Auditor General's Report 2015

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AUDITOR GENERAL’S REPORT 2015

NATIONAL AUDIT DEPARTMENT MALAysIA GOVERNMENT’S FINANCIAL STATEMENT, FINANCIAL MANAGEMENT No. 15, Level 1-5 FOR THE YEAR 2015 AND ACTIVITIES OF THE Persiaran Perdana, Presint 2 Pusat Pentadbiran Kerajaan Persekutuan FEDERAL MINISTRIES/DEPARTMENTS AND 62518 Putrajaya MANAGEMENT OF THE GOVERNMENT’S COMPANIES www.audit.gov.my SERIES 1

NATIONAL AUDIT DEPARTMENT MALAYSIA

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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

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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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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

WJHS00124 T.page.indd 5 5/13/16 2:53 PM SECTION II MINISTRY OF RURAL AND REGIONAL DEVELOPMENT/ PUBLIC WORKS DEPARTMENT ACTIVITIES OF THE FEDERAL MINISTRIES / 6. Construction Of The Subang UniKL Malaysian Institute DEPARTMENTS AND MANAGEMENT OF THE Of Aviation Technology (MIAT) Campus, Selangor 53 GOVERNMENT COMPANIES

MINISTRY OF WORKS/ PUBLIC WORKS DEPARTMENT PREFACE 29 7. Construction Of A New Way Project From Seremban SYNOPSIS 35 Hi-Way PD-FR5 In Pasir Panjang And Upgrading FR5

From Pasir Panjang To Linggi, Negeri Sembilan PART 1 (Section 1) 55

IMPLEMENTATION OF ACTIVITIES BY THE FEDERAL MINISTRIES/DEPARTMENTS MINISTRY OF WORK MALAYSIA / MINISTRY OF WOMEN, FAMILY AND COMMUNITY PRIME MINISTER’S OFFICE 8. Project Management Reconstruction Quarters Welfare National Disaster Management Agency Department 58 1. The Management Of Home Construction And

Refurbishment For Flood Victims 37 MINISTRY OF TRANSPORT 9. The ERL Extension Project From KLIA To klia2 62 PRIME MINISTER’S DEPARTMENT/MINISTRY OF HOME AFFAIRS MINISTRY OF ENERGY, GREEN TECHNOLOGY AND Malaysia Civil Defence Department 2. Management On Procurement Of Supplies And WATER / MINISTRY OF FEDERAL TERRITORIES Services 41 Sewerage Services Department 10. Sewerage Projects Under The River Cleaning Components For “River Of Life” Program 65 MINISTRY OF FINANCE Inland Revenue Board Of Malaysia 3. The Management Of Company Civil Suit 43 MINISTRY OF HEALTH MALAYSIA 11. Management Of Orthopedic Treatment Activities 67

12. Management Of Private Security Services Company Royal Malaysian Customs Department In Hospital 70 4. Controls Of Licensed Warehouse For Liquors And Cigarettes 46 MINISTRY OF HEALTH MALAYSIA / MINISTRY OF

WORKS MALAYSIA MINISTRY OF RURAL AND REGIONAL DEVELOPMENT 13. Construction Project Of New Tampin Hospital, Negeri 5. Rural Water Supply Programme In Sabah 50 Sembilan 73

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WJHS00124 T.page.indd 6 5/13/16 2:53 PM SECTION II MINISTRY OF RURAL AND REGIONAL DEVELOPMENT/ PUBLIC WORKS DEPARTMENT ACTIVITIES OF THE FEDERAL MINISTRIES / 6. Construction Of The Subang UniKL Malaysian Institute DEPARTMENTS AND MANAGEMENT OF THE Of Aviation Technology (MIAT) Campus, Selangor 53 GOVERNMENT COMPANIES

MINISTRY OF WORKS/ PUBLIC WORKS DEPARTMENT PREFACE 29 7. Construction Of A New Way Project From Seremban SYNOPSIS 35 Hi-Way PD-FR5 In Pasir Panjang And Upgrading FR5

From Pasir Panjang To Linggi, Negeri Sembilan PART 1 (Section 1) 55

WORKS MALAYSIA MINISTRY OF RURAL AND REGIONAL DEVELOPMENT 13. Construction Project Of New Tampin Hospital, Negeri 5. Rural Water Supply Programme In Sabah 50 Sembilan 73

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WJHS00124 T.page.indd 7 5/13/16 2:53 PM MINISTRY OF URBAN WELLBEING, HOUSING AND MINISTRY OF EDUCATION MALAYSIA LOCAL GOVERNMENT 22. Management Of Perbadanan Kota Buku 100 National Solid Waste Management Department

14. Solid Waste Disposal Sites Management 77 MALAYSIA OF FINANCE MALAYSIA

23. Management Of Multimedia Development National Housing Department Corporation Sdn. Bhd. 102 15. Construction Of The People's Housing Programme, 24. Management Of Malaysian Agrifood Corporation Lembah Subang 2 80 Berhad (MAFC) 104 25. Sepang International Circuit Sdn. Bhd. 107 MINISTRY OF DEFENCE 16. The Management Of Jiwa Murni Project In Sarawak 82 CONCLUSION 111

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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WJHS00124 T.page.indd 8 5/13/16 2:53 PM MINISTRY OF URBAN WELLBEING, HOUSING AND MINISTRY OF EDUCATION MALAYSIA LOCAL GOVERNMENT 22. Management Of Perbadanan Kota Buku 100 National Solid Waste Management Department

14. Solid Waste Disposal Sites Management 77 MALAYSIA OF FINANCE MALAYSIA

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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SECTION 1

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SYNOPSIS

AUDITOR GENERAL’S REPORT FOR THE YEAR 2015

THE FEDERAL GOVERNMENT’S FINANCIAL STATEMENT AND FINANCIAL MANAGEMENT OF THE FEDERAL MINISTRIES/DEPARTMENTS

NATIONAL AUDIT DEPARTMENT MALAYSIA

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SYNOPSIS

AUDITOR GENERAL’S REPORT FOR THE YEAR 2015

THE FEDERAL GOVERNMENT’S FINANCIAL STATEMENT AND FINANCIAL MANAGEMENT OF THE FEDERAL MINISTRIES/DEPARTMENTS

NATIONAL AUDIT DEPARTMENT MALAYSIA

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PREFACE

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PREFACE

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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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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

WJHS00124 Tek 1.indd 7 5/13/16 3:02 PM have been carried out efficiently and economically to 3. Audit on the Federal Government‟s Financial achieve their desired objectives/goals; and Statement for the Year 2015 revealed that the Statement as a whole reflected a true and fair view on the financial 1.4. Government Companies’ Management Audit position of the Federal Government as at 31st December - to evaluate whether the Federal Government 2015, its operations and cash flows for the year ended 31st Companies have been managed in a proper and December 2015 as well as its accounting records were efficient manner as well as achieving their objectives. properly maintained and updated accordingly. Meanwhile, the audit of financial management revealed that several

Ministries and Departments did not fully comply with 2. My report on the Financial Statement and Financial financial regulations. Among others, these weaknesses Management of the Federal Government‟s were due to negligence in compliance with stipulated Ministries/Departments for the Year 2015 consists of the financial rules/procedures, insufficient manpower, lack of following: training in financial management, inadequate supervision Part I : Certification Of The Federal and close monitoring. Government’s Financial Statement For The Year Ended 31st December 4. Heads of Department had been informed earlier and 2015 confirmed all the matters reported in this report. In addition, The National Audit Department undertook several initiatives Part II : Financial Management Of The to assist the Federal Government‟s Ministries/Departments Federal Government mitigate weaknesses in their financial management. Among

the initiatives that had been taken were as follows: Part III : National Audit Department’s

Involvement In Special Evaluation 4.1. Implementation of a rating system based on Towards Enhancing Accountability Accountability Index (AI). This system rates the Of Public Financial Management compliance of financial regulations in 8 main elements.

These elements are management control, budgetary Part IV : General Matters control, receipting control, management of procurement,

expenditure control, management of trust funds/accounts and deposits, management of assets

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WJHS00124 Tek 1.indd 8 5/13/16 3:02 PM have been carried out efficiently and economically to 3. Audit on the Federal Government‟s Financial achieve their desired objectives/goals; and Statement for the Year 2015 revealed that the Statement as a whole reflected a true and fair view on the financial 1.4. Government Companies’ Management Audit position of the Federal Government as at 31st December - to evaluate whether the Federal Government 2015, its operations and cash flows for the year ended 31st Companies have been managed in a proper and December 2015 as well as its accounting records were efficient manner as well as achieving their objectives. properly maintained and updated accordingly. Meanwhile, the audit of financial management revealed that several

the initiatives that had been taken were as follows: Part III : National Audit Department’s

These elements are management control, budgetary Part IV : General Matters control, receipting control, management of procurement,

expenditure control, management of trust funds/accounts and deposits, management of assets

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WJHS00124 Tek 1.indd 9 5/13/16 3:02 PM and stores as well as management of government officers. To ascertain its compliance, the National Audit vehicles. Federal Ministries/Departments with excellent Department carried out surprise inspection at 244 rating are suggested to be benchmarked (role model). Federal government offices. Thus motivating other Federal Ministries/Departments to further improve and enhance their performance of 4.4. Implementation of the financial management financial management. performance of Premier Grade Officers. The National Audit Department constantly involved in evaluating the 4.2. Implementation of financial management audits performance of Premier Grade Officers on financial at Malaysian Diplomatic Missions Abroad. For the year management as one of the essential elements for their 2015, the National Audit Department audited 8 confirmation exercise. For the year 2015, National Audit Malaysian Diplomatic Missions Abroad. The exercises Department evaluated 29 Heads of of financial management audits are to evaluate its Ministry/Department/Agency. These evaluations compliance with relevant financial laws and regulations. indirectly enhanced the financial management of These financial management audits focused on 5 Ministry/Department/Agency as the promotion of Heads elements namely management control, receipting of Ministry/Department/Agency can only be considered control, expenditure control, management of trust by the Public Service Department after the National funds/accounts and deposits as well as management of Audit Department and Federal Treasury of Malaysia assets and stores. These audits also included The verified that the relevant officers had taken corrective Overseas Accounting System (Sistem Perakaunan Luar actions on all weaknesses raised. Negeri). 4.5. Meetings of the Public Accounts Committee 4.3. Implementation of surprise inspections at (PAC). PAC was formed to examine and monitor Federal government offices throughout the country. The national financial affairs in ensuring national finances Treasury Instructions stipulated that Heads of are governed properly, efficiently and transparent. PAC Ministry/Department are responsible to safeguard public meetings were also attended by representatives from money, stamps or other valuable items in safety boxes, the National Audit Department, Ministry of Finance, vaults, cash boxes or other repositories. Heads of Public Service Department, Accountant General‟s Ministry/Department must ensure that records kept are Department as well as the Economic Planning Unit. For complete, up to date and periodically checked by senior the year 2015, PAC conducted 33 meetings.

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WJHS00124 Tek 1.indd 10 5/13/16 3:02 PM and stores as well as management of government officers. To ascertain its compliance, the National Audit vehicles. Federal Ministries/Departments with excellent Department carried out surprise inspection at 244 rating are suggested to be benchmarked (role model). Federal government offices. Thus motivating other Federal Ministries/Departments to further improve and enhance their performance of 4.4. Implementation of the financial management financial management. performance of Premier Grade Officers. The National Audit Department constantly involved in evaluating the 4.2. Implementation of financial management audits performance of Premier Grade Officers on financial at Malaysian Diplomatic Missions Abroad. For the year management as one of the essential elements for their 2015, the National Audit Department audited 8 confirmation exercise. For the year 2015, National Audit Malaysian Diplomatic Missions Abroad. The exercises Department evaluated 29 Heads of of financial management audits are to evaluate its Ministry/Department/Agency. These evaluations compliance with relevant financial laws and regulations. indirectly enhanced the financial management of These financial management audits focused on 5 Ministry/Department/Agency as the promotion of Heads elements namely management control, receipting of Ministry/Department/Agency can only be considered control, expenditure control, management of trust by the Public Service Department after the National funds/accounts and deposits as well as management of Audit Department and Federal Treasury of Malaysia assets and stores. These audits also included The verified that the relevant officers had taken corrective Overseas Accounting System (Sistem Perakaunan Luar actions on all weaknesses raised. Negeri). 4.5. Meetings of the Public Accounts Committee 4.3. Implementation of surprise inspections at (PAC). PAC was formed to examine and monitor Federal government offices throughout the country. The national financial affairs in ensuring national finances Treasury Instructions stipulated that Heads of are governed properly, efficiently and transparent. PAC Ministry/Department are responsible to safeguard public meetings were also attended by representatives from money, stamps or other valuable items in safety boxes, the National Audit Department, Ministry of Finance, vaults, cash boxes or other repositories. Heads of Public Service Department, Accountant General‟s Ministry/Department must ensure that records kept are Department as well as the Economic Planning Unit. For complete, up to date and periodically checked by senior the year 2015, PAC conducted 33 meetings.

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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 SYNOPSIS Putrajaya th 27 April 2016

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(TAN SRI HJ. AMBRIN BIN BUANG)

Auditor General of Malaysia SYNOPSIS Putrajaya th 27 April 2016

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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

WJHS00124 Tek 1.indd 14 5/13/16 3:02 PM SYNOPSIS

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

Overall Financial Management Performance

WJHS00124 Tek 1.indd 15 5/13/16 3:02 PM with its ratio to the Gross Domestic Product (GDP) at 4. The National Audit Department also carried out 3.22%. The deficit was covered by internal and external surprise checks at 226 Federal Departments/Offices at loans amounting to RM121.364 billion. Apart from financing state and district level. Audit findings revealed that a the development expenditure, the loans were also used to number of offices did not fully comply with stipulated repay the existing debts and finance the Housing Loan financial regulations. Amongst them were mail registers, Trust Fund. cash books and petty cash books were not properly maintained or updated accordingly; surprise inspections

Financial Management Of The Federal Ministries And were not conducted as required; and power were not Departments delegate to the relevant officer in charged of safe box. The

management by Federal Departments showed an Public Accounts Committee Meeting improvement, where a total of 22 (55%) out of 40 6. The Public Accounts Committee (PAC) was formed to departments were rated as excellent in 2015 as compared examine and monitor national financial affairs by ensuring it to 29 (56.9%) out of 51 departments in 2014 and 21 has been governed and managed in an efficient, effective (46.7%) out of 45 departments in 2013. Accountant and transparent manner. PAC meetings were also attended General‟s Department of Malaysia, in 14 States and 16 by representatives from the National Audit Department, branches of Fire and Rescue Department of Malaysia Ministry of Finance, Public Service Department, Accountant throughout the country were also audited. Audit was also General‟s Department as well as the Economic Planning carried out in 8 Malaysian Diplomatic Missions Abroad Unit. In Year 2015, a total of 33 meetings have been under the purview of the Ministry of Foreign Affairs. conducted by PAC.

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WJHS00124 Tek 1.indd 16 5/13/16 3:02 PM with its ratio to the Gross Domestic Product (GDP) at 4. The National Audit Department also carried out 3.22%. The deficit was covered by internal and external surprise checks at 226 Federal Departments/Offices at loans amounting to RM121.364 billion. Apart from financing state and district level. Audit findings revealed that a the development expenditure, the loans were also used to number of offices did not fully comply with stipulated repay the existing debts and finance the Housing Loan financial regulations. Amongst them were mail registers, Trust Fund. cash books and petty cash books were not properly maintained or updated accordingly; surprise inspections

Financial Management Of The Federal Ministries And were not conducted as required; and power were not Departments delegate to the relevant officer in charged of safe box. The

3. The National Audit Department audited 25 Federal reports were submitted to relevant Heads of Department at Ministries and 40 Federal Departments in 2015 in order to Headquarter and State level for further actions. evaluate whether their financial management was in 5. Besides conducting mandatory audits as provided accordance with related laws and financial regulations. under the law, the National Audit Department also carried Audit findings revealed that the overall financial out special evaluation on the financial management performance of the ministries had declined as compared to performance of Premier Grade Officers in various the previous 2 years. In 2015, only 16 ministries were rated Ministries/Departments/Agencies. In Year 2015, a total of as excellent as compared to 20 ministries in 2014 and 23 29 Premier Grade Officers has been evaluated. ministries in 2013. However, performance of financial management by Federal Departments showed an Public Accounts Committee Meeting improvement, where a total of 22 (55%) out of 40 6. The Public Accounts Committee (PAC) was formed to departments were rated as excellent in 2015 as compared examine and monitor national financial affairs by ensuring it to 29 (56.9%) out of 51 departments in 2014 and 21 has been governed and managed in an efficient, effective (46.7%) out of 45 departments in 2013. Accountant and transparent manner. PAC meetings were also attended General‟s Department of Malaysia, in 14 States and 16 by representatives from the National Audit Department, branches of Fire and Rescue Department of Malaysia Ministry of Finance, Public Service Department, Accountant throughout the country were also audited. Audit was also General‟s Department as well as the Economic Planning carried out in 8 Malaysian Diplomatic Missions Abroad Unit. In Year 2015, a total of 33 meetings have been under the purview of the Ministry of Foreign Affairs. conducted by PAC.

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CONCLUSION

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CONCLUSION

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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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WJHS00124 Tek 1.indd 21 5/13/16 3:02 PM as audits conducted by National Audit Department f. The Accountant General‟s Department through its were based on samples and specific scopes; Internal Audit Management Division should play an important role to enhance financial management b. the involvement of Controlling Officers/Heads of performance by carrying out planned inspections on Department should be intensified through a hands- Responsibility Centres; on approach on financial matters; g. Heads of Department should establish a check and c. Ministries/Departments should enhance the balance system, supervise closely and conduct effectiveness of internal audit. Among others, they surprise checks, conduct periodic assessment on should ensure that internal auditors get sufficient skills and capabilities of officers and give training to training and guidance, prepare the annual audit plan officers who are involved in financial management so that auditing could be carried out according to so as to improve their efficiency. This is to avoid priorities, evaluate objectively and independently not officers who lack experiences and skills from using only on internal controls but also on risk their discretion when making decisions; and management and organizational governance, report on significant findings as well as giving h. Records on asset should always be updated by the recommendations that give impact and outcome to Ministries/Departments in preparation for the the organization; Federal Government‟s shift towards accrual accounting. 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 National Audit Department ensure that the same issues do not recur; Putrajaya e. Every Exit Conference with the National Audit 27h April 2016 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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WJHS00124 Tek 1.indd 22 5/13/16 3:02 PM as audits conducted by National Audit Department f. The Accountant General‟s Department through its were based on samples and specific scopes; Internal Audit Management Division should play an important role to enhance financial management b. the involvement of Controlling Officers/Heads of performance by carrying out planned inspections on Department should be intensified through a hands- Responsibility Centres; on approach on financial matters; g. Heads of Department should establish a check and c. Ministries/Departments should enhance the balance system, supervise closely and conduct effectiveness of internal audit. Among others, they surprise checks, conduct periodic assessment on should ensure that internal auditors get sufficient skills and capabilities of officers and give training to training and guidance, prepare the annual audit plan officers who are involved in financial management so that auditing could be carried out according to so as to improve their efficiency. This is to avoid priorities, evaluate objectively and independently not officers who lack experiences and skills from using only on internal controls but also on risk their discretion when making decisions; and management and organizational governance, report on significant findings as well as giving h. Records on asset should always be updated by the recommendations that give impact and outcome to Ministries/Departments in preparation for the the organization; Federal Government‟s shift towards accrual accounting. 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 National Audit Department ensure that the same issues do not recur; Putrajaya e. Every Exit Conference with the National Audit 27h April 2016 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

NATIONAL AUDIT DEPARTMENT MALAYSIA

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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

NATIONAL AUDIT DEPARTMENT MALAYSIA

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PREFACE

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PREFACE

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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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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

WJHS00124 Tek 1.indd 31 5/13/16 3:02 PM 1.4. Government Companies’ Management Audit – assets, security and weaknesses in revenue collections are to evaluate whether Federal Government Companies observed. These weaknesses resulted from negligence in have been managed in a proper and efficient manner complying with the Government‟s rules/procedures; non- as well as achieving their objectives. conscientious in programmes/ activities/ projects planning, scopes definition and tender specifications; no frequent and 2. My report on the implementation of activities of the close monitoring of works of contractors/ consultants; poor Federal Ministries/Departments and the management of project management skills; less emphasize on the outcome/ Government Companies for the year 2015 Series 1 impact of programmes/ activities/ projects and insufficient consists of 2 parts as follows: funds for procurement and maintenance of assets.

Part I : Implementation Of Activities Of The 4. As in previous years, Heads of Department had been Federal Ministries/Departments informed earlier and confirmed all the matters reported in

Part II : Management Of Federal Government this report. Furthermore, Exit Conferences were held with Companies Secretary General of Ministry/ Heads of Department/ Chief Executive Officer of the Government Company and also 3. Section 6(d) of the Audit Act 1957 requires the Auditor attended by representatives from the Attorney General‟s General to carry out audit to evaluate whether Government Chambers, Public Service Department, Malaysian Anti- activities have been manage efficiently, economically and in Corruption Commission, Ministry of Finance and related accordance with their stated objectives. The audit includes contractors to rectify the issues highlighted. Thus, I have various activities such as procurement, construction, suggested 77 recommendations for corrective and infrastructure, maintenance, and revenue management. improvement actions to be taken by Secretary General of This report contains observations from the audit of 20 Ministry/ Heads of Department/ Chief Executive Officer to programmes/ activities/ projects of 19 Federal Ministries/ mitigate the identified weaknesses of the programmes/ Departments, management, management and financial activities/ projects. performance of 5 Government Companies. In general, weaknesses such as works/ supplies/ services not 5. In achieving the objectives of the Government accordance to specifications, of poor quality and not Transformation Programme 2.0 in fighting corruption under suitable; unreasonable delays; improper payment; the National Key Results Areas (NKRA), the Auditor wastages; weaknesses in management of Government‟s General‟s Dashboard (AG Dashboard) was implemented on

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WJHS00124 Tek 1.indd 32 5/13/16 3:02 PM 1.4. Government Companies’ Management Audit – assets, security and weaknesses in revenue collections are to evaluate whether Federal Government Companies observed. These weaknesses resulted from negligence in have been managed in a proper and efficient manner complying with the Government‟s rules/procedures; non- as well as achieving their objectives. conscientious in programmes/ activities/ projects planning, scopes definition and tender specifications; no frequent and 2. My report on the implementation of activities of the close monitoring of works of contractors/ consultants; poor Federal Ministries/Departments and the management of project management skills; less emphasize on the outcome/ Government Companies for the year 2015 Series 1 impact of programmes/ activities/ projects and insufficient consists of 2 parts as follows: funds for procurement and maintenance of assets.

Part I : Implementation Of Activities Of The 4. As in previous years, Heads of Department had been Federal Ministries/Departments informed earlier and confirmed all the matters reported in

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WJHS00124 Tek 1.indd 33 5/13/16 3:02 PM 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 SYNOPSIS 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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WJHS00124 Tek 1.indd 34 5/13/16 3:02 PM 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 SYNOPSIS 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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WJHS00124 Tek 1.indd 35 5/13/16 3:02 PM 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

WJHS00124 Tek 1.indd 36 5/13/16 3:02 PM 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

WJHS00124 Tek 1.indd 37 5/13/16 3:02 PM States namely: Kelantan, Terengganu, Pahang, Perak iii. non-eligibility for 54 RKB‟s recipients and restoration and Sabah have been stricken by great floods. These works requirements. Among of such non- floods caused fatalities, damages/losses of homes as compliance where house were not considered as well as distress to victims involved. To support flood total loss, unoccupied residence, rented houses, victims to begin post-flood lives, the Federal shop lots and non-resident owners; Government has allocated funds amounting to RM500 iv. non-assistance on RKB‟s project or restoration million through KWABBN. The objective of this funding works for 36 flood victims despite of their houses to aid the flood victims for their losses/damages. were destroyed or damaged by floods. These non-

assitance requires rigirous actions and attention by b. The audit performed between September to November relevant authorities; 2015 in 5 states involved revealed that preliminary process for recipient selection and verification, v. less effective on the implementation of RKB‟s appointment of contractors, work executions and project and restoration works. Among highlighted certification in addition to payment procedures for new issues were the compliance with set design; inability permanent home project [Rumah Kekal Baharu (RKB)] of contractors to complete the RKB‟s project; and restoration works have met the stipulated abandoned projects and appropriateness of project Government directives in a fast-track manner. However, site; there were several issues that could jeopardise the vi. 109 houses for restoration works were out of scope. efficiency and effectiveness of this project as follows: These include repairs of stores and barn; construction of new wall and garage; paint jobs for i. the overall performance of the home construction brick gate; roof replacements on houses unaffected project is less satisfactory. A total of 557 (40%) out by floods and installation works for grilles, fan, of 1395 RKB‟s units was incompleted resulted flood cabinets and ceiling; and victims were still staying in transit homes, tents and so on; vii. Unoccuppied or unutilised of 17 constructed and repaired houses for flood victims due to ii. non-updated information on RKB‟s recipients and unwillingness to move, problems in providing basic restoration works in the flood management utilities and the non-official handover. information system (ePASCA BANJIR) lead to

unrealiable and non-integrity of the data and system;

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WJHS00124 Tek 1.indd 38 5/13/16 3:02 PM States namely: Kelantan, Terengganu, Pahang, Perak iii. non-eligibility for 54 RKB‟s recipients and restoration and Sabah have been stricken by great floods. These works requirements. Among of such non- floods caused fatalities, damages/losses of homes as compliance where house were not considered as well as distress to victims involved. To support flood total loss, unoccupied residence, rented houses, victims to begin post-flood lives, the Federal shop lots and non-resident owners; Government has allocated funds amounting to RM500 iv. non-assistance on RKB‟s project or restoration million through KWABBN. The objective of this funding works for 36 flood victims despite of their houses to aid the flood victims for their losses/damages. were destroyed or damaged by floods. These non-

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WJHS00124 Tek 1.indd 39 5/13/16 3:02 PM c. To ensure that all the weaknesses highlighted do not PRIME MINISTER’S DEPARTMENT / MINISTRY OF recur, the Government reaps best value for money and HOME AFFAIRS

achieving its objective to provide immediate relief to the Malaysia Civil Defence Department

flood victims, it is recommended that APBN to take 2. Management On Procurement Of Supplies And actions on the following matters: Services

i. to establish a specialised and comprehensive a. Malaysia Civil Defence Department (CDD) is a civil defence agency established in 1952 under Civil Standard Operating Procedure (SOP) for post-flood Defence Ordinance 1951. The functions of CDD among program. The SOP must comprises comprehensive others are to formulate policies on civil defence; program for RKB‟s project and restoration works organize and manage Civil Defence Forces through which include methods of application, selection, support services and logistics; train and educate the verification and updating information into the flood public about civil defence so they can receive and give management information system (ePASCA appropriate response to the programmes that are BANJIR). Furthermore, this SOP is essential to important to their personal safety; review and organize ensure every relevant parties could equip appropriate training for Civil Defence Forces in themselves to further understanding of their accordance with the current situation; provide respective functions and responsibilities given; emergency assistance; perform tasks and supervise ii. to review the selection mechanisms in order to disaster rescue and accident victims throughout the promote transparent and clear recipient selections country. CDD is an agency under the Prime Minister's th with all parties including flood victims themselves; Department (PMD) effective 29 July 2015 which was and previously under Ministry of Home Affairs (MOHA). For the year 2013 to 2015, a total of RM368.14 million and iii. to immediately coordinate efficient placing for RM40.54 million were spent on operating and completed RKB‟s projects for intended recipients. 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

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WJHS00124 Tek 1.indd 40 5/13/16 3:02 PM c. To ensure that all the weaknesses highlighted do not PRIME MINISTER’S DEPARTMENT / MINISTRY OF recur, the Government reaps best value for money and HOME AFFAIRS achieving its objective to provide immediate relief to the Malaysia Civil Defence Department flood victims, it is recommended that APBN to take 2. Management On Procurement Of Supplies And actions on the following matters: Services

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

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WJHS00124 Tek 1.indd 41 5/13/16 3:02 PM MOHA and CDD appointed members of Opening i. CDD and its Pusat Tanggungjawab (PTJ) must Quotation/Tender Committee and Evaluation of ensure acquisition and acceptance of supplies Quotation/Tender Committee. The results of the complied with the stipulated financial and internal meeting on price negotiation were properly controls procedures. Disciplinary action must be documented. However, the overall management of the taken against officer(s) disregard the financial procurement of supplies and services by CDD was less procedures; satisfactory. Some of the weaknesses identified are as ii. MOHA and CDD must ensure proper and efficient follows: management and administration of procurement

i. poor planning resulted in split procurement totalling contracts to protect the interests of the Government; RM5.80 million; and ii. late in signing of contract between 93 to 554 days iii. CDD must ensure all assets and inventories records and late submission of performance bonds totalling are complete and updated; and implement proper RM0.65 million between 4 to 70 days; store management to safeguard its assets and inventories. 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 MINISTRY OF FINANCE

iv. record for equipment distributed by IPPA/PNPA Inland Revenue Board Of Malaysia

differed from record of receipts at PNPA/Pejabat 3. The Management Of Company Civil Suit Daerah Pertahanan Awam (PDPA). In addition, 12' inflatable boat, commander signal baton, helmet, a. Civil Suit taken by Inland Revenue Board of generator sets, fire retardant clothing, breathing Malaysia (IRBM) towards companies is to ensure the apparatus and surf board bought for more than 250 judgment/command has been made for the companies days were not used and not tested. to pay tax arrears when normal procedure to collect tax failed. Companies tax arrears (net amount of c. To ensure proper, efficient and Government reaps best Receivable Account) for the year ended 2013 is value for money on procurement of supply and services RM4.766 billion (56.55%) out of total tax arrears in CDD, it is recommended MOHA and CDD take action amounting to RM8.429 billion. While in 2014, on the following matters: companies tax arrears is RM4.365 billion (53.08%) out of RM8.224 billion.

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WJHS00124 Tek 1.indd 42 5/13/16 3:02 PM MOHA and CDD appointed members of Opening i. CDD and its Pusat Tanggungjawab (PTJ) must Quotation/Tender Committee and Evaluation of ensure acquisition and acceptance of supplies Quotation/Tender Committee. The results of the complied with the stipulated financial and internal meeting on price negotiation were properly controls procedures. Disciplinary action must be documented. However, the overall management of the taken against officer(s) disregard the financial procurement of supplies and services by CDD was less procedures; satisfactory. Some of the weaknesses identified are as ii. MOHA and CDD must ensure proper and efficient follows: management and administration of procurement i. poor planning resulted in split procurement totalling contracts to protect the interests of the Government; RM5.80 million; and ii. late in signing of contract between 93 to 554 days iii. CDD must ensure all assets and inventories records and late submission of performance bonds totalling are complete and updated; and implement proper RM0.65 million between 4 to 70 days; store management to safeguard its assets and inventories. 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 MINISTRY OF FINANCE iv. record for equipment distributed by IPPA/PNPA Inland Revenue Board Of Malaysia differed from record of receipts at PNPA/Pejabat 3. The Management Of Company Civil Suit Daerah Pertahanan Awam (PDPA). In addition, 12' inflatable boat, commander signal baton, helmet, a. Civil Suit taken by Inland Revenue Board of generator sets, fire retardant clothing, breathing Malaysia (IRBM) towards companies is to ensure the apparatus and surf board bought for more than 250 judgment/command has been made for the companies days were not used and not tested. to pay tax arrears when normal procedure to collect tax failed. Companies tax arrears (net amount of c. To ensure proper, efficient and Government reaps best Receivable Account) for the year ended 2013 is value for money on procurement of supply and services RM4.766 billion (56.55%) out of total tax arrears in CDD, it is recommended MOHA and CDD take action amounting to RM8.429 billion. While in 2014, on the following matters: companies tax arrears is RM4.365 billion (53.08%) out of RM8.224 billion.

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WJHS00124 Tek 1.indd 43 5/13/16 3:02 PM to RM79.10 million and no action taken to b. An Audit performed between May until July 2015 in deliver 32 Notice of Demand (10.3%) towards Cheras Branch, Wangsa Maju Branch and Large companies up to 1st July 2015 amounting to Taxpayer Branch located in Jalan Tunku Abdul Halim, RM5.56 million; and Kuala Lumpur. The audit revealed that IRBM has taken  winding up action is not taken towards 3 appropriate action in distributing companies civil suit companies who failed to pay the remaining files to all IRBM branches starting Januari 2014 to claims, and enable prompt action taken for cases involved.

has implemented in 2014. However, the c. To enhance the management of civil suit taken towards performance cannot be measured accurately as the companies, it is recommended that IRBM consider the data produced from the 3 branches were differ from following actions: the Revenue Collection Department (RCD) reported

data; i. data produced by RCD need to be exact as the data

from the branches in ensuring the accuracy of the ii. Non-compliance of work procedures involving: report;  delay in registering 140 out of 312 summons ii. enhancement of the efficiency of summon (44.9%) in court from 10 to 880 days amounting management starting from the aspect of delivery of to RM113.94 million; summons and Notice of Demand delivery to the  delay in delivering 108 out of 312 summons company; and (34.6%) to companies from 2 to 128 days iii. efficiently monitoring installment made by the amounting to RM95.50 million; companies and implementing decisive action to  no action taken after judgment was obtained ensure companies pay tax arrears as per stipulated towards 29 cases amounting to RM12.44 million; schedule.  delay in delivering 17 out of 312 Notice of

Demand (5.4%) from 5 to 1,361 days amounting

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WJHS00124 Tek 1.indd 44 5/13/16 3:02 PM to RM79.10 million and no action taken to b. An Audit performed between May until July 2015 in deliver 32 Notice of Demand (10.3%) towards Cheras Branch, Wangsa Maju Branch and Large companies up to 1st July 2015 amounting to Taxpayer Branch located in Jalan Tunku Abdul Halim, RM5.56 million; and Kuala Lumpur. The audit revealed that IRBM has taken  winding up action is not taken towards 3 appropriate action in distributing companies civil suit companies who failed to pay the remaining files to all IRBM branches starting Januari 2014 to claims, and enable prompt action taken for cases involved.

However, evaluations conducted in 3 IRBM‟s branches iii. no action taken towards 7 companies which unable found that the management of civil suit was less to obey the tax installment amounting to RM634,810 satisfactory due to weaknesses as follows: and submission of bad checks for tax installment amounting to RM941,763. i. IRBM‟s Civil and Litigation Department performance has implemented in 2014. However, the c. To enhance the management of civil suit taken towards performance cannot be measured accurately as the companies, it is recommended that IRBM consider the data produced from the 3 branches were differ from following actions: the Revenue Collection Department (RCD) reported data; i. data produced by RCD need to be exact as the data

Demand (5.4%) from 5 to 1,361 days amounting

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WJHS00124 Tek 1.indd 45 5/13/16 3:02 PM Royal Malaysian Customs Department private licensed warehouses for liquors and cigarettes

4. Controls Of Licensed Warehouse For Liquors and in 5 states (Federal Territory Kuala Lumpur, Perlis, Cigarettes Johor, Sabah and Sarawak) revealed that generally, the management and controls of public and private licensed a. A licensed warehouse is a building or secure area that warehouse for liquors and cigarettes were satisfactory. store imported dutiable goods in which payment of Audit findings also revealed that 26 (96.3%) out of 27 customs duties is deferred until such goods are taken public and private licensed warehouses visited were out to be exported or sold locally. Operators of licensed conducting permitted activities and dutiable goods were warehouse must obtain a license under Section 65 of labelled and stored properly within licensed areas. In the Customs Act 1967 from the Royal Malaysian addition, all 5 State Customs Department audited had Customs Department (RMCD) before commencing proper controls on the transfer of dutiable goods from/to operations. The function of licensed warehouses was licensed warehouse as well as to Duty Free Island of expanded to allowed operators to use it as a storage Langkawi and Tioman. However, some of the and distribution centre for international and domestic weaknesses identified are as follows: trade. Among activities permitted in a licensed i. Federal Territory Kuala Lumpur Customs warehouse are warehousing dutiable goods; break Department and Perlis Customs Department did not bulking; re-packaging; re-labelling; buying and selling; determine the correct value of bank guarantee for 3 consolidation/merger; and entreport trade (that is Private Licensed Warehouse resulted customs importing goods to be processed or stored and re- duties amounting to RM14.06 million were not exported). For the year 2012 to 2014, revenue collected covered by bank guarantees to safeguard by RMCD through public and private licensed Government‟s interests; warehouses amounted to RM3.922 billion. As at 31 ii. RMCD did not claim customs duties amounting to December 2015, a total of 64 (18.1%) from 353 public RM2.10 million from 6 Private Licensed Warehouse and private licensed warehouses were involved in with dutiable goods stored more than 2 years warehousing of liquors and cigarettes. without approval of extension of time; b. The audit performed from May to September 2015 at iii. transfer of dutiable goods did not comply with the Warehousing Management and Control Unit, Trade stipulated procedures such as: Facilitation and Industry Branch, Customs Division, RMCD Headquarters; Industry Branch/Unit, State  four Private Licensed Warehouse in Perlis did Customs Department; and 43 (67.2%) public and not comply with the additional requirement of

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WJHS00124 Tek 1.indd 46 5/13/16 3:02 PM Royal Malaysian Customs Department private licensed warehouses for liquors and cigarettes

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WJHS00124 Tek 1.indd 47 5/13/16 3:03 PM preparation and submission of monthly balance cigarettes, it is recommended that RMCD take action on statements (containing particulars of exports the following matters: and proof of payment from importers in i. RMCD Headquarters must ensure all private Thailand); and licensed warehouse have adequate bank guarantee  four Private Licensed Warehouse in Johor to safeguard Government‟s interests by enforcing involved in ships supplies with customs duties Customs Standing Order No. 53 on or before 30 amounting to RM20.27 million for a period of 3 June 2016 and monitor its implementation on a years. However, no evidence to confirm whether monthly basis; the transfer of dutiable goods from all four ii. State Customs Directors must claim customs duties Private Licensed Warehouse were escorted by on or before 30 June 2016 from Private Licensed Customs officers to the ships for the purpose of Warehouse with dutiable goods stored more than 2 sealing the ships‟ stores; and years without approval of extension of time; iv. weaknesses in monitoring by State Customs iii. State Customs Directors must ensure all Customs Department such as: procedures are complied, particularly additional  a total of 41 (95.3%) from 43 licensees did not requirements on transfer of dutiable goods from submit annual stock statements verified by Kedah and Perlis to importers in Thailand and Certified Auditors; stipulated procedures on ships supplies from Selangor, Penang and Johor to avoid leakage of  for a period of 3 years, State Customs Government revenue; Department only carried out 68 (54.8%) out of 124 times annual 100% physical examination; iv. RMCD Headquarters must review Customs and Standing Order No. 53 before the end of 2016 so that only licensee suspected for non-compliance  from 26 public and private licensed warehouses and violations of license are required to submit visited, one Private Licensed Warehouse had annual stock statements verified by Certified expired dutiable goods with duties amounting to Auditors; and RM238,433. v. all State Customs Director must carried out the c. To ensure that proper and effective management and annual 100% physical examination. controls of licensed warehouse for liquors and

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WJHS00124 Tek 1.indd 48 5/13/16 3:03 PM preparation and submission of monthly balance cigarettes, it is recommended that RMCD take action on statements (containing particulars of exports the following matters: and proof of payment from importers in i. RMCD Headquarters must ensure all private Thailand); and licensed warehouse have adequate bank guarantee  four Private Licensed Warehouse in Johor to safeguard Government‟s interests by enforcing involved in ships supplies with customs duties Customs Standing Order No. 53 on or before 30 amounting to RM20.27 million for a period of 3 June 2016 and monitor its implementation on a years. However, no evidence to confirm whether monthly basis; the transfer of dutiable goods from all four ii. State Customs Directors must claim customs duties Private Licensed Warehouse were escorted by on or before 30 June 2016 from Private Licensed Customs officers to the ships for the purpose of Warehouse with dutiable goods stored more than 2 sealing the ships‟ stores; and years without approval of extension of time; iv. weaknesses in monitoring by State Customs iii. State Customs Directors must ensure all Customs Department such as: procedures are complied, particularly additional  a total of 41 (95.3%) from 43 licensees did not requirements on transfer of dutiable goods from submit annual stock statements verified by Kedah and Perlis to importers in Thailand and Certified Auditors; stipulated procedures on ships supplies from Selangor, Penang and Johor to avoid leakage of  for a period of 3 years, State Customs Government revenue; Department only carried out 68 (54.8%) out of 124 times annual 100% physical examination; iv. RMCD Headquarters must review Customs and Standing Order No. 53 before the end of 2016 so that only licensee suspected for non-compliance  from 26 public and private licensed warehouses and violations of license are required to submit visited, one Private Licensed Warehouse had annual stock statements verified by Certified expired dutiable goods with duties amounting to Auditors; and RM238,433. v. all State Customs Director must carried out the c. To ensure that proper and effective management and annual 100% physical examination. controls of licensed warehouse for liquors and

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WJHS00124 Tek 1.indd 49 5/13/16 3:03 PM MINISTRY OF RURAL AND REGIONAL DEVELOPMENT performance of BALB programme in Sabah is good

throughout the country to improve their health and i. the preliminary report for Water Supply Project of quality of life. Thus, stimulating the economy, industry, Mukim Tulid/Lanas/Sook, Sabah was not complete agriculture and tourism development. The and comprehensive as the proposed pipeline implementation of BALB Program in Sabah has started alignment excluded a village in Mukim Sook; since 2010. This programme was initiated under the ii. Reticulation System for BALB Project Year National Key Result Areas (NKRA) - Improving Rural 2011/2012 Sabah - Zone 6a(3), Kota Belud were not Development of the Government Transformation completed within the stipulated period. Liquidated Programme (GTP) 1.0 (2010 to 2012) and GTP 2.0 and ascertained damages (LAD) for the period 16th (2013 to 2015). To date, there were 184 on July 2014 to 15th October 2015 (the date of the going/completed projects with an allocation of Certificate of Practical Completion [CPC] issued) RM2.001 billion. totalled RM584,005 was not collected from the

contractor; b. The audit performed at the Ministry Of Rural And iii. no coordination between units in the Ministry led to Regional Development (Ministry), Sabah State Water the delays of BALB Project In Kinabatangan, Sabah Department [Jabatan Air Negeri Sabah (JANS)] and 12 Year 2012 since the installation of the pipes was BALB projects in 11 districts namely Keningau, Kota temporarily suspended due to upgrading of road Kinabalu, Semporna, Kudat, Kota Belud, Tuaran, under the Rural Road Programme (Jalan Luar Sipitang, Kinabatangan, Kuala Penyu, Bongawan and Bandar [JALB]); Membakut. The audit revealed that in general, the

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WJHS00124 Tek 1.indd 50 5/13/16 3:03 PM MINISTRY OF RURAL AND REGIONAL DEVELOPMENT performance of BALB programme in Sabah is good

5. Rural Water Supply Programme in Sabah because the more than 90% of the targeted communities have access to clean and treated water. a. Since the year 1974, the Government of Malaysia has The expenditure performance for the program is also implemented the Rural Water Supply Programme good where 96.7% of the allocation was utilised. In [Bekalan Air Luar Bandar Program (BALB)] under the addition, a total of 169 (98.8%) projects under the GTP Accelerated Rural Water Supply Schemes in the 1.0 were completed within the specified period. Second Malaysia Plan (Rancangan Malaysia ke-2 However, there were some weaknesses identified as [RMKe-2]). The main objective of BALB program is to follows: provide clean and treated water to rural communities throughout the country to improve their health and i. the preliminary report for Water Supply Project of quality of life. Thus, stimulating the economy, industry, Mukim Tulid/Lanas/Sook, Sabah was not complete agriculture and tourism development. The and comprehensive as the proposed pipeline implementation of BALB Program in Sabah has started alignment excluded a village in Mukim Sook; since 2010. This programme was initiated under the ii. Reticulation System for BALB Project Year National Key Result Areas (NKRA) - Improving Rural 2011/2012 Sabah - Zone 6a(3), Kota Belud were not Development of the Government Transformation completed within the stipulated period. Liquidated Programme (GTP) 1.0 (2010 to 2012) and GTP 2.0 and ascertained damages (LAD) for the period 16th (2013 to 2015). To date, there were 184 on July 2014 to 15th October 2015 (the date of the going/completed projects with an allocation of Certificate of Practical Completion [CPC] issued) RM2.001 billion. totalled RM584,005 was not collected from the

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WJHS00124 Tek 1.indd 51 5/13/16 3:03 PM iv. Reticulation System for BALB Project in Pulau Gaya MINISTRY OF RURAL AND REGIONAL DEVELOPMENT/ inclusive of service tank reservoir (capacity of 5 PUBLIC WORKS DEPARTMENT

million litres) that target 2,441 houses was 6. Construction Of The Subang UniKL Malaysian completed but yet to operate optimally because the Institute Of Aviation Technology (MIAT) Campus, Selangor decision made by Jawatankuasa Pembangunan Bersepadu Pulau Gaya, Kota Kinabalu‟s meeting a. The construction of Subang UniKL Malaysian Institute No. 02/2012 indicated illegal settlements on Pulau Of Aviation Technology (MIAT) Campus, Selangor is a Gaya which resulted termination of pipes installation Federal Government project approved under the Tenth and connection to such villages; and Malaysia Plan [Rancangan Malaysia Ke-10 (RMKe-10)]. This campus is an addition to the existing campus in v. even though 5 BALB Project - Reticulation System Jenderam Hulu, Dengkil, Selangor. The objective of this were completed and operational, the performance of project is to provide technical training in the field of meter connection is low at only 38.4% (3,032 out of aviation and aerospace as well as providing practical 7,901 targeted houses). and realistic exposure of live aircraft to students in order c. To ensure that all weaknesses highlighted are efficiently to meet the development needs of the country‟s aviation and effectively mitigated, all parties involved are industry. The project was constructed on a 21.33 acres recommended to take the following actions: land located in Lot PT40446, Persiaran A, Off Jalan Lapangan Terbang Subang, Subang, Selangor. The i. The Ministry shall assess the project outcome of Public Works Department (PWD) was appointed as the BALB Programme in Sabah to determine whether implementing agency on behalf of the client, which is facilities are optimally used and the Government Council of Trust for the People [Majlis Amanah Rakyat reaps best value for money; (MARA)], Ministry of Rural and Regional Development ii. The Ministry/JANS must take proactive and punitive (MRRD). The Ministry of Finance Malaysia agreed to actions against contractors and consultants as offer the contract to Nadi Cergas Sdn. Bhd. through stipulated in the contract; and direct negotiations. The contract valued RM130 million must be completed within 24 months from the date of iii. The Ministry with all related agencies shall expand site possession which was on 18 February 2013. the scope of BALB Programme to hard-core poor in the rural community. b. The audit performed between August to November 2015 at the General Building Works Branch 1, PWD

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WJHS00124 Tek 1.indd 52 5/13/16 3:03 PM iv. Reticulation System for BALB Project in Pulau Gaya MINISTRY OF RURAL AND REGIONAL DEVELOPMENT/ inclusive of service tank reservoir (capacity of 5 PUBLIC WORKS DEPARTMENT million litres) that target 2,441 houses was 6. Construction Of The Subang UniKL Malaysian completed but yet to operate optimally because the Institute Of Aviation Technology (MIAT) Campus, Selangor decision made by Jawatankuasa Pembangunan Bersepadu Pulau Gaya, Kota Kinabalu‟s meeting a. The construction of Subang UniKL Malaysian Institute No. 02/2012 indicated illegal settlements on Pulau Of Aviation Technology (MIAT) Campus, Selangor is a Gaya which resulted termination of pipes installation Federal Government project approved under the Tenth and connection to such villages; and Malaysia Plan [Rancangan Malaysia Ke-10 (RMKe-10)]. This campus is an addition to the existing campus in v. even though 5 BALB Project - Reticulation System Jenderam Hulu, Dengkil, Selangor. The objective of this were completed and operational, the performance of project is to provide technical training in the field of meter connection is low at only 38.4% (3,032 out of aviation and aerospace as well as providing practical 7,901 targeted houses). and realistic exposure of live aircraft to students in order c. To ensure that all weaknesses highlighted are efficiently to meet the development needs of the country‟s aviation and effectively mitigated, all parties involved are industry. The project was constructed on a 21.33 acres recommended to take the following actions: land located in Lot PT40446, Persiaran A, Off Jalan Lapangan Terbang Subang, Subang, Selangor. The i. The Ministry shall assess the project outcome of Public Works Department (PWD) was appointed as the BALB Programme in Sabah to determine whether implementing agency on behalf of the client, which is facilities are optimally used and the Government Council of Trust for the People [Majlis Amanah Rakyat reaps best value for money; (MARA)], Ministry of Rural and Regional Development ii. The Ministry/JANS must take proactive and punitive (MRRD). The Ministry of Finance Malaysia agreed to actions against contractors and consultants as offer the contract to Nadi Cergas Sdn. Bhd. through stipulated in the contract; and direct negotiations. The contract valued RM130 million must be completed within 24 months from the date of iii. The Ministry with all related agencies shall expand site possession which was on 18 February 2013. the scope of BALB Programme to hard-core poor in the rural community. b. The audit performed between August to November 2015 at the General Building Works Branch 1, PWD

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WJHS00124 Tek 1.indd 53 5/13/16 3:03 PM and the Contract Quantity Survey Branch, PWD as well obtains the Certificate of Compliance and as the client department, namely Construction and Completion; Maintenance Division, MARA Headquarters, Kuala ii. MARA shall persistently discuss with Malaysia Lumpur. The audit revealed that in general, the Airlines Berhad (MAB) and resolve the issue of land management of the construction of Subang UniKL MIAT acquisition for taxiway with relevant authorities in Campus was good. Contract was signed within the procuring the taxiway facilities and achieving the stipulated time; interim and advance payments were in objectives; and order; and the Performance Bond and insurance iii. PWD shall ensure the contractor rectifies all policies complied with the terms and conditions of the construction defects and the building functions contract. In addition, PWD established a good perfectly. monitoring mechanism to monitor work done by the contractor. The project has incorporated the result of MINISTRY OF WORKS MALAYSIA / PUBLIC WORKS value management laboratory in accordance with the DEPARTMENT Government‟s aspiration. However, there were several weaknesses as follows: 7. Construction of a New Way Project From Seremban Hi-way PD-FR5 In Pasir Panjang And Upgrading FR5 i. the contractor failed to complete the project within From Pasir Panjang To Linggi, Negeri Sembilan the stipulated extension of time; (Section 1)

ii. the issue of construction site for taxiway was yet to a. Construction of a New Way Project From Seremban Hi- be resolved due to the relocation of construction site way PD-FR5 In Pasir Panjang And Upgrading FR5 might resulted in non-achievement of project From Pasir Panjang To Linggi, Negeri Sembilan objective as planned; (Section 1) is a project under the Eighth Malaysia Plan (8MP), with a cost ceiling of RM160 million. The project iii. delay in finalising price negotiations; and aim to overcome the traffic overcrowding in Teluk iv. unsuitable designs; unsatisfactory quality of Kemang, Port Dickson, especially during festive construction works; and imperfect electrical works. seasons and school holidays as the Port Dickson is a major tourist centre. In addition, local residents using c. In order to rectify the weaknesses highlighted, it is the same path to Lukut and Linggi due to non-existence recommended that: of alternative road. The Ministry of Works Malaysia

i. PWD shall ensure that the contractor complies with [Kementerian Kerja Raya (KKR)] and the Public Works the requirements of the relevant authorities and Department (PWD) was appointed as the implementing

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WJHS00124 Tek 1.indd 54 5/13/16 3:03 PM and the Contract Quantity Survey Branch, PWD as well obtains the Certificate of Compliance and as the client department, namely Construction and Completion; Maintenance Division, MARA Headquarters, Kuala ii. MARA shall persistently discuss with Malaysia Lumpur. The audit revealed that in general, the Airlines Berhad (MAB) and resolve the issue of land management of the construction of Subang UniKL MIAT acquisition for taxiway with relevant authorities in Campus was good. Contract was signed within the procuring the taxiway facilities and achieving the stipulated time; interim and advance payments were in objectives; and order; and the Performance Bond and insurance iii. PWD shall ensure the contractor rectifies all policies complied with the terms and conditions of the construction defects and the building functions contract. In addition, PWD established a good perfectly. monitoring mechanism to monitor work done by the contractor. The project has incorporated the result of MINISTRY OF WORKS MALAYSIA / PUBLIC WORKS value management laboratory in accordance with the DEPARTMENT Government‟s aspiration. However, there were several weaknesses as follows: 7. Construction of a New Way Project From Seremban Hi-way PD-FR5 In Pasir Panjang And Upgrading FR5 i. the contractor failed to complete the project within From Pasir Panjang To Linggi, Negeri Sembilan the stipulated extension of time; (Section 1) ii. the issue of construction site for taxiway was yet to a. Construction of a New Way Project From Seremban Hi- be resolved due to the relocation of construction site way PD-FR5 In Pasir Panjang And Upgrading FR5 might resulted in non-achievement of project From Pasir Panjang To Linggi, Negeri Sembilan objective as planned; (Section 1) is a project under the Eighth Malaysia Plan (8MP), with a cost ceiling of RM160 million. The project iii. delay in finalising price negotiations; and aim to overcome the traffic overcrowding in Teluk iv. unsuitable designs; unsatisfactory quality of Kemang, Port Dickson, especially during festive construction works; and imperfect electrical works. seasons and school holidays as the Port Dickson is a major tourist centre. In addition, local residents using c. In order to rectify the weaknesses highlighted, it is the same path to Lukut and Linggi due to non-existence recommended that: of alternative road. The Ministry of Works Malaysia i. PWD shall ensure that the contractor complies with [Kementerian Kerja Raya (KKR)] and the Public Works the requirements of the relevant authorities and Department (PWD) was appointed as the implementing

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WJHS00124 Tek 1.indd 55 5/13/16 3:03 PM agencies for this project. The scope of work for this Performance Bond has complied with the terms of the project was to build a road Arterial A, and mainline from contract. However, several weaknesses identified are CH7700 to CH8579. The work also included the as follows: upgrading work for the route of FR5 Pasir Panjang to i. project was completed over than 10 years as Linggi. The whole length of the project is a 22.6 km. compared to the initial tenure which was within 2 Arterial B‟s road building project was in a separate years and 6 months; contract as Section 2. The project started in February 2005 and should be completed in August 2007 (2 years ii. reappointment of the similar contractor for the 6 months). Kartajaya-Fort Jeli East-AMR JV Sdn. Bhd. second contract was unfair and against with the (HBA-JV) was appointed as contractor for this project. decision made by the JKR Hospital Project The work progression of the appointed contractor was Committee; not satisfactory and due to that it has been terminated iii. a delay in preparing Final Certificate of Contract through Notice of Termination of Employment Contract Terminated Hiring Contractors up to 1 year and 10 on 23rd December 2009 with 64.6% progressed. months (as to date of exit conference on 16th However, the similar contractor was reappointed to February 2016) for the first and second contract; pursue the remaining works nevertheless the and performance was still not satisfactory with an increase of only 3.6% progressed. Yet, the contractor was iv. construction of the bridge was not in accordance terminated again on 9th May 2013. As a final point, the with the construction drawings and issues regarding Government has appointed Seroja Anggerik utilities relocation were inefficiently managed. Development Sdn. Bhd. on 27th March 2014 as the new contractor and the project completed on 28th December c. To overcome the shortcomings raised, it is 2015. recommended to take action on the following matters:

b. The audit performed between June and September i. PWD should build road divider and a traffic light at 2015 revealed that the overall project management was the intersection of Jalan Kg. Sekawang river, unsatisfactory, as the project took 10 years to be CH17050 to ensure the safety of road users; completed. Moreover, the construction of the bridge ii. PWD should monitor closely on the quality of work was not in accordance with the construction drawings. Conversely, the contract was signed within the and the completion of projects undertaken by the stipulated time, the advance payment was in order and contractor so that no loss incur by the Government

56 57

WJHS00124 Tek 1.indd 56 5/13/16 3:03 PM agencies for this project. The scope of work for this Performance Bond has complied with the terms of the project was to build a road Arterial A, and mainline from contract. However, several weaknesses identified are CH7700 to CH8579. The work also included the as follows: upgrading work for the route of FR5 Pasir Panjang to i. project was completed over than 10 years as Linggi. The whole length of the project is a 22.6 km. compared to the initial tenure which was within 2 Arterial B‟s road building project was in a separate years and 6 months; contract as Section 2. The project started in February 2005 and should be completed in August 2007 (2 years ii. reappointment of the similar contractor for the 6 months). Kartajaya-Fort Jeli East-AMR JV Sdn. Bhd. second contract was unfair and against with the (HBA-JV) was appointed as contractor for this project. decision made by the JKR Hospital Project The work progression of the appointed contractor was Committee; not satisfactory and due to that it has been terminated iii. a delay in preparing Final Certificate of Contract through Notice of Termination of Employment Contract Terminated Hiring Contractors up to 1 year and 10 on 23rd December 2009 with 64.6% progressed. months (as to date of exit conference on 16th However, the similar contractor was reappointed to February 2016) for the first and second contract; pursue the remaining works nevertheless the and performance was still not satisfactory with an increase of only 3.6% progressed. Yet, the contractor was iv. construction of the bridge was not in accordance terminated again on 9th May 2013. As a final point, the with the construction drawings and issues regarding Government has appointed Seroja Anggerik utilities relocation were inefficiently managed. Development Sdn. Bhd. on 27th March 2014 as the new contractor and the project completed on 28th December c. To overcome the shortcomings raised, it is 2015. recommended to take action on the following matters: b. The audit performed between June and September i. PWD should build road divider and a traffic light at 2015 revealed that the overall project management was the intersection of Jalan Kg. Sekawang river, unsatisfactory, as the project took 10 years to be CH17050 to ensure the safety of road users; completed. Moreover, the construction of the bridge ii. PWD should monitor closely on the quality of work was not in accordance with the construction drawings. Conversely, the contract was signed within the and the completion of projects undertaken by the stipulated time, the advance payment was in order and contractor so that no loss incur by the Government

56 57

WJHS00124 Tek 1.indd 57 5/13/16 3:03 PM in the event of default by the contractor or the project. The expansion of the scope resulted an project is terminated. Evaluation of contractor additional of 33 units‟ quarters which makes the total works also need to be made promptly so that the number of 346 units‟ quarters and elevator services for preparation of the Final Certificate of Contract can 17 blocks of quarters to be built. This application was th be made immediately and the Government claim approved by the EPU on 4 June 2013. However, the can be made in advance; and approval was subject to allocation of total cost not exceeding RM100 million. As the approval given for iii. PWD should ensure that the contractor patch-up all changes of scope within allocation, the KPWKM defects before handing over the way to KKR for decided to rebuild quarters in SWD Rumah Seri road users‟ safety as well as providing the Kenangan (RSK) Bedong, Kedah; Rumah Kanak-Kanak International Roughness Index test ( IRI ) reports. (RKK) Taman Bakti Kepala Batas, Pulau Pinang; RSK Tanjung Rambutan, Perak and RKK Tengku Ampuan

st b. The audit performed between June to September 2015 a. On 21 December 2012, the Economic Planning Unit on the quarter‟s construction in RSK Bedong and RSK (EPU) of the Prime Minister's Department (PMD) has Tanjung Rambutan. The audit revealed that the approved the construction of quarters in 9 institutions of construction management was satisfactory. The Social Welfare Department (SWD), The Ministry Of achievements of the actual work progress at RSK Women, Family And Community Development Bedong and RSK Tanjung Rambutan site were at 97% (MWFCD) at a cost of RM100 million through open on 18th August 2015 and 55% on 7th September 2015 tenders method. This approval was stated in the Third respectively. Both projects were in line with the Rolling Plan under the 10th Malaysia Plan (10th MP). schedule as approved by the Public Works Department The construction of 132 units new quarters and the (PWD). On the procurement aspect, the management demolition and rebuilding of 181 units existing quarters has complied with stipulated regulations and necessary were took placed to provide quarters for SWD staffs. On actions have been taken by the contractor on every 22nd May 2013, MWFCD has submitted an application issue raised during the construction work to implement for the additional scope of work of this construction

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WJHS00124 Tek 1.indd 58 5/13/16 3:03 PM in the event of default by the contractor or the project. The expansion of the scope resulted an project is terminated. Evaluation of contractor additional of 33 units‟ quarters which makes the total works also need to be made promptly so that the number of 346 units‟ quarters and elevator services for preparation of the Final Certificate of Contract can 17 blocks of quarters to be built. This application was th be made immediately and the Government claim approved by the EPU on 4 June 2013. However, the can be made in advance; and approval was subject to allocation of total cost not exceeding RM100 million. As the approval given for iii. PWD should ensure that the contractor patch-up all changes of scope within allocation, the KPWKM defects before handing over the way to KKR for decided to rebuild quarters in SWD Rumah Seri road users‟ safety as well as providing the Kenangan (RSK) Bedong, Kedah; Rumah Kanak-Kanak International Roughness Index test ( IRI ) reports. (RKK) Taman Bakti Kepala Batas, Pulau Pinang; RSK Tanjung Rambutan, Perak and RKK Tengku Ampuan

Fatimah, Kuantan, Pahang. Meanwhile in 2015, the MINISTRY OF WORKS / MINISTRY OF WOMEN, FAMILY EPU agreed that the MWFCD shall only continue the AND COMMUNITY construction for Taman Sinar Harapan (TSH) Tampoi, 8. Project Management Reconstruction Quarters Johor Bahru. Welfare Department st b. The audit performed between June to September 2015 a. On 21 December 2012, the Economic Planning Unit on the quarter‟s construction in RSK Bedong and RSK (EPU) of the Prime Minister's Department (PMD) has Tanjung Rambutan. The audit revealed that the approved the construction of quarters in 9 institutions of construction management was satisfactory. The Social Welfare Department (SWD), The Ministry Of achievements of the actual work progress at RSK Women, Family And Community Development Bedong and RSK Tanjung Rambutan site were at 97% (MWFCD) at a cost of RM100 million through open on 18th August 2015 and 55% on 7th September 2015 tenders method. This approval was stated in the Third respectively. Both projects were in line with the Rolling Plan under the 10th Malaysia Plan (10th MP). schedule as approved by the Public Works Department The construction of 132 units new quarters and the (PWD). On the procurement aspect, the management demolition and rebuilding of 181 units existing quarters has complied with stipulated regulations and necessary were took placed to provide quarters for SWD staffs. On actions have been taken by the contractor on every 22nd May 2013, MWFCD has submitted an application issue raised during the construction work to implement for the additional scope of work of this construction

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WJHS00124 Tek 1.indd 59 5/13/16 3:03 PM the project. However, there are weaknesses identified method from Hydraulic Jack In Pile to Hydraulic as follows: Hammer. However, the piling method change back to the preliminary plan which was Hydraulic a. Reconstruction Project In RSK Bedong Quarters Jack In Pile resulted to reappointment of the i. inaccurate planning between the preparation of Bill contractor; of Quantities (BQ) and tender drawings resulted differences in quantity of piles. Due to that, the new  increased in quantity of item work below lowest drawings and a Supplementary Agreement needed floor finish consisting stump pile caps, column to be prepared; and RC Wall resulted a longer period of time for contractor to complete the work; and ii. Independent Checker cannot be appointed until the  Supplementary Agreement was signed; and changes from precast to the in situ during the preparation of BQ and tender drawing, in which iii. according to the Certificate Of Delay And Extention such items namely column, beam, floor and Of Time (EOT 2), due to the delay on the progress walls were precast. However, the construction of work by a third party to initiate and complete the drawings received on 26th May 2014 were using physical work of planting underground electric the in situ resulted the difference of items such cables has led to the incomplete works of road as beams in situ floor, pillars in situ and in situ construction, external works and activities Testing wall work sheer. Furthermore, all precast floor and Commissioning for electrical system and slab either half and hollow core slab has been mechanical connection as compared to the original changed to in situ slab of precast stairs and plan. amendments to the in situ.

b. Reconstruction Project In RSK Tanjung iii. late of 32 days in receiving the exchange of Rambutan Quarters basic design drawing has caused the contractor i. 26 days delayed in submitting drawings to to delayed the iron reinforcement shipments. contractors as well as the determination of platform level was decided over 29 days; c. To ensure that all the weaknesses highlighted do not recur in the implementation of upcoming projects, it is ii. improper planning causes: recommended that PWD to take action on the following  Changes in decision on piling type from spun pile matters: to Reinforce Concrete (RC) pile as well as piling

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WJHS00124 Tek 1.indd 60 5/13/16 3:03 PM the project. However, there are weaknesses identified method from Hydraulic Jack In Pile to Hydraulic as follows: Hammer. However, the piling method change back to the preliminary plan which was Hydraulic a. Reconstruction Project In RSK Bedong Quarters Jack In Pile resulted to reappointment of the i. inaccurate planning between the preparation of Bill contractor; of Quantities (BQ) and tender drawings resulted differences in quantity of piles. Due to that, the new  increased in quantity of item work below lowest drawings and a Supplementary Agreement needed floor finish consisting stump pile caps, column to be prepared; and RC Wall resulted a longer period of time for contractor to complete the work; and ii. Independent Checker cannot be appointed until the  Supplementary Agreement was signed; and changes from precast to the in situ during the preparation of BQ and tender drawing, in which iii. according to the Certificate Of Delay And Extention such items namely column, beam, floor and Of Time (EOT 2), due to the delay on the progress walls were precast. However, the construction of work by a third party to initiate and complete the drawings received on 26th May 2014 were using physical work of planting underground electric the in situ resulted the difference of items such cables has led to the incomplete works of road as beams in situ floor, pillars in situ and in situ construction, external works and activities Testing wall work sheer. Furthermore, all precast floor and Commissioning for electrical system and slab either half and hollow core slab has been mechanical connection as compared to the original changed to in situ slab of precast stairs and plan. amendments to the in situ. b. Reconstruction Project In RSK Tanjung iii. late of 32 days in receiving the exchange of Rambutan Quarters basic design drawing has caused the contractor i. 26 days delayed in submitting drawings to to delayed the iron reinforcement shipments. contractors as well as the determination of platform level was decided over 29 days; c. To ensure that all the weaknesses highlighted do not recur in the implementation of upcoming projects, it is ii. improper planning causes: recommended that PWD to take action on the following  Changes in decision on piling type from spun pile matters: to Reinforce Concrete (RC) pile as well as piling

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WJHS00124 Tek 1.indd 61 5/13/16 3:03 PM i. detailed planning during the design and construction the rights to operate the ERL from KL Sentral to KLIA. stage should be carried out to avoid major changes Superintendent Officer (SO) of the project is the and amendments during the construction progress Secretary-General (DG) of the Ministry of Transport. th and ensuring contract administration are fully This project started on 15 July 2011 was scheduled to st comply; and complete by 31 October 2012. However, it was only completed on 28th September 2013. Consequently, on ii. vehicles for the preliminaries shall be placed at 2nd May 2014, ERLSB started its operation after project site and should be given priority from time to obtaining approval to extend its services from KLIA to time. klia2.

b. The audit performed from January to April 2015 at the

MINISTRY OF TRANSPORT Ministry of Transport Malaysia, Economic Planning Unit (EPU), Public Private Partnership Unit (UKAS), ERLSB 9. The ERL Extension Project From KLIA to klia2 and site visits at ERL klia2 in Sepang. The Audit a. Express Rail Link (ERL) is a high-speed rail link revealed that ERL extension project was completed and commuter service that connects Kuala Lumpur Sentral started its operation on 2nd May 2014. This project (KL Sentral) to Kuala Lumpur International Airport achieved the rail link connection between KLIA and (KLIA). The ERL distance is 57km, stops at 3 klia2 alongside with the opening of klia2 terminal. This intermediate stations i.e. Bandar Tasik Selatan, connection increased the number of ERL‟s passengers Putrajaya and Salak Tinggi with a total construction cost by 43.2% from 6.44 million in 2013 to 9.23 million in of RM2.4 billion. It provides 2 types of services i.e. ERL 2014. However, there are some weaknesses caused Express and ERL Transit. KLIA ERL Extension Project the Government did not obtained best value for money would serve as the main public transport connecting for the expenses incurred. Some of the weaknesses KLIA main terminal to klia2 with a distance of 2.16km. identified are as follows: This project was direct negotiated using design and built i. Price negotiations were not conducted prior to the method by Express Rail Link Sdn. Bhd. (ERLSB). The submission of project cost estimates for the project cost of RM100 millions is funded by the Ministry approval of the Economic Council (EC); of Transport. Rail Operations Control is subjected to the Railways Act 1991 and later repealed by the Land ii. Supplemental Concession Agreement was not Public Transport Act 2010. Through the concession finalized to date despite the ERL services from KLIA agreement dated 25th August 1997, ERLSB was given to klia2 commenced operation since 2nd May 2014;

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WJHS00124 Tek 1.indd 62 5/13/16 3:03 PM i. detailed planning during the design and construction the rights to operate the ERL from KL Sentral to KLIA. stage should be carried out to avoid major changes Superintendent Officer (SO) of the project is the and amendments during the construction progress Secretary-General (DG) of the Ministry of Transport. th and ensuring contract administration are fully This project started on 15 July 2011 was scheduled to st comply; and complete by 31 October 2012. However, it was only completed on 28th September 2013. Consequently, on ii. vehicles for the preliminaries shall be placed at 2nd May 2014, ERLSB started its operation after project site and should be given priority from time to obtaining approval to extend its services from KLIA to time. klia2.

b. The audit performed from January to April 2015 at the

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WJHS00124 Tek 1.indd 63 5/13/16 3:03 PM MINISTRY OF ENERGY, GREEN TECHNOLOGY AND iii. Compensation claimed by ERLSB amounted to WATER / MINISTRY OF FEDERAL TERRITORIES RM2.9 billion yet to be finalized. The computation formula of compensation claimed does not benefit Sewerage Services Department

and protect the interest of the Government; and 10. Sewerage Projects under the River Cleaning Components for “River Of Life” Program iv. The project cost of RM129 million presented by ERLSB in Value Management (VM) lab exceeded a. In 25th September 2010, the Economic Transformation the cost approved by the EC of RM100 million. Program (ETP) was launched for a focus and Thus, the objectives of VM for cost saving are not comprehensive economic plan and as a progressive achieved. intitiative to transform Malaysia into a high income nation by 2020. Thus, the Achievement of the ETP is c. To ensure that all the weaknesses highlighted do not targeted through the implementation of 12 National Key recur, the Ministry is recommended to take action on Economic Area (NKEA) and The River of Life (ROL) is the following matters: one of the 9 Entry Point Projects (EPP) under the NKEA Greater Kuala Lumpur / Klang Valley (GKL / KV). The i. price negotiations must be conducted to ensure that ROL Program has been implemented since 2011 aims the Government reaps best value for money; to transform identified areas along Klang River to ii. Supplemental Concession Agreement is finalized become commercial and heritage centre for a high promptly to protect the interest of both parties. Also, economic value to the country. The ROL program also computation formula of compensation must benefit covers areas under the jurisdiction of Kuala Lumpur City both parties and not detrimental to the Government; Hall [Dewan Bandaraya Kuala Lumpur (DBKL)],

iii. cost component of the project submitted to the Ampang Jaya Municipal Council [Majlis Perbandaran Value Management Lab must be more Ampang Jaya (MPAJ)] and Selayang Municipal Council [Majlis Perbandaran Selayang (MPS)]. Consequently, comprehensive, detailed and approved by the EC; the ROL program involves 3 project phases with an and allocation of RM4 billion. iv. issue of service charges are settled and approved to b. The audit performed between August to 15th November protect the interest of all parties. 2015 in the head office of Sewerage Services Department [Jabatan Perkhidmatan Pembetungan (JPP)]. The audit revealed that, in general, the

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WJHS00124 Tek 1.indd 64 5/13/16 3:03 PM MINISTRY OF ENERGY, GREEN TECHNOLOGY AND iii. Compensation claimed by ERLSB amounted to WATER / MINISTRY OF FEDERAL TERRITORIES RM2.9 billion yet to be finalized. The computation formula of compensation claimed does not benefit Sewerage Services Department and protect the interest of the Government; and 10. Sewerage Projects under the River Cleaning Components for “River Of Life” Program iv. The project cost of RM129 million presented by ERLSB in Value Management (VM) lab exceeded a. In 25th September 2010, the Economic Transformation the cost approved by the EC of RM100 million. Program (ETP) was launched for a focus and Thus, the objectives of VM for cost saving are not comprehensive economic plan and as a progressive achieved. intitiative to transform Malaysia into a high income nation by 2020. Thus, the Achievement of the ETP is c. To ensure that all the weaknesses highlighted do not targeted through the implementation of 12 National Key recur, the Ministry is recommended to take action on Economic Area (NKEA) and The River of Life (ROL) is the following matters: one of the 9 Entry Point Projects (EPP) under the NKEA Greater Kuala Lumpur / Klang Valley (GKL / KV). The i. price negotiations must be conducted to ensure that ROL Program has been implemented since 2011 aims the Government reaps best value for money; to transform identified areas along Klang River to ii. Supplemental Concession Agreement is finalized become commercial and heritage centre for a high promptly to protect the interest of both parties. Also, economic value to the country. The ROL program also computation formula of compensation must benefit covers areas under the jurisdiction of Kuala Lumpur City both parties and not detrimental to the Government; Hall [Dewan Bandaraya Kuala Lumpur (DBKL)], iii. cost component of the project submitted to the Ampang Jaya Municipal Council [Majlis Perbandaran Value Management Lab must be more Ampang Jaya (MPAJ)] and Selayang Municipal Council [Majlis Perbandaran Selayang (MPS)]. Consequently, comprehensive, detailed and approved by the EC; the ROL program involves 3 project phases with an and allocation of RM4 billion. iv. issue of service charges are settled and approved to b. The audit performed between August to 15th November protect the interest of all parties. 2015 in the head office of Sewerage Services Department [Jabatan Perkhidmatan Pembetungan (JPP)]. The audit revealed that, in general, the

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WJHS00124 Tek 1.indd 65 5/13/16 3:03 PM management of sewerage projects is satisfactory from i. JPP must ensure effluent quality for all STPs in the the technical aspects of design, plan preparation, ROL catchment areas do not jeopardize the drawing and specification, Hazard and Operability achievement of ROL program objectives regarding (HAZOP) studies, preparation of project team and water quality; project management accordance with stipulated criteria. However, there were some weaknesses identified ii. JPP must identify sewerage reserve land that have affected the efficiency and effectiveness of projects, as yet to be surrendered to Pesuruhjaya Tanah follows: Persekutuan (PTP) and the process to change the land title to be expedited; i. delay in transfer of land titles to the State Authority (Pihak Berkuasa Negeri) and, to reserve the land for iii. the compliance of effluent terms should be included sewerage purposes for the upgraded Sewerage as one of the contract conditions in the testing and Treatment Plants (STP); commissioning stage; and

ii. Time-at-Large issues regarding the delays of iv. JPP must supervise and take necessary action contract certification by JPP; regarding to maintenance works obliged by the Contractor during Defect Liability Period in ensuring iii. unclear mechanism in verifying the effluent quality all parameters of the STP‟s design are verified. stipulated in the contract which caused non- guarantee towards the compliance after testing and

commissioning stage; MINISTRY OF HEALTH MALAYSIA

iv. non-compliance of effluent quality standards for 11. Management Of Orthopedic Treatment Activities upgraded STPs despite of completeness of physical and certified completed works; and a. Orthopedic is pertaining to the musculoskeletal system that includes surgery of the spine, joints, ligaments, v. failure to comply with the stipulated effluent quality tendons and nerves. Orthopedic treatment activities for Temporary Treatment Facilities during upgrading among others include surgical treatments such as works period. broken bones, amputation, diabetic foot, spinal cord

injury and joint exchange. Orthopedic services are c. To ensure that all weaknesses highlighted all parties available in all 136 hospitals of Ministry of Health involved are recommended to take the following (MOH), where as 22 hospitals provide orthopedic actions:

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WJHS00124 Tek 1.indd 66 5/13/16 3:03 PM management of sewerage projects is satisfactory from i. JPP must ensure effluent quality for all STPs in the the technical aspects of design, plan preparation, ROL catchment areas do not jeopardize the drawing and specification, Hazard and Operability achievement of ROL program objectives regarding (HAZOP) studies, preparation of project team and water quality; project management accordance with stipulated criteria. However, there were some weaknesses identified ii. JPP must identify sewerage reserve land that have affected the efficiency and effectiveness of projects, as yet to be surrendered to Pesuruhjaya Tanah follows: Persekutuan (PTP) and the process to change the land title to be expedited; i. delay in transfer of land titles to the State Authority (Pihak Berkuasa Negeri) and, to reserve the land for iii. the compliance of effluent terms should be included sewerage purposes for the upgraded Sewerage as one of the contract conditions in the testing and Treatment Plants (STP); commissioning stage; and ii. Time-at-Large issues regarding the delays of iv. JPP must supervise and take necessary action contract certification by JPP; regarding to maintenance works obliged by the Contractor during Defect Liability Period in ensuring iii. unclear mechanism in verifying the effluent quality all parameters of the STP‟s design are verified. stipulated in the contract which caused non- guarantee towards the compliance after testing and commissioning stage; MINISTRY OF HEALTH MALAYSIA iv. non-compliance of effluent quality standards for 11. Management Of Orthopedic Treatment Activities upgraded STPs despite of completeness of physical and certified completed works; and a. Orthopedic is pertaining to the musculoskeletal system that includes surgery of the spine, joints, ligaments, v. failure to comply with the stipulated effluent quality tendons and nerves. Orthopedic treatment activities for Temporary Treatment Facilities during upgrading among others include surgical treatments such as works period. broken bones, amputation, diabetic foot, spinal cord

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WJHS00124 Tek 1.indd 67 5/13/16 3:03 PM services with subspecialty such as Paediatric; Spine; Department of 5 selected hospitals were good because Joint Arthroplasty; Oncology; Advanced Trauma; Upper the allocation received were fully utilized. However, the Limb and Hand; Foot And Ankle and Sport Medicine. overall management of orthopedic treatment activities The objectives of the orthopedic treatment activities are audited was less satisfactory. Among other weaknesses to offer comprehensive, effective, modern and cost- identified are as follows: effective services as well as improving service quality i. shortages of orthopedic specialists and nurses standards to its patients. The Orthopedic Department of between 7% to 67% at hospitals audited because the MOH‟s hospitals supplies equipment for orthopedic vacancies were not filled up and insufficient medical treatment activities through three procurement methods, facilities such as medical equipment; namely Approved Purchase Product List (APPL), tenders and direct purchase. For APPL‟s procurement, ii. the deposit payment of External Fixator (EF) the Government has appointed Pharmaniaga Logistics components which need to be paid before patients Sdn. Bhd. (PLSB) as concessionaire to distribute were discharged from the hospital could not be supplies of implant equipment and prosthesis in verified; hospitals for the period from 1 December 2009 to 30 iii. Quantity of 876 EF components valued at November 2019. Tabung Bantuan Perubatan (TBP) RM241,116 were not verified; offers financial assistance for patients who cannot afford to pay but do not meet the criteria for getting a iv. Equipment purchasing application exceeds free supply of implants and prostheses. For the year RM10,000 must be verified by Implants and 2013 to 2015, the Orthopedic Department at the Prostheses Committee. However, 91 equipment hospital received allocation totalled RM923.68 million purchasing applications valued RM1.69 million were and spent RM962.82 million (104.2%). approved without the committee‟s verification; and

b. The audit performed at MOH and 5 selected hospitals v. 2,010 unused implants stock valued RM328,440 at [Hospital Tengku Ampuan Afzan (HTAA), Kuantan; HTAA and HSBY still kept at the store unit of Hospital Tengku Ampuan Rahimah (HTAR), Klang; Orthopedic Operation Theater. Hospital Sungai Buloh (HSB); Hospital Raja Permaisuri c. To ensure that all weaknesses highlighted do not recur, Bainun (HRPB), Ipoh and Hospital Sultanah Bahiyah MOH and 5 selected hospitals are recommended to (HSBYH), Alor Setar] in May and August 2015 revealed take action on the following matters: that the expenditure performance of the Orthopedic

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WJHS00124 Tek 1.indd 68 5/13/16 3:03 PM services with subspecialty such as Paediatric; Spine; Department of 5 selected hospitals were good because Joint Arthroplasty; Oncology; Advanced Trauma; Upper the allocation received were fully utilized. However, the Limb and Hand; Foot And Ankle and Sport Medicine. overall management of orthopedic treatment activities The objectives of the orthopedic treatment activities are audited was less satisfactory. Among other weaknesses to offer comprehensive, effective, modern and cost- identified are as follows: effective services as well as improving service quality i. shortages of orthopedic specialists and nurses standards to its patients. The Orthopedic Department of between 7% to 67% at hospitals audited because the MOH‟s hospitals supplies equipment for orthopedic vacancies were not filled up and insufficient medical treatment activities through three procurement methods, facilities such as medical equipment; namely Approved Purchase Product List (APPL), tenders and direct purchase. For APPL‟s procurement, ii. the deposit payment of External Fixator (EF) the Government has appointed Pharmaniaga Logistics components which need to be paid before patients Sdn. Bhd. (PLSB) as concessionaire to distribute were discharged from the hospital could not be supplies of implant equipment and prosthesis in verified; hospitals for the period from 1 December 2009 to 30 iii. Quantity of 876 EF components valued at November 2019. Tabung Bantuan Perubatan (TBP) RM241,116 were not verified; offers financial assistance for patients who cannot afford to pay but do not meet the criteria for getting a iv. Equipment purchasing application exceeds free supply of implants and prostheses. For the year RM10,000 must be verified by Implants and 2013 to 2015, the Orthopedic Department at the Prostheses Committee. However, 91 equipment hospital received allocation totalled RM923.68 million purchasing applications valued RM1.69 million were and spent RM962.82 million (104.2%). approved without the committee‟s verification; and b. The audit performed at MOH and 5 selected hospitals v. 2,010 unused implants stock valued RM328,440 at [Hospital Tengku Ampuan Afzan (HTAA), Kuantan; HTAA and HSBY still kept at the store unit of Hospital Tengku Ampuan Rahimah (HTAR), Klang; Orthopedic Operation Theater. Hospital Sungai Buloh (HSB); Hospital Raja Permaisuri c. To ensure that all weaknesses highlighted do not recur, Bainun (HRPB), Ipoh and Hospital Sultanah Bahiyah MOH and 5 selected hospitals are recommended to (HSBYH), Alor Setar] in May and August 2015 revealed take action on the following matters: that the expenditure performance of the Orthopedic

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WJHS00124 Tek 1.indd 69 5/13/16 3:03 PM i. fill all vacancies for orthopedic specialists will lead period was between one to two years. As at 2015, 85 towards an improvements in the quality of services; SKKS were appointed at 135 hospitals with contract thus attracting new medical officers to enroll value totalled RM284.77 million. orthopedic sub-specialty programme; b. The audit performed between June and September ii. improve coordination and monitoring aspects with 2015 at Procurement and Privatization Division, Ministry all stakeholders to obtain the latest APPL implant of Health and 8 selected hospitals [Hospital Melaka products and relevant with current developments (HM); Hospital Alor Gajah (HAG); Hospital Tuanku which benefits all parties; and Jaafar (HTJ); Hospital Tuanku Ampuan Najihah (HTAN); Hospital Putrajaya (HPj); Hospital Serdang iii. review the effectiveness of Implants And Prostheses (HSdg); Sarawak General Hospital (SGH) / Sarawak Committee‟s verification procedures relating to General Hospital Heart Center (PJHUS) and Rajah applications for equipment exceeding RM10,000 for Charles Brooke Memorial Hospital (HRCBM)]. SKKS a prompt and orderly approval. contract value for these 8 hospitals in 5 states totalled

RM81.74 million. The audit revealed that the 12. Management of Private Security Services Company management of SKKS services was satisfactory in In Hospital terms of actions taken against contractors for non- a. Ministry of Health (Ministry) appointed private security compliance with contract terms. However, the companies [Syarikat Kawalan Keselamatan Swasta management of SKKS services was less satisfactory (SKKS)] to enhance the security of property, patients, particularly in respect of management of contract and hospital personnel and civilians within hospitals. SKKS compliance; payments; deductions; and penalties as was procured through open tenders and quotations. follows: According to the contracts, 3 types of services provided are unarmed guard, armed guard and cash in transit i. discrepancies between contract terms and the (CIT). For the year 2013 to 2015, the Ministry awarded Letter of Acceptance [Surat Setuju Terima (SST)]; contracts through open tender totalling RM271.02 ii. non-compliance of pre-conditions for appointments million comprised of 45 SKKS at 69 hospitals valued of security guards in respect of permitted age; between RM0.50 million to RM17.05 million. In addition, annual medical screening; pass security vetting; contracts totalling RM13.75 million were awarded pass urine test; attend Certified Security Guard through quotation to 53 SKKS at 66 hospitals valued (CSG) course; adequate tools and equipment; and between RM0.27 million to RM0.49 million. The contract

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WJHS00124 Tek 1.indd 70 5/13/16 3:03 PM i. fill all vacancies for orthopedic specialists will lead period was between one to two years. As at 2015, 85 towards an improvements in the quality of services; SKKS were appointed at 135 hospitals with contract thus attracting new medical officers to enroll value totalled RM284.77 million. orthopedic sub-specialty programme; b. The audit performed between June and September ii. improve coordination and monitoring aspects with 2015 at Procurement and Privatization Division, Ministry all stakeholders to obtain the latest APPL implant of Health and 8 selected hospitals [Hospital Melaka products and relevant with current developments (HM); Hospital Alor Gajah (HAG); Hospital Tuanku which benefits all parties; and Jaafar (HTJ); Hospital Tuanku Ampuan Najihah (HTAN); Hospital Putrajaya (HPj); Hospital Serdang iii. review the effectiveness of Implants And Prostheses (HSdg); Sarawak General Hospital (SGH) / Sarawak Committee‟s verification procedures relating to General Hospital Heart Center (PJHUS) and Rajah applications for equipment exceeding RM10,000 for Charles Brooke Memorial Hospital (HRCBM)]. SKKS a prompt and orderly approval. contract value for these 8 hospitals in 5 states totalled

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WJHS00124 Tek 1.indd 71 5/13/16 3:03 PM appointment of a third party CIT provider without iii. ensure compliance of pre-conditions for approval; appointments of security guards in respect of permitted age, annual medical screening, pass iii. improper payments and deductions pertaining to security vetting, pass urine test and attend Certified service quality and penalties at 5 hospitals namely Security Guard (CSG) course. This is to confirm that HAG, HTJ, HSdg, HUS and PJHUS resulted in the security guards employed have no past criminal overpayments totalled RM235,895; and records, physically fit and mentally healthy; and iv. late payments between 10 to 207 days for 54 cases iv. review contract compliance by all SKKS and take amounting to RM8.08 million in 3 hospitals namely stern action against them for non-compliance. HM, HAG and HPj.

c. To improve public service delivery system, the Ministry MINISTRY OF HEALTH MALAYSIA / MINISTRY OF must ensure proper and efficient management of SKKS WORKS MALAYSIA in hospital to achieve the set objectives. Thus, the 13. Construction Project of New Tampin Hospital, Ministry is recommended to take the following actions: Negeri Sembilan

i. enhance coordination between the Ministry, State a. The construction of new Tampin Hospital project in Health Departments [Jabatan Kesihatan Negeri 2009 under the Ninth Malaysia Plan [Rancangan (JKN)] and hospitals to prevent discrepancy Malaysia Ke-9 (RMKe-9)] to replace the existing between contract terms and SST and disputes hospital operated since 1920. The contractor Fajarbaru between parties. In addition, standard templates Builders Sdn. Bhd. (Fajarbaru) was appointed by Public must be applied for all contracts; Works Department (PWD) on 5th February 2009 through

ii. organise road shows on precise method of restricted tender using design and build method deduction for non-performed services. The Ministry comprises of Design, Construction, Completion, must ensure there are no overpayments at all Equipping, Commissioning and Maintenance of Tampin hospitals excluding samples audited. The Ministry Hospital. Through the design and build method, must investigate thoroughly and surcharge officer(s) consultants and contractors were fully responsible on causing overpayments and losses to the design and project supervision. This project valued at Government; 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,

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WJHS00124 Tek 1.indd 72 5/13/16 3:03 PM appointment of a third party CIT provider without iii. ensure compliance of pre-conditions for approval; appointments of security guards in respect of permitted age, annual medical screening, pass iii. improper payments and deductions pertaining to security vetting, pass urine test and attend Certified service quality and penalties at 5 hospitals namely Security Guard (CSG) course. This is to confirm that HAG, HTJ, HSdg, HUS and PJHUS resulted in the security guards employed have no past criminal overpayments totalled RM235,895; and records, physically fit and mentally healthy; and iv. late payments between 10 to 207 days for 54 cases iv. review contract compliance by all SKKS and take amounting to RM8.08 million in 3 hospitals namely stern action against them for non-compliance. HM, HAG and HPj. c. To improve public service delivery system, the Ministry MINISTRY OF HEALTH MALAYSIA / MINISTRY OF must ensure proper and efficient management of SKKS WORKS MALAYSIA in hospital to achieve the set objectives. Thus, the 13. Construction Project of New Tampin Hospital, Ministry is recommended to take the following actions: Negeri Sembilan i. enhance coordination between the Ministry, State a. The construction of new Tampin Hospital project in Health Departments [Jabatan Kesihatan Negeri 2009 under the Ninth Malaysia Plan [Rancangan (JKN)] and hospitals to prevent discrepancy Malaysia Ke-9 (RMKe-9)] to replace the existing between contract terms and SST and disputes hospital operated since 1920. The contractor Fajarbaru between parties. In addition, standard templates Builders Sdn. Bhd. (Fajarbaru) was appointed by Public must be applied for all contracts; Works Department (PWD) on 5th February 2009 through ii. organise road shows on precise method of restricted tender using design and build method deduction for non-performed services. The Ministry comprises of Design, Construction, Completion, must ensure there are no overpayments at all Equipping, Commissioning and Maintenance of Tampin hospitals excluding samples audited. The Ministry Hospital. Through the design and build method, must investigate thoroughly and surcharge officer(s) consultants and contractors were fully responsible on causing overpayments and losses to the design and project supervision. This project valued at Government; 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,

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WJHS00124 Tek 1.indd 73 5/13/16 3:03 PM PWD acted as implementing agency and Director of iii. one out of 2 Operation Theatre could not be used Health Work Branch, PWD was the Project Director. despite the project was handed over to MOH on 3rd The contract between Government of Malaysia with October 2013 (2 years and 3 month); Fajarbaru was signed on 10th Jun 2009 for a period of iv. contract administration was less efficient because of 36 month. late approval for the EOT 1 and EOT 2 within 28 b. The audit performed at Health Work Branch, PWD; days and 207 days; late issuing of Certificate of Non Contract and Quantity Surveying Branch, PWD; Completion (CNC) for 173 days from the actual Planning Division, MOH; Development Division, MOH; completion date as per contract; and late in handed Engineering Services Division, MOH; Medical over to MOH for 3 month. Although the project did Resources Unit, MOH; Tampin Hospital (new and not function fully as stipulated in the contract, existing); Kluang Hospital (existing) and Permai Certificate of Practical Completion (CPC) was Hospital (existing) from April to Jun 2015. The audit issued. Furthermore, non-issuance of Certificate of revealed that new Tampin Hospital provides better and Partial Occupation (CPO) to non-functioning and pleasant health services to the people of Tampin district uncompleted of two Operation Theatre resulted for and surrounding area. It also provides facilities to Government‟s losses due to non-charged of LAD to employees such as nurses‟ hostel and quarters. the contractor; However, the implementation of this project was less v. less satisfactory on the quality of construction, satisfactory because the project has yet to achieve its objective. In addition, there was less efficiency in project several cases of inappropriate design due to the implementation and improper contract administration. lack of supervision or non-performing of consultants‟ Among other weaknesses identified are as follows: responsibility and it was observed that PWD as implementing agencies was unable to take into i. contractor‟s performance was less satisfactory consideration MOH‟s needs as per Government‟s because the project delayed for 150 days after the Requirement. Among poor qualities were wall extension of time (EOT) of 344 days (31.4% from construction works cracked up to 1,182 point around the actual date). Consequently, Liquidated and hospitals complex. Furthermore, unsuitable water Ascertained Damages (LAD) amounted to RM3.84 tank‟s design resulted the existence of Total million was imposed to the contractor for the delay; Coliform Bacteria in water sample from Block A & ii. contractor‟s failure in technical evaluation had B‟s water tank. Thus, it violated the allowable affected timely completion of the project; parameter standards of treated water; and

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WJHS00124 Tek 1.indd 74 5/13/16 3:03 PM PWD acted as implementing agency and Director of iii. one out of 2 Operation Theatre could not be used Health Work Branch, PWD was the Project Director. despite the project was handed over to MOH on 3rd The contract between Government of Malaysia with October 2013 (2 years and 3 month); Fajarbaru was signed on 10th Jun 2009 for a period of iv. contract administration was less efficient because of 36 month. late approval for the EOT 1 and EOT 2 within 28 b. The audit performed at Health Work Branch, PWD; days and 207 days; late issuing of Certificate of Non Contract and Quantity Surveying Branch, PWD; Completion (CNC) for 173 days from the actual Planning Division, MOH; Development Division, MOH; completion date as per contract; and late in handed Engineering Services Division, MOH; Medical over to MOH for 3 month. Although the project did Resources Unit, MOH; Tampin Hospital (new and not function fully as stipulated in the contract, existing); Kluang Hospital (existing) and Permai Certificate of Practical Completion (CPC) was Hospital (existing) from April to Jun 2015. The audit issued. Furthermore, non-issuance of Certificate of revealed that new Tampin Hospital provides better and Partial Occupation (CPO) to non-functioning and pleasant health services to the people of Tampin district uncompleted of two Operation Theatre resulted for and surrounding area. It also provides facilities to Government‟s losses due to non-charged of LAD to employees such as nurses‟ hostel and quarters. the contractor; However, the implementation of this project was less v. less satisfactory on the quality of construction, satisfactory because the project has yet to achieve its objective. In addition, there was less efficiency in project several cases of inappropriate design due to the implementation and improper contract administration. lack of supervision or non-performing of consultants‟ Among other weaknesses identified are as follows: responsibility and it was observed that PWD as implementing agencies was unable to take into i. contractor‟s performance was less satisfactory consideration MOH‟s needs as per Government‟s because the project delayed for 150 days after the Requirement. Among poor qualities were wall extension of time (EOT) of 344 days (31.4% from construction works cracked up to 1,182 point around the actual date). Consequently, Liquidated and hospitals complex. Furthermore, unsuitable water Ascertained Damages (LAD) amounted to RM3.84 tank‟s design resulted the existence of Total million was imposed to the contractor for the delay; Coliform Bacteria in water sample from Block A & ii. contractor‟s failure in technical evaluation had B‟s water tank. Thus, it violated the allowable affected timely completion of the project; parameter standards of treated water; and

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WJHS00124 Tek 1.indd 75 5/13/16 3:03 PM vi. irregular payment of Facility Engineering works to the contracts‟ specifications/not Maintenance Services (FEMS) and Biomedical suitable/low quality which could affected delivery of Engineering Maintenance Services (BEMS) for new services. Consequently, Forensic Audit need to be Tampin Hospital because the services were not implemented by experts regarding serious cracks on provided by Medivest Sdn. Bhd. and still under the quality of its wall constructions affected the quality contractor‟s responsibility. of construction of new Tampin Hospital;

c. To ensure proper and efficient management of the iv. KKR needs to setting up an investigation committee construction project through design and build method, to take appropriate actions who negligently conduct the Government reaps best value for money, and contract management resulting for mammoth losses strengthen management of future projects, it is for the Government. Furthermore, actions towards recommended that Ministries and PWD to take actions officers for improper payment of non-provided on the following matters: services by Medivest Sdn. Bhd; and i. Ministry of Finance should consider to review the v. KKM needs to optimise the use of equipment and Treasury Circular pertaining to Tender Evaluation hospital facilities including existing equipment and Guidelines. It is suggested that tenderers for facilities at existing hospital to avoid the waste and Turnkey or Design and Build project who failed create a conducive working environment.

evaluation in Second or Third Phase by Technical Evaluation Committee must not be considered for MINISTRY OF URBAN WELLBEING, HOUSING AND Agency Board Procurement which stipulated in the LOCAL GOVERNMENT Procurement Guidelines; National Solid Waste Management Department ii. Ministry Of Works Malaysia [Kementerian Kerja 14. Solid Waste Disposal Sites Management Raya (KKR)] need to enhance their coordination with agency‟s consumer/client. This to ensure that a. National Solid Waste Management Department contractor‟s work/obligations could be implemented [Jabatan Pengurusan Sisa Pepejal Negara (JPSPN)] st according to the Detailed Work Schedule with was established on 1 July 2007 under Solid Waste Critical Flow Method; Management and Public Cleansing Act 2007 (Act 672). Act 672 had been approved by Parliament on 17th July iii. KKR needs to report to relevant authorities and 2007, gazetted on 30th August 2007 and enforced on 1st professional bodies regarding non-compliance September 2011 to integrate Solid Waste Management

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WJHS00124 Tek 1.indd 76 5/13/16 3:03 PM vi. irregular payment of Facility Engineering works to the contracts‟ specifications/not Maintenance Services (FEMS) and Biomedical suitable/low quality which could affected delivery of Engineering Maintenance Services (BEMS) for new services. Consequently, Forensic Audit need to be Tampin Hospital because the services were not implemented by experts regarding serious cracks on provided by Medivest Sdn. Bhd. and still under the quality of its wall constructions affected the quality contractor‟s responsibility. of construction of new Tampin Hospital; c. To ensure proper and efficient management of the iv. KKR needs to setting up an investigation committee construction project through design and build method, to take appropriate actions who negligently conduct the Government reaps best value for money, and contract management resulting for mammoth losses strengthen management of future projects, it is for the Government. Furthermore, actions towards recommended that Ministries and PWD to take actions officers for improper payment of non-provided on the following matters: services by Medivest Sdn. Bhd; and i. Ministry of Finance should consider to review the v. KKM needs to optimise the use of equipment and Treasury Circular pertaining to Tender Evaluation hospital facilities including existing equipment and Guidelines. It is suggested that tenderers for facilities at existing hospital to avoid the waste and Turnkey or Design and Build project who failed create a conducive working environment. evaluation in Second or Third Phase by Technical Evaluation Committee must not be considered for MINISTRY OF URBAN WELLBEING, HOUSING AND Agency Board Procurement which stipulated in the LOCAL GOVERNMENT Procurement Guidelines; National Solid Waste Management Department ii. Ministry Of Works Malaysia [Kementerian Kerja 14. Solid Waste Disposal Sites Management Raya (KKR)] need to enhance their coordination with agency‟s consumer/client. This to ensure that a. National Solid Waste Management Department contractor‟s work/obligations could be implemented [Jabatan Pengurusan Sisa Pepejal Negara (JPSPN)] st according to the Detailed Work Schedule with was established on 1 July 2007 under Solid Waste Critical Flow Method; Management and Public Cleansing Act 2007 (Act 672). Act 672 had been approved by Parliament on 17th July iii. KKR needs to report to relevant authorities and 2007, gazetted on 30th August 2007 and enforced on 1st professional bodies regarding non-compliance September 2011 to integrate Solid Waste Management

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WJHS00124 Tek 1.indd 77 5/13/16 3:03 PM system at national level. The Act gives executive power (72.38%) provisions allocated for solid waste to Malaysian Federal Government to implement Solid management, RM1.024 billion were spent. Audit visit to Waste Management and Public Cleansing. JPSPN‟s 12 of 47 projects revealed several weaknesses as role in formulating policy; strategy and planning of follows: integrated solid waste management; drafting regulations i. 3 projects approved for the Planning Permission as stipulated in Act 672; and setting the standards, (PP) and Development Plan (DP) and 6 projects specifications and work procedures. JPSPN is also exempted from PP and DP. Two projects were in responsible in carrying out privatization of solid waste the process to obtain exemption of PP and DP from management; approval and licensing services; and the local authorities and TPS Klias Jalan Lama management of solid waste and public cleaning project in Beaufort, Sabah was under process of facilities. An allocation amounted RM1.416 billion was bidding; approved under 10th Malaysia Plan to implement Solid ii. delay of 1 to 5 months in signing contracts for 5 Waste Management Program. A total of RM250.61 projects valued between RM10.40 million to million was allocated for incinerator project, RM49.90 million might jeopardise Government‟s reacquisition of land, feasibility study and others facility interest; and expenses on solid waste management. A total of iii. a total of RM25.26 million penalties for Liquidated RM1.165 billion (82.30%) is allocated for 47 solid waste Ascertain Damage (LAD) were returned to 7 disposal sites project [Tapak Pelupusan Sisa Pepejal contractors after extension of time approved by (TPS)]. The scope of TPS programme consists of JPSPN inclusive the period of late penalty. building new landfill, upgrading sanitary landfill and safe

closure landfill. The procurement of TPS programme c. To ensure the management of TPS is carried out was implemented through direct negotiations (Design orderly and effectively, it is recommended that JPSPN and Build), open tenders and selective tenders. consider the following actions:

b. The audit performed between October to December i. JPSPN must comply with circulars issued by 2015 at 12 (25.5%) out of 47 TPS project revealed that Government and Director General of Public Work overall TPS management is less satisfactory. From 47 Department; TPS projects, a total of 33 (70.2%) projects were ii. JPSPN must prepared rules and Standard completed, 9 projects were under construction, 4 Operating Procedures at every stage of project projects under tender evaluation process and 1 project implementation especially in issuance of Certificate in planning stage. From a total of RM1.416 billion

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WJHS00124 Tek 1.indd 78 5/13/16 3:03 PM system at national level. The Act gives executive power (72.38%) provisions allocated for solid waste to Malaysian Federal Government to implement Solid management, RM1.024 billion were spent. Audit visit to Waste Management and Public Cleansing. JPSPN‟s 12 of 47 projects revealed several weaknesses as role in formulating policy; strategy and planning of follows: integrated solid waste management; drafting regulations i. 3 projects approved for the Planning Permission as stipulated in Act 672; and setting the standards, (PP) and Development Plan (DP) and 6 projects specifications and work procedures. JPSPN is also exempted from PP and DP. Two projects were in responsible in carrying out privatization of solid waste the process to obtain exemption of PP and DP from management; approval and licensing services; and the local authorities and TPS Klias Jalan Lama management of solid waste and public cleaning project in Beaufort, Sabah was under process of facilities. An allocation amounted RM1.416 billion was bidding; approved under 10th Malaysia Plan to implement Solid ii. delay of 1 to 5 months in signing contracts for 5 Waste Management Program. A total of RM250.61 projects valued between RM10.40 million to million was allocated for incinerator project, RM49.90 million might jeopardise Government‟s reacquisition of land, feasibility study and others facility interest; and expenses on solid waste management. A total of iii. a total of RM25.26 million penalties for Liquidated RM1.165 billion (82.30%) is allocated for 47 solid waste Ascertain Damage (LAD) were returned to 7 disposal sites project [Tapak Pelupusan Sisa Pepejal contractors after extension of time approved by (TPS)]. The scope of TPS programme consists of JPSPN inclusive the period of late penalty. building new landfill, upgrading sanitary landfill and safe closure landfill. The procurement of TPS programme c. To ensure the management of TPS is carried out was implemented through direct negotiations (Design orderly and effectively, it is recommended that JPSPN and Build), open tenders and selective tenders. consider the following actions:

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WJHS00124 Tek 1.indd 79 5/13/16 3:03 PM Partial Of Occupation (CPO), the appointment of Subang 2 construction has been opened on 4th March operator and handing over completed projects to 2002 through open tender for design and build method. local authorities in determining the ownership of the On 15th January 2003, the Letter of Acceptance worth project promptly; and RM69.52 million were issued to Am Rich Constructions & Development Sdn. Bhd. (ARCD). PPR Lembah iii. JPSPN must prepared comprehensive plan before Subang 2 project has completed on 29th April 2009 after implementation of TPS projects in terms of land approval of 8 extension of time (EOT) which equivalent ownership especially involving individuals land to 1,550 days (52 months). Whereas, a Defects Liability ownership. th Period (DLP) for 24 months was given starting from 29 April 2009 until 29th April 2011.

a. People's Housing Programme [Program Perumahan management of PPR Lembah Subang 2 which was Rakyat (PPR)] is a Government program for the executed by NHD was not satisfactory. Audit found the resettlement of squatters and provides dwellings for construction of PPR Lembah Subang 2 was poorly low-income earners. National Housing Department managed, and delayed for 4 years and 8 months from (NHD) / Ministry of Urban Wellbeing, Housing And Local date of completion. Audit findings are as follows: Government [Kementerian Kesejahteraan Bandar, i. weaknesses in construction planning, site selection Perumahan dan Kerajaan Tempatan (KPKT)] is the and management of procurement/selection of main agency implementing projects for PPR throughout contractors; Malaysia. PPR Lembah Subang 2 was built on part of Lot 14191, Mukim of Damansara, Selangor covering an ii. weakness in monitoring the construction; area of 17.65 acres that had been approved by the iii. coordination problems between Petaling Jaya th State Executive Council (EXCO) on 19 December Municipal Council (MBPJ) and NHD; and 2000. It is intended to provide housing for the iv. weakness in selecting and distributing the units to resettlement of squatters and the other low-income eligible buyers. 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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WJHS00124 Tek 1.indd 80 5/13/16 3:03 PM Partial Of Occupation (CPO), the appointment of Subang 2 construction has been opened on 4th March operator and handing over completed projects to 2002 through open tender for design and build method. local authorities in determining the ownership of the On 15th January 2003, the Letter of Acceptance worth project promptly; and RM69.52 million were issued to Am Rich Constructions & Development Sdn. Bhd. (ARCD). PPR Lembah iii. JPSPN must prepared comprehensive plan before Subang 2 project has completed on 29th April 2009 after implementation of TPS projects in terms of land approval of 8 extension of time (EOT) which equivalent ownership especially involving individuals land to 1,550 days (52 months). Whereas, a Defects Liability ownership. th Period (DLP) for 24 months was given starting from 29 April 2009 until 29th April 2011.

National Housing Department b. The audit performed between November 2014 to 15. Construction of the People's Housing Programme, February 2015 in KPKT, NHD and PPR Lembah Lembah Subang 2 Subang 2. The audit revealed that the project a. People's Housing Programme [Program Perumahan management of PPR Lembah Subang 2 which was Rakyat (PPR)] is a Government program for the executed by NHD was not satisfactory. Audit found the resettlement of squatters and provides dwellings for construction of PPR Lembah Subang 2 was poorly low-income earners. National Housing Department managed, and delayed for 4 years and 8 months from (NHD) / Ministry of Urban Wellbeing, Housing And Local date of completion. Audit findings are as follows: Government [Kementerian Kesejahteraan Bandar, i. weaknesses in construction planning, site selection Perumahan dan Kerajaan Tempatan (KPKT)] is the and management of procurement/selection of main agency implementing projects for PPR throughout contractors; Malaysia. PPR Lembah Subang 2 was built on part of Lot 14191, Mukim of Damansara, Selangor covering an ii. weakness in monitoring the construction; area of 17.65 acres that had been approved by the iii. coordination problems between Petaling Jaya th State Executive Council (EXCO) on 19 December Municipal Council (MBPJ) and NHD; and 2000. It is intended to provide housing for the iv. weakness in selecting and distributing the units to resettlement of squatters and the other low-income eligible buyers. 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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WJHS00124 Tek 1.indd 81 5/13/16 3:03 PM c. To ensure that all weaknesses highlighted do not recur, bridges projects and a longhouses project in rural areas it is recommended that Ministry to take action on the in Sarawak which were left behind from the country‟s following matters: development. JMP implementation in Sarawak is collaboration between Prime Minister‟s Department i. better planning for the upcoming projects to ensure [Jabatan Perdana Menteri (JPM)], Sarawak State its completion and improve the quality of Government, contractors and local communities. construction, safety interests, comfort and Implementation Coordination Unit (ICU) of JPM satisfaction of users / residents in the future; provides guidelines and fund for the project. The ii. ensure the application process and approval of EOT Sarawak State Government through its representatives to contractors are fair and justified before or on the and District Offices help to identify the needs and date of completion in accordance with contract locations for the projects. The local communities acted requirements / circulars / directives in force; and as sub-contractors aim to create a sense of belonging iii. finalizing the list of buyers a few months before within the project. The objectives of the project are to completion and to issue the offer letters as soon as improve the well-being of communities living in rural the Certificate of Completion and Compliance areas of Sarawak; provide basic infrastructure at lower (CCC) for PPR project is received. costs, speedy and with high impact; enhance road connectivity in rural areas and reduce travelling time. In

addition, JMP in Sarawak also provide basic MINISTRY OF DEFENCE MALAYSIA infrastructures such as clean water and electricity

16. The Management of Jiwa Murni Project in Sarawak supply and increase the communities‟ income through land development in agricultural economic activities a. Jiwa Murni Project (JMP) in Sarawak was implemented commercially such as rubber and oil palm. For the by the Malaysian Armed Forces [Angkatan Tentera period between 2009 to 30th June 2015, ATM Malaysia (ATM)] through the Royal Armed Engineers implemented 11 JMP in Sarawak involving contract sum Regiment (RAJD) in collaboration with companies amounting to RM253.98 million. The implementation appointed by the Government. RAJD is responsible for and monitoring of the JMP in Sarawak was undertaken the construction works on site while building materials, by RAJD. The procurement method of JMP is through machineries and labourers were supplied by direct negotiation between the Development Division, contractors. RAJD‟s involvement in JMP Sarawak Ministry of Defence Malaysia (MINDEF) and contractors began in 2009 for constructions and upgrading of 6 while JMP was approved by the Ministry of Finance. roads projects, a slope protection work project, 3

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WJHS00124 Tek 1.indd 82 5/13/16 3:03 PM c. To ensure that all weaknesses highlighted do not recur, bridges projects and a longhouses project in rural areas it is recommended that Ministry to take action on the in Sarawak which were left behind from the country‟s following matters: development. JMP implementation in Sarawak is collaboration between Prime Minister‟s Department i. better planning for the upcoming projects to ensure [Jabatan Perdana Menteri (JPM)], Sarawak State its completion and improve the quality of Government, contractors and local communities. construction, safety interests, comfort and Implementation Coordination Unit (ICU) of JPM satisfaction of users / residents in the future; provides guidelines and fund for the project. The ii. ensure the application process and approval of EOT Sarawak State Government through its representatives to contractors are fair and justified before or on the and District Offices help to identify the needs and date of completion in accordance with contract locations for the projects. The local communities acted requirements / circulars / directives in force; and as sub-contractors aim to create a sense of belonging iii. finalizing the list of buyers a few months before within the project. The objectives of the project are to completion and to issue the offer letters as soon as improve the well-being of communities living in rural the Certificate of Completion and Compliance areas of Sarawak; provide basic infrastructure at lower (CCC) for PPR project is received. costs, speedy and with high impact; enhance road connectivity in rural areas and reduce travelling time. In

addition, JMP in Sarawak also provide basic MINISTRY OF DEFENCE MALAYSIA infrastructures such as clean water and electricity

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WJHS00124 Tek 1.indd 83 5/13/16 3:03 PM JMP won the premier Prime Minister‟s Innovation Award to Mejawah, Belaga and Road project from Long 2015. Lopeng to Ba‟kelalan, Lawas; and

b. The audit performed from September to December v. decayed and cracked bridge curbs at Pa‟Dappur 2015 at MINDEF and 8 projects in Kapit, Miri and Bridge and Pa‟Kelapang Bridge, Bario.

Limbang, Sarawak revealed JMP in Sarawak achieved c. In order to improve the management performance of its objectives in providing road connectivity to rural JMP in Sarawak and to achieve the projects‟ objectives, areas of Sarawak and reducing travelling time. The it is recommended that MINDEF and Sarawak State overall management of JMP in Sarawak was Government to take the following actions: satisfactory. However, there are shortcomings that need to be addressed by MINDEF such as follows: i. MINDEF must carry out proper roads maintenance within defect liability period (DLP), define road i. quality of work was less satisfactory. Road maintenance schedule in the contracts and identify shoulders and drains were not built, potholes, responsible parties for continuous road uneven and muddy road surfaces in certain maintenance after expiry of DLP; and stretches of the Road project from Pekan Belaga to Mejawah, Belaga; Road project from Long Lopeng ii. Sarawak State Government and MINDEF must to Ba‟kelalan, Lawas and Road project from Miri to ensure orderly land acquisition process and Marudi; provision of land compensation in accordance with State Land Code (Chapter 81) 1958. ii. road maintenance was less satisfactory. Faded road

lines; and untrimmed wild plants and grass along road shoulders; MINISTRY OF WORKS / MINISTRY OF HOME AFFAIRS

compensation to land owners; a. Ministry of Home Affairs (MOHA) and Prisons iv. road safety aspects was less satisfactory. Steep, Department of Malaysia (PDM) had applied for winding and high gradient road; no slopes protection allocation from Ministry of Finance Malaysia (MOF) on and street furniture were not well maintained in 5th October 2006 to build a new prison complex on a 50 certain stretches of Road project from Pekan Belaga acres land at Kangkar Pulai in Johor Bahru, Mukim

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WJHS00124 Tek 1.indd 84 5/13/16 3:03 PM JMP won the premier Prime Minister‟s Innovation Award to Mejawah, Belaga and Road project from Long 2015. Lopeng to Ba‟kelalan, Lawas; and b. The audit performed from September to December v. decayed and cracked bridge curbs at Pa‟Dappur 2015 at MINDEF and 8 projects in Kapit, Miri and Bridge and Pa‟Kelapang Bridge, Bario.

Prison Department of Malaysia iii. procedures for land acquisition, compensation arrangements and arbitration processes were not 17. Management of Construction Project Penjara implemented resulting in unpaid land and crop Reman (Tegar) Johor Bahru, Johor compensation to land owners; a. Ministry of Home Affairs (MOHA) and Prisons iv. road safety aspects was less satisfactory. Steep, Department of Malaysia (PDM) had applied for winding and high gradient road; no slopes protection allocation from Ministry of Finance Malaysia (MOF) on and street furniture were not well maintained in 5th October 2006 to build a new prison complex on a 50 certain stretches of Road project from Pekan Belaga acres land at Kangkar Pulai in Johor Bahru, Mukim

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WJHS00124 Tek 1.indd 85 5/13/16 3:03 PM Pulai, Johor Bahru District. This new complex is to actual work done on site. However, there are several replace Penjara Reman Johor Bahru at Jalan Ayer aspects to be addressed by MOHA/PWD as follows: Molek (Penjara Ayer Molek). The project was i. changes in procurement method for Phase II Project implemented in two phases due to insufficient fund. forced the Government to indemnify consultants a MOF approved an allocation of RM50 million for the total of RM3.68 million in compensation; and construction of Project Penjara Reman (Tegar) Johor Bahru Phase l (Phase l Project) initiated in April 2009 ii. damaged property and equipment in Phase I Project and completed in April 2011. However, Phase l Project must be repaired, tested and commissioned by has not been used since completion as it only has contractors before completion of Phase II Project. capacity of 300 prisoners as compared to 726 prisoners c. To ensure completion of Phase II Project within the at that time. In January 2011, MOF approved additional stipulated time; and efficiency and effectiveness of allocation of RM160 million for the construction Project future project management, it is recommended Penjara Reman (Tegar) Johor Bahru Phase lI (Phase lI Project). Intrasegi Sdn. Bhd. and Tegas Setuju Sdn. MOHA/PWD to consider the following actions:

b. The audit performed between June to September 2015 at Head Office of the Public Works Department Security MINISTRY OF HOME AFFAIRS Works Branch (PWD), MOHA, PDM headquarters, Immigration Department of Malaysia Penjara Ayer Molek, Johor Bahru and project site. Audit findings revealed that management of this project is 18. Implementation of the Malaysian Immigration good. Overall, Phase II Project was implemented System (myIMMs)

according to schedule; PWD monitored performance of a. MyIMMs is the information technology systems of the the contractor; contract management was administered Malaysian Immigration Department [Jabatan Imigresen properly; and progress payments were made based on

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WJHS00124 Tek 1.indd 86 5/13/16 3:03 PM Pulai, Johor Bahru District. This new complex is to actual work done on site. However, there are several replace Penjara Reman Johor Bahru at Jalan Ayer aspects to be addressed by MOHA/PWD as follows: Molek (Penjara Ayer Molek). The project was i. changes in procurement method for Phase II Project implemented in two phases due to insufficient fund. forced the Government to indemnify consultants a MOF approved an allocation of RM50 million for the total of RM3.68 million in compensation; and construction of Project Penjara Reman (Tegar) Johor Bahru Phase l (Phase l Project) initiated in April 2009 ii. damaged property and equipment in Phase I Project and completed in April 2011. However, Phase l Project must be repaired, tested and commissioned by has not been used since completion as it only has contractors before completion of Phase II Project. capacity of 300 prisoners as compared to 726 prisoners c. To ensure completion of Phase II Project within the at that time. In January 2011, MOF approved additional stipulated time; and efficiency and effectiveness of allocation of RM160 million for the construction Project future project management, it is recommended Penjara Reman (Tegar) Johor Bahru Phase lI (Phase lI Project). Intrasegi Sdn. Bhd. and Tegas Setuju Sdn. MOHA/PWD to consider the following actions:

Bhd. were appointed through direct negotiation. Phase i. MOHA/PWD must finalized project procurement II Project consists of prison complex equipped with methods before appointing contractors and modern security system for a capacity up to 1,200 consultants; and prisoners, staff quarters and other facilities and implemented using design and built method. The project ii. Contractors must perform testing and started in July 2013 and to be completed in late January commissioning for unused property and equipment 2016. for Phase I Project prior to handing over of Phase II Project to PWD. b. The audit performed between June to September 2015 at Head Office of the Public Works Department Security MINISTRY OF HOME AFFAIRS Works Branch (PWD), MOHA, PDM headquarters, Immigration Department of Malaysia Penjara Ayer Molek, Johor Bahru and project site. Audit findings revealed that management of this project is 18. Implementation of the Malaysian Immigration good. Overall, Phase II Project was implemented System (myIMMs) according to schedule; PWD monitored performance of a. MyIMMs is the information technology systems of the the contractor; contract management was administered Malaysian Immigration Department [Jabatan Imigresen properly; and progress payments were made based on

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WJHS00124 Tek 1.indd 87 5/13/16 3:03 PM Malaysia (JIM)], which was developed to support its a. Contract Management operations in providing the best service to the public, i. the agreement period was earlier than the date external agencies and stakeholders. MyIMMs of approval for direct negotiation by MOF and comprises of three main components namely the Letter of Acceptance; and applications, network and data centre which enable ii. payment worth RM22.64 million was not users to perform data entry, processing, validation, supported with complete documentation. transmitting and storing information from the Immigration Offices to the database and vice versa. b. Implementation of myIMMs Projects These components are installed at all Immigration i. full payment for uninstalled and unused offices throughout the country as well as at the Biometric system and equipment worth RM10.30 Immigration Attaché Offices abroad and also accessible million had been made; by external agencies. MyIMMs contract worth RM29.90 ii. 3 out of 7 systems for Application and Payment million was approved by the Ministry of Finance (MOF), of Visa and Pass in the eServices system were through direct negotiations method to HeiTech. The not utilised; contract was signed on 1st November 2010 between the iii. Agency link-up was not fully installed however Government of Malaysia and HeiTech Padu Berhad for full payment had been made; a period of one year from 1 March 2010 to 28 February 2011. iv. User Acceptance Test (UAT) and Provisional Acceptance Test (PAT) were not b. The audit performed between April to November 2015 comprehensively done as stipulated in the at JIM Headquarters, Putrajaya, 6 JIM‟s branch offices agreement; namely Johor Bahru, Shah Alam, Kuching, Seberang v. Business Continuity Plan was at unsatisfactory Prai, Tawau and Sandakan and JIM Attaché Offices at however full payment had been made; and Jakarta, Indonesia, Dhaka, Bangladesh and vi. myIMMs data was inaccurate and data integrity Kathmandu, Nepal. The audit revealed that, the overall was suspicious. management of myIMMs was less satisfactory in the aspects of planning, implementation and monitoring c. Foreign Workers Management which may affect the achievement of its objectives. The management of foreign workers application was Among the weaknesses identified are as follows: unsatisfactory and incompliance with stipulated policies or rules set by the Government.

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WJHS00124 Tek 1.indd 88 5/13/16 3:03 PM Malaysia (JIM)], which was developed to support its a. Contract Management operations in providing the best service to the public, i. the agreement period was earlier than the date external agencies and stakeholders. MyIMMs of approval for direct negotiation by MOF and comprises of three main components namely the Letter of Acceptance; and applications, network and data centre which enable ii. payment worth RM22.64 million was not users to perform data entry, processing, validation, supported with complete documentation. transmitting and storing information from the Immigration Offices to the database and vice versa. b. Implementation of myIMMs Projects These components are installed at all Immigration i. full payment for uninstalled and unused offices throughout the country as well as at the Biometric system and equipment worth RM10.30 Immigration Attaché Offices abroad and also accessible million had been made; by external agencies. MyIMMs contract worth RM29.90 ii. 3 out of 7 systems for Application and Payment million was approved by the Ministry of Finance (MOF), of Visa and Pass in the eServices system were through direct negotiations method to HeiTech. The not utilised; contract was signed on 1st November 2010 between the iii. Agency link-up was not fully installed however Government of Malaysia and HeiTech Padu Berhad for full payment had been made; a period of one year from 1 March 2010 to 28 February 2011. iv. User Acceptance Test (UAT) and Provisional Acceptance Test (PAT) were not b. The audit performed between April to November 2015 comprehensively done as stipulated in the at JIM Headquarters, Putrajaya, 6 JIM‟s branch offices agreement; namely Johor Bahru, Shah Alam, Kuching, Seberang v. Business Continuity Plan was at unsatisfactory Prai, Tawau and Sandakan and JIM Attaché Offices at however full payment had been made; and Jakarta, Indonesia, Dhaka, Bangladesh and vi. myIMMs data was inaccurate and data integrity Kathmandu, Nepal. The audit revealed that, the overall was suspicious. management of myIMMs was less satisfactory in the aspects of planning, implementation and monitoring c. Foreign Workers Management which may affect the achievement of its objectives. The management of foreign workers application was Among the weaknesses identified are as follows: unsatisfactory and incompliance with stipulated policies or rules set by the Government.

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WJHS00124 Tek 1.indd 89 5/13/16 3:03 PM MALAYSIA EDUCATION MINISTRY c. To ensure that all weaknesses of myIMMs can be 19. Management Of Private Security Services improved to support JIM operations in providing the Company In Schools best services to the public, external agencies and stakeholders, it is recommended that the parties a. The Ministry of Education (Ministry) has privatized security services [Perkhidmatan Kawalan Keselamatan involved take the following actions: (PKK)] in schools by appointing contractors to provide i. Ministry of Home Affairs should promptly plan and security service without firearms. Among the purposes consider lessons learned from the failure of previous of this service is to create a safe and peaceful systems before developing any system. It is to environment continuously and to assure schools‟ ensure the effectiveness of project management in administrations, parents and students a conducive achieving objectives as well as the procurement environment for teaching and learning in all schools systems reaps best value for money; under Ministry‟s control. Generally, PKK is to supply ii. Ministry of Home Affairs and JIM should implement security guards and adequate equipment to carry out project according to the agreed terms of contract security services in schools/hostels; patrol and report its and within the stipulated period. It is to ensure the services to the Government. Ministry/State Education development of system in accordance with required Department [Jabatan Pendidikan Negeri (JPN)] has specification in achieving objectives; offered 947 PKK tenders to institutions/schools with contract value totalling RM2.858 billion for the period of iii. JIM should maintain and updates system 2013 to 2015. development documents to ensure future data migration properly and comprehensively implement; b. The audit performed from July and October 2015 at the and Ministry, Procurement and Asset Management Division iv. Ministry of Home Affairs should review the needs for [Bahagian Perolehan dan Pengurusan Aset (BPPA)], system filtering by operators in the source country to JPN, District Education Offices [Pejabat Pendidikan avoid duplication of work processes. The Ministry Negeri (PPD)] and 59 premises in 5 states namely must ensure a formal agreement between the Malacca, Kedah, Perlis, Kelantan and Selangor. The Government and operators are seal for the purpose audit revealed that the Ministry had provided PKK in of Government‟s systems and information security. 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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WJHS00124 Tek 1.indd 90 5/13/16 3:03 PM MALAYSIA EDUCATION MINISTRY c. To ensure that all weaknesses of myIMMs can be 19. Management Of Private Security Services improved to support JIM operations in providing the Company In Schools best services to the public, external agencies and stakeholders, it is recommended that the parties a. The Ministry of Education (Ministry) has privatized security services [Perkhidmatan Kawalan Keselamatan involved take the following actions: (PKK)] in schools by appointing contractors to provide i. Ministry of Home Affairs should promptly plan and security service without firearms. Among the purposes consider lessons learned from the failure of previous of this service is to create a safe and peaceful systems before developing any system. It is to environment continuously and to assure schools‟ ensure the effectiveness of project management in administrations, parents and students a conducive achieving objectives as well as the procurement environment for teaching and learning in all schools systems reaps best value for money; under Ministry‟s control. Generally, PKK is to supply ii. Ministry of Home Affairs and JIM should implement security guards and adequate equipment to carry out project according to the agreed terms of contract security services in schools/hostels; patrol and report its and within the stipulated period. It is to ensure the services to the Government. Ministry/State Education development of system in accordance with required Department [Jabatan Pendidikan Negeri (JPN)] has specification in achieving objectives; offered 947 PKK tenders to institutions/schools with contract value totalling RM2.858 billion for the period of iii. JIM should maintain and updates system 2013 to 2015. development documents to ensure future data migration properly and comprehensively implement; b. The audit performed from July and October 2015 at the and Ministry, Procurement and Asset Management Division iv. Ministry of Home Affairs should review the needs for [Bahagian Perolehan dan Pengurusan Aset (BPPA)], system filtering by operators in the source country to JPN, District Education Offices [Pejabat Pendidikan avoid duplication of work processes. The Ministry Negeri (PPD)] and 59 premises in 5 states namely must ensure a formal agreement between the Malacca, Kedah, Perlis, Kelantan and Selangor. The Government and operators are seal for the purpose audit revealed that the Ministry had provided PKK in of Government‟s systems and information security. 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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WJHS00124 Tek 1.indd 91 5/13/16 3:03 PM for private agency; listing of documents required for i. review PKK contract terms and comply with Ministry processing of payment; mandatory annual medical of Home Affairs (MOHA) circular‟s requirement for examination for security guards between the age of 55 urine test and security screening for all security to 60 years old; setting the time frame for contractors to guards; submit security screening certificate; and compulsory ii. ensure contract terms are complied by contractors attendance of Certified Security Guards (CSG) course and enforce/impose penalties/deductions to prevent by security guards. There are no recurring issues in 5 issues from recurring; and out of 9 premises visited in 2012. However, overall management of PKK at 59 premises audited were less iii. must ensure schools administration understand and satisfactory. Some of the weaknesses identified are as comply with the procedures on verification of follows: supporting documents prior to payment approval to prevent improper payment. i. contract terms did not specified urine test requirement for security guards; 20. Management of Supplementary Food Programme ii. clocking was not carried out every 2 hours at all specified locations. It was made at the same time a. Supplementary Food Programme [Rancangan Makanan for different points/locations; Tambahan (RMT)] focus on pupils from families under the category of National Poverty Line [Paras Garis iii. equipment not supplied or inadequate or non Kemiskinan Nasional (PGK)]. Its aims to improve the functional as intended or damaged; nutritional level of pupils to be fully focus on teaching iv. the date of equipment when it was damaged was and learning in school. In year 2013 to 2015, the not recorded; and Ministry has allocated a sum of RM758.48 million for the implementation of RMT program. In 2013, family with v. penalties and deductions amounted to RM0.18 monthly income between RM460 to RM630 or RM110 million were not imposed to contractors for breach to RM130 per capita for the year 2013 are eligible for of contract terms. RMT program. While, for the years 2014 and 2015, the c. To ensure that all weaknesses highlighted do not recur eligible monthly income are between RM520 to RM660 and Government reaps best value for money for PKK, or RM130 to RM140 per capita. The program was the Ministry is recommended to take action on the implemented throughout the 190 school days in a year. following matters: For the period 2013 to 2015, a total of 1,665,954

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WJHS00124 Tek 1.indd 92 5/13/16 3:03 PM for private agency; listing of documents required for i. review PKK contract terms and comply with Ministry processing of payment; mandatory annual medical of Home Affairs (MOHA) circular‟s requirement for examination for security guards between the age of 55 urine test and security screening for all security to 60 years old; setting the time frame for contractors to guards; submit security screening certificate; and compulsory ii. ensure contract terms are complied by contractors attendance of Certified Security Guards (CSG) course and enforce/impose penalties/deductions to prevent by security guards. There are no recurring issues in 5 issues from recurring; and out of 9 premises visited in 2012. However, overall management of PKK at 59 premises audited were less iii. must ensure schools administration understand and satisfactory. Some of the weaknesses identified are as comply with the procedures on verification of follows: supporting documents prior to payment approval to prevent improper payment. i. contract terms did not specified urine test requirement for security guards; 20. Management of Supplementary Food Programme ii. clocking was not carried out every 2 hours at all specified locations. It was made at the same time a. Supplementary Food Programme [Rancangan Makanan for different points/locations; Tambahan (RMT)] focus on pupils from families under the category of National Poverty Line [Paras Garis iii. equipment not supplied or inadequate or non Kemiskinan Nasional (PGK)]. Its aims to improve the functional as intended or damaged; nutritional level of pupils to be fully focus on teaching iv. the date of equipment when it was damaged was and learning in school. In year 2013 to 2015, the not recorded; and Ministry has allocated a sum of RM758.48 million for the implementation of RMT program. In 2013, family with v. penalties and deductions amounted to RM0.18 monthly income between RM460 to RM630 or RM110 million were not imposed to contractors for breach to RM130 per capita for the year 2013 are eligible for of contract terms. RMT program. While, for the years 2014 and 2015, the c. To ensure that all weaknesses highlighted do not recur eligible monthly income are between RM520 to RM660 and Government reaps best value for money for PKK, or RM130 to RM140 per capita. The program was the Ministry is recommended to take action on the implemented throughout the 190 school days in a year. following matters: For the period 2013 to 2015, a total of 1,665,954

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WJHS00124 Tek 1.indd 93 5/13/16 3:03 PM students in 21,936 primary schools were benefited from objective program i.e. contribution towards physical RMT program. growth/health and students‟ academic progress;

b. The audit performed between July to October 2015 in iv. there were data recorded on the height and weight 40 primary schools in the urban area covers 4 states of students at the beginning and end of the year as namely Johor, Kelantan, Kedah and Sabah. The audit well as students‟ average performance throughout the year. However, the information is not used for revealed that the RMT program has achieved the the purpose of reviewing the program achievement; objectives in which the menu contains sufficient calories and nutrients as well as inculcate courteous and v. monthly income of parents/guardians who has no discipline culture. According to studies conducted by the pay check were not approved by the Ministry, the RMT program has helped the development Headman/Officer and detail incomes were not of student health and learning. However, there were still specified; some weaknesses that need to be improved by Ministry vi. meals served not accordance with stipulated set to ensure the efficiency of RMT program as follows: menu affect pupils‟ calories and nutrients content; and i. delayed in allocating the fund to schools between 14 to 97 days by Jabatan Pendidikan Negeri (JPN). vii. weaknesses in monitoring on RMT program in the The fund should be distributed within 7 days after federal, state, district and school level.

receiving warrants from the Ministry; c. To overcome all the weaknesses highlighted and to ii. the outstanding balance of RMT program fund up to improve efficiency of RMT program, it is recommended year 2014 amounting to RM0.26 million which was that the Ministry/JPN/PPD/school to take actions on the between RM172 to RM19,984 for each school following matters: resulted an increased in the Kumpulan Wang Kerajaan (KWK). Moreover, expenditure i. set up KPI and evaluate the performance of RMT performance for RMT program does not reflect the program each year. Analyzed accordingly height, actual amount; weight and academic performance of students; iii. Key Performance Indicator (KPI) was only set up for ii. review and make additions the set menu suiting with warrant allocation. The KPI for RMT program were the local population in encouraging pupils to eat. not specifically cater on achievement of overall Approval should be obtained for any changes in

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WJHS00124 Tek 1.indd 94 5/13/16 3:03 PM students in 21,936 primary schools were benefited from objective program i.e. contribution towards physical RMT program. growth/health and students‟ academic progress; b. The audit performed between July to October 2015 in iv. there were data recorded on the height and weight 40 primary schools in the urban area covers 4 states of students at the beginning and end of the year as namely Johor, Kelantan, Kedah and Sabah. The audit well as students‟ average performance throughout the year. However, the information is not used for revealed that the RMT program has achieved the the purpose of reviewing the program achievement; objectives in which the menu contains sufficient calories and nutrients as well as inculcate courteous and v. monthly income of parents/guardians who has no discipline culture. According to studies conducted by the pay check were not approved by the Ministry, the RMT program has helped the development Headman/Officer and detail incomes were not of student health and learning. However, there were still specified; some weaknesses that need to be improved by Ministry vi. meals served not accordance with stipulated set to ensure the efficiency of RMT program as follows: menu affect pupils‟ calories and nutrients content; and i. delayed in allocating the fund to schools between 14 to 97 days by Jabatan Pendidikan Negeri (JPN). vii. weaknesses in monitoring on RMT program in the The fund should be distributed within 7 days after federal, state, district and school level. receiving warrants from the Ministry; c. To overcome all the weaknesses highlighted and to ii. the outstanding balance of RMT program fund up to improve efficiency of RMT program, it is recommended year 2014 amounting to RM0.26 million which was that the Ministry/JPN/PPD/school to take actions on the between RM172 to RM19,984 for each school following matters: resulted an increased in the Kumpulan Wang Kerajaan (KWK). Moreover, expenditure i. set up KPI and evaluate the performance of RMT performance for RMT program does not reflect the program each year. Analyzed accordingly height, actual amount; weight and academic performance of students; iii. Key Performance Indicator (KPI) was only set up for ii. review and make additions the set menu suiting with warrant allocation. The KPI for RMT program were the local population in encouraging pupils to eat. not specifically cater on achievement of overall Approval should be obtained for any changes in

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WJHS00124 Tek 1.indd 95 5/13/16 3:03 PM menu and nutrients contents should be evaluated; PART II and MANAGEMENT OF GOVERNMENT COMPANIES iii. improve the monitoring and supervision of RMT MINISTRY OF TOURISM AND CULTURE MALAYSIA program by standardization the supervision 21. Malaysia Convention & Exhibition Bureau criteria, frequent and strengthen agenda RMT Committee meeting. 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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WJHS00124 Tek 1.indd 96 5/13/16 3:03 PM menu and nutrients contents should be evaluated; PART II and MANAGEMENT OF GOVERNMENT COMPANIES iii. improve the monitoring and supervision of RMT MINISTRY OF TOURISM AND CULTURE MALAYSIA program by standardization the supervision 21. Malaysia Convention & Exhibition Bureau criteria, frequent and strengthen agenda RMT Committee meeting. 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 97

WJHS00124 Tek 1.indd 97 5/13/16 3:03 PM and enlarge MyCEB‟s activities to attract the number of iii. payment to public relation agency for advertising delegations and foreign tourists in contributing to Gross and marketing work was less satisfactory. For National Income. example there was no third party invoice and inconsistent commission rate; b. The performed between May to September 2015 on the aspects of corporate governance, main activities and iv. lack of proper management expenses. For example financial performance from the year 2012 to 2014. The there was late issued of local order, incomplete audit revealed that MyCEB‟s financial performance was information on delivery order and management of good because the company recorded surplus after corporate cards was irregular; and taxation amounted to RM5.95 million, RM12.5 million v. lack of proper procurement management. For and RM1.58 million respectively. Based on the records, example there was an advance payment for more various promotion activities have successfully help to than 50% of the project and less thorough on video attract and increase number of international delegations making. and foreign tourists. Generally, MyCEB complied with c. To ensure that all the weaknesses highlighted do not the stipulated rules on corporate governance for the recur, it is recommended that MyCEB to take action on appointment of Board of Directors and frequency of its meeting. However several aspects of performance of the following matters: activities and financial management shall be addressed i. to improve the management of subvention fund as follows: activities in order to achieve its objectives and

i. improper management of subvention fund activities. goals; Several weaknesses identified as follows: ii. to closely monitor the existing expenses and  lack of proper payments to event organizer; procurement aspects to comply with rules and regulations. The accountability of the grant must be  unpaid subvention fund activities despite of fully realized by ensuring all supporting documents expiry of memorandum of understandings; and completed prior to payment and work done by the  discrepancies of expenditure calculation third party. Proper procurement management must between EPP 7 and EPP 10. be accordance with the approved procurement ii. non-compliance for good procurement management methods for best value for money; and practices for appointment of consultant/booth design iii. to comply with stipulated rules and procedures for consultancy; the usage of corporate card facilities. To establish

98 99

WJHS00124 Tek 1.indd 98 5/13/16 3:03 PM and enlarge MyCEB‟s activities to attract the number of iii. payment to public relation agency for advertising delegations and foreign tourists in contributing to Gross and marketing work was less satisfactory. For National Income. example there was no third party invoice and inconsistent commission rate; b. The performed between May to September 2015 on the aspects of corporate governance, main activities and iv. lack of proper management expenses. For example financial performance from the year 2012 to 2014. The there was late issued of local order, incomplete audit revealed that MyCEB‟s financial performance was information on delivery order and management of good because the company recorded surplus after corporate cards was irregular; and taxation amounted to RM5.95 million, RM12.5 million v. lack of proper procurement management. For and RM1.58 million respectively. Based on the records, example there was an advance payment for more various promotion activities have successfully help to than 50% of the project and less thorough on video attract and increase number of international delegations making. and foreign tourists. Generally, MyCEB complied with c. To ensure that all the weaknesses highlighted do not the stipulated rules on corporate governance for the recur, it is recommended that MyCEB to take action on appointment of Board of Directors and frequency of its meeting. However several aspects of performance of the following matters: activities and financial management shall be addressed i. to improve the management of subvention fund as follows: activities in order to achieve its objectives and i. improper management of subvention fund activities. goals; Several weaknesses identified as follows: ii. to closely monitor the existing expenses and  lack of proper payments to event organizer; procurement aspects to comply with rules and regulations. The accountability of the grant must be  unpaid subvention fund activities despite of fully realized by ensuring all supporting documents expiry of memorandum of understandings; and completed prior to payment and work done by the  discrepancies of expenditure calculation third party. Proper procurement management must between EPP 7 and EPP 10. be accordance with the approved procurement ii. non-compliance for good procurement management methods for best value for money; and practices for appointment of consultant/booth design iii. to comply with stipulated rules and procedures for consultancy; the usage of corporate card facilities. To establish

98 99

WJHS00124 Tek 1.indd 99 5/13/16 3:03 PM strong internal control to prevent staff for amortization of grants. However, PKB did not actively unauthorized expenditure in ensuring a proper participate or implement books related activities payment and misuse for corporate card facilities. 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 MALAYSIA EDUCATION MINISTRY observed that from the year 2013 to 2015, PKB

22. Management of Perbadanan Kota Buku received less respond for its e-Book sales through digital publications. For a period of 3 years, only 249 a. Perbadanan Kota Buku (PKB) is a limited by guarantee digital books were subscribed with a revenue of company incorporated by Ministry of Education (MOE) th RM1,495. Several issues identified are as follows: on 6 July 2011 under the Companies Act 1965 without share capital. PKB is mandated to facilitate the i. management of PKB less focus on the outcome and development of books industry in realization of the impact on its activities/programs they organized or National Book Policy. This policy proposed a one-stop participated; centre to gather and support readers, writers and ii. Board of Directors‟ approval for 2 international book publishers in books related activities. PKB has 4 main fair participation could not be verified; and activities namely Akademi Kota Buku; Copyright and Intellectual Property; Research and Consultation; and iii. Strategic Plan was not finalized; Key Performance Digital Publication. The Government through MOE Indicators (KPI) as a company‟s performance disbursed in stages RM30 million grants from the year measuring tools were not established; and Standard 2011 to 2014 to support PKB‟s operation and books Operating Procedures (SOP) related to the related activities to promote the country‟s books company's main activities were not prepared. industry. c. To strengthen PKB‟s capabilities and better governance b. The audit performed from June to October 2015, in achieving its objectives, it is recommended to take focused on corporate governance, main activities and action on the following matters: financial aspects of PKB for the year 2012 to 2015 revealed that in general, activities implemented by PKB i. PKB‟s Board of Directors must closely monitor the were consistent with the mandate. PKB‟s financial implementation of main projects/activities to ensure performance was satisfactory with an excess of income objectives of the company‟s establishment are for 3 consecutive years contributed by other incomes achieved; i.e. 83.28% to 88.56% which was generated from the

100 101

WJHS00124 Tek 1.indd 100 5/13/16 3:03 PM strong internal control to prevent staff for amortization of grants. However, PKB did not actively unauthorized expenditure in ensuring a proper participate or implement books related activities payment and misuse for corporate card facilities. 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 MALAYSIA EDUCATION MINISTRY observed that from the year 2013 to 2015, PKB

100 101

WJHS00124 Tek 1.indd 101 5/13/16 3:03 PM ii. PKB‟s management must ensure approval from National Key Economic Areas (NKEA), namely Entry Board of Directors for all activities to be Point Project (EPP) 2 - Foreign Outsourcing Market; implemented/participated; and EPP3 - Malaysia As Data Centre; Sri-Upskilling and Upgrading Workforce for Business Services; Integrated iii. PKB‟s Board of Directors and management must Content Development Programme (ICON); and Creative finalise its short-term and long-term strategic plan in Industry Life-Long Learning Programme (CILLP). MDeC determining the company‟s direction. received operating and development fund from Federal Government amounted to RM202.95 million, RM229.67

MALAYSIA OF FINANCE MALAYSIA millions, RM259.86 millions and RM269.20 million in 2012, 2013, 2014 and 2015 respectively. The 23. Management of Multimedia Development development fund was allocated to implement projects Corporation Sdn. Bhd. and provide fundings to the industry to realize MSC a. The Multimedia Development Corporation Sdn. Bhd. Malaysia, DM and NKEA initiatives. (MDeC), incorporated in June 1996 aims to provide a b. The audit performed between July to October 2015 on master development plan for Multimedia Super Corridor the aspects of corporate governance, main activities Malaysia (MSC Malaysia) and oversees its and financial performance from the year 2012 to 2014. implementation. MDeC‟s main role is to increase the In general, the audit revealed MDeC performed its core overall value of MSC Malaysia in terms of labour skills, activities in accordance with the given mandate. balance of payments, assists to improving the per Overall, MDeC‟s financial performance was satisfactory. capita gross national product and e-Business. On 19th MDeC recorded net profit before tax amounting to October 2011, MDeC was given the mandate to realize RM41.64 million, RM58.62 million and RM28.33 million Digital Transformation Program, known as Digital for financial years in 2012, 2013 and 2014 respectively. Malaysia (DM) to drive the nation‟s digital economy However, gross profit margin for the year 2014 holistically. Consequently, MDeC is mandated by the decreased from 6.4% to 4.2% as compared to previous Government through the Ministers Of The Federal year. MDeC‟s performance and management of Government (No. 2) (Amendment) (No. 2) (Amendment) activities; corporate governance; and financial Order 2014 to develop, coordinate and promote management is good and Key Performance Indicators Malaysia's digital economy, ICT industry and (KPI) are met. In addition, MSC Malaysia, DM and widespread use of ICT in Malaysia. In addition, MDeC NKEA programs also achieved the set objectives. was authorized to implement 5 projects under the However, audit finding revealed that the process for

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WJHS00124 Tek 1.indd 102 5/13/16 3:03 PM ii. PKB‟s management must ensure approval from National Key Economic Areas (NKEA), namely Entry Board of Directors for all activities to be Point Project (EPP) 2 - Foreign Outsourcing Market; implemented/participated; and EPP3 - Malaysia As Data Centre; Sri-Upskilling and Upgrading Workforce for Business Services; Integrated iii. PKB‟s Board of Directors and management must Content Development Programme (ICON); and Creative finalise its short-term and long-term strategic plan in Industry Life-Long Learning Programme (CILLP). MDeC determining the company‟s direction. received operating and development fund from Federal Government amounted to RM202.95 million, RM229.67

102 103

WJHS00124 Tek 1.indd 103 5/13/16 3:03 PM MSC Malaysia status took up to 29 months from online plots of land in Cameron Highlands, namely in Bertam application to the assessment of supporting documents. Valley and Tanah Rata. MAFC markets its products under the brand name „Lushious‟. Besides that, MAFC c. To ensure better management of MDeC's activities, it is also provides cold storage services and logistics recommended that the application period for MSC through its subsidiary, CCN Sdn. Bhd. located in Malaysia status are separated into two stages i.e. Puchong. before and after receiving complete documents from applicant. The separation of period would facilitate b. The audit performed between July and October 2015 MDeC in identifying the cause of delay, if any. 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 24. Management of Malaysian Agrifood Corporation performance of MAFC was less satisfactory as the Berhad (MAFC) Company recorded accumulated losses of RM447.84 a. Malaysian Agrifood Corporation Berhad (MAFC) is million in 2014 and negative cash flow from its operation wholly owned by Khazanah Nasional Berhad and for 3 consecutive years from 2012 to 2014. However, in incorporated on 22nd March 2006 with an authorized 2014 net loss after tax was reduced by RM1.45 million capital of RM600 million and paid-up capital of to RM18.49 million. Generally, MAFC complied with the RM430.50 million. MAFC‟s main objective is to boost stipulated rules on corporate governance for the the food supply chain business in Malaysia with modern appointment of the Chairman, Board of Directors (BOD) technology and logistics systems as well as best and Chief Executive Officer. However several aspects practices as stipulated in the International Food Safety of performance and management of activities, corporate Standards. MAFC also assists the Government in governance and financial management shall be streamlining the agriculture sector towards a modern, addressed as follows: vibrant and dynamic sector in accordance with the Ninth Malaysian Plan (9MP), to become one of the core i. no increase in the number of MAFC‟s sectors in the development of national economy. MAFC distributors/retailers since 2012; also emphasizes on environmental preservation by ii. Collaboration Agreement on Highland Agriculture safeguarding natural resources and optimizing the use and Research Collaboration Agreement for leasing of land, water and energy. MAFC‟s main activity is of Malaysian Agricultural Research and producing fresh and safe highland vegetables for Development Institute (MARDI)‟s land in Tanah consumption under controlled environment farms on 2

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WJHS00124 Tek 1.indd 104 5/13/16 3:03 PM MSC Malaysia status took up to 29 months from online plots of land in Cameron Highlands, namely in Bertam application to the assessment of supporting documents. Valley and Tanah Rata. MAFC markets its products under the brand name „Lushious‟. Besides that, MAFC c. To ensure better management of MDeC's activities, it is also provides cold storage services and logistics recommended that the application period for MSC through its subsidiary, CCN Sdn. Bhd. located in Malaysia status are separated into two stages i.e. Puchong. before and after receiving complete documents from applicant. The separation of period would facilitate b. The audit performed between July and October 2015 MDeC in identifying the cause of delay, if any. focused on corporate governance, main activities and financial aspects for the period from the year 2012 to

104 105

WJHS00124 Tek 1.indd 105 5/13/16 3:03 PM Rata was not drafted despite MOU was signed 7 i. expand the market shares of MAFC products and years ago in 2008; increase company's revenue by intensifying products‟ promotion and awareness to consumers; iii. management of activities in Bertam Valley as follows : ii. optimize the utilization of land in Bertam Valley and Lanchang;  Bertam Valley land with an area of 195.3 hectares acquired at RM68.6 million was not iii. Collaboration Agreement on Highland Agriculture optimally used. Only 20 hectares (10.24 %) of and Research Collaboration Agreement between the said land were utilised whilst the remaining the MAFC and MARDI shall be drafted and sealed 175.3 hectares (89.76%) were still idle; promptly; and  some slopes in Bertam Valley farms were not iv. strengthen its monitoring and internal controls in properly maintained and exposed to the risk of ensuring compliance of stipulated procedures landslides; and especially relating to the procurement and  status of participant‟s achievements for the expenditure. Agropreneur Programme could not be

ascertained as compared to its prescribed period. 25. Sepang International Circuit Sdn. Bhd.

a. Sepang International Circuit Sdn. Bhd. (SIC) was iv. planting of vegetables on several plots in Tanah incorporated in 23rd January 1998 and wholly owned by Rata and Bertam Valley was delayed and not in Malaysia Airport Holding Berhad (MHSB). In 22th April accordance to the crop calendar; 2009, Ministry of Finance has acquired SIC from MHSB v. as at the date of audit visit, three parcels of lease by Share Sale Agreement with an authorised capital of land in Lanchang were idle; and RM50 million and paid up capital of RM10 million. The vi. management of company's financial records, main objective of SIC is to expand motorsport activities documents, assets and stores was less satisfactory. in Malaysia and promote national tourism industry. SIC located in an area of 303 hectares with a track of 5.543 c. To strengthen MAFC‟s capabilities and governance in km length and it can accommodate 130,000 spectators achieving its objectives, it is recommended BOD and at one time. It is also equipped with facilities such as the management of MAFC to take action on the following Sepang Circuit Shoppe, Automotive Museum, matters: restaurants and medical centre. SIC is officially opened

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WJHS00124 Tek 1.indd 106 5/13/16 3:03 PM Rata was not drafted despite MOU was signed 7 i. expand the market shares of MAFC products and years ago in 2008; increase company's revenue by intensifying products‟ promotion and awareness to consumers; iii. management of activities in Bertam Valley as follows : ii. optimize the utilization of land in Bertam Valley and Lanchang;  Bertam Valley land with an area of 195.3 hectares acquired at RM68.6 million was not iii. Collaboration Agreement on Highland Agriculture optimally used. Only 20 hectares (10.24 %) of and Research Collaboration Agreement between the said land were utilised whilst the remaining the MAFC and MARDI shall be drafted and sealed 175.3 hectares (89.76%) were still idle; promptly; and  some slopes in Bertam Valley farms were not iv. strengthen its monitoring and internal controls in properly maintained and exposed to the risk of ensuring compliance of stipulated procedures landslides; and especially relating to the procurement and  status of participant‟s achievements for the expenditure. Agropreneur Programme could not be ascertained as compared to its prescribed period. 25. Sepang International Circuit Sdn. Bhd.

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WJHS00124 Tek 1.indd 107 5/13/16 3:03 PM on 9th Mac 1999 and since that SIC has organized the the total numbers of MotoGP spectators from year 2015 Formula One (F1) with Formula One Administration compared to 2014 and 2013. However several aspects Limited (FOA). FOA is the exclusive rights holder for F1 of performance and management of activities, corporate event and the first contract was for a period of 12 years governance and financial management shall be (1999 to 2010). This contract has been renewed twice, addressed as follows: which in 2011 until 2015 (5 years) and 2016 until 2018 i. declining in total of spectators for F1 events for 2 (3 years). Furthermore for Motocycle Grand Prix consecutive years 2014 and 2015 compared to (MotoGP) event, SIC has established a 8 years contract 2013 between 4,298 and 7,143 spectators with Dorna Sports S.L. from 1999 until 2006. Thus respectively; through the Ministry of Finance, the Government has provided SIC the financial grants for fees payment as ii. unattractive marketing strategy i.e. F1 concerts Government‟s commitments to obtain right in organizing were unable to fascinate more F1 attendees to the and broadcasting the F1 and MotoGP events. Whereas event even though additional funds amounted to other fees such as advertising rights, airtime RM10 million was allocated for marketing and management and hospitality were borne by SIC. The promoting the events; total expenditure for the overall F1 and MotoGP events iii. the differences between the amount of payment were amounted to RM2.540 billion for the period 1999 made and the amount stated in the contract and until 2012, which RM1.880 billion (73.9%) out of the Letter of Acceptance for the production services and total amount spent were financed by the Government. for creative and design agency amounting to b. The audit revealed that overall SIC financial RM112,400 and RM24,313 respectively. In performance was good as SIC has recorded net profit addition, the amount of commission paid amounting after tax for 3 consecutive year from 2012 to 2014 to RM94,700 were not supplemented by supporting amounted to RM44.54 million, RM17.15 million and documents; RM8.47 million respectively. However, the net profit was iv. differences particulars between the rental declined by RM8.68 million or 50.6% in year 2014 agreement as compared to the invoices and compared to 2013. The findings also revealed that quotations; SIC‟s event management activities and its corporate governance were well managed due to its ISO 2001 : v. FI concert production services have not been 9008 Certification pertaining to its policies and finalized, although the work has been completed; procedures. Besides that, SIC also recorded a hike in

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WJHS00124 Tek 1.indd 108 5/13/16 3:03 PM on 9th Mac 1999 and since that SIC has organized the the total numbers of MotoGP spectators from year 2015 Formula One (F1) with Formula One Administration compared to 2014 and 2013. However several aspects Limited (FOA). FOA is the exclusive rights holder for F1 of performance and management of activities, corporate event and the first contract was for a period of 12 years governance and financial management shall be (1999 to 2010). This contract has been renewed twice, addressed as follows: which in 2011 until 2015 (5 years) and 2016 until 2018 i. declining in total of spectators for F1 events for 2 (3 years). Furthermore for Motocycle Grand Prix consecutive years 2014 and 2015 compared to (MotoGP) event, SIC has established a 8 years contract 2013 between 4,298 and 7,143 spectators with Dorna Sports S.L. from 1999 until 2006. Thus respectively; through the Ministry of Finance, the Government has provided SIC the financial grants for fees payment as ii. unattractive marketing strategy i.e. F1 concerts Government‟s commitments to obtain right in organizing were unable to fascinate more F1 attendees to the and broadcasting the F1 and MotoGP events. Whereas event even though additional funds amounted to other fees such as advertising rights, airtime RM10 million was allocated for marketing and management and hospitality were borne by SIC. The promoting the events; total expenditure for the overall F1 and MotoGP events iii. the differences between the amount of payment were amounted to RM2.540 billion for the period 1999 made and the amount stated in the contract and until 2012, which RM1.880 billion (73.9%) out of the Letter of Acceptance for the production services and total amount spent were financed by the Government. for creative and design agency amounting to b. The audit revealed that overall SIC financial RM112,400 and RM24,313 respectively. In performance was good as SIC has recorded net profit addition, the amount of commission paid amounting after tax for 3 consecutive year from 2012 to 2014 to RM94,700 were not supplemented by supporting amounted to RM44.54 million, RM17.15 million and documents; RM8.47 million respectively. However, the net profit was iv. differences particulars between the rental declined by RM8.68 million or 50.6% in year 2014 agreement as compared to the invoices and compared to 2013. The findings also revealed that quotations; SIC‟s event management activities and its corporate governance were well managed due to its ISO 2001 : v. FI concert production services have not been 9008 Certification pertaining to its policies and finalized, although the work has been completed; procedures. Besides that, SIC also recorded a hike in

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WJHS00124 Tek 1.indd 109 5/13/16 3:03 PM 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 CONCLUSION 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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WJHS00124 Tek 1.indd 110 5/13/16 3:03 PM 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 CONCLUSION 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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WJHS00124 Tek 1.indd 111 5/13/16 3:03 PM

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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WJHS00124 Tek 1.indd 112 5/13/16 3:03 PM

CONCLUSION

In general, Ministries/Departments/Government Companies had planned properly their programmes/activities/projects. However, in terms of implementation, there were several

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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WJHS00124 Tek 1.indd 113 5/13/16 3:03 PM responsible parties, insufficient technical expertise and too Department of Irrigation and Drainage, local reliance on consultants/contractors, no coordination authorities, Fire and Rescue Department of Malaysia, among agencies involved as well as internal issues faced utility providers such as water, electricity and by contractors. These weaknesses caused the delay in telecommunications, Land Office and state completion of programmes/activities/projects within the governments need to be consulted before projects are stipulated time, unsatisfactory works quality, and cost implemented. Such consultations are needed to ensure escalation for programmes/activities/projects. As a result, all basic facilities are provided and programmes/ the Government did not reap best value for money for activities/projects are implemented smoothly. expenditure incurred for the implementation of iii. the Ministries/Departments shall comply with the programmes/activities/projects. In addition, the objectives Guidelines for Planning and Building Regulations of the programmes/activities/projects were not fully issued by the Standards and Cost Sub-Committee as a achieved and lesser impact on targeted groups. Hence, it reference for the National Development Planning is recommended that: Committee (Jawatankuasa Perancang Pembangunan i. a detailed study on Government projects needs to be Negara) when planning for works procurement to carried out before approval for programmes/ activities/ ensure that buildings are built according to stipulated projects implementation. For this purpose, in standard and cost allocation; accordance with Treasury Instruction 182.1, agencies iv. Controlling Officers/Heads of Department must be need to submit complete information of programmes/ competent on Government procurement procedures activities/projects such as status of projects site, and provide sufficient training to procurement officers. project summary, project ceiling, annual allocation and Competency and trainings of procurement officers are project implementation schedule to the technical important to prevent misconduct, leakage of public department. This is to ensure that all projects are fund, safeguard Government interest and reap best implemented according to schedule and the value for money in government procurement; Government reaps best value for money: v. Controlling Officers/Heads of Department shall ii. an integrated planning among agencies involved needs enhance the management of Government assets to to be carried out at the early stage of project avoid wastage and seriously consider the importance implementation in particular for gigantic programmes/ of maintenance, monitoring and supervision task. activities/projects. For example Department of Records on asset and inventory must be updated Sewerage Services, Department of Environment,

114 115

WJHS00124 Tek 1.indd 114 5/13/16 3:03 PM responsible parties, insufficient technical expertise and too Department of Irrigation and Drainage, local reliance on consultants/contractors, no coordination authorities, Fire and Rescue Department of Malaysia, among agencies involved as well as internal issues faced utility providers such as water, electricity and by contractors. These weaknesses caused the delay in telecommunications, Land Office and state completion of programmes/activities/projects within the governments need to be consulted before projects are stipulated time, unsatisfactory works quality, and cost implemented. Such consultations are needed to ensure escalation for programmes/activities/projects. As a result, all basic facilities are provided and programmes/ the Government did not reap best value for money for activities/projects are implemented smoothly. expenditure incurred for the implementation of iii. the Ministries/Departments shall comply with the programmes/activities/projects. In addition, the objectives Guidelines for Planning and Building Regulations of the programmes/activities/projects were not fully issued by the Standards and Cost Sub-Committee as a achieved and lesser impact on targeted groups. Hence, it reference for the National Development Planning is recommended that: Committee (Jawatankuasa Perancang Pembangunan i. a detailed study on Government projects needs to be Negara) when planning for works procurement to carried out before approval for programmes/ activities/ ensure that buildings are built according to stipulated projects implementation. For this purpose, in standard and cost allocation; accordance with Treasury Instruction 182.1, agencies iv. Controlling Officers/Heads of Department must be need to submit complete information of programmes/ competent on Government procurement procedures activities/projects such as status of projects site, and provide sufficient training to procurement officers. project summary, project ceiling, annual allocation and Competency and trainings of procurement officers are project implementation schedule to the technical important to prevent misconduct, leakage of public department. This is to ensure that all projects are fund, safeguard Government interest and reap best implemented according to schedule and the value for money in government procurement; Government reaps best value for money: v. Controlling Officers/Heads of Department shall ii. an integrated planning among agencies involved needs enhance the management of Government assets to to be carried out at the early stage of project avoid wastage and seriously consider the importance implementation in particular for gigantic programmes/ of maintenance, monitoring and supervision task. activities/projects. For example Department of Records on asset and inventory must be updated Sewerage Services, Department of Environment,

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WJHS00124 Tek 1.indd 115 5/13/16 3:03 PM promptly in preparation for the Federal Government‟s service delivery and creating a fast, accurate and integrity shift towards accrual accounting; work culture. Consequently, The Auditor General‟s Report contributes towards the achievement of the Government vi. Heads of Service/Controlling Officers/Heads of Transformation Programme 2.0 in fighting corruption Department shall set up a special committee to under the National Key Results Areas (NKRA). 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 National Audit Department resulted losses to the Government; Putrajaya

vii. Government companies shall ensure good financial 20th April 2016 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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WJHS00124 Tek 1.indd 116 5/13/16 3:03 PM promptly in preparation for the Federal Government‟s service delivery and creating a fast, accurate and integrity shift towards accrual accounting; work culture. Consequently, The Auditor General‟s Report contributes towards the achievement of the Government vi. Heads of Service/Controlling Officers/Heads of Transformation Programme 2.0 in fighting corruption Department shall set up a special committee to under the National Key Results Areas (NKRA). 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 National Audit Department resulted losses to the Government; Putrajaya vii. Government companies shall ensure good financial 20th April 2016 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.

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WJHS00124 Tek 1.indd 117 5/13/16 3:03 PM PRINTED BY PERCETAKAN NASIONAL MALAYSIA BERHAD KUALA LUMPUR, 2016 www.printnasional.com.my email: [email protected] Tel.: 03-92366895 Fax: 03-92224773

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AUDITOR GENERAL’S REPORT 2015

NATIONAL AUDIT DEPARTMENT MALAYSIA

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