slush fund

A pool of money that is allocated by a business or other entity for a predicted monetary loss.

For instance, stores expect a certain amount of shoplifting to occur each year. A small amount earmarked for the slush fund is then built into the price of all the merchandise. The increase of price due to theft is how stores claim shoplifters hurt other shoppers. Amusingly, the presence of a slush fund is how many justify shoplifting, explaining that it is expected.

A pool of money collected through unofficial means and intended for unofficial purposes.

The money used to pay the Watergate burglars was reputedly from a slush fund that was formed from cash campaign contributions from the Midwest and ended up as an unaffiliated account in a Florida bank. This slush fund also payed for operatives to politically attack McGovern during the campaign.

A slush fund is not inherently illegal, but since it is often used for illicit activities and not properly declared, there are negative connotations to the term.