A good treasurer can save campaigns from embezzlement, embarrassment
You see a story about it all too often: A campaign's treasurer is accused of embezzlement — stealing or misappropriating campaign money — for themselves or sometimes worse. This is a serious offense on many levels. It is a violation of law. It betrays the trust of hard-working donors that don't make political contributions lightly. Like taxpayers, donors want their money used to further a candidate's campaign, not to line the pockets of the bookkeeper.
Longtime Rep. Dana Rohrabacher appears to be the most recent victim. According to media reports, his treasurer of seven years has been accused of embezzling approximately $170,000.
People outside politics might wonder how something like this could happen. They might also wonder how to prevent it from happening to themselves if they — or their friends — run for office.
As the owner of a full-time compliance and campaign treasury services firm, let me make a few suggestions that might have saved Rohrabacher some bad headlines. The first big decision for any candidate or campaign to make is selecting a treasurer. The natural inclination for many first time candidates is to pick an old college buddy or a sibling. Instead, campaigns should pick a treasurer with professional experience in campaign finance and accounting. An old college buddy may be trustworthy, but he needs the time and expertise to properly carry out his role as the treasurer. If a campaign is hit with a complaint or undergoes an audit, the treasurer is usually the one held legally responsible. The candidate and campaign will be held politically responsible and will have to deal with any bad media.
No matter who the campaign selects for treasurer, a campaign should have enough checks and balances to prevent what happened to Rohrabacher. No one person should have control over everything. There should be multiple tiers of approval for expenses. Different people should batch, deposit and reconcile bank accounts. The Federal Election Commission lays out a safe harbor procedure and even has a brochure on treasurer best practices. It also doesn't hurt to hire an outside, independent professional to audit the books and reports every once in awhile.
Compliance firms have developed new technology to assist campaigns. Software can impose unwavering accountability. Some technology literally won't allow a check to be cut until three people on the campaign approve. The person initiating the transaction will need to upload invoices and supporting documentation. Senior managers will be sent notifications and reminders to approve. Senior managers will be forced to review the supporting documentation and either approve or disapprove. A check can be cut only once all the designated individuals in the approval process give the green light. Compliance firms also review of expenses to make sure everything is legitimate, abides by obscure campaign finance rules and can flag special issues for the campaign's counsel to double check.
Many campaigns put all their money and attention into fundraising, strategy and political consultants. Compliance and legal consultants may not be considered "sexy" or important. Hence, the frequent use of volunteer treasurers or friends and neighbors. And while that may work in the short term for a low-volume campaign, the size and scope of a campaign can change over a weekend.
Political issues and events can cause a candidate to surge overnight — bringing in large sums of contributions and requiring large sums of disbursements to catch the tsunami-like wave. By bringing on a professional compliance team from the beginning, a campaign will be on a well-positioned surfboard to ride the wave. It won't have to worry about being derailed by embezzlement.
Brad Crate is the founder and CEO of Red Curve Solutions and was CFO of Mitt Romney's presidential campaign.