MONTGOMERY — One of the groups that solicits tax-deductible donations and then gives out scholarships under the Alabama Accountability Act gave most of its 30 scholarships last year to students already in private schools.

That’s a violation of act compliance rules that if repeated could get the group, AAA Scholarship Foundation Inc., booted from the scholarship program.

But the president of the organization said public school students didn’t apply for the scholarships and had the money not gone to private school attendees, it wouldn’t have been given out. That’s also a compliance violation.

“Our mission is to help as many students as possible,” Kim Dyson, president of the Tampa-based foundation, said Tuesday. “We figured that of the two, (giving the money to private school students) was the less harmful to the children of Alabama.”

Seventy percent of the group’s first-time scholarships went to private school students in 2014, according to the group’s annual report to the Alabama Department of Revenue. The report said that 96 percent of the scholarship funds went to low-income students.

The 2013 act says no more than 25 percent of first-time scholarships can go to students already attending private schools.

The Alabama Accountability Act was passed in 2013 and gives a tax credit of about $3,500 to families of students leaving the state’s worst public schools. The act also provides for a tax-credit-based scholarship program. The tax credits scholarship donors receive, as well as the one families receive, come from the state’s education budget, which supports public schools.

Opponents of the act have said public dollars shouldn’t go to private schools.

Dyson said her foundation has a grassroots effort to educate parents about the scholarships, but it has been difficult. The foundation operates in six states. In Florida, public schools are required to give parents information about other educational options for their children. That’s not the case in Alabama.

“We’re diligently trying to drum up non-private school attendees,” Dyson said. “Sometimes we have to choose between the lesser of two evils, and we try to err on the side of giving the money away.”

6 organizations

Six scholarship granting organizations filed 2014 reports with the Department of Revenue. According to the department’s website, as of April there were nine organizations operating in the state.

On the report, there are five compliance questions that scholarship granting organizations such as AAA must answer “yes” or “no” to, including the previous enrollment question.

According to the Alabama Department of Revenue, if groups answer a particular compliance question “no” for two consecutive years, it will be deemed to have “intentionally and substantially failed to comply with the requirements of the program.” It can then be suspended from the scholarship program.

Three other scholarship granting organizations checked “no” on their reports when asked if their non-scholarship expenditures in 2014 were less than 5 percent of the funds they received in the year.

The Alabama Opportunity Scholarship Fund LLC took in $651,390 last year and had $805,000 in non-scholarship expenses. The group was able to give out $16.9 million in scholarships — more than all other groups combined — because of a large amount of donations made to it in 2013.

The other two scholarship-granting organizations who said they had more than 5 percent in non-scholarship expenses were Chambers County Educational Foundation and Beacons of Hope. They couldn’t be reached for comment Tuesday.

Changes in act

But not being in compliance with the 5 percent requirement won’t haunt the groups next year. Lawmakers made several changes to the act this past spring. Among them: The organizations may expend up to 5 percent of their donations on operating expenses in the calendar year of the donation “or in any subsequent calendar year.”

“It is unrealistic to raise millions in funds in December and then expend those funds in two weeks,” said Lesley Searcy, executive director of Alabama Opportunity.

Combined, the six organizations had $1.4 million in expenses in 2014, according to the reports. Scholarships for Kids Inc. had the second-highest amount of non-scholarship expenses, $582,000.

Alabama Opportunity officials said Tuesday that some of the group’s expenses last year — many of them one-time start-up costs — were paid through a grant, and eventually they’d like donations to go toward scholarships and for grant money to cover other expenses.

“Frankly, 5 percent is not enough to communicate with our parents and schools — often in person and in their communities,” Searcy said. “It takes robust technology to process the thousands of applications we have received. (Alabama Opportunity Scholarship Fund) has set in place many checks and balances to ensure that we follow the guidelines within the law. This is a costly process, but a necessary accountability.”

Alabama Opportunity, whose board of directors is chaired by for former Gov. Bob Riley, had 12,000 applicants last year, Searcy said. Most of its 3,608 scholarships went to students in Mobile, according to the report. All went to students who were low-income, as defined by the act.

Combined, the six gave out about $23.5 million in scholarships, according to the reports. The lion’s share, $16.9 million, was awarded by Alabama Opportunity. The second-highest amount, $6.2 million, was awarded by Scholarships for Kids.

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Mary Sell can be reached at msell@decaturdaily.com. Follow on Twitter @DD_MarySell.

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