Scholarship Procedures

Scholar Fund, Inc.

Procedures for Awarding Scholarships

Adopted by the Board of Directors on May 24, 2012

Section 1. Introduction

Scholar Fund Inc. (“the Corporation”) raises, holds, and administers scholarship funds (“Funds”) used to provide scholarships to individuals, including primary and secondary school students, to be used to pay for the costs of completing a post-secondary education at the post-secondary educational institution of their choice.[1]

The Corporation values and encourages the interest and involvement of donors in funding and administering Funds. Such involvement may include choosing a pre-approved investment option, developing criteria for scholarships, serving on a selection committee (“Committee”), and recommending others to serve on a Committee.

For purposes of these Procedures, a donor (“Donor”) is an individual or organization that contributes to a Fund where (a) such Fund is separately identified by reference to contributions of the Donor and (b) with respect to which the Donor (or his/her designee) has advisory privileges regarding the award of scholarships by reason of the Donor’s status as a donor.

The Corporation has established the following Procedures pursuant to which scholarships will be awarded. Donors must confirm their commitment to abide by these procedures by signing the Donor Agreement. Committee members must also confirm that they have read and accepted these Procedures by signing the Acknowledgement attached to these Procedures.

The following Procedures shall be interpreted so as to ensure the Corporation’s compliance with all applicable requirements of the Internal Revenue Code (“Code”), including the scholarship fund exception to donor-advised funds in Section 4966(d)(2)(B)(ii) of the Code, accompanying Treasury Regulations, and guidance from the Internal Revenue Service.

Section 2. Creation of Funds

Donors interested in creating a Fund shall make a request to the Corporation to set up the Fund. They shall provide the Corporation with a scholarship description, including the amount of the scholarship, eligibility requirements, deadline, and proposed selection criteria.

The Board shall review each request and shall approve the scholarship provided that the selection criteria are (a) objective and nondiscriminatory pursuant to the requirements of Section 4945(g) of the Internal Revenue Code (“the Code”); and (b) adhere to the requirements articulated in these Procedures. If the selection criteria do not meet these standards, the Donor will be asked to revise the criteria, or the scholarship may not be approved.

If the scholarship is approved, the Corporation and the Donor shall enter into a Donor Agreement. The Agreement shall set forth:

• the Donor’s commitment to make an irrevocable gift to the Corporation of a specified amount for the purpose of establishing a Fund;
• the approved selection criteria for the scholarship;
• the Donor’s election of one of two pre-approved options for managing the Fund: (1) having the Corporation hold the Fund, or (2) having the Corporation place the Fund in a 529 College Savings Program portfolio in the scholarship recipient’s name; and
• the timeframe within which the recipient will be expected to matriculate at a post-secondary educational institution.

The Corporation shall follow the Donor’s investment preference in managing the Fund but shall otherwise have ultimate decision-making authority over how Funds are managed, invested, and disbursed. The Corporation shall manage, invest, and disburse Funds solely for its tax-exempt purposes as specified in its Certificate of Incorporation, and in accordance with the requirements of the “scholarship fund exception” under Section 4966(d)(2)(B)(ii) of the Code and other applicable federal tax laws and regulations.

If the Donor elects to have the Corporation hold the Fund, the Corporation may commingle or pool the Fund with other Corporation assets rather than managing the Fund as a separate fund, account, or trust.

If the Donor elects to have the Fund placed in a 529 College Savings Program portfolio, the Corporation shall place the Fund in such an account under the scholarship recipient’s name, once a recipient is chosen.

Section 3. Solicitation of Applicants

Once a Fund is created, the Corporation shall work with the Donor to publicize the scholarship.

The Corporation shall create a customized scholarship webpage and application form on ScholarFund.org, and shall promote the webpage through social media widgets, personalized links, and other means. The Corporation shall also link the webpage to major scholarship websites and databases. The Corporation shall provide the Donor with a scholarship management dashboard to manage the scholarships process through the webpage.

The Corporation, its designees, and members of Committees shall contact primary and secondary school administrators as well as managers of other relevant community institutions to advertise the availability of scholarships and to request that administrators encourage students to apply for scholarships.

In publicizing the Fund, the Corporation, working with the Donor, shall ensure that applicants are solicited on an objective and nondiscriminatory basis from a group that is sufficiently broad so that giving grants to one or more members of the group fulfills a charitable purpose, in keeping with the requirements of Section 4945(g).

Section 4. Selection Committees

The Corporation’s Board of Directors (“Board”) shall establish, in connection with each Fund, a Committee charged with evaluating the applicants for the scholarship and selecting the recipient.[2]

• Formation

The Board shall appoint all members of any Committee. Donors and related persons may provide advice with respect to the selection of recipients solely as members of a Committee. In forming the Committee, the Board may take recommendations from Donors, but sole discretion over such appointments shall lie with the Board.

• Composition   

No combination of Donors, or persons designated by Donors (or persons related to any of these persons) may, directly or indirectly, control any Committee established in connection with a Fund. Donors, persons recommended or designated by Donors, and persons related to any of these persons, shall not constitute a majority of any such Committee. Where a Donor recommends a person for appointment to a Committee based on objective criteria related to the expertise of such person, such person, if appointed by the Board, shall not be deemed to be appointed nor designated by the Donor.

• Committee obligations

The Committee shall make independent decisions on behalf of the Fund without potential or perceived influence caused by conflict of interest. It must evaluate the eligibility of all applicants without bias and make selection recommendations based on the established objective criteria for the scholarship.

The Committee shall avoid any situation (a “conflict of interest”) where personal and business relationships could have, or give the appearance of having, undue influence on the member’s judgment in matters under consideration.

A conflict of interest occurs when an action of a Committee member in recommending the award of a scholarship may result in a direct or indirect private benefit to that Committee member or a family member of that Committee member. Therefore, every member of a Committee shall (a) disclose any personal knowledge of and relationship with any applicant to the other members of the Committee and (b) refrain from participation in the selection process when the Committee determines that the disclosing member would derive, directly or indirectly, a private benefit if any applicant were selected over others.[3]

A Committee may not award any scholarship to:

• a director, officer, or employee of the Corporation;
• a substantial contributor to the Corporation;
• an employee of the Corporation;
• a Donor to the Fund providing the scholarship;
• any member of a Committee choosing the recipient of a scholarship;
• any family member of the above persons; namely, spouses, siblings, nieces, nephews, children, or grandchildren; or
• any other disqualified person as defined in Section 4946(a) of the Code.

Each Committee established under these Procedures shall forward its recommendations to the Board in such form and on such schedule as the Corporation establishes. The Board shall have final approval over the award of each scholarship.

Section 5. Application Process

Applicants for scholarships shall be required to submit such application forms and supporting materials as the Corporation and donor request, on a schedule to be determined by the Corporation and donor.

Section 6. Selection of Scholarship Recipients

The Committee shall select the recipient(s) from among a pool of meritorious students who apply via the ScholarFund.org online platform on an objective and nondiscriminatory basis pursuant to the requirements of Section 4945(g) of the Code. Scholarships may only be awarded pursuant to these Procedures.

In addition to criteria described in the Donor Agreement, criteria for the award of scholarships may include, but are not limited to, the following: prior academic performance, performance of each applicant on tests designed to measure ability and aptitude for educational work; recommendations from instructors of each applicant and any others who have knowledge of the applicant’s capabilities, additional biographical information regarding an applicant’s career, academic and other relevant experiences, financial need, and conclusions which the selection committee may draw as to the applicant’s motivation, character, ability, or potential.[4]

Recipients of scholarships must be primary or secondary school students who intend to use grants for tuition and related expenses at an educational institution described in Section 170(b)(1)(A)(ii) of the Code; i.e., such institution must normally maintain a regular faculty and curriculum and must normally have a regularly organized body of students in attendance at the place where the educational activities are carried on.

The Board reserves the right to impose additional reasonable restrictions and/or requirements upon the awarding of scholarships.

Section 7. Scholarship Disbursement

If the scholarship recipient has already matriculated at a post-secondary educational institution, the Corporation shall disburse the Fund directly to that institution.

If a scholarship recipient will not be matriculating within a short time frame, the Corporation shall either hold the funds until matriculation and then disburse them to the institution, or, per agreement with the Donor, deposit them in a 529 College Savings Portfolio in the recipient’s name.

If the Fund is held over multiple years, the Corporation shall hold an annual check-in with the recipient.

Each scholarship may be used only at an educational institution described in Section 170(b)(1)(A)(ii) of the Code, and for qualified tuition and related expenses within the meaning of Section 117(b)(2) of the Code, and for room and board. Accordingly, a scholarship may be used exclusively for: (1) tuition and fees required for the enrollment or attendance of the recipient at a qualifying educational institution; (2) fees, books, supplies, and equipment required for courses of instruction at such an educational institution; and (3) room and board. No part of the scholarship shall be used as payment for teaching, research, or other services by the recipient required as a condition for receiving the scholarship.

If, at any time, the recipient (1) expresses the intention not to matriculate in a post-secondary educational institution, or (2) fails to matriculate within the timeframe specified in the Donor Agreement, the Corporation may award the scholarship to another recipient.

Section 8. Recordkeeping Requirements

The Corporation shall retain the following records in connection with all scholarships: all information obtained by the Corporation to evaluate the qualifications of potential recipients, a list of all applicants (including any relationship of any applicant to the Corporation or to a director, officer, or employee of the Corporation), the purpose and amount of each scholarship, and any additional information the Corporation obtains in complying these Procedures. Information pertaining to unsuccessful applicants for awards shall be kept along with information on successful applicants.

Records pertaining to any scholarship made pursuant to these Procedures shall be kept for no less than three years after the filing of the Corporation’s annual tax return for the period in which the last installment of such scholarship was paid.