Glossary
Fund Accounting

Release from Restriction

By: Alec Hollingsworth
Updated:  
June 16, 2025

DEFINITION:

A release from restriction is when donor-restricted funds are made available for general use after meeting specific donor conditions or timeframes.
A release from restriction occurs when a nonprofit organization uses donor-restricted funds for the specific purpose or after the time period designated by the donor. Once the restriction criteria are met, the funds are reclassified from restricted net assets to unrestricted net assets. This process ensures transparency and accountability in fund management, as it demonstrates that the nonprofit has honored the donor’s intent. Properly recording releases from restriction is essential for accurate financial reporting, as it affects how income and net assets are presented on financial statements. This accounting practice is a core aspect of fund accounting, helping nonprofits track, manage, and report on designated funds in compliance with donor requirements and generally accepted accounting principles (GAAP).

Key Takeaways

  • Occurs when donor requirements are satisfied
  • Reclassifies funds from restricted to unrestricted
  • Ensures transparency in financial reporting
  • Essential for donor and legal compliance

Why It Matters

It ensures nonprofits honor donor intent and accurately report fund usage in compliance with accounting standards.

Real World Example

A children’s charity receives a $25,000 grant from a foundation to purchase new playground equipment, with the restriction that funds must be used by the end of the year. The charity tracks the grant in a restricted fund. Once they purchase the equipment in November, the restriction is considered met. The charity then records a release from restriction, moving the $25,000 from restricted net assets to unrestricted net assets in their financial statements. This accurately reflects that the funds were used according to the donor’s intent and are no longer considered restricted.

How Aplos Helps

Within Aplos, releases from restriction are tracked and reported seamlessly using fund accounting features. Aplos automatically manages transfers between restricted and unrestricted funds, making it easy to maintain compliance and provide clear reports for donors, boards, and auditors.
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Frequently Asked Questions

What triggers a release from restriction?

A release from restriction is triggered when the nonprofit fulfills the donor’s specified purpose or when the time restriction lapses.

How does Aplos track releases from restriction?

Aplos fund accounting automates the process by allowing users to record and report releases from restriction, making compliance and reporting straightforward.

Why must releases from restriction be reported?

Reporting releases from restriction ensures transparency, demonstrates adherence to donor intent, and is required under accounting standards like GAAP.

Can released funds be used for any purpose?

Yes, once funds are released from restriction, they become unrestricted and may be used for any organizational need.

Are releases from restriction audited?

Yes, auditors often review releases from restriction to confirm that donor requirements were met and that funds were reclassified appropriately.

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