Some gifts come with strings attached: "for the building fund," "for scholarships," a grant that may only pay for the youth program. Accounting rules (ASC 958) require nonprofits to track that money separately as with donor restrictions, and to show when it's spent for its purpose — the release from restriction. GoodBooks does the mechanics automatically; this article explains how it flows so your statements make sense.
Where restriction lives
Not on the fund — on the accounts. Restricted gifts post to a with donor restrictions revenue account (GoodBooks creates "4110 Contributions – With Donor Restrictions" the first time you need it), and the balance sits in Net Assets With Donor Restrictions. Funds have a "typically holds donor-restricted gifts" switch, but that's a display hint, not the bookkeeping.
How money becomes restricted
Three doors, all automatic once set up:
- A restricted campaign. Turn on "Gifts to this campaign are donor-restricted" on the campaign — every gift designated to it posts to the restricted revenue account. See Understanding Campaigns.
- A grant. Grants always post to a restricted revenue account — see The Grant Lifecycle.
- Opening balances. The setup wizard's beginning-balances step has an "Of which donor-restricted" row per fund, so money that arrived restricted before you joined GoodBooks opens in the right class.
How money gets released
When you spend restricted money, pick the grant or campaign in the Spend Against selector on the expense line. GoodBooks appends a balanced pair of "Released from restrictions" lines — moving the amount from the restricted class to the unrestricted class, capped at what that grant or campaign actually has available. The entry form previews it: "Releasing up to $X from '…' restrictions when posted."
You never book a release by hand, and the release accounts (4900/4910) are deliberately kept out of the campaign and grant account pickers — they belong to the engine.
Where to see the restricted balance
| Question | Report |
|---|---|
| "How much restricted money do we hold right now?" | Balance Sheet — the Net Assets section splits into Without Donor Restrictions and With Donor Restrictions, each with its own total, plus a by-fund breakout. |
| "How did restricted money move this year?" | Statement of Changes in Net Assets — per fund, per class: starting balance, receipts, disbursements, ending. |
| "This period's activity by class?" | Income Statement (prints as Statement of Activities) — Without / With / Total columns, with the release pair shown crossing between them. |
| "Just the number." | Net Assets — one figure with the class split. |
One behavior to know: the restricted columns appear only once you have restricted activity. An organization with no restricted gifts sees simple one-column statements — the two-class layout switches on by itself the first time restricted money shows up.
What it looks like in practice
A donor gives $5,000 to your donor-restricted Building Fund campaign:
- The gift posts to restricted contribution revenue → your Balance Sheet now shows $5,000 With Donor Restrictions. You can see it, the board can see it, and nobody accidentally treats it as spendable.
- Months later you pay the contractor $3,000, tagging the expense Spend Against the Building Fund campaign. GoodBooks releases $3,000: the restricted balance drops to $2,000, and the Statement of Activities shows the release crossing from the With column to the Without column.
- The expense itself, like all expenses, reports in the Without column — that's the accounting convention: restricted money is released first, then spent as unrestricted.
Good to know
- Restriction here means donor-imposed. Board-designated money (a reserve the board voted to set aside) is not donor-restricted — track it with a Reserve-type fund instead.
- When in doubt whether a gift is restricted: if the donor wrote it on the check, said it in a letter, or gave through a purpose-specific campaign, treat it as restricted.
- Grant reports exclude the automatic release lines so nothing is double-counted — see Grant Reports.
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