2019 Auditor-General’s Report: Glaring Wrongdoings

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MIGHT went against company constitution by paying co-chairman monthly allowance

The Malaysian Industry-Government Group for High Technology (MIGHT) went against its own company constitution by paying a monthly allowance to its co-chairman, says the Auditor-General’s Report 2019.

The firm under the Science, Technology and Innovation Ministry was found to have paid its co-chairman RM5,000 monthly, or a total of RM406,452 from 2016 and 2019.

As of December 2019, MIGHT had 11 board members, including two co-chairmen, representing the government and the private sector, respectively.

MIGHT’s constitution determined that no remuneration or other benefits in the form of money or monetary value should be given by the firm to any board members.

“Audit reviews found that the co-chairmen (government and private sector representative) was paid RM5,000 monthly.

“From 2016 until December 2019, the co-chairman (government) had received an allowance of RM166,452 while the private representative had received RM240,000,” said the report published on Monday (Aug 24).

In response, MIGHT said that the monthly allowance was made as payment of expenses incurred by the co-chairmen in carrying out their duties, including attending meetings and company activities.

“The payment was limited to only RM5,000 monthly. A payment of RM5,000 was made to ease administrative operations because the actual cost of the expenses exceeded the set limit,” it said.

MIGHT added that Article 4(b) in its constitution regarding remunerations to board members will be reviewed and updated in order to curb clashing with administrative operations.

The audit also found that the firm had used RM84,587 from members’ fees and programme income to organise a golf tournament in 2018 without pre-planning.

“The audit was informed that the golf tournament was organised to be a networking platform for MIGHT members, industry representatives and the government.

“Further review found that the estimated expenditure was only presented at the MIGHT top management meeting and the management paper provided has been approved by the president/chief executive officer (CEO),” said the report.

The audit also found that the board had approved performance incentive payments despite the audited financial report for 2018 indicating that the company was experiencing a pre-tax deficit amounting to RM5 million.

It added that an allocation of a development grant for the A-Bio Investment Programme amounting to RM6.5 million had also been used as an advance for the repair and renovation work on the building without approval from the Economic Planning Unit (EPU).

Finance Ministry owned Amanah Raya changed policies without board approval

Finance Ministry-owned company Amanah Raya Berhad which managed a capital fund of RM5.8bil as of last year was found to have changed its policies without the approval of the board of directors, says the Auditor-General’s Report 2019.

The company which is a full subsidiary of the Finance Ministry, managed the Kumpulan Wang Bersama (KWB) account of RM5.8bil, a common fund guaranteed by the Malaysian government.

The A-G Report also found Amanah Raya not to have managed its capital fund efficiently, as there has been a trending deficit in the KWB fund since 2008.

“This deficit for KWB has continued until 2019 because the current profit cannot afford the annual disbursement of its income to the depositors, making the losses now accumulated to RM1.02bil,” said the A-G’s Report.

It further stated that although Amanah Raya’s output achievements of the trust and inheritance for the years between 2016 and 2019 was highly efficient, the management of the KWB fund was inefficient as it caused losses.

“The disbursement of the income to KWB fund holders was also paid above its nett income for seven financial years. The rate of the investment cost was more than its return rate received for the years 2016 and 2018 causing a fund deficit. This forced Amanah Raya to get a government guarantee to handle its deficit since 2010,” said the latest A-G Report which was released Monday (Aug 24).


CIDBEC’s audit team led by person with no finance background

The audit team of CIDB e-construct Services Sdn Bhd (CIDBEC) is being led by a person with no background in finance.

The Auditor-General’s 2019 Report also said another member of the audit committee was also not from a finance background.

“This can result in the lack of in-depth discussions on financial matters,” said the report.

Among the weaknesses include a delay in taking action against poor debt collection raised during an audit meeting on Jan 30 last year.

It also noted a lack of transparency in the company’s financial reporting processes, as there were no independent members in the audit committee.

“All the audit committee members are CIDB officers who served as non-independent directors,” it said.

According to Malaysian Code on Corporate Governance 2017, the audit committee should comprise independent directors.

The service timeframe, as well as roles and function, were not included in the chairman’s letter of appointment.

The company secretary had failed to advise the board accordingly.

These were among the weaknesses outlined in the report.

However, the A-G found its corporate governance satisfactory.

“Financial position is solid, but there are weaknesses in the company’s credit management,” it said.

CIDBEC is a wholly-owned subsidiary of CIDB (Construction Industry Development Board).

CIDB provided RM42.53 million in grants for CIDBEC to carry out training programmes and Building Information Modelling (BIM) accreditation.

The report also noted that CIDB’s Akademi Binaan Malaysia (ABM) South and North zones had given fee exemption and discounts amounting to RM31,080 to 45 participants without the approval of CIDBEC in 2019.

“Up to October last year, there was no written directive or clear guideline from CIDBEC on fee collection,” it said.

CIDBEC had on Nov 26 issued a directive to its satellite academy myBIM Centre Malaysia, to seek written permission from them first before offering discounts to participants.

It also said that ABM South zone’s request for subsidy was processed although participants’ receipt of payments were not attached.

TalentCorp didn’t achieve KPI to bring back highly-qualified M’sians in past three years

TalentCorp did not achieve its key targets in bringing highly-qualified Malaysians back from other countries in the past three years through its Returning Experts Programme (REP), the 2019 Auditor-General (A-G)’s Report Series 1 highlighted.

The report said that only 272, 309 and 276 Malaysians were brought back in 2017, 2018 and 2019, respectively, through the programme.

The report also said that TalentCorp had targeted to bring back 400 Malaysians in 2017 and another 400 in 2018, while in 2019 they had targeted to bring back 1,000 Malaysians.

In response, TalentCorp said that the drop in their 2019 key performance index (KPI) was because the new board of directors decided to focus on good governance matters.

They, however, said that they were in discussions to improve the REP.

The A-G also said that TalentCorp’s aspirations of making Malaysia a top-20 destination in the Global Talent Competitive Index (GTCI) were not realised, although it noted that Malaysia had made improvements, rising from the 37th position in 2013 to the 26th position this year.

The A-G also said that an analysis of the participants of the REP from 2016 to 2019 would contribute an estimated RM93.91 million to the country’s earnings over a span of five years.

“This analysis shows that the return of Malaysian experts has a positive effect on the country,” said the report.

The report also noted that only 11 outreach programmes were conducted in six countries from 2016 to 2019 and that TalentCorp did not appoint a chief executive officer (CEO) since June 2018. – The Star