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PTAs must maintain their nonprofit status as governed by the Internal Revenue Service Code section 501(c)(3). Within the language of the code, the IRS does permit expenses that are not directly related to the primary purpose of the PTA if the expenses are not of a significant amount.  Five percent is the recommended limit to be used as a guideline for PTAs for all hospitality expenses, including staff or volunteer appreciation based on previous definition by the IRS. It is important to budget appropriately when considering all PTA expenditures, and all expenditures must be approved by the membership.

The PTA may provide hospitality for association, executive board, and committee meetings; staff appreciation; volunteer appreciation; and other events requiring refreshments, food, paper goods, certificates, or decorations. The PTA may choose to:

• Purchase nonalcoholic drinks and/or snacks
• Solicit donations from businesses or members, or
• Store supplies to make coffee and/or punch, etc.

The cost of meals or beverages provided for volunteers during the course of their work; e.g., while processing fundraiser orders or counting money after an evening program, are not considered to be hospitality. Such expenses must be budgeted and approved by the association in advance. The expenditures are accounted for as a cost of doing the program or fundraiser on which they are working; e.g., wrapping paper sales or a fall festival.

A PTA-sponsored Academic Enrichment Program designed as an extension of the school curriculum offers students an opportunity to expand their knowledge and academic experience.

Prior to implementation of any academic enrichment program the Insurance Guide must be consulted to ensure compliance with sanctioned activities. For insurance purposes, an enrichment program is intermittent in nature and does not continue on a daily basis over the duration of the school year. For any questions regarding general liability insurance, contact the California State PTA insurance broker whose number can be obtained from the Insurance Guide.

If a unit, council or district PTA chooses to sponsor activities that the insurance underwriter has not listed, the unit, council or district PTA must contact the California State PTA insurance broker and may have to purchase the necessary additional participant liability insurance for that activity, and the entire association (California State PTA and its unit, council and district PTAs) must be named as an additional insured. Please contact the California State PTA insurance broker for requirements for additional insurance. (Refer to the Insurance Guide.)

A special enrichment program study committee should be appointed by the PTA president to determine if a need for a specific academic program exists and to assess its potential value. A program must be acceptable not only to the PTA association but to the principal as well; therefore the committee should include the school principal, a PTA financial officer, a faculty member and other interested persons. Consideration should be given to the feasibility of the local Parks and Recreation Department providing such a program rather than the PTA.

TOPICS FOR CONSIDERATION

The program must be academic in content with defined goals. The PTA must monitor and evaluate the program to ensure that the goals are being met.

The instructor may be a volunteer or a paid professional. Qualification guidelines must be established for the instructor, and PTA may not hire a voting member of the board as an employee for enrichment programs.

If the instructor is to be paid, the budget must reflect this expenditure. There must be sufficient income from other sources, such as fundraisers or program fees, to meet this expenditure.

A fee may be charged. However, fees should be minimal. All interested children must be served and no child may be excluded because of inability to pay any fee.

The PTA treasurer may handle the bookkeeping or there may be a need for a project financial chairman, who provides written reports given at the regular meetings of the executive board and the association. Checks can be signed by designated elected officers only. All procedures outlined in the Bylaws for Local PTA/PTSA Units for the expenditure of funds must be followed.

The program should be held at a time when all interested students may attend, including those on bus schedules and those residing outside the school attendance area and those students “off-track” when the year-round school calendar is being followed.

Consideration must be given to where the program will be held and the site’s accessibility for all students.

Compliance with the Americans with Disabilities Act requires that the PTA make reasonable accommodations necessary to make the class accessible to students with disabilities. This may include determining that a private location or specialized medical training is available for the handling of student’s personal needs.

The PTA must be responsible for defining and implementing safety and emergency procedures.

When it has been determined that an enrichment program will benefit all children, the committee shall bring its recommendations, including how the program will be operated, to the PTA executive board for approval and recording in the executive board minutes.

In order to continue the program, it must be approved each year by the association.

If the program needs approval by the school district administration or the school board, the PTA must proceed accordingly to obtain the appropriate authorization. The committee responsible for coordination of the program must make a progress report at each executive board meeting and, periodically, to the association. Approval dates must be recorded in the association minutes.

If the program is held before or after school, on or off school grounds, a signed parent consent form must be on file for each student. There must be phone access for emergency needs. The instructor must use procedures established and monitored by the PTA for checking children in and out of the program. The insurance underwriter requires there be at least two unrelated persons 18 or over in attendance at all times.

It is strongly recommended that PTA fund an academic program by giving the monies to the school district as a gift to the school, in accordance with school district policies, instead of the PTA hiring instructors. If PTA votes to hire an instructor, refer to PTA as an Employer.

To reduce risk of exposure and protect California State PTA, California State PTA has determined that sponsoring certain programs is not permissible for PTAs and is not to be covered under the California State PTA General Liability Insurance Policy. Refer to the Insurance Guide for a listing of prohibited activities.

When considering and carrying out large fundraisers, keep the following concerns in mind:

• Is the fundraising project related to PTA’s educational, charitable and philanthropic purposes as a tax-exempt organization?
• Will the proceeds of the fundraiser be designated for specific approved projects that meet the purposes of PTA? Do not hold a fundraiser if the PTA has not determined how the funds will be spent.
• Does the project violate PTA’s noncommercial policy?
• Does the association have enough volunteers?

 

Many PTAs fundraise by ordering a product from a specific vendor. When the product arrives at a school site, the PTA must maintain product inventory. The PTA executive board must ensure that inventory records are maintained and recorded following all PTA financial procedures. PTA membership approval is needed for each fundraiser before ordering product. Any agreement between the PTA and vendor is a contract that must be honored. Carefully document items ordered. Treat inventory like cash. Just like a cash verification form, have two people count product items upon receipt, reconcile against the order form, packing slip and invoice, and sign an inventory summary sheet. If there is a discrepancy, contact the vendor immediately. Pay all invoices promptly. Inventory should be stored in a secure lockable location. Track all sales in detail. Document when items sold are picked up or delivered to customers. If a customer complains, handle it promptly and refund monies if necessary. Periodically count inventory to ensure accuracy. Retain all records for auditor. Write a committee report at the end of the fundraiser documenting the details of the fundraiser. Contact the district PTA immediately if there are any problems.

The standard PTA insurance does not generally cover losses to stored inventory in case of damage. You should consult AIM, the California state insurance broker, if you think you will need additional coverage for property storage.

Fundraising events must be approved in advance by the executive board and association. Approval should be recorded in the minutes. Recruit enough volunteers to conduct the project. Assign each volunteer specific tasks and develop a work schedule. Solicit donated goods and services. Clear the dates with the school and reserve needed facilities and equipment. (See Event Planning Worksheet; Preliminary Planning)

Make firm arrangements with vendors. Obtain all necessary permits. Be sure each vendor is fully covered by his own liability insurance and Workers’ Compensation insurance. Have vendor sign a Hold Harmless Agreement and obtain a copy of the vendor’s certificate of insurance.

If adjustments are needed, the budget can be amended by a two-thirds vote of the association. It is recommended that the treasurer provide the executive board with a budget-to-actual comparison report at least quarterly.

In the spring, the board-elect develops the budget and presents the proposed budget for adoption to the current executive board and the membership at the last PTA meeting of the year. The association approves the release of any funds required prior to the next association meeting in the fall. This allows the board-elect the ability to cover routine summer expenses as outlined in the bylaws.

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

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

Carry-over Funds: Carry-over funds represent the amount which is set aside to begin operations at the beginning of the next PTA fiscal year, prior to the onset of fundraising activities. To calculate the amount of this reserve, review the prior year’s Annual Financial Report to determine which operation or program expenses require funding during transition, and estimate costs for these items in the new fiscal year.

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

Donations: PTAs may ask community supporters to donate funds to the PTA for general use or for a specific program.

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

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

Insurance: Participation in the California State PTA insurance program is required of all PTAs in California. Budget an amount that is similar to the actual expense from the previous year’s premium plus 10%. Units are notified of the premium amounts by October 1. The premium must be submitted to AIM by December 20, or a late fee of $25 will be assessed by California State PTA.

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

Membership Envelopes: The purchase or printing of membership envelopes is listed as an expense.

Reimbursable Expenses: PTA should reimburse executive board members for any approved out-of-pocket expenses. PTA funds may not be used for personal expenses, gifts, personal acknowledgments, or personal use items. Appropriate out-of pocket expenses include photocopies, office supplies, etc. Unit, council and district PTAs should budget for out-of-pocket expenses and ensure the budget is shared equitably among officers/chairmen in accordance with job responsibilities. Members should be reimbursed upon submission of a signed Payment Authorization/Request for Reimbursement form. Receipts must be submitted for all reimbursable expenses. Unit, council and district PTAs may not budget an officer’s allowance. The IRS considers an allowance as miscellaneous income that must be declared by the recipient as such and will be taxed accordingly.

Staff/Volunteer Appreciation: PTA resources may be used for hospitality for staff/volunteer appreciation as long as it does not represent a significant amount. “Not of a significant amount” was previously defined by the IRS as an amount that does not exceed 5 percent of the nonprofit organization’s annual budget (see Staff Appreciation). PTA funds cannot be used to purchase personal gifts for staff or volunteers, including gift cards.

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

Unallocated Reserve: Unallocated reserve funds represent the amount remaining after making allocations for budgeted programs and activities and may be used to cover any unexpected or unplanned expenses in the current fiscal year with approval of the association. The budget should be amended to reflect funds transferred from Unallocated Reserves to other expense categories.

Restricted Reserve: In planning the budget, it is permissible for PTAs to have a savings account to hold funds for more than one year for the following reasons:

• Efficient management of restricted funds;
• A PTA program requires large donation to the school and the school district requires advance notice if the PTA cannot continue to fund the activity; i.e., computer equipment or teacher aide salary; and
• Monies to finance long-term or unexpected but approved projects or programs, i.e., playground project.

As a guide, the savings account reserve should not exceed one-half of the association’s budget for an average year.

The budget committee, which is appointed by the president (or president-elect if the budget is being developed for the new term in advance of taking office), has the responsibility for developing the annual budget. The treasurer (or treasurer-elect if the budget is being developed for the new term in advance of taking office) is designated as the committee chairman. The budget committee may include financial officers, the principal or other designated representative, the president (ex officio), and others. The committee cannot develop the budget until the board-elect has determined the goals and programs for the upcoming year. The executive board should have surveyed the school community before developing the goals and programs.

Once the goals and priorities are established, the committee should:

• Know the goals the association is trying to achieve for the year and plan finances accordingly.
• Invite board members to submit suggestions.
• Review the program(s) proposed by the program committee, including detailed expense projections.
• Review past budgets, income and expenditures.
• Estimate probable income from all sources.
• Balance probable income with probable expenses.
• Determine the amount of carry-over funds to set aside to begin operations at the beginning of the subsequent PTA fiscal year, prior to the onset of fundraising activities.
• Unallocated Reserve funds represent the amount remaining after making allocations for budgeted programs and activities and may be used to cover any unexpected or unplanned expenses in the current fiscal year.

Members must approve all expenditures. If the board decides to spend monies on unbudgeted expenditures and then presents a bill for payment or ratification, the membership may choose not to pay the bill(s). If bills are not approved or ratified by the membership, the executive board is personally liable for any PTA funds owed. If payment for a bill not approved or ratified has been made from the PTA account, the executive board must repay the funds.

Spending funds on unbudgeted items between meetings of the association is limited by an amount specified in the bylaws.

Guidelines for the expenditure of unbudgeted funds are as follows:

• Eight or more association meetings per year –up to $500.
• Five to seven association meetings per year –up to $750.
• Four or fewer association meetings per year –up to $1,000.

Consult the bylaws for the specific amount allowed. The payment of these bills must be ratified at the next association meeting and recorded in the association minutes.