AGs report: Government could potentially lose RM24.45 million due to weaknesses in Railway Asset Corporation's rental collection

KUALA LUMPUR - Weaknesses in property rental collection for the Railway Asset Corporation (RAC) have caused a potential loss of revenue amounting to RM24.45 million to the government, according to the 2021 Auditor General's Report.

Based on the report tabled in the Dewan Rakyat today, the loss included rental amounts of RM12.67 million and RM170,474 which were not collected according to the agreements and rental offer letters.

The audit review also found that rental revenue could not be applied to the subsidiary of Keretapi Tanah Melayu Berhad (KTMB), namely company 174274-D, which operated on eight RAC property lots to carry out delivery and logistics service activities, resulting in a loss of revenue amounting to RM11.61 million.

"Based on the Tenancy Acquisition Offer Letter, the monthly rental rate charged for the eight property lots is RM87,930. However, until Dec 31, 2022 (since July 2012), company 174274-D has not returned the offer acceptance letter to RAC.

"This happened because KTMB did not agree that its subsidiary operating on land owned by RAC was subject to rent. Although discussions have been held, an agreement has not yet been reached," read the report.

According to the report, the audit carried out at RAC involved the collection of property rental income based on tenancy agreements until Dec 31, 2022, covering 374 out of 1,246 property tenants with physical visits made to 34 properties in the states of Selangor, Negeri Sembilan, Johor, Perak, Perlis and Kelantan.

In order to ensure that the RAC was able to generate continuous income through railway assets, the audit recommended it comply with financial regulations on a number of matters.

This included enforcing the terms of tenancy agreements against 12 tenants in arrears, mainly 10 private limited companies running commercial businesses.

The RAC was also advised to ensure that tenants who had returned the rental offer acceptance letter were followed up with rental agreements to ensure that the interests of the RAC were preserved.

The audit also suggested the ministry concerned ensure that the rental issue between RAC and company 174274-D and KTMB itself could be negotiated and resolved immediately.

Meanwhile, the report stated that RAC had carried out its function in generating railway property rental revenue with a total collection of RM69.80 million for the years 2021 and 2022. - BERNAMA