Explore BrainMass

Nonprofit fund accounting: Restricted funds

Restricted funds for Nonprofit fund accounting:
Can a nonprofit (not-for-profit) organization release restrictions on a "strike fund" and use it in the general fund for current year activity? Why or why not?

If you knew that the strike fund was held for steel workers' union to pay benefits during a potential strike versus a fund used by a nonprofit as a safety reserve in cash for a possible future strike, does that change your answer? Why or why not?

Solution Preview

There are different ways that funds can be "restricted." If the board decides to "restrict" funds for a later purpose, it is a way to set aside resources to be sure they are not used or diverted for another purpose without authorization. If the restriction is because a donor has given the nonprofit funds for a specific purpose, the restriction is from an outside source and is not just the board acting in its capacity to manage the organization. If the ...

Solution Summary

Your discussion is 289 words and explains that the reason for the initial restriction matters and gives examples. The practical implications are also mentioned.