Auditor General s Report For The Year 2013

Transcription

1 Auditor General s Report For The Year 2013 The Activities Of The Ministries/Departments/ Agencies And The Management Of Sarawak State Government Companies 2 nd Series

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3 AUDITOR GENERAL S REPORT FOR THE YEAR 2013 The Activities Of Ministries/Departments/Agencies And Management Of State Government s Companies For Sarawak 2 nd Series NATIONAL AUDIT DEPARTMENT OF MALAYSIA

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5 PREFACE 1. Article 106, of the Federal Constitution and the Audit Act 1957 requires the Auditor General to audit the State Government s Financial Statements, Financial Management and Activities of the State Ministries/Departments/Agencies. Section 5(1)(d) of the Audit Act 1957 empowers the Auditor General to carry out audit on any company registered under the Companies Act 1965 that are receiving grant/loan/guarantee from the Federal or State Government and any company where more than 50% of the paid-up share capital is held by the Federal Government, State Government or a public authority. Articles 107 of the Federal Constitution requires the Auditor General to report on the audit findings to the Supreme Head of Malaysia, His Majesty, Seri Paduka Baginda Yang di-pertuan Agong and his Excellency, the Head of State of Sarawak. His Majesty will grant his Royal assent for the Report to be tabled in Parliament while His Excellency will then assent for the Report to be tabled in the State Legislative Assembly. 2. For the year 2014, the National Audit Department will continue to implement the initiatives under the GTP2.0: NKRA Anti-Corruption to table the Auditor General s Report on the Activities of Ministries/Departments/Agencies and the management of State Government s companies in Parliament/State Legislative Assembly at every seating. The National Audit Department will also continue to support the National Transformation Policy and to assist the Ministries/Departments/Agencies making improvements by giving opinions and recommendations through the auditing carried out thus enhancing the people s wellbeing. I hope the report with regards to the implementation of Activities of Ministries/Departments/Agencies and Management of Sarawak State Government s Companies for the year nd Series will become the basis for improving all weaknesses, strengthen efforts to improve and increase accountability and integrity and obtain value for money for each expenditure made as desired by the Government. 3. This report is the result of auditing carried out on certain activities implemented by one Ministries, one Departments, seven Agencies and two State Government s Companies. Auditing on activities of State Departments/Agencies is for the purpose of evaluating whether the programme and activities planned are carried out successfully in accordance with the time frame set, no wastage and their objectives are achieved. Auditing on management of company is to evaluate whether financial performance of the company is good, management of activities, finance and corporate governance of the company were implemented orderly and in accordance to the regulations and objectives are fully achieved. 4. Audit Observations have been submitted to the relevant Heads of Ministries/Departments/Agencies/State Government Companies. Only significant Audit findings are reported in this Report. This Report is also forwarded to the Chief Minister s/state Secretary s Office Sarawak. In order to improve on the weaknesses 3

6 highlighted or to avoid their recurrence, I have forwarded 20 recommendations for the respective Heads of Ministries/Departments/Agencies to take action. 5. I wish to record my thanks to all officers of the Ministries/ Departments/Agencies/Sarawak State Government s Companies who had been very cooperative with my officers throughout the audit. I also wish to express my appreciations and thanks to all my officers for their hard work and commitments to complete this Report. (TAN SRI DATO SETIA HAJI AMBRIN BIN BUANG) Auditor General Malaysia Putrajaya 1 st May

7 REPORT SUMMARY ACTIVITIES OF MINISTRIES/DEPARTMENTS/AGENCIES AND MANAGEMENT OF STATE GOVERNMENT S COMPANIES 1. PUBLIC WORKS DEPARTMENT - The Management Of Water Treatment Plants Public Works Department Sarawak 1.1. Treated water in the state of Sarawak is supplied by Kuching Water Board, Sibu Water Board, LAKU Management Sdn. Bhd. and Public Works Department Sarawak (PWD). Kuching Water Board supplies water to the Kuching City areas, Sibu Water Board to Sibu town, LAKU Management Sdn. Bhd. to the town of Bintulu, Miri and Limbang. The Public Works Department Sarawak through its Water Supply Branch is responsible for the supply of treated water to areas in Sarawak where treated water is not being supplied by Water Supply Agencies. In the year 2010 to 2013 a total of RM million was approved and as at December 2013 a total of RM million was spent on operational and maintenance of water treatment plant (WTP) under the Public Works Department An Audit carried out from October to December 2013 revealed that the management of the WTP in aspect of compliance to the rules and regulations for the acquisition of services and chemical was good but was less than satisfactory in aspect of the maintenance. A summary of the Audit findings are as follows: Preparation of the budget was not done according to the yearly maintenance schedule of WTP and because of that the allocations were not sufficient for carrying out preventive maintenance according to schedule and maintenance was only carried out as and when is required. Maintenance work carried out in 6 out of 14 WTP visited was less than satisfactory To overcome the weaknesses raised in this report and to ensure that the same issues would not recur it is proposed that the Public Works Department Sarawak undertakes the following actions: Public Works Department Sarawak should prepare the annual budget for periodic preventive maintenance to be carried for each of the water treatment plant in accordance with PWD Water Supply Authority Standing Orders so that the WTP can function efficiently, ensure the quality of treated water and reduce incidences of breakdown Public Works Department Sarawak should ensure that the contractors for maintenance are closely monitored so that works standards and contract specifications are complied with. 5

8 The State Water Resources Council Sarawak should establish a procedure for cases whereby the test results of samples by the Ministry of Health Malaysia are beyond the norms set to be investigated and acted upon immediately The State Government of Sarawak should consider the setting up of a specific department for managing all the Water Treatment Plants in Sarawak which are not currently under the jurisdiction of Water Supply Agencies for more systematic and regulated operations. 2. PADAWAN MUNICIPAL COUNCIL SIBU MUNICIPAL COUNCIL SAMARAHAN DISTRICT COUNCIL SERIAN DISTRICT COUNCIL MARADONG DAN JULAU DISTRICT COUNCIL SARATOK DISTRICT COUNCIL SIBU RURAL DISTRICT COUNCIL - Management Of Procurements 2.1. Procurements are done by the Local Authorities to ensure their responsibilities are carried out satisfactorily. Procurements by the Local Authorities include implementation of projects, procurement of works, assets and supplies for the daily operation of the Local Authorities. Procurement expenses of the Local Authorities are financed by allocations received from the Federal and State Governments as well as Local Authorities own allocations. For the year 2011 until 2013, the Local Authorities had received allocations amounting to RM million from the Federal and State Governments as well Local Authorities own allocations. The Local Authorities sources of allocations were from the Federal Government amounting to RM million, RM million from the State Government and RM million from Local Authorities own allocations. The Local Authorities had spent RM million or 85.8% to carry out 29,639 procurements for the same period. The expenditures comprised of RM million or 87.2% from Federal Government allocations, RM million or 85.8% from State Government allocations and RM million or 85.3% from Local Authorities own allocations. For the year 2011 until 2013, the Local Authorities had spent RM million to make 29,639 procurements by direct purchases, tenders, quotations and direct negotiations. The Local Authorities had made 24,351 procurements by direct purchases valued at RM million or 18.9%, 2,955 procurements by tenders valued at RM million or 67.4%, 2,311 procurements by quotations valued at RM million or 13.1% and 22 procurements by direct negotiations valued at RM5.30 million or 0.6% of the overall procurement expenditure An Audit carried out from February to March 2014 revealed that the overall management of procurements at Padawan Municipal Council, Sibu Municipal Council, Samarahan District Council, Serian District Council, Maradong And Julau District Council, Saratok District Council and Sibu Rural District Council was satisfactory in terms of planning, 6

9 monitoring, expenditure performance and management of allocations except for the following cases: Project planning was unsatisfactory in Padawan Municipal Council. Projects implemented were not utilised in Padawan Municipal Council and Samarahan District Council. Allocation was not utilised for its original purpose in Serian District Council. Improper management of rubbish bins in Serian District Council, Saratok District Council and Samarahan District Council. Procurements were not done in compliance with financial regulations in Sibu Municipal Council and Maradong And Julau District Council To ensure that the management of procurements by Padawan Municipal Council, Sibu Municipal Council, Samarahan District Council, Serian District Council, Maradong And Julau District Council, Saratok District Council and Sibu Rural District Council are done based on best practices and the weaknesses highlighted in the report not to recur, it is recommended that the following actions be taken : Padawan Municipal Council should identify the needs, condition at the project area, design and structure, security and impact to the residents in the area concerned before projects are implemented in order to ensure that the objectives of implementing the projects are achieved Padawan Municipal Council and Samarahan District Council should take actions to ensure that the hawkers centre and bus terminal built are utilised immediately Serian District Council should ensure that Government allocations are spent according to its original purpose Serian District Council, Saratok District Council and Samarahan District Council should make procurements based on needs and not to keep excessive stocks. Assets procured should be kept properly and records are updated accordingly Sibu Municipal Council and Maradong And Julau District Council should ensure that financial regulations are complied fully and actions should be taken for any non-compliance of the financial regulations. 7

10 3. MINISTRY OF INFRASTRUCTURE DEVELOPMENT AND COMMUNICATIONS SARAWAK - Management On Collection Of Port Dues Sarawak 3.1. The State of Sarawak has 5 major ports namely Kuching Port Authority, Rajang Port Authority, Miri Port Authority, Tanjung Manis Port Authority and Samalaju Port Authority established through the Port Authorities Ordinance, The Ministry of Infrastructure Development and Communications Sarawak is responsible for formulating the policies, coordinate and supervise the activities of the State Port Authorities. Port Dues is a state revenue and its collection is the responsibility of the State Port Authorities. The rate to be charged is RM2 per metric tonne or per passenger as provided in The Port Authorities Ordinance, Port Dues is chargeable to the companies or shipping agents who use the private/individual jetty in handling and unloading cargoes. For the period 2011 to 2013, a total of million metric tonnes of goods comprising of petroleum, timber and sawn timber, coal and building materials attracting port dues amounting to RM48.58 million An Audit carried out from February to March 2014 showed that the overall performance management on collection of port dues was satisfactory. However there are some weaknesses that need to be improved. Among the weaknesses noted are as follows: Verification on the accuracy of the tonnage was unsatisfactory. Internal controls on the collection of dues were unsatisfactory. Overall inspections of sufferance wharf were not carried out. Register on private/individual jetty was not maintained and updated In order to improve the management on collection of port dues in Sarawak and to ensure that the issues raised would not recur; it is recommended that the following actions be taken: The State Accountant and State Port Authorities should estimates the annual port dues collection based on the increase/decrease numbers of ships coming in/out, the numbers of private/individual jetty, trend analysis on product imports/exports or also on previous year actual collection of port dues The Ministry Of Infrastructure Development And Communications Sarawak and State Port Authorities should establish a uniform mechanism to verify the quantity of cargoes The Ministry Of Infrastructure Development And Communications Sarawak should impose security guarantee and standardise the computation method and to be included in the Work Procedure Manual or Work Instruction so as to protect the interests of the Government. Besides, the Ministry should foster cooperation among the State Port 8

11 Authorities, Malaysian Maritime Enforcement Agency and Sarawak Rivers Board so that the enforcement activities can be better planned amd coordinated State Port Authorities should cooperate with Sarawak Rivers Board and Land And Survey Department so that a complete register of private/individual jetty in the whole state can be maintained to facilitate the monitoring and enforcement activities. 4. LAND CUSTODY AND DEVELOPMENT AUTHORITY - Hartanah Pelita Sdn. Bhd Hartanah Pelita Sdn. Bhd. (HPSB) was incorporated on 6 September 1986 under the Companies Act, Hartanah Pelita Sdn. Bhd. is a company wholly owned by Pelita Holdings Sdn. Bhd. which is also wholly owned subsidiary of Land Custody And Development Authority (LCDA). Pelita Holdings Sdn. Bhd. has an authorised capital and paid-up capital of RM17.22 million. The main activity is hotel service and HPSB owns and operates The Regency Rajah Court Hotel in Kuching, in accordance with the objective of HPSB as per Memorandum of Association to be involved in the ownership and management of hotel activities and home stay. A management agreement was signed between HPSB with Regency International Hotel Services (M) Sdn. Bhd. (RIH) in November 2000 whereby hotel operations management is carried out by RIH. This agreement has been extended until November For the financial years 2010 to 2012, HPSB recorded losses after tax amounting to RM0.20 million, RM0.33 million and RM0.42 million respectively. For the same period, HPSB also recorded an accumulative loss amounting to RM3.82 million, RM4.24 million and RM4.75 million The audit conducted from January to March 2014 revealed that the overall performance of HPSB was less than satisfactory. The audit findings in relation to financial performance, management of its activities and corporate governance are as follows: Recorded losses for 3 consecutive years and accumulated loss at the end of 2012 was RM4.75 million. Performance of RIH was below the term of condition for the renewal of the Management Agreement. The average occupancy rate was below the industry norm. Marketing and promotion was ineffective. Customer s feedback was not taken seriously. Corporate Plan has not been prepared and Standard Operating Procedures were incomplete and asset management was unsatisfactory. 9

12 4.3. In order to improve and enhance the operation and performance of the company in accordance with its objectives, Hartanah Pelita Sdn. Bhd. is recommended to take the following actions: Review and ascertain the direction of the company in the hotel industry in order to compete and obtain returns from the investment and also to determine the possibility of the hotel to be managed by Hartanah Pelita Sdn. Bhd. instead Intensifying marketing and promotions more effectively and to provide shuttles service to hotel guests as a way to attract more customers Strengthen the corporate governance by having Corporate Plan and regular Board of Directors meetings to discuss the operation and direction of the company Appoint at least one independent Board member possessing knowledge and experience in the hotel industry who can give constructive inputs in the hotel management. 5. SARAWAK LAND CONSOLIDATION AND REHABILITATION AUTHORITY - Serian Palm Oil Mill Sdn. Bhd Award Square Sdn. Bhd. was incorporated on 7 November 1994 and has changed its name to Serian Palm Oil Mill Sdn. Bhd. (SEPOM) on 25 March Serian Palm Oil Mill Sdn. Bhd. commenced operation in May 1997 which is 60 % owned by Sarawak Land Consolidation And Rehabilitation Authority (SALCRA) and 40% owned by Genting Plantations Berhad. Serian Palm Oil Mill Sdn. Bhd. authorised capital is RM5 million and paid up capital of RM5 million. The main activities of SEPOM are buying and processing of fresh fruit bunches (FFB) into crude palm oil (CPO) and palm kernel production (PK) for sale. Serian Palm Oil Mill Sdn. Bhd. purchases FFB supplies from SALCRA s plantation and smallholders as well as outside suppliers with valid licences and registered with Malaysian Palm Oil Board (MPOB). The plant capacity limit of SEPOM for FFB processing is 360,000 metric tonnes per annum. The objective of SEPOM is to maximise the sales of palm oil products as well as to increase in the production of quality palm oil and to optimise the capacity of its existing plant As at end of 2013, the General Manager of SALCRA is the chairman of SEPOM, 7 Directors and 6 other members with 4 representatives from Genting Plantations Berhad, 2 from the local community and 1 from SALCRA. The daily operation of SEPOM is managed by the Chief Operating Officer assisted by 36 employees from the factory manager, 3 engineers, the Financial Officer/Administration, 4 administrative staffs, 27 technical staffs and 109 general workers. Since its operation, SEPOM has received numerous awards and certifications such as Malaysian Palm Oil Industry Award (the highest extraction rate achievement in Sarawak) for 1997 and 1999, ISO 14001:2004 Environment Management System in 2011, the Sarawak Chief Minister's Environment Award (Gold Award for Large 10

13 Enterprise Industries-Manufacturing Related Services and Agro-based Industries) in 2011 and 2012 and MPOB Code of Good Milling Practice For Palm Oil Mills in An audit was conducted from February to March The overall financial management performance of SEPOM was good while the management of the corporate governance was satisfactory. However, several issues in the management of activities, financial management and corporate governance can be further improved. In summary, the issues encountered during the course of audit are as follows: Trade receivables of more than 30 days as per contract amounting to RM34.16 million in Marketing Guidelines and Pricing Procedures are not updated while Policies/Manuals and Procedures for Financial Management are yet to be prepared. To consider a more efficient and environmental friendly methods on the disposal of empty fruit bunches. Preventive maintenance of machineries were not done according to schedule To further enhance the company's management on Serian Palm Oil Mill Sdn. Bhd. it is recommended that SEPOM should take the following actions: Improving the performance of palm oil production, its operations, management of schedule machineries maintenance and ensure optimum use of the machineries to increase oil production Review other alternative methods for the disposal of empty fruit bunches Formulate Corporate Plan, Policy and Procedures/Manual on Financial Management and its regulations relating to the administration and financial management and to update the Marketing Manual with the new approved pricing rates. 11

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