Within months of the 1995 Oklahoma City bombing, local charities were advised by the IRS that using donated funds to make lump sum payments to survivors would not be proper.
“Lump sum benefits or other similar arrangements not specifically geared toward alleviating the specific distress would not be appropriate,” the IRS said in an 18-page disaster relief guidance memorandum dated Aug. 25, 1995.
“An outright transfer of funds based solely on an individual's involvement in a disaster or without regard to meeting that individual's particular distress or financial needs would result in excessive private benefit,” the memo stated. “Persons who have been affected by a disaster are not necessarily proper objects of charity.”
Oklahoma City charities followed that IRS advice. Officials in many other disaster-struck cities have ignored it.
Whether ignoring the advice has resulted in tax consequences is unclear, since the IRS doesn't publicize its enforcement actions.
Washington, D.C., attorney Kenneth Feinberg was called in to determine how government and donated funds should be divided up among victims following the Virginia Tech campus shooting; Aurora, Colo., theater shooting; 9/11 terrorists' attack; BP oil spill; and Indiana State Fair pavilion collapse.
He said IRS language has “never prevented or been a barrier” to him in the distribution of funds.
Of course, not all funds are the same. For example, the September 11 Victim Compensation Fund was created by an act of Congress to compensate victims of that terrorists' attack in exchange for not suing the airlines.
Some other funds appear more similar to the Oklahoma City bombing fund.
Feinberg noted that at Virginia Tech he helped get $7 million distributed in 60 days to the injured and families of the dead “without condition.”
“Take the money. It's your money. Do what you want,” Feinberg said.
“I don't know anything about Oklahoma,” he said, adding that up until two or three weeks ago he “didn't even know there was a fund.”
Feinberg knows now, thanks to a controversy that has arisen over the Oklahoma City Community Foundation's handling of its bombing relief fund.
The fund has distributed about $11.1 million for the benefit of bombing survivors over the years, but still has about $10 million in it 17 years after the April 19, 1995, terrorists' attack on the Alfred P. Murrah Building. The attack left 168 dead and hundreds injured.
Some bombing survivors have complained foundation officials have been too tightfisted in withholding funds requested for medical, educational and living needs, while others have said the foundation has done an excellent job.
Feinberg said he was contacted a couple weeks ago by two or three individuals who were dissatisfied with the fund's administration. They asked him if he would be willing to decide how remaining funds should be divvied up among survivors, he said.
Feinberg said he would be willing to do it — free of charge — but would need an official request from someone who has authority over the fund.
There is widespread disagreement over how disaster relief funds should be managed and distributed to best serve the long-term interests of survivors.
In Oklahoma, officials say about $40 million in donations poured into various local charities and government officials for the benefit of bombing survivors.
Much of the money was quickly spent on emergency needs, but about $14.6 million eventually was consolidated into one of about 1,300 funds managed by the Oklahoma City Community Foundation.
The foundation paid case managers to contact individuals injured in the bombing and surviving family members of individuals who died in the attack.
Those case managers contacted survivors at least monthly for three years and continue to contact those with ongoing needs 17 years later, said Nancy Anthony, foundation president. The case managers helped survivors get whatever benefits they could, including insurance payments, social security checks and workers' compensation payments, Anthony said.
They also arranged for payments to be made from the bombing fund for necessary medical, counseling, educational and daily living expenses not covered by other sources, she said.
An education fund was established to pay for postsecondary education expenses not covered by other scholarships for children injured in the Murrah Building day care and children who lost parents in the bombing.
Anthony said many survivors suffered from severe depression and health issues.
The case manager system has provided them ongoing guidance that would have been missing if lump sum payments had been distributed, she said.
There also still is money available to pay for medical and mental health care needs that have developed through the years that might not have been known immediately after the bombing, she said.
Some survivors say the fund has not been nearly as helpful as administrators describe.
For example, Falesha Joyner, 40, of Oklahoma City, told The Oklahoman she lost her right ear and use of her right arm in the bombing. Joyner said initially she was given assistance, but was cut off after she began receiving Social Security checks, even though those checks didn't nearly cover her medical and other needs.
Others say the foundation has been generous and flexible in providing assistance.
Nicole Williams-Flick, who was pregnant when she lost her husband in the bombing, said her daughter was born with special needs.
Not only has the foundation paid for things people might expect, like co-pays on medicine, it also has paid for summer tutors to keep her daughter from regressing and helped locate a funding source for nearly $500 for clothing and equipment necessary to be a varsity cheerleader.
Williams-Flick said her daughter has grown up in the Bridge Creek School District and children in the community are very supportive and protective of her.
“The cheer thing has done wonders for her,” Williams-Flick said.
Anthony said she has read allegations about the fund that are “not accurate” or the results of miscommunications, but can't publicly discuss discrepancies because of confidentiality requirements.
Communities that have divvied up donations among survivors haven't avoided criticism, either.
Disagreements have arisen over such things as how much various injuries should be worth and how much should go to injured individuals compared to family members of individuals who were killed.
There also have been disagreements over whether each lost life should be valued the same, or whether families of high wage earners who were killed should receive more because they face a greater loss of expected lifetime earnings.