DEFINITION of 'Slush Fund'

Money earmarked for a loosely defined, but legitimate, purpose that is instead surreptitiously used for an illegitimate purpose. The term "slush fund" indicates a fraudulent use of money. Expenses paid for out of a slush fund may be disguised as legitimate expenses, such as salaries, but not be commensurate with the work performed. Other times, no effort is made to disguise the spending, such as when a corporate executive uses a slush fund to purchase luxury vehicles for family and friends.

BREAKING DOWN 'Slush Fund'

For example, if a politician siphoned off tax payments that were supposed to fund public goods and used the money to pay for a lavish vacation, the stolen money would be referred to as a slush fund. Another example of a slush fund would be an officer of a charity using donations to pay for personal expenses.

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