Financial Performance and Sustainability in Malaysian Waqf Private Entity and Corporations
Mustafa Mohd Hanefah*1, Muhammad Iqmal Hisham Kamaruddin2, Rosnia Masruki3, Fuadah Johari4, Aimi Fadzirul Kamarubahrin5
1,2,3,4,5Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Bandar Baru Nilai, 71800 Nilai, Negeri Sembilan, Malaysia
Abstract
This paper aims to examine the financial performance and sustainability in Malaysian waqf private entity and corporations. Examining its performance and sustainability may be useful for determining perpetual life of waqf. Besides that, a waqf private entity and corporations frequently compare actual performance with standards or expectations to enhance the organizations’ achievements. Thus, by using ratio analysis, this study examines five years (2014- 2018) annual reports of waqf private entity administered by Pusat Wakaf Majlis Agama Islam Wilayah Persekutuan Sdn. Bhd (PWMSB) and two waqf corporations Pusat Wakaf Selangor (PWS) and Wakaf An-Nur Corporation (WANCorp). The outcomes show that only one waqf corporation was economically feasible and perform acording to seven item. The discoveries give helpful experiences into the economically feasible and performance of waqf private entity and corporations feature the requirement for policy makers all over the Muslim countries generally and specifically for Malaysia to focus on the all encompassing responsibility of waqf foundations to guarantee waqf's efficient recovery. It is trusted that the outcomes and the suggestions of the examination would empower the money related announcing and responsibility of such foundations at a more significant level.
Keywords: Financial; Performance; Sustainability; Waqf; Private Entity; Corporations.
1. Introduction
In general, all waqf institutions in Malaysia are governed by SIRCs. However, for efficiency and effectiveness of waqf institutions some of the SIRCs have split the waqf institution as independent body such as Pusat Wakaf Majlis Agama Islam Wilayah Persekutuan Sdn. Bhd (PWMSB) was identified as private entity owned by Majlis Agama Islam Wilayah Persekutuan.
Meanwhile, Perbadanan Wakaf Selangor (PWS) and Wakaf An-Nur Corportation (WANCorp) is identified as a company limited by guarantee. The separation of waqf institution from State Islamic Religious Councils (SIRCs) is to ensure their performance and accountability.
It is crucial for waqf institutions to identify factors that can improve their performance and sustainability. In addition, as a public entity, it is important for waqf institutions to manage its waqf assets and funds based on transparency and accountability principles. Past studies show that waqf's history has been rough (Osman, 2010; Bremer, 2004; Cizakca, 1998).
There are many waqf properties that have been and still are at the hands of misconduct, mismanagement, corruption, neglect and misuse (Hassan & Shahid, 2010; Bremer, 2004;
Hoexter, 1998; Ariff, 1991). Moreover, numbers of cases on Islamic religious foundations in Malaysia were disclosed in the media that give a big question especially on the accountability of waqf institutions (Kamaruddin, 2018). In 2015, 39 reports for mismanagement of public funds during flood tragedy received by Malaysia Anti-Corruption Commission (MACC) (Bernama, 2015). The consequences of such investigations featured the poor structure, botch, debasement, misuse, disregard and other regulatory slips of waqf which, if not appropriately tended to, will impede the restoration of waqf (Mahamood, 2006; Abdul Rahman et al., 1999).
Therefore, these facts and issues were motivated for this study to examine financial performance and sustainability of waqf private entity and corporations in Malaysia. These two important indicators are essential to be investigated in ensuring the going concern of the operation for these waqf private entity and corporations. Most pertinently, waqf perpetual existence is rely on its financial strength, identifying waqf institutions financial health becoming a crucial task. Therefore, this study contributes to the existing literatures where financial performance and sustainability model applied in this study can also be adopted to determine the financial health for other waqf institutions. Therefore, the rest of the paper is organized as follows. The next section provides the literature review followed by section three which is on the quantitative information of Malaysian waqf private entity and corporations. Next, section four discussed the results of financial performance and sustainability analysis and ended with the conclusion of the study.
2. Literature Review
In order to measure the performance and sustainability of waqf institutions, it can be done from several perspectives. Some researchers were attempting to measure the performance and sustainability of waqf institutions from governance (Yasmin & Haniffa, 2017; Shafii et al., 2014), accountability (Kamarubahrin et al., 2019; Yunanda et al., 2016) and disclosure (Sulaiman & Zakari, 2019; Kamaruddin et al., 2018) perspectives. In this case, several financial ratios were proposed as the indicators to measure such performance and sustainability levels. In addition, these financial indicators were also used to determine the organizational efficiency and effectiveness (Atan et al., 2013). Apart from financial indicators, non-financial indicators also were proposed to measure the effectiveness and efficiency of waqf institutions, (Arshad & Mohd Zain, 2017; Shafii et al., 2014). For instance, Hughes (2013) suggested that high program expense ratio indicates high level in cost efficiency. A higher ratio of program expenses to total expenses suggested that waqf institutions are delivering their programs with a lower total expense absorbed by management. Meanwhile, waqf institutions with a lower program expense ratio are most likely to have lower cost efficiency level.
Besides, Beamon and Balcik (2008) suggested that the effectiveness of waqf institutions were measured by to what extends that each waqf institutions’ objectives and goals are achieved.
Meanwhile, the efficiency of waqf institutions were measured by on how economically all resources were utilised in providing social and economic contributions. The result of inputs and outputs are referred as the efficiency of waqf institution, while the result in evaluating throughputs, outcomes and impacts are referred as the effectiveness of waqf institution (Medina- Borja & Triantis, 2007). In addition, Hossein (2011) examined the financial and operational proficiency of government and private controlled waqf in Iran by utilizing two proportions: (i) the proportion of dispensing to continues; and (ii) the proportion of the rest of the parity for the year to add up to profit. The previous estimates the degree of accomplishment to which the foundation is satisfying its destinations while the last estimates how much the establishment can boost the age and assortment of waqf salary while limiting uncollectable income. Based on these indicators, this study revealed that private waqf institutions were performed better as compared to government waqf institutions.
In addition, a study by Sulaiman et al. (2009) measured the efficiency of public university waqf fund by focusing on three ratios: by concentrating on three ratios: (i) investment income to average investment ratio; (ii) total fundraising expenses to total funds raised ratio; and (iii) programme expenses to total expenses ratio. Moreover, few studies proposed financial indicators as a tool to measure waqf institutions efficiency and effectiveness. There are four categories of ratios in the efficiency and sustainability of the waqf institution through its programs which are:
(i) program efficiency; (ii) other financial performance measures; (iii) administrative efficiency;
and (iii) fundraising efficiency (Epstein & Buhovac, 2009). Besides, there are also other several ratios that can be used to measure the efficiency and sustainability of waqf institutions such as (i) return on investment; (ii) distribution efficiency ratio; (iii) margin of rental activities ratio; and (iv) operating expense efficiency ratio. As non-profit organization and supported by the
government, waqf institutions should analyse its efficiency through these ratios (Dewi et al., 2007; Shafii et al., 2014).
Those ratios analyses will be able to inform the stakeholders whether waqf institutions are disburse waqf funds in accordance to its mission or vice versa. Even though those ratios were proposed to measure waqf institution efficiency; some scholars argued whether those two ratios are suitable to measure the consistency of waqf institutions. Abraham (2006) has proposed nine ratios namely: (i) primary reserve ratio; (ii) operating income ratio; (iii) viability ratio; (iv) contributed income ratio; (v) leverage ratio; (vi) return on assets ratio; (vii) leverage ratio; (viii) net income ratio; (ix) debt burden ratio; and (x) debt coverage ratio. These nine ratios are functioned to measure waqf institutions from various perspectives, but still there are some challenges. The main challenge in adopting these ratios is on how to choose the correct information in the annual report in order to identify the right ratios to be used. Basically, in order to find the right data is by examining qualitative factors that are influencing waqf institutions. In this case, Kamaruddin (2018) and Arshad and Mohd Zain (2017) were proposed a number of financial performance indicators as part of the waqf reporting best practices. This includes such as (i) income growth; (ii) fundraising efficiency; (iii) operating margin; (iv) cash availability; (v) operating income; (vi) objective achieved index; (vii) return of investment; (viii) equity balances;
(ix) revenue concentration; (x) administrative efficiency; (xi) expected income achieved index;
and (xii) program efficiency. By disclosing these ratios analyses, it will indirectly indicate performance and sustainability practices by waqf institutions.
Obviously, a lot of intrigue has been appeared by analysts on waqf. Nonetheless, there is restricted experimental investigation inspecting both financial effectiveness and efficiency especially for waqf private entity and corporations in Malaysia. In fact, there are only few studies that examine the financial vulnerability and sustainability of the waqf private and corporations.
For instance, there is a study conducted by Sulaiman et al. (2009) on waqf sustainability, however this study only aim attention to waqf private entity. Moreover, this research also only measured the efficiency of waqf institution. Accordingly, this research tries to extend through financial effectiveness and efficiency for both types of waqf private and corporations through measuring their financial sustainability and vulnerability.
3. Methodology/Materials
This study was conducted using descriptive quantitative method. It is mainly based on numerical data from the annual reports. For data collection process, a 5 years annual reports (2014 to 2018) of one waqf private entity (PWMSB) and two waqf corporations (PWS and WANCorp) in Malaysia were analysed. In addition, other secondary data sources in the audited annual reports published in the official website of the SIRCs (MAIWP and MAIS) and waqf corporation (WANCorp) were also referred. Ratio analysis was conducted based on financial information available in the annual reports in order to identify the performance and sustainability of these three selected waqf institutions
There are several ratios used in order to examine the financial performance and sustainability of waqf institutions based on several past studies (Sulaiman & Zakari, 2019; Shafii et al., 2014), which includes:
Table 1: Financial Performance and Sustainability Measures for Waqf Institutions 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)
Financial Sustainability
Equity Balances Indicate financial sustainability if the ratio is high.
Accumulated Funds Total revenue Administrative
Cost Ratio
Determine the ability of the organization to control expenditure and impact of the control on service delivery.
Administrative costs Total expenses
Revenue Concentration Index
Indicate that organization has equal revenue from diverse sources if each ratio is close to zero. Revenue that has ratio close to one show that it is dependent on one single source of income which is not healthy to the organization.
Rental + Investment + Current Accounts + Others
Operating Margin Ratio
Indicate the organization is financially stable if the ratio is high.
Surplus Total revenue
According to Froelich et al. (2000), audited financial report is viewed as a significant source of financial data since it is the archive used to scatter data about the financial standing and different issues identifying with the association. Moreover, audited financia report implies that the report has been checked past numbers given by the association and the reviewer has inspected extra documentation before coming to an end result. Along these lines, the yearly reports of waqf private entity and corporations utilized in this study are considered reliable. At first, the goal was to inspect all the 14 waqf institutions in Malaysia. Nonetheless, as clarified in the early section, we just figured out one (1) waqf private entity and two (2) waqf corporations in Malaysia.
This due to limited of availability on the annual report gathers from SIRCs and waqf institution in Malaysia. Thus, selection of waqf private entity and corporation is due to availability of the annual report which can be buy online at Company of Registrar Malaysia website. In addition, selection of waqf private entity and corporations in this study is due to efficiency on the management and operational part compared to waqf department of SIRCs.
Accordingly, this study focused on the annual reports of the year 2014 to 2018 which is the most recent available to the authors. The annual reports of waqf private entity and corporations were obtained.
4. Results and Findings
Seven ratios were used to determine the financial performance and sustainability of selected waqf institutions in Malaysia, namely: (i) net income ratio; (ii) operating income ratio (OIR); (iii) income growth; (iv) equity balances; (v) revenue concentration; (vi) administrative costs; and (vii) operating margin. According to the model of Tuckman and Chang (1991) and Shafii et al.
(2014), waqf private entity and corporations may be financially perform and sustain when the results of net income ratio, operating income ratio and income growth is high. In contrary, equity balances, revenue concentration ratio, administrative costs ratio and operating margin financially perform and sustain when the results of ratios are low. These ratios are divided into two categories which are financial performance ratios and sustainability ratios.
4.1. Financial Performance Analysis
The viability of waqf organizations relies upon the related manageability Helmig et al. (2014) and financial condition and vulnerabilities (Keating et al., 2005). The waqf organizations can upgrade their adequacy in the event that they have adequate reserve and solid financial related help from the benefactors. According to Cohen et al. (2008), things to be determined sheet and benefit and misfortune account are ordinarily utilized in ascertaining the ratios. In the study of
Kamaruddin (2018), the best of using the ratios it is more comparable to waqf private entity and corporations of similar activities, scalable, and collectable. Financial ratios were used in order to evaluate the financial health of an organization. However, those ratios might not be the utmost suitable measures in non-profits, especially to evaluate both efficiency and effectiveness.
According to Abraham (2006), to help the non-profit organization, waqf private company and companies should select ratios to calculate the success based on funding sources available, and they should have sufficient money to achieve their goals. This study thus adopted three ratios as measures of financial efficiency, which are: I net income ratio; (ii) operating income ratio; and (iii) income growth.
4.1.1. Net Income Ratio: The net profit ratio was used to determine whether the financial expenditures resulted in a surplus or a deficit. The higher net income ratio shows that the waqf organization is doing well to handle waqf assets to generate profits. In terms of financial performance, net income ratio of PWS fluctuated yearly (2014 to 2018) and could be considered as low. Net income ratio of PWS has the average of 0.59 which means that the percentage of change in net assets is 59% of the generated income. Meanwhile, net income ratio of WANCorp has the average 5.63 which means that the percentage of change in net assets is 563% of the generated income. Moreover, net income ratio of PWMSB has the average 4,215.43 which means that the percentage of change in net assets is 421,543% of the generated income. Based on findings of WANCorp and PWMBS shows huge ratio, this due to low performance of income such as low waqf collection and at the same time has huge assets during the years. Moreover, as we can see waqf assets of WANCorp is too big compared to its income and similar goes to PWMSB. Finding on net income ratio analysis is shown in Table 2.
Table 2: Net Income Ratio
Waqf Entity & Corporation 2018 2017 2016 2015 2014
PWMSB 29.99 37.70 723.33 1.79 20,834.33
PWS 0.79 1.01 1.15 0.00 -0.01
WANCorp 0.36 0.34 26.79 1.31 -0.65
4.1.2. Operating Income Ratio: The operating income ratio shows to what degree income has been generated from core activities. The higher operating income ratio indicates that waqf institution performs better in managing the assets to generate income. The operating income ratio for PWS is an average of 4.92 which means that the organization is capable of producing income from its core operations 492 percent from the total expenses as shown in Table 3. In comparison, PWMSB has an average of 0.16 indicating that the institution can generate revenue from its core activities just 16 percent of total expenses and finally WANCorp has an average of 3.65 indicating that the institution can generate revenue from its core activities 365.2 percent of total expenses. According to Shafii et al. (2014), the high operating income ratio, which can be a good indicator of financial success but, on the other hand, is not a good indicator of program output in which the high operating income ratio is attributed to the low program expense.
Table 3: Operating Income Ratio
Waqf Entity & Corporation 2018 2017 2016 2015 2014
PWMSB 0.05 0.02 0.00 0.73 0.00
PWS 4.88 1.77 4.63 1.66 11.64
WANCorp 1.21 1.74 1.48 9.60 4.23
4.1.3. Income Growth: Income growth points out the extent to which the organization is able to generate income from its activities from time to time. The higher income growth indicates that waqf institution performs better in managing the assets to generate income.
For the purpose of income growth, information needed to calculate income growth (income
of current year - income of previous year/income of previous year) that is available for waqf private entity and corporations used in this study. The average income growth for PWS is 0.12 indicating that the institution is only able to generate income from its core activities 12% yearly. Meanwhile, PWMSB average is 0.33 which indicating that the institution is able to generate income yearly from its core activities 33%. The average for WANCorp is 0.50 indicating that the institution is able to generate income from its core activities yearly 50% during the period. Thus, PWS is able to generate income from its activities from time to time. Furthermore, effective and efficient management of PWS is better in managing the assets to generate income from the activities.
Table 4: Income Growth
Waqf Entity & Corporation 2018 2017 2016 2015 2014
PWMSB 0.35 5.17 -0.99 11197.63 n/a
PWS 0.23 0.02 0.16 -0.13 0.33
WANCorp 0.57 0.53 -0.74 1.83 0.29
4.2. Financial Sustainability Analysis
This research applied the model of Tuckman and Chang (1991) to look at the financial health of waqf institutions. In order to assess the financial viability of selected waqf institutions, several ratios analyze such as equity balance, income concentration ratio, administrative cost ratio and operating margin ratio were employed.
4.2.1 Equity Balances: This relative measure indicates the potential that a private waqf company and companies need to temporarily supplant lost revenue or spread its equity shortage. Equity included in this study net assets or the waqf funds raised from the waqf private entity and corporations. According to Trussel and Greenlee (2004), a good indicator of financial stability is equity sufficiency. Equity balance is shown up at by partitioning the value with all out income.
They did not suggest recommend any standard benchmark for these ratios. In any case, they verifiably expected that waqf private entity and corporations with a bigger total assets comparative with income have a more noteworthy capacity to supplant lost income than those with a littler or negative total asset. Subsequently, by and large, a waqf private entity and corporations is monetarily maintainable when the proportion of value to income is high. The table beneath gives the consequences of the value to income ratio.
Table 5: Equity Balances
Waqf Entity & Corporation 2018 2017 2016 2015 2014
PWMSB 27.31 33.85 722.87 1.52 20,834.33
PWS 7.80 7.33 5.90 8.19 6.02
WANCorp 0.69 2.28 20.13 56.36 4.23
As shown in Table 5 above, PWS had their average equity balances less than 5 times than their respective revenues, thus indicating their vulnerability. PWMSB seems to be the most financially viable with its equity being more than 1000 times its sales. The low revenue from a single source of income may explain why it recorded the highest ratio. It relies on land, homes, and shop rentals. The equity base consists primarily of real property (land, homes, and shop lots) transferred from either cash or share endowments. The properties are used to raise money for charitable activities. The valuation of these properties may have led to the greater size of their total assets over time. The findings indicate that a WANCorp average equity balance is about 16.74 where it can be considered as sustainable. However, the trend shows the significant decline in percentage especially after 2015 from 56.36 to only 0.69 in 2018.
4.2.2 Administrative Costs Ratio: The administrative cost ratio is the operating expense ratio as a percentage of all out expenses. This ratio decides the capacity of waqf organization to control expenditure and the plausible effect of such control on service delivery. A waqf institution with high administrative expense is accepted to have a more prominent chance to lessen its program managerial (program) costs without a decrease in the quantity of projects embraced. The steadier non-profit organizations (those with high administrative ratios) are less helpless to money related supportability (Greenlee & Trussel, 2000). As needs be, in accordance with this contention, waqf private element and organizations with low authoritative cost proportions would be increasingly impractical and can be classified as "in danger". This is on the grounds that for such waqf private entity and corporations, a further decrease in regulatory expenses may influence the nature of its administrations. Administrative cost right now administrative and general costs, for example, administration, the board, record-keeping, office supplies and administrations, office fixes and support, proficient administrations and honorarium, office related deterioration, dubious obligations, and other related managerial exercises. Table 6 shows the outcomes.
Table 6: Administrative Costs Ratio
Waqf Entity & Corporation 2018 2017 2016 2015 2014
PWMSB 0.47 0.53 0.71 0.32 1
PWS 0.92 0.96 0.87 0.89 0.77
WANCorp 0.82 0.66 0.66 0.49 0.49
All PWMSB, PWS and WANCorp are having their administration costs for more than half of total expenses. From these three waqf institutions, PWS had the lowest potential and a range of possibilities to minimize spending without reducing its plan and service delivery by more than 80%. It is unhealthy as the effective waqf institutions must spend most of the waqf funds for waqf activities which benefits the beneficiaries. Worst, if waqf institutions reported 100% of administrative ratio like PWMSB in 2014, it means that all expenses during that year is just for administrative purposes and no expenses are made for waqf activities and programs. In this case, PWMSB was just established during that year and probably they early expenses are made just to cover the administrative costs. Besides, some other opportunity on the enormous variation inside the ratio may either be because of the character in their business property and the volume of administrative necessities, or inadequate recording and reporting of fees. Care must be taken in defining the administrative ratio. Given the fact that a better ratio of administrative costs can allow waqf organizations to reduce costs without impacting program shipping, better ratios may also mean that too many sources have been devoted to administrative expenditure and thus less funds available for program offerings. In surges, excessive administrative cost ratio won't necessarily mean that waqf institutions are financially sustainable. perhaps, an element analysis on every administrative cost will able to solution this trouble. but, for the reason that constrained information disclosed by decided on waqf organizations, in addition evaluation on administrative cost is unable to be carried out.
4.2.3. Revenue Concentration Index: The Index of revenue concentration is the square of the proportion of the total revenue generated by rising sales supply. An index closes to “one” for other assets than the center sales suggests that waqf institutions had excessive revenues from various assets and this means that the group is notably fitness. According to Tuckman and Chang (1991), a non-profit organization is less vulnerable to downturns in revenues if its revenues assets are varied because it might be far more likely to affect one revenue supply in a financial downturn, and not all the others. Nonetheless, for various sources, an index closes to "0" means that waqf organizations are critically at chance because this is an indicator that it relies on one single core income. The findings are set out in Table 7.
Table 7: Revenue Concentration Index
Waqf Entity & Corporation 2018 2017 2016 2015 2014
PWMSB 0.03 0.21 0.91 0.01 n/a
PWS 0.12 0.16 0.14 0.09 0.11
WANCorp 0.35 0.58 0.95 0.83 0.20
PWS appears to have the lowest average index close to zero which is 0.12, which means relies heavily on single income where 88% of total revenues are from main income which would lead to unstable financial performance. It followed by PWMSB which average index is 0.29. On the other hand, WANCorp is seen to have a more stable financial where its average index is 0.58, which indicates that more than half of its revenues are generated by other sources rather than core revenue. It can be looked through its revenue portfolio where other than cash waqf received as core revenue, it also relies to other revenues such as grant, rental and investment returns. It means that if any economic downturn that affects cash waqf, WANCorp still can rely on its other revenues.
A side from WANCorp, it can also be known that given the fact that waqf organizations have a variety of sources of income, their delivery has now turned into not even the corresponding decrease index scores. As suggested earlier, the index calls for financially sustainable waqf organizations to have a balanced income distribution from more than one resource. It would allow the establishments to take in monetary shocks and thus conduct their waqf activities (Yan et al., 2009). Empirical results suggest that diversification of revenues will dramatically boost financial health (Wicker et al., 2015).
4.2.4. Operating Margin Ratio: This ratio is determined by dividing the usage of net income (or losses) using total revenues. The higher it is, the extra the probability of attracting waqf institutions to the surplus in subsequent periods will result in a decrease in revenue. Non-profit organizations with higher operating margins are significantly less vulnerable to economic hardship, according to Greenlee and Trussel (2000). Thus, waqf organizations may be financially secure if they have a large margin of work. As shown in Table 8, the average operating margin of both PWS and WANCorp is 67.6 percent and 62 percent respectively. However, PWMSB has a large average deficit operating margin which is -14,299.6%. This extraordinary deficit
Table 8: Operating Margin Ratio
Waqf Entity & Corporation 2018 2017 2016 2015 2014 PWMSB -19.58 -53.09 -385.26 -0.38 -256.67
PWS 0.80 0.46 0.79 0.41 0.92
WANCorp 0.35 0.64 0.95 0.97 0.19
5. Conclusion
The research focused on determining the financial performance and sustainability for selected waqf private entity and corporations in Malaysia. Provided that waqf institutions are primarily concerned with financial efficiency and effectiveness as it will indicate how waqf institutions will sustain their operations in fulfilling their goal. The financial health indicators especially through its financial performance and sustainability developed by Shafii et al. (2014) and Sulaiman and Zakari (2019) are used to determine the financial performance and sustainability for selected waqf institutions in Malaysia. Financial performance and sustainability were evaluated in this regard using seven metrics-net income ratio, operating income ratio, sales growth, equity balances, administrative cost ratio, sales concentration index and operating margin ratio.
Using ratio analysis, this study examines five years (2014-2018) annual reports of waqf private entity administered by PWMSB and two waqf corporations which are PWS and
WANCorp. In terms of waqf collections, all these selected waqf institutions in Malaysia have an increase pattern for waqf funds. This might be due to high waqf awareness among Malaysian people. All selected waqf institutions in this study are also able to generate income from their core activities. Nonetheless, it can be inferred from the findings that in terms of financial results, WANCorp has shown the best financial performance based on its huge assets, sufficient income generation and high-income growth, compared to PWS and PWMSB. Similar for financial sustainability, WANCorp also shows it has the most financial sustainability based on big amount in accumulated funds, moderate in administration cost, diversified revenues sources and enough surplus, as compared to PWS and PWMSB. Therefore, based on both financial performance and sustainability, WANCorp is financially healthy.
Managing public properties needs to be focused on responsibility and transparency. Financial Reports of waqf institutions should be provided to meet the accountability and transparency demanded by the stakeholders. Therefore, the performance audit process is also necessary for waqf institutions although they are different in legal establishment. In addition, this study unable to conduct financial performance and sustainability analysis for other waqf institutions in Malaysia due to lack of financial information disclosed. Only PWMSB is the only waqf private entity and PWS and WANCorp under waqf corporation category that had provided their annual reports in public. Alternatively, the other concern might be using the monetary ratios to calculate output. On the one hand, ratios among waqf organizations that give meaningful assessment. But again, they have several vulnerabilities. A few ratios are not extremely important by themselves.
Acknowledgement:
This research was funded by the Ministry of Education (MoE) Malaysia under the Fundamental Research Grant Scheme (FRGS) USIM/FRGS/FEM/055002/51618, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia.
References
[1] Abdul Rahman, A. R., Bakar, M. D., & Ismail, Y. (1999). Current Practices and Administration of Waqf in Malaysia: A Preliminary Study (Awqaf Report).
[2] Abraham, A. (2006). Financial Management in the Nonprofit Sector: A Mission-Based Approach to Ratio Analysis in Membership Organizations. Journal of American Academy of Business Cambridge, 9(2), 212–217.
[3] Ariff, M. (1991). Resource Mobilization through the Islamic Voluntary Sector in Southeast Asia. In M. Ariff (Ed.), The Islamic Voluntary Sector in South-East Asia (pp. 31–49). Institute of Southeast Asian Studies.
[4] Arshad, R., & Mohd Zain, N. (2017). Performance Measurement and Accountability of WAQF Institutions in Malaysia. SHS Web of Conferences, 36(00005), 1–15. https://doi.org/10.1051/shsconf/20173600005
[5] Atan, R., Zainon, S., Aliman, S., & Yeow Theng Nam, R. (2013). Financial Management in Religious Non-Profit Organizations: A Mission Based Approach to Ratio Analysis. International Conference on Advanced Computer Science and Electronics Information (ICACSEI 2013). https://doi.org/10.2991/icacsei.2013.122
[6] Beamon, B. M., & Balcik, B. (2008). Performance Measurement in Humanitarian Relief Chains. International Journal of Public Sector Management, 21(1), 4–25. https://doi.org/10.1108/09513550810846087
[7] Bernama. (2015, May 10). SPRM Terima 286 Aduan Diterima Libatkan Penyelewengan Dana Banjir - Mustafar.
Astro Awani. http://www.astroawani.com/berita-malaysia/sprm-terima-286-aduan-diterima-libatkan- penyelewengan-dana-banjir-mustafar-59656
[8] Bremer, J. (2004). Islamic Philanthrophy: Reviving Traditional Forms for Building Social Justice. CSID Fifth Annual Conference. https://doi.org/10.2139/ssrn.1565859
[9] Cizakca, M. (1998). Awqaf in History and its Implications for Modern Islamic Economies. Islamic Economic Studies, 6(1), 43–70.
[10] Cohen, D. A., Dey, A., & Lys, T. Z. (2008). Real and Accrual-Based Earnings Management in the Pre- and Post- Sarbanes-Oxley Periods. Accounting Review, 83(3), 757–787. https://doi.org/10.2308/accr.2008.83.3.757 [11] Dewi, M. K., Ibrahim, S. H. M., & Ferdian, I. R. (2007). Measuring Performance of Awqaf Institutions : A
Proposal. In Singapore International Waqf Conference.
[12] Epstein, M. J., & Buhovac, A. R. (2009). Performance Measurement of Not-For-Profit Organizations. In Society of Management Accountants of Canada (Management).
[13] Froelich, K. A., Knoepfle, T. W., & Pollak, T. H. (2000). Financial Measures in Nonprofit Organization Research: Comparing IRS 990 Return and Audited Financial Statement Data. Nonprofit and Voluntary Sector Quarterly, 29(2), 232–254. https://doi.org/10.1177/0899764000292002
[14] Greenlee, J. S., & Trussel, J. M. (2000). Predicting the Financial Vulnerability of Charitable Organizations.
Nonprofit Management and Leadership, 11(2), 199–210. https://doi.org/10.1002/nml.11205
[15] Hassan, A., & Shahid, M. A. (2010). Management and Development of the Awqaf Assets. In A. G. Ismail, M. E.
M. Hassan, N. Ismail, & S. Shahimi (Eds.), Seventh International Conference – The Tawhidi Epistemology:
Zakat and Waqf Economy (pp. 309–328).
[16] Helmig, B., Ingerfurth, S., & Pinz, A. (2014). Success and Failure of Nonprofit Organizations: Theoretical Foundations, Empirical Evidence, and Future Research. International Journal of Voluntary and Nonprofit Organizations, 25(6), 1509–1538. https://doi.org/10.1007/s11266-013-9402-5
[17] Hoexter, M. (1998). Waqf Studies in the Twentieth Century: The State of the Art. Journal of the Economic and Social History of the Orient, 41(4), 474–495. https://doi.org/10.1163/1568520001445568
[18] Hossein, P. (2011). Efficiency Criteria in the Public and Private Waqf Management. In S. M. Mahamood (Ed.), Essential Readings in Contemporary Waqf Issues. CERT Publications.
[19] Hughes, J. P. (2013). A New Cost Efficiency Measure for Not-for-Profit Firms: Evidence of a Link Between Inefficiency and Large Endowments. Atlantic Economic Journal, 41, 279–300. https://doi.org/10.1007/s11293- 013-9374-2
[20] Kamarubahrin, A. F., Ayedh, A. M. A., & Khairi, K. F. (2019). Accountability Practices of Waqf Institution in Selected States in Malaysia: A Critical Analysis. International Journal of Economics, Management and Accounting, 27(2), 331–352.
[21] Kamaruddin, M. I. H. (2018). A Case Study on Waqf Reporting Practices for Governance, Performance and Socio-Economic Impact in Malaysia. International Journal of Management, Accounting and Economics, 5(9), 693–714.
[22] Kamaruddin, M. I. H., Masruki, R., & Hanefah, M. M. (2018). Waqf Management Practices: Case Study in a Malaysian Waqf Institution. World Journal of Social Sciences, 8(3), 1–12.
[23] Keating, E. K., Fischer, M., Gordon, T. P., & Greenlee, J. S. (2005). Assessing Financial Vulnerability in the Nonprofit Sector. In Faculty Research Working Papers Series (No. 27). https://doi.org/10.2139/ssrn.647662 [24] Mahamood, S. M. (2006). Waqf in Malaysia: Legal and Administrative Perspectives. University of Malaya Press.
[25] Medina-Borja, A., & Triantis, K. (2007). A Conceptual Framework to Evaluate Performance of Non-profit Social Service Organizations. International Journal of Technology Management, 37(1–2), 147–161.
https://doi.org/10.1504/IJTM.2007.011808
[26] Osman, A. Z. (2010). Accountability of Waqf Management: Insight From Praxis Of Nongovernmental Organisation (NGO). In A. G. Ismail, M. E. M. Hassan, N. Ismail, & S. Shahimi (Eds.), Seventh International Conference – The Tawhidi Epistemology: Zakat and Waqf Economy (pp. 154–175).
[27] Shafii, Z., Yunanda, R. A., & Rahman, F. K. (2014). Financial and Operataional Measures of Waqf Performance:
The Case of State Islamic Religion Council of Singapore and Malaysia. Seminar Waqf Iqlimi.
[28] Sulaiman, M., Adnan, M. A., & Nor, P. N. S. M. M. (2009). Trust Me! A Case Study of the International Islamic University Malaysia’s Waqf Fund. Review of Islamic Economics, 13(1), 69–88.
[29] Sulaiman, M., & Zakari, M. A. (2019). Financial Sustainability of State Waqf Institutions (SWIs) in Malaysia.
Journal of Islamic Accounting and Business Research, 10(2), 236–258. https://doi.org/10.1108/JIABR-05-2016- 0054
[30] Trussel, J. M., & Greenlee, J. S. (2004). A Financial Rating System for Nonprofit Organizations. Research in Government and Nonprofit Accounting, 11(1), 105–128. https://doi.org/10.1016/s0884-0741(04)11005-7 [31] Tuckman, H. P., & Chang, C. F. (1991). A Methodology for Measuring the Financial Vulnerability of Charitable
Nonprofit Organizations. Nonprofit and Voluntary Sector Quarterly, 20(4), 445–460.
https://doi.org/10.1177/089976409102000407
[32] Wicker, P., Longley, N., & Breuer, C. (2015). Revenue Volatility in German Nonprofit Sports Clubs. Nonprofit and Voluntary Sector Quarterly, 44(1), 5–24. https://doi.org/10.1177/0899764013499072
[33] Yan, W., Denison, D. V., & Butler, J. S. (2009). Revenue Structure and Nonprofit Borrowing. Public Finance Review, 37(1), 47–67. https://doi.org/10.1177/1091142108321239
[34] Yasmin, S., & Haniffa, R. (2017). Accountability and Narrative Disclosure by Muslim Charity Organisations in the UK. Journal of Islamic Accounting and Business Research, 8(1), 70–86. https://doi.org/10.1108/JIABR-06- 2015-0024
[35] Yunanda, R. A., Shafii, Z., & Tareq, M. A. (2016). Accountability of Islamic Based Non-Profit Sector: the Case of Waqf Organizations. Jurnal Ekonomi Dan Bisnis Islam, 2(2), 105–124.
