Accounting Procedures Manual for Public Schools in West Virginia

STATE BOARD POLICY 1224.1 ACCOUNTING PROCEDURES MANUAL FOR PUBLIC SCHOOLS IN WEST VIRGINIA

Struc ture o f M a nua l Chapter 1 School Operations Chapter 2 Parent-Teacher Associations, Booster Groups and Other School Support Organizations Appendix A Various Forms Appendix B Sales & Use Tax Appendix C Authorized and Unauthorized Expenditures Appendix D Employee vs. Independent Contractor Appendix E Individual School Review Checklist 2

3 Highlights of Chapter 2 Parent-Teacher Associations, Booster Groups and Other School Support Organizations

2 - 1 G enera l A list of groups that will be collecting funds in the name of the school must be approved by the county board of education in advance (annually). Each school support organization must be approved annually by the school s principal. 4

2 - 1 G enera l , Co nt d All fundraising activities must be covered by liability insurance. Volunteers working for an organization with a separate FEIN, such as a separate 501(c)3, are not covered by the school board s BRIM policy. It is the responsibility of the school support organization to ensure that adequate liability insurance is obtained. 5

2 - 1 G enera l , Co nt d It is strongly encouraged that student support organizations operate as a subaccount of the school s general fund and follow all school accounting procedures. 6

2 - 2 Orga ni za ti o n Every school support organization should be officially organized with a set of published by-laws and be governed by an elected board of directors. Written minutes are to be prepared of each meeting, and such minutes are to be made available to anyone interested. 7

2 - 3 Tra nsa c ti o n J o urna l A transaction journal should be maintained to record all receipts and disbursements. 8

2 - 4 Ba nk Ac c o unts All bank accounts must be insured/bonded. All bank accounts should contain the name and FEIN of the organization. The account cannot use the school s FEIN. 9

2 - 4 Ba nk Ac c o unts, Co nt d If the organization does not obtain a separate FEIN, the organization must operate as a subaccount of the school s general fund and all monies must be deposited in the school s bank account. In this case, all school accounting policies and procedures must be followed. 10

2 - 5 Co l l ec ti o ns All moneys collected should be receipted and deposited intact daily into one of the organization s depository accounts. Total amount of money collected should be reconciled to underlying records. Each check received should be stamped or marked with for deposit only. 11

2 - 6 Di sb ursem ents & 2 - 7 P o sti ng Di sb ursem ents All disbursements must be made by check and the check and stub must be completely filled out at the time the check is issued. Checks are not to be made payable to cash. All checks must be posted daily to the transaction journal. 12

2 - 8 Co nc essi o n Sa l es If concession sales are operated by a school support organization, local procedures should be established to safeguard the inventory of goods sold to protect against pilferage or unauthorized use. Must periodically prepare a profit and loss statement for concession operations. 13

2 - 9 F und Ra i sers All school support organizations must obtain prior approval of the school principal before conducting any fundraising activity in the name of the school. See Appendix A for sample approval form. A profit and loss statement must be prepared for each fundraising activity conducted. Certain fundraisers require collection and remittance of sales tax. 14

2 - 9 F und Ra i sers, Co nt d Donations to school support organizations are only tax- exempt if the organization has obtained its own tax- exempt designation from the IRS or if the organization s funds are maintained in the school s account. Donors must be made aware of tax-exempt status at the time the donation is received. 15

2 - 10 E vent Rec ei p ts Must use pre-numbered tickets. Whenever practical, separate individuals should be used to sell and collect the tickets. Tickets should be torn in half upon collection. Ticket reconciliation report must be prepared and should be signed. 16

2 - 11 Rec o nc i l i a ti o n o f Ba nk Sta tem ents Every bank statement must be reconciled monthly as soon as possible after the bank statements are received. Bank statements are to be filed in chronological order. 17

2 - 12 Annua l F i na nc i a l Sta tem ents Annual financial statements are to be prepared by each school support organization and a copy is to be provided to the school principal. The financial statements are to be signed by the preparer and the organization s president. 18

2 - 13 Co nsum er Sa l es Ta x o n P urc ha ses Private nonprofit organizations such as PTAs, booster groups, etc. are not exempt from paying consumer sales and use tax by reason of their nonprofit status alone and must meet very specific requirements contained in State tax laws and legislative regulations. Each organization must have its own business registration certificate they cannot use the school s registration number. 19

2 - 14 Co nsum er Sa l es Ta x o n Sa l es Private nonprofit organizations that meet the requirements for making tax exempt purchases may also make casual and occasional sales for fund raising purposes and not be required to collect/remit consumer sales tax. The fundraiser cannot last more than 14 consecutive days. The fundraiser is not held more than 18 times during any 12-month period. 20

2 - 15 Busi ness Regi stra ti o n Certi fic a te In order to be considered tax-exempt, must register with the WV Department of Tax and Revenue and obtain a business registration certificate. Exempt from payment of the registration fee. 21

2 - 16 Revi ew o f F i na nc i a l Rec o rds Boards of education have the authority under WVC 18-5- 13(1) to examine the financial records of any parent teacher association, booster group or other school support organization collecting money in the name of the school, or to require the organization to provide the county board with financial statements that have been examined by an independent accountant. 22

2 - 16 Revi ew o f F i na nc i a l Sta tem ents, Co nt d The financial records may be examined in accordance with agreed upon review procedures developed by the county board. Such procedures should include a review of compliance with the provisions of this manual and county board policies. Copies of the report must be provided to the county board of education, to the superintendent and school principal. Must have corrective action plans for reportable conditions. 23

2 - 17 Rec o rds Retenti o n All financial records, minute books and other documents maintained by or in the name of a school support organization belong to the organization and must be delivered or handed over to the duly elected president or the organization, or to the county superintendent of schools upon request. 24

2 - 17 Rec o rds Retenti o n Copies of the organization s annual financial statements and minute books are to be maintained permanently. The transaction journal, bank statements, and canceled checks are to be retained for at least 5 years. All other financial records are to be retained for 3 years. 25

Sc ho o l Sup p o rt Orga ni za ti o ns

Overvi ew Overvi ew What establishes school support organizations? What governs school support organizations? Ways in which a school support organization can operate? FAQs 27

W hat i s a Sc ho o l Sup p o rt Organi zati o n? W hat i s a Sc ho o l Sup p o rt Organi zati o n? Definition: A school support organization is a parent-teacher association, parent-teacher organization, booster club, alumni group, foundation, or any other nongovernmental organization or group of persons whose primary purpose is to support the school district, an individual school, a group of schools, a school club or any of a school s academic, athletic, arts or social activities. 28

G o verni ng Sta tute - W VC 18 - 5 - 13( a ) WV Code 18-5-13(a) Subject to the provisions of this chapter and the rules of the state board, each county board may: (a) Control and manage all of the schools and school interests for all school activities and upon all school property owned or leased by the county, including: (1) Requiring schools to keep records regarding funds connected with the school or school interests, including all receipts and disbursements of all funds collected or received by: (A) Any principal, teacher, student or other person in connection with the schools and school interests; (B) Any program, activity or other endeavor of any nature operated or conducted by or in the name of the school; and (C) Any organization or body directly connected with the school; 29

G o verni ng Sta tute W VC 18 - 5 - 13( a ) WV Code 18-5-13(a) continued: (3) Auditing the records and conserving the funds, including securing surety bonds by expending board moneys. The funds described in this subsection are quasi-public funds, which means the moneys were received for the benefit of the school system as a result of curricular or noncurricular activities. 30

Sc ho o l Sup p o rt Orga ni za ti o n Ac c o unti ng P ro c edures Chapter 2 of State Board Policy 1224.1 Accounting Procedures Manual for Public Schools in West Virginia outlines the accounting procedures for parent-teacher associations, booster groups and other school support organizations Policy 1224.1 can be found at the following web address https://wvde.us/finance-and-administration/school-finance/manuals- policies/ 31

Sc ho o l Sup p o rt Orga ni za ti o n Ac c o unti ng P ro c edures ( c o nt d) State Board Policy 1224.1 Appendix C This appendix outlines several expenditure types and classifies them as authorized and unauthorized. The information is based on solely on Attorney General and WVDE Superintendent interpretations support the classification. 32

Sc ho o l Sup p o rt Orga ni za ti o ns F AQs

Ho w do es a sc ho o l sup p o rt o rgani zati o n ap p l y fo r a F Ho w do es a sc ho o l sup p o rt o rgani zati o n ap p l y fo r a F E I N? E I N? At a minimum, each school support organization that operates outside of the school accounts must have a federal identification number (FEIN). There are several ways that an organization can apply for a FEIN: Apply online. Apply by fax or by mail. Fill out Form SS-4 which can be found on the IRS website. Fax Form SS-4 to: (855) 641-6935 or Mail Form SS-4 to: Internal Revenue Service Attn. EIN Operation Cincinnati, OH 45999 34

Ho w do es a sc ho o l sup p o rt o rgani zati o n regi ster wi th the Ho w do es a sc ho o l sup p o rt o rgani zati o n regi ster wi th the Sec retary o f State? Sec retary o f State? Every outside school support organization must register with the Secretary of State to obtain a Business Registration Certificate. The Business Startup Wizard , a new online tool, is now available through the West Virginia One Stop Business Center. This wizard aims to simplify the registration process in West Virginia. The tool can be accessed at https://business4.wv.gov. Paper forms to register a school support organization can also be found at: https://sos.wv.gov/business/pages/RegNewWVBus.aspx 35

Are sc ho o l sup p o rt o rgani zati o ns requi red to b e a 5 0 1( c ) 3? Are sc ho o l sup p o rt o rgani zati o ns requi red to b e a 5 0 1( c ) 3? School support organizations are not required to be a 501(c)3; however, there are many benefits to obtaining this status from the IRS. These benefits include, but are not necessarily limited to the following: Exemption from sales tax, federal taxes and property taxes. The public legitimacy of IRS recognition. The ability to give donors tax deductions when they make charitable gifts to your organization. Increased opportunities for federal and state grants. 36

Ho w do es a sc ho o l sup p o rt o rgani zati o n ap p l y fo r 5 0 1( c ) 3 Ho w do es a sc ho o l sup p o rt o rgani zati o n ap p l y fo r 5 0 1( c ) 3 status? status? For information regarding 501(c)3 status and application assistance, please see the IRS links below: General Overview - https://www.irs.gov/charities-non-profits/application- for-recognition-of-exemption Form 1023 Overview - https://www.irs.gov/forms-pubs/about-form-1023 501(c)3 Tools - https://www.stayexempt.irs.gov/home/starting- out/starting-out 37

Do es the sc ho o l b o ard s general l i ab i l i ty i nsuranc e p o l i c y Do es the sc ho o l b o ard s general l i ab i l i ty i nsuranc e p o l i c y c o ver the sc ho o l sup p o rt o rgani zati o n? c o ver the sc ho o l sup p o rt o rgani zati o n? Fundraising activities must be covered by liability insurance. The school board s Commercial General Liability Policy through the Board of Risk and Insurance Management (BRIM) generally includes elected or appointed officials, faculty members, employees, volunteers and student teachers acting within the scope of their duties, regardless of whether on school grounds. Volunteers must be acting on behalf of the school board when participating in fundraising activities to be covered by the school board s liability insurance. 38

Do es the sc ho o l b o ard s general l i ab i l i ty i nsuranc e p o l i c y Do es the sc ho o l b o ard s general l i ab i l i ty i nsuranc e p o l i c y c o ver the sc ho o l sup p o rt o rgani zati o n? ( c o nt d) c o ver the sc ho o l sup p o rt o rgani zati o n? ( c o nt d) Volunteers working for a school support organization with a separate FEIN and/or 501(c)3 status are not covered by the school board s policy. It is the responsibility of the school support organization to ensure that adequate liability insurance is obtained for the organizations fundraising activities. 39

Can a sc ho o l sup p o rt o rgani zati o n p ro vi de a di rec t Can a sc ho o l sup p o rt o rgani zati o n p ro vi de a di rec t p a ym ent to a c o ac h? p a ym ent to a c o ac h? A school support organization should NOT pay a coach or other LEA employee directly. In a situation where an approved school support organization wishes to provide supplemental wages for an employee of the LEA, such as an athletic coach or band director, the funding should be provided to the LEA who can pay the employee. This would also apply in situations where a school support organization wishes to provide funding for an additional paid position, such as an additional assistant coach. The funds should be provided to the LEA, which can properly post for the position. 40

Can a sc ho o l sup p o rt o rgani zati o n p ro vi de a di rec t Can a sc ho o l sup p o rt o rgani zati o n p ro vi de a di rec t p a ym ent to a c o ac h? ( c o nt d) p a ym ent to a c o ac h? ( c o nt d) It is recommended that all LEAs have a local policy regarding such additional wages funded through school support organizations. Having a local policy allows the LEA to ensure consistency among schools within the county and to ensure all personnel and payroll laws are properly followed. 41

Can a sc ho o l sup p o rt o rgani zati o n exp end funds fo r Can a sc ho o l sup p o rt o rgani zati o n exp end funds fo r teac her rec o gni ti o n? teac her rec o gni ti o n? W. Va. Code 18-5-13 allows schools to expend funds for student, parent, teacher, and community recognition programs using funds generated through a fund-raiser or donation- soliciting activity. Prior to commencing the activity, the school must publicize that the activity will be for this purpose and must designate the funds generated for this purpose. Any funds generated must be accounted for in a separate account in the General Fund and not co-mingled with other school funds. While this statute does not specifically address school support organizations, it is our recommendation that school support organizations advertise their fundraiser s purpose accordingly. 42

Can a sc ho o l sup p o rt o rgani zati o n do nate to a no np ro fit Can a sc ho o l sup p o rt o rgani zati o n do nate to a no np ro fit o rgani zati o n? o rgani zati o n? School support organizations may not make contributions to charitable or private non-profit organizations unless a fundraiser is conducted specifically for that purpose and advertised accordingly. 43

Are sc ho o l sup p o rt o rgani zati o n fundrai sers sub j ec t to Are sc ho o l sup p o rt o rgani zati o n fundrai sers sub j ec t to sal es tax? sal es tax? After the passage of HB 2854 during the 2019 legislative session, not-for-profit volunteer school support organizations will be exempt from the general consumers sales and service tax if the following conditions are met: The fundraiser must be held for the sole purpose of raising revenue for the functions and activities of the school. A fundraiser cannot last more than 14 consecutive days. (previously 84 consecutive hours) A fundraiser is not held more than 18 times during any 12-month period. (previously 6 times) 44

Can a sc ho o l sup p o rt o rgani zati o n b e l i c ensed to c o nduc t Can a sc ho o l sup p o rt o rgani zati o n b e l i c ensed to c o nduc t b i ngo gam es and raffl es? b i ngo gam es and raffl es? Only a tax exempt charitable or public service organization may be licensed by the Tax Commissioner to conduct bingo games and raffles in West Virginia. This includes, but is not necessarily limited to, organizations that have a letter from the Internal Revenue Service determining that it is exempt from federal income tax under IRC 501(c)(3), 501(c)(4), 501(c)(8), 501(c)(10), 501(c)(19) or 501(d). In order to conduct a charitable bingo game, an organization must make an application to the Tax Commissioner on a form BGO-1 at least sixty days prior to conducting an occasion. This requirement may be waived for renewal applications. The types of available licenses include annual, limited occasion and State Fair. Details about the type of information necessary to complete an application are located in the BGO-1 Instructions. 45

Can a sc ho o l sup p o rt o rgani zati o n b e l i c ensed to c o nduc t Can a sc ho o l sup p o rt o rgani zati o n b e l i c ensed to c o nduc t b i ngo gam es and raffl es? ( c o nt d) b i ngo gam es and raffl es? ( c o nt d) Similarly, in order to conduct a charitable raffle, an organization must make an application to the Tax Commissioner on a form RAF-1 at least sixty days prior to conducting a raffle. This requirement may be waived for renewal applications. Details about the type of information necessary to complete an application are located in the RAF-1 Instructions. Additional information can be found at https://tax.wv.gov/Business/BusinessRegistration/Pages/BusinessRegistratio nBingoAndRaffle.aspx 46

QU E STI ONS? QU E STI ONS? 47