Summary

As part of their fund-raising efforts, some groups have mailed letters to the elderly claiming that Social Security has "dire financial troubles" or that its trust funds are being "mishandled." Typically, these letters request financial contributions to combat these alleged threats to the program. The media have criticized some letters for using scare tactics to solicit millions of dollars in donations from the elderly. This report focuses on the following seven organizations that use social security issues in fund-raising letters: the American Conservative Union, the Council for Citizens Against Government Waste, the National Committee to Preserve Social Security and Medicare, TREA Senior Citizens League, the Seniors Coalition, the 60/Plus Association, and the United Seniors Association, Inc. GAO discusses (1) the basis for the groups' tax exemption; (2) the services that the groups provide; (3) their sources of income, income subject to taxes, and expenses; (4) their financial relationships with other businesses; and (5) the 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.