I can't understand why an accountant would say that. There must be some misunderstanding. The IRS doesn't revoke non-profit status because of a level of savings. Non-profit does not mean NO profit. You can absolutely keep money in savings year after year. The issue about holding onto that much money should be a concern of the members, but it's not a threat to the group's non-profit status. Encourage your friend and her board to ask more questions.
A friend of mine called me today that is new to the whole PTO experience. She had a question about how much money the PTO that I am part of has in it's bank account. Because the PTO at her school $45,000 sitting in one their accounts that is earmarked for Music & Art only with no plans to spend it! They also have $15,000 sitting in their general funds account. (I know that we would all like to have this problem.)The accountant has warned them that the IRS could revoke their non-profit status unless they spend down the money. The board at her school wants to take their chances with the IRS because they don't want to spend the money! We generally end our year with $3000 in the bank because we have a Fall Carnival at the beginning of the school year and need that much as start-up money for the carnival. How much do the rest of you carry over in your account from one year to the next?
