Carry Over Funds
It is a good idea to establish carryover funds or reserve funds, which will help provide funds for unanticipated and unbudgeted expenses; funds for emergencies; and allow the PTA to be fiscally responsible.
How much money can or should be carried over?
As a guide, reserve funds should be 3-6 months of budgeted expenses.
In planning the budget, the PTA should have small contingency savings accounts for the following reasons: efficient management of funds, reserve to carry on programs during the summer and fall until dues are collected, and moneys to finance unexpected but approved projects or programs.
Can a standard reserve amount that remains in a separate savings account from year to year be established?
Yes.
The emergency reserve funds are considered an integral part of each PTA’s planning and budgeting process. The emergency reserve funds are intended to serve as a means to retain financial stability in the event of an unforeseen development such as unplanned expenses arising from a project or an unexpected increase in inflation. The amount of the fund will vary according to each PTA’s size.
If a PTA cannot totally fund large purchases in one year, how are the funds handled without encumbering a future board?
The funds are designated for the specific activity. If the future board does not vote to continue raising money for the activity, the designated funds must then be gifted to the school for partial payment of the activity.
However, before approving proposals for material aid to the school, a PTA should consider whether or not the proposed equipment or services is a public responsibility. If the association approves to raise the funds each year, establish an account that is specified for that particular activities.
Restricted Funds
While it is a common PTA rule that one board cannot obligate the next year’s board, there is one exception
to that rule. The IRS has strict rules on restricted funds. When money is raised for a specific purpose (e.g.,
technology, a new playground, etc.), the money raised must be spent on that purpose. It does not matter if
it is one year, five years, or 25 years from now.
If your PTA wishes to use restricted funds for an alternate purpose, the donors must be notified and given
the option to have their donation refunded to them. However, if you advertise that money raised is going
toward something specific as well as other PTA projects, the collected funds are not restricted, and your
board – and future boards – are able to use that money for whatever budget purpose they desire.
Excess Funds
There is no ruling from the IRS or National PTA that limits the amount of money that a PTA may carry
over to the next budget year. No PTA board has the authority to write checks to the school or the principal
for unbudgeted items to “clean out” the accounts. Expenditures must be approved by the general membership
at a meeting. Every PTA should try to leave sufficient funds for leadership training for new board members
(i.e., Council/Regional trainings, State PTA Convention or National PTA Convention), startup expenses
for the new school year, etc. Funds not spent in one budget year should be included in the new budget.