AUDIT REPORT | The Auditor-General suggested for Finance Ministry to review its contracts procurement policy concerning advance for local contractors.

Based on its audits on problematic projects, the National Audit Department, it recommended that the ministry reviews its policy on Financial Advance for Contractors, which requires contractors to fully repay the advance sums taken upon reaching 75 percent job progress.

"Based on audits carried out on problematic projects, it was found that failures usually occur at the stage where work progress was between 30 percent and 40 percent.

"In the department's opinion, the Finance Ministry should review its 75 percent policy as specified in 1PP PK 4.1 - Administration of Procurement Contracts in General," said the report that was released on Monday.

Under the policy, the government is allowed to issue a financial advance to local contractors who need capital to start working on government projects. The policy applies to both supply and service contracts.

It requires project owners (government bodies) to make sure their advance to contractors is returned through deduction from the contractors' fees, which is to be done in stages until the full amount is collected, at the latest upon 75 percent of the project completion.

In the case of a project that goes defunct, the policy warrants that the advance is claimed from the financial institution that provides the guarantee for the contractor.

The audit report stated that as of 2017, the total amount of unclaimed advances from contractors stood at RM1.026 billion.

Of this amount, RM108.88 million was from projects that have either gone defunct or terminated and projects that have surpassed the 75 percent completion.