KUALA LUMPUR (July 18): Former Human Resource Development Corporation Bhd (HRD Corp) chief operating officer Datuk Ariff Farhan has raised concerns about the potential conflict of interest in the appointment of auditors to conduct independent audits on the government agency, after the Public Accounts Committee (PAC) had uncovered inappropriate investments and property purchases.

"How are they selecting the independent auditor? Who does the selection? Is the NAD (National Audit Department) involved in the selection? These are all important questions," said Ariff, noting that the Ministry of Human Resources’ Secretary-General Datuk Seri Khairul Dzaimee Daud also sits on the board of HRD Corp.

Currently, there are 18 board members at HRD Corp.

Given his concern on the selection of auditors to perform the task, Ariff was of the view that the Ministry of Human Resources' decision to conduct an independent audit on HRD Corp could set a "dangerous precedent".

“This will then set a very, very dangerous precedent. Every government agency and ministry in future, whenever they are audited, will find that they do not have to accept the audit (result). And, they will find that this (independent audit) is a recourse, a way to challenge those findings (of PAC and NAD),” he told the media after a briefing with several members of Parliament on HDR Corp matters.

"This move is akin to casting aspersions on the NAD and the PAC, and would limit the functions of both the agency and committee," Ariff commented.

"I am all for an independent audit appointed and paid for by NAD or MOF (Ministry of Finance), so that there is no cover up by individuals conflicted whether because they are on the board of HRD Corp or senior management of HRD Corp,” he replied to a query by The Edge on whether an independent audit would be more in-depth.

“I welcome a third party who is appointed and paid by anyone or any ministry not related to the parties subject to audit,” he added.

Ariff joined HRD Corp in 2020 as head of strategy. Six months later, he was appointed as chief operating officer. He was removed from the position in May this year.

"I would call on the prime minister to put a stop to this,” Ariff said. “He cannot allow his ministers in the Cabinet to start dictating any audit done on their agencies or ministries.”

Ariff also flagged a potential conflict of interest in the decision to appoint an independent auditor, as the ministry's secretary general Datuk Seri Khairul Dzaimee Daud also sits on the board of HRD Corp.

"How are they selecting the independent auditor? Who does the selection? Is the NAD involved in the selection? These are all important questions," he stressed.

Earlier, Ariff held a briefing with Parliament Special Select Committee on Human Rights, Elections, and Institutional Reform chairman William Leong Jee Keen (Pakatan Harapan — Selayang) and several members of Parliament.

The briefing mainly focused on how to strengthen the weaknesses of the Human Resources Development Act 2001 (Act 612) to ensure the scandal implicating HRD Corp does not recur, according to him.

The weakness is that the Act is “very open-ended,” Ariff noted. “For instance, it allows HRD Corp to make investments but does not set out the necessary processes and procedures, which require the necessary checks and balances."

In addition, the agency's investment panel consists of only one or two board members, with the rest being external individuals deemed qualified by the minister.

As HRD Corp is a company limited by guarantee, Ariff said that the investment panel has absolute power to make decisions on investment matters without needing approval from the board.

"There is Section 50, which gives the minister the power to override decisions if he wants to,” he said. “If the minister is given the wrong advice by senior management and decides to listen to them and override the board's decisions, then there is no necessity for a board in the first place.”

With the agency collecting RM2.4 billion in levies annually, Ariff said that HRD Corp should be turned into a statutory body, which would undergo a higher level of checks and balances.

"Leong is taking this very seriously, and I think there is a lot for him to consider,” he added.

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