Accounting
Nonprofit Accounting
Nonprofit Management
Board-Designated Funds: What They Are and How to Report Them
Last updated: October 8, 2026 · Independent guide · We do not sell rankings or coverage.
Board designated funds are net assets without donor restrictions that a nonprofit’s governing board has set aside for a purpose of its own choosing. Because the limit comes from the board and not from a donor, the board can remove or change it by a later vote. Under US GAAP (ASC 958, as amended by FASB ASU 2016-14), board designated funds stay inside net assets without donor restrictions on the statement of financial position, and you must disclose their amounts and purposes on the face of the statements or in the notes.
Definition: what counts as a board designated fund
The FASB Master Glossary defines board-designated net assets as “net assets without donor restrictions subject to self-imposed limits by action of the governing board.” Designations made by management under authority delegated by the board also count (FASB ASU 2016-14, August 2016).
A board-designated endowment fund, also called a quasi-endowment or a fund functioning as endowment, is a special case. The board designates part of its net assets without donor restrictions to be invested to provide income for a long but unspecified period. ASC 958-205-45-13A says such a fund is generally classified as net assets without donor restrictions (FASB ASU 2016-14).
| Point of difference | Board designated funds | Donor-restricted funds |
|---|---|---|
| Who sets the limit | The governing board (or management under delegated authority) | The donor or grantor |
| Can the limit be removed? | Yes, by a later board action | Only when the donor’s time or purpose condition is met, or the donor agrees |
| Net asset class | Net assets without donor restrictions | Net assets with donor restrictions |
| Required disclosure | Amounts and purposes, on the face or in the notes (ASC 958-210-45-11) | Nature and amounts of restrictions, on the face or in the notes (ASC 958-210-45-9) |
Example: board designated funds on the statement of financial position
This illustration uses invented figures. A food bank ends its fiscal year with $1,850,000 of net assets. During the year its board voted to hold a $300,000 operating reserve and to invest $500,000 as a quasi-endowment. It also holds $410,000 of donor-restricted grants.
| Net assets (illustration) | Amount |
|---|---|
| Without donor restrictions: undesignated | $640,000 |
| Without donor restrictions: board designated operating reserve | $300,000 |
| Without donor restrictions: board designated quasi-endowment | $500,000 |
| Total net assets without donor restrictions | $1,440,000 |
| With donor restrictions | $410,000 |
| Total net assets | $1,850,000 |
Separate lines, as above, meet the disclosure requirement on the face of the statement. You may instead show one line for net assets without donor restrictions and list the designations in a note (ASC 958-210-45-11 and 958-210-50-3).
In the ledger, a designation is a transfer between two equity accounts in the same class: debit undesignated net assets and credit board designated net assets. It is not revenue or expense and does not change total net assets without donor restrictions.
How board designated funds are used in practice and in software
Boards commonly designate funds for operating or liquidity reserves, future programs or projects, an internal line of credit, or an endowment, according to CPA firm HoganTaylor (June 21, 2022).
Designations also affect the liquidity note required by ASC 958-210-50-1A. ASU 2016-14 says the availability of a financial asset may be affected by “internal limits imposed by governing board decisions.” In the FASB’s own illustration, a $36,600 quasi-endowment and a $1,300 liquidity reserve are subtracted from financial assets available for general expenditures within one year (FASB ASU 2016-14).
On Form 990, Schedule D, Part V line 2a asks for the percentage of your endowment that is board designated or quasi-endowment (IRS, Instructions for Schedule D (Form 990), page reviewed April 30, 2026).
In accounting software, you track designations either with separate net asset accounts or with a fund or restriction dimension. Sage Intacct’s nonprofit QuickStart template includes a Net Assets_Board Designated account group that feeds its statement of financial position report in 958 format (Sage Intacct Help, October 1, 2026). Aplos, which sells nonprofit accounting software, suggests tracking board designated funds with separate fund accounts (Aplos, June 2, 2025).
Related terms
- Designated funds in churches: see our guide to church fund accounting software.
- Net asset classes and fund reporting: see our review of nonprofit accounting software.
- Restriction dimensions: see Sage Intacct for nonprofits.
- Pledges receivable: see pledge management software.
How we researched this
We read the full text of FASB ASU 2016-14, including the Master Glossary definitions and paragraphs 958-205-45-13A, 958-210-45-11, 958-210-50-1A and 958-210-50-3, on October 8, 2026. We checked the IRS Schedule D instructions and vendor documentation on the same date, and reviewed the pages that currently rank for this term.
Related guides
- Restricted Funds Accounting: Restrictions and Releases
- Nonprofit Statement of Financial Position: Template
- Form 990 Schedule D: Triggers, Endowments, Reconciliations
Frequently asked questions
Are board designated funds restricted?
No. Board designated funds are part of net assets without donor restrictions, because only a donor can create a restriction under ASC 958. The board’s limit is a self-imposed designation that it can reverse.
Can the board spend or undesignate board designated funds?
Yes. The board can release a designation by a new vote and use the money for general operations. Record the vote in the minutes so your auditor can trace the change.
Do board designated funds have to be shown separately on the balance sheet?
Not necessarily. ASC 958-210-45-11 requires you to provide the amounts and purposes of board designations, but you can do so on the face of the statement of financial position or in the notes.
Sources
- FASB, Accounting Standards Update No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities, August 2016. storage.fasb.org
- IRS, Instructions for Schedule D (Form 990), revised December 2024, page reviewed April 30, 2026. irs.gov
- Sage Intacct Help, Financial reports and graphs for nonprofit organizations, last modified October 1, 2026 (Sage sells Sage Intacct). intacct.com
- Aplos, Board designated fund (glossary), updated June 2, 2025 (Aplos sells nonprofit accounting software). aplos.com
- HoganTaylor, Support your nonprofit’s financial plans with board designations, June 21, 2022. hogantaylor.com
Sherman Hsieh
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