Does the auditor-general’s report provide a true and fair view?

 

From Ibrahim M Ahmad

Kudos to transport minister Loke Siew Fook for his valiant defence of Mass Rapid Transit Corporation Sdn Bhd (MRT Corp) on Wednesday. Never mind that it took several days for him to take the required action.

By all accounts, it appears that MRT Corp was blindsided by Auditor-General (A-G) Wan Soraya Wan Mohd Radzi’s less-than-favourable review of its financial affairs and operations.

Her report, released last Thursday, described the company as one of several government-linked entities in an “unstable” financial position – apparently due to its heavy reliance on government funding. She also said the MRT services were operating below expectations, especially in terms of ridership.

On Tuesday, however, Loke came out in support of MRT Corp, saying conclusions drawn by the A-G lacked “context”.

The minister said the report’s characterisation of the company as financially unstable was misplaced. MRT Corp, Loke said, was established specifically to develop the entire MRT infrastructure using government funds, with all its financial obligations guaranteed by the finance ministry. He also said the MRT service has shown significant improvement, with ridership on an upward trend.

The contrasting positions taken by the A-G and the minister are not merely at surface level. They strike at the core of the purpose and objectives for which MRT Corp was set up.

Loke’s reference to “context” is spot on. It was always the case that the government would fully fund the construction of the entire MRT infrastructure. Running into tens of billions of ringgit, it would have been unreasonable to expect the company to finance the job independently.

That being the case, the treatment of government funding as “losses” that seemingly impact the company’s profitability is laughable. Similarly, the failure to attribute ridership loss to the Covid-19 pandemic and the ensuing lengthy lockdowns which restricted movement among the populace is a startling omission.

The audit findings raise several questions.

The first is whether the audit of MRT Corp’s financials was conducted by suitably qualified persons and in accordance with established accounting standards.

For instance, was the audit in keeping with the accounting standards used for all public infrastructure projects which rely on government funding? Are these the same standards applied in other countries for projects of a similar nature?

The second is whether proper queries were addressed to the entities that were the subject of the report. Were they given the opportunity to address matters raised by the audit? Were their responses properly evaluated before the conclusions in the audit report were reached? Why are those responses not included in the report?

Another question relates to the parameters of the report. Section 6 of the Audit Act 1957 sets out the nature of the A-G’s audit.

It requires the audit to ascertain whether all reasonable precautions have been taken to safeguard the collection and custody of public moneys, whether payments were made with proper authority and against sufficient proof, whether all accounts and other records have been properly maintained, whether moneys have been applied for their proper purposes, whether waste or extravagance was avoided, and whether all provisions of law have been duly complied with.

Essentially, the audit is intended to ensure good governance, especially in the use of public funds. Did the A-G’s report operate within those parameters, or did it traverse improperly into other areas?

Ultimately, does the audit report provide a true and fair view of matters?

Loke’s actions on Tuesday suggest that as far as his ministry is concerned, it does not. I wonder if any of his colleagues are thinking the same. - FMT

Ibrahim M Ahmad is an FMT reader.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.