Friday, October 10, 2008, 1:19 PM

Political GPS: Estimating Your Lobbying Expenses: Will Your Quarterly LDA Report Satisfy Government Auditors?

The third quarterly report for filers under the federal Lobbying Disclosure Act (LDA) is due on October 20, covering the period July 1 - September 30.

Under last year’s lobbying reform law – the Honest Leadership and Open Government Act of 2007 – all LDA reports are subject to random audit by the GAO (Government Accountability Office). In preparing for this next filing, we suggest companies and trade associations review carefully the manner in which your lobbying expenses are tracked and reported. Here are some things to keep in mind:
  • All organizations registered under the LDA must file quarterly reports until their status as a lobbyist-employer is validly terminated. This is true even if the registration has been valid for only part of the reporting period and even if lobbying activities during a particular quarter would not require registration in the first instance.
  • In the first quarterly report of 2008, filers chose whether to estimate lobbying expenses using the LDA’s definition of lobbying (Method A) or the definitions used in the Internal Revenue Code (Method B or C). Whatever the election, it may not be changed during the calendar year. Also bear in mind that the tax law definitions of lobbying are broader than the LDA definitions in some ways and narrower in others.
  • Review your timesheets and expense forms to ensure that they track covered activity. Regardless of which reporting method you use, reportable expenses must include not only time spent by each employee in direct contact with government officials, but also time spent by employees behind the scenes, such as drafting background papers or bill language that will be given to government officials and scripting strategy sessions. Even a meeting held by the CEO with a covered official is reportable if it supports lobbying initiatives.
  • The estimate of lobbying expenses must capture employees’ salary costs and overhead (including a percentage of support staff salaries), payments made to outside lobbying firms, travel expenses, and dues paid to trade associations allocated to political activities.
  • If lobbying expenses are $5,000 or more, the organization must provide a good faith estimate of the actual dollar amount rounded to the nearest $10,000.
  • Keep copies of supporting documentation for at least 6 years.

GAO Issues Report on Lobbying Disclosure Act Compliance

The GAO just issued its first annual report on lobbyists’ compliance with the Lobbying Disclosure Act. GAO found that in over 65% of reports, filers lacked adequate documentation to explain why individuals were listed as lobbyists on their reports. Not surprisingly, many of the randomly-sampled lobbyists reported confusion about their LDA filing obligations and felt that additional Congressional guidance would help them.

GAO also studied the procedures used by the U.S. Attorney for the District of Columbia to review and prosecute apparent LDA violations. The GAO noted increasing numbers of referrals from Congress to the U.S. Attorney in recent years, and constraints on that office’s ability to deal with the caseload. Looking to the future, GAO recommended that the U.S. Attorney develop a more structured approach to LDA cases to ensure that action is taken with respect to repeat offenders. The U.S. Attorney agreed to follow this recommendation and, among other things, intends to develop an improved database for tracking LDA cases.

Surely The Law Doesn’t Mean That. . . . Unintended Consequences in Colorado

In 2007, Colorado adopted a sweeping new ethics law, under which state and local government officials and their family members may not accept or receive gifts or other things of value worth more than $50 in a calendar year, including favors, services, travel and entertainment. The law allowed for only limited exceptions – for example, items of trivial value, awards of appreciation, and food or beverages consumed at certain receptions or meetings.

The new enforcement agency – the Independent Ethics Commission (IEC) – quickly realized that the new law posed several practical problems. Read literally, it would prohibit government employees from receiving a wide range of benefits and things of value that are regularly available to others. In Position Statement 08-01, the IEC clarified that government employees and their family members can receive educational scholarships, insurance proceeds, winnings in raffles or lotteries, and inheritances. Surprisingly, the IEC ruled that it will, in some instances, allow private organizations to give government employees honoraria of more than $50 for speaking engagements, even though honoraria are specifically prohibited in the law.

Colorado and South Dakota to Consider Pay-to-Play

On election day, the voters in two more states will decide whether to restrict campaign contributions by businesses that hold government contracts. Amendment 54 will be on the ballot in Colorado, and Initiated Measure 10 will be put before the voters of South Dakota. The South Dakota measure would limit both contributions and independent expenditures by businesses that hold no-bid state contracts.

If you have any questions or would like more information, please feel free to contact Larry (, (202) 857-4429) or Jim (, (202) 857-4417).

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