AUDIT ON FOREST MANAGEMENT – MALAYSIAN EXPERIENCE STATE AUDIT SECTOR OFFICE OF THE AUDITOR GENERAL OF MALAYSIA

National Audit Department of Malaysia CONTENTS Audit Mandate Previous Auditor General Report Audit Planning Memorandum On Logging Management - 2008 2

National Audit Department of Malaysia AUDIT MANDATE Under Article 106 and 107 Federal Constitution and Section 6(d) Audit Act 1957, the Auditor General shall perform such other duties and exercise such powers in relation to the certifying accounts and compliance audit and shall in his audit make such examination as he may deem necessary to ascertain whether programme, activities and projects were carried out or managed in an efficient manner with due regard for economy and the avoidance of waste or extravagance. 3

National Audit Department of Malaysia PREVIOUS AUDITOR GENERAL REPORT No Year State Topic 1 2001 Perak Audit On Logging Concession 2 2002 Kedah Audit On Forest Plantation 3 2003 Pahang Audit On Logging Management 4 Selangor 5 2004 Johor 6 Sabah Audit On Issuance Of Timber License 7 2006 N. Sembilan 8 Kelantan 5

National Audit Department of Malaysia AUDIT ISSUES 1. Audit On Logging Concession - No tender - Illegal logging - Loss of revenue - Lack of enforcement - Delay in processing license - Delay in issuing license - No record of applicants

National Audit Department of Malaysia AUDIT ISSUES 2. Audit On Forest Plantation - Lack of manpower - No soil investigation - No EIA report - Lack of enforcement - Lack of coordination

National Audit Department of Malaysia AUDIT ISSUES 3. Audit On Logging Management - Delay In Process Of Gazetting Proposed PRF - Logging activities carried out before EIA - Lack Of Enforcement - Lack Of Machinery - Delay in taking court actions - Delay in write-off confiscated timber - Logging activities near water catchment area - Lack of coordination between department - Illegal logging

National Audit Department of Malaysia AUDIT ISSUES 4. Audit On Issuance Of License - Without Tender - Lack Of Enforcement - Incomplete Manual Operation Procedures - Royalty, premium and cess not collected - Wrong calculation on royalty - No royalty marking

AUDIT PLANNING MEMORANDUM ON LOGGING MANAGEMENT – National Audit Department of Malaysia AUDIT PLANNING MEMORANDUM ON LOGGING MANAGEMENT – Concession, Operation and Rehabilitation

National Audit Department of Malaysia AUDIT PLANNING MEMORANDUM Background Audit Objectives Audit Scope and Methodology Audit Criteria Planning Implementation Monitoring Work Schedule Audit Team Cost Estimation Audit Programme

National Audit Department of Malaysia Background Role & Function of Forestry Department in Malaysia Policy/Procedures & Legislations Brief Information Relating To: Forest Resources Forest Management Forest Development Forest Conservation and Environment Protection Forest Harvesting Forest Industries Forestry Education and Training Forest Revenue

National Audit Department of Malaysia Audit Objectives To asses whether the logging management activities are carried out economically and efficiently in achieving their objectives. To ensure the environment is conserved and protected.

National Audit Department of Malaysia 3. Audit Scope and Methodology Scope The study will be on concession, operation and rehabilitation by State Forest Department. The audit to be carried out for 3 years period (2006 to 2008). Methodology Conventional approach and GPS/GIS technology. The study will be carried out by analyzing the document and data at relevant department/agencies Site visit and interview. Appropriate method of data collection and data analysis/audit questionnaire will be conducted. Study of Environment Impact Assessment (EIA) report.

National Audit Department of Malaysia 4. Audit Criteria 4.1 Planning Government Policy Legal Provisions Relating to Forest Matters Types of Forest Revenue Concession & Licensing Concession Handover Forest Plantations Implementation Methods Maintenance of Asset & Records Machinery & Equipments Financial Allocation Enforcement Human Resource & Training Monitoring Mechanism

National Audit Department of Malaysia .... Audit Criteria (Cont) 4.2 Implementation Government Policy Legal Provisions Relating to Forest Matters Types of Forest Revenue Concession & Licensing Concession Handover Forest Plantations Implementation Methods Maintenance of Asset & Records Machinery & Equipments Financial Performance Enforcement Human Resource & Training Monitoring Mechanism

National Audit Department of Malaysia 4.3 Impact Environmental Water pollution – river, flood, erosion, water body ii. Climate change iii. Extinction of Flora and Fauna Revenue Social Economic 4.4 Monitoring Monitoring Mechanism - GIS - Airborne Hyper Spectral Sensing Monitoring Schedule

National Audit Department of Malaysia 5. WORK SCHEDULE No. Stages Year 2008 May June July August September October 1 Overview On The Background 2 Prepare Audit Planning Memorandum/ Entrance Conference With Auditee 3 Carry Out Audit/Detailed Audit 4 Discussion With Auditee/Management 5 Exit Conference/ Management Letter Issued 6 Drafting Audit Report 30

National Audit Department of Malaysia 6. AUDIT TEAM i. State Audit Director - 1 ii. State Audit Deputy Director - 1 iii. Auditor - 1 iv. Assistant Auditor - 4 7. AUDIT COST 8. AUDIT PROGRAMME 31

National Audit Department of Malaysia THANK YOU 32