AG identifies weaknesses in eight govt-owned firms

PETALING JAYA: The Auditor’s General Report 2016 Series 2 has identified weaknesses in eight government-owned companies under the purview of five ministries, despite seven of these companies recording “satisfactory” financial performances in the audited period.

Corporate governance issues, project delays, unachieved targets and straying from mandates are among the weaknesses identified in the report.

The companies are Al Hijrah Media Corp, TH Travel and Services Sdn Bhd, Cyberview Sdn Bhd, Malaysia Venture Capital Management Bhd (Mavcap), German-Malaysian Institute, Malaysian Green Technology Corp, UPM Consultancy & Services Sdn. Bhd, and UTM Holdings Sdn Bhd. Of these organisations, Al Hijrah Media Corp was the only one to record “unsatisfactory financial performance”, posting pre-tax losses for three fiscal years running.

The most discrepancies were identified in the Malaysia Venture Capital Management Bhd, a unit of the Finance Ministry (MoF) – which had deviated from terms and conditions for the deployment of funds under the 10th Malaysian Plan (10thMP), which stipulates that funds amounting to RM130 million should be deployed into Mudharabah direct venture capital investments whereas RM70 million was earmarked for Asean level (OSP3) indirect venture capital (VC) financing.

Mavcap had invested RM193.88 million into Corporate Venture Capitals and OSP3, without written approval from the MoF.

The company is behind schedule in terms of settlement of its loans of RM450 million from the 8th Malaysian Plan which are overdue from 2011 – leaving it with a cumulative total late interest charges of RM85.85 million. Between 2007 and June this year, the company only managed to repay RM337.29 million of the amount.

As at June 2017, Mavcap had only regained RM148.58 million of its total investment given out (RM372.42 million) which resulted in a RM223.84 million loss.

The report also said the company’s investment commitments have surpassed the funding received by 118.1% in the 9th MP, 119.9% (10thMP) and 167.8% (11th MP).

The AG has recommended Mavcap optimise the use of funds provided by the government under every MP; engage in dialogues with MoF; obtain the ministry’s approval before allotting funds which are not in adherence to terms and conditions; and improve corporate governance.

Mavcap in a response on Sept 18 said that it had given a fund restructuring proposal to the MoF’s Economic Planning Unit in December 2012 for which it claimed approval in principle was given for implementation in the same year. It had only received a written approval to implement the changes in partnership with private entities in January 2015.

“The first round of funding from the MoF on Dec 28, 2012 indicated its approval of investments for non-Mudharabah purposes,” Mavcap said in its response.

MoF, in its response on Sept 19, said it is conducting a rationalisation study on VC companies and will periodically engage with Mavcap’s management.