Question: budget reserves

Is there a recommended percentage of yearly budget that should be held in reserves from year to year?

Asked by mbk

Answers:

Advice from PTO Today

Rose H writes:
Hi, There isn't a set amount that applies to all groups. Many groups do keep some funds to carry over for the next year, but some don't. A good rule of thumb is to assess what your initial expenses will be at the start of the school year and make sure you have that amount carried over. For example, some schools have field trip or yearbook expenses right out of the gate and make sure that have that amount in the bank as they start the school year. Also, another reason to have some carry-over funds is it helps a group avoid starting the year with a big fundraiser. Often, families greatly appreciate it when the PTO starts the year in a more community-building mode rather than a fundraising mode.

Community Advice

C S writes:
This isn't a one size fits all answer. Some PTO boards carry over a year's worth of operating expenses; some less. Some PTA's are dictated how much they can carry over by the State PTA organization. Some PTO's in recent years are carrying more funds over because of the economy. Some are padding reserves to account for a special project. In the end, it's whatever the entire board decides. So long as you are providing programs to the children and are spending the bulk of your money, you will not be in jeopardy of losing your tax exempt status (if your organization is tax exempt)

Community Advice

KDHuber writes:
Generally speaking, whatever you have carried over from a previous year is how much you should leave as carry over for the following year. This way you are ensuring that your group is responsibly spending one full year of funding while leaving whatever start up funds you feel are appropriate for the following year. I think that too often when groups think of carry over funds, they see it as "extra" money that can be spent on whatever and this should not be the case UNLESS your group has specifically voted to set aside funds each year for some much larger project...say playgroup equipment...that is too big to fund in one year so that each year for a couple of years your group sets aside funds for this specific fund. Just keep clear records and keep the books open so everyone knows what you are doing with the money and why and you will be good.