Nonprofits often manage a mix of donations — some designated for specific programs and others available for general use. Knowing the difference between restricted and unrestricted funds is essential for transparency and trust.

What Are Restricted Funds?

Restricted funds are gifts or grants that come with conditions — such as supporting a particular project, program, or timeline. Misusing them can lead to compliance violations or loss of donor confidence.

What Are Unrestricted Funds?

Unrestricted funds can be used however your organization sees fit, such as paying rent, salaries, or administrative costs. They’re crucial for keeping your nonprofit running smoothly.

Best Practices for Tracking Funds

• Set up separate accounts in your accounting system for each restricted fund.
• Reconcile monthly to ensure balances match your financial reports.
• Keep detailed documentation of donor restrictions and grant agreements.
• Report transparently — show fund balances clearly on financial statements and in donor communications.

Why It Matters

Proper fund tracking protects your organization’s reputation, simplifies audits, and demonstrates accountability to your donors and board.

Final Thought:
NPDM specializes in helping nonprofits manage restricted and unrestricted funds with clarity and precision — so every dollar goes exactly where it’s meant to.