RM68.81m in contractor advance payments still unrecovered, Audit Dept finds

KUALA LUMPUR, Oct 5 — A total of RM68.81 million in contractor advance payments (WPK) involving 24 projects under five ministries remains unrecovered, with 86.7 per cent of the amount outstanding for more than a decade, according to the Auditor-General’s Report (LKAN) 2/2026.

The five ministries involved are the Ministry of Education (KPM), Ministry of Defence (MINDEF), Ministry of Home Affairs (KDN), Ministry of Transport (MOT) and Ministry of Works (KKR).

The audit found that, overall, the management of WPK by the five ministries complied with the prevailing circulars and financial regulations governing eligibility requirements for contractor advance payments.

“However, the outstanding WPK receivables remained a concern, particularly as a significant portion had been outstanding for more than 10 years and involved companies that had either been dissolved or wound up.

“RM59.63 million out of RM68.81 million in WPK receivables outstanding for more than 10 years involved 21 companies,” the report read.

The report stated that five of the companies had been dissolved, involving WPK receivables amounting to RM10.68 million, while 13 companies had been wound up, involving outstanding WPK of RM27.76 million.

Another three companies remained active, with outstanding WPK amounting to RM21.19 million.

The audit noted that the RM10.68 million owed by dissolved companies could not be recovered, while delays in taking follow-up action against companies that had been wound up had also hindered efforts to recover the outstanding amounts.

Among the delayed actions was the submission of the Proof of Debt Form to the Department of Insolvency (MdI), which is necessary to establish the Government’s claim against companies undergoing winding-up proceedings.

Meanwhile, RM9.18 million in WPK receivables had been outstanding for less than five years, involving three companies that remained active.

The audit also uncovered a reporting issue involving RM5.67 million in WPK balances linked to two projects under KPM and MOT.

The amount had not been reported as WPK receivables, resulting in the actual position of outstanding WPK not being accurately reflected.

The audit called on the ministries to take immediate action to strengthen recovery efforts and ensure that the Government’s financial interests are protected.

For companies that had been wound up under KPM and KKR, the ministries were urged to follow up by submitting the Proof of Debt Form to MdI and obtaining the status of dividend distribution to safeguard the Government’s interests.

The audit also recommended that KPM and KDN take immediate action to initiate civil proceedings or issue letters of demand against companies that remain active if there had been a breach of contract.

Such action, it said, was necessary to ensure that statutory provisions relating to limitation periods were complied with and that the prescribed time limits were not exceeded.

For MOT, the audit recommended that WPK receivables be reported immediately once a Termination Notice is issued to a company.

This would ensure that the reported figures accurately reflect the actual outstanding WPK balance that remains to be recovered.

The findings underscore the need for ministries to strengthen monitoring and follow-up action on contractor advance payments, particularly where companies face financial difficulties, winding-up proceedings or termination of contracts, to prevent public funds from remaining outstanding for prolonged periods.