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Transcript of 1MDB
What is Public Money?
RM 107 MILLION SCANDAL INVOLVES MINISTRY OF YOUTH AND SPORTS
A government scandal which involves the Ministry of Youth and Sports which was amounted to RM 107 million (US$36 million) was reported due to misappropriation of funds.
Funds were used to purchase luxury cars, watches and handbags.
Cause: The loophole in the secretary division.
An effective and efficient way which enhances a reflection of how much money the ministry obtain and how much they can spend.
Describes about the allocation given to each ministry and each department for every programme authorised by the Treasury.
Ensure a proper management planning should be done.
To identify the flow of financial activity for every projects.
Reformation of government financing
The treasury has the power to check the documentation of any ministry
Auditor-General’s Report on 1MDB should be declassified and tabled as a full report in Parliament and made public.
Relationship between missus of public money and financial accountability
Previously known as TIA(Terengganu Investment Authority)
Was renamed as 1MDB(1 Malaysia Development Berhad)
Fully owned by Government of Malaysia
Government of Malaysia only provide 1 million as equity
Separation of duties
If there is no separation of duties, conflict of interest might happen
In the case of 1MDB, the advisor and the finance minister are the same person
MISUSE OF PUBLIC MONEY
Asset Bought by 1MDB overpriced
Bought a power plant from Genting Berhad (Mastika Legenda Sdn Bhd)
Borrowing=RM700M+(USD 1.75B × RM 3.26) = RM 6.405 B
The power purchase agreement(PPA) for Mastika Legenda Sdn Bhd with Tenaga Nasional Berhad will expire at February 2016( 3 1/2 years)
Genting Berhad 2013 Annual Report it states that there was RM 1.888 billion profit from the disposal of Mastika Legenda Sdn Bhd
RM 2.342 billion-RM 1.888 billion=RM 454 million
2013 first quarter Genting Berhad reported that they donated RM 31 million to Yayasan Rakyat 1 Malaysia (YR1M) foundation
YR1M donate RM 2 million for two local schools at Penang
The chairman for 1MDB and YR1M is Dato’ Sri Mohd Najib Tun Haji Razak
The financial statement should state the breakdown of the expenditure
Accountants should have stated all the programs expenditure that had occur to find out the faults in the financial statement.
Auditors can look through how Ministry of Youth and Sports use their money.
Enforce the law
Government should enforce the loopholes that made the scam in the ministry.
“When a company awarded a project submits its claim for payment, the government agency will send its officer or consultant to the ground to determine whether the project meets specific requirements as stated in the contact” (Aliza Shah, 2016).
Outcome Based Budgeting
OBB is useful, efficient and effective way to measure expenditure.
Ministries must submit projections for two years ahead along with their budget requests.
Planning and budgeting should be better integrated, with a single ministry ceiling for operational and development expenditures, merged presentation in the budget, and closer coordination of processes (Curristine et al., 2015).
Government investment needs thorough findings and analysis
Investment involving public money demands a thorough and extensive due diligence to be done
A thorough risk analysis has to be done and reported
Deal public money with great responsibility
Authorities have to get the consent of the management before taking any decisions and adhere to the law
Those who are found to have breached the company’s rule have to be taken severe action on.