Designated Funds or Restricted Funds

by Jan
(Texas)

What's the difference between designated funds and restricted funds.

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Comments for Designated Funds or Restricted Funds

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Restricted Building Fund
by: Anonymous

Our church started a new building project several years ago. Contributions were received from both the congregation as well as a monthly contribution from the General Fund.

Not that we are facing financial hardship but as most churches, we have had a substantial decrease in attendance and giving post-pandemic.

So it looks like any monies contributed directly from the congregation are restricted to the building project. Do the transfers from the General Fund become restricted as well or can they be withdrawn from the "Building Fund"?

Even though the funds were originally intended for a new building, what are anyone's thoughts on using these funds to maintain and improve our existing building facilities?

Church with 20 Restricted Funds
by: Anonymous

Our church has about 20 separate restricted funds. To complicate matters, these restricted funds are invested with some funds split between several investments. Most of these funds date back over 10 years. In 2018, the Leadership Team voted to allow any fund older than 5 years to be transferred into the general fund. This has not happened and no formal policy was written. Now in 2023 (5 years later), we would like to formalize the policy. Can we write our policy and transfer the restricted funds into our general fund if the money has not been entirely spent down? How should we handle interest earned above the gifted amount? Thank you.

Celebrate Recovery - ministry that takes an offering
by: Anonymous

My church has a Celebrate Recovery ministry.

Each week at the Celebrate Recovery meeting, we ask people to "give to their own recovery."

Is the church allowed to use these gifts as part of the general fund?

Or do they have to be used for Celebrate Recovery because we specifically asked for the funds in that meeting?

Church Food Pantry Money
by: Anonymous

Hypothetically, if a church operates a Food Pantry, and the food pantry receives donations, is the whole council responsible for this money? Could the money be used for things like painting and repair of the food pantry space? What about community meals? Could money be given from the food pantry to another organization? Meals on Wheels? The local homeless shelter? Red Cross? How about giving some money to a neighborhood woman who makes and puts out bag lunches for school kids every day? The folks who run the hypothetical food pantry are very kind and justice oriented and want to help others, and mostly have zero understanding of fiduciary responsibility.

transfers to restricted funds.
by: Spiritualist

If a membership approves $35 per month to be placed in a savings account that is a restricted fund, can the membership vote to remove those monies if necessary? The church does have 503c nonprofit status through our national organization.

Designated or Restricted funds
by: Anonymous

Vickey has given the correct definition and difference between the the two types of funds and is in accordance with the definition as laid down by the Charities Act.

The trustees of any charitable entity are empowered with the duty and responsibility to ensure that these funds are utilised in the correct manner that they are set up for.

Do not forget also that any donation to a charitable organisation can attract Gift Aid providing the donation is made by a tax payer. The Sunday school donation plate monies are generally for the use in an unrestricted fund unless defined otherwise.

Anonymous FCCA MAAT

Fundraising for specific purposes;
by: Bob

If our church has a fundraiser to provide dental care and eyeglasses for children livng in a home that is one part of an organization in a foreign country, does that money have to be spent on dental care and/or eyeglasses or can the money be put in the General Fund and used for food, clothing, electric bill, salaries or other budget expenses?

Restrictive fund
by: Betty Hicks

If a fund is set up thru a church for a private school, are those tax deductible for those that give to it since private tuition is is not tax deductible. Note if members children go to this school at reduced rate would that fund be considered tuition?

Designated Fund
by: Anonymous

Can we put disposal gain and loss in designated fund? or operating fund??? I always get confused about this designated fund. Thank you.

question RE...
by: Anonymous

question...if a restricted fund isn't set up properly is it valid as a restricted fund? If it wasn't set up properly, then what are the steps to do so?

Unused donations time frame
by: Anonymous

How long can an organization hold the money without spending it?

Are Sunday School Offerings Restricted?
by: chldy

Our Sunday School program collected offerings for several years from students, most of which were recorded as loose plate offerings, without a record of the individual donors. The money was kept track of in a "restricted fund account", because at the beginning of each Sunday School year, the parents and students were told by the Sunday School staff, with the knowledge of church leadership, that their offerings were going to go to a charity or mission of their choice. However, for several reasons, that money was never paid out to any charity or mission, it just kept adding up. Now, some of the current leadership wants to transfer the money to the church's general fund. Our question is, since the donors were not recorded, making it impossible to go back and ask them to re-designate these donations, and since the leadership, in some years, at least, never named an actual charity or mission that the funds would go to, are these funds truly "restricted", or merely "designated?"

designated accounts - add
by: Connie

Also, I was informed that there is suppose to be a written policy to handle designated accounts. It should cover the way they are handled and what to do with the money if not used within a certain time frame, such as converting to general funds. Would this only pertain to Fund accounts to petition the church members to help raise money for a particular item the church needs? Thank you

Use of designated accounts
by: Connie

I recently began keeping the church accounting software. There are designated accounts set up and the secretary was told these accounts had to be approved by the church and all funds used for that account. - such as Awanas, benevolence, upwards basketball. We do get donations specified for some of these accounts for help with the program. Upwards is used to keep track of registration fees of participants and expenses. It seems to me some of these are designated for purpose of tracking and maybe the ones donated to are restricted to their use. These designated accounts are excluded from the budget. We do have an Awanas expense account that is budgeted. Are these accounts correctly setup in the accounting system? Thank you..

Designated Funds
by: D Fry

It is important to note that for donations to be considered deductible for tax purposes, donations to churches - or other non-profits - cannot be designated for any purpose which the non-profit has not solicited.

Under Section 170 of the Tax Code, if a person wants to give an offering to the church (or other non-profit) and get a tax deduction, the giver must relinquish control and allow the church to use it however the church best decides. If the church solicits and collects funds for a specific purpose, the funds received must be used for that purpose, and cannot be used for other purposes without the express permission of the donor.

But donors cannot specify the use of funds if the organization has not solicited funds for that purpose, and still receive a tax deduction.

However, the organization can accept the funds for a specified purpose, and they become restricted at that point and tax-deductible. But if the organization does not want to accept the conditions of the gift, they must either ask the donor to release the restriction, or return the gift.

Designated vs Restricted Funds
by: Vickey

Please reread my comment as I think you have misunderstood what I was trying to convey.

I stated that the difference between designated and restricted funds is their origin.

Those funds given by donors with specific destinations attached are called "restrictive" funds. When an organization accepts the funds with the stipulation of where and how it is to be used...they are under a moral if not legal obligation to use those funds in the designated way they were given.

Designated funds are those funds that were given into the general fund with NO donor stipulations on how they are to be used and then the governing body votes to set aside a certain portion of the general offerings for a "designated" purpose.

For example: the governing body of a church approves a resolution stating 5% of the general fund is to be set aside for renovations to their church building. Then 6 months later the air conditioning goes out. The governing body can then approve a resolution to use a portion of those "designated" funds to replace or repair the ac.

Now if a donor gave a special donation to be used for new windows, you could not "ethically" if not legally, use those "restrictive" funds to replace the ac.

See the difference?

Designated vs restricted funds
by: Anonymous

I am not sure where your source is that if someone designates funds to be used for a specific purpose a different person or group of persons can decide to redesignate.
If you look at the trouble Susan G Komen Fund got into because they provided funds to planned parenthood and removed those funds when donors did not like dollars going to a abortion clinic when they supported pro life. If you look at this practice a person who designates money to be spent for cancer and not abortion practices their contributions have diminished as they can no longer trust this group to use the funds designated for that purpose. If you adopt this practice your giving will likely diminish. People work hard for the funds they contribute and should be able to designate thier use. It is easier to spend somoene elses money rather than reach into your own pocker for operational expenses.

Difference between Designated and Restricted Funds
by: Vickey

Designated funds are monies set aside from the general fund for a specific purpose. For example, your governing body could decide to set aside a certain percentage of the general fund for property improvements, these funds become designated funds.

Restricted funds are monies given, collected or donated for a specific purpose.

The big difference between designated funds and restricted funds is that the governing body can transfer designated funds back into the general funds. Restricted funds must be used for the purpose in which they were given or raised.

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