government’s financial statement, financial management for...
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i
AUDITOR GENERAL REPORT
GOVERNMENT’S FINANCIAL STATEMENT, FINANCIAL MANAGEMENT FOR THE YEAR 2012 AND
ACTIVITIES OF THE FEDERAL MINISTRIES/DEPARTMENTS AND MANAGEMENT OF THE GOVERNMENT COMPANIES
SERIES 3
NATIONAL AUDIT DEPARTMENT MALAYSIA
iii
SYNOPSIS
AUDITOR GENERAL REPORT FOR THE YEAR 2012
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
vii
CONTENTS
PAGE
CONTENTS vii SECTION I 1 THE FEDERAL GOVERNMENT’S FINANCIAL STATEMENT AND FINANCIAL MANAGEMENT OF THE FEDERAL MINISTRIES/DEPARTMENTS
PREFACE 7
SYNOPSIS 15 PART I - Certification Of The Federal Government’s
Financial Statement For The Year Ended 31 December 2012 15
PART II - Financial Management Of The Federal Government
- Overall Financial Performance 15 - Financial Management Of The Federal
Ministries/Departments (Accountability Index) 16
POSTCRIPT 19
viii
SECTION II 25 ACTIVITIES OF THE FEDERAL MINISTRIES/DEPARTMENT AND MANAGEMENT OF THE GOVERNMENT COMPANIES PREFACE 31 SYNOPSIS 35
PART I - Implementation Of Activities By The Federal Ministries/Departments
PRIME MINISTER’S DEPARTMENT National Security Council 1. Construction Of The Special Malaysia Disaster
Assistance And Rescue Team Complex And The National Crisis And Disaster Management Institute 37
2. Management Of The Government Integrated Radio Network Project 40
Property Management Division 3. Management On The Maintenance Of Federal
Communal Buildings - Sultan Iskandar Building, Johor Bahru And
Menara Usahawan Building, Putrajaya 43
MINISTRY OF AGRICULTURE AND AGRO-BASED INDUSTRY MALAYSIA 4. Marine Fisheries And Its Environment 47
ix
MINISTRY OF RURAL AND REGIONAL DEVELOPMENT 5. Rural Transformation Centre 50
MINISTRY OF EDUCATION MALAYSIA 6. Special Project Management 52 7. Management Of School Building Construction
Projects In Sarawak 55 MINISTRY OF DEFENCE
8. Redevelopment Of College Complex Building For The Royal Malaysian Navy At NAVY Base In Lumut, Perak 57
PART II MANAGEMENT OF GOVERNMENT COMPANY
9. Bank Pembangunan Malaysia Berhad 60
POSTSCRIPT 65
3
SYNOPSIS
AUDITOR GENERAL REPORT FOR THE YEAR 2012
THE FEDERAL GOVERNMENT’S FINANCIAL STATEMENT AND FINANCIAL MANAGEMENT OF
THE FEDERAL MINISTRIES/DEPARTMENTS
NATIONAL AUDIT DEPARTMENT MALAYSIA
7
PREFACE
1. Articles 106 and 107 of the Federal Constitution and
the Audit Act 1957 require the Auditor General to audit the
Federal Government’s Financial Statement, financial
management, activities of the Ministries/Departments as
well as management of the Federal Government
companies and submit his reports to His Majesty, Seri
Paduka Baginda Yang di-Pertuan Agong and obtain his
assent before tabling them in Parliament. Beginning 2013,
the Auditor General Report will be tabled at each sitting of
the Parliament or three times a year in line with the
Government Transformation Programme 2.0 in fighting
corruption under the National Key Result Areas. To fulfil
these responsibilities, the National Audit Department needs
to carry out 4 types of audit as follows:
1.1. Attestation Audit - to give an opinion as to
whether the Federal Government’s Financial Statement
for the year concerned shows a true and fair view as
well as its accounting records are maintained properly
and kept up to date;
1.2. Compliance Audit - to evaluate whether the
financial management of the Federal Ministries/
Departments is in accordance with relevant financial
laws and regulations;
1.3. Performance Audit - to evaluate whether
Federal Government activities/programmes/projects
8
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 manner.
2. My report on the Financial Statement and Financial
Management of the Federal Government’s Ministries/
Departments for the Year 2012 consists of the following:
Part I : Certification Of The Federal
Government’s Financial Statement For
The Year Ended 31 December 2012
Part II : Financial Management Of The Federal
Government
Part III : National Audit Department’s Involvement
In Various Activities Towards Enhancing
Accountability Of Public Financial
Management
Part IV : General Matters
3. Audit on the Federal Government’s Financial
Statement for the Year 2012 revealed that the Statement as
a whole reflected a true and fair view on the financial
position of the Federal Government as at 31 December
2012, its operational income and cash flow for the year
concerned as well as its accounting records were being
maintained properly and kept up to date. As for financial
management, audit findings revealed that several Ministries
9
and Departments still did not follow financial regulations
fully. Among others, these weaknesses were due to
negligence in compliance with stated financial rules/
procedures, insufficient manpower, lack of training in
financial management, inadequate supervision and lax in
monitoring.
4. All the matters reported in this report had been
brought to the attention of the Heads of Department for
their confirmation. The National Audit Department also took
several approaches to help the Federal Government’s
Ministries/Departments to improve their financial
management. Among the approaches that had been taken
were as follows:
4.1. Implementing a rating system based on
Accountability Index (AI). Through this rating system,
marks will be given for compliance with financial
regulations for 6 main elements. These elements are
management control, budgetary control, receipts
control, expenditure control, management of trust funds
and deposits as well as management of assets and
stores. The Federal Ministries/Departments which have
been rated as excellent become role models. This will
motivate others to diligently improve and enhance their
financial management.
4.2. Treasury Instructions require all Heads of
Ministry/Department to ensure that responsible officers
safeguard public money, stamps or other valuable items
in safety boxes, vaults, cash boxes or other receptacles.
They must ensure that records kept are complete, up to
date and periodically checked by senior officers. In
10
order to ascertain to what extent this has been complied
with, the National Audit Department has also carried out
surprise checks in 223 Federal offices throughout the
country.
4.3. The National Audit Department continued to be
involved in the evaluation of the performance of Premier
Grade Officers on financial management as part of their
confirmation exercise. A total of 45 Heads of
Department were evaluated from January to 5 July
2013. These evaluations have indirectly contributed
towards the 9 enhancement of the financial
management as promotion of Heads of Department
would only be considered by the Public Service
Department after the National Audit Department and
Federal Treasury of Malaysia confirmed that corrective
actions on the weaknesses raised had been taken by
the officers.
4.4. Beginning 2013, the Auditor General’s
Dashboard was created to monitor actions taken by the
Ministries/Departments/Government Companies on
Audit issues raised. It also serves as a dissemination
channel to the public on the status of actions taken.
Through this approach, each Audit issue raised will be
given due attention by the Ministries/Departments/
Government Companies and pending cases could also
be settled as soon as possible.
5. I would like to express my thanks to all the officers in
the various Federal Ministries/Departments who have given
their full cooperation to my officers during the audit. I would
11
( TAN SRI DATO’ SETIA HAJI AMBRIN BIN BUANG )
Auditor General Of Malaysia
Putrajaya
22 July 2013
also like to record my appreciation and thanks to my
officers who have shown total commitment and worked
diligently to complete this report.
15
SYNOPSIS
PART I - CERTIFICATION OF THE FEDERAL
GOVERNMENT’S FINANCIAL STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2012
1. The Federal Government’s Financial Statement for
the year ended 31 December 2012 as a whole reflected a
true and fair view of the financial position of the Federal
Government and the accounting records were also properly
maintained and kept up-to-date.
PART II - FINANCIAL MANAGEMENT OF THE FEDERAL GOVERNMENT
Overall Financial Management Performance
2. For the year 2012, the Federal Government
received revenue totaling RM207.913 billion, with an
increase of RM22.494 billion (12.1%) as compared to
RM185.419 billion for the year 2011. This was the highest
income in 5 years since 2008. The Inland Revenue Board
of Malaysia alone managed to collect revenue of
RM124.892 billion in 2012, which was an increase of
RM15.284 billion (13.9%) as compared to RM109.608
billion in year 2011. In the meantime, the Royal Malaysian
Customs Department had also successfully collected
revenue totalling RM32.319 billion in 2012, which showed
16
an increase of RM1.940 billion (6.4%) as compared to
RM30.379 billion in year 2011. In the same year, the
Government had approved allocation of operating
expenditure amounting to RM198.738 billion, which was the
highest approved allocation in 5 years. However, the
allocation was insufficient to cover the operating expenses
amounting to RM205.537 billion. On 16 July 2013, an
additional allocation was approved by the Parliament to
cover the deficit. As for the development expenditure,
Federal Ministries/Departments had spent RM46.932 billion
(95.6%) out (of the approved allocation) of RM49.108
billion.
Financial Management Of The Federal Ministries And
Departments
3. The National Audit Department has audited 25
Federal Ministries and 40 Federal Departments in 2012 in
order to ascertain whether their financial management was
in accordance with established laws and financial
regulations. Audit findings revealed that the overall financial
performance at Ministries/Departments’ level for 2012 had
improved as compared to 2011 and previous years. In
2012, the performance of 22 Ministries and 22 Departments
in their financial management was rated as excellent, which
was an increase of 3 Ministries (15.7%) and 1 Department
(4.8%) as compared to 19 Ministries and 21 Departments in
2011. On the other hand, 3 Ministries and 18 Departments
were rated as good. Besides the Headquarters of the State
Education Department (SED) and the State Health
Department (SHD), 14 state branches of SED and SHD
17
throughout the country were also assessed. Audit had also
been carried out in 8 Malaysian Missions Overseas under
the Ministry of Foreign Affairs.
4. As required under the Treasury Instructions, all
Controlling Officers/Heads of Department must ensure that
the responsible officers safeguard public money, stamps or
other valuable of any kind in safety boxes, vaults, cash
boxes or other receptacles. They must carry out periodic
inspections and maintain complete and updated records.
In order to ensure that such duties were carried out by the
Controlling Officers/Heads of Department, the National
Audit Department had carried out surprise inspections in
223 Federal Departments/Offices at state and district
levels. Audit findings revealed that there were some
instances where public money and other valuable items
were not kept safely and delays in banking-in collections.
The report on the findings had been submitted to the
relevant heads of department/state for further action.
5. Besides conducting mandatory audit as provided
under the law, the National Audit Department also carried
out special evaluation on the financial management
performance of Premier Grade Officers in various
Ministries/Departments/Agencies. For the period from
January 2012 to 5 July 2013, a total of 45 Heads of
Department had been evaluated.
21
POSTSCRIPT
In general, the financial management of the Federal
Ministries/Departments in 2012 showed a better
performance as compared to 2011. This was evident with
22 Ministries being rated as excellent in 2012 as compared
to 19 Ministries in 2011. The financial management at the
Departments’ level in 2012 was also very encouraging
where 22 Departments were rated as excellent as
compared to 21 Departments in 2011. The financial
management performance could still be further enhanced if
the Controlling Officers/Heads of Department not only take
action to rectify the weaknesses as highlighted by Audit but
also take preventive actions to ensure that the same
weaknesses do not recur. With regard to this, the followings
are recommended to further strengthen the performance of
financial management:
a. Controlling Officers/Heads of Department should
conduct a comprehensive check to determine
whether the weaknesses highlighted by Audit also
occur in other areas as well as its Responsibility
Centres and thereafter take corrective actions since
audits conducted by the National Audit Department
are based on samples and specific scopes;
b. Ministries/Departments should enhance the
effectiveness of Internal Audit Units (UAD). Among
others, they should ensure that the UAD staff get
22
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;
c. In order to enable issues highlighted by Audit to be
discussed with greater focus, Audit Committees
should be set up in all Ministries in accordance with
Treasury Secretary General’s Directive dated 5 May
2009 requiring corrective and preventive actions to
be taken. The Audit Committee should report the
results of its discussion to the Financial
Management and Accounts Committee chaired by
the Controlling Officer;
d. In order to further improve financial management,
the involvement of Controlling Officers/Heads of
Department should be increased. They should be
involved hands-on on financial matters;
e. Secretary Generals/Heads of Department should
chair every Exit Conference together with the
officers from the National Audit Department so that
they could know Audit issues beforehand and
urgently take positive actions apart from making
improvements;
23
f. In the implementation of eSPKB, the payment
transactions are done at Responsibility Centres and
the supporting documents are kept at the respective
offices. In order to ensure that payment is done
properly, supported by sufficient documents and
approved by authorised officers, the Accountant
General Department needs to ensure that its
Inspectorate Unit carries out inspection on
Responsibility Centres as planned;
g. All Department’s policies, instructions and
delegation of powers should be done in written form
so that they are more transparent and accountable.
The Department’s Client Charter should be
reviewed and updated constantly so that services
are delivered as promised;
h. Heads of Department should establish a check and
balance system, supervise closely and conduct
surprise checks, conduct periodic assessment on
skills and capabilities of officers and give training to
officers who are involved with financial management
so as to improve their efficiency. This is to avoid
officers who are less experienced and skilled from
using their discretion when making decisions;
i. Records on asset and inventory should always be
updated by the Ministries/Departments in
preparation for the Federal Government to move
towards accrual accounting in 2015;
24
j. Impose surcharge on those who failed to collect
revenue/made improper payment. Surcharge should
also be imposed on Heads of Department/Division
for failing to take action against their staff who failed
to carry out their responsibilities.
National Audit Department
Putrajaya
22 July 2013
27
SYNOPSIS
AUDITOR GENERAL REPORT FOR THE YEAR 2012
ON ACTIVITIES OF THE FEDERAL MINISTRIES/DEPARTMENTS AND MANAGEMENT OF THE GOVERNMENT COMPANIES
SERIES 3
NATIONAL AUDIT DEPARTMENT MALAYSIA
31
PREFACE
1. Articles 106 and 107 of the Federal Constitution and
the Audit Act 1957 require the Auditor General to audit the
Federal Government’s Financial Statement, financial
management, activities as well as management of Federal
Government Companies and submit his reports to His
Majesty, Seri Paduka Baginda Yang di-Pertuan Agong and
obtain his assent before tabling them in Parliament.
Beginning 2013, the Auditor General’s Report will be tabled
at each sitting of the Parliament or three times a year in line
with the National Key Results Areas for fighting corruption
under the Government Transformation Programme 2.0. The
Auditor General Report 2012 Series 1 and 2 were tabled in
Parliament on 1 October 2013. To fulfil these
responsibilities, the National Audit Department needs to
carry out 4 types of audit as follows:
1.1. Attestation Audit – to give an opinion as to
whether the Federal Government’s Financial Statement
for the year concerned shows a true and fair view as
well as its accounting records are maintained properly
and kept up to date.
1.2. Compliance Audit – to evaluate whether the
financial management of the Federal Ministries/
Departments is in accordance with relevant financial
laws and regulations.
32
1.3. Performance Audit – to evaluate whether the
Federal Government activities have been carried out
efficiently and economically to achieve its desired
objectives/goals.
1.4. Government Companies’ Management Audit
– to evaluate whether the Federal Government
Companies have been managed in a proper manner.
2. My report on the implementation of activities of the
Federal Ministries/Departments and the management of
Government Companies for the year 2012 Series 3
consists of 3 parts as follows:
Part I : Implementation Of Activities Of The
Federal Ministries/Departments
Part II : Management Of Federal Government
Companies
3. Section 6(d) of the Audit Act 1957 requires the
Auditor General to carry out audit to evaluate whether
Government activities have been managed efficiently,
economically and in accordance with their stated
objectives. The audit encompasses various activities such
as construction, infrastructure, maintenance, asset
management, environment, procurement, revenue
management, education, health, human capital, contract
administration and socio-economic upgrading programmes.
This report contains observations from the audit of 10
programmes/activities/projects of 6 Federal Ministries/
Departments, management of 1 Government Companies
and management on financial performance and supervision
33
of Government Companies. Generally, weaknesses
observed are such as improper payment; work/procurement
did not follow specifications/was of low quality/was
unsuitable; unreasonable delays; wastage; weaknesses in
revenue management and management of the
Government’s assets. The said weaknesses were due to
negligence when complying with the Government’s rules/
procedures; programmes/activities/projects and scopes/
specifications were not planned and identified properly;
work of contractors/vendors/consultants was not monitored
and supervised closely; poor project management skills;
decisions on procurement were made late; information
systems of the Ministries/Departments/Government
Companies were incomplete and not updated; outcome/
impact of programmes/activities/projects was not given due
attention; shortage of funds for asset maintenance; and
insufficient officers to collect revenue.
4. Just as the previous Series, relevant Heads of
Departments were informed beforehand on issues
highlighted in this report for verification purposes. In order
for corrective actions to be taken and improvements to be
made by the relevant Heads of Departments, a total of 68
recommendations were made by the National Audit
Department.
5. Beginning 2013, the Auditor General’s Dashboard
was created to monitor actions taken by the Ministries/
Departments/Government Companies on Audit issues
raised. It also serves as a dissemination channel to the
public on the status of actions taken. Through this
approach, each Audit issue raised will be given due
34
attention by the Ministries/Departments/Government
Companies and pending cases could also be settled as
soon as possible.
6. I would like to express my thanks to all the officers
of the Ministries/Departments/Government Companies who
have given their cooperation to my officers during the audit.
I also wish to express my appreciation and thanks to my
officers who have given their commitment and worked
diligently to complete this report.
( TAN SRI DATO’ SETIA HAJI AMBRIN BIN BUANG )
Auditor General of Malaysia
Putrajaya
4 October 2013
( TAN SRI DATO’ SETIA HAJI AMBRIN BIN BUANG )
Auditor General Of Malaysia
Putrajaya
4 October 2013
37
SYNOPSIS
PART I - IMPLEMENTATION OF ACTIVITIES BY THE FEDERAL MINISTRIES/ DEPARTMENTS
PRIME MINISTER’S DEPARTMENT
National Security Council 1. Construction Of The Special Malaysia Disaster
Assistance And Rescue Team Complex And The National Crisis And Disaster Management Institute
a. The Special Malaysia Disaster Assistance and Rescue
Team (SMART) was formed on 18 May 1994 following
a cabinet order and managed by the National Security
Council (NSC). The SMART team consisted of elite
personnel who have better expertise in search and
rescue compared to the existing team. The Construction
of SMART Complex and The National Crisis and
Disaster Management Institute (IPKBN) amounting to
RM90.24 million is located at Batu 8, Jalan Puchong-
Kajang, Pulau Meranti, Puchong, Selangor. It was to
build a central administration building and
operation/logistics/training rooms which could provide
complete facilities compared to previous SMART's
headquarters at the Police Training Centre (PULAPOL),
Jalan Semarak, Kuala Lumpur. The Complex included
50 units of quarters which provide accommodation for
staff who were staying at Ceria Heights Apartment,
Cheras, Kuala Lumpur. The construction was carried
38
out using the conventional method by the Public Works
Department (PWD).The construction was divided into 3
phases namely Phase 1 for quarters and obstacles
track; Phase 2 for the SMART headquarters building,
clubhouse and prayer room; and Phase 3 for the IPKBN
building and special simulation building for expert
training of SMART staff. The construction of Phase 1
and Phase 2 was completed in 2009 and 2010
respectively. However, the construction of Phase 3 was
cancelled due to insufficient allocation of fund. Audit
findings revealed that the overall performance of the
construction of the SMART Headquarters and IPKBN
project was not satisfactory. The objective of providing
complete training facilities for SMART staff was still not
achieved due to the cancellation of Phase 3. Among the
weaknesses identified were as follows:
i. Phase 1 and 2 were delayed by 353 days and 350
days respectively from the original contract period;
ii. the submission of Phase 2 to NSC by PWD was
delayed due to certain construction components that
were not fully functional and the supply of electricity
and water which was not yet finalised;
iii. an increase of RM12.65 million from the original
contract cost (the original cost of the project was
RM77.59 million) due to PWD’s poor planning on
the design and scope of works, contingencies on
construction sites and increase in cost of the
construction materials;
iv. As-Built Drawings for Phase 1 was not submitted/
kept properly, causing difficulty in planning building
maintenance works;
39
v. Certificate of Practical Completion (CPC) for Phase
1 and 2 were not issued properly;
vi. construction design was inappropriate/impractical;
vii. construction works were unsatisfactory and of poor
quality and some electrical and mechanical
appliances were not functioning;
viii. furniture/equipment/electrical and mechanical items
were not located at the intended location;
ix. quarters, space/facility/room/equipment at the
clubhouse and SMART headquarters building were
underutilised;
x. Obstacle Track worth RM1.65 million was not used;
and
xi. delay in appointing maintenance contractors for the
complex.
b. In order to improve the weaknesses highlighted, it is
recommended that NSC and PWD consider the
following actions:
i. ensure detailed early planning on the design and
scope of works to be undertaken by the contractor
in order to avoid delay in construction and increase
in cost during implementation;
ii. ensure that the official handover of the building to
the Client Department is done as soon as possible
after completion to enable early detection of defects;
iii. ensure that the construction works are completed as
at the date of issuance of the CPC. Appropriate
action should be taken against officers who failed to
carry out these responsibilities effectively;
40
iv. ensure that submission/keeping of As-Built
Drawings is in order to avoid problems in the
planning of maintenance works;
v. ensure that the building/mechanical and electrical
equipment supplied are maintained with care so that
they could function properly and best value for
money;
vi. ensure that all supplied mechanical and electrical
fixtures and fittings are registered in accordance
with the existing rules and regulations. Further
investigation should be conducted for the assets
which were not located at the intended locations to
ascertain whether they were missing or not supplied
in accordance with contract; and
vii. ensure quarters; room/space/facilities at the SMART
Headquarters; Clubhouse and Obstacle Track are
fully utilised for optimum benefit in line with the
objectives of its construction.
National Security Council 2. Management Of The Government Integrated Radio
Network Project
a. The objective of the Government Integrated Radio
Network (GIRN) was to provide a dedicated shared
communications network infrastructure and at the same
time maintaining autonomy and independence of each
agency. GRIN was developed for security related
agencies, public order, enforcement and emergency
response agencies. It was expected to eliminate
duplication and wastage of money and achieve
economies of scale in the procurement, maintenance
41
and management of telecommunication parts. The
implementation of GIRN involved a public-private
partnership through the Private Finance Initiative (PFI).
The operation and maintenance of GIRN network was
privatized to Sapura Research Sdn. Bhd. with a
concession period of 20 years with an estimated
contract cost or lease network (estimated rental
network) amounting to RM1.833 billion. The
maintenance cost for the first 5 years amounted to
RM956.15 million. A total of 14 agencies have joined
the GIRN network. The National Security Council (NSC)
under the Prime Minister's Office (PMO) was
responsible as the Technical Coordinator during the
concession period. As at the end of 2012, a total of 538
GIRN transmission site were built all over Malaysia. The
construction of GIRN transmission site was divided into
3 categories namely Greenfield, Rooftop and Share.
Audit findings revealed that the overall management of
GIRN was satisfactory especially from the development
and coverage aspect. However, there were several
weaknesses as follows:
a. Hardware condition:
i. handheld terminal and vehicular terminal worth
RM1.85 million were not disposed since 2007.
b. Transmission site condition:
i. backup generator was not functioning;
ii. Guardhouse was not provided;
iii. surrounding at the generator site was not
maintained properly (oily);
42
iv. re-inspection of fire extinguishers were not
carried out;
v. Improper cable installation; and
vi. improper labelling of assets:
• assets were not labelled/the labels cannot be
read (faded); and
• the warning signs were faded.
c. transmission tower rental income of RM2.44 million
was not accounted for as Government revenue;
d. inadequate technology transfer programme; and
e. there were existing posts that should be reviewed.
b. In order to overcome the weaknesses highlighted, it is
recommended that NSC takes the following actions:
i. inform all agencies involved on GIRN operating
procedures for handling any malfunctioned or
damaged GIRN terminal which need to be repaired;
ii. monitor GIRN agencies to ensure optimal usage of
equipment supplied;
iii. seek advice from the Ministry of Finance on the
method of disposal that could be used with
reference to the Treasury Circular No. 5 Year 2007;
iv. ensure each generator including backup generator
could function properly so that there is no disruption
to GIRN network operations;
v. ensure the guardhouses are provided at GIRN
transmission sites with security guards;
vi. monitor and ensure that the maintenance/cleaning
works at the generator sites are done properly to
avoid any accident/mishap at the GIRN
transmission sites;
43
vii. ensure fire extinguisher inspections are conducted
according to schedule;
viii. ensure assets are labelled with Government
ownership and a serial number. Labels should be
clear and easy to read;
ix. ensure the rental income from the transmission
towers are accounted as Government revenue;
x. ensure SRSB submit the technology transfer
program plan within the concession period.
Activities relating to technology transfer including
ongoing training should be reported in the Technical
and Progress Committee Meeting of the Project,
and
xi. discuss with the Ministry of Finance on the staffing
requirement for monitoring GIRN project as it is
considered as a Government strategic project.
Property Management Division 3. Management On The Maintenance Of Federal
Communal Buildings - Sultan Iskandar Building, Johor Bahru And Menara
Usahawan Building, Putrajaya
a. The Property Management Division (BPH) of the Prime
Minister's Department (JPM) is responsible for
controlling and administering 6 out of 45 Federal
Communal Buildings (BGS). As the manager or owner
of these buildings, BPH will provide funds to the Public
Works Department (PWD) for its building maintenance.
BPH plays a major role in ensuring that Government
offices and cafeterias under their care are able to
achieve a safe and conducive work environment as well
as meeting current world class requirements. PWD has
44
been entrusted with the appointment and supervision
pertaining to the works carried out by the appointed
maintenance contractor. Two out of 6 mentioned BGS
are Sultan Iskandar Building (BSI) in Johor Bahru and
Menara Usahawan Building (MU) in Putrajaya. BSI was
built in Johor Bahru at a cost of RM987.47 million,
covering an area of 2.87 million square feet and was
fully operational by 1 December 2008. PWD has
appointed Advanced Maintenance Precision
Management Sdn. Bhd. (AMPM) as its maintenance
contractor through direct negotiation with approval from
the Ministry of Finance. The contract which was worth
RM484.50 million had been undertaken on
29 September 2008 for a period of 5 years beginning
from 1 June 2007 until 31 May 2012. MU or formerly
known as Lot 2G6 in Putrajaya was built at a cost of
RM373.48 million, covering a floor area of 49 thousand
square meters and it was completed on 29 October
2005. PWD has appointed HBS Engineering Sdn. Bhd.
(HBSESB) and Jangka Prestasi Sdn. Bhd. (JPSB) as its
maintenance contractor through open tender. The
maintenance and operations management contract from
the year 2007 to 2010 amounted to RM8.88 million.
Audit findings revealed that the overall management on
the maintenance of these 2 buildings was satisfactory.
However, there were certain essential areas to be
improved as follows:
i. physical maintenance was not satisfactory;
ii. inappropriate building design which complicated
maintenance works;
45
iii. posts were not filled up by the contractor in
accordance with the contract;
iv. further penalty for delay in carrying out works was
not imposed;
v. the validity of information in the register of Work
Order and the Summary of Work Order was doubtful
due to discrepancy of information in those
documents. The obvious differences in information
were such as type of works, dates, location of
defects and type of defects;
vi. maintenance meetings were not held on a monthly
basis; and
vii. documents on maintenance works were not
complete and updated.
b. In order to ensure a good, comfortable and safe working
environment in these building premises, it is
recommended that BPH, JPM and PWD take the
following actions:
i. PWD should enhance monitoring to ensure that the
contractor takes more proactive actions in routine
maintenance, rehabilitation or other periodic
inspection, repair of any defects and replacement of
damaged items. Delay in repair or maintenance
action may have implications on the performance
and lifespan of the asset itself. Work Order should
not be considered done as long as the repair work is
not completed;
ii. a special way should be prepared on level 6 of the
Menara Usahawan Building for maintenance works
46
at the roof top area as existing design does not
facilitate such works;
iii. PWD should monitor on filling up vacant posts to
ensure uninterrupted maintenance operation of
facilities for both buildings even though payments
have been deducted;
iv. PWD should review the penalty clause or payment
deduction relating to pending Work Orders. Penalty
should not be imposed once only when the pending
period exceeds 30 days as there were too many
pending repair works to be done and the contractor
was late in taking actions;
v. PWD should ensure accuracy of information in the
Work Order register and its monthly report because
there were recording errors. Non-compliance with
these standards should result in payment deduction;
vi. BPH should ensure that the Monthly Maintenance
Meeting for Menara Usahawan Building is held
every month to discuss contractor’s performance;
vii. as owner of the Menara Usahawan Building, BPH
should keep complete documents on maintenance
details such as minutes of meetings, spending
patterns, supervision, monthly maintenance reports
and other documents for reference and monitoring
purposes; and
viii. BPH and PWD should expedite in using the Total
Infrastructure Facilities Management System (TIFM)
to enhance effectiveness and efficiency in the
management of maintenance works.
47
MINISTRY OF AGRICULTURE AND AGRO-BASED INDUSTRY MALAYSIA
4. Marine Fisheries And Its Environment
a. The National Fisheries Sector has contributed to the
country's fish production amounting to RM11.438 billion
in 2012, RM10.620 billion in 2011 and RM9.94 billion in
2010. The country's fish production is contributed by
marine captured fisheries, aquaculture and other
general fisheries. Fish is an important source of food
and protein for the people of Malaysia where
consumption of fish per capita amounted to 46kg in
2011. However, per capita fish consumption is expected
to continue to increase from 46kg to 55kg per person
with a growth rate of 1.9% per annum for the period
2011 to 2020. Therefore, the National Agro Food
Policies for 2011 to 2020 has set that the fishing
industry needs to be transformed by focusing on
modernization of fishing technology, upgrading landing
infrastructures and marketing strategy, strengthening
the capability of fishermen, compliance with
international standards with regards to fish handling and
landings as well as managing the sustainability of
fisheries resources. The objective of marine captured
fisheries is to establish the fish landings for the purpose
of food through optimal capture fisheries of RM1.76
million metric tonnes in 2020; ensure that fisheries
resources are properly managed from the perspective
of a sustainable exploitation manner; ensure that the
country's majority fish production is being contributed
through marine captured fisheries; ensure appropriate
strategic planning and provide vital support to
48
institutions related to fisheries industry so that the
fisheries sector meets expected demand and
overcomes the problems faced by the industry. Recent
study shows unsustainable fisheries activity and rapid
development along the coastal areas and estuary has
adverse effects on the fisheries resources and habitat
that are closely related to fisheries within these areas as
well as mangroves, coral reefs and sea grass. These
activities have created numerous social, economic and
biological impacts including reduction in number of
commercial fish species and significant changes to the
functions of the ecosystem. Audit findings revealed that
generally, the management of marine fisheries and its
environment was satisfactory. However, there were
some weaknesses as follows:
i. landings performance and fish consumption per
capita index were not consistent;
ii. comprehensive study on fisheries resources was
not done since 1999 (13 years);
iii. control of resources conservation and the
environment had been less effective;
iv. laws and regulations were not fully complied with;
v. usage of prohibited fishing equipment; and
vi. ineffective enforcement/monitoring.
b. In order to overcome weaknesses raised from the audit
findings and to ensure efficient management of marine
fisheries and its environment so that its objectives could
be achieved, it is recommended that the parties
involved take the following actions:
49
i. provide sufficient allocation of funds and human
capital (at the state and district level) for efficient
implementation through conservation of resources,
monitoring and fisheries management;
ii. enhance collaboration with research agencies such
as local universities to conduct fisheries resources
study so that the latest data especially on fish stock
could be produced and subsequently used for the
purpose of a more effective fishing;
iii. the Department of Fisheries (DOF) should create a
mechanism to ensure stable growth rate in per
capita fish consumption;
iv. agencies involved such as the Malaysian Maritime
Enforcement Agency and Department of Fisheries
should ensure that continuous monitoring is carried
out to overcome zone invasions, overfishing,
destructive fishing and the usage of unwarranted
fishing gears;
v. the Blue Ocean Strategy should be implemented by
those agencies involved (Department of Fisheries,
Department of Environment, Department of Marine
Park, Fisheries Development Authority Of Malaysia
and Malaysian Maritime Enforcement Agency) to
ensure and assure environmental sustainability
apart from the gazette of the prohibited areas of the
fisheries activity. Besides these, other agencies
such as Non-Government Organisations (NGOs),
stakeholders and local residents should also need
to be engaged;
vi. the Department of Fisheries should look into best
practices in the protection and conservation of
50
ecosystems to ensure sustainability of fisheries
resources and to review the use of gear (such as a
trawl) which could result in destructive fishing and if
necessary ban it; and
vii. the Department of Fisheries should follow up on the
plan to increase enforcement officers in the field to
enhance the effectiveness of fisheries management
in Malaysia.
MINISTRY OF RURAL AND REGIONAL DEVELOPMENT
5. Rural Transformation Centre
a. The Rural Transformation Centre (RTC) is an integrated
programme introduced by the Government under the
National Blue Ocean Strategy 4 (NBOS4) and was
officially launched on 31 May 2011. RTC serves as a
One Stop Centre (OSC) and a centre for integration of
services by the Government and the private sector
involving the collection, processing and distribution of
agricultural products; banking and insurance; business
advisory services; skills training; clinics and retail space.
The objective of the RTC programme is to facilitate rural
communities to be viable, competitive and capable in
improving the quality and quantity of their products. This
allows the product to be marketed not only in the
country but also abroad as export. The Ministry of Rural
and Regional Development (MRRD) and the Ministry of
Agriculture and Agro-based Industry (MOAABI) are the
main Ministries leading the implementation of the
programmes under the RTC. The National Key Result
Areas (NKRA) Unit in the MRRD is given the
responsibility for the implementation of the RTC
51
programme. RTC operates in existing premises owned
by various Government agencies. However, they were
not occupied/rented by targeted dealers/groups in line
with its original purpose. Audit findings revealed that
the overall management of RTC had been less than
satisfactory. Among weaknesses that should be given
due attention and rectified were as follows:
i. delay in channelling funds to the Ministry/
implementing agency causing an allocation of
RM4.70 million not being spent;
ii. some dealers were not doing business even though
the number of unrented retail space was only 96
(14%) compared to the total number of retail space
rented which was 592 (86%);
iii. rent arrears in RTC by the end of 2012 amounted to
RM1.49 million; and
iv. dealers from RTC Kota Bharu and Gopeng were not
satisfied with the response they received from
visitors.
b. In order to ensure that the objectives of the
establishment of RTC are achieved and to overcome its
management problems, it is recommended that the
parties involved make the following improvements:
i. MRRD should urgently channel the funds received
so that ministries/implementing agencies could be
able to conduct programmes/activities that have
been planned;
ii. MRRD as the leading Ministry of Initiative 1 (Skills
Training For Rural Residents) should provide
adequate training to enhance knowledge, skills and
52
capability so that the income and standard of living
of the targeted groups could be raised;
iii. MRRD should continuously monitor especially on
the expenditure progress and the initiative
achievements that had been set;
iv. MRRD and MOAABI should establish renting
mechanisms to dealers such as setting grace period
for rental payments so that dealers could sustain
their business operations; and
v. MRRD and RTC management should increase
promotion to attract visitors to RTC through
community activities such as organising cultural,
arts and sports activities.
MINISTRY OF EDUCATION MALAYSIA
6. Special Project Management
a. Visits of the Minister of Education throughout the Ninth
Malaysia Plan (RMKe-9) found that school facilities
such as school halls, teachers' offices, restrooms and
fields were not conducive resulting in uncomfortable
teaching and learning environment. The Minister of
Education suggested that the Ministry of Education
(Ministry) should upgrade facilities to improve school
performance. In order to address this problem, the
Ministry identified and planned strategies to improve/
upgrade facilities through the Special Project which
consisted of 350 projects involving 27 school hall
projects, 91 teachers’ office projects, 161 restrooms
projects and 71 projects in upgrading fields across the
country. A total of RM444.69 million was allocated for
this purpose for 2011 and 2012. The Special Project
53
was planned in mid 2010 and implemented in stages
beginning 2011 to 2012. The projects were expected to
be completed between 6 to 12 months and they were
divided into 10 packages and 105 sub packages to be
implemented by different contractors. This project was
managed by the Special Project Unit, Development
Division, Ministry of Education. A total of 12 different
consultants were appointed through restricted tenders
for the design module of the Special Project to construct
school halls, teachers’ offices, restrooms excluding
upgrading of the field. The Ministry also appointed 50
different consultants through restricted tender for works
supervision of the Special Project. Audit conducted from
November 2012 to January 2013 revealed that
generally, the Special Project management was not
satisfactory because the overall expenditure
performance and work progress of the Special Project
as at December 2012 were only 39.5 % and 55.1%.
Based on the sample of projects audited, there were
several weaknesses in the management of the Special
Project as follows:
i. time taken by the Ministry to issue Letter of
Acceptance (SST) was too long which was between
478 and 732 days from the issuance date of Letter
of Intent. Besides, there was delay in signing the
contract agreement which was between 79 and 392
days from the issuance date of SST. Due to the
delay in issuing SST and signing the contract
agreement with the Consultant, the Consultant
carried out duty without any legal bonding and the
Government’s interest was not safeguarded;
54
ii. 25 out of 26 projects audited failed to be completed
within the specified time and Extensions of Time
(EOT) between 53 and 413 days were applied. As
at December 2012, only 19 out of 25 projects were
completed and handed over. Meanwhile, the
remaining 5 projects were not completed/handed
over while 1 restroom project was completed on 30
May 2013 but not handed over due to objection from
the school nearby. Another field upgrading project
was completed within the stipulated time but was
still categorized as a failure as 4 projects under the
same project package were not completed; and
iii. generally, the design of the Special Project was
satisfactory. However, there were weaknesses from
the safety aspect and in fulfilling users requirement.
b. In order to overcome the weaknesses highlighted and
further improve the quality in the management of the
Special Project, it is recommended that the Ministry
considers the following:
i. establish a clear work procedure or process to
ensure that negotiation is done within the stipulated
period after the issuance of Letters Of Intent to
consultants;
ii. ensure that contract agreements are signed within 4
months and SST is issued immediately after the
appointment of Consultant/Contractor by the
Ministry to safeguard the interests of the
Government. In addition, all payments should be
supported with complete documentation;
iii. consultant/contractor should apply for extension of
time before the original project period ends.
55
Consultants also need to be more proactive and
should immediately inform the Ministry if any
problem which could affect the performance of the
project arises;
iv. appointment of sub contractor for the supply of built-
in furniture should be made in a timely manner so
that the project could be utilised as planned; and
v. the design of the Special Project should take into
account the safety aspect of the building and user
requirements so that projects could be implemented
effectively and facilities could be fully utilised by end
users.
MINISTRY OF EDUCATION MALAYSIA
7. Management Of School Building Construction Projects In Sarawak
a. The School Building Construction Projects (SBCP) were
undertaken with the objective to provide conducive and
comfortable environment for the teaching and learning
process for students and staff. Among the major
components of the SBCP were classrooms,
laboratories, dormitories, teacher quarters and dining
halls. For the period 2008 to 2012, the Ministry of
Education (Ministry) implemented 737 SBCP in
Sarawak with the original contract value amounting to
RM1.825 billion. SBCP were implemented through open
tenders, restricted tenders and direct negotiation. The
Development Division was responsible for the
management of SBCP. This Division is headed by a
Secretary and assisted by administration officers and
technical officers consisting of engineers, architects and
56
quantity surveyors. The function of the Development
Division of the Ministry was to formulate policies and
strategies for the implementation of SBCP; prepare
annual budget; manage the Ministry’s procurement;
monitor the physical and financial performance of the
projects; certify and propose payment to contractors;
conduct monthly site meetings including supervising the
works carried by consultants and coordinate the
operational problems of SBCP at the state level. Audit
findings based on samples selected revealed that
generally, the management of SBCP in Sarawak was
unsatisfactory. Among the weaknesses were as follows:
i. delay in scheduled project implementation between
219 to 909 days;
ii. the design for 8 SBCP did not take into
consideration the safety, practicality and comfort
aspects;
iii. poor quality construction works; and
iv. monitoring on the management of SBCP was not
satisfactory.
b In order to ensure that the Government gets best value
for money for the School Buildings Construction
Projects and to implement a more orderly and prudent
project in the future, it is recommended that the Ministry
considers the following actions:
i. ensure projects are implemented and completed as
scheduled so that students and staff could use
school facilities as planned so as to safeguard the
image of the Ministry;
57
ii. ensure that the designs of school buildings are in
accordance to the standards set with regard to
safety, practicality and comfort so that the end users
get maximum benefit and the Government gets best
value for money spent;
iii. effectively monitor and supervise SBCP works so
that they are implemented according to the
standards and quality stated in the contract; and
iv. terminate sick projects and appoint new contractors
in a timely manner as well as blacklist contractors/
consultants who fail to complete the work/
responsibilities as required by the contract/
agreement.
MINISTRY OF DEFENCE
8. Redevelopment Of College Complex Building For The Royal Malaysian Navy At NAVY Base In Lumut, Perak
a. The Royal Malaysian Navy College (NAVY College)
encompasses 2 training centres, namely Kapal Diraja
Sultan Idris 1 (KDSI 1) which is a training centre for
officers and KD Pelandok which is for other Forces
Rank. KDSI 1 was formerly known as Officer Faculty
which started operating in 1995. KDSI 1 could
accommodate 300 trainees at one time. The
redevelopment of KDSI 1 was to build a residential
building to accommodate trainees which were expected
to increase to 1,000 people. The development of KD
Pelandok was to fulfil the need of a more effective
learning by providing the latest learning facilities to train
other Forces Rank and to improve their skills. This
58
Project was divided into 2 separate packages. Package
A included the reconstruction of KDSI 1 which was
being carried out by HS Development Sdn. Bhd. (HSD)
since 12 April 2010 with a cost of RM48.93 million.
Whereas, Package B was for the construction of KD
Pelandok which consisted of various buildings such as
lecture rooms building, hospitality management and
culinary building, small arm simulator and machinery
testing workshop, propulsion and simulator. Initially, the
construction work was offered to Ijhraa (M) Sdn. Bhd.
with a project cost of RM41.46 million but it failed to be
completed on time. The Ministry then appointed a
rescue contractor, namely JJM Integrated Sdn. Bhd.
(JJM) on 3 October 2012 and it was expected to be
completed on 2 October 2013 with a total cost of
RM42.93 million. Audit findings revealed that the overall
project was less than satisfactory as Package A was
only completed after 2 approved extensions of time.
Meanwhile, there were weaknesses in Package B as
follows:
i. original contractor failed to complete the project
within the stipulated time, the contract was
terminated and the compensation was not yet
collected; project cost which was initially planned
and set at RM41.46 million was offered again to a
rescue contractor with a total cost of RM42.93
million;
ii. work progress of the rescue contractor for Package
B as at February 2013 was only 11.9% completed
since the project resumed on 3 October 2012. The
expected date of completion was on 20 October
59
2013. However, work progress increased to 72.48%
as at September 2013 compared to its scheduled
progress of 88.28% which meant that it was delayed
by 15.80%;
iii. this project had been categorised as a sick project
and the loss suffered amounted to RM10.2 million
wherein RM8.73 million was paid to the original
contractor and RM1.47 million being the difference
between both contracts; and
iv. contract terms and conditions were not fully
complied with.
b. In order to overcome the weaknesses highlighted and
the Government gets best value for money, it is
recommended that the parties involve take the following
actions:
i. the implementing agency should continuously
monitor the project especially on the rescue
contractor so that the construction works conform
with the stipulated specification and quality and the
project could be completed on time;
ii. the Ministry should ensure that all regulations
regarding contract administration are being
complied with; and
iii. the Ministry should ensure that the contract is
signed within 4 months from the issuance of Letter
Of Acceptance so that the contract could be
enforced.
60
PART II - MANAGEMENT OF GOVERNMENT COMPANY
9. Bank Pembangunan Malaysia Berhad
a. Bank Pembangunan Malaysia Berhad (BPMB) was
incorporated under the Company’s Act 1965 on 28
November 1973 and started its operation in June 1974.
BPMB has an authorized capital of RM10 billion and a
paid-up capital of RM3.1 billion. As at 31 December
2012, BPMB shareholders funds amounted to RM7.2
billion. The role of BPMB was to help entrepreneurs in
small and medium industry through provision of various
financing facilities, training and advisory services
especially for Bumiputra entrepreneurs. BPMB’s
objective was to increase participation and involvement
of Bumiputra in infrastructure, maritime, high-tech as
well as oil and gas industry. BPMB had 10 Board
members. The management of the company was
headed by the Group Managing Director and aided by a
Chief Operating Officer, 5 top senior officers and 308
executive and non-executive officers. Audit findings
revealed that overall, BPMB had conducted its services
in line with the given mandate. The overall BPMB’s
financial performance was good where the company
recorded net profits for financial years 2009 to 2012
which were between RM376 million to RM462.13 million
a year. However, there were weaknesses in few
aspects of its activity management, financial
management and corporate governance as follows:
i. some criteria of the Key Performance Indicators
were not achieved;
ii. target set for Non Performance Loan was not
achieved;
61
iii. cost of endowment fund was higher compared to
other local banks;
iv. loan composition did not follow targeted limit;
v. collaterals could not cover loan default;
vi. the palm oil based biodiesel project encountered
operation problems due to increase in market price
of crude palm oil which resulted in higher operating
cost;
vii. incomplete documents and there were delay in
submission of documents by borrowers; and
viii. rescheduled loan still failed to be paid by borrowers.
b. In order to rectify weakness raised in this report and to
prevent them from recurring, it is recommended that the
management of BPMB considers the following:
i. in order to minimise the risk on funding source, loan
composition should be balanced and
comprehensive. Reliance on a sole fund provider
could pose high risk if there is financial instability
faced by that fund provider;
ii. assessment on project should take into account all
factors so that loans given could be settled
effectively;
iii. in order to ensure that there is sufficient collateral to
support the balance owed, external collateral should
be taken if necessary as an additional security to
protect project failure;
iv. BPMB should comprehensively evaluate project
viability;
62
v. BPMB should comply with rules and regulations on
document submission to safeguard its interest in
litigation cases;
vi. enhance assessment and monitoring on loan
tabulation and restructuring (RSA) to ensure more
effective loan repayment; and
vii. take proactive measure to ensure that recovery of
loans could be settled without going through
litigation as this will increase cost to BPMB.
65
POSTSCRIPT
In general, Ministries/Departments/Government Companies
had good plans to implement programmes/activities/projects.
However, in terms of implementation, there were still several
weaknesses that need to be overcome immediately to ensure
that each programme/activity/project is implemented in an
efficient, economical and effective manner to achieve the
stated objectives. In this regard, the following
recommendations are made to overcome the weaknesses
from recurring:
a. As audits conducted by the National Audit Department are
based on samples and certain scopes, Secretary Generals
of Ministry/Heads of Department/Chief Executives should
carry out thorough examination to ascertain whether other
activities have the same weaknesses and thereby take
corrective actions and make improvements. In relation to
this, other than carrying out evaluation on internal controls,
the Internal Audit Unit should carry out procurement and
performance audits on the management of programmes/
activities/projects to ensure that they are implemented
efficiently, economically and the stated objectives are
achieved;
b. Based on Audit conducted, there were several
weaknesses in the implementation of programmes/
activities/projects due to lack of monitoring/supervision by
66
responsible parties, insufficient technical expertise and
relying completely on consultants/contractors, no
coordination among agencies involved as well as internal
problems faced by contractors. These weaknesses caused
the programmes/activities/projects not to be completed
within the stipulated time, unsatisfactory works quality,
increase in cost of programmes/activities/projects and the
Government not getting best value for money for the
expenditure incurred. The objectives of the programmes/
activities/projects were also not fully achieved and did not
give much impact on targeted groups. In this regard, it is
recommended that:
i. the implementation of the Government design and
build projects should be reviewed as they require
higher costs compared to conventional projects. As
such, it is recommended that only complex projects
which require specific expertise are allowed to use the
design and build method. The Ministry of Finance is
required to issue guidelines on the implementation of
design and build projects. Other than that, in order to
safeguard the Government’s interest, consultants of
design and build projects need to be appointed by the
Government. In addition, the Ministry of Finance should
issue financial instructions allowing agencies to include
a clause in the tender document to enable the
Government to remove items that are too expensive
compared to market price and allowing them to be
acquired separately;
67
ii. a detailed study on the Government projects needs to
be carried out before they are approved for
implementation. For this purpose, in line with the
Treasury Instruction 182.1, agencies need to submit
complete information such as status of project site,
project summary, project ceiling, annual allocation and
project schedule to the technical department. This is to
ensure that the project is implemented according to
schedule and the Government gets best value for
money;
iii. integrated planning among agencies involved needs to
be carried out at the early stage of project
implementation especially for big projects. For
example, Department of Sewerage Services,
Department of Environment, Department of Irrigation
and Drainage as well as local authorities need to be
consulted before projects are implemented so that all
basic facilities could be provided and projects could run
smoothly;
iv. the Ministries/Departments need to comply with the
Guidelines for Planning and Building Regulations
issued by the Standards and Cost Committee for the
reference of the National Development Planning
Committee so that buildings are built according to
standard and cost set;
v. in order to curb the problem of failed Government
programmes/activities/projects undertaken by
incapable contractors either in terms of financial or
expertise, it is recommended that companies that wish
68
to participate in the Government’s procurement should
be requested to submit information on paid-up capital
and their financial position for the last three years and
a list of past and present Government/private contracts
involved. Companies are also requested to inform their
experience in the field that they wish to offer. All
information submitted should be supported by the
companies’ declaration. This information should be
taken into consideration during the selection of
contractors;
vi. with regard to the issue of equipment procured but not
utilised whether due to incomplete building/unsuitable
equipment/purchase of equipment in excess/not
required, it is recommended the following:
- view of the users must be taken into account when
preparing the contract specifications relating to
equipment procurement; and
- procurement of equipment should be coordinated
with the progress of the building construction. For
this purpose, the schedule of equipment supplied
should be done beforehand to prevent unused
equipment from being exposed to damage and
theft as well as the expiration of its warranty period
before being utilised.
vii. Controlling Officers/Heads of Department should
enhance Government asset management to avoid
wastage and take serious view on maintenance,
monitoring and supervision tasks. Records on asset
69
and inventory should always be updated in preparation
for the Federal Government to move towards accrual
accounting in 2015;
viii. stern actions such as disciplinary action or
surcharge should be taken against officers who are
found to be negligent or fail to discharge their
duties without reasonable justification thereby
causing losses to the Government;
ix. stern action should also be taken against
consultants who failed to discharge their
responsibilities in monitoring/supervising
programmes/activities/projects such as imposing
penalty/blacklisting them from other Government
projects. In this regard, the agreement with
consultants should include provisions relating to
action that maybe imposed against them for failing
to perform their duties as specified; and
x. Government companies should ensure good
financial performance; implement their activities
properly and achieve the set objectives; and their
financial management and corporate governance
are in line with the rules and regulations stated.
c. In addition to fulfilling the legal requirements, I hope
this report will form a basis for improving the
weaknesses, strengthening efforts and enhancing
accountability and integrity. This report is also
important in the Government’s effort to increase
70
productivity, creativity and innovation in the public
service as well as a work culture which is fast, accurate
and has integrity. Indirectly, this will also contribute to
the achievement of the Government Transformation
Programme 2.0 in fighting corruption under the
National Key Results Areas (NKRA).
National Audit Department Putrajaya 8 October 2013