From zero to hero: Pakatan states prove their mettle in financial management

The debt of the country has risen to RM407 billion. National debt is up by 12 per cent while foreign debt has risen by 22 per cent. We have yet to see an efficient delivery system and good governance of the country. When taxpayers’ money is used without proper accountability the government in charge has to answer to the electorate. Almost for all the past years it had been officially reported of numerous cases of mismanagement of public funds by irresponsible and incompetent government bodies and agencies. Ironically, no obvious and harsh actions have been taken against the wrongdoers for reasons only the incumbent government would know.

54 years in power

Despite being in power for over 5 decades the Auditor-General’s Report 2010, which was released 17 “mysterious” days late, has shown numerous cases of how taxpayers’ money was not managed watchfully by the responsible bodies. Financial management has gone through defects and leakages and this has caused a great financial loss to the country.

The Report showed that most of the failed cases involved contracts which were awarded without open tender where a substantial sum of money was unnecessarily involved. The contract prices offered were unnecessarily high and not competitive and the process of awarding lacked transparency, which would naturally proffer less value for money. In numerous other cases, the procurement process - even through submitted tenders - saw prices of quoted items bloated many times higher than the market price. Yet the deals went through for some “mysterious” reasons. Numerous such cases have caused barefaced misappropriation of allocated fund to the ministries involved. Among the many shortcomings in the delivery system involved huge sum contracts given to those who had little experience in the related business.

Money was promised to the farmers

The electorate are keen to know - as shown in the Auditor-General’s (AG) Report - what happened to the RM110.67 million owed to 73,291 farmers under a special scheme to boost a high rice production. The Ministry of Agriculture and Agro-Based Industry was reported as still owing the RM110million worth of incentives promised to paddy farmers. The money was promised to the farmers who were successful in increasing their rice production.

According to the Report, the farmers were eligible to receive RM341.29 million between January 2007 and January 2010. Bernas (PadiBernas Nasional Berhad), which controls 24 percent of the race market and 45 percent of the local rice demand, only managed to pay incentives worth RM230.62 million at end 2010. The cited reason in the Report was “lack of funds”. The electorate, however, would want to know where the taxpayer’s money amounting to RM110 has gone to.

Poor management and incompetency

A RM73.64 million beef-cattle government project Valley – involving a farmland of 5, 000 acres in Gemas - has not lived up to its mark. The NFC (National Feedlot Centre) is a joint-venture between Negri Sembilan and Federal Government through the Ministry of Agriculture and Agro-based Industry (MoA) to commercially produce more beef domestically and cut down import of meat.

The farmland is now overgrown with shrubs and bushes The project must be handled by those who know little about cattle industry. The AG’s Report showed that the NFC which was set up in 2008 failed to meet the target of breeding 8,000 cattle last year. The Report showed only 41.1 percent (3,289) was produced. Poor management was cited as the reason for this failure, such as poor use and maintenance of its facilities. The electorate would want to know why and who the incompetent people managing this project were, as it involved a huge sum of taxpayers’ money.

Even the Public Service Department (PSD) was not spared by the AG’s Report. More than RM4.5 million was overpaid to pensioners – both alive and dead - from 2007 to 2010. The Report found that one of the reasons for overpaid pension was that the records on the pensioners’ deaths were not correctly updated in the Post Service Department’s (BP) computer system. The electorate deserve to know why such an incompetency among government servants when it involves taxpayer’s money.

Contractors had shoddy track records

Contractors given the responsibility to provide services to the government gave some implausible excuses such as lack of expertise, no spare parts and that they could not find what was the problem with a vehicle. This smacks of incompetency on the part of those who were awarded contracts. According to AG’s report some of these contractors had shoddy track records. One company took more than a year to repair and return a towing truck to a ministry. Despite so many reminders by the AG’s Office, the Defence Ministry still kept irresponsible contractors to provide services to them. It was reported that 10 disreputable contractors were awarded RM67 million for work delays despite being notified by the AG’s Office. These were the type of contractors awarded multi-million ringgit projects under the Ministry of Defence. The electorate would want to know how this could be possible as it involves projects worth millions of ringgit and the money is from the taxpayers.

The Report also mentioned that these companies recorded various levels of delay in repairing the Air Force’s Aviation Ground Support Vehicles (AGSV). The ministry did nothing more than issue these disreputable contractors warning letters. Surprisingly their contracts were extended till Dec 6 2010 when their contracts were supposed to expire on June 5. It noted four companies most disreputable for their delay in delivery of repaired vehicles. The electorate would want to know why these contractors were given special treatments.

Standard procedures were not adhered to

According to the AG’s Report, the ultimate budget allocations for 2010 increased to RM149.06 billion from the initial allocation of RM138.28 billion. This was an increase of RM10.78 billion. However, this amount was still insufficient to cover the operating expenses for 2010 that came to RM151.63 billion – RM2.57 billion more than that was allocated. The standard procedures were not adhered to by some ministries and departments when they spent more than what was allocated. It was reported that there were 138 weaknesses in financial management involving RM360.96 million. 75 cases of overspending their operating allocation totalling RM306.01 million involved 14 ministries and departments encompassing payments for services, procurements, increased activities and unscheduled payments. In some cases equipment such as computers, LCDs and other utilities and office equipment ware were bought at bloated prices. The electorate would want to know why the standard operating and procurement procedures were not adhered to in these situations that resulted in huge loss in taxpayers’ money.

Direct bookings instead open tenders

The AG’ Report stated that the Tourism Ministry overpaid nearly RM270 million for advertisements when it opted to use direct bookings instead of open tenders. This procedure itself breached the Treasury’s regulations. It was stated that an open tender would have seen its advertising spending cost RM75 38 million. The ministry also spent RM195 million to buy 1000 racks – RM1 950 per rack - to hold its tourism pamphlets for the Visit Malaysia Year 2007 campaign done without the treasury’s approval. It was also unable to confirm the distribution of 22 of the 1 000 racks as the ministry could not supply the note of delivery as proof of claim while another 127 racks were also not accounted for. It noted the ministry’s explanation that 622 racks had been distributed to hotels, 127 were “expired” by the contracted company due to “financial complications” and lack of storage space and as many as 85 racks were locked in the company’s storage hold.

The above cited incompetence and gross financial mismanagement cases that have sapped taxpayers’ money are just the tip of the iceberg. Going through the AG Report could see copious cases in government’s financial and management negligence. The electorate are not too pleased with the government that has been there for almost 6 decades and yet not being able to draw from experience on how to address many of the weaknesses found in the delivery system. These misdemeanors and wastage have indubitably involved taxpayers’ hard earned money.

Only 3 years in power

The Opposition-ruled states have proved to be more prudent in managing taxpayers’ money despite still being new to governance and the Federal Government often giving them a cold-shoulder.

The Selangor state government received an overall ‘satisfactory’ rating from the Auditor General for its financial position ending 2010. The state has been extolled in the report for its good performance in decreasing public debts. Public dept dropped by RM58.91 million whereas loan repayment areas were reduced by RM173..47 million. The Report showed that in 2010, the state’s debt to the Federal government had decreased by 5.5% (RM58.91 million) – from RM1,004.64 million (2010 ) compared to RM1,063.55million (2009). The loan repayment arrears were reduced by 20.9% from RM829.86 million (2009) to RM656.39 million (2010).

It was reported that the state’s consolidated revenue increased by RM266.91 million or 20.2 percent, from RM1,319.97 million in 2009 to RM1,586.88 million in 2010. This is despite the state registering a 10.9 percent or RM192.36 million drop to RM1,571.50 million in state’s revenue in 2009 (RM1,763.86 million). The operating expenditure had also decreased by RM382.56 million or (20.9 percent) to RM1,447.26 million in 2010 compared to RM1,829.82 million in 2009, The state government was commended for reduction in revenue arrears by RM99.87 million or 16.6 percent, from RM601.92 million in 2009 to RM502.05 million in 2010.

The Report rated as 'very good' the financial management for four state agencies - the State Treasury, Ampang Jaya Municipal Council, Selayang Municipal Council, and Urban and Rural Planning Department. According to the report, 11 agencies were ‘good’ and one agency was 'satisfactory'. This marked an improvement compared to 2009, where only one agency was listed as ‘very good’, 14 as ‘good’ and one satisfactory.

The Kedah state government achieved a 135.8 percent increase in state revenue with a record surplus budget for 2010 at RM22.50 million, compared to deficit of RM62.89 million in 2009. The state expenditure only increased by RM2.55 million or 0.6 percent. This attributed to a surplus for the state government in 2010. The Report rated Kedah’s financial position as satisfactory with a consolidated revenue increase of 23.9, from RM265.52 million to RM328.28 million in 2009. This increase has reduced the balance of the Consolidated Revenue Account deficit in 2010 by a total of RM22.50 million or 7 percent, from RM320.73 million down to RM298.23 in 2009.

The Report also praises the state government for improving the financial management of its agencies compared to 2009, with four agencies getting the ‘very good’ rate, 12 ‘good’ and one as 'satisfactory'. Overall, the financial management of the state’s agencies improved compared to 2009.

The AG’s Report has rated the Kelantan state government’s financial position in 2010 as satisfactory. The state saw a revenue increase of RM51.07 million or 52.5 percent, from RM97.23 million in 2009 to RM148.30 million in 2010. Scrutiny of 5 years into the consolidated revenue from 2006 to 2010 revealed a drop in 2007 and 2008 and then increase in 2009 and 2010. Cash reserves and investment increased in 2010, with the balance of RM97.23 million in 2009 increasing to RM148.30 million in 2010.

The Report lauded financial management of all government agencies in Kelantan, with four state agencies being rated as ‘very good’ and the other 15 as ‘good’. This indicates improvement in financial management of the state compared to 2009 where only two agencies were rated as ‘very good’ and 12 as ‘good’.

The Penang state government was highly commended in the AG’s Report for its improved financial position in 2010 compared to 2009. Penang's consolidated revenue increased by 2.7 percent, from RM1,101.89 million for 2009 to RM1,131.17 million in 2010. The consolidated cash reserve increased by 6.2 percent to RM572.49 million, up from RM538.95 million in 2009. The state’s revenue for 2010 had increased by RM34.19 million or 9.1 percent compared to 2009 from RM376.51 million to RM410.70 million.

On development under the Ninth Malaysia Plan, the Report rated the state’s performance as satisfactory with a total of RM787.17 or 77.8 percent being spent from the allocated RM1.01 billion. In terms of implementation of projects, the report praised the state's performance as 'very good' with 99 percent of the 9,003 projects successfully carried out.

In 2010, 3 agencies were in ‘very good’ category. 10 agencies were considered ‘good’ and one at satisfactory level. For three successive years, 13 state agencies audited at least twice between 2007 to 2010 have shown ‘very good’ financial management by the state treasury and development body. The report concluded that the financial management of state agencies remained good for 2010.

The gulf of difference in governance

54 years of governance by Barisan Nasional (BN) have not made much impact in reducing weaknesses in the financial management of the country. The lack of competency, accountability and transparency has caused huge sum of taxpayers’ money being abused. Since the electorate are seeing the same weaknesses every year in the past, they have all the rights to voice and protest against such gross incompetence by the incumbent government. On the contrary, It takes a mere 3 years of efficient governance by Pakatan-controlled states – Penang, Selangor, Kedah - and human uprightness in the state government of Kelantan to see tremendous financial success despite all the difficulties these states have to wade through and confront with politically. The Federal government under Barisan Nasional may not be too responsive to the needs of these states, yet the latter have managed to prove to the electorate that with honesty and integrity they could manage the states and taxpayers’ money better and with success.

Malaysia Chronicle