2. Regularly Reconcile the Records: A committee should review its monthly bank statements and reconcile each transaction to the committee’s internal records. Again, this task should not be assigned to any employee also designated to sign checks or monitor bank accounts. Prior to filing any report with the FEC, a committee should also square its banking and accounting records with any information it has provided on the form. The FEC has suggested that this one step would have either prevented or quickly uncovered most of the misappropriations it has investigated in recent years. It is also an excellent technique for discovering accidental errors and omissions in disclosures that are made available to the public and subject to penalties for inaccuracy.
3. Limit Access to Cash and Checks: Committees should limit the number of persons authorized to sign checks, and any expenditure in excess of $1000 should require the signature of two responsible individuals. Because a parent association can spend its own funds to cover PAC operating expenses, most PACs have little need for debit or credit cards. When they are necessary, it is often possible to place both per transaction and cumulative limits on these cards until individual expenditures have been independently approved. The FEC recommends that any committee with a petty cash fund use an Imprest system and keep no more than $500 in circulation.
4. Find the Right People for the Job: Although committees may use member volunteers to raise the profile of the PAC, the accounting functions should be assigned to employees who are trained in their responsibilities. Many qualified third party vendors are also available to provide auditing services and to prepare FEC disclosure forms. Generally speaking, third party involvement in committee finances should be limited to these roles. When outside vendors are given access to the bank, there is a greater risk of mischief. In addition, the committee’s treasurer should carefully review and approve the reports before they are filed.
5. Keep Accounts in the committee's Name: Every committee should have an employer identification number (“EIN”) issued to it by the Internal Revenue Service. All committee bank accounts should be held in the committee’s name and with that EIN. Committee leadership should never approve of opening an account in the name of an individual, or use an individual's Social Security Number for account identification. Only the committee treasurer or his or her designee should have the authority to open and close accounts, and the committee should receive all of its bank statements, unopened, at its primary business address.
6. Document the Controls: After implementing a system, the committee should document the policies and procedures as contemporaneous evidence of the system. Just as no one set of internal governance procedures is right for every association, no one set of internal controls is right for all political committees. But absent a straightforward arrangement of checks and balances, a political action committee is almost certainly left exposed. These basic safeguards should help an association to protect its assets and comply with FEC disclosure requirements.
Ronald M. Jacobs is a Government Affairs partner at Venable LLP. He advises clients on all aspects of state and federal political law, including campaign finance, lobbying disclosure, gift and ethics rules, pay-to-play laws, and tax implications of political activities. He can be reached at RMJacobs@venable.com. Maura Marcheski is an associate with Venable LLP’s Regulatory Group. She assists clients on a variety of regulatory compliance matters before federal agencies.