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Finance & Budget Treasurer

Dealing With Bad Checks

Bad checks, particularly if your group receives them in payment for fundraising products, can be costly. Parent groups typically are liable for full payment on all fundraising products purchased, regardless of whether you are able to collect from the buyers.

You can avoid most bad-check problems by processing fundraiser payments before ordering merchandise. But fundraising companies say you’ll generally get more orders if people are allowed to pay on delivery.

The first step in dealing with bad checks is an ounce of prevention. If your group accepts checks, you should consider adopting check acceptance policies and procedures. Then, only accept checks that meet the guidelines. For example, it’s a good idea to implement these four policies:

1. Require all checks to include the name, address, and telephone number of the person signing the check.

2. Accept only checks with a current date; do not accept post-dated or pre-dated checks.

3. Adopt a policy that requires the check writer to pay a service charge, in addition to any bank charges, when a check is not honored.

4. Refuse to accept additional checks from people who have written bad checks and not made restitution in a timely manner. Restitution should include paying any service charges plus bank charges due.

Inform all parents and students about the policy. Let them know that they may make payments to the PTO by check only if the requirements are met. If possible, assign a person to review all checks prior to ordering the products or services being paid for. Double-check that only checks meeting the requirements are accepted for payment.

Despite your best efforts, you may receive a bad check or two. In most cases, these will be simple mistakes. Handle them quietly by notifying the check writer by phone or e-mail. There may be times, however, when you want to take legal action against the bad-check writer.

Most states have some form of check deception law. These laws make it illegal for a person to write a check that he knows will not be paid by his bank. Writing bad checks is usually a misdemeanor unless the dollar amount is fairly high—several thousand dollars in most states.

Often, willingness to pay the amount of the bad check plus any service or additional fees is a defense to a charge of writing a bad check. Therefore, before attempting to bring a claim against a person who writes a bad check, even in difficult cases, it is a good idea to send a written notice by certified mail, return receipt requested. The notice should do these three things:

• Identify the check number, amount of check, bank on which the check was drawn, date on which the check was written, and the person or organization to whom the check was made payable.

• Request that arrangements be made to make payment on the bad check and any additional charges due, within a set time (often 10 days).

• Cite the state check deception law.

Keep a copy of the notice for the PTO’s records and an additional copy to file with any legal action that may become necessary. If the check remains unpaid after the notice period, take the check, the copy of the notice, and other documentation to your local clerk of court. The staff should assist you in filing a complaint.

It’s smart for PTOs to develop good financial policies and practices, considering the large amount of money groups typically handle. Developing a check acceptance policy is one step toward limiting the headaches bad checks can bring.

Sandra Pfau Englund is an attorney specializing in PTOs and other nonprofit groups.

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