Kuala lumpur: The Royal Commission of Inquiry (RCI) on Lembaga Tabung Haji (TH) has determined that the Islamic pilgrimage fund imprudently declared a 4.50 percent annual profit distribution (hibah) and a 1.75 percent hajj hibah, amounting to RM2.75 billion, for the 2017 financial year.

According to BERNAMA News Agency, the commission's report, released on Wednesday night, identified TH's aggressive hibah payments from 2014 to 2017 as a major contributor to its financial crisis. The RCI discovered that TH employed creative accounting practices to sustain the high hibah distribution, despite its financial incapacity.

The report also highlighted that TH's financial statements for 2014 to 2017 received unqualified audit opinions, even though the 2017 audit report contained an "emphasis of matter." The RCI criticized the National Audit Department for issuing an unqualified audit opinion, suggesting that the highlighted issue should have been noted as a non-compliance matter.

Furthermore, the commission expressed concern over the National Audit Department's lack of firmness, noting that the Auditor General considered factors beyond the audit scope in their evaluation of TH's 2017 accounts. The RCI emphasized the department's failure to question the excessive hibah payouts during the period under review.

The report indicated that the substantial hibah payments prior to 2018 significantly depleted TH's reserves. The generous distributions attracted depositors seeking high returns, causing TH to deviate from its foundational objectives. This scenario heightened the risk of a large-scale withdrawal or bank run if future hibah were perceived as insufficient.

The RCI noted that such risks materialized in 2019 when TH declared a hibah of only 1.25 percent, resulting in a deposit contraction. Deposits fell from approximately RM73 billion to RM69 billion by the end of 2019, though the impact was less severe than anticipated.

Conclusively, the commission asserted that the National Audit Department should have objected to TH's hibah declarations that surpassed its financial limits, pointing to a critical oversight in maintaining the fund's fiscal health.