Student Activities - Financing
Student body funds do not represent a significant portion of the school district budget, and they are not available for discretionary spending by the administration or board of education. Student body funds do represent one of the most visible and likely areas for breaches of internal control.
Depending on the size and location of the school, student body funds can range in size from hundreds of dollars to hundreds of thousands of dollars. Laws and rules govern how student body funds can be used and accounted for; these vary from state to state, but most contain detailed rules and procedures that are to be followed for collecting, accounting, and distributing student body funds. Although student body funds are for the purpose of conducting activities on behalf of students, they are still considered school district funds under the supervision of the local board of education. Student body organizations acquire their purpose, power, and privileges from the rights conferred upon them by the local governing board and the applicable state law.
To avert potential problems regarding the handling of funds, certain principles–a type of "student Bill of Rights"–are suggested here. Students have a right to expect that these principles will be respected in the handling of their funds.
Student Bill of Rights
Student funds shall be segregated from district and other appropriated funds, and shall be accounted for separately. This is an important element of internal control that is easily lost if funds are comingled. Many schools take advantage of the laws that govern student body funds by incorporating their implementation into a learning experience for their students. For instance, a formal constitution that states the name and purpose of the organization is usually required. The constitution presents the framework within which the organization will operate. Students and advisors are heavily involved in creating and maintaining their constitution. The constitution outlines the titles and duties of officers, election of officers, terms of office, and the requirements for eligibility to hold office. At a minimum, the elected officers include a president and treasurer. The constitution also includes rules governing financial activities including budgets, reporting requirements, and authorization of disbursements.
For most secondary schools detailed minutes of meetings are also kept. The minutes contain details of proceedings, including financial matters pertaining to the budget, approval of fund-raising venture, and expenditure authorizations. These study body functions of fund governance often are incorporated into the schools' leadership classes as a learning tool for public governance.
There are occurrences of "disappearing" student money that can adversely effect a school's reputation or the reputation of its employees. Most disappearances involve cash where proper internal controls were not in place. Stories of missing game gate receipts or student store money are not uncommon.
To maintain the public's trust and safeguard the student funds, it is important that the funds be accounted for in a responsible manner. Uniform systems to insure adequate accounting procedures, supervision, segregation of duties, and auditing are necessary. As part of the annual audit of a school district, auditors routinely audit a sample of student body funds within the district. The auditors review for proper accounting procedures, compliance with the law, and for solvency. In addition, unlike many other types of audits, they check to see that reserves are not excessive–the reason being that typically, funds raised in a school year should be spent on those students doing the fundraising and not for future students.
Student body funds also have to comply with state and federal regulations that affect all types of businesses. As an example, student body payments often are made to independent contractors to perform services such as catering, concessions, performances, and so forth. Like everyone else, they have to comply with the Internal Revenue Service's guidelines. Amounts exceeding $600 in one calendar year must be reported on form 1099MISC. This task can be overwhelming and complex. As a result, many school districts require that contractor payments be made through the centralized business office.
Sometimes employees are funded through student body funds to provide help for extracurricular activities. Because student bodies typically do not have the expertise or technology to be employers, most districts run student-body-funded salary payments through their district payroll office. There are several other issues such as use tax and sales tax that also apply to student body funds. Using existing payroll and human resource systems for positions funded by student body funds is a good idea because it allows all of the applicable taxes, employee deductions, and fringe benefits processing to be automated and compliant with the law.
Fund-raisers involving students and parents are the biggest source of income for student body funds. Car washes, candy sales, and carnivals bring in millions of dollars to student body funds each year. This money pays for computers, playground equipment, field trips, and many other athletic and enrichment programs.
To best ascertain which fund-raisers are the most profitable or worthwhile, revenue and cost projections need to be done prior to conducting fund-raising activity. For example if the cost of the item being sold is $1 and the selling price is $3, and the plan is to sell 1,000 of the items, the projected costs should be $1,000 and projected revenues should be $3,000 for a profit of $2,000. At the conclusion of the fund-raiser, a reconciliation should be completed to account for actual monies raised as compared to the projection. Any differences should be reviewed and accounted for with remaining items not sold. Since many students and parents often have an emotional investment in the fund-raiser, being able to account for the profitability is critical.
The tenets above represent a minimum level of care in the handling of student body funds and are meant to serve as a guide. The fiduciary duty school personnel have with regard to student funds is clear. The standards and practices observed by schools and school districts set the tone for trust levels held by the community.