Sanctioned Organizations Presented by John Little, CFO Muskogee Public Schools

What is Sanctioning? Recognition & Attribution Allows organization to operate for benefit of students Finances are exempt from school laws over activity fund Board of Education has complete discretion whether to sanction a group

Sanctioning Does NOT Equal Control Board of Education does not control funds; organizations operate from their own bank accounts Organizations must obtain their own tax ID number Organizations may NOT use school district’s number or tax-free status Sanctioning is not restricted to tax-exempt organizations tax ID

State Law Regarding Sanctioned Organizations Section 88. Exemption of Certain Funds. Those funds which are collected by programs for student achievement and by parent-teacher associations and organizations that are sanctioned by the school district board of education shall be exempt from the provisions as outlined in Section of this title. Each school district board of education shall adopt policies providing guidelines for the sanctioning of organizations and associations exempted or applying to be exempted pursuant to the provisions of this section. The guidelines may include but not be limited to examinations of financial and performance audits performed on each such organization and association. ( )

Application for Sanctioning School Board Policy will dictate the process and timing for application Muskogee Public School district requires annual application with a questionnaire, financial information, and supporting schedules where applicable

Sanctioning Criteria  Must be operated by adults-not students  Must have by-laws  Must include one person from faculty  Mandatory training for officers annually  NO fund raising during school hours  May not use school materials for fundraising  Bank, ID #, & tax-exempt status separate from school

Sanctioning Criteria  Responsible for filing any and all tax forms  Keep the Board informed plans & projects  Must be sanctioned by the Board prior to fund-raising activities  Must be sanctioned by the Board prior to contributing to the school  The Board may require an accountant audit if it so wishes

Apply annually Due in MPS Finance office by August 1st Include Financial Information from July of prior year through June Approval by School Board at Jul/Aug meetings Board can request records at any time Board can withdraw sanctioning at any time Applications are subject to Open Records Act MPS APPLICATION PROCESS

MPS Application Process Documents to submit Application form Financial statement By-Laws (if new or amended since last application ) Online Training List of Donations Received >= $1,000 Deliver to: Mika Barton, Treasurer Muskogee Public Schools 202 West Broadway Muskogee, OK

MPS Application Process Documents to submit Beginning List of donations received>=$1,000  Name of donor Item description Date donated By-Laws (if new or application) amended since last

Compensation & Gifts to District Employees The IRS has deemed certain payments to district employees by sanctioned organizations to be taxable as if paid by the district. Such payments should be made through district payroll and reported on the employee’s W-2 (including FICA). The sanctioned organization should reimburse the district for the wages plus employer FICA. The current policy of the District states that NO administrative fees or stipends to officers, coaches, school employees or others will be permitted.

Compensation & Gifts to District Employees Tax consequences of gifts to district employees  Many organizations will opt to let parents individually give gifts to teachers rather than giving gifts from the organization. This is especially helpful to avoid extensive record-keeping for gift cards (which are never de minimus.)

Tax Status of Sanctioned Organizations Exemption under IRC 501(c)(3) Organization must apply and receive determination letter from IRS PTAs are generally exempt under their national organization’s exemption; PTOs who are not members of the national organization must apply their own to be tax exempt Provides exemption from federal income tax Donations to the organization are tax-deductible the donor onon toto

Common Mistakes made by 501(c)(3) Failure to file Form 990, the annual "Return of Organization Exempt From Income Tax,". ◦ If gross receipts are normally $50,000 or less, may generally file 990-N (e-postcard) Failure to file for 3 consecutive years results in automatic revocation of 501(c)(3) status ◦ Failure to issue 1099s and report to the IRS payments of $600 or more for compensation (contract labor).  Failure to report prizes awarded in raffles, bingo, etc. on form W-2G.

ol Raffles and Bingo  Must be a 501(c)(3) to conduct raffles or bingo.  For bingo, must obtain a license or exemption from the ABLE Commission.  May be required to report prizes: Raffles - winnings >=$600 AND at least 300 times amt of wager (net of amt of wager) Bingo - winnings >= $1,200 before deducting wager  May be required to withhold federal tax: Raffles – winnings >$5,000 Bingo – no FWT unless winner doesn’t provide TIN, backup w/h 28% then  Cannot provide alcohol as prize. FYI: Although sanctioned orgs can hold bingo games, school activity cannot. Raffles are ok for both.

$tate $ales Tax Issues Not required to collect and remit sales taxes: A public or private student group or organization, or 501(c)(3), or PTO or PTA (even if not a 501(c)(3)) Not required to pay sales tax on purchases: A PTA (member of national association; PTOs are notincluded),or A 501(c)(3) AND annual purchases are less than $15,000, or  An organization which has acquired a sales tax permit from the Oklahoma Tax Commission for items purchased for resale. Under Oklahoma statute Title 68 Section 1356 (13), there are 7 types of entities that qualify for sales tax permits, including parent/teacher organizations/associations and 501(c)(3) organizations.

Property Donated by Sanctioned Organizations Must comply with all applicable codes Must be free of liens Becomes property of the district School must maintain and inspect School is potentially liable if injury Equity issues

Title IX Considerations Booster Clubs for Female athletes must be given equivalent opportunities There must be no discrimination in the provision of athletic opportunities One of the many factors considered in determining overall compliance with Title IX is the funding level of related programs. Booster club funds are considered in this analysis

RECOMMENDED PRACTICES Annual election or affirmation of officers Periodic meetings open to the membership Full financial disclosure to the membership Surety bonds for treasurer and others who handle money Officer liability insurance System of internal controls over cash, including segregation of duties as much as possible

SEGREGATION OF DUTIES Ideally, The person who orders/purchases an item should not be the one who pays for it. The person making the purchase should not be the one who approves it. The person who collects money should not be the one who deposits it. The person who reconciles the bank account should not be the one who takes the collections. The person who writes the checks should not be the one who reconciles the bank account.

RECOMMENDED MINIMUM INTERNAL CONTROLS - RECEIPTS Money kept safe with controlled access. Collections listed when received. Money deposited intact by a person other than the one collecting it. Listed collections verified to deposit total. Bank account reconciled monthly. Bank reconciliations reviewed by another.

RECOMMENDED MINIMUM INTERNAL CONTROLS - DISBURSEMENTS All purchases approved in advance by someone other than the person making the purchase. Goods checked to see they are received as ordered. Invoice checked to items received and order pricing; signed by person who accepts responsibility. Signature and countersignature required on checks. Check signer reviews documentation before signing check. Cancelled checks listed and accounted for.

GOOD BUSINESS PRACTICES PROTECT YOUR ASSETS, YOUR OFFICERS, AND YOUR MEMBERS!

Please let us know if any contact information changes from what was on your application.

Application, Policies & Procedures can be found at:   Departments  Finance  Application for Sanctioning