A crucial regulatory step to enhance governance in the endowments sector
In a regulatory move aimed at enhancing transparency and protecting endowment assets, the General Authority for Endowments in the Kingdom of Saudi Arabia issued a comprehensive reference document entitled “100 Questions and Answers on Endowment Matters.” This document emphasizes that mixing endowment funds with the personal funds of the administrator (the person responsible for managing the endowment) is a serious offense warranting immediate dismissal and legal accountability. This initiative is part of the Authority’s efforts to regulate financial practices and governance within the endowment sector, ensuring the achievement of its developmental and social objectives.
Historical context and the role of endowments in community development
The endowment system (waqf) has been a cornerstone of Islamic civilization throughout history, playing a pivotal role in funding public services such as education, healthcare, poverty alleviation, and infrastructure development. In Saudi Arabia, endowments are an integral part of the economic and social fabric, historically contributing to the support of the Two Holy Mosques and various scientific and charitable institutions. With the launch of Vision 2030, there has been a growing focus on developing the non-profit sector, including endowments, to become a significant contributor to the GDP. This has necessitated updating regulations and bylaws to ensure the sustainability of endowments and maximize their impact.
The most prominent violations that warrant dismissal and accountability
The authority clarified unequivocally that there are several practices that subject the supervisor to dismissal and prosecution, most notably:
- Mixing of funds: Merging endowment funds with the personal accounts of the supervisor without legal or regulatory justification.
- Crimes of breach of trust: Committing any crime that affects honor and integrity, which disqualifies him from managing the endowment.
- Failure to open a separate account: Refraining from opening a separate bank account in the name of the endowment to deposit its revenues and manage its expenses.
- Obstructing oversight: Preventing the Authority’s inspectors from performing their duties in desk or field inspections, or withholding necessary documents and information.
- Fictitious actions: Conducting fictitious transactions in the name of the endowment with the aim of circumventing regulations and laws.
The regulations stressed that the supervisor’s authority ends immediately upon the issuance of the decision to dismiss him, and all his actions related to the endowment after this date become invalid, with him being obligated to hand over all assets and documents to the new supervisor under the supervision of the Authority.
The importance and expected impacts of the new measures
These stringent measures are of paramount importance on several levels. Locally , they will increase confidence in the endowment sector and encourage more donors to establish new endowments, while ensuring that their proceeds reach their intended beneficiaries. They also contribute to transforming endowments into sustainable, efficiently and professionally managed institutional entities. Regionally , the Kingdom presents a pioneering model in endowment governance that other countries in the region can emulate to enhance transparency and combat corruption in this vital sector. Internationally , this approach strengthens the Kingdom's position as a leading center in the Islamic economy and attracts the attention of international investors and donors seeking secure and reliable regulatory environments for charitable and developmental work.
Regulations governing the management and expenditure of endowment assets
The document did not merely address violations; it also established clear guidelines for financial transactions. It prohibited trustees from lending endowment funds to others or selling and exchanging its assets except in cases of extreme necessity and with a court order demonstrating the endowment's best interests. It also affirmed that the endowment possesses a legal personality and independent financial standing, thus protecting its assets from the personal debts of the endower. Furthermore, the regulations opened the door to modern forms of endowment, such as the endowment of shares and cash, provided that these are invested in a way that ensures asset growth and continued benefit, keeping pace with modern economic developments.
