Tag: Restricted Funds

Managing Appeal Funds – responding to the Covid-19 pandemic

crisis responseThe current global pandemic is having lasing effects in all areas of life

Many charities want to know whether and how they can respond to an emergency or humanitarian crisis such as this current one.  A charity must apply its funds for the aims it was set up to achieve, but this need not mean that they cannot help when an emergency happens. 

Trustees have a legal responsibility to ensure that funds raised are used for the purposes for which they were raised. This means your charity should consider putting in place a range of checks and controls to safeguard its funds and prevent fraud.

In the interests of openness and transparency, your charity should also be able to demonstrate to donors and the general public that funds raised have been, and will be, used for the purposes they were given.

Disaster Action’s Guidance on Management and Distribution of Disaster Trust Funds is a useful source of information.

Restricted, Unrestricted and Designated Funds

Picture1Unrestricted general funds can be spent at the discretion of the trustees to further any charitable purpose of the charity. This means that these funds can be spent in their own right, or can be added to a restricted fund which does not have enough money to cover its expenditure

Designated funds are still unrestricted, but have been set aside by the trustees for a particular future project or commitment.  The designation is for administrative purposes only and carries no legal authority

Restricted funds are completely different.  Restricted funds refer to funds held under ‘specific trusts’, which is that they are held for a specific charitable purpose.  The restriction carries the weight of the law and so restricted funds can only be lawfully spent on the specific charitable purpose for which they were provided.  As with designated funds, there is no requirement for restricted funds to be held in a separate bank account