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
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
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
PTA funds must be kept separate
from school funds or personal
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
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
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
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 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-
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-
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
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
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
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
2005 - 2006 ANNUAL FINANCIAL REPORT
Balance from Previous year: $610.89 $610.89
1. Membership Dues 1,260.00 1,302.00
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
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
2006 - 2007 PROPOSED BUDGET
Budgeted Actual Proposed
2005-06 2005-06 2006-2007
Balance from Previous year: $610.89 $610.89 $798.13
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
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
Balance, October 7, 2005 $ 1,125.43
Balance, November 4, 2005 $1,304.96
PERIOD TO DATE BUDGET
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
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
Total Disbursements $445.35 $716.55 $5,628.13
John Q. Jones, Treasurer
Maryland PTA www.mdpta.org 12
SAMPLE TREASURER’S REPORT
General Meeting, November 11, 2005 Presented to the General
Treasurer's Report Membership at every meeting
Balance, October 14, 2005 $1,125.43
Membership Dues $525.00
Candy Sale 95.10
Sales Tax 4.78
State & National Dues $428.00
Membership Committee (envelopes) 10.00
Hospitality Committee (Oct. Meeting) 7.35
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 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
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
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
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
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
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
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
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
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).
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.
Maryland PTA www.mdpta.org 16
SAMPLE DISBURSEMENT REQUEST FORM
To the Treasurer:
Pay to the order
Amount : _____________________dollars and ________cents $ ___________
Charge to account: _______________________________ Acct. No. _________________
Approved by: ___________________________
Itemize expenses below:
Please staple original receipts to this form prior to forwarding to the treasurer.
Paid by check no. __________ Date: ___________________________
PROTECTING YOUR PTA FROM FINANCIAL LOSS OR LIABILITY:
Maryland PTA www.mdpta.org 17
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.
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).
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
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
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
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
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.
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
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
Payment over $600.00
Rents, Services, Prizes and Awards, and Other Income Payment
Not required if paid to a Corporation
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
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
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:
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
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
federal income tax-exempt,
Sale of refreshments at school and
85% of the work MUST be done
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
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-
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
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
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
Accounts Payable Records ...............................................................................7 years
Articles of Incorporation ........................................................................... Permanently
Annual Audit Reports ............................................................................... Permanently
Bank Reconciliations ......................................................................................... 1 year
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
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
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-
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
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
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
Maryland PTA www.mdpta.org 36
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
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: ____________________ __________________________________________
Date: ____________________ ___________________________________________
* * * * * * * * * * * *
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
4. Keep the above-described equipment at __________________________________ for a period of no less
Date: ____________________ __________________________________________
Date: ____________________ ___________________________________________
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:
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.
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
Business Owner’s Name Business Name Business Owner’s SSN
Name of Partnership Partnership’s FEIN
Name of Corporation Corporation’s FEIN
Reason: Government Agency, Non-Profit Organization, etc.
________________________ _____________________ __________________
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
(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
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
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.
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
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
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
Maryland PTA www.mdpta.org 45