If it walks like a quid pro quo . . .

by

by David Safier
Some School Tuition Organizations allow tuition tax credit donors to recommend the student who they want to receive their donations. Others don't.

As I was writing a post earlier today about the reforms to the tuition tax credit legislation suggested by the Goldwater Institute in 2003, including getting rid of donor recommedations, something rang a bell.

I remembered this passage in the report.

Flagstaff Christian Scholarship Fund president Lawrence C. Mohrweis notes that “nonprofit organizations that accept contributions with the understanding that donor-directed recommendations will be followed are providing quid pro quo functions. The process of collecting contributions and the process of allocating scholarships should be independent of one another.” It is already illegal for charities to serve as quid pro quo facilitators through which donors direct money to friends or receive compensation in return.

Donors are forbidden from directing money to friends or receiving compensation in return. And yet, it's my understanding that happens all the time.

Then I remembered a commment I received awhile back from ChamBria J Henderson, Executive Director of the Arizona Scholarship Fund, in response to my post saying that the Smith family could recommend its donation goes to the Jones child, while the Jones family recommends its donation goes to the Smith child, a clear quid pro quo arrangement. ChamBria wrote:

Smith contributing on behalf of Jones and Jones contributing on behalf of Smith is reciprocity and federal tax fraud. When the money flows in a circular pattern, whether 2 or 200 families participate it's fraud. Most STOs disallow it.

I'll take the word of these two sources that a reciprocal, quid pro quo arrangement is illegal under federal statutes.

If anyone is naive enough to believe reciprocal arrangements don't happen regularly at some STOs, I have a couple of houses I want to sell that person in an unfinished development, at last year's prices.

I doubt if parents who use a quid pro quo for their donations are aware they're breaking the law. But the STOs should know it. If they're knowingly allowing parents to make reciprocal donations — and it would be very easy to find out by cross checking the recommendations — they are knowingly breaking the law.

I already said I would like to see an in depth financial audit to find out if Yarbrough's STO and others are keeping more money in expenses than is justified. Now I wonder if STOs that accept recommendations should have their records checked to see if they're allowing parents to give reciprocal donations.

Discover more from Blog for Arizona

Subscribe to get the latest posts sent to your email.