Audit of farmers’ body finds 7 violations involving RM50 mil losses

The Registrar of Farmers’ Organisations issued a suspension order to Nafas in June 2018 after an audit management report found serious governance issues. (Nafas pic)

PETALING JAYA: A forensic audit on the National Farmers’ Organisation (Nafas) found seven items that were questionable and had violated the agency’s financial and administrative procedures, resulting in losses of about RM50 million.

Nafas board chairman Phahrolrazi Mohd Zawawi disclosed that the findings were based on forensic auditing of accounts conducted by an international audit firm from May to September last year, involving misconduct under the previous board of directors (AJP).

He said among the irregularities were the purchase of 40,000 tonnes of fertilisers in 2017 from external suppliers, in which there were no supporting documents for the purchases.

Standard procedures were not followed during laboratory test sampling and when the stocks were delivered.

“The purchase cost was RM70 million and the fertilisers had to be kept in a store. The store rental has now reached RM6 million.

“As the fertilisers were not purchased according to specifications, we cannot distribute them to farmers who receive subsidies,” he told a press conference here today.

He said the stored fertilisers required reprocessing according to the correct specifications and this would cost RM700 to RM800 per tonne.

In June 2018, the Registrar of Farmers’ Organisations issued a suspension order to Nafas following an audit management report, made on March 26, 2018, for serious governance issues, particularly in terms of competency, accountability and transparency under the previous AJP leadership and management.

Phahrolrazi said other discrepancies involved the purchase of the Nafas headquarters building in Kota Damansara.

This resulted in losses of about RM11 million after it was bought at a price of RM59.8 million in 2014, when the original bid price was RM48.5 million.

He said what made the purchase more questionable was that private valuers had valued it at RM57 million.

He said the Registrar of Farmers Association was notified of the case and legal action was taken on Feb 4, 2020 against the board members involved in the purchase decision.

He said Nafas also purchased an oil palm plantation at Sungai Karap in Miri, Sarawak, in 2016 at a price of RM135 million after it was offered for RM145.4 million, when the actual market price was RM122.8 million.

In addition, there were doubts on the rental of Nafas’ Wisma Peladang on Jalan Bukit Bintang, Kuala Lumpur, as the rental rate was much lower than the market value in 2015. The rental charged was RM2.5 million per annum compared to RM3.7 million estimated by the Valuation and Property Services Department (JPPH).

“In 2019, the rate charged by Nafas was RM2.75 million per annum compared to the prevalent rate of RM4.94 million per annum.

“The second phase lease agreement from May 2022 to April 2042, dated Aug 22, 2006, was also signed before the expiry of the first phase of the lease (May 2002 to April 2022),” he said.

In addition, there was negligence in buying of stockpiles involving Nafas and its subsidiaries, including the purchase of RM1.3 million worth of biofertilisers, New Zealand goat milk (RM770,000), herbicides (RM525,000), sickles (RM355,000), perennial ground cover (RM2 million) and pesticides (RM3.5 million).

It was also found that some of Nafas’ business zakat payments were made to ineligible recipients, whereby RM500,000 was paid to the Kemaman parliamentary service centre and RM100,000 to the Sarawak Farmers’ Association.

There was a conflict of interest in the purchase of property at RM14.5 million by Nafas Feedmills Sdn Bhd as JPPH’s valuation was RM11.7 million.

Phahrolrazi said to ensure good governance and compliance in Nafas, a Malaysian Anti-Corruption Commission (MACC) officer would be stationed at the agency, a decision that has been endorsed by the Farmers’ Organisation Board.