Å is not a standard XML entity. In order to support it in your XML document, your XML parser needs to be DTD-aware and the document must have a DOCTYPE declaration which either defines that entity or refers to a DTD that defines that entity. An XHTML DTD, for example, defines Å to mean Å.
It is correct for your DOM XML parser to throw an error when it sees a named entity that it is not already aware of, and the parser is either not DTD-aware or there is no DOCTYPE declaration for what that entity means. XML itself defines the entities <, >, &, and ". These are the named entities that can be safely used in any XML application.
If you are writing the document yourself, then just don't use Å - use a numeric equivalent instead or, assuming you're using Unicode, just use the character literal.
If you need to be able to parse XML documents from other people containing any other named entity, and the documents don't have a DOCTYPE, then as Frank mentioned you will need to fix the document yourself by inserting a correct DOCTYPE after the XML declaration.