Nonprofit Law/School athletic booster club
Our cheer "spirit" club operates under the school's athetic booster club, a 501c3, which supports all of the sports at the school. Our cheerleaders are required to pay for and attend a camp and purchase misc items such as Pom poms, warm ups, etc. A fundraiser was offered to help with camp costs, with any money fundraised going directly into the cheerleader's individual account according to who sold the item. Any amount not fundraised, must be made up by the parent. Parents write a check to the main booster, with a note stating it goes to the cheer club and what cheerleader it is to be applied to. I wrote an initial check to send my two girls to the camp and for shoes and clothes. The money was divided by the booster club and I was given two invoices, one for each daughter. The booster club asked for second and third payments for the camps, which I did not make, as I decided not to send one of my daughters. Unbeknowst to me, the booster club had paid for one of my daughters and could not get a refund. I was never told they would make a payment on my behalf without having all of my money nor did I complete any camp paperwork. (The camp is not affiliated with the school.) I made another payment to the booster club stating it was to pay for my other daughter to attend her camp and for her shoes and clothes. I was told I still owed for the daughter who didn't attend and that the check would be applied to her account. In addition, money that was previously applied to other daughter's account and marked as paid for shoes was moved. I was told I could not send younger daughter to camp since I had not fundraised nor paid enough money. Are individual accounts allowed in these situations? Can money be earmarked and put in one child' s account and then moved without my permission? Are thse types of payments considered pass through funds? Our spirit club only offered the one fundraiser, which only benefitted those who sold, all other money coming in came directly from parents to pay for a specific item/service. Does this meet IRS guidelines for tax exemption?
The 501(c)(3) organization is in violation of IRS regulations relating to family fundraising efforts benefiting that particular family. My summary of IRS regulations relating to 501(c)(3) booster organizations is at http://goo.gl/RO1ez
-- you may be interested to read that as it address that issue.
As to your specific questions:
1. Are individual accounts allowed in these situations? No.
2. Can money be earmarked and put in one child' s account and then moved without my permission?
I have in my profile that this free forum is only for relevant IRS federal exemption issues of 501(c)(3) organizations. There is no federal law relating to issuing refunds for fees paid.
Even though your issue is a question of state law, I will give you some general advice. The first effort you should make is to find out what the 501(c)(3) organization had informed you, before your payment, either directly or through their published club rules regarding refunds. Your payment was not a retail purchase so you are not protected by the State's law regarding those types of refunds. Most states require stores to post their return policies by the cash register or print it on the receipt. Service contracts, (e.g., dating services, wireless phone contracts, etc.) usually give consumers a three day right to cancel but those would not apply to 501(c)(3) organization or school program requirements for camp. In any case, you may be covered in what is called unjust enrichment and the small claims court would be able to decide on the matter.
It appears from what you wrote that the school requires the cheer group participants to attend a particular camp and has required the participants to pay such fees through the 501(c)(3) organization. When you made the initial payments (initial check), absent some other contract, you were agreeing to enroll your daughters in the camp and made a payment towards that. There were two payments and, therefore, it appears that there was two contracts. The preliminary question, then, is whether, by making an initial payment, you contracted for the full amount and would be obligated, under law, even if you cancelled before camp, to pay the full amount even for the camp stay that you cancelled for the one daughter. I doubt that was such a provision in the contract that the school or nonprofit had with the camp. In fact, I have never seen camp or school tuition contracts that have, as a provision, that the full amount must be paid even after an initial payment was made and then there was a cancellation before the second payment was due. I suggest, therefore, that you obtain a copy of the contract that the school or school-affiliated group had with the camp. That contract would be required to be released to the public, if the school is a public school. http://www.rcfp.org/ohio-open-government-guide
If such full payment was enforceable even after cancellation (before camp started), you would be at a disadvantage under the law of "Setoff" but, otherwise, you may have a claim. "Setoff, both at law and in equity, is that right which exists between two parties, each of whom under an independent contract owes a definite amount to the other, to set off their respective debts by way of mutual deduction." Walter v. National City Bank, 42 Ohio St. 2d 524 - Ohio: Supreme Court 1975 which is available at http://goo.gl/IxuoeQ
3. Are these types of payments considered pass through funds? If the group is obligated to pass through every cent to the camp, then the payments you make for your daughters to the group are considered pass-through funds and, if the camp had, in fact, agreed to have the group as its agent for the collection, you may have a cause of action against the camp.
4. Our spirit club only offered the one fundraiser, which only benefited those who sold, all other money coming in came directly from parents to pay for a specific item/service. Does this meet IRS guidelines for tax exemption? No, as you can see from my summary of IRS regulations for 501(c)(3) booster organizations.
Harvey Mechanic, Attorney at Law -
Graduate of Shaker Heights High School (Ohio) - I noticed you wrote from Ohio.
P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.