Political donors are notoriously naive. They get so giddy about the political process, their favorite candidates, and political agenda projects that they forget about due diligence precautions inherent in the free market. They leave the door wide open for bad actors.
Let’s stop and think about what attracts bad actors. Money and power that translates into money. The biggest pots of money are in the free market. True, the free market does attract some bad actors.
Free markets however, are primarily merit-based. Bad actors find it more difficult to avoid having to embrace the free market requirement that nothing gets produced without effort. They might actually have to work hard and earn their way, exactly what they are trying to avoid.
Where can bad actors go where they don’t have to earn their way. Bingo, You got it. Politics. True, the pots of money in politics are not as big as those in the free market. However, political money, primarily in campaigns and political agenda projects, is donor based. Donations are harder to track and easier to cook the books on.
Free market ventures must meet generally accepted accounting practices and their long range survival depends on how profitable they are. In the case of non-profits, their success is nevertheless measurable and their ability to attract talent depends on the salaries they can offer.
Not so with politics. The profit is getting elected, influencing policy, or sending a message. The modus operandi of bad actors in the political arena is to recruit candidates, initiate donor-attractive projects, or insert themselves into campaigns or projects based on alleged management, marketing, or fund-raising skills, particularly the latter. The next step is to offer or insist on control of the campaign or project finances.
Once intrenched in a campaign or project, how can bad actors attain their goal of enriching themselves at the expense of the endeavor at hand? Inflated performance fees, misrepresented performance, siphoning off donations, cooking the books, sloppy reporting with no or friendly audits, just for openers.
The big prizes for bad actors, however, are the funds left over when the campaign or project is completed. The telltale sign of the opportunity for malfeasance is money left over and and vague or non-existing policies on how to distribute the spoils. Sound familiar? A campaign or project that is sincerely intended to achieve the stated goal will typically use all funds available to ensure victory or achieve success.
It is conceivable that an efficiently run campaign or project could end up with surplus funds. The ethical approach would be to escrow surplus funds for a future campaign or follow-on project and do so with crystal clear well-documented and publicly reported transparency.
Here is a dose of reality for political donors. When a campaign or agenda project has run its course, political donors, unlike free market investors, predictably move on to the next exciting political drama and lose interest in how the campaign or project finances were wrapped up.
It is easier in politics for bad actors to split the leftovers, leave a trail of unpaid bills, head for the hills with their ill-gotten gains, hole up until they run out of money, and then set the trap for their next political campaign or project financial victim.
How could you as a donor smoke out bad actors short of testing for psychopathic behavior?
- Do your due diligence as if it was a free market endeavor
- Get involved in the cause, campaign, or project you believe in
- Insist on a commitment to financial transparency
- Insist on published lists of board, staff, and credential profiles
- Insist on a financial prospectus
- Insist on a business plan
- Insist on frequent financial reports reviewed by an independent auditor
- Insist on profit retention and distribution policies
- Guard the campaign wallet like it was your own
Political donors are to be congratulated on their enthusiastic largess. However, the challenges and responsibilities for donors are more than just taking advantage of an opportunity to avoid getting their fingers dirty.
A wise donor actively participates in the endeavor they are supporting. They ensure that their donation dollars are wisely used and do not fall into the hands of bad actors. They hold the beneficiaries of their philanthropy accountable.
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D. Pratt Tseramed, June 3, 2020