Government Relations Client Bulletin
May 2007
Bricker & Eckler LLP
100 South Third Street Columbus, Ohio 43215-4291 Phone 614 . 227 . 2300 Fax 614 . 227 . 2390 info@bricker.com www.bricker.com COLUMBUS CLEVELAND CINCINNATI-DAYTON
Internal Controls for Political Committee Treasurers P
rompted by a recent increase in misappropriation from political committees, the Federal Elections Committee (“FEC”) issued two Statements of Policy to federal political committees establishing internal controls and suggesting selfreporting mechanisms when errors are found. While these guidelines are voluntary and are directed at federal committees, they provide solid advice for all political committees, including political parties, candidate campaign committees, political action committees, and ballot issue committees at the federal, state and local levels. Regardless of how large or small the political committee, the treasurer is responsible for committee operations and should make every effort to adopt as many of the FEC’s internal controls as possible. Doing so will protect the committee from problems and, if a misappropriation does occur, having these safeguards in place will create a safe harbor for federal committees against additional FEC sanctions. Bank Accounts: • Open bank accounts in the name of the committee use the committee’s EIN number rather than an individual’s Social Security number; • Someone other than the individual who regularly issues checks should reconcile and review all bank statements; • Limit the number of authorized check writers; • An individual who does not normally handle the committee’s accounts or have banking authority should receive all incoming checks and monitor incoming receipts; and • Carefully monitor use of credit and debit cards and set dollar limits on transactions. Receipts: • List all receipts as the mail is opened and later compare that list with deposits; • The person who opens all mail should place a restrictive endorsement on the back of all checks (“for deposit only”) and forward receipts immediately to the person responsible for deposits; • Committee mail or hand-delivered contributions should be received only by authorized individuals; and • Secure un-deposited receipts in a locked cabinet. Disbursements: • Make disbursements with pre-numbered checks; • Pre-signed checks should not be allowed;
Internal Controls
On April 5, 2007, the FEC issued a Statement of Policy, titled “Safe Harbor for Misreporting Due to Embezzlement.” 11 CFR 104. The Policy sets out recommended safeguards to prevent misappropriations and embezzlement of funds. The FEC also announced that it does not intend to seek civil penalties against political committees that adopt and follow these safeguards. The FEC subsequently issued a more detailed Policy Guidance, titled “Internal Controls and Political Committees.” Both the Statement of Policy and Policy Guidance stress the need to separate duties between committee staff and volunteers, and also to create independent review of committee functions. A summary of key internal controls outlined by the FEC is as follows:
This document has been prepared as a general reference document for informational purposes. The information contained herein is not intended to be and should not be construed as legal advice. Each circumstance should be considered and evaluated separately, and possibly with involvement of legal counsel. Please contact Bricker & Eckler for permission to reprint this bulletin in part, or in its entirety.
January 2007
Government Relations Client Bulletin
• Make certain that proper supporting documentation supports every disbursement (i.e. original invoices, evidence that goods and services were received, etc.); • Checks in excess of $1,000 should be either authorized in writing or counter-signed by another; and • A petty cash system, if one is used, should be limited to $500. The Policy Guidance also contains suggestions for handling petty cash, payroll, electronic accounting and reporting systems. The complete Policy Guidance can be found at www.fec.gov/law/policy/ guidance/internal_controls_polcmtes_07.pdf. The Policy recommends that if any misappropriation of money is discovered, the PAC should immediately notify relevant law enforcement and the FEC. The PAC should also voluntarily file amended reports to correct any errors that were previously reported to the FEC as a result of misappropriation. In the event of a misappropriation, the Statement of Policy makes clear that a PAC with these internal controls in place will not be subject to monetary penalties and sanctions by the FEC for filing incorrect reports.
seeks to encourage all committee treasurers to selfreport any violations discovered in committee records or operations. In return for self-reporting and correction of violations, the FEC notes that it will generally provide appropriate consideration of the committee’s selfreporting status in any eventual conciliation agreement or resolution of the problem. In addition to reducing penalties for self-reported matters by 75 percent, the FEC may also decide to take no action against a committee that self-reports a violation, expedite the process by moving directly to conciliation, refrain from making a formal finding of a violation, or proceed only against the committee itself instead of the individual treasurer who could otherwise be liable for campaign finance violations.
Conclusion
While these FEC guidelines are voluntary, there are significant practical and legal benefits to instituting tighter internal controls on any political committee. No committee-from the largest national political party to a local school levy-wants to consider the possibility that well-meaning volunteers and staff could make mistakes or, worse still, be responsible or complicit in a misappropriation. Taking a few moments to institute these controls now could save your committee countless problems in the future. For more information please contact Maria J. Armstrong at 614.227.8821 or marmstrong@bricker.com.
Self-Reporting Violations
The second Statement of Policy issued by the FEC deals with self-reporting of campaign finance violations. See “Policy Regarding Self-Reporting of Campaign Finance Violations (Sua Sponte Submissions)” 11 CFR Part 111. This Statement of Policy
Government Relations Group
Kurtis A. Tunnell, Chair 614.227.8837 ktunnell@bricker.com Maria J. Armstrong 614.227.8821 marmstrong@bricker.com Luther L. Liggett, Jr. 614.227.2399 lliggett@bricker.com Sean A. Mentel 614.227.8892 smentel@bricker.com Miranda C. Motter 614.227.4810 mmotter@bricker.com Terrence O’Donnell 614.227.2345 todonnell@bricker.com Christopher N. Slagle 614.227.8826 cslagle@bricker.com Jeffery E. Smith 614.227.2352 jsmith@bricker.com Oyango A. Snell 614.227.2349 osnell@bricker.com Elisabeth A. Squeglia 614.227.2396 esqueglia@bricker.com Faith M. Williams 614.227.2374 fwilliams@bricker.com
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