New Rules for Workplace Charity Drive Give Donors a Better Deal

To the Editor:

The U.S. Office of Personnel Management recently issued new regulations overhauling the structure and operations of the Combined Federal Campaign, the at-work employee charity fund drive for federal workers, the military services, and the Postal Service.

The new regulations centralize a number of formerly dispersed “back office” administrative operations and require participating charities to pay an upfront fee to cover the costs of the fund drive. Previously these costs were deducted from employee gifts before the balance was forwarded to the charities.

As The Chronicle reported in its April 24 issue, the United Way of America and several other CFC federated groups have vociferously criticized the new regulations, calling on Congress and the administration to stay their implementation. They say the changes will hurt the campaign.

They are wrong. The changes may be inconvenient for the federations, but they represent a better deal for federal employee-givers, and those are the stakeholders who matter most and whose interests OPM has put first.

Not everyone agrees with United Way and the other critics. The CFC federations and member charities I work with—accounting for about 40 percent of total annual CFC revenues nationwide—are broadly supportive of OPM’s plan. They especially support the provision that charities should pay the costs of the campaign upfront so that gifts can be forwarded 100 percent to the charities federal employee-givers select.

The CFC is the largest and one of the most successful workplace fund drives in the world. Despite recent declines in the number of employees participating, the campaign is still supported by more than half a million federal workers. Even with the hostile fundraising climate the campaign faced in 2013, with the government shutdown and pay freezes and furloughs, federal employees still gave over $200-million, a testament to their generosity.

But the decline in employee participation has been a worrisome long-term trend for the CFC. So in 2012, OPM assembled a commission of various CFC stakeholders to consider ways to keep the campaign vital and relevant. (Disclosure: I was a member of that commission.)

The commission recommended a “pay to play” policy as a way to increase the value proposition of the CFC for givers, allowing for a 100-percent pass-through of gifts from donors to charities. Deducting funds from the gifts “off the top” to pay campaign expenses was a policy left over from a time when most givers did not specify which charities were to benefit. These days, however, almost all CFC givers specifically name the charity or charities they want to benefit and the amount each is to receive.

CFC givers understand that there is no free lunch, that ultimately some of what they give will go to pay the expenses of the solicitation asking for their gifts, but what they don’t want is for a third party over which they have no control to take funds from their gifts—often 10-20 percent or more depending on the local CFC—before the charities they support see the money. And they don’t want to have their gifts reduced to pay for the expenses of other CFC charities they may not support.

United Way and the other critics say charging participation fees to finance the campaign may deter smaller charities from applying, thereby lessening choice for givers. It is more likely, I think, that participation fees will only deter those charities that do not make enough revenue in the CFC to cover the cost of their participation. I suspect those will be relatively few. In any case, the way the system works now, asking CFC givers to underwrite the participation costs of charities that don’t make enough to cover their own campaign expenses, is not sustainable.

Previously, the CFC was organized into about 160 “local campaigns.” Senior federal officials and military officers in the campaign area were responsible for organizing the campaign and for issuing a contract for campaign administration and management support services. The contracts often but not always went to the local United Way. The problem, however, was that conducting 160 “mini-campaigns” led to much duplication of effort and few opportunities to leverage economies of scale. That’s the reason for that 10 to 20 percent and growing campaign-overhead charge.

OPM’s plan is to have slightly fewer but slightly larger (geographically) local campaigns. The campaigns will still be led by local senior federal managers and military officers, and they will still contract for campaign support services. But those contracts will no longer include fiscal services or other services such as the CFC website, which can be more economically centralized at one location.

United Way and the other critics characterize this change as a “loss of local control,” which will lead to federal management and employee disinterest in the campaign.

But there is nothing in the new regulations that prevents local United Ways or other organizations from providing local CFCs with consultative expertise and “boots on the ground” campaign staff. What will disappear, along with the fees that supported it, is the wasteful, duplicative effort of providing funds receipt and redistribution services for each of the 160 local CFCs when one national receipt and disbursement center can do the job more effectively and less expensively.

Neither I nor the charities and federations I work with endorse 100 percent of OPM’s plan. For example, the charity-participation fee structure makes no distinction between charities that participate via their respective federations (meaning they are already paying for much of the administration of the CFC) and the “unaffiliated” charities that CFC management has to deal with on a one-by-one basis (meaning increased administrative costs for the campaign and therefore higher fees for all participating charities). That’s not right and should be fixed.

But generally we believe the restructuring plan is basically sound and that many of the changes are long overdue. OPM mostly got it right.

Patrick Maguire
Business Manager
Independent Charities of America
Larkspur, Calif.