News Items

October 08, 2009

 Considerations for Outsourcing Your PAC Operations

The decision to outsource your PAC operations is reached in a number of ways.  Obviously, cost consideration in one reason, but staffing issues, business efficiencies, legal implications[i] and competency have also been cited as reasons to convert an in-house operation to an outsourcing arrangement.  Whatever the reason(s), it is important to apply objective criteria to the selection process.  As a practical matter, you don’t want to end up adopting a process that fails to address the very concerns you identified.

Identifying potential outsourcers:  Providing compliance and administrative services to political action committees is a somewhat specialized activity.  There are a few accounting practices and law firms that offer these services and there are a handful of companies that provide such assistance to corporations, trade associations and labor organizations.  As a general rule, the accounting firms and law firms are providing such help as part of a broader array of services to their clients and not necessarily offering PAC outsourcing as a core service. Consequently, the user bears the firm’s general overhead costs; as a result, this can end up being a fairly expensive proposition.  Those firms holding themselves out as PAC outsourcing specialists have developed business models that address the major concerns of organizations seeking such help:  competitive pricing, trained administrators, and technology.   Evaluating these firms, however, can be a bit difficult as each tends to have a unique pricing model. As the purchaser of such services you must insist that they to provide you with comparable pricing information.  Practically speaking, you should not sign a contract for such services unless there is a firm fixed price included with the detailed list of services you are to be provided. 

What are the core services you should expect to receive?  Keep in mind that the decision to outsource should embrace the idea that you are going to relinquish control over the core PAC activities, namely recording and processing receipts, preparation of disbursements, reconciling the bank account(s), and preparing and filing federal and state election reports. Time and energy previously devoted to these activities should be redirected towards solicitation efforts, identification and qualification of potential PAC recipients, program oversight, and reporting to organization leaders. Determining how much and from whom PAC funds need to be raised, developing a disbursement strategy to get the most out of the funds available, and keeping your leaders engaged and informed of the PAC’s progress requires considerable attention.  By adopting an outsourcing strategy for the compliance and administrative aspects of your PAC, a better allocation of time and resources will result.

In addition to the “core” functions you should expect to receive from your PAC outsourcing provider, assistance with management reporting for board meetings, information for PAC solicitation brochures, and other forms of information retrieval and presentation.  Typically the providers employ software that makes the assembly of such information efficient and cost-effective.  There does need to be a clear understanding, however, whether such assistance is included in the base service or is considered an “add-on.”  Along that line, some services offer consultative assistance with respect to campaign law compliance.  Again, it will be important to know if this is included in the base service or an item that is billed separately.  Other specialized or tailored services such as the preparation of “thank you” letters to contributors, letters to accompany disbursements, management of solicitation programs, and assistance administering PAC Match programs are typically available.  Again, the emphasis is on shedding as much as possible the tasks and functions that can be more adequately and professionally managed by a firm whose core competency is political action committee compliance and administration. 

Two final points for consideration.  They are legal liability and experience.  You want to be sure the service provider is adequately insured both for employee misconduct (fidelity bond) as well as professional judgment (errors and omissions).  The provider should agree in writing that any mistakes on its part such as missed filings or incorrect advice resulting in a fine or penalty will be paid by the provider.

You must insist on knowing who is going to be responsible for your PAC’s activities, and be provided with information about that individual’s experience as a PAC administrator.  Most service providers will describe a “team” approach but ultimately you will want to establish a working relationship with a person from the outsourcing firm in whom you have confidence that your PAC requirements are going to be managed to your satisfaction.   You should learn about that person’s PAC experience.  For example, if you anticipate your PAC is going to be making disbursements to state candidates, you have to know that your administrator is familiar with the requirements in the states where you plan to make such campaign contributions.  If you aren’t satisfied with the answers to your questions then raise your concerns with the outsourcing firm’s management and demand an alteration.

Conclusion: As in so many other areas, campaign law compliance has become more complex and the opportunities for error increase with each new reporting requirement or compliance feature. The consequences for even negligent acts can be devastating and the fall-out for intentional acts can literally put a company out of business.  Securing the services of a full-service compliance firm is recognition on your part that following the rules and “doing it right” are part and parcel of your overall commitment to involvement in the political process.