Social Security Advocacy: Organizations That Mail Fund-Raising Letters
(Letter Report, 06/18/97, GAO/HEHS-97-69).
Pursuant to a congressional request, GAO identified organizations that
use Social Security issues as part of their mail fund-raising appeals,
focusing on: (1) the bases for the groups' tax exemption; (2) the
services the groups provide; (3) their sources of income, income subject
to taxes, and expenses; (4) their financial relationships with other
businesses; and (5) characteristics of their Social Security-related
fund-raising letters.
GAO noted that: (1) the seven organizations GAO identified that have
mailed the public fund-raising letters alleging threats to Social
Security programs are nonprofit organizations exempt from paying federal
income taxes on income they receive from the public that relates to the
public service they provide; (2) the organizations report providing a
variety of public services, especially education and advocacy on
publicly debated issues; (3) for example, they report educating,
lobbying, and testifying as advocates for the public on issues such as:
(a) the status of Social Security's trust funds, tax increases, and
earnings limits; (b) health care; (c) Medicare; (d) foreign policy; and
(e) the federal budget; (4) the organizations depend on fund-raising
letters to generate most of the income supporting their activities; (5)
for tax year 1993, the most recent year for which comparable data exist,
the seven organizations received over 90 percent of their income from
public contributions; (6) their annual contributions from the public
ranged from about $352,000 to $37 million; (7) they reported to the
Internal Revenue Service that 61 to 79 percent of their total spending
supported public service activities and 14 to 37 percent supported
fund-raising; (8) each of the organizations uses a contractor to produce
and distribute its educational materials and to conduct its fund-raising
activities; (9) GAO was told that hiring professional fund-raising
contractors is commonplace in organizations that solicit contributions
to support their activities; (10) according to officials involved in
regulating tax-exempt organizations that solicit contributions, the
organizations are not prohibited from using fund-raising contractors to
manage their educational and fund-raising activities; and (11)
organization officials acknowledged that their fund-raising letters
discuss issues in strong terms but said their letters are intended not
to scare but to educate the public and motivate individuals to action on
certain issues.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: HEHS-97-69
TITLE: Social Security Advocacy: Organizations That Mail
Fund-Raising Letters
DATE: 06/18/97
SUBJECT: Lobbying activities
Written communication
Elderly persons
Non-profit organizations
Social security benefits
Tax exempt status
Gifts or gratuities
Interest groups
IDENTIFIER: Social Security Program
Social Security Trust Fund
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Cover
================================================================ COVER
Report to the Chairman, Subcommittee on Social Security, Committee on
Ways and Means, House of Representatives
June 1997
SOCIAL SECURITY ADVOCACY -
ORGANIZATIONS THAT MAIL
FUND-RAISING LETTERS
GAO/HEHS-97-69
Fund-Raising Letters
(105155)
Abbreviations
=============================================================== ABBREV
ACU - American Conservative Union
CCAGW - Council for Citizens Against Government Waste
IRS - Internal Revenue Service
SSA - Social Security Administration
TREA - The Retired Enlisted Association
USA - United Seniors Association, Inc.
Letter
=============================================================== LETTER
B-276151
June 18, 1997
The Honorable Jim Bunning
Chairman, Subcommittee on Social
Security
Committee on Ways and Means
House of Representatives
Dear Mr. Chairman:
The Congress and the media have been concerned that some
organizations conduct fund-raising efforts that may raise elderly
people's fears about Social Security. Some organizations, for
example, have sent letters to elderly people stating that the Social
Security program has "dire financial troubles" or that its trust
funds are being "mishandled" and requesting financial contributions
to combat these alleged threats to the program. The media have
reported that the letters have aroused elderly people's fears because
they distort problems facing Social Security and exaggerate threats
to Social Security beneficiaries. The media have criticized some
letters for using scare tactics to solicit millions of dollars in
donations from the elderly.
Because some organizations mailing these letters are exempt from
federal income taxes, some individuals may perceive their activities
as being conducted at taxpayer expense. In addition, the general
public could view these organizations' tax-exempt status as
validation for the worthiness of their fund-raising appeals. This is
because an organization's tax-exempt status is based on the Internal
Revenue Service's (IRS) recognition of it as a nonprofit organization
promoting the general welfare.
Because of your concerns, you asked us to identify organizations that
use Social Security issues as part of their mail fund-raising
appeals. Specifically, you wanted to know (1) the bases for the
groups' tax exemption; (2) the services the groups provide; (3) their
sources of income, income subject to taxes, and expenses; (4) their
financial relationships with other businesses; and (5)
characteristics of their Social Security-related fund-raising
letters. As agreed with your office, this report discusses the
results of our review of seven organizations that we identified as
using Social Security issues in fund-raising letters. The
organizations we identified are the
-- American Conservative Union,
-- Council for Citizens Against Government Waste,
-- National Committee to Preserve Social Security and Medicare,
-- TREA Senior Citizens League,
-- The Seniors Coalition,
-- 60/Plus Association, and
-- United Seniors Association, Inc. (USA).
Other organizations are also involved in Social Security-related
advocacy; however, they do not rely on mail fund-raisers to the
public for support. For example, the Council of Better Business
Bureaus, Inc., reported one such organization as relying on sales of
services and products to members, commercial activities, or
government grants to support its advocacy.
To develop our information, we reviewed the Social Security
Administration's (SSA) correspondence files to identify organizations
that combine Social Security advocacy with fund-raising letters to
the public. SSA develops these files by encouraging individuals who
question Social Security-related mailings received from businesses to
send the agency the organizations' solicitation packages. We also
obtained information that the organizations provided either for
public record to state regulatory agencies and a consumer interest
group or in response to our inquiries. We mailed letters in August
1995 and conducted interviews in November 1996 and March 1997,
requesting officials of the organizations to provide information on
their organizations' activities and their views on issues addressed
in this report. We conducted our review between March 1995 and March
1997 following generally accepted government auditing standards.
(See app. I for more details on our objectives, scope, and
methodology.) Appendixes II through VIII detail information on each
organization, including each's three most recent information returns
based on IRS Forms 990 (if available) and an example of one of its
Social Security-related fund-raising letters.\1
--------------------
\1 IRS Form 990 is a tax-exempt organization's public annual report
on its income and expenses.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
The seven organizations we identified that have mailed the public
fund-raising letters alleging threats to Social Security programs are
nonprofit organizations exempt from paying federal income taxes on
income they receive from the public that relates to the public
service they provide. The organizations report providing a variety
of public services, especially education and advocacy on publicly
debated issues. For example, they report educating, lobbying, and
testifying as advocates for the public on issues such as (1) the
status of Social Security's trust funds, tax increases, and earnings
limits; (2) health care; (3) Medicare; (4) foreign policy; and (5)
the federal budget.
The organizations depend on fund-raising letters to generate most of
the income supporting their activities. For tax year 1993, the most
recent year for which comparable data exist, the seven organizations
received over 90 percent of their income from public contributions.
Their annual contributions from the public ranged from about $352,000
to $37 million. They reported to the IRS that 61 to 79 percent of
their total spending supported public service activities and 14 to 37
percent supported fund-
raising.
Each of the organizations uses a contractor to produce and distribute
its educational materials and to conduct its fund-raising activities.
We were told that hiring professional fund-raising contractors is
commonplace in organizations that solicit contributions to support
their activities. According to officials involved in regulating
tax-exempt organizations that solicit contributions, the
organizations are not prohibited from using fund-raising contractors
to manage their educational and fund-raising activities.
Organization officials acknowledged that their fund-raising letters
discuss issues in strong terms but said their letters are intended
not to scare but to educate the public and motivate individuals to
action on certain issues.
BACKGROUND
------------------------------------------------------------ Letter :2
Some organizations advocate for Social Security issues as part of
their fund-raising appeals. Included among the activities of such
organizations are producing and distributing informational materials
to the public and soliciting contributions from supporters. Some of
these informational materials have included statements about (1)
"thefts" by the federal government from the Social Security trust
funds, (2) threats to cost-of-
living adjustments for Social Security benefits, and (3) proposed
Social Security tax increases. These fund-raising letters have
sometimes included surveys and petitions to raise support for these
organizations' positions.
Organizations may be exempt from paying federal income taxes for
varying reasons. The Internal Revenue Code has 25 categories of
organizations--each with its own rules--that qualify for such
exemption.\2 To qualify, organizations must be nonprofit and
organized for one of the purposes specifically mentioned in the
Internal Revenue Code.
--------------------
\2 They may also be exempt from many state and local taxes.
BASES FOR ORGANIZATIONS'
TAX-EXEMPT STATUS
------------------------------------------------------------ Letter :3
IRS exempted six of the organizations we identified under Internal
Revenue Code section 501(c)(4) as social welfare organizations, and
it exempted the other as a qualifying veterans' organization under
section 501(c)(19).\3 Section 501(c)(4) allows IRS to exempt
nonprofit groups operated and organized exclusively to promote
activities benefiting the common good and general welfare of a broad
community of people. Section 501(c)(19) provides an exemption for
nonprofit veterans' groups that promote similar activities specific
to veterans. Among the seven organizations, three have had their tax
exemption less than 6 years, three an average of 13 years, and one
about 32 years.
Charitable, religious, educational, and scientific organizations,
known collectively as charities, are the best known tax-exempt
organizations and are exempt under section 501(c)(3).\4 The tax
provision for social welfare organizations was intended to grant
exemptions to organizations that were not purely charitable but that
served patriotic or community purposes.
Social welfare organizations differ from charities because
contributions to such organizations do not qualify as charitable
deductions for federal income tax purposes. IRS requires social
welfare organizations to disclose in their fund-raising materials
that contributions to them do not qualify as charitable deductions.\5
In addition, before July 30, 1996, the Internal Revenue Code
stipulated nothing about the issue of individuals profiting
financially from social welfare organizations' activities. Since
that time, the Internal Revenue Code has been amended so that the
exemption allowed under section 501(c)(4) does not apply if any of
the organization's earnings benefit a private shareholder or
individual.\6
In their application for tax exemption, the six groups receiving tax
exemptions under section (501)(c)(4) and the one receiving an
exemption under (501)(c)(19) proposed advocating for the public
interest by trying to influence legislation by contacting legislators
or the general public. In requesting federal income tax exemption
from IRS, the seven organizations essentially described their main
purpose as educating the public about relevant issues and increasing
its participation in the political arena.
--------------------
\3 Social Security-related fund-raising letters were previously
mailed by the TREA Senior Citizens League, part of The Retired
Enlisted Association, before the Senior Citizens League received its
own 501(c)(4) tax exemption.
\4 An organization may have exemptions from federal income taxes
under more than one section of the Internal Revenue Code such as in
cases when the organization establishes separate units that also
qualify for tax exemptions.
\5 We found the organizations' mailings generally include response
devices such as surveys and petitions in which the organizations
usually discuss the nondeductibility of contributions to them for
federal income tax purposes. Contributions to an organization exempt
under section 501(c)(19) of the Internal Revenue Code may qualify as
charitable deductions for federal income tax purposes if 90 percent
or more of the organization's members are war veterans.
\6 P.L. 104-168.
ORGANIZATIONS EMPHASIZE
ADVOCACY WORK
------------------------------------------------------------ Letter :4
All seven organizations said that they rely on fund-raising letters
to finance their educational and advocacy work. They had from 80,000
to 6 million senior citizens, retired military personnel, and members
of the general public among their members and supporters, we were
told.\7
Officials of the organizations we spoke with said their organizations
are issue oriented rather than service oriented. That is, sales of
services and merchandise to members constitute a small portion of
their income. Officials said they educate and advocate for members
and target audiences on a range of issues--including the Social
Security program. Issues other than Social Security include foreign
policy, welfare reform, Medicare, health care, the consumer price
index, and federal spending. In addition to mass mailing
fund-raising letters, these organizations send newsletters to members
and distribute a variety of free, issue-oriented informational
literature to members of the Congress, the media, and interested
groups. As examples, the organizations cited publications that rated
individual Congress members, another containing questions most asked
about Social Security benefits, and one detailing basic information
about becoming a senior activist. Radio public service
announcements; television programs featuring seniors' issues; a
toll-free telephone line for members to obtain information on
relevant issues; and ancillary services, such as discounts on
prescription drugs, eyeglasses, and travel discounts are offered by a
few of these organizations.
The organizations also reported conducting activities to influence
legislation such as lobbying and testifying before the Congress.
Examples of these activities include (1) sponsoring a conference to
discuss and set political agendas for publicly debated issues; (2)
lobbying for the repeal of the Social Security tax increase and
earnings limit; and (3) testifying on issues such as health care, the
federal budget, and telemarketing of seniors. Officials said the
organizations often attach surveys and petitions to their
fund-raising letters to raise support for certain positions. They
reported communicating supporters' responses to surveys and petitions
to the Congress or the President and sometimes urging supporters to
communicate directly with elected officials. Most indicated that
they also participate in or conduct town meetings and workshops on
issues of interest to their targeted groups. We verified neither
each organization's performance of the reported activities nor these
activities' frequency.
--------------------
\7 Some of the organizations defined members as individuals who made
recent contributions and supporters as individuals who answered
surveys or signed petitions.
INCOME AND EXPENSES
------------------------------------------------------------ Letter :5
The seven organizations receive their income mainly from public
contributions and to a lesser extent from commercial activities.
Income they receive from commercial activities is taxed if those
activities do not substantially relate to the basis for their tax
exemption. For example, income from magazine sales may or may not be
taxable depending on the facts and circumstances of each case, which
determine whether the activity substantially relates to the
organization's tax exemption.
A review of the organizations' annual information returns revealed
that all rely on public contributions as their main source of income.
The organizations use fund-raising letters to generate contributions.
For 1993, the most recent year for which comparable information was
available, contributions from the public constituted at least 92
percent of each organization's total income. For the seven
organizations, the amounts they received from the public ranged from
about $352,000 to $37 million. Six of them reported total tax-exempt
income from commercial activities--
interest on investments, insurance income, sales of mailing lists,
advertising revenue, and convention sales--ranging from $11,000 to
$527,000. Three of the six reported taxable commercial income (not
substantially related to their tax-exempt purposes) of $7,000,
$241,000, and $2 million, respectively. (See table 1 for amounts
reported by each organization.)
Table 1
Organizations That Mail Social Security-
Related Fund-Raising Letters to the
Public, Tax Year 1993 Financial Profile
(Dollars in thousands)
Council National
for Committee to
Citizens Preserve TREA The
American Against Social Senior Seniors 60/Plus
Conservati Government Security and Citizens Coalitio Associatio
ve Union Waste Medicare League n n\a USA
----------- ---------- ---------- ------------ -------- -------- ---------- ------
Income from
-----------------------------------------------------------------------------------------
General $9,395 $2,926 $37,443 $4,161 $11,114 $352 $4,830
public
Taxable 0 0 1,988 7 241 0 0
commercial
activities
Tax-exempt 89 11 527 333 70 0 285
commercial
activities
=========================================================================================
Total $9,484 $2,937 $39,958 $4,501 $11,425 $352 $5,115
income
Expenses for
-----------------------------------------------------------------------------------------
Public 6,491 2,139 23,600 2,731 7,548 494 2,721
service
activities
Fund- 2,239 490 7,467 1,079 1,364 165 2,182
raising
activities
Administrat 1,610 252 7,666 262 599 13 966
ive
activities
=========================================================================================
Total $10,340 $2,881 $38,733 $4,072 $9,511 $672 $5,869
expenses
-----------------------------------------------------------------------------------------
\a 60/Plus Association reported a $321,000 deficit.
Source: IRS Form 990, "Return of Organization Exempt From Income
Tax."
The seven organizations' total expenses for tax year 1993 ranged from
about $673,000 to about $39 million. Their reported expenses for
public service activities ranged from about 46 to 79 percent of their
total expenses. Expenses for fund-raising activities ranged from 14
to 37 percent, and those for administrative activities ranged from 2
to 20 percent of their total expenses. (See apps. II through VIII
for a summary of each organization's three most recent information
returns.)
The organizations routinely incurred certain expenses to conduct
their educational and fund-raising programs, according to a review of
the IRS Forms 990. They reported incurring expenses for (1)
production and printing of informational materials, (2) postage and
shipping to distribute materials to the public, (3) mailing lists and
membership development to gain contributors and supporters, and (4)
computer services to support these functions.
RELATIONSHIPS WITH OTHER
BUSINESSES
------------------------------------------------------------ Letter :6
All seven organizations use contractors to conduct educational and
fund-raising programs. Officials told us in March 1997 that, because
these organizations depend heavily on public contributions, using
experienced fund-raisers is the most cost-effective way of managing
their resources. They said the cost of handling the large but
infrequent workload of mailing fund-raising letters in house would be
prohibitive. Because professional fund-raising contractors routinely
handle large-volume mailings, however, they can readily provide
services necessary to market and produce mass mailings at reduced
costs. Moreover, these contractors serve as strategic advisors to
increase the effectiveness of the organizations' mailings. The
contractors may recommend specific mail projects and schedules and
sometimes provide services to conduct mail campaigns or obtain the
services through other vendors. In the latter situation, when the
contractor arranges for other vendors to provide services, their
contracts with the nonprofit organizations require the vendors to be
paid directly by the nonprofit organizations.
The organizations develop and research the issues for their
fund-raising letters, officials told us, and fund-raising contractors
do the creative writing (subject to the organizations' approval) and
find vendors to produce and mail letters. In addition, the
organizations retain approval authority, officials said, over
services provided or obtained on their behalf by fund-raising
contractors. Using professional fund-raisers to handle this aspect
of organization work allows more time for education and advocacy
activities, according to officials.
From the records we examined, we could neither determine how much the
seven nonprofit organizations paid contractors to conduct their
education and fund-raising programs nor how much they paid other
vendors chosen by their fund-raising contractors. For six of the
organizations, according to our review of IRS Forms 990, about 59 to
92 percent of their spending was for producing materials for mailing,
delivering materials, increasing membership, and hiring computer
services. These same services were specified in contracts with the
six organizations' fund-raising contractors.\8
--------------------
\8 USA told us it did not use a fund-raising contractor for tax year
1993 but conducted its fund-raising programs in house. The
organization said 1994 was the first year it used a professional
fund-raising contractor.
FUND-RAISING LETTERS MAKE
EMOTIONAL APPEALS FOR SUPPORT
------------------------------------------------------------ Letter :7
Each of the seven organizations we reviewed conducted mail campaigns
that combined education and fund-raising activities. (See apps. II
through VIII for examples of letters used in these campaigns.) We
found examples of letters describing money in the Social Security
trust funds as having been "borrowed" or "looted" by the Congress "to
spend on wasteful programs." Other letters informed individuals that
they will not receive the benefits to which they are entitled because
the Congress and President "would rather tax Social Security benefits
than stop their wasteful spending" or because they are considering
"anti-senior proposals" that would reduce the amount of individuals'
Social Security benefits.
Members of the public wrote to SSA expressing concern about receiving
such Social Security-related fund-raising letters. SSA responded by
informing them that they do not have to contribute to the
organizations to continue receiving Social Security benefits and
expressed concern that the mailings undermine the public's confidence
in Social Security. In publications that SSA provides the public,
the agency has cautioned about organizations that solicit
contributions to "save" Social Security from serious financial
trouble or to support the organizations' efforts to combat alleged
"mishandling" of the trust funds. One SSA publication reported that
some letters deliberately mislead individuals into thinking they must
respond with a donation or risk losing their Social Security
benefits.
Officials of the organizations do not believe their Social
Security-related fund-raising letters scare the public, they told us,
but that the type of issues their letters raise is the source of the
public's concern. Their letters educate the public about issues,
such as the funding of Social Security benefits and the government's
use of Social Security money, they said, which are not fully
understood by the public. It is more harmful to members of the
public to be uninformed and not act to influence legislation
affecting them, according to these officials.
COMMENTS AND OUR EVALUATION
------------------------------------------------------------ Letter :8
The Commissioner of SSA and each of the seven organizations responded
to our request for comments on a draft of this report, and they took
no exception to its contents. One of the organizations offered
technical comments, which we incorporated in the report. Appendix IX
includes letters from SSA and the six organizations that provided
such letters, commenting on our draft report.
---------------------------------------------------------- Letter :8.1
We are sending copies of this report to the Commissioner of SSA, the
seven organizations we reviewed, and other interested parties.
Copies will also be made available to others upon request.
If you or your staff have any questions about this report, please
call me on (202) 512-7215. Appendix X lists major contributors to
this report.
Sincerely yours,
Jane Ross
Director, Income Security Issues
OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I
Although we identified other organizations known for their Social
Security advocacy, we focused on tax-exempt organizations combining
fund-raising with Social Security advocacy in letters to the general
public for our review. To do this, we initially reviewed files of
SSA's Office of Public Affairs to identify organizations that had
sent Social Security-related fund-raising letters to the public.
Next, we determined whether these organizations recently filed annual
information returns (IRS Forms 990) as required by IRS for currently
operating organizations. Through this process, we identified 10
organizations, only 7 of which were currently operating and had
fund-raising letters in SSA's files.
The organizations we identified are the (1) American Conservative
Union, (2) Council for Citizens Against Government Waste, (3)
National Committee to Preserve Social Security and Medicare, (4) TREA
Senior Citizens League, (5) The Seniors Coalition, (6) 60/Plus
Association, and (7) United Seniors Association. Our objectives were
to provide information about each organization on (1) the basis for
its tax exemption; (2) the services it provides the public; (3) its
income, income subject to taxes, and expenses; (4) its financial
relationships with other businesses; and (5) characteristics of its
Social Security-related fund-raising letters. In literature provided
to the public, SSA encourages individuals who question Social
Security-related mailings received from businesses to mail SSA the
entire solicitation package along with their written inquiry. For
example, members of the public have written to SSA asking whether
they must send money to certain organizations to protect their Social
Security benefits and have enclosed the solicitation packages that
prompted them to contact SSA.
Appendixes II though VIII include examples of Social Security-related
fund-raising letters we found for each organization. These letters
do not constitute the organizations' complete solicitation packages
and may not fully represent all the mailings they have sent to the
public.
In addition, we conducted literature searches and interviewed
cognizant officials to discuss their knowledge of organizations that
send Social Security-related mailings. We interviewed officials from
SSA's Office of Public Affairs and Office of Inspector General; IRS;
the Council of Better Business Bureaus, Inc.; selected state
regulatory agencies; and consumer interest groups. We also discussed
ethical business practices with the National Charities Information
Bureau and Direct Marketing Association.
We determined the bases for the organizations' tax-exempt status by
reviewing their application for tax exemption (IRS Form 1024,
"Application for Recognition of Exemption"), IRS determination
letters, the Internal Revenue Code, and IRS reporting instructions.
In a certified letter to each of the seven organizations sent in
August 1995, we asked them to provide information about their
operations and services they provide the public. All organizations
except 60/Plus Association responded to our letter. In November 1996
and March 1997, we interviewed officials from each organization to
obtain their views on issues addressed in our report and on their
Social Security-related fund-
raising activities.
We profiled the organizations' income and expenses by reviewing IRS
reporting instructions and analyzing the organizations' three most
recent information returns, which they provided or which were on file
with the states where we conducted our field work.\9 Generally, IRS
requires tax-exempt organizations to file an IRS Form 990, "Return of
Organization Exempt From Income Tax," for public inspection.\10 IRS
Form 990 shows expenses incurred by tax-exempt organizations for
various types of services. It also shows organizations' allocation
of expenses for services on the basis of the function the services
support. The functions include the (1) public service activities for
which the organization was created and received its tax exemption,
(2) fund-raising activities to solicit and handle contributions
received from the public, and (3) centralized administrative
activities (that is, board meetings and general legal services) not
directly related to either of the other two functions.
We could not determine the possible financial relationships among the
seven organizations, their fund-raising contractors, and other
businesses. We reviewed copies of the organizations' contracts with
their fund-raising contractors on file with state regulatory
agencies. We also reviewed information that the National Committee
to Preserve Social Security and Medicare, TREA Senior Citizens
League, The Seniors Coalition, and United Seniors Association
provided in response to an inquiry by the Pennsylvania State
Attorney's Office. The Pennsylvania State Attorney's Office had
requested organizations actively soliciting in the state to provide
it with information on the type of businesses with which the
organizations had contracts and an itemization of organizations'
payments to vendors. Upon reviewing the above information, we
determined that we needed certain internal records of the
organizations to determine the amounts they had paid to fund-raising
contractors and the amounts paid to other vendors for services
arranged by fund-raising contractors.
We developed information on the organizations' relationships with
other businesses by reviewing their contracts with fund-raising
contractors corresponding to the periods covered by the
organizations' information returns. We identified the services that
fund-raising contractors managed or provided for the organizations.
We reviewed the organizations' information returns to determine the
amounts they reported spending for services mentioned in contracts
with their fund-raising contractors.
Information in this report was provided by these organizations for
public record to state regulatory agencies, to consumer interest
groups, or in response to our inquiries. We did not verify the
accuracy of the information provided. We performed our work at SSA
headquarters in Baltimore, Maryland; the IRS Southeast Key District
Office, Exempt Organization Branch; state offices in Maryland,
Pennsylvania, and Virginia; and offices of the seven organizations
located in Washington, D.C., and Virginia. We chose the state
regulatory agencies because of their proximity to our work location.
We conducted our review between March 1995 and March 1997 following
generally accepted government auditing standards.
--------------------
\9 IRS requires tax-exempt organizations to file a Form 990 within 5
months and 15 days of the close of their fiscal year. Some states
accept a copy of IRS Form 990 to satisfy state reporting
requirements.
\10 Generally, annual reports are required for tax-exempt
organizations with gross incomes over $25,000.
AMERICAN CONSERVATIVE UNION
========================================================== Appendix II
The American Conservative Union (ACU), founded in December 1964,
received an exemption from federal income taxes as a social welfare
organization under section 501(c)(4) from IRS on April 1, 1977. In
1995, ACU reported its membership to be about 800,000 members and
supporters. ACU advances the principles of American conservatism,
using public education and direct political action, according to an
ACU official. The organization uses mailings to correspond with
members and prospective members. The mailings do not specifically
target seniors but people of all ages, said an official.
ACU is a multi-issue organization, said this official, and Social
Security issues have not been its major focus. Some of the issues
ACU has addressed in its mailings include the Social Security trust
funds, health care reform, Medicare, Social Security tax increases,
defense and foreign policy, and federal spending. In one of its
Social Security-related mailings, ACU asked individuals to help it
get the "Congress' greedy hands out of the Social Security Trust
Funds." ACU's letter alleged that the Congress borrowed money from
the Social Security trust funds and spent it on wasteful programs.
The letter requested financial contributions to support ACU's efforts
to prevent future borrowing from the Social Security trust funds. It
also asked for signatures for a petition to support legislation to
restrict the Congress' use of the Social Security trust funds. (See
fig. II.1 at the end of this app. for a copy of the letter.)
ADVOCACY ACTIVITIES
ACU does not provide members services in the customary sense but
advocates for members through its educational and direct lobbying
activities, according to the official. ACU provides members its
newsletter, Battleline, which covers ACU's activities and
developments in the Congress. ACU distributes a variety of free
literature at events such as conferences. The organization provided
us a copy of ACU's publication rating individual members of the
Congress on the basis of the members' votes on a range of issues.
ACU said it provides these ratings to news media, advocacy groups,
and the public.
ACU uses direct mail "to inform, educate, and alert the public" about
particular issues, the ACU official said, and the mailings usually
request financial support and include petitions or surveys. Some of
the mailings do not seek financial help, however, but instead request
individuals to take certain actions such as writing or calling
members of the Congress. ACU compiles survey responses received from
individuals and reports the results in its newsletter, in subsequent
mailings to the public, and in press releases, the official said.
ACU usually presents the petitions to the Congress.
ACU provides a variety of political advocacy services. For example,
ACU has testified before the Congress and also encourages its members
to make their views known to the Congress. ACU annually sponsors the
Conservative Political Action Conference, during which conservative
activists and leaders discuss current issues and set future political
agendas.
INCOME AND EXPENSES
For tax years 1991 through 1993, ACU received from $822,000 to $9.4
million annually (over 95 percent of its income) from the public.
(See table II.1 for ACU's financial profile based on IRS Form 990.)
ACU reported receiving income ranging from $11,000 to $89,000 from
use of its mailing list. It reported that all of this commercial
income supported tax-exempt activities and thus, under IRS rules, was
not subject to federal income taxes.
Table II.1
ACU's Financial Profile
(Dollars in thousands)
1993 1992 1991
---------------------- ---------------------- ----------------------
Amount Percent Amount Percent Amount Percent
----------------- ---------- ---------- ---------- ---------- ---------- ----------
Income from
-----------------------------------------------------------------------------------------
General public $9,395 99.1 $948 95.5 $822 98.7
Taxable 0 0.0 0 0.0 0 0.0
commercial
activities
Tax-exempt 89 0.9 45 4.5 11 1.3
commercial
activities
=========================================================================================
Total income $9,484 100.0 $993 100.0 $833 100.0
Expenses by function
-----------------------------------------------------------------------------------------
Public service 6,491 62.8 473 49.0 81 8.9
activities
Fund-raising 2,239 21.7 303 31.4 764 83.5
activities
Administrative 1,610 15.6 190 19.7 70 7.7
activities
=========================================================================================
Total expenses $10,340 100.0 $966 100.0 $915 100.0
Expenses by services
-----------------------------------------------------------------------------------------
Postage/shipping 5,343 51.7 342 35.4 309 33.8
Printing/ 1,579 15.3 130 13.5 199 21.7
publication
Mail list related 1,729 16.7 100 10.4 172 18.8
Computer 381 3.7
Subtotal $9,032 87.4 $572 59.2 $680 74.3
Other services 1,308 12.6 394 40.8 235 25.7
=========================================================================================
Total expenses $10,340 100.0 $966 100.0 $915 100.0
-----------------------------------------------------------------------------------------
Note: Percents may not add to 100 due to rounding.
Source: GAO summary of reporting on IRS Form 990.
An ACU official attributed the increase in ACU's contributions from
the public between tax years 1991 to 1993 to the start-up of health
care reform initiatives by President Clinton. At the start of health
care reform, ACU substantially increased mailings to gain members and
solicit contributions, said the official. He believed the increase
in contributions from the public reflected a growing support for
conservative groups such as ACU.
ACU's expenses for tax years 1991 through 1993 ranged from about
$915,000 to $10 million. During this period, its expenses for public
service activities increased from 8.9 percent of its total expenses
to 62.8 percent. In the years following health care reform, the
official said, ACU directed more of its spending to public service
activities and less toward fund-raising. ACU reported that its
spending for fund-raising activities decreased from 83.5 to 21.7
percent of its total expenses during this period.
RELATIONSHIPS WITH OTHER
BUSINESSES
Registration documents revealed that ACU had hired two fund-raising
contractors. An ACU official confirmed that the organization had
contracts with both of the fund-raising contractors during the period
covered by ACU's 1991 through 1993 information returns. One
contractor provided strategic planning and scheduling for ACU's
fund-raising program. It oversaw all aspects of ACU's fund-raising
program, including writing copy, selecting mailing lists and vendors
for cashier services, and determining the quantity of mailings. The
contract authorized the contractor to accept bids from other business
on behalf of ACU for services to conduct fund-
raising. ACU paid vendors for the services its contractor obtained
on its behalf. The other contractor conducted an education as well
as a fund-raising program for ACU. The latter contractor either
performed services or subcontracted with other businesses on ACU's
behalf to obtain services to conduct these programs. The latter
contractor secured computer services; procured mailing lists; and
printed, produced, and mailed literature. A review of ACU's
information returns for tax years 1991 through 1993 shows that 59.2
to 87.4 percent of ACU's total expenses were for services also
specified in contracts with its contractors.
Figure II.1: ACU Fund-Raising
Letter
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
COUNCIL FOR CITIZENS AGAINST
GOVERNMENT WASTE
========================================================= Appendix III
The Council for Citizens Against Government Waste (CCAGW), founded in
September 1984,\11 received exemption as a social welfare
organization from federal income taxes under section 501(c)(4) from
IRS on December 21, 1984. CCAGW describes itself as providing its
members and the general public with educational materials about what
it perceives as government waste. In 1995, CCAGW had about 600,000
members, according to an official.
Of its 16 mailings in 1993 and 1994, a CCAGW official said, only two
discussed Social Security issues. One advocated eight specific
governmentwide spending cuts instead of higher Social Security taxes,
and the other suggested that individuals inform their representatives
if they opposed recent tax increases on Social Security benefits.
CCAGW's mailing about the Social Security tax increase asked current
Social Security beneficiaries whether they were "mad as hell that
[their] Social Security benefits [they] paid for during [their]
working career are now being taxed away." It asked workers "if the
new taxes made [them] doubt that [they'll] ever see a penny of the
Social Security benefits [they] are now paying for." The letter said
that the Congress and President should stop taxing Social Security
benefits and instead be forced to cut wasteful spending. It urged
individuals to support CCAGW's efforts to protect current and future
Social Security benefits by contributing to CCAGW and supporting its
petition to repeal the 1993 Social Security tax increase. (See fig.
III.1 at the end of this app. for a copy of the letter.)
ADVOCACY ACTIVITIES
CCAGW mails members a wide variety of literature about government
waste, including a quarterly newsletter. CCAGW has not surveyed its
members about Social Security-related issues, according to the
official.
CCAGW lobbies the Congress on its members' behalf. On occasion, the
official said, CCAGW asks members to send letters to their
congressional representatives to oppose specific congressional
actions. In 1995, CCAGW joined the Coalition for America's Future,
which lobbied for the repeal of the 1993 Social Security tax increase
and an increase in the earnings limit for Social Security
beneficiaries, among other activities.
INCOME AND EXPENSES
From tax years 1992 through 1994, CCAGW received from $2.3 million to
$2.9 million a year (over 99 percent of its income) from the public.
(See table III.1 for CCAGW's financial profile based on IRS Form
990.) During this period, CCAGW received from $4,000 to $11,000 a
year in income from interest, royalties, and sales of items at
conferences. CCAGW reported all of the income from these activities
as mission related and therefore exempt from federal income taxes.
Table III.1
CCAGW's Financial Profile
(Dollars in thousands)
1994 1993 1992
---------------------- ---------------------- ----------------------
Amount Percent Amount Percent Amount Percent
----------------- ---------- ---------- ---------- ---------- ---------- ----------
Income from
-----------------------------------------------------------------------------------------
General public $2,305 99.6 $2,926 99.6 $2,613 99.8
Taxable 0 0.0 0 0.0 0 0.0
commercial
activities
Tax-exempt 9 0.4 11 0.4 4 0.2
commercial
activities
=========================================================================================
Total income $2,314 100.0 $2,937 100.0 $2,617 100.0
Expenses by function
-----------------------------------------------------------------------------------------
Public service 1,770 76.6 2,139 74.2 1,985 76.0
activities
Fund-raising 396 17.1 490 17.0 446 17.1
activities
Administrative 144 6.2 252 8.7 182 7.0
activities
=========================================================================================
Total expenses $2,310 100.0 $2,881 100.0 $2,613 100.0
Expenses by services
-----------------------------------------------------------------------------------------
Postage/shipping 12 0.5 17 0.6 16 0.6
Printing/ 178 7.7 282 9.8 221 8.5
publication
Membership 1,474 63.8 1,836 63.7 1,599 61.2
related
Subtotal $1,664 72.0 $2,135 74.1 $1,836 70.3
Other services 646 28.0 746 25.9 777 29.7
=========================================================================================
Total expenses $2,310 100.0 $2,881 100.0 $2,613 100.0
-----------------------------------------------------------------------------------------
Note: Percents may not add to 100 due to rounding.
Source: GAO summary of reporting on IRS Form 990.
CCAGW's expenses for the 3 years have been between $2.3 million and
$2.9 million. Its expenses for public service activities have
generally been around 75 percent of its total spending, with
fund-raising expenses accounting for less than 9 percent of its total
spending.
RELATIONSHIPS WITH OTHER
BUSINESSES
CCAGW used a contractor to conduct its fund-raising program. CCAGW's
contract with the fund-raising contractor that we reviewed covered
from April 1, 1994, through March 31, 1997. The contract required
the fund-raising contractor to recommend specific mail projects and
schedules. In addition, the contract stated that the fund-raising
contractor would procure mailing list(s) of prospective donors from
other businesses and could also contract with other vendors for
services such as creating, producing, and mailing materials. The
contract stated that CCAGW would pay vendors for services the
contractor arranged on its behalf. CCAGW used the same contractor
during the years covered by its 1992 through 1994 financial reports,
according to an official. The fund-raising contractor essentially
performed the same services during the earlier period. For tax years
1992 through 1994, CCAGW's expenses for services mentioned in the
contract with its fund-raising contractor accounted for 70 to 74
percent of CCAGW's total spending.
Figure III.1: CCAGW
Fund-Raising Letter
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
--------------------
\11 Before Sept. 1985, CCAGW was called Council for Citizens Against
Waste.
NATIONAL COMMITTEE TO PRESERVE
SOCIAL SECURITY AND MEDICARE
========================================================== Appendix IV
The National Committee to Preserve Social Security and Medicare,
incorporated on November 18, 1982, received exemption as a social
welfare organization from federal income taxes under section
501(c)(4) from IRS on February 22, 1983. As part of its mission, the
Committee has stated that it will support the continuation of the
Social Security and Medicare programs and work to maintain the
integrity of the Social Security trust funds for all Americans.
The Committee uses mailings to conduct its education and advocacy
activities. In 1995, the organization had about six million members
and supporters. About once a month, according to an official, the
organization sends members and prospective members a mailing that
discusses an issue before the Congress that affects Social Security
or Medicare. The mailing usually requests contributions and includes
a survey or petition.
In one of its mailings to the public, the Committee informed
individuals that the Congress was supporting a proposal that
threatened future Social Security benefits. The Committee's letter
told individuals that the Congress' "anti-senior proposals would
reduce the amount of [their] annual Social Security
Cost-of-Living-Adjustment." The Committee reminded people of its
success in opposing other cuts in Social Security benefits and asked
for their support once again. The letter requested support for an
enclosed petition and a financial contribution to the organization.
(See fig. IV.1 at the end of this app. for a copy of the letter.)
ADVOCACY ACTIVITIES
The Committee reports using a variety of means to communicate issues
concerning senior citizens to its members, the public, and those in
the field of aging; some of these means involve no fund-raising. As
examples, an official cited the Committee's bimonthly magazine,
Secure Retirement, its responses to the public's written and
telephone inquiries, legislative alerts on pending issues, opinion
editorials published in newspapers nationwide, and radio public
service announcements. The Committee reports maintaining a toll-free
information hot line to keep members abreast of congressional
developments and providing members discounts for services such as
medical prescriptions, eyeglasses, and hearing aids.
Among its advocacy activities, the Committee lobbies and testifies
before the Congress, surveys the public to formulate legislative
positions, and encourages members to communicate views to the
Congress. The organization reported in 1994 that it testified 10
times on a variety of issues, including health care reform, Medicare
reform, and the federal budget. The Committee said it also holds
town hall-style meetings with seniors about issues of interest to
them and conducts outreach and information sharing on entitlement
programs such as the Supplemental Security Income program.
INCOME AND EXPENSES
For tax years 1992 through 1994, the Committee received $34.2 million
to $37.4 million annually (around 93 percent of its income) from the
public. (See table IV.1 for the Committee's financial profile based
on IRS Form 990.) It received income of $2.3 million to $2.6 million
from interest and magazine sales. It reported that all of its income
from magazine sales, ranging from $1.5 million to $2.2 million, was
unrelated to its tax-exempt mission and therefore subject to federal
income taxes.
Table IV.1
National Committee to Preserve Social
Security and Medicare's Financial
Profile
(Dollars in thousands)
1994 1993 1992
---------------------- ---------------------- ----------------------
Amount Percent Amount Percent Amount Percent
----------------- ---------- ---------- ---------- ---------- ---------- ----------
Income from
-----------------------------------------------------------------------------------------
General public $36,293 93.4 $37,443 93.7 $34,159 93.7
Taxable 2,241 5.8 1,988 5.0 1,549 4.2
commercial
activities
Tax-exempt 322 0.8 527 1.3 766 2.1
commercial
activities
=========================================================================================
Total income $38,856 100.0 $39,958 100.0 $36,474 100.0
Expenses by function
-----------------------------------------------------------------------------------------
Public service 24,225 59.3 23,600 60.9 18,053 53.1
activities
Fund-raising 7,849 19.2 7,467 19.3 9,246 27.2
activities
Administrative 8,808 21.5 7,666 19.8 6,722 19.8
activities
=========================================================================================
Total expenses $40,882 100.0 $38,733 100.0 $34,021 100.0
Expenses by services
-----------------------------------------------------------------------------------------
Postage/shipping 6,908 16.9 6,284 16.2 4,968 14.6
Printing/ 17,583 43.0 17,622 45.5 14,692 43.2
publication
Mail list related 1,021 2.5 954 2.5 1,082 3.2
Computer 2,407 5.9 1,193 3.1 1,131 3.3
Subtotal $27,919 68.3 $26,053 67.3 $21,873 64.3
Other services 12,963 31.7 12,680 32.7 12,148 35.7
=========================================================================================
Total expenses $40,882 100.0 $38,733 100.0 $34,021 100.0
-----------------------------------------------------------------------------------------
Note: Percents may not add to 100 due to rounding.
Source: GAO summary of reporting on IRS Form 990.
The Committee's expenses for the 3 years have ranged from $34.0
million to $40.9 million. During this period, it reported that from
53 to 61 percent of its total expenses were for public service
activities. The organization reported that fund-raising expenses
accounted for 27 percent of its total spending for the first year and
19 percent for the last 2 years covered by its 1992 through 1994
information returns.
RELATIONSHIPS WITH OTHER
BUSINESSES
The Committee used a fund-raising contractor to conduct its direct
mail educational and fund-raising programs. A Committee official
confirmed that the organization had a contract with the fund-raising
contractor in effect during the tax years covered by its 1992 through
1994 information returns. A review of the contract revealed that the
fund-raising contractor oversaw such functions as printing and
producing materials; mail list-
related services; and computer, mailing, and postage services. The
contractor either provided the services or arranged for the Committee
to receive the services from other vendors. The Committee retained
control over all its fund-raising activities, including timing,
frequency, nature, and content of mailings, according to an official.
It also had contracts with other vendors, we found, for cashier
operations, data processing, publication of its magazine, investment
management, list management and brokerage, prescription drug
services, office supplies, artwork, and various consulting services.
Expenses for the services mentioned in the Committee's contract with
the contractor that conducted its educational and fund-raising
programs accounted for about two-thirds of the Committee's total
spending during the 3-year period.
Figure IV.1: National
Committee to Preserve Social
Security and Medicare
Fund-Raising Letter
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
TREA SENIOR CITIZENS LEAGUE
=========================================================== Appendix V
TREA Senior Citizens League was established in 1993 as a special
project of The Retired Enlisted Association (TREA). TREA, founded in
1963, received its current exemption from federal income taxes as a
qualifying veterans' organization under section 501(c)(19) from IRS
on June 29, 1984. TREA is a federally chartered veterans'
organization that provides services to retired military personnel.
TREA considers its target audience to be military personnel retired
either due to a medical disability or to longevity of service.
According to a League official, the League became an independent
affiliate of TREA in January 1995 and received an exemption from
federal income taxes under section 501(c)(4) from IRS on June 28,
1995. The League has stated that its mission includes protecting and
defending benefits--Social Security, Medicare, and veterans' or
military benefits--earned and paid for by seniors. In 1997, the
League had over 750,000 members and supporters, according to a League
official.
TREA created the League to address seniors' issues beyond those
concerning TREA's existing membership of retired military personnel,
according to the official. TREA's Social Security-related mailings
are conducted by the League, this official said. A consumer group
reported that the League has been involved in the Social Security
"notch" issue since 1993.\12 Other issues the League has addressed
include cost-of-living adjustments, Medicare, health care, and health
maintenance organizations.
One of the League's Social Security-related mailings has concerned
the notch issue. The letter informed individuals that "many Notch
Victims receive Social Security checks of $100, $500, and even $1,000
a year LESS than they would if Congress passes Notch reform." The
letter asked individuals who are notch victims for permission to
include their names in the League's petition for notch reform that it
would present to the President and the Congress. It also asked
people to financially support the League's effort to collect two
million signatures for its petitions. (See fig. V.1 at the end of
this app. for a copy of the letter.)
ADVOCACY ACTIVITIES
The League reports using its educational materials to increase public
awareness. The organization distributes its newsletter, The Social
Security & Medicare Advisor, 10 times a year to its most active
supporters. It also distributes a variety of literature on issues of
interest to seniors such as The Notch Victim's Handbook and The
Senior Activist's Survival Manual. The League reports conducting
polls and gathering research information, which it provides to
lawmakers, its members, and the general public.
The League's lobbying activities have included providing the results
of its surveys and petitions, sometimes included with its mailings,
to the Congress as well as providing elected officials information on
seniors' issues upon request.
INCOME AND EXPENSES
For tax years 1993 through 1995, TREA and the League received over 92
percent of their income from the public. Their combined revenues
were $4.5 million and $6.8 million for 1993 and 1994, respectively.
In 1995, the League reported revenues of $1.9 million. (See table
V.1 for TREA's and the League's financial profile based on IRS Form
990.) For the first 2 years, their combined report showed income from
activities such as insurance sales, interest on savings, magazine
advertising, and conventions. TREA reported that less than 1 percent
of its total income was unrelated to its tax-exempt purpose and thus
subject to federal income taxes. For tax year 1995, the League
reported receiving commercial income of $76,000 from interest on
savings and its mailing list. It reported all of this income as
mission-related and therefore exempt from federal income taxes.
Table V.1
TREA's and TREA Senior Citizens League's
Financial Profile
(Dollars in thousands)
1995 League\a 1994 TREA 1993 TREA
---------------------- ---------------------- ----------------------
Amount Percent Amount Percent Amount Percent
----------------- ---------- ---------- ---------- ---------- ---------- ----------
Income from
-----------------------------------------------------------------------------------------
General public $1,872 96.1 $6,403 94.6 $4,161 92.4
Taxable 0 0.0 5 0.1 7 0.2
commercial
activities
Tax-exempt 76 3.9 360 5.3 333 7.4
commercial
activities
=========================================================================================
Total income $1,948 100.0 $6,768 100.0 $4,501 100.0
Expenses by function
-----------------------------------------------------------------------------------------
Public service 1,267 63.8 4,453 72.3 2,731 67.1
activities
Fund-raising 456 23.0 1,432 23.3 1,079 26.5
activities
Administrative 263 13.2 272 4.4 262 6.4
activities
=========================================================================================
Total expenses $1,986 100.0 $6,157 100.0 $4,072 100.0
Expenses by services
-----------------------------------------------------------------------------------------
Postage/shipping 970 48.8 1,760 28.6 730 17.9
Printing/ 1,511 24.5 1,117 27.4
publication
Mail list related 212 10.7 652 10.6 309 7.6
Membership 590 9.6 542 13.3
related
Subtotal $1,182 59.5 $4,513 73.3 $2,698 66.3
Other services 804 40.5 1,644 26.7 1,374 33.7
=========================================================================================
Total expenses $1,986 100.0 $6,157 100.0 $4,072 100.0
-----------------------------------------------------------------------------------------
Note: Percents may not add to 100 due to rounding.
\a 1995 was the first year the League reported as an independent
organization.
Source: GAO summary of reporting on IRS Form 990.
Over the 3 years, expenses for both organizations have ranged from
about $2.0 million to $6.2 million. For these years, TREA and the
League reported that over 60 percent of their expenses were for
public service activities and about 25 percent were for fund-raising
activities.
RELATIONSHIPS WITH OTHER
BUSINESSES
TREA and the League used a contractor to conduct their fund-raising
and education programs. The contractor created and produced mail
solicitation packages and provided, or obtained under contract with
others, services for mail list brokerage, computer services,
production, printing, and mailings. A TREA official confirmed that
the contracts were in effect during the period covered by its 1993
and 1994 information returns, and, since January 1995, the League has
been assigned the terms and conditions of TREA's contract, according
to a League official. A review of TREA's and the League's 1993
through 1995 information returns shows that expenses for services
mentioned in the contract accounted for from 59 to 73 percent of
their total expenses.
Figure V.1: TREA Fund-Raising
Letter
(See figure in printed
edition.)
--------------------
\12 Social Security retirees born in 1917 and beyond generally
receive lower benefits than those born earlier--a disparity commonly
referred to as the "notch." In 1972, the Congress adjusted the Social
Security formula, causing individuals born between 1910 and 1916 to
receive higher benefit amounts than intended. In 1977, the Congress
corrected the formula and in effect reduced benefits to intended
levels for retirees born in 1917 and beyond.
THE SENIORS COALITION
========================================================== Appendix VI
The Seniors Coalition, incorporated on September 17, 1990, received
exemption as a social welfare organization from federal income taxes
under section 501(c)(4) from IRS on July 15, 1991. The Seniors
Coalition has stated its mission as public education and lobbying on
behalf of seniors nationwide. The organization had one million
members and another one million supporters in 1995, according to a
Coalition official.
The Seniors Coalition conducts prospective membership mailings on an
ongoing basis. Once a month, according to an official, The Seniors
Coalition sends mailings to alert members to publicly debated issues,
solicit contributions, and request membership renewals. Some of the
Social Security issues the organization has addressed have included
opposing Social Security tax increases, protecting Social Security,
and eliminating work penalties.
In one of these mailings, The Seniors Coalition accused the Congress
of "looting of the [Social Security] trust funds." The Congress
"stole the money . . . and spent it on wasteful pork barrel
spending projects . . .", and the letter warned individuals that
the Social Security program "will be in grave financial jeopardy in
the future." The letter asked individuals to financially support The
Seniors Coalition's efforts to stop the Congress' raid on the trust
funds, restore money owed the trust funds, and insulate the trusts
funds from future congressional actions. The letter also asked
individuals to complete a survey and support its petition on the
issue. (See fig. VI.1 at the end of this app. for a copy of the
letter.)
ADVOCACY ACTIVITIES
The Seniors Coalition conducts a wide range of activities to educate
members and represent seniors' interests. In addition to monthly
issue alerts, the organization sends members its bimonthly
newsletter, the Senior Class, which features information of interest
to older Americans. In the past year, The Seniors Coalition said it
has published over a dozen papers and books on issues of concern to
seniors and distributed them to the media, the Congress, and the
public. As examples, it cited articles titled "Medicare: Elderly
Lifeline Under Attack" and "100 Most Asked Questions About Your
Social Security Benefits." The organization offers members discounts
on prescription drugs and also provides them a toll-free number to
inquire about specific issues, ask questions about member services,
or request publications.
The Seniors Coalition reports that its lobbying efforts have included
testifying before the Congress many times and encouraging individuals
to send letters and other communications to legislators. Some of the
issues the organization has testified on include the Social Security
earnings limit and long-term care. During the past year, the
organization has involved the public in dozens of town hall meetings
and rallies nationwide, according to an official.
INCOME AND EXPENSES
For tax years 1992 through 1994, The Seniors Coalition received from
$8.8 million to $11.1 million (over 94 percent of its revenues) from
the public. (See table VI.1 for The Seniors Coalition's financial
profile based on IRS Form 990.) During this period, its income from
commercial activities ranged from about $43,000 to $556,000. The
organization reported that about $43,000, $241,000, and $561,000 of
income from advertising and renting its mailing list in 1992, 1993,
and 1994, respectively, did not substantially support its tax
exemption and was therefore subject to federal income taxes.\13
During this period, The Seniors Coalition reported that over 70
percent of its total spending supported public service activities and
from 14 to 23 percent supported its fund-raising activities.
Table VI.1
The Seniors Coalition's Financial
Profile
(Dollars in thousands)
1994 1993 1992
---------------------- ---------------------- ----------------------
Amount Percent Amount Percent Amount Percent
----------------- ---------- ---------- ---------- ---------- ---------- ----------
Income from
-----------------------------------------------------------------------------------------
General public $9,961 94.7 $11,114 97.3 $8,815 99.5
Taxable 561 5.3 241 2.1 43 0.5
commercial
activities
Tax-exempt -5\a -0.0 70 0.6 0 0.0
commercial
activities
=========================================================================================
Total income $10,517 100.0 $11,425 100.0 $8,858 100.0
Expenses by function
-----------------------------------------------------------------------------------------
Public service 7,899 71.8 7,548 79.4 6,290 72.1
activities
Fund-raising 2,121 19.3 1,364 14.3 2,024 23.2
activities
Administrative 977 8.9 599 6.3 409 4.7
activities
=========================================================================================
Total expenses $10,997 100.0 $9,511 100.0 $8,723 100.0
Expenses by services
-----------------------------------------------------------------------------------------
Postage/shipping 3,183 28.9 3,059 32.2 2,437 27.9
Printing/ 3,900 35.5 3,473 36.5 3,166 36.3
publication
Mail list related 1,303 11.8 1,153 12.1 1,254 14.4
Computer 28 0.3 0 0.0 0 0.0
Subtotal $8,414 76.5 $7,685 80.8 $6,857 78.6
Other services 2,583 23.5 1,826 19.2 1,866 21.4
=========================================================================================
Total expenses $10,997 100.0 $9,511 100.0 $8,723 100.0
-----------------------------------------------------------------------------------------
Note: Percents may not add to 100 due to rounding.
\a The Seniors Coalition reported a net loss in tax-exempt commercial
activities.
Source: GAO summary of reporting on IRS Form 990.
RELATIONSHIPS WITH OTHER
BUSINESSES
The Seniors Coalition used a contractor to provide membership
acquisition and creative and production services for its educational
and fund-raising programs. Among the services the fund-raising
contractor provided were copy writing, acquiring mailing lists,
printing, and mailing of literature. The fund-raising contractor was
authorized to contract with other vendors on the Coalition's behalf,
although the Coalition remained liable for actual payments to
vendors. The contractor provided services for most of the period
covered by the three returns we reviewed, according to a Coalition
official.\14 The Seniors Coalition also had contracts with three
other businesses to receive cashier, list marketing, and data
processing services. The contracts with two of the vendors required
them to recognize the fund-raising contractor as The Seniors
Coalition's agent for contract administration, and the third vendor
was affiliated with the fund-raising contractor. A review of The
Seniors Coalition's tax years 1992 through 1994 information returns
shows that expenses for services mentioned in the contract accounted
for about 77 to 81 percent of the organization's total expenses.
Figure VI.1: The Seniors
Coalition Fund-Raising Letter
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
--------------------
\13 Difference in income amounts of $556,000 and $561,000 is due to a
$5,000 loss that The Seniors Coalition reported in tax-exempt
commercial activities.
\14 The official said that The Seniors Coalition was reorganized in
Nov. 1992 and no longer had records relevant to the organization
before it was reorganized.
60/PLUS ASSOCIATION
========================================================= Appendix VII
60/Plus Association incorporated on October 2, 1990, and received its
exemption from federal income taxes as a social welfare organization
under section 501(c)(4) from IRS on March 28, 1991. In its annual
information returns, 60/Plus stated its purpose as protecting
seniors' rights. In applying for an exemption from federal income
taxes, the organization said it would mainly educate the general
public about seniors' concerns, including, but not limited to, the
Social Security and Medicare programs. In its application to IRS for
tax exemption, 60/Plus said that it planned to conduct educational
activities that would include distributing newsletters, journals,
alerts, and letters and convening conferences. Its advocacy
activities would include encouraging seniors to express their views
on various issues to the Congress, it said. The organization had
about one-half million members in 1997, according to an official.
In one of its mailings, 60/Plus alleged that "President Clinton has
requested a 70% Social Security tax increase for about 10 million
seniors" and that the President "wants to increase many other taxes
that affect seniors." The letter informed individuals that the
President will certainly get his way unless they are willing to
protest the tax increases. 60/Plus's letter asked individuals to
support its protest letter to the President and members of the
Congress and to complete its Social Security survey. The letter also
requested individuals to financially contribute to support 60/Plus's
efforts to deliver more letters, send more surveys, and contact more
voters. (See fig. VII.1 at the end of this app. for a copy of the
letter.)
ADVOCACY ACTIVITIES
60/Plus did not respond to our certified letter requesting
information about the services the organization provides. In a 1997
meeting, a 60/Plus official told us that the organization's
fund-raising letters are its primary way of communicating with and
educating members. Its members also receive its newsletter, Senior
Voice, three to four times a year. Some of the organization's other
educational activities include participating in radio and television
interviews and issuing press statements about seniors' issues,
according to this official. 60/Plus sends general literature on the
organization to members of the public who inquire about it. The
organization does not offer any ancillary services such as insurance.
INCOME AND EXPENSES
In its tax years 1993 and 1994 information returns, 60/Plus reported
income of $352,000 and $1.4 million, respectively. It listed
contributions from the public as its exclusive source of income.
(See table VII.1 for 60/Plus's financial profile based on IRS Form
990.) 60/Plus's expenses for the 2 years were $672,000 and $1.9
million, respectively. For each of the 2 years, 60/Plus reported
that a little over 70 percent of its total expenses were for public
service activities and a little over 20 percent for fund-
raising activities.
Table VII.1
60/Plus Association's Financial Profile
(Dollars in thousands)
1994\a 1993\b
------------------ ------------------
Amount Percent Amount Percent
------------------ -------- -------- -------- --------
Income from
----------------------------------------------------------
General public $1,367 100.0 $352 100.0
Taxable commercial 0 0.0 0 0.0
activities
Tax-exempt 0 0.0 0 0.0
commercial
activities
==========================================================
Total income $1,367 100.0 $352 100.0
Expenses by function
----------------------------------------------------------
Public service 1,368 72.6 494 73.5
activities
Fund-raising 398 21.1 165 24.6
activities
Administrative 119 6.3 13 1.9
activities
==========================================================
Total expenses $1,885 100.0 $672 100.0
Expenses by services
----------------------------------------------------------
Postage/shipping 586 31.1 20 3.0
Printing/ 338 17.9 72 10.7
publication
Mail list related 669 35.5 501 74.6
Computer 42 2.2 29 4.3
Subtotal $1,635 86.7 $622 92.6
Other services 250 13.3 50 7.4
==========================================================
Total expenses $1,885 100.0 $672 100.0
----------------------------------------------------------
Note: Percents may not add to 100 due to rounding.
\a 60/Plus reported a $518,000 deficit.
\b 60/Plus reported a $321,000 deficit; 1993 was the first year
60/Plus filed a Form 990 with the states.
Source: GAO summary of reporting on IRS Form 990.
RELATIONSHIPS WITH OTHER
BUSINESSES
60/Plus contracted with a business to conduct its educational and
fund-
raising programs. The contract allowed the fund-raising contractor
to either perform or hire other vendors to perform services such as
designing programs; writing copy; obtaining mailing lists; printing,
producing, and mailing letters; and providing computer services.
60/Plus's contract with its fund-raising contractor covered the 1993
through 1994 information returns we reviewed. Our review of the two
information returns revealed that 60/Plus reported that from 86 to 92
percent of its total expenses were for services also mentioned in the
contract with its fund-raising contractor.
Figure VII.1: 60/Plus
Association Fund-Raising Letter
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
UNITED SENIORS ASSOCIATION
======================================================== Appendix VIII
United Seniors Association (USA), incorporated on May 17, 1991,
received exemption from federal income taxes as a social welfare
organization under section 501(c)(4) from IRS on July 25, 1991. The
organization had 400,000 members and 500,000 supporters in 1995,
according to a USA official. USA has stated that its purpose is to
educate and inform seniors and retirees about matters of interest to
older Americans, including the Social Security and Medicare programs.
An official said the organization communicates with members on a
variety of issues, mainly through mailings. Mailings have covered
issues such as Social Security, Medicare, and health care reform.
The letter accompanying one of USA's Social Security-related mailings
informed individuals that "the tax increases on Social Security
benefits proposed [by the President] can be stopped." The letter
alleged that politicians stole their money and "want to tax more of
their benefits and then turn around and cut Social Security benefits"
instead of cutting their "special interest spending," which was the
real cause of the federal deficit. USA's letter asked individuals to
sign its protest letter relating to these issues and to financially
contribute to help USA alert other seniors about the attacks on
Social Security. (See fig. VIII.1 at the end of this app. for a
copy of the letter.)
ADVOCACY ACTIVITIES
USA members receive USA's newsletter, The Senior American, about
seven times a year, according to an official. The organization also
publishes a variety of other informative literature, which it
distributes to senior Americans and lawmakers. Since June 1995, USA
has hosted a weekly cable television program designed for seniors,
according to the official. Among the services the organization
provides its members are discounts on prescription drugs, eyewear,
hotel accommodations, and rental cars.
The organization uses mailings to alert members and prospective
members to events of interest to them and to solicit their opinions
on issues. USA's mailings often include response devices such as
petitions, surveys, or mailgrams. USA compiles responses to surveys,
petitions, and mailgrams and provides the information to the
Congress, according to the official.
USA reports that it regularly lobbies the Congress on behalf of its
members and has testified before that body on a variety of issues,
including repealing the Social Security tax, Medicare reform, and
pension protection. The organization reports regularly hosting or
participating in town hall meetings and other forums on elderly
issues nationwide.
INCOME AND EXPENSES
For tax years 1991 through 1993, income ranged from about $2.1
million to $5.1 million, with the public's portion ranging from about
88 to 94 percent of USA's revenues. (See table VIII.1 for USA's
financial profile based on IRS Form 990.) USA reported mail list
rental and deferred income as the sources of its other income. The
organization reported that all of its other income was related to its
mission and therefore exempted from federal income taxes.
Table VIII.1
USA's Financial Profile
(Dollars in thousands)
1993 1992 1991
---------------------- ---------------------- ----------------------
Amount Percent Amount Percent Amount Percent
----------------- ---------- ---------- ---------- ---------- ---------- ----------
Income from
-----------------------------------------------------------------------------------------
General public $4,830 94.4 $5,295 92.0 $1,807 88.1
Taxable 0 0.0 0 0.0 10 0.5
commercial
activities
Tax-exempt 285 5.6 463 8.0 234 11.4
commercial
activities
=========================================================================================
Total income $5,115 100.0 $5,758 100.0 $2,051 100.0
Expenses for
-----------------------------------------------------------------------------------------
Public service 2,721 46.4 2,998 48.8 937 49.2
activities
Fund-raising 2,182 37.2 970 15.8 379 19.9
activities
Administrative 966 16.5 2,178 35.4 590 31.0
activities
=========================================================================================
Total expenses $5,869 100.0 $6,146 100.0 $1,906 100.0
Expenses by services
-----------------------------------------------------------------------------------------
Postage/shipping 1,337 22.8 1,433 23.3 603 31.6
Printing/ 1,720 29.3 1,993 32.4 597 31.3
publication
Mail list related 434 7.4 560 9.1 228 12.0
Subtotal $3,491 59.5 $3,986 64.9 $1,428 74.9
Other services 2,378 40.5 2,160 35.1 478 25.1
=========================================================================================
Total expenses $5,869 100.0 $6,146 100.0 $1,906 100.0
-----------------------------------------------------------------------------------------
Note: Percents may not add to 100 due to rounding.
Source: GAO summary of reporting on IRS Form 990.
For the 3 years, USA reported that from $937,000 to $3 million
(around 48 percent) of its total spending supported public service
activities. During this period, USA's spending for fund-raising
ranged from about 20 to about 37 percent of its total spending.
RELATIONSHIPS WITH OTHER
BUSINESSES
In 1994 state registration documents, USA stated having used three
contractors to conduct its educational and fund-raising programs.
Services received from one fund-raising contractor included
consulting services for (1) creating, designing, developing, and
producing fund-raising solicitation materials; (2) increasing
membership; and (3) arranging for production/
mail shop services for newsletters. A second fund-raising contractor
advised USA on creating and producing mailing lists and mail
packages. The third contractor advised USA on its direct mail
program and created and produced packages for mailing. An official
said the organization received the services of the three contractors
after the period covered by its 1991 through 1993 information
returns. USA did not use a fund-
raising contractor before 1994 but instead conducted its fund-raising
activities in house. USA also reported having contracts with three
lobbyists, a media relations business, a financial management
services, and a consultant to produce direct mail packages. From
1991 through 1993, USA reported that expenses for services specified
in these contracts accounted for about 75 percent of its total
expenses.
Figure VIII.1: USA
Fund-Raising Letter
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed edition.)Appendix IX
COMMENTS FROM THE SOCIAL SECURITY
ADMINISTRATION AND SIX
ORGANIZATIONS
======================================================== Appendix VIII
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix X
Roland H. Miller III, Assistant Director, (202) 512-7246
Jacquelyn Stewart, Senior Evaluator
James Wright, Assistant Director
John Smale, Social Science Analyst
*** End of document. ***