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NAOC Scholarship Foundation

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NAOC is currently a 501c(6) non-profit organization NAOC can be directly affiliated with a 501c(3) charitable organization Including common Officers Directors Committee Chairpersons It is advantageous from an IRS standpoint not to be identical Recommendation was 50% but there is not a fixed percentage

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NAOC Scholarship Foundation 501c(3) Requirements Assets must be dedicated to charitable purposes Social activities must be insubstantial Donations are tax deductible Legislative activity must be insubstantial All political activity is prohibited Must serve public purposes

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Donations Anyone can make donations Officers Directors Members Family members of these individuals are eligible to receive scholarships

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Conflicts A Conflict of Interest agreement is completed by all Officers and Directors An Officer and/or a Director should recuse themselves from any selection process for scholarship awards if they are affiliated with potential scholarship awardees Completely avoid such a situation, i.e. dont have any connection with anyone affiliated with being a potential scholarship awardees

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Option 1 (Preferred Option) Establishing a Separate 501c(3) Charitable Organization Could Cost up to $10,000 If we elect this option the following must be accomplished

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Option 1(Cont.) A non-profit organization must be established State to State the cost includes attorney fees to create the Articles of Association, application fees, etc. File to the IRS for 501c(3) tax exempt status Scholarship guidelines, procedures, applications, selection criteria, eligibility rules, etc. must be created This option would also require submission of FORM 1023, Establishing an EIN# and submitting annual tax filings

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Option 1 (Cont.) 2014 will have to dedicate to setup the NAOC Scholarship Foundation (NSF) Cost $10,000 (Currently we have $5,000) To expedite keep most of the same Officers and Board Replacing at least 25-50% of the Officers and Board in November 2014 2015 draft budget, earmark $5000 for the NSF 2014 solicit tax deductible scholarship donations for 2015 awards Establish a working committee to begin writing NSFs Mission, Objectives, Articles and Plans, Procedures and Rules for Scholarship applications, eligibility and awards.

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Option 2 Establish a Completely Separate Charitable Organization that is not Affiliated with the Current NAOC Structure

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Option 2 (Cont.) This option would require all the same submittals as described in Option 1 The disadvantage is no assistance from our current organization A completely separate board must be established to write new Articles of Incorporation Could be extremely time consuming to our current membership

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Option 3 Donation of Funds to an Existing 501c(3) Scholarship Foundation

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Option 3 (Cont.) NAOC to donate funds to an existing 501c (3) Scholarship Foundation NAOC has no control for that foundations disbursement according to their guidelines NAOC would donate to another scholarship awarding charitable organization Working to gain funds Submitting paperwork for our own 501c(3)

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Questions (Cont.) You stated that we currently have $5k - was this originally earmarked for actual scholarships? If so, how will the Board react to using that money, plus some, to establish the charitable organization before any money could be set aside for actual scholarships?

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Questions (Cont.) Is there enough interest to staff a separate organization (Board Members and members) for the long-term?

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Questions (Cont.) Is it reasonable to expect funding, either through the NAOC budget and/or donations to sustain the program long-term?

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Questions (Cont.) If a separate organization is established, what controls would be necessary to ensure it acts in the best interest of NAOC? For instance, would NAOC need to approve/concur with the mission statement/objectives/procedures? I would think that sharing BoD members alone wouldn't necessarily accomplish that objective.

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Concerns Option 2 - This would be an administrative and costly burden to establish an entirely new organization with no ties to NAOC. I would imagine this would take longer than Option 1 and that there may be a potential that NAOC's best interests are not taken into consideration (what controls would we have over this new organization)?

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Concerns Option 3 - This option would delay NAOC moving closer to establishing their own scholarship fund, and ultimately would be more costly, since you imply donating to another fund while incurring costs to establish a separate organization.

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THANK YOU