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Managing Restricted Donations

By Baker Tilly TFW (republished) On 02 Jan 2018

This article was first published in the Salient Point Issue 2, 2016. Re-published with permission from Baker Tilly TFW.

Written by Susan Foong
Partner, Assurance

Scenario 1: The Charity organises a gala dinner to raise donations to fund its general activities.

Scenario 2: A Charity sends out letters of appeal for donations for renovation and upgrading of its premises.

Scenario 3: A donor sends a cheque to the Charity to provide financial support to needy students.


What are restricted donations?

The above are all possible scenarios that a charitable organisation might encounter as it raises funds, but charities must be aware that the funds raised might require different accounting classification and treatments.


Looking at Scenario 1 above, the funds collected at the gala dinner would be considered unrestricted donations; the governing board members of the charity are free to use these donations for any of the charity’s charitable purposes and activities.


However, in Scenarios 2 & 3, the donations were given for specific purposes, and therefore considered restricted donations. Restrictions might arise from:

a) the donor; where the donor specifies the purpose for which the money was given;

b) the purpose communicated by the charity to donors when it asked for funds; or

c) there is a specific trust created through a legal process.


Charities are obliged to ensure that donations that are subject to restriction, are only applied within the purpose specified by the donors.


This is a requirement of the Charities Accounting Standard and also, a legal requirement under the Charities (Fund-Raising Appeals for Local and Foreign Charitable Purposes) Regulations 2012.


The Regulations stipulate that “where the donor has specified an intention that the donation should be used for any specific lawful purpose, the donation shall be used for that purpose by the charity receiving the donation”. Where the donor has not specified such an intention, the Regulations provide that the donation shall be used by the charity receiving the donation according to the purpose communicated to the donor in the appeal before or at the time the donation is received.


Accordingly, separate accounting and proper approval for utilisation of these donations will ensure that the charity complies with the restrictions placed on donations received.


Surplus at completion

What if the purpose for which the restricted donations were collected is completed leaving a surplus? For example, S$1.5 million was collected for refurbishment and the project was completed at S$1.4 million. Can this surplus be funnelled to another purpose?


This is not permissible without the donor’s agreement. The Regulations require that any unutilised restricted donations shall be returned to the donor.


If the donations were collected many years prior to the completion of the project or identifying the individual donors is too difficult because the donations were co-mingled into a fund, the Regulations provide that the charity could communicate with the Sector Administrator who was appointed to supervise the charity or the Commissioner of Charities to obtain their approval for use of the amount for another purpose.


What should charities do?

• Review their policy and the manner which they raise funds

• Review all existing funds to identify and ensure restricted funds are monitored separately

• Plan for timely and efficient utilisation of restricted donations to avoid practical difficulties of contacting donors where there are surplus funds


Avoid accumulating such restricted funds. Over time, these restricted purposes as specified by donors may no longer be the charity’s current need or the charity’s priority projects but the charity would still be held accountable to maintain and utilise these funds in accordance with the donor’s specified wishes.


For details, download the Charities (Fund-raising Appeals for Local and Foreign Charitable Purposes) Regulations 2012 at


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    Click here to read more.