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Chartered Organization not a Legal Entity?

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Posted (edited)

Our local troop and pack have been chartered by our school's PTO since the early 1960s.  Until recently, the PTO has been pretty uninvolved as the CO and has had no involvement other than its president signing the annual charter recertification.  The PTO, as it currently is configured, operates as a part of the school district and therefore does not exist as its own separate non-profit legal entity, does not have a tax ID number, file its own taxes or control its own money.  All of their operations fall under the discretion of the school district. 

The PTO is now questioning how they can act as CO when they have no ability to provide equipment insurance or oversight of troop finances.  Any help or advice anyone has pertaining to this would be greatly appreciated.

 

Edited by ScoutingforAnswers

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Posted (edited)

Your situation is not unusual.  

  • COs often are distant to only start asking questions at some point years down the road.  Just something to work through.
  • Many units have had COs that are not real entities.  It happens even though it's not preferred or even the BSA documented model.  Often they are "parents of" organizations or a neighborhood group.  

In your case, your PTO is a legal entity and a non-profit as they are under the school district and school districts are non-profits.  The real issue is probably that they don't want to give you their non-profit ID and are now questioning whether they can charter your scouting organization.  Also, the PTO must have a non-profit ID to spend money otherwise they must pay taxes, etc.  

You really have two real options.

  • Calm the concerns of the CO.  Don't write off your CO too quick.
  • Find a new CO.
Edited by fred johnson

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3 hours ago, ScoutingforAnswers said:

The PTO is now questioning how they can act as CO when they have no ability to provide equipment insurance or oversight of troop finances.  Any help or advice anyone has pertaining to this would be greatly appreciated.

The IH of this unit might be contemplating the possibility that he/she is personally liable.

 

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Posted (edited)

Thanks Fred & Dave,

The PTO is not trying to play coy with the troop, they literally don't have a non-profit ID that they can provide.  While I'm sure many PTOs  have their own separate checking accounts at a local bank, this PTO does not.  It has an account with the school district's central office who controls and must approve all of its transactions.  For its own activities, the PTO members must pay for activities out of pocket and then seek reimbursement from the school district's central account.  That allows them to operate without a non-profit ID and to not be an actual legal entity because their funds are commingled with those of the school.

I think a big sticking point is with the group's being asked to grant more financial freedom to us than it itself enjoys.  The troop has an EIN it obtained under a member of the scout unit's finance committee that allows it to operate a checking account for the troop from a  local bank. 

For example, let's say both the troop and the PTO want to buy banquet supplies for 70 people at Wal-Mart.  Currently, the troop uses its checking account at the local bank and writes a check for the expenses out of the organization's checking account.  Meanwhile, if the PTO does the same thing, somebody from the group has to use their own money to buy the supplies (paying sales tax), then submit that receipt along with a request for reimbursement to the central office of the school system.  If all items are approved by the central office, a check is cut and then mailed to the member in about 2 weeks.  Friends in the organization have stated they sometimes have over $500 in outstanding receipts awaiting reimbursement from the district.  

Some of the members do not have the ability to pay that much out of pocket, so chairing their events is limited to just a few individuals who have the capability of having cash out of their own pockets for that long.  When the troop was originally chartered, the PTO did have a separate checking account at the bank, but the school district has said they would be charged to use district facilities if they did not make the move to this reimbursement system.  They're questioning how they can be deemed responsible for an organization that has the freedom they had to surrender a few years ago.

 

Edited by ScoutingforAnswers

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Posted (edited)

You hit it on the head.  

18 minutes ago, ScoutingforAnswers said:

They're questioning how they can be deemed responsible for an organization that has the freedom they had to surrender a few years ago.

That is the issue.  The PTO does have a non-profit ID, but they don't use it.  The PTO should be using the school district non-profit ID.  It does seem strange though.  PTOs are usually fundraising organizations that raise money to spend on pet projects.  Play sets.  Teacher supplies.  If the PTO does not control it's funds, then why raise funds.  The raised funds would effectively supplement the district general fund.  That's hardly an inspiring purpose.

You may be stuck in a shoving match between the school district and the PTO.  Smooth the waters if you can.  Otherwise, you may need to find a new charter org.  

One note.  For ten years or more now, you need an SS# or EIN to open a bank account.  So your scouting unit may have inadvertently partially created a new legal entity.  ... I've seen it happen three or four times now.  Our local bank will even show customers the IRS web site for getting an EIN for a non-profit.  While sitting in the bank, customers fill that out to get a new EIN for their scouting org.   I fear it is rarely taken to closure to create a full entity that is structured completely clean with correct paperwork filled each year.  

 

 

Edited by fred johnson

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This is really a matter for your Council professional staff (DE/SE) to sort out.  The Charter Agreement is a contract between the PTO and the BSA local Council.  If the PTO feels it needs to withdraw from the agreement, this is not for you to moderate.  Contact your DE immediately and tell him/her that they are about to lose a Unit and they need to sort it out or find you another CO.  Another question...is the school district a Government agency?  In my area, public schools are a division of the local city government, and they do NOT sponsor scout troops, or any other group that is not a part of the school curriculum.  There is also the issue that all government agencies are required by law to operate on a non-discrimination basis and their activities must be open to all.

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The PTO you describe is something I have never heard of.  The School District sponsors the PTO?  That means the School District is sponsoring the Scout Units !  The way I heard it, that can't be because of BSA's requirements, being  a "private" organization.  BSA Council needs to consider what it wants:  A Scout Unit or consistency in it's recruitment.  

Of course, perhaps the new membership non-requirements (gender neutral, sexual orientation neutral) may allow such sponsorship, Wonderful, more opportunities for kids to be Scouts.

Otherwise, check with your Scout Unit Parents, find a Lions Club or Kiwanis Club or Church or Temple or  Volunteer Fire Brigade or American Legion to sponsor your Unit, all to the better. 

It will work our, keep on the trail. 

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Thanks.  It is a unique setup within our district as of a couple of years ago.  While most PTOs in other districts are set up as their own 501(c)3 non-profits, schools in our district were given that option as well but there's a catch.  A PTO can operate as a separate 501(c)3 and maintain your own checking account, but you can't use district facilities without paying a rental charge.  The PTO in the schools are typically heavily reliant on district facilities for their events so they chose to join in with the district.  They use the district's tax ID (EIN) when needed, avoid the facility rental fees, and have discretion over how their funds at the district's central office are used (buy chromebooks for 4th grade, buy new tables for 1st grade, etc).  For them, the reimbursement is the only real drawback.  For us, the drawback is they aren't separate from the school and we may be the tip of the iceberg since there are 5 other packs and 3 troops currently chartered to different PTOs in the district.  I would rather figure out a solution for our pack and troop first, then help the other packs and troops that may be affected.  

The new membership non-requirements and the need for the PTOs to sign off on which type of units it wanted to charter is what opened this can of worms, but I do hope it can be a positive in the long term.  

If we do need to seek out another CO, I know Elks, VFW, and KofC already charter other packs.  I know the Masonic Lodge has an award or designation it can give to its members for working with Scouts.  Does anyone know of any others like that?  While the PTO has been completely hands off, a CO that maybe has a similar incentive might generate a greater community support. 

Also, I know the PTO would be willing to sign off on the equipment being transferred as well as letting us keep our Pack and Troop numbers.  With such a long history, I know former members would definitely be disheartened if the troop number were to be lost.

  

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9 hours ago, scoutldr said:

 The Charter Agreement is a contract between the PTO and the BSA local Council. 

How can a PTO enter into a contract if it is not a legal entity?

 

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1 hour ago, ScoutingforAnswers said:

I know Elks, VFW, and KofC already charter other packs.

  

The Knights aren't chartering any new units.

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Posted (edited)

That is the question that has come up now.  For 70 years, its just been something the PTO signed off on.  But now with having to make the CO decision on boy/ girl/ or mixed troop, the people in the PTO are asking that exact question.  The president of the PTO is wondering if her signature on this document is as her representing the legal entity of the school district (which she is not authorized to do) or if it is her as a person committing to this charter agreement.  She says those would be the only two legal entities that could possibly exist.  And since they aren't a legal entity why can't the parent leading science club, or the parent leading robotics club sign it.    

Edited by ScoutingforAnswers

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Interesting ... I know our PTO is it's own non-profit and they get to use the school facilities for free as their activities are to benefit the school and the school district.  They don't need to pay to rent the space.  Even then, rents are usually very reasonable such as $4 or $5 for an hour to rent a gym.  In any event, that's your school district.  

 

 

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Almost any responsible "legal entity" (ask the BSA Council to define that) can charter a Scout Unit. It is like a franchise. In fact, it IS a franchise.

I know of a family owned hardware store that charters a Cub Pack.   Up to  few years ago,  a military post could charter a Scout Unit, but because of Fed concerns about the BSA's membership requirements, that was stopped.  

If the PTO has scruples against being a Scout sponsor, go and find another sponsor. It is annoying and takes some doing, but there are lots of Scout friendly folks out there.  And , think about it, you already have the Unit! Scouts and Leaders, fait accompli !   They just need to have the DE come round with the paperwork ! 

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