KUALA LUMPUR: The slew of financial irregularities revealed in the Armed Forces Fund Board (LTAT) are deemed “mismanagement” rather than criminal intent, said LTAT chairman Gen (R) Tan Sri Dr Mohd Zahidi Zainuddin.
“In our deliberations, it’s a mismanagement, and this mismanagement has come out with numbers that were not properly accounted for. When we commissioned Messrs Ernst & Young to do the audit, these are discrepancies that we found, which are not criminal, but mismanagement that has taken place and we are here to correct that,” he told a press conference after announcing LTAT’s dividend for the financial year ended Dec 31, 2018 (FY18) today.
He said if further investigations reveal any criminal element or misconduct that requires action to be taken, LTAT will refer it to the appropriate authorities.
Last week, LTAT’s independent accounting firm Ernst & Young unearthed several instances of “financial irregularities and weaknesses” for FY17 and FY18.
LTAT chief executive Nik Amlizan Mohamed cited an example of mismanagement in which the income from land sales was used to pay dividends.
“No entity should pay dividends without the funds to do so. In 2016, RM238 million was taken when it should not have because the sale was not completed then. It was a substantial amount,” she explained.
Nik Amlizan said she came on board LTAT on Oct 1, 2018 and, since then, there have been many discoveries followed by measures that it has had to undertake to ensure that LTAT moves forward on the right footing sustainably.
LTAT has embarked on a transformation plan which consists of six main pillars encompassing LTAT’s new vision and mission, strengthening corporate governance, enhancing strategic stake-holder management, enhancing sustainable investment returns, improving infrastructure and building talent management.
“We want to move forward. It’s challenging to get returns for the soldiers. If possible, we don’t want to take too much time to look into the past. The assessment (by Ernst & Young) is to help the new management to restore the organisation,” said Nik Amlizan.
Under the corporate governance pillar, it has established a risk board and set up a legal and secretarial department, human resources department and introduced compliance unit as part of risk management department, as well as reintroduced the enterprise risk management framework.
In terms of investment portfolio, she said, LTAT’s new chief investment officer is reviewing the asset allocation strategy and such implementation can only be ready next year.
“We need to introduce fixed income. We never have an investment in MGS (Malaysian Government Securities). It’s a natural asset allocation in any government pension fund. ESG (environmental, social and governance) is something we strongly believe in.”
Nik Amlizan opined that it is premature to discuss asset disposals at this point as all assets under LTAT are considered investments and it has no intention of selling any of its assets now.
Meanwhile, Nik Amlizan admitted that LTAT’s exposure to Boustead Holdings Bhd is high and is not reflective of best practices from investment policies and structure as it cannot be reliant on one or two investments to make its returns.
However, she said it will not rush into making “irresponsible decisions” as there is still deep value in Boustead.
