On March 22, 2007, the Commission approved guidance concerning internal controls and best practices designed to help political committees meet their goals, protect their assets and file accurate disclosure reports.
In recent years, the Commission has noticed an increase in cases involving misappropriation of committee assets. Often these committees had no systems of internal control in place to provide an independent check on their operations and assets.
To help committees comply with the requirements of the Federal Election Campaign Act (the Act) and simultaneously protect their assets, the Commission has published guidance on best practice internal controls. While the Act does not require any particular set of internal controls, it does require that committees file accurate and complete disclosure reports. Implementing effective internal control can help committees meet that requirement since misappropriations of funds or unintentional errors generally lead to the filing of inaccurate disclosure reports.
Selected procedures for internal controls
The suggested internal controls focus on areas that represent particular vulnerabilities the Commission has identified based on its regulatory experience and emphasize a separation of duties and protection of cash and non-cash assets. Some of the key suggestions are outlined below.
Bank Accounts. Limit the number of persons authorized to sign checks. In addition, checks in excess of a certain dollar amount should require the signature of two responsible individuals. The recommended threshold is $1,000. Facsimile signatures should be prohibited unless controlled by a check-signing machine with a numerical sequence counter. No signature stamps should be allowed.
Receipts. Make a list of receipts when the mail is opened. Ideally, the person opening the mail and preparing the list should be independent of the accounting function. A responsible official should periodically (during the monthly bank reconciliation if not more often) compare the list with the recorded amount for the deposit and the deposit amount on the bank statement. Some committees have found using a lockbox service (to independently open mail, record the contributions and make bank deposits) to perform this part of the receipt processing beneficial. Such services may be available through the bank.
Disbursements. Mail all checks promptly and directly to the payee or, if they are to be delivered by committee staff, require that the person taking control of the checks signs for them. The person mailing the check should be independent of those requesting, writing and signing it.
These and other elements identified in "Internal Controls and Political Committees" can significantly reduce the opportunity for intentional misappropriation of funds and any related false reporting. The discussion of internal controls is not intended to be exhaustive or to prescribe any one set of controls. It is up to each political committee to carefully consider what internal controls are valuable and feasible. The "Internal Controls and Political Committees" document is available on the Commission's website at https://transition.fec.gov/law/policy/guidance/internal_controls_polcmtes_07.pdf.