Use of Restricted Income
Many non-profit and faith-based sector organizations have revenue that comes from a variety of sources: some donated with no restrictions for its use, other revenue with restrictions for particular programs or initiatives. Most organizations do not take full fiscal advantage of their restricted funds within their restricted parameters.
Organizations should take note of what the restrictions are and what they are not: in many cases, restricted program funds are not item-specific (yes, sometimes they are, but not usually). In most cases, organizations neglect to calculate in the portion of facility costs (with accompanying custodial costs) and the use of paid staff for the program funded through restricted revenue. Unless otherwise prohibited by the restrictions, these things are typically fair game to be expenses charged against restricted revenue.
Why would an organization want to do this? Using restricted funds in this way frees up unrestricted revenues to be used in other ways to maintain or expand the reach of the organization. Moreover, establishing the building and staff costs of a program invites the organization to apply for larger and broader grants to fund the program down the road, since they aren’t just looking for the bare minimum items. This helps to keep the organization spry and innovative, and frees unrestricted revenues to fund initiatives not supported by restricted revenues or even start up new programs in the middle of a budget cycle as needs arise, since the funds are available.