ValleyBgirls - no, that's just one of the frequent myths. It aparently was a POLICY of your group, not an IRS rule. As the others said, there are really no rules/laws against it. But as a common practice most school communities would expect the group to spend the bulk of the funds raised for that year on programs for the current students.
Typically, you figure out what a reasonable amount to retain is - allowing for next year's start up funds and (hopefully) a bit of a safety net. But after the first year of doing this, then you pretty much are spending 100%. For instance, in our elementary PTO, we kept $2000. So we came into the year inheriting $2000 and left the year with a balance of about that amount.
However, if you are saving up for a large project - something that takes multiple years to plan for - that's fine also. It's just that members of your community deserve to know WHAT they are supporting.
So, it's a common practice to spend what you earned, but not any sort of rule/law.
I thought there was a limited as per the IRS? That is what the outgoing president said & what I keep hearing. That the PTO, as a non-profit, was not allwoed to rollover more than a certain amount into the new year. I was just trying to figure out what that amount was. Thanks
I think I've read posts on this topic here before; you might want to do a search. There's nothing in the IRS rules to say you can't -- unless you have so much invested that more than 33% (?) of your income is "investment income." By-laws are one thing; another is whether parents of graduating students would be upset you didn't spend the money they helped raise while their kids were still in the school.
It all depends on what your bylaws say. Our PTA keeps quite a substantial amount of money in our account. We have been saving because we were unsure if we would raise enough money in the upcoming years. Its a good idea to keep some money in your account so that you can plan events at the beginning of the year before you have raised money.
Is the PTO, as a non-profit, prohibited from keeping a balance in the checking account from year to year? Or are they allowed an amount that they can keep to roll over into the next year? Is there a minimum or maximum?
