Thank you for the input. The 7/31 year end date does make sense. We will require that all financial info is in to us by the end of July. I think those involved would make the effort to do this.
Just a follow up on the second part of my previous post on 9/14/07- our "prepay" expenses. I am thinking about purchasing Finance Manager for our group. How does the program handle such prepay items? We pay for items the teachers would like the kids to have right at the beginning of school. This way the teachers don't have to go through the bureaucracy of purchase orders/approvals etc. with the BOE (necessary, but time consuming). Our group expects repayment through teacher collection of the money due from students, but inevitably some of the money is not collected. As a group we have agreed to build this expense into our budget for the sake of the majority of the students in a class. We are not talking about a great deal of money. Does anyone else have such a situation? I want to keep things as simple as possible and prefer to just call these items "expense" for the initial outlay of cash and "income" for the student reimbursement of the outlay. Is this an acceptable way to handle the transactions? Will reporting it this way (income/expense)work if I have to file the 990EZ or the e-postcard return? Also, is the fee for Finance Manager an annual or one time fee? Thanks again for the guidance!
Ally, our school year aligns with yours, but we end our FY on July 31. That gives us the month of August to have our audit done before we start school. Though it's not essential to finish the review before school starts, it's nice to have that completed before we start getting so busy with day to day PTO activity. Another consideration: your 990/990EZ will be due the 15th day of the 5th month after the close of your FY. For Aug 31, that makes your due date January 15. Which means your treasurer will have the form hanging over her head thru the Christmas holidays, unless she's really ahead of the game. She won't even be able to start working on the form until the time school starts. With an earlier FY end, you could conceivably start working on the 990 before school starts, when PTO activity is quieter. Just something to consider before you make your FY official.
Accounting in most PTOs is usually pretty basic. Your treasurer should be able to provide the three basic financial statements. And you'll want to keep an eye on the way the IRS needs the 990/990EZ filled out as it may influence how you track some things during the year.
But mostly you'll have:
The balance sheet (assets/liabilities) tends to be very simple. It represents a snapshot of a point in time.
The income statement shows your earnings over a period of time with a section at the top for revenue and the bottome for expenses and then total for net income/loss. You do need to get used the "cost of goods sold" term, which is the direct cost/expense of things you sell like T-shirts or school supplies.
The cash flow statement reflects the cash coming in and out over a period of time.
You definitely want a good picture of not only what is coming in revenue-wise, but commitments that are already made for the money, especially paying the vendor.
So, yes, you will follow accounting practices - but usually at a fairly simplistic level. Common sense, agumented with some basic accounting terms and easily found sample templates, should get you through.
Our school year ends in the last week of June and it often takes July into August to get all program volunteers to submit receipts for reimbursement. (We could tighten this up, but with the busy end of school year rolling right into July 4th week, vacations etc. etc. we like to give volunteers leeway in getting things together as their time schedules dictate lest we discourage participation.) By 8/31 the books are closed, school opens after Labor Day weekend and the membership donations, which are our first cash inflows, don't start rolling in until mid September. (We are a very small organization, but since well over $5,000 passes through our checking account each year, we decided to formalize.) The time frame works well for us, so we thought we would stick with it.
One other question- an important function of our group is to "pre-pay" for school supplies that the district does not pay for ( workbooks, simple music instruments, field trips etc.) and the teachers then collect from the students and repay our group. We have always accounted for these transactions as "income" and "expense" even though they are really cash/receivable transactions with any unpaid items at the end of the year written off as "expense". My question is how close to standard accounting practices do we need to be when we become a 501C3? The cash is well taken care of, but the reporting/categorizing may be lacking.
Thanks so much for your input. We are rolling along in our efforts to formalize and your input has been ever so helpful.
