5 - Synopsis Agr2015 Series 1

AUDITOR GENERALS REPORT
2015
GOVERNMENTS FINANCIAL STATEMENT, FINANCIAL MANAGEMENT

FOR THE YEAR 2015 AND ACTIVITIES OF THE
FEDERAL MINISTRIES/DEPARTMENTS AND
MANAGEMENT OF THE GOVERNMENTS COMPANIES
SERIES 1
NATIONAL AUDIT DEPARTMENT
MALAYSIA
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SYNOPSIS
FOR THE YEAR 2015
THE AUDIT OF THE FEDERAL
GOVERNMENTS FINANCIAL STATEMENT,
FINANCIAL MANAGEMENT,
ACTIVITIES OF THE FEDERAL
MINISTRIES/DEPARTMENTS
AND MANAGEMENT OF THE
GOVERNMENT COMPANIES

MALAYSIA
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CONTENTS
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CONTENTS
PAGE
CONTENTS
SECTION I
THE FEDERAL GOVERNMENTS FINANCIAL
STATEMENT AND FINANCIAL MANAGEMENT OF THE
FEDERAL MINISTRIES/DEPARTMENTS
PREFACE
SYNOPSIS
13
PART I
CERTIFICATION OF THE FEDERAL GOVERNMENTS
FINANCIAL STATEMENT FOR THE YEAR ENDED 31ST
DECEMBER 2015
1. Certification Of The Federal Governments Financial
Statement For The Year Ended 31st December 2015
15
PART II
FINANCIAL MANAGEMENT OF THE FEDERAL
GOVERNMENT
2. Overall Financial Management Performance
3. Financial Management Of The Federal
Ministries And Departments
4. Public Accounts Committee Meeting
CONCLUSION
15
16
17
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SECTION II
ACTIVITIES OF THE FEDERAL MINISTRIES /
DEPARTMENTS AND MANAGEMENT OF THE
GOVERNMENT COMPANIES
PREFACE
29
SYNOPSIS
35
PART 1
IMPLEMENTATION OF ACTIVITIES BY THE FEDERAL
PRIME MINISTERS OFFICE
National Disaster Management Agency
1. The Management Of Home Construction And
Refurbishment For Flood Victims
37
PRIME MINISTERS DEPARTMENT/MINISTRY OF

HOME AFFAIRS
Malaysia Civil Defence Department
2. Management On Procurement Of Supplies And
Services
41
MINISTRY OF FINANCE
Inland Revenue Board Of Malaysia
3. The Management Of Company Civil Suit
43
Royal Malaysian Customs Department

4. Controls Of Licensed Warehouse For Liquors And
Cigarettes
46
MINISTRY OF RURAL AND REGIONAL DEVELOPMENT

5. Rural Water Supply Programme In Sabah
50
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MINISTRY OF RURAL AND REGIONAL DEVELOPMENT/

PUBLIC WORKS DEPARTMENT
6. Construction Of The Subang UniKL Malaysian Institute
Of Aviation Technology (MIAT) Campus, Selangor
53
MINISTRY OF WORKS/ PUBLIC WORKS DEPARTMENT
7. Construction Of A New Way Project From Seremban
Hi-Way PD-FR5 In Pasir Panjang And Upgrading FR5
From Pasir Panjang To Linggi, Negeri Sembilan
(Section 1)
55
MINISTRY OF WORK MALAYSIA / MINISTRY OF
WOMEN, FAMILY AND COMMUNITY
8. Project Management Reconstruction Quarters Welfare
Department
58
MINISTRY OF TRANSPORT
9. The ERL Extension Project From KLIA To klia2
62
MINISTRY OF ENERGY, GREEN TECHNOLOGY AND

WATER / MINISTRY OF FEDERAL TERRITORIES
Sewerage Services Department
10. Sewerage Projects Under The River Cleaning
Components For River Of Life Program
65
MINISTRY OF HEALTH MALAYSIA

11. Management Of Orthopedic Treatment Activities
12. Management Of Private Security Services Company
In Hospital
67
70
MINISTRY OF HEALTH MALAYSIA / MINISTRY OF

WORKS MALAYSIA
13. Construction Project Of New Tampin Hospital, Negeri
Sembilan
73
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MINISTRY OF URBAN WELLBEING, HOUSING AND

LOCAL GOVERNMENT
National Solid Waste Management Department
14. Solid Waste Disposal Sites Management
77
National Housing Department

15. Construction Of The People's Housing Programme,
Lembah Subang 2
80
MINISTRY OF DEFENCE
16. The Management Of Jiwa Murni Project In Sarawak
82
MINISTRY OF WORKS / MINISTRY OF HOME AFFAIRS

Prison Department of Malaysia
17. Management Of Construction Project Penjara Reman
(Tegar) Johor Bahru, Johor
85
MINISTRY OF HOME AFFAIRS
Immigration Department of Malaysia
18. Implementation Of The Malaysian Immigration System
(myIMMs)
87
MINISTRY OF EDUCATION MALAYSIA
19. Management Of Private Security Services Company
In Schools
20. Management Of Supplementary Food Programme
91
93
PART II
MANAGEMENT OF GOVERNMENT COMPANIES
MINISTRY OF TOURISM AND CULTURE MALAYSIA
21. Malaysia Convention & Exhibition Bureau
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MINISTRY OF EDUCATION MALAYSIA

22. Management Of Perbadanan Kota Buku
100
MALAYSIA OF FINANCE MALAYSIA

23. Management Of Multimedia Development
Corporation Sdn. Bhd.
24. Management Of Malaysian Agrifood Corporation
Berhad (MAFC)
25. Sepang International Circuit Sdn. Bhd.
104
107
CONCLUSION
111
102
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SECTION 1
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SYNOPSIS
FOR THE YEAR 2015
THE FEDERAL GOVERNMENTS

FINANCIAL STATEMENT AND
FINANCIAL MANAGEMENT OF
THE FEDERAL

MALAYSIA
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PREFACE
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PREFACE
1.
Article 106 and 107 of the Federal Constitution and
the Audit Act 1957 require the Auditor General to audit the
Federal Governments Financial Statement, financial
management, activities of the Ministries/Departments as
well as management of the Federal Government
companies and submit his reports to His Majesty, the
Supreme Head of Malaysia and obtain his assent before
tabling them in Parliament. To fulfil these responsibilities,
the National Audit Department needs to carry out 4 types of
audit as follows:
1.1.
Attestation Audit - to give an opinion as to
whether the Federal Governments Financial Statement

shows a true and fair view as well as its accounting
records are properly maintained and updated
accordingly;
1.2.
Compliance Audit - to evaluate whether the
financial
management
of
the
Federal
Ministries/Departments is in accordance with relevant
financial laws and regulations;
1.3.
Performance Audit - to evaluate whether the
Federal Governments activities/programmes/projects
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have been carried out efficiently and economically to

achieve their desired objectives/goals; and
1.4.
Government Companies Management Audit
- to evaluate whether the Federal Government
Companies have been managed in a proper and
efficient manner as well as achieving their objectives.
2.
My report on the Financial Statement and Financial
Management
of
the
Federal
Governments
Ministries/Departments for the Year 2015 consists of the
following:
Part I
Certification
Of
The
Federal
Governments Financial Statement
For The Year Ended 31st December
2015
Part II
Financial Management
Federal Government
Part III
National
Audit
Departments
Involvement In Special Evaluation
Towards Enhancing Accountability
Of Public Financial Management
Part IV :
Of
The
General Matters
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3.
Audit on the Federal Governments Financial
Statement for the Year 2015 revealed that the Statement as
a whole reflected a true and fair view on the financial
position of the Federal Government as at 31st December
2015, its operations and cash flows for the year ended 31st
December 2015 as well as its accounting records were
properly maintained and updated accordingly. Meanwhile,
the audit of financial management revealed that several
Ministries and Departments did not fully comply with
financial regulations. Among others, these weaknesses
were due to negligence in compliance with stipulated
financial rules/procedures, insufficient manpower, lack of
training in financial management, inadequate supervision
and close monitoring.
4.
Heads of Department had been informed earlier and
confirmed all the matters reported in this report. In addition,
The National Audit Department undertook several initiatives
to assist the Federal Governments Ministries/Departments
mitigate weaknesses in their financial management. Among
the initiatives that had been taken were as follows:
4.1.
Implementation of a rating system based on
Accountability Index (AI). This system rates the
compliance of financial regulations in 8 main elements.
These elements are management control, budgetary
control, receipting control, management of procurement,
expenditure
control,
management
of
trust
funds/accounts and deposits, management of assets
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and stores as well as management of government

vehicles. Federal Ministries/Departments with excellent
rating are suggested to be benchmarked (role model).
Thus motivating other Federal Ministries/Departments
to further improve and enhance their performance of
financial management.
4.2.
Implementation of financial management audits
at Malaysian Diplomatic Missions Abroad. For the year
2015, the National Audit Department audited 8
Malaysian Diplomatic Missions Abroad. The exercises
of financial management audits are to evaluate its
compliance with relevant financial laws and regulations.
These financial management audits focused on 5
elements namely management control, receipting
control, expenditure control, management of trust
funds/accounts and deposits as well as management of
assets and stores. These audits also included The
Overseas Accounting System (Sistem Perakaunan Luar
Negeri).
4.3.
Implementation of surprise inspections at
Federal government offices throughout the country. The
Treasury Instructions stipulated that Heads of
Ministry/Department are responsible to safeguard public
money, stamps or other valuable items in safety boxes,
vaults, cash boxes or other repositories. Heads of
Ministry/Department must ensure that records kept are
complete, up to date and periodically checked by senior
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officers. To ascertain its compliance, the National Audit

Department carried out surprise inspection at 244
Federal government offices.
4.4.
Implementation of the financial management
performance of Premier Grade Officers. The National
Audit Department constantly involved in evaluating the
performance of Premier Grade Officers on financial
management as one of the essential elements for their
confirmation exercise. For the year 2015, National Audit
Department
evaluated
29
Heads
of
Ministry/Department/Agency.
These
evaluations
indirectly enhanced the financial management of
Ministry/Department/Agency as the promotion of Heads
of Ministry/Department/Agency can only be considered
by the Public Service Department after the National
Audit Department and Federal Treasury of Malaysia
verified that the relevant officers had taken corrective
actions on all weaknesses raised.
4.5.
Meetings of the Public Accounts Committee
(PAC). PAC was formed to examine and monitor
national financial affairs in ensuring national finances
are governed properly, efficiently and transparent. PAC
meetings were also attended by representatives from
the National Audit Department, Ministry of Finance,
Public Service Department, Accountant Generals
Department as well as the Economic Planning Unit. For
the year 2015, PAC conducted 33 meetings.
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5.
I would like to express my appreciation to all the
officers in various Federal Ministries/Departments for their
full cooperation during the audit. I would also like to record
my gratitude to my officers who have shown total
commitment and worked diligently to complete this report.
(TAN SRI HJ. AMBRIN BIN BUANG)

Auditor General of Malaysia
Putrajaya
27th April 2016
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SYNOPSIS
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SYNOPSIS
PART I - CERTIFICATION
OF
THE
FEDERAL
GOVERNMENTS FINANCIAL STATEMENT
FOR THE YEAR ENDED 31st DECEMBER
2015
1.
The Federal Governments Financial Statement for
the year ended 31st December 2015 as a whole reflected a
true and fair view of the financial position of the Federal
Government and the accounting records were properly
maintained and updated accordingly.
PART II - FINANCIAL
MANAGEMENT
FEDERAL GOVERNMENT
OF
THE
Overall Financial Management Performance

2. For the year 2015, the Federal Government received
revenue totalling RM219.089 billion, decrease by RM1.537
billion (0.7%) as compared to RM220.626 billion for the
year 2014. In the same year, the Parliament has approved
allocation of operating expenditure amounting to
RM221.727 billion in which a total of RM216.998 billion or
97.9% was spent. As for development expenditure, Federal
Ministries/Departments had spent RM40.768 billion (99.4%)
out of RM41.025 billion of the approved allocation. The
Federal Government incurred deficit of RM37.194 billion
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with its ratio to the Gross Domestic Product (GDP) at

3.22%. The deficit was covered by internal and external
loans amounting to RM121.364 billion. Apart from financing
the development expenditure, the loans were also used to
repay the existing debts and finance the Housing Loan
Trust Fund.
Financial Management Of The Federal Ministries And
Departments
3.
The National Audit Department audited 25 Federal
Ministries and 40 Federal Departments in 2015 in order to
evaluate whether their financial management was in
accordance with related laws and financial regulations.
Audit findings revealed that the overall financial
performance of the ministries had declined as compared to
the previous 2 years. In 2015, only 16 ministries were rated
as excellent as compared to 20 ministries in 2014 and 23
ministries in 2013. However, performance of financial
management by Federal Departments showed an
improvement, where a total of 22 (55%) out of 40
departments were rated as excellent in 2015 as compared
to 29 (56.9%) out of 51 departments in 2014 and 21
(46.7%) out of 45 departments in 2013. Accountant
Generals Department of Malaysia, in 14 States and 16
branches of Fire and Rescue Department of Malaysia
throughout the country were also audited. Audit was also
carried out in 8 Malaysian Diplomatic Missions Abroad
under the purview of the Ministry of Foreign Affairs.
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4.
The National Audit Department also carried out
surprise checks at 226 Federal Departments/Offices at
state and district level. Audit findings revealed that a
number of offices did not fully comply with stipulated
financial regulations. Amongst them were mail registers,
cash books and petty cash books were not properly
maintained or updated accordingly; surprise inspections
were not conducted as required; and power were not
delegate to the relevant officer in charged of safe box. The
reports were submitted to relevant Heads of Department at
Headquarter and State level for further actions.
5.
Besides conducting mandatory audits as provided
under the law, the National Audit Department also carried
out special evaluation on the financial management
performance of Premier Grade Officers in various
Ministries/Departments/Agencies. In Year 2015, a total of
29 Premier Grade Officers has been evaluated.
Public Accounts Committee Meeting
6.
The Public Accounts Committee (PAC) was formed to
examine and monitor national financial affairs by ensuring it
has been governed and managed in an efficient, effective
and transparent manner. PAC meetings were also attended
by representatives from the National Audit Department,
Ministry of Finance, Public Service Department, Accountant
Generals Department as well as the Economic Planning
Unit. In Year 2015, a total of 33 meetings have been
conducted by PAC.
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CONCLUSION
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CONCLUSION
In general, the financial management of the Federal
Ministries in 2015 showed a slight decline in performance
as compared to the previous 2 years. In 2015, 16 ministries
were rated as excellent compared to 20 ministries in 2014
and 23 ministries in 2013.
Performance of financial management by Federal
Departments showed a decrease in the numbers of
excellent departments for the year 2015 as compare to
2014 and previous years. In 2015, a total of 22 (55%) out
of 40 departments were rated as excellent compared to 29
(56.9%) out of 51 departments in 2014 and 21 (46.7%) out
of 45 departments in 2013. The financial management
performance could still be further enhanced if Controlling
Officers/Heads of Department not only take action to rectify
the weaknesses as highlighted by National Audit
Department but also take preventive actions to ensure that
the same weaknesses do not recur. With regard to this, the
followings are recommended to further strengthen the
performance of financial management:
a. Controlling Officers/Heads of Department should
conduct comprehensive checks to determine
whether weaknesses highlighted by National Audit
Department also occurs in departments and
Responsibility Centres and take corrective actions
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as audits conducted by National Audit Department

were based on samples and specific scopes;
b. the involvement of Controlling Officers/Heads of
Department should be intensified through a handson approach on financial matters;
c. Ministries/Departments
should
enhance
the
effectiveness of internal audit. Among others, they
should ensure that internal auditors get sufficient
training and guidance, prepare the annual audit plan
so that auditing could be carried out according to
priorities, evaluate objectively and independently not
only on internal controls but also on risk
management and organizational governance, report
on significant findings as well as giving
recommendations that give impact and outcome to
the organization;
d. Issues highlighted by National Audit Department
should be discussed in detail by the Audit
Committee. These meetings should involve
discussion on corrective and preventive actions to
ensure that the same issues do not recur;
e. Every Exit Conference with the National Audit
Department should be chaired by the respective
Secretary General/Head of Department so that they
could be informed on audit issues beforehand and
urgently take positive actions apart from making
improvements;
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f.
The Accountant Generals Department through its

Internal Audit Management Division should play an
important role to enhance financial management
performance by carrying out planned inspections on
Responsibility Centres;
g. Heads of Department should establish a check and

balance system, supervise closely and conduct
surprise checks, conduct periodic assessment on
skills and capabilities of officers and give training to
officers who are involved in financial management
so as to improve their efficiency. This is to avoid
officers who lack experiences and skills from using
their discretion when making decisions; and
h. Records on asset should always be updated by the
Ministries/Departments in preparation for the
Federal Governments shift towards accrual
accounting.
National Audit Department

Putrajaya
27h April 2016
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SECTION 2
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SYNOPSIS
FOR THE YEAR 2015 SERIES 1
ACTIVITIES OF THE FEDERAL

AND MANAGEMENT OF
THE GOVERNMENT COMPANIES

MALAYSIA
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PREFACE
29
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PREFACE
1.
Article 106 and 107 of the Federal Constitution and
the Audit Act 1957 require the Auditor General to audit the
Federal Governments Financial Statement, financial
management, activities of the Ministries/Departments as
well as management of the Federal Government
companies and submit his reports to His Majesty, the
Supreme Head of Malaysia and obtain his assent before
tabling them in Parliament. To fulfil these responsibilities,
the National Audit Department needs to carry out 4 types of
audit as follows:
1.1.
Attestation Audit
to give an opinion as to
whether the Federal Governments Financial Statement

shows a true and fair view as well as its accounting
records are properly maintained and updated
accordingly;
1.2. Compliance Audit to evaluate whether the
financial management of the Federal Ministries/
Departments is in accordance with relevant financial
laws and regulations;
1.3. Performance Audit to evaluate whether the
Federal Government activities have been carried out
efficiently and economically to achieve its desired
objectives/goals; and
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1.4. Government Companies Management Audit

to evaluate whether Federal Government Companies
have been managed in a proper and efficient manner
as well as achieving their objectives.
2.
My report on the implementation of activities of the
Federal Ministries/Departments and the management of
Government Companies for the year 2015 Series 1
consists of 2 parts as follows:
Part I
Implementation Of Activities Of The

Federal Ministries/Departments
Part II
Management Of Federal Government

Companies
3.
Section 6(d) of the Audit Act 1957 requires the Auditor
General to carry out audit to evaluate whether Government
activities have been manage efficiently, economically and in
accordance with their stated objectives. The audit includes
various activities such as procurement, construction,
infrastructure, maintenance, and revenue management.
This report contains observations from the audit of 20
programmes/ activities/ projects of 19 Federal Ministries/
Departments, management, management and financial
performance of 5 Government Companies. In general,
weaknesses such as works/ supplies/ services not
accordance to specifications, of poor quality and not
suitable; unreasonable delays; improper payment;
wastages; weaknesses in management of Governments
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assets, security and weaknesses in revenue collections are

observed. These weaknesses resulted from negligence in
complying with the Governments rules/procedures; nonconscientious in programmes/ activities/ projects planning,
scopes definition and tender specifications; no frequent and
close monitoring of works of contractors/ consultants; poor
project management skills; less emphasize on the outcome/
impact of programmes/ activities/ projects and insufficient
funds for procurement and maintenance of assets.
4.
As in previous years, Heads of Department had been
informed earlier and confirmed all the matters reported in
this report. Furthermore, Exit Conferences were held with
Secretary General of Ministry/ Heads of Department/ Chief
Executive Officer of the Government Company and also
attended by representatives from the Attorney Generals
Chambers, Public Service Department, Malaysian AntiCorruption Commission, Ministry of Finance and related
contractors to rectify the issues highlighted. Thus, I have
suggested 77 recommendations for corrective and
improvement actions to be taken by Secretary General of
Ministry/ Heads of Department/ Chief Executive Officer to
mitigate the identified weaknesses of the programmes/
activities/ projects.
5.
In achieving the objectives of the Government
Transformation Programme 2.0 in fighting corruption under
the National Key Results Areas (NKRA), the Auditor
Generals Dashboard (AG Dashboard) was implemented on
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31st May 2013. The AG Dashboard displays issues reported

in the Auditor Generals Report and corrective actions taken
by auditees. The AG Dashboard has successfully assisted
Ministries/ Department/ Companies to respond promptly on
issues highlighted. It demonstrates commitments and
concerns
of
Ministries/
Departments/Government
Companies to rectify issues reported in the Auditor
Generals Report and disseminate information and current
status of audit issues to the public.
6.
I would like to express my appreciation to all the
officers
in
the
various
Federal
Ministries/
Departments/Government Companies who have given their
full cooperation to my officers during the audit. I would also
like to record my gratitude and thanks to my officers who
have shown total commitment and worked diligently to
complete this report.
(TAN SRI HJ. AMBRIN BIN BUANG)

Auditor General of Malaysia
Putrajaya
20th April 2016
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SYNOPSIS
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SYNOPSIS
PART I - IMPLEMENTATION OF ACTIVITIES BY THE
FEDERAL MINISTRIES/DEPARTMENTS
PRIME MINISTERS DEPARTMENT
National Disaster Management Agency
1. The Management of Home Construction And
Refurbishment for Flood Victims
a. The National Security Council [Majlis Keselamatan
Negara (MKN)] is an agency as a national focal point for
national disaster management. Beginning 26th August
2015, The Government has established the National
Disaster Management Agency [Agensi Pengurusan
Bencara Negara (APBN)] to replace every MKNs
functions and responsibilities. APBN is responsible for
coordinating and developing the management on
national disaster. This is to ensure all policies and
mechanisms of national disaster are complied and
implemented at each and every levels. The national
disaster management was implemented according to
MKN Directive No. 20. It includes policy and mechanism
which contains framework strategies, directives and
action plans in the management of national disasters.
The allocations and expenses for national disaster were
managed under the National Disaster Relief Trust Fund
[Kumpulan Wang Amanah Bantuan Bencana Negara
(KWABBN)]. At the end of the year 2014, there were 5
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States namely: Kelantan, Terengganu, Pahang, Perak

and Sabah have been stricken by great floods. These
floods caused fatalities, damages/losses of homes as
well as distress to victims involved. To support flood
victims to begin post-flood lives, the Federal
Government has allocated funds amounting to RM500
million through KWABBN. The objective of this funding
to aid the flood victims for their losses/damages.
b. The audit performed between September to November
2015 in 5 states involved revealed that preliminary
process for recipient selection and verification,
appointment of contractors, work executions and
certification in addition to payment procedures for new
permanent home project [Rumah Kekal Baharu (RKB)]
and restoration works have met the stipulated
Government directives in a fast-track manner. However,
there were several issues that could jeopardise the
efficiency and effectiveness of this project as follows:
i.
the overall performance of the home construction

project is less satisfactory. A total of 557 (40%) out
of 1395 RKBs units was incompleted resulted flood
victims were still staying in transit homes, tents and
so on;
ii. non-updated information on RKBs recipients and

restoration works in the flood management
information system (ePASCA BANJIR) lead to
unrealiable and non-integrity of the data and
system;
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iii. non-eligibility for 54 RKBs recipients and restoration

works requirements. Among of such noncompliance where house were not considered as
total loss, unoccupied residence, rented houses,
shop lots and non-resident owners;
iv. non-assistance on RKBs project or restoration
works for 36 flood victims despite of their houses
were destroyed or damaged by floods. These nonassitance requires rigirous actions and attention by
relevant authorities;
v. less effective on the implementation of RKBs
project and restoration works. Among highlighted
issues were the compliance with set design; inability
of contractors to complete the RKBs project;
abandoned projects and appropriateness of project
site;
vi. 109 houses for restoration works were out of scope.
These include repairs of stores and barn;
construction of new wall and garage; paint jobs for
brick gate; roof replacements on houses unaffected
by floods and installation works for grilles, fan,
cabinets and ceiling; and
vii. Unoccuppied or unutilised of 17 constructed and
repaired houses for flood victims due to
unwillingness to move, problems in providing basic
utilities and the non-official handover.
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c. To ensure that all the weaknesses highlighted do not

recur, the Government reaps best value for money and
achieving its objective to provide immediate relief to the
flood victims, it is recommended that APBN to take
actions on the following matters:
i.
to establish a specialised and comprehensive

Standard Operating Procedure (SOP) for post-flood
program. The SOP must comprises comprehensive
program for RKBs project and restoration works
which include methods of application, selection,
verification and updating information into the flood
management
information
system
(ePASCA
BANJIR). Furthermore, this SOP is essential to
ensure every relevant parties could equip
themselves to further understanding of their
respective functions and responsibilities given;
ii. to review the selection mechanisms in order to

promote transparent and clear recipient selections
with all parties including flood victims themselves;
and
iii. to immediately coordinate efficient placing for
completed RKBs projects for intended recipients.
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PRIME MINISTERS DEPARTMENT / MINISTRY OF

HOME AFFAIRS
Malaysia Civil Defence Department
2. Management On Procurement Of Supplies And
Services
a. Malaysia Civil Defence Department (CDD) is a civil
defence agency established in 1952 under Civil
Defence Ordinance 1951. The functions of CDD among
others are to formulate policies on civil defence;
organize and manage Civil Defence Forces through
support services and logistics; train and educate the
public about civil defence so they can receive and give
appropriate response to the programmes that are
important to their personal safety; review and organize
appropriate training for Civil Defence Forces in
accordance with the current situation; provide
emergency assistance; perform tasks and supervise
disaster rescue and accident victims throughout the
country. CDD is an agency under the Prime Minister's
Department (PMD) effective 29th July 2015 which was
previously under Ministry of Home Affairs (MOHA). For
the year 2013 to 2015, a total of RM368.14 million and
RM40.54 million were spent on operating and
development expenditure respectively.
b. The audit performed from June to September 2015 in
MOHA, Civil Defence headquarters [Ibu Pejabat
Pertahanan Awam (IPPA)] and 4 civil defence state
office [Pejabat Negeri Pertahanan Awam (PNPA)] in
Terengganu, Johor, Kedah and Sarawak revealed that
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MOHA and CDD appointed members of Opening

Quotation/Tender Committee and Evaluation of
Quotation/Tender Committee. The results of the
meeting on price negotiation were properly
documented. However, the overall management of the
procurement of supplies and services by CDD was less
satisfactory. Some of the weaknesses identified are as
follows:
i.
poor planning resulted in split procurement totalling

RM5.80 million;
ii. late in signing of contract between 93 to 554 days

and late submission of performance bonds totalling
RM0.65 million between 4 to 70 days;
iii. supplies of 1,010 shine rubber, 8 jet skis and 64 surf
board amounted to RM0.84 million did not comply
with the stipulated specifications; and
iv. record for equipment distributed by IPPA/PNPA
differed from record of receipts at PNPA/Pejabat
Daerah Pertahanan Awam (PDPA). In addition, 12'
inflatable boat, commander signal baton, helmet,
generator sets, fire retardant clothing, breathing
apparatus and surf board bought for more than 250
days were not used and not tested.
c. To ensure proper, efficient and Government reaps best
value for money on procurement of supply and services
in CDD, it is recommended MOHA and CDD take action
on the following matters:
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5/13/16 3:02 PM
i.
CDD and its Pusat Tanggungjawab (PTJ) must

ensure acquisition and acceptance of supplies
complied with the stipulated financial and internal
controls procedures. Disciplinary action must be
taken against officer(s) disregard the financial
procedures;
ii. MOHA and CDD must ensure proper and efficient

management and administration of procurement
contracts to protect the interests of the Government;
and
iii. CDD must ensure all assets and inventories records
are complete and updated; and implement proper
store management to safeguard its assets and
inventories.
MINISTRY OF FINANCE
Inland Revenue Board Of Malaysia
3. The Management Of Company Civil Suit
a. Civil Suit taken by Inland Revenue Board of
Malaysia (IRBM) towards companies is to ensure the
judgment/command has been made for the companies
to pay tax arrears when normal procedure to collect tax
failed. Companies tax arrears (net amount of
Receivable Account) for the year ended 2013 is
RM4.766 billion (56.55%) out of total tax arrears
amounting to RM8.429 billion. While in 2014,
companies tax arrears is RM4.365 billion (53.08%) out
of RM8.224 billion.
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b. An Audit performed between May until July 2015 in

Cheras Branch, Wangsa Maju Branch and Large
Taxpayer Branch located in Jalan Tunku Abdul Halim,
Kuala Lumpur. The audit revealed that IRBM has taken
appropriate action in distributing companies civil suit
files to all IRBM branches starting Januari 2014 to
enable prompt action taken for cases involved.
However, evaluations conducted in 3 IRBMs branches
found that the management of civil suit was less
satisfactory due to weaknesses as follows:
i.
IRBMs Civil and Litigation Department performance

has implemented in 2014. However, the
performance cannot be measured accurately as the
data produced from the 3 branches were differ from
the Revenue Collection Department (RCD) reported
data;
ii. Non-compliance of work procedures involving:
delay in registering 140 out of 312 summons

(44.9%) in court from 10 to 880 days amounting
to RM113.94 million;
delay in delivering 108 out of 312 summons

(34.6%) to companies from 2 to 128 days
amounting to RM95.50 million;
no action taken after judgment was obtained

towards 29 cases amounting to RM12.44 million;
delay in delivering 17 out of 312 Notice of

Demand (5.4%) from 5 to 1,361 days amounting
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to RM79.10 million and no action taken to

deliver 32 Notice of Demand (10.3%) towards
companies up to 1st July 2015 amounting to
RM5.56 million; and
winding up action is not taken towards 3

companies who failed to pay the remaining
claims, and
iii. no action taken towards 7 companies which unable

to obey the tax installment amounting to RM634,810
and submission of bad checks for tax installment
amounting to RM941,763.
c. To enhance the management of civil suit taken towards
companies, it is recommended that IRBM consider the
following actions:
i.
data produced by RCD need to be exact as the data

from the branches in ensuring the accuracy of the
report;
ii. enhancement of the efficiency of summon

management starting from the aspect of delivery of
summons and Notice of Demand delivery to the
company; and
iii. efficiently monitoring installment made by the
companies and implementing decisive action to
ensure companies pay tax arrears as per stipulated
schedule.
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Royal Malaysian Customs Department

4. Controls Of Licensed Warehouse For Liquors and
Cigarettes
a. A licensed warehouse is a building or secure area that
store imported dutiable goods in which payment of
customs duties is deferred until such goods are taken
out to be exported or sold locally. Operators of licensed
warehouse must obtain a license under Section 65 of
the Customs Act 1967 from the Royal Malaysian
Customs Department (RMCD) before commencing
operations. The function of licensed warehouses was
expanded to allowed operators to use it as a storage
and distribution centre for international and domestic
trade. Among activities permitted in a licensed
warehouse are warehousing dutiable goods; break
bulking; re-packaging; re-labelling; buying and selling;
consolidation/merger; and entreport trade (that is
importing goods to be processed or stored and reexported). For the year 2012 to 2014, revenue collected
by RMCD through public and private licensed
warehouses amounted to RM3.922 billion. As at 31
December 2015, a total of 64 (18.1%) from 353 public
and private licensed warehouses were involved in
warehousing of liquors and cigarettes.
b. The audit performed from May to September 2015 at
Warehousing Management and Control Unit, Trade
Facilitation and Industry Branch, Customs Division,
RMCD Headquarters; Industry Branch/Unit, State
Customs Department; and 43 (67.2%) public and
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private licensed warehouses for liquors and cigarettes

in 5 states (Federal Territory Kuala Lumpur, Perlis,
Johor, Sabah and Sarawak) revealed that generally, the
management and controls of public and private licensed
warehouse for liquors and cigarettes were satisfactory.
Audit findings also revealed that 26 (96.3%) out of 27
public and private licensed warehouses visited were
conducting permitted activities and dutiable goods were
labelled and stored properly within licensed areas. In
addition, all 5 State Customs Department audited had
proper controls on the transfer of dutiable goods from/to
licensed warehouse as well as to Duty Free Island of
Langkawi and Tioman. However, some of the
weaknesses identified are as follows:
i.
Federal
Territory
Kuala
Lumpur
Customs
Department and Perlis Customs Department did not
determine the correct value of bank guarantee for 3
Private Licensed Warehouse resulted customs
duties amounting to RM14.06 million were not
covered by bank guarantees to safeguard
Governments interests;
ii. RMCD did not claim customs duties amounting to

RM2.10 million from 6 Private Licensed Warehouse
with dutiable goods stored more than 2 years
without approval of extension of time;
iii. transfer of dutiable goods did not comply with the
stipulated procedures such as:
four Private Licensed Warehouse in Perlis did

not comply with the additional requirement of
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preparation and submission of monthly balance

statements (containing particulars of exports
and proof of payment from importers in
Thailand); and
four Private Licensed Warehouse in Johor

involved in ships supplies with customs duties
amounting to RM20.27 million for a period of 3
years. However, no evidence to confirm whether
the transfer of dutiable goods from all four
Private Licensed Warehouse were escorted by
Customs officers to the ships for the purpose of
sealing the ships stores; and
iv. weaknesses in monitoring by State Customs

Department such as:
a total of 41 (95.3%) from 43 licensees did not

submit annual stock statements verified by
Certified Auditors;
for a period of 3 years, State Customs

Department only carried out 68 (54.8%) out of
124 times annual 100% physical examination;
and
from 26 public and private licensed warehouses

visited, one Private Licensed Warehouse had
expired dutiable goods with duties amounting to
RM238,433.
c. To ensure that proper and effective management and

controls of licensed warehouse for liquors and
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cigarettes, it is recommended that RMCD take action on

the following matters:
i.
RMCD Headquarters must ensure all private

licensed warehouse have adequate bank guarantee
to safeguard Governments interests by enforcing
Customs Standing Order No. 53 on or before 30
June 2016 and monitor its implementation on a
monthly basis;
ii. State Customs Directors must claim customs duties

on or before 30 June 2016 from Private Licensed
Warehouse with dutiable goods stored more than 2
years without approval of extension of time;
iii. State Customs Directors must ensure all Customs
procedures are complied, particularly additional
requirements on transfer of dutiable goods from
Kedah and Perlis to importers in Thailand and
stipulated procedures on ships supplies from
Selangor, Penang and Johor to avoid leakage of
Government revenue;
iv. RMCD Headquarters must review Customs
Standing Order No. 53 before the end of 2016 so
that only licensee suspected for non-compliance
and violations of license are required to submit
annual stock statements verified by Certified
Auditors; and
v. all State Customs Director must carried out the
annual 100% physical examination.
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MINISTRY OF RURAL AND REGIONAL DEVELOPMENT

5. Rural Water Supply Programme in Sabah
a. Since the year 1974, the Government of Malaysia has
implemented the Rural Water Supply Programme
[Bekalan Air Luar Bandar Program (BALB)] under the
Accelerated Rural Water Supply Schemes in the
Second Malaysia Plan (Rancangan Malaysia ke-2
[RMKe-2]). The main objective of BALB program is to
provide clean and treated water to rural communities
throughout the country to improve their health and
quality of life. Thus, stimulating the economy, industry,
agriculture
and
tourism
development.
The
implementation of BALB Program in Sabah has started
since 2010. This programme was initiated under the
National Key Result Areas (NKRA) - Improving Rural
Development of the Government Transformation
Programme (GTP) 1.0 (2010 to 2012) and GTP 2.0
(2013 to 2015). To date, there were 184 on
going/completed projects with an allocation of
RM2.001 billion.
b. The audit performed at the Ministry Of Rural And
Regional Development (Ministry), Sabah State Water
Department [Jabatan Air Negeri Sabah (JANS)] and 12
BALB projects in 11 districts namely Keningau, Kota
Kinabalu, Semporna, Kudat, Kota Belud, Tuaran,
Sipitang, Kinabatangan, Kuala Penyu, Bongawan and
Membakut. The audit revealed that in general, the
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5/13/16 3:03 PM
performance of BALB programme in Sabah is good

because the more than 90% of the targeted
communities have access to clean and treated water.
The expenditure performance for the program is also
good where 96.7% of the allocation was utilised. In
addition, a total of 169 (98.8%) projects under the GTP
1.0 were completed within the specified period.
However, there were some weaknesses identified as
follows:
i.
the preliminary report for Water Supply Project of

Mukim Tulid/Lanas/Sook, Sabah was not complete
and comprehensive as the proposed pipeline
alignment excluded a village in Mukim Sook;
ii. Reticulation System for BALB Project Year

2011/2012 Sabah - Zone 6a(3), Kota Belud were not
completed within the stipulated period. Liquidated
and ascertained damages (LAD) for the period 16th
July 2014 to 15th October 2015 (the date of the
Certificate of Practical Completion [CPC] issued)
totalled RM584,005 was not collected from the
contractor;
iii. no coordination between units in the Ministry led to
the delays of BALB Project In Kinabatangan, Sabah
Year 2012 since the installation of the pipes was
temporarily suspended due to upgrading of road
under the Rural Road Programme (Jalan Luar
Bandar [JALB]);
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iv. Reticulation System for BALB Project in Pulau Gaya

inclusive of service tank reservoir (capacity of 5
million litres) that target 2,441 houses was
completed but yet to operate optimally because the
decision made by Jawatankuasa Pembangunan
Bersepadu Pulau Gaya, Kota Kinabalus meeting
No. 02/2012 indicated illegal settlements on Pulau
Gaya which resulted termination of pipes installation
and connection to such villages; and
v. even though 5 BALB Project - Reticulation System
were completed and operational, the performance of
meter connection is low at only 38.4% (3,032 out of
7,901 targeted houses).
c. To ensure that all weaknesses highlighted are efficiently
and effectively mitigated, all parties involved are
recommended to take the following actions:
i.
The Ministry shall assess the project outcome of

BALB Programme in Sabah to determine whether
facilities are optimally used and the Government
reaps best value for money;
ii. The Ministry/JANS must take proactive and punitive

actions against contractors and consultants as
stipulated in the contract; and
iii. The Ministry with all related agencies shall expand
the scope of BALB Programme to hard-core poor in
the rural community.
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MINISTRY OF RURAL AND REGIONAL DEVELOPMENT/

PUBLIC WORKS DEPARTMENT
6. Construction Of The Subang UniKL Malaysian
Institute Of Aviation Technology (MIAT) Campus,
Selangor
a. The construction of Subang UniKL Malaysian Institute
Of Aviation Technology (MIAT) Campus, Selangor is a
Federal Government project approved under the Tenth
Malaysia Plan [Rancangan Malaysia Ke-10 (RMKe-10)].
This campus is an addition to the existing campus in
Jenderam Hulu, Dengkil, Selangor. The objective of this
project is to provide technical training in the field of
aviation and aerospace as well as providing practical
and realistic exposure of live aircraft to students in order
to meet the development needs of the countrys aviation
industry. The project was constructed on a 21.33 acres
land located in Lot PT40446, Persiaran A, Off Jalan
Lapangan Terbang Subang, Subang, Selangor. The
Public Works Department (PWD) was appointed as the
implementing agency on behalf of the client, which is
Council of Trust for the People [Majlis Amanah Rakyat
(MARA)], Ministry of Rural and Regional Development
(MRRD). The Ministry of Finance Malaysia agreed to
offer the contract to Nadi Cergas Sdn. Bhd. through
direct negotiations. The contract valued RM130 million
must be completed within 24 months from the date of
site possession which was on 18 February 2013.
b. The audit performed between August to November
2015 at the General Building Works Branch 1, PWD
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5/13/16 3:03 PM
and the Contract Quantity Survey Branch, PWD as well

as the client department, namely Construction and
Maintenance Division, MARA Headquarters, Kuala
Lumpur. The audit revealed that in general, the
management of the construction of Subang UniKL MIAT
Campus was good. Contract was signed within the
stipulated time; interim and advance payments were in
order; and the Performance Bond and insurance
policies complied with the terms and conditions of the
contract. In addition, PWD established a good
monitoring mechanism to monitor work done by the
contractor. The project has incorporated the result of
value management laboratory in accordance with the
Governments aspiration. However, there were several
weaknesses as follows:
i.
the contractor failed to complete the project within

the stipulated extension of time;
ii. the issue of construction site for taxiway was yet to

be resolved due to the relocation of construction site
might resulted in non-achievement of project
objective as planned;
iii. delay in finalising price negotiations; and
iv. unsuitable designs; unsatisfactory quality of
construction works; and imperfect electrical works.
c. In order to rectify the weaknesses highlighted, it is
recommended that:
i.
PWD shall ensure that the contractor complies with

the requirements of the relevant authorities and
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5/13/16 3:03 PM
obtains the
Completion;
Certificate
of
Compliance
and
ii. MARA shall persistently discuss with Malaysia

Airlines Berhad (MAB) and resolve the issue of land
acquisition for taxiway with relevant authorities in
procuring the taxiway facilities and achieving the
objectives; and
iii. PWD shall ensure the contractor rectifies all
construction defects and the building functions
perfectly.
MINISTRY OF WORKS MALAYSIA / PUBLIC WORKS
DEPARTMENT
7. Construction of a New Way Project From Seremban
Hi-way PD-FR5 In Pasir Panjang And Upgrading FR5
(Section 1)
a. Construction of a New Way Project From Seremban Hiway PD-FR5 In Pasir Panjang And Upgrading FR5
(Section 1) is a project under the Eighth Malaysia Plan
(8MP), with a cost ceiling of RM160 million. The project
aim to overcome the traffic overcrowding in Teluk
Kemang, Port Dickson, especially during festive
seasons and school holidays as the Port Dickson is a
major tourist centre. In addition, local residents using
the same path to Lukut and Linggi due to non-existence
of alternative road. The Ministry of Works Malaysia
[Kementerian Kerja Raya (KKR)] and the Public Works
Department (PWD) was appointed as the implementing
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agencies for this project. The scope of work for this

project was to build a road Arterial A, and mainline from
CH7700 to CH8579. The work also included the
upgrading work for the route of FR5 Pasir Panjang to
Linggi. The whole length of the project is a 22.6 km.
Arterial Bs road building project was in a separate
contract as Section 2. The project started in February
2005 and should be completed in August 2007 (2 years
6 months). Kartajaya-Fort Jeli East-AMR JV Sdn. Bhd.
(HBA-JV) was appointed as contractor for this project.
The work progression of the appointed contractor was
not satisfactory and due to that it has been terminated
through Notice of Termination of Employment Contract
on 23rd December 2009 with 64.6% progressed.
However, the similar contractor was reappointed to
pursue the remaining works nevertheless the
performance was still not satisfactory with an increase
of only 3.6% progressed. Yet, the contractor was
terminated again on 9th May 2013. As a final point, the
Government
has
appointed
Seroja
Anggerik
th
Development Sdn. Bhd. on 27 March 2014 as the new
contractor and the project completed on 28th December
2015.
b. The audit performed between June and September
2015 revealed that the overall project management was
unsatisfactory, as the project took 10 years to be
completed. Moreover, the construction of the bridge
was not in accordance with the construction drawings.
Conversely, the contract was signed within the
stipulated time, the advance payment was in order and
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5/13/16 3:03 PM
Performance Bond has complied with the terms of the

contract. However, several weaknesses identified are
as follows:
i.
project was completed over than 10 years as

compared to the initial tenure which was within 2
years and 6 months;
ii. reappointment of the similar contractor for the

second contract was unfair and against with the
decision made by the JKR Hospital Project
Committee;
iii. a delay in preparing Final Certificate of Contract
Terminated Hiring Contractors up to 1 year and 10
months (as to date of exit conference on 16th
February 2016) for the first and second contract;
and
iv. construction of the bridge was not in accordance
with the construction drawings and issues regarding
utilities relocation were inefficiently managed.
c. To overcome the shortcomings raised, it is
recommended to take action on the following matters:
i.
PWD should build road divider and a traffic light at

the intersection of Jalan Kg. Sekawang river,
CH17050 to ensure the safety of road users;
ii. PWD should monitor closely on the quality of work

and the completion of projects undertaken by the
contractor so that no loss incur by the Government
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5/13/16 3:03 PM
in the event of default by the contractor or the

project is terminated. Evaluation of contractor
works also need to be made promptly so that the
preparation of the Final Certificate of Contract can
be made immediately and the Government claim
can be made in advance; and
iii. PWD should ensure that the contractor patch-up all
defects before handing over the way to KKR for
road users safety as well as providing the
International Roughness Index test ( IRI ) reports.
MINISTRY OF WORKS / MINISTRY OF WOMEN, FAMILY

AND COMMUNITY
8.
Project Management
Welfare Department
Reconstruction
Quarters
a. On 21st December 2012, the Economic Planning Unit

(EPU) of the Prime Minister's Department (PMD) has
approved the construction of quarters in 9 institutions of
Social Welfare Department (SWD), The Ministry Of
Women, Family And Community Development
(MWFCD) at a cost of RM100 million through open
tenders method. This approval was stated in the Third
Rolling Plan under the 10th Malaysia Plan (10th MP).
The construction of 132 units new quarters and the
demolition and rebuilding of 181 units existing quarters
were took placed to provide quarters for SWD staffs. On
22nd May 2013, MWFCD has submitted an application
for the additional scope of work of this construction
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project. The expansion of the scope resulted an

additional of 33 units quarters which makes the total
number of 346 units quarters and elevator services for
17 blocks of quarters to be built. This application was
approved by the EPU on 4th June 2013. However, the
approval was subject to allocation of total cost not
exceeding RM100 million. As the approval given for
changes of scope within allocation, the KPWKM
decided to rebuild quarters in SWD Rumah Seri
Kenangan (RSK) Bedong, Kedah; Rumah Kanak-Kanak
(RKK) Taman Bakti Kepala Batas, Pulau Pinang; RSK
Tanjung Rambutan, Perak and RKK Tengku Ampuan
Fatimah, Kuantan, Pahang. Meanwhile in 2015, the
EPU agreed that the MWFCD shall only continue the
construction for Taman Sinar Harapan (TSH) Tampoi,
Johor Bahru.
b. The audit performed between June to September 2015
on the quarters construction in RSK Bedong and RSK
Tanjung Rambutan. The audit revealed that the
construction management was satisfactory. The
achievements of the actual work progress at RSK
Bedong and RSK Tanjung Rambutan site were at 97%
on 18th August 2015 and 55% on 7th September 2015
respectively.
Both projects were in line with the
schedule as approved by the Public Works Department
(PWD). On the procurement aspect, the management
has complied with stipulated regulations and necessary
actions have been taken by the contractor on every
issue raised during the construction work to implement
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the project. However, there are weaknesses identified

as follows:
a. Reconstruction Project In RSK Bedong Quarters
i.
inaccurate planning between the preparation of Bill

of Quantities (BQ) and tender drawings resulted
differences in quantity of piles. Due to that, the new
drawings and a Supplementary Agreement needed
to be prepared;
ii. Independent Checker cannot be appointed until the

Supplementary Agreement was signed; and
iii. according to the Certificate Of Delay And Extention
Of Time (EOT 2), due to the delay on the progress
of work by a third party to initiate and complete the
physical work of planting underground electric
cables has led to the incomplete works of road
construction, external works and activities Testing
and Commissioning for electrical system and
mechanical connection as compared to the original
plan.
b. Reconstruction Project
Rambutan Quarters
i.
In
RSK
Tanjung
26 days delayed in submitting drawings to

contractors as well as the determination of platform
level was decided over 29 days;
ii. improper planning causes:

Changes in decision on piling type from spun pile
to Reinforce Concrete (RC) pile as well as piling
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method from Hydraulic Jack In Pile to Hydraulic

Hammer. However, the piling method change
back to the preliminary plan which was Hydraulic
Jack In Pile resulted to reappointment of the
contractor;
increased in quantity of item work below lowest

floor finish consisting stump pile caps, column
and RC Wall resulted a longer period of time for
contractor to complete the work; and
changes from precast to the in situ during the

preparation of BQ and tender drawing, in which
such items namely column, beam, floor and
walls were precast. However, the construction
drawings received on 26th May 2014 were using
the in situ resulted the difference of items such
as beams in situ floor, pillars in situ and in situ
wall work sheer. Furthermore, all precast floor
slab either half and hollow core slab has been
changed to in situ slab of precast stairs and
amendments to the in situ.
iii. late of 32 days in receiving the exchange of

basic design drawing has caused the contractor
to delayed the iron reinforcement shipments.
recur in the implementation of upcoming projects, it is
recommended that PWD to take action on the following
matters:
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i.
detailed planning during the design and construction

stage should be carried out to avoid major changes
and amendments during the construction progress
and ensuring contract administration are fully
comply; and
ii. vehicles for the preliminaries shall be placed at

project site and should be given priority from time to
time.
MINISTRY OF TRANSPORT
9. The ERL Extension Project From KLIA to klia2
a. Express Rail Link (ERL) is a high-speed rail link
commuter service that connects Kuala Lumpur Sentral
(KL Sentral) to Kuala Lumpur International Airport
(KLIA). The ERL distance is 57km, stops at 3
intermediate stations i.e. Bandar Tasik Selatan,
Putrajaya and Salak Tinggi with a total construction cost
of RM2.4 billion. It provides 2 types of services i.e. ERL
Express and ERL Transit. KLIA ERL Extension Project
would serve as the main public transport connecting
KLIA main terminal to klia2 with a distance of 2.16km.
This project was direct negotiated using design and built
method by Express Rail Link Sdn. Bhd. (ERLSB). The
project cost of RM100 millions is funded by the Ministry
of Transport. Rail Operations Control is subjected to the
Railways Act 1991 and later repealed by the Land
Public Transport Act 2010. Through the concession
agreement dated 25th August 1997, ERLSB was given
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the rights to operate the ERL from KL Sentral to KLIA.

Superintendent Officer (SO) of the project is the
Secretary-General (DG) of the Ministry of Transport.
This project started on 15th July 2011 was scheduled to
complete by 31st October 2012. However, it was only
completed on 28th September 2013. Consequently, on
2nd May 2014, ERLSB started its operation after
obtaining approval to extend its services from KLIA to
klia2.
b. The audit performed from January to April 2015 at the
Ministry of Transport Malaysia, Economic Planning Unit
(EPU), Public Private Partnership Unit (UKAS), ERLSB
and site visits at ERL klia2 in Sepang. The Audit
revealed that ERL extension project was completed and
started its operation on 2nd May 2014. This project
achieved the rail link connection between KLIA and
klia2 alongside with the opening of klia2 terminal. This
connection increased the number of ERLs passengers
by 43.2% from 6.44 million in 2013 to 9.23 million in
2014. However, there are some weaknesses caused
the Government did not obtained best value for money
for the expenses incurred. Some of the weaknesses
identified are as follows:
i.
Price negotiations were not conducted prior to the

submission of project cost estimates for the
approval of the Economic Council (EC);
ii. Supplemental Concession Agreement was not

finalized to date despite the ERL services from KLIA
to klia2 commenced operation since 2nd May 2014;
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iii. Compensation claimed by ERLSB amounted to

RM2.9 billion yet to be finalized. The computation
formula of compensation claimed does not benefit
and protect the interest of the Government; and
iv. The project cost of RM129 million presented by
ERLSB in Value Management (VM) lab exceeded
the cost approved by the EC of RM100 million.
Thus, the objectives of VM for cost saving are not
achieved.
recur, the Ministry is recommended to take action on
i.
price negotiations must be conducted to ensure that

the Government reaps best value for money;
ii. Supplemental Concession Agreement is finalized
promptly to protect the interest of both parties. Also,
computation formula of compensation must benefit
both parties and not detrimental to the Government;
iii. cost component of the project submitted to the
Value
Management
Lab
must
be more
comprehensive, detailed and approved by the EC;
and
iv. issue of service charges are settled and approved to
protect the interest of all parties.
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MINISTRY OF ENERGY, GREEN TECHNOLOGY AND

WATER / MINISTRY OF FEDERAL TERRITORIES
Sewerage Services Department
10. Sewerage Projects under the River Cleaning
Components for River Of Life Program
a. In 25th September 2010, the Economic Transformation
Program (ETP) was launched for a focus and
comprehensive economic plan and as a progressive
intitiative to transform Malaysia into a high income
nation by 2020. Thus, the Achievement of the ETP is
targeted through the implementation of 12 National Key
Economic Area (NKEA) and The River of Life (ROL) is
one of the 9 Entry Point Projects (EPP) under the NKEA
Greater Kuala Lumpur / Klang Valley (GKL / KV). The
ROL Program has been implemented since 2011 aims
to transform identified areas along Klang River to
become commercial and heritage centre for a high
economic value to the country. The ROL program also
covers areas under the jurisdiction of Kuala Lumpur City
Hall [Dewan Bandaraya Kuala Lumpur (DBKL)],
Ampang Jaya Municipal Council [Majlis Perbandaran
Ampang Jaya (MPAJ)] and Selayang Municipal Council
[Majlis Perbandaran Selayang (MPS)]. Consequently,
the ROL program involves 3 project phases with an
allocation of RM4 billion.
b. The audit performed between August to 15th November
2015 in the head office of Sewerage Services
Department [Jabatan Perkhidmatan Pembetungan
(JPP)]. The audit revealed that, in general, the
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management of sewerage projects is satisfactory from

the technical aspects of design, plan preparation,
drawing and specification, Hazard and Operability
(HAZOP) studies, preparation of project team and
project management accordance with stipulated criteria.
However, there were some weaknesses identified
affected the efficiency and effectiveness of projects, as
follows:
i.
delay in transfer of land titles to the State Authority

(Pihak Berkuasa Negeri) and, to reserve the land for
sewerage purposes for the upgraded Sewerage
Treatment Plants (STP);
ii. Time-at-Large issues regarding the delays of

contract certification by JPP;
iii. unclear mechanism in verifying the effluent quality
stipulated in the contract which caused nonguarantee towards the compliance after testing and
commissioning stage;
iv. non-compliance of effluent quality standards for
upgraded STPs despite of completeness of physical
and certified completed works; and
v. failure to comply with the stipulated effluent quality
for Temporary Treatment Facilities during upgrading
works period.
c. To ensure that all weaknesses highlighted all parties
involved are recommended to take the following
actions:
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i.
JPP must ensure effluent quality for all STPs in the

ROL catchment areas do not jeopardize the
achievement of ROL program objectives regarding
water quality;
ii. JPP must identify sewerage reserve land that have

yet to be surrendered to Pesuruhjaya Tanah
Persekutuan (PTP) and the process to change the
land title to be expedited;
iii. the compliance of effluent terms should be included
as one of the contract conditions in the testing and
commissioning stage; and
iv. JPP must supervise and take necessary action
regarding to maintenance works obliged by the
Contractor during Defect Liability Period in ensuring
all parameters of the STPs design are verified.
MINISTRY OF HEALTH MALAYSIA

11. Management Of Orthopedic Treatment Activities
a. Orthopedic is pertaining to the musculoskeletal system
that includes surgery of the spine, joints, ligaments,
tendons and nerves. Orthopedic treatment activities
among others include surgical treatments such as
broken bones, amputation, diabetic foot, spinal cord
injury and joint exchange. Orthopedic services are
available in all 136 hospitals of Ministry of Health
(MOH), where as 22 hospitals provide orthopedic
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services with subspecialty such as Paediatric; Spine;

Joint Arthroplasty; Oncology; Advanced Trauma; Upper
Limb and Hand; Foot And Ankle and Sport Medicine.
The objectives of the orthopedic treatment activities are
to offer comprehensive, effective, modern and costeffective services as well as improving service quality
standards to its patients. The Orthopedic Department of
the MOHs hospitals supplies equipment for orthopedic
treatment activities through three procurement methods,
namely Approved Purchase Product List (APPL),
tenders and direct purchase. For APPLs procurement,
the Government has appointed Pharmaniaga Logistics
Sdn. Bhd. (PLSB) as concessionaire to distribute
supplies of implant equipment and prosthesis in
hospitals for the period from 1 December 2009 to 30
November 2019. Tabung Bantuan Perubatan (TBP)
offers financial assistance for patients who cannot
afford to pay but do not meet the criteria for getting a
free supply of implants and prostheses. For the year
2013 to 2015, the Orthopedic Department at the
hospital received allocation totalled RM923.68 million
and spent RM962.82 million (104.2%).
b. The audit performed at MOH and 5 selected hospitals
[Hospital Tengku Ampuan Afzan (HTAA), Kuantan;
Hospital Tengku Ampuan Rahimah (HTAR), Klang;
Hospital Sungai Buloh (HSB); Hospital Raja Permaisuri
Bainun (HRPB), Ipoh and Hospital Sultanah Bahiyah
(HSBYH), Alor Setar] in May and August 2015 revealed
that the expenditure performance of the Orthopedic
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Department of 5 selected hospitals were good because

the allocation received were fully utilized. However, the
overall management of orthopedic treatment activities
audited was less satisfactory. Among other weaknesses
identified are as follows:
i.
shortages of orthopedic specialists and nurses

between 7% to 67% at hospitals audited because
vacancies were not filled up and insufficient medical
facilities such as medical equipment;
ii. the deposit payment of External Fixator (EF)

components which need to be paid before patients
were discharged from the hospital could not be
verified;
iii. Quantity of 876 EF components
RM241,116 were not verified;
valued
at
iv. Equipment
purchasing
application
exceeds
RM10,000 must be verified by Implants and
Prostheses Committee. However, 91 equipment
purchasing applications valued RM1.69 million were
approved without the committees verification; and
v. 2,010 unused implants stock valued RM328,440 at
HTAA and HSBY still kept at the store unit of
Orthopedic Operation Theater.
c. To ensure that all weaknesses highlighted do not recur,
MOH and 5 selected hospitals are recommended to
take action on the following matters:
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i.
fill all vacancies for orthopedic specialists will lead

towards an improvements in the quality of services;
thus attracting new medical officers to enroll
orthopedic sub-specialty programme;
ii. improve coordination and monitoring aspects with

all stakeholders to obtain the latest APPL implant
products and relevant with current developments
which benefits all parties; and
iii. review the effectiveness of Implants And Prostheses
Committees verification procedures relating to
applications for equipment exceeding RM10,000 for
a prompt and orderly approval.
12. Management of Private Security Services Company
In Hospital
a. Ministry of Health (Ministry) appointed private security
companies [Syarikat Kawalan Keselamatan Swasta
(SKKS)] to enhance the security of property, patients,
hospital personnel and civilians within hospitals. SKKS
was procured through open tenders and quotations.
According to the contracts, 3 types of services provided
are unarmed guard, armed guard and cash in transit
(CIT). For the year 2013 to 2015, the Ministry awarded
contracts through open tender totalling RM271.02
million comprised of 45 SKKS at 69 hospitals valued
between RM0.50 million to RM17.05 million. In addition,
contracts totalling RM13.75 million were awarded
through quotation to 53 SKKS at 66 hospitals valued
between RM0.27 million to RM0.49 million. The contract
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period was between one to two years. As at 2015, 85

SKKS were appointed at 135 hospitals with contract
value totalled RM284.77 million.
b. The audit performed between June and September
2015 at Procurement and Privatization Division, Ministry
of Health and 8 selected hospitals [Hospital Melaka
(HM); Hospital Alor Gajah (HAG); Hospital Tuanku
Jaafar (HTJ); Hospital Tuanku Ampuan Najihah
(HTAN); Hospital Putrajaya (HPj); Hospital Serdang
(HSdg); Sarawak General Hospital (SGH) / Sarawak
General Hospital Heart Center (PJHUS) and Rajah
Charles Brooke Memorial Hospital (HRCBM)]. SKKS
contract value for these 8 hospitals in 5 states totalled
RM81.74 million. The audit revealed that the
management of SKKS services was satisfactory in
terms of actions taken against contractors for noncompliance with contract terms. However, the
management of SKKS services was less satisfactory
particularly in respect of management of contract and
compliance; payments; deductions; and penalties as
follows:
i.
discrepancies between contract terms and the

Letter of Acceptance [Surat Setuju Terima (SST)];
ii. non-compliance of pre-conditions for appointments

of security guards in respect of permitted age;
annual medical screening; pass security vetting;
pass urine test; attend Certified Security Guard
(CSG) course; adequate tools and equipment; and
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appointment of a third party CIT provider without

approval;
iii. improper payments and deductions pertaining to
service quality and penalties at 5 hospitals namely
HAG, HTJ, HSdg, HUS and PJHUS resulted in
overpayments totalled RM235,895; and
iv. late payments between 10 to 207 days for 54 cases
amounting to RM8.08 million in 3 hospitals namely
HM, HAG and HPj.
c. To improve public service delivery system, the Ministry
must ensure proper and efficient management of SKKS
in hospital to achieve the set objectives. Thus, the
Ministry is recommended to take the following actions:
i.
enhance coordination between the Ministry, State

Health Departments [Jabatan Kesihatan Negeri
(JKN)] and hospitals to prevent discrepancy
between contract terms and SST and disputes
between parties. In addition, standard templates
must be applied for all contracts;
ii. organise road shows on precise method of

deduction for non-performed services. The Ministry
must ensure there are no overpayments at all
hospitals excluding samples audited. The Ministry
must investigate thoroughly and surcharge officer(s)
causing overpayments and losses to the
Government;
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iii. ensure
compliance
of
pre-conditions
for
appointments of security guards in respect of
permitted age, annual medical screening, pass
security vetting, pass urine test and attend Certified
Security Guard (CSG) course. This is to confirm that
the security guards employed have no past criminal
records, physically fit and mentally healthy; and
iv. review contract compliance by all SKKS and take
stern action against them for non-compliance.
MINISTRY OF HEALTH MALAYSIA / MINISTRY OF

WORKS MALAYSIA
13. Construction Project of New Tampin Hospital,
Negeri Sembilan
a. The construction of new Tampin Hospital project in
2009 under the Ninth Malaysia Plan [Rancangan
Malaysia Ke-9 (RMKe-9)] to replace the existing
hospital operated since 1920. The contractor Fajarbaru
Builders Sdn. Bhd. (Fajarbaru) was appointed by Public
Works Department (PWD) on 5th February 2009 through
restricted tender using design and build method
comprises of Design, Construction, Completion,
Equipping, Commissioning and Maintenance of Tampin
Hospital. Through the design and build method,
consultants and contractors were fully responsible on
design and project supervision. This project valued at
RM138.39 million consist of hospitals main building,
nurses hostel, employees quarters and parking areas.
Ministry of Health Malaysia (MOH) is the project owner,
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PWD acted as implementing agency and Director of

Health Work Branch, PWD was the Project Director.
The contract between Government of Malaysia with
Fajarbaru was signed on 10th Jun 2009 for a period of
36 month.
b. The audit performed at Health Work Branch, PWD;
Contract and Quantity Surveying Branch, PWD;
Planning Division, MOH; Development Division, MOH;
Engineering Services Division, MOH; Medical
Resources Unit, MOH; Tampin Hospital (new and
existing); Kluang Hospital (existing) and Permai
Hospital (existing) from April to Jun 2015. The audit
revealed that new Tampin Hospital provides better and
pleasant health services to the people of Tampin district
and surrounding area. It also provides facilities to
employees such as nurses hostel and quarters.
However, the implementation of this project was less
satisfactory because the project has yet to achieve its
objective. In addition, there was less efficiency in project
implementation and improper contract administration.
Among other weaknesses identified are as follows:
i.
contractors performance was less satisfactory

because the project delayed for 150 days after the
extension of time (EOT) of 344 days (31.4% from
the actual date). Consequently, Liquidated and
Ascertained Damages (LAD) amounted to RM3.84
million was imposed to the contractor for the delay;
ii. contractors failure in technical evaluation had

affected timely completion of the project;
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iii. one out of 2 Operation Theatre could not be used

despite the project was handed over to MOH on 3rd
October 2013 (2 years and 3 month);
iv. contract administration was less efficient because of
late approval for the EOT 1 and EOT 2 within 28
days and 207 days; late issuing of Certificate of Non
Completion (CNC) for 173 days from the actual
completion date as per contract; and late in handed
over to MOH for 3 month. Although the project did
not function fully as stipulated in the contract,
Certificate of Practical Completion (CPC) was
issued. Furthermore, non-issuance of Certificate of
Partial Occupation (CPO) to non-functioning and
uncompleted of two Operation Theatre resulted for
Governments losses due to non-charged of LAD to
the contractor;
v. less satisfactory on the quality of construction,
several cases of inappropriate design due to the
lack of supervision or non-performing of consultants
responsibility and it was observed that PWD as
implementing agencies was unable to take into
consideration MOHs needs as per Governments
Requirement. Among poor qualities were wall
construction works cracked up to 1,182 point around
hospitals complex. Furthermore, unsuitable water
tanks design resulted the existence of Total
Coliform Bacteria in water sample from Block A &
Bs water tank. Thus, it violated the allowable
parameter standards of treated water; and
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vi. irregular
payment
of
Facility
Engineering
Maintenance Services (FEMS) and Biomedical
Engineering Maintenance Services (BEMS) for new
Tampin Hospital because the services were not
provided by Medivest Sdn. Bhd. and still under the
contractors responsibility.
c. To ensure proper and efficient management of the
construction project through design and build method,
the Government reaps best value for money, and
strengthen management of future projects, it is
recommended that Ministries and PWD to take actions
on the following matters:
i.
Ministry of Finance should consider to review the

Treasury Circular pertaining to Tender Evaluation
Guidelines. It is suggested that tenderers for
Turnkey or Design and Build project who failed
evaluation in Second or Third Phase by Technical
Evaluation Committee must not be considered for
Agency Board Procurement which stipulated in the
Procurement Guidelines;
ii. Ministry Of Works Malaysia [Kementerian Kerja

Raya (KKR)] need to enhance their coordination
with agencys consumer/client. This to ensure that
contractors work/obligations could be implemented
according to the Detailed Work Schedule with
Critical Flow Method;
iii. KKR needs to report to relevant authorities and
professional bodies regarding non-compliance
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works
to
the
contracts
specifications/not
suitable/low quality which could affected delivery of
services. Consequently, Forensic Audit need to be
implemented by experts regarding serious cracks on
quality of its wall constructions affected the quality
of construction of new Tampin Hospital;
iv. KKR needs to setting up an investigation committee
to take appropriate actions who negligently conduct
contract management resulting for mammoth losses
for the Government. Furthermore, actions towards
officers for improper payment of non-provided
services by Medivest Sdn. Bhd; and
v. KKM needs to optimise the use of equipment and
hospital facilities including existing equipment and
facilities at existing hospital to avoid the waste and
create a conducive working environment.
MINISTRY OF URBAN WELLBEING, HOUSING AND

LOCAL GOVERNMENT
National Solid Waste Management Department
14. Solid Waste Disposal Sites Management
a. National Solid Waste Management Department
[Jabatan Pengurusan Sisa Pepejal Negara (JPSPN)]
was established on 1st July 2007 under Solid Waste
Management and Public Cleansing Act 2007 (Act 672).
Act 672 had been approved by Parliament on 17th July
2007, gazetted on 30th August 2007 and enforced on 1st
September 2011 to integrate Solid Waste Management
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system at national level. The Act gives executive power

to Malaysian Federal Government to implement Solid
Waste Management and Public Cleansing. JPSPNs
role in formulating policy; strategy and planning of
integrated solid waste management; drafting regulations
as stipulated in Act 672; and setting the standards,
specifications and work procedures. JPSPN is also
responsible in carrying out privatization of solid waste
management; approval and licensing services; and
management of solid waste and public cleaning
facilities. An allocation amounted RM1.416 billion was
approved under 10th Malaysia Plan to implement Solid
Waste Management Program. A total of RM250.61
million was allocated for incinerator project,
reacquisition of land, feasibility study and others facility
expenses on solid waste management. A total of
RM1.165 billion (82.30%) is allocated for 47 solid waste
disposal sites project [Tapak Pelupusan Sisa Pepejal
(TPS)]. The scope of TPS programme consists of
building new landfill, upgrading sanitary landfill and safe
closure landfill. The procurement of TPS programme
was implemented through direct negotiations (Design
and Build), open tenders and selective tenders.
b. The audit performed between October to December
2015 at 12 (25.5%) out of 47 TPS project revealed that
overall TPS management is less satisfactory. From 47
TPS projects, a total of 33 (70.2%) projects were
completed, 9 projects were under construction, 4
projects under tender evaluation process and 1 project
in planning stage. From a total of RM1.416 billion
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(72.38%) provisions allocated for solid waste

management, RM1.024 billion were spent. Audit visit to
12 of 47 projects revealed several weaknesses as
follows:
i.
3 projects approved for the Planning Permission

(PP) and Development Plan (DP) and 6 projects
exempted from PP and DP. Two projects were in
the process to obtain exemption of PP and DP from
the local authorities and TPS Klias Jalan Lama
project in Beaufort, Sabah was under process of
bidding;
ii. delay of 1 to 5 months in signing contracts for 5
projects valued between RM10.40 million to
RM49.90 million might jeopardise Governments
interest; and
iii. a total of RM25.26 million penalties for Liquidated
Ascertain Damage (LAD) were returned to 7
contractors after extension of time approved by
JPSPN inclusive the period of late penalty.
c. To ensure the management of TPS is carried out
orderly and effectively, it is recommended that JPSPN
consider the following actions:
i.
JPSPN must comply with circulars issued by

Government and Director General of Public Work
Department;
ii. JPSPN must prepared rules and Standard

Operating Procedures at every stage of project
implementation especially in issuance of Certificate
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Partial Of Occupation (CPO), the appointment of

operator and handing over completed projects to
local authorities in determining the ownership of the
project promptly; and
iii. JPSPN must prepared comprehensive plan before
implementation of TPS projects in terms of land
ownership especially involving individuals land
ownership.
National Housing Department

15. Construction of the People's Housing Programme,
Lembah Subang 2
a. People's Housing Programme [Program Perumahan
Rakyat (PPR)] is a Government program for the
resettlement of squatters and provides dwellings for
low-income earners. National Housing Department
(NHD) / Ministry of Urban Wellbeing, Housing And Local
Government [Kementerian Kesejahteraan Bandar,
Perumahan dan Kerajaan Tempatan (KPKT)] is the
main agency implementing projects for PPR throughout
Malaysia. PPR Lembah Subang 2 was built on part of
Lot 14191, Mukim of Damansara, Selangor covering an
area of 17.65 acres that had been approved by the
State Executive Council (EXCO) on 19th December
2000. It is intended to provide housing for the
resettlement of squatters and the other low-income
earners, especially in Petaling District. PPR Lembah
Subang 2 is expected to help 2,500 people in Lembah
Subang to own a home. The tender for PPR Lembah
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Subang 2 construction has been opened on 4th March

2002 through open tender for design and build method.
On 15th January 2003, the Letter of Acceptance worth
RM69.52 million were issued to Am Rich Constructions
& Development Sdn. Bhd. (ARCD). PPR Lembah
Subang 2 project has completed on 29th April 2009 after
approval of 8 extension of time (EOT) which equivalent
to 1,550 days (52 months). Whereas, a Defects Liability
Period (DLP) for 24 months was given starting from 29th
April 2009 until 29th April 2011.
b. The audit performed between November 2014 to
February 2015 in KPKT, NHD and PPR Lembah
Subang 2. The audit revealed that the project
management of PPR Lembah Subang 2 which was
executed by NHD was not satisfactory. Audit found the
construction of PPR Lembah Subang 2 was poorly
managed, and delayed for 4 years and 8 months from
date of completion. Audit findings are as follows:
i.
weaknesses in construction planning, site selection

and management of procurement/selection of
contractors;
ii. weakness in monitoring the construction;

iii. coordination problems between Petaling
Municipal Council (MBPJ) and NHD; and
Jaya
iv. weakness in selecting and distributing the units to

eligible buyers.
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c. To ensure that all weaknesses highlighted do not recur,

it is recommended that Ministry to take action on the
following matters:
i.
better planning for the upcoming projects to ensure

its completion and improve the quality of
construction, safety interests, comfort and
satisfaction of users / residents in the future;
ii. ensure the application process and approval of EOT

to contractors are fair and justified before or on the
date of completion in accordance with contract
requirements / circulars / directives in force; and
iii. finalizing the list of buyers a few months before
completion and to issue the offer letters as soon as
the Certificate of Completion and Compliance
(CCC) for PPR project is received.
MINISTRY OF DEFENCE MALAYSIA
16. The Management of Jiwa Murni Project in Sarawak
a. Jiwa Murni Project (JMP) in Sarawak was implemented
by the Malaysian Armed Forces [Angkatan Tentera
Malaysia (ATM)] through the Royal Armed Engineers
Regiment (RAJD) in collaboration with companies
appointed by the Government. RAJD is responsible for
the construction works on site while building materials,
machineries and labourers were supplied by
contractors. RAJDs involvement in JMP Sarawak
began in 2009 for constructions and upgrading of 6
roads projects, a slope protection work project, 3
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bridges projects and a longhouses project in rural areas

in Sarawak which were left behind from the countrys
development. JMP implementation in Sarawak is
collaboration between Prime Ministers Department
[Jabatan Perdana Menteri (JPM)], Sarawak State
Government, contractors and local communities.
Implementation Coordination Unit (ICU) of JPM
provides guidelines and fund for the project. The
Sarawak State Government through its representatives
and District Offices help to identify the needs and
locations for the projects. The local communities acted
as sub-contractors aim to create a sense of belonging
within the project. The objectives of the project are to
improve the well-being of communities living in rural
areas of Sarawak; provide basic infrastructure at lower
costs, speedy and with high impact; enhance road
connectivity in rural areas and reduce travelling time. In
addition, JMP in Sarawak also provide basic
infrastructures such as clean water and electricity
supply and increase the communities income through
land development in agricultural economic activities
commercially such as rubber and oil palm. For the
period between 2009 to 30th June 2015, ATM
implemented 11 JMP in Sarawak involving contract sum
amounting to RM253.98 million. The implementation
and monitoring of the JMP in Sarawak was undertaken
by RAJD. The procurement method of JMP is through
direct negotiation between the Development Division,
Ministry of Defence Malaysia (MINDEF) and contractors
while JMP was approved by the Ministry of Finance.
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JMP won the premier Prime Ministers Innovation Award

2015.
b. The audit performed from September to December
2015 at MINDEF and 8 projects in Kapit, Miri and
Limbang, Sarawak revealed JMP in Sarawak achieved
its objectives in providing road connectivity to rural
areas of Sarawak and reducing travelling time. The
overall management of JMP in Sarawak was
satisfactory. However, there are shortcomings that need
to be addressed by MINDEF such as follows:
i.
quality of work was less satisfactory. Road

shoulders and drains were not built, potholes,
uneven and muddy road surfaces in certain
stretches of the Road project from Pekan Belaga to
Mejawah, Belaga; Road project from Long Lopeng
to Bakelalan, Lawas and Road project from Miri to
Marudi;
ii. road maintenance was less satisfactory. Faded road

lines; and untrimmed wild plants and grass along
road shoulders;
iii. procedures for land acquisition, compensation
arrangements and arbitration processes were not
implemented resulting in unpaid land and crop
compensation to land owners;
iv. road safety aspects was less satisfactory. Steep,
winding and high gradient road; no slopes protection
and street furniture were not well maintained in
certain stretches of Road project from Pekan Belaga
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to Mejawah, Belaga and Road project from Long

Lopeng to Bakelalan, Lawas; and
v. decayed and cracked bridge curbs at PaDappur
Bridge and PaKelapang Bridge, Bario.
c. In order to improve the management performance of
JMP in Sarawak and to achieve the projects objectives,
it is recommended that MINDEF and Sarawak State
Government to take the following actions:
i.
MINDEF must carry out proper roads maintenance

within defect liability period (DLP), define road
maintenance schedule in the contracts and identify
responsible
parties
for
continuous
road
maintenance after expiry of DLP; and
ii. Sarawak State Government and MINDEF must

ensure orderly land acquisition process and
provision of land compensation in accordance with
State Land Code (Chapter 81) 1958.
MINISTRY OF WORKS / MINISTRY OF HOME AFFAIRS
Prison Department of Malaysia
17.
a.
Management of Construction Project Penjara

Reman (Tegar) Johor Bahru, Johor
Ministry of Home Affairs (MOHA) and Prisons
Department of Malaysia (PDM) had applied for
allocation from Ministry of Finance Malaysia (MOF) on
5th October 2006 to build a new prison complex on a 50
acres land at Kangkar Pulai in Johor Bahru, Mukim
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Pulai, Johor Bahru District. This new complex is to

replace Penjara Reman Johor Bahru at Jalan Ayer
Molek (Penjara Ayer Molek). The project was
implemented in two phases due to insufficient fund.
MOF approved an allocation of RM50 million for the
construction of Project Penjara Reman (Tegar) Johor
Bahru Phase l (Phase l Project) initiated in April 2009
and completed in April 2011. However, Phase l Project
has not been used since completion as it only has
capacity of 300 prisoners as compared to 726 prisoners
at that time. In January 2011, MOF approved additional
allocation of RM160 million for the construction Project
Penjara Reman (Tegar) Johor Bahru Phase lI (Phase lI
Project). Intrasegi Sdn. Bhd. and Tegas Setuju Sdn.
Bhd. were appointed through direct negotiation. Phase
II Project consists of prison complex equipped with
modern security system for a capacity up to 1,200
prisoners, staff quarters and other facilities and
implemented using design and built method. The project
started in July 2013 and to be completed in late January
2016.
b. The audit performed between June to September 2015
at Head Office of the Public Works Department Security
Works Branch (PWD), MOHA, PDM headquarters,
Penjara Ayer Molek, Johor Bahru and project site. Audit
findings revealed that management of this project is
good. Overall, Phase II Project was implemented
according to schedule; PWD monitored performance of
the contractor; contract management was administered
properly; and progress payments were made based on
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actual work done on site. However, there are several

aspects to be addressed by MOHA/PWD as follows:
i.
changes in procurement method for Phase II Project

forced the Government to indemnify consultants a
total of RM3.68 million in compensation; and
ii. damaged property and equipment in Phase I Project

must be repaired, tested and commissioned by
contractors before completion of Phase II Project.
c. To ensure completion of Phase II Project within the
stipulated time; and efficiency and effectiveness of
future project management, it is recommended
MOHA/PWD to consider the following actions:
i.
MOHA/PWD must finalized project procurement

methods before appointing contractors and
consultants; and
ii. Contractors
must
perform
testing
and
commissioning for unused property and equipment
for Phase I Project prior to handing over of Phase II
Project to PWD.
MINISTRY OF HOME AFFAIRS
Immigration Department of Malaysia
18. Implementation of the Malaysian Immigration
System (myIMMs)
a. MyIMMs is the information technology systems of the
Malaysian Immigration Department [Jabatan Imigresen
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Malaysia (JIM)], which was developed to support its

operations in providing the best service to the public,
external agencies and stakeholders. MyIMMs
comprises of three main components namely
applications, network and data centre which enable
users to perform data entry, processing, validation,
transmitting and storing information from the
Immigration Offices to the database and vice versa.
These components are installed at all Immigration
offices throughout the country as well as at the
Immigration Attach Offices abroad and also accessible
by external agencies. MyIMMs contract worth RM29.90
million was approved by the Ministry of Finance (MOF),
through direct negotiations method to HeiTech. The
contract was signed on 1st November 2010 between the
Government of Malaysia and HeiTech Padu Berhad for
a period of one year from 1 March 2010 to 28 February
2011.
b. The audit performed between April to November 2015
at JIM Headquarters, Putrajaya, 6 JIMs branch offices
namely Johor Bahru, Shah Alam, Kuching, Seberang
Prai, Tawau and Sandakan and JIM Attach Offices at
Jakarta,
Indonesia,
Dhaka,
Bangladesh
and
Kathmandu, Nepal. The audit revealed that, the overall
management of myIMMs was less satisfactory in the
aspects of planning, implementation and monitoring
which may affect the achievement of its objectives.
Among the weaknesses identified are as follows:
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a. Contract Management
i. the agreement period was earlier than the date
of approval for direct negotiation by MOF and
the Letter of Acceptance; and
ii. payment worth RM22.64 million was
supported with complete documentation.
not
b. Implementation of myIMMs Projects

i.
full payment for uninstalled and unused

Biometric system and equipment worth RM10.30
million had been made;
ii. 3 out of 7 systems for Application and Payment

of Visa and Pass in the eServices system were
not utilised;
iii. Agency link-up was not fully installed however
full payment had been made;
iv. User Acceptance Test (UAT) and Provisional
Acceptance
Test
(PAT)
were
not
comprehensively done as stipulated in the
agreement;
v. Business Continuity Plan was at unsatisfactory
however full payment had been made; and
vi. myIMMs data was inaccurate and data integrity
was suspicious.
c. Foreign Workers Management
The management of foreign workers application was
unsatisfactory and incompliance with stipulated
policies or rules set by the Government.
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c. To ensure that all weaknesses of myIMMs can be

improved to support JIM operations in providing the
best services to the public, external agencies and
stakeholders, it is recommended that the parties
involved take the following actions:
i.
Ministry of Home Affairs should promptly plan and

consider lessons learned from the failure of previous
systems before developing any system. It is to
ensure the effectiveness of project management in
achieving objectives as well as the procurement
systems reaps best value for money;
ii. Ministry of Home Affairs and JIM should implement

project according to the agreed terms of contract
and within the stipulated period. It is to ensure the
development of system in accordance with required
specification in achieving objectives;
iii. JIM should maintain and updates system
development documents to ensure future data
migration properly and comprehensively implement;
and
iv. Ministry of Home Affairs should review the needs for
system filtering by operators in the source country to
avoid duplication of work processes. The Ministry
must ensure a formal agreement between the
Government and operators are seal for the purpose
of Governments systems and information security.
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MALAYSIA EDUCATION MINISTRY

19.
Management Of Private
Company In Schools
Security
Services
a. The Ministry of Education (Ministry) has privatized

security services [Perkhidmatan Kawalan Keselamatan
(PKK)] in schools by appointing contractors to provide
security service without firearms. Among the purposes
of this service is to create a safe and peaceful
environment continuously and to assure schools
administrations, parents and students a conducive
environment for teaching and learning in all schools
under Ministrys control. Generally, PKK is to supply
security guards and adequate equipment to carry out
security services in schools/hostels; patrol and report its
services to the Government. Ministry/State Education
Department [Jabatan Pendidikan Negeri (JPN)] has
offered 947 PKK tenders to institutions/schools with
contract value totalling RM2.858 billion for the period of
2013 to 2015.
b. The audit performed from July and October 2015 at the
Ministry, Procurement and Asset Management Division
[Bahagian Perolehan dan Pengurusan Aset (BPPA)],
JPN, District Education Offices [Pejabat Pendidikan
Negeri (PPD)] and 59 premises in 5 states namely
Malacca, Kedah, Perlis, Kelantan and Selangor. The
audit revealed that the Ministry had provided PKK in
premises visited. The Ministry also implemented several
improvements as stated in 2012 Audit Report. Among
the improvements were setting license renewal period
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for private agency; listing of documents required for

processing of payment; mandatory annual medical
examination for security guards between the age of 55
to 60 years old; setting the time frame for contractors to
submit security screening certificate; and compulsory
attendance of Certified Security Guards (CSG) course
by security guards. There are no recurring issues in 5
out of 9 premises visited in 2012. However, overall
management of PKK at 59 premises audited were less
satisfactory. Some of the weaknesses identified are as
follows:
i.
contract terms did not specified

requirement for security guards;
urine
test
ii. clocking was not carried out every 2 hours at all

specified locations. It was made at the same time
for different points/locations;
iii. equipment not supplied or inadequate or non
functional as intended or damaged;
iv. the date of equipment when it was damaged was
not recorded; and
v. penalties and deductions amounted to RM0.18
million were not imposed to contractors for breach
of contract terms.
c. To ensure that all weaknesses highlighted do not recur
and Government reaps best value for money for PKK,
the Ministry is recommended to take action on the
following matters:
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i.
review PKK contract terms and comply with Ministry

of Home Affairs (MOHA) circulars requirement for
urine test and security screening for all security
guards;
ii.
ensure contract terms are complied by contractors

and enforce/impose penalties/deductions to prevent
issues from recurring; and
iii.
must ensure schools administration understand and

comply with the procedures on verification of
supporting documents prior to payment approval to
prevent improper payment.
20. Management of Supplementary Food Programme

a. Supplementary Food Programme [Rancangan Makanan
Tambahan (RMT)] focus on pupils from families under
the category of National Poverty Line [Paras Garis
Kemiskinan Nasional (PGK)]. Its aims to improve the
nutritional level of pupils to be fully focus on teaching
and learning in school. In year 2013 to 2015, the
Ministry has allocated a sum of RM758.48 million for the
implementation of RMT program. In 2013, family with
monthly income between RM460 to RM630 or RM110
to RM130 per capita for the year 2013 are eligible for
RMT program. While, for the years 2014 and 2015, the
eligible monthly income are between RM520 to RM660
or RM130 to RM140 per capita. The program was
implemented throughout the 190 school days in a year.
For the period 2013 to 2015, a total of 1,665,954
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students in 21,936 primary schools were benefited from

RMT program.
b. The audit performed between July to October 2015 in
40 primary schools in the urban area covers 4 states
namely Johor, Kelantan, Kedah and Sabah. The audit
revealed that the RMT program has achieved the
objectives in which the menu contains sufficient calories
and nutrients as well as inculcate courteous and
discipline culture. According to studies conducted by the
Ministry, the RMT program has helped the development
of student health and learning. However, there were still
some weaknesses that need to be improved by Ministry
to ensure the efficiency of RMT program as follows:
i.
delayed in allocating the fund to schools between 14

to 97 days by Jabatan Pendidikan Negeri (JPN).
The fund should be distributed within 7 days after
receiving warrants from the Ministry;
ii.
the outstanding balance of RMT program fund up to

year 2014 amounting to RM0.26 million which was
between RM172 to RM19,984 for each school
resulted an increased in the Kumpulan Wang
Kerajaan
(KWK).
Moreover,
expenditure
performance for RMT program does not reflect the
actual amount;
iii. Key Performance Indicator (KPI) was only set up for

warrant allocation. The KPI for RMT program were
not specifically cater on achievement of overall
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objective program i.e. contribution towards physical

growth/health and students academic progress;
iv. there were data recorded on the height and weight
of students at the beginning and end of the year as
well as students average performance throughout
the year. However, the information is not used for
the purpose of reviewing the program achievement;
v. monthly income of parents/guardians who has no
pay check were not approved by the
Headman/Officer and detail incomes were not
specified;
vi. meals served not accordance with stipulated set
menu affect pupils calories and nutrients content;
and
vii. weaknesses in monitoring on RMT program in the
federal, state, district and school level.
c. To overcome all the weaknesses highlighted and to
improve efficiency of RMT program, it is recommended
that the Ministry/JPN/PPD/school to take actions on the
following matters:
i.
set up KPI and evaluate the performance of RMT

program each year. Analyzed accordingly height,
weight and academic performance of students;
ii. review and make additions the set menu suiting with
the local population in encouraging pupils to eat.
Approval should be obtained for any changes in
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menu and nutrients contents should be evaluated;

and
iii. improve the monitoring and supervision of RMT
program by standardization the supervision

criteria, frequent and strengthen agenda RMT
Committee meeting.
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PART II
MANAGEMENT OF GOVERNMENT COMPANIES
MINISTRY OF TOURISM AND CULTURE MALAYSIA
21. Malaysia Convention & Exhibition Bureau
a. Malaysia Convention & Exhibition Bureau (MyCEB) is a
non profit organization incorporated on 13th August
2009 under Companies Act 1965 by Ministry of Tourism
and Culture. The establishment of MyCEB is in line with
Malaysias Economic Tranformation Programme (ETP)
under the National Key Economic Areas (NKEA)
programme for tourism industry. MyCEB was given the
mandate organize two Entry Point Project (EPP)
namely: EPP 7 International Major Events and EPP
10- Business Events. Under these 2 EPP, MyCEBs role
to further promote and position Malaysia internationally
as the preferred world leading destination for major
international events/programs in term of sport,
international entertainment, and art and business
events includes meetings, conventions, incentives and
exhibitions. Besides that, MyCEB is also to promote;
identify potential; and support bids for, secure and stage
international and business events successfully in
Malaysia. Furthermore, MyCEBs role is to assist with
international marketing and packaging of selected home
grown and home hosted events to further promote and
position Malaysia internationally as the preferred
destination. Thus, MyCEBs to facilitate the bidding
process for EPP 7 and EPP 10. As at September 2015,
MyCEB has been allocated RM253.93 million to bolster
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and enlarge MyCEBs activities to attract the number of

delegations and foreign tourists in contributing to Gross
National Income.
b. The performed between May to September 2015 on the
aspects of corporate governance, main activities and
financial performance from the year 2012 to 2014. The
audit revealed that MyCEBs financial performance was
good because the company recorded surplus after
taxation amounted to RM5.95 million, RM12.5 million
and RM1.58 million respectively. Based on the records,
various promotion activities have successfully help to
attract and increase number of international delegations
and foreign tourists. Generally, MyCEB complied with
the stipulated rules on corporate governance for the
appointment of Board of Directors and frequency of its
meeting. However several aspects of performance of
activities and financial management shall be addressed
as follows:
i.
improper management of subvention fund activities.

Several weaknesses identified as follows:
lack of proper payments to event organizer;
unpaid subvention fund activities despite of

expiry of memorandum of understandings; and
discrepancies
of
expenditure
between EPP 7 and EPP 10.
calculation
ii. non-compliance for good procurement management

practices for appointment of consultant/booth design
consultancy;
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iii. payment to public relation agency for advertising

and marketing work was less satisfactory. For
example there was no third party invoice and
inconsistent commission rate;
iv. lack of proper management expenses. For example
there was late issued of local order, incomplete
information on delivery order and management of
corporate cards was irregular; and
v. lack of proper procurement management. For
example there was an advance payment for more
than 50% of the project and less thorough on video
making.
recur, it is recommended that MyCEB to take action on
i.
to improve the management of subvention fund

activities in order to achieve its objectives and
goals;
ii.
to closely monitor the existing expenses and

procurement aspects to comply with rules and
regulations. The accountability of the grant must be
fully realized by ensuring all supporting documents
completed prior to payment and work done by the
third party. Proper procurement management must
be accordance with the approved procurement
methods for best value for money; and
iii. to comply with stipulated rules and procedures for

the usage of corporate card facilities. To establish
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strong internal control to prevent staff for

unauthorized expenditure in ensuring a proper
payment and misuse for corporate card facilities.
MALAYSIA EDUCATION MINISTRY
22. Management of Perbadanan Kota Buku

a. Perbadanan Kota Buku (PKB) is a limited by guarantee
company incorporated by Ministry of Education (MOE)
on 6th July 2011 under the Companies Act 1965 without
share capital. PKB is mandated to facilitate the
development of books industry in realization of the
National Book Policy. This policy proposed a one-stop
centre to gather and support readers, writers and
publishers in books related activities. PKB has 4 main
activities namely Akademi Kota Buku; Copyright and
Intellectual Property; Research and Consultation; and
Digital Publication. The Government through MOE
disbursed in stages RM30 million grants from the year
2011 to 2014 to support PKBs operation and books
related activities to promote the countrys books
industry.
b. The audit performed from June to October 2015,
focused on corporate governance, main activities and
financial aspects of PKB for the year 2012 to 2015
revealed that in general, activities implemented by PKB
were consistent with the mandate. PKBs financial
performance was satisfactory with an excess of income
for 3 consecutive years contributed by other incomes
i.e. 83.28% to 88.56% which was generated from the
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amortization of grants. However, PKB did not actively

participate or implement books related activities
whereby for the last 4 years from the year 2012 to
August 2015, PKB only organized and participated in 97
activities with total expenditure of RM4.77 million. It was
observed that from the year 2013 to 2015, PKB
received less respond for its e-Book sales through
digital publications. For a period of 3 years, only 249
digital books were subscribed with a revenue of
RM1,495. Several issues identified are as follows:
i.
management of PKB less focus on the outcome and

impact on its activities/programs they organized or
participated;
ii. Board of Directors approval for 2 international book

fair participation could not be verified; and
iii. Strategic Plan was not finalized; Key Performance
Indicators (KPI) as a companys performance
measuring tools were not established; and Standard
Operating Procedures (SOP) related to the
company's main activities were not prepared.
c. To strengthen PKBs capabilities and better governance
in achieving its objectives, it is recommended to take
action on the following matters:
i.
PKBs Board of Directors must closely monitor the

implementation of main projects/activities to ensure
objectives of the companys establishment are
achieved;
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ii. PKBs management must ensure approval from

Board of Directors for all activities to be
implemented/participated; and
iii. PKBs Board of Directors and management must
finalise its short-term and long-term strategic plan in
determining the companys direction.
MALAYSIA OF FINANCE MALAYSIA
23. Management of Multimedia Development

Corporation Sdn. Bhd.
a. The Multimedia Development Corporation Sdn. Bhd.
(MDeC), incorporated in June 1996 aims to provide a
master development plan for Multimedia Super Corridor
Malaysia (MSC Malaysia) and oversees its
implementation. MDeCs main role is to increase the
overall value of MSC Malaysia in terms of labour skills,
balance of payments, assists to improving the per
capita gross national product and e-Business. On 19th
October 2011, MDeC was given the mandate to realize
Digital Transformation Program, known as Digital
Malaysia (DM) to drive the nations digital economy
holistically. Consequently, MDeC is mandated by the
Government through the Ministers Of The Federal
Government (No. 2) (Amendment) (No. 2) (Amendment)
Order 2014 to develop, coordinate and promote
Malaysia's digital economy, ICT industry and
widespread use of ICT in Malaysia. In addition, MDeC
was authorized to implement 5 projects under the
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National Key Economic Areas (NKEA), namely Entry

Point Project (EPP) 2 - Foreign Outsourcing Market;
EPP3 - Malaysia As Data Centre; Sri-Upskilling and
Upgrading Workforce for Business Services; Integrated
Content Development Programme (ICON); and Creative
Industry Life-Long Learning Programme (CILLP). MDeC
received operating and development fund from Federal
Government amounted to RM202.95 million, RM229.67
millions, RM259.86 millions and RM269.20 million in
2012, 2013, 2014 and 2015 respectively. The
development fund was allocated to implement projects
and provide fundings to the industry to realize MSC
Malaysia, DM and NKEA initiatives.
b. The audit performed between July to October 2015 on
the aspects of corporate governance, main activities
and financial performance from the year 2012 to 2014.
In general, the audit revealed MDeC performed its core
activities in accordance with the given mandate.
Overall, MDeCs financial performance was satisfactory.
MDeC recorded net profit before tax amounting to
RM41.64 million, RM58.62 million and RM28.33 million
for financial years in 2012, 2013 and 2014 respectively.
However, gross profit margin for the year 2014
decreased from 6.4% to 4.2% as compared to previous
year. MDeCs performance and management of
activities; corporate governance; and financial
management is good and Key Performance Indicators
(KPI) are met. In addition, MSC Malaysia, DM and
NKEA programs also achieved the set objectives.
However, audit finding revealed that the process for
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MSC Malaysia status took up to 29 months from online

application to the assessment of supporting documents.
c. To ensure better management of MDeC's activities, it is
recommended that the application period for MSC
Malaysia status are separated into two stages i.e.
before and after receiving complete documents from
applicant. The separation of period would facilitate
MDeC in identifying the cause of delay, if any.
24. Management of Malaysian Agrifood Corporation

Berhad (MAFC)
a. Malaysian Agrifood Corporation Berhad (MAFC) is
wholly owned by Khazanah Nasional Berhad and
incorporated on 22nd March 2006 with an authorized
capital of RM600 million and paid-up capital of
RM430.50 million. MAFCs main objective is to boost
the food supply chain business in Malaysia with modern
technology and logistics systems as well as best
practices as stipulated in the International Food Safety
Standards. MAFC also assists the Government in
streamlining the agriculture sector towards a modern,
vibrant and dynamic sector in accordance with the Ninth
Malaysian Plan (9MP), to become one of the core
sectors in the development of national economy. MAFC
also emphasizes on environmental preservation by
safeguarding natural resources and optimizing the use
of land, water and energy. MAFCs main activity is
producing fresh and safe highland vegetables for
consumption under controlled environment farms on 2
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plots of land in Cameron Highlands, namely in Bertam

Valley and Tanah Rata. MAFC markets its products
under the brand name Lushious. Besides that, MAFC
also provides cold storage services and logistics
through its subsidiary, CCN Sdn. Bhd. located in
Puchong.
b. The audit performed between July and October 2015
focused on corporate governance, main activities and
financial aspects for the period from the year 2012 to
2015. The audit revealed that overall, the financial
performance of MAFC was less satisfactory as the
Company recorded accumulated losses of RM447.84
million in 2014 and negative cash flow from its operation
for 3 consecutive years from 2012 to 2014. However, in
2014 net loss after tax was reduced by RM1.45 million
to RM18.49 million. Generally, MAFC complied with the
stipulated rules on corporate governance for the
appointment of the Chairman, Board of Directors (BOD)
and Chief Executive Officer. However several aspects
of performance and management of activities, corporate
governance and financial management shall be
addressed as follows:
i.
no increase in the number

distributors/retailers since 2012;
of
MAFCs
ii. Collaboration Agreement on Highland Agriculture

and Research Collaboration Agreement for leasing
of
Malaysian
Agricultural
Research
and
Development Institute (MARDI)s land in Tanah
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Rata was not drafted despite MOU was signed 7

years ago in 2008;
iii. management of activities in Bertam Valley as
follows :
Bertam Valley land with an area of 195.3

hectares acquired at RM68.6 million was not
optimally used. Only 20 hectares (10.24 %) of
the said land were utilised whilst the remaining
175.3 hectares (89.76%) were still idle;
some slopes in Bertam Valley farms were not

properly maintained and exposed to the risk of
landslides; and
status of participants achievements for the
Agropreneur Programme could not be
ascertained as compared to its prescribed
period.
iv. planting of vegetables on several plots in Tanah

Rata and Bertam Valley was delayed and not in
accordance to the crop calendar;
v. as at the date of audit visit, three parcels of lease
land in Lanchang were idle; and
vi. management of company's financial records,
documents, assets and stores was less satisfactory.
c. To strengthen MAFCs capabilities and governance in
achieving its objectives, it is recommended BOD and
management of MAFC to take action on the following
matters:
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i.
expand the market shares of MAFC products and

increase company's revenue by intensifying
products promotion and awareness to consumers;
ii. optimize the utilization of land in Bertam Valley and

Lanchang;
iii. Collaboration Agreement on Highland Agriculture
and Research Collaboration Agreement between
the MAFC and MARDI shall be drafted and sealed
promptly; and
iv. strengthen its monitoring and internal controls in
ensuring compliance of stipulated procedures
especially relating to the procurement and
expenditure.
25. Sepang International Circuit Sdn. Bhd.
a. Sepang International Circuit Sdn. Bhd. (SIC) was
incorporated in 23rd January 1998 and wholly owned by
Malaysia Airport Holding Berhad (MHSB). In 22th April
2009, Ministry of Finance has acquired SIC from MHSB
by Share Sale Agreement with an authorised capital of
RM50 million and paid up capital of RM10 million. The
main objective of SIC is to expand motorsport activities
in Malaysia and promote national tourism industry. SIC
located in an area of 303 hectares with a track of 5.543
km length and it can accommodate 130,000 spectators
at one time. It is also equipped with facilities such as the
Sepang Circuit Shoppe, Automotive Museum,
restaurants and medical centre. SIC is officially opened
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on 9th Mac 1999 and since that SIC has organized the
Formula One (F1) with Formula One Administration
Limited (FOA). FOA is the exclusive rights holder for F1
event and the first contract was for a period of 12 years
(1999 to 2010). This contract has been renewed twice,
which in 2011 until 2015 (5 years) and 2016 until 2018
(3 years). Furthermore for Motocycle Grand Prix
(MotoGP) event, SIC has established a 8 years contract
with Dorna Sports S.L. from 1999 until 2006. Thus
through the Ministry of Finance, the Government has
provided SIC the financial grants for fees payment as
Governments commitments to obtain right in organizing
and broadcasting the F1 and MotoGP events. Whereas
other fees such as advertising rights, airtime
management and hospitality were borne by SIC. The
total expenditure for the overall F1 and MotoGP events
were amounted to RM2.540 billion for the period 1999
until 2012, which RM1.880 billion (73.9%) out of the
total amount spent were financed by the Government.
b. The audit revealed that overall SIC financial
performance was good as SIC has recorded net profit
after tax for 3 consecutive year from 2012 to 2014
amounted to RM44.54 million, RM17.15 million and
RM8.47 million respectively. However, the net profit was
declined by RM8.68 million or 50.6% in year 2014
compared to 2013. The findings also revealed that
SICs event management activities and its corporate
governance were well managed due to its ISO 2001 :
9008 Certification pertaining to its policies and
procedures. Besides that, SIC also recorded a hike in
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the total numbers of MotoGP spectators from year 2015

compared to 2014 and 2013. However several aspects
of performance and management of activities, corporate
governance and financial management shall be
addressed as follows:
i.
declining in total of spectators for F1 events for 2

consecutive years 2014 and 2015 compared to
2013 between 4,298 and 7,143 spectators
respectively;
ii. unattractive marketing strategy i.e. F1 concerts

were unable to fascinate more F1 attendees to the
event even though additional funds amounted to
RM10 million was allocated for marketing and
promoting the events;
iii. the differences between the amount of payment
made and the amount stated in the contract and
Letter of Acceptance for the production services and
for creative and design agency amounting to
RM112,400 and RM24,313 respectively.
In
addition, the amount of commission paid amounting
to RM94,700 were not supplemented by supporting
documents;
iv. differences particulars between the rental
agreement as compared to the invoices and
quotations;
v. FI concert production services have not been
finalized, although the work has been completed;
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vi. delayed in approving procurement services by the

Procurement Committee;
vii. delayed in issuing purchase order;
viii. delayed in signing the rental agreement for LED
Giant Screen;
ix. no
details
of
costs
and
clauses
penalty/fines/pieces included in the agreement;
on
x. no procedure on official expenses for personnel

credit card usage. Expenses made by the Chief
Executive Officer were not checked by Human
Resources Department; and
xi. assets were not listed in the Register of Assets and
the assets were not labelled.
c. To strengthen SICs capabilities and governance in
achieving its objectives, it is recommended to take
action on the following matters:
i.
establish an effective marketing strategy to attract

more international spectators present at the F1
event. SIC re-evaluate the budget allocation in order
to allocate more budget on promotion instead of
organizing concert; and
ii. improve the SICs internal controls processes for

procurement, payment and asset management.
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CONCLUSION
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CONCLUSION
In general, Ministries/Departments/Government Companies
had planned properly their programmes/activities/projects.
However, in terms of implementation, there were several
weaknesses that should be resolved promptly to ensure that
each programme/activity/project is implemented in an efficient,
economical and effective manner to achieve the stated
objectives. In order to improve on the weaknesses highlighted
or to avoid their recurrence, the following recommendations
were made:
a. National Audit Department conducted the audit based on
selected samples and scopes. Therefore, Secretary
General of Ministries/Heads of Department/Chief
Executive Officers should carry out thorough examination
to ascertain whether other programmes/activities/projects
have the same weaknesses and thereby take corrective
actions and make improvements. In relation to this, other
than carrying out evaluation on internal controls, the
Internal Audit Department should carry out procurement
and performance audits on the management of
programmes/activities/projects to determine whether
programmes/activities/projects are implemented efficiently,
economically, effectively in achieving the stated objective.
b. Based on audit observation, there were several
weaknesses in the implementation of programmes/
activities/projects due to lack of monitoring/supervision by
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responsible parties, insufficient technical expertise and too

reliance on consultants/contractors, no coordination
among agencies involved as well as internal issues faced
by contractors. These weaknesses caused the delay in
completion of programmes/activities/projects within the
stipulated time, unsatisfactory works quality, and cost
escalation for programmes/activities/projects. As a result,
the Government did not reap best value for money for
expenditure incurred for the implementation of
programmes/activities/projects. In addition, the objectives
of the programmes/activities/projects were not fully
achieved and lesser impact on targeted groups. Hence, it
is recommended that:
i.
a detailed study on Government projects needs to be

carried out before approval for programmes/ activities/
projects implementation. For this purpose, in
accordance with Treasury Instruction 182.1, agencies
need to submit complete information of programmes/
activities/projects such as status of projects site,
project summary, project ceiling, annual allocation and
project implementation schedule to the technical
department. This is to ensure that all projects are
implemented according to schedule and the
Government reaps best value for money:
ii. an integrated planning among agencies involved needs

to be carried out at the early stage of project
implementation in particular for gigantic programmes/
activities/projects. For example Department of
Sewerage Services, Department of Environment,
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Department of Irrigation and Drainage, local

authorities, Fire and Rescue Department of Malaysia,
utility providers such as water, electricity and
telecommunications,
Land
Office
and
state
governments need to be consulted before projects are
implemented. Such consultations are needed to ensure
all basic facilities are provided and programmes/
activities/projects are implemented smoothly.
iii. the Ministries/Departments shall comply with the
Guidelines for Planning and Building Regulations
issued by the Standards and Cost Sub-Committee as a
reference for the National Development Planning
Committee (Jawatankuasa Perancang Pembangunan
Negara) when planning for works procurement to
ensure that buildings are built according to stipulated
standard and cost allocation;
iv. Controlling Officers/Heads of Department must be
competent on Government procurement procedures
and provide sufficient training to procurement officers.
Competency and trainings of procurement officers are
important to prevent misconduct, leakage of public
fund, safeguard Government interest and reap best
value for money in government procurement;
v. Controlling Officers/Heads of Department shall
enhance the management of Government assets to
avoid wastage and seriously consider the importance
of maintenance, monitoring and supervision task.
Records on asset and inventory must be updated
115
5/13/16 3:03 PM
promptly in preparation for the Federal Governments

shift towards accrual accounting;
vi. Heads of Service/Controlling Officers/Heads of
Department shall set up a special committee to
investigate issues pertaining to fraud, wastage and
extravagance spending of public fund. Severe actions
such as disciplinary and/or surcharge shall be taken
against officers who are found to be negligent or fail to
discharge their duties without reasonable justification
resulted losses to the Government;
vii. Government companies shall ensure good financial
performance, proper and prudent implementation of
activities to achieve the set objectives, and their
financial management and corporate governance
comply with stipulated rules and regulations; and
viii. the Controlling Officers of various Ministries/
Departments/Government
Companies
shall
demonstrate high commitments by taking prompt
actions on matters raised by the Auditor General. The
Controlling Officers must give a factual report promptly
and forward to the Continuation Audit Division to
update its status in the AG Dashboard of the National
Audit Department.
c. In addition to fulfilling the legal requirements, I hope this
report will form a basis for mitigating the weaknesses,
strengthening efforts and enhancing accountability and
integrity. This report is also important for the Government
to increase productivity, creativity and innovation in public
116
5/13/16 3:03 PM
service delivery and creating a fast, accurate and integrity

work culture. Consequently, The Auditor Generals Report
contributes towards the achievement of the Government
Transformation Programme 2.0 in fighting corruption
under the National Key Results Areas (NKRA).
National Audit Department

Putrajaya
20th April 2016
117
5/13/16 3:03 PM
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PERCETAKAN NASIONAL MALAYSIA BERHAD
KUALA LUMPUR, 2016
www.printnasional.com.my
email: cservice@printnasional.com.my
Tel.: 03-92366895 Fax: 03-92224773
5/13/16 3:03 PM
AU
GO
NATIONAL AUDIT DEPARTMENT MALAysIA

No. 15, Level 1-5
Persiaran Perdana, Presint 2
Pusat Pentadbiran Kerajaan Persekutuan
62518 Putrajaya
w w w. a u d i t . g o v. m y
WJHS00124
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5 - Synopsis Agr2015 Series 1

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5 - Synopsis Agr2015 Series 1

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AUDITOR GENERALS REPORT

GOVERNMENTS FINANCIAL STATEMENT, FINANCIAL MANAGEMENT

NATIONAL AUDIT DEPARTMENT

PRIME MINISTERS DEPARTMENT/MINISTRY OF

Royal Malaysian Customs Department

MINISTRY OF RURAL AND REGIONAL DEVELOPMENT

MINISTRY OF RURAL AND REGIONAL DEVELOPMENT/

MINISTRY OF ENERGY, GREEN TECHNOLOGY AND

MINISTRY OF HEALTH MALAYSIA

MINISTRY OF HEALTH MALAYSIA / MINISTRY OF

MINISTRY OF URBAN WELLBEING, HOUSING AND

National Housing Department

MINISTRY OF WORKS / MINISTRY OF HOME AFFAIRS

MINISTRY OF EDUCATION MALAYSIA

MALAYSIA OF FINANCE MALAYSIA

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THE FEDERAL GOVERNMENTS

NATIONAL AUDIT DEPARTMENT

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Attestation Audit - to give an opinion as to

whether the Federal Governments Financial Statement

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have been carried out efficiently and economically to

WJHS00124 Tek 1.indd 8

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and stores as well as management of government

WJHS00124 Tek 1.indd 10

officers. To ascertain its compliance, the National Audit

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(TAN SRI HJ. AMBRIN BIN BUANG)

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Overall Financial Management Performance

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with its ratio to the Gross Domestic Product (GDP) at

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as audits conducted by National Audit Department

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The Accountant Generals Department through its

g. Heads of Department should establish a check and

National Audit Department

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ACTIVITIES OF THE FEDERAL

NATIONAL AUDIT DEPARTMENT

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whether the Federal Governments Financial Statement

WJHS00124 Tek 1.indd 31

1.4. Government Companies Management Audit