Watch Your Treasurers!

Or so says The Skeptic. I tend to agree as well.

Allison points to a story about how political committees, particularly candidate committees, are subject to embezzlement. The story from the Austin American Statesman points out that newly elected House Majority Leader John Boehner has over $600,000 stolen by an entrusted employee from his political committee over the course of 10 years.

Stories like these are not uncommon. Boehner's was the biggest that I have pesonally read about, but there are others as noted by the story. What I always find interesting when I see cases like this is how easy it is to prevent. It is quite simple, the person who is cutting the checks should NOT be the person who is reconciling the bank account (balancing the check book--assuming of course that happens) and preparing the FEC reports. To be really careful also doesn't take much, make sure the person who is preparing the chekcs can't sign the checks!!

I know that campaigns are staffed largely with volunteers, but when it comes to money management, you can't use a volunteer and you must regularly conduct audits of your books. I personally, in my work, conducted about two dozen audits. Generally, these audits are pretty clean, just a little bit of money missing if at all, and usually the result of obvious clerical errors or typos. But I have been involved in investigating several cases of embezzlement, some of which were quite significant.

Allison also points out that the foldks at RAD (that's Reports Analysis Division for the FEC un-initiated) are pretty good at seeing errors and they are. But in the biggest case of embezzlement I personally worked on, involving a little over $180,000 in two years, the FEC reports were perfect. There was no way to discover the fraud from the FEC reports. In fact without the bank records, there was no way to tell from the PAC records and database that something was amiss. (It turns out the thief, who had a solid knowledge of the workings of the database, was falsifying the database records.) Thus the very capable RAD Analysts would have had no way of knowing what the problem was. (Want to know how the thief was caught? He forgot to respond to RAD inquiries for additional information on unrelated matters--that tends to tick the FEC off quite a bit).

FEC audits themselves rarely find serious financial problems. Usually it is recordkeeping that gets committees in trouble. Unions in particular are very bad about keeping records of payroll deduction authorization forms. But if you read through the audit reports available on the FEC website (see the Press Release section--it is easier to navigate) you will almost always see some sort of record-keeping problem or failure to account for debts and loans properly.

Allison is right about the fact that it would be far better to contact someone who has actually prepared and/or counsels clients about the preparation of FEC reports. They could call me, I have prepared somewhere in the neighborhood of 1200 FEC reports in my career and probably another 1000 state campaign finance reports. Having done all this work, I can tell you this:

It is easy to make a mistake on a FEC report, it is easy to overlook a mistake and it is surprisingly easy to correct it. But except for a few people outside of RAD at the FEC, I would wager that many people at the FEC, including the folks in the General Counsel's Office (of which Lawrence Noble was once the head), have never seen an FEC report let alone now how to complete one. Preparing an FEC report usually means managing a database of some sort and that in and of itself takes skill.

Finally, I would like to defend the treasurers out there. Usually the treasurer of a campaign is a friend or the accountant of the candidate and is often unprepared for the work. Much of the day to day work is done by someone else, usually unsupervised. This does not absolve the Treasurer of her responsibility since she is legally responsible, but it is understandable. It is situations like these that make me wonder why candidates, particularly on the level of Boehner, don't hire experts to handle their books. I and my company are available (shamelss plug) for reasonable fees and I can fill out a report and make damn sure that money going in and out is properly accounted for.