Both individuals and businesses can donate to the program. Donors can deduct the exact amount they donate from their state taxes. That's a much larger tax break than if you simply claimed the donation as a deduction from your income, as is the case with most charitable donations.

The government audit found that bad checks and other problems spanned several years and added up to accounting errors from more than $300,000. It's unclear how much of that was lost revenue for the state. Auditors pointed out that this is only a small fraction of the $75 million annual hospital tax credit program and a tiny fraction of the state's total tax revenues, which reach billions each year.

The audit examined the records of three entities that administer the tax credit program: the state tax office, the hospitals that qualified to participate, and an intermediary called Georgia HEART. Georgia HEART (Helping Embrace Access to Rural Treatment) is a nonprofit corporation and contractor that all hospitals have hired to administer the program for them.

Donors can donate to the hospitals without Georgia HEART if they wish. When they donate through Georgia HEART, the system verifies they are eligible, accepts the checks, files the paperwork with the state tax office, and sends donors a tax receipt they need to use on their taxes and claim their tax credit. 3% is withheld from donations.

But in some cases, Georgia HEART found that some people's checks bounced and no donation was received.

State auditors found that Georgia HEART's records did not match the reports it sent to the state and recommended that the nonprofit report checks to tax authorities when they bounce. Georgia HEART agreed and said it would revise its practices to address this.

Another problem the auditor highlighted was that Georgia HEART knowingly submitted false reports to the state about $1 donations that never occurred. Georgia HEART did this whenever a donor pre-registered to donate but then changed their mind and did not donate. By pre-registering, donors block a certain amount of the donation cap for themselves. With existing technology, changing the donation amount to $1 was the only way to quickly remove that missing donor from the waiting list, Georgia HEART said. This allowed them to immediately give that spot on the donation list to someone else who actually wanted to donate.

Treasury Department officials told the AJC that a technical solution to this problem would be available soon.

Auditors first asked Georgia HEART in June to stop filing the false reports. But in its recorded response to the audit, Georgia HEART did not agree to stop, saying the $1 donations were a way around the problematic computer program. The morning after the AJC asked Georgia HEART if it was concerned about legal consequences for knowingly filing false tax records with the state, Georgia HEART's CEO Ben Saylor told the AJC that it had told the state it would stop doing so.

Saylor added in his email to the AJC that this workaround has so far allowed other donors to give more than $10 million over time – gifts that would have otherwise been blocked by the donors who never gave. He said they waited three years for the state to fix the technology problem.

The auditors pointed out that false donation reports were originally discovered through Georgia HEART's internal audits.