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Accounting for charity custodial funds

Charity acting as longterm custodian for funds.

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I have charity A who has merged with charity B. All money received from  charity B has it's own bank account, is restricted and used in line with the original family members wishes. Charity A are long-term custodians of this money. Any donations will go into this fund and the money will go towards projects as per when the charity was operating individually.

My question is, does the money from Charity B need disclosing in the accounts as not being their money. Or can it be left to merge within the accounts. The accounts clearly show an income line in the notes.

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By GW
22nd Oct 2019 16:42

You say the charities have merged but the money from Charity B does not belong to the resulting Charity. So have they or haven't they merged?

You will have to check what has happened, should the money from Charity B be a restricted fund within charity A?

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Replying to GW:
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By gemma1984
22nd Oct 2019 16:54

Sorry I didn't make that clear. So Charity B has merged with Charity A but Charity A are referring to themselves as custodians of the fund and are continuing the work that Charity B did along with their own similar Charitable purpose.
Does that help?

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Replying to gemma1984:
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By GW
22nd Oct 2019 17:23

In that case unless there is anything to the contrary in any documentation dealing with the merger, this would be a restricted fund within charity A and would be reported along the same lines as any other restricted funds charity A has.
Read the charities SORP for more detail on restricted funds.

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Replying to gemma1984:
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By lionofludesch
22nd Oct 2019 18:21

gemma1984 wrote:

Sorry I didn't make that clear. So Charity B has merged with Charity A but Charity A are referring to themselves as custodians of the fund and are continuing the work that Charity B did along with their own similar Charitable purpose.
Does that help?

It's a restricted fund. Charity A are more than likely mistaken in calling themselves custodians. Sounds to me like it's their money, albeit they can only use it for certain expenditure. Classic restricted fund, imho.

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Replying to lionofludesch:
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By WhichTyler
23rd Oct 2019 10:37

Agreed about the restricted fund (on the face of it). Custodians is a moot point; any restricted fund is a trust by nature and the charity trustees are trustees of that fund (hope that makes sense). But there may be PR value in using the term

It's important to get this clearly udnerstood at the beginning, so there's no 'but it wasn't supposed to be like that', 'it's just gone into their pot' or ' they were supposed to ask us' further down the line.

Also worth thinking about: is there a risk that not all the fund will be needed (if priorities or projects change? if so what will happen to the residue? It shouldn't be a problem if the 2 charities objectives are close, but worth asking...

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Replying to WhichTyler:
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By WhichTyler
23rd Oct 2019 11:01

also worth checking that the 'separate' bank account is now held in the name of Charity A, as it might cause problems when B finally ceases to exist.

Or just transfer the money to A's account

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Replying to WhichTyler:
RLI
By lionofludesch
23rd Oct 2019 11:58

WhichTyler wrote:

Agreed about the restricted fund (on the face of it). Custodians is a moot point; any restricted fund is a trust by nature and the charity trustees are trustees of that fund (hope that makes sense). But there may be PR value in using the term

I may have expressed myself badly - imho, the trustees seem to be treating this fund differently and calling themselves "custodians" - whatever that means.

It's not different - it's just another fund.

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Replying to lionofludesch:
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By WhichTyler
23rd Oct 2019 16:48

yet they have recognised it as income of charity A (it's not just sitting on the BS as asset & liability), so it has become part of A's funds

wooly thinking alert! go and sort them out...

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By gemma1984
23rd Oct 2019 11:22

Thank you for all your replies. I will go back to the Charity for clarification in some areas.

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By paulwakefield1
23rd Oct 2019 12:59

Also check whether any/all of the funds are permanent endowment

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