Restricted vs. Unrestricted Funds – Knowledge Article
Understanding the difference between restricted and unrestricted funds is critical for proper stewardship, compliance, and financial reporting. Every dollar given must be handled according to donor intent and organizational policy.
Restricted Funds
Restricted funds are donations given for a specific purpose designated by the donor.
Key Points
- Must only be used for the purpose specified (e.g., building fund, missions, special projects).
- Cannot be reallocated without donor permission.
- Must be tracked separately in the accounting system.
- Misuse of restricted funds can create legal and ethical issues.
Example: A donor gives funds specifically for a ministry project—those funds stay tied to that purpose.
Unrestricted Funds
Unrestricted funds are donations given without specific designation and can be used where needed most.
Key Points
- Used for general operations, ministry needs, staffing, and overhead.
- Provide flexibility to meet both daily and strategic needs.
- Represent the primary funding source for overall ministry execution.
Creating a New Designated (Restricted) Fund
- Submit a request to the Accounting Manager for review.
- The Accounting Manager will provide a recommendation to the Finance Team.
- All new designated funds must be formally approved before being created.
Guiding Principle
Our goal is to minimize the number of designated funds, as all donations ultimately support the mission and ministry of Crosspoint. Simplicity in fund structure allows for stronger stewardship, clearer reporting, and greater ministry impact.
Best Practices
- Submit a request to the Accounting Manager for review.
- The Accounting Manager will provide a recommendation to the Finance Team.
Final Note
Stewardship is not just financial—it reflects our integrity and mission. Every dollar entrusted to Crosspoint should be handled with clarity, accountability, and purpose.