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FINANCIAL AND OPERATIONAL MEASURES OF WAQF PERFORMANCE: THE CASE OF STATE ISLAMIC RELIGION
COUNCIL OF SINGAPORE AND MALAYSIA
Zurina Shafii1 Rochania Ayu Yunanda2
Faried Kurnia Rahman3 ABSTRACT
Knowing the factors which can improve performance is very crucial in every organization including Waqf institutions as charitable institutions. Waqf institutions have significant roles in a country to mobilize and distribute public funds. Examining its performance could be useful to assess Waqf’s perpetual existence. In the context of business organizations, financial ratios which rely on the bottom line can be the tools to examine the performance. Financial ratios somehow reflect the financial health and vulnerability of the organizations. Besides that, the organizations frequently compare actual performance with standards or expectations to enhance the organizations’ achievements. Several financial ratios might be applicable to evaluate non-profit organizations although those ratios do not seem sufficient. Financial ratios alone cannot serve as measures of success in non-profits organizations, these organizations have to be assessed in more complex ways, generally dealing with efficiency and effectiveness. Therefore, the purpose of this study is to examine the performance of Waqf institutions using financial and operational approaches. Using content and ratio analysis, this study examines five years (2008-2012) annual reports of Waqf institutions administered by Majlis Ugama Islam Singapura (State Islamic Religion Council or Singapore) and one Majlis Agama Islam Negeri in Malaysia (one State Islamic Religion Council in Malaysia). This study found in terms of Waqf collections, both institutions have growing amount of Waqf funds. This can be a hint of Waqf awareness among people. Both institutions are also able to generate income from their core activities. However, it can be highlighted from program expenses that both institutions might not have a number of projects and programs relating to the role as Mutawalli. Since financial ratios cannot be the utmost measures of success in Waqf institutions, these organizations have to develop the performance measures which can better evaluate efficiency and effectiveness.
Keywords: Financial Ratios, Operational Ratios, Effectiveness, Efficiency 1. INTRODUCTION
Waqf is one of Islamic economic instruments to promote the distribution of public wealth.
This perpetual voluntary charity concept is that the underlying asset should remain and the people can take the benefits of the asset. It promises a continuous reward in the eternal life for as long as the useful years of the underlying asset endure. As in the past, the Waqf sector has the potential to become part of a strong civil society which promotes socio-economic welfare and reduces inequality (Zuki, 2012). Unfortunately,Waqf has not been so popular
1 Faculty of Economics and Muamalat, University Sains Islam Malaysia, email: [email protected]
2 Tazkia University College of Islamic Economics, email: [email protected]
3 Tazkia University College of Islamic Economics, email:[email protected]
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recently. In some Muslim countries, Waqfproperties have been neglected.Therefore, it is not surprising if some of the Waqfassets are not recorded properly or some have even gone missing. In fact, Waqf assets are contributory in providing social and economic welfare as well as promoting religious charity.
Since the Waqf assets should be in existence in perpetuity, the assets must be managed and administered by the appropriate parties responsible to supervise Waqf property benefits so that the benefits can be distributed to the recipients (Mat Rani and Aziz, 2010). In Islam someone who is appointed to manage a Waqf property as a trustee is known as an “al- Mutawalli”. The major tasks of a trustee are to preserve and develop the properties that are donated, and collect Waqf income and distribute the income. Mutawalli should also preserve the properties from any loss and damage.
In recent years, Muslims’ wealth has grown rapidly and some portion of the wealth has been redirected for philanthropy purposes (Zakaria, Samad & Shafii, 2012). Measures to revitalize Waqfinstitutions has also emerged amongst Muslim countries in the last decades.In Southeast Asia, Singapore and Malaysiahave a surprisingly large number of Waqf properties. In Singapore, the Waqf assets are largely administered by MUIS(Majlis Ulama Islam Singapore). In Malaysia, there is an increase amount of Waqf land given by the Muslims from time to time. More than that, Singapore has introduced a more advanced and progressive approach through ‘sukuk’ structure namely Musyarakah bond. This encourages people to invest their assets and indirectly involve in the development of Waqf.
Managing public assets must be based on transparency and accountability. The financial reports of the Waqf institutionsshould be provided to meet the accountability and transparency demanded by the stakeholders. With regard to the above Waqf accountability, Ihsan (2007) explains that accountability to stakeholders could be discharged through Islamic accounting system. Mutawalli has to provide report to Waqif(donors), Waqf board, beneficiaries and community. However,Ihsan (2007) did not explain what kind information should be provided by Mutawalli besides to whom the priority should be given (Ihsan and Adnan, 2010).
Information provided by Mutawalli can be used to assess its performance. Examining the performance could be useful to assess Waqf’s perpetual existence. In the context of business organizations, financial ratios which rely on the bottom line can be the tools to examine the performance. Financial ratios somehow reflect the financial health and vulnerability of the organizations. In the context of non-profit organizations, the bottom line might be irrelevant.
Several financial ratios are applicable for non-profit organizations; however, these do not seem sufficient to the non-profit context. Other measurements are required to evaluate the Waqf institutions. Zuki (2012) suggested that there is scope for enhancing the management and business operation of Waqf institutions by adopting modern approaches that will equip the institutions to provide better and more efficient services to the community.
In non-profit environments, three key characteristics frequently play a dominant role in organizational performance namely organization's resource-acquisition ability, the attainability of the organization's goals, and organizational efficiency (Mensah et. al, 2008).
Non-profit organizations should be able to find proxies to measure efficiency. For example, Hughes (2013) suggested that a higher program expense ratio indicates higher cost efficiency.A higher ratio of program expenses to total expenses suggests non-profit
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organizations deliver their programs with fewer total expenses absorbed by management. In short, it is more cost efficient than those with a lower program expense ratio.
More specifically, our study attempts to investigate the performance of one Islamic State Religious Council (ISRC) in Malaysia benchmarked to ISRC of Singapore using financial and operational measures. The study contributes to existing literature relating to Waqf performance. Waqf’s perpetual existence relies on its financial health, determining its financial performance is important. Other than that, Waqf institution has a role to mobilize Waqf assets productively. Therefore, evaluating its operational activities may also significant.
It is to ensure that the institutions are performing their function.The rest of the paper is organised as follows. The next section provides the literature review discussing on the overview of Waqf practices in Singapore and Malaysia, Waqf financial and operational performances. Section 3 focuses on data collection and analysis. Section 4 concludes this study.
2. LITERATURE REVIEW
Even though there is not a single verse in the Qur‘an that deals specifically with Waqf, Islamic scholars and jurists (the four prominent schools of thought, Shafie, Hanbali, Maliki and Hanafi) agreed that a few of the following verses are to be referred to as the source of the subject matter (Hameed and Yacoob, 2005). In Surah Al Imran, verse 92, Allah (s.w.t.) says,
“By no means shall ye attain righteousness unless ye give (freely) of that which ye love; and whatever ye give, of a truth God know it well”. The verse states that Muslims will not be rewarded with goodness unless they are willing to give their best to others. The gift must be of value and which is dear to the giver.
a. Waqf practices in Malaysia and Singapore
In Malaysia, all Waqf assets are governed and administered by the Islamic State Religious Council or Majlis Agama Islam Negeri (MAIN) as the sole trustee of the Waqf property (Mat Rani and Aziz, 2010).MAIN issued enactments regarding administration aspect and simple procedures of Waqf donation; however, most state enactments do not discuss explicitly how to administer the Waqf property. As a sole trustee to all Waqf properties, MAIN has to ensure that the Waqf property is well administered and managed for welfare purposes. From the legal aspect, MAIN can buy, take, hold, and invest all Waqf properties registered under MAIN. This rule empowers MAIN to develop the Waqf property. Therefore, MAIN is responsible for all development activities, Waqf management and benefits distribution.
Every state has its own MAIN which may have different projects and policies. For example, Waqf Management of Selangor which is managed by MAIS has introduced a scheme called Selangor Share Scheme with the purpose to encourage the public to purchase the share units which are offered by MAIS. This scheme is established based on Section 17 Waqf Enactment (Selangor) 1999 with the main purpose of taking care of the importance andwelfare of the Muslims(Isa et.al (2011)). While, a new approach introduced by Majlis Agama Islam Kedah to encourage the public to do good deeds is through a project called “Waqf Jemba”. Majlis Agama Islam will purchase a property/land and then will divide it according to Jemba and later on, sold to the public. Whereas, in Penang Waqf management is managed throughDevelopment of Majoodsaw Waqf, Development of Khan Mohamad Waqf, and AlimsahWaley Waqf Mosque. WaqfManagement in Federal Territory, this unit’s role as sole trustee for all general Waqf in Federal Territory and is responsible to develop Waqf lands for
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the benefit of Muslims throughMosque, Education centres, Old folk’s &Orphanage, Shelter centres, A 34 storeys ‘A” class office building which will be rented out , Dialysis centres, Service apartments and Waqf Share Scheme (Isa et.al, 2011).
Waqf has grown rapidly in Singapore. With the establishment of The Administration of Muslim Law Act (AMLA) in 1968, and in accordance with Section 58 of AMLA, all Waqf created are vested in Majlis Ugama Islam Singapura (MUIS) or Islamic State Religious Council (Hasan, 2010). While all Waqf are vested in MUIS, there were many Waqf that were still managed by the private trustees. In order to resolve this problem AMLA was amended again in 1995 to include the registration of Waqf. Henceforth, all Waqf in Singapore are required to be registered in MUIS. The registrationof Waqf has enabled MUIS to have complete database of all Waqf properties, revenue, expenses and disbursement information.This information is important for the effective and efficient management of the Waqf. Being a sole trustee of Waqf properties, MUIS established its subsidiary namely WareesPlc in 2003, to manage, develop and monitor Waqf projects. Karim (2008) states that there were still a sizeable number of Waqf which are still undeveloped. Some of the properties are located in very prime location. Warees has successfully transformed a number of unproductive Waqf lands into huge commercial residential areas (www.warees.com). The effective and efficient management of Waqf assets and properties by MUIS has enabled Waqf revenue to increase exponentially. Due to the high potential of Waqf properties, a more advanced and progressive approach needs to be adopted through ‘sukuk’ structure.Warees has introduced cash Waqf scheme and modern financial mode of Sukuk Musharaka bond to fund Waqf development activities. Muslims in Singapore as well as abroad can directly involve in developing various Waqf assets by becoming the investor of modern sukukmusyarakah instrument. Presently, there are three types of Waqf administered in Singapore: the family Waqf, the charitable Waqf, and a combination of the family and charitable Waqf (Hasan, 2010).
b. Waqf Performance
The theoretical framework for Waqfaccounting has not been well-established. Previous studies (Ihsan (2007), Adnan and Ihsan (2010), Nahar and Yacoob (2011)) show that there was no specific guideline in maintaining Waqfreport, and there was no explainationof what kind information should be provided by Mutawalli (Ihsan and Adnan, 2010). Since there was no specifically standardized accounting measurement and report, Waqfinstitutions follow the general accounting standards which are not wholly appropriate. Furthermore, the reporting format using the “profit and loss account” is also unsuitablein the context of Waqf since they operate as not-for-profit institutions which could onlygenerate either “surplus” or “deficit”
instead of “profits” or “losses”.Hence, applying the economic model of accounting and reporting(which emphasizes on profit) to Waqf proves to be problematic (Nahar and Yacoob, 2011). It leads to measure the performance based on financial numbers which are insufficient for Waqf institutions.
Financial ratios are crucial to evaluate the financial condition of an organization, but those ratios might not be the utmost measures of success in non-profits, these organizations have to be assessed in more complex ways, generally dealing with the questions of both efficiency and effectiveness. Waqf institution cannot be evaluated based on financial figures only. For example, high current assets dominated by cash and cash equivalent could be a hint the institution might not mobilize its assets.
349 c. Financial and Operational Measures
In non-profit environments, three key characteristics frequently play a dominant role in organizational performance namely organization's resource-acquisition ability, the attainability of the organization's goals, and organizational efficiency (Mensah et. al, 2008).
Non-profit organizations should be able to find proxies to measure efficiency. For example, Hughes (2013) suggested that a higher program expense ratio indicates higher cost efficiency.A higher ratio of program expenses to total expenses suggests non-profit organizations deliver their programs with fewer total expenses absorbed by management. In short, it is more cost efficient than those with a lower program expense ratio.
There are a few perspectives to measure the performance of Waqf institution. Some researchers try to measure from good governance perspectives (Dewi et al). They proposed a measurement model for Waqf institution using several financial ratios as the indicators.
These financial indicators are used to measure organization efficiency and effectiveness (Atan et al, 2013).
Dewi et al. proposed a measurement model for Waqf institution using 6 ratios: Program efficiency ratio, operating expense efficiency ratio, margin of rental activities ratio, Return on investment, fundraising efficiency ratio, and distribution efficiency ratio. They argued that as non-profit organization and fully supported by the government, Waqf institution should focus more on its efficiency. Epstein & Buhovac (2009) proposed four categories of ratios which could represent the efficiency and sustainability of the Waqf institution through its programs.
The categories comprise administrative efficiency, program efficiency, fundraising efficiency and other financial performance measures.
Atan et al (2013) proposed performance efficiency ratio and operating efficiency ratio to measure the performance. Even though those ratios explore the institution efficiency; they argued that those two ratios are the suitable indicators to measure the consistency of the institution. Those ratios will give an overview for the stakeholders whether the institution disburses the funds in accordance with its mission. Other researchers argued that the institution should choose ratios to measure the performance based on certain questions (Abraham, 2006). First, do the non-profit organizations have adequate money to support its mission? Second, what sources of funding are available to support the NPO’s mission? From these questions, he proposed nine ratios namely return on assets ratio, viability ratio, primary reserve ratio, net income ratio, operating income ratio, contributed income ratio, debt burden ratio, debt coverage ratio and leverage ratio.These nine ratios will examine the institution from many perspectives, but still there are some challenges. The main challenge is how the researcher put the correct perspective to analyze the ratios. The way to find it by examining some qualitative factors influencing the institution (Abraham, 2006).
Rashid (2011) suggested that the Waqf officer should make very detailed enquiries about Waqf properties. This can help Waqf institution to assess its performance. Details may differ from country to country, but broadly the scope of the enquiries to be made by Waqf officer should consist of investigations into:
a. the income and expenditure, verified by spot visits;
b. illegal occupation of a Waqf property, verified by local witnesses, spot inspection, etc.;
c. the gross income as compared with net income;
350 d. payment of taxes, land revenue, levies, etc;
e. expenditure on litigation and who was defendant, Mutawalli personally or the Waqf;
f. the object of Waqf and extent of its fulfilment;
g. matters considered relevant by the Waqf officer.
3. DATA AND METHODOLOGY
This study is conducted using descriptive quantitative methods. It is mainly based on numerical data from annual reports. For data, annual reports of two Islamic State Religious Councils (MAIN and MUIS), 5 year observations (2008 to 2012) were examined. In addition, secondary data sources and document analysis through audited annual reports published in official website of each ISRC were also sourced. The latest five year annual reports were examined to know the current performance of Waqf in the two institutions. The data will be analysed using ratio and content analysis.
The data will be tabulated based on several ratios adopted. The data will be analysed using financial and operational measured modified from several past studies. The ratios used are as follows:
Table 1: Measures of performance Category Ratio Performance
measures
Formula
Financial performance
Net Income Ratio Whether operating
activities resulted in a surplus or deficit
Change in net assets Total income
Operating Income Ratio
Extent to which income generated from core
activities
Core Income Expenses
Income growth Extent to which the organization is able to generate income from its activities
Inc year n – Inc year (n-1) Inc year (n-1)
Operational Performance
Administrative efficiency
Percentage of the expenses spent on administrative expenses
Administrative expenses Total expenses
Program efficiency Percentage of the expenses spent on core activities
Program expenses Total expenses
351 Growth of
program
The increase of core activities
Prog Ex. year n – Prog. ex. year (n-1)
Prog. Ex year (n-1) Fundraising
efficiency
Extent to which the organization is able to generate surplus from the donation
Surplus Total donation
Cash availability Percentage of cash and bank balances
Cash and bank balances Total assets
Modified from Hughes (2013), Atanet al (2013), Dewi et al., Rashid (2011), Epstein &Buhovac, (2009), Abraham (2006).
4. ANALYSIS AND DISCUSSION
To examine the financial and operational performance of Waqf institution, specific accounts were tabulated in the following tables.
4.1 Analysis of MUIS
Table 2: Specific Accounts of MUIS Waqf Report (reported in SGD)
Specific accounts 2012 2011 2010 2009 2008
Waqf income 13,913,586 13,879,546 12,687,004 14,339,371 14,282,745
Program expense 427,819 597,361 8,904,189 2,528,262 51,173,204
Administrative expense 4,369,400 4,523,021 3,815,347 3,453,408 4,224,783
Total expense 4,797,219 5,120,382 12,719,536 5,981,670 55,397,987
Waqf funds 499,234,893 451,856,939 438,912,859 391,194,700 344,556,970 Waqf assets (other than cash) 29,889,024 24,355,101 22,254,941 14,406,291 14,650,506 Waqf asseta (cash and bank balances) 62,099,328 59,596,023 59,776,450 61,028,987 54,268,988 Investment of waqf 472,477,038 431,182,302 419,544,174 349,593,018 308,429,091 Surplus generated from waqf assets 31,469,052 11,681,778 17,824,251 43,909,664 (53,599,720)
From the Table 2, we can see that Waqf core income of MUIS fluctuated. It decreased in 2012 but gradually increased in the last two years. Program expenses are the expenses disbursed to run the core programs. The high cost of program in 2008 might be due to high investment cost in that year. It varied in the observed years but the expense tended to decrease. It indicated that the institution might not conduct several programs because it mainly involved in investment projects. It can be seen from the investment rate which increased 11.43% a year in average. Administrative expenses were a bit fluctuating but relatively stable. The Waqf collection rate has increased 9.8% per year. It indicates that the institution is able to attract people to contribute more on Waqf.
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Table 3: Financial and Operational Ratios of MUIS
RATIO 2012 2011 2010 2009
NI 1.506 1.108 2.677 1.062 OI 2.900 2.711 0.997 2.397 IG 0.002 0.094 (0.115) 0.004 AE 0.911 0.883 0.300 0.577 PE 0.089 0.117 0.700 0.423 GP (0.284) (0.933) 2.522 (0.951) FE 0.063 0.026 0.041 0.112 CA 0.060 0.054 0.051 0.037
Notes:
NI : Net Income Ratio OI : Operating Income Ratio IG : Income Growth
AE : Administrative Efficiency PE : Program Efficiency GP : Growth of Program FE : Fundraising Efficiency CA : Cash Availability
This study analyses eight ratios categorized as financial and operational performance. NI, OI and IG can be the proxies to measure financial performance. AE, PE, GP, FE and CA are the proxies to measure operational performance. NI indicates whether operating activities resulted in a surplus or deficit. OI reveals the extent to which income generated from core activities. IG points out the extent to which the organization is able to generate income from its activities from time to time. The higher NI, OI and IG indicate that the institution performs better in managing the assets to generate income. AE indicate how much the costs spent on administrative expenses. High AE ratio means that the expenses are spent a lot for administrative rather than program. PE shows the percentage of the expenses spent on core activities while GP shows the increase of core activities. High PE ratio shows that the most expenses are disbursed to run the programs. FE indicates the extent to which the organization is able to generate surplus from the donation.The higher the ratio the better the performance.
Last but not least, CA indicates the amount of idle cash and bank balances. The higher the cash availability indicates that the institution keeps high amount of idle cash.
In terms of financial performance, NI, OI and IG ratios fluctuated from time to time and could be considered as high. NI ratio has the average of 1.59 which means that the percentage of change in net assets is 159% of the generated income. The average of OI is 2.25 indicating that the institution is able to generate income from its core activities 225% from the total expenses.
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Figure 1: Waqf Income and Net Surplus of MUIS (expressed in Singaporean Dollars)
The above figure shows the comparison between Waqf income and net surplus generated from Waqf assets. During a five-year observation, the Waqf income from core activities was relatively stable while the surplus is quite fluctuating. Steady income indicates that the institution is able to maintain its income from the core activities. The surplus varied over five years because surplus (deficit) generated from Waqf income and impairment gain or loss in available-for-sale financial assets (MUIS annual reports, 2008-2012).
Figure 2: Administrative Expense and Program Expense of MUIS (expressed in Singaporean Dollars)
Administrative expenses were considerably steady while program expenses were quite shifting. The administrative line shows that administrative expenses did not absorb the expenses that much. The fluctuating program did not really change the administrative expenses. It is a good sign for the administrative efficiency.
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Figure 3: Waqf Funds and Waqf assets (Cash and Bank Balances)
Figure 3 shows the comparison of the amount of Waqf funds and Waqf assets in cash and bank balances. The low level of cash maintained by the institution indicates that MUIS does not keep the Waqf funds in cash. It invested the Waqf funds to generate more income. The amount of Waqf funds keeps increasing while the availability of cash remains steady. This practice is in line with investment management, i.e. in order generate income, most of the capital need investment rather than kept in cash form.
4.2 Analysis of MAIN
Table 4: Specific Accounts of MAIN Waqf Report (expressed in Malaysian Ringgits)
Specific accounts 2008 2009 2010 2011 2012
Waqf income 155,619 1,107,479 1,581,562 1,386,700 2,047,913
Program expense 0 0 0 0 495,513
Administrative expense 5,045 0 1,623 17,761 191,800
Total expense 5,045 0 1,623 17,761 687,313
Waqf funds 150,574 1,258,053 2,837,992 4,206,931 5,567,531
Waqf assets (other than cash) 0 0 0 0 0
Waqf asseta (cash and bank balances) 0 0 0 0 0
Investment of waqf 0 0 0 0 0
Surplus generated from waqf assets 150,574 1,107,479 1,579,939 1,368,939 1,360,600
According to the data from MAIN financial reports, MAIN’s income increased significantly in 2009. It continued increasing in 2010, but decreased slightly in 2011. The core income increased 48% in 2012. The data shows that MAIN did not disburse any program expense in 2008 to 2011. Administrative expenses were also quite low; in 2008 MAIN did not incurred the administrative expenses in. This was because Waqf administrative expenses like salaries were not paid by Waqf unit but subsidized by MAIN. MAIN performed very well in collecting Waqf funds. It increased severely every year. It multiplied almost 37 times in five years. However, information on Waqf assets and the amount of investment are reported in the financial reports.
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Figure 4: Waqf Income and Net Surplus of MAIN (expressed in Malaysian Ringgit)
In 2008 to 2011, Waqf core income and the surplus were slightly different. It indicated that the surplus was mainly generated from the core income alone. In 2012, surplus decreased as compared to Waqf income which increased significantly. It can be concluded that during the year 2012, Waqf unit of MAIN incurred loss from non-operating activities.
Table 5: Financial and Operational Ratios of MAIN
RATIO 2012 2011 2010 2009
NI 1.000 1.000 1.000 7.355 OI 2.980 78.076 974.468 N/A IG 0.477 (0.123) 0.428 6.117 AE 0.279 1.000 1.000 N/A
PE 0.721 N/A N/A N/A
GP N/A N/A N/A N/A
FE 0.244 0.325 0.557 0.880
CA N/A N/A N/A N/A
Notes:
NI : Net Income Ratio OI : Operating Income Ratio IG : Income Growth
AE : Administrative Efficiency PE : Program Efficiency GP : Growth of Program FE : Fundraising Efficiency CA : Cash Availability
NI and OI show relatively high percentage which mean that Waqf unit of MAIN was able to generate surplus. Looking at OI ratio, the high percentage shows the high percentage of income to the total expense. The high percentage of OI was because the expenses rate was very low. It was because MAIN subsidized the expenses of Waqf unit.
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From the financial reports of MAIN, it can be highlighted that Waqf unit of MAIN has been improving. It is proven by the multiplied amount of Waqf funds in five years. However, there are still rooms for improvements in term of management, Waqf programs, and reporting. In term of reporting, the information reported is limited and the continuity of annual reports is also problematic. Masruki and Shafii (2013) also found that recording and reporting for Waqf in Malaysia has been inconsistent. MAIN issued annual reports in 2008 and 2009 but it did not provide the similar reports in the following years. It published audited financial statements only with very limited information. As part of good governance and best practices of Waqf institutions, reporting is believed to be able to improve the accountability and transparency of the Mutawalli. Sacred accountability is evidently examinable from the vantage point of Islamicorganizations like Waqf. Its unique attributes and socio-economic implications deservedue attention; especially the strategic role of accounting and reporting as accountabilitytools to enhance ummah’s confidence in current Waqf practices (Nahar and Yacoob, 2011).
5. CONCLUSION AND RECOMMENDATION
The purpose of this study is to examine the performance of Waqf institutions using financial and operational ratios. Using content and ratio analysis, this study examines five years (2008- 2012) annual reports of Waqf institutions administered by Majlis Ugama Islam Singapura (State Islamic Religion Council or Singapore) and one Majlis Agama Islam Negeri in Malaysia (one State Islamic Religion Council in Malaysia). In terms of Waqf collections, both institutions have increasing amount of Waqf funds. This can be a hint of Waqf awareness among people. Both institutions are also able to generate income from their core activities.
However, it can be highlighted from program expenses that both institutions might not have a number of projects and programs relating to the role as Mutawalli.
Managing public assets must be based on transparency and accountability. The financial reports of the Waqf institutionsshould be provided to meet the accountability and transparency demanded by the stakeholders. Therefore, the performance audit process is also very necessary for Waqf institution which has a different nature from other non-profit organizations.
The study did not include the analysis of all Waqf institutions in Malaysia. MUIS is the only body governing Waqf in Singapore while MAIN represents Waqf practices in one state in Malaysia only. In terms of assets and management, both institutions are not comparable.
However, this study focuses on exploring two different institutions, not comparing them. In addition, using the financial ratios to measure performance could be another limitation. On one hand, ratios can provide meaningful comparisons of similar institutions. On the other hand, they possess several weaknesses. Some ratios by themselves are not highly meaningful.
For example, the high level of Operating Income ratio which can be a good indicator of financial performance but on the other hand it is not a good indicator in terms of Program Efficiency in which the high rate of OI is because of the low level of program expenses.
Since financial ratios cannot be the utmost measures of success in Waqf institutions, these organizations have to develop the performance measures which can better measure efficiency and effectiveness.
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