AG’s Report: Government Linked Companies

glc

In Malaysia, the GLCs get the spotlight every so often when politicians fight. They remain an enigma even though they have been around for a few decades now.  It would appear that positions in the GLCs are a reward rather than an opportunity to serve the organization.  Politicians with dubious expertise are often appointed as directors.  Their remuneration and other benefits are shrouded in secrecy.

Information on the performance and activities of the GLCs other than the public companies is not publicly available although their audited accounts may be obtained from the Registrar of Companies for a fee. Fortunately, the National Audit Department (NAD) does audit these public entities, and the audit information is included in the annual Auditor-General’s reports. Sadly, this information is spread over many documents within the same year and over several years making them difficult to access, integrate and analyze. When evaluating the performance of GLCs, one must not forget that these GLCs are often given monopolistic businesses with special treatment and direct access to the government. It is, therefore, interesting to review the findings of the National Audit Department on the GLCs.

GLCs or government-linked companies are known by several names in Malaysia. The names include Government-Linked Investment Companies, Sovereign Wealth Funds, Strategic Development Company, State government subsidiaries and subsidiaries of Government Agencies and Religious bodies and so on.  The activities of GLCs cover a broad range of business sectors.  There are a few public-listed GLCs, but the majority of them are “limited” or “private limited” companies.  We have not been able to obtain a complete list of these GLCs, but it has been reported that there are as much as 1,700 of them around.

In the AG’s Report Information Graph (Information Graph), we have compiled the GLCs from the audit reports and other sources into two lists – Federal Government Linked Companies and State Government Subsidiaries. These two lists give us the opportunity to compare the characteristics and performance of the GLCs in the two list.

Federal GLCs
Federal Government Linked Companies
State GLCs Full list
State Government’s Subsidiaries

Based on the Annual AG’s Reports for 2011, 2012 and 2013, we have identified 88 Federal Government-Linked Companies and 170 State Government Linked Companies. There is a total of 56 and 134 related audits, respectively.

The number of related audits for each company is indicated by the “count bubble.” When the GLC is clicked, Information about the GLC is displayed together with these audit reports. The audit reports may not be directly on the company, but on a project or other activities where the GLC is involved.

Technology Park Audits
Typical Audit Entity

Related Audits

While this allows the reader to find the related audits, it is still a very tedious to open them individually. All the related audits of the organizations of government-linked companies are listed in the “Related audit” tab page. To make sense of this list, we need to process this list.  Since the audits are associated with the audit issues, they can be cross-tabulated.

Federal Related Audits

Related Audits of Federal Government Linked Companies

State GLCs Related Audits
Related Audits of State Government Subsidiaries

Cross-tabulation against Audit Issues

The audits can be cross-tabulated against each of the main headings of the Audit Issues.  You can view the snap shots of the captured screens in the image galleries below. This facility is unprecedented where the audit information is concerned.

Cross tab options
Cross-Tabulation Options

Image Gallery of the Cross Tabulation of the Federal GLCs against the Audit Issues

Image Gallery of the Cross Tabulation of the State GLCs against the Audit Issues

To view the audit at the intersection of any of the GLCs and sub-audit issues, just click on the numbers at the intersection.

Ten top audit issues

Caution
It must be noted that the audits undertaken by the National Audit Department are not based on a sampling method but their priorities and schedules. The results you see here should not be generalized. They are snapshots summaries of the audit information included in the Information Graph.

Based on the above cross tabulation the top ten audit issues raised by the Audit Department for the Federal Government Linked Companies and State Government Subsidiaries are:

Federal Government Linked Companies (56 audits)

  1. Financial performance (42, 75.00%)
  2. Objectives (35, 62.50%)
  3. Targets (32, 57.14%)
  4. Planning (24, 42.86%)
  5. Contractual issues (21, 37.50%)
  6. Supervision and monitoring (21, 37.5%)
  7. Record management (assets) (20, 35.71%)
  8. Payments (20, 35.71%)
  9. Maintenance (16, 28.57%)
  10. Outdated standard operating procedures (14, 25.00%)

State Government Subsidiaries (134 audits)

  1. Financial performance (99, 73.88%)
  2. Corporate planning (47, 35.07%)
  3. Targets (43, 32.09%)
  4. Financial regulations (41, 30.60%)
  5. Outdated standard operating procedures (39, 29.10%)
  6. Payments (34, 25.37%)
  7. Incompetency (29, 21.64%)
  8. Administrative regulations (28, 20.90%)
  9. Record management (assets) (28, 20.90%)
  10. Maintenance (26, 19.40%)

Discussions

GLCs is used here as an example to show how users can make sense of the related audits of a list of audit entities such as:

  1. Federal Agencies,
  2. Federal departments,
  3. Federal divisions,
  4. Federal ministries,
  5. Federal statutory bodies,
  6. National Projects,
  7. District and land offices,
  8. Local councils or local authorities,
  9. State agencies,
  10. State department,
  11. State government,
  12. State ministries,
  13. State projects,
  14. State Statutory bodies and so on.

The same methodology used to examine the GLCs can be used for any of the groups of entities listed above. Exploring the common issues arising from the audits of these entities can help us diagnose the root problems afflicting them. Based on the diagnosis, strategic plans can be developed to address these weaknesses and to strengthen these institutions.

The annual AG’s report is a rich resource on the performance and activities of the public entities. It is under used or even ignored because it ‘s hard to access, disparate and laborious to use. This Information Graph makes the information come alive with interactive facilities. The system can only become better when more annual reports are added. In the identification of the named entities, accuracy is of paramount importance, and this can be enhanced if the NAD is more explicit and descriptive in their audit findings.

 

 

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