FEDERAL ELECTION COMMISSION

FISCAL YEAR 2009

CONGRESSIONAL BUDGET JUSTIFICATION

![](media/image1.png){width="3.1243055555555554in"
height="2.988888888888889in"}

February 4, 2008

Congressional Submission

**TABLE OF CONTENTS**

Proposed Appropriation Language 1

Executive Summary 2

Commission Structure 3

Mission Statement 4

Strategic Goal 5

Strategic Framework 5

Transparency 6

Receiving Accurate and Complete Campaign Finance Disclosure

Reports and Making Them Available to the Public 6

Review of Campaign Finance Filing Reports 10

Compliance 12

> Education 12
>
> Enforcement 13
>
> Administrative Fine Program 14
>
> Alternative Dispute Resolution 15
>
> Audit Program 15

Development of the Law 16

> Interpreting the FECA 16
>
> Administering the FECA 17

Impact of Request for Increase 18

> Request for Additional Staffing 18
>
> Request for Additional Technological Initiatives 23

Budget Request by Object Class 25

**Proposed Appropriation Language**

***FEDERAL ELECTION COMMISSION***

*SALARIES AND EXPENSES*

For necessary expenses to carry out the provisions of the Federal
Election Campaign Act of 1971, as amended, \$63,618,000 of which not to
exceed \$5,000 shall be available for reception and representation
expenses.

FEDERAL ELECTION COMMISSION

BUDGET REQUEST

EXECUTIVE SUMMARY

The FY 2009 budget request for the Federal Election Commission (FEC or
Commission) is for \$63,618,000. This represents an increase of
\$4,394,000 (7.4%) over FY 2008. This increase is being requested to
ensure that the Commission remains equipped with the staff and
information technology tools to effectively and efficiently meet an
anticipated increase in responsibilities resulting from (1) recent
changes in Federal campaign finance laws, (2) the continuing increase in
the level of contributions to, and spending by, Federal candidates, and
(3) the expanding timeframe that Federal candidates are engaged in their
campaigns.

A brief summary of this request is presented below.

+-----------------------+---------------+--------------+--------------+
| **Table 1: Budget     |               |              |              |
| Summary**             |               |              |              |
+-----------------------+---------------+--------------+--------------+
| **Category:**         | **FY 2008**   | **FY 2009**  | **Percent**  |
|                       |               |              |              |
|                       | **Estimate**  | **Request**  | **Change**   |
+-----------------------+---------------+--------------+--------------+
| **Personnel**         | \$42,498,848  | \$45,145,645 | 6.2%         |
+-----------------------+---------------+--------------+--------------+
| **Non-Personnel**     | \$16,725,152  | \$18,472,355 | 10.4%        |
+-----------------------+---------------+--------------+--------------+
| **Total**             | **\           | **\$         | **7.4%**     |
|                       | $59,224,000** | 63,618,000** |              |
+-----------------------+---------------+--------------+--------------+

To successfully manage the continued increase in its responsibilities,
the Commission would allocate funds from the requested budget increase
to:

-   Add 12 full-time equivalent (FTE) positions to work in areas that
    are most impacted by the increased demands;

-   Invest in several technological advances, such as improvements to
    its public disclosure databases and internal compliance systems,
    that would allow the Commission to provide additional services to
    the regulated community and the public, while conducting business
    more efficiently; and

-   Sufficiently address internal control weaknesses relating to
    financial management and systems previously identified through the
    annual audits of the Commission's financial statements.

A portion of the budget increase also supports the standard anticipated
inflationary adjustments for salaries and benefits, as well as
inflation-driven cost increases for non-personnel expenditures.

  ------------------------------------------------------ ----------------
  **Table 2: Components of the Budget Request**          

  FY 2008 Appropriation                                  \$59,224,000

  Built-in requirements to maintain current services     1,825,000

  FY 2009 Current Services                               \$61,049,000

  Enhancements:                                          

  Additional Staffing                                    1,151,795

  Technological Initiatives                              1,417,205

  FY 2009 Budget Request                                 \$63,618,000
  ------------------------------------------------------ ----------------

**COMMISSION STRUCTURE**

The FEC ([www.fec.gov](http://www.fec.gov/)) is an independent
regulatory agency with exclusive responsibility for administering,
enforcing, defending and interpreting the Federal Election Campaign Act
of 1971, 2 U.S.C. 431 *et seq.*, as amended by the Bipartisan Campaign
Reform Act of 2002 (*BCRA*), Pub. L. 107--155, 116 Stat. 81 (2002)
(*FECA* or the *Act*). The Commission is also responsible for
administering the public funding programs (26 U.S.C.) for presidential
campaigns and conventions, which includes certifying and auditing all
participating candidates and committees, and enforcement of public
funding legislation.

The agency is directed by six Commissioners appointed by the President
with the advice and consent of the Senate. By law, no more than three
Commissioners can be members of the same political party. Each Member
serves a six-year term and two seats are subject to appointment every
two years.[^1] The Commissioners meet regularly to formulate policy and
to vote on significant legal and administrative matters.

As part of its responsibilities, the FEC ensures transparency in the
campaign finance system for Presidential and Congressional elections by
enforcing the *Act*'s requirement that all Federal candidates and
Federal political committees file financial disclosure reports, and by
making those disclosure reports readily available to the public through
the Commission's Internet-based public disclosure system. The FEC also
has exclusive responsibility for civil enforcement of the FECA,
including the handling of civil litigation arising from any legal
actions brought by or against the Commission. All fines or civil
penalties received are deposited with the U.S. Treasury and are not
available for the Commission's use. Additionally, the Commission
promulgates regulations implementing the *Act* and issues advisory
opinions responding to inquiries generally from the regulated community.

MISSION STATEMENT

  -----------------------------------------------------------------------
  ***To prevent corruption in the Federal campaign process by
  administering, enforcing and formulating policy with respect to Federal
  campaign finance statutes.***

  -----------------------------------------------------------------------

The primary purposes of the *Act* are to:

-   Prevent improper influence or the appearance of improper influence
    of Federal candidates by imposing contribution limits; and

-   Provide transparency through mandatory disclosure of financial
    activity.

In order to prevent improper influence of Federal candidates that might
result from large campaign contributions, the Act limits the amount that
any one person or entity may contribute to a Federal political
candidate. The *Act* also prohibits certain entities, such as
corporations and labor unions, from making Federal political
contributions altogether. Beyond contribution limits and prohibitions,
the *Act* also requires accurate and comprehensive public disclosure by
Federal candidates and Federal political committees of all contributions
and expenditures. The Commission facilitates transparency in the Federal
campaign finance system through a state-of-the-art Internet-based public
disclosure system for all campaign finance activity.

The *FECA* reflects a belief that democracy works best when voters can
make informed decisions in the political process, decisions based in
part on knowing the sources of candidates' financial support -- hence,
the focus on transparency. Public confidence in the political process
depends not only on laws and regulations to assure transparency, as well
as on limits and prohibitions on the amounts and sources of
contributions, but also on the knowledge that those who disregard those
laws and regulations will face real consequences for non-compliance --
hence the focus on effective and fair enforcement to maintain the
integrity of campaign financing.

Despite a vigorous enforcement program designed to ensure compliance
with the *Act's* contribution restrictions as well as its disclosure
provisions, voluntary compliance with its requirements remains a
principal focus of the Commission's efforts. Because of the large and
rising number of political committees and the ever-growing number and
complexity of financial disclosure reports filed with the FEC, it would
be cost-prohibitive to enforce the requirements of the *Act* without
significant voluntary compliance. Accordingly, the Commission devotes
significant resources to encouraging voluntary compliance through the
widespread dissemination to the public, the press, political committees,
and to State election officials of educational materials related to the
campaign finance laws.

STRATEGIC GOAL

As reflected in the strategic plan that has been updated for FY 2008
through 2012, the FEC's mission is supported by a single, overarching
strategic goal. This goal, which is presented below, is intended to
succinctly, yet simply, characterize the fundamental responsibility with
which the Commission has been entrusted.

  -----------------------------------------------------------------------
  *To protect the integrity of the Federal campaign process by providing
  transparency, enforcing contribution restrictions, and fairly
  administering the FECA and related statutes.*

  -----------------------------------------------------------------------

**STRATEGIC FRAMEWORK**

This goal is pursued by three strategic objectives and underlying
activities that guide the operations of the FEC. These are some of the
many activities that constitute the day-to- day work of the agency's
staff.

## Objective A: Transparency -- Receiving Accurate and Complete Campaign Finance Disclosure Reports and Making Them Available to the Public 

-   Creating and maintaining a state-of-the-art electronic filing system
    for collecting financial disclosure reports from Federal candidates
    and political committees;

-   Making financial disclosure reports available to the public in a
    timely, efficient and useful manner;

-   Reviewing financial disclosure reports to ensure that the reports
    are accurate and complete; and

-   Encouraging candidates and political committees to correct
    inaccurate or incomplete reports.

### Objective B: Compliance -- Education and Enforcement 

-   Expanding awareness of the campaign finance laws by creating and
    disseminating educational materials, and through instructional
    conferences and workshops;

-   Responding to complaints alleging violations of campaign finance
    laws;

-   Imposing civil penalties for late-filed and non-filed disclosure
    reports;

-   Conducting audits in a timely and efficient manner;

-   Working with the Department of Justice regarding prosecution of
    criminal violations of the *Act*; and

-   Making findings in completed compliance matters available to the
    public in a timely and useful manner.

    **Objective C: Development of the Law -- Interpreting and
    Administering *FECA***

-   Conducting rulemaking proceedings to promulgate Commission
    regulations consistent with revisions to the *Act* and judicial
    decisions;

-   Issuing advisory opinions providing specific guidance to the
    regulated community;

-   Defending challenges to the *Act*, Commission regulations or
    actions; and

-   Certifying all presidential public funding payments in a timely and
    efficient manner.

    Management excellence is a key means to ensure that the FEC achieves
    these objectives in the most efficient and effective manner.
    Consistent with the *President's Management Agenda (PMA)*, the
    Commission is updating its human capital plan to better address the
    following elements: (1) strategic alignment; (2) workforce
    planning; (3) leadership development; and (4) knowledge transfer and
    results-oriented performance. In addition to investing in its
    people, the Commission believes strong financial management and
    up-to-date technology are critical to supporting the mission and
    business operations, thereby ensuring that controls and systems meet
    applicable standards and can accommodate changes in stakeholder
    expectations and needs.

    Together these strategic objectives and management initiatives
    provide a strong foundation on which the FEC accomplishes its
    mission and plans for future challenges. The following section
    discusses the objectives mentioned above and presents brief
    descriptions of program activities, noteworthy trends and key
    accomplishments. Results achieved in carrying out these objectives
    and activities include (1) shorter processing times, (2) new
    procedures for informing the regulated community of the law, (3) an
    increase in the number and types of outreach activities, and (4)
    improved access to and the ease of use of the campaign finance data.

# Objective A: Transparency

**Receiving Accurate and Complete Campaign Finance Disclosure Reports
and Making Them Available to the Public.**

One of the FEC's most important responsibilities is to receive campaign
finance reports, which detail the sources and amounts of funds used to
finance Federal elections, and to make these reports available to the
public in a timely and efficient manner. During the 2006 election cycle,
the Commission received over 127,000 financial disclosure reports and
statements, the equivalent of 3.9 million pages of financial data,
disclosing approximately \$4.1 billion in spending related to Federal
elections. This represents an increase of approximately five percent
from the 2004 election cycle. The Commission anticipates that the 2008
election cycle will see an even greater increase, especially since there
is no incumbent running for the Presidency. For example, as of August
2007, the Commission has received approximately seven percent more
financial disclosure reports and statements than what was received
relative to the same period before the 2004 presidential election.

![](media/image2.wmf)

As illustrated in the chart above, the Commission has seen a continued
increase in the total reports and statements filed over the past 10
years. Despite this increase, the Commission continues to improve on the
timeliness with which reports are processed and made available to the
public on the Commission's website. For example, since the institution
of mandatory electronic filing in 2000, the median time to process all
documents has decreased from eleven to just two days.

In addition to the rising number and complexity of filings, the volume
of transactions disclosed on campaign finance reports has also grown
dramatically. As illustrated in the charts below, every election cycle
since 1990 has seen a new record in total contributions and spending in
Federal elections.

![](media/image3.wmf)![](media/image4.wmf)

![](media/image5.wmf)

![](media/image6.wmf)

Not only does the FEC's Internet-based electronic filing system allow
candidates and political committees to file electronically, it also
permits the committees to disclose more detailed information than ever
before. The rise in the volume of reported information and financial
activity has placed an increased burden on the review and analysis that
the Commission must perform to ensure completeness and accuracy for
disclosure and compliance purposes.

With the passage of mandatory electronic filing for the majority of
committees, the FEC, political candidates and committees, and the public
are experiencing the benefits of timeliness and work process
improvements that a sophisticated system affords. For example, the
Commission's electronic filing system provides a comprehensive on-line
help feature to assist candidates and committees with preparation and
filing of their disclosure reports. Furthermore, the system permits
anyone with Internet access to view the following campaign finance
information:

+-----------------------------------------------------------------------+
| -   A list of all disclosure reports and other forms filed by a       |
|     Federal candidate or a political committee, as well as a link to  |
|     copies of the reports.                                            |
|                                                                       |
| -   Summaries of financial activity, such as total receipts,          |
|     disbursements, contributions to Federal committees, cash on hand  |
|     and debts and obligations of a candidate or committee.            |
|                                                                       |
| -   A list of all documents filed by a candidate with a cross         |
|     reference to reports filed by other political committees, which   |
|     disclose contributions and other expenditures related to that     |
|     candidate.                                                        |
|                                                                       |
| -   An itemized list of each individual contribution to a candidate   |
|     or committee.                                                     |
|                                                                       |
| -   An itemized list for each political committee of contributions    |
|     made to candidates, including independent expenditures for or     |
|     against candidates.                                               |
|                                                                       |
| -   Documents related to FEC audits, enforcement actions and          |
|     litigation regarding a candidate or political committee.          |
|                                                                       |
| -   Documents related to FEC advisory opinions.                       |
+-----------------------------------------------------------------------+

In 2006, the FEC's electronic disclosure database and website received
3.8 million unique visits and over 101 million page hits by users
seeking campaign finance data and other information. Each day, the FEC
website continues to receive an average of 10,000 visitors. When on the
FEC website, these visitors have access to over 27,000 documents, plus
hundreds of thousands of pages of campaign finance data that have been
submitted by candidates and committees and posted on-line by FEC staff.
In FY 2007, the FEC website received approximately 102.6 million hits,
and as the 2008 presidential election nears, the Commission anticipates
an even greater number of visits to the FEC website through FY 2009.

![](media/image7.wmf)

To make campaign finance data contained in the disclosure reports filed
with the Commission even more accessible to the public, in calendar year
2007, the FEC launched two new interactive maps at
[www.fec.gov/DisclosureSearch/mapApp.do](http://www.fec.gov/DisclosureSearch/mapApp.do)
that allow users to have immediate access to contribution information
for both the 2008 presidential race and the 2008 Congressional
candidates. With a simple click on a map, users can access the amount of
funds raised on a state-by-state basis, with an option of viewing
contributions to specific candidates, all candidates or all candidates
from a particular political party.  The maps provide convenient access
to the total contributions to each candidate, along with each
candidate's cash-on-hand and the distribution of each candidate's
contributions by amount. The maps also allow the user to access lists of
contributors by name, city, amounts of contributions and dates within
the first three digits of their zip code, and can be sorted and
downloaded to a spreadsheet format. Contribution data are updated within
one day of the Commission's receipt of electronically-filed presidential
disclosure reports.

> **Campaign Finance Maps**. Campaign finance information is now
> available via easy-to-use maps of the USA for both
> [Presidential](http://www.fec.gov/DisclosureSearch/mapApp.do) and
> [House and Senate](http://www.fec.gov/DisclosureSearch/mapHSApp.do)
> Elections through September 30, 2007.
>
>  
>
> ![](media/image8.png){width="2.854861111111111in"
> height="2.4583333333333335in"}![](media/image9.png){width="0.13472222222222222in"
> height="0.1763888888888889in"}![](media/image10.png){width="3.0208333333333335in"
> height="2.4569444444444444in"}

 

The Commission is in the process of identifying other technological
enhancements that will allow the public to access campaign finance data
more easily and in more useful ways, thereby facilitating the public's
capacity to conduct more sophisticated analyses of the available data.

**Review of Campaign Finance Filing Reports**

In addition to making available to the public all campaign finance
disclosure reports that are filed, the Commission also reviews all
reports for compliance with the law and to verify that the information
is accurate and complete. This ensures that the public is provided a
full representation of all candidates' and committees' campaign finance
activity. The following chart illustrates the (1) total number of
reports and statements received; (2) total number of reports and
statements processed; and (3) total number of reports and statements
reviewed during an election cycle.

![](media/image11.wmf){width="5.626388888888889in"
height="3.623611111111111in"}

In the 2006 Congressional election cycle, nearly \$4.1 billion in
campaign funds were disbursed by 8,000 committees that filed over
127,000 reports and statements. Together these reports contained
information on 2.8 million separate campaign contributions and
expenditure transactions. Despite an increase of nearly 15 percent in
the number of reports reviewed between the 2004 and 2006 election
cycles, and a continued increase in the amount of contributions and
disbursements in the election cycles, the Commission was able to make
significant improvements in the timeliness of the review of these
reports.

Although the Commission has achieved significant success in its effort
to improve the review time for routine matters, it continues to face
challenges in its efforts to analyze more complex matters. These include
potential fraudulent activities designed to circumvent the limits of the
*Act*, such as embezzlement and multi-tiered conduit schemes for making
contributions in the name of another person.

This budget request reflects the need for increased funding for staff
with specialized expertise in identifying such complex, hard-to-detect
schemes. The Commission also seeks funding to support this expertise
through technological enhancements, such as data mining software. These
resources will further assist the FEC in presenting financial data to
the public and the regulated community in a manner that is even more
transparent and beneficial to the public.

# Objective B: Compliance

**Education**

The Commission continues to receive many telephone and written requests
from the regulated community and the public for information, data and
assistance in filing financial disclosure reports. Helping the regulated
community understand its obligations under the *Act* is an essential
component of improving voluntary compliance. One way the Commission
continues to promote voluntary compliance with the law is by educating
political committees and the public about the requirements of the *Act*.

During the past couple of years, the Commission implemented several
policy statements providing the regulated community with additional
guidance on certain submissions by candidates and political committees.
These include statements (1) to clarify and encourage self-reporting of
violations, (2) to offer guidance on disclosure efforts including
descriptions for the purpose of disbursements, and (3) to outline the
requirements to show "best efforts" by committees to obtain and report
financial information.

The Commission also encourages voluntary compliance by hosting
conferences in Washington, DC, and in other cities across the country,
where Commissioners and staff explain how the *Act* applies to
candidates and political committees. These conferences address recent
changes in the campaign finance laws and focus on fundraising and
reporting regulations.

For both political committees and the public, the Commission's website
has become the single-most important source of instantly accessible
information about the *Act* and Commission regulations. While the
Commission continues to make available printed copies of brochures and
publications, documents related to all aspects of the FEC's work are
available at [www.fec.gov](http://www.fec.gov/). These range from
documents such as informational brochures on specific topics and the
FEC's monthly newsletter, *The Record*, to copies of the *Act*, the
Commission's regulations, advisory opinions, and litigation documents.
Documents related to enforcement matters, including audit reports, are
also available. The website also includes a query function for accessing
documents related to closed enforcement actions.

The Commission strongly believes in all aspects of transparency,
including making its internal process more accessible to the public.
Through its continued efforts to improve the accessibility of data, in
March 2007, a new tool to search for advisory opinions was implemented
on the FEC website. The new search engine allows for full-text searches
of all Commission advisory opinions issued since 1990. When a specific
opinion is selected, links to all related materials (e.g., the original
request, Commission draft opinions and third-party comments) are also
provided, making the system a quick and comprehensive research tool.

The Commission also recently expanded its information outreach on the
Internet to include (1) online presentations; (2) hypertext versions of
the *Explanations & Justifications* for all FEC regulations; and (3) a
"*Tips for Treasurers*" page that allows political committee treasurers
and other interested individuals to receive automatic updates, even
without having to visit the FEC's website. The Commission also recently
transitioned to an e-mail distribution program for financial disclosure
forms and other publications aimed at improving customer service, while
simultaneously saving tax dollars by saving on costs associated with
printing and postage. This program allows the Commission to distribute
time-sensitive information to the regulated community more quickly and
more efficiently than ever before. Furthermore, the FEC expanded its
services by providing advance notices and reminders of filing deadlines.

These investments represent a significant first step to help improve
compliance with the *Act* and enable additional educational and outreach
efforts. This budget request seeks to build on these accomplishments.

**Enforcement**

***Traditional Enforcement Program***

Under the traditional enforcement program, the Commission learns of
possible *FECA* violations primarily through:

-   The complaint process, whereby anyone may file a sworn complaint
    alleging violations of the *Act*;

-   The review of a committee's reports or through audit;

-   Voluntary self-reporting by candidates, political committees, and
    corporations who believe that they may have violated the *Act*; and

-   The referral process, whereby other government agencies may refer
    possible violations of the *Act* to the FEC.

The FEC has exclusive jurisdiction over civil enforcement of violations
of the *Act* and coordinates with the Department of Justice on criminal
enforcement of the *Act*. Whether initiated by outside complaint or
internal referral, the most complex and legally significant enforcement
matters, or matters under review (MURs), are handled by the Enforcement
Division of the Office of General Counsel (OGC).

The Enforcement Division:

-   Recommends to the Commission whether it should find "reason to
    believe" that the Act has been violated, a finding that formally
    initiates an investigation;

-   Investigates possible violations of the *Act* by requesting,
    subpoenaing, and reviewing documents and interviewing and deposing
    witnesses;

-   Conducts settlement negotiations seeking to culminate in
    conciliation agreements with respondents;

-   Recommends to the Commission whether it should find "probable cause"
    to believe the *Act* has been violated; and

-   Recommends to the Commission whether suit should be brought against
    a respondent in Federal district court if conciliation cannot be
    reached through settlement negotiations.

If a conciliation agreement cannot be reached and the Commission votes
to initiate civil litigation, it will file and prosecute a civil action
in Federal district court to address the alleged violation of the *Act*.
Depending on the size and complexity of the lawsuit, such cases may be
resolved promptly or may require a significant amount of resources for
several years.

In fiscal year 2007, the FEC closed 497 matters, the largest number
since 2003, while the average time required to complete a case declined
by nearly one third from earlier years. Over 85 percent of the agency's
enforcement cases handled by OGC are now closed within 15 months, the
fastest and most efficient processing of complaints in the Commission's
history.

Although swift resolution of enforcement matters is one of the
Commission's highest priorities, efficiency cannot come at the expense
of fairness to those regulated. The Commission remains focused on
providing candidates and political committees with a fair opportunity to
make appropriate presentations to the Commission in enforcement matters.
As a result, the Commission recently adopted a program allowing oral
hearings in enforcement cases.

The continued growth in the number and amounts of campaign contributions
and disbursements, along with the increased volume in the number and
length of reports filed with the Commission, has created an increased
workload on enforcement programs. This is especially true in election
cycles, such as 2008, where the Commission expects to receive a high
volume of complaints associated with the presidential election. These
demands are further compounded by the number of increasingly complex
schemes aimed at evading the law. Although the Commission attempts to
maximize the effectiveness of its compliance and enforcement programs
through increased use of technology and putting into place management
initiatives to better focus available resources, it is vitally important
that the agency attract and retain additional staff with the expertise
to detect and investigate such schemes.

***Other FEC Enforcement Programs***

**Administrative Fine Program (AFP)**

Based on the Commission's legislative recommendation and subsequent
Congressional mandate, the FEC implemented an Administrative Fine
Program (AFP) in July 2000. Through this program, the Commission
addresses the timely filing of financial disclosure reports in a more
streamlined fashion than permitted by the traditional enforcement
process. Since its inception, the AFP has closed over 1,300 cases and
assessed civil penalties totaling more than \$2.5 million for late-filed
and non-filed reports. In FY 2007, the AFP assessed fines of
approximately \$310,000 and closed 266 cases as compared to
approximately \$200,000 and 89 cases in FY 2006.

In 2007, the Commission revised four aspects of its AFP regulations. One
change completely replaces the "extraordinary circumstances" defense
with a two-part "best efforts" defense. Another includes the addition of
examples of circumstances that will meet the new "best efforts" test.
These revised regulations became effective April 30, 2007, however the
Commission has not yet had an opportunity to handle a sufficient number
of cases under the new regulations to assess the long-term impact on
staff workload and appeal review turnaround time.

Congressional approval for the program was initially provided through
2001. Since that time, it has been extended three times with the current
extension through December 31, 2008. With the end of this extension
approaching, the Commission recommends that Congress provides another
extension to this program or makes permanent the authority for the
Administrative Fine Program. By making the program permanent, Congress
would ensure that the Commission would retain one of the most
cost-effective and successful programs in its history.

**Alternative Dispute Resolution (ADR) Program**

The Commission implemented an Alternative Dispute Resolution (ADR)
program in October 2001. This program is designed to promote compliance
with the *Act* by encouraging settlements outside the traditional
enforcement or litigation processes. The ADR program aims to expedite
resolution of certain less complex enforcement matters and to reduce the
cost of processing complaints through streamlined procedures. This
program also promotes future compliance through settlements reflecting
primarily remedial measures for respondents, such as training, audits
and the hiring of compliance staff.

Since the inception of the ADR program, the Commission has concluded
settlements with respondents in 232 cases and closed 322 cases,
negotiating approximately \$400,000 in civil penalties. In FY 2007, the
Commission negotiated nearly \$60,000 in civil penalties. Generally, all
ADR cases have been closed within three months of referral to the ADR
program, thus expediting this portion of the Commission's enforcement
caseload.

Both the AFP and the ADR programs allow the Commission to expand the
reach of the enforcement process and to streamline case resolution for
less complex matters. These programs focus current resources to ensure
enforcement of the *Act* is performed as efficiently and effectively as
possible.

**Audit Program**

The Commission also enforces the *Act* through audits of candidates and
political committees. In FY 2009, the Commission expects to conduct 40
to 50 "for cause" audits, under Title 2, in those cases where political
committees have failed to meet the threshold requirements for
substantial compliance with the *Act* and have failed voluntarily to
correct errors or omissions in their disclosure reports. In addition,
the Commission

expects to conduct six to eight mandatory audits, under Title 26, for
those presidential candidates who opt to receive presidential matching
funds in the 2008 election. The Commission's audit presence not only
contributes to the Commission's enforcement efforts but also encourages
voluntary compliance within the regulated community.

**Objective C: Development of the Law**

**Interpreting the *FECA***

The Commission provides formal interpretation of the *Act* through
promulgation of regulations and the issuance of advisory opinions (AOs).

***Regulations***

Congressional action, judicial decisions, petitions for rulemaking or
other changes in campaign finance law often necessitate that the
Commission update or adopt new regulations. Consequently, the FEC
undertakes rulemakings to either write new Commission regulations or
revise existing regulations.

The Policy Division of OGC drafts Notices of Proposed Rulemaking (NPRMs)
which, once adopted by the Commission, are published in the *Federal
Register*. NPRMs are also made available on the FEC's website and on the
U.S. Government website,
[www.regulations.gov](http://www.regulations.gov/). NPRMs provide an
opportunity for members of the public and the regulated community to
review proposed regulations, submit written comments to the Commission
and testify at public hearings, which are conducted at the FEC when
appropriate. The Commission considers the public comments and testimony
and deliberates publicly regarding the adoption of the final
regulations. The text of final regulations and the corresponding
*Explanations and Justifications*, once adopted by the Commission, are
published in the *Federal Register*.

The Commission has completed revisions to its regulations to comport
with recent court decisions in the *Shays v. FEC* litigation, in which
the court remanded certain regulations to the agency for further action.
The Commission also just completed revisions to its regulations as
required by the recent Supreme Court decision limiting the scope of the
*Act* with respect to electioneering communications in *FEC v. Wisconsin
Right to Life.* Currently, the Commission is devoting substantial
resources to two separate rulemakings implementing the *Honest
Leadership and Open Government Act* ("*HLOGA*").

***Advisory Opinions***

The Commission responds to questions from the regulated community about
how the *Act* applies to specific situations by issuing AOs. When the
Commission receives a request for an AO, it generally has 60 days to
respond. For AO requests from candidates in the two months leading up to
an election, the response time for the Commission is reduced to 20 days.
Nevertheless, the Commission recently instituted an expedited process
for handling certain time-sensitive requests in even shorter timeframes.
Thus, the Commission is placing special emphasis on expediting the
processing and consideration of highly significant AO requests. Although
the *Act* allows the agency 60 days to respond to most requests, the
Commission issued some of its recent opinions within as little as two
weeks.

Although the number of AO requests that the Commission receives is
subject to cycles dependent on whether or not it is a presidential
election year, the Commission has received a steady increase in the
number of requests in comparison to analogous prior years. Additionally,
the complexity of the topics addressed in these AOs has increased
because of *BCRA*, which required a number of new Commission
regulations, and recent litigation. Despite this increased workload, the
time that the Commission has issued these advisory opinions has
decreased markedly due, in part, to the expedited AO program. As more
requestors seek expedited advisory opinions on close questions of law
under *BCRA*, the Commission anticipates these trends to continue well
beyond the 2008 presidential election. In addition, the Commission
anticipates additional advisory opinion requests as a result of the
*Wisconsin Right to Life* decision and *HLOGA*.

**Administering the *FECA***

***Defending Challenges to the Act***

The Commission is the exclusive representative of the FEC before the
Federal district and circuit courts, and the Supreme Court with respect
to cases involving publicly financed presidential candidates. It also
has primary responsibility for defending the *Act* and Commission
regulations against court challenges. In the case recently decided by
the Supreme Court, *FEC v. Wisconsin Right to Life*, the Commission
defended against an \"as applied\" challenge to the electioneering
communication provision of *BCRA*. In the aftermath of that decision,
the Commission is likely to defend similar challenges based on the new
standard the Court established. There may also be additional court
challenges to the regulatory standard the Commission adopted to
implement *Wisconsin Right to Life*.

In other ongoing litigation, the Commission continues to defend its
regulations implementing *BCRA*. After initial litigation challenging
more than a dozen regulations led to a decision by the D.C. Circuit and
subsequent rulemaking, the case (known as *Shays III*) is again on
appeal before the D.C. Circuit. The Commission has recently prevailed in
a challenge to its "political committee status" rulemaking, and no
appeal was sought. More recently, a challenge was brought by Citizens
United to the Act\'s disclosure provisions as applied to certain
electioneering communications. A three-judge district court denied a
request for a preliminary injunction, and the plaintiff is appealing
that decision to the Supreme Court.

***Public Funding***

In addition to administering the *FECA*, the Commission is responsible
for administering the public funding of presidential elections, as
outlined in Title 26. Public funding of presidential elections has been
an important part of the Nation's presidential election system since
1976. The program is funded by the \$3 income tax check off and

administered by the FEC. Through the public funding program, the Federal
government provides (1) matching funds to candidates seeking their
party's presidential nomination, (2) financing for presidential
nominating conventions, and (3) grants to presidential nominees for the
general election campaigns.

Under the presidential public funding program, the Commission certifies
a candidate's eligibility to participate in the program, establishes
eligibility for payments, and conducts a thorough examination and audit
of the qualified campaign expenses of every candidate who receives
payments under the program. For the 2004 presidential elections, the
Commission certified the eligibility of ten candidates, with certified
payments totaling \$28,433,886 in the primary elections. The Commission
also certified, and the Treasury disbursed, a total of \$29,904,000 for
the convention committees. Finally, a total of \$149,240,000 in grants
to presidential nominees for the general election campaigns was
certified.

Thus far for the 2008 election, the Commission has certified the
eligibility of seven candidates and has certified them as being eligible
for a total of \$19,287,505 in payments. The Commission has also
certified, and the Treasury has disbursed, a total of \$32,712,000 in
payments from the Presidential Election Campaign Fund for the fall 2008
conventions of the two major political parties.

**Impact of Request for Increase**

The requested increase of \$4,394,000 will enable the Commission to keep
pace with the ever-increasing demands being placed on it by (1) changes
in the campaign finance laws and regulations, (2) improvements in
technology, (3) mandated reporting requirements; and (4) the need to
maintain a clean audit opinion and sound internal controls. This
increase will also provide for current services, adjusted for inflation.
Today's changing technological advances and growth in campaign financing
activity necessitate that the Commission employ additional staff with
specialized skills and abilities to investigate complex issues and apply
sophisticated legal expertise to interpret and defend the law.
Misappropriation of campaign funds continues to be a special concern,
and corruption allegations are among the most complex, sensitive and
serious matters brought before the Commission. Such allegations must be
investigated quickly, fairly, and accurately.

**Request for Additional Staffing**

The FEC's employees are its most valuable resource and sound workforce
planning and management are critical to its operations. The President's
Management Agenda requires agencies to assess their organizational
structures and develop organizational plans to streamline operations and
business processes. Even though the Commission has implemented a number
of management and organizational initiatives over the past several years
to increase the efficiency of processing enforcement matters, additional
resources are needed to address the continued growth and complexity of
finance campaign activity. This means building a human capital
infrastructure that can fulfill its mission. Without these additional
resources, the Commission's ability to maintain its current level of
responsiveness would be jeopardized. Provided below is a more specific
description of the Commission's request for \$1,151,795 in additional
funding for an increase of 12 FTEs.

***The Office of General Counsel (OGC).*** The Commission requests a
budget increase to support five additional FTE for OGC. The post-*BCRA*
trend of more complex factual scenarios and legal issues continues to be
presented in complaints, advisory opinion requests and litigation.
Examples of these include complaints alleging embezzlement, complex
conduit schemes, and attempts to evade the Commission's heightened
enforcement of activity by unregistered political committees.

Also, in FY 2009, the Commission projects that OGC will face a
significant increase in workload demands because of the large volume and
increased complexity of matters arising from the 2008 election cycle.
Typically, presidential election years present peak workload demands for
OGC. With an open presidential race and record-setting early fundraising
by the candidates, the Commission expects an even greater volume of
complaints and overall activity for the 2008 cycle.

During presidential election years, the Commission typically receives
the highest number of complaints over the four-year election cycle. In
each of the past two presidential election years, OGC processed over 400
complaints each cycle. In contrast, OGC receives approximately 180
complaints during non-presidential election cycles. The expected
record-level of complaints stemming from the 2008 presidential elections
will add a considerable strain on OGC's ability to prepare cases for
activation and handling by attorneys. For example, in FY 2002, it took
197 days on average to activate a case. By the midpoint of FY 2007, that
time was reduced by more than half to 89 days. If historical averages
hold, the Commission projects that it will see over 180 complaints filed
from July 2008 through December 2008. Additional FTE are required to
continue the Commission's progress in streamlining the activation
process and to maintain the overall efficiency of the Commission's
enforcement docket.

Once cases are reviewed and activated, they are assigned to attorneys
for handling, including making recommendations to the Commission about
how to proceed at various stages of the enforcement process. Over the
past several years, significant strides have been made in reducing the
time it takes to prepare recommendations at the various enforcement
stages and to complete enforcement matters. In FY 2002, it took, on
average, 730 days to close an enforcement matter. By fiscal year 2006,
the Commission reduced this number by 230 days to an average of 500
days. With additional FTE resources, OGC would be able to activate cases
even more quickly and increase the total number of cases that are active
at any one time. The Commission will also be able to close cases even
more quickly so that the regulated community has the benefit of
Commission decisions as soon as possible during an election cycle.

The increased activity in the 2008 election cycle also will have an
impact on the potential number of litigation matters. Over past cycles,
there has been a sharp increase in the number of litigation cases
handled by OGC. For example, by the middle of FY 2005, the litigation
workload increased by approximately 20 percent compared with the number
of cases being handled the previous year. OGC anticipates similar
increases for the 2008 cycle. While it is too early to know what the
exact impact of the recent *Wisconsin Right to Life* decision will be on
the litigation workload over the next several years, the Commission
expects at least a modest increase in the number and complexity of
challenges that will arise. Similarly, the Commission expects that
rulemaking proceedings, necessitated both by anticipated changes in the
*Act* and by final judicial decisions in challenges to the *Act* and to
Commission regulations, will have a significant impact on OGC\'s
workload.

The Commission also anticipates an increase in the number of advisory
opinion requests in the run-up to the presidential election,
particularly requests for expedited advisory opinions. For example, in
2002, a non-presidential election year, the Commission received a total
of 15 advisory opinion requests. In 2006, another non-presidential
election year, the number of advisory opinion requests increased to 38.
However, in 2004, a presidential election year, the Commission received
a total of 45 advisory opinion requests. Accordingly, for the 2008
presidential election year, the Commission projects that it will receive
an even greater volume than in 2004. Also, the complexity of the topics
addressed in these AOs has increased because of *BCRA*, such as the
Millionaires\' Amendment which increases the permissible contribution
limits for the opponents of self-funded candidates. As more requestors
seek expedited advisory opinions on close questions of law under *BCRA*
and as the Commisson begins to receive AO requests on questions of law
under *HLOGA*, the Commission anticipates these trends to continue well
beyond the 2008 presidential election. In addition, the Commission
anticipates additional advisory opinion requests as a result of the
Supreme Court's recent *Wisconsin Right to Life* decision.

Since early 2006, new statutes and Executive Orders have added to the
Commission's responsibilities in administering the *Freedom of
Information Act* (FOIA) and *Privacy Act*, resulting in an increase in
workload for the FEC without an accompanying increase in FTE.

Specifically, Executive Order 13392 required the Commission to:

-   Appoint a Chief FOIA Officer, a role served by a senior-level OGC
    manager;

-   Establish a FOIA Service Center for the intake and initial
    processing of FOIA requests;

-   Appoint a "FOIA Public Liaison," who is an official "to whom a FOIA
    requester can raise concerns about the services a FOIA requester has
    received from the Center;" and

-   Develop a plan to ensure that agency administration of FOIA complied
    with the law, and report the plan to OMB and the Attorney General.

During FY 2007, increasing demands were placed on OGC as a result of
newly promulgated government-wide requirements related to the *Privacy
Act* and the *Freedom of Information Act*.

Consistent with these requirements, OGC is responsible for processing
and coordinating responses to all FOIA requests, not merely those that
present legal issues under the FOIA. Moreover, demand for Commission
services under FOIA is increasing, as a total of 85 requests were
received by the agency in FY 2007 compared to 49 FOIA requests received
in FY 2006.

Similarly, in the privacy area, new legislation and directives from OMB
have created new responsibilities for OGC. Specifically, Section 522 of
the *2005 Consolidated Appropriations Act*, OMB Memorandum M-05-08,
*Designation of Senior Agency Officials for Privacy*, and other
authorities impose more than a dozen new responsibilities and reporting
requirements on the Commission. The Commission has determined that these
duties will be overseen by co-Chief Privacy Officers, one of whom is a
senior-level OGC manager.

The Office of the General Counsel has seen a large increase in demand
for its full range of services without any corresponding increase in
FTE. In part as a response to these increased demands, and in part as an
effort to improve the overall operations, OGC has instituted management
and process improvements that have resulted in handling matters as
quickly and efficiently as possible with the current level of staffing.
While there still remains room for additional improvements that may
produce further benefits, the Commission believes it has done most, if
not all, that it can to increase OGC's operational efficiency without
additional staffing.

***The Alternative Dispute Resolution (ADR) Office.*** The Alternative
Dispute Resolution Office seeks one additional FTE to address the
anticipated growth in complaints that will be handled within this
program, thereby freeing up other Commission resources for other, more
complex enforcement matters. In the last several years, the ADR program
has handled 60 to 100 cases per year, with each staff member handling 30
to 45 cases. The additional FTE will allow the ADR program to handle
between 120 and 160 cases per year and to focus on ways to further
expedite case processing.

***The Office of the Inspector General (OIG).*** The Commission requests
a budget increase to support two additional FTEs in the Office of the
Inspector General. One FTE would be an investigator and the other would
be an auditor. The OIG has faced a considerable increase in workload in
the past several years without an increase in staff. For example, since
FY 2004, the OIG has been responsible for the oversight of the FEC\'s
annual financial statement audit, as required by the *Accountability of
Tax Dollars Act of 2002*, a new legislative requirement for the FEC. In
addition, the OIG has experienced a significant increase in internal
hotline complaints, some of which have resulted in criminal and
administrative investigations. The increase in reporting requirements
(e.g., FOIA, Privacy Act) places an additional burden on the OIG to
conduct internal audits (1) to ensure compliance with applicable
policies and procedures, and (2) to prevent and to detect fraud, waste
and abuse in FEC operations.

***The Office of Equal Employment Opportunity (EEO) and Programs.*** The
Commission requests two additional FTEs bringing the Commission's EEO
staff to three. Staffing the EEO office at three FTE will further build
upon the Commission's support of and commitment to equal opportunity and
diversity by ensuring a strong and effective program. These resources
will enable the Commission to conduct educational programs and other
proactive measures to help prevent unlawful discrimination, to
expeditiously address all cases that arise, and to meet all regulatory
and statutory reporting requirements to the Office of Personnel
Management and the Equal Employment Opportunity Commission (EEOC). In
pursuit of these commitments, the Commission is also striving to attain
the status of a model EEO program, as prescribed by EEOC guidelines
under CFR 1614, in implementing Title VII, *Age Discrimination in
Employment Act*, the *Rehabilitation Act* programs, and relevant
Executive Orders and policy guidance.

# *The Office of Communications (OC).* The Commission requests a budget increase for one additional FTE in the Office of Communications. The additional FTE would enable the OC to expand its online educational initiatives, thereby reaching the segment of the regulated community that is unable to attend FEC regional conferences. For example, the Commission recently purchased software to develop new, interactive online training exercises for the regulated community. The software would allow the OC to create web-based training for the regulated community that is easy to navigate, available on demand and always up-to-date with new Commission regulations and initiatives. This new training initiative represents a fundamental change in the Commission's outreach efforts, and will provide the regulated community with 24-hour access to campaign finance training. However, at current staffing levels, development of these new exercises is often delayed by the staff's need to focus on maintaining existing services. An additional FTE would enable the Commission to move forward with this and other initiatives at an accelerated pace, providing better service to the public and the regulated community.

***The Office of the Chief Financial Officer (OCFO).*** The Commission
requests a budget increase to support one additional FTE in the Office
of the Chief Financial Officer to strengthen financial management. The
Commissioners recently restructured the role of the CFO to significantly
enhance the CFO's responsibilities and to report directly to the
Commission. The change was made to afford the Commission a higher level
of oversight of financial management throughout the agency. The
complexity and additional reporting requirements, such as the annual
financial statement audit, have increased the visibility of the
Commission's financial operations. Accordingly, the Commission believes
having the CFO directly report to the Commissioners strengthens the
internal controls surrounding financial management.

This additional FTE would enhance the Commission's ability to properly
address the underlying internal control weaknesses that resulted in a
qualified audit opinion on the Commission's FY 2006 financial
statements. Furthermore, resources would be allocated to maintain and
update financial management policies and procedures, and provide
training to FEC staff on these policies and procedures, such as travel,
procurement, budget, and accounting matters.

The increase would ensure that the CFO will be able to perform a
higher-level review and analysis, thereby improving overall internal
controls. The additional FTE also would facilitate succession planning
to adequately prepare for the upcoming retirement of finance personnel;
thereby reducing the risk of financial and payroll transactions not
being processed timely or accurately. Finally, additional staffing also
enables the CFO to communicate more effectively with the Commission and
agency management.

**Request for Additional Technological Initiatives**

The Commission requests a budget increase of \$1,417,205 to maintain a
secure, flexible, and modern information technology system that fully
supports the collection, analysis, and dissemination of campaign finance
information. The Commission is in the early stages of developing a
complete, integrated enterprise architecture consisting of
infrastructure and applications that serve the Commission's business
needs. To further build and implement this architecture, additional
funds are needed to increase support for applications and systems
development projects. These resources will be used to manage
enhancements, modifications, and deployments of FEC systems. These
include, but are not limited to:

-   eReview (electronic review of campaign finance filings);

-   Electronic document management;

-   Enhancing detection and analysis capabilities of compliance data
    (e.g., data mining); and

-   Enabling the public to search, view, download, and comment on
    Federal agency rulemaking documents in one central online system.

Consistent with the President's Management Agenda, the Commission has
begun to define requirements for an integrated financial management
system. An integrated system will provide management and technical
capabilities for an agency-wide implementation of standard systems and
processes necessary to support financial management and human resource
(HR) activities. Currently, the Commission does not have an integrated
financial management system, which was noted as an internal control
weakness in the financial statement audit. To address this weakness, the
Commission intends to outsource its financial and HR operations to an
approved line of business (LOB) provider. This will allow the FEC to
provide timely, consistent, and reliable information for leadership and
management decisions, as well as to be compliant with OMB requirements.
Furthermore, the LOB is expected to provide an accounting structure to
enable the FEC to achieve a "clean" audit opinion on its financial
statements, and to resolve several of the internal control weaknesses
identified in the Commission's past financial statement audits.
Maintaining an effective financial management system includes:

-   Ensuring adequate internal controls;

-   Conducting risk assessments;

-   Implementing a back-up disaster recovery and continuing operations
    plan; and

-   Upgrading of security and systems to keep up with changes in
    technology, as well as changing regulations and reporting
    requirements.

The Commission understands the importance of strong internal controls.
Without additional funding, the Commission will be unable to adequately
address its internal control weaknesses to fully resolve these issues.

The FEC also continues to upgrade and enhance its website, electronic
filing and review systems, and other electronic systems, and to adapt to
changes in the law or to technological advances. In order to address the
more complex requirements of the campaign finance process and allow for
transparency, the FEC needs to build additional tools and a supporting
infrastructure to tap into the data that is being collected from the
regulated community. The four cornerstones serving as the foundation for
better tools and access to data include:

-   Integrated enterprise application architecture;

-   Enterprise content management;

-   Enterprise search/data mining capabilities; and

-   Robust and secure enterprise infrastructure.

Several of these improvements will serve to effectively respond to the
internal control weaknesses noted in the past several audits of the
Commission's operations. These functions will also facilitate the FEC's
mission to provide the public with a transparent campaign finance system
by providing useful and accessible website enhancements.

Combined with the responsibility to provide transparency in the campaign
finance process and the public's Internet-driven expectation of instant
access to the very latest information, these growing demands are
projected to soon push the Commission's technology beyond its current
capabilities. Therefore, additional resources are essential for the
Commission to successfully achieve its mission and serve the public and
regulated community.

  --------------- ------------------------- ------------------ ------------------ ------------------
  **Table 3:                                                                      
  Budget Request                                                                  
  by Object                                                                       
  Class**                                                                         

  **Personnel**                             **FY 2007**        **FY 2008**        **FY 2009
                                                                                  Request**

                                            **Estimate**       **Estimate**       

  1110            Full Time Permanent       \$28,909,914       \$31,909,311       \$33,579,996

  1130            Other than Permanent      550,000            775,000            850,000

  1150            Premium Pay, Overtime     65,000             85,000             90,000

  1152            Cash Awards               427,659            550,000            600,000

  1181            Witnesses                 5,000              8,500              8,500

  1210            Personnel Benefits        8,297,145          9,171,036          10,017,148

                  **Subtotal, Personnel**   **\$38,254,718**   **\$42,498,848**   **\$45,145,645**

  2101            Travel                    389,689            397,483            415,000

  2201            Transportation of Things  20,077             21,000             22,000

  2311            Rent                      3,513,877          4,726,125          4,773,094

  2331            Equipment Rental          181,000            185,000            188,500

  2332            Telephones                199,591            200,000            202,000

  2335            Postage, Printing and     459,540            462,000            467,500
                  Microfilm                                                       

  2511            Training and Tuition      293,503            299,374            305,361

  2512            Administrative Expenses   114,018            116,298            119,500

  2513            Depositions and           34,308             34,000             34,000
                  Transcripts                                                     

  2514            IT Contracts              4,984,717          4,265,260          5,713,130

  2521            Other Contracts           1,400,144          1,400,000          1,475,000

  2523            Repair & Maintenance      168,398            165,000            175,000

  2531            Federal Agency Services   957,940            960,000            967,000

  2541            Facilities Maintenance    285,000            290,000            295,000

  2572            Software and Hardware     1,345,296          1,283,157          1,375,000

  2601            Supplies                  190,856            170,000            170,000

  2602            Publications              544,132            560,456            577,270

  3101            Equipment Purchases       174,815            175,000            178,000

  3102            Capitalized IT Equipment  848,897            850,000            855,000

  3103            Non-Capitalized IT        167,000            165,000            165,000
                  Equipment                                                       

                  **Subtotal, Non           **\$16,272,798**   **\$16,725,152**   **\$18,472,355**
                  Personnel**                                                     

  **TOTAL**                                 **\$54,527,516**   **\$59,224,000**   **\$63,618,000**
  --------------- ------------------------- ------------------ ------------------ ------------------

[^1]: The Commission is awaiting Senate confirmation of four of its six
    Commissioners. Accordingly, the FEC is currently operating with only
    two Commissioners.