In a proposed regulation published in the Federal Register on March 29, the Combined Federal Campaign (CFC) shifted its position away from last year's requirement that participating charities check their employee's names against government terrorist watch lists. Instead, the proposed rule uses a certification that charities are in compliance with the law. The proposed rule appears to be a major step in the right direction. Public comments are due in late May. The CFC is the federal government's workplace charitable giving program. In 2004 CFC added language to its funding agreement that required participating organizations to certify that they do not "knowingly employ individuals or contribute funds to organizations" listed as terrorists on various U.S. government watch lists. CFC interpreted this to impose an affirmative obligation for charities to check their employees' names against the lists. On Nov. 10, 2004, OMB Watch and 12 other nonprofits filed suit challenging this policy. The proposed rule seeks public comment on a new approach for the fiscal year 2006 program. It has three elements that apply to federations and unaffiliated organizations:

• A certification by the charity that it is in compliance with all laws, Executive orders and regulations that bar transactions with groups or individuals subject to sanctions by the Treasury Department
• Acknowledgement of awareness of lists of blocked entities and individuals on Treasury's website, and
• A promise to notify CFC if the group "becomes noncompliant" after the certification.

The Supplementary Information in the Federal Register announcement says, "A pattern of abuse of U.S. and foreign charities has become evident in recent years." It goes on to cite instances where charities have been shut down, investigated and leaders prosecuted, and notes that these cases "underscore the importance of due diligence within the charitable sector." The proposed certification would be a condition of participation for charities wishing to get contributions through CFC. In seeking public comment CFC specifically asks how its proposal would work for organizations that also get federal funds from the U.S. Agency for International Development (USAID), which uses a different certification. The USAID certification is much more restrictive, requiring list checking, use of public information and monitoring and oversight procedures. The proposed rule says that, in the event a participating charity notifies CFC that it is not in compliance with the certification requirements, CFC can "take such steps as it deems appropriate under the circumstances," including suspension from the program and recouping funds already disbursed. The proposed rule is being analyzed by attorneys for nonprofits, including OMB Watch's, who sued the CFC challenging the constitutionality of the employee list checking requirement.