Voluntary Building Funds (VBF) are the cornerstone for all successful fundraising in a school.  They set the culture of giving in the school and if promoted incorrectly will create a negative impression.    However, if promoted in the best possible way it will provide the launching pad for other forms of annual giving and identify prospective major gift givers.   

Some schools use this method of fundraising purely as a means of obtaining extra funds towards their school budget and capital works program not realising it has additional benefits to the philanthropic culture of the school.

The presentation of the VBF information on the fee statement is vitally important to its success.  Many schools incorrectly place this voluntary building fund amount above the bottom line and by incorporating this amount into the school fee. By providing a tax deductible receipt they are in breach of the Law. More importantly, if the parent who receives this receipt claims this against their income tax, they are also committing an offence.  Unfortunately this offence not only carries a penalty for the school (removal or suspension of DGR status) but also the donor can receive a fine and additional charges as a percentage of the amount claimed.   This action obviously destroys any philanthropic nature the donor (parent) may have had towards the school.

If the school insists on placing a maintenance levy, building levy or capital works levy or some other levy above the bottom line on the fee statement, then the words “building fund” should not be used.    In these circumstances the amount should be included in the school fee and a brief mention of building maintenance, etc., should be made. The amount simply becomes a component of the overall fee.   The inclusion of a suggested amount on the fee statement below the bottom line and reinforcing the fact that this is a voluntary donation, to receive tax deductibility, should be emphasised with a communication explaining precisely what the building fund is all about.

Having scanned hundreds of school websites and in particular their fees pages in the past six months there are many who would attract the attention of the ATO if what is on the website is in fact what is being charged.   Schools leave themselves open to have their building fund gift fund audited by the ATO and the cost incurred by the school in lost time and potential great embarrassment is not worth the effort of trying to manipulate the system.   Unfortunately it is an Australian trait to see how far one can stretch various definitions and meanings as far as the ATO is concerned, however, the ATO is very clear in its requirements.
Typically the following information is placed on school web site in explanation of a School Building Fund and Library Fund.

Building Fund

For the 20XX year, the suggested Building Fund contribution (100% tax deductible) is $XXX per family. Donations above this amount are also 100% tax deductible. The request for these donations will be contained in your Family Statement. Thank you in advance for your support.
This portion of the fees covers major projects such as:
• Repayments of loans on buildings and extensions
• Provision of new buildings and refurbishment of existing classrooms.

Library Fund
For the 20XX year, the suggested Library Fund contribution (100% tax deductible) is $XX per family. Donations above this amount are also 100% tax deductible. The request for these donations will be contained in your Family Statement. Thank you in advance for your support.
This portion of the fees covers major projects such as:
• Service computer loans
• Purchase resources
• Fund Resource Centre running costs

These statements are open for questioning.

Is the Building Fund contribution VOLUNTARY or is it implicate in the statement that it is obligatory.  The words ‘contained in your Family Statement’ indicate that it is part of the expected payment due even though the amount may appear below the ‘Total’ of the fee statement. The request for the payee to consider making additional payment (second sentence) seems designed to make the payee think that $XXX is enough and I’ll pay this but no more.
The most disconcerting term is “This portion of the fee covers….”  This to me, is quite clear.  The amount is ‘part of the fees’.  It cannot attract tax deductibility as it is against the ATO rules.

None of the above statement on the Fees Schedule for this school engenders a feeling of philanthropy for the school. The school needs to be working with its parents and alumni to engage them in long term fundraising not a fee statement blitz each term.

Bear in mind that a parent may well move their child to another school with a different approach to ‘Building Funds’ or come from a school that has a more accurate representation of what a Building Fund is.   This will cause them concern when they decline to pay the Building Fund contribution and receive a terse letter from the school Business Manager.  Better this than a knock on the door from the tax man!!

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