April 18, 2023 

Federal Election Commission 

Audit Division 

Attn: Kendrick Smith 

1050 First Street, NE 

Washington, DC 20463 

Re: Draft Final Audit Report, Steve Daines for Montana 

Dear Mr. Smith, 

This response is submitted by the undersigned counsel on behalf of Steve Daines for Montana 

(“SDFM” or the “Committee”) in connection with the Audit Division’s Draft Final Audit Report. 

The Committee does not request an oral hearing. 

We appreciate the Audit Division’s efforts throughout this lengthy process and acknowledge that 

Audit staff made numerous adjustments to its preliminary findings in response to ongoing 

discussions and additional information provided. You and Ms. Reminsky have been helpful, 

responsive, courteous, and professional at all times. 

The Committee previously submitted an Exit Conference Response (dated March 11, 2022) and 

Interim Audit Report Response (dated October 31, 2022). It is our understanding that both prior 

responses are available to the Commissioners for reference and review. 

Additionally, please note that the Committee changed treasurers effective April 14, 2023. An 

amended Form 1 was filed to reflect this change. 

Finding 1: Receipt of Contributions in Excess of the Limits 

Refunded Contributions 

As noted in the Draft Final Audit Report, there is a category of excessive contributions that were 

refunded by the Committee, in some cases more than once, but never deposited by the 

contributor. The Draft Final Audit Report, at page 9, finds this category totals $60,327. As 

noted on page 10, the Committee issued a disgorgement check in the amount of $56,920 to the 

U.S. Treasury. The Committee also disclosed refunds totaling $96,782 on its October 2022 

quarterly report and provided documentation to the Audit Division showing that refunds totaling 

$57,282 had been deposited by the refund recipient. On April 13, 2023, the Committee provided 

additional records to the Audit Division demonstrating the deposit of additional refund checks 

issued to donors in September 2022. 
 

 

 

 

 

 

 

 

 

 

The Committee intends to resolve all remaining excessive contributions that have not be 

refunded, reattributed, or redesignated as permitted at the conclusion of this audit. 

Excessive Contributions Projected Through Sampling 

As indicated in the Draft Final Audit Report, the Committee has objected to the use of sampling 

at all stages of this audit. We understand that the Audit Division has employed statistical 

sampling for many years. However, the Audit Division’s finding with respect to the 

Committee’s disclosure of contributions illustrates exactly why we object to the use of sampling. 

The Audit Division found the Committee accepted excessive contributions totaling $496,604. 

This total includes excessive contributions totaling $152,451 that were discovered through the 

Audit Division’s “100% Review of High Dollar Contributions,” and $52,350 discovered through 

the Audit Division’s “100% Review of Contributions Received Through Joint Fundraisers.” The 

specific contributions making up these totals were provided to the Committee and the Committee 

has refunded and resolved a significant number of these contributions. 

The remaining amount, $291,803, is the Audit Division’s “Sample Projection Amount.” The 

Draft Final Audit Report explains at footnote 3 that “[t]he sample error amount ($291,803) was 

projected using a Monetary Unit Sample with a 95 percent confidence level. The sample 

estimate could be as low as $143,260 or as high as $583,597.” With respect to the sample 

projection, the Committee was able to address the excessive contributions found within the 

sample itself, which was provided to the Committee in the form of a spreadsheet which now 

contains an itemized list of only five contributions. 

At page 11, the Audit Division concludes that the Committee has not resolved excessive 

contributions totaling $382,427. It is our understanding that this total includes the sample 

projection amount of $291,803, for which no complete, itemized list of identified and confirmed 

excessive contributions actually exists. And, as footnote 3 indicates, the total projected figure 

may be incorrect by hundreds of thousands of dollars. 

Apart from the specifically identified excessive contributions included in the sample itself, the 

Committee does not understand how it is possible that it could have corrected the remaining 

projected errors that were not specifically identified. The Committee objects to the Commission 

placing a report on the public record that concludes that the committee failed to resolve 

excessive contributions in an amount that is greatly inflated by the projected sample amount. 

The Committee worked diligently to correct the actual, identified excessive contributions that the 

Audit Division brought to its attention, and objects to being faulted for not correcting unspecified 

projected excessive contributions. 

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Finding 2: Disclosure of Debts and Obligations 

Media Placement / Ad Buy Invoice 

With respect to the referenced ad buy of $108,750, the Committee received an invoice for that 

amount from its media vendor for media placement on or about June 15, 2020. (This invoice 

was not from any television or radio station or any station’s advertising broker.) The Committee 

previously explained that the advertising buy that was to be funded with the invoiced amount 

was not placed and that time; rather, it was delayed until September 2020. To the best of the 

Committee’s knowledge, its media vendor did not withdraw and reissue the June 2020 invoice. 

Instead, the Committee issued payment on the June invoice in September 2020 when the ad buy 

was actually placed. The Draft Final Audit Report takes the position that the invoiced amount 

($108,750) should be included in the total figure for debts and obligations not properly included 

on a Schedule D. The Committee disagrees and believes this figure should be excluded from the 

total. 

The Audit Division identified this issue in email correspondence in December 2021. Audit staff 

indicated that the invoice was not paid during the reporting period in which it was incurred, and 

the invoiced amount was not reported as a debt on two quarterly filings (July 2020 and October 

2020). Audit requested comments or additional information about this particular invoice. In a 

response provided to the Audit Division on December 15, 2021, the Committee’s treasurer 

explained: “Media is most generally required to be paid in advance. I would assume we decided 

not to purchase the 6/15/20 [vendor] invoice #6636 until a future date. It was actually purchased, 

and a wire was sent on 9/10/20.” This issue was addressed again in our Interim Audit Report 

Response (October 31, 2022) at page 3 where we explained that “[t]he invoice dated June 15, 

2020 did not reflect an actual obligation, and there was never any debt or obligation associated 

with this invoice that was required to be reported.” 

The Draft Final Audit Report states that no documentation was produced to verify this 

explanation, and absent such documentation, the amount must be treated as an unreported debt. 

The Committee did not produce written records evidencing the delay of the ad buy. It is possible 

that arrangements were made by telephone and no written records exist. The Committee 

contends, however, that its explanation is reasonable and entirely consistent with the realities of 

media placement / ad buy invoicing, and that no substantiating written documentation is 

necessary in these circumstances. 

Invoices for television and radio advertising buys are typically issued to a political committee in 

advance by its media buyer before any actual contractual obligation to the television or radio 

stations exists. The media buyer generally does not commit to purchase airtime from a station 

without its client’s funds in hand, and many stations will not book time until payment is 

received. This is unlike most vendors who provide goods and services first, and then receive 

payment from the committee. As a result, an invoice for an ad buy does not (in most cases) 

reflect an actual, incurred legal obligation because the ad buy has not yet been placed with the 

stations at the time the invoice is issued. Instead, once the ad buyer has the committee’s funds, 

the ad buyer then incurs the obligation on the committee’s behalf and simultaneously renders 

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payment to the station’s brokers. If the ad buy cannot be placed, perhaps due to limited 

inventory or because a station declines to run an ad, no obligation is created at all. Or, as 

happened here, the ad buy was simply not pursued until months later. In any of these cases, 

there is no debt or obligation. 

In short, the June 2020 invoice does not indicate that an actual debt or obligation existed at the 

time the invoice was issued. The Committee was not contractually obligated in the amount of 

$108,750 to its vendor or to any stations in June 2020. The ad buy was not pursued in June 2020 

but was ultimately placed in September 2020. Accordingly, no obligation was incurred and no 

debt existed until September 2020, and no reporting with respect to the issued invoice was 

required between June – September 2020. 

Transactions Overlapping Reporting Periods 

As previously noted in our Interim Audit Report Response (October 31, 2022), at pages 2-3, the 

Audit Division identified several invoices that were issued to the Committee during one 

reporting period and paid by the Committee early in the next reporting period. The Audit 

Division faults the Committee for not reporting these amounts as debts. As we previously noted, 

however, had these invoices been paid 6-8 days earlier, the transaction would not have “crossed” 

reporting periods and no debt disclosure would be necessary. The committee contends that the 

absence of this debt reporting is immaterial to the public record. 

Finding 3: Disclosure of Receipts 

Disclosure of Individual Contributions 

As noted above, the Committee has objected to the use of sampling at all stages of this audit. 

The Audit Division’s finding with respect to the Committee’s disclosure of contributions again 

illustrates why we object to the use of sampling. 

Based on the Audit Division’s review of 100% of the committee’s “high dollar contributions,” 

the Audit Division found disclosure errors totaling $33,792, along with a total of $39,000 of 

disclosure errors from its 100% review of contributions from political committees. From the 

latter two categories, the Audit Division reports that the committee corrected and resolved 

disclosure errors totaling $19,600 and $38,000, respectively. These errors were specifically 

identified by Audit staff and the committee was able to take action to resolve them. 

In addition to these categories that were subject to Audit’s “100% review,” the Audit Division 

projects, based on its sampling, that the Committee’s reports contain additional disclosure errors 

totaling $535,012. See Draft Final Audit Report at 16. As noted in footnote 14 of the Draft Final 

Audit Report, “[t]he sample error amount ($535,012) was projected using a Monetary Unit 

Sample with a 95 percent confidence level. The sample estimate could be as low as $273,748 or 

as high as $970,100.” 

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At page 21, the Audit Division concludes that the committee “did not correct 97% of the 

disclosure errors for contributions from individuals, totaling $549,204,” meaning the 

committee’s “disclosure errors remain materially incorrect.” Again, $535,012 of this total figure 

is a sample projection for which, as we understand it, no complete, itemized list of identified and 

confirmed incorrect disclosures actually exists.1 And, as footnote 14 indicates, the total figure 

may be incorrect by hundreds of thousands of dollars. 

With respect to sample projection, the Committee was able to address the errors found within the 

sample itself, which was provided to the Committee in the form of a spreadsheet containing an 

itemized list of eight transactions. Apart from these eight specifically identified disclosure 

errors, the Committee does not understand how it is possible that it could have corrected the 

remaining projected errors that were not specifically identified. The Committee objects to the 

Commission placing a report on the public record that concludes that the Committee failed to 

“correct 97% of the disclosure errors for contributions from individuals” and that its “disclosure 

errors remain materially incorrect.” Both assertions are deeply misleading and quite simply 

incorrect. The Committee worked diligently to correct the actual, identified reporting errors that 

the Audit Division brought to its attention, and objects to being faulted for not correcting 

unspecified projected disclosure errors. 

Finally, “the Audit staff recommends that SDFM amends its disclosure reports or file a Form 99 

to correctly disclose the remaining contributions from individuals totaling $549,204.” Again, the 

Committee does not understand how it could possibly satisfy this recommendation. 

Disclosure of Joint Fundraising Receipts 

While we do not contest the Audit Division’s overall findings with respect to the Committee’s 

disclosure of joint fundraising receipts, we do wish to note that a significant portion of the total 

“disclosure error” figure consists of minor reporting errors that in no way materially impacted 

the public record or deprived anyone of information. Specifically, the Audit Division identifies a 

total of $345,034 of joint fundraising transfer memo entries reported with an incorrect date of 

receipt. (The Committee has filed amended reports to correct virtually all of the incorrect 

disclosures found by the Audit Division.) With respect to these “date of receipt” errors, in nearly 

all instances the Committee mistakenly reported the date of receipt as the date it received the 

transfer from the joint fundraising committee, rather than the date the contribution was received 

by the joint fundraising committee. This is harmless error. More specifically, it makes no 

difference for purposes of public disclosure that a contribution was reported as received on 

Friday rather than the preceding Monday. Both the contributor’s identity and the contribution 

amount were reported on the public record as required. 

1 By email dated April 12, 2023, the Audit Division explained that “[t]he errors identified by the sample mainly 

relate to incorrect/incomplete names or incorrect dates” and that “most of the errors identified in the sample and 

100% reviews were contributions received between September and December 2020.” We are unsure if the “errors 

identified in the sample” were concentrated in this period because that is when the highest volume of contributions 

occurred, or if the sample was specifically targeted to that period. 

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Finally, we note that the value of the error attributed to the Committee for this minor reporting 

discrepancy is tied to the amount of the contribution, meaning the error valuation varies widely 

and is based entirely on a factor that was not in any way related to the disclosure error. For 

example, a contribution of $2,800 that is reported with the date of receipt off by a few days is 

treated as a $2,800 reporting error. The exact same error made with respect to a $25 contribution 

is tallied as a $25 reporting error. Whether this makes sense from a public disclosure perspective 

is highly debatable. 

Conclusion 

With respect to Finding 1, the Committee addressed a substantial portion of the excessive 

contributions actually identified by the Audit Division and acknowledges that further resolution 

is needed. As noted above, the Committee intends to resolve all outstanding excessive 

contributions that have not be refunded, reattributed, or redesignated as permitted at the 

conclusion of this audit once the Commission’s findings are finalized. The Committee objects, 

however, to the Audit Division’s use of statistical sampling to project the existence of nearly 

$300,000 in excessive contributions that have not actually been identified. 

With respect to Finding 2, the Committee objects to the Audit Division’s treatment of the 

$108,750 media placement invoice and the small number of unreported debts that crossed 

reporting periods and believes the Commission should not accept these portions of the proposed 

findings. As explained above, the Audit Division’s position with respect to the June invoice 

appears to reflect either a lack of understanding of media buying and its accompanying invoicing 

process, or an inflexible approach that treats all invoices as presumptive evidence of an actual 

debt or obligation. Invoices and timely payments that overlap reporting periods by a matter of 

days are a normal part of a committee’s cashflow, and the position of the Audit Division on these 

invoices should also be rejected. 

With respect to Finding 3, the Committee addressed nearly all of the errors that were specifically 

identified by the Audit Division. For the reasons stated, the Committee above opposes the Audit 

Division’s use of statistical sampling and objects to findings that fault the Committee for failing 

to correct “projected” errors that were never specifically identified by the Commission. Finally, 

the misreported date of receipt errors that the Audit Division identified in connection with the 

Committee’s joint fundraising receipts are minor errors that were at all times immaterial for 

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purposes of public disclosure. Those date of receipt errors have been corrected in amended 

reports and the amended dates disclosed no new information of any value to the public. 

***** 

Thank you for your consideration. 

Sincerely, 

Jason Torchinsky 

Michael Bayes 

Counsel to Steve Daines for Montana 

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