Phi Kappa Psi Foundation: Chapter Scholarship Fund FAQs

Chapter Scholarship Fund Frequently Asked Questions

Chapter Scholarship Fund FAQs

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Q: How do Chapter Scholarship Funds work?
A: Chapter Scholarship Funds are created with directed gifts from individual alumni, house corporations, parents or friends. CSFs are sustained and grow through annual gifts from alumni and/or the house corporation. At the end of each fiscal year, the Trustees of the Foundation will determine how much money will be available for scholarships during the next academic year. Complete details are contained in the Policies and Procedures document available from the Foundation.
For example, if Alaska Alpha has a CSF with a balance of $20,000 at the end of the fiscal year, up to $1,000 will be made available to deserving members of Alaska Alpha during the ensuing academic year, in the form of scholarships and grants. The chapter's house corporation or alumni scholarship committee solicits applications from the undergraduate chapter and recommends winners to the Foundation Trustees.
Q: How do I start a Chapter Scholarship Fund for my chapter?
A: It's easy. All you have to do is announce your intent to the Trustees of the Foundation and start soliciting funds from your chapter brothers. A signed CSF agreement formalizes the account. The agreement is between the Foundation and an alumnus group (usually the house corporation) that will be responsible for administering the scholarship process at the chapter level.
All checks must be made payable to the Phi Kappa Psi Foundation and should be sent to the Fraternity Headquarters. The memo section on the check should indicate “(Chapter) CSF”. Gifts made at the Foundation website allow donors the ability to choose a specific Chapter Scholarship Fund. The Foundation will acknowledge each gift for tax purposes and provide the house corporation with periodic status reports on the CSF.
Q: How much can our Chapter Scholarship Fund give in scholarships/grants each year?
A: The Trustees will make available 5% of the end-of-year balance of each CSF, for scholarships. That amount is determined after the completion of the Foundation’s fiscal year audit, so the account balances have been checked and confirmed by an independent accounting firm. For example, if a CSF has a balance of $100,000, a group can expect to award $5,000 in scholarships during the next academic year.
Q: What does the “next” academic year mean?
A: The Foundation’s fiscal year is January 1 through December 31. It takes two to four months for the Foundation’s accounting firm to complete a fiscal year audit. In August, a statement of each Chapter Scholarship Fund is provided and declares the amount available for awards. Since that's near the end of an academic year, the awards are declared for the academic year to follow. For instance, the statements sent in August 2010 indicate award money available for the Fall 2010/Spring 2011 academic year (the “next” academic year).
Q: Why just 5%? Doesn’t the Foundation earn more than that each year?
A: Five percent was selected as the base for what is called a “total return” policy. The basis of the policy is that the Trustees, who guide the investments, will shoot for a 10% or better return each year, but recognize that in some years the Foundation may not reach that goal. By setting the base at 5%, the Trustees can commit easily to an amount that should not be difficult to attain each year and still allow the Chapter Scholarship Fund (CSF) account to grow with any earnings over and above the 5%. In years with low or negative performance, the Foundation can tap that extra growth and still provide each CSF 5% of the balance, so the “total return” will keep each CSF growing over the long-term.
Q: Who picks the winners for our award money?
A: The Chapter Scholarship Fund agreements are signed with an alumnus group associated with the chapter, usually the housing corporation. This is done for a couple reasons: 1) it ensures better continuity of process from year to year and 2) it helps to ensure there are no chapter “politics” involved in selecting winners. As much as we have faith in undergraduate abilities, undergraduates voting on money for other undergraduates is a process that can be fraught with too many biases. In order for the process to be valid and defensible, in case the Foundation was ever questioned, it is better to have a neutral group, independent of the chapter, make award decisions.

Therefore, the Foundation requires an alumnus group to recommend the winners. That can be the housing corporation or it can be another group comprised of alumni. It even can include faculty or staff of the college or university, or parents of chapter members, so long as they defer from voting if their own son is an applicant. This is a great way to involve non-members, so they will see the chapter's focus on scholarship and commitment to rewarding excellence.
Q: What do you mean by “recommend the winners”?
A: Because Chapter Scholarship Funds (CSFs) are accounts within the Foundation, the Trustees of the Foundation must have the final approval on all awards paid from the Foundation. The Trustees are required to ensure that all awards properly qualify as scholarships.
When the selection committee determines its choices for recipients, it must then complete an online disbursement request, recommending the recipients be approved to receive scholarships from the CSF. The Trustees vote to approve those students, so that money may be disbursed from the CSF. In order to protect the Foundation's not-for-profit status and continue to allow deductions for gifts to the CSF, the Trustees must have the final approval of the awarding of scholarships.
Q: What criteria are used to select winners?
A: That's really up to the selection committee. One benefit of the Chapter Scholarship Fund awards is they're flexible to the needs of each chapter. The Foundation’s recommendation is that awards take into account one or more of the following: scholarship, leadership, service and need. The selection committee can use any combination of those or can create several awards to meet one or more of the individual criteria. Whatever their choice, there must be some form of measurement, such as grades, hours of service, chapter or campus leadership positions, etc., to support the award. This helps the Foundation document the validity of the process.
Generally, selection criteria takes two forms: 1) Quantitative criteria can be counted, such as GPA (highest, most improved, etc.), hours of service work, financial need, or a chapter point system which includes several components. This form of award may require only student transcripts or grade reports to confirm the statistical information. 2) Qualitative criteria can lead, to judgment-based decisions. These can include general leadership, contribution to the chapter/campus/community, value to the organization, commitment to service, etc. and are usually addressed in a scholarship application that includes short essay answers. Many committees use a combination of the two, with a minimum GPA requirement and essays to address additional criteria.
Q: How does the whole process work?
A: Once a Chapter Scholarship Fund agreement is signed and submitted by an alumnus group, who certifies they will oversee the application and selection process, the CSF account is opened and money may be received. Activity reports, listing the donors and gifts received can be requested by the alumni group (donor information is not released publicly, but is provided it to the group who signed the CSF agreement). At the end of each fiscal year, after the Foundation’s financial audit, the alumnus group, chapter and advisor will receive access to the online statement of their account, listing the scholarship money available for the next academic year.
The award committee, along with input from the chapter, decides the number, amount and criteria of awards. The committee should also decide on the annual timeline, including deadlines for applications and expected dates of awards including potentially awarding the scholarships at homecoming or Founders Day. Other items the group may consider are naming the awards for prominent alumni or donors, what items should be included on the application, etc. If needed, the Foundation can provide a simple application, customized for the chapter.

The committee works with the chapter's scholarship chairman to promote the awards and receive applications and the appropriate support materials (transcript or grade report, letters of recommendation, etc.). Once the committee has all the required information, the committee meets and reviews the applications and selects their candidates. They can complete the online disbursement request form and submit it, with the support documentation, as their recommendations to the Foundation Trustees. The Foundation staff reviews the material and, if all is in order, will send it to the Trustees for their final approval, which must be done by vote. Once a majority vote is returned in favor, a check for the award is requested, signed and sent.
Q: How do the recipients receive their checks?
A: The Foundation sends checks either to the university bursar to be deposited directly to the student's tuition account, or to the alumnus who requests the disbursement. The Foundation prefers to send the checks directly to the university or college as in this way there is no question the money will be used for educational purposes.
In some cases a scholarship may adversely impact a student's financial aid package, so the Foundation can write the check directly to the student, but only if the student signs an eligibility form which documents that he is eligible, according to the criteria of the award, and will ensure the money is used only for educational purposes. All forms are available on the Foundation’s website. If the money is used in another way, after signing and submitting the form, the recipient is responsible to return the scholarship to the Foundation, or declare the award as appropriate.
Q: Why can't recipients use the money for spring break or personal expenses?
A: According to government policies and regulations, if the IRS doesn't receive tax on the money they then will restrict how it can be used. Since donors received deductions for the gifts that generated the scholarships, that money can be used only for qualifying educational purposes (defined by the IRS). That theme is central to all educational foundations. Scholarships are a qualifying educational purpose, but it would be illegal for the Foundation to provide exempt money (money for which donors received a deduction) awards for non-educational purposes.
Q: How are Chapter Scholarship Funds used to assist with chapter housing efforts?
A: Part or all the principal of a Chapter Scholarship Fund can be made available as a loan to the house corporation if certain conditions are met which include the loan being made as an "arm's length" transaction. That is, it must be a safe, business-based loan with marketplace conditions and the Foundation must be in "first position debt."
The benefit of borrowing from a Chapter Scholarship Fund is that a chapter is essentially borrowing from itself; the principal and interest payments are deposited back into the CSF. Not only do they not lose the interest to the bank, but they can use it for scholarships to students. Once the loan is fully repaid, the money is available in the CSF to borrow again.