KUALA LUMPUR: Three government-linked companies have been flagged by Auditor General (AG) for their unstable financial positions.
Mara Incorporated Sdn Bhd (Mara Inc), Mass Rapid Transit Corporation Sdn Bhd (MRT Corp) and i2M Ventures Sdn Bhd are in hot water after the audit report urged them to step up their corporate governance practices.
Mara Inc is a subsidiary of Mara Corporation Sdn Bhd, making it an indirect subsidiary of Majlis Amanah Rakyat (Mara) that is regulated by Rural and Regional Development Ministry (KKDW).
Mara Inc's main activities include property development, alongside managing property, hospitality and renewable energy which are carried out by Mara Inc and its five wholly-owned subsidiaries with investments amounting to RM159.14 million as of 2023.
Mara Inc managed three local properties while four of its subsidiaries managed six properties abroad in United Kingdom and Australia.
AG highlighted that the company had incurred a total loss of RM286.3 million in 2022, with an equity deficit of RM115.73 million and liabilities at RM234.96 million.
"Mara Inc has implemented real estate management activities in line with the objective of its establishment but this objective has not been achieved completely.
"Implementation of activities is less efficient until resulting in an accumulated loss position of RM286.3 million.
"Loan arrears from Majlis Amanah Raya (Mara) has an impact on the liability position net current of the company," it said.
According to Mara Inc in the report, KKDW had given an approval on Feb 6 2024 to convert old debt to equity shares and it is waiting for consideration and approval from the Finance Ministry.
The report emphasised that the unstable financial position had resulted in the company's inability to pay dividends to shareholders since 2014. Previously, it only paid RM2.88 million dividends to MARA in 2012 and 2013.
"The dividend payment of RM1.55 million for the financial year 2023 has been approved by the board of directors on Feb 20, 2024. Payments are made in stages starting from April 2024," Mara Inc said in the report.
It also revealed that the company's key performance indicators (KPI) was inconsistent between 55 per cent and 94.6 per cent.
Despite real estate investment returns having increased in 2023 compared to 2020, the cost of investment in its subsidiaries in 2022 suffered an impairment of RM87.18 million.
"The financial position of the subsidiary companies is less stable as four companies have a deficit in shareholding," it added.
AG also pointed out that real estate operations management was less efficient as the handover of documents related to real estate was incomplete.
Furthermore, it emphasised that five of the nine elements in Mara Inc's corporate governance practices are not fully practiced.
They involved the chairman, board of directors, company secretary, company standard operating procedure (SOP) and audit committee.
Meanwhile, MRT Corp, which is fully owned by the Minister of Finance (Incorporated), was flagged for its unstable financial position despite achieving its establishment objectives as a developer and asset owner of MRT1 and MRT2.
AG said the performance of these two transportation projects in terms of number of daily passengers, number of trains operating and frequency of peak hour train services still had not reached the targets set in the MRT1 and MRT2 Railway Schemes.
"For MRT1, the reimbursement cost was not audited every six months after 2013 and the MRT1 final account has not been closed although it has completed and fully operational since 2017.
"For MRT2, 84 or 38.2 per cent of the 220 construction works have not been completed and 22,114 damage-related cases were recorded.
"Liquidated ascertained damages (LAD) amounting to RM3.17 million are not charged against the contractor's delay for the Jinjang Depot work package," it added.
In the report, the AG said that four of nine corporate governance elements were not fully practised and recommended corporate governance be improved.
However, the AG report noted that MRT Corp's corporate governance was satisfactory.
As for i2M Venture, the report stated that the company's objective to promote, market and manage business in Iskandar Puteri, Johor was not achieved.
Furthermore, its financial position is entirely dependent on allocations from its parent company, Khazanah Nasional Bhd which is under the Minister of Finance (Incorporated).
The report said three of the GBS Iskandar investors failed to achieve the target with one of them ended an agreement a year after it was sealed.
"i2M Ventures has sued the companies to clawback the financial assistance that has been channeled to the investors amounting to RM425,174," the company said in the report.