Officials Warn Groups in Federal Charity Drive to Make Changes

The U.S. Office of Personnel Management has warned 12 big charity coalitions that raise money through the Combined Federal Campaign that they have violated federal regulations and must fix problems in their operations or risk getting kicked out of the drive.

The dozen federations are significant players in the federal government’s annual charity drive. During the 2003 Combined Federal Campaign, they represented 776 national charities and received pledges amounting to $51.2-million, or 20 percent, of the total $248.5-million pledged through the drive, according to the Office of Personnel Management, which oversees the solicitations.

The federations have denied that they have violated any regulations, although most of them have said they agreed with many of the changes recommended by auditors and have revamped their procedures to satisfy regulators.

MacKenzie Canter III, a Washington lawyer who represents 11 of the federations, has asked that the government withdraw its warnings because he said the federations have made changes the government sought. The Web site of the Office of Personnel Management notes that the federations have been warned to make changes. The government’s action comes as federal workers are deciding which charities to support in the drive that is now under way.

In reply to Mr. Canter, the Office of Personnel Management told the federations that it planned to visit their offices in November “to assess evidence of compliance with CFC regulations.” The government said that it would drop the warnings “as soon as possible” if it could verify compliance with rules by a review of documents provided by federations.

Audits Conducted

The federal action stems from a series of audits of the federations that were conducted over the past two years by the Office of Personnel Management’s inspector general.

The audits reviewed many concerns, including the question of whether federations had improperly sold the names of people who had donated through the Combined Federal Campaign, had boards that were not “responsible,” or had conflicts of interest. The federations have denied any improprieties.

“In our view, these findings indicate a lack of responsible governance and a serious breach that could threaten public confidence in the federation, its members, and the CFC,” said letters of warning sent to each federation by Dan G. Blair, deputy director of the Office of Personnel Management.

The federations are: Animal Charities of America; Children’s Charities of America; Christian Charities USA; Conservation and Preservation Charities of America; Do Unto Others: America’s Emergency Relief, Development, and Humanitarian Outreach Charities; Educate America! The Education, School Support and Scholarship Funds Coalition; Health & Medical Research Charities of America; Hispanic United Fund; Human & Civil Rights Organizations of America; Human Care Charities of America; Military, Veterans & Patriotic Service Organizations of America; and Women, Children, and Family Service Charities of America.

The federal government said that the audits were performed after it received a complaint from a group of other federations that also raise money in the Combined Federal Campaign alleging violations of campaign regulations. The government did not identify the group that made the complaint.

Key Findings

Two of the key audit findings focus on the relationship that the federations have with a business — Maguire/Maguire, a management-consulting and marketing company in Corte Madera, Calif. All 12 federations have contracts with the company for administrative and other services and share the same address as the company. The audit reports said that the federations provided “insufficient oversight” over the company’s work, a charge denied by the federations.

Maguire/Maguire carries out tasks that help the federations raise money in the federal drive and provides federations with a headquarters address and a toll-free telephone line that the company answers in the federation’s name.

Maguire/Maguire also helps federation boards with such services as maintaining documents and distributing board correspondence. Because the company carries out such a wide range of tasks, some federations do not need to have paid employees, although several have one employee apiece.

Linda Mansfield, president of Military, Veterans & Patriotic Service Organizations of America, said in an interview that she suspects the federations were singled out because of their relationship with Maguire/Maguire.

“Our operational model in using a consultant to manage the nuts and bolts of a federation is highly unusual,” said Ms. Mansfield. “I just know that in the CFC arena it is still looked at a bit askance by the government and other federations to contract for services even while retaining all the governance authority within the board.”

But Ms. Mansfield said that the arrangement with Maguire/Maguire is appropriate and leads to great efficiency, low overhead costs, and additional money for charity.

The Office of Personnel Management did not comment on its actions.

Use of Donors’ Names

Federal audit reports concluded that all 12 federations had inadequate controls over their Combined Federal Campaign contributor lists. The government said that the federations violated a federal regulation that requires them to certify that their fund-raising practices “prohibit the sale or lease” of the lists.

The audit reports said that the federations essentially sold names of donors to Maguire/Maguire.

The company used donor names “for surveys in its private marketing practice,” the government said. The company’s policy has been to send an e-mail to each federation’s member charities stating that it will be using the names unless the charities say that it cannot, the audit reports said. “The use by a for-profit marketing firm violates the intent of the regulation regarding CFC contributor lists,” the audit reports said.

Although the federations’ contracts with Maguire/Maguire stated that all databases and materials held and developed by the company were the property of the federations, the contracts did not restrict the use of the information by the company, the audit reports said, and thus violated federal regulations.

The audit reports noted that federal employees may allow the release of their names to the charities to which they have pledged. The reports said that the Combined Federal Campaign has received complaints from federal employees that, after they have allowed the release of their name to charities, “they have received communications from other entities, apparently based on the release of their name in the CFC campaign.”

Denying Wrongdoing

In letters to the government that were included in the audit reports, federations denied any wrongdoing either by them or Maguire/Maguire.

Patrick Maguire, president of Maguire/Maguire, said in an interview that the surveys conducted by his company were made of donors on behalf of the federations’ client charities as part of the federations’ work for them and with the organizations’ consent.

The surveys asked donors about the Combined Federal Campaign, Mr. Maguire said. The company sent survey results to federations and charities, he said, and did not otherwise use them except to provide summaries to the Combined Federal Campaign.

“The names were never sold or leased or even shared,” said Mr. Maguire. “There was absolutely no commercial benefit to Maguire/Maguire or to any other entity,” he said.

Federations told the Office of Personnel Management that they would revise their contracts with Maguire/Maguire to make clear that the company could not use donor names without the federations’ written consent.

In his August letter to the Office of Personnel Management, Mr. Canter said that the federations have now made all changes to their contracts with vendors that were suggested by the government.

Decision-Making Authority

Federal audits found that 10 of the 12 federations delegated “improper decision-making authority” to Maguire/Maguire.

The audit reports said that federations essentially allowed the company to make an important decision: whether charities applying for membership met a federal requirement that they provided “real services, benefits, assistance, or program activities” in 15 or more states or a foreign country to be eligible for listing as a national or international charity in the Combined Federal Campaign.

The audit reports said that the federations did not review applications for membership. Instead, the federations received a database printout from Maguire/Maguire that summarized the information in the applications, the audit reports said.

The printouts did not provide information about how the applicants met the requirements to be a national or international charity, according to the government, but only provided a box that was marked yes or no.

“By accepting the database printout with just yes or no checked, the federation has effectively delegated to Maguire/Maguire the decision-making function of deciding whether the applicant meets this requirement,” said one audit report.

Federations disagreed with the government in letters they sent to the inspector general. For example, Christian Charities USA and other federations told the government that the database worksheets were lists that helped boards review the eligibility of charities.

Each worksheet “does not represent the board’s final decision as to the adequacy of the documentation, nor does it represent a delegation of authority to render that decision, nor does it represent evidence the board is not doing its job,” they wrote.

In his letter to the Office of Personnel Management, Mr. Canter said that the coalitions had adopted a new system to review the eligibility of charities that allows board members to view application documents electronically.

Government’s Warnings

The 2004 Combined Federal Campaign, which began September 1 and ends December 15, continues to list all 12 federations as eligible recipients of gifts by federal workers.

A memorandum posted on the Web site of the Office of Personnel Management notes — by the use of asterisks beside the name of each of the 12 federations — that the coalitions have been issued warnings based on audits that “could result in future decertification from participation in the CFC.”

The government added: “OPM monitors campaigns or federations that were warned as a result of the OIG audit. Warnings remain in effect until OPM has verified full implementation of all corrective actions pursuant to OIG findings.”

Mr. Canter asked the Office of Personnel Management to remove the asterisks from its Web site. The federations “deserve to be relieved of this stigma,” he said.

Alternatively, Mr. Canter asked that the Office of Personnel Management post a notice on its Web site saying that the federations have complied with the rules and to be sure that such a notice was displayed in “equal prominence” to the way the government flagged its warnings.

Mr. Canter also asked that the government place the full audit reports on the Web site of the Office of Personnel Management.

November Visits

In reply to Mr. Canter, Mara T. Patermaster, director of the Office of CFC Operations, said that the warnings were issued because the government’s “review of the initial documentation provided by each federation in response to our requests for corrective action” was not sufficient to allow the government to decide if all rules were being followed.

The Office of Personnel Management plans to visit each federation in November to see if the rules are being followed, she said. In the meantime, said Ms. Patermaster, “if we are able to verify compliance through the review of supporting documents for some federations, we will do so as soon as possible and communicate the resolution to the appropriate parties and on the Web site.”

She added that, “given the large volume of information involved,” the government would not put the audit reports on the Web site of the Office of Personnel Management.