Student Activity Funds

1. Student Activity Funds Suzanne E. Smith, CPA MASBO February 10, 2010 9:00 – 10:15 a.m.

2. State Law • Code Section 37-7-301 gives the School Board the authority to expend school activity funds. • “Activity funds” are defined to include any funds received by school officials paid or collected to participate in any school activity, such activity being part of the school program and partially financed with public funds or supplemented by public funds. • In the simplest terms: • Game gate receipts • Student Fees • Student receipts for participation in field trips • Profit from yearbook sales • Profit from sale of school pictures

3. Where Confusion Often Comes In • In reality, other types of monies are often deposited into student activity funds: • Donations from outside sources • Profits on coke machines in the teachers lounge • Once deposited, these monies become student activity fund monies and are then limited to the same types of expenditures other student activity fund monies are limited to.

4. State Law – What Activity Funds Do Not Include • Activity funds do not include any funds raised and/or expended by an outside organization unless commingled in a bank account with existing activity funds, regardless of whether the funds were raised by school employees or received by school employees during school hours or using school facilities. • This doesn’t mean you can hold donated “cash” in a cash drawer to make needed purchases. • EXAMPLE: PTAs, PTOs, Booster Clubs • Rule of Thumb: A district should not control PTA, PTO, or Booster Club monies. • I recommend limited involvement in the accounting aspects of these outside organizations.

5. State Law - Allowable Expenditures • Activity funds may only be expended for any necessary expenses or travel costs, including advances, incurred by students and their chaperons in attending any in-state or out-of-state school-related programs, conventions or seminars • and/or any commodities, equipment, travel expenses, purchased services or school supplies which the local school governing board, in its discretion, shall deem beneficial to the official or extracurricular programs of the district, • including items which may subsequently become the personal property of individuals (individual students - - not individual adults), • including yearbooks, athletic apparel, book covers and trophies. • Activity funds may be used to pay travel expenses of school district personnel.

6. Need for Board Policy • The local school board shall be authorized and empowered to promulgate rules and regulations specifically designating for what purposes school activity funds may be expended. • This is very important. • This policy should be well designed and reflect the needs of the district. • Often districts try to treat the Activity Funds like mini “General Funds.” This is often a bad idea that can lead to questioned costs during an audit.

7. Activity Funds may not be used to: • Pay salary or wage amounts to District personnel. • Pay stipends directly to employees for field maintenance, keeping stats at ball game, keeping score boards, etc. These payments must flow through payroll. • Purchase incentives for staff members. • Purchase flowers for staff members who are sick, who have babies, or who are getting married or are retiring. • Basically, no public funds can be used to motivate or congratulate.

8. Accounting Systems • Centralized Accounting System • The receipt of funds takes place at each local school. • The expenditure of funds takes place at the central office. • Decentralized Accounting System • Both the receipt of funds and the expenditure of funds takes place at the local school level. • In this instance, the principal will sign general activity fund purchase orders and must be designated as and bonded as a purchasing agent. • The bond for the position of purchasing agent is in addition to the amount of the bond for Principal.

9. Fund Classification • General Funds • Athletic Funds • General Activity Funds • Agency Funds • Club Funds

10. Bank Accounts • Financial institutions must be approved by the School Board. • The bank must qualify as a public funds depository. • The selection process must be competitive. • School principals have no authority to open or close a bank account. • District and local school accounts should be opened using the school district’s tax identification number. • No unauthorized accounts should be opened in the name of an outside group under the district’s tax i.d. number. • Reminder to staff • PTA’s, PTO’s, and Booster Clubs may not use the school’s tax i.d. number.

11. Receipts • Adequate internal controls needed • Segregation of duties • The physical custody of the cash should be separated from the bookkeeping function. Try to involve more than one staff member in the receipt of cash. • Three-part receipt is recommended • Original copy to remitter • 2nd copy to central office • 3rd copy to remain bound • Teacher receipt forms are needed for teachers who collected money from students

12. Money on-hand in Schools School board policy should dictate the amount of money that may remain on-hand in schools for change cash, etc., and the amounts that may remain in the schools overnight awaiting deposit. No teacher should be allowed to leave money in a teacher desk or take money collected off of the campus. Daily deposits are encouraged. Assist your clerical workers in setting aside time for the daily deposit. Daily deposits are the only deposits that are considered timely by the Office of the State Auditor.

13. Events • When a fee is charged for admission to an event and it is anticipated that the revenues generated from the event will generate more than $100, pre-numbered tickets must be used. • Example: Gate receipts at a ball game • Accounted for using a reconciliation form that is signed by those members receipting admissions • The deposit must be safeguarded and controlled • Lock bag for night deposit when necessary

14. Disbursements • General activity funds are school district funds and purchases from these funds MUST be made by issuing a purchase order. • True Club Accounts (Agency Funds) expenditures do not have to have a purchase order. However, both student and club sponsor approval are needed. • The disbursement of all activity funds should be made by using pre-numbered checks. • All expenditures must be accounted for with invoices and/or other documentation. • Only individuals authorized by the school board may sign checks on activity fund bank accounts. • Purchasing laws apply to general activity funds.

15. Purchasing - Legal Requirements • Driven by Code Section 31-7-13 • Requirements for a single purchase – Defined as the amount “encumbered by a single purchase order” • Purchase orders must not be split in order to circumvent state law • Often done to “save time” • Often done to “save headaches”

16. Why Can’t They? • Principals are not legally authorized to bind school districts in contracts for security, lease of drivers education cards, housekeeping, or other services. • Such a contractual agreement can only be binding on a school district when the school board accepts such contract. • If commodities are involved, state purchasing laws must be followed.

17. What are Commodities? • Code Section 31-7-1 defines “commodities” to include various supplies, goods, merchandise, furniture, equipment, automotive equipment of every kind, and other personal property.

18. Small purchases • Purchases not over $5,000 (exclusive of freight and/or shipping charges) – Competitive bids and/or advertising for formal bids not required. • Most school district purchases fall within this category. • These purchases, even though exempt from competitive bids, are not exempt from the district’s purchase order requirements.

19. Midrange Purchases • Purchases over $5,000 but not over $50,000 (exclusive of freight and/or shipping charges) – Two competitive written quotes must be obtained. • Competitive • Written • (Different for ARRA Purchases/Contracts, which require formal bids at $25,000) • I recommend that the central purchasing agent obtain these quotes. Pressure from vendors is then minimized.

20. Written Competitive Bid • Must be in written form • Either on School District bid form or on vendor letterhead • Signed by vendor representative/s • Bids must be developed based on comparable identification of the needs • Bids must be developed independently and without knowledge of other bids or prospective bids • Bids must be submitted by e-mail, fax, regular mail, or other generally accepted means

21. Large Purchases • Purchases over $50,000 (exclusive of freight and/or shipping charges) – Advertisement for formal, competitive bids required. • Advertise for 2 weeks • Clerk of the School Board must review the bid notice prior to the time the publication is made • The school board must accept or reject the bids.

22. Reporting for Student Activity Funds • No later than five working days after the close of the month: • Transmittal form to central office • Transmittal form for a decentralized system contains both receipts and disbursements • Transmittal form for a centralized system contains receipts • These forms are needed for reporting to the school board. The district is required to report all activity fund activity during the month following the activity. • A late report from the school = Possible late board reporting = Possible state law violations

23. Fund Raising Activities • School board has the authority to conduct fund raising activities. • School board should adopt policies. • School board should ensure that there is an adequate system of internal controls surrounding fund raising activities. • The School board should ensure that anticipated profits were met or that any differences are explained.

24. Fund Raising Activities involving Direct Sales to Students • Board may approves activities involving the sale of goods to students or the rental of goods to students. • Examples: Rental of caps and gowns; Sales of school pictures or school yearbooks • A disclosure statement must be made available to prospective purchasers or renters, letting them know that a portion of the sales price will be contributed to the local student activity fund.

25. Accounting for Fund Raising Activities • Students may pay school • Or • Students may pay vendor directly • When vendor is paid directly, principal must maintain an independent listing of students who pay in order to add validity to the amount received from the vendor as profit.

26. School Sponsored Fund Raisers • School sponsored fund raisers include any fund raising event approved by the school board as one sponsored or promoted by the school district • Operation of vending machines • School stores • Concession stands • Carnivals • Organized school-wide sales of products

27. Club Sponsored Fund Raisers • The school board has the authority to adopt policies regarding the establishment, operation and fund raising activities of school sponsored clubs. • The policy should address the types of fund raisers permitted. • Accounting procedures should include a reconciliation of the amount raised and the profit from the fund raiser.

28. Fund Raisers by outside organizations • The school board has the authority to permit the collecting of funds for the PTA, PTO, booster clubs and similar organizations by school employees during school hours. • The funds collected by school employees on behalf of the outside organization are not considered activity funds. • School board should adopt policies in this area. • There are no accounting requirements for the district since the district does not receipt the monies collected.

29. Private Lessons During School Hours • The school board has the authority to allow individual lessons for music, art, and other related activities for academic and nonacademic credit during school hours and using school property. • Policy should address the establishment of the amount the students will be charged. • No accounting requirements.

30. Charity Organizations • The school board has the authority to conduct or participate in any fund -raising activities on behalf of or in connection with a tax exempt charitable organization. • Policy needed. • The money collected by the school/s should be remitted to the charitable organizations. • In the absence of a policy in this area, an auditor may consider the gift to be a “donation” and question the transfer of the money collected to the charity. • Example: Jump Rope for Life

31. Student Fees • The school board has the authority to charge a reasonable fee, not to exceed the actual cost, to students for: • Supplemental instructional materials and supplies • Other fees designated by the school board as fees related to a valid curriculum objective • Extracurricular activities and other educational activities not designated as a valid curricular objective • The school board should adopt policies regarding the assessing and charging of fees to students. • It is a good idea to have the board annually approve all student fees in the minutes. • Districts may wish to public fee lists in the local paper. • Remember the required “hardship waiver.”

32. Hardship Waiver • The school board must adopt a “hardship waiver” policy for students who are unable to pay fees assessed by the school board. • The policy should identify the fees and be furnished to the student at the time the fee is assessed.

33. A. G. Opinions Surrounding Student Activity Funds • Mr. Phil Bryant May 2000 • The “individuals” referred to in the activity fund are deemed to be “students” rather than school faculty/staff members. • Therefore, the personal items purchased that will later become the personal property of “individuals” are intended for “students,” and not faculty members.

34. A. G. Opinions • Mr. Phil Bryant 2000 • Student Athletic Recognition banquets are allowed. • Teacher Recognition banquets are not allowed to be funded through student activity funds.

35. A. G. Opinions • John Compton 2005 • Purchase of leadership books for teachers that will not become the personal property of teachers is ok. • The payment of cell phone service for use by coaches/teachers traveling on school functions is ok. Limited to school use. • Membership dues for principals to belong to professional educational associations may not be paid from student activity funds.

36. A. G. Opinions • Phillip L. Tutor 1983 • Officiating personnel, clock operators, and workmen completing minor repairs to facilities are allowable expenditures from student activity funds when board policy outlines such expenditures as allowable. • There are special exceptions for employees of the school district. The payment for these individuals must be run through the district payroll and subjected to mandatory withholdings.

37. A. G. Opinions • Lonnie L. Haynes 1981 • 3 band students selected for a European Tour – Proceeds from school band concerts may be used to finance the cost of the tour if the board officially designates this European Tour as an official school activity. • Would require board specification.

38. A. G. Opinions • Donald Clanton 1984 • Defines club accounts as having no public funds added to the club accounts. • Purchasing laws will not apply. • Be extremely care when designating funds as club funds.

39. A. G. Opinions • Henry L. Johnson 2004 • A school board does not have the authority to reject a senior’s photograph that meets yearbook specifications on the sole ground that such photograph was not taken by the specific photographer designated by the school board. Specifications may include size, format, dress, color, etc.

40. A. G. Opinions • Phil Bryant 1999 • Student recognition banquets - food may be purchased for students, their parents, and school employees attending the banquet.

41. A. G. Opinions • Darryl A. Hurt 1984 • From gate receipts, a school may purchase bleachers for a city-owned softball complex when the school district plays several of its softball games at the complex. • The bleachers must remain until the custody and control of the district.

42. A. G. Opinions • Honorable Jerry L. Wallace 1989 • The district may pay out of athletic funds all of the actual medical expenses evidenced by itemized bills of account, for injuries sustained by an regularly enrolled student while participating in athletic activities. • In lieu of these payments, the board may contract for insurance to cover such injuries. The payment of these amounts must come from athletic funds.

43. Reminders • All cash flowing into the school must be carefully controlled. • Teachers collecting monies from students should use a Teacher Collection form and submit both the form and the monies to the school secretary/bookkeeper. • All deposits should be made timely (daily). • The board should have a policy outlining deposits and the amount of cash allowed to remain in the building overnight. • Bookkeepers should be given ample “quiet” time to process deposits and make deposits. • Under no circumstances should money leave the building and go home with a staff member to be deposited at a later time.

44. Reminders • All purchases must be evidenced first by a purchase order. • Purchase orders should be issued prior to the purchase, and not after the purchase. • Purchase orders are required for all district funds (those funds handled at central office). • Purchase orders are required for general activity funds. • Principals do not have the authority to sign contracts for services (janitorial, rental services, etc.) Only the board has authority to approve contracts for services. • Bid laws may apply to contracts for services unless commodities are added as a part of the contract.

45. Reminders • Splitting purchases into two or more smaller purchases to keep the individual purchases under $5,000 is not allowed. • Let central office purchasing secure quotes for you. • Be careful. Vendors can pressure staff members. • “Receive goods now” and “I’ll invoice you next year” agreements are not allowed. This is sometimes seen when dealing with athletic vendors.

46. Reminders • I recommend using your PTA/PTO for funding incentives and congratulatory gifts for staff members when possible.

47. Questions