Ethics of ISA accounts

[Basementdweller]

Many units use Individual Scout Accounts, ISA, as a way to make scouting affordable to families.....

 

Several forum members have commented that it is unethical to raise money and then deposit it in an ISA for individual Benefit.

 

Is it unethical???

 

So removing ISA accounts how does one ensure fair or equal distribution of effort and benefit????

Mandatory fund raising hours as a condition of membership???

 

I am looking for ideas with the pending

 

Again....My parents have no problem putting their hand out for help......

 

[packsaddle]

I have long been uncomfortable with this idea of individual accounts. First, the practice opens the unit to potential problems if someone doesn't keep the accounts carefully. I've heard the occasional accusation that the unit is acting like a 'bank', the legal ramifications are something I have no idea about. And finally, the basic ethical question that you ask. And I can only say that I see the conflict.

 

 

 

On the one hand, we have the benefit of teaching the boys the benefits of a marketplace driven by earned, merit-based rewards. On the other hand, that isn't necessarily in support of the idea that fundraising is primarily for the group. Capitalism versus communism?

 

 

 

I wish I had a good resolution to this but I don't. This unit has taken the approach that if there is a strong consensus among the families, the treasurer will keep such individual accounts. But most of the time, nearly everyone has chosen to allow the unit to pool these funds for the benefit of everyone. The leaders keep a careful eye for boys whose circumstances might prevent them from affording something and there have been occasions in which the CO has stepped up to cover those costs. I don't consider that necessarily to be optimal either, but I don't have a better answer.

 

Fortunately, most of the time we've been able to raise the funds needed to cover the communal costs for everyone. I guess that makes us communists.

[MichScouter]

Our unit does have ISA. We give a portion of the money earned for fundraiser to the scouts for there scout accounts and some goes into the pack or troops coffers. We do a 50/50 split of the profits. This way the boys get some money to cover expense like camping fees or cost of an event. The pack and troop also get money they need to buy awards and equipment. When the pack has a really good year of fundraising then they will pay for part of day camp for every scout going.

[Frank17]

There is certainly nothing unethical about ISAs PROVIDED they are run properly. Examples:

 

Johnny goes around selling popcorn to his neighbors telling them that the sale profits will go to fund his troop and his trip to Camp XYZ. The money is used by the troop and for Johnny to attend Camp XYZ - no problem.

 

 

Jimmy goes around selling popcorn to his neighbors telling them that the profits will benefit boy scouts, and be used by the Troop to purchase gear. Instead, the money is used to send him to Camp. - PROBLEM.

 

Basically, there is no problem with ISAs from fundraising provided the stated purpose of the fundraising is disclosed & maintained. Its when excess is collected or the purpose is changed that the ethical issues arise. We DO NOT use ISAs in our troop, but we do allow fundraising for Eagle project costs. In that case, any excess MUST be given to the organization sponsoring the eagle project, or be burned up during the eagle project.

[Khaliela]

We use ISA's and every month the treasurer's report contains information on how much money the boys have in "Scouts Bucks."

In my experience not having ISA's causes more trouble than having them. Parents get awfully upset when little Jimmy gets the same amount of money for camp as everyone else even though Jimmy didn't participate in any of the fundraising activities all year.

 

We divide up fundraisers according to whether they are a troop fundraiser or a "Scout Bucks" Fundraiser. Everyone is required to participate in the annual Troop Fundraiser; money from that pays for patches, Camp O'ree Fees, State Park/National Forest Fees, supplies, grub, etc. Scout Bucks fundraisers are optional and the money from those goes directly into each boy's account. This helps motivate the boys because they know that any money they earn directly benefits them and can be used to pay for Camp, big trips (like the Grand Canyon this spring), or any other scouting related expenses (merit badge supplies, camp tee shirts, uniforms, etc.) Boys that need extra money have the ability to work multiple shifts and earn more than a scouts that only wants to work one shift.

 

We have a couple of families that could not afford scouts if it weren't for their Scout Bucks accounts. Their boys always work two or three shifts and put in a lot of extra time on Scout Bucks fundraisers. I don't see how this is unethical. Why would anyone begrudge a boy the ability to earn his way to camp?

[fred johnson]

I've read alot about IRS, non-profits and fundraisers. It's a game of nuances. Plus, there is ETHICAL and there is LEGAL.

 

Not really serious --> Sometimes I think all troops should just be categorized as for profit organizations and publish 1099 to the scouts that earn money. It would make life easier.

 

BUT ...

 

(please note that most troops fly under the radar. The IRS does not care about small organizations such as most boy scouts troops. )

 

- If your troop / charter org wants to keep the non-profit status, you can't REQUIRE participation in fundraisers. IRS clearly calls that out as the EQUIVALENT to paying dues. The fundraiser is then considered to be FOR-PROFIT (the profit of the members) because it is the monetary equivalent to paying dues. Any money collected by a "TROOP FUNDRAISER" must go equally to all members covered by the purpose of the non-profit.

 

- Our troop does have scout accounts and scout product sales. We treat it as the troop is supplying a channel thru which scouts earn money to participate in scouts. The troop earns 10% for their effort and scouts earn 90% for their efforts (hoping to get to 100% for the scout). The scouts only keep what they earn and it's important to point out that purchases are NOT tax deductible. I think the real risk that our scouts run is that the police might stop them, ask for their vendor permit and arrest them if they don't produce one.

 

Unit finances are a GAME OF NUANCES and IRS LEGAL headaches. A "fundraiser" for a non-profit better go to help everyone. Popcorn sales by individual scouts better not be called a "fundraiser".

 

It's like what was originally posted. Selling something such as "buy my popcorn to send me to camp" is probably okay. Selling something such as "the popcorn sales are a troop fundraiser" and then some of the money goes to a specific scout is probably very very bad.

 

But most troops fly under the radar.

 

CONSULT A TAX ATTORNEY !!!!

[koolaidman]

Just a couple of things to think about:

 

"Under the radar": Your troop is part of your charter org. How much money does your charter org pull in? HOA of a community with 1,000 homes x $500 = $500,000, school, church? The charter org gets audited, you get audited. Something to consider.

 

What is fair: PTOs/PTAs don't ration out playground equipment based on how much wrapping paper Jimmy sold. Church doesn't give you extra God because you put more in the offering plate. Allocating funds based on anything other than fundraising production will always be perceived as "unfair" to the guy who sold a lot. Then again, how fair is it when a home-schooled scout can be carted off mid day to sell when others are in school. The scout that has mom and dad sell for him has an unfair advantage. I'm not sure when or how ISA's got started, but I bet it was the parents of the #1 fundraiser in a troop that first thought of them.

 

I don't think it is morally unethical to put a small percentage of fundraising results into an ISA. It is against the tax code though.

 

Personally, I think it would be a better use of a scout's time to mow yards or do odd jobs to pay for his activities than sell popcorn. More buck for the bang...

 

Participation can be a factor when allocating funds.

[Khaliela]

There is certainly nothing unethical about ISAs PROVIDED they are run properly. Examples:

 

Johnny goes around selling popcorn to his neighbors telling them that the sale profits will go to fund his troop and his trip to Camp XYZ. The money is used by the troop and for Johnny to attend Camp XYZ - no problem.

 

 

Jimmy goes around selling popcorn to his neighbors telling them that the profits will benefit boy scouts, and be used by the Troop to purchase gear. Instead, the money is used to send him to Camp. - PROBLEM.

 

Basically, there is no problem with ISAs from fundraising provided the stated purpose of the fundraising is disclosed & maintained. Its when excess is collected or the purpose is changed that the ethical issues arise. We DO NOT use ISAs in our troop, but we do allow fundraising for Eagle project costs. In that case, any excess MUST be given to the organization sponsoring the eagle project, or be burned up during the eagle project.

Why would excess be an ethical issue? If Johnny has extra "scout bucks" from last year why wouldn't it just roll over to this year. And if Johnny has extra several years in a row it sounds like he would be in a good position to pay for Jamboree in the future.

[sailingpj]

My ship has scout accounts. The reality of them is that they are nothing more than a notation on the treasurer's spreadsheet. The money is all in one of the ship's bank accounts. The majority of our fundraisers are cleaning up and serving at crab feeds, or other things like that. We occasionally get a small donation for doing a color guard. The money is split 50/50 between the general fund (pays for insurance, boat maintenance, slip fees, everything really) and the scouts that worked that fundraiser. Scouts can use that money to pay for any event the ship is attending, or any activity the ship is participating in. The crew bucks can also be used to pay for ship dues ($25 per month). When a scout leaves the ship whatever balance they have of crew bucks just reverts back to ship money.

 

I personally paid my way as a scout working every fundraiser I could. If a scout works every fundraiser we do each year they don't end up having to pay fees for many events.

 

We explain all of this to every new scout and their parents, and it is laid out in our welcome packet. As long as good records are maintained nobody complains.

 

I have never met anyone who thought it was unethical. As far as I know every ship in my area does something quite similar to this.

[fred johnson]

Koolaidman - "Participation (... in fundraising ...) can be a factor when allocating funds."

- Strictly per IRS, NO.

- For our small groups, we're probably under the radar.

- Sometimes people do things because it's been done that way for years. And that's the only reason why you CAN do it.

 

sailingpj - "I have never met anyone who thought it was unethical."

- Glad to meet you.

- We still do it, but there are ethical issues.

 

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The ethics is all about claiming NON-PROFIT.

 

- There is no ethical problem with earning money. There is an ethical problem with earning money and not calling it income. (i.e. skirting taxes)

 

- There is no ethical problem raising money to send yourself to camp. There is a big ethical problem raising money for a non-profit and using a significant part of that money to send an individual to camp because he earned the money. It's also an IRS issue. But your groups are probably okay because the IRS doesn't audit that small.

 

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RANDOM THOUGHTS ...

 

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You are on weak ground when it's ethical because it's such a small amount. Is a small lie not wrong but a big lie is wrong?

 

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Plus BSA is about CHARACTER. Honest Abe Lincoln walked miles to return a penny. Even then it was a small amount. That's character. He did the right thing.

 

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QUESTION - Do you think it is ethical for a food shelf to give donated food to a family free-of-charge if they stay to work the food shelf and charge other families or charge a membership ?

 

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QUESTION - Is it ethical to run a fundraiser for a non-profit in the name of the nonprofit and keep 75% of the money and only give the non-profit 25% ?

 

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IMHO, waiving dues for participation is the same as requiring someone to pay to play. The volunteers are personally benefiting from the fundraiser. That fundraiser is NOT a non-profit event then. I'm okay with it because it helps the kids, but it is personal benefit. i.e. INCOME.

 

IMHO, requiring participation is the same as pay to play also.

 

My opinion is based on my IRS readings. I could be wrong. But it's what I understand right now.

 

**************************************************************************************

 

***** REAL EXAMPLE ***** A local family, not in our troop but I know them personally, never had to pay anything for scouts because their family sold so much. Over ten years, that scout's family (multiple youth) had to have earned more than $10,000 for the family. Their family averaged $5000 in popcorn and wreath sales each year. Work connections and hoofing it around the neighborhoods.

 

That's a business. And I think they were teaching their kids how to have initiative to personally profit. They paid for two jamborees. 4 high adventures. Boy Scout summer camp each year for 6 years each. And much more.

 

I've been in scouts for 13 years now with my FOUR sons. We've easily spent $10,000 on activities and events. Probably more. I can deduct some cost because I'm a leader. ... BUT I was taxed (FICA, Medicare, income tax, state tax) on that money. I don't get FICA and medicare tax back on my share. That $10,000 required me to contribute at least $2,000 (or more) to the fed and state governments. So, that other family got away with not paying any tax. They saved a lot $$$$. He and I have similar jobs and earn similar money. He had more get-up and go to sell the scout products.

 

So what is fair? Personally, I think the family should be issued a 1099 for income.

 

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IMHO, we all want to look the other way because we justify the wrong because it helps the youth and it's a small amount and it helps us achieve our own goals (i.e. youth participation, character building, etc) I'm not sure that moves it from wrong to right hough.

 

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The IRS does have an INSUBSTANTIAL test. I don't know know the threshold. Seems something like if you raise $3,000, it is okay to use $30 or $100 to thank those who helped. I'm sure it would not be viewed as insubstantial if you allocated $2000 or $3,000 to the participants.

 

Personally ... I think you're fine when the amounts are small but it's unethical when the amounts get significant.

 

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IRS only cares when you get big enough to make it worth their effort.

 

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Anyway ... I just don't think we should be so cavalier about it when we say if it's okay or not.

[Scouter99]

I think it depends on the troop's situation; our troop covers gear and other costs with monthly dues, so we don't do a lot of fundraising. The boys who sell popcorn or camp cards get the money in their ISA, and sometimes we sell burgers at a fair for the troop treasury. In years where we need a lot of money for a specific purchase (new trailer or new tents etc) we ask the PLC to determine a percentage of popcorn that will go to the troop, and the troop supports the sale to a greater extent.

 

So, if we were constantly fundraising and the troop really put a lot of work into the sales, then I would support a more collective approach to distributing it. But the famlies in our troop have decided they'd rather pay out of pocket than beat the streets selling things, so we don't, and its perfectly moral that the boys who put in work selling get the money they earned.

[fred johnson]

It is a game of NUANCES to give sales profits to scouts and be a non-profit.

 

It's moral if the boy says "buy my popcorn to send me to camp".

 

It's not moral if the boy says "buy my popcorn to support my troop" or if he refers to it as a "TROOP" fundraiser. If you use what is legal as your moral compass and have read IRS case history, you can't allocate non-profit funds to specific people because of how much they raised for the non-profit.

 

Personally, our troop gives 90% of the profit from each scout goes to that scout. 10% to the troop as sort of a charge to support the scout sales. I don't know if we are right or wrong. We don't call it a troop fundraiser. We ask the scouts to say buy my popcorn to send me to camp. We have one scout that has $1200 in his scout account. IT SCARES ME both in responsibility if we don't budget right and spend HIS money or if we should be issuing him a 1099 or risking our non-profit status.

 

[koolaidman]

Koolaidman - "Participation (... in fundraising ...) can be a factor when allocating funds."

- Strictly per IRS, NO.

- For our small groups, we're probably under the radar.

- Sometimes people do things because it's been done that way for years. And that's the only reason why you CAN do it.

 

sailingpj - "I have never met anyone who thought it was unethical."

- Glad to meet you.

- We still do it, but there are ethical issues.

 

--------------------------------------------------------------------------------------

 

The ethics is all about claiming NON-PROFIT.

 

- There is no ethical problem with earning money. There is an ethical problem with earning money and not calling it income. (i.e. skirting taxes)

 

- There is no ethical problem raising money to send yourself to camp. There is a big ethical problem raising money for a non-profit and using a significant part of that money to send an individual to camp because he earned the money. It's also an IRS issue. But your groups are probably okay because the IRS doesn't audit that small.

 

--------------------------------------------------------------------------------------

 

RANDOM THOUGHTS ...

 

--------------------------------------------------------------------------------------

 

You are on weak ground when it's ethical because it's such a small amount. Is a small lie not wrong but a big lie is wrong?

 

--------------------------------------------------------------------------------------

 

Plus BSA is about CHARACTER. Honest Abe Lincoln walked miles to return a penny. Even then it was a small amount. That's character. He did the right thing.

 

--------------------------------------------------------------------------------------

 

QUESTION - Do you think it is ethical for a food shelf to give donated food to a family free-of-charge if they stay to work the food shelf and charge other families or charge a membership ?

 

--------------------------------------------------------------------------------------

 

QUESTION - Is it ethical to run a fundraiser for a non-profit in the name of the nonprofit and keep 75% of the money and only give the non-profit 25% ?

 

--------------------------------------------------------------------------------------

 

IMHO, waiving dues for participation is the same as requiring someone to pay to play. The volunteers are personally benefiting from the fundraiser. That fundraiser is NOT a non-profit event then. I'm okay with it because it helps the kids, but it is personal benefit. i.e. INCOME.

 

IMHO, requiring participation is the same as pay to play also.

 

My opinion is based on my IRS readings. I could be wrong. But it's what I understand right now.

 

**************************************************************************************

 

***** REAL EXAMPLE ***** A local family, not in our troop but I know them personally, never had to pay anything for scouts because their family sold so much. Over ten years, that scout's family (multiple youth) had to have earned more than $10,000 for the family. Their family averaged $5000 in popcorn and wreath sales each year. Work connections and hoofing it around the neighborhoods.

 

That's a business. And I think they were teaching their kids how to have initiative to personally profit. They paid for two jamborees. 4 high adventures. Boy Scout summer camp each year for 6 years each. And much more.

 

I've been in scouts for 13 years now with my FOUR sons. We've easily spent $10,000 on activities and events. Probably more. I can deduct some cost because I'm a leader. ... BUT I was taxed (FICA, Medicare, income tax, state tax) on that money. I don't get FICA and medicare tax back on my share. That $10,000 required me to contribute at least $2,000 (or more) to the fed and state governments. So, that other family got away with not paying any tax. They saved a lot $$$$. He and I have similar jobs and earn similar money. He had more get-up and go to sell the scout products.

 

So what is fair? Personally, I think the family should be issued a 1099 for income.

 

**************************************************************************************

 

IMHO, we all want to look the other way because we justify the wrong because it helps the youth and it's a small amount and it helps us achieve our own goals (i.e. youth participation, character building, etc) I'm not sure that moves it from wrong to right hough.

 

--------------------------------------------------------------------------------------

 

The IRS does have an INSUBSTANTIAL test. I don't know know the threshold. Seems something like if you raise $3,000, it is okay to use $30 or $100 to thank those who helped. I'm sure it would not be viewed as insubstantial if you allocated $2000 or $3,000 to the participants.

 

Personally ... I think you're fine when the amounts are small but it's unethical when the amounts get significant.

 

--------------------------------------------------------------------------------------

 

IRS only cares when you get big enough to make it worth their effort.

 

--------------------------------------------------------------------------------------

 

Anyway ... I just don't think we should be so cavalier about it when we say if it's okay or not.

Participation does not necessarily equivocate to hours worked or units sold. Fundraising is just another troop activity. If the only participation metrics used were fundraising activities, then I agree with you, but if you put in the other troop activities, it's perfectly kosher. Other metrics include: leadership, scout spirit and advancement per the "national memo" linked to by Sam Houston Area Council.

 

Any way you go *someone* will complain.

 

Like I said before. It's not the size of the troop, it is the size of the CO that will attract your friendly neighborhood agent who will be happy to help clear things up.

[Basementdweller]

It is a game of NUANCES to give sales profits to scouts and be a non-profit.

 

It's moral if the boy says "buy my popcorn to send me to camp".

 

It's not moral if the boy says "buy my popcorn to support my troop" or if he refers to it as a "TROOP" fundraiser. If you use what is legal as your moral compass and have read IRS case history, you can't allocate non-profit funds to specific people because of how much they raised for the non-profit.

 

Personally, our troop gives 90% of the profit from each scout goes to that scout. 10% to the troop as sort of a charge to support the scout sales. I don't know if we are right or wrong. We don't call it a troop fundraiser. We ask the scouts to say buy my popcorn to send me to camp. We have one scout that has $1200 in his scout account. IT SCARES ME both in responsibility if we don't budget right and spend HIS money or if we should be issuing him a 1099 or risking our non-profit status.

that is where I am at Fred......

 

I want all of the boys to earn their way.....But I also don't want to risk any legal problems for our CO or parents.

[infoscouter]

We have recently received guidance from our council, based on IRS "private benefit" rules. This is what was printed in our annual Program Planning Guide:

 

"Some units allow youth to accrue portions of funds raised in an account under their name, rather than billing families that don’t participate equally in the fundraiser. To prevent violation of IRS “private benefit†rules, the youth member should not

earn more than 20% of the total net profits from a fundraiser; the funds may only be used for Scouting purposes reflected

within the scope of unit activities; and the criteria for how much “credit†they have earned should be based on Scout spirit

and participation in all activities, rather than how much a Scout raised in the fundraiser. If a youth transfers to another unit,

such funds can follow to the new unit, but must be transferred directly from one unit to another."