Signing contracts…Who, what, why, where and when
Annually, many PTAs enter into a variety of contracts, such as contracting with a band to provide live music for a school dance, or to purchase supplies for student spirit stores or for fundraising ventures. “PTA assumes full responsibility to comply with the terms and conditions of the contract and to pay the agreed-upon sum. The fact that the activity or fundraiser may not be a financial success or the PTA has insufficient funds to meet the obligation has no effect on the responsibility assumed.” (National PTA PTA Finance Quick Reference Guide).
Contracts are “legally enforceable agreements between two or more persons or organizations.” To find guidelines and written resources pertaining to signing contracts, refer to the California State PTA Toolkit, Finance, Policies and Procedures, Contracts; and National PTA’s PTA Finance Quick Reference Guide.
Before entering into a contract on behalf of PTA, consider the following:
- Has the membership approved the project?
- Does the president have authorization from the board/executive committee to negotiate a contract?
- Have all proposed contracts been received in writing?
- Are the terms and conditions understood by and agreed to by the board/executive committee?
- Do you need review by legal representation?
- Is the length of the contract limited to the term of the participating officers, not to encumber future boards?
If the vendor wants the PTA to sign a contract with a “hold harmless clause” the association should contact the California State insurance broker before signing. A hold harmless clause in the vendor’s favor places the responsibility on the PTA for injury or damages.
PTAs are required to obtain a “hold harmless agreement” and “evidence of insurance” from each vendor, concessionaire, or service provider who provides service for PTA projects or events. Instead of providing “evidence of insurance” to each individual unit, businesses may file an annual copy of coverage with the California State PTA insurance broker. A list of approved vendors is updated each month and is included in the insurance section of the California State PTA website.
When entering into a contract, the PTA president is responsible for the agreement and should clearly identify that it is the PTA entering into the contract and not the president or second elected officer as individuals. The signatures on a written contract should read, “____________ PTA (unit, council or district PTA) by: John Doe, president and Mary Smith, vice president.” (California State PTA Toolkit.)
PTA officers cannot enter into any contracts before they legally take office. Remember, if there is any question about the terms or conditions of the contract, the proper time to seek advice is before signing – not after.
Paying bills between association meetings
Bylaws For Local PTA/PTSA Units, Article VIII, Section 2c, states, “The executive board may authorize payment of other unbudgeted association bills not to exceed accumulative total of ($___ amount ) and ($___ amount ) between meetings of the association. Ratification of payment of these bills must occur at the next association meeting and must be recorded in the association minutes.”
What exactly does this mean? When you adopt the annual budget at the beginning of the fiscal year, you are NOT authorizing expenditure of the money. A budget is a financial representation of the estimated costs of planned activities and programs a PTA/PTSA expects to put on during a specific time period. It is a guideline for estimating income and expenditures. An expense is first estimated, then actuated, then the budget is adjusted accordingly, if necessary, as the PTA year proceeds. This budget must be presented to and approved (or adopted) by the general membership by majority vote at the first meeting of the fiscal year. A revised budget is usually presented mid-year and requires a two-thirds (2/3) vote.
As the PTA program continues, expenses are incurred. Each expense must be approved by the membership, either before the expenditure or after. Despite the best planning, expenses will occur between meetings and it is not always convenient to wait until the next association to pay the bill or to repay the person who spent the funds. Article VIII, Section 2c, provides the means to pay unexpected expenses without waiting for prior approval.
The treasurer must track bills paid without prior authorization between meetings to ensure the total amount does not exceed the limit specified in the bylaws. All bills to be paid must be presented with receipts. The amounts paid are then ratified by the membership at the next scheduled association meeting.
Further information may be found in your bylaws, the California State PTA Toolkit, and National PTA’s President and PTA Finance Quick Reference Guides.