The answer to this is likely different from one school district to the next, but I will answer for how our district works (Catawba County NC).
Each PTO/PTA is, like yours, a separate entity from the school/school district. That being said, it works under the umbrella of the school district as far as being allowed to use the school's names, resources, etc. Because of this, we essentially answer to the principal and/or the school district and are at their mercy. The principal of the school has the authority to disband the PTO at a moments notice and we would have to finalize all outstanding debts and cut a check to the school in the amount of the bank balance. The school district also has the authority to request access to our records at anytime for any reason. I hope this helps you to understand how and why they are able to audit the books of the PTO.

What a strange and sad story from Colorado. If the parents stop coming, so it's a "principal/teacher organization", will the principal charge the teachers to pay for his slush fund??

I would think that all that's necessary to stop the $500 is for enough people (parents) to come to a meeting and take a new vote. The $500 isn't "owed" to the school; that's nonsense about being in arrears.

However, it sounds like your principal is a nutcase, and you may have to be more subtle about it. You might want to try a motion to "temporarily" suspend the $500 payments while the playground fundraiser is ongoing.

You may also need to mention that, per IRS regulations on "restricted funds," if the current fundraiser is specifically saying that funds will be used for the playground, your organization cannot use it for any other purpose. (Some posts on this site talk about how it's smart to say "playground and other items" so you aren't locking yourself in.)

Thank you all so much! I obviously have much to learn and am so grateful for this website! (I just hope I didn't get too off track from the original topic posted here!)

I hope our PTO officers can survive through this. One officer walked into the school's office and got publicly scolded and screamed at for 20 minutes in front of other parents by the school secretary! The Principal has threatened to stop supporting the PTO, and they say we can no longer have a PTO unless we do whatever we must to keep her support. Only 2-5 parents come to the PTO meetings (compared to at least 10 school staff members) as the climate is so hostile. Votes are always won by the school because of the imbalance. The school staff members say they are intimidated and afraid to vote against the principal for fear of adversely affecting or losing their jobs. All 3 of the involved parents say they want to start over and get another bank account, ID #, insurance, etc., but the school secretary got very upset over the notion and started insisting that we get a lawyer if we want to do that because we will need one. What a mess! I'm wondering where the "betterment of the children" is in all of this! That's what I wanted to do by joining PTO....but it looks like that may be a quite a ways off from where we are now! So thanks for your experience and comments!

I cocur with the responders who say that if the PTO has its own tax id number and is banking using that number, the money (and risk and responsibility) belongs to the PTO, not to the school. I guess there could be unique laws in Colorado, but I'd be checking that out carefully before assuming the district can have control over the PTO's money.

I would be very curious why Michelle's school is suddenly so interested in the PTO's record-keeping. I would ask lots of questions and ask to be included in the financial review process. Those records belonged to your PTO, and as a former officer, you should want to be part of the review team. I am not a lawyer or an accountant, so you may want to seek professional advice if you or your fellow former officers are put in a difficult situation regarding the past financial controls.

Ideally, a PTO should be doing its own annual financial review in which case the missing money might or might not have been found.

Someone above asked about whether the officers could be personally responsible. As soon as your PTO starts handling other people's money, it's a good idea to incorporate in your state. That simple step protects the indivdual officers from any personal liability.

To New-At-This, I don't see how a school can demand that your PTO pay more money than it has. You aren't under contract to them. You're just trying to do good things for the students. If your budget can't support the $500/semester payment, then your members shouldn't have approved the expenditure. This is a good time to do a formal budget so your members, and the school admin, can see how you expect to raise money, how much, and how you plan to spend it. We have an allocation for the prinicipal to spend at her discretion in our annual PTO budget, but it's contingent (like all expense categories) on our ability to raise the funds we projected. If our fundraising falls short, we will revisit and amend our expense budget. It would be a very uncooperative principal who would demand that she get her total allocation if it meant we had to eliminate a family event or some enrichment actiivity due to low fundraising.

If you're not sure how to institute some good financial controls, take a look around this website. There's lots of advice that can help your PTO protect its money and hopefully keep the district eyeballs out of your business.

I too will be very curious as to the answers above. I am also from Colorado and our accountant for PTO has been very strict that we keep our books totally separate from the school's books. All monies are put into our PTO account and paid out - sometimes reimbursements go to the school. But we have never heard about that law in Colorado. I am having her check into this, as well.

My understanding has also been, that if you have a separate i.d. number and everything is done as a separate legal entity, that the funds must be kept separate. Otherwise it would be co-mingling funds - which is not legal!

I really hope this is not the case, as I spend much of my day as PTO President dealing with a difficult school board. There is no doubt in my mind they would take every penny from our group and use it as they wanted. And the whole point of enrichment for our children would go by the wayside. I think this would end up disbanding our PTO very quickly!!