Federal auditors find Penang GLC financially unstable

GEORGE TOWN: Federal auditors say a Penang government-linked company (GLC) is financially “unstable” after finding that it suffers from cash flow problems and the inability to pay its short-term debts.

The second series of the 2017 Auditor-General’s Report found PDC Setia Urus Sdn Bhd (PDCSU) unable to fulfil its short-term liabilities as its total liabilities exceeded the company’s current assets.

“Besides that, the company’s profit went down in 2016 and 2017 consecutively. It also suffered from cash flow problems.

“The company is relying on loans from its parent company to carry out its activities,” the report said.

PDCSU is a subsidiary of PDC Premier Holdings Sdn Bhd, which in turn is owned by Penang Development Corporation (PDC), a state statutory body.

PDCSU manages and maintains 10 different properties and facilities in Penang.

According to its website, one of the buildings it manages and maintains is Komtar, the state government’s administrative headquarters. It also maintains the Batu Kawan Stadium, five apartments and four other facilities.

While auditors have found PDCSU’s maintenance works satisfactory, they say the main issue lies in the company’s outsourcing of such work to others.

They said this had impacted the company’s profitability, adding that continuing to do so would not be viable in the future.

The report said most of the outsourced work had been done at a loss to the company, with losses amounting to RM1.56 million in the period from 2015 to 2017.

“For 2015, nine out of the 12 (outsourced) projects done recorded a loss of RM383,852. For 2016, seven out of the 10 projects recorded a loss of RM353,533. Meanwhile, for the year 2017, eight out of the 12 projects recorded a loss of RM828,713,” it said.

The auditors said the car park business had been profitable for PDCSU, adding that this cushioned the losses from the maintenance sector.

However, it noted a minor issue in the car park service, where the late banking of parking fee collections led to losses of RM9,840 involving 131 such incidents.

The auditor said while PDCSU’s administration was “satisfactory”, the company needed to improve its management structure, update its standard operating procedures (SOP) and prepare a key performance index.

It also recommended more viable programmes to improve the company’s profits, as well as more car park services as this had the potential to bring in more profits.

It said PDCSU should also update the terms and conditions in its agreements concerning due dates for payments to protect the company’s interests.

It should also do more to collect all arrears exceeding six months through the enforcement of laws on the matter.

“The company’s SOP has to be improved by requiring the board of directors to approve payments to suppliers, fulfilment of orders and ensuring parking fee collections are remitted to the bank immediately,” it said.

The auditor also recommended that PDSCU monitor its building maintenance jobs and get help from the relevant authorities, especially on building extensions and spoilt fire pump rooms.

In the third series of the Auditor-General’s Report in 2013, PDCSU recorded losses of RM2.74 million. The report also found service charge arrears of RM25.37 million as of December 2013.

FMT has contacted PDC general manager Rosli Jaafar for comment and is awaiting his reply. - FMT