Managing sums

Designated fund or foundations

What to choose for managing funds from various solicitations to parents
or community donations

How can we effectively manage the sums of money that come from parents and the community, in full compliance with the Education Act? What are the differences between a “foundation” and each school’s “designated fund”?

These are the two key questions that we will attempt to answer in this comparative exercise of the two available tools, the Foundation and the Designated Fund: their inherent costs, their own legal requirements, the protection they provide, their durability, and so on.

Getting started

Each school must take note of its needs:
Why collect money?
Who will be approached?
How will this canvassing be carried out?
Who will provide the necessary follow-up?

Then

Analyze the tools available (a foundation? a designated fund?) to store and distribute the money raised:

Using the following guide ;
And by referring to the Minister’s Mandatory Training, Sheet # 22: Designated Fund.

Finally

Choose a tool that meets the needs of your school AND is well suited to those who will be using it.

We would like to thank the Table des secrétaires généraux de l’Estrie-Montérégie for authorizing the use of Info-Flash: Designated Fund and Foundations, Year 4, No. 1, which was revised in January 2018.

toolbox

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	FOUNDATION	SPECIAL PURPOSE FUND
Legal framework	Companies Act, Part III	Education Act, section 94
Purpose (Mission)	One cause: for example, academic perseverance	There may be multiple projects within a special purpose fund.
Legal recognition	Charter and registration application. (Fees required.) Legal entity separate from the school and the school body Must obtain authorization from the school body to use the school's name for solicitation purposes. Even then, the foundation remains a separate entity.	The Education Act (LIP) stipulates that as soon as there is a school or a request from a school, the school body must create a SPF. The SPF is part of the school body. May use the school's name without further authorization.
Administration costs	Equipment, stamps, travel expenses, stationery, legal fees, financial statements, bookkeeping, etc.	None. The Governing Board (GB) has the right to meet on school premises and to use the school's administrative support services and equipment free of charge under the conditions set by the school administration.
Administration	Board of directors elected by a general assembly of members.	The Governing Board alone decides how the funds are allocated. A resolution is essential to authorize expenditures.
Registration as an NPO	Annual obligation to file information returns with the enterprise register. Registration fees to be paid.	No obligation
Registration as a charity	After submitting a registration application, it may issue charitable donation receipts.	If the school body is registered, it may issue receipts.
Bookkeeping	The foundation must maintain books and detailed records allowing tax authorities to verify the amounts reported in annual returns. The foundation must collect its revenues itself and issue charitable donation receipts. These tasks cannot be performed by the school body.	The school body keeps separate books and accounts for each SPF.
Financial statements	Must be prepared annually and, where appropriate, submitted to the tax authorities. If applicable, GST and QST registration must be completed.
Frameworks	The foundation is not required to comply with the administrative and pedagogical frameworks of the school body and the school. However, when authorizing the foundation to use a school's name, the school body may require compliance with its frameworks.	The school is required to comply with the administrative and pedagogical frameworks of the school body.
Directors' responsibilities	To obtain protection, the directors must provide the Foundation with liability insurance. (Cost)	Members of the GB are covered by the school body's insurance.
Operations	Opening a bank account, issuing cheques or bank transfers, deposits, etc.	All these aspects are handled by the school, the school body.
Interest income	After opening the bank account, the Foundation must determine under what conditions and how to invest the funds.	The school body pays interest into the SPF at least once a year.
Fund ownership	All funds collected are the property of the Foundation, which decides how to use them. Furthermore, a donation may be subject to a commercial condition or be designated.	All funds collected must be allocated to the school, and the SPF is overseen by the GB. The GB decides how the funds are allocated. No commercial condition may be attached to a donation.
Archiving and document retention	All bookkeeping documents must be kept for 7 years.	The school body must keep, for 7 years, all documents related to the financial operations of each SPF.
Potential issues for each tool	Succession is difficult to ensure, because when the founders' children leave the school, foundations often collapse. The activities of the foundation must be clearly separated from those of the school. There may be confusion between the school and the foundation, particularly when the foundation deviates from its initial mission. School staff and GB members who are also members of the foundation's board of directors can easily be in a conflict of interest. The foundation is not required to comply with the school body's administrative and pedagogical frameworks. However, when the school body authorizes the foundation to use a school's name, it may require compliance with those frameworks.	Succession is ensured by the GB composition mechanism provided for in the Education Act. It may seem difficult to obtain donations without being able to use the term “Foundation.” Therefore, it may be useful to use the expression: Fundraising Campaign – School XXXX