Financial Aspects of PTOs and Booster Clubs

1. Financial Aspectsof PTOs and Booster Clubs Carol Oman CFISD Director of Internal Audit

2. Agenda • Mission / Purpose of PTOs & Booster Clubs • Fund-Raisers • Tips on Fund-Raisers to Hold • Fund-Raisers that can be Held • Fund-Raisers that have been held • Sales Tax Implications • “One-Day Tax Free” Sales Days • Catalog Sales • Sales Tax Included In Price • Sales Tax Holiday • Fund-Raiser Vendors • IRS Prohibitions • Fund-Raising Activity Report

3. Agenda • Contributions / Donations • Revenues • Expenditures • Financial Deadlines • District • Texas Comptroller’s Office • IRS • Record Retention

4. Mission / Purpose • Assist in supporting students or student organizations • Financial Support • Fund-Raisers • Contributions / Donations • Support through volunteering of your time

5. Fund-Raisers Review the Guidelines • PTOs • http://www.cfisd.net/campuses/pto/pto.htm • Booster Clubs • http://www.cfisd.net/campuses/booster/booster.htm Fund-Raiser Guidelines are included on these webpages.

6. Tips - Fund-Raisers to Hold • What types of fund-raisers can your organization hold? • What types of fund-raisers have you held & why? • What are the sales tax implications? • What vendor should be used? • Have you received permission to hold the fund-raiser?

7. Fund-Raisers that can be Held • The type of fund-raisers that your organization can hold depends on whether you have the following from the Texas Comptroller’s Office: • Sales & Use Tax Exemption – allows an organization to hold two “one-day tax-free” sales days per calendar year. • Sales Tax Permit – allows an organization to sell taxable items in Texas. Apply on-line for a sales tax permit at http://www.cpa.state.tx.us/taxpermit/.

8. Check Your Status • Look up the status of your organization to determine if you have a sales & use tax exemption or permit at http://www.cpa.state.tx.us/taxinfo/sales/tp_db_search.html. • Exempt Organization Search & Verification– Sales & Use Tax Exemption • Sales Taxpayer Search– Sales Tax Permit • You may look up by name, EIN, or sales tax number.

9. No Exemption, No Permit • If your organization does not have a sales & use tax exemption and does not have a sales tax permit, then only the following types of fund-raisers can be held: • Sale of items that are tax-exempt by law – such as cookie dough, coupon books, etc. • Sale of Catalog Items – such as gift wrap, candles, etc.

10. Sales Tax Exemption • If your organization only has a sales & use tax exemption, you may sell: • Items that are tax-exempt by law – such as cookie dough, coupon books, etc. • Catalog Items – such as gift wrap, candles, etc. • Taxable items on two “one-day tax-free” sales days per calendar year.

11. Sales Tax Permit • If your organization only has a sales tax permit, you may sell: • Items that are tax-exempt by law – such as cookie dough, coupon books, etc. • Catalog Items – such as gift wrap, candles, etc. • Taxable items. • Most PTOs need a sales tax permit since they sell spirit items throughout the year. Some Booster Clubs do not need a sales tax permit since no taxable items are sold.

12. Sales Tax Exemption & Permit • If your organization has a sales & use tax exemption and permit, you may sell: • Items that are tax-exempt by law – such as cookie dough, coupon books, etc. • Catalog Items – such as gift wrap, candles, etc. • Taxable items on two “one-day tax-free” sales days per calendar year. • Taxable items.

13. Tax-Exempt Items By law, these items are tax-exempt. • Ads – Athletic Programs, School Newspapers, Posters, Yearbooks • Admission – Athletic Events, Carnivals, Dances, Dance / Drama / Musical Performances, Summer Camps / Clinics, Workshops, Project Graduation • Catalog Sales of Tax-Exempt Items – Cookie Dough • Discount / Entertainment Cards & Books • Food – Meals, Food, Candy or Soft Drinks and Concession-Stand Food is tax-exempt if the sales are part of the organization’s fund-raising drive and all net proceeds go to the group for its exclusive use. Does not include the sales of alcoholic beverages. • Magazine Subscriptions for more than 6 Months • Services – Car Wash, Cleaning

14. Taxable Items • Auctions and Silent Auctions (exception is tax-exempt items, such as gift card or coupons) • Calendars and Day Planners • Candles • Catalog Sales of Taxable Items – Gift Wrap • Clothing including T-Shirts • Flowers – Roses, Carnations, Arrangements • Gift Wrap, Balloons, etc.

15. Taxable Sales • Magazines – When Sold Individually • Magazine Subscriptions – Sold for Less than 6 Months • Plants – Holiday Greenery, Poinsettias, Floral Arrangements • Rummage, Yard & Garage Sales • School Store & Spirit Items • School Supplies • Yard Signs

16. Type of Fund-Raisers • What types of fund-raisers have you held & why? • For Service Purposes (emphasis is not on profit)– School Supplies or a special event, such as a Carnival • For Profit • Consider profit made from previous fund-raisers as compared to the work involved. • Consider sales tax implications.

17. Sales Tax • Did you know . . .Even though you have a Texas sales and use tax-exemption: • You may need to collect sales tax and • You may need to pay sales tax.

18. “One-Day Tax-Free” Sales Days • Organizations exempt from sales tax are entitled to two (2) “one-day tax-free” sales days per calendar year not school year. Suggest holding one fund-raiser in the Spring and one in the Fall. • Sales of taxable items are taxable unless you use a “one-day tax-free” sales day. “One-day” is 24 consecutive hours.

19. “One-Day Tax-Free” Sales Days • Select the taxable fund-raisers (exclude catalog sales and book fairs) that involve the most money received (highest gross) not the largest profit. • Document which fund-raisers are your “one-day tax-free” sales days. • You may take orders and receive the items on one day or deliver the items to the customers on one day. This would be considered your “one-day tax-free” sales day.

20. Catalog Sales • For catalog sales of taxable items and book fairs, you are considered an agent of the vendor. These fund-raisers are ALWAYS taxable. • As an agent of the vendor, you cannot use a “one-day tax-free” sales day. • Make sure that you and the vendor are in agreement on the handling of the sales tax before the fund-raiser is held. • Collect the sales tax and remit it to the vendor. The vendor will pay the sales tax to the Texas Comptroller’s Office.

21. Sales Tax Included? • If you have a taxable sale, will sales tax be included in the sales price or will it be added to sales price? • For catalog sales and book fairs, easiest to have sales tax included in the price. • If sales tax is included in the sales price, must state on brochures or signs.

22. Sales Tax Holiday • Usually in August, the State has a sales tax holiday. • Sales Tax Holiday – August 16, 17, and 18, 2013 • School Starts – Monday, August 26, 2013 • If you sell items that meet the criteria of the sales tax holiday and sell them during that holiday, the items are tax-free. Is not considered as one of your “one-day tax-free” sales days.

23. Fund-Raiser Taxable? • If you are not sure if your fund-raiser is taxable, contact the Texas Comptroller’s Office at 1-800-252-5555. • Document the date, time, who you spoke with, your questions, and the answers received.

24. Fund-Raiser Vendors • Is vendor an Approved Fund-Raiser Vendor?The Approved Fund-Raiser Vendor list is on the PTO and Booster Club Guidelines webpages. • If they are not on the list, request the vendor to submit applicable information to Marty Edwards to become an approved fund-raiser vendor.See http://www.cfisd.net/dept2/general/fund_guide.htm.

25. IRS - Prohibitions • Cannot require anyone to participate in a fund-raiser. • Cannot require that a certain amount be sold or that a certain amount be donated in lieu of fund-raising. • Cannot penalize anyone for not participating in a fund-raiser.

26. Individual Accounts • Individual Accounts for Revenues Raised - PROHIBITED • Cannot credit an individual based on revenues raised to offset that individual’s expenses. • Amount raised must benefit a campus / organization as a whole. • For fees and expenses that students must pay, these can be tracked individually. You just cannot reduce the fees or expenses based on funds raised.

27. Fund-Raising Activity Report • Permission Request – Due by September 30 or at least 30 days before fund-raiser is to be held. Submit to Principal (PTOs) or Sponsor / Principal (Booster Clubs).For fund-raisers to be held at the beginning of the school year, submit your permission request as soon as possible. • Operating Report – Complete within one week of projected end date of fund-raiser. Complete applicable attachment. Submit to Treasurer for PTOs and Booster Clubs.

28. Fund-Raising Activity Report • Examples • Catalog / Product Sales (Attachment A) • Ticket Events with Entry or Participation Fees (Attachment B) • Concessions (Attachment C) Before the first concession sale, the products should be counted and documented. The ending inventory may be performed after each concession or less frequently. At a minimum, inventory the products at the end of each semester. The internal controls over products normally improve when inventories are performed more frequently. Also document any purchases of products that are added to the inventory during this time period.

29. Confused? Permission? Permit? Sales Tax? Activity Report? Exemption? All I want to do is help raise money for the students!!

30. Contributions / Donations Contributions / Donations to a PTO / Booster Club • May be monetary, equipment or other tangible item. • Must be a 501(c)(3) entity as approved by the IRS to receive a charitable contribution. • Provide contributor with your organization’s employer’s identification number (EIN).If requested, provide a copy of your IRS Determination Letter.

31. Revenues • For fund-raisers involving orders, require money to be collected at the time orders are placed. You can determine if any checks are returned prior to delivering products. • Have checks made payable to the PTO or the Booster Club. • Endorse checks and deposit money as soon as possible to prevent the loss of funds.

32. Revenues • As money for a fund-raiser is received, have two people count the money before giving it to the Treasurer for deposit. • Do not use cash received to pay expenses. Deposit money first and then write checks for expenses incurred. This method provides a good audit trail. • Suggest making a copy of all checks received prior to deposit for backup purposes.

33. Expenditures • For funds raised, use the money as originally budgeted or designated. If a change is needed, inform your membership and request approval as required by your bylaws. • Use funds raised in the year the fund-raisers are held, when possible, so that the parents / students that raised the funds will see the benefit.

34. Expenditures • If an organization is working towards a project that will take several years to fund, inform your membership. • Do not purchase gifts for officers, sponsors, or principals with PTO or Booster Club funds unless the gift is a token of service recognition or special award with a value of $25 or less according to the IRS.

35. Financial Deadlines • District • File Financial Report and Review Report with Principal (PTOs) or Sponsor, Principal, and Marty Edwards (Booster Clubs) by 9/15 each year.Due Date for 2012-13 Reports – 9/16/2013 • For fund-raisers to be held, submit Permission Request of the Fund-Raising Activity Report to the Principal (PTOs) or Sponsor / Principal (Booster Clubs) by 9/30 or at least 30 days prior to a fund-raiser being held.

36. Financial Deadlines • Contributions to the District • At the end of the Fall and Spring semesters, compile a list of expenditures that were used to benefit students, a student group, or a school.Examples of benefits provided may include money given directly to a student group or school, items purchased for a student group or school, and assistance provided to pay for all or a portion of a student trip / competition. Most money expended by a PTO or Booster Club would be used to benefit students, a student group, or a school. • This list should be provided to your Principal, Sponsor, or PIE Liaison. • The school should provide a contribution acknowledgment form to the PTO / Booster Club for the above contributions or benefits provided.

37. Financial Deadlines • Texas Comptroller’s Office – If your organization has a sales tax permit, then you must: • Submit a Texas Sales and Use Tax Return • Due either monthly, quarterly, semi-annually, or annuallyon the 20th day of the month following the end of each reporting period.If quarterly, due by 1/20, 4/20, 7/20, and 10/20. • Each time a return is submitted late, a $50 penalty plus interest is owed.

38. Sales Tax Included Calculation Example: Sales Price included Sales Tax Total Sales - $1,000, Tax Rate – 7 ¼% $1,000 / 1.0725 = $932.40 (taxable sales) $932.40 x .0725 = $67.60 (sales tax) $932.40 + 67.60 = $1,000

39. Financial Deadlines • IRS • Must file Form 990-N, 990-EZ, or 990 annually. • 990-N – (online) Gross Receipts are $50,000 or less • 990-EZ – Gross Receipts are greater than $50,000 and less than $200,000 • 990 – Gross Receipts are $200,000 or more • Due 4.5 months after fiscal year end. • Fiscal Year End – May 31 – 990 Form due October 15 • Fiscal Year End – June 30 – 990 Form due November 15 • If form is not filed for 3 consecutive years, the IRS automatically revokes the organization’s 501(c)(3).

40. Record Retention - Permanent • Internal Records • Registration & Approval Form (Booster Club) • Articles of Incorporation or Association • Bylaws / Charter / Constitution • Minutes from Meetings

41. Record Retention - Permanent • State of Texas • Sales Tax Permit Application • Sales Tax Permit • State Sales & Use Tax Exemption Notification • Certificate of Incorporation (if applicable) • State Franchise Tax Exemption Notification (if applicable)

42. Record Retention - Permanent • IRS • Form SS-4 – Application for Employer Identification Number (EIN) • Form 1023 – Application for Recognition of Exemption (include all attachments) • Form 8718 – User Fee for Exempt Organization Determination Letter Request • Acknowledgment of Your Request • Determination Letter

43. Record Retention - Temporary • Keep the temporary records for a minimum of the current year and the four (4) previous years.Before discarding any records, confirm with the Texas Comptroller’s Office and the IRS that your organization is in good standing and that no open items or issues exist related to the time period involving the records that you would like to discard.

44. Record Retention - Temporary • Financial records and backup including checkbook and bank records • Financial Reports and Review Reports • Contributions received by the organization • Financial Aid Guidelines (if applicable) • Sales Tax Reports • IRS 990-N, 990-EZ or 990 forms filed • Correspondence with the Texas Comptroller’s Office and the IRS

45. Contacts • Financial Questions Carol Oman – Director of Internal Audit – 281-897-4111 carol.oman@cfisd.net Pat Stefan – Internal Auditor III – 281-517-6537 patricia.stefan@cfisd.net Janett Tapia-Gonzalez – Internal Auditor II – 281-517-2941 janett.tapia-gonzalez@cfisd.net • Fund-Raisers Marty Edwards – Director of General Administration 281-517-6367 – terry.edwards@cfisd.net • Contributions to Schools, Student Groups & District Pam Scott – Partners in Education Director 281-894-3950 – pamela.scott@cfisd.net

46. Contacts • Texas Comptroller’s Office – Sales Tax General Information – 1-800-252-5555http://www.cpa.state.tx.us/taxinfo/sales/ Exempt Organizations Department 1-800-531-5441 ext. 34142 http://www.cpa.state.tx.us/taxinfo/exempt/index.html • Internal Revenue Service (IRS) Tax-Exempt Organizations1-877-829-5500 (toll-free)www.irs.gov (Select Information for Charities & Non-Profits in the upper right-hand corner of this webpage.)

47. Contacts The following websites have copies of IRS tax returns. Some reports are free while other reports may be purchased. • Economic Research Institute (ERI) http://www.eri-nonprofit-salaries.com/index.cfm?FuseAction=NPO.Search&SearchType=Advanced&CobrandID=0 • GuideStar http://www.guidestar.org/Home.aspx • National Center for Charitable Statistics (NCCS) http://nccsdataweb.urban.org/PubApps/search.php

48. Questions • ???