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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. The
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 Endowment
Fund 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 Endowment Fund.
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 Endowment Fund Trustees.
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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 Endowment Fund and start soliciting funds from your
chapter brothers. A signed CSF agreement formalizes the account. The agreement
is between the Endowment Fund 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 Endowment Fund 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 Endowment Fund will
acknowledge each gift for tax purposes and provide the house corporation
with periodic status reports on the CSF.
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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 CSF has a balance of $100,000, a group can expect to award
$5,000 in scholarships during the next academic year.
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Q: What does the “next” academic
year mean?
A: The Endowment Fund’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 May or June 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 May 2006 indicate award money available for the Fall 2006/Spring
2007 academic year (the “next” academic year).
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Q: Why just 5%? Doesn’t the Endowment
Fund 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 will shoot for a 10% or better return each year, but recognize
that in some years the Endowment Fund 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 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.
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Q: Who picks the winners for our award money?
A: The CSF 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 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 we are ever questioned, it is better to have a
neutral group, independent of the chapter, make award decisions.
Therefore, we require an alumnus group of some sort 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.
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Q: What do you mean by “recommend the
winners”?
A: Because Chapter Scholarship Funds are accounts within
the Endowment Fund, the Trustees of the Endowment Fund 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. For instance,
awards could be made for highest or most-improved GPA, but not for “most
popular brother”. Allowing the use of Endowment Fund monies for non-educational
purposes may result in the Endowment losing its foundation status.
When the selection committee determines its choices for winners, it must
then send a letter 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 last word on the awarding of scholarships.
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Q: What criteria are used to select winners?
A: That's really up to the selection committee. One benefit
of the CSF 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 Endowment Fund document the validity of the process.
Generally, criteria take 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 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 other criteria.
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Q: How does the whole process work?
A: Once a CSF 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 we can provide
it to the group who signed the CSF agreement). At the end of each fiscal
year, after the Foundation’s financial audit the alumni group, chapter
and advisor will receive access to their online statement of their account,
listing the scholarship money available for the next academic year.
The award committee, perhaps with input from the chapter, will decide
the number, amount and criteria of awards. The committee also should decide
on the annual timeline, including deadlines for applications and expected
dates of awards (do you want to give awards at your homecoming or Founders
Day, etc.?). Other items they might consider are naming the awards for
prominent alumni or donors, what items should be included on the application,
etc. If needed, the Endowment Fund can provide a simple application, customized
for the chapter.
The committee should work 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 they have all the required information, the committee will meet, review
the applications and select their candidates. They can complete the online
disbursement request form and submit that, with the support documentation,
as their recommendations to the Trustees of the Endowment Fund. The Endowment
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.
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Q: How do winners get their checks?
A: The Foundation sends checks either to the university
bursar, to be deposited directly to the student's tuition account, or sends
the checks to the alumni group contact who requests the disbursement. The
Endowment Fund 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. This prevents us from having to declare the scholarship
as taxable income to the student (though we are required to submit a list
to the IRS each year of all students receiving awards of $1,000 or more).
In some cases a scholarship may adversely impact a student's financial
aid package, so we 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. These 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
Endowment Fund, or declare the award as taxable income.
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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 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 foundations. Scholarships are
a qualifying educational purpose, but it would be illegal for the Endowment
Fund to provide exempt money (money for which donors received a deduction)
awards for non-educational purposes.
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Q: How can Chapter Scholarship Funds be used
to assist with chapter housing efforts?
A: Part or all the principal of a CSF 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 Endowment must be in "first position debt."
The benefit of borrowing from a Chapter Scholarship Fund is that a chapter
is really 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. And, when the
loan is fully repaid, the money is in the CSF to borrow again.
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