For nonprofit leaders, managing cash flow is challenging enough. But here’s where it often gets messy: understanding the difference between restricted and unrestricted funds.

It sounds simple. But it’s one of the most common pitfalls we see.

The Quick Breakdown

Let’s keep it clear and straightforward:

Restricted Funds

Money that must be used for a specific purpose.
Think: A donor gives $50,000 and says it’s only for scholarships. That money cannot be spent on anything else, not operations, not rent, not that new outreach program you’re dying to launch.

Unrestricted Funds

Money you can use wherever your organization needs it most.
Overhead, staff salaries, new program development, this is your flexible fuel.

Why This Distinction Matters

Cash might look the same in your account, but spending restricted dollars the wrong way can:

Violate donor intent
Trigger audit issues
Create serious cash flow headaches

This isn’t just about compliance, it’s about sustainability. Nonprofit leaders already have enough on their plates. Missteps here can cost time, trust, and future funding.

What You Can Do About It

If you’re leading a nonprofit, here’s your takeaway:

You need a clear system to track fund restrictions before the money is spent.

The good news? This doesn’t have to mean expensive software or complicated spreadsheets.

A simple dashboard
Clear internal policies
Good accounting hygiene

These can prevent tense donor conversations, audit red flags, and the stress of wondering “Wait, can we actually use this money?”

Let’s Make It Easy

At Cascade CPA, we help nonprofits get clarity on their finances without the stiff suits and confusing jargon. We build fund tracking systems that actually make sense to your team, and we’re experts in grant compliance and nonprofit financial strategy.

Want help untangling restricted vs. unrestricted funds?

Schedule a Call