What are Unrestricted Net Assets
Unrestricted net assets are assets donated to nonprofit organizations that are not subject to use restrictions. When taken in, donations are classified as unrestricted, temporarily restricted or permanently restricted net assets. Restricted assets must be used for specific purposes as designated by donors. Generally, the majority of donations to nonprofit organizations are unrestricted.
BREAKING DOWN Unrestricted Net Assets
Unrestricted net assets, along with the two types of restricted net assets, appear on a nonprofit organization's Statement of Financial Position, which is equivalent to a balance sheet. Organizations serving out its mission favor unrestricted donations because the funds allow them maximum flexibility to spend as they see fit, whether for hiring additional personnel or awareness efforts. Watchdog groups exist to provide transparency to the public about how funds are spent. Nonprofits that spend disproportionately on staff salaries relative to fulfilling mission goals are called out. Those that responsibly direct donations to their cause receive high ratings. IRS Form 990 is the basis of the creation of the Statement of Financial Position as well as the Statement of Activities (similar to an income statement). A legitimate nonprofit organization provides Form 990s, annual reports and auditor's reports for donors and would-be donors for inspecting.
Example of Unrestricted Net Assets
Canine Companions for Independence (CCI) is a nonprofit organization that "enhances the lives of people with disabilities by providing highly trained assistance dogs and ongoing support to ensure quality partnerships." CCI's 2016 Statement of Financial Position discloses approximately $62 million in total net assets (assets less liabilities). Of the total net assets, about $49 million was unrestricted, a proportion of 79% that CCI could use at its discretion.