If the language on the flyer stated the money was only going to be used for a specific project than those funds cannot be reallocated without written permission from each donor; however, if the language on the flyers was broad and only suggested it "might" be used for that project than yes, it can be reallocated with a vote from the Board and the General Membership (the General Membership must ultimately approve all reallocations of funds). If you have a donor that donates money for a specific cause, a Board cannot use that money for any other purpose without the written consent from the donor. Once written consent is received (and the donor didn't request it to be allocated to another specific project), the Board can reallocate it at their discretion.
Donor-restricted funds are those for which the *donor* has imposed a restriction on the spending, and indeed those funds generally cannot be spent for other purposes. Spending restrictions imposed by the board, however, can be changed by the board.
Your question about the fundraising materials is a good one, and one I raised in my first response. If the fundraising materials stated unequivocally that the money would be used for a specific purpose, then the money generally must be used for that purpose. As I said, though, if they said anything like "other projects", or even if they said "could be used" or "may be used" instead of "will be used", then the donations are very likely unrestricted.
I don't think that reallocation is allowed, even with a vote. I know when I fill out our tax forms every year I have to pay attention to "donor-restricted funds" -- amounts that were specifically designated for particular purposes. I've seen recommendations that one not print "for the playground" on fundraising materials to preserve flexibility -- "for the playground and other PTO activities" allows you to reallocate if you get more than you need for the particular purpose. Was it "stated" in writing on the fundraising materials?
Whether it's legal or not depends on how it was reallocated -- but I don't think whether it's legal or not is the most important question.
If the special meeting was properly called and properly held, then yes, it was almost certainly legal. The only legal problem I can think of would be fraud if donors were intentionally misled, and that could be difficult to prove; if the fundraising materials even hinted at other projects, or even if they simply did not promise that every dollar raised or a certain amount or percentage would go toward the project, then it's probably not fraud. But even if it was illegal, where would that leave you? Hiring a lawyer? Nobody wants that, I'm sure.
Perception may be the bigger problem, though. People who donate expecting their money to go for one purpose only to have it go for something else may be unlikely to donate again. People who were looking forward to the results of the project may be disappointed. And the PTO may lose credibility, making it less effective in the future. It might be worth a quiet conversation with the board about these issues, particularly if there was anything improper in the arrangements or conduct of the special meeting. But if it's simply that the vote didn't go your way, you might be best served by running for PTO office for next year.
Our PTO held a fundraiser earlier this school year and stated that all proceeds would benefit a specific cause. Once the fundraiser was closed, the profit was added as a line item on the treasurer's monthly report as allocated for the specific cause. Recently, a special meeting was called (memo sent home) & this money has now been reallocated to help pay for the end of the year activities & bills. The specific cause is a work in progress & is not yet completed - plans were underway to utilize this money in the very near future. Is it legal to spend this money for a different cause other than the one stated during the fundraiser? Should those who participated in this fundraiser be notified of this?
