OPM's Ruling On Charity Drive Draws Protest

By Stephen Barr
Monday, March 12, 2007

The nation's largest workplace charity drive -- the Combined Federal Campaign conducted in government offices -- has tossed out a key rule, and that has prompted protests and appeals to members of Congress from nonprofit groups.

The controversy involves a decision by the Office of Personnel Management, which administers the charity drive, to drop a requirement that charities spend no more than 25 percent of their revenue on fundraising and other overhead expenses. Charities that exceeded the cap were required to give the OPM a reason and come up with a plan to reduce overhead to stay in the campaign.

Sen. Charles E. Grassley (R-Iowa) does not like the rule change. "OPM is now taking steps that potentially undermine the CFC, discourage charitable giving by federal employees, and harm our nation's charitable sector," Grassley wrote in letter to President Bush, sent Friday.

Grassley noted that the Internal Revenue Service recently drafted "best practices" for charities to help them improve their accountability, but "OPM is sending exactly the opposite message -- that there is no need for charities to be accountable to the public trust that comes with receiving charitable donations."

The OPM proposed the change in how the charity drive operates last summer and dropped the 25 percent requirement in November. Enforcing the overhead limitation had become an "administrative burden on OPM staff," in part because of lawsuits from charities that failed to qualify, the OPM said in the Federal Register.

James S. Green, associate general counsel at the OPM, said the charity campaign will continue to calculate overhead rates and publish the information so that federal employees can determine for themselves whether a charity has reasonable administrative and fund-raising expenses.

The OPM will advise employees that overhead costs above 35 percent should be seen as problematic, he said. That standard, he noted, is used by the Better Business Bureau Wise Giving Alliance. Green also said more than a dozen other rules will help keep "fly by night operations" out of the campaign.

Federal employees and military personnel pledged $268.5 million to the CFC in 2005, the latest tally available. Even though the number of government workers making donations has declined in recent years, the amount of their pledges has increased. The drive is of huge importance to Washington area charities, which received $57.6 million from federal employees in 2005.

It's clear, however, that many charities -- small and large -- are uncomfortable with the rule change. Global Impact, which represents U.S-based international charities, calculated that 91.8 percent of the comments received by the OPM on the change were in opposition.

The 25 percent rule "does say to people that they want to support organizations that are trying to put the money into services and not other things," said Christel Nichols, president of the House of Ruth, which helps homeless women in the District.

Added Father John Adams, president of So Others Might Eat, which helps the poor and homeless, "It doesn't sound like good business practice to lift the overhead."

H. Art Taylor, president of the Better Business Bureau Wise Giving Alliance, fears the OPM has made a bad decision. "This opens up the door for the campaign to receive charities that frankly are just set up to raise funds and not do much in terms of charitable services," he said.

Stephen F. Ristow, executive vice president of Global Impact, said as government employees see charities entering the program with higher overhead costs, "confidence in the campaign will go down."

Not all federal employees have access to computers or will recognize the importance of checking and comparing overhead rates, said Kalman Stein, vice chairman of the National CFC Committee, which represents a number of charities. "I think they have a greater responsibility to their employees than caveat emptor," he added.

Although the OPM announced it was rewriting the charity campaign rules last year, Neal Denton, vice president of government relations and public policy at the American Red Cross, said the nonprofit community feels rushed by OPM's decision to implement the new rules this month, for the 2007 fall campaign. "This was done very quickly without careful analysis and without a lot of deliberation," he said.

Reps. Henry A. Waxman (D-Calif.) and Thomas M. Davis III (R-Va.), leaders of the House Oversight and Government Reform Committee, also have concerns about the new policy and will be sending a letter today to the Bush administration, a committee spokeswoman said.

Grassley, in his letter to Bush, said he is worried that the charity drive is no longer a priority at the OPM, which oversees federal employee health and retirement programs. He asked Bush to consider transferring the Combined Federal Campaign to the Corporation for National and Community Service, which supports volunteer programs, saying that "would seem to be a more natural fit."

Stephen Barr's e-mail address isbarrs@washpost.com.


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