Optimizing the Use of Restricted Funds Through an Annual Inventory and Assessment [SUBSCRIBERS-ONLY]

Nonprofit organizations can receive restricted funds unexpectedly or they can appear after many years of acquisition efforts. They can be fresh (just arrived) or mature (been sitting around for years). Spending patterns for restricted funds is also constantly changing. Consequently, it is important to periodically pause and take an “inventory” of restricted funds in order to assess the timing and future use of this valuable resource.

Nonprofits generally do a good job of managing the component parts of individual restricted funds where the focus is primarily on honoring promises agreed to with donors and meeting the requirements of awarded grants.

What is often overlooked is long-term planning – how best to optimize the use of restricted funds and incorporate this valuable resource into future budgets. To optimize the use of restricted funds you need to consider three planning metrics: time limitations, availability of other funding, and capacity. Adding an “annual inventory” of restricted funds that incorporates these three metrics into your accounting systems will help your organization to stay focused on the long-term planning dynamics of restricted funds.