Compliance-First Administration
Compliance Operations for Section 25F Programs
Section 25F imposes specific, ongoing obligations on qualifying SGOs — from fund segregation to minimum-spend thresholds to required documentation. PSC builds those requirements directly into its administrative workflows so participating SGOs can operate consistently and produce clear records when a state, auditor, or the IRS asks for them.
Section 25F Requirements
What a Qualifying SGO Must Satisfy
These statutory requirements form the backbone of PSC's compliance workflows. Meeting them is the legal responsibility of the SGO; PSC's role is to make consistent adherence operationally achievable.
- Be described in Section 501(c)(3)
- Be exempt from federal income tax
- Not be a private foundation
- Appear on a participating state's SGO list
- Maintain separate accounts for qualified contributions
- Prevent commingling with other funds
- Spend at least 90% of its income on scholarships for eligible students
- Provide scholarships to at least 10 students who do not all attend the same school
- Use scholarship funds only for qualified K–12 education expenses
- Verify household income and family size
- Give required priority to renewal applicants and qualifying siblings
- Avoid earmarking contributions for a particular student
- Avoid awards to disqualified persons
- Maintain required records and reporting
Workflow Controls
How PSC Operationalizes Compliance
Section 25F Workflow Controls
Application, award, and disbursement workflows are structured to require the information and approvals Section 25F contemplates before a step can be completed.
Separate-Fund Tracking
Contributed funds are tracked in segregated ledgers from the moment of contribution through disbursement, with reconciliation reporting that shows no commingling occurred.
Eligibility Verification
Structured verification steps confirm household income, family size, and student eligibility against the SGO's published standards before an award is finalized.
Documentation Retention
Contribution acknowledgments, application records, verification documents, and award decisions are retained on a defined schedule consistent with recordkeeping expectations.
Annual Certification Support
PSC compiles the underlying data an SGO's board and officers need to complete required annual certifications regarding fund use and program compliance.
Audit-Ready Reporting
Every contribution, award, and disbursement is traceable to supporting documentation, so an SGO can respond promptly to a state, donor, or regulator inquiry.
Controls Across the Lifecycle
Where Compliance Checks Are Built Into Everyday Operations
- Contribution intake confirms the SGO's current state-list status before accepting funds
- No contribution can be flagged or routed as earmarked for a specific student
- Award decisions require documented income and household verification on file
- Renewal and sibling-priority rules are enforced by the application workflow
- Minimum-spend and minimum-student thresholds are monitored against live financial data
- Disqualified-person checks run before an award is finalized
- All compliance exceptions are logged and routed for SGO staff review
- Reporting exports are generated in formats suited to state and auditor review
Important