Restricted Fund
A restricted fund holds donations that donors have designated for a specific purpose, program, or project. The nonprofit must use these funds according to the donor's intent.
A restricted fund holds charitable contributions that donors have earmarked for a specific purpose, program, project, or time period. The nonprofit is legally obligated to use these funds according to the donor's stated intent and cannot redirect them to other needs without donor permission.
Why It Matters for Fundraising
Restricted gifts can be both a blessing and a challenge. They demonstrate strong donor engagement with specific programs and often unlock larger gifts (donors give more when they know exactly where their money goes). However, excessive restriction can strain organizations — if 90% of revenue is restricted but overhead still needs funding, the organization struggles. Communicating the value of unrestricted giving alongside restricted options helps balance this tension.
Types of Restrictions
Restrictions may be purpose-based (for a specific program), time-based (to be used within a certain period), or both. Temporarily restricted funds have conditions that will be met (like a time period expiring), while permanently restricted funds (like endowments) must preserve the principal indefinitely.