Banking: Getting Started
The Center for Leadership and Involvement (CfLI) financial regulations for Registered Student Organizations (RSOs) require your organization to maintain accurate and complete financial records of all receipts and expenditures. Please read the information below carefully before determining if your organization should set up an organizational “outside” financial account. An “outside” account is an organizational banking account, separate from university accounts, set up with a bank, credit union, or other financial institution.
(Refer also to the Good Financial Practices chapter of the Student Organization Resource and Policy Guide for additional tips in developing sound financial practices within your organization. Refer also to Financial Policies chapter of the Policies section of the Resource & Policy Guide)
In determining how your money must be spent in order to follow university policies and procedures, identify the sources of revenue/income/money/funding of your events and activities and whether a university department provides sponsorship for any or all of your events and activities. The following examples will provide some guidance in determining how to expend your money appropriately. Note that several scenarios may apply depending upon how your organization is funding its individual events and activities.
- Obviously if you are an RSO which does not transact any money at all, there is no need for you to establish an organizational banking account.
- If your student organization is a formapart of University Housing, Wisconsin Union Directorate/Hoofers, or Recreational Sports, the policies and procedures established by those units must be followed. Contact these offices directly to fully understand how finances are handled within these university departments.
- If your student organization receives funding from Student Services Finance Committee (SSFC) of the Associated Students of Madison (ASM), policies and procedures established by SSFC must be followed. Contact the ASM Budget Office to fully understand financial guidelines and restrictions for handling your organization’s finances.
- If a university department has chosen to sponsor some or all of a RSO’s events and activities, departmental funding dollars may not co-mingle with an “outside” organizational checking/bank account maintained by the RSO. Any funds controlled by the department to support the RSO’s events and activities, must be paid directly by the department to the vendor from whom goods/services are purchased on behalf of the RSO activities. An exception is the reimbursement of funds previously expended by the RSO with respect to departmentally sponsored activities. In this case, the departmental reimbursement may be paid directly to the RSO, assuming that the expenditures are reimbursable under the rules and regulations governing departmental funds and that the RSO has provided proper documentation (of the event or activity, paid receipts, etc.) to the department.
- Property purchased with departmental funds for the benefit of an RSO remains the property of the department, not the RSO.
- Recommendation in making the most of university departmental financial support in conjunction with your own organizational outside checking account: If a university department sponsors all or some of your RSO’s events and activities, assists financially with your activities, and your RSO has an outside organizational checking account, it is recommended that the outside checking account be used primarily to pay for social activities and expenses that the department or other grants will not fund. It is beneficial for the sponsoring department to pay for any durable goods, such as a personal computer or video camera, to ensure that these items are insured.
- Refer to the full statement of the Minimum Requirements for Departmental Sponsorship of Registered Student Organization Events or Activities to fully understand other considerations when university departments choose to sponsor some or all student organization events and activities, such as “direct supervision” by a university employee, university liability coverage, the departmental acceptance of gifts and donations on behalf of an RSO, and other kinds of revenue generated that is earned as a result of an event or activities that is being sponsored or co-sponsored by a university department.
- For those RSO events and activities NOT sponsored in full or partially by a university department, you’ll need to open an organizational “outside” financial account at a bank, credit union, or other financial institution. Use this account to pay expenses by check and to deposit receipts. Things to consider when opening a bank account are convenience, service charges (the most common are for checks, deposits, stop payments and bad checks), services available, and the potential for earning interest on your money.
Can we use a member's personal account?
No, you may not use an individual member's personal bank account. A voluntary association of individuals-such as your student organization-operates in the name of the entity and not in the name of the individuals who are part of that organization. This means that the business records for the organization must be maintained in the organization's name and not in the name of an officer. It is important to avoid confusion with respect to whom the funds belong and avoid tax liability for an individual (as the IRS considers funds deposited into a personal account to be taxable income). Also, keep in mind that financial institutions will require that checks made payable to the organization be deposited into an account established for the organization.
UW System requires that a Registered Student Organization maintain complete financial records for the organization. This is best accomplished by maintaining a separate account in the name of your organization.
Checking and Savings Accounts
Savings and Checking Accounts
When looking to set up Savings or Checking accounts for your organization, there are many factors to consider. This page gives some basic information to know before acquiring an account for your RSO.
Frequently Asked Questions
Is there a monthly fee or minimum balance required?
Monthly fee charges vary from one financial institution to another. To avoid fee charges, a specified minimum balance or average balance in the account(s) might be required.
Is there a charge per transaction?
Sometimes checking is offered with no monthly fees but with a relatively high charge per transaction such as fees for processing a deposit, coin and currency requests, or for returned checks which can be a big surprise when the first statement arrives. Be sure to ask for a fee schedule or similar document.
Does it matter if your organization receives checks that have cleared?
Some financial institutions, especially credit unions, maintain copies of checks (called safekeeping or truncating) for their members or customers. This service is being phased out as many financials convert checks to electronic images. Financial institutions that offer check safekeeping services may offer checks with a carbon copy attached to each one. Once the check is written, the carbon copy details the original check, exactly.
Your organization's account statement becomes your proof that a check has been cleared. If you do need a copy of the check, your financial institution can produce a photocopy of both sides of the check. Depending on why a copy is needed, there may be a fee for the check copy.
How can we avoid "hidden" costs with so-called FREE checking accounts?
By asking all the questions recommended here, the chances of discovering "hidden" costs that may crop up with free checking will be cut to a minimum. A detailed fee schedule should disclose all applicable fees and should be provided by the financial institution.
Will the funds in our account earn interest?
When certain average minimum balances are maintained throughout the month, your organization could qualify for an interest-earning account. The financial institution should provide a Truth in Savings Disclosure that will outline dividend/interest specifics for each account.
Can we have two-signature checks?
Two-signature checks are a good idea to help prevent fraud or one person spending funds on non-approved expenditures. Many financial institutions, especially smaller credit unions, may not offer two signature checks.
Who should be able to sign on the account?
With any checking and/or savings account, your organization must designate one or more members authorized to withdraw funds from your account.
Ideally, checks should require two officers' signatures to be valid. This reduces the risk of any unauthorized expenditures. Normally you will not be allowed to make "cash back" deposits on an organization account. This means that you will not be able to deposit a check and receive money back. You would be required to write a separate check to receive cash back.
Each year we elect new officers for our organization. Do we need to let the financial institution know if the authorized signers have changed?
Yes, you do. It is imperative that you keep the authorized signers current at the financial institution. If your signers leave town, you will experience a major delay in withdrawing any funds because financial institutions will have to go through certain procedures to change the signers on any account. The signature card and the resolution designate who is authorized to transact business on the account. You cannot change the designations without notifying the financial institution, in writing, of the change. If you don't change the designations at the financial institution and the new authorized signers try to transact business, then the financial institution can refuse to complete the transaction. Signers personally assume all liability for the account.
Contact your organization's financial institution to find out how they process a change of signers. Each financial institution handles this process slightly differently, but most require that at least one of the previous signers authorize the change. You may want to designate one current authorized signer to be responsible for handling any change of signers when new signers take over the account.
Are there banking services that our student organization should NOT take advantage of?
For most organizations, it is advisable to NOT accept ATM/Debit card services, to NOT allow checks to be written for “cash”, and to NOT allow for cash withdrawals at the teller window. Talk with your banking/financial representative to work out the details of your bank account. It is advisable that all banking transactions are handled through checks and deposit slips so there is a written record of all transactions so as to minimize any risk of misappropriation or misuse of student organization funds.
If our organization needs coin or currency, what do we do?
Contact your financial institution. Let your financial institution know what your organizational needs are and they will tell you how they can best meet the request. Remember that fees for coin and currency requests may apply to your organization's account.
Opening a Checking/Savings Account
After you have elected officers, decide who will be responsible for managing your organization's financial business. You will need to have this noted in the minutes of your organization's official meeting. You may be required to produce a copy of the minutes when your organization's account is opened.
Certain basic documents will be required by your financial institution to open the account. Most require:
- Signature cards signed at the time the account is opened by the person(s) who can sign on the account and will have permission to open the accounts. By signing these cards, the person(s) assumes all liability and responsibility for the account (including overdrafts and collection agency fees, both of which may damage your credit rating).
- Depository Resolution establishes the financial institution as the organization's financial institution. An officer of your organization signs this.
- The Tax ID Number, also called an Employer Identification Number (EIN), is used by the IRS to identify your organization, in the same manner that your social security number identifies you personally.
- Many Financial Institutions will require a document that proves the existence of the organization. Examples would be Meeting Minutes, a Letter from the Advisor, etc. You will need to obtain fee schedules and account disclosures from the financial institution at the time you open your organizational account. Ask for them if you don't receive them.
Employer Identification Number
Employer Identification Number (EIN)
Note that the following information is general information on Employer Identification Numbers (EINs), as excerpted from the Internal Revenue Service website. RSOs should contact the federal Internal Revenue Service for information specific to their circumstances.
Why Get an EIN?
You will need an EIN # to open a bank (or other financial institution) account. An EIN number, also known as a Federal Tax Identification Number, is a nine-digit number assigned to your organization by the Internal Revenue Service (IRS). The United States Treasury Department and the IRS require an organization to disclose their EIN when opening any type of deposit account with a financial institution.
Note: If your student organization is maintaining the same banking account from previous years, continue to use the EIN number previously assigned to your organization by the IRS. In this event, your bank/financial institution should already have your EIN number associated with your account. Do NOT apply for a new EIN number each year. However, to maintain accurate information with the IRS, each year you must inform them of the name of the new primary contact person and any other information that has changed, such as the name of your organization or the address.
Every financial institution is required by the IRS to report dividends or interest paid to each depositor when it is in excess of $10.00 in any given tax year. The dividend or interest amount is reported using the account name and the taxpayer identification number, which in the case of a student organization is your organization's EIN. A social security number from one of your organization's members will NOT substitute for an EIN. If the IRS cannot match the identification number and name to their records, the IRS can penalize the financial institution for the incorrect reporting and the account holder for giving incorrect information to the financial institution. The penalty is normally $50.00 but can be higher under certain circumstances.
Applying for an Employer Identification Number
If you need to set up and use your bank account immediately, we recommend applying for an EIN by using the IRS Toll-Free Telephone Service method of applying. (Note once again that the following information on How to Apply is excerpted from the IRS website. For additional information refer to Publication 1635, Understanding Your EIN (PDF).)
The Internet EIN (I-EIN) application is the primary avenue for customers to apply for and obtain an employer identification number. Once all the necessary fields are completed on the online form, preliminary validation is performed and the taxpayer will be alerted to information IRS needs that may not have been included. An EIN will be issued after the successful submission of the completed Form SS-4 online.
Apply by Fax
Taxpayers can FAX the completed Form SS-4 application to their state FAX number after ensuring that the Form SS-4 contains all of the required information. The FAX number for Wisconsin is 215/516-3990. If you provide a return fax number, a fax will be sent back with the EIN within four (4) business days.
Apply by Mail
The processing timeframe for an EIN application received by mail is four weeks. Ensure that the Form SS-4 contains all of the required information. The mailing address for sending your form is the Internal Revenue Service, Attn: EIN Operation, Philadelphia PA 19255.