Strict penalties for those in charge of endowments when funds are mixed: Details of the new regulations
In a decisive step aimed at enhancing transparency and governance in the non-profit sector, the General Authority for Endowments a comprehensive reference document entitled "100 Questions and Answers on Endowment Matters." This document aims to put an end to the malpractices that may plague the management of some endowments. The Authority unequivocally affirmed that mixing endowment funds with the personal funds of the trustee without a legitimate legal or regulatory justification constitutes a crime warranting immediate dismissal and legal accountability.
Regulatory context to enhance governance
This regulatory move comes at a time when Saudi Arabia is undergoing a radical transformation in the management of the third sector, in line with the goals of Vision 2030, which seeks to increase the non-profit sector's contribution to the GDP. Historically, endowments (waqf) have played a pivotal role in the economic and social development of the Islamic world, but today there is an urgent need to transform endowment work from traditional individual practices to organized, institutional work subject to the highest standards of oversight and transparency.
Strict measures to protect endowment assets
The authority clarified in its document that any crime committed by the administrator that violates trust and honor, or his refusal to open a separate bank account in the name of the endowment, would subject him to dismissal and accountability through the competent judicial channels. The new regulations emphasized the following points:
- Absolute transparency: Refusal to enable the Authority’s inspectors to conduct desk or field inspections, or withholding documents, is a major reason for terminating the supervisor’s term.
- Immediate cessation: The dismissed supervisor is obliged to cease any actions related to the suspension immediately upon the issuance of the decision, and any subsequent actions are considered invalid.
- Handing over custody: The assets must be fully disclosed and handed over to the alternative trustee to ensure the continuity of the endowment work.
Lending bans and asset disposal controls
Regarding financial powers, the Authority imposed strict restrictions to protect endowment assets, prohibiting trustees from lending endowment funds to third parties except with an explicit stipulation from the endower or a court order proving the benefit. Furthermore, trustees are not permitted to dispose of endowment assets through sale or exchange except in cases of extreme necessity and with prior authorization from the competent court.
Economic and developmental impact
These measures are expected to bolster the confidence of donors and those establishing endowments, encouraging the injection of more assets into the endowment sector. The Authority has broadened the concept of endowed funds to include modern assets such as stocks, company shares, and cash, provided they are invested securely. This approach opens new horizons for the sharing economy and ensures the sustainability of benefits, as the endowment enjoys a legal personality and independent financial standing, protecting it from seizure to settle the endower's personal debts.
Social responsibility and oversight
In the context of strengthening oversight, legislation grants any beneficiary or interested party the right to file a formal complaint against a negligent administrator. The Authority affirmed that endowment rights do not expire with time and that it oversees endowments of unknown ownership to ensure their proceeds are spent on charitable causes, thus reinforcing the role of endowments as sustainable development entities that serve society and the national economy.
