RM620 million losses due to non-compliance in financial management, audit report shows

The non-compliance of federal ministries and departments in terms of financial management led to issues involving irregular payments, loss of public funds and wastage amounting to RM620.07 million in 2020.

Auditor-General Nik Azman Nik Abdul Majid said of the RM510.49 million in irregular payments, RM499.19 million involved payments for maintenance service claims without verification at the National Security Council level.

Meanwhile, of the RM104.79 million loss in public funds, RM81.69 million involved unclaimed penalties not imposed by the immigration department while RM4.79 million involved equipment that was received late and not installed at Istana Budaya.

“To enable corrective action and improvements to be taken, the auditor-general has submitted 29 recommendations, namely four recommendations for verification of financial statements and 25 recommendations for compliance audits of federal ministries and departments to be considered for implementation by ministries and departments,” he said.

He said this in a statement to Bernama after the Auditor-General’s Report on the federal government’s financial statements and the 2020 Federal Ministries and Departments Compliance Audit were tabled at the Dewan Rakyat today.

Nik Azman said compliance audits involving a total of RM899.44 million had been carried out on three ministries and five federal departments, covering aspects of contract management (RM772.40 million), government procurement (RM54.8 million) and revenue collection (RM72.24 million).

Meanwhile, in the Emphasis of Matter on the Federal Government’s Financial Statements, the auditor-general said that the federal government’s debt in 2020 amounted to RM879.560 billion or 62.1% of gross domestic product (GDP).

Federal debt increased by RM86.562 billion or 10.9% compared to RM792.998 billion or 52.4% in 2019.

According to the auditor-general, 50.4% or RM98.058 billion of the RM194.555 billion in new loans in 2020 was used to finance the principal repayment of matured loans.

“This shows that the government is dependent on new loans to repay mature loans and the use of Development Fund funds amounting to RM8.265 billion for the repayment of private financing initiative liabilities and guarantee commitments,” he said.

Besides this, a total of RM2.65 billion was used to pay for the health ministry’s hospital and clinic support as well as the maintenance of facilities in the education ministry which was previously paid for using operating expenditure allocations.

“Development Fund funds financed through loans should in fact be used to finance physical development projects that contribute to the creation of new capital that can enhance the country’s development and have a high multiplier effect to generate economic activity,” he said.

Meanwhile, federal government revenue declined 14.9% to RM225.075 billion in 2020 from RM264.415 billion the previous year while Covid-19 expenditure amounted to RM38.019 billion.

Operating expenditure declined 14.7% to RM224.6 billion, a decrease of RM38.743 billion compared to 2019 while development expenditure amounted to RM51.36 billion, a decrease of RM2.813 billion or 5.2% compared to RM54.173 billion in 2019.

Nik Azman said overall, the federal government had a deficit of RM87.645 billion with a deficit-to-GDP ratio of 6.2%, compared to 3.4% or RM51.37 billion in 2019.

According to the statement, the Auditor-General’s Report contains three main components, namely the verification of the federal government’s financial statements for the year ended Dec 31, 2020, the federal government’s financial analysis, and the compliance audit of federal ministries and departments.

Nik Azman said overall, the federal government’s financial statements showed a true and fair view of the government’s financial position for the year ended Dec 31, 2020 and that its accounting records were orderly and up to date.

This is the second tabling of the report in the Dewan Rakyat this year after the Auditor-General’s Report 2019 Series 2 was tabled on Sept 28. Also today, the National Audit Department briefed members of the Public Accounts Committee in Parliament on the main issues of the audit findings.

The report can be accessed by the public through http://www.audit.gov.my while issues in the report’s Compliance Audit of Ministries and Federal Departments 2020 will be uploaded on the Auditor-General’s Dashboard Portal.