KUALA LUMPUR – A governance framework report that is meant to prevent future mismanagement and misappropriation of the Human Resources Development Fund (HRDF) has been removed from the corporation’s system.
It is believed that if the framework was made available, the current board of the HRDF – now rebranded as HRD Corp – may have been able to prevent the current controversies that the RM2 billion institution finds itself embroiled in.
HRD Corp is currently under the microscope following several revelations of alleged misconduct and mismanagement.
More specifically, it is subject to an ongoing probe by the Auditor-General, while its chief executive Datuk Shahul Hameed Dawood, and Human Resources Ministry Deputy Secretary-General (Policy and International) Datuk Amran Ahmad are scheduled to appear before the Public Accounts Committee (PAC) on Monday (October 23).
For three years, the framework report detailing alleged financial irregularities and the misappropriation of funds to the tune of millions, as well as troubling conflicts of interest among board members, was kept from the view of the corporation’s officials and the government.
An audit on HRDF was ordered by then Human Resources Minister M. Kulasegaran in 2018, but the DAP leader said the report was no longer accessible following his departure from the ministry.
Kulasegaran has since put the report on his blog as a reminder of HRD Corp veering into the same issues that cropped up three years prior to his tenure as minister. This includes a lack of oversight and expansive powers of the chief executive.
“I reposted it (the document) on my blog because many people have forgotten about the relevance of the report, as it was removed from HRDF’s website after I was no longer the (Human Resources) minister.
“I want the people to know how to improve the organisation, so that it can serve it’s intended purpose,” he told Scoop when contacted.
The present leadership of HRD Corp has also been accussed of misleading the board on its proposed Skills Passport initiative, where the Finance Ministry found discrepancies in a contract procurement valued at between RM53 million to RM159.47 million a year.
“We do not know why this was kept from us. It would have given us a better idea of the issues in HRD Corp so as not to repeat any mistakes,” said a board member who wished to remain anonymous.
RM428,000 for a Volvo, RM154 million ‘tower’ purchase
The report reveals a staggering lack of oversight and accountability within HRDF.
Among the most disconcerting findings are the lavish expenses approved without board consent, including RM428,000 spent on a Volvo vehicle for a minister, which was transported to Kuching, also without the board’s approval.
Equally concerning is the RM154 million splurged on a mysterious ‘tower’ property acquisition, which is among the unauthorised expenditures that underscore the dire need for stronger governance and financial oversight within HRDF.
Furthermore, the report raises alarming questions about executive compensation within the organisation.
The Chief Executive’s (CE) staggering monthly salary of RM56,000, without the necessary board or Establishment and Benefit Committee approval, adds a layer of controversy to HRDF’s financial practices.
Equally egregious is the revelation of RM1.1 million in bonuses for C-level executives, authorised by one of Kulasegaran’s predecessor’s without board approval.
The report calls for the overhaul of the governance structure within HRDF, emphasising the importance of reducing the size of the board, articulating board powers and duties, and limiting the minister’s authority.
It also advocates the establishment of clear governance guidelines, including the necessity for statutory declarations from all board members.
These revelations of excessive expenditures and lack of oversight have ignited concerns about HRDF’s effectiveness and financial prudence.
As HRDF has been rebranded as HRD Corp, the organisation now faces the daunting challenge of regaining public trust and establishing robust governance measures to prevent further scandals.
However, the interim findings of the report paints a grim picture of the organisation’s governance. Among the critical issues raised include poor board oversight over key decisions and fund operations, a lack of monitoring for conflicts of interest within the board, and the absence of clear financial segregation between the Fund and the Corporation.
It also noted inadequate controls for various processes, especially fund management and disbursements.
The report calls for the strengthening and enhancement of governance across HRDF and an in-depth review and assessment of all aspects, including people and processes, to establish strict governance and control and promote a culture of transparency.
Addressing the corporation’s shortcomings
Several recommendations to revise the HRDF Act were made, such as reducing the size of the board, appointing an odd number of directors and eliminating alternate directors, revising the board’s composition to include a mix of skills, defining the powers and duties of the board and its committees, and establishing compulsory board committees, such as the Board Nomination and Remuneration Committee and Board Audit Risk Management Committee.
Furthermore, the report suggested limits on the presiding minister’s power, with all ministerial directions to be given in writing with a clear explanation of necessity. It also recommended that the chief executive should not be a member of the board and that the CEO’s remuneration and benefits should be determined by the board.
Recommendations for HRDF’s governance framework include the development of company-wide Limits of Authority, the establishment of a Board Charter, the creation of policies and procedures for departments and divisions without them, and regular reviews of policies and procedures.
The report also highlights the need for an annual statutory declaration for board members and a review of the roles and accountabilities of C-level executives.
The report further pointed out deficiencies in the HRDF Act, including the extensive power of the minister, lack of coverage on several key areas, and the absence of specific provisions for segregating and auditing the accounts of the Fund and HRDF separately.
The report also raised questions about board composition, the lack of oversight on operations, and potential conflicts of interest among board members who are also CEOs of training providers.
It also highlights disparities in board members’ remuneration and benefits compared to the nature of HRDF’s business.
The review concludes that HRDF’s organisational structure is ineffective, with poor governance and controls over key processes related to the Consolidated Fund. The report calls for a significant overhaul to promote governance, transparency, and compliance culture across HRDF.
Earlier this week, Kulasegaran cautioned the government about the alarming potential for abuse and corruption related to the proposed revival of the HRDF Consolidated Fund that he abolished.
Kulasegaran reiterated his concerns regarding the Budget 2024 proposal to reallocate a percentage of employers’ levy contributions, which could amount to hundreds of millions of ringgit annually, potentially liable to misappropriation.
He revealed that when the Pakatan Harapan government collapsed in 2020, RM300 million remained in the pool fund.
However, within just two years, these funds mysteriously “disappeared” without any accompanying reports detailing their expenditure. – October 21, 2023