Political campaigns: the treasurer's role.

Money is essential in a political campaign in order to carry out the campaign strategy. And CPAs are especially well suited to assist the candidates of their choice manage their finances. The role of campaign treasurer or finance committee chair offers practitioners a number of benefits, including the chance to help improve their communities, influence the political process and expand their own knowledge. In smaller races it also can be a very visible job, but no matter what the size of the campaign, it is always a most important one.

Taking on this role offers tremendous personal and professional rewards. The one civic effort that has probably contributed the most to my career was the involvement in 1972 as campaign finance chair and treasurer in Bennett Johnston's successful. U.S. Senate race here in Louisiana. That position in tile campaign put me on a first-name basis with influential people in the community who may have been 20 or 30 years older but who were in effect working for me as we raised money for our candidate. I made a lot of friends who realized I was more than just a number cruncher--and the firm ended up getting a lot of business through that first campaign. I didn't get involved in that race hoping to make business contacts--I did it because I liked the candidate. Thus, CPAs who take part in the election process for civic-minded reasons will find the effort can provide many unexpected benefits.

WHAT IT TAKES

This article focuses on the treasurer's role, but in smaller campaigns, one person may serve as both treasurer and finance committee chair. Let's discuss each role separately. The finance chair should be a person of impeccable honesty, with a strong commitment to the candidate, and should be both prominent and respected by potential contributors. The chair should be well organized and able to assemble and motivate an effective campaign finance committee. That person should be a leader who can gently apply peer pressure to each of the finance committee members to honor their commitments. The chair should know the donor's potential; for example, it is important to categorize possible donors, since it is a critical mistake to ask a potential $1,000 contributor to give $100. The chair's responsibilities include forming the fundraising strategy and establishing certain ground rules for the type of fundraising events. Besides coordinating these events, the chair is responsible for adhering to the campaign strategy and, in particular, keeping the campaign out of debt, if the finance committee has decided to be debt-free. Probably the biggest responsibility is knowing when to say no.

The campaign treasurer must have many of the same attributes but also should be extremely familiar with all pertinent campaign finance laws and disclosure. Campaign finance rules are sometimes fairly complex and certainly are different for federal as opposed to state or local elections. Each state has a different set of rules, although many are comparable to those of other,states as well as to Federal Election Commission guidelines.

Treasurers also must be able to Stand their ground. For example, except where budgeted, expenditures should not exceed campaign revenues. This is a simple statement but a very complex issue. As the campaign gets closer to election day, the treasurer can come .under tremendous pressure to exceed budget and to borrow money to finance "necessary" expenditures for success. At the end of a close race, the candidate, political advisers and public relations consultants may make recommendations that were not agreed on at the outset of the campaign. The treasurer must be the kind of person who can withstand this pressure and defend the original budget if funds are limited. (The candidate also should be urged not to incur personal debt.)

Depending on the size of the campaign, the treasurer may have a staff to assist in recording contributions and paying bills. The treasurer, campaign chair and candidate not only must be committed, but also must pull together for a successful election. It is helpful if the treasurer and the finance chair have the kind of political experience that enables them to identify potential donors--particularly among area political action committees that might give in this particular election. They also should be able to recognize donors who could cause the candidate political harm if their names were attached to the campaign. Again, knowing when to say no is vital.

THE PROCESS

Because of the extreme importance of the job, the treasurer should be appointed very early and be one of the first key people involved in the campaign. The first step in tile campaign is developing campaign strategy, which is done by the candidate, the campaign steering committee and tile finance committee chair or treasurer. The strategy should be organized around the premise of getting 50% of the votes cast plus one. The treasurer also is charged with selecting a bank depository, determining all applicable campaign finance laws and regulations and carrying out payroll tax reporting responsibilities for campaign employees.

The treasurer should immediately set up the appropriate accounting system. One of the first things to do is establish a budget. The budget should be flexible, and actually should be constructed backwards--that is, revenues and expenditures are estimated from the date of the election back toward the current date. Cash flow budgets are critical. Because of the nature of campaign expenditures, many of the expenses must be paid before they are incurred--no credit accepted. Expenditures as well as revenues should be budgeted on a weekly basis so campaign officials always know where they stand in regard to the total budget.

The campaign treasurer should set up a system that provides a central receiving spot for all contributions. Flexibility must be maintained since the candidate will receive contributions informally while campaigning and money also will flow in through the finance chair, the treasurer, fundraising events and the mail. When they are received, contributions should be entered into a single database that can accommodate the information needed for the deposit, the finance report, a candidate thank you and a base for follow-up contributions.

Another system should monitor limitations on campaign contributions, which vary from state to state and from election to election. Care should be taken to account for in-kind contributions as required in many states and elections. The most obvious and important example of an hi-kind contribution is the campaign headquarters; someone who has vacant office space might donate it for campaign use. Car dealers also often contribute the use of a car for the candidate. These are larger-ticket examples of the kinds of contributions that can benefit the candidate or cause trouble if the treasurer doesn't understand the appropriate guidelines. Most accounting systems are designed for cash basis reporting, but many states require reporting of in-kind contributions that count toward a campaign limit. Also, in most states, it's forbidden to use cash for contributions or expenditures. The campaign treasurer must be thoroughly familiar with these kinds of restrictions, such as limits on corporate contributions, rules on ticket sales, campaign T-shirts and other memorabilia and anonymous donations.

All expenditures should be routed through a central location and the treasurer should approve all payments. Although the treasurer won't be the only person authorized to sign checks, authorization should be limited to very few people, and within the control of the treasurer or the candidate. All invoices must be scrutinized to ensure they meet state campaign disclosure laws. For example, many reporting requirements dictate that fees paid to advertising firms be broken down to identify exactly which vendors were paid by the ad agencies. A slip can cause immeasurable damage, not just because of the magnitude of the expenditure, but because of the resulting poor publicity and possible defeat of the candidate if an election law is broken.

The campaign treasurer, thus, is someone who normally won't make the difference between winning and losing--unless something goes wrong. But given all the important issues the person in this position must handle, a lack of knowledge on the treasurer's part could contribute to a loss.

RAISING FUNDS

As an integral part of the campaign staff, the treasurer will probably be involved in fundraising--especially if he or she serves as campaign finance committee chair. There is no question that the best fundraiser is the candidate, but candidates often are uncomfortable with this task, so a finance committee is usually formed and the treasurer serves as either a member or the chair.

The treasurer should understand the rationale for campaign support. According to Winning with Volunteers, Financing a Campaign, published by the Louisiana Association of Business and Industry, the reasons people give to political campaigns include:

* They would like to be on a first-name basis with the candidate.

* They believe the candidate can influence legislation beneficial to their business activities.

* It's a habit. People know almost instinctively that political campaigns are financed by volunteer contributions.

* Most important of all, they believe in the cause the philosophy the candidate represents--or do not believe in the opponent's position as demonstrated by his or her voting record.

The reasons people don't contribute to political campaigns include:

* They are afraid of making a commitment.

* They don't know how much to give and refuse in order to avoid embarrassment.

* They are not in the right frame of mind to give when asked the first time.

* They fear they will be forgotten by the candidate once they give, so they withhold support.

* They want greater reassurance that the candidate can't lose.

* The request is too vague and does not reflect strategy, planning and, perhaps, budgeting.

* The campaign letterhead and signature are not "important" enough or the letter is poorly written and the need is not clearly identified.

These issues must be considered in developing the fundraising strategy.

The treasurer should be comfortable asking for in-kind contributions since they are generally easier to obtain than cash. In addition, the treasurer should have the vision and understanding of applicable finance law in order to raise funds creatively and, of course, legally. Checks aren't the only option; where allowed, funds can be raised by personal loans, bank loans guaranteed by the pledge of a letter of credit and other methods.

Campaign finance reports are a real problem because many must be filed in short time frames. Toward the end of a campaign, in some states, reports must be filed as frequently as every 48 hours, based on the size of certain contributions and expenditures. This requires a very sensitive accounting system and a treasurer who is extremely knowledgeable about disclosure requirements. As difficult as finance reports are, they also present an opportunity, especially in the second primary or general election. The treasurer should review a defeated candidate's reports to see which of those donors now may wish to contribute to our candidate. It is not unusual for political donors to want to back a whiner.

GETTING INVOLVED

Even once the election is over, the campaign treasurer is integrally involved, not only filing final reports but paying the last bills and wrapping up the campaign, whether in victory or in defeat. There are a lot of responsibilities attached to the job, but this exciting opportunity need not be closed to those who don't have a thorough understanding of election finance basics. A good first step is to volunteer as a member of a campaign finance committee, learning how to raise money and getting a taste of the process. In addition, don't try to cut your teeth on a gubernatorial or U.S. Senate candidate; start at a more local level. CPAs who participate at any level can expect the fulfillment of seeing their candidate elected, the wisdom gained from the process and the possibility of additional business.

Key People

The American Institute of CPAs key person program is a cooperative effort with the state CPA societies to identify and maintain a cadre of CPAs who have a close relationship with members of Congress and who will communicate with them on issues of importance to the accounting profession. In a sense, each key person is an advocate who must be able to relay AICPA positions clearly.

The approximately 2,000 key people nationwide are kept up to date on current issues through the faxed news memo Capitol Account and the Digest of Washington Issues, a quarterly publication that briefly describes each area of import to the profession and the Institute's position on the issues. When timely contact and feedback is needed, Federal Legislative Action Alerts are sent to key person contacts.

For more information on the program, contact John Sharbaugh, AICPA, 1455 Pennsylvania Avenue, NW, Washington, D.C. 20004-1081, phone no. [phone].

EXECUTIVE SUMMARY

* MONEY IS ESSENTIAL in a political campaign and CPAs are especially well suited to help the candidates of their choice manage their finances. The role of campaign treasurer or finance committee chair offers practitioners a number of benefits, including the chance to help improve their communities, influence the political process and expand their own knowledge.

* A CAMPAIGN TREASURER should be well organized, understand donors' potential and be extremely familiar with all pertinent campaign finance laws and disclosure. Treasurers must be able to stand their ground when under pressure to exceed budget.

* BECAUSE IT IS SO IMPORTANT, the treasurer's job should be filled very early. Responsibilities include selecting a bank depository, determining all applicable campaign finance laws and regulations and carrying out payroll tax reporting responsibilities for campaign employees. The treasurer should immediately set up the appropriate accounting system.

* AS AN INTEGRAL PART OF THE CAMPAIGN staff, the treasurer will probably be involved in fundraising--especially if serving as campaign finance committee chair. It's important to understand the motivation behind donation decisions and the applicable regulations.

JAKE L. NETTERVILLE, CPA, a former chair of the American Institute of CPAs, is managing director of Postlethwaite & Netterville, Baton Rouge, Louisiana.

CASE STUDY

From Hometown Lobbyist to Campaign Finance Expert

In 1984, New York CPA Kenneth Alico--a volunteer fireman--went to the state capital in Albany to try to convince legislators to reinstate funding for the western region of New York State's emergency medical services training. When his assemblyman, Bill Paxon, got the region the money it needed, "I said, 'Bill, if I can ever help you, let me know,'" Alico recalls. About a year later, Paxon asked Alico for help in his campaign for Congress when his treasurer resigned after becoming overwhelmed by federal election rules. Alico boned up on the subject at a seminar sponsored by the Federal Election Commission and joined Paxon's ultimately successful campaign.

Although campaigns have their own regulations, CPAs who do tax preparation will see similarities in their political responsibilities, Alico says. "Being a treasurer requires accuracy, complying with filing deadlines and making disclosures--all the things we're used to," he notes. One important difference is that campaign filings are available to the public--and often scrutinized by the media.

Congressman Paxon has moved up in the ranks in Congress, and Alico's association with him has provided tangible benefits. His wife, Camellia Pirrone, also has worked as a campaign treasurer and Alico has been involved in the campaigns of Congressman Jack Quinn and New York Attorney General Dennis Vacco. An employee of Pirrone Accounting, an Orchard Park firm owned by his wife, Alico says, "We've gotten exposure to clients and potential clients and developed a reputation not only in our community but also across the state that we could not have gotten otherwise."

He warns practitioners not tO expect immediate business benefits from their political efforts. "I was probably involved for at least five or six years before we started seeing referrals," he says. But in the end, the range of opportunities can be great. For example, Alico was tapped by the New York State Society of CPAs to testify on tax law complexity before the Oversight Subcommittee of the House Ways and Means Committee. And his work gives him a lot of visibility. "We have a wall full of pictures of my wife and me with congressmen and senators the governor and attorney general," he says. "It's very impressive when our clients walk in."

--Anita Dennis

CASE STUDY

A Long-Standing Passion Becomes a New Niche

Constance Bird and one of her partners, Gerald Clendenin, both love politics and have both served as campaign treasurers. "But it got to be time consuming," Bird says of her volunteer involvement. "That's why we decided we were going to do it as a business, rather than pro bono." The firm, Clendenin, Bird & Company, in Modesto, California, now performs engagements in which it fulfills all the state and federal reporting requirements for its candidate clients, preparing reports that can run up to 40 or 50 pages long. "It's really interesting work--especially if you're a political junkie to begin with," Bird says. "But I think your average campaign treasurer doesn't realize what he or she is getting into. We encourage the candidates to choose prominent political supporters in the community to be their campaign treasurers, then we do the actual nuts-and-bolts reporting."

The two partners were sought out to serve because of their financial expertise. "If you're politically involved and you're a CPA, next thing you know you're the treasurer," Bird says. She estimates that 10% of the 12-person firm's practice now consists of political work and says gaining clients in this area was easier because of the reputation the partners had built as treasurers.

Bird's behind-the-scenes involvement offers her less visibility than a campaign treasurer would have, but charging for the reporting services gives the firm an objectivity she believes is an advantage. Bird, a Democrat, and Clendenin, a supporter of Republican causes, have even handled the reporting requirements for competitors in the same race. "They know we're not part of the campaign team and, because of our reputation, they know we're not going to divulge anything" she explains.

--Anita Dennis

Read All About It

The American Institute of CPAs book Compliance With Federal Election Campaign Requirements discusses what CPAs and candidates should know in federal campaigns ($47.50 for AICPA members, $52 for nonmembers; product no. 305031JA). The newly revised State Campaign Treasurer's Handbook provides a range of valuable information, such as state agencies to contact in order to comply with filing requirements ($21 for members, $23 for nonmembers; product no. 304020JA). Copies can be obtained by calling the AICPA order department at [phone], menu #1; fax [phone].