Charities are organizations established to address the needs of the poor or distressed and other social welfare issues. Federal, state, and private agencies and the American public monitor how well charities are meeting these needs. Although not all charities have a disaster relief focus, historically charities have adapted their work as needed to the immediate or longer-term needs of disaster survivors. In these disaster aid efforts, charities may cooperate with FEMA. Though charities and FEMA have a substantial role in providing disaster aid, people affected by disasters may also pursue other government or private sources of relief. Charities represent a substantial presence in American society. Internal Revenue Code Section 501(c) establishes 27 categories of tax-exempt organizations; the largest number of such organizations falls under Section 501(c)(3), which recognizes charitable organizations, among others. The term charitable, as defined in the regulations that implement Section 501(c)(3), includes assisting the poor, the distressed, or the underprivileged; advancing religion, education, or science; erecting or maintaining public buildings, monuments, or works; eliminating prejudice and discrimination; defending human and civil rights; or combating community deterioration and juvenile delinquency. An organization must apply for IRS recognition as a tax-exempt charity that strives to meet one or more of these purposes. In general, a charity serves these broad public purposes, rather than specific private interests. By 2000, IRS had recognized 1.35 million tax-exempt organizations under Section 501(c), of which 820,000 (60 percent) were charities. At the end of 1999, the assets of Section 501(c)(3) organizations approached $1.2 trillion and their annual revenues approached $720 billion. Charities pay no income taxes on contributions received, but they can be taxed on income generated from unrelated business activities. Federal agencies, state charity officials, other nonprofit organizations, and the general public may all participate in overseeing charitable operations to protect the public interest. At the federal level, IRS has primary responsibility for recognizing tax-exempt status and determining compliance with tax laws, such as those governing the use of charitable funds. Notwithstanding these powers, IRS is not generally responsible for overseeing how well a charity spends its funds or meets its charitable purpose. Despite the federal government’s significant indirect subsidy of charities through their tax-exempt status and the allowance of charitable deductions by individuals, the federal government has a fairly limited role in monitoring charities, with states providing the primary oversight of charities through their attorneys general and/or charity offices. These officials maintain registries of charities and professional fundraisers, including financial reports of registrants. They also monitor the solicitation and administration of charitable assets. Attorneys general and state charity officials have extensive power to investigate charities’ compliance with state law and can correct noncompliance through the courts. Although local law enforcement agents, such as district attorneys, may assist the state with investigations of charities, they tend to focus on the prosecution of the criminal cases of individuals who defraud charities. Further oversight of charities’ efficiency and effectiveness is likely to be carried out by the private sector, including “charity watchdogs,” and the American public. Watchdogs such as the Better Business Bureau’s Wise Giving Alliance and publications such as The Chronicle of Philanthropy are the public’s primary sources for information on charitable organizations and fund-raising. The questions and concerns people bring to the attention of watchdogs and government officials are often the key motivators for initiating investigations. Charities have historically played a role in the nation’s response to disasters. First, some charities, for example, the American Red Cross or the Salvation Army, are equipped to arrive at a disaster scene and provide mass care, including food, shelter, and clothing, and in some circumstances, emergency financial assistance to affected persons. Next, depending on the extent and nature of devastation to a community and charities’ typical services and capacities, some charities are best structured to provide longer-term assistance, such as job training or mental health counseling. Finally, new charities may form post-disaster to address the needs of all survivors or specific population groups. For example, after the September 11 attacks, charities were established to serve survivors of restaurant workers and firefighters. FEMA is the lead federal agency for responding to disasters and may link with charitable organizations to provide assistance. According to FEMA regulations, in the event of a presidentially declared disaster or emergency, such as September 11, FEMA is required to coordinate relief and assistance activities of federal, state, and local governments; the American Red Cross; the Salvation Army; and the Mennonite Disaster Service; as well as other voluntary relief organizations that agree to operate under FEMA’s direction. Although charities are expected to be among the first agencies to provide assistance to those affected, in the event of some natural disasters, FEMA may anticipate need and be the first to respond. FEMA can provide a range of assistance to individual disaster survivors. In a natural disaster, such as a hurricane or flood, the bulk of FEMA’s individual assistance program money tends to be given to individuals whose residences have been damaged. September 11 presented a different challenge for the agency: few people had damage to their homes, but many needed unemployment assistance and help paying their mortgage or rent. Though FEMA and charities provide key resources to survivors of disasters, a range of additional aid may be available for those affected by the September 11 attacks. Federal sources of aid to individuals include Social Security, Medicaid, Disaster Unemployment, and Department of Justice benefits for fallen police officers and firefighters. In addition, the Congress has set up a Federal Victim Compensation Fund for individuals injured and families of those who died in these attacks. See appendix I for more information about this fund. From states, survivors may obtain State Crime Victim Compensation Board funds, unemployment insurance, or workers’ compensation. Some families may also be able to access private insurance or employer pensions. While it may be difficult to tally precisely the total amount of funds collected, 35 of the larger charities have raised almost $2.7 billion and distributed about 70 percent of the money. Distribution rates vary widely among the charities, in part, because some were established to provide immediate assistance while others were established to provide assistance over the longer term. Charities used the money they collected to provide cash and a broad range of services to people directly and indirectly affected, although questions about how best to use the funds as well as service delivery difficulties complicated charities’ responses. Thirty-five of the larger charities have raised almost $2.7 billion as of October 31, 2002, to aid the survivors of the terrorist attacks. (See table 1.) These include a range of organizations, including large, well-established organizations such as the American Red Cross and the Salvation Army and other organizations created specifically in response to September 11, such as the Twin Towers Fund. While the total amount raised may increase over time, many organizations are no longer actively collecting funds. For example, The September 11th Fund stopped soliciting donations in November 2001 and in January 2002 asked the public to stop sending contributions to the fund. The large number of charities collecting funds for September 11 complicates the efforts to determine a precise count of the total funds raised. The Metro New York Better Business Bureau Foundation has identified 470 September 11-related charities, and the IRS estimates that about 600 charities are involved in September 11-related fundraising. The IRS took steps to quickly grant tax-exempt status to about half of these 600 charities after September 11. While some of these new charities appear to be smaller, specific fundraising events such as the Hike of Hope, others like the Twin Towers Fund, which raised $205 million, became major charities. While any one charity will have information on its funding and services, the charitable sector as a whole generally does not have reporting mechanisms in place to track funds across entities or for any one event. Some tracking efforts are under way, however. For example, the Metro New York Better Business Bureau Foundation recently surveyed the 470 September 11-related charities they identified and 270 responded to its request for fund information. Further complicating a precise tally of funds is the interfund transfers that occurred among charities. For example, the Americares Foundation raised $5.3 million in its Heroes Fund and transferred it to the Twin Towers Fund to be distributed. Likewise, the United Jewish Federation of New York distributed $5.4 million in grants it received from the New York Times 9/11 Neediest Fund and the United Jewish Communities of North America. The Metro New York Better Business Bureau Foundation estimates that more than $400 million of the charitable aid it is tracking represents duplicate listings of money raised by grant-making organizations and the direct service providers they are funding. Moreover, an unknown number of corporations have sold and are still selling products for which some portions of the proceeds are to be donated to September 11 charities, a practice known as “cause-related marketing.” Some reports cite hundreds of products being sold in the name of September 11 charities; the extent to which these funds have already been forwarded to charities is not known. A more complete accounting of the number of September 11 charities and the amounts they raised might be possible when all charitable organizations have filed with IRS the required annual information form, called the IRS 990. Among other items, these tax-exempt 501(c)(3) organizations must report on their total revenues (including donations), expenses, grants and allocations, and the total dollars of specific assistance they provided to individuals. This form is due in the fifth month after the close of the organization’s taxable year. As IRS 990 forms for these charities become available, examination of them may yield more information; however, the way these data are reported may not necessarily allow a precise accounting of dollars raised for September 11. For example, pre-existing charities that served other purposes as well as September 11, may not report funding data at the level of detail that would link spending to September 11 purposes.