The Lightning Rod M/M Blog

New Kid In Town

FES - Federal Employee Support For CFC Charitable Giving Incorporated - is a nonprofit organization formed specifically to administer local Combined Federal Campaigns (CFC).  That's a contract job often taken by the local United Way.  In fact, until recently these CFC management contracts were a United Way sinecure.  Not any more.  Other CFC federations now manage CFCs in major cities across the country.

But FES is different.  It's not a CFC federation.  It's not listed in the CFC brochure, and it doesn't solicit gifts for itself from CFC donors.  In other words, FES is not a beneficiary of CFC gifts.  It is truly an independent, disinterested third-party administrator - a status that makes it inherently superior to United Way or another federation that has a stake in the campaign it is managing and thus has an inherent  conflict-of-interest.   

That conflict of interest is not just in theory.  I give most campaign managers credit for resisting temptation to use their power to favor their employer federation at the expense of the other charities.  But in real world CFC campaign situations advantage is sometimes taken; often it's taken without deliberation, but taken nevertheless.

FES started with administering the Pike's Peak CFC.  Then it added Pittsburgh's Three Rivers CFC to its list.  And for 2007 it has added San Francisco Bay Area.  FES is governed by (mostly) retired federal employees themselves, people who have had significant experience with the CFC.  They know what they're doing.  FES gets rave reviews for its service.   You can  bet that  campaigns will sign up as fast as FES can scale up.

When the US Office of Personnel Management (OPM) circulated drafts of the new CFC regulations for comment last year, I suggested they open up the management contracts to the private sector so there would be more competitive bids.  Right now only nonprofits are permitted to bid.  OPM did include that idea in its potential change list at one point, but the howl of opposition from United Way and other federations, fearful of losing their lucrative contracts, caused OPM to withdraw the idea in the final draft of the regulations.   How ironic that a nonprofit corporation organized by federal employees themselves is accomplishing the same thing.

Donor Advised Funds For Workplace Giving?

According to an article in the May 3, 2007, Chronicle of Philanthropy, donor advised funds are now paying out to charities about the same amount annually as the entire United Way system (my observation, not the Chronicle's).  What I found especially interesting was that the Renaissance Charitable Foundation set up donor advised at three companies, which gave their workers the option of contributing.  This is new, and I hope to see more of it.  Replacing United Way donor option ("write-in gifts") with donor advised funds could be good news for both the United Way (which doesn't really want to process write-in gifts) and corporations that want to offer their employees freedom of choice in charitable giving at work but don't want the administrative burder of running that program in-house. 

Independent Charities of America (ICA) offers donor advised funds, too, and it has been ICA's experience that  the interest earned on the assets contribution mostly pay for the administrative costs of the eventual distribution to charities.  (ICA requires a minimum distribution of five percent of the donor's account annually).

That's the good news.  The bad news is that when ICA has offered this option to corporations, the response has been "that's too complicated for our employees to understand."  Maybe so.  It's a new idea for workplace giving.  But once that AH-HAA! moment happens, and employees get it, I think they will love this idea.

What do you think?

Too Many Charities?

With the number of US charities now past one million -- and counting -- I'm hearing more and more pundits and self-appointed watchdogs saying that there are too many of them.  "We've got 700 breast cancer related organizations in this country" said Trent Stamp of Charity Navigator to the New York Times recently.  "If there were less there might be more money for a cure."

Really?

Personally, I think that those who believe there are "too many" charities are mistaken.  Individal acts of charity are manifestations of "the better angels of our nature," as Lincoln put it.  But charitable organizations exist not only to organize our angels but also to experiment with them to determine which of the myraid possible combinations of organized good work work best.  That's work better done by thousands, not hundreds.  And a byproduct of all that activity is that it "pollinates" society's collective conciousness on the possibilities of doing good.  In other words, organized charities' most important contribution is not as "service providers" (though that's a nice side benefit) but rather as "incubators."  In fact, once they have raised our conciousness about an issue, and demonstrated a model successful enough to address that issue that a majority of us agree on, then it is probably time for them to dissolve and let the government run the model.   I'm serious. That's how alms houses morphed into Social Security and how charity hospitals morphed into Medicare. 

Too many charities?  That's like saying there are too many businesses, too many entreprueneers, too many dreamers.  Charities are not like factory-farmed vegetables, best planted uniformly and thus harvested "efficiently."  No.  Charities are more like wildflowers -- unruly, opportunistic, cross-pollinated, and mostly short-lived.  And beautiful.  Let millions bloom.

Penurious To The Point of Poverty

So it's come to this.  According to the Chronicle of Philanthropy and other observers, foundations increasingly won't make grants to sustain charity operations.  Many United Ways now take the same position.  They want to fund "programs" that have "metrics" to engender "measurable solutions" for "community problems."  But nobody wants to pay to keep the lights on.

The same dynamic operates at the individual giver level, too.  Donors equate "low overhead" with "program efficiency," even though the two usually have little in common.  And there are plenty of self-appointed "watchdogs" and "consumer advocates" around repeating the low overhead mantra as if it were gospel.

I'm not saying low overhead shouldn't be a goal.  I'm just saying that the nonprofit sector had better wake up and deal with this over-emphasis on program to the exclusion of operating expenses.  If the overhead doesn't get bought, the program doesn't get done.

This should be self-evident, especially to institutional funders like foundations and the United Way.  But they're like everybody else I guess.  Like the song says:  Everybody wants to go to heaven, but nobody wants to die.

OPM Strikes Back

You may have heard about Senator Charles Grasley's letter to President Bush regarding the new CFC regulations and numbering system.  The story was in the Chronicle of Philanthropy. Here is OPM's response.  Articulate and well-reasoned I think.  What do you think?

FOR IMMEDIATE RELEASE                                                                              CONTACT: Mike Orenstein

March 13, 2007                                                                          202-606-2402 or michael.orenstein@opm.gov

OPM Director Linda M. Springer’s Statement on the Combined Federal Campaign (CFC)

Washington, D.C.:

“As Director of the Office of Personnel Management (OPM) and administrator of the Combined Federal Campaign (CFC), I am today expressing my assurance that the CFC remains a program that Federal employees can support with confidence.

“OPM has taken steps to strengthen our ability to ensure CFC accountability.  Each charity which participates in the CFC must meet stringent eligibility and public accountability requirements.  A participating charity must:

1.     Certify and demonstrate that it is an IRS recognized 501(c)(3) tax-exempt public charity.  OPM compares applicants against an IRS database to verify this certification.

2.     Certify and demonstrate that it prepares and submits to the IRS a Form 990, the annual tax form for non-profits.

3.     Certify and demonstrate that it provides or conducts real services, benefits, assistance, or program activities in 15 or more different states or a foreign country over a three year period prior to the annual CFC for which it is applying.

4.     Certify and demonstrate that the organization is a human health and welfare organization.

5.     Certify and demonstrate that it accounts for its funds in accordance with generally accepted accounting principles (GAAP) and has an audit in accordance with generally accepted auditing standards (GAAS). A copy of the most recent annual audited financial statement must be included with the application for all national and international charities or those charities with over $250,000 in revenues.

6.     Compute the organization's percentage of total support and revenue spent on administrative and fundraising to determine an administrative and fundraising rate (AFR).

7.     Certify that the organization is directed by an active and responsible governing body with no material conflict of interest and a majority of which serve without compensation.

8.     Certify that the organization's fundraising practices prohibit the sale or lease of its CFC contributor lists.

9.     Certify that its publicity and promotional activities are based upon its actual program and operations, are truthful and non-deceptive, and make no exaggerated or misleading claims.

10.  Certify that contributions are effectively used for the announced purposes of the charitable organization.

11.  Certify that it is in compliance with all statutes, Executive Orders, and regulations restricting or prohibiting U.S. persons from engaging in transactions and dealings with countries, entities or individuals subject to economic sanctions administered by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC).

“Concerns have been raised about the elimination of the 25% administrative and fundraising rate (AFR) requirement.  In the past, numerous organizations have participated in the CFC with AFRs in excess of 25% with an accepted explanation and plan to reduce the AFR.

“OPM will continue to calculate AFRs for all participating charities and publish this information in the annual catalog, thereby allowing Federal employees to make informed decisions about how they contribute their money.  The transparency in this process enables employees to draw distinctions between the charities and their operational practices and promotes control over fundraising and administrative costs.

“Combined with the eleven requirements listed above, we believe that CFC charities are receiving appropriate scrutiny.

“Regarding the requirement of financial audits, the submission of financial data did not change for national and international applicants.   Local charities must meet these same standards, with a few exceptions.  For example, charities with less than $100,000 annual revenue do not need an audited financial statement but still must certify that they have adequate controls in place to ensure that funds are properly accounted for. Local charities with revenue between $100,000 and $250,000 must certify that they account for their funds in accordance with GAAS/GAAP procedures, but they do not need to submit the audit unless requested to do so by OPM or the local Local Federal Coordinating Committee (LFCC).

“And to those who express concern with the CFC’s replacement of its numbering system, the number of charitable organizations participating in the CFC continues to grow and we are simply running out of four-digit numbers.  The assignment of new, unique five-digit code numbers will also enable OPM to improve the efficiency and effectiveness of the CFC through the use of electronic giving technology.”

Who Owns The CFC Logo?

As I write this on March 6, 2007, the Combined Federal Campaign's training workshop for campaign managers and volunteer leaders is underway in a hotel in Seattle.  In the hotel lobby, outside the ballroom, attendees can visit with a number of commercial vendors exhibiting their wares -- all the awards and pins and doodads and whatnots so necessary to waging a successsful campaing, and all bearing the CFC campaign logo.  But there's a problem.  One of those vendors, Sales Service America, a subsidiary of United Way of America, claims that it owns the CFC logo and that if other vendors want to show it in their catalogs or on their websites they must first pay a license fee to United Way or face the wrath of United Way's high-powered lawyers.  The US Office of Personnel Management is aware of this situation.  Doesn't it strike you as odd that the government would accede to United Way's claim that it owns the logo and seal of a government program?  Who's in favor of a new CFC logo, one in the public domain?

Is UJC Changing Its Modus Operandi?

Thanks to Ira Kaminow at Just-Tzedakah for this heads-up on an article about United Jewish Communities appearing on the JTA web site entitled "Strategic-planning Model Spreads As Federations Seek To Grow Campaigns."

Some chapters of UJC are copying United Way of America's new approach (or is it the other way around), replacing the traditional "member charity allocations" system with an "outcome-based grants" system.   The result is to increase the decision-making power of the federation and reduce the decision-making power of the member charities. 

Readers of this blog may recall my objections to United Ways adopting this new model when they do so in conjunction with moves to disempower individal contributors' opportunities to give to the charities of their choice.  Moves such as restricting or eliminating donor option programs ("write-in gifts"), for example.  Full disclosure:  My client, Jewish Charities of America, takes the opposite approach, encouraging contributors to tell the federation which of the member charities should share in their gifts and how much for each.

So what do you think?  Is UJC on the right track?

Controversy At Federal Government's Charity Drive

Dear Editor:

Thomas G. Bognanno, president of Community Health Charities of America, couldn't possibly be so misinformed about the Combined Federal Campaign as his quotes in your article make him appear to be (Controversy At Federal Government's Charity Drive).

http://philanthropy.com/free/update/2007/02/2007020701.htm

There was never a requirement that CFC charities have fund raising and administrative overhead of 25% or less, only that if overhead was higher than 25% the applicant charity had to summit a plan for eventually coming under 25%. Charities with 25% plus overhead were routinely admitted year after year -- including charity members of the CFC federations now complaining. Those federations weren't crying "accountability will suffer" when their own members with 25% plus overhead were asking to be included.

Mr. Bognanno and his colleagues claim CFC donors will be "confused" by the new 5-digit numbering system that is replacing the previous 4-digit system. The truth is that even those givers who give to the same charities each year look up their names and associated code numbers in the campaign's givers guide first. Why? Because the old code numbers were subject to change each year, and often did. (The new ones will be permanent). A couple of years ago OPM without advance notice changed the codes for every single member charity in the Christian Charities USA federation, one of the most popular federations in the CFC. There was no confusion and no complaint from givers whatsoever -- not a single phone call -- and the charities raised just as much money as they had raised before the change.

The complainers also allege that their charities "have no time to react" to the new numbers because they have already prepared their marketing materials for the Fall 2007 CFC. If they have done so they have no one to blame but themselves. The government gave several years advance warning about the coming change. Wait -- I take that back. The charities do have someone to blame -- Mr. Bognanno, who was supposed to be keeping his member charities up-to-date on CFC matters but apparently dropped the ball.

As for chastising the government for not being more "sensitive to what the world of philanthropy is saying," Mr. Bognanno surely cannot be suggesting he and his three fellow naysayers represent a majority or even a significant plurality of CFC charities, much less the entire nonprofit sector. There are twenty-seven national CFC federated groups. All of them had a full and fair opportunity to participate in the deliberations that eventually led to the new regulations. The majority of them support the government's actions.

I suspect that Mr. Bognanno and his colleague's real issues have nothing to do with campaign integrity or donor confusion. This all about competition. They've had less of it. They're going to get more of it. And they don't like it. One important fact they don't seem to comprehend, however, it that the CFC is not "their" campaign. The federal fund drive is an employee benefit, not a sinecure for select charities.

Even with the new regulations in place the CFC remains a very exclusive fund drive, far more so than, by comparison, many corporate workplace fund drives, where employees are free to designate their gifts to any charity in the country. In fact, it's ironic that Mr. Bognanno is fighting the government's plan to give its employees more freedom of choice in selecting other charities besides his own members. He and his members bitterly complain when local United Ways try to deny participation in corporate employee fund drives to only United Way charities. There's a word for that.

Maguire Vs. Sodo On The New CFC Regulations

Follow the link below to the Chronicle of Philanthropy's article about the controversy over the new CFC regulations eliminating the former 25% or lower overhead eligibility requirement. The irony here is that Don says it's "job one" for employers to "eliminate the possibility of unscrupulous or badly managed charities from participating in a campaign in the first place," and then the article continues to recall that one of those charities that ran afoul of the 25% rule was Make-A-Wish Foundation of America, one of Don's own members.

Which is MAWFA, Don: Unscrupulous or just badly managed?

http://philanthropy.com/free/update/2006/11/2006112201.htm

When the Board Asks "Why Are We In A Federation," Tell Them This

Good Afternoon Patrick,
I hope your day is going well. I have a question for you. I have been handling the CFC donation payments and donor name downloads for thank yous for the last two years. Members of our Board of Directors have inquired as to why we use a federation for CFC donations and are not an independent agent. Can you please give me some insight on this question as to the benefits that we receive by affiliation with your organization? I’m uncertain as to the procedures one would have to go through to become an independent entity. I believe that it is very beneficial to be a member of Maguire/Maguire, and would appreciate any help you might give me on this matter!
Thanks again for any help. Enjoy your day.

Dear Deb,

This is a good question, and one I get all the time. The first thing I do is send the board member to the appropriate federation web site (in your case, www.conservenow.org). The web site explains the mission and operation of the federation and includes a list of member benefits. Then I recommend they go to my web site and log on to their charity's online portfolio to review all the information posted there. And if it's not just the question of why be in a federation but also wanting to understand how workplace campaigns function I encourage them to watch the hour-long training video "Workplace 101," which is also on my web site.

Or you could just tell them this:

1. If we weren't in our federation I'd have to process reports and payments monthly from 300 separate local CFCs instead of getting one report and one payment that represents the proceeds from all of them.

2. If we weren't in our federation we would be listed in the "unaffiliated" section in the CFC campaign brochures, and our CFC income would drop 40% or more because few donors who are interested in conservation or preservation issues scan that section.

3. If we weren't in our federation we would receive most of our donor names on paper and I'd have to manually enter them.

4. If we weren't in our federation we wouldn't be participating in $50 million worth of corporate employee fund drives in addition to the CFC, which in our case represents $12-15,000 a year that we otherwise wouldn't have.

5. If we weren't in our federation we'd lose access to our share of the pool of gifts that donors have made to the federation itself to be shared by all the federation's members. That share pays for almost our entire cost of membership in the federation.

Here's the full list of member benefits from the federation web site:

MEMBERSHIP SERVICES AND BENEFITS - Campaigns reaching an estimated 10,000,000 employees, depending on your local presence eligibility and state charitable solicitation registration.
Access to the Combined Federal Campaign, 30 state employee campaigns, scores of municipal, county and university campaigns, United Way campaigns in Washington DC and San Francisco, and various independent corporate campaigns.
Automated "sign & go" applications (after first year of participation) including electronic processing and receipt.
Application assistance for campaigns where you can qualify directly, e.g. the Philadelphia, PA, and Dayton, OH, United Way campaigns.
Donor names & addresses keypunched and forwarded electronically, pre-formatted for download to your contributor database.
Monthly electronic funds transfer of gifts directly to your bank account.
Members share in "undesignated" funds and gifts made to the federation, as available.
Private, workplace campaign online portfolio, where members can check the status of their gifts and distributions at any time, review a three year history of workplace campaign giving, keep up to date on individual marketing programs, and download exclusive workplace training and education materials.
Inclusion on our federation's web site, which features "search" capability to help donors find you and information to motivate them to give to you once they do.
Automatic notification of campaign speaking opportunities, kickoff events, "agency fairs", and other opportunities to promote your agency directly to donors.
Complete workplace campaign marketing support, including but not limited to: campaign marketing packet, annual training conferences, copy writing and consulting service for campaign brochure statements and other campaign marketing materials, and assistance with custom workplace development plans and (optional) mass media display advertising.
E-Commerce Giving: This is an optional service available to our members. It is an online donation form that goes on your web site and allows donors to make credit card gifts to you via a secure server. Visa and MasterCard donations are processed free of charge and American Express donations are assessed a low transaction fee of 2.85%. It's a great service if you don't have your own on-line credit card processing system. ( Click here to see an example of the form)
Vehicle Donations: Through a partnership with VDAC (Vehicle Donations to Any Charity), we offer you a zero liability vehicle donation system. You can accept vehicles from anywhere in the country. We handle the towing, issue a charitable receipt to the donor, auction the vehicle, handle the transfer of title, etc. All you have to do is receive the money. Donations can be accepted online, or via a toll free number.