The core method: a fund per restriction
Each restricted grant gets its own fund (some teams think of it as a sub-account) in the books. Every dollar that comes in for that grant is recorded to its fund, and every expense paid from it is recorded against the same fund. At any moment you can answer the two questions a grantmaker cares about: how much of this grant is left, and what was it spent on?
This is what lets you produce a grant report or survive an audit — the trail from money received to money spent stays attached to the restriction the whole way through.
Where it usually breaks down
The bank account holds all the grants together as one balance and has no concept of which deposit belongs to which grant. So the tracking lives somewhere else — a spreadsheet or accounting software — where a treasurer manually tags each transaction to a fund and then reconciles that against the bank every month.
The failure modes are familiar: a deposit gets tagged to the wrong fund, an expense never gets allocated, and by report time the spreadsheet and the bank disagree. The more grants you manage, the heavier this gets.
Tracking grants where the money lives
Holdings tracks funds inside the bank account, so the restriction travels with the money instead of being reconstructed afterward. Invoice a funder directly from the account, and when they pay, it posts to the right fund automatically — the deposit and the fund entry are one event.
Expenses paid from a fund record against it the same way. There's no parallel spreadsheet and no monthly reconciliation between the bank and the fund ledger, because the fund ledger *is* the account. Nonprofit fund accounting is the $25/mo plan; a verified nonprofit profile and the directory listing are free.
How to track a restricted grant
- 1
Create a fund for the grant
Set up a dedicated fund (or sub-account) for the restricted grant so every dollar in and out is tied to it specifically.
- 2
Record incoming grant money to that fund
When the grant is paid — ideally by invoicing the funder directly — record the deposit to the grant's fund so the restriction is attached from the start.
- 3
Allocate every related expense to the fund
As you spend on the grant's purpose, record each expense against its fund so the remaining balance and the spending trail stay accurate.
- 4
Report on the fund
Pull the fund's activity for grant reports and audits — showing money received, money spent, and the purpose it served, all reconciled by design.
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Frequently asked questions
Can I track restricted grants in QuickBooks?
You can approximate it using classes or location tags to stand in for funds, but it's a workaround — QuickBooks isn't built for fund accounting, so it takes manual discipline and still leaves a bank-to-books reconciliation. Dedicated fund accounting handles restrictions natively.
What happens if I spend restricted grant money on the wrong thing?
It's a serious compliance problem — you may have to repay the grant and it can damage funder trust and audit results. That's exactly why per-fund tracking matters: it keeps restricted balances visible so they aren't spent by accident.
How does Holdings keep grants in the right fund?
Funds live inside the account, so when a funder pays an invoice it posts to that grant's fund automatically, and expenses record against it as you spend. The restriction stays attached to the money instead of being re-tagged in a spreadsheet later.