Performance and Accountability Report

Fiscal Year 2008

FEDERAL ELECTION COMMISSION

Feder

Performance and Accountability Report Fiscal Year 2008

Federal Election Commission

999 E St., N.W.

Washington, D.C. 20463

(202) 694-1000

1-(800) 424-9530

www.fec.gov

Released November 2008

Table of Contents

Message From The Chairman .........................................................................................................i

How To Use This Report..............................................................................................................iii

SECTION I: Management's Discussion and Analysis......................................................1

Section I.A: Mission and Organizational Structure .......................................................................1

How the FEC is Organized ........................................................................................1

Disclosure, Compliance and Enforcement..................................................................3

Encouraging Compliance through Education.............................................................3

Enforcing the FECA...................................................................................................3

Interpreting and Developing the Law.........................................................................5

Funding Presidential Elections ...................................................................................5

Section 1.B: FEC Performance Goals, Objectives, and Results......................................................5

Sources of Funds ........................................................................................................5

Summary of Significant Performance Results..............................................................7

Highlights of Performance Measures ..........................................................................9

Section 1.C: Analysis of FEC Financial Statements and Stewardship Information........................9

Balance Sheet ...........................................................................................................10

Statement of Net Cost..............................................................................................10

Statement of Changes in Net Position ......................................................................10

Statement of Budgetary Resources............................................................................10

Statement of Custodial Activity................................................................................10

Section 1.D: Analysis of FEC’s Systems, Controls, and Legal Compliance..................................11

1.D.i – Management Assurances ..............................................................................11

1.D.ii – Management’s Response to the Inspector General’s Management and 

Performance Challenges ...........................................................................................15

1.D.iii – FEC Integrated Internal Control Framework and Legal Compliance .........17

Section 1.E: Possible Future Effects of Existing Events and Conditions......................................17

Section 1.F: Other Management Information, Initiatives and Issues ..........................................18

e-Review...................................................................................................................18

House and Senate Map.............................................................................................18

Enhancements to the Presidential Map.....................................................................18

Intranet....................................................................................................................18

Electronic Vote Database..........................................................................................19

Email Automation and Notification Tool .................................................................19

System Certification and Accreditation Program ......................................................19

Section 1.G: Limitations of the Financial Statements..................................................................19

(cont.)
SECTION II: Performance Report...........................................................................................21

Performance Purposes, Objectives, and Results...........................................................................21

Strategic Goal and Objectives for FY 2008..................................................................................21

Results by Objective ....................................................................................................................22

Objective A: Transparency – Receiving Accurate and Complete Campaign Finance 

Disclosure Reports and Making Them Available to the Public ..................................22

Objective B: Compliance – Education and Enforcement..........................................25

Objective C: Development of the Law – Interpreting and Administering the Act .....29

SECTION III: Auditor's Report and Financial Statements.........................................33

Message From The Chief Financial Officer..................................................................................33

Inspector General's Statement on the Audit of the FEC's 

Fiscal Year 2008 Financial Statements..................................................................34

Independent Auditor's Reports....................................................................................................37

Financial Statements....................................................................................................................58

Notes to the Financial Statements ...............................................................................................63

SECTION IV: Other Accompanying Information............................................................77

Inspector General's Statement on the FEC's Management and Performance Challenges............77

APPENDIX A: List of Acronyms................................................................................................85
i

Message From The Chairman

November 15, 2008

The FEC’s Performance and Accountability Report for Fiscal Year 2008 reflects the agency’s program performance 

and financial activities over the past year and demonstrates our continued commitment to administering the 

Federal Election Campaign Act (FECA) of 1971, as amended. As an agency with specific jurisdiction, the FEC 

provides the American public confidence in the integrity of the Federal election process by disclosing the amounts, 

sources and uses of contributions, as well as emphasizing effective and fair enforcement of the FECA.

During fiscal year 2008, the Commission faced significant challenges. The most significant challenge was 

that the Commission was without a quorum during a six-month lapse between the expiration of prior recess 

appointments and Senate confirmation of the President’s nominees for Commissioners. As a result of the FEC 

being without a quorum of Commissioners for nearly half of the year, the Commission was unable to take 

action on many core business matters that required a four-vote quorum.

The lack of a quorum impacted the Commission beyond the obvious inability to finalize work as statutorily 

authorized. It also affected the Commission’s ability to retain and recruit personnel, thereby impacting the 

Commission’s ability to effectively manage, monitor and communicate with the staff. For example, during 

these six months, turnover was at an all time high within the Commission, including the resignation of the 

Chief Financial Officer and Staff Director.

Although I have less than two months remaining in my six months term as the Chairman, I am determined 

to continue to improve the day-to-day operations and management of the FEC. The number one priority of 

the Commission is our staff. So, in addition to addressing our statutory workload, we must figure out how to 

resolve the many staff-related issues. Although it won’t be easy, we are on our way in making improvements. 

For example, the retention of staff has now stabilized enabling staffing to reach close to the Commission’s 

authorized level. Other changes made since regaining a full Commission in July 2008 continue to reap positive 

results as evidenced by the Commission again receiving an unqualified “clean” opinion on its FY 2008 financial 

statements. The financial and performance data are reliable, accurate and complete. Receiving a clean opinion 

provides the public the confidence that the FEC is managing taxpayers dollars in the most fiduciary manner. 

The FEC’s financial and performance data is more fully discussed in Sections II and III.

Despite our successes, we have ongoing challenges to address. For example, our Independent Auditor’s Report 

on Internal Control identified one material weakness relating to financial accounting and reporting and 

one significant deficiency relating to information technology. Looking ahead, continued oversight by the 

Commissioners, along with greater emphasis on financial management and internal controls, conveys the high 

priority of the Commission to eliminate its internal control weaknesses. Strengthening internal controls and 

enhancing the financial management system will also help the Commission address its management challenges. 

The successes and challenges of this past fiscal year will serve as a foundation for our future efforts.

Sincerely,

Donald F. McGahn II

Chairman

How To Use This Report

This Performance and Accountability Report (PAR) presents comprehensive performance and financial 

information on the Federal Election Commission's (“FEC” or “Commission”) operations. The report 

was prepared pursuant to the Accountability of Tax Dollars Act of 2002 and Office of Management and 

Budget (OMB) Circular A-136, revised, Financial Reporting Requirements, and covers activities from 

October 1, 2007 through September 30, 2008.

The FEC places a high importance on keeping the public informed of its activities. To learn more about 

who we are and what we do to serve the American public, visit FEC's website at www.fec.gov to access 

this report (click on “About the FEC” and then “Budget”).

The FY 2008 Performance and Accountability Report is organized into four sections:

Section I – Management’s Discussion and Analysis (MD&A) provides an overview of the FEC. It 

describes our mission, organizational structure, and regulatory responsibilities.

Section II – Performance Information summarizes the FEC's strategic goal and related objectives and 

provides a forward-looking discussion of future challenges.

Section III – Financial Information, including Auditor's Report details the FEC's financial 

performance by highlighting the agency’s financial position, audit results and describing the FEC's 

compliance with key legal and regulatory requirements.

Section IV – Other Accompanying Information includes our Inspector General’s assessment of the 

FEC’s management challenges.

iii

1

Federal Election Commission Performance and Accountability Report 2008

Section I.A: Mission and Organizational Structure

The Commission was created in 1975 as an independent regulatory agency to strengthen the integrity of the 

electoral process under 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), P.L. 107–155 (FECA or the Act). The Commission is also 

responsible for administering the public funding program for Presidential campaigns and conventions, as outlined 

in Title 26 Internal Revenue Code.

The Act provides the foundation of the FEC’s mission to “prevent corruption in the Federal campaign process by 

administering, enforcing and formulating policy with respect to Federal campaign finance statutes.” The primary 

objectives of the FEC are to 1) disclose campaign finance information, 2) enforce the provisions of the law such 

as the limits and prohibitions on contributions, and 3) interpret and administer the law.

The Act 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, focusing on transparency. 

Public confidence in the political process depends not only on laws and regulations to assure transparency and 

limits and prohibitions on the amounts and sources of contributions, but also on the knowledge that those who 

disregard campaign finance regulations will face real consequences for non-compliance, emphasizing effective and 

fair enforcement to maintain the integrity of campaign financing.

How the FEC is Organized

Organization

The FEC is structured to foster bipartisan decision-making. To accomplish its legislative mandate, the FEC is 

directed by six Commissioners, who are 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. The Chairmanship of the Commission 

rotates among the members, with no member serving as Chairman more than once during his or her term. The 

Commissioners meet regularly to formulate policy and to vote on significant legal and administrative matters. The

Act requires a quorum of at least four votes for the Commission to adopt any official action or policy.

Fiscal year 2008 presented management with a unique challenge in conducting its day-to-day operations. 

Specifically, the Commission was without a quorum during a six-month lapse between the expiration of prior 

recess appointments and Senate confirmation of the President’s nominees for Commissioners. As a result of the 

FEC being without a quorum of Commissioners for nearly half of the year, the FEC was unable to take action 

on many core business matters that required four votes. This prolonged lack of a quorum impacted the agency’s 

ability to achieve several of its performance goals and other key activities.

SECTION I

Management's Discussion and Analy
2

Section I | Management’s Discussion and Analysis

The FEC is headquartered in Washington, D.C. and does not have any regional offices. The FEC’s authorized 

funding and staffing levels for fiscal year (FY) 2008 were $59.2 million and 375 full-time equivalent (FTE) 

positions. The FEC is funded by a single annual appropriation for salaries and expenses. The FEC is also authorized 

to collect fees to offset the costs of its conferences. The following chart represents the organizational structure of 

the agency as of September 30, 2008.

FEC Organizational Chart

The Offices of the Chief Financial Officer, General Counsel, and Staff Director support the agency in accomplishing 

its mission. The Office of the Inspector General, established within the FEC in 1988 under amendments to the 

Inspector General Act, is independent and reports to both the Commissioners and the Congress. The specific roles 

and responsibilities of each office are described in greater detail at http://www.fec.gov/about.shtml.

As illustrated by the organizational chart above, the FEC is structured to administer the FECA effectively and 

efficiently. The FEC’s primary objectives in administering the FECA are to disclose campaign finance information, 

enforce the law, and interpret and administer the provisions of the law, including administering the public funding 

of Presidential elections. The following provides a summary of the activities performed by the agency to ensure 

these objectives are achieved.

General Counsel

Equal Employment

Opportunity & Programs*

Management &

Administration

Compliance 

Communications 

Information Technology

Budget 

Finance 

Procurement

Enforcement

General Law & Advice

Litigation

Policy

Complaints Examination

& Legal Administration

Staff Director Inspector General

The Commissioners

Chief Financial Officer

* The Director for Equal Employment & Opportunity reports to the Staff Director for management and 

administrative purposes; however, has direct reporting authority to the Commission on all EEO matters
3

Federal Election Commission Performance and Accountability Report 2008

Disclosure, Compliance and Enforcement

Disclosing Campaign Finance Information

Disclosing the sources and amounts of funds used to finance federal elections is one of the most important duties 

of the FEC. In fact, it would be virtually impossible for the Commission to fulfill effectively any of its other 

responsibilities without disclosure. The public campaign finance reports are accessible through the FEC’s website 

at http://www.fec.gov/finance/disclosure.shtml. By providing easy, online access to disclosure reports, the FEC 

provides an added incentive for the regulated community to comply with the campaign finance law.

In addition to making campaign finance reports available to the public, the FEC works to ensure that the 

information disclosed is accurate and complete. The Office of Compliance’s Reports and Analysis Division (RAD) 

reviews all reports to track compliance with the law and to ensure that the public record provides a full and 

accurate representation of campaign finance activity. If the FEC’s review identifies an apparent violation or raises 

questions about the information disclosed on a report, the Office of Compliance sends a request for additional 

information (RFAI) to the committee, affording the committee an opportunity to correct the public record, if 

necessary. If the committee is able to resolve the FEC’s concerns, it may avoid an enforcement action. Should the 

committee not sufficiently address the FEC’s concerns, the FEC begins its enforcement efforts on the apparent 

violation.

Encouraging Compliance through Education

Helping the regulated community understand its obligations under the Act is an essential component of voluntary 

compliance. The FEC, through its Office of Communications, places a significant emphasis on encouraging 

compliance. The Office of Communications consists of the following offices/divisions: 1) Information Division, 2) 

Public Disclosure Division, 3) Press Office, and 4) the Office of Congressional, Legislative and Intergovernmental 

Affairs.

In recent years, the Commission’s website has become the single most important source of instantly accessible 

information about the Act and Commission regulations. Members of the regulated community and the general 

public can use the website to track Commission rulemakings, search advisory opinions and closed enforcement 

matters, view campaign finance data and find reporting dates. Moreover, while the Commission continues to 

make available printed copies of its educational brochures and publications, these materials are available and 

easy to access on the FEC’s website along with other instructional information, such as the FEC’s “Tips for 

Treasurers.”

The Commission encourages voluntary compliance through outreach programs. The FEC hosts instructional 

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 specifically address recent changes 

in the campaign finance laws and focus on fundraising and reporting regulations. Additionally, the Commission 

responds to telephone inquiries and written requests from political committees seeking information about the law 

and assistance in filing disclosure reports.

Enforcing the FECA

The FEC has exclusive jurisdiction over civil enforcement of violations of the Act and coordinates with the 

Department of Justice, as appropriate, on matters involving both civil and criminal enforcement of the Act. Under 

the Commission’s traditional enforcement program, the Commission learns of possible election law violations 

primarily through:

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

•	 The Commission’s review of a committee’s reports, or a Commission audit;
4

Section I | Management’s Discussion and Analysis

•	 Voluntary self-reporting by representatives of candidates or political committees 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.

Swift resolution of enforcement matters is one of the Commission’s highest priorities. The Commission’s efforts to 

promptly resolve enforcement matters were hindered during this fiscal year because the agency lacked a quorum 

for six months. Without a quorum, the Commission was unable to vote on pending enforcement matters from 

January through June 2008, thereby impacting the number of OGC’s enforcement matters closed by the FEC 

in fiscal year 2008. Once the Commission regained a quorum, immediate focus was placed on resolving those 

pending matters.

Whether initiated by outside complaint or internal referral, the most complex and legally significant enforcement 

matters are handled by the Office of General Counsel (OGC).

Specifically, the OGC’s Enforcement Division:

•	 Recommends to the Commission whether to find “reason to believe” that the Act has been violated, a 

finding that formally initiates an investigation;

•	 Investigates potential violations of the Act by requesting, subpoenaing, and reviewing documents and 

interviewing and deposing witnesses;

•	 Conducts settlement negotiations on behalf of the Commission to reach conciliation agreements with 

respondents;

•	 Recommends to the Commission whether to find “probable cause” to believe the Act has been violated; 

and

•	 Recommends to the Commission whether to sue a respondent in Federal district court if conciliation 

cannot be reached.

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 quickly or may require a significant amount of resources 

for several years.

To augment OGC’s enforcement role, the Office of Compliance manages several programs to improve the efficiency 

and effectiveness of the Commission’s enforcement efforts. These programs include: 1) Administrative Fine; 2) 

Alternative Dispute Resolution; and 3) Audit. The following provides a summary of each of these programs.

The Administrative Fine (AF) program, implemented in July 2000, helps the Commission enforce the timely filing 

of financial disclosure reports in a more streamlined manner than that permitted by the traditional enforcement 

process. The AF program was set to expire at the end of calendar year 2008, but was extended by Congress 

through 2013. This program, which is administered by the Office of Compliance’s Office of Administrative 

Review (OAR) and RAD, assesses monetary penalties for late and non-filed reports.

The Alternative Dispute Resolution (ADR) program, implemented in October 2001, 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. The ADR program is also aimed at promoting future 

compliance through settlements reflecting primarily remedial measures for candidates and political committees, 

such as training, audits, and the hiring of compliance staff.
5

Federal Election Commission Performance and Accountability Report 2008

The Commission also enforces the Act through audits of candidates and political committees. The Commission 

conducts mandatory audits, under Title 26, as discussed in the section on Public Funding below. In addition, 

the Commission performs “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. The Commission’s audit presence 

not only contributes to its enforcement efforts, but also encourages voluntary compliance within the regulated 

community.

Interpreting and Developing the Law

In fulfilling its statutory mission, the Commission often finds itself in a delicate balancing act. On the one hand, 

the Commission must administer, interpret and enforce the Federal Election Campaign Act, which the Supreme 

Court has said serves a compelling governmental interest. On the other hand, the Commission must remain 

mindful of the constitutional freedom of speech and association, and the practical implication of its actions.

To further its outreach and responsiveness to the public and regulated community, the Commission responds 

to questions from the regulated community about how the Act applies to specific situations by issuing advisory 

opinions (AOs). The Commission recently instituted an expedited process for handling certain time-sensitive 

requests in even shorter timeframes than the Act allows, generally 60 days. It should be noted that 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.

Furthermore, 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 either to write new Commission regulations or revise existing regulations.

Funding Presidential Elections

Public Funding

The Commission’s responsibilities also include administering the public funding of Presidential elections, as 

outlined in Chapters 95 and 96 of 26 U.S.C. The program is funded by taxpayers who voluntarily check off the 

$3 designation for the Presidential Election Campaign on their income tax returns. Through the public funding 

program, the Federal government provides (1) matching funds to candidates seeking their party’s Presidential 

nomination, (2) grants to Presidential nominating conventions and (3) grants to Presidential nominees for the 

general election campaigns.

Under the Presidential public funding program, the Commission (1) determines a candidate’s eligibility 

to participate in the program, (2) certifies the amount of public funds to which the candidate or convention 

committee is entitled, and (3) conducts a thorough examination and audit of the qualified campaign expenses of 

every candidate who receives payments under the program.

Section 1.B: FEC Performance Goals, Objectives, and 

Results

Sources of Funds

The FEC receives an annual appropriation for Salaries and Expenses. In addition, the FEC has authority to collect 

registration fees for the costs of carrying out FEC-hosted conferences. In FY 2008, the FEC’s authorized funding 

level included an appropriation of $59.2 million and estimated registration fees of $300,000.
6

Section I | Management’s Discussion and Analysis

The FEC’s total budget authority level in FY 2008 was $59.5 million. Figure 1 shows the agency’s funding and 

obligations from FY 2004 to 2008.

Figure 1 – Summary of Funding

Personnel vs. Non-Personnel Costs

Figure 2 represents the Commission’s actual expenditures broken out between personnel and non-personnel 

costs for FY 2008. Personnel costs comprised 67.8 percent of the FEC’s costs; the other 32.2 percent was spent 

primarily on information technology (IT) software and hardware and rent and related costs, such as building 

security.

Figure 2 – Fiscal Year 2008 by Major Catagory

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

Dollars $60.0

(in millions)

2004 2005 2006 2007 2008

Fiscal Year

Appropriations Obligations

50.5 50.1 51.7 51.2

54.1 53.7 54.8 54.3

59.5 58.8

Salaries and

Benefits

67.8%

IT Initiatives

Facilities (e.g. Rent)

Other

10.4%

15.4%

6.4%
7

Federal Election Commission Performance and Accountability Report 2008

Summary of Significant Performance Results

The remainder of this section provides a summary of the results of FEC’s key performance objectives, which are 

discussed in greater detail in Section II of this report.

The FEC’s strategic plan was updated effective FY 2008. The changes to the strategic plan were primarily to reflect 

the FEC’s current operations and to more clearly set forth the FEC’s objectives. The FEC’s strategic framework 

consists of a mission statement supported by a single, overarching strategic goal, which is: To protect the integrity 

of the Federal campaign process by providing transparency, enforcing contribution restrictions, and fairly 

administering the FECA and related statutes.

To help the Commission achieve its goal, the following three objectives were established:

•	 Transparency – Receiving Accurate and Complete Campaign Finance Disclosure Reports and Making 

Them Available to the Public

•	 Compliance – Education and Enforcement

•	 Development of the Law – Interpreting, Administering, and Defending the Act

The revised strategic plan also incorporated means and strategies used in achieving its overarching strategic goal: 

(1) operational processes; (2) the development and use of technologies; and (3) human resources. These objectives 

provide the framework for defining the strategic activities needed to effectively measure the Commission’s success 

in achieving its goal. Accordingly, the FEC refined its performance measures in FY 2008 to enhance its ability in 

capturing the data needed to assess the effectiveness of its operations.
8

Section I | Management’s Discussion and Analysis

The following table provides a summary of the Commission’s FY 2008 target and actual results of its performance 

measures. As previously mentioned, the lack of a quorum for six months adversely impacted the agency’s ability 

to achieve several of its FY 2008 performance targets.

Performance Measure FY 2008 

Target

FY 2008 

Actual

Strategic Objective A: Transparency

1. Process reports within 30 days of receipt as measured quarterly 95% 91%

2. Meet the statutory requirement to make reports and statements filed on paper with 

the FEC available to the public within 48 hours of receipt 100% 100%

Strategic Objective B: Compliance

3. Conduct educational conferences and host roundtable workshops on the 

campaign finance law each election cycle, achieving a mean satisfaction rating of 

4.0 on a 5.0 scale

100% 100%

4. Issue press releases summarizing completed compliance matters within two 

weeks of a matter being made public by the Commission 100% 22%

5. Issue press releases containing summaries of campaign finance data quarterly 100% 100%

6. Process enforcement cases within an average of 15 months of receipt 100% 66%

7. Process cases assigned to Alternative Dispute Resolution within 155 days of a 

case being assigned 75% 64%

8. Process reason-to-believe recommendations for the Administrative Fine Program 

within 60 days of the original due date of the subject untimely or unfiled report 75% 79%

9. Process the challenges in the Administrative Fine Program within 60 days of a 

challenge being filed 75% 14%

10. Conclude non-Presidential audits with findings in an average of 10 months, 

excluding time delays beyond the Commission’s control, such as subpoenas and 

extension requests

100% 95%

11. Conclude non-Presidential audits with no findings in an average of 90 days from 

beginning of fieldwork 100% 100%

12. Conclude Presidential audits in an average of 24 months of the election, excluding 

time delays beyond the Commission’s control, such as subpoenas and extension 

requests

100% TBD

Strategic Objective C: Development of the Law

13. Complete rulemakings within specific time frames that reflect the importance of 

the topics addressed, proximity to upcoming elections, and externally established 

deadlines

100% 100%

14. Issue all advisory opinions within 60-day and 20-day statutory deadlines 100% 97%

15. Issue expedited advisory opinions for time-sensitive highly significant requests 

within 30 days of receiving a complete request, or a shorter time when warranted 100% 60%

16. Ensure that court filings meet all deadlines and rules imposed by the Courts 100% 100%

17. Process public funding payments in the correct amounts and within established 

time frames 100% 100%

Section II of this report presents the FEC’s Performance Report, which provides the annual program performance 

information submitted in accordance with the Government Performance Results Act (GPRA) in greater detail.
9

Federal Election Commission Performance and Accountability Report 2008

Highlights of Performance Measures

As previously mentioned, disclosing campaign finance information for Federal elections is a key responsibility of 

the Commission. The FEC continues to encounter an increase in the number of filings related to Congressional 

and Presidential elections. Despite the continued growth in the number of filings and information related to the 

filings, the FEC made 100 percent of these filings available to the public within 48 hours of receipt.

In addition to making campaign finance data readily available to the public, the FEC reviews all reports, 

amendments and statements for accuracy, completeness and compliance with the law. New and amended reports 

for the current and past elections are received at the Commission on a daily basis. The Commission reviewed 

63,380 documents out of 66,767 documents filed within FY 2008, well on its way to completing its review of 

100 percent of the documents received.

The results of the review of the filings fall, generally, into the following categories:

•	 No instance of non-compliance;

•	 Request for Additional Information (RFAI); or

•	 Non-compliance is noted. In this case, the matter of non-compliance is referred to ADR, OGC or Audit 

for further consideration.

Over the past couple of years, the Commission has placed a significant emphasis on the review process to 

improve the FEC’s ability to process cases more timely with more qualitative results. A key factor in helping the 

Commission achieve its target relates to the AF and ADR programs handling of the less-complex cases, which not 

only improved the timeliness of addressing the cases, but also reduced the number of cases that may previously 

have been dismissed by OGC under the statute of limitations.

In recent years, the FEC has steered resources to the most significant violations, leading to a steep increase in 

civil penalties for serious violators. The Commission processed 71 enforcement cases during the fiscal year, of 

which 47 cases (66%) were closed within 15 months. The average processing time for enforcement cases was 16.9 

months.

Section 1.C: Analysis of FEC Financial Statements and 

Stewardship Information

The FEC’s FY 2008 financial statements and notes are presented in the required format for the current year 

in accordance with OMB Circular A-136, revised, Financial Reporting Requirements. The FEC’s current year 

financial statements and notes are presented in a comparative format in Section III of this report.

The following table summarizes the significant changes in the FEC’s financial position during FY 2008.

Net Financial Condition FY 2008 FY 2007 Increase/

(Decrease) % Change

Assets $18,849,424 $18,819,667 $29,757 0.2%

Liabilities $7,218,576 $5,125,513 $2,093,063 40.8%

Net Position $11,630,848 $13,694,154 ($2,063,306) (15.1%)

Net Cost $62,024,007 $56,377,561 $5,646,446 10.0%

Budgetary Resources $61,452,650 $57,295,859 $4,156,791 7.3%

Custodial Revenue $2,305,665 $5,031,538 ($2,725,873) (54.2%)
10

Section I | Management’s Discussion and Analysis

The following is a brief description of the nature of each required financial statement and its relevance. Certain 

significant balances or conditions are explained to elaborate on the impact on the FEC’s operations.

Balance Sheet

The Balance Sheet presents the total amounts available for use by the FEC (assets) against the amounts owed 

(liabilities) and amounts that comprise the difference (Net Position). As a small independent agency, nearly 100 

percent of the FEC’s assets consist of Fund Balance with Treasury (FBWT), Property, Plant and Equipment 

(PP&E), and Accounts Receivable. Fund Balance with Treasury (e.g., Cash) is available through the Department 

of Treasury accounts, from which the FEC is authorized to make expenditures (i.e., obligations) and payments. 

FBWT increased by approximately $353 thousand, or 3.4 percent from the prior year.

Accounts Receivable represent amounts due from the public for fines and penalties assessed by the FEC and 

referred to Treasury for collection. The accounts receivable balance decreased by approximately $287 thousand, 

or 35.1 percent, from FY 2007.

Statement of Net Cost

The Statement of Net Cost presents the annual cost of operating FEC programs. Gross costs less any offsetting 

revenue is used to arrive at the total net cost of operations. The FEC’s total appropriations in FY 2008 was $59.2 

million, which is approximately $4.7 million greater than FY 2007. Roughly $39.8 million, or 67.8 percent, 

of the budget was dedicated to personnel costs. The remaining costs related to rent, information technology 

initiatives, and general operating expenses. Overall, net costs increased by $5.6 million or 10.0 percent from 

FY 2007. The majority of the increase is attributable to: 1) a $1.7 million increase in personnel for the cost of 

living adjustment (COLA), 2) increase of $1.5 million in rent, and 3) approximately $1.0 million increase in 

IT initiatives to address the prior year audit findings. Other costs of operations, such as training, printing, and 

supplies, account for the remaining amount.

Statement of Changes in Net Position

This statement presents in greater detail the net position section of the Balance Sheet, which includes Cumulative 

Results of Operations and Unexpended Appropriations. The statement identifies the activity that caused the 

net position to change during the reporting period. Total Net Position decreased by about $2.1 million, or 15.1 

percent, primarily due to an increase in Appropriations Used, which is largely a function of payments made.

Statement of Budgetary Resources

The Statement of Budgetary Resources provides information on the source and status of budgetary resources 

made available to the FEC during the reporting period. It presents the relationship between budget authority and 

budget outlays, as well as the reconciliation of obligations to total outlays. Total Budgetary Resources and Status 

of Budgetary Resources increased by approximately $4.2 million, or 7.3 percent, over FY 2007. This increase 

primarily is derived from an increase in appropriations received.

Statement of Custodial Activity

The Statement of Custodial Activity represents an accounting of funds collected by the FEC that are owed to the 

U.S. Treasury’s general fund. These monies are not available for the FEC’s use. Total custodial revenue decreased 

from the prior year in the area of fines and penalties by approximately $2.7 million, or 54.2 percent. The decrease 

is primarily due to the Commission's inability to vote or take action on its enforcement matters and to assess fines 

and penalties because of the lack of a quorum for nearly half of the fiscal year.
11

Federal Election Commission Performance and Accountability Report 2008

Section 1.D: Analysis of FEC’s Systems, Controls, and Legal 

Compliance

1.D.i – Management Assurances

The Federal Managers’ Financial Integrity Act of 1982 (FMFIA) is implemented by OMB Circular A-123, revised, 

Management’s Responsibility for Internal Control. The FEC management is responsible for establishing and 

maintaining effective internal control and financial management systems that meet the objectives of the FMFIA

and performing a self-assessment under the guidance of its Directive 53, Implementation of OMB Circular A-123, 

Internal Control Review. Directive 53 outlines the process and describes roles and responsibilities for conducting 

risk assessments and internal control reviews.

Section 2 of the FMFIA requires federal agencies to report, on the basis of annual assessments, any material 

weaknesses that have been identified in connection with its internal and administrative controls. The reviews 

that took place during FY 2008 provide qualified assurance that FEC systems and management controls comply 

with the requirements of the FMFIA. For FY 2008, the FEC reports one material weakness under Section 2 of 

the FMFIA.

The Commission faced significant challenges pertaining to its Human Capital. For example, the Commission 

was without a quorum of four Commissioners from January 2008 through June 2008. As a result of the FEC 

being without a quorum of Commissioners for nearly half of the year, the FEC was unable to vote or take 

action on many core business matters that require a four-vote quorum. This prevented the agency in fulfilling its 

mission such as closing enforcement matters, certifying Presidential funding payments, and issuing final advisory 

opinions, rulemakings, or audit reports.

The lack of a quorum directly impacted retention of leadership and key management positions, causing retention 

of employees to remain a factor for the Commission and its ability to operate effectively and efficiently. As also 

noted by the Inspector General, the previous three years has been a period of relative instability within key 

management positions. Programs to address the HR challenges and leadership development have not progressed 

as planned. For example, the 2005 legislative recommendation to move FEC senior management to senior 

executive service (SES) status was not approved and further approval requests were on hold through this fiscal 

year. The SES approval was sought to allow the FEC to financially compete for management talent both within 

government and the private sector.

Another factor increasing the HR risk factor is the FEC does not have a succession plan in place for key positions. 

The impact of these Human Capital challenges facing the Commission has been reflected in its inability to recruit 

or retain qualified individuals.

The Commission continues to make efforts to address its ability to recruit and retain individuals. Furthermore, 

the Commission continues to emphasize the need for a succession plan. The Office of Human Resources has 

developed a draft HR strategic plan, including a timeline in addressing the weaknesses identified by management 

and the Office of the Inspector General.

Section 4 of the FMFIA requires that agencies financial management systems controls be evaluated annually. The 

FEC evaluated its financial management systems for the fiscal year ending September 30, 2008 in accordance 

with the FMFIA and OMB Circular No. A-127, Financial Management Systems, as applicable. The results of 

management reviews provide qualified assurance under Section 4 of the FMFIA that the FEC’s financial systems 

controls generally conform to the principles and standards required.

The Commission also considers its financial management system to be a non-conformance with Section 4 of 

FMFIA, as it is not fully integrated as defined by OMB Circular A-127. The financial statements auditors also 

identified the lack of an integrated financial management system as a material weakness in the prior year’s audit 
12

Section I | Management’s Discussion and Analysis

report. As a result of the lack of an integrated financial management system, the FEC staff expends a significant 

amount of resources preparing the necessary management reports, and reconciling data from the disparate system, 

thus increasing the risk of error.

The Commission has taken steps to address this weakness. First, in February 2008, the FEC converted its 

accounting system from in-house to an OMB-certified Line of Business (LOB) provider to process its accounting 

transactions. Second, the FEC upgraded its procurement system to a web-based system, eliminating the need for 

procurement requests via paper. Third, the FEC has begun to convert its time and attendance reporting from a 

paper process to a web-based system. The Commission recognizes that additional integration efforts are needed 

for this weakness to be fully eliminated. 

The FEC conducted its assessment of internal control over the effectiveness and efficiency of operations and 

compliance with applicable laws and regulations in accordance with OMB Circular A-123 and FEC Directive 

No. 53. Until this fiscal year, no material weaknesses were identified under the FMFIA by the FEC.

The following table summarizes the results of this year's FMFIA assessment:

Effectiveness of Internal Control over Operations (FMFIA § 2)

Statement of 

Assurance Qualified

Material Weakness Beginning 

Balance New Resolved Consolidated Reassessed EndingBalance

Human Capital 0 1 1

Total Material Weaknesses 0 1 1

Conformance with financial management systems requirements (FMFIA § 4)

Statement of 

Assurance

Systems do not fully conform to 

financial management system requirements

Non-Conformance Beginning 

Balance New Resolved Consolidated Reassessed EndingBalance

Integrated Financial 

Management System 0 1 1

Total Non-Conformances 0 1 1

In addition to the two matters identified above, additional areas for improvement were noted during the 

internal control review. Managers in all divisions continue to review specific procedures on an ongoing basis and 

improve internal controls, where possible. As noted in the Chairman’s Letter, qualified assurance is provided that 

management controls are in place and the Commission’s financial management systems conform to government 

standards articulated in OMB Circulars A-123 and A-136, as revised.
13

Federal Election Commission Performance and Accountability Report 2008

FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 20463

Annual Assurance Statement on Internal Control

The Federal Election Commission (Commission) is responsible for establishing and 

maintaining effective internal control and  nancial management systems that meet the 

objectives of the Federal Managers’ Financial Integrity Act (FMFIA) and the Of ce 

of Management and Budget (OMB) Circular A-123, Management’s Responsibility 

for Internal Control. Internal control is an integral component of the Commission’s 

management that provides reasonable assurance that the following objectives are 

being achieved: effectiveness and ef ciency of operations, reliability of  nancial 

reporting, and compliance with applicable laws and regulations.

The Commission conducted its evaluation of internal control over effectiveness 

and ef ciency of operations and compliance with applicable laws and regulations in 

accordance with OMB Circular A-123. Based on the results of this  scal year 2008 

evaluation, the Commission identi ed one material weakness in its internal control 

over the effectiveness and ef ciency of operations and compliance with applicable 

laws and regulations and one instance of non-conformance of  nancial systems 

requirements, as of September 30, 2008.

The Commission faced challenges pertaining to its Human Capital throughout  scal 

year 2008. The most signi cant challenge pertained to the fact that the Commission 

was without a quorum of four Commissioners beginning January 1, 2008, for six 

months of the calendar year. The lack of a quorum prevented the agency from 

ful lling its mission such as addressing enforcement matters, performing audits, and 

issuing advisory opinions or rulemakings. Furthermore, retention of leadership 

and key management positions has remained a factor in the Commission’s ability to 

operate effectively and ef ciently, as previously noted by the Inspector General.

The impact from this challenge is re ected in the results of the Commission’s 

performance measures, which highlight many areas where the Commission did not 

achieve its target. Although the Commission continued to perform its statutorily 

authorized work, particular matters requiring the approval of a minimum of four 

OFFICE OF THE CHAIRMAN
14

Section I | Management’s Discussion and Analysis

Commissioners could not go forward for approximately six months, until the agency 

regained a quorum. The Commission will address this weakness by conducting an overall 

organizational assessment.

The Commission also considers the lack of an integrated  nancial management system to be 

a non-conformance with Section 4 of FMFIA. Without an integrated  nancial management 

system, the Commission cannot easily produce accurate and timely management reports. 

The independent auditors have identi ed  nancial accounting and reporting controls as a 

material weakness. To address this weakness, the Commission will hire new staff and provide 

additional training. The Commission also recognizes that additional system integration 

efforts are needed for this weakness to be fully eliminated.

Except for these two matters discussed above, which are discussed in greater detail throughout 

this report, the Commission is able to provide a quali ed statement of assurance that the 

internal control and  nancial management systems meet the objectives of the FMFIA.

Donald F. McGahn II

Chairman

October 24, 2008
15

Federal Election Commission Performance and Accountability Report 2008

The following table summarizes the results of this year’s financial statement audit, performed by FEC’s independent 

auditors, Clifton Gunderson:

Audit Opinion Unqualified

Restatement No

Material Weaknesses Beginning 

Balance New Resolved Consolidated Ending Balance

Financial Accounting and Reporting Controls 

(Modified Repeat Finding) 1 0 0 0 1

Total Material Weaknesses 1 0 0 0 1

In addition to the one material weakness, Clifton Gunderson also observed one significant deficiency, as defined 

by the American Institute of Certified Public Accountants (AICPA), Statement on Auditing Standards (SAS) 112: 

Communicating Internal Control Related Matters Identified in an Audit. The FEC has developed a corrective 

action plan to address the weaknesses identified during the annual audit.

Prompt Payment Act

The Prompt Payment Act requires Federal agencies to make timely vendor payments and to pay interest penalties 

when payments are late. The FEC’s on-time payment rate for FY 2008 was effectively 100 percent.

Improper Payments Information Act (IPIA) of 2002 Reporting

The IPIA of 2002 and OMB guidance requires agencies to identify those programs that are susceptible to significant 

erroneous payments, and determine an annual estimated amount of erroneous payments made in its operations.

The FEC reviewed all of its programs and activities to identify those susceptible to significant erroneous payments. 

Approximately 68 percent of the FEC’s expenditures pertain to salaries and benefits, which represents a low 

risk for improper payments, based on established internal controls. The FEC also reviewed all of its FY 2008 

procurements for non-personnel costs to verify their accuracy and completeness. Accordingly, the FEC is unaware 

of any improper payments. The FEC continues to monitor its payment process to ensure that the risk of improper 

payments remains low.

1.D.ii – Management’s Response to the Inspector General’s Management and 

Performance Challenges

The Inspector General’s report in Section IV identified four areas specific to management and performance 

challenges, which include: 1) Governance, 2) Human Capital Management, 3) Information Technology Security, 

and 4) Financial Reporting. The matter pertaining to Governance is new this fiscal year, while the other three 

areas had been identified in prior years.

Governance

The Commission agrees with the Inspector General that the agency has encountered challenges in retaining several 

key senior leadership and other vital management positions. The Commission has begun to take steps to address 

this concern. It has updated the agency-wide Strategic Plan, as well as implemented a new annual performance 

planning system. The Commission’s next step in its efforts to complete the overarching framework, is to conduct 

an agency-wide organizational assessment to address the concerns raised by the Inspector General.
16

Section I | Management’s Discussion and Analysis

Human Capital Management

The Commission is committed to enacting the President’s Management Agenda (PMA) to make government 

more citizen-centered, market-based and results-oriented. The FEC has already met the PMA’s transparency 

requirements and is dedicated to maintaining and strengthening its commitment to a diverse Federal workforce 

that is skilled, flexible, and focused on results and service.

The Inspector General observed that the Commission confronts the same long-standing challenge facing the 

rest of the Federal government: developing and implementing a consistent strategic approach to managing 

and maintaining an appropriately skilled workforce. To address this challenge, the Commission undertook a 

comprehensive human capital management initiative. This initiative included changes in recruitment, strategic 

hiring, and evaluating and training the current workforce.

Information Technology Security

As the Inspector General points out, computerized systems enable the FEC to carry out its mandate to ensure that 

the campaign finance process is fully disclosed. To address the ever-present threats of data misuse, destruction, or 

inappropriate disclosures, as well as to ensure continuity of operations in the event of a disaster, the Commission has 

taken aggressive actions to secure its IT infrastructure, such as its mandatory security awareness training program 

for its employees and contractors. This year, the FEC began several initiatives as security enhancements relating to 

risk assessments of operations, disaster recovery, and continuity of operations in the event of a disaster.

The FEC remains vigilant in its IT security efforts and continues to monitor and evaluate applicable policies. The 

agency appreciates the comments and recommendations from the Inspector General on IT security issues.

Financial Reporting

The FEC is committed to producing timely, accurate, and useful financial information, which is essential for 

making day-to-day operating decisions and managing the government’s operations more efficiently and effectively. 

The FEC is also committed to fully complying with all financial management laws and standards.

At the start of the fiscal year, the FEC placed significant emphasis on its procurement efforts. This included 

upgrading its procurement system to a web-based version, updating its procurement policies and procedures, and 

providing targeted training to FEC staff. These efforts have enhanced the FEC’s ability to process procurement 

actions more timely. For example, in the past, a request was submitted via paper. Under the new system, all requests 

are submitted electronically, which not only eliminates the risk of losing the paper request, but it also provides a 

tracking for each stage of the procurement action. The risk of possible delays, duplication, or not recording an 

obligation in the accounting system has significantly decreased as a result of the FEC’s efforts in procurement.

Beginning February 1, 2008, the FEC transferred its accounting services to the General Services Administration 

(GSA), an OMB-certified line of business service provider for financial management. To demonstrate that GSA 

has adequate controls and safeguards in place, GSA undergoes an annual audit of its control objectives and control 

activities, including those controls over information technology and related processes. The audit is performed in 

accordance with the Statement on Auditing Standards (SAS) No. 70, Service Organizations, which is an auditing 

standard developed by the American Institute of Certified Public Accountants (AICPA) indicating that a service 

organization has been through an in-depth audit, by an independent auditing firm.

The most recent examination of GSA’s controls included procedures to obtain reasonable assurance about whether 

(1) the accompanying description presents fairly, in all material respects, the aspects of GSA’s and Pegasys’ controls 

that may be relevant to a user organization’s internal control as it relates to an audit of financial statements; (2) 

the controls included in the description were suitably designed to achieve the control objectives specified in 

the description, if those controls were complied with satisfactorily and user organizations applied the controls 

contemplated in the design of GSA’s controls; and (3) such controls had been placed in operation as of June 30, 
17

Federal Election Commission Performance and Accountability Report 2008

2008. The results of the SAS 70 audit of GSA’s operations stated that the “aforementioned controls presents fairly 

in all material respects, the relevant aspects of GSA’s and Pegasys’ controls that had been placed in operation as of 

June 30, 2008.”

The FEC continues to make improvements in its financial management but some challenges remain. Management 

continues to work with the Inspector General to improve internal control and eliminate the weaknesses identified 

as part of the annual audit.

1.D.iii – FEC Integrated Internal Control Framework and Legal Compliance

The Commission is subject to numerous legislative and regulatory requirements that promote and support 

effective internal control. Such laws and regulations the FEC adheres to, as applicable, include:

•	 Annual Appropriation Law – establishes the FEC’s budget authority;

•	 Inspector General Act of 1978, as amended (IG Act);

•	 Government Performance and Results Act (GPRA) of 1993;

•	 Federal Financial Management Improvement Act of 1996 (FFMIA);

•	 Clinger-Cohen Act of 1996;

•	 Debt Collection Improvement Act of 1996, as amended; and

•	 Chief Financial Officers (CFO) Act, as amended by the Accountability of Tax Dollars Act of 2002.

The proper stewardship of Federal resources is a fundamental responsibility of the FEC. These laws help the FEC 

improve the management of its programs and financial operations, and assure that programs are managed in 

compliance with applicable law.

Section 1.E: Possible Future Effects of Existing Events and 

Conditions

There are several existing events and conditions that may affect the FEC in the future. The new Administration 

coming into office in January 2009 could propose changes to the FECA. Any amendments to the FECA might 

significantly impact the Commission, and could require changes in internal processes or procedures and require 

that implementing regulations be adopted.

The solvency of the Presidential Election Campaign Fund ("Fund") could impact the FEC. This past fiscal year, 

for the first time in the history of the Fund, which dates to the 1976 elections, the shortfall was so great that the 

primary candidates did not receive any public funds on the first date that they would ordinarily have been paid. 

After the Department of Treasury set aside the amount for the general election and convention financing, it could 

not pay primary election candidates when the matching payment period began at the start of the calendar year. 

Had the Treasury deposited money in the primary matching account based on anticipated receipts, rather than 

actual receipts, there would have been funds sufficient to pay timely primary candidates who participated in the 

program while still reserving all necessary funds for the national party conventions and the general election grants. 

The Department of the Treasury has not interpreted the Fund Act and the Presidential Primary Matching Payment 

Account Act as permitting it to proceed in this fashion, and legislation may be necessary to effect such a change.

Only one of the two major party nominees for the presidency opted to take general election public funding in 

2008. As a result, the Fund will begin the 2009-2012 presidential election cycle with more funds than previously 

anticipated. However, long-term stability of the availability of funds and viability of the program remain a concern 

of the FEC.
18

Section I | Management’s Discussion and Analysis

Section 1.F: Other Management Information, Initiatives 

and Issues

e-Review

The Commission continues to use technology to manage more effectively its ever-increasing workload. One 

such initiative is the implementation of e-Review, which is a web-based review system that will allow the FEC 

to review campaign finance reports, generate, circulate and image outgoing RFAI letters to committees, and to 

provide management with reports detailing key performance metrics. Once fully implemented, it is anticipated 

that e-Review will better allow the FEC to keep pace with the increasing number, size, and complexity of financial 

reports submitted by the regulated community.

House and Senate Map

Building on the success of the Presidential Campaign Finance Map which was launched in June 2007, the FEC 

has built a House and Senate campaign finance research tool based on the same map interface that has made the 

Presidential Map research tool so successful. The House and Senate Map is a new addition to the FEC website 

that uses state and district maps to lead the user to campaign finance data for House and Senate candidates.

It allows the user to select candidates for comparison using bar charts to display such financial categories as 

contribution and disbursement totals, debts and cash on hand. It also presents itemized contributions and 

disbursements by category and includes links to images of reports filed by the candidate and the candidate’s 

committees.

This application lays the groundwork for similar presentations of political action committee (PAC) and party 

committee data, contributor histories and historical data for all committee types. The FEC's goal is to provide 

user-friendly public access to a large, comprehensive database of campaign finance information. These database 

presentation tools achieve the goal of presenting key disclosure data in an attractive, useful and comprehensible 

way on the web.

Enhancements to the Presidential Map

The FEC has released a major enhancement to the Presidential Map improving functionality and performance. 

The presidential map now includes detailed information on each candidate’s campaign expenditures. The upgraded 

presidential map is an easy-to-use online tool for obtaining detailed information about the Presidential campaigns and 

how they spend their money, including the payee name, purpose, date and amount of each campaign expenditure. 

Improvements include easier search capabilities, quick access to summary and expenditure information, one-click 

downloading, better graphics, and a new and very useful “compare” feature.

The Federal election campaign finance map applications have received wide press coverage. Due to the popularity of 

both Federal election campaign finance map applications, web hits on fec.gov web site increased almost tenfold. About 

20 percent of total web hits on fec.gov are generated from the Presidential and House and Senate Map. This is an 

obvious testament to the Federal election campaign finance map applications, popularity, and the sound architecture 

of the Federal election campaign finance map applications reliably to handle the large number of web hits.

Intranet

The FEC is also developing an Intranet that will eventually serve as a portal for all FEC employees to access any and 

all applications and collaboration tools to facilitate greater communication within the agency. The Commission 

partially launched its Intranet this past year. Once all portals are completed, the Intranet will feature a rich suite 

of products and deliver productivity and efficiency gains throughout the agency. Specific benefits will include:
19

Federal Election Commission Performance and Accountability Report 2008

•	 Improved internal communications;

•	 Document management efficiencies;

•	 Improved search capabilities;

•	 Fast and easy access to information;

•	 A reduced number of hard-copy internal policies and procedures;

•	 RSS newsfeeds;

•	 Employee quick polls; and

•	 Non-technical staff’s ability to publish and contribute content to the Intranet site.

Electronic Vote Database

The Commission Secretary is responsible for all administrative matters relating to Commission meetings and 

voting matters. In keeping with the Commission’s tradition of staying as current as possible with technology, 

three initiatives were completed in FY 2008 in the Office of the Commission Secretary: (1) an electronic tally 

vote database; (2) an electronic document work flow project; and (3) electronic voting by the Commissioners. The 

objectives of these initiatives are to provide the FEC with accessible, searchable, electronic versions of documents 

circulated for Commission approval and the means to access a database to cast a vote electronically. The electronic 

document workflow project is expected to bring needed efficiencies not just for the staff in the Secretary’s Office, 

but for the Commission as a whole.

Email Automation and Notification Tool

The Federal Election Commission launched a new system on its website (www.fec.gov) offering automated 

email updates for a variety of campaign finance information. The new service allows users to sign-up to receive 

notification whenever information important to them is added or changed on the Commission’s site.

System Certification and Accreditation Program

The FEC formally began working on implementing its Certification and Accreditation program. The first phase 

of the program consisted of conducting a third party risk assessment of its mission critical information systems. 

This unbiased third party review identified the risks posed against its core applications, determined the potential 

impact of risk exploitation, and identified current and planned security controls. This phase also evaluated the 

impact of implementing new security controls to mitigate any newly discovered risks. This phase of the project 

provides senior management with the necessary knowledge to address risks to its mission critical information 

systems in an effective and cost efficient manner.

Section 1.G: Limitations of the Financial Statements

The principal financial statements have been prepared to report the financial position and results of operations 

of the FEC pursuant to the requirements of 31 U.S.C. 3515 (b). While the statements have been prepared from 

the books and records of the FEC in accordance with U.S. generally accepted accounting principles (GAAP) for 

Federal entities and the formats prescribed by the OMB, the statements are in addition to the financial reports 

used to monitor and control budgetary resources which are prepared from the same books and records.

The statements should be read with the realization that they are for a component of the U.S. Government, a 

sovereign entity.

21

Federal Election Commission Performance and Accountability Report 2008

Performance Purposes, Objectives, and Results

This section of the report serves as the Commission’s Annual Performance Report as specified in OMB Circular 

A-11, Part 6, Preparation and Submission of Strategic Plans, Annual Performance Plans, and Annual Program 

Performance Reports, as amended. In addition, this section fulfills the FEC’s requirements under the Government 

Performance and Results Act.

The FEC defines much of its work in the context of election cycles, which represents two calendar years. For 

example, the 2008 election cycle includes calendar years 2007 and 2008, which also spans parts of three fiscal 

years--the last three quarters of FY 2007, all of FY 2008, and the first quarter of FY 2009. Accordingly, certain 

data is most meaningful in measuring the FEC’s performance by election cycle, making it difficult to provide 

meaningful performance data on a fiscal-year basis. Therefore, the results of the FEC’s performance, as discussed 

in this section, includes data by either fiscal year or by election cycle, depending on which option presents the 

results in the most informative manner.

Strategic Goal and Objectives for FY 2008

To achieve its mission, as detailed in Section I, the FEC has identified one overarching strategic goal. This goal 

is supported, in turn, by three strategic objectives and underlying activities that guide the operations of the FEC 

and its staff on a day-to-day basis.

STRATEGIC GOAL:

To protect the integrity of the Federal campaign process by providing 

transparency, enforcing contribution restrictions, and fairly administering 

the FECA and related statutes.

OBJECTIVE A: TRANSPARENCY – Receiving Accurate and Complete Campaign Finance 

Disclosure Reports and Making Them Available to the Public

OBJECTIVE B: COMPLIANCE – Education and Enforcement

OBJECTIVE C: DEVELOPMENT OF THE LAW – Interpreting, Administering, and 

Defending the Act

Management excellence is a key strategy by which the Commission strives to ensure these objectives are met 

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. 

SECTION II

Performance Report
22

Section II | Performance Report

The Commission believes that, in addition to investing in its people, strong financial management and up-to-date 

technology are critical means to achieving its strategic goal.

The Commission recently reviewed the performance measures and refined them, thereby enhancing the FEC’s 

ability to capture and report data in a more meaningful manner. For example, where a performance measure was 

broad in nature, the FEC made it more specific. Furthermore, many performance measures were combined as it 

was determined that the data being reported was duplicative. The following provides a detailed discussion on the 

FEC’s performance measures, as outlined in its updated Strategic Plan.

Results by Objective

Objective A: Transparency – Receiving Accurate and Complete Campaign 

Finance Disclosure Reports and Making Them Available to the Public

The FEC provides the public with the data to make educated, informed decisions in the political process based, 

in part, on information concerning where candidates for Federal office derive their financial support. The FEC 

gauges its effectiveness through a series of indicators designed to measure performance in areas that promote 

confidence in the campaign finance process.

The FEC promotes voluntary compliance by fully disclosing campaign finances for Federal elections. The following 

provides a discussion on the results achieved in carrying out these objectives and activities.

Performance Measures

•	 Process reports within 30 days of receipt as measured quarterly; and

•	 Meet the statutory requirement to make reports and statements filed on paper with the FEC available to 

the public within 48 hours of receipt.

The Commission’s mandatory electronic filing (“e-filing”) rules require any committee that receives contributions 

or makes expenditures in excess of $50,000 in a calendar year, or that has reason to expect to do so, to submit its 

reports electronically. These mandatory e-filing provisions (11 CFR § 104.18) apply to any political committee 

or other person required to file reports, statements and/or designations with the FEC. These requirements do not 

apply to Senate candidate committees (and other persons who support Senate candidates only), who file with the 

Secretary of the Senate.

The primary function of the e-filing system is to act as the point of entry for submission of electronically filed 

campaign finance reports, providing faster access to reports and streamlining operations. Specifically, the system 

provides for public disclosure of electronically filed reports, via the FEC website, within minutes of being filed. 

When a committee files a financial disclosure report on paper, FEC staff scan and enter the information disclosed 

in the report into the FEC electronic database. The Commission’s Public Disclosure Division ensures that a copy 

is available for public inspection within 48 hours or receipt, both electronically on the website and at the FEC’s 

headquarters, located at 999 E Street, N.W., Washington, D.C.

Figure 3 shows the total number of campaign finance reports and statements filed with the FEC each fiscal year 

since 2004. As illustrated, election years (the odd fiscal years), show a spike in the number of filings received by 

the FEC. The public can access the campaign finance reports and data at http://www.fec.gov/disclosure.shtml.
23

Federal Election Commission Performance and Accountability Report 2008

Figure 3 – Reports and Statements Filed (in thousands)

0

10

20

30

40

50

60

Number 70

Filed

55.7 57.9

66.4 66.8 69.1

Fiscal Year 2004 2005 2006 2007 2008

The FEC achieved a success rate of 100 percent in making the financial disclosure reports and statements available 

to the public within 48 hours of receipt. This fiscal year has been phenomenal in the number of contributors, 

which has led to a significant increase in the volume of data associated with filings. For example, to-date, the data 

equivalent to the number of pages for filings received has been approximately 6.0 billion pages, while in fiscal year 

2007, the number of pages received was approximately 4.0 billion. This represents a 50 percent increase from last 

year. Although the FEC has not increased its staffing from last year, it still has been able to successfully achieve 

its mandate.

After the reports are imaged for disclosure purposes, the data is coded and entered into the FEC’s database for 

review to assess accuracy and complete disclosure of campaign finance information. The agency’s goal is to code 

and enter 95 percent of the reports within 30 days of receipt. For FY 2008, the FEC was able to process 91 percent 

of the reports within 30 days of receipt.

The FEC’s website (www.fec.gov) represents the major source of Federal campaign finance information. The FEC 

website provides access to the campaign finance data that has been submitted by candidates and committees and 

posted on-line by the FEC staff. The public’s interest in finance campaign information is illustrated in Figure 4, 

which shows a continued high number of hits on the FEC’s website by users seeking campaign finance data and 

other information. During FY 2008, the website received approximately 169.5 million hits.
24

Section II | Performance Report

Figure 4 – Total Website Hits (in millions)

0

25

50

75

100

125

150

175

Hits 200

100.0 101.5

169.5 

101.0 102.6

Fiscal Year 2004 2005 2006 2007 2008

To make campaign finance data more accessible to the public, the FEC launched an interactive map providing 

users immediate access to contribution information for the 2008 Presidential, House and Senate elections. Users 

can access the amount of funds raised on a state-by-state basis, contributions, cash-on-hand, and the distribution 

of contributions by amount with a simple click at www.fec.gov/DisclosureSearch/mapApp.do. Furthermore, users 

can access lists of contributors by name, city, and amounts of contributions within the first three digits of any 

zip code. Contribution data is updated within one day of the FEC’s receipt of electronically filed Presidential 

disclosure reports.

A Presidential election cycle includes expenditures related to the election of: 1) the President; 2) all seats in the 

House of Representatives; and 3) one-third of the Senate seats. Figure 5 illustrates that expenditures related to 

Federal elections are on the rise, especially as they relate to a Presidential election year. Total receipts collected as 

of September 30, 2008 were slightly over $5.0 billion, while disbursements were approximately $4.2 billion. As 

the election cycle crosses fiscal years, the FEC is projecting disbursements for the 2008 Presidential election to 

near $6.1 billion.

As a result of the rising expenditure amounts, the FEC assumes a greater workload relating to 1) its disclosure 

and review efforts; 2) the identification of instances of non-compliance; 3) its response to requests for advisory 

opinions; and 4) the likelihood that filings are more complex, increasing the potential for misappropriation of 

funds.
25

Federal Election Commission Performance and Accountability Report 2008

Figure 5 – Expenditures in Federal Elections (in billions)

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

Dollars $7.0

4.7

5.3

6.1

4.0 4.1

Election Cycle 2000 2002 2004 2006 2008

Projected

Objective B: Compliance – Education and Enforcement

Helping the regulated community understand its obligations under the Act is an essential component for 

improving voluntary compliance. The Commission continues to promote compliance with the law by educating 

political committees and the public about the requirements of the Act.

The FEC has exclusive jurisdiction over the civil enforcement of the Federal campaign finance law. In exercising 

that authority, the Commission uses a variety of methods to uncover possible campaign finance violations. 

Instances of non-compliance may lead to an FEC enforcement case or Matter under Review (MUR). In some 

cases, respondents may be given the option to participate in the Commission’s Alternative Dispute Resolution 

program, which seeks to resolve matters more swiftly. By law, all these matters must remain confidential until 

they are closed. Violations involving the late submission of FEC reports or failure to file reports are subject to the 

Administrative Fine program. 

Performance Measures

•	 Conduct educational conferences and host roundtable workshops on the campaign finance law each 

election cycle, achieving a mean satisfaction rating of 4.0 on a 5.0 scale 100% of the time

•	 Issue press releases summarizing completed compliance matters within two weeks of a matter being 

made public by the Commission

•	 Issue quarterly press releases containing summaries of campaign finance data

•	 Process 100% of enforcement cases within an average of 15 months of receipt

•	 Process 75% of the cases assigned to Alternative Dispute Resolution within 155 days of a case being 

assigned
26

Section II | Performance Report

•	 Process 75% of reason-to-believe recommendations for the Administrative Fine Program within 60 days 

of the original due date of the subject untimely or unfiled report

•	 Process 75% of the challenges in the Administrative Fine Program within 60 days of a challenge being 

filed

•	 Conclude non-Presidential audits with findings in an average of 10 months, excluding time delays 

beyond the Commission’s control, such as subpoenas and extension requests

•	 Conclude non-Presidential audits with no findings in an average of 90 days from beginning of 

fieldwork

•	 Conclude Presidential audits in an average of 24 months of the election, excluding time delays beyond 

the Commission’s control, such as subpoenas and extension requests

Results achieved in carrying out these objectives and activities are detailed below.

Expanding Awareness

In addition to its website, the FEC operates a press office and maintains a toll-free line to respond to inquiries 

regarding campaign finance data. 

One way the Commission encourages voluntary compliance is by hosting conferences across the country, where 

Commissioners and staff explain how the Act applies to candidates, parties and political action committees. These 

conferences address recent changes in campaign finance laws and focus on fundraising and reporting regulations. 

The FEC held five conferences in FY 2008, three in the District of Columbia, one in St. Louis, Missouri, and one 

in Orlando, Florida. The FEC also held a roundtable workshop on pre-election communications and a seminar 

for nonconnected committees during FY 2008. The success of these efforts is evidenced by the evaluation scores 

and comments received. The overall rating for each event exceeded a 4.0 out of a possible 5.0.

Responding to Complaints

In the last several years, the FEC has responded to a variety of enforcement matters through its Office of General 

Counsel (OGC), Administrative Fine (AF) and Alternative Dispute Resolution (ADR) programs. Under the 

Commission’s traditional enforcement program, the Commission learns of possible election law violations 

primarily through:

•	 The Commission’s review of a committee’s reports or through a Commission audit;

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

•	 Voluntary self-reporting by representatives of candidates or political committees 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 most complex and legally significant enforcement matters are handled by the OGC that:

•	 Recommends to the Commission whether to find “reason to believe” the FECA has been violated, a 

finding which formally initiates an investigation;

•	 Investigates potential violations of the FECA by requesting, subpoenaing and reviewing documents and 

interviewing or deposing witnesses;

•	 Conducts settlement negotiations on behalf of the Commission, culminating in “conciliation agreements” 

with respondents on the assessment of fines; and

•	 Files suit in Federal district court when conciliation is unsuccessful.
27

Federal Election Commission Performance and Accountability Report 2008

Closed enforcement matters are available online through the Commission’s Enforcement Query System at 

http://eqs.sdrdc.com/eqs/searcheqs.

Office of General Counsel

Enforcement matters are handled by the OGC pursuant to the procedures set forth in §437g of the FECA. Over 

the past several years, the General Counsel has initiated a number of management and organizational changes 

to increase the quality and efficiency of the FEC’s enforcement work, and has implemented policy initiatives 

to facilitate the processing of matters under review. The result is a more objective and expeditious process, with 

meaningful penalties and other remedies proportionate to the violation.

In recent years, the FEC has steered resources to the most significant violations, leading to a steep increase in civil 

penalties for serious violators. The Commission processed 71 enforcement cases during the fiscal year, which were 

processed in an average of 16.9 months. The Commission was able to close 47 cases (66%) within 15 months. 

The goal of processing 100 percent of enforcement cases within an average of 15 months of receipt was not met 

due to the absence of a quorum of Commissioners. The absence of a quorum extended the average closure time 

by preventing the agency from closing enforcement cases. Accordingly, we expect that these processing numbers 

will improve over the next fiscal year as matters recommended to the Commission for closure will be processed 

through the ordinary course.

Alternative Dispute Resolution

The ADR program was implemented in FY 2001 to facilitate settlements outside of the traditional enforcement 

or litigation processes. The program’s primary objective is to enhance the agency’s overall effectiveness through 

more expeditious resolution of enforcement matters with fewer resources required to process complaints and 

internal referrals.

Generally, a case is considered processed when it is closed. A case is closed when the Commission votes on the 

recommendation made by ADR as to what final action should be taken. The number of cases processed through 

ADR is much lower than usual, which was directly attributable to the lack of a quorum of Commissioners for six 

months. During FY 2008, ADR processed 12 cases to closure. Of the12 cases closed, nine were closed within 155 

days, thus meeting the benchmark of 75 percent. 

In addition, the ADR processed 45 cases to the point of sending them to the Commission with a recommendation 

for concluding the matter. As of September 30, 2008, these cases were still pending a vote of the Commission. 

Accordingly, these cases are expected to be closed in FY 2009. 

When both categories of cases are considered together, 57 in total, the 155-day benchmark period was achieved 

64 percent of the time. 

Administrative Fine Program

In response to a legislative mandate, an Administrative Fine (AF) Program was implemented in July 2000 to 

address untimely filing or non-filing of disclosure reports in a more efficient and effective manner. This program is 

administered by the Office of Administrative Review and RAD, which are within the Office of Compliance.

Since the Program’s inception, the Commission has closed 1,641 cases and assessed fines of almost $3.2 million.

As previously noted, the lack of a quorum had an impact on the number of cases opened and closed as well as the 

number of challenges received. Through the first three quarters of fiscal year 2008, only five cases were opened, 

seven challenges were received, and 16 cases were closed. By the close of this fiscal year, an additional 112 cases 

were opened and 12 cases were closed, with total fines assessed for the fiscal year at $34,861. Approximately 79.2 

percent of the reason to believe (RTB) recommendations were processed within 60 days of the reports’ due dates, 

while only approximately 14 percent of challenges were processed within 60 days of the challenges’ receipt dates.
28

Section II | Performance Report

On-going extensive legal analysis required for earlier challenges meant these cases were processed outside the 60-

day target. The more recently received challenges were processed within this target, an indication that, had a full 

Commission been in place for the entire fiscal year and new challenges been received in response to RTB findings, 

it is expected that the challenge review performance measure would have been achieved.

Conducting Audits

The Audit Division’s major responsibilities concern the public funding of Presidential campaigns and audits 

of various political committees. This division evaluates the Presidential primary candidates’ applications 

for matching funds and determines the amount of contributions that may be matched with federal funds. 

As required by 26 U.S.C., the FEC audits all recipients of public funds. In addition, pursuant to 2 U.S.C. 

§438(b), the Commission audits non-Presidential committees that, according to FEC determinations, 

have not complied with the law. The FEC publishes its findings in audit reports, which can be found at 

http://www.fec.gov/audits/audit_reports.shtml.

The FEC’s goals with respect to conducting audits in a timely and efficient manner are to:

•	 Conclude non-Presidential (for cause) audits with findings in an average of 10 months, excluding time 

delays beyond the Commission’s control, such as subpoenas and requests for extensions of time to 

respond to audit reports;

•	 Conclude non-Presidential audits with no findings in an average of 90 days from the beginning of field 

work; and

•	 Conclude Presidential Audits in an average of 24 months of the general election, excluding time delays 

beyond the Commission’s control, such as subpoenas and requests for extensions of time to respond to 

audit reports.

Generally, an audit concludes with the public issuance of an audit report following the Commission’s approval. 

However, due to the lack of a Commission quorum in FY 2008, some audit reports were not approved. 

Additionally, no new audits were conducted above those previously approved before the Commission lost its 

quorum. The Audit Division notes that under the circumstances of the lack of a Commission quorum, for the 

purpose of measuring performance, forwarding audits reports for Commission approval concluded the audit.

In FY 2008, the Audit Division issued to the public or forwarded for Commission approval 31 audit reports 

resulting from audits “for cause.” Findings were reported in 23 out of the 31 audits. The average time to conclude 

95 percent of these audits was 10 months. The remaining eight audits resulted in no findings, and were concluded 

in an average of 2.94 months.

Presidential committee audits demand more time and resources than Title 2 “for cause” audits because of their 

complexity. The number of audits is dependent on the Presidential election cycle, along with the number of 

candidates that participated in the public funding program. In FY 2008, the Commission approved the eligibility 

of seven candidates to receive Presidential Primary Matching Funds. This is in addition to one candidate approved 

eligible in FY 2007 for a total of eight candidates for the 2008 election cycle. One candidate subsequently 

withdrew from the program. Audits of the remaining seven candidates began in fiscal year 2008, as Commission 

approval was not necessary to conduct Title 26 audits. The Commission is on track to accomplish its goal of 

completing these Presidential audits within 24 months after the 2008 Presidential election. After the 2008 general 

election, the FEC will audit the publicly funded national convention committees, their host committees and one 

recipient of General Election public funding.
29

Federal Election Commission Performance and Accountability Report 2008

Objective C: Development of the Law – Interpreting and Administering 

the Act

The Commission provides formal interpretation of the Act through the promulgation of regulations and the 

issuance of advisory opinions (AOs).

Performance Measures

•	 Complete rulemakings within specific time frames that reflect the importance of the topics addressed, 

proximity to upcoming elections, and externally established deadlines 100% of the time

•	 Issue all advisory opinions within 60-day and 20-day statutory deadlines 100% of the time

•	 Issue expedited advisory opinions for time-sensitive highly significant requests within 30 days of receiving 

a complete request, or a shorter time when warranted, 100% of the time

•	 Ensure that court filings meet all deadlines and rules imposed by the Courts 100% of the time

•	 Process public funding payments in the correct amounts and within established time frames 100% of 

the time

Results achieved in carrying out these objectives and activities are detailed below.

Regulations

The FEC publishes its regulations, which are codified in Title 11 of the Code of Federal Regulations (CFR). 

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 at 

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 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 worked on four rulemaking projects during FY 2008. The first rulemaking, which the 

Commission completed during Quarter 1, implements the Supreme Court’s decision in Wisconsin Right to Life

regarding electioneering communications. The WRTL rulemaking affected five existing regulations, and was 

completed in 121 days.

Two rulemakings required constructions of new statutory provisions in the Honest Leadership and Open Government 

Act (HLOGA), which changed the Commission’s existing candidate travel rules and created a new reporting regime 

for lobbying entities that bundle contributions for candidates. By the end of the fiscal year, the Commission had 

voted on draft final rules implementing the HLOGA's Travel Rules, and had held a public hearing on the Notice 

of Proposed Rulemaking for the Bundling Rules.

The final rulemaking that the Commission worked on during FY 2008 was the Millionaires' Amendment repeal, 

which implements the Supreme Court’s decision in Davis.
30

Section II | Performance Report

Advisory Opinions

Advisory Opinions are official Commission responses to questions regarding the application of 

Federal campaign finance law to specific factual situations. The FEC’s Advisory Opinion brochure at 

http://www.fec.gov/pages/brochures/ao.shtml provides a complete description of the AO process and explains 

how to request an advisory opinion.

Consistent with the Act, 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 time for the Commission to 

respond to the request is reduced to 20 days. Nevertheless, the Commission instituted an expedited process last 

year for handling certain time-sensitive requests in even shorter timeframes. The Commission has placed special 

emphasis in the last year on expediting its processing and consideration of certain 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.

The number of AO requests that the Commission receives is subject to cycles and is somewhat higher during 

election years. During FY 2008, the Commission completed 97 percent of AOs within the 60-day statutory 

deadline. The Commission did not receive any 20-day requests. Furthermore, the Commission issued five 

expedited advisory opinions during FY 2008, for which more than 50 percent were issued within 30 days of 

receiving a complete request. The average number of days from receipt of the complete AO request to issuance of 

the AO was 31 days. A summary of AOs can be reviewed at http://saos.nictusa.com/saos/searchao.

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. The Commission’s 

court filings met all deadlines and rules imposed by the courts 100% of the time.

In a case decided last year 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 defending its regulation implementing the Wisconsin Right to Life decision as 

well as a related challenge (Citizens United v. FEC) to disclosure provisions as applied to certain electioneering 

communications. The Commission prevailed before a three-judge district court in Citizens United, and the 

plaintiff has appealed to the Supreme Court.

In other ongoing litigation, the Commission is defending a lawsuit brought by SpeechNow.org, which alleges 

that the Act’s limits on contributions to political committees is unconstitutional as applied to groups that receive 

contributions only from individuals and who make only independent expenditures with their funds. The 

Commission is also defending against claims that some of its regulations are unconstitutional and that it has 

unlawfully delayed its consideration of certain administrative complaints.

Public Funding

In addition to enforcing the FECA, the Commission is responsible for administering the public funding of 

Presidential elections, as outlined in 26 U.S.C. 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.

To be eligible for public funds, a Presidential candidate or a party convention committee must first submit a letter 

of agreement and a written certification in which the candidate or committee agrees to:

•	 Spend public funds only for campaign-related expenses or, in the case of a party convention, for 

convention-related expenses;
31

Federal Election Commission Performance and Accountability Report 2008

•	 Limit spending to amounts specified by the campaign finance law;

•	 Keep records and, if requested, supply evidence of qualified expenses;

•	 Cooperate with an audit of campaign or convention expenses;

•	 Repay public funds, if necessary;

•	 Pay any civil penalties assessed by the FEC; and

•	 Document that Primary candidates have met the “threshold requirement” for eligibility by raising in 

excess of $5,000 in each of 20 states.

The Commission processed seven threshold submissions (submissions to determine whether the candidates’ met 

the eligibility requirements) and 30 non-threshold submissions. These submissions were processed in the correct 

amounts and within established time frames 100% of the time. The Commission certified a total of $27.2 million 

in federal matching funds in the 2008 campaign thus far. 

The Commission approved payment of $84.1 million in federal funds for the general election campaign of Senator 

John McCain and Governor Sarah Palin. Presidential candidates accepting the federal payment are subject to a 

spending limit of $84.1 million, the amount of the payment, plus a combined personal spending limit of $50,000 

from their personal funds. (All expenditures made by or on behalf of a Vice-Presidential candidate are considered 

to be made on behalf of the Presidential candidate.)

Legislative Recommendations

The Commission is empowered to recommend to the President and to Congress suggested improvements to 

the federal campaign finance law. In 2008, due to vacancies on the Commission, the Commission did not issue 

formal legislative recommendations. Nonetheless, the serving Commissioners requested that Congress extend 

the legislative authority for the Administrative Fine Program (AFP). H.R. 6296, which extends the AF program 

authority through 2013, passed the House of Representatives on July 15, 2008, and the Senate on October 2, 

2008. The President signed it into law on October 16, 2008.

Previously in 2007, the Commission approved five legislative recommendations, which were to:

•	 Require electronic filing of Senate campaign finance reports;

•	 Expand the prohibitions on fraudulent misrepresentation of campaign authority to encompass all 

persons purporting to act on behalf of candidates or political organizations;

•	 Add the FEC to the list of Agencies authorized to issue “use” immunity orders under Title 18 with the 

permission of the Attorney General, providing added flexibility in pursuing information in enforcement 

investigations;

•	 Require political committees to include FEC identification numbers, for standardization purposes, on 

contribution checks sent to other political committees and to disclose the identification numbers of 

other political committees when itemizing contributions from them and contributions to them on 

reports filed with the Commission; and

•	 Increase certain monetary registration and reporting thresholds related to actions by individuals and 

small groups involved in political campaigns to adjust amounts for inflation experienced over the last 

thirty years.

Greater detail concerning the Commission’s legislative recommendations can be found at 

http://www.fec.gov/law/legislative_recommendations_2007.shtml#id.

33

Federal Election Commission Performance and Accountability Report 2008

SECTION III

Auditor's Report and Financial Statements

Message From The Chief Financial Officer

November 15, 2008

The PAR summarizes the agency’s annual accomplishments, in addition to providing financial and performance information. I am 

pleased that the FEC sustained an unqualified audit opinion on the financial statements this year. This performance benchmark 

validates our efforts to ensure that the financial statements of the agency, and of the funds for which we are stewards, are fairly 

presented. This achievement is also a testament to the hard work and dedication of the FEC's staff. This accomplishment has even 

greater significance this year, since the Commission was without a full quorum for six months of the fiscal year, as the Chairman 

mentioned.

The FEC is committed to effective and efficient management of its resources. In addition to the improvements mentioned by the 

Chairman, the agency also undertook the following efforts during FY 2008:

•	 Converted the processing of accounting transactions to an OMB certified financial management line of business (FMLOB) 

provider.

•	 Upgraded the procurement system to a web-based version. As part of this upgrade, the Commission also undertook a 

comprehensive review of its procurement efforts, which resulted in the issuance of updated procurement policies and 

procedures.

•	 Began implementation of a web-based Time and Attendance (T&A) system.

•	 Implemented the requirements of HSPD-12 with respect to ID badges.

These efforts help address the prior year’s material weakness in internal control regarding a lack of an integrated financial management 

system. Still, additional steps are needed to fully eliminate the internal control deficiency. Until then, the Commission will continue 

to face challenges in financial reporting, as noted by the material weakness identified by the auditors again this year. Accordingly, 

the FEC will develop a corrective action plan in the first quarter of FY 2009 to remedy the control design deficiencies; continue 

to evaluate and strengthen controls; and develop a plan to achieve greater integration of performance and financial management 

systems. These efforts will lead to better performance management and decision making. 

I look forward to another productive year in FY 2009 with a continuation of the same high level of financial management that 

resulted in our past successes.

Sincerely, 

Brian J. Duffy

Acting Chief Financial Officer
34

Section III | Auditor’s Report and Financial Statements

FEDERAL ELECTION COMMISSION 

 WASHINGTON, D.C. 20463 

 Office of Inspector General

MEMORANDUM

TO: The Commission 

FROM: Inspector General 

SUBJECT: Audit of the Federal Election Commission’s Fiscal Year 2008 Financial 

 Statements 

DATE: November 12, 2008 

Pursuant to the Chief Financial Officers Act of 1990, commonly referred to as the “CFO 

Act”, as amended, this letter transmits the Independent Auditor’s Report and 

accompanying Independent Auditor’s Reports on Internal Control and Compliance and 

Other Matters issued by Clifton Gunderson (CG-LLP) for the fiscal year ending 

September 30, 2008. The audit was performed under a contract with and monitored by 

the Office of Inspector General (OIG) in accordance with the auditing standards 

generally accepted in the United States of America; the standards applicable to financial 

audits contained in Government Auditing Standards, issued by the Comptroller General 

of the United States; and, applicable provisions of Office of Management (OMB) 

Bulletin No. 07-04, Audit Requirements for Federal Financial Statements, as amended. 

Opinion on the Financial Statements

The consolidated balance sheets of the Federal Election Commission (FEC) as of 

September 30, 2008 and 2007 and the related statements of net cost, changes in net cost, 

changes in net position, and combined statement of budgetary resources for the years 

then ended (hereinafter collectively referred to as the “financial statements”) were 

audited. The audit included an examination, on a test basis, of evidence supporting the 

amounts and disclosures in the financial statements. The audit also included assessing 

the accounting principles used and significant estimates made by management, as well as 

evaluating the overall principal statements’ presentation. 

The CG-LLP Independent Auditor’s Report concluded that the FEC’s financial 

statements present fairly, in all material respects, the financial position of the FEC as of 

September 30, 2008 and 2007, and its net cost, changes in net position, budgetary 

resources, and custodial activity for the years then ended in conformity with accounting 

principles generally accepted in the United States of America. 
35

Federal Election Commission Performance and Accountability Report 2008

2

Report on Internal Control

CG-LLP’s planning and performance of the audit included consideration of the FEC’s 

internal control over financial reporting as a basis for designing audit procedures for the 

purpose of expressing an opinion on the financial statements and to comply with OMB 

Bulletin 07-04, as amended, but not for the purpose of expressing an opinion on the 

effectiveness of FEC’s internal control over financial reporting. The auditors did not test 

all internal controls relevant to operating effectiveness as broadly defined by the Federal 

Managers’ Financial Integrity Act (FMFIA) (31 U.S.C. 3512), such as those controls 

relevant to ensuring efficient operations. Consequently CG-LLP did not express an 

opinion on the agency’s internal control over financial reporting. 

The American Institute of Certified Public Accountants (AICPA) established standards 

on communicating deficiencies related to internal control over financial reporting 

identified by the auditors. As defined by the AICPA, a control deficiency exists when 

the design or operation of a control does not allow the agency’s management or its 

employees, in the normal course of performing their assigned duties, to prevent or detect 

misstatements on a timely basis. 

Auditors determine whether an internal control deficiency is a significant deficiency or a 

material weakness based on the factors of likelihood and magnitude. A significant 

deficiency is a control deficiency, or combination of control deficiencies, that adversely 

affects the agency’s ability to initiate, authorize, record, process, or report financial data 

reliability in accordance with generally accepted accounting principles such that there is 

a more than a remote likelihood that a misstatement of the agency’s financial statements 

that is more than inconsequential will not be prevented or detected by the agency’s 

internal controls. A material weakness is a significant deficiency, or combination of 

significant deficiencies, that results in more than a remote likelihood that a material 

misstatement of the financial statements will not be prevented or detected by the 

agency’s internal controls.

CG-LLP identified a significant deficiency in the area of: 

• Information Technology (IT) 

CG-LLP identified a material weakness in the area of: 

• Financial Accounting and Reporting Controls 

Report on Compliance and Other Matters

FEC management is responsible for complying with laws and regulations applicable to 

the agency. To obtain reasonable assurance about whether FEC’s financial statements 

are free of material misstatements, CG-LLP performed tests of compliance with certain 

provisions of laws and regulations, non-compliance which could have a direct and 

material effect on the determination of financial statement amounts, and certain other 

laws and regulations specified in OMB Bulletin No. 07-04, as amended. Tests of 
36

Section III | Auditor’s Report and Financial Statements

3

compliance were limited to these provisions and CG-LLP did not test compliance with all 

laws and regulations applicable to FEC. 

The results of CG-LLP’s tests of compliance with laws and regulations described in the 

audit report disclosed an instance of reportable noncompliance that is required to be 

reported under U.S. generally accepted government auditing standards or OMB guidance. 

CG-LLP identified a reportable noncompliance in the area of: 

• The Federal Managers’ Financial Integrity Act (FMFIA) 

Audit Follow-up

The report on internal control contains recommendations to address weaknesses found by 

the auditors. Management was provided a draft copy of the audit report for comment and 

generally concurred with the findings and recommendations. In accordance with OMB 

Circular No. A-50, Audit Follow-up, revised, the FEC’s corrective action plan is to set 

forth the specific action planned to implement the recommendations and the schedule for 

implementation. The Commission has designated the Chief Financial Officer to be the 

audit follow-up official for the financial statement audit. 

OIG Evaluation of Clifton Gunderson LLP’s Audit Performance

We reviewed CG-LLP’s reports and related documentation and made necessary inquiries 

of its representatives. Our review was not intended to enable the OIG to express, and we 

do not express, an opinion on the FEC’s financial statements, provide conclusions about 

the effectiveness of internal control or conclusions on FEC’s compliance with laws and 

regulations. However, the OIG review disclosed no instances where CG-LLP did not 

comply, in all material respects, with Government Auditing Standards. 

We appreciate the courtesies and cooperation extended to Clifton Gunderson LLP and the 

OIG staff during the audit. If you should have any questions concerning these reports, 

please contact my office on (202) 694-1015. 

Lynne A. McFarland 

 Inspector General 

Attachments 

Cc: Acting Staff Director 

 General Counsel 

 Acting Chief Financial Officer 

 Chief Information Officer 

 Accounting Officer 
37

Federal Election Commission Performance and Accountability Report 2008

1 

11710 Beltsville Drive 

Suite 300 

Calverton, MD 20705-3106 

tel: 301-931-2050 

fax: 301-931-1710 

www.cliftoncpa.com Offices in 17 states and Washington, DC

Independent Auditor’s Report 

To the Inspector General of the 

 Federal Election Commission 

We have audited the balance sheets of the Federal Election Commission (FEC) as of 

September 30, 2008 and 2007, and the related statements of net cost, changes in net position, 

budgetary resources, and custodial activity for the years then ended (hereinafter collectively 

referred to as the “financial statements”). These financial statements are the responsibility of 

FEC’s management. Our responsibility is to express an opinion on these financial statements 

based on our audits. 

We conducted our audits in accordance with auditing standards generally accepted in the 

United States of America; the standards applicable to financial audits contained in Government 

Auditing Standards, issued by the Comptroller General of the United States; and Office of 

Management and Budget (OMB) Bulletin No. 07-04, Audit Requirements for Federal Financial 

Statements, as amended. Those standards require that we plan and perform the audit to obtain 

reasonable assurance about whether the financial statements are free of material misstatement. 

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures 

in the financial statements. An audit also includes assessing the accounting principles used and 

significant estimates made by management, as well as evaluating the overall financial 

statements’ presentation. We believe our audits provide a reasonable basis for our opinion. 

In our opinion, the financial statements referred to above present fairly, in all material respects, 

the financial position of FEC as of September 30, 2008 and 2007, and its net cost, changes in 

net position, budgetary resources, and custodial activity for the years then ended in conformity 

with accounting principles generally accepted in the United States of America. 

In accordance with Government Auditing Standards, we have also issued our reports dated 

November 7, 2008 on our consideration of FEC’s internal control over financial reporting, and on 

our tests of FEC’s compliance with certain provisions of laws and regulations and other matters. 

The purpose of those reports is to describe the scope of our testing of internal control over 

financial reporting and compliance and the results of that testing, and not to provide an opinion 

on the internal control over financial reporting or on compliance. Those reports are an integral 

part of our audit performed in accordance with Government Auditing Standards and should be 

considered in assessing the results of our audit. 

The information in the Management’s Discussion and Analysis section is not a required part of 

the financial statements, but is supplementary information required by accounting principles 

generally accepted in the United States of America. We have applied certain limited procedures, 

which consisted principally of inquiries of management regarding the methods
38

Section III | Auditor’s Report and Financial Statements

2 

of measurement and presentation of this information. However, we did not audit this information 

and, accordingly, we express no opinion on it. 

Our audits were conducted for the purpose of forming an opinion on the financial statements 

taken as a whole. The information in the Message from the Chairman, Performance Section, 

and Other Accompanying Information is presented for purposes of additional analysis and is not 

required as part of the financial statements. This information has not been subjected to auditing 

procedures and, accordingly, we express no opinion on it.

Calverton, Maryland 

November 7, 2008 
39

Federal Election Commission Performance and Accountability Report 2008

Page 1 of 17 

Offices in 17 states and Washington, DC

11710 Beltsville Drive 

Suite 300 

Calverton, MD 20705-3106 

tel: 301-931-2050 

fax: 301-931-1710 

www.cliftoncpa.com

Independent Auditor’s Report on Internal Control Over Financial Reporting 

To the Inspector General of the 

 Federal Election Commission 

We have audited the financial statements of the Federal Election Commission (FEC) as of and 

for the year ended September 30, 2008 and have issued our report thereon dated 

November 7, 2008. We conducted our audit in accordance with the auditing standards generally 

accepted in the United States of America; the standards applicable to financial audits contained 

in Government Auditing Standards, issued by the Comptroller General of the United States; 

and, applicable provisions of Office of Management and Budget (OMB) Bulletin No. 

07-04, Audit Requirements for Federal Financial Statements, as amended. 

The management of FEC is responsible for establishing and maintaining internal control to 

achieve the objectives of effective and efficient operations, and reliable financial reporting. In 

planning and performing our audit, we considered FEC’s internal control over financial reporting 

as a basis for designing our audit procedures for the purpose of expressing our opinion on the 

financial statements and to comply with OMB Bulletin 07-04, as amended, but not for the 

purpose of expressing an opinion on the effectiveness of FEC’s internal control over financial 

reporting. We did not test all internal controls relevant to operating effectiveness as broadly 

defined by the Federal Managers’ Financial Integrity Act (FMFIA) (31 U.S.C. 3512), such as 

those controls relevant to ensuring efficient operations. Accordingly, we do not express an 

opinion on the effectiveness of FEC’s internal control over financial reporting. 

Our consideration of internal control over financial reporting was for the limited purpose 

described in the preceding paragraph and would not necessarily identify all deficiencies in 

internal control over financial reporting that might be significant deficiencies or material 

weaknesses. As discussed below, we identified certain deficiencies in internal control over 

financial reporting that we consider to be a material weakness and a significant deficiency. 

A control deficiency exists when the design or operation of a control does not allow 

management or employees, in the normal course of performing their assigned functions, to 

prevent or detect misstatements on a timely basis. A significant deficiency is a control 

deficiency, or combination of control deficiencies, that adversely affect the entity’s ability to 

initiate, authorize, record, process, or report financial data reliability in accordance with 

generally accepted accounting principles such that there is more than a remote likelihood that a 

misstatement of the entity’s financial statements that is more than inconsequential will not be 

prevented or detected by the entity’s internal control. We consider the deficiency in Information 

Technology described below to be significant deficiency in internal control over reporting. 

A material weakness is a significant deficiency, or combination of significant deficiencies, that 

results in more than a remote likelihood that a material misstatement of the financial statements 

will not be prevented or detected by the entity’s internal controls. 
40

Section III | Auditor’s Report and Financial Statements

Page 2 of 17 

Our consideration of the internal control over financial reporting was for the limited purpose 

described in the second paragraph of this section and would not necessarily identify all 

deficiencies in the internal control that might be significant deficiencies and, accordingly, would 

not necessarily disclose all significant deficiencies that are also considered to be material 

weakness. However, we believe that the significant deficiency in Financial Accounting and 

Reporting Controls described below is a material weakness. 

************************************* 

MATERIAL WEAKNESS 

I. Financial Accounting and Reporting Controls (Repeat Modified Finding) 

The Accountability of Tax Dollars Act of 2002 (ATDA) extends to FEC a requirement to 

submit to the Congress and the Director of the Office of Management and Budget (OMB) 

audited financial statements. OMB Circular A-136, Financial Reporting Requirements, 

defines the form and content of financial statements to be prepared by the agency. To 

accomplish the objective of complying with the ATDA, the agency is required to develop 

a system to prepare a complete set of financial statements on a timely basis in 

accordance with generally accepted accounting principles. The statements are to result 

from an accounting system that is an integral part of an integrated financial management 

system containing sufficient structure, effective internal control and reliable data. 

Financial reporting also consists of policies and procedures related to the processing 

and summarizing of accounting entries, and the preparation of financial statements. 

Below are descriptions of the control deficiencies within FEC’s financial reporting 

environment: 

A. Insufficient Resources and Personnel with Appropriate Federal Accounting 

and Reporting Skill Sets (New Finding) 

FEC did not have adequate resources and employees with appropriate skills sets to 

handle financial management accounting and reporting. There was turnover in key 

financial positions during the year and adequate resources were not always available 

to fill the vacancies. For example, the staff accountant position has been vacant 

since March 2008. This position is responsible for performing monthly reconciliations 

and calculating accrual and property, plant and equipment amounts reported on the 

financial statements. FEC has not developed a program to cross train other Office of 

Chief Financial Officer (OCFO) personnel in performing these tasks and contractors 

hired to perform some of these duties were done so intermittently throughout the 

year. As a result, the Accounting Officer had to take on some of these responsibilities 

leaving FEC with insufficient resources to effectively administer quality assurance 

procedures within their financial reporting environment. 

This deficiency was aggravated by the migration of the agency’s accounting and 

financial reporting operations to a service provider during FY 2008. FEC’s 

understanding of key processes, controls and reports utilized by the service provider 

is on-going and was not obtained timely enough to adequately assess associated 

control risks and develop or redesign internal controls to mitigate those risks. These 

deficiencies are key factors in many of the weaknesses in financial reporting as 

described further in this report. 
41

Federal Election Commission Performance and Accountability Report 2008

Page 3 of 17 

GAO Standards for Internal Control in the Federal Government states “People are 

what make internal control work. The responsibility for good internal controls rests 

with all managers. Management sets the objectives, puts the control mechanisms 

and activities in place, and monitors and evaluates the control. However, all 

personnel in the organization play important roles in making it happen”. Moreover, 

“All personnel need to possess and maintain a level of competence that allows them 

to accomplish their assigned duties, as well as understand the importance of 

developing and implementing good internal control. Management needs to identify 

appropriate knowledge and skills needed for various jobs and provide needed 

training, as well as candid and constructive counseling, and performance appraisals.” 

The need for employees with analytical and federal accounting and reporting 

competencies will only increase as FEC further integrates its financial management 

system. Without the adequate staffing levels and the proper skill sets, the FEC will 

continue to encounter challenges in the financial reporting process including 

preparing financial reports in a timely manner, and consistent with applicable laws 

and regulations. 

Recommendations: 

1. Fill vacant positions within the OCFO as soon as possible. Ensure that the 

individuals possess analytical, Federal accounting and financial reporting 

knowledge and experience to enhance the FEC’s ability to comply with 

accounting and financial reporting standards. 

2. Evaluate the resources and appropriate skills needed throughout the agency to 

meet FEC’s financial management and reporting responsibilities and implement a 

plan on achieving the results and recommendations of the evaluation. 

3. Ensure that appropriate and on-going training is provided to FEC employees on 

federal accounting and reporting and the accounting service provider’s financial 

system. Also, ensure OCFO personnel are properly cross-trained in department 

activities.

 

Management Response: 

Management generally concurs with the finding and recommendations. FEC 

management is committed to improving its internal control and accordingly, will 

develop a corrective action plan to address the issues identified. 

B. Inadequate Financial Statement Preparation and Reporting (Modified Repeat 

Finding) 

OMB Circular A-136, Financial Reporting Requirements, “preparation of the annual 

financial statements is the responsibility of the agency’s management. In carrying out 

this responsibility, each agency chief financial officer should prepare a policy bulletin 

or guidance memorandum that guides the agency’s fiscal and management 

personnel in the preparation of the annual financial statements.” The existence of 

written procedures will provide structure and accountability for the financial 
42

Section III | Auditor’s Report and Financial Statements

Page 4 of 17 

statements preparation and review processes. They also help ensure activities are 

carried out in accordance with management directives. 

Our audit disclosed the following control deficiencies in FEC’s financial statement 

preparation and reporting process. Many of these deficiencies were identified during 

the prior year audit. FEC’s audit follow-up process was ineffective in resolving these 

deficiencies in a timely manner. 

• FEC did not have a comprehensive policy bulletin or guidance memorandum as 

required by OMB Circular A-136. The lack of formalized policies and procedures 

is a contributing factor for the additional control deficiencies described below. 

• Accounting entries recorded in the accounting system or posted to the financial 

statements as “on-top” adjustments were not reviewed timely by FEC or the 

review was not independently performed by someone other than the preparer. 

Other controls in place such as management’s review of the financial statements 

were ineffective in detecting incorrect accounting entries made by the service 

provider. Further, an audit trail supporting the entry was not properly maintained. 

Lack or inadequate internal control increases the risk of financial statement 

misstatements. Our audit identified accounting posting errors related to the 

following transactions: 

3⁄4 The June 30, 2008 financial statements improperly included: 

o $1.5 million in accrued payroll costs; 

o $769,314 in advanced payments to GSA; 

o $41,530,546 in budget authority temporarily unavailable during the 

continuing resolution period; and 

o Accrued employer contributions and payroll taxes costs. 

3⁄4 The Draft September 30, 2008 financial statements provided included: 

o Approximately $2.6 million of collections from custodial activity in 

Fund Balance with Treasury and the Custodial Liability line items 

on the Balance Sheet improperly; and 

o Adjustments made by the service provider to the trial balance, 

after conversion, which impacted the Statement of Budgetary 

Resources for Expired Allotments were not sufficiently 

documented. 

• FEC has not established a formalized timeline for completing key processes and 

controls related to the financial statement process. For example, we noted that 

the Finance Office Checklist detailing month end closing and financial statement 

preparation procedures was not prepared throughout the year. Furthermore, 

control activities, such as fluctuation analysis and relationship testing, were not 

finalized until after the financial statements were issued to the auditors for audit. 

• A mechanism for tracking manual accounting entries sent to the service provider 

was not developed, which prevented FEC from being able to verify accounting 

entries were posted as intended or properly. 
43

Federal Election Commission Performance and Accountability Report 2008

Page 5 of 17 

As a result of the control deficiencies noted above, the financial statements provided 

for audit contained many inconsistencies, errors and typos throughout the document. 

We also noted that the financial statements provided were inconsistent with the 

guidance issued by OMB Circular A-136. Although the FEC has corrected all the 

items identified through the audit process, adequate controls were not in place to 

sufficiently detect such mistakes in a timely manner. 

Recommendations: 

4. Formalize and periodically update policies and procedures to a) ensure 

segregation of duties, b) provide guidance to management and staff in recording 

both recurring and unique transactions, including budgetary accounts, and c) 

provide guidance to management and staff in executing the financial statement 

preparation process in a manner that enhances the timeliness of financial 

statement preparation and minimizes the risk of preparing inaccurate financials. 

5. Implement control activities to help ensure accounting transactions are recorded 

correctly, timely and are properly reviewed and adequate support documentation 

is maintained. Some of these control activities should include, but not be limited 

to: 

• Improving analytical and quality control review of journal vouchers, 

reconciliations and the financial statements, including interim financial 

statements. Procedures should include independent supervisory review of 

controls performed by someone other than the preparer. 

• Developing management’s expectations for fluctuation analysis, which 

includes setting the criteria for variances considered significant. Each 

expectation that is not met should be researched and results collaborated by 

data. Analytical tools that could be used are ratio analysis and trend analysis, 

as well as predictive techniques such as calculation of an expected balance. 

Results should be documented and maintained for management review and 

audit purposes. 

• Implementing proper and timely cut-off controls from processing transactions 

and in preparing the financial statements to allow for management’s timely 

analysis of financial data and for audit purposes. 

• Researching the accounting treatment of unique and non-reoccurring 

transactions and seeking specific guidance from accounting standard-setters 

from the beginning to ensure the recording of such events are properly 

included in the financial statement account balances and to ensure accuracy 

and transparency of financial accountable events. 

6. Establish formalized policies and procedures for performing continuous 

assessment of risk factors associated with financial reporting, evaluating relevant 

controls and developing or redesigning controls to mitigate risks. These policies 

should include a well-defined documentation process that contains an audit trail, 

verifiable results, and specify retention periods so that someone not connected 

with the procedures can understand the assessment process. 

7. Enforce the use of the Finance Office Check List throughout the entire fiscal 

year. 
44

Section III | Auditor’s Report and Financial Statements

Page 6 of 17 

8. Establish a mechanism for tracking manual journal entries sent to the service 

provider and maintaining associated support documents. 

9. Develop or redesign controls that strengthen the accountability structure related 

to the process for resolving audit findings 

 

Management Response: 

Management generally concurs with the finding and recommendations. FEC 

management is committed to improving its internal control and accordingly, will 

develop a corrective action plan to address the issues identified. 

C. Integrate Financial Management System (Modified Repeat Finding) 

FEC utilizes the general ledger and core financial management system (general 

ledger system) of its accounting service provider. The general ledger system is not 

capable of generating most user reports for data analysis on a real time basis. Users 

have to request from the accounting service provider some basic reports, which are 

generated by another software application. 

Other financial management systems used at FEC include excel spreadsheets, 

database applications, and PeopleSoft (PS). These systems are used to accumulate 

and summarize data for the following financial transactions, all of which are material 

to FEC’s financial statements: 

• Collections, Accounts Receivable, and Custodial Liability specific to Fines 

and Penalties; 

• Property and equipment, accumulated depreciation, and depreciation 

expense; 

• Obligations; and 

• Payroll and time attendance reporting. 

None of these FEC financial management systems are interfaced with the general 

ledger system. OMB Circular No. A-127, Financial Management Systems, requires 

that each agency establish and maintain a single integrated financial management 

system. Without a single integrated financial management system to ensure timely 

and accurate financial data, poor policy decisions may occur due to inaccurate or 

untimely information. Managers are less likely to be able to report accurately to the 

President, Congress, and the public on Government operations in a timely manner. 

And, scarce resources are more likely to be directed toward the collection of 

information rather than to delivery of the intended programs. 

As a result of these systems not being integrated, significant time is required to 

compile the information. In addition to gathering the data from the offices, the OCFO 

manually incorporates the information into each stand alone system in order to 

generate the necessary documentation to support the balances reported on the 

financial statements. For example, the OCFO must request accounts receivable 

information from three divisions since there is no mechanism in place to 

automatically notify the OCFO that a fine or penalty was assessed. After the OCFO 

obtains the relevant information, which may not always be received in a timely 
45

Federal Election Commission Performance and Accountability Report 2008

Page 7 of 17 

manner, the data is keystroked into a database. A journal entry is prepared for 

submission to the service provider to record the details into the accounting system. 

Given the number of times the information is separately recorded into different 

systems, there is an increased risk for input error. A monthly reconciliation is 

performed of the accounts receivable, however, without the staff accountant, as 

mentioned above, the recording of transactions may not always occur timely or 

accurately. 

Another example where the lack of an integrated financial system impacts efficiency 

pertains to the recording of obligations. The FEC has improved its procurement 

operations from the prior year by converting to a web-based procurement system 

that requires all purchase requests to be processed electronically, which alleviates 

the duplication of entry in preparing the obligating document. However, the 

procurement system is not integrated to the financial management system. 

Therefore, several areas for error still exist. Specifically, the obligating document is 

provided via e-mail to the Finance Office for review and submission to the service 

provider. Should the Procurement Office forget to send the obligating document to 

the Finance Office, there is an increased risk that the obligation does not get 

recorded in a timely manner or at all. Once the Finance Office receives the obligating 

document, they then print the document to submit the hard copy document to the 

service provider. At this time, the FEC does not send the document to the service 

provider electronically. Therefore, this process further increases the risk that the 

obligation may not be recorded timely or at all. Finally, once the service provider 

receives the obligating document, they keystroke in the relevant financial information 

into the accounting system, providing for the opportunity for an input error. 

Having a single, integrated financial management system does not necessarily mean 

having only one software application within each agency covering all financial 

management system needs. Also, it does not mean that all information is physically 

located in the same database. Rather, a single, integrated financial management 

system is a unified set of financial systems linked together electronically in an 

efficient and effective manner to provide agency-wide financial system support. 

Integration means that the user is able to have one view into systems such that, at 

whatever level the individual is using the system, he or she can obtain needed 

information efficiently and effectively through electronic means. Interfaces are 

acceptable as long as the supporting detail is maintained and accessible to 

managers. Interface linkages must be electronic unless the number of transactions is 

so small that it is not cost beneficial to automate the interface. Easy reconciliations 

between systems, where interface linkages are appropriate, must be maintained to 

ensure data accuracy. 

Without these systems being integrated, controls surrounding the processing, 

recording and review of financial transactions become much more critical and require 

greater resources to ensure completeness and accuracy. FEC management 

continues to place its emphasis on the compilation of the financial and performance 

data, but due to the lack of resources it is not capable of sufficiently performing the 

reviews needed to alleviate the control risk associated with the lack of an integrated 

financial management system. 
46

Section III | Auditor’s Report and Financial Statements

Page 8 of 17 

Recommendation: 

10. Re-evaluate if interfacing its standalone financial management systems with the 

service provider’s system is feasible and/or cost effective. If not feasible and/or 

cost effective, consider the subsystems used by the service provider’s financial 

management systems. 

Management Response: 

Management generally concurs with the finding and recommendations. As of 

February 2008, the FEC transitioned the processing of its accounting transactions to 

an OMB-certified line of business provider. FEC management will evaluate its standalone financial management systems and develop a corrective action plan to 

address the issues identified. 

These deficiencies in internal control may adversely affect any decision by management that is 

based, in whole or in part, on information that is inaccurate because of these deficiencies. 

Unaudited financial information reported by FEC, including budget information, also may contain 

misstatements not prevented or detected because of these deficiencies. 

************************************* 

SIGNIFICANT DEFICIENCY 

II. Information Technology (IT) (Modified Repeat Finding) 

A. Commission-Wide Security Administration Needs To Be Enhanced (Repeat 

Finding) 

An entity-wide security management program should be in place to establish a 

framework and continuing cycle of activity to manage security risks, develop security 

policies, assign responsibilities, and monitor the adequacy of computer security 

related controls. It should also represent the foundation for an entity’s security control 

structure and a reflection of senior management’s commitment to addressing 

security risks. 

During our Fiscal Year 2008 review of FEC’s security program, we noted that FEC 

made progress in addressing prior years’ findings, notably a contract was awarded 

on September 16, 2008 to certify and accredit its major applications and general 

support systems. Also, FEC had developed its Disaster Recovery Plan. However, 

continued efforts are required especially in the areas of security administration and 

oversight. Specifically, we noted that FEC had not fully implemented all security 

procedures and standards; had not finalized and implemented an information 

classification policy; had not finalized and implemented its certification and 

accreditation policy. Furthermore, FEC is currently in the process of developing a 

security plan for its Local Area Network (LAN) that incorporates the results of the 

LAN Risk Assessment 
47

Federal Election Commission Performance and Accountability Report 2008

Page 9 of 17 

Office of Management and Budget (OMB) Circular No. A-130, Appendix III Security 

of Federal Automated Information Resources, requires agencies to implement and 

maintain a program to assure that adequate security is provided for all agency 

information collected, processed, transmitted, stored, or disseminated in general 

support systems and major applications. 

Without an effective entity-wide security program plan, FEC has an increased risk 

that security controls are inadequate and inconsistently applied. Such conditions may 

lead to insufficient protection of sensitive data and high expenditures for controls 

over low risk resources. 

At the time of this review, FEC’s existing security program revealed weaknesses in 

controls that expose the FEC’s financial management systems and data to 

unauthorized access and/or modification. Security weaknesses noted included: 

• FEC has not fully implemented a framework of policies and standards to mitigate 

risks associated with the management of its information resources. Although 

FEC has implemented the majority of its information security policies, it has not 

fully implemented all of the related procedures and standards. FEC has not 

finalized and implemented an information classification policy, as well as its 

certification and accreditation policy. (Repeat Finding)

• FEC is currently in the process of developing a security plan for its LAN that 

incorporates the results of the LAN Risk Assessment. However, the security plan 

is still in the development phase and has not been finalized and approved. 

(Repeat Finding)

• There are weaknesses in FEC’s program for the continuous monitoring and 

evaluation of the computer security policy and control effectiveness. FEC does 

not utilize corrective action plans for all internal reviews of security controls. 

(Repeat Finding)

• Major applications and mission critical general support systems have not been 

certified and accredited to ensure that they are operating according to FEC’s 

security requirements. (Repeat Finding).

• There is currently no process in place to ensure that contractors undergo 

background investigations before obtaining access to FEC systems or data. 

(Repeat Finding)

• The PeopleSoft application is currently running on an Oracle Release 8i 

Relational Database Management System that is no longer supported by the 

vendor. (Repeat Finding)

Recommendations: 

11. Finalize and implement FEC’s information classification policy and certification 

and accreditation policy along with any accompanying standards. 

 

12. Incorporate the results of risk assessments into FEC security plans. 

13. Utilize corrective action plans for all reviews of security controls whether 

performed internally or by a third-party. 
48

Section III | Auditor’s Report and Financial Statements

Page 10 of 17 

14. Certify and accredit all major applications and mission critical general support 

systems. 

15. Implement a process to ensure that background investigations are performed on 

all contractors prior to granting them access to FEC system resources. 

16. FEC should move all of its PeopleSoft financial processing capabilities to GSA or 

update its existing platform to vendor-supported versions/releases. 

Management Response: 

FEC agrees with the majority of elements within this finding. The FEC awarded a 

contract to certify and accredit its major applications and general support systems on 

September 16, 2008. On September 23, 2008 a formal Kick-Off meeting was held to 

formally begin work on the contract. Since that time the vendor has provided the 

Contracting Officer Technical Representative (COTR) with an updated project plan 

that describes how and when certification and accreditation objectives are to be 

achieved. The vendor is currently updating system characterizations and performing 

a system classification for each major application and general support system. The 

Certification and Accreditation contract specifies line items to address the following 

issues identified within this finding: 

• Finalizing and implementing a modified certification and accreditation and 

information classification policies. 

• Updating current security plans by incorporating the results of the recently 

completed risk assessment. 

• Developing a Program of Actions and Milestones to monitor and evaluate the 

internal review of security controls. 

• Certify and Accredit FEC major applications and general support systems. 

On September 29, 2008 the Director of Human Resources addressed the issue of 

contractor background investigations by issuing the following policy “that all 

contracting personnel from this date forward (September 29, 2008) must obtain a 

background investigation prior to obtaining access to FEC systems.” 

With respect to Oracle 8i, due to legacy issues associated with some FEC 

applications the current version of Oracle 8i is required. Although the vendor no 

longer provides support for this version of Oracle it does provide limited support 

which includes assisting customers with work-arounds to issues that may arise. In 

addition the FEC has built a considerable amount of experience and internal 

expertise over the years this product has been in its inventory. In addition to its 

considerable experience, the FEC has tested and maintains Oracle 8i application 

and data backups allowing it to restore any databases to a usable state in the event 

of any mishap. 

The FEC recognizes the risk associated with maintaining a product with limited 

support. Accordingly the FEC is relying upon its considerable internal expertise, 

restricted access to only a few persons, backup and restoral capabilities and 

Oracle’s limited support as compensating factors until the application can be 

removed from its inventory. 
49

Federal Election Commission Performance and Accountability Report 2008

Page 11 of 17 

B. Disaster Recovery and Continuity of Operations Plan Need to be Developed 

(Repeat Finding) 

Losing the capability to process and protect information maintained on FEC’s 

computer systems can significantly impact FEC’s ability to accomplish its mission. 

The purpose of disaster recovery and continuity of operations controls is to ensure 

that, when unexpected events occur, critical operations continue without interruption 

or critical operations are promptly resumed. To achieve this objective, FEC should 

have procedures in place to protect information resources and minimize the risk of 

unplanned interruptions and a plan to recover critical operations should interruptions 

occur. These plans should consider activities performed at FEC’s general support 

facilities (e.g. FEC’s local area network, wide area network, and telecommunications 

facilities), as well as the activities performed by users of specific applications. To 

determine whether the disaster recovery plans will work as intended, FEC should 

establish and periodically test the capability to perform its functions in disaster 

simulation exercises. 

Our review of the service continuity controls identified that FEC has not developed a 

Continuity of Operations Plan (COOP) to support the continuation of its core mission 

in the event of a disaster or other interruption that renders the FEC’s facilities 

unusable. (Repeat Finding)

Recommendation: 

17. Develop and implement a Disaster Recovery Continuity of Operations Plan 

(COOP). 

Management Response: 

Management agrees with the issue presented in this finding, and in fiscal year 2008 

implemented a multiple year three phase project plan to develop and implement a 

FEC-Wide Continuity of Operations Plan (COOP). Phase One consisted of 

developing an Office of Information Technology (OIT) Disaster Recovery Plan (DRP), 

Phase Two (Kick Off Meeting September 29, 2008) consists of preparing for the 

migration of the OIT DRP into a COOP, and Phase Three consists of implementing a 

Commission wide COOP. Bear in mind that, Phase Three is contingent upon 

receiving adequate funding and senior management support. 

C. Logical Access Control Needs to be Strengthened (Modified Repeat Finding) 

Achieving an adequate level of information protection is highly dependent upon 

consistently maintaining effective access controls, system software and configuration 

management controls. Access controls limit and monitor access to computer 

resources (i.e., data files, application programs, and computer-related facilities and 

equipment) to the extent necessary to provide reasonable assurance that these 

resources are protected against waste, loss, unauthorized modification, disclosure, 

or misappropriation. Access controls include logical controls, such as security 

software programs designed to prevent or detect unauthorized access to sensitive 

files. Without proper controls, there is a risk that security features could be 

inadvertently or deliberately omitted or "turned off" or that processing irregularities or 

malicious code could be introduced. 
50

Section III | Auditor’s Report and Financial Statements

Page 12 of 17 

Our testing of internal controls identified a weakness related to the information 

protection in FEC’s information systems environment. These include FEC’s midrange 

computer systems (e.g. servers) and applications. Weaknesses noted include the 

following: 

We noted the following control weaknesses over monitoring access to FEC’s 

networks, systems and physical facility: 

o 4 out of 10 separated employees still have active network accounts; and 

o There is currently no exit clearance process in place for contractors to 

ensure that all FEC property is returned and all access permissions are 

removed. 

 

Recommendations: 

18. FEC should promptly terminate access to FEC resources for separated 

employees. Procedures should be documented and implemented to coordinate 

separations between Human Resources and IT management to ensure user 

accounts are immediately disabled upon termination. 

19. Implement an exit clearance process to track separated FEC contractors and 

ensure that their access permissions are removed and all FEC property has been 

returned. 

Management Response: 

Although the FEC has a documented process in place to terminate FEC resources 

and collect property from separated employees and contractors, it concurs that this 

process can be improved. To this end, the FEC has established a working group to 

implement more stringent procedures to ensure that network access is appropriately 

curtailed. In addition OIT will soon be implementing an automated information 

system to better deal with the issues identified in this finding. The New FEC Access 

System (FAS) includes processes for full time employees, interns, and contractors 

and will eliminate the discrepancies described in this finding. FAS will track staff and 

contractors from the start of their employment or contract at the Commission to exit 

and allow managers to request and document changes in network and application 

access. FAS will enable a higher degree of coordination among offices to ensure that 

user accounts are disabled and equipment is properly returned per FEC policy. FAS 

will retain all historical information regarding; account creation, changes to access 

rights, system resources, and termination information regarding a particular staff or 

contractor. FAS is now in the final testing stages and is tentatively scheduled for full 

implementation by December 1, 2008. 

III. Other Matter 

As required by OMB Bulletin No. 07-04, as amended, we compared the material weaknesses 

disclosed during the audit with those material weaknesses reported in the FEC’s FMFIA report 

that relate to control over financial reporting. Our audit identified a material weakness related to 

the financial statement preparation and reporting as reported above that was not included in the 

FEC’s FMFIA report. 
51

Federal Election Commission Performance and Accountability Report 2008

Page 13 of 17 

IV. Status of Prior Year Conditions 

We have reviewed the status of the FEC’s corrective actions with respect to the findings and 

recommendations from the prior year’s report on internal controls. We have attached Appendix 

A to our report that presents the status of prior year findings and recommendations. 

******************************** 

FEC's response to the material weakness and significant deficiency identified in our audit is 

presented within the body of our report. We did not audit the FEC's response and, accordingly, 

we express no opinion on it. 

In addition to the material weakness and significant deficiency described above, we noted 

certain matters involving internal control and its operation that we reported to the management 

of the FEC in a separate letter dated November 7, 2008. 

This report is intended solely for the information and use of the management of the FEC, the 

FEC Office of Inspector General, Government Accountability Office, the OMB, and the U.S. 

Congress, and is not intended to be and should not be used by anyone other than these 

specified parties. 

Calverton, Maryland 

November 7, 2008 
52

Section III | Auditor’s Report and Financial Statements

APPENDIX A 

FEDERAL ELECTION COMMISSION 

STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS 

September 30, 2008

Page 14 of 15 

PY Rec. 

No. 

Condition/Audit 

Area Recommendation Current Status 

Material Weakness

I. Integrated Financial Management System

1. Integrated 

Financial 

Management 

System 

Assess the extent of financial 

management system integration 

needed for existing systems while 

outsourcing the accounting 

operations to a third party service 

provider. 

Recommendation 

closed. 

2. Integrated 

Financial 

Management 

System 

Implement control activities to 

compensate for the lack of an 

integrated financial management 

system and to ensure that 

accounting transactions are 

recorded correctly, timely reviewed 

and with adequate supporting 

documentation. Some of these 

controls activities should include, but 

not limited to: 

• Improving preparation and 

review of procurement 

documents, including purchase 

requests, purchase 

orders/contracts, and related 

supporting documentation; 

• Improving analytical and quality 

control review of journal 

vouchers, reconciliations and the 

financial statements, including 

interim financial statements; 

• Implementing proper and timely 

cut-off controls for processing 

transactions and in preparing the 

financial statements to allow for 

management’s timely analysis of 

financial data and for audit 

purposes; and 

• Establish a timeline for timely 

receipt of completed accounts 

receivable schedules by the 

finance office from the program 

offices. 

Recommendation 

open: reported in FY 

2008 as a material 

weakness. 

3. Integrated 

Financial 

Management 

System 

Ensure that the general ledger setup 

and posting model definitions are in 

compliance with the latest 

transaction posting consistent with 

USSGL guidance and policies for 

Recommendation 

closed. 
53

Federal Election Commission Performance and Accountability Report 2008

APPENDIX A 

FEDERAL ELECTION COMMISSION 

STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS 

September 30, 2008 

Page 15 of 17 

PY Rec. 

No. 

Condition/Audit 

Area Recommendation Current Status 

recording and classifying 

transactions. 

4. Integrated 

Financial 

Management 

System 

Provide employee training on 

procurement, appropriation law, 

budget execution, and financial 

reporting, as applicable to ensure 

financial reporting and fund control 

policies are consistently and 

accurately executed. 

Recommendation 

open: reported in FY 

2008 as a material 

weakness. 

5. Integrated 

Financial 

Management 

System 

Ensure that FEC complies with 

regulatory agencies’ reporting 

requirements. 

Recommendation 

updated: reported in 

FY 2008 management 

letter 

Significant Deficiencies 

II. Information Technology

6. Security 

Administration 

Perform risk assessments, as part of 

FEC’s overall strategy to mitigate 

risks associated with its IT 

environment. 

Recommendation 

closed

7. Security 

Administration 

Finalize and implement FEC’s 

information classification policy and 

certification and accreditation policy 

along with any accompanying 

standards. 

Recommendation 

open: reported in FY 

2008 as a significant 

deficiency. 

8. Security 

Administration 

Incorporate the results of risk 

assessments into FEC security 

plans. 

Recommendation 

open: reported in FY 

2008 as a significant 

deficiency. 

9. Security 

Administration 

Certify and accredit all major 

applications and mission critical 

general support systems. 

Recommendation 

open: reported in FY 

2008 as a significant 

deficiency. 

10. Security 

Administration 

Refine procedures to ensure that all 

newly hired employees undergo the 

appropriate background 

investigations commensurate with 

the risk level of their position. FEC 

should also ensure these 

investigations are initiated within a 

reasonable time of employment start 

date. 

Recommendation 

closed. 

Re-opened in FY 2008 

for New Contractors 

11. Disaster recovery 

& Continuity of 

Operations 

Perform a BIA to formally identify 

and prioritize all critical data and 

operations on FEC’s networks and 

the resources needed to recover 

them if there is a major interruption 

Recommendation 

closed
54

Section III | Auditor’s Report and Financial Statements

APPENDIX A 

FEDERAL ELECTION COMMISSION 

STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS 

September 30, 2008 

Page 16 of 17 

PY Rec. 

No. 

Condition/Audit 

Area Recommendation Current Status 

or disaster. 

12. Disaster recovery 

& Continuity of 

Operations 

Establish an alternate processing 

site and incorporate the results of 

the BIA into the contingency plan. 

Recommendation 

closed

13. Disaster recovery 

& Continuity of 

Operations 

Develop a comprehensive 

contingency plan that incorporates 

the results of the BIA and includes 

the procedures and resources 

necessary to restore FEC systems in 

the event of a disaster. Ensure 

emergency processing priorities are 

established to assist in managing 

disaster situations, and ensure once 

developed, the plan is tested 

annually and updated based on the 

results of these tests. 

Recommendation 

closed

14. Disaster recovery 

& Continuity of 

Operations 

Develop a COOP that addresses 

measures and procedures to follow 

in the event of a long-term 

interruption. 

Recommendation 

open: reported in FY 

2008 as a significant 

deficiency. 

15. Logical Access, 

System Software 

and Change 

Management 

Controls 

Transfer processing to a service 

provider or update existing platform 

to vendor-supported 

versions/releases. 

Recommendation 

open: reported in FY 

2008 as a significant 

deficiency. 

16. Logical Access, 

System Software 

and Change 

Management 

Controls 

Write audit trails related to DBA 

activity to Operating Systems logs 

and limit DBA’s access to these logs.

Recommendation 

closed

17. Logical Access, 

System Software 

and Change 

Management 

Controls 

Maintain documentation to support 

the testing and approval of system 

software changes. 

Recommendation 

closed

18. Logical Access, 

System Software 

and Change 

Management 

Controls 

Develop additional mitigating 

controls to ensure that PeopleSoft 

passwords are in agreement with 

FEC policy or ensure that if 

PeopleSoft processing is 

outsourced, the third party maintains 

password controls that comply with 

FEC password policies. 

Recommendation 

closed

19. Logical Access, 

System Software 

Promptly terminate access to FEC 

resources for separated employees. 

Recommendation 

open: reported in FY 
55

Federal Election Commission Performance and Accountability Report 2008

APPENDIX A 

FEDERAL ELECTION COMMISSION 

STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS 

September 30, 2008 

Page 17 of 17 

PY Rec. 

No. 

Condition/Audit 

Area Recommendation Current Status 

and Change 

Management 

Controls 

Procedures should be documented 

and implemented to coordinate 

separations between Human 

Resources and IT management to 

ensure user accounts are 

immediately disabled upon 

termination. 

2008 as a significant 

deficiency. 

20. Logical Access, 

System Software 

and Change 

Management 

Controls 

Utilize access request forms that 

identify the user’s access level to 

document user access rights to all 

FEC systems and facilities. 

Additionally, FEC should periodically 

review and recertify user access to 

ensure current access is 

commensurate with job 

responsibilities. 

Recommendation 

closed
56

Section III | Auditor’s Report and Financial Statements

1 

11710 Beltsville Drive 

Suite 300 

Calverton, MD 20705-3106 

tel: 301-931-2050 

fax: 301-931-1710 

www.cliftoncpa.com Offices in 17 states and Washington, DC

Independent Auditor’s Report on Compliance and Other Matters 

To the Inspector General of the 

 Federal Election Commission 

We have audited the financial statements of the Federal Election Commission (FEC) as of, and 

for the year ended September 30, 2008, and have issued our report thereon dated November 7, 

2008. We conducted our audit in accordance with the auditing standards generally accepted in 

the United States of America; the standards applicable to financial audits contained in 

Government Auditing Standards, issued by the Comptroller General of the United States; and 

Office of Management and Budget (OMB) Bulletin 07-04, Audit Requirements for Federal 

Financial Statements, as amended. 

The management of FEC is responsible for complying with laws and regulations, and 

government-wide policies applicable to FEC. As part of obtaining reasonable assurance about 

whether FEC’s financial statements are free of material misstatements, we performed tests of 

FEC’s compliance with certain provisions of laws and regulations, and government-wide 

policies, non-compliance with which could have a direct and material effect on the determination 

of financial statement amounts and certain other laws and regulations specified in OMB Bulletin 

07-04, as amended. We limited our tests of compliance to these provisions and we did not test 

compliance with all laws and regulations applicable to FEC. Providing an opinion on compliance 

with certain provisions of laws and regulations, and government-wide policies was not an 

objective of our audit, and, accordingly, we do not express such an opinion. 

The results of our tests of compliance with applicable laws and regulations, and governmentwide polices described in the preceding paragraph disclosed an instance of reportable 

noncompliance that is required to be reported under U.S. generally accepted government 

auditing standards or OMB guidance and is described in the following paragraphs. 

The Federal Managers' Financial Integrity Act (FMFIA) 

The FMFIA requires agencies to establish management controls over their programs and 

financial systems as stated in the following sections of the Act: 

• Section 2 seeks to assess internal controls necessary to ensure obligations and costs are in 

compliance with applicable law; funds, property, and other assets are safeguarded against 

waste, loss, unauthorized use, or misappropriation; and revenues and expenditures are 

properly recorded and accounted for to permit the preparation of accounts and reliable 

financial and statistical reports. 

• Section 4 seeks to assess nonconformance with government-wide financial systems 

requirements. 
57

Federal Election Commission Performance and Accountability Report 2008

2 

OMB Circular A-123, Management’s Responsibility for Internal Control, is issued under the 

authority of the FMFIA (section 2). OMB Circular A-123 states that management is responsible 

for establishing and maintaining internal control to achieve the objectives of effective and 

efficient operations, reliable financial reporting, and compliance with applicable laws and 

regulations. Management shall consistently apply the internal control standards to meet each of 

the internal control objectives and to assess the internal control effectiveness. 

OMB Circular A-127, Financial Management Systems, offers guidance in implementing FMFIA 

(section 4). OMB Circular A-127 requires that “Financial management systems shall be 

designed to provide for effective and efficient interrelationships between software, hardware, 

personnel, procedures, controls, and data contained within the systems”. 

The FEC has not fully complied with certain requirements of the FMFIA. See details in our 

Independent Auditor’s Report on Internal Control, Sections I and II. The key items we identified 

include: 

• Insufficient resources and personnel with appropriate Federal accounting and reporting skill 

sets; 

• Inadequate financial statement preparation and reporting controls; 

• Financial management systems not fully integrated; and 

• Weaknesses in information technology. 

This report is intended solely for the information and use of the management of FEC, FEC 

Office of Inspector General, GAO, OMB and Congress, and is not intended to be and should not 

be used by anyone other than these specified parties. 

Calverton, Maryland 

November 7, 2008 
58

Section III | Auditor’s Report and Financial Statements

The accompanying notes are an integral part of these statements.

Assets (Note 2) 2008 2007

Intragovernmental:

Fund balance with Treasury (Note 3) $ 10,603,627 $ 10,250,297

Total Intragovernmental 10,603,627 10,250,297

Accounts receivable, net (Notes 2 & 4) 530,187 817,309

General property and equipment, net (Note 5) 7,714,712 7,745,134

Advances to others 898 6,927

Total assets $ 18,849,424 $ 18,819,667

Liabilities (Note 6)

Intragovernmental:

Accounts payable $ 84,455 $ –

Employer contribution and payroll taxes payable 412,450 297,573

Custodial liability 530,187 807,032

Deferred rent 783,538 –

Payable to Treasury – 10,277

Total Intragovernmental 1,810,630 1,114,882

With the public:

Accounts payable 1,775,054 901,977

Accrued payroll and benefits 1,468,908 1,143,513

Unfunded leave 2,161,272 1,964,478

Other 2,712 663

Total liabilities 7,218,576 5,125,513

Net Position

Unexpended appropriations 6,866,188 7,912,472

Cumulative results of operations 4,764,660 5,781,682

Total net position 11,630,848 13,694,154

Total liabilities and net position $ 18,849,424 $ 18,819,667

BALANCE SHEET

As of September 30, 2008 and 2007 (in Dollars)
59

Federal Election Commission Performance and Accountability Report 2008

The accompanying notes are an integral part of these statements.

STATEMENT OF NET COST

For the Years Ended September 30, 2008 and 2007 (in Dollars)

Program costs: 2008 2007

Administering and Enforcing the FECA:

Gross Costs $ 62,024,007 $ 56,599,698

Less: Earned revenue – (222,137)

Net cost of operations (Note 9) $ 62,024,007 $ 56,377,561
60

Section III | Auditor’s Report and Financial Statements

The accompanying notes are an integral part of these statements.

STATEMENT OF CHANGES IN NET POSITION

For the Years Ended September 30, 2008 and 2007 (in Dollars)

2008 2007

Consolidated 

Total

Consolidated 

Total

Cumulative Results of Operations:

Beginning balance $ 5,781,682 $ 6,808,109

Beginning balance, as adjusted 5,781,682 6,808,109

Budgetary Financing Sources:

Appropriations used 58,873,362 53,029,611

Transfers in/out without reimbursement – (10,277)

Other Financing Sources (Non-Exchange):

Imputed financing from costs absorbed by others 2,133,623 2,331,800

Total Financing Sources 61,006,985 55,351,134

Net Cost of Operations (62,024,007) (56,377,561)

Net Change (1,017,022) (1,026,427)

Cumulative Results of Operations 4,764,660 5,781,682

Unexpended Appropriations:

Beginning balance $ 7,912,472 $ 7,289,060

Beginning balance, as adjusted 7,912,472 7,289,060

Budgetary Financing Sources:

Appropriations received 59,224,000 54,527,516

Other adjustments (1,396,922) (874,493)

Appropriations used (58,873,362) (53,029,611)

Total Budgetary Financing Sources (1,046,284) 623,412

Total Unexpended Appropriations 6,866,188 7,912,472

Net Position $ 11,630,848 $ 13,694,154
61

Federal Election Commission Performance and Accountability Report 2008

STATEMENT OF BUDGETARY RESOURCES

For the Years Ended September 30, 2008 and 2007 (in Dollars)

2008 2007

Budgetary Resources (Note 10)

Unobligated balance, brought forward, October 1 $ 2,828,858 $ 2,078,695

Recoveries of prior year obligations 793,729 1,352,281

Budget authority:

Appropriations received 59,224,000 54,527,516

Earned

Collected 2,985 211,860

Accounts receivable – 10,277

Subtotal 59,226,985 54,749,653

Transfer in/out without reimbursement – (10,277)

Permanently not available (1,396,922) (874,493)

Total Budgetary Resources $ 61,452,650 $ 57,295,859

Status of Budgetary Resources

Obligations Incurred

Direct $ 59,491,212 $ 54,255,141

Reimbursable – 211,860

Total Obligations Incurred 59,491,212 54,467,001

Unobligated balance

Apportioned 426,366 220,350

Total Unobligated Balance 426,366 220,350

Unobligated balance not available 1,535,072 2,608,508

Total Status of Budgetary Resources $ 61,452,650 $ 57,295,859

Change in Obligated Balance

Obligated balance, net

Unpaid obligations, brought forward, October 1 $ 7,420,596 $ 7,521,417

Obligations incurred, net 59,491,212 54,467,001

Gross outlays (57,475,890) (53,215,541)

Recoveries of prior year unpaid obligations, actual (793,729) (1,352,281)

Obligated balance, net, end of period

Unpaid obligations 8,642,189 7,420,596

Total, unpaid obligated balance, net, end of period 8,642,189 7,420,596

Net Outlays 

Gross outlays 57,475,890 53,215,541

Offsetting collections (2,985) (222,137)

Distributed offsetting collections – (215,677)

Net Outlays $ 57,472,905 $ 52,777,727

The accompanying notes are an integral part of these statements.
62

Section III | Auditor’s Report and Financial Statements

2008 2007

Revenue Activity:

Sources of Cash Collections:

Miscellaneous Receipts $ 95,262 $ 215,677

Civil Penalties 2,428,750 4,135,632

Administrative Fees 58,496 393,669

Total Cash Collections 2,582,508 4,744,978

Accrual Adjustments (276,843) 286,560

Total Custodial Revenue (Note 11) $ 2,305,665 $ 5,031,538

Disposition of Collections:

Transferred to Treasury $ 2,582,508 $ 4,744,978

Increase/(decrease) in amounts to be transferred (276,843) 286,560

Total Disposition of Collections $ 2,305,665 $ 5,031,538

Retained by FEC $ – $ –

Net Custodial Activity $ – $ –

STATEMENT OF CUSTODIAL ACTIVITY

For the Years Ended September 30, 2008 and 2007 (in Dollars)

The accompanying notes are an integral part of these statements.
63

Federal Election Commission Performance and Accountability Report 2008

Note 1 – Summary of Significant Accounting Policies

Reporting Entity

The Federal Election Commission (FEC or Commission) was created in 1975 as an independent regulatory 

agency with exclusive responsibility for administering, enforcing, defending and interpreting the Federal Election 

Campaign Act (FECA) 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) (“the Act”). The Commission is also responsible for administering 

the public funding programs (26 U.S.C.) for presidential campaigns and conventions, which includes certification 

and audits of all participating candidates and committees, and enforcement of public funding legislation.

The financial activity presented relates primarily to the execution of the FEC congressionally approved budget. 

Consistent with Federal Accounting Standards Advisory Boards’ (FASAB) Statement of Federal Financial 

Accounting Concept No. 2, “Entity and Display,” the Presidential Election Campaign Fund (“the fund”) is not 

a reporting entity of the FEC. Financial activity of the funds is budgeted, apportioned, recorded, reported and 

paid by the Department of Treasury, and therefore, the accounts of the Presidential Election Campaign Fund are 

not included in the FEC’s financial statements.

Basis of Accounting and Presentation

As required by the Accountability of Tax Dollars Act of 2002, the accompanying financial statements present the 

financial position, net cost of operations, changes in net position, budgetary resources, and custodial activity 

of the FEC. While these financial statements have been prepared from the books and records of the FEC in 

accordance with U.S. generally accepted accounting principles (GAAP) and in accordance with the form and 

content for entity financial statements specified by the Office of Management and Budget (OMB) in Circular 

A-136, as revised, Financial Reporting Requirements, as well as the accounting policies of the FEC, the statements 

may differ from other financial reports submitted pursuant to OMB directives for the purpose of monitoring 

and controlling the use of the FEC’s budgetary resources. Generally Accepted Accounting Principles for federal 

entities are the standards prescribed by the Federal Accounting Standards Advisory Board (FASAB), which is the 

official body for setting the accounting standards of the federal government.

These financial statements reflect both accrual and budgetary accounting transactions. Under the accrual method 

of accounting, revenues are recognized when earned and expenses are recognized when a liability is incurred, 

without regard to receipt or payment of cash. Budgetary accounting is designed to recognize the obligation of 

funds according to legal requirements. Budgetary accounting is essential for compliance with legal constraints and 

controls over the use of Federal funds.

Throughout these financial statements, assets, liabilities, revenues, and costs have been classified according to the 

type of entity with which the transactions are associated. Intra-governmental assets and liabilities are those from 

or to other federal entities. Intra-governmental earned revenues are collections or accruals of revenue from other 

federal entities and intra-governmental costs are payments or accruals to other federal entities. These statements 

Notes to the Financial Statements
64

Notes to the Financial Statements 

should be read with the understanding that they are for a component of the US. Government, a sovereign 

entity.

Assets

Assets that an entity is authorized to use in its operations are termed entity assets, while assets that are held by an 

entity and are not available for the entity’s use are termed non-entity assets. Most of the FEC’s assets are entity 

assets and are available to carry out the mission of the FEC, as appropriated by Congress. FEC also has non-entity 

assets, which primarily consist of receipts from fines. These funds are not available to use in its operations and 

must be transferred to the U.S. Treasury. 

Fund Balance with Treasury

FEC does not maintain cash in commercial bank accounts. The U.S. Treasury processes cash receipts and 

disbursements. Funds with the U.S. Treasury consist of appropriated, deposited funds, and custodial collections. 

With the exception of the custodial collections, these funds are available to pay current liabilities and finance 

authorized purchase commitments. Custodial collections, which are not available to finance FEC activities, are 

classified as non-entity assets.

Accounts Receivable

FEC’s accounts receivable represent amounts due from the public for fines and penalties assessed by FEC and 

referred to Treasury for collection. FEC establishes an allowance for the loss on accounts receivable from the 

public that are deemed uncollectible accounts, which is included in Accounts Receivable, net on the balance sheet. 

The allowance is a percentage of the overall receivable balance based on the collection rate of past balances. 

General Property and Equipment

General Property and Equipment (P&E) is reported at acquisition cost. The capitalization threshold is 

established at $25,000 and a useful life of 2 or more years. For bulk purchases, items are capitalized when the 

individual useful lives are at least two years and have an aggregate value of $250,000 or more. The bulk purchase 

capitalization threshold is a new policy that was implemented in FY 2007. Acquisitions of P&E that do not 

meet the capitalization criteria are recorded as operating expenses. General P&E consists of items that are used 

by FEC to support its mission. Depreciation on these assets is calculated using the straight-line method with no 

salvage value. Depreciation begins the month after the asset is placed in service. Maintenance, repairs and minor 

renovations are expensed as incurred. Expenditures that materially increase values, change capacities or extend 

useful lives are capitalized. 

The headquarters building in which the FEC operates is leased through the General Services Administration 

(GSA) under an occupancy agreement, which manages the lease agreement between the Federal government and 

the commercial entity. FEC is billed by GSA for the leased space based upon estimated lease payments made by 

GSA plus an administrative fee. The cost of the headquarters building is not capitalized. The costs of any leasehold 

improvements, which are managed through GSA, are financed with FEC appropriated funds. Construction costs 

of $25,000 or more are accumulated as Construction in Progress until completion and then are transferred and 

capitalized as a Leasehold Improvement over 7 years or the remainder of the lease, whichever is less. 

Internal use software development and acquisition costs of $25,000 are capitalized as software development in 

progress until the development stage is completed and the software successfully tested. At acceptance, software 

development-in-progress costs are reclassified as internal use software costs and amortized using the straightline method over an estimated useful life of 5 years. Purchased commercial software that does not meet the 

capitalization criteria is expensed. Enhancements which do not add significant new capability or functionality 

are expensed. 
65

Federal Election Commission Performance and Accountability Report 2008

Liabilities

Liabilities represent amounts that are likely to be paid by the FEC as the result of transactions or events that 

have already occurred; however, no liabilities are paid by the FEC without an appropriation. Intragovernmental 

liabilities arise from transactions with other Federal entities. Liabilities classified as not covered by budgetary 

resources are liabilities for which appropriations have not been enacted (e.g., annual leave benefits and actuarial 

liability under the Federal Employees Compensation Act), and liabilities resulting from the agency’s custodial 

activities. FEC also has an intragovernmental liability to the U.S.Treasury for fines and miscellaneous receipts 

collected from the public but not yet transferred. These funds may not be used to fund FEC operations.

Accounts Payable

Accounts payable consist of liabilities to other entities or persons for amounts owed for goods, services, and other 

expenses received but not yet paid at the end of the fiscal year. Accounts payable also consist of disbursements in 

transit recorded by FEC but not paid by the U.S. Treasury.

Accrued Payroll and Benefits

Accrued payroll and benefits represents salaries, wages and benefits earned by employees, but not disbursed as 

of September 30, 2008. Accrued payroll and benefits are payable to employees and are therefore not classified as 

intragovernmental.

Annual, Sick and Other Leave

Annual leave is recorded as a liability when it is earned; the liability is reduced as leave is taken. Each quarter, the 

balance in the leave accrued leave account is adjusted to reflect the current leave balances and pay rates. Accrued 

annual leave is paid from future funding sources and accordingly is reflected as a liability not covered by budgetary 

resources. Sick leave and other types of non-vested leave are expensed as taken.

Federal Employee Benefits

A liability is recorded for estimated and actual future payments to be made for workers’ compensation pursuant 

to the Federal Employees Compensation Act (FECA). The liability consists of the net present value of estimated 

future payments calculated by the Department of Labor (DOL) and the actual unreimbursed cost paid by DOL 

for compensation paid to recipients under this FECA. The future workers’ compensation estimate was generated 

by DOL from an application of actuarial procedures developed to estimate the liability for FECA, which includes 

the expected liability for death, disability, medical, and miscellaneous costs for approved compensation cases. The 

liability is calculated using historical benefit payment patterns related to a specific incurred period to predict the 

ultimate payments related to that period. These projected annual benefits payments were discounted to present 

value.

Employee Retirement Plans

FEC employees participate in either the Civil Service Retirement System (CSRS) or the Federal Employees 

Retirement System (FERS), which became effective on January 1, 1987. Most FEC employees hired after 

December 31, 1983, are automatically covered by FERS and Social Security. For employees covered by CSRS, 

the FEC withheld 7.0 percent of base pay earnings. The FEC matches this withholding, and the sum of the 

withholding and the matching funds is transferred to the Civil Service Retirement System.

For each fiscal year, the Office of Personnel Management (OPM) calculates the U.S. Government service cost 

for covered employees, which is an estimate of the amount of funds that, if accumulated annually and invested 

over an employee’s career, would be enough to pay that employee’s future benefits. Since the U.S. Government’s 

estimated service cost exceeds contributions made by employer agencies and covered employees this plan is not 
66

Notes to the Financial Statements 

fully funded by the FEC and its employees. For 2008 and 2007, FEC recognized approximately $2,100,000 and 

$2,300,000, respectively, as of September 30, as an imputed cost and as an imputed financing source for the 

difference between the estimated service cost and the contributions made by FEC and its employees.

FERS contributions made by employer agencies and covered employees are comparable to the U.S. Government’s 

estimated service costs. For FERS covered employees, the FEC made contributions of 11.2 percent of basic pay. 

Employees participating in FERS are covered under the Federal Insurance Contribution Act (FICA) for which the 

FEC contributes a matching amount to the Social Security Administration.

Thrift Savings Plan (TSP)

The Thrift Savings Plan (TSP) is a retirement savings and investment plan for employees covered by either CSRS 

or FERS. The TSP is administered by the Federal Retirement Thrift Investment Board on behalf of Federal 

agencies. For employees belonging to FERS, the FEC automatically contributes one percent of base pay to their 

account and matches contributions up to an additional four percent. For employees belonging to CSRS, there is 

no governmental matching contribution.

The FEC does not report on its financial statements CSRS and FERS assets, accumulated plan benefits, or unfunded 

liabilities, if any, which may be applicable to FEC employees. Reporting such amounts is the responsibility of the 

Office of Personnel Management. The portion of the current and estimated future outlays for CSRS not paid by 

FEC is, in accordance with Statement of Federal Financial Accounting Standards (SFFAS) No. 5, Accounting for 

Liabilities of the Federal Government, included in FEC’s financial statements as an imputed financing source.

Commitments and Contingencies

Commitments are contractual agreements involving financial obligations. FEC is committed for goods and 

services that have been ordered, but have not yet been received.

A contingency is an existing condition, situation, or set of circumstances involving uncertainty as to possible 

gain or loss. The uncertainty will ultimately be resolved when one or more future events occur or fail to occur. A 

contingency liability is recognized when a past event or exchange transaction has occurred, and future outflow or 

other sacrifice of resources is measurable and probable. A contingency is not disclosed when any of the conditions 

for liability recognition are met but the chance of the future event or events’ occurring is remote. A contingency is 

disclosed when any of the conditions for liability recognition are not met and the chance of the future confirming 

event or events occurring is more than remote but less than probable.

Revenues and Other Financing Sources

Annual Appropriation

FEC received the majority of its funding through an annual appropriation as provided by Congress. Additionally, 

the FEC has authority to collect registration fees for FEC hosted conferences and apply these funds to its account, 

which are available to the FEC without further appropriation for the costs of carrying out its conferences.

Imputed Financing Sources

In accordance with OMB Circular A-136, all expenses should be reported by agencies whether or not these 

expenses would be paid by the agency that incurs the expense. The amounts for certain expenses of the FEC, 

which will be paid by other Federal agencies, are recorded in the SNC. A corresponding amount is recognized in 

the “Statement of Changes in Net Position” as an “Imputed Financing Source.” These imputed financing sources 

primarily represent unfunded pension costs of FEC employees, as described above.
67

Federal Election Commission Performance and Accountability Report 2008

Statement of Net Cost

Net cost of operations is the difference between the FEC’s expenditures and its earned revenue. The presentation 

of the statement is based on the FEC’s strategic plan, which presents one program that is based on the FEC’s 

mission and strategic goal. The major program that reflects this strategic goal is summarized as: Administer and 

enforce the FECA efficiently and effectively.

Earned Revenue

Earned revenues include fees for seminars and conferences held during the fiscal year.

Net Position

Net position is the residual difference between asset and liabilities and comprises of unexpended appropriations 

and cumulative results of operations. Unexpended appropriations represent appropriated spending authority 

that is unobligated and has not been withdrawn by the U.S. Treasury, and obligations that have not been paid. 

Unobligated balances associated with appropriations that expire at the end of the fiscal year remain available for 

obligation adjustments, but not for new obligations, until that account is closed, five years after the appropriations 

expire. Cumulative results of operations represent the excess of financing sources over expenses since inception.

Statement of Custodial Activity

The Statement of Custodial Activity summarizes collections transferred or transferable to the U.S. Treasury or 

other parties for miscellaneous receipts, fines and penalties assessed by the FEC. These amounts are not available 

for FEC operations, and accordingly, are reported as custodial revenue.

Use of Estimates

The preparation of the accompanying financial statements in accordance with accounting principles generally 

accepted in the United States requires management to make certain estimates and assumptions that directly 

affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could differ from these 

estimates.
68

Notes to the Financial Statements 

Note 2 – Non-Entity Assets

Non – entity assets, which primarily represent amounts due to the FEC for fines and penalties on those that 

violated the requirements of the Federal Election Campaign Act, consist of the following at September 30:

$ 2008 2007

With the Public:

Accounts Receivable – Custodial $ 530,187 $ 807,032

Accounts Receivable – Conference Fees $ – $ 10,277

Total non-entity assets 530,187 817,309

Total entity assets $ 18,319,237 $ 18,002,358

Total Assets $ 18,849,424 $ 18,819,667

Note 3 – Fund Balance with Treasury

Fund balance with Treasury consisted of the following at September 30:

2008 2007

Fund Balance with Treasury:

Appropriated Funds $ 10,603,627 $ 10,250,297

Total $ 10,603,627 $ 10,250,297

Status of Fund Balance with Treasury $ 2008 2007

Unobligated Balance

 Available $ 426,366 $ 220,350

 Unavailable 1,535,072 2,608,508

Obligated Balance not yet Disbursed $ 8,642,189 $ 7,421,439

Total $ 10,603,627 $ 10,250,297

Available unobligated balances represent amounts that are apportioned for obligation in the current fiscal year. 

Unavailable unobligated balances represent amounts that are not apportioned for obligation during the current 

fiscal year and expired appropriations that are no longer available to incur new obligations. Obligated balances 

not yet disbursed include undelivered orders unpaid and expended authority-unpaid.
69

Federal Election Commission Performance and Accountability Report 2008

Note 4 – Accounts Receivable, net

All accounts receivable are with the public and consist of the following at September 30:

$ 2008

$

Gross 

Accounts 

Receivable Allowance

Net 

Accounts 

Receivable

With the Public

Penalties and Miscellaneous Receipts $ 706,556 $ 176,369 $ 530,187

Total Non-Entity $ 706,556 $ 176,369 $ 530,187

$ 2007

$

Gross 

Accounts 

Receivable Allowance

Net 

Accounts 

Receivable

With the Public

Penalties and Miscellaneous Receipts $ 1,443,300 $ 636,268 $ 807,032

Conference Fees $ 10,277 $ – $ 10,277

Total Non-Entity $ 1,453,577 $ 636,268 $ 817,309

Non-Entity receivables consist of civil penalties assessed by FEC through its enforcement processes or conciliation 

agreements reached with parties. FEC has three offices that administer the penalties: the Office of General Counsel 

(OGC); the Office of Administrative Review (OAR); and the Office of Alternative Dispute Resolution (ADR). 

Each office has a distinct role in the enforcement and collection process. The allowance is based on the historical 

rate of collection and an overall assessment of the debtor’s willingness and ability to pay. Furthermore, debts 

administered by OAR are referred to the U.S. Treasury for collection when delinquent. Debts administered by 

the OGC and ADR are not considered delinquent, under the definition of the Debt Collection Improvement Act of 

1996, and are therefore not referred to the U.S. Treasury. The terms of the agreement between the FEC and the 

parties establish the conditions for collection.

In FY 2007, the FEC received authorization to collect fees for its conferences. A receivable pertaining to the fees 

associated with these conferences as of September 30, 2008 and 2007 was $0 and $10,277, respectively.
70

Notes to the Financial Statements 

Note 5 – General Property and Equipment, Net

The general components of capitalized property and equipment, net of accumulated depreciation, consisted of the following as of 

September 30, 2008 and 2007, respectively:

2008

Asset Class

Service Life 

(years)

Acquisition 

Value

Accumulated 

Depreciation

Net Book 

Value

Software 5 $ 15,937,663 $ 10,811,741 $ 5,125,922

Computers and peripherals 3 to 5 3,264,011 2,327,913 936,098

Furniture 7 852,754 725,573 127,181

Software-in-Development n/a $ 1,525,511 $ – $ 1,525,511

Total $ 21,579,939 $ 13,865,227 $ 7,714,712

2007

Asset Class

Service Life 

(years)

Acquisition 

Value

Accumulated 

Depreciation

Net Book 

Value

Software 5 $ 14,315,296 $ 9,112,519 $ 5,202,777

Computers and peripherals 3 to 5 4,139,404 3,280,787 858,617

Leasehold Improvements 7 or less 5,116,757 5,116,757 –

Furniture 7 852,754 594,480 258,274

Software-in-Development n/a $ 1,425,466 $ – $ 1,425,466

Total $ 25,849,677 $ 18,104,543 $ 7,745,134

Depreciation expense was $2,258,079 and $4,305,752 for the periods ending September 30, 2008 and 2007, respectively.
71

Federal Election Commission Performance and Accountability Report 2008

Note 6 – Liabilities Not Covered By Budgetary Resources

Liabilities Not Covered by Budgetary Resources consisted of the following as of September 30: 

Liabilities Not Covered by Budgetary Resources $ 2008 2007

Intragovernmental

 Custodial Fines and Civil Penalties $ 530,187 $ 807,032

 Deferred Rent $ 783,538 $ –

Total Intragovernmental 1,313,725 807,032

With the Public:

 Unfunded Annual Leave 2,161,272 1,964,478

 FECA Liability $ 2,712 $ 663

Total Liabilities Not Covered by Budgetary Resources $ 3,477,709 2,772,173

Total Liabilities Covered by Budgetary Resources $ 3,740,867 $ 2,353,340

Total Liabilities $ 7,218,576 $ 5,125,513

The FEC accrues a liability related to the Federal Employee’s Compensation Act (FECA) at September 30 each year. This 

amount is included under "Other liabilities on the Balance Sheet" since the BS now classifies FECA liability as other.

Beginning FY 2008, the FEC entered into a new lease agreement for its headquarters that provided a rent 

abatement of $783,538, which covers the first two months of rent. Consistent with generally accepted accounting 

principles, the FEC has recorded rent abatement as deferred rent, which is amortized over the life of the lease of 

ten years.

Note 7 – Commitments and Contingencies

In the opinion of FEC management and legal counsel, the FEC is not a party to any legal actions which are likely 

to result in a material liability. Accordingly, no provision for loss is included in the financial statements.

Note 8 – Leases

FEC has no capital leases. The FEC has a commitment under an operating lease for its headquarters office space. 

Future payments due under the lease through September 30, 2018 are:

Future Operating Lease Payments

Fiscal Year Lease Payment

2009 $ 5,705,136

2010 5,755,351

2011 5,818,278

2012 5,883,092

2013 5,949,852

2014 and thereafter 24,507,967

Total Future Lease Payments $ 53,619,676
72

Notes to the Financial Statements 

Note 9 – Statement of Net Cost

FEC’s costs are consolidated into one program, “Administering the FECA,” as noted below:

$ FY 2008 FY 2007 

Intragovernmental gross costs $ 8,373,674 $ 6,810,914

Intragovernmental net costs 8,373,674 6,810,914

Gross costs with the public $ 53,650,333 49,788,784

Less: Earned revenues from the public $ – (222,137)

Net costs with the public $ 53,650,333 49,566,647

Net Cost of Operations $ 62,024,007 56,377,561

In accordance with OMB Circular A-136, costs incurred for goods and services provided by other federal entities 

are reported in the full costs of FEC’s program and are identified as “intragovernmental.” All other costs are 

identified as “with the public.”
73

Federal Election Commission Performance and Accountability Report 2008

Note 10 – Statement of Budgetary Resources

The Statement of Budgetary Resources (SBR) compares budgetary resources with the status of those resources. 

As of September 30, 2008, budgetary resources were $61,452,650 and net outlays were $57,472,905. As of 

September 30, 2007, budgetary resources were $57,295,859 and net outlays were $52,777,727.

Apportionment Categories of Obligations Incurred

FEC receives apportionments of its resources from OMB. Apportionments are those for resources that can be 

obligated without restriction on the purpose of the obligation, other than to be in compliance with legislation 

underlying programs for which the resources were made available.

For FY 2008 and FY 2007, direct obligations incurred amounted to $59,491,212 and $54,255,141, respectively; 

and reimbursable obligations incurred amounted to $0 and $211,860, respectively.

Comparison to the Budget of the United States Government

SFFAS No. 7, Accounting for Revenue and Other Financing Sources and Concepts for Reconciling Budgetary 

and Financial Accounting, requires an explanation of material differences between budgetary resources available, 

the status of those resources and outlays as presented in the Statement of Budgetary Resources to the related 

actual balances published in the Budget of the United States Government (Budget). The Budget that will include 

FY 2008 actual budgetary execution information is scheduled for publication in February 2009, which will 

be available through OMB’s website at http://www.whitehouse.gov/omb. Accordingly, information required for 

such disclosure is not available at the time of publication of these financial statements.

Balances reported in the FY 2007 SBR and the related President’s Budget reflected the following:

FY 2007

Budgetary 

Resources

Obligations 

Incurred

Distributed 

Offsetting 

Receipts Net Outlays

Statement of Budgetary Resources $ 57,295,859 $ 54,467,001 – $ 52,777,727

Budget of the U.S. Government 55,000,000 55,000,000 – 53,000,000

Difference $ 2,295,859 $ 532,999 $ – $ 222,273

The difference between the Combined Statement of Budgetary Resources and the Budget of the U.S. Government

for budgetary resources is primarily due to expired unobligated balances. The differences for obligations incurred 

and net outlays are due to rounding.

In FY 2007 FEC’s Total Resources on the Statement of Budgetary Resources differed from the SF-133 by 

$213,191. This difference is primarily due to the timing of when the SF-133 was submitted and the Statement of 

Budgetary Resources was finalized, incorporating adjustments for upward and downward spending in the reports. 

The Total Status of Resources line differs by a corresponding amount.

In FY 2007, the U.S. Treasury reflected $456,054 on the 2007 Treasury Combined Statement, Part 4. However, 

these funds are not considered offsetting receipts. These funds represent amounts initially recorded by the FEC in 

the budget clearing account that were then transferred to the civil penalties account. Accordingly, these amounts 

are recorded on the Statement of Custodial Activity and not reported on the Statement of Budgetary Resources.
74

Notes to the Financial Statements 

Note 11 – Custodial Revenues and Liability

The FEC uses the accrual basis of accounting for the collections of fines, penalties and miscellaneous receipts. 

Collectibility by FEC of the fines and penalties is based on the responsible parties’ willingness and ability to pay:

Custodial Revenue $ 2008 2007

Fines, Penalties, and Other Miscellaneous Revenue $ 2,305,665 $ 5,031,538

Custodial Liability

Receivable for Fines, Penalties and Other Miscellaneous Receipts $ 706,556 $ 1,443,300

 Less: Allowance for Doubtful Accounts $ 176,369 $ 636,268

Total Custodial Liability $ 530,187 $ 807,032

Note 12 – Undelivered Orders at the End of the Period

Undelivered orders at September 30, 2008 and 2007 totaled $4,901,323 and $5,077,159, respectively.
75

Federal Election Commission Performance and Accountability Report 2008

Note 13: Reconciliation of Net Cost of Operations to Budget

The objective of this information is to provide an explanation of the differences between budgetary and financial (proprietary) 

accounting. This is accomplished by means of a reconciliation of budgetary obligations and non-budgetary resources available 

to the reporting entity with its net cost of operations. 

$ 2008 2007

Resources Used to Finance Activities:

 Budgetary Resources Obligated

 Obligations incurred $ 59,491,212 54,467,001

 Less: Recoveries of prior year obligations $ (793,729) $ (1,352,281)

 Obligations net of recoveries of prior year obligations 58,697,483 53,114,720

 Less: Offsetting collections $ (2,985) $ (222,137)

 Net Obligations 58,694,498 52,892,583

Other Resources

 Transfer in/out without reimbursement – (10,277)

 Imputed financing from costs absorbed by others $ 2,133,623 $ 2,331,800

Total resources used to finance activities $ 60,828,121 $ 55,214,106

Resources Used to Finance Items not Part of the Net Cost of 

Operations

Change in budgetary resources obligated for goods, services, 

and benefits ordered but not yet provided (181,865) (127,207)

Resources that fund expenses recognized in prior periods cost of 

operations (2,424) 16,968

Resources that finance the acquisition of assets $ 2,226,814 $ 3,295,311

Total resources used to finance items not part of the Net Cost of 

Operations $ 2,042,525 $ 3,185,072

Total resources used to finance the net cost of operations $ 58,785,596 $ 52,029,034

Components of the Net Cost of Operations that will not require or 

Generate Resources in the Current Period

Components Requiring or Generating Resources in Future Periods

 Increase in annual leave 196,794 32,498

 Increase in deferred rent 783,538 –

 Increase in exchange revenue receivable from the public $ – $ 10,277

Total Components of the Net Cost of Operations that will require or 

Generate Resources in Future Periods 980,332 42,775

Components not Requiring or Generating Resources

 Depreciation and amortization $ 2,258,079 $ 4,305,752

Total Components of the Net Cost of Operations that will not 

require or Generate Resources in the Current Period $ 3,238,411 $ 4,348,527

Net Cost of Operations $ 62,024,007 $ 56,377,561

77

Federal Election Commission Performance and Accountability Report 2008

SECTION IV

Other Accompanying Information

FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 20463

MEMORANDUM

TO: The Commission

FROM: Inspector General

SUBJECT: Inspector General Statement on the Federal Election Commission’s

 Management and Performance Challenges

DATE: November 7, 2008

Each year, the Inspector General is required to provide a summary and assessment of the most 

serious management and performance challenges facing the Federal Election Commission. 

The requirement is contained in the Reports Consolidation Act of 2000 (Public Law 106-531), 

an amendment to the Chief Financial Offi cers (CFO) Act of 1990. The attached document 

responds to the requirement, and provides the annual statement on Commission challenges to 

be included in the Federal Election Commission Performance and Accountability Report (PAR) 

Fiscal Year (FY) 2008.

The Inspector General has identi ed four areas for inclusion in the FEC’s FY 2008 PAR:

 Governance

 Human Capital Management

 Information Technology Security

 Financial Reporting

The Inspector General identi ed three of these challenges in the 2005, 2006, and 2007 PARs 

and continues to believe the issues remain challenges for the FEC. This year the Inspector 

General has added governance to the list of challenges. Part of the reasoning for this is the 

turnover rate that has occurred in senior positions within the FEC. 

The Inspector General’s assessment is based on information derived from a combination of 

several sources, including Of ce of Inspector General audit and inspection work, Commission 

reports, and a general knowledge of the Commission’s programs and activities.

OFFICE OF THE INSPECTOR GENERAL
SECTION IV | Other Accompanying Information

78

The Reports Consolidation Act of 2000 permits agency comment on the Inspector 

General’s statements. Agency comments, if applicable are to be included in the  nal 

version of the PAR that is due November 17, 2008.

 

 Lynne A. McFarland

 Inspector General

Attachment

Cc: Joseph F. Stoltz, Acting Staff Director

 Brian J. Duffy, Acting Chief Financial Of cer

 Alec Palmer, Chief Information Of cer

 James J. Wilson, Acting Deputy Staff Director

 Management & Administration

2
79

Federal Election Commission Performance and Accountability Report 2008

Inspector General’s Assessment of FY 2008

Management and Performance Challenges

Facing the Federal Election Commission

GOVERNANCE FRAMEWORK

The past three years has been a period of instability with respect to governance in the FEC. 

Specifi cally, there has been a lack of continuity in several key senior leadership positions of 

the agency. For example, there has been four different Staff Directors, two of which have 

been “acting” rather than permanently assigned. In addition, there have been four different 

Chief Financial Offi cers (CFOs), two of which were also in “acting” positions. The specially 

recruited1

 management team for Staff Director, Deputy Staff Director, Chief Compliance 

Offi cer and Chief Financial Offi cer resigned within a time period of six to twenty-four months. 

There has also been lack of continuity at other vital positions. For example, the head of the 

Administrative Division retired in 2007 and her replacement was employed at the FEC for only 

ten months. The current Offi ce of Human Resources Director, in place only fi fteen months, is 

currently detailed to the Deputy Staff Director for Management and Administration position, 

and therefore is currently serving in both positions. In addition, due to one vacancy and the 

expiration of several recess appointments in December 2007, the Commission operated with 

only two commissioners for six months in 2008, rather than the full six member Commission, 

and therefore lacked a quorum of at least four Commissioners. Further, Congress established 

six year term limits for Commissioners which will result in on-going, continual change in 

agency leadership. The lack of continuity in several key leadership positions, coupled with a 

progressive change in the Commissioners and their executive staff, has created an especially 

challenging operating environment for the agency. 

As new Commissioners and senior leaders assume their roles, they may logically ask what 

information exists to describe the working relationships between the various business areas 

of the agency. An effective governance framework would be able to provide the FEC senior 

leadership and staff the answers to the following questions: What are the objectives of each 

business area? What are the key dependencies between the business areas? When/how do they 

monitor and report results? What are the risks that may prevent each area from contributing to 

the overall mission? How are those risks mitigated or controlled by management? What key 

controls exists to prevent fraud, waste and abuse? Where are the policies and procedures that 

drive day-to-day operations and how are staff informed of changes to policies? Are policies 

and procedures current? What Directives govern whole of organization activities? How does 

management know whether staff comply with FEC Directives? The governance framework 

would provide the above information not only to the Commission and senior leadership but to 

all staff and would defi ne who, what, when, where, why and how of their daily work activities.

1 The FEC contracted with a fi rm that specializes in executive recruitment to assist in the recruitment, evaluation and 

selection of the senior leadership team described.
SECTION IV | Other Accompanying Information

80

A revised agency-wide strategic plan was approved in early 2008. Prior to that, in July 2007, 

the Offi ce of Human Resources implemented a new annual performance planning system, where 

staff performance plans would be linked to business area and organizational objectives. Both are 

core components of a governance framework, but they are not a complete framework. Currently, 

the agency lacks detailed business plans for the various offi ces. Instead, FEC offi ces rely on 

performance measures defi ned in the FEC strategic plan, with some offi ces having few, if any, 

specifi c goals defi ned in the strategic plan. 

Business plans are the logical link between a strategic plan and employee performance plans in 

a governance framework. Business plans typically defi ne, in detail, the objectives and goals of 

the business area and are clearly linked to the organizational strategic plan. In addition, business 

plans document risks and key dependencies that may prevent the offi ce or program from reaching 

its goals; the resources required to meet objectives; stakeholders and relationships; service 

standards (both internal and external) and guidelines for operations; key performance indicators; 

and reporting methods. Progress reporting is typically done quarterly with the plan reviewed and 

updated at least annually. Both managers and staff then base their annual performance objectives 

on the business plan objectives and performance measures to ensure their work efforts contribute 

to the business area objectives. The performance plans also help ensure transparency and 

consistency in rating staff performance. Through OIG interviews with management of various 

business areas, however, it is noted that not all staff participate in the performance planning 

process. For some business areas, the implementation of the performance planning system, with 

mandatory semiannual and annual assessment, is limited to managers and supervisors. Also, 

while various business areas report statistical data such as information requests received, cases 

or audits in progress and completed, etc., the data is primarily a compilation of statistical volume 

rather than an assessment of the quality and effectiveness of service provided by each area. 

If the FEC had a strong governance framework, the incremental whole of government 

compliance requirements routinely introduced by the Offi ce of Management and Budget (OMB) 

and other federal agencies would not be a burden to the agency. Instead, the legal and regulatory 

requirements would largely be addressed through regular business planning or addressed through 

the governance framework. Currently, the FEC business processes are not adequately designed to 

withstand the planned and unplanned continual changes facing the agency. The OIG raised this 

concern with management after the OIG’s 2007 Privacy Audit. During the mandatory privacy 

audit, the OIG recognized that the fi ndings identifi ed during the audit were actually symptoms 

of a larger issue facing the agency, a lack of a comprehensive governance framework. The OIG 

facilitated a presentation in early 2008 by the contract auditor to the then, two Commissioners of 

the FEC, where components of a governance framework and the steps necessary to implement 

such a framework at the FEC were explained. To date, the FEC has not taken the necessary steps 

to address improvements to the governance framework.

C

to 

go

im

fo

ne

ar

pr

sy

li

w

th

an

H

L

m

ch

le

th

ch

O

al

fi 

w

pr

to 

(P

pl

th

em

th

pr

or 

th

fo

fr

em

ef
81

Federal Election Commission Performance and Accountability Report 2008

 

e 

 

 

g 

 

d 

s 

e 

 

 

 

 

h 

o 

f 

s 

Continued regulation and reporting requirements imposed on federal agencies is not likely 

to decline or cease. The FEC needs to take action to address signifi cant weaknesses in the 

governance framework within the agency. The OIG recommends a systematic approach to 

improving the governance framework of the agency through the creation of business plans 

for each FEC offi ce that clearly links to the FEC strategic plan, but also includes the detail 

necessary to effectively manage and report business level activities. Business plans for all 

areas should be made available to all FEC staff to further illustrate the internal systems, 

processes and goals of the agency. The OIG further recommends the performance management 

system be fully implemented for all FEC staff and that each employee have a performance plan 

linked to their respective offi ce’s business plan. The implementation of these recommendations 

would provide the framework necessary to address the continuous evolution of the agency and 

the inevitable change in leadership caused by Commissioners’ term expirations, separations 

and retirement of senior leaders. 

HUMAN CAPTIAL MANAGEMENT

Like most federal agencies, the FEC continues to address the on-going challenge of effectively 

managing human capital in order to fulfi ll its mission. As noted in the previous management 

challenge on governance framework, recent and potential recurring high turn-over in senior 

leadership and a lack of framework to deal effectively with such turnover could directly impact 

the FEC’s ability to achieve its goals. As such, the OIG retains human capital management as a 

challenge facing the FEC. 

Over the last year, the FEC Offi ce of Human Resources (OHR) developed a strategic plan to 

align human capital strategies with the agency mission, goals and objectives. While not yet 

fi nalized, the fi ve year plan, originally intended to begin in 2008, is expected to be fi nalized 

within three months. Within the last year, OHR has made progress implementing several 

programs designed to address human capital management challenges facing the FEC. In order 

to recruit high-performing staff, OHR has implemented the Presidential Management Fellows 

(PMF) program and placed two members at the FEC. While the PMF program typically 

places staff with exceptional management potential at agencies for only a two-year rotation, 

the goal is to retain those individuals at the FEC by converting the PMFs to permanent FEC 

employees. In addition, OHR has implemented an employee recognition and awards program 

that is separate from the annual performance rating system. The program resulted in 31 awards 

presented to staff at the initial award ceremony held in September 2008 and 151 “on the spot” 

or other informal type awards presented to staff throughout the year. Another OHR initiative is 

the fl exiplace (telecommuting) program, formerly in pilot since 2005, was formally approved 

for bargaining unit employees in June, 2008. The voluntary program allows staff to work 

from home or an alternate duty location in order to improve job satisfaction and productivity, 

employee family life and work-life balance, as well as allows the FEC to use resources more 

effi ciently and effectively without decreasing the quality of service to the public, Congress 
SECTION IV | Other Accompanying Information

82

or other entities that do business with the FEC. In order to achieve the full potential of the 

fl exiplace program, inclusion of eligible non-bargaining unit employees is desirable. OHR 

intends to conduct an assessment in 2009 to determine whether the fl exiplace program has 

achieved the intended results. In 2007, the OHR instituted a new employee performance 

management system for non-bargaining unit employees to link employee performance 

objectives to specifi c agency or business area goals. Now entering its second year, OHR 

should analyze and report on whether the program has been successfully implemented, needs 

refi nement, or whether FEC staff require additional assistance in defi ning performance goals 

and assessing performance results for individuals. 

In order to effectively address the human capital management challenges facing the FEC, 

it is vital that the OHR not only have a detailed plan to address those challenges, but that it 

executes the plan well. OHR and FEC management should not plan to assess the impact of 

programs as viewed through the Federal Human Capital Survey (FHCS) results or informal 

feedback mechanism. Rather, they must defi ne and implement appropriate service delivery 

standards, quality assurance processes, monitoring, and reporting mechanisms as programs are 

planned and implemented. Further, programs that have been initiated should not be abandoned 

or revised without adequate assessment. In the 2007 Management Challenges section of the 

Performance and Accountability Report, the OIG noted the positive aspects of the quarterly 

Town Hall meetings and monthly management meetings aimed at improving collective 

communication throughout the Commission. The OIG stressed the need to place greater 

emphasis by consistently scheduling, conducting and monitoring of whether the objectives of 

the meetings were met. Since publishing the last report, only one Commission-wide Employee 

Town Hall meeting and six monthly management meetings have been held. OHR and senior 

leadership must support efforts to address human capital challenges by leading through 

example and demonstrating commitment to fi nalizing, implementing and monitoring the results 

of human capital initiatives.

INFORMATION TECHNOLOGY SECURITY

Information technology (IT) security, while improving each year at the FEC, continues 

to be a challenge for the agency. The challenge the FEC faces in IT security is shared by 

other departments and agencies in the Federal government. Over the last several years, 

identity theft and the need to protect personal information has received heightened national 

attention. Incidents of data theft and loss at federal agencies expose Americans to increased 

risk of identity theft and raise concern about how well the Federal government is securing 

its computer systems; protecting sensitive information from unauthorized use, disclosure, 

and modifi cations; and notifying the public when data breaches occur. The Government 

Accountability Offi ce (GAO) has continued to list IT security on their list of high-risk areas 

since 1997.

So

con

rem

dev

ste

sys

the 

Th

sec

and 

inf

sta

the 

Th

dev

FE

we

sec

pri

rec

we

Wh

bel

eff

Ma

do

FE

and 

to 

adh

Tec

FIS

ste

to 
83

Federal Election Commission Performance and Accountability Report 2008

ds 

s 

 

are 

ned 

e 

 

of 

yee 

r 

ults 

d 

 

Some of the weaknesses GAO has cited at other Federal departments and agencies are also 

continuing weaknesses at the FEC. While the FEC has made progress in several areas, issues 

remain from previous years. There are still weaknesses in contingency planning. The FEC has 

developed a contingency plan; however this plan is not comprehensive and has yet to include 

steps for recovering all of the FEC’s major applications and mission critical general support 

systems. The FEC has still not developed a Continuity of Operations Plan (COOP) to support 

the continuation of its core mission in the event of a disaster.

The FEC has taken important steps to establish and implement an effective information 

security program; however steps still need to be taken to ensure that the FEC has a complete 

and robust security program. Although the FEC has implemented the majority of its 

information security policies, it has not fully implemented all of the related procedures and 

standards. The FEC has still not established an alternate processing site for its operations in 

the event of a disaster. 

The FEC awarded contracts to address several of the above issues. These contracts were to 

develop and implement an entity-wide security program plan, risk assessments, as part of the 

FEC’s overall strategy to mitigate risks associated with its information technology environment 

were to be performed and the results of the assessments were to be incorporated into the FEC’s 

security plans. A Business Impact Analysis was also to be performed to formally identify and 

prioritize all critical data and operations of the FEC’s networks and the resources needed to 

recover them if there is a major interruption or disaster. It appears that some of these tasks 

were completed and others still need to be accomplished. 

While the commitment of the FEC staff to improve IT security is vital, the OIG continues to 

believe the adherence to government-wide IT security standards is an important part of an 

effective security program. GAO has cited the enactment of the Federal Information Security 

Management Act of 2002 (FISMA) as important legislation requiring the development, 

documentation, and implementation of an agency-wide information security program. The 

FEC is one of a handful of Federal agencies that are exempt from FISMA. While the IG 

and management have come to an informal understanding that the FEC should be expected 

to adhere to IT security “best practices”, which in the Federal government would include 

adherence to IT security standards published by the National Institute of Standards and 

Technology (NIST), the IG feels that the FEC should formally adopt adherence in principle to 

FISMA and the NIST standards. We continue to believe this is a necessary and an important 

step for the FEC to take to ensure that the FEC’s vital operations are safe and secure according 

to government standards.
SECTION IV | Other Accompanying Information

84

FINANCIAL REPORTING

Since fi scal year 2004, the FEC has been required to prepare and submit annual audited 

fi nancial statements as a result of the Accountability of Tax Dollars (ATD) Act of 2002. The 

submission of audited fi nancial statements to Congress and the Offi ce of Management and 

Budget is an important component to effective fi nancial management. The requirement to 

prepare and submit audited fi nancial statements has been a continuing challenge for the FEC. 

The FEC did transition to an approved business provider this fi scal year. It is hoped that this 

transition will assist the FEC and will improve fi nancial management. 

A major factor contributing to the FEC challenge of improving fi nancial management has 

been a lack of continuity in the Chief Financial Offi cer position. In the past fi ve years, 

seven different individuals have held the CFO positions. The FEC has been fortunate that 

that the Accounting Offi cer, who is now the acting CFO, and his immediate staff have been 

able to provide stability during the past several fi scal years and in the past, experienced 

FEC employees were acting CFOs during transition periods. Last year it was noted that the 

FEC hired a permanent CFO who had years of experience in fi nancial management and the 

production of audited fi nancial statements. Unfortunately, this person has resigned. Even 

though she has remained on staff to assist with the audit, the IG has concerns with the amount 

of turnover in this vital position. It is very diffi cult to address the recommendations that have 

been made over the years in the various fi nancial statement audits with no stable CFO to direct 

and oversee the changes that need to be made. The IG also believes that part of the reason the 

audit of fi nancial statements has remained a challenge to the FEC is the lack of continuity in 

the CFO position. Unfortunately, the FEC is starting another fi scal year with an acting CFO. 

Still, without a permanent CFO to guide and direct the necessary changes, the FEC is liable to 

fi nd it diffi cult to make the progress that is needed to address the recommendations raised over 

the course of the past fi ve fi nancial statement audits.
85

Federal Election Commission Performance and Accountability Report 2008

ADR Alternative Dispute Resolution

AF Administrative Fine

AICPA American Institute of Certified Public Accountants

AO Advisory Opinion

ATDA Accountability of Tax Dollars Act

BCRA Bipartisan Campaign Reform Act

CFO Chief Financial Officer

CFR Code of Federal Regulations

CHRIS Comprehensive Human Resources Integrated System

CSRS Civil Service Retirement System

DOL Department of Labor

E&J Explanation and Justification

FASAB Federal Accounting Standards Advisory Board

FBWT Fund Balance with Treasury

FCAT-HR Federal Competency Assessment Tool for Human Resources

FEC Federal Election Commission

FECA Federal Election Campaign Act

FECA Federal Employees Compensation Act

FERS Federal Employees’ Retirement System

FFMIA Federal Financial Management Improvement Act

FICA Federal Insurance Contribution Act

FISMA Federal Information Security Management Act

APPENDIX A

List of Acronyms

FMFIA Federal Managers’ Financial Integrity Act 

FMLOB Financial Management Line of Business

FOIA Freedom of Information Act

FTE Full-time Equivalent

FY Fiscal Year

GAAP Generally Accepted Accounting Principles

GAO Government Accountability Office 

GPRA Government Performance and Results Act

GSA General Services Administration

IG Inspector General

IPIA Improper Payments Information Act

IRS Internal Revenue Service

IT Information Technology

LOB Line of Business

MD&A Management’s Discussion and Analysis

MUR Matters under Review

NIST National Institute of Standards and Technology

NPRM Notices of Proposed Rulemaking

OAR Office of Administrative Review

OGC Office of General Counsel

OHR Office of Human Resources

OIG Office of the Inspector General
86

Appendix A | List of Acronyms

OMB Office of Management and Budget

OPM Office of Personnel Management

P&E Property and Equipment

PART Performance Assessment Rating Tool

PAC Political Action Committee

PAR Performance and Accountability Report

PEC Presidential Election Campaign

PMA President’s Management Agenda

RAD Reports and Analysis Division

RFAI Request for Additional Information

SAS Statement on Auditing Standards

SBR Statement of Budgetary Resources

SFFAS Statement of Federal Financial Accounting Standards

SNC Statement of Net Cost

SOF Statement of Financing

TSP Thrift Savings Plan

USC United States Code
The OCFO gratefully acknowledges those that contributed to development of the PAR. From the Staff 

Director’s Office assistance was provided by: Paul Clark, Lynn Frazier, Amy Kort, Joe Stoltz and 

Shawn Woodhead-Werth. In the Office of General Counsel, Chris Hughey provided help. From 

the Commissioners’ Offices: Brad Deutsch and Jill Moschak provided assistance. In the Office of 

the Chief Financial Officer help was provided by: Judy Berning, Ken Pezzella and especially Erin 

Singshinsuk. Editorial and design was supported by James Landon Jones, Office of Administration.