Many faith-based and private schools, as well as churches, parishes and community organizations, are taking advantage of “scrip” programs.  In schools, scrip helps parents afford the cost of educating their children.  This is, by definition, a tuition assistance program, since it helps parents to pay for the tuition they’ve been charged by the school after financial aid and/or scholarships have been awarded.  Parent booster organizations for other non-profits and programs in public schools have seen the success of these programs, and are also jumping on the bandwagon.  After all, it’s simply a matter of changing a habit.  Rather than purchasing goods or services directly from a company or store, you buy a “scrip” card, then use it in place of cash.  A portion of the purchase made from the card is then returned to the school, and many times, tracked in a parent’s “account.”  At certain times of the year, any amount amassed is then transferred to be used as a credit toward the student’s tuition at the school.

Nothing could be easier, right?

The truth is, easy is not necessarily in compliance with law.

Some schools call these programs by catchy names, with the most disturbing using the word “dollars” in them.  Even though this is “money for your school,” these are “credits,” not “dollars.”  If your school is using verbiage such as, “Parents, you can earn St. Polycarp Dollars to help you afford your tuition,”  you should be prepared to send that parent an IRS 1099 at the end of the year if they “earn” more than $600.  After all, they are “earning dollars.”

Before you say, ‘Oh, they don’t mean that.  We’re a faith-based school, and we’re tax-exempt.”  Your school is tax-exempt, but your school still has to follow IRS rules and regulations as a non-profit 501(c)3.  Your school is still subject to penalties and interest if it’s found to be in violation of IRS rules and regulations.  Just like every other business today, the federal government is in need of additional income, so they’re scrutinizing the actions of every faith-based and non-profit organization to make sure they’re toeing the line.

Therefore, you may want to change your terminology, and think about “credits,” not “dollars.”  Also, don’t make the credit a one-to-one ratio, since even a one-to-one credit can create an “earnings” issue.  The “credit” system should be based on a metric not related to dollars.  For instance, a local non-profit I’m familiar with sold hoagies (or subs or grinders), and, for each hoagie sold, the organization earned $3.50 – 50% went to the organization’s funds, while parents could have their financial responsibility to the organization reduced by the other 50%.  That’s still a direct correlation.  Rather than account for $1.75 for each hoagie sold as a direct benefit to the parent, the organization should consider keeping all the funds, but each hoagie sold could become worth 1 “point.”  Each child – not the parent – could amass 300 points, and could gather points by asking individuals to take part in other opportunities which were similarly weighted.  It’s at least a step toward moving away from student fundraising and focusing energy on sustainable development activities, such as an annual appeal, major gift solicitation, planned giving and grantwriting.

Or, you may want to consider a completely different approach to scrip.  Rather than it being an individual “tuition assistance” program, make it a Development program, where all the funds raised benefit the school, and can then be used as a source for need-based financial aid.  This may eliminate potential scrutiny since the dollars associated with the scrip sale does not directly “inure” (there’s a Scrabble word for you) to the person that “earned” them.  While your Generation X families (families of students in the upper grades of high school) will probably complain about this change (since they now have no direct benefit for their family), your Millennial families (with children in grades PK through 10 now) may think it’s great because it’s a way to make everyone work together to benefit the members of your school community.

There are then two ways to offer this benefit:

1) Scrip credits go directly to the school to build the fund which supplies need-based financial aid; or

2) Scrip credits go directly to the school to help keep tuition at a reasonable and marketable level, while need-based funds come from other sources, such as the school’s annual appeal, major gifts or other Development constructs.

For faith-based schools that still receive a “subsidy” or “investment” from their supporting parishes or churches, this can allow you to use parish or church support as need-based aid, and replace any type of across the board tuition reduction with income generated from the scrip program.  Moving to one of these two options gets EVERYONE involved in making it a success.

And when it comes to faith-based schools, building community is an essential step to growing your school.