The 10-year battle over the nation's most important charity drive, the Combined Federal Campaign, has ended in legislation that permanently opens the annual fund-raising event to nontraditional charities and reduces the dominance of the United Way.

The $130 million federal campaign, which solicits 4 million civilian and military workers in the largest workplace drive in the country, is significant not only because of the money it raises. The CFC establishes patterns that are widely copied by state and local governments, according to Bob Bothwell, executive director of the National Committee for Responsive Philanthropy.

The Combined Federal Campaign has been embroiled in political controversy since at least 1971 and has been under almost continuous legal attack for a decade from charities excluded from the drive.

"We're hopeful that this will bring stability to the program," said Rep. Steny H. Hoyer (D-Md.), sponsor of the legislation. "It should alleviate the uncertainty among federal workers, the apprehension among charities and the politicking of OPM and Congress."

"This is a hybrid of good and bad," said Hugh Hewitt, general counsel of the Office of Personnel Management.

"It does not lock in any charities, and it requires all charities to keep their level of administrative expenses low."

In many ways, the deal represents a capitulation to nontraditional charities whose inclusion was championed by members of Congress over OPM's intense objections.

"This is a big victory for politics," said Bothwell, who fought for the nontraditional charitable groups. "Everybody got something they wanted and nobody got everything."

But Donald Devine, the former OPM director whose efforts to exclude the advocacy groups have kept the courts busy for several years, described the compromise as a "true tragedy, but the inevitable result of throwing in into Congress.

"The basic idea of a charity drive is to unite everybody behind causes everybody can support. Anything that undermines that consensus hurts participation. If you let in groups people don't like, it is terribly difficult to rebuild that consensus.

"The drive was noncontroversial when it began. It is so policitized now that it is discouraging, but that's the way the world is."

Devine and others say that the inclusion of controversial charitable groups has cut the participation rate from a high of 81.3 percent in 1966 to what OPM estimates will be a low of 55 percent in the 1987 drive under way.

But Bothwell said that the dramatic decline in the proportion of employes who contribute resulted from a different cause.

In the 1970s, he said, some supervisors were soliciting contributions from subordinates under the implied threat that a failure to contribute would be a black mark against the worker.

A successful court suit curbed this practice, he said, and OPM implemented rules directed at coercion in 1979. The participation rate dropped from 72.8 to 59.4 in a year.

OPM contends, however, that "no effective anticoercion rules" have existed to date, and the controversy surrounding that possible inclusion of unpopular causes in the drive is the only thing that could be responsible for the drop.

At the same time the total contributed each year has risen, which the advocacy groups attribute to increased interest generated by a greater selection of charities.

The compromise calls for:

Allowing the participation of charities that provide broadly defined health and welfare benefits.

Eliminating the practice of allowing federal workers to write in the names of charities.

Barring charities that spend more than 25 percent of their income on administrative expenses.

Tightening rules against coercing employes to give.

Spurring competition among charities to administer local fund drives.

Gradually reducing the percentage of undesignated gifts -- those not earmarked for a specific charity -- that go to the United Way.

Allowing the government to release the names contributors to the charities, unless the worker bars it.

Dividing the undesignated contributions according to the following formula after a two-year phase-in period: United Way, 82 percent; the International Service Agencies (such as Save the Children and CARE), 7 percent; the National Voluntary Health Agencies (such as those working in the areas of heart, cancer, etc.), 7 percent; others at the discretion of the board of directors of each local fund drive, 4 percent.

The United Way of America was in some ways the biggest loser in the deal. The United Way is the national charity organization that last year raised $2.7 billion for the largely traditional charities that often provide direct services to the poor and needy.

So-called nontraditional and advocacy charities often use lobbying or litigation in an effort to achieve their aims.

The United Way has been receiving about 90 percent of the undesignated contributions under a system it largely administered because it runs the federal charity drive in most cities.

"As you know there has been a lot of controversy because of a perception of a conflict of interest," said James Johnson, senior associate with the United Way of America. "We think a formula for the division of receipts will be to everyone's benefit.

"We wanted the write-ins dropped because they are almost impossible to administer, and we wanted a formula {for distribution of undesignated receipts} and we got one that would not hurt us for two years. We had no choice but to accept {the 82 percent} if we wanted some stability in the campaign," Johnson said.

The United Way was not the only disappointed group.

"It was a very tough pill for us to swallow to be excluded" from receiving an automatic share of the undesignated contributions, said Durwood Zaelke, director of the Washington office of the Sierra Club Legal Defense Fund. "It was a very big compromise for us, but the compromise allowed the measure to proceed."

Zaelke represented a group of national service agencies who had sought not only the right to participate in the drive, but a portion of the undesignated receipts as well.

Under the compromise, they must compete for 4 percent of the funds against some popular local charities, among others.

The International Service Agencies, a federation of 34 groups providing health and welfare benefits overseas, are "pretty pleased" with the compromise, according to Richard Leary, executive director of the International Service Agencies. "It has some very good points. I think it will work and the numbers {contributions} will be very good. The allocation of the undesignated contributions is not controlled by one of the beneficiaries, and we are pleased with that."

An aide to Hoyer said, "A lot of ill will had built up, but everybody's bottom line was fairly compatible, and over many meetings we negotiated an agreement among the federations."

He said that although OPM never signed off on the agreement, the administration was eager enough to end write-ins and tighten up accounting procedures that it did not oppose the compromise in the end.

Devine described the effort as "not very good legislation."

"It's a poor way to make law, writing into the legislation specific percentages for specific groups rather than having objective criteria" to use in giving out the undesignated contributions, he said.

Further, he said that the legislation raises public policy questions by making it theoretically possible for churches and colleges to participate. "It equals my worst fear, turning it from a charity drive into a general solicitation mechanism."

Last May, OPM wrote in the Federal Register, "In the more than a quarter century since the CFC began, it has grown from a noble idea, well-launched, into a bureaucratic nightmare . . . ."

OPM Director Constance Horner appointed a task force that conducted hearings across the country, and Hewitt said she still plans issue its recommendations.

Others see it differently. "For too many years the CFC has been treated as a political football," said Sen. Dennis DeConcini, (D-Ariz.), who with Sens. Mark O. Hatfield (R-Ore.) and Barbara A. Mikulski (D-Md.) worked to resolve the issue. "We have finally taken a step in the right direction."