PETALING JAYA: The acquisition process of three oil palm estates in Gua Musang, Kelantan was rushed, with agreements signed just seven to 12 days after getting approval from Felcra Bhd's board of directors, according to the Auditor-General's Report 2/2025.
These include the Dabong estate and Sungai Rawit 2 estate (approved in Board Meeting No. 207/2022), as well as the Aring estate (approved in Special Board Meeting No. 217/2023).
"The acquisition of all three estates relied only on feasibility reports prepared by a Felcra Bhd subsidiary.
"Financially, the investments were questionable due to long payback periods of 11 to 22 years,even after factoring in recovery work.
"On top of that, extra costs including lease payments to Kelantan state agencies were not fully considered.
"Aside from that, palm oil yields from the estates in 2022 to 2024 were low and had not met production targets.
"Felcra is expected to spend RM5.98mil on recovery works to improve yields at these estates," read the report that was released on Monday (July 21).
It also highlighted that land selected for investment should not have unresolved legal or financial issues.
In this case, the leasehold land owned by the Kelantan Islamic Religious and Malay Customs Council (Maik) came with existing debt tied to a company, posing financial risk if the company fails to pay.
As of April 2025, the lease registration for Aring estate had not been completed due to pending approval from the Kelantan state exco, delaying the settlement of the remaining RM30.97mil payment.
The report also found that Felcra also failed to comply with contract terms requiring verification of assets and machinery during vacant possession for Dabong and Aring Estates.
"No asset registry was prepared, and audit visits found discrepancies between the number of assets stated and those actually on site," it said.
In response, Felcra said that a recovery cost of RM3.74mil was needed during the acquisition of the Aring Estate to ensure smooth production, especially for tasks such as weed control and frond pruning.
"Recovery work is still ongoing at the estate, including the construction of pest control drains, and is expected to be completed by May 2025," said Felcra.
On the verification of assets, Felcra said "the estate was purchased on a "lock, stock, and barrel" basis, meaning all assets on the estate were included in the purchase."
"Felcra took immediate action by verifying and documenting the receipt of assets and machinery through the estate manager on April 7 2025," said Felcra.
The AG report recommended Felcra improve its governance processes to ensure that all decisions related to plantation acquisitions are made collectively, align with previous resolutions and follow the company's constitution, rules and regulations.
"Any changes to earlier board decisions must be clearly documented, confirmed through a new resolution, and properly recorded by the company secretary," read the report.
