Bite Sized Blog – SORP Module 2 – Funds

Welcome to the third installment of Tait Walker’s blog series on the new Charity SORP, following our charity seminar giving an overview of the upcoming changes. We have also produced some accompanying bite sized guides – all of which are linked in our blog posts.

FRS102 SORP does not deal with fund accounting, therefore SORP Module 2 deals with funds using current Charity Law. As a result, there is no difference to the treatment of funds if your charity is applying FRSSE SORP or FRS102 SORP.

There are no changes to funds under the new legislation. As a reminder, unrestricted funds are those given to the charity freely and allow discretion over their use. They can be earmarked at the discretion of the trustees – these earmarked funds are often called ‘designated funds’.

Restricted funds are where income is given and its purpose is restricted by the ‘donor’. This means that the charity can only use the money for the purposes given, unless permission is sought from the donor regarding an alternative use.

Income funds – it is important to note that where the restriction is met, e.g. in purchasing a fixed asset, the asset itself is not restricted  unless there is an ongoing restriction over the asset and its use.

Endowment funds – where this is created it can either be a permanent or expendable fund.

It is important that charities correctly classify their funds and have systems in place to readily determine income and expenditure throughout the year. Whilst the financial strength of a charity can be obtained from a quick view of the overall funds held by the charity, it should be noted that unrestricted funds are often key to the charity’s ongoing financial health.

Click here for our bite sized guide on charity funding.

For more information about the treatment of funds in the new SORP rules, please contact Simon Brown on 0191 285 0321 or email

Related Insight