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What's a "Compliance Fund"?A loophole in the public financing rules for presidential elections.

By Juliet LapidosPosted Friday, Sept. 12, 2008, at 2:12 PM ET

John McCain. Click image to expand.The McCain-Palin campaign launched a Web banner ad on Sept. 3 asking supporters to "Invest in Victory" by donating to its "compliance fund." What's a compliance fund?

A loophole. Candidates like John McCain who participate in public financing must not accept private donations, spend more than $50,000 of their personal wealth, or exceed a government-specified spending cap—$84.1 million this season. (Barack Obama, by the way, is the first major party nominee to turn down government funds for the general election in the history of the public financing program.) But in the 1980s the Federal Election Commission decided on an exemption: It's OK to solicit private donations to help defray the cost of following the rules—like reporting where the campaign spends its money. Back in 2004, George W. Bush raised $12.2 million for his compliance fund while John Kerry hauled in $8.9 million. (There is no cap on total compliance spending during the general election.)

Historically, compliance funds were used primarily for legal and accounting services. But after the 2004 season, the Kerry-Edwards campaign requested an advisory opinion from the FEC on whether they could use excess compliance donations to pay off debts incurred from TV advertising. In 2007, the FEC held that since campaigns must tag disclaimers onto the end of any ad ("I'm John McCain, and I approve this message"), they could use compliance funds to pay for up to 5 percent of broadcast advertising. (The FEC initially considered allowing up to 13 percent, but a couple of commissioners balked, and the committee settled on 5 percent, which is a little under the amount of time eaten up in a 30-second ad by the "approval" line.) So while the McCain campaign can't use privately donated money to pay for the first 28.5 seconds of a given TV ad, it's kosher to use that cash for the last second and a half.

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If a campaign diverts compliance funds improperly (by using such funds to pay for more than 5 percent of a TV ad, say), then the FEC can impose a monetary penalty or get the Justice Department on the case. For much of the past year, however, the FEC lacked a quorum, which means they have a long case backlog and won't be very sprightly when it comes to enforcement.

Since Democratic nominee Barack Obama declined public funding, he doesn't need to set up a separate compliance fund. The Obama-Biden camp can allocate money for compliance-related legal and accounting services from a general operating budget.

Got a question about today's news? Ask the Explainer.

Explainer thanks Richard Briffault of Columbia University and David Donnelly of the Public Campaign Action Fund.

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Juliet Lapidos is a Slate assistant editor.
Photograph of John McCain by Paul J. Richards/AFP/Getty Images.
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