Parent Teacher Associations (PTAs), also called Parent Teacher Organizations (PTOs), work to improve their school within the community.
To make this a reality, PTAs generally fundraise. The organizations need money to counter budget cuts, increase communication between families and administrators, or to advocate for new or superior educational policies.
But where does all the money go once the PTA has completed their fundraisers? Some PTAs choose to open a PTA bank account to keep the money separate from school funding or other streams of revenue. This will ensure that the money from the PTA is allocated to the correct person(s) or programs.
Why Should Your PTA Open A Bank Account?
It is important to note that a PTA that operates independently from a school is not automatically tax exempt.
If your PTA is banking under the school’s tax identification number (TIN) then it becomes a subset of the school. Many PTAs mistakenly use the school’s TIN, thinking it applies to their organizations as well. Unfortunately, if the PTA’s money is held in a bank account opened using the school’s TIN, the money technically belongs to the school, not the PTA. To avoid any confusion, many PTAs opt to obtain their own TIN and EIN from the IRS and keep their money and organization totally separated from the school’s money.
The good news is opening a bank account for an organization such as a PTA is a fairly simple process – and in this article, we’ll break it down step-by-step so you have a better understanding of how to open one.
How To Open A PTO/PTA Bank Account
Obtain an EIN
- The first thing you need to do is apply for an Employer Identification Number (EIN). Getting an EIN is simple and free. You can handle it immediately online with the IRS. The EIN has nothing to do with how big/small your organization is, if you have employees or not, or the type of organization (non profits, for profit). It’s simply an identifying number assigned to entities.
Set up a P.O. box for your mail and statements to go to
- For PTA related statements and documents, you do not want to use a home or business address for one of the PTA members whose children will eventually age out of the school. But, having the statements just show up at the school to be put in a pile of mail that the office staff isn’t sure what to do with is not a good idea either. That said, a “best practice” is a dedicated PTA mailbox, so the board will know exactly where everything will be mailed.
Contact banks and open a checking account
- Before you go with the first account that is offered to you, call around to a few local banks and ask what type of account they can offer. You are looking for no fees/minimum fees and the types of documentation they will need in order to set up the account. Usually, banks require a copy of the IRS EIN paperwork, some meeting minutes and a listing of the officers (specifically those who will be allowed to sign and deposit checks) as well as a copy of the PTA’s by-laws. Under no circumstances should you connect the PTA account to a personal account.
Adopt a set of financial controls
- Make sure you put procedures in place to protect the money you raise. Keep in mind that while you currently may have the world’s greatest treasurer, someday someone else will hold that office. By tackling this task at the beginning, you’ll protect your group long-term against misappropriation of funds- while also helping to prevent simple mistakes that can cloud your financial picture.
What papers do you need to open a PTA bank account?
To open a PTA bank account, banks typically ask for the following documentation:
- A copy of the IRS EIN paperwork
- Meeting minutes listing the officers (and a list of individuals who will be able to sign and deposit checks)
- A copy of the PTA’s by-laws
It will also be important to call the bank you have selected ahead of time to ensure you’ll have all of the information they will need in order to open the account.
As stated above – You should not connect the PTA account to a personal account.
The correct Authorized Signers on a PTA bank account?
PTA rules generally require signatures of two officers.
A PTA’s bylaws should indicate at least three officers who will be eligible signatories.
Usually these PTA board members have authority granted on the PTA bank account:
- Vice President (if the President declines)
Over the years, you will also want to keep the following things in mind:
- After each election, change the signatories on your PTA’s bank account. You will want to be sure previous officers no longer have access to your accounts. A transition letter from the outgoing treasurer or president to the bank may be necessary to enact this change.
- You may want to also consider having all bank statements and bank reconciliations reviewed each month. Select someone who does not have access to the bank account or authority to sign checks. This procedure should help prevent fraud or misappropriation of funds.
- Require revenue and receipts counted and deposited in the bank immediately after the completion of an activity. Endorse ALL checks immediately “For Deposit Only to the PTA, Account # … ” and signed by your Treasurer with his or her title. Pro Tip: Get a stamp with this info when you open your bank account.
You can read more about the policies and procedures for depositing PTA funds into a bank account here.
Should A PTA get an EIN or should they register as a 501(c)(3) non profit?
However, getting your organization qualified as 501(c)(3) non profit organization is a larger step. That requires a hefty fee (typically $750), a fairly rigorous application form and some supporting documentation.
As per the IRS, the rule of thumb is that a charitable organization – such as a parent group – should formalize as a 501(c)(3) if they typically have more than $5,000 total (not net) revenue.
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In the aftermath of the 2008 financial crisis, Kate found herself surrounded by friends and family who were concerned about the safety of their money and needed help navigating banks and bank accounts. Her desire to share her knowledge led to the development of BankProfessor.com