It is safe to say that no candidate has ever been motivated to run for office by the anticipated pleasure of filling out Federal Election Commission reports. Nonetheless, properly filing these deadline-driven reports, which must account for every single dollar raised and spent, remains an overwhelming concern for federal campaigns.
Online donations and multiple-vendor fundraising agreements pose a particular filing challenge and, when coupled with attempts to cut data-management costs, can easily lead to a data disconnect between a campaign’s finance and treasury wings. However, a well-designed online contribution processing plan that enforces vendor coordination will enable the campaign to make strategic decisions and ease the pressure associated with federal reporting deadlines.
The FEC does supply campaigns with a program called FECFile that they can use to file reports electronically, but it offers campaigns no help in leveraging their data to optimize future fundraising. This forces fundraisers to track donor data in an alternative database if they wish to successfully mine their data for more fundraising opportunities. The disconnect that results in these cases between treasury and finance datasets can easily lead to misrepresentations in FEC reports when donations do not show up on both datasets. As a result, many campaigns look for a more fundraising-friendly donor database system that they can also use to develop candidate call lists, direct mail reports, and money-bomb opportunities.
Many clients come to us with three different vendors and want all of their data to “talk.” Our solution has been to combine activist data (phone contacts, events, volunteer walks, online participation, e-mail opens, direct mail responses) with donor data (pledges, contributions, previous cycle giving, etc.) in a single database that combines all necessary data. Having data that can “talk” is incredibly useful in finding more supporters and donors, and, because the data is stored on a single system, the political, finance, and treasury arms of the campaign can all operate with the same set of records.
Most often, campaigns deploy multiple methods of donation collection from online sources (i.e. e-mail, websites, widgets, Facebook applications, etc.), making it easy to lose track of what money came from which source. When it comes to online fundraising, the vendor often holds the funds it has collected in a non-campaign account (a practice known as third-party contribution aggregation). The vendor then periodically transfers the funds it has collected to the campaign (minus fundraising costs). This process eliminates the crucial one-to-one donor ratio and date-stamped receipt of each donation needed for proper disclosure. For this reason, it can lead to the filing of inaccurate forty-eight-hour reports in the run-up to Election Day as well as to confusion regarding credit card fees.
Percentage rates collected by vendors on credit card donations made online can vary from as low as 2.5 percent to as high as 7 or even 10 percent. This comes in addition to the basic fee charged on all credit card transactions, which varies from transaction to transaction and from card provider to card provider. Vendors frequently make mistakes in calculating these fees and deducting them from gross donations because this is a human-intensive process with plenty of room for error. The treasurer must then sort out the accurate figures, a task complicated by the fact that the donations are virtual and cannot be traced without the vendor’s assistance. When the bank statement ultimately becomes available to the campaign, the treasurer must labor to avoid creating either a false statement of the campaign’s cash on hand or misrepresenting its donations.
Vendor and credit card fees frequently go unreported, causing a campaign’s cash-on-hand numbers to be vastly overstated in FEC reports. This can result in a lengthy internal audit to validate the reported numbers as well as possible amendment to the reports to reflect the actual cash on hand. In order to avoid FEC reporting issues and data management issues, all contributions should be processed in real time through a campaign-owned merchant account into a campaign-owned bank account. By enforcing rules that require donor dollars to go directly into a campaign-owned bank account at the same time that they are entered into a consolidated financial database, campaigns can ensure the integrity of their funds. In addition, the merchant fees will appear clearly as debits on the campaign-owned account and proper invoices will always be sent to the campaign.
Another caveat for online credit card processing is the issue of donor-initiated charge-backs. The vendor aggregation process described above creates a situation where these transactions can easily go unnoticed. If the campaign does not know which credit card transactions were charged back, it can’t accurately reflect these transactions in an FEC report. This sort of error is very common and leads to a cascade of problems including misrepresentations of donors, cash on hand, and dollars raised. It also limits the campaign’s ability to identify donors who are still able to contribute because they haven’t reached their donation limit yet. When a campaign has its own merchant account, the merchant will notify the campaign of all charge-backs and will even help the campaign dispute them if necessary.
Maintaining proper accounting and filing reports can be stressful enough even when you have a consolidated data structure in place. Dealing with questions from the FEC about reports after you have filed them, however, is a challenge most campaigns are not prepared to face. When the FEC wants to inquire formally about discrepancies or glaring omissions in a campaign’s report, it initiates an administrative process known as a Request for Additional Information (RFAI), which has the potential to result in audits and fines if unresolved. Oversights that can prompt an RFAI include, but are not limited to:
• Ending and beginning cash totals that do not flow from one report to the next
• Inaccurate cycle and donor aggregates
• Failure to resolve contributions that are in excess of federal limits
• Missing information on donors
• Duplicate transactions
• Inaccurate descriptions of disbursements
One of the biggest headaches from a compliance perspective occurs when a campaign fails to resolve excessive donations. Federal regulations provide methods by which contributions that exceed legal limits can be reattributed to a spouse or re-designated to a future election within sixty days of the gift date. If a campaign uses these methods intelligently, by using proven practices and technology applications, it can end up saving tremendous amounts of money that would otherwise have to be refunded. Reports can be created to track excessive donations, send proper correspondence, and keep tabs on where a given donor is in the process. Giving fundraisers and treasurers the tools to contact excessive donors to explain the situation and get any required documentation is critical.
Additional technological improvements, such as online donor solicitation and donation collection, generally provide easier access to donations. But they can also increase frustration around FEC reporting time. Instantly available contribution collection widgets, Facebook applications, conduit PACs like ActBlue that serve as donor clearing houses, and online bundler-tracking systems all allow for easy donations and have been successfully employed by candidates such as Ron Paul, Scott Brown, and Joe Wilson.
The tradeoff, though, is a greatly increased workload for treasurers at reporting deadlines. Campaigns using these fundraising methods often are unable to determine their costs and, as a result, have a hard time identifying the exact amounts given by a donor.
Campaigns can avoid these problems by developing business rules for proper deposit and record keeping. Too often, campaigns depend on accountants unfamiliar with FEC guidelines and end up reporting inaccurate information. Maintaining consistent credit card and check processing systems, including time-stamped bank-deposit batches and a one-to-one ratio on donor dataflow, will pay off when the campaign is using multiple channels to generate revenue. These methods represent a lifeline for treasurers, who need to create timely and accurate FEC reports. Ultimately, they yield the best information for future fundraising efforts and help avoid FEC reporting issues and the risk of a costly and time-consuming audit.
John Plishka is deputy political director at CMDI. Seamus Owens is the sales representative of CMDI.