Auditor General’s Report

For the Year 2013

The Activities Of The Departments/

Agencies And Management Of

Johore State Government Companies

3rd Series

Sekiranya ada ketidaktepatan antara ayat dalam Bahasa Melayu dan Bahasa Inggeris, ayat dalam Bahasa Melayu adalah terpakai.

In case there is any inconsistency between the Malay text and the English text, the text in Malay shall prevail.

AUDITOR GENERAL’S REPORT

FOR THE YEAR 2013

The Activities of Departments/Agencies

and Management of

State Government’s Companies

For

JOHORE

3 rd Series

National Audit Department M alaysia

1. Article 106, of the Federal Constitution and the Audit Act 1957 require the Auditor

General to audit the State Government’s Financial Statement, Financial Management and

Activities of the State Ministries/Departments/Agencies. Section 5(1) (d) of the Audit Act

1957 and Audit (Accounts of Companies) Order 2013 also empowers the Auditor General to

carry out audit on any company registered under the Companies Act 1965 that receive

grant/loan/guarantee from the Federal or State Government and any company where more

than 50% of the paid-up share capital is held by the Federal Government, State Government

or a public authority. Article 107 of the Federal Constitution requires the Auditor General to

report on the audit findings to the Supreme Head of Malaysia, His Majesty, Seri Paduka

Baginda Yang di-Pertuan Agong and His Royal Highness, the Sultan of Johore. His Majesty

will grant his Royal assent for the Report to be tabled in Parliament while His Royal Highness

will then assent for the Report to be tabled in the State Legislative Assembly.

2. For the year 2014, the National Audit Department will continue to implement the

initiatives under GTP2.0: NKRA Anti-Corruption to table the Auditor General’s Report on the

Activities of Departments/Agencies and the management of the State Government’s

Companies in Parliament/State Legislative Assembly at every seating. The National Audit

Department will assist the Government Departments/Agencies making improvement to

enhance the people’s well-being and support the Government Transformation Program in

order to be a developed country by giving opinions and recommendations through the Audit.

I hope the report with regards to the implementation of Activities of Departments/Agencies

and Management of Johore State Government’s Companies for the year 2013 3rd Series will

become the basis for improving all weaknesses, strengthen efforts to improve and increase

accountability and integrity and obtain value for money for each expenditure made as desired

by the Government.

3. This report is the result of auditing carried out on certain activities implemented in 1

Department, 1 agency and 2 State Government’s Companies. Auditing on activities of State

Departments/Agencies are for the purpose of evaluating whether the programme and

activities planned were carried out successfully in accordance with the time frame set, no

wastage and their objectives are achieved. Auditing on management of company is to

evaluate whether the financial performance of the company were implemented orderly and in

accordance with the regulations and objectives are fully achieved.

4. Audit Observations have been submitted to the Heads of

Departments/Agencies/State Government’s Company. Only significant Audit findings are

reported in this Report. This Report is also forwarded to the Menteri Besar and State

Secretary Office of Johore. In order to improve on the weaknesses highlighted or to avoid

their recurrences, I have forwarded 11 recommendations for the respective Heads of

Departments/Agencies to take action.

PREFACE

5. I wish to express my gratitude to all officers of the State Departments/Agencies and

State Government’s Company in Johore who have given their full cooperation to my officers

throughout the audit. I would also like to extend my appreciation and thanks to my officers

who have work diligently and given their full commitment to complete this Report.

(TAN SRI DATO’ SETIA HAJI AMBRIN BIN BUANG)

Auditor General

Malaysia

Putrajaya

15th September 2014

ACTIVITIES OF STATE DEPARTMENTS/AGENCIES AND MANAGEMENT OF STATE

GOVERNMENT’S COMPANIES

1. LANDS AND MINES OFFICE

- Management of Malay Reserve Land

1.1. Malay Reserve Land is land reserved for alienation to Malays or to Malays in the

state in which it lies as long as it is provided for in the legislation as stated in Article 89 of the

Federal Constitution. Definition of Malay according to Johor Malay Reservation Enactments

(ERM) 1936 is a person who belongs to the Malay race or any race who habitually speaks

Malay Language and professes the Muslim religion.

1.2. Johor Lands and Mines Office (PTG) as the State Land Administrator is responsible

for administering and managing the Malay reserve land in Johor while the District Land Office

as District Land Administrator is responsible for Malay reserve land in the district. Mandate to

administer the land in the district is with the approval of the State Authority as provided under

Section 12 of the National Land Code 1965. According to the PTG, until December 2013, the

acreage of Malay reserve land in Johor is 429,386.77 hectares.

1.3. An Audit carried out from January to April 2014 revealed that the conditions stipulated

by the State Executive Council for 4,573 granted land approvals consist of 9,284.02 hectares

of land to the Malays in year 2011 to 2013 served as Malay reserve land was good. However,

there were several weaknesses that affect the management of Malay reserve land as follows:

Actual acreage of Malay reserve land in Johor cannot be measured.

Information on gazetting of cancellation and replacement of Malay reserve land

cannot be verified and the gazetting processes of 518 Malay Reserve Land entry

applications were delayed between 2 to 17 years.

A total of 108 documents of Malay Reserve Land ownership were not endorsed and

caused 4 parcels of land in Kluang and Kulaijaya covering 4.47 hectares of land have

been transferred to non-Malays.

Breakdown plots for development of Malay reserve land owned by non-Malays were

not registered under Malay directors' name.

Areas of Malay reserve land owned by the State Government have been undertaken

and occupied without permission.

Malay Reserve Land Register has not been updated and 767 gazetted Malay

Reserve Land Entry applications have not been registered.

REPORT SUMMARY

1.4. To ensure that the management of Malay reserve land in Johor is implemented more

efficiently and effectively and in compliance with the regulations, PTG and the District Land

Office are recommended to take improvement measures as follows:

1.4.1. Revise the number and acreage of Malay reserve land in Johor and update the Malay

Reserve Land Register thus actual area can be determined.

1.4.2. Organise a task force to update all records, endorsements and gazetting of Malay

reserve land to ensure objectives as Malay reserve land will be achieved as stated in Johor

Malay Reservation Enactments 1936.

1.4.3 Provide management guidelines for Malay reserve land as a reference to the PTG

and District Land Office new officers to ensure the holding status of Malay ownership will be

remained and protected.

2. JOHOR NATIONAL PARKS CORPORATION

- The Management of Johor National Parks

2.1. Johor National Park Corporation (Corporation) was established in 1989 through an

enactment which is gazette in February 1990 and came into effect in January 1992.

Establishment of the Corporation is to preserve and protect wildlife, plants and objects that

have significance in terms of geological, archaeological and ethnological and other

significances in science and landscape, and through preservation and utilisation to promote

education, health, aesthetical value and public recreation. The Corporation has been given

the responsibility to manage 6 Johor National Parks such as Peta and Selai of Endau

Rompin Johor National Park, Gunung Ledang Johor National Park, Tanjung Piai, Pulau

Kukup and Sultan Iskandar Marine Park of approximately 62,287.9 hectares.

2.2. An Audit conducted from February to May 2014 revealed that, the management of

Johor National Parks was satisfactory as the Corporation has set a targeted Strategic

Planning Plan for years 2012 to 2016, encompassing plans for each conservation activity,

education as well as research and the implementation has been executed as planned.

However, there were some weaknesses as follows:

The monitoring meeting was convened but did not discuss overall Strategic Planning

Plan.

There were threats to the Johor National Parks like the invasion of the public and the

wave erosion that were not effectively addressed.

The entry of registered visitors was over the limits especially for daily hikers and

hikers whose stayed overnight at Johor National Park Gunung Ledang.

Inventory Records for the number of trees planted were not maintained.

Research findings on Johor National Parks were yet to be received.

Facilities maintenance works were split into small works and the facilities built were

not maintained.

2.3. To improve the management of Johor National Parks, the Corporation is

recommended to take the following actions:

2.3.1. Make fine measurements to identify actual boundary of Johor National Parks.

2.3.2. Regulate the entry of visitors in Johor National Park Gunung Ledang to minimise side

effects to environment such as erosion of road trails and disruption to wildlife populations as

a result of interaction with human.

2.3.3. Use the findings of a report/study by researchers and students where appropriate, to

improve the management of national parks.

2.3.4. Enhance the maintenance of public facilities in Johor National Parks to ensure the

comfort and safety of visitors.

3. JOHOR CORPORATION

- Johor Silica Industries Sdn. Bhd.

3.1. Johor Silica Industries Sdn. Bhd. (JSISB) was established in 1990 with the name of

the Johor Silica Industries (1970) Sdn. Bhd. which later was changed to Johor Silica

Industries Sdn. Bhd. on 1st November 1994. JSISB is a company 100% owned by Johor

Corporation with paid-up capital of RM0.20 million. The principal activities of the company

are mining, processing and supplying of silica sand. JSISB generally is engaged in the

exploration, mining, processing and supplying of silica sand to silica-related industries such

as manufacturers of glass, paint and contractors.

3.2. An audit conducted from September to November 2013 found that the overall

financial performance was satisfactory as JSISB profit before tax in 2013 has amounted to

RM1.17 million. The management of main activities and corporate governance of JSISB for

2011 to 2013 was good. However, there were some weaknesses as follows.

Stocks of raw silica sand were shrinking.

Corporate plan was not available and the risk of the company was not being

identified.

No specific asset management procedures.

3.3. To fully achieve the objectives of JSISB and Johor Corporation as equity holder gets

value for money, JSISB is recommended to take actions as follows:

3.3.1. Take initial steps to provide long-term strategic planning related to type of business

carried out to replace the existing business when silica sand was out of stock.

3.3.2. Increase the stock of raw silica sand supplies available to ensure that the business

run as usual and profitable.

3.3.3. Streamline and adopt the company’s corporate governance by making Government

Circulars and the Code of Corporate Governance Malaysian as best practices for

safeguarding the interests of the State Government of Johor.

4. JOHOR ISLAMIC RELIGIOUS COUNCIL

- Marsah Sdn. Bhd.

4.1. Marsah Sdn. Bhd. (MSB) was established on 11th January 2005 under Section 16 (4)

of the Companies Act 1965 and is a wholly owned subsidiary of Johor Islamic Religious

Council (MAIJ). The company’s main activity is to manage and organise Kolej Pengajian

Islam Johor (MARSAH). As at 31st December 2012, MSB's authorised share capital and paid

up capital were amounted to RM0.50 million and RM0.20 million respectively. MSB is

responsible for managing MARSAH as a Private Higher Education Institutions (IPTS) under

Section 22 of the Private Higher Educational Institutions Act, 1996.

4.2. An Audit conducted from December 2013 to March 2014 revealed that the company’s

financial performance was satisfactory. MSB recorded profits before tax of RM0.23 million in

2011 and RM0.56 million in 2013. However, in 2012, MSB has suffered a loss before tax of

RM0.36 million. MSB's retained profit at the end of 2013 has amounted to RM1.32 million.

The management of main activities and corporate governance for the years 2011 to 2013

was less than satisfactory due to some weaknesses as follows:

Facilities and infrastructure on MARSAH campus were not well maintained.

Students' hostel at Pandan City, Johor Bahru was uncomfortable and not conducive

for students’ residency.

Board meetings were not held at the stipulated frequency.

Strategy and corporate plans were not available.

Guidelines for the human resource management and financial management were not

available.

Asset management was less than satisfactory.

4.3. To ensure that the objectives of Marsah Sdn. Bhd.'s establishment are achieved and

Johor Islamic Religious Council as equity holders gets value-for-money, the company's

management needs to be improved and should take into consideration the following

recommendations:

4.3.1. Resolve issue of the placement of temporary hostel in Pandan City, Johor Bahru by

finding other alternatives for the students’ comfort. In addition, buildings on MARSAH

campus, Johor Bahru should be utilised optimally to avoid wastage.

4.3.2. Convene the board of directors meetings at the stipulated frequency to monitor

MARSAH operation.

4.3.3. Establish guidelines related to financial, human resources and asset management to

ensure the management of the company is organised and efficient.

NATIONAL AUDIT DEPARTMENT MALAYSIA No.15, Level 1-15, Persiaran Perdana, Presint 2 Pusat Pentadbiran Kerajaan Persekutuan 62518 Wilayah Persekutuan Putrajaya

www.audit.gov.my