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Q&A: Can restricted funds be used for anything but their intended purpose?

The decision to do so involves both relational and legal considerations.

Last Reviewed: June 18, 2020

My church currently has a large surplus in its benevolence budget but a shortfall in its missions budget. The board is planning to transfer a substantial amount from benevolence to missions. But isn't it illegal to use restricted funds for anything other than their intended purpose?

Every state except Pennsylvania has adopted a version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA), a model law that addresses, among other things, investment of assets by nonprofit organizations and the handling of restricted funds. Each state's version can vary a bit (it was up to each state's legislature to determine whether to modify the model law).

UPMIFA contains language that addresses what to do legally when an organization has determined that it is "unlawful, impracticable, impossible to achieve, or wasteful" to carry out a donor restriction for a fund covered ...

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Posted:
  • November 22, 2016
  • Last Reviewed: June 18, 2020

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