KUALA LUMPUR – Human Resources Development Corp (HRD Corp) would set a “dangerous precedent” if permitted to appoint its own independent auditor to challenge the findings of investigations by the Public Accounts Committee (PAC) and the Auditor-General (A-G), warns Datuk Ariff Farhan Doss.
If allowed, HRD Corp’s actions could potentially open the floodgates for government-linked entities to challenge PAC and A-G audit findings in the future.
“The implication of appointing an independent auditor suggests disagreement with PAC and A-G findings, hence conducting their own audit,” he told reporters at Parliament today.
Ariff, who was removed as the corporation’s chief operations officer, met several lawmakers to brief them on HRD Corp’s governance issues.
He also raised pressing concerns regarding the Pembangunan Sumber Manusia Berhad (PSMB) Act 2001, which governs the corporation and its operations.
He added that among the MPs involved in the earlier briefing were the special select committee on human rights, elections and institutional reform’s chairman William Leong (Selayang-PH), Wong Chen (Subang-PH), Hassan Abdul Karim (Pasir Gudang-PH) and Chiew Choon Man (Miri-PH).
“The crux of the discussion was on how to strengthen the weaknesses of PSMB 2001. Many of the issues with HRD Corp over the years have been attributed to governance issues, misconduct, irregularities in procedures and recurring processes stemming from this act.
“One of the glaring weaknesses of this act is its openness, particularly in allowing corporations to make investments without establishing the necessary processes and procedures for adequate checks and balances,” he said.
Under the legislation, Ariff said that the investment panel consisted of one or two board members, and the remainder were external members who, according to the human resources minister, possessed qualifications deemed suitable for the panel.
“This selection process appears highly subjective. The act also says that the investment panel does not need to get the board’s approval. This is very strange because HRD Corp is not a statutory body but a company limited by guarantee, so therefore the board members have fiduciary duty (over its investments),” he added.
He added that another obvious weakness under the act was its Section 50, which empowers the human resources minister to override any decision at his discretion. This is a cause for concern if the minister is acting on “incorrect advice” from senior management.
“My meeting with the PSSC’s Leong is to urge the committee to relook at the act to ensure necessary checks and balances.
“The corporation is empowered under the act to collect approximately RM2.4 billion annually in levies. Therefore, I believe it should by now have attained statutory body status, akin to the Social Security Organisation, which requires approval from the finance minister for investments.
“I also offered my assistance, ensuring that the committee has everything it needs to strengthen this act and scrutinise all HRD Corp procedures and processes to ensure adequate checks and balances,” he added.
Ariff also said that MPs who attended the earlier briefing had expressed concerns regarding the corporation’s plan to appoint an independent auditor.
“Leong assured me that the committee would take this matter seriously, and I believe there’s much for him to consider. I also hope that the committee will decide to summon all involved parties to prevent future scandals like this,” he added.
The audit report, published on July 4, recommended that the Human Resources Ministry take appropriate action against HRD Corp’s management by referring them to enforcement agencies.
The audit report also raised several concerns, notably regarding HRD Corp’s move to amend its key performance indicator goals for 2020-2023 without board approval.
According to the audit report, actions and decisions by HRD Corp’s management failed to adhere to procedures and neglected to safeguard the corporation’s interests essential for achieving its objectives.
Similarly, the PAC’s three-volume report on the corporation identified, among other issues, poor governance practices by HRD Corp’s management and suspicious procurement methods in real estate, resulting in significant financial losses for the corporation. – July 18, 2024