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Accountability in
Accountability in the sacred the sacred
context context
The case of management, accounting
and reporting of a Malaysian cash 87
awqaf institution
Hairul Suhaimi Nahar
Accounting Section, School of Management, Malaysia Science University,
Penang, Malaysia, and
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Hisham Yaacob
Department of Accounting and Finance,
Faculty of Economics, Business and Policy Studies,
University Brunei Darussalam, Gadong, Brunei Darussalam
Abstract
Purpose – The concept of accountability has long been argued in the academic and public policy
debate to have been contextually ingrained in the technical processes of accounting and reporting.
Both processes provide lenses through which the extent of managerial accountability in the corporate
context could be objectively examined. The sacred religion of Islam as a social order with a complete
code of life classifies accountability as being dual; in line with the duality concept in life – in this
temporal world and eternal hereafter, necessitating for accountability concept in accounting and
reporting from the Islamic worldview to transcend beyond the point of worldly objectives. Parallel to
this line of reasoning, the purpose of this paper is to undertake a preliminary empirical investigation
with respect to accounting, reporting and accountability practices of a Malaysian cash awqaf (Islamic
endowment) management institution over a six-year period, from 2000 to 2005.
Design/methodology/approach – The paper uses triangulation research approach, consisting of
case study method and archival documentation review and analysis.
Findings – The preliminary findings indicate that, while the root of accountability in the
management, accounting and reporting practices seems to exist in the awqaf entity studied,
significant improvements remain necessary to ensure accountability could be continuously enhanced
and uphold.
Originality/value – Debating accountability concept in the context of management, accounting and
reporting as practiced by faith-based institution of awqaf from the Islamic perspective inevitably
directs this study to highlight the notion of Islamic accounting and reporting commonly and
extensively discussed in the realm of Islamic finance and banking. The study’s conjecture is that,
by debunking the myth of Islamic accounting and reporting as only serving the acute domain of
transactions reflecting the Islamic financial products in banking environment, it helps to reshape,
broaden and emphasize the all encompassing relevance of Islamic accounting and reporting to that of
not-for-profits, religiously grounded entities such as awqaf institutions. The study further contributes
to the accountability and financial reporting literature in Islamic not-for-profit organizations by
studying the importance of sound accounting practices and reporting transparency in ensuring
accountability. Journal of Islamic Accounting and
Business Research
Keywords Islam, Finance, Banking, Accountability, Accounting, Reporting, Awqaf, Vol. 2 No. 2, 2011
Mutawallis (awqaf trustees), Non-profit organizations pp. 87-113
q Emerald Group Publishing Limited
Paper type Research paper 1759-0817
DOI 10.1108/17590811111170520
JIABR 1. Introduction
2,2 The Islamic revivalism (Al-Tajdid Al-Islami ) ignited post twentieth century had
effectively provided impetus for the reshaping and aligning of Muslims’ (herein
ummah) daily practices with those previously promulgated by Prophet Muhammad
(Peace Be Upon Him) (Yousif, 2004). It began immediately after the collapse of the
Ottoman Empire with the aim of returning Islam to its original pure form (Mawdudi,
88 1992). One of the revivalism agenda is to rejuvenate many of the previously
de-emphasized Islamic institutions such as bayt-al-mal (Islamic wealth administration)
and awqaf (Islamic endowment). While bayt-al-mal administers among others the
collection and disbursement of zakah (compulsory Islamic tax) (Al-Qaradawi, 1999),
awqaf institutions, on the other hand, focus solely on the management of assets (both
liquid and illiquid) voluntarily donated by Muslims for specific purposes (Cizakca,
1998). Both were, however, established with the basic aim of providing social and
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economic safety net, particularly to the poor and needy in Islamic society (Kahf, 1994,
1998; Muhammad, 2010). The imperative of these socio-economic vehicles is duly
emphasized by God (Allah) in the Quran[1]:
And in their wealth and possessions, there is right of the needy (Quran; 51:19).
Help one another in furthering virtue and God-consciousness (Taqwa), and do not help one
another in furthering evil and enmity (Quran 5:2).
The revitalization of awqaf practices had effectively resulted in the establishment of
different forms of awqaf institutions in different parts of the world including corporate,
private (e.g. NGOs) and government controlled entities (Husain, 2007)[2]. Irrespective of
their form of establishment, awqaf institutions are essentially entities with charitable
aims, to which the accountability concept is paramount in the context of their survival.
This necessitates for effective operations, appropriate accounting methods and
transparent reporting being devices reflecting mutawalli’s (awqaf trustee) (Yayla,
2011)[3] accountability to provide collective influence towards awqaf’s survival. Unlike
accountability concept inherent in conventional endowment setting, awqaf institutions
are expected to embrace a more holistic accountability connotation. Mutawallis are
effectively required to observe multiple accountability traits – primary and secondary
(Hisham and Shahul-Hameed, 2006). While the latter is related to the normal managerial
accountability towards waqifs (donor)[4] (Yayla, 2011) and beneficiaries (Ahmad-Zamri,
2010), the former requires mutawallis to observe another form of intangible
accountability – sacred accountability towards Allah. This is premised on the fact
that awqaf operations are effectively governed by Shari’ah (Islamic law) which is
designed by God, to which all Muslims are obliged to adhere to (Lewis, 2001).
Sacred accountability is evidently examinable from the vantage point of Islamic
organizations like awqaf. Its unique attributes and socio-economic implications deserve
due attention; especially the strategic role of accounting and reporting as accountability
tools to enhance ummah’s confidence in current awqaf practices. Mutawalli’s
accountability is even more crucial in the case of cash awqaf where donated liquid
assets (i.e. cash) are collected, pooled and administered. Additionally, given the multiple
accountability traits, mutawalli’s unique position in awqaf arrangement and the
importance of maintaining ummah’s confidence towards awqaf institutions and
practices meant that the role of accounting and reporting for awqaf transactions are
apparently imperative. Thus, proper management of awqaf assets, appropriate
accounting methods and transparent reporting of awqaf transactions should therefore Accountability in
facilitate the upholding of both primary and secondary accountabilities. the sacred
It is envisaged that the additional layer of intangible accountability to the Creator
(Allah) in the sacred accountability framework governing awqaf would ensure and context
enhance the effective functioning of its operations. Hence, examining current
management, accounting and reporting practices in awqaf institutions technically
helps in assessing the extent of mutawalli’s accountability in ensuring the adherence of 89
awqaf practices to Shari’ah requirements, thereby enhancing ummah’s confidence
towards awqaf institutions. This will in turn ensures the survival of awqaf institutions
to serve the ummah’s socio-economic objectives.
Despite the importance of awqaf institutions and the unique role of accountability,
prior research on awqaf has been rather fragmented and relatively under-developed
compared to both secular and other faith-based charity institutions (Al-Qaradawi, 1999;
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Elsergany, 2010; Hamid, 2003; Iqbal, 2000; Mohammad-Akkhtar, 1983; Namazi, 2010;
Hyndman, 1990; Hyndman and McDonnell, 2009; Sinclair et al., 2010)[5]. The literature
on awqaf generally covers the historical aspects (Cizakca, 2004; Razali, 2004), legislations
(Khalid, 2002; Khan, 2002; Siti-Mashitoh, 2006), administration (Hashmi, 1984;
Yayla, 2011; Zainal-Abidin, 1999) and awqaf practices across different geographical
boundaries (Haque, 2002; Kuran, 2004; Mohd-Daud, 1999). Research highlighting
contemporary awqaf practices and the accounting and reporting of awqaf transactions
in the context of upholding accountability are noticeably scarce (Adnan et al., 2007;
Ihsan et al., 2006)[6]. This reflects a major gap in the existing awqaf literature.
Hence, this paper attempts to explore the manifestation of dual accountability in the
sacred, religiously embedded institution of awqaf in Malaysia. Specifically, our first
research objective is to investigate the management, accounting and reporting
practices of a cash awqaf administration by an Islamic Religious Council in one of the
states in Malaysia. Second, based on the accountability framework developed by
Stewart (1984), we seek to locate the extent of mutawalli’s accountability as reflected by
its operations, accounting and reporting practices.
Based on triangulation research approach, i.e. interviews and document analysis,
we find the presence of accountability in the management, accounting and reporting
practices but there is scope for further improvement to ensure accountability is
continuously uphold. Further, as transparent reporting of awqaf transactions serves
the objective of ensuring accountability, we propose some fundamental modifications
to the current accounting and reporting system.
Our paper contributes to the wider literature on accountability in faith-based
institutions and the role of trustees. We also contribute to the awqaf literature and
practices by highlighting the much neglected issues of accounting and reporting for cash
awqaf transactions by a cash awqaf institution operating in a country which claimed to
have a more developed economic model among Muslim countries. Our empirical results
(albeit preliminary) on the extent of mutawalli’s accountability in managing cash awqaf
provide the basis for undertaking future in-depth investigative projects on such
religious institutions which would further contribute to the development of appropriate
future policy framework in the specific context of management and methods for
accounting and reporting of cash awqaf transactions.
The paper proceeds as follows. The next section presents discussions on awqaf and
its position in Islam followed by the nature of accounting, reporting and accountability
JIABR in Islam, including issues related to awqaf operations and awqaf accounting and
2,2 reporting practices in Section 3. Section 4 explains the research method employed in
this study. Section 5 presents the research findings followed by discussions of the
findings and suggestions in Section 6. Section 7 concludes the paper.
The Shari’ah emphasizes, among others, the notions of universal brotherhood as well
as social and economic justice, all of which are deeply ingrained in the Islamic teachings
(Kamla, 2009; Lewis, 2001). It requires that all worldly resources are to be utilized in a
manner fulfilling the needs of all human beings and to serve the objective of achieving
equitable distribution of income and wealth (Dogarawa, 2009). Specifically, Islam
provides that wealth should not be circulated only among certain sector of the society –
the rich (Quran, 59:7). To achieve this aim, Islam instituted several religiously based
economic vehicles including zakah and awqaf, which central tenet lies in the Islamic
concept of sadaqah and infaq (Islamic donations). These wealth mobilization techniques
conceptually subscribe to the equivalent concept of charity in the non-Islamic context.
Awqaf is a much older and more established philanthropic vehicle compared to zakah
in Islam (White, 2006) and it differs from zakah in at least four aspects. First, while zakah
falls under the category of compulsory charity, awqaf is voluntary in nature
(Siti-Mashitoh, 2006). Second, awqaf involves using one’s wealth for religious purposes
over and above the minimum and obligated threshold of zakah (Alam, 2010). Thirdly,
awqaf falls under a specific branch of sadaqah termed as Sadaqah-Jarriyyah (good deeds
which continue even after death) (Haq, 1996). In this context, the soul of the deceased will
continue to be rewarded so long as the awqaf assets he/she donated continue benefiting
the beneficiaries. Finally, and in the specific context of social and economic development,
awqaf extends the role of zakah which ensures the flow of cash fund to those in need –
asnafs or zakah beneficiaries. This is done by mobilizing resources (Raimi et al., 2010;
Salim, 2007) and providing the necessary material infrastructure (Dogarawa, 2009).
Waqafa from which the word awqaf (plural of waqf ) is derived literally means
“confinement and prohibition” or causing a thing to stop or stand still (Hassan, 1984).
Linguistically, it takes the meaning of “stand still, hold still, not to let go” (Ahmed,
2004, p. 2). Awqaf is however operationally defined as ownership of assets meant for
specific charitable purposes determined by the waqif(s) by dedicating the assets’
usufruct to identified beneficiaries (Hashmi, 1984; Hassan, 1984; Kahf, 1998)[7]. This
indicates that awqaf technically involves granting of specific assets to specific
beneficiaries on a perpetuity basis, serving specific noble religious objectives.
The extant literature on awqaf acknowledges the existence of two types of awqaf,
namely, ordinary (illiquid assets, e.g. land and buildings) and specific (liquid assets,
e.g. cash) (Baskan, 2002; Cizakca, 1995, 2004; Yayla, 2011), the ownership of which are
legally sanctioned by Shari’ah from being changed, transferred and inherited
(Khan, 2007). Cash awqaf, which was introduced and flourished during the Ottoman Accountability in
Empire (Baskan, 2002; Cizakca, 1995, 2004; Hoexter, 1998; Kuran, 2001), functions as the sacred
financing device to develop and support ordinary awqaf (Sadeq, 2002) as well as
providing credit facilities with repayments being subsequently used to finance social context
services for those in need (Cizakca, 1995).
Extant awqaf literature also indicates the role of mutawalli in awqaf assets
management. The appointment of mutawalli who possesses almost similar conceptual 91
characteristics to that of trustees in conventional endowment context has
systematically created accountability issues which are commonly addressed by the
need for maintaining proper accounting records and transparent reporting practices
(Yayla, 2011). As Tawheed warrants Muslims to submit to Allah in everything
(Baydoun and Willet, 1997), accounting, reporting and accountability in awqaf context
must also therefore falls under the ambit of Islam. This is discussed next.
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human (in) actions in this world by the assigned angels (Quran, 78:29; 82:11).
The judgement results would subsequently determine whether humans should be
rewarded with heaven (Quran, 76:11-22; 85:11; 88:8-16; 98:7-8) or punished with hell
(Quran, 77:29-33; 78:21-36; 88:2-7). This is central to the accountability concept in Islam
(taklif ) as the eternal reward and punishment in the next world should provide strong
motivations for Muslims to be accountable for their (in) actions in this world
(Mohamed-Haneef, 1997). Additionally, the link between the three worldly elements
(accounting, reporting and accountability) and duality in life can be discerned in the
word hisab or “account” which has been extensively referred to in the Qur’an (Askary
and Clarke, 1997)[11].
The word “account” in Islam conceptually relates to human’s obligations as Allah’s
representative on earth (Khalifah–vicegerent) (Quran, 2:30; 35:39) and has to “account”
to Allah in the hereafter on all matters pertaining to their worldly endeavours
(Askary and Clarke, 1997; Ros-Aniza and Abdul-Rahim, 2003). Human’s appointment
as Allah’s vicegerent effectively position them as trustee (or steward) to Allah’s resources
(the universe) which are granted as reasons (Quran, 6:95; 13:2; 31:20) and means (Quran,
16:14) for worshipping Allah (Mohamed-Haneef, 1997). As vicegerents, humans agree to
assume such responsibility in covenant with Allah (Abdul-Rahim, 2003), reinforcing
the centrality of accountability in life, especially for Muslims. Thus, Islam considers the
concept of Tawheed, dualism in life and human vicegerency as equally important in
contributing to the establishment of a more comprehensive and sacred accountability
framework, i.e. taklif.
Unlike accountability in non-sacred context, taklif encompasses both primary
and secondary accountability (Hisham and Shahul-Hameed, 2006) with the former
capturing the essence of Dheen whereby worldly activities are considered as ibadah if
resources granted by Allah are utilized for the purpose of pleasing Him by way of
benefitting society. Thus, both accounting and reporting become enabling tools for
humans to evaluate their sacred accountability to both fellow humans and Allah
(Shahul-Hameed and Yaya, 2005). Table I depicts the implications of Tawheed, dualism
in life and vicegerency on accounting, reporting and accountability.
The above presents the essence of the new paradigm in accounting, reporting and
accountability framework termed “Islamic accounting”. It was initially developed to
facilitate the accounting and reporting for Islamic banking and finance transactions but
later include transactions by other institutions operating within Shari’ah parameters.
Accountability in
Implications on accounting, reporting
Concepts Conceptualization and accountability the sacred
(1) Tawheed
context
Oneness of Allah Allah is the only God to be worshipped The conduct of worldly and spiritual
and submitted by humans affairs are guided by Shari’ah
Allah is the Allah creates everything for a purpose, All activities must be considered as an 93
Creator i.e. to worship Him act of worship (ibadah)
Worldly creatures are resources, Accounting, reporting and
reasons and means to worship Allah accountability are not worldly affairs
disparate from spiritual engagement
Islam as Dheen Islam as a complete way of life with Accounting and reporting are means to
Shari’ah as the governing rule and the worship Allah
rejection of secularism, i.e. sacred-
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profane dichotomy
(2) Dualism in life The existence of the everlasting Islamic accountability concept based on
hereafter and the Day of Judgment the notion of taklif
where human’s performance in this Accounting and reporting as
world is being judged, i.e. accountability accountability tools to ensure
Worldly (in) actions determine human’s observance of taklif
fate in the hereafter (heaven or hell) Need to account to Allah for all worldly
(in) actions. Reward and punishment in
the everlasting hereafter should
motivate Muslims to be accountable for
their (in) actions in this world
(3) Human as Resources (the universe) are granted to Reiterates and reinforces the centrality
Vicegerent human as reasons and means for of Islamic accountability (taklif ) Table I.
worshipping Allah concept in life The implications of
Human appointment as vicegerent Islamic concepts on
reflects trusteeship in covenant with accounting, reporting and
Allah accountability
Islam therefore provides a starting point of departure from the focus of accounting and
reporting to facilitate the secular wealth maximization aims (Kamla, 2009) to also
include the ethical (Briloff, 1986; Francis, 1990)[12] (Gambling and Karim, 1991) and
sacred accountability (Lewis, 2001) beyond single worldly concerns (Baydoun, 2000).
Accordingly, given the spiritual attachment and dual form of accountability, it is
expected that the roles and functions of accounting, reporting and accountability in
awqaf operations would be wider than its conventional endowment counterparts.
Waqif
(Donor)
Mutawalli
ALLAH
(Awqaf Trustee)
Beneficiaries
Figure 1.
Accounting, reporting and A B
accountability in awqaf
Source: Authors Own
of awqaf effectively renders the decision usefulness (DU) objective for economic decision Accountability in
making less important. While the primary aim of providing relevant information for the sacred
decision-making purposes remains valid, the target users who are expected to utilize the
information in making the necessary decisions and the types of decisions they make, context
are no longer consistent with the operational nature of awqaf transactions.
Target users in the context of awqaf include not only the waqifs (current or
potential) but also the whole ummah, and the decisions are no longer solely economics 95
in nature. Since awqaf practices have a religious root, decisions arising from reported
information do not only aid in making economic decision of whether to be involved in
awqaf practices but also Shari’ah decisions especially in determining whether awqaf
operations have been conducted within Shari’ah parameters and equivalently
important, whether mutawallis have appropriately discharged their primary (to Allah)
and secondary (to waqifs and beneficiaries) accountabilities.
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The conceptual issues associated with the adoption of DU in awqaf also meant that
many concepts, accounting terms and reporting format applied in corporate (for-profit)
context to be of little relevance in catering for the unique nature and structure of awqaf
transactions. For instance, the concept of profit as embedded in for-profit organizations
is also arguably irrelevant in the third sector (specifically charities), given the absence
of surplus over revenue available for distribution (Wells, 2006). Additionally, the
prevailing accounting term “assets” which is conceptually related to “future economic
benefits” (MASB Financial Reporting Standard 101) is also inconsistent with awqaf
operations. Neither waqifs who provide the inward cash flows to cash awqaf fund nor
the mutawallis who manage the awqaf fund, are expected to directly reap the accruing
future benefits from the use of the assets.
Furthermore, the reporting format using the “profit and loss account” is also unsuitable
in the context of awqaf since they operate as not-for-profit institutions which could only
generate either “surplus” or “deficit” instead of “profits” or “losses”. Moreover, the concept
of “deficit” would also be of little relevance to awqaf (particularly cash awqaf ) as the
mutawalli’s disbursing capabilities are effectively bounded by the fund available based on
the amount collected. Hence, applying the economic model of accounting and reporting
(which emphasizes on profit) to awqaf proves to be problematic.
3.2.2 The nature of cash awqaf collections. In the case of cash awqaf operations,
monies collected are conceptually “liabilities” to the mutawalli since they have to manage
the fund according to the pre-specified aims stipulated in the awqaf deeds. Thus, cash
awqaf cannot be considered as income to mutawallis but rather as an income to the fund
which the mutawalli is managing. In this regard, the adoption of fund accounting is
arguably more relevant to better reflect the conceptual underpinning of mutawalli-awqaf
fund relationship and the role of mutawalli as trustee rather than the owner of cash
awqaf fund.
4. Research method
In view of the exploratory nature of our research, we adopt the qualitative approach
whereby data is gathered based on physical observations and archival documents
in the natural setting. It provides rich data for deeper understanding of the identified
phenomenon (Leonard and McAdam, 2000) which cannot be explained by any
measurement or quantification process commonly used in quantitative research
(Zickmund, 2000). The choice of case study method is deemed appropriate as we seek
JIABR to have in-depth understanding of real situation, thus providing accurate perspectives
2,2 whilst ensuring validity of observations (Taylor and Bogdan, 1984).
We analyzed the financial reports prepared by the selected cash awqaf institution
for a six-year period (2000-2005), allowing us to observe and analyze any potential
accounting and reporting patterns that emerge during the period. This eliminates
potential contextual errors and further refines the research method and design (Cooper
96 and Schindler, 2003). We further supplement our archival data observations with
semi-structured and in-depth interviews. This involved face-to-face discussions with
mutawalli which is a much better method of soliciting information given the two-way
communication (Kahn and Cannell, 1957). Furthermore, the in-depth interviews
provide rich data compared to merely observing mutawalli’s activities and also allow
for necessary follow-up procedures for clarifications (Marshall and Rossman, 2006),
i.e. it provides answers to potential “why” and “how” questions.
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According to Torres and Pina (2003), the quantitative nature of financial reporting
could be located on the first ladder (fiscal accountability) as it provides relevant
information reflecting the entity’s current financial strength as well as future
sustainability[16]. The other three accountability levels (process, programme and
policy) could also be examined through financial reporting activities which provide
the necessary qualitative information disclosure. Therefore, both quantitative and
qualitative dimensions of financial reporting effectively facilitate the assessment of
various accountability levels in awqaf institutions. We adopt Stewart’s (1984) public
accountability framework for at least two specific reasons. First, it accommodates our
aims of analyzing mutawalli’s accountability by further cascading accountability into
four different identifiable dimensions (fiscal, process, programme and policy). Second,
the identifiable dimensions are also arguably supportive of our developed framework
linking accounting, reporting and accountability (Figure 1) whereby it also reflects
mutawalli’s multiple accountability traits.
We take cognizant of the fact that Stewart’s (1984) framework falls short of directly
locating mutawalli’s primary accountability. Nevertheless, we consider mutawalli’s
observance of secondary accountability as tantamount to simultaneously observing
JIABR his/her accountability towards Allah as Muslims are commanded to take care of both their
2,2 relationship with other fellow humans as well as with Allah (Quran, 3:112). In this regards
and in the specific context of awqaf arrangement, discharging accountability towards
waqifs and beneficiaries is considered as means for mutawalli to observe accountability
towards Allah since the worldly activities of properly managing awqaf assets are
effectively an act of worship by virtue of the Tawheedic concept. Thus, Stewart’s (1984)
98 framework provides indirect assessment of mutawalli’s primary accountability.
5. Research findings
5.1 The cash awqaf: legal, administrative and operational background
The existence, operations, administration, accounting and reporting aspects of both
normal and cash awqaf are governed by the State’s Awqaf Share Act (1998) (hereafter
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“the Act”) gazetted on 12 March 1998[17]. The cash awqaf which began its operation in
2000 effectively forms an integral part of the SIRC’s normal awqaf system (illiquid
assets), allowing Muslims without physical assets to participate in such philanthropic
activities. The administrative aspect of the cash awqaf unit is consistent with the
provisions in the Act (1998)[18] and is currently managed by a division within the SIRC
whereby the state’s Sultan is the SIRC’s head and all administrative matters including
that of planning, implementation and managing of cash awqaf fund are under the
responsibility of the Timbalan Yang Dipertua (Deputy Head), assisted by one
“Economic Officer” (EO) with four support staffs.
In the case of cash awqaf, the Act allows the SIRC to accept awqaf participation in
terms of cash based on pre-agreed purposes of either “to finance the maintenance and
development of awqaf properties managed by the SIRC” (Section IV, Rule 9(1)[a])
and/or “to finance any projects or development activities approved by the SIRC”
(Section IV, Rule 9(1)[c]). These effectively form the distribution channels through
which the collected cash awqaf monies could be utilized. Table II presents the inflow
and outflow of fund.
It can be seen that the receipts of fund are mainly from the public. In terms of
disbursements, the amount and the recipients/beneficiaries vary each year. The reason
for the variation was due to the SIRC having to prioritize the disbursements according
to the critical needs of the ummah as explained by the EO:
We focus on critical areas where the ummah needs most, such as education, health and the
upkeep of Muslims’ places of worships including the Mosques and suraus.
As part of cash awqaf operations, the Act further allows the SIRC to invest certain
portion of the cash awqaf collected with the aim of further strengthening the cash
awqaf fund. Table III presents the investment activities by the SIRC. It can be seen that
substantial portions of cash awqaf fund is held in fixed deposits or investment
accounts (Mudharabah) while the remaining unutilized fund is held as bank deposits in
local Islamic banks.
The SIRC is also expected to publish in “gazette form”, “soonest possible” after the year
end, three types of statements (Rules 13[3]), namely:
(1) a statement detailing all activities undertaken during the year;
(2) a revenue and expenses account for the year; and
(3) the cash awqaf fund’s balance sheet.
The Act further requires the SIRC to have all the above financial statements audited
by the Federal Government’s Auditor General Department (Rules 13[5]). Currently,
the above accounting and reporting responsibilities are assumed by the EO under
the supervision of the Deputy Head. At the SIRC level, the accountant (a certified
practicing accountant) advises the SIRC’s head on matters related to financial
management, accounting and reporting for both awqaf operations.
JIABR Based on annual reports review and interviews with EO, several important features
2,2 of accounting and reporting practices for cash awqaf transactions were observed. The
SIRC prepares and maintains separate financial statements for each type of awqaf,
with accounting treatments on the transactions conforming to the relevant Malaysian
financial reporting standards issued by the Malaysian Accounting Standard Board
(n.d.) for corporate (for-profit) organizations. However, the reporting formats are
100 self-designed. The use of self-designed reporting format was explained by the EO:
Our main problem associated with reporting lies on the absence of established reporting
standards for adoption. Accordingly, we self-designed the reporting format.
The recording of all accounting transactions for cash awqaf is done manually since
investment in a computerized accounting system is still under consideration by the
SIRC. This has prompted the SIRC to practice segregation of duties as part of its
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its underlying altruistic reality. Hence, the financial reporting regulatory authority,
specifically in Malaysia, needs to expedite the process of developing specific standards
for mutawallis’ guidance.
6.1.2 Issues in reporting. The transparency in awqaf reporting is vital due to its
charity-based status. The quality of awqaf reporting essentially determines its survival
because if stakeholders’ transparency demand can be fulfilled, there is high likelihood
that it will continue to receive endowments. Informative (non) financial disclosure of
awqaf transactions effectively enhances waqifs’ (current and potential) confidence in
both, the awqaf practices and the institutions managing it. Unfortunately, the existing
legislative enactment is rather weak in enforcing the mutawalli to make public disclosure
of its awqaf activities. The subjective wording in the Act (“soonest possible”) with
JIABR respect to the production of annual audited financial statements compromised the
2,2 demand for timely reporting. The limited availability of annual audited financial
statements for public scrutiny further reinforce the exclusivity of such documents,
rendering mutawalli’s accountability and performance difficult to be consistently
monitored and assessed. This potentially weakens mutawalli’s motivation for
demonstrating accountability through quality reporting.
104 Besides the above regulatory issue, the observed quality with regards to
non-financial disclosure by the SIRC equally requires further improvement as it
would strengthen the transparency construct (Stewart, 1984; Leat, 1990)[19] and hence,
meeting the accountability demands by waqifs. For instance, comprehensive qualitative
information relating to the objectives (Gray, 1984)[20] and detailed target awqaf
recipients would certainly enhance ummah’s understanding on awqaf practices and
hence, their confidence in such sacred, religiously rooted activities.
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Consistent with discussion in Section 3.2 earlier, we present our proposed templates
for cash awqaf reporting called “Statement of Cash Awqaf Activities” (SOCAA) in
Table VII and the Cash Awqaf Fund Balance Sheet in Table VIII. Developed based on
fund accounting which records and monitors cash awqaf fund entrusted to mutawalli,
The SOCAA for the year ended 2010 Managed by: SIRC of PQRS
2010 2009
No. Items Note RM RM RM RM
The cash awqaf fund balance sheet as at 31 December 2010 Managed by: SIRC of PQRS
2010 2009
Items Note RM RM RM RM
our study also suffers from several limitations. First, we only focused on a single
mutawalli managing one aspect of awqaf operation – cash awqaf. Second, we adopt a
single accountability framework developed by Stewart (1984) in examining and
locating mutawalli’s accountability. While we recognize that these render our results to
be context specific and hence non-generalizable, we however believe that these
systematically offer opportunities for future research. Overall, we consider our study
as important to the development of awqaf in the future which will greatly depend on
good governance and reporting transparency by awqaf institutions.
Notes
1. Muslims considered Qur’an (n.d.) as the word of Allah based on God’s proclamation in the
Qu’ran itself (Quran, 81:19).
2. An example of private awqaf institution is that in Singapore (see Husain, 2007), while NGOs
led and government controlled awqaf institutions are common in Indonesia and Malaysia,
respectively.
3. See Yayla (2011) for an excellent discussion on the definition, roles and the nature of
mutawalli’s appointment.
4. This accountability framework is based on the setting where waqifs are not managing assets
they donated. Otherwise, the secondary accountability dimension is irrelevant and
inapplicable.
5. Additionally, research on awqaf institutions is rather limited compared to the bayt-al-mal
institutions which have been extensively studied due to its closed connection with the
Islamic institutions of zakah (or tithes) (e.g. Al-Qaradawi, 1999; Elsergany, 2010; Hamid, 2003;
Iqbal, 2000; Mohammad-Akkhtar, 1983; Namazi, 2010). For discussions of research related to
non-Islamic charities, see among others Hyndman (1990), Hyndman and McDonnell (2009)
and Sinclair et al. (2010).
6. The only available literature specifically on awqaf financial reporting is the theoretical
papers by Adnan et al. (2007) and Ihsan et al. (2006).
7. Based on definitions by renowned religious scholars, Sheikh Abu Zahra and Qadi Abu Yusuf.
8. Nevertheless, there has been literature that argues to the contrary. Quattrone (2004) in the
case of Christianity, and Jayasinghe and Soobaroyen (2009) in the case of Hinduism and
Buddhism, provide evidence of the intertwined nature of financial reporting, accountability
and religion in their respective theological beliefs.
9. Worldly activities will become an act of worship in the presence of two elements: Accountability in
(1) if intention (niyyah) is purely for the sake of seeking the pleasure of Allah; and (2) if
worldly activities are conducted within the ambit of Shari’ah, i.e. permissible by the religion. the sacred
See Hadith on “Actions are judged by intentions” narrated by Imam Bukhari and Muslim context
(e.g. Yaaqub, 2006).
10. This does not suggest that Muslims should take the worldly affairs lightly. Allah in fact
commands Muslims to strive hard in attaining success in both worlds by leading a balanced 107
life of getting material comfort in this world and seeking happiness in the hereafter
(Quran, 2:201; 28:77; 62:10).
11. Repeatedly mentioned in the Holy Qur’an in excess of eighty times (Askary and Clarke,
1997).
12. We take cognizant of the fact that discussions on accounting and morality do exist in
the non-Islamic context (e.g. Briloff, 1986; Francis, 1990) but the arguments are
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