Zakah on donated money and where Zakah is to be spent
1-12-2011 | IslamWeb
Question:
If there is an organization that is applicable to receive zakah, does the organization also have to pay zakah? If yes, can it pay to itself? For example if an organization is saving money to build a shelter for the homeless (or any other activity that the zakah can be spent on) and is receiving the zakah from people. Does this organization have to pay zakah to someone else? If yes, can the organization pay to another organization and the other one pays to this organization? If no, what is the evidence?
Answer:
All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad, sallallaahu ‘alayhi wa sallam, is His slave and Messenger.
If what you meant is that the donators gave the money you are asking about so that it can be spent in charity or it is Zakah (obligatory charity) paid to the organization so that it would distribute it, then there is no Zakah on this money.
Mataalib Ouli An-Nuha reads, “It is not an obligation either to pay Zakah on the money taken without war or on the one-fifth of the booty, as this should be allotted to the general welfare of the Muslims, and there is no Zakah on the money whose donator advised to be spent in charity or which he advised to buy an endowment with, even if there is profit in such endowment, as its owner is not existent [probably died].”
Furthermore, you should know that it is not permissible for the charity organization to spend the money in other than the eight categories that are determined by the Sharee’ah (Islamic legislation). These categories are mentioned in Allaah’s Saying (which means): {As-Sadaqaat (Zakat) are only for the poor, and for the needy, and for those employed to collect (the funds); and for attracting the hearts of those who have been inclined (towards Islam); and to free the captives; and for those in debt; and for Allaah's Cause (i.e. for those fighting in the holy wars), and for the wayfarer (a traveller who is cut off from everything); a duty imposed by Allaah. And Allaah is All-Knower, All-Wise.}[Quran, 9:60]
For more benefit, please refer to Fataawa 100148, 97276, 92059 and 90534.
Therefore, it is not permissible for this charity organization to spend the Zakah in charitable projects like setting up companies for the unemployed, or facilitating their incorporation at the workplace, or building houses and the like as all this is contrary to the principle and it is does not enable the people who are eligible for Zakah to own it.
Ibn Baaz 
said, “Some latter-day scholars are of the view that it is permissible to spend the Zakah on charitable projects but this is not the preponderant opinion, as this view is contrary to the evidence and it is contrary to the view of the scholars of the Salaf (righteous predecessors).” Besides, Ibn ‘Uthaymeen said the same thing. The Fataawa of the Permanent Committee also stated the same thing, “The money of Zakah should not be delayed from its due time and nothing of it should be spent on general charitable projects [of the public].”
Allaah Knows best.