James Oaksun: ‘A spin through 9 years of FEC filings’

By James Oaksun, candidate for LNC treasurer
Originally published at LibertyForAll.net

Want to have some fun? Join me as we travel through nine years of the Libertarian National Committee’s filings with the Federal Election Commission.

I’ve done all the heavy lifting for you. The analysis is complete and these are the results.

First, a couple charts. (Click on charts to enlarge.) The first shows total revenue from itemized contributions, adjusted for inflation. We do this to put everything into constant dollars and prevent the current management from taking credit from the debasement of our currency.

As the current management has frequently stated, the first year of the cycle is typically the weakest. You can see that clearly here. Yet that does not explain why 2005 was weaker than 2001. Or why 2009 was weaker than 2005 – in fact, why 2009 was the weakest year of the last decade.

The next chart shows the number of itemized donors, adjusted for population growth. Population in the US increased by about eight percent this past decade. We should have gotten some boost from that, even if we were standing relatively still. Did we?

No.

Our number of itemized donors dropped by nearly 50 percent this decade. That is right – nearly by half.

Folks, we’re moving backwards. All around us we see evidence of the forces of liberty moving ahead – with the Ron Paul campaign, with C4L, with YAL. But not with the Libertarian Party.

Why?

Using the FEC data I have constructed a database of Libertarian Party itemized donors from 2001 to 2009. I know who they are, where they are, how much they gave and when.

In total there are 5,120 names on the list.

111 of these people gave all nine years! Amazing! When I’m elected treasurer, I will seek them all out and give them a smile and a hearty handshake.

Interestingly, nearly 2,900 of the people – 56 percent of the total – gave only one time. Another 912 people – 18 percent of the total – gave just twice.

It is a law of fundraising that it is much easier to keep someone giving who has already given, than it is to find a new donor. Yet we’ve been failing at this miserably.

Why?

We can also use the data to construct lapse rates for both existing (gave at least once before) as well as new (never gave before) donors. The differences here are quite striking.

Sources indicate to me that the current management uses a “rule of thumb” of a 50 percent lapse rate after one year giving, and 15 percent for years two and later.

The data filed with the FEC indicates that, for first time donors, this is a wildly optimistic assumption.

Over the last nine years, the first year lapse rate for first time (never gave before) itemized donors was 75 percent! Only one in four gave again the next year. If the person gave again the second year, there was a 50 percent chance they would give the third year.

The situation is even worse if the person’s first contribution was in a presidential election year. In that case, the first year lapse rate is a mind boggling 86 percent!

Lapse rates for people who have given at some point previously are much better. First year lapses average 38 percent for previous givers (45 percent for a presidential-year donation). Over time the lapse rate declines, reaching 15 percent (the current management’s year-two assumption) after five years.

Future Implications

The Libertarian Party needs new members, and enhanced donor giving. Various mechanisms have been suggested for achieving this, from the Internet to direct mail. The ultimate success of these programs is highly sensitive to the lapse rate assumption used.

Depending on the size of the program initiated, a 10 percent error in the lapse rate assumption can be worth several hundred thousand dollars. Given the Libertarian Party’s current precarious financial situation, a miscalculation of that magnitude could be a fatal error.

Mr. Oaksun is a candidate for LNC Treasurer.

18 thoughts on “James Oaksun: ‘A spin through 9 years of FEC filings’

  1. No Thanks

    Mr. Oaksun wants to be LP Treasurer, but he comes here and publicly admits to having violated federal law/regulation by having data-mined names and addresses from FEC filings?? That’s illegal.

    Why would the LP elect someone who knows so little about the FEC restrictions relevant to the job?

    No thanks!

    The last thing the LP needs is FEC problems.

  2. No Thanks

    Mr. Oaksun wants to be LP Treasurer, but he comes here and publicly admits to having violated federal law/regulation by having data-mined names and addresses from FEC filings?? That’s illegal.

    Why would the LP elect someone who knows so little about the FEC restrictions related to the job?

    No thanks!

    The last thing the LP needs is FEC problems!

  3. George Phillies

    What Mr. Oaksun did is transparently not illegal.

    The names are a matter of public record; that is why they are published. They are entirely open for analysis, as witness OpenSecrets. What would be illegal is using that list of names to ask them for political donations…which Mr. Oaksun obviously did not do.

  4. Michael H. Wilson

    My I put another twist on this? Thank you!

    Over the last decade the LP has not built and supported an adequate sales staff. Thus membership churn and a lackluster preformance in recruiting new members.

    Supporting the sales staff, that is the volunteers is important. Better and more literature and a decent website are two important tools.

  5. Marc Montoni

    Sock puppet “No Thanks” needs to read the law before he presumes to counsel others.

    I’m no Phillies fan, but he is correct that only if Oaksun were to use the harvested names for fundraising purposes would the law be violated. Oaksun has not done so. Back to the books for you, “No Thanks”.

    Oaksun said:

    … the current management uses a “rule of thumb” of a 50 percent lapse rate after one year giving, and 15 percent for years two and later…. The data filed with the FEC indicates that, for first time donors, this is a wildly optimistic assumption. … Over the last nine years, the first year lapse rate for first time (never gave before) itemized donors was 75 percent! Only one in four gave again the next year. If the person gave again the second year, there was a 50 percent chance they would give the third year.

    The quoted 50% first-year lapse rate is only slightly inflated. Crunching a few numbers, I think the current lapse rate is closer to 40%. Keep in mind that the retention rate will never be 100%. The average nonprofit that manages between a 50% to 60% retention rate is doing pretty well. As I recall, the LP’s best retention rate ever was about 60%.

    I am somewhat in a position to know because I served as a state membership chair for the better part of a decade and a half. It has been pretty clear to me that the lapse rate has dipped since 2002 or so. I believe there are three main factors:

    1. The abandonment of former, long-established “best practices” with renewal notices.

    2. Passionless presentation that inspires few people to renew.

    3. There has been a wholesale reduction in local activity – many local groups have stopped meeting. National is usually the main source of new members, but having an active, viable local party nearby is a huge factor in making people want to renew.

    The obvious weakness I see in Oaksun’s analysis is that it is only about reportable contributions (any contributions from a single person that aggregate in excess of $200 in a calendar year). Sometimes people donate a few hundred dollars one year, then just renew at $25 the next. It would be more meaningful if complete donor histories were available for the analysis. Unfortunately this isn’t available to those not on the LNC.

    The LNC should be doing these sorts of analyses; but I haven’t seen anything of the sort since the 2002 time frame. A lot of metrics that used to get analyzed no longer are. Or perhaps they are being done, but they’re so embarrassing they’re no longer published.

    James, did you make an allowance for purchasers of life memberships (anyone who gave in excess of $1,000 within a one-year period) ? I know of at least a few members who had to “stretch” a bit to buy a life membership — some did so so they would not have to renew ever again.

  6. Michael H. Wilson

    Here’s another idea. How about calling and/ or sending a survey to every member who fails to renew with in a 120 day period for a couple of years asking them why they did not renew. The results might shed some light on this problem

  7. Don Lake .......... and taking attitude

    to action ……….
    Michael H. Wilson // Feb 11, 2010:
    “How about calling and/ or sending a survey to every member who fails to renew with in a 120 day period for a couple of years asking them why they did not renew. The results might shed some light on this problem …….. ”

    may be things like lack of connection to the real world, real issues, follow up on promises made, and daily ethics ………….

    Liberty and smaller government, sure fire winners in a post WWII era where local, state, national, and international governance hes expanded, er, EXPLODED! There should be

    [a] less than a dozen over seas [imperial] military bases

    [b] only the 48 continental United States

    [c] on going working relationships with the Castro brothers and the former Soviets

    [d] an out and out Central Bank [verses the funny money of the Federal Reseerve] …..

    [e] zero troops in the middle east

    [f] high general regard for alternative parties

    [g] more tolerance of the on going debating society

    [h] leveling of government expenditures and indebtedness —— and less fear for and resentment from our collective grand children

    Coulda, shoulda, woulda ………..

  8. James Oaksun

    I agree, Marc — the LNC *should* be doing (or commissioning) this sort of analysis. Alas, there is no evidence in the record I have seen that they have. At least not recently.

    The “life memberships” are a curious story that I may write about at some point. According to the LNC minutes, the tracking of these was so embarrassingly bad that it cannot be determined exactly who is one, and what they paid for it (if anything; mention was made of many “honorary” life memberships).

    Theoretically a life membership represents a deferred revenue item, that should be recognized over the expected duration of the benefit. However the tracking and accounting of this was so lousy that Starr reported to the LNC in May 08 that they were just going to consider the life member revenue (whatever it was) as ordinary revenue.

    One of the things I want to do when I take over is a full experience study of contributor lapse rates. The committee is obviously flying blind without one and I repeat what I said in the article: the ultimate cost (benefit) of any solicitation is very sensitive to the lapse rate assumed.

  9. Robert Capozzi

    jo, OK, I track the theory, but what would the “duration” be?

    The theory of deferring revenue recognition over the assumed duration makes perfect sense in GAAP accounting for a for-profit. Tell us why you think it applies to a non-profit.

    Where would you expect to see sources of revenue analysis? Seems to me that’s among the LAST things one would want to put in the public domain.

  10. TNSTAAFL

    I believe these numbers are flawed for one reason – I myself give ONLY $199 each year for the sole purpose of avoiding my name being on a FEC report. My wife does the same. I know others who do the same, year after year like our former state chair, who works in governement, does the same so he doesn’t get into trouble since he is not suppose to give political donations. So that is at least three people, who donate regularly but avoid being on FEC reports. How many of you give less than $200 a year so are not on these reports? How many of you donated to Ron Paul but because you did not want the grief from your state committees for sending money to a republican (or named smeared in IPR) so gave in small enough amounts to avoid having your name on some FEC report? I would think anyone wanting to run for treasurer of either a state or national committee would know these things simply to advise all of us how to keep ourselves and our local or state affiliates below big brothers radar!

  11. Bruce Cohen

    Oaksun@9

    Actually, there was a big ‘scandal’/’fight’ Aaron was in over actually keeping the forward costs on the books as a liability.

    Aaron is the real mover behid us recognizing the future costs of Life Membership.

    Mister Oaksun, this is a dishonest statement, and please retract.

  12. James Oaksun

    TNST – I clearly state that the analysis applies *only* to itemized contributions. Not to *all* contributions. I look forward to conducting a similar analysis on a more comprehensive basis. For now, all I can do is specify the sources I am using and report on that basis.

    Robert — I am not certain of what the duration should be, only that it is some number in excess of 1, which is by implication the number currently in use.

    I am also aware that there is at least one state party that offered “lifetime” memberships for a time, then ran into problems and said to people, well we’re out of money so start paying again.

    Yes, in theory, we didn’t (and probably don’t) have to treat the funds in any special way under accounting dogma. But there is accounting dogma and there are the numbers you use to manage the business. In my opinion, there should be some recognition somewhere that, essentially, some number of people, essentially, lent a significant sum to the LNC, in the expectation that they would get a future benefit of some value.

  13. James Oaksun

    And here, I’ll even tee up a future article.

    If you take the 2 graphs from this article and superimpose them on the graph of total revenue I have issued earlier, you see that the *total* revenue graph has fallen at an even faster rate.

    What this means, is, over time the LNC has become increasingly reliant on the itemized contributions, especially those over $1000. Even as those itemized contributions have themselves decreased in the aggregate.

    Whether this is a sign of organizational health, or not, is something I’m sure will be discussed. Though I have my own opinion on that.

  14. George Phillies

    The legitimate approach on a life membership is to put the money into a trust account, withdraw money at a rate determined by a return rule, more riskily the actuarial rule, or the dues, and when the member expires collect the principal. The LNC should have something like a million dollars put away covering current life memberships, give or take something under a factor of two, and it in fact has almost no cash on hand.

  15. James Oaksun

    George is correct, in my opinion, on how we should treat the money, at minimum for our internal management purposes, if not for reported GAAP purposes.

    On my website (www.JamesOaksun.com) I pledge as follows: “Buying a lifetime membership is not a loan. It is a trust – a trust that we will be here for a long time, and that the funds will be well managed. When I become treasurer, all lifetime membership funds going forward will be managed in a separate account, and brought into income on a periodic basis.”

    In partial response to a point made earlier I would ask as follows:

    1. Has the LP offered life memberships since November 12, 2006?
    (I’ll answer this one — Yes, and such memberships are currently being offered; see https://www.lp.org/membership)

    2. How many life memberships have been purchased since that date?

    3. How do the funds raised from the sale of these life memberships compare with the current cash balance?

    (As these are internal confidential numbers, I will defer discussion of these to a later date, with the appropriate qualified parties.)

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