Wasted millions must be measured in stolen futures

THE true cost of the millions of ringgit in public funds that are reported as lost in the Auditor-General’s Report 2013 must be tabulated in order to drive home the importance of stemming this endless haemorrhage.

Two prominent cases highlighted in the first of the three-part AG’s Report released last week, illustrate the unconscionable wastage of money that leaves a black mark on the civil service.

The first case involves the RM342.55 million Paya Peda Dam in Terengganu, which the Report said, was marred by the inexperience and lack of expertise of the contractors JAKS Resources Bhd and Pembinaan Sujaman Sdn Bhd.

The troubling question is why the contract was awarded by direct negotiation when an open tender would have easily identified a competent contractor for the job.

The AG found that not only did the contractors lack the experience needed for the construction of a dam with a hydro-mechanical gate system, they had also flouted international guidelines, failed to submit preliminary drawings resulting in an incomplete submission for the project and made wrong calculations on components of the project.

This scandalous litany of flaws warrants an independent investigation into the gaps in accountability that allow such a state of affairs to exist.

The Report notes that the project’s shortcomings resulted in a flood two years ago, and affected the targeted increase in paddy yields in the Besut district.

Moreover, flood damage carries many direct and indirect costs, ranging from destruction of property to loss of income and even lives, and to loss in property value and reduced investor confidence.

The other glaring case involves the Kuantan court complex, the construction of which was delayed by 560 days, resulting in a cost increase of some RM19.56 million, according to the Report.

The reasons given for the delay were poor planning in the design and scope of construction work. Among other things, the terms of the contract were disregarded and there were differences between the As-Built drawings and actual construction, the Report said.

Some 158 weeks after the scheduled completion date and almost RM20 million in extra costs later, the complex was completed.

Considering that the extra millions in wasted funds could have gone towards social services and amenities for the underprivileged sectors of society, it is a grave crime against the less fortunate that the country’s wealth continues to be squandered in this way.

Being scrupulous about the use of public funds is not just a matter of financial accountability, it is a solemn duty for civil servants and society at large to ensure that the money saved reaches the most deserving people in our midst.

So, the wastage that the AG dutifully reports without fail every year is really a tally of the opportunities for a better life that are snatched from the people at the bottom of society.

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AG Report 2013: Retailers under TUKAR forced to sell or rent

PETALING JAYA (April 7): The lack of increase in sales and profits had spurred some business owners involved in the Retail Stores Transformation Programme (Tukar) to sell or rent their premises to other parties.

 

According to the Auditor General’s Report 2013, 18 (26%) out of 70 retail stores of sundry shops involved in the programme has sported a decline in sales partly due to competition from other nearby supermarkets.

 

The report revealed that 18 out of 70 shops stores showed no tangible difference and also recorded a decline in sales, partly due to the competition from nearby supermarkets.

 

Furthermore, 10 stores had closed down their businesses, partly due to capital shortage. 

 

“Besides that, the participants had difficulties in getting their supply because they did not maximise the returns on stock sales as a working capital for the next stock purchase,” the report stated.

 

“In addition, the participants also experienced difficulty in returning expired items due to absence of agreement between the participants and suppliers,” it added.

 

As a result, some of the business owners had to relinquish their stores by selling or renting out the premises.

 

According to interviews between some participants and officers from the Auditor General’s office, this was done as there was no clause in the contracts that specified against selling or renting our premises involved in the programme.

 

“Among the causes of the poor sales causing participants to close or sell their businesses are due to competition with a nearby supermarket, difficulties in obtaining goods as well as the reluctance of suppliers to accept faulty or expired goods, the unsuitable locations of the stores and the priority of the TUKAR programme on store upgrades rather than capital assistance to restock merchandise,” the report stated.

 

“Also, the closure or transfer of businesses is due to the lack of capital and a the lack of a clause in the loan agreement prohibiting sale of business while the loan is enforced.”

 

Participants also lacked due to distant locations of the training programmes, transportation issues and health problems.

 

Also, shopkeepers did not use the sales system under the programme, due to lack of training from suppliers and aging retailers who found it difficult to understand the system.

 

“As a result, the Point Of Sales system’s functions, such as monitoring the sales and stocks of goods, the use of bar code and inventory database that could be linked directly to the consultant, could not be used,” the report stated.

 

The Tukar programme is one of the Entry Point Projects (EPPs) under the National Key Economic Areas (NKEA) for wholesaling and retailing, supervised by the Domestic Trade, Co-operatives and Consumerism Ministry.

 

Launched on February 19, 2011, it aims to modernise traditional and existing sundry stores and to enhance its competitiveness in the retail store sector.

 

The programme was conducted through Bank Rakyat and five special cooperatives were approved by the Performance Management And Implementation Unit (PEMANDU) and placed under the supervision of the Cooperative Commission of Malaysia.

 

The participants of this programme were given loans as their source of funds.

 

Bank Rakyat will issue a loan to the applicant up to maximum of RM80,000 at the rate of 3% service charge and a maximum repayment period of 15 years.

 

A total of RM30,000 from RM80, 000 loan amount can be used for the purchase of stocks of goods sold.

 

Between 2011 to 31 December 2013, the Finance Ministry had approved an allocation fund of RM149 million to implement the TUKAR programme.

 

The implementation of this project was expected to contribute RM5.56 billion to the Gross National Income (GNI).

 

The auditor recommended that the Domestic Trade Ministry takes the following actions;

 

i. prior to any renovation of the participants? shop lots, a loan agreement should be signed first between the participants and the lenders so that the loan terms and conditions could be enforced.

 

ii. including a requirement in the offer letter or agreement for participation that the retailers should not change ownership or sell their stores to other retailers.

 

iii. ensure that appointed consultants perform their roles and responsibilities in monitoring the stores continuously in terms of advice, ensuring adequate supply; helping the store layout and providing adequate training.

 

iv. review the adequacy of training so that it is in line with the participants’ environment, and;

 

v. frequently conduct motivational programmes to encourage traders to commit fully to their businesses.

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AG's Report 2013: Inexperienced contractors for dam causes flood, delay

PETALING JAYA (April 7): The inexperience and lack of expertise of the contractors hired to helm the construction of the Paya Peda Dam in Terengganu had not only culminated in a flood two years ago but will also affect targeted increase of paddy yields in the district of Besut this year.

The Auditor General’s (AG’s) Report 2013 stated today that the Finance Ministry had hired water and steel pipes manufacturer JAKS Resources Bhd and Pembinaan Sujaman Sdn Bhd through a RM342.55 million contract via direct negotiation.

However, the AG found that not only did the contractors lack the experience needed in the construction of a dam with a hydro mechanical gate system, they had also flouted international guidelines, failed to submit preliminary drawings resulting in an incomplete submission for the project and made wrong calculations on components of the project.

They also had insufficient assets for construction, causing a delay in the completion of the project which was initially targeted to be completed within a timeframe beginning June 1, 2010 to November 30, 2013.

“For example for the month of July 2013, the total number of machines should be used in the construction of the Peda Dam is 215 units of machinery but the contractor only uses a total of 151 units of machinery alone,” the report stated.

“In the Audit’s opinion, this delay can be avoided if the contractor had been working to implement the project as specified in the contract.

“It could have also been avoided by the selection of competent contractors in terms of experience, knowledge, and sufficient resources in construction management, especially for large-scale projects requiring high technical expertise.”

The Paya Peda dam is located 1.5km upstream of Angga Barrage and 17km from Jerteh, Terengganu.

A total of 12:12 square km (16%) of a 77 square km catchment area has been used as water reservoirs.

According to the Final Design Report 2009, the dam is expected to save (reliable storage) of 220 million  cubic metres of water and produce up to 1,120 million liters per day (MLD) to meet the water supply needs of agriculture, domestic and development in the Besut district until 2050.

“The objective of this project is for the construction of a dam to provide water to meet the Besut Irrigation Scheme in the North Terengganu Integrated Agricultural Development Area (IADA KETARA), increase the supply of water in the Besut district and a control structure to reduce flood risks downstream of the Besut river and other areas during the monsoon season,” the report stated.

Key requirements of project not met.

The audit found that weaknesses of the project include:
                                                                       
i. lack of compliance with the contract clauses such as the shortage of equipment utilised than specified in the contract which contributed to the delay in completion of the project and the appointment of a subcontractor without permission

ii. improper payments of RM530,000 to a surveyor for work related to land surveying However, the Agriculture Ministry has taken steps to recover the amount overpaid. The company has returned a total of RM150, 000 and the balance will be paid in installments;

iii. selection of contractors who are not qualified / experienced had also contributed to the high number of Non-Compliance Reports;

iv. recommendations by the Environmental Impact Assessment (EIA) was not fully complied with, including for tests to be conducted to ascertain the existence of arsenic minerals, unsatisfactory management of oil waste and an Emergency Response Team was established at the beginning of the project; and

v. lack of engagement with local residents to address flooding.

The incompetence had resulted in a flood two years ago that caused 2,300 residents to be evacuated after the upstream coffer of the dam, or a section of the dam’s bank, collapsed after heavy rains.

National news agency Bernama had reported that the overflowing water submerged the whole area of Kampung Padang Bual up to the roofs of the residents’ houses.

According to the AG’s report, the temporary bank was constructed according to international standards of 1:25 years but the rains at that particular time had exceeded was extraordinary, which exceeded the 1:50 years mark.

The delay in the project will affect projected paddy cultivation conducted twice a year, therefore affecting increase of paddy yields and flood mitigation, the objectives of the project.
                                                                                                                                                                          
The contractors had also appointed 16 subcontractors without approval from the enforcement officer, resulting in 271 workers ranging from project engineers, supervisors, project managers, surveyors and technicians, chainmen, field assistant, machine operators, drivers and staff from 8 subcontractors working at site.  

The Edge Financial Daily had reported in March 2010, that according to a local research house, JAKS would have to subcontract a large portion of civil works to more experienced contractors due to its lack of experience in dam construction.

The delay will cause the government an additional cost of consultancy totalling RM454, 899 per month or RM2.96 million, based on application letters dated May 30, 2013 for the period December 2013 to June 2014.

A-G report: Hospitals purchased fish at above market prices

KUALA LUMPUR: The Auditor-General has found that fish bought on contracts by two hospitals were higher by between 34.4% and 100% compared to market prices.

According to the Auditor-General’s Report 2013, Series 1, the purchases resulted in the Government not getting value for money.

The report tabled in the Dewan Rakyat on Monday stated that siakap was bought at RM21 per kg in the 2012-2014 contract by the Sultanah Aminah Hospital, Johor compared to the RM14.50 per kg market price, while squid was bought at RM16 per kg (market price of RM9.50 per kg).

It added that the Kuala Lumpur Hospital bought pomfret at RM21.50 per kg in the 2012-2014 contract against a RM16 per kg market price, grouper for RM19.50 per kg (market price of RM12), nyior fish for RM18 per kg (RM10), and catfish for RM11 per kg (RM5.50).

The A-G urged the Health Ministry to plan and monitor the procurement of perishable goods and monitor prices to ensure value for money purchases.

The Health Ministry, in its reply, said the contract prices of fish paid by the two hospitals included transportation costs. – Bernama

A-G report notes discrepancies in Sukma equipment purchases

KUANTAN: There were striking differences in prices of equipment acquired for the 15th Malaysia Games (Sukma) despite being of the same type, size and brand.
The Auditor-General in his report for Pahang said the equipment included vacuum cleaners bought at between RM400 and RM600 each, whiteboards between RM590 and RM920 each, industrial fans between RM248 and RM650 each and trolleys between RM150 and RM600 each.

Other items were LCD television sets at between RM1,450 and RM2,300 and video cameras between RM1,600 and RM2,100 each.

The Auditor-General also found that support equipment was acquired from the same suppliers of the sporting equipment.

The report said suppliers who were not specialised in providing support equipment would obtain the items from other suppliers, who would then ma
rk up the prices.

The Sukma 15 secretariat responded that the items were bought according to the sporting events and were requested by the respective technical committees.

It added that the suppliers of sporting and support equipment were appointed according to the type of sports contested to expedite the supply process.

“The selection of suppliers was made according to the lowest prices and many of the sporting equipment suppliers also provided the support equipment,” said the secretariat in its response dated Oct 10 last year.

However, the Auditor-General felt that the difference in prices was due to each committee purchasing the same item from different suppliers.

The Auditor-General also discovered that up to 1,211 assets worth RM93,150 had gone missing due to theft, accident, natural disaster, depreciation, fraud and the negligence of officers.

Among the causes for the loss was the failure of the secretariat and committee to record the assets’ movement during the organisation of Sukma 15 as well as the lack of monitoring the usage of equipment.

There was also wastage as up to 24 items bought for a total of RM120,688 still had not been used as of the day of auditing.

The secretariat responded that the landing foam mats it bought were not used for training sessions due to the late completion of the venue, while the weightlifting training bar sets had been utilised and returned to storage in Rompin.

“The vacuum cleaner for the sepak takraw event was not used because it was provided by the venue without the secretariat being informed,” it said.

Auditor General’s report highlights five general weaknesses

KUALA LUMPUR: The Auditor General's report on seven projects and activities by government statutory bodies highlighted five general weaknesses.

In general the weaknesses were improper payment, work or supplies not according to specifications, low quality or inappropriate, unreasonable delays, wastage, weakness in management of products and assets.

Auditor General Tan Sri Ambrin Buang said on Tuesday, among the reasons were carelessness in adhering to procedures fixed by the Government, lack of attention to detail when planning projects or fixing scopes and specifications of tenders and no frequent monitoring of contractors, negotiators or suppliers.

He also mentioned reasons like lack of skill in project management, late decisions on acquisitions, incomplete and outdated agency information systems, lack of attention towards effectiveness or impact of a project, and lack of funds for asset management.

The seven government statutory bodies audited were Malaysian Agricultural Research and Development Institute (MARDI), Universiti Malaysia Sabah, Universiti Malaysia Kelantan, Universiti Utara Malaysia, Employees Provident Fund, Retirement Fund (Incorporated) (KWAP) and the Accountant General’s Department of Malaysia.

109 recommendations submitted in 1st series of AG's Report 2013

KUALA LUMPUR (April 7): A total of 109 recommendations were submitted in the First Series of the Auditor-General's Report 2013 to assist the ministries, departments and government companies to improve the inadequacies identified.

 

Auditor-General Tan Sri Ambrin Buang said the report, which was tabled in Parliament today, contained matters which had been observed from the audit of 17 programmes, activities and projects of 14 Federal Ministries and Departments, and the management of two Government Companies. 

 

"Beginning this year, ministers have been informed of the reports concerning their respective ministries so that they will know much earlier the issues to be reported and take immediate action," he said in his preface in the report. 

 

Ambrin said that generally, there were weaknesses such as 'improper payment', works/supplies/services which did not follow specifications/low quality/unsuitable; delays and unsuitable prices; wastage; weaknesses in revenue management, government asset management and maintenance; non-compliance of environmental regulations as well as weaknesses in the management of government companies. 

 

He said the weaknesses were due to negligence in complying with regulations/procedures stipulated by the government; poor care in the planning of programmes/activities/projects and determining the scope and specifications of tender and poor monitoring of works by the contractors/vendors/consultants. 

 

Other weaknesses included lack of skill in project management; delays in making decisions on purchases; ministries'/departments'/government companies' information systems which were not detailed and not updated; lack of attention on outcome/impact of a particular programme/activity/project and inadequate allocation for asset management.

 

In the report, Ambrin said the National Audit Department had carried out four types of audit namely the Attestation Audit, Compliance Audit, Performance Audit and Government Companies' Management Audit.

 

He said the Auditor-General's Dashboard, which was launched on May 30, 2013, had been displayed on the website of the National Audit Department on the following day which showed the status of action in the latest Auditor-General's Report beginning 2012.

 

"It is used to monitor actions taken by the Ministries, Departments on issues raised in the report. In addition, it also serves to show the Government's commitment in tackling leakages in its financial management," he said. 

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