All perfect praise be to Allah the Lord of the Worlds. May Allah`s peace and blessings be upon our Prophet Mohammad and upon all his family and companions.
Muslim jurists have allowed the Waqf of animals. Al-Emrani, a Shafie scholar, said: "It is valid to make every beneficial property as a Waqf, such as houses, lands, clothes, furniture, weapons and animals" {Al-Bayan Fi Math-hab Al-Imam Al-Shafi`ei, Vol.8: p.60}.
According to the general rule, Waqf is effective immediately and it isn`t allowed to make it conditional except in two situations: First: It is no longer in the donor`s possession; rather, it has become in the possession of Allah. For example, mosques, schools and cemeteries. Second: Making it conditional upon the death of the donor. In this case, it takes the rules of bequest in the sense that the donor is allowed to go back on it, it is one-third of the inheritance, the consent of the heirs is required if it is more than one-third of the inheritance, and then it takes the same ruling of the Waqf.
The Shafie scholar Sheikh Abdulhamid Al-Sharwani said: "His saying (If made conditional upon death, then it is like a bequest). In other words, it is valid as Waqf and takes the rulings of bequest in terms of being one-third of the inheritance, it is allowed to back down on it, it can`t be made to an heir, it can`t be sold, gifted or inherited." {Tohfat Al-Mohtaj Fi Shareh Al-Menhaj along with the Commentaries of Al-Sharwani and Al-Obadi, Vol.6:p.255}.
As understood from the above question, the beneficiaries of this Waqf are the poor people, the Waqf administrator and the children of the deceased. If the sheep that the donor left are less than one-third of the inheritance, then they become a Waqf. If they are more, then what is more than one-third isn`t considered Waqf save with the approval of the heirs. The evidence on this is that the Messenger of Allah said: "(Give) one-third, and one-third is a lot. It is better to leave your heirs independent of means, than to leave them poor and holding out their hands to people." {Bukhari & Muslim}.
If the Waqf animals are still alive, then it isn`t allowed to sell them nor to give their value for charity. Therefore, the Waqf administrator is to spend on them from the money made from selling their male produce, as conditioned by the donor. If that wasn`t sufficient, then their milk and wool should be sold to buy the needed barley and the heirs don`t have to pay any amount from their private wealth.
The Shafie scholar Zakaria Al-Ansari said: "The expenses of the property donated as Waqf is due from the yield of the Waqf itself and if it had no yield then from the public treasury." {Asna Al-Matalib, Vol.2:p.473}.
However, if the existing sheep are the yield of the sheep donated as Waqf in the first place then it is allowed to sell them and give the money to charity because they aren`t considered as a Waqf. For more information, kindly check {Moghni Al-Mohtaj Shareh Al-Menhaj, Vol.3:p.547}.
In conclusion, it is allowed to sell the remaining sheep and distribute the money to the poor people if they (sheep) are from the yield of the sheep originally donated as Waqf. However, if the remaining sheep are from the sheep that were donated as Waqf, then it isn`t allowed to sell them nor give their value to charity. Therefore, the money made from selling the produced male sheep should be spent on the fodder and water for the sheep donated as Waqf in the first place. However, if that wasn`t enough, then their milk and wool should be sold to cover the cost of the needed barley and the heirs don`t have to pay any amount from their private wealth. And Allah the Almighty knows best.