The Shadow Economy Part II: District Booster Clubs and Outside Support Organizations

School carnivals, snack bars at football games, school dances, chain-gangs at Friday night football games throughout our county-none of these things would occur were it not for the work of volunteers and Outside Support Organizations (OSO's).  The work that these volunteer groups do provides vital assistance to students and to our school district.  But when significant sums of money start to roll through these organizations, there must be uniform accountability.  Currently, according to a soon-to-be released audit report on the subject of these organizations' compliance with School Board policy, we have many organizations that need additional guidance and support to be in full compliance.

Using approximate figures, the school district receives about $7 Million dollars per year that supports various student organizations.  One million flows through George Stone Technical School, Three Million runs through school internal accounts, (and this money is subject to Board rules on cash handling, fundraising, and most importantly is subject to district audit) But Three Million dollars yearly flows directly through OSOs --they have their own checking accounts, their own treasurer, and very little oversight.  These organizations are required, under our District's 13 year old "OSO Manual", to provide each Principal of each school whose programs are supported copies of minutes, financial statements, and IRS documentation demonstrating their compliance with applicable law on non-profit organizations.  The problem is that many of these documents could not be readily obtained at several schools when a recent district-wide audit of these organizations was conducted.  Many clubs do comply--but there are a significant number that do not.  From the report:

"School principals may not be fully aware of the requirements that OSOs must operate under, and what their monitoring responsibilities are, including what documents they are required to have submitted to them..Throughout the process of obtaining financial information related to this project, we noted principals were not provided required information by their OSOs, nor were they actively seeking out this information until our office asked for the information. We began requesting this information in December 2014. The information from the 2013-2104 year should have been 


collected throughout that school year, and been available to us by December 2014..Of the 49 booster clubs, we noted that 31 of the 49 (63%) booster clubs were at some time registered with the IRS as a federally recognized taxexempt organization. However, currently 8 of the 31 have had their taxexempt status revoked by the IRS. Revocation usually occurs as a result of failure to file annual tax returns for three consecutive years. Finally, we noted that 18 of the 49 (37%) booster clubs do not appear to have at any time registered with the IRS for tax-exempt status." 

One school principal, in an effort to be proactive and to address parental concern, requested our School Board Auditing Department to look into one of the school's OSO's.  The outcome?  It appears as if the organization understands now where it had gone wrong, and what it needs to do to be in compliance.  This school and this organization will accept the recommendations made by the Auditor to become compliant.  That is the best outcome we can hope for--because we need these groups, we need their support, and without them many school activities would cease.

But for this  organization the road to coming into compliance was a rocky one.  From the report on this one, individual OSO:

"-Adequate and auditable financial records were not maintained  
-An annual audit was not done 
-A copy of budget and audit were not provided to the principal 
-Sound accounting procedures were not utilized 
-Required documents were not on file with the principal.

We were able to determine all funds collected were not deposited. A collection totaling $395 was found in the records presented to us. This collection included $275 of cash and two checks for $60 each, both date-d July 11, 2013. This collection was given back to the president on January 27, 2015. It is unclear if this was an isolated event. Because of the inconsistency of supporting documentation and/or errors, we were unable to determine the extent of collections not deposited. Over $14,000 was paid in staff pay for in-charge instructors. The president stated 1099s were not issued, a 1096 was not prepared, and was unsure if they were needed. One of the individuals noted as staff was also a District employee. Payments to this employee totaled approximately $4,000."