Appeals can take a variety of forms, some being as simple as requests for donations to programmes of events and activities with aim of raising funds for a specific purpose.
Raising funds for a specific purpose can create complications, for example: What happens if funds raised aren’t sufficient to fulfil the purpose? Or, what if donations are received over and above what is required? The charity needs to set out how the funds will be treated in these circumstances and communicate these terms effectively with donors.
Before an appeal is launched a charity needs to decide which type of fund the donations will be treated as:
- Unrestricted
- Designated
- Restricted
- Endowed
(See our previous blog on 21 September 2021 for an explanation of different funds)
The type of fund to be used and communicated to donors can have varying impacts on the appeal. A restricted fund for a specific purpose can be more appealing and engaging for donors, as they know more specifically how their donation will be used and may mean more funds are raised. Whilst unrestricted and designated funds give the charity more flexibility to utilise funds, but this may be less appealing to donor’s and therefore funds being raised may be less.
Whatever the type of fund used it is important that charities are clear and transparent with their appeals to ensure that donors understand how the funds they donate will be used.
For more information, please contact Harry Howley or your usual UHY adviser.
