KUALA LUMPUR – Amid heightened interest in aiding the Palestinian cause, Kedai Amal Aman Palestin Sdn Bhd’s (KAAP) business model comes into question as it markets its products as “buying while donating” to embattled non-governmental organisation Aman Palestin Bhd.
According to its corporate information, KAAP’s RM5,000 share capital is divided between two people who are also on Aman Palestin’s board – chief executive officer Awang Suffian Awang Piut (RM3,000) and director Wan Hisham Wan Embong (RM2,000).
Both were appointed to KAAP’s board of directors on May 7, 2018, which is the date the company was incorporated. At that point in time, Awang Suffian and Wan Hisham had been directors at Aman Palestin for eight and 12 years, respectively.
KAAP’s principal activities, as stated in its annual Directors’ Report, include “general trading, travel agents and wholesale of stationeries, books, magazines and newspapers”.
Besides being listed as an Aman Palestin branch on the NGO’s official website, KAAP also appears to be leveraging Aman Palestin’s humanitarian cause for its business venture.
Checks by Scoop on KAAP’s official Shopee account showed that a majority of items for sale display Aman Palestin’s logo while a number of products, including kopiah and robes, are marketed as Aman Palestin merchandise.
In the description section for the items, it is stated that proceeds from sales will be donated to an Aman Palestin fund, which will then channel humanitarian aid to Palestine, Syria, Yemen, Lebanon and Malaysians affected by local disasters.
While the above might point to a form of collaboration between Aman Palestin and KAAP, the latter’s financial reports and statements appear to tell a different story as there seems to be no mention of the loss-making company undertaking financial transactions with the NGO.
Kedai Amal Aman Palestin: a company in the red
Based on documents sourced by Scoop from the Companies Commission, KAAP was last audited for its financial year ending in December 2020, during which it recorded a loss of RM37,760.
The loss can perhaps be attributed to how KAAP’s revenue dropped by 71.14% to RM129,157 while its cost of sales decreased to RM72,328 from RM358,003 in 2019, causing it to garner RM56,829 in gross profit for 2020 compared to RM89,500 in the previous year.
The company also appears to have a track record of “splurging” on administrative expenses as it has consistently increased the amount of money towards the cost, going from RM56,963 in 2018 to RM88,823 in 2019 and finally RM91,809 in 2020.
For the first time since its establishment, KAAP also spent RM2,780 on other operating expenses in 2020. The company’s comprehensive finance statement does not detail where the expenses were channelled to.
Despite seemingly operating at a loss, the company’s cash at bank, generally described as the total amount of money held by a company in either current or deposit accounts, increased by a whopping 443.78%, going from RM127,586 in 2019 to RM693,786 the next year.
The total value of the company’s current assets stood at RM1.52 million as of its 2020 financial year end, with inventories worth RM689,253 and trade receivables of RM145,048 as well as its cash in bank contributing to the figure.
For the record, KAAP’s trade receivables, which is usually defined as the amount owed to a business by its customers after the sale of products or services on credit, was valued at the same figure for 2019 while its inventories were priced at RM514,811 that year.
In its financial position statement for 2020, KAAP also saw a capital deficiency of RM36,124 after accumulating losses of RM41,124, a markedly drastic decrease compared to accumulated losses of RM3,364 in 2019.
As for its current liabilities, KAAP accumulated RM776,547 in unspecified “other payables” after recording none the previous year and RM32,476 in 2018. In terms of its acquirals, the amount went up by 54.7% to RM5,247 in 2020. In 2018, the figure stood at RM1,537.
Besides that, the amount due to directors, which is stated as being “unsecured, interest-free and repayable on demand”, has remained at RM782,417 for all three financial year-end reports.
Auditors provide qualified opinion, highlight issues with KAAP’s inventories
Notably, the documents revealed that the company’s financial statements and an “unqualified” auditor’s report for 2018, 2019 and 2020 was only circulated to its board members on May 24, 2023 after being signed off by auditors Azhan & Co a week before on May 17.
Despite the “unqualified” auditor’s report label on the documents’ front pages, the auditors invariably provided a basis for a qualified opinion in their Independent Auditors’ Report to KAAP board members, which was attached with the financial statements.
An unqualified auditor’s report is one where auditors conclude that a business’ financial statements fairly present its affairs in all material aspects.
On the other hand, a qualified report indicates certain issues, potentially regarding a limitation in the auditor’s work scope or a disagreement with management on accounting policies.
In terms of business perception, a qualified report is typically viewed unfavourably by stakeholders such as banks and investors, with financial institutions being more likely to demand further details before crediting a business if it was issued a qualified report on inventory matters.
In Azhan & Co’s “Basis for Qualified Opinion” section in its audit report for KAAP’s December 2020 financial year end, the member firm of the Malaysian Institute of Accountants laid out some issues it faced with the company’s inventories.
“We did not observe the counting of the physical inventories at the beginning and end of the year,” it noted.
“We were unable to satisfy ourselves (with) alternative means concerning the inventory quantities held at December 31, 2019 and 2020, which are stated in the statement of financial position at RM514,811 and RM689,253, respectively.
“Consequently, we were unable to determine whether any adjustments to these amounts were necessary.”
However, the auditor said barring “possible effects” from the matter above, the accompanying financial statements give a “true and fair view” of the company’s financial position, performance and cash flows.
The same basis for the auditors’ qualified opinion is attached in KAAP’s 2018 and 2019 financial year-end auditors’ report by the same firm, with edits to the numerical value of inventories recorded each year to align with the company’s financial statements.
For all the years, the auditors also said that while its opinion on the company’s financial statements do not cover the Directors’ Report, its responsibility as auditors is to read the report and consider whether it is “materially inconsistent” with the company’s financial statements, knowledge obtained in the audit or “otherwise appears to be materially misstated”.
“As described in the Basis for Qualified Opinion section, we were unable to satisfy ourselves as to the physical inventory quantities the financial statements have properly drawn up (as at December 31, 2018 to 2020).
“Accordingly, we are unable to conclude whether or not the Directors’ Report is materially misstated with respect to this matter.”
The auditors added that in accordance with the Companies Act 2016, it reported that in its opinion, the accounting and other records for the matter as described in its basis for qualified opinion section “have not been properly kept by the company in accordance with provisions of the act”.
Aman Palestin’s controversies entangled with KAAP?
On November 23, it was reported that the Malaysian Anti-Corruption Commission (MACC) froze 41 Aman Palestin-linked bank accounts amounting to RM15.86 million as part of its probes into alleged irregularities in the NGO’s fundraising activities.
It is unknown if KAAP’s bank accounts were part of the freezing order, which ruffled the feathers of Aman Palestin leaders who threatened to take the anti-graft agency to court for its “malicious” attempts to tarnish the NGO’s reputation.
The graft busters also conducted a search at the organisation’s premises, obtaining financial and operational management documents spanning the past five years.
Initial investigations have identified issues involving the misappropriation of funds estimated at RM70 million, with the funds having supposedly been diverted for purposes other than the objectives of the establishment of the company.
MACC chief commissioner Tan Sri Azam Baki previously told Scoop that its investigations into Aman Palestin commenced on October 17 based on information published by the media.
This came after the “PROmediaTAJDID” Facebook page posted on October 11 a letter from the Perlis Mufti Department dated August 24 in which state Mufti Datuk Mohd Asri Zainul Abidin expressed reservations about Aman Palestin’s collection and distribution of funds.
Besides calling for more transparency on the matter, the mufti also instructed the Perlis Islamic Religious Affairs Department to not permit Aman Palestin’s collection of funds in places of worship and relevant religious premises within the state.
The state religious authority then suspended fund collections by the organisation in Perlis effective October 12, pending the completion of a probe. – December 21, 2023
As the Aman Palestin saga continues to unfold, read more on Scoop’s coverage of the issue here: https://www.scoop.my/topics/aman-palestin/