1. What is Islamic Relief Canada’s overall overhead cost
Based on our most recent audited financial statements, for every dollar you give to Islamic Relief Canada, about 14 cents (or 13.8%) is incurred as overhead, split into a 3% administrative operating cost and 10.8% fundraising costs so that we can reach and help even more people in need. Our administrative costs support essential functions that keep our organization running in a reliable and compliant manner — including technology, finance, legal and compliance, donor services, human resources, volunteer engagement, government and media outreach. Fundraising costs that allow us to continue to grow include credit card processing fees, digital advertising, community events, marketing collateral, sponsorships and a grassroots fundraising team across Canada that cultivates donors and supporters.
That means 86 cents (or 86.2%) of every dollar is invested in programs delivering relief and development to those in need across the world. This is well-above the standard recommended by Charity Intelligence Canada, one of the leading charity-rating organizations in Canada, which maintains that a “reasonable range” for overhead spending is up to 35%, hence highly efficient charities are able to spend up to 65% on programs. With a 13.8% overhead cost, we fall well within the median of overhead costs for nonprofit charity organizations.
Moreover, as a member of the Humanitarian Coalition, Islamic Relief Canada receives matching funds from the government for large humanitarian crises. Our overseas affiliates are also often able to procure institutional funding that grows your gift further. This increases the power of your donation. Furthermore, a significant amount of our work is carried out by generous and hard-working volunteers who donate their time to stretch your dollars even further. Overhead percentages fluctuate every year, since it is a function of actual overhead costs as a percentage of revenue received during the year. We strive to be diligent in our spending and only invest in overhead when we are convinced it will either reduce organizational risk or enable raising more money for those we serve around the world.
2. What is Islamic Relief’s federation model and how does it compare to other models in the sector?
Islamic Relief Canada is an independent organization that is a member of Islamic Relief Worldwide, which is a global federation of Islamic Relief affiliate offices that operate in over 40 countries across the world.
You can read more about the Islamic Relief Worldwide governance structure here: islamic-relief.org/family-governance.
Our model allows us to have access to complex contexts around the world and to be able utilize our collective resources so that we can reliably scale our programs and operations to improve efficiency and value for money.
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 Canada 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. A risk with this model is that oversight of programmes on the ground can be imprecise and inadequate, which may result in misuse of funds and neglect of vulnerable communities.
There is a hybrid model where organizations have a few field office operations under their direct oversight and also work in other countries through partnerships.
We believe our model is optimal since 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 directly for people in need. Funding field offices and employing from the local population is part of a wholesome approach to development work as it enables communities to earn an income and at the same time, leverage their direct knowledge of the areas and needs of their local communities.
For instance, instead of Islamic Relief Canada covering the total costs of a field office in Yemen, we share that cost with Islamic Relief federated members in the USA, 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. This model also improves the quality of the program implementation as it allows for field offices to have the collective resources to retain the expertise needed to implement the programs effectively and sustainably. 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.
In 2019, Islamic Relief Worldwide undertook a benchmarking analysis which 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 Islamic Relief Canada’s relationship with Islamic Relief Worldwide (IRW) and how much are your overhead costs to IRW?
We are able to access remote communities that are in need around the world in the most complex environments due to the global trusted infrastructure of our primary implementing partner Islamic Relief Worldwide, through which the majority of our international projects are implemented. Islamic Relief Canada is a member of the Islamic Relief Worldwide federation, along with members from 12 other countries, which contribute to projects implemented by IRW. The primary mandate of IRW is to effectively design, implement and deliver on programs around the world. According to the Canada Revenue Agency guidelines for charities, costs that focus primarily on beneficiaries of the charity’s programs are not overhead costs but are to be classified as charitable expenses.
When Islamic Relief Canada chooses Islamic Relief Worldwide to implement its project, the activities required to design, implement and monitor every project incurs costs that are valued at 7-8% of the total project costs, which are incurred and paid to Islamic Relief Worldwide. Per the CRA’s guidelines, these are charitable costs and not overhead costs.
Additionally, there are program-related expenses that occur in the field offices which are required to implement 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. Per the CRA’s guidelines, these are charitable costs and not overhead costs.
When Islamic Relief Canada works with IRW, we’re contracting them to implement what is objectively required to complete the project. That includes costs such as staffing to identify regions and individuals most in need, the process of distributing funding, the materials, equipment and items needed to implement the program, as well as collecting accurate reports and data to ensure the effectiveness and impact of our programming. This allows us to ensure that donors can be confident that their donations are being used both efficiently and effectively.
Through the federation model – having this vast network of country presence – IRW very rarely partners with other local organizations to implement the programs on their behalf, thereby saving additional administrative costs that would be incurred by those local partners. The vast majority of Islamic Relief Canada’s programs implemented internationally are implemented by Islamic Relief Worldwide. Only in very limited and rare circumstances does IRW work with other local organizations, when it is determined that that is the most efficient and most-effective way to render aid to those in need.
4. Does Islamic Relief Canada have a Zakat policy and can you share it?
Islamic Relief Canada has a Scholar Verified Zakat Policy. 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).
5. It seems like donors can bypass administrative costs by donating to IRW. Why donate to Islamic Relief Canada at all?
Donors who make charitable contributions to a Canadian registered charity receive taxable deductions (tax receipts). Donors cannot get a tax deduction for contributions made directly to foreign organizations like Islamic Relief Worldwide under our tax laws.
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 Islamic Relief Canada 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.
6. How are some charities able to have no overhead?
It is not possible to deliver aid and long-term humanitarian programming without incurring costs.
According to Charity Intelligence Canada, overhead that is too low (below 5%) can be a cause for concern. For example, in an attempt to claim 0% overhead, some organizations will ask certain donors to designate their donations to cover overhead costs.
Claims like this can be deceptive and may not give donors the full story. Every charity requires some overhead. A nonprofit may claim 0% overhead to appeal to donors, but in reality, they do incur overhead and that cost is covered from somewhere.
In addition, overhead costs are necessary for credible financial statements and are crucial to the function of any organization: liability insurance, staff training, technology, and the costs of fundraising are all necessary costs that are accounted for within overhead. In fact, at IRC, a significant portion of our fundraising costs (approximately 2%) are credit card processing fees, which are incurred prior to us even receiving the donation. Overall, our overhead costs ensure that we have the appropriate mechanisms in place to monitor where your donation goes so that we can report back to donors and regulators in an effective manner.
7. Does Islamic Relief Canada 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:
(1) ‘al fuqara’ (the chronically poor)
(2) ‘al masakin’ (the acutely poor)
(3) ‘al amilina alayha’ (the administrators of the funds)
(4) ‘al mualafati qulubhum’ (those that incline their hearts towards good)
(5) ‘f’il riqabi’ (the freeing of captives and those in bondage)
(6) ‘al gharimina’ (those in debt)
(7) ‘f’il sabili-llahi’ (in the way of God)
(8) ‘al sabili’ (the traveller)
Based on these eight criteria, Islamic Relief Canada follows the scholarly ruling that the poor and needy are the primary categories of people to receive zakat. As such, these are the two groups Islamic Relief Canada specifically focuses on when it comes to zakat disbursement.
Additionally, Islamic Relief Canada follows the scholarly ruling stating that collectors of zakat are one of the eight groups that are eligible to receive zakat. As such, Islamic Relief Canada is eligible to use up to 12.5% of donations made to Zakat-specific funds for overhead costs, including administrative and operational functions. The remaining amount is used to help implement our Zakat-eligible projects on the field. This means that 100% of your Zakat donation gets used in Zakat-eligible ways.
Based on our Zakat Policy, Islamic Relief Canada’s overhead costs, including administrative and operational functions, is capped at 12.5% for Zakat. In order to remain at or below that limit, in instances that require it, Islamic Relief Canada will utilize unrestricted general funds, or non-Zakat funds, to fill in gaps where needed. We will not use your Zakat funds on fundraising, marketing, event sponsorship, influencers, generic training, and governance costs.
8. Why is marketing and digital advertising work part of your fundraising overhead cost?
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 is critical to understand that investing in donor outreach 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 $17 million in cash revenue in 2016 to over $60 million in 2023, with an active program portfolio of over 176 projects valued at over $71 million.
This growth allows us to do more to support the people in need through our programs across the world. It has meant that in the past year, through your donations and sadaqa we were able to bring relief and transform the lives of more than 3,262,938 individuals in over 30 countries through more than 100 life-saving projects. Without our investment into our fundraising and marketing efforts, this number would be greatly reduced. Our careful investment makes it possible to maximize every dollar you give to continue increasing the scale of our reach to answer the call of rights-holders in need, and deliver the crucial assistance they require without holding back alhamdulillah.