Awqaf Governance: Issues of Transparency and Disclosure

By Dr Hisham Dafterdar, CPA
Chairman, Awkaf Australia

“Awqaf” has been the buzzword for the last two decades. The sector’s growth is increasingly evident in the number, size and prominence of awqaf organizations. However, while the sector has achieved remarkable revival, the questions seem to remain the same! How are awqaf organizations governed and regulated? What are their management strategies in respect of their assets, investments and disbursements? Why do not all awqaf organizations disclose comprehensive information? How should they act to be more transparent and accountable?

Transparency and disclosure are not only part of corporate governance best practices; in awqaf they are the heart of ethical behavior. Ethical behavior in a waqf organization cannot be fulfilled simply by disbursing money to beneficiaries and publishing annual reports that display more photos and less statistics. Ethical behavior is a whole raft of value-based actions that include accurate, reliable and transparent reporting irrespective of any regulatory requirement. Transparency requires reporting relevant and reliable financial and non-financial information, with input from nazirs, accountants, investment managers and auditors, and making these reports freely accessible to the public.

There is no single definition of transparency and no exact criterion for its measurement. Awqaf have hard-to-measure goals. Awqaf organizations might have social impact goals such as capacity building, social wellbeing, community empowerment, welfare, etc. These goals are too intangible to gauge with numbers. Counting the number of people fed or the number of schoolbags distributed may create a positive impression, but that’s no proof of enablement. Awqaf organizations have long been criticized for being too vague in conveying real impact. Only a small number of the large awqaf organizations disclose meaningful high quality performance and financial information.

Determining impact cannot be ascertained by just checking numbers. In order to measure impact, awqaf should employ both quantitative and qualitative metrics involving measurable outcomes and descriptive analysis. Standards for ethics and governance for awqaf remain mostly in their theoretical framework. There is no legal regulation that requires compliance with standards in the publication of social information. This has led the vast majority of awqaf organizations to adopt voluntary disclosure policies. Consequently transparency in the awqaf sector is relatively low in comparison with companies in the private sector and even in comparison with NGOs and non-profit foundations.

Transparency is awqaf’s barometer of public confidence. Awqaf organizations that consistently disclose high quality operational and financial information are viewed as being more credible and trustworthy by their stakeholders. Transparency associated with non-financial information is just as important, if not more so than with financial information. This is because awqaf is more concerned with human welfare and social development. To assess an organization’s value purely on the basis of financial indicators is insufficient to prove that it is carrying out fully its mission and satisfying the needs of its beneficiaries. Non-financial information makes the numbers come alive on the path to achieving the mission of the waqf organization.

Awqaf worldwide, are facing increasing demand for accountability and improved transparency. The growth of the awqaf sector has led to an increasing interest in the work carried out by awqaf organizations. Societal pressure has increased due to a number of factors. One major concern revolves around finances as stakeholders want assurance that assets and resources are being managed and used efficiently and ethically. Another challenge lies in the lack of clarity surrounding program outcomes and impact assessment. Lack of transparency is a major ethical problem. The consequences are far-reaching as it erodes confidence in the waqf organization and can have a detrimental impact on the sector as a whole. Unsurprisingly, transparency brings about few concerns for privacy. As we seek transparency, we should not expect awqaf organizations to disclose everything on record. Transparency is not for everything, nor for everyone. Awqaf nazirs have to respect the privacy of their stakeholders, and in particular that of vulnerable beneficiaries.

Stakeholders may not want their personal or sensitive data on display for all people to see. It would be a breach of trust and a disservice to society as a whole. People’s right to privacy is articulated in many national laws. On the other hand, overemphasizing privacy can create a sense of secrecy that may lead to suspicion and loss of public trust. Hence, awqaf nazirs should know how to walk the fine line between the demand for transparency and the right to privacy. When we talk about ethics in awqaf, we are talking about the sector’s core. Sustaining a high standard of ethics is essential for awqaf to maintain credibility and trust among stakeholders. In the absence of transparency legislation for the sector, awqaf organizations should turn to the basic Islamic principles of honesty, trust and openness in order to be considered transparent in their reports. Awqaf organizations have to live the truth and tell the truth. The truth should not be eclipsed by reports that hide more than reveal significant information. By proactively addressing these transparency issues, awqaf organizations can not only establish greater credibility but also fulfill their mission effectively while fostering community support and engagement.