The SPARK Reserves
The SPARK Reserves fund is the PTO’s long-term funding source for budget shortfalls and capital investments. The PTO seeks to raise enough funds to match the annual operating expenses, plus other initiatives or needs identified throughout the year. If fundraising for the year exceeds operating expenses for the year, the net income is allocated to the SPARK Reserves (as equity on the PTO balance sheet). The PTO Board may lead other events/programs to fund the SPARK Reserves, as needed.
Historical capital improvements funded by the Reserves have included:
- Technology infrastructure (computers and interactive whiteboards)
- Facility infrastructure (playground ground surface and equipment)
It is the Board’s responsibility to assess school’s short, medium, and long-term funding priorities and to then determine a funding plan for capital investments. These expenditures can be funded by both the use of existing Reserves and supplemental fundraising. Historically contributions to the SPARK Reserves programs were allocated according to the following guidelines: 65% Technology, 10% Playground, and 25% Unrestricted.
In addition to funding capital investments, a key function of the Reserves is to provide a buffer should a recession, economic downturn or other unexpected events dampen PTO fundraising in the short-term. By maintaining a healthy Reserves balance, the PTO will continue to fund its key operating expenses, such as curriculum and academic programs, during challenging economic times. The Board currently targets to maintain a balance in the Reserves of 1.5-2.0 times the annual operating budget.
Cash Flow Management
The Reserves also play an important role in helping to manage the cash flow cycle between income and expenses. Many large expenditures, such as curriculum, software licenses and teacher startup funds, are incurred before school starts while most fundraising inflows occur at the beginning of and during the school year. The Reserves are used to float this timing mismatch in the cash flow cycle and are then replenished by current year fundraising.
The SPARK PTO Investment Policy governs the management of PTO assets, including SPARK Reserves. The Investment Policy establishes guidelines to ensure PTO funds are appropriately managed to earn a return on invested assets while minimizing risk and expenses and maintaining adequate liquidity. The Investment Policy outlines permissible investments, which are limited to cash and cash equivalents and fixed income investments. External investment managers execute the investment strategy consistent with investment objectives.
Why SPARK Reserves as opposed to a Foundation?
The Reserves serves the same purpose as a Foundation. The main difference is that it falls under the umbrella of the PTO.
History of the SPARK Reserves
From 2009-2014, the PTO operated without a reserves fund or foundation. During this time, the PTO Board budgeted for both annually-consumed-expenses (e.g. software licenses, teacher training) and capital investments (e.g. computers, playground) as one process. In May 2014, the PTO Board decided to establish the SPARK Reserves to fund capital expenditures. The Board made the decision maintain all funding mechanisms for the SPARK Reserves within the PTO structure – versus forming a separate 501(c)(3) foundation. The SPARK Reserves officially kicked off in June 2015, at a fundraising event at the home of SPARK parents Jon and Heather Hallett.
The SPARK PTO Board, which includes the Principal, oversees the annual PTO operating budget. The operating budget is determined based on historical spending and input from the administration on current year needs. The annual budget is approved by the Board and “recommended to PTO Membership for approval at the first general meeting of the Membership in any school year”.
Since the establishment of the SPARK Reserves, the Board manages capital needs separately from the annual operating budget process. While there is not a budget process for The SPARK Reserves, but the PTO Board works closely with the administration to determine funding needs and initiatives. Since The SPARK Reserves is not a Foundation, we do not have IRS annual payout minimums.
Approval Process for Capital Improvement Projects
A project lead should submit a proposal to the PTO Board Co-Presidents stating the purpose and description of the project, equipment, etc. If the projected cost is over $5,000, the project lead must present three (3) separate quotes. For projects quoted at less than $15,000, tbe project requires the majority vote of the PTO Board. If quoted amounts are over $15,000, the project requires a majority vote of the PTO Board and GO Team.
The SPARK Reserves balance is identified in the Equity section of the PTO Balance Sheet (contact PTO Treasurer). The SPARK Reserves balance and spending are reported in the PTO’s Annual Report.