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									                                     INTRODUCTION

This booklet has been developed to provide PTA leaders with very important information
regarding the fiscal operation of the association.


BOARD OF DIRECTORS/EXECUTIVE BOARD
As a member of the board of directors and/or the executive board of an organization (in-
cluding a PTA local unit or council), it is the INDIVIDUAL responsibility of each board
member to make sure the organization is operating in a fiscally, financially, and legally
sound manner.

When an individual becomes a board member, either through election or appointment, that
person becomes legally obligated to conduct themselves prudently, properly and responsi-
bly; and to be sure the organization conducts itself in a manner so that the best interests of
the organization and its members are protected and preserved.

This is known as a FIDUCIARY RESPONSIBILITY.

If a member of a board, fails to exercise reasonable caution and care, that person is left
open, not only to criticism from peers, but to potential personal liability for financial losses
or damages resulting from failure to exercise reasonable care during the term as a board
member.

The treasurer is the legally responsible, authorized custodian, elected by the members, to
have charge of the funds of the PTA. While the treasurer is assigned the duty of being the
custodian of the funds of the association and accounting for these funds, all of the officers
and chairmen have a fiduciary responsibility to ensure that the PTA is maintaining proper
financial records, depositing money in a timely manner, adhering to the budget and com-
plying with all legal and reporting functions. Adhering to the policies and guidelines estab-
lished by National PTA, Maryland PTA, and the IRS will help to reduce or eliminate ques-
tions about the management of the PTA and its monies.




Maryland PTA                        www.mdpta.org                                   1
 “The primary emphasis in PTA should be focused upon the promotion of the PTA
Mission and the Purposes of the PTA. The real working capital of a PTA lies in its
 members, not in its treasury. Fund-raising is not a primary function of the PTA.”
                             -National PTA Annual Resources for PTAs 2003-2004, Money Matters




Maryland PTA                  www.mdpta.org                                     2
                                 THE PTA TREASURER

DUTIES OF THE TREASURER
As an elected officer, the treasurer is a representative of the entire PTA, serves on the ex-
ecutive board of the association, and should reflect characteristics necessary to perform
the functions required of the position and instill confidence in the fiscal integrity of the PTA.


      Review your local PTA unit's by-                   Pay, BY CHECK ONLY, all finan-
       laws and National PTA and Mary-                     cial obligations of the PTA as au-
       land PTA documents relating to                      thorized by the bylaws, executive
       dues and finance.                                   board, or the membership.

      Attend all meetings and serve as                   Forward the state and national por-
       an active participant on the execu-                 tions of the membership dues to
       tive board.                                         the Maryland PTA using the "Mary-
                                                           land PTA Membership Dues
      Attend training workshops for trea-                 Statement with the dues payment
       surers at council, state, and/or na-                by the first of each month, with the
       tional levels.                                      initial payment no later than Octo-
                                                           ber 1. The final payment should
      Maintain an accurate and detailed                   be postmarked no later than March
       account of all monies received or                   15. (See Appendix for a sample
       paid out.                                           of this statement)

      Submit a written report at all regu-               Cooperate with the membership
       lar meetings of the association and                 chairman and fund raising chair-
       of the executive board and have fi-                 man to coordinate safe handling of
       nancial records available so that                   all funds.
       questions can be promptly ans-
       wered.                                             Preserve all vouchers, receipts,
                                                           bank statements, canceled checks
      Be a pro-active member of the                       and other records and submit to
       budget committee assisting in the                   the auditor or auditing committee,
       formulation of the local unit’s                     the executive board, or member-
       budget for the fiscal year. Fully                   ship when requested.
       understand the elements of the
       budget so as to be able to explain                 Maintain complete financial records
       any line item to the General Mem-                   as specified in the Records Reten-
       bership.                                            tion Timetable.

      Receive and promptly deposit all                   Deliver to your successor, all books
       PTA funds ONLY into the PTA's                       and records, including historical
       bank account.                                       records, promptly at the conclusion
                                                           of your term of office.


Maryland PTA                        www.mdpta.org                                    3
               PRINCIPLES OF PTA FINANCIAL MANAGEMENT

      The budget is approved by the
       general membership according to                    Always issue a receipt for monies
       the bylaws.                                         received.
      The treasurer and other officers                   Two people should ALWAYS count
       authorized to handle funds must be                  money, and both should sign and
       bonded.                                             retain a copy of the receipt verify-
                                                           ing the amount.
      All funds are to be administered by
       the treasurer.                                     Assure current, complete, and ac-
                                                           curate record keeping of all funds.
      NEVER sign a blank check.
                                                          An auditor or auditing committee
      Pay ALL bills by check - cash is                    conducts an audit of financial
       NEVER used.                                         records annually.
      All funds are to be deposited into                 An audit of financial records is
       authorized PTA bank accounts –                      conducted in the event a treasurer
       NO EXCEPTIONS.                                      leaves office prior to the annual
                                                           audit.
      PTA funds must be kept separate
       from school funds or personal
       funds.
                                  TREASURER: TAKING OFFICE
       Verify that the books have been or are in the process of being audited before accepting
        them. Meet with the auditor or auditing committee to review any recommendations they
        may have made.
       Review your local unit bylaws, standing rules, and “Money Matters” booklet of the National
        PTA publication Annual Resources for PTAs to become familiar with the required duties.
       Know the PTA Mission and PTA Purposes. Be familiar with the policies and guidelines of
        PTA.
       Secure the signatures of new officers authorized to sign checks and file the signature
        cards with the bank. Secure a copy for the treasurer's records.
       Check on bonding and liability insurance, incorporation status, and related procedures for
        the unit.
       Obtain and review the retiring treasurer’s complete files and records. Notify the executive
        board of any records that are not available.




Maryland PTA                        www.mdpta.org                                     4
                          TREASURER: RELINQUISHING OFFICE
     Be sure that all state and national dues have been collected and forwarded to the Maryland
      PTA office.
     Gather the books, etc. in preparation for the audit.
     Prepare the Annual Report.
     Submit or assist in the preparation of required tax forms, both state and federal, if required.
     Arrange for the transfer of all records, reports, and files to the new treasurer.
     Obtain signature cards from the bank so that the new treasurer and other officers autho-
      rized to sign checks can transfer the accounts in a timely manner.
     Assist the incoming treasurer in the transition into the position.


PTA BUSINESS PROCEDURES                               A disbursement form (an example is pro-
All local PTA monies and other assets,                vided in the bookkeeping section) should
including checking accounts, savings ac-              be used to enhance the record keeping
counts, and certificates of deposit, are the          process, classify the receipts, and obtain
properties of the PTA unit. Treasurers                the confirmation of the chairman or officer
who have custody of funds shall maintain              responsible for the expenditure.
complete records of their receipts and
disbursements. PTAs involved in various                  As part of the required record keep-
activities must recognize the responsibili-              ing, a proper RECEIPT or invoice
ties of the officers and members in con-                 MUST be retained in the PTA's
ducting the affairs of the organization.                 records. This will provide proof that
                                                         the disbursement of funds was proper
LIMITED LIABILITY
                                                         and legitimate.
Limited liability may be provided for offic-
ers and members of local PTA units by
incorporating under state law. (See sec-              DEPOSITING FUNDS
tion “Other Topics: Incorporation.”)                  A primary duty of the treasurer is the time-
                                                      ly depositing of PTA funds into the PTA's
DISBURSING FUNDS                                      bank account, and the proper and accu-
When the PTA incurs an approved bud-                  rate recording of that deposit in the PTA's
geted financial obligation, it is the respon-         books. All funds should be promptly de-
sibility of the treasurer to pay that obliga-         posited into a bank account in the name
tion.     All obligations and/or liabilities          of the PTA, which has been approved by
should be paid BY CHECK.              NEVER           the PTA's executive board. Night depo-
USE CASH.                                             sits and 24-hour banking can and should
The current Maryland PTA local unit by-               be used as needed. PTA funds must
laws require that two persons, the trea-              NEVER be deposited into anyone’s per-
surer and one other officer shall sign                sonal account, nor should the funds ever
checks or vouchers.        Bank signature             be deposited into a school bank account
cards will allow several signatures for the           or the bank account of another organiza-
authorized signers.                                   tion.

                                                             PTA funds should NEVER be
       NEVER sign a blank check.                           placed in a school building safe.


Maryland PTA                          www.mdpta.org                                       5
All checks that are deposited should be              the bank as soon as possible. The trea-
endorsed:                                            surer should coordinate with the chairman
                   For Deposit Only                  of the activity to obtain the funds from the
                                                     activity immediately after the conclusion
                     ______________PTA               of the activity. All exchanges of money
       Account No.______________                     should be counted by at least two people
                                                     (including the provider and the recipient of
The bank may furnish a stamp with this               the funds) with both signing a receipt veri-
information or one may be purchased.                 fying the amount. If the project is a con-
Duplicate deposit slips should be made               tinuing one, the money should be depo-
so that the treasurer will have a copy to            sited daily in the PTA's bank account. Ar-
retain for the record. If the PTA is plan-           rangements can be made beforehand for
ning a fund raising activity that will involve       a police escort to the bank, if large
large sums of money, the treasurer                   amounts of money are anticipated from a
should arrange to deposit the money in               fundraiser.

CONTENTS OF THE TREASURER'S FILE
   A copy of the PTA unit or council bylaws and standing rules with appropriate sec-
    tions marked.
   A copy of the budget adopted by the membership.
   Receipt book to acknowledge money received by the treasurer.
   Checkbook to disburse funds as authorized.
   Treasurer's account books, ledgers, and/or computer software to keep the financial
    records of the association.
   Federal Employer Identification Number (EIN) and the Maryland IRS Group Exemp-
    tion number 1999; copies of filed Form 990, 99OEZ, and other required IRS forms.
   A copy of the Articles of Incorporation.
   Maryland Sales and Use Tax remittal number, reports filed with the state, and all in-
    formation pertaining to sales and use tax.
   A copy of the Money Matters booklet from the Annual Resources for PTAs and Mar-
    yland PTA’s Cash Encounters booklet.
   Required historical PTA financial records as defined in the Record Retention Timet-
    able.
   A copy of all insurance policies, contracts, leases, and approved plans of work.
   A copy of Personal Property Return forms.
EMPLOYER IDENTIFICATION NUMBER                       existing PTAs. These EINs are still valid
(EIN)                                                today. Newer EINs begin with 52 or 91.
Every PTA must have an EIN (a nine-digit             The EIN number should be part of the
number) from the IRS. Prior to 1970,                 permanent records of the PTA. They are
EINs beginning with 23 were assigned to              used for establishing bank accounts and



Are required for fililing tax forms. It the PTA does not have an EIN or if the PTA is newly
organized, it may acquire an EIN by filing a Form SS-4 (Application for Employer Identifica-
tion Number) with the IRS. Multiple EINs are not permitted.
Maryland PTA                         www.mdpta.org                                   6
Additional information on the SS-4 is in the Annual Resources for PTAs. The letter of de-
termination (exemption letter) for all Maryland PTAs is on file in the state PTA office.
                           FINANCIAL RECORD KEEPING
BUDGET                                                               Process
The budget is a plan that expresses the            There are three (3) basic steps or stages
goals and objectives (the programs,                in developing the PTA's annual plan - the
projects, and activities) of the PTA in            budget. They are:
terms of income and expense. An effec-                1. Determine the PTA's goals and ob-
tive budget requires the PTA to determine                jectives (a list of programs, projects,
both the ends that are sought and the                    and activities for the coming year).
specific means to be used to achieve                  2. Develop the necessary revenue
those ends or results.                                   sources to pay for the accomplish-
                                                         ment of the goals and objectives.
BUDGET DEVELOPMENT                                    3. Reconcile, or balance, steps 1 and
                                                         2.
                   When
The Maryland PTA recommends that the               Step 1 - Goals and Objectives
budget be developed during the planning            The PTA should first determine its goals
period for new officers (since new officers        and objectives for the upcoming year.
are usually elected in late spring this will       This would be a listing of the programs,
generally occur during the summer) and             projects, and activities which it feels
approved by the membership at the first            should be undertaken and the reason
general meeting of the school year.                why. A description of each should be
                   Who                             written with specific reasons for that ac-
A finance or budget committee usually              tivity, along with a timeline or date for the
has the responsibility for developing a            activity. The list of the Appropriate Uses
budget for the PTA. The committee may              of PTA Funds (pages 32 - 34) should be
be elected or appointed according to the           consulted to insure that goals and objec-
local unit bylaws. It is suggested that the        tives fall within the IRS and National PTA
committee consist of an uneven number              guidelines.
of members to preclude tie votes on any            An analysis of past activities will help.
issue that may be debatable. This com-             The treasurer's annual report can be an
mittee should be chaired by the treasurer          important aid. In the sample copy of a
and include several other PTA leaders              proposed budget, shown on page 11, the
(members) who have knowledge of what               budget values and the actual values for
has occurred in the past and what future           the previous year are provided.
plans are appropriate for the PTA.
                                                   The list of goals and objectives should in-
                                                   clude leadership education for the PTA's
leaders, and it should provide for ongoing,        treasurer's reports can provide excellent
continuing administrative expenses.                information. The historical information in
                                                   the treasurer's records can be used to de-
After the goals and objectives are listed,         termine costs and quantities of items from
estimated expenses or costs necessary to           prior years and then used as a basis for
achieve those goals and objectives                 estimating costs for the coming year. In-
should be established. Again, annual               flation and changes to past years’ pro-

Maryland PTA                       www.mdpta.org                                    7
grams should be considered in making
the cost estimates.                                After the budget has been developed, it
                                                   must be reviewed by the executive board
Step 2 - Revenue                                   or board of directors.    Following the
After determining the PTA's goals and ob-          board's review and approval, the budget
jectives, very careful consideration must          must be presented to the PTA member-
be given to developing sources of reve-            ship at a general membership meeting for
nue adequate to pay the estimated ex-              approval. Often this is the first general
penses and costs associated with the               membership meeting of the new school
goals and objectives. Often, some of the           year.    A majority vote of valid card-
programs or projects outlined as goals or          carrying members who are present and
objectives will generate revenue. The              voting (providing a quorum exists) is re-
section on fund raising should be re-              quired for adoption.
viewed with respect to selecting appropri-
ate revenue sources. A listing of all reve-        AMENDING THE BUDGET
nue generators should be made, along
with the expectation of the amount of rev-           THE EXECUTIVE BOARD ALONE
enue that each will generate. Considera-             CANNOT APPROVE AN AMEND-
tion should also be given to the sales tax            MENT TO THE BUDGET. THE
required for some revenue generators.                GENERAL MEMBERSHIP, WHICH
Step 3 - Reconciliation                                APPROVED THE ORIGINAL
Finally, a comparison between the ex-                BUDGET, MUST ALSO APPROVE
penses/costs of accomplishing the                      ANY AMENDMENT TO THE
goals/objectives and the anticipated reve-                    BUDGET.
nue should be made. If there is a differ-
ence between the two, realistic adjust-
ments must be made to either or both of
these areas. When the two areas equal              The budget is an annual plan. It is an es-
each other, the committee’s proposed               timate of the planned expenses and in-
budget has been developed.                         come. It may be necessary, from time to
                                                   time, to amend the budget. To amend an
BUDGET APPROVAL                                    adopted budget, it is necessary to vote on
                                                   the proposed amendment at a general
 ADOPTION OF THE PTA BUDGET                        membership meeting of the association.
  REQUIRES THE APPROVAL OF                             1. If previous notice has been given,
   THE GENERAL MEMBERSHIP                                 a majority vote is required.
                                                       2. If previous notice has not been
                                                          given, a 2/3 vote is required.




Maryland PTA                       www.mdpta.org                                 8
                                     Samples

         Page 10 contains a sample of the annual financial report for the
         previous year that is presented to the Executive Board for in-
         formation and review.
         Page 11 contains a sample local unit budget. This is the budg-
         et that is prepared by the local unit’s Budget Committee (three
         or more individuals including the president and the treasurer.)
         A printed copy should be presented to Executive Board for ap-
         proval. After the Executive Board has approved the budget, the
         treasurer should make a sufficient number of copies for each
         attendee at the General Membership meeting, where the budg-
         et is then put to a ratification vote by the General Membership.

         Page 12 contains a sample of the treasurer’s report that should
         be presented at every Executive Board meeting.

         Page 13 contains a sample of the treasurer’s report that should
         be presented at every General Membership meeting.




Maryland PTA                   www.mdpta.org                          9
                           SAMPLE ANNUAL FINANCIAL REPORT
                              __________________School PTA/PTSA
                             2005 - 2006 ANNUAL FINANCIAL REPORT
                                                          Budgeted    Actual
                                                          2005-06    2005-06

       Balance from Previous year:                       $610.89      $610.89

       RECEIPTS:

        1. Membership Dues                               1,260.00     1,302.00
        2. Fundraising
          a. Candy Sale                                    200.00       152.10
          b. Bazaar                                      2,500.00     2,477.29
          c. Sales Tax                                     135.00       131.47
       TOTAL RECEIPTS                                   $4,705.89    $4,673.75

       DISBURSEMENTS:

        10. Organizational Expenses:
        11. State & National Dues                        $420.00      $434.00
        12. PTA Council Dues                               72.00        74.40
        13. PTA Publications                               25.00        21.75
        14. Delegate Expenses                             250.00       246.00
        15. Liability Insurance                           119.00       119.00
        16. Bonding Insurance                              13.00        13.00
             Total Organizational Expenses               $899.00      $908.15

        20. Operating Expenses:
        21. Supplies/Postage                             $125.00       $93.00
        22. Membership Committee                           30.00        22.00
        23. Newsletter                                    150.00       150.00
        24. Hospitality Committee                          50.00        43.25
        25. Contingency Fund                               50.00         0.00
             Total Operating Expenses                    $405.00      $308.25

        30. PTA Objectives:
        31. Parent Programs                                 0.00         0.00
        32. Life Membership & Awards                     $100.00       $89.50
        33. Scholarships                                  200.00       200.00
        34. Special Projects                              600.00       600.00
        35. Classroom Teachers                            200.00       200.00
        36. Fund Raising Expenses
           a. Candy Sale                                    20.00        19.50
           b. Bazaar                                     1,400.00     1,387.37
           c. Sales Tax                                    135.00       131.47
        37. Contingency Fund                                46.89        31.38
             Total PTA Objectives                       $2,701.89    $2,659.22

       Carryover                                         $700.00      $798.13

TOTAL DISBURSEMENTS                                     $4,705.89    $4,673.75




Maryland PTA                            www.mdpta.org                            10
SAMPLE BUDGET
                              _________________________School PTA/PTSA
                                    2006 - 2007 PROPOSED BUDGET

                                                               Budgeted          Actual     Proposed
                                                               2005-06           2005-06   2006-2007

    Balance from Previous year:                                $610.89           $610.89     $798.13

        RECEIPTS:
    1. Membership Dues ($5.25 per member)                      1,260.00         1,302.00     1,890.00
    2. Fund Raising
                a. Candy Sale                                   200.00            152.10       200.00
                b. Bazaar                                     2,500.00          2,477.29     2,600.00
                c. Sales Tax                                    135.00            131.47       140.00
    3. Interest                                                   0.00              0.00         0.00
    4. Miscellaneous                                              0.00              0.00         0.00
        TOTAL RECEIPTS                                       $4,705.89         $4,673.75    $5,628.13

       DISBURSEMENTS:

      10. Organizational Expenses:
      11. State & National Dues*                               $420.00           $434.00      $720.00
      12. PTA Council Dues ($.30 per member)                     72.00             74.40       108.00
      13. PTA Publications                                       25.00             21.75        50.00
      14. Delegate Expenses                                     250.00            246.00       350.00
      15. Liability Insurance                                   119.00            119.00       125.00
      16. Bonding Insurance                                      13.00             13.00        20.00
               Total Organizational Expenses                   $899.00           $908.15    $1,373.00

      20. Operating Expenses:
      21. Supplies/Postage                                     $125.00            $93.00     $125.00
      22. Membership Committee                                   30.00             22.00       35.00
      23. Newsletter                                            150.00            150.00      150.00
      24. Hospitality Committee                                  50.00             43.25       55.00
      25. Contingency Fund                                       50.00              0.00       25.00
              Total Operating Expenses                         $405.00           $308.25     $390.00

      30. PTA Objectives
      31. Parent Programs                                         -                 -        $400.00
      32. Life Membership & Awards                             $100.00            $89.50     $100.00
      33. Scholarships                                          200.00            200.00      200.00
      34. Special Project                                       600.00            600.00      650.00
      35. Classroom Teachers                                    200.00            200.00      200.00
      36. Fund Raising Expenses
               a. Candy Sale                                      20.00            19.50        20.00
               b. Bazaar                                       1,400.00         1,387.37     1,400.00
               c. Sales Tax                                      135.00           131.47       140.00
      37. Contingency Fund                                    ___46.89             31.38        55.13
      Total PTA Objectives                                   $2,701.89         $2,659.22    $3,165.13

    Carryover                                                  $700.00           $798.13     $700.00

    TOTAL DISBURSEMENTS                                      $4,705.89         $4,673.75    $5,628.13

       Adopted by Association: ______________________(date)
       *2005-2006 membership dues $3.35 per member. 2006-2007 membership dues $3.25.


Maryland PTA                               www.mdpta.org                                        11
Presented to the Executive     SAMPLE TREASURER'S REPORT
Board at every meeting        _____________________School PTA/PTSA
                             Executive Board Meeting, November 4, 2005
                                         Treasurer's Report
        General Account:
        Balance, October 7, 2005                                                       $ 1,125.43
        Receipts:                                                                          624.88
        Disbursements:                                                                     445.35
        Balance, November 4, 2005                                                       $1,304.96
                                              REPORTING              TOTAL
                                               PERIOD               TO DATE     BUDGET
        RECEIPTS:
        Balance on hand                                               798.13    $ 798.13
        1. Membership Dues                    $ 525.00              1,123.50    1,890.00
        2a. Candy Sale                           95.10                 95.10      200.00
        2b. Bazaar                                                              2,600.00
        2c. Sales Tax                             4.78              4.78          140.00
        3. Interest                               0.00              0.00            0.00
        4. Miscellaneous                          0.00              0.00            0.00
           Total                              $ 624.88         $2,021.51       $5,628.13

        DISBURSEMENTS:
        10. Organizational Expenses:
        11. State & National Dues               428.00              $ 428.00      720.00
        12. PTA Council Dues                                           34.20      108.00
        13. PTA Publications                                                       50.00
        14. Delegate Expenses                                         36.00       350.00
        15. Liability Insurance                                      125.00       125.00
        16. Bonding Insurance                                         20.00        20.00
            Total                             $ 428.00               643.20    $1,373.00

        20.   Operating Expenses:
        21.   Supplies/Postage                                       $ 38.00    $ 125.00
        22.   Membership Committee              $ 10.00                20.00       35.00
        23.   Newsletter                                                          150.00
        24.   Hospitality Committee                7.35               15.35        55.00
        25.   Contingency Fund                                                     25.00
              Total                             $17.35               $73.35     $390.00

        30. PTA Objectives:
        31. Parent Programs                                                     $400.00
        32. Life Membership/ Awards                                              100.00
        33. Scholarships                                                         200.00
        34. Special Project                                                      650.00
        35. Classroom Teachers                                                   200.00
        36. Fund Raising Expenses
              a. Candy Sale                                                        20.00
              b. Bazaar                                                         1,400.00
              c. Sales Tax                                                        140.00
        37. Contingency Fund                                                       55.13
            Total                                $0                   $0       $3,165.13

        Carryover                                                                $700.00
        Total Disbursements                    $445.35              $716.55    $5,628.13
                                         John Q. Jones, Treasurer


Maryland PTA                           www.mdpta.org                                       12
                              SAMPLE TREASURER’S REPORT
                              __________________School PTA/PTSA
                               General Meeting, November 11, 2005 Presented to the General
                                       Treasurer's Report         Membership at every meeting

       Balance, October 14, 2005                                        $1,125.43

       Receipts:

               Membership Dues                                           $525.00
               Candy Sale                                                  95.10
               Sales Tax                                                    4.78

                      Total                                              $624.88

       Disbursements:

               State & National Dues                          $428.00
               Membership Committee (envelopes)                 10.00
               Hospitality Committee (Oct. Meeting)              7.35

                      Total                                              $445.35

       Balance, November 11, 2005                                       $1,304.96


                                       John Q. Jones, Treasurer

          (A copy of the treasurer’s report should be presented to each member at the
          General Membership meeting. A feasible way of doing this is to copy the trea-
          surer’s report onto the reverse side of the printed agenda that is distributed to
          the members as they enter the meeting place. In most instances, the secretary
          can easily copy the minutes of the last General meeting, with the treasurer’s re-
          port below it, onto the reverse side of the printed General Membership meeting
          agenda. This gives each member a copy of the agenda, a copy of the minutes,
          and a copy of the treasurer’s report, on only one sheet of paper.)




Maryland PTA                           www.mdpta.org                                13
                                                    BOOKKEEPING
Bookkeeping is the systematic and accu-                                 CASH RECORD/GENERAL LEDGER
rate recording of the financial transactions                            The cash record, or general ledger, is a
of the organization. This process should                                bound book or electronic ledger listing all
preserve a current and complete record of                               the financial transactions for the organiza-
the financial transactions of the organiza-                             tion in the order in which they occur, list-
tion. The information may be used to de-                                ing amounts, accounts, and other perti-
velop periodic reports, provide a basis for                             nent information relating to the transac-
projections, evaluate the success of a                                  tion.    A sample of a Cash Record or
particular program or venture, serve as an                              General Ledger is shown on this page.
important instrument for the yearly audit                               The titles in the headings of the ledger
(or a random IRS audit) and/or demon-                                   page      are     defined     as     follows
strate that the local unit is being properly                                DATE - the date of transaction (deposit in the
managed.                                                                        bank or date a check is written).
                                                                            TRANSACTION - An indication of the source
There are numerous methods of record-                                           of funds credited to the account as a re-
ing financial information. A good record                                        ceipt or the payee of the check or bank
keeping system must be (1) simple to                                            charge if a disbursement
use; (2) easy to understand; (3) reliable;                                  ACCT No. - an account number assigned for
                                                                                each budget line
(4) accurate; (5) consistent; and designed                                  RECEIPT - the amount of money deposited
to provide information on a timely basis.                                       to the account either through a direct de-
In the following figures, a sample of a                                         posit or a bank transfer such as interest
suggested bookkeeping process with                                          DISBURS - the amount of money distributed
sample ledger pages for PTAs is de-                                             as the result of writing a check or a bank
                                                                                charge
picted. This process, if followed, will pro-                                BALANCE - the current balance of the mon-
vide a current status of all accounts and                                       ey in the account
assist in the preparation of the required
reports.

                                        CASH RECORD (GENERAL LEDGER)
 DATE           CK No.      TRANSACTION                                 ACCT No.        RECEIPT          DISBURS          BALANCE
 7/1/05         -           Balance brought forward                                                                           798.13
 9/3/05         923         Council Insurance                           15/16                              145.00             653.13
 9/8/05         --          Deposit Membership Dues                     1               598.50                              1,251.63
 9/9/05         924         PTA Council - Dues                          12                                  34.20           1,217.43
 9/10/05        925         PTA Council - Workshop Regis                14                                  36.00           1,181.43
 9/10/05        926         Jane Doe - Hospitality Exp.                 24                                   8.00           1,173.43
 9/10/05        927         Mary Smith - Membership Exp.                22                                  10.00           1,163.43
 10/3/05        928         Bob Brown - Supplies-paper                  21                                  38.00          1,125.43*
 10/15/05       --          Deposit - Membership & Candy                1,2a,2c         624.88                              1,750.31
 10/15/05       929         Jane Doe - Hospitality Exp.-Oct             24                                   7.35           1,742.96
 10/15/05       930         Mary Smith - Membershp Envel                22                                  10.00           1,732.96
 10/30/05       931         MD PTA - State & Nat Dues                   11                                 428.00           1,304.96
*Note: This balance is the beginning balance for the October date on the two sample treasurer’s reports. This line and earlier transac-
tions would have been on the previous treasurer’s report with later entries shown on the current sample reports




Maryland PTA                                       www.mdpta.org                                                     14
.
DEPOSIT LEDGER                                                    but the concept can be expanded to ac-
                                                                  commodate the sources of income that
The deposit ledger is a bound book or                             your PTA may need.
electronic ledger listing all the receipt
transactions for the organization from the
cash record. It provides a means of ac-
                                                                 DATE - the date that a deposit is made or that a
counting for funds from different sources                            bank credit is made (the same as listed in the
made on one deposit, provides an ac-                                 cash record)
counting of all deposits by source, and                          TOTAL DEPOSIT - the total amount of the deposit
                                                                     made for each deposit slip (the same as in
provides a method of determining if the                              the cash record)
amount of funds raised will require the                          MEMBERSHIP - the amount of the total deposit
preparation of tax returns.                                          that is from membership dues
                                                                 INTEREST - interest credited to the account by
                                                                     the bank
Below a sample deposit ledger page is                            CANDY SALE - the amount of the deposit that is
provided to show how the PTA's deposits                              from candy sales
can be recorded to provide information for                       BAZAAR - the amount of the deposit that is from
                                                                     bazaar receipts
reporting and evaluating the PTA's in-                           SALES TAX - the amount of deposit from sales
come. This example shows a limited                                   tax
number of income categories and lines
                                                DEPOSIT LEDGER
    DATE         TOTAL DEPOSIT        MEMBERSHIP         INTEREST       CANDY SALE       BAZAAR          SALES TAX
    9/8/05             598.50             598.50
    10/15/05           624.88             525.00                            95.10                              4.78


DISBURSEMENT LEDGER
The Disbursement Ledger records the status of each of the budget disbursement lines. It
lists all disbursement transactions from the cash record and enters the transaction on a
page similar to that shown below. A page should be provided for each of the budget dis-
bursement lines (on some large ledger pages, it may be possible to combine several budg-
et lines). The headings of the columns in the disbursement ledger are defined as follows:

     DATE - date the check is written or that the transaction occurs (same as defined for cash record)
     TRANSACTION - the payee of the check or bank charge (same as defined for the cash record)
     DISBURS - the amount of the disbursement (same as defined for the cash record)
     TOTAL DISBURS - the total expended since budget approval (obtained by adding the amount of the disbursement
        to the amount shown on the previous line). This amount is the amount reported in the total to date column of
        the treasurer's report.
     BUDGET REMAINING - the amount remaining in the budget line item (obtained by subtracting the amount of the
        disbursement from the total shown on the previous line). This provides an instant status of the money available
        for the remainder of the fiscal year.


                      DISBURSEMENT LEDGER - ACCOUNT No. 24 - Hospitality
    DATE        CK. No.     TRANSACTION                          DISBURS            TOTAL DISBURS          BUDGET
                                                                                                          REMAINING
    7/1/05                  Approved Budget                            -                     -              55.00
    9/10/05     926         Back To School Night                     8.00                  8.00             47.00
    10/15/05    929         Executive Board meeting                  7.35                 15.35             39.65


Maryland PTA                                   www.mdpta.org                                              15
DISBURSEMENTS                                      Approved By - signature of the PTA of-
                                                      ficer approving the disbursement.
    All disbursements MUST be                      Title - title of the PTA officer approving
           made by check.                             the disbursement.
    Disbursements are NEVER                        Purpose - a detailed explanation of the
           made in CASH.                              purpose for the disbursement, such
                                                      as “Refreshments provided for visitors
                                                      during American Education Week”.
All disbursements are made by check;
                                                   Itemize Expenses Below - a breakout
never in cash. All disbursements must be
                                                      of the expenditures, such as:
in concert with a line item in the approved
                                                      1) 5 boxes of cookies - $12.68
budget. Additionally, RECEIPTS MUST
                                                      2) 2 lb. of coffee - $4.25
SUPPORT         ALL     DISBURSEMENTS.
                                                      3) 1 box of tea bags - $3.25
There must be a paper trail to support all
                                                      4) 1 box of sugar packets - $4.00
transactions so that the yearly audit can
                                                      If there are more items than will fit in
be done properly AND to support any po-
                                                      the space provided, write, “See at-
tential audit by the IRS. PTA leaders
                                                      tached sheet” and attach a separate
cannot afford to be timid about this issue!
                                                      sheet of itemized purchases.
If a parent, teacher, administrator, or any-
                                                   Total - the total sum of the individual
one else has an adverse response to your
                                                      purchases.
request for receipts, such as “What’s the
                                                   Paid By Check No. - number of the
matter? Don’t you trust me?” Simply re-
                                                      check used for disbursement (filled in
spond, “Yes, we trust you, but the IRS
                                                      by the treasurer).
doesn’t.”
                                                   Date - the date the check is written
All requests for disbursement must be                 (filled in by the treasurer).
made using some type of disbursement               Treasurer - the signature of the treasur-
request form. A sample is shown on the                er.
next page. The form would be filled out
as follows:                                        All receipts and the canceled check
                                                   should be attached to the disbursement
 Date - the date the request is made.              request form and filed for audit..
 Pay to the order of - the name of the
   person or company to whom the
   check is made payable.

                                                    Maryland PTA bylaws require, and
  NEVER make out a check to “CASH"
                                                    your bonding insurer may require,
                                                    that each check carry two signa-
 Amount - the dollar amount of the                  tures – the treasurer and one other
   check.                                           officer. The use of two signatures
 Charge to Account - the name of the                provides your PTA with the security
   approved budget line item account                of having two officers who are
   that the disbursement is to be                   aware of and approve every transac-
   charged to (i.e. membership, hospital-           tion. It is recommended that your
   ity, scholarships, etc.)                         unit authorize three signatories -
 Acct. No. - the number of the budget               the treasurer, the president, and
   line item account that is being                  perhaps the vice-president.
   charged.
Maryland PTA                       www.mdpta.org                                 16
                        SAMPLE DISBURSEMENT REQUEST FORM

                                         DISBURSEMENT REQUEST
                                         _________________PTA


                                                                                            Date_____________

To the Treasurer:

Pay to the order
of_____________________________________________________________


Amount : _____________________dollars and ________cents                                             $ ___________

Charge to account: _______________________________ Acct. No. _________________



                                                      Approved by: ___________________________
                                                                                     Signature
                                                                        ________________________________
                                                                                       Title

------------------------------------------------------------------------------------------------------------------------
Purpose:
________________________________________________________________________
Itemize expenses below:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

                                                                   Total ____________________________

Please staple original receipts to this form prior to forwarding to the treasurer.
-------------------------------------------------------------------------------------------------------------------------

Paid by check no. __________                                   Date: ___________________________
                                                               Treasurer: _______________________
                                                                                          Signature


      PROTECTING YOUR PTA FROM FINANCIAL LOSS OR LIABILITY:
Maryland PTA                                  www.mdpta.org                                               17
                                       INSURANCE

Maryland PTA bylaws require all local units and PTA councils to have liability and bonding
insurance. It is in the best interest of the PTA to protect the members, general public, and
the assets of the PTA. The more common types of insurance coverage for PTAs are dis-
cussed in the following paragraphs. Insurance costs are a legitimate PTA expense and
should be included in the budget.
LIABILITY INSURANCE                                 listed by position title and not by name. A
One of the requirements placed on all or-           blanket position bond covers all members
ganizations, including PTAs, is to protect          handling funds with the amount of cover-
its membership and the general public               age applying separately to each member.
from accident or injury at the PTA's activi-        A commercial blanket bond covers all
ties. This is done by:                              members handling funds with the amount
                                                    of coverage for any one loss regardless of
1. Organizing and managing the safest               the number of members involved.
   possible activities.
                                                    The cost of the insurance will vary de-
2. Providing liability insurance coverage in        pending on the type of bond coverage se-
   case of accident or injury.                      lected, the positions bonded and the
                                                    amount of coverage desired. A sug-
More and more, lawsuits are generated               gested amount for the coverage would be
about incidents that, in the past, would            an average of the gross receipts of the
not have gone to court. PTAs are not ex-            organization over the past three or four
cluded from these actions.                          years.
Maryland PTA and many of the PTA                    Maryland PTA and many of the PTA
Councils offer a liability insurance pro-           Councils offer a bonding insurance pro-
gram. All local units must obtain liability         gram. All local units must obtain bonding
insurance coverage.                                 insurance coverage.
FIDELITY BONDING INSURANCE                          OTHER INSURANCES
This type of insurance protects the PTA in          Other types of insurance that your organi-
the event an officer or member's disho-             zation may want to consider are property
nesty results in the loss of funds. With            insurance, association professional liabili-
this type of insurance, upon proof of a             ty, directors and officers, and automobile.
dishonest act by an officer and/or a mem-           Many of these insurance coverages can
ber, the PTA can receive a reimburse-               be obtained in a “packaged” policy
ment for the loss of funds (from the insur-         through an independent insurance agen-
ance company).                                      cy.
Many different options are available in se-
lecting a fidelity bond policy. A position
schedule bond covers the position(s)




Maryland PTA                        www.mdpta.org                                  18
                                        TAXES, TAXES, TAXES

      PTAs in Maryland are exempt from paying FEDERAL INCOME TAX on most income.
         PTAs in Maryland ARE NOT EXEMPT from paying Maryland State Sales Tax.


SALES AND USE TAX                                                 use tax on all sales for 20 cents or more,
PTAs must pay sales and use tax on all                            and must remit that tax to the Revenue
purchases of taxable items. PTAs are                              Administration Division. This remittance
NOT EXEMPT from these taxes and will                              may be required monthly, quarterly, semi-
not be issued exemption certificates by the                       annually, or annually, depending upon the
Revenue       Administration       Division.                      method specified by the Revenue
However, if a PTA purchases tangible                              Administration Division.
personal property to donate directly to its
school, the PTA may use the exemption                               The penalty for failure to pay your
number of its school to purchase the item                           Maryland State Sales Tax on time is
tax-free.                                                           10% of the Amount Due + 1.08% In-
                                                                    terest per month. Criminal penal-
There is an exemption for sales of
                                                                    ties may also be assessed for will-
magazine subscriptions in a fund raising
                                                                    ful failure to pay or for fraud.
activity by an elementary or secondary
school in the state if the net proceeds are
used solely for the educational benefit of                        For a one-time event, the PTA may obtain
the school or its students. The exemption                         a temporary permit, effective for 30 days
also extends to sales of the subscriptions                        (410-767-1543).     For annual or more
by a nonprofit parent-teacher organization                        frequent events, the PTA must register for
or other nonprofit organization within the                        a permanent license (410-767-1300).
school.
                                                                  A permanent license also entitles the
If a PTA sells or auctions taxable items,                         holder to use a Blanket Resale Certificate
including donated items, it must register                         to buy resale inventory without paying
with the Revenue Administration Division                          sales tax to the vendor (See Appendix A-
and must collect from its customers, as a                         2).
separately stated amount, the sales and
        *        *        *        *        *        *        *        *        *       *        *           *
Examples of Taxable Items:
Candy, gum, opened or unopened soft drinks,                       Books and newspapers (including
snowballs (are not "food")                                        subscriptions)
Christmas trees                                                   Clothing
Flowers and plants (except growing vegetable                      Photographs
plants)                                                           Handcrafts
Antiques, collectibles, and white elephants                       School supplies
Magazines (excluding subscriptions)                               Computer software

Food: Sales of food, including baked goods, are subject to the sales and use tax, unless either one of the two following
conditions apply:
    1) There are no facilities for consumption of the food on the premises where sold, and there is no admission
         charge for entrance to the area where the food is sold.             OR
    2) The food is sold at a school sponsored or educationally related event at a school, or at any other event at a
         school if the net proceeds of the entire event (not just food sales) are used for the benefit of that school.
NOTE: Soft drinks, candy, and gum are NOT food and are NOT included under the above two conditions.
Maryland PTA                                 www.mdpta.org                                              19
FLEA MARKETS                                        CHARITABLE SOLICITATION ACT
Independent sellers of taxable items at flea        The Charitable Solicitation law ensures
markets and other events sponsored by               that those who solicit the general public
PTAs must be registered to collect and              are legitimate organizations and that dona-
remit Maryland sales and use tax, except            tions will be used for the stated purposes,
individuals renting space to sell only their        thereby avoiding a fraud on the public and
own unwanted household goods not ac-                preserving the capability of genuine organ-
quired for the purpose of resale. Each ex-          izations to perform works which are in the
hibitor must also have either a Traders Li-         public interest.
cense or an Exhibitor's Affidavit. A Trad-
ers License is needed by those who derive           Under this act, charitable organizations
more than 10% of their yearly income from           and individuals who solicit on their behalf
flea markets, or who participate in more            are required to register with the Office of
than three flea markets a year. Licenses            the Secretary of State, unless otherwise
can be obtained from the Clerk of the Cir-          exempt.
cuit Court of your county. Affidavits can be        A charitable organization that solicits cha-
obtained from the State License Bureau              ritable contributions in Maryland must reg-
(410-260-6240). It is the responsibility of         ister with the Secretary of State. A charit-
the PTA to see that either a license or affi-       able organization that raises more than
davit is conspicuously displayed if one is          $25,000 in charitable contributions is re-
required.     The PTA should notify the             quired to complete the full registration and
Temporary License Section (410-767-                 submit financial information. Charitable
1543) of the date and location of the event,        contributions are computed by totaling
and of the name, address, sales and use             lines 1, 6(a), and 7(a) on the Form 990EZ
tax number, and type of merchandise of              (these are lines 1(a), 9(a) and 10(a) on the
each exhibitor. The information should be           IRS Form 990). If the organization rece-
provided at least ten days prior to the             ives less than $25,000 in charitable contri-
event. Within seven days after the conclu-          butions, an “Exempt Organization Fund-
sion of the event, the PTA must forward all         Raising Notice” must be completed. This
Exhibitors’ Affidavits to the Comptroller of        is a one-page form that provides notice
the Treasury, State License Bureau, Room            that the organization is soliciting. Section
314, 80 Calvert Street, Annapolis, MD               6-405(a) exempts parent-teacher organiza-
21401.                                              tions from this fund raising notice require-
                                                    ment. Assuming the local PTA unit never
ADMISSION TAX
                                                    raises more than $25,000 in charitable
Gross receipts from activities normally sub-        contributions, the unit would not have to
ject to the admissions and amusements               file documentation with the Office of the
tax are exempt from that tax if no promoter         Secretary of State.
is hired or compensated to manage the
event, and the gross proceeds from the
event are donated to a school, or are oth-
erwise exclusively used for educational
purposes.

For additional information contact the Spe-
cial Events Section (410-767-1543).

Maryland PTA                        www.mdpta.org                                  20
                                                     For Forms 990 or 990EZ filed for
FEDERAL INCOME TAX                                   years beginning after 1986, the
                                                     penalty imposed on the organiza-
PTAs are exempt from paying federal                  tion for failure to file its return is
income tax on most income. However, if               now $20 per day with a maximum
gross receipts are normally $25,000 or               fine of $10,000, or 5% of the gross
more, PTAs must file Form 990EZ (Form                receipts for the year involved.
990 if gross receipts are over $100,000).
Schedule A must also be filed with either
form. These forms must be filed by the
15th day of the fifth month after the close        The penalty may be charged when the
of the PTA’s fiscal year. Be sure to use           return is late unless the organization can
the school address and not that of an              show that the late filing was due to
individual.      On Form 990EZ, the                reasonable cause. The penalty may also
information needed for Block E (group              be charged if the organization files an
exemption number) is 1999. Block F is              incomplete return or furnishes incorrect
501(c)(3).      On Schedule A, Part IV             information.
(Reason for Non-Private Foundation
Status) number 12 is the applicable box.           If the organization does not file a complete
Call 1-800-829-3676 to order forms or              return or does not furnish correct
publications; call 1-800-829-1040 for              information, the responsible person(s)
assistance or tax questions. Call the State        failing to comply will be charged a penalty
PTA office to verify or obtain your 9-digit        of $20 a day, not to exceed $10,000 or 5%
identification number.                             of your gross receipts. If gross receipts are
                                                   normally under $25,000 and the PTA has
Any PTA that files a form 990 or 990EZ for         received a Form 990EZ or 990 from IRS,
a tax year beginning after December 31,            check box K in the area above Part I,
1986, must make its complete return with           attach the label (be sure it is the school
all attachments available for public               address - if not, correct it), sign the form
inspection upon request within the three-          and return it.
year period beginning with the due date of
the return. This is to be made available at        NOTE: Any parent group that no longer
the organization's main office. Any person         retains its affiliation with the National
who does not comply with the public                and State PTAs must file form 1120 and
inspection requirement may be assessed a           pay income tax on all receipts unless
penalty of $20 for each day the inspection         they apply for and receive tax-exempt
was not permitted up to a maximum of               status. Maryland PTA is obligated to
$10,000 with respect to one return. The            notify IRS when a group is no longer
organization need not disclose the names           considered a PTA.
of its contributors.




Maryland PTA                       www.mdpta.org                                   21
                             FORMS, FORMS, FORMS
The Internal Revenue Service (IRS) has many important requirements that it places on pri-
vate, nonprofit, tax-exempt organizations--including PTAs.
GENERAL REQUIREMENTS:
Section 501(c)(3) of the Internal Revenue Code
      State four-digit group exemption number - 1999
      Filing Requirement - Gross receipts usually $25,000 or more
      Filing Deadline - Due 15th day of 5th month after end of fiscal year for Forms
             99OEZ, 990, 990T, Schedule A, and possibly Schedule B
      PENALTIES - $20.00 per day up to $10,000.00
FORM 990 EZ - SHORT FORM -
RETURN OF ORGANIZATION EXEMPT FROM INCOME TAX
    GROSS RECEIPTS - less than $100,000
    ASSETS - less than $250,000
    FILING EXTENSIONS - 2 three-month extensions (Form 2758)
    (CONTENT OF FORM:)
          Income Statement/Balance Sheet
          Statement Program Service Announcement
          List of Officers and Directors
FORM 990 - RETURN OF ORGANIZATION EXEMPT FROM INCOME TAX
    GROSS RECEIPTS - $100,000 or more
    ASSETS - $250,000 or more
    FILING EXTENSIONS - 2 three month (Form 2758)
    CONTENT OF FORM:
           Income Statement/Balance Sheet
           Program Service Accomplishments
           List of Officers
           Reconciliation to Audited Financial Statements
           Other Information
           Analysis of Income
SCHEDULE A - ORGANIZATION EXEMPT UNDER 501(c)(3)
    REQUIRED ATTACHMENT TO FORM 990 AND FORM 99OEZ
    PART IV - Demonstrates public charity (box 11a)
    LOBBYING -Insubstantial amount

SCHEDULE B – SCHEDULE OF CONTRIBUTORS
    MAY BE A REQUIRED ATTACHMENT TO FORM 990 AND FORM 990EZ.
    Based on single contributions of $5,000 or more and/or
    Based on the percentage of your contributions in relation to your gross revenue
FORM 990T - EXEMPT ORGANIZATION BUSINESS INCOME TAX RETURN
    WHO MUST FILE
    UNRELATED BUSINESS INCOME
           Trade or Business
           Regularly Carried on
Maryland PTA                     www.mdpta.org                               22
              Unrelated to Exempt Purpose
       FILING EXTENSION - Automatic 6 month extension (Form 7004)
       HOW MUCH IS TOO MUCH - National recommends no more than 15% of the gross
       receipts be from Unrelated Business Income

FORM 1099 MISC - MISCELLANEOUS INCOME
    REQUIRED FILING
          Payment over $600.00
          Rents, Services, Prizes and Awards, and Other Income Payment
          Not required if paid to a Corporation
    FILING DEADLINE
          January 31 1099-Misc
          February 28 1096 -Transmittal

FORM 1096 - Transmittal form for FORM 1099 - MISC.

FORM 1128 - APPLICATION TO ADOPT, CHANGE, OR RETAIN A TAX YEAR

FORM 2758 - APPLICATION FOR EXTENSION OF TIME TO FILE form 990s

To obtain forms call 1-800-829-3676 or access on line at www.irs.gov.

Note: It would be impossible and impractical to include in this booklet, all of the informa-
     tion required with regard to compliance with and filing of Federal Income tax forms.
     If your unit requires additional information not contained in this booklet, please con-
     tact the Maryland PTA office at 410-760-6221 or your local office of the Internal
     Revenue Service.




Maryland PTA                      www.mdpta.org                                23
THE PTA AUDIT

An audit involves an examination of financial transactions and the procedures used to con-
duct those transactions. Its purpose is to assure both the membership and the executive
board that the funds of the PTA have been properly administered and that good financial
practices have been followed. Maryland PTA bylaws require that all PTAs submit a copy of
the treasurer’s annual report reviewed by the auditing committee to the Maryland PTA or
their designated representative.

The books and records must be audited annually or at any time there is a change in the
position of treasurer or any other officer with financial signature authority. Refer to the ar-
ticle on “Duties of Officers” in your local PTA unit bylaws.

WHO CAN AUDIT
                                                   The treasurer should gather together all
   Any PTA member with financial                   of the financial records for delivery to the
    signature authority for the as-                audit committee.
     sociation should NOT be the
      auditor or a member of the                   The following should be delivered:
         auditing committee.                              A copy of the last audit report
                                                          Checkbook and canceled checks
                                                          Bank statements and duplicate de-
The Maryland PTA Bylaws Format allows                         posit slips
the audit to be conducted by either an                    Annual Financial Report
auditor or an auditing committee of no                    Income Ledger
less than three (3) persons.                              Expense Ledger
                                                          Treasurer's reports
The treasurer is normally not present                     Copies of all bills, invoices, or re-
when the committee meets but should be                      ceipts for which a check was writ-
available, either by phone or in person, to                 ten
answer any questions the audit committee                  Copies of general membership and
may have.                                                     executive board minutes, which
An auditor can be an accountant, a firm                       would include an adopted budg-
that is in the business of providing ac-                      et as well as any amendments,
counting services, or an individual with                      approved during the year
auditing experience.                                      Check requests/vouchers
                                                          Current bylaws and standing rules
An Auditing Committee should consist of                   Other material or information re-
not less than three (3) PTA members se-                       quested by the audit committee
lected by the executive board. It should
be noted that this is a committee of PTA           Page 8 of the Money Matters booklet, of
members. PTA is a private organization,            the Annual Resources for PTAs provides
and the books and records belong to the            a step-by-step process to follow in con-
membership. Non-members do not have                ducting an audit. A quick synopsis of the
the right to examine these records.                process can be summarized as follows:

AUDIT PROCEDURE
Maryland PTA                       www.mdpta.org                                  24
   1. Compare the starting balances with               4. Prepare written report of findings,
      the last audit.                                     signed by all audit committee mem-
                                                          bers and forward to the executive
   2. Check all documents for mathe-                      board.
      matical accuracy (including all
      ledgers, checkbook, bank state-                The audit committee investigates, ex-
      ments, canceled checks, deposit                amines facts, draws conclusions from the
      slips).                                        facts, and presents a written report of its
                                                     work to the executive board. The execu-
  3. Check that all income and expendi-              tive board receives the report and has the
     tures are allocated into the same               obligation to act upon the report. An im-
     categories that constitute the ap-              portant part of the executive board’s
     proved budget and that they are ac-             legal responsibility is to report the re-
     curately reflected in the annual fi-            sults of the auditing committee’s re-
     nancial report.                                 port to the membership


       *       *   *      *     *      *         *        *      *     *      *          *




“A PTA renders a greater service by working to secure adequate funding
for programs that have a more enduring benefit than purchasing equip-
ment for schools. PTAs should not contribute to the problem of inequi-
ties within a school district by excessive fundraising.”
                                                 - Money Matters,
                                                 National PTA Annual Resources for 2003-2004




Maryland PTA                     www.mdpta.org                                      25
                            FUND RAISING AND THE PTA
         Use of the PTA name or logo to endorse a product or service, or the use
         of children to sell products is NOT permitted under ANY circumstances.


Most PTA units find a need to raise funds           allocation into your school’s budget, it re-
in addition to the local unit dues in order         mains there - permanently - funded by
to finance leadership activities for officers       your tax dollars. Buy it with the PTA’s
and other members or enhance enrich-                money; and once it breaks you have to
ment opportunities for students.         The        raise more money to buy another.
Ways and Means Committee (or Fund
Raising Committee) is never expected to             FUND RAISING GUIDELINES
just “raise money” to give to the Principal,        Fund raising projects should be for a defi-
the school, or any other group or cause             nite, pre-determined, and budgeted pur-
that seems to need funds. PTA FUNDS                 pose that furthers the Purposes of the
ARE RAISED IN CONCERT WITH A                        PTA.
PLANNED AND APPROVED BUDGET                            It must be non-commercial, nonsecta-
AND ARE USED ONLY FOR THE PTA                           rian, and nonpartisan
PURPOSES         DETAILED       IN    THAT             It must never exploit children. Child-
BUDGET.                                                 ren should NEVER be used as door-
DO IT RIGHT - ONCE AND FOR ALL                          to-door salespersons.
If a school need is not being met, the                 Class time should never be used for
recommended course of action for a PTA                  fund raising.
is to work to include the item in the next             Gambling, raffles, or any form of en-
school budget. A PTA renders a greater                  tertainment that may be detrimental to
service by securing public support and                  character building or that may place
funds for education needs than by                       the PTA at risk for liability or
providing the items on their own or mak-                embarrassment should not be under-
ing gifts to their school. Raising funds to             taken.         In addition, the funds
provide items to a school is imposing an                raised from these activities may be
additional tax on the parents of the school             subject to taxation and, in extreme
children. Anytime a PTA raises money to                 circumstances, may cause the PTA
buy something that should be provided by                involved to lose its tax-exempt status.
public tax money, it double-taxes the con-              Local, county and state laws may re-
tributors and relieves the burden on the                gulate these activities.
Board of Education and the elected offi-               PTAs should not sponsor fund raising
cials.                                                  events where alcoholic beverages are
                                                        consumed as they may place the PTA
Good legislative activity by a PTA - writing            at risk for liability.
letters or making telephone calls to public            A PTA must consider local, state and
officials; attending public meetings where              federal laws and/or taxes and obtain
parental/citizen input is invited or permit-            all permits and/or licenses whenever
ted; addressing the local Board of Educa-               necessary or required by local ordin-
tion, your County Council, or your State                ances.
Delegates, etc. – can get your school                  Safety should be a prime considera-
more money in one year than ten years of                tion.
fund raising. In addition, once you get an
Maryland PTA                        www.mdpta.org                                  26
                                                    1. Get it in writing (and read EVERY
SOME EXAMPLES OF ACCEPTABLE                            word. If you don’t understand it, ask a
FUND RAISERS                                           neutral party who does). Oral con-
                                                       tracts, which are legal in Maryland, do
   Festivals and carnivals                            not permit an accurate statement of
   Book fairs, street fairs, science fairs            the original agreement. Be wary of any
   Athletic events and field days (your               vendor who will not put into writing on
    general liability insurance may not                the contract anything that he/she is
    cover athletic events)                             agreeing to orally.
   Dramatic productions and musical                2. Understand the nature of the rela-
    programs                                           tionship. Who is going to do what for
   Tours of gardens, parks, public build-             whom?
    ings and historic sites
   Exhibits
                                                         Keep in mind the “85% “rule.
   Fun nights, meals, parties and socials
                                                          In order for the income from
   Rummage, garage and white elephant
                                                         the fund raising activity to be
    sales
                                                          federal income tax-exempt,
   Sale of refreshments at school and
                                                        85% of the work MUST be done
    PTA events
                                                                 by volunteers.
   Arts and craft sales
This document could not possibly list all           3. Financial consideration. How much
of the acceptable fund raising ideas that              will this cost? When are payments
PTA could engage in. If in doubt about                 due? Is time a factor?
the acceptability of a fund raising project,
please contact your PTA Council office or           4. Duties and obligations of both par-
the Maryland PTA office.                               ties. Applies to both parties. Who is
                                                       going to deliver and where?
Remember, one well-planned annual fund
raising project will usually raise the funds        5. The contract should be in the name
needed to finance the year’s activities. If            of the PTA: not the school, not the
the fund raising event is to reflect the high          principal, not the fund raising chair-
principles of the PTA, it will have educa-             man, etc. The contract is signed by
tional, social, or recreational value.                 the president.
                                                           (The Name of the PTA)            PTA
DEVELOPING CONTRACTS                                        A Signature and Title of the Signer(s)
In the ordinary course of business, most                   “By Direction of the Executive Board”
PTAs enter into a variety of contracts.
Each time the PTA enters into a contrac-               The length of the contract must be li-
tual arrangement, the unit assumes the                 mited to the term of the participating
responsibility to conform to and abide by              executive board members so as not to
the terms and conditions of the contract.              project an undesired obligation onto
                                                       future boards.


Here is a basic checklist for contracts and            6. Conditions and stipulations.
agreements:                                               Does anything have to happen be-
                                                          fore the contract goes into effect?
Maryland PTA                        www.mdpta.org                                      27
       If use of a facility is involved, does          Do sales tax or charitable solicitation
       it meet standards such as handi-                taxes apply?
       capped accessibility, air standards,
       fire safety, exclusive limitations,          11. Enforcement. What happens if they
       etc.? How do I cancel, and what                  don’t perform? What happens if we
       does it cost?                                    don’t perform? Is there a binding ar-
                                                        bitration agreement?
   7. Terms of contract. How much
      time do the parties have to per-              12. Date of contract. When does it be-
      form: how long will the arrange-                  gin and end?
      ment go on? Are you required to               13. Legality. You cannot contract for an
      purchase any minimum?                             illegal activity or break a civil law.
   8. Documents related to the con-
      tract. Are there any related docu-              The local PTA’s Sales and Use Tax License
      ments that should be integrated or              Number should be provided in lieu of paying
                                                      the sales tax to the vendor for items that are
      expressly superseded? Bylaws?                   resold in the original purchased condition.
                                                      Some vendors will promise to “pay the sales
   9. Able to subcontract? Can they                   tax for you”. PTAs should be cautious. In
      decide someone else will perform                Maryland, the final seller - in this case the
      the task without telling you?                   PTA - is ultimately responsible to pay the
                                                      sales tax and will be held accountable.

    Note: Maryland PTA provides an exhibit area each year at the Annual Convention
    and at the apply. Leadership law
10. Laws that SummerWhat state’s Conference. Because Maryland PTA cannot dis-
    criminate against any this contract?
    will be used to interpret legitimate exhibitor - as long as their message is not in op-
    position to the Purposes of the PTA and is in good taste - many fund raising ven-
    dors purchase space in these exhibit areas.
         THIS DOES NOT CONSTITUTE AN ENDORSEMENT BY MARYLAND PTA OF
                     THESE VENDORS, THEIR PRODUCTS, OR SERVICES.



Other Legal Implications
In addition to tax and regulatory concerns, there are two main types of legal implications to
fund raising activities.
First, product liability concerns are always present when the PTA is involved in selling a
product. The concerns vary with the type of products sold. For example, the sale of gift-
wrap or magazines is less likely to result in personal injury than the sale of frozen pizza or
fresh fruit, which if not handled properly, could result in claims of food poisoning.
Second are personal injury claims. For example, a volunteer who is injured while engag-
ing in a fund raising activity may attempt to hold the PTA responsible.
                 PTAs need to consider the risk of both kinds of claims
                      before choosing their fund raising activity.


UNRELATED BUSINESS INCOME
Maryland PTA                        www.mdpta.org                                      28
Maryland PTAs are exempt from federal                  2. Regularly carried on - IRS regulations
income tax under Section 501 (c)(3) of                    state that activities which are carried
the internal revenue code (see the “Pur-                  on only “discontinuously or periodical-
poses” article of the local PTA unit by-                  ly” will not be considered to be regular-
laws). Tax exempt status means that the                   ly carried on. An activity occurring on-
PTA does not pay federal income tax on                    ly once per year may be considered
income from activities related to the pur-                UBI if a commercial company perform-
pose for which the PTA was given its ex-                  ing the same activity would also be ac-
empt status.                                              tive only once a year (i.e. sale of
                                                          Christmas trees).
It is important to remember that not all
business income is subject to taxation:                3. Unrelated to the organization’s tax ex-
only “unrelated business income” as de-                   empt purpose - If an activity is not
fined in the Internal Revenue Code. To                    substantially related to the PTA’s mis-
determine whether an organization has                     sion, then it could be considered unre-
“unrelated business income”, three fac-                   lated to fulfilling the exempt purpose of
tors must be present. The income must                     the PTA. The relation to PTA activity
be:                                                       cannot solely come from the PTA’s
    from a business that                                  need for money.
    is regularly carried on, and that
    is unrelated to the organization’s ex-             The judgment as to whether an activity is
    empt purposes.                                     related or unrelated can only be made on
                                                       a case-by-case basis. There are three
The law requires non-profits to:                       special exemptions: Conducted only once
      1. Report unrelated business activi-             per year, eighty-five percent (85’%) of the
         ties where gross receipts are at              work is conducted by volunteers, and the
         least $1,000.00 by filing IRS                 selling of donated merchandise. The fed-
         Form 990-T                                    eral, state and local government may
      2. Pay taxes on such income                      have different standards for pursuing the
1. From a business - To be considered a                charge of UBI.
   business, the nonprofit must take an                Nonprofit organizations risk losing their
   active role in the generation of the in-            tax-exempt status if such activities be-
   come from an activity. The activity                 come the primary focus and make the
   must provide income, but does not                   tax-exempt mission secondary.
   have to produce a profit.

       *       *    *      *      *      *         *        *      *      *      *




Maryland PTA                       www.mdpta.org                                      29
EXCESS BENEFIT TRANSACTION                           The law identifies different types of
When a PTA provides “perks” payment,                 excess benefits transactions including:
or extra benefits to officers, board mem-
bers or employees of their organization,             1. Non-fair market value transactions
the IRS may consider it an “excess bene-                When a disqualified person purchases
fit transaction” and the individual receiving           or leases property and pays less than
the benefit may have to pay tax penalties.              market price as determined under es-
                                                        tablished tax law standards, it is con-
The Taxpayer Bill of Rights 2, which be-                sidered a non-fair market value trans-
came law on July 31,1996, imposes new                   action.
penalties for engaging in excess benefit             2. Unreasonable compensation transac-
transactions. The rule applies to transac-              tions. When a disqualified person
tions occurring on or after September 14,               receives unreasonable compensation
1995.                                                   for consideration of services. Rea-
                                                        sonable compensation is that amount
An “excess benefit transaction” is defined              that a similar for-profit as well as non-
as “any transaction in which an economic                profit enterprise would pay for under
benefit is provided by an applicable tax-               similar circumstances.
exempt organization (such as PTA) direct-
ly or indirectly to or for the use of any dis-       3. Revenue sharing transactions in viola-
qualified person (officer, board member,                tion of private inurement rules. Private
or executive staff of a PTA) if the value of            inurement transactions take place
the economic benefit provided exceeds                   when an individual takes advantage of
the value of the consideration (including               the association’s tax benefit for private
the performance of services) received for               gain. An example would be using the
providing such benefit”. In other words, if             PTA’s tax-exempt status to buy com-
a PTA provides a benefit as a considera-                puter equipment (tax-free) that was
tion for service to an officer or person as-            actually being purchased for personal
sociated with the PTA that exceeds what                 use.
would be considered reasonable com-
pensation for that service, it may be con-           Fines & Penalties
sidered an excess benefit transaction.               The disqualified person is subject to an
                                                     initial excise tax of 25 % of the amount of
A “disqualified person” includes any indi-           the excess benefit. If the excess benefit
vidual who is in a position to exercise in-          is not repaid within a time period specified
fluence over the exempt organization’s               by the IRS, the disqualified person must
affairs. Officers, directors, board mem-             pay a tax equal to 200% of the excess
bers, and staff of tax-exempt organiza-              benefit. The organization’s managers,
tions will typically be considered disquali-         including volunteers, who knowingly ap-
fied persons. The definition of a disquali-          prove the transaction that results in the
fied person also includes family members             excess benefits are jointly liable for a tax
of persons with substantial influence in-            of 10% of the excess benefit, up to a
cluding an individual’s spouse, siblings,            maximum of $10,000.
children and grandchildren and their
spouses.                                             For more detailed information on Excess
                                                     Benefit Transactions, refer to the Money
                                                     Matters booklet of the Annual Resources
                                                     for PTAs.

Maryland PTA                         www.mdpta.org                                  30
                                RECORDS RETENTION SCHEDULE

It is very important that certain records of the association be retained. The following is a
list of items/records that local PTA units should review on a periodic basis and keep in a
safe place.

   Accounts Payable Records ...............................................................................7 years
   Articles of Incorporation ........................................................................... Permanently
   Annual Audit Reports ............................................................................... Permanently
   Bank Reconciliations ......................................................................................... 1 year
   Budgets...........................................................................................................10 years
   Bylaws ..................................................................................................... Permanently
   Cash Receipt Records ......................................................................................7 years
   Checks ..............................................................................................................7 years
     Checks for important payments such as taxes, special contracts, etc. should be filed with the
     papers pertaining to the transaction and kept .................................................. Permanently
   Contracts & Leases (expired) ..............................................................................7 years
   Contracts & Leases (active) ....................................................................... Permanently
   Corporation Reports ................................................................................ Permanently
   Correspondence with vendors ........................................................................... 1 year
   Correspondence (general) ..................................................................................3 years
   Correspondence (legal) ............................................................................. Permanently
   Disbursement Requests....................................................................................7 years
   Duplicate Deposit Slips ...................................................................................... 1 year
   Employee Records ...........................................................................................3 years
   Employment Applications .................................................................................3 years
   Equipment owned by PTA ....................................................................... Permanently
   Financial Statements ......................................................................................10 years
   Grant Award Letters ........................................................................................10 years
   Insurance Records, Accident Reports, Claims, Policies, Certificates ...... Permanently
   Inventories (product & materials) ............................................................................7 years
   Invoices .............................................................................................................7 years
   Journals ................................................................................................... Permanently
   Minute Books ........................................................................................... Permanently
   PTA Charter ............................................................................................. Permanently
   Purchase Orders ...............................................................................................7 years
   Sales Records ..................................................................................................7 years
   Standing Rules (current) ............................................................................ Permanently
   Tax-exempt status documents and all documents and correspondence
      dealing with the IRS ............................................................................ Permanently
       (For a more detailed breakdown refer to Money Matters, Annual Resources for PTAs
   Trademark Registrations.......................................................................... Permanently




Maryland PTA                                     www.mdpta.org                                                     31
                            PROPER USE OF PTA FUNDS
For many years, PTA leaders throughout Maryland have asked for a detailed guideline of how PTA
funds should and should not be spent. The following list, created by Maryland PTA, was reviewed
and approved by the Executive Committee of the National PTA and the National PTA’s attorneys
for use in Maryland.

                          PTA FUNDS SHOULD BE SPENT FOR:
                              (In alphabetical order; not prioritized)

Awards - Purchase and presentation of                 that are held in an effort to bring about
certificates, frames, trophies, plaques,              family involvement and participation.
etc., for outstanding service by students,
teachers, parents, volunteers, administra-            Field Trips - PTAs may fund or subsidize
tors, and members of the community; es-               extracurricular field trips for students.
pecially awarding of National PTA Life                HOWEVER, PTAs should be aware of
Achievement Award and Maryland PTA                    two areas of responsibility that they bear:
Honorary Life Membership Award.                       1) The IRS requires that the PTA be
                                                      able to demonstrate how the field trip
Communications/Publicity - Flyers, pho-               is directly related to curriculum.
tographs (purchase of film and develop-               2) The PTA may be liable for any injury
ment), announcement boards, letters,                  or damages that occur during the field
etc., about PTA and School individuals,               trip.
activities, awards, etc.
                                                      Fund Raiser Costs - The up-front costs
Classroom/School Enrichment Pro-                      of conducting an acceptable fund raiser.
grams - special equipment or special field            (Refer to page 27 of this publication for
trips, special cultural arts presentations            acceptable fund raisers.)
for activities beyond curricular demands.
PTAs must ensure that the equipment                   Guest Speakers - Funding/fees for guest
or program can be demonstrated to re-                 speakers at PTA meetings.
late to the curriculum. PTAs may fund
new and/or experimental programs during               Hospitality - Refreshments provided for
the initial year, while evaluating the suc-           meetings, conferences, public hearings,
cess of the program. Responsibility for               PTA social activities, etc., including pur-
continual funding of successful programs              chase/rental of coffee pots, soft drink coo-
should then be transferred to the local               lers, paper ware, etc.
Board of Education.

Committee Expenses - expenses re-
quired for standing, special and Ad Hoc
committees to perform their duties.

Cultural Arts - Sponsorship of Cultural
Arts programs, in particular, the National
PTA Reflections program.

Family Involvement Fellowships - fun
nights, puppet shows, magic shows, etc.
Maryland PTA                        www.mdpta.org                                    32
Insurance - liability and bonding insur-           Pennants, bumper stickers, pencils, pens,
ance for the PTA.                                  banners, key chains etc.
Leadership Training - PTA Workshops,               PTA Dues - National, State and Council
Conferences and Conventions on the                 dues.
county, State and National levels. (Regis-
tration, transportation, meals, parking            PTA Newsletters - development, produc-
fees, etc.)                                        tion, reproduction, distribution and mailing
                                                   costs.
Legislative Activity - Local, State, and
National PTA-related legislative activity.         PTA Office Equipment - items such as
Attendance at meetings, hearings and               tables, chairs, desks, copiers, fax ma-
conferences dealing with education budg-           chines, file cabinets, etc. that are used to
ets, legislation relating to the health            conduct PTA business, where the PTA
and/or welfare of children and youth, leg-         has a secure area/office in which to store
islation related to changes in the federal,        this equipment.
state, or local education system, etc.             PTA Publications - all officers and the
(fees, transportation costs, parking fees,         Principal should receive subscriptions to
and sustenance) development, produc-               "Our Children", the "Maryland PTA Bulle-
tion, reproduction, distribution, and mail-        tin", and the PTA Council newsletter.
ing costs of flyers, letters and other an-
nouncements.                                       PTA/School Related Celebrations -
                                                   Back To School Night, American Educa-
Membership Supplies - envelopes,                   tion Week, Founder’s Day, Teacher Ap-
stamps, stamp pads, flyers, posters, etc.          preciation Week, etc. (Decorations, re-
Memorials - planting of trees, shrubs, or          freshments, banners, etc.)
perennial flower beds, or memorial dona-           Reproduction Costs - for PTA-related
tions to the Maryland and National PTA             newsletters, flyers, programs, announce-
scholarship funds in memoriam of stu-              ments, etc.
dents, teachers, administrators, and PTA
leaders who pass away.                             Scholarships - monetary scholarships for
                                                   graduating students who have ties to the
Needy Student Assistance - school                  respective school.
supplies, clothing, transportation assis-
tance and other basic necessities for stu-         In accordance with IRS regulations, the
dents whose families clearly demonstrate           PTA bears the responsibility of ensur-
a need for financial assistance.                   ing that the funds presented to the re-
                                                   spective graduates are, in fact, used to
Parent Workshops/Seminars - funding                further education and/or training.
of workshops and seminars for parents
with regard to education, health, sub-             Volunteer Appreciation - celebrations,
stance abuse, CPR, welfare, parenting              refreshments, certificates, plaques, etc.
and other community issues.                        to reward ALL of your hard-working
                                                   volunteers.
Postage & Stationery - letterhead, enve-
lopes, stamps, mailing boxes, etc.


Promotional Items - items given away
that promote the school and/or PTA.
Maryland PTA                       www.mdpta.org                                  33
                        PTA FUNDS SHOULD NOT BE SPENT FOR:
               (All of these items should be supplied by the local Board of Education)

Basic School Supplies - textbooks,                    and/or pay for the installation of any
workbooks,     library  books,     pencils,           playground equipment, they may be
crayons, poster board, art supplies, chalk,           liable for ANY injury sustained by AN-
tape, glue, notebooks, etc.                           YONE using the equipment at ANY
                                                      time; and such liability would NOT
Capital     Improvements        -    pur-             generally be covered by the PTA's lia-
chase/repairs of windows, doors, rugs,                bility insurance.
draperies, standard lighting, cooking ap-
pliances, stage equipment, gym equip-                 Presentation Equipment - film projec-
ment, etc.                                            tors, overhead projectors, slide projectors,
                                                      video camera, video projectors, televi-
Contributions to Other Associations -                 sions, radios, record/tape/CD players,
PTAs may not make monetary contribu-                  etc.; and/or the repair thereof.
tions to non-charitable organizations, no
matter how worthy the cause.                          Principal's Discretionary Fund - block
                                                      grants that are given to principals to use
Funding of School Personnel - provid-                 for educational expenses.
ing wages and/or benefits for additional
teachers, instructional assistants, admin-            School Office Equipment - copiers, copy
istrators, staff personnel, therapists,               paper, fax machines, shredders, tele-
nurses, counselors, custodians, etc.                  phones, public address systems, desks,
(PTAs may have to reimburse the local                 chairs, equipment maintenance contracts
school district for the cost of custodial             and/or repair of any such equipment.
services whenever the PTA is conducting
an activity in a school building on a Satur-          Teacher Development - continuing edu-
day, Sunday or holiday.)                              cation/college fees for teachers, instruc-
                                                      tional assistants, therapists, nurses,
Janitorial Supplies - brooms, mops,                   and/or administrators.
pails, detergent, soap, paper towels, toilet
paper, floor wax, buffers, vacuum clean-              Technology - computers, monitors, prin-
ers, etc.                                             ters, scanners, modems, and the asso-
                                                      ciated infrastructure.
Playground Equipment - swings, slides,
climbing bars, see-saws, protective sur-
faces, fences, sandboxes, etc. (PTAs                    RECEIPTS MUST BE COLLECTED
should be aware that if they purchase                      for every PTA expenditure.




          MISSING FUNDS and/or EMBEZZLEMENT OF PTA FUNDS
Maryland PTA                          www.mdpta.org                                      34
All persons handling funds and all per-             Every action taken by the board must be
sons signing the PTA checks are liable for          done at a properly called meeting of the
the use or misuse of the funds of the               executive board and all the actions must
PTA. Responsible fiscal management is               be recorded in the minutes of the meet-
a must in any organization.                         ing.

Whenever a PTA thinks (or is certain) that          The persons involved should have a pri-
there is a problem with its funds, there are        vate hearing with the executive board of
some very important, basic steps that               the PTA and have an opportunity to ex-
must be taken.                                      plain what has happened.

Suspected mismanagement of funds                    The local unit should contact the Council
should be handled in a tactful manner.              president for assistance in resolving the
You are encouraged to be sensitive to               situation.
protect the person's reputation by being
discreet in what is said. It is NOT, how-           It may be necessary to consult legal
ever, responsible to disregard the inci-            counsel and/or the bonding company at
dent.                                               this point. Some situations can be han-
                                                    dled through Small Claims Court; some
The local PTA unit has the responsibility           may require other legal action.
to be accountable to its membership for
all monies.                                         Theft is breaking the law and should be
                                                    handled as a serious offense. Embez-
The first and most important step is to             zlement is the same as ordinary theft.
audit the financial books and records of            The charges are criminal and need to be
the association.                                    filed with the police department. It is im-
                                                    portant to know that it is the responsibility
                                                    of any PTA leader who suspects embez-
No proof of wrongdoing exists and no
                                                    zlement or fraud to report it to the proper
allegation of wrongdoing can be made
until the PTA ascertains that funds have
                                                    authorities, otherwise, they may also be
been improperly handled or are missing.             held liable. If the police department finds
                                                    evidence enough to file criminal charges,
                                                    the police department or the governmen-
                                                    tal attorney’s office will pay the cost of the
The audit committee reports its findings to
                                                    trial.
the executive board.
                                                    If a civil suit is filed by a local PTA, the
The executive board receives the report
                                                    attorney's fees are paid by that local PTA.
of the audit committee and has the obliga-
                                                    (In general, a suit is any civil action
tion to act upon the report. This is often a
                                                    brought before a court of law. Criminal
very difficult step because it may involve
                                                    prosecutions are not spoken of as suits.)
an accusation against a PTA member. If
funds are missing, the executive board              DO NOT make any public or private
must take every reasonable step to collect          statements, seek the advice of the school
or recover the missing funds.                       district, or take any action without the ap-
                                                    proval of the executive board.



Maryland PTA                        www.mdpta.org                                   35
                               PTA Mission
                      The mission of the PTA is threefold:

       - To support and speak on behalf of children and youth in the schools, in
          the community, and before governmental bodies and other organiza-
                    tions that make decisions affecting children; and

       - To assist parents in developing the skills they need to raise and protect
                                    their children; and

        - To encourage parent and public involvement in the public schools of
                                     this nation.




Maryland PTA                     www.mdpta.org                               36
                                       OTHER TOPICS

INCORPORATION                                         related information and also to report any
The status of incorporation has advan-                business personal property owned or
tages and disadvantages. The most sig-                leased as of January 1 of the year in which
nificant feature of a corporation is its abili-       the return is filed. The filing date of April
ty to shield from liability. It should be             15 is a fixed date and is not related to the
noted that it would NOT prevent a liable              fiscal year of the organization.
action. Maryland PTA bylaws require that
Maryland PTAs be incorporated.                        Some important things to know in
                                                      completing the return are:
Corporate status requires that a Personal             1. PTAs are “Domestic Non-Stock
Property Return is filed each year with the              Corporations.”     Therefore the ID #
State Department of Assessments and                      prefix is “D.”
Taxation, but no fees are due. The return             2. The Federal Principal Business Code is
is due on April 15. There are late filing                81300.
penalties of from $30 to $500 plus inter-             3. If the answer to question C. of Section I
est. Since PTAs would be a Domestic                      is “No,” complete questions D. and E.
Non-Stock Corporation, the ID# Prefix will               in Section I and then skip Section II.
be D. The Federal Principal Business                  4. Section III on page 3 must be
Code is 8300.                                            completed.
                                                      5. Sign and date the return, make a copy
Councils or local units needing to incorpo-              for your files, and mail the document to
rate may obtain the "Articles of Incorpora-              the State of Maryland, Department of
tion" package from the Maryland PTA of-                  Assessments and Taxation, Personal
fice. When completed, send a check                       Property Division in the envelope
made payable to the "Maryland State De-                  provided with the return forms.
partment of Assessments and Taxation"
in the amount of $120.00, to the Maryland             There are penalties assessed for late filing
PTA, 5 Central Avenue, Glen Burnie, MD                and the corporate status may be forfeited
21061.                                                by failure to file the return.

Maryland PTA will then submit the appli-              If your PTA’s Incorporation Charter has
cation to the Maryland State Department               been forfeited, contact the Maryland PTA
of Assessments and Taxation for you. A                office for a Revival of Charter packet. The
short time thereafter, the Maryland State             fee is $100.00.
Department of Assessments and Taxation
will forward, directly to your PTA, a copy            FISCAL YEAR
of your articles of incorporation.                    The fiscal year - or operating year - of an
                                                      organization is any 12 consecutive month
PERSONAL PROPERTY RETURN                              time period for which budgets are pre-
All PTAs incorporated in the state of                 pared and for which financial reports (in-
Maryland must file a Personal Property                cluding reports to the Internal Revenue
Return annually by April 15. Filing this              Service) are prepared. It must cover the
                                                      full year usually beginning on the first day
return serves to provide an annual report             of a month and ending on the last day of
of corporate officers and directors and
Maryland PTA                          www.mdpta.org                                   37
the preceding month in the following year
(i.e., July 1 to June 30).                           1. The amount of the grant.
                                                     2. The "sole and express" purpose of the
The fiscal year for your PTA can be found                  grant.
in Article XIII of your bylaws and is one of         3. A date by which the district must
the Bylaws Articles mandated by the Mar-                   spend the grant funds.
yland PTA.                                           4. Unused grant funds must be returned
                                                           to the PTA.
It is advisable to have the fiscal year end
when business is slow.         Usually, for          The PTA should then provide the money
PTAs, this will occur in mid summer (July            and allow the school district to make the
1).                                                  purchase

If you are in the process of revising your           A Sample Grant Agreement is on the fol-
bylaws, the July 1 date would be an ex-              lowing page.
cellent time for new officers to assume
their duties as well as for the new fiscal
year to begin since they would then serve
for a full fiscal year. This also benefits the       HOLD HARMESS PROCESS
audit process as well as tax form prepara-           If a PTA does purchase material or
tion.                                                equipment for the school district, a "Hold
                                                     Harmless Agreement" should be initiated
If a PTA changes its fiscal year, it must            to transfer ownership to the school district
inform IRS.                                          and to provide that the district will assume
                                                     the responsibility of ownership. The
If your PTA has filed a tax return, please           school district should agree to:
look into the need to file a return for a par-
tial year before amending the fiscal year              1. Accept ownership of the described
in your bylaws.                                           equipment.
                                                       2. Accept responsibility for the installa-
                                                          tion, operation, and maintenance of
DONATION OF EQUIPMENT                                     the described equipment.
Donations or contributions of materials                3. Hold the PTA harmless from any
and/or equipment to a school district be-                 claim or lawsuit arising from dam-
come the property of the district and the                 ages caused by or from the use of
district is free to use the equipment in any              the equipment.
manner it deems appropriate.
                                                     A Sample Hold Harmless Agreement is
                                                     on the following page.
GRANT PROCESS FOR EQUIPMENT
It is recommended that a local PTA unit
establish a “grant” process if a PTA wants
to purchase equipment for a school dis-
trict. After assurance that the school dis-
trict wants the equipment, the grant
agreement should be signed between the
PTA and the school district.
The agreement should specify:
Maryland PTA                         www.mdpta.org                                  38
                                      SAMPLE GRANT AGREEMENT

_____________________ PTA hereby gives to the ____________________________ School District a mon-
etary grant in the amount of _____________Dollars ($     ) by check number __________.

This grant is for the sole and express purpose of:
________________________________________________________________________________________
________________________________________________________________________________________
__________________________________________________________________________________
It is agreed, that the grant funds will be spent for the stated purpose on or before: ____________ or the funds
will be refunded to the PTA. Any unused or unexpended funds will be refunded to the PTA. The School Dis-
trict will provide a complete accounting of the expenditure of the grant funds to the PTA.

The School District agrees to maintain the above-described property at ____________________ for a period
of not less than _______________ years from the date of purchase.

           Date: ____________________ __________________________________________
                                                          PTA Officer
                                      ___________________________________________
                                                          PTA Officer
           Date: ____________________ ___________________________________________
                                                         Superintendent
                                      ___________________________________________
                                                           Principal


    *           *       *       *        *         *         *   *        *       *       *          *

                                SAMPLE HOLD HARMLESS AGREEMENT

The ________________________PTA presents to the ____________________________ School District the
following described equipment:
___________________________________________________________________________________

The School District hereby agrees to:
1. Accept ownership of the above-described equipment.
2. Accept responsibility for the installation, operation and maintenance of the above-described equipment.
3. Hold the PTA harmless from any claim or lawsuit arising from damages caused by or from the use of said
     equipment.
4. Keep the above-described equipment at __________________________________ for a period of no less
     than ______________________years.

           Date: ____________________ __________________________________________
                                                           PTA Officer
                                      ___________________________________________
                                                           PTA Officer
           Date: ____________________ ___________________________________________
                                                          Superintendent
                                      ___________________________________________
                                                  School Board President


(The hold harmless agreement should be dated and signed by the school district superintendent, the school
    board president and two elected PTA officers.)




Maryland PTA                                 www.mdpta.org                                      39
       STATEMENT FOR RECIPIENTS OF MISCELLANEOUS INCOME

PTAs may be required to file Form 1099-
MISC with the IRS if they pay $600 or                1099-MISC forms must be sent to the re-
more during the calendar year to any                 cipients on or before January 31 of each
non-incorporated business or person for              year and filed along with transmittal form
services rendered or in payment for a                1096 with the IRS on or before February
grant, award or scholarship.                         28 of each year.
                                                     The name and address of the recipient,
1099-MISC forms are not required to be               his or her social security number (or Em-
issued to corporations or to those paid              ployer Identification Number) and the
less than $600. Some examples of pay-                amount of the payments must be included
ments requiring the filing of Form 1099-             on Form 1099-MISC. To obtain the in-
MISC that your PTA may encounter are:                formation necessary to properly prepare
1. Payments of $600 or more to a volun-              Form 1099-MISC, the treasurer should
   teer for expenses when the volunteer              send the payee a Form W-9, Payer’s re-
   does not provide the PTA with specific            quest for Taxpayer Identification Number
   documentation for the expenses in-                and certification.
   curred on behalf of the PTA.                      Because of the substantial penalty poten-
2. Payment of $600 or more for a scho-               tial, it is in a PTA’s best interest to issue a
   larship or grant awarded to an individu-          1099-MISC to anyone it is not sure is op-
   al when the PTA does not have written             erating as a corporation or included in the
   verification (receipts) that the money            definition of a service provider.
   was specifically used for tuition and re-         A penalty of $50 applies to the following:
   lated expenses.
                                                       1. Each failure to file in time the infor-
3. Payments of $600 or more in a calen-                   mational return - up to a maximum
   dar year to a non-incorporated entity as               of $100,000
   a grant or for services rendered.                   2. Each failure to furnish recipient
                                                          Taxpayer Identification Number - up
Example: “Big Toot” the Clown is an enter-
                                                          to a maximum of $100,000
tainer/teacher who specializes in teaching
music to young children during a one-hour
                                                       3. Each failure to furnish in time a
clown show. “Big Toot” is hired by the PTA to             statement to a payee - up to a max-
stage a show in March of this year. His fee is            imum of $100,000
$350.00 per performance. “Big Toot” may be
                                                     For information regarding specifically
paid by check with no further action...
                   ...until…                         when and how to file, you can obtain a
The PTA feels that “Big Toot” was such a big         copy of the instructions for Form 1099-
hit last school year that they decide to bring       MISC from the Internal Revenue Service.
him back for another performance in Novem-
ber of the next school year. Again, his fee is
                                                     In order to capture the information
$350.00.     Since “Big Toot” has now been           needed for reporting purposes, your PTA
paid more than $600.00 during the same ca-           may create a form similar to the one
lendar year, the PTA must now file a 1099-           shown on the next page.
MISC.



Maryland PTA                         www.mdpta.org                                    40
                    SAMPLE FORM - COLLECTING 1099 MISC INFORMATION

Washington Elementary PTA
3000 Armhurst Way
Armistead, Maryland 21290

Effective January 1,1984, Federal Law requires back-up withholding must be made on payments to
vendors for which we have not been furnished a 9 digit Social Security Number (SSN), or a Federal
Employer Identification Number (FEIN).

Please complete the following information. We are required by law to obtain this information from
you when making a reportable payment to you. If you do not provide us with this information, your
payments may be subject to federal income tax back-up withholding. Also, if you do not provide us
with this information, you may be subject to a $50.00 penalty imposed by the Internal Revenue
Service under section 6723.

INSTRUCTIONS: Find your tax status and fill in the boxes to the right of your tax status. Sign and
date the form.
                                Individual’s Name                              Individual’s SSN

Individual:
                    Business Owner’s Name             Business Name        Business Owner’s SSN

Sole:
                                Name of Partnership                            Partnership’s FEIN
Partnership:
                                Name of Corporation                            Corporation’s FEIN

Corporation:
                    Reason: Government Agency, Non-Profit Organization, etc.

Exempt:

Address:




________________________               _____________________             __________________
              Signature                             Date                    Telephone Number

Please return this form in the pre-addressed envelope to:
Washington Elementary PTA
3000 Armhurst Way
Armistead, Maryland 21290
Attn: PTA Treasurer


Maryland PTA                           www.mdpta.org                                  41
                                         FAQ’S
                              (Frequently Asked Questions)

Q. I was told at one of my Council’s              Q. With all this attention being paid to
workshops that PTAs should not hold               IRS and Maryland Sales Tax require-
“adult” fund raisers, such as Bull                ments, has any PTA in Maryland every
Roasts and Dance Parties where beer               really been audited by the IRS?
and wine are served. Yet I know of a
PTA on the other side of town that is             A. YES, several in recent years.
holding a Saturday Night Party fund
raiser where all kinds of alcoholic be-
verages will be served. How can they
do it if we can’t do it?                          Q. Has any local PTA ever been fined
                                                  for failure to pay Maryland State Sales
A. As in any case where a PTA is doing            Tax?
something that it is not supposed to be
doing, that PTA either - 1) did not bother        A. YES, several in recent years.
to contact its PTA Council office or the
Maryland PTA Office for guidance in the
matter, or 2) knows that it should not be
doing this and has decided to do it any-          Q. What would happen if my local PTA
way, regardless of the risk.                      refused to pay our National and State
                                                  dues?

                                                  A. “PTA” is a national, registered trade-
Q. It is my understanding that PTAs               mark. In order for your local unit to call
have to pay Maryland State Sales Tax              itself a “PTA”, your unit must be in union
on everything they buy, yet I know of a           with the Maryland PTA and the National
PTA that has a State Sales Tax Exemp-             PTA and pay annual dues to both. Fail-
tion number. How did they get it?                 ure to pay these dues would lead to a sit-
                                                  uation where the Maryland PTA would
A. They do not have a State Sales Tax             have to formally notify the IRS that the
Exemption number. They are probably               unit is no longer operating as a “PTA”.
using the school’s exemption number,              This would cause the PTA to lose its char-
which is only legal when being used to            ter along with its federal income tax ex-
purchase capital equipment directly for           emption. This would probably result in
the school through the proper channels.           the local PTA unit’s books being audited
The schools are State Sales Tax Exempt;           by the IRS, and their assets seized and
PTAs ARE NOT!                                     distributed to charitable needs according
                                                  to law.
Also, be careful not to confuse a Sales
Tax Exemption number with a Sales Tax             The bottom line is: If you want to be a
Account Number, which is the account              PTA, you must pay your dues to the
number that EVERY PTA in Maryland                 Maryland and National PTA.
must have to remit its sales tax to the
Revenue Administration Division.


Maryland PTA                      www.mdpta.org                                 42
Q. One of our Executive Board mem-                mission slips” to our parents to sign
bers is also active with United Cerebral          as “hold harmless” forms. That will
Palsy of Maryland and UCP is about to             protect us from any lawsuit, won’t it?
begin its annual fund drive. Can our
PTA make a monetary donation to                   A. It may; and it may not. Permission
UCP?                                              slips HAVE been found to be worthless in
                                                  some court cases. It is recommended
A. Yes. PTAs may make contributions to            that you obtain a certificate of insurance
other charitable organizations if members         through your provider.
approve the donation as part of their an-
nual or reallocation budgeting process.
As with any PTA expenditure, such a do-
nation should advance the mission of the          Q. Our PTA would like to sponsor a
organization and benefit the community            field trip to an Oriole game at Camden
as a whole vs. an individual or small             Yards for our third-graders. Is this ac-
group. It will be the PTA’s responsibility        ceptable?
to document information related to this
donation (including details on the receiv-        A. The IRS requires that the PTA be able
ing group) so they can provide it to the          to demonstrate how the PTA-sponsored
IRS if they are ever audited.                     field trip is directly related to curriculum.
                                                  Good luck.

Q. I’ve been having trouble getting my
Executive Board to approve a budget
that contains a significant amount of             Q. Since checks should not be written
money appropriated for Leadership                 to “cash”, how does our PTA obtain
Training - attending our Council’s                funds to be used for start-up change
workshops and the Maryland PTA’s                  for an event?
Annual Convention and Summer Lea-
dership Conference. They feel that the            A. A check, charged against the event
money we raise should first go to the             budget line item, should be written to the
needs of the school; and then if there’s          chairman of the event or the person re-
any money left over, we can use that              sponsible for handling the funds for the
for training. What should I do?                   event. That individual should cash the
                                                  check to obtain the start-up funds. The
A. Tell them they have it backwards.              start-up funds should be listed separately
Leadership Training is not only the most          in the accounting to be sure they are not
important budget category that your unit          included as income for the event. The
should be spending its money on; the IRS          start-up funds should be listed and depo-
requires it.                                      sited as a return of funds (a negative dis-
                                                  bursement) to the budget line item that
                                                  was the original source of the start-up
                                                  funds.
Q. Our PTA is about to sponsor a roll-
er-skating party at the local roller-
skating rink. We have heard that roll-
er-skating is not covered by our liabili-         Q. If I am chairing an event that re-
ty insurance, so we have issued “per-             quires me to outlay a substantial
Maryland PTA                      www.mdpta.org                                   43
amount of funds to purchase supplies.              cal unit officers, is generally oriented
Can I be issued a check before hand                more toward the seasoned PTA leader.
so I don’t have to use my own money?
                                                   In addition, keep two things in mind.
A. Yes; as long as you properly complete           1) The National PTA Convention is held in
a Disbursement Request form, sign it, and          June, after the current school year ends
understand that you MUST forward ALL               and before the new school year begins.
receipts after you make the purchases,             Newly elected officers have been known
and you MUST return any unused portion             to resign before they ever start to perform
of the advance funding. It is preferable to        their new duties. It would be most benefi-
have the check made payable to the                 cial to your PTA, and a courtesy to the
item(s) supplier if you are buying all of          membership’s hard work at fund raising
your supplies in one place.                        as well, if all delegates to the National
                                                   PTA Convention were to have already
                                                   served on the Executive Board in some
                                                   capacity.
Q. My PTA has many members of the
Executive Board that want to go to a               2) Attendance at the National PTA Con-
National PTA Convention. Can the                   vention in Leadership Training is not in-
PTA help fund my cost even if I am not             tended to be a reward for service per-
an officer for the current year?                   formed. Therefore, funding for outgoing
                                                   executive board members who will not be
A. Leadership Training for PTA leaders is          returning to the executive board in any
a requirement under the IRS guidelines.            capacity should be carefully considered -
How many of your PTA leaders can at-               UNLESS, they have won a major award
tend your Council workshops, the Mary-             for the unit through their hard work and
land PTA Annual Convention, the Mary-              they are going to the National PTA Con-
land PTA Summer Leadership Confe-                  vention to accept that award.
rence, and the National PTA Convention,
is controlled by how affluent your PTA is          Leadership Training for any PTA leader is
and how much money has been budgeted               good and useful, and the more trained
for Leadership Training.          Generally        leaders your unit has, the better. So the
speaking, first-time leaders or incoming           bottom line answer to the question is:
leaders should concentrate FIRST on at-
tending your Council’s Workshops, the              How much does your unit have budgeted
Maryland PTA Annual Convention and the             for Leadership Training, and how much
Maryland PTA Summer Leadership Con-                will your unit get in return for its invest-
ference. These events offer more for the           ment?
local unit officer and for those who are
trying to “get their feet wet”. The National
PTA Convention, while offering a substan-
tial amount of good information for the lo-




Maryland PTA                       www.mdpta.org                                  44
               Appendix




Maryland PTA    www.mdpta.org   45

								
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