of Malaysia and His Royal Highness, the Ruler of State of Negeri Sembilan. His
.... 5. Negeri Sembilan Foundation – The Management of the Education Loan ...
AUDITOR GENERAL’S REPORT FOR THE YEAR 2009
AUDITOR GENERAL’S REPORT 2009 ON THE ACTIVITIES OF THE NEGERI SEMBILAN STATE GOVERNMENT DEPARTMENTS AND AGENCIES AND THE MANAGEMENT OF STATE GOVERNMENT COMPANIES
NATIONAL AUDIT DEPARTMENT Malaysia
PREFACE 1. Article 106 and 107 of the Federal Constitution and the Audit Act 1957 requires the Auditor General to audit the State Government financial statement as well as its activities and to submit his Report to the His Majesty, the Supreme Head of Malaysia and His Royal Highness, the Ruler of State of Negeri Sembilan. His Majesty will give his Royal assent for the Report to be tabled in Parliament while His Royal Highness will assent for the report to be tabled in the State Legislative Assembly. To fulfil these responsibilities, the National Audit Department conducts performance audit to evaluate the performance of State Government activities as to whether they were carried out efficiently, prudently and achieve the stipulated targets. 2. My Report on the management of activities of the departments/agencies of the Negeri Sembilan State Government for the year 2009 is a result of an audit carried in nine departments/agencies and two State Government companies. The programmes/activities are the management of the maintenance of bridges on state roads, the management of sand mining and extraction activities and its impact on the environment, solid waste management and its impact on the environment, the management on the maintenance of municipal roads, the management of the education loan, the management of non-revenue water while state government companies under audit are Ganda Akademik Sdn. Bhd. And Liberty Capital Sdn. Bhd. 3. The objectives of this audit is to evaluate whether the programmes/projects were implemented effectively and within the stipulated time frame, the contract specifications and terms and conditions of the agreement were complied with, no wastage and achieve their targets. Overall, the audit revealed there were still some shortcomings as reported in my Report for the year 2008. Among the weaknesses were the management of maintenance of bridges on state roads was not comprehensive; environment damages and water pollution due to ineffective monitoring on the activities of sand mining and extraction and solid waste management resulting in an impact on the environment. The management on the maintenance on municipal roads can be further enhanced to provide comfort to the users. Failure by the Negeri Sembilan Foundation to take actions against defaulters resulted in an increase in arrears on loan repayment. Negeri Sembilan could not achieve the targeted NRW rate due to poor management on its Non-Revenue Water
Programme. Generally, these weaknesses can impair the image of the government as well as the public services. 4. All Controlling Officers were informed of the matters reported to obtain their confirmations. This Report also includes the current status of the matters raised in my 2008 Report to give an extent of the follow-up and corrective actions taken by the departments/agencies with respect to the issues raised. Generally, the departments/agencies have taken corrective actions on those weaknesses. 5. Besides fulfilling the legislative requirements, I hope this Report will be a basis for remedial actions and to enhance the accountability and integrity of the departments/agencies. This Report is also vital for addressing the economic crisis and to act as a mechanism for the public service to transform all performance and public policies such as to ensure conservation and sustainable management of resources, reducing the digital gap between urban and rural areas, providing quality service to society, eradicating poverty, restructuring the Malaysian society, increasing the nation’s economic activities, strengthening the family institutions and to provide proper facilities. Indirectly, this will contribute to the Government Transformation Programme with its slogan “People First, Performance Now” hereby fulfilling the needs, interests and aspirations of all Malaysians. 6. I would like to express my gratitude to all officers in the various departments and agencies who have 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 their commitment to complete this Report.
(TAN SRI DATO’ SETIA AMBRIN BIN BUANG) Auditor General of Malaysia Putrajaya 21 June 2010
SYNOPSIS PART I 1.
ACTIVITIES OF DEPARTMENTS/AGENCIES
Department of Public Works, Negeri Sembilan – The Management of the Maintenance of Bridges on State Roads As a technical department with the expertise and skills in engineering, the Public
Works Department (PWD) is responsible for the inspection and maintenance of bridges throughout the State. PWD Negeri Sembilan spent a total of RM9.33 million to replace four bridges on state roads out of 10 bridges planned, due to limited funds. In addition, PWD Negeri Sembilan also repaired two other bridges due to urgent needs. Overall, the management of the maintenance of bridges on state roads is not satisfactory. Amongst the weaknesses observed were PWD Negeri Sembilan did not follow the guidelines for the inspection of bridges on state roads which were used by the PWD headquarters in Kuala Lumpur for the inspection the bridges on federal roads and the Inventory Registers of bridges on state roads were not updated. Immediate actions should be taken to strengthen and improve the management of the maintenance of bridges on state roads. 2.
Irrigation and Drainage Department, Negeri Sembilan – The Management of Sand Mining and Extraction Activities and Its Impact on the Environment Sand production, one of Negeri Sembilan state government's economic resources
has generated revenue through royalties totalling RM1.6 million between the years 2007 and 2009. These activities are carried out either on land owned by the state government or by individuals. The District And Land Office will issue permit after taking into consideration the technical comments from the Department Of Irrigation And Drainage, Negeri Sembilan, Department Of Mineral And Geosciences, Negeri Sembilan and Department Of Environment, Negeri Sembilan (DOE) on the appropriateness of sand extraction in the area and potential effects to the environment.
Sand extraction in Negeri Sembilan is not
satisfactorily managed and has caused deterioration in the quality of water, erosion on the river banks and changes to the river regime. Reviews also showed that the administrative and technical terms and conditions for sand mining as stipulated by DOE were not complied with by the operators. The Water Regulatory Authority, Negeri Sembilan did not enforce the Water Act 1920 (Amendment 2007) which serves to protect the river from pollution. Coordination and monitoring between departments involved in sand extraction activities iv
should be strengthened to protect the environment. Laws and regulations should be enforced to ensure no further destruction to the environment. 3.
Port Dickson Municipal Council – Solid Waste Management and Its Impact on the Environment The privatization of cleaning services and disposal of solid waste in Port Dickson
Municipal Council (MPPD), Negeri Sembilan was implemented since 2002 in line with the directive from the Ministry Of Housing And Local Government to improve the efficiency of the cleaning services and disposal of solid waste. MPPD had allocated a total of RM22.50 million for the years 2007 to 2009. SWM Environment Sdn. Bhd. was appointed as the contractor responsible for the cleaning services and disposal of solid waste in Mukim Jimah, Linggi, Pasir Panjang, Port Dickson and Si Rusa. Two waste disposal sites under the supervision of MPPD are Sua Betong and Bukit Palong. Several weaknesses were identified during the audit such as an illegal dumping, no leachate treatment pond and no basic facilities at the disposal sites, expired concession agreement and lack of proper monitoring by MPPD. MPPD should strengthen its enforcement on illegal dumping and the management of solid waste disposal sites to ensure these weaknesses do not occur. 4.
Seremban Municipal Council and Nilai Municipal Council – The Management on the Maintenance of Municipal Roads To ensure that roads are maintained periodically for the safety and comfort of road
users, adequate allocations should be provided. For the periods 2007 to 2009, the Seremban Municipal Council (MPS) and Nilai Municipal Council (MPN) had allocated RM26.20 million and RM10.31 million respectively for road maintenance which include roads, drains, signboards, street lightings and slopes. Overall, the roads were satisfactorily managed by MPS and MPN. However, it could be further enhanced to ensure road maintenance is carried out efficiently as there were weaknesses such as road surface damaged, gaps at road shoulders, road break-up after being paved and drains not cleaned which causes discomfort to the public. The municipals should carry out regular monitoring and inspection to ensure the roads are safe to road users.
Negeri Sembilan Foundation – The Management of the Education Loan
The Negeri Sembilan Foundation (Foundation) which was established in 1979 is one of the government bodies that provide education financing facilities in the form of scholarships and loans to the Negeri Sembilan’s residents who are eligible to enter the institutions of higher learning, polytechnics and colleges recognized by the Malaysian Government and also foreign universities. Overall, the main weakness in the management of this loan is on its repayments. As at 2009, the arrears on loan repayment is RM8.19 million or 12.5% of total loans amounting to RM65.56 million and involving 3,021 borrowers. The increase in the loan repayment was mainly due to borrowers failed to repay their loans or to repay according to schedules and the borrowers did not notify on the deferment for repayment. However, the Foundation should evaluate its ability to provide future loan if it wish to remain as a provider on education loans.
Other weaknesses observed were
problems faced by the Foundation to process and generate accurate and updated information from the System on the Management of Education Loans as the technology used was obsolete. Effort to replace this system has not materialized as the new system could not be commissioned within the prescribed period even though it was developed for more than three years and has yet to be handed to the Foundation. 6.
Syarikat Air Negeri Sembilan – The Management of Non-Revenue Water Syarikat Air Negeri Sembilan (SAINS) has received an allocation of RM166 million
from the Ministry of Energy, Water And Green Technology (KeTTHA) under the Ninth Malaysian Plan for the implementation of a holistic programme on Non-Revenue Water (NRW). For the year 2007, Negeri Sembilan ranked second highest out of the 13 states in respect of NRW which was 53.1%. For the years 2008 and 2009, the rate of the NRW in Negeri Sembilan was above 50% as compared to the national rate of 37%.
estimated the loss of revenue from NRW amounting to RM40 million per annum in 2008. Several issues were observed such as the rate of NRW did not meet the targeted Key Performance Indicator of the National Water Services Commission (SPAN), water balance calculations were not accurate and increasing NRW rate. These weaknesses were due to the lack of staff in carrying out continuous maintenance and monitoring as well as the lack of expertise and equipment. Overall, the NRW in Negeri Sembilan is unsatisfactorily managed and needs improvements so that the NRW rate is in accordance to the objectives of SPAN.
PART II –
MANAGEMENT OF STATE GOVERNMENT COMPANIES
Ganda Akademik Sdn. Bhd. Ganda Akademik Sdn. Bhd. (GASB) which was established in July 1993 is a wholly
owned subsidiary of the Negeri Sembilan Foundation (Foundation). The authorized capital is RM5 million and its paid-up capital as at June 2008 amounted to RM3.55 million. GASB carries out its education activities at two educational centres under the Department of Skill Development, Ministry of Human Resources. The management of its activities especially in the operation of the two educational centres was not satisfactory, and among the weaknesses observed were poor assets management, rental arrears and loans repayments to Foundation were overdue.
The financial performance in respect of the profit margin
showed an increase in negative returns while the current ratio recorded a declining trend from 2006 to 2008. However, the financial position of the GASB has improved in 2009 and was able to recover the losses suffered in during 2006 to 2008 as a result of the Economic Stimulus Package given by the government. Measures should be taken to rectify these weaknesses such as reducing operating costs, disposing obsolete assets, restructuring the organization and promoting the company’s products more aggressively. 8.
Liberty Capital Sdn. Bhd. Liberty Capital Sdn. Bhd. (LCSB) which was established in 1 July 1993 is a wholly
owned subsidiary of the Negeri Sembilan Foundation (Foundation) with a total investment of RM1.1 million (100%). The objectives of LCSB are to improve the results of the critical subjects of Mathematics, Science and English Language among students in rural areas. LCSB manages three tuition centres owned by the Foundation at Rantau and Simpang Pertang which commenced operation in 2008 and also at Palong 5, which commenced in 2009. The main activities were well managed by the company, but there were some weaknesses such as mission and vision of the company were not determined, the budget was not realistic, physical inspection of assets were not carried out, repair and disposal of assets was not done as well as physical monitoring and visits to the tuition centres were not recorded. The financial performance of LCSB was unsatisfactory as there were accumulated losses for three consecutive financial years ended 2006 to 2008. Losses were attributed to the increased spending of LCSB. Therefore, LCSB needs to enhance its strategies to enable it to increase its earnings and hence reduce accumulative losses.