Penny Appeal USA needs to get its story straight on zakat overhead.

They like to spend, also they spend nothing, except when they do.

Welcome to the Working Towards Ehsan Newsletter, covering Muslim Non-Profits and Leadership. This is a service of Islamic Estate Planning Attorney Ahmed Shaikh. Subscribe to this newsletter below:

Earlier in Ramadan, I wrote about various international charities collecting zakat in the United States, focusing on domestic overhead based, imperfectly, on the 990s filed by each charity. I also noted that except for Islamic Relief USA (I wrote about their extremely problematic policy here), zakat-collecting international charities operating in the United States tend not to tell donors what they do with zakat and how they spend it in writing. 

Since then, things have changed a bit with some of the charities I wrote about. Today I will focus on Penny Appeal USA (PAUSA), which looked like a big spender, with 37.8% domestic overhead or the third highest among those ranked. It appeared to respond to my article, and it’s worth looking at. 

Penny Appeal has a few different stories on overhead. 

Story 1: Overhead is good, and nonprofits should spend more on it

This particular story predates my article (first uploaded in 2021, as best as I can tell) and is about the philosophical tilt of PAUSA in the form of a letter to donors on overhead. This philosophy is like Islamic Relief USA as both lavishly spend in the United States. Both prioritize organizational growth above just about everything else. As I researched this article, I noticed PAUSA zakat advertising following me around on both the Washington Post and the New York Times websites, indicating that among various marketing strategies, the organization pays for the ethically questionable practice of surveillance advertising. 

PAUSA reaches out to the Muslim public for zakat donations. They claim all their programs are zakat eligible but also want to pay for their growth. Maybe it’s a wonderful thing to pay for a nonprofit’s growth. However, this is in no way a legitimate purpose of zakat. If you are a donor and want to give your wealth to the poor, you should have different giving priorities from someone who thinks nonprofits need more money to pay to follow people around on the internet. 

Story 2: Penny Appeal takes no overhead on zakat

This story comes from what looks like a slapped-together “zakat policy” placed days after my article. It claims there is no overhead on Zakat, but there is an overhead of 12.5% when distributed by on-the-ground partners. 

 The zakat policy is mostly a bullet-pointed summary of 9:60 of the Quran and looks exceptionally lazy. It fails to define terms or how the organization interprets them. These terms, like “in the cause of Allah” or “reconcile hearts,” can all be interpreted in wildly different ways by charities, and it’s important to know where a zakat-collecting organization stands so that a donor can intelligently evaluate the organization. 

We don’t even know what “overhead” means. We don’t know if PAUSA accounts for zakat separately if there is a separate bank account, or much of anything. There is no indication they ever consulted with Islamic scholars about how they administer zakat. There is also no separate accounting for zakat, which, unfortunately, is the norm for Muslim nonprofits. PAUSA claims overhead is paid for with the “sadaqa/ where most needed” category. Especially considering the third story below, I would like to see the math. 

I would like to see a better thought-out zakat policy that serves a purpose beyond telling donors they have one. Muslim organizations would be well served to review the Islamic Council of Europe’s zakat policy- there is no reason why it cannot be a model for zakat-collecting organizations in North America. 

Story 3: Penny Appeal USA absolutely takes overhead on Zakat

Just five days before the hastily slapped-together Zakat policy, PAUSA put up a FAQ on zakat, which as of this writing, is still up. It says: 

In line with the category c above, (‘the administrators of the funds’), a portion of the zakat we collect does go towards paying for administrative costs which enable us to collect zakat, distribute zakat, and monitor the programs we fund.

There was no “category c above.” PAUSA’s staff was probably copying something from somewhere else. 

Does Penny Appeal USA appeal only to unsophisticated zakat donors? 

Penny Appeal USA’s zakat operation looks unbearably sloppy. They seem to make conclusions without supporting them or checking to see if their claims are consistent with other claims, including, in one case, a claim made just days before.   

I hope the organization gets its act together. Zakat is a pillar of Islam and part of how Muslims worship. Muslims should take zakat seriously and expect anyone they donate zakat to take it just as seriously. 

PAUSA and other Muslim zakat collectors should issue separate accountings and a zakat transparency report, all based on a thoughtful zakat policy.