The Basics of Education Foundations for Florida K-12 Public SchoolsOctober 30, 2015 | Category: Articles
With variances in resources from county to county, communities are turning to education foundations as a vehicle for initiatives and improvements. The following outlines the basic creation and formation of education foundations in the State of Florida for K-12 Public Schools, while distinguishing between the two primary types of 501(c)(3) education foundations that Florida school districts and private parties can create to support a school district for funding not appropriated by the State of Florida or federal government.
Education Foundations in General
An Education Foundation is a 501(c)(3) tax exempt entity created for the purpose of raising funds for education related issue, private schools, or public schools through private donations, grants, or a combination of the two. In Florida, an education foundation’s specific purpose, and the manner the foundation implements its objectives across the State, can vary greatly. However, each foundation is generally operated toward the goal of raising funds and awareness for education related issues that impact a specific district or region within the State of Florida.
Direct Support Organizations and Non-Direct Support Organizations
In Florida, for K-12 public schools, there are broadly two types of Education Foundations: Direct Support Organizations ("DSOs") and Non-Direct Support Organizations (“Non-DSOs”). Non-DSOs are often called Local Education Foundations, or Independent Education Foundations as well. Whether an education foundation is defined as a DSO or a Non-DSO can have a significant impact on whether it was created properly, is governed appropriately, and is accounting for its funds properly. Section 1001.453, Florida Statutes governs whether a foundation is considered a DSO or a Non-DSO. Under this statute, an education foundation is defined as a DSO if it:
- “Is approved by the district school board”;
- “Is a Florida corporation not for profit, incorporated under the provisions of chapter 617 and approved by the Department of State”; and
- “Is organized and operated exclusively to receive, hold, invest, and administer property and to make expenditures to or for the benefit of public kindergarten through 12th grade education and adult career and community education programs in this state.”
Some of the other issues addressed for DSOs in this statute include board membership, funding for the DSO from the district, audit requirements, and additional rule making requirements. The major distinction between a DSO and Non-DSO is school district involvement in governance and funding. Regarding membership on the board, in a DSO the Board of Directors must be approved by the district school board. No such requirement exists for a Non-DSO. Additionally, for a DSO, the foundation can receive funding from the district for “[t]he use of property, facilities, and personal services]”However, the statute is silent as to any additional approved expenditures. Other requirements also include that rules must be enacted regarding the use of the property, facilities, or personal services provided by the district.
These rules must provide for budget and audit review and oversight by the school board and the Department of Education. Once drafted, these rules must be coordinated with the Department of Education. Regarding accounting and audits, if a DSO has more than $100,000 in expenditures or expenses, then an annual financial audit is required by a certified public accountant.
The audit must be completed in accordance with the Auditor General’s rules and the Commissioner of Education’s rules. This audit must be completed and submitted within nine (9) months of the fiscal year to the district school board and the Auditor General. Additionally, an exemption is provided that donors and prospective donors information is considered exempt.
Impact of being a DSO vs. Non-DSO
If a foundation is a Non-DSO then the above requirements do not apply. However, it appears the Non-DSO cannot receive funding from the school district for property, facilities, or personal services – or anything else. If an Education Foundation is truly independent from the school district then it must be financially independent.
A clearly defined structure and purpose must be in place for education foundations which are dependent on the district for funding. While this statute is fairly well defined, there is a broad range of formulations for how education foundations have developed over the years. Sometimes DSOs call themselves DSOs and they are actually not, and vice-versa. The lines are often blurred both in practice, and perhaps more dangerously, in accounting principles.
There are many nuances to the creation, formation and sustainment of an education foundation. Several questions warrant consideration for key leaders and stake holder considering the creation, reorganization, and sustainment of a foundation. Some of the issues include the following questions: What is the scope of the foundation, and which formation model lends itself to such ends? Is the intended scope in line with the statute? If not, and if you want it to be, then what do you need to do to make it in line? The education law attorneys of Douglas Law. are available to discuss these questions, and many more education law issues, upon request.
DOUGLAS LAW. provides counsel & consulting to administrators, school boards, and privately held institutes. Our next webinar on “Truancy – Management and Process Improvement” is scheduled for December 9, 2015. Email info@DHClawyers.com for information and interests.
 “To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes … and none of its earnings may inure to any private shareholder or individual[.]” https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-501c3-organizations (last visited October 12, 2015).
 “The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.” https://www.irs.gov/charities-non-profits/charitable-organizations/exempt-purposes-internal-revenue-code-section-501c3 (last visited October 12, 2015).
 E.g., Mark Zuckerberg’s gift of 100 Million Dollars to the Newark, New Jersey School System.
 See The Consortium of Florida Education Foundations description of education foundations in the State of Florida: “Local education foundations have evolved since the beginning and today they range widely in size and scope to reflect the unique challenges of their public schools and the focus of their board and school system leaders. More established foundations in urban areas now have large staffs and boards raising millions annually for a variety of initiatives. In rural areas, local education foundations may be volunteer-driven and focused on a few targeted programs.” http://www.cfef.net/p/6/our-history (last visited October 12, 2015).
 E.g., see, The Foundation for Rural Education Excellence (“F.R.E.E.”) through North East Florida Education Consortium (“N.E.F.E.C.”) whose mission is, “To help ensure the achievement of academic excellence and career opportunities for rural students in northeast Florida.” http://www.freeneedsyou.org/ (last visited October 12, 2015).
 See § 1001.453, Fla. Stat. (2004).
 § 1001.453(1)(a)(1.), Fla. Stat. (2004).
 § 1001.453 (1)(a)(2.), Fla. Stat. (2004)
 § 1001.453(1)(a)(3.), Fla. Stat. (2004).
 § 1001.453(3), Fla. Stat. (2004).
 § 1001.453(2)(a), Fla. Stat. (2004).
 § 1001.453(2)(b), Fla. Stat. (2004).
 § 1001.453(4), Fla. Stat. (2004).
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