Restricted Fund
Definition of 'Restricted Fund'A reserve of money that can only be used for specific purposes. Restricted funds provide reassurance to donors that their contributions will be used in a manner they have chosen. When a donor gives money to a nonprofit organization, he or she may specify whether the gift is unrestricted and can be used for any purpose the organization sees fit, temporarily restricted to be used for a certain purpose, or permanently restricted so that the donation acts as principal on which interest can be earned (and only the interest is to be spent). |
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Investopedia explains 'Restricted Fund'Most often endowments are considered restricted funds.Their principal usually cannot be spent at all, and only a specified percent of the interest they earn can be spent per year. Furthermore, there are restrictions on how the interest can be spent - it may be used only to fund scholarships and professorships, for example. |
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