GOVERNANCE AND COMPLIANCE (Partial Focus on Construction Industry) - Nik Zafri's Overview

 

When it comes to embezzlement, the law is unequivocal - any transfer of company funds to a personal account or personal investment without prior approval from the Board of Directors and without legitimate business justification constitutes embezzlement.

In the construction industry, where financial flows are complex and high-value, strict governance and financial controls must be enforced:

1. Project Legitimacy : The project must be legitimate and verifiable, supported by formal contracts, defined scope of works, deliverables, and Client approvals,

2. Corporate Fund Custody : Project funding must be maintained strictly in the company’s official bank accounts and not in personal accounts, proxy entities, shelf companies, or nominee structures,

3. Transaction Transparency : All financial transactions must be transparent, traceable, and supported by proper documentation, with segregation of duties between approval, execution, and reconciliation,

4. Progress Payment Alignment : Construction progress reports must be prepared and independently verified, ensuring financial disbursements align with physical progress on site.

5. Contractual Payment Controls : Payments to contractors, subcontractors, and suppliers must be properly certified, contractually justified, and supported by invoices, certifications, and approved variations.

6. Payroll, Taxation, and Statutory Compliance

All salaries, consultant retaining fees, and payments to staff whether ad hoc, contract-based, or permanent must be clearly documented, including offer/appointment letters, periodical performance assessments, salary slips, payroll approvals, statutory contributions (EPF, SOCSO, EIS), and taxation records.

Additionally, the company must comply with statutory fiscal obligations, including:

Sales and Service Tax (SST) registration once turnover exceeds:

• RM500,000 per annum for Services Tax (e.g., professional, consultancy, engineering services), and

• RM500,000 or RM1.5 million depending on goods category for Sales Tax under the Sales Tax Act 2018.

Timely payment of company income tax under the Income Tax Act 1967. Mandatory employer EPF contributions under the Employees Provident Fund Act 1991.

Failure to remit statutory dues constitutes a compliance breach and may trigger regulatory enforcement and forensic investigations.

7. Auditability

All transactions must be subject to internal and external audits, with supporting records retained for regulatory, forensic, and governance review.

8. Board Oversight

Board resolutions and management approvals must be documented, particularly for significant expenditures, related-party transactions, investments, and fund transfers.

9. Anti-Bribery, Conflict of Interest and Related-Party Transparency

Compliance with Anti-Bribery and Corruption frameworks (e.g., ISO 37001 / ABMS) must be enforced, supported by:

• ABMS Oath/Integrity Pact,

• Statements of Conflict of Interest and Partiality w/a

• Related Party Transaction declarations

This is critical where:

• Board members who hold external directorships, management roles, or advisory positions in other entities that could reasonably be perceived to compromise their independence or objectivity.

• The company hires siblings, relatives, or close associates, or

• Board members are related to one another.

All such relationships and potential conflicts must be declared, documented, and transparently disclosed.

10.1 Financial Integrity and Corporate Governance

The Board of Directors shall ensure that all company funds are used strictly for legitimate business purposes and that no funds are diverted for personal use or unauthorised investments.

The Company shall implement and maintain controls to ensure:

1. segregation of duties in financial approvals and payments,

2. transparency and traceability of all transactions,

3. statutory compliance with taxation, payroll, and SST obligations,

4. declaration and management of conflicts of interest and related-party relationships,

5. independent audit and record retention and

6. compliance with Anti-Bribery and Corruption Management Systems (ABMS).

Any breach shall be treated as misconduct and may be subject to disciplinary action, civil liability, and criminal prosecution.

10. IPO and Capital Market Compliance

Should the company intend to go public, it must fully comply with all regulatory requirements with complete transparency; not limited to the following; including:

• Preparation of a prospectus,

• Fair and defensible share pricing methodology,

• Appointment of licensed fund/investment managers, advisers, and underwriters,

• Compliance with securities and capital market regulations,

• Full disclosure of financials, governance structures, and risk factors

11. Statutory and Regulatory References (Malaysia)

This governance framework aligns with; not limited to the following; laws and regulations:

• Companies Act 2016 (Act 777),

• Malaysian Anti-Corruption Commission Act 2009 (MACC Act),

• Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATPUA),

• Capital Markets and Services Act 2007 (CMSA),

• Securities Commission Malaysia Act 1993 (SCMA)

• Income Tax Act 1967

• Sales Tax Act 2018 & Service Tax Act 2018

• Employees Provident Fund Act 1991

• Any other relevant regulations

FORENSIC RED-FLAG FRAMEWORK (CONSTRUCTION INDUSTRY)

• Financial Red Flags

a. Payments made to personal or proxy accounts

b. Projects funded via shelf companies or nominee entities

c) Large cash withdrawals or round-sum transfers

d) Invoices without supporting site progress

e) Variations approved without Board or Client approval

• Payroll and Tax Red Flags

a) “Ghost employees” or consultants without contracts

b) No EPF/SOCSO/EIS remittance despite payroll expenses

c) Failure to register for SST despite exceeding thresholds

d) Underreported revenue to avoid taxation

• Governance Red Flags

a) Board members related or holding undisclosed external roles,

b) Related-party contracts without declaration

c) Board approvals done retrospectively

d) No ABMS declarations or COI statements

• Project Execution Red Flags

a) Payments exceeding certified progress,

b) Undocumented Variation Orders,

c) Backdated certificates,

d) Subcontractors owned by insiders and

e) Repeated cost overruns without justification

• IPO/Capital Market Red Flags

a) Inflated project pipeline for valuation,

b) Undisclosed liabilities or contingent claims,

c) Non-independent valuation or share pricing, and

d) Unlicensed fund managers or advisors

Corporate governance failures are rarely accidental. They are often systemic, deliberate, and traceable. Robust controls, transparency, and documentation are the first line of defence against embezzlement, corruption, and financial crime.

Managing Fast-Track Megaprojects: Supervision, Systems, and the True Purpose of NCRs

Managing a fast-track megaproject is never easy. It demands close coordination and genuine teamwork among all parties, Client, Consultant, and Contractor alike. In such environments, almost everything is interdependent, time-sensitive, and high-risk. At the same time, projects of this scale increasingly operate under heightened expectations for Environmental, Social and Governance (ESG) performance and strong anti-bribery and integrity controls.

At the very beginning, a robust initial risk assessment is critical. It sets the baseline for design decisions, construction sequencing, procurement strategy, testing requirements, approval workflows, and ESG obligations such as environmental impact control, worker safety, community interface, and ethical procurement. However, in fast-track projects, this initial assessment is often developed with limited information and under significant time pressure. As such, it should never be treated as static or final.

Every submission must be reviewed thoroughly, yet approved within tight timelines. Delays in review can clog the system, slow down progress, and create knock-on effects across multiple work fronts. Approvals must also align precisely with the commencement of each project phase, too early invites risk, too late invites delay. These risks, including ESG and governance-related risks, should already be identified, ranked, and mitigated during the initial risk assessment stage.

Beyond documentation, there is the added complexity of Factory Acceptance Tests (FAT), Site Acceptance Tests (SAT), and the crucial task of determining the most appropriate standards and codes of practice. These decisions should be directly informed by the risk register - higher-risk systems demand stricter standards, closer supervision, and more rigorous testing and inspection regimes. Where ESG is concerned, this also includes environmental compliance, waste management controls, worker welfare standards, and safe operational readiness.

In such a pressurised environment, risks and Non-Conformance Reports (NCRs) are foreseeable. What matters most to me, however, is effective supervision, ethical conduct, and never taking anything for granted, regardless of experience, past success, or schedule pressure.

An NCR should always be viewed as a tool for improvement, not fault-finding. Importantly, NCRs play a vital role in validating and refining the initial risk assessment. When an NCR arises, it is often a signal that a risk was either underestimated, improperly mitigated, or not identified at all. This applies equally to technical, safety, environmental, and governance-related non-conformances.

From an ABMS perspective, NCRs and root cause analyses must also be handled transparently and independently, free from coercion, undue influence, or conflict of interest. Decisions must be documented, traceable, and defensible. Shortcuts taken under time pressure especially in procurement, approvals, or inspections represent governance risks that can be far more damaging than technical failures.

Root cause analysis should avoid blaming individuals or shifting responsibility. Instead, it should focus on whether systems, processes, interfaces, or controls are aligned and how they can be improved or amended. The lessons learned from each NCR should feed directly into improving future risk assessments, strengthening ESG controls, and enhancing ABMS safeguards for subsequent phases and future projects.

From experience, system-related NCRs (such as documentation gaps, procedural misalignments, unclear responsibilities, weak approval controls, or insufficient ESG monitoring) are relatively inexpensive to address. In fact, it is far better and cheaper to have five NCRs to improve a system than to allow systemic weaknesses to persist, particularly where governance and integrity are concerned.

Workmanship-related NCRs, on the other hand, are a different matter. Even a single workmanship NCR can be far more costly than multiple system NCRs due to rework, delays, safety exposure, environmental impact, and potential long-term performance or durability issues. Many workmanship NCRs can be traced back to weaknesses in early risk identification, supervision planning, constructability reviews, or inadequate enforcement of ESG and safety standards.

If all stakeholders approach NCRs and risk assessments with this mindset : objective, improvement-driven, ethical, and forward-looking, problems can be resolved diplomatically rather than escalating into conflict. A mature project team uses NCRs to strengthen controls, refine risk registers, reinforce ESG commitments, and uphold ABMS principles, rather than to apportion blame.

At the end of the day, everyone is paid to do their job. But it is how we anticipate risk, uphold integrity, protect people and the environment, respond to non-conformance, and continuously improve our systems that ultimately determines whether a fast-track megaproject truly succeeds not just technically, but sustainably and credibly.

Bahasa Melayu sebagai Teras Pendidikan: Suatu Kenyataan Kepimpinan Nasional

Oleh: Nik Zafri Abdul Majid

Titah Kebawah Duli Yang Maha Mulia Seri Paduka Baginda Yang di-Pertuan Agong agar Bahasa Melayu dimasukkan sebagai teras dalam Dasar Pendidikan Negara wajar disambut dengan sikap terbuka, matang dan berpandangan jauh. Titah ini bukan bertujuan menafikan kepelbagaian, sebaliknya mengajak seluruh rakyat dan pembuat dasar untuk kembali kepada asas pembinaan negara yang telah dipersetujui sejak merdeka.

Perkara 152 Perlembagaan Persekutuan memperuntukkan Bahasa Melayu sebagai Bahasa Kebangsaan, sambil pada masa yang sama menjamin kebebasan penggunaan dan pembelajaran bahasa-bahasa lain. Keseimbangan ini mencerminkan kebijaksanaan penggubal Perlembagaan: Malaysia dibina atas kepelbagaian, namun disatukan oleh satu bahasa bersama. Dalam konteks ini, meletakkan Bahasa Melayu sebagai teras pendidikan bukan langkah ke belakang, tetapi kesinambungan kepada kontrak sosial dan prinsip kenegaraan.

Dasar Pendidikan Kebangsaan dan Falsafah Pendidikan Kebangsaan telah lama menggariskan bahawa pendidikan berperanan membentuk insan seimbang serta memperkukuh perpaduan nasional. Pendidikan tidak sekadar memindahkan ilmu, tetapi membentuk nilai, pemikiran dan jati diri. Oleh itu, bahasa pengantar utama bukan isu teknikal semata-mata, sebaliknya berkait rapat dengan hala tuju negara dan identiti generasi masa hadapan.

Dalam perjalanan pembangunan negara, terdapat usaha memperkukuh penguasaan bahasa asing, khususnya Bahasa Inggeris, atas pertimbangan daya saing global dan akses kepada ilmu. Salah satu contoh dasar lalu ialah penggunaan bahasa Inggeris bagi pengajaran sains dan matematik. Walaupun dasar tersebut digubal dengan niat baik, penilaian semula menunjukkan keperluan imbangan yang lebih adil agar matlamat penguasaan ilmu tidak menjejaskan kefahaman pelajar dan peranan Bahasa Melayu sebagai bahasa ilmu. Pengalaman ini memberi pengajaran bahawa kekuatan sistem pendidikan terletak pada keseimbangan, bukan penggantian mutlak.

Isu Bahasa Melayu sering menjadi sensitif kerana ia bersentuhan dengan emosi, identiti dan sejarah. Namun, perbincangan ini tidak harus dilihat sebagai pertembungan antara bahasa, kaum atau ideologi. "Multilingual" adalah kekuatan negara, tetapi bahasa kebangsaan ialah asas penyatuan. Banyak negara maju mengekalkan dan berbangga bahasa kebangsaan masing-masing sebagai bahasa pendidikan utama, sambil menggalakkan penguasaan bahasa asing sebagai nilai tambah strategik.

Persoalan sama ada wujud pihak yang menidakkan Bahasa Melayu perlu ditangani dengan berhati-hati. Secara umumnya, tidak ramai yang menolak kedudukan Bahasa Melayu secara terbuka. Namun, terdapat kecenderungan untuk melihat isu bahasa melalui lensa ekonomi dan pasaran semata-mata, sehingga aspek kenegaraan dan jati diri kurang diberi penekanan. Di sinilah perlunya kepimpinan yang konsisten dan berprinsip dalam menterjemahkan dasar.

Kenyataan bahawa pihak yang tidak menerima Bahasa Melayu sebagai teras pendidikan “lebih baik tidak tinggal di negara ini” hendaklah difahami sebagai peringatan nilai, bukan penolakan terhadap sesiapa. Setiap negara mempunyai asas yang perlu dihormati begitu juga dengan Malaysia:

Perlembagaan, kedaulatan undang-undang, institusi Raja dan bahasa kebangsaan

Menghormati asas ini adalah tanda kesetiaan kepada negara.

Sebagai satu kenyataan kepimpinan nasional, kita wajar menegaskan bahawa Malaysia mampu bersaing di peringkat global tanpa mengorbankan jati diri. Bahasa Melayu mesti terus diperkukuh sebagai bahasa ilmu, bahasa wacana dan bahasa perpaduan, sambil penguasaan bahasa lain dipertingkat secara sistematik. Inilah pendekatan seimbang yang mencerminkan kematangan sebuah negara berdaulat berakar kukuh di tanah sendiri, namun terbuka luas kepada dunia.