Costs to run and promote the 2017 campaign to rally federal employees to give to charity consumed more than one in four dollars pledged by government workers to nonprofits, according to documents obtained by the Chronicle and confirmed by the U.S. Office of Personnel Management.
Campaign expenses increased about $1 million over 2016, though they were less than the $28 million annual average during the period from 2007 to 2016, according to OPM, which oversees the annual drive. (The numbers are not adjusted for inflation.)
At the same time, pledges plunged in last year’s campaign, to $101 million, a 39 percent decline from the previous year.
The drop in pledges and the increased expenses put the overhead rate for the annual drive — called the Combined Federal Campaign — at nearly 26 percent. That’s higher than the 15 percent rate in 2016, when $167 million in pledges came in, and the nearly 14 percent overhead rates in 2015 and 2014.
Through the campaign — which usually runs from September to mid-December — federal employees pledge donations to thousands of nonprofits; most opt to give a slice of their paychecks over the coming year.
Pledges to the drive have declined every year since 2009, when they peaked at $283 million. Low morale among federal employees may have affected the campaign in recent years, as cutbacks and constant threats of government shutdowns make government workers uneasy, observers say.
The 2017 campaign saw the largest year-over-year drop in pledges since 2009.
Some charities say changes OPM implemented this year, including new upfront fees it charged nonprofits to participate, are to blame for the drop in donations. They’re also critical of what they say is a sloppy rollout of new systems to promote the campaign and process pledges.
“It’s important for OPM and their contractors to work closely together to address the issues of the past campaign,” says Jim Starr, president of America’s Charities, which helps nonprofits register for the CFC.
Before the 2017 campaign, more than 120 nonprofits — many of them United Way chapters — administered and promoted the CFC in areas across the United States. Each nonprofit had its own system for processing employee donations and enrolling charities in the drive.
That changed with 2017’s campaign, when OPM contracted out the duties of establishing a central website for pledges and charity enrollment. The agency also hired five companies to handle promotion of the campaign in 36 regions across the country, replacing the network of local charities that handled marketing in the past.
OPM says campaign expenses will drop once the development costs of its new online system for processing pledges are paid in full. Those expenses were spread out over three years — and will cost nearly $2.8 million annually through 2019.
The agency says it will also look for other ways to cut expenses. “We are committed to looking at every way possible to save money from the overall system expenses whether that is labor costs or other direct expenses incurred by the various contractors,” an OPM spokesman said in an email.
OPM also noted that the 2017 campaign officially started October 1, but its new online pledge system wasn’t ready until mid-October, which likely affected the fundraising total. The agency says it decided to delay the website’s launch to give nonprofits hobbled by Hurricanes Harvey, Irma, and Maria extra time to pay listing fees and join in the campaign.
Nonprofits say significant promotional work that was done in previous years was not performed in 2017 as new companies took over marketing.
Some nonprofits complain that they weren’t invited to local events this year to talk with federal employees about their work as they had been in past years. Or they were directed to functions that were difficult to reach.
Traci Wickett, president of the United Way of Southern Cameron County, says she was invited to four events with Transportation Security Administration employees in Houston — several hours away from her nonprofit’s location in Brownsville, Texas.
In previous years, Wickett says, she would have attended five or six local community meetings with federal employees. Last year, she wasn’t invited to any gatherings close by. “It’s just sad if you don’t have any contact with people,” Wickett says. “It’s impersonal; it’s remote.”
OPM says it does not have data to show how many of such events remained in place in 2017. Events that were focused purely on fundraising, like bake sales and cook-offs, were eliminated this year under a new set of regulations, the agency acknowledges. However, meetings focused on education and awareness, like charity fairs, were still allowed. The agency says it will connect with officials that approve such events to ensure they understand the new rules for the gatherings.
The pledge website also had problems when it first launched, says Marshall Strauss, chief executive of the Workplace Giving Alliance, a consortium of federations that participate in the CFC. The search function made it difficult for employees to find charities, says Strauss, who’s been openly critical of OPM’s efforts this year. He fears some people may have simply given up on it.
Such problems were addressed within a week, says Katie Boyce, general manager of the Give Back Foundation — which was hired in December 2015 to build the new online hub along with its subcontractor, TASC, a benefits-management company.
Some 80 percent of people who used the new system completed the pledge process, according to OPM.
Many charities were angered by new upfront fees required to participate in 2017. In past years, charities were charged fees from their pledges when the drive ended.
The new upfront charges led to thousands of groups dropping out altogether.
But many of the groups that dropped out didn’t raise any money through the drive to begin with, according to OPM. Under the old system, many nonprofit participants didn’t realize they were being charged at all, the agency adds. Today, for the first time, all charities can see online how much they’re paying in fees, OPM says.
Still, small charities in particular are angry about the new expenses, which they say ate up a significant amount of their pledges.
Take the United Way of Southern Cameron County. The charity paid a $340 application fee and $635 listing fee to join the campaign in 2017.
Its results were dismal: It got six pledges for a total of $1,702. The organization typically raised about $8,500, says Wickett, who blames the drop in donations largely on the CFC’s poor marketing of the drive this year.
Then came the kicker: Wickett’s group received its first monthly disbursement from employees’ checks in April. The total? $0.
Wickett learned that in addition to the $975 it paid in application and listing fees, CFC administrators had charged $280.83 in “distribution fees"— a portion of which came out of its first payment. But since it received so few pledges, the group was left with nothing in its first disbursement. “I was really surprised,” Wickett says. “I may have said a bad word or two.” All charities were assessed a 16.5 percent fee from their pledges to help pay for the costs of the campaign, according to OPM.
The group has calculated what it will gain in total from the CFC: $446.17.
That means costs were about 73 percent of its CFC pledges.
“If any charity had 73 percent overheard they’d be run out of town on a rail,” Wickett says, adding that the charity wouldn’t be participating in 2018’s CFC.
Results were worse of the Heartland United Way in Grand Island, Neb. Fees added up to about 94 percent of its $1,284 in pledges in 2017, says Karen Rathke, president of the organization. That total was about one-eighth of what it raised in past years.
After fees, it’ll net $97.14 from the 2017 drive, Rathke says. If one counts staff time devoted to completing its application for the CFC, the organization lost money, Rathke says.
Rathke thinks donors will be unhappy to learn how much of their pledges are going toward overhead. “I really believe in a high level of transparency and accountability and trust that we’ve built with our donors,” Rathke says, who notes the organization will also not apply for next year’s drive. “I just feel like this works against that.”
