“Sunlight is said to be the best of disinfectants.”

 Louis Brandeis, 1913

Federal Election Commission

Performance and Accountability Report

Fiscal Year 2004
“Sunshine is said to be the best of disinfectants; electric light the best policeman,” Justice Louis Brandeis’ famous quote, 

orignially published in “What Publicity Can Do”, Harper’s Weekly Dec. 20, 1913: 10–13, was cited during the 1976 

Supreme Court case Buckley v. Valeo upholding major provisions of the Federal Election Campaign Act of 1971, as 

amended.

About the quote:

In 1976, the Federal Election Campaign Act was tested in the landmark Supreme Court Case, Buckley v. Valeo. In the 

spirit of former Justice Brandeis’ famous quote, the court affi rmed the importance of bringing campaign fi nance information into the “sunshine,” and upheld major provisions of the Act. The majority opinion concluded the public’s right to 

know overrides the right to privacy.

The Federal Election Campaign Act passed in 1971, in an era when public distrust of government was high. Vietnam 

was coming to an end and Watergate was foremost in the minds of the American public. By 1972, almost two-thirds of 

Americans believed that those in government were acting in their own self-interest rather than acting in the best interest 

of the country*. In response congress began to expand openness in government fi rst with the Freedom of Information 

Act (FOIA) in 1966, then with the Federal Election Campaign Act, which led to the establishment of the Federal Election 

Commission in 1974. 

*Statement of Senator Lawton Chiles, author of the sunshine legislation.
Federal Election Commission

Performance and Accountability Report

Fiscal Year 2004

October 1, 2003 – September 30, 2004
FEC Performance and Accountability Review FY 2004

Released December 2004

Written by Karen Shaffer, Cheryl Kelley and John O’Brien

Design and Layout by James Landon Jones
i

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Contents

List of Illustrations iii

A Message from the FEC Chairman v

The Federal Election Commission (FEC) At A Glance vii

How To Use This Report ix

About The FEC 1

A Brief History of the Federal Election Commission 1

What the FEC Does 2

How the FEC Accomplishes Its Mission 4

Commission Membership and Statutory Offi cers 4

Program Performance Overview: Highlights of FEC Performance in FY 2004 9

FEC’s Workfl ow and Its Relationship to Strategic Plan and Annual Performance Plan 11

Performance Data Collection and Reporting 11

Goals and Objectives for FY 2004 12

Future Challenges 15

Financial Performance Overview: Analysis of Financial Statements 18

Debt Collection Improvement Act 20

Systems, Controls, and Legal Compliance 22

Overview of Strategic Plan 25

FY 2004 Performance Plan and Results 27

Disclosure 27

Compliance 29

Public Financing 34

Program Assessment Rating Tool (PART) Reviews 36

Message from the CFO 39

Independent Auditor’s Report 41

Limitations on the Financial Statements 87

Principal Statements 89

Notes to the Financial Statements for the Year Ended September 30, 2004 95

SECTION I – MANAGEMENT’S DISCUSSION AND ANALYSIS

SECTION II – FEC PERFORMANCE REPORT FOR FY 2004

SECTION III – AUDITOR’S REPORT AND FINANCIAL STATEMENTS

(cont.)
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Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Required Supplementary Information 109

Inspector General Assessment of Major Performance and Management Challenges 111

Management’s Response to the Inspector General’s Statement on the Management 

and Performance Challenges Facing the Federal Election Commission 121

Appendix A: Management’s Decision and Final Actions on 

OIG Audit Recommendations 123

Appendix B: Glossary of Terms 125

Appendix C: Historical Data 127

APPENDICES
iii

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Figure 1.1 Total Transactions Processed by Election Cycle Through 9/30 

of Election Year (in millions) 2

Figure 1.2 Total Disbursements in Federal Elections, 

Presidential Cycles (in millions) 3

Figure 1.3 Total Disbursements in Federal Elections,

Congressional Cycles (in millions) 3

Figure 1.4 FEC Members 5

Figure 1.5 FEC Organization Chart 6

Figure 1.6 Total Website Hits, Fiscal Year (in millions) 10

Figure 1.7 Key Performance Measures by Major Program 15

Figure 1.8 Allocation (total obligations) by Major Program Area 20

Figure 1.9 FTEs by Major Program Area 20

Figure 1.10 Dollar Allocation by Component, FY 2004 21

Figure 1.11 Median Days Required to Process Reports 28

Figure 1.12 Days Needed to Complete Processing for 95% of Reports 28

Figure 1.13 Document Volumes and Process Effi ciency 

(through 9/30 of election year) 29

Figure 1.14 Total Transactions Coded Per FTE, Fiscal Year 29

Figure 1.15 FY 2004 Performance Plan Results – Disclosure 30

Figure 1.16 FY 2004 Performance Plan Results – Compliance 31

Figure 1.17 RAD FTE Hours Per RFAI, Fiscal Year 33

Figure 1.18 Fines and Penalties Assessed, Fiscal Year 33

Figure 1.19 Number of Title 2 Audits Completed, Fiscal Year 34

List of Illustrations

v

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

FEDERAL ELECTION COMMISSION

Washington, D.C. 20463

December 16, 2004

I am pleased to present the Federal Election Commission’s Performance and Accountability Report (PAR) for FY 2004, prepared under the guidance of the Offi ce of Management 

and Budget’s (OMB) Bulletin No. 01-09. This Performance and Accountability Report 

contains the Commission’s fi nancial statements, as required by the Accountability of Tax 

Dollars Act of 2002.

The Accountability of Tax Dollars Act of 2002 extended the requirements for the preparation of fi nancial statements and for a full fi nancial audit of the agency’s fi nancial management systems and internal management controls down to agencies the size of the Commission. The FEC requested and received a waiver from this requirement in FY 2003, as did 

most of the agencies newly required to undergo fi nancial audits, to give the FEC time to 

prepare for the fi nancial audit. Therefore, this report refl ects the fi rst year that the FEC 

was required to produce fi nancial statements and undergo a full fi nancial audit.

The Commission is pleased to report that the FEC received a fully unqualifi ed (clean) 

opinion from the Independent Certifi ed Public Accounting fi rm of Clifton Gunderson 

LLP, which was engaged by the FEC Offi ce of Inspector General to audit the consolidated 

fi nancial statements included in this report. The unqualifi ed (clean) opinion indicates that 

the FEC’s fi nancial statements present fairly the fi nancial position of the Federal Election 

Commission.

This achievement demonstrates both our continued dedication to sound fi nancial management and the reliability of the fi nancial data upon which we base our budget and fi nancial 

decisions. The attainment of the clean opinion in our fi rst year of the required preparation of fi nancial statements and audits is a signifi cant success and refl ects the commitment 

of resources by the FEC to ensure that our fi nancial systems and internal management 

controls are sound.

Bradley A. Smith

Chairman

A Message from the FEC Chairman

Offi ce of the Chairman

vii

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Th e Federal Election Commission (FEC) At A Glance

Mission: To assure that the campaign fi nance process is fully disclosed and 

that the rules are effectively and fairly enforced, fostering the electorate’s faith 

in the integrity of the nation’s political process.

• Created by Congress in 1975 as an independent regulatory agency to administer and enforce the Federal Election Campaign Act (FECA), the statute that 

governs the fi nancing of federal elections. 

• The FEC has jurisdiction over the fi nancing of campaigns for the U.S. House, 

the U.S. Senate, the Presidency, and the Vice Presidency.

• Responsibilities include disclosing campaign fi nance information, enforcing 

the provisions of the law such as the limits and prohibitions on contributions, and overseeing the public funding of Presidential elections. 

• The FEC regulated the disbursement (spending) by federal candidates and 

committees estimated at approximately $5.1 billion for the 2004 Presidential and Congressional elections, an increase of over 1,400 percent over the 

$310 million spent by federal candidates and committees during the fi rst 

publicly-funded elections in 1976. 

• The public has full access to documents that trace the sources of campaign 

fi nancing. There are approximately 3 million itemized transactions for the 

2004 election cycle in the FEC’s disclosure database.

• In FY 2004, there were 4.1 million visits and nearly 100 million “hits” on the 

FEC’s website.

FEC accomplishes its mission at a cost of approximately 20 cents annually for 

each American. For less than a quarter per citizen each year, the FEC ensures 

full disclosure of campaign fi nancing and fair and effective enforcement of 

election rules.

This report is available at www.fec.gov.

ix

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

How To Use Th is Report

This Performance and Accountability Report (PAR) was produced to meet the 

requirements of the Accountability of Tax Dollars Act of 2002 and guidance 

from the Offi ce of Management and Budget (OMB), which expanded the authorization granted under the Reports Consolidation Act of 2000 to require that 

agencies prepare a PAR annually. It provides the Federal Election Commission’s 

(FEC) fi nancial and performance information for FY 2004, enabling the President, the Congress, and the American people to assess the Commission’s performance in meeting its statutory mission. 

The FY 2004 PAR is organized into the following three major sections:

• Management’s Discussion and Analysis (MD&A), which provides an overview of the fi nancial and performance information contained in the Performance and Financial Sections. It includes the Commission’s assessment on 

the reliability and completeness of the information presented. MD&A offers 

an overview of the FEC organization, highlights of its most important goals 

and results, and addresses issues affecting the Commission’s performance in 

the future.

• Performance, which provides a report on the FEC’s accomplishments, and 

results in meeting its goals and objectives, as required by the Government 

Performance and Results Act (GPRA). This section provides results for all of 

the measures contained in FEC’s FY 2004 performance plan. 

• Financial, which contains the details on FEC’s fi nances, including the Commission’s fi nancial statements, the auditor’s report, and the Inspector General’s assessment of the top management challenges facing the Commission.

In addition, three Appendices contain Management’s Decision and Final Actions on Offi ce of Inspector General (OIG) Audit Recommendations, a Glossary 

of Terms, and Additional Performance Data. 

The Commission’s Strategic Plan, FY 2004 – 2009, and its Annual Performance 

Plans, which form the basis for this report, are available on the FEC website at 

www.fec.gov.

FEC also prepares an Annual Report Annual Report that covers the activities of each calendar that covers the activities of each calendar

year. Reports through 2003 are available in electronic form at http://www.fec.

gov/pages/anreport.shtml. The report for 2004 will be published in June 2005.

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Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

 Management’s Discussion and Analysis – Section I

About Th e FEC

A Brief History of the Federal Election Commission

As early as 1905, President Theodore Roosevelt recognized the need for campaign fi nance reform and called for legislation to ban corporate contributions 

for political purposes. In 1907, he proposed public funding of federal elections. 

In response, Congress enacted several statutes between 1907 and 1966 to:

• Limit the disproportionate infl uence of wealthy individuals and special interest groups on the outcome of federal elections; 

• Regulate spending in campaigns for federal offi ce; and 

• Deter abuses by mandating public disclosure of campaign fi nances. 

However, there was no real signifi cant enforcement of campaign fi nance legislation for the most part until the post-Watergate period after the 1972 elections. 

In 1971, Congress did consolidate its earlier reform efforts in the Federal Election Campaign Act (FECA), instituting more stringent disclosure requirements 

for federal candidates, political parties and political action committees (PACs). 

It also set up the income tax check-off to provide for the fi nancing of Presidential general election campaigns and national party conventions. Still, without 

a central administrative authority, the campaign fi nance laws were diffi cult to 

enforce. Authority was split between the General Accounting Offi ce (now the 

Government Accountability Offi ce) and offi ces in the Clerk of the House and 

the Secretary of the Senate, with criminal enforcement in the Department of 

Justice. 

Following reports of serious fi nancial abuses in the 1972 Presidential campaign, 

Congress amended the FECA in 1974 to set limits on contributions by individuals, political parties, and PACs. It established the FEC as an independent agency 

to enforce the law, facilitate disclosure and administer the public funding 

program. Amendments to the Internal Revenue Code that same year established 

the matching fund program for Presidential primary campaigns. Subsequent 

amendments in the late 1970’s streamlined the disclosure process and expanded the role of political parties.

The Bipartisan Campaign Reform Act of 2002 (BCRA), sponsored by Senators 

John McCain and Russell Feingold, and Representatives Christopher Shays and 

Marty Meehan, amended the FECA further. It banned national parties from 

raising or spending nonfederal funds (often called “soft money”), restricted socalled issue ads, increased the contribution limits, and indexed certain limits 

for infl ation.
2

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section I – Management’s Discussion and Analysis

What the FEC Does

The sanctity of the political process is key to public faith in the policy decisions 

made by the elected and executive branches of government. The FEC strives to 

provide the electorate with the capability to make educated, informed decisions in the political process as to where candidates for federal offi ce derive 

their fi nancial support, and with the confi dence that those who disregard the 

laws regarding campaign fi nancing and/or its requirements for public disclosure 

will suffer real and evenhanded consequences for noncompliance. 

The Commission’s disclosure database, which contains millions of transactions, 

is available through the FEC’s website. Last year, the FEC redesigned its website to make it more user-friendly. Interested citizens can select a profi le of a 

committee’s fi nancial activity for each election cycle. Citizens also can access 

information on contributions by using a variety of search elements (e.g., donor’s 

name, recipient’s name, date, amount, or geographic location).

The sheer volume of data available to the public is staggering. The Commission 

defi nes its work in the context of election cycles, which include the preceding and actual election years, i.e., calendar years 2003 and 2004 constitute 

the 2004 election cycle. In any election cycle, nearly 8,000 committees fi le 

between 85,000 to 90,000 reports, which contain information concerning 

between 2.5 to 3.0 million itemized contributions, as well as millions of other 

itemized disbursements, receipts, and other payments previously not entered 

into Commission databases. These reports are now fi led electronically, except 

for Senate reports and other committees with less than $50,000 in activity. 

At the same time, the FEC has the resources to audit less than 1 percent of 

the committees fi ling reports in any given cycle, and only has the capacity to 

actively pursue approximately 2 percent of total committees through its compliance (enforcement) process at any given time.

Figure 1.1 Total Transactions Processed by Election Cycle Th rough 9/30 of Election Year (in millions)

Total transactions increased dramatically between the 2000 and 2004 Presidential election cycles.

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Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

 Management’s Discussion and Analysis – Section I

Campaign fi nancing has skyrocketed since 1976, when the FEC regulated the 

disbursement by federal candidates and committees of $310 million in the fi rst 

publicly-funded elections. For the 2004 Presidential and Congressional election, it is estimated that the FEC regulated the disbursement (spending) of approximately $5.1 billion—an increase of more than 1,400 percent in just eight 

Presidential election cycles. 

Total disbursements (spending) by federal committees and candidates in federal elections is the most signifi cant measure of the total workload faced by the 

Commission. The fi gures below depicts total spending in recent federal Presidential and Congressional election cycles. Spending in Presidential cycles has 

more than tripled and in Congressional cycles it has nearly tripled. As of the 

June 30, 2004 reports processed by the FEC, over $2.2 billion had already been 

disclosed for the 2004 cycle.

Figure 1.2 Total Disbursements in Federal Elections, Presidential Cycles (in millions)

Disbursements (spending) in Presidential elections have more than tripled since 1988

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Figure 1.3 Total Disbursements in Federal Elections,Congressional Cycles (in millions)

Disbursements (spending) in Congressional elections have nearly tripled since 1986

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Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section I – Management’s Discussion and Analysis

The FEC strives to foster and maintain an attitude of voluntary compliance with 

the rules of the campaign fi nance process through:

• facilitating public disclosure of campaign fi nance activity; providing information and policy guidance to the public, press, political committees, and 

elections offi cials on the law and Commission regulations; 

• enforcing the FECA through audits, investigations, and civil litigation; and 

• implementing the public funding programs for Presidential campaigns and 

conventions. This includes certifi cation and audits of participating candidates and committees, and enforcement of public funding legislation.

How the FEC Accomplishes Its Mission

The FEC is structured to foster bipartisan decision making. Its work is directed 

by six members, who are appointed by the President and confi rmed by the 

Senate. Each member serves a 6-year term, and two seats are subject to appointment every 2 years. By law, no more than three Commissioners can be 

members of the same political party, and at least four votes are required for any 

offi cial Commission action. Chairmanship of the Commission rotates among 

the members each year, with no member serving as Chairman more than once 

during his or her term. 

Commission Membership and Statutory Offi cers

The Commissioners serve full time and are responsible for administering 

and enforcing the Federal Election Campaign Act. They generally meet twice 

weekly, once in closed session to discuss matters that, by law, must remain 

confi dential, and once in a meeting open to the public. At these meetings, they 

formulate policy and vote on signifi cant legal and administrative matters. 

In addition to the Commissioners, the Staff Director and General Counsel positions were created by the FECA in 1974. The Inspector General was established 

later under amendments to the Inspector General Act of 1978, and is independent and reports to both the Commission and the Congress under the provisions 

of the IG Act. The Staff Director functions as the Chief Operating Offi cer and is 

responsible for implementing agency policy and overseeing the Commission’s 

public disclosure activities, audit program, outreach efforts, and review of reports. The Commission’s work is supported by several staff offi ces, including the 

Administration Division, Offi ce of Congressional, Legislative and Intergovernmental Affairs, Offi ce of Equal Employment Opportunity and Special Programs, 

Offi ce of Personnel and Labor Relations, Offi ce of Planning and Management, 

and Press Offi ce.
5

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

 Management’s Discussion and Analysis – Section I

The Offi ce of General Counsel 

(OGC) staff performs the following functions: 

• Drafts advisory opinions and 

regulations as well as other 

legal memoranda interpreting 

the federal campaign fi nance 

law; 

• Investigates alleged violations 

of the law, negotiates conciliation agreements, and recommends civil penalties for 

individuals and entities that 

have violated the Act;

• Handles all civil litigation 

arising out of any legal actions 

brought by or against the 

Commission. It is the exclusive representative of the Commission before the federal district and circuit 

courts, and the Supreme Court with respect to matters related to public 

fi nancing of Presidential elections; and

• Processes all audit-related legal and repayment matters, and handles fi nal 

legal actions for debt settlements, administrative terminations, and administrative fi nes matters. 

The Audit Division evaluates the matching fund submissions of Presidential 

primary candidates and determines the amount of contributions that may be 

matched with federal funds. As required by law, it audits all public funding recipients. It also audits those committees that, according to FEC determinations, 

have not met the threshold requirements for substantial compliance with the 

law. The division’s resources are also used in the Commission’s investigations of 

complaints.

The Information Division provides general educational assistance to candidates, 

committees, and others involved in elections through the Internet, e-mail, letters, telephone conversations, publications, and conferences. To foster voluntary compliance with the FECA, the FEC aggressively engages in outreach and 

educational efforts, such as seminars and prior notice mailings before each 

major fi ling period. 

FEC Members

Bradley A. Smith, Chairman

Ellen L. Weintraub, Vice Chair

David M. Mason, Commissioner

Danny L. McDonald, Commissioner

Scott E. Thomas, Commissioner

Michael E. Toner, Commissioner

Statutory Offi cers

James A. Pehrkon, Staff Director

Lawrence H. Norton, General Counsel

Lynne A. McFarland, Inspector General

Figure 1.4 FEC Members
6

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section I – Management’s Discussion and Analysis

The Information Technology (IT) Division provides internal IT support, operates the electronic fi ling system, and enters information into the FEC database 

from all reports fi led by political committees and other entities. IT is responsible 

for operating and maintaining the FEC website that is now the main source 

of information and disclosure of campaign fi nance data. The division is also 

responsible for the computer programs that sort and organize campaign fi nance 

data into indexes. These indexes permit a detailed analysis of campaign fi nance 

activity and provide a tool for monitoring contribution limits. The indexes are 

available on the website and online through the Direct Access Program (DAP), 

a subscriber service managed by the division. The division publishes the Reports on Financial Activity ports on Financial Activity series of periodic studies on campaign fi nance and series of periodic studies on campaign finance and

generates statistics for other publications.

The Offi ce of Administrative Review (OAR) was established in 2000 after statutory amendments permitted the Commission to impose civil money penalties 

for violations of certain reporting requirements. Under the program, if the Commission fi nds “reason to believe” (RTB) that a committee failed to fi le a required 

report or notice, or fi led it late, it will notify the committee of its fi nding and the 

amount of the proposed civil money penalty. Within 40 days, the committee 

may challenge the RTB fi nding. OAR reviews these challenges and may recommend that the Commission uphold the RTB fi nding and civil money penalty, 

uphold the RTB fi nding but modify or waive the civil money penalty, determine 

that no violation occurred, or terminate its proceedings. OAR also serves as the 

Commission’s liaison with the U.S. Department of the Treasury on debt collection matters involving unpaid civil money penalties under this program.

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Figure 1.5 FEC Organization Chart
7

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

 Management’s Discussion and Analysis – Section I

The Alternative Dispute Resolution (ADR) offi ce provides parties in enforcement 

actions with an alternative method for resolving complaints that have been fi led 

against them or for addressing issues identifi ed in the course of an FEC audit. 

The program is designed to promote compliance with the federal campaign 

fi nance law and Commission regulations and to reduce the cost of processing 

complaints by encouraging settlements outside the agency’s normal enforcement track. 

The Public Disclosure Division processes incoming campaign fi nance reports 

from federal political committees and makes the reports available to the public 

in the Public Records Offi ce as well as through fax lines and mail responses to 

requests for data and information.

The Reports Analysis Division (RAD) provides committee offi cials with technical assistance in complying with reporting requirements and conducts detailed 

examinations of the campaign fi nance reports fi led by political committees. 

Due to limited resources in compliance, the review of reports represents the 

only full scrutiny of 100 percent of all committee fi lings. Each committee has 

a RAD analyst assigned, who assists the committee and seeks to voluntarily assure compliance with the law and full, accurate disclosure. RAD also performs 

the fi rst part of the late and non-fi ling programs, referring committees to the 

OAR for fi nal action, and refers debt settlement and administrative termination 

actions to the OGC for fi nal legal action. 

In mid-FY 2004, the FEC Offi ce of Election Administration (OEA) was transferred to the new Election Assistance Commission (EAC), so limited funds and 

only 2.0 full-time equivalent (FTE) positions were devoted to it in FY 2004. Existing assets were transferred to the Election Assistance Commission in mid-FY 

2004. The transfer was originally projected for FY 2003 but delays in appointing 

the new commissioners for the EAC delayed the establishment of the new commission and the transfer of the OEA.

9

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

 Management’s Discussion and Analysis – Section I

Program Performance Overview: Highlights of 

FEC Performance in FY 2004

FEC’s mission is to assure that the campaign fi nance process is fully disclosed 

and that the rules are effectively and fairly enforced. The sanctity of the political process is key to public faith in the policy decisions made by those who are 

elected. FEC’s overarching goal is to provide the electorate with the capability 

to make educated, informed decisions in the political process as to where candidates for federal offi ce derive their fi nancial support, and with the confi dence 

that those who disregard the federal election campaign laws will suffer real and 

evenhanded consequences for noncompliance. To attain this desired outcome, 

FEC strives to foster and maintain an attitude of voluntary compliance with the 

rules of the campaign fi nance process. Voluntary compliance and public confi dence are necessary because limited budgetary resources preclude extensive 

efforts to enforce federal campaign laws.

FEC’s Performance Plan contains a number of measures and indicators that 

provide insight into how well the Commission is achieving its mission. These 

measures provide a basis for comparing actual program results with established 

program performance goals as required by the Government Performance and 

Results Act. This section highlights seven of the measures, using the stoplight 

grading scale refl ected in the Executive Branch Management Scorecard, which 

is used to track progress on the President’s Management Agenda initiatives. 

FEC’s FY 2004 Performance Report is presented in Section II, with its additional 

statistical information provided in Appendix C.

During FY 2004, the Commission continued to implement the Bipartisan Campaign Reform Act of 2002 and respond to Constitutional challenges to the new 

Act. In December 2003, the Supreme Court upheld the two principle features 

of the BCRA: the control of soft money and the regulations of electioneering 

communications. The Court found unconstitutional the BCRA’s ban on contributions from minors and the “choice provision,” which provides that a party 

committee cannot make both coordinated and independent expenditures on 

behalf of a candidate after that candidate’s general election nomination. The 

FEC issued new regulations, rules, and advisory opinions, including candidate 

travel regulations that established uniform payment rates for all federal election travel on either government or private aircraft and other conveyances. As 

an interim measure, the Commission approved a Statement of Policy Regarding 

Disclosure of Closed Enforcement and Related Files that identifi ed the categories or records that will be released to the public once enforcement cases are 

closed. The Commission presented 12 legislative recommendations to the President and the Congress for improving campaign fi nance laws.
10

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section I – Management’s Discussion and Analysis

In December 2003, the Commission unveiled its Enforcement Query System 

(EQS), a web-based search tool that allows users to fi nd and examine public 

documents regarding closed Matters Under Review (MUR). Previously, these 

documents were available only on paper or microfi lm at FEC headquarters in 

Washington, DC.

The FEC redesigned its website to better meet the needs of the regulated community, researchers, and the general public. In FY 2004, it recorded almost 100 

million “hits” and 4.1 million visits from the public, an increase over previous 

years. In FY 2003, there were only 59 million “hits” and 2 million visits.

In FY 2004, the Audit Division completed a major effort to increase the number 

of non-Presidential committees audited in each election cycle. The goal was to 

complete 45-50 audits of committees or double the roughly 20-25 committees 

audited each election cycle in past years. In FY 2004, the division completed 

the last of 50 audits of these committees from the 2002 election cycle.

The Commission also continued to expand its enforcement presence and 

improve the timeliness of enforcement actions through the Alternative Dispute 

Resolution (ADR) and Administrative Fine (administered by OAR) programs. 

These programs streamline the process for late and non-fi ler enforcement and 

for cases that would otherwise be dismissed due to lack of enforcement resources. In addition, the programs allow the General Counsel to focus resources on the more signifi cant compliance issues and cases, and to improve the 

timeliness of the resolution of those cases. This has allowed the FEC to close a 

higher percentage of cases with substantive action rather than dismissing them 

for staleness or lack of resources.

Figure 1.6 Total Website Hits, Fiscal Year (in millions)

Th e traffi c on FEC’s redesigned website nearly doubled between FYs 2003 and 2004.

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Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

 Management’s Discussion and Analysis – Section I

FEC’s Workfl ow and Its Relationship to Strategic Plan and 

Annual Performance Plan

Performance Data Collection and Reporting 

As a result of the pattern of campaign fi nancing, not all data is collected or 

available on a fi scal year basis. Therefore, an assessment of FEC performance 

can best be determined by comparing annual trends from election cycle to 

election cycle. Assurance of the accuracy of performance data reported in 

Section II and in this section of the report is achieved through data verifi cation 

processes inherent in the recurring use and updates of the data. FEC analysts, 

managers, and executives verify the data on an ongoing basis. The data receive a fi nal review by budget and program branch chiefs with budget and 

performance responsibilities prior to submission and fi nal review by the Staff 

Director. The Data Sources and Quality discussion in Section II of this report 

provides additional information about FEC’s actions to ensure the accuracy of 

data, which are documented in the Data Verifi cation and Validation sections of 

the FEC’s annual Performance Plans and Reports.

The FEC is different from most agencies in that its natural workfl ow patterns do 

not begin and end neatly on October 1, the start of the new federal fi scal year 

when FEC receives its annual appropriation from the Congress. The Commission defi nes its work in the context of election cycles. An election cycle consists 

of the preceding and actual election years, i.e., calendar years 2003 and 2004 

constitute the 2004 election cycle. An election cycle, therefore, spans three fi scal years (i.e., the 2004 cycle begins in FY 2003 and ends in FY 2005). The beginning of the new fi scal year (October 1) coincides with the peak pre-election 

period when the FEC experiences its heaviest workloads for many programs. 

The fl ow of work for programs such as audits and enforcement actions is such 

that action on the referrals for audits and compliance actions from the 2004 

election will not be fi nalized for three to four years after the election. This is 

particularly true for Presidential audits and enforcement cases arising from the 

public funding provisions of the FECA. As a result, work undertaken or completed in any fi scal year includes work that began in previous election cycles. 

The Strategic Plan outlines performance goals and workloads by election cycle, 

while the Annual Performance Plan relates the specifi c activities of FY 2004 to 

work from several election cycles. Goals for each core program area establish 

targets for the speed/timeliness in which an action should take place, and the 

volume of transactions that will be processed. 
12

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section I – Management’s Discussion and Analysis

Goals and Objectives for FY 2004

To achieve its mission, the FEC has identifi ed three major program areas– public disclosure, compliance, and public fi nancing. The Commission uses a set of 

performance indicators to measure success in achieving improved public confi dence in the political process. If FEC meets its performance targets for timely 

review and processing of reports, for resolving enforcement actions in a timely 

manner, and for informing and educating the public about campaign fi nance, 

it will achieve its desired outcome to fairly and effectively apply campaign fi -

nance rules and to promote disclosure, thereby enabling the electorate to make 

informed choices in the electoral process. 

A fourth goal, which appeared in previous performance plans, was election 

administration. In FY 2004, the Offi ce of Election Administration was transferred to the newly created Election Assistance Commission, so this goal was 

not included in the FY 2004 plan. The goals, objectives, and desired outcomes 

described in this report are tied to the remaining three core FEC programs:

1. Public Disclosure

Goal: Promote disclosure of campaign fi nance reports required to be fi led for 

public view under the FECA to ensure full, accurate, and timely disclosure of 

campaign fi nance activity in federal elections, and to provide information and 

policy guidance on the FECA to the public, press, and those persons and entities required to comply with the FECA.

Success in this program will mean that:

• Sources of campaign funds in federal elections are accurately, fully, and 

timely disclosed to the public;

• The electorate can make informed decisions as to the sources of campaign 

funds for candidates for federal offi ce;

• The electorate can readily obtain campaign fi nance information directly from 

the FEC in usable formats;

• The press and media can use FEC data to more widely disclose campaign 

fi nance information; and

• The public and the campaign fi nance community can easily obtain policy 

guidance and assistance in understanding and complying with the FECA.
13

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

 Management’s Discussion and Analysis – Section I

2. Compliance

Goal: Enforce the disclosure and limitations provisions of the FECA to encourage and obtain voluntary compliance with the disclosure and limitations provisions of the FECA through enforcement of the Act in a timely, consistent, and 

comprehensive manner. 

Any reported FECA violation may lead the General Counsel to classify it as a 

Matter Under Review. If the General Counsel determines there is a “reason to 

believe” that a violation has been committed, the respondents are notifi ed and 

an investigation may begin.

Faced with a large number of complex cases, in 1993 the Commission developed the Enforcement Priority System (EPS) to provide a consistent and impartial ranking of cases based on the relative seriousness of the alleged violations. EPS enables the FEC to match the seriousness of a particular case to the 

resources available to undertake the investigation. EPS is used in conjunction 

with the case management system, which enables the Commission to measure 

performance with regard to the substantive resolution of cases by issue and to 

measure timeliness of enforcement actions. The increased level of civil penalties assessed by the Commission following implementation of the EPS has 

demonstrated the benefi ts of pursuing more substantive cases. Success in this 

program will mean that:

• The public has confi dence that the FECA is fairly and swiftly enforced;

• The election community has a high level of confi dence that the FECA is fairly 

enforced, resulting in a high level of voluntary compliance with the FECA;

• The election community believes that there are real, timely consequences for 

violation of the disclosure and limitation provisions of the FECA; and

• FEC enforcement resources are focused on the most salient and signifi cant 

compliance concerns under the FECA.

3. Public Financing 

Goal: Implement the Presidential election public funding provisions of the 

FECA and successfully administer the public funding provisions of the FECA for 

qualifi ed candidates in Presidential elections.

In December 2003, seven Presidential candidates in the 2004 primary elections submitted matching fund requests totaling more than $15 million. Despite a brief shortfall in the Presidential fund all candidates received their full 

entitlement in February 2004, and the eligible national Presidential nominating 

conventions and general election committees were fully funded. The Department of the Treasury maintains the matching fund account, which is comprised 
14

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section I – Management’s Discussion and Analysis

of money derived from a taxpayer check-off system. Preparations are underway for audits of the seven candidates receiving matching funds, as well as 

the committees of the two general election candidate committees, the two 

host committees, and the two convention committees. These fi eld audits will 

be completed by FY 2005, with all audit issues resolved in FY 2006, although 

compliance issues may take longer to resolve. 

Success in this program will mean:

• The successful implementation of the public funding provisions of the FECA 

continues for each Presidential election;

• All federal funds disbursed in Presidential elections are properly certifi ed and 

accounted for by eligible candidates;

• All audits and enforcement actions related to public funding are completed in 

a fair and timely fashion; and

• There are real and timely consequences for failure to comply with the FECA 

requirements.

How the FEC Achieves Its Goals

 Improvements in productivity, aided by IT enhancements, generally have 

enabled the FEC to keep pace with the large increases in federal campaign 

fi nance activity during recent election cycles. This activity has nearly doubled 

in the last 12 years. Total candidate and committee disbursements (spending) 

for a non-Presidential election cycle have increased from $1.1 billion in 1986, 

to $3.1 billion for the 2002 congressional cycle, a more than 184 percent 

increase. In Presidential election cycles, spending exceeded an estimated $5.1 

billion for the 2004 Presidential election cycle compared to $1.6 billion in the 

1988 cycle.

The FEC receives information from approximately 8,000 committees fi ling 

over 90,000 reports and generating 2-3 million itemized transactions each 

cycle. Every election cycle since 1992 has seen a new record in total spending 

in federal elections for Congressional and Presidential elections. FEC’s electronic fi ling system offers the capability of instantly updating the database and 

expanding the types of information collected. The average annual cost is about 

$1.5 million to maintain the electronic fi ling system. With the passage of mandatory electronic fi ling, FEC is beginning to see the benefi ts of timeliness and 

work process improvements such a sophisticated system affords. For example, 

since the institution of mandatory electronic fi ling, the median time to process 

all documents has improved from 11 days (2000 cycle) to 6 days (2002 cycle) 

to 2 days for the 2004 cycle as of September 30, 2004.
15

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

 Management’s Discussion and Analysis – Section I

Measure Goal FY

2004 

FY

2003

FY

2002

FY

2001

Reports fi led with FEC 

will be available to the 

public within 48 hours

99% of reports are 

available within 48 

hours

Green Green Green Green

Review all reports and 

statements received

35,000 reports and 

20,000 statements 

expected in 2004

Green Green Green Green

Respond to data requests 

from press, public, 

and committees 

within 72 hours

100% of requests will 

receive a response 

within 72 hours

Green Green Yellow Yellow

Committees will receive 

responses to requests for 

assistance within 72 hours

75% of committees receive a response within 

72 hours

Green Green* Green* Yellow*

Committees are referred 

for potential audit or 

enforcement actions

110 committees are 

referred for potential 

further actions (75 for 

audit; 35 for enforcement)

Green for 

Enforcement

Green for 

Audit

Green for 

Audit

Yellow for 

Enforcement

Yellow Yellow

Half of FEC’s cases are 

processed or closed with 

substantive action

200 cases are processed 

or closed; 100 with 

substantive action

Green for 

Substantive 

Yellow for 

Case 

Numbers

Green for 

Substantive

Yellow for 

Case 

Numbers

Green for 

Substantive** 

Yellow for 

Case 

Numbers

Green for 

Substantive*** 

Yellow for 

Case 

Numbers

Maintain caseload with 

*50% active and 

50% inactive cases.

175-200 cases are 

maintained; with 50% 

active and 50% inactive

Green Green Green Green ***

Figure 1.7 Key Performance Measures by Major Program

* Goal was 100%

** Goal was 40% closed with substantive action

*** Goal was 40% active and 60% active for FY 2001

The Commission’s key performance measures by major program are highlighted in Figure 1.7 below, with comparative results from FYs 2001, 2002, and 

2003. The chart incorporates the color coding used in the Executive Branch 

Management Scorecards that track status and progress toward the goals of the 

President’s Management Agenda. Green indicates that FEC met or exceeded 

the goal; yellow indicates that FEC came very close to meeting the goal: FEC is 

pleased that none of the scores are red for failing to meet the goal by a signifi -

cant margin.

17

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

 Management’s Discussion and Analysis – Section I

Future Challenges

The FEC has experienced a more than 1,400 percent increase in total campaign 

fi nance activity since 1976 (from $310 million in total disbursements in federal elections in 1976 to approximately $5.1 billion in the 2004 election.) This 

increase in total fi nancial activity has led to a 27 percent increase in total documents fi led in an election cycle since the 1984 cycle, as well as a 400 percent 

increase in itemized transactions entered into the disclosure databases since 

1984. The Commission has met these increases with a relatively static level of 

staffi ng though the use of management initiatives, productivity increases, and 

the use of technological improvements.

External factors that affect the general application of the FECA pose the greatest 

challenge to the FEC’s ability to achieve its mission. These factors are beyond 

the control of the Commission, and can include:

• Signifi cant increases or decreases in the level of competition in federal 

election campaigns, the volume and intensity of fund-raising for federal 

campaigns, and the general political attitude, interest, and awareness of the 

public and the electorate, which can greatly infl uence the tone and competitiveness of elections;

• Amendments to FECA, which could either close present “loopholes” in the 

law and strengthen the FEC’s enforcement and disclosure operations, or 

loosen the regulations regarding the limits and restrictions on fund-raising 

and reporting;

• Future Supreme Court rulings on contested elements of the FECA, e.g., the 

defi nition of “express advocacy,” the legal determination of what activity by 

a group triggers registration as a committee (and thus reporting requirements 

and limitation provisions). The BCRA amendments to the FECA resolved 

some issues, left others still open, and created some potential new issues to 

be resolved; and

• The solvency of the Presidential Election Campaign Fund and, as a consequence, the determination of Presidential candidates to either opt in or out 

of the public funding programs.

All of these factors can infl uence the amount of money to be regulated by the 

FEC each election cycle, which affects FEC workload by variations in the number of reports fi led and transactions to be processed, the volume of requests for 

information, data, and assistance, and the number of complaints fi led with the 

Commission. The status of the Presidential fund may become an active factor 

in future elections, because of declining public support of the check-off and 

absent any legislative fi x to index income into the fund.
18

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section I – Management’s Discussion and Analysis

FEC did not experience a major shortfall for the 2004 Presidential election because several major candidates decided not to take federal matching funds for 

the 2004 primaries; however, this may change in future elections. There was a 

brief shortfall, however, with the February 2004 primary matching payments for 

this election, which was restored with the February deposits to the fund. Shortfalls in 1996 and 2000 occurred for several reasons. First, the eligibility requirements for receiving matching funds have not been adjusted for infl ation since 

1974, thus allowing more candidates to qualify for matching funds. Second, the 

“front-loading” of the primary and caucus nominating process, which puts a 

premium on “early” fund-raising for Presidential candidates, resulted in a high 

volume of funds being raised in 1995 and 1999 that were eligible for matching 

payments in January of 1996 and 2000. Absent legislative action, the Public 

Funding program faces potential shortfalls because of declining participation in 

the check-off program, and the failure to index contributions to infl ation while 

the payouts are indexed. 

Authority for the Administrative Fine program will expire on December 31, 

2005, unless action is taken to extend it.

To address these concerns, in May 2004 the FEC submitted to Congress and the 

President 12 legislative recommendations, four of which are considered a priority by the Commission.

• Allow use of federal campaign funds donations to State and local candidates 

and for any other lawful purpose;

• Increasing the amount that authorized committees may give to authorized 

committees of other candidates;

• Modifying terminology of “reason to believe” fi nding; and

• Require electronic fi ling of Senate reports.
19

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

 Management’s Discussion and Analysis – Section I

Financial Performance Overview: 

Analysis of Financial Statements

The FEC notes that this is its fi rst audited fi nancial statement cycle, so comparative data is not available for prior years. The fi nancial statements and accompanying notes begin on page 39 in Section III.

FEC’s Consolidated Statement of Net Cost shows how the FEC used its resources 

in FY 2004. The Commission allocated its budget of $50,456,592 (including the 

OEA until the transfer of this offi ce to the newly established EAC). The following 

pie charts refl ect the FEC’s total obligations of $50,388,416 for FY 2004. FEC 

allocated its resources to its three programs (disclosure, compliance, and public 

fi nancing) based on the cost of the FTEs dedicated to each program. FTE fi gures 

were derived from the work hours entered by employees into the Management 

Information System (MIS). Costs for the offi ces and divisions that provided management and support services were allocated pro rata to the three programs. 

Imputed costs for future retirement and federal employees’ health benefi ts also 

were allocated pro rata to the three programs.

During the past four fi scal years, the FEC spent the bulk of its resources on the 

two main programs: Disclosure and Compliance. Spending and FTE dedicated 

to Public Financing decreases as the presidential audits and the related compliance cases are completed each four-year cycle. As would be expected, the 

resources are allocated mostly to Compliance as the Audit and OGC staff shift 

over to non-presidential compliance activities.

The percentage of staff dedicated to Disclosure is higher than the percentage of 

dollars as the staff for these activities tends to be lower graded and less expensive than the lawyers and auditors dedicated to Compliance. However, more 

resources and higher level staff has been dedicated to Disclosure through the IT 

initiatives, as higher level programmers, systems analysts and other IT staff have 

been required to implement the IT initiatives and keep the more sophisticated 

databases, electronic fi ling, and the enhanced website running.

Resources and FTE dedicated to the OEA elections efforts declined as the relocation of the OEA staff and resources to the new EAC grew more imminent. 

The major accomplishments of the FEC in FY 2001-2004 were covered in the 

Management’s Discussion and Analysis.

The pie charts in Figures 1.14 and 1.15 on page 20 show how dollars and FTEs 

were allocated organizationally among the three program areas for FY 2001–

2004. These charts are based on total obligations for each fi scal year.

For comparison purposes, FTE and funds allocated for program areas in the 

past four fi scal years are presented below. Election administration became the 

responsibility of the new Offi ce of Election Administration in mid-2004, so management and overhead costs were not allocated to OEA in the FY 2004 chart. 
20

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section I – Management’s Discussion and Analysis

The FEC did not allocate these costs until FY 2004, but for comparison purposes 

these costs were recalculated and allocated for FY 2001-2003 for the PAR.

The pie chart in Figure 1.10 on page 21 shows how the FEC utilized its budget 

(based on total obligations by object class) in FY 2004. FEC is a labor-intensive 

agency that does not provide grants; approximately 70-72 percent of the FEC’s 

budget has been devoted to personnel expenses over the past 4 years. Costs 

are aggregated into several categories: (1) personnel; (2) travel and transportation; (3) space rental and federal agency services; (4) equipment rental and 

maintenance; (5) telephone/postage, printing and publications; (6) IT contracts, 

hardware and software; (7) equipment purchases and supplies; and (8) all other, 

including, training, depositions, and other contracts. Full details on FEC’s FY 

2004 budget may be found at www.fec.gov.

Figure 1.8 Allocation (total obligations) by 

 Major Program Area 

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Figure 1.9 FTEs by Major Program Area 

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More than three-fourths of FEC’s budget and staffi ng resources have been devoted to 

its compliance and disclosure programs.
21

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

 Management’s Discussion and Analysis – Section I

Debt Collection Improvement Act 

FEC manages its delinquent debt pursuant to the Debt Collection Improvement 

Act (DCIA) of 1996. It refers delinquent debt greater than 90 days old to the 

Department of the Treasury (Treasury) for cross servicing and offset. In FY 2004, 

FEC’s net receivables (delinquent debt) totaled $95,358.

Prompt Payment Act 

The Prompt Pay Act requires federal agencies to make timely vendor payments 

and to pay interest penalties when payments are late. FEC’s on-time payment 

rate for FY 2004 was effectively 100%. 

Improper Payments Information Act

In accordance with OMB guidance, FEC reviewed all of its programs and activities to identify those, which may be susceptible for signifi cant erroneous payments. FEC does not make grants, and its non-personnel expenses are approximately $15 million. FEC is confi dent that improper payments are immaterial. 

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Figure 1.10 Dollar Allocation by Component, FY 2004 

Nearly three-fourths of FEC’s budget is devoted to personnel costs.
22

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section I – Management’s Discussion and Analysis

Grants Management

FEC does not administer any grant programs.

Systems, Controls, and Legal Compliance

This section describes select systems that are critical to FEC management, and 

discusses FEC’s capacity to comply with the federal laws and regulations that 

pertain to those systems and controls over its resources. While exempt from 

the Paperwork Reduction Act, FEC seeks to comply with the spirit and intent 

of a variety of federal fi nancial management systems requirements, including 

those articulated by the Chief Financial Offi cers Act, Federal Managers’ Financial Integrity Act (FMFIA), Government Management Results Act, Federal Financial Management Improvement Act, OMB Circular A-127, Financial Management Systems, and the Clinger-Cohen Act of 1996. FEC’s goals for its fi nancial 

management systems focus on ensuring effective internal controls, timely and 

reliable fi nancial and performance data for reporting, and system integration. Its immediate priority is to address the two weaknesses identifi ed by the 

auditors in the FY 2004 audit of FEC’s fi nancial statements. The auditors cited 

FEC’s fi nancial reporting process and FEC’s information technology as material 

weaknesses. The auditors’ report and management’s responses are presented in 

their entirety in Section III; the auditors’ fi ndings and FEC’s responses are summarized below:

• Financial Reporting: The auditors noted that FEC had to expend a tremendous amount of effort to “cleanup” its accounting records in order to prepare 

auditable fi nancial statements as of and for the year ended September 30, 

2004. They opined that weaknesses in four related areas (fi nancial statement 

preparation; timely recording, reconciliation and analysis; General Ledger 

system setup and posting model defi nitions; and the lack of an integrated 

fi nancial management system) constituted a material weakness. FEC believes 

that it took appropriate action before and during the audit period to address 

and mitigate the problems cited by the auditors to the extent that these issues do not constitute a material weakness.

• Information Technology: The auditors opined that weaknesses in four related 

information technology areas (entity-wide security program, controls to protect information, contingency plan, and software development and change 

controls), when viewed as a whole, constituted a material weakness. FEC 

acknowledges that the problems identifi ed are reportable conditions, but 

does not believe that the collective weight of these issues rises to the level 

of a material weakness. Management recognized these issues (in some cases 

prior to the beginning of the fi nancial statement audit) and has initiated corrective action. FEC maintains that it is not appropriate to fi nd the existence 
23

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

 Management’s Discussion and Analysis – Section I

of fi nancial management material weaknesses for systems and applications 

that do not directly impact on the accuracy and security of information used 

in the FEC fi nancial statements. 

FEC Financial Management System

The FEC is actively moving toward an integrated fi nancial system. The FEC 

has migrated to PeopleSoft fi nancials and is currently upgrading the system to 

comply with Government Accountability Offi ce standards and federal systems 

certifi cation requirements. In FY 2004 and continuing into FY 2005, the FEC 

engaged in a legacy system “off-load” process to migrate legacy systems over to 

the new PeopleSoft compatible, Oracle IT platform. In addition, since late FY 

2003 the FEC has been developing and implementing a budget preparation and 

MIS system that will be totally integrated with the fi nancial system and all other 

Oracle-based IT systems.

25

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

FEC Performance Report For FY2004 – Section II 

Overview of Strategic Plan

FEC currently operates under its FY 2004 – 2009 Strategic Plan, developed in 

accordance with the Government Performance and Results Act. This Strategic 

Plan provides the framework for how FEC will use its resources to implement 

and enforce the campaign fi nance laws during the 2004 (FY 2004-2005), 2006 

(FY 2006-2007) and 2008 (FY 2008-2009) election cycles. 

As noted in the Management’s Discussion and Analysis Section, the FEC is 

different from most agencies in that its natural workfl ow patterns do not begin 

and end neatly on October 1, the start of the new federal fi scal year. The fl ow 

of work for programs such as audits and enforcement actions can span two or 

three election cycles. As a result, work undertaken or completed in any fi scal 

year includes work that began in previous election cycles. 

The FEC achieved several successes in FY 2004 and expects to continue these 

successes and build upon them in FY 2005. This is contingent on the FEC 

receiving the budget requested for FY 2005 of $52,159,000 and 391 FTE. In addition, the FEC requires this level of funding to continue to implement changes 

required by the BCRA amendments to the FECA and to cope with the implications of recent court proceedings and rulings with regard to FEC regulations 

promulgated to implement the BCRA.

The FEC funding for FY 2004 and 2005 as proposed includes the multi-year 

IT initiative funding for the overall improvements to the FEC IT programs, and 

activities that require long range funding and implementation. Reductions in 

the FY 2005 budget, whether programmatic or due to across-the-board general 

reductions will endanger the success of these multi-year initiatives. It is therefore crucial for the FEC to receive requested funding levels for FY 2005 to enable the Commission to continue to build upon recent successes in disclosure, 

compliance and public fi nancing.

27

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

FEC Performance Report For FY2004 – Section II 

FY 2004 Performance Plan and Results

The FEC’s Strategic Plan identifi es performance goals by election cycle or other 

multi-year periods. The FY 2004 Performance Plan focuses on the results sought 

for only the fi scal year. While it is diffi cult to measure how the FEC ensures 

public faith in the political and campaign fi nance systems, FEC gauges its effectiveness through a series of performance indicators designed to measure 

performance in areas that promote confi dence in the election fi nance process. 

The FEC Offi ce of Election Administration was included in prior reports as a 

program area; it was transferred to the new Election Assistance Commission 

(EAC) in mid FY 2004, so it is not included in this year’s report.

Disclosure

The desired outcome is that the public can make informed choices in the electoral process because of full disclosure of the sources of candidate campaign 

funding. Disclosure goals focus on timely responses to requests for information 

and speed in making information available to the public. 

The table on page 30 summarizes FEC’s performance on its disclosure goals 

for FYs 2001–2004. It uses the color coding used in the Executive Branch 

Management Scorecards that track status and progress toward the goals of the 

President’s Management Agenda. Green indicates that FEC met or exceeded the 

goal; yellow indicates that FEC came very close to meeting the goal. Red would 

be used to indicate that the Commission failed to meet a goal by a signifi cant 

margin. FEC is proud that none of its results received a “red” score.

The key to disclosure is timely and accurate disclosure of campaign fi nance 

information. Two of the Commission’s key measures of this are the timeliness 

of data processed into the Commission disclosure database; and the timeliness 

of reviews of the reports to foster the voluntary improvement of the accuracy of 

the reports fi led. The two timeliness measures for processing information are: 

the median days required to process the reports (days to place 50 percent of the 

reports and itemized data on the public record), as depicted in Figure 1.11 on 

page 28; and the days from receipt of report to completion of processing for 95 

percent of all reports received, as depicted in Figure 1.12 also on page 28. 

Figure 1.13 on page 29 depicts those measures and compares numbers of 

documents and itemized transactions processed as of September 30 of the election year for the 2000, 2002 and 2004 election cycles.

The only 100 percent scrutiny of all disclosure reports results from the review 

of the reports by the Reports Analysis Division (RAD). The record workloads 

incurred since the 1992 cycle impacted on the timeliness of the review of the 

reports. Signifi cant backlogs of unreviewed reports developed, reaching over 

30,000 reports at one point in the 2000 cycle. However, RAD made signifi -

cant improvement in the timeliness of the review of reports in FY 2004 for the 

2004 cycle. It should also be noted that RAD and IT are engaged in a project to 
28

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section II – FEC Performance Report For FY2004

develop and implement an automated review system that will greatly enhance 

the breadth and scope of reports review and should further improve the timeliness of review.

A review of workload and performance data for the data processing and reports 

review activities of the Commission reveals improvement in the processing of 

reports. In addition to the timelier processing of reports, the FEC is more effi cient, with the coding of itemized transactions, reaching 169,000 per FTE in 

FY 2004 compared to 128,000 per FTE in FY 2002. This productivity increase 

is illustrated in Figure 1.14 on page 29. (Many of the FEC workloads vary in 

cycles including in odd and even fi scal year cycles due to the nature of when 

the election date falls in the fi scal year as noted previously.)

Figure 1.11 Median Days Required to Process Reports

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Figure 1.12 Days Needed to Complete Processing for 95% of Reports

As Figures 1.11 and 1.12 illustrate, electronic fi ling and other initiatives dramatically 

decreased the time it takes to process reports.

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29

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

FEC Performance Report For FY2004 – Section II 

Compliance

The desired outcomes are the perception by the regulated community that disclosure reports must be accurately and timely fi led and the impartial and timely 

enforcement of the FECA. Compliance goals focus on primarily on the number of 

actions accomplished.

The table on page 31 summarizes FEC’s performance on its compliance goals for 

FY 2001–2004. It uses the color coding used in the Executive Branch Management Scorecards that track status and progress toward the goals of the President’s 

Management Agenda. Green indicates that FEC met or exceeded its goal; yellow 

indicates that FEC came very close to meeting the goal. Red would be used to 

indicate that the Commission failed to meet a goal by a signifi cant margin. The 

FEC is proud that only one of its results received a “red” score.

Figure 1.13 Document Volumes and Process Effi ciency (through 9/30 of election year)

Th e numbers and timeliness of documents processed increased signifi cantly from 2002 to 2004

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Figure 1.14 Total Transactions Coded Per FTE, Fiscal Year

Electronic fi ling and IT increased productivity (number of transactions coded per employee)

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30

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section II – FEC Performance Report For FY2004 Performance Measure/Responsible FEC Component FY 2004 Volume and Results FY 2003 Volume and Results FY 2002 Volume and Results FY 2001 Volume and Results Make 99% of reports fi led at FEC available for public review within 48 hours by processing reports and statements (scan, fi lm, fi le, code, and enter summary data) (Public Disclosure/Data Systems) GREEN 87,500 reports and statements GREEN 90,500 reports and statements GREEN 71,000 reports and statements GREEN 81,100 reports and statements Code and enter itemized data from disclosure reports fi led, 95% complete within 45 days from the date the reports are received at the FEC; reduce backlog of unprocessed 2004 cycle reports to less than 2,000 (and all unprocessed reports to less than 3,000) (Data Systems) GREEN 44,800 reports and 1,660,000 transactions 2004: Backlog 378 99% 17 days to 95% complete 2002: Backlog 34 99% GREEN 56,500 reports 1,457,000 transactions 2004: Backlog 101 99% 19 days to 95% complete 2002: Backlog 66 99% GREEN 39,000 reports 1,125,000 transactions 2002: Backlog 2100 96% GREEN 49,000 reports 1,181,000 transactions 2002: Backlog 547 95% 18 days to 95% complete 2000: Backlog 312 99% 44 days to 95% complete Respond to 75% of requests for assistance from committees in fi ling reports within 72 hours. (Reports Analysis) GREEN 18,500 requests GREEN 20,200 requests GREEN 14,900 requests GREEN 12,500 requests Review 60% of all quarterly reports fi led within 90 days of receipt at Commission (75% within 120 days), complete 100% review of all reports fi led; reduce backlog of unreviewed 2004 cycle reports to less than 15,000, and less than 16,000 for all reports from all cycles (Reports Analysis) GREEN 44,600 reports 2004: 8,600 Backlog 85% of reviews completed 2002: 505 Backlog 99% of reviews completed GREEN 61,400 reports 2004: 7,300 Backlog 54% of reviews completed 2002: 424 Backlog 99% of reviews completed GREEN/YELLOW 40,100 reports 2002: 14,700 Backlog 70% of reviews completed 2000: 1,300 Backlog 99% of reviews completed GREEN/YELLOW 52,500 reports 2002: 10,700 Backlog 8.5% of reviews completed 2000: 4,300 Backlog 95% of reviews completed

Review 100% of all statements received GREEN 14,300 statements GREEN 14,300 statements GREEN 14,300 statements GREEN 14,300 statements

Prepare RFAI’s for 100% of all committees’ reports reviewed which require them, 

60% within 90 days of receipt at Commission GREEN 9,700 RFAI’s GREEN 11,300 RFAI’s YELLOW 8,800 RFAI’s YELLOW 11,500 RFAI’s

Respond to 100% of all requests within 72 hours

 (Public Disclosure, Press Offi ce, Information)

Requests for general information on FEC and FECA

(14 days for written requests)

Calls and requests for copies of forms, the FECA and Regulations, 

and Commission brochures and guidelines

GREEN

23,000 Public Records

34,100 Printouts

51,400 Press/Information

14,800 Orders 

GREEN

24,300 Public Records

37,800 Printouts

37,600 Press/Information

11,300 Orders

GREEN

22,000 Public Records

29,000 Printouts

37,900 Press/Information

4,100 Orders

GREEN

23,800 Public Records

30,300 Printouts

48,600 Press/Information

9,900 Orders

Comply with statutory deadlines for 95% of all FOIA requests and appeal received; 

respond to all requests for legal assistance from FOIA Offi cer (OGC)

GREEN

30 Requests

YELLOW—need data on

FOIA appeals and legal

GREEN

26 Requests

YELLOW—need data on

FOIA appeals and legal

GREEN

20 Requests

YELLOW—need data on

FOIA appeals and legal

GREEN

38 Requests

YELLOW—need data on

FOIA appeals and legal

Enable Commission to meet statutory deadlines for issuance or conclude 

action on Advisory Opinions for 95% of all 60 and 20 day deadlines, 

estimated 40 in FY 2002, and meet 45-60 day target for AO reconsiderations, 

15 days for defi cient request notices (OGC)

GREEN

47 Advisory Opinions

GREEN

28 Advisory Opinions

GREEN

18 Advisory Opinions

GREEN

28 Advisory Opinions

Maintain targets for completion of all rule-making petitions fi led pursuant to 11 CFR 

Part 200, complete revisions to sections of Regulations in FY 2004 (OGC) GREEN

GREEN

Massive Effort on BCRA

Implementation Deadlines

GREEN

Massive Effort on BCRA

Implementation Deadlines

GREEN

Notify all fi lers of upcoming reporting periods, and provide copies of forms as a 

pre-reporting notice; publish monthly FEC Record (Information) GREEN GREEN GREEN GREEN

Publish statutorily required Annual Report and publish the following: 

FEC Disclosure Forms,

FECA (the Act), FEC Regulations and updates, 11 CFR, 

Campaign Guides/Brochures (Information)

GREEN GREEN GREEN GREEN

Figure 1.15 FY 2004 Performance Plan Results – Disclosure

YELLOW 71 days to 95% complete YELLOW 71 days to 95% complete

YELLOW 50 days to 95% complete

2000: Backlog 175 99%

45 days to 95% complete
31

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

FEC Performance Report For FY2004 – Section II 

Performance Measure/Responsible FEC 

Component

FY 2004

Volume and Results

FY 2003

Volume and Results

FY 2002

Volume and Results

FY 2001

Volume and Results

Refer committees for potential audits (RAD) 75 committees for potential audits from 

the 2002 election cycle in FY 2003-2004 (50 in FY 2003 and 25 in FY 2004)

GREEN/YELLOW

1 Referral—Total is one less than 

75, but completed early; in FY 2003 

rather than 2004.

GREEN

73 Referrals

YELLOW

1 Referral; Less than 75 per full 

2000 Cycle

GREEN

52 Referrals

Refer committees for potential enforcement actions (RAD) 35 committees; complete all 

enforcement referrals within the second FY of the election cycle (all of 2004 cycle by 

close of FY 2005) (RAD) 

GREEN

43 referrals

YELLOW

17 Referrals

YELLOW

15 Referrals

YELLOW

11 Referrals

Publish committees that fail to fi le reports (RAD) OAR—Admin Fines Program GREEN GREEN GREEN GREEN

Complete the expanded number of 438(b) audits (Audit) Expand from 20-25 to 40-

45 per Election Cycl: 20-25 authorized committee audits and 20-25 unauthorized 

committee audits; initiate an estimated 45-50 total audits for the 2002 cycle; initiate all 

authorized committee audits within 6 months of the election 

GREEN 32 Audits Completed

Goal of 50 for 2002 Cycle Achieved

GREEN 21 Audits Completed

Goal of 50 for 2002 Cycle Achieved

GREEN 17 Audits Completed

Goal of 25 for 2000 Cycle Achieved

GREEN 15 Audits Completed

Goal of 25 for 2000 Cycle Achieved

Maintain the Enforcement Priority System (EPS) to identify and assign the more 

signifi cant enforcement cases, more rapidly dispose of less signifi cant cases, and 

manage limited staff resources: (OGC) 

Process and close 200 cases in FY 2004, 50% with substantive Commission action 

Maintain monthly average total caseload of 175 to 200 cases, with average ratio of 

50% active to 50% inactive cases (OGC) 

GREEN

Substantive and Active Cases 

50% or better

YELLOW

GREEN

Substantive and Active Cases 

50% or better

GREEN

Substantive and Active Cases 

50% or better

GREEN

Substantive and Active Cases 

50% or better

GREEN

100 cases closed

Respond to RAD requests for review of debt settlement plans and administrative 

terminations, complete review of complex debt settlement plans; complete debt 

settlements and administrative terminations (OGC) Complete 25 debt settlements and 

500 administrative terminations

GREEN/YELLOW

7 Debt Settlements

419 Admin Terminations

GREEN/YELLOW

12 Debt Settlements

462 Admin Terminations

GREEN/YELLOW

22 Debt Settlements

630 Admin Terminations

GREEN/YELLOW

36 Debt Settlements

60 Admin Terminations

File all litigation pleadings in district court for offensive litigation of Commission 

determination to fi le suit, and meet all other time limits for briefs and other pleadings 

imposed by the rule or order of the courts; estimated 10-15 defensive suits initiated. 

(OGC)

GREEN File pleadings within 

90 days of Commission 

determination to fi le suit, 

Initiate 10-15 defensive suits

GREEN

Massive efforts to meet BCRA 

Challenge Deadlines at SCOTUS

GREEN

Massive efforts to meet BCRA 

Challenge Dead-lines at SCOTUS

GREEN

Make at least one attempt to initiate settlement prior to commencement of suit for each 

case early enough to permit consideration by Commission of any settlement proposal 

prior to target date of initiation of suit (OGC) 

YELLOW

Virtually no Offensive

Suits Filed—but case can be 

made that successful efforts for 

conciliations avoided suits. See 

also measure below.

YELLOW

Virtually no Offensive

Suits Filed—but case can be 

made that successful efforts for 

conciliations avoided suits.

YELLOW

Virtually no Offensive

Suits Filed—but case can be 

made that successful efforts for 

conciliations avoided suits.

YELLOW

Virtually no Offensive

Suits Filed—but case can be 

made that successful efforts for 

conciliations avoided suits.

Ensure that all pleadings and briefs represent the Commission’s positions 

persuasively, by reporting on status of each active litigation case once a month, and by 

maintaining a system to obtain satisfaction of all judgments imposing civil penalties 

(OGC)

GREEN

Successful increase in civil penalties 

collected.

GREEN

Successful increase in civil penalties 

collected.

GREEN

Successful increase in civil penalties 

collected.

GREEN

Successful increase in civil penalties 

collected.

Permits operation of the ADR and administrative fi ne programs with 3 FTE each o 

process non-and/or late-fi ler cases and less salient cases; frees enforcement staff in 

OGC to work on more complex, substantive cases for potential enforcement action 

(RAD and ADR, OAR)

GREEN

41 closed ADR Cases; 

26 Substantive

137 Admin fi nes collected

GREEN

50 closed ADR Cases; 

31 Substantive

394 Admin fi nes collected

GREEN

18 closed ADR Cases; 

17 Substantive

117 Admin fi nes collected

GREEN

270 closed ADR Cases; 

25 Substantive

361 Admin fi nes collected

Enhance automated review and data mining capabilities; full productivity and workload 

impacts not expected until 2006 cycle (RAD and Data)

YELLOW

Developmental work on Automated 

Review Process and Data Mining

YELLOW

Developmental work on Automated 

Review Process and Data Mining

YELLOW

Developmental work on Automated 

Review Process and Data Mining

YELLOW

Developmental work on Automated 

Review Process and Data Mining

Utilize additional staff in RAD and OGC acquired due to BCRA impacts to ensure that 

new provisions of the FECA amended by BCRA are complied with, properly reported, 

and enforced (RAD and OGC)

GREEN

ITD, RAD, BCRA Staff hired

RED

YELLOW

ITD, RAD, BCRA Staff mostly hired NO BCRA Staff Increment NO BCRA Staff Increment

Figure 1.16 FY 2004 Performance Plan Results – Compliance

YELLOW

Less than 100 cases closed

YELLOW

Less than 100 cases closed

YELLOW

Less than 100 cases closed

RED

OGC BCRA staff not fi lled

RED

OGC BCRA staff not fi lled
32

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section II – FEC Performance Report For FY2004

The FEC has engaged in efforts to improve its general compliance program to 

foster the image that the FECA is fairly, impartially, and timely enforced, and 

that there are real consequences to not complying with the law. The initiatives 

have included the expansion of the enforcement presence through the use of 

the Administrative Fine and ADR programs. These programs have generated 

more streamlined enforcement actions, produced substantive resolution to cases that would have been dismissed or never activated, and fostered compliance 

with the fi ling requirements and deadlines with regularized, real consequences 

for failing to fi le reports on time.

In addition, the two programs (Administrative Fine and ADR) have allowed 

OGC to focus its enforcement resources on more substantive cases, and improve the timeliness of cases closed. The measures of these initiatives include: 

the number of cases closed, the percentage of cases closed with substantive 

action rather than dismissed, the days elapsed to close cases, and the total and 

average amount of civil penalties and fi nes collected. The last measure is an attempt to quantify the substantive nature of cases, assuming that larger fi nes and 

penalties are indicative of more major violations of the FECA.

While the total cases closed has decreased for OGC, the percentage closed 

with substantive action has increased markedly, from an average of 45 percent 

in FYs 1995-2002 to 85 percent in FY 2004. The total cases closed decreased 

partially because some of the less substantive cases were transferred to the new 

Administrative Fine and ADR programs, allowing the Offi ce of General Counsel 

to concentrate its resources on more salient cases. 

Administrative fi nes and ADR cases are closed with signifi cantly less time than 

for OGC cases. Administrative fi nes cases for late and non-fi lers take less time 

to complete, especially when measured from the date a Reason to Believe 

determination was made to the fi nal determination date. The diffi culties associated with the mail processing and delivery post-9/11 had a somewhat adverse 

impact on the processing of these cases. However, there is evidence that the 

program is improving fi ling timeliness and compliance, and that the cases are 

most likely to derive from the non-electronically fi led reports (also the smaller 

committees in terms of dollar activity.) ADR cases have shown improvement in 

timeliness for those cases not dismissed and generally take less time to complete than traditional enforcement cases.
33

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

FEC Performance Report For FY2004 – Section II 

The RAD staff has utilized technology to reduce the time required to process 

requests for additional information, as shown in Figure 1.17 below. 

Overall, civil monetary penalties have increased signifi cantly from FY 2001 to 

FY 2004, as illustrated in Figure 1-18. Administrative Fine and ADR programs 

have allowed FEC to effectively process late and non-fi ling cases that in the past 

might not have received attention. 

Figure 1.17 RAD FTE Hours Per RFAI, Fiscal Year

Th e RAD staff continued to decrease the time it takes to 

process Requests For Additional Information

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Figure 1.18 Fines and Penalties Assessed, Fiscal Year

By focusing on more salient cases, FEC has dramatically increased the civil penalties assessed

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34

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section II – FEC Performance Report For FY2004

The FEC has increased the number of non-Presidential audits, known as Title 

2 audits, from 20-25 per election cycle to 45-50 per cycle in the 2002 cycle. 

These results were evident in FYs 2003–2004, when the number of Title 2 audits more than doubled from FYs 2001–2002.

Public Financing

The desired outcomes of the public funding program are to process timely and 

accurately requests for federal funds to qualifi ed presidential candidates and to 

ensure impartial and timely enforcement of the FECA.

Due to the timing of the election cycle, the FEC’s goals for FY 2004 in this area 

were limited. The Commission reviewed all matching fund requests and certifi ed for payment within required time frames. It also met its earlier goal of completing by December 2003 all repayment matters within three years of general 

election for the 2000 election.

Results from FYs 2001- 2003

The FEC achieved its goals for public fi nancing in accordance with the following time frames established in the Commission’s Strategic Plan.

Within two years of each Presidential general election, complete the certifi cation of payments to and audits of publicly funded candidates in Presidential 

elections:

• Process monthly certifi cation requests for federal matching funds (estimated 

10-12 candidates in a Presidential election with an incumbent, 15-17 candidates in an “open” Presidential election);

• Audit primary candidates receiving federal matching funds (same criteria for 

number of candidates);

Figure 1.19 Number of Title 2 Audits Completed, Fiscal Year

Th e number of audits completed has doubled since FY 2001

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35

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

FEC Performance Report For FY2004 – Section II 

• Audit at least four (major) national party convention and host committees 

receiving federal funds for nominating conventions, and any eligible minor 

party convention committees; and

• Audit general election candidate committees of two major parties (and any 

eligible minor parties).

Within three years of each Presidential general election, complete legal review 

of Presidential audits:

• Review legal issues arising from primary audits, at least four convention 

audits, and two or three general election audits;

• Resolve repayment questions for committees receiving federal funds (always 

meeting three year statute of limitations);

• Initiate enforcement cases involving Presidential committees referred through 

internal referral process or complaint; and

• Provide Congress with a report on the public funding programs.

Within four years of each Presidential general election, complete initial actions 

on enforcement cases involving Presidential committees referred through internal process or complaint.

All 2000 cycle Presidential audits were completed by the close of 2002; the 

FEC target is two years from the date of the general election. The FEC goal will 

be FY 2006 for the 2004 cycle audits.

All 2004 certifi cations for matching funds were processed in a timely manner. 

As noted, the FEC has warned in the A-123 process that the Presidential funds 

are incurring shortfalls due to lack of indexing of contributions into the fund 

for infl ation, while the payments are indexed for infl ation. In addition, public 

support for the check-off fund has been eroding. The FEC has requested educational program funding to explain the check-off and has made several legislative recommendations to “fi x” the program in the past but has not received any 

of the requested funding. The program will require legislative changes to avoid 

signifi cant shortfalls in future elections; all shortfalls to date have been confi ned 

to the primary matching fund program and have been made good reasonably 

soon in the cycle. Future shortfalls could impact on the general election and/or 

on the primary program in a major fashion.
36

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section II – FEC Performance Report For FY2004

Other FY 2004 Performance Results

IT development and enhancements assist the FEC in meeting its objectives 

and goals. The two major on-going initiatives are the IT Enhancements and the 

Electronic Filing projects. During FY 2004, the Commission continued to provide point of entry for fi ling House disclosure documents at the FEC; scan all 

documents and transmit images to House Offi ce in usable format for that offi ce; 

work with Senate Offi ce in making Senate documents available for disclosure; 

and enhance and upgrade FEC imaging system and all web-based disclosure 

applications. FEC also continued its multiyear enhancement and upgrade of IT 

systems for all Commission Offi ces and Divisions; migration to client/server environment; and implementation of document management system; and maintained its new fi nance and accounting system. The Commission developed a 

Data Mining program to take advantage of the enhanced disclosure system and 

to enhance the automated review process in RAD.

The Commissioner and management staff continued to comply with government-wide laws and regulations for budget, planning, personnel, Equal Employment Opportunity, and other issues affecting federal agencies; and to provide 

guidance and support to the staff in meeting the FEC mission and achieving 

agency objectives and goals.

The Department of Agriculture, which performs the payroll function for FEC, 

underwent a Statement of Auditing Standards (SAS) 70 system review, which 

noted several reportable conditions that did not affect FEC. These audits, 

completed under the guidelines of the American Institute of Certifi ed Public 

Accountants’ SAS Number 70, Service Organizations, provide an opinion on 

the internal controls placed in operation and include tests of operating effectiveness. 

Program Assessment Rating Tool (PART) Reviews

During FY 2004, FEC participated in one PART review by OMB. FEC’s Compliance-Enforcement program received an overall rating of “Results Not Demonstrated.” OMB found that the program’s purpose is clear and addresses a 

specifi c public need. The program’s annual performance measures demonstrate 

progress toward meeting FEC’s strategic goals, and it annually meets goals 

designed to promote voluntary compliance. OMB noted that the program lacks 

long-term performance measures, does not have a history of regular, independent evaluations, and needs to better link its budget and performance goals. 

The Commission is working to address these concerns.
37

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

FEC Performance Report For FY2004 – Section II 

Data Sources and Quality

The FEC has a planning and budgeting system based on a detailed Management Information System (MIS), and is driven by program-based workloads and 

activity data, outputs, and productivity measures. In an ongoing evaluation 

process, the monthly MIS reports and fi scal year-based productivity measures 

are used to evaluate program effi ciency and effectiveness. The FEC has also 

married the A-123 and A-127 processes, under the Federal Managers’ Financial 

Integrity Act, to ongoing program management activities, and relates the annual A-123 reports to the FEC budget requests. 

The evaluation of program resources, mainly staff resources, and the resulting 

program outputs and productivity measures are used in the internal planning 

and budget formulation processes. Commission management plans and budget requests are workload-driven, and related to resource levels and expected 

program activity levels.

As a personnel-intensive agency, about 70 percent of the Commission’s resources are staff costs, and the remaining 30 percent represents mainly rent 

and other direct support for that staff. Using the MIS and summary MIS reports, 

both produced on a monthly basis, all workloads, program outputs, productivity, and effectiveness and effi ciency are being monitored, in monthly management reports. Several other tracking systems monitor the status of reports 

processing (fi ling, fi lming, data coding and entry, and reports review), enforcement and litigation activities, Advisory Opinions and regulatory rule making, 

and audit progress. The Enforcement Priority System continually adjusts active 

enforcement case loads to match available resources.

A major, multiyear effort to institute a case management system for OGC to 

track enforcement cases resulted in the system becoming fully operational in 

FY 2003. This system monitors case status and tracks staff time by case for all 

OGC programs, not just enforcement. The implementation of the case management system provides a signifi cant tool for the FEC to monitor resource usage 

and case progress. 

FEC’s performance goals are tied directly to the Commission’s workload and 

activity measures and the level of funding requested. The ongoing program 

activity monitoring and output measurement efforts enable the Commission to 

determine if its performance goals are being achieved. This provides the basis 

for future evaluation efforts.

39

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Auditor’s Report - Section III

Message from the CFO

The FEC is pleased to present the Federal Election Commission’s Performance and 

Accountability Report (PAR) for FY 2004, prepared under the guidance of the Offi ce of Management and Budget’s (OMB) Bulletin No. 01-09. This Performance and 

Accountability Report contains the Commission’s fi nancial statements, as required 

by the Accountability of Tax Dollars Act of 2002; a section of performance information, and a report on the Commission’s material weaknesses as identifi ed in the 

audit report.

The Accountability of Tax Dollars Act of 2002 extended the requirements for the 

preparation of fi nancial statements and for a full fi nancial audit of the agency’s 

fi nancial management systems and internal management controls down to agencies the size of the Commission. The FEC requested and received a waiver from this 

requirement in FY 2003, as did most of the agencies newly required to undergo 

fi nancial audits, to give the FEC time to prepare for the fi nancial audit. Therefore, 

this report refl ects the fi rst year that the FEC was required to produce fi nancial statements and undergo a full fi nancial audit.

The Commission is pleased that the FEC received a fully unqualifi ed (clean) 

opinion from the Independent Certifi ed Public Accounting fi rm of Clifton Gunderson LLP, which was engaged by the FEC Offi ce of Inspector General to audit the 

consolidated fi nancial statements included in this report. The unqualifi ed opinion 

indicates that the FEC’s fi nancial statements present fairly the fi nancial position of 

the Federal Election Commission.

The FEC committed signifi cant resources to improving our fi nancial systems and 

preparing for the fi rst year audit. We acquired the services of an accounting fi rm 

to review our FY 2003 fi nancial systems and statements, and to prepare for the FY 

2004 audit and the preparation of full fi nancial statements. The accounting fi rm 

also assisted Commission staff in their successful achievement of an unqualifi ed 

audit opinion in the fi rst year of full fi nancial audits.

The FEC is also engaged in ongoing efforts to more fully integrate our fi nancial 

management systems and to upgrade our fi nancial accounting system, which was 

acquired and installed over the previous fi scal years. The past and on-going commitment of resources to enhance and improve the FEC fi nancial management 

systems is proof of the agency’s continuing efforts to ensure that the Commission 

has sound and effective fi nancial management controls systems.

This report also contains a discussion of key performance measures that depict the 

Commission’s processing of record levels of campaign fi nance reports and data 

from those reports in the most recent election cycles. New records of total campaign spending have been set each election cycle since the 1992 election. The FEC 

has managed to improve our timeliness of data processing and review of reports, 

and to expand and improve our disclosure of reports and data in the face of these 

record levels of campaign fi nance activity. The FEC has improved our compliance 

programs by expanding our enforcement presence and increasing the number of 

cases closed with substantive actions. 
40

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section III – Auditor’s Report

The Commission has also successfully implemented the recent major amendments 

to the Federal Election Campaign Act (FECA), the Bipartisan Campaign Reform Act 

(BCRA). The FEC met stringent deadlines both for promulgating implementing regulations and preparing for legal reviews of the substance of the legislation. The legal 

ramifi cations of these rule-making efforts and court cases extended into FY 2004 

and will continue to require a signifi cant commitment of resources.

The FEC has achieved these successes with limited increases in staff and resources 

through management initiatives to improve performance, enhanced use of IT resources, and the implementation of electronic fi ling of campaign fi nance disclosure 

reports. We have also instituted an administrative fi ne program to improve timely 

fi ling.

While the audit did report some material weaknesses and reportable conditions, 

the FEC is engaged in efforts to correct any weaknesses and improve our fi nancial 

management systems. The FEC also notes that our fi nancial management controls 

generally comply with the FMFIA and that there are no weaknesses that we believe 

place our overall system of management controls at serious risk of jeopardizing the 

soundness of our fi nancial statements.

FEC managers are required to include concern for internal management controls in 

their on-going management duties and responsibilities, and to annually report any 

potential vulnerabilities or weaknesses through a process of risk assessment of their 

programs. In keeping with OMB circulars and directives, the FEC has emphasized 

integrating management controls concerns with general management responsibilities.

This report refl ects the results of the audit of the fi nancial statements, our performance in meeting our mission and our objectives for our major programs, and our 

concern for sound fi nancial and program management. Taken as a whole, these 

efforts refl ect the Commission’s goal to effectively and effi ciently meet our mission 

responsibilities, and the FEC’s efforts to maintain, and enhance and improve, sound 

fi nancial management controls.

We are pleased to report that the FEC’s system of management controls, taken as a 

whole, are in compliance with the FMFIA and the Accountability Act, and provide 

reasonable assurance against waste, fraud, and abuse of agency resources. They 

also provide reasonable assurance that the Commission is using resources effectively and effi ciently in meeting our mission responsibilities. This report refl ects 

the FEC’s continual commitment to improving and enhancing our management 

controls systems.

John C. O’Brien

Acting Deputy Staff Director for Management

Acting Chief Financial Offi cer
41

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Auditor’s Report - Section III

Independent Auditor’s Report

Office of Inspector General 

MEMORANDUM

TO: The Commission 

FROM: Inspector General 

SUBJECT: Audit of the Federal Election Commission’s Fiscal Year 2004 Financial 

Statements 

DATE: December 16, 2004 

This letter transmits the final audit report of the Federal Election Commission’s (FEC) fiscal year 

(FY) 2004 financial statements. In accordance with the Accountability of Tax Dollars Act of 

2002, the FEC prepared financial statements in accordance with Office of Management and 

Budget (OMB) Bulletin No. 01-09, Form and Content of Agency Financial Statements, as 

amended, and subjected them to audit. 

The Chief Financial Officers Act of 1990 (Public Law 101-576, commonly referred to as the 

“CFO Act”), as amended, requires the FEC Office of Inspector General (OIG), or an independent 

external auditor as determined by the Inspector General, to audit the agency financial statements. 

Under a contract monitored by the OIG, Clifton Gunderson LLP (CG-LLP), an independent 

certified public accounting firm, performed the audit of the FEC’s FY 2004 financial statements. 

In the report dated December 8, 2004, CG-LLP issued an unqualified opinion on the FEC’s 

financial statements. The OIG commends the FEC for the noteworthy accomplishment of 

receiving an unqualified opinion, the first year the FEC was subject to the requirements of the 

Accountability of Tax Dollars Act of 2002. Although the OIG recognizes this significant 

accomplishment, it is important to recognize that a tremendous amount of effort by FEC 

management, staff, and consultants was necessary to achieve the unqualified opinion. In 

addition, the auditor report on internal control includes both reportable conditions and material 

weaknesses, and numerous audit recommendations that must be addressed by management. 

FEDERAL ELECTION COMMISSION

Washington, D.C. 20463
42

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section III – Auditor’s Report

2

Audit Process

CG-LLP conducted the audit 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 OMB Bulletin 

No. 01-02, Audit Requirements for Federal Financial Statements, as amended. The results of the 

financial statement audit are detailed in three reports: report on compliance with laws and 

regulations; report on internal control; and the opinion on the financial statements. 

Report on Compliance with Laws and Regulations

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 with which could have a direct and material effect on the 

determination of financial statement amounts, and certain laws and regulations specified in OMB 

Bulletin No. 01-02, such as the Anti-Deficiency Act and the Prompt Payment Act. 

The results of CG-LLP’s tests of compliance with laws and regulations described in the audit 

report disclosed no instances of noncompliance with the laws and regulations that are required to 

be reported under Government Auditing Standards and OMB Bulletin No. 01-02. 

Report on Internal Control

CG-LLP’s planning and performance of the audit included consideration of the FEC’s internal 

control over financial reporting. The CG-LLP auditors obtained an understanding of the FEC’s 

internal control; determined whether internal controls had been placed in operation; assessed 

control risk; and performed tests of controls in order to determine auditing procedures for the 

purpose of expressing an opinion on the financial statements. The auditors limited their internal 

control testing to those controls necessary to achieve the objectives described in OMB Bulletin 

No. 01-02 and consequently CG-LLP did not provide an opinion on internal control. 

Internal control as it relates to the financial statements, is a process, affected by agency’s 

management and other personnel, designed to provide reasonable assurance of the following:

(1) transactions are properly recorded, processed, and summarized to permit preparation of the 

financial statements and assets are safeguarded against loss from unauthorized acquisition, use or 

disposition; (2) transactions are executed in accordance with laws governing the use of budget 

authority and other laws and regulations that could have a direct and material effect on the 

financial statements and other laws and regulations identified by OMB; and (3) transactions and 

other data that support reported performance measures are properly recorded, processed, and 

summarized to permit the preparation of performance information in accordance with criteria 

stated by management. 
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In performing the testing of internal control necessary to achieve the objectives in OMB Bulletin 

No. 01-02, the auditors identified matters relating to significant deficiencies in the design or 

operation of FEC’s internal control. The testing of internal control identified both reportable 

conditions and material weaknesses. The American Institute of Certified Public Accountants 

(AICPA) categorizes reportable conditions as matters relating to significant deficiencies in the 

design or operation of the internal control, which in the judgment of the auditor, could adversely 

affect the agency’s ability to record, process, summarize, and report financial data consistent 

with the assertions by management in the financial statements. Material weaknesses are 

reportable conditions in which the design or operation of one or more of the internal control 

components does not reduce to a relatively low level the risk that misstatements in amounts that 

would be material in relation to the financial statements being audited may occur and not be 

detected within a timely period by employees in the normal course of performing their assigned 

functions.

CG-LLP identified material weaknesses in the areas of: 

� Financial Reporting 

� Information Technology 

CG-LLP identified reportable conditions, not considered to be material weaknesses, which 

include the following: 

� Cost Accounting System and Processes 

� General Property and Equipment 

� Payroll

Opinion on the Financial Statements

CG-LLP audited the balance sheet of the FEC as of September 30, 2004, and the related 

statements of net cost, changes in net position, budgetary resources, financing, and custodial 

activity for the year then ended. In the report dated December 8, 2004, CG-LLP issued an 

unqualified opinion on the FEC’s financial statements. 

The audit included an examination, on a test basis, 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. 

Audit Follow-up

The report on internal control contains numerous recommendations to address weaknesses found 

by the auditors. Management was provided a draft copy of the audit report for comment and 

CG-LLP reviewed management’s comments. Although CG-LLP stands by the report and the 
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weaknesses detailed, the OIG and CG-LLP intend to work with management through the followup and audit process to ensure the weaknesses are addressed satisfactorily. In accordance with 

OMB Circular No. A-50, Audit Followup, revised, and based on an agreement with the Offices 

of the Staff Director and General Counsel, the Staff Director or designee shall develop an action 

plan for corrective action of the recommendations. The action plan is to set forth specific action 

planned to implement the recommendations and the schedule for implementation. 

OIG Evaluation of Clifton Gunderson LLP’s Audit Performance

In connection with the OIG’s contract with CG-LLP, the OIG reviewed CG-LLP’s reports and 

related documentation and inquired of its representatives. Specifically, we performed the 

following: (1) reviewed CG-LLP’s approach and planning of the audit; (2) evaluated the 

qualifications and independence of the auditors; (3) monitored the work of the auditors 

throughout the audit; (4) examined audit documents and audit reports to ensure compliance with 

Government Auditing Standards and OMB Bulletin No. 01-02; and (5) performed other 

procedures we deemed necessary. 

The OIG’s review of CG-LLP’s work, as differentiated from an audit in accordance with 

Government Auditing Standards issued by the Comptroller General of the United States, was not 

intended to enable us to express an opinion on the FEC’s financial statements; provide 

conclusions about the effectiveness of internal control; or reach conclusions on whether FEC’s 

management substantially complied with laws and regulations related to the audit. CG-LLP is 

responsible for the opinion and conclusions reached in the attached reports dated December 8, 

2004. The OIG review disclosed no instances where CG-LLP did not comply, in all material 

respects, with Government Auditing Standards.

If you should have any questions, please contact my office on (202) 694-1015. We appreciate 

the courtesies and cooperation extended to Clifton Gunderson LLP and the OIG staff during the 

conduct of the audit. 

 Lynne A. McFarland 

 Inspector General 

Attachments 

Cc: Staff Director 

 Acting Chief Financial Officer 

 Accounting Officer 

 Information Technology Director 

 Deputy Staff Director for Audit and Review 
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Centerpark I

4041 Powder Mill Road, Suite 410 

Calverton, Maryland 20705-3106

tel: 301-931-2050 

fax: 301-931-1710 

www.cliftoncpa.com Offices in 15 states and Washington, DC

Independent Auditor’s Report 

To the Inspector General of the 

 Federal Election Commission 

We have audited the balance sheet of the Federal Election Commission (FEC) as of 

September 30, 2004, and the related statements of net cost, changes in net position, budgetary 

resources, financing, and custodial activity for the year then ended. These financial statements 

are the responsibility of FEC’s management. Our responsibility is to express an opinion on these 

financial statements based on our audit. 

We conducted our audit 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. 01-02, 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 principal 

statements’ presentation. We believe our audit provides a reasonable basis for our opinion. 

In our opinion, the financial statements referred to in the first paragraph present fairly, in all 

material respects, the financial position of FEC as of September 30, 2004, and its net cost, 

changes in net position, custodial activity, budgetary resources and reconciliation of net cost to 

budgetary obligations for the year 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 

December 8, 2004 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. 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. 
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Our audit was conducted for the purpose of forming an opinion on the basic financial statements 

taken as a whole. The Management Discussion and Analysis and Required Supplementary 

Information are not a required part of the basic financial statements, but are supplementary 

information required by OMB Bulletin No. 01-09, Form and Content of Agency Financial 

Statements. We have applied certain limited procedures to such information, which consisted 

principally of inquiries of FEC management regarding the methods of measurement and 

presentation of the supplementary information. However, we did not audit the information and 

express no opinion on it. 

Calverton, Maryland 

December 8, 2004
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Centerpark I

4041 Powder Mill Road, Suite 410 

Calverton, Maryland 20705-3106

tel: 301-931-2050 

fax: 301-931-1710 

www.cliftoncpa.com Offices in 15 states and Washington, DC

Independent Auditor’s Report on Internal Control 

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, 2004, and have issued our report dated December 8, 2004. We 

conducted our audit 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. 01-02, Audit Requirements for Federal Financial Statements, as 

amended.

In planning and performing our audit, we considered FEC’s internal control over financial 

reporting by obtaining an understanding of FEC’s internal control; determined whether internal 

controls had been placed in operation; assessed control risk; and performed tests of controls in 

order to determine our auditing procedures for the purpose of expressing our opinion on the 

financial statements. We limited our internal control testing to those controls necessary to 

achieve the objectives described in OMB Bulletin No. 01-02. We did not test all internal 

controls relevant to operating objectives 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. The objective of our audit was not to provide assurance on internal control. 

Consequently, we do not provide an opinion on internal control. 

Our consideration of the internal control over financial reporting would not necessarily disclose 

all matters in the internal control over financial reporting that might be reportable conditions. 

Under standards issued by the American Institute of Certified Public Accountants, reportable 

conditions are matters coming to our attention relating to significant deficiencies in the design or 

operation of the internal control that, in our judgment, could adversely affect the agency’s ability 

to record, process, summarize, and report financial data consistent with the assertions by 

management in the financial statements. Material weaknesses are reportable conditions in which 

the design or operation of one or more of the internal control components does not reduce to a 

relatively low level the risk that misstatements in amounts that would be material in relation to 

the financial statements being audited may occur and not be detected within a timely period by 

employees in the normal course of performing their assigned functions. Because of inherent 

limitations in internal controls, misstatements, losses, or noncompliance may nevertheless occur 

and not be detected. However, we noted certain matters discussed in the following paragraphs 

involving the internal control and its operation that we consider to be reportable conditions and 

material weaknesses. 
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Finally, with respect to internal control related to performance measures reported in FEC’s 

Performance and Accountability Report, we obtained an understanding of the design of 

significant internal controls relating to the existence and completeness assertions, as required by 

OMB Bulletin No. 01-02, as amended. Our procedures were not designed to provide assurance 

on internal control over reported performance measures, and, accordingly, we do not provide an 

opinion on such controls. 

********************************

MATERIAL WEAKNESSES

I. Financial Reporting

The Accountability of Tax Dollars Act of 2002 extends to FEC a requirement to prepare 

and submit to the Congress and the Director of the OMB an audited financial statement. 

Fiscal year 2004 is the first year FEC is preparing and submitting audited financial 

statements. 

FEC has attained a major achievement by having its financial statements audited for the 

first time. FEC, however, had to expend a tremendous amount of effort to “cleanup” its 

accounting records in order to prepare auditable financial statements as of and for the 

year ended September 30, 2004. 

The weaknesses identified below collectively resulted in a material weakness in FEC’s 

financial reporting process. 

A. Financial Statement Preparation 

Our audit of the interim financial statements disclosed several misstatements and/or 

misclassifications resulting from ineffective or lack of adequate quality and 

supervisory reviews and internal controls over the financial statement preparation and 

reporting process. These errors or omissions, some illustrated below, have consumed 

significant FEC resources in researching and correcting. The resources expended 

could have been devoted to the normal daily business operations of FEC. 

• FEC downloads the trial balance from the general ledger (GL) system to a 

spreadsheet to generate its financial statements. The unadjusted trial balance used 

in preparing the March 31, 2004 financial statements did not agree to the balances 

in the GL system for most of its financial statement line items such as fund 

balance with treasury (FBWT), accounts payable (AP), net position and related 

accounts. Accordingly, the financial statements submitted to OMB did not have 

the correct balances because the errors were identified by both the FEC and the 

auditors only after the financial statements were submitted. 

• The March 31, 2004 financial statements did not properly report the appropriation 

received and the status of budgetary resources. 
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• Software-in-development was not reported in the interim financial statements 

because FEC was still compiling the data. 

• Certain on-top financial statement adjustments were posted incorrectly and key 

account relationships did not always agree. 

• The interim financial statements did not reflect the current accounting activities 

for certain areas and only partially met the guidance in OMB Bulletin 01-09, 

Form and Content of Agency Financial Statements.

In addition, “catch-up” journal vouchers and significant past activities detected during 

this “clean-up” process were recorded for the first time as adjusting journal entries or 

“on-top” financial statement adjustments. 

Moreover, OMB Bulletin No. 01-09, Form and Content of Agency Financial 

Statements, states that 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. FEC does not have formal plans, 

methodology, or procedures to guide the financial statement preparation and reporting 

process.

Two of the five standards for internal control as stated in the Government 

Accountability Office (GAO) Standards for Internal Control in the Federal 

Government are (1) information and communications, and (2) control activities. 

(1) Information should be recorded and communicated to management and others 

within the entity who need it and in a form and within a timeframe that enables 

them to carry out their internal control and other responsibilities. 

(2) Examples of control activities are: Reviews by management at the functional or 

activity level, proper execution of transactions and events, and accurate and 

timely recording of transactions and events. 

B. Timely Recording, Reconciliation and Analysis 

A major objective of internal control is to ensure the integrity of the underlying 

accounting data supporting the financial statements. An important control in this 

regard is the reconciliation of accounting records. An adequate reconciliation 

provides the assurance that processed transactions are properly and timely recorded in 

the accounting records and financial statements, which then allows management the 

ability to analyze its financial condition and results of operations on a routine basis. 

The FEC has not performed many of the periodic account reconciliations and 

analyses necessary during the year. Account reconciliations not performed included 

certain FBWT reports from the Department of Treasury, budgetary accounts such as 
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obligations, intragovernmental activities, and general property and equipment, among 

others. In addition, reconciliations that were performed were often not completed in a 

timely manner and certain account reconciliations contained reconciling items that 

have long been outstanding. Moreover, certain assets, such as software-indevelopment, were not reported in the interim financial statements because FEC was 

still compiling the data. 

Furthermore, due to FEC’s delay in submitting the June 30, 2004 accounting data in 

the Treasury’s Federal Agencies' Centralized Trial-Balance System (FACTS II), FEC 

was prevented by the system to submit the data. Thus, FEC did not submit its June 

30, 2004 accounting data. The accounting data includes mostly budgetary 

information that is required for the Report on Budget Execution and Budgetary 

Resources (SF 133), and the Year-End Closing Statement (FMS 2108). 

C. GL System Setup and Posting Model Definitions 

The GL system setup and posting model definitions do not fully comply with the 

transactions posting models consistent with the United States Standard General 

Ledger (USSGL) guidance and policies when recording and classifying certain 

transactions. As a result, certain proprietary accounts and budgetary accounts do not 

agree, and certain trial balance accounts do not trace to the USSGL crosswalk. 

FEC is aware of the inherent limitations of the GL system and has attempted to 

upgrade the GL system during fiscal year 2004 to correct weaknesses identified. 

However, due to the enormous resources consumed in testing and monitoring the 

system upgrade and the problems arising from the upgrade process and the audit of 

the financial statements, FEC has decided to postpone its upgrade until fiscal year 

2005.

D. Integrated Financial Management System 

 

A single, integrated financial management system is a unified set of financial systems 

linked together electronically in an efficient and effective manner to provide agencywide 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. It does not necessarily mean having only one software application covering 

all financial management system needs within an agency. Interfaces are acceptable as 

long as the supporting details are 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 reconciliation between systems, where 

interface linkages are appropriate, must be maintained to ensure data accuracy. 
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FEC does not have an integrated financial management system. Significant financial 

management systems such as the “cost system” and the property and equipment 

system are not interfaced with the GL system. 

Recommendations: 

1. Establish written policy and procedures to formalize plans, methods and procedures 

to guide the financial statement preparation and reporting process. 

2. Prepare and analyze monthly reconciliations of subsidiary and summary account 

balances. Consider a “formal closing” of all accounts at an interim date(s), which 

will reduce the level of accounting activity and analysis required at year-end. This 

“formal closing” entails ensuring that all transactions are recorded in the proper 

period through the month-end. With complete and timely transaction recording, 

analysis of all major accounts can be performed effectively. 

3. Ensure that supervisory reviews are applied to the financial statements and its 

supporting documentation, and the reviews are documented. 

4. Ensure that upgrades to the financial management system comply with the posting 

model definitions in the USSGL. 

5. Evaluate the functional requirements to integrate the financial reporting, property and 

equipment and the cost systems with the GL system; assess the degree of integration 

necessary to have a single, unified financial management system. 

II. Information Technology (IT) 

The reportable conditions below, when evaluated together, make the IT area a material 

weakness.

A. Entity-Wide Security Program 

Effective information security management is critical to FEC’s ability to ensure the 

reliability, availability, and confidentiality of its information assets, and thus its 

ability to perform its mission. If effective information security practices are not in 

place, FEC’s data and systems are at risk of inadvertent or deliberate misuse, fraud, 

improper disclosure, or destruction—possibly without detection. 

GAO’s research of public and private sector organizations, recognized as having 

strong information security programs, shows that their programs include (1) 

establishing a central focal point with appropriate resources, (2) continually assessing 

business risks, (3) implementing and maintaining policies and controls, (4) promoting 

awareness, and (5) monitoring and evaluating policy and control effectiveness. (U.S. 

Government Accountability Office, Executive Guide: Information Security 
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Management, Learning From Leading Organizations, GAO/AIMD-98-68

[Washington, D.C.: May 1998]), and (GAO’s Information Security Risk Assessment: 

Practices of Leading Organizations, A Supplement to GAO’s May 1998 Executive 

Guide on Information Security Management, GAO/AIMD-00-33 [Washington, D.C.: 

November 1999]). 

FEC has taken important steps to establish an effective information security program, 

but much remains to be done. In January 2004, FEC revised the Computer Security 

Officer position description to further strengthen the Commission’s computer security 

program. In April 2004, FEC issued an Interim Final “Information System Security 

Program Policy”, Policy Number 58A. Policy Number 58A was issued to “manage 

the risk to information rather than just systems”. The FEC approved Policy Number 

58A and supplements to Policy Number 58A in September 2004. 

Current weaknesses that exist in the FEC’s information security program include the 

following: 

• FEC did not finalize its Information System Security Policy until September 

2004. This policy was not fully implemented in fiscal year 2004; 

• A framework of policies and standards to mitigate risks associated with the 

management of information resources has not yet been implemented; 

• Risk assessments, as part of FEC’s overall strategy to mitigate risks associated 

with its information technology environment, have not been conducted for more 

than three years. The FEC conducted a risk assessment in March of 2000, with 

several recommendations for strengthening its information technology 

environment. We noted that the FEC has not implemented many of the 

recommendations. Furthermore, the FEC has not updated its risk assessment 

since March of 2000 to ensure that its strategy to mitigate risk reflects changes in 

its information technology environment; 

• There was no documented and approved entity-wide security program plan. FEC 

has indicated that it is in the process of documenting its entity-wide security 

program plan. The FEC has just established in September 2004 policy guidelines 

which it will use in the development and implementation of an entity-wide 

security program plan; 

• The FEC completed the identification of its major application and mission critical 

general support systems in September 2004, as part of its risk mitigation strategy. 

Thus, the FEC has not completed the development of security plans for these 

applications and systems; 

• Major applications and mission critical general support systems have not been 

certified to ensure that they are operating according to FEC’s security 

requirements;

• A program for the continuous monitoring and evaluation of FEC’s policy and 

controls to ensure operating effectiveness has not been established; and 

• There is no periodic security awareness training. Training is only provided to 

new employees and contractors. The FEC did conduct a baseline awareness 
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training program, but does not have a process in place to provide security 

awareness training on an annual basis. 

Recommendations: 

6. Implement a framework of policies and standards to mitigate risks associated with the 

information resources management. 

7. Conduct risk assessments at least every three years as part of an overall strategy to 

mitigate risks associated with its information technology environment. 

8. Complete the documentation, approval and implementation of an entity-wide security 

program plan. 

9. Develop, and implement security plans for major applications and mission critical 

general support systems as part of a risk mitigation strategy. 

10. Certify that the major applications and mission critical general support systems are 

operating according to FEC’s security requirements. 

11. Establish a program for the continuous monitoring and evaluation of the computer 

security policy and control effectiveness. 

12. Provide periodic computer security awareness training to all employees and 

contractors (i.e. contractors granted access to the FEC’s network). 

B. Controls to Protect Information 

For a computerized organization like FEC, achieving an adequate level of information 

protection is highly dependent upon maintaining consistently effective access controls 

and system software 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/technical controls such as 

designing security software programs to prevent or detect unauthorized access to 

sensitive data. Similarly, system software controls limit and monitor access to 

powerful programs and sensitive files that control computer processing and secure the 

application and data supported by the system. 

Our limited testing of internal controls identified information protection related 

weaknesses in FEC’s information systems environment. Impacted areas included the 

local area and wide area networks as well as its midrange computer systems (e.g. 

servers). These vulnerabilities expose FEC and its computer systems to risks of 
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external and internal intrusion, and subject sensitive information related to its major 

applications to potential unauthorized access, modification, and/or disclosure. 

FEC has not assessed the risk of inadequate protection for its sensitive and mission 

critical files. No written criteria have been established to guide security personnel in 

monitoring and restricting access to production data and program files. 

Current weaknesses in access controls include the following: 

• No documentation or verification that the vulnerabilities identified in the February 

2004 network penetration scan have been addressed; 

• Visitor (individuals that do not have approved daily access) logs for data center 

access were not maintained and no compensating controls to monitor and record 

visitor access to the data center have been implemented; 

• Password controls are weak: 

o There is no password lifetime set on the local area network (LAN); 

o There are no technical controls to enforce password changes on the LAN and 

the GL system; 

o Some passwords on the FEC LAN have not been changed since 1997; 

o The password policy cannot be updated or changed in the current version of 

the GL system; 

o The GL system passwords do not expire; 

o There is no limitation on the number of GL system password attempts (i.e. no 

lock-out policy); 

o There is no policy on the GL system composition of passwords; and 

o There are no controls on password length for the GL system. 

• There are no records of access requests granted to remote users. The FEC was 

unable to provide access request approval documentation to support the access of 

all dial-up and Virtual Private Network (VPN) users that we sampled for our 

review. In addition, there was no evidence of periodic re-validations of these 

users;

• GL system access requests are not properly documented or reviewed. The FEC 

was only able to provide us original access matrices for eight of the 33 current GL 

system users. Additionally, the FEC does not periodically perform revalidations 

of GL system access; 

• The principle of “least privilege” is not consistently applied in the GL system 

application. A high level IT official has similar access rights and privileges in the 

GL system application as the Accounting Officer; 

• Data center access is not adequately documented or reviewed: 

o Four employees have their names misspelled on the cardholder report; 

o One of the individuals with access to the data center was terminated recently, 

but his access key is still active and the physical location of the key could not 

be determined; and 

o FEC could not identify one user who has access to the data center or justify 

why the individual has access to the data center. 
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• The FEC is not in compliance with its auditing policy because it does not 

automatically log the network activity described in the Audit Event Standards,

even though it has the capability to do so. 

Recommendations: 

13. Establish a program to document corrective actions and verify that weaknesses 

identified have been addressed. Ensure and document that recommendations from the 

most recent network security review have been implemented. 

14. Monitor and record visitor access to the data center. 

15. Strengthen the password controls for the FEC’s network and major applications, 

including the GL system. 

16. Document and periodically revalidate VPN and dial-up access rights and privileges. 

17. Document access requests and approvals for the GL system. Perform periodic 

revalidation of access granted to the GL system. 

18. Ensure that the principle of “least privilege” is enforced. Ensure access in the GL 

system is granted according to job function and responsibility. 

19. Disable the active access keys of users not requiring access to the data center. 

Correct the misspelled names on the cardholder report. 

20. Use access request forms to document user access rights and periodically review the 

access for appropriateness. 

21. Automatically log network activity as required by the Audit Events Standards.

C. Contingency Plan 

Losing the capability to process and protect information maintained on FEC’s 

computer systems can significantly impact FEC’s ability to accomplish its mission to 

serve the public. The purpose of service continuity controls is to ensure that, when 

unexpected events occur, critical operations continue without interruption or 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 LAN, wide area network 

(WAN), and telecommunications facilities), as well as the activities performed by 

users of specific applications. To determine whether the disaster recovery plans will 
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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 deficiencies that could affect 

FEC’s ability to respond to a disruption in business operations as a result of a disaster 

or other long-term emergency. The deficiencies were as follows: 

• FEC has not formally identified and prioritized all critical data and operations on 

its major applications and the resources needed to recover them if there is a major 

interruption or disaster. In addition, we could not determine whether FEC had 

established emergency processing priorities that will help manage disaster 

situations more effectively for the network; 

• FEC does not have alternative processing sites for most of its operations in the 

event of a disaster, including its general ledger system; 

• The FEC Disclosure Database is replicated at an off-site location as a webenabled read-only database the public can access. In the event that data cannot be 

updated at the FEC and then replicated at the off-site location, there is no 

operational mechanism to update the Disclosure Database replicated at the offsite 

location; 

• FEC does not have adequate capacity for most of its back-up tapes in its fireproof 

safe; hence, back-up tapes are not kept in a fireproof safe. Back-up tapes, 

however, are rotated on a weekly basis to an off-site facility; 

• FEC data center is fully exposed to a wet pipe sprinkler system, with no 

compensating controls to avert inadvertent water damage to critical hardware and 

magnetic media in the case of a malfunction or false alarm; and 

• FEC has not developed and documented a comprehensive contingency of 

operations plan of its data centers, networks and telecommunication facilities. 

Recommendations: 

22. 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 or disaster. 

Ensure that emergency processing priorities are established to assist in managing 

disaster situations more effectively for the network. 

23. Establish alternative processing sites for FEC’s operations in the event of a disaster. 

24. Establish operational mechanisms to update the Disclosure Database in the event the 

FEC database is unavailable to replicate the Disclosure Database resident at the 

offsite location.

25. Procure an additional fireproof safe(s) for back-up tapes. 
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26. Investigate and document options for compensating controls to avoid inadvertent 

water damage to critical hardware and magnetic media in the case of a malfunction or 

false alarm from the wet pipe sprinkler system. 

27. Develop and document a comprehensive contingency of operations plan of FEC’s 

data centers, networks and telecommunication facilities. 

D. Software Development and Change Controls 

Establishing controls over the modification of application software programs helps to 

ensure that only authorized programs and authorized modifications are implemented. 

This is accomplished by instituting policies, procedures, and techniques that help 

make sure all programs and program modifications are properly authorized, tested, 

and approved and that access to and distribution of programs is carefully controlled. 

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.

Weaknesses that currently exist in the FEC’s controls over modification of 

application programs include the following: 

• System Development Life Cycle Methodology has not been finalized and 

implemented; 

• No written policy has been created to manage software libraries; 

• Written procedures to modify, test, approve or release software for any of its 

applications, including the GL system, have not been documented; 

• Emergency change procedures and procedures for installing patches are not 

documented; and 

• Certain software code changes for the GL system were not reviewed before being 

implemented. 

Recommendations: 

28. Finalize and implement the System Development Life Cycle Methodology. 

29. Create a written policy to manage software libraries. 

30. Document written procedures to modify, test, approve or release software for any of 

its applications. 

31. Document written emergency change procedures for installing patches. 

32. Establish policies and procedures to ensure that the software code is reviewed prior to 

moving the modified code into production. 
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REPORTABLE CONDITIONS

III. Cost Accounting System and Processes 

A. Cost Allocation Methodology 

FEC does not have a cost accounting system that is integrated with the GL system. 

The current cost accounting system is not adequate to produce the cost data for the 

Statement of Next Cost (SNC) in an efficient manner. Accordingly, the cost data 

presented on the SNC is compiled from three systems’ raw data, which is then 

gathered and analyzed in an elaborate, complex, and manually intensive spreadsheet. 

Raw data used in the allocation of costs, such as payroll, is sometimes based on 

estimates due to the timing of the availability of the data. Expenses on the budget 

execution report, another source of raw data, are not reconciled with the general 

ledger balances. 

FEC summarizes employee hours in a spreadsheet based on an office’s program 

numbers, which is generated by a system. The program numbers represent the type of 

work performed by an employee and the hours are assigned directly or allocated to 

FEC’s three major programs. FEC could not provide crosswalk documentation or 

definitions supporting the basis of assignment or allocation. The data accumulation 

and analysis is performed by one person and not subjected to a second review. 

In addition, the FEC did not have a formal comprehensive policy and procedures for 

the program cost allocation. Although a written procedures document was provided 

to us, the document was written in response to our audit request and did not include a 

comprehensive set of procedures. 

The manually intensive and elaborate cost allocation process dictates the need for a 

formal comprehensive policy and procedures. Moreover, the heavy reliance on a 

single person to carry out this process could impair FEC’s ability to generate a timely 

and accurate report when the person becomes unavailable. 

A control activity in the GAO Standards for Internal Control in the Federal 

Government is appropriate documentation of transactions and internal control. 

Internal control and all transactions and other significant events need to be clearly 

documented, and the documentation should be readily available for examination. The 

documentation should appear in management directives, administrative policies, or 

operating manuals. All documentation and records should be properly managed and 

maintained. 

Recommendations: 

33. Establish formal and comprehensive cost allocation methodology and related policy 

and procedures. 
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34. Cross-train employees to minimize the risks of major interruptions in normal business 

operations.

35. Establish a review process wherein a person, other than the preparer, reviews the 

work performed to ensure accuracy and propriety.

B. Managerial Cost Accounting 

Statement of Federal Financial Standard No. 4, Managerial Cost Accounting 

Concepts and Standards for the Federal Government, requires reporting components 

to perform a minimum-level of cost accounting and provide basic information 

necessary to accomplish the many objectives associated with planning, decisionmaking, and reporting. This minimum-level of cost accounting includes, among 

others: providing information for performance measurement; integrating both cost 

accounting and general financial accounting by using the USSGL; providing useful 

information; and accommodating management’s special cost information needs or 

any other needs that may arise due to unusual or special situations or circumstances. 

The present FEC cost accounting system does not provide the minimum-level 

identified above. 

FEC management notified us that it is in the process of developing a new cost 

accounting system. 

Recommendation: 

36. Evaluate the functional requirements for the new cost accounting system to ensure 

that at least, the minimum level of cost accounting required in SFFAS No. 4 is 

attained.

IV. General Property and Equipment (Property) 

FEC’s accounting for property involves a time-consuming effort that increases the risk of 

errors due to its process of expensing its property at the time of acquisition and preparing 

a journal voucher to reclassify the expense to an asset for reporting purposes. 

Our audit disclosed deficiencies, errors or omissions that questioned the effectiveness of 

FEC’s internal control on property. Some examples are noted below: 

• Depreciation expense and accumulated depreciation reported on the depreciation 

report were not correct. We were informed that although the property management 

system calculates depreciation correctly, when the data is converted into another 

system to generate the depreciation report, the calculation gets corrupted. This error 

was identified during the audit and was subsequently adjusted. 

• Software-in-development was not adequately tracked and was not reported until the 

September 30, 2004 financial statements. There was one instance of software-in-
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development being reported as completed software in the property management 

system; therefore, the asset was being improperly depreciated. Another instance was 

completed software that was not recorded. These errors were only identified during 

the audit process. 

• Several assets were recorded using the purchase order amount, instead of the actual 

cost. 

• For the 45 sample items we tested, we noted that 45 receiving reports were not 

completed properly, that is, they were either not signed, did not have the date of 

receipt, did not have a description of the goods or services received, or lacked a 

reference to the invoice to be paid. Although only 6 of the 45 items pertained to 

acquisitions in fiscal year 2004, this deficiency persisted throughout fiscal year 2004. 

One of the five standards for internal control in GAO Standards for Internal Control in 

the Federal Government is control activities. Control activities occur at all levels and 

functions of the entity. They include a wide range of diverse activities such as approvals, 

authorizations, verifications, reconciliations, performance reviews, maintenance of 

security, and the creation and maintenance of related records, which provide evidence of 

execution of these activities as well as appropriate documentation. 

Recommendations: 

37. Enforce current procedures to require documentation of approvals and certifications 

for procurement and disbursements transactions. 

38. Formally communicate to all appropriate personnel to ensure compliance and 

consistent application of the policies and procedures. 

V. Payroll 

We identified the following weaknesses related to the 45 items tested for payroll: 

• Twelve employees’ leave and/or credit hour balances reported on the time & 

attendance (T&A) reports did not agree with comparable data on the Statement of 

Earnings and Leave from the payroll service provider; 

• FEC’s policy requires timekeepers to perform a monthly reconciliation between the 

leave balances in FEC’s records and the payroll service provider. The timekeepers 

are to forward leave balance certifications to the finance office indicating whether 

balances agree or disagree. Nine leave balance certification forms were either not 

completed or not submitted by the timekeepers to the finance office; 

• Forty one documents supporting payroll activities such as requests for leave, 

approved absence forms, and certain payroll deduction elections forms were not 

available for review; and 

• Changes made to some T&A reports were not authorized or properly authorized. In 

addition, the T&A reports of two employees were already approved by the certifying 

officer even though the pay period has not yet ended. 
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OMB Circular A-123, Management Accountability and Control (Revised June 21, 1995), 

requires that “the documentation for transactions, management controls and other 

significant events must be clear and readily available for examination.” GAO Standards

for Internal Control in the Federal Government states that transactions and other 

significant events should be authorized and executed only by persons acting within the 

scope of their authority. This is the principal means of assuring that only valid 

transactions to exchange, transfer, use or commit resources and other events are initiated 

or entered into.” 

Recommendations: 

39. Implement procedures to ensure that payroll deduction elections are authorized by 

maintaining adequate supporting documentation or an ability to query the service 

provider systems to verify these deductions if initiated by an employee without the 

FEC’s intervention. Consider training/re-training payroll employees on the proper 

procedures for obtaining and retaining support documents for payroll elections. 

40. Ensure that timekeepers perform a monthly reconciliation of leave balances reported 

in its records and the service provider records and submit the leave balance 

certification to the finance office monthly. 

41. Implement procedures for ensuring hours recorded on the T&A reports are properly 

supported and authorized. Consider further automating payroll processing to 

decrease the risk of errors. 

42. Implement procedures for ensuring all payroll and personnel documents are properly 

completed and authorized before payroll data is transmitted to the payroll service 

provider for processing. 

OTHER MATTERS 

Federal Managers’ Financial Integrity Act (31 U.S.C. 3512) (Integrity Act) Compliance and 

Reporting 

OMB Circular No. A-123 provides the reporting guidance for the Integrity Act. OMB Circular 

A-123 states that annually, by December 31, the head of each executive agency submit to the 

President and the Congress (i) a statement on whether there is reasonable assurance that the 

agency's controls are achieving their intended objectives; (ii) a report on material weaknesses in 

the agency's controls, and (iii) whether the agency's financial management systems conform with 

government-wide requirements. 

OMB Bulletin No. 01-02 requires that we compare the material weaknesses in the agency’s 

controls and material non-conformances on the agency’s financial management systems in the 

FEC’s Integrity Act report to our report on internal control dated December 8, 2004. Since the 
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Integrity Act report is due by December 31, 2004, FEC has not started and does not intend to 

start the process of accumulating the information required for its report until November 2004. 

Accordingly, since the Integrity Act report has not been completed, the comparison of reports 

could not be performed. 

********************************

In addition to the material weaknesses and reportable conditions described above, we noted 

certain matters involving internal control and its operation that we reported to the management of 

FEC in a separate letter dated December 8, 2004. 

This report is intended solely for the information and use of the management of FEC, FEC 

Office of Inspector General, OMB, and Congress, and is not intended to be and should not be 

used by anyone other than these specified parties. 

Calverton, Maryland 

December 8, 2004 
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Centerpark I

4041 Powder Mill Road, Suite 410 

Calverton, Maryland 20705-3106

tel: 301-931-2050 

fax: 301-931-1710 

www.cliftoncpa.com Offices in 15 states and Washington, DC

Independent Auditor’s Report on Compliance with Laws and Regulations 

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, 2004, and have issued our report thereon dated 

December 8, 2004. We conducted our audit 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. 01-02, Audit Requirements for Federal 

Financial Statements, as amended. 

The management of FEC is responsible for complying with laws and regulations applicable to 

FEC. As part of obtaining reasonable assurance about whether FEC’s financial statements are 

free of material misstatements, we performed tests of its compliance with certain provisions of 

laws and regulations, noncompliance 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 No. 01-02. We limited our tests of compliance to these provisions and we did not 

test compliance with all laws and regulations applicable to FEC. 

The results of our tests of compliance with laws and regulations described in the preceding 

paragraph disclosed no instances of noncompliance with the laws and regulations that are 

required to be reported under Government Auditing Standards and OMB Bulletin No. 01-02. 

Providing an opinion on compliance with certain provisions of laws and regulations was not an 

objective of our audit, and accordingly, we do not express such an opinion. 

We noted certain immaterial instances of noncompliance that we have reported to management 

of FEC in a separate letter dated December 8, 2004. 

This report is intended solely for the information and use of the management of FEC, FEC 

Office of Inspector General, OMB and Congress, and is not intended to be and should not be 

used by anyone other than these specified parties. 

Calverton, Maryland 

December 8, 2004 

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1

MATERIAL WEAKNESSES

I. Financial Reporting

The Accountability of Tax Dollars Act of 2002 extends to FEC a requirement to prepare

and submit to the Congress and the Director of the OMB an audited financial statement.

Fiscal year 2004 is the first year FEC is preparing and submitting audited financial

statements. FEC has attained a major achievement by having its financial statements

audited for the first time. FEC, however, had to expend a tremendous amount of effort to

“cleanup” its accounting records in order to prepare auditable financial statements as of

and for the year ended September 30, 2004.

The weaknesses identified below collectively resulted in a material weakness in FEC’s

financial reporting process.

A. Financial Statement Preparation

Our audit of the interim financial statements disclosed several misstatements and/or

misclassifications resulting from ineffective or lack of adequate quality and supervisory

reviews and internal controls over the financial statement preparation and reporting

process. These errors or omissions, some illustrated below, have consumed significant

FEC resources in researching and correcting. The resources expended could have been

devoted to the normal daily business operations of FEC.

FEC Response: FEC acknowledges that there were misstatements in its March 31, 2004

financial reports, but does not agree that the controls surrounding its quarterly and annual

financial statement preparation process is so ineffective to warrant the classification of

this finding as a material weakness in FEC’s financial reporting function. During the

audit, we have made significant improvements to our supervisory controls. Though we

are continuing to identify ways to improve further, we believe our current processes have

improved to the point that they are no longer a material weakness.

Fiscal Year 2003 was the first year for which FEC was required to compile a full

set of financial statements to comply with the provisions of the Accountability of Tax

Dollars Act of 2002. Although FEC was waived from the requirement to submit such

statements to the Office of Management and Budget (OMB), it endeavored to conduct an

internal evaluation of its fiscal year 2003 financial data and financial reporting risks to

ensure that its annual and quarterly financial statements were materially accurate.

Additionally, in fiscal year 2002, FEC replaced its accounting system and converted its

financial information from the “old” system to the “new” accounting system. As part of

its internal evaluation, FEC sought to analyze and correct any inconsistencies resulting

from the data conversion, and identify and correct any misstatements and/or relationship

discrepancies related to its general ledger accounts.

The agency made great strides in its commitment to present a complete set of

financial statements, which not only appropriately reflect current year activities, but also

reflect accurate historical financial information. “Catch-up” journal vouchers and “on

top” adjustments to FEC’s accounting records for fiscal year 2003 and the first and

second quarters of fiscal year 2004 were necessary to achieve its commitment. The

misstatement found in the March 31, 2004 financial statements was due to human error.

However, FEC has since prepared accurate financial statements for the third and fourth

quarter of fiscal year 2004.
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In light of FEC’s implementation of compensating management controls (i.e.,

extensive data analysis to appropriately reflect account balances) and given that the error

found in the second quarter of the fiscal year 2004 financial statements was not a

persistent problem in FEC’s financial statements compilation process, FEC does not

concur with this material weakness. FEC believes that the process for the latter half of

the fiscal year was vastly improved (better controls) and the risk of misstatement to the

financial statements was effectively mitigated.

Improper reporting of the appropriation received and the status of budgetary

resources in the March 31, 2004 statements was cited by the auditors. At the time the

appropriation received amount was recorded, FEC was under a Continuing Resolution.

FEC’s efforts to solicit the guidance from OMB as to how the Appropriations should be

reported, given the Continuing Resolution, were unsuccessful, as information received

from OMB was not received timely (before the financials statements submission due

date).

FY 2004 was the first year FEC had to file quarterly financial statements with

OMB. Many agencies use spreadsheet models supplied by CPA firms to compile the

complex quarterly and annual statements. It is common to download ledger information

into these models.

B. Timely Recording, Reconciliation and Analysis

A major objective of internal control is to ensure the integrity of the underlying

accounting data supporting the financial statements. An important control in this regard is

the reconciliation of accounting records. An adequate reconciliation provides the

assurance that processed transactions are properly and timely recorded in the accounting

records and financial statements, which then allows management the ability to analyze its

financial condition and results of operations on a routine basis.

The FEC has not performed many of the periodic account reconciliations necessary

during the year. Account reconciliations not performed included certain FBWT reports

from the Department of Treasury, budgetary accounts, intragovernmental activities, and

general property and equipment, among others. In addition, reconciliations that were

performed were often not completed in a timely manner and certain account

reconciliations contained reconciling items that have long been outstanding. Moreover,

certain assets, such as software-in-development, were not reported in the interim financial

statements because FEC was still compiling the data.

Furthermore, due to FEC’s delay in submitting the June 30, 2004 accounting data in the

Treasury’s Federal Agencies' Centralized Trial-Balance System (FACTS II), FEC was

prevented by the system to submit the data. Thus, FEC did not submit its June 30, 2004

accounting data. The accounting data includes mostly budgetary information that is

required for the Report on Budget Execution and Budgetary Resources (SF 133), and the

Year-End Closing Statement (FMS 2108).

FEC Response: FEC understands the critical role that reconciliations play in internal

control and acknowledges the lack of routine reconciliations during the first half of the

fiscal year. However, we do not concur with the classification of this finding as a material

weakness in FEC’s financial reporting function. We have taken steps to implement an

appropriate reconciliation schedule in the future
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3

As a result of its internal evaluation of the fiscal year 2003 financial data and

financial reporting process, FEC identified the need to acquire additional personnel

resources to assist with the preparation of periodic reconciliations, in order to mitigate the

risk of material misstatements to its financial statements. As such, FEC engaged

contractors who have expended considerable effort to bring reconciliations up to date in

fiscal year 2004. Though these reconciliations lagged for the first and second quarters of

fiscal year 2004, they were completed prior to the completion of the audit and have

revealed insignificant reconciling items related to FBWT accounts. All other

reconciliations for major accounts (i.e. fixed assets) were performed on time and

provided to the auditors.

Additionally, with assistance from contractors, FEC is currently performing

routine reconciliations of its subsidiary records to the general ledger balances and is

committed to this effort for fiscal year 2005. With respect to the submission of FEC’s

financial information to Treasury, when FEC tried to log on to submit the June 30, 2004

reports by the due date, the Treasury computer system was not operational. Since

Treasury did not extend the deadline to agencies for FACTs submissions, FEC’s

accounting data was not submitted by the due date. All first, second and fourth quarter

reports were submitted to Treasury and OMB on time. To date, Clifton Gunderson has

had no adjustments to the reports except minor reclassifications.

Finally, FEC concurs with the matters pertaining to the compilation of softwarein-development financial data. FEC has revised the data-gathering procedures and

methodology for accounting for software-in-development.

C. GL System Setup and Posting Model Definitions

The GL system setup and posting model definitions do not fully comply with the

transactions posting models consistent with the United States Standard General Ledger

(USSGL) guidance and policies when recording and classifying certain transactions. As a

result, certain proprietary accounts and budgetary accounts do not agree, and certain trial

balance accounts do not trace to the USSGL crosswalk.

FEC is aware of the inherent limitations of the GL system and has attempted to upgrade

the GL system during fiscal year 2004 to correct weaknesses identified. However, due to

the enormous resources consumed in testing and monitoring the system upgrade and the

problems arising from the upgrade process and the audit of the financial statements, FEC

has decided to postpone its upgrade until fiscal year

2005.

FEC Response: FEC does not concur with this finding as a material weakness. FEC

was fully aware of the posting model shortcomings and adequately considered the risk of

misstatements in the financial reports. As such, FEC reengaged the implementer of the

accounting system to upgrade the system and correct posting model shortcomings.

However, the upgrade was postponed to dedicate resources and attention to the audit.

FEC adequately compensated for the posting model shortcomings with extensive

reconciliations and analyses. Relationships between proprietary and budgetary accounts

were tested on a monthly basis and were provided to the auditors throughout the audit.

FEC expects the upgrade of its financial system to be completed in FY 2005 but will

continue the reconciliation of the accounts impacted by the posting model shortcomings.

The upgraded financial system will be fully compliant with the USSGL.
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D. Integrated Financial Management System

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. It does

not necessarily mean having only one software application covering all financial

management system needs within an agency. Interfaces are acceptable as long as the

supporting details are 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 reconciliation between systems, where interface linkages are

appropriate, must be maintained to ensure data accuracy.

FEC does not have an integrated financial management system. Significant financial

management systems such as the “cost system” and the property and equipment system

are not interfaced with the GL system.

FEC Response: FEC disagrees with this finding and its classification as a material

weakness. The FEC made a decision based on acceptable risk and on a cost benefit basis

that the MIS, budget projection, and other performance reporting processes would be

migrated after other priority commission programs were migrated to the new

environment. This process is on-going: in FY 2004 and now in FY 2005 the FEC is

engaged in a legacy system off-load process to migrate legacy systems over to the new IT

platform. In addition, the FEC has been engaged since late FY 2003 in developing and

implementing a budget preparation and MIS system that will be totally integrated with

the financial system and all other oracle based IT systems.

The OMB guidance and GAO standards do not require agencies to have totally

integrated financial management systems with all other agency systems. OMB Circulars

A-127 and A-123 and the GAO standards, as well as the CFO Act, were designed to

make agencies modernize, automate, and integrate outdated and disparate accounting

systems. In addition the goal was to make sure all agency accounting systems were

compliant with GAO standards and OMB circulars and directives. These initiatives do

not require all agency systems to be totally integrated—they must use the same

information in preparing performance and cost allocation reports and data. The FEC does

this. The FEC budget projection process uses the same pay information from the service

provider as the accounting system does, and both use the same HR information from the

FEC Personnel system. In that regard, they are integrated.

The A-123 and A-127 Circulars and the GAO standards provide for agencies to

make decisions on a cost-benefit basis with regard to management controls. The FEC

determined that limited funds and staff resources available for the FEC IT initiatives

mandated a priority for the main Disclosure database and other major disclosure and

compliance programs. In addition, funds were allocated to acquire a financial and

accounting system that was compliant with GAO standards and was JFMIP certified.

The migration of other systems such as the MIS, budget projection, and other

performance reporting processes to the new oracle based client server platform was given

a lower priority.
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The FEC also made decisions not to acquire vendor produced COTS HR packages

due to costs and general reports from other agencies about the performance of these

systems. A similar decision was made with regard to the procurement and property

systems. The determination was made to not incur additional costs until the financial

system upgrade to a newer version was completed. At that time a determination would

be made on a cost benefits and potential risk analysis basis on whether it was worth the

costs to totally integrate the procurement, property and financial systems. Currently the

FEC is comfortable with the acceptable risks with the two systems not totally integrated,

but will instead continue to provide personnel resources to perform reconciliations and

analyses to ensure the accuracy of the financial statements..

Recommendations:

1. Establish written policy and procedures to formalize plans, methods and procedures to

guide the financial statement preparation and reporting process.

2. Prepare and analyze monthly reconciliations of subsidiary and summary account

balances. Consider a “formal closing” of all accounts at an interim date(s), which will

reduce the level of accounting activity and analysis required at year-end. This “formal

closing” entails ensuring that all transactions are recorded in the proper period through

the month-end. With complete and timely transaction recording, analysis of all major

accounts can be performed effectively.

3. Ensure that supervisory reviews are applied to the financial statements and its

supporting documentation, and the reviews are documented.

4. Ensure that upgrades to the financial management system comply with the posting

model definitions in the USSGL.

5. Evaluate the functional requirements to integrate the financial reporting, property and

equipment and the cost systems with the GL system; assess the degree of integration

necessary to have a single, unified financial management system.

FEC Response: Per the discussion above, the FEC will continue to evaluate the

acceptable risk levels and the costs and benefits of integrating the accounting system with

the other financial management systems (i.e. procurement and property systems); as

noted the MIS and Budget systems are in the process of being upgraded and enhanced,

including integrating them further with the service provider payroll and FEC accounting

systems.

The FEC IT Strategic Plan provides for the future evaluation of the costs and

benefits of further integrating the HR and other systems with the FEC financial system.

Decisions to proceed will be based on Commission priorities and available resources and

funds.

Finally, with respect to formalizing plans for the financial statement preparation

process, a formal plan for monthly closing, reconciliation review and statement analysis

will be prepared and implemented in FY 2005.
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II. Information Technology (IT)

The reportable conditions below, when evaluated together, make the IT area a material

weakness.

FEC General Response: The FEC does not agree that the reportable conditions in the

IT area reach the level of a material weakness. In conjunction with the Financial

Statements Audit of the FEC, four areas of Information Technology were examined for

material weaknesses. The outcome of the audit in IT revealed a number of reportable

conditions, none of which, individually, rise to the level of material weakness. FEC

Management is also of the opinion that the collective “weight” of these reportable

conditions does not together result in a material weakness. The reason for this position is

that reportable conditions have been recognized and corrective actions have been and are

being taken. The cost benefits test may be used for portions of these conditions, but for

the majority the FEC has initiated corrective actions, some of which pre-date the audit.

FEC Management has also indicated our position on the FEC exemption from the

Paperwork Reduction Act, which also exempts the FEC from many of the related and

underlying statutes and regulations. We agree that best practices and sound management

controls justify the use of some of the recommendations made during the audit in the area

of IT control (many of which the FEC as implemented already). However, the FEC

strongly believes that these recommendations, either singularly or collectively, do not rise

to the level of material weaknesses. In addition, the FEC maintains that the agency can

not be held to guidance and criteria identified in studies and analyses as if these were

standards that are required to be adhered to.

Finally, the FEC continues to maintain that it is not appropriate to find the

existence of financial management material weaknesses for systems and applications that

do not directly impact on the accuracy and security of information used in the FEC

financial statements. 

The audit for IT support of financial statements was broken down into four areas:

(1) Entity-wide Security Program, (2) Controls to Protect Information, (3) Contingency

Plan and (4) Software Development and Change Controls.

Entity-wide Security Program:

It was noted in the draft report that the “FEC has taken important steps to

establish an effective information security program, but much remains to be done.” The

references cited in the audit report, provide general guidance and are not audit standards.

The FEC, in strengthening and building upon its security policy, has implemented the

level of security that is commensurate with the FEC mission, best practices, budget and

available resources. The resulting updated and modernized security program

demonstrates the FEC’s commitment to information security and a continuing pursuit of a

balanced security program and costs to the agency.
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Controls to Protect Information:

The FEC has installed an automated key entry system to all sensitive areas, such

as the data center and hub rooms, in addition to the general building entry security

processes. The access to the general areas where data is stored are further protected via

password protection systems installed on each server and all personal computers. In an

effort to follow the NIST guidance and protect to the level required by overall agency

mission, the methodology employed by the FEC for physical security of the IT systems

and data is in keeping with GSA, GAO and NIST standards and best practices.

Contingency Plan:

The FEC has taken reasonable precautions in preserving data in the event of a

catastrophe. All FEC information and data is backed up daily, weekly and monthly and

stored at an off-site facility. The main disclosure data base is retained at an acceptable

level of redundancy in order to reproduce it in the event of catastrophe. Although the

FEC identified a potential budget request for FY 2006 of over $15 million to fully

replicate the FEC IT systems and provide a staffed continuity of operations back-up site,

there is no interest at either OMB or our oversight and appropriation committees for such

and expenditure. The existing spending and resulting level of risk in this area is at an

acceptable level, based on the costs benefits test.

Software Development and Change Controls:

The FEC has established a System Development Life Cycle Plan that reflects the

existing development environment of the FEC. That environment consists of purchased

application software that is in compliance with existing certifications, and set-up and

adapted for specific, particular FEC mission requirements. There is very little, if any,

homegrown software that is developed solely by FEC personnel at this time. The level of

controls over the modification and implementation of application systems are adequate

for the size and single location of the agency. The use of system modification logs has

been an effective method of control, yet use of this methodology was not acknowledged

in the report. The agency has established an IT Quality Assurance Office, in an effort to

incorporate the latest best practices in software application control.

A. Entity-wide Security Program

• FEC did not finalize its Information System Security Policy until September 2004.

This policy was not fully implemented in fiscal year 2004;

FEC Response: In November 1997, the FEC established Directive 58, outlining the

Commission policy on the control of commission software, and the use of agency

computers. This directive formed the basis of the agency’s computer security program.

This directive has been enhanced and expanded incorporating the latest guidance and best

practices provided by NIST in detail, and issued in policy 58A. The updating of

Directive 58 was begun in December 2001 with the establishment of an agency

Information Systems Security Officer, and followed with the establishment of an interim

Information System Security Program Policy 58A dated April 2004. This interim policy

became final in September 2004 as approved by the agency’s Chief Technology Officer

(CTO).
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• A framework of policies and standards to mitigate risks associated with the

management of information resources has not yet been implemented;

FEC Response: As a vital component of the Information Systems Security Program Policy (ISSPP) 58A, the FEC has developed and approved sub-policy 58-2.1: Risk

Management policy. This policy establishes a framework of procedures and standards to

mitigate risks associated with the management of information resources. The FEC is in

the early stages of implementing this new policy.

• Risk assessments, as part of FEC’s overall strategy to mitigate risks associated with

its information technology environment, have not been conducted for more than three

years. The FEC conducted a risk assessment in March of 2000, with several

recommendations for strengthening its information technology environment. We

noted that the FEC has not implemented many of the recommendations. Furthermore,

the FEC has not updated its risk assessment since March of 2000 to ensure that its

strategy to mitigate risk reflects changes in its information technology environment;

FEC Response: The FEC Risk Management policy specifies a risk assessment of its

major applications and general supports systems every 3 years. The FEC has addressed

many of the recommendations outlined in the March 2000 risk assessment; greater detail

is required from the auditors as to which specific recommendations they believe have not

been met. The FEC has updated its risk assessment program by developing and

implementing 58A Information System Security Program Policy and 58-2.1 Risk

Management. A risk assessment was conducted February 24, 2004 in the form of a

Security Audit, the purpose of which was to identify any vulnerabilities in the IT

infrastructure and to identify the risks associated with those vulnerabilities.

• There was no documented and approved entity-wide security program plan. FEC has

indicated that it is in the process of documenting its entity-wide security program

plan. The FEC has just established in September 2004 policy guidelines which it will

use in the development and implementation of an entity-wide security program plan;

FEC Response: This issue is addressed in the response to the first bullet above.

• The FEC completed the identification of its major application and mission critical

general support systems in September 2004, as part of its risk mitigation strategy.

Thus, the FEC has not completed the development of security plans for these

applications and systems;

FEC Response: The FEC identified its major applications, mission critical in May 2004.

The lone General Support System was identified in March 2000, when the development

of the security plan was completed for that system. These documents have been provided

to the audit team.

• Major applications and mission critical general support systems have not been

certified to ensure that they are operating according to FEC’s security requirements;

FEC Response: The FEC has a policy that provides for the certification and

accreditation of major applications and mission critical systems. That policy is 58-2.4:

Certification and Accreditation Policy. The agency Security Officer attended an

Accreditation and Certification workshop sponsored by NIST in order to apply the NIST

guidelines that may be appropriate to the FEC, in June 2004.
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• A program for the continuous monitoring and evaluation of FEC’s policy and controls

to ensure operating effectiveness has not been established; and

FEC Response: The FEC has established the position of Information Systems Security

Officer. This is a full-time management position, and as indicated in the position

description, has the responsibility for continuously monitoring the overall policies and

controls. This position description has been provided to the audit team.

• There is no periodic security awareness training. Training is only provided to new

employees and contractors. The FEC did conduct a baseline awareness training

program, but does not have a process in place to provide security awareness training

on an annual basis.

FEC Response: The FEC has finalized and approved a Security Awareness training

policy which provides initial and ongoing training for all current and new employees, as

well as contractors. This training has been in place during the past year and-a-half. The

FEC has a security awareness program in place and documented, this documentation was

provided to the audit team. All new employees and contractors undergo this training

upon arrival at the FEC. Security awareness is emphasized in all FEC training classes as

it pertains to the particular lesson being taught. Security awareness is re-enforced by the

help desk personnel as problems are reported, and each time a help mission is launched.

Information concerning virus protection, new viruses reported in trade journals and as

reported through our support contracts are disseminated on a regular basis by the FEC

security team, Help Desk personnel and trainers. Since the Security Awareness Training

Program has only been established for a short period of time, an appropriate periodic

training refresh period has yet to be established.

B. Controls to Protect Information

• No documentation or verification that the vulnerabilities identified in the February

2004 network penetration scan have been addressed;

FEC Response: The FEC has addressed and verified that the vulnerabilities pinpointed

by the Nessus scan have been addressed. We are in the process of fully documenting all

corrective actions.

• Visitor (individuals that do not have approved daily access) logs for data center

access were not maintained and no compensating controls to monitor and record

visitor access to the data center have been implemented;

FEC Response: The FEC does, in fact, maintain an electronic log which is the Kastle

Key system. Each time a person enters the room the date and time is recorded. The only

way to access the data center is with a Kastle key. Only individuals with Kastle Key

access privileges for the data center are allowed entry.
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• Password controls are weak:

o There is no password lifetime set on the local area network (LAN);

o There are no technical controls to enforce password changes on the LAN and the

GL system;

o Some passwords on the FEC LAN have not been changed since 1997;

o The password policy cannot be updated or changed in the current version of the

GL system;

o The GL system passwords do not expire;

o There is no limitation on the number of GL system password attempts (i.e. no

o lock-out policy);

o There is no policy on the GL system composition of passwords; and

o There are no controls on password length for the GL system.

FEC Response: The FEC is in the process of implementing the recommendations to

provide stronger password controls. Users will be forced through system control to

change their password periodically. Below is the implementation of the agency’s

password policy, as outlined in policy 58A:

As many of you are aware, the Federal government has increased its focus on computer security.

Agencies that process sensitive but unclassified information are required to enforce more

stringent access control policies. One stipulation of these policies is that we enhance our

identification/authentication methods. Due to this increased focus and recently initiated audit by

the Office of Inspector General, the Commission is implementing a formal password policy. The

policy (58-3.1 Logical Access Policy) and its derived FEC password standard can be found in

\NTSRV1\FEC-WIDE\ FEC IT Policies and Standards. Please take the time to review them both.

This password standard requires a change of passwords no less than every 180 days. In order to

ensure that every one has changed their Network, Lotus Notes and other logon passwords,

current passwords will expire at midnight (12:00 AM) December 13, 2004. In order to logon after

that time you will need to change your password. As usual, any questions should be addressed

to the Helpdesk.

Summary of FEC IT Security Password and Standard

Passwords must contain a minimum of eight (8) characters.

Passwords must consist of a mix of upper and lower case letters, numbers, and special

characters.

Passwords must not contain any word found in any dictionary in any language, or be

based on any word or character in literature.

Passwords must not be based on user IDs, or related to personal information.

Passwords must be changed no less than once every 180 days.

Passwords will not be allowed to be repeated for at least five generations.

Users passwords must not be related to one another such that compromise of one makes

others easier to guess; e.g., “abCdefg1”, “abCdefg2”, “abCdefg3”.

User IDs will be disabled or revoked following five (5) consecutive failed login attempts.

Please note, we highly recommend our employees use Pass Phrases such as

SeeU2morrow! or *CU2morrow.
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Again, please be aware that these password standards are effective as of December 13, 2004

and apply to all FEC Information Systems that require a password including;

Windows(your network account)

Lotus Notes

PeopleSoft

FEC (Keaterm)

Comprizon.buy

To assist you in implementing these standards the ITD HelpDesk has created instructions on

changing passwords to meet these criteria. These instructions are located in \\Ntsrv1\FECWIDE\Help Desk Information\Password Information & Instructions. As always, the HelpDesk

can be reached at X1255 or via email.

• There are no records of access requests granted to remote users. The FEC was unable

to provide access request approval documentation to support the access of all dial-up

and Virtual Private Network (VPN) users that we sampled for our review. In addition,

there was no evidence of periodic re-validations of these users;

FEC Response: There is a record of those individuals that have been granted access

through the use of the VPN. The individuals on the access list have been approved by the

CTO. The list is maintained by the Systems Branch. The list is periodically reviewed by

the CTO. It is FEC policy that all FEC employees may access the network via dialup

connection. Many FEC personnel have been provided with FEC laptops so that dial-up

access may be available at home.

• GL system access requests are not properly documented or reviewed. The FEC was

only able to provide us original access matrices for eight of the 33 current GL system

users. Additionally, the FEC does not periodically perform revalidations of GL

system access;

FEC Response: GL user matrix has been provided to the audit team. Supervisors

request access for people that require access to the GL system either directly to the

administrator or report them via the GL system Lotus notes database that is used to

record all administrator activity. For example, log number 159 is a request for access

rights.

• The principle of “least privilege” is not consistently applied in the GL system

application. A high level IT official has similar access rights and privileges in the

GL system application as the Accounting Officer;

FEC Response: The privileges for the high level IT official, were modified to allow the

appropriate level necessary to perform the functions of the position, at the time it was

identified by the audit team. This was complete months ago.

• Data center access is not adequately documented or reviewed:

o Four employees have their names misspelled on the cardholder report;

o One of the individuals with access to the data center was terminated recently, but

his access key is still active and the physical location of the key could not be

determined; and

o FEC could not identify one user who has access to the data center or justify why

the individual has access to the data center.
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FEC Response: Data Center is adequately documented and reviewed through the use of

the automated Kastle Key secure entry system. Kastle is under contract to monitor access

24-7 to the building as well as the data center. On occasion, since names are entered

manually by the administrative division, spelling errors may occur and go undetected,

due to the reviewers may be unaware of the correct spelling.

The individual in question in the second sub-bullet above, was not terminated, but

in fact passed away. His Kastle Key was in his possession at the time of death and was

unrecoverable at the time. Lost key procedures were instituted and his access was

revoked during August 2004. He passed away on July 21, 2004. When personnel are

terminated, or they leave the employ of the FEC voluntarily, their key is collected in

accordance with personnel check out policy.

The individual that could not be identified was unknown to the Systems Branch

Manager when asked. It is not expected of the Systems Branch manager to know each

person on an access list. The person was a contract employee with proper credentials to

be on the access list.

• The FEC is not in compliance with its auditing policy because it does not

automatically log the network activity described in the Audit Event Standards, even

though it has the capability to do so.

FEC Response: 58-3.3: Auditing and Monitor Policy and the Audit Event Standards

are recently approved policies and standards, they were developed just prior to the

audit. All of the FEC Information Systems have not yet come under their purview.

The accounting system is scheduled for compliance soon.

C. Contingency Plan

• FEC has not formally identified and prioritized all critical data and operations on its

major applications and the resources needed to recover them if there is a major

interruption or disaster. In addition, we could not determine whether FEC had

established emergency processing priorities that will help manage disaster situations

more effectively for the network.

FEC Response: The FEC Mission Critical, General Support Systems, and Major

Applications have been identified. The resources and data necessary to recover those

entities in the event of a major interruption or disaster will be identified when the FEC

completes its disaster recovery plans and procedures which is in process.

• FEC does not have alternative processing sites for most of its operations in the event

of a disaster, including its general ledger system

FEC Response: the FEC does not have the budget or the mission criticality to justify the

expense of establishing an alternative site. The FEC has the appropriate level of data

processing that is consistent with its mission.
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• The FEC Disclosure Database is replicated at an off-site location as a web-enabled

read-only database the public can access. In the event that data cannot be updated at

the FEC and then replicated at off-site location, there is no operational mechanism to

update the Disclosure Database replicated at the off-site location.

FEC Response: the FEC does not have the budget or the mission criticality to justify the

expense of establishing an alternative site. The FEC has the appropriate level of data

processing that is consistent with its mission.

• FEC does not have adequate capacity for most of its back-up tapes in its fireproof

safe; hence backup tapes are not kept in a fireproof safe.

FEC Response: The FEC will look into the expenses involved in expanding its fireproof

safe capacities. In the interim, the off-site storage facility picks up tapes on a weekly

basis, in the event of a catastrophe in the FEC Data Center, the maximum loss of data

would be one week. At this time this is considered acceptable risk

• FEC data center is fully exposed to a wet pipe sprinkler system, with no

compensating controls to avert inadvertent water damage to critical hardware and

magnetic media in the case of a malfunction or false alarm.

FEC Response: In accordance with the NIST Computer Security Handbook chapter 15

Physical and Environmental Security, page 171, Water sprinkler systems are the

preferred fire extinguishing systems. See below extract:

Fire Extinguishment. A fire will burn until it consumes all of the fuel in the building

or until it is extinguished. Fire extinguishment may be automatic, as with an

automatic sprinkler system or a HALON discharge system, or it may be

performed by people using portable extinguishers, cooling the fire site with a

stream of water, by limiting the supply of oxygen with a blanket of foam or

powder, or by breaking the combustion

chemical reaction chain.

When properly installed, maintained, and

provided with an adequate supply of water,

automatic sprinkler systems are highly

effective in protecting buildings and their

contents. Nonetheless, one often hears

uninformed persons speak of the water

damage done by sprinkler systems as a

disadvantage. Fires that trigger sprinkler

systems cause the water damage. In short, sprinkler systems reduce fire

damage, protect the lives of building occupants, and limit the fire damage to the

building itself. All these factors contribute to more rapid recovery of systems

following a fire.

Each of these factors is important when estimating the occurrence rate of fires

and the amount of damage that will result. The objective of a fire-safety program

is to optimize these factors to minimize the risk of fire.

Halons have been identified as harmful to

the Earth's protective ozone layer. So,

under an international agreement (known

as the Montreal Protocol), production of

halons ended January 1, 1994. In

September 1992, the General Services

Administration issued a moratorium on

halon use by federal agencies.
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• FEC has not developed and documented a comprehensive contingency of operations

plan of its data centers, networks and telecommunication facilities.

FEC Response: The FEC is in process of developing a disaster recovery plan that will

address these issues.

D. Software Development and Change Controls

• System Development Life Cycle (SDLC) Methodology has not been finalized and

implemented.

FEC Response: The overall agency SDLC has been drafted and the policies and

procedures are written. The implementation will take place with the establishment of the

Quality Assurance Branch within the IT Division, as soon as the IT organization plan

takes effect. There is a Quality Assurance Manager on board and he has taken steps to

begin the establishment of appropriate QA controls.

• No written policy has been created to manage software libraries.

FEC Response: See the SDLC that was provided. The management of software libraries

is addressed in the SDLC.

• Written procedures to modify, test, approve or release software for any of its

applications, including the GL system have not been documented.

FEC Response: See the SDLC. In addition to the procedures in the SDLC, the

procedures and flow are depicted in graphic form with the key players identified in the

diagram for each system supported by the IT Division. The key players are identified as

the business owners, the IT owners with the hardware and OS identified. See sample of

the major systems diagram.

• Emergency change procedures and procedures for installing patches are not

documented.

FEC Response: See SDLC

• Software code changes were not reviewed before being implemented.

FEC Response: All changes to the GL system are recorded in the Lotus Data Base set

up to provide a log of all activity in the GL system. The changes are documented in this

log, and acceptance is verified by the business owner of the GL system. As far as code

changes are concerned, the FEC does not own source code to any purchased software,

and therefore is not capable of making any code changes. We do, however maintain and

modify as requested, via the log any changes to application scripts developed in house

pertaining to the specific applications requirements of the FEC.
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REPORTABLE CONDITIONS

III. Cost Accounting System and Processes

A. Cost Allocation Methodology

FEC does not have a cost accounting system that is integrated with the GL system.

The current cost accounting system is not adequate to produce the cost data for the

Statement of Net Cost (SNC) in an efficient manner. Accordingly, the cost data presented

on the SNC is compiled from three systems’ raw data, which is then gathered and

analyzed in an elaborate, complex, and manually intensive spreadsheet.

FEC Overall Response: FEC acknowledges the benefits that can be enjoyed from the

use of a fully integrated financial management system. However, as pointed out in

previous responses, FEC’s management has evaluated the cost versus the benefit of

integrating all of its financial systems and believes that the cost should not outweigh the

benefit of integration. FEC believes that its current systems are adequately configured to

meet its mission. Also, FEC believes that given its size and the fact that payroll

constitutes the majority of its costs, at this time the process for compiling and allocation

its costs is adequate and, in our opinion, not complex. Therefore, FEC does not concur

with the classification of this finding as a reportable condition.

FEC Response: The FEC prepares its cost allocation based on the budget reporting

system’s (MIS)data, and data from the accounting system as reported on the Budget

Execution Report (BER). Our costs are based on data that is meaningful to OMB and our

oversight committees in the presentation of budget requests and appropriation

justifications: actual FTE allocated to programs and activities, and Budget Authority

(BA), obligations, and final expenditures. These are the data that they are interested in

reviewing in the context of the budget and appropriation processes. Both the OMB and

congressional offices have commented on the quality and usability of FEC budget

presentations in recent years, and the proof is that the FEC has attained a 3.5% increase in

its budget for FY 2005 and a recommended 5.5% increase for FY 2006 when the budgets

for many domestic agencies and programs have been frozen or even reduce in recent

years.

Raw data used in the allocation of costs, such as payroll, is sometimes based on estimates

due to the timing of the availability of the data.

FEC Response: Payroll costs constitute the large majority of FEC’s costs. As

previously communicated to Clifton Gunderson during the audit in responses to requests

for information, use of data from the actual service provider and FEC payroll process

necessarily requires the use of projections from actual data due to compressed time

frames mandated by the Accountability of Tax Dollars Act and OMB regulations.

Depending upon when the end of the last month of a quarter falls, there is a built in 10

day to two week processing time lag from when payroll data is collected and reported to

the service provider and the payroll information is reported back to the FEC. This

necessarily requires the use of projections to meet quarterly timeframes for reporting.

These “estimates” are projections based on actual year to date data as available when the

reporting time frame falls.

FEC could not provide crosswalk documentation or definitions supporting the basis of

assignment or allocation. The data accumulation and analysis is performed by one person

and not subjected to a second review. In addition, the FEC did not have a formal
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comprehensive policy and procedures for the program cost allocation. Although a written

procedures document was provided to us, the document was written in response to our

audit request and did not include a comprehensive set of procedures. The manually

intensive and elaborate cost allocation process dictates the need for a formal

comprehensive policy and procedures. Moreover, the heavy reliance on a single person to

carry out this process could impair FEC’s ability to generate a timely and accurate report

when the person becomes unavailable.

FEC Response: Definitions of the three major programs are provided in the FEC

Strategic Plan, Performance Plans, and FEC Mission Statement. A document describing

the allocation process and additional documentation and explanation were provided in

both written and verbal form in meetings to describe the new allocation process (see

below). The document in question was written prior to the audit in preparation for the

audit—documenting procedures in the normal course of preparing for an audit. The FEC

noted that comprehensive procedures were not required due to the limited scope of the

allocation process at the FEC. The FEC is a small agency with over 70% of its costs

dedicated to payroll expenses, and it is our opinion that the process for compiling and

allocating such costs is adequate under the costs benefits test.

Recommendations:

35. Establish formal and comprehensive cost allocation methodology and related policy

and procedures.

FEC Response: The FEC has formally documented the cost allocation procedures; prior

to the FY 2002, Act the FEC did not allocate management and overhead costs to the three

major programs but reported them separately. The FEC does not see a cost effective need

for “comprehensive” detailed procedures carried out solely by the budget office,

particularly when as noted the system is being replaced by a new budget preparation and

reporting system, automated and more fully integrated with the FEC financial system. In

response to the 2002 Act the FEC added requirements to the new system to automate the

allocation process in the new system which will be fully documented.

36. Cross-train employees to minimize the risks of major interruptions in normal business

operations.

FEC Response: The FEC will train several employees to use the new automated budget

preparation and reporting system which will be fully documented.

37. Establish a review process wherein a person, other than the preparer, reviews the

work performed to ensure accuracy and propriety.

FEC Response: The FEC notes again that at some point in a small agency with limited

staff the costs benefits test requires that officials perform their tasks responsibly and

effectively. There is a limit to what tasks can be double-checked with a two person

budget office. In addition, the new automated system will provide a built in check as a

compensating measure of control.
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Auditor’s Report - Section III

17

B. Managerial Cost Accounting

Statement of Federal Financial Standard No. 4, Managerial Cost Accounting Concepts

and Standards for the Federal Government, requires reporting components to perform a

minimum-level of cost accounting and provide basic information necessary to accomplish

the many objectives associated with planning, decision making, and reporting...The

present FEC cost accounting system does not provide the minimum-level identified

above. FEC management notified us that it is in the process of developing a new cost

accounting system.

Recommendations:

38. Evaluate the functional requirements for the new cost accounting system to ensure

that at least, the minimum level of cost accounting required in SFFAS No. 4 is attained.

FEC Response: The FEC does not concur with this finding or its classification as a

reportable condition. SFFAS No. 4 is a very general standard which gives agencies the

flexibility of devising methods or techniques for allocating costs in a reliable and

consistent manner. The FEC believes that the current methods and techniques for

allocating costs are adequate given its size, mission and the nature of costs incurred (i.e.

mostly payroll costs). FEC’s current methods allow for satisfaction of the following

“minimum” level of costs as prescribed in SFFAS No. 4:

• Capturing costs by major programs (i.e., responsibility segments)

• Capturing its full cost of operations

• Using a consistent costing methodology

• Using cost data to assist in measurement of performance

• Reporting cost information consistently

• Combining the standard general ledger data in the costing process

• Determining a reasonable and useful level of data precision

• Accommodating special information needs of management

• Documenting the costing techniques/methods

In that vein, the FEC believes that the current budget reporting and other financial

management and reporting systems provide beneficial and useful high level management

information, and make even more detailed information available to division and office

managers. It is FEC’s position that while its costing process is adequate, it will be

improved upon implementation of its new budget reporting system, which will contain an

automated cost allocation setup.

IV. General Property and Equipment (Property)

FEC’s accounting for property involves a time-consuming effort that increases the risk of

errors due to its process of expensing its property at the time of acquisition and preparing

a journal voucher to reclassify the expense to an asset for reporting purposes.

Our audit disclosed deficiencies, errors or omissions that questioned the effectiveness of

FEC’s internal control on property. Some examples are noted below:

• Depreciation expense and accumulated depreciation reported on the depreciation

report were not correct. We were informed that although the property

management system calculates depreciation correctly, when the data is converted

into another system to generate the depreciation report, the calculation gets
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Section III – Auditor’s Report

18

corrupted. This error was identified during the audit and was subsequently

adjusted.

• Software-in-development was not adequately tracked and was not reported until

the September 30, 2004 financial statements. There was one instance of softwarein- development being reported as completed software in the property

management system; therefore, the asset was being improperly depreciated.

Another instance was completed software that was not recorded. These errors

were only identified during the audit process.

• Several assets were recorded using the purchase order amount, instead of the

actual cost.

• For the 45 sample items we tested, we noted that 45 receiving reports were not

completed properly, that is, they were either not signed, did not have the date of

receipt, did not have a description of the goods or services received, or lacked a

reference to the invoice to be paid. Although only 6 of the 45 items pertained to

acquisitions in fiscal year 2004, this deficiency persisted throughout fiscal year

2004.

One of the five standards for internal control in GAO Standards for Internal Control in

the Federal Government is control activities. Control activities occur at all levels and

functions of the entity. They include a wide range of diverse activities such as approvals,

authorizations, verifications, reconciliations, performance reviews, maintenance of

security, and the creation and maintenance of related records, which provide evidence of

execution of these activities as well as appropriate documentation.

Recommendations:

37. Enforce current procedures to require documentation of approvals and certifications

for procurement and disbursements transactions.

38. Formally communicate to all appropriate personnel to ensure compliance and

consistent application of the policies and procedures.

FEC Response: FEC agrees with these findings. In FY 2003 and in preparation for the

audit, FEC needed to establish asset values for prior year purchases. Detailed records

were not always available. Federal accounting standards allow for the use of estimates

where detailed records are not available. In some cases that meant using reports and

estimates (purchase orders) from as far back as FY 1997. Thus, not all receiving reports

were available. FEC provided the audit team with invoices, purchase orders and receiving

reports for FY 2004 purchases. FEC will modify its stated requirement on receiving

reports to delete the provision requiring a description of goods and services received.

Since this information is on the purchase order and invoice, it is not necessary to require

it on the receiving report. Instead, FEC will add an invoice number field to the receiving

report. This will tie the approval to the goods or services received.

The error in the spreadsheet calculation of depreciation expense was caught and

corrected by FEC in its regular review of the financial statements. Software in Progress

was a new account added in FY 2004 and will be tracked quarterly in FY 2005.
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Auditor’s Report - Section III

19

Current procedures will be enforced. Late in FY 2004 some minor procedures

changed (e.,g., Software in Progress). These changes will be documented and

communicated to appropriate staff in early FY 2005.

V. Payroll

Recommendations:

39. Implement procedures to ensure that payroll deduction elections are authorized by

maintaining adequate supporting documentation or an ability to query the service

provider systems to verify these deductions if initiated by an employee without the FEC’s

intervention. Consider training/re-training payroll employees on the proper procedures

for obtaining and retaining support documents for payroll elections.

40. Ensure that timekeepers perform a monthly reconciliation of leave balances reported

in its records and the service provider records and submit the leave balance certification

to the finance office monthly.

41. Implement procedures for ensuring hours recorded on the T&A reports are properly

supported and authorized. Consider further automating payroll processing to decrease the

risk of errors.

42. Implement procedures for ensuring all payroll and personnel documents are properly

completed and authorized before payroll data is transmitted to the payroll service

provider for processing.

FEC response: FEC’s payroll is processed by a service provider. Seventy percent of

FEC’s annual budget is for payroll. We were pleased that after an extensive audit, Clifton

Gunderson found no incorrect payments or leave balances and had only minor

suggestions on improvements. .

The official record of an employee’s leave balance is the earnings and leave

statement, not the manually prepared timesheets.

FEC agrees it is responsible for obtaining original documents (tax forms, health

deductions, etc.) when employees are hired. However, FEC employees may use OPM’s

Employee Express to change certain deductions. In some cases changes are made by the

service provider employees (TSP loan repayments) or an authorized contractor such as

for enrollment in the Flex Fund HCA Program. Thus, there is not necessarily a form in

FEC’s files for every change to an employee’s deductions. Of the 41 documents the

auditors state were not in FEC’s files, Payroll personnel were able to produce alternative

evidence showing the changes were made either by the employee through Employee

Express, the service provider, or an authorized FEC employee or contractor.

FEC recognizes there are some situations (i.e., holidays, travel) where timesheets

may be approved before the end of the pay period. Both cases noted by the auditors

during the audit were around holiday time, when many employees are off. Supervisors

remain responsible for hours worked by their employees. There is no indication this is

widespread problem or anyone was paid incorrectly as a result of the advanced approval

of the timesheets.

Timekeepers and supervisors will be reminded of the proper procedures for

approving leave, correcting timesheets to minimize potential errors and submitting leave

verifications to payroll each pay period.
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Section III – Auditor’s Report

20

OTHER MATTERS

Federal Managers’ Financial Integrity Act (31 U.S.C. 3512) (Integrity Act)

Compliance and Reporting

OMB Circular No. A-123 provides the reporting guidance for the Integrity Act. OMB

Circular A-123 states that annually, by December 31, the head of each executive agency

submit to the President and the Congress (i) a statement on whether there is reasonable

assurance that the agency's controls are achieving their intended objectives; (ii) a report

on material weaknesses in the agency's controls, and (iii) whether the agency's financial

management systems conform with government-wide requirements. OMB Bulletin No.

01-02 required that we compare the material weaknesses in the agency’s controls and

material non-conformances on the agency’s financial management systems in the

FEC’s Integrity Act report to our report on internal control dated November 1, 2004.

Since the Integrity Act report is due by December 31, 2004, FEC has not started and does

not intend to start the process of accumulating the information required for its report until

November 2004. Accordingly, the comparison of reports could not be performed.

FEC Response: The FEC noted to Clifton Gunderson that the A-123 annual statement

process is an annual one based on calendar years, not fiscal years, and is due to the

President December 31, 2004, not by September 30, 2004. Given the heavy workload

faced by FEC managers during an election year (2004), FEC management stated that we

would not require division and office managers to prepare their statements prior to

September 30, 2004. The FEC notes that Clifton Gunderson was made aware that the A123 process at the FEC requires all managers to integrate concern for management

controls into the on-going managerial and supervisory duties they perform on a

continuing basis. This conforms to the last OMB revision of the A-123 process designed

to integrate management controls and A-123 into the overall management processes of

federal agencies.

It is therefore incorrect to state that the process has not been started. It is a

process that is on-going on a regular basis. The process of preparing and submitting the

annual statements to the Staff Director will not have been started by September 30. 2004.

FEC management did note that the 2003 statement indicated that managers had

discovered no major potential weaknesses or potential vulnerabilities in their self

assessment process. The FEC notes that the A-127 financial systems management

controls review process can be more than covered by the extensive self-assessment the

FEC performed, with the help of a contractor, for FY 2003 processes in preparation for

the FY 2004 audit. It should also be noted that the review and evaluation process

covered by the audit is more extensive than any self-assessment provided for in A-127 of

financial management controls.

The FEC has commented to the FEC IG on prior occasions that the FEC does not

require a comprehensive plan to integrate its one existing financial system with any other

financial systems. In terms of integrating the financial system with systems such as the

budget reporting systems, as well as the property (fixed assets) and procurement systems,

the FEC indicates in both the main FEC and FEC IT Strategic Plans and Performance

Plans, the schedule for improving these systems. As noted the FEC is currently engaged

in developing and implementing a more fully integrated budgeting system with the

accounting system.
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Federal Election Commission Performance and Accountability Report

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Financial Statements and Supplementary Information - Section III

Limitations on the Financial Statements

Management has prepared the accompanying fi nancial statements to report the 

fi nancial position and results of operations of the Federal Election Commission, 

for fi scal year 2004 pursuant to the requirements of Title 31 of the United States 

Code, section 3515(b).

While the statements have been prepared from the books and records of the 

Federal Election Commission in accordance with generally accepted accounting principles (GAAP) for federal entities and the formats prescribed by OMB, 

the statements are in addition to the fi nancial reports used to monitor and control budgetary resources which are prepared from the same books and records.

The statements should be read with the understanding that they represent a 

component of the U.S. Government, a sovereign entity. One implication of this 

is that the liabilities presented herein cannot be liquidated without the enactment of appropriations, and ongoing operations are subject to the enactment of 

future appropriations.

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Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Financial Statements and Supplementary Information - Section III

Principal Statements

Federal Election Commission

Balance Sheet

As of September 30, 2004

Assets

Intragovernmental:

Fund balance with Treasury (Note 2) $ 11,817,284

Total Intragovernmental Assets 11,817,284

Accounts Receivable, net (Note 3) 95,358

General property and equipment, net (Note 4) 8,753,961

Advances to others 4,014

Total Assets $ 20,670,617

Liabilities

Intragovernmental:

Accounts Payable (Note 5) $ 237,080

Custodial Liability 461,025

Total Intragovernmental 698,105

Accounts payable 742,256

Accrued payroll and benefits 1,190,514

Unfunded leave 1,785,307

Actuarial Federal Employees Compensation Act (FECA) liability (Note 6) 43,425

Other 5,187

Total Liabilities 4,464,794

Commitments and Contingencies -

Net Position

Unexpended appropriations 9,280,593

Cumulative results of operations 6,925,230

Total Net Position 16,205,823

Total Liabilities and Net Position $ 20,670,617

The accompanying notes are an integral part of these statements
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Federal Election Commission Performance and Accountability Report

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Section III – Financial Statements and Supplementary Information

Federal Election Commission

Statement of Net Cost

For the year ended September 30, 2004

 Obtain 

Compliance

 Promote 

Disclosure

 Public 

Financing

 Election 

Administration Totals 

Intragovernmental gross costs $ 4,843,146 $ 2,485,933 $ 716,013 $ - $ 8,045,092

Less: Intragovernmental earned revenue - -

Intragovernmental net costs 4,843,146 2,485,933 716,013 8,045,092 - 

Gross costs with the public 26,215,665 13,456,214 3,875,738 309,386 43,857,004

Less: earned revenues from the public (149,818) (149,818)

Net costs with the public 26,215,665 13,306,396 3,875,738 309,386 43,707,186

Net Cost of Operations $ 31,058,811 $ 15,792,329 $ 4,591,751 $ 309,386 $ 51,752,277

The accompanying notes are an integral part of these statements
91

Federal Election Commission Performance and Accountability Report

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Financial Statements and Supplementary Information - Section III

Federal Election Commission

Statement of Changes in Net Position

For the year ended September 30, 2004

Beginning Balances

Budgetary Financing Sources:

Appropriations received

Appropriations transferred in/out (+/-)

Other adjustments (rescissions, etc) (+/-)

Appropriations used

Other Financing Sources:

Imputed fi nancing from costs absorbed by others

Total Financing Sources

Net Cost of Operations (+/-)

Ending Balances

The accompanying notes are an integral part of these statements

6,014,404 10,411,548

51,240,000

(481,092)

- (1,463,081)

50,426,782 (50,426,782)

50,426,782 (1,130,955)

2,236,321

2,236,321 -

52,663,103 (1,130,955)

(51,752,277)

6,925,230 9,280,593

 Cumulative Results of Unexpended

 Operations Appropriations

$ $

$ $
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Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section III – Financial Statements and Supplementary Information

Federal Election Commission

Statement of Budgetary Resources

For the year ended September 30, 2004

 Combined Total 

Budgetary Resources

Budget authority:

Appropriations received $ 51,240,000

Net transfers (481,092)

50,758,908

Unobligated balance:

Beginning of period 1,323,078

1,323,078

Subtotal 52,081,986

Recoveries of prior year obligations 887,780

Enacted rescissions (302,316)

Permanently not available:

 Cancellations of expired/no-year accounts (1,160,764)

Total Budgetary Resources $ 51,506,686

Status of Budgetary Resources

Obligations Incurred

Direct

Category A 42,587,222

Category B 7,518,185

50,105,407

Unobligated balance

Balance currently available

Category A 86,214

86,214

Unobligated balance not available 1,315,065

Total Status of Budgetary Resources $ 51,506,686

Relationship of Obligations to Outlays:

Obligated balance, net, beginning of period $ 10,564,690

Obligated balance transferred, net, end of period

Undelivered orders 7,875,301

Accounts payable 2,169,850

Other liabilities 5,187

$ 10,050,338

Outlays

Disbursements 49,737,166

Net Outlays $ 49,737,166

The accompanying notes are an integral part of these statements
93

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Financial Statements and Supplementary Information - Section III

Federal Election Commission

Statement of Financing

For the year ended September 30, 2004

Resources Used to Finance Activities

Budgetary Resources Obligated

Obligations Incurred $ 50,105,407

Less: Recoveries of prior year obligations (887,780)

Net obligations 49,217,627

Other Resources

Imputed financing from costs absorbed by others 2,236,321

Net other resources used to finance activities 2,236,321

Total resources used to finance activities 51,453,948

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 (1,209,155)

Resources that finance the acquisition of assets 3,421,957

Total resources used to finance items not part of the net cost of operations 2,212,802

Total resources used to finance the net cost of operations 49,241,146

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 liability 86,430

Increase in FECA liability 17,158

Total components of Net Cost of Operations that will require or generate resources in future periods 103,588

Components not Requiring or Generating Resources:

Depreciation and amortization 2,407,543

Total components of Net Cost of Operations that will not require or generate resources 2,407,543

2,511,131

Net Cost of Operations $ 51,752,277

Total components of net cost of operations that will not require or generate resources in the current periods

The accompanying notes are an integral part of these statements
94

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Section III – Financial Statements and Supplementary Information

Federal Election Commission

Statement of Custodial Activity

As of September 30, 2004

Collections on Behalf of the Federal Government

Cash Collections

Miscellaneous Receipts $ 476,507

Civil Penalties 3,737,570

Administrative Fees 830,330

Allowance for Uncollectible Receivables (381,431)

Total Custodial Revenue $ 4,662,976

Disposition of Collections

Transferred to Treasury 4,567,618

Amount to be transferred 95,358

Total Disposition of Collections $ 4,662,976

The accompanying notes are an integral part of these statements
95

Federal Election Commission Performance and Accountability Report

Fiscal Year 2004

Financial Statements and Supplementary Information - Section III

Notes to the Financial Statements for 

the Year Ended September 30, 2004 

Note 1 - Summary of Signifi cant Accounting Policies

Reporting Entity

The accompanying fi nancial statements present the fi nancial position, net cost 

of operations, changes in net position, custodial activity, budgetary resources, 

and fi nancing of the Federal Election Commission (FEC). Created in 1975 by 

an act of Congress, the FEC is an independent agency charged with administering and enforcing the Federal Election Campaign Act (FECA). The fi nancial 

activity presented relates primarily to the execution of the FEC congressionally 

approved budget. Until March 31, 2004 FEC retained responsibility for Election 

Administration. Under P.L. 107-252, effective April 1, 2004, that responsibility 

and remaining funds were transferred to the newly formed Election Assistance 

Commission. 

The Presidential Election Campaign Fund (“the fund”) is not a reporting entity 

of the FEC’s. Federal Accounting Standards Advisory Boards’ (FASAB) Statement 

of Federal Financial Accounting Concept No. 2, “Entity and Display,” states that 

two criteria determine whether a program qualifi es as an agency‘s reporting 

entity: conclusive criteria and indicative criteria. Conclusive criteria include 

which agency budgets the funds. Indicative criteria include which agency 

exercises “continuing administrative control including the ability to select or remove the governing authority and the authority to review and/or modify budget 

requests.” Since the funds are budgeted, apportioned, recorded, reported and 

paid by Treasury, the accounts of the Presidential Election Campaign Fund are 

not included in the FEC’s fi nancial statements.

The FEC maintains eligibility requirements for the fund. Under the Internal Revenue Code, qualifi ed Presidential candidates receive money from this fund. The 

FEC helps Treasury determine which candidates are eligible to receive the funds 

and the amount of funds to be received. The Secretary of the Treasury makes 

the payments to eligible candidates and major party and qualifi ed minor party 

nominees as well as National Party Conventions also receive money from this 

fund. The Fund is fi nanced exclusively by a voluntary tax check off. Individual 

taxpayers may direct $3 of their tax to the Fund (up to $6 for joint fi lers) by 

checking a box on their tax return.
96

Federal Election Commission Performance and Accountability Report

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Section III – Financial Statements and Supplementary Information

Basis of Accounting and Presentation

These fi nancial statements refl ect both accrual and budgetary accounting 

transactions. Under the accrual method of accounting, revenues are recognized 

when earned and expenses are recognized when 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.

These fi nancial statements have been prepared from the books and reports of 

FEC in accordance with U.S. generally accepted accounting principles (GAAP) 

for the federal government, the Offi ce of Management and Budget (OMB) Bulletin No. 01-09, Form and Content of Agency Financial Statements. FEC did 

not prepare audited fi nancial statements for FY 2003 and therefore, there is no 

presentation of comparative information for the FY 2004 statements.

Assets

Intra-governmental assets are those assets that arise from transactions with other 

federal entities. Entity assets are available for use by the entity in its operations 

while nonentity assets are assets held by the entity but not available for use by 

the entity in its operations.

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 and deposited funds that are available to pay current liabilities 

and fi nance authorized purchase commitments. 

Accounts Receivable 

FEC’s accounts receivable represent amounts due from the public or U.S. 

Treasury for fi nes and penalties assessed by FEC and referred to Treasury for 

collection. An allowance for uncollectible accounts has been established and 

included in Accounts Receivable, net on the balance sheet. The allowance is 

a percentage of the overall receivable balance and the collection rate of past 

balances. 

General Property and Equipment

General P&E is reported at acquisition cost. The capitalization threshold is established at $25,000 and a useful life of 2 or more years. 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.
97

Federal Election Commission Performance and Accountability Report

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Financial Statements and Supplementary Information - Section III

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 reclassifi ed as internal use software costs 

and amortized using the straight-line method over the estimated useful life of 

5 years. Purchased commercial software that does not meet the capitalization 

criteria is expensed. Enhancements which do not add signifi cant new capability 

or functionality are expensed. Construction costs of $25,000 or more are accumulated as Construction in Progress until occupancy and then are capitalized 

as a Leasehold Improvement over 5-7 years or the life of the lease whichever is 

shorter. 

The land and building in which the FEC operates is leased from a commercial 

entity. The General Services Administration (GSA) provides the facility occupied 

by the FEC. GSA charges the FEC a Standard Level Users Charge that approximates the commercial rental rates for similar properties.

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.

Accounts Payable

Accounts payable consist of amounts owed for goods, services, and other expenses received but not yet paid.

Accrued Payroll and Benefi ts

Accrued Payroll and Benefi ts represents salaries, wages and benefi ts earned by 

employees, but not disbursed as of September 30, 2004. Accrued payroll and 

benefi ts are payable to employees and are therefore not classifi ed 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 year, the balance in the accrued, restored, and compensatory leave account is adjusted to refl ect current leave balances and pay rates. 

Accrued annual leave is paid from future funding sources and accordingly is 

refl ected as a liability not covered by budgetary resources. Sick leave and other 

types of non-vested leave are expensed as taken.
98

Federal Election Commission Performance and Accountability Report

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Section III – Financial Statements and Supplementary Information

Employee Retirement Plans

Civil Service Retirement System (CSRS) and Federal Employees Retirement 

System (FERS)

FEC employees participate in one of two retirement programs, either the CSRS 

or the 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 CSRS covered employees, the FEC withheld 7.0% of gross earnings. The 

FEC matches the withholding, and the sum of the withholding and the matching funds is transferred to the Civil Service Retirement System.

For each fi scal year the Offi ce 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 benefi ts. 

Since the U.S. Government’s estimated FY 2004 service cost exceeds contributions made by employer agencies and covered employees, this plan is not fully 

funded by the FEC and its employees. For FY 2004 FEC recognized $2.236 million as an imputed cost and as an imputed fi nancing 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 exceed 

the U.S. Government’s estimated FY 2004 service cost. For FERS covered employees the FEC made contributions of 10.7% of basic pay. Employees contributed .80% of gross earnings. 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)

Employees covered by CSRS and FERS are eligible to contribute to the U.S. 

Government’s TSP, administered by the Federal Retirement Thrift Investment 

Board. The FEC makes a mandatory contribution of 1% of basic pay for FERScovered employees. FERS employees are eligible to contribute up to 12% of 

basic pay to their TSP account. In addition, FEC makes matching contributions, 

of up to 5% of basic pay, for employees who contribute to the Thrift Saving 

Plan. Contributions are matched dollar for dollar for the fi rst 3 percent of pay 

contributed each pay period and 50 cents on the dollar for the next 2 percent 

of pay. CSRS participants may contribute up to 9% of their gross pay, but there 

is no governmental matching contribution. The maximum amounts that either 

FERS or CSRS employees may contribute to the plan in calendar year 2004 is 

$13,000 for those under age fi fty and $16,000 for those fi fty and older.
99

Federal Election Commission Performance and Accountability Report

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Financial Statements and Supplementary Information - Section III

The FEC fi nancial statements do not report CSRS or FERS assets, accumulated 

plan benefi ts, or unfunded liabilities, if any, which may be applicable to FEC 

employees and funded by FEC. Such reporting is the responsibility of OPM.

Contingencies

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 outfl ow or other sacrifi ce 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 confi rming event or events occurring 

is more than remote but less than probable.

In the opinion of FEC management and legal counsel, 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 fi nancial statements.

Revenues and Other Financing Sources

Annual Salaries and Expenses Appropriation

Annual one year appropriations are provided by Congress and are available for 

obligation in the fi scal year for which it was provided to fund the overall operation of the FEC.

Imputed Financing Sources

In accordance with OMB Bulletin No. 01-09, 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 “Statement of Net Cost.” 

A corresponding amount is recognized in the “Statement of Changes in Net 

Position” as an “Imputed Financing Source.” These imputed fi nancing sources 

primarily represent unfunded pension costs of FEC employees.

Statement of Net cost

Sub-Organization Program Costs

The FEC Statement of Net Cost is presented by Responsibility Segment. The Responsibility Segments are based on the FEC’s mission and funding sources. The 

major programs that comprise the Responsibility Segments are: Obtain Compliance, Promote Disclosure and Public Financing. Costs for a fourth segment, 

Election Administration, is reported for the six months ended March 31, 2004, 

when the function transferred to the Election Assistance Commission. 
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Section III – Financial Statements and Supplementary Information

Earned Revenue

Earned revenues collected by FEC included fees for seminars and conferences 

held during the year in various parts of the country. Earned revenues collected 

by FEC also included amounts collected from the public for information provided under the Freedom of Information Act (FOIA), primarily photocopying.

Net Position

Net position is the residual difference between asset and liabilities and comprises Unexpended Appropriations and Cumulative Results of Operations.

Unexpended appropriations include appropriations not yet obligated or expended, represented by the unobligated balances and undelivered orders of 

FEC’s appropriated funds. Unobligated balances associated with appropriations 

that expire at the end of the fi scal year remain available for obligation adjustments, but not for new obligations, until that account is closed, fi ve years after 

the appropriations expire. Cumulative Results of Operation is the Net Result of 

FEC’s operation 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, fi nes and 

penalties. These amounts are not reported as revenue to FEC.

Use of Estimates

The preparation of fi nancial statements in accordance with the accounting principles described above require management to make estimates and assumptions that affect the amounts reported in the fi nancial statements and accompanying footnotes. Actual results could differ from those estimates.
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Financial Statements and Supplementary Information - Section III

Note 2 - Fund Balance with Treasury

Fund balance with Treasury at September 30, 2004, consisted of the following:

2004

Appropriated Funds $11,451,617 

Other Funds 365,667

Total Fund Balance with Treasury $11,817,284 

Status of Fund Balance with Treasury

2004

Unobligated Balance

- Available $ 86,214 

- Unavailable 1,315,065 

Obligated Balance, Not Yet Disbursed 10,050,338

Other Funds 365,667

Total Status of Fund Balance with 

Treasury $11,817,284 

Fund Balance with Treasury is an asset maintained with Treasury. The appropriated funds are available to pay current liabilities. FEC has the authority to 

disburse funds to agencies and institutions participating in its programs through 

the Treasury, which processes cash receipts and disbursements on its behalf. 

Other Funds consist of custodial collections and are not available to fi nance 

FEC activities and are therefore classifi ed as non-entity assets. 

Available unobligated balances represent amounts that are apportioned for obligation in the current fi scal year. Unavailable unobligated balances represent 

amounts that are not apportioned for obligation during the current fi scal year 

and expired appropriations no longer available to incur new obligations. Obligated balances not yet disbursed include reimbursements and other income 

earned, undelivered orders and expended authority-unpaid. 
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Section III – Financial Statements and Supplementary Information

Non-entity Assets

Non – entity assets at September 30, 2004 consist of the following:

FY 2004

Fund balance with Treasury (Custodial) $ 365,667 

Accounts Receivable 95,358 

Total non-entity Assets $ 461,025 

Total entity Assets 20,209,592 

 Total Assets $ 20,670,617 

Non-entity assets are not available to fi nance FEC activities.

Note 3 - Accounts Receivable, Net

Accounts Receivable at September 30, 2004, consist of the following:

Gross Accounts 

Receivable Allowance Net Accounts Receivable

NON-ENTITY

Intragovernmental $ - $ - $ - 

With the Public 

476,789 

 

381,431 

 

95,358 

 Total Non-Entity 

476,789 

 

381,431 

 

95,358 

TOTAL $ 476,789 $ 381,431 $ 95,358 
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Federal Election Commission Performance and Accountability Report

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Financial Statements and Supplementary Information - Section III

Note 4 - Property and Equipment, Net

Capitalized property and equipment, net of accumulated depreciation, consisted of the following as of September 30, 2004:

Service

Life Acquisition Accumulated Net Book

Asset Class (years) Value Depreciation Value

Software 5 $ 8,150,070 $ 3,651,895 $ 4,498,175 

Desktop and laptop 

computers and 

peripherals peripherals 3 2,431,700 1,460,814 970,885 

Leasehold Improvements 5-7 1,912,848 1,153,973 758,875 

Furniture 7 694,730 173,555 521,175 

Telecommunication 

Equipment 5 234,763 234,763 - 

Software-in-Development n.a. 1,078,650 - 1,078,650 

Construction-in-Progress n.a. 926,200 - 926,200 

Totals $ 15,428,961 $ 6,675,000 $ 8,753,961 

Depreciation expense was $2,407,543 for the fi scal year ended September 30, 

2004.
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Section III – Financial Statements and Supplementary Information

Note 5 - Liabilities Covered and Not Covered By 

Budgetary Resources

Liabilities Covered by Budgetary Resources are those for which budgetary 

resources are available in the current fi scal year. Liabilities Not Covered by 

Budgetary Resources result from the receipt of goods and services, or the occurrence of events, for which appropriations, revenues, or other fi nancing sources 

necessary to pay the liabilities have not yet been made available through Congressional appropriation. These include FECA and annual leave liability. FEC’s 

liabilities covered and not covered by budgetary resources are as follows:

Liabilities Covered by Budgetary Resources

Accounts Payable $ 979,336

Accrued Payroll and Benefi ts 1,190,514

Other 5,187

Liabilities Not Covered by Budgetary Resources

Accrued Unfunded Annual Leave 1,785,307

Custodial Liability 461,025

Accrued Unfunded FECA Liability 43,425

Total Liabilities Covered and Not Covered 

by Budgetary Resources $4,464,794
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Financial Statements and Supplementary Information - Section III

Note 6 - FECA Liability

The Federal Employee’s Compensation Act (FECA) provides income and medical cost protection to covered federal civilian employees injured on the job, 

employees who have incurred a work-related occupational disease, and benefi ciaries of employees whose death is attributable to a job-related injury or occupational disease. Claims incurred for benefi ts for FEC employees under FECA 

are administered by the Department of Labor (DOL) and are ultimately paid by 

the FEC.

The FEC accrues FECA liability at September 30, 2004. FECA liability includes 

two components: (1) the accrued liability which represents money owed for 

claims paid by the DOL through the current fi scal year, for which billing to and 

payment by the FEC will occur in a subsequent fi scal year and; (2) the liability 

for future costs which represents the expected liability for approved compensation cases beyond the current fi scal year. Estimated future costs have been 

actuarially determined, using the model provided by DOL and are regarded as 

a liability to the public because neither the costs nor reimbursement have been 

recognized by DOL. FECA liability is included in Liabilities Not Covered by 

Budgetary Resources, as described in Note 5.

Note 7 - Leases

The FEC has a commitment under an operating lease for its headquarters offi ce 

space. The lease is for a period of ten years and expires September 30, 2007. 

Under their lease agreement with GSA, the FEC is charged rent that is intended 

to approximate commercial rental rates. FEC has no capital leases. Future payments due under the lease:

Future Operating Lease Payments

Fiscal Year Lease Payments

2005 $ 3,722,474

2006 3,738,582

2007 3,755,389

Total Future Lease Payments $ 11,216,445
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Section III – Financial Statements and Supplementary Information

Note 8 - Statement of Budgetary Resources 

The Statement of Budgetary Resources (SBR) compares budgetary resources 

with the status of those resources. As of September 30, 2004, budgetary resources were $51,506,686 and net outlays were $49,737,166. 

Apportionment Categories of Obligations Incurred 

FEC receives apportionments of its resources from OMB. Category A 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. Category B 

apportionments are to be used for Information Technology enhancements only. 

The apportionment categories of obligations incurred as of September 30, 2004 

are summarized below:

2004

Direct:

 Category A

$ 42,587,222

 Category B 7,518,185

Total Apportionment Categories of 

Obligations Incurred $ 50,105,407

Comparison to the Budget of the United States Government 

Statement of Federal Financial Accounting Standards No. 7 (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). However, the Budget has not yet been published. The Budget

is scheduled for publication in February 2005 and will be available through 

OMB. Accordingly, information required for such disclosure is not available at 

the time of publication of these fi nancial statements. In FY 2004 FEC adjusted 

the beginning balance of Expended Authority Unpaid downward by $105,866 

in its SF-133 submission to Treasury to correct an administrative error in the FY 

2003 report. Undelivered Orders Unpaid went up by a corresponding amount. 

The general ledger reported the fi gures correctly.
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Note 9 - Custodial Revenues and Accounts Receivable 

FEC uses the accrual basis of accounting for the collections of fi nes, penalties 

and miscellaneous receipts. Collectibility by FEC of the fi nes and penalties is 

based on the responsible parties’ willingness and ability to pay:

2004

Fines, Penalties and Other Misc. Revenue $4,662,976 

Accounts Receivable for Fines, Penalties 

and Other Miscellaneous Receipts

Accounts Receivable 476,789

Less: Allowance for Doubtful Accounts 381,431

Total $ 95,358

Note 10 – Explanation of the Relationship Between 

Liabilities Not Covered by Budgetary Resources on the 

Balance Sheet and the Change in Components 

Requiring or Generating Resources in Future Periods

The increase in FECA Liability of $17,158 is included as part of the Resources 

that fund expenses recognized in prior periods line item of the Statement of 

Financing. The change in the unfunded annual leave balance between FY 2003 

and FY 2004 of $86,430 is refl ected as Components Requiring or Generating 

Resources in future Periods on the Statement of Financing. See Note 5 for the 

liability balance.

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Assessment of Major Performance and Management Challenges - Section III

Required Supplementary Information

Intragovernmental Assets:

Trading Partner Agency:

Fund Balance

with Treasury

Treasury $ 11,817,284

Total $ 11,817,284

Intragovernmental Liabilities:

Trading Partner Agency:

Accounts

Payable

Covered by Budgetary Resources:

Department of Health & Human Services $ 11,574

Department of Labor 2,947

Department of Treasury 5,198

Government Printing Office 347

General Services Administration 198,444

OPM 588

U. S. Department of Agriculture 10,002

U. S. Postal Service 7,980

Total Covered by Budgetary Resources $ 237,080

Federal Election Commission

Required Supplementary Information

As of September 30, 2004
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Section III – Financial Statements and Supplementary Information

Federal Election Commission

Required Supplementary Information

Statement of Budgetary Resources

For the year ended September 30, 2004

 Obtain 

Compliance

 Promote 

Disclosure

 Public 

Financing

 Election 

Administration Totals 

Budgetary Resources

Budget authority:

Appropriations received $ 30,710,026 $ 15,658,690 $ 4,563,660 $ 51,240,000 307,624 $

Net transfers (288,337) (147,019) (42,848) (481,092) (2,888) 

 30,421,689 15,511,671 4,520,812 50,758,908 304,736

Unobligated balance:

Beginning of period 792,970 404,326 117,839 1,323,078 7,943 

 792,970 404,326 117,839 1,323,078 7,943 

Subtotal 31,214,659 15,915,997 4,638,651 52,081,986 312,679

Recoveries of prior year obligations 532,079 271,301 79,070 887,780 5,330 

Enacted rescissions (181,189) (92,386) (26,926) (302,316) (1,815) 

Permanently not available:

 Cancellations of expired/no-year accounts (695,689) (354,723) (103,383) (1,160,764) (6,969)

Total Budgetary Resources $ 30,869,860 $ 15,740,189 $ 4,587,412 $ 51,506,686 309,225 $

Status of Budgetary Resources

Obligations Incurred

Direct

Category A 25,524,096 13,014,444 3,793,006 42,587,222 255,676

Category B 4,505,926 2,297,520 669,603 7,518,185 45,136 

 30,030,022 15,311,964 4,462,609 50,105,407 300,812

Unobligated balance

Balance currently available

Category A 51,670 26,347 7,679 86,214 518 

 51,670 26,347 7,679 86,214 518 

Unobligated balance not available 788,168 401,877 117,125 1,315,065 7,895 

Total Status of Budgetary Resources $ 30,869,860 $ 15,740,188 $ 4,587,413 $ 51,506,686 309,225 $

Relationship of Obligations to Outlays:

Obligated balance, net, beginning of period $ 6,331,809 $ 3,228,517 $ 940,938 $ 10,564,690 63,426 $

Obligated balance transferred, net, end of period

Undelivered orders 4,719,959 2,406,653 701,409 7,875,301 47,280 

Accounts payable 1,300,472 663,095 193,256 2,169,850 13,027 

Other liabilities 3,109 1,585 462 5,187 31 

Total Obligated balance, net, end of period $ 6,023,540 $ 3,071,333 $ 895,127 $ 10,050,338 60,338 $

Outlays

Disbursements 29,809,321 15,199,432 4,429,811 49,737,166 298,602

Net Outlays $ 29,809,321 $ 15,199,432 $ 4,429,811 $ 49,737,166 298,602 $
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Section III – Asessment of Major Performance and Management Challenges

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113

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Assessment of Major Performance and Management Challenges - Section III

FEC Management and Performance Challenges

(Prepared by FEC’s Office of the Inspector General) 

INFORMATION TECHNOLOGY SECURITY

The Federal Election Commission’s (FEC) mission is to assure that the campaign finance 

process is fully disclosed, and that the rules are effectively and fairly enforced, fostering 

the electorate's faith in the integrity of the nation's political process. The FEC’s 

responsibilities are divided into three primary programs: disclosure of campaign finance 

information; enforcement of the provisions of the law, such as the limits and prohibitions 

on campaign contributions; and oversight of the public funding of Presidential elections.

The FEC’s goal is to provide the electorate with the capability to make educated, 

informed decisions about the source of financial support for candidates of Federal office, 

as well as provide confidence that those who disregard the laws regarding campaign 

financing and/or its requirements for public disclosure will be held accountable for noncompliance. Accomplishment of the FEC’s mission and goals depend heavily on 

computerized systems. The Commission’s computerized disclosure database plays a 

significant role in this process. The database contains millions of transactions, and is 

available through the FEC’s website, which allows the public to access campaign 

contribution information. 

While information technology (IT) can result in a number of benefits, such as information 

being processed quickly and communicated almost instantaneously, it also increases the 

risk of fraud, inappropriate disclosure of sensitive data, and disruption of critical 

operations and services. The Government Accountability Office (GAO), formerly named 

the General Accounting Office, has reported IT security as a high-risk area throughout 

the government since February 1997. The GAO designated IT security as a governmentwide high-risk area because of growing evidence indicating that controls over 

computerized operations were not effective, and risks were increasing.

GAO commented in November 2002, that although progress had been made on Federal 

computer security, serious and widespread information security weaknesses continue to 

place Federal assets at risk of inadvertent or deliberate misuse; financial information at 

risk of unauthorized modification or destruction; sensitive information at risk of 

inappropriate disclosure; and critical operations at risk of disruption. A primary reason 

for these weaknesses is that Federal agencies have not yet fully implemented 

comprehensive security management programs, which are critical to identifying 
114

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Section III – Asessment of Major Performance and Management Challenges

2

information security weaknesses and risks on an ongoing basis. The Congress has shown 

continuing interest in addressing these risks, as evidenced by Congressional hearings on 

information security and enactment of the Federal Information Security Management Act 

(FISMA) of 2002. 

The FEC is not immune to the government-wide information security weaknesses 

reported by GAO. The FEC lacks a comprehensive disaster recovery plan for the 

Commission’s data centers, networks, and telecommunications. The disaster recovery 

plan is necessary to assist the Commission to respond to minor business interruptions, 

such as temporary power failures, as well as major disasters, such as fire, other natural, or 

terrorist disasters. In addition, the Commission has documented weaknesses related to 

computer access controls that are necessary to limit and monitor access to the 

Commission’s computer resources. 

To compound the challenges, the FEC is also seriously lacking a critical statutory and/or 

regulatory IT security framework necessary for a Federal agency. The Inspector General 

believes the framework is essential to establish and ensure the minimum appropriate 

requirements to adequately protect the FEC’s critical IT resources from fraud, waste, 

loss, unauthorized modification or appropriation. 

The FEC’s General Counsel (GC) opined in September 2004 on the FEC’s exemption 

from several important Federal laws, regulations, and standards related to management 

controls and procedures for IT security. The basis for the exemptions is primarily due to 

the FEC’s exemption from the Paperwork Reduction Act (PRA), an Act generally 

unrelated to IT security. The majority of the Federal IT security laws and regulations, 

such as the Computer Security Act of 1987, as amended, and the FISMA derive their 

authority from the PRA or other laws from which the FEC is exempt. 

Specifically, the GC concluded that the FEC is exempt from the Computer Security Act 

of 1987, a law that established minimum acceptable security practices for Federal 

computer systems. In addition, the FEC is not required to follow Federal Information 

Processing Standards (FIPS) issued by the National Institute of Standards and 

Technology (NIST). The FIPS are standards and guidelines pertaining to Federal 

computer requirements. Lastly, the FEC is exempt from the FISMA, a law followed by a 

majority of both small and large Federal departments and agencies to provide information 

security for the operations and assets of Federal agencies.

The Government Accountability Office (GAO) is one of a handful of Federal agencies 

that is also exempt from FISMA. However; although GAO is not obligated by law to 

comply with FISMA, unlike the FEC, GAO has formally adopted the requirements of 
115

Federal Election Commission Performance and Accountability Report

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Assessment of Major Performance and Management Challenges - Section III

3

FISMA to help ensure the establishment of an effective information security program, 

and to fulfill GAO’s goal of being a model Federal agency.

The FISMA was signed into law on November 27, 2002. FISMA replaces the 

Government Information Security Reform Act (GISRA), which expired in November 

2002. FISMA requires agency Chief Information Officers (CIOs) to work with agency 

program officials in conducting annual security reviews of agency programs and systems. 

It also directs Inspectors General (IGs) to perform annual independent evaluations of an 

agency’s security program.

In addition, FISMA requires Federal agencies to develop, document, and implement an 

agency-wide information security program to provide information security for the 

operations and assets of the agency. This includes:

• Periodic risk assessments; 

• Policies and procedures that are based on risk assessments; 

• Subordinate plans for providing adequate information security for networks, facilities, 

information systems, or groups of information systems, as appropriate; 

• Security awareness training to inform employees (including contractors) of the security 

risks associated with their activities, and their responsibilities to comply with those 

agency policies and procedures designed to reduce those risks;

• Periodic testing and evaluation of the effectiveness of information security policies; 

• A process for planning, implementing, evaluating, and documenting remedial action to 

address any deficiencies in the information security policies, procedures, and practices of 

the agency; 

• Procedures for detecting, reporting, and responding to security incidents; and

• Plans and procedures to ensure continuity of operations of the agency’s information 

systems. 

The FEC deserves credit for the improvements made to its IT security program recently, 

including implementation of a mandatory security awareness training program for 

employees and contractors, approval in September 2004 of an Information System 

Security Policy, and appointment of an agency-wide IT security officer. The IT Division 

is staffed by a dedicated and motivated staff. The commitment of the staff is critical to 

the accomplishment of the numerous tasks necessary to protect the FEC’s IT 

infrastructure, as well as to accomplish the many aggressive IT initiatives contained in 

the FEC’s IT strategic plan. However; as information security threats become more 

aggressive and potentially more destructive, the challenge will be to provide increasing 

vigilance, continuous system improvement, and support at all organizational levels to 

ensure the integrity, confidentiality, and availability of mission critical information and 

information systems. The Inspector General believes a proper balance of resources is 

essential to the accomplishment of the agency mission and to protect the IT 

infrastructure. 
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4

FINANCIAL REPORTING

The Federal government has a stewardship obligation to prevent fraud, waste, and abuse; 

to use tax dollars appropriately; and to ensure financial accountability to the President, 

the Congress, and the American people. Timely, accurate, and useful financial 

information is essential for making operating decisions day-to-day; managing the 

government’s operations more efficiently, effectively, and economically; meeting the 

goals of Federal financial management reform legislation (such as the Chief Financial 

Officers Act); supporting results-oriented management approaches; and ensuring 

accountability on an ongoing basis. 

One of the goals of the President’s Management Agenda (PMA) is improved financial 

management. In identifying improved financial performance as one of its five 

government-wide initiatives, the PMA stated that a clean financial audit is a basic 

prescription for any well-managed organization, and recognized that “most federal 

agencies that obtain clean audits only do so after making extraordinary, labor-intensive 

assaults on financial records.” Further, the PMA stated that without sound internal 

controls, and accurate and timely financial information, it is not possible to accomplish 

the President’s agenda to secure the best performance and highest measure of 

accountability for the American people. 

On November 7, 2002, the President signed the Accountability of Tax Dollars Act of 

2002 (Public Law 107-289). The Act requires the FEC and other Federal agencies not 

previously covered by the Chief Financial Officers Act, to prepare and submit to the 

Congress and the Director of the Office of Management and Budget (OMB) audited 

financial statements, beginning with the fiscal year (FY) 2002 cycle. In recognizing the 

challenges of the new requirement, the Act permitted the OMB Director to waive the 

reporting requirement during an initial transition period for FYs 2002 and 2003 for those 

agencies that had not prepared audited financial statements in the past. Beginning in FY 

2004, the FEC is required to prepare and submit annual audited financial statements. 

In addition to audited financial statements, the FEC is required to submit un-audited 

quarterly financial statements forty-five days after each quarter end. Also, beginning in 

FY 2004, the FEC will prepare and submit for the first time an annual Performance and 

Accountability Report (PAR). The PAR provides financial and performance information 

that enables Congress, the President, and the public the ability to assess the performance 

of the FEC relative to its mission, and for management to be accountable for its actions 

and resources.
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Assessment of Major Performance and Management Challenges - Section III

5

The effort required to accomplish these financial and performance reporting requirements 

and meet the deadlines imposed is a significant challenge for the FEC. Many entities 

must cooperate to make this happen; including financial management and staff, program 

managers with performance reporting responsibilities, consultants, and independent 

auditors. The FEC’s first year preparing audited financial statements and the PAR 

coincide with the OMB’s accelerated reporting initiatives. OMB guidance shortens the 

time to prepare and submit the PAR, as well as to audit the year-end financial statements, 

from 120 days for FY 2003, to 45 days for FY 2004. 

The Commission’s ability to meet these accelerated time frames will depend upon having 

effective and timely interim and year-end procedures to accumulate and record financial 

transactions, close the books, and prepare the financial statements. A challenge for the 

FEC’s financial management system is the ability to produce timely, accurate, and 

reliable information throughout the course of the year. By doing so, the effort will be 

lessened at fiscal year end to compile, analyze, and correct its financial data in order to 

prepare accurate financial statements within a reasonable timeframe after the close of the 

fiscal year. The FEC has made progress towards these goals, but significant challenges 

remain ahead. 

HUMAN CAPITAL MANAGEMENT

In January 2001, the Government Accountability Office (GAO) designated strategic 

human capital management as a government-wide high-risk area. GAO’s high risk 

reports, started in 1990, are a means to focus attention on problems that are impeding 

effective government and illustrate a greater vulnerability to fraud, waste, abuse, and 

mismanagement. According to GAO, “the basic problem, which continues today, has 

been the long-standing lack of a consistent strategic approach to marshaling, managing, 

and maintaining the human capital needed to maximize government performance and 

assure its accountability.” GAO stated that “importantly, although strategic human 

capital management remains high-risk government-wide, federal employees are not the 

problem.” Rather, GAO believes the problem is a set of policies and practices that are 

not strategic, and are viewed by many as outdated and over-regulated. In the final 

analysis; modern, effective, and credible human capital strategies will be essential in 

order to maximize the performance, and assure the accountability of the government for 

the benefit of the American people. A challenge for the Federal government; including 

the FEC, is acquiring, developing, and retaining talented staff. Several important factors 

are necessary to ensure a competent and satisfied staff; to include renewed efforts in 

recruiting, hiring, professional development, and retention strategies to ensure that 

agencies have the needed talent. 
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Section III – Asessment of Major Performance and Management Challenges

6

Studies conducted by government oversight agencies, such as the Government 

Accountability Office (GAO), and the Office of Personnel Management (OPM), have 

predicted a potential gloomy retirement scenario for the Federal government. The 

potential problem could significantly impact the Federal government’s ability to manage 

its tasks and programs due to the possibility of large numbers of employees that may 

retire over a relatively short period of time. The aging work force and government 

attrition are the primary factors that contribute to the potential crisis. 

The Office of Inspector General (OIG) completed a study in December 2001 and 

concluded, “the FEC’s potential loss of a large number of office heads over the next 

several years is noteworthy.” The study found that 21% of the 24 office heads were 

eligible for retirement in 2001. By the end of calendar year 2006, 46% will have become 

eligible for regular retirement; 67% by the end of calendar year 2008. The OIG 

commented the numbers were noteworthy due to the FEC’s organizational structure, 

which consists of several small offices with potentially only a handful of staff to draw 

upon who possess the institutional knowledge of the divisions. 

The FEC acknowledged to the Office of Management and Budget in June of 2001 “the 

most significant result of possible retirements over the next five years will be the loss of 

senior management.” The FEC also reported to the OMB that budget limitations have 

precluded the FEC from establishing an executive development program, which would be 

a way to address the retirement scenario. An executive development program can include 

such things as formal training and mentoring programs geared toward grooming firstlevel supervisors for upward mobility within an organization. 

To acquire and retain an adequate work force and replace the sizeable number of Federal 

employees eligible for retirement over the coming years demands that agencies improve 

their recruiting, hiring, and retention practices. The ability to retain employees is 

dependent, to a great extent, on employee job satisfaction. In the last couple of years, the 

FEC instituted a semi-annual performance appraisal meeting that allows for management 

and staff to discuss goals and objectives for both the manager and employee instead of 

having to wait until the formal annual appraisal process.

In addition, the FEC’s 2004 legislative recommendations to the President included a 

recommendation that Congress should amend federal law to permit the FEC to establish 

Senior Executive Service (SES) positions at the FEC. Currently, the FEC is prohibited 

by law from creating SES positions within the agency. The Commission believes that 

conversion of current and future senior level positions to SES positions will “assist the 

FEC in retaining highly qualified individuals and will attract superior candidates when 

vacancies arise, thus permitting the Commission to remain competitive in the 

marketplace for federal executives.” 
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Assessment of Major Performance and Management Challenges - Section III

7

Challenges remain at the FEC to develop agency programs to acquire, develop, and retain 

talent necessary to ensure the FEC is equipped to accomplish its mission, and achieve its 

goals. The FEC is lacking a formal telecommuting program that would enable staff to 

work from home, or designated telecommuting centers. Section 359 of the 2001 

Department of Transportation appropriations bill (Public Law 106-346) requires all 

Executive agencies to establish telecommuting policies. The Office of Personnel 

Management believes Federal telecommuting programs can improve employees' work 

lives by allowing a better balance of work and family responsibilities, and by reducing 

work-related stress. 

Hiring, training, and retaining adequate personnel to handle the myriad duties of the 

Commission are ongoing challenges. The increasing technical and sophisticated nature of 

the Commission’s work, coupled with the competition for qualified employees – often 

against private sector companies or other government agencies – only increases the 

Commission’s challenge in this area. Without a continued focus on recruitment, 

retention, and training, the Commission runs the risk of losing ground in its efforts to 

address several other top management challenges, such as information technology 

security and financial reporting.

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Assessment of Major Performance and Management Challenges - Section III

Management’s Response to the Inspector General’s 

Statement on the Management and Performance Challenges 

Facing the Federal Election Commission

Information Technology Security

The Commission agrees with the Inspector General that the benefi ts of information technology (IT) also bring the risks of fraud, inappropriate disclosure 

of sensitive data, and disruption of critical operations and services. While the 

Federal Election Commission’s (FEC) exemption from the Paperwork Reduction 

Act provides it derivative exemption from federal statutes governing IT management controls and procedures for IT security, such as the Federal Information 

Security Management Act (FISMA) of 2002, FEC management is committed to 

the spirit and intent of such legislation. 

As the Inspector General points out, computerized systems enable the FEC to 

carry out its mandate to ensure that the campaign process is fully disclosed. 

The Commission’s ability to foster Americans’ faith in the integrity of the 

Nation’s political process rests primarily on the validity of the information it 

provides through its IT systems. To address the ever-present threats of data misuse, destruction, or inappropriate disclosure, 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. In FY 2004, the Commission implemented a 

mandatory security awareness training program for its employees and contractors. It approved an Information System Security Policy and appointed an IT 

security offi cer with responsibility for overseeing the security of all of FEC’s IT 

resources. 

The FEC will continue its vigilance in this area and welcomes further work from 

the Inspector General on IT security issues.

Financial Reporting

The FEC agrees with the Inspector General that the fi nancial reporting requirements imposed by the Accountability of Tax Dollars Act of 2002 create special 

challenges for the FEC. Clearly the agency responsible for fostering the public’s 

faith in the integrity of campaign fi nancing must be able to demonstrate that its 

own fi nancial recordkeeping is beyond reproach. The Commission’s fi nancial 

management and documentation has been sound over the years, but its reporting mechanisms have been geared toward informing the public of campaign 

fi nancing matters. During the Fall of 2004, the Commission prepared its fi rst fi -

nancial statements and subjected them to audit, and issued its fi rst Performance 

and Accountability Report (PAR). FEC has not been required to produce auditable fi nancial statements, nor has it been required to issue a PAR based upon 

the fi nancial and performance results within 45 days of the close of the fi scal 

year. At the same time, it performed its core mission of disclosing campaign 
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Section III – Asessment of Major Performance and Management Challenges

fi nance information, enforcing campaign fi nance laws, and overseeing public 

funding of the 2004 Presidential and Congressional elections, in which a record 

amount of funds exceeding $1 billion was raised and spent by the candidates. 

FEC is not the only agency challenged by the new requirements of the Accountability of Tax Dollars Act. While this process enhances accountability 

and instills a discipline in the Commission’s fi nancial management, it requires 

the Commission to retool its fi nancial management system to provide accurate, 

timely, and reliable information throughout the year. The Commission sought 

the assistance of outside experts to prepare its fi nancial statements and PAR. 

The Inspector General hired an independent audit fi rm to conduct the audit. 

When the FEC realized that it would be unable to meet the November 15 deadline unless the auditors stopped their work and issued a disclaimer of opinion, 

it sought permission from the Offi ce of Management and Budget to extend the 

audit period and submit the PAR no later than December 20, 2004. While the 

Commission is disappointed it was unable to meet the deadline, it still issued its 

PAR 2 weeks earlier than the deadline imposed for all agencies in FY 2003.

Human Capital Management

The Commission agrees with the Inspector General that human capital is a 

challenge for the FEC as well as the federal government as a whole. In her 

2001 report, the Inspector General noted the retirement eligibility of a signifi -

cant number of experienced senior employees. The loss of institutional memory is of concern to all organizations, and especially to one with small, specialized staffs such as FEC. While it cannot change the demographics of its current 

workforce and prevent employees from taking advantage of the opportunity 

to retire, the Commission has taken steps toward effective succession planning and making the FEC an employer of choice. In FY 2004, the Commission 

sought to amend its legislation to convert senior level positions to Senior Executive Service (SES) positions. SES benefi ts would help attract and retain talented 

individuals and make FEC competitive in the marketplace. FEC employees 

receive a semiannual performance update as well as an annual appraisal.

The FEC does participate in the transit subsidy program up to $100 per month 

(the maximum benefi t in 2004). We also send managers to the Federal Management Development Centers. The FEC is also exploring fl exiplace work plans 

and allows fl ex time and compressed work week schedules, although not for 

management personnel.
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Appendix A: Management’s Decision and Final Actions on OIG Audit Recommendations

Appendix A: 

Management’s Decision and Final Actions on 

OIG Audit Recommendations

As of September 30, 2004, no OIG audit report with corrective actions 

remained outstanding. 

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Federal Election Commission Performance and Accountability Report

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Appendix B: Glossary of Terms

Appendix B: 

Glossary of Terms

 ADR Alternative Dispute Resolution 

 BCRA Bipartisan Campaign Reform Act of 2002 

 DAP Data Access Program

 EAC Election Assistance Commission

 EQS Enforcement Query System

 EPS Enforcement Priority System 

 FEC Federal Election Commission 

 FECA Federal Election Campaign Act

 FMFIA Federal Managers’ Financial Integrity Act 

 FTE Full Time Equivalent 

 FY Fiscal Year 

 GPRA Government Performance and Results Act

 IG Inspector General

 IT Information Technology

 MIS Management Information System 

 MUR Matters Under Review 

 OAR Offi ce of Administrative Review 

 OEA Offi ce of Election Administration 

 OGC Offi ce of General Counsel 

 OIG Offi ce of the Inspector General 

 OMB Offi ce of Management and Budget

 PAR Performance and Accountability Report

 PAC Political Action Committee

 RAD Reports Analysis Division

 RTB Reason to Believe

 RFAI Request for Additional Information

127

Federal Election Commission Performance and Accountability Report

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Appendix C. Historical Data

Appendix C: 

Historical Data

TABLE 1, HISTORICAL DATA BY ELECTION CYCLE

PROCESSED DATA ENTRY REPORTS REVIEWED

 Election

Cycle Number Filed Entered Backlog Percent Reviewed Backlog Percent

2004 as of 

9/30/2004 58,757 58,379 378 99% 50,190 8,567 85%

2002 as of 

9/30/2002 49,245 47,195 2,050 96% 34,574 14,671 70%

2000 as of 

9/30/2000 49,700 48,609 1,091 98% 32,173 17,527 65%

Documents

Election

Cycle Median Days Days To 95% Done 

 Docs Over

30 Days Old Median Days Days To 95% Done 

 Docs Over 

30 Days Old 

2004 as of 

9/30/2004 2 12 42 as of 9/30/04 2 12 42 

2002 as of 

9/30/2002 6 50 522 as of 9/30/04 6 71 8 

2000 as of

 9/30/2000 11 42 157 as of 9/30/02 10 45 - 

 Transactions Documents 

Election 

Cycle 

Total

Processed

Date Reached 

1.5 Million Final Total* 50,000 Filed Processed 99%

Reviewed 

95%

2004 as of 

9/30/2004 2,146,177 31-May-04 2004 30-Jul-04 29-Feb-04

2002 as of 

9/30/2002 1,475,684 31-Oct-02 2,445,253 2002 31-Oct-02 31-May-03 30-Jun-03

2000 as of 

9/30/2000 1,649,941 31-Aug-00 2,454,413 2000 31-Oct-00 31-Mar-01 30-Sep-01

* as of 9/30/2004

TABLE 2, PROCESSING OF ITEMIZED TRANSACTIONS

Table 2 supports Figure 1.14 (page 29) and shows the volume of transactions.

Itemized Transactions 

Coded Per FTE FY 2001 FY 2002 FY 2003 FY 2004

Direct FTE Itemized Coding

Transactions Processed 1,181,000 1,125,000 1,457,000 1,660,000 

Transactions Coded Per FTE 134,000 128,000 158,000 169,000 
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Federal Election Commission Performance and Accountability Report

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Appendix C: Historical Data

TABLE 3, REVIEW OF REPORTS, RFAI’S AND REFERRALS

Table 3 provides additional information about the workload of RAD.

RAD–Reports Analysis 

Workloads And Outputs

Reports Reviewed FY 2001 FY 2002 FY 2003 FY 2004

Form 3 Reports Reviewed 52,500 40,100 61,400 44,600 

FTE 24.6 23.1 23.1 27.6 

Hours Per Review 0.82 1.01 0.66 1.09 

RFAIʼS Prepared

Requests For Addl Information 11,500 8,800 11,300 9,700 

FTE 5.4 4.8 5.6 3.2 

Hours Per RFAI 0.83 0.96 0.87 0.57 

Referrals

Referred For Audit 52 1 73 1 

Referred To OGC 11 15 17 43 

TABLE 4, CALLS/REQUESTS FOR INFORMATION HANDLED

Table 4 provides additional detail about FEC’s disclosure and outreach efforts.

Informational Requests and 

Inquiries FY 2001 FY 2002 FY 2003 FY 2004

Total Calls 84,900 74,800 82,100 92,700 

Percent Change N/A -12% 10% 13%

Press Calls 11,300 7,900 8,300 5,500 

Percent Change N/A -30% 5% -34%

RAD Calls For Assistance 12,500 14,900 20,200 18,500 

Percent Change N/A 19% 36% -8%
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Federal Election Commission Performance and Accountability Report

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Appendix C. Historical Data

TABLE 5-A, ADMINISTRATIVE FINES PENALTIES ASSESSED

Tables 5-A, 5-B and 5-C (below) list the fi nes and penalties assessed by FEC in 

FYs 2001–2004

FY 2001 FY 2002 FY 2003 FY 2004

Total Fines $ 563,810 $ 289,891 $ 668,392 $ 369,055 

Number Of Fines 361 117 394 137

Ave. Fine Amount $ 1,562 $ 2,478 $ 1,696 $ 2,694 

TABLE 5-B, ADR PENALTIES ASSESSED (Final Civil Penalty Assessed)

FY 2001 FY 2002 FY 2003 FY 2004

Total Fines $ 32,143 $ 23,000 $ 30,200 $ 66,650 

Number Of Fines 19 7 14 15

Ave. Fine Amount $ 1,692 $ 3,286 $ 2,157 $ 4,443 

TABLE 5-C, OGC ENFORCEMENT PENALTIES ASSESSED (Final Civil Penalty Assessed)

FY 2001 FY 2002 FY 2003 FY 2004

Total Fines 626,855 $ 1,153,563 $ 2,215,375 $ 3,024,595 

Number Of Fines 41 54 69 46

Ave. Fine Amount 15,289 $ 21,362 $ 32,107 $ 65,752 

TABLE 5-D, OGC ENFORCEMENT PENALTIES ASSESSED (Final Civil Penalty Assessed)

Table 5-D shows the fi nes collected for FYs 1995–2000

FY AMOUNT NUMBER AVERAGE

1995 $ 1,922,050 77 $ 24,962 

1996 $ 656,654 60 $ 10,944 

1997 $ 1,364,750 63 $ 21,663 

1998 $ 1,055,599 45 $ 23,458 

1999 $ 567,055 33 $ 17,183 

2000 $ 1,087,100 60 $ 18,118 

 TOTALS $ 6,653,208 338 $ 19,684 
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Federal Election Commission Performance and Accountability Report

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Appendix C: Historical Data

TABLE 6, ALLOCATED FTE AND COSTS–OBLIGATED FUNDS 

FEC Staff Resources–FTE with Management and Support Allocated

FEC Program FY 2001 FY 2002 FY 2003 FY 2004

FTE FTE % FTE FTE % FTE FTE % FTE FTE %

Disclosure 126.5 36.6% 125.6 35.6% 125.6 34.8% 142.8 38.3%

Compliance 164.4 47.6% 182.3 51.7% 202.9 56.1% 197.4 52.9%

Public Financing 48.3 14.0% 36.7 10.4% 25.9 7.2% 30.7 8.2%

Elections Admin. 6.2 1.8% 8.2 2.3% 6.9 1.9% 2.0 0.5%

Total FEC 345.4 100.0% 352.8 100.0% 361.4 100.0% 372.9 100.0%

FEC Program Costs with Management and Support Costs Allocated

FEC Program FY 2001 FY 2002 FY 2003 FY 2004

OBLIGATIONS PERCENT OBLIGATIONS PERCENT OBLIGATIONS PERCENT OBLIGATIONS PERCENT

Disclosure $11,440,707 28.3% $12,302,038 27.8% $13,579,924 27.4% $15,497,480 30.9%

Compliance $21,086,119 52.2% $25,434,873 57.5% $30,666,366 61.9% $30,107,438 60.1%

Public Financing $5,970,714 14.8% $4,656,894 10.5% $3,907,876 7.9% $4,474,112 8.9%

Elections Admin. $1,867,918 4.6% $1,825,518 4.1% $1,387,705 2.8% $309,386 Direct Costs

Total FEC $40,365,458 100.0% $44,219,323 100.0% $49,541,871 100.0% $50,388,416 100.0%

TABLE 7, FEC ANNUAL BUDGET AND FTE, FYs 2001–2004

Fiscal Year Annual Budget FTE

FY 2001 $40,365,458 345.4 

FY 2002 $44,219,323 352.8 

FY 2003 $49,541,871 361.4 

FY 2004 $50,388,416 372.9 

For more information or to comment

on this report, please contact either 

John O’Brien or Cheryl Kelley at:

Federal Election Commission

999 E Street, N.W.

Washington, D.C. 20463

800/424-9530

202/694-1215 (local)

202/219-3336 (for the hearing impaired)

http://www.fec.gov

info@fec.gov

4PG030