What is more important than obtaining 501(3)(c) status is that you ensure your PTO is incorporated as a business with your state. If it is not, your individual executive board officers could be held liable and individually sued should there be an insurance claim or other lawsuit that is handed to your PTO.
501(3)(c) is great for setting you up as a non-profit, but, it does not protect you from lawsuits.
part of me balks at the 501(c)3 becuz what if down the road the new officer's AREN'T as careful with the monies and such. somehow, I feel safer from it being embezzled??? not sure if it's valid and supported, but somehow I feel an extra layer of protection down the road.
I think having an agreement and it documented is a good idea. and in the by-laws.
I like the idea of an agreement between the school and the PTO in regards to finaces. I would highly recommend this be an open meeting between the Business Office, Admin, and PTO officers and very well doncumented. An amendment to the by-laws is not a bad idea either! CYA! (Cover Your Assets!)
Like JHB, our group did look at 501c3 and we decided not too. Looking bad, I still not sure we did the "right" thing but that's for the new moms to look at!
mykidsmom makes some good points. Having your PTO exist under the school's umbrella only works well if you relationship with the school is good and if everyone's in agreement as to goals and processes. And that situtation can change over time. You do want to protect yourself. But if everything is going smoothly, I don't know that I'd separate and formalize "just in case". But I would document the situation, and perhaps draft a Memorandum of Understanding as to roles and responsibilities. You'd want to handle this diplomatically. And remember, your power to negotiate (as parents) is in the planning stage when events and activities is dependent on parent volunteers are being considered.
Years ago, when we reformatted our PTO as 501(c)(3) and formalized all the process I was really gung ho about the idea. Now - I still think it's good - but there have been several new sets of officers since I left. I now recognize that not every group of officers is prepared to maintain that level of an organization. It's amazing how quickly the knowledge can get wiped out, even though plenty of documentation was left behind. They can forget to pay the (sales) tax and file the reports with the IRS. Filing LATE is a $20 per day penalty. Then again, they may maintain the business side of the organization perfectly.
I'm really not trying to disuade you from formalizing. But if I had a situation where everything was legit, both the school and the PTO members were happy, and the PTO didn't HAVE to take on so much of the business side of running a parent group, I'd seriously consdier that model.
You sound like your school is a charter school. I'm the past prez of ours here in Colorado and would first advise you may want to look at getting your own account. I say this incase things change (just humor me for a moment) and your admin makes changes that could hurt your org. Many moons ago, our PTO monies were with the school and when the CFO left, she had the PTO mixed in with the monies for student activity fund. It took us three months to resolve the amount of funds we had. We now have a separate account at a separate bank BUT the Business Office still keeps a copy of our bank statement. We do this because of parents that didn't hand over everything or anything when leaving.
To became 501C3 or not is the question and is an expensive process but worth looking into. If you are a charter, this could also help protect your funds with the school district as well. (another long story!)
You are correct that if your PTO is an independent organization earning more than $5000 gross per year, the IRS expects you to formalize.
But it sounds like yours is not independent, but rather operates under the school's umbrella. Your PTO is essentially a specialized committee. My own opinion is that if it works for you, don't change it. Less headache and overhead.
Technically, all the funds do belong to the school and theoretically they could use them in ways other than the PTO wants. But if that's not been a problem so far, I wouldn't worry about it.
Independence is double edged sword. You do get more freedom to act independently, but you get a lot more responsibilityand reporting.
I've formalized a PTO and built best practices from the ground up, been part of an informal PTO (less than $5000), and been a member of the PTA so I'm familiar with the various models. I'm all for formalizing if it's a choice between operating illegally or doing what you should.
However, in your case - if the school is handling the financial side and you can devote yourself to your programs and activities - and if that system is working for you, I'd leave it in place.
