There is an agreement that the university will perform certain services in exchange for a specified dollar amount. The university is penalized for nonperformance. The agreement is enforceable by law and is legally binding. Performance is usually accomplished under time and fund-use constraints.
Payment is for the normal cost of the goods or services.
Restricted funds that meet one or more of these criteria should be accounted for as a grant or contract and be used in the manner specified by the granting agency. Generally, funds may not be transferred in or out of these funds. Some exceptions may apply. In these cases accurate records must be maintained for reporting purposes that indicate where the funds were transferred and how they were used. A state appropriation that is established with the expectation that other university entities will contribute to or participate in the costs of a particular function can accept transfers from other restricted funds that are similar in nature or discretionary to the department.