A donor gives money specifically for a community garden’s accessible path. The organisation also needs new office equipment. Both may be worthwhile, but the donation’s stated purpose cannot simply disappear because another expense is urgent.
The Charity Commission’s internal financial controls guidance addresses restricted funds and the need to account for them separately. That guidance applies to its jurisdiction in England and Wales. Organisations elsewhere should check their governing rules and local requirements.
Keep the purpose attached to the transaction
A practical record includes the donor’s restriction, the amount received, the project reference, authorised spending, and the remaining balance. Preserve the original wording rather than reducing a specific restriction to a vague label such as “general support.”
For a fictional example, a group receives 1,000 units for path materials and spends 300 on eligible supplies. Its project record shows 700 remaining for that restricted purpose. That balance is not automatically available for unrelated costs just because the organisation’s bank account contains enough money.
Separate accounting does not necessarily mean opening a separate bank account for every gift. The required arrangements depend on the organisation and applicable rules. What matters for the record is that people can trace the restricted money and see how decisions respected its conditions.
If plans change, obtain appropriate advice and authority before redirecting funds. Do not promise a donor that any unspent balance will be used differently unless the organisation can lawfully make that change.
When volunteers hand over responsibilities, include the restrictions and supporting documents, not just a spreadsheet total. A clear handover prevents the next treasurer from mistaking money held for a particular project for money available for anything.