Extraclassroom Activity Funds (ECAF) are operated by and for the students of a school district. They are important funds that not only help pay for various opportunities for students, but also provided learning experiences, teaching them the importance of morale for their school education. Extra-classroom activity funds are defined by SED in the Regulations of the Commissioner of Education as “funds raised other than by taxation or through charges of a board of education (Board), for, by or in the name of a school, student body or any subdivision thereof.” These funds can be raised and collected by the students through admissions, membership dues, sales, campaigns, and donations, and are considered used for appropriate expenses if they abide by established regulations.
According to the Regulations of the Commissioner of Education, for all school districts that contain a population of less than one million students, whether it is a city school district or a union free school district, the board of education must create a set of rules and regulations for ECAF that need to be followed strictly. They should address the safeguarding, accounting, and auditing of all moneys received and derived from, as well as the conduct, operation, and maintenance of extraclassroom activities.
The New York State Office of the Comptroller (OSC) has recently been performing more audits of the extraclassroom activities fund at various school districts across the State. OSC audits were finding that although there was an adopted or implemented policy by the board, the district officials and the board were not ensuring that the policies and procedures were being reasonably followed. Some of the findings they noted included missing documentation to support cash collections, or the timeliness of the receipts could not be readily determined because of inadequate records maintained by the clubs or the Central Treasurer. The OSC also noted issues where disbursements did not contain the proper documentation to support the expenditure including missing invoices or lack of authorizing signatures by the club student treasurer.
The OSC has the following recommendations:
- The Board should not only adopt or implement their own policy, but district officials should ensure that the policy is being followed for extraclassroom activity funds especially regarding recordkeeping of the funds as well as cash receipts and disbursements.
- The Board should be receiving annual reports and should check for any issues or weaknesses and identify corrective action, if necessary.
- Student treasurers who oversee extraclassroom funds need to be provided with adequate oversight of the cash handling procedures and how to maintain appropriate records for the money that is being spent. Additionally, it is imperative that the district officials and the Board make sure that the faculty advisors, the central treasurer and the student treasurers responsible for the funds know the proper procedures and policies for cash receipts and disbursements, and that all requirements are being strictly followed to maintain satisfactory and acceptable records.
Failing to establish and ensure compliance with ECAF policy and procedures could increase a district’s risk of fraud or misuse in the spending of these funds.
In addition, school districts need to ensure that the vendors paid through ECAF are in compliance with IRS guidelines regarding the filing of form 1099. This can be done by:
- Maintaining a list of vendors paid through extra-classroom activities and a running total of amounts paid to each vendor with corresponding check number.
- Reviewing the vendor listing at the end of each calendar year to ensure all vendors paid $600 or more were issued a Form 1099.
A best practice is to obtain a W-9 form from each vendor before the first payment is made. Form 1099 must be sent to each vendor by January 31st of the following calendar year.
The New York State Education Department released an updated version of The Safeguarding, Accounting, and Auditing of Extra Classroom Activity Funds pamphlet dated January 2019. The document contains many sample forms. Key Updates include:
- Pages 11-14 – Sales tax
- Page 22 – Charter Schools
- Page 23 – Internal Control
- Page 37 – Admissions Form
- Page 41 – Tax Exempt Status
By reviewing the prior-year ECAF independent audit reports, districts can see how ECAF is being handled. As internal auditors, we are here to help with any corrective actions that may need to be implemented.
Alyssa is a member of Cerini & Associates’ audit staff where she works with our education and school district clients. Alyssa has experience in accounting, auditing, and claims auditing. Alyssa’s knowledge and experience allows her to provide specific services including system testing and analysis, as well as claims audit functions.