About Revenue

Where do nonprofits get the money they need? A few nonprofits are independently endowed; others are supported by a broad membership base; some others are subsidiaries of commercial business, using profit from the commercial parent to fund some of the nonprofit’s charitable activities.

But most nonprofits—and even those with plenty of resources—need to ask the world for money. This "ask" comes in two basic forms:

  • "Please give us money, simply because you like our mission." This is a request for unrestricted donation.


  • "Please give us money to conduct this specific initiative (or project)." This is a request for restricted donations. The money received as restricted donations must be used only to fund the specified initiative. Donors of this type of funding typically want assurance that their gift is spent on the initiative that they favor. The most usual way that donors exert this desired control is to make their gift in the form of a cost-reimbursable grant. The grant is sealed by a written agreement that stipulates all the terms that the recipient must meet in order to receive the funds. Such grants are often limited to reimbursement of actual, allowable expenses - as defined in the grant agreement - that the nonprofit incurs in the course of conducting specific projects/activities.

More on restricted and unrestricted at Restricted and Unrestricted Revenue.

Many nonprofits rely heavily on cost-reimbursable grants for their revenue. This reliance on reimbursement as a primary source of revenue engenders an intense interest in cost accounting, which is a rather complex topic. You can begin to explore it at About Cost Accounting.

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