September 16, 2019
Managing 4-H Entity Funds
This is taken from Jim Lindquist's note in the August 20th Tuesday Letter.
You may wonder about the policies in place for the use of Extension funds and why we operate with requirements and restrictions relating to the use and management of funds. Kansas statutes, including the Kansas Extension laws, make certain requirements relating to the proper handling of public funds as well as funds raised in support of Extension programming. The local unit Extension boards are given management responsibilities for local funds, but both federal and state laws also make the Director for Extension responsible for the expenditure of all funds, derived from whatever source. So statutes dictate some practices and policies, and others have come about to allow for oversight responsibilities to be effectively managed by the local board and by the Director for Extension. The local board receives and approves a monthly financial summary statement for the local Extension unit account. The monthly audit of local unit financial operations by the K-State Research and Extension business office allows the Director for Extension to meet their oversight responsibilities.
By Kansas law, both the director for Extension and the local Extension board are accountable for funds raised and/or collected by Extension affiliated groups such as 4-H clubs, 4-H councils, and Master Gardeners. In addition, the IRS has required that the local Extension boards provide oversight of these Extension affiliated accounts to qualify for exemption from IRS filing requirements and payment of income tax on funds raised by the club or organization.
Most of the time financial issues that come to light don’t involve fraud, but are the result of policies not being followed. One such policy is the requirement that Extension professionals not sign any checks of any Extension related accounts. Employees can provide a signature which indicates the expenditure has been audited and is approved for payment, but two signatures of club or organization members are required for each expenditure transaction to occur. (Extension Council and District expenditures require three signatures).
In order for the local board to ensure compliance with financial requirements for 4-H and other Extension affiliated groups, an annual review of those accounts is to be conducted by a financial review committee. Approval of the reports should be documented by the board, recording in their minutes a motion to approve the reports, including in the minutes the name of each group. This review and board approval is required of all Extension affiliated organizations. The reviews are to be completed and reports submitted to the local office by November 1 each year. Those clubs and organizations not meeting this requirement may be subject to reconsideration of the ability to use the 4-H name and emblem and be responsible for registering and reporting as a “for profit” business, subject to all associated tax filing and reporting responsibilities.
For more information see Financial Review Committee Responsibilities found in the Board Leadership website:
Additional financial resources relating to use of funds policies are available from the Employee Resources website:
If you have questions on financial reviews for your local 4-H entities, please contact your Regional 4-HYD Specialist.