The Audit" Act prescribes the nature and scope of audit to be undertaken by the Auditor-General. Besides the normal audit of the accounts in terms of propriety and regularity of transactions in public fund management, the Auditor General is also required to ascertain whether monies have been applied to the purposes for which they were appropriated and whether in his opinion the related activities have been carried out in an efficient manner with due regard for economy or the avoidance of waste and extravagance.
The Malaysian Government is currently engaged in a series of poverty redressal programmes and one of many such programmes is the provisioning of low-cost houses for the low-income groups The Audit Department undertook a review of the low cost housing programme together with five other subsidy programmes which were also currently being implemented. This article sets out the:
The main objective of the National Housing Programme is to provide Malaysians, particularly those in the lower income groups, with reasonable housing aimed at eliminating slum dwellings and squatter living. To achieve this, a housing strategy, with emphasis on the construction of low-cost housing for the lower income groups, was prepared by the Malaysian Government. The housing programmes for the middle and higher income groups are, however, left to private enterprise. Private housing developers are subject to government licensing requirements to ensure a planned and orderly development throughout the country.
Housing, being a State matter is undertaken by the 13 State Governments and the Federal Territory of Kuala Lumpur (capital city) under the supervision and coordination of the Ministry of Housing and Local Government. This Ministry, besides issuing general guidelines on implementation, also provides financial assistance such as loans and technical advice.
The low-cost housing programmes sponsored by the Malaysian Government only concentrated on providing single storey terrace houses and multi-storey flats that did not exceed M$7,500 and M$12,500 per unit respectively. However, these price guidelines are only applicable to low-cost housing programmes financed by the Federal Government and not those funded solely by the respective State Governments and City Hall, Kuala Lumpur.
Under the First Malaysia Plan (1966-1970) an allocation of M$162.5 million was made for low-cost housing. By the end of the Plan period a total of 22,522 low-cost housing units were built, half of which were flats, costing approximately M$100 million. For the Second Malaysia Plan (1971-1975) nearly M$172 million was allocated for public housing throughout Malaysia. During this period the various Federal and State Agencies constructed a total of 86,000 units of which 13,244 units were low-cost houses constructed under the programme of the Ministry of Housing. In the Third Malaysian Plan, prior to the Midterm Review, the Government allocated M$463.7 million as loans to the State Governments and City Hall, Kuala Lumpur to construct about 61,200 units of low-cost houses throughout Malaysia.
In addition to public low-cost housing programmes sponsored by the Ministry of Housing, a number of Federal Agencies and regional development authorities are also involved in building about 53,100 low-cost housing units.
(a) Preliminary investigation and initial review
To report about the implementation of any particular programme in detail requires the employment of specialist teams of audit personnel with the requisite skill and experience to carry out evaluation audit of a much wider scope. To determine the scope of audit and extent of the review of the low-cost housing programme, a team of relatively experienced officers was formed to undertake the audit. The team, in order to acquire a quick working knowledge of the entities under audit, had to make visits to the Ministry of Housing and City Hall, Kuala Lumpur. A number of meetings between the Audit Officers and the officials of the Ministry and City Hall were held and during these meetings briefings were given by the senior and ground level officials of the implementing agencies.
Interviews with executives and other senior officials of the Ministry and City Hall were also conducted by the Audit Officers to obtain additional information and clarification on the activities carried out so as to identify any significant problems that may exist. Much time was spent by the Audit Officers in obtaining and examining basic documents, accounting records, special reports and files, from the Ministry and City Hall to extract information. pertaining to objectives, policies, standards and procedures. The supervising auditor had to confine the gathering of data that would be useful for the initial review of the housing programme being audited. On the spot inspections were conducted by the audit officers on two low-cost housing projects, selected at random in the Kuala Lumpur area, for an insight and point of reference to evaluate the facts given in the various documents and briefings.
(b) Detailed audit review
After the preliminary audit review the audit officers were able to draw their attention to the most important matters on which to focus their efforts. The success of the housing programme was initially assessed and meausred against the defined aims and objectives of the housing programes of the Ministry and City Hall. Issues that were seemingly unimportant or less important were subsequently eliminated. From the initial review the following critical areas were identified for a more detailed audit examination:-
A formal work programme was prepared for a detailed review of the above critical areas of the low cost housing programme. The work programme outlined the time frame, staffing requirements and other special information or events pertaining to the performance of the detailed review of the low-cost, housing programme. Since it was proposed that the review should be on as wide a scale as possible, Audit Branch Heads from the 13 States and other audit officers selected to undertake the review were called to attend a seminar on low-cost housing in Kaula Lumpur. These audit officers were briefed on how the audit would be conducted. Detailed audit guidelines outlining the various tasks to be performed during the review process were also issued to every audit officer involved. Questionnaires on cricital areas to be reviewed in detail were also issued to all audit officers conducting the audit. In addition, in this, instance, provision was made for successful applicants of several low-cost housing schemes to be individually interviewed or their comments obtained by means of questionnaires specifically prepared for that purpose. This was to assess the impact of the low-cost housing scheme at the beneficiary level
This audit review was affected by a number of factors, amongst which was the difficulty in obtaining relevant, up-to-date records and necessary explanations from the respective implementing agencies. Due to the apparent lack of coordination between the different divisions in compiling essential data for appraising progress, much time was spent by the audit officers in tracing files and records of the housing programme from the various divisions of the agencies to obtain the necessary information. The response by participants to enquiries by audit officers were poor or not sufficiently informative. The Audit Department was also handicapped by the shortage of experienced officers to carry out sufficiently detailed investigations into individual housing schemes within the given time-frame.
(i) Implementation Capacity-inadequate
Lack of technical and experienced personnel in the various aspects of housing development appeared to be the main problem faced by most of the implementing Agencies. In most cases, delays in the completion of the programmes could be attributed to land acquisition problems and the lack of coordination in planning, control and supervision of the projects, at various stages of construction. It was evident that additional staff and more technical assistance have to be made available to the implementing agencies if the low-cost housing programmes are to be completed as planned.
(ii) Scarcity of suitable housing sites and delayed acquisition or non-availability of sites
To bring the price of low-cost houses to a level that is within the reach of the lower income groups, land for such houses would have to be provided by the States concerned at reduced cost. This would entail an element of subsidy which was unavoidable with spiraling cost of land throughout the country. While private land usually takes a long time to acquire, our examination revealed that in many instances State land earmarked for low-cost houses could also not be readily put to use due to the presence, of squatters. Our study revealed that the presence of these squatters hampered the work of contractors in certain States as they could not take possession of the sites on the scheduled dates. In some cases, the contractors had even threatened to terminate the contracts. Eviction of squatters at various phases of the project, in most cases, took between 25 and 600 days. Protracted negotiations between various government agencies over such matters as the choice of the location for low-cost housing development and the fixing of land premium have also been observed to have delayed a number Of projects.
(iii) Difficulty in producing low-cost houses within the stipulated price range
Low-cost single storey terrace houses and multi-storey flats for sale or rent were to be built at costs not exceeding M$7,500 and M$12,500 per unit respectively. To keep within these cost limits at current prices would require considerable subsidy from the government in the form of land and infrastructure facilities such as roads, drains and utility services. In most States, the cost of infrastructure facilities were borne by the respective State Governments and are not included in the costs to be recovered from buyers. In some housing schemes only part of the infrastructure cost was taken into account in computing such costs while in others premia payable for land would be determined by the State Governments at some future dates after the buyers had settled their instalments. There is apparently a lack of uniformity in determining recoverable costs. Although many States do not include infrastructure costs in computing recoverable cost of low-cost houses and flats, these States still experienced difficulties in limiting the unit cost to M$7,500 and M$12,500. In certain cases the implementing agencies were unable to give information about the cost for each unit of low-cost flats/houses due to lack of proper costing record. No separate records of the total cost of each project was also maintained. Without such records, it is difficult for the agency to control the cost per unit within the limit prescribed by the Ministry of Housing. It was emphasised that information on unit costs was important not only for control purposes but also for determining the sale price should there be any change in future policy.
(iv) Cash flow problems-delays in receiving loans froth the Federal Government
Loans provided by the Federal Government are channeled through the Ministry of Housing to the respective State Governments and City Hall at an interest rate of 4%. These loans are subsequently relent to the various State agencies, (i.e. State Development Boards, etc. set up by the various State governments to undertake development works). Although the State Governments apparently had no serious problems in financing their low-cost housing programmes in view of the availability of loan funds, many of the state agencies often experienced cash flow problems especially during the preliminary stages of1 project implementation. There had been, for various reasons, many instances of long intervals between the approvals of loans and the execution of the relevant loan agreements, consequently delaying the withdrawals of loans from the Federal Government. The States required funds for the acquisition of land, preparation of sites and other infrastructure, and any delays encountered in the preliminary works would gravely affect the time table for the completion of the projects. In 1978, to overcome this problem, the Federal Government agreed to grant loans up to M$5 million to each State to establish revolving funds to meet preliminary expenses on approved low-cost housing projects. This was expected to expedite the public low-cost housing programme. Administrative problems, such as delays in approving loans and executing relevant agreements, could also be overcome by more concerted planning and coordination of efforts between the authorities involved, both at State and Federal levels.
(v) Weaknesses in planning and coordinating projects
The study revealed that delays in the implementation of low-cost housing projects in certain States were due to shortcomings in the planning and coordination before the implementation of the projects. Some of the problems could have been avoided had the location of sites, the types and number of units to be built and the type of community facilities to be provided been planned and coordinated in concert with other relevant authorities well in advance of implementation. The Audit examination also revealed that frequent alteration of house plans had also delayed the completion of certain low-cost housing projects.
(vi) Problems of allocating low-cost houses
Originally, a total family income of M$300 per month and below irrespective of the family size was the yardstick used to determine the eligibility of applicants for low-cost housing. However, it was subsequently decided by the Ministry of Housing that the size of the family is also ah important factor in determining the eligibility for low-cost houses and flats provided that the applicant's total family income is not in excess of M$800per month. Despite this, audit examination revealed that, although most State Governments have adhered to these guidelines, this was not complied with by City Hall as applicants with-family monthly incomes of between M$l,000 and M$2,500 were also alloted low-cost housing units. According to directives issued by the Ministry of Housing in 1965 and 1966 priority was also to be given to owner occupiers and chief tenants of illegal houses on state land in the Kuala Lumpur area that were demolished for public purposes. Althouth the number of squatters to be evicted and offered low-cost housing units were determined by census, no such census reports or relevant details such as the number of squatters displaced, size of family and total income, addresses of low-cost units alloted together with the dates of occupation and particulars of rejections were maintained. In their absence it was not possible to ascertain whether the allocations of units were properly controlled and complied with the eligibility criteria. Proper records of particulars pertaining to the initial allocation of units to applicants other than squatters were also not maintained or available for audit. Consequently no verification could be made on the screening of successful candidates and the justification of allocations. In one State certain policy guidelines on allocation of houses were observed not to conform with the objectives of the Federal Government on low-cost housing.
(vii) Delays in allocation of low-cost housing
The applications for low-cost houses and flats especially in the Kuala Lumpur area have always been overwhelming resulting in much time being spent in processing the applicants and subsequent delays in the allocation of the completed houses. Although the Ministry had previously advised the respective State Governments to invite applications while the houses were still under construction and to process the applications before the completion date it was observed however that considerable delays in the allocation of completed houses continued to occur. Such delays are not only detrimental to those in the poverty groups who are in desparate need of accommodation but also caused the Government substantial losses in rental revenue.
(viii) Arrears of monthly payments
To accomplish the Government's objective of providing proper low-cost housing (with acceptable basic facilities) for the lower income groups, it was found necessary to subsidize the house buyers or tenants by reducing the monthly payments on the purchase price or rental. Despite this, the majority of the State agencies and City Hall, Kuala Lumpur faced monthly collection problems and in some cases the arrears have reached alarming proportions. This state of affairs is partly due to the shortcomings in the collection machinery, particularly the lack of staff. The continued accummulation of arrears had adversely affected the financial position of the States concerned as they had to repay the loans to the Federal Government for low-cost housing construction and to maintain essential services in the housing estates. Since in the selection of applicants their ability to pay the purchase price or the proposed rental was a major factor a majority of the succesful applicants should have been able to pay the instalments or rents as and when they fell due. The authorities in a number of cases have been reluctant to take appropriate measures to recover the arrears.
(ix) Deviation from loan agreements
Loans agreements executed between the Federal Government and the implementing agencies for low-cost housing programme specify the particular low-cost housing project for which the loans were given. Despite this, deviations were observed. In one instance a whole multi-storey block was converted to shopping lots at the expense of living accommodation.
(x) Qualify of construction
Interviews with the successful applicants and tenants by audit officers revealed that they were dissatisfied over the quality of construction and general conditions of the buildings such as poor ventilation, cracked walls after a period of about 4 months, poor electrical wiring and unsatisfactory installation of water pipes.
(xi) Low-cost houses for rent or sale
To ensure that the low-income groups benefit from public housing the Federal Government stipulated, as one of the conditions on loans given to the State Governments and City Hall, Kuala Lumpur, that completed houses should not be rented or sold on hire purchase terms for more than M$55 per month. This condition, however was observed to have not been adhered to by a number of State Governments. A few State Governments have now sought the Federal Government's approval to exceed the limits set.
One encouraging feature emerging from this audit review is that it has generated several discussions between officers of the Ministry/Departments concerned and audit officers in order to resolve the various administrative problems, and some positive decisions have been taken to improve implementation procedures. It has also created awareness amongst officials at Federal, State and District levels of the need to coordinate efforts, and to work closely together in order to exchange ideas and information so as to ensure more orderly implementation of the Low-Cost Housing Schemes.