Islamic Relief USA's New Zakat Policy is Built for Administrative Bloat

They found innovative ways to turn more zakat into an overhead slush fund. Will donors and Islamic Scholars buy it?

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My articles on Islamic Relief USA (IRUSA) last Ramadan helped many donors understand how zakat works at the organization. There have been some changes donors need to know about, at least in how IRUSA portrays how zakat works at the organization. 

First, the positive:

• IRUSA has a zakat policy (well, sort of, I will get to that), unlike nearly all its peers in international giving. IRUSA is the leader in its sector among Muslim groups, which is why it deserves special attention from this newsletter, not necessarily because it’s the worst. Though as I described earlier in Ramadan, it appears to be the worst in domestic overhead from the various international charities I looked at. 

• Many wildly misleading or untrue statements about overhead costs on IRUSA’s website have been removed. 

• IRUSA’s leadership seems to have been responsive to its donors, who should continue engaging with Muslim charities. Many readers reached out after my articles about zakat being expensive. IRUSA was quoting unrealistically low overhead figures to donors and showing Muslims a zakat policy they did not follow. It is important to tell donors the truth. The new zakat policy goes part of the way in rectifying this. 

Unfortunately:

• The reason IRUSA created its zakat policy (as opposed to agreeing with the policy of Islamic Relief Worldwide) was structural bloat within the organization where expenses continue to be exceptionally high, much higher than many peers, not because of some claimed “US context.” If there is a context, it is special to how IRUSA is run and how inefficient it has been as an organization while for years pretending to be the opposite in donor marketing. 

• This policy is extremely dissimilar to the Islamic Relief Worldwide zakat policy, which should be binding through all Islamic Relief affiliated organizations.

• The zakat policy does not appear to place meaningful restrictions on IRUSA management to do whatever they want with the money. 

Percentage could be fair

The top line of the policy looks somewhat fair. Instead of a 12.5% administrative fee that IRUSA used to claim was mandated by Islamic jurisprudence but was fake all this time, they raised it to 20%. This includes 10% for IRUSA costs, 2% for IRW costs (in the UK, but they combine it with field costs), and 8% for costs in the field. So, 80% goes to people in need. If donors are okay with it, that’s fine (it’s too little for me). However, that’s not what’s happening. 

IRUSA has flexibility and no real restrictions

IRUSA claims IRW has a similar zakat policy. This is not true in many important respects (see graphic below). You can read the Islamic Relief Worldwide policy here. Compare the new IRUSA policy here. IRUSA’s main job is to collect money and send it to IRW, which distributes the funds to field offices worldwide. So IRUSA is locked into IRW’s zakat policy everywhere around the world except for how money is spent in the United States, and IRUSA spends an enormous amount of money in the United States to cover overhead that was not designed with IRW’s zakat policy in mind. 

Indeed, according to IRUSA’s 990 filed in 2021, as I pointed out previously, over 38% of the organization’s spending was for domestic overhead. IRUSA does not account for how it spends zakat, not in its federally filed 990 or its publications. 

10% peg, meet 38% hole

Here is a description of some differences between the new IRUSA policy and the IRW policy, which should apply to all Islamic Relief offices worldwide. IRUSA justifies these differences because of a “US context.” This means trying to fit a 38% peg (IRUSA’s overhead) into a 10% hole (IRUSA’s new domestic expense limit) by making new holes in the 80% to eligible zakat recipients’ wall to make it all fit. Like that analogy, it starts to get messy. They need to slush money through various categories to pay for overhead. Here is a comparison of the policies to make it more clear: 

IRUSA has not changed how they conduct its operations, though thankfully, they have removed much of the false and misleading advertising and website copy. While there are examples of the IRW policy, including important restrictions, the IRUSA policy does not tie the organization’s hands or commit to reducing overhead on zakat. It simply recharacterized prohibited expenses into permissible ones. A zakat policy with no meaningful restrictions is not much of a policy. 

Inversion of zakat categories 

This is not a newsletter on fiqh, but I try to focus on the value donors can help more people or unwittingly waste their donations, which is part of our worship for Muslims. However, even a Muslim with a nodding familiarity with zakat rules might notice that IRUSA’s policy is endeavoring to palm off a program to get people into debt as compliant with a Quranic provision that encourages zakat to get people out of debt. This is some of the more Orwellian fiqh I have ever seen. What is it based on? 

Another provision had to do with freeing slaves. IRUSA justifies a grant to a “halfway house” called Green Rentry Project by IMAN in Chicago. IMAN, for its part, does not use the term “halfway house” and does not appear to have one. A halfway house is part of the carceral system in the United States, and being in one is the opposite of freedom. IRUSA appears to be wrong about the example they provided. 

The Green Reentry Project is real, but I don’t see any evidence it does anything to free anyone. The program aims to help released people obtain housing and employment skills and help set the formerly incarcerated for success. It’s possible (even likely) that the beneficiaries of such a project are eligible for zakat, but a zakat policy claims, apparently falsely, to fund a carceral system under a provision for zakat meant to free slaves is both disconcerting and sloppy. 

IRUSA should give donors more credit 

The policy should not give donors much comfort. There is no American context for why a nonprofit gets to play with zakat categories like putty to justify feeding their chronic and insatiable bloat as an institution. Zakat donors should not tolerate such an open-ended policy. 

Donors should encourage IRUSA to reduce administrative bloat that appears too dependent on zakat funds. If IRUSA has spending priorities that are not zakat-eligible per IRW’s rules, it should convince donors to give them non-zakat funds to pay for such things. IRUSA should not need a special zakat policy to give themselves a pass to do whatever they want. I think donors would understand why overhead might be higher than the previously advertised 12.5%, and they may also convince scholars this is fine. However, raising the overhead figure and instituting a swiss cheese policy so full of holes that it’s almost meaningless does not do much more than insult their donor’s intelligence. 

Zakat Transparency Report

IRUSA does extol its transparency both internally and externally. However, we don’t know how the organization accounts for zakat. We don’t know how much zakat IRUSA even collects or distributes, nor do the scholars they consulted. Islamic Relief says they are transparent, but it can do better. Future iterations of donor reports from IRUSA should account for how they spend on zakat and how they treat it differently from other donation sources. 

What Scholars Say and What Donors Buy

I hope there will be more updates on this. However, respected scholars signed on to this zakat policy, which will probably confuse some readers. How would Islamic scholars agree to unlimited overhead expenses tucked in various categories? How would they agree loaning people money is the same as getting them out of debt? From my conversations with the people involved, the scholars acted with limited information and context. This whole affair was unfortunate, but it can be a learning opportunity for Islamic scholars who are approached to add their names to things. 

I spoke with Sh. Hamza Maqbul, a former fundraiser for Islamic Relief USA, circulated his objections to the new zakat policy on social media. He does not recommend giving Islamic Relief zakat and does not think much of it counts as legitimate zakat. He does not have an axe to grind against his former employer. His views are only a result of his being learned on the fiqh of zakat. 

If you are an Islamic scholar with some knowledge or training in zakat, now is the time to say something. Is IRUSA’s boondoggle-style zakat acceptable? For Muslim scholars, it’s time to teach the Muslim community how to worship with excellence. Is this zakat policy excellence?  Is donating zakat to Islamic Relief USA a good idea?  Beyond this space, I hope learned people can give khutbas and lectures in their communities and write about how it’s appropriate to use zakat or not. Don’t let organizations like IRUSA decide unchecked since that has been a disaster.

Muslim donors should respect our scholars. However, we never need to treat them as our substitute brains. If something seems off to you, maybe you are on to something. Ask questions, investigate. Don’t be lackadaisical about your worship.

Don’t pray on a soiled carpet

As I often say in this newsletter, you won’t pray on a soiled carpet. You go about your affairs, particularly worship, as much as you can as a fallible human being, with excellence. So why donate to a nonprofit specializing in wasting money, which publishes a zakat policy that justifies wasting money?

To keep up with Muslim nonprofits and leadership, subscribe to this newsletter. If you have something to add to the conversation, please comment.

P.S. If you missed my article just before Ramadan on how Muslim nonprofits faked a statistic on Muslim suicide to use it to juice zakat donations, you should read it here.