- Associated Press - Monday, April 4, 2016

COLUMBIA, S.C. (AP) - A nonprofit that distributes scholarships to children with disabilities violated state law and faced being booted from South Carolina’s private school tuition program, according to a Department of Revenue audit.

The audit accused Palmetto Kids First Scholarship Program of having a quid pro quo arrangement with donors, The State newspaper reported (https://bit.ly/1UE2mTu). It found that every parent who donated to the group and requested a scholarship in 2014 received tuition help - about 60 in all.

It also found some donors broke tax rules by getting scholarships and claiming a dollar-for-dollar tax credit, potentially reducing their tax bill as much as $10,000.

Olga Lisinska, the nonprofit’s leader, told the newspaper no law was broken but Palmetto Kids First is making recommended changes. She said she’s putting legal disagreements aside to concentrate on convincing legislators to double available tax credits to $25 million.

“We do want to put all these issues … behind us so we all can focus on the kids,” she said.

A Senate panel will consider further revising the private school choice law. Legislators did not intend for people to profit from it, said Sen. Wes Hayes, R-Rock Hill.

The Legislature approved the limited program in 2014 after a decade of opposition to the idea of using tax credits to help parents pay private tuition. Changes made last year gave parents a way to benefit without the nonprofits, allowing those who pay tuition upfront to receive a refund of up to $10,000 through tax credits.

Of the four nonprofits certified to receive donations and grant scholarships in South Carolina, only Palmetto Kids First - the largest - awarded scholarships to donors, the audit found.

State law doesn’t allow donations to benefit a specific child or school. The audit offered no direct proof that parents were promised scholarships in exchange for donations. But it pointed to the nonprofit’s aggressive marketing to parents and private schools, which touted the tax benefits of donating.

Palmetto Kids First has agreed to stop awarding scholarships to donors’ children and not accept donations from parents of scholarship recipients.

The Revenue Department hasn’t decided whether to take action against donors who didn’t follow state tax regulations. The goal was to bring the nonprofit and taxpayers into compliance, said spokeswoman Ashley Thomas.

“The department conducted this review to protect the integrity of the program and to ensure its benefit to exceptional needs students as intended,” Director Rick Reames said.

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