Auditor General flags poor governance in Felcra's RM241mil land deals

New Straits Times

21-07-2025

KUALA LUMPUR: The Auditor General's Report 2/2025 has raised concerns over major governance failures in Felcra Bhd's RM241.76 million purchase of four oil palm estates carried out between 2022 and 2024.
Auditor General Datuk Wan Suraya Wan Mohd Radzi said serious irregularities and weaknesses in governance were highlighted in the report such as the procurement process, price valuation, yield performance, and compliance with board resolutions and agreements.
"The acquisition of the Telupid Estate was approved despite objections from board members and a viability report that rated the land as less feasible due to its terrain and soil conditions.
"Additionally, procurement decisions were rushed and not properly documented."
Among the most glaring issues was Felcra's purchase of the Telupid Estate in Sabah for RM62.29 million.
The land was deemed less viable for oil palm cultivation due to steep slopes and unsuitable soil series.
Despite an earlier board decision to defer the purchase and appoint an external consultant, the acquisition was approved 22 days later without the consultant being engaged.
Two directors had raised concerns over the lack of independent analysis and requested for a delay, but these were ultimately disregarded.
A similar pattern occurred in the RM92.44 million lease acquisition of the Aring Estate in Kelantan.
Board members had abstained from voting, citing governance concerns and the absence of mitigation plans should the investment underperform.
Nonetheless, Felcra proceeded to sign the lease agreement just seven days after board approval.
"The Board of Directors proceeded with the acquisition despite some board members abstaining from the decision.
"There was no evidence that appropriate action was taken regarding the issues raised by the board members before the acquisition decision was finalised.
"The first payment was made on Sept 27, 2023, 12 days after the agreement was signed."
Two other estates purchased were Dabong and Sg. Rawit 2, valued at RM66.15 million and RM20.88 million respectively.
The report also found that projected palm oil yields across all estates were overly optimistic.
While Felcra had set post-recovery targets as high as 18 metric tonnes per hectare for some estates, viability assessments revealed that significant portions of land, especially at the Telupid site, were unsuitable for planting due to steep terrain exceeding 250 metres in elevation, breaching agricultural guidelines.
Three of the estates were located in Gua Musang, Kelantan, and were acquired via lease agreements. The fourth was purchased outright in Sabah.
Felcra had set a strategic goal to acquire up to 30,000 hectares of plantation land within five years to help cover its RM210 million annual operating expenditure.
However, Wan Suraya warned that the lack of proper governance and risk assessment in these transactions could undermine that ambition.
"The governance of high-value procurement must be strengthened to prevent wastage and ensure value for money," she said.
The Auditor General recommended that Felcra improve its internal controls, ensure all board decisions are properly deliberated and recorded, and adhere strictly to procurement protocols in future land acquisitions.