Understanding Sanctioning in Edmond Public Schools

Slide Note

Sanctioning in Edmond Public Schools allows organizations to operate for the benefit of students by permitting fundraising on school property and providing financial exemption from certain laws. However, it does not equate to control as organizations manage their own funds and must comply with relevant laws. The application process involves annual submissions with financial information, subject to approval by the School Board. Using software reports for financial management and ensuring outgoing and incoming officers are involved in the process are recommended steps. Additionally, 501(c)(3) status for tax exemption is highlighted.

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Edmond Public Schools Sanctioned Organizations

What is Sanctioning? Recognition & Attribution Allows organization to operate for benefit of students Permits fundraising on school property 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 NOTuse school district s tax ID number or tax-free status Board of Education is NOT responsible for ensuring that organization complies with applicable state and federal laws

Sanctioning Application Process Apply annually applications emailed end of April Due in EPS business office by mid June each year Include Financial Information from June of prior year through May (June 1, 2023 to May 31, 2024) see example next slide Approval by School Board at August meeting Board can request records at any time Board can withdraw sanctioning at any time Applications are subject to Open Records Act

Using Your Softwares Profit and Loss Report For Your Cash Flow Statement 1. Date range for report must be June 1 of prior year to May 31 of current year. 2. Write in the June 1 beginning cash balance. 3. Add Total Income. 4. Subtract Total Expenses. 5. This gives the ending balance which must reconcile to the bank statement.

Application Process cont. Recommend that outgoing and incoming officers fill out application together. This is a great way to pass down information. Bank statements please review and sign the statements prior to submitting. Organizations with debit cards and electronic payments must submit an example of the controls in place in addition to the reviewed bank statement.

501(c)(3) Status Exemption from income taxation by the IRS under section 501(c)(3) of the Internal Revenue Code Certificate of Incorporation and Bylaws must be filed with the Secretary of State Criteria and process for applying can be found in IRS Publication 557 PTAs that are members of the National Parent Teacher Association are exempt under a group and national exemption Group exemption also available under Parent Booster USA

501(c)(3) Advantages Income is tax exempt (except unrelated business income, e.g. advertising) Contributions received are tax deductible to the donor Many corporations and foundations require 501(c)(3) status before they will make contributions Individual members are protected from personal liability Eligible to hold bingo games in Oklahoma

Obtaining 501(c)(3) status If you have not yet received your 501(c)(3) determination letter from the IRS, EPS recommends contacting Parent Booster USA (www.parentbooster.org) PBUSA is a non-profit organization that provides services to booster clubs at reasonable prices Tax exempt status may become a requirement of sanctioning in the future

Parent Booster USA Founded in 2004 by an attorney skilled in nonprofit and tax law, PBUSA has more than 3,500 member organizations in 48 states with a 95% annual renewal rate. PBUSA provides peace of mind for parent volunteers, school administrators and school district leadership. https://parentbooster.org/member-resources

Tax Return Requirements ALL nonprofit groups are required to file tax returns The IRS requires that any organization, regardless of income, MUST file the appropriate tax return Organizations recognized as tax-exempt file the appropriate form of IRS 990 If an organization does not have tax-exempt status it may be required to file a corporate tax return and pay tax on net income

Tax Return Requirements cont. If a booster club does not file a tax return, it risks future penalties and interest for failure to do so If a booster club DOES NOT have federal tax-exempt status, filing a Form 990, the tax-exempt return, will raise questions The IRS expects all organizations to begin filing taxes immediately upon obtaining an Employer Identification Number (EIN) Nonprofits that fail to file federal income taxes on time for three consecutive years automatically lose their tax- exempt status

Federal Filing Obligations If 501(c)(3), 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) If gross receipts < $200,000 AND total assets < $500,000 file 990-EZ Searchable data base of exempt organizations as well as revoked exemptions is available at http://www.irs.gov/Charities-&-Non- Profits/Exempt-Organizations-Select-Check If an organization has unrelated business income of more than $1,000, it must file an unrelated business tax return, Form 990-T in addition to the Form 990 (Taxes will be due on this income regardless of the 501(c)(3) status) If non 501(c)(3), Form 1120 Corporate income tax return is required

State Filing Obligations Oklahoma automatically exempts organizations with IRS 501(c)(3) status from Oklahoma state income tax. However, organizations must file the OK tax return, Form 512E. The form is due on the same day the IRS Form 990 is due. This makes the form's due date the 15th day of the 5th month after the end of your fiscal year. In simple terms, that is May 15 for organizations on a January 1 - December 31 calendar year. From parentbooster.org

State Filing Obligations cont. In Oklahoma, school fundraising organizations, including PTAs, PTOs, and booster clubs, must file exemption from charity registration if the group is "authorized" by the school. Apply for exemption , including your school's authorization letter and a $15 filing fee with theOklahoma Secretary of State. From parentbooster.org

State Sales Tax Not required to collect and remit sales taxes: A public or private student group/organization, or A 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 not included), or An organization which has acquired a sales tax permit from the Oklahoma Tax Commission for items purchased for resale, or An organization which has acquired a sales tax exemption from the Oklahoma Tax Commission (The OTC allows ONE exempt parent-teacher group per school) Additional information can be found on Oklahoma Tax Commission Agency Rules pgs 464-465

State Sales Tax cont. Per the Oklahoma Sales Tax Exemption Packet (one PTO per school): The entities that qualify for sales tax exemption in Oklahoma are specifically legislated. Therefore, not all entities that are recognized by the Internal Revenue Service as tax exempt pursuant to 26 USC 501(c)(3) are exempt from sales tax in Oklahoma. The organization must have a Federal Identification Number before applying. Oklahoma has ruled that Booster Clubs are NOT exempt. Booster Clubs may apply for a Oklahoma sales tax resale permit. This permit would enable the group to make purchases for resale exempt from sales tax. Periodic sales tax returns will be required for a permit holder. Sales tax must be charged to the customers for all goods sold. Collected taxes must be remitted with periodic returns.

State Sales Tax cont. Collect and remit sales tax on goods sold Pay sales tax on purchases PTA NO NO PTO NO YES PTO w/Sales tax exemption * NO NO Booster Club YES YES Booster Club w/sales tax permit YES MAYBE ** *Limit one PTO per school per OTC **Only on items for resale are exempt

Payments for Professional Services All individuals who will have contact with our students must have a current, clear background check on file with the district Payment for professional services is strongly encouraged to be made through the school s activity fund in order to ensure compliance This practice will alleviate the need for your club to file form(s) 1099 for these services Funding to the activity fund can be by donation or reimbursement depending on school s preference

Payments for Professional Services cont. If your club does pay directly for any of the following, a form 1099-MISC must be issued to the payee for any payments totaling $600 or more in a calendar year: Services, Prizes/Awards, Rents, Royalties, Attorney fees, Medical services A 1099-MISC is not required for payments to companies/individuals who only provide goods

Merchant Accounts EPS does not approve or chose the merchant processor or cash payment apps for booster clubs. Merchant accounts & cash payment apps must be linked to business bank accounts (not personal) Income and expense should be categorized appropriately on the cash flow statement as opposed to labeling as credit card receipts or similar non-specific terms.

Debit Cards EPS strongly discourages the use of debit cards by any sanctioned organization If a debit card is used, observe the following safeguards: Monthly statements reviewed and signed by two officers who do NOT have access to the debit card Debit card receipts are approved and signed by two officers other than the purchaser Debit card should be kept in secure location Purchases should be reported in detail on reports

Raffles and Bingo Raffles are allowed under Oklahoma law for accredited public schools and affiliated student groups, PTAs, PTOs and 501(c)(3) organizations. For bingo games where consideration is paid to play, organization must be a 501(c)(3) and must obtain a license or exemption from the ABLE Commission. May be required to report prizes: Raffles - winnings >=$600 AND at least 300 times amount of wager (net of amount of wager) Bingo - winnings >= $1,200 before deducting wager May be required to withhold federal tax: Raffles winnings >$5,000 Bingo no FWT unless they don t provide TIN, then backup w/h 28% Can t provide alcohol as prize. FYI: Although sanctioned organizations can hold bingo games, schools cannot. Raffles are allowed for both.

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: Compensation for services (e.g. payments to coaches, band directors, etc.) Gifts to employees of the district (unless de minimis) Tangible personal property of minimal value may be non-taxable (dollar threshold for de minimis is not defined in law) Cash and gift cards are NEVER de minimis, and thus ARE taxable regardless of amount and should be avoided. Call the EPS Business Office for guidance before making a taxable payment or giving a taxable gift!

Compensation for Services Compensation to EPS employees may not be allowed for reasons of conflict with contract terms or school equity issues Check with the business office before making any compensation arrangements with EPS employees Any payments to employees are considered taxable wages and must be made through EPS payroll department Organization will reimburse the school for the compensation amount PLUS employer FICA and Teachers Retirement (totaling 25.39%) Employee will be responsible for employee FICA and income tax withholding

Gifts to District Employees If a sanctioned organization gives a gift to an employee, this is deemed a taxable fringe benefit by the IRS. Once an employee receives tangible gifts with an accumulated value of $75 in a calendar year, this exceeds the de minimis threshold and the entire amount is taxable income. Inform the district of any gifts (even if individually de minimis) BEFORE Winter Break. The business office must combine gifts from every source for W-2 reporting. If gifts are given school wide, submit a spreadsheet listing the names of recipients, item(s) given and dollar amount. Please turn in promptly to Michele Russell in business department. The District will invoice the sanctioned organization for the employer FICA.

Gifts to District Employees cont. Inform recipient up front of the possible tax consequences of your gift. o The employee will pay the employee FICA, federal, and state taxes on gifts. The following are not considered taxable fringe benefits: o Gifts to employees from individual parents o Meals provided to staff during normal work hours if paid directly from booster club funds o Employee reimbursements for qualified business expenses with appropriate receipts (without receipts it is a taxable gift)

Hosting Events on School Property All building usage is subject to the provisions stated in District Policy #5330 Fundraising events held outside of school hours require a nominal rental fee of $20 an hour, proof of insurance, and a completed contract Activity Booking Form must be completed and approved by site principal Fundraisers must be safe (e.g. no dunk tanks) and follow EPS guidelines (if not allowed in school, not allowed as fundraiser) Any extra hours worked by EPS staff for the event (custodial, event supervisor, auditorium tech) will be billed to the club All vendors (such as food trucks, photo booths, and bouncy houses) must supply proof of adequate liability insurance and a signed Sex Offender Affidavit on file A list of approved food truck vendors is available from the business office Contact Michele Russell for rental and food truck information at Michele.Russell@edmondschools.net

Policy #5330 Facilities Use page 2 section II paragraph C C. PTA/PTO groups and other specifically sanctioned parent organizations fall into a special class of facility users. Such organizations that conduct fund raising activities utilizing the facilities identified will be subject only to the provisions noted below: 1. The organization will furnish the school district with a liability policy covering the specific activity or event. The policy must name the Edmond Public Schools as an additional insured. 2. The organization will be assessed a utility fee in the amount of $20 per hour for utilization of a gymnasium, cafeteria, auditorium, or athletic facility. 3. In addition to the rental fee, organizations shall be charged a minimum $30 per hour fee for custodial personnel, and/or auditorium technicians, and/or a facility supervisor, as applicable. 4. The requirement to obtain liability insurance coverage (except for hired services as noted in section I paragraph D above) as well as the utility fee shall be waived if all proceeds from the activity are deposited into the school s appropriate activity account.

District Beverage Agreement Previously, the District had an exclusive rights agreement with Southwest Beverages-Coca Cola which extended to sanctioned parent organizations. This year, the District is only maintaining the exclusivity to vending machines. Sanctioned organizations are still encouraged to use Southwest Beverages when possible, but it is not required. Sanctioned organizations are no longer restricted to selling only Coca-Cola products.

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 (but may ask for assistance with expenses) School is potentially liable if injury occurs In order to ensure compatibility and ongoing support, all technology items should be purchased by the district.

Title IX Considerations for Booster Clubs 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 Required annual election or affirmation of officers Required periodic meetings open to the membership Required 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 Emails must come from sanctioned organization, not from EPS employee. A principal/sponsor can forward email written by sanctioned org. Sanctioned org. need a locked drop box for payments and forms. EPS employees cannot handle the money.

RESTRICTIONS REGARDING OFFICER POSITIONS Employees of Edmond Public Schools are restricted from holding certain offices within a sanctioned organization. Officer positions that typically have fiscal control (e.g. President and Treasurer) are restricted as follows: Any full-time employee that is assigned to the school that is supported by the organization cannot hold the office of President or Treasurer Any relative of a full-time employee that is assigned to the school that is supported by the organization cannot hold the office of President or Treasurer Relative is defined as: father, mother, brother, sister, spouse, child, cousin, aunt or uncle, including generational extensions (e.g. grandparent, great-uncle)

RESTRICTIONS REGARDING OFFICER POSITIONS cont. A substitute worker that is not on a long-term contract may serve as President or Treasurer Should the by-laws of an organization define a different position as having fiscal responsibility, said position would also be restricted

Ways to Protect Against Liability Insurance and bonds Good procedures Written documents to provide club memory Well thought-out activities and services (no dunk tanks) Consider national affiliation (PTA vs. PTO) Volunteer Protection Act provides some protection if an incident occurs within the scope of the volunteerism and there is no misconduct or negligence

Best Sanctioning Financial Practices Issue numbered receipts Segregate duties as much as possible It takes two Check payments must have two signatures Provide financial transparency to organization members and district File proper IRS forms correctly and timely Understand Board of Education sanctioning policy, guidelines and procedures. Controls in place if using debit cards to prevent misuse.

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

Minimum Internal Controls - Receipts Money kept safe with controlled access. School staff cannot collect money for PTA/PTO/Booster club. 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.

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. Two signatures required on checks. Check signer reviews documentation before signing check. Cancelled checks listed and accounted for. Bank statements reviewed and signed by two officers other than debit card holder. Debit card receipts approved & attached with bank statement.

Please let us know if any contact information changes from what was on your application. Cheryl Fenech 405-340-2809 cheryl.fenech@edmondschools.net Officer changes Updated information for officers Email address Phone number Banking information Updated signature cards Tax returns filed after application submitted

Contact Information for EPS Nicole Ball, Finance Supervisor Phone: (405) 340-2881 Email: Nicole.ball@edmondschools.net Cheryl Fenech, Sanctioning Assistant Phone: (405) 340-2809 Email: Cheryl.fenech@edmondschools.net This presentation, along with other resources, will be posted on our website: edmondschools.net/district/departments/business/ sanctioned-organizations/