Designated Funds or Restricted Funds

by Jan
(Texas)

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

Know the answer? Face the same situation? Please post your answer or comment by using the "comment" link below. Thank you!

Comments for Designated Funds or Restricted Funds

Click here to add your own comments

Sep 05, 2010
 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.

Jul 11, 2013
 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.
Jul 11, 2013
 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?
Oct 28, 2013
 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.
Jan 22, 2014
 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..
Jan 22, 2014
 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
Jul 02, 2014
 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?"
Oct 25, 2015
 Unused donations time frame
by: Anonymous

How long can an organization hold the money without spending it?
Feb 17, 2016
 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?
Jan 26, 2018
 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.
May 27, 2018
 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?
Mar 24, 2019
 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?
Sep 26, 2019
 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
Aug 24, 2020
 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.

Click here to add your own comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Church Accounting FAQs.



Need training on how to use QBO or Aplos effectively for a church or better yet ...need an expert in either of those accounting software to do your monthly bookkeeping and/or payroll? See more on our accounting services!

Contact Me!