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5 Smart Financial Controls

Avoid unnecessary headaches with these practices to keep your assets safe and your records clean and up to date.

by Christy Forhan

A few financial controls can make the treasurer's job much easier, keep the PTO's money safer, and ease a lot of stress. Here are five smart practices for any parent group, whether your budget is $1,000 or more than $100,000.

1. Require Two Signatures

Can you write a PTO check on your own? Do you need a second authorized signature? No? Then you are accepting an unnecessary risk and a big personal burden. Just one person has the power to spend the PTO's hard-earned money. Now is the time to consider tightening up your PTO's check-signing policy. Having two officers or, as in some PTOs, an officer and the principal, sign every check ensures that two leaders know—and accept the responsibility for—how the money is being spent.

Get together with your executive board to decide who should be the authorized signers. Then visit your bank. Update the account signature card, if necessary, to add the new authorized signers. The bank may also need to update your account record to reflect that two signatures are now required on your checks. The bank may allow you to start using a second signature with your current checks. In the future, when you need to reorder checks, you can request that the printer add a second signature line. In our PTO, the president, vice president, and treasurer are authorized to sign, though only two at once.

If you adopt this policy, it might be tempting to have an officer sign a few checks just in case. Don't do that. Never sign a blank check, and never ask another officer to do so. It's really bad practice. It means the officer is authorizing the expenditure of PTO funds without knowledge of the expense. This negates the dual signature control and places an unfair risk on the officer and an extra burden on you.

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2. Maintain a Paper Trail

Have you had a conversation like this one?

"Hey, PTO Treasurer! Oh, I'm so glad I caught you (as you're racing out of the grocery to get home in time for the bus). I've been carrying these receipts around from the fall festival for a while, and I've been meaning to drop them off to get reimbursed. They're in here somewhere. Here they are. Thanks!"

And you are handed a crumpled wad of receipts as your friend disappears into the produce section.

Here's a different ending to this conversation.

"I'll be glad to cut you a check. Just fill out a yellow Reimbursement Request Form and attach your receipts. I'll send a form home with your daughter tomorrow or you can pick one up at the school. After you turn it in, I'll mail you the check."

And now the responsibility is where it belongs, on the volunteer's shoulders until she can provide the proper information needed to back up the reimbursement.

Preparing a separate supporting document for each transaction might, at first, seem like overkill. After all, vendors provide paper invoices, and volunteers turn in paper receipts for reimbursement. Isn't that enough?

Look at your files for the answer. Can you easily retrieve the receipt that supports a particular check? Is it easy to figure out what activities generated the money in a certain large deposit? Are the receipts and deposit tickets scrawled with notes or stapled to little scraps of paper? Have you ever had trouble tracing transactions during your audit? If so, you can benefit from paving the paper trail with standard control forms.

A paper trail for each transaction ensures traceability and visibility of every PTO dollar, develops historical information that is useful for future planning, facilitates your annual audit, and keeps your files neat. Plus, the information on the control form can remind you of the steps to properly complete the transaction: secure two signatures, assign budget category, log transaction, mail reimbursement check, etc. Use control forms for a while and they will naturally become part of your standard operating procedures.

There are three major financial transactions for which you can design a unique control form. All the forms should have a place for treasurer approval, date, budget category, and a place to check off that the transaction has been logged. The rest of the information varies based on the type of transaction.

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Comments

  1. Posted by - April on Sep. 30, 2014

    Second issue is that this PTO was kinda ran to the ground two years ago and the current president was forced into being the president by the means of being the last person standing and unfortunately the last treasurer was dishonest and didnt keep correct books. Anyways, I wanted to know why we havent applied to be a 501c and she was worried that since the books havent been audited due to what the last treasurer did and she didnt know about needing to pay taxes on any fundraisers over 5k that what money she has been able to raise will get a lien put on it and the children will not get a prom and fundraising will be halted for a year, which has happened to another local school. Anyone know what I can do to start working on straightening this out?? Ethically and legally?? I dont want to walk into something that is going to blow up in my face.....
  2. Posted by - April on Sep. 30, 2014

    HI, I am new to the PTO and I am running into several problems! First, from what I understand the Principal is trying to run the PTO and the way he is doing it is causes me some concern. Apparently several times the PTO has been approached by departments at the school to purchase items the kids needed, like soccer balls, and when approved the principal went to the athletics department and told them they didnt need it and not to let us order the equipment for them. Why?? Because he wants us to spend the money on teacher appreciation breakfasts/luncheons only or whatever other projects he approves of. I have a suggestion of putting into the bylaws that a portion of the funds can only be used for departments to requesting items they need to benefit the students. I am also suggesting that it be voted upon that we only sponsor one teacher appreciation breakfast/luncheon a semester up to a certain amount. Can this be done?
  3. Posted by - Concerned on Jan. 11, 2012

    We are a PTO, I am currently looking up our current bylaws to find answers to some nagging questions. I have read the bylaws on this site and know that we have changed some bylaws to better fit us. My question is... Are we not supposed to have members (not just officers) vote on where large amounts of monies are to be spent? There are only 4 officers at this time and just recently 2 of us learned that 2 others agreed to pay for a project that the Principal asked them to support. The 2 of us had no clue what the project was until the money was promised and we were informed much later, I'm assuming this is inappropriate and would like some guidance on how to approach this situation.
  4. Posted by - Malden on Sep. 03, 2010

    Our PTA has just switched over to a PTO. I am the treasurer and we are in the middle of a school fundrasier that normally brings in at least $16,000. I have been writing receipts to the children as the money come in. However, I have been told several times by a few committee members that there is no need to write receipts and that I am wasting my time. Although, I am volunteering for this position I do take it seriously and realize that I am the one ultimately responsible. It would be good to hear what some of you think.
  5. Posted by - Stacey on Jun. 23, 2010

    Regarding whether teachers/administrators should have a vote on the PTO budget, I would ask you is your group a Parent Group or a Parent-Teacher Organization? If it's a Parent Group, and the teachers & admin are not members, then they should not have a say. If, however, it's a Parent-Teacher group, they should. Our PTO bylaws state that every parent and staff member of our school is an automatic member, and dues are optional. To deal with any imbalance of parents vs. teachers, we have a few teacher reps, exec officers and committee chairs who make up our PTO Board and handle the majority of the decision making, like setting the budget. Then whoever attends the general meetings vote to approve or disapprove. If you don't consult with staff, it's really impossible to know all the needs of the school and the important ways the PTO can make a difference for the kids.
  6. avatar

    Posted by Vicky128 on Jan. 18, 2010

    Our PTO allocates $100.00 to every teacher who submits receipts to our board regarding expenses they make that benefit our children. We budget approximately $3500.00 yearly for this. Is this ok to do? Do we have to file any tax forms at a PTO to do this? We all love to give our teachers monies they use for the classrooms that benefit our children - but I'm concerned about 990 tax forms we may have to complete.
  7. avatar

    Posted by Craig on Oct. 28, 2009

    Hi Julie,

    You're certainly doing the right thing by insisting on receipts. You work too hard at fundraising to be so casual with how the money is spent. On top of that, how would parents who contribute feel if they knew that the money was being used without a real system in place to keep track of it? Because PTOs are all independent, there are no national guidelines. But there's no doubt that turning in receipts is a best practice. The real risk is that money can easily be misspent, even for personal use, because you don't have simple checks and balances in place.

    Craig
  8. Posted by - Julie on Oct. 14, 2009

    Hi,

    I just took over as treasurer for our pto. I am frustrated because they are telling me that there are no receipts available for years past and for the current fiscal year I have not received all of the receipts. I am constantly being told to stop "stressing" over this because "this is a very laid back group". I am also told that they are not filing IRS returns so they are not subject to the same rules as other organizations and non-profits. I used to run a 501(c)3 non-profit and I realize that the scale for a PTO is very different but I believe that the same best practices should apply. Could you point me to some legal or pto nationwide best practices documentation which shows that you must keep receipts for items purchased and for all cash receipts.
  9. Posted by - Mary on Jun. 04, 2009

    Regarding Michelle's post... Our teachers and administrators do NOT have a vote regarding how the money is spent. The funds belong to the PTO and we strongly feel that they cannot tell us how to spend our money. We consider and discuss their requests/suggestions at exec. board meetings however, they do have a vote. The PTO is operated by parent volunteers and funded by parents dues/fundraiser support. Therefore, the parents should decide how to allocate the funds to benefit their children and the school. Welcome feedback and suggestions but I would say no to a teacher vote.
  10. Posted by - Craig Bystrynski from PTO Today on Jun. 01, 2009

    Hi Treas -- Legally they have no "right" to audit your group. You are an independent organization separate from the school. However, the district does have the power to make life very difficult for you -- for instance, preventing you from sending information home through the classrooms/students. The question you must weigh is how important it is to take a stand on this issue and what the consequences are likely to be. Good luck! -- Craig
  11. Posted by - Treasurer on Jun. 01, 2009

    I have just gotten word that our School District plans on auditing our parent association. Can they do this? Do they have any right to examine our books. We have set up our own audit committee to review the books. We are a 501 3c non-profit.
  12. Posted by - Craig from PTO Today on May. 15, 2009

    Hi VJ -- Groups that gross less than $5,000 aren't required to file. If you sell $7,000 worth of candy for your fundraiser and half of that goes to the fundraising company, meaning you raised $3,500, you still have to file. (Because your gross is above $5,000., even though your net is below.) If your gross is above $5,000 but less than $25,000, you can file form 990-N, which is actually a postcard. From $25,000 to less than $100,000 you can file form 990EZ, which is less involved than form 990. If you gross $100,000 or more, you must file form 990. Hope this helps! -- Craig
  13. Posted by - VJ on May. 14, 2009

    Does anyone know if there is an IRS threshold under which a PTO won't have to file the 990 form? We are a new PTO and we would like to begin fundraising 1 month before the beginning of our fiscal year.
  14. Posted by - Nancy on Mar. 20, 2009

    I would disagree that a PTO should "save or invest" a large amount of money long-term. If there is money left over in the budget, the PTO should vote to either roll the money over to the next school year's budget or to spend it. It's great that you have money left over. The way schools are not fully funded, it's surprising you couldn't find something to direct the funds towards.

    Because PTO's don't have paid staff or really any monthly expenses, they don't need to keep a permanent reserve/emergency fund, like a home or business. Have you asked your parents about having this reserve? What are their expectations about when the money should be spent?

    I definitely wouldn't invest the funds in anything that has risk involved. That money was hard earned by volunteers and given by parents.
  15. Posted by - Nancy on Mar. 20, 2009

    For those folks who have principals/schools wanting to deposit the money into their accounts, or having check signing rights, don't. You are a separate entity with separate bylaws, mission, board, etc. If you've gone through the work of becoming a separate 501(c)3 organization, you should have separate bookkeeping transactions, a board and PTO members to make decisions. You've raised the money, you get to decide how it's spent--not the principal, teachers, etc.

    Our PTO funds a non-licensed staff member, so that school's budget line item can be transfered to fund a portion of a teacher's salary. It's how our school has tried to make up for lost teacher positions.
  16. Posted by - MICHELLE on Mar. 12, 2009

    I AM NEW TO THE P.T.O. THIS YEAR. MY QUESTION IS WHETHER OR NOT TEACHERS SHOULD HAVE A VOTE AS TO HOW FUNDS ARE SPENT? WE HAVE A SERIOUS PROBLEM WITH THE PARENTS BEING OUTNUMBERED EACH MONTH BY SCHOOL DIST. EMPLOYEES.
  17. Posted by - Craig Bystrynski from PTO Today on Feb. 24, 2009

    Not true. Imagine, for example, the American Cancer Society trying to spend all of their money the same year it was raised. That wouldn't make a lot of business sense. Parent groups are governed by the same IRS rules. Nothing says you can't put money aside, and good business practice says you should save at least a little so you don't have to start from scratch each year. For one thing, it's harder to connect with people when the first thing they see from you is a fundraising request. And certainly don't spend the money just to spend it. You worked hard enough to get it -- you want to make your dollars count. Good luck!

    --Craig
  18. Posted by - Maria Scotto Rosiello on Feb. 24, 2009

    Hello, i have a question that i am having trouble getting an answer to. hope you can help
    we are a PTO and nonprofit 501 (c). in 2005 the existing board put $8000 in a saving account to "keep for a rainy day" the money is still there and has only increased by $135 in interest. we are thinking of putting the money into a new risk CD. the question is we are hearing from other PTO or PTA that you must spend all of your fundraised money during that year it was raised. if this is true then it was a mistake for the board to hold back that money in 2005. each year we do spend all the incoming money but never touch that "safety net of $8000" do you know if this is true? are we able to hold money aside from year to year? thanks for your help
  19. Posted by - Treasurer on Feb. 04, 2009

    I am the treasurer of the PTO at my child's school and I also have a home based business. We were wanting to use my home based business and have a fundraiser to raise money for the PTO. Is there a problem with that if I am donating the profit to the school?
  20. Posted by - Becky on Jan. 21, 2009

    Do you have a good audit sample to use to do a yearly audit?
  21. avatar

    Posted by plus on Jan. 13, 2009

    We have started selling scrip at our school. How do other schools reconcile it each month? Do you make bank deposits each time the money is received or do you make deposits once a week? What type of cash handling policies do other schools have in place?
    Thank you,
    Tami
  22. Posted by - Mary on Jan. 10, 2009

    I have a question: I have recently been elected as treasurer at my sons New High School.
    I need to open a pta bank account and have no idea what is required. I would be grateful if you could help.

    Thank you

    Mary
  23. Posted by - Treasurer on Jan. 02, 2009

    I do all these things but....where I see the money disappearing is when CASH is involved before it ever hits the checkbook. You can require two people to be there to count receipts but what if one has to go to the bathroom or bends down to pick up a quarter from the floor? $20's, $50's and $100's are easy to stuff into a pocket or purse.

    Even having two people man the cash drawer poses the same problems. So....you add a third person or maybe put them on camera? We have a school store that sells huge amounts of clothing and merchandise to students and parents.

    Cash handling procedures are so complicated when you're busy and you have to remember, you're dealing with volunteers who like to feel they're trusted.
  24. Posted by - Deborah Julien on Dec. 17, 2008

    Great article. My sentiments exactly.
  25. Posted by - Laura O. on Oct. 22, 2008

    Our organization supports only the instrumental music department, but our budget process is still applicable. We've done it several different ways - from putting the lion's share of our assets into the music department account, and letting them spend it...which led to a hefty overrage. ..and no accountability.

    Our current system requires that they provide a budget request before the school year starts. We raise our first round of funds, do a projection, revise their request to fit our projection, and give them a spreadsheet of approved expenditures for the year. They then have to submit requests to our treasurer to have checks cut to vendors, their activity account, or for personal reimbursement. If the item does not fit a line item on the approved budget, it doesn't get paid by us!
  26. Posted by - Lisa on Oct. 21, 2008

    What I am trying to say is that the money that the PTO has is to be distributed at the discretion of the PTO board, not the principal or a school staff member. You might want to convene a meeting and discuss this, because the main workings of the PTO is it is a parent run organization that works with the teachers to better the learning environment which our children use.
    The principal of the school or an office staff member should not be making the decisions about what the money is used for. If you have questions about if a money request is within or outside of the teachers required budget that the district defines, then the principal or office staff member that knows the school budget can help you, but they should not be writing PTO checks.
  27. Posted by - Lisa on Oct. 21, 2008

    Regarding the comment from C. Burkhardt and Betty, this is not a normal practice. The money that the PTO raises and uses to function is not for the school to use at their discretion. The PTO is not to use money to pay for teachers to be reimbursed for extra work. Taxes have to be taken out. You are getting into a sticky situation. This is not what you want to be a part of as a PTO board.
    In our school district the teachers are given an allotted amount in their paychecks for extra work or education. When you are paying for teachers to basically do their job then I feel that this does not benefit the children.
  28. Posted by - Betty on Oct. 03, 2008

    Our group is currently facing the same problem.. After 3 years of running the PTO the school is now wanting a staff member in the business office to having signing rights to the account. Our group is not comfortable with this. We also have a question of a particular request the principal has made to pay a teacher through the PTO for doing an additional project. Isn't that compensation and why should the parent group pay for that? Any feedback would be greatly appreciated.

    Thanks,
  29. Posted by - C. Burkhardt on Sep. 30, 2008

    Hi,
    Our parent organization has typically held the monies it has raised and then disbursed them to the school or other vendor. Our Head of School doesn't want to hassle with asking us for money and wants to hold our funds in the school's account and disburse as she needs them. Our parent group is not comfortable with this. Is it typical to have the school hold and disburse monies and is it wrong to be raising money for the school's operating budget?

    Thanks
    Chris
  30. Posted by - kimberly on Jun. 18, 2008

    i need some trasurer forms
  31. Posted by - Tim Sullivan on Apr. 03, 2008

    I'd another simple, smart control here: the person who receives and opens your bank statements shoud not be a signer on your checks. It's a 5-minute process to receive the statement, take a quick loom at the returned checks to make sure they look kosher and to take aquick scan at the transaction record for same.

    And then the statement can be handed over to treasurer for balancing.

    This one is a key for me.

    Tim
  32. Posted by - seRena Chambers on Apr. 02, 2008

    Hi, please read the article
  33. Posted by - Heather Hock on Feb. 11, 2008

    GREAT article! Very concise, great advise.

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