June 15, 2006 | Read Time: 3 minutes
By Suzanne Perry and Grant Williams
Government officials who oversee the Combined Federal Campaign have vowed to improve the screening of organizations that raise funds through the annual charity drive for federal workers after the release of a scorching outside review of the campaign’s current practices.
The review by the Government Accountability Office — the investigative arm of Congress — concluded that almost 1,300 charities that raise funds through the Combined Federal Campaign owe a total of at least $36-million in back payroll and other federal taxes. The review also found that the federal campaign’s screening process was so lax that a fake charity was able to join three different local fund-raising drives.
“We learned that the Office of Personnel Management does not conduct even the most basic background checks about entities applying to participate in the [Combined Federal Campaign],” Rep. Jim Ramstad, chairman of the House Ways and Means oversight subcommittee, which ordered the review, said at a hearing to discuss the findings of the Government Accountability Office.
More than 22,000 charities participated in the Combined Federal Campaign in 2005, collecting $268.5-million from federal workers across the country. Almost 80 percent of the delinquent payments uncovered by the investigation involved payroll taxes — money that charities must withhold from employees’ wages for federal income taxes, Social Security, and Medicare, as well as matching contributions they owe Social Security and Medicare.
The Government Accountability Office, which did not identify any organizations by name, found that the majority of delinquent charities owed less than $10,000 apiece.
The report said investigators had referred 15 groups — including a museum, a hospital, and a homeless shelter — to the Internal Revenue Service for further action, saying they had “engaged in abusive and potentially criminal activity related to the federal tax system.”
In its review, the Government Accountability Office accused the Office of Personnel Management, which oversees the Combined Federal Campaign, of not screening participating charities for federal tax problems or validating with the Internal Revenue Service “whether an organization is truly a tax-exempt entity.”
The report noted that federal law prevents the personnel office from gaining access to information about charities that would be necessary to check them for tax delinquency. “Even if OPM had specific policies to check for unpaid taxes, it has no access to a specific charity’s tax data,” the report said.
But Steven T. Miller, who oversees tax-exempt organizations for the IRS, told the hearing that it is easy to check whether an organization is eligible for charitable donations by consulting the IRS’s Web site.
James S. Green, associate general counsel for the Office of Personnel Management, pledged that the Combined Federal Campaign would check all applicants against IRS records for the nearly 300 fund-raising drives for government workers that will be held worldwide next fall.
“We are confident that all charities will be checked before the 2006 campaign season,” he told the subcommittee members.
Asked several times by Mr. Ramstad, Republican of Minnesota, whether the IRS could revoke a charity’s tax-exempt status if it failed to pay employment taxes, Mr. Miller said it could probably not do that unless the delinquency prevented the organization from carrying out its charitable mission.
“Perhaps we need to look at the law and change the law,” Mr. Ramstad said.
