Recently, a couple of units in District M reached out to their Commissioner with questions related to fundraising and “Scout Accounts”. To start, the primary intent of fundraising should be raising funds to help the Pack/Troop/Crew run their program, from paying for needed program items such as Pinewood Derby or camping equipment, to funding activities such as campouts and more.
Scout Accounts are a way for Scouts to use a portion of the fundraising and dedicate that to the the individual costs a Scout may have — attending Summer Camp, Grey Wolf, and more. But often there are questions raised by unit leaders, families, and Scouts on how these can be used.
Northern Scouting Scouting publishes the Guide for Unit Funds. In in, the guide states that “the youth member should not earn more than 20% of the total net profits from a fundraiser” To understand more, keep reading below.Guidlines for Unit Funds
Where to start?
Start by listening to the December 2014 CubCast. In it, Steve McGowan, General Counsel for the Boy Scouts of America, explains individual Scout accounts and how they fit into IRS rules.
Sales of popcorn, camp cards and the like are an important part of Scouting, McGowan says. They teach Scouts to be thrifty and to manage money. They give families who might not otherwise be able to afford Scouting a chance to experience it.
But money earned from fundraisers must primarily be used in a way that benefits the entire unit, McGowan says. The nonprofit status of the BSA and of the unit’s chartered organization is at stake.
Here’s a nice explanation from McGowan in the podcast:
An example would be if a Scout is part of a unit, and the unit raises money to offset the costs of Scouting for the entire unit. Nothing wrong with that. If they use it as a means to pay down the cost for the unit and each member to go to summer camp, nothing wrong with that.
On the other hand, when you move over to the other side, and a Scout goes out and sells a lot of popcorn, and the unit designates that money that he raises to be used only for that Scout and only for activities that benefit that Scout, we get into an issue of whether or not the IRS would consider that to be a substantial private benefit.
What Northern Star Council guidelines state:
Northern Star Scouting’s Guidelines for Unit Funds state that the “private benefit” to an individual scout should not be more than 20% of the total gross from a fundraiser. (The amount of direct benefit should be no more than 20% but a unit could say 10% or 5%.) That typically would account for an individual wanting to pay for their own campout, program, new sleeping bag, etc. It all depends on how the Troops bylaws are written on what they could use their 20% for — but it must be Scouting related. Also, most of the time if a youth leaves the unit the dollars/credit the youth may have based on fundraising goes back to the unit (or may be transferred if they switch unit, depending on the unit’s bylaws)
That being said, if a Troop were to say that they were going to use the dollars the Troop raised to pay for all of the youth members camp fee, program registration, or a trip to Valleyfair, then it is not an private benefit but a benefit to all the youth in the troop (even if some youth decided not to go). In this instance it is based on the scout spirit and participation, not how much an individual scout raised. The troop could also say that they would use their funds to pay for a troop overnight for all youth who participated in a fundraiser during the year. Again, not reflective of how much an individual raised but an equal benefit to everyone based on participation.
As an example…. if a youth has personally raised $1,000 in fundraising, say selling holiday wreaths or working a community fair, the youth should get no more than $200 direct benefit to themselves. The unit has the discretion on how they want to use the remaining $800 to support the entire unit; youth, activities, events, etc. Some units actually save $100-$500 each year to help any youth in their unit who may need financial support to buy a book or a scouting need that a family may not be able to provide.
What’s definitely not OK
Money raised in the name of Scouting that isn’t used for Scouting is a definite no-no.
McGowan shares the fictional example of a Scout raising money from popcorn sales and having his portion go into his individual Scout account. He then uses that money to go to Disney World.
“That’s absolutely prohibited,” he says. “Any use of the funds would have to be Scouting-related. … In fact, you can get into problems if you start taking designated funds to a lot of personal equipment that might not otherwise be unit equipment. These are gray areas, and common sense has to prevail.”
If the unit uses popcorn money to buy new tents, that’s fine. If a Scout uses popcorn money to buy a backpack and shoes for school, that’s problematic.
It all comes down to the amount of money involved and its purpose, McGowan explains.
“Johnny, who goes out and sells a couple of hundred dollars’ worth of popcorn, and he gets some credit towards a summer camp, I don’t think anybody’s ever going to complain about that young boy being able to do that or say that that’s not a legitimate purpose related to Scouting.”
Frequently Asked Questions:
Q. Do we need to do Scout Accounts?
A. No, they are not required and are only done if your unit’s bylaws allow for them. In general, they are more typical in Scouts BSA Troops and Venturing Crews. Scout Accounts are far less common with Packs.
Q. My unit wants to do a fundraising, with 60% going to the Unit and 40% of the proceeds going to the Scout. Can we do this?
A. No — this is above the 20% stated in the Northern Star Scouting Guide. This has been established based on the IRS regulations for non-profits and what is considered “substantial” individual benefits. Individual credit can’t be more than the 20%.
Q. Some families in the unit are concerned about that limit – they’ve asked why they should fundraise if the amount is only 20%?
A. The primary’s purpose of fundraising is paying for the unit — allowing the unit to run program, activities, and keep the unit running. I’d recommend showing those families where funds are going, whether that’s to pay for campouts, activities, or the other parts of the program. For example, my unit is able to keep unit campouts free and put some funds towards equipment maintenance (trailer, pinewood derby track).
Q. Can the Scout Accounts be used for items such as Grey Wolf, Jamborees or NOAC?
A. That depends on the unit bylaws. These programs are all Scouting programs, so would be allowed per the BSA and Northern Star Scouting regulations as scout-related, no different from Summer Camp.
Q. When my Scout leaves the unit/Scouting, can the unit write them a check for their Scout Account balance?
A. No, they unit cannot send the Scout an individual check, as that would violate the IRS guidelines for fundraising. If the Scout is moving to another unit (and his/her current unit allows it) those funds can be sent by the old unit to the new unit.
If the Scout is leaving the program entirely, any funds in his/her account go back to the unit and can be used as the unit sees fit.
Q. My Scout is aging out – can he/she get the funds from his/her Scout account to help pay for college?
A. No, regardless of the reason, funds raised as part of unit fundraising cannot be used for non-Scouting programs.
Excerpts taken from Scouting Magazine https://blog.scoutingmagazine.org/2014/12/03/individual-scout-accounts/