Banking

Managing Money-Setting Up Bank Accounts

Student Organization Office (SOO) 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” checking 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 Handbook for additional tips in developing sound financial practices within your organization. Refer also to the Eligibility and Registration chapter under “Financial Regulations of Registered Student Organizations (RSOs)”

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 funded its individual events and activities.

1. Obviously if you’re an RSO which doesn’t transact any money at all, there’s no need for you to establish an organizational banking account.

2. Special Note: If your student organization is a formal part 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.

3. If your student organization receives funding from SSFC, policies and procedures established by the Student Services Finance Committee of ASM must be followed. Contact the ASM Budget Office to fully understand financial guidelines and restrictions for handling your organization’s finances.

4. 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.

5. For those RSO events and activities NOT sponsored in full or partially by a university department, you’ll need to open an organizational “outside” checking 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-Madison 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.

Do We Need An Employer Identification Number (EIN) To Open An Account?

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.

Yes, 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 And Submitting An EIN

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 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)

APPLY BY EIN Toll-Free Telephone Service

You can obtain an EIN immediately by calling the Business & Specialty Tax Line
(800-829-4933). The hours of operation are 7:00 a.m. to 10:00 p.m. local time, Monday through Friday. An assistor takes the information, assigns the EIN, and provides the number to an authorized individual over the telephone.

The person making the call must be authorized to sign the form or be an authorized designee. (In most cases, this person would be the primary student contact for your student organization.) If you are applying by telephone, it will be helpful to complete Form SS-4 before contacting the IRS. An IRS representative will use the information from the Form SS-4 to establish your account and assign you an EIN. Write the number you are given on the upper right corner of the form and sign and date it. Keep this copy for your records. If requested by an IRS representative, mail or fax the signed Form SS-4 within 24 hours to the IRS address provided by the IRS representative.

APPLY BY EIN ONLINE

The Internet EIN (I-EIN) application is another 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.

TO APPLY FOR AN EIN, go to the IRS website. The SS-4 is the name and number of the form you'll use to apply for an EIN. Fill out the SS-4 form. The following are some tips in helping you fill out the form:

In item 1 (Legal name of entity), list the name of your student organization.
In Item 7 (Name of principal officer), list the name of your organization's primary student contact.
In Item 9a, check the Other nonprofit organization box and then enter "Registered Student Organization of the University of Wisconsin-Madison". Leave the Group Exemption Number space blank.

Questions to Ask a Bank / Getting the Best Checking or Savings Account

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 fee 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 details.

We've heard that some financial institutions don't return checks with the monthly checking account statement. 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. Financial institutions that offer check safekeeping services will have 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 and the carbon copy become 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.

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.

Can we have two-signature checks?

Yes, it is highly recommended. Two-signature checks are a good idea to help prevent fraud or one person spending funds on non-approved expenditures.

What will we need to open our checking or 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.

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.

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.