I'm not a lawyer, but it sounds like from what you've described, your PTO is financially a committee of the school and the money really belongs to the school. If the credit card transactions were to the school, the school was raising the money, at least on paper. Your customer's credit card receipts said ABC Elementary School, not ABC PTO.

To my knowledge our PTO does not have a 501(c)(3) status separate from the school's. This year we had a silent auction/fundraiser and brought in about $20K. The credit card payments were paid through the school's account, and then the school reimbursed us. The PTO has not filed any paperwork (I forgot the number of the form, but it has 9s in it!) of any kind, ever.

What are we doing wrong? Is this illegal/an IRS violation? Is the money 'actually' the school's?