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Boost your knowledge with authoritative guidelines and non-profit status insights for running booster clubs and PTOs in Edinburg Consolidated Independent School District. Presented by Delia Orellana, this ECISD workshop aims to support your organization's needs.
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Running Your Booster Club or PTO Edinburg Consolidated Independent School District Presented By: Delia Orellana ECISD District Auditor 2019-2020 Booster Club & PTO Training
ECISD Thanks You! • Thank you for your ongoing support of our students and the programs of the Edinburg Consolidated Independent School District! ECISD values your commitment and wants to extend support to help cover your needs. • Booster Clubs and Parent Groups represent the school they support. Therefore, it is necessary for them to follow the guidelines set forth by the District. This is done to protect our parents, patrons, and most importantly, our students. • ECISD currently has 33 PTOs and 38 Booster Clubs supporting its schools and students
Reminder • This workshop is intended to provide you with general information, but it does not substitute for legal advice from an attorney and a CPA! • The regulatory information discussed does not include all laws or rules that may apply to your particular situation. • Booster Clubs and Parent Organizations should obtain competent independent counsel, such as a Certified Public Accountant (CPA) or an attorney, to address accounting and tax matters related to their specific circumstances. The cost of these services would be the Booster Club’s or Parent Organization’s responsibility. In addition, the IRS and the Texas State Comptroller’s Office may be contacted for questions related to your organization’s specific situation.
Today’s topics • Authoritative Guidelines • Non-Profit Status • How to Operate • How To Become a NonProfit PTO
Booster Clubs & PTOs are Governed by Various Entities ECISD - GE Local Board Policy University Interscholastic League (UIL), Internal Revenue Service (IRS), State Secretary’s Office, and State Comptroller’s Office Authoritative Guidelines
GE (Local) Board Policy General Overview • Booster and Parent Organizations must be consistent with the District’s objectives and in accordance with board policy, UIL Guidelines, financial and audit regulations. • The Superintendent and the principal, as applicable, shall have the authority to veto any proposed action of the organization. Failure to Follow GE (Local) Policy The organization shall cease to be recognized by the Board as a legitimate school-related club or organization. Any privileges afforded to the organization as a District-affiliated organization shall cease
UIL Guidelines – ALL areas Academics, Athletics, and fine arts Coaches and Directors of UIL academics, athletics and fine arts can not accept more than $500 in money, product or service from any source as recognition or appreciation for their involvement in UIL activities.
UIL Guidelines - Athletics Athletic Booster Rules: • Booster Clubs must receive district approval before raising funds. • Booster cannot give anything to students, including awards. • School must give prior approval for any banquet or get-together given for students. • Athletic booster funds shall not be used to support athletic camps, clinics, private instruction or any activity outside of school. • Boosters may donate money or merchandise to the school with prior approval from administration. • Donations can be used to cover the cost of transportation or out of town meals, but remember it is a violation of UIL rules for the booster or an individual to pay for such costs directly. For more information regarding UIL Guidelines for Booster Clubs, please visit the UIL Website.
UIL Guidelines – Athletics (cont.) Athletic Booster Clubs - Gifts to Student Athletes • Student athletes are prohibited from accepting valuable consideration for their participation. • Valuable consideration is defined as tangible or intangible property or service including anything that is useable, wearable, saleable or consumable. • With permission of the Superintendent or principal, athletes can accept from their fellow students small “goodie bags” that contain candy, cookies or items that have no intrinsic value. Penalties for Violations of UIL Rules • Forfeiture of all varsity athletic eligibility for one calendar year from the date of the violation.
UIL Guidelines - Music Gifts To Students • Music boosters are allowed flexibility to purchase or give items to the students. • With prior approval, music boosters may also: • Assist with expenses for travel to music related activities, • Assist with expenses for educational fieldtrips, • Fund scholarships for private lessons or music camps, • Fund through school district the cost of patches, t-shirts, or other items for competition, For more information regarding UIL Guidelines for Booster Clubs, please visit the UIL Website.
Must be NonProfit Entities OPTION 1 – Become exempt through Group Exemption • Parent Booster USA @ www.ParentBooster.org (annual fee) or OPTION 2 – Do it yourself • Get an Employer Identification Number (EIN) – IRS.gov • Incorporate in Texas – Secretary of State Form 202 • Apply for Tax Exempt Status with IRS – IRS Form 1023 • Apply for Sales Tax Exemption in Texas – Texas Comptroller Form AP-207 OPTION 3 – Hire a 3rd Party to do it for you • CPA or Experienced Bookkeeper does Option 2 for you
Is Your Organization a NonProfit? IRS Tax Exempt Organization Look Up Tool - https://apps.irs.gov/app/eos/ If you find your organization’s name, click on the name and the next screen will show you the following items: • Determination Letter • Publication 78 Data • Form 990-N status • Revocation status (if your 501(c)(3) status was revoked)
Is Your Organization State Tax Exempt? Texas Tax Exempt Organization Look Up Tool - https://comptroller.texas.gov/taxes/exempt/search.php If you find your organization’s name, you will be able to view the following: • Exemption Verification Letter • State Taxpayer ID • Address • Exemption status (franchise, sales and hotel)
New Officers • Election of new officers must be formalized in meeting minutes • Read and review the ECISD Booster and Parent Organization Handbook • Submit your New Officer Information Sheet to your campus principal and auditors • Transfer records/passwords to new officers • Financial/accounting information, articles of incorporation, bylaws, minutes • ParentBooster.Org - if your organization is a paid member, update the contact person • Read and understand your organization’s bylaws and lookup your tax exempt status • Team sponsors/coaches cannot serve as officers
Bank Account • Update bank signature cards • Two to three authorized signers on the account • No ECISD employees may be authorized signers on the account • Authorized check signers cannot be family members or live in the same household. • Organization cannot possess a debit card or credit card • Dual signature on all checks written from organization’s bank account • Ensure that an EIN was used to set up the account • An individual’s social security number should never be used to set up the account • Social security numbers can only be used for “authorized signer” purposes, but they are not the identifying number for the organization’s account
Adopt an Annual Budget • Simplify the approval of your fundraising and expenses by creating a budget and approving it at the start of the school/fiscal year • It can be amended during the school year • To adopt it, the organization must follow the approval requirements stipulated in your bylaws
Conduct Meetings • Report to members regularly • Budget • Treasurers reports • Activities and programs, etc. • Maintain minutes of all board, committee, and other meetings • Sponsors must be invited to all your meetings • Meetings must be open to the public • The Superintendent and the principal, as applicable, shall have the authority to veto any proposed action of the organization.
Maintain financial records Maintain financial records of all financial activity (including, but not limited to): • Budget • Ledger of transactions • Monthly bank reconciliations • Treasurers reports • Copies of invoices and receipts, etc. • Monthly bank statements • Fundraiser approval forms • Profit and loss statements
Maintain and Review Formation Documents • Keep copies of • Bylaws • EIN number • State incorporation letter • IRS 501(c)(3) letter • State sales tax exemption letter • ECISD Booster and PTO Handbook • Review/amend bylaws, as needed • Review/amend financial controls, as needed
Cash Handling • Money receipted should be receipted • Cash/checks should be counted by two individuals • Tabulation of Monies Collected Form • Cash/checks received should be deposited into the organization’s bank account on a daily basis • Petty Cash Funds are NOT allowed (except when needed for fundraisers)
General Fundraising Rules • Ensure your fundraisers support your tax-exempt mission • Fundraising activities support/benefit the students and student activities • All fundraising efforts must be within federal, state and ECISD guidelines • Fundraiser Approval Forms • Submit to campus principal at least 2 weeks before the fundraiser begins • Campus principal and Assistant Superintendent of Finance and Operations must approve all fundraisers before they begin
Non-Allowed Fundraisers • Bingos (loterias) may not be used as a fundraiser unless the following applies to your organization: • Your organization has been an IRS 501(c)(3) organization for 3 years or more, and • Your organization obtains the proper license from the Charitable Bingo Operations Division of the Texas Lottery Commission • Raffles may not be used as a fundraiser unless the following applies to your organization: • Your organization has been an IRS 501(c)(3) organization for 3 years or more, and • This is your first or second bingo in the calendar year, and • You have printed the required disclosures on your tickets • Students cannot be required to seek donations
Purchase of Capital Assets (items $500 or more) • Purchases of capital assets must also be approved by the school principal • Purchases of capital assets that will be used for a school or a school program must be purchased through the district and become the property of the district. • Donations must be documented on a “Donation Form” which requires the principal’s approval
Annual Review • Your Treasurer and a second person should prepare an annual financial report of revenue and expenses. • At least two officers without check financial responsibilities (i.e., check signing; bookkeeping duties) should conduct an internal review of your organization’s documents to ensure that all transactions are properly supported
Annual Filings - Yes, you must still file annual tax returns • Make Sure you file your required annual federal and state tax returns! • IRS 990-series return (If You are a 501(c)(3) Non Profit) • Due 5 months and 15 days after fiscal year end • 990-N if less than $50,000 collected • 990-EZ if less than $200,000 collected • Failure to file for 3 consecutive years will result in your tax exemption being revoked • State franchise tax report • Due May 15th, regardless of your year end • Not required if you filed Form AP-207 and received notice from Texas Comptroller’s office recognizing you as tax exempt • State sales tax report (if sales are not tax exempt) • IRS Form 1099s (if you paid any independent contractor for services more than $600 during the calendar year) • Other Forms – inquire with IRS, State of Texas, etc. • Parent Booster USA will complete these forms for members after booster/PTO answers a few questions
Common Mistakes • Believing that the EIN number issued by the IRS indicates that an organization is exempt and does not need to pay taxes. • Believing that District policies do not apply to booster clubs and other related parent organizations • Obtaining 501(c)(3) status and forgetting to file an annual IRS Form 990 • Obtaining 501(c)(3) status and forgetting to obtain State Sales Tax Exemption • Not asking for help from District Auditors office
Most Common Audit Findings • Fundraiser Approvals • “…prepare a fundraising approval form for all planned fundraisers and submit the completed form to the campus Principal and the Assistant Superintendent for Finance and Operations for approval.” • Lack of Receipts / Invoices • “All Checks must be backed up by a corresponding receipt or invoice.” • Bank Account Reconciliations are Not Prepared • “Prepare a reconciliation of your bank account on a monthly basis.” • Tax Exemption • “…the organization should apply for its tax-exempt status from the IRS...”
ECISD Booster Club and Parent Organization Handbook • For additional and detailed information of the items discussed please refer to our “Booster Club and Parent Organization Handbook” at our District Website. • The handbook will contain specific links and addresses to the forms and resources discussed today, including: • IRS EIN and Tax Exemption • State Incorporation / Association • Texas Parent Teacher Association • Texas Comptroller of Public Accounts (Sales Tax) • University Interscholastic League (UIL) • ECISD Policies, Procedures and Forms
How to Become a Nonprofit Organization There are 3 Ways to Do This Option A – Parent Booster USA Option B – Do It Yourself Option C – Pay someone to do it
Option A – ParentBooster UsA https://parentbooster.org/Membership-Options • Covers all organizations (Boosters, PTOs, PTAs) • Initial Cost $495 for 1st year, $345 annually for renewal • Tax exempt as long as annual fees are paid • Obtains an EIN for your organization • Prepares Secretary of State Form 202 for you • Gives you “501(c)(3) umbrella exemption” through it’s group exemption • Prepares your organization’s annual IRS tax return (Form 990) • Provides online bookkeeper software • Provides online support and various templates
Option B – DO It Yourself Step 1 – Get an Employer Identification Number (EIN) • The EIN is the number the IRS issues to keep track of businesses, including nonprofit organizations. • Has nothing to do with having employees. • Any independent PTO/A or Booster needs an EIN to set up a bank account. (You should never use a personal social security number to open a bank account for your PTO) • Get an EIN using the online application on the IRS website. https://sa.www4.irs.gov/modiein/individual/index.jsp
Option B – Do It Yourself Step 2 - Become a Nonprofit Corporation • Form 202 – Certificate of Formation • Select Initial Directors, • Assign an Incorporator, • Register an Agent and an address, • Elect Members (who will be part of the organization) • Make sure that you include the IRS Required Clauses for 501(c)(3)s • “No” Clauses - activities, inurement, or campaigning and • Dissolution Clause • Texas Secretary of State Fee $25 http://www.sos.state.tx.us/corp/forms/202_boc.pdf
Option B – Do It Yourself Step 3 - Form 1023-EZ • Streamlined application for 501(C)(3) Status • Available for organizations with less than $50,000 in gross receipts per year • Less information requested • Identification of applicant, • Organizational Structure, • Specific Activities, • Foundation Classification – PTOs and Booster Clubs are normally set up as a “Public Charity” • Online Only Application • IRS fee of $275 • You still need to complete the EIN process, articles of association / organization, bylaws and include all required provisions on the documents.
Option B – DO It Yourself Step 4 - Texas Comptroller’s Form AP-207 • MUST submit it along with a copy of its IRS exemption letter to the Texas Comptroller. • No fees are charged for this exemption! • This application is done through the mail and takes around 10 days for the Comptroller’s office to process. • After the Texas Comptroller’s office notifies the organization of its exempt status, the club can make tax free purchases and hold their 2 one-day tax-free days. • If you are in a situation where you will need to pay tax, detailed instructions on how to collect and remit tax can be found in the ECISD Booster Club & Parent Organization Handbook.
Option C – Hire a CPA or Bookkeeper • You pay the same application form fees as In Option B Form 202 ($25) + Form 1023 (EZ $275 or Reg. $600) AND • You pay the CPA’s/bookkeeper’s fees Fees Vary AND • You pay the annual tax return preparation 990-N, 990-EZ or 990 (Fees Vary) • Most costly option
THANK YOU! Delia Orellana District Auditor Ph: (956) 289-2300 ext. 2063 DELIA.ORELLANA@ECISD.US JAVIER CAMPOS District Auditor Ph: (956) 289-2300 ext. 2155 JAVIER.CAMPOS@ECISD.US
