FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

0D\ MEMORANDUM 

TO: Patricia C. Orrock 

Chief Compliance Officer 

Dayna C. Brown 

Acting Assistant Staff Director 

Audit Division 

Lorenzo Holloway 

Assistant General Counsel 

Compliance Advice 

FROM: Neven F. Stipanovic 

Associate General Counsel 

unsel

ounsel 

Policy Division 

Margaret J. Forman 

Attorney 

SUBJECT: Interim Audit Report on the Association for Emergency Responders 

and Firefighters (LRA 1113) 

The Office of the General Counsel has reviewed the proposed Interim Audit Report 

(“Proposed IAR”) of the Association for Emergency Responders and (“AERF”). The Proposed 

IAR contains three findings: Increased Activity (Corrected) (Finding 1), Disclosure of 

Disbursements (Finding 2), and Recordkeeping for Disbursements and Use of Designated 

Depository (Finding 3).1 We concur with the findings generally, and comment on Findings 2 

and 3. If you have any questions, please contact Margaret J. Forman, the attorney assigned to 

this audit. 

1 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), (b)(6). 
 

 

 

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I. DISCLOSURE OF DISBURSEMENTS (FINDING 2). 

The Proposed IAR states that although AERF 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 159 payments totaling $2,240,253 were not 

paid directly to the vendors, but instead the funds were disbursed directly to the account of a 

limited liability company (“LLC”). This LLC bears the name of the AERF committee and was 

created approximately three months after the registration of AERF.2 AERF appears to have used 

the LLC account as an intermediate vehicle for the payment of some, but not all, of its expenses.3 

The proposed IAR states that AERF 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 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 May 6, 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 73 percent of the Committee’s total expenditures. 

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

entries. We note that 52 U.S.C. § 30109(b) is not relevant to the reporting issues. That provision 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. 52 U.S.C. § 30109(b). It is not itself a source of reporting 

requirements. The Audit Division also observes that although the required reports were filed, they were filed 

incorrectly. 

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. 

II. RECORDKEEPING FOR DISBURSEMENTS AND USE OF 

DESIGNATED DEPOSITORY (FINDING 3). 

The proposed IAR correctly notes that by routing expenditures from its designated 

depository account through the LLC account, the Committee may have failed to meet the 

requirement under 52 U.S.C. § 30102(h) and 11 C.F.R. § 103.3(a) 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 

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 2 separately discusses approximately $149,000 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 disclose 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 AERF did originally report the ultimate payees for some of the reports, our analysis 

above would also apply to this aspect of the finding, and therefore this discussion should be removed from Finding 3 

for the same reasons. This aspect should also be included in the Audit Division’s cover memorandum to the 

Commission, as discussed in the next paragraph. We also note that, in response to the exit conference, AERF filed 

amendments disclosing the intermediate payroll processor and the itemized memo entries, which is consistent with 

the Commission guidance on this issue. 
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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. § 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.