PR1MA Corporation Malaysia (PR1MA) reported significant discrepancies in its financial statements for the financial year 2023 (FY2023), with RM42.18 million in overstated inventory and understated expenses, according to the Auditor-General’s Report 1/2025.
The report revealed that PR1MA had improperly capitalised sales commissions and legal fees for home unit sales, totaling RM42.18 million.
This was in violation of the Malaysian Financial Reporting Standards (MFRS) 102 on inventory. These expenses should have been recorded as costs in the period incurred, rather than being capitalised, the report stated.
Additionally, the audit flagged an overstated cost of sales of RM8.11 million and understated staff expenses of RM4.67 million.
PR1MA recognised RM289.91 million in cost of sales based on the percentage of house sales completed.
However, the correct figure, calculated according to project completion percentages as of December 31, 2023, was RM281.80 million, in compliance with MFRS 15, which governs revenue from contracts with customers. This discrepancy resulted in an overstated net shortfall of RM8.11 million.
Bernama cited that the audit also highlighted that PR1MA paid out RM4.67 million in staff bonuses for 2023. Under MFRS 110, which deals with events after the reporting period, these bonuses should have been recognised in the same year.
These findings point to significant financial reporting issues that could affect the accuracy of PR1MA's financial statements for FY2023.
The report, presented in the Dewan Rakyat today also said that nine Employees Provident Fund (EPF) subsidiaries had suffered losses for three consecutive years since 2021, with total losses in 2023 amounting to RM224.21 million.
The report stated that the nine subsidiaries suffered losses of RM76.51 million in 2022 and RM49.76 million in 2021.
The companies that suffered losses are KWASA Europe S.à r.l, which recorded the highest loss of RM158.42 million in 2023, followed by Ameen Direct Equity I, L.P (RM25.61 million), KWASA Europe-I S.à r.l (RM14.40 million), Naungan Sentosa Sdn Bhd (RM11.88 million), Kwasa Utama Sdn Bhd (RM8.61 million), YTR Harta Sdn Bhd (RM2.70 million), Kwasa Singapore Duo Pte Ltd (RM1.36 million), PPNK – Harta Sdn Bhd (RM840,000) and Common Icon Sdn Bhd (RM390,000).
According to the audit report, three EPF subsidiaries, namely KWASA Europe, KWASA Europe-I and Naungan Sentosa suffered losses due to the capital structure of the subsidiaries, which are largely in the form of shareholder loans.
"The EPF, as the sole shareholder of the company, gets a return in the form of income interest which is used to pay dividends to contributors.
"Meanwhile, Ameen Direct Equity I is a newly established fund in 2021 with a long-term investment focus and has not yet generated enough income to cover operating expenses," Bernama quoted her saying.
According to the AG report, the EPF was audited without reprimands but the report recommended that federal agencies strengthen revenue generation efforts to continue operations based on continuous efforts and reduce reliance on government grants.
The report also recommended that federal agencies review the direction and business plans of subsidiary companies that have suffered losses for three consecutive years and have not provided proper returns.
The EPF owns a total of 55 subsidiaries, of which 34 recorded profits in 2023.
Additionally, lawmakers heard that financial statements of 22 agencies under the Ministry of Higher Education are among 133 financial statements of Federal Agencies under various ministries that have been given the Auditor General's Certificate with reprimand.
Among the agencies under the ministry are Malaysian Qualifications Agency (MQA), National Higher Education Fund Corporation (PTPTN), University of Malaya Medical Centre (PPUM) and 19 public universities including the University of Malaya.
Also receiving the Auditor General's Certificate without reprimand are 12 agencies under the Ministry of Transport and 11 agencies under the Ministry of Finance, including Bank Negara Malaysia (BNM), the Employees Provident Fund (EPF) and the Inland Revenue Board (IRB).
“The Prime Minister’s Department, through nine agencies including the Human Rights Commission (SUHAKAM), the Federal Land Development Authority (FELDA) and the Tabung Haji (TH), also received the Auditor General’s Certificate without reprimand.
“Under the Ministry of Rural and Regional Development, seven agencies also received this certificate, including the Kedah Regional Development Authority (KEDA) and MARA,” according to the report.
Also receiving the Auditor General’s Certificate without reprimand were eight agencies under the Ministry of Agriculture and Food Security, the Ministry of Plantations and Commodities (7), the Ministry of Youth and Sports and the Ministry of Works (5) each, and the Ministry of Tourism, Arts and Culture and the Ministry of Defence (4) each.
Three agencies under the Ministry of Natural Resources and Environmental Sustainability, the Ministry of Education, the Ministry of Human Resources, the Ministry of Energy Transition and Water Transformation, the Ministry of Investment, Trade and Industry and the Ministry of Economy also received certificates without reprimand.
Two agencies each under the Ministry of Housing and Local Government and the Ministry of Health Malaysia, the Ministry of Science, Technology and Innovation and the Ministry of National Unity also received the certificates without reprimand.
Under the Ministry of Communications, two agencies including the Malaysian National News Agency (Bernama) and an agency under the Ministry of Women, Family and Community Development were also given the Auditor General's Certificate without reprimand.
The Report also raised serious concerns over the financial sustainability of the Solid Waste Management and Public Cleaning Corporation (SWCorp) and its ability to sustain operations.
The report covers the 2023 Federal Agency Financial Statements and reveals that as of Dec 31, 2023, SWCorp's cash reserves were insufficient to meet payments to creditors including its concessionaire company.
Despite receiving annual grants from the federal government, SWCorp's revenue generation remains inadequate to cover operational costs, forcing the agency to rely heavily on government financial injections, the report said.
"SWCorp’s ability to cover operating costs and financial commitments in the future is dependent on additional financial support from the federal government," the report stated.
The agency also saw a decline in its assets, which fell to RM691.79 million in 2023 from RM759.86 million the previous year. However, its liabilities also decreased, dropping to RM831.94 million from RM854.47 million during the same period.
Despite this, net liabilities have been steadily increasing to RM140.15 million in 2023, up from RM94.61 million in 2022 and RM7.42 million in 2021.
“The agency's assets are insufficient to cover its long-term liabilities,” the report noted.
In 2023, SWCorp received a government grant of RM2.24 billion, which included operational grants and payment of RM1.545 billion, accounting for 69 per cent of the agency’s total revenue.
“From 2021 to 2023, over 65 per cent of SWCorp’s revenue came from federal government grants,” the report added.
Additionally, the report showed that SWCorp’s expenditure for 2023 amounted to RM2.294 billion, exceeding its revenue of RM2.24 billion and resulting in a deficit of RM53.9 million.
Its operational spending increased to RM2.014 billion in 2023, up from RM1.969 billion in 2022, with a significant portion allocated to solid waste collection and public cleaning services, contributing to the deficit, the report said.
After three consecutive years of losses, the Auditor-General has recommended that SWCorp adopt a clearer strategic direction and implement effective revenue-generating mechanisms to reduce its reliance on government support.
"SWCorp needs to address the discrepancy in accounts receivable with local authorities to ensure proper collection of solid waste management and public cleaning fees.
"Additionally, the agency should resolve outstanding differences in accounts payable between SWCorp and its concessionaire companies,” the report advised. – February 24, 2025
