HRD Corp fails audit, auditor-general wants enforcement agencies to step in

The Auditor-General’s Department has urged the Human Resources Ministry to refer the management of Human Resources Development Corporation (HRD Corp) to the relevant enforcement agencies after the government entity failed its audit.

“The ministry must take the necessary action against HRD Corp’s management on the identified mismanagement by referring the matter to the relevant enforcement agency,” said Auditor-General Wan Suraya Wan Mohd Radzi in the latest Auditor-General’s Report published today.

Among others, auditors found mismanagement of hundreds of millions of ringgit involving training grants, investments and property purchases.

For example, a total of more than RM50 million in training grants were disbursed to the same individuals multiple times while more than 200 were deemed “suspicious” (meragukan) by the auditors.

The 234 “suspicious” grantees were awarded grants under Skim Gerak Insan Gemilang from 2020 to 2023.

They were “suspicious” because the same identity card number was used for different names while in other cases there were multiple instances of the same name, but with different identity card numbers.

“As a whole, the corporate governance of HRD Corp is unsatisfactory. Decisions made by HRD Corp management did not follow procedures and did not protect its interests to achieve its objectives,” Wan Suraya (above) said in the report.

The audit’s scope is from 2019 to 2023.

HRD Corp’s CEO since 2020 is Shahul Hameed Sheikh Dawood.

Responding to the issue of the award of multiple grants to single individuals, HRD Corp told auditors this was because grantees needed to undergo various training to upskill.

However, the auditors noted that the grant awarded by the government is for one course per person only, and not for 3,726 individuals to attend multiple courses.

HRD Corp said it has also upgraded its digital infrastructure to address the issue.

High-risk investments resulted in losses

The auditors also found poor governance in HRD Corp’s investments of RM3.727 billion, resulting in unrealised losses of RM49.38 million.

The funds invested were from the Human Resources Development Fund (HRDF), which is a consolidated fund of employer levy contributions.

Among others, HRDF invested in public-listed firms, some of which were done without Investment Panel oversight.

Instead, the HRD Corps CEO sought approval directly from then-human resources minister V Sivakumar, who approved the investments in September and October last year, because the Investment Panel chairperson post was vacant.

The audit found that for one company, the report presented to the minister differed from the findings of the HRDF treasury department’s own analysis of the viability of reinvesting in the public-listed firm.

HRDF’s treasury on Oct 10, 2023, reported the public-listed entity was in a downturn and facing liquidity issues but in his letter to the minister six days later, the HRD Corp CEO said the same firm was solid and had the potential to rise.

The audit also found that the CEO continued to seek approval to reinvest in this firm, even though the Investment Panel had rejected it in two prior meetings in December 2022 and March 2023.

In its response to the auditor-general, HRD Corp stood by its decision to reinvest in the public-listed firm, arguing that the company had the potential to grow in the near future.

In response, the auditor-general said the HRD Corp management has the obligation to recoup the RM49.83 million in unrealised losses.

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