Ten Questions From Donors About CFC Charities

1. How can I tell if an organization is legitimate?

   The U. S. Office of Personnel Management (OPM), through the Office of CFC Operations, screens all CFC participating charities against the IRS Master File of Exempt organizations to ensure that they are duly registered as 501(c)(3) charities to which donor contributions are tax deductible. In addition, all CFC charities are reviewed annually for evidence that they are providing services on a local, state, national, or international level (depending on the type of application), as well as public and financial accountability. The CFC review does not evaluate whether an organization uses its donations efficiently. Each individual donor is responsible for evaluating this type of information. However, the Director of OPM has the authority to reject any organization that either has not taken corrective action in response to a sanction, or whose financial controls do not meet the required audit standards.

2. Can I get information about a charity’s operations and expenditures directly from the charity?

   Yes. Federal law requires the charity to send you a copy of its IRS Form 990 for a reasonable charge, upon request. In addition, you can request a copy of the organization's Annual Report. Prevailing industry standards recommend that the Annual Report include:¹

   1. the organization's mission statement,
   2. a summary of the past year's program service accomplishments,
   3. a roster of the officers and members of the board of directors, and
   4. financial information that includes:
      
      
      1. total income in the past fiscal year;
      2. expenses in the same program, fund raising and administrative categories as in the financial statements; and
      3. net assets.

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¹Better Business Bureau - Wise Giving Guide, Quarterly Magazine, Spring Edition 2003; Standards of for Charitable Accountability, p.9., 2003.

3. How can I learn more about an organization’s financial information?

   Charities with an annual revenue above $25,000 must file an annual information return to the IRS known as the IRS Form 990 (although some faith-based organizations are not required to file). This document can contain useful information about the organization's program, its staff and board of directors, and its finances. To access the IRS Form 990 we recommend you search the IRS database of exempt organizations (www.irs.gov/taxstats/charitablestats/article/0,,id=97186,00.html). In addition, you may also request copies of the IRS Form 990 from the State Attorney General's Registry of Charitable Organizations. You can reach the state office corresponding to the organization by contacting the National Association of State Charity Officials (www.nasconet.org). You may also contact the Guidestar organization and obtain online copies of the most recent IRS Form 990 and, for a fee, more detailed information on the organization (www.guidestar.org).

   The vast majority of charities participating in the CFC provide an internet address and/or telephone number. If you have trouble contacting the organization, please contact your local CFC office. A list of local campaigns is available in the Campaign Locator section of the CFC website, http://www.opm.gov/cfc/Search/Locator.asp.

4. How can I understand the information that is on the organization's IRS Form 990?

   The IRS Form 990 is an informational return. It contains a wealth of information regarding the organization. The first page provides information on the revenues and expenses of the organization. The remaining pages provide details about the information on the first page, plus information regarding the organization's management. Some examples:

   • Part I, lines 13, 14, and 15 show the total amounts that the organization spent on program services; management and general; and fundraising, respectively. Part II provides detailed information regarding the types of costs incurred (e.g., payroll, telephone, etc.) for each of these categories. Part III details how much of the program costs were spent on each specific program.

   • Part IV is the organization's balance sheet. Organizations are required to show if they have made loans to certain related parties (line 50) or have received loans from certain related parties (line 63).

   • Part V provides a listing of the officers, directors, and key employees along with information regarding their compensation. This section has been expanded to include information on transactions with former officers, etc. (Part V-B).

   • Part VI, line 82a & b - shows the value of donated services the organization has received. This can sometimes be a substantial amount, but it is not included on Part I.

   

   These are just a few examples of the types of information that can be obtained through the IRS Form 990. For more detailed information on the IRS Form 990, please check the IRS website (www.irs.gov).

5. What is the role of the U.S. Office of Personnel Management regarding the review of charities in the CFC?

   The Office of Personnel Management (OPM) is accountable for assuring Federal employees their designations will be honored and distributed to the charitable organization of their choice, and that all charitable organizations listed in the CFC meet strict eligibility requirements on an annual basis. All charity applications are reviewed either by OPM or a Local Federal Coordinating Committee (LFCC), as applicable. These applications contain the eligibility and public accountability criteria that must be met in order to participate in the CFC as set forth in Executive Orders 12353 and 12404, and 5 C.F.R. Part 950. These criteria are designed to ensure donors that only legitimate, accountable, and responsible charitable organizations are admitted to the CFC. These criteria include, but are not limited to, a demonstration by the applicant that it:

   • Is an IRS determined tax-exempt charity;
   • Provided to the IRS a Form 990, which is an informational tax return for non-profits;
   • Provided real services, benefits, assistance, or program activities; and
   • Has an active and responsible Board of Directors, in which a majority of its Board members serve without compensation and without a conflict of interest.

6. What is the role of the IRS regarding nonprofit organizations?

   The IRS is responsible for reviewing an organization's application to qualify as an organization exempt from Federal taxes (a nonprofit) because of the type of activities it conducts in the interest of public welfare. The IRS also is responsible for conducting examinations of nonprofit organizations and to determine any liability for tax penalties, or revocation of tax exempt status. For more information about the IRS's oversight of exempt organizations, visit www.irs.gov/charities/index.html.

7. Where else can I get information about the organizations in the CFC?

   A number of organizations make available information for donors about the charities they evaluate or rate. Known as charity ”watchdog“ organizations, these can help donors make responsible choices when donating. However, as suggested in a recent report about the organizations and publications that rate nonprofit organizations, because approaches and criteria to rating an organization may vary, it is important that donors fully understand the information they are receiving from such ratings and rankings so they can make well-informed judgments and not be misled and/misinformed.² Following is website information for each of the leading nonprofit organization rating services:

   • Better Business Bureau's Wise Giving Alliance (www.giv.org)
   • Standards of Excellence Institute (www.standardsforexcellenceinstitute.org)
   • American Institute of Philanthropy (www.charitywatch.org )
   • Charity Navigator (www.charitynavigator.org)

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²Rating the Raters: An Assessment of Organizations and Publications That Rate/Rank Charitable Nonprofit Organizations; report by a joint task force of the National Council of Nonprofit Associations and the National Human Services Assembly, 2005.



8. How can I evaluate an organization's use of funds?

   All of the above organizations evaluate financial measures although they differ on the allowable/desired percentage for fundraising costs. If you have questions about how an organization is using its funds, the most effective way of obtaining a response is by contacting the Chief Financial Officer or the bookkeeper for the organization and ask them to explain their use of funds for programs, administration, and fundraising. You may also wish to request historical information about the organization’s expenses and revenues so you can identify changes over time. Finally, you can review the organization's IRS Form 990 (see Item #3).
   
   OPM will continue to calculate and publish participating charities’ percentage of administrative and fundraising expenses (AFR) in campaign materials, and advise donors that an AFR in excess of 35% is considered high by many in the philanthropic community. Potential CFC donors should carefully review the circumstances applicable to the charities of their choice to be certain they fully understand and accept the AFR situations for such charities before donating to them.

9. What documents must the charity make available to the public?

   In general, all registrations and annual filings submitted to the IRS are open to public inspection. Only the Schedule B (Schedule of Contributors) portion of the annual IRS filing is exempt from public disclosure. While not required by law, nonprofit organizations do voluntarily disclose information about their operations and finances on their websites. Donors can play an important part in encouraging this best practice by asking their favorite charities to make it available as well.

10. What can I expect when I submit a complaint to OPM regarding a CFC charity?

    The Office of CFC Operations (OCFCO), which is responsible for the day–to–day operations of the CFC, receives inquiries and complaints from the general public, the media, and other interested parties regarding possible mismanagement or questionable practices. All complaints about CFC participating organizations are reviewed by OCFCO staff for possible violation of the CFC regulations. In cases where there is evidence of a violation or gross mismanagement and/or improper actions resulting in a loss of charitable assets, the OCFCO will refer the matter to the OPM‘s Office of the Inspector General (OIG) for investigation. To contact the OIG, please see www.opm.gov/About_OPM/ExecutiveTeam/inspectorgeneral.asp.

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