Thanks to you all for the advice. I think this will be our plan of attack:
First, the PTA Treasurer and I will make a list based on the previous 2 years' financial records of inappropriate handling. We will take this list to the PTA President and explain that these items are not PTA funds. If she is still not in agreement, we will call the State PTA and ask for a meeting. If she is in agreement, we will still call the State PTA and ask for help in handling this situation. Perhaps a well-spoken State PTA Official can intervene here.
I am not sure about calling a lawyer, we are a very small and poor PTA. I could ask amongst the members if any are attorneys and if they would be willing to work with us on this issue free of charge. Or perhaps the State PTA office has an attorney available for things like this.
My respects to Tim, but I have to diagree that my assesment based on the facts presented was harsh.
What was described is the transfer of funds from the school to the PTO to circumvent the legal process for expending those funds. Further they go on to say the school is asking them to deposit checks that are not written to them without endorsement. On the surface that alone I can think of a hald dozen federa banking laws being violated.
Further in differance to those that think that this is just a lack of understanding on the part of the school officials - I would ask you to go ask your own administrators if they would not immediately see something wrong in this process. I did just that today and the school secretary who handles the school accounts thought I was making this one up! In her words "No one could be that silly".
I stand by my advice - talk to an attorney to protect yourself and your organization.
Continuing on mum24"s point, there are rules about "unrelated business income" for 501(c)(3) organizations. This money might be defined as u.b.i. and may be taxable. That might be a stretch, but if you're looking for something "written in stone", an IRS publication might carry the appropriate weight. See Publication 598 for more info about unrelated business income.
I would also concur that this is probably just a tough transition between how it's always been and how it should be. I doubt anyone is doing anything purposefully underhanded here - just taking advantage of the convenience of the PTA's checking account. It is awkward that the secretary wants you to cash a check at the PTA's bank that is not made out to the PTA (can't you just say that the bank won't allow you to do that?). But I would work with the principal directly to change the procedures, not bring in the big guns unless you absolutely believe there's intentional mismanagement of funds.
Since your Treasurer agrees with you, I'm inclined to think your best bet may be to get the state PTA involved in talking to your President first, since he/she doesn't seem to be on board. I think all your officers need to be on the same page before you can push the school on this issue.
The fact that you had so many problems with your audit should be of concern to your state treasurer, because your tax exemption comes from your association with state/national.
Your state PTA people should have no problem getting you some rules in writing that you can then take to the Principal. (And besides, we pay all those dues to get support from state/ national, right?) I would think that would help you without making any one PTA person at your school the "bad guy."
I don't know how big your school system/district is, but in our school, $10,000 would be relatively immaterial. For a school auditor to catch that, he/she would have to audit the individual school and ask some pretty specific questions. I don't get the sense that is done in too many places.
But for most local PTAs, $10k is definitely material. If, in your case, it's pushing you over the limit for where you have to file your own tax return, I'm somewhat at a loss as to how you are going to explain that revenue on your tax return. Talk about a can of worms--that's also something that can be thrown out there as a reason not to do this. Any money that comes into the PTA account needs to be explained on the tax return--when you look at the return, you're not going to find a line that this kind of transaction easily fits in to.
Thank you all for the information. Can anybody tell me where I might find something written in stone that says this is bad? I get the impression the school principal and secretary don't believe me. If I could go into a meeting informed and ready to educate them, I would feel a lot more comfortable. It is hard for me to say "this is bad" or "this is illegal" when I have nothing to back up my statement.
Also, I am trying to find a diplomatic way of doing all this. I want to maintain a good feeling with the staff, and want to work with them. Any ideas on how to word this? Should I put in writing the changes that need to be made, rather than relying on my poor verbal communication skills?
Thanks again for your help! It is great having a place to come to for ideas!
1. I think DaveP's assessment is rather harsh based on the details that we know. I wouldn't assume that there's all kinds of chicanery going on here. And I don't know that you need a lawyer.
2. That said, I think Dave and Luvmy's advice (and your inclination) is correct. There are reasons why cash should be handled "by the books." That goes for your school and for your PTA. (And yes, they are separate entities). It's not that you don't trust a specific person or you think that a specific person is doing wrong. Instead, it's because if you have lax procedures then someone, sometime will take advantage. Or someone, sometime will have to answer for inconsistencies.
Remain professional. Find some like-minded folks to support you professionally. I'm virtually positive that your district has ways (and yes, they may be bureaucratic and a pain) that the school should handle its funds. Your not a bad guy for asking that rules be followed. If your principal and secretary think the policies are too painful, they should work with the district to make the policies more palatable.
