KUALA LUMPUR (July 4): The Public Accounts Committee (PAC) found that the Human Resource Development Corp, or HRD Corp, has been utilising a significant portion of the levy it collected from companies for risky investments.

The investments were high risk in nature, such as investments in put and call options, which may expose HRD Corp to the risk of significant losses, said Datuk Mas Ermieyati Samsudin, chairperson of the bipartisan parliamentary committee. HRD Corp is a company limited by guarantee under the purview of the Ministry of Human Resources.

"The PAC was informed that there is an amount of levies that have not been used by the employer within two years, which are then categorised as unutilised levy,” Mas Ermieyati told a press conference at Parliament. This is “too short of a time period” to fully help small and medium enterprises (SMEs) to utilise the funds for employee training.

The PAC found that the amount of levy collection recorded by HRD Corp increased significantly to RM2.13 billion in 2023 compared with RM475 million in 2020.

This significant increase, the PAC chairperson said, is a result of the expansion of the Human Resource Development Act 2001 on March 1, 2021, where the levy has been made mandatory for all sectors.

The transfer of the unutilised levy, which is then used for investment purposes on behalf of HRD Corp, was not presented in the board of directors' meeting despite being requested by the board members, Mas Ermieyati explained.

"It should be noted that HRD Corp is not an investment institution.... The main goal and function of HRD Corp is the development of human resources for the purpose of promoting training and development of employees, apprentices, and trainees, and not as an investment institution," she added.

Furthermore, Mas Ermieyati said that HRD Corp's investment panel did not report these investment activities to the board of directors as the management justified it by saying that the chairman of the investment panel is the chairman of the board.

"This resulted in the board of directors not being able to monitor HRD Corp's investment activities holistically as well as dismissing the board of directors' role as the party responsible for HRD Corp's direction," she said.

In addition, the PAC also found weaknesses in the management of HRD Corp, including poor governance and suspicious methods of acquiring properties, which may cause losses to the company.

For instance, Mas Ermieyati said that HRD Corp's approval process for property acquisitions has gone through various procurement methods and has not been a consistent procedural standard process. HRD Corp's board of directors, she added, was not supplied with complete documents for some of the property purchase transactions.

Besides that, the PAC chairperson pointed out that training allocations that are utilised from non-levy funds, such as government grants, are more vulnerable to the risk of leakage, misappropriation, waste and corruption due to the lack of standard operating procedures and monitoring.

PAC's recommendations for improvements

To address the weaknesses, the parliamentary PAC has recommended the government, especially the Human Resources Ministry as the ministry responsible for HRD Corp, to implement several measures of improvement, including upgrading HRD Corp into a statutory body, like the Employees Provident Fund (EPF) or Social Security Organisation (Socso), to ensure better governance.

The PAC called on HRD Corp to ensure that every investment activity is monitored by its investment panel and the board of directors in a more transparent and orderly manner.

"The investment panel must report investment activities to the board of directors when requested as stipulated in the Human Resource Development (PSMB) Act 2001 and not just to the chairman," Mas Ermieyati said.

The PAC has also called on the board of directors of HRD Corp to review the process of transferring levy to the unutilised levy account to ensure that the interests of SMEs are protected.

"HRD Corp needs to take proactive steps to find alternatives for SMEs to be able to utilise the contributed training funds before it is categorised as unutilised levy," Mas Ermieyati said.

Furthermore, the PAC chairperson said HRD Corp should focus more proactively on the disbursement of training funds to ensure the development of human resources and highly skilled workforce through more comprehensive and focused training programmes and not just generic ones.