How much of your income is “restricted”?

If you are a small charity, and someone gives you a donation, you can usually spend it however you like, as long as it’s to further your cause, of course!

However, if someone asks for their donation to be used in a particular way, or even on a particular project, you obliged under charity regulations to honour that request (or if you can’t, you need to make it clear to the donor why you can’t). In other words, you have now received your first restricted income.

As you grow, you may find more of your income is restricted. You may want to encourage restricted donations. For example, if you send out a mailing asking for funds to be spent on young people in Scotland, you can’t very well spend the proceeds on building a hostel in Hertfordshire!

As you probably know, fundraisers refer to restricted income as being “earmarked”.  Earmarking can relate to a specific project (e.g. re-housing tsunami victims in Sri Lanka) or can be very general (e.g. “Africa”, “youth clubs”).

• You can assign a default earmark to selected fundraising activities, so that, for example, any income raised from the February 2010 mailing is automatically earmarked to projects in Ethiopia, or to a specific building project in Liverpool.

• You can earmark non-income resources such as “gifts in kind” to an earmark. Or you can use earmarks to express a supporter’s interest in an area of work even if they have not yet given a donation.

• You can set up an earmark project containing one or more categories, and input target income for each project. Then you can monitor income or other resources against this target, for example how much you have actually raised for, say, immunisation, against how much you expected to raise.

• You can also enter expenditure on a project, and keep track of expenditure against a budget.