If you’ve been in Scouting for a while, you may have heard the term “individual scout accounts” used when talking about fundraising or paying for camp. In this article, I’ll be covering everything you should know (along with the BSA’s guidance) on using your own individual scout account!
As a disclaimer, although I’ve cited the BSA’s official stance on individual scout accounts, along with some relevant IRS regulations, all troops are different. I’m only able to speak from my own Scouting experience. This isn’t legal advice, so contact your local council if you have any questions/concerns.
So, What are BSA Individual Scout Accounts? An individual scout account consists of unit-held funds that a scout and their family can use to pay for Scouting-related expenses. This can be extremely beneficial for families who have a hard time covering the costs of uniforms, dues, campouts, and more!
But Cole, how does it all work? How can scouts add money to their accounts to cover the Many Costs of Scouting? In just a bit, we’ll get into the finer details of individual scout accounts and cover some important rules! This can be a little confusing, but I’ll try my best to keep things simple. 🙂
What is an Individual Scout Account?
I touched on the definition earlier, but let’s take a second to dive into the individual scout account and how it works. The individual scout account is separate from the rest of a troop’s finances. So, not just any money collected by a unit can be added to an individual scout account.
Instead, when adding to and using your individual scout account, you’ll need to comply with IRS regulations. There are a few main ways that I’ve seen scouts add funds to their individual scout accounts:
- By receiving a small percentage of proceeds from fundraising/popcorn sales (most common).
- By contributing small amounts of money on a regular basis to gradually pay for large expenses.
- By being ‘grandfathered in’ the funds from an older sibling’s scout account who Eagle out.
- Through gifts/donations from friends or family who specifically want their money to cover Scouting costs.
These accounts can greatly benefit scouts who have trouble paying for expenses like uniforms, camps, or outings. By allocating funds specifically for scouts, Scouting families are able to cover expenses gradually, rather than all at once! However, below are a few things you must know…
The Do’s and Don’ts of an Individual Scout Account
It’s important to remember that funds from an individual scout account can only be used for specific Scouting-related purposes. Below are some expenses that troops typically cover/reimburse for using funds from individual scout accounts:
- Summer/Winter Camps
- Large Scouting Events Like Jamborees
- Awards/Badges/Camp Items
- Troop/BSA Nationals Dues
- Scouting Class A Uniforms
- Eagle Scout Project Materials
- High Adventure Activities With Scouting
- Troop Donations (if a scout is leaving)
This is only my own experience, so I’d recommend checking with your troop first to be 100% sure that an expense can be covered by your individual scout account. Like I mentioned earlier, all troops are different and the decision is ultimately up to your unit committee.
Fundraising is where things can get confusing. Due to IRS regulations on non-profits (the BSA is a non-profit org), there are some strict rules on how your unit can contribute to your account. Violating any of these rules can lead to your troop losing their non-profit tax exemption! 🙁
Fundraising and Individual Scout Accounts
Scouting does a lot of fundraising, especially through popcorn sales. These sales are extremely beneficial to the unit and can pay for supplies and outings. But, these funds must be distributed in a specific way since the BSA is a non-profit organization.
No more than 30% of popcorn sale proceeds can be designated toward an individual scout account. Usually though, scouts receive less and the funds are instead pooled to subsidize the expenses of all scouts. In my troop, our individual scout accounts typically received around 12%.
Putting a high percentage of fundraised money into an individual’s scout account breaks what the IRS calls “Private Benefit”. So, if a scout collects funds from popcorn sales, it must primarily be used for the whole troop’s benefit. This applies to any fundraiser where Scouting or the BSA are mentioned.
However, if you request donations from friends and family, noting that it’ll specifically offset your costs of Scouting, those can be put into an individual scout account. Because this fundraising is external, contributing the money to your scout account likely won’t violate the IRS rules of private benefit!
Substantial and Insubstantial Benefit
A unit can give funds to scouts, but this represents a bit of a grey area. If a scout individually receives fundraised money for their own benefit, they legally must pay taxes on these funds — if they’re ‘substantial.’ The IRS classifies private benefit into two categories: substantial benefit and insubstantial benefit.
The IRS has classified 30 percent of the money raised as “substantial,” and less than 2 percent as “insubstantial.” The burden of proof that the benefit is “insubstantial” is on the organization.Source: Scouting.org
So, in the case of fundraising proceeds, no more than 30 percent of the money raised is allowed to go towards a scout’s individual troop account. However, keep in mind that these funds can only be used for Scouting-related expenses like camps, Eagle Projects, and other troop-related activities.
To recap, you can provide financial aid bigger than an insubstantial benefit, but it must benefit all scouts. Only giving some money to certain scouts (like those who sell more popcorn) will fall under private benefit, but if all scouts are included then it’s fine. Confusing, right?! 😛
Why Should or Shouldn’t I Start an Individual Scout Account?
An individual scout account can be beneficial for a lot of reasons but, at the same time, it might not be ideal for every troop. Below, I’ll go over the main pros and cons for having individual scout accounts in your unit:
Pros of Individual Scout Accounts
- Financial Aid
Scouting equipment and dues add up, and not everyone can afford it. The opportunity to participate in Scouting should be there for every family, regardless of income, and an individual scout account helps to reduce costs.
- A Scout is Thrifty
By managing funds in an individual scout account, scouts can learn essential money management skills. Also, being individually rewarded for fundraising encourages each scout to try their best.
- Minimize Expenses
Having an individual scout account can make it so dues and campout fees don’t need to be paid all at once. This protects families from steep, unexpected expenses.
Cons of Individual Scout Accounts
- Potential Legal Pitfalls
Violating the IRS’ definition of “substantial benefit” could get your troop’s nonprofit status revoked. Also, potential issues arise if a scout is moving and needs to transfer their funds to another troop.
- More Accounting Work
Tracking and managing each scout’s individual account creates more work for your unit’s committee. Unless someone is spearheading the accounting, it could be difficult to ensure everything is up-to-date.
- Unfair Fund Distribution
If scouts are rewarded for the amount they fundraise, those with fewer family connections or less free time will be at a big disadvantage. There’s an argument to be made that all fundraised money should be shared equally.
Depending on your troop’s number of scouts, committee size, and wealth disparity amongst families, setting up individual scout accounts might be a great call. However, you should definitely have a plan beforehand and thoroughly review the BSA’s IRS guidelines.
How Do I Start My Own Individual Scout Account?
If you’d like to learn more about individual scout accounts in your troop, the process is actually pretty easy! The best thing to do is talk with whoever is in charge of your troop’s finances. They’ll give you all the info you need if your troop already has a system set up.
While individual scout accounts were very common in the past, according to Scouting forums, some troops are starting to do away with them entirely to avoid the legal complexities. From what you’ve just learned, I’ll let you decide if they’re the best fit for your troop!
If you’d like more info, I’d highly recommend contacting your local council and asking them for guidance. You can also read Scouting Magazine’s article and listen to their podcasts for some specific examples of proper and improper use of troop accounts.
While individual scout accounts might not be the best fit for every troop, there are definitely benefits to setting up methods that help Scouting families pay for expenses. Remember, I’m not giving legal advice, but I hope this article gets you started down the right path!
Although Scouting might seem rather expensive at first glance, know that the time any young person spends as a scout is a huge investment in their future! To learn more about the Value and Real-world Benefits of Earning the Eagle Scout Rank, check out my complete article.
Thanks for reading! I hope this article taught you everything you were hoping to learn about individual scout accounts. No matter your financial situation, I’d strongly encourage you to use this tool if you can and make the most of your time in Scouting! 🙂