Unrestricted net assets are a portion of a nonprofit organization’s net assets that are not subject to donor-imposed restrictions or other limitations on their use. In other words, these are funds that the organization can use for any lawful purpose that is consistent with its mission.
Unrestricted net assets are an important source of funding for nonprofits because they provide flexibility in budgeting and planning. Nonprofits can use these funds to cover operating expenses, invest in new programs, or save for future needs. Since unrestricted net assets are not subject to donor restrictions, nonprofits have more control over how they are used.
Unrestricted net assets are disclosed in a nonprofit organization’s financial statements and are typically reported as a separate line item. In addition, nonprofits must ensure that their use of unrestricted net assets is consistent with their mission and that they are used in the best interest of the organization.
It’s important to note that unrestricted net assets are just one of three categories of net assets for nonprofits. Temporarily restricted net assets and permanently restricted net assets are the other two categories, and they are subject to donor-imposed restrictions or other limitations on their use.