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CFC Contributors Beware

Not All of the Participating Charities Deserve Your Support

October 3, 2007

 
 

In offices nationwide, employees are often encouraged to pledge part of their pay checks to charity. A variety of programs exist to facilitate this, including those run by groups like the United Way and Earth Share, but the largest is the government’s workplace giving campaign. Called the Combined Federal Campaign (CFC), it offers federal civilian employees, members of the military, and U.S. Postal Service workers the opportunity to contribute to tens of thousands of charities. Since its launch in 1961, the CFC has generated nearly $6 billion in contributions.

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The Flawed Government Charity Drive

While the campaign to increase generosity should be commended, questions have arisen regarding the effectiveness of its oversight of the participating charities. In 2006, federal investigators released a report revealing that 6% of the charities in the program owed back payroll taxes and several engaged in criminal activity. Officials from the campaign have said that their hands are tied, citing a federal law that prevents them from screening charities for federal tax compliance. Perhaps even more disturbing was that the federal investigators were able to enroll a fake charity. Campaign officials claim that they’ve since taken steps to guarantee that all participating charities are actually tax-exempt charities recognized by the IRS.

If campaign officials had conducted appropriate due diligence, or if the investigators had probed a little further, federal employees would have found out that many of the charities the government recommends supporting are in poor fiscal health. We examined the 2,045 national and international charities participating in the CFC (there are thousands more that participate in hundreds of local campaigns). Our investigation revealed that 817 are rated by Charity Navigator and that 30% of those fail to earn a good rating. Specifically, two charities have a 0-star, ‘exceptionally poor’ rating, 69 have a 1-star, ‘poor’ rating, and 176 have a 2-star, ‘needs improvement’ rating.

Despite the fact that various reports, including Charity Navigator’s analysis, demonstrate the need for increased scrutiny, this year the CFC announced its intentions to lower its standards. The campaign has a long-held guideline restricting participation in the program to charities that keep the sum of their fundraising and administrative costs under 25%. This is only standard it had in place to monitor the efficiency of the charities and Charity Navigator has long supported this minimum requirement. Of the more than 5,000 charities reviewed by our analysts, we’ve found that the vast majority spend 10% or less of their budget on fundraising endeavors and 15% or less on administrative costs. Yet, even though elected officials and charity representatives advised against such an action, the CFC moved forward with its plan to relax its eligibility criteria, effectively opening the door for more poorly-run charities to gain entrance into the program. Now, charities that exceed 25% on non-programmatic fees can participate so long as they publish their expenses in the campaign’s documents. As a result, 147 (of the 817 charities that are both rated by Charity Navigator and in the CFC) have expenses that exceed the previous standard. In fact, several charities devote less than half of their budget to the programs and services they exist to provide. And one, the Marine Corps Heritage Foundation, spends 67% of its budget just on fundraising and administrative costs.

Looking beyond finances, we find that 30% of the 817 charities sell, trade or share their supporters’ personal information regardless of their donors’ wishes. And another 23% refrain from doing so only when a donor requests that his/her information be kept confidential. That means less than 50% of the charities are committed to protecting the rights of their donors. This is yet another indication that not all of the charities in the program are worthy of support.

For many efficient and effective charities, the Combined Federal Campaign is a critical source of funding. It is important that federal employees continue to give generously, but it is equally important that they take the time to research the charities they are considering supporting – because the government is unable or refuses to do so. Those donors who plan to contribute via the CFC can use our site, for free, to review each charity’s fiscal health and commitment to keeping donors' personal information confidential. Simply enter a charity’s CFC number in the search box to look for specific charities. Alternatively, you can limit any search to charities in the CFC by using our advanced search tool or by selecting CFC as a filter criteria on the search results page. Keep in mind that Charity Navigator does not offer a rating for every charity included in the campaign. If your favorite CFC charity is not one of the 817 we rate, then we encourage you to consult our guide for Evaluating Charities Not Currently Rated by Charity Navigator. Finally, we offer our Guide To Giving In The Workplace for those who are not federal employees, but who are interested in participating in their employer’s workplace giving program.

   
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