LTAT reserves negative since 2020 – AG’s report

PETALING JAYA: The Armed Forces Fund Board (LTAT) has recorded negative balances in its reserves since 2020, the Auditor-General’s Department has found after inspecting the accounts of federal agencies for 2022.

It was found that LTAT’s reserves recorded negative figures of RM376mil in 2020 and RM258mil in 2021. In 2022, the figure was RM338mil.

The report also mentioned 41 old share portfolios with an unrealised loss of RM662mil, with action yet to be taken, and this had contributed to the negative balance of the reserves.

The report added that LTAT did not provide investment impairments in Boustead Holdings Bhd and Pharmaniaga Bhd, amounting to RM768mil and RM44mil respectively.

“This resulted in nett profit for the year and investment in subsidiaries overstated by RM812mil,” it said.

The report also revealed that LTAT sold its shares in Perumahan Kinrara Bhd and Tanah Sutera Development Sdn Bhd worth RM43mil to Perbadanan Perwira Harta Sdn Bhd (PPHSB) in 2022.

In return, LTAT received RM232mil worth of shares from PPHSB.

The report also shared that LTAT recorded an income increase of 27% or RM139mil, amounting to RM653mil in 2022, up from the 2021 figure of RM514mil.

“LTAT also reported an increase in a nett profit of 13.1% or RM50mil to RM433mil in 2022, compared to RM383mil in profits the previous year (2021).

“It was able to provide dividend payments to contributors amounting to RM476mil with the nett profit,” it said.

The report added that LTAT’s investment in 13 subsidiary companies totalled RM5.288bil.

The amount included the investment cost towards Boustead Holdings Bhd totaling RM2.550bil, and Pharmaniaga Bhd at RM106mil.

“As of Dec 31, 2022, the nett asset value for investment in Boustead Holdings Bhd was RM1.783bil and the market value for the investment at Pharmaniaga Bhd was RM62mil.

The report also flagged LTAT for paying dividends to contributors from non-cash profits which could cause a liquidity risk in future.

It then recommended that LTAT review and restructure investment strategies by diversifying investments and not to concentrate investments in subsidiary companies to reduce investment risk as well income dependency.

The report also called for improved investment management governance by adding good investment policy so stocks that suffer prolonged losses can be addressed.

“LTAT must ensure the basis of dividend declaration be based on real profit so as not to affect the ability to pay to contributors in future,” it added.

The 2022 AG Report on Financial Statements of Federal Agencies is accessible online at the National Audit Department’s website at https://lkan.audit.gov.my after being tabled in the Dewan Rakyat yesterday.