CERTIFIED PUBLIC ACCOUNTANT
CERTIFIED FORENSIC ACCOUNTANT
PROCEDURES FOR OPERATIONS FOR MASSACHUSETTS SCHOOL DISTRICTS
These guidelines have been prepared in order to assist and educate public school officials, teachers and other interested parties in connection with the establishment, operation and management of student activity accounts under the provisions of Section 47 of Chapter 71 of the General Laws of Massachusetts, as amended by Chapter 66 of the Acts of 1966. These procedures for operations are not intended to provide legal advice regarding actual cases and controversies.
This manual was prepared as an adaptation and enhancement of the issue provided by the Massachusetts Association of School Business Officials, "Student Activity Accounts, Guidelines for Massachusetts School Districts". It was partly developed through the cooperative efforts of various communities within The Commonwealth.
The following procedures will govern how student activity accounts in the public schools are managed and operated. Each building principal is expected to adhere to these guidelines if their school is collecting and/or disbursing student activity monies. School Committee policies must also be adhered to in operating such accounts.
Any questions on the operation of these accounts should be directed to the Business Manager or the Superintendent of Schools.
I. GENERAL INFORMATION
STUDENT ACTIVITY ACCOUNTS
A student activity account shall be used for monies raised by students or student organizations and which will be expended by those students or student organizations for their benefit. Monies deposited to a student activity account are governed by MGL Chapter 66 of the acts of 1996, as well as the policies of the School Committee. Monies governed by any other laws (see section on "Relevant laws") which specify other ways in which the money must be handled cannot be deposited to a student activity account. (For example, athletic gate receipts are governed by MGL Chapter 71, Section 47 and must be deposited with the city/town treasurer and, therefore, cannot be deposited to a student activity account.)
Only organizations approved by the Superintendent may raise and disburse monies through a student activity account. Further information on the approval process for a group to be recognized as a student organization can be found later in these procedures.
AGENCY ACCOUNTS V. CHECKING ACCOUNTS
MGL Chapter 66 of the Acts of 1996 allows the School Committee to vote to authorize the treasurer to establish an "interest bearing bank account, hereinafter referred to as the Student Activity Agency Account" for "the purpose of conducting student activities". All monies collected through student activities must be deposited to this account.
MGL Chapter 66 further allows the School Committee to authorize the treasurer to establish a "student activity checking account" to be controlled and operated by the school principal. Such an account is only for expenditures in accordance with school committee policy, and must have a maximum balance specifies in the school committee policy. The funds to establish such a checking account must come from the Agency Account specified above, as must all monies to periodically replenish the checking account (after submittal of appropriate documentation) up to the maximum balance.
Information on how deposits and expenditures are to be made in each account can be found on the following pages.
The following Massachusetts laws pertain to student monies and should be reviewed by the building principals annually:
1. Massachusetts General Law Chapter 66 Acts of 1996 - Student Activity Accounts (see Appendix B)
2. Massachusetts General Law Chapter 44, Section 53 - Lost Textbook Revolving Account
3. Massachusetts General Law Chapter 71, Section 47 - Athletic Revolving Account
4. Massachusetts General Law Chapter 548, - School Lunch Revolving Account
5. Massachusetts General Law Chapter 71, Section 71E - Adult Education and Continuing Education Revolving Accounts
6. Massachusetts General Law Chapter 71, Section 71C - Community school programs revolving account
7. Massachusetts General Law Chapter 74, Section 14B - Culinary Arts and other vocational technical revolving funds
8. Massachusetts General Law Chapter 44, Section 53A - Grants Gifts (covers all scholarships)
9. Massachusetts General Law Chapter 268A - Conflict of Interest
Copies of these laws or questions on them can be addressed through the Business Office.
II. ORGANIZATIONAL MANAGEMENT
ESTABLISHING A STUDENT ACTIVITY ORGANIZATION
Elementary and middle schools may maintain a "general" school activity account for monies raised by the entire student body through building fund-raisers. Specific monies raised by specific groups shall be maintained as separate sub-accounts.
At the high school level, all monies shall be credited to the appropriate sub-account for the student organization.
In order to maintain a sub-account within the overall school student activity account, the organization for which the account is maintained must be approved by the Superintendent. The following process shall be used for an organization to request approval:
Submit a Request for Recognition letter with all the required information to the Superintendent of Schools. The required information shall include:
1. the suggested mane of the organization,
2. the reason for forming such a student organization,
3. criteria for membership in the organization,
4. school and/or grade span for the organization,
5. how adult supervision will be achieved (NOTE: paid advisors require AES contract language and budget monies; advisors will not be paid with student activity monies).
MGL Chapter 66 of the Acts of 1996 requires that the principal "shall give bond to the municipality or district in such amount as the treasurer shall determine to secure the principal's faithful performance of his duties in connection with such account".
The Business Manager will periodically review the options for providing this coverage and determine which is best suited to the needs of the school department. If any additional cost is involved, it can be charged to each school's individual student activity account (interest earnings). The Superintendent shall make the determination as to whether the school budget can cover the cost or if each school must cover its share of the cost.
All student activity accounts shall have an internal audit annually by the Business Manager.
At least once every three years, an external audit of each student activity account shall be done. The audit shall be arranged by the Business Manager or the Superintendent, not the principal or bookkeeper. The cost of the independent audit will be paid from the interest earned on the Student Activity Account.
In addition to the annual audit, there will be on-going periodic internal audit review no less than quarterly by the Business Manager or another designee of the Superintendent. The periodic internal review should involve reviewing the monthly reports prepared by the individuals having daily oversight of the accounts.
External audit will be part of the on-going audit with the city/town/district.
TAX EXEMPT STATUS
All Student Activity Account purchases will be under the tax exempt number of the city/town/district through the Treasurer's Office.
Monies not under the control of the school system (ex. PTO, Booster Clubs, staff monies etc.) are not considered student activity monies and are not eligible to use the tax exempt number, nor may they be maintained in the student activity accounts.
The student activity accounts authorized by MGL Chapter 66 of the acts of 1996 are for student monies only.
Any monies belonging to staff (e.g. sunshine funds, staff vending machines) cannot be maintained in such accounts. Should staff wish to maintain such an account(s), they must establish a bank account in their own name, and cannot use the city/town/district tax exempt number for such accounts.
Gifts to student organizations may be deposited to the applicable student activity account if the student organization has been recognized as an organization and authorized to have a subsidiary account. All gifts will be treated in accordance with existing school policy.
III. OPERATING PROCEDURES
ACCOUNTING SYSTEMS, FORMS AND RECORDKEEPING
A critical point to keep in mind with all recordkeeping is that each person involved should protect themselves from charges of wrong-doing by keeping detailed records with appropriate backup documents. A clear audit trail shall be left at all times. This would include the following:
1. a checkbook
2. a checkbook register that maintains accounts balances
3. copies of deposit slips
4. appropriate documentation of deposits - through the use
of receipts issued to students, lists of students paid, correspondence, etc. 5. cancelled checks
6. copies of paid invoices
7. bookkeeping procedures that include the classification of income and expenses. (Sample chart of accounts is included in Appendix E.)
8. Pre-numbered tickets should be used with an inventory system for monitoring the use of such
9. Standardized forms (deposits, disbursements, etc.) should be used whenever possible
10. All disbursements must require a bill or some type of receipt
11. All deposits to the student activity bookkeeper must require a school deposit slip stating source of the monies, total amount being deposited, and signature of the person making the deposit
12. Bank reconciliations and account reconciliations should be done monthly with a copy of each to the Business Manager. At the high school level, copies of the account reconciliation shall also be sent to the student officer/treasurer or the advisor of each organization
13. Periodic financial reports should be made in accordance with directives from the Business Manager
14. Other reports shall be prepared as required by the Business Manager, Superintendent and/or School Committee
15. Information must be maintained and forms 1099 must be issued in accordance with Internal Revenue Code Section 6041(a), whereby all unincorporated vendors and service providers are issued Forms 1099 for payments received of $600.00 or more within one calendar year.
16. The principals are to maintain access to all copies of records that document the processes of receiving and expending funds, which includes (but is not limited to) the records of teachers and class advisors. In fact, the preferred method would be that teachers would be required to turn in their records at the end of each school year. The documents relative to the expenditure of funds by means of the warrant process (if applicable) must also be retained.
Sample forms, that apply to the above mentioned reporting procedures, are shown in Appendix A.
Internal controls must always be sufficient so that all school committee and central office requirements be satisfied prior to the commitment for the expenditure of funds (e.g. planning for a trip in June that will occur the following March). Moreover, schools need to be cautioned to avoid certain adverse circumstances, such as:
a. The expense of cash prior to the receipt of documentation (issue no blank checks)
b. Utilization of funds for activities which have not been previously approved (by the Superintendent's office) as student activities.
N.B. These are examples and not an all inclusive list.
For additional comments concerning internal controls, see Appendix D.
The area most susceptible to abuse is the receipts process, since cash is collected by many individuals (often students). Principals shall pay close attention to their building procedures for the handling of all receipts.
1. Any student organizations receiving monies from any source (fund-raisers, donations, etc.) should turn over such money to the principal or the principal's designee within twenty-four hours for subsequent deposit to the student activity account.
2. If money is received on a weekend, it shall be turned in to the principal's office on the first business day. No student shall take money home at any time. Money received over the weekend shall be deposited to a night depository, secured in a locked vault, or safeguarded by other means.
3. The principal or principal's designee should deposit all monies received from student activity organizations to the city/town/district Treasurer's Office no later than forty-eight hours after receipt by the Principal's Office.
4. Any money not deposited to the bank on the same day it was received shall be kept overnight in a safe or other secure, locked area.
5. All money turned over to the office by a student organization (student officer/treasurer or advisor) shall be accompanied by a school deposit slip stating the source of the monies and the amount of money being deposited. This form shall be signed by the person turning over the money to the office, and co-signed by the advisor or a teacher.
6. The advisor or student officer/treasurer should keep a duplicate of the school deposit slip submitted to the office with the money.
7. All receipts must be deposited by the principal or the principal's designee to the Treasurer's Office designated by the city/town/district Treasurer for deposit to the agency account with the city/town/district Treasurer. The original bank receipt must be immediately forwarded to the Business Manager for forwarding to the city/town/district Treasurer. A copy of the bank receipt, and all relevant backup shall be maintained by the principal.
8. No receipts may be made into the checkbook except the initial transfer from the agency account to open the checkbook, a transfer from the agency account to increase the checkbook maximum (with school committee approval), or for replenishment of funds based on the submittal of receipts to the Business Manager.
A. INTEREST EARNINGS
Interest earned on agency accounts and the checking accounts authorized by the School Committee with student activity monies must accrue to the student activity account. A separate record shall be maintained on all interest earnings
The School Committee policy specifies the use and disposition of all interest earned, which shall be for the benefit of the students participating in activities. A copy of the School Committee policy can be found in Appendix C.
Any monies paid to the school or to a student activity organization as commissions belong to the students (ex. school pictures, yearbooks, class rings, candy sales). Such monies shall be expended in accordance with specific school committee policy for the benefit of students. At no time shall such commissions be used to benefit staff.
A copy of the school committee policy can be found in Appendix C.
C. OTHER EARNINGS
School Committee policy requires that a school submit a plan for the collection and expenditure of any undesignated earnings (such as vending machine receipts) to them for approval.
A copy of the school committee policy can be found in Appendix C.
1. No purchases will be made without prior approval of the principal
2. The up-fronting of personal monies should be avoided whenever possible. If it is anticipated that up-fronting of monies may be necessary, prior approval shall be obtained from the principal.
3. Equipment and supplies purchased with student activity account monies are the property of the organization, not of any individual student, advisor, or other interested party.
4. Student advisors, or others involved in purchasing through the student activity account, shall not in any way benefit personally from the purchase.
5. Student activity monies shall not be used fro any purpose unrelated to student activities or for the benefit of any staff person.
6. Purchases made with monies in student activity accounts are exempt from the provisions of MGL Chapter 30B, the Procurement Law. It is recommended, however, that principals follow the provisions of this law to the maximum extent possible to insure the most efficient use of these monies. It is recognized, however, that many purchase decisions will be made by students (particularly at the secondary level), and selection of the low bidder may not be reasonable. Students should be taught how to compare costs as part of their experience. School Department policy will be enforced for all levels of purchasing.
7. Student activity monies shall not be used to pay any school department employee for services. Payments for reimbursements of expenses (with receipts) is allowed, but no payment for time or services shall be made.
1. All expenditures/disbursements from student activity accounts shall be made by check.
2. No check shall be made payable to cash.
3. All expenditures/disbursements must be classified in accordance with an accepted chart of accounts. (For a sample chart of accounts, see Appendix E.)
4. Checks shall be signed only after they are completely prepared.
5. Check signature authority shall be accordance with school committee policy. (A copy of the school committee policy is in Appendix C.)
6. No checks shall be issued without bills or receipts to document the disbursement. Vendor statements alone (i.e. without any supporting documents) should not be used for the issuance of checks.
7. No funds are to be expended for sales taxes, this includes reimbursements.
8. A record of all checks issued will be maintained.
9. All checks shall be accounted for, including voided checks (which shall be mutilated to avoid re-use, but not destroyed).
10. Checkbook reconciliations to bank statement and account reconciliations should be done monthly. The principal should review and approve the reconciliations.
11. A standardized form should accompany all requests for check issuance. This form shall accompany the invoice and/or all supporting documents and must state to whom the check shall be payable, the reason for the payment, the amount of the check, the account to be charged, and the approval signature of the student officer/treasurer and/or advisor.
12. Checks from the student activity checkbook can be issued for up to $1,000.00 without approval of the Business Manager or his designee. If a principal believes it is necessary to issue a check in excess of $1,000.00 from the checkbook (because of timelines), approval must be obtained from the Business Manager, prior to issuance of such.
Samples of forms for the above mentioned expenditure documentation are shown in Appendix A.
REPLENISHMENT OF CHECKBOOK MONIES
Each building checkbook has a maximum balance approved in the school committee policy. This maximum balance became the beginning balance in the checkbook. As checks are issued, the balance in the checkbook will decrease. Periodically, the principal should submit documentation to the Business Manager to account for the expenditures, along with a request to have monies equal to the total expended in the checkbook transferred (via the warrant process) from the student activity agency account into the student activity checkbook.
Such request shall include a billhead requesting replenishment of the account accompanied by a copy of each school withdrawal slip (originals shall be kept on file by the school). Actual bills/receipts that backup each withdrawal slip will be maintained by the school in their files.
The individual bank accounts of the schools must not be allowed to exceed the "cap" then the difference must be immediately refunded to the Treasurer's office for re-deposit.
1. Fund-raising projects should be held in accordance with School Committee policy.
2. Results of fund-raisers shall be reported to the principal within one week of the close of the fund-raising activity on an approved form.
3. All monies received through fund-raisers shall be deposited in accordance with the preceding section on "Receipts".
4. Expenditures related to fund-raisers must be handled in accordance with the guidelines and policies for all other student activity account expenditures.
Any student activity organization inactive for a period of three (3) years or more, and for which there has been no receipts or disbursements recorded on their behalf, shall require the following to be closed:
1. Written notification by the advisor or student officer/treasurer to the principal or other authorized administrator that the particular activity will cease to be a viable account. If an advisor or student officer/treasurer is not available, such discontinuance shall be by vote of the School Committee.
2. All assets of the recognized student activity organization shall be determined and stated in writing.
3. Any disposition of assets of an inactive recognized student activity organization shall be determined by the School Committee, but in no case shall the disposition benefit specific individuals. (The primary goal in disposition shall be to benefit the student body.)
CLASS ACCOUNTS AT GRADUATION
Class accounts are established to benefit students currently enrolled in the school system. Once a class of students graduates, the school district is no longer responsible for these monies.
Class accounts shall remain open for ninety days after graduation to insure that all outstanding bills can be paid. Upon completion of the ninety days, the monies, if not withdrawn by the students, shall be disposed of in accordance with School Committee policy.
The Superintendent's or Business Office should maintain the following lists:
1. The bank account numbers for the student activity accounts maintained by the schools.
2. approved student activities
In the operations of a fund, just as it is in conducting a business, internal controls, documentation, supporting evidence, appropriate procedures and the like are certainly necessary. Aspects of importance also include efficiency and the ease of operation. The Superintendent's office must consider its procedures for operations, on an on-going basis, to be assured that there is the appropriate balance of the interests regarding what are appropriate bookkeeping and control procedures necessary to affect an efficient and easily functioning system of operations. Moreover, it is important to stress the need for cooperation by all personnel involved. There needs to be regular meetings established in order for the administration, the teachers and the students to be involved together to affect the intended purposes of the law. Everyone involved needs to understand the importance and the value of what is being addressed and that their cooperation is of the utmost necessity.
STUDENT ACTIVITY ACCOUNT REQUIRED FORMS
Student Activity Account Deposit Slip
Student Activity Fund Withdrawal Slip
Student Activity Account Event Financial Report
Student Activity Account Cash Box Log Book
Student Activity Account Request for Recognition of a Student Organization
Student Activity Account Checkbook/Bank Reconciliation
Student Activity Account Quarterly Activity Report
Student Activity Account Annual Activity Report
Student Activity Account Annual Deficit Account Report
© Copyright Edmund R. Milot, CPA
158 Duffy Drive, Taunton, MA 02780--2822
ph: 508-823-1597 fax: 508-823-8017 firstname.lastname@example.org