Oct 262014
 

It’s tax form filing time again! Federal and state laws require every PTA to file the following tax forms annually:

  • IRS Form 990 (990, 990EZ or 990N)
  • California State Franchise Tax Board Form 199 (199 or 199N)
  • Registry of Charitable Trusts RRF-1

These filings and forms are due four and one half months after the end of the fiscal year or on November 15, if your fiscal year ends June 30. Check your bylaws for your specific fiscal year.

California State PTA and Highlands Council are here to help you!
Our Tax Filing Support Center is available exclusively to PTA leaders. We can help you with what to file and how to file your tax information. If you have tax questions, we have answers.

Have you received correspondence from a governmental agency? Immediately notify the state PTA office. Complete the online form or call toll free at 1 (888) 564-6782. Then contact Tenth District PTSA at treasurer@tenthdistrictptsa.org, or call (213) 745-7190. Forward copies of the correspondence to  the State PTA and the Tenth District PTSA.

Learn more about important reports that your PTA must file.
Jan 242014
 

PTA Audit

An audit is a formal examination of the financial books and records of the financial officers of the PTA. It serves to certify that receipts and expenditures, as authorized in the minutes, are in conformity with Bylaws for Local PTA/PTSA Units, Standing Rules, and budget limitations. The PTA audit serves as an official examination of the financial records conducted by the auditor or appointed audit committee at the times specified in the Bylaws for Local PTA/PTSA Units,Article VI, Section 8 and when there is a change in financial officers.

Audit Schedule

At the beginning of the year, the treasurer should set up the books from the perspective of an auditor. The auditor should meet with the financial officers and explain what is required to conduct an audit.

Purpose of an Audit

An audit determines the accuracy of the books, detects inconsistencies or errors, provides recommendations for corrective action, protects the financial officers, verifies that funds were sent through channels as appropriate, and assures the membership that the association’s resources were managed in a businesslike manner within the regulations established for their use.

The person conducting the audit should always be impartial and not related by blood or marriage nor reside in the same household as the president or other financial officers or any chairmen handling funds.

The auditor is often a member of the budget, programs, or fundraising committees, but is never the one authorized to sign the PTA’s checks. It is permissible for the PTA to hire a professional to conduct the audit.

The auditor may be an elected officer, appointed individual or committee, or a professional hired by the PTA in accordance with the procedures listed in the Bylaws. The president, treasurer, financial secretary, secretary, or committee chairmen handling funds may not audit the finances.

Auditor Duties

Audit the books and financial records of the association semiannually.

Prepare a mid-year and year-end audit in the months stipulated in the bylaws.

Prepare and present written reports to the executive board in the months stipulated in the bylaws.

Prepare and present written reports for adoption by the association in the months stipulated in the bylaws.

The outgoing auditor is responsible for conducting the audit at close of term. The California State PTA recommends that if the audit is not completed within two (2) weeks after the completion of the term of office, the president may appoint a committee to immediately audit the books. The same time frame must be followed for the semi-annual audit.

Preparation for an Audit

Collect all financial books, records and reports from the treasurer, including:

  • A copy of the last audit report;
  • Current bylaws and standing rules;
  • Originals of checkbook register and canceled checks (including voided checks);
  • Originals of bank statements, bank book and deposit slips;
  • Cash receipts;
  • Authorizations for payment;
  • Itemized statements and receipts of bills paid;
  • Monthly Treasurer’s Reports;
  • Original treasurer’s books/ledgers;
  • Annual Financial Report;
  • Copies of board, executive committee and association minutes, which would include an adopted budget, any amendments that were approved during the year, approval of expenditures, and ratification of payments;
  • Committee reports from chairmen (e.g., fundraising, membership, etc.);
  • Any other information requ e s ted by the auditor;
  • Copy of PTA-required Workers’ Compensation annual Payroll Report form ;
  • Copies of all required state and federal report forms if PTA hires employee(s);
  • Copies of all required federal report forms if PTA hires independent contractor(s);
  • Copies of the most recently filed IRS Form 990, if required ;
  • Council and district PTAs must also include copies of the State Form 199 and RRF-1.

Audit Procedure

Audit each account separately. Check off items in red ink as they are reviewed. Do not correct errors. Ask the responsible financial officer to correct errors after presenting the report. After errors have been corrected, and the auditor is satisfied that the financial accounts are correct, draw a double line across the ledger and checkbook register where the audit concludes and sign and date using red ink, “Audited by (name) on (date).” The auditor en su res that the association’s financial records are accurate:

  • Check to be sure all financial materials requested are available.
  • If the PTA has more than one account, audit each account separately.
  • Include bank name, bank address, type of account and the account number on each report.
  • Check off items in red ink as reviewed.Make sure additions/subtractions are correct in all instances.
  • Do not correct errors.Make notes as to how to correct errors and include in the report.
  • Start audit with records posted after the last audit. Check to see if the amount shown on the first bank statement (adjusted for outstanding checks and deposits) corresponds to the starting balance recorded in the checkbook register, ledger, and treasurer report, and the ending balance of the last audit.
  • Check to see that the ending balance of the last bank statement, checkbook register, ledger and treasurer report agree.
  • Confirm reconciliation of each month’s bank statement to the checkbook register by someone other than the treasurer.Make sure every check is substantiated with an aut h orizati on for paym ent with reason for disbursement, appropriate payee and a receipt or bill. If no authorization can be found, verify it was a transfer payment, such as council dues. Note missing checks. (Void checks are filed.)
  • Check that all bank charges and interest earned are recorded in the checkbook register, ledger and treasurer reports.
  • Ensure that checks (see bylaws) and authorizations are signed by approved officers.
  • Reconcile each deposit slip with bank statement and checkbook entries. Ensure money was deposited promptly.
  • Ensure collection process is in place for returned checks that includes reimbursement of applicable bank charges. A returned check is treated as reverse income and reimbursed bank charges are treated as reverse expenses.
  • Reconcile checkbook register to the ledger. Check each month’s ledger entries for error, and cross-check against checks issued and receipts posted. Cross-reference checkbook register with checks issued.
  • Verify that all income and expenditures are allocated into the same categories that constitute the approved budget.
  • Make certain that council, district, State and National PTA portions of the membership dues have been kept separate from other receipts and forwarded immediately.
  • Make certain that the number of memberships agrees with membership chairman’s report, and verify that membership monies collected correspond to membership monies forwarded.
  • Ensure payment for insurance premiums.
  • Make certain the money collected for a specific purpose (special projects, Founders Day, scholarship funds, council dues, etc.) has been so disbursed.
  • Check association and executive board minutes to see if expenditures were authorized. No motion is required for payment of transfer funds – per capita, Founders Day freewill offering, and insurance premiums.
  • Check event reports to verify receipts and expenditures.
  • Check all cash receipt slips issued, and verify proper entry in ledger.
  • Ensure that Cash Verification Forms (Forms 387) are being used and two people are counting money.
  • If an advance has been given, ensure that advance amount matches the approved expense.
  • Compare figures on monthly treasurer and annual financial reports against ledger for accuracy.
  • Ensure proper tax returns have been filed, if necessary.
  • Prepare copies of written report, including recommendations, for president, secretary, financial officers, and council/district. When called upon, read only the statement “The auditing committee has/I have examined the records of the treasurer of _____ PTA and find
  • them to be correct, or
  • them to be substantially correct with the following recommendations, or
  • more adequate accounting procedures are needed so that a more thorough audit report can be given, or
  • them to be incorrect.
  • Verify that the PTA-requiredWorkers’ Compensation Annual Payroll Report form has been filed through PA channels.
  • Verify that all required state and federal report forms have been filed if PTA hires employee(s) or independent contractor(s).
  • Verify that all tax forms have been filed, if required.
  • Council and district PTA auditors only: verify that council and district PTAs have filed the required State Forms 199 and RRF-1.

Each committee member must sign the report. If questions are raised by the membership, the president should state that a committee has been appointed to look into any problem, and that the members will report back to the association at the next meeting. The audit report is adopted by the association with the motion “I move that the audit report be adopted.”

  • Ask the responsible financial officer to correct errors after presenting the report.
  • After any errors have been corrected and all are satisfied that the financial accounts are correct, draw a double line across the ledger and checkbook register where the audit concludes and sign and date using red ink “Examined by (name) on (date).”

5.4.6 Audit Report

At the completion of the audit, meet with the financial officers and president to discuss recommended corrections.When errors have been corrected by a financial officer and accounts are accurate, draw a double line in red ink where the audit concludes. Sign and date the ledger (Audit Report Form, Forms 383).

AUDIT REPORT CHECKLIST

    • Prepare written report.
    • Report should include bank name and address, type of account, account number, EIN, beginning balance (ending balance from last audit), a total of all expenditures, all deposits, outstanding checks, outstanding deposits, and an ending balance (Audit Report Form, Forms 383).

Include a statement at the bottom of the report to be read upon presentation of the report, “The audit committee has/I have examined the records of the treasurer of _____ PTA and find – them to be correct, or – them to be substantially correct with the following recommendations, or – more adequate accounting procedures are needed so that a more thorough audit report can be given, or – them to be incorrect.” Each member of the committee or the auditor should sign the report.

  • Attach any recommendations to the report. List errors in arithmetic or posting. List unpaid bills and payments authorized, but not paid.
  • Present the audit report with recommendations to the executive board, and attach the report to the executive board minutes.
  • Present the audit report to the association and read the statement given on the report (from the form).
  • Formally adopt the audit report with a motion: “I move that the audit report be adopted” and record the action in the association minutes. Any PTA member may make a motion to adopt the audit report.
  • Attach a signed copy of the audit report to the association minutes.
  • Forward copies of adopted audit to the next level PTA.

If there are questions raised by the membership, the president should appoint a committee to look into the problems and report back to the association at the next meeting (Mismanagement of Funds/Embezzlement 5.4.7, 230).

If assistance is needed, contact the council or district PTA. At any time during the process, the California State PTA also may be contacted for information and assistance.

For more information on audit procedures, see National PTA Annual Resources for PTAs.

Internal Revenue Service (IRS) Audit

The IRS examines the records of PTAs on a random sampling basis. The notification of an IRS audit of the PTA records will include a list of items that must be made available. If a PTA letter of exemption is required, the state office will furnish a copy upon request.

Do not make any implicit, explicit, oral or written statements or accusations.

A notification of intention to audit from the IRS should not be cause for panic. All PTA financial records should be kept up-to-date, so that an audit can be conducted without a problem. If contacted for an IRS audit, notify the district and California State PTA treasurers. After the audit is completed, provide the district and California State PTA treasurers with the results.

Mismanagement of Funds/ Embezzlement

Mismanagement of funds refers to the potential loss of PTA funds and raises questions about the integrity of the individual(s) in charge of the PTA funds. PTA funds are protected by following correct financial procedures. The PTA executive board must safeguard the association’s assets and potentially clear the individuals who may be involved.

There are several signs of possible mismanagement: lack of receipts and/or treasurer’s reports; payments made in cash rather than by check; missed meetings by financial officers; and unanswered phone calls or mail. However, these are merely signs, not proof of wrongdoing, so be discreet. Do not make any implicit, explicit, oral or written statements or accusations. Such actions could result in a lawsuit for libel or slander.

PROCEDURE

With guidance from the district PTA, review the information, and determine the appropriate course of action.

Call a special meeting of the unit executive board and principal to confidentially review the facts and determine the actions to be taken.

Exclude the individual(s) who might be involved in the mismanagement of funds.

Notify the council/district PTA presidents of the scheduled meeting date, so they can attend. The president will invite the council/district PTA treasurer to attend, if necessary.

Convene the meeting.

Instruct the secretary to take minutes of the special meeting. These minutes must reflect all actions authorized by the executive board. However, be careful not to accuse any specific individual. File these minutes with the minutes of the executive board.

Review the information presented. Conduct the discussion. A motion and vote are needed to authorize any proposed action(s), which could include:

  • Obtaining the books and financial records from the treasurer;
  • Requesting the bank to freeze the account pending the results of an audit. Provide the bank with a statement from the executive board authorizing the bank to take such action;
  • Appointing appropriate person(s) to audit the books and records of the unit immediately and thoroughly; or
  • Adjourning the meeting. Remind all present that the matter is confidential and must not be discussed.

When an audit is authorized, obtain a written report from the auditor and call a second special meeting of the executive board and the principal to review the audit findings. Evaluate the audit findings to determine if there are indications of carelessness or inaccurate or improper record keeping or the more serious matter of missing funds.

If the results of the audit indicate that money is missing from the account, the executive board shall notify the council or district PTA president immediately and file a complaint with the local law enforcement agency or district attorney’s office requesting an investigation.

  • Provide copies of all substantiating documents;
  • Request appropriate legal action; and
  • Request direction as to the next steps, including meeting with the individual(s) concerned to discuss the results of the audit.

Do not make a direct accusation. Do not accept any offer of direct repayment from an individual, unless so instructed by the district attorney’s office.

REMOVING THE OFFICER

Consult with the council/district PTA prior to beginning the following process.

If removing the officer from office is a consideration, the executive board must make a formal request through channels to the council/district PTA for assistance in determining whether a hearing should be conducted to remove the officer from office before proceeding with any action. The council/district PTA hearing panel following a two-thirds (2/3) affirmative vote, may recommend that the executive board meet and remove the officer from office.

Notice Procedures Concerning Removal: Following the two-thirds (2/3) affirmative vote by the council/district PTA hearing panel recommending that the officer be removed from office: (1) The officer must be given fifteen (15) days’ written notice of the hearing by the executive board to remove the officer from office; (2) The written notice shall contain the reasons for the proposed removal, and shall be mailed by certified mail, return receipt requested, to the last address of the officer shown on the association’s records; (3) At the hearing, the officer must be given an opportunity to address the executive board, either orally or in writing; (4) If the hearing panel recommends removal from office, the executive board shall convene not less than five (5) days following the hearing and vote whether the officer will be removed from office; (5) A twothirds (2/3) vote of the executive board shall be sufficient to remove the officer from office; (6) The removal vote shall be recorded in the executive board minutes and shall specify the number of members voting in favor of and against such removal; (7) The council/district PTA shall be notified in writing of the action taken by the executive board; (8) The officer is notified by certified mail, return receipt requested.

PROSECUTING THE CASE

The district attorney’s office will weigh the evidence and determine whether to proceed with the case and whether to detain the alleged suspect.

Embezzlement, the stealing of money entrusted into one’s care by means of fraud for one’s own use, is considered to be the same as theft under the law. Criminal charges must be filed with the police or sheriff ‘s department. Under California law, the charge would be petty theft or, if the amount is over $4,000, grand theft.

If it is determined that embezzlement or misappropriation has probably occurred, be careful not to commit a crime known as “compounding.” Compounding is a form of extortion that occurs when one says to someone, “I will not turn you into the police provided that you do the following . . .” Seek advice from the district attorney’s office on ways to avoid compounding.

Theft in any form is a violation of the law and should be handled as a serious offense. If money is stolen from an individual’s car or property, a police report should be filed immediately and contact made with the individual’s insurance company to determine coverage.

NOTIFICATION OF INSURANCE COMPANY

Claims must be reported in a timely manner. As soon as a mismanagement incident is being investigated, it should be reported to the insurance broker by the district PTA.

Aug 012013
 

The budget is a financial representation of the activities and operations a PTA expects to conduct during a specified time period. The budget estimates income and expenses for the fiscal year and must be presented to the association for approval and recorded in the association minutes. The budget should coincide with the association’s fiscal year.

Developing the Budget

The budget committee, which is appointed by the president or president-elect, has the responsibility for developing the annual budget. The treasurer is designated as the committee chairman. The budget committee may include financial officers, the principal or other designated representative, the president (ex officio), and others. The committee should:

  • Invite board members to submit suggestions.
  • Survey the associations needs and probable costs.
  • Review the program(s) proposed by the program committee, including detailed expense projections.
  • Meet soon after election to prepare the budget .
  • Review past budgets, income, and expenditures.
  • Estimate probable income from all sources.
  • Balance probable income with probable expenses.
  • Unallocated Reserve funds represent the amount remaining after making allocations for budgeted programs and activities and may be used to cover any unexpected or unplanned expenses in the current fiscal year.
  • Carry-over funds represent the amount which is set aside to begin operations at the beginning of the next PTA fiscal year, prior to the onset of fundraising activities.

FUNDS NOT BELONGING TO THE UNIT

Council, district, State, and National PTA portions of membership dues and the Founders Day freewill offering are not a part of the units funds to be used for expenses. They should not be included in the annual budget as receipts for budget planning purposes. They also are not included in the gross receipts when reporting to the IRS (Gross Receipts 5.7.5, 241). These funds can be paid without the authorization of the membership. Such funds should be forwarded through channels immediately. Council or district PTA remittance forms must be issued to track and provide payment authorization.

All disbursement of funds not belonging to the unit must be recorded in the next treasurer’s report and payment reported to the association. PTA districts and councils set their own dates far enough in advance of the state deadlines to have sufficient time for such transfers to be received by the California State PTA office (Budget Sample, Forms 385).

SCHOOL BOND AND OTHER BALLOT MEASURE CAMPAIGNS

A PTA may spend a portion of its funds on election issues that have an impact on the education, health, or well-being of children and youth (Legal Guidelines for Campaign Activity 4.3.3a, 129).

A PTA may assist in raising funds or soliciting individual donations for coalitions or election issue campaign organizations without reporting the amounts, provided that all donations are strictly voluntary and the funds are given directly to the campaign organizations and not funneled through the PTA. Donations must not be made payable to PTA and may not be deposited in any PTA account.

Recommended Budget Line Items

When developing a PTA budget, consider including the following line items:

Carry-over Funds: Carry-over funds are needed for start-up expenses at the beginning of a new PTA fiscal year, prior to the onset of fundraising activities. To calculate the amount of this reserve review the prior years Annual Financial Report to determine which operation or program expenses require funding, and estimate costs for these items in the new fiscal year.

Convention: The annual California State PTA convention is usually held at the end of April or the first part of May. The unit should budget enough money to cover the cost of registration, hotel room, transportation and food for the allowed number of delegates based on the units membership (Attending Conventions and Conferences 2.8, 64).

Donations: Sometimes PTAs ask parents to donate funds for a specific program.

Fundraisers: Fundraising income is the gross income from the fundraiser. List each fundraiser individually. The expenses for conducting each fundraiser should be listed under Expenses individually by fundraiser.

Gross Income: This includes the total amount of income for the year, excluding council, district, State, and National PTA portions of the per capita dues and freewill offering.

Insurance: Participation in the California State PTA insurance program is required of all PTAs in California. Budget an amount that is similar to the actual expense from the previous years premium. Units are notified of the prem ium amounts each year in November. The premium must be forwarded through PTA channels to be received in the California State PTA office by January 31, or a late fee of $25 will be assessed by the California State PTA. Postmarks will not be accepted.

Membership Dues: Each association determines its own membership dues, but a portion of each membership must be forwarded through channels. The forwarded funds should be listed as Funds Not Belonging to the Unit. The budget should only reflect the amount of dues the unit retains as income.

Membership Envelopes: Membership envelopes should be listed as an expense.

Reimbursable Expenses: PTA should reimburse executive board members for any approved out-of-pocket expenses. PTA funds may not be used for personal expenses, personal acknowledgments, or personal use items. Appropriate out-of pocket expenses include copies, office supplies, etc. Unit, council and district PTAs should budget for out-of-pocket expenses and reimburse member upon submission of an expense statement and/or receipts. Receipts must be submitted for all reimbursable expenses. Unit, council and district PTAs may not budget for an officers allowance. The IRS considers an allowance as miscellaneous income that must be declared by the recipient as such and will be taxed accordingly.

Training/Workshops: Budget funds to send executive board members to council, PTA district, and California State PTA workshops.

Unallocated Reserve: Unallocated reserve funds represent the amount remaining after making allocations for budgeted programs and activities and ma be used to cover any unexpected or unplanned expenses in the current fiscal year.

Approving the Budget

The PTA shall not assume any financial obligation in any one term of office that will be carried over into the succeeding term. The proposed budget must be presented to and voted upon by the executive board and recommended for adoption to the association. After the budget is adopted by the association, it should be followed closely in all financial transactions.

For additional information on approval of budget see National PTA Annual Resources for PTAs.

Authorizing Expenditures

Adoption of the budget does not authorize the expenditure of the money. Bills should be presented for payment authorization. Spending funds on unbudgeted items between meetings of the association is limited by an amount specified in the bylaws. Consult the bylaws for the specific amount allowed. The payment of these bills must be ratified at the next association meeting and recorded in the association minutes.

Request for Advance

Persons authorized to purchase items for the PTA, for which the expense will be reimbursed, may request an advance in an amount not to exceed estimated expenses.

To receive an advance for an approved expense, a Request for Advance Form (Forms 413) must be completed, approved by the president and returned to the treasurer with a Payment Authorization Form (Forms 411) attached. An Expense Statement (Forms 401) must be filed within two weeks after the completion of the activity. All receipts must be attached to the expense statement. If an advance greater than the expense is received, a refund of the difference should accompany the expense statement. If expenses exceed the amount of the advance, reimbursement of the difference should be made, providing the total is not in excess of the approved amount.

Amending the Budget

If adjustments are needed, the budget can be amended by a simple majority vote if a 30 day notice has been given; if less than 30 days, a two-thirds vote is required.