Financial Best Practices for School PTO and PTA Groups

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A must-read for every PTO Treasurer! Run your PTO or PTA like a business with these financial best practices for school parent groups from the experts at PTO Today.

by Julie Drummond

12/09/2024

Make sure your school parent group organization is a legal business entity with an EIN.

While an EIN (Employer Identification Number) does not automatically grant nonprofit or tax-exempt status, your group does need an EIN to open a bank account, and to apply for 501(c)(3) status.

Applying for an EIN online is easy and free. Go to the IRS website and type "EIN" in the search bar, or use Form SS-4 and apply by fax or mail.

Set up a bank account for your parent group.

Shop around for a branch in your community with the best rates and features, like:

  • Lowest transaction fees
  • Lowest minimum balance maintenance fee
  • Free online banking, supply of checks

Ask about business checking account options for nonprofits. Larger groups with sizable long-term savings might consider having some of their money in an interest-bearing account.

Register your group as a nonprofit in your state.

State incorporation is an inexpensive process with the secretary of state. A few tips:

  • Incorporate before applying for 501(c)(3) status with the IRS
  • Include required language from the IRS in your organizing documents (purpose, dissolution)

Determine your group’s 501(c)(3) status.

Being a 501(c)(3) makes your group a charitable organization that is exempt from paying federal income tax. This is optional for groups that gross less than $5,000 annually. Otherwise, it is recommended to apply within 27 months of incorporation.

  • To apply for tax-exempt status, use Form 1023-EZ (for organizations grossing $50,000 or less) or Form 1023 (nonprofits projected to gross more than $50,000).  
  • Donations to your group are tax-deductible.
  • Many grants are only open to 501(c)(3) groups.
  • Once approved, follow up in your state for exemption from state-level income tax and sales tax.
  • 501(c)(3)s must file an annual information return, Form 990 (or 990-EZ) - due on the 15th day of the fifth month after the end of your fiscal year (i.e., if your FY ends June 30th, your return is due November 15th).
  • If your 501(c)(3) group's annual gross receipts are normally $50,000 or less, you may be eligible to submit Form 990-N (e-postcard).
  • Organizations that fail to file the required 990 Forms for three consecutive years will automatically lose their tax-exempt status. Learn more (IRS website) 

Start each school year with a budget.

This can include detailed categories with income and expense using past years' experience and data, or a few general categories related to your mission if your group is new. The benefits of setting a budget:

  • It directs all financial decision-making for the year.
  • You know whether the group is achieving its goals, as do all group members.
  • School administrators know what to expect from the group.
  • You can respond to unexpected requests for money and adjust for income shortfalls or if a surplus is available.
  • Less stress, greater credibility, and groundwork for the group's future.

Require two signatures on checks and payments from the group account.

  • The executive board decides who the authorized signers on the group account should be (usually two officers, sometimes an officer and the principal). Go to the bank to officially update who the current authorized signers are.
  • If you order checks, you can ask for a second signature line to be printed on the new checks.
  • If you don't want to use two signers for every check, strongly consider requiring it for checks over a certain amount (i.e., $100).
  • NEVER sign a blank check or ask another officer to do so.

Detail and document all financial transactions.

  • Set a required procedure for accountability when money comes in or out (deposits, payment requests, reimbursement requests). Do not take action on an informal text or email request; make sure everyone knows and follows the procedure.
  • Record transactions (payer/payee, description, date, amount, any supporting documentation such as receipts or bills) and track using accounting software or spreadsheets.
  • Provide paper or electronic receipts for sales.
  • Set a time limit for reimbursement requests in your bylaws (i.e., no more than 45 days after the transaction date).
  • Set a plan and policy for bounced checks or declined cards.
  • Financial forms and tips for school parent groups

Digital payment methods are recommended for security and tracking; however, if you are accepting cash at an event, be sure to:

  • Accept cash in one spot. Have deposit slips in the cash box at end of events.
  • At bigger events, sell tickets to attendees to use for games, concessions, etc.
  • Have at least two volunteers count and verify money at the event and sign off on it before depositing.
  • Deposit funds as soon as possible.
  • Don't keep cash in an unsecured location.
  • Don’t deposit group funds in an individual's personal account, even temporarily.

Review, reconcile, and report each month.

  • Every transaction that affects your bank account must be logged so you can stay up to date on your financial status by budget category.
  • Have monthly bank statements sent to an officer who does not have authority to sign checks for review and sign off first. Extra eyes help detect errors - either on the group's part or sometimes the bank's – or other issues early.
  • Double-check all the transactions in and out of the account every month and reconcile.
  • Report monthly to executive board and membership.

Conduct an annual financial review (audit).

  • Independent review and verification of the parent group’s finances can be done by an audit committee, parent volunteers, or paid professionals. The reviewers should not have had prior access to the PTO bank account.
  • The treasurer should not be part of the audit review (other than to provide info and answer questions).
  • Serves as "another set of eyes" to ensure accuracy, order, and to make suggestions for additional financial controls.
  • May also use to measure group's performance to budget.

Fraud & Embezzlement Protection Tips for PTO and PTA Groups 

Watch out for fraudulent inducement (tricking a person into releasing money under false pretenses):

  • Impersonating an officer or volunteer (i.e., hacked email address, fake text).
  • Impersonating a vendor (i.e., phony email or phone request).
  • Callback control is most effective risk control tool.
  • Only call the direct number you know for the person/vendor/bank to confirm the transaction.
  • DON'T click on links or use the phone number provided by the request you are trying to authenticate.
  • DO protect your group's money by having parent group insurance to replace lost funds in the case of embezzlement or theft so your group efforts can continue.

Have insurance coverage for your PTO or PTA.

Insurance policies for school PTO, PTA, and booster groups are highly recommended because they are designed to protect against injuries, embezzlement, theft, your officers against mismanagement and misrepresentation lawsuits, property damage, and more. In most cases, parent groups are not covered by the school’s policy. PTO Today offers insurance packages that are designed exclusively for all school parent groups (PTO, PTA, etc.) and boosters with the coverage they need most. Reach out to This email address is being protected from spambots. You need JavaScript enabled to view it. for your free consultation.

Record-Retention Rules for PTO Groups*

*Based on IRS guidelines. If you are a PTA, check with state-level bylaws.

Keep permanently:

  • Incorporation paperwork
  • Application & supporting documentation for IRS Form 1023
  • IRS determination letter for 501(c)(3) tax-exempt status
  • Meeting minutes and agendas
  • Year-end treasurer reports
  • Annual financial review reports from auditor

Keep old financial files for 7 years:

  • Canceled checks
  • Bank statements
  • Paid invoices & receipts
  • Deposit slips
  • IRS Form 990-series

Keep for 3 years:

  • Monthly treasurer reports

Featured product to help your group manage its finances: Finance Manager from PTO Today

You can get a free 30-day trial of PTO Today’s Finance Manager, financial management software designed by parent group leaders for school PTO and PTA groups. Benefits of using Finance Manager to manage your parent group's finances include:

  • Accounting software
  • Financials stored securely online, easily accessible from anywhere
  • Create and maintain budgets
  • Easily reconcile bank accounts
  • Quick reports for meetings, taxes, audits
  • Simplify year-to-year transitions
  • Treasurer transitions made simple
  • 1:1 customer service from the PTO Today Leader Support team

Do your research when it comes to online payment options.

There are lots of options out there when it comes to online payments. Whichever you choose, be sure to put a written policy in place for use of online and electronic payments.

Pros of using online payments:

  • Popular income source
  • Convenience for families, supporters, and vendors

Cons of using online payments:

  • Cost/fees for service
  • Security issues (storage of devices, strong controls in place for use in addition to best practices)
  • Potential operational glitches
  • Your group needs to consider the benefits and any cons for your specific community and use

Looking for even more detailed information on running your school parent group? PTO Today has specialized expert toolkits for school parent groups, including 501(c)(3) step-by-step instructions, filing tax information returns, and how to be a great PTO treasurer.

You can get all of PTO Today's expert toolkits—along with a suite of online communication tools for your parent group, PTO Today Plus partner perks and rewards, free samples for your school events, and so many other great resources and benefits—when you join PTO Today Plus! 

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