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ACCOUNTING FOR ZAKAT: THE ACCOUNTABILITY OF INDONESIAN

ZAKAT AGENCIES

Iwan Purwanto Sudjali SE (Akt), M. Bus (Acc)

Submitted in fulfilment of the requirements for the degree of

Doctor of Philosophy

School of Accountancy

QUT Business School

Queensland University of Technology

2017

Accounting for Zakat: the Accountability of Indonesian Zakat Agencies iii

Keywords

Accountability, Alms, Charitable Organisation, Donor, Beneficiaries, Faith-based Organisation, Indonesia, Islam, Not-for-profit, Stakeholder, Trust, Zakat, Zakat Agency

Accounting for Zakat: the Accountability of Indonesian Zakat Agencies v

Abstract

Islam has a long and strong tradition of philanthropic giving. Islamic charitable

giving can take the form of voluntary charitable giving or sadaqah, and ‘mandatory’

alms-giving or zakat (Powell, 2009). Zakat holds an important position within the

Islamic faith because it is considered to be one of the five pillars of Islam (Ybarra,

1996).

This study focuses on the accountability of zakat agencies, as most Muslims

practise the giving of zakat, and it is the main form of Islamic charitable giving.

Zakat agencies are Islamic faith-based organisations engaged in a non-reciprocal

transfer of resources by collecting donations (primarily in the form of zakat) from

Muslims to be distributed to eligible beneficiaries. Similar to secular organisations

that engage in a non-reciprocal transfer of resources, such as charitable organisations,

trust is an important element that determines public support and ultimately ‘giving’

(Sari, Bahari, & Hamat, 2013).

In term of context, this study focuses on Indonesian zakat agencies because

Indonesia is the largest majority Muslim country and the giving of zakat is practised

widely by Indonesian Muslims (Public Interest Research and Advocacy Centre,

2007). In Indonesia, zakat is collected and distributed by three different types of

organisations: (1) local Imams; (2) government-sponsored zakat agencies; and (3)

private zakat agencies (Fauzia, 2008).

This study is motivated by an indication of a lack of trust and the possibility of

an accountability gap within Indonesian zakat agencies (Sari, et al., 2013). A number

of authors have claimed that an organisation can gain and maintain stakeholders’

trust by demonstrating accountability (Furneaux & Wymer, 2015; Irvine, 2002;

Parsons, 2003, 2007). Therefore, zakat agencies should meet stakeholders’

expectations in relation to information by communicating a sufficient and

appropriate level of accountability information.

This study is also motivated by limited accountability studies regarding Islamic

faith-based organisations. Prior studies on the accountability of faith-based

organisations have primarily focused on Christian or Western contexts (Yasmin,

vi

Haniffa, & Hudaib, 2013). This study seeks to fill this gap by investigating the

accountability of Indonesian zakat agencies by exploring: (1) administrators’

perceptions on the core elements of accountability (to whom, for what, and how); (2)

donors’ perceptions on the core elements of accountability; (3) identifying the inter-

relationship amongst the core elements of accountability; and (4) identifying the

possibility of an accountability gap and, if so, identifying potential additional

disclosure that may bridge this gap.

Drawing on middle range thinking (MRT) perspectives (Laughlin, 1995, 2004,

2007), this study utilises the accountability literature to develop a skeletal

accountability framework to guide this research. To achieve the objectives of this

research and address the research questions, a mixed methods approach was adopted.

Interviews with the administrators of zakat agencies, and surveys of the donors of

zakat agencies were conducted to gain insight into administrators’ and donors’

perceptions of the concept of accountability. Content analysis of media used by zakat

agencies to discharge accountability was also conducted to gauge the actual practice

of accountability.

The findings of this study indicate that administrators and donors have both

similar and dissimilar perceptions regarding the core elements of accountability.

Administrators and donors agreed that zakat agencies should be accountable to a

wide range of stakeholders, including sacred (God) and secular stakeholders such as

regulators, the board, the parent organisation, donors, and beneficiaries.

Regarding the scope of accountability, administrators and donors held similar

views that indicate the scope of accountability of zakat agencies extends beyond the

dimension of accountability typically encapsulated in Stewart’s (1984) ladder of

accountability and includes Syari’ah accountability. This finding also indicates the

existence of sacred and secular dimensions in the accountability of zakat agencies.

The result of the factor analysis indicates that donors are interested in financial

and non-financial information. Several types of non-financial information considered

important by donors, such as information about future plan and beneficiaries, were

not mentioned by administrators. On the other hand, administrators mostly

mentioned financial and programme information. This finding indicates that there are

differences in the perceptions of administrators and donors regarding the types of

information that should be disclosed by zakat agency to discharge accountability.

Accounting for Zakat: the Accountability of Indonesian Zakat Agencies vii

Administrators and donors agreed that zakat agencies should use formal and

informal mechanisms to discharge accountability. Most administrators and donors

stated that the annual report is an important mediun to discharge formal

accountability and zakat agencies should use the annual report to discharge

accountability. However, there are only a few zakat agencies that publish annual

reports. This finding indicates a gap between the source of information considered

important by administrators and donors and actual practice.

With regard to the association between the core elements of accountability, this

study does not make a prediction on the direction of the relationship between the

core elements of accountability due to the exploratory nature of this study. Non-

parametric correlation tests demonstrated that correlation exists between several

elements of “to whom”, “for what’, and “how”. For example, financial accountability

and financial information were related to primary stakeholders (regulators, donors,

and beneficiaries), and formal sources of information were related to financial

accountability.

Several limitations have been identified in this study. The size of the sample

was limited and is not representative of the general population, therefore, caution

should be exercised in the replication of the findings in other contexts. The

perceptions of donors about the understanding of accountability were limited

regarding propositions and items that were put forward in the questionnaires. This

study also only draws on the perceptions of accountability of one type of external

stakeholder, that of donors. Other external stakeholders may have different

perceptions regarding accountability. Nevertheless, the theoretical insights gained

from this study have the potential to enhance understanding regarding the notion of

accountability.

Future research in this area could explore the perception of accountability from

the perspective of a broader range of stakeholders, such as regulators, beneficiaries,

and academics. More quantitative research is also required to operationalise and

validate the inter-relationship between the core elements of accountability in other

settings and to explore the perceptions of accountability among individuals with

different demographic attributes.

Accounting for Zakat: the Accountability of Indonesian Zakat Agencies ix

Table of Contents

Keywords........................................................................................................................... iii

Abstract ............................................................................................................................... v

Table of Contents ................................................................................................................ ix

List of Figures ...................................................................................................................xiii

List of Tables ..................................................................................................................... xv

List of Abbreviations and Acronyms ................................................................................. xix

Glossary ............................................................................................................................ xxi

Statement of Original Authorship .................................................................................... xxiii

Acknowledgements .......................................................................................................... xxv

Chapter 1: Introduction .................................................................................... 1

1.1 Context ...................................................................................................................... 1

1.2 Research Motivations ................................................................................................. 4

1.3 Research Aim, Objectives, and Questions ................................................................... 6

1.4 Research Contributions .............................................................................................. 9

1.5 Thesis Outline .......................................................................................................... 12

Chapter 2: A Contextual Understanding of Zakat: Its Meaning, Impost, and Administration ...................................................................................................... 17

2.1 Introduction ............................................................................................................. 17

2.2 An Overview of Zakat .............................................................................................. 17

2.3 Imposition of Zakat .................................................................................................. 19

2.4 Collection and Administration of Zakat .................................................................... 20

2.5 History of Zakat Administration in Indonesia ........................................................... 23

2.6 Zakat Regulation and Disclosure Requirement in Indonesia ...................................... 31

2.7 Summary.................................................................................................................. 33

Chapter 3: Literature Review and Research Perspective ............................. 35

3.1 Introduction ............................................................................................................. 35

3.2 Why Should Zakat Agencies be Accountable? .......................................................... 35

3.3 Empirical Evidence Regarding Sacred and Secular Accountability in Faith-Based Organisations ........................................................................................................... 39

3.4 Donor’s Information Requirements and the Accountability Gap ............................... 42

3.5 Implications from the Literature Review ................................................................... 43

3.6 Philosophical Perspective to Accounting Research ................................................... 44

3.7 Middle Range Thinking Perspective ......................................................................... 47

3.8 Limitations of Middle Range Thinking ..................................................................... 51

3.9 Justification for the Adoption of Middle Range Thinking.......................................... 52

x

3.10 Summary ................................................................................................................. 54

Chapter 4: Theoretical Framework ............................................................... 55

4.1 Introduction ............................................................................................................. 55

4.2 Meaning of Accountability ....................................................................................... 55

4.3 Who Should Zakat Agencies be Accountable to? ...................................................... 57

4.4 The Scope of Accountability and Information Required ........................................... 64

4.5 By What Means Should Accountability be Discharged? ........................................... 72

4.6 Inter-Relationship among the Core Elements of Accountability ................................ 76

4.7 Theoretical Understanding and Research Questions .................................................. 78

4.8 Summary ................................................................................................................. 80

Chapter 5: Research Methods ........................................................................ 83

5.1 Introduction ............................................................................................................. 83

5.2 Mixed Methods Research ......................................................................................... 83

5.3 Research Methods Used for Research Question 1 ..................................................... 86

5.4 Research Methods Used for Research Question 2 ..................................................... 95

5.5 Research Methods Used for Research Question 3 ................................................... 102

5.6 Research Methods Used for Research Question 4 ................................................... 102

5.7 Discussion of Research Findings ............................................................................ 104

5.8 Summary ............................................................................................................... 105

Chapter 6: The Accountability of Zakat Agencies: Administrators’ Perceptions .................................................................................................... 107

6.1 Introduction ........................................................................................................... 107

6.2 Administrators’ Perceptions on the Meaning of Accountability .............................. 107

6.3 Should Zakat Agencies be Accountable? ................................................................ 111

6.4 To Whom Should Zakat Agencies be Accountable? ............................................... 114

6.5 What Should Zakat Agencies be Accountable for? ................................................. 120

6.6 Type of Information Considered Important by Administrators ................................ 125

6.7 By What Means Should Zakat Agencies Discharge Their Accountability? .............. 129

6.8 Discussion ............................................................................................................. 133

6.9 Summary ............................................................................................................... 139

Chapter 7: The Accountability of Zakat Agencies: Donors’Perceptions ... 141

7.1 Introduction ........................................................................................................... 141

7.2 Donors’ Perceptions on the Meaning of Accountability .......................................... 141

7.3 Should Zakat Agencies be Accountable? ................................................................ 142

7.4 To Whom Should Zakat Agencies be Accountable? ............................................... 144

7.5 What Should Zakat Agencies be Accountable for? ................................................. 150

7.6 Types of Information Required by Donors.............................................................. 155

Accounting for Zakat: the Accountability of Indonesian Zakat Agencies xi

7.7 By What Means Should Zakat Agencies Discharge Their Accountability? .............. 167

7.8 Inter-relationship among the Core Elements of Accountability................................ 177

7.9 Do the Perceptions of Donors on the Core Elements of Accountability Differ among the three Groups of Donors and among Donors Who Have Different Demographic attributes? .............................................................................................................. 179

7.10 Discussion .............................................................................................................. 184

7.11 Summary................................................................................................................ 191

Chapter 8: The Accountability of Zakat Agencies: A Comparison between Administrators’ and Donors’ Perceptions ......................................................... 193

8.1 Introduction ........................................................................................................... 193

8.2 Media Used to Discharge Accountability ................................................................ 194

8.3 A Comparison between Administrators’ and Donors’ Perceptions on the Accountability of Zakat Agencies ........................................................................... 204

8.4 Discussion .............................................................................................................. 216

8.5 Summary................................................................................................................ 220

Chapter 9: Summary, Recommendations, and Conclusion ......................... 221

9.1 Introduction ........................................................................................................... 221

9.2 Research Motivation and Questions ........................................................................ 221

9.3 Research Approach ................................................................................................ 223

9.4 Research Design ..................................................................................................... 223

9.5 Research Findings .................................................................................................. 224

9.6 Research Contributions .......................................................................................... 241

9.7 Research Limitations .............................................................................................. 246

9.8 Future Research ..................................................................................................... 248

References ........................................................................................................... 251

Appendices .......................................................................................................... 278

Appendix A Human Ethics Approval Certificate and Participation Information Sheet ....... 278

Appendix B Interview Questions Matrix .......................................................................... 285

Appendix C Survey Instrument ........................................................................................ 288

Appendix D The Data Dictionary and Rules for Coding ................................................... 307

Appendix E Type of Information Identified in Literature .................................................. 308

Appendix F Initial Eigenvalues and Criterion Value from Monte Carlo Parallel Analysis . 310

Appendix G Scree Plot ..................................................................................................... 311

Appendix H Pearson Correlations of the Core Elements of Accountability........................ 315

Appendix I The Results of MANOVA Test for Factor Scores on to Whom Zakat Agencies Should be Accountable by the Groups of Donors Who Give to Local Imam, Government-Sponsored Zakat Agencies, and Private Zakat Agencies ................................................... 316

Appendix J The Results of MANOVA for Factor Scores on to Whom Zakat Agencies Should be Accountable by Demographic Attributers of Donors ........................................ 317

xii

Appendix K The Results of MANOVA for Factor Scores on the Scope of Accountability by the Groups of Donors ....................................................................................................... 318

Appendix L The Results of MANOVA for Factor Scores on the Scope of Accountability by Demographic Attributers of Donors ................................................................................. 319

Appendix M The Results of MANOVA for Factor Scores on Type of Information by the Groups of Donors ............................................................................................................ 321

Appendix N The Results of MANOVA for Factor Scores on Type of Information by Demographic Attributers of Donors ................................................................................. 322

Appendix O The Results of MANOVA for Factor Scores on Type of Information by the Groups of Donors ............................................................................................................ 323

Appendix P The Results of MANOVA for Factor Scores on Type of Information by Demographic Attributers of Donors ................................................................................. 324

Appendix Q The Results of MANOVA for Factor Scores on Medium to Discharge Accountability by the Groups of Donors .......................................................................... 325

Appendix R The Results of MANOVA for Factor Scores on Medium to Discharge Accountability by Demographic Attributers of Donors ..................................................... 326

Appendix S Cross-tabulation of Respondents by Demographic Profiles ............................ 327

Accounting for Zakat: the Accountability of Indonesian Zakat Agencies xiii

List of Figures

Figure 1-1 Thesis Structure ..................................................................................... 16

Figure 4-1 Skeletal Framework of Possible Stakeholders of Zakat Agencies ........... 64

Figure 4-2 Skeletal Framework of the Possible Scope of Zakat Agency Accountability ........................................................................................... 66

Figure 4-3 Skeletal Framework of Possible Media to Discharge Accountability. ..... 76

Figure 4-4 Skeletal Framework of Possible Inter-relationship among the Core Elements of Accoountability ..................................................................... 78

Figure 7-1 Factor Plot in Rotated Space for "To Whom Should Zakat Agencies be Accountable" ...................................................................................... 149

Figure 7-2 Factor Plot in Rotated Space for the Scope of Accountability ............... 154

Figure 7-3 Factor Plot in Rotated Space for Medium used to Discharge Accountability ......................................................................................... 176

Figure 7-4 Estimated Marginal Means of Accountability to Primary Stakeholders ............................................................................................ 183

Figure 7-5 Estimated Marginal Means of Accountability to Secondary Stakeholders ............................................................................................ 183

Figure 7-6 Estimated Marginal Means of Formal Sources of Information .............. 184

Accounting for Zakat: the Accountability of Indonesian Zakat Agencies xv

List of Tables

Table 2-1 Comparison of Zakat al-fitr and Zakat al-mal .......................................... 20

Table 2-2 Comparison of Three Zakat Agencies in Indonesia .................................. 29

Table 4-1 Potential Stakeholders of Not-for-profit Organisations and the Attributes of Stakeholders Linked to the Types of Accountability ............. 62

Table 4-2 Means to Discharge Accountability ......................................................... 73

Table 5-1 Research Methods Used to Answer Research Questions .......................... 85

Table 5-2 Sample Selection Process ........................................................................ 89

Table 5-3 Distribution of Interviewees .................................................................... 91

Table 5-4 Cross-tabulation of the Groups of Respondents Who Gave to Local Imams, Government-sponsored Zakat Agencies, and Private Zakat Agencies by Demographic Profiles .......................................................... 100

Table 6-1 Perceptions of Administrators on the Meaning(s) of Accountability ...... 108

Table 6-2 Perceptions of Administrators on “Why Should Zakat Agencies Be Accountable?” ......................................................................................... 111

Table 6-3 Perceptions of Administrators on “To Whom Should Zakat Agencies be Accountable?” .................................................................................... 114

Table 6-4 Perceptions of Administrators on the Scope of Zakat Agencies’ Accountability ......................................................................................... 120

Table 6-5 Perceptions of Administrators on Types of Information that Should be Disclosed by Zakat Agencies .............................................................. 126

Table 6-6 Perceptions of Administrators on Media that Should be Used by Zakat Agencies to Discharge Accountability ........................................... 130

Table 7-1 Perceptions of Donors on the Meaning(s) of Accountability .................. 142

Table 7-2 Cross-tabulation of the Importance of Demonstrating Accountability to Stakeholders by the Groups of Donors ................................................. 143

Table 7-3 Reasons Why Zakat Agencies Should be Accountable .......................... 143

Table 7-4 Reasons Why Zakat Agencies Should Not be Accountable .................... 144

Table 7-5 Cross-tabulation between the Groups of Respondents and their Perceptions on the Stakeholders of Zakat Agencies ................................. 145

Table 7-6 Spearman’s rho Correlation Matrix for to Whom Zakat Agencies Should be Accountable ............................................................................ 147

Table 7-7 Rotated Component Matrix of “To Whom Should Zakat Agencies be Accountable" ........................................................................................... 147

Table 7-8 Perceptions of Donors on the Scope of Zakat Agencies Accountability ......................................................................................... 151

Table 7-9 Spearman’s rho Correlation Matrix for the Scope of Accountability ...... 152

xvi

Table 7-10 Results of Factor Extraction on the Scope of Accountability ............... 153

Table 7-11 Perceptions of Donors on Types of Information that should be disclosed by Zakat Agencies ................................................................... 157

Table 7-12 Spearman's rho Correlation on Types of Information that Should be Disclosed by Zakat Agencies .................................................................. 161

Table 7-13 Results of Factor Analysis on the Perception of Donors on the Types of Information .............................................................................. 165

Table 7-14 Perceptions of Donors on the Sources of Information .......................... 168

Table 7-15 Proportion of Donors with Access to Sources of Information about Zakat Agencies ....................................................................................... 169

Table 7-16 Cross-tabulation of the Interest of Respondents in Relation to Reading Annual Reports by the Groups of Donors .................................. 170

Table 7-17 Reasons for Reading Annual Reports or Financial Statements ............. 171

Table 7-18 Reasons for Not Reading Annual Reports or Financial Statements ...... 172

Table 7-19 Spearman's rho Correlations for the Sources of Information ................ 173

Table 7-20 Pattern and Structure Matrix with Oblique Oblimin Rotation of the Source of Information Variables ............................................................. 174

Table 7–21 Rotated Component Matrixa with Orthogonal Varimax Rotation of the Source of Information Variables ........................................................ 175

Table 7-22 Results of Spearman’s rho CorrelationTest on Factor Scores of “To Whom”, “For What”, and “How” ............................................................ 178

Table 7-23 Results of MANOVA on “To Whom”, “For What”, and “How” by the Groups of Donors and Demographic Attributes of Donors ................. 181

Table 7-24 Tests of Between-subjects Effects on Interaction Variables Education x Sectors of Employment ....................................................... 182

Table 7-25 Classification of Zakat Agencies Stakeholders Compared to Theoretical Framework ........................................................................... 186

Table 8-1 Media Used by Zakat Agencies to Discharge Accountability ................ 194

Table 8-2 Summary of Magazine Contents ........................................................... 195

Table 8-3 Type of Information Disclosed on Website ........................................... 197

Table 8-4 Type of Information Disclosed on Facebook ......................................... 200

Table 8-5 Type of Information Disclosed in Annual Reports ................................ 202

Table 8-6 A Comparison between the Perceptions of Administrators and Donors on the Meaning of Accountability ............................................... 205

Table 8-7 Should Zakat Agencies be Accountable? .............................................. 206

Table 8-8 Why Should Zakat Agencies be Accountable? ...................................... 206

Table 8-9 Comparison of the Perception of Administrators and Donors on “To Whom Zakat Agencies Should be Accountable” ..................................... 207

Accounting for Zakat: the Accountability of Indonesian Zakat Agencies xvii

Table 8-10 A Comparison between the Perception of Administrators and Donors on the Scope of Accountability of Zakat Agencies ...................... 209

Table 8-11 A Comparison between the Perception of Administrators and Donors on Types of Information that Should be Disclosed by Zakat Agencies ................................................................................................. 211

Table 8-12 A Comparison between the Perceptions of Administrators and Donors on Media that Should be Used by Zakat Agencies to Discharge Accountability ........................................................................ 215

Table 9-1 Summary of Findings ............................................................................ 225

Accounting for Zakat: the Accountability of Indonesian Zakat Agencies xix

List of Abbreviations and Acronyms

AUD Australian Dollar Ar Arabic BAZNAS Badan Amil Zakat Nasional (refer to Glossary) IAI Ikatan Akuntan Indonesia LAZ Lembaga Amil Zakat (refer to Glossary) MANOVA Multivariate Analysis of Variance MRT Middle Range Thinking MUI Majelis Ulama Indonesia (refer to Glossary) KMO Kaiser-Meyer-Olkin PA Parallel Analysis PCA Principal Component Analysis PSAK Pernyataan Standar Akuntansi Keuangan (Indonesian

Statement of Financial Accounting Standards) QUT Queensland University of Technology RT Rukun Tetangga (refer to Glossary) RW Rukun Warga (refer to Glossary) UK United Kingdom US United States

Accounting for Zakat: the Accountability of Indonesian Zakat Agencies xxi

Glossary

Amil Ar. A zakat collector. A zakat collector can be an individual or an organisation

Amilin BAZNAS

Ar. pl. of amil Badan Amil Zakat Nasional; a general term for a government-sponsored zakat agency. BAZNAS consists of three tiers: Central BAZNAS created by the Central Government provincial BAZNASs created by provincial governments local BAZNASs created by local governments

Fatwa Ar. An Islamic legal pronouncement or scholarly opinion on a matter of Islam produced by an Islamic jurist

Fiqh Imam Islamic jurists

Ar. Islamic jurisprudence, knowledge An Islamic spiritual leader who is also a mosque leader A Muslim scholar who is an expert in Islamic jurisprudence or Islamic law

LAZ Lembaga Amil Zakat; a general term for a private zakat agency

MUI Majelis Ulama Indonesia (The Indonesian Ulema Council). MUI is a non-governmental organisation that consists of Islamic jurists and clerics representing most Muslim groups in Indonesia. While a fatwa issued by MUI is not a legal regulation, most Muslims follow this fatwa.

Ramadan RT RW Sadaqah Shari’ah Hadith Sunnah Zakat

The ninth month of Islamic calendar where Muslims fast An association of several households that live in a neighbourhood An association of several RTs Ar. Denotes any act of kindness, such as voluntary donation, endowment (waqf), and other forms of kindness Ar. Islamic law derived from the holy Qur’an and hadist Ar. Hadith are sayings and behaviours of the Prophet Ar. Sunnah is documentation (recorded) of sayings and behaviours of the Prophet. Hadith and Sunnah are used interchangeably in this study Ar. Islamic alms giving in which every Muslim who has wealth or income above a certain threshold is required by the Holy Qur’an to give a portion of her/his wealth or income to specified beneficiaries

Accounting for Zakat: the Accountability of Indonesian Zakat Agencies xxiii

Statement of Original Authorship

The work contained in this thesis has not been previously submitted to meet

requirements for an award at this or any other higher education institution. To the

best of my knowledge and belief, the thesis contains no material previously

published or written by another person except where due reference is made.

Signature: QUT Verified Signature

Date: 10 September 2017

Accounting for Zakat: the Accountability of Indonesian Zakat Agencies xxv

Acknowledgements

I would like to take this opportunity to acknowledge and thank the following

individuals and organisations for their support of my research.

• The administrators and donors of the zakat agencies who gave so generously

of their time to participate in this study.

• My research supervisors, Associate Professor Stuart Tooley and Dr Craig

Furneaux for their wise counsel, scholarly guidance, and great support.

• The Director of Higher Degree Research Studies, Dr Stephen Cox.

• Badan Pemeriksa Keuangan – Republik Indonesia, for granting me paid study

leave.

• Australian Award Scholarship for providing me with a scholarship and

financial support.

• Dr Jonathan Bader, Gayleen Furneaux, Millen Tsefai, Dennis O’ Connell, and

Samantha Kenny, and the QUT Learning Advisor and Research Support Staff.

• Zia Song, Christine Wang, Jocelyn Tan, and the ASS Student Support

Services. Thank you for making this journey easier, especially during my first

year in Brisbane.

• Professional editors, Kylie Morris and Fiona Crawford, who provided

copyediting and proofreading services, according to university-endorsed

guidelines and the Australian Standards for editing research theses.

• My personal friends, Tanto dan Keluarga, Pak Muis, Mbak Elly, Mas Gede

dan Keluarga, Desi C. Hidayah, and all my Indonesian friends.

• My family – my wife Tina and my children Ega, Fio, and Kelvin, my mother,

the late Sri Mulyani, my father Eddy Sudjali, Ibu Kismiyati, Bp Suparman,

Mas Budi dan Keluarga, Mas Markus dan Keluarga, Peter dan Keluarga, Mas

Ari dan Keluarga – who have supported me selflessly. This thesis is dedicated

to these important people in my life.

Chapter 1: Introduction 1

Chapter 1: Introduction

1.1 CONTEXT

The practice of philanthropic giving is encouraged in many religions. This is

also true for Muslims, with philanthropic giving central to the Islamic faith

(Bremer, 2004). Muslims believe that charitable giving is not just as an act of

kindness but also an act of worship (ibadah) to become close to Allah (Arjomand,

1998). A survey in the UK indicated that Muslims donated an average of US $567

annually, higher than the followers of other religion (Austin, 2013). The exact

amount of global Islamic charitable giving is not known, however, it has been

estimated at between US $200 billion to US $1 trillion annually (Stirk, 2015).

Islamic charitable giving can be categorised as either a voluntary endeavour

– ‘sadaqah’ – or as faith-based expectation – ‘zakat’. Sadaqah means ‘sincere

giving’ and denotes any act of kindness, such as voluntary donation, endowment

(waqf), and other forms of kindness (Fauzia, 2008). Giving sadaqah is encouraged

and will be rewarded by God; however, those who refrain from giving sadaqah

will not be punished. Zakat is an Islamic alms giving in which every Muslim who

has wealth or income above a certain threshold is required by the Holy Qur’an to

give a portion of her/his wealth or income to particular beneficiaries (al Qardawi,

2000; Stirk, 2015). Muslims believe that God will reward those who give zakat

and punish those who do not. The centrality of zakat to the practice of Islamic

faith has seen the proliferation of Islamic charitable organisations designated to

collect and distribute zakat (Halimatusa'diyah, 2015; Weiss, 2007).

The Holy Qur’an specifies who has to pay zakat and the beneficiaries of

zakat. However, the Holy Qur’an does not provide guidance relating to the

processes for the transferring of zakat from the person who pays zakat (the donor)

to the zakat recipient (the beneficiary) (Salim, 2006). Therefore, the

administration of zakat varies in many countries, particularly with regards to the

role of the government in the administration and redistribution of zakat. In Islamic

countries, such as Saudi Arabia and Pakistan, the payment of zakat is state-

2 Chapter 1: Introduction

enforced and collected by a government agency, whereas in other predominantly

Muslim but secular countries, such as Turkey and Syria, the government is not

involved in the collection and administration of zakat (Powell, 2009). In these

secular countries, the payment of zakat is not enforced and Muslims can give their

zakat directly to beneficiaries or charitable organisations. Other predominantly

Muslim countries, such as Bangladesh, Egypt, and Indonesia, have an

institutionalised zakat collection and administration system (Hoque, Khan, &

Mohammad, 2015). In these countries, the respective governments create zakat

agencies; however, Muslims are not obliged to give their zakat to the intermediary

institution created by the government.

This study focuses on organisations that collect and distribute zakat

(hereafter referred to as zakat agencies) in a voluntary giving regime. Notably,

and of interest in the context of this research, the notions of zakat and zakat

agencies exhibit specific features that cannot be found in other charitable

activities. Zakat is different from voluntary giving, in that it is a form of faith-

based alms-giving and is expected to be performed by every pious Muslim.

However, the payment of zakat in most majority Muslim countries is not state-

enforced (Stirk, 2015). To provide a country context, this study focuses on

Indonesian zakat agencies, as Indonesia is the largest Muslim-majority country

based on population (Hasan, 2015). According to the latest census in 2010, the

Indonesian population is 237 million, with 87.18% identifying as Muslim (BPS

(Statistics Indonesia), 2011).

As a country with the largest Islamic population in the world, the amount of

zakat is potentially quite substantial. It has been estimated that the potential

annual economic value of zakat in Indonesia could be as much as US$ 83 billion

(Firdaus, Beik, Irawan, & Juanda, 2012). The exact amount of zakat collected in

Indonesia is unknown, as most Muslims give zakat directly to beneficiaries

(Fauzia, 2008) and the majority of zakat agencies do not report the amount of

zakat collected to the Central Government-Sponsored Zakat Agency (the Central

BAZNAS) or the Ministry of Religious Affairs. However, the Central BAZNAS

has estimated that the amount of zakat collected by all zakat agencies in Indonesia

in 2012 to be approximately USD 2.3 billion (Rinaldo, 2013).


Traditionally, Indonesian Muslims have given zakat directly to beneficiaries

or to a local Imam (the local Islamic spiritual leader who is also the local mosque

leader), who in turn distributes the zakat to local beneficiaries (Fauzia, 2008). In

collecting and distributing zakat, the local Imam may be guided and assisted by a

committee drawn from members of the mosque. Local Imams collect zakat on an

ad-hoc basis, usually during Ramadan (a month in the Islamic calendar where

Muslims fast) (Fauzia, 2008). Because the scope of zakat collection and

distribution by local Imams is within a local community, there is arguably a high

level of transparency about the amount of zakat collected and the identity of

beneficiaries individually. Thus, it is possible to demonstrate informal

accountability without providing formal reporting due to the close connection

between donors and beneficiaries.

The collection and distribution of zakat changed in Indonesia as a result of

the establishment of local and provincial government-sponsored zakat agencies in

the 1970s and private zakat agencies in the 1980s (Abdullah, 1991). Muslims now

have more choices in distributing their zakat than prior to the establishment of

government-sponsored zakat agencies and private zakat agencies. However, there

are differences between local Imams and the government-sponsored zakat

agencies and private zakat agencies. While local Imams mostly only collect and

distribute zakat from and to the members of their congregation, government-

sponsored zakat agencies and private zakat agencies operate in larger areas. The

donors of government-sponsored zakat agencies and private zakat agencies might

not know every individual who administers a zakat agency and the beneficiaries

of the zakat agency. In these circumstances, informal means might be insufficient

to discharge accountability, thus requiring formal reporting. A growing body of

literature indicates the importance of demonstrating accountability to gain trust

and public support for charitable organisations (Buchheit & Parsons, 2006;

Furneaux & Wymer, 2015; Irvine, 2002; Parsons, 2003, 2007; Tinkelman &

Mankaney, 2007). Because transparency and accountability are required to build

trust, it is important to understand the notion of accountability from the

perspective of administrators and donors of zakat agencies.


Accountability1 can be defined as “the giving and demanding of reasons for

conduct” (Roberts & Scapens, 1985, p. 447). This definition implies that an

organisation has an obligation to explain its actions and the results of its actions

(Unerman & O'Dwyer, 2006b). The dissemination of information to stakeholders

is the key element of accountability and can be provided through formal and

informal channels (Gray, Bebbington, & Collison, 2006). Annual reports are

widely used as a mechanism to discharge accountability as they provide visibility

regarding the activities and performance of organisations (Connolly, Hyndman, &

McConville, 2012; Hyndman & McMahon, 2010; Torres & Pina, 2003; Tower,

1993). However, annual reports are not the only mechanism available to discharge

accountability. Accountability information can also be disseminated through

informal mechanisms, such as social relations and web reporting (Avina, 1993;

Connolly & Dhanani, 2013; Hammack, 1995). In the context of zakat agencies,

both formal and informal mechanisms may assist Muslims to obtain information

that is important for making an informed judgement about continuing or

discontinuing the giving of zakat to a particular zakat agency.

1.2 RESEARCH MOTIVATIONS

The motivation for this study arose from calls for zakat agencies to

demonstrate accountability echoed by the government, media, and zakat

practitioners. President Yudhoyono stated in his speech at a National Symposium

of Zakat organised by the Central Government-sponsored Zakat Agency (the

Central BAZNAS) in 2011 that “Many people are concerned that zakat agencies

are not accountable and zakat fund is not distributed to the eligible beneficiaries”

(RUU Zakat dan kesejahteraan umat, 2010). Likewise, the Minister of Religious

Affairs in his speech at the award-giving ceremony of the Central BAZNAS

Award 2015 for government-sponsored zakat agencies that had outstanding

performance asked government-sponsored zakat agencies and private zakat

agencies to improve their professionalism, public accountability, and ability to

foster public trust (BAZNAS, 2015; emphasis added). The Indonesian public also

demanded more accountability from zakat agencies, as seen in several media 1 A more comprehensive discussion of accountability is presented in the Theoretical Framework.


articles, for example, Kompas (Revianur, 2012) and Republika (Zuhri, 2013).

These articles argue that zakat agencies need to be transparent and accountable to

foster public trust.

Several authors have also argued that zakat agencies should demonstrate

accountability to foster trust (Fernandez, 2009; Halimatusa'diyah, 2015; Lessy,

2012; Powell, 2009). Powell (2009) argued that giving zakat is not only a matter

of religious duty; it is also influenced by trust and the accountability of the zakat

agency. Specifically, in selecting between giving directly to beneficiaries, a local

Imam, a government-sponsored zakat agency, or a private zakat agency, trust may

influence the decision of Muslims. Arguably, Muslims are more likely to give

their zakat to a zakat agency that is accountable than to a zakat agency that is not

accountable. On the other hand, there is public concern regarding the

accountability of zakat agencies that discourages Muslims from giving zakat to

zakat agencies (Lessy, 2012). For example, a lack of transparency means that

donors do not have information regarding the amount of zakat collected and

distributed (Lessy, 2012).

Although the President, the Minister of Religious Affairs, several authors,

and the public have asked for zakat agencies to be accountable, the practical

output of accountability has not been specified, especially in relation with to

whom, for what, and how accountability should be discharged by zakat agencies.

As a consequence, this has created confusion for zakat agencies, as reflected in the

following statement from the Chief of Forum Zakat (a peak body/an association of

zakat agencies), which stated “guidance on what should be reported by zakat

agencies to parliament does not exist and it is not clear what should be accounted

for by zakat agencies to government” (Revisi UU Zakat: Spirit transparansi dan

akuntabilitas pengelolaan zakat, 2008). These factors motivated this study to

investigate the understanding of accountability from the perspective of

administrators and donors of zakat agencies, especially in relation to the key

element of accountability: to whom, for what, and how.

This study is also motivated by the call for more research to understand the

notion of accountability in various organisations (Godwin, Northcott, & Stewart,


2011; O'Dwyer & Unerman, 2008; Unerman & O'Dwyer, 2006a) and the paucity

of research about accountability in Islamic faith-based charitable organisations

(Yasmin, et al., 2013). Yasmin et al. (2013) suggested that religious beliefs may

influence accountability practised by faith-based charitable organisations.

Previous research on the accountability of charitable organisations has mostly

concentrated on the accountability of Western or secular organisations (for

example Dhanani & Connolly, 2012; Hyndman & McDonnell, 2009; O'Dwyer &

Unerman, 2008). On the other hand, prior studies examining the accountability of

faith-based organisations have largely focused on religious organisations such as

the Church of England (Laughlin, 1988, 1990), the Salvation Army of England

(Irvine, 2002; Joannides, 2012), the Roman Catholic Church (Bigoni, Deidda

Gagliardo, & Funnell, 2013; Quattrone, 2004), the Wesleyan Methodists in New

Zealand (Cordery, 2006), State Islamic Religious Councils (Abdul-Rahman &

Goddard, 1998), and Hindu and Buddhist temples (Jayasinghe & Soobaroyen,

2009). Therefore, little is known about how accountability is understood and

exercised in Islamic faith-based charitable organisations. In addition, to the best of

my knowledge, no research has been published specifically investigating the

understanding of accountability in the context of Indonesian zakat agencies. This

study seeks to fill this gap and contributes to the literature on the accountability of

faith-based charitable organisations and, in particular, zakat agencies.

1.3 RESEARCH AIM, OBJECTIVES, AND QUESTIONS

It has been argued that accountability is a socially constructed concept and

different individuals may have a different understanding of accountability

(Ebrahim, 2003b; Shearer, 2002; Sinclair, 1995). The aim of this study is to

examine the understanding of accountability and identify potential gaps between

the expectations of donors in terms of disclosure and the disclosure practised by

Indonesian zakat agencies. In order to achieve the research aim, it was therefore

important to gain an understanding of accountability from the view and

perceptions of internal and external stakeholders, and to identify how

accountability is actually discharged by zakat agencies. The research aim was

supported by four research objectives.


The first objective of this study focuses on the understanding of

accountability from the perspective of internal stakeholders. Administrators were

selected to represent internal stakeholders as administrators are involved in the

daily activities of zakat agencies. It was expected that they would have a good

understanding of the accountability of zakat agencies. This research objective was

addressed through the following research questions.

RQ.1 How is accountability understood by the administrators of zakat agencies?

a) To whom do the administrators of zakat agencies believe zakat

agencies should be accountable?

b) What is the scope of accountability of zakat agencies according to the

administrators of zakat agencies?

c) What information (financial and non-financial) do the administrators

of zakat agencies consider necessary to be disclosed by zakat agencies

to discharge their accountability?

d) According to the administrators of zakat agencies, by what means

should zakat agencies discharge their accountability?

The second objective of this study is to gain an understanding of the

perceptions of external stakeholders of zakat agencies regarding the notion of

accountability. Donors were selected to represent external stakeholders. Donors

are an important resource provider to charitable organisations and their views

were deemed to be important (Ebrahim, 2003b; Waters, 2009). Because zakat

agencies share similarities with charitable organisations in terms of channelling

donations from donors to beneficiaries, the support of donors is also important for

zakat agencies. This research objective was addressed through the following

research questions:

RQ.2 How is accountability understood by the donors of zakat agencies?

a) To whom do the donors of zakat agencies believe zakat agencies

should be accountable?


donors of zakat agencies?


c) What information (financial and non-financial) do the donors of zakat

agencies expect and consider necessary to be disclosed by zakat

agencies to discharge their accountability?

d) According to the donors of zakat agencies, by what means should

zakat agencies discharge their accountability?

The third objective was to investigate the inter-relationship among the core

elements of accountability. A number of authors have suggested that inter-

relationship exists among the core elements of accountability: (1) to whom

accountability should be discharged (to whom); (2) the scope of accountability

and types of information to satisfy every aspect of the scope of accountability (for

what); and (3) mechanisms to discharge accountability (how) (Connolly,

Hyndman, & McConville, 2011; Hyndman, 1990, 1991; Stewart, 1984; Waters,

2009). However, previous studies have only partially explored the relationship

between the core elements of accountability and have not explored the inter-

relationship between all core elements of accountability. For example, Waters

(2009) only explored the relationship between the mechanism to disseminate

accountability (organisational website) and the scope of accountability (financial

accountability and information about audited financial statements, programmes,

and services). Waters (2009) did not take into account stakeholders (to whom)

who may use financial information from the internet. Therefore, this study also

aims to explore the inter-relationship between these core elements of

accountability. Because the nature of this study is exploratory, this study does not

predict the direction of inter-relationships between these core elements of

accountability. This research objective was addressed using the following research

question.

RQ.3 What inter-relationships exist amongst the core elements of accountability

in the context of zakat agencies?

An accountability gap can exist if inconsistencies occur between the

perceptions of administrators, the perceptions of donors, and the disclosure

practised by an organisation (Hyndman, 1990, 1991). Therefore, the fourth

research objective was to identify the possibility of an accountability gap, and to


identify additional disclosures that could improve the accountability of zakat

agencies. This research objective was addressed through the following research

question.

RQ.4 Is there an expectations gap in the scope and disclosure of zakat agency

accountability between administrators and donors?

a) What media and type of information is currently used and disclosed?

b) Do administrators and donors have different views on to whom, for

what, and how to discharge accountability?

c) Is there an expectations gap?

1.4 RESEARCH CONTRIBUTIONS

This study has both theoretical and practical contributions.

1. The novelty of this study lies in the context of study. This study

provides empirical insight about the understanding of accountability

within a specific context, namely in the context of Islamic faith-based

organisations in developing countries. While previous research has

provided rich descriptions and exploration of accountability within

Christian faith-based organisations and secular charitable organisations

in Western countries, there is a limited number of studies regarding the

accountability of Islamic organisations, especially those organisations

that administer zakat. The findings of this study aim to fill this gap.

2. This study identifies the stakeholders of Islamic faith-based charitable

organisations based on the perceptions of the administrators and donors

of zakat agencies. This study finds that the ultimate stakeholder of zakat

agencies is God. The existing literature mostly related a bond of

accountability to stakeholders (Stewart, 1984) with power derived from

the ownership of resources, regulation or contractual relationship

(Carroll, 1989; Cordery & Baskerville, 2011; Pfeffer, 1981). However,

this study finds that a bond of accountability can result from the

spiritual belief that God will ask accountability in the hereafter. This

finding indicates that power to hold accountability is more complex

than the current understanding.


3. In addition to God, several secular stakeholders are identified. These

stakeholders include resource providers (such as donors, volunteers, and

the board), regulators (such as government and the Central BAZNAS),

beneficiaries, and other stakeholders (such as media and academics).

Although administrators and donors acknowledge that zakat agencies

should be accountable to a broad range of stakeholders, the results of

the factor analysis suggest that two different classifications of

stakeholders exist. The primary stakeholders mostly consist of those

who have a contractual relationship or bond of accountability with zakat

agencies, such as donors and the government; while the secondary

stakeholders mostly consist of those who do not have a contractual

relationship, or only have a link of accountability, such as the media.

This finding supports the concept of “bonds and links of accountability”

proposed by Stewart (1984, p. 25); however, it differs from the

classification of stakeholders proposed by Carroll (1989) and Flack

(2007).

4. Based on the framework of Stewart’s (1984) ladder of accountability,

this study identifies the scope of accountability for zakat agencies.

Previous studies, for example, Laughlin (1988, 1990) and Yasmin et al.

(2013), also adopted this framework. The findings of the current study

confirm that Stewart’s (1984) ladder of accountability is applicable in

the context of zakat agencies. However, the use of Stewart’s (1984)

ladder of accountability in the context of Islamic faith-based charitable

organisations should be modified, as the accountability of zakat

agencies also includes Syari’ah accountability, amil fund

accountability, and ethics accountability. The finding regarding

Syari’ah accountability indicates that the scope of accountability of

zakat agencies also includes sacred accountability.

5. The results of factor analysis suggest that the scope of accountability of

zakat agencies can be clustered into ‘financial and sacred

accountability’ and ‘governance and performance accountability’. The

financial and sacred accountability factor consists of accountability for


finance, ethics, Syari’ah, and the amil fund; while ‘governance and

performance accountability’ consists of legal accountability, mission

accountability, governance, and performance accountability (efficiency,

effectiveness, and outcomes). Financial and sacred accountability can

be considered primary accountability, while governance and

performance accountability can be considered secondary accountability.

This finding provides a new insight into the understanding of sacred

and secular dichotomy. Previous studies have mostly found that sacred

and secular dichotomy exist (Laughlin, 1988, 1990) or do not exist

(Abdul-Rahman & Goddard, 1998; Bigoni, et al., 2013; Irvine, 2002).

The result of factor analysis provides empirical support for Laughlin

(2007), who argues that sacred and secular is a relative concept.

Financial accountability can be considered sacred if this scope of

accountability determines the sustainability of an organisation

(Laughlin, 2007). In the view of zakat agency donors, financial

accountability is as important as Syari’ah accountability, which

represents sacred accountability.

6. With regards to the type of information that should be disclosed by

zakat agencies, the administrators and donors of zakat agencies agreed

that zakat agencies should disclose financial and non-financial

information. Although donors expect non-financial information, the

finding indicates that administrators and donors place strong emphasis

on financial information.

7. Zakat agencies use several types of media to discharge accountability.

Although many donors do not have access to, and most do not read,

annual reports, they expect zakat agencies to disclose annual reports.

This finding indicates that donors expect zakat agencies to demonstrate

accountability using formal media.

8. While previous qualitative studies have identified that the types of

stakeholders, the scope of accountability, and the means of discharging

accountability were correlated (Connolly, et al., 2012; Kilby, 2006;


O'Dwyer & Boomsma, 2015), this study provides preliminary

quantitative evidence that to whom, for what (the scope of

accountability and type of information), and how accountability should

be discharged are statistically correlated. This finding makes a practical

contribution in regard to zakat agencies because the finding indicates

that every area of accountability requires different types of information

and media to discharge accountability.

9. This study provides evidence about to whom zakat agencies should be

accountable, the scope of accountability of zakat agencies, the

information needs of donors, and the media that should be used by

zakat agencies to disseminate accountability information. These

findings might be useful for regulators to determine the type of

information that should be disclosed by zakat agencies and the media

that should be used to discharge accountability. For example, this study

finds that all zakat agencies have a website and donors consider the

internet as a very important source of information. However, the

findings in this study indicate that the website has not been fully

utilised to discharge accountability. Therefore, it is recommended that

zakat agencies regularly publish their financial and non-financial

information on their website.

1.5 THESIS OUTLINE

As depicted in Figure 1.1, this thesis consists of nine chapters, as follows.

Chapter 1: Introduction

Chapter 2: A Contextual Understanding of Zakat: Its Meaning, Impost, and

Administration

This chapter provides a contextual understanding of zakat by presenting an

overview of the meaning of zakat, the subject of zakat and its rates, and the

history of zakat administration. This chapter also highlights the current zakat

administration and regulation in Indonesia.


Chapter 3: Literature Review and Research Perspective

This chapter discusses the empirical literature on accountability to provide

the justification for this research and to outline the research methodology of this

study. This chapter provides insight into the rationale for the demand of

accountability of zakat agencies. This is followed by a discussion of the previous

literature investigating accountability in the context of faith-based organisations.

The implications from the literature review are then discussed. This chapter also

highlights the philosophical perspective and research design adopted in this study.

Middle range thinking was selected as the philosophical perspective. Central to

middle range thinking is the view that existing theory is contextually incomplete

(skeletal) and empirical data is required to ‘flesh out’ the theory.

Chapter 4: Theoretical Framework

This chapter presents the core concepts of accountability: (1) who an

organisation should be accountable to (to whom); (2) what an organisation should

be accountable for and what kind of information should be disclosed by an

organisation to discharge accountability (for what); and (3) by what means an

organisation should discharge its accountability (how).

Chapter 5: Research Methods

Consistent with middle range thinking perspective, a mixed methods

approach was selected for data collection and analysis. A mixed methods

approach is appropriate for a study such as this, where different research questions

require different information and data analysis. The methods included interview,

survey, and content analysis. Interviews were used to collect data regarding the

understanding of accountability in the context of zakat agencies from the

perspective of administrators. A survey of donors was used to collect information

about the view of donors on the accountability of zakat agencies. In addition,

website and document analysis were conducted to identify the media used to

discharge accountability and information provided by zakat agencies.


Chapter 6: The Accountability of Zakat Agencies: Administrators’ Perceptions

This chapter presents the findings of the first research question regarding

administrators’ perceptions on to whom, for what, and how accountability should

be discharged by zakat agencies. The insights are based on the analysis of the

interview transcripts with administrators. The analysis of the interview data was

conducted by coding the data. The code was derived from existing theory (theory-

driven code) and the key themes that emerged from transcripts (data-driven code).

Chapter 7: The Accountability of Zakat Agencies: Donors’ Perceptions

This chapter presents the findings of the second research question regarding

the understanding of accountability from the perspective of donors of zakat

agencies and the third research question regarding the inter-relationship among

the core elements of accountability. The insights are based on an analysis of the

survey data. This chapter reports on: (1) the profile of the respondents; and (2) to

whom, for what, and how accountability should be discharged. Factor analysis

was used to condense variables in every core element of accountability.

Specifically, to answer the third research question, this chapter also reports the

results of a non-parametric correlation test on factor scores of the core elements of

accountability and the results of the multivariate analysis of variance in relation to

whom, for what, and how.

Chapter 8: The Accountability of Zakat Agencies: A Comparison between

Administrators’ and Donors’ Perceptions

The aim of this chapter is to establish if an accountability expectations gap

exists between the views of administrators (as presented in Chapter 6) and the

views of donors (as presented in Chapter 7) and, if so, explore the nature of this

expectations gap. This chapter consists of a comparison of administrator and

donor perceptions regarding the meaning of accountability, to whom zakat

agencies should be accountable, the scope of accountability, types of information

that should be disclosed, and the forms of media that should be used by zakat

agencies to disseminate accountability. To answer research question 4, this

chapter also reports the results of the comparison between media and the types of


information considered important by administrators and donors with the actual

media and types of information disclosed by zakat agencies.

Chapter 9: Summary, Recommendations, and Conclusion

This chapter provides the summary of this thesis, key contributions, the

implications for theory and practice, the limitations of this study, and

recommendations for future research.


Figure 1-1 Thesis Structure

Chapter 2: A Contextual Understanding of Zakat – Its Meaning, Impost, and

Administration • An overview of zakat • Imposition of zakat • Collection and administration of Zakat • History of Zakat administration in Indonesia • Zakat regulation and disclosure requirement in

Indonesia

Chapter 1: Introduction • Context • Research motivations • Research aims, objectives,

and questions • Research contributions • Thesis outline

Chapter 3: Literature Review • Why should zakat agencies be accountable? • Empirical evidence regarding sacred and secular accountability • Donor information requirement and accountability gap • Implication from literature review • Philosophical perspective to accounting research • MRT perspective • Limitation of MRT • Justification for the adoption of MRT

Chapter 5: Research Methods Mixed methods: Interview, survey, and document analysis


Chapter 9: Summary,

Recommendations, and Conclusion

Chapter 7: The Accountability of Zakat Agencies: Donors’ Perceptions

Empirical Details

Chatpter 8: The Accountability of Zakat Agencies: A Comparison between Administrators’ and Donors’ Perceptions

Chapter 4: Theoretical Framework • The meaning of accountability • To whom? • For what? • How to discharge accountability? • Inter-relationship among the core element of accountability • Theoretical understanding and research questions

Enrich Understanding

Guide Understanding

Chapter 2: A Contextual Understanding of Zakat: Its Meaning, Impost, and Administration 17

Chapter 2: A Contextual Understanding of Zakat: Its Meaning, Impost, and Administration

2.1 INTRODUCTION

Central to this study is the concept of zakat, its collection, administration,

and distribution. This chapter provides a contextual understanding of zakat. To

achieve this aim, this chapter is divided into seven sections. Section 2.2 provides

an overview of the meaning of zakat. Section 2.3 highlights the zakat base (what

zakat is imposed on) and its rates. Section 2.4 presents the history of zakat

administration, while Section 2.5 describes zakat administration in Indonesia. A

discussion regarding zakat regulation is presented in Section 2.6. Finally, Section

2.7 provides the summary of this chapter.

2.2 AN OVERVIEW OF ZAKAT

Zakat literally has two meanings: “purity” and “growth” (Samad & Glenn,

2010, p. 303); however, in a religious context, zakat is usually translated as ‘alms’

and is similar in meaning to the concept of ‘tithe’ within the Christian context

(Powell, 2009). Zakat is different from voluntary donations, because the

payment/contribution of zakat is considered to be a faith-based duty ordered by

God to Muslims who have assets and/or income above a certain threshold

(Retsikas, 2014).

Zakat is recognised as an essential element of worship in Islam. It is

considered to be one of the five pillars of Islam, along with the declaration of

faith, performing daily prayers, fasting during Ramadan, and the pilgrimage to

Mecca (Lewis, 2001). Zakat is mentioned 30 times in the Holy Qur’an (Ahmed,

2004), such as the following: “And in their wealth is the right of him who asked

and him who is needy” (51:19).

18 Chapter 2: A Contextual Understanding of Zakat: Its Meaning, Impost, and Administration

The beneficiaries of zakat are specified in the Holy Qur’an. The Holy

Qur’an (9: 60) determines eight categories of beneficiaries to whom zakat can be

given: (1) those who cannot meet their daily needs yet refrain from begging (faqir

or fuqara(pl)); (2) those who have resorted to charity (miskin or masakin (pl))2;

(3) those who collect and distribute zakat or zakat administrator (amylin or amil

(pl)); (4) new converts to Islam or those whose hearts have been inclined towards

Islam (mullafatul qulub); (5) for ransoming of slaves and captives (riqab); (6)

persons in debt or debtors (gharimin); (7) those who defend the way of God (fi-

sabilillah); and (8) travellers (ibn-as-sabil) (Ahmed, 2004).

Although the Holy Qur’an clearly states the eligible beneficiaries of zakat, it

does not provide guidance in relation to the allocation of zakat to every category

of beneficiary (Kuran, 2002). Al Qardawi (2000) suggested that the allocation of

zakat to every category of beneficiary should be dependent on the amount of zakat

collected and the urgency for assistance of every category. If the amount of zakat

collected is plenty, zakat must be distributed to all categories of beneficiary that

exist in a region. If a category of beneficiary requires more assistance than the

other categories, this category of beneficiary should receive more assistance than

the other categories. If the amount of zakat collected is small, the priority of

distribution should be given to the poorest (al Qardawi, 2000). This discussion

indicates that zakat agencies should have policies and procedures to ensure that

zakat is administered and distributed in accordance with the Holy Qur’an.

An individual or an organisation that collects, administers, and distributes

zakat is referred to as amil. There is a general agreement that an amil should not

take more than one-eighth of the zakat collected for an amil fund (Ariff, 1991b).

An amil fund is used to finance general and administrative expenses, including

staff salaries.

2 Several Islamic jurists, such as Abu Yusuf, Ibn al-Qasim, and Yaacob do not differentiate between the

meaning of fakir and miskin because they consider both categories to be poor and eligible beneficiaries of zakat (Mahamod, 2011).


2.3 IMPOSITION OF ZAKAT

There are two categories of zakat, zakat al-fitr and zakat al-mal. Zakat-al-

fitr is an annual poll tax that is due when the sun sets on the last day of Ramadan3

and must be paid before the Eid al-Fitr prayer (Siddiqi, 1991).4 Zakat-al-fitr can

be given in the form of cash or local staple food. Zakat al-mal (hereafter referred

as zakat) is an obligation of every Muslim who has assets or income above a

certain threshold or nisab to give a portion of their assets or income to eligible

beneficiaries (Bakar & Rashid, 2010).

During the era of the Prophet, gold and silver were the main currency of

exchange and the main sources of income for Muslims came from trading and

agricultural activities (Samad & Glenn, 2010). Therefore, the objects of zakat

during that era were gold, silver, inventory merchandise, agricultural produce, and

livestock. The imposition of zakat on wages and salaries was not practised during

the era of the Prophet. At the present time, many Muslims earn from wages,

salaries, or professional activities. Therefore, the majority of Islamist jurists

contend that zakat should be imposed on income from wages and salaries, and

professional activities (al Qardawi, 2000).

Table 2.1 reports the basic elements of zakat, including the base of zakat,

the threshold of zakat, the rate of zakat, and the due date of both zakat al-fitr and

zakat al-mal. The basic principles of zakat presented in Table 2.1 are applied in

Indonesia and quite similar throughout the majority of the Islamic world (Fauzia,

2008). These basic principles have been applied reasonably consistently

throughout the existence of Islam, as the primary sources of the jurisprudence of

zakat have been the Holy Qur’an and the tradition of the Prophet in dealing with

zakat (al Qardawi, 2000).5

3 The Ramadan is the ninth month of the Islamic Calendar during which Muslims undertake fasting. 4 The Eid-al-Fitr prayer is performed after sunrise on the first day after Ramadan has ended or 1st day of

Shawwal (the tenth month of the Islamic calendar). 5 Islamic jurists may differ in regard to several details about zakat, for example, on the role of the state in the

collection of zakat (see Section 2.4). In several Middle East states, the government appoints a mufti (a person with the highest religious authority) who has an authority to issue a fatwa (religious edict) on matters where Islamic jurists have a difference of opinion (Alterman & Hunter, 2004). In Indonesia, the government does not appoint a mufti. Several Islamic non-governmental organisations created an Indonesian Ulema Council (MUI) that usually issues a fatwa based on the consensus of its members


Table 2-1 Comparison of Zakat al-fitr and Zakat al-mal

Zakat al-fitr Zakat al-mal Zakat base and threshold

Zakat al-fitr is a poll-tax for every Muslim (including a baby born before the sun sets on the last day of Ramadan). The head of the household has an obligation to pay zakat on behalf of his family members.

(1) Zakat is imposed on the total amount of assets or income;

(2) the threshold for gold, cash, merchandise, and other financial assets is equivalent to the value of 85 grams of gold;

(3) the threshold for silver is 595 grams; (4) the threshold for agricultural products is 950

kilograms; (5) the threshold for grazing animals is 5 for

camels, 30 for bovine animals, and 40 for sheep and goats;

(6) the threshold for income from salaries and professional activities is equal to the threshold of gold (equivalent to the value of 85 grams of gold).

Rate 2 kg of local staple food such as wheat, dates, or rice (or can be paid in cash that is equal to the market value of 2 kg of local staple food).

(1) 2.5% of all types of income and assets, except for agricultural products;

(2) 5% of agricultural harvests from irrigated land; (3) 10% of agricultural harvests from non-irrigated

land; (4) 20% of buried treasure; (5) the rate of zakat for livestock depends on the

amount and category of the livestock (for details, see al Qardawi, 2000; Samad & Glenn, 2010);

(6) the amount of zakat can be based on the quantity (non-financial value) of the asset or the market value of the asset.

Due Date The obligation to give zakat al-fitr is due when the sun sets on the last day of Ramadan and must be paid before the Eid al-Fitr prayer. However, it may be paid before that date.

(1) Zakat for income from salary or professional activities must be paid promptly after the income is earned;

(2) Zakat for agricultural products also must be paid promptly after the agricultural crop is harvested;

(3) Zakat for assets such as gold, silver and livestock is due annually or after the ownership of each asset reaches one Islamic (lunar) calendar year.

(Sources: Ahmed, 2004; al Qardawi, 2000 ; Samad & Glenn, 2010)

2.4 COLLECTION AND ADMINISTRATION OF ZAKAT

The Holy Qur’an does not clearly state who must collect and administer

zakat (Fauzia, 2008). If guidance on a particular issue is not found in the Holy

(www.mui.or.id). Although Indonesian Muslims usually refer to a fatwa issued by MUI, it is worth noting that this fatwa is not part of the formal legal system.

http://www.mui.or.id/


Qur’an and the Sunnah,6 Muslims usually follow an Islamic legal pronouncement

(fatwa) issued by an Islamic scholar or jurist. Islamic jurists use several methods

to reach a decision that is consistent with Islamic principles, such as analogical

deduction, scholarly consensus, custom, public interests analysis, judicial

discretion, and others (Powell, 2009). Every jurist has a different preference for

the methods that they use to produce an Islamic legal pronouncement (Powell,

2009). There are four prominent Islamic jurists whose Islamic legal

pronouncements are followed by the majority of Muslims, namely Hanafi, Maliki,

Shafi’i, and Hanbali (Powell, 2009).

Because Islamic jurists use different methods to produce Islamic legal

pronouncements, they may have different opinions on a particular issue, including

matters that relate to zakat. Those who support the argument that zakat must be

collected and administered by the state mostly refer to the practice of zakat

administration during the life of the Prophet (al Qardawi, 2000). During his life,

the Prophet had the roles of head of state and head of religion. He appointed

several of his companions as zakat officers and instructed them to collect and

distribute zakat in the Arabian Peninsula (al Qardawi, 2000). After the Prophet

passed away, the four Rightly-Guided Caliphs7 replaced him as the head of state

and head of religion. During the eras of the Caliphs Abu Bakr and Umar, zakat

was collected and administered by the state, much like tax. This past practice is

used to justify the collection and administration of zakat by the state by those who

argue in favour of the role of the state in zakat collection.

During the era of Caliph Uthman, Islamic jurists classified assets subject to

zakat into two categories: ‘apparent assets’ and ‘non-apparent assets’ (al Qardawi,

2000, p. 117). ‘Apparent assets’ are assets that can be seen and counted by zakat

officers, such as agricultural produce and livestock, whereas ‘non-apparent assets’

are assets that cannot be easily seen and counted by zakat officers such as gold,

silver, or money because these assets can be easily hidden by the owner (al

6 Muslims believe that the Holy Qur’an is “the verbatim word of Allah or God, revealed to the Prophet

Muhammad”, while Sunnah or Hadith are recorded sayings and behaviours of the Prophet (Beekun & Badawi, 2005, p. 113).

7 The four Rightly-Guided Caliphs consist of Abu Bakr (632-634 A.C.), Umar (634-644 A.C.), Uthman (644-656 A.C.), and Ali (656-661 A.C.).


Qardawi, 2000). Caliph Uthman’s policy was that the state would only collect and

administer zakat from ‘apparent-assets’ because it was difficult to identify and

collect zakat from ‘non-apparent assets’ if the owner of assets was not cooperative

(Kahf, 2000). Uthman entrusted Muslims to calculate their zakat for ‘non-

apparent assets’ and distribute it directly to eligible beneficiaries (Kahf, 2000;

Samad & Glenn, 2010). Thus, the payment of zakat for ‘non-apparent assets’ then

became ‘a voluntary charitable activity’ that depended on an individual’s

conscience and religious piety.

Following the era of the four Rightly-Guided Caliphs, leaders of Islamic

states no longer have authority as religious leaders (Fauzia, 2008). There is a

separation between a political and religious leader. As a result, several Islamist

jurists have questioned the legitimacy of the state in the collection and

administration of zakat for both ‘apparent assets’ and ‘non-apparent assets’.

Jurists from the Maliki School of Law contend that the collection of zakat on both

‘apparent’ and ‘non-apparent’ assets must be state-enforced, while jurists from the

Hanafi and Shafi’i School of Law maintain that the government can only enforce

the collection of zakat for ‘apparent’ assets (al Qardawi, 2000). In contrast, jurists

from the Hanbali School of Law argue that the government may facilitate the

collection of zakat for both ‘apparent’ and ‘non-apparent’ assets, however,

Muslims are not obliged to give their zakat to the government (al Qardawi, 2000).

Because the Holy Qur’an and the Sunnah do not clearly state who must

collect zakat, and Islamic jurists have different opinions about the authority of the

State to enforce the collection of zakat, zakat collection and administration varies

across predominantly Muslim states (Kahf, 2000; Powell, 2009). A number of

Islamic states, such as Saudi Arabia and Pakistan treat zakat as a ‘tax’ that is

enforced and administered by a government authority, while a number of

predominantly Muslim states, such as Turkey and Syria, are not involved in the

collection and administration of zakat (Powell, 2009). Other predominantly

Muslim states, such as Egypt and Bangladesh, have facilitated the collection and

administration of zakat by creating a government-sponsored zakat agency,

however, the payment of zakat is voluntary (Powell, 2009). In states where the

payment of zakat is not enforced by law, the obligation to pay zakat is in practical


terms ‘voluntary’, as no institution or individual has a legal authority to impose its

payment and the government does not impose sanctions on individuals who do not

pay zakat (Ariff, 1991a; Salim, 2006).

2.5 HISTORY OF ZAKAT ADMINISTRATION IN INDONESIA

Islam was introduced to Indonesia by merchants from Gujarat, India, around

the 12th century (Wanandi, 2002) and has become the religion of choice for the

majority of the Indonesian population. The dominance of Islam is also reflected in

the number of mosques located within Indonesian communities – there were

approximately 644,000 mosques in 2010 (Melisa, 2012). Although the majority of

the Indonesian population is Muslim, Indonesia is not an Islamic country or a

totally secular country. It has a government ministry that is responsible for

administering religious affairs; however, religious choice and practice is left to

every individual. The freedom of religious choice and the practising of religious

obligations also extends to the giving of zakat.

Traditionally, Indonesian Muslims have given their zakat directly to the

poor or to the leader of their local mosque, who is usually the local Imam (Fauzia,

2008). The method of giving zakat to local Imams has been practised since the

beginning of Islam in Indonesia8 (Salim, 2008). During the Dutch colonisation

period,9 the colonial government prohibited native government officials from

being involved in the collection and distribution of zakat because the colonial

government was concerned that local government officials might misuse zakat,

which could lead to social unrest (Salim, 2008)10. Indonesia was under Japanese

occupation from March 1942 to August 1945 and the Japanese occupation

authorities were also not involved in the collection and administration of zakat

(Fauzia, 2008). Indonesia gained independence in 1945 and the newly established

government continued the Dutch and Japanese policy with regards to the

8 C. Snouch Hurgronje – a prominent Dutch orientalist - provided an explanation that Islam was introduced

to Indonesia by merchants, not by conquest of the Arabic Kingdom, therefore the tradition of enforcing zakat by the State is not recognised in Indonesia (Salim, 2008)

9 The Dutch colonisation period was from 1602 to 1943 (Kartodirdjo, 1987). 10 An example of the misuse of zakat funds during the colonial era was the unpaid loan by the Regent of

Cirebon. From 1903 – 1905, the Regent of Cirebon borrowed ƒ 400.00 from the Mosque Fund10 and this was not paid back until his death (Fauzia, 2008, p. 123).


collection and administration of zakat (Salim, 2008). Thus, local Imams played an

important role in the collection and distribution of zakat during these periods

(Abdullah, 1991; Fauzia, 2008).

A local Imam collects and distributes zakat within his local neighbourhood,

with both donors and beneficiaries coming from his local congregational

membership. In performing his duty, a local Imam may be guided and assisted by

a committee drawn from the membership of the congregation. This committee is

run by volunteers who work part-time and temporarily, mostly during Ramadan

(Fauzia, 2008). The local Imam and the committee administers the collection of

zakat, the selection of zakat recipients, and the distribution of zakat to people who

are eligible in their neighbourhood (Fauzia, 2008).

The Indonesian government’s policy towards zakat administration changed

slightly during the Suharto era (1965–1998). During the early years of his

presidency, there was increased public demand for the involvement of the Central

Government in zakat collection and distribution. In response to this demand,

Suharto tasked three senior military officers to establish a national zakat

collection agency. He also stated that he would act as a national amil until the

national zakat agency was established. Suharto urged all government officials to

support zakat collection by the State (Abdullah, 1991; Salim, 2008). In response

to Suharto’s appeal, several provincial and local governments created provincial

and local government-sponsored zakat agencies.11 For example, the Province of

11 The structure of BAZNAS follows the structure of Indonesian governmental system that consists of:

a. The Central Government b. Provincial governments. The executive head of the provincial governmental system is a Governor

who is directly elected by its citizens. There is also a parliament at the provincial level that monitors provincial government and produce legislation.

c. Local government. Local governments consist of a regency or city. A regency is led by a regent while a city is led by a mayor. A regency covers a rural area where most of its citizens depend on farming. A city is an urban area. Local parliament exists at the regency or city levels.

d. District. Regencies and cities are divided into districts. A district is led by a civil servant called “Camat”. There is no parliament at the district level.

e. Village. The district is divided into villages. Villages in cities are led by a civil servant appointed by the local government while villages in rural areas are led by a person who is elected by the villagers.

f. RW (Rukun Warga) and RT (Rukun Tetangga). A RT is an association of several households that live in a village. A RW is an association of several RTs. RW and RT are not part of a formal governmental system. The Chiefs of RT and RW are elected by individuals who live in a neighbourhood. The Chiefs of RT and RW are usually a local informal leader and have a good knowledge about poor households in their neighbourhood. Therefore, their voices are considered


Jakarta created a government-sponsored agency at the provincial level in 1968 and

the Province of East Kalimantan created a government-sponsored agency at the

provincial level in 1972 (Salim, 2008).

During his time as the national amil, Suharto was only able to collect zakat

of approximately Rp20 million annually (Salim, 2006). He considered the amount

of zakat collected to be too small and, therefore, resigned from his role as a

national amil and aborted the plan to establish a national zakat collection agency

in 1974 (Salim, 2006). Following his resignation, provincial and local government

zakat agencies continued to collect and distribute zakat at provincial and local

levels.

A provincial government-sponsored zakat agency (provincial BAZNAS) is

created by a provincial government, while a local government-sponsored zakat

agency (local BAZNAS) is created by a local government. There are 33 provincial

BAZNAS and 434 local BAZNAS (Meutia, 2012). A provincial BAZNAS

collects donations from the employees of the provincial government and

provincial government-owned companies. A local BAZNAS collects zakat

donations from the employees of the local government and local government-

owned companies and other individuals who live in the local city or regency.

Provincial and local BAZNASs receive funding from the level of government that

created them and are required to report to the provincial or local government that

created them.

Provincial and local BAZNASs faced public criticism in the 1980s.

Although provincial and local BAZNASs received support from local and

provincial governments, they did not perform well. Critics argued that provincial

and local BAZNASs did not provide sufficient information to the public about the

amount of zakat collected and the usage of zakat funds (Lessy, 2012), while

others stated that provincial and local BAZNASs did not have sufficient human

resources with the expertise to execute their programmes (Abdullah, 1991).

Consequently, provincial and local BAZNASs could not gain public trust and

important by government and zakat agencies. Zakat agencies usually ask for a recommendation from the Chief of RT and RW before giving assistance to a poor individual.


were only able to collect a small amount of zakat compared to the potential

economic value of zakat (Abdullah, 1991; Fauzia, 2008). This motivated a

number of pious and well-educated altruistic Muslims to create private zakat

collection agencies or Lembaga Amil Zakat (LAZ) (Fauzia, 2008). The first

private zakat agency was created by the employees of the Bontang LNG Company

in 1986. It was followed by the establishment of other private zakat agencies, such

as Dompet Dhuafa Republika and Pos Keadilan Peduli Umat, in the early 1990s.

The exact number of private zakat agencies is currently unavailable. Forum

Zakat – an association of zakat agencies12 – states on its website that the

membership of Forum Zakat is 200 zakat agencies. However, only 18 private

zakat agencies are officially registered with the Indonesian Taxation Office and

the Ministry of Religious Affairs (Halimatusa'diyah, 2015). The registered zakat

agencies have mostly been created by large private companies or large Islamic

not-for-profit organisations. Several not-for-profit organisations that collect zakat

have not sought legal status as an official private zakat agency due to the

difficulty in obtaining a licence from the Government (Fauzia, 2008). In addition,

regulations that prohibit unlicensed not-for-profit organisations from collecting

zakat are not enforced.

Private zakat agencies vary in many aspects, such as their size and the focus

of their activities. Large private zakat agencies operate across many regions in

Indonesia, whereas small private zakat agencies may only operate in one or two

regions. Several private zakat agencies focus on poverty eradication, while others

focus on Islamic proselytisation. A small private zakat agency collects

approximately AUD 150,000 of zakat, while the largest private zakat agency can

collect approximately AUD 10,000,000 of zakat annually (Meutia, 2012).

Most private zakat agencies are managed by full time professionals who

receive a salary for their work (Fauzia, 2008). The governance structure of a

private zakat agency generally consists of a Board of Trustees and executives.

12 Only two government-sponsored zakat agencies have become a member of the Forum Zakat.


Private zakat agencies do not receive funding from the government and Syari’ah13

prescribes that a zakat agency is only allowed to allocate one eighth of zakat

collected to finance its operating expenses. This Syari’ah provision restricts the

amount of zakat funds that can be used for administrative purposes. Therefore,

efficiency in collecting and distributing zakat is important (Evidia, 2012). This

indicates that financial performance is important for the survival of private zakat

agencies.

Although many private and provincial/local government-sponsored zakat

agencies exist, several Islamic scholars have argued that the Central Government

should be involved in the collection and distribution of zakat (Fauzia, 2008;

Lessy, 2012). This argument resurfaced following Suharto’s resignation in 1998.

The Parliament responded to this demand by passing Law 38/1999 on Zakat

Management that stipulated the establishment of a Central Government-sponsored

zakat agency. The Central Government established a national zakat agency or the

central Badan Amil Zakat National (BAZNAS) in 2001. Following the

establishment of the Central BAZNAS, three tiers of government-sponsored zakat

agencies exist and follow the structure of the Indonesian governmental system.

Law 38/1999 was subsequently amended by Law 23/2011 on Zakat

Management. It worth noting that both zakat management laws do not enforce the

payment of zakat. Both laws only advise Muslims to self-assess their zakat

obligation and pay their zakat to zakat agencies. Therefore, payment of zakat in

Indonesia is voluntary. Zakat Management Law 23/2011 gives dual roles to the

Central BAZNAS. First, as a national zakat collection agency that collects zakat

from the employees of the Central Government, Central Government-owned

companies, and national and multinational corporations that have a head office in

Jakarta to be distributed to eligible beneficiaries in all regions in Indonesia.

Secondly, the Zakat Management Law also gives authority to the Central

BAZNAS to issue zakat regulations and to monitor the collection and distribution

13 Syari’ah refers to Islamic rules based on the teachings of the Holy Qur’an and Sunnah that guides

Muslims on how they must/should behave in all spheres of life (El-Halaby & Hussainey, 2015; Rammal & Parker, 2012).


of zakat by other zakat agencies. Table 2.2 summarises and compares the three

different types of zakat agencies in Indonesia.


Table 2-2 Comparison of Three Zakat Agencies in Indonesia

Local Imam – Community-based Zakat Committees

Government-sponsored Zakat Agencies Private Zakat Agencies (LAZ) Central BAZNAS BAZNAS Province BAZNAS Local

Form Local Imam is a leader of local Mosque and is usually assisted by a community-based zakat committee.

An organisation created by the Central Government but does not form part of the governmental system.

An organisation created by a provincial government but does not part of the governmental system.

An organisation created a local government but does not part of governmental system

A not-for-profit organisation

Continuity of Organisation

• Temporary – ad-hoc. • Usually only collect zakat

during the fasting month. • The committee is usually

established before the fasting month and dissolved after the fasting month has ended.

Continuously Continuously Continuously Continuously

Report to Community President through the Minister of Religious Affairs Public

• Central BAZNAS • Governor • Public

• Central BAZNAS • BAZNAS Province • Regent or mayor • Public

• Central BAZNAS • Public

Governance Local Imam assisted by a community-based zakat committee

• A board and executive. • Board members consist of 3

government officials and 8 public representatives.

• Appointed by the President based on a recommendation from Parliament.

• The executive and staff consist of full time paid employees and they are not civil servants.

• A board and executive. • Board members consist of 5

persons • No government officials sit

on the board • The executive and staff

consist of full time paid employees and they are not a civil servant.

• A board and Executive. • Board members consist

of 5 persons • No government official

sits in board • The executive and staff

consist of full time paid employees and they are not a civil servant.

• Board and executive • The composition of

board and executive varies across private zakat agencies

• The executive and staff consist of full time paid employees

Board Tenure Ad-hoc Every term is 5 years and the maximum tenure is 2 terms or 10 years

Every term is 5 years and the maximum tenure is 2 terms or 10 years

Every term is 5 years and the maximum tenure is 2 terms or 10 years

Not regulated by legislation and depend on every organisation policy


Local Imam – Community-based Zakat

Committees

Government-sponsored Zakat Agencies Private Zakat Agencies (LAZ) Central BAZNAS BAZNAS Province BAZNAS Local

Management Local Imam assisted by a community-based committee

Professional (Full time-paid staff) Professional (Full time-paid staff)

Professional (Full time-paid staff)

Professional (Full time-paid staff)

Legal Basis Formed by the members of a local mosque congregation

President Decree Governor Decree Regent or Mayor Decree Foundation based on legal deed

Funding Zakat (Amil Fund)

• Zakat (Amil Fund) • The Central Government

• Zakat (Amil fund) • Provincial government

• Zakat (Amil Fund) • Local government

Zakat (Amil fund)

Working Area Local community All regions in Indonesia Provincial, according to the geographical region of the provincial government although it is not prohibited to distribute zakat to other provinces.

Local, according to the geographical region of the local government, although it is not prohibited to distribute zakat to other regions.

Depends on the size of LAZ, a large LAZ can cover all regions in Indonesia but a small LAZ may only focus on a local or a provincial area.

Donors Local Muslims The employees of: • The Central Government

institutions • State-owned companies. • National and multinational

private (for-profit) companies

The employees of: • Provincial government

institutions • Provincial government-

owned companies

The employees of: • Local government

institutions, • Local government-owned

companies • Muslims who reside in a

local region.

• Muslims from all regions in Indonesia.

• Private zakat agencies can open a branch at every province or region.

Beneficiaries Local Muslims Muslims in all regions in Indonesia

Muslims who live in a province where the provincial BAZNAS is established.

Muslims who live in a city or regency where the local BAZNAS is established.

Muslims in all regions in Indonesia

Programmes and activities

Giving financial assistance to poor people

Focuses on community development, poverty eradication, health, education, Islamic proselytistion and disaster relief assistance, for example, merit-based scholarships for students from low income families, free medical services, and financial assistance for small businesses.

Similar to the programmes and activities of the Central BAZNAS because provincial BAZNASs follow the programmes and activities of the Central BAZNAS

Ssimilar to the programmes and activities of the Central BAZNAS, because local BAZNASs follow the programmes and activities of the Central BAZNAS

Every private zakat agency has a different focus but their activities are mostly related to poverty eradication, health, education, providing humanitarian assistance, Islamic proselytisation, and disaster relief assistance.

Source: Fauzia (2008, p.203)


2.6 ZAKAT REGULATION AND DISCLOSURE REQUIREMENT IN INDONESIA

Zakat Management Law 39/1999 was the first regulation that regulated

reporting and disclosure information by zakat agencies. Law 39/1999 states that

all government-sponsored zakat agencies must report to Parliament annually,

while private zakat agencies were not obliged to report to Parliament. However,

Law 39/1999 did not state what should be reported by government-sponsored

zakat agencies. Law 39/1999 also states that zakat agencies can appoint a public

accountant to audit their financial statements. Because Law 39/1999 only states

that “zakat agencies can appoint public accountants to audit their financial

statement”, it implies that a financial audit is not mandatory. Although it is not

mandatory, several private zakat agencies voluntarily appoint public accountants

and publish the results of their audits (Fauzia, 2008).

The provision for zakat agencies to undertake a voluntary audit has

prompted the Indonesian Institute of Accountants (Ikatan Akuntan Indonesia or

IAI), as the accounting standard setter in Indonesia, to issue PSAK (Pernyataan

Standar Akuntansi Keuangan) 109 on Accounting Standard for Zakat and Islamic

Voluntary Donations on 6 April 2010. This accounting standard serves as a guide

for zakat agencies on the content of information that should be reported in a

financial statement. Although the accounting standard is not part of the legislation

in Indonesia, a zakat agency must comply with the accounting standards issued by

the IAI to obtain an unqualified audit opinion.

PSAK 109 states that general purpose accounting standards apply to zakat

agencies, except for matters that are specifically regulated in this standard, such as

the requirement to report halal and non-halal funds separately. According to this

standard, the financial statements of the zakat agency consist of:

1. balance sheets (statement of financial position);

2. statement of changes in funds;

3. statement of changes in managed assets;

4. statement of cash flows;


5. notes to the financial statements.

In their financial statements, zakat agencies must:

1. separately disclose funds from zakat, funds from voluntary donations,

funds for the amil, and funds from non-halal14 sources;

2. disclose the policy in the zakat distribution, such as the policy of

selecting beneficiaries;

3. disclose the policy in allocating zakat funds to beneficiaries and amil

(the proportion for beneficiaries and for the zakat administrators);

4. disclose the methods used to determine the fair value of non-monetary

zakat;

5. disclose information about the amount of zakat used to finance the

activities of zakat agencies and the amount of zakat distributed to

beneficiaries;

6. disclose any related party transactions between zakat administrators and

zakat beneficiaries.

In addition to financial information, PSAK 109 states that zakat agencies

must disclose performance information in collecting and distributing zakat.

However, this standard does not provide further guidance on the definition of

performance, how to measure performance, and what kind of performance

information should be disclosed by zakat agencies.

Zakat Management Law 38/1999 was amended by Zakat Management Law

23/2011 to improve the accountability and transparency of zakat agencies

(Islahudin, 2012). This new law states that all zakat agencies must be audited

without exception, even small agencies. Article 19 Zakat Management Law

23/2011 stipulates that every organisation that collects and distributes zakat is

required to submit a report to the Central BAZNAS. The report must contain audit

information about zakat collection and distribution. Zakat Management Law

14 Non-halal funds are all revenues from sources that are not permissible according to Syari’ah, such as

interest from a non-Islamic bank.


23/2011 also states that the Central BAZNAS must report to the Central

Government on the usage of government funding, the administration of zakat

collected by the Central BAZNAS, and a national aggregated account of zakat

collected by all zakat agencies in Indonesia.

In addition, government issued Government Regulation 14/2014 on the

Implementation of Zakat Management Law. This Government Regulation

provides guidance relating to the implementation of Zakat Management Law.

Chapter IX Article 76 Government Regulation 14/2014 states that zakat agencies

must report to the Central BAZNAS. This report must contain “accountability and

performance [information] on the utilisation of the zakat fund and other voluntary

donations”. However, this regulation does not provide further explanation

regarding the contents of this accountability and performance information.

Furthermore, this legislation also does not specify whether zakat agencies must

publish their audited financial reports to the public.

2.7 SUMMARY

This chapter has provided an overview about zakat and zakat administration.

Zakat is different from voluntary charitable giving, as it is a religious duty and the

beneficiaries of zakat are determined in the Holy Qur’an. However, the Holy

Qur’an is silent on who should collect and administer zakat. Because the Holy

Qur’an does not clearly specify who must collect and administer zakat, the system

of zakat collection and distribution is different in every Muslim dominated

country.

In Indonesia, the government takes a voluntary approach with regards to the

payment, collection, and administration of zakat. Traditionally, Muslims gives

zakat directly to beneficiaries or local Imams. The government created

government-sponsored agencies to collect and administer zakat in 1968, while the

first private zakat agency was established in 1986. Therefore, there are three types

of zakat agencies in Indonesia: local Imams; government-sponsored zakat

agencies; and private zakat agencies. This study explores the understanding of

accountability from the perspective of both the administrators of zakat agencies

and the donors.

Chapter 3: Literature Review and Research Perspective 35

Chapter 3: Literature Review and Research Perspective

3.1 INTRODUCTION

The aim of this chapter is to discuss the empirical literature on

accountability in faith-based organisations and the research perspective adopted in

this study. This chapter is structured as follows. Section 3.2 discusses why zakat

agencies should be accountable. This is followed by a discussion of the empirical

evidence on accounting and accountability in faith-based organisations in Section

3.3. Section 3.4 highlights donor’s information requirements and the

accountability gap. The implications from the literature review for the current

study are discussed in Section 3.5. Following this, the philosophical perspectives

adopted in this study are discussed in Sections 3.6 to 3.9. Finally, Section 3.10

provides a summary of this chapter.

3.2 WHY SHOULD ZAKAT AGENCIES BE ACCOUNTABLE?

Accountability is important for any organisation and giving an account is “a

pervasive feature of organisational and social life” (Roberts, 2001, p. 1555).

However, justification is required as to why an individual or an organisation has

an implicit and/or explicit obligation to render an account to another (Day &

Klein, 1987). The obligation to give account can arise from a transfer of resources

from resource providers to an organisation (Cordery & Baskerville, 2011;

Ebrahim, 2003b; Hyndman & McMahon, 2010).

Most organisations are not self-sufficient; therefore, they require financial

and non-financial resources from individuals or other organisations. Resources are

not free to obtain, because resource providers expect their interests to be satisfied

by the organisation that received the resources (Hill & Jones, 1992). For example,

shareholders provide financial capital to a private (for-profit) organisation,

expecting that the private organisation will provide a return on their investment. In

charitable organisations, resource providers, such as donors and volunteers, do not

36 Chapter 3: Literature Review and Research Perspective

receive a direct benefit from providing resources because the resources are used

for the benefit of beneficiaries. Although resource providers do not receive a

direct benefit from providing resources to a charitable organisation, they do

expect that the organisation will use the resources entrusted to achieve

organisational missions that the donors support. To assess to what extent an

organisation has used its resources to achieve its organisational mission, the

disclosure of information is needed. Therefore, transfer of resources provides

legitimacy for resource providers to demand accountability from an organisation.

Accountability is also linked to trust and the continuity of support from

society. Many studies have indicated that accountability can induce trust and trust

is required to attract resources (Furneaux & Wymer, 2015; Palmer, 2013; Ryan &

Irvine, 2012a; Swift, 2001; Yasmin, et al., 2013). Trust is particularly important

for organisations that are involved in a non-reciprocal transfer of resources, such

as charitable organisations. Because the welfare of resource providers is not

affected by the activities of charitable organisations, resource providers can easily

sever their support of a charitable organisation if they find a charitable

organisation is not trustworthy. Resource providers are more likely to trust

charitable organisations that are accountable than charitable organisations that are

not accountable (Furneaux & Wymer, 2015). Therefore, demonstrating

accountability by providing information to justify the appropriateness of the usage

of resources is important for charitable organisations.

Yasmin et al. (2013) claimed that trust for an organisation can be based on

identity (“identity-based trust”) or knowledge (“knowledge-based trust”) (p. 117).

In identity-based trust, familiarity with individuals who administer an organisation

creates trust, while in knowledge-based trust, it is through familiarity with the

activities of an organisation that trust is developed (Yasmin, et al., 2013).

Accountability can create and foster knowledge-based trust because it can be used

to demonstrate a good stewardship of resources (Broadbent, Dietrich, & Laughlin,

1996; Connolly, et al., 2011, 2012; Furneaux & Wymer, 2015; Ijiri, 1983;

Parsons, 2007; Swift, 2001; Tinkelman & Mankaney, 2007).


The importance of demonstrating accountability to foster trust is also true

for zakat agencies (Fernandez, 2009; Halimatusa'diyah, 2015; Lessy, 2012;

Powell, 2009). Similar to charitable organisations, zakat agencies also engage in

non-reciprocal transfers of resources because zakat agencies collect zakat and

other donations from Muslims to support their charitable activities for the benefit

of beneficiaries (Fauzia, 2008). While the donors of zakat agencies do not expect

to receive direct material benefit from giving zakat to zakat agencies, a zakat

agency still needs to provide a range of information, such as the amount of zakat

collected and the usage of the zakat funds to demonstrate its accountability. By

disclosing accountability information, it is expected that public trust in zakat

agencies will increase, as well as the number of Muslims who give zakat to them.

Another reason for why a charitable organisation should be accountable is

the increasing competition for donations in charitable sectors. A number of

authors have argued that competition between charitable organisations for

donations encourages charitable organisations to disclose accountability

information (Connolly & Hyndman, 2004; Schmitz, Raggo, & Bruno-van

Vijfeijken, 2012). Several charitable organisations use accountability to

demonstrate that they are better than other charitable organisations; in other

words, accountability gives them a competitive advantage over their competitors

(Hyndman & McMahon, 2010; Schmitz, et al., 2012).

Indonesian zakat agencies also operate in a competitive environment

because many zakat agencies collect zakat. Furthermore, Indonesian Muslims also

have choices regarding whether to give zakat directly to beneficiaries or to a zakat

agency. Arguably, accountability can be used by a zakat agency to gain a

competitive advantage over its competitors to attract donations. Muslims are more

likely to give zakat to a zakat agency that is accountable than to a zakat agency

that is not accountable (Powell, 2009).

On the other hand, limited disclosure of information can discourage

Muslims from giving zakat to zakat agencies. An example of limited disclosure

that discourages Muslims from giving zakat to zakat agencies was reflected in a

study about peasants’ resistance to giving zakat to the Malaysian Zakat Agency


(Scott, 1987). Scott (1987) noted that Malay peasants described the Malaysian

Zakat Agency as “something of a Bermuda Triangle into which their contributions

disappear, never to be seen again” (p. 433). This does not mean that the Malaysian

Zakat Agency misappropriated zakat funds, but that a lack of transparency and

communication provided the public with limited knowledge about the usage of

zakat (Scott, 1987). As a result, Malay peasants only gave a portion of their zakat

to the Malaysian Zakat Agency and distributed the rest of their zakat directly to

poor individuals in their neighbourhood (Scott, 1987). A lack of transparency in

zakat distribution also occurred in Indonesia (Lessy, 2012), in which it was argued

that “if they (Muslims) give zakat through institutions they might not know who

would receive the zakat” (p. 112).

The rationale for a charitable organisation to be accountable also emanates

from legal requirements. Crofts (2014) provided evidence that regulation can

drive an organisation to be accountable. Usually a market mechanism is used to

force an organisation to be accountable; however, this mechanism is absent in

charitable organisations, which do not have shareholders (Collier, 2008; Goodin,

2003). In the absence of shareholders and a market mechanism, regulations are

required to ensure that the acts of a charitable organisation are in accordance with

the interests of their stakeholders (Connolly, et al., 2011; Hyndman & McDonnell,

2009; Weidenbaum, 2009). Regulations provide an explicit expectation about

obligation that should be met by an organisation and lead to legal accountability

(Crofts, 2014; Hill & Jones, 1992). For example, the Internal Revenue Service

(the US tax authority) requires not-for-profit organisations in the US to publish

their tax return forms (Form 990), making the financial and non-financial

information of not-for-profit organisations accessible to the general public

(Ebrahim, 2009). While regulations for the disclosure of information are limited,

legislation requires zakat agencies to report regularly to the Central BAZNAS and

government, indicating a legal obligation to provide information about the usage

of zakat to the government and the Central BAZNAS.


3.3 EMPIRICAL EVIDENCE REGARDING SACRED AND SECULAR ACCOUNTABILITY IN FAITH-BASED ORGANISATIONS

The main characteristic of faith-based organisations is the influence of

religious teaching on their identity and mission (Berger, 2003). A faith-based

organisation is not necessarily involved in religious activities, however, their

values are shaped by religious beliefs (Yasmin, et al., 2013). The influence of

religious beliefs can be very dominant in faith-based organisations (Goodin,

2003), influencing their views on the importance of financial accountability.

Because financial accountability is usually disseminated through financial

reporting (Stewart, 1984), discussion of financial accountability in faith-based

organisations also involves the role of accounting and financial reports in the

accountability of faith-based organisations.

The literature on accountability in faith-based organisations is dominated by

debate focused on sacred and secular tension in faith-based organisations.

Laughlin (1988, 1990) introduced the concept of ‘sacred versus secular’ when he

investigated the accountability of the Church of England. He described sacred and

secular affairs as mutually exclusive. Accounting is a secular activity that

facilitates secular accountability. As a secular activity, accounting should not

interfere with the core sacred activity of the Church in preserving the Christian

belief. The Church will support secular accountability practices, if these activities

do not interfere with the sacred mission of the Church. The existence of a sacred

and secular divide was cautiously supported by Booth (1995). Although he

supported its existence, he admitted that an individual’s belief, and the need for

external resources, might influence the level of support or opposition to secular

activities in the Church (Booth, 1995).

The existence of sacred and secular tension has been questioned by a

number of commentators (e.g. Hardy & Ballis, 2005; Irvine, 2002; Jacobs &

Walker, 2004; Jayasinghe & Soobaroyen, 2009; Quattrone, 2004). These authors

argued that secular accountability in religious organisations is influenced by many

elements beyond the sacred and secular dichotomy. Focusing on the role of

financial reporting in the accountability of the Salvation Army in England, Irvine

(2002) found that secular accountability mechanisms, such as a financial reports,


were important for the Salvation Army to gain public support. She argued that

sacred and secular tensions might only occur in well-established religious

organisations that do not depend on public funding (Irvine, 2002). In the Roman

Catholic Church, Bigoni, Gagliardo, and Funnell (2013) also found that

accounting is used to provide assurance that the wealth of the Church is used to

achieve religious agendas. Therefore, the accountability of faith-based

organisations is impacted by the need for external resources.

On the other hand, some researchers have suggested that the development of

accountability in religious organisations is more complex than the sacred and

dichotomy and the need for resources (Abdul-Rahman & Goddard, 1998;

Jayasinghe & Soobaroyen, 2009; Quattrone, 2004). Based on an investigation into

the development of sophisticated accountability practices in the Society of Jesus

from the 16th to the 17th centuries, Quattrone (2004) suggested that the sacred and

secular dichotomy and the need for external resources is not sufficient to explain

the role of accounting in religious organisations. He maintained that the

development of accounting in a religious organisation is a result of the interaction

of many elements, such as theological, religious, institutional, and social factors.

Jacobs (2005) argued that sacred and secular tension depends on the religious

beliefs of every individual who leads an organisation and reflects the worldview

of Christians. Drawing on Studstill (2000), Jacobs (2005) suggested that sacred

and secular affairs are not mutually exclusive but rather a continuum of

experience. The position of individuals in this spectrum depends on their

perceptions, values, and attitudes toward secular and religious activities.

The accountability of faith-based organisations is also influenced by the

attitude of several organisational actors to the role of accounting to discharge

accountability. The presence of occupational groups that support or oppose the

use of accounting for accountability can influence the role of accounting in faith-

based organisations (Booth, 1993). Abdul-Rahman and Goddard (1998)

investigated the role of accounting in management and accountability in two

Malaysian Islamic organisations. Although the individuals who managed these

organisations shared similar understandings of sacred and secular affairs, the role

of accounting was very different in these organisations. Thus, the authors argued


that the sacred and secular dichotomy was not sufficient to explain the role of

accounting in the accountability of these Islamic religious organisations (Abdul-

Rahman & Goddard, 1998). They contended that the attitude of leaders towards

accounting determines the role of accounting in accountability. If the leaders

consider accounting information to be useful, accounting will play an important

role in the discharge of accountability, otherwise accounting is considered to be an

insignificant activity in organisational life.

Laughlin (2007) argued that secular and sacred activities are relative

concepts, and that all core and important activities for an organisation are

considered sacred activities, while less important activities are considered secular

activities. Therefore, the understanding of sacred and secular differs in every

organisation. An organisation might consider financial accountability to be a

sacred activity, while another organisation might consider financial accountability

to be a secular activity (Laughlin, 2007). As an example, Laughlin (2007)

suggested that accounting is a sacred activity in a for-profit organisation, but not

in the Church of England.

Crofts (2009) argued that the debate on sacred and secular accountability in

a faith-based organisation is caused by the ambiguity of the classification of

financial accountability as either a sacred or secular activity. If financial

accountability is considered to be part of stewardship activities, it will be

considered a sacred activity and important (Cordery, 2006; Crofts, 2009).

Otherwise, financial accountability will be considered a secular activity and less

important than sacred activities.

Previous reviews of the literature have indicated that the accountability of

religious organisations is influenced by many factors, such as the views on sacred

and secular affairs (Crofts, 2009; Laughlin, 2007), the need for external resources

(Bigoni, et al., 2013; Irvine, 2002), the religiosity of individuals (Booth, 1993;

Jacobs, 2005), the presence of occupational groups and organisational actors that

support or oppose the use of accounting (Abdul-Rahman & Goddard, 1998;

Booth, 1993), the level of trust for an organisation (Jayasinghe & Soobaroyen,

2009), and the understanding of external stakeholders regarding the notion of


accountability (Hardy & Ballis, 2013). However, these studies focused only on

one type of faith-based organisation, that is, religious organisations such as

churches or temple (Bigoni et al., 2013; Hardy & Ballis, 2013; Irvine, 2002; Jacob

2005; Jayasinghe & Soobaroyen, 2009). Therefore, an investigation into how

accountability is understood and practised in different types of faith-based

organisations is required to enrich understanding of the notion of accountability.

3.4 DONOR’S INFORMATION REQUIREMENTS AND THE ACCOUNTABILITY GAP

As discussed in Section 3.2., resource providers can legitimately ask an

organisation to give an account. Resource providers can sever their support to an

organisation if they consider the organisation is not accountable because the

organisation cannot provide information that satisfies the need of resource

providers. Thus, it is crucial for an organisation to disclose relevant and

appropriate information for accountability purposes.

Previous accountability studies in the not-for-profit sector have pointed to

the existence of an accountability gap, because the information provided by an

organisation does not meet the information required by donors (Connolly &

Hyndman, 2004; Hyndman, 1990, 1991). Hyndman (1990) asked donors to rank

the importance of 14 types of information that can usually be found in annual

reports. He then compared the information preferred by donors with information

that could be found in annual reports. His study concluded that an accountability

gap existed because information deemed important by donors was not available in

the annual reports. For example, donors consider information about organisational

goals and performance to be important, but this information is not provided by

not-for-profit organisations. On the other hand, the most frequently disclosed

financial information for not-for-profit organisations, such as an audited funds

flow statement and audited balance sheets, is considered the least important

information by donors.

Further study by Hyndman (1991) suggested that this accountability gap

was not caused by a lack of understanding of the types of information required by

external stakeholders. Hyndman (1991) found that the administrators and the


auditors of not-for-profit organisations are aware that performance information is

important for donors but they do not disclose this information. He indicated that

the accountability gap might be caused by limited motivation to provide

performance information and complacency regarding the adequacy of existing

reporting practices (Hyndman, 1991).

Although smaller, such an accountability gap was also observed in

subsequent studies in the UK. Connolly and Hyndman (2004) compared

performance information disclosed by British and Irish charities with information

required by the donors identified in Hyndman’s (1990) study. They found that the

disclosure of several performance indicators increased; however, the

accountability gap still existed and the disclosure of efficiency information, such

as administration costs to total costs ratio decreased significantly (Connolly &

Hyndman, 2004). Connolly and Hyndman (2004) suggested that cost constraints,

the possibility of information misinterpretation, and satisfaction with the existing

reporting practices might discourage charitable organisations from voluntarily

disclosing accountability information.

Ryan and Irvine (2012a) found that Australian not-for-profit organisations

do not disclose sufficient information to explain unusual expenditure patterns in

their annual reports. Their study indicated that this lack of narrative information

can lead to an accountability gap. While their study does not make a comparison

between the expectation of stakeholders and the information provided by a not-

for-profit organisation, their studies has identified that not-for-profit organisations

may not sufficiently disclose information to their stakeholders and this can lead to

an accountability gap.

3.5 IMPLICATIONS FROM THE LITERATURE REVIEW

A number of studies have investigated accountability in the context of faith-

based and secular not-for-profit organisations. Berger (2003) defined a faith-based

organisation as an organisation in which its mission is derived from religious

teachings. Based on this definition, zakat agencies can be classified as a faith-

based organisation because zakat agencies are created to collect and distribute

zakat or Islamic faith-based alms giving. However, zakat agencies differ from


most faith-based organisations investigated in previous studies because zakat

agencies are only involved in charitable activates and do not provide religious

services; previous studies have mostly focused on the accountability of

organisations that provide religious services, such as a church or temple (Cordery,

2006; Irvine, 2002; Jacobs & Walker, 2004; Jayasinghe & Soobaroyen, 2009;

Laughlin, 1988, 1990; Quattrone, 2004) or in the context of developed countries

(Crofts, 2009, 2014; Yasmin, et al., 2013). In the context of secular charitable

organisations, previous studies have demonstrated the existence of an

accountability gap (Connolly & Hyndman, 2004; Hyndman, 1990, 1991). This

suggests that there is scope to make a significant contribution to the literature by

examining the understanding of accountability in a different organisational

context, that is, Islamic faith-based charitable organisations in a developing

country.

This study aims to fill this gap by investigating the accountability of

Indonesian Islamic zakat agencies. As discussed in Section 3.2, zakat agencies are

similar to charitable organisations because zakat agencies engage in a non-

reciprocal transfer of resources by collecting and distributing faith-based alms

giving. Therefore, this study extends the literature on accountability by

investigating the understanding of accountability in Islamic faith-based charitable

organisations. The following sections highlight the research perspective adopted

to investigate the accountability of Indonesian zakat agencies.

3.6 PHILOSOPHICAL PERSPECTIVE TO ACCOUNTING RESEARCH

Every research project should be based on a set of basic beliefs about the

world (Laughlin, 1995). These basic beliefs are referred to as ‘worldviews’

(Creswell, 2009) or ‘paradigms’ (Guba & Lincoln, 1994). Research paradigms

guide the whole process of inquiry and provide perspectives or lenses for

explaining or understanding an empirical phenomenon (Laughlin, 2007).

Accountability, which is the main focus of this study, is a socially constructed

concept (Bovens, 2007; Cooper & Owen, 2007; Messner, 2009), a chameleon like

phenomenon that may be interpreted differently by different people in different

contexts (Sinclair, 1995). Thus, this study subscribes to the view that


accountability is a product of human interaction and accepts that a comprehensive

accountability theory may not exist.

Research paradigms represent the assumptions that a researcher makes

about the nature of social science and the nature of society (Burrell & Morgan,

1979; Chua, 1986; Hopper & Powell, 1985). The nature of social science consists

of four interconnected elements – ontology, epistemology, human nature, and

methodology – while the nature of society can be assumed to be either orderly or

disorderly (Burrell & Morgan, 1979, p. 1&10). These four elements are distinct,

but inter-related in such a way that a certain position in one element will influence

the position that should be taken in other elements (Chua, 1986; Hopper &

Powell, 1985).

Ontology refers to the basic assumptions about the fundamental nature of

the empirical phenomenon being investigated (Neuman, 2011). There are two

opposing positions within social science: realism and nominalism (Chua, 1986). A

realist will argue that reality exists external to the observer and can be discovered

using scientific methods (Hopper & Powell, 1985). In contrast, a nominalist will

argue that reality that is independent from human perception does not exist,

because social reality consists of labels and concepts that are constructed by

humans during their interactions (Chua, 1986).

Epistemology deals with the issue of how researchers understand the

phenomenon being investigated, what the nature of the relationship between the

researcher and the object of study is, and what criteria should be used to determine

the validity of the observer’s understanding about the reality (Neuman, 2011).

Epistemological positions are related to assumptions about reality or ontological

beliefs. A realist, who argues for the existence of reality in social science, will

have a positivist epistemological perspective (Burrell & Morgan, 1979).

Positivists use observation to gather empirical evidence to test hypotheses that are

developed from existing theories. Theory is considered valid as long as empirical

evidence does not falsify the theory (Chua, 1986). Research findings extend

existing theories and can be generalised to other contexts. In contrast, a nominalist

will have an anti-positivist epistemological perspective. Anti-positivists argue that


observations will not produce an understanding on the empirical reality, because

what is considered to be ‘truth’ is actually a result of human interaction with the

particular object or phenomenon (Chua, 1986). Anti-positivists believe that

knowledge can only be produced by investigating the subjective interpretation of

individuals who experience empirical phenomena in specific settings (Chua,

1986). Because truth is subjective and research findings are context specific, prior

theory was not relevant for the present study. Every empirical investigation will

produce a new theory, however, they cannot be applied to other contexts

(Laughlin, 1995).

Perspectives on human nature are based on assumptions about the

relationship between human agency and the environment (Hopper & Powell,

1985). There are two opposing views with regards to the nature of human

behaviour: determinism and voluntarism. These are also related to ontological and

epistemological beliefs. Realists believe that human actions are deterministic and

that human behaviour is a function of social pressure and situations; therefore,

human actions can be predicted by identifying the variables that drive the

behaviour (Neuman, 2011). On the other hand, a nominalist believes in

voluntarism (Neuman, 2011). Voluntarism assumes humans have the capacity to

make conscious decisions and manipulate their environments (Neuman, 2011).

Individual actions are determined by subjective individual consideration and

social settings; however, people are also capable of changing those settings.

The methodology chosen to investigate a social phenomenon is dependent

on ontological and epistemological perspectives and assumptions about human

nature (Hopper & Powell, 1985). Methodology deals with selecting the

appropriate research methods to collect empirical evidence. Those who believe

that reality exists and can be observed objectively, and that human behaviour is

predictable, will use a nomothetic approach to investigate an empirical

phenomenon (Neuman, 2011). A nomothetic approach puts emphasis on adhering

to systematic procedures and techniques in conducting research. Empirical data is

collected using quantitative methods and statistical analysis to test hypotheses. On

the other hand, those who hold a nominalist, anti-positivist, and voluntarist view

use an ideographic approach to investigate an empirical phenomenon (Neuman,


2011). The ideographic approach emphasises the importance of people’s

subjective experience on a particular empirical phenomenon. An ideographic

approach prefers qualitative methodology because it can collect information

directly from the persons who experience the social phenomenon.

On the nature of society, the researcher can assume society to be stable and

orderly, or chaotic and subject to fundamental conflict (Burrell & Morgan, 1979).

The objective of research for those who assume the orderliness of society is to

understand and explain it (Hopper & Powell, 1985). On the other hand, those who

assume that society is subject to fundamental conflict will conduct research to

reveal the injustices in society and promote radical change (Hopper & Powell,

1985).

Previous discussion has shown that every research perspective has its

strengths and weaknesses. The limitations that are inherent in every perspective

only provide a partial and incomplete understanding of an empirical phenomenon

(Chua, 1986; Laughlin, 1995). Laughlin (1995) suggested that every researcher

should determine his/her research paradigms before conducting any research. A

clearly stated position on research paradigms will make the researcher and the

readers aware of the impact of the selected research perspectives on research

insights, what is included and excluded in the research, and the bias in her/his

empirical investigation (Laughlin, 1995). Following Laughlin’s (1995)

suggestion, the next section discusses the research perspective adopted in this

study.

3.7 MIDDLE RANGE THINKING PERSPECTIVE

Based on Burrell and Morgan’s (1979) sociological works, Laughlin (1995,

2004, 2007) proposed a middle range thinking (MRT) perspective for accounting

research. Laughlin (1995) clustered the four elements of social science (ontology,

methodology, human nature, and methodology) and the perception of society

(orderly versus disorderly) into three dimensions of research: theory,

methodology, and change. Laughlin (1995) used three different scalars ranging

from low, medium, and high to describe the position of researcher in terms of

theory, methodology, and change.


Theory refers to the ontological and epistemological beliefs of the researcher

that determine the assumption of reality and the role of prior theories for future

research. A high position on theory means that the researcher assumes the

existence of reality in accounting that can be studied objectively and empirical

results that can be generalised to other phenomenon. Existing knowledge is

important for current research because hypotheses are derived from existing

theories and previous research findings. Observation is used to test hypotheses

and to falsify or verify a theory. Those who hold alternative views to positivists

mostly question the validity of positivist assumptions about the existence of

objective reality and the generalisation of research findings in social science,

which are described by Laughlin (1995) as a “considerable leap of faith” (p. 83).

In contrast, a low position on theory assumes that reality is subjectively

created by human interactions. Accounting is seen as a social practice where

people are assumed to be creators of empirical phenomenon (Chua, 1986). This

perspective is held by interpretivists who assume that people’s perceptions of an

empirical phenomenon are subjective and every empirical phenomenon is distinct

and unique, rendering existing theories for the phenomenon under investigation

irrelevant, and making generalisation impossible (Neuman, 2011). Since

interpretivists are not looking for generalisation, their empirical investigation is

focused on obtaining an understanding of empirical phenomenon by receiving

knowledge directly from the perspective those who have experienced the

phenomenon (Hopper & Powell, 1985). The total rejection of possible shared

common attributes between different social phenomenon is seen as a weakness of

taking a low position on theory (Broadbent & Laughlin, 2013). Those who

criticise interpretivists argue that some general patterns may exist in social science

that are important to guide future research (Laughlin, 1995).

Methodology consists of assumptions regarding human nature that relate to

the role of researcher subjectivity in the discovery process and the impact of

theoretical closure on the choice of methodological approach (Broadbent &

Laughlin, 2013; Laughlin, 1995). A high position on methodology is supported by

positivists who argue that researchers should avoid subjectivity during empirical

investigation. A high position on methodology also implies that existing


theoretical frameworks will determine the research methods adopted and the

researcher is seen as only executing a specific set of research methods. According

to the opposing perspective, those who hold a low position on methodology

assume that prior knowledge does not have relevance for the current research

(Laughlin, 2004). A low level of prior theorising also means that the researcher is

free from theoretical rules in selecting research methods and is allowed to bring

subjectivity into the empirical investigation (Laughlin, 1995). This

methodological perspective leads to the use of a qualitative approach, such as

document analysis or interviews.

Both high and low positions on methodology have weaknesses. Accounting

theory is sometimes ambiguous and complex, and employing a tight theoretical

definition in methodology is considered inappropriate because it can lead to a

limited understanding of the empirical phenomenon (Laughlin, 1995). For

example, a highly formalised survey or document analysis used by positivists will

limit the researcher’s understanding of reality with a predetermined set of

constructs, because other possible explanations are not accommodated (Broadbent

& Laughlin, 2013). In contrast, a low position on methodology means that the

analysis of empirical phenomenon is based on the perceptual powers of the

researcher (Laughlin, 1995). However perceptual powers differ between

individuals, making replication by other researchers near impossible (Broadbent

& Laughlin, 2013)

Change relates to the position of the researcher toward the status quo. In this

dimension, those who have a high position on change believe that the current

situation is imperfect; therefore, change is necessary, while those who have a low

position believe that the current situation is perfect and change is not necessary

(Laughlin, 1995). Both positivists and interpretivists assume that societies and

organisations are relatively stable, and therefore adopt a similar low position on

change (Chua, 1986). Positivists and interpretivists have different arguments to

justify their low position on change. Positivists argue that research should be

neutral and not involved with moral judgements about maintaining or changing

the existing institutional structure because it can obstruct the objectivity of

research, while interpretivists argue that research should take the empirical


phenomenon for granted and leave the object of the investigation unchanged

(Chua, 1986). Both positivist and interpretive perspectives on change are

questioned by critical researchers, who argue that research should have an

evaluative dimension, reveal injustice in society, and transform society for the

better (Broadbent & Laughlin, 1997; Laughlin, 1987).

To address the limitations of high and low positions, Laughlin (1995, 2004,

2007) suggested accounting researchers take a middle position on theory,

methodology, and change. He called this perspective middle range thinking

(MRT). The objective of holding a middle position between two extreme research

perspectives is to reap the strength while avoiding the weaknesses of each

perspective (Laughlin, 1995).

By taking the middle position in theory, MRT encourages researchers to

employ existing theories to guide their research (which is the strength of a high

position on theory) and also acknowledge that the empirical detail may be

different in every accounting phenomenon (which is the strength of a low position

on theory) (Laughlin, 1995). The middle position on theory means that MRT

acknowledges the existence of reality in social science, but recognises that this

reality is different from the objective reality that is usually found in natural

sciences (Laughlin, 1995). Reality in social science is a product of ‘inter-

subjective consensus’ among people (Broadbent & Unerman, 2011, p. 9). Inter-

subjective reality occurs when people try to make a subjective matter into an

objective reality based on consensus (Broadbent & Unerman, 2011). For example,

there is a consensus amongst accountants on how to record and report a specific

financial transaction. This consensus enables most people, and especially

accountants, to interpret the meaning of financial statements; although subjectivity

is involved in generating the financial statements. The fact that most people can

understand accounting numbers does not mean that a grand theory can be

formulated in accounting (Broadbent & Unerman, 2011). As a social practice, it is

impossible to find a grand theory in accounting that is applicable in all contexts

(Laughlin, 1995). However, it is possible to identify a ‘skeletal theory’ that may

capture general patterns of empirical phenomenon in accounting (Laughlin, 2004).


With respect to methodology, the middle position uses ‘skeletal theory’ in a

process of continually refining the research design (Laughlin, 1995, 2004, 2007).

The researcher may engage in a discovery process but should follow some

structured rules to enable replication by other researchers (Broadbent & Laughlin,

2013). MRT endorses a “critical discursive analysis” for its methodological

approach whereby the researcher and the researched can be involved in a

discursive process to arrive at a consensus that leads to an understanding of the

phenomenon under investigation and formulate a change response if appropriate

(Broadbent & Laughlin, 2013, p. 51). An MRT perspective has a preference for a

qualitative data narrative, although descriptive quantitative data, such as

questionnaires, are also acceptable for certain purposes (Laughlin, 2004).

In the change dimension, MRT also adopts a middle position that allows for

proposing change; however, careful consideration must be taken before arguing

that change is appropriate (Laughlin, 1995, 2004, 2007). Suggestions for change

must be preceded by several careful steps, including: (1) gaining an understanding

of the relevant empirical phenomenon based on the existing skeletal theories; (2)

engagement between the researcher and the researched to gain a mutual

understanding of the empirical phenomenon; and (3) formulating strategic change

based on this mutual understanding. This process may not result in a change

proposal if both the researcher and the researched conclude that change is

unnecessary (Broadbent & Laughlin, 2013).

3.8 LIMITATIONS OF MIDDLE RANGE THINKING

Several criticisms have been directed toward MRT. Lowe (2004) and

Roslender (2013) claimed that the accuracy of Laughlin’s (1995) classification of

the dominant schools of thought in accounting is questionable. For example, it can

be found in accounting research that positivists who have a high change

orientation or interpretivists employ sophisticated methodology. However, this

criticism is weak because the simplistic classification of the dominant schools of

thought in accounting is not directed towards producing an accurate categorisation

of accounting research, but to triggering philosophical thinking about the diversity

of research approaches in accounting.


Lowe (2004) also raised issues regarding Laughlin’s (1995) use of rhetoric

language to justify the superiority of MRT over other research perspectives.

Responding to this comment, Laughlin (2004) acknowledged that there are

researchers who take other perspectives and that there are many possible ways to

understand empirical phenomenon in accounting (Laughlin, 2004). However, the

chosen research perspectives should be justified appropriately (Laughlin, 2004).

Dey (2002) claimed that the MRT position related to theories that encourage

the researcher to gain an understanding of the existing skeletal theory can lead to

theoretical closure and research results that are driven by existing theories. This

limitation can be avoided by elaborating the fitness of empirical data with the

skeletal theory (Laughlin, 2004). Thus, although the theories are determined in

advance, MRT allows the researcher to elaborate the theories employed based on

the data found during the empirical investigation (Laughlin, 1995, 2004, 2007).

Specific to this study, given the nature of accountability as a socially

constructed concept and research perspective adopted in this study, subjectivity

and bias could occur. Although MRT acknowledges that social reality exists, the

researcher might inadvertently bring bias in understanding the empirical

phenomenon (Laughlin, 1995). In order to reduce this bias, communication with

research participants in the current study was conducted by phone for matters that

required further clarification. In addition, intensive consultation on the findings

and their interpretation was conducted with the research supervisors to reduce

interpretation bias.

3.9 JUSTIFICATION FOR THE ADOPTION OF MIDDLE RANGE THINKING

This study adopted the MRT paradigm as proposed by Laughlin (1995,

2004, 2007) for the following reasons. First, given that the number of studies on

accountability in Islamic organisation is limited, this study seeks to understand,

rather than predict. There are ‘skeletal’ patterns that can be used as a conceptual

framework to understand an empirical phenomenon, however, they never fully

capture the detail and diversity that exist in every empirical phenomenon

(Laughlin, 2004). MRT offers an opportunity for the researcher to gain insight


from the existing accountability literature as a conceptual framework to

investigate the accountability of Indonesian zakat agencies. The ‘skeletal’

guidance offered by the existing theories enlightens the researcher in analysing the

empirical phenomenon and streamlines the research process. Although

generalisation to other contexts may not be possible, the insight from a new

empirical study will enrich existing theory (Laughlin, 2004). Therefore, this

empirical study seeks to enrich understanding of the concept of accountability by

providing new angles, perspectives, and interpretations.

Second, the position of MRT towards the status quo (change dimension)

supports the normative element of this study. While the main contribution of this

research is to extend the accountability literature in Islamic organisational

contexts, this study also has a normative element. MRT encourages researchers to

investigate the possibility of reforming the status quo to create a better society

(Broadbent & Laughlin, 2013). Based on the findings, several measures were

proposed to improve the accountability of zakat agencies.

Prior accounting studies have used MRT as a framework to analyse various

empirical accounting phenomenon (Bracci & Llewellyn, 2012; Broadbent, Gallop,

& Laughlin, 2010; Broadbent & Laughlin, 1997; Kraus, 2012). Broadbent and

Laughlin (1997) demonstrated how MRT could be used to examine an empirical

accounting phenomenon. They used MRT to gain an understanding of the impact

of new legislation that linked accountability indicators with the level of resources

given to an organisation. Bracci and Llewellyn (2012) investigated the impact of

accounting reforms in two different Italian social care providers. In their study,

Bracci and Llewellyn (2012) showed that individuals’ understanding of the

concept of accountability has an impact on how they perform their duties. Kraus

(2012) used the MRT perspective to investigate the impacts of the increased use

of accounting on the core values and work practices of Swedish home care

providers. These studies acknowledged that MRT provides a sound approach to

understanding an empirical accounting phenomenon based on existing skeletal

theories. Therefore, it is argued that MRT is also fit to be used as a framework in

investigating how administrators and donors of zakat agencies understand


accountability and its impact on the accountability mechanisms practised by zakat

agencies.

3.10 SUMMARY

To summarise, the above review of the literature indicates that

accountability is important for charitable organisations because these

organisations engage in a non-reciprocal transfer of resources. Zakat agencies are

similar to charitable organisations, as they receive donations from Muslims, that

is, the zakat is to be used for the welfare of beneficiaries. Zakat agencies can also

be considered faith-based organisations because zakat is faith-based alms giving.

While there are many types of organisations, most studies have primarily focused

on religious organisations or charitable organisations in a Western context. This

suggests that there is scope to contribute to the literature by investigating

accountability in a different organisational setting. By focusing on the

accountability of zakat agencies, this study aims to address the lack of empirical

research on accountability in Islamic faith-based charitable organisations. This

study extends existing research by examining the understanding of accountability

from the perceptions of administrators and donors in different regulatory and

cultural environments, specifically, in Indonesian zakat agencies. The middle

range thinking research perspective was adopted to investigate the perceptions of

administrators and donors on the accountability of zakat agencies. MRT was

adopted because it allowed the researcher to gain insight from existing theories to

understand the accountability of Indonesian zakat agencies.

Chapter 4: Theoretical Framework 55

Chapter 4: Theoretical Framework

4.1 INTRODUCTION

The MRT research perspective adopted in this study posits that literature

can be used to guide the understanding of a research phenomenon. The aim of this

chapter is to discuss the accountability literature that guides this study and

provides the theoretical basis for the research questions. This chapter is structured

as follows. Section 4.2 provides insight into the meanings of accountability. The

core concepts of accountability that include to whom, for what, and how to

discharge accountability are then articulated in Sections 4.3 to 4.5. This is

followed by a discussion of the inter-relationships between the core concepts of

accountability in Section 4.6. The research questions are highlighted in Section

4.7. Finally, Section 4.8 presents the summary of this chapter.

4.2 MEANING OF ACCOUNTABILITY

The notion of accountability has been widely discussed in the literature from

various perspectives, for example, from the principal–agent perspective

(Broadbent, et al., 1996; Ebrahim, 2003b), stakeholder-agency perspective

(Collier, 2008; Kreander, Beattie, & McPhail, 2009), public accountability

perspective (Coy & Dixon, 2004; Coy, Fischer, & Gordon, 2001; Stewart, 1984),

and the identity and social relationship perspective (Unerman & O'Dwyer,

2006b); however, the meaning of accountability remains elusive and under

theorised (Connolly & Dhanani, 2013; Ebrahim, 2005; Mulgan, 2000; Ryan &

Irvine, 2012b; Sinclair, 1995). The difficulty of giving a precise definition for

accountability is related to the nature of accountability being a socially

constructed concept (Ebrahim, 2003b; Shearer, 2002; Sinclair, 1995). As a

socially constructed concept, the meaning of accountability varies from person to

person, time to time, and one discipline to another. Every discipline may have a

different interpretation of accountability, and this definition might not necessary

be applicable to other disciplines (Cooper & Owen, 2007; Sinclair, 1995).

56 Chapter 4: Theoretical Framework

Accountability is often associated with the concepts of responsibility,

liability, transparency, and responsiveness (Koppell, 2005), and answerability or

justification (Ebrahim & Weisband, 2007). However, this association does not add

clarity to the meaning of accountability, because these concepts are also “umbrella

concepts” that “need extensive operationalisation” (Bovens, 2010, p. 950).

Accountability is broader than responsiveness, liability, responsibility,

transparency, answerability, or justification, because accountability also includes

the dissemination of information (Unerman & O’Dwyer, 2012) and an

examination of this information to determine future actions (Bovens, 2007).

Accountability can be interpreted as a social relationship between

organisational players (Ebrahim, 2005; Kreander, et al., 2009; Unerman &

O'Dwyer, 2006b) that involves “the giving and demanding of reasons for conduct”

(Roberts & Scapens, 1985, p. 447), or “the obligation to explain and justify

conduct” (Bovens, 2007, p. 450). As a social relationship, it involves two parties:

(1) individual(s) or an organisation(s) that has a legitimate right to hold another

party to give account, usually referred to as the ‘accountor’; and (2) individual(s)

or an organisation(s) that has an obligation to give account or the ‘accountee’

(Stewart, 1984; Unerman & O'Dwyer, 2006b).

From the perspective of the accountee, accountability can be understood as a

process of providing information to explain and justify the reasonableness of

every action or inaction and the results (Arrington & Francis, 1993; Messner,

2009; Shearer, 2002; Sinclair, 1995). Accordingly, the discharge of accountability

necessitates the disclosure of information to facilitate external scrutiny (Bovens,

2010; Hood, 2010; Koppell, 2005). This also includes the accountee taking

ownership and responsibility for what has happened or is happening within one’s

jurisdiction (Dunsire, 1978).

From the perspective of the accountor, accountability is an exercise of

power to judge or evaluate the performance of the accountee (Stewart, 1984)

against pre-determined standards or expectations (Dunsire, 1978). Because

accountability involves an evaluation against pre-determined standards, it is also

associated with responsiveness or the ability to meet the implicit and explicit


expectations of stakeholders (Koppell, 2005). The results of the evaluation are

used by the accountor to determine future actions that include rewards and

punishments against the accountee (Bovens, 2007). The rewards may include

continuous financial and non-financial support for an organisation, while the

punishments may include the discontinuation of financial and non-financial

support. In this context, both rewards and punishments can influence the survival

of organisations.

This study adopted the definition of accountability as an obligation of an

individual or organisation (the accountee) to provide explanations and justification

for every action and the results of every action to the accountors (Edwards &

Hulme, 1995; Roberts & Scapens, 1985). This definition implies that the process

of rendering an account will include these elements: to whom (who are the

accountors?); for what (what should be explained or justified?); and how (how

should the explanation or justification be rendered) (Murtaza, 2012; Najam, 1996;

Ospina, Diaz, & O’Sullivan, 2002; Ryan & Irvine, 2012a; Tower, 1993). With

regard to zakat agencies, this definition leads to the following questions:

1. Who should zakat agencies be accountable to (to whom)?

2. What should zakat agencies be accountable for (for what)?

3. By what means should zakat agencies discharge their accountability

(how)?

4.3 WHO SHOULD ZAKAT AGENCIES BE ACCOUNTABLE TO?

4.3.1 Identification of accountors

A number of authors have argued that an organisation should be accountable

to various stakeholders groups (Connolly & Hyndman, 2013b; Ebrahim, 2003a;

Gray, Owen, & Adams, 2009; Unerman & O'Dwyer, 2006b). Initially,

stakeholders were defined as “those groups without whose support the

organisation would cease to exist” (Stanford Research Institute (1963) cited in

Freeman & Reed, 1983, p. 89). This narrow definition of a stakeholder suggests

that an organisation only needs to be accountable to those who can influence the

sustainability of an organisation (Donaldson & Preston, 1995; O'Dwyer &


Unerman, 2008; Sternberg, 1997; Woodward & Marshall, 2004). Recently,

stakeholders have been defined more broadly as “any group or individual who can

affect or is affected by the achievement of the organisation’s objectives”

(Freeman, 1984, p. 31).

Ebrahim (2003b) suggested that the stakeholders of not-for-profit

organisations can be classified into three broad groups: resource providers;

regulators; and beneficiaries and communities. Resource providers not only

provide financial assets but also human resources, raw materials, information,

social support, and other forms of resources (Pfeffer & Salancik, 2003). Thus,

resource providers may consist of small or large donors (Connolly & Hyndman,

2013a; Hyndman & McDonnell, 2009; Najam, 1996; O'Dwyer & Unerman,

2007), the board (Schmitz, et al., 2012), employees (Collier, 2008), the parent

organisation of a not-for-profit organisation (Fletcher, Guthrie, Steane, Roos, &

Pike, 2003), and volunteers (O'Brien & Tooley, 2013). It is also common for

governments to provide funding to not-for-profit organisations; therefore, the

government can also be classified as a resource provider (Ebrahim, 2009;

O'Dwyer & Unerman, 2007). Empirical findings also suggest that resource

providers are legitimate stakeholders of not-for-profit organisations (Christensen

& Mohr, 2003; Connolly & Hyndman, 2013a; Cordery & Baskerville, 2011;

Dixon, Ritchie, & Siwale, 2006; Flack, 2007; Schmitz, et al., 2012; Woodward &

Marshall, 2004).

The second category of stakeholders is regulators, which consists of the

government and a network of peer organisations that actively produce codes or

standards of behaviour (Ebrahim, 2003b; Hyndman & McDonnell, 2009; Najam,

1996; Schmitz, et al., 2012). Regulators gain legitimacy to demand accountability

from an organisation through legal means (Cordery & Baskerville, 2011).

Regulation gives power to the government to hold an organisation accountable. In

most countries, the involvement of the government is intended to protect the

interests of stakeholders who do not have the power to enforce accountability

(Flack, 2007). This involvement is reflected in regulations about reporting

standards and disclosure requirements that must be adhered to by organisations

(Ebrahim, 2009; Hyndman & McDonnell, 2009). An empirical investigation of


Australian not-for-profit organisations found that the management of not-for-

profit organisations in Australia considered the network of peer organisations or

peak bodies to be stakeholders (Flack, 2007; Woodward & Marshall, 2004). The

network of peer organisations can also publish standards or codes of conduct. In

most cases, it is not mandatory to obey the standards issued by the network of

peer organisations; however, complying with these standards can improve public

confidence.

The third category of stakeholder is beneficiaries (Connolly & Hyndman,

2013a; Ebrahim, 2003a; Najam, 1996). A number of empirical studies have also

suggested that not-for-profit organisations consider beneficiaries to be their

stakeholders (Connolly & Hyndman, 2013a; Flack, 2007; Kilby, 2006; Schmitz, et

al., 2012; Woodward & Marshall, 2004). Beneficiaries can be users of the services

or broad community members (Najam, 1996). Beneficiaries have a legitimate

demand to ask for accountability because their welfare is affected by the activities

of the organisations (Unerman & O'Dwyer, 2006b) and discharging accountability

to beneficiaries can increase organisational credibility and reputation and public

trust (Connolly & Dhanani, 2013). Ironically, beneficiaries are often neglected

because they do not have the power to enforce their demands (Ebrahim, 2003b;

Gray, et al., 2006; Najam, 1996; O'Dwyer, 2005).

Other categories of stakeholders have been identified in the empirical

literature, such as religious bodies (Woodward & Marshall, 2004), charity

‘watchdog’ organisations, advisors (Flack, 2007), the media, and academics

(Candler & Dumont, 2010; Connolly, et al., 2012; Flack, 2007; Friedman &

Miles, 2002; Hyndman & McMahon, 2010). The media and academics may not

have legitimacy and power to demand accountability. However, in special

circumstances, such as in the occurrence of fraud in a not-for-profit organisation,

the media and academics can become powerful stakeholders. The media may

report mismanagement or fraud that has occurred in an organisation and bring it to

the public’s attention, forcing the organisation to provide an explanation to the

public. Some academics in the UK have used publications to promote the

development of statements of recommended practice and performance reporting

by not-for-profit organisations (Hyndman & McMahon, 2010). Likewise,


academics have also played an important role in shaping regulations about

financial reporting in the Australian not-for-profit sector (Palmer, 2013).

Prior studies on faith-based organisations have identified that these

organisations are not only accountable to stakeholders but also to God. In a study

of Malaysian Islamic not-for-profit organisations, Abdul-Rahman and Goddard

(1998) found that the ultimate accountability of Malaysian Islamic not-for-profit

organisations is to God. This understanding is related to the Islamic belief that all

human beings have to account to God for their actions and inactions (Abu-

Tapanjeh, 2009; Nahar & Yaacob, 2011; Rice, 1999). Likewise, previous studies

of Christian faith-based organisations also found that they were accountable to

God (Crofts, 2009; Joannides, 2012).

Because every stakeholder has different levels of power to impose their

interests on an organisation, several authors have tried to classify stakeholders

based on their power and other attributes. Stewart (1984) explained that an

organisation only has an accountability relationship with those who have the

power to enforce accountability. The ability to hold an organisation to account

creates a bond of accountability. The relationship with those who do not have the

power to enforce accountability is referred to as a link of accountability (Stewart,

1984). The link of accountability is not a genuine accountability relationship,

because it only represents an act of responsiveness to stakeholder demands

(Stewart, 1984).

Mitchell et al. (1997) classified stakeholders into salient and non-salient

stakeholders based on three different attributes: power; legitimacy; and urgency.

Power relates to the ability of a stakeholder to impose their interest on an

organisation (Mitchell, et al., 1997). A legitimate stakeholder is a stakeholder that

has a moral or legal right to demand an organisation to satisfy their interests

(Mitchell, et al., 1997). Urgency is the degree of immediate attention that should

be given to the demands of a particular stakeholder (Mitchell, et al., 1997).

Carroll (1989) classified stakeholders into primary and secondary

stakeholders. Primary stakeholders are those who have a contractual relationship

with an organisation, such as large resource providers and regulators; while


secondary stakeholders are those who do not have a contractual relationship, such

as small resource providers and beneficiaries (Carroll, 1989). Because primary

stakeholders have a contractual relationship, they have the power to enforce

accountability. On the other hand, secondary stakeholders do not have a

contractual relationship and hence only have a limited ability to impose their

interests (Carroll, 1989).

Flack (2007) classified stakeholders into internal and external stakeholders.

Flack (2007) defined internal stakeholders as those who provide resources, such

as employees, donors, and volunteers; and external stakeholders as those who

perform oversight functions, such as regulators and mass media. Van Puyvelde,

Caers, Bois, and Jegers (2012) classified stakeholders into internal stakeholders,

external stakeholders, and interface stakeholders. Internal stakeholders consist of

executives, managers, staff, and volunteers. External stakeholders consist of

donors, suppliers, beneficiaries, peer organisations, and others. Interface

stakeholders represent an organisation to the public. The board is an interface

stakeholder because it has a connecting role between internal and external

stakeholders. Table 4.1 reconciles the concepts of bond and link accountability

proposed by Stewart (1984) and the classification of stakeholders proposed by

Mitchell et al. (1997) and Carroll (1989), based on a framework of accountability

relationship provided by Cordery and Baskerville (2011).


Table 4-1 Potential Stakeholders of Not-for-profit Organisations and the Attributes of Stakeholders Linked to the Types of Accountability

Potential Stakeholders

Stakeholder Attributes (Mitchell, et al., 1997)

Category of Stakeholder

(Carroll, 1989)

Type of Accountability (Stewart, 1984) Power Legitimacy Urgency

Government Yes, granted by statute

Yes, through legal means

Unlikely Primary – Contractual

A bond of accountability

Major Donors Possibly • Yes, through donations

• Moral dimension/shared values

Possibly Primary – contractual

A bond of accountability

Small Donors And Volunteers

Unlikely • Yes, through donations


Possibly Secondary – non-contractual

A link of accountability

Beneficiaries Unlikely • Yes, through charity mission



Media Unlikely • Possibly, moral dimension/shared values

Unlikely Secondary – non-contractual


Academic Unlikely • Possibly, moral dimension / shared values

Unlikely Secondary – non- contractual


Source: Adapted from Cordery and Baskerville (2011)

Organisations usually give a high priority to meeting the interests of primary

or salient stakeholders and a low priority to meeting the interests of secondary and

non-salient stakeholders. It is worth noting that a powerful stakeholder will not

always impose their interests on an organisation. In several cases, powerful

stakeholders may have no intention of imposing their interests, because they may

see no urgency to exercise their power (Mitchell, et al., 1997). On the other hand,

secondary or non-salient stakeholders may be able to enforce their interests by

influencing public opinion toward an organisation (Carroll, 1989; Cordery &

Baskerville, 2011). A study conducted by Cordery and Baskerville (2011)

documented that beneficiaries of a not-for-profit organisation in Singapore, who

have urgent interests but do not have sufficient power to enforce their interests,

used the media to escalate their demands. As a result, the not-for-profit

organisation had to satisfy the demand of its beneficiaries because it realised that a

failure to provide adequate responses to negative publicity could damage its

reputation and discourage potential resource providers from providing them with


resources (Cordery & Baskerville, 2011). This means that not-for-profit

organisations should not only be accountable to primary or salient stakeholders

who have a bond of accountability, but also to secondary or non-salient

stakeholders who only have a link of accountability because their interests may be

urgent and legitimate (Cordery & Baskerville, 2011; Dhanani & Connolly, 2012;

Gray, Owen, & Adams, 1996; O'Dwyer & Unerman, 2007).

4.3.2 Possible stakeholders of zakat agencies and their relative importance

Figure 4.1 depicts the possible stakeholders of zakat agencies that consist of

sacred and secular stakeholders. Drawing on stakeholder theory, the secular

stakeholders of zakat agencies may consist of resource providers, regulators,

beneficiaries, and others. Transfer of resources justifies the obligation to give

account to donors (Cordery & Baskerville, 2011; Ebrahim, 2003b) while

regulation justifies the obligation to give account to government (Crofts, 2014).

Zakat agencies should also be accountable to those affected by the activities of

zakat agencies, such as beneficiaries and other parties. Solid arrows indicate that

zakat agencies need to discharge accountability to these stakeholders through

various mechanisms. The mechanisms to discharge accountability will be

discussed in Section 4.5.

Previous literature also indicates that faith-based organisations are

accountable to God (Abdul-Rahman & Goddard, 1998; Crofts, 2009; Joannides,

2012). Therefore, it is expected that zakat agencies would be accountable to God

as described by a strong dashed arrow. There are also sacred accountability

relationships between the secular stakeholders of zakat agencies and God as

described by soft dashed arrows. This sacred accountability relationship may

influence the accountability expectations of secular stakeholders to zakat

agencies.


Legend: : Sacred accountability relationship

: Sacred accountability relationship

: Secular accountability relationship Figure 4-1 Skeletal Framework of Possible Stakeholders of Zakat Agencies

4.4 THE SCOPE OF ACCOUNTABILITY AND INFORMATION REQUIRED

Inherent in the concept of accountability is the scope of accounts or “what

should be accounted for” by an organisation (Patton, 1992, p. 169). Stewart’s

(1984) ladder of accountability provides a basic framework to analyse the scope

of accountability. Stewart (1984) proposed a hierarchical scope of accountability

that consists of five different elements: accountability for probity and legality;

process accountability; programme accountability; performance accountability;

and policy accountability. Every element of Stewart’s (1984) ladder of

accountability outlines different areas or scope of accountability and different

information requirements. Although this framework was developed for the public

sector context, Stewart (1984) argued that this framework is also applicable in

other organisational sectors. For example, Laughlin (1990) used this framework to

investigate the accountability of the Church of England, while Yasmin et al.

Secular Accountability

God

Resource Providers

Other Parties

Regulators

Beneficiaries

Zakat Agencies

Sacred Accountability


(2013) used this framework to investigate the accountability of Christian and

Muslim charitable organisations in England and Wales.

Similar constructs have been developed in the not-for-profit sector. For

example, Kearns (1996) stated that the accountability of not-for-profit

organisations consists of accountability for resources, accountability for

outcomes, and accountability for processes. Goodin (2003) claimed that

organisations can be held accountable for their actions, their results, and their

intentions. The scope of accountability can also be classified into functional and

social accountability (Najam, 1996; O'Dwyer & Unerman, 2007). Ebrahim (2010)

suggested that the accountability of not-for-profit organisations covers four

different areas: finances; governance; performance; and mission. Dhanani and

Connolly (2012) proposed four areas of accountability: fiduciary accountability;

financial accountability; procedural accountability; and strategic accountability.

As discussed in Section 3.3, a number of authors have indicated that sacred

accountability exists in faith-based organisations (Crofts, 2009; Joannides, 2012;

Laughlin, 1990), including Islamic faith-based organisations (Abdul-Rahman &

Goddard, 1998; Nahar & Yaacob, 2011). As faith-based organisations, it is

expected that the scope of accountability of zakat agencies also includes ‘secular

and sacred elements of accountability’.

Figure 4.2 presents the possible scope accountability of zakat agencies. It is

expected that an interaction exists between sacred and secular accountability.

Several areas of accountability (i.e. mission, amil fund, and ethical accountability)

are more aligned with sacred (Syari’ah) accountability while other areas of

accountability (i.e. financial, programmes, performance, and legal accountability)

are more aligned with secular accountability (as indicated by solid arrows).

Mission, amil fund, and ethics accountability can be classified as a subset of

Syari’ah accountability. Syari’ah accountability is also expected to influence other

areas of secular accountability, including financial, programmes, performance,

and legal accountability as indicated by a dashed arrow. These areas of

accountability are now discussed in more detail.


Legend

Influenced alignment / interaction

Strong alignment / interaction

Figure 4-2 Skeletal Framework of the Possible Scope of Zakat Agency Accountability

1. Syari’ah Accountability

In Islamic organisations, sacred accountability is related to compliance with

Syari’ah requirements (Lewis, 2001; Nahar & Yaacob, 2011). Syari’ah is

based on the teachings of the Holy Qur’an and Sunnah that guides Muslims on

how they must/should behave in all spheres of life (El-Halaby & Hussainey,

2015; Rammal & Parker, 2012).Shari’ah does not only deal with religious

rituals, but also many aspects of human activities, such as business, trading,

and others (Abu-Tapanjeh, 2009; Wilson, 2006). Therefore, Shari’ah

accountability is an overaching concept that influences the understanding

accountability in other areas of accountability.

Because zakat agencies are Islamic faith-based organisations, zakat agencies

have a responsibility to comply with Syari’ah requirements. As discussed in

Chapter 2, there are Syari’ah requirements regarding zakat collection and

Sacred (Syari’ah) Accountability

Amil

Mission

Ethics

Programme

Performance

Governance

Financial

Legal

Secular Accountability

The Scope of Accountability of

Zakat Agency


distribution. Therefore, it is expected that the scope of the accountability of

zakat agencies also includes Syari’ah accountability.

2. Mission Accountability

An organisation is created by individuals who share core values and want to

achieve common goals. In several not-for-profit organisations, these core

values are rooted in religious belief (Lyons, 2001). The core values and

common goals are reflected in the mission of an organisation. Thus, the

mission will reflect why an organisation exists and the shared core values

among its members.

Because, an organisation is created by individuals who share core values, it is

reasonable that there are demands on the administrators of an organisation to

demonstrate their complainace with these core values. This demand will lead to

mission accountability in which the administrators of not-for-profit

organisations are required to justify their policies and actions in achiving

organisational goals. Mission accountability may relate to policy in selecting

beneficiaries, the allocation of financial resources for programmes, and future

plans (Ebrahim, 2010). Mission accountability is similar to the concept of

strategic accountability (Dhanani & Connolly, 2012) or social accountability

(O'Dwyer & Unerman, 2007).

In the case of zakat agencies, these shared core values may include the

motivation to help others by using zakat fund and to practise religious

teachings (Fauzia, 2018). The mission of zakat agencies is not only to help

poor individuals but also to perform Syari’ah or Islamic religious obligation.

Especially for donors, Muslims will not give zakat to a zakat agency if the

mission of this zakat agency discords with Syari’ah. Because giving zakat is

not only a charitable activity but also a religious ritual, it is reasonable to argue

that Syari’ah accountability will have a strong interaction with mission

accountability as described by a solid arrow in Figure 4.2.

3. Amil Fund Accountability

Related to Syari’ah accountability is accountability for the amil fund.

According to Syari’ah, the administrators of zakat agencies are allowed to


retain up to one eighth (12.5%) of the zakat collected (al Qardawi, 2000). This

fund is referred to as the amil fund. Generally, this fund is used to finance the

activities of zakat agencies. While Syari’ah does not provide specific guidance

on how the administrators of zakat agencies must use this fund, it is expected

that the usage of this fund complies with Syari’ah requirements (Azhar, 2012).

The administrators of zakat agencies should provide an account on the usage

of the amil fund, including the appropriate use of the amil fund from a

Syari’ah perspective. Therefore, the amil fund is also expected to have a

strong interaction with Syari’ah accountability.

4. Ethical Accountability

Candler and Dumont (2010) argued that the accountability of not-for-profit

organisations should also include ethical accountability. Crofts (2009)

identified the presence of ethical accountability in his study on the

accountability of Australian faith-based organisations. Ethical accountability is

a product of implicit public expectations that are reflected in professional

norms and social values (Kearns, 1996).

In the context of zakat agencies, such professional norms and social values

would be expected to be framed within a sacred, Syari’ah, context. Therefore,

it is also expected that ethical accountability is stongly influenced by Syari’ah

accountability. The application of ethical accountability in zakat agencies may

relate to behaviour and remuneration for the administrators of zakat agencies.

While Syari’ah does not limit remuneration for zakat administrators as long as

the amil fund does not exceed one eight of the amount of zakat collected, it is

not ethical for the administrators to use excessive amil funds for their personal

benefits (Azhar, 2012). It is expected that zakat agencies will comply with

professional norms and social values.

5. Financial accountability

Financial accountability is concerned with the appropriate use of resources

(Ebrahim, 2010; O'Dwyer & Unerman, 2010) and similar to the concept of

accountability for probity (Stewart, 1984) or accountability for resources

(Kearns, 1996), or functional accountability (O'Dwyer & Unerman, 2007). It


represents the stewardship function of management, which has been recognised

as the traditional focus of accountability (Basnan, 2010). Financial

accountability provides comfort to stakeholders that organisational resources

are not being misappropriated and are only used to achieve the objectives of an

organisation.

While financial accountability is the main domain of secular accountability, in

the context of zakat agencies, financial accountability also relates to Syari’ah

accountability. In addition to providing information about the the amout of

zakat revenue and the usage of zakat funds, it is expected that zakat agencies

also provide information that the usage of zakat fund complies with Syari’ah

requirements.

6. Legal Accountability

Legal accountability relates to compliance with regulations (Stewart, 1984).

The existing literature indicates that regulation was used to improve the

accountability of not-for-profit organisations (Chisolm, 1995; Ebrahim, 2009;

Weidenbaum, 2009). Regulation was also the main driver for faith-based not-

for-profit organisations to disclose accountability information (Crofts, 2014).

Regulations are usually created to protect public interests and guide the

activities of organisations. Several regulations relate to how an organisation

should account for its activities and the usage of financial resources. For

example, the financial reporting of charitable organisations in England must

comply with Statements of Recommended Practice (Hyndman & McMahon,

2010).

In the secular context, legal accountability only interacts with secular

accountability. However, in several predominantly Muslim but secular

countries, Syari’ah may influence legal regulations. For example, in Indonesia,

the Parliament passed Zakat Management Law 23/2011 to ensure that zakat

agencies report to government and comply with Syari’ah requirements. This

Zakat Management Law states that zakat agencies should undergone Syari’ah

audit to ensure that zakat agencies comply with Syari’ah requirements.


Therefore, legal accountability in the context of Indonesian zakat agencies is

also influenced by Syari’ah.

7. Governance Accountability

Governance accountability is concerned with the existence of mechanisms to

ensure that every action adopted by an organisation complies with the existing

code of conducts, procedures, and regulations (Dhanani & Connolly, 2012;

Ebrahim, 2010). This concept is similar to process accountability (Stewart,

1984; Yasmin, et al., 2013) or procedural accountability (Kearns, 1996). In

charitable organisation contexts, governance accountability focuses on the

application of good governance in organisational activities, such as fund-

raising activities and the usage of resources. In the context of zakat agencies,

good governance is not only needed to ensure compliance with the existing

code of conducts, procedures, and regulations but also compliance with

Syari’ah requirements.

8. Programme Accountability and Performance Accountability

Programme accountability is concerned with organisational effectiveness or

whether the objectives of a programme have been achieved, while performance

accountability is concerned with organisational efficiency or whether the

results of a programme meet pre-determined standards (Cordery & Sinclair,

2013; Kearns, 1996; Stewart, 1984). In the context of zakat agencies,

programme accountability relates to Syari’ah accountability because every

programme created by zakat agencies must comply with Syari’ah requirements.

The application of performance accountability in the context of zakat agencies

may include several financial performance and non-performance metrics.

Programme and performance accountability indicates that organisations have a

responsibility to spend their resources effectively and efficiently to generate

optimal outputs and outcomes (Dhanani & Connolly, 2012). Concepts

Statement No 5 Service Efforts and Accomplishments Reporting (GASB,

2008) explained the concepts of inputs, outputs, outcomes, and efficiency as

the following:


• Input is the measure of effort. Information about the amount of financial

and non-financial resources that are used to deliver a programme is

required to measure input. For example, information about the amount

of zakat funds spent on a programme to provide scholarships for

students from poor families.

• Outputs and outcomes are the measures of accomplishments. The

following information is required to measure the accomplishment of an

organisation. First, information about the amount of services or goods

produced, such as the number of scholarship recipients. Secondly,

information about the results of the provision of services or the

consumption of goods, such as an increase in the income of

beneficiaries. In the context of zakat agencies, information about

outputs may include the number of beneficiaries that received

assistance from a programme, such as the number of students who

received scholarships; while information about outcomes may include

information about the results of assistance and social impacts, such as

the number of students who finished their study and found a job.

• Efficiency is a ratio between effort (inputs) with accomplishments

(outputs and outcomes). The efficiency of a programme can be

measured by comparing resources used (inputs) and the amount of

service delivered or the amount of goods produced (outputs).

A number of authors have argued that every area of accountability requires

different types of information (Parker & Gould, 1999; Stewart, 1984; Yasmin, et

al., 2013). Ideally, information disclosed by an organisation should enable its

stakeholders to evaluate the accountability of an organisation from every area of

accountability (Broadbent, et al., 1996; Stewart, 1984).

Syari’ah accountability relates to compliance to Syari’ah requirements, and

therefore requires the disclosure of information about how far an organisation

complies with Syari’ah requirements (Belal, Abdelsalam, & Nizamee, 2015). A

zakat agency should provide information about Syari’ah compliance and disclose

the results of Syari’ah audits to satisfy information requirements about Syari’ah


accountability. It is also expected that the disclosure of Syari’ah compliance can

satisfy ethical accountability because ethical accountability in Islamic

organisations is framed in Syari’ah values. Amil fund accountability is related to

the use of financial resouerces and Syari’ah compliance, therefore, the disclosure

of financial information and Syari’ah compliance are needed. Mission

accountability requires information about the impacts of activities on stakeholders

and information about future plans, including the issue of sustainability (Yasmin,

et al., 2013). Syari’ah compliance information is also useful to evaluate mission

accountability because mission accountability is stongly influenced by Syari’ah

accountability.

Financial accountability is related to the use of financial resources, therefore

financial information, such as organisational revenue and expenditure, is

considered sufficient for discharging financial accountability (Connolly, et al.,

2012; Stewart, 1984; Yasmin, et al., 2013). Legal accountability requires

information about compliance with legal regulations while information about

governance, organisational structure, and internal control adequacy are required to

satisfy governance accountability (Yasmin, et al., 2013). Programme and

performance accountability can be evaluated provided that information about

inputs, outputs, and outcomes is available (Hyndman, 1990, 1991; Stewart, 1984;

Yasmin, et al., 2013). In addition to input, output, and outcome information,

Connolly and Hyndman (2004) stated that information about a statement of goals

and objectives, budget information, and future target information is required to

evaluate performance accountability, while Ryan and Irvine (2012a) contended

that explanatory expenditure information is also required to evaluate performance

accountability.

4.5 BY WHAT MEANS SHOULD ACCOUNTABILITY BE DISCHARGED?

It is important that accountability information can be reached, accessed, and

understood by both internal and external stakeholders. It is common for an

organisation to use formal and/or informal means to discharge accountability;

therefore, accountability information can be reached and accessed through a wide

range of stakeholders (Ebrahim, 2003a; Gray, et al., 2006; Patton, 1992; Unerman


& O'Dwyer, 2006b). Table 4-2 describes formal and informal means to discharge

accountability.

Table 4-2 Means to Discharge Accountability

Means to Discharge

Accountability Examples Prior Studies

Formal Reporting Annual reports, annual reviews, financial reports, customised report, and letters.

Dhanani and Connolly (2012); O'Dwyer and Unerman (2007); (Steccolini, 2004)

Informal Reporting

Any methods except formal reporting, such as website, internal printed media, mass media, social media, and oral reporting.

Ebrahim (2003a); Godwin, et al. (2011); Hardy and Ballis (2013); Unerman and Bennett (2004)

Formal reporting to discharge accountability

Large organisations are more likely to use formal reporting to discharge

accountability than small organisations. In large organisations, the stakeholders

are diverse and there is a distance between individuals involved in an

accountability relationship (Avina, 1993). This means that stakeholders cannot

directly observe the activities of an organisation. This distance also hampers direct

communication and inhibits the development of mutual knowledge (Roberts &

Scapens, 1985). In this situation, formal reporting, such as annual reports and

financial statements, is important because it is the main bearer of information

(Dhanani & Connolly, 2012; Gray, et al., 1996; Laughlin, 1990; Patton, 1992;

Roberts, 1991; Tower, 1993).

A body of literature recognises the importance of annual reports as a formal

means to discharge accountability (Broadbent, et al., 1996; Connolly & Hyndman,

2004; Connolly, et al., 2012; Ebrahim, 2003a; Goddard & Assad, 2006; Hines &

Jones, 1992; Palmer, 2013; Torres & Pina, 2003). Annual reports have a

functional role to communicate the performance and activities of not-for-profit

organisations and a symbolic role to signal that the administrators of not-for-profit


organisations are accountable and comply with the prevailing norms (Flack,

2007).

In addition to annual reports, mail reporting and customised reporting can

also be used to discharge accountability. Steccolini (2004) has documented that

several organisations in Italy use a mail report to disseminate accountability

information to their stakeholders. Several organisations prepare customised formal

reports requested by powerfull stakeholders (Connolly & Hyndman, 2013a;

Cordery, Baskerville, & Porter, 2010; Hyndman & McMahon, 2010). .

Informal reporting to discharge accountability

Accountability can also be discharged through several types of informal

media, such as the internet (Dumont, 2013; Saxton & Guo, 2011), internal printed

media (Hardy & Ballis, 2013), mass media (Mack & Ryan, 2007; Sinclair, 1995;

Steccolini, 2004), dialogue, oral reporting, and/or social interactions (Avina,

1993; Cordery, et al., 2010; Dixon, et al., 2006; Godwin, et al., 2011; Gray, et al.,

2006; Hardy & Ballis, 2013; Jayasinghe & Soobaroyen, 2009; Mack & Ryan,

2007; Unerman & O'Dwyer, 2006b).

Many organisations use the internet (organisational website) to discharge

accountability for various reasons. The internet can be used to disseminate real-

time information because this technology is accessible anytime and anywhere

(Connolly & Dhanani, 2013). The internet can be reached by a large number of

stakeholders at a minimal marginal cost and provides an opportunity to engage in

an interactive dialogue with stakeholders (Saxton & Guo, 2011; Unerman &

Bennett, 2004; Waters, 2007). With internet, an organisation can disclose

immense quantity of information. more information than other media. For

example, a study in the US found that not-for-profit organisations used the

internet to disclose a wide variety of information, such as a description of

services, current news, the mission statement, annual reports, the listing of board

directors, IRS 990 form, message from the chief executive director, and a list of

organisational goals (Waters, 2007). Although the internet offers significant

opportunity for the dissemination of accountability information, existing studies

indicate that most not-for-profit organisations only use the internet to disclose


promotional information and not for disseminating accountability information

(Dumont, 2013; Gandía, 2009).

Mass media and internal printed media can also be used to discharge

accountability. Several stakeholders prefer mass media to annual reports because

the content of mass media is more accessible and easier to understand than annual

reports (Martin & Kloot, 2001; Patton, 1992). In addition, mass media is

published in shorter periods than annual reports, which are published annually;

therefore, the information in mass media is timely and relevant for stakeholders

(Mack & Ryan, 2007). For internal printed media, Hardy & Ballis (2013)

documented that internal printed media can also be used to discharge

accountability in not-for-profit organisations.

Social media has recently gained popularity as an organisational

communication tool. Similar to organisational websites, social media also can be

used as a method of disseminating accountability information because it is easily

accessible and can be used to do an interactive two-way dialogue between an

organisation and its stakeholders (Nah & Saxton, 2012; Scott & Orlikowski,

2012). However, it might be difficult to differentiate between the usage of social

media as a means for discharging accountability or as a means for promotional

activities. A study on the usage of social media by not-for-profit organisations in

the US found that not-for-profit organisations mostly use social media to

disseminate information about organisational activities, engagement activities

with external stakeholders, such as giving recognition for donations and responses

to stakeholder’s inquiries, and promotional activities to attract an audience to

participate in an event and funding (Lovejoy & Saxton, 2012). This indicates that

both accountability and promotional information are mixed within social media.

Dialogue, oral reporting, or social interactions can also be used to render

accountability of an organization (Cordery, et al., 2010). These informal

communication methods mostly occur in small organisations that have a high

degree of closeness between with their stakeholders (Godwin, et al., 2011;

Jayasinghe & Soobaroyen, 2009). Accounting and formal reporting technologies

are usually underdeveloped in small organisations; therefore the diffusion of


information does not depend solely on accounting (Avina, 1993). Informal

communication methods provide information about what occurs in an

organisation, offsetting the weaknesses of rudimentary accounting and reporting

technologies (Avina, 1993). While it is commonly used in small organisations,

Cordery et al. (2010) has documented the use of social interaction to discharge

accountability in a large organisation.

It is expected that zakat agencies will use various means to disseminate

accountability. Figure 4-3 depicts media that can be used by zakat agencies to

discharge accountability.

Figure 4-3 Skeletal Framework of Possible Media to Discharge

Accountability.

4.6 INTER-RELATIONSHIP AMONG THE CORE ELEMENTS OF ACCOUNTABILITY

A number of authors have suggested that inter-relationships exist among the

core elements of accountability: (1) to whom accountability should be discharged;

(2) the scope of accountability and type of information to be disclosed; and (3) the

means of discharging accountability (Connolly & Hyndman, 2004; Connolly, et

al., 2011; Hyndman, 1990, 1991; Stewart, 1984; Waters, 2009). For example,

Stewart (1984) argued that every element of his ladders of accountability requires


different types of information. Information about a statement of goals and

objectives, inputs, output and outcome information, efficiency and effectiveness

information, budget information, and future target information are required to

evaluate performance accountability (Connolly & Hyndman, 2004).

The findings of previous empirical studies suggest that every group of

stakeholders has different information requirements and different preferences for

means to disclose accountability information (Connolly & Hyndman, 2013a;

Connolly, et al., 2012; Deegan & Rankin, 1997; Tooley, Hooks, & Basnan, 2010).

Based on a survey of stakeholders of for-profit organisations, Deegan and Rankin

(1997) found that bankers, academics, and shareholders are more likely to seek

environmental information than stockbrokers and financial analysists. A study of

the public sector context conducted by Tooley, Hooks, and Basnan (2010) found

that internal stakeholders (management, councillors, and employees) and external

stakeholders (the public, creditors, and state government) have similar views

regarding the importance of non-financial performance information, statements of

revenue and expenditure, and future plans. However, internal stakeholders and

external stakeholders have different perceptions about the importance of overview

and operational information, balance sheets, cash flow statements, and financial

information outside of financial statements (Tooley, et al., 2010).

In the context of not-for-profit organisations, Connolly et al. (2012) found

that academics, auditors, funders, and management have different views regarding

the importance of information about the usage of financial resources and

information about organisational activities. O’Dwyer and Boomsma (2015)

documented that the government, as a resource provider of not-for-profit

organisations, demands formal reporting. Based on a case study of 15 not-for-

profit organisations in India, Kilby (2006) found that downward accountability to

beneficiaries could be achieved by employing both formal accountability

mechanisms, such as by organising formal and regular meetings with

beneficiaries, and informal accountability mechanisms, such as conducting

irregular and informal meetings. Kilby (2006) also found that donors were more

interested in financial accountability than other areas of accountability.


Although several authors have suggested that the core elements of

accountability are inter-related, previous studies have only partially explored this

connection amongst the core elements of accountability, such as the relationship

between formal or informal accountability mechanisms and beneficiaries (Kilby,

2006) and the type of information considered important by administrators and

donors of not-for-profit organisations (Hyndman, 1990, 1991). Therefore, this

study explores the inter-relationship amongst all core elements of accountability.

Figure 4-4 describes the framework of possible inter-relationship among the core

elements of accountability.

Figure 4-4 Skeletal Framework of Possible Inter-relationship among the Core Elements of Accoountability

4.7 THEORETICAL UNDERSTANDING AND RESEARCH QUESTIONS

The accountability literature that informs this study suggests that the notion

of accountability is related to whom an organisation should be accountable, for

what an organisation should be accountable, what types of information an

organisation should disclose to satisfy every area of the scope of accountability,

and by what means an organisation should discharge its accountability (Murtaza,

2012; Najam, 1996; Ospina, et al., 2002; Ryan & Irvine, 2012a; Tower, 1993). As

stated in Chapter 1, the aim of this study is to investigate the understanding of

accountability in the context of zakat agencies. An empirical investigation was

required to flesh out the skeletal framework regarding accountability in the

context of zakat agencies. To achieve the aim of this study, this study asks the

following research questions:




















d) According to the donors of zakat agencies, by what means should

zakat agencies discharge their accountability?

The first research question was proposed to achieve the objective of this study

regarding the understanding of accountability from the perspective of internal

stakeholders, that is, administrators; while the second research question was

proposed to address the second objective of this study in relation to understanding

the views and perceptions of external stakeholders of zakat agencies, that is,

donors, on the notion of accountability.

As discussed in Section 4.6, a number of authors have suggested that an

inter-relationship exists amongst the core elements of accountability: (1) to whom

accountability should be discharged; (2) the scope of accountability and type of

information to disseminate accountability; and (3) means to discharge


accountability. Therefore, this study aims to operationalise the qualitative

understanding of accountability in a quantitative inquiry by answering the

following research question:



As the nature of this study is exploratory, this study does not predict the direction

of inter-relationship between these core elements of accountability.

An accountability gap can exist if inconsistencies occur between the

perceptions of donors, the perceptions of administrators, and the disclosure

practised by an organisation (Connolly & Hyndman, 2013b; Hyndman, 1990,

1991). Therefore, the third research objective was to identify the possibility of an

accountability gap and to identify additional disclosure that could improve the

accountability of zakat agencies, if an accountability gap exists. This research

objective was addressed through the following research question.







4.8 SUMMARY

This chapter highlighted the accountability literature that informed this

study. Discussion about the meaning of accountability indicates that

accountability is a socially constructed concept and different individuals have

different perceptions regarding accountability. Although the exact definition of

accountability is elusive, this study adopts the definition of accountability as an

obligation of an individual or organisation to provide an explanation and

justification for their actions and the results (Roberts & Scapens, 1985). The

exploration of accountability in the literature led the discussion of accountability

around these core concepts: (1) to whom should an organisation be accountable;


(2) for what should an organisation be accountable for and what types of

information should be disclosed by an organisation; and (3) by what means should

an organisation discharge its accountability.

Regarding to whom zakat agencies should be accountable, the

accountability literature outlines that zakat agencies should be accountable to a

wide range of stakeholders, including resource providers, regulators, beneficiaries,

and others. In terms of ‘for what’, Stewart’s (1984) ladder of accountability

provides a basic framework to evaluate the scope of accountability of zakat

agencies. However, because a zakat agency is an Islamic faith-based organisation,

and to promote greater accountability, the scope of accountability of zakat

agencies is expected to include other areas of accountability. The scope of

accountability of zakat agencies should consist of financial accountability, legal

accountability, governance accountability, programme accountability,

performance accountability, mission accountability, Syari’ah accountability, amil

fund accountability, and ethical accountability. Consequently, information

disclosed by zakat agencies should satisfy all areas of these aspects of the scope of

accountability. Regarding the means to discharge accountability, it is expected

that zakat agencies will use various media to disseminate accountability

information, such as annual reports, financial reports, the internet, mass media,

and others. Finally, as previous studies have suggested that the core elements of

accountability are inter-related, this study also investigates the existence of an

inter-relationship among the core elements of accountability. The next chapter

discusses the research methods adopted in this study.

Chapter 5: Research Methods 83

Chapter 5: Research Methods

5.1 INTRODUCTION

This chapter discusses the methods employed in this study. The selection of

research methods in this study was guided by the MRT research perspective and

based on the ability of selected methods to address every research question. This

chapter is structured as follows. Section 5.2 highlights the mixed methods adopted

in this study. Sections 5.3 to 5.6 describe research methods used to answer every

research question that includes sample selection methods, data collection, and

analysis methods. Section 5.7 highlights the approach used to discuss the research

findings. Finally, this chapter concludes with a summary in Section 5.8.

5.2 MIXED METHODS RESEARCH

As discussed in Chapter 3, this study follows the MRT paradigm proposed

by Laughlin (1995, 2004, 2007). From a research paradigm perspective, MRT

allows the adoption of mixed methods because MRT posits that “subjectivity and

structured formality” can be combined to produce a better understanding of the

empirical phenomenon being investigated (Laughlin, 2007, p. 275). MRT prefers

qualitative methodology but also permits the use of quantitative methodology,

such as surveys (Broadbent & Laughlin, 2013). Guided by the research paradigm

that underpins this study, it was important to employ research methods that are

appropriate to the research aims and research questions being investigated

(Creswell & PlanoClark, 2007).

Several previous studies have adopted the MRT perspective and used a

mixed methods approach, for example, Basnan (2010) used MRT and mixed

methods to investigate the accountability of Malaysian local authorities, while

Sardesai (2014) used MRT and mixed methods to investigate the impact of a new

public policy on management accounting technologies and the working life of

academics. The mixed methods approach has also been used in previous

accountability studies (e.g. Connolly, et al., 2012; Kreander, et al., 2009; Yasmin,

84 Chapter 5: Research Methods

et al., 2013). These authors stated that mixed methods can provide a robust

approach and are appropriate for use in accountability research.

Mixed methods research employs both quantitative and qualitative methods

to collect and analyse data in one or more stages of study (Creswell & PlanoClark,

2007; Johnson, Onwuegbuzie, & Turner, 2007). It is argued that mixed methods

can produce a more robust conclusion than a single method because the

weaknesses of a particular method can be compensated by the strengths of other

methods (Jick, 1979; Tashakkori & Teddlie, 2010). Furthermore, the combination

of qualitative and quantitative methods can produce a better understanding of a

research phenomenon being investigated than only using a quantitative or

qualitative method (Bryman, 2006). While the motivation to adopt mixed methods

is varied, the main reason to adopt mixed methods is because different research

questions need to be addressed through both quantitative and qualitative methods

(Johnson & Onwuegbuzie, 2004). This study adopted mixed methods research

because different research questions in this study needed to be addressed by

qualitative and quantitative methods. The methods of data collection consisted of

a survey, interviews, and a content analysis of documents and websites. Table 5-1

summarises the research methods and data collection methods used in this study

and research questions addressed.


Table 5-1 Research Methods Used to Answer Research Questions

No Research Questions Data Collection Methods Participants

RQ.1 How is accountability understood by the administrators of Indonesian zakat agencies? a) To whom do the administrators of

zakat agencies believe zakat agencies should be accountable?

b) What is the scope of accountability of zakat agencies according to the administrators of zakat agencies?

c) What information (financial and non-financial) do the administrators of zakat agencies consider necessary to be disclosed by zakat agencies to discharge their accountability?

d) According to the administrators of zakat agencies, by what means should zakat agencies discharge their accountability?

Qualitative method - Interviews

The administrators of zakat agencies

RQ.2 How is accountability understood by the donors of zakat agencies? a) To whom do the donors of zakat

agencies believe zakat agencies should be accountable?

b) What is the scope of accountability of zakat agencies according to the donors of zakat agencies?

c) What information (financial and non-financial) do the donors of zakat agencies expect and consider necessary to be disclosed by zakat agencies to discharge their accountability?

d) According to the donors of zakat agencies, by what means should zakat agencies discharge their accountability?

Quantitative method – Survey

The donors of zakat agencies

RQ.3 What inter-relationships exist amongst the core elements of accountability in the context of zakat agencies?

Data to answer RQ.3 was derived from RQ.2.

The donors of zakat agencies


No Research Questions Data Collection Methods Participants

RQ.4 Is there an expectations gap in the scope and disclosure of zakat agency accountability between administrators and donors? a) What media and type of

information is currently used and disclosed?

b) Do administrators and donors have different views on to whom, for what and how to discharge accountability?


Content analysis of annual reports, internal magazines, website, social media (Facebook).

Not applicable

5.3 RESEARCH METHODS USED FOR RESEARCH QUESTION 1

Semi-structured interviews with the administrators of zakat agencies were

employed as a method to collect data to answer research question 1. Although

other data collection methods (i.e questionnaire) can also be used to collect

information about the understanding of accountability from the perspective of

administrators, the decision to conduct semi-structured interviews was taken on

the basis that the nature of this study is ‘exploratory’. While accountability is

broadly discussed in the literature, the meaning of accountability remains elusive

and the understanding of accountability in the context of Islamic organisations is

limited. Richards and Morse (2007) argue that the semi-stuctured interview is

appropriate for a study where the existing literature can provide a general

understanding about new phenomena but the detail of this new phenomena may

differ from that discussed in the existing literature. Accountability literature

guides this study, especially in developing interview protocol and interpreting

data, but the understanding of accountability in the Islamic organisational context

may be different from that in the existing literature. Therefore, semi-stuctured

interviews were employed because they provide an opportunity to explore

perceptions, understandings, thoughts, experiences, and unique information held

by individuals interviewed (Stake, 2006; Richards & Morse, 2007). Further, by


employing semi-structured interviews, it is possible to probe, clarify, and refine

information proposed by participants. Several authors have used semi-structured

interviews in previous accountability studies, for example, to investigate the

understanding of accountability in charitable organisation in the UK from the

perspective of donors (Connolly & Hyndman, 2013a) and the perceptions of

accountability in Australian faith-based not-for-profit organisation contexts

(Crofts, 2009).

5.3.1 Sample Selection Method

As discussed in Chapter 2, Indonesian zakat agencies differ in size (large

and small) and type of organisation (local Imam, government-sponsored zakat

agency, and private zakat agency). Based on the accountability literature, there is

a high degree of closeness and transparency in a small community organization

(Avina, 1993; Goodwin, et. al., 2001; Jayasinghe & Soobaroyen, 2009) such as

zakat collection by local Imams. Thus, it can be argued that the collection and

distribution of zakat by local Imams is relatively similar to that of the work of a

small community organisation because all donors and beneficiaries are members

of the local community or congregation. Donors are more readily able to see what

happens to their zakat and this narrows the gap of accountability. In contrast, this

natural transparency does not exist in zakat distribution by formal organisations,

and formal accountability mechanisms, such as reporting and disclosure of

information, are needed. Therefore, local Imams are excluded from the sample for

this study and the focus is only on formal zakat agencies (i.e. government-

sponsored zakat agencies and private zakat agencies).

Because formal zakat agencies vary in terms of size and type of

organisation, it was necessary to select a sample that represented different types

and sizes of organisations to capture variations and improve representativeness

(Eisenhardt, 1989; Stake, 2006). In addition, previous empirical research has

indicated that accountability practised by organisations is influenced by the size of

an organisation (Avina, 1993; Christensen & Mohr, 2003; Connolly & Hyndman,

2004). The variability of the sample also provided an opportunity to contrast

between small and large zakat agencies and between government-sponsored zakat


agencies and private zakat agencies. Thus, the sample was selected from small

and large government-sponsored zakat agencies, and small and large private zakat

agencies.

This study used income as the proxy of size as this has been adopted in a

number of previous studies (Connolly & Hyndman, 2001, 2004; Schmitz, et al.,

2012; Yasmin, et al., 2013). Connolly and Hyndman (2001, 2004) classified

charitable organisations with annual income the same or less than £650,000 (AUD

1,100,000 ≈ Rp11,000,000,000) as a small charitable organisation, while

charitable organisations with an annual income of more than £650,000 were large

charitable organisations. Following Connolly and Hyndman (2001, 2004), this

study classified zakat agencies with an annual income the same or less than

Rp11,000,000,000 (AUD 1,100,000) as a small zakat agency, while zakat

agencies with an annual income of more than Rp11,000,000,000 (AUD

1,100,000) were considered large zakat agencies.

The initial list of zakat agencies was obtained from the list of registered

zakat agencies issued by the Indonesian Taxation Office. This list only covers the

Central BAZNAS and 19 private zakat agencies. Eleven registered zakat agencies

had revenue of less than Rp11,000,000,000 (AUD 1,100,000), while eight zakat

agencies had revenue of more than Rp11,000,000,000 (AUD 1,100,000) in 2010

(Meutia, 2012). Because some zakat agencies are unregistered, this study also

tried to find participants from unregistered zakat agencies. The internet was used

to identify unregistered zakat agencies by using key words ‘lembaga amil zakat’.

The number of unregistered zakat agencies was unknown and the process of

finding unregistered zakat agencies was halted after 15 private unregistered zakat

agencies were identified. The contact details of registered and unregistered private

zakat agencies were obtained from the internet using the ‘Google’ search engine

and key words the name of private zakat agency.

The contact details of government-sponsored zakat agencies were collected

from the internet using the ‘Google’ search engine and key words ‘badan amil

zakat nasional’ and the name of local or provincial governments. This process

was also halted after the contact details of 15 government-sponsored zakat


agencies were identified. Therefore, the list of zakat agencies used in this study

consisted of 49 zakat agencies (19 registered zakat agencies, 15 unregistered zakat

agencies, and 15 government-sponsored zakat agencies).

The use of the internet to obtain the contact details of zakat agencies

excluded zakat agencies that did not have a website. However, this method was

considered appropriate as this study also investigated the usage of the internet to

discharge accountability. Therefore, zakat agencies that did not have a website

were excluded from this study.

Table 5-2 summarises the sample selection process and the final number of

zakat agencies. The fieldwork undertaken to collect data was conducted twice.

The first fieldwork was from December 2014 to March 2015. A letter requesting

participation in this study was sent to 14 (out of 49) selected zakat agencies.

Approximately two weeks after the initial letter request had been sent, the

researcher phoned zakat agencies that did not reply to ask about their response to

this study. Three local government-sponsored zakat agencies, two provincial

government-sponsored zakat agencies, one small private zakat agency, and two

large private zakat agencies agreed to participate in this study.

Table 5-2 Sample Selection Process

No Description 1st Fieldwork 2nd Fieldwork Total

Invited Agree to Participate Invited Agree to

Participate Invited Agree to Participate

1 Small-local government-sponsored zakat agencies 3 3 1 1 4 4

2 Small-provincial government-sponsored zakat agencies

2 1 0 0 2 1

3 Large-provincial government-sponsored zakat agencies

1 1 0 0 1 1

4 Small private zakat agencies 3 1 2 1 5 2

5 Large private zakat agencies 5 2 6 1 11 3

Total 14 8 7 3 23 11

The second fieldwork was shorter than the first fieldwork and was

conducted for two weeks at the end of October 2015. Emails requesting

participation in this study were sent to seven zakat agencies. Approximately two


weeks after the initial email request had been sent, a second email request was

sent to the zakat agencies that did not reply to the first email. One local

government zakat agency and two large private zakat agencies agreed to

participate in this study. In total, eleven zakat agencies participated in this study.

The number of organisations involved in this study was considered sufficient

because four or more cases in a study are considered appropriate to gain an

understanding of a research phenomenon (Eisenhardt, 1989; Stake, 2006).

There is an inherent limitation in the sample section processes adopted in

this study. Self-selection bias may exist in this study. Zakat agencies that gave

positive responses to the interview request may have good accountability

practices, while those that did not have good accountability systems may have

refused to participate. This means that the sample may not necessarily represent

the population. In addition, due to time and resource constraints, this study only

investigated a few zakat agencies and interviewed a relatively small number of

participants in each stakeholder group. This small sample might limit the

generalisability of the findings from this study to other zakat agencies.

5.3.2 Characteristics of Respondents

The participatants of this study consist of 17 respondents from 11 zakat

agencies. Table 5-3 provides information about the profile of respondents. All

interviewees could be considered as senior staff, with positions ranging from

Manager to Chief Executive. They all had more than five years of experience in

administrating zakat agencies. While most interviewees were willing to be

intervieweed individually and, as such become an organisational participant, other

contacted potential interviewees insisted on additional organisational members

also being in attendance – either due to perceived lack of confindence or in

consideration that ‘accountability’ is a concept equally applicable to areas of the

organisation beyond the realm of one person or departement. Ten (out of 11) zakat

agencies that participated in this study are from large cities. Therefore, the views

of participants reflect the understanding of accountability from zakat agencies in

large cities.


Table 5-3 Distribution of Interviewees

No Code Position Size Organisation Location Remarks

1

P1 General Manager Small Local BAZNAS A Large City P2 Executive Secretary Small Local BAZNAS A Large City

2

P3 Executive Secretary Small Local BAZNAS B Large City Interview was conducted in a group P4 Treasurer Small Local BAZNAS B

3 P5 Chief Executive Small Local BAZNAS C Small City (Regency)

Interview was conducted in a group

P6 Executive Secretary Small Local BAZNAS C P7 Treasurer Small Local BAZNAS C 4 P8 Chief Executive Small Local BAZNAS D Large City

5

P9 Chief Executive Small Provincial BAZNAS E

Large City Interview was conducted in a group P10 Accounting Advisor

(Volunteer) Small Provincial BAZNAS E

Large City

P11 Communication Advisor (Volunteer) Small Provincial BAZNAS

E Large City

6 P12 Finance Manager Large Provincial BAZNAS F

Large City

7 P13 Chief Executive Small LAZ G Large City 8 P14 General Manager Small LAZ H Large City 9 P15 Chief Accounting Large LAZ I Large City

10 P16 Vice President Director Large LAZ J Large City

11 P17 Operating Director Large LAZ K Large City

5.3.3 Interviews Protocols

There was no difference in the interview protocol between the first and

second fieldwork. This study employed semi-structured interviews to gain an

understanding of the notion of accountability from the perspective of internal and

external stakeholders of zakat agencies. The semi-structured interviews used

interview guides that consisted of open-ended questions to be explored during

interviews. The interview guides were used to provoke responses from the

respondents, so that they could express their knowledge and opinion regarding the

themes investigated in this study. The interview guides helped the researcher to

ask every research question but still allowed the participants to express their

understanding according to their preference (Patton, 2002). Thus, semi-structured

interviews were more systematic than unstructured interviews, but still enabled


the researcher to probe and further explore specific information that emerged

during the interviews (Patton, 2002).

The content of the interview guide was informed by the theoretical

framework and previous empirical findings (see Appendix B). In addition, the

content of the interview guide was also informed by a preliminary understanding

about the business process of zakat agencies and their current accountability

practices gained from websites and public document analysis. The drafts of the

interview guide were revised several times based on feedback from the research

supervisors. The drafts of the interview guides were also revised based on advice

from two Indonesian research students who reviewed the interview guide. The

interview guide covered the main research themes, such as ‘the meanings of

accountability’, ‘to whom’. ‘stakeholders’, ‘dissemination of information’ and

‘financial reporting.

This study employed both face to face and telephone interviews. The

protocol for direct face to face interviews and telephone interviews, as well as the

protocol for an individual and a group interview was similar. All interviews began

with a brief introduction about this study, then the researcher explained the nature

of participation, which was voluntary, anonymous, and could be withdraw until

three months after the interview was conducted. The researcher explained that

neither interviewees nor their organisations would be identified in the interview

transcripts, this thesis, or other publications based on the data collected in this

study.

Participants were asked to read a participation information sheet and to sign

a consent form if they decided to participate (see Appendix B). The participants

also had the opportunity to read the list of questions (the semi-structured interview

guide) before the interview was conducted. After obtaining consent from the

participants, the researcher asked ice breaker questions about recent developments

in zakat administration and the growth of zakat agencies in Indonesia. This was

followed by asking questions that focused on the themes of this study, such as the

meanings of accountability, to whom zakat agencies should be accountable, and

how zakat agencies should discharge their accountability.


The interviews were held at the participants’ offices. No participants

received a reward or incentive for their time and participation. The interviews

lasted between 30 minutes to 2 hours and the average duration was 51 minutes.

Three interviews were conducted in a group that consisted of two or three

respondents. In a group interview, every participant could confirm, reject, or add

more information; therefore, a group interview could produce more robust results

than a single interview. In addition, two interviews were conducted by phone

because a direct face to face interview could not be arranged during the fieldwork.

All interviews were in Indonesian and audio-recorded for transcription. The

recordings were immediately transcribed and translated into English by the

researcher to ensure accuracy. The transcripts were carefully re-read several times

while listening to the recordings to gain some insight into participants’

understanding of the concept of accountability. These processes also offered an

opportunity to become immersed in the data, which is important in qualitative

analysis. These processes enabled the researcher to identify a saturation point or

provide early warnings on additional information that was required (Patton, 2002).

To achieve reliability, validity, objectivity, and data interpretation accuracy, the

transcriptions were emailed to respondents and proposed results were discussed

with supervisors (peer debriefing) (Creswell & Miller in Marshall & Rossman,

2011)

5.3.4 Analysis of Interview Data

The interview transcriptions were long, unstructured, and messy. Therefore,

the interview transcriptions need to be classified into pre-determined topics to

assist with interpretation. Assisted by NVivo software, content analysis was

employed to classify words or sentences that had a similar conceptual meaning

into pre-defined topics (Grbich, 2007). Content analysis has been used in a

number of studies that employed interviews to explore the understanding of

accountability (Campbell & Lambright, 2016; Schmitz, et al., 2012).

An important stage of content analysis is the development topic lists (code

book) into which words or sentences from the interview transcriptions are

classified (Dhanani & Connolly, 2012). In this study, both a theory-driven


(deductive) approach (Crabtree & Miller, 1999) and data-driven (inductive)

approach were employed (Boyatzis, 1998) to develop pre-defined topic lists. The

pre-defined topic lists were drawn from the existing literature and prepared in

advance. This pre-defined topic list consisted of variables that were related to all

core elements of accountability, such as God and donors (to whom), financial

accountability and legal accountability (for what), and annual reports and

magazines (how). However, it was possible that the pre-defined topic lists may

not capture all topics that emerged from the interviews. Therefore, the pre-defined

topic lists were modified or extended during data analysis (Campbell &

Lambright, 2016).

Before the interview transcriptions were coded based on the content, it was

important to assign descriptive information, such as the date of interview, types,

and size of zakat agency into the interview transcripts. This descriptive coding

was useful for later retrieval when the researcher looked for patterns related to a

particular characteristic of data (Richards, 2009; Richards & Morse, 2007). For

example, by using codes based on the type of zakat agency (government-

sponsored versus private zakat agencies), the researcher could easily locate and

retrieve information about to whom zakat agencies should be accountable based

on interviewees that represented government-sponsored or private zakat agencies.

After the data was labelled according to the descriptive characteristics of the

interviewees, every word or sentence from the interview transcripts was coded

and classified into pre-defined topic lists. After every interview transcript was

coded, interpretation was undertaken in light of existing theories. This approach

fits with MRT philosophy, which considers prior theories as guidance for current

research.

There is an inherent weakness in content analysis. Content analysis uses a

given set of pre-designed code (theory driven code) to categorise and analyse the

data, therefore reducing large data into smaller organised data. However, the pre-

designed code can also deflect the attention of the researcher from emerging

themes (data-driven code) that are not found in the code book (Silverman, 2013).


Although this study employed both theory-driven code and data-driven code, there

was the possibility that several emerging themes may be overlooked.


A survey was used to collect data to address the second research question

about the perceptions of donors regarding the notion of zakat agencies’

accountability. A survey was selected because it could be used to collect

quantitative and qualitative information from a large number of individuals in a

relatively short period of time at a minimum cost (Kayrooz & Trevitt, 2005).

5.4.1 Sample Selection Method

Surveys are generally used: (1) to provide description about a population;

(2) to provide an explanation about a particular phenomenon; and (3) to explore or

identify certain concepts or attributes from a population (Babbie, 1990). Surveys

have been used in previous accounting research seeking to identify users of

accounting information and their information needs (e.g. Mack & Ryan, 2006;

Tooley, et al., 2010).

The survey instrument combined both open-ended and closed questions (see

Appendix C). The contents of the survey were developed based on a review of

the previous literature. Based on feedback from supervisors, the content, layout,

and wording of the questionnaire draft went through several minor and major

revisions and refinements. After the final draft was approved by the supervisors,

the questionnaire draft was translated into Indonesian. Two research students from

Queensland University of Technology (QUT) were asked to review the

translation, content, and wording of the final questionnaire draft.

A pilot study is necessary to ensure that every question in the questionnaire

draft captures all information needed in a study and the questionnaire can be

understood by participants (Oppenheim, 1992). Thus, the questionnaire in

Indonesian was pilot tested with five Indonesian research students, one manager

of a local government-sponsored zakat agency, and one government employee.

The content and translation of the questionnaire were revised again according to

feedback from the translation reviewers, pilot test participants, and supervisors.


The survey package consisted of a participant information sheet, an

invitation to participate in the survey, the questionnaire, and a return envelope.

The participant information sheet explained about the researcher and his

institution, providing brief information about this study, ethical clearance, and

confidentiality. Convenience sampling was used to select participants. This study

used two methods to distribute the questionnaire to Muslims who gave zakat to

government-sponsored zakat agencies and private zakat agencies. First, the

researcher distributed 500 questionnaires in sealed envelopes directly to

participants at their offices. The researcher selected offices that were near the

office of the zakat agencies for convenience and to achieve a high response rate

because the researcher could directly distribute and collect the surveys.

Participants were given seven days to complete the questionnaires. After one

week, the researcher collected the questionnaires in a sealed envelope to secure

confidentiality from participants in their office.

Secondly, the researcher asked the administrators of zakat agencies to

distribute postal survey packages to their donors. The content of postal survey

packages is similar to the non-postal survey packages, except that the postal

survey packages also contain a pre-paid stamped return envelope. Previous studies

have also used the postal survey method to maintain confidentiality (Hyndman,

1990). Three zakat agencies agreed to distribute postal questionnaires to their

donors. A total of 100 postal questionnaires were given to zakat agencies for

distribution to their donors. The postal questionnaires were directed towards

participants who lived far from the office of the zakat agency.

Similar to the interview participants, the survey participants did not receive

a reward or incentive for their time and participation. In order to increase the

response rate, the researcher stated that a donation of Rp10, 000.00 (AUD 1)15

would be given on behalf of the participant to a zakat agency selected by the

participant for every survey completed and returned. The survey participant could

15 The funding for this donation was provided by the Research Project Support Scheme from the QUT

Business School and paid on 15-17 June 2015.


select their preferred zakat agency from a list of zakat agencies provided in the

survey package.

Like all data collection methods, the survey has disadvantages, such as: (1)

the respondent may misinterpret questions; (2) the ordering of questions

sometimes has an impact on the respondent’s answers; (3) the cultural and

personal background of respondents can influence their answer; and (4) the

respondents do not try hard to answer survey questions (Foddy, 1993). The

method of selecting respondents also created limitations in this study. Given that

an organisation has various groups of stakeholders, this study only focused on one

type of external stakeholder, that is, donors. The other groups of stakeholders

were not represented in the surveys and may have different perceptions regarding

accountability.

5.4.2 Analysis of Survey Data

For data analysis purposes, returned questionnaires with many unanswered

questions were not included in analysis. From 500 surveys returned, 239

responses were usable, with a response rate at 47.80%. This sample size was

considered sufficient to ensure the robustness of statistical data analysis

(Oppenheim, 1992). Data collected from the surveys were analysed using SPSS

version 23 statistical software. Descriptive analysis was used on every survey

question to identify the distribution of data and to gain an understanding of the

data collected (Onwuegbuzie & Combs, 2010). Various statistical tests were used

to examine the difference in perceptions regarding several accountability elements

by the groups of donors (who gave to local Imam, government-sponsored zakat

agencies, and private zakat agencies) and different demographic attributes of

donors: (1) the level of education; (2) sector of employment; and (3) age groups.

Chi-square tests and Kruskal-Wallis tests were used for nominal data, while the

multivariate analysis of variance (MANOVA) test was used for scale data. In

addition, factor analysis was used to create smaller groups of variables that shared

similar attributes (Pett, Lackey, & Sullivan, 2003).


Factor Analysis

Factor analysis was employed in this study to condense a large number of

variables into a smaller set of variables to understand the underlying construct and

inter-relationship among variables. Factor analysis is a data reduction method

used to identify patterns of data without losing much information by consolidating

several highly correlated variables into a few set of factors that share variance

(Hair, Black, Babin, Anderson, & Tatham, 2006). Factor analysis assumes that

highly correlated variables share similar underlying evaluative dimensions (Hair

et al., 2006). It also assumes that there is a linear relationship between variables

and factors (Gorsuch, 1983). The grouping of variables into a factor is based on

the value of the loading score. The loading score indicates the magnitude of the

correlation between a variable and a factor.

The responses of participants to survey questions 7 (to whom zakat agencies

should be accountable), 8 (for what aspects zakat agencies should be accountable),

12 (how zakat agencies should discharge their accountability), and 13 (type of

information that should be disclosed by zakat agencies) (see Appendix C)

consisted of more than five variables. Therefore, factor analysis was used to group

and simplify the responses of participants to understand the inter-relationships

among variables and to identify the underling constructs of every factor. In

addition, the simpler classification of participants’ responses produced by factor

analysis facilitated correlation analysis to answer research question 3.

Factor analysis can be performed using several different techniques,

however, this study used principal component analysis (PCA) to develop factors.

PCA is usually used in exploratory studies where the inter-relationship among

variables is not widely understood (Pett, et al., 2003; Tabachnick & Fidell, 2007).

A few previous accounting studies have used factor analysis to reduce the number

of variables in exploratory studies (Fullerton, Kennedy, & Widener, 2013; Ritchie

& Kolodinsky, 2003; Scandura & Viator, 1994). Dumont (2013) also used factor

analysis to investigate the virtual accountability of non-for-profit organisations.

This study can be classified as an exploratory study because the meaning of

accountability in the context of zakat agencies has not been clearly theorised. In


addition, the constructs in this study were developed based on prior literature in

Western and Christian contexts. Thus, an exploratory factor analysis was

considered appropriate to simplify the constructs identified in this study.

Before proceeding to factor analysis, it was important to evaluate the

suitability of the data. Factor analysis also necessitates the presence of inter

correlations between variables where some correlation coefficients of variables

must be greater than 0.3 (Tabachnick & Fidell, 2007). The identification of inter

correlations was undertaken by visually inspecting the correlation matrix, in

addition to Bartlett’s test of sphericity to determine the existence of sizable

correlation among variables. Factor analysis requires at least five variables and 50

observations (10 observations per variable) (Hair, et al., 2006). To measure the

adequacy of the sample and to assess the appropriateness of factor analysis

application, a Kaiser-Meyer-Olkin (KMO) test was performed (Pallant, 2016).

After preliminary statistical tests confirm that the data collected is suitable

for factor analysis, it is important to determine the number of factors. The number

of factors can be determined by retaining factors that have eigenvalues greater

than 1 (Kaiser’s criterion), examining the scree plot, and parallel analysis (Pallant,

2016). As suggested by a number of authors, this study primarily employed

parallel analysis to determine the number of factors (Hayton, Allen, & Scarpello,

2004; O’Connor, 2000; Pallant, 2016). However, this study also considered

existing theories and factor interpretability to determine the number of factors

(Pett, et al., 2003). If the number of factors retained based on parallel analysis did

not fit with the existing theories, the number of factors was determined based on

the other two methods.

Parallel analysis was conducted using MonteCarloPA software developed

by Watkins (2000). The magnitude of eigenvalues and scree plots was also

evaluated to determine the appropriateness of the number of factors. The grouping

of variables was based on the score of a factor loading greater than 0.4 (Nunnally

& Bernstein, 1994; Ritchie & Kolodinsky, 2003). Factor analysis may produce

variables that load into more than one factor (cross-loading), making

interpretation difficult. In this case, the factors were rotated to ease the


interpretation of data (Tabachnick & Fidell, 2007). In this study, both oblique

(Oblimin) and orthogonal (Varimax) rotations were used, allowing the results of

rotation methods to be compared.

Factor analysis has limitations. First, it is sometimes difficult to give a name

to a factor because variables that load into a particular factor may not theoretically

correlate or make logical sense. Second, several variables may load equally into

more than one factor (cross-loading), even after rotation. Therefore, cross-loading

variables and variables that load onto a factor that does not theoretically correlate

or make logical sense are usually deleted (Fullerton, et al., 2013).

5.4.3 Characteristics of Respondents

The demographic characteristics of survey respondents have implications

for the interpretation of findings. Therefore, it is important to gain insight on the

demographic characteristics of survey respondents. Table 5-4 presents the cross-

tabulation of respondents by the groups of respondents who gave most of their

zakat to local Imams, government-sponsored zakat agencies, and private zakat

agencies, and the demographic profile of the respondents (sector of employment,

age category, and the level of education).16

Table 5-4 Cross-tabulation of the Groups of Respondents Who Gave to Local Imams, Government-sponsored Zakat Agencies, and Private Zakat Agencies by

Demographic Profiles

Demographic Profile Local Imam

Government-sponsored

Zakat Agencies

Private Zakat

Agencies

All Respondents

n=239

Freq. % Freq. % Freq. % Freq. %

Sector of Employment17

Government employee 138 58.97 37 15.81 27 11.54 202 86.32 Non-government employee18 13 5.56 6 2.56 13 5.56 32 13.68

Total Responses 151 64.53 43 18.38 40 17.09 234 100 Did Not Respond to This Question 5

16 This survey did not ask for information about the geographical location of where the respondents resided. 17 Data was initially collected based on six areas of employment (see Appendix Q); however, it was

collapsed into two categories due to a low frequency in several categories. 18 Non-government employees consist of state-owned company employees, private company employees, or

self-employed and others.


Age Category19

≤ 30 37 15.74 5 2.13 9 3.83 51 21.70 31 – 40 46 19.57 18 7.66 15 6.38 79 33.62 41 – 50 40 17.02 13 5.53 9 3.83 62 26.38 ≥ 51 29 12.34 7 2.98 7 2.98 43 18.30 Total Responses 152 64.68 43 18.30 40 17.02 235 100.00 Did Not Respond to This Question 4

Education20

Below Bachelor degree 36 15.32 7 2.98 9 3.83 52 22.13 Bachelor degree or higher 116 49.36 36 15.32 31 13.19 183 77.87 Total Responses 152 64.68 43 18.30 40 17.02 235 100 Did Not Respond to This Question 4

The majority of respondents (155 respondents or 64.85%) indicated that

they gave most of their zakat to local Imams. There were 44 (18.41%) respondents

who stated that they gave most of their zakat to government-sponsored zakat

agencies, and 40 (16.74%) respondents stated that they gave most of their zakat to

private zakat agencies. Based on the sector of employment, the majority of

respondents (86.32%) were government employees. According to their age

groups, the majority of respondents were below 40. Based on the level of

education, the majority of respondents were well educated, as 77.87% of them had

completed university. Based on 2014 population data issued by Statistics

Indonesia,21 government employees only represent 3.8% of the labour force and

the percentage of the labour force who hold a bachelor degree qualification is

7.5%.

The demographic profile indicates that the sample is not representative

because the majority of respondents were government employees or well-educated

individuals, while the majority of the Indonesian population are not government

employees and have education levels below a bachelor degree. Therefore, the

19 Age data was initially collected based on six categories (see Appendix Q). However, there were only

three respondents below 21 years (1.3%) and one respondent above 60 years (0.4%). Therefore, the ‘≤ 20’ and ‘21-30’ categories and ‘51-60’ and ‘≥ 61’ categories were merged.

20 Education data was initially collected into five categories in this survey (see Appendix Q). However, the levels of education were reduced into only two categories (below bachelor degree and bachelor degree or higher) because several variables had a zero or low frequency.

21 According to 2014 data provided by Badan Pusat Statistik (Statistics Indonesia), the number of government employees was 4,455,303 (https://www.bps.go.id/linkTabelStatis/view/id/1174), the workforce population was 118,169,922 and the number of those in the work force with a bachelor degree or higher was 8,846,837 (https://www.bps.go.id/linkTabelStatis/view/id/1936)

https://www.bps.go.id/linkTabelStatis/view/id/1174

https://www.bps.go.id/linkTabelStatis/view/id/1936


results of this survey may not reflect the perception of the general population who

give zakat. The results of this study are more likely to reflect the understanding of

accountability in the zakat agency context from the perspective of well-educated

government employees. Although the sample is not representative, based on the

MRT research perspective adopted in this study, the findings of this study still

provide a valuable theoretical insight that can enrich the skeletal understanding of

the notion of accountability.


The data to answer the third research question were generated using factor

analysis. Factor analysis was used to produce a new set of values or scores for

every respondent on every variable of the core element of accountability (Pett, et

al., 2003). These new values or scores were labelled as factor scores and replaced

the original score collected in the survey. In this study, factor scores were

produced using the regression method (Tabachnick & Fidell, 2007). The factor

scores were then used in non-parametric correlation tests to determine whether

there was a significant correlation among to whom, for what, type of information,

and how. A MANOVA test was also performed to establish whether there was a

significant difference in the views of donors about the concept of accountability

among the groups of donors and donors who had different demographic attributes

(the primary beneficiaries of zakat, the age of donors, the level of education, and

occupation).


The aim of research question 4 was to investigate the existence of an

accountability gap in the accountability of Indonesian zakat agencies. In order to

identify an accountability gap, it is necessary to identify media used by zakat

agencies to discharge their accountability and the presence or absence of

accountability information in these media. Content analysis was used to identify

the presence or absence of accountability information in annual reports, internal

printed media, the internet (website), social media, and mass media of Local

BAZNAS A, B, C, and D, Provincial BAZNAS E and F, small LAZ G and H, and

large LAZ I, J, and K. The results of the content analysis were compared with the


views of administrators and donors as to whom, for what, the types of information

and the media that should be used by zakat agencies to answer research question

4. Content analysis was selected because this method has been used in previous

studies investigating the use of various media to discharge accountability, such as

annual reports (Dhanani & Connolly, 2012; Flack, 2007; Hyndman, 1990, 1991;

Yasmin, et al., 2013), the internet (Connolly & Dhanani, 2013; Dumont, 2013;

Saxton & Guo, 2011; Waters, 2007), and internal printed media (Hardy & Ballis,

2013).

Several authors have used the presence or absence of various types of

accountability information in previous accountability studies, for example, to

investigate the content of annual reports published by Australian not-for-profit

organisations (Flack, 2007) and the content of annual reports and annual reviews

of the top 100 British charitable organisations (Connolly & Hyndman, 2013b).

Because the objective of content analysis in this study was only to identify the

presence or absence of a specific accountability information, the quantity, quality,

and completeness of the information were not examined.

For the purpose of coding the textual data, a list of various types of

accountability information was created. Similar to the content analysis of the

interview data, the list of accountability information was based on the existing

accountability literature or theory-driven (inductive approach) (Boyatzis, 1998).

The list of accountability information developed by Hyndman (1990, 1991) was

used as a basic framework to develop the coding instrument. The Hyndman list

(1990, 1991) was selected as a basic framework because this list is simple but able

to capture the main information usually disclosed by charitable organisations. The

Hyndman list has been used in previous content analysis studies that investigate

the accountability of charitable organisations (Connolly & Hyndman, 2013b;

Flack, 2007).

The original list developed by Hyndman (1990, 1991) only consists of 14

types of information. In this study, this list of information was modified and

expanded into 24 types of information (see Appendix D) based on the existing

accountability literature (Flack, 2007; Tooley, et al., 2010; Yasmin, et al., 2013).


It is possible that this list of information did not capture all information found in

annual reports, websites, the internet, or Facebook. Therefore, a data-driven

(inductive) approach was also employed for data analysis to code the information

that did not match the list (Crabtree & Miller, 1999).

Because only three zakat agencies produced annual reports, the content

analysis of annual reports was only conducted for these three annual reports. The

annual reports selected were the latest annual reports. Six zakat agencies

published magazines and only one magazine was selected as a sample from each

zakat agency. The administrators of zakat agencies explained that the content of

the magazines was relatively similar in each edition, therefore selecting only one

edition of magazine was considered appropriate. For Facebook, the content

analysis was only conducted on the 50 latest posts. During the coding processes,

every page of the annual reports, every article in a magazine, every page on the

website of zakat agencies, and every posting on Facebook were analysed for their

themes.

As part of data analysis and to address RQ 4, a comparison was made

between information demanded by external stakeholders, information considered

important by the administrators of zakat agencies, and information supplied by

zakat agencies. The information demanded by external stakeholders but not

supplied by zakat agencies indicated an accountability gap. Based on the possible

identified accountability gap, recommendations for future improvement have been

proposed.

5.7 DISCUSSION OF RESEARCH FINDINGS

The final stage of this study was to analyse and discuss the findings on the

understanding of accountability in the context of zakat agencies as identified from

the interviews, surveys, and document and website analysis. The discussion

involved an integrative analysis of qualitative and quantitative data. Every piece

of data was considered to be a piece of the jigsaw, which when combined and

appropriately analysed created a complete image (Bazeley, 2012; Bazeley &

Kemp, 2012).


Finally, rigour and reliability are always the main issues in qualitative

studies (Marshall & Rossman, 2011). Concerns about reliability were dealt with

by using triangulation and member checking. Triangulation was performed by

combining multiple research methods to investigate the same empirical

phenomenon to improve the validity of findings. Triangulation was conducted by

comparing the findings from the interviews, surveys, and document analysis. The

interview data and interpretation were also shared with related respondents

(member checks) to improve validity (Marshall & Rossman, 2011).

5.8 SUMMARY

This study adopted a mixed methods research design because different

research questions in this study required different information and data analysis.

Semi-structured interviews were used to collect data on the understanding of

accountability in the context of zakat agencies from the perspective of the

administrators of zakat agencies. A survey was used to collect data regarding the

understanding of accountability in the context of zakat agencies as perceived by

donors. A non-parametric correlation test was performed to identify the inter-

relationship amongst the core elements of accountability. In addition, document,

website, and social media analysis was conducted to identify the media used to

disseminate accountability information by zakat agencies and type of information

disclosed by zakat agencies. The next three chapters present the findings of this

study.

Chapter 6: The Accountability of Zakat Agencies: Administrators’ Perceptions 107


6.1 INTRODUCTION

This chapter presents the findings that address the first research question

about the perceptions of administrators of zakat agencies on the concept of zakat

agencies’ accountability. The insights are based on interviews with the

administrators of zakat agencies. This chapter is structured as follows. Section 6.2

reports the understanding of accountability from the perspective of administrators.

Section 6.3 presents the views of the administrators regarding whether zakat

agencies should be accountable. Sections 6.4 to 6.7 focus on the core elements of

accountability, namely: ‘to whom’, ‘for what’, and ‘how’. Section 6.8 discusses

the findings of this study. Finally, Section 6.9 summarises the findings presented

and discussed in this chapter.

6.2 ADMINISTRATORS’ PERCEPTIONS ON THE MEANING OF ACCOUNTABILITY

In order to gain insight into the administrators’ understanding of

accountability in the context of zakat agency, interviewees were asked open-ended

questions about what they understood by the term accountability. Table 6-1

summarises the responses of interviewees on the meaning of accountability. The

majority of respondents did not link accountability with justification or

answerability, instead associating accountability with an expected quality of zakat

agency administrators, such as transparency, compliance with Syari’ah

requirements, and trustworthiness.

108 Chapter 6: The Accountability of Zakat Agencies: Administrators’ Perceptions

Table 6-1 Perceptions of Administrators on the Meaning(s) of Accountability

No Meaning(s) of Accountability

BAZNAS LAZ Total n=11 Small

n=5 Large n=1

∑ n=6

Small n=2

Large n=3

∑ n=5

1 Transparency 5 1 6 2 3 5 11 2 Actions that comply with

Syari’ah requirements 5 0 5 2 3 5 10

3 Trustworthy 5 0 5 0 3 3 8

4 Financial reporting 1 1 2 2 2 4 6

5 Good administration 2 0 2 1 2 3 5

6 Justification 0 0 0 1 2 3 3

7 Responsiveness 1 0 1 0 1 1 2

8 Compliance with government regulations

1 0 1 0 0 0 1

All interviewees associated accountability with transparency, making

transparency the most frequently stated by interviewees. Interviewees recognised

that most external stakeholders, such as donors and government, are not involved

in the daily administration of zakat agencies. These external stakeholders do not

know about the use of resources entrusted to zakat agencies. Therefore,

administrators believed that zakat agencies should proactively disseminate

information to external stakeholders:

If they [external stakeholders] do not receive our reports, they do not

have information. (P16 – Vice President Director of a large LAZ J)

An interviewee indicated that transparency is linked with the disclosure of

financial information.

So, we do not want to restrict the access of information. We want to

provide everything. The proof is our financial reports. Our report is

accessible anytime and we do not cover up any information. We always

welcome anyone who wants to access any information. (P14 – General

Manager of a small LAZ H)

Furthermore, interviewees also stated that transparency of actions or activities is

also important for zakat agencies.

Yes, even though it is a big organisation, but this organisation cannot

provide reports or data, this organisation is not accountable. But, as long


as this organisation can provide data or [information about] their

activities, this organisation is accountable. At least, a zakat agency should

provide data about its activities in a financial year. (P15 – Chief

Accountant of a large LAZ I)

The second most prevalent term associated with accountability was actions

that complied with Syari’ah requirements. The reference to accountability through

Syari’ah compliance is not surprising because zakat is not only a charitable

activity, but also a religious duty. Therefore, there are religious requirements that

must be satisfied by zakat agencies. This understanding also indicated that the

concept of accountability in zakat agencies is linked with sacred constructs.

Accountability is compliance with government regulation and Syari’ah

requirements determined by God. (P5 – Chief Executive of a small local

BAZNAS C)

Accountability means an organisation that can carry out its tasks, both

from Syari’ah and professional perspectives. (P13 – Chief Executive of a

small LAZ G)

The third most prevalent understanding mentioned by interviewees was

‘amanah’ or trustworthiness. The concept of amanah is related to the concept of

stewardship and transfer of resources. Interviewees considered themselves as a

trustee or steward of the funds donated by Muslim communities. This transfer of

resources is considered a ‘mandate’ given by donors to zakat agencies. Zakat

agencies receive a mandate from donors to distribute zakat funds to eligible

beneficiaries. As a recipient of this mandate or trusteeship or stewardship, the

administrators of zakat agencies have an obligation to perform the mandate and

report to individuals or organisations that give the mandate.

Trustworthy, can be trusted to perform mandate. (P5 – Chief Executive of

a small local BAZNAS C)

Six participants linked accountability with financial reporting. The majority

of participants that linked accountability with financial reporting were

interviewees from private zakat agencies.


That our [financial] recording and reporting are orderly. (P13 – Chief

Executive of a small LAZ G)

Public, especially our donors – can access financial data and this financial

data can convince them; [the financial data] do not create questions or

doubt or even distrust. If public get [our financial] data and they are

convinced; it means that our accountability is good. (P15 – Chief

Accounting of a large LAZ I)

Five interviewees linked accountability with good administration or

professionalism. As an organisation that collects donation from Muslims,

interviewees believed that the accountability of zakat agencies is related to the

administration of the zakat fund.

Accountability is an organisation that acts professionally. (P13 – Chief

Executive of a small LAZ G)

Although accountability is usually interpreted as providing reasons for

actions, only a few interviewees linked accountability with justification or

providing reasons for conduct. The majority of interviewees that mentioned this

justification were from private zakat agencies. Interviewees stated that they

needed to provide information to explain and justify their achievements or

failures, as stated in the following comments:

We tell about preconditions, preconditions that influence our

achievement. I report about that. I report about favourable condition and

unfavourable condition. I also report about our internal condition, then

the condition of donors, then the condition of beneficiaries, all related

parties, then the solutions. Therefore, our performance is based on these

conditions. (P13 – Chief Executive of a small LAZ G)

It means that I have to tell everything to the donors. The donors must

know everything. If my program fails, why does my program fail? If I

have to discontinue a program, why do I have to discontinue this

program? If I succeed, [I have to explain] why my program succeeds.

(P16 – Vice-President Director of a large LAZ J)


A small minority of interviewees linked accountability with responsiveness.

Interviewees perceived responsiveness as an ability to provide assistance that

meets the demand of stakeholders and this assistance should be given promptly, as

described in the following comments.

And whenever a disaster occurs, [we act promptly]; for example, we

heard the news that the house of Mr A was burned. We will survey the

location and give financial assistance. (P5 – Chief Executive of a small

local BAZNAS C)

Finally, one interviewee linked accountability with compliance with government

regulations, as mentioned in the following comment:

It complies with government regulation. (P5 – Chief Executive of a small

local BAZNAS C)

6.3 SHOULD ZAKAT AGENCIES BE ACCOUNTABLE?

When asked about “should zakat agencies be accountable?” all interviewees

unanimously agreed that zakat agencies should be accountable. A number of

reasons were proposed to support their views about the importance of

demonstrating accountability. The three most popular reasons proposed by

interviewees were: (1) accountability is important because it is required to gain

public trust and external support; (2) stewardship of resources; and (3) demanded

by regulations. Their responses are presented in Table 6-2.

Table 6-2 Perceptions of Administrators on “Why Should Zakat Agencies Be Accountable?”

No Reasons BAZNAS LAZ Total

N=11 Small n=5

Large n=1 ∑ Small

n=2 Large n=3 ∑

1 Gain public trust 3 1 4 2 3 5 9 2 Religious reasons 4 0 4 1 1 2 6 3 Required by regulation 5 0 5 0 2 2 7 4 Zakat agency is a ‘steward’

that receives a mandate to administer zakat.

3 0 3 1 1 2 7

5 Zakat agency is a financial institution that administers funds donated by public.

3 0 3 1 1 2 5


The majority of interviewees (9 out of 11) stated that trust must be earned

and disclosure of information can be used to earn trust. The disclosure of

information can be used to convince donors that the zakat fund has been

distributed to eligible beneficiaries, as reflected in the following comments:

One method that we used to improve public trust to us is reporting. Every

month we produce this report. (P1 – General Manager of a small local

BAZNAS A)

Yes, it is a necessity. Therefore, donors will not doubt that the zakat fund

is distributed to eligible beneficiaries. (P15 – Chief of Accounting of a

large LAZ I)

Further, interviewees believed that trust would encourage Muslims to give

zakat to zakat agencies, as stated in the following comments:

Accountability is needed to build and to increase public trust; therefore,

our revenues will increase. (P12 – Finance Manager of a large provincial

BAZNAS F)

This will encourage Muslims who do not give zakat to give zakat or those

who give zakat but not to [formal] zakat agencies – for example those

who give zakat to Imams or directly to beneficiaries – will give zakat to

[formal] zakat agencies. (P15 – Chief Accounting of a large LAZ I)

Six interviewees stated that religious reasons also motivate zakat agencies to

be accountable. For example, they believe that zakat funds belong to God and

God will ask for accountability from all human beings in the afterlife. In addition,

one interviewee mentioned that Islam teaches Muslims to provide a written

account, as per the following comment:

I always put emphasis to our staff that this fund belongs to Allah, belongs

to the poor people, and you must not misuse it. (P3 – Executive Secretary

of a small local BAZNAS B)

Islam teaches us to record all our works and transactions. Recorded! We

are taught if we received zakat, for example, Rp 2 million, this


transaction must be recorded. (P9 – Chief Executive of a small provincial

BAZNAS E)

Five interviewees indicated that zakat agencies should be accountable

because existing regulations require zakat agencies to give an account. This

comment is reflected in the following quote:

Accountability is required by regulation. The law states that zakat

agencies must be able to present their data. There is public representative

that audit zakat agencies, in this case public accountant. It means that we

must be accountable and responsible for the accuracy of information

provided. (P15 – Chief of Accounting of a large LAZ I).

An interviewee stated that satisfying legal requirements is important because there

is a legal sanction for zakat agencies and their administrators who do not comply

with regulations.

Why? If I do not provide it [a financial report], I can be jailed even

though I am correct [do not misappropriate zakat fund]. (P8 – Chief

Executive of a small local BAZNAS D)

Five interviewees highlighted that zakat agencies only receive a mandate

from the donors to distribute zakat funds to eligible beneficiaries. They consider

zakat agencies to be a steward of zakat funds entrusted by donors for poor people.

As a trustee of zakat fund, there is an obligation to give account. Interviewees

stated that donors have a right to obtain information about the usage of zakat

funds because donors have already given a donation to zakat agencies, as stated in

the following comments:

Amil is only entrusted zakat fund from Muslims who perform their

religious duty. On the other hand, there are [poor] persons who have a

right to this money (P16 – Vice President Director of a large LAZ J)

Individuals who give zakat should have a right to access information

about the usage of zakat funds. (P14 – General Manager of small LAZ H)

Five interviewees compared zakat agencies with financial institutions, such

as a bank that must be able to safeguard the money deposited by their customers.


This reason is related to the administrator’s understanding of accountability as a

responsibility. Interviewees stated that a zakat agency has a responsibility to

safeguard zakat funds donated by the public.

A zakat agency is a public financial institution. It is a public financial

institution that administers money from public. (P3 – Executive Secretary

of a small local BAZNAS B)

6.4 TO WHOM SHOULD ZAKAT AGENCIES BE ACCOUNTABLE?

This section presents the findings addressing the following research

question:

RQ.1.a. To whom do the administrators of zakat agencies believe zakat


Table 6-3 reports the responses of interviewees to the questions about to

whom zakat agencies should be accountable. The findings indicate that

administrators and donors share a similar perception on to whom zakat agencies

should be accountable. The majority of interviewees were in agreement that zakat

agencies should be accountable to a wide range of stakeholders that include God,

resource providers, regulators, beneficiaries, and others.

Table 6-3 Perceptions of Administrators on “To Whom Should Zakat Agencies be Accountable?”

To Whom BAZNAS LAZ

Total Small n=5

Large n=1 ∑ Small

n=2 Large n=3 ∑

God 5 1 6 2 3 5 11 Government 5 1 6 2 3 5 11 Central BAZNAS 5 1 6 1 3 4 10 Boards 3 2 5 2 3 5 10 Donors 5 1 6 2 3 5 10 Parent organisation 0 0 0 2 3 5 5 Indonesian Ulema Council (MUI)

0 0 0 0 0 0 0

Beneficiaries 2 0 2 1 3 4 6 Academics and education institutions

0 1 1 0 1 1 2

Media 0 0 0 0 1 1 1 Other zakat agencies 0 0 0 0 0 0 0 Informal leaders 0 0 0 0 0 0 0


All interviewees echoed that zakat agencies should be accountable to God

and they consider that the ultimate accountability of zakat agencies is to Allah, as

stated in the following quote:

Firstly, to God, the Qur’an states it … We cannot see God, but you must

believe that God sees your work. It makes us to work (well) and – we will

never misappropriate zakat funds or do other misconducts’ (P16 – Vice

President Director of a large LAZ J)

Interviewees explained that accountability to God is closely related to the

concept of dualism in life. Muslims believe that their life in this world is

temporary. In the afterlife, Muslims must account for their actions (inactions)

during their life in this world, as illustrated in the following quote:

We have to give account in this world and in the hereafter … Even

though we did everything properly and everybody believed that, but if

our actions did not comply with Syari’ah requirements, we still receive

punishment in the hereafter. (P5 – Chief Executive of a small local

BAZNAS C)

While interviewees stated that the primary accountability of zakat agencies

is to God, this does not negate the importance of accountability to human beings.

This is shown in their comments where all interviewees stated that zakat agencies

should be accountable to the government, and the majority of interviewees (10 out

of 11) stated that zakat agencies should be accountable to donors, the Central

BAZNAS, and the board. Furthermore, interviewees comments indicated that

accountability to the government and donors is more important than

accountability to other secular stakeholders, as shown in the following comments:

BAZNAS City B is accountable to the local government and local

Parliament, but mainly to the local government. (P5 – Executive

Secretary of a small local BAZNAS C)

In my opinion, our primary stakeholder is our donors, because we are a

charitable organisation. (P14 – General Manager of a small LAZ H)


Interviewees stated that accountability to the government is important

because the government has the authority to give licence to zakat agencies to

operate.

Structurally, we are accountable to the government that gives zakat

agencies formal legality. (P13 – Chief Executive of a small LAZ G)

Specifically, for government-sponsored zakat agencies, interviewees also

stated that the main reason to be accountable to the government is because a

government-sponsored zakat agency is created by government.

This zakat agency is created by the government of this city, so, firstly, we

have to account to the (local) government. (P3 – Executive Secretary of a

small local BAZNAS B)

With regards to accountability to donors, interviewees stated that

accountability to donors is important because zakat agencies depend on a

continuous flow of donations from donors. Therefore, donors have the power to

request information from zakat agencies. This indicated that resource dependency

motivated zakat agencies to give account.

The most important accountability is to donors; donors who give zakat to

us, donors who entrust their zakat to us. (P15 – Chief of Accounting of a

large LAZ I).

Several donors are smart. They ask for [information]. Donors who give

zakat more than one hundred million rupiah [AUD 10,000] are smart

donors. Our donors vary from those who give two hundred thousand

rupiah [AUD 20] to two hundred million rupiah [AUD 20,000]. But they

do not ask for detailed information like corporate donors. They usually

ask about the usage of zakat fund. (P16 – Vice President Director of a

large LAZ J)

Interviewees mentioned the importance of being accountable to the Central

BAZNAS because Zakat Management Law states that all zakat agencies must

report to the Central BAZNAS. The Central BAZNAS has an authority to issue a

recommendation letter for an organisation to obtain a licence as a zakat agency


from the Ministry of Religious Affairs. In addition, the Central BAZNAS also has

an authority to monitor the activities of zakat agencies.

So, according to regulation, we have to account to the Mayor and the

Central BAZNAS. (P1 – General Manager of a small local BAZNAS A)

[In addition to] accountability to donors who entrust their zakat to us, it is

important to report to the Ministry of Religious Affairs and the other

institutions, such as the Central BAZNAS. (P15 – Chief of Accounting of

a large LAZ I).

Zakat agencies usually have several boards and committees, such as the

board of Trustees, Syari’ah Advisory Board, Supervisory Board,22 and Advisory

Board. In this context, these boards and committees are the representative of an

organisation that creates a zakat agency. Therefore, their role is to oversee the

executive. The executives of zakat agencies usually hold a regular meeting with

all board members and committees. In this meeting, the executive gives an

account of the administration of zakat funds to the board:

Secondly, [I am accountable] to the board. I am part of the management.

If this zakat agency is a corporation, the founders [of this zakat agency]

are the board and I am only an executive. So, my accountability is to

donors, board, and beneficiaries. (P13 – Chief Executive of a small LAZ

G)

Several interviewees did not state clearly that they had to account to the

boards, but from their explanation it could be concluded that this was the case:

We conducted meetings several times to evaluate our performance in

2014 and preparing the program for 2015. We will bring the programme

prepared in this meeting to plenary meetings with oversight committee

and the boards. We will present our program to them. They may give

suggestions, revision, or add new programmes. (P12 – Finance Manager

of a small provincial BAZNAS F)

22 In several zakat agencies, the Syari’ah Advisory Board and Supervisory Board are called the Sya’riah

Advisory Committee and Supervisory Committee.


We will bring this report to the annual meeting. The meeting agendas are

to report and account for financial management of previous financial year

and to prepare programmes for the next year. Boards, Oversight

Committee, and the management attended this annual meeting. (P8 –

Chief Executive of a small local BAZNAS D)

Although the board has a strategic role in the administration of an

organisation and most interviewees stated that zakat agencies should be

accountable to the board, several interviewees expressed that the board might not

have an active role in zakat administration, as per the following comments:

We have an oversight committee [as a sub-committee of the board]. If

this oversight committee is active and working, it would be very great.

(P1 – General Manager of a small local BAZNAS A)

The members of the board are not active in most of zakat agencies … I

mean the board of trustee and advisory board. These boards do not

perform their duty. (P16 – Vice President Director of a large LAZ J)

Interviewees from private zakat agencies unanimously agreed that the

administrators of zakat agencies should be accountable to their parent

organisation. By chance, all private zakat agencies that participated in this study

were created by an Islamic religious organisation or a for-profit (private)

institution. Therefore, the interviewees from private zakat agencies considered

that zakat agencies had to give an account to their parent organisation or

institution. One Vice Director of a large LAZ explained:

I am supervised by many parties. Our parent organisation has a Board of

Trustees and Supervisory Board. This zakat agency also has a Board of

Trustees and Supervisory Board. I report regularly to them. Our parent

organisation has an internal audit division that does performance audit,

Syari’ah audit and financial audit. If I make a mistake, I will ask guidance

from them. (P16 – Vice President Director of a large LAZ J)

Furthermore, the parent organisation has an interest in the activities of the

zakat agencies because the parent organisation also has to account to their

stakeholders. One Chief Executive of LAZ commented:


We report every six months. The parent organisation needs our report for

their report as a foundation. So, we are asked to submit a report [every

semester]. (P13 – Chief Executive of a small LAZ G)

Despite zakat agencies being created as a faith-based charitable organisation

to help poor individuals, only six (out of eleven) interviewees stated that zakat

agencies should be accountable to beneficiaries and four (out of five) interviewees

from private zakat agencies stated that zakat agencies should be accountable to

beneficiaries; however, only two (out of six) interviewees from government-

sponsored zakat agencies mentioned accountability to beneficiaries. Interviewees

interpreted accountability to beneficiaries differently from accountability to

donors and government. While the focus of accountability to donors and

government is to provide information, interviewees linked accountability to

beneficiaries with providing good quality assistance. This finding suggests that

the meaning of accountability is not only limited to providing reasons for

conducts but also to the extent of the agencies’ responsiveness and responsibility.

[Zakat agency should be accountable] to their beneficiaries or individuals

who have right to zakat fund (P16 –Vice President Director of a large

LAZ J)

Yes, we must be accountable to them [beneficiaries]. But our

accountability to the children [orphans] and their guardians is by giving

good programmes and not giving low quality programmes. We want to

give the best place, the best programmes, and the best teachers for them.

(P13 – Chief Executive of s small LAZ G)

One interviewee stated that zakat agencies also have an accountability

relationship with academics and the media. Academics and the media were

identified as stakeholders because they can help zakat agencies to disseminate

information about the activities of zakat agencies to the public.

We call [our partners] ABCG, which stands for Academics, Business,

Civil Society, and Government. We invite them to focus group

discussions and we present our programmes to them. (P16 – Vice



6.5 WHAT SHOULD ZAKAT AGENCIES BE ACCOUNTABLE FOR?

This section presents the findings to answer the following research question:

RQ.1.b. What is the scope of accountability of zakat agencies according to the


Table 6-4 summarises the responses of interviewees to the question about

the scope of accountability of zakat agencies. The comments indicate that

interviewees had a similar understanding regarding the scope of zakat agencies’

accountability. Most interviewees suggested that the accountability of zakat

agencies must consist of all elements of Stewart’s (1984) ladder of accountability

and Syari’ah accountability (sacred accountability).

Table 6-4 Perceptions of Administrators on the Scope of Zakat Agencies’ Accountability

Accountable for: BAZNAS LAZ

Total Small n=5

Large n=1 ∑ Small

n=2 Large n=3 ∑

Syari’ah accountability 5 1 6 2 2 4 10 Amil fund accountability 0 0 0 0 0 0 0 Ethics accountability 0 0 0 0 0 0 0 Finance 5 1 6 2 3 5 11 Legal 5 0 5 1 3 4 9 Process 5 1 6 2 3 5 11 Programme 2 1 3 1 3 4 7 Performance 1 0 1 1 3 4 5 Mission 4 0 4 2 3 5 9

The majority of interviewees (10 out of 11) stated that zakat agencies should

be accountable from a Syari’ah perspective. Interviewees believed that zakat

agencies must comply with Syari’ah requirements in distributing zakat, as

described in the following quotes:

There is religious arrangement on zakat. It must comply with Syari’ah

requirements. Zakat must be divided into eight categories of

beneficiaries. The portion [of zakat] for amil must not be higher than the

portion [of zakat] for the other categories of beneficiaries. (P2 –

Executive Secretary of a small local BAZNAS A)


The funds must be used in accordance with the sources of fund. For

example, [Syari’ah stated that] zakat fund can only be distributed to 8

beneficiaries and non-zakat fund can be distributed to anyone. There are

requirements on the usage of amil fund. And [there is Syar’iah

requirements] for the usage of non-halal fund such as interest. (P17 –

Operating Director of a Large LAZ K)

Although Indonesia is a secular country and the government does not

enforce Syari’ah requirements, the comments of the interviewees indicate that

compliance with Syari’ah requirements is as important as compliance with the law

and regulations. The administrators of zakat agencies may need to consult with a

Syari’ah expert to ensure that their actions comply with Syari’ah requirements.

We must comply with government regulation and Syari’ah requirements

determined by God. (P5 – Chief Executive of a small local BAZNAS C)

There is a question about a sick person. This person is not a poor person

who is eligible for zakat but he does not have sufficient money to pay an

expensive medical treatment. This person needs money urgently to pay

for expensive medical [treatment]. Can this person borrow money from

us? Can zakat money be used to help this person? This person is not

considered to be an eligible zakat beneficiary. We ask this question to our

Syari’ah Advisor. (P13 – Chief Accounting of a large LAZ G)

References to financial accountability and process accountability were the

most frequent in the responses of interviewees. Eleven administrators of zakat

agencies stated that zakat agencies should be accountable for the proper

administration and control of financial resources. Financial accountability is also

related to the stewardship of resources provided by donors. Interviewees

explained that zakat agencies should record the collection and distribution of

zakat funds appropriately.

It means we should be professional in safeguarding the fund. It is not

only about saving the money, but also about the ability to give a written

description about the funds in our account, supported by records and


physical evidence. Everything can be traced. (P13 – Chief Executive of a

small LAZ G)

Furthermore, one interviewee stated that the recording of every transaction

must comply with the existing accounting standards.

Then, we have accounting standard – PSAK [Accounting Standard] No

109. We have implemented it since 2009, so our balance sheet follows

this standard. We train all local BAZNASs in this province to apply this

standard. (P9 – Chief Executive of a small provincial BAZNAS E)

Nine interviewees stated that zakat agencies should satisfy legal

accountability. They stressed that the government has authority to enforce

regulations on reporting the collection and distribution of zakat funds, as per the

following comment:

Because if I did not provide it [customised reports requested by the

government], I can be jailed even though I am correct. (P9 – Chief

Executive of a small provincial BAZNAS E)

Eleven interviewees noted that the process of zakat collection and

distribution should comply with internal standard operating procedures (SOPs).

SOPs are required to ensure that assistance is given to legitimate beneficiaries

who require the most help because their funds are limited. This indicates that

process accountability is important for zakat agencies.

We review their application and do a survey. If the result indicates that

this person is eligible for help, we will help. We may not give all

requested funding, because we have standard operating procedure. (P2 –

General Manager of a local BAZNAS A)

There are standard operating procedures for zakat distribution and zakat

collection, for the usage of ambulance and others. (P6 – Executive

Secretary of local BAZNAS C)

Seven (out of 11) interviewees stated that zakat agencies should be

accountable for their programmes, while five (out of 11) interviewees said that


zakat agencies should be accountable for their performance. The comments of the

interviewees indicate that programme accountability was linked to performance

accountability. Their understanding regarding programme accountability focused

on the effectiveness of a programme, while performance accountability was

related to efficiency. Interviewees also believed that evaluation of the execution of

programmes or activities was important for programme and performance

accountability.

We conduct meetings with all branch offices. In these meetings, we

evaluate our performances and which programmes are achieved and not

achieved. The programmes that are not achieved will be continued in the

next year. We do an evaluation from collection and usage perspectives.

(P12 – Finance Manager of a large provincial BAZNAS F).

Interviewees recognised that they should account for financial performance

and non-financial performance.

We should account for our performance. We have [three] performance

indicators: [1] organisational performance or the performance of

organisation itself; [2] financial performance – how stable is our financial

condition – from collection and distribution perspective; and [3]

programme performance. (P 16 – Vice President Director of a large LAZ

J).

Although interviewees talked about financial performance, they did not

explain the financial ratios used to measure financial performance. Instead of

using financial ratios, the administrators of zakat agencies use the percentage of

amil fund from total donation collected as an indicator of financial performance.

Interviewees agreed that a zakat agency is not allowed to retain more than 12.5%

of zakat collected for administrative purposes. Therefore, an efficient zakat

agency is a zakat agency that uses an amil fund of less than 12.5% of the total

donations collected.

We determine that the amil fund is maximum 10% of the amount of zakat

collected. Why do we set 10% of fund collected as a limit? This is our

argument. The Holy Qur’an states that the beneficiaries of zakat can be


classified into eight categories. If zakat is divided evenly, every category

will receive 12.5% of the amount of zakat collected. It is the maximum

amount but we try to use less than 10%. (P12 – Chief of Accounting of a

large LAZ I)

Furthermore, interviewees stated that performance was a relative concept.

They argued that the performance of an organisation should be compared with

other organisations.

Accountability is not only about our performance but also comparing our

performance with the performance of other organisations. If the report of

zakat agencies is comparable, then we can measure accountability. When

we compare the reports of an organisation with other similar

organisations, then we can measure accountability. (P8 – Chief Executive

of a small local BAZNAS D)

Nine interviewees alluded that zakat agencies should be accountable for the

achievement of the mission of the organisation. The main mission of most zakat

agencies is to provide humanitarian assistance. Several zakat agencies are also

active in Islamic proselytisation; however, their main mission is usually to provide

humanitarian assistance. Interviewees stated that they were concerned about the

impacts of their activities on the welfare of beneficiaries and highlighted the

importance of providing assistance that enable beneficiaries to generate income.

This indicates that the achievement of the organisational mission is important for

zakat agencies.

On the impacts, ... we cannot measure but we observe the changes [in the

welfare of beneficiaries]. The transformation that occurs, from a

community who does not want to attend school, from a community who

does not want to conduct an activity to be a learner and active

community. They help themselves and have extraordinary activities. (P13

– Chief Executive of a small LAZ G)

In fact, the most important thing from a program is its impacts, isn’t it?

We report about the impacts of our programmes. We not only report

about money but also the impacts of an activity. (P7 – Chief Executive of

a small local BAZNAS C)


Furthermore, one interviewee stated that accountability for the mission is

more important that financial accountability.

Accountability is not only about finance. Finance is only one of several

indicators. How much funds are collected and how much funds are

disbursed? How much is the amil fund? These are [financial] indicators.

But it is not the end. If the fund is distributed to beneficiaries but the

beneficiaries cannot generate enough income for themselves, it means

that our performance is not good. (P16 –Vice President Director of a

large LAZ J)

6.6 TYPE OF INFORMATION CONSIDERED IMPORTANT BY ADMINISTRATORS

This section addresses the following research question:

RQ.1.c What information (financial and non-financial) do the administrators of

zakat agencies consider necessary to be disclosed by zakat agencies to

demonstrate their accountability?

To answer this research question, interviewees were asked to identify any

information that should be disclosed by zakat agencies to demonstrate

accountability. The results are presented in Table 6-5. This information is

classified into nine themes; therefore, it can be compared with the findings from

the surveys and document analysis.


Table 6-5 Perceptions of Administrators on Types of Information that Should be Disclosed by Zakat Agencies

No Type of Information BAZNAS LAZ

Total Small n=5

Large n=1 ∑ Small

n=2 Large n=3 ∑

I Overview – Organisation 1 Statement of mission and objectives 1 0 1 0 0 0 1 2 History of the organisation 0 0 0 0 1 1 1 II Governance 3 Boards and committee activities 0 0 0 0 0 0 0 4 Profile of Boards, CEO and senior staff 0 0 0 0 0 0 0 5 Information about the organisation’s

structure 0 0 0 0 0 0 0

6 Remuneration of boards, CEO and senior staff 0 0 0 0 0 0 0

III Future Plans 7 Future plans 1 0 1 0 2 2 3

IV Organisation Policy and Program 8 Organisation policy (criteria) in selecting

beneficiaries 2 0 2 1 2 3 5

9 Overview of programmes and activities 5 1 6 2 3 5 11 10 Organisation policy related to the

allocation of resources 0 0 0 0 0 0 0

11 Information about how to access zakat agency services 0 0 0 0 0 0 0

V Beneficiaries 12 Overview of beneficiaries 2 0 2 1 2 3 5 13 Human interest stories (information about

how zakat fund helps beneficiaries) 0 0 0 0 0 0 0

VI Other Non-financial Information 14 Information about related parties’

transactions 0 0 0 0 0 0 0

15 Acknowledgement of donors and volunteer’s contributions

0 0 0 0 0 0 0

VII Financial Information 16 Audited financial reports 0 0 0 0 0 0 0 17 Total revenue and its sources 5 1 6 2 3 5 11

18 Usage of the zakat fund for beneficiaries (except amil fund) 5 1 6 2 3 5 11

19 Usage of other donated funds (except zakat fund) 0 0 0 0 0 0 0

20 Usage of amil fund 0 0 0 0 0 0 0

21 Auditor's report or other types of assurance reports

1 1 2 0 3 3 5

22 Fundraising costs 0 0 0 0 0 0 0 VIII Performance Information 23 Financial performance information 0 0 0 0 1 1 1 24 Non-financial performance information 1 0 1 2 3 5 6


Only one interviewee from a small government-sponsored zakat agency that

stated zakat agencies should disclose information about their mission and

objectives. Likewise, only one interviewee from a large government-sponsored

zakat agency that stated zakat agencies should disclose information about the

history of the organisation. With regard to governance information, none of the

interviewees mentioned governance information.

Three interviewees stated that zakat agencies need to disclose information

about their future plans. The disclosure of future plans is linked with

organisational credibility and public trust. Information about future plans is used

to signal that a zakat agency is managed professionally.

For example, our Chairman makes a projection about an ideal zakat agency

in 2030. Everything is planned, including the best methods to achieve the

programmes. We need to convince the public that we are professional and

trustworthy in administering zakat. (P 10 – Communications Advisor of a small

provincial BAZNAS E)The disclosure of future plans is also linked with the need

for resources. By disclosing their future plans, it is expected that the public has

information about the future activities of zakat agencies that require public

support. Therefore, the disclosure of future plans can be used to attract donors to

give donations, as presented in the following quote:

We present our last year’s work, our achievements, and our plans for next

year [to our stakeholders]. We present our progress, our performance and

the amount of funds needed. [Therefore], the level of trust increases and

the amount of zakat collected also increases. (P16 – Vice President

Director of a large LAZ J).

With respect to information about organisational policies and programs, five

interviewees mentioned that zakat agencies should disclose information about

their policies and criteria to select beneficiaries. In contrast, all interviewees

mentioned that zakat agencies should disclose information about their

programmes and activities. Interviewees stated that disclosing information about

programmes can attract donors to give a donation, as explained in the following

quote:


We also explain about our programs, program A, B, C and others.

Initially, they may not believe in us and it is natural. But several of them

will give zakat to us. (P1 – General Manager of small local BAZNAS A)

Five (out of 11) interviewees stated that zakat agencies should disclose

information about their beneficiaries. Information about beneficiaries can be used

to create a positive image and convince donors that the zakat fund has been

distributed to eligible recipients:

Zakat agencies should be able to explain the effectiveness and the benefit

of their assistance. Therefore, the donors are convinced that their zakat is

beneficial for the eligible recipients. (P15 – Chief of Accounting of a

large LAZ I)

Financial information was the most cited by interviewees. All interviewees

stated that zakat agencies should disclose information about their revenue and the

usage of zakat funds. Further, five interviewees indicated that zakat agencies

should disclose their auditor’s report to certify that their financial report complies

with accounting standards. Most interviewees stated that financial information is

considered important to convince donors that the zakat fund is being used

appropriately.

We publish financial reports since 2010. There is information about the

amount of zakat collected and distributed in this report. We publish audit

report. So, donors have convincing information on zakat distribution.

(P15 – Chief Accounting of a large LAZ I).

One method that we used to improve public trust to us is reporting. Every

month we produce this report. It consists of information about the amount

of funds collected and the amount of funds distributed. (P1 – General

Manager of a small BAZNAS A)

The responses of the interviewees indicated that the disclosure of

performance information was limited. Only one interviewee mentioned narrative

analysis of financial performance. Six interviewees – the majority of them from

private zakat agencies – only mentioned information about narrative analysis of


non-financial performance when re asked about non-financial information that

should be disclosed by zakat agencies. Other types of performance information,

such as information about efficiency, effectiveness, and outcomes and narrative

analysis of factors influencing financial and non-financial performance were not

mentioned by interviewees.

In addition to information related to the administration of zakat agencies,

most interviewees (7 out of 11) stated that zakat agencies should also publish

religious information in their internal publications. The disclosure of religious

information is used to remind Muslims that giving zakat is a compulsory religious

duty for Muslims.

Our duty is to remind the public that zakat is compulsory according to

our religion. The duty of the government is to provide regulation. The

duty of amil is to remind people to pay zakat. (P2 – Executive Secretary

of a BAZNAS A)

The administrators of zakat agencies also used religious information to

reinforce the image of the zakat agency as a faith-based organisation. This

information can induce public trust in a zakat agency.

The content of our magazine consists of 80% religious information and

20% [the activities of] this organisation. The reason is to avoid the image

of our magazine as a marketing tool. It makes our magazine more

elegant. We share knowledge about Islam and if they feel this knowledge

is beneficial, then they will give a donation. (P14 – General Manager of a

small LAZ H)

6.7 BY WHAT MEANS SHOULD ZAKAT AGENCIES DISCHARGE THEIR ACCOUNTABILITY?

This section presents findings to answer the following research question:

RQ.1.d. According to the administrators of zakat agencies, by what means


Table 6-6 summarises the perceptions of administrators on media that

should be used by zakat agencies to discharge their accountability. The findings


indicate that zakat agencies should use various forms of media to disseminate

accountability information.

Table 6-6 Perceptions of Administrators on Media that Should be Used by Zakat Agencies to Discharge Accountability

No Media BAZNAS LAZ

Total Small n=5

Large n=1 ∑ Small

n=2 Large n=3 ∑

1 Customised reports 5 1 6 2 3 5 11

2 Website 5 1 6 2 3 4 10

3 Annual reports 4 2 6 1 3 4 10

4 Internal media (magazines/bulletins/pamphlets published by zakat agencies)

2 1 3 2 2 4 7

5 Mass media 4 1 5 0 2 2 7

6 Public announcement in mosque 3 0 3 0 2 2 5

7 Social media (Facebook) 2 0 2 1 2 3 5

8 Letter (sent by zakat agencies to their donors) 1 0 1 1 2 3 4

9 Staff of zakat agencies 1 0 1 1 0 1 2

All interviewees stated that zakat agencies used customised reporting to

discharge accountability. Customised reporting is used to discharge accountability

to regulators (the government and the Central BAZNAS). The regulators usually

determine the format and content of reports.

The report required [by regulators] is only a piece of paper. Our treasurer

submits this report [to regulators]. (P8 – Chief Executive of a small

BAZNAS D)

We used to report [to government and the Central BAZNAS] once a year,

but currently, we are asked to report [to the government and the Central

BAZNAS] every six months. (P13 – Chief Executive of a small LAZ G).

Intervieewees also stated that zakat agencies use customised reports to

discharge accountability to their board and their parent organisation. However, the

customised report submitted to the board and the parent organisation is different

from the customised report submitted to regulators. The customised report for the

Board and the parent organisation is usually submitted at an annual general


meeting. Because this report is specifically prepared for the board or the parent

organisation, this report is not distributed to external stakeholders.

We report [to the parent organisation] every six months, because our

parent organisation needs our report for their report as a foundation. (P13

– Chief Executive of a small LAZ G)

An annual report is widely known as the media to disseminate

accountability to external stakeholders. However, there only three interviewees

mentioned an annual report as a tool to discharge accountability.

This [annual] report was sent to the Governor, Vice-Governor, Mayor

and Vice-Mayor, Parliament, the Head of the Government Department,

and the Head of the Village. But no one – from the President to the Heads

of the Village – gave responses. (P8 – Chief Executive of a small local

BAZNAS D)

Ten (out of eleven) interviewees stated that zakat agencies should use their

website to disseminate accountability. Interviewees stated that a website has

advantages compared to other forms of media because a website can be accessed

by anybody from anywhere.

We cannot give a bundle of report to the public but our reports to the

public are available on our web. We have a website that can be accessed

by people around the world. (P1 – General Manager of a small local

BAZNAS A)

Internal printed media and mass media were cited by the same number

of interviewees (7 out of 11). Interviewees explained that zakat agencies

should use internal printed media and mass media to publish audited balance

sheets, audited statements of financial position, and audited statements of

cash flow, as per the following quote:

This is an internal-printed magazine for reporting to donors; therefore,

most information consists of programmes implementation, financial

reporting, religious information, and information to educate donors such


as the importance of giving zakat and other voluntary religious giving

(P17 – Operating Director of a large LAZ K).

We publish the audit report in the newspaper. I know that not every donor

knows about the usage of the zakat fund, but at least we disclose it in the

newspaper and our internal magazine. (P12 – Finance Manager of a large

provincial BAZNAS F)

Participants also discussed other media that can be used by zakat agencies to

disseminate accountability, such as a letter, religious gathering, public

announcements in mosques, social media, and verbal information.

Facebook is my favourite because it is easy. For the magazine, we have to

publish it. For Facebook, if I’ve got an idea today, I just write it on the

fan page. (P14 – General Manager of a small LAZ H).

There is a monthly religious gathering. We invite [our donors] every

month. In these religious gatherings, we report our progress. (P16 – Vice


In addition to these forms of media, nine interviewees explained that the

participation of external stakeholders – especially beneficiaries and donors –

reduces the demand for the disclosure of information. The first type of

participation is where zakat agencies give donors the opportunity to propose the

beneficiaries of zakat. This method is used to preserve the degree of closeness

between donors and beneficiaries that is usually found in the administration of

zakat by local Imams. This method avoids the information asymmetry described

by Scott (1986) as the ‘Bermuda Triangle’ because donors know the beneficiaries

of the zakat. It is also based on consideration that most Muslims want to help poor

people who live in their neighbourhood. Participation will convince donors that

the zakat fund is actually distributed to eligible beneficiaries because donors can

see that their poor neighbours receive assistance from zakat agencies.

The donor can recommend his or her neighbour to get financial assistance

by filling in the form. They can choose financial assistance to buy basic


needs or financial assistance for productive economic activities. (P9 –

Chief Executive of a small provincial BAZNAS E).

The second type of participation is public partipation in the development of

programmes. Zakat agencies seek feedback from a wide variety of stakeholders

through public hearings, public dialogue, or surveys to develop a programme that

suits the needs of beneficiaries. Donors and other stakeholders are expected to

give their thoughts or suggestions to improve the quality of proposed

programmes:

We ask our donors to participate [in developing our programmes] by

giving their ideas and thoughts. From this process, we can determine how

we should run a programme, the amount of funds needed and the sources

of the funds. It means that our donors are involved. (P16 – Vice President

Director of a large LAZ J).

6.8 DISCUSSION

Based on the research findings presented in Sections 6.2 to 6.7, this section

discusses the findings in every section, with reference to the literature and

accountability framework.

Administrators’ perceptions regarding the meaning of accountability

The findings regarding the meaning of accountability support the literature

suggesting that every individual has a different understanding of accountability

(Bovens, 2010; Mulgan, 2000; Sinclair, 1995). This finding is consistent with a

previous empirical study in the US that found the leaders of US transnational not-

for-profit organisations linked accountability with several concepts, such as

financial management and transparency (Schmitz, et al., 2012). Interviewees not

only perceived accountability as a mechanism to justify and provide reasons for

actions and results (Day & Klein, 1987; Ebrahim & Weisband, 2007; Roberts &

Scapens, 1985) such as justification and financial reporting, but also as ‘a virtue’

or ‘positive feature of organisations or officials’ (Koppell, 2005; Bovens, 2010),

such as compliance with religious requirements, trustworthiness, responsibility,

and responsiveness. This finding reinforces the notion of accountability as a


nebulous, inter-subjective, and socially constructed concept (Bovens, 2010;

Ebrahim, 2003a; Shearer, 2002).

Should zakat agencies be accountable and why?

The results highlighted in Section 6.3 revealed that interviewees

unanimously agreed that zakat agencies should be accountable. Interviewees

believed that discharging accountability was related to the transfer of resources,

stewardship, and trust. Interviewees stated that zakat agencies were ‘a steward of

public money’ or an intermediary institution that collects donations from donors

to be used for the welfare of beneficiaries. As a steward of resources, zakat

agencies have an obligation to provide information about the usage of the

resources entrusted to them. Furthermore, interviewees believed that

accountability can be used to convince donors that the zakat fund has been used

appropriately for the welfare of beneficiaries. By showing the appropriate use of

resources, interviewees stated that zakat agencies can foster public trust. This

finding is consistent with previous work showing that trust is a mediating variable

that links accountability with donations, because accountability can induce trust

and trust leads to donations (Furneaux & Wymer, 2015; Verbruggen, Christiaens,

& Milis, 2011). Thus, accountability is a tool that can be used to secure funding

from donors.

Interviewees also stated that regulations require zakat agencies to be

accountable. For example, there is a regulation that requires zakat agencies to

submit audited financial reports to the government. Reporting to the government

is mandatory because the government can give sanctions to zakat agencies that do

not comply. This finding mirrors Croft (2014), who found that government

demand was the driver for reporting in Australian faith-based organisations. This

finding is also consistent with previous literature stating that the government may

introduce regulations to increase the accountability of charitable organisations

(Chisolm, 1995; Connolly, et al., 2011; Ebrahim, 2009; Weidenbaum, 2009).

To whom should zakat agencies be accountable?


All interviewees considered that zakat agencies must be accountable to God.

This finding suggests that Islamic religious beliefs influence the perceptions of

accountability in the administration of zakat. This finding offers additional

support to previous literature that found a faith-based organisation has

accountability to God (Abdul-Rahman & Goddard, 1998; Crofts, 2009; Joannides,

2012).

In addition to accountability to God, interviewees also acknowledged that

zakat agencies should be accountable to a wide range of stakeholders. This

finding confirms the finding of Schmitz et al. (2012), which asserted that US not-

for-profit organisations are accountable to various stakeholders, such as donors,

the board, beneficiaries, the government, and others. The comments of

interviewees indicate that a contractual relationship exists between zakat agencies

and government because regulations provide authority to government and the

Central BAZNAS to monitor zakat agencies. Therefore, government and the

Central BAZNAS can be classified as the primary stakeholders (Carroll, 1989).

This contractual relationship gives regulators power to demand accountability, as

indicated in the requirement for zakat agencies to submit customised reports.

Thus, the relationship between the zakat agencies and government can be

classified as ‘a bond of accountability’ (Stewart, 1984) because government and

the Central BAZNAS have the power to ask zakat agencies to give account. This

finding supports the existing literature that identifies regulators as important

stakeholders of not-for-profit organisations (Cordery & Baskerville, 2011; Najam,

1996; Schmitz, et al., 2012).

Interviewees also recognised that zakat agencies should be accountable to

donors. An accountability relationship with donors is related to the transfer of

resources (Cordery & Baskerville, 2011). Zakat given by Muslims creates a

contractual relationship between donors and a zakat agency. Although donors

cannot withdraw their donation, they will not provide support in the future if a

zakat agency cannot demonstrate accountability in the usage of resources. As

stated in Section 6.4, interviewees stated that donors can request information from

zakat agencies; therefore, donors can be classified as powerful and primary

stakeholders (Carroll, 1989). Because donors have an ability to hold an


organisation to give account, the accountability relationship between zakat

agencies and donors can be classified as a bond of accountability (Stewart, 1984).

This finding also supports the existing literature that classifies donors as a salient

stakeholder of not-for-profit organisations because donors provide resources

(Christensen & Mohr, 2003; Connolly, et al., 2012; Ebrahim, 2003a; Hyndman &

McMahon, 2010; Schmitz, et al., 2012).

Interviewees stated that zakat agencies owed accountability to their board

and their parent organisation. A parent organisation is a powerful and salient

stakeholder for private zakat agencies because private zakat agencies are created

by the parent organisation. For government-sponsored zakat agencies,

interviewees stated that they had to account to the government because

government-sponsored zakat agencies were created by the government. Although

private zakat agencies do not depend on resources from their parent organisation,

a parent organisation has the authority to elect the board of private zakat agency.

The relationship between the parent organisation and the administrators of zakat

agencies is an explicit contractual relationship, because administrators are elected

by the parent organisation to administer a zakat agency. Likewise, the relationship

between the board and the administrators of zakat agencies is an explicit

contractual relationship because the administrators have the responsibility to

execute the budget and programmes approved by the board. Parent organisations

and the board can be classified as the primary stakeholders (Carroll, 1989) or

salient stakeholders (Cordery & Baskerville, 2011) and a bond of accountability

(Stewart, 1984) exists between zakat agencies and the board and parent

organisation. Therefore, the parent organisation and board can ask for information

about the administration of zakat agency.

This study also finds that zakat agencies should be accountable to

beneficiaries because the mission of zakat agencies is to increase the welfare of

beneficiaries. This finding corresponds with Schmitz et al. (2012), who also found

that the leaders of US not-for-profit organisations were accountable to their

beneficiaries. This finding also supports the existing literature that not-for-profit

organisations should be accountable to beneficiaries (for example Connolly, et al.,

2012; Najam, 1996).


Although most intervieewees stated that zakat agencies should be

accountable to their beneficiaries, there is an indication that accountability to

beneficiaries only reflects a recognition of responsiveness to the demand of

beneficiaries and a recognition of responsibility to the welfare of beneficiaries.

Interviewees associated accountability to beneficiaries with a responsibility to

provide good programmes and responsiveness in providing assistance. This

indicates that the accountability relationship between zakat agencies and

beneficiaries falls short of a bond of accountability and only constitutes a link of

accountability (Stewart, 1984). Although beneficiaries have a legitimate right to

demand accountability, their relationship with a charitable organisation is only

based on an implicit contractual relationship through the charitable mission and

organisational values (Cordery & Baskerville, 2011). Therefore, beneficiaries do

not have the power to hold a zakat agency accountable and can be classified as

secondary stakeholders (Carroll, 1989).

A few interviewees identified an accountability relationship with other

groups of stakeholders, such as academics, the media, and professional bodies.

Academics, media, and professional bodies can disseminate information about the

activities of zakat agencies to the public. Although zakat agencies can receive

benefits by creating a good relationship with these stakeholders, these

stakeholders do not have the power to hold zakat agencies to account. As a result,

these stakeholders are classified as secondary stakeholders (Carroll, 1989). Thus,

the accountability relationship between zakat agencies and these stakeholders is

only in the form of a link of accountability (Stewart, 1984) that reflects the

responsiveness of zakat agencies to the needs of the media, academics, and peer

organisations.

Overall, the responses of interviewees indicated that zakat agencies should

be accountable to a broad range of stakeholders. However, upward accountability

to regulators and resource providers was mentioned more frequently than

downward accountability to beneficiaries or horizontal accountability to

academics, media, and others. This finding suggests that administrators focus on

upward accountability to stakeholders that can influence their performance, such

as regulators and donors.


The scope of accountability of zakat agencies

With respect to the scope of accountability, the results indicate that the

scope of zakat agencies accountability extends beyond the scope of accountability

proposed by Stewart (1984). Administrators stated that the scope of zakat

agencies accountability includes Syari’ah accountability. Syari’ah accountability

was related to accountability to God. Although zakat agencies do not provide

religious services, as do the Church of England or the Salvation Army, it is clear

from the comments of interviewees that there is a sacred dimension in the

accountability of zakat agencies.

All interviewees stated that zakat agencies have financial accountability.

This finding is consistent with Yasmin et al., (2013), who found that charitable

organisations have financial accountability. Administrators consider that financial

accountability is important in gaining public trust and public trust is needed to

attract donations. Further, the procedures implemented by zakat agencies to

achieve their organisational objectives is also considered important by all

administrators. Several administrators also mentioned mission, performance,

programme, and legal accountability. This finding suggests that Stewart’s (1984)

ladder of accountability is applicable in the context of zakat agencies.

The findings of this study support previous literature that sacred and secular

accountability is equally important for organisations that require public support

(Bigoni, et al., 2013; Irvine, 2002). This finding also suggests that religious

beliefs influence the understanding of accountability of faith-based charitable

organisations and extends the findings of previous accounting and accountability

studies that found the existence of sacred and secular accountability in religious

organisations (Abdul-Rahman & Goddard, 1998; Bigoni, et al., 2013; Irvine,

2002; Jacobs, 2005; Jacobs & Walker, 2004; Jayasinghe & Soobaroyen, 2009;

Joannides, 2012; Laughlin, 1988, 1990; Quattrone, 2004).

With respect to type of information, most interviewees stated that zakat

agencies should disclose financial information and programme information. This

finding indicates that administrators considered financial and programme

information as equally important, which is in contrast to Connolly et al. (2012),


who found that the administrators of charitable organisations in the UK consider

performance information more important than financial information.

By what means should zakat agencies discharge their accountability?

The findings presented in Section 6.7 indicate that zakat agencies use formal

and informal means to discharge accountability. Several media that are used to

disseminate accountability information include annual reports, websites, internal

printed media, mass media, religious gatherings, social media, and public

announcements in mosques. Prior literature has also suggested that not-for-profit

organisations use formal and informal means to discharge their accountability

(Cordery, et al., 2010; Gray, et al., 2006; Unerman & O'Dwyer, 2006b).

The use of informal media, such as websites and internal printed media, to

disseminate accountability information is more common than the use of formal

media, such as annual reports. It is possible that zakat agencies give information

using the internet, internal, and printed media in preference to annual reports

because annual reports are only published once a year, while other media can be

published in a shorter period, such as daily, monthly, or quarterly. There are many

activities that need to be reported to the public promptly, such as distribution of

zakat funds and fundraising activities for disaster victims. This information will

lose its value if it is not reported to the public in a timely fashion. In addition, the

preparation of annual reports requires specific knowledge in formal reporting;

therefore, it requires more effort to prepare annual reports.

6.9 SUMMARY

This chapter presented the findings regarding the understanding of

accountability from the perceptions of zakat agencies’ administrators.

Interviewees associated accountability with several concepts, such as

transparency, amanah or trustworthiness, responsibility, responsiveness, and

justification. Interviewees’ responses indicate that the accountability of zakat

agencies covers sacred and secular dimensions. All interviewees agreed that zakat

agencies must be accountable to God and wide groups of secular stakeholders,

such as donors, the government, the Central BAZNAS, and beneficiaries. The

scope of accountability also consists of sacred (Syari’ah accountability) and


secular accountability. For secular accountability, consistent with Stewart’s

(1984) ladder of accountability, interviewees indicated that the accountability of

zakat agencies consists of financial accountability, process accountability,

programme accountability, performance accountability, and policy (mission)

accountability. With regards to media for disseminating accountability,

interviewees stated that zakat agencies should use formal and non-formal

mechanisms. Customised formal reports, financial reports, and annual reports

were mentioned as the formal mechanisms to disseminate accountability. For

informal mechanisms, interviewees referred to the internet, mass media, internal

printed media, and social media.

141

Chapter 7: The Accountability of Zakat Agencies: Donors’Perceptions

7.1 INTRODUCTION

This findings chapter addresses the second research question about donors’

perceptions regarding the accountability of zakat agencies. While accountability is

typically analysed qualitatively, the insights presented in this chapter are based on

a survey of the donors of zakat agencies. This chapter is presented as follows.

Section 7.2 describes the perceptions of donors regarding the notion of

accountability while Section 7.3 presents the responses of donors with regards to

the importance of demonstrating accountability for zakat agencies. Sections 7.4 to

7.7 report donors’ perceptions regarding the key accountability issues of “to

whom”, “for what”, and “how”. In these sections, factor analysis was used to

regroup variables of “to whom”, “for what”, and “how” based on shared variance

and to produce factor scores. Section 7.8 presents the results of the non-parametric

correlation test to investigate the correlation among the elements of “to whom”,

“for what”, and “how”. Section 7.9 investigates the relationship between “the

groups of respondents based on to whom zakat is given” and “the demographic

attributes of the respondents” and their understanding of accountability. The

discussion of findings is presented in Section 7.10. The final section provides the

summary of this chapter.

7.2 DONORS’ PERCEPTIONS ON THE MEANING OF ACCOUNTABILITY

Donors were asked to describe their understanding of the term

‘accountability’. The results are presented in Table 7-1. The majority of

respondents (51.9%) associated accountability with the ability to provide

information about the usage of the zakat fund. This was followed by transparency

(40 respondents or 17.3%) and the ability to provide reliable and accurate

financial information (21 respondents or 9.1%). Donors also linked accountability

to a normative concept about a state of being accountable. For example, donors

142 Chapter 7: The Accountability of Zakat Agencies: Donors’Perceptions

linked accountability with the ability to distribute zakat to eligible beneficiaries

(7.95%), good administration (5.02%), trustworthiness (3.35%), and compliance

with regulation (2.09). These findings show that donors had different views and

perceptions regarding the meaning of accountability.

Table 7-1 Perceptions of Donors on the Meaning(s) of Accountability

No Meaning (s) of Accountability

Primary Recipient of Zakat

Local Imam BAZNAS LAZ Total


1 Demonstrating that the zakat fund is used appropriately

85 54.84 17 38.64 18 45.00 120 50.21

2 Transparency 17 10.97 10 22.73 13 32.50 40 16.74

3 Providing reliable and accurate financial information

13 8.39 4 9.09 4 10.00 21 8.79

4 Financial assistance is received by eligible beneficiaries

14 9.03 3 6.82 2 5.00 19 7.95

5 Good administration 5 3.23 6 13.64 1 2.50 12 5.02

6 Trustworthy 7 4.52 1 2.27 0 0 8 3.35

7 Compliance with regulation 5 3.23 0 0 0 0 5 2.09

8 Compliance with Syari’ah requirements 1 0.65 1 2.27 1 2.50 3 1.26

9 Others 2 1.29 1 2.27 0 0 3 1.26

10 Did not respond 6 3.87 1 2.27 1 2.50 8 3.35

Total 155 44 40 239 100

7.3 SHOULD ZAKAT AGENCIES BE ACCOUNTABLE?

Donors were asked whether zakat agencies should be accountable to their

stakeholders. The results are presented in Table 7-2. Of the 221 respondents who

responded to this question, most respondents (95%) believed that zakat agencies

should be accountable. This indicates that respondents consider accountability to

be very important in the administration of zakat agency. A chi-square test was

performed to determine whether there was a significant difference among the

groups of respondents and no significant differences were identified. This finding

indicates that all groups of respondents have a similar view on the importance of

demonstrating accountability.

143

Table 7-2 Cross-tabulation of the Importance of Demonstrating Accountability to Stakeholders by the Groups of Donors

Primary Recipient of Zakat All

Respondentsa

(n=221) Local Imam BAZNAS LAZ Yes No Yes No Yes No Yes No

Should zakat agencies be accountable?

135 (96%)

6 (4%)

38 (90%)

4 (10%)

38 (100%)

0 (0)

211 (95%)

10 (5%)

Donors were also asked to explain why they thought that zakat agencies

should be accountable. The results are reported in Table 7-3. It is notable that

there was similarity among the donor groups on why zakat agencies should be

accountable. The most popular reasons were that: (1) giving an account about the

usage of the zakat fund is the obligation of organisations that receive zakat

(36.02%); (2) accountability will increase public trust (22.75%); and (3) to show

trustworthiness or amanah (12.32%). Respondents also stated that God would ask

for accountability from the administrators of zakat agencies (4.27%) and to

comply with Syari’ah requirements (1.90%).

Table 7-3 Reasons Why Zakat Agencies Should be Accountable

No Reasons Primary Recipient of Zakat

Total Local Imam BAZNAS LAZ


1 It is an obligation to give account 52 38.52 12 31.58 12 31.58 76 36.02

2 To increase public trust 28 20.74 11 28.95 9 23.68 48 22.75

3 Amanah (trustworthiness or fulfiling or upholding trust) 12 8.89 7 18.42 7 18.42 26 12.32

4 Zakat fund is from public [Muslim] donations 16 11.85 2 5.26 1 2.63 19 9.00

5 Avoid malfeasance 10 7.41 1 2.63 4 10.53 15 7.11

6 God will ask accountability 6 4.44 2 5.26 1 2.63 9 4.27

7 To comply with regulations 5 3.70 2 5.26 2 5.26 9 4.27

8 To comply with Syari’ah 2 1.48 1 2.63 1 2.63 4 1.90

9 Did not mention their reason 4 2.96 0 0.00 1 2.63 5 2.37 Total 135 38 38 211 100

Table 7-4 summarises the reasons of respondents who stated that zakat

agencies do not need to be accountable. Five respondents stated that zakat

agencies do not need to demonstrate accountability because they give zakat ‘from


the heart’. Three respondents stated that God will ask for accountability from

zakat agencies while one respondent stated that there are regulations that regulate

zakat agencies.

Table 7-4 Reasons Why Zakat Agencies Should Not be Accountable

No Reasons

The Primary Recipient of Zakat Total

Local Imam BAZNAS LAZ


1 They give zakat ‘from the heart’ 2 33.33 3 75.00 0 0 5 50

2 A zakat agency is accountable to God 3 50.00 0 0 0 0 3 30

3 There are regulations that regulate zakat agencies 0 0 1 25.00 0 0 1 10

4 Did not mention their reason 1 16.67 0 0 0 0 1 10

Total 6 4 0 10 100

7.4 TO WHOM SHOULD ZAKAT AGENCIES BE ACCOUNTABLE?

As discussed in Section 7.3, most respondents stated that zakat agencies

should be accountable. Therefore, this study also investigated to whom zakat

agencies should be accountable and to address the following research question:

RQ.2.a. To whom do the donors of zakat agencies believe zakat agencies should be accountable?

To answer this research question, respondents were asked to indicate whether a

zakat agency should be accountable to a range of possible stakeholders listed in a

questionnaire (see Appendix C No. 7).

Descriptive statisticsTable 7-5 presents the descriptive statistics of the

findings. The majority of respondents indicated that zakat agencies should be

accountable to God (95%), donors (76%), the Central BAZNAS (64%), the public

(60%), and the government (59%).

145

Table 7-5 Cross-tabulation between the Groups of Respondents and their Perceptions on the Stakeholders of Zakat Agencies

No To Whom

Primary Recipient of Zakat All Respondents

Local Imam BAZNAS LAZ

Yes (%)

No (%)

Yes (%)

No (%)

Yes (%)

No (%)

Yes (%)

No (%)

Total (n)

1 God 133 96

6 4

37 100

0 0

35 90

4 10

205 95

10 5 215

2 Donors 108 76

29 21

26 72

10 28

26 70

11 30

160 76

50 24 210

3 Central BAZNAS 90 65

49 35

26 72

10 28

20 54

17 46

136 64

76 36 212

4 Public 84 62

52 38

24 67

12 33

17 35

20 55

125 60

84 40 209

5 Government 76* 55

62* 45

30* 83

6* 17

19* 51

18* 49

125 59

86 41 211

6 Beneficiaries 67 49

69 51

18 50

18 50

15 41

22 59

100 48

109 52 209

7 The board 61 44

76 54

15 42

21 58

14 38

23 62

90 43

120 57 210

8 MUI 55 40

81 60

19 53

17 47

17 46

20 54

55 26

81 74 209

9 Peak Body 47 34

90 66

11 51

25 69

14 38

23 62

72 34

138 66 210

10 Volunteers 29 21

107 79

4 11

32 89

10 27

27 73

43 21

166 79 209

11 Media 25 18

111 82

9 25

27 75

10 27

27 73

44 21

165 79 209

12 Parliament 15 11

121 89

6 17

30 83

4 11

33 89

25 12

184 88 209

Notes: * Significant difference at 0.1 level using Pearson Chi Square Test

Although it might be expected that donors would expect zakat agencies to

be accountable to their beneficiaries, the finding indicates different perceptions

among participants. There were 109 (52%) respondents who stated that zakat

agencies should not be accountable to their beneficiaries while 100 (48%)

respondents agreed that zakat agencies should be accountable to their

beneficiaries. A similar pattern was observed for accountability to the board,

MUI, peer organisations, volunteers, the media, and Parliament. The percentage

of participants who stated that zakat agencies should not demonstrate

accountability to these stakeholders was higher than the percentage of participants

who stated that zakat agencies should demonstrate accountability to them.

Chi-square tests were performed to identify whether the responses among

the groups of donors were significantly different. The result indicated that there


was no significant difference among the three groups of donors surveyed, except

for their perception on accountability to the government.23 A post-hoc test was

conducted to determine which groups of donors were statistically different from

one another. The results indicated differences on the views of accountability to the

government between the group of donors who give zakat to government-

sponsored zakat agencies and the other groups of donors. Participants who gave

zakat to government-sponsored zakat agencies might expect government-

sponsored zakat agencies to be accountable to government because: (1)

government-sponsored zakat agencies are created by government; (2)

government-sponsored zakat agencies receive funding from government; and (3)

zakat might be directly deducted from salary government employees and given to

the government-sponsored zakat agencies.

Grouping of Stakeholders

The results of the survey indicated that zakat agencies should be

accountable to a wide range of stakeholders. The theoretical framework discussed

in Section 4.3 shows that stakeholders of an organisation can be classified into

several categories based on several stakeholders’ attributes. Factor analysis was

applied to classify the stakeholders of zakat agencies and to facilitate the

identification of their underlying dimension.

Factor analysis requires sizeable correlations among variables; therefore, a

Spearman correlation test was performed. The results of the Spearman correlation

test are presented in Table 7-6. Visual inspection of the results of the correlation

test indicate that many variables had correlation coefficients of 0.3 or above.

Bartlett’s test of sphericity was also performed to determine the presence of

correlation among variables. The result of Bartlett’s test of sphericity was

significant (χ2=917.550, p<0.000), indicating that a sufficient correlation among

variables existed. The Kaiser-Meyer-Olkin (KMO) test was used to measure

sample adequacy and the results exceeded the recommended value of 0.6 (KMO =

0.826), indicating that the size of the sample was sufficient. Therefore the

application of factor analysis was suitable (Tabachnick & Fidell, 2007). 23 χ2 (2, n=211) = 10.601, p: 0.005, phi=0.224.

147

Table 7-6 Spearman’s rho Correlation Matrix for to Whom Zakat Agencies Should be Accountable

Variable (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)

(1) God 1.000

(2) Government 0.355** 1.000

(3) Parliament 0.100 0.299** 1.000

(4) MUI 0.245** 0.421** 0.408** 1.000

(5) Central BAZNAS 0.226** 0.556** 0.242** 0.421** 1.000

(6) Zakat Forum 0.137* 0.225** 0.312** 0.424** 0.424** 1.000

(7) Boards 0.267** 0.310** 0.270** 0.369** 0.467** 0.638** 1.000

(8) Donors 0.452** 0.362** 0.211** 0.313** 0.340** 0.364** 0.363** 1.000 (9) Beneficiaries 0.273** 0.182** 0.292** 0.296** 0.207** 0.349** 0.251** 0.488** 1.000 (10) Volunteers 0.160* 0.142* 0.338** 0.216** 0.188** 0.476** 0.423** 0.260** 0.287** 1.000 (11) Media 0.193** 0.237** 0.296** 0.317** 0.283** 0.465** 0.322** 0.265** 0.100 0.480** 1.000 (12) Public 0.402** 0.363** 0.244** 0.300** 0.252** 0.353** 0.310** 0.362** 0.284** 0.273** 0.324**

Notes: n=239 ** Correlation is significant at the 0.01 level (2-tailed) * Correlation is significant at the 0.05 level (2-tailed)

Based on Kaiser’s criterion, the number of components that should be

retained was three because three components had initial eigenvalues of 1 or above

(see Appendix D). Based on Monte Carlo PCA for parallel analysis, the number

of components that should be retained was two becausee two components had

eigenvalues above the criterion value created by the Monte Carlo PCA for parallel

analysis. Visual inspection of the scree plot presented in Appendix E was

inconclusive because there were three elbows, each at components 2, 4, and 6. As

parallel analysis is considered more accurate than other methods (Pallant, 2016),

two components or factors were retained.

The results of the factor analysis are presented in Table 7-7. Two factors

produced by principal component analysis accounted for 48.59% of the total

variation in the data.

Table 7-7 Rotated Component Matrix of “To Whom Should Zakat Agencies be Accountable"

To Whom Pattern Matrix Structure Matrix Communalities Factor 1 Factor 2 Factor 1 Factor 2


Primary Stakeholders

Secondary Stakeholders

Primary Stakeholders

Secondary Stakeholders

God 0.814 0.235 0.709 –0.130 0.546

Government 0.752 0.046 0.731 –0.291 0.537

Donor 0.706 –0.054 0.731 –0.371 0.537

Public 0.549 –0.158 0.620 –0.404 0.404

Central BAZNAS 0.522 –0.230 0.625 –0.463 0.432

Beneficiaries 0.467 –0.158 0.538 –0.367 0.309

MUI 0.435 –0.331 0.583 –0.525 0.427

Volunteer -0.138 –0.821 0.230 –0.759 0.591

The Zakat Forum 0.064 –0.795 0.421 –0.824 0.683

Media –0.022 –0.714 0.298 –0.704 0.496

Board 0.223 –0.604 0.493 –0.704 0.535

Parliament 0.119 –0.514 0.349 –0.567 0.332

% of variance explained 37.541 11.045 Extraction method: principal component analysis. Rotation method: oblimin with Kaiser normalisation. Rotation converged in 9 iterations.

The first factor accounted for a total of 37.54% of the variance being

explained. The groups of stakeholders that loaded into this factor are considered

the ‘primary stakeholders’ of zakat agencies because they consist of resource

providers (donors), regulators (the government, the Central BAZNAS, and MUI),

the public and beneficiaries. Three stakeholders loaded strongly into factor 1,

namely God (0.814), the government (0.752), and donors (0.706), while the

public, the Central BAZNAS, beneficiaries, and MUI had moderate factor

loadings from 0.435 to 0.549. Although MUI does not have legal authority to

produce regulations, their ‘fatwa’24 is followed by most Muslims in Indonesia,

including zakat agencies. Therefore, MUI can be considered a regulator,

particularly for matters that relate to Syari’ah.

The second factor accounted for 11.05% of the total variance being

explained. The second factor consisted of the board, peer organisations, media,

volunteers, and parliaments25 and was labelled ‘secondary stakeholders’. It is

24 An Islamic legal pronouncement on a specific issue handed down by Muslim cleric(s). 25 Indonesia follows a presidential system where Parliament (legislative) is separate from the Executive. The

head of the government is the President and the head of the ministry and department is not a member of Parliament. The main task of Parliament is to produce regulations and to monitor the government; therefore, they do not monitor zakat agencies.

149

surprising that the board loaded into the same factor as peer organisations, media,

and volunteers, as the board is an internal stakeholder; while peer organisations,

the media, and volunteers are external stakeholders. Volunteers, the zakat forum,

the media, and the board loaded strongly to factor 2 (factor loading from 0.604 to

0.821), while Parliament only moderately loaded to factor 2 (0.514).

Principal component analysis with oblique Oblimin rotation also produced a

correlation matrix between Factor 1 and Factor 2. The results indicate a medium

negative correlation (r = –0.448) between Factors 1 and 2. Because both

components were correlated, oblique rotation was more appropriate than

orthogonal rotation (Pett, Lackey & Sullivan, 2003). The negative correlation

indicates that the primary stakeholders and the secondary stakeholders are distinct

groups of stakeholders. In addition, as shown in Figure 7-1, the plot of each

stakeholder in rotated space clearly indicates that the primary stakeholders and the

secondary stakeholders are separate groups of stakeholders.

Figure 7-1 Factor Plot in Rotated Space for "To Whom Should Zakat Agencies be

Accountable" Factor scores were produced for every factor using the multiple regression

approach. Multivariate analysis of variance (MANOVA) tests were carried out

with factor scores for Factors 1 and 2 as dependent variables and (i) the groups of

respondents, (ii) employment sectors, (iii) age categories, and (iv) level of


education as independent variables. The results of the MANOVA tests did not

find statistically significant results based on the groups of donors (Appendix G)

and demographic attributes of the donors (Appendix H). Thus, there was no

difference in the perception of stakeholders regarding zakat agencies based on the

groups of donors and demographic attributes of donors.

7.5 WHAT SHOULD ZAKAT AGENCIES BE ACCOUNTABLE FOR?

The findings in this section address the following research question:

RQ. 2(b). What is the scope of accountability of zakat agencies according to the


Participants were asked to indicate the level of importance of ten statements

about the scope of accountability (see Appendix C, Question No. 8).

Descriptive StatisticsTable 7-8 presents the responses of respondents

regarding the scope of accountability of zakat agencies as reported by the mean

score of the variables. The higher the mean score, the higher the importance that

respondents assigned to the variables presented. The survey revealed that the

majority of respondents had similar views about the relative importance of each

variable that represented the scope of accountability, as indicated by the minimal

differences in the mean score of each variable.

151

Table 7-8 Perceptions of Donors on the Scope of Zakat Agencies Accountability

No Scope

of Accountability

Primary Receipient of Zakat

All Respondents n=239

Local Imam

BAZ NAS LAZ

Mean Frequency*

Mean Mean Mean 0 1 2 3 4 5

1 Finances 4.80 4.77 4.81 4.80 20 0 1 0 40 178

2 Syari’ah 4.72 4.77 4.58 4.72 23 1 3 1 45 166

3 Ethics 4.53 4.57 4.56 4.55 23 1 1 8 74 132

4 Outcome 4.32 4.43 4.22 4.33 23 1 2 20 94 99

5 Legal 4.35 4.37 4.19 4.33 22 6 2 16 84 109

6 Efficiency 4.30 4.31 4.14 4.28 26 0 1 27 96 89

7 Effectiveness 4.29 4.37 4.14 4.27 24 1 0 21 110 83

8 Governance 4.30 4.29 4.22 4.26 23 1 4 23 98 90

9 Mission 4.29 4.23 4.00 4.23 25 4 3 24 91 92

10 Amil Fund 3.91 3.83 4.17 3.93 32 15 10 31 70 81 Notes: *: 0 = Did not respond to this question; 1 = Not Important; 2 = Less Important; 3= Medium; 4 =

Important; 5: Very Important

Accountability for finances had the highest mean score (4.80) with 178 (out

of 239) respondents stating that accountability for finances was very important.

This was followed by compliance with Syari’ah requirements (mean score: 4.72)

and accountability for ethics (mean score: 4.55). The three categories that received

the lowest mean score were governance (mean score: 4.25), mission (mean score:

4.23), and amil fund (mean score: 3.93). Only 81 (out of 239) respondents stated

that accountability for the amil fund was very important. The results of the

Kruskal-Wallis test showed no significant difference between the perceptions of

donors who gave to local Imams, government-sponsored zakat agencies, and

private zakat agencies regarding the scope of accountability. This indicates that

there was no difference in the perceived scope of accountability of zakat agencies

based on the groups of donors.

Grouping the Scope of Accountability

Several authors have proposed that the scope of accountability consists of

several areas (Dhanani & Connolly, 2012; Ebrahim, 2010; Goodin, 2003; Kearns,


1996; Stewart, 1984). The survey identified ten elements in which zakat agencies

should be accountable. Factor analysis was used to produce factor scores for

further analysis and to condense these areas of accountability by grouping

correlated areas of accountability so that they can be compared with the existing

literature.

Because factor analysis requires highly correlated variables, Spearman rho

correlation was used to test the correlation among variables. The results are

presented in Table 7-9 and indicate that most variables had a correlation of 0.3 or

above. The result of Bartlett’s test of sphericity was significant (χ2=714.843,

p<0.000); indicating a sufficient correlation among the variables. The KMO value

was 0.86 and above the recommended value of 0.6, indicating that the size of the

sample was sufficient. Therefore the application of factor analysis for the scope of

accountability was suitable (Tabachnick & Fidell, 2007).

Table 7-9 Spearman’s rho Correlation Matrix for the Scope of Accountability

Scope of Accountability 1 2 3 4 5 6 7 8 9

1. Finances 1.000

2. Amil Fund 0.183** 1.000

3. Ethics 0.473** 0.243** 1.000

4. Syari’ah 0.595** 0.213** 0.563** 1.000

5. Law and regulation 0.339** 0.050 0.412** 0.455** 1.000

6. Governance 0.395** 0.171* 0.431** 0.413** 0.590** 1.000

7. Effectiveness 0.327** 0.134 0.423** 0.392** 0.514** 0.584** 1.000

8. Efficiency 0.382** 0.197** 0.525** 0.406** 0.470** 0.569** 0.610** 1.000

9. Outcome 0.315** 0.229** 0.498** 0.379** 0.415** 0.469** 0.519** 0.488** 1.000

10. Mission 0.380** 0.114 0.385** 0.301** 0.462** 0.503** 0.524** 0.563** 0.508** ** Correlation is significant at the 0.01 level (2-tailed) * Correlation is significant at the 0.05 level (2-tailed)

After the suitability of the data for factor analysis was confirmed, the next

step was to determine the number of factors that should be retained. Based on

Kaiser’s criterion, two components should be retained because two components

had eigenvalues above one (Appendix D). Visual inspection of the scree plot

(Appendix E) indicates that the sharp elbow is located in the second component;

therefore, there only one factor should be retained. The result of Monte Carlo

PCA for parallel analysis indicates that only one factor should be retained because

153

only component 1 had an eigenvalue above the criterion valued from the Monte

Carlo PCA for parallel analysis. However, retaining only one factor is not

appropriate from a theoretical perspective because the previous literature has

indicated that the scope of accountability consists of several elements (Ebrahim,

2010; Goodin, 2003; Kearns, 1996; Stewart, 1984). Moreover, Nunally and

Bernstein (1994) suggested that the number of factors retained should make

theoretical sense. Therefore, two factors were retained because this was more

theoretically justifiable than one factor.

The results of the factor extraction on the scope of accountability based on a

two factors solution are presented in Table 7-10. The two factors solution

produced a simple structure of factors that accounted for 55.57% of the total

variation in the data. The result suggests that there were two distinct scopes of

accountability as perceived by donors. The plot of every item of the scope of

accountability presented in Figure 7-2 also indicates that Factors 1 and 2 were

distinct.

Table 7-10 Results of Factor Extraction on the Scope of Accountability

Scope of Accountability

Pattern Matrixa Structure Matrix

Communalities

Factor 1 Factor 2 Factor 1 Factor 2 Performance

and Governance Accountability

Financial and Sacred

Accountability

Performance and Governance Accountability

Financial and Sacred

Accountability

Legal 0.818 –0.192 0.760 0.054 0.611

Mission 0.801 –0.143 0.759 0.099 0.594

Governance 0.798 –0.019 0.792 0.221 0.627

Efficiency 0.699 0.144 0.742 0.354 0.569

Effectiveness 0.693 0.170 0.744 0.378 0.580

Outcomes 0.540 0.222 0.607 0.385 0.413

Amil Fund –0.225 0.706 –0.013 0.638 0.453

Syari’ah Accountability 0.406 0.570 0.577 0.692 0.629

Ethics 0.386 0.552 0.552 0.668 0.582

Finances 0.307 0.551 0.473 0.643 0.499

Eigenvalues 4.41 1.15 % of variance explained 44.10 11.47

Extraction method: principal component analysis. Rotation method: oblimin with Kaiser normalisation. a. Rotation converged in 10 iterations.


Figure 7-2 Factor Plot in Rotated Space for the Scope of Accountability

The first factor explains 44.10% of total variance. The variables with

significant loading in this factor were compliance with regulations, governance,

mission, and performance; thus, this factor was labelled “Governance and

Performance Accountability”. All items that compose this factor had high factor

loadings exceeding 0.690, with the exception of accountability for outcome that

only moderately loaded into this factor (0.540).

The second factor was associated with 11.47% of total variance and

consisted of accountability for finances, amil fund, ethics, and Syari’ah

compliance; thus, the second factor was labelled “Sacred and Financial

Accountability”. Accountability for the amil fund had the highest loading score

(0.706), while Syari’ah accountability (0.570), ethics accountability (0.552), and

finance accountability (0.551) loaded moderately to the second factor.

As discussed in Chapter 2, a zakat fund consists of: (1) zakat funds to be

distributed to beneficiaries, and (2) the amil fund (to finance the administration of

zakat agencies). Therefore, it is reasonable that accountability for finances and

accountability for amil fund loaded into the same factor because both areas of

155

accountability are directly related to the usage of financial resources. The usage of

the zakat fund for beneficiaries must comply with Syari’ah requirements. Thus,

financial accountability was also related to Syari’ah accountability. According to

Syari’ah, one eighth of the zakat fund belongs to the administrators of zakat

agencies. Syari’ah and government regulations do not regulate the usage of the

amil fund. However, it is also expected that the administrators of zakat agencies

will consider this ethical dimension in the usage of the amil fund.

Principal component analysis with oblique oblimin rotation26 also produced

a correlation matrix between two factors. The component correlation matrix

indicated a medium correlation between two factors (r = 0.301). Therefore, the

application of oblique oblimin rotation was considered appropriate.

Factor scores for Factors 1 and 2 were produced using a multiple regression

approach. MANOVA tests on factor scores on Factors 1 and 2 were performed

with four different independent variables: (1) the groups of respondents; (2) age

group; (3) employment sector; and (4) education. The results indicated no

significant difference among the different independent variables, except for

employment sector, [(F (2,179) = 3.514, p=0.032; Wilks’ Lambda=0.962]

(Appendixes J and I). Test of between subject effects only indicated a marginally

significant difference on the importance of performance and governance

accountability [(F (1, 3.973) =3.699, p=0.096]. An inspection of the mean scores

indicated that respondents who were not government employees perceived

performance and governance accountability to be more important than

respondents who were government employees.

7.6 TYPES OF INFORMATION REQUIRED BY DONORS

This study also sought to identify the types of information considered

important by donors. This section addresses the following research question:

RQ 2 (c): What information (financial and non-financial) do the donors of zakat agencies expect and consider necessary to be disclosed by zakat agencies?

26 Orthogonal varimax rotation was also performed and produces identical results.


To answer this research question, respondents were asked to indicate the

level of importance of various types of information on a five-point Likert-type

scale (see Appendix X No.13).

Descriptive Statistics

The summary of responses from participants is presented in Table 7-11. All

information types listed in the questionnaire were identified by the majority of

donors as being of “medium importance” to “very important”, indicating that all

variables listed in the questionnaire were considered necessary to be disclosed by

zakat agencies to render accountability. Notably, participants perceived

beneficiary-related information and financial information to be the most important

information compared to other types of information.

157

Table 7-11 Perceptions of Donors on Types of Information that should be disclosed by Zakat Agencies

No Type of Information


All Respondents (n = 239)

Local Imam

BAZ NAS LAZ

Mean Frequency*


Overview – Organisation

1 Statement of mission and objectives 4.32 4.13 4.08 4.25 1 2 3 28 106 99

2 History of the organisation 3.45 3.50 3.51 3.50 4 8 16 82 108 21

Governance Information

3 Boards and committee activities 3.86 3.71 3.82 3.83 4 1 13 58 115 47

4 Profile of boards, CEO and other senior staff

3.88 3.63 3.78 3.82 10 3 14 56 104 52

5 Information about organisation structure 3.86 3.75 3.81 3.82 6 3 13 54 116 47

6 Remuneration of boards, CEO and other senior staff

3.64 3.55 3.54 3.61 6 6 20 74 92 41

Future Plans

7 Future plans 4.38 4.35 4.22 4.35 5 1 0 16 117 100

Organisation Policy and Program

8

Organisation’s policy for selecting beneficiaries including the criteria to select beneficiaries

4.39 4.33 4.08 4.26 6 2 3 23 110 95

9 Overview of programmes and activities

4.25 4.30 4.22 4.22 6 2 2 28 111 90

10 Organisation’s policy related to the allocation of resources

4.26 4.28 4.00 4.19 7 2 5 27 112 86

11 Information about how to access zakat agency services

4.17 4.23 4.19 4.14 6 4 5 27 116 81

Beneficiaries

12 Overview of beneficiaries 4.53 4.53 4.46 4.48 3 1 1 13 90 131

13

Human interest stories (information about how zakat funds help beneficiaries)

4.35 4.33 4.32 4.32 5 2 1 19 111 101




All Respondents (n = 239)

Local Imam

BAZ NAS LAZ

Mean Frequency*


Other Non-financial Information

14 Information about related parties’ transactions

4.12 4.03 4.03 4.07 5 3 5 42 106 78

15 Acknowledgement of donors and volunteer’s contributions

3.54 3.63 3.43 3.55 6 7 13 84 102 27

Financial Information

16 Audited financial statements 4.38 4.48 4.24 4.35 5 1 1 32 80 120

17 Total revenues and sources of revenues 4.40 4.55 4.22 4.35 3 1 4 22 93 116

18 Usage of zakat fund for beneficiaries other than amil

4.42 4.20 4.16 4.31 4 1 3 18 113 100

19 Usage of other donated funds (except zakat fund)

4.42 4.20 4.16 4.30 3 1 4 24 102 105

20 Usage of the amil fund 4.30 4.30 4.22 4.26 6 1 4 31 94 103

21 Auditor's report or other type of assurance report

4.30 4.43 4.11 4.25 4 1 3 37 89 105

22 Fundraising cost 3.96 3.88 3.62 3.88 6 3 13 48 114 55 Performance Information

23 Financial performance information 4.17 4.13 3.95 4.11 4 0 1 41 124 69

24 Non-financial performance information

4.03 4.18 3.84 4.02 8 2 7 40 118 64

Notes *: 0: Did not responses; 1 = Not Important; 2 = Less Important; 3= Medium; 4 = Important; 5: Very Important

Information about zakat agencies’ beneficiaries had the highest mean score

(4.48), which reflects the importance of information about beneficiaries. In

relation to information about zakat agencies beneficiaries, 221 (out 239)

respondents agreed that they were important or very important. The other type of

information about beneficiaries – information about human interest stories

(information about how zakat funds help beneficiaries) – was also considered very

important by the majority of respondents (mean score: 4.32), while 212 (out of

239) respondents stated that information about human interest stories was

important or very important.

159

The relative importance of financial information was reflected by the mean

score of the “independent auditor report” (4.35) and “audited financial statements”

(mean score: 4.35). The number of respondents who stated that information about

“independent auditor report and other assurance reports” (105 out of 239) and

“audited financial statements” (120 out of 239) was important or very important

was also quite high. The other financially-related information (information about

how the zakat fund was spent, information about the proportion of zakat for

beneficiaries, and information about total revenues and its sources) was also

considered very important by the majority of donors and had an average mean

rating above 4. These findings indicate that donors had a strong interest in

financial accountability. However, information regarding the proportion of zakat

fund for amil and information relating to fundraising were not regarded as being

as important as other financial information. These findings are consistent with the

findings from Section 7.5 about the scope of accountability that indicated

participants had a lower interest in the usage of amil fund than other scopes of

accountability.

This study found that respondents had mixed perceptions regarding the

importance of organisational information. While information about the

organisation’s vision, mission, and objectives was considered important (mean

score: 4.25), information about the history of the organisation was only

considered moderately important (mean score: 3.50). It is possible that donors

believe that information about the history of an organisation does not influence

the ability to distribute a zakat fund, therefore, they do not consider this

information important. In contrast, the organisation’s vision, mission, and

objectives are considered important because they provide a general description

about how an organisation will use the money donated to them.

In order to measure the differences in the ratings regarding information

given by the three groups of donors, a Kruskal-Wallis Test was performed. There

were no significant differences in the responses between the groups of donors,

except for information about the statement of zakat agency’s vision, mission, and

objectives. Post-hoc tests were conducted to identify which specific groups of

donors differed. The result indicated that the group of respondents who gave to


local Imams and the group of respondents who gave to government-sponsored

zakat agencies differed significantly in regard to their perceptions on the

importance of information about the vision, mission, and objectives (Chi-square:

4.423; p value: 0.035). An inspection of the mean ranks for every group of donors

suggests that respondents who gave zakat to local Imams had the highest

perception regarding the importance of information about the zakat agency’s

vision, mission, and objectives; while the respondents who gave to private zakat

agencies reported the lowest. No significant difference was observed between the

group of respondents who gave to government-sponsored zakat agencies and

private zakat agencies.

Grouping of Information Types

This study identified 24 types of information considered important by

donors. Factor analysis was used to simplify these types of information. A

Spearman non-parametric correlation test was used to test the presence of

correlation among the variables. The results are presented in Table 7-12 and

indicate that most variables had correlation coefficients of 0.3 or above. The result

of Bartlett’s test of sphericity was significant (χ2=3551.585, p<0.000), indicating a

sufficient correlation among variables. The value of KMO was 0.90 and above the

recommended value of 0.6, indicating that the size of the sample was sufficient.

Therefore, the application of factor analysis was appropriate (Tabachnick &

Fidell, 2007).

After the applicability of the factor analysis was confirmed, it was

important to determine the number of factors. Based on eigenvalues above 1, there

were five components that should be retained (Appendix D). However, there were

only four components that satisfied the criterion value from Monte Carlo PCA for

Parallel Analysis. Visual inspection of the scree plot (Appendix E) was

inconclusive because sharp elbows were present at components 2, 4, and 7.

Therefore, based on the Monte Carlo PCA for parallel analysis, the number of

components that should be retained was four.

161

Table 7-12 Spearman's rho Correlation on Types of Information that Should be Disclosed by Zakat Agencies

Types of Information 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

1. Statement of mission and objectives 1.000

2. History of the organisation 0.406** 1.000

3. Boards and committee activities 0.497** 0.327** 1.000

4. Profile of boards, CEO, and senior staff 0.451** 0.542** 0.481** 1.000

5. Information about organisation structure 0.456** 0.595** 0.379** 0.741** 1.000

6. Remuneration of boards, CEO and senior staff 0.240** 0.451** 0.366** 0.441** 0.604** 1.000

7. Future plans 0.066 0.242** 0.182** 0.316** 0.413** 0.493** 1.000

8. Organisation policy in selecting beneficiaries, including the criteria to select beneficiaries

0.525** 0.358** 0.531** 0.488** 0.475** 0.453** 0.393** 1.000

9. Overview of programmes and activities

0.305** 0.146* 0.431** 0.307** 0.290** 0.338** 0.335** 0.569** 1.000

10. Organisation’s policy related to the allocation of resources

0.220** 0.177** 0.343** 0.297** 0.268** 0.365** 0.299** 0.415** 0.694** 1.000

11. Information about how to access the zakat agency’s services

0.190** 0.268** 0.325** 0.277** 0.318** 0.382** 0.389** 0.392** 0.507** 0.610** 1.000

12. Overview of beneficiaries 0.279** 0.197** 0.370** 0.355** 0.319** 0.396** 0.286** 0.485** 0.596** 0.650** 0.563** 1.000



13. Human interest stories (information about how the zakat fund helps beneficiaries)

0.263** 0.187** 0.428** 0.254** 0.242** 0.375** 0.290** 0.508** 0.509** 0.547** 0.484** 0.661** 1.000

14. Information about related parties’ transactions

0.266** 0.303** 0.192** 0.248** 0.369** 0.435** 0.373** 0.316** 0.272** 0.287** 0.361** 0.400** 0.378** 1.000

15. Acknowledgement of donors and volunteer’s contributions

0.388** 0.367** 0.353** 0.407** 0.442** 0.399** 0.396** 0.546** 0.433** 0.335** 0.418** 0.370** 0.449** 0.469** 1.000

16. Audited financial statements 0.481** 0.274** 0.353** 0.373** 0.395** 0.353** 0.279** 0.589** 0.491** 0.385** 0.387** 0.429** 0.449** 0.354** 0.818** 1.000

17. Total revenue and sources of revenue 0.305** 0.179** 0.398** 0.280** 0.264** 0.383** 0.309** 0.489** 0.508** 0.454** 0.421** 0.488** 0.529** 0.273** 0.644** 0.708** 1.000

18. Usage of the zakat fund for beneficiaries other than amil

0.173** 0.116 0.352** 0.210** 0.249** 0.422** 0.370** 0.439** 0.477** 0.436** 0.390** 0.436** 0.485** 0.414** 0.574** 0.622** 0.725** 1.000

19. Usage of other donated funds (except the zakat fund)

0.196** 0.077 0.339** 0.284** 0.201** 0.330** 0.266** 0.412** 0.527** 0.422** 0.362** 0.509** 0.470** 0.319** 0.543** 0.579** 0.655** 0.739** 1.000

20. The zakat fund for amil and how the amil fund is spent

0.201** 0.243** 0.284** 0.277** 0.380** 0.445** 0.449** 0.394** 0.423** 0.423** 0.428** 0.415** 0.388** 0.440** 0.434** 0.448** 0.484** 0.586** 0.497** 1.000

21. Auditor's report or other type of assurance reports

0.275** 0.224** 0.460** 0.302** 0.325** 0.465** 0.376** 0.501** 0.531** 0.474** 0.427** 0.503** 0.537** 0.356** 0.537** 0.556** 0.616** 0.669** 0.570** 0.598** 1.000

22. Fundraising costs 0.276** 0.150* 0.231** 0.223** 0.351** 0.291** 0.279** 0.294** 0.331** 0.338** 0.347** 0.352** 0.272** 0.295** 0.377** 0.437** 0.283** 0.347** 0.363** 0.365** 0.342** 1.000

163


23. Financial performance information, such as efficiency ratio

0.363** 0.195** 0.338** 0.371** 0.346** 0.255** 0.174** 0.340** 0.302** 0.317** 0.318** 0.290** 0.267** 0.260** 0.369** 0.492** 0.425** 0.417** 0.447** 0.351** 0.387** 0.667** 1.000

24. Non-financial performance information, such as the number of beneficiaries

0.312** 0.160* 0.406** 0.246** 0.334** 0.319** .0309** 0.368** 0.350** 0.277** 0.279** 0.340** 0.285** 0.321** 0.389** 0.425** 0.352** 0.360** 0.412** 0.395** 0.390** 0.571** 0.636**

** Correlation is significant at the 0.01 level (2-tailed) * Correlation is significant at the 0.05 level (2-tailed)


The results of the factor analysis are presented in Table 7-13. Factor

analysis produced four components or factors that explained 64.32% of the total

variation27. The value of communalities was above 0.3 in all variables, indicating

that every variable fit well with other variables in every component (Pallant,

2016). Most theoretically related variables inclined to load on the same factor.

There were four types of information that loaded into more than one factor: (1)

information about future plans; (2) the overview of zakat agency programmes and

activities; (3) information about how to access zakat agency services; and (4)

board and committee activities. Overall, the results of the factor analysis indicate

that donors had a strong interest, not only in financial information about the usage

of zakat funds but also in non-financial information, such as information about

governance, the programme, and performance.

The first factor was classified as “financial and beneficiary

information”. Eleven variables that loaded into this factor accounted for 42.61%

of the total variance and had an eigenvalue of 10.23. Financial information items,

such as information about total revenue and sources of revenue and information

about the usage of the zakat fund for beneficiaries loaded highly to this factor,

ranging from 0.671 to 0.832. Beneficiary-related information such as “the

overview of beneficiaries” (0.766) and “organisation policy in selecting

beneficiaries” (0.766) also loaded into the first factor. These findings reflect that

donors who were interested in financial information were also interested in

information about the beneficiaries of zakat.

27 The component plot in rotated space for every type of information was not produced because a component plot rotated with four factors is difficult to interpret.

165

Table 7-13 Results of Factor Analysis on the Perception of Donors on the Types of Information

Type of Information Pattern Matrix Structure Matrix

Communalities Factor 1

Factor 2

Factor 3

Factor 4

Factor 1

Factor 2

Factor 3

Factor 4

1. Total revenue and sources of revenue 0.832 –0.072 0.127 –0.094 0.823 0.289 0.402 0.139 0.702 2. Usage of the zakat fund for beneficiaries other than amil 0.814 –0.124 0.167 –0.052 0.811 0.247 0.426 0.174 0.729 3. Zakat fund for amil and how the amil fund is spent 0.771 –0.185 0.174 0.179 0.809 0.206 0.431 0.384 0.691 4. Overview of beneficiaries 0.766 0.102 –0.104 0.052 0.784 0.395 0.213 0.264 0.632 5. Organisation’s policy in selecting beneficiaries 0.766 0.062 –0.147 0.016 0.741 0.338 0.155 0.216 0.570 6. Usage of other donated funds (except the zakat fund) 0.739 –0.035 0.083 0.153 0.797 0.314 0.366 0.360 0.664 7. Organisation’s policy related to the allocation of resources 0.709 0.083 –0.071 0.121 0.750 0.372 0.229 0.318 0.585 8. Human interest stories 0.674 0.052 –0.150 0.238 0.705 0.323 0.144 0.411 0.568 9. Audited financial statements 0.671 0.101 0.305 –0.207 0.768 0.428 0.554 0.032 0.721 10. Future plans 0.569 0.428 –0.017 –0.107 0.710 0.641 0.297 0.113 0.662 11. Auditor's report or other type of assurance report 0.550 0.200 0.221 –0.049 0.701 0.479 0.473 0.161 0.578 12. Profile of boards, committee members, and senior staff –0.096 0.839 0.137 0.185 0.349 0.866 0.355 0.305 0.798 13. Information about organisation structure 0.068 0.825 0.001 –0.036 0.396 0.847 0.246 0.110 0.721 14. History of the organisation –0.118 0.752 –0.016 0.255 0.254 0.738 0.179 0.336 0.608 15. Statement about the zakat agency's vision, mission, and objectives 0.151 0.632 0.176 –0.364 0.375 0.686 0.357 –0.203 0.626 16. Overview of zakat agency programmes and activities 0.410 0.472 0.035 –0.173 0.569 0.623 0.293 0.016 0.535 17. Financial performance information, such as efficiency ratio 0.049 0.082 0.825 –0.118 0.355 0.310 0.851 0.015 0.683 18. Information about related parties’ transactions –0.081 –0.015 0.771 0.298 0.278 0.208 0.775 0.373 0.743 19. Non–financial performance information, such as the number of

beneficiaries 0.029 0.047 0.760 –0.010 0.326 0.265 0.782 0.104 0.615

20. Remuneration of boards, CEO, and other senior staff 0.139 0.184 0.097 0.626 0.421 0.363 0.280 0.705 0.594 21. Acknowledgement of donors and volunteer’s contribution 0.164 0.158 0.190 0.539 0.447 0.360 0.364 0.633 0.541 22. Information about how to access zakat agency services 0.441 0.061 –0.011 0.509 0.601 0.316 0.234 0.637 0.606 23. Fundraising costs 0.390 –0.046 0.236 0.488 0.592 0.254 0.431 0.619 0.623 24. Boards and committee activities 0.181 0.448 0.039 0.461 0.505 0.603 0.288 0.585 0.642

Notes: Factor 1 Financial and beneficiary information Factor 2 Governance and programme information Factor 3 Performance information Factor 4 Other information Extraction method: principal component analysis. Rotation method: oblimin with Kaiser normalisation.

a Rotation converged in 10 iterations.


The second factor explained 8.63% of the total variance and had an

eigenvalue of 2.07. There were five variables with a high loading on the second

factor, which included information about the profile of boards, committee

members, and senior staff (0.839), information about the organisation’s structure

(0.825), information about the history of organisation (0.752), and information

about the zakat agency's vision, mission, and objectives (0.632). The overview of

the zakat agency programmes and activities also loaded moderately (0.472) to the

second factor. Thus, this factor was named “governance and programmes

information”.

The third factor had an eigenvalue 1.60 and accounted for 6.66% of the

total variance. This factor includes financial performance and non-financial

performance information and information about related party transactions. This

factor was labelled “performance information” because two out of the three

variables that loaded into this factor were related to performance. Both financial

and non-financial performance information had high loadings of 0.825 and 0.760,

respectively, in this factor. The last factor being extracted had an eigenvalue of

1.54 and accounted for 6.43% of the total variance. Variables that loaded into this

factor included remuneration information, acknowledgment of donors and

volunteer contribution, information about zakat agencies services, fundraising

costs, and board and committee activities. Thus, performance information

required was not limited to the usage of the zakat fund to deliver programmes and

activities but also covered fundraising costs. Several cross-loading variables were

observed in this factor. For example, information about board and committee

activities also loaded into factor 4 (governance and programme information) and

the fundraising cost variable also loaded into factor 1 (financial and beneficiary

information). Every variable in factor 4 was theoretically different. Thus, this

factor was labelled as “other information”.

Principal component analysis with oblique oblimin rotation also produced

the correlation of every factor. Two factors had a correlation of above 0.3;

therefore, the application of oblique rotation was more appropriate than

orthogonal rotation.

167

Factors scores for Factors 1, 2, 3, and 4 were produced using a multiple

regression approach. MANOVA tests were carried out with an independent

variable, that is the factor scores for Factors 1, 2, 3 and 4 against several different

dependent variables based on: (1) the primary recipient of zakat; (2) occupation;

(3) the level of education; and (4) the age group. The results did not show a

statistically significant difference for all variables (see Appendix M and N). Thus,

there were no different perceptions regarding the importance of the four clusters

of information types to discharge accountability among the groups of donors who

gave to local Imams, government-sponsored zakat agencies, and private zakat

agencies and among donors with different demographic attributes.

7.7 BY WHAT MEANS SHOULD ZAKAT AGENCIES DISCHARGE THEIR ACCOUNTABILITY?

This section presents information about the mechanisms used to disseminate

accountability to answer the following research question:

RQ2.d. According to the donors of zakat agencies, by what means should zakat agencies discharge their accountability?

Descriptive Statistics

Table 7-14 presents the perception of donors regarding the importance of

several sources of information on the accountability of zakat agencies. The

majority of respondents (118 out of 224) stated that the annual report was a very

important source of information (mean score 4.42). Other sources of written

information, such as internal printed media, organisation website, and letters were

also rated as important to very important by the majority of respondents, with

mean responses varying from 3.80 to 4.13. Verbal sources of information, such as

verbal information from staff and verbal information from a friend, relative, and

family members had lower scores than written sources of information, with mean

values of 3.36 and 3.12 respectively.

A Kruskal-Wallis test was conducted to identify whether there were

significant differences among the perceptions of the three groups of donors on the

importance of several sources of information on the accountability of zakat

agencies. The results indicate that there were no significant differences across the


three groups of donors on their views on the importance of several sources of

information on the accountability of zakat agencies.

Table 7-14 Perceptions of Donors on the Sources of Information

Source of Information

Primary Reciepient of Zakat All Respondents

Local Imam

BAZ NAS LAZ

Mean Frequency*


Annual reports 4.39 4.54 4.36 4.42 15 2 3 13 88 118

Internal printed media 4.04 4.14 4.12 4.13 18 0 7 26 119 69

Internet 4.02 4.19 4.27 4.11 16 5 7 23 111 77

Letter (sent by zakat agencies to their donors) 3.77 3.89 3.82 3.80 22 7 11 49 102 48

Mass media 3.80 3.92 3.91 3.89 17 5 13 41 106 57

Public announcement in mosques 3.64 3.59 3.42 3.64 18 9 23 53 89 47

Social media 3.03 3.46 3.70 3.24 29 19 30 67 69 25

Staff of zakat agencies 3.37 3.46 3.37 3.36 21 14 36 60 73 35

Friend, relative, or family members 3.12 3.16 3.12 3.12 26 20 39 62 80 12

Notes *: 1 = Not Important; 2 = Less Important; 3= Medium; 4 = Important; 5: Very Important

Accountability can only be achieved if the disclosure of information can

reach stakeholders. Therefore, respondents were also asked whether they had

access to several types of media that are usually used by zakat agencies to disclose

accountability information. The results are presented in Table 7-15. In general, the

majority of respondents had access to informal sources of information, such as

public announcements in mosques (64%), the internet (63%), mass media (57%),

and internal printed media (53%). The proportion of donors who accessed

information from the internet and mass media was consistently higher than those

who did not have access to the internet and mass media among the three groups of

donors. Although donors indicated that the annual report was a very important

source of information, this survey found that the majority of respondents (65%)

169

did not have access to annual reports, even for the donors of government-

sponsored zakat agencies and private zakat agencies that publish annual reports.

Table 7-15 Proportion of Donors with Access to Sources of Information about Zakat Agencies

Source of Information N


Local Imam BAZNAS LAZ TOTAL

Yes No Yes No Yes No Yes No Public announcement in mosques

173 88 (72%)

34 (28%)

13 48%)

14 (52%)

10 (42%)

14 (58%)

111 (64%)

62 (36%)

Internet 174 73 (59%)

50 (41%)

16 (59%)

10 (41%)

21 (84%)

4 (16%)

110 (63%)

64 (37%)

Mass media 175 68 (56%)

54 (44%)

17 (61%)

11 (39%)

16 (64%)

9 (36%)

101 (58%)

74 (42%)

Internal printed media 172 60

(50%) 60

(50%) 15

(56%) 12

(44%) 17

(68%) 8

(32%) 92

(53%) 80

(47%)

Social media 172 60 (50%)

60 (50%)

10 (37%)

17 (63%)

14 (56%)

11 (44%)

84 (49%)

88 (51%)

Friend, relative, or family members 172 60

(49%) 61

(51%) 12

(44%) 15

(56%) 8

(33%) 16

(67%) 80

(47%) 92

(53%) Letter (sent by zakat agencies to their donors)

173 44 (36%)

77 (64%)

10 (37%)

17 (63%)

15 (60%)

10 (40%)

69 (40%)

104 (60%)

Annual reports 187 40 (32%)_

85 (68%)

15 (45%)

18 (55%)

14 (48%)

15 (51%)

69 (37%)

118 (63%)

Staff of zakat agencies 170 42

(36%) 76

(64%) 8

(30%) 19

(70%) 10

(40%) 15

(60%) 60

(35%) 110

(65%)

A Kruskal-Wallis test was conducted to identify whether there were

significant differences among the three groups of donors regarding their ability to

gain access to several sources of information. The results indicate that there were

no significant differences across the three groups of donors, except for public

announcements in mosques (p = 0.003). Respondents who gave zakat to local

Imams were more likely to depend on information from public announcements in

mosques than respondents who gave zakat to government-sponsored zakat

agencies or private zakat agencies. This is predictable because the activities of

local Imams are based on mosques, therefore, their donors depend on information

about the usage of zakat funds from public announcement in mosques. For access

to annual reports, the proportion of respondents who did not have access to annual


reports was higher for the group of donors who gave to local Imams than the

groups of donors who gave to government-sponsored zakat agencies or private

zakat agencies. However, the difference is not statistically significant.

Do donors read annual reports?

In order to gauge donors’ interest in annual reports and financial statements,

respondents were asked whether they read annual reports or financial statements

published by zakat agencies (see Appendix C 9). The results are presented in

Table 7-16. The majority of respondents (76.9%) did not read annual reports or

financial statements published by zakat agencies. The proportion of donors who

read annual reports between the groups of donors who gave most of their zakat to

government-sponsored zakat agencies (32.6%) and private zakat agencies (32.4%)

was relatively equal, but higher than the group of donors who gave most of their

zakat to local mosques (17.7%). Chi-square tests were carried out to explore

whether the difference was significant. The results indicate that the difference was

significant, (χ2 (2, n=221) = 6.272, p: 0.043, phi=0.168).

Table 7-16 Cross-tabulation of the Interest of Respondents in Relation to Reading

Annual Reports by the Groups of Donors

Primary Recipient of Zakat Do you read the Annual

Report? Total28 No Yes

Local Imam Frequency 116 25 141 Percentage 82.3% 17.7% 100.0% Adjusted Residual 2.5 -2.5

BAZNAS Frequency 29 14 43 Percentage 67.4% 32.6% 100.0% Adjusted Residual -1.6 1.6

LAZ Frequency 25 12 37 Percentage 67.6% 32.4% 100.0% Adjusted Residual -1.5 1.5

Total Frequency 170 51 221 Percentage 76.9% 23.1% 100.0%

Post-hoc testing was performed by calculating adjusted residuals. The

results of the post hoc test confirmed that the proportion of respondents who gave

to local Imams and read annual reports was significantly lower than those who 28 From the 221 respondents that answered this question, only 187 respondents answered the question about access to annual reports.

171

gave to government-sponsored zakat agencies and private zakat agencies and read

annual reports. However, the difference between the proportion of respondents

who read annual reports those who gave to government-sponsored zakat agencies

and private zakat agencies was not significantly different. It is possible that donors

who gave to local Imams have a lower interest in reading the annual reports of

zakat agencies than those who give to government-sponsored zakat agencies or

private zakat agencies because local Imams do not produce annual reports and

therefore they depend on other types of information sources.

Further Chi-square tests for independence were conducted with different

explanatory variables, that is, sector of employment, level of education, and age

groups. The results indicated no significant association between these explanatory

variables regarding reading annual reports.

Why do donors read annual reports?

Respondents were also asked to answer an open-ended question about why

they read zakat agencies’ reports (see Appendix C No. 10). The results are

presented in Table 7-17.

Table 7-17 Reasons for Reading Annual Reports or Financial Statements

No Reasons for reading

annual reports or financial statements


Local Imam BAZNAS LAZ Total


1 To obtain financial information about the usage of the zakat fund.

20 80 8 57 8 67 36 70

2 To obtain information about programmes 1 4 2 14 1 8 4 8

3 To access Syari’ah accountability 1 4 1 7 0 0 2 4

4 Others 1 4 3 21 1 8 5 10

5 Did not provide a reason 2 8 0 0 2 17 4 8 Total 25 14 12 51 100

The majority of respondents (76.60%) read annual reports to obtain

information about the usage of the zakat fund. Other responses were relatively less

common and included getting information about programmes (8.51%) and to

access Syari’ah accountability (4.26%), and other reasons (10.64%). These


findings lead to the conclusion that respondents were more interested in financial

accountability regarding the usage of zakat funds than other scopes of

accountability. These responses were consistent with the answers of respondents

from the previous section about the scope of accountability that indicated financial

accountability was the most important factor in evaluating the accountability of

zakat agencies.

Why do donors not read annual reports?

The responses of respondents to the question regarding why they do not

read annual reports or financial statements were grouped into seven key themes

(see Appendix C 11) and are presented in Table 7-18. In general, there were no

significant differences in the opinions of donors, except for the role of government

in monitoring zakat agencies. The majority of respondents stated that they trusted

individuals who administered zakat agencies. This finding is consistent with the

answer from the previous question in this survey about selecting a particular

method of giving zakat that found that trust was an important factor in selecting

zakat agencies. Participants also expressed that they did not read annual reports

because they believed that the government monitored zakat agencies.

Table 7-18 Reasons for Not Reading Annual Reports or Financial Statements

No Reasons for not reading

annual reports or financial statements

Primary Recipient of Zakat Total

Local Imam % BAZ

NAS % LAZ % Freq %

1 Trust individuals who administer zakat agencies 48 38 10 33 9 47 67 39

2 Government monitors zakat agencies 34 27 15 50 6 32 55 32

3

Do not give zakat to government-sponsored zakat agencies or private zakat agencies

28 22 0 0 0 0 28 16

4

Do not understand financial information presented in annual reports or financial statements

7 6 4 13 3 16 14 8

5 Not interested in the affairs of zakat agencies 4 3 1 3 0 0 5 3

6 Rely on the other sources of information 2 2 0 0 1 5 3 2

7 Content of annual reports does not satisfy my information needs.

2 2 0 0 0 0 2 1

173

Total 125 30 19 174

The previous sections discussed the views of donors regarding the

accountability of zakat agencies. The next sections present the results of the

statistical analysis of the inter-relationship among the core elements of

accountability.

Grouping of Media Used to Disseminate Accountability

Factor analysis was used to simplify the media used by zakat agencies to

disseminate accountability, therefore, the underlying dimensions of these media

could be identified. Spearman non-parametric correlation tests were performed to

determine the presence of correlation among variables. The results are presented

in Table 7-19 and confirm the presence of many correlation coefficients of 0.3 or

above. The result of Bartlett’s test of sphericity was significant (χ2=565.443,

p<0.000), indicating a sufficient correlation among variables. The KMO value

was 0.796 and exceeded the recommended value of 0.6, indicating that the size of

the sample was sufficient for factor analysis.

Table 7-19 Spearman's rho Correlations for the Sources of Information

Sources of Information 1 2 3 4 5 6 7 8

(1) Annual reports 1.000

(2) Mass media 0.320** 1.000

(3) Internal Printed Media 0.476** 0.447** 1.000

(4) Internet 0.416** 0.454** 0.428** 1.000

(5) Information from staff 0.172* 0.362** 0.309** 0.140* 1.000

(6) Information from a member of family 0.065 0.281** 0.231** 0.039 0.742** 1.000

(7) Public announcement in mosques 0.255** 0.276** 0.307** 0.201** 0.418** 0.437** 1.000

(8) Social media 0.164* 0.394** 0.231** 0.333** 0.398** 0.369** 0.381** 1.000

(9) Letter 0.345** 0.319** 0.390** 0.314** 0.321** 0.208** 0.345** 0.313**

** Correlation is significant at the 0.01 level (2-tailed) * Correlation is significant at the 0.05 level (2-tailed)

With regard to the number of factors, both eigenvalues and Monte Carlo

parallel analysis confirmed that two factors could be extracted (see Appendix D).

The elbow of the scree plot was at component 3 (see Appendix E), indicating two


factors should be extracted. Therefore, factor analysis with two fixed number of

factors was performed using oblique oblimin rotation.

The results of the principal component analysis with oblique oblimin

rotation are presented in Table 7-20, while the results of the orthogonal varimax

rotation are reported in Table 7–21. The results of the rotation support orthogonal

rotation as more appropriate than oblique rotation because the results of oblique

oblimin rotation are more difficult to interpret than the results of orthogonal

varimax rotation. For example, Table 7-20 shows that the oblimin rotation

produced three variables (information from family members, annual report, and

the internet) that loaded strongly to both factors.

Oblique oblimin rotation produced a component correlation matrix between

Factors 1 and 2. The component correlation matrix indicated that Factors 1 and 2

were not correlated (r = 0.03). In this case, the application of orthogonal rotation

assumes that each component was not correlated, which was more appropriate

than oblique rotation that assumed the presence of correlation among components.

Table 7-20 Pattern and Structure Matrix with Oblique Oblimin Rotation of the Source of Information Variables

Medium Pattern Matrixa Structure Matrix

Communalities Factor 1 Factor 2 Factor

1 Factor 2

Information from staff 0.711 –0.524 0.695 –0.502 0.757

Internal printed media 0.670 0.321 0.680 0.341 0.565

Mass media 0.664 0.131 0.668 0.152 0.464 Social media 0.663 –0.145 0.659 –0.124 0.455

Letter 0.610 0.202 0.617 0.221 0.421

Announcement in mosques 0.606 –0.334 0.595 –0.315 0.466

Information from family members

0.642 –0.648 0.622 –0.628 0.807

Annual Reports 0.500 0.548 0.517 0.563 0.567 Internet 0.519 0.540 0.536 0.556 0.578

175

Table 7–21 Rotated Component Matrixa with Orthogonal Varimax Rotation of the Source of Information Variables

Medium Factor 1 Factor 2

Informal Sources of Information

Formal Sources of Information

Information from member of the family 0.898 –0.020 Information from staff 0.862 0.119 Announcement in mosques 0.657 0.184 Social media 0.569 0.362 Internet –0.001 0.761 Annual report –0.020 0.753 Internal-printed media (internal publication) 0.256 0.707 Letter 0.294 0.578 Mass media 0.381 0.564 Eigenvalues 2.602 2.478 % of variance explained 28.914 27.529

The first factor had an eigenvalue of 2.602 and accounted for 28.91% of

the total variance. This factor was classified as “informal sources of

information” because variables with a high loading on this factor were informal

and verbal sources of information, such as information from family members

(0.898), information from staff (0.862), and public announcements in mosques

(0.657), except for social media. Although zakat agencies officially administer a

social media account, it might be considered as an informal source of information

by donors.

The second factor extracted consisted of formal and written information,

such as the internet, annual report, internal-printed media, letters, and mass media.

Zakat agencies use these media to formally publish their financial and non-

financial information. Therefore, this factor was named “formal sources of

information”. This factor had an eigenvalue of 2.48 and explained 27.53% of the

total variance.

Figure 7-3 displays the position of every variable in rotated space. It is clear

that orthogonal rotation produced two distinct factors. Therefore, the results of


orthogonal rotation were used, because two factors were not correlated and the

result of orthogonal rotation did not indicate cross loadings.

Figure 7-3 Factor Plot in Rotated Space for Medium used to Discharge

Accountability

Factor scores for Factors 1 and 2 were produced using a multiple regression

approach. MANOVA tests were carried out with an independent variable as the

factor scores for Factors 1 and 2 against several different dependent variables

based on (i) the methods of giving zakat, (ii) occupation, (iii) the level of

education, and (iv) the age group. The results did not show a statistically

significant difference for all variables (see Appendix O and P). Thus, there were

no different perceptions regarding the importance of formal and informal

mediums to disseminate accountability among the groups of donors and donors

with different demographic attributes.

177

7.8 INTER-RELATIONSHIP AMONG THE CORE ELEMENTS OF ACCOUNTABILITY

The findings presented in this section answer the following research

question:

RQ. 3. What inter-relationships exist amongst the core elements of

accountability in the context of zakat agencies?

Because every core element of accountability investigated in this study

consisted of many variables (to whom: 12 variables; for what: 10 variables; types

of information: 24 variables; how: 9 variables); it was not practical to run a

correlation test among these variables. As discussed in the research methods

chapter, factor analysis was employed to condense these variables into smaller

groups of variables and factor scores were produced on every factor to replace the

original set of variables on “to whom”, “for what”, and “how”. Thus, a

Spearman’s rho non-parametric correlation test was performed on factor scores of

every factor for to whom, for what, and how. Non-parametric correlation analysis

was selected because several variables were not normally distributed.29

Table 7-22 presents the results of the Spearman’s rho non-parametric

correlation. Financial accountability was significantly related to accountability to

primary stakeholders (r=0.246).30 This indicates that donors who considered

financial accountability to be important also considered accountability to main

stakeholders important. The correlation coefficient between financial

accountability and accountability to secondary stakeholders was small and not

significant, indicating the absence of correlation between both factors. In addition,

performance accountability was not significantly correlated with to whom zakat

agencies should be accountable.

29 Parametric correlation analysis (Pearson Correlation) was also conducted and the results are presented in

Appendix F 30 Cohen (1988) suggested that the strength of a correlation between two variables is: (1) small if the value

of r is 0.10 to 0.29; (2) medium if the value of r is 0.30 to 0.49; and large if the value of r is 0.50 to 1.00).


Table 7-22 Results of Spearman’s rho CorrelationTest on Factor Scores of “To Whom”, “For What”, and “How”

Elements of Accountability No

Grouping of Variables based on Factor

Analysis

1 2 3 4 5 6 7 8

To Whom 1 Primary

Stakeholders 1.000

2 Secondary Stakeholders NA 1.000

For What – The Scope of Accountability

3 Financial and Sacred Accountability

0.246** –0.014 1.000

4

Performance and Governance Accountability

0.074 –0.046 NA 1.000

For What - Types of Information

5 Financial Information 0.186** –0.048 0.508** 0.379** 1.000

6 Governance Information 0.105 0.048 0.378** 0.098 NA 1.000

7 Performance Information 0.069 –0.053 0.357** 0.169* NA NA 1.000

8 Other Information 0.119 –0.118 –0.002 0.186* NA NA NA 1.000

How 9 Informal

Sources 0.077 0.040 0.221** 0.027 0.186* 0.235** 0.104 0.173*

10 Formal Sources 0.206** –0.003 0.424** 0.309** 0.516** 0.263** 0.277** 0.089

** Correlation is significant at the 0.01 level (2-tailed) * Correlation is significant at the 0.05 level (2-tailed) NA Not-applicable because the scores in these cells indicate correlations among factors in the

same elements of accountability, for example, correlation between the main stakeholders and secondary stakeholders (between the factors of to whom) or correlation between performance accountability and financial accountability (between the factors of for what). Thus, the results in these cells were deleted because they were not relevant and to avoid confusion. For types of information considered important to be disclosed by zakat

agencies to disseminate accountability, financial information was significantly and

positively correlated with accountability to primary stakeholders (r = 186) but not

with secondary stakeholders. Financial information had a large and significant

179

association with financial accountability (r = 0.508) and medium correlation with

performance accountability (r = 0.379). Governance and programme information

had a significant medium correlation with financial accountability (r = 0.378).

Performance information was significantly associated with performance

accountability (r = 0.169) and financial accountability (r = 0.357). Although

weak, other information had a significant correlation with performance

accountability.

With regards to the sources of information, informal sources of information

had a weak positive but significant correlation with financial accountability (r =

0.221), financial information (r = 0.186), governance information (r = 0.235), and

other information (r = 0.173). Formal sources of information had a positive

significant correlation with accountability to main stakeholders (r = 0.206),

financial accountability (r = 0.424), and performance accountability (r = 0.309).

Formal sources of information were also significantly related to almost all types

of information (financial, governance, and performance information). The fact

that formal sources of information were significantly correlated with most of the

other factors indicates that donors consider formal sources of information to be an

important method for disseminating accountability.

Overall, the findings indicate a correlation between formal sources of

information and financial information for discharging financial accountability to

primary stakeholders. Formal sources of information are also required to disclose

performance and governance information to discharge performance

accountability. However, this study did not find correlations between performance

accountability and accountability to primary stakeholders or accountability to

secondary stakeholders.

7.9 DO THE PERCEPTIONS OF DONORS ON THE CORE ELEMENTS OF ACCOUNTABILITY DIFFER AMONG THE THREE GROUPS OF DONORS AND AMONG DONORS WHO HAVE DIFFERENT DEMOGRAPHIC ATTRIBUTES?

Multivariate analysis of variance (MANOVA) was conducted to test

whether the views and perceptions of donors on “to whom”, “for what’, and

“how” were distinct between: (1) the three group of donors; and (2) donors with


different demographic attributes (level of education, employment sectors, and age

group). As indicated in Section 8.2, the distribution of data was skewed; therefore,

it was necessary to select criteria for statistical inference that was not affected by

this problem. This study adopted Pillai’s Trace criterion because it was considered

reasonably robust even when the assumptions of MANOVA were moderately

violated31 (Tabachnick & Fidell, 2007).

The results of MANOVA are presented in Table 7-23. There was no

significant difference regarding (i) the perception about to whom zakat agencies

should be accountable, (ii) the perception about the scope of accountability, (iii)

the perception about the types of information that should be disclosed by zakat

agencies, and (iv) the medium used to disseminate information between the

groups of donors and the demographic characteristic of respondents. The only

significant variable was the interaction variable between the occupation and age

categories, indicating that the combination of the level of education and

occupation of donors influenced their perception regarding understanding of

accountability.

31 Wilks’ Lamda criterion is usually more powerful than Pillai’s Trace criterion; therefore, most research

adopts Wilks’ Lamda criterion (Tabachnick & Fidell, 2007). In this study, both Wilks’ Lamda and Pillai’s Trace criterion produced relatively similar results.

181

Table 7-23 Results of MANOVA on “To Whom”, “For What”, and “How” by the Groups of Donors and Demographic Attributes of Donors

Pillai’s Trace

Value F Hypothesis df Error df Sig. Partial Eta

Squared

Intercept 0.171 2.169 10.000 105.000 0.025 0.171

Recipient of zakat 0.149 0.853 20.000 212.000 0.647 0.074

Age Category 0.264 1.032 30.000 321.000 0.423 0.088

Education 0.072 0.811 10.000 105.000 0.618 0.072

Sectors of Employment 0.082 0.935 10.000 105.000 0.505 0.082

Recipient of zakat * Age Category 0.494 0.987 60.000 660.000 0.507 0.082

Recipient of zakat * Education 0.211 1.248 20.000 212.000 0.218 0.105

Recipient of zakat * Sectors of Employment 0.145 0.830 20.000 212.000 0.675 0.073

Age Category * Education 0.250 0.973 30.000 321.000 0.510 0.083

Age Category * Sectors of Employment 0.164 0.618 30.000 321.000 0.944 0.055

Education * Sectors of Employment 0.162 2.034 10.000 105.000 0.037 0.162

Recipient of zakat * Age Category * Education 0.299 1.186 30.000 321.000 0.235 0.100

Recipient of zakat * Age Category * Sectors of Employment

0.040 0.440 10.000 105.000 0.923 0.040

Recipient of zakat * Education * Sectors of Employment 0.000 . 0.000 0.000 . .

Age Category * Education * Sectors of Employment 0.000 . 0.000 0.000 . .

Recipient of zakat * Age Category * Education * Sectors of Employment

0.000 . 0.000 0.000 . .

Table 7-24 presents the results of tests of the between-subjects effect on

education x occupation. The results indicate that the understanding regarding

accountability to primary stakeholders, accountability to secondary stakeholders,

and the importance of formal sources of information was significantly different

based on the interaction variables of education and occupation.


Table 7-24 Tests of Between-subjects Effects on Interaction Variables Education

x Sectors of Employment

Source Dependent Variable Type III Sum of Squares

df Mean Square F Sig.

Partial Eta

Squared

Education * Sectors of Employment

Primary stakeholders 3.117 1 3.117 4.403 0.038 0.037 Secondary stakeholders 4.945 1 4.945 5.577 0.020 0.047 Financial accountability 1.734 1 1.734 2.034 0.157 0.018 Performance accountability 0.856 1 0.856 0.706 0.403 0.006 Financial information 1.460 1 1.460 1.494 0.224 0.013 Governance information 0.285 1 0.285 0.259 0.612 0.002 Performance information 0.028 1 0.028 0.028 0.866 0.000 Other information 0.257 1 0.257 0.342 0.560 0.003 Informal sources of information 1.362 1 1.362 1.237 0.268 0.011

Formal sources of information 6.309 1 6.309 6.266 0.014 0.052

Visual inspection of the line graphs presented in Figure 7-4 indicates that

both government employees and non-government employees with high education

levels (bachelor degree or higher) tended to consider accountability to primary

stakeholders to be important. Individuals with education levels lower than a

bachelor degree and who were government employees had the lowest perception

regarding the importance of demonstrating accountability to primary stakeholders.

Visual inspection of the line graph presented in Figure 7-5 indicates the

presence of the interaction effect between the level of education and the sectors of

employment of respondents and the importance of accountability to secondary

stakeholders. The perception regarding the importance of accountability to

secondary stakeholders was higher for individuals who were government

employees than individuals who were not government employees and had a low

level of education.

183

Figure 7-4 Estimated Marginal Means of Accountability to Primary Stakeholders

Figure 7-5 Estimated Marginal Means of Accountability to Secondary Stakeholders


Figure 7-6 indicates that the perception of government employees and non-

government employees who had education levels of a bachelor degree or higher in

regard to the importance of formal sources of information was higher than

government employees and non-government employees who had education levels

below a bachelor degree. This finding that highly educated people are more

interested in written and formal information than individuals with a low level of

education is understandable.

Figure 7-6 Estimated Marginal Means of Formal Sources of Information

7.10 DISCUSSION

It is clear from the results presented in Section 7.2 that donors had various

understandings of accountability. Their perceptions about accountability were

related to a mechanism to provide information (Bovens, 2010), such as

demonstrating the usage of the zakat fund, transparency, and providing financial

information and accountability as a normative construct; or the positive attributes

of organisations (Bovens, 2010), such as good administration and trustworthiness.

As detailed in Sections 7.3 and 7.4, the results of the survey revealed that

the majority of donors stated that zakat agencies should be accountable to a wide

185

range of stakeholders that cover both sacred and secular dimensions. The majority

of respondents stated that zakat agencies should be accountable to God. This

indicates that the understanding of accountability in zakat agencies covers a

sacred dimension. This view stems from the Islamic belief that the ultimate

accountability of human beings is to God (Nahar & Yaacob, 2011).

In addition to the sacred stakeholder, secular stakeholders were also

evidenced in the context of zakat agencies. The finding indicates that donors

expect zakat agencies to be accountable to individuals or organisations that can

influence the sustainability of zakat agencies, such as donors, regulators, and

media and to individuals or organisations whose welfare is affected by the

activities of zakat agencies such as beneficiaries. This finding also confirmed the

presence of upward (to donors and regulators), downward (to beneficiaries), and

horizontal (media and peer organisations) accountability relationships identified in

literature (Candler & Dumont, 2010; Ebrahim, 2003b; Godwin, et al., 2011;

Hyndman & McDonnell, 2009; Najam, 1996).

Based on the results of factor analysis, there are two groups of stakeholders

of zakat agencies: primary stakeholders and secondary stakeholders. Primary

stakeholders consist of God, donors, the Central BAZNAS, the government, MUI,

the public, donors, and beneficiaries; whereas secondary stakeholders consist of

boards, volunteers, the media, and peer organisations. Table 7-25 compares the

results of the factor analysis with the theoretical framework discussed in Section

4.3. Primary stakeholders and secondary stakeholder had different power,

legitimacy, and urgency. Donors and the government have an explicit, contractual

relationship with zakat agencies, thus, they have power to hold zakat agencies to

be accountable. Donors have legitimacy to hold zakat agencies accountable

through donations, while the government gains legitimacy through legislation and

possibly through funding. It is expected that a bond of accountability (Stewart,

1984) exists between zakat agencies and donors and between zakat agencies and

the government. Therefore, donors and the government are primary stakeholders.

This finding is consistent with the concept of primary stakeholders (Carroll, 1989)

and salient stakeholders (Cordery & Baskerville, 2011; Mitchell, et al., 1997).

186 Accounting for Zakat: the Accountability of Indonesian Zakat Agencies

Table 7-25 Classification of Zakat Agencies Stakeholders Compared to Theoretical Framework

Potential Charity

Stakeholders

Stakeholder Attributes (Cordery & Baskerville, 2011; Mitchell, et al., 1997)

Category of Stakeholder

(Carroll, 1989)

Type of Accountability (Stewart, 1984) Finding

Power Legitimacy Urgency Government Yes, granted by

statute Yes, through legal means Unlikely Primary – explicit

contractual A bond of accountability Primary

Major donors Possibly • Yes, through donations • Moral dimension/shared values

Possibly Primary – explicit contractual

A bond of accountability Primary

Public Possibly • Yes - through donations • Moral dimension/shared values

Unlikely Secondary – implicit contractual

A link of accountability Primary

Beneficiaries Unlikely • Yes, through charity mission Unlikely Secondary – implicit contractual


MUI Unlikely • Possibly, through moral dimension/shared values

Unlikely Secondary – implicit contractual


Volunteer Unlikely • Yes, through non-monetary contributions



A link of accountability Secondary

The Zakat Forum Unlikely • Possibly, through moral dimension/shared values

Unlikely Secondary – non-contractual


The media Unlikely • Unlikely Unlikely Secondary – non-contractual


Board Yes Yes Yes Primary – explicit contractual

A bond of accountability Secondary

Parliament Yes, granted by statute

Yes, through legal means Unlikely Primary – implicit contractual

A bond of accountability Secondary

Chapter 7: The Accountability of Zakat Agencies: Donors’Perceptions 187

Based on power, beneficiaries and MUI should be classified as non-salient

stakeholders (Cordery & Baskerville, 2011; Mitchell, et al., 1997) or secondary

stakeholders (Carroll, 1989) because beneficiaries and MUI do not have the

formal authority to hold zakat agencies accountable. The relationship between

zakat agencies and beneficiaries and between zakat agencies and MUI is only

based on an implicit contractual relationship through shared values. Because

beneficiaries and MUI do not have the legal power to hold zakat agencies

accountable, their relationship only indicates a link of accountability (Stewart,

1984). However, the result of factor analysis suggests that donors, regulators,

beneficiaries, and MUI loaded into the same factor. This indicates that

participants may not only consider legal power to classify stakeholders, but also

the moral dimension, social power, and organisation’s values. Donors might

expect zakat agencies to be accountable to MUI because zakat agencies are an

Islamic faith-based organisation. While fatwa issued by MUI is not legally

binding, there is a social expectation that every Muslim and Islamic faith-based

organisation will comply with fatwa issued by an MUI. It is unlikely that Muslims

will support an Islamic organisation that does not comply with fatwa issued by an

MUI. In relation to accountability to beneficiaries, zakat agencies are established

to help poor beneficiaries, therefore, it is morally justifiable to give account to

beneficiaries.

Volunteers, media, and the Forum Zakat would be classified as secondary

stakeholders based on the framework proposed by Carroll (1989) or non-salient

stakeholders based on the framework proposed by Cordery and Baskerville

(2011), and this correlates with the results of the factor analysis. The classification

of Parliament as a secondary stakeholder is appropriate because Indonesian zakat

agencies do not have an accountability relationship with the Parliament.

According to Zakat Management Law, institutions that have the authority to

regulate and monitor zakat agencies are the Ministry of Religious Affair and the

Central BAZNAS.

The results of the survey provide evidence of a general consensus by

respondents regarding the scope of accountability of zakat agencies. Contrary to


previous literature that stated the scope of accountability consisted of five areas

(Stewart, 1984), this study found that the scope of accountability of zakat agencies

also included accountability for Syari’ah, amil fund, ethics, and mission. This

indicates the presence of sacred accountability in the context of Islamic faith-

based charitable organisations. This finding also suggests that Stewart’s (1984)

ladder of accountability is insufficient, because this framework does not consider

sacred accountability.

In relation to the level of importance of every area of the scope of

accountability, respondents rated all elements as important to very important. The

high level of importance rating for accountability for finances indicates that

donors have a strong interest in financial information, suggesting that financial

accountability is important. It might be possible that donors expect zakat agencies

to demonstrate their stewardship of resources because zakat funds are collected

from Muslims’ donations.

Factor analysis was used to condense the scope of accountability of zakat

agencies and produced two distinct factors. The first factor consisted of legal

accountability, governance accountability, programme accountability

(effectiveness), performance accountability (efficiency and outcomes), and

mission (policy) accountability. This scope of accountability is related to non-

financial aspects of the scope of accountability proposed by Kearns (1996); ,

Ebrahim (2010), and Dhanani and Connolly (2012).

Financial accountability, amil fund accountability, ethics accountability, and

Syari’ah accountability loaded into the same factor. Therefore, this scope of

accountability was referred to as financial and sacred accountability. This finding

provided empirical evidence in accordance with Laughlin (2007), who argued that

sacred and secular are not absolute constructs because sacred and secular activities

are different in every organisation. In the context of zakat agencies, donors

consider financial accountability to be as important as sacred accountability. This

finding supports previous literature that stated financial accountability can be

classified as a sacred activity in faith-based organisations (Cordery, 2006; Crofts,

2009). This finding also agrees with Irvine (2002) and Bigoni et al. (2013), who


found that a faith-based organisation that needs support from external

stakeholders will use financial reports to discharge accountability. Zakat agencies

need support from donors, therefore, financial accountability is important, while

Syari’ah accountability is also important because zakat agencies are an Islamic

faith based organisation.

The results presented in Section 7.6 provide evidence that zakat agencies

should disclose a broad set of information to their stakeholders. Respondents

showed a strong interest in financial information, such as audited financial

statements, information about total revenue and sources of revenue, and

information about the usage of the zakat fund. These findings support Dixon et al.

(2006), who found that donors had a strong interest in financial and activities

information but contradicts the results of previous studies in the UK that found

donors were more interested in performance information (Connolly & Hyndman,

2103b; Hyndman, 1990, 1991).

Factor analysis confirmed the information set that should be disclosed by

zakat agencies includes financial information, programmes and beneficiary

information, mission and governance information, information about future plans,

and performance information. In addition to financial information, donors also

need a broad type of information to access the accountability of zakat agencies.

This finding suggests that financial information was important but insufficient to

capture all aspects of accountability (Lee, 2008).

With respect to the mechanisms for discharging accountability, respondents

regarded written sources of information officially issued by zakat agencies, such

as annual reports, internal printed media, and the internet (organisational website)

as of higher importance than verbal sources of information, such as information

from friends, relatives, and family members. Based on the results of factor

analysis, there are two categories of information sources. The first categorty

consists of written information, such as annual reports, internal publications,

letters, and mass media. The second category consists of informal sources of

information, such as social media, public announcement in mosques, and

information from family and staff.


It is possible that the grouping of sources of information is based on the

accessibility and reliability of the sources of information. Arguably, informal

sources of information are easier to access than formal sources of information;

however, informal sources of information are less reliable and accurate than

formal sources of information. Based on the quality of information, information

provided in annual reports, internal printed media, and via the internet might be

more accurate and reliable than information provided by public announcements in

mosques, social media, the staff of zakat agencies, and information from friends,

relatives and family members.

Specifically, with regards to annual reports, this study found that the

majority of donors stated that the annual report was an important or very

important source of information. This finding supports the existing literature that

considers annual reports an important form of media for discharge accountability

(Connolly, et al., 2012; Ebrahim, 2003a; Hines & Jones, 1992; Palmer, 2013).

Although donors considered annual reports to be an important source of

information, the majority of respondents stated that they did not have access to

annual reports and only a few donors read annual reports. This finding resonates

with Connolly and Hyndman (2013a), who found that donors rarely read annual

reports.

Correlation analysis provided evidence of correlation among variables of to

whom zakat agencies should be accountable, the scope of accountability, types of

information, and the media used to disseminate information. This finding supports

previous qualitative literature about inter-relationship among the core elements of

accountability (Connolly & Hyndman, 2004; Connolly, et al., 2011; Stewart,

1984; Waters, 2009). Primary stakeholders had significant and positive correlation

with financial and sacred accountability, financial information, and formal sources

of information; while secondary stakeholders did not have a significant correlation

with other variables. This finding indicates that donors perceived zakat agencies

should provide financial information through formal sources of information to

discharge financial accountability to their primary stakeholders.


Financial and sacred accountability had a significant strong relationship

with financial information and a significant medium relationship with governance

information and performance information. Although weak, performance and

governance accountability had a significant correlation with performance

information and other information and a significant medium correlation with

financial information. Performance accountability also had a significant medium

correlation with formal sources of information. These findings suggest that donors

perceived financial and performance information to be important to discharge

both elements of accountability (financial and sacred accountability and

performance and governance accountability).

For sources of information, formal sources of information had a significant

correlation with financial, governance, and performance information, while

informal sources of information had a significant correlation with financial,

governance, and other information. These findings suggest that donors expect

zakat agencies to provide many types of information in various forms of formal

and informal media.

Although most variables of every element of accountability loaded strongly

into a particular factor, the results of MANOVA tests showed that differences

among the groups of donors who gave their zakat to local Imams, government-

sponsored zakat agencies, and private zakat agencies appeared to be insignificant.

In addition, there were no significant differences in their understanding of

accountability among donors with different demographic attributes, except for

interaction variables between education and sectors of employment. It is possible

that the lack of demographic variation of donors who participated in this study

may have contributed to the insignificance of these results. Nevertheless, this

finding provides preliminary evidence that the understanding of accountability

might be influenced by the demographic characteristics of individuals.

7.11 SUMMARY

This chapter examined donors’ perceptions on the meaning of

accountability, to whom zakat agencies should be accountable, the scope of


accountability, types of information to disseminate accountability, and how

accountability should be discharged. In addition, this chapter also sought to

operationalise quantitative and qualitative approaches to accountability. Overall,

the findings indicate the presence of sacred and secular accountability in zakat

agencies. Respondents believed that sacred accountability should be fulfilled

because God will demand accountability from all human beings. Secular

accountability is also important because zakat funds are collected from Muslim

donations.

This study provides evidence of a consensus among respondents for

Indonesian zakat agencies to show accountability to their stakeholders. Donors

expected zakat agencies to be accountable to a wide range of stakeholders,

including God, regulators, resource providers, beneficiaries, and others. With

regards to the scope of accountability, this study also found that the scope of

accountability of zakat agencies extended beyond Stewart’s (1984) ladder of

accountability and includes accountability for Syari’ah, ethics, and mission. With

regards to the types of information, it is clear from the responses of respondents

that donors consider financial information to be very important. Although donors

have a strong interest in financial information, they also stated that zakat agencies

should disclose other types of information, such as programme and activities

information. This study also found that donors consider annual reports to be a

very important source of information. Although most respondents stated that the

annual report was very important, most of them did not have access to an annual

report and most of them also did not read the annual report. Consequently, donors

rely on other accessible information, such as public announcements in mosques,

the internet, and mass media.

Chapter 8: The Accountability of Zakat Agencies: A Comparison between Administrators’ and Donors’ Perceptions 193

Chapter 8: The Accountability of Zakat Agencies: A Comparison between Administrators’ and Donors’ Perceptions

8.1 INTRODUCTION

Previous research has indicated that an accountability gap might exist

because information provided by an organisation does not match information

required by its external stakeholders (Hyndman, 1990, 1991). The gap might also

exist because the perceptions of administrators regarding the notion of

accountability are different from the perceptions of donors. This accountability

gap can influence the level of trust of stakeholders for an organisation. Therefore,

the aim of this chapter is to compare the perceptions of administrators (as

presented in Chapter 6) with the perceptions of donors (as presented in Chapter 7)

on the notion of accountability and how accountability is actually discharged by

zakat agencies to answer the fourth research question:



This research question is addressed through three subsidiary questions?


b) Do administrators and donors have different views on to whom, for what, and

how to discharge accountability?


This chapter is structured as follows. Section 8.2 reports the media used by zakat

agencies to discharge accountability. Section 8.3 compares the perceptions of

administrators and donors regarding the meaning of accountability and actual

practices of the core elements of accountability (to whom, for what, and how).

Section 8.4 provides discussion and is followed by a summary in Section 8.5.

194 Chapter 8: The Accountability of Zakat Agencies: A Comparison between Administrators’ and Donors’ Perceptions

8.2 MEDIA USED TO DISCHARGE ACCOUNTABILITY

The findings presented in this section identify the forms of media used by

zakat agencies to discharge accountability and types of information that can be

found in these media. Content analysis was employed to identify types of

information that can be found in these media. The results of the content analysis

were compared with types of information considered important by administrators

and donors to answer the following research questions:

RQ.4(a) What media and type of information is currently used and disclosed?

The summary of media used by zakat agencies to discharge accountability is

presented in Table 8-1. It is immediately apparent that the use of informal

mechanisms to discharge accountability is more common than the use of formal

mecahnisms. It is only three zakat agencies that produce annual reports but most

zakat agencies have website, social media (Facebook) and internal printed media.

Table 8-1 Media Used by Zakat Agencies to Discharge Accountability

Media BAZNAS LAZ

Total Small n=5

Large n=1

Small n=2

Large n=3

Annual reports 1 20% 0 0% 0 0% 2 66.67% 3

Newspaper 1 20% 1 100% 0 0 0 0 2

Internal printed media (Magazine) 1 20% 1 100% 2 100% 2 66.67% 6

Internet (Website) 5 100% 1 100% 2 100% 3 100% 11

Social media (Facebook) 4 80% 1 100% 2 100% 3 100% 10

8.2.1 Magazine

Six zakat agencies published magazines regularly. These magazines were

sent to their stakeholders regularly (monthly, bimonthly, or quarterly) and were

free of charge. The content analysis was conducted on six magazines published by

six zakat agencies. The years of publication varied from 2013 to 2015. The results

indicate that several types of accountability-related information could be found in

these magazines. Table 8-2 reports the results of the content analysis of the

magazines based on the number of articles.


Table 8-2 Summary of Magazine Contents

No Type of information

Number of magazine providing

this information

n=6

BAZNAS LAZ

Total n=6

(Articles) Small n=1

(Articles)

Large n=1

(Articles)

Small n=2

(Articles)

Large n=2

(Articles)

1 Number of articles - 11 11 34 30 86

2 Organisational structure 1 1 0 0 0 1

3 Programmes and activities 5 0 2 9 12 23

4

Human interest stories (information about how zakat funds help beneficiaries)

4 0 1 1 2 4

5 Acknowledgment of donor contributions

4 1 1 2 0 4

6

Financial information – the amount of zakat collected

4 1 1 0 2 4

7

Financial information – the usage of the zakat fund

4 1 1 0 2 4

8 Religious information 6 8 2 13 11 34

9 Other information, such as science and health

6 0 4 9 3 16

10 Year of publication 2014 2014 2014 2013 and 2015

The number of pages was in the range of 24 to 60 pages, whereas the

number of articles was in the range of 11 to 20 articles in every magazine.

Magazines published by private zakat agencies contain more articles than

magazines published by government-sponsored zakat agencies. A total of 86

articles from magazines was coded and the results indicated that most information

was not related to accountability, such as religious information (34 articles or

39.53% of total articles) and science information (16 articles or 18.60% of total

articles).

In general, the disclosure of programmes and activities information is higher

in private zakat agencies than government-sponsored zakat agencies. While


programme and activities information was found in five (out of six) magazines,

with a total of 23 (out of 86) articles, the number of articles about programmes

and activities published by private zakat agencies (9 to 12 articles) is higher than

the number of articles about programmes and activities published by government-

sponsored zakat agencies (0 to 2 articles). This may indicate that private zakat

agencies consider programme and activities information very important.

Four (out of six) zakat agencies publish financial accountability-related

information in their magazines. However, the number of financial information is

relatively low and only consisted of four (out 86 or 4.65%) articles. This financial

information was unaudited and detailed the amount of zakat collected and

distributed. There was also only one article about the structure of an organisation.

In addition to articles, photos of beneficiaries were shown to illustrate the

programmes and activities conducted by zakat agencies.

8.2.2 Website

All participating zakat agencies had websites where they posted

accountability-related information. Table 8-3 presents the type of information

identified in the websites of zakat agencies. There was no identifiable

accountability disclosure pattern based on the size or types of zakat agencies,

because accountability information disclosed by zakat agencies on their website

was relatively similar between large and small zakat agencies or between

government-sponsored agencies and private zakat agencies.


Table 8-3 Type of Information Disclosed on Website


Total Small n=5

Large n=1

Small n=2

Large n=3

Overview – Organisation 1 Statement of mission and objectives 4 1 1 3 9 2 History of the organisation and legal information 4 1 1 2 8 Governance 3 Information about the organisation’s structure 3 0 0 2 5 4 Profile of boards, CEO, and other senior staff 1 0 0 1 2 5 Boards and committee activities 0 0 0 0 0 6 Remuneration of boards, CEO, and other senior

staff 0 0 0 0 0

Future Plans 7 Future plans 0 0 0 1 1 Organisation Policy and Program 8 Overview of programmes and activities 5 1 2 3 11 9 Information about how to access zakat agency

services 0 0 0 0 0


1 0 0 1 2

11 Organisation’s policy for selecting beneficiaries, including the criteria to select beneficiaries

1 0 0 0 1

Beneficiaries 12 Overview of beneficiaries 4 1 2 3 10 13 Human interest stories (information about how

zakat funds help beneficiaries) 4 1 2 3 10

Other Non-financial Information 14 Information about related to parties’ transactions 0 0 0 0 0 15 Acknowledgement of donor and volunteer’s

contributions 1 0 0 1 2

16 Religious information 0 0 2 2 4 Financial Information

17 Auditor's report or other type of assurance report 0 0 0 2 2 18 Audited financial report 0 0 0 2 2 19 Total revenue and its sources 2 0 0 2 4 20 Fundraising costs 2 0 0 2 4 21 Usage of the zakat fund for beneficiaries

(excluding amil fund) 2 0 0 2 4

22 Usage of the amil fund 2 0 0 2 4 23 Usage of other donations (excluding zakat) 2 0 0 2 4 Performance Information

24 Financial ratios – Amil fund ratio 0 0 1 0 1 Non-financial Performance Information

25 The number of beneficiaries 0 0 0 1 1


Basic information such as address, contact details, and bank accounts were

available on the website. The majority of zakat agencies (9 out of 11) disclosed

information about their missions and objectives. An analysis of the statements of

missions and objectives indicated that accountability was important, because the

majority of zakat agencies stated ‘accountability’ or other words that are usually

associated with accountability, such as transparency, professional, amanah, and

trustworthy in the statements of missions and objectives of. For example,

A trustworthy (amanah) organisation that brings prosperity to

society. (Small Local BAZNAS B).

To be a role model of private zakat agencies that amanah (trustworthy),

professional, accountable and to be a prominent zakat agency. (Large

LAZ K).

The majority of zakat agencies also disclosed information about the history

of their organisations and legal information on their website. Legal information is

particularly important for zakat agencies because it gives legitimacy to collect

zakat. Providing legal information also increases public trust because it signals to

the public that a zakat agency is a legal organisation and approved by the

government.

Five (out of 11) zakat agencies disclosed governance information on their

website. There were two large zakat agencies compared to three small zakat

agencies that disclosed governance information. The content of the governance

information was mainly in relation to the structure of the organisation. Only one

small zakat agency and one large private zakat agency disclosed information

about the profile of their board. However, governance information related to

accountability, such as the activities of the board and remuneration of the board,

CEO, and other senior staff was not available. It is possible that remuneration

information is considered confidential information; therefore, zakat agencies are

reluctant to disclose this information.


All zakat agencies disclosed information about their beneficiaries and

human-interest stories on their website. Private zakat agencies used many pictures

of smiling beneficiaries and narrative information about beneficiaries. On the

other hand, government-sponsored zakat agencies mostly only used narrative

information to explain about their beneficiaries. Information about beneficiaries

usually covered the number of beneficiaries and described the condition of

beneficiaries before and after the beneficiaries received assistance from the zakat

agencies.

All zakat agencies disclosed information about their programmes and

activities on their website. For example, a small private zakat agency disclosed a

success story of a freshwater fish farming programme in a village. Photos and

stories were shown to describe the programmes and activities offered by zakat

agencies. Compared to other types of information, the disclosure of programmes

and activities was relatively extensive. Information about programs and activities

was usually concluded by a request to make donations to support the programmes

or activities. Although zakat agencies disclosed extensive information about

programmes and activities, programmes and activities information that might be

beneficial for beneficiaries was limited. None of the zakat agencies disclosed

information about how to access zakat agencies services and only one small

government-sponsored zakat agency disclosed information about organisational

policies in selecting beneficiaries.

With regards to financial and performance information, the disclosure of

financial and performance information was also limited. While four zakat

agencies disclosed financial information on their website, the quality of the

financial information varied. Only two zakat agencies disclosed their annual

reports in pdf format on their website, while two other zakat agencies only

provided balance sheets, statements of financial position, and statements of cash

flow (without notes relating to financial statements). In relation to performance

information, no zakat agencies disclosed performance information on their

website.


8.2.3 Social Media

Social media, such as Facebook, can be used to disclose information to

demonstrate accountability. Table 8-4 details types of information disclosed on

the Facebook page of zakat agencies. Eight zakat agencies had a Facebook

account, while three others zakat agencies did not. Based on the number of

persons who ‘liked’ or the number of ‘friends’, the number of individuals who

accessed information about zakat agencies using Facebook was quite substantial.

In general, the Facebook accounts of private zakat agencies were accessed by

more individuals than the Facebook accounts of government-sponsored zakat

agencies. A Facebook account of a large zakat agency was accessed by more than

85,000 persons, as indicated by the number of persons who liked this Facebook

account, while a Facebook account of a small zakat agency was accessed by only

600 persons. Zakat agencies usually updated their Facebook page whenever there

was a new activity or programme. Therefore, the content of information on

Facebook was more up-to-date than the content of the websites of the zakat

agencies.

Table 8-4 Type of Information Disclosed on Facebook


Total Small n=5

Large n=1

Small n=2

Large n=3

1 Number of zakat agencies that have a Facebook account

3 1 2 2 8

2 Overview of programmes or activities

3 1 2 2 8

3 Human interest stories (information about how zakat funds help beneficiaries)

0 1 2 2 5

4 Religious information 1 0 2 1 4

5 Updated 3 1 2 2 8

6 Members/Like 615

to 1,360

2,026 4,324

to 7,339

10,558 to 85,489 –

8 Linked to website 2 1 2 2 7

Basic information about the addresses of the zakat agency’s offices and

contact details was available. The most common accountability information on


Facebook was information about programmes and activities. For example, a

private zakat agency posted information about the distribution of cash financial

assistance and recent training given to a group of farmers about organic farming.

Although general information about a programme was available, information that

could be used to measure the performance of a programme was not available. For

example, information about the goals or objectives of a programme, financial

resources allocated for a programme, targets that would be achieved by a

programme, and output indicators (such as the number of participants) were not

available. Therefore, information provided on Facebook was not sufficient to

evaluate the accountability of a zakat agency.

All private zakat agencies posted information about their beneficiaries,

especially how financial assistance given by a zakat agency helped beneficiaries.

In contrast, only one government-sponsored agency posted information about the

impact of its activities on the welfare of beneficiaries. Four zakat agencies posted

information about religious information on Facebook. This religious information

related to Islamic teaching, including the importance of giving zakat from a

religious perspective. There were several types of accountability related

information that were not found on Facebook, such as mission and objectives,

governance information, financial information, and performance information.

8.2.4 Annual Reports

This section presents the findings about the use of annual reports to render

accountability. The annual reports analysed consisted of annual reports produced

by two large private zakat agencies for the year of 2013 (LAZ I and LAZ J) and

one annual report produced by a small, local government-sponsored zakat agency

(Local BAZNAS E)32 for the year 2014. The summary of information available in

annual reports is presented in Table 8-5.

32 The code for zakat agencies can be found in Table 5-3 Distribution of Interviewees


Table 8-5 Type of Information Disclosed in Annual Reports

No Type of Information Small

BAZNAS n=1

Large LAZ n=2

Overview – Organisation

1 Statement of mission and objectives 1 2 2 History of the organisation and legal information 1 2 Governance

3 Information about the organisation’s structure 1 2 4 Profile of the Boards, CEO and other senior staff 1 0 5 Boards and committee activities 1 0 6 Remuneration of Boards, CEO and other senior staff 0 0 Future Plans

7 Future plans 1 2 Organisation Policy and Program

8 Overview of programmes and activities 1 2 9 Information about how to access zakat agency services 0 0 10 Organisation’s policy related to the allocation of resources or

donated funds 1 1

11 Organisation’s policy for selecting beneficiaries, including the criteria to select beneficiaries

1 0

Beneficiaries 12 Overview of beneficiaries 1 2 13 Human interest stories (information about how zakat funds help

beneficiaries) 1 1

Other Non-financial Information 14 Information about related parties’ transactions 0 0 15 Acknowledgement of donors and volunteer’s contributions 0 1 Financial Information

16 Auditor's report or other types of assurance reports 0 2 17 Audited financial reports 0 2 18 Total revenue and its sources 1 2 19 Fundraising costs 0 0 20 Usage of zakat funds for beneficiaries (excluding amil fund) 1 2 21 Usage of the amil fund 1 1 22 Usage of other donations (excluding zakat fund) 1 2

Financial and Non-financial Performance 23 Financial performance information – Amil fund ratio (amil

fund/total zakat collected) 0 1

24 Narrative analysis of non-financial performance information 1 0


The number of pages of the three annual reports ranged from 46 to 131

pages. All annual reports detailed information about the mission and objectives,

the history of the organisation, information about the organisation’s structure, and

future plans. However, only the annual report produced by a government-

sponsored zakat agency presented information about the profile of the board

members and the activities of the board. Furthermore, none of the annual reports

presented information about the remuneration of the boards.

The information about zakat agencies’ programmes and activities was quite

extensive in all annual reports. The number of pages used to disclose information

about programmes and activities was 11 of 46 pages (23.91%) of the annual report

for LAZ I, 63 of 74 (85%) pages of the annual report for LAZ J, and 23 of 133

(17.29%) pages of the annual report for local BAZNAS D. The annual reports

also contained descriptions and pictures about programmes and activities.

Information about the number of beneficiaries was available in all programmes

and activity reports; however, financial information for every programme was

only available in the annual reports produced by local BAZNAS D and LAZ I.

In terms of financial information, only LAZ I disclosed a complete set of

financial statements, including notes for the financial statements. LAZ J only

produced balance sheets, statements of financial position, and the statements of

cash flow without notes for the financial statements. The financial statements of

LAZ I and LAZ J were audited, therefore their financial statements complied with

Indonesian accounting standards. The financial statement of local BAZNAS D

was unaudited and did not comply with Indonesian accounting standards. The

financial statement of Local BAZNAS D consisted of only a statement of cash

flow.There was a note for this cash flow statement that explained the financial

assistance according to the categories of beneficiaries.

Performance information in all annual reports was limited. Information

about financial ratios was not available, with the exception of information about

the amil fund ratio. Although there was information about programmes, activities,

and financial information, it was difficult to measure the financial and non-


financial performances of every organisation due to insufficient information about

inputs and outputs. For example, all zakat agencies reported that they gave seed

capital to groups of farmers. Although they reported on the groups of farmers that

received the seed capital, it was difficult to measure the outputs because the

amount of assistance was different for every group and every group had a

different number of members.

8.2.5 Mass Media

While mass media is easily accessible to the public, most zakat agencies do

not use this medium to discharge accountability. There are only two zakat

agencies (a small and a large government-sponsored zakat agency) that publish

their financial information in commercial newspapers. The small government-

sponsored zakat agency published unaudited zakat revenues and disbursement in

commercial newspapers, while the large government-sponsored zakat agency

published audited financial statements that consists of balance sheet, income

statements and cash flow statements without notes to the financial statement.

8.3 A COMPARISON BETWEEN ADMINISTRATORS’ AND DONORS’ PERCEPTIONS ON THE ACCOUNTABILITY OF ZAKAT AGENCIES

This section compares the understanding of accountability based on the

perceptions of administrators and donors to answer the following research

question:

RQ.4.b Do administrators and donors have different views on to whom, for what

and how to discharge accountability?

Further, this section also compares the perceptions of andministrators and donors

on accountability with information disclosed by zakat agencies, and the actual

media used to discharge zakat agency accountability to answer the following

research question:

RQ.4.c Is there an expectations gap?


8.3.1 A Comparison between Administrators’ and Donors’ Perceptions on the Meaning of Accountability

The first comparison is related to the responses of administrators and donors

to the open-ended question about their views and perceptions regarding the

meaning of accountability, as presented in Table 8-6. A comparison of the views

of administrators and donors, suggests that donors focused on the usage of the

zakat fund and transparency, while administrators focused on transparency and

compliance with Syari’ah requirements. This indicates that donors focused on the

secular aspect of accountability, while administrators tried to balance between

sacred and secular accountability. It is possible that donors have a higher interest

in secular accountability than sacred accountability because their reasons for

giving zakat are not only to fulfil religious duty, but also to help poor individuals.

On the other hand, administrators are more balanced in their views about secular

and sacred accountability. Therefore, administrators linked the accountability of

zakat agencies to both the sacred aspect of accountability (compliance with

Syari’ah requirements) and secular accountability (such as transparency, financial

reporting, and others).

Table 8-6 A Comparison between the Perceptions of Administrators and Donors on the Meaning of Accountability

No Meaning of Accountability Administrators

n=11 Donors n=239

Freq. % Freq. % 1 Zakat fund is used appropriately 0 0 139 50.21 2 Transparency 11 100 40 16.74 3 Reliable and accurate financial reports 6 54.55 21 8.79 4 Good administration 5 45.45 12 5.02 5 Trustworthy 8 72.73 8 3.35 6 Compliance with regulation 1 9.09 5 2.09 7 Compliance with Syari’ah requirements 10 90.91 3 1.26 9 Justification 4 36.36 0 0

10 Responsiveness 2 18.18 0 0 11 Others 0 0 3 1.26 12 Did not respond 0 0 8 3.35


8.3.2 A Comparison between Administrators’ and Donors’ Perceptions on “Should Zakat Agencies be Accountable”

The comparison of administrators’ and donors’ perceptions regarding

“should zakat agencies be accountable” is presented in Table 8-7, while the

comparison of reasons for demonstrating accountability is presented in Table 8-8.

Administrators and the majority of donors (88.28%) agreed that zakat agencies

should be accountable. Regarding the reasons for accountability, there was

agreement between administrators and donors that zakat agencies should be

accountable because accountability can increase public trust, is required by

regulation, demonstrates trustworthiness and a good stewardship of resources, and

because zakat is ‘public money’ donated by the public. On the other hand,

religious reasons were mentioned by 54.55% of administrators and 6.16% of

donors. This finding also indicates that administrators considered sacred and

secular accountability to be equally important, while donors focused on secular

accountability.

Table 8-7 Should Zakat Agencies be Accountable?

No Should zakat agencies be accountable? Administrators

n=11 Donors n=239

Freq. % Freq. %

1 Yes 11 100 211 88.28 2 No 0 0 10 4.18 3 Did not respond 0 0 18 7.53 Total 11 100 239 100

Table 8-8 Why Should Zakat Agencies be Accountable?

No Why should zakat agencies be accountable? Administrators

n=11 Donors n=211

Freq. % Freq. %

1 Gain public trust 9 81.82 48 22.75 2 Required by regulation 5 45.45 9 4.27

3 Amanah (trustworthiness or stewardship of resources) 5 45.45 26 12.32

4 A zakat agency is a financial institution that administers zakat funds donated by Muslims 5 45.45 19 9.00

5 There is an obligation to give account 0 0 76 36.02 6 Avoid malfeasance 0 0 15 7.11 7 Religious reasons 6 54.55 13 6.16


8 Did not mention their reason 0 0 5 2.37

8.3.3 A Comparison between Administrators’ and Donors’ Perceptions on the Stakeholders of Zakat Agencies

Table 8-9 summarises the responses of the administrators of zakat agencies

and donors regarding to whom zakat agencies should be accountable.

Administrators and donors agreed that zakat agencies should be accountable to a

wide range of stakeholders that included God, the government, the Central

BAZNAS, the board, donors, and others. There was a high level of agreement

between administrators and donors regarding accountability to God. However,

there were both differences and agreement in relation to their views about

accountability to secular stakeholders.

Table 8-9 Comparison of the Perception of Administrators and Donors on “To Whom Zakat Agencies Should be Accountable”

No To Whom Administrators

n=11 Donors n=239

Frequency % Frequency % 1 God 11 100 205 95 2 Government 11 100 125 59 3 Donors 10 91 160 76 4 Central BAZNAS 10 91 136 64 5 Boards 10 91 90 43 6 Beneficiaries 6 55 100 48 7 Parent Organisation33 5 45 0 0 8 Parliament 3 27 25 12 9 Academics 34 2 18 0 0 10 Media 1 9 44 21 11 Peer Organisations 0 0 72 34 12 MUI 0 0 55 26 13 Volunteers 0 0 43 21

The majority of administrators and donors had similar perceptions on

accountability to the government, donors, and the Central BAZNAS. In relation to

the percentage of respondents who said that zakat agencies should be accountable

33 Parent organisation was not listed in the questionnaire. Although respondents could add information

about individual(s) or organisation(s) that are considered to be a stakeholder of a zakat agency, no respondents added a new stakeholder name.

34 Academics were not listed in the questionnaire. Although respondents could add information about individual(s) or organisation(s) that were considered stakeholders of a zakat agency, no respondents added a new stakeholder name.


to the government, all administrators agreed that zakat agencies should be

accountable to the government, while only 59% of donors agreed. With regards to

accountability to donors, the majority of administrators (90.91%) stated that zakat

agencies need to be accountable to donors, while only 160 donors (76%) agreed.

Likewise, ten administrators (91%) and 136 donors (64%) agreed that zakat

agencies should be accountable to the Central BAZNAS.

Administrators and donors had different perceptions concerning

accountability to boards and beneficiaries. While the majority of administrators

indicated that zakat agencies should be accountable to the board, the majority of

donors stated that zakat agencies should not be accountable to the board.

Similarly, the majority of administrators (54.55%) stated that zakat agencies

should be accountable to beneficiaries, while only 90 donors (48%) agreed. It is

possible that donors do not understand the role of the board in the administration

of zakat agencies, therefore they stated that zakat agencies should not be

accountable to the board.

8.3.4 A Comparison between Administrators’ and Donors’ Perceptions on the Scope of Accountability

The second core element of accountability is the scope of accountability.

Table 8-10 summarises the scope of accountability based on the views and

perceptions of the administrators and donors of zakat agencies. In general, both

administrators and donors agreed that the scope of a zakat agency consists of

sacred and secular dimensions. However, there were variations in their

perceptions relating to the scope of secular accountability.

The majority of administrators and donors agreed that zakat agencies should

be accountable for finances, Syari’ah, and their mission. All administrators and

most donors (91%) stated that financial accountability is important for zakat

agencies. Syari’ah accountability is mentioned by ten (out of 11) administrators

and 88% of donors. Accountability for mission was mentioned by nine (87%)

respondents and considered important or very important by 77% of donors. With

respect to performance accountability (outcomes, efficiency, and effectiveness),


five (45%) administrators mentioned that zakat agencies should be accountable

for their performance. On the other hand, most donors considered accountability

for outcomes (81%), efficiency (77%), and effectiveness (81%) to be important or

very important.

Table 8-10 A Comparison between the Perception of Administrators and Donors on the Scope of Accountability of Zakat Agencies

No The Scope of Accountability Administrators

n=11 Donors n=239

Freq. % Mean Freq.* % 1 Finances 11 100 4.80 218 91 2 Syari’ah 10 91 4.72 211 88 3 Ethics 0 0 4.55 206 86 4 Outcome 5 45 4.33 193 81 5 Efficiency 5 45 4.28 185 77 6 Effectiveness 5 45 4.27 193 81 7 Governance 0 0 4.26 188 79 8 Legal 2 18 4.33 193 81 9 Mission 9 82 4.23 183 77 10 Amil fund 0 0 3.93 151 63

∗ Based on the number of respondents who stated ‘important’ and ‘very important’

Accountability for amil fund, which is related to financial and Syari’ah

accountability, was not mentioned by administrators and had the lowest mean

score based on the opinion of donors. Accountability for ethics and governance

was also not mentioned by administrators, although most donors considered these

elements of accountability to be important or very important.

8.3.5 A Comparison between Administrators’ and Donors’ Perceptions on Information that Should be Disclosed by Zakat Agencies to Discharge Accountability and Actual Reporting

It has been argued that the scope of accountability determines the type of

information that should be disclosed by an organisation (Stewart, 1984). Table

8-11 presents the type of information that should be disclosed by zakat agencies

according to the perceptions of administrators and donors. It also presents the type

of information that is usually disclosed by zakat agencies in various media. The

findings indicate the existence of an accountability gap because actual information

disclosed by zakat agencies is different from the views of donors and

administrators on type of information that should be disclosed by zakat agencies.


Table 8-11 A Comparison between the Perception of Administrators and Donors on Types of Information that Should be Disclosed by Zakat Agencies


Administrators n=11

Donors n=239

Actual Information Annual Report (n=3)

Website (n=11)

Magazine (5)

Facebook (n=8) Freq. % Mean

Score Freq. %

I Organisation Overview

1 Statement of mission and objectives 1 9 4.25 205 85.77 3 9 0 0

2 History of the organisation 1 9 3.50 129 53.97 3 8 0 0

II Governance

3 Information about the organisation’s structure 0 0 3.82 163 68.20 2 5 1 0

4 Profile of Boards, CEO and other senior staff 0 0 3.82 156 65.27 1 2 0 0

5 Boards and committee activities 0 0 3.83 162 67.78 1 0 0 0

6 Remuneration of Boards, CEO and other senior staff 0 0 3.61 133 55.65 0 0 0 0

III Future Plans

7 Future plans 3 27 4.35 217 90.79 3 1 0 0

IV Organisation Policy and Programmes

8 Overview of programmes and activities 11 100 4.22 201 84.10 3 5 4 8

9 Information about how to access zakat agency services 0 0 4.14 197 82.43 0 0 0 0

10 Organisation’s policy related to the allocation of resources or donated fund 0 0 4.19 205 85.77 2 2 0 0

11 Organisation’s policy for selecting beneficiaries, including the criteria to select beneficiaries 5 45 4.26 198 82.85 1 1 0 0



Administrators n=11

Donors n=239

Actual Information

Annual Report (n=3)

Website (n=11)

Magazine (5)

Facebook (n=8) Freq. % Mean

Score Freq. %

V Beneficiaries

12 Overview of beneficiaries 5 45 4.48 221 92.47 3 10 0 0 13 Human interest stories (information about how zakat funds

help beneficiaries) 0 0 4.32 212 88.70 2 10 4 5

VI Other Non-financial Information

14 Information about related parties’ transactions 0 0 4.07 184 76.99 0 0 0 0

15 Acknowledgement of donors and volunteer’s contributions 0 0 3.55 139 53.97 1 2 4 0

VII Financial Information

16 Auditor's report or other type of assurance report 5 45 4.25 194 81.17 2 2 0 0

17 Audited financial report 5 45 4.36 200 83.68 2 2 0 0

18 Total revenue and its sources 11 100 4.35 209 87.45 3 4 5 0

19 Fundraising costs 0 0 3.88 169 70.71 0 0 0 0

20 Usage of zakat fund for beneficiaries (excluding amil fund) 11 100 4.31 213 89.12 3 2 5 0

21 Usage of the amil fund 0 0 4.26 197 82.43 2 4 3 0

22 Usage of other donations (excluding the zakat fund) 0 0 4.30 207 86.61 3 1 4 0

VIII Financial Performance

23 Financial performance information 0 0 4.11 193 80.75 1 1 0 0

IX Non-financial Performance

24 Non-financial performance information 6 54.54 4.02 182 76.15 3 1 0 0


While only one administrator (out of 11) highlighted the importance of

disclosing organisational information such as organisation mission and objectives

and the history of the organisation, nine (out of 11) organisations disclosed

organisational information. Content analysis of several types of media indicated

that information about the mission and objectives of zakat agencies could be

found in three (out of 3) annual reports and nine (out of 11) websites of zakat

agencies. From the perspective of donors, most donors believed that it was

important for zakat agencies to disclose organisational information.

With regards to governance information, the majority of donors considered

governance information to be important or very important but administrators did

not mention disclosing governance information in their comments. Five zakat

agencies disclosed this information in their websites, two zakat agencies disclosed

governance information in annual reports and one zakat agency disclosed

governance information in internal printed magazines.

All administrators stated that zakat agencies should disclose information

about their programmes and activities and the majority of donors stated that

information about programmes and activities was important or very important.

Information about programmes and activities was disclosed by zakat agencies in

various types of media, such as annual reports, websites, magazines, and social

media. Although information about programmes and activities was available,

information about how beneficiaries could access the zakat agency’s services was

not available.

Analysis of media used by zakat agencies to disclose accountability

information indicates that information about beneficiaries is widely available in

various media. This information was found in two (out of 3) annual reports, ten

(out of 11) websites of zakat agencies, four (out of 5) internal printed magazines

and five (out of 8) social media. Five (out of 11) administrators and the majority

of donors stated the importance of disclosing information about beneficiaries,

All administrators agreed that zakat agencies should disclose financial

information about total revenue and its sources and information about the usage of


the zakat fund. Less than half of the administrators (45%) stated zakat agencies

should disclose an auditor’s report and other types of assurance reports and

audited financial statements. Furthermore, no administrators mentioned that zakat

agencies should disclose information about fundraising costs, the usage of amil

funds, and the usage of other donations. From the perceptions of donors, the

majority of financial information variables received a high rating. Although its

disclosure was generally considered important, the disclosure of financial

information was limited. Only two zakat agencies published a complete set of

audited financial statements in their annual reports. The most common financial

information was un-audited total revenue and its sources and the usage of zakat

fund. This finding indicates the existence of an accountability gap, especially on

financial information.

With regards to performance information, administrators only mentioned

non-financial performance accountability and did not mention financial

performance accountability. On the other hand, the majority of donors considered

financial and non-financial performance information to be important or very

important. The actual practice indicates that the disclosure of financial and non-

financial performance information is limited because it only one zakat agency

disclosed this information on their website and three zakat agencies disclosed this

information in annual reports. This finding supports the existence of an

accountability gap, especially on performance information.

8.3.6 A Comparison between Administrators’ and Donors’ Perceptions on Media that Should be Used by Zakat Agencies to Discharge Accountability and the Actual Media that are Used to Discharge Accountability

This section compares the perceptions of administrators and donors

regarding the types of media that should be used by zakat agencies to discharge

accountability and the types of media that are used by zakat agencies to

disseminate accountability information. The results are presented in Table 8-12.

Overall, there were differences and similarities amongst the views of

administrators, the expectations of donors, and the actual media used to


disseminate accountability information. The findings also suggest that a gap exists

between the views of administrators and their own organisational practices.

Table 8-12 A Comparison between the Perceptions of Administrators and Donors on Media that Should be Used by Zakat Agencies to Discharge Accountability

No Media Administrators

(n=11) Donors n=239

Actual Media Used

by Zakat Agencies (n=11)

Freq. % Mean Freq. % Freq. % 1 Annual reports/financial reports 10 91 4.42 206 86 3 27 2 Internet/website 10 91 4.11 188 79 11 100 3 Internal printed media

(Magazines/bulletin/pamphlets published by zakat agencies)

7 64 4.13 188 79 6 55

4 Mass media 7 64 3.89 163 68 2 18 5 Letter (sent by zakat agencies to

their donors) 4 36 3.80 150 63 1 9

6 Public announcement in mosque 5 45 3.64 136 57 NA NA 7 Social media (Facebook) 5 45 3.24 108 45 8 73 8 Staff of zakat agencies 2 18 3.36 94 39 NA NA 9 Friend, relative, or family

member 2 18 3.12 92 38 NA NA

10 Customised report 11 100 NA NA NA 11 100

Administrators agreed with donors on most media that should be used by

zakat agencies to disseminate information, however, the actual reporting practices

varied. For example, most administrators (91%) and donors (86.19%) agreed that

the annual report is an important medium to discharge accountability and zakat

agencies should use annual reports to discharge accountability but only three

(27%) zakat agencies published annual reports. One large private zakat agency

published a complete set of annual reports that included an audited financial

statement and notes to the financial statement. This financial statement complied

with Indonesian accounting standards. One large private zakat agency produced

annual reports that contained narrative information and audited financial

statements without notes for the financial statements. One small government-

sponsored zakat agency produced annual reports that contained narrative

information and an un-audited financial statement.

The majority of administrators (91%) and donors (78.66%) also believed

that zakat agencies should use the internet to disseminate accountability.


Consistent with the views regarding the importance of organisational websites to

discharge accountability, all zakat agencies had an organisational website.

Seven administrators (64%) stated that zakat agencies should use internal

printed media and mass media to disseminate accountability information. Most

donors also considered that internal printed media (78.66%) and mass media

(68.20) were important media to disseminate accountability information. While

six zakat agencies published an internal magazine, only two zakat agencies used

mass media to disseminate accountability information.

With regards to social media, the majority of zakat agencies (73%) used

social media to communicate with their external stakeholders. However, only five

(45%) administrators mentioned social media as a medium for discharging

accountability and 108 donors (45%) stated that social media was an important or

very important medium for discharging accountability.

The findings presented in this section indicate that an accountability gap

also exists in relation to media that should be used to discharge accountability.

Although administrators and donors agreed in relation to most media that should

be used by zakat agencies, the actual practice is different, especially in relation to

the use of annual reports and mass media to discharge accountability.

8.4 DISCUSSION

The results of this study indicate that zakat agencies use various media to

render accountability. Zakat agencies use annual reports, the internet, magazines,

and mass media to disseminate accountability information. Although there is an

effort from zakat agencies to provide an account by using various media, the

findings also indicate that these media might not be used effectively.

There is also an indication that several stakeholders may not have sufficient

information from zakat agencies. In addition to media that are usually publicly

available, zakat agencies also produced customised reports for regulators and their

parent organisation. This indicates an accountability gap because information

provided by zakat agencies does not meet their information demands. Because this


media is not publicly available, donors are not aware about this information and

the survey of donors did not ask about this report.

The content analysis of magazines published by zakat agencies found that

zakat agencies provided financial and non-financial information in their

magazines. This indicates that zakat agencies use magazines to discharge

accountability. The results of the content analysis indicated that the type of

information published in the annual reports varies. This finding supports Yasmin

et al. (2013), who concluded that the quality of information disclosed by faith-

based organisations in annual reports varies.

With regards to the internet and websites, the majority of zakat agencies

disclosed information about their mission, programmes, and beneficiaries on their

websites. However, only four zakat agencies provided financial information on

their websites. This finding supports Connolly and Dhanani (2013), who found

that charitable organisations did not fully utilise the internet to discharge

accountability.

All zakat agencies that had a Facebook account disclosed brief information

about religious activities and programmes, however, financial information was not

available. This finding indicates that zakat agencies might be inclined to use

Facebook as a medium to advertise their activities but not to disseminate

accountability information (Lovejoy & Saxton, 2012).

The content of magazine, website, Facebook, and internal printed media

also contains religious information. This finding suggests the existence of sacred

dimension in the disclosure of zakat agencies. This finding mirrors that of Hardy

and Ballis (2013), who observed that the main feature of accountability

information in mass media and magazines published by faith-based organisation is

“rich in religious discourse but reveals little in term of commercial accountability”

(p. 546).

A comparison into the views of administrators and donors regarding the

meaning of accountability indicates that accountability consists of sacred and

secular dimensions. The majority of donors related accountability with the


appropriate use of zakat funds, which indicates that holding a zakat agency to

account is important to donors. On the other hand, the majority of administrators

linked accountability with transparency, reliable and accurate financial reports,

good administration, and trustworthiness, which indicates that administrators want

to create an image as an accountable zakat agency. Several administrators and

donors also linked accountability with Syari’ah compliance, which indicates the

existence of sacred accountability.

All administrators and most donors stated that zakat agencies should be

accountable for a variety of reasons. Administrators and donors stated that

demonstrating accountability is important to gain public trust, to satisfy

regulation, to demonstrate trustworthiness, and to comply with religious

requirements. In relation to the importance of giving an account to gain public

trust, this finding suggests that donors and administrators were aware of the

importance of accountability to foster knowledge-based trust (Connolly &

Hyndman, 2013a; Yasmin, et al., 2013). While knowledge-based trust exists, the

results of the content analysis of media used by zakat agencies to disseminate

accountability information indicates that several zakat agencies provide limited

accountability information disclosure. This finding indicates that several zakat

agencies might also depend on ‘identity’ to build trust and attract donations

(Yasmin, et al., 2013). These findings confirm the findings of a previous study

that suggested the existence of identity-based trust in Islamic charitable

organisations (Yasmin, et al., 2013).

The results of the interviews and survey also suggest that administrators and

donors agreed that there are two dimensions of accountability in zakat agencies:

sacred accountability to God and secular accountability to other human beings.

These results mirror the results of previous studies that found the existence of

sacred and secular stakeholders in Christian faith-based organisations (Bigoni, et

al., 2013; Crofts, 2009; Irvine, 2002; Joannides, 2012; Laughlin, 1988, 1990).

While previous studies in a Christian context mostly consider secular and

sacred accountability as an independent concept, the findings of this study

indicate that zakat agencies might consider sacred and secular accountability as an


inter-related concept. The results of factor analysis show that Syari’ah

accountability and financial accountability loads into the same factor. From the

perspective of administrators, the comment of interviewees indicates that zakat

agencies should give account to God and secular/external stakeholders.

Administrators consider that accountability to external stakeholders is important

because Islam teaches Muslims to give a written account to every party involved

in a transaction.

The concept of accountability in zakat agencies is related to the concept of

stewardship. As the steward of God, Muslims believe that all human beings must

be accountable to God and other human beings. Syari’ah compliance is important

for rendering sacred accountability to God. Likewise, compliance with Syari’ah

requirements is also important to gain support from donors. For example, it would

be unlikely for Muslims to give zakat to a zakat agency that does not comply with

Syari’ah requirements. Administrators also believe that accountability to other

human beings is needed to achieve accountability to God and considered as a

subset of accountability to God. For zakat agencies, the motivation for them to be

accountable to other human beings is not only to gain public trust and to attract

funding but also to achieve accountability to God.

With regards to type of information that should be disclosed by zakat

agencies and media that should be used by zakat agencies to disseminate

accountability information, the findings presented in this chapter indicate the

existence of an accountability gap. Administrators and donors agreed that annual

reports and/or financial statements are necessary to discharge the accountability of

zakat agencies; however, only three zakat agencies produced annual reports with

financial information. This finding indicates that there is a gap between

administrators and donors’ perception of the media that is important to

disseminate accountability information and actual practice.

From a type of information perspective, in formation about future plans,

organisation policies and programmes, and financial and performance information

are considered important by donors but the disclosure of these types information

is limited. For example, there are only four zakat agencies that publish


information about future plans and five zakat agencies that disclose financial

information. This finding indicates that information considered important by

donors is not available. This finding indicates an accountability gap because

information provided by zakat agencies does not meet the information needs of

donors. The results of this study correspond with the results of previous studies

that found the existence of an accountability gap (Connolly & Hyndman, 2013b;

Hyndman, 1990, 1991).

8.5 SUMMARY

This chapter compared the perception of administrators and donors on three

core elements of accountability that included to whom, for what, and how to

discharge accountability. The findings of this study indicate that administrators

and donors both agreed and disagreed over several elements of accountability.

Administrators and donors agreed that zakat agencies should be accountable to

God and a wide range of secular stakeholders. They also agreed that zakat

agencies should be accountable from financial and Syari’ah aspects. The findings

also indicate that administrators are aware about various media that can be used to

discharge accountability but zakat agencies might not use these forms of media to

discharge accountability effectively. With regards to type of information and

media to disseminate accountability information, the findings indicate the

presence of an accountability gap between the perceptions of administrators and

donors on type of information and media to disseminate accountability

information and actual organisational practice.

Chapter 9: Summary, Recommendations, and Conclusion 221

Chapter 9: Summary, Recommendations, and Conclusion

9.1 INTRODUCTION

This final chapter draws on the skeletal framework (discussed in Chapter 4),

previous empirical studies (discussed in Chapter 3), and empirical findings from

this study (presented in Chapters 6 to 8) to provide the summary and conclusion

of this thesis. This chapter is structured as follows. Section 9.2 revisits the

research motivation and questions. Section 9.3 highlights the research perspective,

while Section 9.4 presents a summary of the research design. A summary of the

findings of this study is presented in Section 9.5. Section 9.6 discusses the

theoretical and practical contributions of this study while Section 9.7 highlights

the limitations. Finally, Section 9.8 presents recommendations for future research.

9.2 RESEARCH MOTIVATION AND QUESTIONS

The motivation for carrying out this research was based on three factors.

First, this study was motivated by government and public demands for zakat

agencies to be more accountable. However, there is a lack of clarity regarding the

meaning of accountability and how accountability should be operationalised in the

context of zakat agencies, especially in terms of “to whom”, “for what”, and

“how” accountability should be discharged. This lack of clarity around the notion

of accountability creates confusion for zakat agencies.

This study was also motivated by the call for more research to understand

the notion of accountability in various types of organisations (Dhanani &

Connolly, 2012; Hardy & Ballis, 2013; Hyndman & McDonnell, 2009; Yasmin, et

al., 2013) because the understanding of accountability in various types of

organisations is limited (Unerman & O'Dwyer, 2006a). This limited

understanding has practical implications, especially for regulators in formulating

regulations to improve organisational accountability.

222 Chapter 9: Summary, Recommendations, and Conclusion

Finally, this study was also motivated by a gap in the academic literature,

particularly in relation to faith-based charitable organisations. It has been

suggested that religious belief may influence the accountability practised by faith-

based charitable organisations, however, little is known about how accountability

is exercised in Islamic faith-based charitable organisations (Yasmin, et al., 2013).

Most published studies have focused on accountability within the context of

secular charitable organisations (Connolly & Hyndman, 2013b; Schmitz, et al.,

2012), Christian faith-based organisations (Crofts, 2009, 2014; Irvine, 2002;

Laughlin, 1988, 1990), Hindu and Buddhist faith-based organisations (Jayasinghe

& Soobaroyen, 2009) and Western Islamic not-for-profit organisations (Yasmin,

et al., 2013). This study was undertaken to fill a gap in this knowledge by

investigating the understanding of accountability in Islamic faith-based charitable

organisations.

Based on these motivations, the aim of this study was to examine the

understanding of accountability as perceived by the administrators and donors of

zakat agencies. To achieve this aim, the following research questions were

proposed:




















d) According to the donors of zakat agencies, by what means should zakat

agencies discharge their accountability?









9.3 RESEARCH APPROACH

This study adopted a middle range thinking perspective (Laughlin, 1995,

2004, 2007). This study employed the existing literature to develop a skeletal

framework of accountability. This skeletal framework guided this study to gain

understanding about the accountability of zakat agencies.

9.4 RESEARCH DESIGN

As this study aimed to answer research questions about “how accountability

is understood” by the administrators and donors of zakat agencies, a mixed

methods research design was adopted. Interviews were conducted with the

administrators of zakat agencies to gain insight into their perceptions of the

accountability of zakat agencies. A survey was conducted with donors to gain

insight into their perceptions of the accountability of zakat agencies. Factor

analysis was conducted on the survey data to summarise the views of donors on

the core elements of accountability. Spearman tests were performed to investigate

the inter-relationship among the core elements of accountability. Document


analysis was conducted to identify how zakat agencies actually discharge their

accountability.

9.5 RESEARCH FINDINGS

This section summarises the major findings and is presented in accordance

with the research questions in the light of theoretical framework presented in

Chapter 4. The summary of findings is presented in Table 9.1.


Table 9-1 Summary of Findings

Research Questions Existing Literature Findings of This Study

Actual Practice Impact of Finding on Literature Views of Administrators Views of Donors



RQ.1.a and RQ.2.a

To whom should zakat agencies be accountable?

Resource providers, such as: donors, volunteers, staff, government, the parent organisation, the board

Resource providers: the board, donors, and the parent organisation

Resource providers: the board, donors, and the parent organisation

Not applicable Supports the existing literature on accountability to resource providers, regulators, beneficiaries, and others

Regulators, such as the government and the Central BAZNAS

Regulators: such as the government and the Central BAZNAS

Regulators such as Government and the Central BAZNAS

Not applicable

Beneficiaries Beneficiaries Beneficiaries Not applicable

Others, such as the media, academics

Others, such as media and academics

Others, such as MUI, the media, and peak body

Not applicable

Accountability literature on religious organisations indicates that religious organisations are accountable to God

The ultimate accountability of zakat agencies is to God.

This finding suggests that sacred accountability to God does not only exist in religious organisations, but also in Islamic faith-based charitable organisations.

Zakat agencies should be accountable to God

This finding suggests that sacred accountability to God does not only exist in religious organisations, but also in Islamic faith-based charitable organisations.

∗ New finding: in relation to the Islamic faith-based charitable organisations context and extends accountability literature about faith-based organisations

∗ Opportunity for future research to investigate the existence of sacred accountability in non-Islamic faith-based charitable organisations


Research Questions Existing Literature Findings of This Study Actual Practice Impact of Finding on Literature Views of Administrators Views of Donors

RQ.1.a and RQ.2.a

To whom should zakat agencies be accountable? (cont.)

Previous literature classifies stakeholders from various aspects: ∗ Based on contractual relationship: primary

and secondary stakeholders (Carroll, 1989). ∗ Based on ability to enforce accountability:

those who have a bond of accountability and those who only have a link of accountability (Stewart, 1984).

∗ Based on their involvement in the administration of organisation: internal stakeholders (such as the executive and staff); external stakeholders (such as donors and the government) and interface stakeholders that link between internal and external stakeholders (such as the board) (Van Puyvelde, et al., 2012)

∗ Based on their role in providing resources and oversight functions: internal stakeholders (those who provide resources) such as donors and the board and external stakeholders (those who perform oversight function) such as the government (Flack, 2007).

Not applicable The results of the factor analysis indicate that donors classify the stakeholders of zakat agencies into two categories: primary stakeholders that consist of the government, the Central BAZNAS, donors, MUI, and beneficiaries; while secondary stakeholders are the board, media, and academics.

Not applicable New finding: the results of the factor analysis suggest that donors have a different understanding of the classification of stakeholders. The results of the factor analysis suggest that donors may not classify stakeholders based on their power and ability to enforce accountability, but rather the visibility of actions.

For example, the existing literature indicates that the board have an important role in the administration of an organisation. However, the donors of zakat agencies consider the board to be a secondary stakeholder. It is possible that donors may not have information about the roles and activities of the board, therefore they consider the board to be secondary stakeholders.

Previous literature suggests that not-for-profit organisations give priority to accountability to regulators and donors rather than to other stakeholders.

Priority to government, the central BAZNAS and donors.

Priority to government, the central BAZNAS and donors.

Not applicable Supports the existing literature (Cordery & Baskerville, 2011; Najam, 1996; Smith et al., 2012).

Research Questions Existing Literature Findings of This Study Actual Impact of Finding on Literature


Views of Administrators Views of Donors Practice

RQ.1.b and RQ.2.b

What is the scope of accountability of zakat agencies?

Stewart’s (1984) ladder of accountability

Zakat agencies should be accountable in all elements of Stewart’s (1984) ladder of accountability.

It is important to demonstrate accountability in area of accountability.

Not applicable

New finding: The application of Stewart’s (1984) ladder of accountability in zakat agencies needs to be extended to include Syari’ah, amil fund and ethics accountability.

Accountability literature on religious organisations indicates that religious organisations have sacred and secular accountability.

∗ Syari’ah accountability that indicates sacred accountability.

∗ Secular accountability such as financial and performance accountability

∗ Syari’ah accountability that indicates sacred accountability.

∗ Secular accountability such as financial, process and performance accountability

Not applicable

∗ New finding: in relation to the zakat agencies and Islamic charitable organisations context and extends the existing accountability literature regarding faith-based organisations.

∗ An opportunity for future research to investigate the existence of sacred accountability in non-Islamic faith-based charitable organisations.

Laughlin (1998, 1990) indicates sacred and secular dichotomy in religious organisations while several authors suggest that financial accountability is as important as sacred accountability (Irvine, 2002; Jacobs & Walker, 2004).

Laughlin (2007) explained that the activities considered sacred or secular differ in every organisation.

The administrators believe that secular accountability is equally as important as sacred accountability.

Factor analysis suggests that the scope of accountability of zakat agencies can be condensed into “financial and Syari’ah accountability” and “governance and performance accountability”.

Not applicable

New finding: from the data analysis perspective, (i.e. factor analysis). The finding supports Laughlin (2007) who argues that sacred and secular activities are different in every organisation. Because the core function of zakat agencies is to distribute religious donation, financial accountability can be considered as an important or sacred activitiy. Financial accountability is important because it is related with public trust and support. This finding also conforms with Irvine (2002); Jacobs & Walker (2004) who find that financial accountability is important in organisations that need public support.


Research Questions Existing Literature Findings of This Study

Actual Practice Impact of Finding on Literature Views of Administrators Views of Donors

RQ.1.c and RQ.2.c

What information (financial and non-financial) do the administrators of zakat agencies consider necessary to be disclosed by zakat agencies to discharge their accountability?

∗ Information disclosed by an organisation should enable its stakeholders to access the accountability of the organisation in every element of Stewart’s (1984) ladder of accountability.

∗ Donors are more interested in financial information than other types of information.

∗ Administrators recognised that zakat agencies should disclose various types of information to discharge their accountability, such as financial and performance information.

∗ The administrators of zakat agencies did not mention governance information.

∗ Donors also recognised that zakat agencies should disclose various types of information to discharge their accountability.

∗ The results of the factor analysis suggest that the scope of accountability of zakat agencies can be condensed into:

1) Financial and beneficiary information

2) Governance and programmes information

3) Performance information

4) Other information

∗ Every organisation discloses different types of information.

∗ Type of information usually disclosed by zakat agencies:

1) Human interest stories.

2) Statement of mission and objectives.

3) History of the organisation

4) Information about the organisation’s structure

5) Overview of programs and activities

6) The amount of zakat collected and distributed

7) Usage of the amil fund.

∗ Confirm previous literature that donors and administrators consider financial accountability is important for organisation that depend on public support (Dixon et al., 2006)

∗ Confirm previous literature that financial information is important but inssuficient to capture all aspect of accountability (Lee, 2008)

Research Questions Existing Literature Findings of This Study Actual Practice Impact of Finding on Literature


Views of Administrators Views of Donors

RQ.1.d and RQ.2.d

By what means should zakat agencies discharge their accountability?

∗ Accountability can be discharged through formal and informal mechanisms.

∗ Accountability can be discharged through various forms of media, such as annual reports, the internet, internal printed media, and others

∗ Annual report is the main mechanism for discharging accountability.

∗ Administrators acknowledged the importance of annual report to discharge accountability.

∗ Various forms of media can be used to discharge accountability: (1) Customised formal

reports; (2) Annual reports, (3) Internet (website); (4) Internal printed media; (5) Mass media (6) Public announcements

in mosques; (7) Letter (8) Verbal information

from the staff of zakat agencies

∗ Customised reports are directed toward regulators (government and the Central BAZNAS) and major donors.

∗ Annual report is very important to discharge accountability

∗ Donors do not only depend on annual reports to obtain accountability information.

∗ Donors stated that various forms of media can be used to discharge accountability information.

∗ The results of the factor analysis suggest that these media can be condensed into two groups:

(1) Primary sources of information, that consist of annual reports, the Internet, internal printed media, letters, and mass media.

(2) Secondary sources of information, that consist of verbal information from the members of family, information from staff, public announcements in mosques, and social media.

∗ Accountability is discharged through formal and informal mechanisms

∗ While the majority of administrators and donors stated that the annual report is an important medium to discharge accountability, only three zakat agencies published annual reports.

∗ The majority of donors did not read the annual reports.

∗ Six zakat agencies publish magazines but only five zakat agencies provide financial information in their magazines.

∗ All zakat agencies have a website however there was only four zakat agencies that provide financial information in their website. Therefore, it can be concluded that zakat agencies did not fully utilised the internet to discharge accountability.

∗ Supports the existing literature that an annual report is an important tool for disseminating accountability information.

∗ Supports the existing literature that donors rarely read annual reports

∗ New finding: Provide insight that actual practices may be different than beliefs.

∗ Supports the existing literature (but new finding from data analysis perspective, i.e. the use of factor analysis) that annual reports are not the only source of information because donors also depend on other sources of information.

∗ New finding: the results of the factor analysis suggest that donors consider reliability and accessibility of information sources. Arguably, primary sources of information are more reliable but less accessible than secondary sources of information.


Research Questions Existing Literature Findings of This Study Actual Practice Impact of Finding on Literature Views of Administrators Views of Donors

∗ Eight zakat agencies have a Facebook account. While information about programme and activities can be found in Facebook, information related to accountability, such as financial information, the objectives of a programme, and the number of beneficiaries are not available. Therefore, it can be concluded that Facebook is not used as a medium to discharge accountability.

RQ.3 What inter-relationships exist amongst the core elements of accountability in the context of zakat agencies?

Qualitative research indicates that the core elements of accountability are inter-related.

Not applicable

The results of non-parametric correlation test on the factor scores of the core elements of accountability indicate that several variables are correlated.

Not applicable

New finding: from data analysis perspective, (i.e. the use of factor analysis and non-parametric correlation analysis). The results of non-parametric correlation test support the results of previous qualitative studies that indicated the existence of inter-relationship among the groups of stakeholders, the scope of accountability, types of information and sources of information.


Research Questions Existing Literature Findings of This Study Impact of Finding on Literature

RQ 4 Is there an expectations gap in the scope and disclosure of zakat agency accountability between administrators and donors?

a. What media and type of information is currently used and disclosed?

Presented in the summary of existing literature in RQ.1.d and RQ.2.d.

Zakat agencies use various media to discose accountability information that incluse annual reports, the internet (website), internal printed media, and mass media

Support the existing literature that accountability information can be discharged through various medi

b. Do administrators and donors have different views on to whom, for what and how to discharge accountability?

Presented in the summary of findings of RQ.1.d and RQ.1.d.

• Administrators and donors agreed that zakat agencies should be accountable to a wide range of stakeholders that include resource providers (such as Board and donors), regulators (government and the Central BAZNAS), beneficiaries and others

• Administrators and donors agreed that the ultimate accountability of zakat agencies is to God

• For the scope of accountability, administrators and donors agreed that the accountability of zakat agencies consists of sacred and secular accountability.

• Administrators and donors agreed that zakat agencies should disclose various types of information to public.

Support and the existing literature that the accountability of faith-based organisations consist of sacred and secular elements

c. Is there an expectations gap?

An accountability gap exists because information provided by an organisation does not meet information required by donors (Hyndman, 1990; 1991)

• While administrators and donors share similar views on to whom, for what and how, the actual practice may indicate an accountability gap.

• For example, administrators and donors agreed that an annual report is an important medium to discharge accountability but there are only three zakat agencies that disclose annual reports.

• Powerful stakeholders such as government, the central BAZNAS and large donors usually asked for customised information which indicate that publicly available information about zakat agencies cannot satisfy their information needs.

• Future plans information, organisation policies and programmes information, financial information, and performance information are considered important by donors but the disclosure of these information is limited. There are only five zakat agencies that disclose financial information.

Supports the existing literature about the possibility of accountability gap.


9.5.1 Research Question 1: How is accountability understood by the administrators of zakat agencies?

This research question consists of four sub-research questions. Interviews

with the administrators of zakat agencies were conducted to answer the four sub-

research questions. The summary of findings is presented according to sub-

research questions, as follows.

RQ.1.a To whom do the administrators of zakat agencies believe zakat agencies should be accountable?

The most important finding for this research question was that zakat

agencies should be accountable to God. This finding corresponds with the

literature regarding accountability in religious organisations, suggesting that the

ultimate accountability of faith-based organisation is to God (Abdul-Rahman &

Goddard, 1998; Crofts, 2009; Joannides, 2012).

Administrators also stated that zakat agencies should be accountable to a

wide range of secular stakeholders, such as the government, donors, the central

BAZNAS, the board, and beneficiaries. A minority of participants also stated that

zakat agencies should be accountable to MUI, Parliament, academics, and the

media. This finding is consistent with the findings of a previous study conducted

in the US in secular charitable organisation context about leadership views in

relation to whom a charitable organisation should be accountable (Schmitz, et al.,

2012). This finding also supports the literature suggesting that not-for-profit

organisations should be accountable to a wide range of stakeholders (Dhanani &

Connolly, 2012; Ebrahim, 2003a; Gray, et al., 2009; Unerman & O'Dwyer,

2006b).

Previous literature has emphasised the importance of power in an

accountability relationship (Carroll, 1989; Cordery & Baskerville, 2011; Stewart,

1984). The sources of power to enforce accountability identified in the literature

are resources (Pfeffer, 1981), contractual relationship, and regulation (Carroll,

1989; Cordery & Baskerville, 2011; Mitchell, et al., 1997). The majority of

stakeholders mentioned by administrators has the power to enforce accountability.

For example, donors have power because they provide resources to zakat

agencies, while the government and the Central BAZNAS have power because


legislation states that zakat agencies should account to them. With regard to

accountability to God, the power of God to enforce accountability is implicit;

however, this power is perceived as real by administrators. Likewise, MUI is not

able to enforce accountability but several donors stated that zakat agencies should

be accountable to MUI. This finding indicated that power to enfornce

accountability is a complex concept.

RQ.1.b What is the scope of accountability of zakat agencies according to the administrators of zakat agencies?

The findings for this research question identified that zakat agencies should

be accountable in all areas of Stewart’s (1984) ladder of accountability.

Administrators stated that zakat agencies have accountability for finance, process,

mission, programme, and performance. The majority of respondents also stated

that zakat agencies should demonstrate Syari’ah accountability. This finding

indicates that the scope of accountability of zakat agencies also extends into the

sacred aspect. This finding corresponds with the results of previous studies that

identified the existence of sacred and secular accountability in faith-based

organisations, such as churches (Irvine, 2002; Jacobs, 2005; Laughlin, 1988,

1990; Quattrone, 2004), Buddhist and Hindu temples (Jayasinghe & Soobaroyen,

2009), and Islamic religious councils (Abdul-Rahman & Goddard, 1998).

This finding also indicates that financial accountability and process

accountability are as important as Syari’ah accountability. This provides a new

insight into the understanding of sacred and secular activities because it supports

Laughlin (2007), who claimed that the meaning of sacred and secular activities

differs in every organisation. In the context of zakat agencies, Syari’ah

accountability is important and sacred because zakat agencies are faith-based

organisations. Syari’ah accountability is important because Muslims believe that

every human being has to account to God in the afterlife (Nahar & Yaacob, 2011).

Likewise, financial accountability is important for zakat agencies because it can

induce trust. Trust is required to secure the continuity of support from resource

providers (Connolly, et al., 2012; Furneaux & Wymer, 2015)


RQ.1.c What information (financial and non-financial) do the administrators of zakat agencies consider necessary to be disclosed by zakat agencies to discharge their accountability?

The scope of accountability determines the types of information that should

be disclosed by an organisation to discharge its accountability. All interviewees

stated that zakat agencies should disclose various financial information, such as

information about total revenue and its sources, the usage of the zakat fund for

beneficiaries, auditor’s reports and other types of assurance reports. The majority

of administrators also stated that zakat agencies should disclose non-financial

information, such as the overview of zakat agencies programmes and activities,

information about the beneficiaries of zakat, information about future plans, and

others. This finding supports Hyndman (1991) and Connolly and Hyndman

(2013b) who found that administrators are usually aware of the various types of

financial and non-financial information that should be disseminated by charitable

organisations.

In terms of Syari’ah accountability, participants did not explicitly describe

information that should be disclosed to discharge Syari’ah accountability.

However, several participants alluded to the existence of a Syari’ah advisor in a

zakat agency. The existence of a Syari’ah advisor gives a signal that a zakat

agency complies with Syari’ah.

RQ.1.d According to the administrators of zakat agencies, by what means should zakat agencies discharge their accountability?

Participants stated that zakat agencies use various media to disseminate

accountability information. The majority of administrators acknowledged that an

annual report is an important medium for discharging accountability. This finding

conforms to the existing literature that indicates an annual report as the main tool

for discharging accountability (Connolly & Hyndman, 2013b; Crofts, 2014;

Ebrahim, 2003a; Hines & Jones, 1992; Palmer, 2013). The majority of

administrators also stated that zakat agencies use customised reports to discharge

accountability to regulators and the parent organisation, as information required

by regulators and the parent organisation is not available in annual reports.

Administrators also mentioned that zakat agencies use the internet, magazines,

Facebook, and mass media to disseminate accountability information. This


finding corresponds with the findings of previous studies that identified the use of

the internet (Dumont, 2013; Saxton & Guo, 2011), magazines (Hardy & Ballis,

2005), and mass media (Mack & Ryan, 2007) to discharge accountability.

9.5.2 Research Question 2: How is accountability understood by the donors of zakat agencies?

The objective of this research question was to identify the perceptions of

donors regarding the notions of accountability. To achieve the objective of this

research question, this research question was divided into four sub research

questions. A survey was used to answer these sub research questions and the

summary of findings is presented according to the sub research questions as

follow.

RQ.2.a To whom do the donors of zakat agencies believe zakat agencies should be accountable?

The findings indicate that zakat agencies should be accountable to a wide

range of stakeholders. The majority of donors stated that zakat agencies should be

accountable to God, donors, the central BAZNAS, the public, the government,

and beneficiaries. On the other hand, the majority of donors stated that zakat

agencies should not be accountable to beneficiaries, the board, MUI, peer

organisations, volunteers, the media, and Parliament. This finding provides new

insight, as previous empirical studies that investigated the understanding of

accountability from the perspective of donors did not identify the existence of a

sacred accountability to God. For example, Connolly et al. (2012) and Connolly

and Hyndman (2013a) only found that charitable organisations should be

accountable to a wide range of secular stakeholders, such as donors and

regulators.

The results of the factor analysis suggest that there are two categories of

stakeholders. The first category consists of God, the government, donors, the

central BAZNAS, beneficiaries, MUI, and the public. The second category

consists of volunteers, the zakat forum, the media, the board, and Parliament. This

classification of stakeholders conflicts with the classification of stakeholders

based on power (Carroll, 1989) and the role of stakeholders in an organisation


(Flack, 2007; Van Puyvelde, et al., 2012), as regulators, resource providers, and

beneficiaries loaded into the same factor.

The results of the factor analysis also indicate that donors may not only also

consider power and a contractual relationship in the classification of stakeholders,

but also other factors such as organisational mission and objectives and the

visibility of the role of stakeholders on zakat agencies. Because zakat agencies are

created to help beneficiaries, donors may consider that accountability to regulators

and donors cannot be achieved if zakat agencies are not accountable to

beneficiaries. Therefore, accountability to donors, regulators, and beneficiaries is

“mutually supportive” (Connolly & Hyndman, 2013a, p. 268).

The results of MANOVA tests on the factor scores indicated that there was

no significant difference between the perception of donors who gave to local

Imams, government-sponsored zakat agencies, and private zakat agencies. The

results of MANOVA tests also indicated that the demographic attributes of

respondents did not relate to their views on to whom zakat agencies should be

accountable.

RQ.2.b. What is the scope of accountability of zakat agencies according to the donors of zakat agencies?

Donors were asked to rate the importance of demonstrating accountability in

several aspects that represent the scope of accountability identified in the

literature. The results of the factor analysis suggest that the scope of

accountability of zakat agencies can be simplified into “financial and Syari’ah

accountability” and “governance and performance accountability”. The financial

and sacred accountability factor consists of accountability for finance, ethics,

Syari’ah, and the amil fund, while “governance and performance accountability”

consists of legal accountability, mission accountability, governance, and

performance accountability (efficiency, effectiveness, and outcomes). Financial

and sacred accountability can be considered the primary accountability, while

governance and performance accountability can be considered the secondary

accountability.


The results of factor analysis suggest that financial accountability, ethical

accountability, and amil fund accountability are considered as important as

Syari’ah accountability. Financial accountability and amil fund accountability are

considered to be important activities because zakat agencies depend solely on

public donations, that is, zakat. As indicated in previous studies, financial

accountability is important to gain trust and support from external resource

providers (Furneaux & Wymer, 2015; Irvine, 2002). This finding is also

consistent with Cordery (2006) and Crofts (2009) who claimed that financial

accountability in faith-based organisations is a part of stewardship activities;

therefore, it is considered a sacred activity. This classification of the scope of

accountability also supports the new concept of sacred and secular accountability

proposed by Laughlin (2007), who considered sacred and secular to be relative

concepts. The donors of zakat agencies might consider financial accountability,

amil fund accountability, and ethics accountability to be as important as Syari’ah

accountability, thus explaining why these areas of accountability loaded into the

same factors.

RQ.2.c. What information (financial and non-financial) do the donors of zakat agencies expect and consider necessary to be disclosed by zakat agencies to discharge their accountability?

Data analysis showed that all types of information were considered

important and very important by most donors. It is possible that the donors of

zakat agencies consider that information disclosed by an organisation should

enable its stakeholders to access the accountability of zakat agency in all elements

of the scope of accountability. This result supports the findings of previous studies

that indicated the importance of disclosing various types of information to

discharge organisational accountability (Connolly & Hyndman, 2013a; Yasmin, et

al., 2013). Factor analysis on the types of information produced four distinct

factors. This information was classified as “financial and beneficiary

information”, “governance and programme information”, “performance

information”, and “other information”.


RQ.2.d. According to the donors of zakat agencies, by what means should zakat agencies discharge their accountability?

The objective of this research question was to investigate the views of

donors regarding the various forms of media for disseminating accountability

information. Consistent with existing literature, the majority of donors (86%)

stated that an annual report is an important or very important medium for

discharging accountability (Connolly, et al., 2012; Ebrahim, 2003a; Palmer, 2013;

Torres & Pina, 2003). Although the majority of donors stated that an annual report

is an important or very important medium for disseminating accountability

information, the majority of donors (63%) did not have access to annual reports.

This study also sought to identify whether donors read annual reports.

Consistent with Connolly and Hyndman (2013a), the results indicate that the

majority of donors (76.9%) do not read annual reports. Further analysis indicates

that the proportion of donors who read annual reports is higher within the group of

donors who give zakat to formal zakat agencies (government-sponsored zakat

agencies and private zakat agencies) compared to the donors who give zakat to

local Imams. It is possible that the donors to local Imams may not be interested in

reading annual reports because they do not give zakat to formal zakat agencies.

Therefore, they are not interested in assessing the accountability of formal zakat

agencies.

The results of the factor analysis suggest that there are two different sources

of information. The first factor consists of information from family members,

information from staff, public announcements in mosques, and social media. The

first factor consisted of information variables pertaining to informal and verbal,

and was thus labelled “informal media”. The second factor consisted of the

internet, annual reports, internal publications, letters, and mass media. The second

factor related to formal and written information, and was thus labelled “formal

media”. Formal media is more reliable but less accessible than informal media.

This finding suggests that donors do not depend on single sources of information,

for example, annual reports, but also other sources of information, such as the

internet and mass media (Mack & Ryan, 2007).


9.5.3 Research Question 3: What inter-relationships exist amongst the core elements of accountability in the context of zakat agencies?

The findings of this research question indicate that inter-relationships exist

amongst the core elements of accountability. For example, primary stakeholders

had a significant correlation with financial and sacred accountability, financial

information, and formal sources of information, while no significant correlation

existed between secondary stakeholders and other variables. Financial and sacred

accountability correlated with primary stakeholders, financial information,

governance information, performance information, informal sources, and formal

sources of information, while performance and governance accountability related

to financial information, performance information, other information, and formal

sources of information. Formal sources of information had significant correlation

with other variables, except secondary stakeholders and other information. Thus,

this finding provides empirical quantitative evidence regarding the inter-

relationship among the core elements of accountability indentified in previous

qualitative studies (Connolly, et al., 2012; Kilby, 2006; O'Dwyer & Boomsma,

2015).

9.5.4 Research Question 4: Is there an expectations gap in the scope and disclosure of zakat agency accountability between administrators and donors?

The findings of this research question indicate that there are differences

between the views of administrators and donors about the types of information

that should be disclosed and the types of information that are actually disclosed by

zakat agencies. The summary of findings is presented according to sub-research

questions, as follows.

RQ.4.a. What media and type of information is currently used and disclosed?

With regards to the types of media for discharging accountability, zakat

agencies use more than one medium to discharge accountability. Zakat agencies

use magazine, website, annual report, and mass media to discharge accountability.

However, there are only three zakat agencies that publish annual reports. It is

possible that the role of the annual report as a media to discharge accountability is

replaced by other media.


RQ.4.b Do administrators and donors have different views on to whom, for what and how to discharge accountability?

Administrators and donors agreed that zakat agencies should be

accountable to a wide range of stakeholders that include sacred and secular

stakeholders. Administrators and donors agreed that zakat agencies should be

accountable to God, resource providers, regulators, beneficiaries, and others. They

also agreed that the ultimate accountability of zakat agencies is to God. For the

scope of accountability, donors and administrators agreed that the scope of

accountability of zakat agencies consists of sacred and secular elements and zakat

agencies need to disclose various types of information to satisfy every element of

the scope of accountability. Regarding media to disseminate information,

administrators stated that several media, such as annual reports, the internet, and

internal printed magazines are directed towards donors and other stakeholders

while customised reports are directed towards regulators. From the perspective of

donors, they depend on various formal (written) and informal (verbal media) to

obtain information about zakat agencies. Administrators and donors also agreed

that an annual report is an important medium to discharge accountability.

RQ.4.c Is there an expectations gap?

Overall, the findings presented in this section indicate the existence of an

accountability gap because several stakeholders may not have sufficient

information from zakat agencies. While administrators and donors share similar

views on to whom, for what, and how, the actual practice may be different from

the views of administrators. All administrators and most donors agreed that zakat

agencies should disclose organisation policies, programmes, and financial and

performance information but the disclosure of these types information is limited.

For example, there are only five zakat agencies that disclose financial information.

The same gaps were also observed for other types of information. As a result,

powerful stakeholders such as government, the Central BAZNAS, and large

donors demand customised report from zakat agencies. This finding indicates that

administrators are aware of the various types of information that should be

disclosed, however, their actual practice is different – an insight previously

suggested by Hyndman (1990, 1991).


A gap was also observed between the views of administrators and donors

regarding media that should be used to disseminate accountability information and

the actual media that was used to disseminate accountability information. For

example, while most administrators and donors stated that zakat agencies should

use annual reports to discharge accountability, only three zakat agencies published

annual reports. Further, most donors and administrators agreed that zakat agencies

should use the internet to discharge accountability and all zakat agencies had their

own website but accountability information disclosed on the websites of zakat

agencies was limited.

There are several possible reasons that might cause the gap. From a demand

perspective, it is possible that donors may not demand accountability information

as stated in the existing literature (Connolly & Hyndman, 2013a; Hyndman &

McMahon, 2010; Yasmin, et al., 2013). From the supply side, it is possible that

zakat agencies may not have sufficient expertise and resources to prepare

accountability information.

9.6 RESEARCH CONTRIBUTIONS

This study has both theoretical and practical contributions as follows.

9.6.1 Empirical Enrichment of the Theoretical Framework

This study makes the following theoretical contributions.

1. The novelty of this study compared with previous empirical investigations

lies with the context of study. This study provides empirical insight into the

understanding of accountability within a specific context, namely in the

context of Islamic faith-based organisations in developing countries. While

previous research has provided rich descriptions and exploration of

accountability within Christian faith-based organisations and secular

charitable organisations in Western countries, little attention has been

dedicated to the accountability of Islamic organisations, in particular

organisations that administer zakat. The findings of this study fill this gap.


2. Based on the perceptions of administrators and donors, this study has

identified that the stakeholders of zakat agencies consist of sacred and secular

stakeholders. This study found that zakat agencies should be accountable to

God. In addition to God, administrators and donors stated that zakat agencies

should be accountable to resource providers (such as donors, volunteers, and

the board), regulators (such as the government and the Central BAZNAS),

beneficiaries, and other stakeholders (such as the media and academics). The

results of factor analysis suggest that two different classifications of

stakeholders exist. The first classification is the primary stakeholders that

consists of God, donor, government, the central BAZNAS, beneficiaries, and

MUI while the second classification is the secondary stakeholders that

consists of media, peak body (the Forum Zakat), and Parliament.

The classification of sacred and secular stakeholders as primary stakeholders

provides a new insight into the understanding of power in an accountability

relationship. Arguably, most primary stakeholders are powerful stakeholders

with various sources of power. For example, the power of the government

and the Central BAZNAS to enforce accountability originates from

regulation, while MUI has power because MUI has the religious authority to

issue fatwa. Donors have power because they possess financial resources

(Carroll, 1989; Pfeffer, 1981).

The belief of donors that zakat agencies should be accountable to God

indicates that the sources of power are not limited to physical powers, such as

regulation and resources, but also spiritual power. Administrators consider

accountability to God to be important because they believe that all human

beings must account to God for every action and inaction. While the power of

God to enforce accountability is not physically observed, donors perceived

the spiritual power of God to be real. Therefore, donors stated that zakat

agencies should be accountable to God.


In relation to accountability to beneficiaries, this finding suggests that donors

may not only consider power to classify the stakeholders, but also the moral

dimension and the charity’s values. As observed by Connolly and Hyndman

(2013a), the participants of the survey may have considered accountability to

donors and beneficiaries to be mutually supportive. Therefore, beneficiaries

are also considered primary stakeholders.

3. Based on the framework of Stewart’s (1984) ladder of accountability, this

study identified the scope of accountability of zakat agencies. The findings of

this study confirm that Stewart’s (1984) ladder of accountability is applicable

in the context of zakat agencies. However, the use of Stewart’s (1984) ladder

of accountability in zakat agencies should be modified, because the

accountability of zakat agencies also includes Syari’ah accountability.

4. Laughlin (1988, 1990) proposed that a sacred and secular dichotomy exists in

religious organisations. Laughlin (2007) further explained that the activities

considered sacred or secular differ in every organisation. The findings of this

study have provided support to Laughlin (2007) about the relativity of sacred

and secular activities. In the context of zakat agencies, donors considered

financial accountability to be as important as Syari’ah accountability, thus

explaining why both areas of accountability loaded into the same factor. This

finding also supports previous studies that consider financial accountability is

as important as sacred accountabuility in faith-based organisations that need

public support (Bigoni, et al., 2013; Irvine, 2002).

5. With regards to the types of information that should be disclosed by zakat

agencies, both the administrators and donors agreed that zakat agencies

should disclose financial and non-financial information. Although donors

expect non-financial information, the finding indicates that both

administrators and donors put a strong emphasis on financial information.


6. Both administrators and donors agreed that zakat agencies should use various

media to disseminate accountability information. While existing literature has

emphasised the importance of formal reporting through annual reports, the

finding of this study provides evidence that accountability can be discharged

through various forms of formal and informal media.

7. While previous qualitative studies have identified that the core elements of

accountability are inter-related, this study provides preliminary quantitative

evidence that “to whom”, “for what”, and “how” are statistically correlated.

8. This study also identified the existence of an accountability gap. While there

is evidence that the administrators understand the types of information that

should be disclosed by zakat agencies to discharge accountability and the

media that should be used to discharge accountability, their actual practices

differ.

9.6.2 Practical Contribution and Recommendations for Practice

This study provides evidence about the information needs of donors, which

may be useful for regulators to determine the information that should be disclosed

by zakat agencies. This study has recommendations for practice as follows.

1. Zakat agencies collect public donations, particularly from the Muslim

community. The existing regulations only require zakat agencies to submit

audited financial statements to the Ministry of Religious Affairs and the

Central BAZNAS, but do not specify the publication of this audited financial

statement. While this study found that several zakat agencies voluntarily

published financial and non-financial information, the contents of the

information varied, making comparison difficult. Therefore, it would be

beneficial for external stakeholders if regulators issued a regulation or

guidance on reporting. This regulation or guidance should include

information that should be disclosed and media that should be used by zakat

agencies to disseminate this information. This regulation or guidance on

reporting would standardise the reports of zakat agencies, enabling external

stakeholders to make an informed judgement to determine future actions.


2. Based on the findings presented in Chapter 7, information that should be

disclosed by zakat agencies should include the following.

a) Donors stated that Syari’ah accountability is important; however, the

results of content analysis on various media that are used by zakat

agencies indicate that the disclosure of Syari’ah compliance is limited.

Therefore, it is suggested that zakat agencies disclose information about

their compliance to Syari’ah requirements.

b) Financial and beneficiary information that consists of information about:

• audited financial statements;

• auditor reports and other type of assurance reports;

• zakat and non-zakat fund collected and distributed;

• the usage of the amil fund;

• the overview of beneficiaries;

• organisational policies related to the allocation of resources and

selecting beneficiaries.

c) Governance and programme information that consists of information

about:

• the profile of board members and senior staff;

• information about the organisation structure;

• statement of mission and objectives;

• the overview of zakat agencies programme and activities.

d) Performance information that consists of information about:

• financial performance;

• non-financial performance.

e) Other information that consist of information about:

• the remuneration of boards, ceo and senior staff;

• board and committee activities;

• acknowledgement of donor and volunteer contributions;

• information about how to access the services of zakat agencies.


3. It is important for accountability information to be accessible to a wide range

of stakeholders (Coy, et al., 2001). This study finds that all zakat agencies

have a website and donors consider the internet a very important source of

information. The internet has several advantages for disseminating

accountability information in comparison to other media. It is accessible

anytime and anywhere at a relatively low cost. However, this study indicates

that the internet has not been fully utilised to discharge accountability.

Therefore, it is recommended that zakat agencies regularly publish their

financial and non-financial information on their website.

Public announcements in mosques offer a low-cost method for disseminating

accountability information, but the amount of information that can be

disseminated via this medium is limited and it can also only be accessed by

the local community. However, considering that most donors have access to

public announcements in mosques, it is suggested that zakat agencies also use

this medium to disseminate accountability information. Because the capacity

of public announcements in mosques is limited, it is suggested that zakat

agencies only disseminate a summary of critical information via this media.

Zakat agencies can advise their stakeholders to visit their website if their

stakeholders require more detailed information.

4. This study finds that “to whom”, “for what’, and “how” are inter-related. This

finding has practical implications for zakat agencies because this finding

indicates that every area of accountability requires different types of

information and media to discharge accountability.

9.7 RESEARCH LIMITATIONS

In addition to the limitations of the selected research methods discussed in

Chapter 5, several additional limitations have been identified in this study.


1. The analysis of the understanding of accountability from the perspective of

administrators was based on the data from 11 interviews, while the analysis of

the understanding of accountability from the perspective of donors was based

on 239 usable survey responses. The respondents of survey were selected

using convenience sampling and most of them were government employees

or well-educated individuals. Therefore, caution should be exercised in

replicating the findings of this study in other contexts.

2. This study only investigated the understanding of accountability from the

views of administrators and donors. It is possible that other groups of

stakeholders, such as volunteers or beneficiaries, may have different views

with regards to the accountability of zakat agencies.

3. The findings and discussion about the perception of donors on the notion of

accountability are limited to propositions and items that were put forward in

the questionnaires. Although several precautionary actions, such as pilot tests

and a review of the survey instrument by supervisors, were undertaken to

minimise the possibility of items or themes being omitted, it is still possible

that a few accountability related items or themes may have inadvertently not

been included in this study. To address this limitation, respondents were

allowed to add any additional information that was considered appropriate to

answer a particular survey question.

4. The sample size for document analysis only consisted of three annual reports

and six internal printed magazines. These were the maximum number of

annual reports that could be collected during the field work of this study. The

researcher could collect more than six editions of internal printed magazines

but due to time constraints, content analysis was only undertaken on six

magazines. This limited the conclusions that could be drawn from this sample

and limits the generalisability of the findings.

5. While the results of the survey indicated that the majority of participants give

zakat to local Imams, this study does not investigate the views of local Imams

on accountability of zakat agencies. It is possible that local Imams have

different understandings of accountability.


6. The study, through both literature and empirical findings, identified both

sacred and secular dimensions to the accountability of zakat agencies and,

notably, an espoused accountability to God. However, the study did not

explore the implications of this accountability in term of scope and the means

of discharge.

7. While the location of zakat agencies (and administrators) in noted, data on the

location of donors was not collected. It is possible that the perceptions of

donors from big cities may be different to the perceptions of donors from

small cities whereby the proximity of donors to zakat agencies may influence

the strength of the ‘trust bonding’ and thus the gap of accountability.

9.8 FUTURE RESEARCH

Based on the research findings and limitations, several future research

opportunities have been identified in this study.

1. This study only investigated the understanding of core elements of

accountability (to whom, for what, and how) by conducting a survey with

donors and interviewing the administrators of zakat agencies. There is an

opportunity to investigate the views of other stakeholders, such as

beneficiaries and the board regarding the accountability of zakat agencies.

Investigating the accountability of zakat agencies from the perspective of a

wide range stakeholders may produce conflicting results because different

stakeholders may have different expectations and understanding. In this case,

a Delphi method could be used to reconcile the different views regarding the

core elements of accountability (Basnan, 2010).


2. The study only conducted non-parametric correlation analysis between “to

whom”, “for what”, and “how” because the data was not normally distributed.

The sample size for the factor analysis was 230. This size of the sample is

only considered ‘fair’ and a larger sample size would increase the reliability

of factors (Comrey & Lee cited in Tabachnick & Fidell, 2007, p. 613). Future

research could investigate the relationship between these core elements of

accountability based on a larger sample allowing the factors to produce more

reliable results. A larger sample would also allow the application of more

sophisticated statistical methods, such as linear regression or path analysis, to

identify the relationship among variables.

3. Because the findings of this study suggest that accountability influences trust

in faith-based charitable organisations, other potentially fruitful topics for

future research in the context of faith-based charitable organisations would

be:

(1) Do Muslims switch or reallocate zakat based on accountability?

(2) Does an increase in the amount of money donated to zakat agencies

influence accountability expectation?

(3) How does trust in organisation/agencies/government/people/religion

influence accountability?

4. The majority of donors stated that they give most of their zakat to local

Imams. Local Imams are different from formal zakat agencies because they

operate in a small area. Because, they operate in a small area, transparency

can be achieved without producing a formal report. Therefore, future research

can explore about the understanding of accountability from the perspective of

local Imams.

5. A key finding of this study is that, and in the views of donors and

administrators, zakat agencies are accountable to God. However, and as noted

in the limitations in Section 9.7, the implications of this accountability were

not further investigated. Future research, through engagement with key

stakeholders of zakat agencies, could investigate such questions as “if zakat

agencies are accountable to God, what is the means through which this

accountability is to be discharged?”.


6. Chapter seven notes that there is, generally, no statistical difference in the

perceptions of the different groups of donors towards the accountability of

zakat agencies. Further research, through engagement with donors/donor

groups (e.g., through interviews), could address the question of “what does

this imply?” – that is, does this observation mean that all donors view and

understand accountability through a common ‘lens’ grounded in, for example,

religion, or are there other factors that motivate and harness this shared

understanding?

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278 Appendices

Appendices

Appendix A Human Ethics Approval Certificate and Participation Information Sheet

Appendices 279

280 Appendices

PARTICIPANT INFORMATION FOR QUT RESEARCH PROJECT – Interview: ZAKAT AGENCIES –

The Accounting for zakat: The Accountability of Indonesian not-for-profit Organisations QUT Ethics Approval Number: 1400000703

RESEARCH TEAM

Principal Researcher: Principal Supervisor: Associate Supervisor:

Iwan Purwanto Sudjali – PhD Candidate - School of Accountancy Associate Professor Stuart Tooley - School of Accountancy Dr Craig Furneuex - School of Accountancy

QUT Business School - Queensland University of Technology (QUT) DESCRIPTION

This project is being undertaken as part of a PhD thesis for Iwan Purwanto Sudjali.

The aim of this research is to examine the potential gap between: (1) the expectations of stakeholders in term of disclosure of financial and non-financial information about zakat collection and distribution; and (2) the disclosures of financial and non-financial information provided by Indonesian zakat agencies. This research will: (1) explore the concept of zakat agency accountability from the perspective of key stakeholders; (2) explore the concept of zakat agency accountability from the perspective of zakat agencies; (3) identify accountability information provided by zakat agencies; (3) ascertain whether the expectation of stakeholders on accountability are being met; and if not, then (4) identify additional disclosures which are required to bridge this gap.

You are invited to participate in this research because you involved in a government-sponsored zakat agency or a not-for-profit organization that collect and distribute zakat and have knowledge of how accountability is understand and discharged by zakat agencies. Because of this special knowledge, you are able to help the research team to understand about the concept of zakat agency accountability within government-sponsored zakat agencies and Islamic not-for-profit organization context.

PARTICIPATION

Your participation will involve an interview at your office or a place that convenient to you and will take approximately one-hour time. Questions will include: (1) who do you identify as the stakeholders of your organization; (2) do you think that zakat agencies should be accountable for the collection and distribution of zakat funds; (3) what type of information do your organisation consider necessary for the stakeholders; and (4) what mechanism does your organization use to discharge accountability.

Your participation in this project is entirely voluntary. You will have opportunity to view the interview transcript. If you do agree to participate you can withdraw from the project without comment or penalty. If you withdraw within 3 months after interview, on request any identifiable information already obtained from you will be destroyed. You do not have to answer question(s) that you are uncomfortable answering. Your decision to participate or not participate will in no way impact upon your current or future relationship with QUT.

EXPECTED BENEFITS

It is expected that this project will not directly benefit you. However, it may benefit policy makers and zakat agencies in developing an accountability framework, which will contribute towards building and enhancing trust in zakat agencies. Specifically, your response is very important to my research objective of improving our understanding on the concept of accountability in zakat agencies and Islamic not-for-profit organisation contexts. If you would like a summary of the

http://www.qut.edu.au/

Appendices 281

results, please email the researcher at [email protected]. The summary of results is expected available at the end of June 2015.

RISKS

There are minimal risks associated with your participation in this research. These include risk that your participation will be re-identifiable by people who read my thesis or other publications. However, the likelihood of this risk occurring is low because your identity or the identity of your organisations will be kept anonymous in the thesis or any other publications based on this data. The participating organizations will be only referred to as cases with pseudonym. In addition, this study will not disclose any confidential information or any unique characteristic of your organization that make your participation easily re-identifiable.

PRIVACY AND CONFIDENTIALITY

All comments and responses will be treated confidentially unless required by law. The names of individual persons are not required in any of the responses. Findings and reports from this project will also not identify individual or organisational participants.

If you agree to be audio-recorded during interview: • You will have the opportunity to verify your comments and responses prior to final inclusion; • The audio recording will be destroyed at the end of this research; • The audio recording will not be used for any other purposes; • It is only the research team who will have access to the audio recording.

Any notes and data provided during the meeting will be kept confidential. Any data collected as part of this project will be stored securely as per QUT’s Management of research data policy. All hard/paper copies of the information will be stored in a facility provided by QUT and always locked-up. Electronic data will be stored on a QUT mainframe drive and will be protected by password. It is only the research team who will have access to the data.

Please note that non-identifiable data collected in this project may be used as comparative data in future projects or stored on an open access database for secondary analysis.

CONSENT TO PARTICIPATE

We would like to ask you to sign a written consent form (enclosed) to confirm your agreement to participate.

QUESTIONS / FURTHER INFORMATION ABOUT THE PROJECT

If have any questions or require further information please contact one of the research team members below.

Name: Iwan Purwanto Sudjali (PhD Candidate)

Name: Associate Professor Stuart Tooley (Principal Supervisor)

Phone: +61 7 3138 9872 Phone: +61 7 3138 6845 Email: [email protected] Email: [email protected]

Name: Dr Craig Furneaux (Associate Supervisor)

Phone: +61 7 3138 1186 Email: [email protected] CONCERNS / COMPLAINTS REGARDING THE CONDUCT OF THE PROJECT

QUT is committed to research integrity and the ethical conduct of research projects. However, if you do have any concerns or complaints about the ethical conduct of the project you may contact the QUT Research Ethics Unit on [+61 7] 3138 5123 or email [email protected]. The QUT Research Ethics Unit is not connected with the research project and can facilitate a resolution to your concern in an impartial manner.

mailto:[email protected]



282 Appendices

Thank you for helping with this research project. Please keep this sheet for your information.

Appendices 283

CONSENT FORM FOR QUT RESEARCH PROJECT

The Accounting for zakat: The Accountability of Indonesian not-for-profit Organisations QUT Ethics Approval Number: 1400000703

RESEARCH TEAM CONTACTS Name: Iwan Purwanto Sudjali (PhD Candidate)

Name: Associate Professor Stuart Tooley (Principal Supervisor)

Phone: +61 7 3138 9872 Phone: +61 7 3138 6845 Email: [email protected] Email: [email protected]

Name: Dr Craig Furneaux (Associate Supervisor)

Phone: +61 7 3138 1186 Email: [email protected]

STATEMENT OF CONSENT

By signing below, you are indicating that you:

• Have read and understood the information document regarding this project. • Have had any questions answered to your satisfaction. • Understand that if you have any additional questions you can contact the research

team. • Understand that you are free to withdraw at any time, without comment or penalty. • Understand that you can contact the Research Ethics Unit on [+61 7] 3138 5123 or

email [email protected] if you have concerns about the ethical conduct of the project.

• Understand that the project will include an audio recording. • Understand that data collected in this project may be used as comparative data in

future projects. • Agree to participate in the project.

Name

Signature

Date

Please return this sheet to the researcher.




http://www.qut.edu.au/

284 Appendices

Appendices 285

Appendix B Interview Questions Matrix

Interview Questions Research Questions

Introduction:

• Brief introduction about myself and my study. • Interviewee is asked to sign the consent form.

About the Study:

1. Can you tell me about the recent development in the administration of zakat agencies?

2. What is your opinion on the growth of zakat agencies? 3. What do you understand by the term of

“accountability” in the context of zakat agency? 4. Do you consider that zakat agency should demonstrate

accountability to their stakeholders? Why? How?

Opening Questions

5. To whom should zakat agencies be accountable to? Why?

Internal Stakeholders External Stakeholders

Boards Staff and

employees Volunteers Donors Beneficiaries Others, please

specify ………

God Government

(National, Provincial, and Local)

Minister of Religious Affair

MUI (Indonesian Ulema Council)

Peak Body (Forum Zakat)

Media Professional Bodies Community/Public Others, please

specify …………

6. From these stakeholders, which stakeholder do you consider as the most important? Why?

7. Who are the main target audiences for financial and non-financial information? Why?

RQ1.a To whom do the administrators of zakat agencies believe zakat agencies should be accountable?

286 Appendices


8. What should be accounted for by zakat agencies?

9. Should zakat agencies account for amil fund? RQ1.b What is the scope of accountability of zakat agencies according to the administrators of zakat agencies?

10. How does your organisation demonstrate accountability to your stakeholders?

11. Do you see an importance for zakat agencies to disclose financial and non-financial information to their stakeholders? Why? Why Not?

12. What kind of information (financial and non-financial) do you think important to be disclosed to your stakeholders?

13. Being a faith-based organisation, do you think that your organisation is accountable in ways that different from secular organisations? Why?

14. If you have corporate donors, do corporate donors have different accountability requirement from individual donors? Why?

RQ1.c What information (financial and non-financial) do the administrators of zakat agencies consider necessary to be disclosed by zakat agencies to discharge their accountability?

15. What is your organisation’s preferred form of disclosures (annual reports, online magazine, leaflets, advertising, social media, etc.) why?

16. Accounting and audit are western system of accountability, do you think that these mechanisms of accountability are compatible with Islamic values? Why?

17. Do you think that a certification to financial statements from an independent body (such as audit firm or oversight committee) is important for zakat agency accountability? Why?

18. Do you publish (or not publish) annual reports (or/and others reports) in the last financial year? Why?

If you publish annual reports: 19. What role do you see annual reports serving in term of

zakat agency accountability? 20. To whom do you usually give a copy of your annual

reports? 21. How do you make your annual report available to

them (by mail, email, publish in website, etc.)?

RQ1.d According to the administrators of zakat agencies, by what means should zakat agencies discharge their accountability?

Appendices 287


If you do not publish annual reports: 22. If you do not publish annual reports, how do you

communicate about the usage of zakat funds and your activities to your stakeholders?

23. How do you make this information available to your stakeholders?

288 Appendices

Appendix C Survey Instrument

STATEMENT OF CONSENT Pernyataan Kesediaan untuk Berpartisipasi dalam Penelitian

By completing this survey, you are indicating that: • Agree to participate in this study as a survey respondent. • Have read and understood the information document regarding this project. • Have read and understood the information document regarding this project.

Dengan mengisi survey ini berarti Anda menyatakan: • Setuju untuk berpartisipasi dalam penelitian ini sebagai response survey. • Menyadari bahwa keikutsertaan Anda dalam penelitian ini bersifat sukarela. • Telah membaca dan memahami lembar informasi peserta yang menjelaskan penelitian ini. Part A: The following set of questions focus on who you give your zakat to and why Bagian A: Pertanyaan-pertanyaan berikut terkait tentang siapa yang menjadi

penerima zakat Anda dan alasan mengapa Anda menyerahkan zakat kepada individu atau organisasi tersebut

1 Please select the statement that best describes your practice in giving zakat. (Silahkan pilih pernyataan yang paling tepat mengambarkan kebiasaan Anda dalam membayar zakat?) a. I give all or most of my zakat directly to beneficiaries or a local Imam.

Go to question 2a, 2b, and 2c (Saya biasanya memberikan seluruh atau sebagian besar zakat langsung kepada Mustahik atau Takmir Masjid)

Lanjutkan ke pertanyaan no 2a, 2b, dan 2c

b. I give all or most of my zakat to a government-sponsored zakat agency. Go to question 3a, 3b, and 3c

(Saya biasanya memberikan seluruh atau sebagian besar zakat ke BAZNAS tingkat Provinsi/Kabupaten/Kota)


c. I give all or most of my zakat to a private zakat agency. Go to question 4a, 4b and 4c

(Saya biasanya memberikan seluruh atau sebagian besar zakat kepada Lembaga Amil Zakat)


2a Why do you give all or most of your zakat directly to beneficiaries or Local Imam? You may indicate more than one answer.

(Mengapa Anda memberikan semua atau sebagian besar zakat langsung kepada Mustahik atau Takmir Masjid) (Anda dapat mengindikasikan lebih dari satu jawaban) a. It is more convenient to give my zakat directly to beneficiaries or Local Imam

Appendices 289

than to a government-sponsored zakat agency or a private zakat agency (Memberikan zakat langsung kepada Mustahik atau Imam Masjid setempat adalah lebih mudah dibandingkan dengan memberikan zakat kepada BAZNAS tingkat Provinsi/Kabupaten/Kota atau Lembaga Amil Zakat).

b. I want to support the programmes and activies of my Local Imams (Saya ingin memdukung program-program atau kegiatan-kegiatan pendayagunaan zakat yang dibuat oleh Takmir Masjid).

c. I want to help beneficiaries who live in my neighbourhood (Saya ingin membantu Mustahik yang hidup disekitar rumah saya).

d. If I give to my Local Imam, I will know how my zakat is used. (Bila saya memberikan zakat kepada Imam Masjid setempat, saya dapat mengetahui penggunaan dana zakat yang saya serahkan).

e. If I give to my Local Imam, I will know the beneficiaries of my zakat. (Bila saya memberikan zakat kepada Imam Masjid setempat, saya dapat mengetahui penerima zakat yang saya serahkan).

f. I trust the local Imam to use my zakat for appropriate purposes (Saya percaya bahwa Takmir Masjid akan menggunakan dana zakat yang saya berikan sesuai dengan kaidah agama)

g. Other, please specify …. (Lain-lain, mohon dijelaskan …..)

2b Why do you not give most or all zakat to a government-sponsored zakat agency in your hometown? (You may indicate more than one answer) Mengapa Anda tidak memberikan seluruh atau sebagian besar kewajiban zakat Anda kepada BAZNAS tingkat Provinsi/Kabupaten/Kota di tempat tinggal Anda? (Anda dapat memilih lebih dari satu jawaban). a. Giving zakat to a government-sponsored zakat agency is less convenient than

giving zakat directly to a private zakat agency. Memberikan zakat kepada BAZNAS tingkat Provinsi/Kabupaten/Kota adalah kurang praktis apabila dibandingkan dengan memberikan zakat langsung kepada Mustahik atau Takmir Masjid.

b. If I give my zakat to the government-sponsored zakat agency in my hometown, I can not help the beneficiaries who live in my neighbourhood. Apabila saya memberikan zakat kepada BAZNAS tingkat Provinsi/Kota/Kabupaten, saya tidak dapat membantu Mustahik yang ada di sekitar tempat tinggal saya.

c. I do not know the existence of government-sponsored zakat agency in my hometown Saya tidak mengetahui keberadaan BAZNAS tingkat Provinsi/Kabupaten/Kota di sekitar tempat tinggal saya.

d. Programmes and activities offered by government-sponsored zakat agency in my

290 Appendices

hometown are not interesting. Program-program dan kegiatan-kegiatan pendayagunaan zakat yang dilakukan oleh BAZNAS tingkat Provinsi/Kota/Kabupten di tempat tinggal saya kurang menarik.

e. I do not know individuals who manage the government-sponsored zakat agency in my hometown. Saya tidak mengenal orang-orang yang mengelola BAZNAS tingkat Provinsi/Kota/Kabupaten tempat tinggal saya.

f. If I give my zakat to the government-sponsored zakat agency in my hometown, I will not know the usage of zakat that I give to them. Apabila saya memberikan zakat kepada BAZNAS tingkat Provinsi/Kota/Kabupaten, saya tidak dapat mengetahui penggunaan dana zakat yang telah saya berikan.

g. If I give my zakat to the government-sponsored zakat agency in my hometown, I will not know the beneficiaries of my zakat. Apabila saya memberikan zakat kepada BAZNAS tingkat Provinsi/Kota/Kabupaten, saya tidak dapat mengetahui Mustahik yang menerima dana zakat yang telah saya berikan.

h. Zakat was deducted from my salary by my employer and was not given to a government-sponsored zakat agency (default option from my employer). Pemberi kerja memotong langsung zakat dari penghasilan saya dan menyerahkan zakat tersebut ke amil zakat selain BAZNAS tingkat Provinsi/Kota/Kabupaten.

i. Other, please specify ……………………………………………… Lain-lain, mohon dijelaskan ……………………………………………

2c Why do you not give most or all zakat to a private zakat agency? (You may indicate more than one answer) Mengapa Anda tidak memberikan seluruh atau sebagian besar kewajiban zakat Anda kepada Lembaga Amil Zakat? (Anda dapat memilih lebih dari satu jawaban). a. Giving zakat to a private zakat agency is less convenient than giving zakat

directly to a government-sponsored zakat agency. Memberikan zakat kepada Lembaga Amil Zakat kurang praktis apabila dibandingkan dengan memberikan zakat langsung ke mstahik atau Takmir Masjid.

b. If I give my zakat to the government-sponsored zakat agency in my hometown, I can not help the beneficiaries who live in my neighbourhood. Apabila saya memberikan zakat kepada BAZNAS tingkat Provinsi/Kota/Kabupaten, saya tidak dapat membantu Mustahik yang ada di sekitar tempat tinggal saya.

c. I do not know the existence of private zakat agency in my hometown.

Appendices 291

Saya tidak mengetahui keberadaan Lembaga Amil Zakat di tempat tinggal saya d. Programmes and activities offered by private zakat agencies in my hometown are

not interesting. Program-program dan kegiatan-kegiatan pendayagunaan zakat yang dilakukan oleh Lembaga Amil Zakat kurang menarik.

e. I do not know individuals who manage private zakat agencies in my hometown. Saya tidak mengenal orang-orang yang mengelola Lembaga Amil Zakat.

f. If I give my zakat to a private zakat agency in my hometown, I will not know the usage of zakat that I give to them. Apabila saya memberikan zakat kepada Lembaga Amil Zakat, saya tidak dapat mengetahui penggunaan dana zakat yang telah saya berikan.

g. If I give my zakat to a private zakat agency in my hometown, I will not know the beneficiaries of my zakat. Apabila saya memberikan zakat kepada Lembaga Amil Zakat, saya tidak dapat mengetahui Mustahik yang menerima dana zakat yang telah saya berikan.

h. Zakat was deducted from my salary by my employer and was not given to a private zakat agency (default option from my employer) Pemberi kerja memotong langsung zakat dari penghasilan saya dan menyerahkan zakat tersebut ke amil zakat selain Lembaga Amil Zakat.

i. Other, please specify ……………………………………………….…. Lain-lain, mohon dijelaskan ………………………………

j. Go to PART B (Skip Questions No. 3a, 3b, 3c, 4a, 4b, and 4c)

k. Silahkan lanjutkan ke Bagian B (Anda tidak perlu menjawab pertanyaan No. 3a, 3b, 3c, 4a, 4b, dan 4c)

3a Why do you give all or most zakat to a government-sponsored zakat agency? You may indicate more than one answers. Mengapa Anda memberikan seluruh atau sebagian besar zakat Anda kepada BASNAS Provinsi/Kabupaten/Kota? Anda dapat memilih lebih dari satu jawaban. a. Because that government-sponsored zakat agency is near my home.

(Karena lokasi lembaga tersebut dekat dengan tempat kediaman saya) b. Because that government-sponsored zakat agency is managed by trustworthy

individuals. (Karena lembaga tersebut dikelola oleh orang yang dapat dipercaya)

c. Because the representatives of government sit in that organisation (Karena perwakilan pemerintah terlibat dalam pengelolalaan lembaga zakat tersebut).

d. Because that government-sponsored zakat agency has a well-known reputation. (Karena lembaga pengelola zakat tersebut terkenal)

e. Because that government-sponsored zakat agency is able to deal with a substantial amount of donations. (Karena lembaga pengelola zakat tersebut mampu mengelola dana zakat dalam

292 Appendices

jumlah yang besar). f. Because that government-sponsored zakat agency is transparent on how they

used zakat funds. (Karena lembaga pengelola zakat tersebut transparan dalam penggunaan dana zakat)

g. Because zakat is deducted from my salary and given to that organisation by my employer (default option of employer). (Karena zakat dipotong langsung oleh pemberi kerja dan oleh pemberi kerja disalurkan ke lembaga pengelola zakat tersebut.)

h. Because it is convenience to give zakat to that organisation. (Karena mudah memberikan zakat ke lembaga pengelola zakat tersebut).

i. Because that organisation is accountable in zakat collection and distribution (Karena organisasi tersebut tranparent dalam penerimaan dan penyaluran zakat).

j. Other, please specify ……. Lainnya, mohon dijelaskan ….

3b Why do you not give most or all zakat directly to beneficiaries or a local Imam? (You may indicate more than one answer) Mengapa Anda tidak memberikan seluruh atau sebagian besar kewajiban zakat Anda langsung kepada mustahik atau Takmir Masjid? (Anda dapat memilih lebih dari satu jawaban). a. Giving zakat to directly to beneficiaries or local Imams is less convenient than

giving zakat a government-sponsored zakat agency. Memberikan zakat langsung kepada Mustahik atau Takmir Masjid kurang praktis apabila dibandingkan dengan memberikan zakat kepada BAZNAS tingkat Provinsi/Kota/Kabupaten.

b. My local Imam is less transparent in providing information about the amount of zakat received and distributed that government-sponsored zakat agencies. Takmir Masjid kurang transparan dalam menyediakan informasi tentang zakat yang diterima dan disalurkan apabila dibandingkan dengan BAZNAS tingkat Provinsi/Kota/Kabupaten

c. Because my local Imam is unable to deal with a substantial amount of zakat funds. Takmir Masjid tidak sanggup mengelo dana zakat dalam jumlah yang besar

d. I do not know activities that are funded by zakat collected by my local Imam. Saya tidak mengetahui kegiatan-kegiatan yang dilaksanakan oleh Takmir Masjid dalam menggunkanan dana zakat.

e. Programmes and activities offered by my local Imamprivate are not interesting. Program-program dan kegiatan-kegiatan pendayagunaan zakat yang dilakukan Takmir Masjid kurang menarik.

f. Zakat was deducted from my salary by my employer and was not given to a

Appendices 293

private zakat agency (default option from my employer) Pemberi kerja memotong langsung zakat dari penghasilan saya dan menyerahkan zakat tersebut kepada BAZNAS tingkat Provinsi/Kota/Kabupaten.

g. Other, please specify ………………………………………………………… Lain-lain, mohon dijelaskan ……………………………………………………

3c Why do you not give most or all zakat to a private zakat agency? (You may indicate more than one answer) Mengapa Anda tidak memberikan seluruh atau sebagian besar kewajiban zakat Anda kepada Lembaga Amil Zakat? (Anda dapat memilih lebih dari satu jawaban). l. Giving zakat to a private zakat agency is less convenient than giving zakat

directly to a government-sponsored zakat agency. Memberikan zakat kepada Lembaga Amil Zakat kurang praktis apabila dibandingkan dengan memberikan zakat ke BAZNAS tingkat Provinsi/Kota/Kabupaten.

m. Because zakat should be given to a zakat agency created by government. Zakat seharusnya diberikan kepada pemerintah atau lembaga pengelola zakat yang dibentuk pemerintah.

n. I do not know the existence of private zakat agency in my hometown. Saya tidak mengetahui keberadaan Lembaga Amil Zakat di tempat tinggal saya

o. Programmes and activities offered by private zakat agencies in my hometown are not interesting. Program-program dan kegiatan-kegiatan pendayagunaan zakat yang dilakukan oleh Lembaga Amil Zakat kurang menarik.

p. I do not know individuals who manage private zakat agencies in my hometown. Saya tidak mengenal orang-orang yang mengelola Lembaga Amil Zakat.

q. If I give my zakat to a private zakat agency in my hometown, I will not know the usage of zakat that I give to them. Apabila saya memberikan zakat kepada Lembaga Amil Zakat, saya tidak dapat mengetahui penggunaan dana zakat yang telah saya berikan.

r. If I give my zakat to a private zakat agency in my hometown, I will not know the beneficiaries of my zakat. Apabila saya memberikan zakat kepada Lembaga Amil Zakat, saya tidak dapat mengetahui Mustahik yang menerima dana zakat yang telah saya berikan.

s. Zakat was deducted from my salary by my employer and was not given to a private zakat agency (default option from my employer) Pemberi kerja memotong langsung zakat dari penghasilan saya dan menyerahkan zakat tersebut ke amil zakat selain Lembaga Amil Zakat.

t. Other, please specify …………………………………. Lain-lain, mohon dijelaskan ………………………………

Go to PART B (Skip Questions No 4a, 4b and 4c)

294 Appendices

(Silahkan lanjutkan ke Bagian B (Anda tidak perlu menjawab pertanyaan nomor 4a, 4b and 4c)

4a Why do you give all or most zakat to a private zakat agency (LAZ)? You may indicate more than one answer. Mengapa Anda memilih memberikan seluruh atau sebagian besar zakat kepada LAZ? (Anda dapat memilih lebih dari satu jawaban). a. Because it close or near my home.

(Karena kantor lembaga pengelola zakat tersebut dekat dengan tempat kediaman saya)

b. Because that organisation is managed by trustworthy individuals. (Karena lembaga pengelola zakat tersebut dikelola oleh orang-orang yang dapat dipercaya)

c. Because that organisation has a well-known reputation. (Karena lembaga pengelola zakat tersebut memiliki reputasi yang terkenal)

d. Because that organisation is able to deal with a substantial amount of donations (Karena lembaga pengelola zakat tersebut mampu mengurus donasi dalam jumlah besar)

e. Because that organisation is transparent on how they used zakat. (Karena lembaga pengelola zakat tersebut transparan dalam pengunaan dana zakat)

f. Because zakat is deducted from my salary and given to that organisation by my employer (default option of employer). (Karena zakat dipotong langsung oleh pemberi kerja dan oleh pemberi kerja disalurkan ke lembaga pengelola zakat tersebut.)

g. Because it is convenience to give zakat to that organisation (Karena memberikan zakat ke lembaga pengelola zakat tersebut dapat dilakukan dengan mudah.)

h. Other, please specify ……. (Lainnya, mohon dijelaskan ….) Go to PART B (Silahkan lanjutkan ke Bagian B)

4b Why do you not give most or all zakat directly to beneficiaries or a local Imam? (You may indicate more than one answer) Mengapa Anda tidak memberikan seluruh atau sebagian besar kewajiban zakat Anda langsung kepada mustahik atau Takmir Masjid? (Anda dapat memilih lebih dari satu jawaban). a. Giving zakat to directly to beneficiaries or local Imams is less convenient than

giving zakat a private zakat agency. Memberikan zakat langsung kepada Mustahik atau Takmir Masjid kurang praktis apabila dibandingkan dengan memberikan zakat kepada lembaga amil zakat.

b. My local Imam is less transparent in providing information about the amount of zakat received and distributed than private zakat agencies.

Appendices 295

Takmir Masjid kurang transparan dalam menyediakan informasi tentang zakat yang diterima dan disalurkan bila dibandingkan dengan lembaga amil zakat.

c. Because my local Imam is unable to deal with a substantial amount of zakat funds. Takmir Masjid tidak sanggup mengelola dana zakat dalam jumlah yang besar

d. I do not know activities that are funded by zakat collected by my local Imam. Saya tidak mengetahui kegiatan-kegiatan yang dilaksanakan oleh Takmir Masjid dalam menggunkanan dana zakat.

e. Programmes and activities offered by my local Imam are not interesting. Program-program dan kegiatan-kegiatan pendayagunaan zakat yang dilakukan Takmir Masjid kurang menarik apabila dibandingkan dengan program pendayagunaan zakat yang dibuat oleh lembaga amil zakat.

f. Zakat was deducted from my salary by my employer and was not given to a private zakat agency (default option from my employer) Pemberi kerja memotong langsung zakat dari penghasilan saya dan menyerahkan zakat tersebut ke Lembaga Amil Zakat.

g. Other, please specify ………………………………………………. Lain-lain, mohon dijelaskan ……………………………………………

4c Why do you not give most or all zakat to a government-sponsored zakat agency in your hometown? (You may indicate more than one answer) Mengapa Anda tidak memberikan seluruh atau sebagian besar kewajiban zakat Anda kepada Badan Amil Zakat Nasional tingkat Provinsi/Kabupaten/Kota di tempat tinggal Anda? (Anda dapat memilih lebih dari satu jawaban). j. Giving zakat to a government-sponsored zakat agency is less convenient than

giving zakat directly to a private zakat agency. Memberikan zakat kepada Badan Amil Zakat Nasional tingkat Provinsi/Kabupaten/Kota adalah kurang praktis apabila dibandingkan dengan memberikan zakat kepada lembaga amal zakat.

k. I do not know the existence of government-sponsored zakat agency in my hometown Saya tidak mengetahui keberadaan Badan Amil Zakat Nasional tingkat Provinsi/Kabupaten/Kota di sekitar tempat tinggal saya.

l. Programmes and activities offered by government-sponsored zakat agency in my hometown are not interesting. Program-program dan kegiatan-kegiatan pendayagunaan zakat yang dilakukan oleh Badan Amil Zakat Nasional tingkat Provinsi/Kota/Kabupten di tempat tinggal saya kurang menarik.

m. I do not know individuals who manage the government-sponsored zakat agency in my hometown. Saya tidak mengenal orang-orang yang mengelola Badan Amil Zakat Nasional

296 Appendices

tingkat Provinsi/Kota/Kabupaten tempat tinggal saya. n. If I give my zakat to the government-sponsored zakat agency in my hometown, I

will not know the usage of zakat that I give to them. Apabila saya memberikan zakat kepada Badan Amil Zakat Nasional tingkat Provinsi/Kota/Kabupaten, saya tidak dapat mengetahui penggunaan dana zakat yang telah saya berikan.

o. If I give my zakat to the government-sponsored zakat agency in my hometown, I will not know the beneficiaries of my zakat. Apabila saya memberikan zakat kepada Badan Amil Zakat Nasional tingkat Provinsi/Kota/Kabupaten, saya tidak dapat mengetahui Mustahik yang menerima dana zakat yang telah saya berikan.

p. Zakat was deducted from my salary by my employer and was not given to a government-sponsored zakat agency (default option from my employer). Pemberi kerja memotong langsung zakat dari penghasilan saya dan menyerahkan zakat tersebut ke amil zakat selain Badan Amil Zakat Nasional tingkat Provinsi/Kota/Kabupaten.

q. Other, please specify …………………………………………………… Lain-lain, mohon dijelaskan ……………………………………………

Part B: The following set of questions focus on the concept of accountability in general and in the context of zakat collection and distribution

Part B: Pertanyaan-pertanyaan berikut terkait tentang konsep akuntabilitas dalam konteks lembaga pengelola zakat

5 Based on your understanding, what is the meaning of accountability? Menurut pemahaman Anda, apakah yang dimaksud dengan akuntabilitas? ......................................................................................................................

6

Do you think that individuals or organisations that collect and distribute zakat should be accountable to their stakeholders? Menurut pendapat Anda, apakah lembaga-lembaga yang mengumpulkan dan menyalurkan zakat seharusnya menunjukan akuntabilitas kepada para pemangku kepentingan? a. Yes, why?

Please, explain .............................................................................. Please proceed to question No.7 (Ya, mengapa? Mohon jelaskan, .................................................................... Silahkan lanjutkan ke pertanyaan No.7)

b. No, why not? Please, explain ......................................................................................... Please proceed to question No. 9 (Tidak, mengapa tidak? Mohon jelaskan, .................................................... Silahkan lanjutkan ke pertanyaan No.9)

7 To whom a zakat agency should be accountable? You may indicate more than one stakeholder

Appendices 297

Menurut pemahaman Anda, kepada siapakah lembaga pengelola zakat seharusnya bertanggung jawab? (Anda boleh memilih lebih dari satu jawaban)

a. God (Tuhan) b. Government / Minister of Religious Affair (Pemerintah dan Kementrian Agama) c. Parliament (DPR) d. Indonesian Ulema Council (Majelis Ulama Indonesia) e. The Central BAZNAS (BAZNAS Pusat) f. Peak Body (Forum Zakat) g. Boards (Dewan Pembina) h. Donors (Muzakki) i. Beneficiaries (Mustahiq) j. Volunteers (Sukarelawan) k. Media (Media) l. Public (Masyarakat) m. Other (please specify, ……….…), (Lainnya, mohon sebutkan ………………)

298 Appendices

8 What is the scope of accountability of zakat agencies?

Should zakat agencies be accountable in these elements of

accountability scope?

Apakah pengelola zakat harus bertanggung jawab dalam elemen

akuntabilitas berikut ini?

Plaese indicate

your answer

by giving a tick

mark (√) Silahkan memberi

tanda centang (√) pada pilihan Anda

If you were asked to evaluate the level of importance of these elements

of accountability for zakat accountability, what level of

importance would you give to the following items?

Berapa nilai yang Anda berikan untuk area akuntabilitas berikut ini?

Silahkan lingkari atau silang jawaban pilihan Anda

Not

Impo

rtan

t T

idak

Pen

ting

Les

s Im

port

amnt

K

uran

g Pe

ntin

g

Med

ium

Se

dang

Impo

rtan

t Pe

ntin

g

Ver

y Im

port

ant

Sang

at P

entin

g

Yes Ya

No Tidak 1 2 3 4 5

Finances For example, to demonstrate that resources are used appropriately and as designated purposes Akuntabel dalam hal Pengelolaan Keuangan Misalnya, melaporkan bahwa pengelolaan keuangan dilakukan secara cermat.

1 2 3 4 5

Amil Fund For example, amil fund is accounted appropriately and used solely to finance the activities of people or organisation that collect zakat Dana Amil Misalnya, penggunan dana amil telah dipertanggungjawabkan dan hanya digunakan untuk operasional organisasi

1 2 3 4 5

Ethics For example, to treat ethically their beneficiary Etika Misalnya, amil zakat menunjukan perilaku yang beretika dalam memperlakukan mustahik

1 2 3 4 5

Syari’ah Accountability For example, the administration of zakat complies with Syari’ah Requirements Akuntabel dalam hal Syari’ah Misalnya, patuh terhadap ketentuan Syari’ah dalam pengelolaan zakat

1 2 3 4 5

Appendices 299

Legal Accountability For example, all government regulations about zakat agency is satisfied Hukum dan Peraturan Perundangan Misalnya, organisasi pengelola zakat seharusnya telah mendapatkan izin dari Pemerintah.

1 2 3 4 5

Governance For example, governance of an organisation that collect/receive zakat should follow best practices Tata Kelola Organisasi Misalnya. tata kelola lembaga zakat mengikuti praktek-praktek terbaik

1 2 3 4 5

Effectiveness For example, ability to execute every programme Efektifitas Misalnya, mampu menjalankan kegiatan-kegiatan yang telah direncanakan

1 2 3 4 5

Efficiency For example, to conduct activities efficiently (measured by the inputs of every programme) Efisiensi Misalnya, melaksanakan kegiatan dengan efisien (diukur dengan input yang digunakan untuk melaksanakan satu kegiatan atau program)

1 2 3 4 5

Outcome For example, to account for the impacts of their activities to their beneficiaries and society Outcome Misalnya, bertanggung jawab atas dampak yang ditimbulkan dari kebijakan yang diambil oleh pengelola zakat terhadap kesejahteraan mustahik dan masyarakat

1 2 3 4 5

Mission For example, to demonstrate that that every activity is in line with the mission of organisation Misi Organisasi Misalnya, bertanggung jawab atas tercapainya misi organisasi.

1 2 3 4 5

Part C: The next questions are related to the role of annual reports on the accountability of zakat agencies Part C: Pertanyaan-pertanyaan berikut ini tentang peran laporan tahunan dalam akuntabilitas lembaga zakat

300 Appendices

9 Do you read annual reports or financial reports produced by individuals or organisations that collect your zakat? Apakah Anda membaca laporan tahunan dan laporan keuangan yang dibuat oleh orang atau organisasi yang menerima zakat Anda? a. Yes, please proceed to question No. 10

Ya, silahkan lanjutkan ke pertanyaan No.10

b. No, please proceed to question No. 11 Tidak, silahkan lanjutkan ke pertanyaan No.11

10 Why do you read annual reports or financial reports produced by individuals or organisations that collect your zakat? ................................................................................................................................. Mengapa Anda membaca laporan tahunan dan laporan keuangan yang dibuat oleh orang atau organisasi yang menerima zakat Anda? ................................................................................................................................. Please proceed to question No. 11 Silahkan lanjutkan ke pertanyaan No.11

11 Why do you not read the annual reports or financial statements of zakat agencies?

(You may give more than one answers) Mengapa Anda tidak membaca laporan tahunan atau laporan keuangan lembaga zakat (Anda dapat memilih lebih dari satu jawaban): a. I do not understand financial information presented in annual reports or financial

statements Saya tidak memahami informasi keuangan yang disajikan dalam laporan tahunan atau laporan keuangan

b. I am not interested in the affairs of zakat agencies Saya tidak tertarik dengan kegiatan-kegiatan yang dilakukan lembaga pengelola zakat

c. I believe that the government has monitor the activities of zakat agencies Saya percaya bahwa pemerintah telah mengawasi kegiatan operasional lembaga pengelola zakat

d. The content of annual reports does not contribute to my information needs Isi laporan tahunan tidak sesuai dengan kebutuhan informasi saya

e. I rely on other sources of information about zakat agencies. Saya bergantung pada sumber informasi lainnya.

f. I trust individuals that administer zakat agencies. Saya mempercayai pengurus lembaga pengelola zakat.

g. I do not have access to annual reports of financial statements Saya tidak mempunyai akses terhadapa laporan tahunan dan keuangan

h. I do not give zakat to government-sponsored zakat agencies or private zakat agencies Saya bergantung kepada orang lain sebagai sumber informasi tentang kegiatan-kegiatan lembaga penyalur zakat

Appendices 301

i. Other (please specify), ----------------------------------------------------------- Lainnya, mohon sebutkan, -------------------------------------------------------

Part D: The next questions are related to the dissemination of information to the stakeholders Bagian D: Pertanyaan-pertanyaan berikut terkait tentang penyebarluasan informasi kepada para pemangku kepentingan

12 If you were asked to rate the importance of the following sources of information for the accountability of zakat agencies, how much importance do you place on the following sources of information about zakat agencies (1 is not important and 5 is very important)? Jika Anda diminta untuk menilai sumber informasi berikut ini dalam konteks penyebarluasan informatisi lembaga pengelola zakat, berapakah nilai yang akan Anda berikan untuk sumber-sumber informasi berikut ini (1 untuk tidak penting dan 5 untuk sangat penting)?

Source of Information (Sumber Informasi)

How do you rate the importance of the following

source of information?

Berapa nilai yang Anda berikan untuk sumber informasi berikut

ini?

Do You Have Access to these

sources of information? Apakah Anda memiliki akses

terhadap sumber

informasi tersebut

Ver

y Im

port

ant

Sang

at P

entin

g

Impo

rtan

t Pe

ntin

g

Med

ium

Se

dang

Les

s Im

port

amnt

K

uran

g Pe

ntin

g

Not

Impo

rtan

t Ti

dak

Pent

ing

Yes Ya

No Tidak

5 4 3 2 1 a. Annual reports

Laporan Tahunan b. Mass media

(television/radio/commercial magazines or newspapers) Mass Media (Televisi/Radio/Majalah dan Surat Kabar)

c. Magazines, newslletter, bulletins, or pamphlets published by zakat agencies Majalah, selebaran, bulletin atau pamphlet yang diterbitkan lembaga

302 Appendices

pengelola zakat d. Internet (website)

Internet (website) e. Verbal information from the

staff of zakat agency Informasi lisan dari pegawai lembaga zakat

f. Verbal information from a friend, a relative or a family member Informasi lisan dari teman, saudara, atau anggota keluarga lainnya

g. Public announcement in Mosques Pengumunan di Masjid-Masjid

h. Social Media (such as Twitter or Facebook) Media social seperti Facebook atau Twitter

i. Other, (please specify) … Lainya, mohon sebutkan …

13 Do you expect information listed below from zakat agencies and how do you rate the importance of the following information to be disclosed in the annual reports of zakat agencies?

(Informasi apa yang Anda harap dari lembaga pengelola zakat dan seberapa pentingkah informasi berikut ini untuk para pemangku kepentingan?)

Type of Information (Type Informasi)

How Important? Tingkat Kepentingan

Ver

y Im

port

ant

Sang

ap P

entin

g

Impo

rtan

t Pe

ntin

g

Med

ium

Se

dang

Les

s Im

port

amnt

K

uran

g Pe

ntin

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5 4 3 2 1 1. Statement of mission and objectives

Uraian tentang misi dan tujuan organisasi

2. History of the organisation Uraian tentang sejarah organisasi

3. Overview of organisation programme and

Appendices 303

activities Uraian tentang program dan aktivitas organisasi

4. Organisational structure Struktur Organisasi

5. Profile of boards, CEOs, and senior staff Profil Pengurus dan Staff Senior

6. Boards or committees’ activities (such as number of meeting) Informasi tentang aktivitas dari Dewan Pengurus

7. Information about the renumeration of Boards Informasi tentang renumerasi Dewan Pengurus

8. Future plans Informasi tentang Rencana Kerja

9. Overview of zakat agencies beneficiaries Uraian tentang penerima bantuan zakat

10. Human interest stories (information about how zakat fund help beneficiaries) Informasi tentang bagaimana zakat membantu mustahik

11. Information about how to access zakat agency services Informasi tentang bagaimana mengakses kegiatan yang ditawarkan lembaga zakat

12. Organisation policy related to the allocation resources (the proportion of zakat funds for amil and for other category of beneficiaries) Kebijakan organisasi dalam pengalokasian sumberdaya (terutama proporsi dana zakat untuk amil dan tujuh kategori mustahik lainnya)

13. Organisation policy in selecting beneficiaries including the criteria to select beneficiaries Kebijakan organisasi dalam memilih penerima zakat termasuk kriteria dalam pemilihan penerima zakat

14. Acknowledgement of donors and volunteers’ contribution Penghargaan atas sumbangan dari mustahik dan sukarelawan

15. Auditor’s report or other types of assurance reports

304 Appendices

Laporan Auditor Independen dan laporan kepatuhan lainnya

16. Audited financial statements Laporan Keuangan yang telah Diaudit

17. Total revenue (zakat received) and sources of revenue Total penerimaan termasuk informasi perincian sumber-sumber penerimaan

18. The amount and the usage of amil fund Jumlah dana zakat untuk amil dan perincian penggunaanya

19. The proportion of zakat funds for beneficiaries (except amil) Proportion dana zakat untuk mustahik selain amil berserta perinciannya

20. Administration and fundraising costs Biaya administrasi dan biaya untuk mengumpulkan zakat

21. Revenue and usage of other funds (except zakat fund) Penerimaan dan pengunaan dana infak dan sedekah

22. Related parties transcations Informasi tentang transaksi dengan pihak-pihak terkait.

23. Financial performance information: Actual spending against budget Informasi tentang kinerja keuangan: Pengeluaran dibandingkan dengan anggaran

24. Non-financial performance information: the number of service provided Informasi tentang kinerja non-keuangan: Jumlah pelayanan yang diberikan dalam satu tahun

25. Other, please specify … Informasi lainnya, mohon sebutkan ……

14 Have you ever asked for information about the administration of zakat from individuals or organisations that collect your zakat? Apakah Anda pernah meminta informasi tentang pengelolaan zakat kepada orang atau organisasi yang menerima zakat Anda? a. Yes, why?

Please, explain ..............................................................................

(Ya, mengapa?

Appendices 305

Mohon jelaskan, .......................................................................................)

b. No, why not? Please, explain ..............................................................................

(Tidak, mengapa tidak? Mohon jelaskan, ........................................................................................)

15 In addition to the information already being presented by zakat agencies; do you have any suggestions about information that you think would be useful and should be disclosed by zakat agencies? Selain informasi yang saat ini telah disajikan oleh lembaga pengelola zakat kepada masyarakat, apakah Anda memiliki saran tentang informasi yang menurut Anda berguna dan seharusnya disajikan oleh lembaga pengelola zakat?

Part E: Demographic Information Bagian E: Informasi Pribadi

16 What is your occupation? (Apa pekerjaan Anda?) a. Government employee (Pegawai Negeri Sipil) b. State-owned company employee (Pegawai BUMN/BUMD) c. Entrepreneur/Self employed (Wiraswasta) d. Professional (Profesional seperti dokter, akuntan, dan lain-lain) e. Employee of private companies (Pegawai swasta) f. Other, please specify …. (Lain-lain, mohon jelaskan ……………)

17 Which age group do you belong to? (Berapakah umur Anda?) a. Under 21 (dibawah 21) b. 21-30 c. 31-40 d. 41-50 e. 51-60 f. Over 60 (diatas 60)

18 What is your highest level of educational qualification? Tingkat Pendidikan terakhir?

a. Elementary School (SD) b. Junior high school (SMP) c. Senior high school (SMU atau sederajat) d. Diploma / Vocational Training (Diploma atau yang sederajat) e. Bachelor (Sarjana) f. Master (Magister) g. PhD (Doktor)

To recognise your participation in this study, QUT will donate AUD $1 to your preferred zakat agency. Which zakat agency is your preference: Sebagai ungkapan terima kasih atas partisipasi Anda, saya akan menyumbangkan Rp10.000,00 untuk setiap lembar survey lengkap yang dikembalikan ke Tim Peneliti. Anda dimohon untuk memilih salah satu lembaga pengelola zakat dari daftar berikut ini:

306 Appendices

a. BAZNAS Kota Bogor b. BAZ Kota Semarang c. BAZ Kota Malang d. BAZ Kabupaten Sragen e. BAZ Province Jawa Tengah f. BAZ Province DKI Jakarta g. BAZ Province Jawa Barat h. LAZ Bamuis BNI i. LAZ Al-Azhar Peduli Umat j. LAZ Dewan Dakwah k. Yayasan Al-Hilal

The research team would like to invite you to participate in an interview. In this interview, the research team would like to hear further from you about your understanding on the concept of zakat agencies accountability. If you are willing to participate in this interview, please contact the research team at XXXXX (pre-paid mobile phone number) Tim peneliti memohon Anda untuk berpartisipasi lebih lanjut dalam penelitian ini sebagai narasumber wawancara. Dalam wawancara tersebut, saya ingin mengetahui lebih lanjut mengenai pendapat Anda tentang konsep akuntabilitas. Bila Anda bersedia mohon hubungi Tim Peneliti pada nomer beeikut ini XXXX.

Thank you very much for participating in this survey. The return of completed manual questionary indicates your consent to participate in this study. (Submitting the questionary indicates your consent to participate in this study). Terima kasih telah berpartisipasi dalam penelitian ini. Pengembalian lembar survey yang telah terisi mengindikasikan bahwa Anda telah setuju untuk berpartisipasi dalam penelitian ini.

Appendices 307

Appendix D The Data Dictionary and Rules for Coding

General Coding Arrangements

(1) The results of data analysis were recorded in an Excel spreadsheet.

(2) A row was allocated for every type of information.

(3) A column was allocated for every type of medium to record the presence or

absence of a particular type of information.

(4) For annual reports, every page of the first annual report was read, if a

particular type of information listed in Appendix E was identified, “1” was

recorded in the column allocated for the first annual report. After all pages

were read, all information that was blank was coded “0”. The same process

was employed for the second and third annual reports.

(5) For magazines, every article of the first magazine was read. If a particular

type of information listed in Appendix E was identified, “1” was recorded in

the column allocated to the first magazine. After all pages were read, all

information that was blank was coded “0”. The same process was employed

for the rest of magazines.

(6) For the website of zakat agencies, every page of the website of the zakat

agency was read. If a particular type of information listed in Appendix E was

identified, “1” was recorded in the column allocated to the first website. After

all web pages were read, all information that was blank was coded “0”. The

same process was employed for the websites of other zakat agencies.

(7) For the Facebook account of zakat agencies, every post in the Facebook

account of the first zakat agency was read. If a particular type of information

listed in Appendix E was identified, “1” was recorded in the column allocated

to the first Facebook account. After 25 posts were read, the coding was ended

and all information that was blank was coded “0”. The same process was

employed for the rest of the Facebook accounts.

308 Appendices

Appendix E Type of Information Identified in Literature

No Type of Information Description

1. Overview - Organisation 1 Statement of mission and

objectives Statement of goals, statement of objectives, statement of objectives

2 History of the organisation Information about when a zakat agency was established, by whom, their original name (if applicable)

Governance Information 3 Boards and committee activities Description of board activities, such as the number

of meeting 4 Profile of Boards, CEO and

other senior staff Description of the profile of board and CEO, such as the level of education, previous experience, professional position in other organisations, professional membership, and others

5 Information about organisation structure

• Organisation chart • Description of the name of individuals who held

senior positions. 6 Remuneration of Boards, CEO

and other senior staff Description of remuneration or salary or honorarium for the members of boards, CEO and other senior staff

1. Future Plans 7 Future plans Future plans, programme information for next year,

budget information for next year, statement of quantified objectives for the next year

2. Organisation Policy and Programme

8 Organisation’s policy for selecting beneficiaries including the criteria to select beneficiaries

Information about criteria used to accept or reject funding application

9 Overview of programmes and activities

Information about the names of existing programmes and activities, the description of existing programmes and activities and the location of existing programmes and activities.


Information about how zakat agencies divides the zakat fund in relation to every category of beneficiaries

11 Information about how to access zakat agency services

Information about the procedures to obtain the assistance from zakat agencies, information about documents that are needed to support application

5. Beneficiaries 12 Overview of beneficiaries Description about the beneficiaries of zakat,

description about how zakat is distributed to every category of beneficiaries

13 Human interest stories Information about how the zakat fund increases the quality of life of beneficiaries

6. Other Non-financial Information

14 Information about related Information about financial transactions with the

Appendices 309

parties’ transaction parent organisation, other organisations that are created or owned by the same parent organisations

15 Acknowledgement of donors and volunteer’s contribution

Description to recognise and appreciate the contribution of donors, volunteers

7. Financial Information

Audited financial statements A complete set of financial statements that consist of balance sheets, statement of financial position, cash flow statement and notes to financial statements

Total revenues and sources of revenue

Total revenue and the breakdown of revenue sources, for example, revenue from zakat fund and revenue from sedekah (voluntary donations)

Usage of zakat fund for beneficiaries other than amil

Information about the distribution or usage of the zakat fund to every category of beneficiaries

Usage of other donated funds (except zakat fund)

Information about the distribution or usage of the zakat fund to every category of beneficiaries

Usage of the amil fund Detailed information about the distribution or usage of the zakat fund to every category of beneficiaries

Auditor's report or other type of assurance report

Financial auditor reports, Syari’ah auditor report

Fundraising costs The cost to raise donations 8. Performance Information

Financial performance information

Various financial performance indicators, financial ratios, such as gearing ratio, current administration costs as a percentage of total expenditure, fundraising ratio

Non-financial performance information

The number of beneficiaries that received financial and non-financial assistance

310 Appendices

Appendix F Initial Eigenvalues and Criterion Value from Monte Carlo Parallel Analysis

Initial Eigenvalues and Criterion Value from Monte Carlo Parallel Analysis for to Whom Zakat Agencies Should be Accountable

Component Number

Initial Eigenvalues Criterion Value from Monte

Carlo PCA for Parallel Analysis

Decision

1 4.505 1.3745 Accept 2 1.325 1.2788 Accept 3 1.107 1.2006 Reject

Parallel analysis was conducted based on 12 variables, 239 samples and 100 replications. Initial Eigenvalues and Monte Carlo for Parallel Analysis for the Scope of Accountability

Component Number Initial Eigenvalues

from PCA

Criterion Value from Monte Carlo PCA for Parallel

Analysis Decision

1 4.410 1.3551 Accept 2 1.147 1.2261 Reject

Parallel analysis was conducted based on 10 variables, 239 samples and 100 replication Initial Eigenvalues and Monte Carlo PCA for Parallel Analysis for Type of Information to Disseminate Accountability

Component Number

Initial Eigenvalues from PCA


Analysis Decision

1 10.225 1.6215 Accept 2 2.072 1.5240 Accept 3 1.598 1.4433 Accept 4 1.543 1.3777 Accept 5 1.141 1.3229 Reject

Parallel analysis was conducted based on 24 variables, 239 samples and 100 replication Initial Eigenvalues and Monte Carlo PCA for Parallel Analysis For Medium to Discharge Accountability

Component Number

Initial Eigenvalues from PCA


Analysis Decision

1 3.504 1.2959 Accept 2 1.576 1.2007 Accept

Parallel analysis was conducted based on 9 variables, 239 samples and 100 replication

Appendices 311

Appendix G Scree Plot

Scree Plot for to Whom Zakat Agencies Should be Accountable

312 Appendices

Scree Plot for the Scope of Accountability of Zakat Agencies

Appendices 313

Scree Plot for Type of Information to Discharge the Accountability of Zakat Agencies

314 Appendices

Scree Plot for Media to Discharge the Accountability of Zakat Agencies

Appendices 315

Appendix H Pearson Correlations of the Core Elements of Accountability

1 2 3 4 5 6 7 8 9

(1) Primary Stakeholders 1.000

(2) Secondary Stakeholders –0.478** 1.000 (3) Financial and Sacred Accountability 0.246** –0.014 1.000 (4) Performance Accountability 0.074 –0.046 0.260** 1.000

(5) Financial Information 0.186** –0.048 0.508** 0.379** 1.000 (6) Governance Information 0.105 0.048 0.378** 0.098 0.372** 1.000 (7) Performance Information 0.069 –0.053 0.357** 0.169* 0.457** 0.256** 1.000

(8) Other Information 0.119 –0.118 –0.002 0.186* 0.270** 0.161* 0.082 1.000

(9) Informal Sources 0.077 0.040 0.221** 0.027 0.186* 0.235** 0.104 0.173* 1.000

(10) Formal Sources 0.206** –0.003 0.424** 0.309** 0.516** 0.263** 0.277** 0.089 0.065

316 Appendices

Appendix I The Results of MANOVA Test for Factor Scores on to Whom Zakat Agencies Should be Accountable by the Groups of Donors Who Give to Local Imam, Government-Sponsored Zakat Agencies, and Private Zakat Agencies

Multivariate Testsa

Effect Value F

Hypothesis

df Error df Sig.

Partial Eta

Squared

Intercept Pillai's Trace 0.000 0.023b 2.000 235.000 0.978 0.000

Wilks' Lambda 1.000 0.023b 2.000 235.000 0.978 0.000

Hotelling's Trace 0.000 0.023b 2.000 235.000 0.978 0.000

Roy's Largest Root 0.000 0.023b 2.000 235.000 0.978 0.000

The

Groups of

Donors

Pillai's Trace 0.012 0.707 4.000 472.000 0.587 0.006

Wilks' Lambda 0.988 0.707b 4.000 470.000 0.588 0.006

Hotelling's Trace 0.012 0.706 4.000 468.000 0.588 0.006

Roy's Largest Root 0.012 1.423c 2.000 236.000 0.243 0.012

a. Design: Intercept + Recipient_of_zakat

b. Exact statistic

c. The statistic is an upper bound on F that yields a lower bound on the significance level.

Appendices 317

Appendix J The Results of MANOVA for Factor Scores on to Whom Zakat Agencies Should be Accountable by Demographic Attributers of Donors

Multivariate Testsa

Effect Value F Hypothesis df Error df Sig.

Partial Eta

Squared Intercept Pillai's Trace 0.013 1.406b 2.000 217.000 0.247 0.013

Wilks' Lambda 0.987 1.406b 2.000 217.000 0.247 0.013 Hotelling's Trace 0.013 1.406b 2.000 217.000 0.247 0.013 Roy's Largest Root 0.013 1.406b 2.000 217.000 0.247 0.013

Age Group Pillai's Trace 0.020 0.732 6.000 436.000 0.624 0.010 Wilks' Lambda 0.980 0.729b 6.000 434.000 0.626 0.010 Hotelling's Trace 0.020 0.726 6.000 432.000 0.629 0.010 Roy's Largest Root 0.013 0.954c 3.000 218.000 0.416 0.013

Education Pillai's Trace 0.022 2.406b 2.000 217.000 0.093 0.022 Wilks' Lambda 0.978 2.406b 2.000 217.000 0.093 0.022 Hotelling's Trace 0.022 2.406b 2.000 217.000 0.093 0.022 Roy's Largest Root 0.022 2.406b 2.000 217.000 0.093 0.022

Area of Employment

Pillai's Trace 0.024 2.666b 2.000 217.000 0.072 0.024 Wilks' Lambda 0.976 2.666b 2.000 217.000 0.072 0.024 Hotelling's Trace 0.025 2.666b 2.000 217.000 0.072 0.024 Roy's Largest Root 0.025 2.666b 2.000 217.000 0.072 0.024

Age Group * Education

Pillai's Trace 0.038 1.423 6.000 436.000 0.204 0.019 Wilks' Lambda 0.962 1.422b 6.000 434.000 0.204 0.019 Hotelling's Trace 0.039 1.422 6.000 432.000 0.205 0.019 Roy's Largest Root 0.033 2.386c 3.000 218.000 0.070 0.032

Age Group * Area of Employment


Education * Area of Employment


Age Group * Education * Area of Employment


a. Design: Intercept + AgeNew + EduDummy + OccupationDummy + AgeNew * EduDummy + AgeNew * OccupationDummy + EduDummy * OccupationDummy + AgeNew * EduDummy * OccupationDummy b. Exact statistic c. The statistic is an upper bound on F that yields a lower bound on the significance level.

318 Appendices

Appendix K The Results of MANOVA for Factor Scores on the Scope of Accountability by the Groups of Donors

Multivariate Testsa


Partial Eta



The Groups of Donors


a. Design: Intercept + Recipient_of_zakat b. Exact statistic c. The statistic is an upper bound on F that yields a lower bound on the significance level.

Appendices 319

Appendix L The Results of MANOVA for Factor Scores on the Scope of Accountability by Demographic Attributers of Donors

Multivariate Testsa

Effect Value F Hypothesis df Error df Sig. Partial Eta



Age Groups Pillai's Trace 0.048 1.488 6.000 360.000 0.181 0.024 Wilks' Lambda 0.952 1.494b 6.000 358.000 0.179 0.024 Hotelling's Trace 0.051 1.500 6.000 356.000 0.177 0.025 Roy's Largest Root 0.047 2.844c 3.000 180.000 0.039 0.045


Employment Sector




Age Group * Areas of Employment


Education * Areas of Employment


Age Groups * Education * Areas of Employment



320 Appendices

Tests of Between-Subjects Effects

Source Dependent Variable Type III Sum of Squares

df Mean Square F Sig. Partial Eta

Squared

Corrected Model Fin Acc 24.839a 15 1.656 1.735 0.048 0.126 Perform Acc 8.372b 15 0.558 0.536 0.918 0.043

Intercept Fin Acc 1.335 1 1.335 1.399 0.238 0.008 Perform Acc 1.293 1 1.293 1.241 0.267 0.007

Age Group Fin Acc 6.377 3 2.126 2.228 0.087 0.036 Perform Acc 0.746 3 0.249 0.239 0.869 0.004

Education Fin Acc 1.334 1 1.334 1.398 0.239 0.008 Perform Acc 0.154 1 0.154 0.148 0.701 0.001

Employment Sector

Fin Acc 1.688 1 1.688 1.770 0.185 0.010 Perform Acc 2.913 1 2.913 2.795 0.096 0.015



Age Group * Employment Sector


Education * Employment Sector


Age Group * Education * Employment Sector

Fin Acc 3.006 3 1.002 1.050 0.372 0.017 Perform Acc

3.567 3 1.189 1.141 0.334 0.019

Error Fin Acc 171.746 180 0.954 Perform Acc 187.578 180 1.042

Total Fin Acc 196.595 196 Perform Acc 195.966 196

Corrected Total Fin Acc 196.585 195 Perform Acc 195.950 195

a. R Squared = .126 (Adjusted R Squared = .054) b. R Squared = .043 (Adjusted R Squared = -.037)

Appendices 321

Appendix M The Results of MANOVA for Factor Scores on Type of Information by the Groups of Donors

Multivariate Testsa







322 Appendices

Appendix N The Results of MANOVA for Factor Scores on Type of Information by Demographic Attributers of Donors

Multivariate Testsa


Partial Eta



Age Group Pillai's Trace 0.058 0.927 12.000 564.000 0.519 0.019 Wilks' Lambda 0.943 0.923 12.000 492.401 0.524 0.019 Hotelling's Trace 0.060 0.918 12.000 554.000 0.529 0.019 Roy's Largest Root 0.035 1.625c 4.000 188.000 0.170 0.033


Employment Sector



Pillai's Trace 0.007 0.114 12.000 564.000 1.000 0.002 Wilks' Lambda 0.993 0.113 12.000 492.401 1.000 0.002 Hotelling's Trace 0.007 0.112 12.000 554.000 1.000 0.002 Roy's Largest Root 0.004 0.167c 4.000 188.000 0.955 0.004








Appendices 323

Appendix O The Results of MANOVA for Factor Scores on Type of Information by the Groups of Donors

Multivariate Testsa




The Group of Donors



324 Appendices

Appendix P The Results of MANOVA for Factor Scores on Type of Information by Demographic Attributers of Donors

Multivariate Testsa






Employment Sector











Appendices 325

Appendix Q The Results of MANOVA for Factor Scores on Medium to Discharge Accountability by the Groups of Donors

Multivariate Testsa

Effect Value F Hypothesis df Error df Sig. Partial Eta Squared

Intercept Pillai's Trace 0.001 0.051b 2.000 188.000 0.950 0.001 Wilks' Lambda 0.999 0.051b 2.000 188.000 0.950 0.001 Hotelling's Trace 0.001 0.051b 2.000 188.000 0.950 0.001 Roy's Largest Root 0.001 0.051b 2.000 188.000 0.950 0.001




326 Appendices

Appendix R The Results of MANOVA for Factor Scores on Medium to Discharge Accountability by Demographic Attributers of Donors

Multivariate Testsa


Partial Eta





Employment Sector











Appendices 327

Appendix S Cross-tabulation of Respondents by Demographic Profiles

Cross-tabulation of the groups of respondents who give to local Imams, government-sponsored zakat agencies and private zakat agencies by employmen sectors Employment

Sectors Local Imam BAZNAS LAZ Total

F % F % F % F % Government Employee 138 0.59 37 0.16 27 0.12 202 84.5 State-owned Companies Employee

8 0.03 2 0.01 2 0.01 12 5.0

Private Companies or Self Employed

2 0.01 3 0.01 9 0.04 14 5.9

Others 3 0.01 1 0.01 2 0.01 6 2.6

Total 151 0.64 43 0.19 40 0.18 234 100 Cross-tabulation of the groups of respondents who give to local Imams, government-sponsored zakat agencies and private zakat agencies by age category

Age Category

Local Imam BAZNAS LAZ Total F % F % F % F %

≤ 20 3 1.28 0 0 0 0 3 1.3 21–30 34 14.47 5 2.13 9 3.83 48 20.10 31–40 46 19.57 18 7.66 15 6.38 79 33.10 41–50 40 17.02 13 5.53 9 3.83 62 25.90 51–60 29 12.34 7 2.98 6 2.55 42 17.60 ≥ 60 0 0 0 0 1 0.43 1 0.4 Total 152 67.68 43 18.30 40 17.02 235 100

Cross-tabulation of the groups of respondents who give to local Imams, government-sponsored zakat agencies and private zakat agencies by the level of education

Education Local Imam BAZNAS LAZ Total F % F % F % F %

Junior High School 0 0 0 0 1 0.43 1 0.4 Senior High School 13 5.53 5 2.13 3 1.28 21 8.8 Diploma 23 9.79 2 0.85 5 2.13 30 12.6 Bachelor Degree or Higher

116 49.36 36 15.32 31 13.19 183 76.6

Total 152 64.68 43 18.30 40 17.02 235 100

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