International Zakat Organizations Overhead Ranked: from Bloated to Lean

Your donation may go 30% further if you pick the right charity. Don't read this if you think charities should spend more on overhead.

Mar 23, 2023

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Ramadan Mubarak. There is obviously an interest among zakat donors to make sure as much of their donation as possible goes to the people in most need. There are no perfect apple-to-apple comparisons available when evaluating nonprofits that do international relief or development work, which is what I focus on in this article. However, I do think one metric is especially useful: how much in “overhead” is spent in the United States before any funds go overseas (or granted to domestic charitable purposes in some cases). Donors give to these organizations not to pay for hotel ballrooms, honorariums for speakers, and Google advertising, but to help the poor and needy, typically overseas.

What I Include. What I Ignore (and Why)

In this evaluation I am not counting the organization’s own distinction of “programmatic” vs “administrative” spending. Much of this is accounting gimmickry. If a nonprofit pays a legal bill or a fundraising dinner because some of the fundraising pitch counted as “education”, I don’t care if the organization’s accountant counts some of the payments as “programmatic.” It’s overhead. So, my numbers will look different from what the charities represent on their websites or annual reports.

Note that my inclusion of an organization and where they rank is just a reflection of how bloated or lean their domestic operations are, and not necessarily an endorsement of their work. We often don’t know much or anything about international operations, and those may also be lean or bloated in ways that are unrelated to US operations. I would love to see more transparency from all of these organizations when it comes to international operations.

I have included the IRS form 990 where I came up with this number if you want to check it for yourself. Where possible, the 990 came from the organization’s website. I cannot break down zakat programs since Muslim charities in the United States don’t account for zakat and with the only recent exception of Islamic Relief USA, none have written zakat policies that I was able to review.

12

38.2% Domestic Overhead for Islamic Relief USA (IRUSA) (990 Source)

The most expensive charity I looked at (I wrote about them last year here and here), though by a hair. Islamic Relief has made clear that they are spending their way to growth, explicitly citing the “overhead myth” and applying it to zakat. This is an NGO philosophy where IRUSA gives itself permission to spend donations aggressively on domestic salaries, advertising, and marketing. As a corporate culture, IRUSA is not concerned with being lean so seeing them at the top of the list is not a surprise. When an organization views financial efficiency as an obstacle to success there is no surprise you might end up with an inefficient organization. This year IRUSA has a new “zakat policy” though, which I will address in a later newsletter inshallah.

Islamic Relief has a further layer of overhead in the UK that most other nonprofits don’t have before those in need can benefit overseas, so it may be even more expensive overall than its peers.

11

38.1% Domestic Overhead for Zakat Foundation (990 Source)

Zakat Foundation has overhead proportionally about as generous as IRUSA. While the organization has no written zakat policy, the organization claims that certain programs do not have overhead, like the orphan sponsorship program. That may well mean donors who don’t donate to these programs pay the load. In any event, I would love to know how the math works here. The 990 won’t tell us.

10

37.8% Domestic Overhead for Penny Appeal USA (990 Source)

Islamic Relief’s fellow British import, Penny Appeal elsewhere has a “100% zakat policy” in other countries— this is not happening in the United States from what I can see. This organization looks like it is spending to fuel growth, and this makes individual donations less appealing given that more efficient options exist.

9

34.5% Domestic Overhead for Mercy Without Limits (990 Source)

It’s possible this organization may fare better; however, they had an unusually large “other expenses” category that was not explained.

8

28.6% Domestic Overhead for Developments in Literacy (DIL) (990 Source)

This small Pakistan-focused education non-profit seems expensive. I don’t know if it is representative of similar smaller country-specific organizations, however.

7

25.16% Domestic Overhead for US for UNHCR (990 Source)

This is not a Muslim-run organization. However, I have included them because they advertise aggressively online and claim a 100% zakat policy. UNHCR has been collecting fatwas about their zakat eligibility from around the world. This includes the seal of approval from Ali Goma, the former Mufti of Egypt and credibly accused war criminal. Zakat eligibility aside, it speaks to an organization’s values that they want to advertise such an endorsement.

6

24% Domestic Overhead for Helping Hand for Relief and Development(990 Source)

It’s possible this organization is more efficient, but the 990 was unclear about what happened to about $6.6 Million dollars put under “other expenses”, so I just made that overhead. I asked about the issue, and if I get a reply I will be sure to update this article.

5

18.4% Domestic Overhead for Mercy USA (990 Source)

This organization had a somewhat unconventional 990. Even so, it appears to be a reasonably lean organization.

4

17.67% Domestic Overhead for Muslim Aid (990 Source)

This is a small organization in terms of payroll that spends heavily on advertising and promotion.

3

12.5% Domestic Overhead for Life for Relief and Development (990 Source)

While this organization looks solid when it comes to domestic expenses, the way they arranged their 990 may have given them a bit of an advantage, and I gave them the benefit of the doubt on certain expenses.

2

11.9% Domestic Overhead for Indian Muslim Relief and Charities (IMRC) (990 Source)

Like its peers, IMRC does not have a written zakat policy. Unlike its peers, the organization’s operations are largely funded through an endowment. I am informed by management that zakat funds are not used for US-based expenses at all, however, it would be nice for donors to be told this in writing in a zakat policy.

1 8.48% Domestic Overhead for Baitulmaal (990 Source)

While Baitulmaal looks like the champ when it comes to a lean US operation, the organization has not shown this kind of performance for very long. Baitulmaal’s 2021 990 shows a massive year-over-year increase (from $4,338,767 to $33,249,497) in revenue without anything like a proportional increase in costs. The number did not look this great in previous years. A few more years of this kind of performance will demonstrate their commitment to providing the most benefit from the dollars they raise.

A Little Research Makes Your Charitable Dollar Go Further

Organizations within the Muslim charitable sector are not interchangeable. The differences between the most bloated to the leanest organizations are substantial. Some are committed to heavy spending on overhead using your donations while others want to maximize donations for those in need. All of them should focus on providing greater transparency on how zakat is used and should provide a written zakat policy and separate zakat accounting.

If anyone feels there was an oversight in my numbers or if there is a charity I should include in this list, let me know in the comments.

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