It always bugs me to see large sums carried over from previous years without a purpose. If you're saving for some large purchase like a playground then there should be something in the books that states that XX sum of is designated for X program. It bugs me because I like to see my fundraising efforts benefiting the school right away not sitting in an account doing nothing. If you repeatedly report to your members that you have this large sum in your account with no plans for use then I would think they would wonder why the group needs to fundraise.
That being said, we do allot a sum to be carried over to the following year to cover the costs of our fall picnic and other start of the year expenses.
First question - why does the Principal have any control over the check book?
To answer you probably need to look at your groups Charter or by-laws (assuming you have them). If you are an organization separate and independent of the school, then you should have your own EIN (tax number) and bank account and the officers (President(s)/Treasurer) should have physical control of the checkbook and signature authority to make withdrawls. If you are independent I would have the board sit down with the Principal and define a plan to make this happen - which would eventually mean the Principal pays you the money to put into your own account.
However, since the Principal does have control of the checkbook, I can assume that your PTO does not have it's own EIN and that you are operating as an extension of the school. If so, it means you don't need to file tax or non-profit forms at the end of the year, but it also means that you do not have control over the money you raise. In this case, the Principal is exercising proper authority and you are at his/her whim (although your group can certainly make recommendations).
I have never heard of a non-profit group losing that status because they had too much money in the account, but I suppose it is possible if an insufficient amount of funds were spent on their non-profit purpose over several years. At the end of the year we usually have more than you indicated in our bank account so I wouldn't worry about it too much.
As far as a petty cash fund is concerned I think $0 (zero) is an appropriate amount for day to day. To keep the accounting as easy as possible, everyone should be willing to pay out for PTO supplies and fill out a reimbursement request form with receipts and get a check in return. It is a little more work (and may take some members a little time to get used to it), but it makes it much easier to keep track of where the money is going. The key is for the checks to be written in a reasonably short time frame and given to the purchaser quickly.
Exceptions to the rule can be made on a case-by-case basis for those things that absolutely, positively need to be purchased in cash right away - but there should not be many of those and it would require a PTO officer to make a withdrawl from the bank to get the cash. It shouldn't be laying around (even if it is locked up in a desk).
This isn't to say there shouldn't be a cash box for a specific event (for instance, to sell tix at the door). But the money used for the cash box should be withdrawn specifically for the event, should be accounted for as part of the event, and should be deposited into the account as soon as possible after the event.
We have a principal that exercises too much control over expenditures for the PTO. We began our school year with $11,000 of money that was raised last year but not spent. Parents have made several suggestions about spending it but she ignores all requests. Recently I was told of a school that lost its tax exempt status for keeping too much money in the organization’s account from one year to the next. I was wondering if you know what the legal limit to hold over from one year to the next is. We believe that the money should be spent in the year it is raised but she will not listen to our suggestions.
I was also wondering if you have a suggestion for a dollar amount that the principal should be allowed to keep in her office for petty cash.