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Combined Federal Campaign Reference Materials

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CFC Memorandum 2004-10

September 13, 2004

FROM: MARA T. PATERMASTER
DIRECTOR, OFFICE OF CFC OPERATIONS
SUBJECT: GUIDANCE ON 2005 CFC ELIGIBILITY REQUIREMENTS FOR NATIONAL/INTERNATIONAL FEDERATIONS AND UNAFFILIATED ORGANIZATIONS

This memo clarifies eligibility requirements for participation in the 2005 National/International Combined Federal Campaign (CFC). Information contained in this document clarifies and reiterates guidance previously issued in CFC Memoranda 2000-7, 2000-10, 2001-2, 2002-10, 2002-13 and 2003-9.

Please note that guidance regarding the requirements for compliance with the CFC's anti-terrorism certification is not part of this guidance. Anti-terrorism certification guidance will be issued separately.

OPM encourages representatives of participating charities and prospective applicant organizations to attend its CFC orientation sessions. These sessions are held annually in the fall, in Washington DC. CFC Operations staff are always willing to respond to questions about the application process and to discuss issues identified.

New national/international federations must submit the complete applications of member charities, including each organization's administrative and fundraising rate. Federations that participated in the prior year's campaign must submit a complete application for each new member and each member previously denied participation in the CFC.

Attachment A - Statement of Real Services, Benefits, Assistance or Program Activities

Applicant Must State the Year in which Each Service was provided in Each State or Country

The CFC regulations at 5 CFR � 950.202(a) require applicants to provide a schedule listing those states (minimum 15) or the foreign countries (minimum 1) where the program activities have been provided over the three year period immediately preceding the start of the campaign application year and a detailed description of those activities. This schedule is required as Attachment A to the application and must be provided in addition to the annual report, and other documents or publications that may accompany the application.

The applicant is required to use Attachment A to establish a "clear showing "of actual services provided. General statements on the Attachment A, such as "over the past three years " or "during the years 2001-2003 " accompanied by a listing of services lack the detail necessary for OPM to determine whether organizations have met this requirement.

Beginning with the 2005 campaign, Attachment A of the national/international CFC applications must include the year in which each real service, benefit, assistance or program activity was provided in each state or foreign country. Failure to provide the year of the service in the state or country will result in denial of CFC participation.

Suggestions for appropriate Attachment A formats are available in the CFC Memorandum 2003-09 and are attached to this Guidance Memorandum.

Use of Standardized Formats and Checklists

An increasing number of applicants rely on the use of standardized formats and checklists to describe the real services, benefits, assistance, or program activities that their organizations provided in the past three years. Some applicants use standard listings of service categories which an organization may "check-off " to indicate the services provided in each state. Associated with such checklists has been a tendency to replicate the identical narrative description of services for each of the states in which the organization is claiming to have provided services. In some cases, the only unique information provided is a number indicating how many persons the organization claims to have served in each state.

OPM relies on the integrity of the information in Attachment A to assure federal donors that the participating charities have met CFC accountability standards. In some instances, the use of broad descriptions of services, benefits, assistance or program activities and/or descriptions that replicate the identical information for each state in which service is claimed does not adequately allow OPM to determine that the real services, benefits, assistance or program activities were provided or to accurately determine the individuals or entities who benefited.

Use of standardized formats and the accompanying level of descriptive detail varies among applicants. OPM will exercise discretion in ascertaining whether a standardized format or checklist provides sufficient detail to enable a judgment that an applicant has sufficiently demonstrated its provision of real services.

Use of Lists (i.e. member listings/affiliated or support group listings)

Providing listings of affiliated support groups and members or a breakdown of attendees, by state, at an annual conference, in itself, is not a sufficient demonstration of real services, benefits, assistance or program activities required for national eligibility. In addition, providing the location of residence of organization members, alone, does not meet the eligibility criteria.

Memorials, Museums, Public Recreation Facilities, etc

Listing the names and addresses of an organization's members or visitors to a facility does not satisfy national eligibility criteria. Each applicant must make a clear showing of the actual services, benefits, assistance, or program activities provided in each state or foreign country.

Scholarships and Fellowships/Mentorships

Organizations that issue student scholarships or sponsor fellowships/mentorships must indicate the state in which the recipients reside, not the state where the school or mentor is located.

Distribution of Publications

The dissemination of information and publications, alone, does not meet the national eligibility criteria.

Web-based Services

National/International CFC applicant organizations which rely substantially on web-based services must comply with the national eligibility and public accountability standards at 5 CFR � 950.202 and 950.203.

In addition, the Office of CFC Operations requires web-based service organizations to document proof that a service was actually provided over the website as a part of their application.

Acceptable supporting documentation shall consist of:

  1. service logs or other records indicating the geographic distribution of users and the scope of services received; or
  2. any two of the following three items:
    • Evidence that recipients, including members of the general public, dues paying members or affiliate organizations, have registered for use of the website;
    • Summary reports that document customer feedback, through service satisfaction or utilization surveys or other mechanisms;
    • Documented evidence that recipients of web-based services paid a fee for the service.

Reports that only reflect the number of hits to a website are not acceptable evidence of real services on Attachment A.

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Attachment D - Audited Financial Statements

Accrual Based Accounting Required

Organizations seeking National/International CFC eligibility are required to account for their funds in accordance with Generally Accepted Accounting Principles (GAAP), which requires an accrual based accounting system. Both the IRS Form 990 and the audited financial statements must be prepared using the accrual method. National/International CFC eligibility will be denied for organizations using any method of accounting other than the accrual basis, including the cash basis, modified cash basis, and modified accrual basis of accounting.

Separate Schedule Required for Combined and Consolidated Audits

Combined and consolidated audits are not accepted unless the applicant's financial information is reflected in a separate audited combining or consolidating schedule that breaks out the information for the applicant.

Reconciliation of Audited Revenues and Expenses with IRS Form 990

Organizations applying for National/International CFC participation must submit an annual audit of fiscal operations as described at 5 C.F.R. � 950.203(a)(2). The audit must cover the same fiscal period as the IRS Form 990. Reconciliation statements that purport to reconcile a cash-based IRS Form 990 with an accrual-based audited financial statement will not be accepted because both must be prepared using the accrual method.

If revenue and expenses on the audit and the IRS Form 990 differ, these amounts must be reconciled either on the IRS Form 990, Parts IV-A and IV-B, or in an accompanying signed statement by the certified public accountant who completed the audit. If the CPA who completed the audit is not available, it is acceptable to use another CPA within the same firm to provide the reconciliation and signed statement.

Organizations have asked whether a certified public accountant (CPA) must perform the reconciliation if it is not completed in the IRS Form 990, or whether a financial manager within their organization can perform the reconciliation. The reconciliation must be performed in an accompanying signed statement by the CPA who completed the audit if:

  • Line 12 (revenues) or Line 17 (expenses) of IRS Form 990 Part I are different from total revenues or expenses set forth on the audited financial statements, and Part IV-A and/or Part IV-B are not completed; or
  • Line 12 (revenues) or Line 17 (expenses) of IRS Form 990 Part I are different from total revenues or expenses set forth on the audited financial statements, and the figure stated on Line a of IRS Form 990 Parts IV-A or IV-B is different from total revenues or expenses set forth on the audited financial statements.

The only instance when an organization's management may provide a clarification is if Line 12 or Line 17 of Part I, or Line a of Parts IV-A and/or IV-B do not equal the revenues or expenses in the audited financial statements because certain categories of revenues or expenses on the audited financial statements have to be added together to equal the totals in the IRS Form 990.

We understand that certain categories of revenues and expenses on the audited financial statements may have to be added together to equal the total revenues and expenses that are listed on the IRS Form 990, either on Lines 12 and 17 of Part I or on Line a of Part IV-A and IV-B. For example, categories of revenues and expenses such as unrestricted, restricted or changes in temporarily restricted net assets may have to be added together to equal the amounts in the IRS Form 990. If this is the case, an appropriate management representative (e.g. officer, director, trustee or chief financial officer) may provide an explanation of the calculation and categories that were used in arriving at the totals on the IRS Form 990. This explanation should accompany the financial documents in the application as it is originally filed with OPM.

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Attachment E - IRS Form 990

Except for smaller organizations that file the IRS Form 990EZ, organizations must attach a complete IRS Form 990 as part of the CFC application as required by 5 CFR �950.203(a)(3). A complete IRS Form 990 includes all six pages, including a signature on page six in the box marked "Signature of Officer," all statements referenced in the Form, and Schedule A. Organizations filing IRS Form 990EZ may submit the 990EZ together with pages 1 and 2 of Form 990 in place of a complete Form 990.

Board Compensation Must be Set Forth in IRS Form 990

Part V of the IRS Form 990 requires the charity to include a "List of officers, directors, trustees, and key employees (List each one even if not compensated)." An organization's IRS Form 990 that does not include a list of the officers, Board of Directors, trustees and key employees, and their compensation, if any, is incomplete and will result in a denial.

0% Administrative and Fundraising Rate

Organizations which do not reflect administrative and fundraising expenses on the IRS Form 990 but show such expenses on the audited financial statement will be denied unless the audited financial statements specifically state that these services were donated.

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Attachment F - Administrative and Fundraising Expenses

Administrative and Fundraising Rate Exceeding 25% Explanation and Formal Plan

The CFC regulations at 5 CFR �950.203(a)(4)(i) require that organizations with administrative and fundraising rates (AFR) exceeding 25% provide, as Attachment F, an explanation and formal plan to reduce these expenses below 25%. The explanation must include a full discussion of the reason(s) that the organization's AFR exceeded 25%. The formal plan for reducing the AFR must relate to the explanation and must be reasonable under the circumstances. The formal plan must demonstrate that the organization has established a clear objective(s) as to how to reduce the AFR, and has taken steps to implement the objective. The plan should include the time frame during which it is anticipated that an AFR below 25% will be obtained.

The Office of CFC Operations will consider the degree to which the AFR exceeds 25% in determining whether the plan is reasonable under the circumstances. For organizations that have participated in the CFC in prior years, the Office of CFC Operations will additionally consider the organization's AFR during prior campaign years as a factor in determining whether the formal plan is reasonable under the circumstances.

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Attachment G - Annual Report

Compensated Staff Member who Also Serves on Board is Compensated

CFC regulations at 5 CFR �950.203(a)(5) require an organization seeking CFC eligibility to certify that it is directed by an active and responsible governing body whose members have no material conflict of interest and a majority of which serve without compensation. The regulation does not distinguish between compensation as a staff member where that staff member additionally serves on the Board, and compensation as a Board member in consideration for performing Board work. OPM interprets its CFC regulation to mean that a paid staff member who serves on the Board is a compensated member of the Board, even if the staff member is not being compensated for performing Board work.

Board Members' Terms of Office and Meeting Dates and Locations

Every applicant must provide, as part of Attachment G, its Board members' terms of office and meeting dates and locations in the previous year. Copies of the organization's bylaws are not acceptable substitutes for specific terms of office. Further, information on board members' terms of office and meeting dates and locations must represent the calendar or fiscal year immediately preceding the campaign year for which the organization is applying. This information does not have to be part of the applicant's published annual report, but must be included with the application. In prior years, OPM had requested this information in support of the certification that the organization is governed by an active and responsible board. See, CFC Memorandum 2000-10. Commencing with the 2005 CFC, failure to provide Board members' terms of office as well as Meeting Dates and Locations of Board Meetings will result in a denial.

Annual Report - Contents Must Describe Activities During Year Covered

Annual reports or their substitutes (as defined in CFC regulations) must include a description of the organization's services or activities during the year covered by the report and identify the Board of Directors and chief administrative personnel. OPM will not accept annual reports that contain only a description of mission and goals or historical information about services and activities without a defined timeframe.

Disclosure of Federation Dues/Fees in Annual Report

Each Federation is required to include, in its annual report that is made available to the public, a statement that sets forth details regarding member dues and/or service fee arrangements with its member organizations. See CFC Memorandum 2002-13.

If you have questions or comments regarding this guidance, please send them by electronic mail to cfc@opm.gov.

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