Guide to Establishing a Corporate Scholarship
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1 Guide to Establishing a Corporate Scholarship
2 Table of Contents Contents Table of Contents... 2 Preface... 3 Basic Steps to Establishing a Corporate Scholarship... 5 Determine how your company will fund the scholarship award(s)... 5 Endowed Scholarships... 5 Annual Scholarships... 5 Determine amount available for scholarship award(s)... 5 Determine the duration of scholarship award(s)... 5 Establish scholarship criteria... 6 Trust Document... 6 Committee... 6 The Criteria... 6 Write Your Application... 6 Beyond the Application... 7 Promote your scholarship... 7 Select and monitor scholarship recipients... 7 Administration of Scholarship Funds... 8 What the IRS Needs You to Understand... 9 Foundations... 9 Selection committee... 9 Do not discriminate... 9 The scholarship check should go to the institution... 9 Addendum A Sample Criteria Establishment Form for an Academic Scholarship Addendum B Sample: Academic Scholarship Application
3 Preface The PMA Foundation for Industry Talent (PMA FIT) has recognized the need for guidance in the development of corporate scholarships. Members of the produce industry have spoken and we ve responded by presenting you with this Guide to Establishing a Corporate Scholarship. From selecting the type of scholarship funds to establishing criteria for student selection, this Guide will explain the general steps involved with setting up your own scholarship. A bonus What the IRS Needs You to Understand section will explain some of the intricacies involved from a tax standpoint to make sure you prepare accordingly. Completing the Guide is a sample application that you may use as a reference for creating your own scholarship application. We hope that this Guide to Establishing a Corporate Scholarship will assist you in reaching the ultimate objective of helping students reach their educational goals. Please Note: PMA FIT is providing this Guide to Establishing a Corporate Scholarship for general information purposes only. PMA FIT makes no representations or warranties regarding the accuracy, completeness, or reliability of any information contained herein, and nothing herein is intended to constitute legal, accounting, tax, or other advice or opinions. This Guide references third parties for informational purposes, but nothing herein constitutes an endorsement by PMA FIT of such parties or their products or services. 3
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5 Basic Steps to Establishing a Corporate Scholarship Determine how your company will fund the scholarship award(s) There are two basic types of scholarship funds: endowed and annual. Your company will need to choose the one with which to establish its scholarship. Endowed Scholarships Endowments are large amounts of money that form the fund and are invested. The amount invested is never spent on the scholarship awards. Rather, a portion of the money earned in this investment is awarded for scholarships. An investment broker can advise your company on the best ways to invest the endowment. Annual Scholarships Unlike the endowed scholarship described above, an annual scholarship is not a permanent fund. The annual scholarship is awarded only as long your company chooses to contribute to the fund. They may either be a one-time gift or replenished each year through an endowment. Determine amount available for scholarship award(s) Once your company has accumulated the amount of capital needed to establish a scholarship, it must determine the amount available to be paid annually in scholarships. Your company can decide on this amount on a year-by-year basis which provides flexibility in determining the number of scholarships awarded each year. Determine the duration of scholarship award(s) Your company will need to decide whether the scholarship will be renewable each year or a one-time award. If the scholarship is renewable, consider setting a maximum number of years a student may apply for and be awarded the scholarship. Generally, renewable scholarships have a condition that requires the receiver to complete the scholarship application annually. 5
6 Establish scholarship criteria Establishing selection criteria will help your company to decide who the scholarships are ultimately awarded to. Basically, the selection criteria are the standards your company will use when reviewing applications from potential scholarship award winners. To best define the profile of the scholarship recipient, your company should prioritize the criteria. It is recommended that the selection criteria be as flexible as possible. Trust Document The selection criteria will become part of a document called the Trust Document. This document will also contain the duration and provisions for renewal mentioned above. Committee It is quite common for companies to set up a committee to establish the Trust Document policies, set criteria and select recipients. These items would then be approved by select members of your company s staff and/or board of directors as well as legal counsel, as necessary. The Criteria The criteria selected by your company should maintain the purpose of the scholarship. It also must not contain restrictions or discriminatory provisions by law. Many factors must be considered when establishing scholarship criteria for applicants, including financial need, achievement, geographic location and demographics. To help get you started, we ve created a sample form for establishing your company s scholarship criteria. (See Addendum A Sample Criteria Establishment Form for an Academic Scholarship Application.) Please note, you may wish to consider more criteria than what is listed in the on this form - it is not meant to be all-inclusive. Write Your Application Once your company has set the criteria for your scholarship recipients, you will need to create your scholarship application. Examples of scholarship applications can be found online and used as a template in designing your own forms. (We have also put together a sample see Addendum B.) 6
7 Beyond the Application In order to gain additional insights into those who are applying for your company s scholarship awards, you may decide to have them also present one or more of the following: Personal interview Letter(s) of reference Character evaluation form Student essay Letter of acceptance from the institution High school or college transcripts Financial information summary form Promote your scholarship You must determine how to reach the desired population for your specific scholarship program, the most likely options being your company s employee newsletter or an internal campaign. Be sure to supply the answers to the following questions: Where and when are applications available? Where should applications be sent? How many copies are needed? When are applications due? What additional information/documents must accompany the application? How and when will the award winners be notified? How and when will the awards be disbursed? Select and monitor scholarship recipients Typically, a selection committee reviews the scholarship applications submitted and selects the most appropriate recipient(s) based on the established criteria. The selection committee must be made up of individuals who are independent from your company. Once the scholarship recipients are selected and notified, you must decide how their progress will need to be monitored, if at all. The level of monitoring your award recipients need will depend upon your established selection criteria. For example, if your selection criteria call for the maintenance of a minimum GPA, then a process for periodic reporting may be necessary. 7
8 Administration of Scholarship Funds Administration of all of the above steps as well as the on-going fulfillment activities involved in a successful scholarship program can be very time consuming. Your company must ensure that sufficient resources are available to support the process. Many companies use third-party vendors to handle all or some aspects of their scholarship program. The following are a few of the organizations that administer scholarships for corporations: Citizens Scholarship Foundation of America, Inc. (800) National Merit Scholarship Corporation (847) Scholarship Managers
9 What the IRS Needs You to Understand Foundations Many companies create private foundations to administer scholarship programs. Scholarship grants awarded by private foundations are taxable expenditures unless the grant programs meet the requirements for individual grants and receive advance approval from the IRS. Corporate foundations have to follow a special set of guidelines and rules established by the IRS. For example, when companies offer scholarships for the children of their employees, the scholarship program must do so with the intention of allowing these students to obtain an education solely for their personal benefit, and not for the benefit of the employer. On the other hand, a company that wants to support promising students with the goal of recruiting them (or that wants to give its employees tuition reimbursement), is free to do so from corporate funds and not through a foundation. The corporation can subsequently write off the cost as a business expense. Selection committee The committee that selects the scholarship recipients must be totally independent and separate from the foundation and employer. Do not discriminate IRS rules are designed to make sure that scholarship programs are not discriminatory in any way, and that the selection of recipients is based on objective criteria unrelated to the employment of the recipients or their parents. For example, your company can not set up a scholarship fund to award only certain families. The penalty for noncompliance could be a large excise tax or the loss of tax-exempt status. The scholarship also cannot be rescinded if the student s parent leaves the company. The scholarship check should go to the institution Scholarships cannot be given directly to a student without complying with some very stringent IRS rules. Since the IRS requires tracking of how the funds are spent (in other words, on the individual), the student must spend time submitting receipts to the IRS. 9
10 For more information on IRS tax laws, visit the IRS Web site at 10
11 Addendum A Sample Criteria Establishment Form for an Academic Scholarship 1. What qualifies an employee to be eligible for this program? Full-time employee Part-time employee Employed for months/years (circle one) Other 2. What type of scholarship would you like to establish? A one-time award, or Renewable for years and the student must re-apply each year, or Renewable for years; if a GPA of is not maintained, The student is ineligible to renew their scholarship that year, or The student is no longer eligible for their scholarship, or The student will be issued their scholarship with a warning letter indicating that subsequent payments will not be made if the above GPA is not achieved in the next academic year, or The student will be sent a warning letter indicating they will not receive this year s payment and they will not receive further payments until the above GPA is achieved for one full academic year. There are no GPA requirements for renewal. 3. What would you like the amount of the award to be? Does this differ for Community College versus a 4-year institution? Yes No Does this differ for a two-year degree versus a 4-year degree? Yes No 4. How many awards would you like to make each year? 5. Must the college attended by the recipient be accredited? Yes 11
12 No 6. What type of college may recipients attend? Any, including community, four-year or vocational Four-year only Graduate school Private In (designate state, such as your company s headquarter state) Anywhere Other 7. How many units must the student enroll in each quarter/semester? Part-time (six units or less) Part time (a minimum of six units) Full time No requirement 8. From what high school must the student have graduated? Any Any in (designate county) Did not graduate from a high school but obtained a GED The following specific high school(s) 9. With regard to college enrollment, The student must be a graduating high school senior at the time of application The student may have graduated high school in any year in the past as long as they meet other eligibility requirements Other 10. Does the student need to be a United States citizen? Yes No 11. With regard to the applicant s residential status in (designated) county, the student must Be a County native 12
13 Be a (designate state) native Have lived there for years No requirement 12. In order to be eligible for this scholarship, the student must demonstrate financial need. Yes No If financial need is a determining factor for eligibility the following will be taken into consideration: Parent s income, savings and assets Number of siblings Number of siblings attending college concurrently The cost of the college chosen All of the above Other 13. In order to be eligible for this scholarship, academic merit is a factor. Yes Students must graduate from high school with a minimum GPA of No 14. Often the most successful college students are those who are well-rounded students during their high school years. Eligibility for this scholarship includes an assessment of the students other activities during their high school years. Yes Such an assessment includes consideration of the following: The student had to work a part time job while enrolled in high school The student had to assist with family care Community involvement Involvement in sports Volunteer work All of the above Other No requirements No 13
14 15. Are there other circumstances that should be considered when making the award? Yes Family situation Disabilities or illness Other No 16. To whom should communication from any recipient be forwarded? 14
15 Addendum B Sample: Academic Scholarship Application Typically, this information will be pulled directly from your Criteria Establishment Form and may look like the following sample criteria, awards and application process. (Company Logo) (Company Name) is pleased to offer an academic collegiate scholarship for the dependants of (Company Name) employees. Eligibility Students who meet the following criteria are eligible for the scholarship. The candidate: is a dependant of a full time (Company Name) employee who has been employed for three years or more at (Company Name) is a citizen of the United States of America has a minimum grade point average of 2.75 and either is enrolled full time in an US high school, has graduated from a US high school or has obtained their US GED at the time of application (attach transcripts or official record); OR is enrolled full time as a college student at the undergraduate level with a minimum grade point average of 2.5 at the time of application (attach transcripts or official record) Application Process Application materials must be received by (Deadline Date), in order to be considered. The following materials should be submitted: 1. Completed application form 2. A typed essay (no more than one page double spaced) addressing one of the following topics: a. Describe an accomplishment you have been recognized for and its influence on you. b. Who has been most influential in your life and why? c. What is the impact of fresh fruits and vegetables on society? d. What are your career aspirations and why? 3. One letter of reference or recommendation from a teacher, coach, or other adult who is not an immediate relative. 4. Letter of Acceptance at accredited 4 year or community college. Selection Process Recipients will be selected by (Whom or What Group?) based on application materials provided. All scholarship applicants will be notified of the committee s decision by (Notification Date). Payment will be made to the recipient s school of choice upon notification and in accordance with the school s scholarship guidelines. Purpose of Scholarship To provide financial assistance to a student with an interest in pursuing continuing education in any field Award Up to five annual tuition scholarships payable to the recipients educational institutions for tuition will be awarded as follows: $1,000 per year for accredited community colleges $2,500 $4,000 per year for accredited 4 year schools 15
16 Questions If you have questions or need further information, please contact (Contact Name) at (Phone/ Address). 16
17 (Company Logo) (Company Name) Scholarship Application Form Please complete this form. Information must be typed or printed directly on this form. Please put an asterisk by your preferred mailing address, if applicable. Name Age Accredited 4 year or community college name Accredited 4 year or community college address, city, state Accredited 4 year or community college Admissions Office telephone Home address Home telephone E mail address Parent or Guardian s Name who is an employee of (Company Name) Number of years your parent or guardian has worked for (Company Name) Parent or Guardian s address Overall GPA Major GPA, if applicable Major, if applicable Expected graduation date Honors Activities/Sports Jobs/Volunteer Work Family Care Responsibilities Community Involvement Are there other circumstances that should be considered when reviewing your application? Application materials must be received by (Deadline Date), in order to be considered. Send completed application materials to: (Company Name) Attn: (Contact Name) (Contact Information) 17
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