Tabung Haji Should Have Recorded RM1.4b Net Loss in 2017 Instead of Reported RM3.4b Profit, RCI Finds

KUALA LUMPUR, July 31 — Lembaga Tabung Haji (TH) should have reported a net loss of approximately RM1.4 billion for the 2017 financial year instead of the RM3.4 billion net profit it declared, had the pilgrimage fund fully complied with standard accounting practices, according to findings by the Royal Commission of Inquiry (RCI).

In a statement today, TH acknowledged the findings of the RCI report, which examined the institution’s financial reporting standards and profit distribution declarations during the period leading up to its 2018 Recovery and Restructuring Plan.

The RCI noted that as a statutory body established under federal law, TH is bound by the Statutory Bodies (Accounts and Annual Reports) Act 1980 [Act 240], which mandates the preparation of financial statements in accordance with generally accepted accounting principles—specifically the Malaysian Financial Reporting Standards (MFRS).

According to the RCI findings, TH’s 2017 financial statements failed to fully apply MFRS accounting rules. Had full compliance been enforced at the time, the board would have been forced to record a net loss of RM1.4 billion rather than the RM3.4 billion net profit presented to the public.

The commission also criticized TH’s reliance on the Realisable Asset Value (RAV) methodology, stating that the approach breached Section 22 of the Tabung Haji Act regarding asset valuation because RAV figures were not recorded within TH’s audited financial statements.

“This finding reinforces the critical need to ensure financial statements are prepared transparently, consistently, and in full compliance with established accounting standards,” TH stated.

Furthermore, the RCI concluded that TH’s profit distribution practices between 2014 and 2017 violated Section 22 of the Tabung Haji Act, which strictly stipulates that profit distributions must be funded from actual realized profits rather than depositors’ principal savings.

The commission found that distributing profits without sufficient realized earnings depleted TH’s financial reserves and generated persistent expectations for high payout rates among depositors. This practice caused TH’s asset-liability deficit to surge from RM352 million in 2014 to RM4.093 billion by 2017.

The RCI further highlighted that profit distributions had historically been declared prior to the finalization of financial statement audits. To prevent a recurrence, the commission recommended that all future profit distributions be announced strictly on the basis of finalized, audited financial results to preserve good governance, transparency, and long-term financial sustainability.

TH welcomed the recommendation, noting that it has already implemented the practice across its operations since 2022.

“TH welcomes the recommendation and has implemented this approach since 2022. Profit distributions are now announced exclusively based on audited financial results, thereby strengthening the integrity of the financial reporting process and boosting depositor confidence in the institution,” the board added.

Following comprehensive governance reforms, enhanced risk management protocols, and refined investment strategies, TH’s financial trajectory has returned to positive growth.

Profit distribution rates have climbed steadily from 3.10 per cent in FY2023 to 3.25 per cent in 2024, reaching 3.50 per cent in 2025—marking its highest payout rate in eight years.

TH emphasized that these achievements reflect its ongoing commitment to managing the savings of its more than 9.8 million depositors with prudence, transparency, and sustainability, in line with its mandate as a custodian of Muslim community funds and facilitator of the national haj pilgrimage.

–NMT