KUALA LUMPUR (Feb 24): The Auditor General’s Report has questioned the Solid Waste Management and Public Cleansing Corp’s (SWCorp) ability to continue its operations, given its leveraged position and insufficient revenue generation.  

“This situation (increasing net debt) indicates that SWCorp’s assets are unable to cover its liabilities in the long term,” the report said.

For the financial year ended Dec 31, 2023 (FY2023), SWCorp had net debt of RM140.15 million — RM691.79 million in total assets versus RM831.94 million in total debt. Net debt stood at RM94.61 million in FY2022, and RM7.42 million in FY2021. 

The agency under the Ministry of Housing and Local Government employs the services of three concession companies — E-Idaman Sdn Bhd, Alam Flora Sdn Bhd and SWM Environment Sdn Bhd — for solid waste management and public cleansing services.

In turn, SWCorp Fund collects contributions from 52 local authorities across six states and the federal territories, to finance the cost of services provided by the concession companies. 

However, the agency has had to rely on federal government grants to finance these services.

Federal government grants received by SWCorp in FY2023 totalled RM1.54 billion, making up 65% of the agency’s revenue of RM2.24 billion.

Even with the federal-level financial assistance, revenue was insufficient to cover its expenditure of RM2.29 billion, resulting in a deficit of RM53.9 million — extending the agency's streak in the red to three years. It logged deficits of RM87.2 million in FY2022, and RM60.75 million in FY2021.  

“Overall, the federal government grants and income generated by SWCorp were insufficient to cover its operating expenses, even with the increase in grants received in 2023. This was due to the increase in expenditure for solid waste and public cleansing services,” the report said.

“Based on SWCorp’s financial position as at FY2023, there is uncertainty regarding its ability to continue operations based on ongoing efforts,” it added.

The agency declined to comment when contacted by The Edge, saying that it would provide a response after the debate on the Auditor General’s Report in Parliament on Thursday.

According to the Auditor General’s Report, SWCorp’s outstanding receivables totalled RM301.62 million in FY2023, with 96.5% or RM291.11 million being unpaid contributions from local authorities.

The report said outstanding gross contributions from local authorities were RM521.92 million, citing SWCorp’s records.

“However, there are discrepancies in the amounts recorded by local authorities that need to be resolved by both parties,” the report said.  

“Further review found that SWCorp has provided a provision for doubtful debts in FY2023 amounting to RM230.81 million for outstanding contributions from local authorities, which represented 44.2% of total outstanding receivables for SWCorp Fund,” it added.

SWCorp's liquidity ratio showed that for every RM1 of current liabilities, SWCorp only had 80 sen of current assets to cover liabilities, compared to 86 sen in 2022. 

"This shows SWCorp has difficulty paying off short-term debt," added the report.

The report said SWCorp’s net current debt stood at RM145.87 million in FY2023, a 44% increase from FY2022, mainly due to RM681.78 million in unsettled payables owed to the concession companies.

“SWCorp has not settled payments to the concession companies, due to discrepancies in the receivables amount that SWCorp does not agree with,” the report said.

“The Ministry of Finance (MOF) has issued a letter instructing SWCorp to make the payments, and the concession companies to issue credit notices. However, the MOF’s decision has not been agreed upon by the concession companies.

“Therefore, SWCorp will bring this matter to the dispute resolution committee, and subsequently to arbitration if no resolution is reached,” it added.

According to the report, the MOF also emphasised that in the case of negligence in managing extra-contractual work, surcharges should be imposed on responsible parties to ensure more orderly management and prevent financial losses to the government.

“Statutory bodies and agencies should be more vigilant, and adhere to contractual procedures. Internal investigations and stricter preventive measures must be taken to ensure more efficient and orderly financial management in the future,” it added.

Towards addressing SWCorp’s financial position, the Auditor General’s Report recommended the agency establish an effective mechanism to generate its own income to ensure it can continue operating without excessive reliance on federal government financial assistance.

Besides this, the report also said SWCorp should ensure discrepancies in outstanding receivables recorded between the agency and local authorities are resolved to ensure revenue can be collected.

“Additionally, SWCorp should take immediate action to resolve the discrepancies in outstanding payables recorded between SWCorp and the appointed concession companies,” it added.

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