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Kuala Lumpur, Malaysia • Heavily indebted Malaysian state investment fund 1MDB said Thursday its entire board of directors has offered to resign after a parliamentary inquiry found a massive unexplained payment and called for a police probe of the fund's former head.

In a report submitted to Parliament on Thursday, the Public Accounts Committee said the company lacked sufficient documentation to explain a payment of $2.1 billion. Overall, the fund's financial performance was "unsatisfactory," with debts ballooning from $1.3 billion in 2009 to $12.8 billion this January, it said.

The report said 1MDB's business model depended heavily on debt, mainly bank loans and bonds, partly guaranteed by the government. Such heavy reliance on debt for working capital should never have been allowed, it said.

The report, however, did not mention Prime Minister Najib Razak, who was behind the creation of 1MBD in 2009 and has been battling allegations that hundreds of millions of dollars was channeled from the fund into his personal bank accounts.

Malaysia's attorney general cleared Najib of wrongdoing in January, saying $681 million deposited in the prime minister's accounts was a donation from Saudi Arabia's royal family, an explanation that was met with widespread skepticism. He said most of the money had been returned by Najib.

1MDB has claimed the $2.1 billion payment was to Aabar Ltd., a subsidiary of the International Petroleum Investment Co., formed by the Abu Dhabi government to invest in the energy industry. But the report said there was no document to back this. Another $1.367 billion was paid to Aabar without the approval of 1MDB's board, it said.

The report warned that the government could face losses of around $5.2 billion if 1MDB fails to pay its debts. The fund's only shareholder is the Ministry of Finance.

It said the fund's board of directors failed in its responsibility to keep tight control over finances. It said there were "constraints and weaknesses" by the fund's management and board.

The report said the fund's former CEO and current board member, Shahrol Azral Ibrahim Halmi, should be held accountable and urged law enforcement agencies to further investigate Shahrol and other managers.

Shahrol is also an official in the prime minister's department.

Opposition lawmaker Tony Pua said the 106-page report "confirms gross mismanagement and wanton neglect of all principles of good governance and accountability."

In a statement, 1MDB said its debts will be resolved by an ongoing rationalization plan that includes asset sales. It said the board believes the mass resignation was the right thing to do to facilitate any follow-up investigations.

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