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TH: Negligence, incompetence or complaints falling on deaf ears?

 | February 1, 2016

The people, particularly depositors in the institution, want to know why internal audit did not pick up the issues earlier, asks Amanah's Dzulkefly Ahmad.

Dzulkefly-Ahmad.KUALA LUMPUR: Going by Bank Negara’s own analysis and surveillance and the strong advisory concerns expressed on the deteriorating financial position of Tabung Haji (TH), warned Amanah Strategy Director Dzulkefly Ahmad, depositors must be concerned about the institution’s position on risk management. “The question that begs an immediate response would be whether risk management reports were presented fairly and transparently to the Risk Management Committee?”

If so, he added, TH needs to explain the rumblings in the market that the chairman of the Risk Management Committee has just resigned. “If it’s true, what are his reasons?”

Given the recent expose on TH, continued Dzulkefly, the people and particularly depositors would also want to know why internal audit did not pick up issues earlier. “Is it a case of negligence, incompetence or did their complaints, perhaps as usual, fall on deaf ears?”

“The net asset value being less than deposits had reportedly been documented a year ago in the 2014 audited accounts.”

Dzulkefly was commenting on the “hurried” appointment of Attorney-General Mohd Apandi Ali as a TH director. “This leaves a bad taste in the mouth. It does not help to end TH’s trust deficit.”

“It must be remembered that TH’s recent move to purchase 1MDB’s Tun Razak Exchange (TRX) land at 43 times its original purchase price was already a case of the institution pandering to Putrajaya. It was extremely regrettable.”

One area that needs to be resolved, ventured Dzulkefly, was political appointments in critical roles in GLCs including TH. “Many of these appointees have dubious qualifications. The appointment of the TH Chairman may be a case in point. This may have indeed exacerbated the already dented confidence in TH.”

It may be within this context, said Dzulkefly, that the now famous letter from Bank Negara Governor Zeti Akhtar Aziz to Tabung Haji Chairman Abdul Azeez Abdul Rahim comes into the picture. “It highlighted some serious issues that pertain to risk management, reserve policy, compliancy and even basic issues like prudence.”

The letter did reprimand TH and stress on the need to buck up over the broader issues of governance and supervision of the fund’s management, pointed out Dzulkefly. “Zeti expressed worries that given the current global climate, TH may not be able to withstand the impact of financial shock.”

The Bank Negara Governor has similarly alluded to the need for more board members with technical know-how and experience in the financial sector to tide TH through the tough times expected ahead, summed up Dzulkefly.

According to Section 22 of the Tabung Haji Act 1995, the fund cannot declare dividends if its assets are less that its aggregate liabilities at the end of its financial year. Since the bulk of its liabilities are in the form of customer deposits, this means the value of assets must grow faster than the deposits coming into the fund.


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