PETALING JAYA: Tabung Haji’s (TH) financial woes between 2014 and 2020 were driven not only by investment decisions but also by a shift away from its original role as a savings institution for pilgrims, according to the Royal Commission of Inquiry (RCI) report.
The report found that the institution’s expansion into large-scale commercial ventures, including property and plantation investments, exposed it to risks beyond its core expertise and contributed to losses in several subsidiaries.
The RCI said TH’s original objective was to provide a savings platform for Malaysians to prepare for their pilgrimage, but its role gradually expanded towards becoming a broader “economic pillar of the ummah”.
This resulted in the institution making investments in areas where it lacked sufficient expertise and risk controls, leading to financial difficulties that necessitated restructuring.
The commission also highlighted the increasing burden of providing financial assistance for pilgrims’ haj costs, which was funded through TH’s investment returns.
The cost of performing haj had risen significantly over the years, while pilgrims continued paying a subsidised amount, placing additional pressure on TH’s finances.
The report noted that haj subsidies, known as Hafis, increased from RM106mil in 2014 to RM300mil in 2019 and were projected to rise further, reducing funds available for hibah distribution and increasing reliance on investment income.
The RCI also raised concerns over weaknesses in financial reporting, including the use of Realisable Asset Value (RAV) to justify hibah payments between 2014 and 2017.
Instead of relying solely on audited financial statements, Tabung Haji management used RAV calculations, which the commission said created a more favourable picture of its financial position.
The practice allowed TH to continue declaring high hibah rates despite its actual financial position being under pressure.
The report also questioned the role of the National Audit Department (JAN), which issued clean audit certificates for TH’s financial statements from 2014 to 2017 despite concerns over its financial position.
The commission said stronger action should have been taken given the issues surrounding asset valuation, hibah payments and financial sustainability.
The RCI found that TH’s financial position had deteriorated significantly, with assets valued at RM70.3bil compared with liabilities of RM74.4bil at the end of 2017.
The institution subsequently underwent a restructuring exercise in 2018, including the transfer of impaired assets to Urusharta Jamaah Sdn Bhd through a RM19.6bil sukuk issuance and a RM300mil cash injection.
Separately, the report revealed that TH staff received unusually high bonuses of up to 13 months’ salary, with RM74mil paid out in 2014 even though the fund’s liabilities had exceeded its assets.
It also found that TH Properties Sdn Bhd, a wholly owned subsidiary of TH, paid RM2.19mil in special bonuses to directors and selected officers in 2017 and 2018, citing profits from an Australian property project.
However, the commission said the payments breached the Companies Act 2016 because they were approved without the required shareholder resolutions and exceeded the executive committee’s authority.
Following a legal review, the RCI recommended that the RM2.19mil in bonuses be recovered.
Beyond the bonus payments, the commission said the Tabung Haji Act 1995 grants overly broad powers to the minister and proposed 25 recommendations focusing on improving governance, investment controls, risk management, financial reporting and audit processes.
The government has said that about 75% of the recommendations have since been implemented.
The commission stressed that restoring public confidence in TH remained crucial, given that millions of depositors rely on the institution to safeguard their savings for the pilgrimage.
