Chapter Scholarship Funds

Your chapter’s needs will largely determine how your Chapter Scholarship Fund (CSF) program is implemented. Scholarships are a tool developed to not only reward students financially for their academic excellence but also to encourage leadership, service, and chapter/campus involvement. They are also a cultivation mechanism for recruiting and retaining the best and brightest men.

Where is your chapter excelling? What needs improvement? What should be rewarded, recognized, or encouraged?

The chapter’s CSF program should be established through a collaborative effort between the undergraduate chapter and the house/alumni corporation, who ultimately directs the fund. Once you have determined your goals, it is critical that you continue to work together as both undergraduates and alumni volunteers to ensure the program’s success.

This program should become a staple in the chapter’s annual awards process and be highlighted as a point of pride during recruitment and alumni gatherings. Additionally, it is important to promote this program to not only active Phi Psis but to potential members as well to demonstrate Phi Psi’s commitment to its members’ success.

When the selection committee determines its choice(s) for recipient(s), it must then complete an online disbursement request, recommending the recipient(s) be approved to receive scholarships from the Chapter Scholarship Fund. The Trustees of the Phi Kappa Psi Foundation will then vote to approve those students’ awards, so that money may be disbursed from the CSF.

The Foundation sends checks directly to the educational institution’s bursar to be deposited into each student’s tuition account. The Foundation requires the checks be sent to the university or college to ensure the money is used for educational purposes. This also allows an expedited timeline from request to awarding since no support material is needed from the recipients to process the awards.

The chapter should allow 4-6 weeks from the time of application until the award(s) are reflected in each student’s tuition account.

Chapter Scholarship Funds (CSFs) 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. Current policies state that annually five percent (4.5%) of the fair market value of the Chapter Scholarship Fund’s assets will be available to be distributed.

It’s easy. All you need to do is announce your intent to the Trustees of the Foundation and start soliciting funds from your chapter brothers. A signed Chapter Scholarship Fund (CSF) agreement formalizes the fund. 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 should be made payable to the Phi Kappa Psi Foundation and should be sent to the Foundation offices. The memo section on the check should indicate “(Chapter) CSF”. Gifts made via the Foundation website offer donors the flexibility 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.

Since your fund is invested, the fund balance will rise and fall daily as the investment values change. Current policies state that the fund will be able to disburse 4.5% of a 20-quarter rolling average. At the end of the fiscal year (December 31^st), we look back for 20-quarters (5 years) and calculate the average value of your fund to smooth out the ups and downs of the investment markets. This provides you with a relatively equal amount each year for your scholarship awarding/grant-making. The granting amount is established annually and is determined after the completion of the Foundation’s fiscal year audit, so the account balances have been confirmed by an independent accounting firm.

Four and a half 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, work to achieve a higher return each year, but recognize that in some years the Foundation may not reach that objective. By setting the base at 4.5%, the Trustees have authorized an amount that allows your fund to grow with any earnings over and above the 4.5% and applicable management fees. In years with low or negative performance, the Foundation can tap that extra growth and still provide each fund 4.5% of the rolling quarter average balance, so the “total return” will keep your fund growing over the long-term.

The “next” academic year references the academic year that follows the end of the calendar year and close of the Foundation’s books, which happens December 31st. The term “academic year” is a term commonly used by institutions of higher education in regard to the year beginning August 1st of one calendar year and ending June 1st of the next. For example, the next academic year to follow December 31, 2019 would be the “2020-2021 academic year” or August 1, 2020 to June 1, 2021.

You are not required to make a distribution. Any funds not distributed during a grant period (August 1 – June 1) will be added to and become part of the principal of the fund. If you encounter a situation where there is no valid recipient, you may consider changing the criteria of the award to reward, recognize, or encourage members in another area to ensure continued chapter growth.

The Chapter Scholarship Fund agreement is 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. 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 or brother 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.

Because Chapter Scholarship Funds 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. To protect the Foundation’s not-for-profit status and continue to allow tax deductions for gifts to the CSF, the Trustees must have the final approval of the awarding of scholarships.

The criteria for awards are up to each chapter and its 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 consider 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 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 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.

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, as well as an online statement of their account and the scholarship money available for the next academic year will be available online.

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 then complete the online disbursement request form and submit it as their recommendations to the Foundation Trustees. The Foundation staff reviews the request 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.

The Foundation sends checks directly to the educational university’s bursar to be deposited into the students’ tuition accounts. The Foundation requires the checks be sent to the university or college to ensure the money will be used for educational purposes. This also allows an expedited timeline from request to awarding since no support material is needed from the recipients to process the awards.

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.

Part of 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.