Short answer: QuickBooks Online (QBO) can track grant activity well, but it has no built-in running balance for each restriction. The setup that works for most nonprofits: classes for programs and functions, a customer or project for each grant, and separate net asset accounts for “with donor restrictions” and “without donor restrictions.” Add a monthly restricted-funds rollforward that ties to QBO. Release a restriction when it is actually satisfied, not when the cash arrives.
By Rex Biggs II, CPA, founder of Rektio Accounting. Rektio provides monthly bookkeeping, grant tracking, restricted-fund accounting and board reporting for 501(c)(3) nonprofits with $1M-$15M in revenue.
Why restricted funds get messy in QuickBooks Online
Nonprofit finance staff and bookkeepers keep running into the same limits. QBO is built for businesses, so it has no fund module. Classes and projects can tag income and expenses, but nothing shows a running balance for each restriction. Many teams end up rebuilding grant balances in spreadsheets every month. Once you have more than a few grants on different cycles, those spreadsheets drift away from the books.
A setup that works
| What you need to see | Where it lives in QBO |
|---|---|
| Program, management & general, fundraising | Classes |
| Each grant or restricted gift (budget vs. actual, start/end dates) | Customer (the grantor) + Project (the grant) |
| With vs. without donor restrictions | Separate net asset and revenue accounts (some organizations also use Locations) |
| Grant budgets | QBO budgets, one per grant |
| Restricted balance by fund | Monthly rollforward that ties to QBO |
The monthly workflow
- Record the award correctly. Record restricted gifts and grants as revenue with donor restrictions, tagged to the grant’s project. Record the restriction (purpose, time period, end date) in the project notes.
- Code every expense to the grant it supports. This includes payroll allocations and bills, not only obvious grant purchases. Most grant balances go wrong at this step.
- Release restrictions when they are satisfied. When you spend for the restricted purpose, or when the time restriction lapses, move the amount from “with donor restrictions” to “without donor restrictions” with matching release entries. The release moves the money between the two categories but doesn’t change total net assets.
- Update the restricted-funds rollforward. For each fund: beginning balance + new restricted revenue − releases = ending balance. The total has to match net assets with donor restrictions on the statement of financial position.
- Run budget-to-actual for each grant, and flag anything underspent, overspent or close to its end date.
- Clear the release accounts at year-end close, so this year’s releases don’t mix with next year’s.
What to put in the board package
Every board wants something different, so build the package around the decisions your board actually makes. A strong monthly or quarterly package usually starts from:
- A one-page summary: cash, months of operating reserve, and what needs a decision
- Statement of financial position and statement of activities, compared with budget
- Restricted funds by purpose, showing what is available for general operations and what isn’t
- Grant progress: spending against budget and upcoming end dates
- A short narrative explaining the variances
Boards should never read “cash in the bank” as “cash we can spend on anything.” The restricted-funds page is what prevents that mistake.
When to get help
If grant balances only exist in a spreadsheet, releases get booked when cash arrives, or the board package takes weeks to assemble, it’s time for a monthly process. Rektio keeps the books every month for 501(c)(3) nonprofits with $1M-$15M in revenue: reconciliations, payroll, grant tracking, restricted-fund accounting, and a board package customized to each client. We work in QuickBooks Online. Pricing starts at $1,500/month, scoped to your organization. If past periods need cleanup, we almost always build catch-up into the onboarding fee or handle it as a special onboarding project before monthly service starts.
Talk to Rektio Accounting: (463) 215-0968 · rektio.com/contact-us
FAQ
Can QuickBooks Online track restricted funds for a nonprofit?
Yes, with the right setup. Use classes for programs and functions, a project under each grantor for each grant, and separate net asset accounts for with and without donor restrictions. QBO has no built-in running balance for each restriction, so keep a monthly rollforward that ties to the books.
Should I use classes or projects to track grants in QuickBooks Online?
Most nonprofits use classes for programs and functional expenses, and projects for individual grants. Projects nest under the grantor as a customer, have start and end dates, and work with per-grant budgets and payroll allocations.
When should a nonprofit release restricted funds?
When the restriction is satisfied: the money has been spent for the restricted purpose, or the time restriction has lapsed. Don’t release when the cash arrives. Booking the release too early makes unrestricted funds look stronger than they really are.
How do I see how much is left in each grant?
Run budget vs. actuals by project for each grant, and update a restricted-funds rollforward every month: beginning balance plus new restricted revenue, minus releases, equals ending balance.
What should a nonprofit board financial report include?
Usually a one-page summary of cash and reserves, the statement of financial position, the statement of activities compared with budget, restricted funds by purpose, grant progress and a short narrative. Rektio customizes the board package for each client.
Does Rektio work with nonprofits outside Indiana?
Yes. Rektio Accounting is based in Fishers, Indiana and works with 501(c)(3) nonprofits across the United States, all on a recurring monthly basis.
