FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

April 1, 2021 

MEMORANDUM 

TO: Patricia C. Orrock 

Chief Compliance Officer 

FROM: Neven Stipanovic 

Associate General Counsel 

Policy Division

 Lorenzo Holloway 

Assistant General Couns

Joshua Blume 

Attorney 

 Compliance Advice 

Officer 

 

 

 

 

 

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SUBJECT: Interim Audit Report on the US Veterans Assistance Foundation (LRA 1105) 

I. INTRODUCTION 

The Office of the General Counsel has reviewed the draft Interim Audit Report (“IAR”) 

on the US Veterans Assistance Foundation (“Committee”). The draft IAR contains five findings: 

(1) Misstatement of Financial Activity; (2) Disclosure of Occupation and Name of Employer; (3) 

Disclosure of Disbursements; (4) Recordkeeping for Disbursements and Use of Designated 

Depository; and (5) Failure to File 24/48-Hour Reports.1

 We comment on Findings 3 and 4 and 

otherwise concur with the findings. If you have any questions, please contact Joshua Blume, the 

attorney assigned to this audit. 

We recommend that the Commission consider this document in Executive Session because the Commission 

may eventually decide to pursue an investigation of matters contained in the proposed IAR. 11 C.F.R. § 2.4(a) and 

(b)(6). 

1 
 

 

 

 

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II. DISCLOSURE OF DISBURSEMENTS (Finding 3). 

The draft IAR states that although the Committee reported having made expenditures to 

vendors directly from the federal account maintained at its designated depository, certain bank 

records examined by the Audit Division show that at least some of these funds were disbursed 

directly to the account of a limited liability company (“LLC”) rather than to the vendors. This 

LLC bears the name of the Committee and was created approximately three months after the 

registration of the Committee.2 The Committee appears to have used the LLC account as an 

intermediate vehicle for the payment of some, but not all, of its expenses.3 

The draft IAR states that the Committee disclosed the above expenditures inaccurately, in 

that the intermediate payee, the LLC, was not disclosed at all, and the ultimate payees were not 

disclosed through memo entries, but instead directly in the reports.4 Commission regulations 

require nonconnected committees to report each person to whom an expenditure is made in an 

aggregate amount exceeding $200 within the calendar year to meet the committees’ operating 

expenses, together with the date, amount, and purpose of such operating expenditure. 11 C.F.R. 

§§ 104.3(b)(3)(i), (vii), 104.9(a), (b).5 These regulations do not distinguish between ultimate 

payees and intermediate payees or contain specific instructions regarding either type of entity. 

The Audit Division has informed us that it relied on the Commission’s Ultimate Payee 

Interpretive Rule for its conclusion that the Committee inaccurately reported the disbursements. 

Reporting Ultimate Payees of Political Committee Disbursements (“Ultimate Payee Interpretive 

Rule”), 78 Fed. Reg. 40,625 (Jul. 8, 2013). The Ultimate Payee Interpretive Rule clarifies the 

reporting regulations and provides further guidance regarding how political committees should 

report disbursements in three specific situations: (1) The committee reimburses an individual 

who used personal funds to pay committee expenses aggregating more than $200 to a single 

vendor; (2) An authorized committee of a candidate reimburses a candidate who used personal 

funds to pay committee expenses aggregating to more than $200 to a single vendor, and (3) The 

2 In its response to the Audit Division’s exit conference memorandum, the Committee denies the existence of 

the LLC. However, the Audit Division has verified the existence of the LLC on a website maintained by the Nevada 

Secretary of State. The treasurer of the Committee, Robert Piaro, is listed on the website as one of three managers 

of the LLC. Further, Mr. Piaro’s daughters, Michelle Hammen and Melissa Stelter, who are assistant treasurer and 

paid staff of the Committee, respectively, are listed on the website as the other two managers of the LLC. See 

https://esos.nv.gov/Entity/Search/BusinessInformation (last visited Mar. 4, 2021). 

3 Operating expenditures, such as expenditures for payroll, telephone, cable, and other legal fees, as well as 

independent expenditures, were paid directly from the Committee's designated depository account. Nevertheless, 

the categories of expenditure routed through the LLC account, including fundraising expenses and some legal fees, 

comprise approximately 90 percent of the Committee’s total expenditures. 

4 The Committee argues that 52 U.S.C. § 30109(b) does not address accounting practices such as the use of 

memo entries. The Audit Division responds that the statute concerns persons not filing required reports and 

observes that although the required reports were filed, they were filed incorrectly. We note that 52 U.S.C. § 

30109(b) is not relevant to the reporting issues. Rather, it requires the Commission to notify an entity that has failed 

to file a required report of the violation, before undertaking enforcement action, and to publish a list of non-filers. It 

is not itself a source of reporting requirements. 

5 Section 104.9 speaks of reporting persons to whom expenditures are made from the reporting committee’s 

federal account(s). 
 

 

 

 

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committee’s payment of its credit card bill includes charges of more than $200 to a single 

vendor. Id., at 40,626. 

We do not believe that the Ultimate Payee Interpretive Rule directly addresses this 

reporting situation. First, the Ultimate Payee Interpretive Rule by its terms is limited to the 

above three scenarios. See Ultimate Payee Interpretive Rule, 78 Fed. Reg. at 40,626 (“Further, 

the Commission is only addressing the three issues at hand . . .”). Second, and more 

fundamentally, the Committee here did report its ultimate payees. The Commission regulations’ 

intent regarding the reporting of disbursements are thus satisfied.6 We, therefore, recommend 

that the Audit Division remove the aspect of Finding 3 that concludes that the Committee failed 

to report the LLC as the intermediate payee.7 

Because of the importance of this question of whether the reporting of the intermediate 

payee is necessary in this situation, we recommend that the Audit Division raise the issue for the 

Commission’s consideration in the cover memorandum accompanying the transmission of the 

audit report to the Commission. 

III. RECORDKEEPING FOR DISBURSEMENTS AND USE OF 

DESIGNATED DEPOSITORY (Finding 4) 

The draft IAR correctly notes that by routing expenditures from its designated depository 

account through the LLC account, the Committee may have violated 52 U.S.C. § 30102(h) and 

11 C.F.R. § 103.3(a), which require committees to make all disbursements, except those for petty 

cash, through checks drawn on a designated depository account. Because the Committee’s funds 

were routed through the LLC account before being disbursed to the vendors, and the composition 

of funds in the LLC account is unknown, the Committee may have impermissibly commingled 

its funds with the personal funds of an individual or with corporate funds. Political committees 

are forbidden from commingling their funds with the personal funds of an individual. 52 U.S.C. 

6 Since the LLC might have served as a conduit for the disbursement of funds to the vendors, reporting the 

LLC as the immediate payee but failing to disclose the ultimate payee vendors could have resulted in a reporting 

violation. See MUR 6724 (Bachmann for President and MichelePAC), Factual and Legal Analysis to Peter 

Waldron, at 8-9 (July 13, 2017) (“The Commission has determined, however, that merely reporting the immediate 

recipient of a committee’s payment will not satisfy the requirements of [52 U.S.C. §] 30104(b)(5) when the facts 

indicate that the immediate recipient is merely a conduit for the intended recipient of the funds.”) (footnote omitted). 

7 Finding 3 separately discusses approximately $26,000 in payroll disbursements reported as paid directly to 

employees in the reports, instead of reported as payments to the payroll processing company with memo entries 

detailing payment to the employees. The Commission has instructed committees to report payroll expenditures as 

they would report credit card expenditures as discussed in the Ultimate Payee Interpretive Rule, with appropriate 

itemization involving memo entries. See MUR 6818 (Allen Weh for Senate), Factual and Legal Analysis, at 4, n.17 

(June 15, 2017). See also https://transition.fec.gov/rad/pacs/FederalElectionCommission-RAD-PACs.shtml#disb10 

(instruction to payment to the payroll company on line 21(b) and to itemize payments to individual salary recipients 

in memo entries). In the MUR, the committee had reported only its lump sum expenditures to the intermediate 

payroll processor and had failed to itemize the ultimate payroll recipients. MUR 6818 (Allen Weh for Senate), 

Factual and Legal Analysis at 5-6 (identifying violation but dismissing in exercise of prosecutorial discretion). 

Here, however, as the Committee did report the ultimate payees, our analysis above would also apply to this aspect 

of the finding, and therefore should be removed from Finding 3 for the same reasons. This aspect should also be 

included in Audit Division’s cover memorandum to the Commission, as discussed in the next paragraph. 
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§ 30102(b)(3); 11 C.F.R. § 102.15. Contributions also may not be commingled with corporate 

funds. See 52 U.S.C. § 30118; 11 C.F.R. § 102.15 (cross referencing 52 U.S.C. § 30118 and Part 

114 of the Commission’s regulations). See also Advisory Opinion 2017-06 (Stein-Gottlieb) at 8 

(concluding that a corporation’s proposed method of collecting and forwarding contributions to 

political committees was permissible because, among other reasons, the funds would be kept in a 

separate account, which would “prevent any commingling of contributions and corporate 

funds”), Advisory Opinion 1990-01 (Digital Corrections) (concluding that a corporation 

transmitting funds to political committees must keep such funds in a separate account and such 

funds “may not be commingled with the funds of [a corporation]”). We do not know whether the 

LLC account contained any personal funds of an individual. Nor do we know whether the LLC 

is treated for taxation purposes as a corporation, 11 C.F.R. § 110.1(g), and, if so, whether the 

Committee’s funds may be distinguished from the LLC’s funds in the LLC account according to 

generally accepted accounting principles. We note, however, that if one or both of these 

situations is the case here, routing Committee funds through the LLC may have resulted in 

impermissible commingling of funds.