“Follow the money” is a core tenet of investigative and business journalism. It involves tracing financial transactions and using public records and data analysis to uncover corruption, fraud, or hidden influences.
5 Ways to Follow The Money
Here are key methods and resources business journalists use to follow the money:
1. Analyze Financial Statements and Reports
For publicly traded companies, the starting point is often their regulatory filings.
- Cash Flow Statements: This is often the most critical statement for tracing money. It shows cash generated from (or spent on) operations, investing, and financing. Discrepancies between net income and cash flow can be a major red flag.
- Income Statements (P&L) and Balance Sheets: Analyze revenue, expenses, assets, and liabilities. Look for unusual line items, large year-over-year changes, or inconsistencies.
- Footnotes: Do not overlook the footnotes in financial reports (e.g., 10-K, 10-Q). Companies often disclose crucial details about accounting policies, debt obligations, stock options, and off-balance sheet transactions here.
- Key Financial Metrics: Understand and calculate financial ratios (like liquidity, debt-to-equity, etc.) to assess a company’s health and compare it to industry peers.
2. Leverage Public Records and Databases
A vast amount of information is publicly available, often requiring diligent searching and linking names.
- Securities and Exchange Commission (SEC) Filings (U.S.): The EDGAR database is essential for accessing corporate documents like 10-Ks (annual reports) and 10-Qs (quarterly reports).
- Business Registrations: Use state, national, or international business registers to find out who owns a company, including corporate officers, directors, and sometimes beneficial owners (who ultimately profit from the company).
- Property Records: Check local and county real estate records (deeds, mortgages) to find assets owned by individuals or companies under investigation.
- Court Records: Civil litigation, divorce, and probate proceedings can uncover financial disputes, asset lists, and business agreements.
- Campaign Finance Records: Websites like OpenSecrets.org (U.S.) track political donations, showing which industries or companies are trying to exert influence.
- Government Contracts and Spending: Review federal, state, and local government procurement and budget databases to track public funds and who is receiving them.
3. Investigate People and Their Networks
Financial trails often follow individuals, not just companies.
- Profile the Subject: Create a comprehensive profile of the individual(s) or entity you are investigating. Collect every name, company, associate, proxy, lawyer, and family member.
- Look for Proxies and Shell Companies: High-level officials or criminals rarely hold assets in their own names. Investigate associates, family members, and the ownership structure of subsidiary companies or Limited Liability Companies (LLCs).
- Analyze Lifestyle: Compare a subject’s known income to their visible expenditures (luxury homes, cars, travel, etc.). Significant, unexplained wealth is a classic “red flag.”
4. Utilize Specialized Techniques and Data Skills
Developing proficiency in data analysis can unlock complex stories.
- Data Journalism Tools: Use tools like Tableau or spreadsheet software to analyze large datasets from public records (e.g., campaign contributions, contract databases).
- Forensic Accounting Concepts: Understand basic methods for tracing funds, such as following money through bank deposits, looking for structured transactions (breaking up large cash transactions to avoid reporting limits), or identifying rapid asset transfers.
- “Following the Food Chain”: Look at who is on a company’s board of directors, who their primary suppliers and customers are, and where they interact socially and professionally.
5. Don’t Be Afraid to Ask “Silly” Questions
As an expert on the topic, a former journalist advises:
- Break It Down: Don’t assume you or your reader understands complex financial jargon. Ask sources to “break it down, Barney-style” (i.e., explain it simply) so you can report the nuances accurately and make the information accessible.
- Ask for Context: Always ask why a company made a certain financial move, not just what the number is. Is the expense an investment, a cutback, or a way to manipulate earnings?
Conclusion: The Ultimate Goal
The ultimate goal of following the money isn’t just to report numbers; it’s to uncover power, accountability, and impact.
- Uncover Power: By tracking the flow of funds, journalists reveal who truly controls a company, an industry, or a political agenda—often exposing the true decision-makers hidden behind proxies and shell corporations.
- Ensure Accountability: Tracing expenditures and income streams is the most effective way to detect fraud, corruption, or mismanagement. It provides the empirical evidence needed to hold individuals and institutions responsible for their actions.
- Clarify Impact: Financial trails show how corporate decisions affect people’s lives—whether through job cuts, environmental damage, or government policy. It connects the boardroom to the community.
In an era of increasing globalization and financial complexity, the ability to “follow the money” remains the single most important skill for a business journalist dedicated to serving the public interest.