KUALA LUMPUR, Nov 27 — 1Malaysia Development Berhad (1MDB) was found to have performed poorly and was not profitable as its business model of borrowing money to carry out operations landed it in debt, the High Court heard today.
Tan Sri Ambrin Buang, who was the auditor-general when the federal audit on 1MDB was carried out in 2015, today summed up the problems that the government-owned company was found to have.
“The summary that can be made from the 1MDB Audit Report that was done by the National Audit Department (NAD), found that 1MDB faced problems of debt and poor cash flow in just six years of operations.
“Besides that, the corporate governance of 1MDB was found to be very weak such as non-compliance of instructions and decisions made by the board of directors, as well as major investments that were made without detailed evaluation,” Ambrin, who previously headed the NAD, said today.
Ambrin said the government auditors from NAD also discovered that 1MDB’s business model that relied on taking on domestic and foreign loans were actually a burden on the company.
“This is because the borrowings made by 1MDB exceeded 1MDB’s income and 1MDB did not make profits,” he explained.
Ambrin is the sixth prosecution witness in the joint trial of former prime minister Datuk Seri Najib Razak and former 1MDB CEO Arul Kanda Kandasamy over the latter two’s alleged role in the tampering of the 1MDB audit report.
Ambrin also spoke about how government auditors from NAD were hampered in their efforts while carrying out the audit on 1MDB.
The audit process on 1MDB had started on March 9, 2015 and had ended on March 4, 2016 when Ambrin presented the NAD’s findings to Parliamentary watchdog Public Accounts Committee (PAC).
Ambrin said the audit process on 1MDB took longer than expected, due to the company’s failure to provide the necessary documents that were requested.
“According to our original planning, the NAD initially planned to present the final audit report in mid-December 2015, that is about 10 months from when the audit was started in March 2015.
“The period of the audit process on 1MDB took double the time from the usual time taken by NAD for an audit,” he said.
Ambrin said the NAD had initially expected the process of verifying 1MDB’s financial statements to be “not difficult to carry out”, as the company’s financial statements were audited by accredited accounting firms and 1MDB as a government-owned firm was expected to have proper and orderly storage of financial records and documents.
“But actually, this did not happen as the existing audited financial statements were as of March 2014 and many of the supporting documents sought by NAD, including ‘bank statements’ and ‘management account’, were not obtained despite repeated requests made to 1MDB. This is the difficulty that NAD faced throughout 1MDB’s audit,” he said.
Earlier, Ambrin pointed out that 1MDB was already given the chance to explain itself on the audit findings via a December 16, 2015 exit conference, but noted that no such feedback was provided then.
Ambrin then read out a letter from 1MDB’s Arul Kanda on December 9, 2015 to him, where the company confirmed having received draft audit reports from the NAD for verification.
In the December 2015 letter that was read out, 1MDB said it was still checking records within its possession as well as seeking clarification from past 1MDB staff on transactions done years ago, while also seeking permission for access of documents in the police’s custody, and ultimately promising to provide further clarification when such information was available.
Ambrin said, however, that after waiting for two weeks for feedback from 1MDB, the NAD decided to proceed with printing the final 1MDB audit report for its scheduled presentation to the PAC on February 24, 2016.
But Ambrin eventually only presented the audit report to PAC on March 4, 2016 after being pressured in February 2016 into making amendments to the report.
Ambrin had last week said 1MDB had either made late submissions or fail to submit important documents to government auditors, and that the NAD was not allowed to access 1MDB computers and servers to get the required information for auditing.
Today is day five of the trial, which will resume tomorrow morning before High Court judge Mohamed Zaini Mazlan.