Kuala lumpur: Minister in the Prime Minister's Department (Religious Affairs), Dr Zulkifli Hasan, used the analogy of a single mother named Mak Cik Senah to explain how Lembaga Tabung Haji (TH) reported high performance and profits, when in reality its true financial position was the opposite.
According to BERNAMA News Agency, in his story, Mak Cik Senah saves her money in a kootu (community savings) fund managed by other people. These managers promise to give her a share of the profits at the end of each year if their business makes a profit. Zulkifli explained that while Mak Cik Senah was happy to receive more money back than she put in, there was an essential legal rule that dividends can only be paid if the fund's assets exceed its debts and liabilities. During a ministerial briefing on the Royal Commission of Inquiry (RCI) report on TH, he highlighted how the problem arose when the fund managers artificially increased the assets' value on paper, creating the illusion of profit.
Zulkifli explained that on the surface, the scheme looked beneficial because it offered high dividends. However, it was an illusion as the savings were steadily shrinking behind the facade. The managers were paying dividends using what he termed 'invisible money', a form of fraud similar to a Ponzi scheme or the well-known Skim Pak Man Telo.
He stated that the analogy reflects the RCI's finding that TH's financial statements before 2018 were manipulated to show high profits, allowing the fund to declare profit distributions that did not reflect TH's true financial performance. The RCI found that the declaration of profit distributions before 2018 did not comply with the requirements of the Tabung Haji Act, as TH's assets, including the pool of depositors' funds, did not exceed its liabilities.
Zulkifli detailed that one method used was asset valuation conducted outside the audited financial statements, called Realisable Asset Value (RAV), which inflated the asset values. This manipulation enabled TH to announce high profit distributions through creative accounting, violated the Malaysian Financial Reporting Standards (MFRS), and altered impairment policies that did not present an accurate financial picture.
He added that this financial manipulation was confirmed by the audit firm PricewaterhouseCoopers (PwC) in a 2018 report. He clarified that Ernst and Young was not TH's auditor and was not involved in asset valuation; instead, they were appointed only to review pro forma statements prepared by TH.
Meanwhile, PwC found that only RM556 million of the total assets valued at RM4.6 billion were assessed by professional valuers, an action taken to allow TH to announce high profit distributions, despite the institution's insolvency. Zulkifli stated that the decision to distribute profits while the deficit between assets and liabilities widened violated the Tabung Haji Act, jeopardizing the institution's financial sustainability for future generations.
He warned that, akin to Mak Cik Senah's situation, inflating asset values to present a false profit could lead to bankruptcy, with no one willing to rescue. In TH's case, Zulkifli revealed that the government had to inject over RM10 billion to rescue the institution from financial ruin caused by misconduct. This rescue was crucial to protect depositors' savings and sustain TH's significance for the Muslim community.
Zulkifli concluded by emphasizing the opportunity cost of this bailout, stating that the RM10 billion could have been used to build numerous facilities needed by the people and the Muslim community.