The House Ways and Means Committee's Subcommittee on Oversight held a hearing November 8 to address issues relating to charitable fundraising and services for victims of the September 11 attacks in New York, Washington and Pennsylvania. Complaints about lack of coordination, complicated application processes, delay in distribution of funds, duplication of services and use of donations for non-September 11 related activities led Rep. J.D. Hayworth (R-AZ) to write the Ways and Means Committee Chair requesting oversight. Within days Subcommittee Chair Amo Houghton (R-NY) announced the hearings. Sen. Charles Grassley (R-IA) has written to Attorney General John Ashcroft and Internal Revenue Service (IRS) Commissioner Charles Rossotti expressing similar concerns and asking for information on their oversight efforts by November 16. Invited witnesses at the House hearing included representatives of charity watchdog groups, major relief organizations, the IRS and the New York Attorney General. Their testimony described the enormous scope of relief activity to date and the efforts underway to provide greater coordination and accountability. Several of the witnesses stressed the need to reserve funds for long-term needs, citing the experiences of other relief efforts, such as the United Way and Oklahoma Community Foundation after the 1995 bombing of the federal building in Oklahoma City. Much of the public criticism of relief programs was in response to Red Cross statements that it would hold about half of the $564 million it has raised in reserve to respond to future terrorist attacks. However this policy now is under review following the resignation of Red Cross CEO Dr. Bernadine Healy. Michael Farley, Vice President of Chapter Fundraising, told the subcommittee that the Red Cross has spent about $154 million to date, assisting 25,000 families with food, lodging and counseling; providing 10 million meals to survivors and emergency personnel; and making $47.9 million in three-month grants for expenses to 2,300 families that lost breadwinners. The new CEO, Harold Decker, has asked for a review of how the Red Cross can increase coordination with other agencies. Elliott Spitzer, the Attorney General of New York, testified about his efforts to establish coordination mechanisms, including development of a database -- operated by the nonprofit community -- that can be used by all relief organizations and protect the privacy of families seeking aid. Spitzer said he is pushing to streamline the application process by developing a uniform application form. He also stated that he has seen little evidence of scam operations. Joshua Gottbaum, CEO of the September 11 Fund in New York, testified that this joint effort of the New York Community Trust and United Way of New York City has raised $337 million, and distributed $47 million to date, working through 80 nonprofits to help 16,000 people. He supported use of the database created by the New York Attorney General, and emphasized the need to use funds to address long-term needs and help those who "fall through the cracks," such as elderly parents that were partially supported by adult children, but are not technically dependents. Lt. Col. Tom Jones of the Salvation Army also stressed the need to help "collateral victims," displaced and unemployed families who have lost jobs and income as a result of the economic impacts of the attacks. The bulk of the $60 million raised by the Salvation Army will be spent for this purpose, although they have already spent $8.5 million on immediate needs of victims. Jones testified that in eight weeks the Salvation Army had spent $55 million assisting nearly 2 million people with everything from food and shelter for travelers stranded by airport closures to rescue and clean up at the attack sites. IRS Director of Exempt Organizations division Steve Miller said charities can provide "disaster relief in a variety of ways," but the people served must belong to a "charitable class," which includes persons that are distressed, needy or victims of a Presidential- declared disaster. The charity must also control its own program, and gifts that are not made with "disinterested generosity" are not deductible contributions. As a result, he noted that charitable funds cannot be divided among victims on a pro-rata basis. Targeted contributions should be given directly to the victims or through a non-charitable organization. Miller also explained the IRS' role in overseeing charities, emphasizing that they focus on whether or not charities are serving charitable purposes, and not whether assistance is provided in the most efficient possible manner. While Congress looks at charities' responses to the attacks, it is still working on its own program. The airline bailout bill currently under consideration includes a September 11 Victim Compensation Fund, but conditions for receiving assistance are being debated. For example, applicants would forfeit the right to sue airlines and awards could be reduced by "collateral sources," such as life insurance policies. Rep. Roy Blunt (R-MO) wants to reduce awards by any amounts given by charity, which would have the effect of negating the efforts of the charitable sector. The issues raised at the hearing clearly illustrate that this proposal is inappropriate. Charitable programs are not meant to replace government assistance, but, as Daniel Borochoff of the American Institute of Philanthropy told the panel, "[t]he role of the charities is to fill in the cracks and meet those needs that are not being met by the government and insurance coverage." Nonprofits that want to submit written comments have until close of business on November 26 to do so. Because of problems with Congressional mail caused by anthrax, written statements for the printed record should be sent electronically to hearingclerks.waysandmeans@mail.house.gov, along with a fax copy to 202/225-2610.