Restricted funds
Restricted funds are donations a nonprofit must spend only on the specific purpose or time period the donor designated.
Temporarily restricted funds free up once their condition is met; permanently restricted funds (like an endowment principal) must be kept intact. Restrictions mean a healthy-looking balance sheet isn't always freely spendable.
Related terms
- Net assets — Net assets are what a nonprofit owns minus what it owes — its accumulated financial cushion, the nonprofit equivalent of equity.
- Endowment — An endowment is a pool of donated funds a nonprofit invests long-term, spending only the investment income while preserving the principal.
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