Temporarily Restricted Contributions - Purpose and Time

Temporarily restricted contributions are those donations that have restrictions placed upon them, but those restrictions are only temporary. There are two types of restrictions that are classified as temporarily restricted, and they are purpose and time.

1. Purpose Restrictions
When a contribution is made with a purpose restriction, it means that the donor has specified how the funds should be used. For example, a donor may contribute money to a nonprofit organization with the restriction that it be used to purchase new equipment for a specific program. In this case, the nonprofit organization can only use the funds for that specific purpose, and not for anything else.

2. Time Restrictions
When a contribution is made with a time restriction, it means that the donor has specified a time frame during which the funds must be used. For example, a donor may contribute money to a nonprofit organization with the restriction that it be used within the next six months. In this case, the nonprofit organization must use the funds within the specified time frame, or the funds may revert back to the donor.

In both cases, purpose and time restrictions are temporary, meaning that they will expire at some point. Once the purpose or time restriction has expired, the funds become unrestricted and can be used by the nonprofit organization for any purpose. It is important for nonprofit organizations to keep track of their temporarily restricted contributions and ensure that they are using the funds in accordance with the restrictions placed upon them.

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