What if a NC Campaign Committee Uses a Credit Card for Expenses?

ElectaFile Short Summary:Some but not all political campaign committees have credit cards; these tools of convenience create traps to avoid! One main, main, main trap is failing to account for the underlying payee charged to the credit card. Forgetting to track that is a major hassle and can get you in big trouble…***Bonus Trap Discussion Included***

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Our unscientific sense of things is that most political committees do not have credit cards in the committee’s name for expenditures. However, for those that do, reporting credit card purchases and payment on credit card debt is tricky.

Who Might Have a Credit Card in a Committee’s Name? Our sense is that party committees may have credit cards. Long-serving incumbent candidate committees might have credit cards. Essentially any committee that has existed and likely will continue to exist for a period of time.

Why Would Anyone Use a Committee Credit Card? In responsible hands, campaign committee credit cards can be incredibly convenient. If you think about the flow of funds that most go from a donor to a committee to an individual vendor, or the number of reimbursements that treasurers must account for every time the Sign Bros eat at Arby’s in Sylva, the paperwork is crushing. A campaign credit card in the right hands can be a force multiplier.

Why Would You Not Want to Use a Credit Card? Some times the ability to buy things is almost too convenient. If a campaign volunteer or worker has to buy out of his or her own pocket and seek reimbursement, he or she is probably not so quick on the draw to buy the GOTV Ice Sculptures for the Wilmington event in July? A reimbursement policy is just one more control that can make financial sense.

How Do You Report Credit Card Purchases? You report them in two ways. First, credit card purchases are reflected as debts of the committee using a special set of forms if you’re filing on paper or automatically if you use ElectaFile or another e-filing platform.

A credit card purchase is first a debt incurred as of the date of the purchase. You’ll need to tell the Board of Elections when the debt was incurred, how long it remains outstanding, and when it is paid off. The reporting mechanism tells the board the card vendor and the underlying payee by the credit card.

For example, if you purchase a case of Pepsi from Wal Mart on the First Bank credit card for $100. You’ll have a reportable debt of $100 to First Bank that arises on the date you purchased the Pepsi. You’d report that as a debt to First Bank, your credit card company, but in that same reportable transaction you’d also report something called the “Purchase Place” which is the means by which you’d report Wal Mart and the Pepsis.

If you then pay off the $100 charge at the end of the same month, you’d have a $100 expenditure as a payment to First Bank. Note that your single credit card payment at the end of the month that covers the whole bill is a single expenditure. You wouldn’t again need to itemize the charges that the bill covers.

Here’s an illustration: Let’s say on three separate days at three separate stores (Wal Mart, Roses and K-Mart) you bought $100’s worth of Pepsi, $95’s worth of Coca Cola, and $5’s worth of Tab (for the holdouts in the back…). You then wrote a $200 check to your credit card company at the end of the month. You would disclose those individual purchases as debts but then report only one expenditure for $200 to your credit card company.

Where Do People Get in Trouble On This? First, they don’t think about credit cards as “debts” the way we think about car loans and home loans. And they simply fail to report them correctly.

Second, the rare but big disaster is a situation where a committee credit card is used all of the time without good records of underlying purchases. Years later, an auditor comes calling and you’re trying to reconstruct what you bought with your credit card. You must track both 1) the initial purchase using the credit card and 2) the payment to the credit card company.

Important Bonus Trap: In North Carolina, there are historical examples of committees getting extremely sideways with the authorities through the use of personal credit cards.

In some instances, this is a different trap. Where a committee is subjected to audit and a treasurer or a candidate has been reimbursed on her personal credit card for credit card purchases (think “I bought the yard signs on my personal credit card and need to be reimbursed”…), you’ll see instances where a treasurer’s or candidate’s personal credit card has multiple campaign charges and personal charges on the same credit card! In hindsight separating permissible expenditures from personal expenses is doubly tough if the credit card holder hasn’t kept track of the underlying purchase—they simply rely on credit card statements and spotty memory.

This is very tricky. Our recommendation is that if you’re making a habit of using personal credit cards to purchase campaign items and seek reimbursement, you’ve got to do the work on the front end to track the underlying purchase. Be a hawk about this!

At the risk of our readers throwing tomatoes at us, don’t just rely on the credit card statement. A one line entry among dozens after months and years may not help your memory (we are all getting older…). Also, if it comes down to it, your credit card statement may have all sorts of personal information about how you choose to spend your money personally. While that stuff is likely redact-able, you still have to explain generally what was redacted (that’s my personal subscription to Welcome Back Kotter! Fan Club…) which could be awkward.

Do the receipt work early on personal credit cards. If you get a committee credit card, keep tight records and put those credit cards into sure hands…

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