Restricted funds FAQs

Donations with a specified purpose are known as restricted funds. Charity lawyer Laura Soley explains how they work

What are restricted, designated and unrestricted funds?

Restricted funds are donations given to the PTA or funds raised by the PTA for a particular purpose that can only be used for that purpose. For example, where a donor makes a donation of money to the PTA and specifies that it be used for buying books for the library, or the PTA fundraises for donations for new play equipment.

Sometimes donors may make a donation to the PTA and express a wish or request, but without obliging the PTA to use it for a particular purpose. Where a donor expresses a wish, the PTA does not have to follow that wish, but should at least consider whether to do so. If the PTA does decide to follow the wish, the donation should be designated for that purpose ie, set aside as a designated fund.

Unrestricted funds are the ordinary property of the PTA which can be spent on any of the PTAs general purposes.

Weve set some money aside to buy laptops – have we created a restricted fund?

Restricted and designated funds shouldnt be confused. If the PTA receives a donation from a donor who specifies that the money is to be used for a particular purpose, a legal restriction is created and the funds may not be used for any other purpose and the donation will be held as a restricted fund.

However, when the PTA sets aside money from its unrestricted funds for a particular purpose, this is a designated fund and no legal restriction is created; the money is still legally unrestricted and can be undesignated by the PTA at any time. Restricted and designated funds should appear in your accounts.

Do we have to spend a restricted fund straight away?

A restricted fund may sit in the bank for a reasonable time before the PTA gets round to using it. This is fine as long as the PTA has plans to use it within a reasonable time (or reserves it).

How can we avoid problems with fundraising appeals?

When you fundraise for donations for a specific project or activity, be careful how you word your appeal. If you do not raise enough money to carry out the specific project or activity – eg you dont raise enough money to buy the playground equipment – or you raise too much money, there are legal hoops you will have to go through to be able to use the money for something else.

The Charity Commission recommends including wording in your fundraising appeal to give you flexibility in relation to how you can use the donations. For example, you could say: ‘We are raising funds to buy a new climbing frame for the school. If for any reason we cant buy the climbing frame, or there are surplus funds left over following the purchase of the climbing frame, we will use the money to buy other equipment that the school could not otherwise have.

Alternatively, you could avoid creating a restricted fund at all by seeking donations to the PTAs general funds but giving your project as an example, using wording such as: ‘We plan to support the purchase of a new climbing frame for the school. To support this and other projects that we run, please give a donation to our PTA.

More information

Help with wording your fundraising appeal.

Guidance on failed appeals (when you raise too much or too little).


  • Laura Soley is a partner at Bates Wells, a law firm which advises thousands of charities and social enterprises and the first law firm to achieve B Corp certification – awarded to businesses that balance purpose and profit.