Donor-imposed restriction definition
/What is a Donor-Imposed Restriction?
A donor-imposed restriction is a limitation on how a contributed asset can be used. This restriction can address the purpose to which an asset is put, the time period during which it can be used, or both. A restriction may be permanent, or limited to a specific period of time or an event, after which the restriction is lifted.
Explicit and Implicit Donor-Imposed Restrictions
An explicit donor-imposed restriction is a restriction that has either been directly communicated to the recipient or conveyed in writing. An implicit donor-imposed restriction is derived from the manner in which a contribution is solicited from the donor. For example, if you contact a potential donor about giving money for the construction of a new museum exhibit, then it is implied that any resulting donations will be spent on that exhibit.
Example of a Donor-Imposed Restriction
Here are several examples of donor-imposed restrictions:
Asset donation. A donor contributes a delivery van to a nonprofit organization, and imposes a restriction that it can only be used to ferry disabled people to the grocery store for the next five years, after which it may be sold. This is an example of both a usage restriction and a time restriction.
Cash donation. A local philanthropist donates $100,000 to a community health center with the condition that the funds must be used to purchase medical equipment for a new pediatric clinic. This is a usage restriction.
Donor Imposed Restriction FAQs
How do donor-imposed restrictions differ from board designations?
Donor-imposed restrictions are binding limitations established by contributors specifying how or when donated resources must be used. Board designations are internal decisions assigning unrestricted resources to particular purposes. Donor restrictions require compliance with donor terms, while boards generally retain authority to modify or remove their own designations when circumstances change.