U.S. OFFICE OF PERSONNEL MANAGEMENT 

OFFICE OF THE INSPECTOR GENERAL 

OFFICE OF AUDITS 

Final Audit Report 

Subject: 

AUDIT OF COMMUNITY HEALTH CHARITIES 


2008 COMBINED FEDERAL CAMPAIGN 


ARLINGTON, VIRGINIA 


Report No. 3A-CF-OO-IO-036 

Date: April 4 , 2011 

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UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 


Washington, DC 20415 


Office of the 

Inspector General 

AUDIT REPORT 

AUDIT OF COMMUNITY HEALTH CHARITIES 


2008 COMBINED FEDERAL CAMPAIGN 


ARLINGTON, VIRGINIA 


Report No. 3A-CF-OO-IO-036 Date: April 4, 2011 

Michael R. Esser 

Assistant Inspector General 

for Audits 

www.opm. gov www.usajobs.gov 
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 


Washington , DC 20415 


Office of the 

Tnspector General 

EXECUTIVE SUMMARY 


AUDIT OF COMMUNITY HEALTH CHARITIES 


2008 COMBINED FEDERAL CAMPAIGN 


ARLINGTON, VIRGINIA 


Report No. 3A-CF-OO-I0-036 Date: April 4, 2011 

The Office of the Inspector General has completed an audit of the 2008 Combined Federal 

Campaign (CFC) activities of the Community Health Charities (CHC) federation. CHC served 

as a national federation during the 2008 CFe. Our main objective was to determine if CHC's 

activities as a federation were in compliance with Title 5, Code of Federal Regulations, Part 950 

(5 CFR 950), including the responsibilities of national and international federations. The audit 

identified two instances of non-compliance with the regulations (5 CFR 950) governing the CFC. 

The following findings represent the results of our audit work as of the date ofthis report. 

ADMINISTRATIVE EXPENSES 

• Expenses Understated in Annual Report Procedural 

CHC did not accurately report the membership dues and/or service charges received from its 

member agencies. 

DISTRIBUTION OF FUNDS 

• CHC Local Affiliates Overcharged Administrative Fees $142,852 

Three of the eight CHC local affiliates reviewed did not comply with the member agency 

administrative fee limitation set by the CHC national office. As a result, CHC member 

agencies participating in the 2008 CFC were overcharged a total of$142,852 in 

administrative fees. 

www.opm.gov www.usajobs.gov 
iii

ELIGIBILITY

Our review of CHC’s federation and member agency eligibility showed that it complied with

the applicable provisions of 5 CFR 950. 

GOVERNANCE STRUCTURE

Our review of CHC’s governance structure showed that it complied with the applicable

provisions of 5 CFR 950. 
CONTENTS

PAGE

 EXECUTIVE SUMMARY ............................................................................................. i 

I. INTRODUCTION AND BACKGROUND .................................................................... 1 

II. OBJECTIVES, SCOPE, AND METHODOLOGY ........................................................ 3 

III. AUDIT FINDINGS AND RECOMMENDATIONS ...................................................... 6 

A. ADMINISTRATIVE EXPENSES ......................................................................... 6 

1. Expenses Understated in Annual Report ......................................................... 6 

B. DISTRIBUTION OF FUNDS ............................................................................... 7 

1. CHC Local Affiliates Overcharged Administrative Fees ................................ 7 

C. ELIGIBILITY ........................................................................................................ 9 

D. GOVERNANCE STRUCTURE ............................................................................ 9 

IV. MAJOR CONTRIBUTORS TO THIS REPORT .......................................................... 10 

APPENDIX (Community Health Charities response, dated December 1, 2010, to the 

draft audit report.) 
1 

I. INTRODUCTION AND BACKGROUND

INTRODUCTION

This report details the findings and conclusions resulting from our audit of the 2008 Combined 

Federal Campaign (CFC) activities of the Community Health Charities (CHC) Federation. The

audit was performed by the Office of Personnel Management’s (OPM) Office of the Inspector 

General (OIG), as authorized by the Inspector General Act of 1978, as amended.

BACKGROUND

The CFC is the sole authorized fund-raising drive conducted in Federal installations throughout 

the world. In 2008, it consisted of 242 separate local campaign organizations located throughout 

the United States, including Puerto Rico, the Virgin Islands, and foreign assignments. The

Combined Federal Campaign Operations (CFCO) at OPM has the responsibility for management

of the CFC. This includes publishing regulations, memoranda, and other forms of guidance to

Federal offices and private organizations to ensure that all campaign objectives are achieved. 

The CFCs are conducted by a Local Federal Coordinating Committee (LFCC) and administered

by a Principal Combined Fund Organization (PCFO). The LFCC is responsible for organizing 

the local CFC, deciding on the eligibility of local voluntary organizations, electing and

supervising the activities of the PCFO, and acting upon any problems relating to a voluntary 

agency’s noncompliance with the policies and procedures of the CFC. The PCFO is responsible 

for training employee key-workers and volunteers; preparing pledge cards and brochures; 

distributing campaign receipts; submitting to an extensive and thorough audit of its CFC

operations by an Independent Certified Public Accountant in accordance with generally accepted

auditing standards; cooperating fully with the OIG audit staff during audits and evaluations; 

responding in a timely and appropriate manner to all inquiries from participating organizations, 

the LFCC, and the Director of OPM; and consulting with federated groups on the operation of 

the local campaign. 

National federations are responsible for administering applications for their membership, acting

as a fiscal agent for their members, and making sure that donor designations are honored. 

Organizations are prohibited from using consultants in their CFC operations to perform policymaking or decision-making functions. To participate in the CFC, a federation consents to allow

the Director of OPM complete access to its CFC records, as well as its members’ CFC records. 

A federation must have 15 or more member agencies that meet eligibility requirements contained

in 5 CFR 950.202 and 950.203. After obtaining status as a national federation, it must reestablish eligibility each year and certify and/or demonstrate that its members meet all eligibility

requirements expressed in 950.301(e). The Director may elect to review and accept or reject the 

national federation’s eligibility certifications made on behalf of its members. The Director may

request additional information from the federation at his discretion. 

Executive Orders No. 12353 and No. 12404 established a system for administering an annual 

charitable solicitation drive among Federal civilian and military employees. Title 5 Code of 

Federal Regulations Part 950 (5 CFR 950), the regulations governing CFC operations, sets forth
2 

ground rules under which charitable organizations receive Federal employee donations. 

Compliance with these regulations is the responsibility of the PCFO and LFCC. Management of 

the PCFO is also responsible for establishing and maintaining a system of internal controls. 

All findings from our previous audit of CHC (Report Number 3A-CF-00-01-085, dated 

October 15, 2001), covering the 1998 and 1999 campaign years, have been satisfactorily

resolved. 

The initial results of our audit were discussed with CHC officials during an exit conference held

on June 11, 2010. A draft report was provided to CHC on October 29, 2010 for review and

comment. CHC’s response to the draft report was considered in preparation of this final report

and is included as an Appendix. 
3 

II. OBJECTIVES, SCOPE, AND METHODOLOGY 

OBJECTIVES

The primary purpose of our audit was to determine if CHC was in compliance with 5 CFR 950, 

including the responsibilities of national and international federations. Our audit objectives for

the 2008 campaign year were: 

Administrative Expenses 

• Determine if CHC has agreements in place with the member agencies concerning the

amount of dues/fees/expenses to be charged.

• Determine if CHC charges its member agencies any additional dues/fees/expenses other 

than that prescribed by the agency agreement. 

• Verify that dues/fees/expenses are accurately reported. 

Distribution of Funds 

• Determine if CHC’s procedures for processing and tracking receipts are reasonable.

• Determine if CFC’s disbursement policy is reasonable and that the initial distributions 

to member agencies were timely for the 2008 campaign.

• Determine if CHC’s deposited amounts agree to the check amounts in the audited

PCFO records.

• Determine if CHC is maintaining CFC financial records and interest-bearing bank 

accounts separate from other internal organization records and bank accounts. 

• Determine if checks written to agencies agree with the amounts on CHC’s distribution

list and that all checks were timely and distributed in accordance with the regulations. 

• Determine if the total funds received by CHC were properly disbursed and all campaign

funds were accounted for.

Eligibility 

• Determine the adequacy of CHC’s review of applications for membership in the 

Federation and compliance with the eligibility regulations (5 CFC 950.301, 202, and

203). 

• Determine if CHC’s member application review process complies with the

requirements contained in 5 CFR 950.301, 202, and 203. 

• Determine the extent to which CHC requires membership applications to comply with

the requirements in the regulations. 

Governance Structure 

• Determine compliance with 5 CFR 950.203 by reviewing CHC’s bylaws, board of 

directors appointment and termination dates, board minutes, ethics policy, conflict of 

interest statements, and the most recent IRS 990 form. 
4 

SCOPE AND METHODOLOGY

We conducted this performance audit in accordance with generally accepted government 

auditing standards. Those standards require that we plan and perform the audit to obtain 

sufficient and appropriate evidence to provide a reasonable basis for our findings and

conclusions based on the audit objectives. We believe that the evidence obtained provides a 

reasonable basis for our findings and conclusions based on the audit objectives.

The audit covered campaign year 2008. CHC served as a national CFC Federation for the 2008 

campaign, during which it received donations totaling $21,047,090 for its member agencies. The

audit fieldwork was conducted at CHC’s offices from May 24 through 28, 2010, and June 10 

through 11, 2010. Additional audit work was completed at our Washington, D.C. and Cranberry 

Township, Pennsylvania offices. 

In conducting the audit we relied to varying degrees on computer-generated data. Our review of

a sample of campaign expenses and supporting data, a sample of pledge card entries, and the 

distribution of campaign contributions and related bank statements, verified that the computergenerated data used in conducting the audit was reliable. Nothing came to our attention during 

our review of the data to cause us to doubt its reliability.

We considered the campaign’s internal control structure in planning the audit procedures. We

gained an understanding of the management procedures and controls to the extent necessary to

achieve our audit objectives. We relied primarily on substantive testing rather than tests of 

internal controls. The audit included tests of accounting records and such other auditing 

procedures as we considered necessary to determine compliance with 5 CFR 950. 

To accomplish our objectives for administrative expenses we judgmentally selected eight CHC 

state affiliates for review. Specifically, we selected the following: 

• Three state affiliates (Illinois, New York and Virginia) which had the largest number of 

member agencies located in that state; 

• Three state affiliates (Tennessee, Georgia, and Texas) which had the member agencies

with the highest designations; and

• The two remaining Washington, D.C. metropolitan area affiliates not previously 

selected (Maryland and Washington, D.C.).

The role played by the state affiliates in the overall structure of this national federation includes:

• Helping to publicize and promote the participation of the Member health charities;

• Helping to establish eligibility for participation in the Campaign;

•Working with the participating charities to develop their local strategies for the 

Campaign; and

• Helping to effect and track the disbursements to the Member health charities. 

Consequently, we reviewed the disbursements from CHC to their state affiliates and from the 

state affiliates to their member agencies to determine if the administrative expenses withheld
5 

were in accordance with the affiliate’s agreements with CHC and if the expenses were properly

reported in the CHC Annual Report. 

In regards to our objectives concerning CHC’s distribution of funds, we accomplished the 

following: 

• We reviewed CHC’s policies and procedures for receiving, recording, and distributing

funds, and

• We reviewed CHC’s documentation supporting campaign expenses, cash receipts, and

cash disbursements. 

To determine if CHC was in compliance with the regulations regarding member eligibility we

reviewed CHC’s eligibility policies and procedures and its application review materials to verify

that all regulation requirements were included in its review.

To complete our governance structure objectives, we reviewed CHC’s By-Laws, Mission

Statement, Articles of Incorporation, membership requirements, Code of Ethics, Board of

Director’s minutes and IRS form 990 to determine if CHC was in compliance with the 

regulation’s public accountability standards (5 CFR 950.203). 

The samples mentioned above, that were selected and reviewed in performing the audit, were not 

statistically based. Consequently, the results could not be projected to the universe since it is

unlikely that the results are representative of the universe taken as a whole. 
6 

III. AUDIT FINDINGS AND RECOMMENDATIONS

A. ADMINISTRATIVE EXPENSES

1. Expenses Understated in Annual Report Procedural

The administrative expenses withheld by CHC and its local affiliates from the 

distributions to its member agencies greatly exceeded the administrative expense

percentages reported in CHC’s Annual Report. 

 

5 CFR 950.301 (e) (2) (iii) states that the annual report must include an accurate

description of the federation’s membership dues and/or service charges received by

the federation from the charitable organizations participating as members. The

information must clearly present the amounts raised, the sources of contributions, the 

cost of fundraising, and how costs are recovered from donations. 

 

CHC’s 2008 Annual Report indicated that operating expenses recovered from

amounts distributed to its member agencies typically averaged less than four percent

of the amounts distributed. However, our review of eight local affiliates’ 

distributions to the member agencies found that an average operating expense of 

16.42 percent was withheld from the amounts sent to the member agencies.

 

As part of our review, we requested and received distribution schedules for the eight

local affiliates to determine the amount of operating expenses withheld from CFC

monies distributed to CHC’s member agencies. As part of the distribution process,

CHC does not send monies received directly to the member agencies. Instead monies 

received are sent to its 36 local affiliates, of which 2.25 percent is returned to CHC

from each affiliate to cover its operating expenses. CHC then allows its local

affiliates to withhold up to 13.75 percent additionally (not to exceed a total of 16 

percent) from the amount it sends to each local affiliate before the monies are sent to

the member agencies.

 

The CFC regulations permit the organizing and operating entity which incurs 

expenses in relation to operating the campaign to reimburse itself for those reasonable

expenses from the campaign funds received from donors prior to their distribution to

member charities. CHC is that organizing and operating entity for the purpose of 

their member charities and is, by regulation, entitled to reimbursement for its

expenses incurred for the 2008 CFC campaign. Additionally, CHC’s local affiliates

work for the member charities to help publicize and promote the participation of the 

member charities. However, the 2009 CHC Annual Report (the report that 

encompasses the 2008 campaign) did not reflect the total expense percentage 

withheld by both CHC at the national level and by its local affiliates, and therefore 

did not report accurately the administrative expenses withheld in full.

 
7 

As a result of not accurately reporting the operating expenses withheld from the 

amounts distributed to its member agencies, potential donors might be misled to

believe more of their donated dollars will reach the desired charity. 

CHC’s Comments:

CHC disagrees with the finding. However, it stated that it understands the point made

in the finding and the need to address the issue. CHC states that it is willing to amend

its Annual Reports, to both reflect the administrative expense of the national 

organization and of the Affiliates.

OIG Comments: 

We accept CHC’s response and corrective action. We request that the CFCO ensure 

that Annual Reports for the current and future campaigns accurately report the total

expense percentage withheld. 

Recommendation 1 

We recommend that the CFCO follow-up with CHC to ensure that its annual reports

for current and future campaigns properly reflect the administrative expense of the 

national organization and of its local affiliates.

B. DISTRIBUTION OF FUNDS

1. CHC Local Affiliates Overcharged Administrative Fees $142,852 

CHC did not have proper controls in place to ensure that its local affiliates did not 

withhold more administrative fees than its agreements with the affiliates allow. As a 

result, the disbursements to the member agencies of the CHC CFC federation were

reduced by $142,852. 

 

CHC’s agreements with its local affiliates state that withholdings for operating 

charges may not exceed 16 percent of funds received by the affiliates from CHC. 

 

Federations, such as CHC, are responsible for administering the applications for their

membership, acting as fiscal agents for their members, and making sure donor 

designations are honored. CHC distributes CFC receipts to its local affiliates for

further distribution to the member agencies headquartered in that state. The local

affiliates are permitted to deduct operating charges from the CFC receipts prior to

sending the funds to the member charities. Additionally, the local affiliate must pay 

CHC 2.25 percent of the campaign receipts per a revenue sharing agreement with

CHC. Because the withholding limitation of 16 percent is inclusive of the 2.25 

percent paid to CHC, the state affiliates are left with a maximum of 13.75 percent for 

their operating charges. 

 
8 

We reviewed the disbursements and withholdings for eight local affiliates to

determine if the amount of operating charges withheld by the local affiliate exceeded

16 percent. We found that three of the eight local affiliates (National Capital Area,

Georgia, and Texas) did not comply with the limitation set by CHC. As a result,

CHC member agencies participating in the 2008 Combined Federal Campaign were

overcharged a total of $142,852 in operating charges.

CHC’s Comments:

CHC disagrees with the finding and the recommendation that $142,852 be disbursed 

to the member agencies of the 2008 campaign. CHC states that the member charities

of the local affiliates in question, operating through their Boards of Directors,

authorized their affiliates to use those additional amounts to develop their capacity for

fundraising, tracking, and disbursing CFC and other funding for the member charities.

OIG Comments: 

We disagree with CHC’s opinion that because the respective local affiliate Boards of

Directors recommended additional spending for charitable expenses that those 

additional expenses withheld from the disbursement of CFC funds was allowable. 

CHC’s agreements between it and its local affiliates state that in no case should an

affiliate deduct more than 16 percent from the CFC funds received from CHC. This

language clearly establishes a threshold for administrative fees of 16 percent per 

affiliate, which was exceeded by the affiliates in question. 

 

Additionally, Recommendation four of the draft audit report requested that CHC 

review the administrative fees charged by its remaining state affiliates and required 

the affiliates to reimburse member agencies all fees retained that exceeded the 16 

percent of operating charges set in its affiliate membership agreements. However to 

date, CHC has not provided any evidence to support that it performed this analysis. 

Therefore, we request that CHC provide that information to the CFCO for review, 

and if any other local affiliates withheld more than 16 percent, that those funds be 

returned to the CFC member agencies as well.

Recommendation 2 

We recommend that the CFCO direct CHC to properly disburse $142,852 to the 

member agencies of the 2008 campaign. 

Recommendation 3 

We recommend that the CFCO direct CHC to implement procedures to ensure that its

local affiliates comply with the administrative fee limitations set forth in its CHC

affiliate membership agreement. 
9 

Recommendation 4 

We recommend that the CFCO require CHC to review the administrative fees

charged by its remaining state affiliates and require the affiliates to reimburse 

member agencies all fees retained that exceed the 16 percent operating charge set in

its CHC affiliate membership agreements. 

C. ELIGIBILITY

Our review of CHC’s federation and member agency eligibility showed that it complied

with the applicable provisions in 5 CFR 950.

D. GOVERNANCE STRUCTURE

Our review of CHC’s governance structure showed that it complied with the applicable

provisions in 5 CFR 950.
10 

IV. MAJOR CONTRIBUTORS TO THIS REPORT

Special Audits Group

, Auditor-In-Charge

, Auditor 

, Senior Team Leader

, Senior Team Leader 

, Group Chief, 
.. ,\,. 

7;',Community 

Health Charities . ' 

WO RKING FOR A HEAL1HY .AMERI CA 2010 DEC -6 PH 2: 29

December 1, 20 I 0 

Office of Personnel Management 

Office of the General 

Washington, DC 20415·1100 

Dcttr_ 

The following is our informal, initial comments in response to the OPM IG draft report 

detailing the results of its audit of the Combined Federal Campaign (eFC) operations at 

CommWlilY Health Charities of America (CHC) for the 2008 Campaign. I want to thank 

you for granting the extension until December 31 as the due date for our response. As 

you requested, we arc: however sharing with you OUT comments a month earlier in order 

to enable you to begin your evaluation now. We would be glad to hear and respond to 

any questions or concerns you may have about our comments, as these are our 

preliminary thoughts in informal form and we want to make sure our points are fully 

helpful. 

First, we appreciate being able to respond to the Report in draft fonn. I am committed to 

having CRC address the points in your Report with the utmost of care and consideration. 

In fact. for a number ofthe issues and recommendations in the draft. we' ve already taken 

action. 

Let me also note that we are justifiably proud of our Federation's long and productive 

history with the Campaign which dates back to 1957. 

As you may know, Community Health Charities of America (CHC) is comprised of some 

of the largest and most respected health charities in the nation including St. Jude 

Children 's Research Hospital, Susan G. Komen for the Cure, American Cancer Society, 

and the American Diabetes Association. The charities have established and operate e HC 

through National eHC and through regional eHC Affiliates in order to achieve more 

effectiveness and efficiency in their CFC and other operations. The annual support from 

generous Federal donors is critical to the achievement of the missions of these charities, 

which offer millions of Americans hope for cures, care, and compassion. 

We recognize that CHC may be different from other entities participating in the CFC. 

e He was founded, and is mainly governed, by our Member charities, both at the national 

and affiliate (state) levels. On a national level, our 57 Member charities annually 

nominate and elect our board of directors and empower them to approve Qur annual 

budget and perfonnancc objectives. The same governing arrangement is in place at the 

CHC Affiliate level locally. 

200 N. Glebe Road I Suite 80 1 I Arlington. VA 22203 I (703) 528-1007 I taJ( (703) 528-1365 I www.healthcharities.org 

Community Health Charities 01 America 
Each Member charity is entitled and required to participate in the Council of Member 

Charities, a standing committee in our governance structure. The Council of Member 

Charities, comprised of a designated representative from each Member charity, concerns 

itself with all matters related to the relationship between CHC and its Members and 

serves as a forum for updating Members regarding CHC activities and for collectively 

exploring ways to fulfill their individual missions in partnership with CHC. We furnish 

our Members with annual financial statements that are audited in accordance with 

Generally Accepted Auditing Standards (GAAS) by an independent certified public 

accounting firm. Members serve on all standing committees, including our finance and 

audit committees and on all special task forces. The point here is that our Member 

charities essentially govern CHC at the national and Affiliate levels, and participate 

through CHC in public and private sector workplace giving campaigns. 

Our Federation is also somewhat unique in that the funds raised by CHC National in 

public and private sector campaigns are disbursed to our national Member charities 

through the thirty-seven Affiliates. Our Affiliates play the primary role in linking federal 

employees with their local health charities and services. While the CHC National Office 

is the organizing, operating, and overseeing entity for the national CFC Campaign, the 

CHC Affiliates are the "boots on the ground" who help publicize and promote the 

participation of the Member health charities, and help meet the requirements of the CFC 

regarding local services by responding to requests for health information, services, PCFO 

inquiries, and assist in helping to establish eligibility for participation in the Campaign. 

With regard to the Affiliates, they put an extensive amount of effort into the campaign, as 

they work with the participating charities to develop their local strategies for the 

campaign, coordinating and organize the efforts to publicize the health-related missions 

of the various charities within CHC, conduct public presentations about the purposes, 

accomplishments, and needs of our health charities, and help to effect and track the 

disbursements to our Member health charities. 

As requested, our intention is to address the recommendations in the draft report. We 

noted that the findings found our organization in compliance with eligibility provisions of 

the Campaign and with our governance structure. Two areas however, pertaining to 

administrative expenses and distribution of funds, were the subject of recommendations 

in the report. 

A. ADMINISTRATIVE EXPENSES 

We respectfully disagree with the finding regarding the publication of the CHC 

administrative expenses. National CHC is a 501(c) 3 corporation, separate from our 

independently incorporated Affiliates. Our administrative expenses are identified on our 

IRS Form 990 and subsequently in our Annual Report. It was our intent and desire to 

accurately report the financial facts as officially presented on the CHC National.IRS 

Form 990. 

200 N. Glebe Road ISuite 801 IArlington, VA 22203 I (703) 528-1007 Ifax (703) 528-1365 I www.healthcharities.org 2 
We understand the point in your Report and to address this issue, we are willing to amend 

our 2009 Annual Report, and all future Annual Reports, to both reflect the administrative 

expense of the national organization and of the Affiliates. Our amended Annual Report 

will reflect an administrative expense of 2.25% withheld by the National Office and the 

additional 13.75% administrative expenses that can be withheld by our Affiliates for the 

national CFC campaign. 

As noted above with regard to the Affiliates, they put an extensive amount of effort into 

the campaign. In accordance with your recommendation, we are willing to amend the 

2009 Annual Report and all future Annual Reports to present the total administrative 

expenses withheld for the national CFC Campaign by including both the CRC National 

Office expense and the sum total of the withholding from our Affiliates. 

Recommendation 1 

As explained above, we fully concur with the recommendation and as stated above are 

willing to amend our 2009 Annual Report and all future Annual Reports to reflect the 

total administrative expenses. All future Annual Reports would reflect the total 

administrative expenses by aggregating both the CHC National Office and CHC 

Affiliates. 

To further address this issue as reflected in the concerns you've raised in your 

recommendations, we have already undertaken action internally to ensure that these 

points are made clear throughout CHC National and all the Affiliates, and have 

undertaken additional procedures to enable us to more closely monitor the administrative 

expenses for the Campaign. 

At the end of our last fiscal year, Community Health Charities of America established 

four regional Service Centers around the country to standardize more efficient accounting 

and distribution functions. The CHC Service Centers utilize a central financial database 

managed by the National Office. Standard business rules and internal controls govern the 

accounting and distribution systems for the National Office and 19 Affiliates currently 

integrated into the Service Centers. The balance of our Affiliates (17) will be 

transitioning into the CHC Service Centers by next fiscal year. Affiliates will be able to 

readily produce the required financial information necessary for their local governing 

boards and regulatory authorities in accordance with the affiliation agreement with the 

National Office, including distribution and administrative policies. This will provide a 

mechanism for this office to further ensure the accurate calculation of administrative 

expenses. 

B. DISTRIBUTION OF FUNDS 

200 N. Glebe Road I Suite 801 IArlington, VA 22203 I (703) 528-1007 Ifax (703) 528-1365 I www.healthcharities.org 3 
Recommendation 2 

We respectfully disagree with the statement that CHC 'did not have proper controls in 

place to ensure that it's local Affiliates did not withhold more administrative fees than its 

agreements with the Affiliates allow' and disagree with the recommendation that 

$142,852 be disbursed to the Affiliate Member agencies of the 2008 campaign. 

Specifically, you note that upon review of eight CHC Affiliates, three (National Capital 

Area, Georgia, and Texas) had administrative expenses higher than authorized by CHC 

and recommend that the additional amounts be disbursed to the Member charities. 

Actually, the Member charities of the three CHC Affiliates, operating through their 

Boards of Directors, authorized their Affiliates to use those additional amounts to 

develop their capacity for fundraising, tracking, and disbursing CFC and other funding 

for the Member charities. These Affiliate Member charities were not deprived of these 

amounts and this was not an issue about lack of control. The amounts were used and 

applied according to how the Affiliates' charities wanted them to be used - to improve 

their CFC and other funding efforts. 

As the charities in these Affiliates authorized and directed the use of those funds it does 

not seem accurate to say that the charities were 'overcharged' anything or that those 

amounts - spent for the charities' benefit as the charities directed - should now also be 

disbursed to them. 

However, we would respectfully propose that, in the future, we be clearer as to whether 

this is an overall CHC National limit, or a limit on each Affiliate. We would further 

propose to reinforce such limits by written communication to the Affiliates' Boards of 

Directors emphasizing the importance of not making local increases to the administrative 

expenses and directing the newly established CHC Service Centers to monitor the 

Affiliates to provide further improved tracking and enforcement of the self-imposed 

limits by real-time identification and adjustment of such expenses. 

This will be part of our more detailed disclosure that includes the activities of the 

Affiliates. In the meantime, other actions, such as the implementation of several 

centralized service centers and more carefully stated and applied controls will lead to 

further improved tracking and enforcement of the self-imposed limits. 

Recommendation 3 

As outlined above, we have instituted new administrative procedures through our CHC 

regional Service Centers that will enable better procedures to monitor and enforce our 

internal policies and limits on administrative expenses for all public and private sector 

campaigns, including the CFC Campaign. 

200 N. Glebe Road I Suite 801 IArlington, VA 22203 I (703) 528-1007 Ifax (703) 528-1365 I www.healthcharities.org 4 
Recommendation 4 

Again, as stated above, we have already instituted far-reaching steps that address this 

r~ommendation directly and eff~tively. Full implementation of this transition to 

regional CHC Service Centers is underway and will be achieved by next fiscal year as 

another system to help ensure accurate administrative expenses. 

With regard to 2008, we have already voluntarily reviewed all our Affiliates and have 

determined that the administrative fees were on average, nation·wide, within the level of 

the operating charge set in the eHC affiliate membership agreements. 

Thank you again for the opportunity to provide this initial response to this draft report 

and I hope that you will agree that we have addressed your concerns adequately. I look 

forward to hearing from your office in response to these draft comments for a mutually 

agreeable resolution for all of these issues in support of this incredibly important 

charitable campaign and the millions of individuals who benefit from this expression of 

federal employee generosity. 

Sin ly. 

Thomas G. Bogn 0 

CEO and President 

Community Health Charities of America 

200 N. Glebe Road I Suite 801 I Arlington, VA 22203 I (703) 528·1007 I fax (703) 528-1365 I www.healthchartties.org 5