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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.

Reimbursement Request. Include the requesters name, phone number, and address if you plan to mail the check. Add a place for a second officer approval, the check number, the check date, the amount, and reason for reimbursement. Remind the volunteer to attach the receipt to the form.

Check Request. Use this form when a check is needed in advance of the transaction, such as for an assembly or mail order purchase. Check requests are similar to reimbursement requests, but your form should include the check payee name and address of the payee. A completed check request form is a reminder to watch for an invoice or receipt coming your way.

Cash Receipt. After a money-generating event, your volunteers use a cash receipt form to record the money collected. The form should have a tally area by bill and coin denomination, along with a place to record checks and the check total. You can staple the banks deposit ticket to the control form after the money is deposited.

I use control forms like these and find they work best for me when I copy each type onto a different color paper. If I see a yellow form in my treasurer binder, I know I have a reimbursement request to process. If there's a pink form, I need to prepare a check. And if I am carrying a green cash receipts form, I'm on my way to the bank.

I like the color forms for my own ease of filing and also so I can direct a volunteer to the proper form by color, not just by title. I use 25 to 50 of each type each year, and I just photocopy them at school.

3. Report Monthly

Every month, that's 12 in all, the treasurer should prepare a report of financial activity for the executive board and members. If activity is reported every month, it is less likely that a surprise will catch the PTO off guard or short of cash.

Robert's Rules of Order recommends a monthly report showing the balance at the beginning of the month, plus receipts (cash in), and less disbursements (checks out), with the ending balance at the bottom. If your parent group operates under a preapproved annual budget, your standard report might also include year-to-date performance against plan for each of your budget categories.

The completed report should be signed by the treasurer, presented at your regular meeting, and filed for future reference. If you keep your financial records in a computer-based system, you may be able to generate the report automatically from the system. Check your user manual or online help for advice.

4. Reconcile Monthly

If your PTO maintains a checking account, as most PTOs do, you should reconcile that account every month.

Occasionally, you may make a mistake when you record information in the checkbook. Banks also sometimes make mistakes. If you do not reconcile your checking account, you must rely solely on what the bank reports as your balance, even if that amount differs widely from what you think it should be. The longer an account goes unreconciled, the bigger the potential mess and the larger the risk to the PTO.

Reconciling is the mathematical process of verifying the balance in your account, based on the transactions posted against your account at the bank.

Reconciling by hand can take a little time and concentration, but it's not an overwhelming task if it's done promptly each month. Chances are, there's a worksheet for account reconciliation printed on the back of your monthly statement. Detailed instructions likely are included there, too. If you consistently use a computer-based system, monthly reconciliation can be reduced to just a couple of minutes, since the computer does all the computations for you.

What if your checking account hasn't been reconciled for months? You have two choices. You can find all the back statements and reconcile them month by month against the checkbook. Or if that is simply an impossible task, adjust the checkbook balance to match what the bank reports as of your last statement date. Be careful, though; you will need to re-record any transactions that you posted to your check register after that date, because those will not be reflected on the bank statement. From that point on, do the right thing and reconcile each month.

If you are really stuck, check with your bank. They may be willing to spend some time with you getting your checkbook to match their balance. You may also be able to recruit a volunteer with a head for numbers from your members. It is far better to ask for help and get the matter under control than to allow a financial mess to fester.

5. Conduct an Annual Audit

The annual audit is an independent verification of the PTO's financial practices. An audit can also highlight ideas for improvements in financial control and reporting. In the PTO world, an audit is a financial review, but the word does not refer to the legal opinion of a professional accounting firm, as is the case in the business world. PTO members, parent volunteers, or a paid professional can complete the PTO's audit.

Some PTOs define the make-up of their audit committee in their bylaws. Other groups recruit one parent volunteer. In any case, if you have consistently applied good financial controls, your audit should run smoothly and be completed quickly. Your auditors will appreciate organized files, balanced records, and complete data.



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#32 PTSO President 2014-11-14 14:39
Our charter school created a PTSO last year (first year) and the directors are requiring complete control of the bank accounts and decision making. They are the signers on the PTSO accounts and require all spending to go through them. We operate under the school's tax ID# but PTSO members continue to say this complete control they have should not be happening. Every time I, PTSO President, try to exhibit some level of assertiveness on behalf of our group, I am shut down. These directors also want to attend our meetings (by phone or in person), told us not to discuss budgets or spending with members and are not open to the idea of members voting on spending. We are going to hold a meeting with them next month at which time we will propose the firm structure of our PTSO, excluding their control, or the current officers are stepping down. Any input/articles/ suggestions for us? Thank you in advance!
#31 Concerned 2012-01-11 15:34
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.
#30 Malden 2010-09-03 00:23
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.
#29 Stacey 2010-06-23 23:00
Regarding whether teachers/admini strators 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.
#28 Vicky 2010-01-18 19:49
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.
#27 Craig Bystrynski 2009-10-28 14:05
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.

#26 Julie 2009-10-14 22:09

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.
#25 Mary 2009-06-04 09:41
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/sugges tions 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.
#24 Craig Bystrynski from PTO Today 2009-06-01 21:22
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/stud ents. 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

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