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TS-FS-04 Trust & Stewardship Financial Stewardship CORE Compliance v2.9.7

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).

Compliance 5
  • Distinct ledger accounts for Zakat and Sadaqah in the accounting system with clear policies for allocation.
    Process Essential
  • Donation forms must include explicit donor selection for (a) donation type and (b) Gift Aid claim, with clear default wording for Gift Aid treatment.
    Process Essential
  • Prohibit negative balances in the Zakat restricted fund; inter-fund movements recorded as debtor/creditor; no use for operating cashflow.
    Control Essential
  • Segregate Zakat vs Sadaqah at source: labelled boxes, separate receipt books/batches, dual controls for counting.
    Process Essential
  • Require downstream partners to ring-fence Zakat in their ledgers with right-to-audit clauses.
    Control Essential
Basic 1
  • Visual separation in financial reports and donor communications
    Transparency High
Good 6
  • Configure finance/CRM systems to record three distinct dimensions: (i) Fund Type (Zakat/Sadaqah/Other), (ii) Restriction Status (Restricted/Unrestricted/Designated), and (iii) Purpose/Project Code.
    System Configuration Essential
  • Finance must reconcile Gift Aid receipts/adjustments to the 'Gift Aid (Sadaqah)' fund monthly.
    Monitoring Essential
  • Board-approved Zakat cost allocation policy specifying which direct/indirect costs may be charged to Zakat, the methodology, and a cap aligned with Shariah advice.
    Policy Essential
  • Qard Hasan (inter-fund loan) controls: documented purpose, due date ≤90 days, repayment schedule, monthly ageing review, and escalation for overdue.
    Control Essential
  • Adopt an FX policy: record at spot rate, revalue month-end, post differences to same fund.
    Policy Essential
  • Dedicated bank accounts for Zakat funds
    Transparency High
Better 4
  • Publish an annual Zakat report showing opening balance, receipts, eligible distribution, overheads, and Qard Hasan movements
    Reporting High
  • Regular audit of fund separation and usage by internal audit or Shariah audit
    Transparency High
  • System-enforced fund posting rules and maker-checker approvals
    Control High
  • Automated exception reports for cross-fund mispostings
    Control High
Best 1
  • Optional sub-ledgers/classes for Zakat by eligible categories (Quran 9:60)
    Reporting Medium

Related Criteria

TS-FS-01 Trustees review management accounts TS-FS-02 Banking, procurement & AML controls TS-FS-03 Robust accounting system TS-FS-05 Fundraising costs fairly reported TS-FS-06 Statutory accounts externally audited/examined with clean outcome and filed on time (all applicable regulators)
Version
2.9.7 2025-11-05

Discussion (1)

Administrator 2026-03-07 11:07:47.331970

📋 **Version updated: 1.0.0 → 2.9.7** **Changes:** Updated islamic_references from mizan-297.json

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