Conservatives in Congress appear to have gotten their wish. Thanks to budget cuts, the number of people working for the Internal Revenue Service (IRS) has fallen by about 10,000 in the past several years. That means, however, that there are fewer people around to ensure those organizations that claim to be non-profit actually are.

A report (pdf) from the Government Accountability Office (GAO) found that only 0.7% of charities were audited in 2013, and that’s down from an already-low 0.81% in 2011. This drop came while returns filed by charitable organizations went from 725,888 to 763,149, an increase of 5%. For comparison, about 1% of individuals and about 1.4% of corporations were audited in 2013.

The tea-party backlash on the IRS for investigating whether certain organizations were more political than charitable might account for the agency’s reluctance to go after charitable organizations, according to Josh Hicks of The Washington Post.

The main recommendation made by the GAO was to direct the IRS’s exempt organizations division to develop quantitative compliance goals and other measures and indicators that can be used to assess impact of exams and other enforcement activities on compliance by charities.

In response, the IRS vowed to improve the application process for organizations seeking tax-exempt status and reduce the backlog of applications, to determine the effect of enforcement action on organizations and improve the sharing of information with state charity regulators.

-Steve Straehley

To Learn More:

Shrinking IRS Struggles to Keep Up With Growing Number of Tax-Exempt Charities (by Josh Hicks, Washington Post)

Tax-Exempt Organizations: Better Compliance Indicators and Data, and More Collaboration with State Regulators Would Strengthen Oversight of Charitable Organization (Government Accountability Office (pdf)

IRS Audit Rate Dropping Lower and Lower (by Noel Brinkerhoff, AllGov)

IRS Gave Non-Profit Tax-Exempt Status despite Record Campaign Money-Laundering Disclosure in California (by Noel Brinkerhoff, AllGov)