Auditor General Report_2008-English

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CONTENTS

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THE FEDERAL GOVERNMENTS FINANCIAL STATEMENT AND FINANCIALMANAGEMENT OF THE FEDERAL MINISTRIES/DEPARTMENTS

Preface 3

Part I - Certification Of The Federal Governments Financial StatementFor The Year Ended 31 December 2008

6

Part II - Financial Management Of The Federal Government 6

- Overall Financial Management Performance 6- Financial Management At Federal Ministries And Departments

Level6

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

Preface 11

Part I - Implementation Of Activities By The Federal Ministries/Departments 13

PRIME MINISTERS DEPARTMENTAttorney Generals Chambers- Handling Of Civil And Prosecution Cases By State Legal

Advisor Offices13

MINISTRY OF FINANCE- Public Infrastructure Maintenance Programme, Basic

Infrastructure Programme And Parliamentary ConstituencyRural Development Projects

13

Inland Revenue Board- Management Of Individual Tax Assessment For Salaried

Income Under Self Assessment System

14

Inland Revenue Board- Management Of Refunds For Overpaid Income Tax 15

Royal Customs Department Of Malaysia- Management Of Customs Duty Assessment On Imported

Goods16

MINISTRY OF AGRICULTURE AND AGRO-BASED INDUSTRY- Infrastructure Development Programme For Crop

Diversification17

- Construction Of Tanjung Manis Integrated Deep Sea FishingPort, Mukah,Sarawak

18


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MINISTRY OF RURAL AND REGIONAL DEVELOPMENT- Management Of Infodesa Programme 18

MINISTRY OF WORKS

- Construction Of The Federal Government AdministrativeCentre, Muadzam Shah, Kedah

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Public Works Department Sabah- Construction Of Sapulut - Kalabakan Road, Sabah 20

MINISTRY OF TRANSPORT- Electrified Double TrackProject Between Rawang And Ipoh 20

MINISTRY OF SCIENCE, TECHNOLOGY AND INNOVATION- Management Of Human Capital Development Programme In

Science, Technology And Innovation21

MINISTRY OF FEDERAL TERRITORYCity Hall Kuala Lumpur- Enforcement Of Trading Activities, The Department Of Safety

And Enforcement22

MINISTRY OF EDUCATION MALAYSIA- Maintenance Of School Buildings 23

- Project To Supply Clean Water To Rural Schools In Sabah 24

MINISTRY OF HEALTH MALAYSIA- Construction Of Pekan Hospital, Pahang 24

- Management Of Prevention And Control Of Dengue Fever 25

- Management Of Harm Reduction Programme 26

MINISTRY OF HOUSING AND LOCAL GOVERNMENTTown And Country Planning Department, Peninsular Malaysia- Management Of Local Planning 27

MINISTRY OF INFORMATION, COMMUNICATION ANDCULTURENational Library Department- Management Of Rural Libraries 28

Department Of Broadcasting

- Management Of Procurement Of External Broadcasting VanWith Broadcasting System And Digital Radio Production

29

MINISTRY OF HUMAN RESOURCES- Management Of Educational Equipments In Training Institutes,

Manpower Department30

MINISTRY OF HIGHER EDUCATION- Management Of Procurement Of Course Equipments For

Community Colleges30

MINISTRY OF HOME AFFAIRS- Construction And Management Of The Ministry Of Home

Affairs Complex, Perak31


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Royal Malaysian Police- Management Of Red Light Surveillance Camera System And

The Issuance Of Summons32

VARIOUS MINISTRIES AND DEPARTMENTS- Management Of Emolument For Civil Servants 33

Part II - Management Of Government Companies 34

- Export - Import Bank Of Malaysia Berhad 34

- Syarikat Prasarana Negara Berhad 35

- JKP Sdn. Bhd. 36

- Kumpulan Modal Perdana Sdn. Bhd. 37

- Hotel Chains Of Seri Malaysia Sdn. Bhd. 38

- Malaysia Venture Capital Management Berhad 39


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SYNOPSIS

AUDITOR GENERALS REPORT 2008

ON THE FEDERAL GOVERNMENTSFINANCIAL STATEMENT AND

FINANCIAL MANAGEMENT OF THE

FEDERAL MINISTRIES/DEPARTMENTS


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PREFACE

1. Article 106 and 107 of the Federal Constitution and Audit Act 1957 require the

Auditor General to audit the Federal Governments Financial Statement, financial

management as well as its activities and submit his Reports to the King and obtain his

consent before tabling the Audit Reports in Parliament. To fulfil these responsibilities,

the National Audit Department needs to carry out 3 types of audits as follows:

1.1. Attestation Audits to give an opinion as to whether the Federal

Governments Financial Statement for the year concerned shows a true and fair

view as well as its accounting records were maintained properly and updated

accordingly.

1.2. Compliance Audits to determine whether the financial management in

Ministries/Departments is in accordance with relevant financial laws and regulations.

1.3. Performance Audits to ascertain whether Government activities have

been carried out efficiently and economically to achieve its desired objectives/goals.

2. Similar to the year 2007, audit findings on the Federal Governments Financial

Statement and financial management are reported separately from the audit findings onthe activities of the Federal Ministries/Departments as well as management of

Government companies. This separation allows easy reference and to ensure a greater

impact on the issues raised as each has a different scope of objective and management

technique. My Report on the Federal Governments Financial Statement and financial

management for the year 2008 includes the followings:

Part I : Certification On The Federal Governments FinancialStatement For The Year Ended 31 December 2008

Part II : Financial Management Of The Federal Government

Part III : Involvement of The National Audit Department In VariousActivities To Enhance Public Fund Management AndAccountability

Part IV : General Matters

3. The audit on the Federal Governments Financial Statement for the year ended 31

December 2008 revealed that the Statement generally reflects a true and fair view on

the financial position of the Federal Government, operational outputs and cash flow for

the year concerned as well as accounting records were maintained properly andupdated accordingly. As for the financial management of the Federal Government,


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auditing revealed the non-compliance of various financial regulations. Several

weaknesses due to insufficient manpower, lack of training in financial management,

inadequate supervision and lax of monitoring continue to occur.

4. All matters reported had been brought to the attention of the respective Controlling

Officers/Heads of Department for confirmation. The National Audit Department has

taken various measures to assist the Federal Ministries/Departments in rectifying the

weaknesses in financial management. Among the measures taken were as follows:

4.1. Implementing the star rating system based on the Accountability Index.

Through this system, marks will be given for compliance of regulations of 6 main

elements in financial management. The 6 elements are management control,

budgetary control, revenue control, expenditure control, management of trust funds

and deposits as well as management of assets and stores. The Federal

Ministries/Departments rated as excellent can become a role model to others. Thiswould motivate Federal Ministries/Departments to diligently improve to enhance their

financial management.

4.2. Published the book Excellent Financial Management From The Perspective

Of The National Audit Department. This is one of the proactive steps introduced to

enhance Governments financial management. Therefore, it is hoped that the Heads

of Department/Agency will be guided by examples of common weaknesses

identified during the course of audit in order to achieve an excellent rating under the

Accountability Index System. It is also hoped that the book will be used as a

reference in Government training institutes and public institutions of higher learning.

4.3. Treasury Instructions require the Heads of Department to ensure the

responsible officers safeguard public money, stamps or other valuable items in

safety boxes, vaults, cash boxes or other receptacles. Heads of Department should

also ensure complete and updated records being maintained and periodic

inspections carried out by senior officers. To ensure the implementation of these

instructions, the National Audit Department has carried out surprise inspections in

98 Federal Departments/Offices throughout the country.

4.4. The Agency Adoption Programme was introduced in 2003. Under this

programme, selected offices with weaknesses in financial management were given

continuous guidance and advice to assist them in rectifying weaknesses especially

with regard to the maintenance of accounting records. In 2008, this programme was

implemented in 5 Government offices. Generally, financial management at the

selected offices have improved and showed significant positive results.

4.5. Carrying out special evaluations on the performance of Premier Grade

Officers on financial management as part of their confirmation exercise. A total of 92

Heads of Department were evaluated from January 2008 to May 2009. Theseevaluations have indirectly contributed towards the enhancement of the financial


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management as promotion of Heads of Department would only be considered by the

Public Services Department after the National Audit Department had confirmed that

the officers had taken corrective actions on the weaknesses on financial

management.

4.6. Officers from the National Audit Department have participated in discussions

on the development of computerised systems at various Federal

Ministries/Departments to ensure internal controls were adequate to safeguard the

integrity of data and reliability of the systems. It is felt that such involvement is

necessary as huge expenditure has been spent in developing computerised

systems. Thus, it is appropriate that these systems should be implemented properly

to meet the desired objectives.

5. I wish 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 also wish to record my appreciation and thanks to my officers who have worked

diligently and for their totalcommitment to complete this Report.

( TAN SRI DATO SETIA HAJI AMBRIN BIN BUANG )

Auditor General of Malaysia

Putrajaya

17 June 2009


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SYNOPSIS

PART I - CERTIFICATION OF THE FEDERAL GOVERNMENTSFINANCIAL STATEMENT FOR THE YEAR ENDED 31DECEMBER 2008

1. The Federal Governments Financial Statement for the year ended 31 December

2008 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 2008, the Government had approved RM152.01 billion for operating

expenditure in the government sector. However, a total of RM153.50 billion was spent

during the year whereby exceeding approved allocation amounting to RM1.49 billion.

Nine Ministries had spent more than the approved allocation for emolument, services

and supplies, acquisition of capital assets, subsidies and fixed charges. Whereas a total

of RM42.85 billion (91.2%) was spent out of RM46.98 billion as approved under the

development allocation for the implementation of 1,111 projects. The Government had

received revenue totalling RM159.79 billion as compared to RM139.89 billion for the

year 2007. There were 56 Federal Ministries/Departments with arrears of revenue

totalling RM23.19 billion for the year 2008 as compared to RM14.08 billion for the year

2007. The significant increase was due to the requirement in the Treasury Circular No. 3

Year 2008 which was issued in the beginning of the year 2008 by the Ministry of

Finance whereby all outstanding loan and other debts should be considered as

Receivable Account.

Financial Management At Federal Ministries And Departments Level

3. The National Audit Department had carried out audits in 27 Federal Ministries

and 33 Departments in the year 2008 in order to ascertain whether financial

management at these Ministries and Departments were being managed according to

established laws and financial regulations. The result of the audit showed that some of

the Federal Ministries and Departments were not serious to improve their performance

in financial management even though such weaknesses had been repeatedly reported

and brought up to their attention by the National Audit Department. As an effort to

motivate the Federal Ministries and Departments to further improve and strengthen their

performance in financial management, the National Audit Department has introduced


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the Accountability Index for financial management. Federal Ministries and Departments

rated as excellent can become a role model to others. From the assessments carried

out, the financial management performance of 4 Ministries and 2 Departments were

rated as excellent; 20 Ministries and 10 Departments as good and the remaining 3

Ministries and 10 Departments as satisfactory. Besides that, the Headquarters and 14state branches of the Royal Malaysian Customs Department as well as 11 Malaysian

Representative Offices abroad under the Ministry of Foreign Affairs were also audited.

4. The 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 as stated under the Treasury Instructions. They

must also ensure that all records are properly maintained, up-to-date and examined by

senior officers periodically. In order to ensure that such duties were carried out by the

Controlling Officers/Heads of Department, the National Audit Department has carried

out surprise inspections in 98 Federal Departments/Offices. The audit revealed that

there were some instances where public money and other valuable items were not kept

safely, delays in banking-in collections and cash balances in hand differ from records.

5. Besides conducting mandatory audits as provided under the laws, the National

Audit Department also implements the Adoption Programme and special evaluations on

the financial management performance of Premier Grade Officers from various

Ministries/Departments/Agencies. In 2008, the National Audit Department had carried

out the Adoption Programme at 5 Federal Department whereas from January 2008 to

May 2009, a total of 92 Premier Grade Officers had been evaluated.


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SYNOPSIS

AUDITOR GENERALS REPORT 2008

ON ACTIVITIES OF THE

FEDERAL MINISTRIES/DEPARTMENTS

AND THE MANAGEMENT OF

GOVERNMENT COMPANIES


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PREFACE

1. Article 106 and 107 of the Federal Constitution and Audit Act 1957 require the

Auditor General to audit the Federal Governments Financial Statement, financial

management as well as its activities and submit his Reports to the King and obtain his

consent before tabling the Audit Reports in Parliament. To fulfil these responsibilities,

the National Audit Department needs to carry out 3 types of audits as follows:

1.1. Attestation Audits to give an opinion as to whether the Federal

Governments Financial Statement for the year concerned shows a true and fair

view as well as its accounting records were maintained properly and updated

accordingly.

1.2. Compliance Audits to determine whether the financial management in

Ministries/Departments is in accordance with relevant financial laws and regulations.

1.3. Performance Audits to ascertain whether Government activities have

been carried out efficiently and economically to achieve its desired objectives/goals.

2. Starting from 2006, my Report on performance audits on the implementation of

activities of the Federal Ministries/Departments and the management of Government

companies are prepared separately from the Report on the Financial Statement and

financial management of the Federal Government for the year 2008. This is for easy

reference and to ensure greater impact on the issues highlighted. My Report on the

implementation of activities of the Federal Government as well as the management of

the Government Companies for the year 2008 includes the followings:

Part I : Implementation Of Activities By The Federal Ministries/

Departments

Part II : Management Of Government Companies

Part III : Follow-up Actions Being Undertaken/Not Carried Out By The

Ministries/Departments/Government Companies On Matters

Highlighted In The Auditor Generals Reports For The Year 2006

And 2007

3. Section 6(d) Audit Act 1957 requires the Auditor General to conduct audits to

ascertain whether Government activities have been managed efficiently, economically

and in accordance with the objectives of these activities. The audits were conducted on

various activities among others, project constructions, maintenance works, law

enforcements, procurements, asset management, taxations as well as social economy

enhancement programmes. This Report contains matters observed from the audits on

32 activities/projects undertaken by various Ministries/Departments/Governmentcompanies. Generally, the Ministries/Departments/Government companies have


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planned well for the implementation of these activities/projects. However there were

several weaknesses in the execution of these activities/projects due to shortage of

manpower and expertise, insufficient funds, lack of close supervision and ineffective

monitoring.

4. As in previous years, auditing had also been carried out on companies which

Government owned more than 50% equity. This is to ascertain whether the respective

company have carried out its activities effectively, prudently and in accordance with its

established objectives. This Report comprises the analysis of financial performance of

48 Government companies based on their Financial Statements for the year 2007 and

matters observed from the audits on the management of activities carried out by 6

Government companies. Audit analysis revealed that 27 of these companies reported a

profit before tax amounting to RM78 billion for the year 2007 whereas 21 companies

had incurred losses totalling RM0.87 billion. However, only 14 out of the 27 profitable

companies paid dividends totalling RM72.21 billion to the Government and taxesamounting to RM24.37 billion were collected from 30 companies. Generally, the audit

on the management of activities by the companies revealed that the activities were well

planned. However, there were several weaknesses in the execution of these activities

that needs to be rectified especially those related to internal controls on financial

management.

5. To assist the Ministries/Departments/Government companies to overcome the

weaknesses highlighted in the Auditor Generals Report for the year 2007, a total of 360

recommendations were proposed. Follow-up audits conducted up to 1 April 2009

revealed that the respective Ministries/Departments/Government companies had takenaction on 338 (93.9%) recommendations. As for the Auditor Generals Report for the

year 2006, actions on 201 (93.9%) from 214 recommendations have been taken. The

13 and 22 recommendations for year 2006 and 2007 respectively are either being

undertaken or has not been carried out yet.

6. I wish 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 also wish to record my appreciation and thanks to my officers who have worked

diligently and for their totalcommitment to complete this Report.

( TAN SRI DATO SETIA HAJI AMBRIN BIN BUANG )

Auditor General of Malaysia

Putrajaya

17 June 2009


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SYNOPSIS

PART I - IMPLEMENTATION OF ACTIVITIES BY THE FEDERAL MINISTRIES/

DEPARTMENTS

PRIME MINISTERS DEPARTMENT

Attorney Generals Chambers

- Handling Of Civil And Prosecution Cases By State Legal Advisor Offices

The State Legal Advisor Office (SLAO) is responsible for drafting and vetting laws to be

tabled at the State Legislative Assembly, provides legal advice to the State Government

in all aspects of administration, relationship between Federal and State Governments as

well as the private sector and to conduct prosecutions on criminal and civil proceedings.

The audit revealed that there is room for improvement in conducting criminal andcivil

proceedingsas there were cases where SLAO had taken up to 183 days to review a

civil case and up to 1,149 days for a criminal case. Among the factors which caused

such delays were the difficulties faced in seeking further information from other law

enforcement agencies, heavy workload, unstipulated time frame to complete certain

work processes and the frequency of transferring officers involved in on-going cases. As

such, it is recommended that the Attorney Generals Chambers considers the following

matters:

Ensure work processes involving civil and criminal cases are completed by

SLAO within the time frame as stipulated in the High Court Rules 1980,

Subordinate Court Rules 1980 and Limitation Act 1953. As for work processes

without a stipulated time frame, the Attorney Generals Chambers should

determine the time frame and ensure all SLAO complies with it.

Review staffing in SLAO to deal with the increasing workload.

Standardise a Management Information System to be used by all SLAO in order

to facilitate references/reviews and to further improve the monitoring on handling

of cases.

MINISTRY OF FINANCE

- Public Infrastructure Maintenance Programme, Basic InfrastructureProgramme And Parliamentary Constituency Rural Development Projects

From 2005 to November 2008, a total of 92,687 projects under the Public Infrastructure

Maintenance Programme, Basic Infrastructure Programme and Parliamentary

Constituency Rural Development Projects involving RM4.59 billions were implemented.

Generally, the audit revealed that certain programmes/projects were not satisfactorily

implemented such as delays in project completion, work done not in accordance with


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the original scope of works, increased project cost due to the inclusion of procurements

of equipment and asset in the scope of works, unutilised facilities upon completion,

improper payment made for works not done and shortages of officers in project

supervision. To ensure the objectives of these programmes/projects are achieved and

Government gets value for money, it is recommended that the Federal Treasury,

Implementation and Coordination Unit (ICU) in the Prime Minister's Department and

State Development Offices (SDO)/District Offices consider the following matters:

The Letter of Offer should clearly state the date of commencement and

completion of works and also the provisions relating to penalties for delays so

that SDO/District Offices can initiate action against contractors who failed to

execute their works accordingly.

ICU should ensure each and every project is implemented as planned and

utilised optimally to avoid wastage of public funds.

The SDO of the Federal Territory of Kuala Lumpur should investigate improper

payments and if there are any irregularities, appropriate actions must be taken

against those involved.

The Federal Treasury should review the post of technicians and assistant

technicians emplaced at each SDO by taking into account the present workload.

SDO should then ensure specific trainings to be given to enable them to carry

out their duties efficiently and effectively.

MINISTRY OF FINANCE

Inland Revenue Board

- Management Of Individual Tax Assessment For Salaried Income Under SelfAssessment System

The Self Assessment System is based on Assess, Pay and File concept where a

taxpayer is required to make his/her own assessment/tax computation by referring to

guidelines/regulations issued, make payment and submit Income Tax Form (BE Form)

to Inland Revenue Board (IRB). Generally, the audit revealed that the Self Assessment

System for salaried income is useful as it reduces the workload of IRB officers. However,

there were some weaknesses in its implementation that could cause non/undercollection of income tax. Among the weaknesses were BE Forms could not be sent to

taxpayers, non/late submission of BE Forms by taxpayers and no penalties imposed,

mistakes/inaccurate information in BE Forms as well as Tax Deduction Schedules were

not prepared by employers and notices not issued by IRB to employers to deduct

employees salary with tax arrears. The IRB must immediately solve the problems

regarding BE Forms as it can affect the collection of Government revenue. As such, IRB

is advised to take the following actions:

Provide continuous explanations to taxpayers by desk officers at public places

such as shopping malls and office buildings.


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For cases to be audited by the Desk Audit Unit (Salaried Income), all supporting

documents must be obtained from taxpayers and filed accordingly.

Penalties must be imposed on taxpayers for non/late submission of BE Forms.

Ensure employers prepare Tax Deduction Schedules for employees with a

monthly salary exceeding RM2,551.

Issue a Tax Deduction Instruction to ensure employee salaries are deducted to

settle their tax arrears.

Strengthen manpower in the Desk Audit Unit (Salaried Income) as over 50% of

the BE Forms audited by the Unit revealed taxes were either over or under

collected.

MINISTRY OF FINANCE

Inland Revenue Board

- Management Of Refunds For Overpaid Income Tax

In accordance with Section 111 Income Tax Act 1967, the Inland Revenue Board (IRB)

is responsible to refund overpaid income tax to taxpayers. Auditing on samples of

refund of overpaid income tax involving RM648.70 million revealed that majority of the

refunds were delayed between 10 days to 2 years for manual cases and up to a year for

e-Filingcases. Among the reasons for the delay were due to the implementation by

stages of the Self Assessment System, incomplete/doubtful information/document

submitted by taxpayers and the incapability of IRB to solve this problem as responsible

officers were required to manage other assignments. In addition, some of the overpaid

income taxes were not refunded correctly resulting in losses to the Government. As the

collection of income tax is of uttermost importance to Government revenue, it is

recommended that IRB considers and takes immediate actions on the following matters:

To enhance its delivery system, the IRD should comply with the time frame for

repayment of overpaid income taxes as stipulated in the Client Charter.

The Client Charter on repayment of overpaid income taxes should be clearly and

specifically stated. In relation to this, taxpayers need to be informed of their

responsibility in ensuring the correctness of income tax assessment informationfor all the relevant years of assessment, the original dividend vouchers attached

are complete, overpaid income tax for the concerned assessment year to be

offsetted with the income tax due from other years of assessment, outstanding

real property gains tax and debts due to Government for companies if the

Compared Total exceeds the Compared Aggregate for purpose of dividend

payment.

Simplify the tax payment codes through discussion with the Federal Treasury.

This is important to prevent taxpayers from filling the wrong transaction code due

to the confusion over the numerous existing codes which have resulted in

payment transactions been recorded in the unrelated assessment year.


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Review the manpower requirement in every Collection Branch/Unit by taking into

consideration the existing workload.

Prepare a complete checklist on computation for repayment of overpaid income

tax in order to ensure only correct amounts are refunded accordingly. Items to

be listed for checking are tax increase under subsection 107B(3)/107C(9),subsection 107B(4)/107C(10), subsection 103(3) and 103(4) of Income Tax Act

1967, debts under section 108 of Income Tax Act 1967, outstanding real

property gains tax and proof of confirmation of dividend vouchers for tax

deduction.

Prepare a standardised Computation of Excess Income Tax Statement for every

refund to be used by all IRD Branches and sent to taxpayers involved. The

statement should contain detailed information such as the date and income tax

assessment for each assessment year, date and income tax imposed, date and

income tax payable and amount due to Government (involves dividend and real

property gains tax) to facilitate taxpayers to carry out checking on the

computation of the refund of overpaid income tax.

Overpayment of refunds should be collected immediately from taxpayers

involved.

The Fund For Income Tax RefundStatement should to be prepared for auditing

purpose as stipulated in the Trust Deed.

Determine the amount of funds required under the Fund For Income Tax Refund

so as to ensure all refunds are made accordingly to taxpayers.

Royal Customs Department Of Malaysia

- Management Of Customs Duty Assessment On Imported Goods

From 2006 to 2008, the Royal Customs Department of Malaysia had collected an

average of RM6.38 billion a year on import duty, excise duty (import) and sales tax

(import). The audit revealed several weaknesses such as delay in declaring imported

goods and payment of import duties/taxes by forwarding agents/importers, errors in

classification and valuation by Assessing Officers, poor handling of Custom Declaration

Forms, shortcomings in the Customs Information System that accept multiple import

declaration of the same goods and poor interface with Gate Control System. Toovercome these weaknesses which among others were due to manpower shortage and

weakness in monitoring, it is recommended that the Royal Customs Department takes

the following actions:

Prepare a guideline on the rate of compound/fine to prevent the imposition of low

rates of compound/fine that are incompatible for offences committed and non-

uniformity between custom stations. The Royal Customs Department should

increase monitoring and enforcement to ensure importers complies with the laws

and regulations.

Follow-up on the application for additional post of Assessing Officers that had

been submitted to the Public Service Department to ensure posts created are


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compatible with the heavy workload and to reduceclassification and valuation

errors of imported goods. In addition, approved posts should be filled

immediately.

Carry out surprise checks and enforce disciplinary action to ensure proper

management of declaration forms and to prevent any infringement.

Ensure the Price Monitoring And Classification Committee holds periodical

meetings to enhance its functions as a supervisory body to resolve issues and

problems of assessment and classification at station and state level effectively.

Collect arrears of revenue zealously to prevent losses on Government revenue.

Ensure the integrity of data in the Customs Information System and the system

is able to interface with the Gate Control System to substantiate payment of

import duties/taxes. For cases whereby Gate Control System does not work, the

Customs Officers stationed at check points should inspect documents and goodsphysically.

Prepare annual training programme to ensure each and every officer attends

course/training for at least 7 days a year as stipulated under Service Circular No.

6 of 2005 in order to increase his/her skill and efficiency especially related to

their line of work.

MINISTRY OF AGRICULTURE AND AGRO-BASED INDUSTRY

- Infrastructure Development Programme For Crop Diversification

As at December 2008, the Government has incurred a total of RM182.93 million to carry

out the Infrastructure Development Programme For Crop Diversification. Generally, the

implementation and monitoring of constructing agricultural infrastructure were

satisfactory whereby 92.5% of the projects were implemented as planned. However,

there were weaknesses in maintaining the completed infrastructure and implementation

of agricultural activities. To ensure continuous benefit on the implementation of this

programme, it is recommended that the Ministry consider the following matters:

Take immediate action to complete the abandoned project in order to benefit the

project participants as planned.

Prepare a periodical maintenance plan and provide sufficient allocation for such

maintenance.

Ensure areas chosen are suitable before approving a project so that agricultural

activities can be carried out throughout the year.

Apart from close monitoring and continuous guidance, prepare a strategic plan

to assist farmers to market their crops as this is crucial in encouraging them to

actively cultivate the crops.


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MINISTRY OF AGRICULTURE AND AGRO-BASED INDUSTRY

- Construction Of Tanjung Manis Integrated Deep Sea Fishing Port, Mukah,Sarawak

The construction of Tanjung Manis Integrated Deep Sea Fishing Port, Mukah, Sarawak

was implemented at a cost of RM313.62 million. The audit revealed severalweaknesses such as project delay, unsatisfactory work quality and some basic facilities

were not constructed or completed. Thus the main objective of the project could not be

completely achieved. To overcome these weaknesses and also to prevent the

recurrence of the same weaknesses in other projects, it is recommended that the

Ministry of Agriculture and Agro-based Industry, the Ministry of Finance, Public Works

Department and Fisheries Development Authority of Malaysia consider the following

matters:

The contractor should not be allowed to postpone any repair works until the

completion of phase 3 of the project as damages/defects can become moreserious if immediate remedial actions are not taken.

For a fast track project implemented by design and build concept and approval

by the Ministry of Finance on a multi-phase contract price, the Ministry of

Finance should approve the contract price for each phase in sequence to the

implementation stages as suggested by the Ministry/Department concerned.

This is vital to prevent disruption of the implementation of the project.

The Ministry of Finance should approve sufficient allocation to complete all basic

facilities/components of the project to ensure a fully functional Integrated Deep

Sea Fishing Port and thus ensure the achievement of its objective.

MINISTRY OF RURAL AND REGIONAL DEVELOPMENT

- Management Of Infodesa Programme

The Infodesa Programme aims to bridge the digital divide between urban and rural

communities. As at 31 December 2008, a total of RM68.38 million was incurred for this

programme and 41,298 participants were given ICT training. The audit revealed several

weaknesses such as delay in project completion as well as delay in operating the

completed Infodesa Centres (MID) due to delay in procuring equipments and filling up

the post of MID managers. In addition, a total of 156 MID constructed by the Federal

Government were situated on land that has yet to be registered in the name of the

Federal Land Commissioner. To overcome these problems and to ensure that the

objective of this programme is achieved, it is recommended that the Ministry of Rural

and Regional Development considers the following matters:

As this is a costly programme that has been implemented since the Eighth

Malaysia Plan, the Ministry should create a permanent post for MID managers to

facilitate the appointment process and ensure the MID managers commitment.

Ensure that each MID establishes a Management Board to assist in its functions.

As District Officers are too busy to chair the board meeting, a representative

from the District Office could be appointed as chairman.


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Close monitoring of projects to ensure they are implemented within the

stipulated time frame. In this regard, the implementing agency should submit

monthly progress report and to clarify if any delays were to occur.

Ensure MID managers abide all financial rules and regulations on procurement

and management of assets. Related records and registers should be maintainedand updated regularly. The Ministry must also conduct regular spot checks on

MID to confirm compliance with the related rules and regulations. To ensure MID

managers perform their responsibility competently and effectively, management

training including financial management should be given.

Increase the number of computer users in MID to ensure ICT equipments are

used optimally and to achieve the objective of bridging the digital divide between

urban and rural communities. For this purpose, the Ministry should increase

awareness among the local and neighbouring communities of the facilities

available in MID.

Ensure all MID project sites are registered in the name of the Federal Land

Commissioner in order to continue its activities even if a change of the ruling

party of the state Government occurs.

Adequate allocation for maintenance of equipments and buildings should be

budgeted for to ensure continuity of this programme.

Perform regular reviews to determine the achievements of the programme and to

carry out further improvements.

MINISTRY OF WORKS

- Construction Of The Federal Government Administrative Centre, MuadzamShah, Kedah

As at 31 December 2008, 95% of the Federal Government Administrative Centre,

Muadzam Shah, Kedah project was completed and a total of RM243.53 million was

spent. The audit revealed several weaknesses such as the appointment of the

contractor and project implementation method that caused project delay, unsatisfactory

contract management, delay/not occupying completed building and poor quality

construction works. This complex could have been utilised earlier if effective co-

ordination between the Prime Ministers Department, Public Works Department (PWD)and other involved agencies exist and efficient consultants were appointed. To

overcome these problems, it is recommended that PWD as the Project Superintending

Officer and user departments/agencies consider the following matters:

Procurement of furniture should be synchronized with construction work

progress. In this regard, furniture should be procured when the progress of

construction work achieved 80% so that the complex could be utilised upon

completion.

For a common-user building, user departments/agencies should be identified

and finalized at the planning stage of the project to prevent changes in building

plans that could cause delays.


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User requirements should be considered during the design stage to prevent a

completed building being left unoccupied for not fulfilling their needs and

additional cost for renovations.

To safeguard Government's interests, PWD should comply with rules and

regulations on contract management. In this regard, the contract should besigned within 4 months after the issuance of Letter of Acceptance. Stern action

needs to be taken to ensure contractor rectify all defects reported before the end

of the Defects Liability Period.

Close supervision and monitoring to prevent project delay and ensure stipulated

work specifications are fully complied.

PUBLIC WORKS DEPARTMENT SABAH

- Construction Of Sapulut - Kalabakan Road, Sabah

The Sapulut - Kalabakan Road, Sabah was constructed by Konsortium FA Irama Duta

Sdn. Bhd. (contractor) under the design and build concept at a total cost of RM563.33

million. The contractor was appointed by the Ministry of Finance through direct

negotiation. The audit revealed that even though the original plan was to construct a

paved road for a distance of 145 kilometers, only a gravel road was built due to

insufficient allocation caused by the problem of the contractors obligation to remove

substantial amount of unsuitable material from the project site. The problem of

unsuitable soil was not identified prior to project implementation due to inadequate soil

investigation. Monitoring of the implementation and maintenance of this project was

unsatisfactory resulting in poor quality workmanship. In this regard, it is recommendedthat the Public Works Department Sabah considers the following matters:

Ensure the contractor repairs damaged road and drains as well as slope failures

to prevent the situation from getting worst until the whole road gets damaged

before the expiry of the Defects Liability Period and thus putting road users' lives

at risk.

Enhance monitoring to ensure the contractor carries out quality maintenance

according to schedule and stipulated terms and conditions of the contract.

Apply sufficient allocation under the Tenth Malaysia Plan to pave the road.

Ensure adequate soil investigations are carried out by responsible parties for

future road construction projects so that a suitable design can be prepared

before commencement of the project.

MINISTRY OF TRANSPORT

- Electrified Double TrackProject Between Rawang And Ipoh

The Electrified Double Track Project Between Rawang And Ipoh was implemented at a

cost of RM5.77 billion through 2 packages namely the Infrastructure Package andSystem Package. The main contractor for the Infrastructure Package is DRB-Hicom


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Berhad (DRB-Hicom) while Mitsui-MTS Konsortium (Mitsui) is the contractor for the

System Package. The audit revealed the objective of the project was not fully achieved

due to several weaknesses such as delay in project completion that resulted in an

estimated cost overrun of RM1.43 billion, procurement of excess equipments and non-

coordination of train procurement with infrastructure development. In addition, there is a

possibility of the Government bearing part of the losses estimated at RM1.14 billion.

This is due to a maximum liability of RM257.99 million that could be claimed from the

contractor as stipulated in terms and conditions of the contract between DRB-Hicom

(original contractor) and the Government. To ensure Government gets value for money

and also to prevent the recurrence of the same weaknesses in other projects, it is

recommended that the Ministry of Transport (Ministry), Keretapi Tanah Melayu Berhad

(KTMB) and related central agencies consider the following matters:

The Ministry should impose penalties amounting to RM80.88 million (RM164,727

per day) on DRB-Hicom for failing to complete the project on time.

Five sets of Automatic Fare Collection System which are still kept in the store

should be distributed to commuter stations that require them to avoid wastage.

The Ministry/KTMB should ensure all defects are rectified by contractors during

the Defects Liability Period so that the Government will not incur additional cost

for repairs.

Procurements of related equipments and facilities should be synchronized with

the infrastructure and system development. In this regard, equipments and

facilities should be procured when the progress of construction work achieved

80% so that the infrastructure could be fully utilised upon completion.

As stipulated in terms and conditions of the contract, the Ministry should report

to the Ministry of Finance to terminate the service of the project manager who

failed to perform.

Central Agencies should allocate sufficient funds to procure equipments/facilities

that are components of the project to enable a completed project to function

according to plan.

MINISTRY OF SCIENCE, TECHNOLOGY AND INNOVATION- Management Of Human Capital Development Programme In Science,

Technology And Innovation

From 2006 to 2008, a total of RM153.73 million was spent to carry out the Human

Capital Development Programme. The audit revealed several weaknesses such as

targets of schemes not fully achieved, payments made to unqualified recipients, several

important elements to safeguard Governments interest were not included in the

contract, delay in distributing allocations and failure to comply with terms and conditions

of contract as well as inefficient monitoring and evaluation of the programme. In this

regard, it is recommended that the Ministry of Science, Technology and Innovation(Ministry) considers the following matters:


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Intensify publicity of the Human Capital Development Programme especially

among students/lecturers of institutions of higher learning and also officers of

Ministry/agencies involved in the field of science and technology.

Ensure all important elements are included in the contract such as the

requirement for all recipients to submit examination results/research progressreports and to present oneself after the end of the study/research. In addition,

monitoring should also be carried out by the Ministry to ensure that the above

terms and conditions are fully complied with and to impose penalties on those

who fail to comply.

Evaluate the Human Capital Development Programme to ascertain whether the

programme has achieved its intended objective and consequently take remedial

actions on any weaknesses that could affect the achievement of its objective.

MINISTRY OF FEDERAL TERRITORYCity Hall Kuala Lumpur

- Enforcement Of Trading Activities, The Department Of Safety AndEnforcement

Generally, the audit revealed that the enforcement on the trading activities by the

Department of Safety and Enforcement is unsatisfactory. Among the weaknesses

observed were the Enforcement Action Reports were inconsistent with the Yearly

Performance Target, delays in carrying out follow-up actions on KEJAs (obstruction by

chairs and tables) operations, inefficiency in managing public complaints and Notice of

Offence and Compound (Notice of Offence) as well as confiscated items were not kept

properly. To overcome the above weaknesses, the City Hall Kuala Lumpur (City Hall) is

recommended to consider the following matters:

Ensure the Enforcement Action Report is prepared in consistent with the related

Yearly Performance Target to enable evaluations be carried out on the

performance of the enforcement activities by the Department of Safety and

Enforcement.

The Work Procedure Manual and the Client Charter for enforcement of trading

activities need to be concise and clear. As such, City Hall needs to determine

the time frame for carrying out follow-up action after issuance of Notice ofOffence/informing verbally to the petty traders to remove the chairs and tables

that caused obstruction. In addition, the time frame for managing the public

complaints as stated in the Work Procedure Manual and the Client Charter

should be standardized. City Hall also needs to maintain a comprehensive and

up-to-date Record of Complaints for the purpose of monitoring and enhancing its

efficiency on delivery system.

Enhance the methodology in managing compound collections by overcoming the

problems relating to PADU System (Laws Database System). Besides that, City

Hall needs to monitor the status of every Notice of Offence that was issued and

prepare a Report on Arrears of Compound as well as to ensure that all Notice of

Offence are filed properly.


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Reduce time frame for claiming back confiscated goods from 3 months to 1

month to enable earlier action to write-off the confiscated goods and thus

overcome the problem of storage congestion and further depreciation of its value.

MINISTRY OF EDUCATION MALAYSIA

- Maintenance Of School Buildings

A total of 47 private consultants were awarded contracts worth RM22.18 million to

identify maintenance/repair works in schools that need to be carried out, supervise/

monitor and certify the actual works done by contractors before payments are made by

the Ministry of Education Malaysia (Ministry). The audit revealed that unsatisfactory

maintenance works on some school infrastructure/buildings had resulted in poor/

unconducive situation that could endanger the safety of its users. The weaknesses in

the maintenance and repair works were due to the Ministry not being allocated sufficient

funds and technical manpower. The Ministry on its part had not monitored the

performance of the consultants which resulted in some consultants who fail to carryout

their responsibilities effectively. In addition, the required monitoring on the works that

supposedly carried out by the Ministry/State Education Departments (SED)/District

Education Offices (DEO)/schools was not done. To overcome the above weaknesses, it

is recommended that the Ministry considers the following matters:

Prepare a scheduled maintenance plan that includes preventive and corrective

maintenance for all schools in the country based on General Circular Letter No.

2 of 1995. For this purpose, sufficient financial allocation must be provided.

Prepare a clear and measurable scope for maintenance/repair works for easy

reference by contractors and officers who supervise the related works.

Enhance monitoring/supervision on maintenance/repair works carried out by

contractors. For this purpose, the Ministry should closely monitor the

performance of the consultants to ensure that they carry out their responsibility

effectively as stipulated in the contract. Teachers stationed at SED/DEO/schools

should not be given the task of managing maintenance works. Such

responsibility should be given to those with technical knowledge and expertise.

In relation to this, sufficient technical posts must be created and TechnicalAssistants Grade J36 which are still vacant in some SED must be filled

immediately. To enhance monitoring on maintenance/repair works, a monitoring

register should be maintained in each school.

Take appropriate actions against those who were proven to have certified works

as completed which actually has not been completed or not done at all as this is

an improper payment. If the certification was done by a public officer, disciplinary

action or surcharge must be imposed. If this involved a consultant, the company

concerned should be blacklisted and the offence reported to the relevant

professional bodies for further action.


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Restructure the various divisions responsible for maintenance of school

buildings by placing them under one unit to ensure maintenance/repair works

could be planned and managed efficiently and effectively.

Ensure all concerned parties involved in maintenance/repair works comply with

the relevant financial regulations. Market surveys must be carried out to ensureGovernment gets value for money for all procurements. Financial management

training should also be given to those involved.

MINISTRY OF EDUCATION MALAYSIA

- Project To Supply Clean Water To Rural Schools In Sabah

The Ministry of Education Malaysia (Ministry) had implemented projects to supply clean

water to rural schools in Sabah through the Rain Water Harvesting System, well tube,

gravity water tube reticulation system and supplying treated water project. As at

December 2008, a total of RM174.32 million had been spent for supplying clean water

through Rain Water Harvesting System. The audit revealed that the implementation of

phase 3 of this project was not satisfactory. There were weaknesses such as delays in

project completion, work specifications not fully met, no maintenance of the pipe water

system by contractors and project modifications done without approval by the

Department of Federal Development of Sabah. To ensure the targeted group benefits

from this project, it is recommended that the Sabah Project Team (SPT) who has taken

over the function of the Department of Federal Development of Sabah and the Ministry

consider the following matters:

SPT should closely monitor the work carried out by contractors and ensure

periodical maintenance of the pipe water system is carried out. In this regard, the

school authorities, the Ministry, SPT and the contractors should coordinate by

having regular meetings to discuss and overcome maintenance problems of this

project.

The Ministry should allocate funds for maintenance of the project after the expiry

of the Defects Liability Period for its continuous benefits.

SPT should ensure school authorities obtain approval before modification works

are carried out so that the said modification would not affect the function of the

water tank.

SPT should determine total penalties that could be imposed on contractors and

ensure that they settle the amount concerned.

MINISTRY OF HEALTH MALAYSIA

- Construction Of Pekan Hospital, Pahang

The audit revealed that the implementation of this project at a total cost of

RM96.45 million was not satisfactory resulting in the Government incurring losses as

well as facilities provided could not be utilised for the benefit

of the

public. Among the

weaknesses observed were the issuance of Certificate of Practical Completion (CPC)


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even though certain portion of the works had not been completed and equipments not

fully supplied by the contractor, delays in project completion resulting in cost overrun,

unsuitable/poor quality construction works and equipments/facilities not been used

optimally. To rectify the weaknesses, the Ministry of Health (Ministry) and the Public

Works Department (PWD) need to consider the following matters:

PWD should speed up the process of signing the contract to safeguard

Governments interest and to enforce contract terms and specifications.

Performance Bond and all insurance policies should also be submitted within the

stipulated time.

PWD should not issue CPC before completion of project and all equipments are

supplied by contractor.

The Ministry should ensure the 2 years warranty period for equipments received

after the issuance of CPC is set from the actual date of equipments received andnot from 31 January 2009.

The Ministry should expedite repair works on all detected defects/damages so

that the hospital can operate effectively. In addition, the Rehabilitation and

Pharmaceutical Unit should operate as soon as possible to ensure equipments

procured could be utilised optimally.

The Ministry should claim penalty from the supplier for the late supply of 2 units

of ambulance immediately.

The Ministry should maintain an Asset Register to record all assets procured.

The Ministry should enhance the monitoring process to ensure quality works are

completed according to schedule.


- Management Of Prevention And Control Of Dengue Fever

The audit revealed that the activities to prevent and control dengue fever by the Ministry

of Health Malaysia (Ministry) were not effective in decreasing the incidence and

mortality rate of dengue fever but instead keeps increasing every year. According to the

Ministrys record there were 49,335 cases of dengue and dengue haemorrhagic fever

with 112 deaths in 2008 as compared to 38,556 cases and 92 deaths in 2006. Among

the factors that could have caused such increase were weaknesses in enforcements

and controls such as inspections of premises were not done according to plan, failure to

follow-up inspections on premises that could not be inspected during the previous visits,

vector detection index not fully used, delay in notifying dengue cases and incomplete

blood test. These weaknesses among others were due to lack of manpower and

facilities as well as lack of cooperation from the public in the prevention and control of

this disease. In relation to this, it is recommended that the Ministry considers the

following matters:


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Create specific posts and special units at the Ministry, State Health Departments

and District Health Offices to prevent and control dengue fever as incidence and

mortality rate of dengue fever kept on increasing yearly. With the creation of

such unit, the Ministry should consider taking over this activity from local

authorities to ensure proper and comprehensive planning and implementation.

Use of the Vector Detection Index to ensure detection of infection risk level/

dengue epidemic is implemented at all districts. In addition, the prevention and

control of Aedes mosquitoes should be implemented at all identified high risk

localities.

Create a mechanism to overcome problems that has contributed to the delay in

sending notices of dengue fever cases. Early notification is essential to ensure

the inspection of premises and fogging to be done as soon as possible in the

affected areas to prevent an epidemic from happening.

Ensure inspections are carried out according to plan as the inspection ofpremises to detect the reproduction of Aedes mosquitoes is one of the important

controls to reduce the incidence of dengue fever.

Ensure follow-up inspections are carried out on premises which were not

inspected during the previous visit so that the potential reproduction habitat for

Aedes mosquitoes are identified and early eradication carried out. For this

purpose, the Ministry should intensify the awareness campaign regarding the

importance of publics cooperation in making the prevention and control of

dengue fever a success. In relation to this, involvement by public groups such as

community societies, youth clubs, non-governmental organisations and voluntary

groups should also be encouraged.

Ensure serology tests carried out are recorded properly. This test is to establish

whether an individual has been infected with dengue fever so that treatment can

be given and affected premises and localities be identified earlier to prevent the

epidemic.

Determine a reasonable time frame and ensure it is complied with to prevent any

delay in the issuance of compound notices which will affect enforcements

effectiveness. In addition, action should be taken on all unsettled compound

cases by referring to the Deputy Public Prosecutor.

Distribute unused equipments to other District Health Offices that require them to

prevent obsolescence and wastage. Besides that, a plan to increase the number

of transportation vehicles should be prepared.


- Management Of Harm Reduction Programme

The Harm Reduction Programme implemented by the Ministry of Health Malaysia

(Ministry) since 2006 consists of 2 components, namely Methadone Replacement

Therapy as well as Needle and Syringe Exchange Activity with the objective of

preventing the spread of Human Immunodeficiency Virus (HIV). Generally, the audit


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revealed that this programme has helped in reducing the addiction level, minimize risky

lifestyle behaviors and improve the quality of an addicts life. However there were

several weaknesses that need to be rectified such as the number of addicts treated did

not reach the targeted goals due to either lack of medical personnel or required basic

facilities, improper procurement of methadone that resulted in Government incurring

losses, improper records of needles in hand and ineffective monitoring on the

performance of the programme. In this regard, it is recommended that the Ministry

considers the following matters:

Create special posts and ensure the availability of sufficient basic facilities in all

hospitals or health clinics that are involved in this programme as the

effectiveness of the Methadone Replacement Therapy requires the involvement

of health personnel on a full time basis and sufficient basic facilities.

Ensure financial aid is provided to the Malaysian AIDS Council and other

responsible non-governmental organisations under the Needle and Syringe

Exchange Activitybefore such activity commences.

Enhance the Needle and Syringe Exchange Activity by increasing the coverage

areas through the Outreach activity as this programme is able to create

awareness among the addicts on the risk of HIV infections through sharing

needles. Besides this, co-operation with the police and locals must be improved.

Impose penalties on suppliers who do not comply with the terms and conditions

of contract for supplying methadone. In future, the Ministry should immediately

inform and submit a copy of the agreement to hospitals to prevent purchases ofmethadone outside contract at a higher cost.

Ensure all parties involved in the procurement, recording and storage of needles

comply with relevant regulations.

Ensure the MyMMT system (My Methadone Maintenance Therapy System)

functions as planned and the Malaysian AIDS Council submits report on its

achievement of activities organised within the stipulated time in order to enhance

monitoring of the Harm Reduction Programme. With information obtained from

the above sources, the Ministry should then carry out analysis to evaluate the

effectiveness of the programme.

MINISTRY OF HOUSING AND LOCAL GOVERNMENT

Town And Country Planning Department, Peninsular Malaysia

- Management Of Local Planning

Local Planning (LP) is an important reference document to ensure systematic

development of a particular area. It contains among others, explanation regarding the

use of land, environment, infrastructure and utility, landscape and traffic of a particular

area. The audit revealed several weaknesses such as delay in gazetting the LP thatresulted in a shorter execution period, approval of development based on a draft LP and


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benefits could not be enjoyed by the public fully. Besides that, compliance to the LP was

not closely monitored. In this regard, it is recommended that the Town and Village

Planning Department, State and Local Authorities who are directly involved in the

preparation/usage of the LP consider the following matters:

All involved parties should collectively prepare a comprehensive guideline on

preparation, gazetting, printing, distribution and enforcement of the LP to ensure

it could be adhered to by all concerned parties. Among others, the guidelines

should state the responsible party to manage the printing, the number of LP to

be printed and distributed as well as records to be maintained in relation to the

preparation, distribution and monitoring of its usage. In addition, a time frame

should also be determined for each related work process.

The Ministry of Finance should review the process of appointing consultants and

the cost involved to prepare the draft LP as the present process takes a long

time.

The local authorities should consistently monitor the relevant areas and take

necessary actions against parties who do not abide by the LP to ensure that the

development is done in accordance with the gazetted LP. This is required to

ensure a systematic development of the area does not threaten life or the

environment and the Government gets value for money for costs incurred in

preparing the LP.

MINISTRY OF INFORMATION, COMMUNICATION AND CULTURE

National Library Department

- Management Of Rural Libraries

As at 31 December 2008, a total of 425 rural libraries were operating in the country.

They were established to be the catalyst to cultivate the reading habit and reduce

disparities of illiteracy among the rural folks and the urbanites. The audit revealed

several weaknesses such as delay in completing construction/renovation of buildings,

works did not comply with agreed specifications/scopes, unsatisfactory maintenance of

buildings, improper records of books and penalties were not imposed on suppliers who

failed or delayed the supply of books/reading materials. In this regard, it is

recommended that the National Library Department considers the following matters:

Monitor construction of rural libraries or renovations on public buildings as rural

libraries to ensure project specifications/scopes are fully complied with by

implementing agencies. In addition, the National Library Department should

review the number of officers required to carry out supervision as currently it has

only one assistant technician to supervise the construction of all rural libraries in

the country. The same officer is also involved in other development projects

managed by the National Library Department.

Carry out periodical maintenance of rural libraries to ensure they are always in

good physical condition and safe to use. For this purpose, sufficient funds should

be allocated.


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Monitor the performance of suppliers of books and ensure they comply with the

terms and conditions of contract and impose penalties if they fail to do so. A

mechanism should be created to enable rural libraries to procure the latest

magazines.

Synchronize procurement of books and library accessories with completion dateof construction/renovations of rural libraries to ensure they could operate and

benefit the public upon completion.

Ensure all rural libraries continuously implement activities of cultivating reading

habits as these can increase the interest of reading among the local

communities. For this purpose, a guideline on Implementing Rural Libraries

Activities should be issued to relevant parties to explain the implementation

procedures/processes of such activities.

Review whether a minimum fine could be imposed on book borrowers to reduce

the rate of lost/unreturned books.

MINISTRY OF INFORMATION, COMMUNICATION AND CULTURE

Department Of Broadcasting

- Management Of Procurement Of External Broadcasting Van WithBroadcasting System And Digital Radio Production

a. The Ministry of Information (Ministry) had spent not less than RM40 million for the

procurement of External Broadcasting Van with Broadcasting System and Digital

Radio Production in order to increase broadcasting coverage of Radio Television

Malaysia (RTM). However, there were several weaknesses in the said procurement

such as delays in the supply of the specific van/equipments, contract conditions not

complied with and improper payments. To ensure the objectives of the procurement

are achieved and the Government gets value for money, it is recommended that the

Ministry considers the following matters:

Ensure the contractor supplies the External Broadcasting Van and Broadcasting

Equipments that have yet to be delivered. In relation to this, the Ministry should

ensure the contractor renews the Performance Bond which had expired on 3rd

March 2009 and renews the warranty for the undelivered van and equipments.

For the case where payment has been made for unsupplied equipments,

investigation should be carried out to identify the responsible parties and if found

guilty, surcharge must be taken against them.

RTM should inform their stations that received the equipments on its warranty

and manufacturers guarantee in order to benefit from these facilities.

b. To safeguard Governments interest, it is recommended that the Ministry should

improve its procurement management by taking the following steps:

Contracts must be signed within 4 months from the date of issuance of the Letterof Acceptance.


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Ensure the Performance Bond is valid until all repairs on defects are completed

by the contractor to prevent the Government from bearing the cost of repairs.

Any application to modify the specification or equipment schedule should only be

approved after a price adjustment and contract cost survey has been carried out.

The contractor should also submit a confirmation of quality assurancecomparable to the original specification.

MINISTRY OF HUMAN RESOURCES

- Management Of Educational Equipments In Training Institutes, ManpowerDepartment

Under the Eighth Malaysia Plan, the Ministry of Human Resources (Ministry) has spent

not less than RM441.33 million to provide educational equipments to 7 Industrial

Training Institutes throughout the country. The audit revealed several weaknesses in the

management of the equipments which resulted in Government not getting value for

money and adversely affected the academic activities. Among the weaknesses were

equipments procured at a much higher cost than market value, not less than RM3.66

million worth of equipments not utilised or underutilised and improper maintenance of

equipments. These weaknesses among others were the result of poor planning for

procurement/maintenance of equipments and the failure to carry out market price

surveys. In this regard, it is recommended that the Ministry considers the following

matters:

Ensure contract price is based on negotiated price of each type of equipment

and agreed between the supplier and the Ministry and not based on the

approved allocation for the procurement. In relation to this, market price surveys

should be carried out as a reference in determining the price of the equipments

as well as verify the price offered by the supplier.

Carry out detailed planning of the procurement and obtain views from lecturers/

trainers to ensure only compatible and required equipments are procured.

Review the rate of penalty imposed on suppliers for delays in the supply of

equipments as the present rate is too low.

Determine time frame for every relevant work process in the maintenance/repairs of equipments and ensure that the time allocated is complied with to

prevent delays in maintenance/repairs. In addition, the Ministry should take

action on suppliers who delay maintenance/repairs by imposing a penalty or

confiscate the Performance Bond.

MINISTRY OF HIGHER EDUCATION

- Management Of Procurement Of Course Equipments For Community Colleges

From 2006 to 2008, the Ministry of Higher Education (Ministry) had spent a total of

RM80.07 million to provide course equipments for community colleges. The audit

revealed several weaknesses such as required equipments were not provided,


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equipments not used optimally due to oversupply/not required/not suitable equipments,

delays in supply, payments made though equipments has not been tested/

commissioned, equipments kept at an unsuitable/unsafe location as well as asset

records not maintained properly nor updated. In this regard, it is recommended that the

Ministry considers the following matters:

Obtain views from relevant lecturers to ensure equipments procured are suitable

for the courses. For cases where suppliers failed to deliver, the Ministry should

take immediate actions to acquire unsupplied equipments by appointing new

suppliers. Whereas for the oversupplied equipments, it should be distributed to

other community colleges which require the said equipments.

Take action to ensure that all remaining equipments that have not been received

by the relevant community colleges are delivered by suppliers immediately.

The relevant community colleges should urgently apply for funds from the

Ministry to improve its security. Community colleges should also be perceptive

regarding the suitable placement of the equipments and to immediately obtain

certification from the Department of Occupational Safety and Health Malaysia for

specific equipments that require such certification.

Maintain proper and up-to-date asset records for easy reference. Such records

should also be regularly checked by responsible officers and used for the

purpose of physical verification.

Carry out investigation to determine all payments were vouched with supporting

documents. If misappropriation of funds occurs, disciplinary action or surcharge

must be taken against the responsible parties.

Training should be given to officers involved in the procurement of equipments

and the maintenance of the asset records especially for officers of the

community colleges.

MINISTRY OF HOME AFFAIRS

- Construction And Management Of The Ministry Of Home Affairs Complex,Perak

This complex was completed in April 2005 at a cost of RM41.83 million. The auditrevealed several weaknesses such as the As-Built Plan together with the Operational

and Maintenance Manual were only furnished by the contractor 3 years after project

completion, delay in handing over the As-Built Plan had caused the consultant to face

difficulties in certifying the quality of the construction works and remedial works were not

fully carried out by the contractor during Defects Liability Period. In addition, work areas

were not up to the standards set by the Malaysian Administrative Modernisation and

Management Planning Unit and also did not take into consideration areas for additional

staff as well as facilities such as the Day Nursery, Library, Sports and Recreation Room

were not utilised. In this regard, it is recommended that the Ministry considers the

following matters:


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Prepare a comprehensive manual on managing this complex that includes all

aspects of managing a common user building such as financial requirement,

usage of areas/facilities and the security of the building.

Settle all issues on remedial works immediately by urging the contractor to

complete unfinished works and to issue the Certificate of Making Good Defectsas well as to finalise the closing account of the project as soon as possible.

The Complex Maintenance Management Committee which was formed in July

2008 must take assertive and immediate actions to settle complaints from

employees and the public regarding the facilities in the complex.

As a short term solution, renovate and modify all underutilised areas such as

Day Nursery, Library, Sports and Recreation Room to be converted into work

areas for departments facing critical shortage in office space. For long term

measure, the Ministry should plan to relocate certain departments that do not

deal with the public in different buildings/locations as the surrounding areas of

the complex are limited.

The Ministry and management of the complex should take immediate action to

increase its level of security to ensure the safety of assets and users.

MINISTRY OF HOME AFFAIRS

Royal Malaysian Police

- Management Of Red LightSurveillance Camera System And The Issuance Of

Summons

The Red Light Surveillance Camera System was developed by the Royal Malaysian

Police (RMP) at a cost of RM8.98 million with the intention to increase awareness of

road users to abide the traffic lights rules, thereby reducing the accident rate at road

junctions. The contract for maintenance, repairs and supply of spare parts for this

system valued at RM5.46 million was signed between the Ministry of Internal Security

and Commercial Circle (M) Sdn. Bhd. for the period from 2004 to 2009. As at 31

December 2008, the contractor has been paid a total of RM3.21 million. The audit

revealed that the management and monitoring of the system and its equipments were

not satisfactory. There were several weaknesses that could adversely affect theeffectiveness of the system such as equipments not being fully utilised, faulty

equipments that remain unrepaired and without proper maintenance, placing

equipments at unsuitable locations and inefficient issuance of summons. To rectify the

weaknesses and to ensure the Government achieves the objective of installing the

system and to get value for money, it is recommended that the Ministry of Home Affairs

and RMP take the following remedial actions:

Create a mechanism to collect data on the number of accidents due to violation

of the traffic light rules and accidents at junctions which have been installed with

the system for the purpose of evaluating the effectiveness of the system in

achieving its objective.


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Ensure fully functional system/equipments are installed at suitable locations. For

this purpose, continuous supervision must be carried out to ensure maintenance

of the system/equipments are done according to schedule and breakdowns

repaired immediately. Besides this, the Ministry/RMP should co-operate with the

relevant local authorities to ensure construction/road widening/development

activities do not affect the effectiveness of the system.

Designate police personnel to manage the system and train them to operate the

system especially in film handling to ensure there are no faulty recordings which

will jeopardise the issuance of summons.

Determine a time frame for each process from the date of offence until the

issuance of summons to ensure there is no delay in issuing summons to

offenders.

VARIOUS MINISTRIES AND DEPARTMENTS

- Management Of Emolument For Civil Servants

Based on data in the Human Resources Management Information System (HRMIS), a

total of 1,257,426 posts of various grades have been approved by the Public Services

Department of which 1,013,532 posts have been filled up as at 31 December 2008. The

total filled up posts do not include 206,652 personnel in the armed forces and police.

For 2008, a total of RM41.01 billion has been spent on emoluments. At ministries/

departments, there were several weaknesses in the management of emolument that

resulted in over/under payments due to mistakes/carelessness by/of the officers while

processing payments, lack of co-ordination among divisions involved, lack of

supervision on collections of overpaid emoluments and service records not updated. To

overcome the weaknesses, it is recommended that ministries/departments consider the

following matters:

Impose surcharge against careless officers who caused over/under payments of

emoluments in accordance with Section 18 Financial Procedures Act.

Establish co-ordination among involved parties at all levels to ensure existing

regulations are complied with and timely updating of information could be done

whenever there is a change in officers status especially involving transfers andpromotions.

Ensure responsible officers carry out detail checking before approving any

changes in the emolument of officers to avoid over/under payments.

Issue delegation of power to officers who approve the Statement of Changes of

Officers Salary (Form Fin. 8).

Provide regular training to officers who manage emolument payment to increase

their awareness in existing and latest regulations. The National Public

Administration Institute should be requested to organise courses related to the

management of emolument. In addition, officers should refer to the process of

managing emolument as stated in the Manual Work Procedures.


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The Accountant General's Department Malaysia should expedite interfacing of

the Government Financial And Management Accounting System (GFMAS) and

Human Resource Management Information System (HRMIS). Heads of

department should ensure all required information is updated in HRMIS and its

accuracy verified.

Internal Audit/Inspectorate Unit in each ministry/department should randomly

check service records of officers every 6 months to ensure these records are

complete and updated. Errors detected from such checking could be rectified

immediately.

PART II - MANAGEMENT OF GOVERNMENT COMPANIES

As at 31 December 2008, the Government has invested RM24.21 billion in 99

companies. A total of RM22.51 billion was invested in 50 companies where theGovernment holds more than 50% equity. The objectives of these investments are to

obtain reasonable returns, maintain Governments interest in strategic sectors and to

invest in sectors that lack investments from the private sectors. Audit analysis on the

income for 2007 of 48 companies revealed that 27 companies earned pre-tax profit of

RM78 billion whereas the remaining 21 companies incurred losses amounting to

RM0.87 billion. However, only 14 out of the 27 profitable companies paid dividends

totalling RM72.21 billion to the Government. A total of 30 companies paid tax amounting

to RM24.37 billion to the Government. The audit revealed that the activities of these

companies were well planned. However there were weaknesses in the implementationof these activities especially with regards to internal controls of financial management.

- MANAGEMENT OF EXPORT- IMPORT BANK OF MALAYSIA BERHAD

Export-Import Bank of Malaysia Berhad (EXIM Bank) is wholly owned by the

Government with a paid up capital of RM2.71 billion. The main objective of EXIM Bank

is to arrange for credit facilities to increase the capabilities of Malaysian companies to

export products/services and carry out investment projects overseas. From 2006 to

2008, EXIM Bank approved 115 loans/guarantees totalling RM3.30 billion. The audit

revealed that the management of lending activities of EXIM Bank were not satisfactory

such as approval of loans which does not meet the established criteria or without liquid

assets or bank/corporate guarantees, loose process in the release of loans, ineffective

performance monitoring of the borrowers and increase in non-performing loans (NPLs).

In this regard, it is recommended that the Board of Directors and the management of

EXIM Bank consider the following matters:

The management should ensure appropriate loan securities are determined by

considering the risk level of every borrower by giving priority to securities such

as cash/cash and equivalents or bank/corporate guarantees.


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The Board and management should monitor and supervise closely the

performance of borrowers and carry out post mortem review on all NPLs in

accordance to the policies of EXIM Bank. This is to ensure NPLs do not

continue to increase. In addition, loan performance status should be made a

compulsory agenda and to be presented/discussed at every Boards meeting.

The management should ensure dividends be paid from profits to the

Government, who as a shareholder entitles for such returns on the investments.

- MANAGEMENT OF SYARIKAT PRASARANA NEGARA BERHAD

Syarikat Prasarana Negara Berhad (Prasarana) is wholly owned by the Government

with a paid up capital of RM3.80 billion. The company is responsible to manage the

infrastructure of public transportation in Klang Valley and Penang. As at

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