Where Most Needed

Somebody in Congress wanted to know whether charities that receive support through the Combined Federal Campaign are paying their taxes (payroll taxes and the like).  The Washington Post reported on hearings held May 25 by the Subcommittee on Oversight of the House Ways and Means Committee to hear the General Accounting Office report on their forensic investigation.  But rather than the Post report, anyone with an interest in the subject should take a look at the testimony of Gregory Kutz of the GAO that provides all the details. 

The GAO found a total delinquency of about $36 million, 80% of which is unpaid payroll taxes.  It turns out that 1,280 charities, about 7% of the total, owned more than $100, which sounds rather serious (it is what the Post picked up on).  But of those, 80% owed less than $10,000 and only 7%, about 90 groups, owed more than $50,000.  Yet by my calculation, those 90 organizations would be responsible for about 85% of the total owed. 

And the GAO singled out 15 groups for more study, based on various criteria, and found about $7 million outstanding—so a mere 15 groups accounted for 20% of the total.  After investigation, they described these groups as "abusers," meaning that, in GAO's judgment, they were deliberately taking advantage of the lax enforcement environment (in many cases, the directors of the organizations had salaries of over $100,000).  The serious abusers thus represent less than one-hundredth of one percent-or about 7 charities out of 10,000. 

To the question of whether the CFC was screening charity applicants to determine whether they were in arrears, the GAO diplomatically pointed out that legally the Office of Personnel Manament, who runs the CFC, does not have access to IRS taxpayer records.  However, CFC could at least cross check as to whether applicants have 501(c)(3) status, which they do not do currently.  As a test, the GAO submitted applicatons to the CFC using phony organization names and IRS tax ID numbers, which were accepted into the program. 

But then again, if the incidence of serious abuse is so low, are these additional screenings by the OPM/CFC worth the time and effort?  Instead, it seems to me that the IRS should be running these tests and cracking down on the handful of high-dollar abusers. It really is a case of a few bad apples, and they aren't hard to find.