Every PTA and PTA Council needs to conduct an audit at the end of the fiscal year. For most PTAs, the fiscal year ends June 30th. That means that your PTA or PTA Council needs to be setting up the audit committee now. Here’s how your PTA can have a successful audit.

The Audit Committee

PTAs should conduct an audit at the end of the fiscal year, any time the signatories on the checking account change, and whenever there is a question about whether PTA funds are being used properly. Your bylaws spell out how the audit committee is formed, namely, it is made up of at least three members elected by the executive committee (PTA officers). If your executive committee decides to elect a committee of more than three members, it should still be an odd number of members so questions that may arise can be decided clearly by voting. The executive board (officers and committee chairs) may decide to use an outside auditor (e.g., you have a PTA parent who is an accountant who volunteers to conduct the audit). If your PTA has more than $150,000 in gross receipts (total money coming into the PTA account) for the fiscal year, Illinois requires you to use an outside independent auditor.

Members of the audit committee cannot include signatories to the checking account, and it is one of the two committees of which the PTA president is not an ex officio member (the other is the nominating committee). The committee will select its own chair, conduct the audit after the end of the fiscal year, and report the findings at the first general membership meeting of the next year.

What the Audit Is

At its most basic level, your PTA audit is a general accounting of the money flowing into and out of your PTA during the fiscal year. The audit (and audit report adopted by your PTA members) assures members that the PTA funds were properly used and accounted for. Conducting an audit protects your current officers from being accused of wrongdoing and assures your incoming officers that they are not inheriting hidden financial problems.

The audit consists of the following figures:

  • The account balance from the last PTA audit
  • Plus any money that came into the PTA during the fiscal year (e.g., memberships, fundraising, donations)
  • Minus any PTA funds spent (e.g., state and national PTA dues, paying vendors for materials, items purchased for the school)
  • Plus any outstanding checks that have not cleared
  • Minus any deposits that haven’t been credited to the account yet

The total from all those additions and subtractions should equal the current checking account balance.

What Materials the Audit Committee Needs

Seeing the calculations above, it is clear that the audit committee needs a lot of materials to ensure that everything was done correctly. The treasurer should supply the committee with:

  • Checkbook and check registers
  • Bank statements, canceled and voided checks, deposit slips, and any other communications from the bank
  • The PTA ledger (or spreadsheet, accounting software, or however your PTA tracks money against budget lines)
  • Membership records
  • Monthly treasurer’s reports
  • Minutes from executive committee, executive board, and general membership meetings

While the treasurer cannot be a member of the audit committee, they should be on hand or easily contacted by the committee to answer any questions.

Conducting the Audit

The audit committee starts working from the previous audit. Verify the beginning balance and that any outstanding checks or deposits from the audit report have cleared.

The committee then checks all the income into the PTA account, comparing bank statements and deposit vouchers against the ledger. The total income for the year should be noted on the audit report. Next, expenses are checked by comparing expenditure vouchers against the ledger and bank statements as well. Verify that the proper Illinois PTA and National PTA dues were paid for every member of the PTA. The total expenses for the PTA should be noted on the audit report.

Finally, identify any outstanding checks or deposits that haven’t cleared yet and note them on the audit report. Do the additions and subtractions and verify that the audit report’s balance is the same as the checking account’s balance. If it is not, dig through the financial materials to identify where the difference is coming from. It may be a simply typo in an entry throwing off all the following balances, money may have been stolen, or the financial records have not been maintained properly. Identifying the reason for the difference should be noted in the audit report as well.

The Audit Report

The audit report is presented to the PTA members for adoption at the first general membership meeting of the fiscal year. It is often the first item of new business and should be adopted before the budget is presented and voted on.

The audit report includes the numbers mentioned earlier (in What the Audit Is) as well as a statement from the audit committee. That statement says that the financial books have been found to be one of four things:

  • Correct: This means that all the financial information was correct with no errors.
  • Incomplete: This means that the audit committee did not have enough information to complete the audit. This may mean that there were missing reports, bank statements, receipts, etc. that prevented the committee from being able to document all the income and expenditures for the previous year. This is also an indication that your PTA needs to improve its financial processes in the coming year (and needs a different treasurer from the prior year).
  • Substantially Correct with the Following Adjustments: This means that the financial records were basically correct, but there were a few minor errors (e.g., digits switched in the check register throwing off the balance, typos in the spreadsheet ledger, etc.).
  • Incorrect: This means that money was missing from the PTA account. You’ll want to refer to our earlier article 10 Steps to Deal with Suspected Fraud or Theft in Your PTA.

Wrapping Up

Once the audit is finished, the audit committee signs off on the audit report form and passes it on to the incoming treasurer and president. Since your PTA’s total income is now documented, your treasurer can file your PTA’s IRS Form 990 right away.

Resources

The leadership resources on the Illinois PTA website includes information on conducting an audit and a sample audit report form under the Finances category. If your audit committee needs access to these tools, have them ask the PTA president for the password to the leadership resources section or have the president download the materials for the committee. National PTA also has financial resources included in its Local Leader Kit.