Definition
Restricted funds are money or assets given to a charity for a specific purpose that is narrower than its general objects. The charity can only spend them on that purpose and must account for them separately.
How a fund becomes restricted
The restriction comes from the donor or from the terms of the appeal. A grant given to run a named project, or money raised by an appeal for a new roof, creates restricted funds. Trustees cannot decide later to spend the money on something else.
Types
| Type | What can be spent |
|---|---|
| Restricted income fund | All of it, but only on the specified purpose |
| Expendable endowment | Held as capital to produce income, though trustees may spend the capital |
| Permanent endowment | Only the income. The capital must be kept |
In the accounts
Each material restricted fund is tracked separately. The SOFA has a restricted column, and a note explains what each fund is for and how it moved in the year. Spending a restricted fund on the wrong purpose is a breach of trust.
Compare unrestricted funds.