The financial health of your PTA is crucial to the success of speaking up for all children and families. California State PTA provides guidance, support and training in board fiduciary duties and governance to support the work of your PTA.
PTAS ARE PUBLIC CHARITIES
PTAs are legally classified as “public charities” and are organized and operated exclusively for the exempt purposes recorded in Article II of all PTA bylaws. Public charities may not carry on any activities not permitted under Section 501(c)(3) of the Internal Revenue Code (IRC).
As public charities, PTAs:
- Are eligible to receive tax-deductible contributions
- Are generally exempt from paying federal and state taxes
- Must file federal and state Returns annually
- May not use its funds to benefit a private person.
Additionally, PTAs are noncommercial and may not endorse a commercial entity or engage in activities not related to promoting the Purposes of PTA. The name “PTA” may not be used in conjunction with commercial activities, including the promotion of commercial goods and services.
PTA OFFICERS ARE FIDUCIARIES
PTA officers and board members are PTA fiduciaries. A fiduciary is a legal and ethical relationship of trust. PTA members, supporters and donors trust PTA officers and board members to prudently:
- Carry out the purposes of PTA (per bylaws Article II)
- Protect the assets of the organization including cash, physical property, volunteers and the PTA’s reputation
- Disburse assets to meet the needs of the children and members served by the PTA
- Comply with federal, state and local laws
- Ensure that the association remains transparent
- Ensure continuity of the association.
Only a highly trusted PTA member may serve as a PTA fiduciary.
TEN FINANCIAL CONTROLS FOR ALL PTAs
Internal controls are the basic policies and procedures PTAs use to safeguard their assets, deter and detect errors, prevent fraud and theft, ensure accuracy, and produce reliable and timely financial reports:
- Association members elects a treasurer and other financial officers annually
- Association members approves all PTA programs, activities, fundraisers and expenditures
- The association adopts and monitors the PTA budget, approving changes as needed
- A minimum of two trained PTA members receive, count and record cash and checks received
- Following approval by the association and executive board, the president and secretary sign a Payment Authorization Form for each and every PTA expenditure
- Check-signers are not related by marriage or by blood
- Two authorized check-signers sign every PTA check
- The PTA financial reviewer or another trained PTA member opens and inspects monthly Bank Statements
- The treasurer and other financial officers report “Income Statements,” “Budget Updates,” and other financial reports at each meeting of the association and executive board
- The PTA board orders a midterm and fiscal-year-end financial review annually, which are reported to the executive board and association.
Adoption of the budget does not authorize the expenditure of the money. Plans must be presented to Executive Board and the Executive Board must authorize expenditures. Amend budget by a vote of the association as needed. Refer to the California State PTA Toolkit.
PTA FINANCES AND EMAIL: PHISHING SCAMS
If you get an email from a fellow PTA officer asking to wire funds, do not send money.
Both email-phishing scams and crypto ransomware/malware are increasingly common and can have devastating impacts on businesses and non-profit associations of all sizes. As a non-profit association, PTA can be vulnerable to these types of cyber crimes at all levels and, in fact, we have heard reports of email-phishing scams happening to local leaders.
Email-phishing scams are typically fraudulent email messages appearing to come from legitimate enterprises (e.g., your PTA treasurer or president, your Internet service provider, your bank). These messages usually direct you to a spoofed website or otherwise get you to divulge private information such as bank account information or account passwords. The perpetrators then use this private information to commit identity theft or trick you to wire money.
Establish communication “backchannels” such as text message or phone calls to verify the authenticity of the request. Additionally, remember to keep your personal and PTA computer systems and firewalls up-to-date to minimize the potential for viruses to inflect your system with malware.
- California State PTA Online Toolkit –Finance Policies and Procedures
- Osterman Research White Paper –Best Practices for Dealing with Phishing and Ransomware
- Tipwire Video – Tips to Protect Yourself from Phishing
It is important to note that while PTAs help raise significant resources for schools and children, fundraising is not part of the primary mission of PTA. Often times PTAs must fundraise in order to support the vital programs and services on campus that support student learning and family engagement.
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