Today the Chronicle of Philanthropy published an op ed by our CEO, Marshall Strauss, about the steep decline of the CFC, how government blunders have contributed to its demise, and what might be done to save it. If you subscribe to the Chronicle, you can read the full article: https://www.philanthropy.com/article/Opinion-Federal-Charity/242184. Meanwhile, here are the main points.
Some of the CFC’s decline can be attributed to broad trends in giving, particularly toward online activity. But the government must take responsibility as well. OPM’s bungled attempts to reform the campaign may be killing it. Here are some examples:
Upfront fees. Workplace campaigns have traditionally withheld funds from donations to pay campaign operating expenses. The CFC followed suit until 2017 when, in an attempt to tell donors that 100% of their money was going to the charities, OPM instituted admission fees that were paid in advance and were nonrefundable. The government set the fees so high that charities raising modest sums in the campaign were in danger of losing money on the deal. And now many of them are. Many others simply decided not to participate in the first place. Fewer than half as many charities participated in the CFC in 2017 as in 2016.
Undermining community ties. For decades, the CFC was run by community-based organizations with experienced fundraisers who could capitalize on local relationships for marketing and solicitation. By creating much larger administrative regions and contracting for services managed from faraway places, the sense of community at the heart of charity was lost, along with a lot of institutional memory.
Failed technology. An enormous and much needed part of the government’s reform effort aimed at centralizing and streamlining back-office systems (recording pledges, transferring funds, and so on). But the new online systems were rolled out before they were ready for prime time. Some of the technical problems discouraged or even prevented donors from pledging. Furthermore, donors had to use an online search function to locate charities they wanted to support. In many instances, the search function wouldn’t search.
In 2013, the Workplace Giving Alliance published a report on search, warning of the centrality of search in the digital world. We were hopeful the picture would improve when new systems were designed – especially when government staff asked for a copy of our report. In fact, almost all the problems we highlighted in 2013 have been repeated, and there are new difficulties that make things even worse. Furthermore, paper directories listing all CFC charities – booklets with a table of contents, and alphabetical index, and actual pages one could flip through – were plentiful in 2013. Now they are disappearing.
Higher costs. A big part of the rationale behind the CFC reforms was to reduce administrative costs. In fact, they are having the opposite effect. The government’s procurement procedures and security requirements for online systems slowed everything down, made it more expensive, and eliminated flexibility through a multi-year contract with a new central administrator. For years, CFC overhead has hovered around 10 percent. Judging from numbers currently available for the 2017 campaign, with its rising costs and falling revenue, the old overhead rate could double.
What Can Be Done?
The CFC is imploding. Donors and charities alike are fleeing the campaign. We may have passed the tipping point. But there are a few things the government can do that might save the CFC.
- Back off the flat, nonrefundable fees and return to percentage-based assessments.
- Delay this year’s application deadline (January 31) so that charities can know what they have raised in the 2017 campaign before they have to pay for 2018.
- Fix the technology. Especially, fix search. The central administrator is being paid millions to design systems. Those systems should work.
- Announce improvements now for the 2018 campaign so charities know what they’re being asked to pay for.
- Give the charities a refund. The government asked them to pay in advance for a "product" the charities thought they knew well. When the product was delivered, it was vastly inferior to what had been implicitly promised by years of experience. Ordinary consumers faced with such a circumstance would demand their money back. They might even turn to a government agency for help.