Chapters have asked if there are ways to reduce the costs of membership. Over the last year, we have worked on a way to address that issue. We believe we have a good solution and we are proposing legislation this summer to implement it. Here is information delegates should know to make an informed vote.
Currently 65% of our annual income is from member and chapter fees. While we cannot significantly reduce the total income we collect, we can consider allowing the educational percentage of those fees to be paid from CEFs rather than from chapter operating budgets. The effect is that total Fraternity income is not significantly affected, but the amount chapters need to bill and collect from their members is reduced.
Triangle annually provides programs, events and services to chapters, mostly through paid professional staff. These are currently financed by the National Active Fee (NAF) which is billed to chapters each term. A percentage of each of these programs and services are recognized as having educational value – some by as much as 80%.
Educational work can be financed by funding from the Triangle Education Foundation (or the CEFs within TEF), so long as we can carefully account for all such funds. The best way to do that is to keep education funds and operating funds separated. Rather than just having CEFs pay for a percentage of NAFs, our legal counsel has advised we separate the two purposes into two separate fees – reducing the NAF and adding an education fee. That will keep the education funds separate from all other funds for accounting and tax purposes.
We would then reduce the NAF by the same amount as the new education fee. The end result would be a lower NAF and a National Education Fee that could be paid with funds generated by your CEF, rather than your operating budget – effectively reducing the amount chapters with CEF funds need to collect and pay from members.
Example for a chapter of 25 actives:
Without Ed Fee – NAFs = $365 per member for 21/22 academic year. Cost to chapter operating budget = $9,125.
With Ed Fee – NAFs = $250 per member; Ed Fee = $115 per member. Cost to CEF = $2,875; Cost to chapter operating budget = $6,250– a savings of over $2,800!
The National Education Fee legislation is proposed for our online summer convention (TRI-CON 2021) planned for June 26/27. We will be providing you with more information on how this fee can help your chapter and how you can benefit more from your CEF. We also will be holding two or three webinars to discuss this issue and other proposed legislation, and to answer your questions before the voting. Chapters are encouraged to elect their Convention delegates before May 1, so they can be included in those discussions.
This is not just another fee, but a means by which to reduce overall costs to chapters over time. There also will be a corresponding effort by TEF to grow current CEFs or start them for groups currently without. As CEFs grow and we are able to increase educational content of programs and services, this can have a significant financal advantage to chapters over time.
CEF – Chapter Endowment Fund – accounts within TEF for the sole benefit of individual chapters; generates funding annually for educational purposes.
NAF – National Active Fee – Fee required by Triangle Bylaws to underwrite services and programs that support chapters; billed in installments based on number of academic terms.
NEF – National Education Fee – proposed new fee, payable with education funding, to support the qualified educational percentage of services and programs.
TEF – Triangle Education Foundation – Triangle’s fundraising and charitable arm. Gifts to TEF are tax-deductible, but funds can only be used for qualified educational purposes.
Q: Why is a new fee necessary?
A: The new fee is an essential part of an effort to reduce the cost of membership to undergraduates. Our legal experts have told us we can allow CEFs to contribute to educational costs if we separate the accounting of educational work from non-educational work. That means, we can lower the NAF if we create a new fee to cover the educational portion. In this way, both fees can be accounted for separately for auditing and tax reporting purposes. We are really just building a new vehicle to allow for reducing the NAF.
Q: Won’t a new fee raise our cost?
A: No. The National Active Fee (NAF) will be reduced by the amount of the Education Fee, so the combined total is the same as what you would have paid for the NAF before the new fee. However, chapters with CEFs or other educational dollars can pay the Education Fee with that money, so less of the chapter operating budget is used. That effectively lowers the cost of membership to undergraduates.
Q: What if we don’t have a Chapter Endowment Fund (CEF)?
A: Then nothing really changes for your chapter for the moment. Chapters without education funds simply pay both the NAF and Education Fee from their operating budgets – same as you have done in previous years when you’ve paid NAFs… it won’t cost you more or less. Those chapters are encouraged to work with Triangle Education Foundation (TEF) to build a fundraising effort to start or grow your CEF, so you will have educational funds in future. We feel this is a cause to which alumni will respond well.
Q: What if we don’t wish to use our Chapter Endowment Fund (CEF) funds for this purpose?
A: Then nothing really changes for your chapter either. You would pay both fees from your chapter operating budget, leaving your CEF funds for other educational purposes you choose. These must be qualified educational purposes as approved by TEF. The National Education Fee is pre-qualified for CEF funds.
Q: What if we don’t have a Chapter Endowment Fund (CEF), but have a local foundation or scholarship fund?
A: Because the Education Fee covers qualified educational programs/services, you can pay these fees from any educational fund available to you. You will receive an invoice for the Education Fees, so can provide that to your fund administrators. HQ can provide a letter certifying these Education Fee payments will be deposited to an account to hold educational funds and will only be distributed for exempt educational purposes. If you need anything more detailed than this, please contact HQ to discuss. We will be happy to work with your fund administrators to see if our fee qualifies for distribution.
Q: What if we have an alumnus who wants to pay the Education Fee for us – will he get a tax deduction?
A: At this point, alumni are encouraged to contribute to your CEF, so it will grow and provide income you can use to pay these funds long into the future. All contributions to the CEF are tax deductible to the donor. That said, if you have an alumnus, parent or other wishing to help the chapter with a special one-time donation, contact Scott Bova, President of TEF at email@example.com.
Q: Does this mean we can reduce the dues we charge our members?
A: If you have sufficient CEF funds to pay your education fees for you, then you could probably reduce your fees. However, if your members already are used to a set fee, you could stay at that amount and now have more flexibility in budgeting. Could you use a few hundred extra dollars to provide more brotherhood events, or set aside funds to help with improvements to the chapter house? Would it be nice not to have reserve funds in case a member or two could not return to campus? Our experience is that many chapters budget pretty close to break-even, so having some extra funds to give you a buffer against crisis could be a good thing.
Q: What steps can chapters take to support this effort?
A: First, educate your members on how this new fee can help the chapter – that it is not a new tax. Sometimes members just hear “new fee” and they don’t listen to its potential benefit.
Second, make sure to elect capable delegates to the June 26/27 TRI-CON 2021 virtual convention this summer. Since it’s virtual, we are hopeful more presidents and other executive officers will be able to attend.
Third, encourage your delegate/s to attend one or more of the online webinars we will be doing to inform about this and other legislation in May and June. If the legislation passes, the new fee will go into effect for Fall 2021.