restricted funds

Definition

Grants or donations that require that the funds be used in a specific way or for a specific purpose. They can be considered a contract between the donating party and the receiving party. Restricted funds are often associated with non-profit organizations, since a donation might be made to the organization for a specific use only. If the funds are used for something other than what was stipulated, the organization could be required to pay the funds back. For example, a restricted funds gift to a university could indicate that the funds only be used for scholarships in a specific department.