Restricted fund
Money given for a stated purpose, to be spent only on that purpose.
A restricted fund is money a charity, club or community group has been given for a stated purpose — by a donor, a funder or the terms of an appeal — and may spend only on that purpose. The Charity Commission describes restricted funds as funds held on specific trusts declared by the donor or with their authority.
Restricted money sits in the same bank account as everything else, so what keeps it apart is the record: each restricted fund has its own heading, every receipt and payment is tagged to it, and its balance is shown separately in the accounts. Restricted funds are outside a charity’s reserves. When the purpose is met and money is left over, the terms of the gift decide what happens to it.
Worked example
A football club receives £4,000 from the county for pitch drainage. It pays the contractor £1,900 and then £750, so the restricted fund shows £4,000 in, £2,650 out and £1,350 left — money the committee can spend only on drainage, whatever the bank balance says.
Common mistake
Treating the bank balance as spendable. A healthy balance can be mostly restricted money; spending it on running costs because it is “there” uses money that was promised to something else.
Grounded in Charity Commission — Charity reserves: building resilience (CC19) guidance. Figures last checked . General information, not tax advice.
Related terms
Unrestricted fund
Money the trustees or committee can spend on anything within the organisation’s purposes.
Designated fund
Unrestricted money the trustees have earmarked — and can release again.
Receipts and payments account
A small charity’s or club’s cash-based accounts: money in, money out, and the balance.
Independent examination
The lighter check of a smaller charity’s accounts, instead of an audit.
← Back to the full glossary.
Questions about this term
Restricted fund: common questions
- What makes money restricted rather than unrestricted?
- Who set its purpose. If a donor, a funder or the wording of an appeal said what the money is for, it is restricted to that purpose. If nobody did, it is unrestricted, and the trustees or committee can spend it on anything within the organisation’s purposes.
- Is a restricted fund part of a charity’s reserves?
- No. The Charity Commission’s reserves guidance places restricted funds outside the definition of reserves, because the trustees cannot use them freely. Their size and nature can still affect how much in reserves a charity decides it needs.
- Can a restricted fund be used to cover a cash shortfall elsewhere?
- Not without the authority of whoever set the restriction. The money is held for its stated purpose, so using it for running costs, even briefly, puts that purpose at risk. Ask the funder first, and for a charity take advice before moving restricted money anywhere else.
Let Fin handle the jargon for you
Connect your bank and Fin sorts your income, expenses and GST automatically — so terms like this just become numbers that are already worked out. Free to start, no card needed.
Get 2Fin free →