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Based on results of the Agreed-Upon Procedures Reports and Office of Inspector General Audits of Combined Federal Campaigns (CFC), we have noted several accounting areas that require guidance. This memo addresses those areas. The procedures outlined in this memo should be implemented during the 2008 campaign.
CFC regulation 5 CFR §950.901(i)(3) permits campaigns to issue one-time payments to organizations that received minimal donations and provides specific procedures for these payments. The Local Federal Coordinating Committee (LFCC) must determine and authorize the amount of the gross pledges the campaign is defining as a minimal donation. For example, an LFCC may determine one-time payments will be made to any organization that received gross pledges of $500 or less. In determining which organizations received minimal donations, the Principle Combined Fund Organization (PCFO) must add designated pledges plus undesignated pledges to arrive at the amount of gross pledges. Gross pledges will be reduced for estimated pledge loss and administrative expenses of the local campaign; however, the sum of the gross pledges determines whether a donation is minimal and subject to a one-time payment. If campaigns have been using a different method for determining the minimal donation amount for one-time payments, then they must correct their determinations starting with the 2008 campaign. The LFCC must document this decision in the minutes of the meeting at which it was determined.
Estimated pledge loss is the average of the actual shrinkage percentage for the three most recently completed campaigns. For the 2008 campaign, the actual shrinkage percentages from the 2005, 2006, and 2007 campaigns will be used to calculate estimated pledge loss.
Estimated Pledge Loss (Average Shrinkage) 120,000/850,000 = 0.1412 or 14.1%
If charity X received $450 in gross pledges for 2008, the estimated pledge loss would be calculated as follows:
Estimated Pledge Loss: $450.00 x 0.141 = $63.45
The organization's distribution is also reduced by its proportionate share of the estimated expense amount. (Please see the Administrative Expense Reimbursement section below for a definition of estimated expense amount). If charity X's proportionate share of the 2008 estimated expense amount is $25, the one-time payment is calculated as:
$450.00 - $63.45 - $25.00 = $361.55
A one-time payment distribution must be made with the first distribution for the campaign. If the campaign opts not to make one-time payments, all organizations with pledges must receive distributions in each quarterly or monthly distribution. Campaigns are not permitted to hold distributions until the amount reaches a pre-determined "minimum check" amount.
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CFC regulation 5 CFR §950.106(b) states, "The PCFO may only recover campaign expenses from receipts collected for that campaign year." Therefore, the expenses incurred for the audit of a campaign must be paid from funds from the campaign being audited. For example, in 2009 the fall 2007 campaign will be audited. The cost of this audit must be paid from funds for the 2007 campaign.
Because this cost is paid after the close of the campaign, the amount should be accrued and withheld from the last distribution. We encourage campaigns to negotiate a fixed cost agreement with the Independent Public Accountant (IPA) so that the actual amount can be known prior to the close of the campaign. If campaigns are unable to negotiate a fixed cost agreement, an estimated amount should be withheld based on prior experience and discussions with the auditor. Any differences between the final amount and the amount withheld should be handled in the following manner:
CFC regulation 5 CFR § 950.106(a) states, "The PCFO shall recover from the gross receipts of the campaign its expenses, approved by the LFCC, reflecting the actual costs of administering the local campaign." This approval of actual expenses by the LFCC is separate from the approval of budget expenses. The LFCC must review actual expenses, authorize full or partial reimbursement, and document this authorization in its meeting minutes.
Because actual expenses are not known until the end of the campaign, which is two years from the beginning of the campaign, LFCCs are encouraged to authorize reimbursement of an estimated expense amount from the first distribution for the campaign. This amount consists of actual expenses to-date and any estimated future expenses (e.g., awards ceremony costs). Prior to the final distribution for the campaign, the PCFO must provide the LFCC with documentation of the actual expenses for approval. The estimated expense amount charged in the first distribution will be adjusted for actual expenses with the final distribution. This adjustment may only be made to distributions for organizations receiving quarterly or monthly payments. No adjustments may be made for organizations that received one-time payments.
The following procedures must be implemented by campaigns for expense reimbursement:
If campaigns have any questions, please contact your OPM Regional Representative at 202/606-2564 or firstname.lastname@example.org.