Since my last posting on Safe Harbor rules with the FEC, I have heard people in the political realm trying to figure out how to resolve the position of trust problem. I want to elaborate to help candidates and campaigns understand how they can address this issue.
What is the position of trust problem? And why has this become an issue?
Every enterprise contains a person or persons of trust. This can be the person with access to the bank accounts or power of attorney over the business or someone who simply exercises control of the day to day activities.
Over the past few weeks (and years) several campaigns have witnessed embezzling by their campaign treasurers. The candidates are wondering how to avoid this when ultimately that person is in a position of trust.
While there is a certain satisfaction that the embezzlers were caught and history shows that they have been punished in the past, it is no consolation to the candidates or their campaigns. Positions of trust ultimately present a weak point in many campaigns.
In the mind of many candidates, having the treasurer and compliance be the same person is thought to be safer. Congressional candidates often say to me, “Paul, we want our compliance firm to act as treasurer because they are then subject to criminal penalties.”
This is ultimately pretty meaningless to most committees. While a treasurer bears the criminal and civil penalties of misuse of campaign funds, the committee will likely be forced to spend tens of thousands of dollars cleaning up the mess. Not to mention the whole scenario often provides a point of attack against the candidate in the next election.
But what can be done? How can your political committee protect itself?
Campaigns today need to build in protections to minimize the chances of embezzlement and fraud. An ounce of prevention is ultimately the cure. Here are three steps that political committees should consider to minimize risk:
1. Separate your compliance team and your treasurer. Split responsibilities will help increase the likelihood that improper activity is caught.
2. Select a person (preferably a local person) the candidate trusts to be the treasurer. If that person is not easily selected, then look for a CPA or lawyer to help. These individuals abide by strict ethical guidelines within their profession. The candidate should have their person of trust ensuring the information on each report is correct while maintaining safeguards to limit the ability to embezzle.
3. Ensure your compliance team not only provides financial reports, but also permits the treasurer online access to the bank accounts. This allows the independent treasurer to periodically review the bank records to ensure the numbers on the reports correspond to the numbers on the bank statements.
Following these three steps will ultimately ensure that your positions of trust will not be a problem, but rather a strength and extra security for your campaign.