1. What is IRUSA’s relationship with Islamic Relief Worldwide (IRW)? Is it true that IRUSA’s and IRW’s administrative fees together amount to 44 to 53 cents per dollar?
The majority of our international projects are implemented through Islamic Relief Worldwide. IRUSA is a member of the Islamic Relief Worldwide federation, along with members from 12 other countries, that contribute to projects and decisions made by the federation and implemented by Islamic Relief Worldwide. In order to facilitate the implementation of programs by Islamic Relief Worldwide and/or other partners, additional fees may apply to cover costs incurred at the administrative and programmatic levels.
That being said, IRUSA’s overall administrative fee is 16.1%, based on our 2020 Audited Financial Statement. Zakat-specific donations incur a standard administrative fee of 12.5% from IRUSA in adherence with Islamic jurisprudence.
The additional fees applied by IRW vary from program to program based on a number of items, including, for example, the complexity of implementation and project location. However, these additional programmatic fees do not exceed 7% of the project’s total expenditure. Of that 7%, IRW receives 4% from IRUSA at the specific project level, and, then, can apply to receive the final 3% for additional programmatic purposes. These are considered programmatic costs because they are the costs IRW incurs to manage the implementation of the program as the global secretariat responsible for implementation of programs of the federation.
Additionally, there are program-related expenses that occur in the field offices which are fundamentally required to implement the actual programs and benefit the people we serve. These additional costs go towards the field operations and cannot exceed more than 8% of the total program cost. When IRUSA works with IRW, we’re contracting them to implement what is objectively required to complete the project. That includes costs such as staffing that are able to identify regions and individuals most in need, the process of distributing funding, and collecting accurate reports and data to ensure we have effective and impactful programming in place as well as the materials, equipment and items needed to implement the program. This allows us to ensure that donors can be confident that their generous donations are being used both efficiently and effectively.
Moreover, IRW very rarely partners with other local organizations to implement the programs on their behalf thereby requiring additional administrative costs incurred by those local partners. The vast majority of IRUSA’s programs implemented internationally are implemented by Islamic Relief Worldwide. In very limited and rare circumstances, IRW does work with other local organizations when it is determined that that is the most-efficient and most-effective way to render aid for those in need.
2. What is Islamic Relief’s federation model and how does it compare to other models in the sector?
IRUSA is a member of a global federation of international relief and development organizations that operate in over 40 countries across the world: 12 of those are considered member organizations. They operate independently in their country but work together to serve a global humanitarian and development mission.
You can read more about the Islamic Relief Worldwide governance structure here: islamic-relief.org/family-governance.
Our model allows us to be able to utilize our collective resources so that we can scale up our programs and operations in more countries.
There are other models in which humanitarian organizations operate.
For instance, there is one model in which an international organization has and operates its own field offices in multiple countries directly. In such a situation, the organization is responsible for all costs of the field operations in the countries where they operate. This positions them so they are directly responsible for all costs and makes scaling their work to new countries dependent on their ability for that one organization to raise enough funds to grow and impact more communities in need of assistance.
A second example is an organization that partners with other international or national non-governmental organizations (NGOs) or local community based organizations to implement programs. Those organizations may have their headquarters based in the United States but end up partnering with other organizations to implement the work on their behalf. In this circumstance, those organizations also pay for the administrative costs of their partner organizations. This model allows those organizations to support programs in more countries; however, they have less direct oversight of the programs and must pay for the administrative and operational costs of those implementing partners which helps build the partner organizations capacity rather than their own capacity.
Additionally, a third model is a combination of the first and second example. Where organizations have a few field office operations under their direct oversight and also work in other countries through partnerships. This has both the positives and negatives already mentioned above.
We prefer our model, because we are able to use the collective resources of the 12 federated members to fund the field operations and split the cost of those field offices. This significantly lessens the burden of the costs of each field operation on the membership of the federation and allows Islamic Relief member offices to use more money to support more programs assisting people in need.
For instance, instead of IRUSA covering the total costs of a field office in Yemen, we share that cost with Islamic Relief federated members in Canada, UK, Germany, Sweden, Australia, Malaysia, Switzerland, Italy, Spain, South Africa, Norway, and Mauritius. This model takes place in over 30 countries where we have direct field operations as a global federation. We believe this model serves the donor best as it saves money for the donor due to the members sharing the costs of each field office and allows Islamic Relief to implement more programs in more countries to serve more people. It also improves the quality of the program implementation as this model allows for field offices to retain the expertise needed to implement the programs effectively and sustainably because the collective resources allow for the field operations to have sufficient funds to keep operations running. Furthermore, this model allows us to leverage our capacity to secure additional funding from governments and institutions. Just recently, Islamic Relief Worldwide secured $22 million in funding from the United Nations Development Program (UNDP) to support programs in Afghanistan. IRUSA is the largest funder for programs for Islamic Relief (IR) Afghanistan which allowed IR Afghanistan and IRW to be able to secure the $22 million to support many more people. This is just one example among many others.
In 2019, Islamic Relief Worldwide contracted a consultant to conduct a benchmarking analysis who found that the federation of Islamic Relief members operates at lower overhead costs than similar federated entities operating at the same scale or larger. The costs incurred are lower than the general market of federated NGOs operating at our size and scale.
3. What is IRUSA’s overall administrative fee?
IRUSA’s overall administrative fee is 16.1%, based on our 2020 Audited Financial Statement. This is calculated by taking our administrative expenses and dividing it by our total revenue and multiplying it by 100. There are multiple models of calculating overhead costs; however, this is the model most used in the industry according to generally accepted accounting principles.
That 16.1% administrative fee is used to ensure that our programming is impactful and effective and supports essential departments that keep our organization running and allow us to continue to grow, including: Legal, Finance, IT, HR, fund development, marketing, communications, volunteer engagement, orphan services, and donor services.
As published on our website, zakat-specific donations incur a standard administrative fee of 12.5% from IRUSA in adherence to Islamic jurisprudence. Donor intent is critical for us at IRUSA. Due to that, we make sure that we have separate funds for every type of Islamic giving and humanitarian cause we fundraise for, so we can properly track the donations received and expended. Specifically, we have separate Zakat funds as global and country-specific so we are able to track and administer Zakat separately from the remainder of our funds.
Based on the standard recommended by Charity Navigator, one of the leading charity-rating organizations in the US, only the most highly efficient charities have an administrative fee that is 25% or lower.
Further, More Than Giving Co, a US-based nonprofit consultant group, finds: “CharityWatch.com reports that it’s reasonable for most charities to spend up to 40% of their budget on operating expenses—in other words, at least 60% should go to programs, and 40% should go to everything else. However, charities that spend less than 40% get higher grades from CharityWatch, with those spending 25% or less on operating expenses receiving the highest ‘A’ grades.”
Based on this analysis, IRUSA’s 16.1% administrative fee makes us a highly financially efficient organization.
To provide some context, United Way has an administrative fee of 14.5%, St. Jude Children’s Research Hospital has an administrative fee of 18%, and Oxfam International has an administrative fee of 30%.
4. Does IRUSA have a zakat policy and can you share it?
Islamic Relief USA is currently generally guided by Islamic Relief Worldwide’s Zakat policy where it is applicable. We’re committed to collecting and distributing Zakat in accordance with Sharia, and in an honest and ethical manner. We believe this is paramount to fulfilling our organizational values, such as Ihsan (excellence) and Amana (custodianship).
The policy can be found here on our website: irusa.org/irw-zakat-policy
5. Is it true that IRUSA’s 990 Form from 2019 states that 31% of revenue went to administrative fees?
No, that is inaccurate. Total revenue in 2019 was nearly $89 million, but total spent on administrative costs was about $18 million, meaning that our administrative fee in 2019 was about 20%. Our 2019 990 Form was referenced although we do have a more recent 2020 990 Form available on our website.
The fluctuation of our administrative cost in 2019 is due to a change IRUSA made in 2018. During that time, IRUSA revamped its (Gifts-In-Kind) GIK program to increase its humanitarian impact and enhance efficiency. To achieve this, we re-evaluated our GIK partnerships and reduced the number of GIK projects implemented, focusing instead on enhancing our development and emergency project portfolio. Reducing our GIK program consequently reduced our total revenues thereby increasing our administrative costs. We did this intentionally, because we were focused on the beneficiary first and foremost. We want to implement a program that will have the largest impact on the people we serve. We believe that reevaluating programs, determining if they are the best value for our beneficiaries is critical in order to fulfill our value of Ihsan (excellence).
We also prioritized the sectors we work in. This new strategy to increase sustainable programming ultimately leads to a greater impact on our beneficiaries.
Generally, in-kind donations actually bring down our total costs, and contribute to a lower administrative fee. Because of this change in strategy, our administrative fee fluctuated in 2019.
6. I heard that in-kind donations drive up IRUSA’s administrative fee. Is this true?
This is inaccurate. In-kind donations cost the organization $0 with regards to the actual donated medicine or medical supplies, which are the primary items IRUSA receives as donations for our work internationally. However, there is a cost associated with the shipping, handling, and distribution of those medical supplies, and that is counted as a program expense as it is required in order to provide these items to those in need. Generally, the costs to distribute the medical supplies and medicine are low, vary from project to project and do not account for significant amounts of program expenditure.
Additionally, in recent years, IRUSA has reduced the amount of Gifts-In-Kind (GIK) it accepts as we are working to develop a more longer-term and impactful program to assist communities with high-value medical supplies and medicine in locations where it is challenging or extremely expensive to procure those items.
The value of every donation is added to our total revenue. Generally, in-kind donations actually bring down our total costs, and contribute to a lower administrative fee. As mentioned, we have not secured significant donated items to impact our revenue or expenses in a material way over the past three years as we continue to work to revamp and upgrade the program.
7. Does IRW take additional administrative fees for orphan-related donations separate from IRUSA?
IRUSA collects a 12.5% administrative fee on orphan-related donations. IRUSA works with IRW to implement orphan-related programming, and additional fees from IRW (up to a maximum of about 15%) are applied to cover their costs incurred at the administrative and programmatic levels. Of that, 3% is used by IRW to administer the program, and 12% is used by the field staff to implement the orphan-related programming, including identifying vulnerable children; ensuring the distribution of funds to support their basic needs that may include food, clothing, healthcare, or education; and investing in their futures by providing job and skills training to help lift them and their families out of poverty. That is a total potential cost of 27.5% to make sure orphans programs operate at efficient, effective, and optimal levels to deliver the best possible support for orphaned children–in order to properly administer this program, each staff member is required to oversee the benefits provided to at least 250-400 orphans. Our federation has over 77,500 orphans sponsored across the world.
Donations to orphan-related programming is expansive as funds can go to all projects with beneficiaries that include orphans.These projects are tailored to the specific needs of the orphan families within their community and can address necessities such as education; water, sanitation, and hygiene (WASH); health and nutrition; livelihood; food security; and/or emergency response.
Finally, in order to continue facilitating the assistance of orphans, we work to provide additional services to the impacted orphans to make sure they are receiving other supplemental support in addition to their sponsorships.
8. It seems like donors can bypass administrative fees by donating to IRW. Why donate to IRUSA at all?
Donors make charitable contributions to a US 501(c)(3) tax-exempt organization like IRUSA so that they may get a tax deduction for their contribution. Donors generally cannot get a tax deduction for contributions made directly to foreign organizations like Islamic Relief Worldwide under the federal tax code.
While it is possible for donors to use vehicles such as donor advised funds (DAF) to make contributions to foreign organizations, many DAF sponsoring organizations do not allow such giving because of the complexities involved in foreign grant-making. Where a DAF sponsoring organization does engage in foreign grant-making, it will perform the same administrative processes that IRUSA engages in to ensure that funds are used in furtherance of charitable purposes (due diligence, reporting, site monitoring, anti-terrorism screening, anti-money laundering, etc.), which incur an administrative cost.
9. Can you share a clear definition of what IRUSA considers an administrative vs. a programmatic expense?
IRUSA’s overall administrative fee is 16.1%, based on our 2020 Audited Financial Statement. Zakat-specific donations incur a standard administrative fee of 12.5% from IRUSA in adherence to Islamic jurisprudence.
That 16.1% administrative fee is used to ensure that our programming is impactful and effective and supports essential departments that keep our organization running and allow us to continue to grow, including HR, IT, finance, legal, fund development, marketing, communications, volunteer engagement, orphan services, and donor services.
That means that 83.9% is invested in programs delivering relief and development, and towards the costs of implementing those projects, for people in need across the world.
10. Why is IRUSA not ratable according to CharityWatch?
According to CharityWatch:
“CharityWatch is unable to rate this organization due to how it is structured. This does not imply a negative or positive evaluation.
Some charities engage in significant financial transactions with a related organization outside of the U.S. for which sufficient audited financial information is either not available, is not presented in combined form, and/or is not based on U.S. reporting standards. CharityWatch’s methodology is not designed to measure how efficiently one entity of a charity grants funds to its affiliates, partners, or related organization(s) outside of the U.S. In many of these cases, the charity is essentially functioning as a U.S. based fundraising arm. Therefore, when applicable, CharityWatch has calculated a Cost to Raise $100 fundraising ratio for such charities.”
This is based on IRUSA’s membership in a global federation of international relief and development organizations that operate in over 40 countries across the world.
11. Is it true that any funds IRUSA raises for domestic distribution and then distributes itself incurs a 12.5% administrative fee?
No, this is inaccurate. Only zakat-specific and orphan-related donations incur a 12.5% administrative fee. IRUSA’s overall administrative fee is 16.1%, based on our 2020 Audited Financial Statement. This includes both domestic and international projects that we implement or that are implemented by Islamic Relief Worldwide and/or other partners.
12. I heard that of the newly arriving Afghan refugees that IRUSA is helping to resettle, individuals would not qualify as refugees under international law. Is this accurate?
This is incorrect. IRUSA has partnered with one of nine resettlement agencies in the United States, Church World Service (CWS), to help resettle arriving Afghan refugees. Through this federally-funded effort, all Afghan refugees undergo a rigorous interview and vetting process before they are assigned to a resettlement agency. This is a required part of the process as a portion of the funding they receive from the US Department of State (DOS), which is responsible for allocating government funding to resettle Afghan refugees.
Once an Afghan refugee is approved for resettlement through IRUSA, IRUSA assists with housing, vocational classes, ESL courses, access to free legal assistance and medical assistance, and many other services as outlined by the Afghan Placement and Assistance Program (APA).
13. Does IRUSA cover fundraising expenses through Zakat funds? Does this include salaries and other overhead, including online pay per click (PPC) advertising and direct mail?
In order for a project to be zakat-eligible it must fit within one or more of the eight criteria as defined in the Qur’an:
- The poor
- The needy
- The collectors of zakat (IRUSA is an example)
- Those whose hearts are to be won over (new Muslims or friends of the Muslim community)
- Captives or the enslaved
- Those burdened with debt
- In the cause of Allah (SWT)
Based on these eight criteria, IRUSA follows the scholarly ruling that the poor and needy are the primary categories of people to receive zakat. Given that, those are the two groups IRUSA specifically focuses on when it comes to zakat disbursement and believes it is acceptable to give zakat to individuals who are in those groups.
Additionally, IRUSA follows the scholarly ruling stating that collectors of zakat are one of the eight groups that are eligible to receive zakat. As such, IRUSA is eligible to use up to 12.5% of donations made to zakat-specific funds for core work, including administrative and operational functions, including marketing.
Our marketing and digital advertising work generates 14 to 16 dollars per dollar spent. We believe this investment is worthwhile, as it helps us grow our work to increase our total revenue of donations so we can assist more people in an impactful manner. It’s critical to understand that investing in reaching out to donors through our marketing and fundraising efforts only supports increasing our aid and assistance to those in need. These investments have allowed our organization to grow from approximately $65 million in cash revenue in 2016 to over $141 million in 2021, with an active program portfolio of over 400 projects valued at over $230 million.
This growth allows us to do more to support the people in need through our programs across the world.