GUIDELINES FOR INFAITH ADMINISTERED SCHOLARSHIP FUNDSGUIDELINES FOR INFAITH ADMINISTERED SCHOLARSHIP FUNDS

Scholarship Fund Overview
At InFaith Community Foundation, you have three options for providing scholarship support:

  1. You may simply make a gift to the InFaith Field of Interest Fund for Education, with no gift minimum required.

If you are interested in creating your own scholarship fund, two options are available:

  1. Designated Donor Advised Scholarship Fund
  2. InFaith Administered Scholarship Fund

Due to the complexities and tax issues related to scholarship administration, the foundation requests donors please consult with staff to determine the best solution for your scholarship interests. In general:

  • Scholarship grants can be awarded in your name, or in memory or honor of another. You may also choose to remain anonymous.
  • You can designate scholarships for any level of education from preschool to postgraduate studies, providing the application and selection process is through an accredited educational institution.
  • Scholarship grants are made payable to the educational institution and can be used to defray educational expenses such as tuition, fees, books, supplies and equipment required for study.

About InFaith Administered Scholarship Funds
You can establish a permanently-endowed fund at the foundation, customized by you and fully administered by InFaith Community Foundation. Through this fund option, specific individuals are awarded scholarship grants through a board-approved scholarship committee. Under the Pension Protection Act of 2006 (HR-4), the donor must relinquish all advisement privileges to the fund aside from the initial recommendations agreed upon through their Fund Agreement. The minimum gift for a InFaith Administered Scholarship Fund varies according to complexity, but is typically $500,000 or more.

Scholarship Criteria and Selection Process
The Foundation assumes complete responsibility for administration of InFaith administered scholarship funds, carries out the selection of recipients, and helps donors comply with all related tax regulations.

Like grants distributed from the foundation, scholarship grants must be distributed for charitable purposes. In addition, scholarships grants must be awarded in an objective and non-discriminatory basis, and no impermissible private benefit may be conferred. Since furthering education is a charitable purpose, scholarships can be defined as a charitable activity, so long as benefiting recipients are members of a "charitable class."

  • Charitable Class. In general, a charitable class is a group of applicants that is large enough that an indefinite number of individuals may benefit. "All the graduating seniors at a local high school" is a common and generally acceptable class. A class that includes members of a single family, on the other hand, wouldn't qualify as a charitable class and thus is not acceptable. Religious, race-based, ethnic and gender limitations pose special questions, and must be discussed with foundation staff.  
  • Scholarship Purpose. Scholarship grants are awarded to provide financial support for the expense of tuition, fees, books, supplies and equipment required for study.

Scholarship Applicant Criteria
The following are generally-accepted criteria to consider if you are establishing an InFaith administered scholarship fund:

  • Financial need
  • Achievement in academics (GPA, test scores, etc.), athletics, music and the arts, community service, leadership or character
  • Superior performance or work in a particular field of study
  • Enrollment or acceptance to an accredited educational institution in the United States (college or university, public or private, community college or vocational/technical school, seminary, etc.)

Selecting Scholarship Recipients
The Foundation will convene an advisory committee to be responsible for the review of applications and the selection of scholarship recipients. The committee may be comprised of board members, members of the community, staff or other volunteers based upon initial recommendations from the donor, and the purpose and criteria that have been defined for the scholarship fund.

Generally accepted recommendations from donors are those that are not a related party and those that have expertise in the area of selection. An example would be recommending the heads of a science department at a specific university for a scholarship that benefits the advancement of the sciences.

Those responsible for selecting scholarship recipients must not be in the position to derive an economic benefit, directly or indirectly, from the scholarship process. Relatives of applicants should not serve on selection committees, relatives of donors are ineligible to receive scholarship grants and members or relatives of the board of the foundation and its staff are ineligible to receive scholarship grants.

Due to the complex administrative procedures, the foundation discourages "renewable" scholarship awards. In addition, IRS rulings suggest serious issues regarding roles of donors and/or fund advisors in the selection process. There is considerable concern that such individuals would exert excessive donor control or undue influence in the selection process, in which case neither the scholarship grant nor the donor's gifts to establish the scholarship fund would be considered charitable. There is also concern that donors and/or fund advisors may "pre-select" individuals-meaning contributions and scholarship grants may be earmarked to route aid to a particular person. Again, such situations are not considered charitable no matter how deserving or needy that person might be, and can also place the donor and foundation at risk.

Approval of Recipients
The Foundation, by law, must retain final responsibility for all distributions and has the right to reject any award recommended by a selection committee, particularly if information indicates the recipient was not selected in an objective and non-discriminatory basis or is inconsistent with the purpose of the fund. Staff is available to help donors develop objective and non-discriminatory criteria.

Role of the Foundation
For all scholarship funds, the foundation plays an important role in overseeing the successful implementation of scholarship programs. The InFaith Administered Scholarship Fund also includes additional services such as reminders of any applicable scholarship criteria, communication with recipients when necessary, and award certificates that can be presented to recipients on behalf of the scholarship fund. Please consult with the foundation regarding any publicity of any scholarship fund at the foundation.

The Foundation assumes sole responsibility for communications with educational institutions, scholarship committees, recipients, and others who are assisting with the administration of scholarship funds, and must approve any revisions pertaining to scholarship administration. The Foundation is also responsible for transmitting scholarship grant payments. The Foundation transmits scholarship payments directly to educational institutions to be applied to a recipient's tuition account. This helps ensure the scholarship grant is being used only for the charitable purpose of defraying educational expenses of the recipient. Scholarship grants not used for educational purposes, or any unused portion of a scholarship grant, should be returned to the foundation where it will be applied back to the scholarship fund.

Additional Considerations:

  • Award Displacement: Some donors have expressed concern that scholarship grants from a fund at the foundation may actually reduce the amount of financial aid a recipient receives from the educational institution itself. This is sometimes referred to as "award displacement." Scholarship grants awarded by the foundation can impact the financial aid package a student is receiving from an institution. However, it may help to understand there are many needy students, and educational institutions - just like our donors - are trying to give as many students as possible some type of financial assistance. In most cases when aid packages are adjusted due to an outside scholarship grant, educational institutions reduce the student's loan obligation that can then be of assistance to another student, which we view as a positive outcome. Financial aid offices at educational institutions can better advise students on the impact of outside scholarship grants.
  • Tax Issues for Scholarship Recipients: Scholarship grants apply to direct, educational expenses at an educational institution, such as tuition, fees, books, supplies or equipment. The recipient is responsible for any tax liability incurred as a result of a scholarship grant. Scholarship grants awarded for tuition, fees, books and supplies may not incur tax liability, while monies applied to room and board may be considered taxable income. The Foundation does not provide tax advice to donors or scholarship recipients, and the recipient is responsible for all tax reports.
  • Fundraising Policy: Due to IRS restrictions, the foundation cannot accept checks given by individual supporters in response to fundraising events (i.e. golf tournaments, banquets) for charitable funds at the foundation. Gifts from such fundraising events must be made payable to the individual organizing the event, and are not eligible for a charitable tax deduction through the foundation.

These guidelines provide an overview of the foundation's scholarship fund guidelines and are not intended to be all encompassing. As each scholarship fund is unique and customized to meet the donor's recommendations, you are strongly encouraged to contact Rebecca Sauer regarding your specific scholarship fund interests before proceeding. We wish to work with you to create a scholarship fund that is consistent with your wishes, and compliant with foundation and IRS guidelines for scholarships.