Question: Do you know where I can obtain clear or more definitive guidelines regarding scholarships/trusts? How are they operated, created, monitored, etc. if they are using the district's Tax ID number? Currently we have most operated under our student bodies, but there are a few stray accounts out there, possibly under our federal tax identification number.
Response: Since you first looked for information in the Associated Student Body Accounting Manual and Desk Reference, you know that student body organizations can hold scholarship monies and it is critical that they have written direction from the donor so that the dollars end up being used as they were intended. Written direction is critical for scholarships/trusts that are not specifically for student body organizations as well. There are two important resources that you can go to to obtain important information on trusts: the Education Code and the California School Accounting Manual.
Education Code sections 41030-41038 cover the area of Foundation Funds. Specifically, Education Code 41030 states: "Any gift or bequest of money which is to be invested pursuant to this article shall be placed in a district special fund in the county treasury, to be designated as a Foundation Fund. If the gift or bequest of money is required to be used for specific purposes according to the terms of the gift or bequest, the governing board shall place the money in a separate account in the Foundation Fund, and may by resolution designate the separate account by the name that it shall be known, including in its name the term "Foundation Account." The code sections following 41030 through 41038 contain more specific information on investments as well, along with other statutory rules and requirements.
In addition, the California School Accounting Manual speaks to foundation special revenue funds. On page 203-6, there is an explanation about when this type of fund is to be used, which is when there is a formal trust agreement with the donor. Other types of donations, those without a formal trust agreement, are to be accounted for in the General Fund where you can account for them separately depending on how your chart of accounts is set up. Further information is on page 203-14, which addresses two optional types of trust funds. Foundation Private-Purpose Trust Funds are used to account separately for moneys received from gifts or bequests per Education Code Section 41031 under which principal and income benefit individuals, private organizations or other governments and under which neither principal nor income may be used for purposes that support the LEA's own programs. This would be the best place to put scholarships, for instance. Another optional fund is an Article-XIII-B Fund. This type of fund is being phased out and eliminated by the end of 2003/2004 in conformity with GASB 34.
We have found that many districts have set up Foundation Trust Funds that contain donations from several different sources that do not have formal trust agreements attached to the donations. With the Standardized Account Code Structure (SACS) and with GASB 34, these types of erroneous Trust Funds are slowly being eliminated and the dollars are then being correctly accounted for in the General Fund. This is probably what you are dealing with. Remember, without a formal trust agreement with the donor, the accounting should be done in the General Fund. It is not a good thing to set up more funds and/or records than you actually have to have.
8/07/03
