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Journal of Islamic Accounting and Business Research

Emerald Article: Accountability in the sacred context: The case of management, accounting and reporting of a Malaysian cash <IT>awqaf</IT> institution Hairul Suhaimi Nahar, Hisham Yaacob

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To cite this document: Hairul Suhaimi Nahar, Hisham Yaacob, (2011),"Accountability in the sacred context: The case of management, accounting and reporting of a Malaysian cash <IT>awqaf</IT> institution", Journal of Islamic Accounting and Business Research, Vol. 2 Iss: 2 pp. 87 - 113 Permanent link to this document: http://dx.doi.org/10.1108/17590811111170520 Downloaded on: 31-03-2012 References: This document contains references to 113 other documents To copy this document: permissions@emeraldinsight.com This document has been downloaded 457 times.

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Accountability in the sacred context


The case of management, accounting and reporting of a Malaysian cash 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 classies 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 ndings indicate that, while the root of accountability in the management, accounting and reporting practices seems to exist in the awqaf entity studied, signicant 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 nance and banking. The studys conjecture is that, by debunking the myth of Islamic accounting and reporting as only serving the acute domain of transactions reecting the Islamic nancial 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-prots, religiously grounded entities such as awqaf institutions. The study further contributes to the accountability and nancial reporting literature in Islamic not-for-prot organizations by studying the importance of sound accounting practices and reporting transparency in ensuring accountability. Keywords Islam, Finance, Banking, Accountability, Accounting, Reporting, Awqaf, Mutawallis (awqaf trustees), Non-prot organizations Paper type Research paper

Journal of Islamic Accounting and Business Research Vol. 2 No. 2, 2011 pp. 87-113 q Emerald Group Publishing Limited 1759-0817 DOI 10.1108/17590811111170520

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1. Introduction 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, 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 specic purposes (Cizakca, 1998). Both were, however, established with the basic aim of providing social and 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 reecting mutawallis (awqaf trustee) (Yayla, 2011)[3] accountability to provide collective inuence towards awqafs 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 beneciaries (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 Shariah (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 ummahs condence in current awqaf practices. Mutawallis 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, mutawallis unique position in awqaf arrangement and the importance of maintaining ummahs condence 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 facilitate the upholding of both primary and secondary accountabilities. It is envisaged that the additional layer of intangible accountability to the Creator (Allah) in the sacred accountability framework governing awqaf would ensure and 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 mutawallis accountability in ensuring the adherence of awqaf practices to Shariah requirements, thereby enhancing ummahs condence towards awqaf institutions. This will in turn ensures the survival of awqaf institutions to serve the ummahs 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; 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 reects 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. Specically, our rst 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 mutawallis accountability as reected by its operations, accounting and reporting practices. Based on triangulation research approach, i.e. interviews and document analysis, we nd 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 modications 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 mutawallis 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 specic 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

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in Islam, including issues related to awqaf operations and awqaf accounting and reporting practices in Section 3. Section 4 explains the research method employed in this study. Section 5 presents the research ndings followed by discussions of the ndings and suggestions in Section 6. Section 7 concludes the paper. 2. Islam and the institution of awqaf Islam literally means peace and submission (Abdalati, 1998; Mawdudi, 1992) and a Muslim is regarded as one who resigns himself/herself to Allah (Mohd-Rizal et al., 2006, p. 127). The Islamic faith considers Allah as the only God (Quran, 112:1) and accordingly, Muslims must submit to Allah in everything (Baydoun and Willet, 1997). Such act of bearing witness to the existence and oneness of God is termed as Tawheed (unity of God) (Faruqi, 1992). By subscribing to Tawheed, Muslims are required to observe the rule of Shariah. The Shariah 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 fullling the needs of all human beings and to serve the objective of achieving equitable distribution of income and wealth (Dogarawa, 2009). Specically, 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 ones wealth for religious purposes over and above the minimum and obligated threshold of zakah (Alam, 2010). Thirdly, awqaf falls under a specic 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 beneting the beneciaries. Finally, and in the specic context of social and economic development, awqaf extends the role of zakah which ensures the ow of cash fund to those in need asnafs or zakah beneciaries. 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 connement 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 dened as ownership of assets meant for specic charitable purposes determined by the waqif(s) by dedicating the assets usufruct to identied beneciaries (Hashmi, 1984; Hassan, 1984; Kahf, 1998)[7]. This indicates that awqaf technically involves granting of specic assets to specic beneciaries on a perpetuity basis, serving specic 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 specic (liquid assets, e.g. cash) (Baskan, 2002; Cizakca, 1995, 2004; Yayla, 2011), the ownership of which are legally sanctioned by Shariah from being changed, transferred and inherited

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(Khan, 2007). Cash awqaf, which was introduced and ourished during the Ottoman Empire (Baskan, 2002; Cizakca, 1995, 2004; Hoexter, 1998; Kuran, 2001), functions as nancing device to develop and support ordinary awqaf (Sadeq, 2002) as well as providing credit facilities with repayments being subsequently used to nance social 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 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. 3. Accounting, reporting and accountability in Islam The non-Islamic perspective generally focuses on two worldly roles of accounting and reporting. First, they function as a basic yardstick for the assessment of managerial accountability arising from the separation of ownership from control (Bushman and Smith, 2001; Davis et al., 1982; Gray et al., 1996; Sunder, 1999; Watkins, 2007). Second, they act as a guiding device for nancial reporting users in making economics (Arnold and Cooper, 1999; FASB Concept Statement), social (Gray, 2002) and environmental (Buhr, 1998; Hopwood, 2009; Maunders and Burrit, 1991) decisions often devoid of religious aims. Such roles, drawn from the secular viewpoint, is deemed to be conned to only worldly aims and purposes (Quattrone, 2004; Jayasinghe and Soobaroyen, 2009)[8] (Shahul-Hameed and Yaya, 2005), neglecting and displacing the holistic dimension of Islam being a complete way of life. Prior studies have acknowledged the Islamic conceptualization role of accounting, reporting and accountability in at least three specic areas (Haniffa and Hudaib, 2002; Kamla et al., 2006; Lewis, 2001; Napier, 2009). First, Islam locates the position of accounting, reporting and accountability in the spiritual context. Second, Islam introduces the notion of sacred accountability (taklif ) based on religious spirit and nally, it identies strategic roles of accounting and reporting in ensuring the achievement of taklif. Central to the conceptualizing process are the main Islamic concepts of Tawheed, dualism in life and the role of man as Khalifah (vicegerent). These concepts collectively establish a framework in explaining how accounting, reporting and accountability as secular activities as currently understood and perceived in the non-Islamic context (Laughlin, 1988; Shahul-Hameed, 2000; Tinker, 2004) manifest itself in the Islamic denomination. The concept of Tawheed principally commands Muslims to worship and submit to a single God, i.e. Allah (Quran, 112:1-4) who is the Creator (Quran, 6:12-14) who created humans for the purpose of worshipping Him (Quran, 51:56). To guide Muslims on how to submit and worship Him, Allah bestowed Muslims with the religion of Islam as a Dheen a complete way of life (Al-Buraey, 1990), with Shariah as the social (Faruqi, 1992; Lewis, 2001; Tinker, 2004) and economic (Chapra, 1992; Mohamed-Haneef, 1997; Naqvi, 1981) constitution. Thus, Shariah governs the conduct of humans worldly and spiritual affairs by rejecting the sacred-profane dichotomy (Al-Attas, 1993; Elmessiri, 1996).

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Accordingly, Dheen necessitates worldly activities including but not limited to accounting, reporting and observing accountability to be regarded as an act of worship (ibadah) (Yaaqub, 2006)[9] (Quran, 6:162-163). This effectively establishes the link between worldly activities and human spiritual dimension in the Islamic domain. The non-recognition of sacred-profane divide in Islam is further reinforced through the concept of dualism in life whereby this world is considered as a transit point during which humans are tested before the eternal journey to the hereafter (Quran, 3:185; 4:77; 6:32; 13:26; 18:7; 57:20). In view of the temporal nature of this world, worldly activities are therefore not the end for Muslims but are simply means to attain salvation in the everlasting hereafter[10]. The next eternal world is promised by Allah (Quran, 82:1-4; 84:1-6; 87:17; 88:1; 101:1-5) beginning with the Day of Judgment during which all humans will be resurrected and judged (Quran, 81:1-14; 82:1-5; 84:1-13). The judgement entails the presentation of a report book (Quran, 36:12; 56:8-10; 58:6; 75:13; 84:7-8) containing the recording of all 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 Quran (Askary and Clarke, 1997)[11]. The word account in Islam conceptually relates to humans obligations as Allahs representative on earth (Khalifahvicegerent) (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). Humans appointment as Allahs vicegerent effectively position them as trustee (or steward) to Allahs 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 benetting 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 nance transactions but later include transactions by other institutions operating within Shariah parameters.

Concepts (1) Tawheed Oneness of Allah

Conceptualization Allah is the only God to be worshipped and submitted by humans Allah creates everything for a purpose, i.e. to worship Him Worldly creatures are resources, reasons and means to worship Allah

Implications on accounting, reporting and accountability

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The conduct of worldly and spiritual affairs are guided by Shariah Allah is the All activities must be considered as an Creator act of worship (ibadah) Accounting, reporting and accountability are not worldly affairs disparate from spiritual engagement Accounting and reporting are means to Islam as Dheen Islam as a complete way of life with Shariah as the governing rule and the worship Allah rejection of secularism, i.e. sacredprofane dichotomy Islamic accountability concept based on (2) Dualism in life The existence of the everlasting the notion of taklif hereafter and the Day of Judgment Accounting and reporting as where humans performance in this world is being judged, i.e. accountability accountability tools to ensure Worldly (in) actions determine humans observance of taklif Need to account to Allah for all worldly fate in the hereafter (heaven or hell) (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 of Islamic accountability (taklif ) Vicegerent human as reasons and means for concept in life worshipping Allah Human appointment as vicegerent reects trusteeship in covenant with Allah

Table I. The implications of Islamic concepts on accounting, reporting and 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. 3.1 Accounting, reporting and accountability implications on mutawallis roles Awqaf, like other charity entities, practically operate in low value conict and high trust environment (Laughlin, 1996). Accountability is thus imperative for such entities to ensure public condence and trust as well as continuous ow of funds to support their activities and survival (Laughlin, 1996; Sinclair et al., 2010). Owing to the unobservable duciary, moral and economics relationship between charity organizations and their donors, accountability serves the purpose of measuring, evaluating and reporting trustees performance (nancial or otherwise) (Cutt and Murray, 2000). The extant literature on faith-based charity organizations across different theological beliefs have also acknowledged sound accounting and transparent

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reporting practices as common mechanisms through which accountabilities in such organizations could be discharged and assessed (Connolly and Hyndman, 2004; Jayasinghe and Soobaroyen, 2009; Hisham and Shahul-Hameed, 2006; Laughlin, 1990; Quattrone, 2004; Steccolini, 2004; Van-Staden and Heslop, 2009). Specically, it could be achieved by providing timely, relevant and consistent (non) nancial information to stakeholders (Keating and Frumkin, 2000). Figure 1 shows the framework linking accounting and reporting to the dual accountability expected of mutawallis in awqaf arrangement. Being a trustee in awqaf arrangement, the mutawalli is accountable to both waqif and beneciaries[13]. Such secondary accountability could be visibly viewed and objectively assessed through Channel A, consisting of the observance of awqaf deeds and also by practising sound accounting and transparency in reporting. It is in this context that the presence of accounting and reporting legislative interventions applicable to charity organizations[14] helps in reinforcing the importance of nancial reporting being legal instruments to ensure trustees accountability in such organizations. Channel B, on the other hand, depicts the Islamic paradigm which effectively imposes demand for all humans to be accountable to Allah and hence, waqif, mutawalli and beneciaries (ummah) are all accountable to Allah for their worldly (in) actions. Through this channel, sound accounting and reporting transparency would function as devices enabling waqif and beneciaries to indirectly determine whether mutawalli has discharged his/her primary accountability to Allah and also serve as means for mutawalli to demonstrate both his/her primary and secondary accountabilities. 3.2 Issues in accounting and reporting for awqaf Most literature on awqaf is silent on technical issues surrounding accounting and reporting of awqaf transactions. Additionally, in the absence of specic nancial reporting standards for awqaf (being a charity, not-for-prot entity), mutawallis (especially in Malaysia) have only the nancial accounting and reporting framework meant for prot-making corporations as their reference. This raises a number of theoretical and practical issues in so far as awqaf transactions are concerned. We consider below two main issues with regards to accounting and reporting for awqaf operations. 3.2.1 Objective of accounting and reporting, accounting terms and reporting format for awqaf. Accounting primarily helps in constructing (social) reality (Hines, 1988) by reecting the nature of reality for transactions it represents (Maurer, 2002). Accordingly, the objective and model of accounting and reporting for awqaf transactions must therefore reect the charitable, not-for-prot reality it posses. Philanthropic motive
Waqif (Donor) Mutawalli (Awqaf Trustee) Beneficiaries ALLAH

Figure 1. Accounting, reporting and accountability in awqaf

Source: Authors Own

of awqaf effectively renders the decision usefulness (DU) objective for economic decision making less important. While the primary aim of providing relevant information for 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, 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 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 Shariah decisions especially in determining whether awqaf operations have been conducted within Shariah parameters and equivalently important, whether mutawallis have appropriately discharged their primary (to Allah) and secondary (to waqifs and beneciaries) accountabilities. 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-prot) context to be of little relevance in catering for the unique nature and structure of awqaf transactions. For instance, the concept of prot as embedded in for-prot organizations is also arguably irrelevant in the third sector (specically 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 benets (MASB Financial Reporting Standard 101) is also inconsistent with awqaf operations. Neither waqifs who provide the inward cash ows to cash awqaf fund nor the mutawallis who manage the awqaf fund, are expected to directly reap the accruing future benets from the use of the assets. Furthermore, the reporting format using the prot and loss account is also unsuitable in the context of awqaf since they operate as not-for-prot institutions which could only generate either surplus or decit instead of prots or losses. Moreover, the concept of decit would also be of little relevance to awqaf (particularly cash awqaf ) as the mutawallis 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 prot) 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-specied 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 reect 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 identied phenomenon (Leonard and McAdam, 2000) which cannot be explained by any measurement or quantication process commonly used in quantitative research (Zickmund, 2000). The choice of case study method is deemed appropriate as we seek

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to have in-depth understanding of real situation, thus providing accurate perspectives whilst ensuring validity of observations (Taylor and Bogdan, 1984). We analyzed the nancial 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 renes the research method and design (Cooper 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 mutawallis activities and also allow for necessary follow-up procedures for clarications (Marshall and Rossman, 2006), i.e. it provides answers to potential why and how questions. Hence, a journal which records all data collected is systematically maintained including the electronic recording and transcriptions (verbatim) of all interviews. These avoid losing or misinterpreting any important parts of the interviews which could adversely affect data analysis process (Leonard and McAdam, 2000). We adopt multiple analysis methods including content analysis, descriptive statistics and cross-tabulation. Such triangulation approach aims at addressing both the reliability and validity concerns in qualitative research (Cooper and Schindler, 2003; Leonard and McAdam, 2000; Taylor and Bogdan, 1984). In locating mutawallis accountability based on the selected accountability framework (Section 4.2), we further supplement the process with two specic ratio calculations (Sections 5.3.1 and 5.3.2). This provides quantiable measure of accountability in justifying our process of identifying and locating mutawallis accountability within the selected framework. 4.1 Context and sample We focus on a single cash awqaf institution in one of the 14 states in Malaysia (Abdul-Rahim and Goddard, 1998)[15]. The Federal Constitution states that all religious matters are state matters to which the Sultan (the States Constitutional Head) is responsible with the exception of four states without the Sultan (Penang, Malacca, Sabah and Sarawak). The administration of religious matters in these four states is assumed by the Yang Di Pertuan Agong (The Majesty) who is selected on a rotation basis every ve years from among the Sultans. Accordingly, several administrative institutions at both state (e.g. State Islamic Religious Councils (SIRCs)) and federal levels (e.g. Islamic Development Department JAKIM) were gradually established to facilitate this administrative framework. The early awqaf practices in Malaysia were mainly concentrated on illiquid assets such as mosques and religious schools (Siti-Mashitoh, 2006) with mutawallis being appointed from among the leaders in the society (Razali, 2004). With the proliferation of philanthropic activities among Malaysian Muslims and the advent of new public management philosophies, the government decided to centralize the management of awqaf practices by enacting relevant laws empowering SIRCs to assume trusteeships of all awqaf assets. This effectively renders SIRCs to become the sole mutawalli to all assets endowed under the awqaf system in Malaysia. The SIRCs currently handle both normal (illiquid assets) and cash awqaf (share awqaf ). The latter was formally legalized following the approval of Fatwa

(religious decree) Council in April 2007 and operates in a manner whereby cash endowments from the sale of awqaf share certicates are pooled and used for specic religious purposes as determined by the respective SIRCs. Currently, only four SIRCs in the state of Selangor, Johor, Penang and Pahang have introduced cash awqaf operations. Malaysias current legal settings with regards to Islamic matters based on the British designed Federal Constitution have effectively given rise to signicant differential levels of operations, administrative and regulatory procedures across SIRCs in different states. In view of this and given the exploratory nature of our study, we therefore opine that analyzing accounting, reporting and accountability issues in a single organizational setting systematically controls for various noises arising from multiple settings approach which could confound the results and analysis thereof. Hence, we limit our focus on a single SIRC managing cash awqaf operations. 4.2 Assessing accountability using Stewart (1984) framework To assess whether accountability has been delivered by our selected cash awqaf institution, we adopt the established accountability framework developed by Stewart (1984). This framework is visualized in the form of a ladder covering both contractual and communal accountability reecting output quality at different levels (Hayes, 1996). The four levels are: (1) scal (probity and legality) accountability which is concerned with whether funds collected were spent as planned and/or for authorized purposes; (2) process accountability which is concerned with whether stipulated procedures have been properly followed; (3) programme accountability which is concerned with whether activities undertaken have achieved its intended results; and (4) policy accountability (accountability for priorities) which is concerned with whether the organizations are fullling user needs appropriately. According to Torres and Pina (2003), the quantitative nature of nancial reporting could be located on the rst ladder (scal accountability) as it provides relevant information reecting the entitys current nancial strength as well as future sustainability[16]. The other three accountability levels (process, programme and policy) could also be examined through nancial reporting activities which provide the necessary qualitative information disclosure. Therefore, both quantitative and qualitative dimensions of nancial reporting effectively facilitate the assessment of various accountability levels in awqaf institutions. We adopt Stewarts (1984) public accountability framework for at least two specic reasons. First, it accommodates our aims of analyzing mutawallis accountability by further cascading accountability into four different identiable dimensions (scal, process, programme and policy). Second, the identiable dimensions are also arguably supportive of our developed framework linking accounting, reporting and accountability (Figure 1) whereby it also reects mutawallis multiple accountability traits. We take cognizant of the fact that Stewarts (1984) framework falls short of directly locating mutawallis primary accountability. Nevertheless, we consider mutawallis observance of secondary accountability as tantamount to simultaneously observing

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his/her accountability towards Allah as Muslims are commanded to take care of both their relationship with other fellow humans as well as with Allah (Quran, 3:112). In this regards and in the specic context of awqaf arrangement, discharging accountability towards waqifs and beneciaries 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, Stewarts (1984) framework provides indirect assessment of mutawallis primary accountability. 5. Research ndings 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 States Awqaf Share Act (1998) (hereafter the Act) gazetted on 12 March 1998[17]. The cash awqaf which began its operation in 2000 effectively forms an integral part of the SIRCs 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 states Sultan is the SIRCs 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 Ofcer (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 nance the maintenance and development of awqaf properties managed by the SIRC (Section IV, Rule 9(1)[a]) and/or to nance 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 inow and outow 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/beneciaries 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 xed deposits or investment accounts (Mudharabah) while the remaining unutilized fund is held as bank deposits in local Islamic banks. 5.2 Accounting and reporting practices The nancial management, accounting and reporting practices of the SIRCs cash awqaf unit are guided by Section IV of the Act (Rules 13 [1-5]). It states that the SIRC must prepare and maintain complete and correct accounts of all awqaf monies collected.

2000 1. Cash awqaf collection (a) Public (b) State government (c) Private organization Total cash awqaf income 2. Cash Awqaf investment income Total cash awqaf income Accumulated cash awqaf income 3. Disbursements (a) Mosques/Surau (b) Health (c) Education (d) Others Total Surplus Accumulated surplus 4. Percentage of changes in (a) Cash awqaf collected (%) (b) Cash awqaf investment income (%) (c) Disbursements (%) 69,830 69,830 69,830 69,830

2001 73,712 100,000 113,000 286,712 4,279 290,991 360,821

2002 287,797 100,000 387,797 15,335 403,132 763,953

2003

2004

2005 134,669 134,669 21,608 156,277 1,277,058 21,000 3,000 24,000 132,277 978,601 34 26 253

110,882 100,171 100,000 210,882 100,171 22,811 22,964 233,693 123,135 997,646 1,120,781 39,500 4,000 8,000 51,500 71,635 846,324 2 53 0.7 2 49

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6,000 15,000 18,000 84,602 71,166 16,000 12,000 150 39 150 6,039 115,602 101,166 69,830 284,952 287,530 132,527 69,830 354,632 642,162 774,689 319 194 3,926 35 258 1,814 246 49 212

Source: SIRCs Annual Reports 2000-2005

Table II. Cash awqaf receipts, expenditures and disbursements

2000 1. Bank deposits 2. Mudharabah account (investment) (a) BIMB (b) Bank Rakyat 69,680

2001

2002

2003

2004

2005

Total 966,088

54,632 342,162

74,689 146,324 278,601

200,000 200,000 200,000 200,000 200,000 1,000,000 100,000 100,000 500,000 500,000 500,000 1,700,000 69,680 354,632 642,162 774,689 846,324 978,601 3,666,088

Source: SIRCs Annual Reports 2000-2005

Table III. Cash awqaf investments

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 funds balance sheet. The Act further requires the SIRC to have all the above nancial statements audited by the Federal Governments 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 certied practicing accountant) advises the SIRCs head on matters related to nancial management, accounting and reporting for both awqaf operations.

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Based on annual reports review and interviews with EO, several important features of accounting and reporting practices for cash awqaf transactions were observed. The SIRC prepares and maintains separate nancial statements for each type of awqaf, with accounting treatments on the transactions conforming to the relevant Malaysian nancial reporting standards issued by the Malaysian Accounting Standard Board (n.d.) for corporate (for-prot) organizations. However, the reporting formats are 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 internal control system. The EO explained:
We segregate critical accounting and reporting duties among our support staffs because we want to ensure strong internal control is in place. This is important as we are working in the non-computerized environment.

The cash awqaf nancial statements are noted to be very basic, reecting the non-voluminous nature of its transactions. It consists of the normal prot and loss account and a balance sheet, supplemented with additional notes for further explanations. These documents are prepared on a monthly and yearly basis with the yearly documents being audited by the Governments Auditor General Department and subsequently tabled at the annual SIRC general meeting for endorsement. The cash awqaf collection is labelled total cash awqaf income in the nancial statement and the sources of reduction in cash awqaf fund are in the form of disbursements consisting of four major types (Table I). Interestingly, the salaries of staffs handling cash awqaf administrative duties, other utilities and related overheads are not considered as expenses and hence not recorded as these are absorbed by the SIRC through fund provided by the government. Perhaps, the most notable feature of the SIRCs cash awqaf reporting is its lack of disclosure on important qualitative information. Specically, there was no further disclosure on details related to expenditures and disbursements items which various stakeholders particularly the waqifs (current and potential) would be interested to know. Periodical statements informing the ummah on the position and movement of cash awqaf fund are also unavailable for public scrutiny. 5.3 Extant of accountability 5.3.1 Input-output ratio or collection-disbursement ratio. Our rst indicator for measuring and locating mutawallis accountability in terms of efciency is represented by ratio of output to input, indirectly reecting cash awqaf fund retention ratio. The ratio effectively indicates the extent to which cash awqaf fund collected had been spent or disbursed according to what Shariah has prescribed and waqifs have agreed to. As mutawallis are entrusted to manage the cash awqaf fund, measuring how well the collected fund is being managed, specically in terms of its distribution and disbursement methods, helps in directly assessing mutawallis accountability. Table IV presents our analysis on the SIRCs efciency.

It can be seen that the output-input ratios uctuated considerably across the six-year period. The retention ratios are observed to be high during the rst two years (2000 and 2001), reecting the newly established status of the SIRCs cash awqaf unit. A reasonable period is required to identify target recipients and streamlining distribution mechanisms as the same recipients could also become asnafs under the zakah system. This is explained by the EO:
Our rst two years of operations involve streamlining the distribution channels and mechanisms as recipients could also benet from other charitable vehicles such as zakah. We want to fully optimize the usage of awqaf fund so that all sections of the ummah could get the benets.

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The disbursement ratios further indicate that distributions never exceeded half of the amount collected to ensure the sustainability of the cash awqaf fund. Moreover, the SIRC adopts an investment policy whereby all remaining cash awqaf fund is to be invested in Islamic investment accounts to generate reasonable returns to further maximize the fund. This effectively requires the SIRC to draw appropriate dividing lines between disbursing the amounts collected to meet the pressing economic, social and religious needs of the ummah and the equivalently important mission of ensuring sustainability with respect to cash awqaf system. The EO explained:
While we focus on optimizing the usage of awqaf fund in meeting the ummahs critical economic, social and religious needs, we also ensure that this sacred system could be sustainable and viable in the long run.

5.3.2 Return on investment. Our second measure of mutawallis accountability is the rate of returns on invested cash awqaf fund. This simple but widely used performance measure in investment performance studies provide indirect indications with regards to mutawallis accountability premising on the fact that the investment objectives of cash awqaf fund should be that of maximizing the managed fund and hence, the rate of returns on investments should also be their main consideration besides Shariah requirements. Table V presents the return on investments (ROI) over the ve-year period. Information on invested amount was derived from Table III and the investments
2000 Input Output Ratio (%) (output /input) 69,830 150 0.2 2001 290,991 6,039 2 2002 403,132 115,602 29 2003 233,693 101,166 43 2004 123,135 51,500 42 2005 156,277 24,000 15

Source: SIRCs Annual Reports 2000-2005

Table IV. Results on cash awqaf efciency analysis

2000 Investment returns Invested amount ROI (%)

2001 4,279 300,000 1.4

2002 15,335 300,000 5.1

2003 22,811 700,000 3.3

2004 22,964 700,000 3.3

2005 21,608 700,000 3.1

Source: SIRCs Annual Reports 2000-2005

Table V. Cash awqaf ROI

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undertaken by the SIRC are all within Shariah boundary as only Islamic deposits and investment accounts are selected for investments of the cash awqaf fund. It further reveals that the invested amount increased by more than 100 percent from 2003 onwards, indicating the strengthening of cash awqaf fund. Indirectly, this reects the increase in cash awqaf fund available for purposes of distributions as well as investments. The calculated ROIs are noted to be reasonable and stable across the six-year period. This may be attributed to the nature of Islamic investment accounts which are relatively safer with low risk attached and hence, gives relatively lower returns compared to other higher risk investment channels like equity markets. 5.4 Locating mutawallis accountability based on Stewarts accountability ladder Based on Stewarts (1984) ladder of accountability framework, we present in Table VI our assessments on the extent of mutawallis accountability based on the various dimensions specied by the framework. Arguably, all accountability dimensions have been achieved by the SIRCs cash awqaf unit based on the identied activities. Existence of the observable secondary accountability in different dimensions across the SIRCs cash awqaf operations indirectly suggests that primary accountability to Allah has been accordingly observed. 6. Discussions and suggestions Based on the ndings reported in the previous section, we highlight two specic issues warranting further discussions as we consider them as important in view of their close connection with the SIRCs accountability role as the mutawalli managing signicant cash fund. The inability on the part of the SIRC and other stakeholders (e.g. the nancial reporting regulatory authority) to address these issues, in our opinion, would expose this sacred Shariah based economic vehicle at the risk of being unsustainable in the long run. We further provide suggestions for future public policy formulation. 6.1 Issue I: accounting and reporting 6.1.1 Financial reporting framework, the nature of cash awqaf collections and expenses. As argued earlier in Section 3.2.1, applying corporate (for-prot) nancial reporting framework to charity entities is inappropriate and does not reect the reality of awqaf transactions. Our documentation review and in-depth interview exercises reveal that the SIRC currently applies the corporate (for-prot) nancial reporting framework to its awqaf operations with cash awqaf collected considered as income to the SIRC being the mutawalli (Section 5.2). Additionally, associated expenses are also not recognized and hence, reported. The question of whether a portion of cash awqaf fund could be used to absorb the associated administrative costs needs to be properly addressed from the Shariah perspective. The SIRC currently treats all related expenses associated with its cash awqaf as being subsidized items, thereby neglecting the matching concept in expenses recognition. It is recommended that if the practice of subsidized expenses is to remain, a separate note reecting the treatment of associated expenses at unit level (Cash awqaf unit) should be included with all relevant costs items being properly disclosed. This would better reect the real nancial position of its cash awqaf fund. Indeed, the absence of specic accounting and reporting standard for awqaf effectively leaves the SIRC to opt for accounting and reporting techniques inconsistent with

Ladder Accountability dimensions 1 Fiscal: ensuring cash awqaf collected was used (spent/ disbursed) as planned

Relevant activities identied The cash awqaf fund was used according to its planned objectives of: Disbursement. Distributed to areas permitted by Shariah and agreed by waqifs Investment. A portion of cash awqaf fund was invested in investment channels permitted by Shariah, aims at strengthening funds value Disbursement and investment. The cash awqaf operations have complied with: SIRCs internal operational disbursement proceduresa and Shariah requirements (in permissible areas); SIRCs internal investment procedures and Shariah requirements (on permissible channels) Accounting and reporting Compliance with the acts provisions with respect to accounting and reporting and preparing the necessary statements The achievement of both planned objectives: Awqaf operations. Relevant beneciaries have beneted from awqaf assistanceb Investment. The fund value has strengthened over the years with positive investment returns yearly (Table V) Fund usage. SIRCs policy on fund usage balances the ummahs needs (awqaf distribution) and the importance of strengthening cash awqaf fund (investment) for future survival and sustainability Disbursement. SIRCs disbursement policy prioritizes three critical sectors (education, health and maintenance of house of worships) of ummahs current needs Investment. SIRCs investment policy prioritizes investment channels providing minimum risk exposure to cash awqaf fund while generating modest returns

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Process: adherence to stipulated procedures

Programme: whether activities conducted have achieved the intended results

Policy/priorities: fullling user needs appropriately

Notes: aOur selected SIRC has established internal procedures for both disbursement and investment activities; bbeneciaries were contacted to survey their view as to whether the cash awqaf received had, at least lessen the nancial burdens they were facing; all respondents contacted agreed that the awqaf assistance provided great relief to their nancial burdens

Table VI. Locating mutawallis accountability based on Stewarts (1984) accountability ladder

its underlying altruistic reality. Hence, the nancial reporting regulatory authority, specically in Malaysia, needs to expedite the process of developing specic 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 fullled, there is high likelihood that it will continue to receive endowments. Informative (non) nancial disclosure of awqaf transactions effectively enhances waqifs (current and potential) condence 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

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respect to the production of annual audited nancial statements compromised the demand for timely reporting. The limited availability of annual audited nancial statements for public scrutiny further reinforce the exclusivity of such documents, rendering mutawallis accountability and performance difcult to be consistently monitored and assessed. This potentially weakens mutawallis motivation for demonstrating accountability through quality reporting. Besides the above regulatory issue, the observed quality with regards to non-nancial 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 ummahs understanding on awqaf practices and hence, their condence in such sacred, religiously rooted activities. 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,

No. 1 2 3 4 5 6 7 8

Items

The SOCAA for the year ended 2010 Managed by: SIRC of PQRS 2010 2009 Note RM RM RM RM XXX XXX XXX (XXX) (XXX) XXX XXX XXX XXX XXX XXX (XXX) (XXX) XXX XXX XXX

Table VII. The SOCAA template

Cash awqaf collected Investment income Total cash awqaf fund available Disbursements Expensesa Net movement in cash awqaf fund Total cash awqaf fund brought forward Total cash awqaf fund carried forward

Note: aAssuming expenses are NOT absorbed by the SIRC

The cash awqaf fund balance sheet as at 31 December 2010 Managed by: SIRC of PQRS 2010 2009 Items Note RM RM RM RM Fixed assets: tangible Current assets Cash at bank and in hand Investment deposits Total current assets Current liabilities Net current assets Net assets The cash awqaf funda Note: aAs per item no. 8 in Table VII XXX XXX XXX XXX (XXX) XXX XXX XXX XXX XXX XXX (XXX) XXX XXX XXX XXX

Table VIII. The cash awqaf fund balance sheet template

it conceptually emphasizes accountability rather than protability (Van-Staden and Heslop, 2009), consistent with the not-for-prot nature of awqaf institutions. 6.1.3 Computerized accounting and reporting system. While technological advancement in accounting and reporting provides a push factor for the systemization of accounting and reporting processes in many corporate and public organizations, the SIRC maintains the traditional manual approach of recording and reporting its cash awqaf transactions. This may be attributed to the non-voluminous nature of transactions involved. However, the systemization of accounting and reporting activities will benet the SIRC in terms of its internal control while improving efciency and effectiveness of all accounting and reporting activities (Borthick, 1996; Sutton, 2000). It also lessens the SIRCs reliance on human capital which could be better channelled to other critical areas such as promotional and educational activities. 6.2 Issue II: operational-disbursements issue The ndings on cash awqaf disbursements reported in Table I (item 3) indicate the concentration of distribution in three main sectors, namely health, education and the maintenance of mosques/surau. These sectors also received due attention through the Islamic instrument of zakah. Hence, instead of having both zakah and awqaf institutions concentrating on the same sectors, the SIRC should further streamline its choice of distributional sectors. Perhaps, it should focus its attention on areas which could stimulate ummahs economic activities. Prior awqaf practices in other Islamic countries (Section 2) include the channelling of cash awqaf fund into capital fund for business start-up nancing (Cizakca, 1995), thereby lessening the burden of borrowing costs imposed by the for-prot banking institutions (Islamic or otherwise). This could be an option to be considered as it has never been practiced in Malaysia. It effectively facilitates ummahs efforts to earn a living, and consequently, changing their economic status from being recipients of charity or zakah into donors or endowers. Verily, Allah prefers Muslims to give more instead of receiving more (Quran, 2:177). Alternatively, the pooled cash awqaf fund could also be used to build multi-purpose complex (one-stop-centre) including that for Islamic administrative activities, training, shelters for destitute and new converts, leisure, business centres as well as centres for religious activities (Husain, 2007)[21]. These allow for the efcient administration and streamlining of Islamic activities by having all related activities for the betterment of the ummah under one roof. 7. Summary and conclusion Religiously rooted charity and not-for-prot organizations provide a vantage point in studying the intermingling issues of accounting, reporting and accountability. Thus, awqaf institution as an Islamic charity entity presents a unique setting worthy of investigation. We studied one cash awqaf institution operating in Malaysia covering the areas of accounting, reporting and accountability over a period of six years. The practical imperative of our study lies on the fact that awqaf survives on ummahs philanthropic instincts, which is technically inuenced by their condence towards awqaf practices itself and the institutions managing the awqaf fund. Hence, we argue that the religious root of awqaf and the concern over its survival reinforce the practical imperative of accountability and reporting transparency by mutawalli.

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Since accountability involves processes of giving account to specic authorities for ones (in) actions or (mis) conducts (Roberts, 1991; Roberts and Scapens, 1985; Williams, 1987), we therefore considered the SIRCs accounting practices and its subsequent quality of reporting as the observable accountability devices reecting its accountability level. In general, our empirical results, based on triangulation research approach, suggest that accountability does exist in different dimensions (based on Stewarts (1984) accountability framework) across the SIRCs cash awqaf operations. However, we also identify several issues (Section 6) worthy of debate to which it presents potential rooms for further renement and improvement in the areas of management, accounting and reporting of cash awqaf. These we believe cannot be ignored, for they represent the risks of negotiating non-accountability, with serious repercussions in both the temporal world and the everlasting hereafter. We recognized that no study is without its limitations and we acknowledged that 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 mutawallis accountability. While we recognize that these render our results to be context specic 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 Quran (n.d.) as the word of Allah based on Gods proclamation in the Quran 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 denition, roles and the nature of mutawallis 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 specically on awqaf nancial reporting is the theoretical papers by Adnan et al. (2007) and Ihsan et al. (2006). 7. Based on denitions 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 nancial reporting, accountability and religion in their respective theological beliefs.

9. Worldly activities will become an act of worship in the presence of two elements: (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 Shariah, i.e. permissible by the religion. See Hadith on Actions are judged by intentions narrated by Imam Bukhari and Muslim (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 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 Quran 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 centred mainly on human to human relationship without spiritual attachment as in the case of Islam. 13. We thank the rst reviewer who pointed out that such accountability dimension is context dependent whereby the framework is only applicable to situation where mutawalli is a different natural entity from waqifs, which are common and legally acceptable practices in Malaysia. In the case where the mutawalli is also a waqif, then the mutawalli is directly accountable to beneciaries and Allah. 14. For example, the nancial reporting guideline Statement of Recommended Practices on charity in the UK and the relevant GAAP related to non-prot entities in the USA. 15. We have to observe the states anonymity despite earlier agreement to the contrary. Throughout the course of our negotiation, we consider this as an illustration of Abdul-Rahim and Goddards (1998) theorization that accounting and reporting in Malaysias SIRC is deeply intertwined with the element of power. In our case, our study on elements of accounting, reporting and accountability in these institutions are also intermingled with power and the struggle to maintain the reputation of those in power. 16. The relevant information includes sources of the entitys resources and channels to which it was used, as well as resources left for use in future period. 17. Act No. 208, (36/65): The Government Gazette, Islamic Administrative Enactment, Vol. 51 No. 6, pp. 30-44. 18. Section IV, Rule No. 10(1&4). 19. In the context of Stewarts (1984) Accountability Ladder, qualitative information conceptually provides indications with regards to process and program accountability as well as accountability for priorities (Leat, 1990). 20. Charities are in better position to provide quality qualitative reporting given the presence of established specic aims which allows for the establishment of clear dened objectives and the appropriate accountability measures (Gray, 1984). 21. One good example in this context could be found in Singapore, see Husain (2007). References Abdalati, H. (1998), Islam in Focus, Islamic Book Trust, Kuala Lumpur. Abdul-Rahim, A.R. (2003), Accounting regulatory issues on Islamic capital market instruments: the case of investments in Islamic bonds, International Journal of Islamic Financial Services, Vol. 4 No. 4, pp. 1-11.

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