Take A Fresh Look at Scrip Fundraising
Increasingly, nonprofits are finding scrip to be a comparatively easy way to raise funds. How does scrip fundraising work, anyway?
Wait! Scrip is not just for churches and schools anymore. Increasingly, nonprofit cultural centers, health clinics, civil rights organizations and environmental coalitions are finding scrip to be a comparatively easy way to raise funds.
How does scrip work, anyway?
With regular scrip (which is issued as a gift card) a group — let’s say a disabilities center — 50 scrip gift cards from a grocery chain (or gas station, etc.). Each card has a face value of $100, so the total has a face value of $5,000. But the nonprofit pays only $95 per card for a total of $4,750.
The nonprofit sells the gift cards at the face value to clients, staff, volunteers, and others. In other words, a family might buy 2 scrip booklets worth $200 total and pay $200 for them. The family uses the scrip at one of the designated businesses. If the family shops there anyway, they don’t experience any difference in the expense, and the disability center nets $250 from its $4,750 investment (the typical commission for a nonprofit is 5% of the face value).
But 5% doesn’t sound like much to raise!
True. But suppose you have just 15 board members or staff or volunteers who spend $100 per week at a grocery chain such as Safeway or Costco. Each may be glad to buy $400 worth of grocery gift cards per month. Over the year you’ll make $3,950. (Compare this with how much work it is to raise $3,500 at a spaghetti feed or by asking board members for donations.)
And probably, you’ll have more than 15 members participating and often at higher levels, and in some cases, your small group of loyal supporters will also be willing to sell gift cards to their friends. Many small organizations easily raise $10,00 and $30,000 through their beneficiaries, volunteers, and members. And many of us are glad to have an easy and no-cost way to support organizations we care about.
What else is good about scrip?
Scrip can be used by supporters of all income levels, and many middle-class volunteers (for example) feel good about selling scrip to their neighbors. After all, if the neighbor already shops at Target or TJ Maxx, it’s not hard to ask them to buy scrip.
So what is e-scrip?
The advent of e-scrip has made it far easier to sell scrip to supporters who are not regularly at your site (that’s why scrip has traditionally been associated with churches, schools and sports teams who meet in person frequently). With e-scrip you can sell scrip to e-businesses and national chains to supporters around the country and the world.
With e-scrip, a nonprofit registers with a service such as Great Lakes Scrip Center or escrip.com (USA) or fundscrip.com (Canada), and the organization’s members and supporters register as well, designing the nonprofit as the one they wish to support. The service then issues store gift cards (such as Safeway’s or Best Buy’s) and uses credit card information to move 1% to 4% of the price of purchased items to the nonprofit as a donation.
What are the arguments against raising money through scrip and e-scrip?
Although many supporters of nonprofits welcome scrip as a way to donate, others are uncomfortable with the necessary sharing of private information, such as telling Wal-Mart where you donate. In other cases, someone may not like your nonprofit’s affiliation with a business of which they don’t approve. And for some organizations, tying donations in any way to consumer spending doesn’t feel right.
Any other downsides of scrip?
Regular scrip often results in a nonprofit handling a good deal more money than it ever has previously. For example, an all-volunteer group may be used to handling hundreds of dollars, but with scrip they may be handling tens of thousands of dollars in a short period of time. Doing so requires conscientious volunteers who have strong ability to manage funds carefully, promptly, and ethically.
An unintended consequence of scrip: the store treats the 5% as a donation on their own books, hugely and artificially inflating the size of their “donations” to nonprofits each year. The reality is that stores make a profit on scrip: often their profit margin is larger than the 5% (or other percentage), and people lose their gift cards or don’t get around to using them. So when you see those big donation numbers from scrip-issuing stores (like Target or Walmart), pour a few grains of salt on them (or maybe a whole salt shaker).
What are your top 5 pieces of advice about scrip?
- Experiment with scrip first with a small group of folks, and see how they experience it and how your organization feels about it.
- Second, poll your members and volunteers: “At which of the following businesses do you already shop regularly? Would you consider buying from them in a way that would benefit our organization — at no additional cost to you?”
- With e-scrip, be sure to choose a reputable, stable e-scrip broker (some have gone out of business leaving nonprofits cheated.)
- Consider telling supporters they should only buy gift cards from you for stores and services they already patronize. Don’t allow your profits from the scrip program to lead you to encouraging anyone to buy more than they would without scrip. (Bad wording: “Buy at Piggly Wiggly and support our disabilities center!” Better: “Do you already shop at Piggly Wiggly? Did you know you can support our families without it costing you a dime?”
- Have a committee of volunteers be in charge of the scrip program, and recognize them as leaders of volunteers and as star fundraisers. Regularly ask them how they suggest the scrip program be changed or improved, or whether they are tired of running it.
This article is adapted from a section in Nonprofit Sustainability: Making Strategic Decisions for Financial Viability, by Jeanne Bell, Jan Masaoka and Steve Zimmerman.
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About the Author
Jan is a former editor of Blue Avocado, former executive director of CompassPoint Nonprofit Services, and has sat in on dozens of budget discussions as a board member of several nonprofits. With Jeanne Bell and Steve Zimmerman, she co-authored Nonprofit Sustainability: Making Strategic Decisions for Financial Viability, which looks at nonprofit business models.
Jeanne Bell, MNA, is CEO of CompassPoint Nonprofit Services, and consults to nonprofits in business planning, financial systems, and sustainability. She co-authored Financial Leadership for Nonprofit Executives (Fieldstone).
Steve Zimmerman, CPA, MBA, is principal at Spectrum Nonprofit Services, a finance and strategy consulting firm based in Milwaukee. With Jeanne Bell and Jan Masaoka, he co-authored Nonprofit Sustainability: Making Strategic Decisions for Financial Viability, published by Jossey-Bass in 2011. In addition to writing the Finance & Strategy column for Blue Avocado and consulting to nonprofits across the country, Steve conducts train-the-consultant sessions how to use the book’s framework with nonprofits in strategic and/or business planning. His site includes templates and other materials based on the book.
Articles on Blue Avocado do not provide legal representation or legal advice and should not be used as a substitute for advice or legal counsel. Blue Avocado provides space for the nonprofit sector to express new ideas. The opinions and views expressed in this article are solely those of the authors. They do not purport to reflect or imply the opinions or views of Blue Avocado, its publisher, or affiliated organizations. Blue Avocado, its publisher, and affiliated organizations are not liable for website visitors’ use of the content on Blue Avocado nor for visitors’ decisions about using the Blue Avocado website.
“An unintended consequence of scrip: the store treats the 5% as a donation on their own books, hugely and artificially inflating the size of their “donations” to nonprofits each year.”
I am not entirely sure what you are referring to when you make this statement, but I do want to point out that they do not get to deduct that 5% on their taxes. The gift is not being used to fulfill the mission of the nonprofit organization as it is being used for a fundraiser (similar to how donations of raffle items work). If a donated item (5% of a gift card in this case) is used for an unrelated use, the donor does not get to deduct the fair market value of the item (the entire 5%). The contribution is limited to the tax basis in the contributed property/item (what they paid for the item). In the case of a restaurant, they would only be able to deduct the cost they paid for the food, not the cost of the chef, waiter, etc. (Side Note: In the case of Wal-Mart or Target, the donation is inventory so they can only deduct the lesser of the cost of the item to them or the fair market value regardless of the use of the donation). So, if the business’s average markup is more than 5%, they aren’t going to be able to deduct anything.
Furthermore, they actually haven’t made any tax deductible donations yet as they haven’t donated anything but a plastic card (I guess maybe they could deduct the cost of a plastic card). They don’t actually donate something until people use that last 5% on the card. The gift card is basically like a pledge or future interest in property. You don’t get to take the deduction until cash or property (valued at 5% in this example) has changed hands. They don’t get to claim a tax deduction until that last 5% is being used which may be in subsequent years. My main point here is that they aren’t going to get credit for a tax deduction for all of the people that did not end up using the cards.
My guess is very few businesses can take a tax deduction with their scrip program (if any), but the ones that can are not going to be able to take the full 5%.
Now, maybe you are not talking about tax deductions and are instead talking about advertising on a website or other claims made by the business in which case I am way off topic.
Byron Snapp
My kids belonged to a choir that uses a gift card scrip campaign to raise activity funds.It's raised quiet a bit of money . Unfortunately, it's made me aware of another major negative "side effect"–all those extra plastic cards ending up being disposed of in the environment. Using a plastic card weekly or monthly instead of cash is o.k. if the card can be reloaded and used again later. However, when I bought and used one, and then asked the store if it could be reloaded, they said no.They would simply throw the cards away after I used it. A lot of the choir parents use these on a monthly basis–the cards are for our major local grocery store chain where many people do their regular shopping. As a result, it's adding up many extra pieces of plastic in our landfills.I suggested that the parents each call or email the store management and lobby for cards we could reload, but there was no interest. "We're just doing it for our kids," was the common reply. Claire Rusowicz
My kids belonged to a choir that uses a gift card scrip campaign to raise activity funds.It's raised quiet a bit of money . Unfortunately, it's made me aware of another major negative "side effect"–all those extra plastic cards ending up being disposed of in the environment. Using a plastic card weekly or monthly instead of cash is o.k. if the card can be reloaded and used again later. However, when I bought and used one, and then asked the store if it could be reloaded, they said no.They would simply throw the cards away after I used it. A lot of the choir parents use these on a monthly basis–the cards are for our major local grocery store chain where many people do their regular shopping. As a result, it's adding up many extra pieces of plastic in our landfills.I suggested that the parents each call or email the store management and lobby for cards we could reload, but there was no interest. "We're just doing it for our kids," was the common reply. Claire Rusowicz
Like any other fundraising strategy, there’s no “magic bullet”. It looks like this kind of program works really well for some, but reading through some of the restrictions from retailers on eScrip.com, it might not be very useful for smaller groups.
Another downside that wasn’t mentioned was the link between buying local and the support nonprofits and groups get from local retailers. Scrip is great if you want to buy from the “big box” stores, but when it comes to building relationships, those same stores don’t do it as well as the small businesses. We get far more sponsorships and in-kind donations from local people than we do from chain stores. Is the face value of those gifts more than we would get from a scrip program? I don’t know, but I do know it’s hard to put a price on the relationships and goodwill we get when we keep our money local.
A scrip company called Community Connection offers a card that you can sign up all of your locally owned stores onto so that they can participate in you scrip program.
Like any other fundraising strategy, there’s no “magic bullet”. It looks like this kind of program works really well for some, but reading through some of the restrictions from retailers on eScrip.com, it might not be very useful for smaller groups.
Another downside that wasn’t mentioned was the link between buying local and the support nonprofits and groups get from local retailers. Scrip is great if you want to buy from the “big box” stores, but when it comes to building relationships, those same stores don’t do it as well as the small businesses. We get far more sponsorships and in-kind donations from local people than we do from chain stores. Is the face value of those gifts more than we would get from a scrip program? I don’t know, but I do know it’s hard to put a price on the relationships and goodwill we get when we keep our money local.
A scrip company called Community Connection offers a card that you can sign up all of your locally owned stores onto so that they can participate in you scrip program.
There are other scrip providers as well such as United Scrip and Community Connection. I know both of these companies offer some diverse merchants and Community Connection even offers a gift card with 65 different merchants on one card. Do your research and utilize multiple brokers to maximize your efforts and as a result your bottom line, you know the old addage don’t keep all your eggs in one basket.
There are other scrip providers as well such as United Scrip and Community Connection. I know both of these companies offer some diverse merchants and Community Connection even offers a gift card with 65 different merchants on one card. Do your research and utilize multiple brokers to maximize your efforts and as a result your bottom line, you know the old addage don’t keep all your eggs in one basket.
Scrip is alright but I agree with the card not being reusable is not good. I hope they can do something to make scrip both an effective fund raising tool as well as an environment caring tool as well.
Scrip is alright but I agree with the card not being reusable is not good. I hope they can do something to make scrip both an effective fund raising tool as well as an environment caring tool as well.
The other downside of Scrip: I used to buy these from my kids’ schools. Then, I bought a Safeway gift card that had been corrupted. The customer service was awful and I still don’t have a replacement or my $100 back.