Restricted v Unrestricted Donations to a Nonprofit

Restricted v Unrestricted Donations to a Nonprofit

1 January 2017

Julianne Shenk

JBS Nonprofit Consulting

“Where does my money go when I make a donation to a charity?”

“Can I designate any sort terms regarding my donation?”

I get messages and questions just like this one all of the time. You want to know where your money is going, what it is being put towards, and used for. As a donor, you have every right to know the answers to those questions.

Most people often donate money to a charity simply by writing a check or presenting cash with no stipulations. This is called an unrestricted donation. You have no say in where the donation goes or how it is used. It can go to a number of places including administrative costs, building upkeep, community programs, grants…the list goes on.

If you would like to make sure that your donation goes to a specific campaign, program, or usage, you will need to make a restricted donation. I know this may sound daunting and one client actually said to me, “That sounds like extra work that I don’t have the time for. I’ll just catch them next year.” That made me sad. The charity would have lost out on a donation because of a perceived burden.  It isn’t hard at all. It is as simple as a letter sent accompanying the donation expressing your wishes.

FYI: There are two types of restricted donations, Temporary Restricted Donations and Permanent Restricted Donations. Temporary restricted donations contain a temporary donor-imposed restriction for either a particular period of time or for a particular purpose.  The restriction on this type of donation expires after the passage of the period of time or the fulfillment of the particular purpose.  A permanent restricted donation are funds for which the amount of the donation must be maintained in perpetuity, with the purpose fulfilled using earnings from interest or investments.

If you want to support a certain campaign, project, etc. a restricted temporary donation allows you to direct your efforts. If you wish to establish and/or maintain a scholarship program for example, a restricted permanent donation would be a good route.

To make a restricted donation, simply compose a letter stating your wishes for the contribution (i.e., specific program, effort, need, etc.) and present it to the organization with the donation. (Tip: make a copy of the letter and check if applicable, for your records). Rest assured, the organization is under legal obligation to use/disperse the funds per your request.

One thing to keep in mind, that nonprofits need unrestricted donations, too. They need the discretion to make improvements, research and develop. They need funds available for emergencies, new programs and community projects and outreach. In short, nonprofits need, operate on, and thrive via donations.

As always, I encourage you to do your research and decide what a comfortable donation is and where you want that donation to go. And, as I often say, nonprofits do not just need your money, they need you. They need volunteers. If you can, volunteer your time. You will be helping others and you will be helping yourself, too. I even included an article about the benefits of volunteering on my site last summer. You can access the article here:

Staying Active and Healthy Through Volunteering

It is the end of the year and I know folks are getting ready to make their year-end contributions to their favorite nonprofit organization(s), I hope that this gives you some new insight and presents options as to how your money can and will be used.