Budgets & Financial Records
Where do I find the budget and financial records?
The president and incoming treasurer should obtain the budget and financial records from the outgoing treasurer. Review those records with your officers and make note of the things that must be done to start the new school year.
What is a budget?
A budget is an outline of estimated income and expenses for a twelve-month period based upon the unit’s goals or plans of work for that period. Refer to the sample budget on page 18 to guide you in preparing your unit’s budget.
Who prepares the budget?
Your bylaws and/or standing rules should state who is on your budget committee. The budget committee is responsible for preparing the budget. Best practice for the budget committee is to have five members consisting of incoming and outgoing officers or chairmen (be sure to include the incoming and/or outgoing treasurer and fundraising committee chairman). The principal should serve in an advisory role and cannot determine what is and is not in a PTA budget. Again, check your bylaws for specific make-up. The outgoing treasurer should have the previous year’s end of year totals, current budget and year-to-date totals on all budgeted line items. These numbers will be crucial to developing a new budget.
How and when is the budget adopted?
A new budget is adopted annually, best practice is to have the committee meet and develop the proposed budged by April 30th and then presented at the May annual meeting for approval. The treasurer (usually serves as the budget committee chairperson) presents the budget to the executive committee and board for consideration. It must be presented to the PTA membership for approval. Any expenditure not provided for in the adopted budget, must be submitted to the voting body before money is spent. A majority vote of the members present is required for adoption.
How are changes made in the budget?
Since the budget is only an estimate of the planned expenditures for the year, it may be necessary to amend it during the year. Amendments require a vote of the members at any regular meeting or at a special meeting called for that purpose. To amend something previously adopted requires prior notice and a majority vote, or a two-thirds vote without prior notice.
Your PTA Annual Financial Review
What is an annual financial review (audit), and how often does one have to be done?
An annual financial review (audit) is a financial review of the PTA’s books. It must be conducted annually, at the end of the fiscal year, or whenever the treasurer or other authorized signers on the account leaves office.
Whose responsibility is it to see that an annual financial review (audit) is conducted?
The outgoing treasurer (as reminded by the outgoing president) should make arrangements for an annual financial review (audit) to be done as soon and expeditiously as possible after they leave office. The incoming president should coordinate with the outgoing treasurer and president to ensure this happens at the end of the fiscal year or as stated in the bylaws.
Who can perform an annual financial review (audit) the books?
Your unit does not have to hire a CPA, and generally speaking, should not have to pay for an annual financial review (audit). An individual or committee of no fewer than three people can perform the annual financial review (audit). (Check your bylaws.) The key is to have a review of the books conducted by someone who is familiar with proper PTA financial management. The reviewer(s) cannot be one of the signers on the bank accounts, or related to one of the signers. Contact your council, regional director or the state office for further guidance.
What do we do with the annual financial review (audit) report when it is completed?
The treasurer and/or the annual financial review (audit) committee presents the annual financial review (audit) report at the next executive committee, board and general/unit meetings, after which it becomes part of the minutes, the official records of the association. You then need to send a copy to the state office by December 1st.
FREQUENTLY ASKED QUESTIONS ABOUT FINANCIAL MANAGEMENT
When should we change the signers on the PTA bank accounts?
Go to the bank with an outgoing signer as soon as school ends or per bylaws, and whenever one of your account signers is no longer serving as one of your officers. Bring a signed copy of the minutes from the election meeting with you. Be sure to complete and file Form 126 with the Missouri Department of Revenue to update your contact information.
What is a fiscal year?
The fiscal year is the twelve-month period used for reporting to the IRS (your dates are listed in your bylaws). All PTA’s are required to file with the IRS every year. File the 990-N electronically if annual gross receipts were less than $50,000. File the 990EZ with Schedule A or 990 with Schedule A if gross receipts were more than $50,000. All forms must be filed with the IRS by the 15th day of the fifth month after the end of the fiscal year.
Fiscal Year – Budget Year – School Year -Calendar Year – What is the difference?
It is easy to get confused with all of these different “year” ends.
- Fiscal Year is determined by your bylaws for IRS reporting purposes. It begins on the first day of a stated month and ends on the last day of a stated month covering a twelve-month period.
- School Year runs from the first day of school in August through the last day of school in the spring. New officers usually begin their term officially at the end of the last day of school in the spring. Obviously, this is different if you are a year-round school. Check unit bylaws for variations.
- Budget Year is determined by when the annual budget is approved, and is in force for twelve months from that date. Best practice is budgets should be approved at May annual meeting and cover your fiscal year.
- Calendar Year is January through December.
Does the fiscal year have to be the same as the budget year or the officers’ term of office year?
Not necessarily. Best practice would say that your fiscal year and budget year should be the same but really do not have to do with the term of office unless stated in your bylaws.
How much money do we need to run our PTA?
Start by identifying what programs and projects in your plans of work need to be funded. Do not raise money first and then decide how to spend it. A PTA should raise the amount of money needed to meet its proposed budget. PTA is an educational organization, not a fund-raising organization. Choose wisely the fund-raising activities that best meet your PTA’s needs.
Is it ever okay for PTAs to pay salaries of school personnel?
Absolutely not! This is a school system responsibility under all circumstances.
What do we do with unspent funds when school ends? Should we turn them over to the principal?
All funds can only be spent as approved in the budget. If they are not spent at the end of the school year, then they should be carried over to the following year’s budget. The officers cannot arbitrarily decide how to spend or use up funds at the end of the school year. In addition, you should never turn PTA funds over to the school.
Is there a limit on the amount of funds that can be carried over from year to year?
No. There is no limitation on amounts carried over from year to year. However, it is good to carry over at least 2-4 months budget to start the year off soundly.
What does the PTA do for money during the summer?
The budget in place at that time will dictate what is approved and what can be paid. If expenses fall under an approved line item, they should be paid or reimbursed. If they are not covered in the budget, then they cannot be paid or reimbursed. If your bylaws state that the new officers’ term of office begins at the end of the school year, then the new officers are responsible for making such decisions during the summer based on the budget in place.
Can the outgoing officers commit how funds will be spent in the next budget year?
Again, best practice states that the budget should be approved at the May annual meeting. Having input from incoming and outgoing officers/chairman will ensure a well balanced budget.
Can the principal tell the PTA how to spend the PTA’s funds or what fund-raisers to do?
No. Only the PTA decides how PTA funds will be raised and spent and the principal has but one voice as any other member has. However, a principal can limit PTA activities within a building, particularly if it interferes with student learning. All PTAs are strongly encouraged to build a healthy relationship with building principals in order to work together to best meet the mission and purposes of PTA.
With the reduction in the state’s funding for education and local school system budget challenges, shouldn’t PTA offer to fill the gaps…by buying books, desks, equipment, and even paying salaries?
Absolutely not! More now than ever PTAs need to advocate to secure adequate funding for education and for all children. PTA is not there to buy the basics or to create inequities from one school to another.
Is attending training and convention a “legitimate” PTA expense?
YES! Attending training is an appropriate PTA budget expense. Verify that your budget allocates sufficient funds for members to attend these important events (e.g., National or State Convention, state leadership training events, Legislative Events and Regional Conferences) during the year. Have attendees submit a brief oral or written report from the activity to help create accountability.
How many fundraisers are allowed annually?
PTAs should use the 3-to-1 Rule: for every fundraising activity, there should be at least three non-fundraising projects. Refer to the Financial Management section of this publication, Treasurer’s Section of the Missouri PTA Tool Kit and National PTA Money Matters Quick Reference Guide for further guidance.
Does our PTA need insurance, and if so, what kind?
YES. Ask yourself and your unit’s volunteers, “Are we willing to volunteer without these protections?” Every PTA should have four types of insurance:
- Fidelity bonding insurance covers individuals handling funds and PTA financial assets.
- General liability coverage protects PTA members in the event they are held legally liable for bodily injury or property damage resulting from a covered event. For example, if someone gets hurt at your fall festival and sues.
- Directors and Officers (D&O) insurance provides protection if an officer/director is sued for failure, or alleged failure, to live up to their responsibilities and duties assumed in their PTA position.
- Property insurance covers fixed assets; inventory and other property owned by a PTA, such as a storage unit, its contents, fundraiser orders pending delivery, etc.
Where can I get more information about PTA financial management and proper procedures?
Refer to the Treasurer’s Section of the Missouri PTA Tool Kit and the PTA Money Matters Quick Reference Guide. In addition, updated resources are posted on the Missouri PTA website and the National PTA website. You should visit them often to make sure you have the most up to date information. When you have a question, never hesitate to contact your council treasurer, regional director, the state treasurer or the state office. Proper management of your PTA’s financial assets and good name is among your unit’s highest priorities and is critical to the success of your unit’s work for children.
What does my unit or council need to know about distribution gift cards?
According to the IRS, a gift card (if it is for general purchase) is the same as cash and cash (threshold is over $25.00) is considered taxable income. If the gift card is something specific (like a Honey Baked Ham, Starbucks Coffee, Sonic Route 44), that is not considered taxable income.
A PTA unit should not purchase a gift card to hand to a member to shop for the PTA. PTA advises it is not a best practice to reimburse or pay for anything with cash. Remember, the IRS views gift cards the same as cash.
Suggested Best Practices:
Like all decisions, it is important to ask how this applies to the PTA purposes and mission.
Rather than using the gift card to assist a teacher in purchasing supplies for his/her classroom, it is recommended that the PTA unit advise that reimbursement will be made after the original purchase and reimbursed for up to $XX.XX amount. Receipts are required for reimbursement. This now becomes a reimbursed expense and is not
considered income.
PTA members purchasing supplies for a PTA function should purchase them in advance, provide receipts and be reimbursed, or an approved check signer accompany the PTA member when purchasing.
Gift cards should not be purchased as a gift for an individual (including teachers or other school staff). Donations for or of gift cards can be accepted and used for events.