20/20 Toolbox: Mixing the Nonprofit with the For Profit

Ann Batley

Soon after we assumed the ownership of Camp Mont Shenandoah in 1996, my husband, Jay, and I were interested in establishing a scholarship program for our campers. We were clueless, however, as to how to go about it; especially since we wanted to fundraise to create an endowment in perpetuity. This, we knew, could pose potential problems as owners of a for-profit business.

Our interest was born out of our camper recruitment travels in which we heard time and again from families that wanted to send their daughter to our camp but couldn’t afford our tuition rates. As a small, traditional girls’ camp, we aren’t cheap. The first several years as directors, we did what we could to assist families in need, having “scholarships” come out of camp’s revenues. There was no formal application process; “scholarships” were offered based on expression of need and anecdotal evidence.

In 2001, we were approached by a group of women, all of whom were alumnae of Camp Okahahwis, a girls’ camp not far from us that had closed its doors in 1963. This group of women was in the process of fundraising to establish a scholarship fund to memorialize their summer camp experiences. They were “interviewing” camps to be recipients of their scholarship fund. (By being a recipient camp, it opened the door to allow campers of that camp to apply for the Camp Okahahwis scholarship monies.) Because Camp Mont Shenandoah and Camp Okahahwis shared a common history and had similar values and traditions, we were a selected camp and became the fortunate recipients of the generosity and benevolence of these women. For over ten years, many of our campers have applied for and received scholarships from this fund to attend our camp.

Early in the establishment of their fund, the Camp Okahahwis alumnae had selected the Community Foundation Serving Richmond and Central Virginia for its administration and to act as the nonprofit entity that would allow donations to be taxdeductible — a far easier, less expensive, and less time consuming option over creating their own independent 501(c)(3). Although community foundations have been around for almost a century, they have flourished in the last twenty years. Their collective goal is to improve the quality of life in their given region, and community foundations are excellent vehicles through which individuals, businesses, and organizations can establish permanent, charitable, tax-exempt funds. A community foundation is charged with being the steward of the funds by administering and investing them. Currently, close to 700 community foundations exist in the United States.

The concept of the Camp Okahahwis Scholarship Fund was intriguing to me. Could we establish our own scholarship fund through a community foundation? Jay was dubious about it, and my father (still part owner of the camp with my mother) was a little blunter. “It can’t be done. You cannot mix a for-profit business with the nonprofit. It will never pass the IRS sniff test.” And he should know. He spent several years as executive director for nonprofit organizations and had the wisdom and experience to know what the IRS will and won’t allow.

I can’t recall now what caused me to pursue the idea further, probably my utter obstinacy and inability to comprehend the words “can’t” or “no,” but I wasn’t easily deterred. In the early summer of 2005, I met with the executive director of the Community Foundation for Roanoke Valley to pitch my scholarship thoughts to him. I was especially interested in getting a scholarship fund started in 2006, the year Camp Mont Shenandoah turned eighty. Kicking off a fundraising campaign would be a fantastic way to celebrate our eightieth reunion celebration that summer.

He, too, didn’t think the idea would pass muster with the IRS because we would be creating a nonprofit fund in which Camp Mont Shenandoah, a for-profit business, would be the sole beneficiary. He further explained that the Camp Okahahwis group was most likely successful in establishing their fund because, first, they were no longer an operational business; and, secondly, they selected more than one camp annually to benefit from their funds. Leaving that meeting somewhat defeated, the executive director made a parting comment that he would investigate the matter further just to be sure.

Later that fall, the phone rang, and the news was good. The executive director said we could have our fund! I couldn’t believe it! According to him, the IRS ruled in our favor because contributions to the fund would be filtered through a public charity (i.e., the community foundation), which would be responsible for the distribution of the funds in a tax exempt fashion. Specifically, our scholarship fund (termed the Camp Spirit Scholarship Fund, after our Camp Spirit ceremony that takes place the final night of our core six-week session) would be considered tax exempt in the eyes of the IRS because its intent is to provide an experiential/educational program to an unknown group and infinite number of people. The benefactor is the camper while the benefit to the camp is considered secondary.

We could have our fund, but there were strict rules we needed to follow to maintain the legality of the fund, according to the IRS. The primary regulation is that, once established, no owner, director or employee of Camp Mont Shenandoah, Ltd. could be involved with the administration of the fund. In other words, we had no voice in the application process or the selection of campers to receive scholarships from the fund. A committee comprised of camp alumnae, Community Foundation for Rockbridge, Bath and Allegheny board (an offshoot of the Community Foundation for the Roanoke Valley) members, and local residents was created after the details of the fund were crafted. The two activities in which we, as owners and directors, could be involved were distribution of application materials to our campers and prospective families and fundraising.

The hard work began that fall to raise our goal of $100,000 — the endowment from which scholarships would be made. We approached several different groups during our fundraising efforts, including: camp alumnae, current and former camp parents, friends, family, and members of our local community. (The original description of the scholarship fund stated that one scholarship was to be awarded annually to a girl in our community.) Letters were sent, phone calls were made, and we spoke to people face to face.

But the money was slow to come in, and our frustrations increased. I naively thought that once we described our purpose and goals, the money would quickly follow. What we didn’t count on was people’s resistance to give money to a for-profit entity, although we had clearly stated that this was a permitted activity by the IRS with all of the tax advantages of giving to a 501(c)(3). Somehow, we had to convince folks that, in giving to the Camp Spirit Scholarship Fund, they were providing tuition assistance to girls and young women and not adding to Camp Mont Shenandoah’s bottom line.

In the winter of 2006, we decided that the camp would match, dollar for dollar, scholarship funds that were disbursed each year with the hope that potential donors would see our true motive for the scholarship — to help deserving girls attend summer camp who may not otherwise be able to because of financial constraints. This was added to our fundraising scheme, and it proved to be much more successful.

We didn’t meet our initial goal of $100,000, but we came close. By the end of 2006, we had about $90,000 in the coffers. The Community Foundation for Rockbridge, Bath and Allegheny allowed for a 4 percent annual distribution of the endowment, which, with our match, totaled about $7,200 in available scholarship funds. This is not a great sum of money, but it certainly was a good start, and we have been able to help a number of campers with partial scholarships attend our one-, three-, and six-week sessions.

Like most folks, we were shocked and, pardon the cheap cliché, caught with our pants down in 2008 when the economy tanked. Small business revenues tumbled right alongside those of major corporations. Hundreds of thousands lost jobs, and many family budgets were slashed. Lifestyles often had to be amended to survive the tumult of the times. Even though we may not feel this way, by most accounts, summer camps are considered a luxury and one that can be easily excised from the family’s finances. Yet, many parents recognized the importance and need of a summer camp experience in their child’s life and loathed the idea of not being able to give their child this opportunity.

As a result, the need for scholarship monies has become more important in recent years as families seek to find a balance. Our scholarship selection committee has experienced an increase in applicants, with the total number of annual applicants tripling since 2007. With this increase, our fund has evolved into being much more need-based while relying less heavily on a camper’s merits. We also kicked off another fundraising campaign with our eighty-fifth reunion celebration in August 2011. This time, our goal is to reach $250,000, which would allow for $20,000 in annual scholarships (which includes the camp’s match). We have employed the efforts of our alumnae by creating a fundraising committee headed by two alumnae who have strong ties to camp, having spent many summers with us as campers and counselors, and my dad, the consummate fundraiser. Although we are still in the process of achieving our goal, we have been the fortunate recipients of donations ranging from $25 to $25,000. Every dollar makes a difference.

What have I learned from all of this?

First and foremost, the focus of any scholarship and subsequent fundraising needs to be on the child that will benefit, not the camp. Prospective donors are willing to give, and give more, if the cause seems truly charitable and not just a scheme to fill a camp’s beds and add to its revenues.

Secondly, and of almost equal importance, get help! Use cheerleaders, especially those with fundraising experience, to help meet the goal. I wish I had used more camp alumnae assistance with our initial fundraising efforts in 2006. I think we would have been successful in achieving — if not exceeding — our original goal of $100,000. Plus, by having alumnae involved, it increases your public relations with the group and raises their awareness that the camp continues to thrive.

Third, it’s important to listen and be flexible. I am thankful that I took seriously the comments from others expressing concern about giving to a for-profit entity and questioning whom their donation would really benefit.

Fourth, much goodwill can be created within the community by utilizing a community foundation — not only by having them hold the fund, but having foundation board members participate in the selection process of awarding scholarships.

Finally, trust your own instincts. Although I admired and respected my husband’s and father’s opinions, I had that proverbial gut feeling that we could, indeed, mix the for-profit business with the nonprofit.

I can’t exactly say that I enjoy fundraising, but I do enjoy connecting with people, especially those that are enthusiastic about summer camp. I would start the entire process all over again, if necessary, because of the impact I know a summer camp experience can have in a child’s life. A Camp Spirit Scholarship selection committee member shared this (anonymous) quote with me from a camper’s recent application for the scholarship: “The question is not why I want to go to camp; it’s why I have to go to camp . . . I can’t imagine not going back; I can’t imagine a summer without being there . . . I am thankful for everything that Camp Mont Shenandoah has done for me, for how much it has changed my life, but I know there is so much more in store for me this summer, and I would give anything to have the opportunity to return.”

Eligibility Requirement Considerations for Nonprofit Status

  1. Contributions to your fund are filtered through a public charity.
  2. The public charity is solely responsible for distributions of funds in a tax-exempt fashion.
  3. Your intent is to provide an experiential/ educational program to an unknown group and infinite number of people.
  4. The camper is the benefactor.
  5. The benefit to the camp is secondary to benefit to the camper.

 

Camp Mont Shenandoah

Camp Mont Shenandoah, an ACA-accredited camp, is located in Bath County, Virginia. It serves girls between the ages of seven and sixteen with a residential camp experience. Founded in 1927, Camp Mont Shenandoah is one of the oldest girls’ camps in Virginia. Jay and Ann Batley represent the third generation of family ownership and management.

 

A former camper and counselor for many summers at Camp Mont Shenandoah, Ann Batley and her husband, Jay, assumed the operations and partial ownership of the camp in 1996. Ann is an ACA standards visitor, has served on the board of ACA, Virginias, and continues to serve as the section’s complaint resolution chair.
 

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