Every PTA that takes in money ends up having a check that was written to the PTA
returned by their bank for non-sufficient funds (NSF). When NSF checks are part of a fundraiser that includes merchandise, the costs can be significant as the PTA is liable for full payment on all of the fundraising products purchased. It’s important to have standing rules about how your PTA will deal with NSF checks.

An Ounce of Prevention

The first step in handling NSF checks is to set up rules that help prevent such checks being written in the first place. Good policies to include are:

• Only accept checks that include the name, address, and telephone number of the person signing the check.
• Do not accept pre-dated or post-dated checks, only those with the current date.
• Require those who write an NSF check to the PTA to pay an additional service fee to the PTA in addition to reimbursing the PTA for any bank fees associated with the NSF check.
• Do not accept checks from people who have written NSF checks in the past and not corrected the situation in a timely manner. That correction should include paying the PTA service fee and the PTA’s bank charges.

Make sure that parents are aware of your PTA’s requirements for accepting checks. Consider including a copy of the policy in fundraising materials. Review all of the checks received prior to ordering fundraising products to ensure that the PTA’s policies are being met.

Handling the NSF Check

Even with good check acceptance policies, your PTA will likely still receive an NSF check every once in a while. In most cases, such checks are simple mistakes that can be handled quietly with a phone call or e-mail. You can contact the check writer’s bank to see if the lack of funds was a temporary problem. Let them know you have a check from the account that was returned for non-sufficient funds and that you want to know if the account now has the funds to cover the check. If so, have your PTA’s bank process the check again, and contact the check writer for payment of service and bank fees.

When the politely quiet approach does not work, your PTA may wish to consider taking legal action. In Illinois, the first step is to send a letter to the check writer by certified mail with return receipt requesting the check be made good. The request should include:

• The check number, the date it was written, the amount of the check, the bank on which the check was drawn, and the person or organization the check was written to.
• Request that payment be made on the NSF check and the additional bank and service fees within 30 days of receipt of the letter. Under Illinois law, failure to meet the 30 day deadline can result in the check writer having to pay triple the amount of the check, but not less than $100 or more than $1,500.
• Cite the Illinois check deception law (Chapter 720—Criminal Offenses, Title III—Specific Offenses, Article 17—Deception).

There are numerous sample NSF check request letters available online. Keep a copy of the letter for your PTA’s records along with an additional copy to file with any legal action. If the check remains unpaid after 30 days, take the check, copy of the notice letter, and any other documentation to your local clerk of court. The staff there should be able to help you in filing a complaint.

From National PTA

It is hard to acknowledge that theft, fraud and embezzlement are pervasive in today’s
society. In many cases, the person who
commits these acts is someone you know, like and trust. Convincing a nonprofit to prosecute is often difficult. A nonprofit’s duty to its members, the community, and its donors are significant and this should have strong consideration when determining whether to prosecute or not. Managers of nonprofit organizations must constantly be on the lookout for fraud. Fraud costs U.S. organizations more than $400 billion annually. The average organization loses approximately 6% of its total annual revenue to these abuses. And these abuses are perpetrated at all levels of the organization.

Internal Controls

Every organization should have a strong system of internal controls. Internal controls are not only for large organizations; there are steps small organizations can take to protect their assets as well. They may not have enough volunteers or employees to maintain strict delineation of duties but internal controls are still possible. Without good internal controls it could take months to become aware of a problem. View our Fraud Prevention Checklist. Also be sure to access the Preventing Theft in Your PTA e-learning course. This course will teach you how to detect theft in your unit and what to do if you suspect it is happening.

Internal controls are a process designed to provide reasonable assurance regarding the reliability of financial reporting, the effectiveness and efficiency of your operations, and compliance with applicable laws and regulations. Implementing proper internal controls provide assurance that:

• Fraud will be discovered on a timely basis
• Perpetrators will be identified
• A strong deterrent to improper activities is in place
• Loss will be covered by insurance

Good internal controls will take away the opportunity needed by desperate people to commit a crime. What will cause a normally good person to reach this point? Gambling debts, divorce, illness, drug problems, peer pressure, and work lay-offs are some of the reasons that are given when people are questioned about these abuses. It may be hard to take appropriate action when you have compassion for the person committing the fraud, but that should not be part of the consideration.

Internal controls include policies such as:

• Always using deposit and expense vouchers for income and expenses
• Requiring two signatures on every check
• Having two independent money counters at an event before turning the collected funds over to the treasurer (who then counts again to confirm how much they are receiving)
• Depositing funds immediately after events
• Never using blank checks
• Having bank statements sent to and signed off by a non-signatory to the PTA checking account who is familiar with the PTA’s activities (e.g., the PTA secretary if the president, vice president, and treasurer are all signatories to the account)

PTA-Specific Warning Signs

The following is a list of PTA-specific warning signs that may indicate that theft, fraud or embezzlement is taking place:

• Treasurer’s report delayed or non-existent
• Budget monitoring reports delayed (may be part of the treasurer’s report)
• Delayed deposit of cash receipts
• Missing supporting documents
• Multiple corrections to the cash book
• Checks bouncing when there should be sufficient cash
• Lifestyle or behavior changes of staff or volunteers

The Cost of Not Prosecuting Fraud

There are many costs as a result of not prosecuting fraud:

• Not pursuing action sets a precedent that may cause additional fraud later on or create an environment that encourages fraud rather than deters it.
• This may cause loss of credibility and respect for the association among the members, community, partners and donors.
• Lack of prosecution may void the insurance policy.

Fraud can have a significant impact on your association. It can lead to:

• Financial loss
• Costly investigation (in actual dollars and time lost)
• Lost opportunities
• Damaged reputation
• Damaged relationships with vendors, partners, members and the community
• Loss of donors
• Litigation

Investigate all suspected fraud and decide if sufficient probable cause exists to prosecute. You may want to get an attorney involved from the beginning to make certain that evidence of possible fraud is properly preserved. They can advise the association on the likelihood of success in civil court, and protect the organization from issues related to improper actions or civil rights violations against the suspect.

Do not be afraid to talk about fraud. Make it well known that theft will not be tolerated and that prosecution may result. Promote safeguards to reduce incidents of fraud and encourage people to come forward if they suspect irregularities.

Suspected Fraud Action Step-by-Step

When you suspect fraud, be sure to consider the following:

• Determine if insurance covers the loss.
• Consider whether to call the police.
• Consider whether to call the district attorney.
• Consider whether to meet with the individual.
• Contact your Illinois PTA district or region director for resources and guidance.

Be sure your PTA has a written policy with procedures describing how future incidences will be handled.

Check the insurance policy before you have a problem to see if it requires prosecution in order to recover a loss. You should also check the policy to see if it will cover losses if you do not have written controls in place or what happens if the controls are not followed. Many times this is grounds for denying a claim. You may want to check your state law to see if there are provisions that you may want to incorporate in your policy.

If you have evidence that fraud has occurred, take the following steps:

• Do not make accusations.
• Do not offer not to prosecute if the money is paid back. Doing so is a form of extortion.
• Determine what other access the suspect has, what other types of fraud schemes the suspect could have perpetrated, the likelihood of collusion, and the possible duration of the schemes discovered.
• Document all allegations.
• Gather facts, documents and interviews.
• Identify all bank accounts involved and consider closing or freezing the accounts. Follow the steps in your policy developed to cover such matters.
• Contact the authorities.
• Contact insurance company.
• If it is determined that fraud did occur, National PTA recommends that the PTA should file an official report with the police department.

The IRS requires every 501(c)3 non-profit organization to file some variety of the Form 990 annually. Failure to file for three consecutive years will result in your PTA’s non-profit status being revoked and having to pay taxes on your PTA’s income. In addition, many businesses will not make donations to organizations that are not tax-exempt.

Which IRS Form 990 you need to file depends on your PTA’s gross income. Gross income is the total amount of money your PTA takes in over the fiscal year, including all membership dues. Here’s how the IRS breaks down who files which Form 990:

• If your PTA’s gross income is less than $50,000, you complete the online postcard Form 990-N.
• If your PTA’s gross income is over $50,000 but less than $200,000, you complete the Form 990EZ along with any Schedules.
• If your PTA’s gross income is over $200,000, you complete the full Form 990 and any Schedules.

Your PTA will need to file by the 15^th day of the fifth month after the end of your fiscal year. For PTAs that have their fiscal year end on June 30^th, the filing deadline is November 15^th.

For most PTAs, only the online Form 990-N is required. Completing the form takes less than ten minutes, and the IRS will usually notify you within an hour that your form has been accepted. Be sure to print out this receipt and send it in to the Illinois PTA state office along with a copy of your audit report by December 31^st (you can send this along with your dues payment).

Here is the information you will need to complete the Form 990-N:

Organization’s legal name

An organization’s legal name is the organization’s name as it appears in the articles of incorporation or similar organizing document, as most recently amended and (when required by state law) filed with the appropriate state authority. If you have changed your organization’s legal name, you must inform the IRS of the new name and provide certain supporting documentation before filing your e-Postcard.  You should report the change of name as far in advance of your filing deadline as possible.  If you haven’t received an affirmation letter reflecting your name change by the time your return is due, you will have to file a paper return (Form 990 or 990-EZ) for the year in which you changed your name and report the change of name on the paper return.

Any other names your organization uses

If the organization is known by or uses other names to refer to the organization as a whole (and not to its programs and activities), commonly referred to as Doing-Business-As (DBA) names, they should be listed.

Organization’s mailing address

The mailing address is the current mailing address used by the organization. If the organization’s mailing address has changed since it filed its previous return (Form 990 or 990-EZ) or e-Postcard simply enter the new mailing address.

Organization’s website address (if you have one).

Organization’s employer identification number (EIN)

Every tax-exempt organization must have an EIN, sometimes referred to as a Taxpayer Identification Number (TIN), even if it does not have employees. The EIN is a unique number that identifies the organization to the Internal Revenue Service. Your organization would have acquired an EIN by filing a Form SS-4 prior to requesting tax-exemption.  The EIN is a 9-digit number and the format of the number is NN-NNNNNNN (for example:  00-1234567).

• If you do not know your EIN, you may be able to find it on the organization’s bank statement, application for Federal tax-exempt status, or prior year return.
• Please note that the EIN is not yourtax-exempt number.  That term generally refers to a number assigned by a state agency that identifies organizations as exempt from state sales and use taxes.
• If you do not have an EIN, see theInstructions for Form SS-4 for different ways to apply for an EIN.  DO NOT use the EIN of a parent or other organization.

Name and address of a principal officer of your organization

Usually president, vice president, secretary, or treasurer – often specified in the organization’s bylaws.

Organization’s annual tax year

Like any taxpayer, exempt organizations must keep books and reports and file returns based on an annual accounting period called a tax year.  A tax year is usually 12 consecutive months that can be either calendar year or fiscal year and is often specified in the organization’s bylaws.

Answers to the following questions:

• Are yourgross receipts still normally $50,000 or less?
• Has your organization terminated or gone out of business?

Protect your PTA’s tax-exempt status by filing your Form 990 on time. The IRS has additional information about protecting tax-exempt status, including online training videos.