skip to Main Content

America's First Choice for Nonprofit Startup and Compliance

When Foundation Group launched in 1995, we were the first specialty firm in America dedicated exclusively to starting nonprofits and helping them to stay compliant with state and federal regulations.

20 years later, we're still going strong!  In fact, our client base continues to grow exponentially every year...and we've never been more committed to bringing our clients the expertise they need to see their vision come to pass.  Simply put, we love what we do and we're passionate about doing it with excellence!

We were the first...and we've never stopped leading!  Call us and see why we are America's first choice for nonprofit startup and compliance services.

3 Key Considerations for Charities and Foundations Offering Scholarships

3 Key Considerations For Charities And Foundations Offering Scholarships

Scholarships are an excellent opportunity to make a positive impact and support the objectives and mission of your nonprofit. However, there can be IRS compliance issues for your organization if your program isn’t set up properly.

Keep these 3 considerations in mind when creating a scholarship program:

1.  Establish the scholarship’s purpose in alignment with your organization’s goals. Starting with a clear alignment of purpose helps avoid eligibility and selection issues. For example, an animal rescue charity may wish to offer scholarships to students studying veterinary medicine; a food security foundation may wish to offer scholarships to students pursuing studies in nutrition.

2.  Define eligibility rules in compliance with IRS requirements. To start, eligibility criteria must be broad enough to serve a public interest. But, you can limit the eligible group to the people you wish to serve with your scholarship, such as residents of a city or state. To show that your program doesn’t create unfair advantages, you should also include a plan to publicize your scholarship to reach those who are eligible. Rules about defining scholarship eligibility vary depending on the type of organization awarding the funds. It’s essential to understand and comply with all regulations.

3.  Specify an objective selection process that follows specific guidelines. Recipient selection has a lot of potential for problems and will come under scrutiny. It’s imperative that you take measures to ensure that members of your organization cannot privately benefit from the selection process. Selection criteria need to be objective and non-discriminatory; however, you don’t have to limit the criteria to grades and test scores. You can and should define criteria that align with your purpose and mission, making sure that all criteria are compliant. Different regulations exist for public charities, for private foundations, and for funding scholarships connected to educational institutions and businesses. Non-compliance can result in financial and other penalties.

Scholarship programs look simple on the surface, but compliance is complicated. Foundation Group has over twenty years of experience helping foundations and charities ensure compliant scholarship programs that serve their intended purpose.

Greg McRay, EA

Greg McRay is the founder and CEO of The Foundation Group. He is registered with the IRS as an Enrolled Agent and specializes in 501(c)(3) and other tax exemption issues.

Leave a Reply


This site uses Akismet to reduce spam. Learn how your comment data is processed.

Notify of
Back To Top
Free eBook Download!
Successfully Starting a New Nonprofit
  • Defining Your Nonprofit's Purpose
  • Nonprofit Ownership
  • Board of Directors
  • Executive Compensation
  • Fundraising & Compliance Basics
Start a 501(c)(3) Nonprofit
Introducing the SureStart nonprofit formation system.
Cost-Effective. Turnkey. Guaranteed!

Don’t compromise your vision. Discover just what you can accomplish with the right assistance!
Free eBook Download!
Understanding IRS Form 990
  • What is this Filing?
  • Which Version do I File?
  • When is it Due?
  • And Much More!
Free eBook Download!
Understanding Charitable Solicitations
  • What is this Filing?
  • Who Requires It?
  • Website Donations
  • And Much More!