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By Greg Heitkamp, CPA Manager

Many not-for-profit organizations rely on contributions from individuals and companies in order to thrive. It is very important when receiving contributions that the organization's management has a clear understanding of how that money is intended (by the donor) to be spent. When receiving contributions the not-for-profit organization should request the donor sign a document stating how the funds are expected to be utilized.

Organizations can receive unrestricted contributions, temporarily restricted contributions, or permanently restricted contributions. Unrestricted contributions can be used as the organization pleases. Restricted contributions must be used as specified by the donor. It is very important to track these contributions and ensure that they are being utilized properly. Permanently restricted contributions are contributions whose principle is to be invested indefinitely according to the donor's wishes. Additionally, the donor can specify how the income from these permanently restricted funds is expended.

The not-for-profit organization is legally obligated to only spend these funds as specified by the donor. There are several repercussions to inappropriately spending these funds that could range from the funds being required to be returned, loss of a significant donor, and bad publicity which could lead to the loss of other donors. If there is ever a question as to whether the funds are being spent properly the organization should seek additional clarification from the donor and/or legal counsel.


If you have any questions regarding the article above or any other issue affecting your not-for-profit organization please contact your Blue & Co. advisor or e-mail us at or call us at 800-717-BLUE


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CIRCULAR 230 DISCLOSURE: To ensure compliance with recently-enacted U.S. Treasury Department Regulations, we are now required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including any attachments, is not intended or written by us to be used, and cannot be used, by anyone for the purpose of avoiding federal tax penalties that may be imposed by the federal government or for promoting, marketing or recommending to another party any tax-related matters addressed herein.


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