6 Charities Sue OPM Over Their Exclusion From Donation Drive

A group named after actor Michael J. Fox is contesting its disqualification from a federal donation campaign. (Louis Lanzano - AP)

A half-dozen charities are suing the federal government, saying they were unfairly dropped from the list of organizations eligible to receive donations from federal employees.

The Michael J. Fox Foundation for Parkinson's Research and five other nonprofit organizations are asking a federal judge for a restraining order to prevent their exclusion from the official eligibility list for the Combined Federal Campaign. An estimated 1.3 million federal employees donate more than $250 million a year to the more than 22,000 national, local and international nonprofit groups included in the campaign, according to the Government Accountability Office.

"We do consider it important," said Joyce Oberdorf, a spokeswoman for the Fox Foundation, the charity started by the actor that has grown into the nation's largest donor for Parkinson's Disease research. The foundation has been on the federal list since 2003.

The other groups that have sued are the American Association of Kidney Patients; the Allergy & Asthma Network Mothers of Asthmatics; the Sturge-Weber Foundation; the Navigators, which provides faith-based counseling and other services to U.S. military personnel; and Awana Clubs International, a Christian youth evangelical group.

Bernard J. DiMuro, the attorney for the six charities, declined to comment yesterday, saying that the parties are in discussions. A conference call with U.S. District Judge Colleen Kollar-Kotelly is scheduled for today. Meanwhile, the federal Office of Personnel Management, which runs the campaign, has agreed to postpone finalizing the charity list -- originally scheduled for this week -- for at least another week.

OPM spokesman Michael Orenstein declined to comment on the pending litigation.

In rejecting the charities' applications, the OPM said they did not meet a requirement that charities operate in 15 or more states or in another country over the previous three years, according to the lawsuits.

Charities must apply every year for inclusion in a brochure of eligible national organizations that is sent to every federal employee. Local charities are included in regional sections of the brochure.

The Fox Foundation said it cited $14 million in research grants to individuals in 16 states from 2002 through 2005. A rejection letter from the OPM said 2002 grants do not count. An appeal letter from the foundation said the organizations that received grants in 2002 also received grants in later years. The appeal said that "a complete reading" of the foundation's application would show that it has complied with the rules.

But OPM Deputy Director Dan G. Blair rejected the appeal, saying that those subsequent awards do not count as separate grants, according to the charity's lawsuit.

The foundation contends that the OPM acted in an "arbitrary and capricious manner" in rejecting its appeal.

The other charities were excluded because the OPM said they also did not operate in at least 15 states. Their unsuccessful appeals asserted that they met the requirement.

The way the OPM goes about creating the annual list has been a recent subject of criticism and legal wrangling. Last year, the OPM dropped a long-standing requirement that charities spend no more than 25 percent of their revenue on salaries and other administrative expenses after the national chapter of the Make-A-Wish Foundation sued in federal court. The agency was forced to print additions to the brochure it had prepared for the campaign.

And in July, the Government Accountability Office concluded that the OPM was too lax in vetting the charities that participate in the annual fundraising drive. The GAO found that 1,280 charities participating in the campaign -- nearly 6 percent -- owed federal taxes.

Fifteen of the worst offenders were referred to the Internal Revenue Service.

To illustrate the lack of oversight, the GAO successfully got a fake charity accepted into three local campaigns across the country. The GAO withdrew the application before any donations could be made.

The GAO also found that the OPM did not independently verify with the IRS whether charities in the Combined Federal Campaign were truly tax-exempt organizations.