Every year or so a story surfaces about a political candidate getting ripped off by someone helping on their campaign. A few years back, professional campaign treasurer Kinde Durkee was sentenced to eight years in prison for embezzling over $7 million from clients that included prominent members of the United States Senate and House of Representatives. I believe all of this was preventable and that you, as a candidate, can avoid such issues on your campaign.
First, let me assure you that the large amount of money skimmed in the Kinde Durkee case is unusual. However, candidates getting ripped off on the campaign trail is extremely common. In most instances, candidates getting ripped off is not fraudulent or criminal. It’s typically a matter of bad business practices. You don’t hear about such things too much though because 1) the candidate is embarrassed they got ripped off, or 2) the candidate doesn’t know they were ripped off.
Here’s 5 ways candidates for elected office can get their money ripped off and what you can likely do to protect your campaign cash.
1. The Candidate Didn’t Read Their Bank Statements
It’s essential that you know where your campaign money goes. That means reading all of your monthly bank statements for your campaign account. You need to make sure that the money you’ve raised went into the account. You also must verify the amounts of the payments you agreed to make match the amounts disbursed from your account.
You’re looking for two things for the most part as you review your statements. You want to ensure that money doesn’t leave your account that you’re not aware of. You’re also making sure that all of your contributions are deposited.
I’ve seen campaign cash skimmed from money you’ve raised not deposited into the campaign account. Fortunately in both instances, the individuals responsible were caught and convicted of their crimes.
If you ask for your monthly bank statements and your treasurer only provides the financial statements they’ve been keeping, clearly tell them you want the official bank statements. If they delay or fail to give you the bank statements for your campaign account, go online and get the statements yourself.
You need to know that what your treasurer says reconciles with the financial activity the bank reports is happening with your account. Should there be a discrepancy, you might have a problem. It may not be on the level of Kinde Durkee’s theft of funds, but that does not mean you can excuse such issues.
Ask your treasurer to explain the differences. Perhaps it’s a book keeping error. If it’s not, then you probably need to find a new treasurer and possibly take the matter to law enforcement.
2. The Candidate Didn’t Sign Their Own Checks
Candidates who are not the sole signatory on their checks can easily see money disappear from their campaign accounts. Anyone you authorize to sign checks can do just that; sign checks from your campaign account. Money can quickly go out the door that you’re not aware of, hence why you must read your bank statements.
Such checks might be legitimate campaign expenditures. Some may not be. While you do need to be serious about preventing any fraudulent transactions from taking place, you must be diligent to stop any necessary but unauthorized transactions from occurring.
Cash flow is always an issue on a campaign. Not having cash on hand when you need it is one way campaigns get in trouble and sometimes lose. You need to make sure you have available money in the bank when key expenditures need to be made; like those related to voter contact. Some vendors will allow you to age or defer payment. If cash is tight, and it typically is, defer what bills you can to keep your campaign going.
The best way to do this is to be the sole signatory on your campaign checks. On most local races this won’t be a problem. It may be inconvenient at times, but it can prevent you from being skimmed or having cash flow problems. If you’re running in a bigger race, this may not be feasible.
You still need to limit the number of people who can sign your checks, and you must be sure to read your bank statements in such situations.
3. The Campaign Didn’t Have A Check Approval Process
Whether or not you are the sole signer of your campaign checks, you should have a check approval process.
A check approval process starts with a form your campaign has. Whenever anyone has a request for writing a check, including you, the form is filled out. The form should include who the request is for, what the amount is for, and who authorizes it. If you aren’t the one signing your checks, such an approval process will be vital to protecting your campaign dollars.
I recommend having two people on the campaign authorize any expenditure. One is always you, the candidate. The other is whoever is requesting the check. Common check requesters are the campaign consultant, the campaign manager, the fundraiser, and the treasurer.
The treasurer will most likely only be requesting checks from invoices received. Your consultant or campaign manger, if you have one, should first sign off on the expenditure and then it would go to you for your approval or disapproval.
Your treasurer should never cut a check, even if it’s for you to sign, without receiving an authorization form from both you and another designated member of your campaign.
If you are requesting a check, then you should have your consultant or campaign manager sign off on the request. While you as the candidate can always overrule your staff, if a consultant or campaign manager has issues with an expenditure, that is a very good indication that the money may not need to be spent at this time; if at all.
Too often first time candidates and overeager campaign staffers buy junk that the campaign doesn’t need. Junk includes coffee cups, fans, pot holders, and just about anything that costs money, takes up space, and doesn’t do much to help win an election. A check approval process can save you money by stopping the purchase of such junk.
4. The Campaign Had A Credit Card
When you open your campaign account, the bank will likely ask you if you’d like a credit card too. Do yourself a major favor and don’t take it. Credit cards on campaigns, as in regular life, are far too easy to abuse. Purchases will take place of things that aren’t necessary for your campaign. This can harm your chances of winning.
Candidates often take people out to eat or to coffee and put it on the campaign credit card. Little by little, expenditures pile up and before you know it the campaign is spending money to pay off that debt, and the interest on the debt, not on the things that win campaigns.
Credit cards can also fall into the wrong hands. We all know about credit card and identity theft. While that may happen, that’s not my biggest concern. An overzealous treasurer, consultant, or campaign manager, can use the credit card to put your campaign in debt for something you may need, but can’t currently afford.
If you don’t raise the money to then pay for it, plus the compounding debt, you’re still stuck with the debt to pay.
My advice is stay away from credit cards. If you must have one, limit its use to pure emergencies. The best way to ensure your campaign credit card isn’t actually abused – other than not having one – is to not carry it. You can use it for specific occasions when it’s required, but keeping it out of your wallet is the best way to not rack up unnecessary debt.
I’d even recommend having your treasurer keep the credit card. If it needs to be used, then you can go through the same approval process that you would for a check. That will help keep credit card purchases under control.
You will, however, be required to review your credit card statements just like your bank statements. If you don’t, then you’ve allowed that credit card to open another door for your money to walk out of your campaign.
5. The Candidate Was Overcharged
A lot of candidates get ripped off because they are overcharged and they didn’t even know it.
Overcharging is more subjective and I don’t know of any examples where this rose to the criminal level. It mostly occurs when a candidate does not ask enough questions, agrees to a bad deal, and fails to properly oversee certain aspects of the campaign.
There are many ways a consultant or a fundraiser can overcharge a candidate, and most candidates don’t even know it happened. Let’s examine how a consultant charges a campaign and can potentially overcharge.
Consultants usually receive a fee or monthly retainer from a candidate to advise them on how to best win their election. This money comes directly from the campaign. It is common practice for consultants to also receive commissions from vendors providing services to the campaign. This money comes indirectly from the campaign.
There isn’t anything devious about this. It is a common business practice in the political consulting world, just as it is for professional advertisers and marketers outside of politics. That said, your consultant should be willing to tell you what commissions they make from the campaign vendors they bring on to your campaign.
On the races I consult for, I receive a commission on the mass communications for the campaigns. This includes mailings, television ad buys, radio ad buys, and telephone calls. The commission on these activities is anywhere from 5% to 15% and is included in the price the campaign pays each vendor.
15% seems to be standard in the political consulting world. If it’s higher than that you should attempt to negotiate it down to that. If 15% strikes you as too high, you might be able to get it lowered to 10% if there is enough mass communication happening for your campaign. If you can’t, then asking a consultant to lower their direct fees is reasonable.
A consultant’s direct fee or retainer will vary based on who the consultant is and their experience. My goal on local races is to keep my fees to around 10% of the entire campaign budget.
On races where there are few voters, that percentage may be closer to 20% as I need to do the same amount of work, but there are less voters to reach. Bigger races will often see my fees drop below 10%, perhaps reaching down to 5% of the total budget.
If your consultant’s fees make up more than 20% of your budget, you likely have a problem. Too much of your money is going to pay their fees and not into the voter contact activities that win campaigns. You should negotiate a lower fee. And as I said earlier, there is nothing wrong with deferred payments.
You can ask your consultant to defer part of their fees into a “Win Bonus.” If you win your election, you pay them. If you don’t win, then you don’t owe them anything else. If your consultant agrees to this, the “Win Bonus” would be that amount of fees deferred in your race, plus an agreed upon percentage that makes the payment a true bonus.
Fundraisers also are a source of spending unnecessary campaign cash.
Fundraisers charge a percentage for the money they help bring into a campaign. The commission you pay them is often between 10% and 15%. Some highly sought after fundraisers charge more than 15%. Some also charge a monthly retainer on top of their commission.
I’m not a big fan of fundraisers charging a fee and a commission. It can be a license for a fundraiser not to work hard on your behalf. You should go for a straight commission. If the fundraiser isn’t open to that, then ask if they will lower their commission.
If your fundraiser won’t do this, then negotiate that any monthly fees you pay count against the commissions they earn. That way both sides are protected. They have an incentive to work as hard raising money as do you, and the fundraiser receives compensation if you are neglectful of your fundraising.
You also need to keep a lid on expenditures at fundraising events. I’ve been to far too many fundraisers that didn’t make money, some that even lost money, that should have been successful. They didn’t make money because the overhead of the event was too high.
Overheads to watch at a fundraiser are the cost of the location, the cost of food, the cost of drinks, and the cost of entertainment. Each of these can be controlled. Rather than renting a location, get the location donated. A private home or business is perfect for this.
For food, don’t provide a full meal. Give your donors appetizers and finger food. That’ll drive your costs down too. There also isn’t any need for a full bar, hosted or otherwise. Provide beer, wine, soft drinks, and water. Your guests will be happy. You and your fundraiser should also find someone to be the food sponsor and the beverage sponsor. This will cut your overhead and increase your take from the event.
And you don’t need a DJ or band, unless they are donating their services. If you want music at your event, plug in your iPhone or whatever device you carry and put on a playlist you’ve created. Your donors will be talking to you and others anyway, so music and dancing are going to be the last things on their mind, and an expenditure you don’t need to make.
As always with fundraising, it is important for you to check the laws and regulations of the jurisdiction you are running in and ensure your compliance with any rules and limits pertaining to campaign contributions.
Now you see five ways that candidates often get ripped off. You also now have the knowledge to avoid the pitfalls that they frequently fall into.
Candidates need to take the steps to protect the money they’ve raised and spot issues before they’ve blown up into major financial problems. You’re raising money so you can run a good campaign that reaches the voters and helps you win your election.
The voters are looking for people who will be good stewards of their tax dollars. One on the best ways you can prove to them that you will be responsible with their money is to demonstrate you are prudent and careful with the funds donors entrust with you for your campaign.