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  • 1.  Scholarship Agreement with a Foundation

    Posted 10-25-2022 11:30 AM
    Hello Everyone,

    We have a Foundation looking to establish a scholarship fund at our institution, however, there was some questionable language in the gift agreement. 

    1. The Foundation is requesting that their scholarship committee select the student. After selection so long as the student meets the eligibility of the scholarship requirements the University will be tasked with distributing the funds to the student. Is this still unacceptable as donor control? Does it matter that it is a Foundation establishing the gift agreement terms and therefore the tax benefit does not matter? Can this still be accepted and counted toward our campaign counting?
    2. The Foundation is also requesting that if the student recipient does not maintain the required GPA and remain eligible for the scholarship award the funds must be paid back to the "donating" Foundation. I know there are typically these types of terms within grants if budgets are not met, but has anyone ever accepted this type of term for the establishment of a scholarship?
    My understanding is that these would not be accepted if an individual is making a gift, but since it is a Foundation and there is no incentive for a charitable gift, would this agreement be accepted with these terms and counted? Any feedback is greatly appreciated.

    ------------------------------
    Marc Robb
    Director of Advancement Services & Donor Relations
    Rowan University
    robbm@rowan.edu
    ------------------------------


  • 2.  RE: Scholarship Agreement with a Foundation

    Posted 10-25-2022 12:08 PM
    Regardless of the fact the foundation cannot claim a deduction, the circumstances presented indicate that the foundation is using you as their bank - or as a conduit to specific individuals. While that might be okay with the foundation, Rowan is not being given irrevocable control of the funds. Therefore, these payments should be treated as payments to specific student accounts and should not be considered philanthropic support of the institution.  Further, as the payments are not being given irrevocably to Rowan, you could not count these in official fundraising totals per CASE.

    Advancement should not be involved in handling these payments. Instead, they should go directly to the Office of Financial Aid or the Business Office. Then, if the student they select fails to live up to the funding requirements, they can demand a tuition refund from the Business Office - although I wonder if they would agree to those terms.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987




    Original Message


  • 3.  RE: Scholarship Agreement with a Foundation

    Posted 10-25-2022 12:37 PM
    Marc, here's the specific language from CASE on donor control matters relevant to this discussion.  Please see page 24 for the full text:

    3.1.2 Donor Control

    A donor may express intent for the designation of a gift including general or specific purposes, which are consistent with the charitable purpose of the institution. A donor may not retain any explicit or implicit control over the use of a gift after
    acceptance by the institution.

    (Note: This section on donor control does not refer to future commitments [see Chapter 3.5] or revocable or conditional pledges [see Chapter 3.4.1], which remain in the control of the donor until the institution realizes the gift and are countable in some CASE AMAtlas surveys. It speaks to the use of gifts once they are actually received by the institution.)

    The following are examples of donor control precluding the counting of a gift:
    • A donor establishes or contributes to a scholarship fund but requires the ability to select or veto the recipient.

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987





    Original Message


  • 4.  RE: Scholarship Agreement with a Foundation

    Posted 10-25-2022 02:43 PM

    If they wish to grant scholarships to specific individuals they select, they should send them directly to Financial Aid and not to Advancement. They are not gifts. They are direct scholarships. That is the term we use here.

     

     

    Aaron Forrest CPA

    Senior Director Gift and Donor Services

    University of Rochester Office of Advancement

    585.275.2799 | aaron.forrest@rochester.edu

     




    Original Message


  • 5.  RE: Scholarship Agreement with a Foundation

    Posted 10-26-2022 09:58 AM
    Hi John and Aaron,

    Thank you both for this information. The RU Foundation has been operating that we would not accept these as gifts, but the challenging argument on why to accept was that "another school had recently entered into a similar agreement". While I highly doubted this claim, I wanted to pose the question on the listserv to make sure my interpretations that this should not be accepted through the Foundation were still correct.

    Thank you both again for sharing your knowledge on this it is greatly appreciated.


    ------------------------------
    Marc Robb
    Director of Advancement Services & Donor Relations
    Rowan University
    robbm@rowan.edu
    ------------------------------

    Original Message


  • 6.  RE: Scholarship Agreement with a Foundation

    Posted 10-26-2022 10:06 AM
    I "love" those "everyone else does it" arguments.  That does not make it right.

    But, as we both noted, you can accept these arrangements - just not as charitable donations - nor should the Advancement Office be involved.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987





    Original Message


  • 7.  RE: Scholarship Agreement with a Foundation

    Posted 10-26-2022 10:51 AM

    If I recall correctly, a foundation that wishes to grant scholarships directly needs to go through an approval process that verifies that the scholarships do not impermissibly favor related individuals, do not impermissibly discriminate, etc.

     

    Assuming that I recall that correctly, it would be another reason not to act in any way that might appear that you were enabling the outside organization to circumvent those requirements.

     

    I'm not suggesting in any way that anything untoward is intended, only that there are a variety of issues related to awarding scholarships!  It is entirely appropriate for an educational institution to provide scholarship support for its students and to engage donors to provide that support.  At the same time, the institution then is responsible for the conduct of those scholarship programs to make sure that they serve the educational mission of the organization rather than impermissibly benefitting specific people or groups, that they conform to all legal requirements, that the associated gifts qualify as charitable contributions including issues related to donor control, etc. So care is warranted where there are factors that might be in gray areas.

     

    My US$0.02 worth; the usual disclaimers apply.

     

    Good luck!

     

    Alan

     

    Alan S. Hejnal    (he/him/his)

    Data Quality Manager

     

     




    Original Message


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