It just doesn’t make sen-se

Questionable transactions found all over in report of institution

The pilgrims fund is at risk of a ‘bank run’. And the reasons for this – overstated profits, understated value of assets, an unbalanced profile of depositors and several questionable transactions. It may not be able to declare dividends for years to come.

PETALING JAYA: Over-stated profits, under-stated value of assets, an unbalanced profile of depositors and questionable transactions were all uncovered in the review of the financial position of Lembaga Tabung Haji (TH).

The consultants highlighted that TH was sitting on up to RM10.2bil in losses of its domestic and international equities as of October this year and its liabilities outstripped assets by RM9bil.

The consultants, in a startling statement, stated that the pilgrims fund would not be able to declare dividends for many years to come if the balance sheet was not restored.

“The gap between the assets and liabilities is RM9bil. If the RM9bil hole is not covered, no hibah (dividends) distribution is possible not just for 2018 but also in the coming years,” according to the report on Rehabilitation and Restructuring Plan of TH released yesterday.

The report came about after the government-appointed accounting firm PricewaterhouseCoopers (PwC) performed a review on the financial position of TH on its accounts for 2017 and up to June this year.

There were several facets to the report ranging from an analysis of TH’s financial results for the past five years from 2013 to 2017, the profile of its depositors where 50% of the funds were from only 1.3% of its depositors, and a plan to restore the balance sheet of the pilgrims fund.

The report stated that TH was a victim of its own “success” by declaring high dividends of up to 8.5% over the last five years when bank deposits only earned 3% on average.

This resulted in the fund attracting deposits with one depositor putting more than RM190mil in the fund.

Earlier in the day, Minister in the Prime Minister’s Department Datuk Seri Dr Mujahid Yusof said that TH had been illegally distributing hibah to depositors since 2014 because its liabilities were more than its assets.

The payment for hibah had supposedly contravened the Tabung Haji Act 1995 where the fund is not allowed to declare dividends if its liabilities are more than assets.

The damning report on TH con- firmed weeks of speculation that the fund’s finances were not in the pink of health and it required assistance from the government.

Towards this end, the plan proposed for the government to set up a Special Purpose Vehicle (SPV) to takeover assets worth close to RM20bil from TH, a move that would relieve pressure on the bal- ance sheet of the fund.

The idea is for the SPV to hang on to the assets for five years and nurse it back to its full value, hence taking the burden off TH.

The proposal for TH also entails Bank Negara providing a temporary short-term borrowing of RM10bil to improve the liquidity position of TH, and for TH to be placed under the supervision of the central bank.

The report by PwC touched on TH over-stating its assets in 2016 and 2017.

It stated that had the value of the assets been marked-to-market, TH’s liabilities would have outstripped the assets to the tune of RM4.1bil in 2017.