Can this be signed electronically?

Yes. Electronic signatures are generally enforceable under the ESIGN Act (15 U.S.C. §7001) and UETA where adopted. Certain exceptions such as wills, some court filings, and specific real estate instruments may be excluded; check state law for limits.

What makes funds legally restricted?

Restrictions stem from donor stipulations in the agreement, grant terms, or legal instruments specifying purpose, time, or use. Proper documentation and accounting entries are required to demonstrate compliance and avoid tax or contractual disputes.

Who enforces donor restrictions?

Donors, grantmakers, or courts may enforce restrictions. Noncompliance can lead to donor demands, requirement to return funds, or regulatory review by state attorneys general in charitable matters.

How do we change a restriction?

Amendments require written donor consent or, if permitted by law, court approval. Document any modification in writing and retain evidence of donor authorization to avoid reversion or breach claims.

Is notarization required for validity?

Not typically required for most fund agreements, but some jurisdictions or institutional policies may require notarization or witnesses for certain instruments; check state requirements before execution.

How long must records be kept?

Retain executed agreements and supporting records at least three years after the end of the tax period, with industry-specific rules applying (e.g., HIPAA six-year rule). Follow IRS and applicable state retention guidance.

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Restricted and Unrestricted Funds Agreement

Restricted and Unrestricted Funds Agreement

This template is fully customizable. Edit the text, fill out the fields, and send it for signature. Give it a try!

What a Restricted and Unrestricted Funds Agreement Is

A Restricted and Unrestricted Funds Agreement documents how a recipient will hold, manage, and use donated or grant funds that are either limited to a specific purpose (restricted) or available for general use (unrestricted). The agreement defines fund classifications, donor conditions, permitted expenditures, reporting obligations, and reversion or remedy terms. It creates an auditable record for accounting, compliance, and donor stewardship, and clarifies which activities require prior approval versus routine administrative use. Organizations use it to align financial controls with donor intent and regulatory obligations.

Why having a clear agreement matters

A written agreement reduces ambiguity, protects tax-exempt status, and documents donor intent so funds are used correctly and reports are accurate.

Typical parties who prepare or sign this agreement

Organizations and donors use this agreement to set expectations and document restrictions before funds are transferred.

Nonprofit finance teams that must track donor-restricted grants and prepare audited financial statements.
Foundations and grantmakers who need formal assurances about fund use and reporting cadence.
University development offices managing gifts with program or scholarship restrictions.

Clear role allocation—who prepares, reviews, and signs—helps prevent misuse and simplifies audits and donor communications.

Who typically signs or approves

Nonprofit CFO

Responsible for finance and compliance, the CFO reviews restrictions, confirms accounting treatment, and signs to accept fiscal responsibility. They coordinate reporting, budget allocations, and ensure internal controls align with donor conditions.

Program Director

Oversees programmatic use of funds and certifies that expenditures meet donor-specified purposes. The director provides project budgets, periodic reports, and program-level approvals required by the agreement.

How to complete the agreement step by step

Follow these steps to prepare, review, and finalize a Restricted and Unrestricted Funds Agreement for reliable tracking and compliance.

01

Draft details: Enter parties, amount, fund type, and restriction language clearly.
02

Internal review: Finance and program leads verify accounting codes and eligible expenses.
03

Donor confirmation: Share the draft with the donor for written acceptance or revision.
04

Finalize signing: Execute with authorized signatures and store the executed agreement securely.

Typical routing and processing flow

A consistent workflow ensures approvals, signatures, and storage are completed without omissions.

Prepare: Create the agreement and attach budget or scope documents.
Review: Finance confirms accounting treatment; legal checks restrictive language.
Sign: Authorized representatives sign; an audit trail is recorded.
Record: Store executed agreement in the organization’s records system.

Setting up an online signing workflow

Configure an eSignature workflow that captures intent, consent, and an audit trail for each signer.

Upload Document	Add the finalized agreement file (PDF or DOCX) to the signing platform.
Place Fields	Insert signature, date, and initial fields where required.
Authentication	Select signer authentication level (email, SMS code, or KBA).
Routing Order	Define signer order for sequential approvals if needed.
Archive Copy	Set automatic storage and export of the signed PDF plus audit trail.

Technical and platform considerations for eSigning

Confirm the platform supports required authentication, audit trails, and acceptable document formats before sending the agreement.

Supported Formats: PDF, DOCX, and editable templates.
Authentication Methods: Email link, SMS code, KBA, SSO.
Integrations: CRM and cloud storage connectors.

Ensure the chosen platform can produce a tamper-evident signed file and retain the certificate of completion for audits and donor reporting.

Essential clauses to include in the agreement

Include clauses that clarify purpose, restrictions, reporting, remedies, accounting treatment, and amendment procedures to reduce future disputes.

Purpose

Define the specific program or activity that the restricted funds must support, with measurable objectives where possible.

Use Restrictions

Specify eligible and ineligible expenses, including whether indirect costs are allowed or capped.

Reporting Requirements

State the frequency, format, and recipient of financial and programmatic reports required by the donor or grantor.

Return or Reversion

Describe conditions under which unused funds must be returned or repurposed and any donor approval process.

Accounting Treatment

Indicate how funds will be tracked (temporarily restricted, permanently restricted, unrestricted) under applicable accounting standards.

Amendment Procedure

Set forth how both parties may modify restrictions, including required approvals and documentation.

Key security and compliance controls to confirm

Encryption: TLS and AES-256

Audit Trail: Timestamped signature logs

HIPAA BAA: BAA available if required

Access Controls: Role-based permissions

Data Residency: Check regional storage options

Retention Policy: Configurable retention schedules

Common penalties and risks to avoid

Breach of Terms: Contract damages

Tax Exposure: IRS scrutiny

Donor Reputational Risk: Loss of future support

Grant Forfeiture: Return of funds required

Regulatory Penalties: State or federal fines

Audit Findings: Corrective action mandated

Frequent mistakes when preparing this agreement

Vague restriction language that fails to define eligible expenses and reporting metrics, creating interpretation disputes later.
Not documenting donor consent for amendments, which can make later reallocation of restricted funds legally risky.
Failing to track expenditures separately in accounting systems, causing misstatements on audited financials and grant reports.
Using inconsistent dates or amounts between the agreement and related schedules, which complicates reconciliation and compliance.

Timing and reporting deadlines to track

Set and communicate dates for reporting, review, and audit activities tied to restricted funds to maintain compliance.

Effective Date:

Date entered controls when restrictions and reporting obligations begin.

Periodic Reports:

Donor-required financial or program reports typically annual or quarterly as specified.

Budget Approval:

Internal deadline to finalize eligible expense categories before funds are spent.

Audit Window:

Allow time for external audit within fiscal year close procedures.

Correction Period:

Specify timeframe for correcting misapplied funds and remitting returns.

Key milestones from pledge to closeout

Track milestone dates from initial pledge through reporting and final closeout to ensure obligations are met.

01

Pledge Date

Donor commits funds and signs agreement.

02

Receipt and Deposit

Organization receives funds and records them in accounting.

03

Interim Reporting

Periodic updates provided to donor per schedule.

04

Final Closeout

Final report and reconciliation completed; any reversion processed.

Restricted versus unrestricted funds at a glance

A short comparison highlights differences in purpose, restrictions, accounting, and donor consent requirements.

Criteria	Restricted	Unrestricted
Purpose	specific program	general operations
Use Limitations
Accounting	temporarily/permanently restricted	unrestricted
Donor Consent Required

eSignature vendor comparison for signing agreements

Compare common vendor features and starting prices for executing Restricted and Unrestricted Funds Agreements electronically; signNow is listed first per platform comparison conventions.

	signNow	DocuSign	Adobe Sign	PandaDoc	HelloSign
Starting Price	$8/user/mo	$15/user/mo	$14/user/mo	$19/user/mo	$15/user/mo
Free Trial	7-day free trial	No	No	Yes, limited	Yes, limited
Bulk Send	Yes	Yes	Yes	Yes	No
Audit Trail	Yes	Yes	Yes	Yes	Yes
Envelope Cap	No cap	100 envelopes/user/yr	Varies by plan	Varies by plan	Varies by plan

Frequently asked questions and practical answers

Answers to common questions about execution, enforceability, and handling of restricted and unrestricted funds in the U.S. context.

Need help? Contact support

Can this be signed electronically?
Yes. Electronic signatures are generally enforceable under the ESIGN Act (15 U.S.C. §7001) and UETA where adopted. Certain exceptions such as wills, some court filings, and specific real estate instruments may be excluded; check state law for limits.
What makes funds legally restricted?
Restrictions stem from donor stipulations in the agreement, grant terms, or legal instruments specifying purpose, time, or use. Proper documentation and accounting entries are required to demonstrate compliance and avoid tax or contractual disputes.
Who enforces donor restrictions?
Donors, grantmakers, or courts may enforce restrictions. Noncompliance can lead to donor demands, requirement to return funds, or regulatory review by state attorneys general in charitable matters.
How do we change a restriction?
Amendments require written donor consent or, if permitted by law, court approval. Document any modification in writing and retain evidence of donor authorization to avoid reversion or breach claims.
Is notarization required for validity?
Not typically required for most fund agreements, but some jurisdictions or institutional policies may require notarization or witnesses for certain instruments; check state requirements before execution.
How long must records be kept?
Retain executed agreements and supporting records at least three years after the end of the tax period, with industry-specific rules applying (e.g., HIPAA six-year rule). Follow IRS and applicable state retention guidance.

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