AUDITOR GENERAL S REPORT 2012

Transcription

1 AUDITOR GENERAL S REPORT 2012 Activities of Departments/Agencies and Management of State Government s Companies Kelantan 2 nd Series i

2 PREFACE 1. Article 106 of the Federal Constitution and the Audit Act 1957 requires the Auditor General to audit the Financial Statements of the State Government, the Financial Management, and the Activities of State Departments/Agencies. Section 5 (1) (d) of the Audit Act 1957 empowers the Auditor General to audit a company registered under the Companies Act 1965, which received grant/loan/guarantee from the Federal Government or the State Government and a company where more than 50 % of the paid-up share capital is held by the Federal Government, State Government or State Government Agencies. An order known as the Audit (Accounts of Companies) Order 2004 (amended 2009) with the consent of the Supreme Head of Malaysia, His Majesty, Seri Paduka Baginda Yang di-pertuan Agong has authorised the Auditor General to conduct an audit on the State Government companies. While Article 107 of the Federal Constitution requires the Auditor General to submit his report on the audit findings to the Supreme Head of Malaysia, His Majesty, Seri Paduka Baginda Yang di-pertuan Agong and His Royal Highness, the Sultan of Kelantan. His Majesty will give his Royal Assent for the tabling of the Report in Parliament while His Royal Highness will then assent for the tabling of the Report in the State Legislative Assembly. 2. The National Audit Department as from 2013 has been assigned the responsibility to implement 4 initiatives under the GTP2.0: Anti-Corruption NKRA. One of these initiatives is the submission of Auditor General s Report on the Activities of State Departments/Agencies and the Management of State Government Companies to be tabled in the Parliament/State Legislative Assembly at each session convened in order for it to be promptly accessible by the public in line with the Government s aspiration to make the Government Transformation Programme for the period of 2013 to 2015 a success. I hope this Report on the implementation of the Activities of the Kelantan State Government Departments/Agencies and the Management of the Kelantan State Government Companies for the Year 2012: 2 nd Series would become a basis to improve all weaknesses, strengthening improvement efforts, enhancing accountability and integrity as well as getting value for money for every spending as desired by the Government. 3. The Audit on the activities of the Departments/Agencies was to assess whether the planned programs and activities were successfully implemented in a timely manner, without any wastage and achieved its objectives. While the audit on the company's management was to evaluate whether the financial performance of the company is good, management and financial activities as well as corporate governance implemented in accordance with the set rules and achieved the desired objectives of its incorporation. ii

3 4. There were 2 activities and 2 companies management reported in the Kelantan Auditor General s Report for the Year 2012: 1 st Series. The Kelantan Auditor General s Report for the Year 2012: 2 nd Series reported another 2 activities and one companies management namely the Dhua fat Housing Aid Programme, Paddy Fertilizer Subsidy Programme and Infra Quest Sdn. Bhd. Audit Observations has been submitted to the relevant Heads of Departments/Agencies/State Government Companies. Only material Audit findings are reported in this Report. In order to improve weaknesses or to avoid their recurrence, I have forwarded 12 recommendations to be taken as remedial action by the Head of Department/Agency and Chief Executive Officer concerned. 5. I wish to express my gratitude to all officers in the various Departments/Agencies and State Government Companies in Kelantan who has given their full cooperation to my officers during the audit. I would also like to extend my appreciation and thanks to my officers who have worked diligently and gave their full commitment to complete this report. (TAN SRI DATO SETIA HAJI AMBRIN BIN BUANG) Auditor General Malaysia Putrajaya 5 th June 2013 iii

4 REPORT SUMMARY ACTIVITIES OF THE STATE DEPARTMENTS/AGENCIES AND MANAGEMENT OF STATE GOVERNMENT COMPANIES 1. STATE DEVELOPMENT OFFICE KOTA BHARU LAND AND DISTRICT OFFICE PASIR MAS LAND AND DISTRICT OFFICE TUMPAT LAND AND DISTRICT OFFICE - Dhua fat Housing Aids Programme 1.1. Dhua fat Housing Aids Programme (DHAP) is a programme to help the poor build or repair their houses and it is carried out by the State Government since year For the year 2010 to 2012, a total of RM15.90 million has been allocated for this programme and has helped 1,144 recipients. Of this amount, RM11.47 million has been allocated for 45 State Legislative Assembly s (SLA) constituents and another RM4.42 million beside these constituents. The total aids approved for each SLA for the year 2010 to 2012 were between RM70,000 and RM100,000 as ascertained by the Chairman of Economic Planning, Finance And Welfare Committee. The State Development Office (SDO) and Land And District Office (LADO) are responsible for allocation disbursement for those outside SLA s constituents and those within these constituents respectively An Audit conducted from August to November 2012 revealed that the management of DHAP was less than satisfactory due to the absent of guidelines in implementing DHAP by the State Government. These guidelines are important to ensure transparency in the distribution of house building/repairing aid to the targeted groups. The implementation of programme without clear guidelines and procedures had resulted in the following weaknesses: Selection of dhua fat housing aid receipients was made without application forms. The recipient s incomes exceeded the poverty line. The aids were disbursed differently without justification. Houses were uneconomical to be repaired. Full payments were made for incomplete houses. iv

5 No house specification. Aids were given to the same recipients. The quality of work was less than satisfactory To improve the management of Dhua fat Housing Aids Programme (DHAP), SDO and LADOs are recommended to take the following measures: SDO has to establish clear procedures or guidelines on eligibility requirement, application, assessment and approval method and to set maximum amount of housing aid SDO has to establish basic plan and specification for Dhua fat houses based on aids amount by referring other housing aid programmes best practice SDO has to appoint a Government Agency as implementing agency responsible for all affairs regarding DHAP LADOs have to ensure construction and repair of houses are done via Work Indent Enhance monitoring to ensure quality of work are in accordance with specification. 2. STATE DEVELOPMENT OFFICE - Paddy Fertilizer Subsidies Programme 2.1. Paddy Fertilizer Aids Scheme is a Federal Government s programme that has been introduced since year 1979 by the Ministry of Agriculture and Agro-Based Industry. From the year 1991, the State Government has implemented a similar scheme to help poor farmers who did not received fertilizer aids from any Federal Government s agency. The purposes of Paddy Fertilizer Subsidies Programme (Programme) are to reduce paddy production input costs, modernise paddy planting activity, enhance paddy production, increase paddy growers income and as an incentive to farmers who cultivate paddy. The State Development Office (SDO) assisted by Land And District Office (LADO) are responsible for coordinating this programme. For this purpose, the State Government has allocated a total of RM5.50 million and a total of RM4.90 million was spent for the period 2010 to 2012 which involved 8,987 farmers who cultivated 4,328 hectares of paddy fields in Kelantan An Audit conducted from August to November 2012 at SDO and 3 LADOs namely Pasir Puteh, Pasir Mas dan Machang revealed that in general the implementation of Paddy Fertilizer Subsidies Programme was less than satisfactory due to several weaknesses as follows: Programme s effectiveness study was not carried out. v

6 Farmers did not receive fertilizer subsidies. Fertilizer supplied not within fertilizing season. Some receipients were not paddy Planters. Some receipients received subsidies from 2 sources. Allocation of fertilizer exceeded eligibility To improve the managemant of Paddy Fertilizer Subsidies Programme, SDO dan LADOs are recommended to take the following measures: LADOs have to update the records of paddy planters in their respective areas and prepare a complete Paddy Planters Register to assist in reviewing and monitoring LADOs have to cross-check list of applicants of State Government Fertilizer Subsidy with the Federal Government Paddy Fertilizer Scheme s list of receipients to avoid overlapping Prepare a Report of the Effectiveness of Fertilizer Subsidy Allocation Programme to be presented to the State Government and recommend a better implementation method of Paddy Fertilizer Subsidies Programme in Kelantan. 3. KELANTAN STATE ECONOMIC DEVELOPMENT CORPORATION - Infra Quest Sdn. Bhd Infra Quest Sdn. Bhd. (IQSB) was incorporated on 23rd January 1997 and operated actively in year IQSB is a wholly owned subsidiary of Permodalan Kelantan Berhad which is 100% owned by Kelantan State Economic Development Corporation. The authorised capital of IQSB is RM5 million and the paid-up capital is RM2 million. The main activities of IQSB are as telecommunication tower consultant and renting out its own telecommunication towers to telecommunication companies. Among the main objectives of IQSB are to expedite new application process for installation of telecommunication infrastructure and to obtain local authorities approval for all existing telecommunication infrastructure An Audit conducted from October to December 2012 revealed that in general, the management of IQSB was satisfactory. IQSB s profit before tax increased for the year 2010 compared to 2009 and has decreased in Financial ratio analysis showed a declining trend for the year Besides, the management of activity and corporate governance showed several weaknesses as follows: Areas surrounding towers were not maintained. vi

7 Damage and loss of fittings at towers. Signboards were not prepared. WiFi project did not achieve the stipulated targets. Key Performance Indicator was not prepared to assess company s performance For purposes of futher improvement and to enhance the company s performance, Audit recommended IQSB undertakes the following measures: To ensure the company s financial performance that achieved profits can be maintained and enhanced to generate returns to shareholders To ensure areas surrounding telecommunication towers are maintained according to prescribed guidelines and equipment and fittings are in good condition To ensure market products and ventures in new business opportunities can generate revenues to the company To enhance corporate governance practices by complying with Malaysian Code on Corporate Governance s best practices and Government s circulars to safeguard sharehol vii