Preparing an annual budget and program plan, and having the board or membership approve this plan, is one of the most important legal responsibilities for a nonprofit board of directors. A parent group budget may be fairly simple, setting forth the main sources of income and expenses, and expected amounts for each. Periodic reports should be prepared throughout the year that show actual income and expenses compared to the budget.
For example, a simple parent group budget might look like the following:
|YOUR SCHOOL BOOSTER CLUB BUDGET|
|Current Grants to School||$10,000||$10,000|
Did you know that if your nonprofit, tax-exempt group does not spend all its funds each year, you can roll it over to the next year?
There is no legal requirement that nonprofit, tax-exempt organizations spend all their funds and there is no limit on the amount of funds that may be carried over to subsequent years. Many larger nonprofits hold funds equal to one year or more of their operating budget in reserves. Parent groups frequently carry forward at least minimal sums to get the next year started.
Can a nonprofit group set up separate “accounts” for individual students? For example, individual students are credited with the dollars they earn during a candy or other sale towards a band trip, so that when a student nets $100 from a sale, their trip costs are reduced by that $100?
No, the IRS has strict rules regarding nonprofits setting up individual fundraising accounts (IFAs), as these types of activities are called. See PBUSA’s policy on IFA’s.
Is the amount paid for items purchased from a school auction tax-deductible for the buyer?
The fair market value of the item purchased is not tax-deductible. However, if a buyer pays more than the fair market value for an item, a deduction may be taken for the amount that exceeds that value. For example, if a parent pays $50 for a $25 gift certificate to a local restaurant, the parent may deduct the amount exceeding the fair market value – $25 – as a contribution. Some items, however, such as a class quilt, painted furniture, or other one-of-a-kind item cannot be easily valued and therefore the price paid is considered by the IRS as the fair market value. Similarly, the cost of a raffle ticket is considered its fair market value because it is the price a willing buyer will pay for the chance to win the prize being raffled.