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Who's on first? Developing and managing endowed scholarship funds.

GIVEN THE MULTIPLE goals and multiple players involved in developing and managing endowed scholarship funds, there are lots of opportunities for communication gaps, poor service, and less than optimal use of the funds. In an ideal world, endowed funds and annual gifts given for scholarship support would be used to take the place of unfunded aid in the offers made to students, freeing unfunded (and therefore unrestricted) resources for other purposes. However, many institutions are not able to achieve this efficient outcome for a number of reasons.

In some cases, the funds raised have such heavy restrictions on use that the financial aid office is not able to find eligible candidates. In other cases, the finance office does not notify financial aid of the available resources until late in the year, after financial aid offers have already been made. In still other cases, the flow of information is such that funds are not used, or are used sub-optimally from a net tuition revenue perspective. So how can administrators avoid these pitfalls and establish best practices in handling this vital resource? Here are nine critical elements to consider.

1. Make sure institutional policies support the centralized distribution of endowed funds. On some campuses, academic or student life departments are encouraged to work directly with donors-or through development officers that are dedicated to their particular academic units--to raise scholarship funds that then are put under the control of that department, rather than being centrally managed by the financial aid office.


Over time, a decentralized approach often leads to funds not being used at all (because departmental leadership has changed and no one knows about the funds) or being given to returning students who are doing well academically as an add-on to other aid they are already receiving. Using the funds in this way not only fails to free up unfunded aid resources, but also is very unlikely to have any impact on enrollment and revenues, as upperclassmen who are doing well academically tend to already have high retention rates. So, requiring central management of funds, regardless of who is involved in cultivating the donor, is step one.

2. Require a minimum contribution for establishing an award that will be sufficient to ensure an annual scholarship of at least $500 or $1,000 under the institution's spending guidelines. When such minimums are not in place, it becomes very difficult to build a meaningful award into a student's package. Funds end up being "frittered away" as one-time awards or prizes for graduating seniors.

3. When the award is being developed, work with donors to keep the awarding criteria general and based on information captured in the student system. Regardless of the donor's requested criteria, build in a clause that will allow the funds to be spent if a student meeting those criteria cannot be identified. It is not uncommon for some endowed awards to have such restrictive criteria that it's impossible to find an eligible student, or for the criteria to be such that additional steps (such as an application) are required in order to identify appropriate candidates.

A personal favorite example is one award that required potential candidates to submit an essay about what their Italian heritage meant to them. Winners then had to attend a ball in their honor, and the cost of a gown or tuxedo rental was more than the value of the scholarship! By keeping restrictions to attributes captured in the student system (major, GPA, financial need, zip code, etc.) it becomes much easier to administer awards. Good communication between advancement officers and the director of financial aid can help ensure the funds will provide the greatest possible benefit to the institution while also meeting the donor's wishes.

4. Routinely communicate any changes to funds or the creation of new funds to all appropriate parties. This includes the fund manager, finance office, advancement office, and financial aid office. With the number of players involved, it is all about communication. Therefore, it is critical for clear protocols to be in place for regular communication in the event of any change to a fund.

5. Create a central database to house pertinent information about each endowed scholarship fund. Accessible by the financial aid director and advancement staff, it should include the following: fund name, fund number, fund balance, fund manager, a history of annual income and expenditures, awarding criteria, and basic information about prior- and current-year recipients (ID, GPA, major, aid application status, academic year).

Such databases serve a number of critical functions--such as easy identification of funds not being used; ability to identify potential mismatches between criteria and the students awarded a fund; and ability to identify funds where recipients will be graduating and new recipients will need to be selected. At some institutions, selected information about all students is uploaded into the scholarship database to facilitate the selection of eligible students.

For example, at Marist College (N.Y.), the staffs of Information Technology's Web Services department and the Student Financial Services office collaborated to develop a comprehensive endowed scholarship management system. The system houses information about all endowed scholarships, as well as information (geographic/biographical, etc.), that students provide via an online application form. Because the scholarships also require a recommendation from a faculty or staff member, students can enter the name of the person who will be providing a recommendation, which automatically generates an e-mail request to that person. When the recommendation is submitted via the endowed scholarship system, it is automatically attached to every scholarship application the student has submitted. The system then allows the financial aid office to easily match students to scholarship criteria using the information housed in the database.

Plans are in place to further enhance the process by uploading student data (e.g., GPA, major) from the central student system to the scholarship management system, so staff can more easily verify data the student has provided. This system's in-house development required approximately 240 hours of IT staff time.

As Bill Thirsk, Marist's CIO and VP of information technology, explains, "We were approached by Student Financial Services to automate their time-consuming and cumbersome paper process of managing the endowed scholarship system. The web team created a system that both streamlined the process and offered enhanced automated functionality."

Launched in March 2005, the endowed scholarship online application was initially utilized by 290 students to submit 1,461 applications. This past academic year, 346 students used the online system, including 128 renewal applications, also handled automatically, and were awarded close to $350,000 in scholarship aid. A custom-built administration screen allows financial aid officers to manage all aspects of the process and monitor real-time metrics for their reporting purposes.

"As usage trends upward, the system is being continually improved," Thirsk adds. "This year, a new feature was added which automatically e-mails all students--and the faculty and staff who made recommendations--their award status."

6. The finance office should notify fund managers of the amounts available for awarding by mid-January. This allows them to be incorporated into initial aid offers wherever possible. It is understood that estimates may be necessary and that small over- or under-expenditures in any given fund may result. However, to be able to renew endowed scholarships for returning students as part of the awarding process, this timing is critical.

7. If endowed funds will be used to replace general merit awards offered to incoming students, students should be notified in the offer letter of such. Explain that their merit award is funded through the generosity of alumni and friends of the university and that they will be notified later of their donor's name. This approach anticipates questions that may arise when the funds are "swapped out" in the fall, once the student has enrolled, and sets the stage for requesting the student write to thank the donor.

8. Protocols must be in place for notifying the financial aid office of any endowed funds managed by other offices. This is critical to ensuring the institution is in compliance with federal regulations regarding over-awarding of students in receipt of federal funds. Institutional policy should require that endowed funds be released only via the regular financial aid disbursement process.

9. The financial aid office should share recipient information with advancement early each fall so donors can be notified by October and, ideally, invited to a campus event on campus to meet with students. This type of stewardship activity is critical to encourage donors to increase institutional commitments.


If these nine critical elements are in place, the possibility for miscommunication and poor stewardship of funds is greatly reduced. In this day of increased competition for donor dollars and increased need for scholarship support, all institutions should be working toward these practices in endowed scholarship management.

Kathy Kurz is vice president of the enrollment management consulting firm Scannell & Kurz, Inc. She can be reached via the firm's website,
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Author:Kurz, Kathy
Publication:University Business
Geographic Code:1USA
Date:Oct 1, 2010
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