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Plain-English guide · for nonprofits
Unrestricted grants for nonprofits
Updated September 2026
An unrestricted grant comes with no limits from the donor on how you spend it. It can pay for salaries, rent, tools or a reserve. Ask your community foundation, small family foundations and funders who already give to you.
The three terms people mix up
| Term | What it means |
|---|---|
| Unrestricted | No donor-imposed restriction at all. Your board directs it. Your accountant calls it “net assets without donor restrictions.” |
| General operating support | Given to support the organization rather than a specific project. Close to unrestricted, and people use the two terms interchangeably, though a funder may still ask for a report on the organization as a whole. |
| Restricted | Limited by the donor to a purpose, a program or a time period. Spending it on anything else is not a judgment call, it is a breach. |
A fourth thing gets confused with these: board-designated funds. Money your own board has set aside for a purpose is still unrestricted, because your board can undesignate it. Only the donor can create a restriction. When you ask for a van, donors who give limit their gift to the van.
Why it matters more than the amount suggests
Restricted grants fund programs, not the organization that delivers them: the bookkeeper, the insurance, the audit, the person who answers the phone, the tools. An organization that is fully restricted-funded can be growing and still be one late reimbursement away from missing payroll.
Unrestricted money is the only grant money that can absorb a surprise, and it is what lets you say no. A funder offering money for a program slightly off your mission is much easier to decline when your core costs are covered.
Two other sources behave like unrestricted money. One is indirect cost recovery on federal grants. If you have a federal grant and no negotiated rate, you can charge up to 15% on top of your direct costs to cover overhead, leaving out a few items such as equipment and rent. That is the “de minimis” rate, and it pays for overhead, not one program. The other is unrestricted gifts from individuals.
Where unrestricted grants actually come from
Community foundations
A good place to ask for unrestricted or general operating money for a small local group. Call their program staff and talk candidly about what you actually need.
Family foundations without a formal program
They may fund people they trust rather than projects they designed. They work through relationships, so you may not find them advertised.
Capacity-building and general operating programs
Some larger foundations run explicit general operating support lines. These are competitive but they exist, and they are worth finding because some renew.
Renewal of an existing restricted relationship
A realistic route for a small organization. A funder who has watched you deliver for three years may be more open to loosening restrictions than a new funder is to starting unrestricted.
Corporate giving and local business
Corporate and local business gifts may come with no restriction at all, because the giver has not set any rules for them.
How to ask for it
Ask an existing funder first
The conversation is much easier with someone who already believes in you. “Would you consider making next year's renewal general operating?” is a reasonable question to ask a three-year funder.
Name what it pays for
“Unrestricted” sounds like “we have not decided.” Say the specific thing: the audit, the second caseworker, the database that replaces four spreadsheets. Funders fund clarity.
Show the whole cost of a program
If your program budget hides the true share of rent, insurance and administration, you are teaching funders that programs are cheaper than they are. Full-cost budgeting is the argument for operating support.
Report well on what you already have
The strongest case for unrestricted money is a track record of using restricted money precisely and reporting on it on time.
Track the ratio
Know what percentage of your income is unrestricted, and watch it over time. It is a better health indicator than total revenue.
What to do when it arrives
Decide in advance, at board level, where unrestricted money goes by default, otherwise it dissolves into whatever is loudest that month. One approach is a standing split: some to operating reserve, some to the costs no grant will cover, some to the gap in the program that is closest to breaking. Writing that policy while no money is on the table is much easier than writing it afterwards.
This is general information, not legal or financial advice. Funder policies vary and change. Read each funder's own guidelines before relying on any summary.
The Ember tool for thisEmber Budget
Ember Budget keeps restricted and flexible money apart, program by program. It flags any program that has spent past its restricted funds, and warns you when overhead is running on restricted money. Unlimited users on every tier.
Sources: eCFR, 2 CFR 200.414(f) (de minimis indirect cost rate, up to 15% of modified total direct costs) and 200.1 (what modified total direct costs leave out), read 27 September 2026; FASB ASU 2016-14, Presentation of Financial Statements of Not-for-Profit Entities (net assets with and without donor restrictions); PwC Viewpoint, not-for-profit guide 6.7 (ASC 958-605-45-4: a gift given in answer to an ask for a stated purpose carries the donor's restriction), read 29 September 2026. Funder policies vary; read each funder's own guidelines.