Ask the Experts – Preclearance Program for Personal Contributions

Question: Every six months we survey our officers and directors asking whether they have made personal political contributions. Is this sufficient for purposes of pay-to-play reporting?

Answer: Unfortunately, an after-the-fact survey is insufficient in protecting your company from running afoul of pay-to-play laws.
Surveys provide information about personal contributions after the contribution has already been made. When you sit down to complete a pay-to-play report and you consult the survey responses, the damage has already been done if the contribution was made in violation of the pay-to-play law. Furthermore, the time for corrective measures (seeking reimbursement of the contribution) has more than likely passed.
Developing an internal program whereby employees (and in some instances their immediate family members) must seek pre-approval before making a personal political contribution is the gold standard. It is the best practice to ensure compliance with the varied pay-to-play laws.
The most compelling reasons to implement a pre-clearance program are to avoid debarment, fines, and negative publicity. Moreover, having a contract rescinded because of a pay-to-play violation can result in the loss of millions of dollars in revenue.
The success of any program is directly proportional to the education provided to employees. Educating them on the need for a pre-clearance strategy results in increased participation, which in turn results in decreased risk to the company.
At its core, a thorough program must let employees know the company is not prying into their personal spending habits and requiring permission is not an attempt to invade their privacy. The message must be conveyed that the company has legitimate business reasons for requiring pre-approval. Such reasons include: maintaining the company’s ability to effectively conduct business with states and municipalities; ensuring the conduct of the company’s employees does not jeopardize the company’s reputation; and shielding the company’s employees and their family members from personal liability.
There is no one-size-fits-all compliance program, but if a pre-clearance strategy is not used, a violation of a jurisdiction’s pay-to-play law is more likely to occur.

For more information, be sure to check out the “Pay-to-Play” section for each state and local jurisdiction in the U.S. Procurement Lobbying Compliance Laws online publication. Please feel free to contact us if you have any questions. – https://stateandfed.com/contact-us/