What is Outsourcing?

PAC OUTSOURCING: What are we talking about?

Managing a political action committee is a very special activity involving a myriad of administrative detail, record keeping and most importantly accurate and timely compliance with federal and state laws. The average corporate PAC raises and spends in excess of $100,000 during a two-year campaign cycle. Association and labor organizations regularly accumulate millions of dollars each year. It’s little wonder that a special breed of political professional has been created, namely “the PAC Administrator”. These individuals are typically well acquainted with the political scene and have in many instances spent time working on a political campaign or in some related activity. What many of them lack in formal accounting and legal training they’ve acquired through extensive AND, oftentimes, intensive on-the-job experience.

For many companies and associations, the decision of how to handle PAC management has been to hire one of these very competent individuals to develop and expand the PAC. That means the entity will pay the salary costs and benefits, provide the workspace, purchase software and hardware as well as take responsibility for the legal consequences of that individual’s behavior and capabilities. Based on qualifications, a PAC administrator in the Washington DC area can command a salary from the low 30’s to the real pro’s who are earning (and rightfully so) 5-digit and some 6-digit paychecks. Add in the support costs and technology, and you are looking at costs exceeding $100,000 per annum.

Based on such statistics, a growing number of companies and associations are beginning to look at alternative methods for managing their PAC activities. There are several alternatives: law firms and accounting firms have units established to assist their clientele in this area; software companies that have developed specialized products to support government affairs activities offer this service, and there are a few companies that specialize in providing PAC management services as their primary function.

There are pro’s and con’s for choosing one of these alternatives to “in-housing” the PAC management functions. This is certainly not an attempt to cite them all, but rather to help you begin to appreciate the options that are available.

Law Firms/Accounting Firms: Generally, these professionals will be well versed in the various state, federal and even municipal campaign laws that must be adhered to by PACs. Compliance will be a foremost concern and they will be available to answer your questions generally on a timely basis. Cost will be an important consideration, and typically they won’t guarantee their work, meaning that if a filing is late due to their oversight, they don’t pay the fine. PAC management is not their mainline service and it is often provided primarily to keep a good client happy.

Software companies: Regulators like the FEC are now requiring electronic reporting of PAC activity, and there are several companies that have developed products to assist filers with these requirements. As an offshoot of their product support services, some of the companies offer PAC management services to their customers. The up side is that they usually understand the capabilities of their software and this saves training your administrator on the product. They also can “bundle” the services and the software and make the package financially attractive. The downside is that the individuals working on your PAC data aren’t fully qualified about the intricacies of the campaign laws and cannot always provide the high level of compliance that is essential.

PAC management firms: The increased interest in PAC “outsourcing” has spawned a new firm that is dedicated to PAC management is all aspects. These firms employ trained PAC administrators, rely on software products that are fully functional and maintained by their developers, and provide clients with a high level of competency with regard to campaign law compliance. They research state and federal rules, offer assistance in management reporting, and, of course, handle all the transactions from receipts entry to preparing disbursement check and, most importantly, assuring that reports are prepared and filed on time. They’ll guarantee their work and generally offer advice on how PACs can operate more efficiently. As these companies absorb the associated operating costs in their fees, clients know exactly what the costs will be for the contract period, which is typically 12-months. Downside? Well, it’s certain that your administrator isn’t sitting in an office across the hall, so most contact is by telephone, fax and email, but most users of such services don’t see this as major concern. “We we’re a bit concerned that we’d lose control over the process, but I’ve got a great relationship with our administrator, and I feel I’m in total control”, says Jeff Pannozzo, Director of Government Affairs, DuPont.

Should your company outsource its PAC activities? It really is a decision that has to be made on a case-by-case basis. Clearly more companies and associations are going in that direction not so much to reduce costs, but because campaign law is complicated and failure to comply can result in bad publicity, something nobody relishes. There are obviously alternatives and that again helps resolve particular requirements. There’s no one answer… we at PAC Services, however, think there is a solution, and we’d be happy to hear how we can be of service to you.