Check-Off Funds May Languish, According to Comptroller Report

Published Date:
Jan 21, 2014

On New York state tax returns, filers can check one or more boxes to donate money for wildlife management, breast cancer research, volunteer firefighters or five other causes. Did you ever wonder where that money actually went? State Comptroller Thomas P. DiNapoli did, and as noted in a recent report, he wasn't entirely happy with what he found.

Six of the funds have been accumulating balances, DiNapoli said in a press release that accompanied the report. Although he found that $12 million flowed into six check-off programs during the last five years, only $5.1 million—43 percent—has been spent, compared with nearly 70 percent during the previous five years. And in two of the funds—prostate cancer and volunteer firefighting and EMS fund—there has been no spending at all. As a result, there's nearly $2.9 million sitting in the prostate cancer fund and half a million in the firefighting fund.

In his report, DiNapoli called for program reforms to ensure that funds in these check-off accounts are "committed to their intended purposes as expeditiously as possible." If this doesn't happen, he wants administering agencies to provide the executive branch, legislative branch and the public at large with an explanation of why and a plan for "timely and effective use of the funds." Overall, the reports calls for new policies and procedures to govern disbursement of the check-off funds. Currently, the breast cancer and the volunteer firefighting and EMS funds require that money be spent in the year in which they were donated, “to the extent practicable.” DiNapoli said he'd like to see all the funds covered by similar rules.

A Multipoint Reform Plan

DiNapoli offered a number of other specific points for handling the check-off funds in the future:

  • Revamp the law and identify a new administrative process for the prostate cancer fund.
  • Improve the administration of the funds through standardized processes with clear criteria to ensure the most effective use of the funds.
  • Develop policies for dedicated funds that do not have a defined recipient or specific use, to establish a prompt, competitive process for distribution.
  • Require administering agencies to report annually on the use of check-off funds, including the award process used, the amount awarded by recipient, and how such funds were used.
  • Identify projected tax check-off fund activity in the executive budget submission and the state’s financial plan.

Currently, said the report, although certain programs include some limited reporting requirements, the state has imposed no standard reporting mechanism on the responsible agencies. That is, there are few requirements to provide detailed information about the use of funds or the progress made in meeting the goals set forth in each program’s enabling statute.

The check-off procedures are essentially a partnership between two government agencies: The funds are collected and deposited into the state’s general checking account by the Department of Taxation and Finance. The Office of the State Comptroller accounts for these moneys in the related dedicated state funds, and publicly reports on the financial activity. The only exception to this procedure is the World Trade Center Memorial Fund, which is under the sole custody of the Department of Taxation and Finance.

CPA Weighs in On Options

Alan E. Weiner, a past NYSSCPA President, says he has always advised clients against making these check-off contributions: the extra work generally isn't worth it for the typically small contributions. The tax preparer has to reconcile, in the following year, the difference between the refund reported by the state to the IRS with the amount of the refund actually received or credited to the taxpayer’s following year’s estimate. The preparer also has to record the contribution in the taxpayer’s tax information for the following year.

For example, said Weiner, this might happen: The client will get a Form 1099G that does not match the cash received, because the contribution is correctly omitted from the refund. The client then questions the discrepancy, requiring the preparer to pull the file and issue a response. The preparer must be sure to segregate the charitable contribution from the tax deduction or refund number and reflect it as an itemized deduction, if applicable. The tax preparer's additional time probably results in a higher professional fee, he said.

"I encourage clients to keep their charitable contributions separate from their tax return," said Weiner.     

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