A restricted fund is a reserve account that contains money that can only be used for specific purposes. Restricted funds provide reassurance to donors that their contributions are used in a manner they have chosen.Click to see full answer. Accordingly, what’s the difference between restricted and unrestricted funds?Donors to a nonprofit organization may designate or “restrict” the use of their donations to a particular purpose or project. An example is a gift to a special scholarship fund at a university. “Unrestricted” funds are donations the nonprofit may use for any purpose.Similarly, are designated funds restricted? Restricted funds are monies set aside for a particular purpose as a result of designated giving. They are permanently restricted to that purpose and cannot be used for other expenses of the nonprofit. By contrast, unrestricted funds may be used for any legal purpose appropriate to the organization. Subsequently, one may also ask, what is a restricted gift? Restrictions give donors comfort that the organization they have chosen to support will use their gift as they envision. Donor restricted funds are created when gifts are received subject to donor stipulations or a binding understanding with the donor.What makes a donation restricted?The funds can be restricted because the donor wants the money to go to a specific program or the donor wants the money to be utilized after a specific time or event such as an anniversary. Restricted funds give donors assurance that their money is being used in the manner they initially chose.