shareUpdate: VPAP Reclassifies Forgiven Loans
Date: 08/18/2010
The nonpartisan Virginia Public Access Project has come up with a better way to account for situations when candidates make personal loans to their own campaigns and later forgive all or part of the loan.
The current state forms require candidates to double-count any loan that is forgiven. Here is how it works: The state disclosure forms do not have a line item for loan forgiveness. As a result, a candidate can back out a loan only by "repaying" it -- and must show a corresponding "contribution" to balance the payment. Both transactions -- the repayment and contribution -- are paper transactions; no money changes hands.
This result is that any candidate who forgives all or part of a loan is forced to overstate both the amount their campaign spent and the amount they personally donated to their campaign.
For example, Mike Wray sought to close out his House of Delegates campaign account last year. Wray had $115 in the bank, but still needed to pay off a $11,500 personal loan he had made earlier this year. He decided to repay $115 of the loan and write off $11,385. In order the reconcile the state forms, Wray had to enter a $11,385 "donation" -- which combined with his original loan made it appear he had given $23,000 to his campaign.
VPAP has embarked on an effort to eliminate this double-counting by reclassifying forgiven loans as campaign contributions. Under its new system, VPAP has converted Wray's forgiven loans to donations to make it clear he donated $11,385 and loaned $115, which was later repaid.
VPAP has identified at least 100 other candidates committees where forgiven loans were double-counted over the last decade. The process to reclassify all these loans should take two-three weeks.
VPAP must accept partial responsibility for the misleading state forms, which VPAP executive director David Poole helped redesign several years ago.