The deadline for filing the first 2009 Lobbying Disclosure Act (LDA) report has arrived – reports are due Monday, April 20th. Now that the Government Accountability Office (GAO) randomly audits LDA reports, the GAO auditor may not be far behind. To ensure that any visit by GAO goes well, and to avoid receiving notices of noncompliance from Congress and the Department of Justice, organizations should commit the necessary time and resources to LDA compliance.
Times have changed. The increased scrutiny on lobbying activities and the stigma associated with bearing the "Scarlet L" are reason enough to focus on LDA compliance. Moreover, getting it wrong on LDA compliance can now result in real penalties: civil fines of up to $200,000 per violation, and criminal penalties of up to five years in jail. LDA compliance is therefore essential and the attending duties may no longer simply be relegated to the newest government relations hire or the poor administrative support professional who occasionally helps the lobbying staff. And, as many organizations recently discovered, it is not advisable in this environment to register the entire government relations team without evaluating how much lobbying each person performs. Organizational management must recognize that LDA compliance is worthy of appropriate attention and oversight.
We have not yet seen a prosecution under the new rules and we do not know whether a GAO audit finding will become a full-scale enforcement matter. As a result, no one can fully appreciate or assess the risk associated with LDA noncompliance. Even aside from the legal consequences, however, the reputational and financial risks are clear. A lobbying scandal can create a public relations nightmare as well as affect the bottom line. No organization wants to be branded as the corporate or non-profit equivalent of "Jack Abramoff."
So, what should lobbying organizations do?
Plan For A "Crisis"
Is it really a crisis when the organization receives a GAO audit letter, or a notice of noncompliance from the Clerk of the House or Secretary of the Senate? With advance planning, it need not be. However, organizations must take any letter from a government agency seriously and should prepare for an LDA audit as though it were inevitable. Because the GAO audits are random and will be conducted annually, there is no telling when an organization's turn will arrive.
Organizations should have a "response team" of outside compliance counsel and in-house personnel ready to manage any type of LDA issue that arises. Before replying to any notices, organizations should have the response team conduct internal inquiries and analyze records so the organization is prepared for an auditor's arrival. More importantly, organizations should focus on compliance efforts now and institute a process as described below.
Develop An Effective LDA Compliance And Training Program
Lobbying organizations must ensure they have effective procedures to track lobbying activities, both by lobbyists and non-lobbyists. While some vendors now market and sell LDA compliance programs, a one-size-fits-all approach does not always work and rarely coheres well with any other financial tracking and/or legal compliance programs already in place. Each organization's processes will vary, as will the level of sophistication necessary to truly comply with the law. For example, a nonprofit organization with a five-person lobbying team and one main public-policy issue does not need the same type of compliance program as a multinational corporation with multiple lines of business and a plethora of policy issues.
Every organization should have two principal goals when implementing a compliance program. First, develop a program that has the flexibility to address reforms in the law and changes in the organization's mission or business. Second, conduct regular training so employees understand the program's underlying legal and procedural requirements.
Conduct Compliance Program Audits
Just as organizations conduct audits to evaluate the effectiveness of financial procedures, LDA compliance programs should be audited on a regular basis. A properly planned and executed audit can serve several important purposes. First, the audit can determine whether any problems have already occurred and give the organization the opportunity to take proactive remedial action. Second, an audit can reveal any weaknesses in the existing program and allow for future improvements. Finally, in the event the organization is ever investigated, an audit can demonstrate that the organization has been diligent and proactive in attempting to comply with the law and has made the necessary improvements to its compliance efforts to guarantee the program's effectiveness.
Stay Current On The Law
In the past two years, laws governing lobbyists and lobbying organizations have changed substantially: the House and Senate changed their ethics rules, the Lobbying Disclosure Act was significantly amended, President Obama limited lobbyists' ability to work in his Administration and lobby for stimulus funds, and the Secretary of the Senate and the Clerk of the House issued several different versions of LDA Guidance. In addition, the Obama Administration has signaled that more lobbying and ethics restrictions may be forthcoming.
With such a fluid environment, organizations that lobby need to stay abreast of developments by hiring outside counsel, subscribing to a specialized news service, and/or dedicating staff to assume these responsibilities. Despite the heightened scrutiny on lobbying generally and the potential for increased penalties associated with LDA violations, organizations that take steps like the ones described above will have no need to panic if and when the GAO auditor arrives.
This article is designed to give general information on the developments covered, not to serve as legal advice related to specific situations or as a legal opinion. Counsel should be consulted for legal advice.