The bottom line is that, in order to remain accountable to funding sources and to stand up to audits in good faith, restrictions must be followed as thoroughly as possible. When a donor says they want their funds to be used to purchase and distribute school supplies to children from low-income families, for example, the funding should be used for exactly that. The expenses might include the cost of purchasing supplies or the cost of staffing a school supply donation drive. Acceptable use would not include funding a counseling center for the low-income parents of school-aged children.
So long as restrictions are followed and expenses match to revenue appropriately, financial managers can have peace of mind that their audit will proceed smoothly.