Seperate Scout Accounts

[fauxc]

Our Pack is setting up seperate Scout Accounts for the boys. I know that some have tried this before and either don't like it or think that it is too much work. First let me explain the reason why we are doing this and what I am looking for advice on.

 

Currently we do fundraisers and some of the boys do it and some don't. The boys that usually do it are the same ones and some of them go above and beyond, but don't get rewarded like they should. We would like to reward those boys that do this and have a portion of the fundraiser money go towards their account.

 

Here are my questions:

 

1) Are the Scout account funds used to pay for everything such as camping fees, derbys, trophys, activities or does the pack pay for a portion of these. I would expect that the Pack would still pay for advancement awards, banquet, etc.

 

2) What % goes toward the Scout account.

 

3) My concern is that I want to be sure there are enough funds for the Pack to pay for awards, banquet, etc., so what happens if the Pack falls short?

 

4) How did you handle pushback from parents?

 

Thanks

[SeattlePioneer]

My pack went to individual Scout accounts a year ago. It was a major success and we will be doing it again this year.

 

Our normal pack dues are $5/month or $60/year.

 

Scout families that sell $200 in popcorn get their pack membership paid. Anything less than $200 nets ZERO.

 

For sales over $200, the family Scout account is credited with 25% of SALES over $200.

 

Families can use Scout accounts for anything Scout related including uniforms, day camp fees, outing fees or whatever.

 

Cub Scouts who transfer over to Boy Scout can transfer any credits to a troop Scout account. Otherwise if a family quits Scouting the funds reverts to the pack.

 

I'm the Treasurer. I set up a Quicken account for any family with a Scout Account and charge any qualified expenses turned in to me against the account until it is exhausted.

 

MOST families paid the pack membership with popcorn sales. A number of familes had $200-250 Scout account balances after the popcorn sale.

 

Our pack is in a low income area. We can mostly avoid leaning on family budgets using this method.

 

September 12th will be our pack recruiting night. New families can join the pack through the end of December by paying $20. New families will be exposed to a site sale on our September 22nd outing, and will be encouraged to pay for the 2013 pack dues by selling popcorn if they wish to do so.

 

So even NEW families will be exposed to selling popcorn in a fun activity, and will be able to get in the swing of the popcorn sale easily should they wish to do so.

 

Those families that prefer not to sell popcorn at all, or just nominal amounts, are welcome to do so.

[pchadbo]

What we do in our Pack is at the beginning of the fundraiser we determine what portion of the Pack's "cut" will be going to the boy. For example for popcorn, the Pack gets 35% of total sales, the boys get 35% of the Pack's 35% for what they sold (Johnny sells $100, pack get $35 Johnny gets $12.25 of that).

We do that for each fundraiser in advance and it is made Public. This makes the process transparent to the parents and all others. As far as uses, it is for Scouting activity fees (camping, overnights, special events, etc.) if the boy leaves the pack, the money is returned to the Pack, if he transfers or crosses over, his money goes to the new Unit.

Trophys, advancements, Blue and Gold etc are still paid by the Pack.

[Second Class]

I'm trying to get away from scout accounts. They are a pain to manage. They may run afoul of the tax code. See other threads for those details.

 

Your first step is to develop a real budget that reflects what you spend PER BOY during the year.

 

This should be your dues amount. It will be a huge number. Ours is over $200.00 per boy.

Our dues are half that! Half the boys have been riding on the backs of the other half.

 

I'm going to suggest a $650.00 minimum sales goal per boy. That will net the Troop $227.00, which is break even. And we'll prorate sales for those that don't try very hard. Dues they don't pay by their commission, they write a check for.

 

Don't forget your recharter fees, Boy's Life, insurance fees for camping/day camp, Blue and Gold costs,

Awards, adult awards if you do those, equipment, depreciation, Etc.

[Oak Tree]

We did away with Scout accounts once we realized that we were in violation of the tax code. The IRS says you can't raise money for one particular person and claim that it's a fund-raiser for an organization. At that point, it's basically a job. You work, you get paid.

 

1. That said, when we had Scout accounts, we normally used the accounts to pay for anything that the Scout would normally pay for themselves.

 

2. We did from 50%-100%, depending on the fund raiser.

 

3. What if the pack falls short today, when there aren't any Scout accounts? Same thing.

 

4. Whenever we're making a change, we try to get lots of input, give people lots of warning, explain the rationale, and then finally just say, "That's the way the committee decided to handle it."

[Polaris]

Answers:

1) No. Our scout accounts are used only to pay for summer camp.

 

Pack dues pay for race cars/boats, trophies, 3 campouts, awards, belt loops, den supplies up to $100 per den, leader training (I.e. Univ of Scouting), Pack mtg activities, Blue and Gold, Holiday Party, BSA registration and insurance, equipment maintenance, service projects, etc. We have developed a budget for each activity per scout and collect dues at the beginning of the year. Each family receives our budget/dues structure in writing. If a family chooses not to fundraise to pay their dues, dues payments are collected and placed into the Pack general fund. "The Cub Scout helps the Pack go."

 

2) Scout accounts are funded 100% of profits after the dues amount is funded. The scout account only retains enough funds to cover the cost of summer camp. Any above that goes back into the Pack general fund. We offer large amount gift cards as incentives for the high sellers. All scouts that fundraise are eligible for prizes. We also offer surprise incentives to those that make that extra special sale.

 

If the scout doesn't attend camp, the funds go back into the general fund. If a scout crosses over, the Pack writes a check to the troop. We will hold more money in the AOL Webelos account as Boy Scout camp is more expensive.

 

3) Written budget and dues collection prevent shortfalls. We make sure the Pack fund has monies before the scout accounts are funded.

 

4) Again, put it in writing and give it to the families. We explain our budget/dues structure at the back-to-school ice cream social and popcorn kickoff. Our program offers a lot of opportunities. A family can chose to participate or not. We don't nickel and dime throughout the year. Often, we cover costs for family members as well as scouts. We want the entire family participating. An example where we will collect money from parents is for their own tickets for a minor league baseball game.

 

Basically, we do the same thing as your Pack. The boys that fundraise have dues (Pack expenses/activites) and summer camp paid for and those that don't--they pay out of pocket. The difference is that we collect dues for all activites whether they attend or not. That's how we are able to budget for events. Everyone "pays" their fair share.

[Beavah]

The boys that usually do it are the same ones and some of them go above and beyond, but don't get rewarded like they should.

 

Really? Yeh mean your popcorn sales don't teach 'em to interact with strangers? They aren't havin' fun with their friends while learning from da adults? There isn't some great down-time? They don't get any personal satisfaction out of providin' a service to their pack and makin' their pack go? Sounds like yeh need to up the energy of your popcorn sales and emphasize da Cub Scout Promise a bit more!

 

A fundraiser for a not-for-profit organization is not about financially rewarding the workers. It's about raising money for a charity.

 

Your way of lookin' at it suggests that your intent is to commit fundraising fraud, which is probably a felony offense in your state. If your chartered organization is a not-for-profit, yeh are also proposing that your pack engage in tax evasion, as others have suggested. No fundraised or contributed monies to a not-for-profit can inure to the benefit of individual members.

 

So I'd gently suggest that yeh start by re-adjusting the way yeh are thinking about things, and help folks in your pack to realize that they are not doin' this for themselves and their own reward. Yeh help make the pack go for da same reason yeh help at da church fundraiser or give to the local homeless shelter or volunteer to read for the kids in da children's hospital. Yeh do it out of kindness and service to the community. Cub Scouting is one of your favorite charities, and yeh give because yeh want Cub Scouting to succeed for all the boys.

 

Then, after yeh get that message across to everybody, your troop committee should allocate funds accordin' to what is best for the pack as a whole. That's their job as "board of directors", eh? To do what's best for da pack, even if it isn't what's best for their family. We call that sort of thing honor and duty.

 

Now, once yeh get in da proper mindset yeh might decide that teachin' kids about managing money is an educational goal of your chartered organization. That depends on bein' honest about your CO's mission. In that case, then it may be appropriate to set aside a small fraction of the proceeds to that purpose so that the boys get to manage some money and purchases themselves as an educational activity. Or, yeh might honestly decide that your chartered organization believes more in teaching about responsibility to each other and an obligation to charity. Most churches fall in da latter group, I reckon. In that case, perhaps yeh set aside the money first for the families in da pack that are most in need.

 

You know... "I promise to do my duty ... to help other people."

 

Beavah

 

[Basementdweller]

Everyone here is confusing multiple issues....

 

The first is the cost of the program....

 

Fauxc how much does your program cost to provide each scout per year????? this should include everything, den crafts, pinewood, blue and gold.

 

The second is do you collect dues????

Who tracks it? how accurate is it???? does it cover the cost of the program??

 

Third Fundraising

 

Do you sell popcorn, rootbeer floats, light bulbs, Christmas trees?

 

fourth

 

Scout Accounts....work great for us.

 

First year as CM our packs den leaders were running the program out of their pockets. the pack had 4 boys that sold $800 in popcorn.....No other fund raising...All of the other families rode on the backs of these boys and the generosity of the den leaders.

 

Second year we started a Program fee for the Pack. It included all activities, recharter fee, boys life, pinewood, trophies, belt loops and a Pack tshirt for $80. The families could buy out of selling popcorn by simply paying it and not sell popcorn.

 

at the same time we instituted our Scout Accounts...100% of the fundraising profits go to the boys to use in their scouting program. The CC and Treasurer track it....this prevents lost time tracking Dues every week. We have all of the money in place for the year by the end of October.

 

As Pack leadership we set up store front selling of popcorn....We went from less than $1,000 to more than $10,000 that first year. All of the boys paid for their program fees easily.

 

 

So exactly how it works new scout joins in September we collect a $20 join fee to cover his registration till December, it is put in his scout account....the pack turns in and pays his fees to council.....Popcorn starts shortly after.......Boy signs up for times at the storefront or sells door to door....boy profit is $100 for sales... it is put into his scout account, his current balance is $120

 

Nov 1st program fee of $80 is with drawn leaving boy a balance of $40 in his account. Christmas wreath sales start....boy makes $40 profit for his efforts.....so Balance is $80..

 

Year passes March day camp sign up time day camp cost $75....parent signs boy up and pays for it out of his scout account.......boy has a balance of $5 remaining...... We allow shirts and books to be purchased from the account and have created withdrawal/deposit forms.

 

pretty simple works well...

 

 

 

[Basementdweller]

Push back from the parents.

 

The program for your scout cost the Pack $80....here is what that includes xyz. Sure it is a lot of money but here is how we are going to help you do it. Scout Accounts.....

 

Then sell the fundraising....

 

 

100% of the fundraisers go to the ISA accounts.

 

Packs cost of doing business is covered by the program fees.

[fauxc]

Beavah,

 

I think that you are way off of the subject here. The idea of this post was to get some suggestions on how to use Scout Accounts. I am by no means committing fundraising fraud or tax evasion as you put it. This money is in one account which is the Pack account and the money belongs to the Charter Organization. The separate scout accounts are just a way to allocate the money on a spreadsheet. The money is used to pay for activities, events, camping, etc. We are not writing out checks individually to each scout. At the end the Pack is still paying for everything. This is just a way to give an incentive to have the boys raise money and more importantly to have the parents see the benefit of their son participating. Because if you don't have the parents on board, then you talk forever about how it benefits, the boys, pack, etc, and it doesn't matter. In the end, the Pack still pays for everything.

[Beavah]

Yah, fauxc, I hear yeh. And I understand your motivation better from your last post, which is worded a bit differently than your earlier posting. That perhaps merits some reflection on which yeh really mean.

 

Da problem is, what you describe is still tax evasion under the law, and quite possibly fundraising fraud.

 

Yeh see, if little Johnny Cub Scout goes up to someone (out of uniform) and says "Will you give me money so that I can go to Cub Scout camp?" then that isn't fraud. He's makin' it clear that he is asking for a personal gift, not a donation to a charity. Same as if he walked up to a stranger and said it was his birthday and asked da stranger to buy him a cupcake.

 

But if he goes up to someone and says "Will you buy overpriced popcorn to benefit Cub Scouting?" and in reality the money is goin' into an account that he and his family have effective control over in order to pay for their own personal cub scout activities, then that is a problem. It's not goin' to support Cub Scouting, it's inuring to the benefit of an individual in cub scouts. Da fact that the pack is holdin' the money and doin' the accounting just makes 'em a participant in the fraud.

 

It's problematic in terms of state fundraisin' laws (you're pretending to raise money for a cause when in fact the boy is raisin' money for himself) and sales tax statutes (yeh don't collect sales tax for da popcorn because the state considers your pack a charity, but then you're failin' to act like a charity by allowin' the proceeds to benefit individuals directly). It's also a problem for da IRS and federal taxes if your CO is a not-for-profit, because it violates the terms of their federal tax exemption. Yeh are exempted from federal tax because yeh are a NFP, and you're only a NFP if the proceeds don't inure to the benefit of any individual. Finally, it's a problem in terms of da Labor Laws, because now it looks like da kids are hocking popcorn for a form of remuneration, and therefore subject to da labor laws and payroll taxes.

 

In short, da guidance from da BSA and from the IRS has been "don't do this", and most of us who know somethin' about the laws and structures have always advised against it. Your initial postings used words that showed exactly why this stuff is not allowed.

 

Can yeh still do it? Of course. It's a choice. Da risk yeh run is probably low; you're not talkin' large amounts and in all likelihood you or your CO will get off with a slap on the wrist in the unlikely event someone chooses to pursue it. Whether that's good citizenship or an ethical approach is somethin' to consider with your CO and perhaps their legal counsel. IMHO, our fellow citizens give us special perqs in terms of taxes and fundraisin', and we should live up to the terms of those special privileges as a matter of honor. Others may disagree.

 

But let's speculate for a moment on a scheme that might be more appropriate. Yeh can make a good case for the educational benefit of teaching boys about earning money and payin' their way. So let's say that for every dollar of popcorn sold, a boy gets one PackToken. Or even better, for every hour worked at popcorn sellin' events he gets 5 PackTokens. Each event that the Pack holds has a participation price of a certain number of PackTokens that the boy must pay from his supply of PackTokens. Yeh want to go on the campout? Yeh have to pay 10 PackTokens or yeh can't come. There might be other ways he can earn PackTokens, by doin' other work for the pack like sellin' hot dogs durin' the pinewood derby or helpin' set up for da raingutter regatta.

 

The point is to make it an educational exercise that if yeh want to participate in the benefits of a group, yeh have to contribute some elbow grease to the group. That would push each boy into workin' and contributin', not just the lads who don't have well-off parents to buy out their obligation. Wouldn't that achieve your goals just as well (or better)?

 

Plus it would have the benefit of bein' consistent with our educational mission, eh? Yeh wouldn't be entanglin' yourself and your Chartered Organization in all sorts of problems with federal and state laws and tax regulations.

 

Beavah

(This message has been edited by Beavah)

[fred8033]

TAX IMPLICATIONS - I've read on this repeatedly. Generally, the whole topic is clear as mud. As with many legal issues, it is an argument of nuances. How much is the private benefit of scout accounts necessary to achieve the public good of the exempt status? http://www.irs.gov/pub/irs-wd/02-0041.pdf Gosh, we had eight eagles who did a total of 2400 hours of community service for their projects. Plus we do service projects at camp (i.e. for a non-profit). We help in the community thru food shelters and local service. We help keep kids from being delinquent. Plus selling grows character and confidence. Good arguements for individual accounts and keeping exempt status. But if the scout has $10,000 in his individual account and buys tickets to the next three world jamborees with first class airplane tickets, that's a strong arguement toward personal benefit and not tax exempt.

 

I wish everyone the best deciding. Generally though, the IRS doesn't go after scout groups.

 

PACK

Question #1 - We don't have scout accounts. If scouts want to go to BSA/council/district run camps, the parents pay. For everything else, the pack pays ALL. advancements. pack family overnights. b&g. pinewood derby. everything. The pack spends $135 to $165 per scout. We try to make all "pack" (not den) activities be family oriented (parent, child, siblings).

 

Question #2 - Percent? Zero.

 

Question #3 - Our dues are minimal. We want people involved. If we don't get successful fundraising, we scale down the

program.

 

Question #4 - Only push back we find is from parents who know Boy Scouts. They want a scout account to bring forward.

 

TROOP

Question #1 - Scouts pay fees for each camping event and activity. Troop pays for advancements, banquets, etc.

 

Question #2 - Goal is 100% of profit.

 

Question #3 - Budget. We find the troop has lower overhead than the pack. About $75 per scout at most.

 

Question #4 - Pushback? If you like or tolerate the other person, invite them to join the committee. If you don't, then don't sweat it. If they push harder, give them the list of other local scouting units.(This message has been edited by fred8033)

[Oak Tree]

the whole topic is clear as mud.

 

I'm going to disagree with that point. The IRS rules on this are quite clear. There are documents that discuss this specific issue. (for example, see http://www.irs.gov/pub/irs-tege/eotopica93.pdf)

 

"Inurement of income is strictly forbidden under IRC 501©(3) without regard to the amount involved. Because the financing arrangements of clubs operated like A have the effect of permitting the earnings of the organization to inure to the benefit of specific insiders (the parents and their children), these organizations cannot qualify for exemption."

 

It doesn't matter whether the organization is doing good. It's just that you can't earn money for yourself through fund-raising.

 

Private inurement is really, really prohibited. Google that phrase at irs.gov and you'll see it everywhere.

 

Here'a another example: "

[fred8033]

It's not that clear cut. I'm not saying your wrong. I'm not saying your giving bad advice. Your giving the play-it-safe answer which is always a good choice.

 

I'm just saying it's not 100% clear. The following 2002 IRS article explains my reasoning. http://www.irs.gov/pub/irs-wd/02-0041.pdf

 

I had read the 1993 article you quoted. That same 1993 document you quote also says: "As indicated in GCM 39862, the inurement proscription is aimed at preventing dividend-like distributions of charitable assets or expenditures to benefit a private interest"

 

The 1993 article example has a gymnastics booster club. But there are significant differences between the scouters and the example booster club "A".

 

---- Booster club "A" supervisory board included gym X owners (i.e. insiders) who directly financially benefit (i.e. dividend)

---- Booster club "A" purchased equipment that was installed at gym X giving the owners commercial benefit.

---- Booster club "A" gymnastics were 100% taught by gym X paid staff.

---- Booster club "A" did not work work with the broader class of gymnasts. They worked with gymnasts training at for-profit gym X.

 

The article hits at organizations that want tax exempt status, but were created more for the profit of those involved than for a public good. A good number of the IRS articles talk about physician partnerships that go after non-profit status.

 

That's why I think this is all clear as mud. Scout groups are created for strong public good and don't have the direct dividend type of ownership or of fundraising. There is no cash draw and the money pays for that which is directly part of the public good.

 

As for scout accounts, the 2002 IRS article raises key points. A few more key parts are these

 

- Popcorn sales have a 1/3 of sales go to the local councils and benefits the larger scout population. Without scouts earning credit, many scouts wouldn't sell. That would directly affect money available to pay for camps.

 

- The funds spent directly hit at the public benefit. Educational Preventing delinquency. Public good. It is also a personal benedit, but it greatly benefits the public. Many service hours donated. Better strong citizens.

 

I wish I could find a 2011 or 2012 article. Your advice is good. I'm just saying it's not 100% clear and very very much depends on the nuances of the specific situation.

[fred8033]

Oak Tree: I should mention that I'm close to full agreement with what you wrote. I just don't think it's a 100% definitive. It's a case by case thing. There is room to argue, wiggle and perhaps options. Also note that most every example presented is written within "COULD", not a definitive "would". Here's an okay summary I had found. Plus a great quote: "... frequently results in illegal private benefit. However, the IRS has stopped short of strictly prohibiting IFAs." That's the issue. There is some room to argue you can do scout accounts. It's a thing of interpretting insubstatial, benefit, necessary, and many other words.

 

http://www.parentbooster.org/Default.aspx?pageId=521265

 

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In my previous message, I provided my reasoning. Here's my reasoning to agree with you.

 

- 2011-06-27 IRS memo - http://www.irs.gov/pub/irs-tege/booster_club_field_directive_6-27.pdf

(requiring volunteering or charging more for not doing it is private benefit)

- 2008-06-11 All Experts web page - http://en.allexperts.com/q/Nonprofit-Law-2266/2008/6/credit-hours-worked.htm

- 2001 EO CPE http://www.boosterrules.sebengriffin.com/docs/eotopich01.pdf

 

 

Here's a few cases of big penalties. Three penalties, $61,000, $30,000 and $9,000. Booster clubs raised $6.8 million from 2000 to 2005. WOW !!!!

- 2008-12-16 Kentucky - http://www.kentucky.com/2008/12/16/628251/audits-trouble-bryan-station-high.html

- 2008-08-10 Kentucky - http://www.kentucky.com/2008/08/10/485490/fund-raising-takes-a-hit.html

- 2009-01-14 Follow-up http://homeschoolcpa.com/update-on-the-irs-and-booster-club-fundraising/

 

Another way to avoid IRS audits, don't have millions going thru your checking accounts.

 

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Beavah's discussion of earning PackToken's is interesting. I could see benefit to it. Just don't allow paying $$$$ as an alternative. Waive the tokens in justifiable cases ... fine. BUT don't let families buy their way out. If you do that, the pack tokens become a way to avoid a financial cost. That's the one that's clear cut illegal. Plus now you open the pack up to questions of employment relationships and taxes, etc.

 

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I'm just saying this is not a 100% clear cut.