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State and Federal Communications' Experts Answer Your Questions
August 2016

Here is your chance to "Ask the Experts" at State and Federal Communications, Inc. Send your questions to experts@stateandfed.com. (Of course, we have always been available to answer questions from clients that are specific to your needs, and we encourage you to continue to call or email us with questions about your particular company or organization. As always, we will confidentially and directly provide answers or information you need.) Our replies are not legal advice, just our analysis of laws, rules, and regulations.

Our company is active and registered as a lobbyist employer in several states. What are best practices for record-keeping? What will we need to access and keep in the event of a state audit?

Each state takes a different approach to auditing, requiring registered companies and lobbyists to keep substantiating records for varying periods of time.  As a conservative rule of thumb, it's generally advisable to keep substantiating records for seven years.  However, for each state where your company has an active registration, you should determine if there is a set document retention policy.  While some states have no set period of time for lobbyists/employers to retain records, a majority of states require retention for a set period of time, usually within a three to five year range.

Here are a few important best practices tips for staying compliant with varying state documentation policies:

  • Know what you need to save.  Just as reporting requirements vary from state to state, so do record retention policies.   Your company will need to obtain and save receipts, invoices, and internal expense reports to substantiate any disclosed expenditure, especially those made on behalf of public officials or employees.   For registered in-house lobbyists and non-lobbyist employees who have reported income on employer disclosure reports, your company will need to obtain the methodology used to calculate the disclosed pro-rated portion of compensation reported, and save substantiating compensation records for each particular filing.   For contract lobbyists, your company will need to save the contract/renewal documents, as well as all invoiClces and receipts.

Additionally, if your company is required to disclose trade association dues, political contributions, business associations, or other auxiliary information on company reports, you will need to retain the corresponding transmittal letters, dues statements, and any other substantiating information.

OFFICIAL NOTIFICATIONS:  In states requiring notification to officials/employees for reported expenditures (Arkansas, Ohio, and California are examples), your company will need to save the notice to the official.  We additionally recommend documenting proof of the transmittal method (postal mail, e-mail, delivery service) in your retention records.

  • Set a clear policy and communicate expectations to employees and outside contractors.   Your company's government relations training should include information on the importance of document retention, including the need to collect and provide invoices, receipts, and other substantiating documentation for any lobbying expenditure.  Contract lobbyists should provide detailed invoices itemizing any reportable lobbying expense. Moreover, in-house employees who are registered as lobbyists or otherwise required to report compensation should be able to provide a clear and concise methodology for tracking compensation, as well as supporting documentation substantiating the compensation reported.  For example, this can include an excel spreadsheet or worksheet logging all time spent during a reporting period engaging in lobbying activities (and including preparation, research, or travel time if necessary).

  • Implement a centralized system for obtaining and saving substantiating documentation.   Waiting for an audit notice to collect substantiating documentation is never advisable.   We recommend designating a centralized record keeping system, managed by someone who can work with your employees and contractors to proactively obtain and catalogue the necessary supporting documentation on a set reporting schedule.   Keeping the responsibility for documentation in a centralized location will save time and effort down the road, especially as individual employees leave the company, and outside contractual relationships change.

Myra Cottrill, Esq., Client Specialist