Nonprofit accounting requires careful tracking of how funds can be used. This guide explains fund restrictions and how to manage them in GrantLink.

Understanding Fund Restrictions

Net Assets Without Donor Restrictions

Previously called "unrestricted funds":

No donor-imposed limitations
May include board-designated amounts, which remain without donor restrictions because a governing board is not a donor
Still subject to contracts, law, debt covenants, budgets, and fiduciary oversight; “without donor restrictions” does not mean unrestricted cash

Net Assets With Donor Restrictions

Previously called "restricted funds":

Donor specified how funds must be used
Must track purpose and/or time restrictions
Release when restrictions are met

Types of Restrictions

Purpose Restrictions

Funds must be used for specific purposes:

"For the youth program"
"To purchase equipment"
"For scholarships"

Time Restrictions

Funds must be used during specific periods:

"For fiscal year 2025"
"Not to be spent before January 2026"
Multi-year grants with annual budgets

Perpetual Restrictions

Principal must be maintained forever:

Endowments
Spending and appropriation depend on donor terms and applicable state law; do not assume all income is freely spendable

How Grants Relate to Restrictions

Do not assume most grants are donor-restricted contributions. Under FASB ASU 2018-08, first determine whether the provider receives commensurate value (an exchange transaction). If not, determine whether a contribution is conditional: both a barrier and a right of return or release are required. An agreement may contain both conditions and restrictions. Determine whether the contribution is recognizable; when it is recognized, classify the recognized amount based on any donor-imposed restrictions.

When Restrictions Are Released

Donor restrictions release when the stipulated purpose is fulfilled, the stipulated time expires, or both. Spending or report acceptance matters only when it satisfies the actual stipulation. Cash receipt does not establish revenue, and spending does not by itself establish either revenue or release.

Tracking in GrantLink

Setting Grant Restriction Type

Add grants manually or by uploading grant documents. Preserve the agreement and accounting analysis rather than relying on obsolete “temporarily/permanently restricted” face-of-statement labels.

Monitoring Restricted Funds

Dashboard shows:

Total restricted funds by grant
Spending against restricted amounts
Remaining restricted balances

Releasing Restrictions

Allocations can support a restriction-release analysis but do not automatically establish or post a GAAP release. Review the stipulation, evidence, and release register with the accountant.

Reporting Implications

Statement of Financial Position

Shows net assets by category:

Without donor restrictions
With donor restrictions

Statement of Activities

Shows:

Revenues by restriction type
Expenses, which GAAP reports as decreases in net assets without donor restrictions
Net assets released from restrictions

Notes to Financial Statements

ASU 2016-14 requires quantitative and qualitative information about liquidity and availability and disclosures about the amounts and purposes of board designations and donor restrictions. The precise note format depends on material facts; it is not enough to reproduce internal fund labels.

QuickBooks Integration

Chart of Accounts Setup

Account design varies. GAAP financial statements use two net-asset classes; detailed records may separately track purpose, time, and perpetual restrictions. Have the accountant approve the chart and entries.

Tracking with Classes

Per-grant Expenses and Money received links identify relevant QuickBooks Online activity; there is no organization-wide grant tracking mapping. Expense links backfill and auto-allocate eligible linked activity, with Ledger, Todos, and manual allocation as exception paths. Settings > QuickBooks Mapping is only for restriction-release account mappings.

Internal operating practices (not GAAP requirements)

Understand each grant - Know what restrictions apply
Code correctly from the start - It's hard to fix later
Review regularly - Ensure spending matches restrictions
Document releases - Track when restrictions are satisfied
Reconcile net assets - Match GrantLink to financial statements

How GrantLink supports this today

GrantLink helps by organizing allocations backed by QuickBooks Online, budget lines, fund receipts, funding shares, documents, report outputs, and activity history. It supports audit preparation, but it does not replace funder guidance, accounting policy, or professional review.

QuickBooks Online remains the accounting source of truth. GrantLink allocations do not inherently rewrite QuickBooks Online; writes require explicit permission and the applicable workflow.

Sources

FASB ASU 2016-14 — two net-asset classes, liquidity and availability, board-designation and donor-restriction disclosures
FASB ASU 2018-08 — exchange-versus-contribution and condition-versus-restriction framework

Tracking Restricted vs Unrestricted Funds