The GAO released a report finding that the IRS does not have the resources to effectively oversee charitable organizations. The GAO recommends that the IRS develop compliance goals and additional performance measures that can be used to assess the impact of enforcement activities on compliance, and clearly communicate with state charity regulators regarding how they can use IRS information related to examinations of charitable organizations. In addition, the GAO recommends that Congress expand the mandate for organizations to electronically file their Form 990s.
The report provides details regarding the selection of organizations for examinations. In 2013, approximately 4,500 charitable organization examinations were initiated, based on the following sources:
- 41% as part of the IRS National Research Program project on employment taxes
- 22% based on computerized data analysis of the Form 990
- 9.9% from document matching, which involves review of records that do not match information returns
- 8% from referrals received from outside of the IRS
- 5.7% from referrals received from inside the IRS
- 4% from IRS review of an organization’s operations (ROO) through internal information, websites, and public documents
- 3.2% related to refund claims or requests for abatement that required additional review
- 2.9% from compliance check letters and questionnaires
- 0.4% from news items
The report also found that the examination rate for charitable organizations decreased from 0.81% to 0.71% between 2011 and 2013.