Proper Care of Giver-Restricted Gifts

Givers often want their gifts used for a specific purpose or time—this is termed a “giver-restricted” gift. The solicitation methods used by many ministries encourage givers to indicate a purpose or time restriction on their gifts. At other times, the giver initiates a gift restriction. However the restriction is generated, there are often significant accounting, legal, tax, and integrity issues associated with giver-restricted gifts.

A common misconception is that the control of giver-restricted gifts by a ministry is in conflict with, or contradictory to, stipulations by givers. This is not true.

Board control and giver restrictions are really a “hand-in-glove” concept. It is not either/or but both/and! Restricted gifts must be used for a specific exempt purpose and unrestricted gifts may be used for any exempt purpose.

The ministry must control all contributions made to the organization and ensure that the funds are used exclusively for its exempt purposes. Additionally, the board must provide reasonable measures to assure that giver-restricted gifts are used for the intended exempt purpose.

Historical practices of many evangelical ministries have conditioned givers to give for specific purposes and to expect that use of their funds will be for the stated purposes and not for the general use of the ministry. Such practices include raising funds to support specific projects or programs, as well as to support the ministry of specific workers (but not gifts made directly to or for the benefit of a specific individual). Specific-use appeals are often considered to be more effective than general appeals.

Giver-imposed restrictions create specific responsibilities for the ministry, both to comply with ethical practices and generally accepted accounting principles:

  • Resources must be used and accounted for in accordance with the giver-intended purposes.
  • Communications must be truthful, current, complete, accurate, and not misleading.
  • Giver expectations created by the ministry must be realistic and fulfilled by the use of funds.
  • All gifts must be under the ministry’s control.

Types of restricted contributions. Have contributions been received and accepted with a giver-imposed restriction? This determination must be made so that the contributions may be properly receipted, recorded in the accounting records, and expended within the limitations of the giver restrictions. Contributions with giver-imposed restrictions are either:

  • Permanently restricted. Some giver restrictions limit the ministry’s use of the contributed asset permanently. Examples of permanently restricted contributions include gifts of cash and securities that must be invested in perpetuity to provide the ministry with an ongoing source of income.

If a ministry receives a permanently restricted contribution, it must be separately recorded from other operating assets. Permanently restricted contributions are commonly referred to as endowments, whereby the organization may spend earnings but may not spend any of the principal, which must remain intact in perpetuity.

  • Temporarily restricted. Contri­bu­tions with temporary giver-imposed restrictions limit use of the gifts to later periods or later specific dates (time restrictions), specific purposes (purpose restrictions), or both. Normally, only the use of related net assets are restricted, not the specific assets. Temporary giver restrictions expire either by passage of time or as a result of actions taken by the organization.

Restrictions are only made by donors. Only donors can restrict a gift—either temporarily or permanently.  

Designations of unrestricted assets by a ministry’s governing board do not result in restricted contributions or net assets since the designations may be reversed by the board and they do not alter the nature of the giver’s contribution.

Boards can designate (and subsequently undesignate) unrestricted net assets, but boards cannot unrestrict giver-restricted gifts. However, givers do have the power to lift the restriction on a previously restricted gift.  

Restrictions result from giver intent and direction. All statements made by the ministry in its fundraising appeals about the use of a gift must be honored by the organization. A giver’s intent or direction may be expressed:

  • Explicitly. In many cases, giver restrictions are explicit. For example, a giver may send a letter specifying that the contribution be used for a certain program.  Or, a ministry distributes a letter and includes a response form. The giver indicates a restriction on the response form by checking a box corresponding with a restricted gift option or by writing the restriction on the response form.
  • Implicitly. Giver restrictions can be implied if the circumstances surrounding the contribution make the giver’s intended restriction on the use of the assets clear. Let’s say a ministry representative verbally communicates a specific need to a major giver. The giver writes out a check and hands it to the ministry representative. Although the giver did not indicate the purpose of the gift on a response form or on the check, the specific fundraising solicitation and the immediate gift constitutes an implied giver restriction.

Giver restrictions must be determined based on both solicitations and giver responses to those solicitations. Solicitations and giver responses must be considered as a whole.  The giver’s intent relates to both what was communicated in the appeal and to any giver instructions accompanying the gift.

Once the giver has indicated the intent for which the donation was given and the ministry has accepted the gift, it is the responsibility of the ministry to fulfill that intent. The charity could have chosen not to accept the gift if the fulfillment of the giver restriction was in question.

In most cases, the giver is responding to a specific appeal. The appeal itself generally identifies the purpose for which donations are sought. If the giver simply responds to the appeal, it should be assumed that the giver’s intent is that the funds be used as described in the appeal.  

Another way to determine giver intent is based on specific communication, written or verbal, from the giver. This can take the form of letters accompanying a gift, notes on the gift response piece, or personal conversations with the giver. Any communication accompanying the gift should be considered an expression of giver intent.

Example #1:  A solicitation letter is very general in nature presenting only the over-all needs of the ministry. The giver sends a gift with the response device that accompanied the request for general funds. However, the giver notes on the response device that they want the gift to be used for computer equipment or for a specific program. This is a restricted gift.  

Example #2: A solicitation letter is very specific in presenting a need for funds for a building project. However, the giver either checks a box or sends a note with the gift to “use where needed most.” This is an unrestricted gift.

Ministries should take care in soliciting, accepting, and handling giver-restricted gifts to identify intended limitations and to provide appropriate control and use documentation. Failure to carefully define and use gifts for intended exempt purpose could cause practical concerns and tax implications that the giver and ministry would hope to avoid.


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.