An important responsibility of the executive board is ensuring that PA/PTA money is safe from theft and misuse. As stewards of these funds, the board needs to have proper internal controls — policies and procedures that serve as checks and balances over an organization’s assets — in place, both to safeguard the money and maintain the trust of the membership and donors. Even though PA/PTAs’ boards are made up of parent volunteers whose intentions are to support their children’s schools, mistakes, or even fraud, can occur. Managing a PA/PTA’s financial affairs should be viewed as running any business, where security and controls are essential.
There are a few basic principles from which internal controls flow:
- Separate duties. You should separate aspects of certain key processes among different people to reduce the opportunity for errors or fraud. For example, financial transactions should be conducted, approved, recorded and reconciled by different people.
- Keep detailed and accurate records. Your PA/PTA should have procedures for recording each step of every transaction. Keeping such records will maximize control over the funds.
- Review and reconcile these records. This is the final step in the checks and balances aspect of internal controls. PA/PTAs need procedures for this work too, which includes, balancing your checkbook, reconciling it with the bank statement, analyzing reports, etc.
- Avoid conflicts of interest. All organizations that conduct business and handle money must have procedures in place to prevent conflicts of interest, and PA/PTAs are no exception. PA/PTA officers and members cannot play a role in decision-making when their personal or business interests have the potential to conflict — or intersect — with the interests of the PA/PTA.
CR A-660 includes numerous specific internal controls that PA/PTA boards are required to incorporate into their practices. CR A-660 also requires that a PA/PTA’s bylaws document certain additional controls for protecting its funds; these include a process for counting, securing, and depositing funds received; record keeping protocols; a process for authorizing emergency expenditures; authorized signatories for checks; and protocols for safeguarding funds when using online banking. A PA/PTA may create and maintain other controls appropriate to its size, scope and the nature of its board, financial affairs and activities.
Your PA/PTA’s internal controls should be passed on to each new administration and followed each year by all officers. They also should be reviewed by each new administration, and amended as appropriate, to ensure that they cover and correspond with your PA/PTA’s work.
Your PA/PTA should be aware of some of the internal controls listed below. Most are required by CR A-660; the few that are not required but are considered best practices by PA/PTAs and other nonprofits are in italics.
FOR HANDLING PA/PTA FUNDS
- Counting and handling of any cash, checks, or money orders received must be completed by at least 2 PA/PTA members who may not be related.
- All funds collected should be deposited into the checking account as quickly as possible.
- Any funds that cannot be immediately deposited in the bank must be securely locked on school premises (e.g., the school safe). When PA/PTA funds are secured in the school, the PA/PTA must obtain a written acknowledgment from the principal. This acknowledgment must include the amount of money and where the funds are being stored.
- No funds shall be kept in a member’s home.
- PA/PTAs may use debit cards in exceptional circumstances: they may only be used to pay for goods and services that cannot be paid for by check.
FOR HANDLING CHECKS
- All checks issued by the PA/PTA must be signed by 2 officers who may not be related or reside in the same household.
- No checks may be written payable to “petty cash” or “cash.”
- Other than the mandatory checking account, any bank accounts must be authorized by a vote of the membership and must be in the name of the PA/PTA.
- The primary mandatory checking account must be used for all transactions, including deposits and withdrawals.
- Your PA/PTA should ask for cleared check images to be included on bank statements.
FOR AUTHORIZING EXPENDITURES
- The PA/PTA board must obtain the membership’s approval before spending PA/PTA funds. This must occur at a regularly scheduled meeting where a quorum is achieved.
- Each expense must be confirmed from an identified line in your budget.
- PA/PTAs’ bylaws must contain a process for boards to authorize any emergency expenditure, and indicate the circumstances that warrant one. A maximum dollar amount must be included.
- Any emergency expenditure made must be approved by a vote of the membership at the next general membership meeting following the expenditure.
- Out-of-pocket expenditures:
- A PA/PTA member may be reimbursed for out-of-pocket expenditures only if she/he submits a receipt.
- The bylaws must define permissible out-of-pocket expenditures and the maximum amount for which a member may be reimbursed
- Reimbursement must be made by check payable to the member, and never in cash.
- Total out-of-pocket expenditures should be tracked by line in your budget and compare it to the budgeted amount.
- Your bylaws might contain a provision for authorizing budget modifications, other than emergency expenditures. If your PA/PTA made more money than expected, or a priority shifted, it might want to ask the membership to add a new budget item that was not included in the original approved budget.
FOR MAINTAINING FINANCIAL RECORDS
- All financial records including checkbooks, ledgers, cancelled checks, invoices, and receipts must be maintained in a secure location on school premises.
- All financial records must be saved for 6 years.
- Photocopy all checks and letters accompanying income and file appropriately.
- Record on any bill the date it was paid, the initials of the staff person approving the payment, the amount paid, the check number, and the type of expense.
- If your PA/PTA inputs any of this information electronically, make sure the procedures cover this work as well.
- To keep receipts and invoices more easily organized, your PA/PTA might have an internal check request form that accompanies every check that is written. It should be attached to each invoice or receipt.
FOR MONITORING FINANCIAL ACTIVITIES
- Reports — CR A-660 requires several reports, which must be prepared and then reviewed by others, such as:
- Treasurer’s Report — must be prepared for every executive board and general membership meeting, and should be reviewed by both the executive board and general membership during their respective meetings.
- Fundraising Reports — must be prepared for each fundraising activity, and should be reviewed by the general membership as well as the principal. Many PA/PTAs have the individual in charge of a particular fundraiser prepare this report.
- Interim and Annual Financial Reports — must be prepared at specific times per your bylaws and should be reviewed by the principal. (See the Financial Records page for more information on reports.)
- Bookkeeping practices/processes – your PA/PTA must have established bookkeeping practices, such as balancing the checkbook and reconciling it with monthly bank statements, in place. CR A-660 requires that PA/PTAs’ bylaws contain a process for record keeping.
- The executive board should review the bank statement for the bank account every month.
- The person who completes the reconciliation — comparison of the checkbook or ledger entries for the month against the bank statement — should not be the same person who records items in the checkbook or ledger.
- Internal Audits – Audits are reviews of financial records conducted to reconcile revenue and expenditures and determine compliance with applicable laws, policies, rules and regulations. Although CR A-660 does not require them, it recommends that PA/PTAs conduct internal audits once a year and whenever there is a change in the office of treasurer. The audit committee must be selected by the general membership, and must be composed primarily of PA/PTA members. (See the Audits page for more information.)
- External Audits – The Chancellor may conduct an external audit when serious allegations of financial impropriety are raised, or a grievance or complaint is filed relating to the financial practices of PA/PTA. (See the Audits page for more information.)
FOR AVOIDING CONFLICTS OF INTEREST*
- PA/PTA members must be careful to avoid acting in circumstances in which their personal interests conflict with their interests as PA/PTA members.
- PA/PTA officers may not have any direct or indirect interest in any business transaction, any financial interest, or any business dealing with the school, the school district, the PEP, a CEC, a Citywide Education Council, or the DOE.
- PA/PTA members who have an direct or indirect interest in any business transaction, any financial interest, or any business dealing with any of the bodies named in the above-bullet must refrain from participation in any decision relating to that matter. Such interest must be disclosed to the membership and recorded in the minutes a the meeting at which the disclosure was made.
- If a PA/PTA decides to conduct an internal audit, a signatory of PA/PTA checks may not serve on or guide the work of the audit committee.
- For PA/PTAs with more than $50,000 in annual net income, CR A-660 recommends the PA/PTA hire a CPA or person with professional experience in accounting, business, or a related field to conduct the audit. This individual cannot be a member of the PA/PTA, be a relative of a PA/PTA member, or have any direct or indirect interest in PA/PTA funds.
- Your PA/PTA may require that the nominating committee (for elections of officers) be responsible for ensuring that any candidates for office are aware of the conflicts of interest provision in CR A-660 and attest in writing they do not have any conflicts of interest.
- Before voting occurs at a general membership meeting, officers should remind members to abstain from voting if they have a conflict of interest.
*PA/PTAs that are incorporated in New York State should be aware of the Not-for-Profit Corporation Law’s requirements for avoiding conflicts of interest.