While bartering may be making an Internet-powered comeback, it still doesn’t make sense for modern political committees to use an exchange of goods or services, known as in-kind contributions, as a form of fundraising.
In-kinds are one of the most common campaign compliance infractions so it’s difficult to understand why campaigns would accept this form of contributions. Just last month, the Federal Election Commission fined former Sen. John Ensign’s (R-Nev.) campaign committee $32,000 for accepting an in-kind contribution from the senator’s family that was not properly reported by the campaign. While that was an example of an extraordinary circumstance that is bound never to repeat, the situation also exemplified the need for a better understanding of in-kinds.
Here are the top reasons in-kind contributions should be avoided:
1. In-kind gifts take cash management responsibilities from campaign managers and put them in the hands of fundraisers and donors.
Budget and strategy is best left to professional campaign management staff and the candidate. When a campaign’s finance team accepts an in-kind contribution, it’s an end-run around critical cash management systems and often results in a bad expense.
2. Don’t give your opponent political ammo.
An in-kind donation can easily come back and bite you. During the 2008 presidential primaries, the New York Times discounted their advertising rates by nearly two-thirds for an ad purchased by MoveOn.org. Then GOP-frontrunner Rudy Giuliani understandably demanded the same “discount,” but luckily, his campaign treasury office, supported by the compliance and software team at CMDI, advised the former mayor of the illegal nature of the Times’ discount to the liberal publication, MoveOn.Org.
Giuliani was able to turn the Times’ in-kind donation into an example of the newspaper “selling out” to the Democrats.
While in-kind infractions are more common than others, and often go unnoticed by the FEC, when the story becomes news, it shines a negative light on the credibility of the candidate who cannot seem to manage the internal, financial operations of their campaign.
3. Date of receipt is most often incorrectly reported.
When a campaign receives a contribution check, it deposits it into the bank within 10-days, records the donor information, including the gift-receipt date, and reports it on the next appropriate FEC report. When an in-kind is made, it is often at an event, managed by fundraising staff, who themselves may not be aware of any/all in-kinds that are being made such as wine service, linen rentals, etc.
Political events are a very common source of in-kind receipt issues. For an event, the day of the event should be the date of receipt for catering, bartending or valet in-kind services. This is because the services (contribution) are being rendered that very day. So when a notice of in-kind contribution shows up at the campaign office weeks later, the chance to report the gift on the correct date may have come and gone, prompting the need for an amended disclosure report to the FEC.