GAO report looks at prevalence of ‘insiders’ in nonprofit conversions

by Jeremy

Dive Brief:

Dive Insight:

Nearly all nonprofit conversions the GAO tracked involved the sale of a for-profit college to a tax-exempt organization. However, IRS approval isn’t enough for the colleges to be considered nonprofits to access federal financial aid. The U.S. Department of Education must also decide.

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The GAO notes that the department approved 35 of the 59 transactions and denied two during the period studied. Another nine were being reviewed, and 13 of the schools closed before a decision was made.

The IRS and the department each look at which individuals are involved in a transaction and how they might benefit from its completion, among other factors. The GAO noted it didn’t analyze whether any college’s conversion helped insiders but focused on oversight.

Its report stems from a request by several Democratic lawmakers in 2018 to look into these dealings, which have faced criticism in part for the ties the schools sometimes keep with their former owners.

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