Glossary
Fund Accounting

Board‑Designated Fund

By: Alec Hollingsworth
Updated:  
June 2, 2025

DEFINITION:

A board-designated fund is money set aside by a nonprofit's board for a specific purpose, but which can be reallocated by the board at any time.
A board-designated fund is an internal fund set aside by a nonprofit organization's board of directors for a specific purpose, project, or future need. Unlike donor-restricted funds, board-designated funds are established at the discretion of the board and can be redirected or removed by future board decisions. These funds provide nonprofits with flexibility to address strategic priorities, such as building reserves, funding capital projects, or supporting special initiatives. Board-designated funds are still considered unrestricted from a legal standpoint because the board can change their designation at any time, but they are tracked separately to ensure transparency and accountability within the organization.

Key Takeaways

  • Created internally by the nonprofit board
  • Can be changed or removed by future board decisions
  • Helps with strategic planning and financial stability
  • Legally considered unrestricted funds

Why It Matters

They help nonprofits plan for the future and demonstrate responsible stewardship.

Real World Example

A nonprofit animal shelter receives a large, unrestricted donation. The board decides to designate $100,000 of these funds for a future building expansion, creating a board-designated fund. This allows the organization to show its intent to save for the project while maintaining flexibility. If an urgent need arises, such as unexpected veterinary costs, the board can vote to reallocate some or all of these funds. Throughout this process, the shelter tracks the board-designated fund separately in its accounting software, providing clear documentation for internal and external stakeholders.

How Aplos Helps

In Aplos, you can easily track board-designated funds by creating separate fund accounts and generating reports that show how these internal designations are used. This helps organizations maintain clear records and ensures accurate financial reporting, making it simple to manage board decisions and demonstrate transparency to stakeholders.
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Frequently Asked Questions

What is the difference between a board-designated fund and a restricted fund?

A board-designated fund is set aside by the board and can be changed at their discretion, while a restricted fund has donor-imposed restrictions and cannot be reallocated by the board.

Can a board-designated fund be used for emergencies?

Yes, the board can reallocate board-designated funds for emergencies or other needs by a formal vote.

How should board-designated funds be tracked?

They should be tracked separately in your accounting system, such as Aplos, to maintain transparency and accurate reporting.

Related Terms

Expense Allocation
Class Tracking
IRS Form 990
Single Audit
Nonprofit Corporation
Project Tracking

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