Laurel to The Arizona Republic for “Perfectly Legal,” a series of six articles, published in May, that exposed a network of charities that were inflating their balance sheets—and their image as efficient do-gooders—by claiming tax breaks on donated goods that they never actually handled.

The yearlong investigation analyzed the tax returns of this network, including the paper trail for a crate containing 8,884 pounds of medicine and medical supplies from a charity in Canada to the balance sheets of charities in St. Louis and Glendale, California—even as the crate remained in a warehouse operated by yet another charity outside this network. At each “stop” along the crate’s virtual journey, a charity in the network claimed the full value of the supplies on its tax return. (Eventually, the medicine ended up at missions in Guatemala and the Philippines, but what isn’t clear is whether any of the charities in the network ultimately paid the shipping costs to get it there.)

According to experts quoted by the Republic, small-scale “daisy chains” like this are common and legal. For example, one charity may receive a large donation, but without a warehouse to store it or sufficient funds to cover shipping costs, it passes on the donated goods to another charity with the necessary resources. Both charities are allowed to write off the full value of the donated goods. But it should raise flags with auditors when “daisy-chain” strategies move beyond a simple matter of one charity helping another out, and become effectively the business model, as was the case of the network of charities the Republic wrote about.

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