i

AUDITOR GENERAL REPORT

GOVERNMENT’S FINANCIAL STATEMENT, FINANCIAL MANAGEMENT FOR THE YEAR 2012 AND

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

SERIES 3

NATIONAL AUDIT DEPARTMENT MALAYSIA

ii

iii

SYNOPSIS

AUDITOR GENERAL REPORT FOR THE YEAR 2012

THE AUDIT OF THE FEDERAL GOVERNMENT’S FINANCIAL STATEMENT,

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

GOVERNMENT COMPANIES

NATIONAL AUDIT DEPARTMENT MALAYSIA

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v

CONTENTS

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vii

CONTENTS

PAGE

CONTENTS vii SECTION I 1 THE FEDERAL GOVERNMENT’S FINANCIAL STATEMENT AND FINANCIAL MANAGEMENT OF THE FEDERAL MINISTRIES/DEPARTMENTS

PREFACE 7

SYNOPSIS 15 PART I - Certification Of The Federal Government’s

Financial Statement For The Year Ended 31 December 2012 15

PART II - Financial Management Of The Federal Government

- Overall Financial Performance 15 - Financial Management Of The Federal

Ministries/Departments (Accountability Index) 16

POSTCRIPT 19

viii

SECTION II 25 ACTIVITIES OF THE FEDERAL MINISTRIES/DEPARTMENT AND MANAGEMENT OF THE GOVERNMENT COMPANIES PREFACE 31 SYNOPSIS 35

PART I - Implementation Of Activities By The Federal Ministries/Departments

PRIME MINISTER’S DEPARTMENT National Security Council 1. Construction Of The Special Malaysia Disaster

Assistance And Rescue Team Complex And The National Crisis And Disaster Management Institute 37

2. Management Of The Government Integrated Radio Network Project 40

Property Management Division 3. Management On The Maintenance Of Federal

Communal Buildings - Sultan Iskandar Building, Johor Bahru And

Menara Usahawan Building, Putrajaya 43

MINISTRY OF AGRICULTURE AND AGRO-BASED INDUSTRY MALAYSIA 4. Marine Fisheries And Its Environment 47

ix

MINISTRY OF RURAL AND REGIONAL DEVELOPMENT 5. Rural Transformation Centre 50

MINISTRY OF EDUCATION MALAYSIA 6. Special Project Management 52 7. Management Of School Building Construction

Projects In Sarawak 55 MINISTRY OF DEFENCE

8. Redevelopment Of College Complex Building For The Royal Malaysian Navy At NAVY Base In Lumut, Perak 57

PART II MANAGEMENT OF GOVERNMENT COMPANY

9. Bank Pembangunan Malaysia Berhad 60

POSTSCRIPT 65

x

1

SECTION 1

2

3

SYNOPSIS

AUDITOR GENERAL REPORT FOR THE YEAR 2012

THE FEDERAL GOVERNMENT’S FINANCIAL STATEMENT AND FINANCIAL MANAGEMENT OF

THE FEDERAL MINISTRIES/DEPARTMENTS

NATIONAL AUDIT DEPARTMENT MALAYSIA

4

5

PREFACE

6

7

PREFACE

1. Articles 106 and 107 of the Federal Constitution and

the Audit Act 1957 require the Auditor General to audit the

Federal Government’s Financial Statement, financial

management, activities of the Ministries/Departments as

well as management of the Federal Government

companies and submit his reports to His Majesty, Seri

Paduka Baginda Yang di-Pertuan Agong and obtain his

assent before tabling them in Parliament. Beginning 2013,

the Auditor General Report will be tabled at each sitting of

the Parliament or three times a year in line with the

Government Transformation Programme 2.0 in fighting

corruption under the National Key Result Areas. To fulfil

these responsibilities, the National Audit Department needs

to carry out 4 types of audit as follows:

1.1. Attestation Audit - to give an opinion as to

whether the Federal Government’s Financial Statement

for the year concerned shows a true and fair view as

well as its accounting records are maintained properly

and kept up to date;

1.2. Compliance Audit - to evaluate whether the

financial management of the Federal Ministries/

Departments is in accordance with relevant financial

laws and regulations;

1.3. Performance Audit - to evaluate whether

Federal Government activities/programmes/projects

8

have been carried out efficiently and economically to

achieve their desired objectives/goals; and

1.4. Government Companies’ Management Audit

- to evaluate whether the Federal Government

Companies have been managed in a proper manner.

2. My report on the Financial Statement and Financial

Management of the Federal Government’s Ministries/

Departments for the Year 2012 consists of the following:

Part I : Certification Of The Federal

Government’s Financial Statement For

The Year Ended 31 December 2012

Part II : Financial Management Of The Federal

Government

Part III : National Audit Department’s Involvement

In Various Activities Towards Enhancing

Accountability Of Public Financial

Management

Part IV : General Matters

3. Audit on the Federal Government’s Financial

Statement for the Year 2012 revealed that the Statement as

a whole reflected a true and fair view on the financial

position of the Federal Government as at 31 December

2012, its operational income and cash flow for the year

concerned as well as its accounting records were being

maintained properly and kept up to date. As for financial

management, audit findings revealed that several Ministries

9

and Departments still did not follow financial regulations

fully. Among others, these weaknesses were due to

negligence in compliance with stated financial rules/

procedures, insufficient manpower, lack of training in

financial management, inadequate supervision and lax in

monitoring.

4. All the matters reported in this report had been

brought to the attention of the Heads of Department for

their confirmation. The National Audit Department also took

several approaches to help the Federal Government’s

Ministries/Departments to improve their financial

management. Among the approaches that had been taken

were as follows:

4.1. Implementing a rating system based on

Accountability Index (AI). Through this rating system,

marks will be given for compliance with financial

regulations for 6 main elements. These elements are

management control, budgetary control, receipts

control, expenditure control, management of trust funds

and deposits as well as management of assets and

stores. The Federal Ministries/Departments which have

been rated as excellent become role models. This will

motivate others to diligently improve and enhance their

financial management.

4.2. Treasury Instructions require all Heads of

Ministry/Department to ensure that responsible officers

safeguard public money, stamps or other valuable items

in safety boxes, vaults, cash boxes or other receptacles.

They must ensure that records kept are complete, up to

date and periodically checked by senior officers. In

10

order to ascertain to what extent this has been complied

with, the National Audit Department has also carried out

surprise checks in 223 Federal offices throughout the

country.

4.3. The National Audit Department continued to be

involved in the evaluation of the performance of Premier

Grade Officers on financial management as part of their

confirmation exercise. A total of 45 Heads of

Department were evaluated from January to 5 July

2013. These evaluations have indirectly contributed

towards the 9 enhancement of the financial

management as promotion of Heads of Department

would only be considered by the Public Service

Department after the National Audit Department and

Federal Treasury of Malaysia confirmed that corrective

actions on the weaknesses raised had been taken by

the officers.

4.4. Beginning 2013, the Auditor General’s

Dashboard was created to monitor actions taken by the

Ministries/Departments/Government Companies on

Audit issues raised. It also serves as a dissemination

channel to the public on the status of actions taken.

Through this approach, each Audit issue raised will be

given due attention by the Ministries/Departments/

Government Companies and pending cases could also

be settled as soon as possible.

5. I would like to express my thanks to all the officers in

the various Federal Ministries/Departments who have given

their full cooperation to my officers during the audit. I would

11

( TAN SRI DATO’ SETIA HAJI AMBRIN BIN BUANG )

Auditor General Of Malaysia

Putrajaya

22 July 2013

also like to record my appreciation and thanks to my

officers who have shown total commitment and worked

diligently to complete this report.

12

13

SYNOPSIS

14

15

SYNOPSIS

PART I - CERTIFICATION OF THE FEDERAL

GOVERNMENT’S FINANCIAL STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2012

1. The Federal Government’s Financial Statement for

the year ended 31 December 2012 as a whole reflected a

true and fair view of the financial position of the Federal

Government and the accounting records were also properly

maintained and kept up-to-date.

PART II - FINANCIAL MANAGEMENT OF THE FEDERAL GOVERNMENT

Overall Financial Management Performance

2. For the year 2012, the Federal Government

received revenue totaling RM207.913 billion, with an

increase of RM22.494 billion (12.1%) as compared to

RM185.419 billion for the year 2011. This was the highest

income in 5 years since 2008. The Inland Revenue Board

of Malaysia alone managed to collect revenue of

RM124.892 billion in 2012, which was an increase of

RM15.284 billion (13.9%) as compared to RM109.608

billion in year 2011. In the meantime, the Royal Malaysian

Customs Department had also successfully collected

revenue totalling RM32.319 billion in 2012, which showed

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an increase of RM1.940 billion (6.4%) as compared to

RM30.379 billion in year 2011. In the same year, the

Government had approved allocation of operating

expenditure amounting to RM198.738 billion, which was the

highest approved allocation in 5 years. However, the

allocation was insufficient to cover the operating expenses

amounting to RM205.537 billion. On 16 July 2013, an

additional allocation was approved by the Parliament to

cover the deficit. As for the development expenditure,

Federal Ministries/Departments had spent RM46.932 billion

(95.6%) out (of the approved allocation) of RM49.108

billion.

Financial Management Of The Federal Ministries And

Departments

3. The National Audit Department has audited 25

Federal Ministries and 40 Federal Departments in 2012 in

order to ascertain whether their financial management was

in accordance with established laws and financial

regulations. Audit findings revealed that the overall financial

performance at Ministries/Departments’ level for 2012 had

improved as compared to 2011 and previous years. In

2012, the performance of 22 Ministries and 22 Departments

in their financial management was rated as excellent, which

was an increase of 3 Ministries (15.7%) and 1 Department

(4.8%) as compared to 19 Ministries and 21 Departments in

2011. On the other hand, 3 Ministries and 18 Departments

were rated as good. Besides the Headquarters of the State

Education Department (SED) and the State Health

Department (SHD), 14 state branches of SED and SHD

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throughout the country were also assessed. Audit had also

been carried out in 8 Malaysian Missions Overseas under

the Ministry of Foreign Affairs.

4. As required under the Treasury Instructions, all

Controlling Officers/Heads of Department must ensure that

the responsible officers safeguard public money, stamps or

other valuable of any kind in safety boxes, vaults, cash

boxes or other receptacles. They must carry out periodic

inspections and maintain complete and updated records.

In order to ensure that such duties were carried out by the

Controlling Officers/Heads of Department, the National

Audit Department had carried out surprise inspections in

223 Federal Departments/Offices at state and district

levels. Audit findings revealed that there were some

instances where public money and other valuable items

were not kept safely and delays in banking-in collections.

The report on the findings had been submitted to the

relevant heads of department/state for further action.

5. Besides conducting mandatory audit as provided

under the law, the National Audit Department also carried

out special evaluation on the financial management

performance of Premier Grade Officers in various

Ministries/Departments/Agencies. For the period from

January 2012 to 5 July 2013, a total of 45 Heads of

Department had been evaluated.

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19

POSTSCRIPT

20

21

POSTSCRIPT

In general, the financial management of the Federal

Ministries/Departments in 2012 showed a better

performance as compared to 2011. This was evident with

22 Ministries being rated as excellent in 2012 as compared

to 19 Ministries in 2011. The financial management at the

Departments’ level in 2012 was also very encouraging

where 22 Departments were rated as excellent as

compared to 21 Departments in 2011. The financial

management performance could still be further enhanced if

the Controlling Officers/Heads of Department not only take

action to rectify the weaknesses as highlighted by Audit but

also take preventive actions to ensure that the same

weaknesses do not recur. With regard to this, the followings

are recommended to further strengthen the performance of

financial management:

a. Controlling Officers/Heads of Department should

conduct a comprehensive check to determine

whether the weaknesses highlighted by Audit also

occur in other areas as well as its Responsibility

Centres and thereafter take corrective actions since

audits conducted by the National Audit Department

are based on samples and specific scopes;

b. Ministries/Departments should enhance the

effectiveness of Internal Audit Units (UAD). Among

others, they should ensure that the UAD staff get

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sufficient training and guidance, prepare the annual

audit plan so that auditing could be carried out

according to priorities, evaluate objectively and

independently not only on internal controls but also

on risk management and organizational

governance, report on significant findings as well as

giving recommendations that give impact and

outcome to the organization;

c. In order to enable issues highlighted by Audit to be

discussed with greater focus, Audit Committees

should be set up in all Ministries in accordance with

Treasury Secretary General’s Directive dated 5 May

2009 requiring corrective and preventive actions to

be taken. The Audit Committee should report the

results of its discussion to the Financial

Management and Accounts Committee chaired by

the Controlling Officer;

d. In order to further improve financial management,

the involvement of Controlling Officers/Heads of

Department should be increased. They should be

involved hands-on on financial matters;

e. Secretary Generals/Heads of Department should

chair every Exit Conference together with the

officers from the National Audit Department so that

they could know Audit issues beforehand and

urgently take positive actions apart from making

improvements;

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f. In the implementation of eSPKB, the payment

transactions are done at Responsibility Centres and

the supporting documents are kept at the respective

offices. In order to ensure that payment is done

properly, supported by sufficient documents and

approved by authorised officers, the Accountant

General Department needs to ensure that its

Inspectorate Unit carries out inspection on

Responsibility Centres as planned;

g. All Department’s policies, instructions and

delegation of powers should be done in written form

so that they are more transparent and accountable.

The Department’s Client Charter should be

reviewed and updated constantly so that services

are delivered as promised;

h. Heads of Department should establish a check and

balance system, supervise closely and conduct

surprise checks, conduct periodic assessment on

skills and capabilities of officers and give training to

officers who are involved with financial management

so as to improve their efficiency. This is to avoid

officers who are less experienced and skilled from

using their discretion when making decisions;

i. Records on asset and inventory should always be

updated by the Ministries/Departments in

preparation for the Federal Government to move

towards accrual accounting in 2015;

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j. Impose surcharge on those who failed to collect

revenue/made improper payment. Surcharge should

also be imposed on Heads of Department/Division

for failing to take action against their staff who failed

to carry out their responsibilities.

National Audit Department

Putrajaya

22 July 2013

25

SECTION 2

26

27

SYNOPSIS

AUDITOR GENERAL REPORT FOR THE YEAR 2012

ON ACTIVITIES OF THE FEDERAL MINISTRIES/DEPARTMENTS AND MANAGEMENT OF THE GOVERNMENT COMPANIES

SERIES 3

NATIONAL AUDIT DEPARTMENT MALAYSIA

28

29

PREFACE

30

31

PREFACE

1. Articles 106 and 107 of the Federal Constitution and

the Audit Act 1957 require the Auditor General to audit the

Federal Government’s Financial Statement, financial

management, activities as well as management of Federal

Government Companies and submit his reports to His

Majesty, Seri Paduka Baginda Yang di-Pertuan Agong and

obtain his assent before tabling them in Parliament.

Beginning 2013, the Auditor General’s Report will be tabled

at each sitting of the Parliament or three times a year in line

with the National Key Results Areas for fighting corruption

under the Government Transformation Programme 2.0. The

Auditor General Report 2012 Series 1 and 2 were tabled in

Parliament on 1 October 2013. To fulfil these

responsibilities, the National Audit Department needs to

carry out 4 types of audit as follows:

1.1. Attestation Audit – to give an opinion as to

whether the Federal Government’s Financial Statement

for the year concerned shows a true and fair view as

well as its accounting records are maintained properly

and kept up to date.

1.2. Compliance Audit – to evaluate whether the

financial management of the Federal Ministries/

Departments is in accordance with relevant financial

laws and regulations.

32

1.3. Performance Audit – to evaluate whether the

Federal Government activities have been carried out

efficiently and economically to achieve its desired

objectives/goals.

1.4. Government Companies’ Management Audit

– to evaluate whether the Federal Government

Companies have been managed in a proper manner.

2. My report on the implementation of activities of the

Federal Ministries/Departments and the management of

Government Companies for the year 2012 Series 3

consists of 3 parts as follows:

Part I : Implementation Of Activities Of The

Federal Ministries/Departments

Part II : Management Of Federal Government

Companies

3. Section 6(d) of the Audit Act 1957 requires the

Auditor General to carry out audit to evaluate whether

Government activities have been managed efficiently,

economically and in accordance with their stated

objectives. The audit encompasses various activities such

as construction, infrastructure, maintenance, asset

management, environment, procurement, revenue

management, education, health, human capital, contract

administration and socio-economic upgrading programmes.

This report contains observations from the audit of 10

programmes/activities/projects of 6 Federal Ministries/

Departments, management of 1 Government Companies

and management on financial performance and supervision

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of Government Companies. Generally, weaknesses

observed are such as improper payment; work/procurement

did not follow specifications/was of low quality/was

unsuitable; unreasonable delays; wastage; weaknesses in

revenue management and management of the

Government’s assets. The said weaknesses were due to

negligence when complying with the Government’s rules/

procedures; programmes/activities/projects and scopes/

specifications were not planned and identified properly;

work of contractors/vendors/consultants was not monitored

and supervised closely; poor project management skills;

decisions on procurement were made late; information

systems of the Ministries/Departments/Government

Companies were incomplete and not updated; outcome/

impact of programmes/activities/projects was not given due

attention; shortage of funds for asset maintenance; and

insufficient officers to collect revenue.

4. Just as the previous Series, relevant Heads of

Departments were informed beforehand on issues

highlighted in this report for verification purposes. In order

for corrective actions to be taken and improvements to be

made by the relevant Heads of Departments, a total of 68

recommendations were made by the National Audit

Department.

5. Beginning 2013, the Auditor General’s Dashboard

was created to monitor actions taken by the Ministries/

Departments/Government Companies on Audit issues

raised. It also serves as a dissemination channel to the

public on the status of actions taken. Through this

approach, each Audit issue raised will be given due

34

attention by the Ministries/Departments/Government

Companies and pending cases could also be settled as

soon as possible.

6. I would like to express my thanks to all the officers

of the Ministries/Departments/Government Companies who

have given their cooperation to my officers during the audit.

I also wish to express my appreciation and thanks to my

officers who have given their commitment and worked

diligently to complete this report.

( TAN SRI DATO’ SETIA HAJI AMBRIN BIN BUANG )

Auditor General of Malaysia

Putrajaya

4 October 2013

( TAN SRI DATO’ SETIA HAJI AMBRIN BIN BUANG )

Auditor General Of Malaysia

Putrajaya

4 October 2013

35

SYNOPSIS

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37

SYNOPSIS

PART I - IMPLEMENTATION OF ACTIVITIES BY THE FEDERAL MINISTRIES/ DEPARTMENTS

PRIME MINISTER’S DEPARTMENT

National Security Council 1. Construction Of The Special Malaysia Disaster

Assistance And Rescue Team Complex And The National Crisis And Disaster Management Institute

a. The Special Malaysia Disaster Assistance and Rescue

Team (SMART) was formed on 18 May 1994 following

a cabinet order and managed by the National Security

Council (NSC). The SMART team consisted of elite

personnel who have better expertise in search and

rescue compared to the existing team. The Construction

of SMART Complex and The National Crisis and

Disaster Management Institute (IPKBN) amounting to

RM90.24 million is located at Batu 8, Jalan Puchong-

Kajang, Pulau Meranti, Puchong, Selangor. It was to

build a central administration building and

operation/logistics/training rooms which could provide

complete facilities compared to previous SMART's

headquarters at the Police Training Centre (PULAPOL),

Jalan Semarak, Kuala Lumpur. The Complex included

50 units of quarters which provide accommodation for

staff who were staying at Ceria Heights Apartment,

Cheras, Kuala Lumpur. The construction was carried

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out using the conventional method by the Public Works

Department (PWD).The construction was divided into 3

phases namely Phase 1 for quarters and obstacles

track; Phase 2 for the SMART headquarters building,

clubhouse and prayer room; and Phase 3 for the IPKBN

building and special simulation building for expert

training of SMART staff. The construction of Phase 1

and Phase 2 was completed in 2009 and 2010

respectively. However, the construction of Phase 3 was

cancelled due to insufficient allocation of fund. Audit

findings revealed that the overall performance of the

construction of the SMART Headquarters and IPKBN

project was not satisfactory. The objective of providing

complete training facilities for SMART staff was still not

achieved due to the cancellation of Phase 3. Among the

weaknesses identified were as follows:

i. Phase 1 and 2 were delayed by 353 days and 350

days respectively from the original contract period;

ii. the submission of Phase 2 to NSC by PWD was

delayed due to certain construction components that

were not fully functional and the supply of electricity

and water which was not yet finalised;

iii. an increase of RM12.65 million from the original

contract cost (the original cost of the project was

RM77.59 million) due to PWD’s poor planning on

the design and scope of works, contingencies on

construction sites and increase in cost of the

construction materials;

iv. As-Built Drawings for Phase 1 was not submitted/

kept properly, causing difficulty in planning building

maintenance works;

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v. Certificate of Practical Completion (CPC) for Phase

1 and 2 were not issued properly;

vi. construction design was inappropriate/impractical;

vii. construction works were unsatisfactory and of poor

quality and some electrical and mechanical

appliances were not functioning;

viii. furniture/equipment/electrical and mechanical items

were not located at the intended location;

ix. quarters, space/facility/room/equipment at the

clubhouse and SMART headquarters building were

underutilised;

x. Obstacle Track worth RM1.65 million was not used;

and

xi. delay in appointing maintenance contractors for the

complex.

b. In order to improve the weaknesses highlighted, it is

recommended that NSC and PWD consider the

following actions:

i. ensure detailed early planning on the design and

scope of works to be undertaken by the contractor

in order to avoid delay in construction and increase

in cost during implementation;

ii. ensure that the official handover of the building to

the Client Department is done as soon as possible

after completion to enable early detection of defects;

iii. ensure that the construction works are completed as

at the date of issuance of the CPC. Appropriate

action should be taken against officers who failed to

carry out these responsibilities effectively;

40

iv. ensure that submission/keeping of As-Built

Drawings is in order to avoid problems in the

planning of maintenance works;

v. ensure that the building/mechanical and electrical

equipment supplied are maintained with care so that

they could function properly and best value for

money;

vi. ensure that all supplied mechanical and electrical

fixtures and fittings are registered in accordance

with the existing rules and regulations. Further

investigation should be conducted for the assets

which were not located at the intended locations to

ascertain whether they were missing or not supplied

in accordance with contract; and

vii. ensure quarters; room/space/facilities at the SMART

Headquarters; Clubhouse and Obstacle Track are

fully utilised for optimum benefit in line with the

objectives of its construction.

National Security Council 2. Management Of The Government Integrated Radio

Network Project

a. The objective of the Government Integrated Radio

Network (GIRN) was to provide a dedicated shared

communications network infrastructure and at the same

time maintaining autonomy and independence of each

agency. GRIN was developed for security related

agencies, public order, enforcement and emergency

response agencies. It was expected to eliminate

duplication and wastage of money and achieve

economies of scale in the procurement, maintenance

41

and management of telecommunication parts. The

implementation of GIRN involved a public-private

partnership through the Private Finance Initiative (PFI).

The operation and maintenance of GIRN network was

privatized to Sapura Research Sdn. Bhd. with a

concession period of 20 years with an estimated

contract cost or lease network (estimated rental

network) amounting to RM1.833 billion. The

maintenance cost for the first 5 years amounted to

RM956.15 million. A total of 14 agencies have joined

the GIRN network. The National Security Council (NSC)

under the Prime Minister's Office (PMO) was

responsible as the Technical Coordinator during the

concession period. As at the end of 2012, a total of 538

GIRN transmission site were built all over Malaysia. The

construction of GIRN transmission site was divided into

3 categories namely Greenfield, Rooftop and Share.

Audit findings revealed that the overall management of

GIRN was satisfactory especially from the development

and coverage aspect. However, there were several

weaknesses as follows:

a. Hardware condition:

i. handheld terminal and vehicular terminal worth

RM1.85 million were not disposed since 2007.

b. Transmission site condition:

i. backup generator was not functioning;

ii. Guardhouse was not provided;

iii. surrounding at the generator site was not

maintained properly (oily);

42

iv. re-inspection of fire extinguishers were not

carried out;

v. Improper cable installation; and

vi. improper labelling of assets:

• assets were not labelled/the labels cannot be

read (faded); and

• the warning signs were faded.

c. transmission tower rental income of RM2.44 million

was not accounted for as Government revenue;

d. inadequate technology transfer programme; and

e. there were existing posts that should be reviewed.

b. In order to overcome the weaknesses highlighted, it is

recommended that NSC takes the following actions:

i. inform all agencies involved on GIRN operating

procedures for handling any malfunctioned or

damaged GIRN terminal which need to be repaired;

ii. monitor GIRN agencies to ensure optimal usage of

equipment supplied;

iii. seek advice from the Ministry of Finance on the

method of disposal that could be used with

reference to the Treasury Circular No. 5 Year 2007;

iv. ensure each generator including backup generator

could function properly so that there is no disruption

to GIRN network operations;

v. ensure the guardhouses are provided at GIRN

transmission sites with security guards;

vi. monitor and ensure that the maintenance/cleaning

works at the generator sites are done properly to

avoid any accident/mishap at the GIRN

transmission sites;

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vii. ensure fire extinguisher inspections are conducted

according to schedule;

viii. ensure assets are labelled with Government

ownership and a serial number. Labels should be

clear and easy to read;

ix. ensure the rental income from the transmission

towers are accounted as Government revenue;

x. ensure SRSB submit the technology transfer

program plan within the concession period.

Activities relating to technology transfer including

ongoing training should be reported in the Technical

and Progress Committee Meeting of the Project,

and

xi. discuss with the Ministry of Finance on the staffing

requirement for monitoring GIRN project as it is

considered as a Government strategic project.

Property Management Division 3. Management On The Maintenance Of Federal

Communal Buildings - Sultan Iskandar Building, Johor Bahru And Menara

Usahawan Building, Putrajaya

a. The Property Management Division (BPH) of the Prime

Minister's Department (JPM) is responsible for

controlling and administering 6 out of 45 Federal

Communal Buildings (BGS). As the manager or owner

of these buildings, BPH will provide funds to the Public

Works Department (PWD) for its building maintenance.

BPH plays a major role in ensuring that Government

offices and cafeterias under their care are able to

achieve a safe and conducive work environment as well

as meeting current world class requirements. PWD has

44

been entrusted with the appointment and supervision

pertaining to the works carried out by the appointed

maintenance contractor. Two out of 6 mentioned BGS

are Sultan Iskandar Building (BSI) in Johor Bahru and

Menara Usahawan Building (MU) in Putrajaya. BSI was

built in Johor Bahru at a cost of RM987.47 million,

covering an area of 2.87 million square feet and was

fully operational by 1 December 2008. PWD has

appointed Advanced Maintenance Precision

Management Sdn. Bhd. (AMPM) as its maintenance

contractor through direct negotiation with approval from

the Ministry of Finance. The contract which was worth

RM484.50 million had been undertaken on

29 September 2008 for a period of 5 years beginning

from 1 June 2007 until 31 May 2012. MU or formerly

known as Lot 2G6 in Putrajaya was built at a cost of

RM373.48 million, covering a floor area of 49 thousand

square meters and it was completed on 29 October

2005. PWD has appointed HBS Engineering Sdn. Bhd.

(HBSESB) and Jangka Prestasi Sdn. Bhd. (JPSB) as its

maintenance contractor through open tender. The

maintenance and operations management contract from

the year 2007 to 2010 amounted to RM8.88 million.

Audit findings revealed that the overall management on

the maintenance of these 2 buildings was satisfactory.

However, there were certain essential areas to be

improved as follows:

i. physical maintenance was not satisfactory;

ii. inappropriate building design which complicated

maintenance works;

45

iii. posts were not filled up by the contractor in

accordance with the contract;

iv. further penalty for delay in carrying out works was

not imposed;

v. the validity of information in the register of Work

Order and the Summary of Work Order was doubtful

due to discrepancy of information in those

documents. The obvious differences in information

were such as type of works, dates, location of

defects and type of defects;

vi. maintenance meetings were not held on a monthly

basis; and

vii. documents on maintenance works were not

complete and updated.

b. In order to ensure a good, comfortable and safe working

environment in these building premises, it is

recommended that BPH, JPM and PWD take the

following actions:

i. PWD should enhance monitoring to ensure that the

contractor takes more proactive actions in routine

maintenance, rehabilitation or other periodic

inspection, repair of any defects and replacement of

damaged items. Delay in repair or maintenance

action may have implications on the performance

and lifespan of the asset itself. Work Order should

not be considered done as long as the repair work is

not completed;

ii. a special way should be prepared on level 6 of the

Menara Usahawan Building for maintenance works

46

at the roof top area as existing design does not

facilitate such works;

iii. PWD should monitor on filling up vacant posts to

ensure uninterrupted maintenance operation of

facilities for both buildings even though payments

have been deducted;

iv. PWD should review the penalty clause or payment

deduction relating to pending Work Orders. Penalty

should not be imposed once only when the pending

period exceeds 30 days as there were too many

pending repair works to be done and the contractor

was late in taking actions;

v. PWD should ensure accuracy of information in the

Work Order register and its monthly report because

there were recording errors. Non-compliance with

these standards should result in payment deduction;

vi. BPH should ensure that the Monthly Maintenance

Meeting for Menara Usahawan Building is held

every month to discuss contractor’s performance;

vii. as owner of the Menara Usahawan Building, BPH

should keep complete documents on maintenance

details such as minutes of meetings, spending

patterns, supervision, monthly maintenance reports

and other documents for reference and monitoring

purposes; and

viii. BPH and PWD should expedite in using the Total

Infrastructure Facilities Management System (TIFM)

to enhance effectiveness and efficiency in the

management of maintenance works.

47

MINISTRY OF AGRICULTURE AND AGRO-BASED INDUSTRY MALAYSIA

4. Marine Fisheries And Its Environment

a. The National Fisheries Sector has contributed to the

country's fish production amounting to RM11.438 billion

in 2012, RM10.620 billion in 2011 and RM9.94 billion in

2010. The country's fish production is contributed by

marine captured fisheries, aquaculture and other

general fisheries. Fish is an important source of food

and protein for the people of Malaysia where

consumption of fish per capita amounted to 46kg in

2011. However, per capita fish consumption is expected

to continue to increase from 46kg to 55kg per person

with a growth rate of 1.9% per annum for the period

2011 to 2020. Therefore, the National Agro Food

Policies for 2011 to 2020 has set that the fishing

industry needs to be transformed by focusing on

modernization of fishing technology, upgrading landing

infrastructures and marketing strategy, strengthening

the capability of fishermen, compliance with

international standards with regards to fish handling and

landings as well as managing the sustainability of

fisheries resources. The objective of marine captured

fisheries is to establish the fish landings for the purpose

of food through optimal capture fisheries of RM1.76

million metric tonnes in 2020; ensure that fisheries

resources are properly managed from the perspective

of a sustainable exploitation manner; ensure that the

country's majority fish production is being contributed

through marine captured fisheries; ensure appropriate

strategic planning and provide vital support to

48

institutions related to fisheries industry so that the

fisheries sector meets expected demand and

overcomes the problems faced by the industry. Recent

study shows unsustainable fisheries activity and rapid

development along the coastal areas and estuary has

adverse effects on the fisheries resources and habitat

that are closely related to fisheries within these areas as

well as mangroves, coral reefs and sea grass. These

activities have created numerous social, economic and

biological impacts including reduction in number of

commercial fish species and significant changes to the

functions of the ecosystem. Audit findings revealed that

generally, the management of marine fisheries and its

environment was satisfactory. However, there were

some weaknesses as follows:

i. landings performance and fish consumption per

capita index were not consistent;

ii. comprehensive study on fisheries resources was

not done since 1999 (13 years);

iii. control of resources conservation and the

environment had been less effective;

iv. laws and regulations were not fully complied with;

v. usage of prohibited fishing equipment; and

vi. ineffective enforcement/monitoring.

b. In order to overcome weaknesses raised from the audit

findings and to ensure efficient management of marine

fisheries and its environment so that its objectives could

be achieved, it is recommended that the parties

involved take the following actions:

49

i. provide sufficient allocation of funds and human

capital (at the state and district level) for efficient

implementation through conservation of resources,

monitoring and fisheries management;

ii. enhance collaboration with research agencies such

as local universities to conduct fisheries resources

study so that the latest data especially on fish stock

could be produced and subsequently used for the

purpose of a more effective fishing;

iii. the Department of Fisheries (DOF) should create a

mechanism to ensure stable growth rate in per

capita fish consumption;

iv. agencies involved such as the Malaysian Maritime

Enforcement Agency and Department of Fisheries

should ensure that continuous monitoring is carried

out to overcome zone invasions, overfishing,

destructive fishing and the usage of unwarranted

fishing gears;

v. the Blue Ocean Strategy should be implemented by

those agencies involved (Department of Fisheries,

Department of Environment, Department of Marine

Park, Fisheries Development Authority Of Malaysia

and Malaysian Maritime Enforcement Agency) to

ensure and assure environmental sustainability

apart from the gazette of the prohibited areas of the

fisheries activity. Besides these, other agencies

such as Non-Government Organisations (NGOs),

stakeholders and local residents should also need

to be engaged;

vi. the Department of Fisheries should look into best

practices in the protection and conservation of

50

ecosystems to ensure sustainability of fisheries

resources and to review the use of gear (such as a

trawl) which could result in destructive fishing and if

necessary ban it; and

vii. the Department of Fisheries should follow up on the

plan to increase enforcement officers in the field to

enhance the effectiveness of fisheries management

in Malaysia.

MINISTRY OF RURAL AND REGIONAL DEVELOPMENT

5. Rural Transformation Centre

a. The Rural Transformation Centre (RTC) is an integrated

programme introduced by the Government under the

National Blue Ocean Strategy 4 (NBOS4) and was

officially launched on 31 May 2011. RTC serves as a

One Stop Centre (OSC) and a centre for integration of

services by the Government and the private sector

involving the collection, processing and distribution of

agricultural products; banking and insurance; business

advisory services; skills training; clinics and retail space.

The objective of the RTC programme is to facilitate rural

communities to be viable, competitive and capable in

improving the quality and quantity of their products. This

allows the product to be marketed not only in the

country but also abroad as export. The Ministry of Rural

and Regional Development (MRRD) and the Ministry of

Agriculture and Agro-based Industry (MOAABI) are the

main Ministries leading the implementation of the

programmes under the RTC. The National Key Result

Areas (NKRA) Unit in the MRRD is given the

responsibility for the implementation of the RTC

51

programme. RTC operates in existing premises owned

by various Government agencies. However, they were

not occupied/rented by targeted dealers/groups in line

with its original purpose. Audit findings revealed that

the overall management of RTC had been less than

satisfactory. Among weaknesses that should be given

due attention and rectified were as follows:

i. delay in channelling funds to the Ministry/

implementing agency causing an allocation of

RM4.70 million not being spent;

ii. some dealers were not doing business even though

the number of unrented retail space was only 96

(14%) compared to the total number of retail space

rented which was 592 (86%);

iii. rent arrears in RTC by the end of 2012 amounted to

RM1.49 million; and

iv. dealers from RTC Kota Bharu and Gopeng were not

satisfied with the response they received from

visitors.

b. In order to ensure that the objectives of the

establishment of RTC are achieved and to overcome its

management problems, it is recommended that the

parties involved make the following improvements:

i. MRRD should urgently channel the funds received

so that ministries/implementing agencies could be

able to conduct programmes/activities that have

been planned;

ii. MRRD as the leading Ministry of Initiative 1 (Skills

Training For Rural Residents) should provide

adequate training to enhance knowledge, skills and

52

capability so that the income and standard of living

of the targeted groups could be raised;

iii. MRRD should continuously monitor especially on

the expenditure progress and the initiative

achievements that had been set;

iv. MRRD and MOAABI should establish renting

mechanisms to dealers such as setting grace period

for rental payments so that dealers could sustain

their business operations; and

v. MRRD and RTC management should increase

promotion to attract visitors to RTC through

community activities such as organising cultural,

arts and sports activities.

MINISTRY OF EDUCATION MALAYSIA

6. Special Project Management

a. Visits of the Minister of Education throughout the Ninth

Malaysia Plan (RMKe-9) found that school facilities

such as school halls, teachers' offices, restrooms and

fields were not conducive resulting in uncomfortable

teaching and learning environment. The Minister of

Education suggested that the Ministry of Education

(Ministry) should upgrade facilities to improve school

performance. In order to address this problem, the

Ministry identified and planned strategies to improve/

upgrade facilities through the Special Project which

consisted of 350 projects involving 27 school hall

projects, 91 teachers’ office projects, 161 restrooms

projects and 71 projects in upgrading fields across the

country. A total of RM444.69 million was allocated for

this purpose for 2011 and 2012. The Special Project

53

was planned in mid 2010 and implemented in stages

beginning 2011 to 2012. The projects were expected to

be completed between 6 to 12 months and they were

divided into 10 packages and 105 sub packages to be

implemented by different contractors. This project was

managed by the Special Project Unit, Development

Division, Ministry of Education. A total of 12 different

consultants were appointed through restricted tenders

for the design module of the Special Project to construct

school halls, teachers’ offices, restrooms excluding

upgrading of the field. The Ministry also appointed 50

different consultants through restricted tender for works

supervision of the Special Project. Audit conducted from

November 2012 to January 2013 revealed that

generally, the Special Project management was not

satisfactory because the overall expenditure

performance and work progress of the Special Project

as at December 2012 were only 39.5 % and 55.1%.

Based on the sample of projects audited, there were

several weaknesses in the management of the Special

Project as follows:

i. time taken by the Ministry to issue Letter of

Acceptance (SST) was too long which was between

478 and 732 days from the issuance date of Letter

of Intent. Besides, there was delay in signing the

contract agreement which was between 79 and 392

days from the issuance date of SST. Due to the

delay in issuing SST and signing the contract

agreement with the Consultant, the Consultant

carried out duty without any legal bonding and the

Government’s interest was not safeguarded;

54

ii. 25 out of 26 projects audited failed to be completed

within the specified time and Extensions of Time

(EOT) between 53 and 413 days were applied. As

at December 2012, only 19 out of 25 projects were

completed and handed over. Meanwhile, the

remaining 5 projects were not completed/handed

over while 1 restroom project was completed on 30

May 2013 but not handed over due to objection from

the school nearby. Another field upgrading project

was completed within the stipulated time but was

still categorized as a failure as 4 projects under the

same project package were not completed; and

iii. generally, the design of the Special Project was

satisfactory. However, there were weaknesses from

the safety aspect and in fulfilling users requirement.

b. In order to overcome the weaknesses highlighted and

further improve the quality in the management of the

Special Project, it is recommended that the Ministry

considers the following:

i. establish a clear work procedure or process to

ensure that negotiation is done within the stipulated

period after the issuance of Letters Of Intent to

consultants;

ii. ensure that contract agreements are signed within 4

months and SST is issued immediately after the

appointment of Consultant/Contractor by the

Ministry to safeguard the interests of the

Government. In addition, all payments should be

supported with complete documentation;

iii. consultant/contractor should apply for extension of

time before the original project period ends.

55

Consultants also need to be more proactive and

should immediately inform the Ministry if any

problem which could affect the performance of the

project arises;

iv. appointment of sub contractor for the supply of built-

in furniture should be made in a timely manner so

that the project could be utilised as planned; and

v. the design of the Special Project should take into

account the safety aspect of the building and user

requirements so that projects could be implemented

effectively and facilities could be fully utilised by end

users.

MINISTRY OF EDUCATION MALAYSIA

7. Management Of School Building Construction Projects In Sarawak

a. The School Building Construction Projects (SBCP) were

undertaken with the objective to provide conducive and

comfortable environment for the teaching and learning

process for students and staff. Among the major

components of the SBCP were classrooms,

laboratories, dormitories, teacher quarters and dining

halls. For the period 2008 to 2012, the Ministry of

Education (Ministry) implemented 737 SBCP in

Sarawak with the original contract value amounting to

RM1.825 billion. SBCP were implemented through open

tenders, restricted tenders and direct negotiation. The

Development Division was responsible for the

management of SBCP. This Division is headed by a

Secretary and assisted by administration officers and

technical officers consisting of engineers, architects and

56

quantity surveyors. The function of the Development

Division of the Ministry was to formulate policies and

strategies for the implementation of SBCP; prepare

annual budget; manage the Ministry’s procurement;

monitor the physical and financial performance of the

projects; certify and propose payment to contractors;

conduct monthly site meetings including supervising the

works carried by consultants and coordinate the

operational problems of SBCP at the state level. Audit

findings based on samples selected revealed that

generally, the management of SBCP in Sarawak was

unsatisfactory. Among the weaknesses were as follows:

i. delay in scheduled project implementation between

219 to 909 days;

ii. the design for 8 SBCP did not take into

consideration the safety, practicality and comfort

aspects;

iii. poor quality construction works; and

iv. monitoring on the management of SBCP was not

satisfactory.

b In order to ensure that the Government gets best value

for money for the School Buildings Construction

Projects and to implement a more orderly and prudent

project in the future, it is recommended that the Ministry

considers the following actions:

i. ensure projects are implemented and completed as

scheduled so that students and staff could use

school facilities as planned so as to safeguard the

image of the Ministry;

57

ii. ensure that the designs of school buildings are in

accordance to the standards set with regard to

safety, practicality and comfort so that the end users

get maximum benefit and the Government gets best

value for money spent;

iii. effectively monitor and supervise SBCP works so

that they are implemented according to the

standards and quality stated in the contract; and

iv. terminate sick projects and appoint new contractors

in a timely manner as well as blacklist contractors/

consultants who fail to complete the work/

responsibilities as required by the contract/

agreement.

MINISTRY OF DEFENCE

8. Redevelopment Of College Complex Building For The Royal Malaysian Navy At NAVY Base In Lumut, Perak

a. The Royal Malaysian Navy College (NAVY College)

encompasses 2 training centres, namely Kapal Diraja

Sultan Idris 1 (KDSI 1) which is a training centre for

officers and KD Pelandok which is for other Forces

Rank. KDSI 1 was formerly known as Officer Faculty

which started operating in 1995. KDSI 1 could

accommodate 300 trainees at one time. The

redevelopment of KDSI 1 was to build a residential

building to accommodate trainees which were expected

to increase to 1,000 people. The development of KD

Pelandok was to fulfil the need of a more effective

learning by providing the latest learning facilities to train

other Forces Rank and to improve their skills. This

58

Project was divided into 2 separate packages. Package

A included the reconstruction of KDSI 1 which was

being carried out by HS Development Sdn. Bhd. (HSD)

since 12 April 2010 with a cost of RM48.93 million.

Whereas, Package B was for the construction of KD

Pelandok which consisted of various buildings such as

lecture rooms building, hospitality management and

culinary building, small arm simulator and machinery

testing workshop, propulsion and simulator. Initially, the

construction work was offered to Ijhraa (M) Sdn. Bhd.

with a project cost of RM41.46 million but it failed to be

completed on time. The Ministry then appointed a

rescue contractor, namely JJM Integrated Sdn. Bhd.

(JJM) on 3 October 2012 and it was expected to be

completed on 2 October 2013 with a total cost of

RM42.93 million. Audit findings revealed that the overall

project was less than satisfactory as Package A was

only completed after 2 approved extensions of time.

Meanwhile, there were weaknesses in Package B as

follows:

i. original contractor failed to complete the project

within the stipulated time, the contract was

terminated and the compensation was not yet

collected; project cost which was initially planned

and set at RM41.46 million was offered again to a

rescue contractor with a total cost of RM42.93

million;

ii. work progress of the rescue contractor for Package

B as at February 2013 was only 11.9% completed

since the project resumed on 3 October 2012. The

expected date of completion was on 20 October

59

2013. However, work progress increased to 72.48%

as at September 2013 compared to its scheduled

progress of 88.28% which meant that it was delayed

by 15.80%;

iii. this project had been categorised as a sick project

and the loss suffered amounted to RM10.2 million

wherein RM8.73 million was paid to the original

contractor and RM1.47 million being the difference

between both contracts; and

iv. contract terms and conditions were not fully

complied with.

b. In order to overcome the weaknesses highlighted and

the Government gets best value for money, it is

recommended that the parties involve take the following

actions:

i. the implementing agency should continuously

monitor the project especially on the rescue

contractor so that the construction works conform

with the stipulated specification and quality and the

project could be completed on time;

ii. the Ministry should ensure that all regulations

regarding contract administration are being

complied with; and

iii. the Ministry should ensure that the contract is

signed within 4 months from the issuance of Letter

Of Acceptance so that the contract could be

enforced.

60

PART II - MANAGEMENT OF GOVERNMENT COMPANY

9. Bank Pembangunan Malaysia Berhad

a. Bank Pembangunan Malaysia Berhad (BPMB) was

incorporated under the Company’s Act 1965 on 28

November 1973 and started its operation in June 1974.

BPMB has an authorized capital of RM10 billion and a

paid-up capital of RM3.1 billion. As at 31 December

2012, BPMB shareholders funds amounted to RM7.2

billion. The role of BPMB was to help entrepreneurs in

small and medium industry through provision of various

financing facilities, training and advisory services

especially for Bumiputra entrepreneurs. BPMB’s

objective was to increase participation and involvement

of Bumiputra in infrastructure, maritime, high-tech as

well as oil and gas industry. BPMB had 10 Board

members. The management of the company was

headed by the Group Managing Director and aided by a

Chief Operating Officer, 5 top senior officers and 308

executive and non-executive officers. Audit findings

revealed that overall, BPMB had conducted its services

in line with the given mandate. The overall BPMB’s

financial performance was good where the company

recorded net profits for financial years 2009 to 2012

which were between RM376 million to RM462.13 million

a year. However, there were weaknesses in few

aspects of its activity management, financial

management and corporate governance as follows:

i. some criteria of the Key Performance Indicators

were not achieved;

ii. target set for Non Performance Loan was not

achieved;

61

iii. cost of endowment fund was higher compared to

other local banks;

iv. loan composition did not follow targeted limit;

v. collaterals could not cover loan default;

vi. the palm oil based biodiesel project encountered

operation problems due to increase in market price

of crude palm oil which resulted in higher operating

cost;

vii. incomplete documents and there were delay in

submission of documents by borrowers; and

viii. rescheduled loan still failed to be paid by borrowers.

b. In order to rectify weakness raised in this report and to

prevent them from recurring, it is recommended that the

management of BPMB considers the following:

i. in order to minimise the risk on funding source, loan

composition should be balanced and

comprehensive. Reliance on a sole fund provider

could pose high risk if there is financial instability

faced by that fund provider;

ii. assessment on project should take into account all

factors so that loans given could be settled

effectively;

iii. in order to ensure that there is sufficient collateral to

support the balance owed, external collateral should

be taken if necessary as an additional security to

protect project failure;

iv. BPMB should comprehensively evaluate project

viability;

62

v. BPMB should comply with rules and regulations on

document submission to safeguard its interest in

litigation cases;

vi. enhance assessment and monitoring on loan

tabulation and restructuring (RSA) to ensure more

effective loan repayment; and

vii. take proactive measure to ensure that recovery of

loans could be settled without going through

litigation as this will increase cost to BPMB.

63

POSTSCRIPT

64

65

POSTSCRIPT

In general, Ministries/Departments/Government Companies

had good plans to implement programmes/activities/projects.

However, in terms of implementation, there were still several

weaknesses that need to be overcome immediately to ensure

that each programme/activity/project is implemented in an

efficient, economical and effective manner to achieve the

stated objectives. In this regard, the following

recommendations are made to overcome the weaknesses

from recurring:

a. As audits conducted by the National Audit Department are

based on samples and certain scopes, Secretary Generals

of Ministry/Heads of Department/Chief Executives should

carry out thorough examination to ascertain whether other

activities have the same weaknesses and thereby take

corrective actions and make improvements. In relation to

this, other than carrying out evaluation on internal controls,

the Internal Audit Unit should carry out procurement and

performance audits on the management of programmes/

activities/projects to ensure that they are implemented

efficiently, economically and the stated objectives are

achieved;

b. Based on Audit conducted, there were several

weaknesses in the implementation of programmes/

activities/projects due to lack of monitoring/supervision by

66

responsible parties, insufficient technical expertise and

relying completely on consultants/contractors, no

coordination among agencies involved as well as internal

problems faced by contractors. These weaknesses caused

the programmes/activities/projects not to be completed

within the stipulated time, unsatisfactory works quality,

increase in cost of programmes/activities/projects and the

Government not getting best value for money for the

expenditure incurred. The objectives of the programmes/

activities/projects were also not fully achieved and did not

give much impact on targeted groups. In this regard, it is

recommended that:

i. the implementation of the Government design and

build projects should be reviewed as they require

higher costs compared to conventional projects. As

such, it is recommended that only complex projects

which require specific expertise are allowed to use the

design and build method. The Ministry of Finance is

required to issue guidelines on the implementation of

design and build projects. Other than that, in order to

safeguard the Government’s interest, consultants of

design and build projects need to be appointed by the

Government. In addition, the Ministry of Finance should

issue financial instructions allowing agencies to include

a clause in the tender document to enable the

Government to remove items that are too expensive

compared to market price and allowing them to be

acquired separately;

67

ii. a detailed study on the Government projects needs to

be carried out before they are approved for

implementation. For this purpose, in line with the

Treasury Instruction 182.1, agencies need to submit

complete information such as status of project site,

project summary, project ceiling, annual allocation and

project schedule to the technical department. This is to

ensure that the project is implemented according to

schedule and the Government gets best value for

money;

iii. integrated planning among agencies involved needs to

be carried out at the early stage of project

implementation especially for big projects. For

example, Department of Sewerage Services,

Department of Environment, Department of Irrigation

and Drainage as well as local authorities need to be

consulted before projects are implemented so that all

basic facilities could be provided and projects could run

smoothly;

iv. the Ministries/Departments need to comply with the

Guidelines for Planning and Building Regulations

issued by the Standards and Cost Committee for the

reference of the National Development Planning

Committee so that buildings are built according to

standard and cost set;

v. in order to curb the problem of failed Government

programmes/activities/projects undertaken by

incapable contractors either in terms of financial or

expertise, it is recommended that companies that wish

68

to participate in the Government’s procurement should

be requested to submit information on paid-up capital

and their financial position for the last three years and

a list of past and present Government/private contracts

involved. Companies are also requested to inform their

experience in the field that they wish to offer. All

information submitted should be supported by the

companies’ declaration. This information should be

taken into consideration during the selection of

contractors;

vi. with regard to the issue of equipment procured but not

utilised whether due to incomplete building/unsuitable

equipment/purchase of equipment in excess/not

required, it is recommended the following:

- view of the users must be taken into account when

preparing the contract specifications relating to

equipment procurement; and

- procurement of equipment should be coordinated

with the progress of the building construction. For

this purpose, the schedule of equipment supplied

should be done beforehand to prevent unused

equipment from being exposed to damage and

theft as well as the expiration of its warranty period

before being utilised.

vii. Controlling Officers/Heads of Department should

enhance Government asset management to avoid

wastage and take serious view on maintenance,

monitoring and supervision tasks. Records on asset

69

and inventory should always be updated in preparation

for the Federal Government to move towards accrual

accounting in 2015;

viii. stern actions such as disciplinary action or

surcharge should be taken against officers who are

found to be negligent or fail to discharge their

duties without reasonable justification thereby

causing losses to the Government;

ix. stern action should also be taken against

consultants who failed to discharge their

responsibilities in monitoring/supervising

programmes/activities/projects such as imposing

penalty/blacklisting them from other Government

projects. In this regard, the agreement with

consultants should include provisions relating to

action that maybe imposed against them for failing

to perform their duties as specified; and

x. Government companies should ensure good

financial performance; implement their activities

properly and achieve the set objectives; and their

financial management and corporate governance

are in line with the rules and regulations stated.

c. In addition to fulfilling the legal requirements, I hope

this report will form a basis for improving the

weaknesses, strengthening efforts and enhancing

accountability and integrity. This report is also

important in the Government’s effort to increase

70

productivity, creativity and innovation in the public

service as well as a work culture which is fast, accurate

and has integrity. Indirectly, this will also contribute to

the achievement of the Government Transformation

Programme 2.0 in fighting corruption under the

National Key Results Areas (NKRA).

National Audit Department Putrajaya 8 October 2013