All unit, council and district PTAs must conduct audits annually. Copies of the Annual Financial Report, the 990 form, and the Indiana NP-20 are now required to be on file with the Indiana PTA office. A unit is not considered in good standing without these records on file.

An audit is a formal examination of the financial books and records of the financial officers of the PTA. It serves to certify that receipts and expenditures, as authorized in the minutes, are in conformity with Bylaws for Local PTA/PTSA Units, Standing Rules, and budget limitations. The PTA audit serves as an official examination of the financial records. Audits are required to be conducted each year, or when there is a change in the treasurer office.

Purpose of an Audit

An audit determines the accuracy of the books, detects inconsistencies or errors, provides recommendations for corrective action, protects the financial officers, verifies that funds were sent through channels as appropriate, and assures the membership that the association's resources were managed in a businesslike manner within the regulations established for their use.

The person conducting the audit should always be impartial and not related by blood or marriage nor reside in the same household as the president or other financial officers or any chairmen handling funds.

PTA/PTSA unit audits can be completed in one of 3 ways:
1. Your Field Service Representative (or any Indiana PTA Board of Managers member) can audit the records.

2. An auditing committee can be formed with at least 3 members from within the PTA to audit the records. Officers with check signing authority are prohibited from serving on the auditing committee.

3. A licensed accountant can be contracted to conduct the audit.

Audit Schedule

-At the end of each fiscal year (June 30th), the treasurer should set up the books from the perspective of an auditor.

-Upon receiving the last bank statement of the fiscal year, the treasurer should then set up the audit.

-After the audit, the treasurer should complete and file the required tax forms with the Federal and Indiana departments of revenue.

-Sign and return the Annual Financial Report, along with copies of the 990 forms and NP-20 to the Indiana PTA Office.

Preparation for an Audit

The treasurer should prepare all financial books, records and reports for the auditor, including:

• A copy of the last audit report;
• Current bylaws and standing rules;
• Originals of checkbook register and canceled checks (including voided checks);
• Originals of bank statements, bank book and deposit slips;
• Cash receipts;
• Authorizations for payment;
• Itemized statements and receipts of bills paid;
• Monthly Treasurer's Reports;
• Original treasurer's books/ledgers;
• Annual Financial Report;
• Copies of board, executive committee and association minutes, which would include an adopted budget, any amendments that were approved during the year, approval of expenditures, and ratification of payments;
• Committee reports from chairmen (e.g., fundraising, membership, etc.);
• Any other information requested by the auditor;
• Copies of the most recently filed IRS Form 990,
• Council and unit PTAs must also include copies of the Indiana NP-20.

 

Audit Procedure

Audit each account separately. Check off items in red ink as they are reviewed. Do not correct errors. Ask the responsible financial officer to correct errors after presenting the report. After errors have been corrected, and the auditor is satisfied that the financial accounts are correct, draw a double line across the ledger and checkbook register where the audit concludes and sign and date using red ink, "Audited by (name) on (date)." The auditor ensures that the association's financial records are accurate:

• Check to be sure all financial materials requested are available.
• If the PTA has more than one account, audit each account separately.
• Check off items in red ink as reviewed.Make sure additions/subtractions are correct in all instances.
• Do not correct errors.Make notes as to how to correct errors and include in the report.
• Start audit with records posted after the last audit. Check to see if the amount shown on the first bank statement (adjusted for outstanding checks and deposits) corresponds to the starting balance recorded in the checkbook register, ledger, and treasurer report, and the ending balance of the last audit.
• Check to see that the ending balance of the last bank statement, checkbook register, ledger and treasurer report agree.
• Confirm reconciliation of each month's bank statement to the checkbook register by someone other than the treasurer.Make sure every check is substantiated with an aut h orizati on for paym ent with reason for disbursement, appropriate payee and a receipt or bill. If no authorization can be found, verify it was a transfer payment, such as council dues. Note missing checks. (Void checks are filed.)
• Check that all bank charges and interest earned are recorded in the checkbook register, ledger and treasurer reports.
• Ensure that checks (see bylaws) and authorizations are signed by approved officers.
• Reconcile each deposit slip with bank statement and checkbook entries. Ensure money was deposited promptly.
• Ensure collection process is in place for returned checks that includes reimbursement of applicable bank charges. A returned check is treated as reverse income and reimbursed bank charges are treated as reverse expenses.
• Reconcile checkbook register to the ledger. Check each month's ledger entries for error, and cross-check against checks issued and receipts posted. Cross-reference checkbook register with checks issued.
• Verify that all income and expenditures are allocated into the same categories that constitute the approved budget.
• Make certain that State and National PTA portions of the membership dues have been kept separate from other receipts and forwarded immediately.
• Make certain that the number of memberships agrees with membership chairman's report, and verify that membership monies collected correspond to membership monies forwarded.
• Ensure payment for insurance premiums, if any.
• Make certain the money collected for a specific purpose (special projects, Founders Day, scholarship funds, council dues, etc.) has been so disbursed.
• Check association and executive board minutes to see if expenditures were authorized. No motion is required for payment of transfer funds.
• Check event reports to verify receipts and expenditures.
• Check all cash receipt slips issued, and verify proper entry in ledger.
• Ensure that Cash Verification Forms (Forms 387) are being used and two people are counting money.
• If an advance has been given, ensure that advance amount matches the approved expense.
• Compare figures on monthly treasurer and annual financial reports against ledger for accuracy.
• Ensure proper tax returns have been filed, if necessary.
• Prepare copies of written report, including recommendations, for president, secretary, financial officers, and council/district. When called upon, read only the statement "The auditing committee has/I have examined the records of the treasurer of _____ PTA and find them to be: correct; substantially correct with the following recommendations; more adequate accounting procedures are needed so that a more thorough audit report can be given; completely incorrect.
  
• Verify that all tax forms have been filed, 990 and Indiana NP-20.

Each committee member must sign the report. If questions are raised by the membership, the president should state that a committee has been appointed to look into any problem, and that the members will report back to the association at the next meeting. The audit report is adopted by the association with the motion "I move that the audit report be adopted."

• Ask the responsible financial officer to correct errors after presenting the report.
• After any errors have been corrected and all are satisfied that the financial accounts are correct, draw a double line across the ledger and checkbook register where the audit concludes and sign and date using red ink "Examined by (name) on (date)."

Completing Annual Financial Report

At the completion of the audit, meet with the financial officers and president to discuss recommended corrections.When errors have been corrected by a financial officer and accounts are accurate, draw a double line in red ink where the audit concludes. Sign and date the ledger and complete the Annual Financial Form and return it to the Indiana PTA Office.

Most tax-exempt organizations, other than churches, must file a yearly return or notice with the IRS. If an organization does not file as required for three consecutive years, the law provides that it automatically loses its tax-exempt status. Loss of exempt status means an organization must file income tax returns and pay income tax, and its contributors will not be able to deduct their donations.

Every PTA unit must file their 990 form with the IRS by November 15th of each year. What must be filed this year depends on the organization’s financial activity:

Financial activity	Filing requirement
Gross receipts normally ≤ $25,000 Filing Information	990-N (e-Postcard)
Gross receipts < $ 500,000 and Total assets < $1.25 million	990-EZ or 990
Gross receipts ≥ $500,000, or Total assets ≥ $1.25 million	990
Private foundation (regardless of financial activity)	990-PF

Tax Form Reference from the IRS

ALL YOU NEED TO KNOW ABOUT THE IRS FORM 990
Due to new laws, ALL PTAs are required to submit Form 990s, regardless of annual income.

How do I know which form of the 990 I need to fill out?
Which form your unit fills out depends on the average gross receipts over the past 3 years. The gross receipts equal the TOTAL amount of money your unit took in during the year. The gross receipts from the past 3 years are averaged. If that average falls UNDER $25,000 your unit needs to fill out an 990-N (e-postcard). If your unit exceeds $25,000, you are required to complete the 990EZ. Only units with average gross receipts of over $1 million need to file a Form 990-long form. You can also click HERE to find out which version of the 990 your unit is required to complete.

How do I know my unit's tax status?
While every PTA unit MUST file a 990 form by November 15th, 2010. Some units have not submitted a 990 for over three years. You can check to see if your unit is one of 44 that still need to file HERE...

When do I have to file the Form 990?
Forms must be filed by the 15th day of the 5th month of the end of your Fiscal year. To make it simple -the fiscal year for any PTA unit ends on June 30th, and the deadline for filing any unit's 990 form is November 15th.