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What are revenue restrictions? How do I account for them?

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Institutional funders and individual donors often attach restrictions to their gifts. These restrictions govern how and when your organization can spend those contributions.

Not every organization raises or receives restricted contributions. However, accounting standards require all nonprofit organizations to report their grants and donations in each of two categories: unrestricted, or without donor restrictions, and restricted, or with donor restrictions.
  • Unrestricted revenue is money available for everyday use at your organization’s discretion. General operating support is a common form of unrestricted revenue.
  • Restricted revenue is money that a donor specifies must be spent for a specific purpose or at a specific time, or to be held in perpetuity. Examples include: project grants, capital campaign contributions, multi-year funding, and endowment gifts.
  • Revenue that is designated as restricted by an organization's Board or Trustees is entered as unrestricted revenue in the CDP, only donor-restricted revenue is reported as restricted.
If your organization receives restricted revenue, the Cultural Data Profile asks you to record your organization’s revenue in each of these categories, as appropriate. Your financial statements should contain this information.

Management Tip:  If your organization receives contributions or grants restricted for a specific purpose, or for the future:
  • Segregate these funds in your books and spend them only as the donor specifies.
  • Transfer these funds to an unrestricted account (in accounting terms, this is a “release from restriction”) when your organization satisfies the conditions of the grant – for example, by delivering the program for which the money was intended.



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