Double payment for river cruise boat supplier

Melaka River Cruise (MRC) management paid the accessory supplier for two of its boats twice, the 2010 Auditor-General's Report says.

"The audit review on maintenance payment vouchers for MRC boats in 2009 found that the accessory supplier for boats Puteri Hang Li Po and Hang Lekir received double payments amounting to RM12,312 in 2009," the report reads.

It also called for an investigation by the Melaka River and Coast Development Corporation (PPSPM) to identify whether there were elements of "negligence or malpractice in the case of double payments".

MRC began operations in February 2006 and by December 2010, it had acquired 40 boats at a total cost of RM3.87 million.

According to the audit report, the overall management of the MRC is less than satisfactory due to several weaknesses, such as unregistered and unlicensed boats and double payments for maintenance of the boats, among others.

The report says PPSPM was aware of the discrepancy and sent a notice to the supplier on April 16, 2010.

The supplier had admitted to the blunder and reduced the maintenance fee in the subsequent invoice, but the auditors were not able to certify the reduction as no supporting document was made available.

The audit review also found that nine boats purchased from May 2009 to September 2009 were yet to registered and licensed.

"The boats have been in operation without valid licences for a period of 13 to 17 months," says the report.

The nine boats were finally registered and licensed by Nov 1, 2010.

The audit also discovered that PPSPM had renewed the insurance for one of its boats, Tun Teja, from July 8, 2009 till July 29, 2011 at a premium of RM3,464 - despite the boat being out of order since early 2009.

The corporation however said the renewal was necessary to enable PPSPM to make an insurance claim for the boat once it was repaired.

The audit report also lists the MRC management as unsatisfactory for operating unregistered and unlicensed boats and for its unsafe petrol storage facility.

Weakness in KMB financial management

As for Kumpulan Melaka Bhd (KMB), the audit report detected weaknesses in its financial management, even though the state corporation had recorded pre-tax profits from 2007 till 2009.

KMB is wholly owned by Chief Minister Incorporated (CMI) and it functions as the consultant for property developments and investments in joint venture projects.

The audit conducted between June and August last year revealed that KMB still owed the Malacca state government RM5.2 million.

The loan agreement requires KMB to pay back RM7.5 million from RM23.4 million it borrowed to fund the construction and development of the Taming Sari Tower, which was completed in December 2007 at a cost of RM26.3 million.

"The Taming Sari Tower has been rented out to Melaka Taming Sari Bhd (MTSB), a wholly owned subsidiary of KMB, at a rate of RM0.35 million a month.

"According to the agreement, KMB has to pay back the loan to the state government at a rate of RM7.5million beginning January 2009.

"However, until June 2010 KMB had only settled RM2.3 million and the remainder of RM5.2 million is yet to paid, although KMB collected rental of RM4.72 million from MTSB out of the RM8.4 million MTSB owed KMB for rental and management of the premises," the audit report says.

KMB in its response said the loan repayment to the state was dependent on MTSB's business performance, and looking at the fact that MTSB had just started operations and the high cost involved, it had failed to pay its rent on schedule.

"However, MTSB has shown a strong commitment to settle all outstanding arrears," explained KMB.

Although it notes that KMB's administration of the Taming Sari Tower is satisfactory, the audit report, nevertheless, recommends that it improves on both rent collection from its subsidiaries, as well as repays its debt to the state government.

Another state-linked company, the Malacca International Bowling Centre (MIBC) had taken a RM20.06 million loan from the state government until May 2009 for development purposes.

Money given out without loan agreement

MIBC is managed by the Malacca International Trade Centre Bowlplex Sdn Bhd (MITCBSB), which has a 40 percent stake in KMB.

However, the audit review found that KMB has yet to prepare a loan agreement for the RM20.06 million as well as the MITCBSB repayment schedule.

"The loan advancement of RM1.51 million given to MITCBSB from 2007 to 2009 by the state government to fund its project has not been paid. The repayment scheduled has not been drawn up by KMB either.

"Benua Aspirasi (BASB), which operates MIBC, also failed to settled the RM2.12 million in commitment fees, rent deposit and building rent owed to MITCBSB since it began operations in August 2009.

"However, until the end of June 2010, BASB only paid RM0.92 million in rental despite raking in RM3.49 million in revenue," says the report.

The audit report also says that KMB terminated BASB's contract in October 2010 for failing to adhere to the agreement and MICB's operations were now being managed by MITCBSB.