Campaign Spending Commission

     Campaign committees are commonly faced with the dilemma of checks written to vendors or other individuals, or checks are written to return contributions to donors, but the checks are not cashed and remain on campaign books as outstanding. Over time this leads to a discrepancy between the “cash on hand” as reported in the campaign disclosure report and the actual bank balance. A candidate has asked for advice on how the outstanding checks should be treated for bookkeeping and reporting purposes.

     Candidates should establish a policy whereby outstanding checks will not be honored after a reasonable time period, such as, after 180 days or six months. Banks are in accord with such policies. Notices such as “Void after 180 days” can be printed on checks with no additional cost. Under the Uniform Commercial Code followed by FDIC banks, a check is considered “stale dated” six months after the date of issuance by the issuer of the check. In other words, banks that follow the Uniform Commercial Code will not honor or cash checks that are dated longer than six months.

     The committee should void checks written to vendors or other individuals such as campaign workers and not cashed within six months. Once a check is voided, the campaign spending report should reflect that there was no expenditure as previously reported. This can be accomplished by reporting on Schedule B of the Disclosure Report a negative expenditure with an explanation in the purpose column that a previous check as identified and previously reported as an expenditure has been voided.

     Since no expenditure, by the amount of the voided check was reported, the campaign committee should reflect an unpaid expenditure in Schedule E, or alternatively report the unpaid expenditure as a nonmonetary contribution. Some campaigns may choose to issue a second check under the assumption that the original check was lost in transit. Under current proposed rules unpaid expenditures become contributions within one year from the date of the original receipt of the good or service. In other words, unpaid expenditures are treated similar to a loan. At the time the check is voided, the amount may be recorded as a nonmonetary contribution and expenditure, similar to any other nonmonetary contribution.

     Contributions that are returned to the donor and remain outstanding after six months should also be voided. A subsequent campaign spending report should reflect a negative expenditure on Schedule B of the Disclosure Report for the amount of the voided check. In the event of an excess contribution, contributions greater than the statutory limit, the excess amount must escheat to the Hawaii Election Campaign fund. Campaign committees have 30 days to return contributions to the donor, thereafter, excess contributions escheat to the Hawaii Election Campaign fund. Where the campaign simply wants to refund a contribution from a particular donor, and the check remains outstanding after six months, the campaign committee may consider a donation to the Hawaii Election Campaign fund. (Charitable or community organization donations can be made to the extent provided by statute for a given office.)

     Campaign committees should develop accounting policies and practices to enable timely and accurate reporting of contributions and expenses. Clearly, “stale dated” checks should be handled routinely to allow for expeditious reconciliation of bank statements. Campaigns may want to establish a practice of writing to the payee within some reasonable period after the check is initially drafted and remains outstanding with an advisement that the check will be voided by a certain date.

     This is provided by the Commission as a means of stating its current interpretation of the Hawaii Election Campaign Contributions and Expenditures laws provided under HRS section 11-191, et seq.and the administrative rules of the Commission provided in chapter 2-14, Hawaii Administrative Rules. The Commission may adopt, revise, or revoke this Advisory Opinion upon its own initiative or upon the enactment of amendments to the Hawaii Revised Statutes or the adoption of administrative rules by the Commission.

Dated: Honolulu, Hawaii, December 22, 2000.

CAMPAIGN SPENDING COMMISSION

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A. Duane Black
Chairperson

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Della Au
Commissioner

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Clifford Muraoka
Commissioner

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Mona Chock
Commissioner

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Richard Choy
Commissioner