May 2, 2002 | Read Time: 2 minutes
A draft report by the investigative arm of Congress concludes that the Internal Revenue Service lacks adequate data on the finances of nonprofit groups and has failed to develop effective strategies for overseeing charities.
The report, prepared by the General Accounting Office at the request of Sen. Charles E. Grassley, an Iowa Republican, also says that state officials believe that the IRS withholds too much information from state charity regulators. It adds that the Form 990 informational tax return filed by nonprofit organizations does not provide all the information the IRS needs to properly oversee charities.
The summary findings of the draft report were published in the electronic newsletter of the Direct Marketing Association Nonprofit Federation. In a note to federation-newsletter subscribers, Lee M. Cassidy, the group’s director, says he expects Mr. Grassley to propose legislation making “significant changes” in the way the IRS regulates charities.
Mr. Grassley, the senior Republican on the Senate Finance Committee, requested the GAO study last summer, saying he was particularly concerned about the many charities that are used, in the senator’s words, “as vehicles to defraud taxpayers who believe they are contributing to a worthwhile cause” (The Chronicle, July 26). He asked the GAO to determine how much of the money charities raise is spent on charitable programs, how well the IRS ensures that charities comply with federal tax laws, and whether the IRS is doing a good job of cooperating with state regulators.
The draft report concludes that several problems exist with the data the IRS collects from the Forms 990 filed by nonprofit groups. “Form 990 data alone are not adequate for oversight, and caution is warranted in using the data,” the GAO states in the draft report.
The draft report adds that federal law gives nonprofit organizations “considerable discretion” in the way they report expenses, and as a result it is very difficult to compare data provided by charities.
The final version of the GAO report is expected to be released this week. Updates on the report’s findings will be available on The Chronicle’s home page.
