. 4.2. Implementation of financial management audits at Malaysian Diplomatic Missions Abroad. For the year 2015, the National Audit Department audited 8 Malaysian Diplomatic Missions Abroad. The exercises of financial management audits are to evaluate its compliance with relevant financial laws and regulations. These financial management audits focused on 5 elements namely management control, receipting control, expenditure control, management of trust funds/accounts and deposits as well as management of assets and stores. These audits also included The Overseas Accounting System (Sistem Perakaunan Luar Negeri). 4.3. Implementation of surprise inspections at Federal government offices throughout the country. The Treasury Instructions stipulated that Heads of Ministry/Department are responsible to safeguard public money, stamps or other valuable items in safety boxes, vaults, cash boxes or other repositories. Heads of Ministry/Department must ensure that records kept are complete, up to date and periodically checked by senior

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SYNOPSIS

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5. I would like to express my appreciation to all the officers in various Federal Ministries/Departments for their full cooperation during the audit. I would also like to record my gratitude to my officers who have shown total commitment and worked diligently to complete this report.

(TAN SRI HJ. AMBRIN BIN BUANG) Auditor General of Malaysia Putrajaya 27th April 2016

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SYNOPSIS

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5. I would like to express my appreciation to all the officers in various Federal Ministries/Departments for their full cooperation during the audit. I would also like to record my gratitude to my officers who have shown total commitment and worked diligently to complete this report.

(TAN SRI HJ. AMBRIN BIN BUANG) Auditor General of Malaysia Putrajaya 27th April 2016

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SYNOPSIS

PART I - CERTIFICATION OF THE FEDERAL GOVERNMENT’S FINANCIAL STATEMENT FOR THE YEAR ENDED 31st DECEMBER 2015

1. The Federal Government‟s Financial Statement for the year ended 31st December 2015 as a whole reflected a true and fair view of the financial position of the Federal Government and the accounting records were properly maintained and updated accordingly.

PART II - FINANCIAL MANAGEMENT OF THE FEDERAL GOVERNMENT

Overall Financial Management Performance 2. For the year 2015, the Federal Government received revenue totalling RM219.089 billion, decrease by RM1.537 billion (0.7%) as compared to RM220.626 billion for the year 2014. In the same year, the Parliament has approved allocation of operating expenditure amounting to RM221.727 billion in which a total of RM216.998 billion or 97.9% was spent. As for development expenditure, Federal Ministries/Departments had spent RM40.768 billion (99.4%) out of RM41.025 billion of the approved allocation. The Federal Government incurred deficit of RM37.194 billion

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SYNOPSIS

PART I - CERTIFICATION OF THE FEDERAL GOVERNMENT’S FINANCIAL STATEMENT FOR THE YEAR ENDED 31st DECEMBER 2015

1. The Federal Government‟s Financial Statement for the year ended 31st December 2015 as a whole reflected a true and fair view of the financial position of the Federal Government and the accounting records were properly maintained and updated accordingly.

PART II - FINANCIAL MANAGEMENT OF THE FEDERAL GOVERNMENT

Overall Financial Management Performance 2. For the year 2015, the Federal Government received revenue totalling RM219.089 billion, decrease by RM1.537 billion (0.7%) as compared to RM220.626 billion for the year 2014. In the same year, the Parliament has approved allocation of operating expenditure amounting to RM221.727 billion in which a total of RM216.998 billion or 97.9% was spent. As for development expenditure, Federal Ministries/Departments had spent RM40.768 billion (99.4%) out of RM41.025 billion of the approved allocation. The Federal Government incurred deficit of RM37.194 billion

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4. The National Audit Department also carried out surprise checks at 226 Federal Departments/Offices at state and district level. Audit findings revealed that a number of offices did not fully comply with stipulated financial regulations. Amongst them were mail registers, cash books and petty cash books were not properly maintained or updated accordingly; surprise inspections were not conducted as required; and power were not delegate to the relevant officer in charged of safe box. The reports were submitted to relevant Heads of Department at Headquarter and State level for further actions. 5. Besides conducting mandatory audits as provided under the law, the National Audit Department also carried out special evaluation on the financial management performance of Premier Grade Officers in various Ministries/Departments/Agencies. In Year 2015, a total of 29 Premier Grade Officers has been evaluated. Public Accounts Committee Meeting 6. The Public Accounts Committee (PAC) was formed to examine and monitor national financial affairs by ensuring it has been governed and managed in an efficient, effective and transparent manner. PAC meetings were also attended by representatives from the National Audit Department, Ministry of Finance, Public Service Department, Accountant General‟s Department as well as the Economic Planning Unit. In Year 2015, a total of 33 meetings have been conducted by PAC.

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with its ratio to the Gross Domestic Product (GDP) at 3.22%. The deficit was covered by internal and external loans amounting to RM121.364 billion. Apart from financing the development expenditure, the loans were also used to repay the existing debts and finance the Housing Loan Trust Fund. Financial Management Of The Federal Ministries And Departments 3. The National Audit Department audited 25 Federal Ministries and 40 Federal Departments in 2015 in order to evaluate whether their financial management was in accordance with related laws and financial regulations. Audit findings revealed that the overall financial performance of the ministries had declined as compared to the previous 2 years. In 2015, only 16 ministries were rated as excellent as compared to 20 ministries in 2014 and 23 ministries in 2013. However, performance of financial management by Federal Departments showed an improvement, where a total of 22 (55%) out of 40 departments were rated as excellent in 2015 as compared to 29 (56.9%) out of 51 departments in 2014 and 21 (46.7%) out of 45 departments in 2013. Accountant General‟s Department of Malaysia, in 14 States and 16 branches of Fire and Rescue Department of Malaysia throughout the country were also audited. Audit was also carried out in 8 Malaysian Diplomatic Missions Abroad under the purview of the Ministry of Foreign Affairs.

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4. The National Audit Department also carried out surprise checks at 226 Federal Departments/Offices at state and district level. Audit findings revealed that a number of offices did not fully comply with stipulated financial regulations. Amongst them were mail registers, cash books and petty cash books were not properly maintained or updated accordingly; surprise inspections were not conducted as required; and power were not delegate to the relevant officer in charged of safe box. The reports were submitted to relevant Heads of Department at Headquarter and State level for further actions. 5. Besides conducting mandatory audits as provided under the law, the National Audit Department also carried out special evaluation on the financial management performance of Premier Grade Officers in various Ministries/Departments/Agencies. In Year 2015, a total of 29 Premier Grade Officers has been evaluated. Public Accounts Committee Meeting 6. The Public Accounts Committee (PAC) was formed to examine and monitor national financial affairs by ensuring it has been governed and managed in an efficient, effective and transparent manner. PAC meetings were also attended by representatives from the National Audit Department, Ministry of Finance, Public Service Department, Accountant General‟s Department as well as the Economic Planning Unit. In Year 2015, a total of 33 meetings have been conducted by PAC.

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with its ratio to the Gross Domestic Product (GDP) at 3.22%. The deficit was covered by internal and external loans amounting to RM121.364 billion. Apart from financing the development expenditure, the loans were also used to repay the existing debts and finance the Housing Loan Trust Fund. Financial Management Of The Federal Ministries And Departments 3. The National Audit Department audited 25 Federal Ministries and 40 Federal Departments in 2015 in order to evaluate whether their financial management was in accordance with related laws and financial regulations. Audit findings revealed that the overall financial performance of the ministries had declined as compared to the previous 2 years. In 2015, only 16 ministries were rated as excellent as compared to 20 ministries in 2014 and 23 ministries in 2013. However, performance of financial management by Federal Departments showed an improvement, where a total of 22 (55%) out of 40 departments were rated as excellent in 2015 as compared to 29 (56.9%) out of 51 departments in 2014 and 21 (46.7%) out of 45 departments in 2013. Accountant General‟s Department of Malaysia, in 14 States and 16 branches of Fire and Rescue Department of Malaysia throughout the country were also audited. Audit was also carried out in 8 Malaysian Diplomatic Missions Abroad under the purview of the Ministry of Foreign Affairs.

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CONCLUSION

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CONCLUSION

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CONCLUSION

In general, the financial management of the Federal Ministries in 2015 showed a slight decline in performance as compared to the previous 2 years. In 2015, 16 ministries were rated as excellent compared to 20 ministries in 2014 and 23 ministries in 2013.

Performance of financial management by Federal Departments showed a decrease in the numbers of excellent departments for the year 2015 as compare to 2014 and previous years. In 2015, a total of 22 (55%) out of 40 departments were rated as excellent compared to 29 (56.9%) out of 51 departments in 2014 and 21 (46.7%) out of 45 departments in 2013. The financial management performance could still be further enhanced if Controlling Officers/Heads of Department not only take action to rectify the weaknesses as highlighted by National Audit Department but also take preventive actions to ensure that the same weaknesses do not recur. With regard to this, the followings are recommended to further strengthen the performance of financial management:

a. Controlling Officers/Heads of Department should conduct comprehensive checks to determine whether weaknesses highlighted by National Audit Department also occurs in departments and Responsibility Centres and take corrective actions

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CONCLUSION

In general, the financial management of the Federal Ministries in 2015 showed a slight decline in performance as compared to the previous 2 years. In 2015, 16 ministries were rated as excellent compared to 20 ministries in 2014 and 23 ministries in 2013.

Performance of financial management by Federal Departments showed a decrease in the numbers of excellent departments for the year 2015 as compare to 2014 and previous years. In 2015, a total of 22 (55%) out of 40 departments were rated as excellent compared to 29 (56.9%) out of 51 departments in 2014 and 21 (46.7%) out of 45 departments in 2013. The financial management performance could still be further enhanced if Controlling Officers/Heads of Department not only take action to rectify the weaknesses as highlighted by National Audit Department but also take preventive actions to ensure that the same weaknesses do not recur. With regard to this, the followings are recommended to further strengthen the performance of financial management:

a. Controlling Officers/Heads of Department should conduct comprehensive checks to determine whether weaknesses highlighted by National Audit Department also occurs in departments and Responsibility Centres and take corrective actions

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f. The Accountant General‟s Department through its Internal Audit Management Division should play an important role to enhance financial management performance by carrying out planned inspections on Responsibility Centres;

g. Heads of Department should establish a check and balance system, supervise closely and conduct surprise checks, conduct periodic assessment on skills and capabilities of officers and give training to officers who are involved in financial management so as to improve their efficiency. This is to avoid officers who lack experiences and skills from using their discretion when making decisions; and

h. Records on asset should always be updated by the Ministries/Departments in preparation for the Federal Government‟s shift towards accrual accounting.

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as audits conducted by National Audit Department were based on samples and specific scopes;

b. the involvement of Controlling Officers/Heads of Department should be intensified through a hands-on approach on financial matters;

c. Ministries/Departments should enhance the effectiveness of internal audit. Among others, they should ensure that internal auditors get sufficient training and guidance, prepare the annual audit plan so that auditing could be carried out according to priorities, evaluate objectively and independently not only on internal controls but also on risk management and organizational governance, report on significant findings as well as giving recommendations that give impact and outcome to the organization;

d. Issues highlighted by National Audit Department should be discussed in detail by the Audit Committee. These meetings should involve discussion on corrective and preventive actions to ensure that the same issues do not recur;

e. Every Exit Conference with the National Audit Department should be chaired by the respective Secretary General/Head of Department so that they could be informed on audit issues beforehand and urgently take positive actions apart from making improvements;

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f. The Accountant General‟s Department through its Internal Audit Management Division should play an important role to enhance financial management performance by carrying out planned inspections on Responsibility Centres;

g. Heads of Department should establish a check and balance system, supervise closely and conduct surprise checks, conduct periodic assessment on skills and capabilities of officers and give training to officers who are involved in financial management so as to improve their efficiency. This is to avoid officers who lack experiences and skills from using their discretion when making decisions; and

h. Records on asset should always be updated by the Ministries/Departments in preparation for the Federal Government‟s shift towards accrual accounting.

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as audits conducted by National Audit Department were based on samples and specific scopes;

b. the involvement of Controlling Officers/Heads of Department should be intensified through a hands-on approach on financial matters;

c. Ministries/Departments should enhance the effectiveness of internal audit. Among others, they should ensure that internal auditors get sufficient training and guidance, prepare the annual audit plan so that auditing could be carried out according to priorities, evaluate objectively and independently not only on internal controls but also on risk management and organizational governance, report on significant findings as well as giving recommendations that give impact and outcome to the organization;

d. Issues highlighted by National Audit Department should be discussed in detail by the Audit Committee. These meetings should involve discussion on corrective and preventive actions to ensure that the same issues do not recur;

e. Every Exit Conference with the National Audit Department should be chaired by the respective Secretary General/Head of Department so that they could be informed on audit issues beforehand and urgently take positive actions apart from making improvements;

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SECTION 2

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SECTION 2

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SYNOPSIS

AUDITOR GENERAL’S REPORT FOR THE YEAR 2015 SERIES 1

ACTIVITIES OF THE FEDERAL MINISTRIES/DEPARTMENTS

AND MANAGEMENT OF THE GOVERNMENT COMPANIES


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SYNOPSIS

AUDITOR GENERAL’S REPORT FOR THE YEAR 2015 SERIES 1

ACTIVITIES OF THE FEDERAL MINISTRIES/DEPARTMENTS

AND MANAGEMENT OF THE GOVERNMENT COMPANIES


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PREFACE

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PREFACE

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PREFACE


1.1. Attestation Audit – to give an opinion as to whether the Federal Government‟s Financial Statement shows a true and fair view as well as its accounting records are properly maintained and updated accordingly;

1.2. Compliance Audit – to evaluate whether the financial management of the Federal Ministries/ Departments is in accordance with relevant financial laws and regulations;

1.3. Performance Audit – to evaluate whether the Federal Government activities have been carried out efficiently and economically to achieve its desired objectives/goals; and

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PREFACE


1.1. Attestation Audit – to give an opinion as to whether the Federal Government‟s Financial Statement shows a true and fair view as well as its accounting records are properly maintained and updated accordingly;

1.2. Compliance Audit – to evaluate whether the financial management of the Federal Ministries/ Departments is in accordance with relevant financial laws and regulations;

1.3. Performance Audit – to evaluate whether the Federal Government activities have been carried out efficiently and economically to achieve its desired objectives/goals; and

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assets, security and weaknesses in revenue collections are observed. These weaknesses resulted from negligence in complying with the Government‟s rules/procedures; non-conscientious in programmes/ activities/ projects planning, scopes definition and tender specifications; no frequent and close monitoring of works of contractors/ consultants; poor project management skills; less emphasize on the outcome/ impact of programmes/ activities/ projects and insufficient funds for procurement and maintenance of assets. 4. As in previous years, Heads of Department had been informed earlier and confirmed all the matters reported in this report. Furthermore, Exit Conferences were held with Secretary General of Ministry/ Heads of Department/ Chief Executive Officer of the Government Company and also attended by representatives from the Attorney General‟s Chambers, Public Service Department, Malaysian Anti-Corruption Commission, Ministry of Finance and related contractors to rectify the issues highlighted. Thus, I have suggested 77 recommendations for corrective and improvement actions to be taken by Secretary General of Ministry/ Heads of Department/ Chief Executive Officer to mitigate the identified weaknesses of the programmes/ activities/ projects. 5. In achieving the objectives of the Government Transformation Programme 2.0 in fighting corruption under the National Key Results Areas (NKRA), the Auditor General‟s Dashboard (AG Dashboard) was implemented on

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1.4. Government Companies’ Management Audit – to evaluate whether Federal Government Companies have been managed in a proper and efficient manner as well as achieving their objectives.

2. My report on the implementation of activities of the Federal Ministries/Departments and the management of Government Companies for the year 2015 Series 1 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 manage efficiently, economically and in accordance with their stated objectives. The audit includes various activities such as procurement, construction, infrastructure, maintenance, and revenue management. This report contains observations from the audit of 20 programmes/ activities/ projects of 19 Federal Ministries/ Departments, management, management and financial performance of 5 Government Companies. In general, weaknesses such as works/ supplies/ services not accordance to specifications, of poor quality and not suitable; unreasonable delays; improper payment; wastages; weaknesses in management of Government‟s

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assets, security and weaknesses in revenue collections are observed. These weaknesses resulted from negligence in complying with the Government‟s rules/procedures; non-conscientious in programmes/ activities/ projects planning, scopes definition and tender specifications; no frequent and close monitoring of works of contractors/ consultants; poor project management skills; less emphasize on the outcome/ impact of programmes/ activities/ projects and insufficient funds for procurement and maintenance of assets. 4. As in previous years, Heads of Department had been informed earlier and confirmed all the matters reported in this report. Furthermore, Exit Conferences were held with Secretary General of Ministry/ Heads of Department/ Chief Executive Officer of the Government Company and also attended by representatives from the Attorney General‟s Chambers, Public Service Department, Malaysian Anti-Corruption Commission, Ministry of Finance and related contractors to rectify the issues highlighted. Thus, I have suggested 77 recommendations for corrective and improvement actions to be taken by Secretary General of Ministry/ Heads of Department/ Chief Executive Officer to mitigate the identified weaknesses of the programmes/ activities/ projects. 5. In achieving the objectives of the Government Transformation Programme 2.0 in fighting corruption under the National Key Results Areas (NKRA), the Auditor General‟s Dashboard (AG Dashboard) was implemented on

32

1.4. Government Companies’ Management Audit – to evaluate whether Federal Government Companies have been managed in a proper and efficient manner as well as achieving their objectives.

2. My report on the implementation of activities of the Federal Ministries/Departments and the management of Government Companies for the year 2015 Series 1 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 manage efficiently, economically and in accordance with their stated objectives. The audit includes various activities such as procurement, construction, infrastructure, maintenance, and revenue management. This report contains observations from the audit of 20 programmes/ activities/ projects of 19 Federal Ministries/ Departments, management, management and financial performance of 5 Government Companies. In general, weaknesses such as works/ supplies/ services not accordance to specifications, of poor quality and not suitable; unreasonable delays; improper payment; wastages; weaknesses in management of Government‟s

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35

SYNOPSIS

34

31st May 2013. The AG Dashboard displays issues reported in the Auditor General‟s Report and corrective actions taken by auditees. The AG Dashboard has successfully assisted Ministries/ Department/ Companies to respond promptly on issues highlighted. It demonstrates commitments and concerns of Ministries/ Departments/Government Companies to rectify issues reported in the Auditor General‟s Report and disseminate information and current status of audit issues to the public. 6. I would like to express my appreciation to all the officers in the various Federal Ministries/ Departments/Government Companies who have given their full cooperation to my officers during the audit. I would also like to record my gratitude and thanks to my officers who have shown total commitment and worked diligently to complete this report. (TAN SRI HJ. AMBRIN BIN BUANG) Auditor General of Malaysia Putrajaya 20th April 2016

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35

SYNOPSIS

34

31st May 2013. The AG Dashboard displays issues reported in the Auditor General‟s Report and corrective actions taken by auditees. The AG Dashboard has successfully assisted Ministries/ Department/ Companies to respond promptly on issues highlighted. It demonstrates commitments and concerns of Ministries/ Departments/Government Companies to rectify issues reported in the Auditor General‟s Report and disseminate information and current status of audit issues to the public. 6. I would like to express my appreciation to all the officers in the various Federal Ministries/ Departments/Government Companies who have given their full cooperation to my officers during the audit. I would also like to record my gratitude and thanks to my officers who have shown total commitment and worked diligently to complete this report. (TAN SRI HJ. AMBRIN BIN BUANG) Auditor General of Malaysia Putrajaya 20th April 2016

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SYNOPSIS PART I - IMPLEMENTATION OF ACTIVITIES BY THE

FEDERAL MINISTRIES/DEPARTMENTS

PRIME MINISTER’S DEPARTMENT

National Disaster Management Agency

1. The Management of Home Construction And Refurbishment for Flood Victims

a. The National Security Council [Majlis Keselamatan

Negara (MKN)] is an agency as a national focal point for national disaster management. Beginning 26th August 2015, The Government has established the National Disaster Management Agency [Agensi Pengurusan Bencara Negara (APBN)] to replace every MKN‟s functions and responsibilities. APBN is responsible for coordinating and developing the management on national disaster. This is to ensure all policies and mechanisms of national disaster are complied and implemented at each and every levels. The national disaster management was implemented according to MKN Directive No. 20. It includes policy and mechanism which contains framework strategies, directives and action plans in the management of national disasters. The allocations and expenses for national disaster were managed under the National Disaster Relief Trust Fund [Kumpulan Wang Amanah Bantuan Bencana Negara (KWABBN)]. At the end of the year 2014, there were 5

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SYNOPSIS PART I - IMPLEMENTATION OF ACTIVITIES BY THE

FEDERAL MINISTRIES/DEPARTMENTS

PRIME MINISTER’S DEPARTMENT

National Disaster Management Agency

1. The Management of Home Construction And Refurbishment for Flood Victims

a. The National Security Council [Majlis Keselamatan

Negara (MKN)] is an agency as a national focal point for national disaster management. Beginning 26th August 2015, The Government has established the National Disaster Management Agency [Agensi Pengurusan Bencara Negara (APBN)] to replace every MKN‟s functions and responsibilities. APBN is responsible for coordinating and developing the management on national disaster. This is to ensure all policies and mechanisms of national disaster are complied and implemented at each and every levels. The national disaster management was implemented according to MKN Directive No. 20. It includes policy and mechanism which contains framework strategies, directives and action plans in the management of national disasters. The allocations and expenses for national disaster were managed under the National Disaster Relief Trust Fund [Kumpulan Wang Amanah Bantuan Bencana Negara (KWABBN)]. At the end of the year 2014, there were 5

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iii. non-eligibility for 54 RKB‟s recipients and restoration works requirements. Among of such non-compliance where house were not considered as total loss, unoccupied residence, rented houses, shop lots and non-resident owners;

iv. non-assistance on RKB‟s project or restoration works for 36 flood victims despite of their houses were destroyed or damaged by floods. These non-assitance requires rigirous actions and attention by relevant authorities;

v. less effective on the implementation of RKB‟s project and restoration works. Among highlighted issues were the compliance with set design; inability of contractors to complete the RKB‟s project; abandoned projects and appropriateness of project site;

vi. 109 houses for restoration works were out of scope. These include repairs of stores and barn; construction of new wall and garage; paint jobs for brick gate; roof replacements on houses unaffected by floods and installation works for grilles, fan, cabinets and ceiling; and

vii. Unoccuppied or unutilised of 17 constructed and repaired houses for flood victims due to unwillingness to move, problems in providing basic utilities and the non-official handover.

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States namely: Kelantan, Terengganu, Pahang, Perak and Sabah have been stricken by great floods. These floods caused fatalities, damages/losses of homes as well as distress to victims involved. To support flood victims to begin post-flood lives, the Federal Government has allocated funds amounting to RM500 million through KWABBN. The objective of this funding to aid the flood victims for their losses/damages.

b. The audit performed between September to November

2015 in 5 states involved revealed that preliminary process for recipient selection and verification, appointment of contractors, work executions and certification in addition to payment procedures for new permanent home project [Rumah Kekal Baharu (RKB)] and restoration works have met the stipulated Government directives in a fast-track manner. However, there were several issues that could jeopardise the efficiency and effectiveness of this project as follows:

i. the overall performance of the home construction

project is less satisfactory. A total of 557 (40%) out of 1395 RKB‟s units was incompleted resulted flood victims were still staying in transit homes, tents and so on;

ii. non-updated information on RKB‟s recipients and restoration works in the flood management information system (ePASCA BANJIR) lead to unrealiable and non-integrity of the data and system;

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iii. non-eligibility for 54 RKB‟s recipients and restoration works requirements. Among of such non-compliance where house were not considered as total loss, unoccupied residence, rented houses, shop lots and non-resident owners;

iv. non-assistance on RKB‟s project or restoration works for 36 flood victims despite of their houses were destroyed or damaged by floods. These non-assitance requires rigirous actions and attention by relevant authorities;

v. less effective on the implementation of RKB‟s project and restoration works. Among highlighted issues were the compliance with set design; inability of contractors to complete the RKB‟s project; abandoned projects and appropriateness of project site;

vi. 109 houses for restoration works were out of scope. These include repairs of stores and barn; construction of new wall and garage; paint jobs for brick gate; roof replacements on houses unaffected by floods and installation works for grilles, fan, cabinets and ceiling; and

vii. Unoccuppied or unutilised of 17 constructed and repaired houses for flood victims due to unwillingness to move, problems in providing basic utilities and the non-official handover.

38

States namely: Kelantan, Terengganu, Pahang, Perak and Sabah have been stricken by great floods. These floods caused fatalities, damages/losses of homes as well as distress to victims involved. To support flood victims to begin post-flood lives, the Federal Government has allocated funds amounting to RM500 million through KWABBN. The objective of this funding to aid the flood victims for their losses/damages.

b. The audit performed between September to November

2015 in 5 states involved revealed that preliminary process for recipient selection and verification, appointment of contractors, work executions and certification in addition to payment procedures for new permanent home project [Rumah Kekal Baharu (RKB)] and restoration works have met the stipulated Government directives in a fast-track manner. However, there were several issues that could jeopardise the efficiency and effectiveness of this project as follows:

i. the overall performance of the home construction

project is less satisfactory. A total of 557 (40%) out of 1395 RKB‟s units was incompleted resulted flood victims were still staying in transit homes, tents and so on;

ii. non-updated information on RKB‟s recipients and restoration works in the flood management information system (ePASCA BANJIR) lead to unrealiable and non-integrity of the data and system;

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PRIME MINISTER’S DEPARTMENT / MINISTRY OF HOME AFFAIRS Malaysia Civil Defence Department

2. Management On Procurement Of Supplies And Services

a. Malaysia Civil Defence Department (CDD) is a civil

defence agency established in 1952 under Civil Defence Ordinance 1951. The functions of CDD among others are to formulate policies on civil defence; organize and manage Civil Defence Forces through support services and logistics; train and educate the public about civil defence so they can receive and give appropriate response to the programmes that are important to their personal safety; review and organize appropriate training for Civil Defence Forces in accordance with the current situation; provide emergency assistance; perform tasks and supervise disaster rescue and accident victims throughout the country. CDD is an agency under the Prime Minister's Department (PMD) effective 29th July 2015 which was previously under Ministry of Home Affairs (MOHA). For the year 2013 to 2015, a total of RM368.14 million and RM40.54 million were spent on operating and development expenditure respectively.

b. The audit performed from June to September 2015 in

MOHA, Civil Defence headquarters [Ibu Pejabat Pertahanan Awam (IPPA)] and 4 civil defence state office [Pejabat Negeri Pertahanan Awam (PNPA)] in Terengganu, Johor, Kedah and Sarawak revealed that

40

c. To ensure that all the weaknesses highlighted do not recur, the Government reaps best value for money and achieving its objective to provide immediate relief to the flood victims, it is recommended that APBN to take actions on the following matters:

i. to establish a specialised and comprehensive

Standard Operating Procedure (SOP) for post-flood program. The SOP must comprises comprehensive program for RKB‟s project and restoration works which include methods of application, selection, verification and updating information into the flood management information system (ePASCA BANJIR). Furthermore, this SOP is essential to ensure every relevant parties could equip themselves to further understanding of their respective functions and responsibilities given;

ii. to review the selection mechanisms in order to promote transparent and clear recipient selections with all parties including flood victims themselves; and

iii. to immediately coordinate efficient placing for completed RKB‟s projects for intended recipients.

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PRIME MINISTER’S DEPARTMENT / MINISTRY OF HOME AFFAIRS Malaysia Civil Defence Department

2. Management On Procurement Of Supplies And Services

a. Malaysia Civil Defence Department (CDD) is a civil

defence agency established in 1952 under Civil Defence Ordinance 1951. The functions of CDD among others are to formulate policies on civil defence; organize and manage Civil Defence Forces through support services and logistics; train and educate the public about civil defence so they can receive and give appropriate response to the programmes that are important to their personal safety; review and organize appropriate training for Civil Defence Forces in accordance with the current situation; provide emergency assistance; perform tasks and supervise disaster rescue and accident victims throughout the country. CDD is an agency under the Prime Minister's Department (PMD) effective 29th July 2015 which was previously under Ministry of Home Affairs (MOHA). For the year 2013 to 2015, a total of RM368.14 million and RM40.54 million were spent on operating and development expenditure respectively.

b. The audit performed from June to September 2015 in

MOHA, Civil Defence headquarters [Ibu Pejabat Pertahanan Awam (IPPA)] and 4 civil defence state office [Pejabat Negeri Pertahanan Awam (PNPA)] in Terengganu, Johor, Kedah and Sarawak revealed that

40

c. To ensure that all the weaknesses highlighted do not recur, the Government reaps best value for money and achieving its objective to provide immediate relief to the flood victims, it is recommended that APBN to take actions on the following matters:

i. to establish a specialised and comprehensive

Standard Operating Procedure (SOP) for post-flood program. The SOP must comprises comprehensive program for RKB‟s project and restoration works which include methods of application, selection, verification and updating information into the flood management information system (ePASCA BANJIR). Furthermore, this SOP is essential to ensure every relevant parties could equip themselves to further understanding of their respective functions and responsibilities given;

ii. to review the selection mechanisms in order to promote transparent and clear recipient selections with all parties including flood victims themselves; and

iii. to immediately coordinate efficient placing for completed RKB‟s projects for intended recipients.

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i. CDD and its Pusat Tanggungjawab (PTJ) must ensure acquisition and acceptance of supplies complied with the stipulated financial and internal controls procedures. Disciplinary action must be taken against officer(s) disregard the financial procedures;

ii. MOHA and CDD must ensure proper and efficient management and administration of procurement contracts to protect the interests of the Government; and

iii. CDD must ensure all assets and inventories records are complete and updated; and implement proper store management to safeguard its assets and inventories.

MINISTRY OF FINANCE

Inland Revenue Board Of Malaysia

3. The Management Of Company Civil Suit a. Civil Suit taken by Inland Revenue Board of

Malaysia (IRBM) towards companies is to ensure the judgment/command has been made for the companies to pay tax arrears when normal procedure to collect tax failed. Companies tax arrears (net amount of Receivable Account) for the year ended 2013 is RM4.766 billion (56.55%) out of total tax arrears amounting to RM8.429 billion. While in 2014, companies tax arrears is RM4.365 billion (53.08%) out of RM8.224 billion.

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MOHA and CDD appointed members of Opening Quotation/Tender Committee and Evaluation of Quotation/Tender Committee. The results of the meeting on price negotiation were properly documented. However, the overall management of the procurement of supplies and services by CDD was less satisfactory. Some of the weaknesses identified are as follows:

i. poor planning resulted in split procurement totalling

RM5.80 million;

ii. late in signing of contract between 93 to 554 days and late submission of performance bonds totalling RM0.65 million between 4 to 70 days;

iii. supplies of 1,010 shine rubber, 8 jet skis and 64 surf board amounted to RM0.84 million did not comply with the stipulated specifications; and

iv. record for equipment distributed by IPPA/PNPA differed from record of receipts at PNPA/Pejabat Daerah Pertahanan Awam (PDPA). In addition, 12' inflatable boat, commander signal baton, helmet, generator sets, fire retardant clothing, breathing apparatus and surf board bought for more than 250 days were not used and not tested.

c. To ensure proper, efficient and Government reaps best value for money on procurement of supply and services in CDD, it is recommended MOHA and CDD take action on the following matters:

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i. CDD and its Pusat Tanggungjawab (PTJ) must ensure acquisition and acceptance of supplies complied with the stipulated financial and internal controls procedures. Disciplinary action must be taken against officer(s) disregard the financial procedures;

ii. MOHA and CDD must ensure proper and efficient management and administration of procurement contracts to protect the interests of the Government; and

iii. CDD must ensure all assets and inventories records are complete and updated; and implement proper store management to safeguard its assets and inventories.

MINISTRY OF FINANCE

Inland Revenue Board Of Malaysia

3. The Management Of Company Civil Suit a. Civil Suit taken by Inland Revenue Board of

Malaysia (IRBM) towards companies is to ensure the judgment/command has been made for the companies to pay tax arrears when normal procedure to collect tax failed. Companies tax arrears (net amount of Receivable Account) for the year ended 2013 is RM4.766 billion (56.55%) out of total tax arrears amounting to RM8.429 billion. While in 2014, companies tax arrears is RM4.365 billion (53.08%) out of RM8.224 billion.

42

MOHA and CDD appointed members of Opening Quotation/Tender Committee and Evaluation of Quotation/Tender Committee. The results of the meeting on price negotiation were properly documented. However, the overall management of the procurement of supplies and services by CDD was less satisfactory. Some of the weaknesses identified are as follows:

i. poor planning resulted in split procurement totalling

RM5.80 million;

ii. late in signing of contract between 93 to 554 days and late submission of performance bonds totalling RM0.65 million between 4 to 70 days;

iii. supplies of 1,010 shine rubber, 8 jet skis and 64 surf board amounted to RM0.84 million did not comply with the stipulated specifications; and

iv. record for equipment distributed by IPPA/PNPA differed from record of receipts at PNPA/Pejabat Daerah Pertahanan Awam (PDPA). In addition, 12' inflatable boat, commander signal baton, helmet, generator sets, fire retardant clothing, breathing apparatus and surf board bought for more than 250 days were not used and not tested.

c. To ensure proper, efficient and Government reaps best value for money on procurement of supply and services in CDD, it is recommended MOHA and CDD take action on the following matters:

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to RM79.10 million and no action taken to deliver 32 Notice of Demand (10.3%) towards companies up to 1st July 2015 amounting to RM5.56 million; and

winding up action is not taken towards 3 companies who failed to pay the remaining claims, and

iii. no action taken towards 7 companies which unable to obey the tax installment amounting to RM634,810 and submission of bad checks for tax installment amounting to RM941,763.

c. To enhance the management of civil suit taken towards

companies, it is recommended that IRBM consider the following actions:

i. data produced by RCD need to be exact as the data from the branches in ensuring the accuracy of the report;

ii. enhancement of the efficiency of summon management starting from the aspect of delivery of summons and Notice of Demand delivery to the company; and

iii. efficiently monitoring installment made by the companies and implementing decisive action to ensure companies pay tax arrears as per stipulated schedule.

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b. An Audit performed between May until July 2015 in

Cheras Branch, Wangsa Maju Branch and Large Taxpayer Branch located in Jalan Tunku Abdul Halim, Kuala Lumpur. The audit revealed that IRBM has taken appropriate action in distributing companies civil suit files to all IRBM branches starting Januari 2014 to enable prompt action taken for cases involved. However, evaluations conducted in 3 IRBM‟s branches found that the management of civil suit was less satisfactory due to weaknesses as follows:

i. IRBM‟s Civil and Litigation Department performance has implemented in 2014. However, the performance cannot be measured accurately as the data produced from the 3 branches were differ from the Revenue Collection Department (RCD) reported data;

ii. Non-compliance of work procedures involving:

delay in registering 140 out of 312 summons (44.9%) in court from 10 to 880 days amounting to RM113.94 million;

delay in delivering 108 out of 312 summons (34.6%) to companies from 2 to 128 days amounting to RM95.50 million;

no action taken after judgment was obtained towards 29 cases amounting to RM12.44 million;

delay in delivering 17 out of 312 Notice of Demand (5.4%) from 5 to 1,361 days amounting

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to RM79.10 million and no action taken to deliver 32 Notice of Demand (10.3%) towards companies up to 1st July 2015 amounting to RM5.56 million; and

winding up action is not taken towards 3 companies who failed to pay the remaining claims, and

iii. no action taken towards 7 companies which unable to obey the tax installment amounting to RM634,810 and submission of bad checks for tax installment amounting to RM941,763.

c. To enhance the management of civil suit taken towards

companies, it is recommended that IRBM consider the following actions:

i. data produced by RCD need to be exact as the data from the branches in ensuring the accuracy of the report;

ii. enhancement of the efficiency of summon management starting from the aspect of delivery of summons and Notice of Demand delivery to the company; and

iii. efficiently monitoring installment made by the companies and implementing decisive action to ensure companies pay tax arrears as per stipulated schedule.

44

b. An Audit performed between May until July 2015 in

Cheras Branch, Wangsa Maju Branch and Large Taxpayer Branch located in Jalan Tunku Abdul Halim, Kuala Lumpur. The audit revealed that IRBM has taken appropriate action in distributing companies civil suit files to all IRBM branches starting Januari 2014 to enable prompt action taken for cases involved. However, evaluations conducted in 3 IRBM‟s branches found that the management of civil suit was less satisfactory due to weaknesses as follows:

i. IRBM‟s Civil and Litigation Department performance has implemented in 2014. However, the performance cannot be measured accurately as the data produced from the 3 branches were differ from the Revenue Collection Department (RCD) reported data;

ii. Non-compliance of work procedures involving:

delay in registering 140 out of 312 summons (44.9%) in court from 10 to 880 days amounting to RM113.94 million;

delay in delivering 108 out of 312 summons (34.6%) to companies from 2 to 128 days amounting to RM95.50 million;

no action taken after judgment was obtained towards 29 cases amounting to RM12.44 million;

delay in delivering 17 out of 312 Notice of Demand (5.4%) from 5 to 1,361 days amounting

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private licensed warehouses for liquors and cigarettes in 5 states (Federal Territory Kuala Lumpur, Perlis, Johor, Sabah and Sarawak) revealed that generally, the management and controls of public and private licensed warehouse for liquors and cigarettes were satisfactory. Audit findings also revealed that 26 (96.3%) out of 27 public and private licensed warehouses visited were conducting permitted activities and dutiable goods were labelled and stored properly within licensed areas. In addition, all 5 State Customs Department audited had proper controls on the transfer of dutiable goods from/to licensed warehouse as well as to Duty Free Island of Langkawi and Tioman. However, some of the weaknesses identified are as follows:

i. Federal Territory Kuala Lumpur Customs Department and Perlis Customs Department did not determine the correct value of bank guarantee for 3 Private Licensed Warehouse resulted customs duties amounting to RM14.06 million were not covered by bank guarantees to safeguard Government‟s interests;

ii. RMCD did not claim customs duties amounting to RM2.10 million from 6 Private Licensed Warehouse with dutiable goods stored more than 2 years without approval of extension of time;

iii. transfer of dutiable goods did not comply with the stipulated procedures such as:

four Private Licensed Warehouse in Perlis did not comply with the additional requirement of

46

Royal Malaysian Customs Department

4. Controls Of Licensed Warehouse For Liquors and Cigarettes

a. A licensed warehouse is a building or secure area that

store imported dutiable goods in which payment of customs duties is deferred until such goods are taken out to be exported or sold locally. Operators of licensed warehouse must obtain a license under Section 65 of the Customs Act 1967 from the Royal Malaysian Customs Department (RMCD) before commencing operations. The function of licensed warehouses was expanded to allowed operators to use it as a storage and distribution centre for international and domestic trade. Among activities permitted in a licensed warehouse are warehousing dutiable goods; break bulking; re-packaging; re-labelling; buying and selling; consolidation/merger; and entreport trade (that is importing goods to be processed or stored and re-exported). For the year 2012 to 2014, revenue collected by RMCD through public and private licensed warehouses amounted to RM3.922 billion. As at 31 December 2015, a total of 64 (18.1%) from 353 public and private licensed warehouses were involved in warehousing of liquors and cigarettes.

b. The audit performed from May to September 2015 at Warehousing Management and Control Unit, Trade Facilitation and Industry Branch, Customs Division, RMCD Headquarters; Industry Branch/Unit, State Customs Department; and 43 (67.2%) public and

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private licensed warehouses for liquors and cigarettes in 5 states (Federal Territory Kuala Lumpur, Perlis, Johor, Sabah and Sarawak) revealed that generally, the management and controls of public and private licensed warehouse for liquors and cigarettes were satisfactory. Audit findings also revealed that 26 (96.3%) out of 27 public and private licensed warehouses visited were conducting permitted activities and dutiable goods were labelled and stored properly within licensed areas. In addition, all 5 State Customs Department audited had proper controls on the transfer of dutiable goods from/to licensed warehouse as well as to Duty Free Island of Langkawi and Tioman. However, some of the weaknesses identified are as follows:

i. Federal Territory Kuala Lumpur Customs Department and Perlis Customs Department did not determine the correct value of bank guarantee for 3 Private Licensed Warehouse resulted customs duties amounting to RM14.06 million were not covered by bank guarantees to safeguard Government‟s interests;

ii. RMCD did not claim customs duties amounting to RM2.10 million from 6 Private Licensed Warehouse with dutiable goods stored more than 2 years without approval of extension of time;

iii. transfer of dutiable goods did not comply with the stipulated procedures such as:

four Private Licensed Warehouse in Perlis did not comply with the additional requirement of

46

Royal Malaysian Customs Department

4. Controls Of Licensed Warehouse For Liquors and Cigarettes

a. A licensed warehouse is a building or secure area that

store imported dutiable goods in which payment of customs duties is deferred until such goods are taken out to be exported or sold locally. Operators of licensed warehouse must obtain a license under Section 65 of the Customs Act 1967 from the Royal Malaysian Customs Department (RMCD) before commencing operations. The function of licensed warehouses was expanded to allowed operators to use it as a storage and distribution centre for international and domestic trade. Among activities permitted in a licensed warehouse are warehousing dutiable goods; break bulking; re-packaging; re-labelling; buying and selling; consolidation/merger; and entreport trade (that is importing goods to be processed or stored and re-exported). For the year 2012 to 2014, revenue collected by RMCD through public and private licensed warehouses amounted to RM3.922 billion. As at 31 December 2015, a total of 64 (18.1%) from 353 public and private licensed warehouses were involved in warehousing of liquors and cigarettes.

b. The audit performed from May to September 2015 at Warehousing Management and Control Unit, Trade Facilitation and Industry Branch, Customs Division, RMCD Headquarters; Industry Branch/Unit, State Customs Department; and 43 (67.2%) public and

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49

cigarettes, it is recommended that RMCD take action on the following matters:

i. RMCD Headquarters must ensure all private licensed warehouse have adequate bank guarantee to safeguard Government‟s interests by enforcing Customs Standing Order No. 53 on or before 30 June 2016 and monitor its implementation on a monthly basis;

ii. State Customs Directors must claim customs duties on or before 30 June 2016 from Private Licensed Warehouse with dutiable goods stored more than 2 years without approval of extension of time;

iii. State Customs Directors must ensure all Customs procedures are complied, particularly additional requirements on transfer of dutiable goods from Kedah and Perlis to importers in Thailand and stipulated procedures on ships supplies from Selangor, Penang and Johor to avoid leakage of Government revenue;

iv. RMCD Headquarters must review Customs Standing Order No. 53 before the end of 2016 so that only licensee suspected for non-compliance and violations of license are required to submit annual stock statements verified by Certified Auditors; and

v. all State Customs Director must carried out the annual 100% physical examination.

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preparation and submission of monthly balance statements (containing particulars of exports and proof of payment from importers in Thailand); and

four Private Licensed Warehouse in Johor involved in ships supplies with customs duties amounting to RM20.27 million for a period of 3 years. However, no evidence to confirm whether the transfer of dutiable goods from all four Private Licensed Warehouse were escorted by Customs officers to the ships for the purpose of sealing the ships‟ stores; and

iv. weaknesses in monitoring by State Customs Department such as:

a total of 41 (95.3%) from 43 licensees did not submit annual stock statements verified by Certified Auditors;

for a period of 3 years, State Customs Department only carried out 68 (54.8%) out of 124 times annual 100% physical examination; and

from 26 public and private licensed warehouses visited, one Private Licensed Warehouse had expired dutiable goods with duties amounting to RM238,433.

c. To ensure that proper and effective management and controls of licensed warehouse for liquors and

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cigarettes, it is recommended that RMCD take action on the following matters:

i. RMCD Headquarters must ensure all private licensed warehouse have adequate bank guarantee to safeguard Government‟s interests by enforcing Customs Standing Order No. 53 on or before 30 June 2016 and monitor its implementation on a monthly basis;

ii. State Customs Directors must claim customs duties on or before 30 June 2016 from Private Licensed Warehouse with dutiable goods stored more than 2 years without approval of extension of time;

iii. State Customs Directors must ensure all Customs procedures are complied, particularly additional requirements on transfer of dutiable goods from Kedah and Perlis to importers in Thailand and stipulated procedures on ships supplies from Selangor, Penang and Johor to avoid leakage of Government revenue;

iv. RMCD Headquarters must review Customs Standing Order No. 53 before the end of 2016 so that only licensee suspected for non-compliance and violations of license are required to submit annual stock statements verified by Certified Auditors; and

v. all State Customs Director must carried out the annual 100% physical examination.

48

preparation and submission of monthly balance statements (containing particulars of exports and proof of payment from importers in Thailand); and

four Private Licensed Warehouse in Johor involved in ships supplies with customs duties amounting to RM20.27 million for a period of 3 years. However, no evidence to confirm whether the transfer of dutiable goods from all four Private Licensed Warehouse were escorted by Customs officers to the ships for the purpose of sealing the ships‟ stores; and

iv. weaknesses in monitoring by State Customs Department such as:

a total of 41 (95.3%) from 43 licensees did not submit annual stock statements verified by Certified Auditors;

for a period of 3 years, State Customs Department only carried out 68 (54.8%) out of 124 times annual 100% physical examination; and

from 26 public and private licensed warehouses visited, one Private Licensed Warehouse had expired dutiable goods with duties amounting to RM238,433.

c. To ensure that proper and effective management and controls of licensed warehouse for liquors and

WJHS00124 Tek 1.indd 49 5/13/16 3:03 PM

51

performance of BALB programme in Sabah is good because the more than 90% of the targeted communities have access to clean and treated water. The expenditure performance for the program is also good where 96.7% of the allocation was utilised. In addition, a total of 169 (98.8%) projects under the GTP 1.0 were completed within the specified period. However, there were some weaknesses identified as follows:

i. the preliminary report for Water Supply Project of

Mukim Tulid/Lanas/Sook, Sabah was not complete and comprehensive as the proposed pipeline alignment excluded a village in Mukim Sook;

ii. Reticulation System for BALB Project Year 2011/2012 Sabah - Zone 6a(3), Kota Belud were not completed within the stipulated period. Liquidated and ascertained damages (LAD) for the period 16th July 2014 to 15th October 2015 (the date of the Certificate of Practical Completion [CPC] issued) totalled RM584,005 was not collected from the contractor;

iii. no coordination between units in the Ministry led to the delays of BALB Project In Kinabatangan, Sabah Year 2012 since the installation of the pipes was temporarily suspended due to upgrading of road under the Rural Road Programme (Jalan Luar Bandar [JALB]);

50

MINISTRY OF RURAL AND REGIONAL DEVELOPMENT

5. Rural Water Supply Programme in Sabah a. Since the year 1974, the Government of Malaysia has

implemented the Rural Water Supply Programme [Bekalan Air Luar Bandar Program (BALB)] under the Accelerated Rural Water Supply Schemes in the Second Malaysia Plan (Rancangan Malaysia ke-2 [RMKe-2]). The main objective of BALB program is to provide clean and treated water to rural communities throughout the country to improve their health and quality of life. Thus, stimulating the economy, industry, agriculture and tourism development. The implementation of BALB Program in Sabah has started since 2010. This programme was initiated under the National Key Result Areas (NKRA) - Improving Rural Development of the Government Transformation Programme (GTP) 1.0 (2010 to 2012) and GTP 2.0 (2013 to 2015). To date, there were 184 on going/completed projects with an allocation of RM2.001 billion.

b. The audit performed at the Ministry Of Rural And Regional Development (Ministry), Sabah State Water Department [Jabatan Air Negeri Sabah (JANS)] and 12 BALB projects in 11 districts namely Keningau, Kota Kinabalu, Semporna, Kudat, Kota Belud, Tuaran, Sipitang, Kinabatangan, Kuala Penyu, Bongawan and Membakut. The audit revealed that in general, the

WJHS00124 Tek 1.indd 50 5/13/16 3:03 PM

51

performance of BALB programme in Sabah is good because the more than 90% of the targeted communities have access to clean and treated water. The expenditure performance for the program is also good where 96.7% of the allocation was utilised. In addition, a total of 169 (98.8%) projects under the GTP 1.0 were completed within the specified period. However, there were some weaknesses identified as follows:

i. the preliminary report for Water Supply Project of

Mukim Tulid/Lanas/Sook, Sabah was not complete and comprehensive as the proposed pipeline alignment excluded a village in Mukim Sook;

ii. Reticulation System for BALB Project Year 2011/2012 Sabah - Zone 6a(3), Kota Belud were not completed within the stipulated period. Liquidated and ascertained damages (LAD) for the period 16th July 2014 to 15th October 2015 (the date of the Certificate of Practical Completion [CPC] issued) totalled RM584,005 was not collected from the contractor;

iii. no coordination between units in the Ministry led to the delays of BALB Project In Kinabatangan, Sabah Year 2012 since the installation of the pipes was temporarily suspended due to upgrading of road under the Rural Road Programme (Jalan Luar Bandar [JALB]);

50

MINISTRY OF RURAL AND REGIONAL DEVELOPMENT

5. Rural Water Supply Programme in Sabah a. Since the year 1974, the Government of Malaysia has

implemented the Rural Water Supply Programme [Bekalan Air Luar Bandar Program (BALB)] under the Accelerated Rural Water Supply Schemes in the Second Malaysia Plan (Rancangan Malaysia ke-2 [RMKe-2]). The main objective of BALB program is to provide clean and treated water to rural communities throughout the country to improve their health and quality of life. Thus, stimulating the economy, industry, agriculture and tourism development. The implementation of BALB Program in Sabah has started since 2010. This programme was initiated under the National Key Result Areas (NKRA) - Improving Rural Development of the Government Transformation Programme (GTP) 1.0 (2010 to 2012) and GTP 2.0 (2013 to 2015). To date, there were 184 on going/completed projects with an allocation of RM2.001 billion.

b. The audit performed at the Ministry Of Rural And Regional Development (Ministry), Sabah State Water Department [Jabatan Air Negeri Sabah (JANS)] and 12 BALB projects in 11 districts namely Keningau, Kota Kinabalu, Semporna, Kudat, Kota Belud, Tuaran, Sipitang, Kinabatangan, Kuala Penyu, Bongawan and Membakut. The audit revealed that in general, the

WJHS00124 Tek 1.indd 51 5/13/16 3:03 PM

53

MINISTRY OF RURAL AND REGIONAL DEVELOPMENT/ PUBLIC WORKS DEPARTMENT

6. Construction Of The Subang UniKL Malaysian Institute Of Aviation Technology (MIAT) Campus, Selangor

a. The construction of Subang UniKL Malaysian Institute

Of Aviation Technology (MIAT) Campus, Selangor is a Federal Government project approved under the Tenth Malaysia Plan [Rancangan Malaysia Ke-10 (RMKe-10)]. This campus is an addition to the existing campus in Jenderam Hulu, Dengkil, Selangor. The objective of this project is to provide technical training in the field of aviation and aerospace as well as providing practical and realistic exposure of live aircraft to students in order to meet the development needs of the country‟s aviation industry. The project was constructed on a 21.33 acres land located in Lot PT40446, Persiaran A, Off Jalan Lapangan Terbang Subang, Subang, Selangor. The Public Works Department (PWD) was appointed as the implementing agency on behalf of the client, which is Council of Trust for the People [Majlis Amanah Rakyat (MARA)], Ministry of Rural and Regional Development (MRRD). The Ministry of Finance Malaysia agreed to offer the contract to Nadi Cergas Sdn. Bhd. through direct negotiations. The contract valued RM130 million must be completed within 24 months from the date of site possession which was on 18 February 2013.

b. The audit performed between August to November

2015 at the General Building Works Branch 1, PWD

52

iv. Reticulation System for BALB Project in Pulau Gaya inclusive of service tank reservoir (capacity of 5 million litres) that target 2,441 houses was completed but yet to operate optimally because the decision made by Jawatankuasa Pembangunan Bersepadu Pulau Gaya, Kota Kinabalu‟s meeting No. 02/2012 indicated illegal settlements on Pulau Gaya which resulted termination of pipes installation and connection to such villages; and

v. even though 5 BALB Project - Reticulation System were completed and operational, the performance of meter connection is low at only 38.4% (3,032 out of 7,901 targeted houses).

c. To ensure that all weaknesses highlighted are efficiently

and effectively mitigated, all parties involved are recommended to take the following actions:

i. The Ministry shall assess the project outcome of

BALB Programme in Sabah to determine whether facilities are optimally used and the Government reaps best value for money;

ii. The Ministry/JANS must take proactive and punitive actions against contractors and consultants as stipulated in the contract; and

iii. The Ministry with all related agencies shall expand the scope of BALB Programme to hard-core poor in the rural community.

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53

MINISTRY OF RURAL AND REGIONAL DEVELOPMENT/ PUBLIC WORKS DEPARTMENT

6. Construction Of The Subang UniKL Malaysian Institute Of Aviation Technology (MIAT) Campus, Selangor

a. The construction of Subang UniKL Malaysian Institute

Of Aviation Technology (MIAT) Campus, Selangor is a Federal Government project approved under the Tenth Malaysia Plan [Rancangan Malaysia Ke-10 (RMKe-10)]. This campus is an addition to the existing campus in Jenderam Hulu, Dengkil, Selangor. The objective of this project is to provide technical training in the field of aviation and aerospace as well as providing practical and realistic exposure of live aircraft to students in order to meet the development needs of the country‟s aviation industry. The project was constructed on a 21.33 acres land located in Lot PT40446, Persiaran A, Off Jalan Lapangan Terbang Subang, Subang, Selangor. The Public Works Department (PWD) was appointed as the implementing agency on behalf of the client, which is Council of Trust for the People [Majlis Amanah Rakyat (MARA)], Ministry of Rural and Regional Development (MRRD). The Ministry of Finance Malaysia agreed to offer the contract to Nadi Cergas Sdn. Bhd. through direct negotiations. The contract valued RM130 million must be completed within 24 months from the date of site possession which was on 18 February 2013.

b. The audit performed between August to November

2015 at the General Building Works Branch 1, PWD

52

iv. Reticulation System for BALB Project in Pulau Gaya inclusive of service tank reservoir (capacity of 5 million litres) that target 2,441 houses was completed but yet to operate optimally because the decision made by Jawatankuasa Pembangunan Bersepadu Pulau Gaya, Kota Kinabalu‟s meeting No. 02/2012 indicated illegal settlements on Pulau Gaya which resulted termination of pipes installation and connection to such villages; and

v. even though 5 BALB Project - Reticulation System were completed and operational, the performance of meter connection is low at only 38.4% (3,032 out of 7,901 targeted houses).

c. To ensure that all weaknesses highlighted are efficiently

and effectively mitigated, all parties involved are recommended to take the following actions:

i. The Ministry shall assess the project outcome of

BALB Programme in Sabah to determine whether facilities are optimally used and the Government reaps best value for money;

ii. The Ministry/JANS must take proactive and punitive actions against contractors and consultants as stipulated in the contract; and

iii. The Ministry with all related agencies shall expand the scope of BALB Programme to hard-core poor in the rural community.

WJHS00124 Tek 1.indd 53 5/13/16 3:03 PM

55

obtains the Certificate of Compliance and Completion;

ii. MARA shall persistently discuss with Malaysia Airlines Berhad (MAB) and resolve the issue of land acquisition for taxiway with relevant authorities in procuring the taxiway facilities and achieving the objectives; and

iii. PWD shall ensure the contractor rectifies all construction defects and the building functions perfectly.

MINISTRY OF WORKS MALAYSIA / PUBLIC WORKS DEPARTMENT 7. Construction of a New Way Project From Seremban

Hi-way PD-FR5 In Pasir Panjang And Upgrading FR5 From Pasir Panjang To Linggi, Negeri Sembilan (Section 1)

a. Construction of a New Way Project From Seremban Hi-

way PD-FR5 In Pasir Panjang And Upgrading FR5 From Pasir Panjang To Linggi, Negeri Sembilan (Section 1) is a project under the Eighth Malaysia Plan (8MP), with a cost ceiling of RM160 million. The project aim to overcome the traffic overcrowding in Teluk Kemang, Port Dickson, especially during festive seasons and school holidays as the Port Dickson is a major tourist centre. In addition, local residents using the same path to Lukut and Linggi due to non-existence of alternative road. The Ministry of Works Malaysia [Kementerian Kerja Raya (KKR)] and the Public Works Department (PWD) was appointed as the implementing

54

and the Contract Quantity Survey Branch, PWD as well as the client department, namely Construction and Maintenance Division, MARA Headquarters, Kuala Lumpur. The audit revealed that in general, the management of the construction of Subang UniKL MIAT Campus was good. Contract was signed within the stipulated time; interim and advance payments were in order; and the Performance Bond and insurance policies complied with the terms and conditions of the contract. In addition, PWD established a good monitoring mechanism to monitor work done by the contractor. The project has incorporated the result of value management laboratory in accordance with the Government‟s aspiration. However, there were several weaknesses as follows:

i. the contractor failed to complete the project within the stipulated extension of time;

ii. the issue of construction site for taxiway was yet to be resolved due to the relocation of construction site might resulted in non-achievement of project objective as planned;

iii. delay in finalising price negotiations; and

iv. unsuitable designs; unsatisfactory quality of construction works; and imperfect electrical works.

c. In order to rectify the weaknesses highlighted, it is recommended that:

i. PWD shall ensure that the contractor complies with the requirements of the relevant authorities and

WJHS00124 Tek 1.indd 54 5/13/16 3:03 PM

55

obtains the Certificate of Compliance and Completion;

ii. MARA shall persistently discuss with Malaysia Airlines Berhad (MAB) and resolve the issue of land acquisition for taxiway with relevant authorities in procuring the taxiway facilities and achieving the objectives; and

iii. PWD shall ensure the contractor rectifies all construction defects and the building functions perfectly.

MINISTRY OF WORKS MALAYSIA / PUBLIC WORKS DEPARTMENT 7. Construction of a New Way Project From Seremban

Hi-way PD-FR5 In Pasir Panjang And Upgrading FR5 From Pasir Panjang To Linggi, Negeri Sembilan (Section 1)

a. Construction of a New Way Project From Seremban Hi-

way PD-FR5 In Pasir Panjang And Upgrading FR5 From Pasir Panjang To Linggi, Negeri Sembilan (Section 1) is a project under the Eighth Malaysia Plan (8MP), with a cost ceiling of RM160 million. The project aim to overcome the traffic overcrowding in Teluk Kemang, Port Dickson, especially during festive seasons and school holidays as the Port Dickson is a major tourist centre. In addition, local residents using the same path to Lukut and Linggi due to non-existence of alternative road. The Ministry of Works Malaysia [Kementerian Kerja Raya (KKR)] and the Public Works Department (PWD) was appointed as the implementing

54

and the Contract Quantity Survey Branch, PWD as well as the client department, namely Construction and Maintenance Division, MARA Headquarters, Kuala Lumpur. The audit revealed that in general, the management of the construction of Subang UniKL MIAT Campus was good. Contract was signed within the stipulated time; interim and advance payments were in order; and the Performance Bond and insurance policies complied with the terms and conditions of the contract. In addition, PWD established a good monitoring mechanism to monitor work done by the contractor. The project has incorporated the result of value management laboratory in accordance with the Government‟s aspiration. However, there were several weaknesses as follows:

i. the contractor failed to complete the project within the stipulated extension of time;

ii. the issue of construction site for taxiway was yet to be resolved due to the relocation of construction site might resulted in non-achievement of project objective as planned;

iii. delay in finalising price negotiations; and

iv. unsuitable designs; unsatisfactory quality of construction works; and imperfect electrical works.

c. In order to rectify the weaknesses highlighted, it is recommended that:

i. PWD shall ensure that the contractor complies with the requirements of the relevant authorities and

WJHS00124 Tek 1.indd 55 5/13/16 3:03 PM

57

Performance Bond has complied with the terms of the contract. However, several weaknesses identified are as follows:

i. project was completed over than 10 years as

compared to the initial tenure which was within 2 years and 6 months;

ii. reappointment of the similar contractor for the second contract was unfair and against with the decision made by the JKR Hospital Project Committee;

iii. a delay in preparing Final Certificate of Contract Terminated Hiring Contractors up to 1 year and 10 months (as to date of exit conference on 16th February 2016) for the first and second contract; and

iv. construction of the bridge was not in accordance with the construction drawings and issues regarding utilities relocation were inefficiently managed.

c. To overcome the shortcomings raised, it is

recommended to take action on the following matters: i. PWD should build road divider and a traffic light at

the intersection of Jalan Kg. Sekawang river, CH17050 to ensure the safety of road users;

ii. PWD should monitor closely on the quality of work and the completion of projects undertaken by the contractor so that no loss incur by the Government

56

agencies for this project. The scope of work for this project was to build a road Arterial A, and mainline from CH7700 to CH8579. The work also included the upgrading work for the route of FR5 Pasir Panjang to Linggi. The whole length of the project is a 22.6 km. Arterial B‟s road building project was in a separate contract as Section 2. The project started in February 2005 and should be completed in August 2007 (2 years 6 months). Kartajaya-Fort Jeli East-AMR JV Sdn. Bhd. (HBA-JV) was appointed as contractor for this project. The work progression of the appointed contractor was not satisfactory and due to that it has been terminated through Notice of Termination of Employment Contract on 23rd December 2009 with 64.6% progressed. However, the similar contractor was reappointed to pursue the remaining works nevertheless the performance was still not satisfactory with an increase of only 3.6% progressed. Yet, the contractor was terminated again on 9th May 2013. As a final point, the Government has appointed Seroja Anggerik Development Sdn. Bhd. on 27th March 2014 as the new contractor and the project completed on 28th December 2015.

b. The audit performed between June and September 2015 revealed that the overall project management was unsatisfactory, as the project took 10 years to be completed. Moreover, the construction of the bridge was not in accordance with the construction drawings. Conversely, the contract was signed within the stipulated time, the advance payment was in order and

WJHS00124 Tek 1.indd 56 5/13/16 3:03 PM

57

Performance Bond has complied with the terms of the contract. However, several weaknesses identified are as follows:

i. project was completed over than 10 years as

compared to the initial tenure which was within 2 years and 6 months;

ii. reappointment of the similar contractor for the second contract was unfair and against with the decision made by the JKR Hospital Project Committee;

iii. a delay in preparing Final Certificate of Contract Terminated Hiring Contractors up to 1 year and 10 months (as to date of exit conference on 16th February 2016) for the first and second contract; and

iv. construction of the bridge was not in accordance with the construction drawings and issues regarding utilities relocation were inefficiently managed.

c. To overcome the shortcomings raised, it is

recommended to take action on the following matters: i. PWD should build road divider and a traffic light at

the intersection of Jalan Kg. Sekawang river, CH17050 to ensure the safety of road users;

ii. PWD should monitor closely on the quality of work and the completion of projects undertaken by the contractor so that no loss incur by the Government

56

agencies for this project. The scope of work for this project was to build a road Arterial A, and mainline from CH7700 to CH8579. The work also included the upgrading work for the route of FR5 Pasir Panjang to Linggi. The whole length of the project is a 22.6 km. Arterial B‟s road building project was in a separate contract as Section 2. The project started in February 2005 and should be completed in August 2007 (2 years 6 months). Kartajaya-Fort Jeli East-AMR JV Sdn. Bhd. (HBA-JV) was appointed as contractor for this project. The work progression of the appointed contractor was not satisfactory and due to that it has been terminated through Notice of Termination of Employment Contract on 23rd December 2009 with 64.6% progressed. However, the similar contractor was reappointed to pursue the remaining works nevertheless the performance was still not satisfactory with an increase of only 3.6% progressed. Yet, the contractor was terminated again on 9th May 2013. As a final point, the Government has appointed Seroja Anggerik Development Sdn. Bhd. on 27th March 2014 as the new contractor and the project completed on 28th December 2015.

b. The audit performed between June and September 2015 revealed that the overall project management was unsatisfactory, as the project took 10 years to be completed. Moreover, the construction of the bridge was not in accordance with the construction drawings. Conversely, the contract was signed within the stipulated time, the advance payment was in order and

WJHS00124 Tek 1.indd 57 5/13/16 3:03 PM

59

project. The expansion of the scope resulted an additional of 33 units‟ quarters which makes the total number of 346 units‟ quarters and elevator services for 17 blocks of quarters to be built. This application was approved by the EPU on 4th June 2013. However, the approval was subject to allocation of total cost not exceeding RM100 million. As the approval given for changes of scope within allocation, the KPWKM decided to rebuild quarters in SWD Rumah Seri Kenangan (RSK) Bedong, Kedah; Rumah Kanak-Kanak (RKK) Taman Bakti Kepala Batas, Pulau Pinang; RSK Tanjung Rambutan, Perak and RKK Tengku Ampuan Fatimah, Kuantan, Pahang. Meanwhile in 2015, the EPU agreed that the MWFCD shall only continue the construction for Taman Sinar Harapan (TSH) Tampoi, Johor Bahru.

b. The audit performed between June to September 2015 on the quarter‟s construction in RSK Bedong and RSK Tanjung Rambutan. The audit revealed that the construction management was satisfactory. The achievements of the actual work progress at RSK Bedong and RSK Tanjung Rambutan site were at 97% on 18th August 2015 and 55% on 7th September 2015 respectively. Both projects were in line with the schedule as approved by the Public Works Department (PWD). On the procurement aspect, the management has complied with stipulated regulations and necessary actions have been taken by the contractor on every issue raised during the construction work to implement

58

in the event of default by the contractor or the project is terminated. Evaluation of contractor works also need to be made promptly so that the preparation of the Final Certificate of Contract can be made immediately and the Government claim can be made in advance; and

iii. PWD should ensure that the contractor patch-up all defects before handing over the way to KKR for road users‟ safety as well as providing the International Roughness Index test ( IRI ) reports.

MINISTRY OF WORKS / MINISTRY OF WOMEN, FAMILY AND COMMUNITY 8. Project Management Reconstruction Quarters

Welfare Department a. On 21st December 2012, the Economic Planning Unit

(EPU) of the Prime Minister's Department (PMD) has approved the construction of quarters in 9 institutions of Social Welfare Department (SWD), The Ministry Of Women, Family And Community Development (MWFCD) at a cost of RM100 million through open tenders method. This approval was stated in the Third Rolling Plan under the 10th Malaysia Plan (10th MP). The construction of 132 units new quarters and the demolition and rebuilding of 181 units existing quarters were took placed to provide quarters for SWD staffs. On 22nd May 2013, MWFCD has submitted an application for the additional scope of work of this construction

WJHS00124 Tek 1.indd 58 5/13/16 3:03 PM

59

project. The expansion of the scope resulted an additional of 33 units‟ quarters which makes the total number of 346 units‟ quarters and elevator services for 17 blocks of quarters to be built. This application was approved by the EPU on 4th June 2013. However, the approval was subject to allocation of total cost not exceeding RM100 million. As the approval given for changes of scope within allocation, the KPWKM decided to rebuild quarters in SWD Rumah Seri Kenangan (RSK) Bedong, Kedah; Rumah Kanak-Kanak (RKK) Taman Bakti Kepala Batas, Pulau Pinang; RSK Tanjung Rambutan, Perak and RKK Tengku Ampuan Fatimah, Kuantan, Pahang. Meanwhile in 2015, the EPU agreed that the MWFCD shall only continue the construction for Taman Sinar Harapan (TSH) Tampoi, Johor Bahru.

b. The audit performed between June to September 2015 on the quarter‟s construction in RSK Bedong and RSK Tanjung Rambutan. The audit revealed that the construction management was satisfactory. The achievements of the actual work progress at RSK Bedong and RSK Tanjung Rambutan site were at 97% on 18th August 2015 and 55% on 7th September 2015 respectively. Both projects were in line with the schedule as approved by the Public Works Department (PWD). On the procurement aspect, the management has complied with stipulated regulations and necessary actions have been taken by the contractor on every issue raised during the construction work to implement

58

in the event of default by the contractor or the project is terminated. Evaluation of contractor works also need to be made promptly so that the preparation of the Final Certificate of Contract can be made immediately and the Government claim can be made in advance; and

iii. PWD should ensure that the contractor patch-up all defects before handing over the way to KKR for road users‟ safety as well as providing the International Roughness Index test ( IRI ) reports.

MINISTRY OF WORKS / MINISTRY OF WOMEN, FAMILY AND COMMUNITY 8. Project Management Reconstruction Quarters

Welfare Department a. On 21st December 2012, the Economic Planning Unit

(EPU) of the Prime Minister's Department (PMD) has approved the construction of quarters in 9 institutions of Social Welfare Department (SWD), The Ministry Of Women, Family And Community Development (MWFCD) at a cost of RM100 million through open tenders method. This approval was stated in the Third Rolling Plan under the 10th Malaysia Plan (10th MP). The construction of 132 units new quarters and the demolition and rebuilding of 181 units existing quarters were took placed to provide quarters for SWD staffs. On 22nd May 2013, MWFCD has submitted an application for the additional scope of work of this construction

WJHS00124 Tek 1.indd 59 5/13/16 3:03 PM

61

method from Hydraulic Jack In Pile to Hydraulic Hammer. However, the piling method change back to the preliminary plan which was Hydraulic Jack In Pile resulted to reappointment of the contractor;

increased in quantity of item work below lowest floor finish consisting stump pile caps, column and RC Wall resulted a longer period of time for contractor to complete the work; and

changes from precast to the in situ during the preparation of BQ and tender drawing, in which such items namely column, beam, floor and walls were precast. However, the construction drawings received on 26th May 2014 were using the in situ resulted the difference of items such as beams in situ floor, pillars in situ and in situ wall work sheer. Furthermore, all precast floor slab either half and hollow core slab has been changed to in situ slab of precast stairs and amendments to the in situ.

iii. late of 32 days in receiving the exchange of basic design drawing has caused the contractor to delayed the iron reinforcement shipments.

c. To ensure that all the weaknesses highlighted do not recur in the implementation of upcoming projects, it is recommended that PWD to take action on the following matters:

60

the project. However, there are weaknesses identified as follows:

a. Reconstruction Project In RSK Bedong Quarters i. inaccurate planning between the preparation of Bill

of Quantities (BQ) and tender drawings resulted differences in quantity of piles. Due to that, the new drawings and a Supplementary Agreement needed to be prepared;

ii. Independent Checker cannot be appointed until the Supplementary Agreement was signed; and

iii. according to the Certificate Of Delay And Extention Of Time (EOT 2), due to the delay on the progress of work by a third party to initiate and complete the physical work of planting underground electric cables has led to the incomplete works of road construction, external works and activities Testing and Commissioning for electrical system and mechanical connection as compared to the original plan.

b. Reconstruction Project In RSK Tanjung

Rambutan Quarters i. 26 days delayed in submitting drawings to

contractors as well as the determination of platform level was decided over 29 days;

ii. improper planning causes: Changes in decision on piling type from spun pile

to Reinforce Concrete (RC) pile as well as piling

WJHS00124 Tek 1.indd 60 5/13/16 3:03 PM

61

method from Hydraulic Jack In Pile to Hydraulic Hammer. However, the piling method change back to the preliminary plan which was Hydraulic Jack In Pile resulted to reappointment of the contractor;

increased in quantity of item work below lowest floor finish consisting stump pile caps, column and RC Wall resulted a longer period of time for contractor to complete the work; and

changes from precast to the in situ during the preparation of BQ and tender drawing, in which such items namely column, beam, floor and walls were precast. However, the construction drawings received on 26th May 2014 were using the in situ resulted the difference of items such as beams in situ floor, pillars in situ and in situ wall work sheer. Furthermore, all precast floor slab either half and hollow core slab has been changed to in situ slab of precast stairs and amendments to the in situ.

iii. late of 32 days in receiving the exchange of basic design drawing has caused the contractor to delayed the iron reinforcement shipments.

c. To ensure that all the weaknesses highlighted do not recur in the implementation of upcoming projects, it is recommended that PWD to take action on the following matters:

60

the project. However, there are weaknesses identified as follows:

a. Reconstruction Project In RSK Bedong Quarters i. inaccurate planning between the preparation of Bill

of Quantities (BQ) and tender drawings resulted differences in quantity of piles. Due to that, the new drawings and a Supplementary Agreement needed to be prepared;

ii. Independent Checker cannot be appointed until the Supplementary Agreement was signed; and

iii. according to the Certificate Of Delay And Extention Of Time (EOT 2), due to the delay on the progress of work by a third party to initiate and complete the physical work of planting underground electric cables has led to the incomplete works of road construction, external works and activities Testing and Commissioning for electrical system and mechanical connection as compared to the original plan.

b. Reconstruction Project In RSK Tanjung

Rambutan Quarters i. 26 days delayed in submitting drawings to

contractors as well as the determination of platform level was decided over 29 days;

ii. improper planning causes: Changes in decision on piling type from spun pile

to Reinforce Concrete (RC) pile as well as piling

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63

the rights to operate the ERL from KL Sentral to KLIA. Superintendent Officer (SO) of the project is the Secretary-General (DG) of the Ministry of Transport. This project started on 15th July 2011 was scheduled to complete by 31st October 2012. However, it was only completed on 28th September 2013. Consequently, on 2nd May 2014, ERLSB started its operation after obtaining approval to extend its services from KLIA to klia2.

b. The audit performed from January to April 2015 at the Ministry of Transport Malaysia, Economic Planning Unit (EPU), Public Private Partnership Unit (UKAS), ERLSB and site visits at ERL klia2 in Sepang. The Audit revealed that ERL extension project was completed and started its operation on 2nd May 2014. This project achieved the rail link connection between KLIA and klia2 alongside with the opening of klia2 terminal. This connection increased the number of ERL‟s passengers by 43.2% from 6.44 million in 2013 to 9.23 million in 2014. However, there are some weaknesses caused the Government did not obtained best value for money for the expenses incurred. Some of the weaknesses identified are as follows:

i. Price negotiations were not conducted prior to the submission of project cost estimates for the approval of the Economic Council (EC);

ii. Supplemental Concession Agreement was not finalized to date despite the ERL services from KLIA to klia2 commenced operation since 2nd May 2014;

62

i. detailed planning during the design and construction stage should be carried out to avoid major changes and amendments during the construction progress and ensuring contract administration are fully comply; and

ii. vehicles for the preliminaries shall be placed at project site and should be given priority from time to time.

MINISTRY OF TRANSPORT

9. The ERL Extension Project From KLIA to klia2

a. Express Rail Link (ERL) is a high-speed rail link commuter service that connects Kuala Lumpur Sentral (KL Sentral) to Kuala Lumpur International Airport (KLIA). The ERL distance is 57km, stops at 3 intermediate stations i.e. Bandar Tasik Selatan, Putrajaya and Salak Tinggi with a total construction cost of RM2.4 billion. It provides 2 types of services i.e. ERL Express and ERL Transit. KLIA ERL Extension Project would serve as the main public transport connecting KLIA main terminal to klia2 with a distance of 2.16km. This project was direct negotiated using design and built method by Express Rail Link Sdn. Bhd. (ERLSB). The project cost of RM100 millions is funded by the Ministry of Transport. Rail Operations Control is subjected to the Railways Act 1991 and later repealed by the Land Public Transport Act 2010. Through the concession agreement dated 25th August 1997, ERLSB was given

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the rights to operate the ERL from KL Sentral to KLIA. Superintendent Officer (SO) of the project is the Secretary-General (DG) of the Ministry of Transport. This project started on 15th July 2011 was scheduled to complete by 31st October 2012. However, it was only completed on 28th September 2013. Consequently, on 2nd May 2014, ERLSB started its operation after obtaining approval to extend its services from KLIA to klia2.

b. The audit performed from January to April 2015 at the Ministry of Transport Malaysia, Economic Planning Unit (EPU), Public Private Partnership Unit (UKAS), ERLSB and site visits at ERL klia2 in Sepang. The Audit revealed that ERL extension project was completed and started its operation on 2nd May 2014. This project achieved the rail link connection between KLIA and klia2 alongside with the opening of klia2 terminal. This connection increased the number of ERL‟s passengers by 43.2% from 6.44 million in 2013 to 9.23 million in 2014. However, there are some weaknesses caused the Government did not obtained best value for money for the expenses incurred. Some of the weaknesses identified are as follows:

i. Price negotiations were not conducted prior to the submission of project cost estimates for the approval of the Economic Council (EC);

ii. Supplemental Concession Agreement was not finalized to date despite the ERL services from KLIA to klia2 commenced operation since 2nd May 2014;

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i. detailed planning during the design and construction stage should be carried out to avoid major changes and amendments during the construction progress and ensuring contract administration are fully comply; and

ii. vehicles for the preliminaries shall be placed at project site and should be given priority from time to time.

MINISTRY OF TRANSPORT

9. The ERL Extension Project From KLIA to klia2

a. Express Rail Link (ERL) is a high-speed rail link commuter service that connects Kuala Lumpur Sentral (KL Sentral) to Kuala Lumpur International Airport (KLIA). The ERL distance is 57km, stops at 3 intermediate stations i.e. Bandar Tasik Selatan, Putrajaya and Salak Tinggi with a total construction cost of RM2.4 billion. It provides 2 types of services i.e. ERL Express and ERL Transit. KLIA ERL Extension Project would serve as the main public transport connecting KLIA main terminal to klia2 with a distance of 2.16km. This project was direct negotiated using design and built method by Express Rail Link Sdn. Bhd. (ERLSB). The project cost of RM100 millions is funded by the Ministry of Transport. Rail Operations Control is subjected to the Railways Act 1991 and later repealed by the Land Public Transport Act 2010. Through the concession agreement dated 25th August 1997, ERLSB was given

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MINISTRY OF ENERGY, GREEN TECHNOLOGY AND WATER / MINISTRY OF FEDERAL TERRITORIES

Sewerage Services Department 10. Sewerage Projects under the River Cleaning

Components for “River Of Life” Program a. In 25th September 2010, the Economic Transformation

Program (ETP) was launched for a focus and comprehensive economic plan and as a progressive intitiative to transform Malaysia into a high income nation by 2020. Thus, the Achievement of the ETP is targeted through the implementation of 12 National Key Economic Area (NKEA) and The River of Life (ROL) is one of the 9 Entry Point Projects (EPP) under the NKEA Greater Kuala Lumpur / Klang Valley (GKL / KV). The ROL Program has been implemented since 2011 aims to transform identified areas along Klang River to become commercial and heritage centre for a high economic value to the country. The ROL program also covers areas under the jurisdiction of Kuala Lumpur City Hall [Dewan Bandaraya Kuala Lumpur (DBKL)], Ampang Jaya Municipal Council [Majlis Perbandaran Ampang Jaya (MPAJ)] and Selayang Municipal Council [Majlis Perbandaran Selayang (MPS)]. Consequently, the ROL program involves 3 project phases with an allocation of RM4 billion.

b. The audit performed between August to 15th November

2015 in the head office of Sewerage Services Department [Jabatan Perkhidmatan Pembetungan (JPP)]. The audit revealed that, in general, the

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iii. Compensation claimed by ERLSB amounted to RM2.9 billion yet to be finalized. The computation formula of compensation claimed does not benefit and protect the interest of the Government; and

iv. The project cost of RM129 million presented by ERLSB in Value Management (VM) lab exceeded the cost approved by the EC of RM100 million. Thus, the objectives of VM for cost saving are not achieved.

c. To ensure that all the weaknesses highlighted do not recur, the Ministry is recommended to take action on the following matters:

i. price negotiations must be conducted to ensure that the Government reaps best value for money;

ii. Supplemental Concession Agreement is finalized promptly to protect the interest of both parties. Also, computation formula of compensation must benefit both parties and not detrimental to the Government;

iii. cost component of the project submitted to the Value Management Lab must be more comprehensive, detailed and approved by the EC; and

iv. issue of service charges are settled and approved to protect the interest of all parties.

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MINISTRY OF ENERGY, GREEN TECHNOLOGY AND WATER / MINISTRY OF FEDERAL TERRITORIES

Sewerage Services Department 10. Sewerage Projects under the River Cleaning

Components for “River Of Life” Program a. In 25th September 2010, the Economic Transformation

Program (ETP) was launched for a focus and comprehensive economic plan and as a progressive intitiative to transform Malaysia into a high income nation by 2020. Thus, the Achievement of the ETP is targeted through the implementation of 12 National Key Economic Area (NKEA) and The River of Life (ROL) is one of the 9 Entry Point Projects (EPP) under the NKEA Greater Kuala Lumpur / Klang Valley (GKL / KV). The ROL Program has been implemented since 2011 aims to transform identified areas along Klang River to become commercial and heritage centre for a high economic value to the country. The ROL program also covers areas under the jurisdiction of Kuala Lumpur City Hall [Dewan Bandaraya Kuala Lumpur (DBKL)], Ampang Jaya Municipal Council [Majlis Perbandaran Ampang Jaya (MPAJ)] and Selayang Municipal Council [Majlis Perbandaran Selayang (MPS)]. Consequently, the ROL program involves 3 project phases with an allocation of RM4 billion.

b. The audit performed between August to 15th November

2015 in the head office of Sewerage Services Department [Jabatan Perkhidmatan Pembetungan (JPP)]. The audit revealed that, in general, the

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iii. Compensation claimed by ERLSB amounted to RM2.9 billion yet to be finalized. The computation formula of compensation claimed does not benefit and protect the interest of the Government; and

iv. The project cost of RM129 million presented by ERLSB in Value Management (VM) lab exceeded the cost approved by the EC of RM100 million. Thus, the objectives of VM for cost saving are not achieved.

c. To ensure that all the weaknesses highlighted do not recur, the Ministry is recommended to take action on the following matters:

i. price negotiations must be conducted to ensure that the Government reaps best value for money;

ii. Supplemental Concession Agreement is finalized promptly to protect the interest of both parties. Also, computation formula of compensation must benefit both parties and not detrimental to the Government;

iii. cost component of the project submitted to the Value Management Lab must be more comprehensive, detailed and approved by the EC; and

iv. issue of service charges are settled and approved to protect the interest of all parties.

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i. JPP must ensure effluent quality for all STPs in the

ROL catchment areas do not jeopardize the achievement of ROL program objectives regarding water quality;

ii. JPP must identify sewerage reserve land that have yet to be surrendered to Pesuruhjaya Tanah Persekutuan (PTP) and the process to change the land title to be expedited;

iii. the compliance of effluent terms should be included as one of the contract conditions in the testing and commissioning stage; and

iv. JPP must supervise and take necessary action regarding to maintenance works obliged by the Contractor during Defect Liability Period in ensuring all parameters of the STP‟s design are verified.

MINISTRY OF HEALTH MALAYSIA

11. Management Of Orthopedic Treatment Activities a. Orthopedic is pertaining to the musculoskeletal system

that includes surgery of the spine, joints, ligaments, tendons and nerves. Orthopedic treatment activities among others include surgical treatments such as broken bones, amputation, diabetic foot, spinal cord injury and joint exchange. Orthopedic services are available in all 136 hospitals of Ministry of Health (MOH), where as 22 hospitals provide orthopedic

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management of sewerage projects is satisfactory from the technical aspects of design, plan preparation, drawing and specification, Hazard and Operability (HAZOP) studies, preparation of project team and project management accordance with stipulated criteria. However, there were some weaknesses identified affected the efficiency and effectiveness of projects, as follows:

i. delay in transfer of land titles to the State Authority

(Pihak Berkuasa Negeri) and, to reserve the land for sewerage purposes for the upgraded Sewerage Treatment Plants (STP);

ii. Time-at-Large issues regarding the delays of contract certification by JPP;

iii. unclear mechanism in verifying the effluent quality stipulated in the contract which caused non-guarantee towards the compliance after testing and commissioning stage;

iv. non-compliance of effluent quality standards for upgraded STPs despite of completeness of physical and certified completed works; and

v. failure to comply with the stipulated effluent quality for Temporary Treatment Facilities during upgrading works period.

c. To ensure that all weaknesses highlighted all parties involved are recommended to take the following actions:

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i. JPP must ensure effluent quality for all STPs in the

ROL catchment areas do not jeopardize the achievement of ROL program objectives regarding water quality;

ii. JPP must identify sewerage reserve land that have yet to be surrendered to Pesuruhjaya Tanah Persekutuan (PTP) and the process to change the land title to be expedited;

iii. the compliance of effluent terms should be included as one of the contract conditions in the testing and commissioning stage; and

iv. JPP must supervise and take necessary action regarding to maintenance works obliged by the Contractor during Defect Liability Period in ensuring all parameters of the STP‟s design are verified.

MINISTRY OF HEALTH MALAYSIA

11. Management Of Orthopedic Treatment Activities a. Orthopedic is pertaining to the musculoskeletal system

that includes surgery of the spine, joints, ligaments, tendons and nerves. Orthopedic treatment activities among others include surgical treatments such as broken bones, amputation, diabetic foot, spinal cord injury and joint exchange. Orthopedic services are available in all 136 hospitals of Ministry of Health (MOH), where as 22 hospitals provide orthopedic

66

management of sewerage projects is satisfactory from the technical aspects of design, plan preparation, drawing and specification, Hazard and Operability (HAZOP) studies, preparation of project team and project management accordance with stipulated criteria. However, there were some weaknesses identified affected the efficiency and effectiveness of projects, as follows:

i. delay in transfer of land titles to the State Authority

(Pihak Berkuasa Negeri) and, to reserve the land for sewerage purposes for the upgraded Sewerage Treatment Plants (STP);

ii. Time-at-Large issues regarding the delays of contract certification by JPP;

iii. unclear mechanism in verifying the effluent quality stipulated in the contract which caused non-guarantee towards the compliance after testing and commissioning stage;

iv. non-compliance of effluent quality standards for upgraded STPs despite of completeness of physical and certified completed works; and

v. failure to comply with the stipulated effluent quality for Temporary Treatment Facilities during upgrading works period.

c. To ensure that all weaknesses highlighted all parties involved are recommended to take the following actions:

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Department of 5 selected hospitals were good because the allocation received were fully utilized. However, the overall management of orthopedic treatment activities audited was less satisfactory. Among other weaknesses identified are as follows:

i. shortages of orthopedic specialists and nurses

between 7% to 67% at hospitals audited because vacancies were not filled up and insufficient medical facilities such as medical equipment;

ii. the deposit payment of External Fixator (EF) components which need to be paid before patients were discharged from the hospital could not be verified;

iii. Quantity of 876 EF components valued at RM241,116 were not verified;

iv. Equipment purchasing application exceeds RM10,000 must be verified by Implants and Prostheses Committee. However, 91 equipment purchasing applications valued RM1.69 million were approved without the committee‟s verification; and

v. 2,010 unused implants stock valued RM328,440 at HTAA and HSBY still kept at the store unit of Orthopedic Operation Theater.

c. To ensure that all weaknesses highlighted do not recur,

MOH and 5 selected hospitals are recommended to take action on the following matters:

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services with subspecialty such as Paediatric; Spine; Joint Arthroplasty; Oncology; Advanced Trauma; Upper Limb and Hand; Foot And Ankle and Sport Medicine. The objectives of the orthopedic treatment activities are to offer comprehensive, effective, modern and cost-effective services as well as improving service quality standards to its patients. The Orthopedic Department of the MOH‟s hospitals supplies equipment for orthopedic treatment activities through three procurement methods, namely Approved Purchase Product List (APPL), tenders and direct purchase. For APPL‟s procurement, the Government has appointed Pharmaniaga Logistics Sdn. Bhd. (PLSB) as concessionaire to distribute supplies of implant equipment and prosthesis in hospitals for the period from 1 December 2009 to 30 November 2019. Tabung Bantuan Perubatan (TBP) offers financial assistance for patients who cannot afford to pay but do not meet the criteria for getting a free supply of implants and prostheses. For the year 2013 to 2015, the Orthopedic Department at the hospital received allocation totalled RM923.68 million and spent RM962.82 million (104.2%).

b. The audit performed at MOH and 5 selected hospitals

[Hospital Tengku Ampuan Afzan (HTAA), Kuantan; Hospital Tengku Ampuan Rahimah (HTAR), Klang; Hospital Sungai Buloh (HSB); Hospital Raja Permaisuri Bainun (HRPB), Ipoh and Hospital Sultanah Bahiyah (HSBYH), Alor Setar] in May and August 2015 revealed that the expenditure performance of the Orthopedic

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Department of 5 selected hospitals were good because the allocation received were fully utilized. However, the overall management of orthopedic treatment activities audited was less satisfactory. Among other weaknesses identified are as follows:

i. shortages of orthopedic specialists and nurses

between 7% to 67% at hospitals audited because vacancies were not filled up and insufficient medical facilities such as medical equipment;

ii. the deposit payment of External Fixator (EF) components which need to be paid before patients were discharged from the hospital could not be verified;

iii. Quantity of 876 EF components valued at RM241,116 were not verified;

iv. Equipment purchasing application exceeds RM10,000 must be verified by Implants and Prostheses Committee. However, 91 equipment purchasing applications valued RM1.69 million were approved without the committee‟s verification; and

v. 2,010 unused implants stock valued RM328,440 at HTAA and HSBY still kept at the store unit of Orthopedic Operation Theater.

c. To ensure that all weaknesses highlighted do not recur,

MOH and 5 selected hospitals are recommended to take action on the following matters:

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services with subspecialty such as Paediatric; Spine; Joint Arthroplasty; Oncology; Advanced Trauma; Upper Limb and Hand; Foot And Ankle and Sport Medicine. The objectives of the orthopedic treatment activities are to offer comprehensive, effective, modern and cost-effective services as well as improving service quality standards to its patients. The Orthopedic Department of the MOH‟s hospitals supplies equipment for orthopedic treatment activities through three procurement methods, namely Approved Purchase Product List (APPL), tenders and direct purchase. For APPL‟s procurement, the Government has appointed Pharmaniaga Logistics Sdn. Bhd. (PLSB) as concessionaire to distribute supplies of implant equipment and prosthesis in hospitals for the period from 1 December 2009 to 30 November 2019. Tabung Bantuan Perubatan (TBP) offers financial assistance for patients who cannot afford to pay but do not meet the criteria for getting a free supply of implants and prostheses. For the year 2013 to 2015, the Orthopedic Department at the hospital received allocation totalled RM923.68 million and spent RM962.82 million (104.2%).

b. The audit performed at MOH and 5 selected hospitals

[Hospital Tengku Ampuan Afzan (HTAA), Kuantan; Hospital Tengku Ampuan Rahimah (HTAR), Klang; Hospital Sungai Buloh (HSB); Hospital Raja Permaisuri Bainun (HRPB), Ipoh and Hospital Sultanah Bahiyah (HSBYH), Alor Setar] in May and August 2015 revealed that the expenditure performance of the Orthopedic

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period was between one to two years. As at 2015, 85 SKKS were appointed at 135 hospitals with contract value totalled RM284.77 million.

b. The audit performed between June and September 2015 at Procurement and Privatization Division, Ministry of Health and 8 selected hospitals [Hospital Melaka (HM); Hospital Alor Gajah (HAG); Hospital Tuanku Jaafar (HTJ); Hospital Tuanku Ampuan Najihah (HTAN); Hospital Putrajaya (HPj); Hospital Serdang (HSdg); Sarawak General Hospital (SGH) / Sarawak General Hospital Heart Center (PJHUS) and Rajah Charles Brooke Memorial Hospital (HRCBM)]. SKKS contract value for these 8 hospitals in 5 states totalled RM81.74 million. The audit revealed that the management of SKKS services was satisfactory in terms of actions taken against contractors for non-compliance with contract terms. However, the management of SKKS services was less satisfactory particularly in respect of management of contract and compliance; payments; deductions; and penalties as follows:

i. discrepancies between contract terms and the Letter of Acceptance [Surat Setuju Terima (SST)];

ii. non-compliance of pre-conditions for appointments of security guards in respect of permitted age; annual medical screening; pass security vetting; pass urine test; attend Certified Security Guard (CSG) course; adequate tools and equipment; and

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i. fill all vacancies for orthopedic specialists will lead towards an improvements in the quality of services; thus attracting new medical officers to enroll orthopedic sub-specialty programme;

ii. improve coordination and monitoring aspects with all stakeholders to obtain the latest APPL implant products and relevant with current developments which benefits all parties; and

iii. review the effectiveness of Implants And Prostheses Committee‟s verification procedures relating to applications for equipment exceeding RM10,000 for a prompt and orderly approval.

12. Management of Private Security Services Company In Hospital

a. Ministry of Health (Ministry) appointed private security

companies [Syarikat Kawalan Keselamatan Swasta (SKKS)] to enhance the security of property, patients, hospital personnel and civilians within hospitals. SKKS was procured through open tenders and quotations. According to the contracts, 3 types of services provided are unarmed guard, armed guard and cash in transit (CIT). For the year 2013 to 2015, the Ministry awarded contracts through open tender totalling RM271.02 million comprised of 45 SKKS at 69 hospitals valued between RM0.50 million to RM17.05 million. In addition, contracts totalling RM13.75 million were awarded through quotation to 53 SKKS at 66 hospitals valued between RM0.27 million to RM0.49 million. The contract

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period was between one to two years. As at 2015, 85 SKKS were appointed at 135 hospitals with contract value totalled RM284.77 million.

b. The audit performed between June and September 2015 at Procurement and Privatization Division, Ministry of Health and 8 selected hospitals [Hospital Melaka (HM); Hospital Alor Gajah (HAG); Hospital Tuanku Jaafar (HTJ); Hospital Tuanku Ampuan Najihah (HTAN); Hospital Putrajaya (HPj); Hospital Serdang (HSdg); Sarawak General Hospital (SGH) / Sarawak General Hospital Heart Center (PJHUS) and Rajah Charles Brooke Memorial Hospital (HRCBM)]. SKKS contract value for these 8 hospitals in 5 states totalled RM81.74 million. The audit revealed that the management of SKKS services was satisfactory in terms of actions taken against contractors for non-compliance with contract terms. However, the management of SKKS services was less satisfactory particularly in respect of management of contract and compliance; payments; deductions; and penalties as follows:

i. discrepancies between contract terms and the Letter of Acceptance [Surat Setuju Terima (SST)];

ii. non-compliance of pre-conditions for appointments of security guards in respect of permitted age; annual medical screening; pass security vetting; pass urine test; attend Certified Security Guard (CSG) course; adequate tools and equipment; and

70

i. fill all vacancies for orthopedic specialists will lead towards an improvements in the quality of services; thus attracting new medical officers to enroll orthopedic sub-specialty programme;

ii. improve coordination and monitoring aspects with all stakeholders to obtain the latest APPL implant products and relevant with current developments which benefits all parties; and

iii. review the effectiveness of Implants And Prostheses Committee‟s verification procedures relating to applications for equipment exceeding RM10,000 for a prompt and orderly approval.

12. Management of Private Security Services Company In Hospital

a. Ministry of Health (Ministry) appointed private security

companies [Syarikat Kawalan Keselamatan Swasta (SKKS)] to enhance the security of property, patients, hospital personnel and civilians within hospitals. SKKS was procured through open tenders and quotations. According to the contracts, 3 types of services provided are unarmed guard, armed guard and cash in transit (CIT). For the year 2013 to 2015, the Ministry awarded contracts through open tender totalling RM271.02 million comprised of 45 SKKS at 69 hospitals valued between RM0.50 million to RM17.05 million. In addition, contracts totalling RM13.75 million were awarded through quotation to 53 SKKS at 66 hospitals valued between RM0.27 million to RM0.49 million. The contract

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iii. ensure compliance of pre-conditions for appointments of security guards in respect of permitted age, annual medical screening, pass security vetting, pass urine test and attend Certified Security Guard (CSG) course. This is to confirm that the security guards employed have no past criminal records, physically fit and mentally healthy; and

iv. review contract compliance by all SKKS and take stern action against them for non-compliance.

MINISTRY OF HEALTH MALAYSIA / MINISTRY OF WORKS MALAYSIA

13. Construction Project of New Tampin Hospital, Negeri Sembilan

a. The construction of new Tampin Hospital project in

2009 under the Ninth Malaysia Plan [Rancangan Malaysia Ke-9 (RMKe-9)] to replace the existing hospital operated since 1920. The contractor Fajarbaru Builders Sdn. Bhd. (Fajarbaru) was appointed by Public Works Department (PWD) on 5th February 2009 through restricted tender using design and build method comprises of Design, Construction, Completion, Equipping, Commissioning and Maintenance of Tampin Hospital. Through the design and build method, consultants and contractors were fully responsible on design and project supervision. This project valued at RM138.39 million consist of hospital‟s main building, nurses‟ hostel, employees‟ quarters and parking areas. Ministry of Health Malaysia (MOH) is the project owner,

72

appointment of a third party CIT provider without approval;

iii. improper payments and deductions pertaining to service quality and penalties at 5 hospitals namely HAG, HTJ, HSdg, HUS and PJHUS resulted in overpayments totalled RM235,895; and

iv. late payments between 10 to 207 days for 54 cases amounting to RM8.08 million in 3 hospitals namely HM, HAG and HPj.

c. To improve public service delivery system, the Ministry

must ensure proper and efficient management of SKKS in hospital to achieve the set objectives. Thus, the Ministry is recommended to take the following actions:

i. enhance coordination between the Ministry, State

Health Departments [Jabatan Kesihatan Negeri (JKN)] and hospitals to prevent discrepancy between contract terms and SST and disputes between parties. In addition, standard templates must be applied for all contracts;

ii. organise road shows on precise method of

deduction for non-performed services. The Ministry must ensure there are no overpayments at all hospitals excluding samples audited. The Ministry must investigate thoroughly and surcharge officer(s) causing overpayments and losses to the Government;

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iii. ensure compliance of pre-conditions for appointments of security guards in respect of permitted age, annual medical screening, pass security vetting, pass urine test and attend Certified Security Guard (CSG) course. This is to confirm that the security guards employed have no past criminal records, physically fit and mentally healthy; and

iv. review contract compliance by all SKKS and take stern action against them for non-compliance.

MINISTRY OF HEALTH MALAYSIA / MINISTRY OF WORKS MALAYSIA

13. Construction Project of New Tampin Hospital, Negeri Sembilan

a. The construction of new Tampin Hospital project in

2009 under the Ninth Malaysia Plan [Rancangan Malaysia Ke-9 (RMKe-9)] to replace the existing hospital operated since 1920. The contractor Fajarbaru Builders Sdn. Bhd. (Fajarbaru) was appointed by Public Works Department (PWD) on 5th February 2009 through restricted tender using design and build method comprises of Design, Construction, Completion, Equipping, Commissioning and Maintenance of Tampin Hospital. Through the design and build method, consultants and contractors were fully responsible on design and project supervision. This project valued at RM138.39 million consist of hospital‟s main building, nurses‟ hostel, employees‟ quarters and parking areas. Ministry of Health Malaysia (MOH) is the project owner,

72

appointment of a third party CIT provider without approval;

iii. improper payments and deductions pertaining to service quality and penalties at 5 hospitals namely HAG, HTJ, HSdg, HUS and PJHUS resulted in overpayments totalled RM235,895; and

iv. late payments between 10 to 207 days for 54 cases amounting to RM8.08 million in 3 hospitals namely HM, HAG and HPj.

c. To improve public service delivery system, the Ministry

must ensure proper and efficient management of SKKS in hospital to achieve the set objectives. Thus, the Ministry is recommended to take the following actions:

i. enhance coordination between the Ministry, State

Health Departments [Jabatan Kesihatan Negeri (JKN)] and hospitals to prevent discrepancy between contract terms and SST and disputes between parties. In addition, standard templates must be applied for all contracts;

ii. organise road shows on precise method of

deduction for non-performed services. The Ministry must ensure there are no overpayments at all hospitals excluding samples audited. The Ministry must investigate thoroughly and surcharge officer(s) causing overpayments and losses to the Government;

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iii. one out of 2 Operation Theatre could not be used despite the project was handed over to MOH on 3rd October 2013 (2 years and 3 month);

iv. contract administration was less efficient because of late approval for the EOT 1 and EOT 2 within 28 days and 207 days; late issuing of Certificate of Non Completion (CNC) for 173 days from the actual completion date as per contract; and late in handed over to MOH for 3 month. Although the project did not function fully as stipulated in the contract, Certificate of Practical Completion (CPC) was issued. Furthermore, non-issuance of Certificate of Partial Occupation (CPO) to non-functioning and uncompleted of two Operation Theatre resulted for Government‟s losses due to non-charged of LAD to the contractor;

v. less satisfactory on the quality of construction, several cases of inappropriate design due to the lack of supervision or non-performing of consultants‟ responsibility and it was observed that PWD as implementing agencies was unable to take into consideration MOH‟s needs as per Government‟s Requirement. Among poor qualities were wall construction works cracked up to 1,182 point around hospitals complex. Furthermore, unsuitable water tank‟s design resulted the existence of Total Coliform Bacteria in water sample from Block A & B‟s water tank. Thus, it violated the allowable parameter standards of treated water; and

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PWD acted as implementing agency and Director of Health Work Branch, PWD was the Project Director. The contract between Government of Malaysia with Fajarbaru was signed on 10th Jun 2009 for a period of 36 month.

b. The audit performed at Health Work Branch, PWD;

Contract and Quantity Surveying Branch, PWD; Planning Division, MOH; Development Division, MOH; Engineering Services Division, MOH; Medical Resources Unit, MOH; Tampin Hospital (new and existing); Kluang Hospital (existing) and Permai Hospital (existing) from April to Jun 2015. The audit revealed that new Tampin Hospital provides better and pleasant health services to the people of Tampin district and surrounding area. It also provides facilities to employees such as nurses‟ hostel and quarters. However, the implementation of this project was less satisfactory because the project has yet to achieve its objective. In addition, there was less efficiency in project implementation and improper contract administration. Among other weaknesses identified are as follows:

i. contractor‟s performance was less satisfactory

because the project delayed for 150 days after the extension of time (EOT) of 344 days (31.4% from the actual date). Consequently, Liquidated and Ascertained Damages (LAD) amounted to RM3.84 million was imposed to the contractor for the delay;

ii. contractor‟s failure in technical evaluation had affected timely completion of the project;

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iii. one out of 2 Operation Theatre could not be used despite the project was handed over to MOH on 3rd October 2013 (2 years and 3 month);

iv. contract administration was less efficient because of late approval for the EOT 1 and EOT 2 within 28 days and 207 days; late issuing of Certificate of Non Completion (CNC) for 173 days from the actual completion date as per contract; and late in handed over to MOH for 3 month. Although the project did not function fully as stipulated in the contract, Certificate of Practical Completion (CPC) was issued. Furthermore, non-issuance of Certificate of Partial Occupation (CPO) to non-functioning and uncompleted of two Operation Theatre resulted for Government‟s losses due to non-charged of LAD to the contractor;

v. less satisfactory on the quality of construction, several cases of inappropriate design due to the lack of supervision or non-performing of consultants‟ responsibility and it was observed that PWD as implementing agencies was unable to take into consideration MOH‟s needs as per Government‟s Requirement. Among poor qualities were wall construction works cracked up to 1,182 point around hospitals complex. Furthermore, unsuitable water tank‟s design resulted the existence of Total Coliform Bacteria in water sample from Block A & B‟s water tank. Thus, it violated the allowable parameter standards of treated water; and

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PWD acted as implementing agency and Director of Health Work Branch, PWD was the Project Director. The contract between Government of Malaysia with Fajarbaru was signed on 10th Jun 2009 for a period of 36 month.

b. The audit performed at Health Work Branch, PWD;

Contract and Quantity Surveying Branch, PWD; Planning Division, MOH; Development Division, MOH; Engineering Services Division, MOH; Medical Resources Unit, MOH; Tampin Hospital (new and existing); Kluang Hospital (existing) and Permai Hospital (existing) from April to Jun 2015. The audit revealed that new Tampin Hospital provides better and pleasant health services to the people of Tampin district and surrounding area. It also provides facilities to employees such as nurses‟ hostel and quarters. However, the implementation of this project was less satisfactory because the project has yet to achieve its objective. In addition, there was less efficiency in project implementation and improper contract administration. Among other weaknesses identified are as follows:

i. contractor‟s performance was less satisfactory

because the project delayed for 150 days after the extension of time (EOT) of 344 days (31.4% from the actual date). Consequently, Liquidated and Ascertained Damages (LAD) amounted to RM3.84 million was imposed to the contractor for the delay;

ii. contractor‟s failure in technical evaluation had affected timely completion of the project;

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works to the contracts‟ specifications/not suitable/low quality which could affected delivery of services. Consequently, Forensic Audit need to be implemented by experts regarding serious cracks on quality of its wall constructions affected the quality of construction of new Tampin Hospital;

iv. KKR needs to setting up an investigation committee to take appropriate actions who negligently conduct contract management resulting for mammoth losses for the Government. Furthermore, actions towards officers for improper payment of non-provided services by Medivest Sdn. Bhd; and

v. KKM needs to optimise the use of equipment and hospital facilities including existing equipment and facilities at existing hospital to avoid the waste and create a conducive working environment.

MINISTRY OF URBAN WELLBEING, HOUSING AND LOCAL GOVERNMENT

National Solid Waste Management Department

14. Solid Waste Disposal Sites Management a. National Solid Waste Management Department

[Jabatan Pengurusan Sisa Pepejal Negara (JPSPN)] was established on 1st July 2007 under Solid Waste Management and Public Cleansing Act 2007 (Act 672). Act 672 had been approved by Parliament on 17th July 2007, gazetted on 30th August 2007 and enforced on 1st September 2011 to integrate Solid Waste Management

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vi. irregular payment of Facility Engineering Maintenance Services (FEMS) and Biomedical Engineering Maintenance Services (BEMS) for new Tampin Hospital because the services were not provided by Medivest Sdn. Bhd. and still under the contractor‟s responsibility.

c. To ensure proper and efficient management of the construction project through design and build method, the Government reaps best value for money, and strengthen management of future projects, it is recommended that Ministries and PWD to take actions on the following matters:

i. Ministry of Finance should consider to review the Treasury Circular pertaining to Tender Evaluation Guidelines. It is suggested that tenderers for Turnkey or Design and Build project who failed evaluation in Second or Third Phase by Technical Evaluation Committee must not be considered for Agency Board Procurement which stipulated in the Procurement Guidelines;

ii. Ministry Of Works Malaysia [Kementerian Kerja Raya (KKR)] need to enhance their coordination with agency‟s consumer/client. This to ensure that contractor‟s work/obligations could be implemented according to the Detailed Work Schedule with Critical Flow Method;

iii. KKR needs to report to relevant authorities and professional bodies regarding non-compliance

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works to the contracts‟ specifications/not suitable/low quality which could affected delivery of services. Consequently, Forensic Audit need to be implemented by experts regarding serious cracks on quality of its wall constructions affected the quality of construction of new Tampin Hospital;

iv. KKR needs to setting up an investigation committee to take appropriate actions who negligently conduct contract management resulting for mammoth losses for the Government. Furthermore, actions towards officers for improper payment of non-provided services by Medivest Sdn. Bhd; and

v. KKM needs to optimise the use of equipment and hospital facilities including existing equipment and facilities at existing hospital to avoid the waste and create a conducive working environment.

MINISTRY OF URBAN WELLBEING, HOUSING AND LOCAL GOVERNMENT

National Solid Waste Management Department

14. Solid Waste Disposal Sites Management a. National Solid Waste Management Department

[Jabatan Pengurusan Sisa Pepejal Negara (JPSPN)] was established on 1st July 2007 under Solid Waste Management and Public Cleansing Act 2007 (Act 672). Act 672 had been approved by Parliament on 17th July 2007, gazetted on 30th August 2007 and enforced on 1st September 2011 to integrate Solid Waste Management

76

vi. irregular payment of Facility Engineering Maintenance Services (FEMS) and Biomedical Engineering Maintenance Services (BEMS) for new Tampin Hospital because the services were not provided by Medivest Sdn. Bhd. and still under the contractor‟s responsibility.

c. To ensure proper and efficient management of the construction project through design and build method, the Government reaps best value for money, and strengthen management of future projects, it is recommended that Ministries and PWD to take actions on the following matters:

i. Ministry of Finance should consider to review the Treasury Circular pertaining to Tender Evaluation Guidelines. It is suggested that tenderers for Turnkey or Design and Build project who failed evaluation in Second or Third Phase by Technical Evaluation Committee must not be considered for Agency Board Procurement which stipulated in the Procurement Guidelines;

ii. Ministry Of Works Malaysia [Kementerian Kerja Raya (KKR)] need to enhance their coordination with agency‟s consumer/client. This to ensure that contractor‟s work/obligations could be implemented according to the Detailed Work Schedule with Critical Flow Method;

iii. KKR needs to report to relevant authorities and professional bodies regarding non-compliance

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(72.38%) provisions allocated for solid waste management, RM1.024 billion were spent. Audit visit to 12 of 47 projects revealed several weaknesses as follows:

i. 3 projects approved for the Planning Permission

(PP) and Development Plan (DP) and 6 projects exempted from PP and DP. Two projects were in the process to obtain exemption of PP and DP from the local authorities and TPS Klias Jalan Lama project in Beaufort, Sabah was under process of bidding;

ii. delay of 1 to 5 months in signing contracts for 5 projects valued between RM10.40 million to RM49.90 million might jeopardise Government‟s interest; and

iii. a total of RM25.26 million penalties for Liquidated Ascertain Damage (LAD) were returned to 7 contractors after extension of time approved by JPSPN inclusive the period of late penalty.

c. To ensure the management of TPS is carried out

orderly and effectively, it is recommended that JPSPN consider the following actions:

i. JPSPN must comply with circulars issued by

Government and Director General of Public Work Department;

ii. JPSPN must prepared rules and Standard Operating Procedures at every stage of project implementation especially in issuance of Certificate

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system at national level. The Act gives executive power to Malaysian Federal Government to implement Solid Waste Management and Public Cleansing. JPSPN‟s role in formulating policy; strategy and planning of integrated solid waste management; drafting regulations as stipulated in Act 672; and setting the standards, specifications and work procedures. JPSPN is also responsible in carrying out privatization of solid waste management; approval and licensing services; and management of solid waste and public cleaning facilities. An allocation amounted RM1.416 billion was approved under 10th Malaysia Plan to implement Solid Waste Management Program. A total of RM250.61 million was allocated for incinerator project, reacquisition of land, feasibility study and others facility expenses on solid waste management. A total of RM1.165 billion (82.30%) is allocated for 47 solid waste disposal sites project [Tapak Pelupusan Sisa Pepejal (TPS)]. The scope of TPS programme consists of building new landfill, upgrading sanitary landfill and safe closure landfill. The procurement of TPS programme was implemented through direct negotiations (Design and Build), open tenders and selective tenders.

b. The audit performed between October to December 2015 at 12 (25.5%) out of 47 TPS project revealed that overall TPS management is less satisfactory. From 47 TPS projects, a total of 33 (70.2%) projects were completed, 9 projects were under construction, 4 projects under tender evaluation process and 1 project in planning stage. From a total of RM1.416 billion

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79

(72.38%) provisions allocated for solid waste management, RM1.024 billion were spent. Audit visit to 12 of 47 projects revealed several weaknesses as follows:

i. 3 projects approved for the Planning Permission

(PP) and Development Plan (DP) and 6 projects exempted from PP and DP. Two projects were in the process to obtain exemption of PP and DP from the local authorities and TPS Klias Jalan Lama project in Beaufort, Sabah was under process of bidding;

ii. delay of 1 to 5 months in signing contracts for 5 projects valued between RM10.40 million to RM49.90 million might jeopardise Government‟s interest; and

iii. a total of RM25.26 million penalties for Liquidated Ascertain Damage (LAD) were returned to 7 contractors after extension of time approved by JPSPN inclusive the period of late penalty.

c. To ensure the management of TPS is carried out

orderly and effectively, it is recommended that JPSPN consider the following actions:

i. JPSPN must comply with circulars issued by

Government and Director General of Public Work Department;

ii. JPSPN must prepared rules and Standard Operating Procedures at every stage of project implementation especially in issuance of Certificate

78

system at national level. The Act gives executive power to Malaysian Federal Government to implement Solid Waste Management and Public Cleansing. JPSPN‟s role in formulating policy; strategy and planning of integrated solid waste management; drafting regulations as stipulated in Act 672; and setting the standards, specifications and work procedures. JPSPN is also responsible in carrying out privatization of solid waste management; approval and licensing services; and management of solid waste and public cleaning facilities. An allocation amounted RM1.416 billion was approved under 10th Malaysia Plan to implement Solid Waste Management Program. A total of RM250.61 million was allocated for incinerator project, reacquisition of land, feasibility study and others facility expenses on solid waste management. A total of RM1.165 billion (82.30%) is allocated for 47 solid waste disposal sites project [Tapak Pelupusan Sisa Pepejal (TPS)]. The scope of TPS programme consists of building new landfill, upgrading sanitary landfill and safe closure landfill. The procurement of TPS programme was implemented through direct negotiations (Design and Build), open tenders and selective tenders.

b. The audit performed between October to December 2015 at 12 (25.5%) out of 47 TPS project revealed that overall TPS management is less satisfactory. From 47 TPS projects, a total of 33 (70.2%) projects were completed, 9 projects were under construction, 4 projects under tender evaluation process and 1 project in planning stage. From a total of RM1.416 billion

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Subang 2 construction has been opened on 4th March 2002 through open tender for design and build method. On 15th January 2003, the Letter of Acceptance worth RM69.52 million were issued to Am Rich Constructions & Development Sdn. Bhd. (ARCD). PPR Lembah Subang 2 project has completed on 29th April 2009 after approval of 8 extension of time (EOT) which equivalent to 1,550 days (52 months). Whereas, a Defects Liability Period (DLP) for 24 months was given starting from 29th April 2009 until 29th April 2011.

b. The audit performed between November 2014 to

February 2015 in KPKT, NHD and PPR Lembah Subang 2. The audit revealed that the project management of PPR Lembah Subang 2 which was executed by NHD was not satisfactory. Audit found the construction of PPR Lembah Subang 2 was poorly managed, and delayed for 4 years and 8 months from date of completion. Audit findings are as follows:

i. weaknesses in construction planning, site selection

and management of procurement/selection of contractors;

ii. weakness in monitoring the construction;

iii. coordination problems between Petaling Jaya Municipal Council (MBPJ) and NHD; and

iv. weakness in selecting and distributing the units to eligible buyers.

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Partial Of Occupation (CPO), the appointment of operator and handing over completed projects to local authorities in determining the ownership of the project promptly; and

iii. JPSPN must prepared comprehensive plan before implementation of TPS projects in terms of land ownership especially involving individuals land ownership.

National Housing Department 15. Construction of the People's Housing Programme,

Lembah Subang 2 a. People's Housing Programme [Program Perumahan

Rakyat (PPR)] is a Government program for the resettlement of squatters and provides dwellings for low-income earners. National Housing Department (NHD) / Ministry of Urban Wellbeing, Housing And Local Government [Kementerian Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan (KPKT)] is the main agency implementing projects for PPR throughout Malaysia. PPR Lembah Subang 2 was built on part of Lot 14191, Mukim of Damansara, Selangor covering an area of 17.65 acres that had been approved by the State Executive Council (EXCO) on 19th December 2000. It is intended to provide housing for the resettlement of squatters and the other low-income earners, especially in Petaling District. PPR Lembah Subang 2 is expected to help 2,500 people in Lembah Subang to own a home. The tender for PPR Lembah

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Subang 2 construction has been opened on 4th March 2002 through open tender for design and build method. On 15th January 2003, the Letter of Acceptance worth RM69.52 million were issued to Am Rich Constructions & Development Sdn. Bhd. (ARCD). PPR Lembah Subang 2 project has completed on 29th April 2009 after approval of 8 extension of time (EOT) which equivalent to 1,550 days (52 months). Whereas, a Defects Liability Period (DLP) for 24 months was given starting from 29th April 2009 until 29th April 2011.

b. The audit performed between November 2014 to

February 2015 in KPKT, NHD and PPR Lembah Subang 2. The audit revealed that the project management of PPR Lembah Subang 2 which was executed by NHD was not satisfactory. Audit found the construction of PPR Lembah Subang 2 was poorly managed, and delayed for 4 years and 8 months from date of completion. Audit findings are as follows:

i. weaknesses in construction planning, site selection

and management of procurement/selection of contractors;

ii. weakness in monitoring the construction;

iii. coordination problems between Petaling Jaya Municipal Council (MBPJ) and NHD; and

iv. weakness in selecting and distributing the units to eligible buyers.

80

Partial Of Occupation (CPO), the appointment of operator and handing over completed projects to local authorities in determining the ownership of the project promptly; and

iii. JPSPN must prepared comprehensive plan before implementation of TPS projects in terms of land ownership especially involving individuals land ownership.

National Housing Department 15. Construction of the People's Housing Programme,

Lembah Subang 2 a. People's Housing Programme [Program Perumahan

Rakyat (PPR)] is a Government program for the resettlement of squatters and provides dwellings for low-income earners. National Housing Department (NHD) / Ministry of Urban Wellbeing, Housing And Local Government [Kementerian Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan (KPKT)] is the main agency implementing projects for PPR throughout Malaysia. PPR Lembah Subang 2 was built on part of Lot 14191, Mukim of Damansara, Selangor covering an area of 17.65 acres that had been approved by the State Executive Council (EXCO) on 19th December 2000. It is intended to provide housing for the resettlement of squatters and the other low-income earners, especially in Petaling District. PPR Lembah Subang 2 is expected to help 2,500 people in Lembah Subang to own a home. The tender for PPR Lembah

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83

bridges projects and a longhouses project in rural areas in Sarawak which were left behind from the country‟s development. JMP implementation in Sarawak is collaboration between Prime Minister‟s Department [Jabatan Perdana Menteri (JPM)], Sarawak State Government, contractors and local communities. Implementation Coordination Unit (ICU) of JPM provides guidelines and fund for the project. The Sarawak State Government through its representatives and District Offices help to identify the needs and locations for the projects. The local communities acted as sub-contractors aim to create a sense of belonging within the project. The objectives of the project are to improve the well-being of communities living in rural areas of Sarawak; provide basic infrastructure at lower costs, speedy and with high impact; enhance road connectivity in rural areas and reduce travelling time. In addition, JMP in Sarawak also provide basic infrastructures such as clean water and electricity supply and increase the communities‟ income through land development in agricultural economic activities commercially such as rubber and oil palm. For the period between 2009 to 30th June 2015, ATM implemented 11 JMP in Sarawak involving contract sum amounting to RM253.98 million. The implementation and monitoring of the JMP in Sarawak was undertaken by RAJD. The procurement method of JMP is through direct negotiation between the Development Division, Ministry of Defence Malaysia (MINDEF) and contractors while JMP was approved by the Ministry of Finance.

82

c. To ensure that all weaknesses highlighted do not recur, it is recommended that Ministry to take action on the following matters:

i. better planning for the upcoming projects to ensure

its completion and improve the quality of construction, safety interests, comfort and satisfaction of users / residents in the future;

ii. ensure the application process and approval of EOT to contractors are fair and justified before or on the date of completion in accordance with contract requirements / circulars / directives in force; and

iii. finalizing the list of buyers a few months before completion and to issue the offer letters as soon as the Certificate of Completion and Compliance (CCC) for PPR project is received.

MINISTRY OF DEFENCE MALAYSIA 16. The Management of Jiwa Murni Project in Sarawak a. Jiwa Murni Project (JMP) in Sarawak was implemented

by the Malaysian Armed Forces [Angkatan Tentera Malaysia (ATM)] through the Royal Armed Engineers Regiment (RAJD) in collaboration with companies appointed by the Government. RAJD is responsible for the construction works on site while building materials, machineries and labourers were supplied by contractors. RAJD‟s involvement in JMP Sarawak began in 2009 for constructions and upgrading of 6 roads projects, a slope protection work project, 3

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83

bridges projects and a longhouses project in rural areas in Sarawak which were left behind from the country‟s development. JMP implementation in Sarawak is collaboration between Prime Minister‟s Department [Jabatan Perdana Menteri (JPM)], Sarawak State Government, contractors and local communities. Implementation Coordination Unit (ICU) of JPM provides guidelines and fund for the project. The Sarawak State Government through its representatives and District Offices help to identify the needs and locations for the projects. The local communities acted as sub-contractors aim to create a sense of belonging within the project. The objectives of the project are to improve the well-being of communities living in rural areas of Sarawak; provide basic infrastructure at lower costs, speedy and with high impact; enhance road connectivity in rural areas and reduce travelling time. In addition, JMP in Sarawak also provide basic infrastructures such as clean water and electricity supply and increase the communities‟ income through land development in agricultural economic activities commercially such as rubber and oil palm. For the period between 2009 to 30th June 2015, ATM implemented 11 JMP in Sarawak involving contract sum amounting to RM253.98 million. The implementation and monitoring of the JMP in Sarawak was undertaken by RAJD. The procurement method of JMP is through direct negotiation between the Development Division, Ministry of Defence Malaysia (MINDEF) and contractors while JMP was approved by the Ministry of Finance.

82

c. To ensure that all weaknesses highlighted do not recur, it is recommended that Ministry to take action on the following matters:

i. better planning for the upcoming projects to ensure

its completion and improve the quality of construction, safety interests, comfort and satisfaction of users / residents in the future;

ii. ensure the application process and approval of EOT to contractors are fair and justified before or on the date of completion in accordance with contract requirements / circulars / directives in force; and

iii. finalizing the list of buyers a few months before completion and to issue the offer letters as soon as the Certificate of Completion and Compliance (CCC) for PPR project is received.

MINISTRY OF DEFENCE MALAYSIA 16. The Management of Jiwa Murni Project in Sarawak a. Jiwa Murni Project (JMP) in Sarawak was implemented

by the Malaysian Armed Forces [Angkatan Tentera Malaysia (ATM)] through the Royal Armed Engineers Regiment (RAJD) in collaboration with companies appointed by the Government. RAJD is responsible for the construction works on site while building materials, machineries and labourers were supplied by contractors. RAJD‟s involvement in JMP Sarawak began in 2009 for constructions and upgrading of 6 roads projects, a slope protection work project, 3

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85

to Mejawah, Belaga and Road project from Long Lopeng to Ba‟kelalan, Lawas; and

v. decayed and cracked bridge curbs at Pa‟Dappur Bridge and Pa‟Kelapang Bridge, Bario.

c. In order to improve the management performance of

JMP in Sarawak and to achieve the projects‟ objectives, it is recommended that MINDEF and Sarawak State Government to take the following actions: i. MINDEF must carry out proper roads maintenance

within defect liability period (DLP), define road maintenance schedule in the contracts and identify responsible parties for continuous road maintenance after expiry of DLP; and

ii. Sarawak State Government and MINDEF must ensure orderly land acquisition process and provision of land compensation in accordance with State Land Code (Chapter 81) 1958.

MINISTRY OF WORKS / MINISTRY OF HOME AFFAIRS

Prison Department of Malaysia 17. Management of Construction Project Penjara

Reman (Tegar) Johor Bahru, Johor a. Ministry of Home Affairs (MOHA) and Prisons

Department of Malaysia (PDM) had applied for allocation from Ministry of Finance Malaysia (MOF) on 5th October 2006 to build a new prison complex on a 50 acres land at Kangkar Pulai in Johor Bahru, Mukim

84

JMP won the premier Prime Minister‟s Innovation Award 2015.

b. The audit performed from September to December 2015 at MINDEF and 8 projects in Kapit, Miri and Limbang, Sarawak revealed JMP in Sarawak achieved its objectives in providing road connectivity to rural areas of Sarawak and reducing travelling time. The overall management of JMP in Sarawak was satisfactory. However, there are shortcomings that need to be addressed by MINDEF such as follows: i. quality of work was less satisfactory. Road

shoulders and drains were not built, potholes, uneven and muddy road surfaces in certain stretches of the Road project from Pekan Belaga to Mejawah, Belaga; Road project from Long Lopeng to Ba‟kelalan, Lawas and Road project from Miri to Marudi;

ii. road maintenance was less satisfactory. Faded road lines; and untrimmed wild plants and grass along road shoulders;

iii. procedures for land acquisition, compensation arrangements and arbitration processes were not implemented resulting in unpaid land and crop compensation to land owners;

iv. road safety aspects was less satisfactory. Steep, winding and high gradient road; no slopes protection and street furniture were not well maintained in certain stretches of Road project from Pekan Belaga

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85

to Mejawah, Belaga and Road project from Long Lopeng to Ba‟kelalan, Lawas; and

v. decayed and cracked bridge curbs at Pa‟Dappur Bridge and Pa‟Kelapang Bridge, Bario.

c. In order to improve the management performance of

JMP in Sarawak and to achieve the projects‟ objectives, it is recommended that MINDEF and Sarawak State Government to take the following actions: i. MINDEF must carry out proper roads maintenance

within defect liability period (DLP), define road maintenance schedule in the contracts and identify responsible parties for continuous road maintenance after expiry of DLP; and

ii. Sarawak State Government and MINDEF must ensure orderly land acquisition process and provision of land compensation in accordance with State Land Code (Chapter 81) 1958.

MINISTRY OF WORKS / MINISTRY OF HOME AFFAIRS

Prison Department of Malaysia 17. Management of Construction Project Penjara

Reman (Tegar) Johor Bahru, Johor a. Ministry of Home Affairs (MOHA) and Prisons

Department of Malaysia (PDM) had applied for allocation from Ministry of Finance Malaysia (MOF) on 5th October 2006 to build a new prison complex on a 50 acres land at Kangkar Pulai in Johor Bahru, Mukim

84

JMP won the premier Prime Minister‟s Innovation Award 2015.

b. The audit performed from September to December 2015 at MINDEF and 8 projects in Kapit, Miri and Limbang, Sarawak revealed JMP in Sarawak achieved its objectives in providing road connectivity to rural areas of Sarawak and reducing travelling time. The overall management of JMP in Sarawak was satisfactory. However, there are shortcomings that need to be addressed by MINDEF such as follows: i. quality of work was less satisfactory. Road

shoulders and drains were not built, potholes, uneven and muddy road surfaces in certain stretches of the Road project from Pekan Belaga to Mejawah, Belaga; Road project from Long Lopeng to Ba‟kelalan, Lawas and Road project from Miri to Marudi;

ii. road maintenance was less satisfactory. Faded road lines; and untrimmed wild plants and grass along road shoulders;

iii. procedures for land acquisition, compensation arrangements and arbitration processes were not implemented resulting in unpaid land and crop compensation to land owners;

iv. road safety aspects was less satisfactory. Steep, winding and high gradient road; no slopes protection and street furniture were not well maintained in certain stretches of Road project from Pekan Belaga

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actual work done on site. However, there are several aspects to be addressed by MOHA/PWD as follows:

i. changes in procurement method for Phase II Project

forced the Government to indemnify consultants a total of RM3.68 million in compensation; and

ii. damaged property and equipment in Phase I Project must be repaired, tested and commissioned by contractors before completion of Phase II Project.

c. To ensure completion of Phase II Project within the

stipulated time; and efficiency and effectiveness of future project management, it is recommended MOHA/PWD to consider the following actions:

i. MOHA/PWD must finalized project procurement

methods before appointing contractors and consultants; and

ii. Contractors must perform testing and commissioning for unused property and equipment for Phase I Project prior to handing over of Phase II Project to PWD.

MINISTRY OF HOME AFFAIRS

Immigration Department of Malaysia 18. Implementation of the Malaysian Immigration

System (myIMMs) a. MyIMMs is the information technology systems of the

Malaysian Immigration Department [Jabatan Imigresen

86

Pulai, Johor Bahru District. This new complex is to replace Penjara Reman Johor Bahru at Jalan Ayer Molek (Penjara Ayer Molek). The project was implemented in two phases due to insufficient fund. MOF approved an allocation of RM50 million for the construction of Project Penjara Reman (Tegar) Johor Bahru Phase l (Phase l Project) initiated in April 2009 and completed in April 2011. However, Phase l Project has not been used since completion as it only has capacity of 300 prisoners as compared to 726 prisoners at that time. In January 2011, MOF approved additional allocation of RM160 million for the construction Project Penjara Reman (Tegar) Johor Bahru Phase lI (Phase lI Project). Intrasegi Sdn. Bhd. and Tegas Setuju Sdn. Bhd. were appointed through direct negotiation. Phase II Project consists of prison complex equipped with modern security system for a capacity up to 1,200 prisoners, staff quarters and other facilities and implemented using design and built method. The project started in July 2013 and to be completed in late January 2016.

b. The audit performed between June to September 2015

at Head Office of the Public Works Department Security Works Branch (PWD), MOHA, PDM headquarters, Penjara Ayer Molek, Johor Bahru and project site. Audit findings revealed that management of this project is good. Overall, Phase II Project was implemented according to schedule; PWD monitored performance of the contractor; contract management was administered properly; and progress payments were made based on

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87

actual work done on site. However, there are several aspects to be addressed by MOHA/PWD as follows:

i. changes in procurement method for Phase II Project

forced the Government to indemnify consultants a total of RM3.68 million in compensation; and

ii. damaged property and equipment in Phase I Project must be repaired, tested and commissioned by contractors before completion of Phase II Project.

c. To ensure completion of Phase II Project within the

stipulated time; and efficiency and effectiveness of future project management, it is recommended MOHA/PWD to consider the following actions:

i. MOHA/PWD must finalized project procurement

methods before appointing contractors and consultants; and

ii. Contractors must perform testing and commissioning for unused property and equipment for Phase I Project prior to handing over of Phase II Project to PWD.

MINISTRY OF HOME AFFAIRS

Immigration Department of Malaysia 18. Implementation of the Malaysian Immigration

System (myIMMs) a. MyIMMs is the information technology systems of the

Malaysian Immigration Department [Jabatan Imigresen

86

Pulai, Johor Bahru District. This new complex is to replace Penjara Reman Johor Bahru at Jalan Ayer Molek (Penjara Ayer Molek). The project was implemented in two phases due to insufficient fund. MOF approved an allocation of RM50 million for the construction of Project Penjara Reman (Tegar) Johor Bahru Phase l (Phase l Project) initiated in April 2009 and completed in April 2011. However, Phase l Project has not been used since completion as it only has capacity of 300 prisoners as compared to 726 prisoners at that time. In January 2011, MOF approved additional allocation of RM160 million for the construction Project Penjara Reman (Tegar) Johor Bahru Phase lI (Phase lI Project). Intrasegi Sdn. Bhd. and Tegas Setuju Sdn. Bhd. were appointed through direct negotiation. Phase II Project consists of prison complex equipped with modern security system for a capacity up to 1,200 prisoners, staff quarters and other facilities and implemented using design and built method. The project started in July 2013 and to be completed in late January 2016.

b. The audit performed between June to September 2015

at Head Office of the Public Works Department Security Works Branch (PWD), MOHA, PDM headquarters, Penjara Ayer Molek, Johor Bahru and project site. Audit findings revealed that management of this project is good. Overall, Phase II Project was implemented according to schedule; PWD monitored performance of the contractor; contract management was administered properly; and progress payments were made based on

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a. Contract Management i. the agreement period was earlier than the date

of approval for direct negotiation by MOF and the Letter of Acceptance; and

ii. payment worth RM22.64 million was not supported with complete documentation.

b. Implementation of myIMMs Projects i. full payment for uninstalled and unused

Biometric system and equipment worth RM10.30 million had been made;

ii. 3 out of 7 systems for Application and Payment of Visa and Pass in the eServices system were not utilised;

iii. Agency link-up was not fully installed however full payment had been made;

iv. User Acceptance Test (UAT) and Provisional Acceptance Test (PAT) were not comprehensively done as stipulated in the agreement;

v. Business Continuity Plan was at unsatisfactory however full payment had been made; and

vi. myIMMs data was inaccurate and data integrity was suspicious.

c. Foreign Workers Management The management of foreign workers application was unsatisfactory and incompliance with stipulated policies or rules set by the Government.

88

Malaysia (JIM)], which was developed to support its operations in providing the best service to the public, external agencies and stakeholders. MyIMMs comprises of three main components namely applications, network and data centre which enable users to perform data entry, processing, validation, transmitting and storing information from the Immigration Offices to the database and vice versa. These components are installed at all Immigration offices throughout the country as well as at the Immigration Attaché Offices abroad and also accessible by external agencies. MyIMMs contract worth RM29.90 million was approved by the Ministry of Finance (MOF), through direct negotiations method to HeiTech. The contract was signed on 1st November 2010 between the Government of Malaysia and HeiTech Padu Berhad for a period of one year from 1 March 2010 to 28 February 2011.

b. The audit performed between April to November 2015 at JIM Headquarters, Putrajaya, 6 JIM‟s branch offices namely Johor Bahru, Shah Alam, Kuching, Seberang Prai, Tawau and Sandakan and JIM Attaché Offices at Jakarta, Indonesia, Dhaka, Bangladesh and Kathmandu, Nepal. The audit revealed that, the overall management of myIMMs was less satisfactory in the aspects of planning, implementation and monitoring which may affect the achievement of its objectives. Among the weaknesses identified are as follows:

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a. Contract Management i. the agreement period was earlier than the date

of approval for direct negotiation by MOF and the Letter of Acceptance; and

ii. payment worth RM22.64 million was not supported with complete documentation.

b. Implementation of myIMMs Projects i. full payment for uninstalled and unused

Biometric system and equipment worth RM10.30 million had been made;

ii. 3 out of 7 systems for Application and Payment of Visa and Pass in the eServices system were not utilised;

iii. Agency link-up was not fully installed however full payment had been made;

iv. User Acceptance Test (UAT) and Provisional Acceptance Test (PAT) were not comprehensively done as stipulated in the agreement;

v. Business Continuity Plan was at unsatisfactory however full payment had been made; and

vi. myIMMs data was inaccurate and data integrity was suspicious.

c. Foreign Workers Management The management of foreign workers application was unsatisfactory and incompliance with stipulated policies or rules set by the Government.

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Malaysia (JIM)], which was developed to support its operations in providing the best service to the public, external agencies and stakeholders. MyIMMs comprises of three main components namely applications, network and data centre which enable users to perform data entry, processing, validation, transmitting and storing information from the Immigration Offices to the database and vice versa. These components are installed at all Immigration offices throughout the country as well as at the Immigration Attaché Offices abroad and also accessible by external agencies. MyIMMs contract worth RM29.90 million was approved by the Ministry of Finance (MOF), through direct negotiations method to HeiTech. The contract was signed on 1st November 2010 between the Government of Malaysia and HeiTech Padu Berhad for a period of one year from 1 March 2010 to 28 February 2011.

b. The audit performed between April to November 2015 at JIM Headquarters, Putrajaya, 6 JIM‟s branch offices namely Johor Bahru, Shah Alam, Kuching, Seberang Prai, Tawau and Sandakan and JIM Attaché Offices at Jakarta, Indonesia, Dhaka, Bangladesh and Kathmandu, Nepal. The audit revealed that, the overall management of myIMMs was less satisfactory in the aspects of planning, implementation and monitoring which may affect the achievement of its objectives. Among the weaknesses identified are as follows:

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MALAYSIA EDUCATION MINISTRY 19. Management Of Private Security Services

Company In Schools

a. The Ministry of Education (Ministry) has privatized security services [Perkhidmatan Kawalan Keselamatan (PKK)] in schools by appointing contractors to provide security service without firearms. Among the purposes of this service is to create a safe and peaceful environment continuously and to assure schools‟ administrations, parents and students a conducive environment for teaching and learning in all schools under Ministry‟s control. Generally, PKK is to supply security guards and adequate equipment to carry out security services in schools/hostels; patrol and report its services to the Government. Ministry/State Education Department [Jabatan Pendidikan Negeri (JPN)] has offered 947 PKK tenders to institutions/schools with contract value totalling RM2.858 billion for the period of 2013 to 2015.

b. The audit performed from July and October 2015 at the Ministry, Procurement and Asset Management Division [Bahagian Perolehan dan Pengurusan Aset (BPPA)], JPN, District Education Offices [Pejabat Pendidikan Negeri (PPD)] and 59 premises in 5 states namely Malacca, Kedah, Perlis, Kelantan and Selangor. The audit revealed that the Ministry had provided PKK in premises visited. The Ministry also implemented several improvements as stated in 2012 Audit Report. Among the improvements were setting license renewal period

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c. To ensure that all weaknesses of myIMMs can be improved to support JIM operations in providing the best services to the public, external agencies and stakeholders, it is recommended that the parties involved take the following actions:

i. Ministry of Home Affairs should promptly plan and consider lessons learned from the failure of previous systems before developing any system. It is to ensure the effectiveness of project management in achieving objectives as well as the procurement systems reaps best value for money;

ii. Ministry of Home Affairs and JIM should implement project according to the agreed terms of contract and within the stipulated period. It is to ensure the development of system in accordance with required specification in achieving objectives;

iii. JIM should maintain and updates system development documents to ensure future data migration properly and comprehensively implement; and

iv. Ministry of Home Affairs should review the needs for system filtering by operators in the source country to avoid duplication of work processes. The Ministry must ensure a formal agreement between the Government and operators are seal for the purpose of Government‟s systems and information security.

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MALAYSIA EDUCATION MINISTRY 19. Management Of Private Security Services

Company In Schools

a. The Ministry of Education (Ministry) has privatized security services [Perkhidmatan Kawalan Keselamatan (PKK)] in schools by appointing contractors to provide security service without firearms. Among the purposes of this service is to create a safe and peaceful environment continuously and to assure schools‟ administrations, parents and students a conducive environment for teaching and learning in all schools under Ministry‟s control. Generally, PKK is to supply security guards and adequate equipment to carry out security services in schools/hostels; patrol and report its services to the Government. Ministry/State Education Department [Jabatan Pendidikan Negeri (JPN)] has offered 947 PKK tenders to institutions/schools with contract value totalling RM2.858 billion for the period of 2013 to 2015.

b. The audit performed from July and October 2015 at the Ministry, Procurement and Asset Management Division [Bahagian Perolehan dan Pengurusan Aset (BPPA)], JPN, District Education Offices [Pejabat Pendidikan Negeri (PPD)] and 59 premises in 5 states namely Malacca, Kedah, Perlis, Kelantan and Selangor. The audit revealed that the Ministry had provided PKK in premises visited. The Ministry also implemented several improvements as stated in 2012 Audit Report. Among the improvements were setting license renewal period

90

c. To ensure that all weaknesses of myIMMs can be improved to support JIM operations in providing the best services to the public, external agencies and stakeholders, it is recommended that the parties involved take the following actions:

i. Ministry of Home Affairs should promptly plan and consider lessons learned from the failure of previous systems before developing any system. It is to ensure the effectiveness of project management in achieving objectives as well as the procurement systems reaps best value for money;

ii. Ministry of Home Affairs and JIM should implement project according to the agreed terms of contract and within the stipulated period. It is to ensure the development of system in accordance with required specification in achieving objectives;

iii. JIM should maintain and updates system development documents to ensure future data migration properly and comprehensively implement; and

iv. Ministry of Home Affairs should review the needs for system filtering by operators in the source country to avoid duplication of work processes. The Ministry must ensure a formal agreement between the Government and operators are seal for the purpose of Government‟s systems and information security.

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i. review PKK contract terms and comply with Ministry of Home Affairs (MOHA) circular‟s requirement for urine test and security screening for all security guards;

ii. ensure contract terms are complied by contractors and enforce/impose penalties/deductions to prevent issues from recurring; and

iii. must ensure schools administration understand and comply with the procedures on verification of supporting documents prior to payment approval to prevent improper payment.

20. Management of Supplementary Food Programme a. Supplementary Food Programme [Rancangan Makanan

Tambahan (RMT)] focus on pupils from families under the category of National Poverty Line [Paras Garis Kemiskinan Nasional (PGK)]. Its aims to improve the nutritional level of pupils to be fully focus on teaching and learning in school. In year 2013 to 2015, the Ministry has allocated a sum of RM758.48 million for the implementation of RMT program. In 2013, family with monthly income between RM460 to RM630 or RM110 to RM130 per capita for the year 2013 are eligible for RMT program. While, for the years 2014 and 2015, the eligible monthly income are between RM520 to RM660 or RM130 to RM140 per capita. The program was implemented throughout the 190 school days in a year. For the period 2013 to 2015, a total of 1,665,954

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for private agency; listing of documents required for processing of payment; mandatory annual medical examination for security guards between the age of 55 to 60 years old; setting the time frame for contractors to submit security screening certificate; and compulsory attendance of Certified Security Guards (CSG) course by security guards. There are no recurring issues in 5 out of 9 premises visited in 2012. However, overall management of PKK at 59 premises audited were less satisfactory. Some of the weaknesses identified are as follows:

i. contract terms did not specified urine test

requirement for security guards;

ii. clocking was not carried out every 2 hours at all specified locations. It was made at the same time for different points/locations;

iii. equipment not supplied or inadequate or non functional as intended or damaged;

iv. the date of equipment when it was damaged was not recorded; and

v. penalties and deductions amounted to RM0.18 million were not imposed to contractors for breach of contract terms.

c. To ensure that all weaknesses highlighted do not recur

and Government reaps best value for money for PKK, the Ministry is recommended to take action on the following matters:

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i. review PKK contract terms and comply with Ministry of Home Affairs (MOHA) circular‟s requirement for urine test and security screening for all security guards;

ii. ensure contract terms are complied by contractors and enforce/impose penalties/deductions to prevent issues from recurring; and

iii. must ensure schools administration understand and comply with the procedures on verification of supporting documents prior to payment approval to prevent improper payment.

20. Management of Supplementary Food Programme a. Supplementary Food Programme [Rancangan Makanan

Tambahan (RMT)] focus on pupils from families under the category of National Poverty Line [Paras Garis Kemiskinan Nasional (PGK)]. Its aims to improve the nutritional level of pupils to be fully focus on teaching and learning in school. In year 2013 to 2015, the Ministry has allocated a sum of RM758.48 million for the implementation of RMT program. In 2013, family with monthly income between RM460 to RM630 or RM110 to RM130 per capita for the year 2013 are eligible for RMT program. While, for the years 2014 and 2015, the eligible monthly income are between RM520 to RM660 or RM130 to RM140 per capita. The program was implemented throughout the 190 school days in a year. For the period 2013 to 2015, a total of 1,665,954

92

for private agency; listing of documents required for processing of payment; mandatory annual medical examination for security guards between the age of 55 to 60 years old; setting the time frame for contractors to submit security screening certificate; and compulsory attendance of Certified Security Guards (CSG) course by security guards. There are no recurring issues in 5 out of 9 premises visited in 2012. However, overall management of PKK at 59 premises audited were less satisfactory. Some of the weaknesses identified are as follows:

i. contract terms did not specified urine test

requirement for security guards;

ii. clocking was not carried out every 2 hours at all specified locations. It was made at the same time for different points/locations;

iii. equipment not supplied or inadequate or non functional as intended or damaged;

iv. the date of equipment when it was damaged was not recorded; and

v. penalties and deductions amounted to RM0.18 million were not imposed to contractors for breach of contract terms.

c. To ensure that all weaknesses highlighted do not recur

and Government reaps best value for money for PKK, the Ministry is recommended to take action on the following matters:

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objective program i.e. contribution towards physical growth/health and students‟ academic progress;

iv. there were data recorded on the height and weight of students at the beginning and end of the year as well as students‟ average performance throughout the year. However, the information is not used for the purpose of reviewing the program achievement;

v. monthly income of parents/guardians who has no pay check were not approved by the Headman/Officer and detail incomes were not specified;

vi. meals served not accordance with stipulated set menu affect pupils‟ calories and nutrients content; and

vii. weaknesses in monitoring on RMT program in the federal, state, district and school level.

c. To overcome all the weaknesses highlighted and to

improve efficiency of RMT program, it is recommended that the Ministry/JPN/PPD/school to take actions on the following matters:

i. set up KPI and evaluate the performance of RMT

program each year. Analyzed accordingly height, weight and academic performance of students;

ii. review and make additions the set menu suiting with the local population in encouraging pupils to eat. Approval should be obtained for any changes in

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students in 21,936 primary schools were benefited from RMT program.

b. The audit performed between July to October 2015 in 40 primary schools in the urban area covers 4 states namely Johor, Kelantan, Kedah and Sabah. The audit revealed that the RMT program has achieved the objectives in which the menu contains sufficient calories and nutrients as well as inculcate courteous and discipline culture. According to studies conducted by the Ministry, the RMT program has helped the development of student health and learning. However, there were still some weaknesses that need to be improved by Ministry to ensure the efficiency of RMT program as follows:

i. delayed in allocating the fund to schools between 14 to 97 days by Jabatan Pendidikan Negeri (JPN). The fund should be distributed within 7 days after receiving warrants from the Ministry;

ii. the outstanding balance of RMT program fund up to year 2014 amounting to RM0.26 million which was between RM172 to RM19,984 for each school resulted an increased in the Kumpulan Wang Kerajaan (KWK). Moreover, expenditure performance for RMT program does not reflect the actual amount;

iii. Key Performance Indicator (KPI) was only set up for warrant allocation. The KPI for RMT program were not specifically cater on achievement of overall

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objective program i.e. contribution towards physical growth/health and students‟ academic progress;

iv. there were data recorded on the height and weight of students at the beginning and end of the year as well as students‟ average performance throughout the year. However, the information is not used for the purpose of reviewing the program achievement;

v. monthly income of parents/guardians who has no pay check were not approved by the Headman/Officer and detail incomes were not specified;

vi. meals served not accordance with stipulated set menu affect pupils‟ calories and nutrients content; and

vii. weaknesses in monitoring on RMT program in the federal, state, district and school level.

c. To overcome all the weaknesses highlighted and to

improve efficiency of RMT program, it is recommended that the Ministry/JPN/PPD/school to take actions on the following matters:

i. set up KPI and evaluate the performance of RMT

program each year. Analyzed accordingly height, weight and academic performance of students;

ii. review and make additions the set menu suiting with the local population in encouraging pupils to eat. Approval should be obtained for any changes in

94

students in 21,936 primary schools were benefited from RMT program.

b. The audit performed between July to October 2015 in 40 primary schools in the urban area covers 4 states namely Johor, Kelantan, Kedah and Sabah. The audit revealed that the RMT program has achieved the objectives in which the menu contains sufficient calories and nutrients as well as inculcate courteous and discipline culture. According to studies conducted by the Ministry, the RMT program has helped the development of student health and learning. However, there were still some weaknesses that need to be improved by Ministry to ensure the efficiency of RMT program as follows:

i. delayed in allocating the fund to schools between 14 to 97 days by Jabatan Pendidikan Negeri (JPN). The fund should be distributed within 7 days after receiving warrants from the Ministry;

ii. the outstanding balance of RMT program fund up to year 2014 amounting to RM0.26 million which was between RM172 to RM19,984 for each school resulted an increased in the Kumpulan Wang Kerajaan (KWK). Moreover, expenditure performance for RMT program does not reflect the actual amount;

iii. Key Performance Indicator (KPI) was only set up for warrant allocation. The KPI for RMT program were not specifically cater on achievement of overall

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PART II MANAGEMENT OF GOVERNMENT COMPANIES MINISTRY OF TOURISM AND CULTURE MALAYSIA 21. Malaysia Convention & Exhibition Bureau a. Malaysia Convention & Exhibition Bureau (MyCEB) is a

non profit organization incorporated on 13th August 2009 under Companies Act 1965 by Ministry of Tourism and Culture. The establishment of MyCEB is in line with Malaysia‟s Economic Tranformation Programme (ETP) under the National Key Economic Areas (NKEA) programme for tourism industry. MyCEB was given the mandate organize two Entry Point Project (EPP) namely: EPP 7 – International Major Events and EPP 10- Business Events. Under these 2 EPP, MyCEB‟s role to further promote and position Malaysia internationally as the preferred world leading destination for major international events/programs in term of sport, international entertainment, and art and business events includes meetings, conventions, incentives and exhibitions. Besides that, MyCEB is also to promote; identify potential; and support bids for, secure and stage international and business events successfully in Malaysia. Furthermore, MyCEB‟s role is to assist with international marketing and packaging of selected home grown and home hosted events to further promote and position Malaysia internationally as the preferred destination. Thus, MyCEB‟s to facilitate the bidding process for EPP 7 and EPP 10. As at September 2015, MyCEB has been allocated RM253.93 million to bolster

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menu and nutrients contents should be evaluated; and

iii. improve the monitoring and supervision of RMT program by standardization the supervision criteria, frequent and strengthen agenda RMT Committee meeting.

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PART II MANAGEMENT OF GOVERNMENT COMPANIES MINISTRY OF TOURISM AND CULTURE MALAYSIA 21. Malaysia Convention & Exhibition Bureau a. Malaysia Convention & Exhibition Bureau (MyCEB) is a

non profit organization incorporated on 13th August 2009 under Companies Act 1965 by Ministry of Tourism and Culture. The establishment of MyCEB is in line with Malaysia‟s Economic Tranformation Programme (ETP) under the National Key Economic Areas (NKEA) programme for tourism industry. MyCEB was given the mandate organize two Entry Point Project (EPP) namely: EPP 7 – International Major Events and EPP 10- Business Events. Under these 2 EPP, MyCEB‟s role to further promote and position Malaysia internationally as the preferred world leading destination for major international events/programs in term of sport, international entertainment, and art and business events includes meetings, conventions, incentives and exhibitions. Besides that, MyCEB is also to promote; identify potential; and support bids for, secure and stage international and business events successfully in Malaysia. Furthermore, MyCEB‟s role is to assist with international marketing and packaging of selected home grown and home hosted events to further promote and position Malaysia internationally as the preferred destination. Thus, MyCEB‟s to facilitate the bidding process for EPP 7 and EPP 10. As at September 2015, MyCEB has been allocated RM253.93 million to bolster

96

menu and nutrients contents should be evaluated; and

iii. improve the monitoring and supervision of RMT program by standardization the supervision criteria, frequent and strengthen agenda RMT Committee meeting.

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iii. payment to public relation agency for advertising and marketing work was less satisfactory. For example there was no third party invoice and inconsistent commission rate;

iv. lack of proper management expenses. For example there was late issued of local order, incomplete information on delivery order and management of corporate cards was irregular; and

v. lack of proper procurement management. For example there was an advance payment for more than 50% of the project and less thorough on video making.

c. To ensure that all the weaknesses highlighted do not recur, it is recommended that MyCEB to take action on the following matters:

i. to improve the management of subvention fund activities in order to achieve its objectives and goals;

ii. to closely monitor the existing expenses and procurement aspects to comply with rules and regulations. The accountability of the grant must be fully realized by ensuring all supporting documents completed prior to payment and work done by the third party. Proper procurement management must be accordance with the approved procurement methods for best value for money; and

iii. to comply with stipulated rules and procedures for the usage of corporate card facilities. To establish

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and enlarge MyCEB‟s activities to attract the number of delegations and foreign tourists in contributing to Gross National Income.

b. The performed between May to September 2015 on the

aspects of corporate governance, main activities and financial performance from the year 2012 to 2014. The audit revealed that MyCEB‟s financial performance was good because the company recorded surplus after taxation amounted to RM5.95 million, RM12.5 million and RM1.58 million respectively. Based on the records, various promotion activities have successfully help to attract and increase number of international delegations and foreign tourists. Generally, MyCEB complied with the stipulated rules on corporate governance for the appointment of Board of Directors and frequency of its meeting. However several aspects of performance of activities and financial management shall be addressed as follows:

i. improper management of subvention fund activities.

Several weaknesses identified as follows: lack of proper payments to event organizer;

unpaid subvention fund activities despite of expiry of memorandum of understandings; and

discrepancies of expenditure calculation between EPP 7 and EPP 10.

ii. non-compliance for good procurement management practices for appointment of consultant/booth design consultancy;

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iii. payment to public relation agency for advertising and marketing work was less satisfactory. For example there was no third party invoice and inconsistent commission rate;

iv. lack of proper management expenses. For example there was late issued of local order, incomplete information on delivery order and management of corporate cards was irregular; and

v. lack of proper procurement management. For example there was an advance payment for more than 50% of the project and less thorough on video making.

c. To ensure that all the weaknesses highlighted do not recur, it is recommended that MyCEB to take action on the following matters:

i. to improve the management of subvention fund activities in order to achieve its objectives and goals;

ii. to closely monitor the existing expenses and procurement aspects to comply with rules and regulations. The accountability of the grant must be fully realized by ensuring all supporting documents completed prior to payment and work done by the third party. Proper procurement management must be accordance with the approved procurement methods for best value for money; and

iii. to comply with stipulated rules and procedures for the usage of corporate card facilities. To establish

98

and enlarge MyCEB‟s activities to attract the number of delegations and foreign tourists in contributing to Gross National Income.

b. The performed between May to September 2015 on the

aspects of corporate governance, main activities and financial performance from the year 2012 to 2014. The audit revealed that MyCEB‟s financial performance was good because the company recorded surplus after taxation amounted to RM5.95 million, RM12.5 million and RM1.58 million respectively. Based on the records, various promotion activities have successfully help to attract and increase number of international delegations and foreign tourists. Generally, MyCEB complied with the stipulated rules on corporate governance for the appointment of Board of Directors and frequency of its meeting. However several aspects of performance of activities and financial management shall be addressed as follows:

i. improper management of subvention fund activities.

Several weaknesses identified as follows: lack of proper payments to event organizer;

unpaid subvention fund activities despite of expiry of memorandum of understandings; and

discrepancies of expenditure calculation between EPP 7 and EPP 10.

ii. non-compliance for good procurement management practices for appointment of consultant/booth design consultancy;

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amortization of grants. However, PKB did not actively participate or implement books related activities whereby for the last 4 years from the year 2012 to August 2015, PKB only organized and participated in 97 activities with total expenditure of RM4.77 million. It was observed that from the year 2013 to 2015, PKB received less respond for its e-Book sales through digital publications. For a period of 3 years, only 249 digital books were subscribed with a revenue of RM1,495. Several issues identified are as follows:

i. management of PKB less focus on the outcome and

impact on its activities/programs they organized or participated;

ii. Board of Directors‟ approval for 2 international book fair participation could not be verified; and

iii. Strategic Plan was not finalized; Key Performance Indicators (KPI) as a company‟s performance measuring tools were not established; and Standard Operating Procedures (SOP) related to the company's main activities were not prepared.

c. To strengthen PKB‟s capabilities and better governance

in achieving its objectives, it is recommended to take action on the following matters: i. PKB‟s Board of Directors must closely monitor the

implementation of main projects/activities to ensure objectives of the company‟s establishment are achieved;

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strong internal control to prevent staff for unauthorized expenditure in ensuring a proper payment and misuse for corporate card facilities.

MALAYSIA EDUCATION MINISTRY

22. Management of Perbadanan Kota Buku a. Perbadanan Kota Buku (PKB) is a limited by guarantee

company incorporated by Ministry of Education (MOE) on 6th July 2011 under the Companies Act 1965 without share capital. PKB is mandated to facilitate the development of books industry in realization of the National Book Policy. This policy proposed a one-stop centre to gather and support readers, writers and publishers in books related activities. PKB has 4 main activities namely Akademi Kota Buku; Copyright and Intellectual Property; Research and Consultation; and Digital Publication. The Government through MOE disbursed in stages RM30 million grants from the year 2011 to 2014 to support PKB‟s operation and books related activities to promote the country‟s books industry.

b. The audit performed from June to October 2015, focused on corporate governance, main activities and financial aspects of PKB for the year 2012 to 2015 revealed that in general, activities implemented by PKB were consistent with the mandate. PKB‟s financial performance was satisfactory with an excess of income for 3 consecutive years contributed by other incomes i.e. 83.28% to 88.56% which was generated from the

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amortization of grants. However, PKB did not actively participate or implement books related activities whereby for the last 4 years from the year 2012 to August 2015, PKB only organized and participated in 97 activities with total expenditure of RM4.77 million. It was observed that from the year 2013 to 2015, PKB received less respond for its e-Book sales through digital publications. For a period of 3 years, only 249 digital books were subscribed with a revenue of RM1,495. Several issues identified are as follows:

i. management of PKB less focus on the outcome and

impact on its activities/programs they organized or participated;

ii. Board of Directors‟ approval for 2 international book fair participation could not be verified; and

iii. Strategic Plan was not finalized; Key Performance Indicators (KPI) as a company‟s performance measuring tools were not established; and Standard Operating Procedures (SOP) related to the company's main activities were not prepared.

c. To strengthen PKB‟s capabilities and better governance

in achieving its objectives, it is recommended to take action on the following matters: i. PKB‟s Board of Directors must closely monitor the

implementation of main projects/activities to ensure objectives of the company‟s establishment are achieved;

100

strong internal control to prevent staff for unauthorized expenditure in ensuring a proper payment and misuse for corporate card facilities.

MALAYSIA EDUCATION MINISTRY

22. Management of Perbadanan Kota Buku a. Perbadanan Kota Buku (PKB) is a limited by guarantee

company incorporated by Ministry of Education (MOE) on 6th July 2011 under the Companies Act 1965 without share capital. PKB is mandated to facilitate the development of books industry in realization of the National Book Policy. This policy proposed a one-stop centre to gather and support readers, writers and publishers in books related activities. PKB has 4 main activities namely Akademi Kota Buku; Copyright and Intellectual Property; Research and Consultation; and Digital Publication. The Government through MOE disbursed in stages RM30 million grants from the year 2011 to 2014 to support PKB‟s operation and books related activities to promote the country‟s books industry.

b. The audit performed from June to October 2015, focused on corporate governance, main activities and financial aspects of PKB for the year 2012 to 2015 revealed that in general, activities implemented by PKB were consistent with the mandate. PKB‟s financial performance was satisfactory with an excess of income for 3 consecutive years contributed by other incomes i.e. 83.28% to 88.56% which was generated from the

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National Key Economic Areas (NKEA), namely Entry Point Project (EPP) 2 - Foreign Outsourcing Market; EPP3 - Malaysia As Data Centre; Sri-Upskilling and Upgrading Workforce for Business Services; Integrated Content Development Programme (ICON); and Creative Industry Life-Long Learning Programme (CILLP). MDeC received operating and development fund from Federal Government amounted to RM202.95 million, RM229.67 millions, RM259.86 millions and RM269.20 million in 2012, 2013, 2014 and 2015 respectively. The development fund was allocated to implement projects and provide fundings to the industry to realize MSC Malaysia, DM and NKEA initiatives.

b. The audit performed between July to October 2015 on the aspects of corporate governance, main activities and financial performance from the year 2012 to 2014. In general, the audit revealed MDeC performed its core activities in accordance with the given mandate. Overall, MDeC‟s financial performance was satisfactory. MDeC recorded net profit before tax amounting to RM41.64 million, RM58.62 million and RM28.33 million for financial years in 2012, 2013 and 2014 respectively. However, gross profit margin for the year 2014 decreased from 6.4% to 4.2% as compared to previous year. MDeC‟s performance and management of activities; corporate governance; and financial management is good and Key Performance Indicators (KPI) are met. In addition, MSC Malaysia, DM and NKEA programs also achieved the set objectives. However, audit finding revealed that the process for

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ii. PKB‟s management must ensure approval from Board of Directors for all activities to be implemented/participated; and

iii. PKB‟s Board of Directors and management must finalise its short-term and long-term strategic plan in determining the company‟s direction.

MALAYSIA OF FINANCE MALAYSIA 23. Management of Multimedia Development

Corporation Sdn. Bhd. a. The Multimedia Development Corporation Sdn. Bhd.

(MDeC), incorporated in June 1996 aims to provide a master development plan for Multimedia Super Corridor Malaysia (MSC Malaysia) and oversees its implementation. MDeC‟s main role is to increase the overall value of MSC Malaysia in terms of labour skills, balance of payments, assists to improving the per capita gross national product and e-Business. On 19th October 2011, MDeC was given the mandate to realize Digital Transformation Program, known as Digital Malaysia (DM) to drive the nation‟s digital economy holistically. Consequently, MDeC is mandated by the Government through the Ministers Of The Federal Government (No. 2) (Amendment) (No. 2) (Amendment) Order 2014 to develop, coordinate and promote Malaysia's digital economy, ICT industry and widespread use of ICT in Malaysia. In addition, MDeC was authorized to implement 5 projects under the

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National Key Economic Areas (NKEA), namely Entry Point Project (EPP) 2 - Foreign Outsourcing Market; EPP3 - Malaysia As Data Centre; Sri-Upskilling and Upgrading Workforce for Business Services; Integrated Content Development Programme (ICON); and Creative Industry Life-Long Learning Programme (CILLP). MDeC received operating and development fund from Federal Government amounted to RM202.95 million, RM229.67 millions, RM259.86 millions and RM269.20 million in 2012, 2013, 2014 and 2015 respectively. The development fund was allocated to implement projects and provide fundings to the industry to realize MSC Malaysia, DM and NKEA initiatives.

b. The audit performed between July to October 2015 on the aspects of corporate governance, main activities and financial performance from the year 2012 to 2014. In general, the audit revealed MDeC performed its core activities in accordance with the given mandate. Overall, MDeC‟s financial performance was satisfactory. MDeC recorded net profit before tax amounting to RM41.64 million, RM58.62 million and RM28.33 million for financial years in 2012, 2013 and 2014 respectively. However, gross profit margin for the year 2014 decreased from 6.4% to 4.2% as compared to previous year. MDeC‟s performance and management of activities; corporate governance; and financial management is good and Key Performance Indicators (KPI) are met. In addition, MSC Malaysia, DM and NKEA programs also achieved the set objectives. However, audit finding revealed that the process for

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ii. PKB‟s management must ensure approval from Board of Directors for all activities to be implemented/participated; and

iii. PKB‟s Board of Directors and management must finalise its short-term and long-term strategic plan in determining the company‟s direction.

MALAYSIA OF FINANCE MALAYSIA 23. Management of Multimedia Development

Corporation Sdn. Bhd. a. The Multimedia Development Corporation Sdn. Bhd.

(MDeC), incorporated in June 1996 aims to provide a master development plan for Multimedia Super Corridor Malaysia (MSC Malaysia) and oversees its implementation. MDeC‟s main role is to increase the overall value of MSC Malaysia in terms of labour skills, balance of payments, assists to improving the per capita gross national product and e-Business. On 19th October 2011, MDeC was given the mandate to realize Digital Transformation Program, known as Digital Malaysia (DM) to drive the nation‟s digital economy holistically. Consequently, MDeC is mandated by the Government through the Ministers Of The Federal Government (No. 2) (Amendment) (No. 2) (Amendment) Order 2014 to develop, coordinate and promote Malaysia's digital economy, ICT industry and widespread use of ICT in Malaysia. In addition, MDeC was authorized to implement 5 projects under the

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plots of land in Cameron Highlands, namely in Bertam Valley and Tanah Rata. MAFC markets its products under the brand name „Lushious‟. Besides that, MAFC also provides cold storage services and logistics through its subsidiary, CCN Sdn. Bhd. located in Puchong.

b. The audit performed between July and October 2015

focused on corporate governance, main activities and financial aspects for the period from the year 2012 to 2015. The audit revealed that overall, the financial performance of MAFC was less satisfactory as the Company recorded accumulated losses of RM447.84 million in 2014 and negative cash flow from its operation for 3 consecutive years from 2012 to 2014. However, in 2014 net loss after tax was reduced by RM1.45 million to RM18.49 million. Generally, MAFC complied with the stipulated rules on corporate governance for the appointment of the Chairman, Board of Directors (BOD) and Chief Executive Officer. However several aspects of performance and management of activities, corporate governance and financial management shall be addressed as follows:

i. no increase in the number of MAFC‟s distributors/retailers since 2012;

ii. Collaboration Agreement on Highland Agriculture and Research Collaboration Agreement for leasing of Malaysian Agricultural Research and Development Institute (MARDI)‟s land in Tanah

104

MSC Malaysia status took up to 29 months from online application to the assessment of supporting documents.

c. To ensure better management of MDeC's activities, it is recommended that the application period for MSC Malaysia status are separated into two stages i.e. before and after receiving complete documents from applicant. The separation of period would facilitate MDeC in identifying the cause of delay, if any.

24. Management of Malaysian Agrifood Corporation Berhad (MAFC)

a. Malaysian Agrifood Corporation Berhad (MAFC) is

wholly owned by Khazanah Nasional Berhad and incorporated on 22nd March 2006 with an authorized capital of RM600 million and paid-up capital of RM430.50 million. MAFC‟s main objective is to boost the food supply chain business in Malaysia with modern technology and logistics systems as well as best practices as stipulated in the International Food Safety Standards. MAFC also assists the Government in streamlining the agriculture sector towards a modern, vibrant and dynamic sector in accordance with the Ninth Malaysian Plan (9MP), to become one of the core sectors in the development of national economy. MAFC also emphasizes on environmental preservation by safeguarding natural resources and optimizing the use of land, water and energy. MAFC‟s main activity is producing fresh and safe highland vegetables for consumption under controlled environment farms on 2

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plots of land in Cameron Highlands, namely in Bertam Valley and Tanah Rata. MAFC markets its products under the brand name „Lushious‟. Besides that, MAFC also provides cold storage services and logistics through its subsidiary, CCN Sdn. Bhd. located in Puchong.

b. The audit performed between July and October 2015

focused on corporate governance, main activities and financial aspects for the period from the year 2012 to 2015. The audit revealed that overall, the financial performance of MAFC was less satisfactory as the Company recorded accumulated losses of RM447.84 million in 2014 and negative cash flow from its operation for 3 consecutive years from 2012 to 2014. However, in 2014 net loss after tax was reduced by RM1.45 million to RM18.49 million. Generally, MAFC complied with the stipulated rules on corporate governance for the appointment of the Chairman, Board of Directors (BOD) and Chief Executive Officer. However several aspects of performance and management of activities, corporate governance and financial management shall be addressed as follows:

i. no increase in the number of MAFC‟s distributors/retailers since 2012;

ii. Collaboration Agreement on Highland Agriculture and Research Collaboration Agreement for leasing of Malaysian Agricultural Research and Development Institute (MARDI)‟s land in Tanah

104

MSC Malaysia status took up to 29 months from online application to the assessment of supporting documents.

c. To ensure better management of MDeC's activities, it is recommended that the application period for MSC Malaysia status are separated into two stages i.e. before and after receiving complete documents from applicant. The separation of period would facilitate MDeC in identifying the cause of delay, if any.

24. Management of Malaysian Agrifood Corporation Berhad (MAFC)

a. Malaysian Agrifood Corporation Berhad (MAFC) is

wholly owned by Khazanah Nasional Berhad and incorporated on 22nd March 2006 with an authorized capital of RM600 million and paid-up capital of RM430.50 million. MAFC‟s main objective is to boost the food supply chain business in Malaysia with modern technology and logistics systems as well as best practices as stipulated in the International Food Safety Standards. MAFC also assists the Government in streamlining the agriculture sector towards a modern, vibrant and dynamic sector in accordance with the Ninth Malaysian Plan (9MP), to become one of the core sectors in the development of national economy. MAFC also emphasizes on environmental preservation by safeguarding natural resources and optimizing the use of land, water and energy. MAFC‟s main activity is producing fresh and safe highland vegetables for consumption under controlled environment farms on 2

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i. expand the market shares of MAFC products and increase company's revenue by intensifying products‟ promotion and awareness to consumers;

ii. optimize the utilization of land in Bertam Valley and Lanchang;

iii. Collaboration Agreement on Highland Agriculture and Research Collaboration Agreement between the MAFC and MARDI shall be drafted and sealed promptly; and

iv. strengthen its monitoring and internal controls in ensuring compliance of stipulated procedures especially relating to the procurement and expenditure.

25. Sepang International Circuit Sdn. Bhd. a. Sepang International Circuit Sdn. Bhd. (SIC) was

incorporated in 23rd January 1998 and wholly owned by Malaysia Airport Holding Berhad (MHSB). In 22th April 2009, Ministry of Finance has acquired SIC from MHSB by Share Sale Agreement with an authorised capital of RM50 million and paid up capital of RM10 million. The main objective of SIC is to expand motorsport activities in Malaysia and promote national tourism industry. SIC located in an area of 303 hectares with a track of 5.543 km length and it can accommodate 130,000 spectators at one time. It is also equipped with facilities such as the Sepang Circuit Shoppe, Automotive Museum, restaurants and medical centre. SIC is officially opened

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Rata was not drafted despite MOU was signed 7 years ago in 2008;

iii. management of activities in Bertam Valley as follows :

Bertam Valley land with an area of 195.3 hectares acquired at RM68.6 million was not optimally used. Only 20 hectares (10.24 %) of the said land were utilised whilst the remaining 175.3 hectares (89.76%) were still idle;

some slopes in Bertam Valley farms were not properly maintained and exposed to the risk of landslides; and

status of participant‟s achievements for the Agropreneur Programme could not be ascertained as compared to its prescribed period.

iv. planting of vegetables on several plots in Tanah

Rata and Bertam Valley was delayed and not in accordance to the crop calendar;

v. as at the date of audit visit, three parcels of lease land in Lanchang were idle; and

vi. management of company's financial records, documents, assets and stores was less satisfactory.

c. To strengthen MAFC‟s capabilities and governance in achieving its objectives, it is recommended BOD and management of MAFC to take action on the following matters:

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i. expand the market shares of MAFC products and increase company's revenue by intensifying products‟ promotion and awareness to consumers;

ii. optimize the utilization of land in Bertam Valley and Lanchang;

iii. Collaboration Agreement on Highland Agriculture and Research Collaboration Agreement between the MAFC and MARDI shall be drafted and sealed promptly; and

iv. strengthen its monitoring and internal controls in ensuring compliance of stipulated procedures especially relating to the procurement and expenditure.

25. Sepang International Circuit Sdn. Bhd. a. Sepang International Circuit Sdn. Bhd. (SIC) was

incorporated in 23rd January 1998 and wholly owned by Malaysia Airport Holding Berhad (MHSB). In 22th April 2009, Ministry of Finance has acquired SIC from MHSB by Share Sale Agreement with an authorised capital of RM50 million and paid up capital of RM10 million. The main objective of SIC is to expand motorsport activities in Malaysia and promote national tourism industry. SIC located in an area of 303 hectares with a track of 5.543 km length and it can accommodate 130,000 spectators at one time. It is also equipped with facilities such as the Sepang Circuit Shoppe, Automotive Museum, restaurants and medical centre. SIC is officially opened

106

Rata was not drafted despite MOU was signed 7 years ago in 2008;

iii. management of activities in Bertam Valley as follows :

Bertam Valley land with an area of 195.3 hectares acquired at RM68.6 million was not optimally used. Only 20 hectares (10.24 %) of the said land were utilised whilst the remaining 175.3 hectares (89.76%) were still idle;

some slopes in Bertam Valley farms were not properly maintained and exposed to the risk of landslides; and

status of participant‟s achievements for the Agropreneur Programme could not be ascertained as compared to its prescribed period.

iv. planting of vegetables on several plots in Tanah

Rata and Bertam Valley was delayed and not in accordance to the crop calendar;

v. as at the date of audit visit, three parcels of lease land in Lanchang were idle; and

vi. management of company's financial records, documents, assets and stores was less satisfactory.

c. To strengthen MAFC‟s capabilities and governance in achieving its objectives, it is recommended BOD and management of MAFC to take action on the following matters:

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the total numbers of MotoGP spectators from year 2015 compared to 2014 and 2013. However several aspects of performance and management of activities, corporate governance and financial management shall be addressed as follows:

i. declining in total of spectators for F1 events for 2

consecutive years 2014 and 2015 compared to 2013 between 4,298 and 7,143 spectators respectively;

ii. unattractive marketing strategy i.e. F1 concerts were unable to fascinate more F1 attendees to the event even though additional funds amounted to RM10 million was allocated for marketing and promoting the events;

iii. the differences between the amount of payment made and the amount stated in the contract and Letter of Acceptance for the production services and for creative and design agency amounting to RM112,400 and RM24,313 respectively. In addition, the amount of commission paid amounting to RM94,700 were not supplemented by supporting documents;

iv. differences particulars between the rental agreement as compared to the invoices and quotations;

v. FI concert production services have not been finalized, although the work has been completed;

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on 9th Mac 1999 and since that SIC has organized the Formula One (F1) with Formula One Administration Limited (FOA). FOA is the exclusive rights holder for F1 event and the first contract was for a period of 12 years (1999 to 2010). This contract has been renewed twice, which in 2011 until 2015 (5 years) and 2016 until 2018 (3 years). Furthermore for Motocycle Grand Prix (MotoGP) event, SIC has established a 8 years contract with Dorna Sports S.L. from 1999 until 2006. Thus through the Ministry of Finance, the Government has provided SIC the financial grants for fees payment as Government‟s commitments to obtain right in organizing and broadcasting the F1 and MotoGP events. Whereas other fees such as advertising rights, airtime management and hospitality were borne by SIC. The total expenditure for the overall F1 and MotoGP events were amounted to RM2.540 billion for the period 1999 until 2012, which RM1.880 billion (73.9%) out of the total amount spent were financed by the Government.

b. The audit revealed that overall SIC financial

performance was good as SIC has recorded net profit after tax for 3 consecutive year from 2012 to 2014 amounted to RM44.54 million, RM17.15 million and RM8.47 million respectively. However, the net profit was declined by RM8.68 million or 50.6% in year 2014 compared to 2013. The findings also revealed that SIC‟s event management activities and its corporate governance were well managed due to its ISO 2001 : 9008 Certification pertaining to its policies and procedures. Besides that, SIC also recorded a hike in

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the total numbers of MotoGP spectators from year 2015 compared to 2014 and 2013. However several aspects of performance and management of activities, corporate governance and financial management shall be addressed as follows:

i. declining in total of spectators for F1 events for 2

consecutive years 2014 and 2015 compared to 2013 between 4,298 and 7,143 spectators respectively;

ii. unattractive marketing strategy i.e. F1 concerts were unable to fascinate more F1 attendees to the event even though additional funds amounted to RM10 million was allocated for marketing and promoting the events;

iii. the differences between the amount of payment made and the amount stated in the contract and Letter of Acceptance for the production services and for creative and design agency amounting to RM112,400 and RM24,313 respectively. In addition, the amount of commission paid amounting to RM94,700 were not supplemented by supporting documents;

iv. differences particulars between the rental agreement as compared to the invoices and quotations;

v. FI concert production services have not been finalized, although the work has been completed;

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on 9th Mac 1999 and since that SIC has organized the Formula One (F1) with Formula One Administration Limited (FOA). FOA is the exclusive rights holder for F1 event and the first contract was for a period of 12 years (1999 to 2010). This contract has been renewed twice, which in 2011 until 2015 (5 years) and 2016 until 2018 (3 years). Furthermore for Motocycle Grand Prix (MotoGP) event, SIC has established a 8 years contract with Dorna Sports S.L. from 1999 until 2006. Thus through the Ministry of Finance, the Government has provided SIC the financial grants for fees payment as Government‟s commitments to obtain right in organizing and broadcasting the F1 and MotoGP events. Whereas other fees such as advertising rights, airtime management and hospitality were borne by SIC. The total expenditure for the overall F1 and MotoGP events were amounted to RM2.540 billion for the period 1999 until 2012, which RM1.880 billion (73.9%) out of the total amount spent were financed by the Government.

b. The audit revealed that overall SIC financial

performance was good as SIC has recorded net profit after tax for 3 consecutive year from 2012 to 2014 amounted to RM44.54 million, RM17.15 million and RM8.47 million respectively. However, the net profit was declined by RM8.68 million or 50.6% in year 2014 compared to 2013. The findings also revealed that SIC‟s event management activities and its corporate governance were well managed due to its ISO 2001 : 9008 Certification pertaining to its policies and procedures. Besides that, SIC also recorded a hike in

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CONCLUSION

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vi. delayed in approving procurement services by the Procurement Committee;

vii. delayed in issuing purchase order;

viii. delayed in signing the rental agreement for LED Giant Screen;

ix. no details of costs and clauses on penalty/fines/pieces included in the agreement;

x. no procedure on official expenses for personnel credit card usage. Expenses made by the Chief Executive Officer were not checked by Human Resources Department; and

xi. assets were not listed in the Register of Assets and the assets were not labelled.

c. To strengthen SIC‟s capabilities and governance in

achieving its objectives, it is recommended to take action on the following matters:

i. establish an effective marketing strategy to attract

more international spectators present at the F1 event. SIC re-evaluate the budget allocation in order to allocate more budget on promotion instead of organizing concert; and

ii. improve the SIC‟s internal controls processes for

procurement, payment and asset management.

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CONCLUSION

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vi. delayed in approving procurement services by the Procurement Committee;

vii. delayed in issuing purchase order;

viii. delayed in signing the rental agreement for LED Giant Screen;

ix. no details of costs and clauses on penalty/fines/pieces included in the agreement;

x. no procedure on official expenses for personnel credit card usage. Expenses made by the Chief Executive Officer were not checked by Human Resources Department; and

xi. assets were not listed in the Register of Assets and the assets were not labelled.

c. To strengthen SIC‟s capabilities and governance in

achieving its objectives, it is recommended to take action on the following matters:

i. establish an effective marketing strategy to attract

more international spectators present at the F1 event. SIC re-evaluate the budget allocation in order to allocate more budget on promotion instead of organizing concert; and

ii. improve the SIC‟s internal controls processes for

procurement, payment and asset management.

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CONCLUSION

In general, Ministries/Departments/Government Companies had planned properly their programmes/activities/projects. However, in terms of implementation, there were several weaknesses that should be resolved promptly to ensure that each programme/activity/project is implemented in an efficient, economical and effective manner to achieve the stated objectives. In order to improve on the weaknesses highlighted or to avoid their recurrence, the following recommendations were made:

a. National Audit Department conducted the audit based on selected samples and scopes. Therefore, Secretary General of Ministries/Heads of Department/Chief Executive Officers should carry out thorough examination to ascertain whether other programmes/activities/projects have the same weaknesses and thereby take corrective actions and make improvements. In relation to this, other than carrying out evaluation on internal controls, the Internal Audit Department should carry out procurement and performance audits on the management of programmes/activities/projects to determine whether programmes/activities/projects are implemented efficiently, economically, effectively in achieving the stated objective.

b. Based on audit observation, there were several weaknesses in the implementation of programmes/ activities/projects due to lack of monitoring/supervision by

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CONCLUSION

In general, Ministries/Departments/Government Companies had planned properly their programmes/activities/projects. However, in terms of implementation, there were several weaknesses that should be resolved promptly to ensure that each programme/activity/project is implemented in an efficient, economical and effective manner to achieve the stated objectives. In order to improve on the weaknesses highlighted or to avoid their recurrence, the following recommendations were made:

a. National Audit Department conducted the audit based on selected samples and scopes. Therefore, Secretary General of Ministries/Heads of Department/Chief Executive Officers should carry out thorough examination to ascertain whether other programmes/activities/projects have the same weaknesses and thereby take corrective actions and make improvements. In relation to this, other than carrying out evaluation on internal controls, the Internal Audit Department should carry out procurement and performance audits on the management of programmes/activities/projects to determine whether programmes/activities/projects are implemented efficiently, economically, effectively in achieving the stated objective.

b. Based on audit observation, there were several weaknesses in the implementation of programmes/ activities/projects due to lack of monitoring/supervision by

112

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115

Department of Irrigation and Drainage, local authorities, Fire and Rescue Department of Malaysia, utility providers such as water, electricity and telecommunications, Land Office and state governments need to be consulted before projects are implemented. Such consultations are needed to ensure all basic facilities are provided and programmes/ activities/projects are implemented smoothly.

iii. the Ministries/Departments shall comply with the Guidelines for Planning and Building Regulations issued by the Standards and Cost Sub-Committee as a reference for the National Development Planning Committee (Jawatankuasa Perancang Pembangunan Negara) when planning for works procurement to ensure that buildings are built according to stipulated standard and cost allocation;

iv. Controlling Officers/Heads of Department must be competent on Government procurement procedures and provide sufficient training to procurement officers. Competency and trainings of procurement officers are important to prevent misconduct, leakage of public fund, safeguard Government interest and reap best value for money in government procurement;

v. Controlling Officers/Heads of Department shall enhance the management of Government assets to avoid wastage and seriously consider the importance of maintenance, monitoring and supervision task. Records on asset and inventory must be updated

114

responsible parties, insufficient technical expertise and too reliance on consultants/contractors, no coordination among agencies involved as well as internal issues faced by contractors. These weaknesses caused the delay in completion of programmes/activities/projects within the stipulated time, unsatisfactory works quality, and cost escalation for programmes/activities/projects. As a result, the Government did not reap best value for money for expenditure incurred for the implementation of programmes/activities/projects. In addition, the objectives of the programmes/activities/projects were not fully achieved and lesser impact on targeted groups. Hence, it is recommended that:

i. a detailed study on Government projects needs to be carried out before approval for programmes/ activities/ projects implementation. For this purpose, in accordance with Treasury Instruction 182.1, agencies need to submit complete information of programmes/ activities/projects such as status of projects site, project summary, project ceiling, annual allocation and project implementation schedule to the technical department. This is to ensure that all projects are implemented according to schedule and the Government reaps best value for money:

ii. an integrated planning among agencies involved needs to be carried out at the early stage of project implementation in particular for gigantic programmes/ activities/projects. For example Department of Sewerage Services, Department of Environment,

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115

Department of Irrigation and Drainage, local authorities, Fire and Rescue Department of Malaysia, utility providers such as water, electricity and telecommunications, Land Office and state governments need to be consulted before projects are implemented. Such consultations are needed to ensure all basic facilities are provided and programmes/ activities/projects are implemented smoothly.

iii. the Ministries/Departments shall comply with the Guidelines for Planning and Building Regulations issued by the Standards and Cost Sub-Committee as a reference for the National Development Planning Committee (Jawatankuasa Perancang Pembangunan Negara) when planning for works procurement to ensure that buildings are built according to stipulated standard and cost allocation;

iv. Controlling Officers/Heads of Department must be competent on Government procurement procedures and provide sufficient training to procurement officers. Competency and trainings of procurement officers are important to prevent misconduct, leakage of public fund, safeguard Government interest and reap best value for money in government procurement;

v. Controlling Officers/Heads of Department shall enhance the management of Government assets to avoid wastage and seriously consider the importance of maintenance, monitoring and supervision task. Records on asset and inventory must be updated

114

responsible parties, insufficient technical expertise and too reliance on consultants/contractors, no coordination among agencies involved as well as internal issues faced by contractors. These weaknesses caused the delay in completion of programmes/activities/projects within the stipulated time, unsatisfactory works quality, and cost escalation for programmes/activities/projects. As a result, the Government did not reap best value for money for expenditure incurred for the implementation of programmes/activities/projects. In addition, the objectives of the programmes/activities/projects were not fully achieved and lesser impact on targeted groups. Hence, it is recommended that:

i. a detailed study on Government projects needs to be carried out before approval for programmes/ activities/ projects implementation. For this purpose, in accordance with Treasury Instruction 182.1, agencies need to submit complete information of programmes/ activities/projects such as status of projects site, project summary, project ceiling, annual allocation and project implementation schedule to the technical department. This is to ensure that all projects are implemented according to schedule and the Government reaps best value for money:

ii. an integrated planning among agencies involved needs to be carried out at the early stage of project implementation in particular for gigantic programmes/ activities/projects. For example Department of Sewerage Services, Department of Environment,

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service delivery and creating a fast, accurate and integrity work culture. Consequently, The Auditor General‟s Report contributes towards the achievement of the Government Transformation Programme 2.0 in fighting corruption under the National Key Results Areas (NKRA).

National Audit Department Putrajaya 20th April 2016

116

promptly in preparation for the Federal Government‟s shift towards accrual accounting;

vi. Heads of Service/Controlling Officers/Heads of Department shall set up a special committee to investigate issues pertaining to fraud, wastage and extravagance spending of public fund. Severe actions such as disciplinary and/or surcharge shall be taken against officers who are found to be negligent or fail to discharge their duties without reasonable justification resulted losses to the Government;

vii. Government companies shall ensure good financial performance, proper and prudent implementation of activities to achieve the set objectives, and their financial management and corporate governance comply with stipulated rules and regulations; and

viii. the Controlling Officers of various Ministries/ Departments/Government Companies shall demonstrate high commitments by taking prompt actions on matters raised by the Auditor General. The Controlling Officers must give a factual report promptly and forward to the Continuation Audit Division to update its status in the AG Dashboard of the National Audit Department.

c. In addition to fulfilling the legal requirements, I hope this report will form a basis for mitigating the weaknesses, strengthening efforts and enhancing accountability and integrity. This report is also important for the Government to increase productivity, creativity and innovation in public

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service delivery and creating a fast, accurate and integrity work culture. Consequently, The Auditor General‟s Report contributes towards the achievement of the Government Transformation Programme 2.0 in fighting corruption under the National Key Results Areas (NKRA).

National Audit Department Putrajaya 20th April 2016

116

promptly in preparation for the Federal Government‟s shift towards accrual accounting;

vi. Heads of Service/Controlling Officers/Heads of Department shall set up a special committee to investigate issues pertaining to fraud, wastage and extravagance spending of public fund. Severe actions such as disciplinary and/or surcharge shall be taken against officers who are found to be negligent or fail to discharge their duties without reasonable justification resulted losses to the Government;

vii. Government companies shall ensure good financial performance, proper and prudent implementation of activities to achieve the set objectives, and their financial management and corporate governance comply with stipulated rules and regulations; and

viii. the Controlling Officers of various Ministries/ Departments/Government Companies shall demonstrate high commitments by taking prompt actions on matters raised by the Auditor General. The Controlling Officers must give a factual report promptly and forward to the Continuation Audit Division to update its status in the AG Dashboard of the National Audit Department.

c. In addition to fulfilling the legal requirements, I hope this report will form a basis for mitigating the weaknesses, strengthening efforts and enhancing accountability and integrity. This report is also important for the Government to increase productivity, creativity and innovation in public

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PRINTED BYPERCETAKAN NASIONAL MALAYSIA BERHADKUALA LUMPUR, 2016www.printnasional.com.myemail: [email protected].: 03-92366895 Fax: 03-92224773

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AUDITOR GENERAL’S REPORT 2015

NATIONAL AUDIT DEPARTMENTMALAYSIA

GOVERNMENT’S FINANCIAL STATEMENT, FINANCIAL MANAGEMENTFOR THE YEAR 2015 AND ACTIVITIES OF THE

FEDERAL MINISTRIES/DEPARTMENTS AND MANAGEMENT OF THE GOVERNMENT’S COMPANIES

SERIES 1

NATIONAL AUDIT DEPARTMENT MALAysIANo. 15, Level 1-5Persiaran Perdana, Presint 2Pusat Pentadbiran Kerajaan Persekutuan62518 Putrajaya

www.aud i t .gov.mywww.aud i t .gov.my

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AUDITOR GENERAL’S REPORT GENERAL’S REPORT 2015 NATIONAL AUDIT DEPARTMENT MALAYSIA GOVERNMENT’S...

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