Hello:
In the United States, temporarily or permanently restricted funds must be used for the designated purpose. This is a function of law which can be enforced by an Attorney General in your jurisdiction, a written agreement with the donor or grantor which can be enforced in the the courts and the ethical obligation to honor what the donor was told they were giving money for.
If you want to change the use of temporarily or permanently restricted funds you need to ask for permission to change the use of those funds and it is good practice to get that change authorization in writing. I have found that as long as the original donor intent was or is being met with other funds or funds spent to date, that donors are willing to give you permission to change the use of the funds including for use on general operating expenses.
To answer you specific question about the budget surplus, it depends on the language used to solicit the funds and any written agreements. For example, some grant and gifts indicate that interest earned must be used for the designated purpose; therefore, if there is no designation on the use of interest it can be used for general operating expenses. In other cases, a donor may designate a gift to sponsor an event. In this case if the donor gift was $5000 and the expenses of the events were $5000 and you had attendance revenue of $2000, then the $2000 will be unrestricted as long as there are no donor stipulations to the contrary.
Garfield Byrd
On Fri, Dec 23, 2011 at 10:23 PM, James Hare messedrocker@gmail.com wrote:
Hello my fellow fiduciaries,
As the Wikimedia DC treasurer, one of my responsibilities is to segregate funds so that money intended for a particular activity is used on that activity. For instance, when the Wikimedia Foundation graciously awarded us a $5100 grant earlier this year, I made sure to classify it as a separate asset account so that only items pertaining to the objective of the grant could be spent with that money. Of course you all know what the pitfall of earmarked donations is: you're less capable of prioritizing spending, allocating money where it is most needed. Charities generally prefer unrestricted gifts for this reason.
Yet in the course of soliciting organizations for money, you want to be able to sell them sometimes. "Contribute to Wikimedia DC, and you will make [Event] possible." If a sponsoring organization is giving for the sake of [Event], but you end up running a budget surplus, you will want to re-allocate that money. (The assumption here is that donations are governed by contracts that require money to be used toward a specific function.) I am wondering what the best solution is so that money is used in as non-restrictive a sense as possible while the donor gets what they want. I am thinking that in exchange for imposing no restriction on the gift, the donor receives some kind of perquisite (such as a banner or poster), but the donor is going to get that anyway. What are your thoughts?
For the American subscribers to this mailing list, when donors earmark their donation by simply requesting that it go toward a particular purpose but otherwise not requiring any sort of contract, to what extent would we be obligated to honor that request under law?
-- James Hare
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