Earmarked Donation Accounting: Keep Scholarship and Welfare Funds Separate

Alumni associations and clubs often run more than one pot of money: a scholarship fund, a welfare fund for members in hardship, a building fund, perhaps sponsorship for the annual reunion. Donors give to a specific cause and expect it to be used for that cause. When all of it sits in one cash book, the committee cannot prove where each taka went. Earmarked donation accounting fixes this by giving every restricted fund its own clear trail.

What "earmarked" means in practice

An earmarked (or restricted) donation is one the donor has given for a named purpose. The association can hold it, but should spend it only on that purpose unless the donor and the general meeting agree otherwise.

Compare three common types of money:

The last row is where most problems start. If scholarship money quietly pays the office rent in a tight month, the fund balance on paper no longer matches reality.

Set up earmarked donation accounting: your fund structure

Create a separate account head for each fund

In your chart of accounts, add an income head and a fund balance for each earmarked purpose, for example "Scholarship Fund – donations received" and "Scholarship Fund – grants paid". Keep the number of funds small; three well-run funds are better than ten neglected ones.

Consider a separate bank account for large funds

For a fund that will grow over years, a dedicated bank account makes the balance visible at a glance and reduces the risk of mixing.

Write down each fund's rules

For each fund, record in the minutes: its purpose, who can approve spending, any eligibility rules (for scholarships, for instance) and how often it will be reported.

Record every gift properly

For each earmarked donation:

1. Issue a numbered receipt that names the fund, not just "donation";
2. Record the payment method and, for mobile wallets, the transaction ID;
3. Post it to that fund's income head on the same day;
4. Deposit cash into the bank promptly and keep the deposit slip.

Tip: If a donor's intention is unclear, ask before recording. "Is this for the scholarship fund or for general use?" is a much easier question now than a year later.

Control spending from each fund

Spending from an earmarked fund deserves more care than routine expenses.

• Two people involved: one prepares the payment voucher, another approves it;
• Supporting evidence: a committee decision, the recipient's acknowledgement, or a supplier bill;
• Purpose check: confirm the payment matches the fund's written purpose before approval.

Say an alumni association's scholarship fund starts the year with ৳2,00,000 and receives ৳1,50,000 in new gifts. As an example, if it awards 20 scholarships of ৳7,500, it pays out ৳1,50,000 and ends the year with ৳2,00,000. That closing figure should match both the ledger and the bank, with each award backed by a voucher.

Report each fund on its own

Good earmarked donation accounting ends with clear reporting. Donors and members want to see their fund, not a single combined total. A simple fund report shows opening balance, gifts received, amounts spent, and closing balance, with a line on what was achieved, such as the number of students supported.

Sample update for donors:

"Thank you for supporting the scholarship fund. This year the fund received ৳1,50,000 and awarded 20 scholarships. The full fund statement is available in the documents section of our association website."

Ask donors before publishing their names. Some prefer to stay anonymous, and that wish should be respected in every report.

A note on rules and compliance

Depending on how your association is registered and how much it receives, there may be reporting or tax requirements for donations. These vary, so check your constitution and take advice from an accountant or lawyer rather than relying on general guidance.

Running a savings-and-loan cooperative instead? Our sister product Somity Keeper — cooperative society software handles members, savings, loans and instalments, and small savings groups can start on mobile with Somity Keeper Lite.

How Society Keeper helps

Society Keeper includes full double-entry accounting with a chart of accounts you can edit, so each fund can have its own heads. Receipt and payment vouchers go through maker-checker approval, and every receipt carries a QR code anyone can scan to verify. The ledger, receipts and payments, and income and expenditure reports export to Excel, and the association website has a documents section for publishing fund statements. Find more guides on the blog.