KUALA LUMPUR: The Agriculture and Food Security Ministry has confirmed that 42 governance and management issues within the National Farmers Organisation (Nafas) were identified through a Special Audit Report in 2018.
Its Minister Datuk Seri Mohamad Sabu however said improvements to the issues identified in the audit report by the Registrar of Farmers Organisations could not be implemented, partly due to the change in government at that time.
Mohamad, who was responding to a question from Sim Tze Tzin (PH-Bayan Baru) during the Minister's Question Time in the Dewan Rakyat today, did not go into detail about the governance and management issues faced by Nafas.
In June 2018, the Registrar of Farmers Organisations issued a suspension order for Nafas following an audit management report conducted on March 26 of the same year, due to serious governance issues, particularly regarding competence, accountability, and transparency in the leadership of the Board of Directors and management at the time.
A forensic audit found seven questionable matters and financial mismanagement within the institution, leading to a loss of approximately RM50 million.
These included the purchase of 40,000 metric tonnes of rice fertiliser in 2017, which did not follow standard procedures, sourced from an external supplier without standard operating procedures (SOP) for sample testing or stock checks during delivery, and without supporting documents for the purchase.
The purchase cost RM70 million, and Nafas had to store the fertiliser at a warehouse, incurring RM6 million in rent. As the fertiliser did not meet specifications, Nafas could not distribute it to subsidised farmers.
The stored fertiliser also required reprocessing to meet the correct specifications, which involved high costs of RM700 to RM800 per metric tonne.
Another finding was the purchase of Nafas' headquarters building in Kota Damansara, resulting in a loss of about RM11 million, as it was bought for RM59.8 million in 2014, while the original offer price was RM48.5 million.
The building was valued at RM57 million by a private appraiser.
Mohamad said Nafas, which has been awarded a direct negotiation contract for fertiliser supply since 1979, owns 16 subsidiaries, of which only four companies related to the fertiliser contract have been profitable.
He said in order to rectify the situation, one of the first actions he took as the minister was to gazette Nafas as a public body under the Malaysian Anti-Corruption Commission Act 2009 (Act 694), allowing Nafas to be investigated under this Act.
"In addition, I instructed the establishment of a Special Monitoring Committee for Nafas' Governance Strengthening, which operated from Feb 7 until Oct 31.
"The report from this special committee highlighted the need for a comprehensive reform of Nafas' governance and management," he said.
Recently, Nafas, which has 603,000 members, 280 District Farmers Organisations (PPK), and 14 State Farmers Organisations (PPN), has been embroiled in controversy, raising concerns about its governance and effectiveness as the sole government fertiliser supplier.
The Malaysian Anti-Corruption Commission (MACC) had previously announced the commencement of investigations into the existence of a cartel in the distribution and supply of paddy fertiliser contracts under an organisation controlled by a ministry, with an estimated value of RM1.8 billion.
Several revelations have been made by the commission in Kuala Lumpur, including at the headquarters of the organisation, the ministry, and nine companies receiving related projects.
Following these revelations, the Registrar of Farmers Organisations suspended Nafas' Constitution with immediate effect.
The suspension order was issued by the Director-General of the Farmers Organisations, Amir Matamin, as the Registrar under Section 20(1) of the Farmers Organisations Act 1973 (Act 109).
During the suspension period, the Board of Directors and management of Nafas no longer have powers as stipulated in the organisation's Constitution.