for FISCAL REPORTING to the DISTRICT for ORGANIZATIONS USING the DISTRICT S EIN and NOT FOR PROFIT STATUS

Transcription

1 GUIDELINES and PROCEDURES for FISCAL REPORTING to the DISTRICT for ORGANIZATIONS USING the DISTRICT S EIN and NOT FOR PROFIT STATUS November 2015 The Beaver Dam Unified School District does not discriminate against pupils on the basis of sex, race, religion, national origin, ancestry, creed, pregnancy, marital or parental status, sexual orientation, or physical, mental, emotional, or learning disability or handicap in its education programs or activities. Federal law prohibits discrimination on the basis of age, race, color, national origin, sex, or handicap. Those with complaints should contact Sharon Bliefernicht, 705 McKinley St, Beaver Dam, WI

2 TABLE OF CONTENTS OVERVIEW 3 Introduction 3 Independent Organizations 5 Organizations that Partner with the District 5 FUND 60 EXTERNAL ORGANIZATIONS ACCOUNTS SPECIFIC PROCEDURES and GUIDELINES 7 Organization s Responsibilities 7 Treasurer Responsibilities 8 President s Responsibilities 10 Administrative Liaison s Responsibilities 11 District Business Office Responsibilities 11 School Board Responsibilities 12 SUMMARY 12 Source Information 12 SAMPLE FORMS 13 District Forms 14 Sample Receipt of Donation Letter 19 IRS Form SS-4 20 WI DOR Form S As of November 2015 Page 2

3 INTRODUCTION: OVERVIEW Public school districts, under the Internal Revenue Service (IRS) Code, are considered governmental agencies that are tax exempt ( 115) and contributions to them are deductible for the donor ( 170(c)(1)). Under Wisconsin Department of Revenue (DOR), non-profits, including school districts may also obtain a Certificate of Exempt Status (CES) number to exempt them from paying state sales and use taxes. These days the role of parent teacher organizations (PTOs), booster clubs and other external organizations provide our schools with much needed support to supplement the limited resources that the District has available for individual schools or specific programs. A partnership with these organizations is critical to the success of the schools and our students. The financial end of these relationships may be structure one of two ways, with organizations operating as completely separate, independent entities, or as integrated into the school district. Both are governed by rules and regulations established by the DOR and the IRS. Organizations that have established themselves as independent entities have applied for their own federal employer identification number (FEIN) with the IRS, have qualified as a 501(c)(3), not for profit organization, and secured a CES number from the DOR. Being a 501(c)(3) allows these organizations to fundraise without a tax liability for the organization or for its donors. Filing the paperwork necessary for the non for profit status takes time particularly waiting for approval from the IRS as well as money for the filing fees. This may be prohibitive for some organizations. For those that can do this, it allows them to be truly independent. For those organizations that do not have the means to file the requisite paperwork with the IRS, the District is willing to partner with you. However, there are specific restrictions imposed by the DOR that must be adhered to. The District can make its EIN and not for profit status available to external organizations so that they can fundraise as a not for profit and to avoid having to establish bank accounts based on the social security number of any individual. However, DOR requires that, in order to do so, organizations must relinquish control of funds to the District. DOR has a three-part test to determine whether a PTO or booster organization is separate from the District (and therefore must obtain its own not for profit status) or is to be treated as part of the school. These are laid out in DOR publication Can the school withhold the organization s funds? If not, the organization is independent. 2. Can the school make the ultimate decision about how the funds are used? If not, the organization is independent. 3. Do reserve balances at the end of the fiscal year become property of the school or are they carried from year to year for the organization? If the latter, the organization is independent. Organizations cannot use the District s EIN and CES number to operate as a not for profit unless the financial relationship between the organization and the school passes all three tests. If your organization is willing to relinquish control as required by DOR, then we will work with you to establish and manage your funds, including fiscal controls, to preserve the assets of the organization and to protect those responsible for managing those funds. To do so, the organization must agree to the procedures and guidelines contained within this document. Please know, we do not want to control the organizations funds. Rather, we want to give you the tools As of November 2015 Page 3

4 to ensure that the assets are managed in accordance with generally accepted accounting practices and work with you within the legal framework established by the state. Within this document are recommended guidelines and required procedures for organizations that want to partner with the District for financial management. Fiscal activity will be recorded within the District s financial software as an agency account. Each month, the organization shall submit its records to the District s business office to record the month s activities and to reconcile the records. At year end, the organizations records will be submitted to the District and be available to the District s auditors for testing if selected. In addition, the District reserves the right to conduct internal audits at any time to ensure that records are compliant with established guidelines. Because the organizations are accessing the District s status with the IRS and DOR in order to operate, the district will act as an agent, or trustee, and not as an administrator or manager. The District is responsible for maintaining records and properly accounting for the activity within the agency funds, where these records will be maintained. The school board has fiduciary responsibility to establish and enforce policies and procedures to safeguard agency assets consistent with the assets of the school district. The decentralized nature of external organizations accounts requires strong fiscal controls on the funds. These controls include clearly defined lines of authority and areas of responsibility, as well as policies and procedures to guide the operation of agency funds. This document is designed to provide standardized accounting procedures and fiscal controls for the administration of external organization activity funds in the Beaver Dam Unified School District. Adherence to these guidelines and procedures is expected from all district staff and the organization s officers involved in the management of these funds. The external organization s activity records must be kept up-to-date at all times and are subject to audit at any time. The Director of Business Services, or her/his designee, reserves the right to mandate that all funds be remitted to the Business Office and all transactions then flow through the Business Office. These guidelines and procedures reflect existing state and federal statutes, regulations, and guidelines; board policies; administrative procedures; and generally accepted accounting practices. They are intended to protect the organization s officers, building administrators, and the respective staff members who are responsible for maintaining these fund financial records. Independent organizations, with their own 501(c)(3) status, are encouraged to adopt these practices as well. These guidelines also serve to protect the District, to ensure that accounts using the District s EIN and not for profit status act in manners that do not jeopardize the District s status. The Director of Business Services shall have responsibility and authority to implement all policies and procedures pertaining to the supervision and administration of external organizations activity funds for which the District serves as agent in accordance with established policies and rules of the School Board. The Director of Business Services is also responsible for prescribing appropriate accounting procedures. The principal of the school, as trustee, shall be directly responsible for the conduct of these financial activities in accordance with the policies, rules and procedures set forth by the School Board and the Director of Business Services. As of November 2015 Page 4

5 INDEPENDENT ORGANIZATIONS For organizations that choose to establish themselves as separate and independent of the school district, the following should be considered and explored. Consultation with a tax attorney is also recommended. STATE AND FEDERAL REQUIREMENTS: Federal Employer Identification Number (FEIN) Applying for a FEIN from the Internal Revenue Service (IRS) may be done online, at or by using IRS Form SS-4 (a sample of the one-page form is in the appendix). The online process results in issuance of an FEIN immediately, according to the IRS s website. IRS 501(c)(3) Status External organizations should also file for a 501(c)(3) status with the IRS to be considered a tax-exempt nonprofit organization. This allows donors to the organization to deduct the donation for federal tax purposes. For more information, search 501c3 on 501(c)(3) organizations are completely independent of the District and their financial activity is not to be recorded on the District s books. Wisconsin Department of Revenue Certificate of Exempt Status (CES) Sales to certain nonprofit organizations are exempt from sale or use tax. So that retailers can identify these nonprofits, the DOR issues a Certificate of Exeempt Status (CES) number. To obtain a CES number, the organization must complete Form S-103 (a sample of the one-page form is in the appendix). The DOR has informed the District that independent external organizations cannot use the District s CES number. Bank Account 501(c)(3) Organizations. The organization must use its FEIN to open a bank account (checking and/or savings). The account must require the signatures of two officers for checks or withdrawls. ORGANIZATIONS THAT PARTNER WITH THE DISTRICT Agency funds held for external organizations shall be recorded in the District s agency fund records, fund 60. Decisions regarding fundraising efforts and the disbursement of an organization s monies are made by the members of the organization, collaboratively with the administrative liaison to the organization. GENERAL PRINCIPLES: The following information is to provide guidance to organizations, administrative liaisons and the business office. 1. Purpose: The purpose of external organizations funds is to account for those activities and functions relating to these organizations. Fundraising projects shall contribute to the educational experiences of students and shall add to, not conflict with, the instructional program. Accounts are created to provide accurate record keeping within each fund while keeping the balances of each activity separate and distinct. Balances shall carry over from year to year upon approval. 2. Management: The management of organization s funds shall be in accordance with sound business practices, including sound budgetary and accounting procedures and thorough audits. As of November 2015 Page 5

6 3. Responsibility: The officers for each organization are charged with the overall responsibility for all activity in these accounts. 4. Competition to local merchants: Fundraising efforts shall be conducted in such a manner as to offer minimum competition to local merchants. 5. Obligations: The District shall not be obligated for purchases made by the organization, its members or officers. 6. Reimbursement for Cash Purchases: In some cases money might be spent personally by an organization member or officer. This should only be done with the prior permission of the president and treasurer of the organization. In the case of the president or treasurer, it should only be done with the prior approval of two officers of the organization. This practice is strongly discouraged, but it is recognized as necessary on rare occasions. In such cases, the individual should obtain a receipted bill for the money expended. Where bills or receipts are unobtainable, an itemized statement, signed by the individual must accompany the disbursing order to support this request for reimbursement. Approval is at the discretion of the officers as to reasonableness in such cases. 7. Accommodations for Staff from External Organizations Funds: a. These funds shall not be used for any purpose that represents an accommodation, loan, or credit to school district employees. b. The payment of salaries or stipends to school district employees from these funds is strictly prohibited. 8. Use of District Credit for Personal Advantage: Organization members or officers may not make purchases using these funds in order to take advantage of District purchasing privilege, tax exempt status, or credit capacity. 9. Deposits: a. All money must be deposited intact. No money may be dispersed from undeposited funds. b. The External Organizations Deposit Form (Form EO-2) is available for use for all money reporting. c. Deposits should be made to the organization s bank account as soon as practicable. 10. Negative Balances: No account, at any time, should have a negative balance. 11. Fiscal Year End: At the end of the fiscal year, ending on June 30, organizations will submit bank and fiscal records to the District business office. 12. Audits: External organizations records and financial procedures are subject to periodic internal audits by the business office and to outside audits by independent auditors. The business office shall conduct periodic internal audits of these accounts for the purpose of, but not limited to, a. safeguarding the organization s resources; b. providing assurances to the organization s members and donors; c. protecting the organization s officers; d. protecting district employees and the board; e. checking for accurate financial records; f. determining the adequacy of internal controls; and g. improving administration and policies. 13. Retention of Records: Financial records must be kept at least seven (7) years and supporting documents must be kept at least until audited. As of November 2015 Page 6

7 FUND 60 EXTERNAL ORGANIZATIONS ACCOUNTS SPECIFIC PROCEDURES and GUIDELINES ORGANIZATION RESPONSIBILITIES The purpose of external organizations accounts is to provide a method to partner with external organizations, whereby they obtain a not for profit status through the District s FEIN and follow established accounting guidelines and procedures to ensure that records are maintained in accordance with accounting practices.. Budget External Organization Statement of Purpose and Budget (Form EO-1): This form is recommended for organizations to explain the primary objective of the group, planned activities of the group and a proposed budget for the group. The form can be shared with the administrative liaison to communicate to the District what the organization s plans are for the year. Organizations may request to carry money over from the prior year to support activities for the coming year using the External Organizaitons Carry-Over Reqest form (EO-6). Receipts/Deposits Clearance of Money Collected: Organizations are required to promptly deposit their funds intact in their bank account. Receipts: Personal Checks: o Postdated checks will not be accepted. o Personal checks may not be cashed for anyone. o Personal checks must be made out for the exact amount due the organization. Ticket Sales: o Only pre-numbered two-part tickets must be used when ticket sales are made. o Cash Box / Ticket Reconciliation Form (EO-5) must be used to record ticket sales and be submitted with any unused tickets and the collections from the sales. o Two members of the organization, including an officer, must perform the ticket reconciliation together. Deposits: A completed External Organization Deposit Form (EO-2) should accompany each deposit, except when a Ticket Reconciliation and Deposit Form is used. o This form is to be completed by an authorized member. o The form must indicate the amount of money being deposited. This should be validated by the treasurer or other officer. All money must be deposited intact. No money may be dispersed from undeposited funds. Purchasing/Disbursements: Checking Accounts: External organizations shall maintain independent checking accounts established at a local bank or credit union of their choosing. The president or treasurer shall contact the District Director of Business Services to obtain the District s EIN and tax exempt number to establish the account. As of November 2015 Page 7

8 The account shall be in the District s name, DBA (doing business as) the organization s name. The account shall have an on-line banking option. The District shall be listed as an authorized viewer of the account, with log in access but no authorization to initiate any transactions. The District accountant and Director of Business Services shall be the only District employees with access to this information. Accounts shall require two signatures on all checks or withdrawal requests o Treasurer or President o The administrative liaison to the organization Documentation for Checks Issued: o Documentation of expenditures shall be recorded on the External Organization Check Request Form (EO-3) and signed by an officer of the organization. These forms are available on the district s website. Form EO-3 must be accompanied by supporting documents such as receipts, invoices or sales slips. Check Requests for Reimbursement: o Prior to issuing checks, all requests by members of the organization for checks for reimbursement must be completed on the External Organization Check Request and signed by requestor. o Check requests must be accompanied by supporting documents such as invoices or sales slips. Statements of account balances, which do not include detail of the purchase, are not acceptable documentation. o Sales taxes are not reimbursable. Month End: Reconciliation The treasurer shall reconcile the bank account upon receipt of the statement, completing the External Organization Reconciliation Form (EO-4). Once reconciled, the treasurer shall forward a copy of the reconciliation to the District Accountant for review and entry in the District s financial software system. TREASURER RESPONSIBILITIES The organization s treasurer shall be responsible for the organizations accounts. Treasurers are expected to be familiar with all the information listed in the Organization section above. The treasurer s duties, as they relate to agency funds include, but are not limited to: The treasurer is responsible for ensuring that all records are complete and accurate. Collection of agency fund monies from group representatives; Preparation of deposits for the bank; Preparation of disbursements; Preparation of bank reconciliations; and Maintenance of the organization s financial records, including: o Revenues by source; o Expenditures, including required supporting documentation; o Month-End reporting to the business office; o Records maintenance. As of November 2015 Page 8

9 Receipts and Deposits: Receipts and Deposits: Receive a properly completed External Organization Deposit Form accompanying each deposit turned in to the treasurer. o Verify and document the deposit. o Deposit the funds in the organization s bank account. o Document all discrepancies between deposit form and actual deposit. All money must be deposited intact. No money may be dispersed from un-deposited funds. All receipts must be deposited promptly. Purchasing/Disbursements: Checks: Only pre-numbered checks shall be used. A Check Request Form (EO-3) shall document the purpose of each check issued. Supporting documents such as invoices or sales slips, letters, etc. shall be required and maintained Checks are not to be written as paid to the order of cash. In the case when money was spent personally by an organization member, the individual shall obtain a receipted bill for the money expended. Where bills or receipts are unobtainable, an itemized statement, signed by the individual must accompany the disbursing order to support this request for reimbursement. Note: sales taxes paid are not reimbursable. Check requests must be filed chronologically. Signature of Checks: Each school organization shall have its own bank account. o Two authorized signatures are required for all withdrawals, that of the treasurer or another officer and by the District s administrative liaison to the organization. o Checks must never be pre-signed. Such action makes the signer personally liable for anything recorded over his signature. Do not destroy voided checks. They are to be retained and accounted for. Bad Checks: In the event a check is returned from the bank as bad (NSF, Closed Acct, etc), then Call the maker of the check and record notes of the conversation. All returned checks, plus any incurred fees, are the responsibility of the maker. Before accepting a new check from the maker of a bad check, confirm with the bank that funds are available. If someone has multiple instances of bad checks, the organization may, at the treasurer s discretion, require all transactions be in cash. o The maker is to be held accountable for any fees or charges incurred. The returned check is to be treated as a negative receipt for the amount of the check, plus any fees charged by the bank. When the replacement check (or cash) is deposited, it must be treated as a new receipt. o The negative receipt must be applied to the balance of the organization that accepted the check, or to a general account maintained for such purposes. Month End: Financial reports must be kept and a copy submitted to the District Business Office following the close of each month s activity. These reports must reflect the financial activity of the organization, including a summary of revenues and expenditures for the month being reported. In addition, a copy of the bank statement must be submitted to the As of November 2015 Page 9

10 BusinessOffice by the 20th of the following month. The Month-End Close-Out Procedures have been distributed separately to the treasurer by the business office. Reconciliation The treasurer shall reconcile the bank account upon receipt of the statement, completing the External Organization Reconciliation Form (EO-4). Once reconciled, the treasurer shall forward a copy of the reconciliation to the District Accountant for review and entry in the District s financial software system. Retention of Records: The treasurer is responsible for keeping required sales and financial records and forwarding these records to the next treasurer, the organization s president, or the administrative liaison when they step aside from this role.. PRESIDENT S RESPONSIBILITIES The president of each organization is responsible for supervising all activities of the organization. As such, the president approves all transactions of the organization s account. Presidents are expected to be familiar with all the information listed in the Organization Responsibilities and Treasurer Responsibilities sections above. Budget Ensure that the External Organization Statement of Purpose and Budget is completed. This form should be shared with the District s Administrative Liaison to the organization. Fund Raising Activities The president is in charge of all fund raising projects and is accountable for an accurate accounting of such activities. Receipts/Deposits Clearance of Money Collected: Ensure that all shall be documented and deposited intact into the organization s bank account in accordance with the procedures outlined above. Monies may not be placed in any individuals personal bank accounts. The president is responsible for all money collected until it is deposited with the bookkeeper. All money must be deposited intact. No money may be dispersed from undeposited funds. Purchasing/Disbursements: Check Requests: Checks being issued must include the signatures of the treasurer and administrative liaison. In the event the check is being issued to the treasurer, the president will sign the check. Check requests must be accompanied by supporting documents such as invoices or sales slips. o Statements of account balances, which do not include detail of the purchase, are not acceptable documentation. As of November 2015 Page 10

11 ADMINISTRATIVE LIAISON RESPONSIBILITIES Each external organization shall work with an assigned District liaison, generally the principal of the school. Liaisons are expected to be familiar with all the information listed above, but have no decision making authority for the organization. Rather the liaison shall act collaboratively with the organization and coordinate, as necessary, communication between the organization and the District business office. Budgets: Activity Account Statement of Purpose and Budget: Liaisons shall assist organizations with completing this form (Form EO-1) and share the information with the Business Office. Purchasing/Disbursements: Checks being issued must include the signature of the administrative liaison as well as the treasurer or other officer. This constitutes the district s authority of control of use of the funds. Close-Out of Accounts/Inactivity: The principal shall communicate to the Director of Business Service if the organization becomes inactive. If the organization remains inactive for 24 months, any remaining funds will be donated to the District and the bank account will be closed. Retention of Records: The liaison shall work with the organization s treasurer to ensure compliance with records retention requirements. BUSINESS OFFICE RESPONSIBILITIES The Director of Business Services shall have responsibility and authority to implement all policies and rules pertaining to the supervision and administration of funds the district acts as trustee for, including their creation, operation and closure, in schools in accordance with established policies and rules of the School Board. The Director of Business Services is also responsible for prescribing appropriate accounting procedures and is expected to be familiar with the responsibilities of all parties involved, as described above. Financial Statements: A copy of the financial reports prepared and submitted by the organizations, in accordance with the Month-End Close-Out Procedures, must be maintained on file by the business office Fund 60 should be included in regular financial update reports prepared for the Board of Education. Bank Reconciliation: The District accountant shall reconcile the bank statements to the Skyward reports of each school. The reconciliation papers shall be maintained by the business office. Conduct Internal Audits: The business office shall conduct periodic internal audits of external organizations accounts for the purpose of a. safeguarding the organization s resources; b. providing assurances to the organization s members and donors; c. protecting the organization s officers; As of November 2015 Page 11

12 d. protecting district employees and the board; e. checking for accurate financial records; f. determining the adequacy of internal controls; and g. improving administration and policies. Resource: The business services office shall act as a resource to appropriate organization officers (president and/or treasurer), and administrative liaisons in the administration of these procedures. SCHOOL BOARD RESPONSIBILITIES The school district s Board of Education is responsible for adopting policies over the establishment of all agency funds. These policies should include the appropriate accounting and reporting practices. SUMMARY Agency funds must be supported by detailed records, maintained by each organization. Due to fiduciary responsibility of the Board of Education, these funds are subject to the same internal controls as all other district funds. Student activity funds are accounted for and reported in fund 60 as an asset and a liability (818000, Due to Parent Organizations ). This manual outlines the district s procedures and internal controls relative to agency funds. DPI requires, as supplemental information to the district s financial statements, a schedule of the liabilities at the beginning of the year, total receipts, total disbursements, and year-end balance. These guidelines are subject to modification at any time by the District. In the event changes are made, the District shall notify all organizations before implementing the changes unless changes are imposed on the District by state or federal law. This document is based on: 1. Guidelines developed by, and feedback provided by the Wisconsin Department of Public Instruction (DPI) School Financial Services Team 2. Feedback from the District s independent auditors and legal counsel 3. Wisconsin DOR Publication Wisconsin DPI Agency Funds Guidelines 5. Internal Revenue Service information at ww.irs.gov 6. IRS Publication Chapter 22, Agency Funds / Trust Funds of the Handbook for Evaluation and Improvement of Business Office and Support Service Functions, June 2000 edition, from the Wisconsin Association of School Business Officials (WASBO). 8. Student Activity Funds: Procedures and Controls, Charles Cuzzetto, Association of School Business Officials International (ASBO), As of November 2015 Page 12

13 SAMPLE FORMS ORGANIZATION: Primary Objective: BEAVER DAM UNIFIED SCHOOL DISTRICT DISTRICT EXTERNAL ORGANIZATION STATEMENT OF PURPOSE AND BUDGET School Year: Form EO-1 Planned Activities: Proposed Budget: Revenues Source 1 carryover Expenditures Planned Expenditures Estimated Total Estimated Total Revenues $0.00 Estimated Total Estimated Total Expenditures $0.00 Submitted by President/Treasurer Reviewed by Prinicpal/Administrator Reviewed by Director of Business Services Date Date Date As of November 2015 Page 13

14 BEAVER DAM UNIFIED SCHOOL DISTRICT DISTRICT EXTERNAL ORGANIZATION DEPOSIT FORM Date: Form EO-2 ORGANIZATION: DENOMINATION NUMBER OF BILLS OR COINS TOTAL HUNDREDS FIFTIES TWENTIES TENS FIVES ONES OTHER BILLS QUARTERS DIMES NICKELS PENNIES OTHER COIN TOTAL CASH AND COINS $ CHECK NUMBER FROM AMOUNT TOTAL CHECKS $ TOTAL DEPOSIT $ Submitted by (sign and print name) Approved by President/Treasurer attach copy of bank deposit slip As of November 2015 Page 14

15 BEAVER DAM UNIFIED SCHOOL DISTRICT DISTRICT EXTERNAL ORGANIZATION CHECK REQUEST FORM Form EO-3 ORGANIZATION: Requestor's Name: Complete Address: City, State & Zip: PURPOSE OF REQUEST Date of Purchase Description and Purpose of Purchase Total Submitted By (date) Approved by Treasurer (or other officer) (date) Approved by President (or other officer) (date) NOTES: 1 Sales taxes are not reimbursable. 2 Copies of all receipts must be attached to the request to document the expense. If the requestor is either the treasurer or the president a third officer must be the second approver of 3 the request. The President or Treasurer cannot approve their own request. As of November 2015 Page 15

16 BEAVER DAM UNIFIED SCHOOL DISTRICT DISTRICT EXTERNAL ORGANIZATION RECONCILLIATION FORM Date: Form EO-4 ORGANIZATION: BANK BALANANCE $ OUTSTANDING CHECKS CHECK NUMBER TOTAL CHECKS $ AMOUNT SUBTOTAL (A) (BANK BAL - OUT STANDING CHECKS) $ OUTSTANDING DEPOSITS DEPOSIT DATE TOTAL DEPOSITS $ TOTAL (B) (SUBTOTAL A + DEPOSITS) $ BOOK BALANCE ON RECONCILLIATION DATE $ Book Balance must equal Total B (Bank Balance - Outstanding Checks + Outstanding Deposits) Submitted by Treasurer (date) Approved by President (or other officer) (date) Accepted by District Business Office (date) As of November 2015 Page 16

17 As of November 2015 Page 17

18 As of November 2015 Page 18

19 SAMPLE RECEIPT OF DONATION LETTER As of November 2015 Page 19

20 IRS FORM SS-4 As of November 2015 Page 20

21 WI DOR FORM S-103: As of November 2015 Page 21