As 2025 comes to an end, organizations looking to improve their compliance programs in the new year should consider conducting reviews of their lobby law compliance practices. In the third episode of “The Lobby Bar” podcast, hosts Charlie Ricciardelli and Tyler Rosen outline the five W’s — who, what, when, where and why — of conducting these internal compliance checkups and review the top 10 issues that organizations and companies may encounter when auditing their Federal Lobbying Disclosure Act reporting practices.
Episode Summary
As 2025 comes to a close, “The Lobby Bar” hosts Charlie Ricciardelli and Tyler Rosen want to help government affairs teams and compliance professionals out with regard to a critical year-end to-do item: federal lobbying reports. Tune in as they break down the “five Ws” of the lobbying compliance audits and outline their “Top 10” most common findings of their experiences guiding clients through the process.
Voiceover (00:00):
From Skadden, you’re listening to The Lobby Bar. A political law podcast where we strive to make political law accessible, and host Charlie Ricciardelli and Tyler Rosen deliver practical insights on the compliance challenges and regulatory developments that matter to legal, compliance and government affairs professionals across all industries.
Charlie Ricciardelli (00:23):
Hello, welcome to The Lobby Bar. My name is Charlie Ricciardelli.
Tyler Rosen (00:26):
And I’m Tyler Rosen.
Charlie Ricciardelli (00:27):
We are partners in Skadden’s political law practice here in Washington, DC. Thanks for joining us for another episode of The Lobby Bar. Tyler and I were kicking around ideas for, what are we on, our third episode I believe, and the last one we were using a holiday theme and talking about the hot new toy to get a government affairs department. And Tyler came up with a good idea of thinking about New Years resolutions and what government affairs practices and compliance professionals might be thinking about in terms of New Years resolutions. Which more seriously got us thinking about, well, what are clean up or to-do items toward the end of the year or the beginning of the year that make a lot of sense that we see folks doing relatively frequently.
(01:07):
And some version of audits or compliance reviews for your lobbying and PAC activity is something that you commonly see companies doing around this time of year, or thinking about doing for January. So, we wanted to spend a little bit of time talking about that. We’re going to focus in this episode specifically on lobbying audits, and I’m gingerly using that phrase “audit” intentionally. Let me say this, audits conjure up something of a little bit of a more painful process, in at least the tax and IRS context. And we’re really talking about, when we’re talking about auditing, your lobby policies, procedures and reporting practices.
(01:50):
I don’t know, Tyler, if we think of it more as a compliance review I guess?
Tyler Rosen (01:54):
Sure.
Charlie Ricciardelli (01:54):
Sure.
Tyler Rosen (01:55):
A compliance review, a compliance gap analysis. Call it an annual political law checkup.
Charlie Ricciardelli (01:59):
Right.
Tyler Rosen (02:00):
We’ll talk about how frequently you should be doing them anyway. Call it whatever you want.
Charlie Ricciardelli (02:03):
I like checkup.
Tyler Rosen (02:03):
Yeah.
Charlie Ricciardelli (02:03):
Checkup is good. It sounds friendly, something a pediatrician would do. That’s better.
Tyler Rosen (02:08):
Yeah.
Charlie Ricciardelli (02:10):
So in any event, let’s talk about what that would look like. And again, in order to make this as useful as possible, we’re going to really zero in on federal lobbying. What are your practices around filing your federal lobbying reports? And I would say most of our clients have the obligation to file federal lobby reports under the Lobbying Disclosure Act because they have an in-house registered lobbyist. If you’re not in that position, well, you have a couple of options. You could turn us off right now, which I don’t recommend. Or stick around because it will be fascinating. But if you have state lobbying activities, a lot of this at least conceptually ports over to doing a checkup or compliance review on your state lobby policies, procedures, reporting. But we’re going to focus on the Lobbying Disclosure Act, the federal lobbying law (the LDA).
(02:58):
The mechanism that we’re going to start with, because this is a podcast and we’re really seasoned journalists at this point on episode three, is doing the five Ws, the who, what, why, where and when of this type of lobbying compliance audit. So I will kick off with the who. Well, who should do this? Well, we should do it.
Tyler Rosen (03:19):
Specifically Charlie.
Charlie Ricciardelli (03:20):
Specifically me. No, listen, I think you do want outside counsel, whoever that may be, to assist you in this. Obviously, you can’t have the same folks who are preparing the reports necessarily looking over to make sure they’re doing it right, and you do want some outside expertise when you’re talking about reviewing policies, procedures, their sufficiency, etc.
(03:40):
So let’s talk about what.
Tyler Rosen (03:41):
Yeah.
Charlie Ricciardelli (03:41):
Tyler, do you want to walk through the what?
Tyler Rosen (03:42):
Yeah. So for the what with a lobby compliance review or checkup, it starts with the filings themselves. You pull what’s being put out there on the public record, and then it’s looking at what goes into those reports. Processes, data tracking documents, records of expenditures, other documents that feed into it. Basically, the idea of an audit or of a compliance checkup is we want to know how did you arrive at everything that’s on that report, and what went into that, and what the process was.
Charlie Ricciardelli (04:14):
Yeah, I think that’s right. The end product are the reports and you’re going to have to pull those. And then in terms of what goes in, you got to pull your policies. If you have a procedures document, which you should, pull the procedures. All of the data collection tools, and documents, and records that you have.
(04:29):
And I think you’re also going to need to talk to the folks who are responsible for compiling these reports. So I think step one is gathering all the documents, making sure that they are in good shape, adequate. Understanding the plumbing of how we’re compiling all of the data that goes into the reports. And then talk to the folks who are on the ground who are really doing it so you can, what’s the phrase, their lived experience. You can really understand how those policies and procedures are being implemented.
Tyler Rosen (04:56):
Yeah, because that can look very different sometimes. The lived experience and the world on paper can be very, very different.
Charlie Ricciardelli (05:02):
Yeah, I think that’s right. The number of times that we see somebody with an A-plus policy and an A-minus set of procedures, and then something has gone wrong in the translation.
(05:13):
And not to skip ahead too far to the-
Tyler Rosen (05:15):
Yeah, let’s skip ahead a little bit.
Charlie Ricciardelli (05:17):
Yeah. So what do you do?
Tyler Rosen (05:18):
I think that people should know what’s coming.
Charlie Ricciardelli (05:20):
That’s true. What I was going to say is that gap usually has to be filled by training and reminders, etc., where you see that sort of a gap. Hey, everything on paper looks great, but we’re not actually getting it done. One of the outflows of this type of audit is, hey, we need to train our folks a little bit better. So that’s the who, it’s the what.
(05:38):
In terms of the when, there’s no hard and fast rule here. Obviously, we’re self-interested so we’d say, “Oh, you should be doing this every year.” And some folks do. That’s why we’re doing it as a New Years resolution. A lot of times, companies will dust off their policies, procedures and do this type of checkup every year, but it’s not strictly necessary. I think every couple of years is reasonable. If you’re getting much beyond that, I think it leads to a question about how confident are you in your practices.
Tyler Rosen (06:05):
Yeah. And then where should you do it? Where those documents and where those people are. We’ll find them, wherever they are.
Charlie Ricciardelli (06:10):
Yeah. That’s the one W that’s not particularly relevant.
Tyler Rosen (06:12):
It’s not that applicable, but it would be weird if we just did the four Ws.
Charlie Ricciardelli (06:16):
That’s true. So finally, why? Tyler, why in your view, why bother? Why are we even doing this?
Tyler Rosen (06:22):
Yeah, I think there are a bunch of reasons. The first is, and we see clients come to us with a request to do these reviews and they are coming for a variety of reasons. I think one is sometimes to anticipate and prepare for, and hopefully get a good grade on, internal audit. Because often times large companies will have an internal audit function and government affairs compliance is an area that we do see subject to those reviews sometimes. Sometimes those internal auditors don’t know exactly what they’re looking for when it comes to this space and having gone through an exercise with outside counsel where you run through all the processes and the procedures, and get a clean bill of health or get specific action items that you can then work on and ultimately then have a clean bill of health, puts a company in a much better spot when they’re doing that internal audit. I think that’s the first reason.
(07:11):
The second is that there are GAO audits as part of the federal lobbying law. And if we’re talking about state lobby laws, there are a number of states that do either random audits or targeted audits. And at the federal level, they’re random. So having gone through this exercise puts you in a much more comfortable space when you are having conversations with the auditor, the actual external auditor, about what you’re doing.
(07:35):
I’d say the third reason is just, substantively, it’s helpful. There are lots of circumstances where this sort of checkup can identify issues, things that could lead to embarrassment for the company, or lead to things that would be awkward and the sooner you can spot them and deal with them, the easier they are to resolve.
(07:53):
And I guess, finally, at the end of the day, it’s about complying with the law and we’re here to comply with the laws. There’s not a legal requirement to do the audit, but there is a legal requirement to get the filings right. So, it’s a way of making sure that a company’s complying with its obligations to get these filings right.
Charlie Ricciardelli (08:09):
I’m glad we didn’t use scare quotes. But yeah, complying with the law is its own reward. So there’s certainly enough reasons, as Tyler mentioned, to make sure getting this done, yeah.
Tyler Rosen (08:19):
We’re for that here. We’re pro-
Charlie Ricciardelli (08:21):
We’re pro following the law.
Tyler Rosen (08:22):
... complying with the law.
Charlie Ricciardelli (08:23):
Exactly.
Tyler Rosen (08:23):
That’s right.
Charlie Ricciardelli (08:24):
Great, okay. So we’ve gone through our five Ws questions. And I think what we thought we would do before we get to the “so what” or the output and what do we do after this audit, we’ve talked a little bit about what it looks like. We thought we would spotlight some of the issues that you may come across and we’re hearkening back to, as we’re wont to do on this podcast it seems, to the old Dave Letterman Top 10 lists. We’ve solicited from our group, both the attorneys and in this context, much more importantly, our reports analyst team. They’ve seen a lot.
Tyler Rosen (08:57):
They’ve seen things, they’ve seen things.
Charlie Ricciardelli (08:58):
They’ve seen some things.
Tyler Rosen (08:58):
Yeah.
Charlie Ricciardelli (08:59):
So we’ve polled them for their top 10 findings, which I promise you, they’re not the funniest things that folks have found because this is a family podcast. But, they’re probably the most significant recurring items that we tend to see uncovered in an audit or compliance checkup, review, whatever you want to call this. Which will hopefully tease out some of these issues, and again, go to the why is this important, why do we need to do this, and what should we be focused on.
(09:23):
So whether we do this with drum rolls and flourishes or just play it straight remains to be seen, but I will let Tyler kick it off with the number 10 of our top 10 findings.
Tyler Rosen (09:35):
All right. Top 10 findings in a lobby and compliance review. Number 10, registering as the wrong entity type. We’re setting the bar pretty low to start off here. But under the LDA, the federal lobby law, you can register as a lobbying entity. You can also register as a lobbying firm. If you’re a lobbying firm, don’t register as a lobbying entity. If you’re a lobbying entity, don’t register as a lobbying firm. It seems pretty straightforward, but it is something that we have found on audits.
Charlie Ricciardelli (10:02):
Is there a corollary to this that’s maybe even more elementary? And hopefully I’m not stealing the thunder of a later one, I don’t think I am. Register the right company name, the actual legal entity. To be clear, when we’re talking about the federal lobbying law, that is the entity that literally employees, employs your in-house lobbyist, that meets the registration threshold. That is the legal entity. So you don’t want to register as a brand name, or the wrong affiliate, or just automatically go to the top of the house, you want to identify the right legal entity that employs the in-house lobbyist.
(10:39):
And while following the law is its own reward, and again, that’s what the LDA requires and you should do it, there are consequences to getting it wrong also. You are out on the public record disclosing the expenditures, all expenditures made by the legal entity that’s registered for the purpose of lobbying. So if you’re registering the wrong entity, it’s inherently an incorrect report. If you’re registering the brand, that implies that you are now doing a universal filing and you should be capturing the lobby expenditures of every single affiliate, which most companies don’t necessarily want to do. So you do want to be precise here.
(11:14):
Number nine in our top 10 findings, semi-annual LD-203 reports that get filed by the individual lobbyists not including the PACs that they control. Keep in mind, the individual lobbyists have to file a semi-annual just like the company has to file, and they have to list their certain federal political contributions that they make. But they also need to disclose whether they control a PAC. Most of the time, where we see this come up or where we see this missed is they fail to disclose the fact that they control the company’s connected PAC. The company that they’re employed by or lobbying for almost certainly has a federal PAC, it should be going on that report and just noting this lobbyist controls this PAC and you can find its contributions on the company report. Not necessarily limited to that. They could control trade association PACs, other PACs. So you want to make sure that when they’re filing this correctly, they’re capturing and disclosing any PAC that they control.
Tyler Rosen (12:13):
Yeah. And what it means to control a PAC I think is a question that should be thought about and should be something that you’re thinking about in doing these reports. If you have somebody who’s on a PAC board for instance, it doesn’t necessarily mean that they control the PAC, but it’s something where we’re in this space of potentially controlling a PAC and we want to get down to the right answer about whether the lobbyist actually does control the PAC.
Charlie Ricciardelli (12:34):
And listen, I will say this much. You’re certainly in the ballpark, and I think there are a number of companies and lobbyists who just say, “Listen, if I’m on the PAC board, I’m going to take the position that I control it.” I think that’s pretty common. There may be arguments in the other direction, depending on the facts and circumstances.
Tyler Rosen (12:48):
I think that’s right. Number eight, using old bill numbers and/or not listing the bill name.
(12:56):
Okay, so on the LD-2, not the 203, we’re switching out of the quarterly report, the company has to list the issues, the bills that they lobbied during the quarter. There’s often times some continuity. If in quarter one, you were lobbying a bill, in quarter two you may well be lobbying the same bill, and so there’s often times a lot of continuity between reports.
(13:17):
The thing is though, the U.S. House and Senate, they have sessions, and every two years they have a new session and all those bill numbers change. And even if it’s the same legislation that gets reintroduced into the new session, it will have a new bill number. So what was House Resolution 324 may have been an issue that the company cared about in the last session, but in the new session it could be something completely different.
(13:41):
And we have seen this happen, a company gets a press inquiry. “Oh, we see on your lobby report that you’re lobbying on the free education for martians bill,” in something that the company has no interest in, no involvement in, and it can be something pretty embarrassing. It could be contrary to the positions that they care about and it is awkward. And the right answer here to the press is not a fun answer to give. Which is, “Oh, yeah, we screwed up the report.” So there’s not a great resolution to that.
(14:12):
One way to catch that scenario, and also again, is a requirement of the law, is that you also list the bill name. So the requirement is to include the bill name and the bill number. And hopefully if you’re reporting the bill name, you will notice that it’s changed in a new session and you’re getting it right.
Charlie Ricciardelli (14:28):
Okay, I will move to number seven, failing to specify the provisions that you lobbied, the provisions of the bill. Keep in mind that the whole purpose of this in the requirement is to disclose enough information so that a member of the public who picks up this report can understand what you were lobbying. So sometimes or not infrequently, we will see companies just list the bill. We lobby the bill and not identifying the specific components of it, which is insufficient under the law.
(14:55):
Folks do it for various reasons. I would imagine one of them is, well, it’s just easier. We slap the bill number, hopefully the right one on there and the name, and we just call it a day. Some people may not be excited about identifying a specific provision, but again, it’s the requirement. And there’s a flip side too and it’s very similar to what Tyler was just saying where you may be signing up, if you fail to change the bill number and now it’s a different bill, and now it looks like you’re lobbying the wrong bill. Well, there are lots of provisions in some of these bills, they can be pretty broad. And you’re essentially implicitly signing up for, I’m lobbying all of them and any one component of them, which may or may not be a reputational issue in its own right. So you do want to dial in and identify those provisions that you are lobbying.
Tyler Rosen (15:40):
The next one, number six, deficient procedures for collecting information. Maybe associated with that we should have no procedures for identifying the information required for the report. Both the LD-2 and the LD-203 have lots of information that a company needs to compile to put on the report. For the LD-2, in addition to the bills and the provisions that we’ve just been talking about, there’s also a requirement to disclose the company’s spending on lobbying, specifically compensation for in-house people for lobbying, the compensation to external lobbyists and consultants for lobbying, payments to trade associations for the non-deductible portion of their dues and other payments. And then also, travel and entertainment, and lodging expenses, the sort of extra stuff.
(16:24):
So, it’s really not enough to just say, “We think we spent about $100,000 this quarter.” There needs to be a process for collecting that information, and sometimes it doesn’t exist. Sometimes it’s very rudimentary in a way that is not provable to an external auditor. And sometimes, the lack of having it written down, we can somewhat macabrely call it the hit by a bus problem. Where you may have an absolutely amazing compliance person who is totally on top of all of this stuff - collecting it, has great procedures, the information is perfectly accurate. But, they quit or something happens to them and nobody knows how to put that Humpty Dumpty back together again of how you get the information. So it is really, really important that there are written procedures for this thing.
Charlie Ricciardelli (17:10):
Yeah, agreed. So, insufficient versions of those or not having them at all are real problems. And I think it’s worth teasing out, maybe I’m belaboring it, but our view of a policy versus a procedure so that we’re being clear about what we’re actually recommending.
(17:28):
Writ large, the way that I think about this as a policy is an employee-facing document that in the simplest terms possible, gives employees marching orders so that they are able to comply with the law. And in our space, whether we’re talking about lobbying, whether we’re talking about political contributions and pay-to-play concerns, gifts, conflicts of interest, we’re really talking about relatively simple pre-clearance requirements. If you’re going to lobby, if you’re going to take any action to influence any government decision, you have to raise your hand and come to legal or compliance for preapproval for tracking.
(18:02):
And then on the back end, you have the procedures, which are all the intricate ... it’s the plumbing for what happens when somebody raises their hand to come and engage in the lobbying. How you vet to determine whether or not they’re going to have to register, and if they do have to register, how you handle the reporting, and that’s what we’re talking about here. Having a memorialized set of procedures that says, “Okay, we’re going to ask Jack to track his time in this way, and we’re going to reach out to Jane to collect trade association dues payments that are attributable to lobbying” and etc. So you really want to have a good set of procedures to address, again, what Tyler macabrely refers to as hit by the bus. I might say win the lottery problem. Compliance people just-
Tyler Rosen (18:42):
You mean they wouldn’t just stick around-
Charlie Ricciardelli (18:44):
No.
Tyler Rosen (18:44):
... after winning the lottery?
Charlie Ricciardelli (18:45):
Well, yeah. Complying with the law is its own reward, so maybe they would. So fully agree.
(18:51):
Which brings us to number five, which is a complete cop-out and it is not following your data collection procedures. We will admit that we needed to get to 10, and so we kind of split these two because not having them or there being insufficient, or simply not following them are all kind of related. They could have been their own bullet.
Tyler Rosen (19:10):
I don’t know, I think it’s an ... Just like you were talking about the difference between the world on paper and the lived experience, I think it’s a separate issue.
Charlie Ricciardelli (19:18):
It’s defensible. So great, congratulations, you have a great policy, you have this great set of procedures, you listened to this podcast three or four times and you’ve memorialized the procedures. Folks have to follow them. And that’s pretty intuitive and obvious, but it’s probably ... It could be number one on this list for at least the most common thing that we see in the audit is there are shortcuts or people are ignoring what they’re supposed to be doing, whether it’s tracking time or they forget to include X, Y or Z expense. Again, this is going to be a training issue. Again, bridging that gap between what’s on paper and lived experiences, you need to drill this home and do recurring training. I think in this context, annual training does make a lot of sense. Be thoughtful about how you structure that training.
(20:04):
I guess now I really am skipping ahead, but identify the right population, make sure it’s targeted and they’re really getting something out of it. But I think that’s the way to make sure that you don’t end up on this list at number five for failing to follow your procedures.
Tyler Rosen (20:17):
All right. So the top 10 findings in a lobbying compliance review, number four, failing to coordinate with outside lobbyists. And this can come up in a few different ways. Certainly, with the federal law and in almost every state, both the company and the outside lobbying firm will have their own filing obligations, and the lobbying firm reports the client. So we’ve got to make sure that it’s got all the things Charlie said up at the top about the right client name. It’s not just a brand, it’s the right legal entity that’s paying them, that they’re getting that right. And the compensation that they’re reporting receiving is the same thing that the company thinks that it’s spending and is including in its numbers.
(21:01):
Now for the LDA, for the LD-2 quarterly report, for the company that number gets thrown in with all of the other expenses and it’s not necessarily apparent from the face of the filings if this is screwed up. At the state level, it sometimes is very clear that it’s been screwed up. Somebody looks at the filings for the lobbying firm, sees one number, sees what should be the parallel report on a client or lobbyist employer report and they don’t match. And that’s a very, very low hanging fruit for a regulator to come call you up and say, “What’s up with this?”
Charlie Ricciardelli (21:34):
I would identify here also an interesting, to me, tension between the company and its outside consultants in terms of reporting. We see it a lot under the LDA, and another reason why you want to check to make sure that they are disclosing the right thing. Keep in mind the number that the company reports is, for that quarterly period, its total expenditures attributable to covered federal lobbying. And you may just assume that, “Well, this is an outside consultant and they’re registered to lobby, so we’re just going to disclose the entire thing.” That’s not necessarily the case. They may be doing other things. They may be doing some state work. They may be doing strategic consulting or communications consulting that isn’t covered under the LDA and that wouldn’t go on the report. That’s not an expenditure for the purpose of lobbying.
(22:25):
So part of this coordination is to make sure that you agree with the number that they’re going to put on their report. And this is where the tension comes in because they are motivated to increase their number because they want to publicly report that they’re getting paid a lot because it makes them seem more successful. “Oh, look at how much money this big, impressive, wonderful company is paying me to lobby.” And on the flip side, the company tends to, some companies care more or less about this, but generally speaking they want to keep their number down. Accurate, but down. They certainly don’t want to artificially inflate it.
(22:59):
So you may identify that tension. It’s a good idea to ask to get that report from the outside lobbyist before they file it so you can review it and put it through that filter. And say, “Hey, really only half of what you’re doing is disclosable, why is your full retainer on here?”
Tyler Rosen (23:14):
Yeah, that’s a really great point. And I don’t know that people realize. Unlike sickos like us, who are regularly reading Politico Influence and whatnot, but it’s something that in the industry, people really keep tabs of. There are top 10 lists of lobbying firms by revenue. You see it at the federal level, you see it at the state level. Being a top five lobbying firm by billings in a state is advertising, and it’s something that the lobbying firms do have often times an incentive to want to take the broadest possible view of what’s reportable.
Charlie Ricciardelli (23:42):
Okay, number three, which we have termed on our list ... I’ll pull back the curtain for those of you watching on video, we have a little outline where we’ve listed all our top 10.
Tyler Rosen (23:52):
We’re not just making this up as we go. There was methodology, there was rigor. There was rigor for this.
Charlie Ricciardelli (23:57):
Yeah, we actually planned this. So number three we wrote down as put me down for 80, or put me down for 80%. What we’re getting at here is, and this comes up all the time, where somebody’s been a registered lobbyist for 10, 15, 20 years and they just have their number. They’re like, “I spend 80% of my time lobbying, just put me down,” and they report the same figure for their amount of time spent engaged in lobbying activity every single quarter. To be clear for the uninitiated, which I’m sure most of you are initiated, they need to track their time which we then convert into a dollar figure by figuring out the portion of their salary attributable to lobbying, so you take their hours for lobbying.
(24:38):
And again, you see it very frequently, people just have their standard number. That’s not a thing. That is not possible. Things vary, people spend time on different projects. It’s a red flag that they are not thoughtfully recording this time so there’s not really much accuracy behind the number. And again, listen, this is a good-faith standard and we’re rounding to the nearest 10,000, so I’m not trying to claim this has to be a science experiment and they don’t need to keep track of their time down to a six-minute increment. But there needs to be some reasonably contemporaneous method of tracking that time, and if they’re just using the same number over, and over and over again, it’s a real clue that they’re not putting any thought or diligence into it.
(25:21):
The other thing, and maybe we’re too charitable, that we see is, “Put me down for 100%.”
Tyler Rosen (25:25):
I was just going to say that, yeah.
Charlie Ricciardelli (25:27):
Yeah. We see that a lot. They’re just like, “That’s all I do is lobbying.” No, that’s not all you do. You have other responsibilities. There’s no chance that all of your time is spent as an in-house person engaged in lobbying. So those are red flags that, again, we need to do a little bit more training.
Tyler Rosen (25:41):
Yeah. The more charitable, maybe, version of the put me down for 100% is, “Well, let’s just be conservative and we’ll put me down for 100%.” Another word for conservative is inaccurate. The idea here is if you’re over-reporting or under-reporting, it’s still not an accurate report. The report is supposed to capture an accurate good faith estimate of a company’s lobbying expenses and if we go with 100%, that’s not right.
(26:08):
Number two finding, missing honorary expense process for LD-203. So this maybe is also a little bit of a cop-out, if Charlie’s going to say that we’re cheating to stretch it to 10. You could say this is a subset of either not having procedures or deficient procedures, but I think this is a sufficiently unique issue that it’s worth calling out and doing separately. So the LD-203, I think most people doing the filings understand the political contribution part of the LD-203, you have to report certain federal contributions. But the honorary expense piece of it is much less straightforward and there’s a requirement to disclose certain honorary expenses, honoring federal legislative branch and covered executive branch officials. That can include things like payments to charity, payments to sponsor events that actually honor one of those folks. And it’s not always obvious and intuitive what those things are, and whether a company has paid for any of them if they would then need to report.
(27:07):
So, our process where whoever is there sitting on the last day of the month getting ready to do the filing yells out their office door, “Hey, anybody pay for any honorary expenses” — that’s not sufficient. So the question is what do you do about that? And some will try to build out a process that addresses honorary expenses on the front end. At a time when a sponsorship is being considered or a donation is being considered, you’re either getting some information from the organization or from the in-house person who’s responsible for requesting the thing to determine whether it’s an honorary expense. Another is to tie it into the payment system and get a sense of what’s gone out during this semi-annual period and doing some legal revenue on the back end.
Charlie Ricciardelli (27:47):
Okay. So our number one, and maybe we should think about or talk about why this was number one. But our number one finding in lobbying audits, compliance reviews, checkups, as you like it, is failing to round your expenditure figure to the nearest $10,000. It’s such low-hanging fruit. It’s wild to not get this right. It’s right there on the form, it says it right there. And while maybe it’s not the most egregious failure and some folks may say, “Hey, we’re being even more accurate than required,” it’s a large-type tip-off that you’re not paying attention to what the law requires or in fact the form. So make sure you’re rounding it.
(28:25):
Another related failure is just assuming that you round up. It’s really you round to the nearest one. So if it’s 12,000, it’s 10,000, don’t go 12 to 20. Give yourself the break and go down to 10.
Tyler Rosen (28:39):
Yeah. I think it is just a flaming red flag that somebody either doesn’t read instructions or doesn’t have any idea what they’re doing with this. We see this not infrequently. Our clients I think mostly don’t have this issue, but we do see it sometimes with new clients, with looking at other filings on the public record. To Charlie’s point, that it’s more accurate and therefore “righter” to have a specific number, “We spent $832,412.74.” That’s not accurate. Nobody’s getting it that accurately. The reason the law lets you round to the nearest 10,000 is it’s a good-faith standard. It’s inherently imprecise.
(29:19):The idea here is we’re going for accuracy, not precision. We want it to be a generally accurate number, hopefully the rounding to the 10,000 erases whatever jankiness there is in the numbers, but that’s the idea of it. Trying to put a specific dollar amount is crazy and it’s inherently not right.
Charlie Ricciardelli (29:37):
That’s a good point. It makes me realize that when you’re looking at this good faith standard and when you are called to account for the accuracy of your reports, let’s say in a GAO audit, which Tyler and I have both sat through, innumerable of those. It’s largely a show your work exercise. They want to see the process. They want to know that you have a policy and a set of procedures in place that’s being implemented to arrive at what is a defensible good faith estimate of your expenditures for lobbying and the issues that you lobbied and the agencies. They’re less worried about the specific number. So if you sit down in that GAO audit and you haven’t even rounded to the nearest 10,000, I don’t think that’s going to reassure anybody that the process, which is really the important part, is shored up the way that it should be.
(30:25):
Okay, so that’s our top 10. We talked about what this audit looks like. You’ve gathered your policies, you’ve gathered your procedures, the problems, all the data that went into it. You’ve pored over it, you’ve talked to everybody involved, and you identified hopefully fewer than three of the things that were on our top 10 list, maybe none. What do we do next as a result of this?
Tyler Rosen (30:46):
You mean so what?
Charlie Ricciardelli (30:47):
Yes, I mean so what-
Tyler Rosen (30:49):
So what.
Charlie Ricciardelli (30:49):
... is next?
Tyler Rosen (30:51):
Right.
Charlie Ricciardelli (30:52):
So you got to fix it. That’s the obvious answer. But to the extent you reviewed that policy and there are gaps in the policy, you need to plug them. You need to revise that policy, improve your procedures, revise them, create them if you didn’t find them or you don’t know where they are, you didn’t have them. And I think in my view, that’s obviously step one.
(31:12):
Well, step one I should say actually is you may need to amend some reports. And if you’ve identified gaps and you missed things, you went through all this, you pored through all the trade association dues payments and you missed three or four, you may need to go back and amend prior reports. So that’s probably step one.
(31:27):
Step two, fix what you identified as insufficient policies or procedures. And then a very common product of this process is awareness and training for the team. I teased this at the beginning. We often just throw out, do training and do training, and we don’t really talk about what that means. I said earlier you want to be thoughtful about the audience and the content. When we talk about lobbying training, it really depends on who we’re talking to. There are two basic components and both are important, but sometimes it makes sense to split them up.
(32:02):
Number one, you want to train the lobbyists and the GR team so that they understand what they’re supposed to be tracking. Well, what is lobbying activity? Who are the covered officials? What’s the definition? What do I do when I’m talking to my trade association about legislative issues, is that lobbying, is it not? We need to educate them so that they understand, okay, we have this policy, I know I’m supposed to track time, expenses, issues, etc. When does that apply? So you spend some time talking to them.
(32:31):
And then often a separate second training is the back end for the legal and the compliance folks who are charged with compiling, preparing and filing the report so that they understand. They need to understand that also, but they also need to understand what else goes into the report in terms of those honorary expenses on the semi-annual LD-203 Tyler talked about. How do they handle trade association dues payments? Do they know in which quarter those are supposed to be reported? Spoiler alert for the trade association dues payments ... it’s in the quarter you actually pay them, which is different than when you report payments for everything else and outside consultants.
Tyler Rosen (32:59):
Everything else.
Charlie Ricciardelli (33:00):
So you want to train them. And often, it doesn’t make sense to combine that training. You can do it, it just depends really on how many people you’re talking about. But, think about at least splitting it up.
Tyler Rosen (33:16):
Excellent. Well, we ended up talking for a really long time about lobby compliance checkups. So we are actually going to come back to you with part two of this podcast after the new year, where we’re going to talk about PAC audits and PAC compliance reviews. So until then, happy new year to everyone, and we’ll see you on the other side.
Charlie Ricciardelli (33:39):
Great. Thank you.
Voiceover (33:41):
Thank you for joining us for today’s episode of The Lobby Bar, a political law podcast. If you like what you’re hearing, be sure to subscribe in your favorite podcast app so you don’t miss any future conversations. Additional information about Skadden can be found at skadden.com.
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