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 Management Of Sabah State Government Companies 1 st 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 Sabah 1 st Series NATIONAL AUDIT DEPARTMENT OF MALAYSIA

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5 PREFACE 1. Articles 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 Sabah. 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 Sabah State Government s Companies for the year st 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 five Departments/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 Sabah. In order to improve on the weaknesses 3

6 highlighted or to avoid their recurrence, I have forwarded 23 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/Sabah 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 2 nd February

7 REPORT SUMMARY ACTIVITIES OF MINISTRIES/DEPARTMENTS/AGENCIES AND MANAGEMENT OF STATE GOVERNMENT S COMPANIES 1. SABAH PUBLIC WORKS DEPARTMENT - Bridge Construction Project 1.1. Sabah Public Works Department (PWD) is responsible in providing physical infrastructure in order to upgrade the socio-economic development of Sabah. This includes the provision of roads and bridges that are safe, efficient and comply with the quality specification. In order to carry out the responsibilities, PWD has established the Bridge Division in 2005 to plan, implement and maintain bridges in Sabah using Federal Government and the State Government fund. PWD has received a total allocation of RM million and RM million for the construction of 44 and 18 bridges in the 9 th Malaysian Plan and 10 th Malaysian Plan respectively in which RM million and RM million are from the Federal Government while RM98.11 million and RM76.12 million are from State Government. This allocation was distributed to the District Engineers for bridge construction projects at the respective areas. National Audit Department has selected 6 out of 13 bridges construction projects for the year 2010 to 2013 which amounted to RM67.36 million as audit samples. The Audit was conducted at PWD Head Quarters in Kota Kinabalu and PWD Branches in Penampang, Kota Belud, Beaufort, Tenom and Ranau. Out of 6 projects that were selected, 2 projects have been completed and 4 are under constructions An Audit conducted from July to October of 2013 on audit sample revealed that overall the bridge construction projects were satisfactory due to 6 projects completed within the stipulated time. However, several weaknesses were identified as follows: Delay in project completion Land ownership problem Delay in project execution 1.3. To improve and to overcome the problems, the PWD recommended taking the following actions: Improve the quality of existing working system by having a mitigation plan to ensure no delays due to site problems Improve the communication, coordination and engagement with all stakeholders involved during the process of site survey and design of bridges. 5

8 Improve the monitoring and supervision of the constructions work to avoid delays in project completion. 2. Ministry of Resource Development and Information Technology - Management of e-desa Programme 2.1. The e-desa Programme is one of the State Government strategies in developing Information and Communication Technology (ICT) to bridge the digital gap among those not exposed to ICT such as a rural community in Sabah. Through this programme, the State Government is hoping to produce an IT-literate community and subsequently contribute to economic growth. Ministry of Resource Development and Information Technology (MRDIT) is the responsible agency for implementing the e-desa Program. MRDIT provides e-desa centres with ICT equipment and Internet access for the target groups to access information. In addition, MRDIT also provides training and guidance on ICT for the target groups in order to achieve the objectives. The management of e-desa Centre was handed over by MRDIT to the Committee of e-desa Management (CeDM) that was established and tasked to plan and implement the ICT training and guidance for the target groups Through the Eighth Malaysia Plan (8MP) to the Tenth Malaysia Plan (10MP) which started from 2004 until 2013, Sabah State Government had allocated RM10.45 million to provide 32 e-desa Centre s including furniture s and ICT equipment. Within the period, MRDIT has spent RM1.07 million or 64.5% from the allocated RM1.66 million for administration expenditure while a total of RM4.87 million or 89% out of RM5.47 million was spent on development of e-desa Programme An Audit conducted from June to September 2013 revealed that the Management of e-desa Programme in Sabah was satisfactory and weaknesses identified are as follows: Disorganised appointment of operator ICT equipment and the surrounding of e - Desa Centre was not maintained ICT equipment was not fully utilised 2.4. To ensure the management of e Desa Programme is implemented effectively and achieve the objectives, the MRDIT is recommended to take the following actions: Evaluate the actual needs of the local community towards e-desa Centre, perform coordination with the Malaysian Communications and Multimedia Commission (MCMC) to avoid duplication of e-desa Centre construction and 1 Malaysia Internet Centre (PI1M) as well as take proactive measures to get alternative site to rebuild the e-desa Centre in Kg. Muhibbah, Sandakan. 6

9 Set targets on ICT training at the e-desa Centre and ensure the appointed company implements the ICT training program in collaboration with the e-desa Centre to attract users to visit e-desa Centre as well as generating income for CeDM Review the operation mechanism of e -Desa Centre whether to rent it to the interested parties or appoint a service provider by making PI1M as a benchmark so that the e-desa Centre can operate smoothly and efficiently Plan and implement scheduled maintenance to ensure the ICT equipment and Government buildings are in good and safe condition. 3. DEPARTMENT OF AGRICULTURE - The Management of Sabah Agriculture Institute 3.1. Sabah Agriculture Institute (SAI) is one of 7 Agriculture Institutions which are responsible to implement Agriculture Certificate courses throughout Malaysia. Its objective is to train youths in agriculture so that they can work either in public or private sector. Therefore, SAI is responsible to conduct Agriculture Certificate course for 2 years in order to produce skilled worker in agriculture. Since its establishment until year 2013, a total of 2,264 students have completed their training and were awarded with Certificate of Agriculture An Audit from July to September 2013 revealed that the management of Agriculture Certificate Programme was satisfactory. However, remedial action should be taken by the management of Department of Agriculture and SAI as follows: A study on the effectiveness of Agriculture Certificate course was never been conducted. A hostel building was not occupied due to sewerage problem. A guard house was not used since it was completed in Disposal action of the damaged equipment was not taken To improve the management of SAI, the Department Of Agriculture and SAI are recommended to take the following actions: A study on the effectiveness of Agriculture Certificate course should be conducted in order to evaluate the graduates career advancement. Apart from that, SAI and Department of Agriculture are recommended to set up an alumni association among their former students The SAI management should prepare a sufficient budget for hostel equipment s procurement to replace damaged equipment and fix the sewerage problem at SAI hostel. 7

10 Maintenance programme for training and hostel facilities should be prepared and implemented SAI management should comply with the State Ministry of Finance Circular No.9 Year 2010 in managing their assets in term of maintenance, usage and disposal. 4. KOTA KINABALU CITY HALL PENAMPANG DISTRICT COUNCIL - Procurement Management of Local Authorities 4.1. Procurement management of Local Authorities (LA) is subject to Local Government Ordinance, 1961, City of Kota Kinabalu Enactments 1996, Financial Instructions for Local Authorities, Local Authorities By-Laws, Treasury Instructions and Circulars issued by both Federal and State Government from time to time. Procurement can be executed by direct acquisition, quotation, tender or direct award methods. Procurement made should be based on aspects of public accountability, integrity, economy, efficient and effective and taking in consideration the Government interest. Market research should be done to get value for money For the year 2011 to 2013, Kota Kinabalu City Hall (KKCH) and Penampang District Council (PDC) had executed a total of 6,085 procurements amounted to RM million and 1,729 of procurement amounted to RM11.63 million respectively. The procurement includes the acquisitions of works/services and supplies using the Federal Government, State Government and LA s allocation An Audit conducted from July to October 2013 revealed that overall the execution of works and services of KKCH and PDC. Overall, implementation of works and services of KKCH and PDC in terms of quality, compliance of specification and implementation were good and actions had been taken on the Audit comments. Meanwhile, procurement management was less than satisfactory due to several weaknesses as follows: Purchases did not comply with procurement procedures. Payment for work not yet done and delay in payments to the contractor. Insufficient allocation for annual procurement. Improper storage To improve and strengthen the management of procurement of KKCH and PDC, the Audit recommended KKCH and PDC to take the following actions: Provide a sufficient allocation to cover the payments of the contract signed. 8

11 Acquisitions and returns are executed in full compliance to procurement procedures Take initiative in order to increase the students participation so that the Terminal Sejahtera Project that has commenced operation achieves the target set and avoid wastage Enhance the control of usage and storage of supplies received by complying with the store management procedure. Apart from that, KKCH should provide a proper storage/store to avoid goods received from being damaged. 5. MINISTRY OF FINANCE - K.K.I.P. Sdn. Bhd K.K.I.P. Sdn. Bhd. (KKIPSB) was established on 17 January 1983 under the Companies Act with an authorised capital of RM500 million and paid up capital of RM107 million. KKIPSB is a wholly owned subsidiary of Sabah State Government under Chief Minister Incorporated. The main activity of KKIPSB is related to management, development and implementation of Kota Kinabalu Industrial Park project An Audit conducted from June to September 2013 revealed that the overall Company s financial performance was good where the company recorded profit in 2010 and 2012 and has an accumulated profit of RM29.11 million in In terms of activity management and corporate governance there were several weaknesses as follows: Delay in project completion. Outstanding balance on sales of land/commercial buildings. Apartment Seri Malawa was unsold. Joint venture project did not provide any returns Overall financial performance, activity management and corporate governance of KKIPSB were good. KKIPSB is recommended to take the following actions: Ensure contractor completes the projects within the stipulated time Ensure completed buildings are sold promptly Monitor joint venture project to ensure every investment provides return to the company. 9

12 6. SABAH ECONOMIC DEVELOPMENT CORPORATION (SEDCO) - Sabah Urban Development Corporation Sdn. Bhd Sabah Urban Development Corporation Sdn. Bhd. (SUDC) was established in 1972 under the Companies Act SUDC is a subsidiary of Sabah Economic Development Corporation (SEDCO), a State Government agency. Its authorised and paid up capital is RM40 million. Its objective was to be a leader in State Government property and related industrial development projects An Audit conducted from May to September 2013 revealed that the overall Company s financial performance was good because the company recorded profit for the year 2010 to 2012 and has an accumulated profit of RM78.17 million in The activity management is good while its corporate governance is satisfactory. However, there were several weaknesses identified as follows: Work list for 2 out of 3 projects were not complied with. No firm action taken to collect outstanding rental. Standard Operating Procedures was not up to date. Financial management in terms of receipts, expenditure and asset control were not orderly In order to strengthen the management of SUDC in terms of financial performance, activities management and corporate governance, SUDC is recommended to take the following actions: Ensure completed property projects sold or rented promptly Ensure rental collection is efficient and outstanding rentals is monitored Take action on encroachment of land and commercial lot to avoid problems in the future. Apart from that, periodic monitoring needs to be done to ensure SUDC s assets are safe and free from encroachment Update existing SOP Maintain Asset Listing (Property, Plant and Equipment Register (PPER) card), conduct verification of assets and disposal of obsolete and damaged asset to save space. 10

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