GLCs must operate with accountability and integrity

THE National Audit Department was restructured last September as part of its transformation plan. One of the main changes was to deepen its audit of government companies.

As a result, the latest of the Auditor-General’s Report series has a separate volume on the management of government-linked companies (GLCs).

This is a noteworthy development because as Auditor-General Tan Sri Dr Madinah Mohamad pointed out in the report’s preface, the governance of GLCs has been a hot topic in recent years, particularly in relation to accountability, transparency and integrity.

“The failure of good governance would expose an entity to risks of abuse of power, embezzlement and corruption,” she wrote.

The Audit Act 1957 empowers the Auditor-General to audit a company in which the Federal Government, a state government or a public authority holds more than half of the paid-up capital.

Tabled in Parliament on Monday, the Auditor-General’s Report 2016 Series 1 contains audit findings on the management of seven GLCs: Tekun Nasional, CyberSecurity Malaysia, Syarikat Pemasaran Karyaneka Sdn Bhd, Ketengah Holding Sdn Bhd, Ketengah Properties Sdn Bhd, Prisma Harta Sdn Bhd and UMK Business Ventures Sdn Bhd.

An agency under the Agriculture and Agro-Based Industry Ministry, Tekun provides existing and new entrepreneurs with loans to develop and expand their businesses.

CyberSecurity Malaysia describes itself as the national cybersecurity specialist agency under the Science, Technology and Innovation Ministry.

Wholly owned by Malaysia Handicraft Development Corpora­tion, Karyaneka was set up to market and promote Malaysian craft products.

Ketengah Holding is the investment holding arm of the Central Terengganu Development Authority (better known as Ketengah, its Bahasa Malaysia acronym), while Ketengah Properties handles the property business of Ketengah Holding.

Prisma Harta is a wholly-owned subsidiary of the Iskandar Region Development Authority that manages a housing scheme in Bandar Nusajaya, Johor.

UMK Business Ventures is Universiti Malaysia Kelantan’s business wing. Its main activity is the rental of student residences in Pengkalan Chepa, Kelantan, to the university.

As can be expected from this mixed bag of GLCs, the overall report card – based on financial performance and corporate governance practices – is a medley of decent grades, underwhelming scores and worrying Fs.

When auditing each of these companies, the National Audit Department detected weaknesses and recommended immediate remedies.

The department said some of the companies responded swiftly after the weaknesses were highlighted.

Nevertheless, it added, corrective action should be continuous and every company should have a system of checks and balances to ensure a holistic evaluation.

This is an important point for all GLCs. The Auditor-General’s Report is not just about identifying flaws in the organisations that have been audited.

A GLC does not have to wait to be audited before deciding to do the right thing, which is to operate with accountability and integrity, and to ensure that its activities generate maximum value for money.