FEDERAL ELECTION COMMISSION

Performance and Accountability Report

Fiscal Year 2007

Released November 2007

Table of Contents

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

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

SECTION . Management's Discussion and Analysis........................................

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

The FEC Today ..........................................................................................................1

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

Disclosing Campaign Financing.................................................................................2

Education and Enforcement.......................................................................................3

Other FEC Enforcement Programs ............................................................................4

Development of the Law............................................................................................4

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

Section I.B – FEC Performance Goals, Objectives, and Results................................................... 6

Sources of Funds ........................................................................................................6

Personnel vs. Non-Personnel Costs.............................................................................7

Summary of Significant Performance Results..............................................................8

Section I.C – Analysis of FEC Financial Statements and Stewardship Information ..................... 9

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

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

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

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

Statement of Custodial Activity................................................................................11

Section I.D – Analysis of FEC’s Systems, Controls, and Legal Compliance............................... 11

I.D.i – Management Assurances...............................................................................11

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

Performance Challenges...............................................................................13

I.D.iii – FEC Integrated Internal Control Framework Legal Compliance.................15

Section I.E – Possible Future Effects of Existing Events and Conditions ................................... 15

Section I.F – Other Management Information, Initiatives and Issues........................................ 16

Section I.G – Limitations of the Financial Statements .............................................................. 17

SECTION II. Performance Report.................................................................................. 

Section II.A – Performance Purposes, Objectives, and Results.................................................. 19

Strategic Goal and Objectives for FY 2007...............................................................19

Section II.B – FY 2007 Results................................................................................................. 20

Objective 1: Transparency – Receiving Accurate and Complete Campaign Finance 

Disclosure Reports and Making Them Available to the Public ..............20

Objective 2: Compliance – Education and Enforcement..........................................24

Objective 3: Development of the Law – Interpreting and Administering the Act......29

(cont.)
SECTION III. Auditor's Report and Financial Statements ................................ 

Message From the Chief Financial Officer................................................................................. 33

Independent Auditor's Report .................................................................................................. 39

Financial Statements................................................................................................................. 59

Notes to the Financial Statements............................................................................................. 65

SECTION IV. Other Accompanying Information..................................................... 79

From the Inspector General ...................................................................................................... 79

APPENDIX . List of Acronyms......................................................................................... 
Message From The Chairman

November 15, 2007

I am pleased to present the Federal Election Commission’s (FEC) Performance and Accountability 

Report for fiscal year 2007, as required by the Accountability of Tax Dollars Act of 2002. The 

Commission received an unqualified opinion from its outside auditors on the agency’s 2007 

annual financial statements. This is a significant improvement over the Commission’s prior 

years’ performance. This improvement reflects a commitment by the Commissioners and staff 

of this agency to ensure that our internal controls are adequate to safeguard the tax dollars 

with which we have been entrusted.

As the 2008 Presidential election nears, we are reminded of the importance of our goal: to 

effectively and fairly administer the federal campaign finance laws. The FEC applies three 

objectives – transparency, enforcement, and development of the law – to achieve its goal. The 

strategies to achieve these objectives are outlined in our Strategic Plan.

The financial and performance data presented in this report are reliable, accurate, and complete. 

Section I of this report provides an overview of the FEC’s mission and accomplishments. The 

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

continually assessing the efficiency and effectiveness of the Commission’s processes and when 

we perceive a way to improve our operations, we are committed to working to implement 

those improvements. Accordingly, the FEC is committed to the continued improvement of its 

management and fiscal processes, and the resolution of the remaining weaknesses identified 

by the Inspector General and our auditors, Clifton Gunderson, LLP. These items are discussed 

in Section III of this report. 

The FEC places a high priority on sound financial management, information technology, 

human resources, and administrative support services. The FY 2007 Performance and 

Accountability Report demonstrates how well the FEC performed during the year and 

highlights our commitment to providing the high level service the regulatory community 

expects and deserves from the Federal Election Commission. I am very pleased to be able to 

share the Commission’s progress with all of our stakeholders. We believe that given the path 

we are on, we will be able to report more success in the years ahead.

Sincerely,

Robert D. Lenhard

Chairman

i

How To Use This Report

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

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

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

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

October 1, 2006 through September 30, 2007.

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

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

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

The FY 2007 Performance and Accountability Report is organized into four sections:

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

the FEC. It describes our mission, organizational structure and regulatory responsibility.

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

objectives and provides a forward-looking discussion of future challenges.

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

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

compliance with key legal and regulatory requirements.

Section IV – Other Accompanying Information includes the agency's Inspector General’s 

assessment of the FEC’s management challenges.

Appendix A – List of Acronyms

iii

1

Federal Election Commission Performance and Accountability Report 2007

Section I.A – Mission and Organizational Structure

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

electoral process under the Federal Election Campaign Act (FECA) of 1971, 2 U.S.C. 431 et seq., as amended by 

the Bipartisan Campaign Reform Act of 2002 (BCRA), P.L. 107–155 (the Act). Th e Commission is also responsible 

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

26 Internal Revenue Code.

Th e Act provides the foundation of the FEC’s mission to “prevent corruption in the federal campaign process 

by administering, enforcing and formulating policy with respect to federal campaign fi nance statutes.”

Th e primary objectives of the FEC are to: (1) disclose campaign fi nance information; (2) educate stakeholders 

and enforce the provisions of the Act such as the limits and prohibitions on contributions; and (3) interpret and 

administer the Act.

The FEC Today

Th e FEC strives to foster compliance with the rules of the federal campaign process by administering, enforcing 

and formulating policy with respect to federal campaign fi nance statutes. It is headquartered in Washington, DC 

and does not have any regional offi ces. Th e FEC’s authorized funding and staffi ng levels for fi scal year (FY) 2007 

were $54.8 million and 375 full-time equivalent (FTE) positions. Th is amount was a slight increase from FY 

2006, where the funding was authorized at $54.2 million and 375 FTE. Th e FEC is funded primarily by a single 

annual appropriation for salaries and expenses. Th e FEC is also authorized to collect fees to off set the costs of its 

conferences.

How the FEC is Organized

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

directed by six Commissioners, who are appointed by the President with the advice and consent of the Senate. 

By law, no more than three Commissioners can be members of the same political party. Each member serves a 

six-year term and two seats are subject to appointment every two years. Th e Chairmanship of the Commission 

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

Commissioners meet regularly to formulate policy and to vote on signifi cant legal and administrative matters. Th e

Act requires at least four votes for the Commission to adopt any offi cial action or policy.

Th e Offi ces of the Chief Financial Offi cer, General Counsel, and Staff Director support the agency in accomplishing 

its mission. During FY 2007, the FEC restructured to align its divisions and offi ces to operate more eff ectively 

and effi ciently. Th e restructuring included the addition of the Deputy Staff Director for Management and 

Administration, and the Chief Communications Offi cer. Th e Commission also realigned the Chief Financial 

Offi cer (CFO) to report directly to the Commission. Th ese changes were made to aff ord the Commission a 

SECTION I

Management's Discussion and Analysis
2

Section I | Management’s Discussion and Analysis

higher level of oversight of management throughout the agency; thereby increasing objectivity and strengthening 

internal controls.

Th e Offi ce of the Inspector General, established within the FEC in 1988 under amendments to the Inspector 

General Act, is independent and reports to both the Commissioners and the Congress. Th e FEC’s Inspector 

General has two major responsibilities: (1) to conduct audits and investigations to detect fraud, waste and abuse 

within the agency; and (2) to improve the economy and eff ectiveness of agency operations. Th e Inspector General 

is required to report its activities to Congress on a semiannual basis. Th ese reports include descriptions of any 

serious problems or defi ciencies in agency operations, as well as corrective actions taken by the agency.

Th e specifi c roles and responsibilities of each offi ce are described in greater detail at http://www.fec.gov/about.

shtml. Th e following chart represents the organizational structure as of September 30, 2007.

As illustrated in the organizational chart above, the FEC is structured to administer the FECA eff ectively and 

effi ciently. Th e FEC’s primary objectives in administering the FECA are to disclose campaign fi nance information, 

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

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

these objectives are achieved.

Disclosing Campaign Financing

One of the most important responsibilities of the FEC’s Offi ce of Communications is to make available to the 

public campaign fi nance reports disclosing the sources and amounts of funds used to fi nance federal elections. Th ese 

reports are accessible through the FEC’s website at http://www.fec.gov/fi nance/disclosure.shtml. By providing 

easy, online access to disclosure reports, the FEC provides an added incentive for the regulated community to 

comply with the campaign fi nance law. Th e Offi ce of Communications consists of the following offi ces/divisions: 

The Commissioners

Inspector General General Counsel Staff Director Chief Financial Officer

Equal Employment 

Opportunity and

 Special Programs

Management and

 Administration

Office of 

Compliance

Office of 

Communications

Budget, Planning 

and Management

Finance

Procurement

Information

Technology Division

General Law 

and Advice

Enforcement

Policy

Litigation

Complaints, Examinations

and Legal Administration
3

Federal Election Commission Performance and Accountability Report 2007

(1) Information Division; (2) Public Disclosure Division; (3) Press Offi ce; and (4) Congressional, Legislative 

and Intergovernmental Aff airs. While the Commission continues to make available printed copies of reports, 

brochures and publications, they are also available on FEC’s website.

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

information disclosed is accurate and complete. Th e Offi ce of Compliance’s Reports and Analysis Division (RAD) 

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

accurate representation of campaign fi nance activity. If the FEC’s review of the report identifi es an apparent 

violation or raises questions about the information disclosed on a report, the Commission sends a request for 

additional information (RFAI) to the committee, aff ording the committee an opportunity to correct the public 

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

Should the committee not suffi ciently address the FEC’s concerns, the FEC begins its enforcement eff orts on the 

apparent violation.

Education and Enforcement

Encouraging Compliance

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

improving voluntary compliance. In recent years, the Commission’s website has become the single-most important 

source of instantly accessible information about the Act and Commission regulations. Members of the regulated 

community and the general public can use the website to track Commission rulemakings, search advisory 

opinions and closed enforcement matters, view campaign fi nance data and fi nd reporting dates. Moreover, while 

the Commission continues to make available printed copies of its educational brochures and publications, these 

materials are available and easy to access on the FEC’s website along with other instructional information, such 

as the FEC’s Tips for Treasurers.

Th e Commission also encourages voluntary compliance through a number of activities including outreach 

programs. Th e FEC hosts instructional conferences in Washington, DC, and in other cities across the country, 

where Commissioners and staff explain how the Act applies to candidates and political committees. Th ese 

conferences specifi cally address recent changes in the campaign fi nance laws and focus on fundraising and 

reporting regulations. Additionally, the Commission responds to telephone inquiries and written requests from 

political committees seeking information about the law and assistance in fi ling disclosure reports.

Enforcement of the FECA

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

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

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

primarily through:

•	 Th e complaint process, whereby anyone may fi le a sworn complaint alleging violations of the Act;

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

•	 Voluntary self-reporting, sua sponte, by a candidate or political committee representative who believes 

that they may have violated the Act; and

•	 Th e referral process, whereby other government agencies may refer possible violations of the Act to the 

FEC.

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

matters are handled by the Offi ce of General Counsel (OGC).
4

Section I | Management’s Discussion and Analysis

Specifically, the Enforcement Division, within the OGC:

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

finding that formally initiates an investigation;

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

interviewing and deposing witnesses;

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

respondents;

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

and

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

cannot be reached.

Although swift resolution of enforcement matters is one of the highest priorities for the Commission, efficiency 

cannot come at the expense of fairness to the regulated community. Accordingly, the Commission remains 

focused on providing respondents with a fair opportunity to make appropriate presentations to the Commission 

on enforcement matters.

Other FEC Enforcement Programs

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

efficiency and effectiveness of the Commission’s enforcement efforts. These programs include: (1) Administrative 

Fine; (2) Alternative Dispute Resolution; and (3) Audit. The following provides a summary of each of these 

programs.

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

filing of financial disclosure reports in a more streamlined manner than the traditional enforcement process. This 

program, which is administered by the Office of Compliance’s Office of Administrative Review (OAR) and RAD, 

assess monetary penalties for late and non-filed reports.

The Alternative Dispute Resolution (ADR) program, implemented in October 2001, is designed to promote 

compliance with the Act by encouraging settlements outside the traditional enforcement or litigation processes. 

The ADR program aims to expedite resolution of certain less complex enforcement matters and to reduce the cost 

of processing complaints through streamlined procedures. The ADR program is also aimed at promoting future 

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

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

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

Commission conducts “for cause” audits, under Title 2, in those cases where political committees have failed to 

meet the threshold requirements for substantial compliance with the Act and have voluntarily failed to correct 

errors or omissions in their disclosure reports. In addition, the Commission conducts mandatory audits, under 

Title 26, as discussed in the section on Public Funding. The Commission’s audit presence not only contributes to 

its enforcement efforts, but also encourages voluntary compliance within the regulated community.

Development of the Law

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

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

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

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

tensions between valid governmental interests and certain constitutional guarantees were keenly evident in the 

significant litigation involving the Commission.
5

Federal Election Commission Performance and Accountability Report 2007

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

formal interpretation of the Act by promulgating regulations and issuing advisory opinions (AOs). Specifically, 

the Commission issues AOs to clarify how the statute and regulations apply to real-life situations brought to the 

Commission by candidates, political committees and others in the regulated community. Although the Act allows 

the agency 60 days to respond to most requests, the Commission has placed special emphasis in the last year on 

expediting its processing and consideration of AO requests.

Furthermore, Congressional action, judicial decisions, petitions for rulemaking or other changes in campaign 

finance law often necessitate that the Commission update or adopt new regulations. Consequently, the FEC 

undertakes rulemakings either to write new Commission regulations or revise existing regulations.

Funding Presidential Elections

Public Funding

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

outlined in 26 U.S.C. Although this program is administered by the FEC, it is funded by dollars voluntarily 

checked off by taxpayers on their income tax returns. Since 1993, the taxpayer check-off amount has been $3 per 

return. These monies are collected by the Internal Revenue Service (IRS) and maintained by the U.S. Treasury. 

Also, the Treasury is responsible for the accounting and reporting of these funds. Through the public funding 

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

nomination; (2) financing for Presidential nominating conventions; and (3) grants to Presidential nominees for 

the general election campaigns.

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

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

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

every candidate who receives payments under the program.
6

Section I | Management’s Discussion and Analysis

Section I.B – FEC Performance Goals, Objectives, and 

Results

In addition to the previously discussed restructuring, the FEC also updated its strategic plan during FY 2007. 

Changes to the FEC’s strategic plan were driven by two primary considerations. First, the FEC’s previous strategic 

plan did not reflect current FEC operations. Second, the plan did not fully address reporting requirements 

under the Government Performance and Results Act (GPRA), as emphasized by the OMB under the Performance 

Assessment Rating Tool (PART) process. The revised strategic plan defines more clearly the FEC’s objectives and 

consolidates its strategic goals into one primary goal.

The revised strategic plan also incorporates the means and strategies used to achieve the strategic goal, which 

includes: (1) operational processes; (2) the development and use of technologies; and (3) human resources. The 

revised strategic plan developed long-term and annual performance goals to improve accountability and better 

align performance to the strategic goal.

Based on the revisions to the strategic plan, this report aligns the FEC’s reporting requirements, under GPRA 

and OMB Circular A-136. The revised strategic plan was also the basis for the structuring of the FY 2009 budget 

request. The revised strategic plan served as the foundation with respect to implementing and achieving the 

strategic goal and objectives for the year. Given the revisions to the strategic plan, the format of the Statement of 

Net Cost was revised. Accordingly, FEC’s results and accomplishments relate to a single goal and the related costs 

are reflected under one program on the Statement of Net Cost (see Section III).

The revised strategic plan is currently under review by the Commission. Final approval is expected during the first 

quarter of FY 2008.

The FEC has one primary strategic goal – To protect the integrity of the federal campaign process by providing 

transparency, enforcing contribution restrictions, and fairly administering the FECA and related statutes. 

This goal is pursued by three strategic objectives and by underlying activities that guided the FEC’s operations 

during FY 2007. The strategic objectives are:

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

Them Available to the Public

•	 Compliance – Education and Enforcement

•	 Development of the Law – Interpreting and Administering the Act

Sources of Funds

The FEC receives an annual appropriation for Salaries and Expenses. In FY 2007, the appropriation was $54.5 

million. In addition, the FEC is authorized to collect registration fees for the costs of carrying out FEC-hosted 

conferences. These amounts, which were estimated at $300,000, represent offsetting collections and are included 

in the FEC’s authorized funding level (i.e., budget authority).

The FEC’s total budget authority level in FY 2007 was $54.8 million. Figure 1 shows the agency’s funding and 

obligations from FY 2003 to 2007.
7

Federal Election Commission Performance and Accountability Report 2007

Personnel vs. Non-Personnel Costs

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

costs for FY 2007. Personnel costs comprised 70.3 percent of the FEC’s costs; the other 29.7 percent was spent 

primarily on building rent, capital items and information technology (IT) software and hardware.

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

discussed in greater detail in Section II of this report.

0

10

20

30

40

50

60

49.5 48.3 50.1 51.2 53.7 54.3

50.5 51.7 54.1 54.8

Budget Authority Obligations

Fiscal Year

2003 2004 2005 2006 2007

Figure 1 – Summary of Funding (in millions)

Salaries 

and Benefits 

– 70.3 %

IT Initiatives – 14.2 %

Facilities (Rent, maintenance, and security) – 7.4 %

Other – 8.1%

Figure 2 – Fiscal Year 2007 Costs by Major Category
8

Section I | Management’s Discussion and Analysis

Summary of Significant Performance Results

The FEC actively communicates its experience and expertise to interested individuals, political committees, and 

state and local governments. The FEC achieved its goal of conducting educational campaign finance conferences 

and seminars throughout the U.S. and anticipates expanding its outreach efforts in the future.

Disclosing campaign finance information of federal elections is a key responsibility of the FEC. The FEC continues 

to encounter an increase in the number of filings related to Congressional and Presidential elections, which occur 

in even-numbered calendar years. Despite the continued growth in the number of filings and information related 

to the filings, the FEC made 98.5 percent of these filings available to the public within 48 hours of receipt, just 

shy of its 100 percent goal. The portion of the filings that were not processed within the 48 hours is attributed, in 

part, to the extended processing time for paper filings, thereby preventing the achievement of this goal.

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

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

for the current and past elections are received at the Commission on a daily basis. In FY 2007, the Commission 

reviewed 55,748 reports, 73 percent of which were reviewed within 90 days of the date received. The Commission's 

performance goal is to review 60 percent of reports within 90 days of receipt. The Commission exceeded its 

performance goal by 13 percent in FY 2007. Because of the 90-day processing period and the fact that a filing 

deadline falls ten days before the end of the fiscal year, a small percentage of reports received in a fiscal year cannot 

be reviewed before that fiscal year ends. In FY 2007, this was 3.7 percent (see Figure 6 in Section II). Although the 

Commission does review 100 percent of all filings received, when the fiscal-year-end performance measure was 

developed there was no meaningful time-related goal associated with it. The FEC is in the process of updating its 

strategic plan to incorporate a more accurate, time-related goal.

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

•	 No instance of non-compliance;

•	 Request for Additional Information (RFAI); or

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

for further consideration.

The outcome of the FEC’s enforcement efforts resulted in the Commission assessing a total of $4.37 million in 

fines and civil penalties in FY 2007. Although this is a 25.8 percent decrease from FY 2006, this amount reflects 

the FEC’s continued efforts in enforcing the FECA, while also highlighting the fact that there is a continued need 

to educate the regulatory community about the Act’s requirements.

Another focus of the FEC has been to address enforcement “matters under review” more quickly and in greater 

numbers. The FEC established a goal of having at least 50 percent of its cases in “active” status, meaning that 

the complaint has been assigned to an attorney for review. OGC exceeded this goal for “active” status cases by 

achieving an average rate of 88 percent as of September 30, 2007.

With respect to the number of cases closed, OGC established a goal to close 75 to 100 enforcement cases per year, 

requiring no more than 40 percent be closed through dismissal. The OGC achieved this goal by closing 160 cases, 

39 percent of which were dismissed. With respect to the agency as a whole, the number of cases closed from FY 

2006 to FY 2007 increased by 220, representing a 79.4 percent improvement (see Figure 9 in Section II). The increase 

can be attributed to many factors, including the significant emphasis that the Commission placed on the review 

process to improve the FEC’s ability to process cases more timely. Another major factor relates to the AF and ADR 

programs handling of the less-complex cases, which not only improved the timeliness of addressing the cases, but also 

reduced the number of cases that may have previously been dismissed by OGC.
9

Federal Election Commission Performance and Accountability Report 2007

Additional enforcement efforts included completing 25 audits this fiscal year, which consisted of seven Presidential 

campaign and convention committee audits and 18 “for cause” audits. Title 26 Presidential audits, which are 

mandatory, demand more time and resources than Title 2 “for cause” audits because of their complexity and the 

scope of the audit. The number of Title 2 audits depends upon the number of referrals received by RAD as a result 

of its review of each filing. This pace is on schedule to meet the two-year goal of 40 to 45 Title 2 audits per election 

cycle. One factor that might preclude the FEC from obtaining its goal is that, by statute, audits of candidates that 

participate in the Public Funding program take precedence over Title 2 audits.

The FEC did not meet its goal of completing all Presidential audits within two years of the 2004 Presidential 

election. Out of the 15 audits related to that election, six (40%) were completed within the two-year timeframe. 

As of September 30, 2007, of the remaining nine audits, seven had been completed, leaving two outstanding. 

Presidential audits are extremely complex. There has been an increase in the volume of expenditures, which 

impacted the scope and length of time it took to complete these audits.

Federal election law permits all eligible national committees of major and minor parties to receive public funds 

to help pay the official costs of their Presidential nominating conventions. Consistent with its goal, the FEC 

certified payment for each of the two major political parties’ convention committees in a timely and accurate 

manner. The initial payments of $16,356,000 were made in July 2007 for planning and conducting the 2008 

Presidential nominating conventions. Thus far in the 2008 Presidential election cycle, the Commission has 

certified two candidates for eligibility under the Primary Matching Fund program, and anticipates that a number 

of other candidates will apply for Public Funding. This expectation is based on inquiries received from several 

committees.

Section I.C – Analysis of FEC Financial Statements and 

Stewardship Information

The FEC’s FY 2007 financial statements and notes are presented in the required format in accordance with OMB 

Circular A-136, revised, Financial Reporting Requirements. The FEC’s current year financial statements and notes 

are presented in a comparative format.

The following table summarizes the significant changes in the FEC’s financial position during FY 2007.

Net Financial 

Condition FY 2007 FY 2006 Increase/(Decrease) % Change

Assets $18,819,667 $19,346,109 ($526,442) (2.7%)

Liabilities $5,125,513 $5,248,940 ($123,427) (2.4%)

Net Position $13,694,154 $14,097,169 ($403,015) (2.9%)

Net Cost $56,377,561 $55,906,556 $471,005 .8%

Budgetary 

Resources $57,295,859 $56,527,231 $768,628 1.4%

Custodial 

Revenue $5,031,538 $6,602,398 ($1,570,860) (23.8%)
10

Section I | Management’s Discussion and Analysis

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

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

Balance Sheet

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

(liabilities) and amounts that comprise the difference (Net Position). As a small independent agency, about 96 

percent of the FEC’s assets consist of Fund Balance with Treasury (FBWT) and Property and Equipment (P&E). 

Fund Balance with Treasury (e.g., Cash) is available through the Department of Treasury accounts from which the 

FEC is authorized to make expenditures (i.e., obligations) and payments. FBWT increased by about $182,000, 

or 1.8 percent, from FY 2006, largely due to obligations incurred in the fiscal year but not paid as of September 

30, 2007. P&E consists of capitalized property. Net P&E decreased by approximately $1.0 million, or 11.6 

percent, from FY 2006. The decrease is primarily due to the timing of when the leasehold improvements were 

capitalized and the expiration of the FEC's lease on September 30, 2007. The expiration of the lease accelerated 

the depreciation of the remaining balance associated with leasehold improvements, bringing the net book value 

of leasehold improvements from $1.3 million in FY 2006 to zero in FY 2007.

Finally, accounts receivable increased from FY 2006 by approximately $300,000 primarily due to the assessment 

of one penalty occurring at the end of FY 2007.

Statement of Net Cost

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

revenue is used to arrive at the total net cost of operations. The FEC’s total budget in FY 2007 was $54.8 million. 

Roughly $38.2 million, or 70 percent, of the budget was dedicated to personnel costs. The remaining costs were 

related to rent, information technology initiatives, and general operating expenses. Overall, costs increased by 

approximately one percent, which relates primarily to an increase in depreciation expense.

As previously mentioned, and consistent with OMB guidance, the FEC revised the format of the Statement of 

Net Cost to be consistent with its draft strategic plan. This change affected the presentation of the Statement of 

Net Cost to reflect one responsibility segment in FY 2007, rather than the three responsibility segments that were 

reported in FY 2006.

Statement of Changes in Net Position

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

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

position to change during the reporting period. The total net position decreased by approximately $400,000 

which is primarily due to an increase in depreciation expense.

Statement of Budgetary Resources

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

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

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

of Budgetary Resources increased by approximately $770,000, or 1.4 percent, over FY 2006. The slight increase 

is due primarily to the fact that the federal government operated under a full-year continuing resolution (P.L. 

110-5), which held funding at the prior year's level while providing for about half the cost of living increase for 

federal employees in FY 2007.
11

Federal Election Commission Performance and Accountability Report 2007

Statement of Custodial Activity

The Statement of Custodial Activity represents an accounting of funds accrued and collected by the FEC that are 

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

decreased from the prior year approximately $1.6 million, or 23.8 percent. The decrease is primarily due to one 

unusually large civil penalty received in FY 2006. The FEC does not maintain any stewardship assets.

Section I.D – Analysis of FEC’s Systems, Controls, and 

Legal Compliance

I.D.i – Management Assurances

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

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

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

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

A-123, Internal Control Review. Directive 53 outlines the process and describes roles and responsibilities for 

conducting risk assessments and internal control reviews.

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

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

took place during FY 2007 provide reasonable assurance that FEC systems and management controls comply 

with the requirements of the FMFIA. The FEC has no material weaknesses to report for FY 2007 relating to 

Section 2 of the FMFIA.

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

The FEC evaluated its financial management systems for the fiscal year ending September 30, 2007 in accordance 

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

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

controls generally conform to the principles and standards required.

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

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

No. 53. No material weaknesses were identified under the FMFIA in recent years by the FEC.

Although there were no material weaknesses identified from the Internal Control Review, several areas for 

improvement were noted. Managers in all divisions continue to review specific procedures on an ongoing basis and 

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

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

OMB Circulars A-123 and A-136.
12

Section I | Management’s Discussion and Analysis

FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 20463

Annual Assurance Statement on Internal Control

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

maintaining effective internal control and fi nancial management systems that meet the 

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

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

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

management that provides reasonable assurance that the following objectives are being 

achieved: effectiveness and effi ciency of operations, reliability of fi nancial reporting, and 

compliance with applicable laws and regulations.

The Commission conducted its evaluation of internal control over the effectiveness 

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

accordance with OMB Circular A-123. Based on the results of this evaluation, the 

Commission provides reasonable assurance that its internal control over the effectiveness 

and effi ciency of operations, and compliance with applicable laws and regulations, as of 

September 30, 2007, were operating effectively and no material weaknesses were found 

in the design or operation of these internal controls.

Robert D. Lenhard

Chairman

October 24, 2007

OFFICE OF THE CHAIRMAN
13

Federal Election Commission Performance and Accountability Report 2007

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

auditors, Clifton Gunderson:

Audit Opinion Unqualified

Restatement No

Material Weaknesses Beginning 

Balance New Resolved Consolidated Ending Balance

Program Cost Allocation 1 0 1 0 0

General Property and 

Equipment 1 0 1 0 0

Integrated Financial 

Management System 0 1 0 0 1

Total Material 

Weaknesses 2 1 2 0 1

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

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

Communicating Internal Control Related Matters Identified in an Audit. The FEC is developing a corrective action 

plan to address the weaknesses identified during the annual audit.

Prompt Payment Act

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

when payments are late. The FEC’s on-time payment rate for FY 2007 was effectively 100 percent.

Improper Payments Information Act (IPIA) of 2002 Reporting

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

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

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

Approximately 70 percent of the FEC’s expenditures pertain to salaries and benefits, which represents a low risk 

for improper payments, based on established internal controls. The FEC recently implemented additional review 

procedures surrounding its procurement and disbursement processes for non-personnel costs. Accordingly, the 

FEC is unaware of any improper payments. The FEC continues to monitor and look for additional ways to 

improve the payment process to ensure that the risk of improper payments remains low.

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

Management and Performance Challenges

Human Capital Management

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

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

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

that is skilled, flexible, and focused on results and service.
14

Section I | Management’s Discussion and Analysis

The Inspector General’s report in Section IV observes that the Commission confronts the same long-standing 

challenge facing the rest of the federal government: developing and implementing a consistent strategic approach 

to managing and maintaining an appropriately skilled workforce. To address this challenge, the Commission 

undertook a comprehensive human capital management initiative. This initiative included changes in recruitment; 

strategic hiring; and evaluating and training the current workforce. The Commission made strides in succession 

planning and diversity in the hiring of several senior leaders to fill critical top-level positions.

The FEC also implemented a newly devised performance management system, which better aligns individual 

performance with the agency’s strategic goal and objectives. The new leadership can now develop the Human 

Capital Strategic Plan. Because of the resulting recognition of its outstanding work in this area, the FEC was 

invited to participate in a pilot program with the Partnership for Public Service, which promotes public service 

and fosters excellence in the federal government through its “Best Places to Work” initiative.

Information Technology Security

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. To address the ever-present threats of data misuse, destruction, or 

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

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

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

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

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

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

Financial Reporting

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

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

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

The FEC made considerable progress in financial reporting, with many steps taken to improve upon prior years. 

First, as previously mentioned, the CFO position was restructured to report directly to the Commission. Second, 

the management and administrative functions previously performed by the CFO were realigned to a newly 

created position under the Staff Director. Finally, the procurement function was separated from Administration 

and moved under the CFO. These organizational changes formalized and streamlined reporting processes and 

empowered the FEC to place more emphasis on financial management, thereby strengthening internal controls.

The FEC has begun the process of replacing its accounting system to meet the demands of the federal government’s 

reporting requirements, including an integrated financial management system. Toward the end of FY 2007, the 

Commission entered into an agreement with the General Services Administration (GSA), an OMB-certified 

federal Line of Business (LOB) provider for financial management services. The conversion of financial data is 

expected to be completed by mid-FY 2008. Achieving this aggressive goal depends, in large part, on the successful 

development of an electronic interface between the FEC’s payroll provider (National Finance Center) and the 

GSA’s financial system.

Although significant progress was achieved in this area, the FEC understands the challenges ahead. In FY 2008, 

the FEC will continue to work with the Inspector General to eliminate the material weakness and significant 

deficiency identified as part of the annual audit.
15

Federal Election Commission Performance and Accountability Report 2007

I.D.iii – FEC Integrated Internal Control Framework Legal 

Compliance

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

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

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

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

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

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

•	 Clinger-Cohen Act of 1996;

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

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

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

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

compliance with applicable law.

Section I.E – Possible Future Effects of Existing Events and 

Conditions

There are several existing events and conditions that may affect the FEC in the future. Any amendments to 

the FECA may significantly impact the Commission. Amendments to the Act may require changes in internal 

processes or procedures and require that implementing regulations be adopted.

For example, proposed legislation in the House and Senate, if enacted, will significantly affect the FEC in 

the future. S. 436, the 527 Reform Act of 2005, amends the FECA to clarify when organizations described in 

section 527 of the Internal Revenue Code of 1986 must register as political committees. The House has similar 

legislation pending, H.R. 420, the 527 Reform Act of 2007. At the end of FY 2007, both bills were still pending 

in Congress. Two other bills proposing to reorganize the FEC by replacing the six commissioners with one 

Chairman were also pending.

The solvency of the Presidential Election Campaign (PEC) Fund may impose major burdens on the FEC. For 

the 2004 elections, eight candidates were certified for matching funds. With the participation of three additional 

major party candidates, the program could experience severe shortfalls. The PEC Fund is likely to continue to 

face major deficits in timely payments for the 2008 election. This fund will likely be short of the monies necessary 

to meet the objectives of the public financing program because primary matching funds will once again be 

unavailable in the early months of 2008.

The Commission has consistently made legislative recommendations to Congress to address this issue. The FEC 

is concerned that a totally open primary in both major parties in 2008 (with the presumed participation of a 

number of candidates in both primaries) will further exacerbate this potential shortfall. At some point, without a 

legislative remedy, the shortfall may affect payments to general election candidates as well as to primary candidates. 

The perceived impact of spending ceilings, along with the effects of increased individual contribution limits, has 

for the first time caused some 2008 candidates to consider refusing the general election grant. This change, while 

benefiting the PEC Fund balance, would diminish the effectiveness of the program by eliminating one of its 

major components.
16

Section I | Management’s Discussion and Analysis

Congressional approval for the AF program has been received through 2008. The Commission is recommending 

that Congress make permanent the authority for the AF program or provide an extension. If this program is not 

approved beyond 2008, the Commission’s enforcement operations, which have been streamlined as a result of the 

AF program, could be affected. By making the program permanent, Congress would ensure that the Commission 

would retain one of the most cost-effective and successful programs in its history.

Section I.F – Other Management Information, Initiatives 

and Issues

e-Review

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

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

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

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

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

reports submitted by the regulated community.

House and Senate Map

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

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

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

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

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

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

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

committees.

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

committee data, contributor histories and historical data for all committee types. In summary, the goal is to provide 

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

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

way on the Web.

Intranet

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

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

scheduled for launch during the second quarter of FY 2008, will feature a rich suite of products and deliver 

productivity and efficiency gains immediately. Specific benefits will include:

•	 Improved internal communications;

•	 Document management efficiencies;

•	 Improved search capabilities;

•	 Fast and easy access to information;

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

•	 A digital assets library;

•	 RSS newsfeeds;
17

Federal Election Commission Performance and Accountability Report 2007

•	 Employee quick polls; and

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

The first feature to be developed will be a Human Resources portal, with additional features added throughout the 

year. As additional features are added, the Intranet will become the main navigation point for FEC employees.

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

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

three initiatives are underway in the Office of the Commission Secretary: (1) the creation of an electronic tally 

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

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

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

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

but for the Commission as a whole.

The Office of Human Resources (OHR) moved to a generalist staffing model to be as a viable, long-term solution 

for the agency. The FEC believes that it is imperative to retain the following core human capital functions: (1) 

human capital strategy; (2) employee relations; (3) labor relations; (4) organization and position management; 

(5) staff acquisition; (6) employee development; and (7) performance management. To ensure effective and 

efficient results in these core functions, it is essential to automate the administrative functions of the OHR. These 

functions include time and attendance and processing personnel and benefits actions. The FEC is automating 

these functions, with a LOB service provider, which will enable OHR to offer the results-oriented, strategic 

services needed to support the FEC in achieving its mission.

Section I.G – Limitations of the Financial Statements

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

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

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

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

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

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

entity.

19

Federal Election Commission Performance and Accountability Report 2007

Section II.A – Performance Purposes, Objectives, and 

Results

Th is section serves as the Commission’s Annual Performance Report as specifi ed in OMB Circular A-11, Part 6, 

Preparation and Submission of Strategic Plans, Annual Performance Plans, and Annual Program Performance Reports, 

as amended. In addition, this section fulfi lls the FEC’s requirements under the Government Performance and 

Results Act.

Th e FEC defi nes much of its work in the context of election cycles, which represents two calendar years. For 

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

years–the last three quarters of FY 2007, all of FY 2008, and the fi rst quarter of FY 2009. Accordingly, certain 

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

meaningful performance data on a fi scal-year basis. Th erefore, the results of the FEC’s performance, as discussed 

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

results in the most informative manner.

Strategic Goal and Objectives for FY 2007

To achieve its mission, as detailed in Section I, the FEC has identifi ed one overarching strategic goal. Th is goal 

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

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

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

in the most effi cient and eff ective manner. Consistent with the President’s Management Agenda (PMA), the 

Commission is updating its human capital plan to better address the following elements: (1) strategic alignment; 

(2) workforce planning; (3) leadership development; and (4) knowledge transfer and results-oriented performance. 

Th e Commission believes that, in addition to investing in its people, strong fi nancial management and up-to-date 

technology are critical means to achieving its strategic goal.

SECTION II

Performance Report

STRATEGIC GOAL

To protect the integrity of the federal campaign process by providing transparency, enforcing 

contribution restrictions, and fairly administering the FECA and related statutes.

Objective 1: Transparency – Receiving Accurate and Complete Campaign Finance 

Disclosure Reports and Making Them Available to the Public

Objective 2: Compliance – Education and Enforcement

Objective 3: Development of the Law – Interpreting and Administering the Act
20

Section II | Performance Report

Section II.B – FY 2007 Results

Objective 1: Transparency – Receiving Accurate and Complete 

Campaign Finance Disclosure Reports and Making Them Available 

to the Public

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

in part, on information concerning where candidates for federal offi ce derive their fi nancial support. Th e FEC 

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

confi dence in the campaign fi nance process.

Performance Measures

•	 Maintaining a state-of-the-art electronic fi ling system for collecting fi nancial disclosure reports from 

federal candidates and political committees;

•	 Making fi nancial disclosure reports available to the public in a timely, effi cient and useful manner;

•	 Reviewing fi nancial disclosure reports to ensure that the reports are accurate and complete; and

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

Th e FEC promotes voluntary compliance by fully disclosing campaign fi nances for federal elections. Th e following 

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

Th e Commission’s mandatory electronic fi ling (e-fi ling) rules require any committee that receives contributions 

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

its reports electronically. Th ese mandatory e-fi ling provisions (11 CFR § 104.18) apply to any political committee 

or other person required to fi le reports, statements and/or designations with the FEC. Th ese requirements do not 

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

Secretary of the Senate.

Th e primary function of the e-fi ling system is to act as the point of entry for submission of electronically fi led campaign 

fi nance reports, providing faster access to reports and streamlining operations. Specifi cally, the system provides 

for public disclosure of electronically fi led reports, via the FEC website, within minutes of being fi led. When a 

0

10

20

30

40

50

60

70

60.8 55.7 57.9

66.4 69.1

Fiscal Year

2003 2004 2005 2006 2007

Figure 3 – Total Reports and Statements Filed (in thousands)
21

Federal Election Commission Performance and Accountability Report 2007

committee fi les a fi nancial disclosure report on paper, FEC staff scan and enter the information disclosed in the 

report into the FEC electronic database. Th e Commission’s Public Records Offi ce ensures that a copy is available 

for public inspection at the FEC’s headquarters, located at 999 E Street, N.W., Washington, DC or electronically 

within 48 hours of receipt.

Figure 3 shows the total number of campaign fi nance reports and statements fi led with the FEC each fi scal year 

since 2003. Th e public can access the campaign fi nance reports and data at http://www.fec.gov/disclosure.shtml.

As illustrated in Figure 3, election years (the odd fi scal years), show a spike in the number of fi lings received by the 

FEC. Despite an increase in the number of fi lings, the FEC achieved a success rate of 98.5 percent in making the 

fi nancial disclosure reports and statements available to the public within 48 hours of receipt. Th e percentage of 

fi lings that was not processed within the 48-hour period is attributable, in part, to the extended processing time 

required for paper fi lings, thereby preventing the achievement of this goal.

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

review to assess accuracy and completeness of disclosure of campaign fi nance information. Th e agency’s goal is to 

code and enter 95 percent of the reports within 45 days of receipt. For FY 2007, the FEC was able to process 95 

percent of the reports within 40 days of receipt.

Th e FEC’s website (www.fec.gov) represents the major source of federal campaign fi nance information. For both 

political committees and the public, the Commission’s website has become the single-most important source 

of instantly accessible information about campaign fi nance, the FECA and Commission regulations. Th e FEC 

website provides access to over tens of millions of pages of campaign fi nance data that have been submitted 

by candidates and committees and posted on-line by the FEC staff . Th e public’s interest in fi nance campaign 

information is illustrated in Figure 4, which shows a continued high number of hits on the FEC’s website by users 

seeking campaign fi nance data and other information.

During FY 2007, the website received nearly 102.6 million hits, with an average of 10,000 visitors per day.

To make campaign fi nance data even more accessible to the public, the FEC launched a new interactive map 

(see Figure 5) in June 2007 to provide users with immediate access to contribution information for the 2008 

Presidential election. With a simple click, users can access the amount of funds raised on a state-by-state basis, 

contributions, cash-on-hand, and the distribution of contributions by amount.

0

20

40

60

80

100

120

Fiscal Year

2003 2004 2005 2006 2007

Hits

2003 2004 2005

59.2

100.0 101.0 101.5 102.6

Figure 4 – Total Website Hits (in millions)
22

Section II | Performance Report

Furthermore, users can access lists of contributors by name, city, and amounts of contributions within the fi rst 

three digits of any zip code. Contribution data is updated within one day of the FEC’s receipt of electronically 

fi led Presidential disclosure reports.

Figure 5 – Presidential Campaign Finance Map

 www.fec.gov/DisclosureSearch/mapApp.do

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

60.8

55.3 55.6

50.3

66.4

61.2 57.9 57.9

69.1 66.5

Fiscal Year

2003 2004 2005 2006 2007

Number of Documents

Filed Reviewed

Figure 6 – Document V.olume and Review Efficiency (in thousands)
23

Federal Election Commission Performance and Accountability Report 2007

Th e FEC reviews each report fi led to ensure the accuracy and completeness of the information received and to 

monitor compliance with the law. Figure 6 illustrates the continued effi ciency with which campaign fi nance reports 

are being reviewed. Th is rapid rate of reviewing is especially noteworthy given the growth in the number of reports 

and statements fi led, as shown in Figure 3.

Th e FEC reviews all reports, amendments and statements for accuracy, completeness and compliance with the 

law. New and amended reports for the current and past elections are received at the Commission on a daily 

basis. In FY 2007, the Commission reviewed 55,748 reports, 73 percent of which were reviewed within 90 

days of the date received. Th e Commission performance goal is to review 60 percent of reports within 90 days 

of receipt. Th e Commission exceeded its performance goal by 13 percent in FY 2007. Because of the 90-day 

processing period and the fact that a fi ling deadline falls ten days before the end of the fi scal year, a small 

percentage of reports received in a fi scal year cannot be reviewed before that fi scal year ends. In FY 2007, this 

was 3.7 percent. Although the Commission does review 100 percent of all fi lings received, when a fi scal-yearend performance measure was developed there was no meaningful time-related goal associated with it. Th e 

FEC is in the process of updating its strategic plan to incorporate a more accurate, time-related goal.

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

in the House of Representatives; and (3) one-third of the Senate seats. Figure 7 illustrates that expenditures 

related to federal elections are on the rise, especially as they relate to a Presidential election year. As illustrated 

below, total federal election expenditures increased by approximately 63 percent from the Presidential election 

in 1996 to the 2004 Presidential election year. To date, over $800 million has been expended under the 2008 

Presidential election cycle. Th is amount is nearly $300 million more than the funds expended at the same point 

in time for the 2004 Presidential election cycle.

Figure 7 also illustrates that expenditures related to Congressional elections are substantially increasing. Specifi cally, 

these expenditures increased approximately 62 percent between the 1998 and the 2006 Congressional election. 

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

and review eff orts; (2) the identifi cation of instances of non-compliance; (3) its response to requests for advisory 

opinions; and (4) the likelihood that fi lings are more complex, which increases the potential for misappropriation 

of funds.

2006

2004

2002

2000

1998

1996

Election Year

0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0

$ 4.1

$ 5.3

$ 4.0

$ 4.7

$ 2.5

$ 3.3

Figure 7 – Expenditures in Federal Elections (in billions)
24

Section II | Performance Report

Objective 2: Compliance – Education and Enforcement

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

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

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

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

that authority, the Commission uses a variety of methods to uncover possible election law violations. Instances of 

non-compliance may lead to a FEC enforcement case or Matter under Review (MUR). In some cases, respondents 

may be given the option to participate in the Commission’s Alternative Dispute Resolution program, which seeks 

to resolve matters more swiftly through mediation. Violations involving the late submission of FEC reports 

or failure to file reports are subject to the Administrative Fine program. By law, all these matters must remain 

confidential until they are closed.

Performance Measures

•	 Expanding awareness of the campaign finance laws through creation and dissemination of educational 

materials, and instructional conferences and workshops;

•	 Responding to complaints alleging violations of the campaign finance laws;

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

•	 Making findings in completed compliance matters available to the public in a timely and useful manner; 

and

•	 Conducting audits in a timely and efficient manner.

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

Expanding Awareness

In addition to its website, the FEC operates a press office and maintains a toll-free line (1-800-424-9530) to 

respond to inquiries regarding campaign finance data. The FEC has also achieved its goal of responding to 

information requests within 72 hours.

The Commission encourages voluntary compliance by hosting conferences across the country, where Commissioners 

and staff explain how the Act applies to candidates and political committees. These conferences address recent 

changes in campaign finance law and focus on fundraising and reporting regulations. The FEC established a target 

to hold a total of four conferences during FY 2007. This target was achieved by holding three conferences in the 

District of Columbia and one in the state of Washington.

Although we are unable to determine the immediate effect that these conferences will have on voluntary 

compliance, we believe that the regulated community’s awareness of the law has been expanded by the FEC’s 

educational programs and that the results of the efforts will be far reaching into the future. The success of these 

efforts is evidenced by the favorable ratings received for each conference. The overall rating exceeded a 4.0 rating 

out of a possible 5.0 for each conference.

The FEC also hosts state outreach seminars, which are held throughout the country to brief PACs, party 

committees and candidate committees on areas of the law specific to their needs. In FY 2007, meetings were held 

in Colorado, Arizona, and Georgia.

Responding to Complaints

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

Counsel (OGC), Administrative Fine (AF) and Alternative Dispute Resolution (ADR) programs. Under the 
25

Federal Election Commission Performance and Accountability Report 2007

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

primarily through:

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

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

•	 Voluntary self-reporting, sua sponte, by a candidate or political committee representative who believes 

that they may have violated the Act; and

•	 The referral process, whereby other government agencies may refer possible violations of the Act to the 

FEC.

The most complex and legally significant enforcement matters are handled by the OGC that:

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

finding which formally initiates an investigation;

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

interviewing or deposing witnesses;

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

with respondents on the assessment of fines; and

•	 Files suit in federal district court when conciliation is unsuccessful.

Office of General Counsel

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

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

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

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

meaningful penalties and other remedies proportionate to the violation.

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

penalties for serious violators. From FY 2003 to 2007, the OGC negotiated conciliation agreements providing for 

civil penalties totaling more than $16.2 million. In FY 2007 alone, civil penalties amounted to more than $4.1 

million, a decrease of 30.6 percent from civil penalties assessed last year. The decrease is attributable to the $3.8 

million civil penalty negotiated in one matter in 2006. Not only was this penalty more than four-times greater 

than any civil penalty obtained in Commission history, but it alone was more than the aggregate amount obtained 

in any previous year. Excluding this one penalty, FY 2007 reflects an increase over FY 2006 of approximately $2.2 

million, or 127 percent.

In terms of efficiency, on average cases closed 32 percent, faster in FY 2007 compared to FY 2002. In FY 2002, 

it took, on average, 730 days to close an enforcement matter. By FY 2007, the Commission reduced this number 

by 230 days to an average of 500 days. This productivity is derived from the implementation of the AF and ADR 

programs, as well as better management of personnel, improved information technology, and the shifting of 

priorities.

The percentage of “substantive” closings for the FEC, as a whole, over the past 10 years has climbed to 74 

percent, with only 26 percent of the matters being dismissed. In the mid-1990s, it was not unusual for the 

Commission to dismiss over half of its enforcement caseload with no action. A significant portion of those cases 

were dismissed as “stale” (i.e., cases that went unassigned for at least 12 months). From FY 1995 to 2000, the FEC 

dismissed 21 percent of its cases as stale. Importantly, the General Counsel has all but eliminated the practice of 

dismissing stale cases. FY 2007 was the fourth year in a row in which the FEC did not dismiss a single case as 

stale.
26

Section II | Performance Report

Figure 8 shows the number of cases opened for enforcement action. Th e number of cases opened, 434 in FY 2007, 

increased by 38.2 percent from FY 2006. Th is increase is due primarily to the increase in the number of fi lings 

and the cyclical nature of the AF program.

Alternative Dispute Resolution

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

or litigation processes. Th e program’s primary objective is to enhance the agency’s overall eff ectiveness through 

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

internal referrals. In FY 2007, ADR formally closed 71 cases, with substantive action taken in 58 percent of those 

cases. Th is is an increase of 16.4 percent over the number of cases closed in FY 2006.

Administrative Fine Program

In response to a legislative mandate, the AF program was implemented in July 2000 to address failures to timely 

fi ling or non-fi ling of disclosure reports in a more effi cient and eff ective manner. During FY 2007, the AF 

program closed 266 cases in an average of 128 days, which is nearly a 200 percent increase in the number of cases 

closed over FY 2006. Th is program is administered by the Offi ce of Administrative Review and RAD, which are 

within the Offi ce of Compliance.

0

100

200

300

400

500

600

596

432

261

434

314

Fiscal Year

2003 2004 2005 2006 2007

Number of Cases

Figure 8 – Enforcement Cases Opened

0

100

200

300

400

500

600

86 73 81

394

214

137

49

79

89

61

266

71

41

160 127

Fiscal Year

2003 2004 2005 2006 2007

OGC AF ADR

Number of Cases

Figure 9 – Enforcement Cases Closed by Program
27

Federal Election Commission Performance and Accountability Report 2007

Figure 9 shows the number of cases closed from FY 2003 to FY 2007. Th e eff orts by OGC, AF, and ADR led to 

an increase in case closings from 277 in FY 2006 to 497 in FY 2007, a 79.4 percent increase. Th e increase in the 

number of cases closed is not only attributable to the cyclical nature of the AF program but also to a management 

decision to prioritize the closing of cases in a more effi cient and eff ective manner.

As the discussion and fi gures in this section demonstrate, the FEC has improved its performance in timeliness 

and quantity. Th e improved overall performance, in part, is due to the implementation of the AF and ADR 

programs. Th ese programs enable the FEC to focus its resources on more substantive cases thereby improving 

the eff ectiveness and effi ciency of processing cases. Closed enforcement matters are available online through the 

Commission’s Enforcement Query System at http://eqs.sdrdc.com/eqs/searcheqs.

Figure 10 illustrates how the combination of OGC, ADR, and AF increased fi nes by a signifi cant 50.2 percent, 

from $2.91 million in 2003 to $4.37 million in FY 2007. Th e amount of fi nes is dependent upon the nature of 

the violation.

Conducting Audits

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

of various political committees. Th is division evaluates the Presidential primary candidates’ applications for 

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

by law, the FEC audits all recipients of public funds. In addition, the Commission audits those committees that, 

according to FEC determinations, have not complied with the law. Th e Audit Division publishes its fi ndings in 

audit reports, which can be found at http://www.fec.gov/audits/audit_reports.shtml.

During FY 2007, the Audit division completed 25 audits, of which 18 were performed under Title 2. For each 

election cycle, the FEC’s target is to conduct 40 to 45 audits, pursuant to 2 U.S.C. §438(b). An election cycle 

spans two calendar years. Th is pace is on schedule to meet the two-year goal of 40 to 45 Title 2 audits per election 

cycle.

In addition to the Title 2 “for cause” audits, the FEC is responsible for completing mandatory audits pursuant to 

Title 26. Th ere were 15 audits associated with the 2004 Presidential election. Th e FEC has a goal to complete all 

Title 26 Presidential audits within two years after the Presidential elections. Th e FEC did not achieve this goal. 

Out of the 15 audits, six (40%) were completed within the two-year timeframe. As of the end of FY 2007, of 

$0

$1

$2

$3

$4

$5

$6

2.21

1.42

3.02

0.67

0.42

0.03 0.37

0.15

0.20

0.13

0.31

0.06

0.06

4.00

5.56

Fiscal Year

2003 2004 2005 2006 2007

OGC AF ADR

Figure 10 – Fines/Penalties Assessed by Program (in millions)
28

Section II | Performance Report

the remaining nine audits associated with the 2004 Presidential election, seven had been completed, leaving two 

outstanding. Presidential audits are extremely complex, and as stated earlier, the increased volume of expenditures 

aff ects the scope and length of time it takes to complete an audit. In FY 2008, the FEC will reevaluate its audit 

process to determine how to achieve this goal, given the increased complexities of Title 26 audits.

Figure 11 illustrates the number of audits started over the past fi ve years.

Figure 12 shows the number of audits completed between FY 2003 and 2007. Presidential committee audits 

demand more time and resources than Title 2 “for cause” audits because of their complexity. Th e number of 

audits is dependent on the Presidential election cycle, along with the number of candidates that participated in 

the public funding program.

0

5

10

15

20

25

30

35

29

35

28

35

24

Fiscal Year

2003 2004 2005 2006 2007

Number of Audits

Figure 11 – Audits Approved to be Started

0

5

10

15

20

25

30

35

29

22

32

25

18

Fiscal Year

2003 2004 2005 2006 2007

Number of Audits

Figure 12 – Audits Completed by the Commission
29

Federal Election Commission Performance and Accountability Report 2007

Federal election law permits all eligible national committees of major and minor parties to receive public funds to 

help pay the official costs of their Presidential nominating conventions. The FEC certified payments for each of 

the two major political parties’ convention committees, with initial payments of $16,356,000 made in July 2007 

for planning and conducting their respective 2008 Presidential nominating conventions. In exchange for public 

funding of the conventions, committees agree to certain requirements, including spending limits, the filing of 

periodic disclosure reports, and detailed audits.

Objective 3: Development of the Law – Interpreting and 

Administering the Act

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

issuance of advisory opinions (AOs).

Performance Measures

•	 Conducting rulemaking proceedings to promulgate Commission regulations consistent with revisions 

to the FECA and judicial decisions related to the Act;

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

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

•	 Certifying all Presidential public funding payments in a timely and efficient manner.

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

The FEC publishes its regulations annually, which are codified in Title 11 of the Code of Federal Regulations 

(CFR). The Policy Division of the OGC drafts Notices of Proposed Rulemaking (NPRMs), which are then 

adopted by the Commission and are published in the Federal Register. NPRMs are also made available on the 

FEC’s website at http://www.fec.gov/law/law_rulemakings.shtml and on the U.S. Government website, www.

regulations.gov. NPRMs provide an opportunity for members of the public and regulated community to review 

proposed regulations, submit written comments to the Commission and testify at public hearings, which are held 

at the FEC when appropriate. The Commission then considers the public comments and testimony and deliberates 

publicly regarding the adoption of the final regulations. The text of final regulations and the corresponding 

Explanation and Justification (E&J), once adopted by the Commission, are published in the Federal Register.

The FEC issued several rulemaking documents during FY 2007, a summary of which can be reviewed at 

http://www.fec.gov/law/cfr/cfr.shtml. The number of rulemakings is dependent upon many factors, such as the 

complexity of the issues to be addressed, the need for clarification, the passage of new legislation, or the outcome 

of litigation efforts.

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

finance law to specific factual situations. The FEC’s Advisory Opinion brochure at http://www.fec.gov/pages/

brochures/ao.shtml provides a complete description of the AO process and explains how to request an advisory 

opinion.

Consistent with the Act, when the Commission receives a request for an AO, it generally has 60 days to respond. 

For AO requests from candidates in the two months leading up to an election, the time for the Commission to 

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

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

emphasis in the last year on expediting its processing and consideration of certain highly significant AO requests. 

Although the Act allows the agency 60 days to respond to most requests, the Commission issued some of its recent 

opinions within as little as two weeks.
30

Section II | Performance Report

During FY 2007, the FEC issued 24 advisory opinions, with an average response time of 48 days. A summary 

of the AOs can be reviewed at http://saos.nictusa.com/saos/searchao. Of these AOs, 18 (75%) were completed 

within the required 60-day response period. The number of AO requests that the Commission receives depends 

largely on election cycles. Additionally, the complexity of the topics addressed in these AOs has increased, 

primarily because of BCRA, which required a number of new Commission regulations and which is the subject 

of recent litigation.

Defending Challenges to the Act

The Commission exclusively represents itself before the federal district and circuit courts, and before the Supreme 

Court with respect to cases involving publicly-financed Presidential candidates, and has primary responsibility for 

defending the Act and Commission regulations against court challenges. The Commission brings enforcement 

suits in U.S. District Courts when matters are not satisfactorily resolved through the administrative enforcement 

process and sues to enforce administrative subpoenas. The agency also defends suits contesting its dismissals 

of administrative complaints, petitions for review of Commission decisions regarding the Presidential public 

funding program and civil suits challenging the constitutionality of provisions of the FECA and the validity of the 

Commission’s regulations. When the Commission brings enforcement suits seeking civil penalties, it must initiate 

such actions within the applicable statute of limitations and adhere to all other applicable court rules.

The outcome of litigation is unpredictable and can take several years to reach final resolution, especially if cases 

proceed all the way to the Supreme Court. Once a final decision is reached, it can often require the Commission 

to promulgate more regulations and issue additional advisory opinions.

For example, the Commission is in the process of defending its “political committee” rulemaking. Although the 

Commission recently received a favorable decision from the district court, the plaintiffs may decide to appeal 

that ruling. Depending upon the outcome of the case, the Commission may consider additional rulemaking 

or will be implementing the statute and applicable regulations on a case-by-case basis in advisory opinions and 

through the enforcement process. Generally speaking, pending and likely litigation represents a substantial 

likelihood of additional work for the Commission. The FEC’s rules implementing BCRA are still subject to 

litigation (e.g., Shays III and EMILY’s List – see http://www.fec.gov/law/litigationrecent.shtml for details) and 

could result in orders to rewrite extensive portions of the FEC’s regulations. As a measure of significance, postBCRA rulemakings have expanded the FEC’s regulations by at least 40 percent. In addition, implementation and 

probable future “as applied” challenges following a recent Supreme Court decision (Wisconsin Right to Life) could 

require considerable expense and effort.

Public Funding

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

Presidential elections, as outlined in 26 U.S.C. To be eligible for public funds, a Presidential candidate or a party 

convention committee must first submit a letter of agreement and a written certification in which the candidate 

or committee agrees to:

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

convention-related expenses;

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

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

•	 Cooperate with an audit of campaign or convention expenses;

•	 Repay public funds, if necessary; and

•	 Pay any civil penalties imposed by the FEC.
31

Federal Election Commission Performance and Accountability Report 2007

Primary candidates must additionally certify that they have met the “threshold requirement” for eligibility by 

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

The Commission certifies a candidate’s eligibility to participate in the program, establishes eligibility for payments, 

and conducts a thorough examination and audit of the qualified campaign expenses of every candidate who 

receives payments under the program. For the 2004 Presidential election, the Commission certified the eligibility 

for ten candidates and two convention committees. For the FY 2008 Presidential election, the FEC has certified 

two candidates for eligibility under the program so far. However, the total number of eligible candidates is 

dependent upon the number of applicants.

Legislative Recommendations

Every year, the Commission forwards to the President and Congress recommendations for improvements to the 

federal campaign finance law. On April 12, 2007, the Commission approved five legislative recommendations, 

which were to:

•	 Require electronic filing of Senate campaign finance reports;

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

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

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

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

investigations;

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

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

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

reports filed with the Commission; and

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

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

thirty years.

Greater detail concerning the Commission’s legislative recommendations can be found at http://www.fec.gov/

law/legislative_recommendations_2007.shtml#id.

Improving management efficiency and effectiveness remains a key focus of the Commission. Consistent with the 

PMA, the Commission seeks to continue to provide a greater focus on performance that better aligns with results, 

and provides a framework for greater transparency of its operations.

33

Federal Election Commission Performance and Accountability Report 2007

SECTION III

Auditor's Report and Financial Statements

Message From the Chief Financial Offi cer

November 15, 2007

I am pleased to present the Commission’s fi nancial statements for fi scal year 2007. Our fi nancial statements are an 

integral component of the Performance and Accountability Report, as required under the Accountability of Tax Dollars 

Act of 2002. Th is is the fourth year that the FEC has prepared and submitted audited fi nancial statements. 

Th e Commission is committed to fi nancial management excellence, and sound stewardship and management of the 

public funds to which we have been entrusted. Th e following highlights the results of the fi scal year 2007 audit:

•	 Received an unqualifi ed opinion on the principal fi nancial statements; and

•	 Reduced the number of audit fi ndings from seven to two, as identifi ed as part of the Auditor’s Report on 

Internal Control.

Th e success of this year’s audit is attributable to the eff orts of our employees, who have made fi nancial management 

a priority; thereby ensuring that the highest quality fi nancial data is reported. Th e Commission continued its 

high standard of fi nancial management and reporting during fi scal year 2007. As a result, we observed signifi cant 

improvements in fi nancial management, including overcoming a qualifi ed audit opinion that was received for the 

past two years.

We recognize more needs to be done to further strengthen internal controls, as outlined by the recommendations 

made in the Auditor’s Report on Internal Control. To date, we have begun to address several of the recommendations, 

including:

•	 Signing an agreement with the General Services Administration (GSA) for fi nancial management services;

•	 Awarding several contracts to resolve the need for risk assessments, continuity of operations, and a disaster 

recovery plan;

•	 Updating documentation of current fi nancial management processes and systems; and

•	 Identifying training needs for employees to further enhance awareness of fi nancial management.

We will continue to emphasize improving fi nancial management. A key focus for FY 2008 includes continuing the 

same high level of quality fi nancial management that resulted in our unqualifi ed opinion and improving upon it. 

We also will focus on continuing to implement our Strategic Plan. In the past year, we took steps to develop our 

requirements for a line of business provider for fi nancial management services that will improve operations and permit 

us to better integrate fi nancial, program, and performance data. We have brought our stakeholders into the process 

and will work closely with them to improve upon our ability to produce timely, reliable, and useful data.

Sincerely,

Erin D. Singshinsuk

Chief Financial Offi cer

35

Federal Election Commission Performance and Accountability Report 2007

Independent Auditor’s Report
36

Section III | Auditor’s Report and Financial Statements
37

Federal Election Commission Performance and Accountability Report 2007

39

Federal Election Commission Performance and Accountability Report 2007

1 of 20 

11710 Beltsville Drive, Suite 300 

Calverton, Maryland 20705-3106

tel: 301-931-2050 

fax: 301-931-1710 

www.cliftoncpa.com Offices in 17 states and Washington, DC

Independent Auditor’s Report 

To the Inspector General of the 

 Federal Election Commission 

We have audited the balance sheets of the Federal Election Commission (FEC) as of 

September 30, 2007 (FY 2007) and 2006 (FY 2006), and the related statements of net cost, 

changes in net position, budgetary resources, and custodial activity for the years then ended 

(hereinafter collectively referred to as the “financial statements”). These financial statements are 

the responsibility of the FEC’s management. Our responsibility is to express an opinion on these 

financial statements based on our audits 

We conducted our audits in accordance with auditing standards generally accepted in the United 

States of America; the standards applicable to financial audits contained in Government Auditing 

Standards, issued by the Comptroller General of the United States; and applicable provisions of 

Office of Management and Budget (OMB) Bulletin No. 07-04, Audit Requirements for Federal 

Financial Statements. Those standards require that we plan and perform the audit to obtain 

reasonable assurance about whether the financial statements are free of material misstatement. 

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in 

the financial statements. An audit also includes assessing the accounting principles used and 

significant estimates made by management, as well as evaluating the overall financial 

statements’ presentation. We believe our audits provide a reasonable basis for our opinion. 

In our opinion, the financial statements referred to above present fairly, in all material respects, 

the financial position of the FEC as of September 30, 2007 and 2006, and its net cost, changes in 

net position, budgetary resources, and custodial activity for the years then ended in conformity 

with accounting principles generally accepted in the United States of America. 

In our report dated November 7, 2006, we expressed a qualified opinion on the FY 2006 

statement of net cost because we were not able to obtain sufficient competent audit evidence to 

support the allocation of program costs. As described in Note 1, FEC has changed the 

presentation of program costs in its statement of net cost. Accordingly, our present opinion on 

the FY 2006 financial statements, as presented herein, is different from that expressed in our 

previous report. 

In accordance with Government Auditing Standards, we have also issued our reports dated 

November 13, 2007 on our consideration of the FEC’s internal control over financial reporting, 

and on our tests of the FEC’s compliance with certain provisions of laws and regulations and 

other matters. The purpose of those reports is to describe the scope of our testing of internal 
40

Section III | Auditor’s Report and Financial Statements

2 of 20 

control over financial reporting and compliance and the results of that testing, and not to provide 

an opinion on the internal control over financial reporting or on compliance. Those reports are 

an integral part of our audit performed in accordance with Government Auditing Standards and 

should be considered in assessing the results of our audit. 

The information in the Management Discussion and Analysis section is not a required part of the 

consolidated financial statements, but is supplementary information required by U.S. generally 

accepted accounting principles and OMB Circular No. A-136, Financial Reporting 

Requirements. We have applied certain limited procedures, which consisted principally of 

inquiries of management regarding the methods of measurement and presentation of this 

information. However, we did not audit this information and, accordingly, we express no opinion 

on it. 

Our audits were conducted for the purpose of forming an opinion on the consolidated financial 

statements taken as a whole. The information in the Message from The Chairman, Performance 

Section, and Other Accompanying Information is presented for purposes of additional analysis 

and is not required as part of the consolidated financial statements. This information has not 

been subjected to auditing procedures and, accordingly, we express no opinion on it.

Calverton, Maryland 

November 13, 2007 
41

Federal Election Commission Performance and Accountability Report 2007

3 of 20 11710 Beltsville Drive, Suite 300 

Calverton, Maryland 20705-3106

tel: 301-931-2050 

fax: 301-931-1710 

www.cliftoncpa.com Offices in 17 states and Washington, DC

Independent Auditor’s Report on Compliance and Other Matters 

To the Inspector General of the 

 Federal Election Commission 

We have audited the financial statements of the Federal Election Commission (FEC) as of, and 

for the year ended September 30, 2007, and have issued our report thereon dated 

November 13, 2007. We conducted our audit in accordance with the auditing standards 

generally accepted in the United States of America; the standards applicable to financial audits 

contained in Government Auditing Standards, issued by the Comptroller General of the United 

States; and, applicable provisions of Office of Management and Budget (OMB) Bulletin 07-04, 

Audit Requirements for Federal Financial Statements. 

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 FEC’s 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 other laws and regulations specified 

in OMB Bulletin 07-04. We limited our tests of compliance to these provisions and we did not 

test compliance with all laws and regulations applicable to FEC. Providing an opinion on 

compliance with certain provisions of laws and regulations was not an objective of our audit, 

and, accordingly, we do not express such an opinion. 

The results of our tests of compliance with laws and regulations described in the preceding 

paragraph disclosed no instances of reportable noncompliance or other matters that are required 

to be reported under U.S. generally accepted Government Auditing Standards or OMB Bulletin 

No. 07-04. 

This report is intended solely for the information and use of the management of FEC, FEC 

Office of Inspector General, Government Accountability Office, OMB and Congress, and is not 

intended to be and should not be used by anyone other than these specified parties. 

Calverton, Maryland 

November 13, 2007 
42

Section III | Auditor’s Report and Financial Statements

Page 4 of 20 

11710 Beltsville Drive, Suite 300 

Calverton, Maryland 20705-3106

tel: 301-931-2050 

fax: 301-931-1710 

www.cliftoncpa.com Offices in 17 states and Washington, DC

Independent Auditor’s Report on 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, 2007 and have issued our report thereon dated 

November 13, 2007. We conducted our audit in accordance with the auditing standards 

generally accepted in the United States of America; the standards applicable to financial audits 

contained in Government Auditing Standards, issued by the Comptroller General of the United 

States; and, applicable provisions of Office of Management and Budget (OMB) Bulletin No. 

07-04, Audit Requirements for Federal Financial Statements. 

In planning and performing our audit, we considered FEC’s internal control over financial 

reporting as a basis for designing our audit procedures for the purpose of expressing our opinion 

on the financial statements and to comply with OMB Bulletin 07-04, but not for the purpose of 

expressing an opinion on the effectiveness of FEC’s internal control over financial reporting. 

We did not test all internal controls relevant to operating effectiveness as broadly defined by the 

Federal Managers’ Financial Integrity Act (FMFIA) (31 U.S.C. 3512), such as those controls 

relevant to ensuring efficient operations. Accordingly, we do not express an opinion on the 

effectiveness of FEC’s internal control over financial reporting. 

Our consideration of internal control over financial reporting was for the limited purpose 

described in the preceding paragraph and would not necessarily identify all deficiencies in 

internal control over financial reporting that might be significant deficiencies or material 

weaknesses. As discussed below, we identified certain deficiencies in internal control over 

financial reporting that we consider to be significant deficiencies. 

A control deficiency exists when the design or operation of a control does not allow management 

or employees, in the normal course of performing their assigned functions, to prevent or detect 

misstatements on a timely basis. A significant deficiency is a control deficiency, or combination 

of control deficiencies, that adversely affect the entity’s ability to initiate, authorize, record, 

process, or report financial data reliability in accordance with generally accepted accounting 

principles such that there is more than a remote likelihood that a misstatement of the entity’s 

financial statements that is more than inconsequential will not be prevented or detected by the 

entity’s internal control. 

A material weakness is a significant deficiency, or combination of significant deficiencies, that 

results in more than a remote likelihood that a material misstatement of the financial statements 

will not be prevented or detected by the entity’s internal controls. 
43

Federal Election Commission Performance and Accountability Report 2007

Page 5 of 20 

Our consideration of the internal control over financial reporting was for the limited purpose 

described in the second paragraph of this section and would not necessarily identify all 

deficiencies in the internal control that might be significant deficiencies and, accordingly, would 

not necessarily disclose all significant deficiencies that are also considered to be material 

weakness. However, we believe that the significant deficiency in Integrated Financial 

Management System described below is a material weakness. 

Finally, with respect to internal control related to performance measures reported in the FEC’s 

Performance and Accountability Report as of September 30, 2007, we obtained an understanding 

of the design of significant internal controls relating to the existence and completeness 

assertions, as required by OMB Bulletin 07-04. 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 WEAKNESS 

I. Integrated Financial Management System (Modified Repeat Finding) 

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 management support. An integrated system should maintain an interrelationship 

between software, hardware, personnel, procedures, controls and data contained within the 

systems which allows users to obtain necessary information efficiently and effectively 

through electronic means. It does not necessarily mean having only one software 

application covering all financial management 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 linkage is appropriate, must be maintained to ensure data accuracy. 

The FEC does not have an integrated financial management system. Its general ledger and 

core financial management system are housed in PeopleSoft (PS). However, significant 

financial activity, such as Obligations, Revenue, Accounts Receivable, Property, Plant and 

Equipment (PPE) and payroll transactions, originate outside of PS. Of these transactions, 

only the Payroll activity processed through the National Finance Center’s (NFC) payroll 

system is automatically interfaced with the FEC’s core financial system. Obligations, 

Revenue, Account Receivable and Property transactions are recorded in subsidiary 

schedules maintained in multiple excel spreadsheets and then manually posted to the 

general ledger. These spreadsheets support the flow of transactions throughout the year. 

As a result of a lack of an integrated system, FEC goes through a process of compiling 

financial data in separate spreadsheets in a complex and time-consuming process to 

generate the financial statements. Although FEC reviews these spreadsheets, the risks of 
44

Section III | Auditor’s Report and Financial Statements

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error increase due to the inherent risk and limitations of a spreadsheet based application in 

an agency’s financial management system. Some of these risks include: 

x Substantial manual intervention is necessary, thereby increasing the risk of human error 

not being detected. 

x Difficulty in tracking changes made to spreadsheets, including formula changes, 

preventing an adequate audit trail. 

x Difficulty in verifying change controls and error correction changes made. 

x Unique, new or non-recurring transactions are difficult to incorporate. 

x Difficulty in performing automatic checks and balances on the transactions in the 

spreadsheets. 

x Delay in recording transactions in the general ledger. 

x Increase in the use of journal vouchers as a means for posting transactions to the 

general ledger. 

x Substantial resources are spent processing transactions resulting in fewer resources for 

financial analysis and reporting. 

These risks for errors were substantiated through our audit testing that identified the 

following control deficiencies: 

x Accounting entries posted to the general ledger were not always sufficiently 

documented or documentation to support the entries was not always properly 

maintained. 

x Accrued expenses reported on the June 30, 2007 financial statements were misstated 

due to a posting error. 

x The change in gross accounts receivable transactions were not recorded in the interim 

statements of custodial activity (March 2007 and June 2007). 

x Multiple budgetary accounting related issues occurred resulting in: 

o The Recoveries of Prior Year Obligations and Obligations Incurred line items of the 

June 30, 2007 and September 30, 2007 draft financial statements being misstated. 

The reconciliation between the fourth quarter SF-133 and Statement of Budgetary 

Resources (SBR) as of September 30, 2007 was performed using incorrect SF-133 

data. Accordingly, the reconciliation did not reveal significant adjustments needed 

to the SBR and related financial statements, including a routine year-end adjusting 

entry of cancelling the 2002 fund. 

o FEC has not established the posting logic prescribed by Treasury for recording 

budget authority received under a continuing resolution. Furthermore, the FEC did 

not record apportionments in accordance will OMB Circular No. A-11, 

Preparation, Submission and Execution of the Budget. Specifically, FEC recorded 

the entire requested appropriation of $54 million as budget authority in February 

2007 even though the entire budget authority did not become available until April 

2007. The incorrect entries increased the risk that the system’s fund control may not 

have been effective, increasing the possibility that funds could have been 

obligated/expended in a manner that could have caused a violation of the AntiDeficiency Act. 

x FEC’s obligating documents contained errors or were inconsistent with supporting 

documentation; thereby increasing the risk for disbursements to be applied to the 
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Federal Election Commission Performance and Accountability Report 2007

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incorrect appropriation account or obligation. Specifically, we noted 2 out of 45 

disbursements that were applied to the incorrect appropriation account. 

x FEC did not prepare and submit to OMB an analysis of significant financial statement 

line item fluctuations between March 31, 2006 and March 31, 2007. Moreover, our 

review of the analyses performed in subsequent reporting quarters showed that the 

analyses were not performed timely and/or were not complete. 

x FEC did not complete the Statement of Budgetary Resources (SBR) reconciliation to 

SF-133 Report on Budget Execution and Budgetary Resources for the quarters ending 

December 31, 2006, March 31, 2007 and June 30, 2007 as required by OMB Circular 

A-136. 

FEC is aware of these risks and the need for an integrated financial management system. 

Accordingly, they plan to migrate a significant portion of their accounting function to the 

General Services Administration (GSA) during fiscal year 2008. In preparation for the 

migration, FEC is working with GSA to determine the feasibility of linking external 

systems not yet integrated to PeopleSoft. 

Recommendations: 

1. Assess the extent of financial management system integration needed for existing 

systems while outsourcing the accounting operations to a third party service provider. 

2. Implement control activities to compensate for the lack of an integrated financial 

management system and to ensure that accounting transactions are recorded correctly, 

timely, reviewed, and with adequate supporting documentation. Some of these control 

activities should include, but not limited to: 

x Improving preparation and review of procurement documents, including purchase 

requests, purchase orders/contracts, and related supporting documentation. 

x Improving analytical and quality control review of journal vouchers, reconciliations 

and the financial statements, including interim financial statement. 

x Implementing proper and timely cut-off controls for processing transactions and in 

preparing the financial statements to allow for management’s timely analysis of 

financial data and for audit purposes. 

x Establish a timeline for timely receipt of completed accounts receivable schedules 

by the finance office from the program offices. 

3. Ensure that the general ledger setup and posting model definitions are in compliance 

with the latest transaction posting consistent with USSGL guidance and policies for 

recording and classifying transactions. 

4. Provide employee training on procurement, appropriation law, budget execution, and 

financial reporting requirements, as applicable, to ensure financial reporting and fund 

control policies are consistently and accurately executed. 

5. Ensure that FEC complies with regulatory agencies’ reporting requirements. 
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Management Response: 

Management generally concurs with the finding and recommendations. FEC management 

is committed to resolving the issues noted and has begun to address the recommendations. 

For example, FEC has entered into an agreement with GSA, an OMB-certified Line of 

Business provider, for financial services. FEC management has also begun to identify 

training opportunities for its staff to enhance awareness of sound financial management 

practices. FEC management will develop a corrective action plan addressing issues 

identified. 

SIGNIFICANT DEFICIENCY 

II. Information Technology (IT) (Modified Repeat Finding) 

A. Commission-Wide Security Administration 

An entity-wide security program should be in place to establish a framework and 

continuing cycle of activity to manage security risk, develop security policies, assign 

responsibilities, and monitor the adequacy of computer security related controls. 

Without a well-designed program, security controls may be inadequate; responsibilities 

may be unclear, misunderstood, and improperly implemented; and controls may be 

inconsistently applied. Such conditions may lead to insufficient protection of sensitive 

or critical resources and disproportionately high expenditures for controls over low-risk 

resources. 

During our Fiscal Year 2007 review of FEC’s security program, we noted that FEC 

made progress in addressing prior years’ findings, notably a contract was recently 

awarded to conduct a risk assessment of FEC’s major applications and general support 

systems. The information obtained from this risk assessment will be used to adjust and 

fully implement its information classification, certification and accreditation policies. 

However, at the time of this review, FEC’s existing security program revealed 

weaknesses in controls that expose the FEC’s financial management systems and data 

to unauthorized access and/or modification. Security weaknesses noted included: 

x Risk assessments have not been performed as part of FEC’s overall strategy to 

mitigate risks associated with its IT environment. (Repeat Finding)

x FEC has not fully implemented a framework of policies and standards to mitigate 

risks associated with the management of its information resources. Although FEC 

has implemented the majority of its information security policies, it has not fully 

implemented all of the related procedures and standards. FEC has not finalized and 

implemented an information classification policy, as well as its certification and 

accreditation policy. (Repeat Finding)

x FEC has created security plans for all of its major applications and mission critical 

general support systems. However, these security plans are not consistent with best 

practices “Risk Management Cycle”, as they are not based on an assessment of the 

risks to FEC systems. (Repeat Finding)
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Federal Election Commission Performance and Accountability Report 2007

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x Major applications and mission critical general support systems have not been 

certified and accredited to ensure that they are operating according to FEC’s 

security requirements. (Repeat Finding).

x FEC could not provide evidence to show that background investigations were 

performed timely for 3 out of the 10 newly hired employees that we sampled (30%). 

(New Finding).

Recommendations: 

6. Perform risk assessments, as part of FEC’s overall strategy to mitigate risks associated 

with its IT environment. 

7. Finalize and implement FEC’s information classification policy and certification and 

accreditation policy along with any accompanying standards. 

8. Incorporate the results of risk assessments into FEC security plans. 

9. Certify and accredit all major applications and mission critical general support systems. 

10. Refine procedures to ensure that all newly hired employees undergo the appropriate 

background investigations commensurate with the risk level of their position. FEC 

should also ensure these investigations are initiated within a reasonable time of 

employment start date. 

Management Response: 

FEC agrees with the majority of elements within this finding and believes that conducting a 

comprehensive risk assessment is a prudent course of action and consistent with its Risk 

Management Policy. To that end, FEC has re-issued a previous “Request for Proposal” 

(RFP). The contract was recently awarded to conduct a risk assessment of FEC’s major 

applications and general support systems. The information obtained from this risk 

assessment will be utilized to adjust and fully implement its information classification, and 

certification and accreditation policies. The data sensitivity and criticality information 

obtained will be incorporated into the appropriate FEC system security plans. This risk 

assessment contract deliverables include a risk remediation plan and strategy. This 

remediation plan will be incorporated into the overall ITD Corrective Action Plan (CAP). 

The modified system security plans, risk assessment and the resulting risk remediation plan 

will be included as major components of the certification and accreditation package for 

senior management to analyze in its decision to provide either an Authorization To Operate 

(ATO) or an Interim Authorization To Operate (IATO). 

B. Disaster Recovery and Continuity of Operations 

Losing the capability to process and protect information maintained on FEC’s computer 

systems can significantly impact FEC’s ability to accomplish its mission. The purpose 
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of disaster recovery and continuity of operations controls is to ensure that, when 

unexpected events occur, critical operations continue without interruption or critical 

operations are promptly resumed. 

To achieve this objective, FEC should have procedures in place to protect information 

resources and minimize the risk of unplanned interruptions and a plan to recover critical 

operations should interruptions occur. These plans should consider activities performed 

at FEC’s general support facilities (e.g. FEC’s local area network, wide area network, 

and telecommunications facilities), as well as the activities performed by users of 

specific applications. To determine whether the disaster recovery plans will work as 

intended, FEC should establish and periodically test the capability to perform its 

functions in disaster simulation exercises. 

Our review of the service continuity controls identified weaknesses that could affect 

FEC’s ability to respond to a disruption in business operations after a disaster or other 

interruption. Details of the matter are as follows: 

x FEC has not performed a business impact analysis (BIA) to formally identify and 

prioritize all critical data and operations on its networks and the resources needed to 

recover them if there was a major interruption or disaster. In addition, FEC has not 

established emergency processing priorities that will help manage disaster situations 

more effectively for the network. (Repeat Finding)

x FEC has not established an alternate processing site for its operations in the event of 

a disaster. (Repeat Finding)

x FEC’s contingency plan is not comprehensive, as it does not include steps for 

recovering all FEC’s major applications and mission critical general support 

systems. Additionally, the plan does not prioritize resources or set a timeframe for 

recovery. (Repeat Finding)

x FEC has not developed a continuity of operations plan (COOP) to support the 

continuation of its core mission in the event of a disaster that renders FEC’s 

facilities unusable. (Repeat Finding)

Recommendations: 

11. Perform a BIA to formally identify and prioritize all critical data and operations on 

FEC’s networks and the resources needed to recover them if there is a major 

interruption or disaster. 

12. Establish an alternate processing site and incorporate the results of the BIA into the 

contingency plan. 

13. Develop a comprehensive contingency plan that incorporates the results of the BIA and 

includes the procedures and resources necessary to restore FEC systems in the event of 

a disaster. Ensure emergency processing priorities are established to assist in managing 

disaster situations, and ensure once developed, the plan is tested annually and updated 

based on the results of these tests. 
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Federal Election Commission Performance and Accountability Report 2007

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14. Develop a COOP that addresses measures and procedures to follow in the event of a 

long-term interruption. 

Management Response: 

FEC agrees that a formal BIA would be useful and recently awarded a contract to develop 

a comprehensive disaster recovery plan. A component of this contract is to assist FEC in 

formally identifying and prioritizing all critical data and operations on its networks and the 

resources needed to recover them in the event of a disaster. Determine gaps in current 

plans and strategies to close the identified gaps on a priority basis (i.e. risk, value derived, 

cost, time). The vender will then assist FEC with utilizing the data gleamed from this 

analysis to validate (and/or modify) its already established emergency processing 

priorities. FEC will ensure that all emergency processing priorities are prominently 

indicated in the resulting disaster recovery plan. The proposed plan will also include a 

testing plan and maintenance mechanism to ensure that the plan stays current. 

Two additional components of this contract are to identify and prioritize those resources 

needed to develop a COOP and define the requirements needed to establish an alternate 

processing site. 

C. Logical Access, System Software and Change Management Controls 

Achieving an adequate level of information protection is highly dependent upon 

maintaining consistently effective access controls, system software and configuration 

management controls. Access controls limit and monitor access to computer resources 

(i.e., data files, application programs, and computer-related facilities and equipment) to 

the extent necessary to provide reasonable assurance that these resources are protected 

against waste, loss, unauthorized modification, disclosure, or misappropriation. Access 

controls include logical controls, such as security software programs designed to 

prevent or detect unauthorized access to sensitive files. 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, while 

change and configuration controls ensure 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. 

Our testing of internal controls identified weaknesses related to the information 

protection in FEC’s information systems environment. These include FEC’s midrange 

computer systems (e.g. servers) and applications. Weaknesses noted include the 

following: 

x The PeopleSoft application is currently running on an Oracle Release 8i Relational 

Database Management System that is no longer supported by the vendor. 

x Audit trail parameters for the Oracle database that supports the PeopleSoft 

application have not been set to ensure appropriate segregation of incompatible 

security responsibility and to provide necessary management oversight. Although 
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‘auditing’ is activated, the audit and archive logs are written to database tables and 

operating system logs respectively to which the database administrators (DBAs) 

have full access. This implies that the DBAs have the capability to purge these logs 

and remove possible evidence of database activity. 

x FEC does not maintain documentation supporting timely approval and testing of 

patches and software upgrades prior to being moved into production. 

x The PeopleSoft application does not have built-in functionality to enforce FEC’s 

password policies. Furthermore, the mitigating controls implemented by FEC do 

not address the following PeopleSoft weaknesses: 

o PeopleSoft does not have an account lockout policy. 

o PeopleSoft does not prevent users from using previous passwords. 

o PeopleSoft does not have the ability to enforce strong password requirements. 

x FEC does not properly monitor access to its networks, systems and physical facility: 

o Six out of 10 separated employees still have active network accounts. 

o Three out of 10 LAN accounts have not logged on for more than 90 days. 

o One out of 10 LAN accounts has not changed its password in 180 days. 

o Two out of 10 LAN accounts have not logged on for more than 90 days and 

have not changed their passwords in 180 days. 

o Access documentation is not maintained for system administrators and database 

administrators. Additionally, administrator privileges are not periodically 

reviewed for appropriateness. FEC’s current policy is to grant employees 

access based on their positions. Only employees hired to perform 

administrative functions are granted administrative access. 

Recommendations: 

15. Transfer processing to a service provider or update existing platform to vendorsupported versions/releases. 

Management Response: 

FEC has evaluated four approved agencies for a Line of Business (LOB) solution and 

selected the General Services Administration (GSA) as its service provider. FEC has 

finalized its decision regarding moving its financial, human resources, travel services and 

procurement activities to GSA’s LOB by signing an Interagency Agreement. GSA’s LOB 

solution will replace the FEC PeopleSoft application thus eliminating the discrepancies 

described in this finding. 

16. Write audit trails related to DBA activity to Operating Systems logs and limit DBA’s 

access to these logs. 

Management Response: 

Although the FEC has a process in place to trace any and all (attempted and successful) 

transactions which may occurs in its Oracle databases, it concurs that implementing 

additional separation of duty controls will assist in eliminating the possibility that a 
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Federal Election Commission Performance and Accountability Report 2007

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database administrator could purge auditing logs to hide inappropriate actions. To this 

end, the FEC recently implemented a process whereby database administrators have been 

restricted to read only access to Oracle audit log files. 

17. Maintain documentation to support the testing and approval of system software 

changes. 

Management Response: 

Although FEC believes its recently issued patch management standard is sufficient, the 

process of maintaining supporting documentation to support the standard can be improved. 

In an effort to improve this process, the FEC will issue patch management standard 

reminders to its technical personnel. In addition, the FEC will add reviewing patch 

management supporting documentation to its Security Review Policy to ensure that 

supporting documentation is properly maintained. 

18. Develop additional mitigating controls to ensure that PeopleSoft passwords are in 

agreement with FEC policy or ensure that if PeopleSoft processing is outsourced, the 

third party maintains password controls that comply with FEC password policies. 

Management Response: 

Although FEC has developed compensating controls to reduce the risk associated with this 

finding, it concurs that the PeopleSoft application does not meet the requirements specified 

in FEC’s Password Policy. With this in mind and understanding the limitations of the 

current version of PeopleSoft utilized at FEC, the Password Policy is being amended to 

allow an exemption for the PeopleSoft application. 

In addition, the FEC selection of GSA’s LOB financial solution will replace the FEC 

PeopleSoft application thus eliminating the discrepancies described in this finding. 

19. Promptly terminate access to FEC resources for separated employees. Procedures 

should be documented and implemented to coordinate separations between Human 

Resources and IT management to ensure user accounts are immediately disabled upon 

termination. 

20. Utilize access request forms that identify the user’s access level to document user 

access rights to all FEC systems and facilities. Additionally, FEC should periodically 

review and recertify user access to ensure current access is commensurate with job 

responsibilities. 

Management Response: 

Although the FEC has a documented process in place to terminate FEC resources for 

separated employees, it concurs that this process can be improved. To this end, the FEC 

recently awarded a contract to develop and implement an automated HR New Personnel 

Workflow Process. 
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 The New Personnel Workflow Process will include full time employees, interns, and 

contractors and eliminate the discrepancies described in this finding. The new process will 

track staff from the start of their employment at FEC to exit and allow managers to request 

and document any changes in network and application access. This new process will 

enable a higher degree of coordination between HR and ITD to ensure that user accounts 

are disabled upon exiting per FEC policy. The new process will retain all historical 

information regarding account creation, changes to access rights, system resources, and 

termination information regarding a particular account. 

OTHER MATTER 

OMB Bulletin No. 07-04 requires that the auditor’s report on internal control “identify those 

material weaknesses disclosed by the audit that were not reported in the reporting entity’s 

Federal Managers’ Financial Integrity Act (FMFIA) report.” The FEC’s schedule of material 

weaknesses and non-conformances included in the Performance and Accountability Report did 

not identify the material weakness noted in this report. We do not believe, however, that failure 

to report the material weaknesses in FMFIA constitutes a separate reportable condition or a 

material weakness because different criteria are used by management and the auditors in 

determining material weaknesses. 

STATUS OF PRIOR YEAR CONDITIONS 

We have reviewed the status of the FEC’s corrective actions with respect to the findings and 

recommendations from the prior year’s report on internal controls. We have attached Appendix 

A to our report that presents the status of prior year findings and recommendations. 

******************************** 

FEC's response to the material weakness and significant deficiency identified in our audit is 

presented within the body of our report. We did not audit the FEC's response and, accordingly, 

we express no opinion on it. 

In addition to the material weakness and significant deficiency described above, we noted certain 

matters involving internal control and its operation that we reported to the management of the 

FEC in a separate letter dated November 13, 2007. 

This report is intended solely for the information and use of the management of the FEC, the 

FEC Office of Inspector General, Government Accountability Office, the OMB, and the U.S. 

Congress, and is not intended to be and should not be used by anyone other than these specified 

parties. 

Calverton, Maryland 

November 13, 2007 
53

Federal Election Commission Performance and Accountability Report 2007

APPENDIX A 

FEDERAL ELECTION COMMISSION 

STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS 

September 30, 2007 

Page 15 of 20 

PY 

Rec. 

No. 

Condition/Audit 

Area Recommendation Current Status1

Material Weaknesses

I. Program Cost Allocation 

1 Cost Allocation 

Methodology 

Revise the account lockout threshold in TRS to five 

invalid attempts. 

Closed 

2 Cost Allocation 

Methodology 

Establish written policies and procedures to ensure 

that employees enter their time in the cost system 

timely and properly and the results are supported by 

source data which is reviewed and approved by 

management 

Closed 

3 Cost Allocation 

Methodology 

Ensure correct and consistent application of the cost 

allocation process in accordance with the cost system 

user manual and conceptual design document. 

Closed 

4 Cost Allocation 

Methodology 

Ensure errors in TRS causing the system to allocate 

hours for the Information Division to the wrong 

program are resolved. 

Closed 

II. General Property and Equipment 

5 Property, Plant and 

Equipment 

Improve analytical and quality control review of 

subsidiary schedules, journal vouchers and property 

reconciliation to ensure material errors and differences 

are identified and resolved timely. 

Closed 

6 Property, Plant 

and Equipment 

Use correct USSGL. Closed 

7 Property, Plant 

and Equipment 

Develop a mechanism for reconciling individual 

property items in the property system to the bulk 

purchases recorded in the general ledger to ensure 

completeness of the property system records. Also, 

ensure that the property management system has 

complete information, such as bar code identification, 

serial number and location of the asset. 

Closed 

8 Property, Plant 

and Equipment 

Clearly document physical inventory procedures, 

results of the physical inventory, and the 

reconciliation performed. Maintain the documentation 

for audit trail and management review purposes. 

Updated – 

reported in 

current year 

management 

letter 

 

1

 Updated recommendation can be considered closed since a new recommendation has been proposed in current 

year’s Auditor’s Report on Internal Control or management letter. 
54

Section III | Auditor’s Report and Financial Statements

APPENDIX A 

FEDERAL ELECTION COMMISSION 

STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS 

September 30, 2007 

Page 16 of 20 

PY 

Rec. 

No. 

Condition/Audit 

Area Recommendation Current Status1

9 Property, Plant 

and Equipment 

Establish a standard process, mechanism or policies to 

ensure [offices and divisions] notify the Finance 

Office of the acquisition and disposition of property 

assets. 

Updated – 

reported in 

current year 

management 

letter. 

10 Property, Plant 

and Equipment 

Perform a monthly analysis of property as part of the 

monthly analysis of financial activities. 

Closed 

Reportable Conditions 

III. Information Technology 

11 Entity-Wide 

Security 

Complete the documentation approval and 

implementation of an entity-wide security program 

plan. 

Open – 

reported in 

current year 

significant 

deficiency 

12 Entity-Wide 

Security 

Finalize and implement FEC’s information 

classification policy and certification and accreditation 

policy along with any accompanying standards. 

Open – 

reported in 

current year 

significant 

deficiency 

13 Entity-Wide 

Security 

Perform risk assessments, as part of FEC’s overall 

strategy to mitigate risks associated with its IT 

environment. 

Open – 

reported in 

current year 

significant 

deficiency 

14 Entity-Wide 

Security 

Incorporate the results of the risk assessments into 

FEC’s security plans. 

Open – 

reported in 

current year 

significant 

deficiency 

15 Entity-Wide 

Security 

Classify information resources in accordance with the 

risk assessments. 

Open – 

reported in 

current year 

significant 

deficiency 

16 Entity-Wide 

Security 

Utilize corrective action plans for all reviews of 

security controls whether performed internally or by a 

third party. 

Closed 
55

Federal Election Commission Performance and Accountability Report 2007

APPENDIX A 

FEDERAL ELECTION COMMISSION 

STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS 

September 30, 2007 

Page 17 of 20 

PY 

Rec. 

No. 

Condition/Audit 

Area Recommendation Current Status1

17 Entity-Wide 

Security 

Ensure that corrective action plans identify the task to 

be completed in addition to identifying the resources 

required to accomplish the elements of the plan, any 

milestones in meeting the tasks, and scheduled 

completion dates for the milestones. 

Closed 

18 Entity-Wide 

Security 

Certify and accredit all major applications and mission 

critical general support systems. 

Open – 

reported in 

current year 

significant 

deficiency 

19 Contingency 

Planning 

Perform a BIA to formally identify and prioritize all 

critical data and operations on FEC’s networks and the 

resources needed to recover them if there is a major 

interruption or disaster. 

Open – 

reported in 

current year 

significant 

deficiency 

20 Contingency 

Planning 

Ensure that emergency processing priorities are 

established to assist in managing disaster situations 

more effectively for the network and include business 

owners in the discussion to determine how much 

backup data is needed on-hand to minimize the impact 

of a disaster. 

Open – 

reported in 

current year 

significant 

deficiency 

21 Contingency 

Planning 

Establish an alternative processing site for FEC’s 

operations in the event of a disaster and ensure that an 

operational mechanism exists to update the disclosure 

database in the event that FEC’s database is 

unavailable to replicate the disclosure database 

resident at the off-site location. 

Open – 

reported in 

current year 

significant 

deficiency 

22 Contingency 

Planning 

Develop and document a comprehensive COOP of 

FEC’s data centers, networks, and telecommunication 

facilities. 

Open – 

reported in 

current year 

significant 

deficiency 

23 Contingency 

Planning 

Develop a COOP to support the continuation of FEC’s 

core mission in the event of a disaster that renders 

FEC’s facilities unusable. 

Open – 

reported in 

current year 

significant 

deficiency 
56

Section III | Auditor’s Report and Financial Statements

APPENDIX A 

FEDERAL ELECTION COMMISSION 

STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS 

September 30, 2007 

Page 18 of 20 

PY 

Rec. 

No. 

Condition/Audit 

Area Recommendation Current Status1

24 Controls to 

Protect 

Information 

Finalize and implement FEC’s process to manually 

review logs of users using budgetary overrides where 

the reviewer is an individual who does not have access 

to utilize the overrides. 

Closed 

25 Controls to 

Protect 

Information 

Develop mitigating controls to ensure that PeopleSoft 

passwords are in agreement with FEC’s policy or 

ensure that when PeopleSoft processing is outsourced, 

the third-party maintains password controls that 

comply with FEC’s password policies. 

Open – 

reported in 

current year 

significant 

deficiency 

26 Controls to 

Protect 

Information 

Use access request forms that identify the user’s 

access level to document user access rights to all 

FEC’s systems. Additionally, FEC should 

periodically review the appropriateness of access 

granted and recertify user access rights. 

Closed 

27 Controls to 

Protect 

Information 

Investigate to determine a baseline level of auditing 

that can be performed without causing a detrimental 

impact to the performance of the Oracle databases and 

the applications that they support. 

Closed 

28 Controls to 

Protect 

Information 

Periodically review data center access and remove 

unnecessary access rights. 

Closed 

29 Software 

Development and 

Change Controls 

Implement formal policies and procedures for 

managing system software changes. 

Closed 

30 Software 

Development and 

Change Controls 

Maintain documentation to support the testing and 

approval of system software changes. 

Open – 

reported in 

current year 

significant 

deficiency 

31 Software 

Development and 

Change Controls 

Complete the migration of financial processing to a 

third-party service provider and verify that the service 

provider is utilizing vendor supported system software 

version. 

Open – FEC 

has plans to 

migrate to a 

third party 

service 

provider in 

FY 2008. 
57

Federal Election Commission Performance and Accountability Report 2007

APPENDIX A 

FEDERAL ELECTION COMMISSION 

STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS 

September 30, 2007 

Page 19 of 20 

PY 

Rec. 

No. 

Condition/Audit 

Area Recommendation Current Status1

IV. Integrated Financial Management System 

32 Integrated 

Financial 

Management 

System 

Evaluate the extent of systems integration needed for 

existing systems when considering the outsourcing of 

the FEC’s accounting services to a shared service 

provider. 

Updated – 

reported in 

current year 

material 

weakness 

V. Administrative Fines, Civil Penalties and Miscellaneous Receipts 

33 Administrative 

Fines, Civil 

Penalties and 

Miscellaneous 

Receipts 

Implement policies and procedures for reviewing the 

accounts receivable schedules for reasonableness and 

accuracy prior to recording related account 

transactions in the general ledger. 

Closed 

34 Administrative 

Fines, Civil 

Penalties and 

Miscellaneous 

Receipts 

Formalize policies and procedures for performing 

accounts receivable reconciliations. While developing 

these procedures, the FEC should consider 

establishing a timeline for when the reconciliations 

should be finalized by the program offices and 

forwarded to the Finance Office. 

Updated – 

reported in 

current year 

material 

weakness 

35 Administrative 

Fines, Civil 

Penalties and 

Miscellaneous 

Receipts 

Document all the methodologies applied in calculating 

allowances for uncollectible accounts. Periodically 

review the methodologies against actual procedures 

performed and revise them as necessary. 

Updated – 

reported in 

current year 

management 

letter 

VI. Controls Over Procurement and Disbursement Transactions 

36 Procurement and 

Disbursement 

Issue formal guidance for performing corrective action 

when negative obligation balances occur. Procedures 

should describe the conditions when corrective action 

is needed, corrective actions to perform and the 

individuals responsible for resolving the error. The 

timely response and clear communication on 

corrective action should also be included in the 

procedures. 

Closed 

37 Procurement and 

Disbursement 

Ensure documentation related to procurement and 

disbursement actions are properly approved and 

supported. Procurement policies and procedures 

should be enhanced to document, completely and 

clearly, operating procedures for the procurement 

cycle and should include procedures for documenting 

justification when exceptions are made to established 

procedures. 

Updated – 

Reported in 

current year 

management 

letter 
58

Section III | Auditor’s Report and Financial Statements

APPENDIX A 

FEDERAL ELECTION COMMISSION 

STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS 

September 30, 2007 

Page 20 of 20 

PY 

Rec. 

No. 

Condition/Audit 

Area Recommendation Current Status1

38 Procurement and 

Disbursement 

Ensure reconciliations are consistently performed, 

reviewed and approved in a timely manner. 

Closed 

39 Audit Follow-up Formalized the remediation process related to audit 

findings and recommendations that is consistent with 

OMB Circular A-50 guidelines. 

Updated – 

reported in 

current year 

management 

letter 
59

Federal Election Commission Performance and Accountability Report 2007

Assets (Note 2) 2007 2006

Intragovernmental:

Fund balance with Treasury (Note 3) $ 10,250,297 $ 10,068,481

Total Intragovernmental Assets 10,250,297 10,068,481

Accounts receivable, net (Notes 2 & 4) 817,309 520,471

General property and equipment, net (Note 5) 7,745,134 8,757,157

Advances to others 6,927 –

Total assets $ 18,819,667 $ 19,346,109

Liabilities (Note 6)

Intragovernmental:

 Accounts payable $ – $ 50,000

Employer contribution and payroll taxes payable 297,573 290,119

Custodial liability 807,032 976,525

Payable to Treasury 10,277 –

Total Intragovernmental 1,114,882 1,316,644

With the public:

Accounts payable 901,977 864,387

Accrued payroll and benefits 1,143,513 1,105,617

Unfunded leave 1,964,478 1,931,980

Other 663 30,312

Total liabilities 5,125,513 5,248,940

Net Position

Unexpended appropriations - Other Funds 7,912,472 7,289,060

Cumulative results of operations - Other Funds 5,781,682 6,808,109

Total net position 13,694,154 14,097,169

Total liabilities and net position $ 18,819,667 $ 19,346,109

BALANCE SHEET

As of September 30, 2007 and 2006 (in Dollars)

The accompanying notes are an integral part of these statements.
60

Section III | Auditor’s Report and Financial Statements

STATEMENT OF NET COST

For the Years Ended September 30, 2007 and 2006 (in Dollars)

Program costs: 2007 2006

Administering and enforcing the FECA $ 56,599,698 $ 55,906,556

Less: Earned revenue (222,137) –

Net cost of operations (Note 9) $ 56,377,561 $ 55,906,556

The accompanying notes are an integral part of these statements.
61

Federal Election Commission Performance and Accountability Report 2007

STATEMENT OF CHANGES IN NET POSITION

For the Years Ended September 30, 2007 and 2006 (in Dollars)

2007 2006

Consolidated 

Total

Consolidated 

Total

Cumulative Results of Operations:

Beginning balances $ 6,808,109 $ 8,064,275

Beginning balances, as adjusted 6,808,109 8,064,275

Budgetary Financing Sources

Appropriations used 53,029,611 52,297,571

Transfers in-out without reimbursement (10,277) –

Other Financing Sources (Non-Exchange):

Imputed financing from costs absorbed by others 2,331,800 2,352,819

Total Financing Sources 55,351,134 54,650,390

Net Cost of Operations (56,377,561) (55,906,556)

Net Change (1,026,427) (1,256,166)

Cumulative Results of Operations $ 5,781,682 $ 6,808,109

Unexpended Appropriations:

Beginning Balances $ 7,289,060 $ 5,821,556

Beginning Balances, as adjusted 7,289,060 5,821,556

Budgetary Financing Sources:

Appropriations received 54,527,516 54,700,000

Other adjustments (874,493) (934,925)

Appropriations used (53,029,611) (52,297,571)

Total Budgetary Financing Sources 623,412 1,467,504

Total Unexpended Appropriations 7,912,472 7,289,060

Net Position $ 13,694,154 $ 14,097,169

The accompanying notes are an integral part of these statements.
62

Section III | Auditor’s Report and Financial Statements

STATEMENT OF BUDGETARY RESOURCES

For the Years Ended September 30, 2007 and 2006 (in Dollars)

2007 2006

Budgetary Resources (Note 10)

Unobligated balance, brought forward, October 1 $ 2,078,695 $ 1,794,495

Recoveries of prior year obligations 1,352,281 967,661

Budget authority:

Appropriations received 54,527,516 54,700,000

Spending authority from offsetting collections:

Earned

Collected 211,860 –

Accounts receivable 10,277 –

Transfer in/out without reimbursement (10,277) –

Permanently not available: (874,493) (934,925)

Total Budgetary Resources $ 57,295,859 $ 56,527,231

Status of Budgetary Resources

Obligations Incurred

Direct $ 54,255,141 $ 54,448,901

Reimbursable 211,860 –

Total Obligations Incurred 54,467,001 54,448,901

Unobligated balance

Apportioned 220,350 108,327

Total Unobligated Balance 220,350 108,327

Unobligated balance not available 2,608,508 1,970,003

Total Status of Budgetary Resources $ 57,295,859 $ 56,527,231

Change in Obligated Balance:

Obligated balance, net

Unpaid obligations, brought forward, October 1 $ 7,521,417 $ 6,520,709

Obligations incurred net 54,467,001 54,448,901

Less: Gross outlays (53,215,541) (52,480,532)

Less: Recoveries of prior year unpaid obligations, actual (1,352,281) (967,661)

Obligated balance, net, end of period

Unpaid obligations 7,420,596 7,521,417

Total, unpaid obligated balance, net, end of period 7,420,596 7,521,417

Net Outlays 

Gross outlays 53,215,541 52,480,532

Less: Offset collections (222,137) –

Less: Distributed offsetting receipts (215,677) –

Net outlays $ 52,777,727 $ 52,480,532

The accompanying notes are an integral part of these statements.
63

Federal Election Commission Performance and Accountability Report 2007

2007 2006

Revenue Activity:

Sources of Cash Collections:

Miscellaneous Receipts $ 215,677 $ 373,669

Civil Penalties 4,135,632 5,960,484

Administrative Fees 393,669 174,924

Total Cash Collections 4,744,978 6,509,077

Accrual Adjustments 286,560 93,321

Total Custodial Revenue (Note 11) $ 5,031,538 $ 6,602,398

Disposition of Collections:

Transferred to Treasury $ 4,744,978 $ 6,303,190

Amount Yet to be Transferred 286,560 299,208

Total Disposition of Collections $ 5,031,538 $ 6,602,398

Retained by FEC $ – $ –

Net Custodial Activity $ – $ –

STATEMENT OF CUSTODIAL ACTIVITY

For the Years Ended September 30, 2007 and 2006 (in Dollars)

The accompanying notes are an integral part of these statements.

65

Federal Election Commission Performance and Accountability Report 2007

Note 1 – 

Summary of Signifi cant Accounting Policies

Reporting Entity

Th e Federal Election Commission (FEC or Commission) was created in 1975 as an independent regulatory 

agency with exclusive responsibility for administering, enforcing, defending and interpreting the Federal Election 

Campaign Act (FECA) of 1971, 2 U.S.C. 431 et seq., as amended by the Bipartisan Campaign Reform Act of 2002 

(BCRA), Pub. L. 107–155, 116 Stat. 81 (2002) (“the Act”). Th e Commission is also responsible for administering 

the public funding programs (26 U.S.C.) for presidential campaigns and conventions, which includes certifi cation 

and audits of all participating candidates and committees, and enforcement of public funding legislation.

Th e fi nancial activity presented relates primarily to the execution of the FEC congressionally approved budget. 

Consistent with Federal Accounting Standards Advisory Boards’ (FASAB) Statement of Federal Financial 

Accounting Concept No. 2, “Entity and Display,” the Presidential Election Campaign Fund (“the fund”) is not a 

reporting entity of the FEC. Financial activity of the funds is budgeted, apportioned, recorded, reported and paid 

by the Department of Treasury, and therefore, the accounts of the Presidential Election Campaign Fund are not 

included in the FEC’s fi nancial statements.

Basis of Accounting and Presentation

As required by the Accountability of Tax Dollars Act of 2002, the accompanying fi nancial statements present 

the fi nancial position, net cost of operations, changes in net position, budgetary resources, and custodial activity 

of the FEC. While these fi nancial statements have been prepared from the books and records of the FEC in 

accordance with U.S. generally accepted accounting principles (GAAP) and in accordance with the form and 

content for entity fi nancial statements specifi ed by the Offi ce of Management and Budget (OMB) in Circular 

A-136, as revised, Financial Reporting Requirements, as well as the accounting policies of the FEC, the statements 

may diff er from other fi nancial reports submitted pursuant to OMB directives for the purpose of monitoring 

and controlling the use of the FEC’s budgetary resources. Generally Accepted Accounting Principles for federal 

entities are the standards prescribed by the Federal Accounting Standards Advisory Board (FASAB), which is the 

offi cial body for setting the accounting standards of the federal government.

Th ese 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 a liability is incurred, 

without regard to receipt or payment of cash. Budgetary accounting is designed to recognize the obligation of 

funds according to legal requirements. Budgetary accounting is essential for compliance with legal constraints and 

controls over the use of federal funds.

NOTES TO THE FINANCIAL 

STATEMENTS
66

Notes to the Financial Statements 

Throughout these financial statements, assets, liabilities, revenues, and costs have been classified according to the 

type of entity with which the transactions are associated. Intra-governmental assets and liabilities are those from 

or to other federal entities. Intra-governmental earned revenues are collections or accruals of revenue from other 

federal entities and intra-governmental costs are payments or accruals to other federal entities. These statements 

should be read with the understanding that they are for a component of the U.S. Government, a sovereign 

entity.

Reclassifications

Certain prior year balances were reclassified to conform to current year presentation. The FEC updated its strategic 

plan, which now reflects one strategic goal and three objectives. Accordingly, and consistent with OMB Circular 

A-136, as revised, and OMB Circular A-11, Preparation, Submission and Execution of the Budget, the Statement 

of Net Cost (SNC) was revised to reflect management’s definition of its operations. To be consistent with the 

FY 2007 presentation, the three responsibility segments reflected in the FY 2006 SNC were consolidated and 

reclassified as one program. Except for the SNC, this reclassification had no impact on the financial statements, 

and there was no net effect on the total net costs for FY 2006.

The FEC revised its methodology in determining the intragovernmental costs. Accordingly, Note 9 – Statement 

of Net Cost for FY 2006 was reclassified to be consistent with the new methodology applied for FY 2007.

The presentation of the Statement of Financing (SOF) has been revised, effective this fiscal year, to comply with 

OMB Circular A-136, revised, which provided for the SOF to no longer be considered a basic statement. Instead, 

the SOF is required to be displayed in the notes and referred to as “Reconciliation of Net Cost of Operations to 

Budget” rather than the SOF. Accordingly, certain reclassifications were made to the previously issued FY 2006 

SOF to conform to the new format.

Assets

Assets that an entity is authorized to use in its operations are termed entity assets, while assets that are held by an 

entity and are not available for the entity’s use are termed non-entity assets. Most of the FEC’s assets are entity 

assets and are available to carry out the mission of the FEC. The FEC also has non-entity assets, which primarily 

consist of receipts from fines. These funds are not available to use in its operations and must be transferred to the 

U.S. Treasury.

Fund Balance with Treasury

The FEC does not maintain cash in commercial bank accounts. The U.S. Treasury processes cash receipts and 

disbursements. Funds with the U.S. Treasury consist of appropriated, deposited funds, and custodial collections. 

With the exception of the custodial collections, these funds are available to pay current liabilities and finance 

authorized purchase commitments. Custodial collections, which are not available to finance FEC activities, are 

classified as non-entity assets.

Accounts Receivable

The FEC’s accounts receivable represent amounts due from the public or the U.S. Treasury for fines and penalties 

assessed by the FEC and referred to Treasury for collection. The FEC establishes an allowance for the loss on 

accounts receivable from the public that are deemed uncollectible accounts, which is included in Accounts 

Receivable on the balance sheet. The allowance is a percentage of the overall receivable balance and the collection 

rate of past balances.
67

Federal Election Commission Performance and Accountability Report 2007

General Property and Equipment

General Property and Equipment (P&E) is reported at acquisition cost. The capitalization threshold is 

established at $25,000 and a useful life of 2 or more years. For bulk purchases, items are capitalized when the 

individual useful lives are at least two years and have an aggregate value of $250,000 or more. The bulk purchase 

capitalization threshold is a new policy that was implemented in FY 2007. Acquisitions of P&E that do not 

meet the capitalization criteria are recorded as operating expenses. General P&E consists of items that are used 

by FEC to support its mission. Depreciation on these assets is calculated using the straight-line method with no 

salvage value. Depreciation begins the month after the asset is placed in service. Maintenance, repairs and minor 

renovations are expensed as incurred. Expenditures that materially increase values, change capacities or extend 

useful lives are capitalized.

The headquarters building in which the FEC operates is leased through the General Services Administration 

(GSA) under an occupancy agreement, which manages the lease agreement between the federal government and 

the commercial entity. FEC is billed by GSA for the leased space based upon estimated lease payments made by 

GSA plus an administrative fee. The cost of the headquarters building is not capitalized. The costs of any leasehold 

improvements, which are managed through GSA, are financed with FEC appropriated funds. Construction costs 

of $25,000 or more are accumulated as Construction in Progress until completion and then are transferred and 

capitalized as a Leasehold Improvement over 7 years or the remainder of the lease, whichever is less.

Internal use software development and acquisition costs of $25,000 are capitalized as software development in 

progress until the development stage is completed and the software successfully tested. At acceptance, software 

development-in-progress costs are reclassified as internal use software costs and amortized using the straightline method over an estimated useful life of 5 years. Purchased commercial software that does not meet the 

capitalization criteria is expensed. Enhancements which do not add significant new capability or functionality 

are expensed.

Liabilities

Liabilities represent amounts that are likely to be paid by the FEC as the result of transactions or events that 

have already occurred; however, no liabilities are paid by the FEC without an appropriation. Intragovernmental 

liabilities arise from transactions with other federal entities. Liabilities classified as not covered by budgetary 

resources are liabilities for which appropriations have not been enacted (e.g., annual leave benefits and actuarial 

liability under the Federal Employees Compensation Act), and liabilities resulting from the agency’s custodial 

activities. FEC also has an intragovernmental liability to the U.S.Treasury for fines and miscellaneous receipts 

collected from the public but not yet transferred. These funds may not be used to fund FEC operations.

Accounts Payable

Accounts payable consist of liabilities to commercial vendors and contractors for amounts owed for goods, 

services, and other expenses received but not yet paid at the end of the fiscal year. Accounts payable also consist of 

disbursements in transit that have been recorded by the FEC but not paid by the U.S. Treasury.

Accrued Payroll and Benefits

Accrued payroll and benefits represents salaries, wages and benefits earned by employees, but not disbursed as 

of September 30, 2007. Accrued payroll and benefits are payable to employees and are therefore not classified as 

intragovernmental.
68

Notes to the Financial Statements 

Liabilities Not Covered by Budgetary Resources

Liabilities represent the amount of monies or other resources that are likely to be paid by the FEC as a result of 

a transaction or event that has already occurred. Liabilities for which an appropriation has not been enacted are 

classified as Liabilities Not Covered by Budgetary Resources.

Annual, Sick and Other Leave

Annual leave is recorded as a liability when it is earned; the liability is reduced as leave is taken. Each quarter, the 

balance in the accrued leave account is adjusted to reflect current leave balances and pay rates. Accrued annual 

leave is paid from future funding sources and accordingly is reflected as a liability not covered by budgetary 

resources. Sick leave and other types of non-vested leave are expensed as taken.

Federal Employee Benefits

A liability is recorded for estimated and actual future payments to be made for workers’ compensation pursuant 

to the Federal Employees Compensation Act (FECA). The liability consists of the net present value of estimated 

future payments calculated by the Department of Labor (DOL) and the actual unreimbursed cost paid by DOL 

for compensation paid to recipients under this FECA. The future workers’ compensation estimate was generated 

by DOL from an application of actuarial procedures developed to estimate the liability for FECA, which includes 

the expected liability for death, disability, medical, and miscellaneous costs for approved compensation cases. The 

liability is calculated using historical benefit payment patterns related to a specific incurred period to predict the 

ultimate payments related to that period. These projected annual benefits payments were discounted to present 

value.

Employee Retirement Plans

FEC employees participate in either the Civil Service Retirement System (CSRS) or the Federal Employees 

Retirement System (FERS), which became effective on January 1, 1987. Most FEC employees hired after 

December 31, 1983, are automatically covered by FERS and Social Security. For employees covered by CSRS, 

the FEC withheld 7.0 percent of base pay earnings. The FEC matches this withholding, and the sum of the 

withholding and the matching funds is transferred to the Civil Service Retirement System.

For each fiscal year, the Office of Personnel Management (OPM) calculates the U.S. Government service cost 

for covered employees, which is an estimate of the amount of funds that, if accumulated annually and invested 

over an employee’s career, would be enough to pay that employee’s future benefits. Since the U.S. Government’s 

estimated service cost exceeds contributions made by employer agencies and covered employees this plan is not 

fully funded by the FEC and its employees. For 2007 and 2006, FEC recognized approximately $2.3 million 

and $2.4 million, respectively, as of September 30, as an imputed cost and as an imputed financing source for the 

difference between the estimated service cost and the contributions made by FEC and its employees.

FERS contributions made by employer agencies and covered employees exceed the U.S. Government’s estimated 

service costs. For FERS covered employees the FEC made contributions of 10.7 percent of basic pay. Employees 

participating in FERS are covered under the Federal Insurance Contribution Act (FICA) for which the FEC 

contributes a matching amount to the Social Security Administration.
69

Federal Election Commission Performance and Accountability Report 2007

Thrift Savings Plan (TSP)

The Thrift Savings Plan (TSP) is a retirement savings and investment plan for employees covered by either CSRS 

or FERS. The TSP is administered by the Federal Retirement Thrift Investment Board on behalf of federal 

agencies. For employees belonging to FERS, the FEC automatically contributes one percent of base pay to their 

account and matches contributions up to an additional four percent. For employees belonging to CSRS, there is 

no governmental matching contribution. 

The FEC does not report on its financial statements CSRS and FERS assets, accumulated plan benefits, or unfunded 

liabilities, if any, which may be applicable to FEC employees. Reporting such amounts is the responsibility of the 

Office of Personnel Management. The portion of the current and estimated future outlays for CSRS not paid by 

the FEC is, in accordance with Statement of Federal Financial Accounting Standards (SFFAS) No. 5, Accounting 

for Liabilities of the Federal Government, included in the FEC’s financial statements as an imputed financing 

source.

Commitments and Contingencies

Commitments are contractual agreements involving financial obligations. The FEC is committed for goods and 

services that have been ordered, but have not yet been received.

A contingency is an existing condition, situation, or set of circumstances involving uncertainty as to possible 

gain or loss. The uncertainty will ultimately be resolved when one or more future events occur or fail to occur. A 

contingent liability is recognized when a past event or exchange transaction has occurred, and future outflow or 

other sacrifice of resources is measurable and probable. A contingency is not disclosed when any of the conditions 

for liability recognition are met but the chance of the future event or events’ occurring is remote. A contingency is 

disclosed when any of the conditions for liability recognition are not met and the chance of the future confirming 

event or events occurring is more than remote but less than probable.

Revenues and Other Financing Sources

Annual Appropriation

The FEC received the majority of its funding through an annual appropriation as provided by Congress. Also, 

the FEC, in FY 2007, received authority from Congress to collect registration fees for FEC hosted conferences 

and apply these funds to its account, which are available to the FEC without further appropriation for the costs 

of carrying out it conferences.

Imputed Financing Sources

In accordance with OMB Circular A-136, all expenses should be reported by agencies whether or not these 

expenses would be paid by the agency that incurs the expense. The amounts for certain expenses of the FEC, 

which will be paid by other federal agencies, are recorded in the SNC. A corresponding amount is recognized in 

the “Statement of Changes in Net Position” as an “Imputed Financing Source.” These imputed financing sources 

primarily represent unfunded pension costs of FEC employees, as described above.
70

Notes to the Financial Statements 

Statement of Net Cost

The SNC presents one program, which is based on the FEC’s mission and strategic goal as outlined in the revised 

strategic plan. The major program that reflects this strategic goal is summarized as: Administer and enforce the 

FECA efficiently and effectively.

Earned Revenue

Earned revenues include fees for seminars and conferences held during the year.

Net Position

Net position is the residual difference between assets and liabilities and is comprised of unexpended appropriations 

and cumulative results of operations. Unexpended appropriations represent appropriated spending authority that 

is unobligated and has not been withdrawn by the U.S. Treasury, and obligations that have not been paid. 

Unobligated balances associated with appropriations that expire at the end of the fiscal year remain available for 

obligation adjustments, but not for new obligations, until that account is closed, five years after the appropriations 

expire. Cumulative results of operations represent the excess of financing sources over expenses since inception.

Statement of Custodial Activity

The Statement of Custodial Activity summarizes collections transferred or transferable to the U.S. Treasury or 

other parties for miscellaneous receipts, fines and penalties. These amounts are reported as custodial revenue and 

are not available for FEC operations.

Use of Estimates

The preparation of accompanying financial statements in accordance with generally accepted accounting principles 

requires management to make certain estimates and assumptions that directly affect the reported assets, liabilities, 

revenues, and expenses. Actual results could differ from these estimates.
71

Federal Election Commission Performance and Accountability Report 2007

Note 2 – 

Non-Entity Assets

Non–entity assets, which primarily represent receipts resulting from the FEC imposing civil penalties on those 

that violated the requirements of the Federal Election Campaign Act, consist of the following at September 30:

2007 2006

Intragovernmental:

Fund Balance with Treasury (Custodial) $ – $ 456,054

With the Public:

Accounts Receivable – Custodial 807,032 520,471

Accounts Receivable – Conference Fees $ 10,277 $ –

Total non-entity assets 817,309 976,525

Total entity assets $ 18,002,358 $ 18,369,584

Total Assets $ 18,819,667 $ 19,346,109

Note 3 – 

Fund Balance with Treasury

Fund balances with Treasury consisted of the following at September 30:

2007 2006

Fund Balance with Treasury:

Appropriated Funds $ 10,250,297 $ 9,612,427

Custodial $ – $ 456,054

Total Fund Balance with Treasury $ 10,250,297 $ 10,068,481

Status of Fund Balance with Treasury 2007 2006

Unobligated Balance

Available $ 220,350 $ 108,327

Unavailable 2,608,508 1,970,003

Obligated Balance not yet disbursed 7,421,439 7,534,097

Non-Budgetary Fund Balance with Treasury

Custodial Funds not yet transferred to Treasury $ – $ 456,054

Total Status of Fund Balance with Treasury $ 10,250,297 $ 10,068,481

Available unobligated balances represent amounts that are apportioned for obligation in the current fiscal year. 

Unavailable unobligated balances represent amounts that are not apportioned for obligation during the current 

fiscal year and expired appropriations that are no longer available to incur new obligations. Obligated balances 

not yet disbursed include undelivered orders unpaid and expended authority unpaid.
72

Notes to the Financial Statements 

Note 4 – 

Accounts Receivable, net

All accounts receivable are with the public and consist of the following at September 30:

Gross 

Accounts 

Receivable

Allowance

Net 

Accounts 

Receivable

With the Public

Penalties and Miscellaneous Receipts $ 1,443,300 $ 636,268 $ 807,032

Conference Fees $ 10,277 $ – $ 10,277

Total Non-Entity $ 1,453,577 $ 636,268 $ 817,309

Gross 

Accounts 

Receivable

Allowance

Net 

Accounts 

Receivable

With the Public

Penalties and Miscellaneous Receipts $ $1,074,698 $ $ 554,227 $ $ 520,471

Total Non-Entity $ $1,074,698 $ $ 554,227 $ $ 520,471

Non-Entity receivables consist of civil penalties assessed by FEC through its enforcement processes or conciliation agreements 

reached with parties. FEC has three offices that administer the penalties: the Office of General Counsel (OGC); the Office of 

Administrative Review (OAR); and the Office of Alternative Dispute Resolution (ADR). Each office has a distinct role in the 

enforcement and collection process. The allowance is based on the historical rate of collection and an overall assessment of the 

debtors' willingness and ability to pay. Furthermore, debts administered by OAR are referred to the U.S. Treasury for collection 

when delinquent. Debts administered by the OGC and ADR are not considered delinquent, under the definition of the Debt 

Collection Improvement Act of 1996, and are therefore not referred to the U.S. Treasury. The terms of the agreement between the 

FEC and the parties establish the conditions for collection.

In FY 2007, the FEC received authorization to collect fees for its conferences. Accordingly, a receivable pertaining to the fees 

associated with these conferences as of September 30, 2007 was $10,277. There were no conferences held in FY 2006.

2007

2006
73

Federal Election Commission Performance and Accountability Report 2007

Note 5 – 

General Property and Equipment, Net

The general components of capitalized property and equipment, net of accumulated depreciation, consisted of the 

following as of September 30, 2007 and 2006:

2007

Asset Class

Service Life 

(years)

Acquisition 

Value

Accumulated 

Depreciation

Net Book 

Value

Software 5 $ 14,315,296 $ 9,112,519 $ 5,202,777

Computers and peripherals 3 to 5 4,139,404 3,280,787 858,617

Leasehold Improvements 7 or less 5,116,757 5,116,757 –

Furniture 7 852,754 594,480 258,274

Software-in-Development n/a $ 1,425,466 $ – $ 1,425,466

Total $ 25,849,677 $ 18,104,543 $ 7,745,134

2006

Asset Class

Service Life 

(years)

Acquisition 

Value

Accumulated 

Depreciation

Net Book 

Value

Software 5 $ 12,582,805 6,971,393 $ 5,611,412

Computers and peripherals 3 to 5 3,553,620 2,810,613 743,007

Leasehold Improvements 7 or less 4,912,211 3,566,376 1,345,835

Furniture 7 852,754 450,409 402,345

Software-in-Development n/a $ 654,558 $ – $ 654,558

Total $ 22,555,948 $ 13,798,791 $ 8,757,157

Depreciation expense was $4,305,752 and $3,990,233 for the periods ending September 30, 2007 and September 

30, 2006, respectively.
74

Notes to the Financial Statements 

Note 6 – Liabilities Not Covered By Budgetary 

Resources

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 financing sources necessary to pay the liabilities have not 

yet been made available through Congressional appropriation. Liabilities Not Covered by Budgetary Resources 

consisted of the following as of September 30, 2007 and 2006:

Liabilities Not Covered by Budgetary Resources 2007 2006

Intragovernmental $ 807,032 $ 976,525

Custodial

With the Public:

Unfunded Annual Leave 1,964,478 1,931,980

FECA Liability $ 663 $ 17,631

Total Liabilities Not Covered by Budgetary Resources 2,772,173 2,926,136

Total Liabilities Covered by Budgetary Resources $ 2,353,340 $ 2,322,804

Total Liabilities $ 5,125,513 $ 5,248,940

The FEC accrues a liability related to the Federal Employee’s Compensation Act (FECA) at September 30 each 

year. This amount is included under “Other” liabilities.

Note 7 – Commitments and Contingencies

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 financial statements.

Note 8 – Leases

FEC has no capital leases. The FEC has a commitment under an operating lease for its headquarters office space. 

The lease for this space expired September 30, 2007. FEC renewed its lease agreement with GSA for another ten 

years. Future payments due under the new lease, approved December 2006, with an effective date of October 1, 

2007 through September 30, 2018 are:

Future Operating Lease Payments

Fiscal Year Lease Payment

2008

2009

2010

2011

2012

2013 and thereafter

$ 4,787,089

5,705,136

5,755,351

5,818,278

5,883,092

$ 30,457,819

Total Future Lease Payments $ 58,406,765
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Federal Election Commission Performance and Accountability Report 2007

Note 9 – Statement of Net Cost

FEC’s costs are consolidated into one program, “Administering and enforcing the FECA,” as noted below:

$ FY 2007 FY 2006 

Intragovernmental gross costs $ 6,810,914 $ 7,391,510

Intragovernmental net costs 6,810,914 7,391,510

Gross costs with the public $ 49,788,784 $ 48,515,046

Less: Earned revenues from the public $ (222,137) $ –

Net costs with the public $ 49,566,647 $ 48,515,046

Net Cost of Operations $ 56,377,561 $ 55,906,556

In accordance with OMB Circular A-136, costs incurred for goods and services provided by other federal entities 

are reported in the full costs of FEC’s program and are identified as “intragovernmental.” All other costs are 

identified as “with the public.”

Note 10 – Statement of Budgetary Resources

The Statement of Budgetary Resources (SBR) compares budgetary resources with the status of those 

resources. As of September 30, 2007, budgetary resources were $57,295,859 and net outlays were $52, 777, 727. 

As of September 30, 2006, budgetary resources were $56,527,231 and net outlays were $52,480,532.

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. Prior to FY 2006 Category B 

apportionments were to be used for Information Technology enhancements only. Beginning in FY 2006 the B 

fund designation was eliminated.

In FY 2007 and FY 2006, direct obligations incurred amounted to $54,255,141 and $54,448,901, respectively; 

and reimbursable obligations incurred amounted to $211,860 and $0, respectively.

Comparison to the Budget of the United States Government

SFFAS No. 7, Accounting for Revenue and Other Financing Sources and Concepts for Reconciling Budgetary 

and Financial Accounting, requires an explanation of material differences between budgetary resources available, 

the status of those resources and outlays as presented in the Statement of Budgetary Resources to the related 

actual balances published in the Budget of the United States Government (Budget). The Budget that will include 

FY 2007 actual budgetary execution information is scheduled for publication in February 2008, which will 

be available through OMB’s website at http://www.whitehouse.gov/omb. Accordingly, information required for 

such disclosure is not available at the time of publication of these financial statements.
76

Notes to the Financial Statements 

Balances reported in the FY 2006 SBR and the related President’s Budget reflected the following:

FY 2006

Budgetary 

Resources

Obligations 

Incurred

Distributed 

Offsetting 

Receipts Net Outlays

Statement of Budgetary Resources $ 53,765,075 $ 54,448,901 – $ 52,480,532

Budget of the U.S. Government 54,000,000 54,000,000 – 52,000,000

Difference $ ( 234,925) $ 448,901 $ – $ 480,532

The differences between the Combined Statement of Budgetary Resources and the Budget of the U.S. Government 

are due to rounding. The Budget of the U.S. Government reflects amounts in millions while the Statement of 

Budgetary Resources is in dollars.

In FY 2007 FEC's Total Resources on the Statement of Budgetary Resources differed from the SF-133 by 

$213,191. This difference is primarily due to the timing of when the SF-133 was submitted and the Statement of 

Budgetary Resources was finalized, incorporating adjustments for upward and downward spending in the reports. 

The Total Status of Resources line differs by a corresponding amount.

In FY 2007, the U.S. Treasury reflected $456,054 on the 2007 Treasury Combined Statement, Part 4. However, 

these funds are not considered offsetting receipts. These funds represent amounts initially recorded by the FEC in 

the budget clearing account that were then transferred to the civil penalties account. Accordingly, these amounts 

are recorded on the Statement of Custodial Activity and not reported on the Statement of Budgetary Resources.

Note 11 – Custodial Revenues and Liability

FEC uses the accrual basis of accounting for the collections of fines, penalties and miscellaneous receipts. 

Collectibility by FEC of the fines and penalties is based on the responsible parties’ willingness and ability to 

pay:

Custodial Revenue $ 2007 2006

Fines, Penalties, and Other Miscellaneous Revenue $ 5,031,538 $ 6,602,398

Custodial Liability

Receivable for Fines, Penalties and Other Miscellaneous Receipts 1,443,300 1,074,698

 Less: Allowance for Doubtful Accounts $ 636,268 $ 554,227

Total Custodial Liability $ 807,032 $ 520,471

Note 12 – Undelivered Orders at the End of the 

Period

Undelivered orders at September 30, 2007 and 2006 totaled $5,077,159 and $5,211,294 respectively.
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Federal Election Commission Performance and Accountability Report 2007

Note 13 – Reconciliation of Net Cost of Operations 

to Budget

The presentation of the Statement of Financing (SOF) was revised, effective this fiscal year, to reflect a new format 

required pursuant to OMB Circular A-136, revised, which provided for the SOF to be displayed in the notes 

and referred to as “Reconciliation of Net Cost of Operations to Budget” rather than the SOF. The objective of 

this information is to provide an explanation of the differences between budgetary and financial (proprietary) 

accounting. This is accomplished by means of a reconciliation of budgetary obligations and non-budgetary 

resources available to the reporting entity with its net cost of operations.

2007 2006

Resources Used to Finance Activities:

 Budgetary Resources Obligated

 Obligations incurred $ 54,467,001 $54,448,901

 Less: Recoveries of prior year obligations $ (1,352,281) $ (967,661)

 Obligations net of recoveries of prior year obligations 53,114,720 53,481,240

 Less: Offsetting collections $ (222,137) $ –

 Net Obligations 52,892,583 53,481,240

Other Resources

 Transfer in/out without reimbursement (10,277) –

 Imputed financing from costs absorbed by others $ 2,331,800 $ 2,352,819

Total resources used to finance activities $ 55,214,106 $ 55,834,059

Resources Used to Finance Items not Part of the Net Cost of 

Operations

 Change in budgetary resources obligated for good, services, 

and benefits order but not yet provided (127,207) 1,184,233

 Resources that fund expenses recognized in prior periods cost of 

operations 16,968 50,406

 Resources that finance the acquisition of assets $ 3,295,311 $ 2,160,662

Total resources used to finance items not part of the Net Cost of 

Operations $ 3,185,072 $ 3,395,301

Total resources used to finance the net cost of operations $ 52,029,034 $ 52,438,758

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 32,498 –

 Increase in exchange revenue receivable from the public $ 10,277 $ –

Total Components of the Net Cost of Operations that will require or 

Generate Resources in Future Periods 42,775 –

Components not Requiring or Generating Resources

 Depreciation and amortization 4,305,752 3,990,233

 Revaluation of assets or liabilities $ – $ (522,435)

Total Components of the Net Cost of Operations that will not 

require or Generate Resources in the Current Period $ 4,348,527 $ 3,467,798

Net Cost of Operations $ 56,377,561 $ 55,906,556

79

Federal Election Commission Performance and Accountability Report 2007

SECTION IV

Other Accompanying Information

From the Inspector General

FEDERAL ELECTION COMMISSION 

Washington, DC 20463 

Office of Inspector General 

MEMORANDUM

TO: The Commission 

FROM: Inspector General 

SUBJECT: Inspector General Statement on the Federal Election Commission’s 

Management and Performance Challenges 

DATE: October 15, 2007 

Each year, the Inspector General is required to provide a summary and assessment of the 

most serious management and performance challenges facing the Federal Election 

Commission. The requirement is contained in the Reports Consolidation Act of 2000 

(Public Law 106-531), an amendment to the Chief Financial Officers (CFO) Act of 1990. 

The attached document responds to the requirement, and provides the annual statement 

on Commission challenges to be included in the Federal Election Commission 

Performance and Accountability Report (PAR) Fiscal Year (FY) 2007.

The Inspector General has identified three areas for inclusion in the FEC’s FY 2007 

PAR:

 Human Capital Management 

 Information Technology Security 

 Financial Reporting 

The Inspector General identified these same three challenges in the 2005 and 2006 PARs 

and continues to believe the issues remain challenges for the FEC. This year, human 

capital management is again highlighted, due in part to the significant staff turnover in 

the Office of Human Resources. Overall, the FEC has devoted significant efforts to 

address the challenges and progress is being made on these important areas. 

The Inspector General’s assessment is based on information derived from a combination 

of several sources; including Office of Inspector General audit and inspection work, 
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Section IV. | Other Accompanying Information
81

Federal Election Commission Performance and Accountability Report 2007

Inspector General’s Assessment of FY 2007 

Management and Performance Challenges 

Facing the Federal Election Commission 

HUMAN CAPITAL MANAGEMENT

According to the Government Accountability Office (GAO), it first added strategic 

human capital management as a governmentwide high-risk area in 2001 because federal 

agencies lacked a strategic approach to human capital management that integrates human 

capital efforts with agency mission and program goals. GAO asserts the area remains 

high-risk “because the federal government now faces one of the most significant 

transformations to the civil service in half a century, as momentum grows toward making 

governmentwide changes to agency pay, classification, and performance management 

systems.” 

While GAO recognizes that progress has been made in addressing federal human capital 

challenges, it notes “significant opportunities remain to respond to current and emerging 

21st century challenges.” Further, GAO advises that “before implementing any future 

human capital reforms, agencies should demonstrate they have met certain conditions; 

including that they have developed an institutional infrastructure that can support reform. 

This infrastructure should include, among other things, (1) a modern, credible 

performance management system that provides clear linkage between institutional, unit, 

and individual performance oriented outcomes; and (2) adequate safeguards to ensure 

fair, effective, credible and nondiscriminatory implementation of the system.” The FEC 

has performed the first step in the process by developing a new organization-wide 

strategic plan covering 2007 - 2012. Although currently in draft, the new plan is due to 

be updated and finalized in late 2007 and expected to cover the period 2008 - 2013. 

The second key step, a “modern, credible performance management system,” is also 

underway. The FEC recently transitioned to a new performance management system 

which includes quarterly reviews of progress towards stated objectives and objective 

setting done in consultation with staff. While the new system remains paper-based, there 

is the potential to move to a more automated system in the future. Notwithstanding the 

change, a recent human capital survey participant noted, “While people may want to fix 

the performance appraisal system, what really needs to change is the culture.” 

Management and staff throughout the FEC must be willing to participate fully and openly 

in creating and assessing timely, achievable, measurable performance objectives. 

Without the necessary monitoring that appraisals are created and assessed in a frequent 

and timely manner, there is the potential the benefits will not be realized. 

The FEC Office of Human Resources (OHR) has undergone significant change recently, 

experiencing an 86 percent staff turnover in the last 18 months, with a 57 percent change 

in the last four months alone. In order to address the identified challenges, the FEC 

sought to assemble a highly skilled and multi-faceted human resources team. The FEC 

hired a new HR Director with the opportunity to recruit the best staff. Recognizing the 
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Section IV. | Other Accompanying Information

2

old HR system did not contain written plans for recruitment, retention or training, the 

new HR team has begun creating a strategic plan to address the universal risk of an aging 

workforce as well as ongoing business needs of retention, recruitment and training.

Forming the core of the revamped HR strategy is the HR staff themselves. The FEC 

OHR will move from an HR specialist to an HR generalist model. While newly recruited 

staff was selected for their experience and specialist skills, each will be tested using the 

Office of Personnel Management Federal Competency Assessment Tool for Human 

Resources (FCAT-HR). Based on the results, the HR staff will each create training plans 

aimed at securing, at a minimum, basic competency in all generalist skills as well as 

setting goals for achieving advanced and expert skill sets in more technical areas. This 

new model involves cross-training and enabling HR staff to transition from performing 

specialist activities to become generalists by acquiring knowledge and expertise in a 

broad range of human capital areas, with emphasis on strong interpersonal and 

communication skills. According to the HR Director, OHR will implement an 

organizational model similar to that of a professional services firm. Further, in this 

model, OHR is strategic, transparent and customer-focused. 

Further enabling the new HR generalist model is a move to an HR line of business 

(LOB). The FEC plans to outsource some administrative HR activities and automate 

others using the U.S. General Services Administration (GSA) Comprehensive Human 

Resources Integrated System (CHRIS). The planned LOB conversion includes: an 

automated workflow process for personnel actions; automated time and attendance; 

reminders of when performance evaluations are due with an eventual move to an on-line 

performance evaluation system; training history; and conversion to a new travel system.

Much like the Office of Personnel Management’s Employee Express, the CHRIS system 

will allow FEC employees to review changes in employment information and manage 

their personnel activities on-line. Timing for implementation has not yet been agreed and 

it is likely that a phased approach will be used. According to the FEC, the over-all effect 

will be to minimize the day-to-day administrative processing of HR activities and address 

the evolving needs and growing demands for consultative, advisory and analytical 

services. The LOB efforts are in the early stages of planning and implementation, 

therefore the OIG has not received a detailed business plan for the LOB efforts such as a 

cost-benefit analysis or other detailed plan. 

Prior to recruitment and placement of the current HR team, the previous two years has 

been a period of relative instability within the FEC OHR area. As such, programs that 

sought to address the HR challenges of employee and leadership development and worklife balance have not progressed as planned. For example, the mentoring and 

development program that included detailing employees to other federal agencies is 

neither well known nor widely exercised. The IG notes only one instance of use in the 

last several years and is not aware of a system to notify FEC employees of access to or 

benefits of the program. The planned FEC Employee Handbook is still in the conceptual 

stage and the senior management development program identified and budgeted in 2005 

has not progressed to date. According to the FEC, due to budget shortages, the use of 

interns was eliminated entirely in the Audit division for the last two years but is expected 
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Federal Election Commission Performance and Accountability Report 2007

3

to resume in 2008 with a plan to hire clerks to perform matching funds review, if 

required, relating to Presidential audits. The 2005 legislative recommendation to move 

FEC senior management to senior executive service (SES) status was not approved and 

further approval requests are on hold with no plan for a similar request in 2008. The SES 

approval was sought to allow the FEC to financially compete for management talent both 

within government and the private sector. The flexiplace (telecommute) pilot program 

has been extended a number of times and is currently under negotiation between 

management and the National Treasury Employees Union. The revised program, 

covering bargaining unit employees, is expected to be finalized in late 2007 or early 

2008.

The IG notes the positive and continuing effort to address HR challenges through 

improved communication within the Commission. Two staff-level town hall meetings 

held in April and September 2007 have elicited a great deal of employee feedback to 

management and serve as both a sounding board and a means for collective 

communication from management to staff. The use of separate monthly management 

meetings should continue with greater emphasis on consistent timing and communicating 

whether the objectives of the various management initiatives are being met. The OHR 

should review past programs that may have been in various stages of implementation and 

determine whether the programs should be further developed or terminated. The 

increased planning through rigorous development of strategic and business plans at the 

unit level, as well as individual performance plans, should be monitored to ensure the 

plans are complete, consistent, and fully aligned to the FEC objectives.

INFORMATION TECHNOLOGY SECURITY

Information technology (IT) security, while improving each year at the FEC, continues to 

be a challenge for the agency. The challenge the FEC faces in IT security is shared by 

other departments and agencies in the Federal government. Over the last several years, 

identity theft and the need to protect personal information has received heightened 

national attention. Recent incidents of data theft and loss at federal agencies expose 

Americans to increased risk of identity theft and raise concern about how well the Federal 

government is securing its computer systems; protecting sensitive information from 

unauthorized use, disclosure, and modifications; and notifying the public when data 

breaches occur. The Government Accountability Office (GAO) has continued to list IT 

security on their list of high-risk areas since 1997. 

Some of the weaknesses GAO has cited at other Federal departments and agencies are 

also continuing weaknesses at the FEC. Risk assessments are to be conducted every 

three years as part of an overall strategy to mitigate risks associated with its IT 

environment. The FEC has not conducted these necessary risk assessments. In addition, 

the FEC’s disaster recovery plan needs improvement to include a comprehensive 

contingency plan of its data centers, networks and telecommunication facilities. The 

disaster recovery plan should also include a prioritization and timeframe for recovering 

resources in the event of a disaster. 
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Section IV. | Other Accompanying Information

4

The FEC has awarded contracts to address these issues. In the upcoming fiscal year, an 

entity-wide security program plan is to be developed and implemented, risk assessments, 

as part of the FEC’s overall strategy to mitigate risks associated with its information 

technology environment are to be performed, and the results of the assessments are to be 

incorporated into the FEC’s security plans. A Business Impact Analysis is also to be 

performed to formally identify and prioritize all critical data and operations of the FEC’s 

networks and the resources needed to recover them if there is a major interruption or 

disaster. The Inspector General is pleased to observe the steps the FEC is taking to 

correct the existing weaknesses. These are important steps to enhance IT security and 

should resolve many of the related outstanding issues. 

In the past year, continued commitment of the Information Technology Division staff has 

resulted in success in addressing some of the security challenges. The FEC has continued 

to improve the physical security controls over the data center by adding the Datacenter 

access list to the agency’s Security Review Policy. A comprehensive set of policies and 

procedures for managing system software changes has also been fully implemented by 

the Commission. Account lockout thresholds have been revised on some systems and 

ITD has developed a corrective action plan that specifically addresses IT security. 

While the commitment of the FEC staff to improve IT security is vital, the IG continues 

to believe the adherence to government-wide IT security standards is an important part of 

an effective security program. GAO has cited the enactment of the Federal Information 

Security Management Act of 2002 (FISMA) as important legislation requiring the 

development, documentation, and implementation of an agency-wide information 

security program. The FEC is one of a handful of Federal agencies that are exempt from 

FISMA. While the IG and management have come to an informal understanding that the 

FEC should be expected to adhere to IT security “best practices”, which in the Federal 

government would include adherence to IT security standards published by the National 

Institute of Standards and Technology (NIST), the IG feels that the FEC should formally 

adopt adherence in principle to FISA and the NIST standards. The IG understands that 

part of the hurdle to this is the necessary resources and time. 

FINANCIAL REPORTING

Since fiscal year 2004, the FEC has been required to prepare and submit annual audited 

financial statements as a result of the Accountability of Tax Dollars (ATD) Act of 2002. 

The submission of audited financial statements to Congress and the Office of 

Management and Budget is an important component to effective financial management. 

The requirement to prepare and submit audited financial statements has been a continuing 

challenge for the FEC.

A major factor contributing to the FEC challenge of improving financial management has 

been a lack of continuity in the Chief Financial Officer position. In the past four years, 

five different individuals have held the CFO positions. The FEC has been fortunate that 
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Federal Election Commission Performance and Accountability Report 2007

5

the Accounting Officer and his immediate staff have been able to provide continuity 

during the past several fiscal years and in the past, experienced FEC employees were 

acting CFOs during transition periods. In January 2007, the FEC hired a permanent CFO 

who has experience in financial management and the production of audited financial 

statements. The CFO’s knowledge should assist the FEC in continuing to establish the 

appropriate policies and procedures related to the sound financial management of the 

agency’s resources. The duties, responsibilities and reporting structure for the CFO have 

also been significantly revised during her tenure. 

One of the changes that occurred was the reassignment of the management and 

administrative functions that originally resided in the CFO’s office. Those duties have 

been transferred to a senior level manager who reports directly to the Staff Director. In 

addition, the procurement function that was located in the Administrative Office was 

reassigned to the CFO. The most significant revision transpired when a reorganization in 

reporting structure occurred that now has the CFO reporting directly to the Commission. 

This shift in reporting has elevated the importance of sound financial management and 

internal controls. The IG believes the above changes should have a positive impact on 

the operations of the OCFO and in turn the production of audited financial statements. 

The FEC also updated its strategic plan in FY 2007. The FEC has developed a draft 

strategic plan that management feels more clearly defines the agency’s objectives and 

consolidates its strategic goals into one concise goal. The Statement of Net Cost (SNC) 

was revised to reflect the changes to the strategic plan and several outstanding issues that 

related to the SNC were resolved by this consolidation. 

The FEC has made significant progress in the initiative started the previous year 

concerning transitioning the FEC to a Financial Management Line of Business (FMLoB). 

The FEC has chosen GSA to be its provider for financial services. Management is 

moving forward during fiscal year 2008 and anticipates the conversion of financial data 

to be completed mid-way thorough the fiscal year. The FMLoB has the potential to 

provide the FEC with cost saving and efficiencies in its financial management, and the IG 

hopes the FEC will take full advantage of the opportunity. 

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Federal Election Commission Performance and Accountability Report 2007

ADR Alternative Dispute Resolution

AF Administrative Fine

AICPA American Institute of Certified Public Accountants

AO Advisory Opinion

ATD Accountability of Tax Dollars

BCRA Bipartisan Campaign Reform Act

CFO Chief Financial Officer

CFR Code of Federal Regulations

CHRIS Comprehensive Human Resources Integrated System

CSRS Civil Service Retirement System

DOL Department of Labor

E&J Explanation and Justification

FASAB Federal Accounting Standards Advisory Board

FBWT Fund Balance with Treasury

FCAT-HR Federal Competency Assessment Tool for Human Resources

FEC Federal Election Commission

FECA Federal Election Campaign Act

FECA Federal Employees Compensation Act

FERS Federal Employees’ Retirement System

FFMIA Federal Financial Management Improvement Act

FICA Federal Insurance Contribution Act

FISMA Federal Information Security Management Act

APPENDIX A

List of Acronyms

FMFIA Federal Managers’ Financial Integrity Act 

FMLOB Financial Management Line of Business

FOIA Freedom of Information Act

FTE Full-time Equivalent

FY Fiscal Year

GAAP Generally Accepted Accounting Principles

GAO Government Accountability Office 

GPRA Government Performance and Results Act

GSA General Services Administration

IG Inspector General

IPIA Improper Payments Information Act

IRS Internal Revenue Service

IT Information Technology

LOB Line of Business

MD&A Management’s Discussion and Analysis

MUR Matters under Review

NIST National Institute of Standards and Technology

NPRM Notices of Proposed Rulemaking

OAR Office of Administrative Review

OGC Office of General Counsel

OHR Office of Human Resources

OIG Office of the Inspector General
88

Appendix A | List of Acronyms

OMB Office of Management and Budget

OPM Office of Personnel Management

P&E Property and Equipment

PART Performance Assessment Rating Tool

PAC Political Action Committee

PAR Performance and Accountability Report

PEC Presidential Election Campaign

PMA President’s Management Agenda

RAD Reports and Analysis Division

RFAI Request for Additional Information

SAS Statement on Auditing Standards

SBR Statement of Budgetary Resources

SFFAS Statement of Federal Financial Accounting Standards

SNC Statement of Net Cost

SOF Statement of Financing

TSP Thrift Savings Plan

USC United States Code