This model policy was developed by Parent Booster USA, Inc. (PBUSA) to assist schools, school districts and their respective administrators to understand best practices for working with school support organizations.
Schools in this school district must maintain clear roles distinct from the roles of the organizations that provide support to the schools. Each school must manage its own activities in accordance with school policy and state law, including without limitation collecting student fees for classes and school-conducted extracurricular activities and contracting for and purchasing items to be owned and used by the school. School support organizations act as grant-making organizations responding to requests from schools/school staff for support needed (volunteers and funds) that is not provided in the ordinary operating budget. At no time, however, should school support organizations act as an agent of the school to collect student fees for classes and other school activities, determine or provide waivers of such fees, or engage in other activities as an agent of the school.
Schools within this school district may cooperate with, including providing use of school facilities for meetings and activities, and accept funds from school support organizations (i.e. parent-teacher-student organizations, sports, arts, academic and other booster clubs) provided the school support organization meets the following requirements:
Organize as a nonprofit corporation including:
- Filing incorporation documents in the state and maintaining such corporation in good/active standing with the state by filing state-required annual or other reports;
- Adopting and abiding by a set of bylaws that outlines the organization’s operating procedures;
- Electing officers in accordance with the procedures set forth in the bylaws; providing the names and contact information of the officers to the principal of the school that the organization primarily supports; updating the principal when the officers change.
- File all required state registrations, including state fundraising registration requirements.
- Obtain and identify the organization using its own federal tax identification number (also known as an employer identification number or EIN); school support organizations may not use the school’s EIN.
- Be recognized by the Internal Revenue Service as a 501(c)(3) organization, and maintain such status by annually filing the required IRS 990-series return.
- Adopt and abide by appropriate financial controls. See Attachment A: Recommended Financial Controls.
- Provide monthly financial reports. Provide periodic (usually monthly) financial reports to the organization’s officers and members that include at least a statement of receipts and disbursements, a copy of the bank statement(s), and a copy of the cash tally sheets.
- Conduct annual financial review/audit. Appoint an audit commit consisting of officers/members who are not signatories on the bank account to conduct a year-end financial review of the organization’s records. Provide the review to the new officers of the organization with a copy to the principal or other designated administrator of the school the organization primarily supports. The Better Business Bureau Standards for Charity Accountability (available at www.give.org) provide that the annual financial review may be completed by an internal audit committee provided the organization’s gross receipts do not exceed $250,000/year. Larger organizations should hire an outside financial professional, such as a certified public accountant, to complete the financial review. See Attachment B: Guide to Conducting an Internal Financial Review.
The monthly treasurer’s reports shall be compiled and kept in the organization’s records for three (3) years. The year-end treasurer’s report shall be kept permanently. Bank statements, canceled checks, check registers, invoices, receipts, cash tally sheets, investment statements, and related documents should be kept for seven (7) years.
Attachment A: Recommended Financial Controls for School Support Organizations
- Annual budget - Develop, approve, amend as necessary and abide by an annual budget that at a minimum shows expected sources of income and line items showing the amount expected from each source, and expected expenses and line items showing the amount of each expected expense.
- Bank accounts – Use only FDIC insured financial institutions. Title accounts in the name of the organization using the organization’s EIN.
- Bank signatories - Require at least two signatories on the bank account at all times. Document in the meeting minutes the name and position/office title of the signatories.
- Bank statements/reconciliations – Require bank statements to be reviewed by at least one of the bank signatories PLUS one other officer without signature authority to ensure separation of financial controls.
- Purchase approval - Require all purchases on behalf of the organization to be pre-approved in the annual budget, or by appropriate vote of the board or membership, as provided for in the bylaws.
Bill payment – Pay all bills by check from the organization’s
bank account. Online or e-checks are permissible, however
all procedures for paper checks must be followed, including:
- Use sequentially numbered checks – all checks must be accounted for and held in the custody of an officer authorized by the Board, such as the Treasurer.
- Payments – must correlate to an invoice or receipt on which the check number and date paid are written. If a receipt or invoice is not available, an officer shall write and sign a description of what was purchased.
- Pre-signing – blank checks may never be pre-signed for any reason.
- Bank cards – If debit/credit cards are established in the name of the organization, a policy approved by the Board of Directors must be established that includes a list of the authorized users, daily/monthly/annual spending limits, and limits use to charges for the organization. No personal charging on the card by the authorized users shall be allowed.
Cash – All cash must be kept in a secure location, such as
in a lock box, and the following controls must be in place:
- Cash box. A cash box ledger shall be kept and monthly cash box reports, including starting balance, expenditures, additions and ending balance shall be provided to the organization’s officers/board of directors;
- Receipts. A receipt shall be provided whenever cash is turned over or collected; receipts shall be numbered and kept in a bound book, with one copy provided to the person turning in the cash, and one copy kept in the receipt book as a record. Alternatively, a receipt ledger on which the date, amount, and signature of both the giver and recipient of the funds may be used.
- Counting. Cash must always be counted by two individuals, on the day when the funds are collected, and at the site (i.e. school) where the funds are collected. A cash tally sheet showing the date and amount collected, and signed by the counters should be maintained. If the treasurer is not one of the counters, the treasurer should recount the funds, and counter-sign the tally sheet.
- Deposits. Cash should be deposited immediately into the organization’s bank account. A copy of the deposit slip shall be immediately forwarded and kept by the treasurer. The deposit slip should be cross-referenced against the cash tally sheet, and saved for the bank reconciliation.
Attachment B: Guide to Conducting an Internal Financial Review
School support organizations (booster clubs) should conduct a financial review of the organization’s financial practices each year. This review is intended to ensure that appropriate financial policies are in place, and that each organization is following these policies.
Step #1: Gather financial documents including:
Copies of all written financial policies
Copies of treasurer’s reports for the year (or other period) to be reviewed
List of all bank and investment accounts, including names of persons authorized to sign on each account
Copies of all bank and other financial statements for the period to be reviewed
Copies of all bank and investment account reconciliations for the period to be reviewed
Cash tally sheets
Cash receipts journal
Invoices, receipts and other documents
Documentation of any restrictions on the use of any particular funds or donor gifts
IRS letter documents including most recent Form 990, IRS letter recognizing tax-exempt status, and IRS letter assigning an EIN (employer identification number) to the organization.
Step #2: Review financial documents and processes:
- Check the organization’s EIN (employer identification number) as assigned by the IRS against the EIN used on the organization’s bank and other financial accounts. Make sure that the school’s EIN is not being used.
- Check names of persons authorized to (a) approve transactions and (b) sign checks, against:
- persons authorized to conduct these activities in the organization’s minutes; and,
- bank records indicating who is authorized as a signatory.
- Check to ensure that the same person(s) who sign checks are not the same/or only persons reviewing monthly bank statements.
- Check all bank reconciliations to determine that the beginning balance of one month is the same as the ending balance of the previous month. Also note whether the balance listed on financial statements is the same as the balance listed on the treasurer’s reports presented to the organization.
- Pick one month and perform a bank reconciliation using the original records. If you find a discrepancy between your reconciliation and the reconciliation provided by the treasurer or other person who performed the original reconciliation, research the discrepancy to find the error or explanation for the discrepancy.
- Count all cash in petty cash accounts to ensure that the count agrees with the books.
- Check to see if the organization carries fidelity bond coverage on people handling the organization’s funds; if insurance is not held, propose that the organization consider obtaining bonding coverage.
Step #3: Review income and receipts
- Determine if the deposits listed on the financial reports provided to the organization match deposits listed on bank statements.
- Check to see if cash tally sheets match the amount of cash report as received from an event on financial reports, and also match the deposit indicated on bank statements.
Step #4: Review disbursements
- Test to be sure that payments made were properly authorized – by a line item in the approved budget, an approved amendment to the budget, or an appropriate vote authorizing the expenditure.
- Test purchase orders to be sure that they were properly approved and match the actual disbursement or invoice.
- Review records to ensure that there is an invoice, receipt or other appropriate written documentation for each disbursement, and that the amounts match.
Step #5: Tax/information returns
- Review financial records to ensure that appropriate federal (IRS Form 990) and state income tax/information returns have been timely filed.
Step #6: Review financial control systems
- Check to evaluate whether financial duties have been appropriately separated. Although it can be difficult for small organizations to separate financial duties, certain separations are essential for appropriate financial controls. These separations protect both the organization, and the individuals handling the finances. Specifically:
- Individuals with signature authority should NEVER approve the transactions/disbursements for which they sign. All expenditures should be approved in an annual budget, as originally approved or amended, or by a vote of the board or membership as appropriate. All disbursements should be documented by an invoice, receipt or other appropriate written documentation.
- The individual(s) with signature authority may reconcile bank statements. However, at least one additional officer or director should review monthly bank statements, or bank statements may be included with the treasurer’s report to the board/membership.
- Finances should be reviewed annually by an audit committee that consists of two or more individuals who do not routinely handle the organization’s finances, such as by being a signatory on the accounts.
- Cash should always be counted by at least 2 persons at/near the time received, and then recounted by the treasurer or other individual prior to deposit.
Step #7: Review reporting systems to ensure adequate information is provided for the organization and its officers/directors to make reasonable decisions.
- Are reports from the treasurer timely and complete?
- Are financial policies, including separation of financial controls, being followed?
- Are all records being gathered (invoices, receipts, cash records, checks and disbursement records, bank records, treasurer’s reports) so that they can be reviewed as needed, and only discarded in accordance with the organization’s record retention guidelines?
Step #8: Write a report
The financial review/audit report should document at a minimum:
- Steps taken in the financial review
- Current fund(s) balance and balance sheet
- Comments, if any, on any concerns or discrepancies found and the audit committee’s recommendations to correct these concerns or discrepancies.