The School Support
Organization Financial
Accountability Act of 2007
(as amended 2008)
Presented by
Chadwick W. Jackson, JD
Staff Attorney
Office of the Comptroller of the Treasury
Division of Municipal Audit
What is this law about?

This legislation governs groups or
organizations that raise money in the
name of a school to support the school
and its students.
Who does this law affect?

If money is raised by a nongovernmental
group in the name of a school and for the
benefit of a school or its students…that
group is a school support organization
(SSO) and must comply with this law.
What is the law intended to do?




Promote accountability for school support
organizations;
Protect the school support organization
members from certain personal civil liability
through incorporation;
Promote consumer and donor confidence in the
school fundraising process by outside support
organizations; and
Provide legitimacy to school support
organizations.
What is a School Support
Organization?






Booster Club,
Foundation,
PTA,
PTO,
PTSA, or
Any nongovernmental organization or group of
persons whose primary purpose is to support a:




School,
School district,
School club, or
Academic, arts, athletic or social activities related to a
school.
 School
Support Organizations are
the only organizations or groups
that can raise money in the name
of a school or school district.
Why are they the only groups?

TCA § 49-2-604: “A group or organization
may not use a school district’s or school’s
name, mascot, or logos, property, or
facilities for the raising of money,
materials, property, or securities until a
policy has been adopted by the local
board of education concerning
cooperative agreements, school support
organizations, and the use of school
facilities for fundraising purposes.”
Therefore…



The Board Policy MUST require the group
or organization to be a nonprofit entity.
That nonprofit entity MUST be a school
support organization.
The primary purpose of the nonprofit
entity MUST be to support the school
system, school or its athletics, clubs or
social activities.
Who or What is NOT a School
Support Organization?

…a group of persons who merely
request that students, parents, or
members of the general public make
donations to a school district, school,
school club, or academic, arts,
athletic, or social activity related to a
school… OR
Who or What is NOT a School
Support Organization?

…who assist in the raising of funds
for a specified purpose under the
sponsorship of a school employee
where the funds are turned over to
the school to be used for the specific
purpose for which the funds were
raised…
A Fork in the Road…
Two Paths From Which To
Choose…
I.
II.
Run the fundraiser through
the school.
Run the fundraiser through
the not-for-profit
incorporated SSO.
Through the School
A school employee is in charge of the
fundraiser.
 The school employee is responsible
for collecting, receipting, accounting
for, and safeguarding the money
from the fundraiser.

Through the School



The school sponsor turns the money over
to the school’s bookkeeper to be run
through the school’s accounting system.
The bookkeeper keeps a separate account
within the overall accounting system for
the money.
The bookkeeper deposits the money into
the school’s bank account.
The end result…

By law, money received through that
fundraising effort must be spent in
accordance with the purpose for which it
was raised.
Therefore, if the school-sponsored
fundraiser is for new uniforms for the
basketball team…the money can only be
spent for new uniforms for the basketball
team.
What becomes of the SSO?

In order to achieve this type of fundraising
activity, the members/parents of the
traditional booster club act as volunteers
for the school as part of a collaborative
effort between parents and the school to
raise money for a specific purpose.
What does all this mean?
I.
II.
The “parent volunteers” do not fall under the
definition of a “school support organization”
under the SSOFAA.
The “parent volunteers” assist the school with
the fundraising activities and are not
responsible for the financial aspects of the
fundraiser…
…that becomes the responsibility of the
school.
What does all this mean?
III.
IV.
The “parent volunteers” can still raise
money that is needed for specific items
by the particular group or groups they
support.
The “parent volunteers” do not have to
incorporate, elect officers, maintain
bylaws, or maintain financial
statements.
Caveat!!!
There’s one catch…

The “parent volunteers” can only dictate
how the money is spent at the outset
when the fundraiser is planned if it is to be
for a “specific item” or “specific
purpose”…
…otherwise it falls into the
broader category and the coach or sponsor must
follow school policy and decide how the money
is spent for their group.
BECAUSE…

“A group of persons who…assist in the
raising of funds for a specified purpose
under the sponsorship of a school
employee where the funds are turned over
to the school to be used for the specific
purpose for which the funds were raised,
shall not be considered a school support
organization.”
Behind Door #2!!!
What must be done in
order to raise money as
an outside support
organization or booster
club?
What the law says…

TCA § 49-2-604: “A group or organization
may not use a school district’s or school’s
name, mascot, or logos, property, or
facilities for the raising of money,
materials, property, or securities until a
policy has been adopted by the local
board of education concerning cooperative
agreements, school support organizations,
and the use of school facilities for
fundraising purposes.”
The responsibility of the Board of
Education
Adopt a policy concerning:
a. Cooperative Agreements
b. School Support Organizations
c. The use of school facilities for
fundraising purposes.
II.
Develop a process to certify valid school
support organizations authorized to raise
money for local schools.
****These must be done before any
fundraising will be allowed!!!
I.
The responsibility of the Director of
Schools or his/her designee
 Post
or publish a list of
organizations that have complied
with the adopted board of
education policy on school support
organizations.
 Do not allow fundraising activities
without approval.
The School Board’s Policy

Shall include at a minimum that…
i. Prior to soliciting, raising, or collecting
money, materials, property, or securities to
support a school district, school, school club,
or any academic, arts, athletic, social activity
or event related to a school…
…a school support organization shall
submit to the director of schools or his/her
designee a form that documents certain
things.
The form shall include the following:
(A)
(B)
(C)
The organization’s status as a nonprofit
organization, foundation, or a chartered
member of a nonprofit organization or
foundation;
The goals and objectives of the
organization; and
The telephone number, address, and
position of each officer of the organization.

What does it mean to be a “nonprofit
organization”?

The long and the short of it is…
CHARTER
How to charter as a
nonprofit organization
I.
II.
Fill out Form SS4418 (Nonprofit
Charter Form)
from the
Secretary of State.
Fill out Form SS4520 (Statement
of Exemption).

Mail those two
forms to the
Secretary of State’s
Office, Division of
Business Services in
Nashville.
A few notes on filling out the
Nonprofit Charter


Anyone can be listed as the nonprofit
corporation’s registered agent….so long as
they have a Tennessee address.
Anyone associated with starting the
nonprofit corporation can be listed as an
“incorporator” on the charter.
A few notes on filling out the
Nonprofit Charter

If the school board and the principal will allow
it, mail and other corporate documents can
be sent to the school to make things easier
on the booster club’s officers who may only
be in office for a year.
How to be a booster club under
the SSOFAA
I.
II.
III.
IV.
V.
VI.
VII.
Comply with the local board policy.
Maintain bylaws.
Keep minutes of meetings.
Maintain a copy of your charter.
Retain a copy of what the Sec of State sends
back to you when you file your charter.
Maintain detailed statements of receipts and
disbursements.
Adopt and maintain a written accounting policy
for your booster club.
Written Accounting Policy

What the law says: “A school support
organization’s officers shall ensure
that school support organization
funds are safeguarded and are spent
only for purposes related to the goals
and objectives of the organization.”
Written Accounting Policy

Specifically, the law states that: “The
organization shall adopt and
maintain a written policy that
specifies reasonable procedures for
accounting, controlling and
safeguarding any money, materials,
property or securities collected or
disbursed by it.”
Model Financial Policy
“Procedures Manual”


The SSOFAA authorizes the Office of the
Comptroller to adopt a model financial
policy for school support organizations.
The “Procedures Manual” can be found on
our website at
http://comptroller.state.tn.us/ma/sso.htm
School Support Organizations
Annual Requirements

Before the beginning of the school year,
submit a form to the director or his/her
designee...
…verifying your continued existence as
a nonprofit organization;
…stating your goals and objectives;
…current telephone numbers and
addresses of officers;
Additional Annual Requirements


File a statement of total revenues and
disbursements before the end of each
school year with the director of schools or
his/her designee.
Return the Annual Report to the Secretary
of State after the close of each fiscal year.
What a booster club is not
allowed to do…
A nongovernmental group or organization including all school support
organizations

MAY NOT…
1.
2.
3.
4.
Use the school or district sales tax
exemption to purchase items;
Bind the school or school district to any
contracts or financial obligations;
Maintain or operate a bank account that
bears the EIN of a school, school board or
district; or
Use its funds for a purpose other than those
related to its goals and objectives that relate
to supporting a school district, school,
school club, or school academic, arts,
athletic or social activity.
A FEW WORDS ON
“SCHOOL
REPRESENTATIVES”
Who is a
“school representative”?
A “school representative” is
I.
A school board member;
II.
The director of Schools;
III.
A principal;
IV.
Any school or school system’s bookkeeper; OR
V.
Any individual who works for the school system who,
as a part of their employment by the school system is
charged with directing or assisting in directing the
related school club or activity…
…specifically including but not limited to
coaches, assistant coaches, band directors, or
any other school sponsor of a related club or
activity.
What is a “school
representative” not allowed to
do?
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“A school representative may not act as a
treasurer or bookkeeper for a school
support organization.”
“A school representative may not be a
signatory on the checks of a school
support organization.”
“A majority of the voting members of any
school support organization board should
not be composed of school
representatives.”
What is allowed…
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
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The band director can be the treasurer of
the basketball booster club.
An English teacher can be treasurer and
sign checks for the football booster club.
Et cetera…et cetera…et cetera…
BECAUSE…

A school representative for purposes of a
school club or activity is the person who is
in charge of directing or assisting in
directing the club or activity as part of
their employment by the school
system.
AND FINALLY…

Any teacher, coach, assistant coach,
principal, bookkeeper, director, or board
member can sell items in a fundraiser for
any group and act as a volunteer to assist
with the raising of money for any SSO or
club, regardless of what activity it is.
However…


A school’s bookkeeper or a bookkeeper for the
entire school system is not allowed to be the
bookkeeper for any booster club in the district.
TCA 49-2-603(3)(A)(i)(d) and (ii)(d) states that
a school representative is “Any individual who is
primarily responsible for accounting for school
system funds or the funds of an individual
school”
SPECIAL COMMENTS


The SSOFAA does not require a
school support organization to be
designated as a 501(c)(3) under the
IRS tax codes.
Nothing in the law requires SSOs to
surrender their funds to the school
principal…
…however, the board policy
may be more restrictive than the
law.
SPECIAL COMMENTS

A local board of education may grant the
principal of a school the authority to enter into
an agreement with a school support organization
to operate and collect money for a concession
stand or parking at a school event…
…where any money it collects or any
portion designated by the agreement shall
be considered as school support
organization funds and not as student
activity funds…
Provided that…
Booster clubs and concessions
I.
II.
The board has adopted a policy
concerning school support
organizations; and
The SSO provides the school with the
relevant collection documentation that
would have been required pursuant to
the provisions of the TISUAPM (the
“Manual”) for student activity funds.
Booster clubs and bookstores

“A local board of education may grant the
principal of a school the authority to enter
into an agreement with a school support
organization to operate a bookstore
located on school grounds…where any
money the school support organization
collects or any portion designated by the
agreement shall be…school support
organization funds; provided,
Booster clubs and bookstores
I.
II.
III.
The board has adopted a policy;
100% of the profits of the operation of
the bookstore are used for support of
the school; and
The SSO provides the school with the
relevant collection documentation that
would have been required by the
“Manual” for student activity funds.
The Envelope Rule

A principal may allow a school support
organization to turn in its fundraising
money during school and it may be
collected by teachers and turned into a
designated school support organization
member…HOWEVER, the money must be
turned in using sealed envelopes.
The Envelope Rule conflicts with
the “Manual”


The Internal School Uniform Accounting
Policy Manual provides that once a
teacher, in his or her official capacity,
receives money…
…that money automatically belongs to
the school and must be run through the
school’s accounting system.
So, to keep teachers from inadvertently violating
either the “Manual” or the SSOFAA, the
Envelope Rule was created.
Thus…

If the money is in a sealed envelope
and the teacher does not actually
“receive”, “receipt”, or “handle” the
money directly…it can continue to be
school support organization funds
and therefore turned in at school.
In a Nutshell…
A school support organization
must
I.
II.
III.
IV.
V.
File a charter and exemption form with the
Secretary of State.
Maintain organizational structure through
bylaws and officers.
Adopt an accounting and financial policy.
Get permission from the director of schools or
his/her designee before conducting a
fundraiser.
Keep up with records for 4 years.
A school support organization
must also…
VI.
VII.
VIII.
Document and maintain a detailed list of
receipts and disbursements.
Annually file a statement of total revenues
and disbursements with the director of
schools or his/her designee before the end of
the school year.
Maintain adequate separation of duties
between SSO officers and the school
representative related to the school group or
organization (i.e. football coach, assistant
coaches…band director…choir director…etc)
CAUTION!!!
I.R.S. IMPLICATIONS

If your booster club is not a 501(c) corporation
under the Internal Revenue Code, the booster
club MAY HAVE TO PAY FEDERAL
INCOME TAX on the money you raise!!!

The booster club may be required to file a form
1120 corporate tax return annually with the
IRS.
Credits against
extracurricular activity fees

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If parents receive monetary deductions on
fees for extracurricular activities … the IRS
may require those parents to account for
those fee-credits as income.
Services performed in exchange for a
benefit = Income
Kentucky booster parents hit with $30,000
personal IRS bill.
Credits against
extracurricular activity fees

NOTE:


This office does not condone the use of
“credits” given to individual students or their
parents or “accounts” maintained on behalf of
individual students.
It appears that the SSOFAA does not
provide for nor allow the disbursement of
booster club funds for the benefit of individual
students.
Credits against
extracurricular activity fees

Since a “school support organization” may
not use its funds for a purpose other than
those related to its goals and objectives that
relate to supporting a school district, school,
school club, or school academic, arts, athletic
or social activity…TCA 49-2-608(3)
…it would appear that credits to individual
accounts are not allowed under the law other
than those credits which are applied to all
students who participate in the club or
activity.
Comptroller Audits




The Comptroller has the authority to audit
an SSO.
These audits are not performed annually.
An SSO does not have to submit an
annual financial report or audit to the
Comptroller.
Audits will occur on a case-by-case basis in
the event of corporate mismanagement, theft,
or a failure to comply with the SSOFAA.
School Support Organization Financial
Accountability Act of 2007
 Passed
May 21, 2007.
 Amended
June 13, 2008.
 Effective
July 1st, 2008.
Contact Information
Comptroller of the Treasury
Division of Municipal Audit
Bank of America Plaza, Suite 1100
414 Union Street
Nashville, Tennessee 37243-0271
615-532-4475
http://comptroller.state.tn.us/cpdivma.htm