Booster Club Reserves and Carryover: How Much to Keep

Terms

How Much to Keep

No federal rule sets a required reserve level for a booster club. The amount is a board decision, and it should come from the club’s own calendar, not a rule of thumb.

1. List the expenses due before the first major revenue arrives. For a fall program on a July 1 fiscal yearFiscal yearThe club’s 12-month accounting year, set in the bylaws. Many booster clubs use July 1 through June 30 to match the school year, and the club’s filing deadlines count from the day it ends.All terms, that might be summer camp, clinicians, equipment orders, insurance, and early travel deposits.
2. Add a cushion for one fundraiser falling short, often equal to the net of the club’s riskiest fundraiser or about 10 percent of annual expenses.
3. Add restricted balances separately. They are not part of the operating reserve.
4. Compare the total with the projected year-end balance and adjust the budget if needed.

Worked example

A band booster club has a $60,000 annual budget on a July 1 fiscal year. Before fall fundraising begins in October, it must pay:

The target is about 29 percent of the annual budget. A scholarship fund of $3,000 is held on top of that, as a restricted balance.

Why Not Keep More

• Donor expectations. Parents and sponsors give to support current students. A balance that grows every year raises fair questions about why the money is not being used.
• Theft risk. Large balances that nobody watches are easier to steal from without notice.
• Filing thresholds. A club with total assets of $500,000 or more at year end must file the full Form 990 rather than the shorter Form 990-EZ, and its gross receipts are what decide whether it may file the Form 990-N postcard. See Which Form 990 a Booster Club Files.
• State thresholds. Some state charitable registration rules turn on revenue or assets. This varies by state; see Booster Club Filing Requirements by State.

Why Not Keep Less

A club that ends the year near zero forces volunteers to front money for summer costs, pushes the new board into rushed fundraising, and risks bounced payments. It also cannot absorb a rained-out event or a canceled sponsor.

Restricted Funds

Restricted gifts are promises. The club must track each one, report its balance separately in the treasurer’s report, and spend it only on the stated purpose.

1. Record the restriction in writing when the gift arrives: donor, amount, purpose, and any time limit.
2. Track each restricted fund as its own line in the books and budget.
3. Spend only on the purpose, with the restriction noted on the payment request.
4. Report restricted balances at every meeting and in the annual financial review.
5. If the purpose becomes impossible (the program ends, the item is no longer needed), ask the donor in writing for permission to redirect the gift. If the donor cannot be reached, get professional advice; state law governs changes to restricted gifts.

Reserves and restricted funds belong to the program as a whole, never to individual students. Holding money in a student’s name or crediting fundraising to a family can endanger the club’s 501(c)(3) status. See Private Benefit and Individual Fundraising Accounts.

Where to Keep Reserves

• A separate savings or money market account at the same or another federally insured bank, titled in the club’s name and EIN (Employer Identification NumberEINEmployer Identification Number: the nine-digit federal tax identification number the IRS assigns to the club. The club needs it to open a bank account, apply for 501(c)(3) status, and file its annual return.All terms), with the same signers and the same monthly review as the checking account.
• Within insurance limits. The Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per corporation or association at each insured bank.
• Certificates of deposit only if they mature before the money is needed.
• No stocks or other investments without a board-adopted investment policy and professional advice. Donated stock should be sold promptly unless a policy says otherwise.

Interest earned is income and appears on the treasurer’s report and the federal annual return.

Reserve Policy Template

Using the Reserve

1. The treasurer reports the need and the effect on the reserve.
2. The board votes to use the reserve, and the minutes record the amount and purpose.
3. The budget is amended if the use was not in the adopted budget.
4. The next budget includes a plan to rebuild the reserve to target.