The CFC is the annual workplace giving campaign of the federal government and is administered by the OMP. The CFC raised $250 million in 2005. Most of debt represented penalties, payroll taxes and interest dating back to 1988 and also included amounts from annual reporting penalties, excise tax, exempt organization business income taxes, unemployment taxes and other taxes and penalties. Most (79 percent) of the 1280 charities owe less than $10,000. A minimum of 170 charities owing money received about $1.6 billion in 2005 federal grants. Fifteen charities that were selected for deeper study were "engaged in abusive and potentially criminal activity related to the federal tax system." By not complying with the trustee obligation to forward the money to the Internal Revenue Service (IRS), the money was diverted by the senior officers and directors to charity related expenses, like paying their own salaries, some in excess $100,000. Charities, although exempt from federal income tax, as employers are required to remit payroll taxes to the IRS that they withheld from employee wages. Willful failure to comply is a felony under U.S. law. The 15 were referred to the IRS for collection or criminal investigation. Some of the abuses by CFC Charities include: 1. Type of charity: Museum Tax debt: Over $100,000 Charity activity: Repeated underpaid payroll taxes. Federal and local liens were filed against the charity. IRS assessed a penalty against personal assets of the director who admitted underpaying payroll taxes to fund operations. 2. Type of Charity: Health Service Provider Tax debt; Over $400,000 Charity activity: Repeated late payroll tax remittance while accruing interest and penalties. Executives paid through a contractor that had received $3 million from the charity. The charity received more than $2 million in federal grants from Department of Health and Human Services (HHS). 3. Type of Charity: Mental Health Clinic Tax debt: Over $1.5 million Charity activity: Failure to remit or remit timely payroll taxes for the last 15 years. Director diverted payroll tax money to pay his and employee salaries. Source: GAO's analysis of IRS public and other records. The OPM does not screen CFC charities for federal tax problems or even independently validate if the charity is tax-exempt with the IRS. Also, federal law prohibits the OPM access of taxpayer information to screen for tax delinquency. Even with the requirements and forms for charity eligibility, the GAO found it possible to create a fictitious charity that applied successfully to three large, local CFC campaigns, showing the vulnerable aspects of the system. Further GAO recommendations and information on the report are available on the website http://www.gao.gov. AccountingWEB.com Jan-9-2007 Categories: Accounting (General), In-Depth News Times read: 1628
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