Segregate and control Zakat vs Sadaqah (ledgers, banking, donor intent)
This criterion evaluates whether the organization maintains strict separation and control over Zakat and Sadaqah funds across ledgers, banking, and donor intent capture. For UK reporting, Zakat is treated as a restricted fund under Charities SORP (FRS 102). Minimum compliance requires segregated fund accounting within the General Ledger (GL), while separate bank accounts are best practice. Trusteeship requires safeguarding donors’ trusts by segregating Zakat from Sadaqah (Qur’an 23:8; 70:32) and ensuring collection is handled with integrity (Qur’an 9:103). Mixing funds leading to misapplication risks unjust consumption (Qur’an 2:188; 4:29). Additionally, Sadaqah may be restricted or unrestricted depending on donor terms; the system must capture that restriction separately from the ‘Zakat vs Sadaqah’ type to honour the covenant (Qur’an 5:1).
| Metric | Separate ledger existence & reconciliation |
|---|---|
| Target | Not specified |
| Frequency | Annual |
| Method | Verify existence of separate ledgers & count reconciliation frequency. |
| Unit | Score |
Level 1: Initial/Ad-hoc
Zakat and Sadaqah funds are co-mingled in the same ledger and bank account. There is no formal system to track them separately.
Level 2: Developing
An informal system (e.g., spreadsheets, tags in accounting software) is used to track Zakat and Sadaqah funds, but they reside within a single primary ledger. The process is inconsistent and dependent on individuals.
Level 3: Established
A formal, documented policy requires the separation of Zakat and Sadaqah funds. The organization consistently uses separate general ledger accounts for Zakat and Sadaqah. Sadaqah appeals that are restricted are tracked as restricted Sadaqah funds separately from general Sadaqah. Donor intent is captured.
Level 4: Advanced
The separation of funds is systematically enforced through accounting system controls. System validation rules prevent posting Zakat receipts to Sadaqah funds and vice versa. Inter-fund transfers are strictly controlled as Qard Hasan with board approval and ageing registers. Exceptions are detected and corrected monthly.
Level 5: Optimizing
The organization maintains fully segregated bank accounts for Zakat and Sadaqah funds. External assurance covers both Zakat restricted fund and restricted Sadaqah appeals where donor terms exist. Findings are used for continuous improvement. Zakat financial reports are made transparently available to stakeholders, including overhead rates and category distribution.
Organisation Types
By Organisation Size
| Size | Applicability | Notes |
|---|---|---|
| Micro | partial | Legal requirement to segregate restricted funds (Zakat) applies, but complex CRM/finance systems are disproportionate; simple spreadsheet ledgers suffice. |
| Small | partial | Must maintain distinct ledgers for Zakat/Sadaqah, but full 3-dimensional CRM integration may be scaled down to basic accounting software. |
| Medium | full | |
| Large | full | |
| Major | full |
Applicable When
- The organization collects and/or distributes Zakat funds
- The organization collects and/or distributes Sadaqah funds
Not Applicable When
- The organization does not handle Zakat or Sadaqah funds
Related Criteria
Discussion (1)
📋 **Version updated: 1.0.0 → 2.9.7** **Changes:** Updated islamic_references from mizan-297.json
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