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MEMORANDUM 

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$

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&): RQ0D\ VHHDWWDFKPHQW &):GLGQRWUHTXHVWDQDXGLWKHDULQJ

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WKH')$5

,QUHVSRQVHWRWKH')$5&):SURYLGHGDGGLWLRQDOLQIRUPDWLRQDVQRWHGEHORZ

Finding 1. Misstatement of Financial Activity 

,QUHVSRQVHWRWKH,QWHULP$XGLW5HSRUW&): ILOHGDPHQGHGGLVFORVXUHUHSRUWVWKDW

PDWHULDOO\FRUUHFWHGWKHSXEOLFUHFRUG

7KH$XGLW VWDII UHFRPPHQGVWKDWWKH&RPPLVVLRQ ILQG WKDW &): XQGHUVWDWHGLWV

UHSRUWHGEHJLQQLQJFDVKRQKDQG EDODQFHE\RYHUVWDWHGGLVEXUVHPHQWVE\



DQGXQGHUVWDWHGLWVHQGLQJFDVK RQKDQG EDODQFH E\ LQFDOHQGDU

 ,QLWVUHVSRQVHWRWKH,QWHULP$XGLW5HSRUW&):GHPRQVWUDWHGWKDWD GLVEXUVHPHQWZDVD

GLVEXUVHPHQWQHJRWLDWHGLQ7KHUHIRUHWKH$XGLWVWDIIUHGXFHGWKHEDQNEHJLQQLQJFDVKRQKDQG

DQGGLVEXUVHPHQWVDFFRUGLQJO\




\HDUDQGXQGHUVWDWHGEHJLQQLQJFDVKRQKDQGEDODQFHUHFHLSWVGLVEXUVHPHQWV

DQGHQGLQJFDVK RQ KDQG EDODQFH E\   DQG 

UHVSHFWLYHO\LQFDOHQGDU\HDU

Finding 2. Receipt of Contributions in Excess of the Limit 

,QUHVSRQVHWRWKH')$5&):SURYLGHGGRFXPHQWDWLRQWRGHPRQVWUDWHWKDW

RI WKH  LQ UHIXQG FKHFNV LVVXHG IRU H[FHVVLYH FRQWULEXWLRQV KDYH EHHQ

QHJRWLDWHGE\WKHFRQWULEXWRUV$GGLWLRQDOO\&):SURYLGHGGRFXPHQWDWLRQWKDWDQ

DGGLWLRQDOZDVGLVJRUJHGWRWKH867UHDVXU\$VVXFK&):UHVROYHG

DOEHLWXQWLPHO\WKHH[FHVVLYHFRQWULEXWLRQV

7KH$XGLWVWDIIUHFRPPHQGVWKDWWKH&RPPLVVLRQILQGWKDW&):UHFHLYHGH[FHVVLYH

FRQWULEXWLRQVIURPLQGLYLGXDOVWRWDOLQJ

Finding 3. Cash Disbursements 

,QUHVSRQVHWRWKH')$5&):SURYLGHGDOHWWHUVLJQHGE\WKH&DPSDLJQ0DQDJHU

VWDWLQJWKDWDOOFDVKZDVXVHGIRUWKHFDQYDVVLQJSURJUDP&):VWDWHGWKDWLW3PDGH

LWV EHVW HIIRUWV WR FRPSO\ ZLWK WKH )HGHUDO (OHFWLRQ &DPSDLJQ $FW GXULQJ WKH

&29,' SDQGHPLF ZKLOH DOVR QDYLJDWLQJ FKDOOHQJHV SUHVHQWHG WR WKH FDQYDVV

ZRUNHUVLQFDVKLQJFKHFNV ́&):VWDWHGWKDW

7KH2IILFH RI*HQHUDO&RXQVHO 32*& ́DVVHUWVWKDWWKH&RPPLWWHH

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+RZHYHU WKH &RPPLWWHH SURYLGHG UHFRUGV IRU FDVK GLVEXUVHPHQWV

WRWDOLQJ  $OWKRXJK WKH &RPPLWWHH FRXOG QRW SURYLGH

GRFXPHQWDWLRQIRUDOOFDVKSD\PHQWVUHFRUGVIRUDVXEVWDQWLDODPRXQW

RIWKHFDVKSD\PHQWVZHUHSURYLGHGZKLFKLVPDWHULDOO\GLVWLQJXLVKDEOH

IURPWKHIDFWVSUHVHQWHGLQWKH085UHIHUHQFHGE\WKH2*&

)XUWKHU&):VWDWHGWKDWLWPDGHRQO\IRXUFDVKSD\PHQWVDQGSURYLGHGUHFRUGVIRU

DVXEVWDQWLDODPRXQWRIWKHFDVKGLVEXUVHPHQWVZKHUHDVWKHFRPPLWWHHUHIHUHQFHG

LQWKH085HQJDJHGLQD3SDWWHUQRIPDNLQJFDVKGLVEXUVHPHQWVDQGLQWHQWLRQDOO\

IDOVLI\LQJDQGFRQFHDOLQJLWVDFWLYLW\ ́

7KH $FWVSHFLILHV WKDW 3>Q@R GLVEXUVHPHQWVPD\ EHPDGHRWKHU WKDQ SHWW\ FDVK

GLVEXUVHPHQWV««H[FHSW E\FKHFN ́

7KH$FW IXUWKHU VWDWHVWKDWFRPPLWWHHV

3PD\PDLQWDLQD SHWW\FDVK IXQG IRU GLVEXUVHPHQWV QRWLQH[FHVV RI WRDQ\

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$VVXFKWKH$XGLW

VWDII UHFRPPHQGV WKDW WKH &RPPLVVLRQ ILQG WKDW &): PDGH H[FHVVLYH FDVK

GLVEXUVHPHQWVWRWDOLQJ

Finding 4. Contributions from Unregistered Political Organizations 

,QUHVSRQVHWRWKH')$5&):VWDWHGWKDWWKHXQUHVROYHGDPRXQWVKRXOGEH

UHGXFHGE\DWRWDORIDVIROORZV



7KHDPRXQWWKDW&):GLVJRUJHGWRWKH867UHDVXU\RIZDVPRUHWKDQWKHUHPDLQLQJ

H[FHVVLYHFRQWULEXWLRQDPRXQWFDOFXODWHGE\WKH$XGLWVWDIIRI&):LQFOXGHGD

FRQWULEXWLRQIURPDQLQGLYLGXDOLQLWVFDOFXODWLRQZKLOHRQO\RIWKDWFRQWULEXWLRQZDVLQ

H[FHVVRIWKHOLPLW



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x WKHUHZHUHDOVRLPSHUPLVVLEOHIXQGVGLVFORVHGRQVWDWHILOLQJVVXFKDVIXQGV

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x GLVFORVXUHV RQ VWDWH ILOLQJV GR QRW GHPRQVWUDWH WKDW IXQGV ZHUH IURP

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If this Audit Division Recommendation Memorandum is not approved on a tally vote, 

Directive No. 70 states that the matter will be placed on the next regularly scheduled 

open session agenda. 

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Why the Audit 

Was Done 

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Future Action 

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86&E

Draft Final Audit Report of the 

Audit Division on 

Citizens for Waters 

(January 1, 2019 - December 31, 2020) 

About the Campaign S

&LWL]HQVIRU:DWHUVLVWKHSULQFLSDOFDPSDLJQFRPPLWWHHIRU

0D[LQH:DWHUV'HPRFUDWLFFDQGLGDWHIRUWKH8QLWHG6WDWHV

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&DOLIRUQLD

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2UJDQL]DWLRQFKDUWS

Financial Activity S

x Receipts 

o &RQWULEXWLRQVIURP,QGLYLGXDOV 

o &RQWULEXWLRQVIURP3ROLWLFDO

&RPPLWWHHV 

o 2IIVHWVWR2SHUDWLQJ

([SHQGLWXUHV 

o 2WKHU5HFHLSWV 

Total Receipts $ 2,126,028 

x Disbursements 

o 2SHUDWLQJ([SHQGLWXUHV 

o &RQWULEXWLRQ5HIXQGV 

o 2WKHU'LVEXUVHPHQWV 

Total Disbursements $ 2,183,652 

Findings and Recommendations S

x 0LVVWDWHPHQWRI)LQDQFLDO$FWLYLW\)LQGLQJ

x 5HFHLSWRI&RQWULEXWLRQVLQ([FHVVRIWKH/LPLW)LQGLQJ

x &DVK'LVEXUVHPHQWV)LQGLQJ

x &RQWULEXWLRQVIURP8QUHJLVWHUHG3ROLWLFDO2UJDQL]DWLRQV

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Draft Final Audit Report of 

the Audit Divison on 

Citizens for Waters 

(January 1, 2019 - December 31, 2020) 
 

 

 

Table of Contents 

Page 

Part I. Background 

$XWKRULW\IRU$XGLW 

6FRSHRI$XGLW 

Part II. Overview of Campaign 

&DPSDLJQ2UJDQL]DWLRQ 

2YHUYLHZRI)LQDQFLDO$FWLYLW\ 

Part III. Summaries 

)LQGLQJVDQG5HFRPPHQGDWLRQV 

Part IV. Findings and Recommendations 

)LQGLQJ0LVVWDWHPHQWRI)LQDQFLDO$FWLYLW\ 

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)LQGLQJ&DVK'LVEXUVHPHQWV 

)LQGLQJ&RQWULEXWLRQVIURP8QUHJLVWHUHG3ROLWLFDO2UJDQL]DWLRQV 




Part I 

Background 

Authority for Audit 

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'LYLVLRQRIWKH)HGHUDO(OHFWLRQ&RPPLVVLRQWKH&RPPLVVLRQLQDFFRUGDQFHZLWKWKH)HGHUDO

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3ULRUWRFRQGXFWLQJDQ\DXGLWXQGHUWKLVVXEVHFWLRQWKH&RPPLVVLRQVKDOOSHUIRUPDQLQWHUQDO

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FRPPLWWHHPHHWWKHWKUHVKROGUHTXLUHPHQWVIRUVXEVWDQWLDOFRPSOLDQFHZLWKWKH$FW86&

E

Scope of Audit 

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DVDUHVXOWWKLVDXGLWH[DPLQHG

 WKHUHFHLSWRIH[FHVVLYHFRQWULEXWLRQV

 WKHUHFHLSWRIFRQWULEXWLRQVIURPSURKLELWHGVRXUFHV

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 WKHHYDOXDWLRQRIDGDLO\FDVKDQDO\VLV

 WKHUHYLHZRIGLVEXUVHPHQWVIRUSHUVRQDOXVHRIIXQGV

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 WKHFRPSOHWHQHVVRIUHFRUGV DQG

 RWKHUFRPPLWWHHRSHUDWLRQVQHFHVVDU\WRWKHUHYLHZ
 



Part II 

Overview of Campaign 

Campaign Organization 

Important Dates 

x 'DWHRI5HJLVWUDWLRQ 0D\

x $XGLW&RYHUDJH -DQXDU\  'HFHPEHU

Headquarters 1RUZDON&DOLIRUQLD

Bank Information 

x %DQN'HSRVLWRULHV 2QH

x %DQN$FFRXQWV 2QH FKHFNLQJ

Treasurer 

x 7UHDVXUHU:KHQ$XGLW:DV&RQGXFWHG 'DYLG*RXOG

x 7UHDVXUHU'XULQJ3HULRG&RYHUHGE\$XGLW 'DYLG*RXOG

Management Information 

x $WWHQGHG)(&&DPSDLJQ)LQDQFH6HPLQDU <HV

x :KR+DQGOHG$FFRXQWLQJDQG

5HFRUGNHHSLQJ7DVNV

7UHDVXUHU

Overview of Financial Activity

(Audited Amounts) 

Cash on hand @ January 1, 2019 $ 414,778 

Receipts 

o &RQWULEXWLRQVIURP,QGLYLGXDOV 

o &RQWULEXWLRQVIURP3ROLWLFDO&RPPLWWHHV 

o 2IIVHWVWR2SHUDWLQJ([SHQGLWXUHV 

o 2WKHU5HFHLSWV 

Total Receipts $ 2,126,028 

Disbursements 

o 2SHUDWLQJ([SHQGLWXUHV 

o &RQWULEXWLRQ5HIXQGV 

o 2WKHU'LVEXUVHPHQWV 

Total Disbursements $ 2,183,652 

Cash on hand @ December 31, 2020 $ 357,154 


Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

'XULQJDXGLWILHOGZRUNDFRPSDULVRQRI&):¶VUHSRUWHGILQDQFLDODFWLYLW\ZLWKLWVEDQN

UHFRUGVUHYHDOHGDPLVVWDWHPHQWRIWKHEHJLQQLQJFDVKRQKDQGGLVEXUVHPHQWVDQGWKH

HQGLQJFDVKRQKDQGIRUFDOHQGDU\HDUDVZHOODVDPLVVWDWHPHQWRIWKHEHJLQQLQJ

FDVKRQKDQGUHFHLSWVGLVEXUVHPHQWVDQGWKHHQGLQJFDVKRQKDQGIRUFDOHQGDU\HDU

6SHFLILFDOO\IRU&):XQGHUVWDWHGWKHEHJLQQLQJFDVKRQKDQGE\

RYHUVWDWHGGLVEXUVHPHQWVE\DQGXQGHUVWDWHGWKHHQGLQJFDVKRQKDQGE\

)RU&):XQGHUVWDWHGWKHEHJLQQLQJFDVKRQKDQGUHFHLSWV

GLVEXUVHPHQWVDQGWKHHQGLQJFDVKRQKDQGE\DQG

UHVSHFWLYHO\,QUHVSRQVHWRWKH,QWHULP$XGLW5HSRUWUHFRPPHQGDWLRQWKH

&): UHSUHVHQWDWLYHVWDWHGWKDWPDQ\RIWKHPLVVWDWHPHQWVZHUHDWWULEXWDEOHWRVRIWZDUH

WHFKQLFDOLVVXHVDQGWKDW&):LVLQWKHSURFHVVRIILOLQJDPHQGPHQWVWRDFFXUDWHO\

UHIOHFWLWVILQDQFLDODFWLYLW\6XEVHTXHQWWRWKH)HEUXDU\GXHGDWHRILWVUHVSRQVH

WRWKH,QWHULP$XGLW5HSRUW&):ILOHGDPHQGHGGLVFORVXUHUHSRUWVWRDGGUHVVWKLV

ILQGLQJ

$EVHQWWKHIXOOUHYLHZ RIWKHDPHQGHGGLVFORVXUHUHSRUWV&):¶VILQDQFLDO

DFWLYLW\IRUDQGUHPDLQVPLVVWDWHG

)RUPRUHGHWDLOVHHS

Finding 2. Receipt of Contributions in Excess of the Limit 

'XULQJDXGLWILHOGZRUNWKH$XGLWVWDIIUHYLHZHGFRQWULEXWLRQVIURPLQGLYLGXDOVWR

GHWHUPLQHLIDQ\H[FHHGHGWKHFRQWULEXWLRQOLPLW7KLVUHYLHZLQGLFDWHGWKDW&):

UHFHLYHGDSSDUHQWH[FHVVLYHFRQWULEXWLRQVWRWDOLQJ7KHVHHUURUVRFFXUUHGDVD

UHVXOWRI&):QRWUHVROYLQJWKHH[FHVVLYHSRUWLRQRIFRQWULEXWLRQVE\REWDLQLQJVLJQHG

UHDWWULEXWLRQOHWWHUVIURPLWVFRQWULEXWRUVRULVVXLQJUHIXQGVRIWKHH[FHVVLYHSRUWLRQRI

FRQWULEXWLRQVLQDWLPHO\PDQQHU,QUHVSRQVHWRWKH,QWHULP$XGLW5HSRUW

UHFRPPHQGDWLRQ&):SURYLGHGFRSLHVRIWKHIURQWRIUHIXQGFKHFNVLVVXHGWRWDOLQJ

EXWGLGQRWSURYLGHFDQFHOOHGFKHFNVWRWKHFRQWULEXWRUVRUDQDFFHSWDEOH

DOWHUQDWLYH7KH$XGLWVWDIIPDLQWDLQVWKDW&):KDVQRWUHVROYHGH[FHVVLYHFRQWULEXWLRQV

WRWDOLQJ

)RUPRUHGHWDLOVHHS

Finding 3. Cash Disbursements 

'XULQJDXGLWILHOGZRUNWKH$XGLWVWDIIGHWHUPLQHGWKDW&):PDGHWKUHHFDVK

GLVEXUVHPHQWVDQGLVVXHGRQHFKHFNSD\DEOHWRFDVKZKLFKH[FHHGHGWKHFDVK

GLVEXUVHPHQWOLPLWE\7KH$FWUHTXLUHVSROLWLFDOFRPPLWWHHVWRPDNHDOO



&):ILOHGDPHQGHGGLVFORVXUHUHSRUWVIURP0DUFKWKURXJK0DUFKWRDGGUHVV)LQGLQJ

0LVVWDWHPHQWRI)LQDQFLDO$FWLYLW\6LQFHWKHVHDPHQGPHQWV ZHUHILOHGDIWHUWKHUHTXLUHGGXHGDWHWKH\

ZLOOEHH[DPLQHGLQIXOOGXULQJWKHQH[WSKDVHRIWKHDXGLWSURFHVV


GLVEXUVHPHQWVH[FHSWWKRVHIURPDSHWW\FDVKIXQGE\FKHFNRUVLPLODUGUDIWGUDZQRQD

FRPPLWWHHDFFRXQWQRWWRH[FHHG,QUHVSRQVHWRWKH,QWHULP$XGLW5HSRUW

UHFRPPHQGDWLRQWKH&):UHSUHVHQWDWLYHVWDWHGWKDWFLUFXPVWDQFHVUHODWHGWRWKH

&29,'SDQGHPLFPDGHLWGLIILFXOWIRUFDQYDVVHUVWRFDVKFKHFNVWKHUHIRUH &):

LVVXHGFDVKWRLWVFDQYDVVHUVUDWKHUWKDQFKHFNV)XUWKHUWKHUHSUHVHQWDWLYHVWDWHGWKH

FDPSDLJQPDQDJHUPDGHEHVWHIIRUWVWRWUDFNDOOFDVKH[SHQGLWXUHVDQGLVZLOOLQJWRPDNH

DGHFODUDWLRQWKDWWKHFDVKSDLGWRFDQYDVVHUVIXUWKHUHGWKHFDQYDVVLQJSURJUDP7KH

$XGLWVWDIIPDLQWDLQVWKDW&):PDGHH[FHVVLYHFDVKGLVEXUVHPHQWVWRWDOLQJ

)RUPRUHGHWDLOVHHS

Finding 4. Contributions from Unregistered Political 

Organizations 

'XULQJDXGLWILHOGZRUNWKH$XGLWVWDIILGHQWLILHGWKDW&):DFFHSWHGSD\PHQWV

WRWDOLQJIURPXQUHJLVWHUHGQRQIHGHUDOFRPPLWWHHV DQG PDGHDQDJJUHJDWHRI

LQGLVEXUVHPHQWVUHODWHGWRWKHSURGXFWLRQDQGGLVWULEXWLRQRI3VODWHEDOORW

PDLOHUV ́

,QUHVSRQVHWRWKH,QWHULP$XGLW5HSRUWUHFRPPHQGDWLRQWKH&):UHSUHVHQWDWLYH

DVVHUWHGWKDWWKHSD\PHQWVUHFHLYHGZHUHQRWFRQWULEXWLRQVEXWUDWKHUUHLPEXUVHPHQWV

IURPQRQIHGHUDOFRPPLWWHHVIRUFRVWVDVVRFLDWHGZLWKWKHLUQRQIHGHUDOFDQGLGDWHV

DSSHDULQJ RQWKH&DQGLGDWH¶VVODWHPDLOHUEURFKXUH7KH&):UHSUHVHQWDWLYHVWDWHGWKDW

&):WRRNSURDFWLYHPHDVXUHVWRYHULI\IXQGVUHFHLYHGZHUHIURPIHGHUDOO\SHUPLVVLEOH

VRXUFHVDQGLWV PLVVWDWHPHQWRIWKHDSSOLFDEOHLQGLYLGXDOFRQWULEXWLRQOLPLWDQGRPLVVLRQ

RIVRPHSURKLELWHGVRXUFHVRQQRWLFHVZDVXQLQWHQWLRQDO7KH&):UHSUHVHQWDWLYH

SURYLGHGFRSLHVRIQLQHOHWWHUVRISHUPLVVLELOLW\WRWDOLQJDQGVWDWHGWKDW&):

LV3LQWKHSURFHVVRIUHYLHZLQJDQGFRQILUPLQJWKDWIXQGVUHFHLYHGIURPWKHXQUHJLVWHUHG

SROLWLFDORUJDQL]DWLRQVZHUHIURPIHGHUDOO\SHUPLVVLEOHIXQGVWRGHWHUPLQHDQGGLVJRUJH

DQ\LPSHUPLVVLEOHIXQGVWRWKH867UHDVXU\ ́$EVHQWDGGLWLRQDOGRFXPHQWDWLRQWKH

$XGLWVWDIIPDLQWDLQVWKDW&):KDVQRWGHPRQVWUDWHGWKDWIXQGVUHFHLYHGIURP

XQUHJLVWHUHGQRQIHGHUDOFRPPLWWHHVWRWDOLQJZHUH

PDGHZLWKSHUPLVVLEOHIXQGV

)RUPRUHGHWDLOVHHS




Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Summary 

'XULQJDXGLWILHOGZRUNDFRPSDULVRQRI&):¶VUHSRUWHGILQDQFLDODFWLYLW\ZLWKLWVEDQN

UHFRUGVUHYHDOHGDPLVVWDWHPHQWRIWKHEHJLQQLQJFDVKRQKDQGGLVEXUVHPHQWVDQGWKH

HQGLQJFDVKRQKDQGIRUFDOHQGDU\HDUDVZHOODVDPLVVWDWHPHQWRIWKHEHJLQQLQJ

FDVKRQKDQGUHFHLSWVGLVEXUVHPHQWVDQGWKHHQGLQJFDVKRQKDQGIRUFDOHQGDU\HDU

6SHFLILFDOO\IRU&):XQGHUVWDWHGWKHEHJLQQLQJFDVKRQKDQGE\

RYHUVWDWHGGLVEXUVHPHQWVE\DQGXQGHUVWDWHGWKHHQGLQJFDVKRQKDQGE\

)RU&):XQGHUVWDWHGWKHEHJLQQLQJFDVKRQKDQGUHFHLSWV

GLVEXUVHPHQWVDQGWKHHQGLQJFDVKRQKDQGE\DQG

UHVSHFWLYHO\,QUHVSRQVHWRWKH,QWHULP$XGLW5HSRUWUHFRPPHQGDWLRQWKH

&):UHSUHVHQWDWLYHVWDWHGWKDWPDQ\RIWKHPLVVWDWHPHQWVZHUHDWWULEXWDEOHWRVRIWZDUH

WHFKQLFDOLVVXHVDQGWKDW&):LVLQWKHSURFHVVRIILOLQJDPHQGPHQWVWRDFFXUDWHO\

UHIOHFWLWVILQDQFLDODFWLYLW\6XEVHTXHQWWRWKH)HEUXDU\GXHGDWHRILWVUHVSRQVH

WRWKH,QWHULP$XGLW5HSRUW&):ILOHGDPHQGHGGLVFORVXUHUHSRUWVWRDGGUHVVWKLV

ILQGLQJ

$EVHQWWKHIXOOUHYLHZRIWKHDPHQGHGGLVFORVXUHUHSRUWV&):¶VILQDQFLDO

DFWLYLW\IRUDQGUHPDLQVPLVVWDWHG

Legal Standard 

Contents of Reports. (DFKUHSRUWPXVWGLVFORVH

x 7KHDPRXQWRIFDVKRQKDQGDWWKHEHJLQQLQJDQGHQGRIWKHUHSRUWLQJSHULRG

x 7KHWRWDODPRXQWRIUHFHLSWVIRUWKHUHSRUWLQJSHULRGDQGIRUWKHHOHFWLRQF\FOH

x 7KHWRWDODPRXQWRIGLVEXUVHPHQWVIRUWKHUHSRUWLQJSHULRGDQGIRUWKHHOHFWLRQF\FOH

DQG

x &HUWDLQWUDQVDFWLRQVWKDWUHTXLUHLWHPL]DWLRQRQ6FKHGXOH$,WHPL]HG5HFHLSWVRU

6FKHGXOH%,WHPL]HG'LVEXUVHPHQWV86&E  DQG

Facts and Analysis 

A. Facts 

'XULQJDXGLWILHOGZRUNWKH$XGLWVWDIIUHFRQFLOHG&):¶VUHSRUWHGILQDQFLDODFWLYLW\ZLWK

LWVEDQNUHFRUGVIRUFDOHQGDUV\HDUVDQG7KHUHFRQFLOLDWLRQLGHQWLILHG WKDW

&):PLVVWDWHGWKHEHJLQQLQJFDVKRQKDQGGLVEXUVHPHQWVDQGWKHHQGLQJFDVKRQKDQG

IRUDVZHOODVWKHEHJLQQLQJFDVKRQKDQGUHFHLSWVGLVEXUVHPHQWVDQGWKHHQGLQJ

FDVKRQKDQGIRU7KHIROORZLQJFKDUWVGHWDLOWKHGLVFUHSDQFLHVEHWZHHQ&):¶V

GLVFORVXUHUHSRUWVDQGLWVEDQNDFWLYLW\7KHVXFFHHGLQJSDUDJUDSKVH[SODLQZK\WKH

GLVFUHSDQFLHVRFFXUUHG



&):ILOHGDPHQGHGGLVFORVXUHUHSRUWVIURP0DUFKWKURXJK0DUFKWRDGGUHVV)LQGLQJ

0LVVWDWHPHQWRI)LQDQFLDO$FWLYLW\6LQFH WKHVHDPHQGPHQWVZHUHILOHGDIWHUWKHUHTXLUHGGXHGDWHWKH\

ZLOOEHH[DPLQHGLQIXOOGXULQJWKHQH[WSKDVHRIWKHDXGLWSURFHVV


2019 Campaign Activity 

Reported Bank Records Discrepancy 

%HJLQQLQJ&DVKRQKDQG#

-DQXDU\

  

8QGHUVWDWHG

5HFHLSWV   

2YHUVWDWHG

'LVEXUVHPHQWV   

2YHUVWDWHG

(QGLQJ&DVKRQKDQG#

'HFHPEHU

  

8QGHUVWDWHG

7KHEHJLQQLQJFDVKRQKDQGZDVXQGHUVWDWHGE\DQGWKHUHSRUWLQJGLVFUHSDQF\ LV

XQH[SODLQHGEXWOLNHO\UHVXOWHGIURPSULRUSHULRGGLVFUHSDQFLHV

 7KHRYHUVWDWHPHQWRIUHFHLSWVUHVXOWHGIURPWKHIROORZLQJ

x 5HFHLSWUHSRUWHGWKDWGLGQRWFOHDUWKHEDQN 

x 8QH[SODLQHGGLIIHUHQFHV 

Overstatement of Receipts ($13,196) 

7KHRYHUVWDWHPHQWRIGLVEXUVHPHQWVUHVXOWHGIURPWKHIROORZLQJ

x 'LVEXUVHPHQWVUHSRUWHG WKDWGLG QRWFOHDUWKHEDQN 

x 8QH[SODLQHGGLIIHUHQFHV 

Overstatement of Disbursements $19,643 

7KHXQGHUVWDWHPHQWRIWKHHQGLQJFDVKRQKDQGZDVDUHVXOWRIWKHUHSRUWLQJ

GLVFUHSDQFLHVGHVFULEHGDERYHDVZHOODVRYHUVWDWLQJWKHHQGLQJFDVKRQKDQGE\

RQ&):¶V-XO\4XDUWHUO\5HSRUW

2020 Campaign Activity 

Reported Bank Records Discrepancy 

%HJLQQLQJ&DVKRQKDQG#

-DQXDU\

  

8QGHUVWDWHG

5HFHLSWV   

8QGHUVWDWHG

'LVEXUVHPHQWV   

8QGHUVWDWHG

(QGLQJ&DVKRQKDQG#

'HFHPEHU

  

8QGHUVWDWHG



7KHUHSRUWHGHQGLQJFDVKRQKDQGGRHVQRWHTXDOWKHEHJLQQLQJFDVKRQKDQGSOXVUHSRUWHG

UHFHLSWVPLQXVUHSRUWHGGLVEXUVHPHQWV7KLVZDVGXHWRDPDWKHPDWLFDOGLVFUHSDQF\RQWKH-XO\

4XDUWHUO\5HSRUWLQZKLFKWKHHQGLQJFDVKRQKDQGZDVRYHUVWDWHGE\



7KHUHSRUWHGHQGLQJFDVKRQKDQGGRHVQRWHTXDOWKHEHJLQQLQJFDVKRQKDQGSOXVUHSRUWHG

UHFHLSWVPLQXVUHSRUWHGGLVEXUVHPHQWV7KLVZDVGXHWRPDWKHPDWLFDOGLVFUHSDQFLHVRQVHYHUDO

UHSRUWVZKLFKXQGHUVWDWHGWKHHQGLQJFDVKRQKDQGE\


7KHXQGHUVWDWHPHQWRIUHFHLSWVUHVXOWHGIURPWKHIROORZLQJ

x 5HFHLSWVQRW UHSRUWHG 

x 8QH[SODLQHGGLIIHUHQFHV 

Understatement of Receipts $262,391 

7KHQHWXQGHUVWDWHPHQWRIGLVEXUVHPHQWVUHVXOWHGIURPWKHIROORZLQJ

x 'LVEXUVHPHQWVQRWUHSRUWHG 

x 'LVEXUVHPHQWVUHSRUWHGEXWQRWFOHDULQJWKHEDQN 

x 8QH[SODLQHGGLIIHUHQFHV 

Net Understatement of Disbursements $256,164 

7KHXQGHUVWDWHPHQWRIWKHHQGLQJFDVKRQKDQGZDVDUHVXOWRIWKHUHSRUWLQJ

GLVFUHSDQFLHVGHVFULEHGDERYHDVZHOODVDPDWKHUURUVRIUHODWLQJWR&):¶V

UHSRUWHGHQGLQJFDVKRQKDQGRQLWVGLVFORVXUHUHSRUWV

B. Interim Audit Report & Audit Division Recommendation 

7KH$XGLWVWDIIGLVFXVVHGWKLVPDWWHUGXULQJWKHH[LWFRQIHUHQFHZLWKWKH&):

UHSUHVHQWDWLYHVDQGSURYLGHGVFKHGXOHVGHWDLOLQJWKHPLVVWDWHPHQWVRIILQDQFLDODFWLYLW\

'XULQJWKHH[LWFRQIHUHQFHWKH&):UHSUHVHQWDWLYHVVWDWHGWKDWLWVIDLOXUHWRILOHDFWLYLW\

IRUHLJKWGD\VRIWKH3RVW*HQHUDO5HSRUWZDVDVLPSOHRYHUVLJKWDQGWKHUHFHLSWV

DQGGLVEXUVHPHQWVQRWILOHGGXULQJWKLVSHULRGUHSUHVHQWHGWKHPDMRULW\RIWKH

PLVVWDWHPHQW7KH&):UHSUHVHQWDWLYHV VWDWHGWKH\PD\ILOHD)RUPWRFRUUHFWWKH

PLVVWDWHPHQWV

7KH&):UHSUHVHQWDWLYHVGLGQRWSURYLGHDZULWWHQH[LWFRQIHUHQFHUHVSRQVHIRUWKLV

ILQGLQJ

7KH,QWHULP$XGLW5HSRUWUHFRPPHQGHGWKDW&):DPHQGLWVGLVFORVXUHUHSRUWVRUILOHD

)RUP 0LVFHOODQHRXV(OHFWURQLF6XEPLVVLRQWRFRUUHFWWKHPLVVWDWHPHQWVQRWHG

DERYH,QDGGLWLRQWKH,QWHULP$XGLW5HSRUWUHFRPPHQGHG WKDW&):UHFRQFLOHWKHFDVK

RQKDQGEDODQFHRQLWVPRVWUHFHQWO\ILOHGUHSRUWWRLQFOXGHWKHVHDGMXVWPHQWVDQGFRUUHFW

DQ\VXEVHTXHQWGLVFUHSDQFLHV

C. Committee Response to Interim Audit Report 

,QUHVSRQVHWRWKH,QWHULP$XGLW5HSRUWUHFRPPHQGDWLRQWKH&):UHSUHVHQWDWLYHVWDWHG

WKDWPDQ\RIWKHPLVVWDWHPHQWVZHUHDWWULEXWDEOHWRVRIWZDUHWHFKQLFDOLVVXHVDQGWKDWWKH

LVVXHVZHUHIXUWKHUH[DFHUEDWHGE\WKH&29,'SDQGHPLFDVWHFKQLFDOLVVXHVFRQWLQXHG



7KHPDMRULW\RIUHFHLSWV DQG GLVEXUVHPHQWV QRWUHSRUWHGZHUHGXULQJWKHHLJKWGD\SHULRGIURP2FWREHU

WKURXJK2FWREHU&):LQDGYHUWHQWO\ILOHGLWV'D\3RVW(OHFWLRQ5HSRUW ZLWK

WKHVWDUWGDWHRI2FWREHULQVWHDGRI2FWREHUDQGWKHUHIRUHGLGQRWUHSRUWDQ\UHFHLSWV

RUGLVEXUVHPHQWVGXULQJWKLV SHULRG



See supra footnote 7 

,I&): FKRRVHVWRILOHD)RUPLQVWHDGRIDPHQGLQJLWVGLVFORVXUHUHSRUWVWKHIRUPPXVWFRQWDLQDOO

SHUWLQHQWLQIRUPDWLRQWKDWLVUHTXLUHGRQWKHVFKHGXOH
 



WRJURZEXWFRPSDQ\FXVWRPHUVXSSRUWZDVUHGXFHG7KH&):UHSUHVHQWDWLYHVWDWHGWKDW

&):LVLQWKHSURFHVVRIILOLQJDPHQGPHQWVWRDFFXUDWHO\UHIOHFWLWVILQDQFLDODFWLYLWLHV

6XEVHTXHQWWRWKH)HEUXDU\GXHGDWHRILWVUHVSRQVHWRWKH,QWHULP$XGLW5HSRUW

&):ILOHGDPHQGHGGLVFORVXUHUHSRUWVWRDGGUHVVWKLVILQGLQJ*LYHQWKDWWKH

DPHQGPHQWVZHUHILOHGODWHDQGWRHQVXUHWKHWLPHO\SURJUHVVLRQRIWKHDXGLWWKH\ZLOOEH

UHYLHZHGLQWKHQH[WSKDVHRIWKHDXGLWSURFHVV$EVHQWWKHIXOOUHYLHZRIWKHILOHG

DPHQGHGGLVFORVXUHUHSRUWV&):¶VILQDQFLDODFWLYLW\IRUDQGUHPDLQV

PLVVWDWHG

Finding 2. Receipt of Contributions in Excess of the Limit 

Summary 

'XULQJDXGLWILHOGZRUNWKH$XGLWVWDIIUHYLHZHGFRQWULEXWLRQVIURPLQGLYLGXDOVWR

GHWHUPLQHLIDQ\H[FHHGHGWKHFRQWULEXWLRQOLPLW7KLVUHYLHZLQGLFDWHGWKDW&):

UHFHLYHGDSSDUHQWH[FHVVLYHFRQWULEXWLRQVWRWDOLQJ7KHVHHUURUVRFFXUUHGDVD

UHVXOWRI&):QRWUHVROYLQJWKHH[FHVVLYHSRUWLRQRIFRQWULEXWLRQVE\REWDLQLQJVLJQHG

UHDWWULEXWLRQOHWWHUVIURPLWVFRQWULEXWRUVRULVVXLQJUHIXQGVRIWKHH[FHVVLYHSRUWLRQRI

FRQWULEXWLRQVLQDWLPHO\PDQQHU,QUHVSRQVHWRWKH,QWHULP$XGLW5HSRUW

UHFRPPHQGDWLRQ&):SURYLGHGFRSLHVRIWKHIURQWRIUHIXQGFKHFNVLVVXHGWRWDOLQJ

EXWGLGQRWSURYLGHFDQFHOOHGFKHFNVWRWKHFRQWULEXWRUVRUDQDFFHSWDEOH

DOWHUQDWLYH7KH$XGLWVWDIIPDLQWDLQVWKDW&):KDVQRWUHVROYHGH[FHVVLYHFRQWULEXWLRQV

WRWDOLQJ

Legal Standard 

A. Authorized Committee Limits. )RUWKHHOHFWLRQDQDXWKRUL]HGFRPPLWWHHPD\

QRWUHFHLYHPRUHWKDQDWRWDORISHUHOHFWLRQIURPDQ\RQHSHUVRQRU

SHUHOHFWLRQIURPDPXOWLFDQGLGDWHSROLWLFDOFRPPLWWHH86&D $

DQGD $&)5DDQGEDQG

B. Handling Contributions That Appear Excessive,IDFRPPLWWHHUHFHLYHVD

FRQWULEXWLRQWKDWDSSHDUVWREHH[FHVVLYHWKHFRPPLWWHHPXVWHLWKHU

x 5HWXUQWKHTXHVWLRQDEOHFKHFNWRWKHGRQRURU

x 'HSRVLWWKHFKHFNLQWRLWVIHGHUDODFFRXQWDQG

 .HHSHQRXJKPRQH\LQWKHDFFRXQWWRFRYHUDOOSRWHQWLDOUHIXQGV

 .HHSDZULWWHQUHFRUGH[SODLQLQJZK\WKHFRQWULEXWLRQPD\EHLOOHJDO

 ,QFOXGHWKLVH[SODQDWLRQRQ6FKHGXOH$LIWKHFRQWULEXWLRQKDVWREH

LWHPL]HGEHIRUHLWVOHJDOLW\LVHVWDEOLVKHG

 6HHNDUHDWWULEXWLRQRUDUHGHVLJQDWLRQRIWKHH[FHVVLYHSRUWLRQIROORZLQJ

WKHLQVWUXFWLRQVSURYLGHGLQWKH&RPPLVVLRQUHJXODWLRQVVHHEHORZIRU

H[SODQDWLRQVRIUHDWWULEXWLRQDQGUHGHVLJQDWLRQDQG

 ,IWKHFRPPLWWHHGRHVQRWUHFHLYHDSURSHUUHDWWULEXWLRQRUUHGHVLJQDWLRQ

ZLWKLQGD\VDIWHUUHFHLYLQJWKHH[FHVVLYHFRQWULEXWLRQUHIXQGWKHH[FHVVLYH

SRUWLRQWRWKHGRQRU&)5E DQGDQGN  LL%




C. Joint Contributions.$Q\FRQWULEXWLRQPDGHE\PRUHWKDQRQHSHUVRQH[FHSWIRUD

FRQWULEXWLRQPDGHE\DSDUWQHUVKLSPXVWLQFOXGHWKHVLJQDWXUHRIHDFKFRQWULEXWRURQ

WKHFKHFNPRQH\RUGHURURWKHUQHJRWLDEOHLQVWUXPHQWRULQDVHSDUDWHZULWLQJ$

MRLQWFRQWULEXWLRQLVDWWULEXWHGHTXDOO\WRHDFKGRQRUXQOHVVDVWDWHPHQWLQGLFDWHVWKDW

WKHIXQGVVKRXOGEHGLYLGHGGLIIHUHQWO\&)5NDQG

D. Reattribution of Excessive Contributions7KH&RPPLVVLRQUHJXODWLRQVSHUPLW

FRPPLWWHHVWRDVNGRQRUVRIH[FHVVLYHFRQWULEXWLRQVRUFRQWULEXWLRQVWKDWH[FHHGWKH

FRPPLWWHH¶VQHWGHEWVRXWVWDQGLQJZKHWKHUWKH\KDGLQWHQGHGWKHLUFRQWULEXWLRQWREH

DMRLQWFRQWULEXWLRQIURPPRUHWKDQRQHSHUVRQDQGZKHWKHUWKH\ZRXOGOLNHWR

UHDWWULEXWHWKHH[FHVVDPRXQWWRWKHRWKHUFRQWULEXWRU7KHFRPPLWWHHPXVWLQIRUP

WKHFRQWULEXWRUWKDW

x 7KHUHDWWULEXWLRQPXVWEHVLJQHGE\ERWKFRQWULEXWRUV

x 7KHUHDWWULEXWLRQPXVWEHUHFHLYHGE\WKHFRPPLWWHHZLWKLQGD\VDIWHUWKH

FRPPLWWHHUHFHLYHGWKHRULJLQDOFRQWULEXWLRQDQG

x 7KHFRQWULEXWRUPD\LQVWHDGUHTXHVWDUHIXQGRIWKHH[FHVVLYHDPRXQW

&)5N

:LWKLQGD\VDIWHUUHFHLYLQJWKHH[FHVVLYHFRQWULEXWLRQWKHFRPPLWWHHPXVWHLWKHU

UHFHLYHWKHSURSHUUHDWWULEXWLRQRUUHIXQGWKHH[FHVVLYHSRUWLRQWRWKHGRQRU&)5

EDQGNLL%)XUWKHUDSROLWLFDOFRPPLWWHHPXVWUHWDLQ

ZULWWHQUHFRUGVFRQFHUQLQJWKHUHDWWULEXWLRQLQRUGHUIRULWWREHHIIHFWLYH&)5

O

1RWZLWKVWDQGLQJWKHDERYHDQ\H[FHVVLYHFRQWULEXWLRQWKDWZDVPDGHRQDZULWWHQ

LQVWUXPHQWWKDWLVLPSULQWHGZLWKWKHQDPHVRIPRUHWKDQRQHLQGLYLGXDOPD\EH

DWWULEXWHGDPRQJWKHLQGLYLGXDOVOLVWHGXQOHVVLQVWUXFWHGRWKHUZLVHE\WKH

FRQWULEXWRUV7KHFRPPLWWHHPXVWLQIRUPHDFKFRQWULEXWRU

x +RZWKHFRQWULEXWLRQZDVDWWULEXWHGDQG

x 7KHFRQWULEXWRUPD\LQVWHDGUHTXHVWDUHIXQGRIWKHH[FHVVLYHDPRXQW

&)5N %

Facts and Analysis 

A. Facts 

1. Facts 

'XULQJDXGLWILHOGZRUNWKH$XGLWVWDIIFRQGXFWHGD UHYLHZRIDOOFRQWULEXWLRQVWR

LGHQWLI\DSSDUHQWH[FHVVLYHFRQWULEXWLRQVIURPLQGLYLGXDOVDVQRWHGEHORZ


Excessive Contributions - 100% Review 

([FHVVLYH&RQWULEXWLRQ$PRXQW 

Total Amount of Excessive Contributions $19,000 

Reason for Excessive Contributions 

&RQWULEXWLRQVQRWUHVROYHGYLDVLJQHG

UHDWWULEXWLRQ OHWWHU RUUHIXQG 

Total Amount of Excessive Contributions $19,000 

2. Additional Information 

&):GLGQRWPDLQWDLQDVHSDUDWHDFFRXQWIRUTXHVWLRQDEOHFRQWULEXWLRQV+RZHYHU

&):GLGPDLQWDLQDVXIILFLHQWEDODQFHLQLWVEDQNDFFRXQWWRPDNHUHIXQGVRIWKH

DSSDUHQWH[FHVVLYHFRQWULEXWLRQV

B. Interim Audit Report & Audit Division Recommendation 

7KH $XGLW VWDII GLVFXVVHG WKLV PDWWHU ZLWK WKH &): UHSUHVHQWDWLYHV GXULQJ WKH H[LW

FRQIHUHQFHDQGSURYLGHGDVFKHGXOHRIWKHDSSDUHQWH[FHVVLYHFRQWULEXWLRQV'XULQJWKH

H[LWFRQIHUHQFHWKH&): UHSUHVHQWDWLYHV VWDWHGWKDWWKH\ZRXOGSURYLGHGRFXPHQWDWLRQ

UHODWHGWRWKHVHFRQWULEXWLRQV

7KH&):UHSUHVHQWDWLYHVGLGQRWSURYLGHDZULWWHQH[LWFRQIHUHQFHUHVSRQVHIRUWKLV

ILQGLQJ

7KH,QWHULP$XGLW5HSRUWUHFRPPHQGHG WKDW &):

x 3URYLGHHYLGHQFHGHPRQVWUDWLQJWKDWWKHFRQWULEXWLRQVLQTXHVWLRQZHUHQRW

H[FHVVLYHRULIH[FHVVLYHZHUHUHVROYHGLQDWLPHO\PDQQHU7KLVHYLGHQFH

VKRXOGKDYHLQFOXGHGGRFXPHQWDWLRQWKDWZDVQRWPDGHDYDLODEOHWRWKH$XGLW

VWDIIGXULQJWKHDXGLWLQFOXGLQJFRSLHVRIVROLFLWDWLRQFDUGVFRPSOHWHGE\WKH

FRQWULEXWRUVDWWKHWLPHRIWKHLUFRQWULEXWLRQWKDWFOHDUO\LQIRUPHG WKH

FRQWULEXWRUVRIWKHOLPLWDWLRQVRUWLPHO\UHIXQGVRUUHDWWULEXWLRQVIRUH[FHVVLYH

FRQWULEXWLRQV

x $EVHQWVXFKGHPRQVWUDWLRQ&):VKRXOGKDYHUHYLHZHGLWVFRQWULEXWLRQVWR

GHWHUPLQHZKLFKDUHH[FHVVLYHDQGKRZHDFKFDQEHUHVROYHGDQGRURIIHUD

UHIXQGIRUDQ\UHPDLQLQJH[FHVVLYHDPRXQWV&):PXVWHLWKHUSURYLGHHYLGHQFH

WKDWWKHH[FHVVLYHFRQWULEXWLRQDPRXQWVZHUHUHIXQGHGRUIRUDQ\H[FHVVLYH

FRQWULEXWLRQVIRUZKLFK&):ZDVXQDEOHWRSURFHVVDUHIXQGIRUDQ\UHDVRQ

SURYLGHHYLGHQFHWKDWWKHH[FHVVLYHFRQWULEXWLRQDPRXQWVZHUHGLVJRUJHGWRWKH

867UHDVXU\)RUDUHDWWULEXWLRQERWKWKHFRQWULEXWRUDQGWKHLQGLYLGXDOWR

ZKRPDFRQWULEXWLRQZDVUHDWWULEXWHGPXVWEHQRWLILHG

,IIXQGVZHUHQRWDYDLODEOHWRPDNHWKHQHFHVVDU\UHIXQGV&):VKRXOGKDYH

GLVFORVHGWKHFRQWULEXWLRQVUHTXLULQJUHIXQGVRQ6FKHGXOH''HEWVDQG

2EOLJDWLRQVXQWLOIXQGVEHFRPHDYDLODEOHWRPDNHVXFKUHIXQGV

x
 

 



C. Committee Response to Interim Audit Report 

,QUHVSRQVHWRWKH,QWHULP$XGLW5HSRUWUHFRPPHQGDWLRQWKH&): UHSUHVHQWDWLYHVWDWHG

WKDW&):PDGHEHVWHIIRUWVWRHQVXUHFRQWULEXWLRQVZHUHZLWKLQWKHFRQWULEXWLRQOLPLWV

)XUWKHU&):VWDWHGWKHH[FHVVLYHFRQWULEXWLRQVWRWDOLQJZHUHLQDGYHUWHQWDQG

&):LVVXHGUHIXQGVDVSDUWRILWV,QWHULP$XGLW5HSRUWUHVSRQVH&):SURYLGHGFRSLHV

RIWKHIURQWRIWKHUHIXQGFKHFNVWRWDOLQJEXWGLGQRWSURYLGHFDQFHOOHGFKHFNV

WRWKHFRQWULEXWRUVRUDQDFFHSWDEOHDOWHUQDWLYH7KH$XGLWVWDIIPDLQWDLQVWKDWWKH

DSSDUHQWH[FHVVLYHFRQWULEXWLRQVWRWDOLQJKDYHQRWEHHQUHVROYHG

Finding 3. Cash Disbursements 

Summary 

'XULQJDXGLWILHOGZRUNWKH$XGLWVWDIIGHWHUPLQHGWKDW&):PDGHWKUHHFDVK

GLVEXUVHPHQWVDQGLVVXHGRQHFKHFNSD\DEOHWRFDVKZKLFKH[FHHGHGWKHFDVK

GLVEXUVHPHQWOLPLWE\7KH$FW UHTXLUHVSROLWLFDOFRPPLWWHHVWRPDNHDOO

GLVEXUVHPHQWVH[FHSWWKRVHIURPDSHWW\FDVKIXQGE\FKHFNRUVLPLODUGUDIWGUDZQRQD

FRPPLWWHHDFFRXQWQRWWRH[FHHG,QUHVSRQVHWRWKH,QWHULP$XGLW5HSRUW

UHFRPPHQGDWLRQWKH&): UHSUHVHQWDWLYHVWDWHGWKDWFLUFXPVWDQFHVUHODWHGWRWKH

&29,'SDQGHPLFPDGHLWGLIILFXOWIRUFDQYDVVHUVWRFDVKFKHFNVWKHUHIRUH&):

LVVXHGFDVKWRLWVFDQYDVVHUVUDWKHUWKDQFKHFNV)XUWKHUWKHUHSUHVHQWDWLYHVWDWHGWKH

FDPSDLJQPDQDJHUPDGHEHVWHIIRUWVWRWUDFNDOOFDVKH[SHQGLWXUHVDQGLVZLOOLQJWRPDNH

DGHFODUDWLRQWKDWWKHFDVKSDLGWRFDQYDVVHUVIXUWKHUHGWKHFDQYDVVLQJSURJUDP7KH

$XGLWVWDIIPDLQWDLQVWKDW&):PDGHH[FHVVLYHFDVKGLVEXUVHPHQWVWRWDOLQJ

Legal Standard 

A. Disbursement by Check. $SROLWLFDOFRPPLWWHHPD\RQO\PDNHH[SHQGLWXUHVLQ

FDVKQRWWRH[FHHGIURPDSHWW\FDVKIXQG$ZULWWHQMRXUQDOIRUVXFKFDVK

H[SHQGLWXUHVLVWREHPDLQWDLQHGE\WKHWUHDVXUHU$OORWKHUGLVEXUVHPHQWVVKDOOEH

PDGHE\FKHFNRUVLPLODUGUDIWGUDZQRQDFFRXQWVHVWDEOLVKHGDWWKHFDPSDLJQ¶V

GHSRVLWRU\LHV86&K

B. Petty Cash Fund. $SROLWLFDOFRPPLWWHHPD\PDLQWDLQDSHWW\FDVKIXQGRXWRI

ZKLFKLWPD\PDNHH[SHQGLWXUHVQRWLQH[FHVVRIWRDQ\SHUVRQSHUSXUFKDVHSHU

WUDQVDFWLRQV

,WLVWKHGXW\RIWKHWUHDVXUHUWRNHHSDQGPDLQWDLQDZULWWHQMRXUQDORIDOOSHWW\FDVK

GLVEXUVHPHQWV7KHZULWWHQMRXUQDOVKDOOLQFOXGH

x 1DPHDQGDGGUHVVRIHYHU\SHUVRQWRZKRPDQ\GLVEXUVHPHQWLVPDGH

x 'DWH

x $PRXQW

x 3XUSRVHDQG

x ,IGLVEXUVHPHQWLVPDGHIRUDFDQGLGDWHWKHMRXUQDOVKDOOLQFOXGHWKHQDPH

RIWKDWFDQGLGDWHDQGWKHRIILFHLQFOXGLQJ6WDWHDQG&RQJUHVVLRQDOGLVWULFW

VRXJKWE\VXFKFDQGLGDWH&)5
 



x



C. Required Records for Disbursements. )RUHDFKGLVEXUVHPHQWWKHWUHDVXUHURID

SROLWLFDOFRPPLWWHHPXVWNHHSUHFRUGVRQWKH

x $PRXQW

x 'DWH

x 1DPHDQGDGGUHVVRIWKHSD\HH

x 3XUSRVHDEULHIGHVFULSWLRQRIZK\WKHGLVEXUVHPHQWZDVPDGH 

x ,IWKHGLVEXUVHPHQWZDVPDGHRQEHKDOIRIDFDQGLGDWHWKHFDQGLGDWH¶VQDPH

DQGRIILFHVRXJKWE\WKHFDQGLGDWHDQG

x ,IWKHGLVEXUVHPHQWZDVLQH[FHVVRIWKHUHFRUGVPXVWLQFOXGHDUHFHLSW

RUDQLQYRLFHIURPSD\HHRUDFDQFHOOHGFKHFNRUVKDUHGUDIWWRWKHSD\HH,I

WKHGLVEXUVHPHQWZDVPDGHE\FUHGLWFDUGWKHUHFRUGPXVWLQFOXGHWKH

PRQWKO\VWDWHPHQWRUFXVWRPHUUHFHLSWDQGWKHFDQFHOOHGFKHFNXVHGWRSD\

WKHFUHGLWFDUGELOO86&FDQG&)5E

D. Preserving Records and Copies of Records.7KHWUHDVXUHURIDSROLWLFDOFRPPLWWHH

PXVWSUHVHUYHDOOUHFRUGVDQGFRSLHVRIUHSRUWVIRU\HDUVDIWHUWKHUHSRUWLVILOHG

86&G

Facts and Analysis 

A. Facts 

'XULQJDXGLWILHOGZRUNWKH$XGLWVWDIIH[DPLQHGEDQNUHFRUGVDQGWKHGLVEXUVHPHQW

GDWDEDVHSURYLGHGE\&):DQGLGHQWLILHGIRXUWUDQVDFWLRQVWRWDOLQJLQYROYLQJ

FDVKGLVEXUVHPHQWVHDFKRIZKLFKH[FHHGHGWKHWUDQVDFWLRQOLPLWIRUFDVK

GLVEXUVHPHQWV2QHWUDQVDFWLRQZDVDFKHFNSD\DEOHWR3&DVK ́LQWKHDPRXQWRI

WKHUHPDLQLQJWKUHHWUDQVDFWLRQVFRQVLVWHGRIFDVKZLWKGUDZDOVIURP&):¶VEDQN

DFFRXQW

&):SURYLGHGUHFRUGVIRUFDVKGLVEXUVHPHQWVWRWDOLQJ5HFRUGVIRUFDVK

GLVEXUVHPHQWVWRWDOLQJZHUHQRWSURYLGHG7KHFDVKGLVEXUVHPHQWVZHUHXVHGWR

SD\YDULRXVLQGLYLGXDOVIRU*HW2XWWKH9RWH *279DFWLYLW\

7KH$XGLWVWDIIQRWHVWKDWSROLWLFDOFRPPLWWHHVPD\PDLQWDLQDSHWW\FDVKIXQGRXWRI

ZKLFKWKH\PD\PDNHH[SHQGLWXUHVQRWWRH[FHHGWRDQ\SHUVRQSHUSXUFKDVHDQG

SHUWUDQVDFWLRQ7KHSROLWLFDOFRPPLWWHHVPXVWPDLQWDLQDZULWWHQMRXUQDORIDOOSHWW\

FDVKGLVEXUVHPHQWVSHU&)5+RZHYHU&):GLGQRWPDLQWDLQDSHWW\FDVK

IXQG&): FRQILUPHGWKDWWKHUHZDVQRSHWW\FDVKIXQGDQGDUHYLHZRI&):¶V

GLVEXUVHPHQWUHFRUGVGLGQRW\LHOGDQ\HYLGHQFHWRGHPRQVWUDWHWKDW&):HVWDEOLVKHGRU

PDLQWDLQHGDSHWW\FDVKIXQG7KH$XGLWVWDIIFRQFOXGHVWKDWIRXUFDVKGLVEXUVHPHQWVLQ

H[FHVVRIWRWDOLQJZHUHH[FHVVLYHFDVKGLVEXUVHPHQWV

B. Interim Audit Report & Audit Division Recommendation 

7KH$XGLWVWDIIGLVFXVVHGWKLVPDWWHUZLWKWKH&):UHSUHVHQWDWLYHVGXULQJWKHH[LW

FRQIHUHQFHDQGSURYLGHGDVFKHGXOHRIWKHFDVKGLVEXUVHPHQWV'XULQJWKHH[LW

 7KHSD\HHLVXVXDOO\WKHSHUVRQSURYLGLQJWKHJRRGVRUVHUYLFHVWRWKHFRPPLWWHH,QWKHFDVHRIWUDYHO

DGYDQFHVKRZHYHUWKHSD\HHLVWKHSHUVRQUHFHLYLQJWKHDGYDQFH&)5E 
 



FRQIHUHQFHWKH&):UHSUHVHQWDWLYHV VWDWHGWKDWLQKLQGVLJKW&):VKRXOGKDYHZULWWHQ

FKHFNVLQVWHDGRIPDNLQJFDVKSD\PHQWVEXWPHQWLRQHGWKDWGXHWRWKHODUJHQXPEHURI

LQGLYLGXDOVSDUWLFLSDWLQJLQ WKH*279DFWLYLW\LWZDVHDVLHUWRSD\FDVKWKDQWRLVVXH

FKHFNV7KH&):UHSUHVHQWDWLYHVVWDWHGWKDWWKH\ZRXOGSURYLGHFRPPHQWVUHODWHGWR

WKLVILQGLQJ

7KH&):UHSUHVHQWDWLYHVGLGQRWSURYLGHDZULWWHQH[LWFRQIHUHQFHUHVSRQVHIRUWKLV

ILQGLQJ

7KH,QWHULP$XGLW5HSRUWUHFRPPHQGHGWKDW &): GHPRQVWUDWHLWVFRPSOLDQFH ZLWKWKH

$FWUHJDUGLQJFDVKGLVEXUVHPHQWVVXEPLWWKHPLVVLQJGLVEXUVHPHQWUHFRUGVDQGSURYLGH

DQ\UHOHYDQWFRPPHQWV

C. Committee Response to Interim Audit Report 

,QUHVSRQVHWRWKH,QWHULP$XGLW5HSRUWUHFRPPHQGDWLRQWKH&): UHSUHVHQWDWLYHVWDWHG

WKDW&):LVVXHGFDVKWRLWVFDQYDVVHUVWRSD\IRUFDQYDVVLQJFRVWVLQVWHDGRIFKHFNV

EHFDXVHGXULQJWKH&29,'SDQGHPLFFKHFNFDVKLQJVWRUHVDQGEDQNVZHUHFORVHGRU

PDLQWDLQHGOLPLWHGKRXUVPDNLQJLWGLIILFXOWIRUFDQYDVVHUVWRFDVKFKHFNV7KH&):

UHSUHVHQWDWLYHDOVRVWDWHGWKDWWKH&DQGLGDWH¶V FRQVWLWXHQWVDUH3FRPSULVHGRIPDQ\ORZ

ZDJHDQGZRUNLQJFODVVFRPPXQLWLHVZKRUHJXODUO\ZRUNSD\FKHFNWRSD\FKHFNDQGLQ

PDQ\LQVWDQFHVFDVKWKHLUFKHFNVLPPHGLDWHO\DWFKHFNFDVKLQJVWRUHVRUGLUHFWO\IURP

WKHEDQNV ́

7KH&):UHSUHVHQWDWLYHIXUWKHUVWDWHGWKDWWKHFDPSDLJQPDQDJHUPDGHEHVWHIIRUWVWR

WUDFNDOOFDVKH[SHQGLWXUHVEXWVKHZDVXQDEOHWRSURYLGH&): ZLWKDOOGLVEXUVHPHQW

UHFRUGV$FFRUGLQJWR&):WKHFDPSDLJQPDQDJHUZRXOGEHZLOOLQJWRPDNHD

GHFODUDWLRQWKDW3WKHFDVKUHFHLYHGZDVXVHGWRSD\FDQYDVVHUVDQGLQIXUWKHUDQFHRIWKH

FDQYDVVLQJSURJUDP ́

7KH$XGLWVWDIIPDLQWDLQVWKDW&):KDVQRWGHPRQVWUDWHGLWVFRPSOLDQFHZLWKWKH$FW

UHJDUGLQJFDVKGLVEXUVHPHQWVDQGWKDW&):KDVPDGHH[FHVVLYHFDVKGLVEXUVHPHQWV

WRWDOLQJ

Finding 4. Contributions from Unregistered Political 

Organizations 

Summary 

'XULQJDXGLWILHOGZRUNWKH$XGLWVWDIILGHQWLILHGWKDW&):DFFHSWHGSD\PHQWV

WRWDOLQJIURPXQUHJLVWHUHGQRQIHGHUDOFRPPLWWHHV DQG PDGHDQDJJUHJDWHRI

LQGLVEXUVHPHQWVUHODWHGWRWKHSURGXFWLRQDQGGLVWULEXWLRQRI3VODWHEDOORW

PDLOHUV ́

,QUHVSRQVHWRWKH,QWHULP$XGLW5HSRUWUHFRPPHQGDWLRQWKH&):UHSUHVHQWDWLYH

DVVHUWHGWKDWWKHSD\PHQWVUHFHLYHGZHUHQRWFRQWULEXWLRQVEXWUDWKHUUHLPEXUVHPHQWV

IURPQRQIHGHUDOFRPPLWWHHVIRUFRVWVDVVRFLDWHGZLWKWKHLUQRQIHGHUDOFDQGLGDWHV

DSSHDULQJRQWKH&DQGLGDWH¶VVODWHPDLOHUEURFKXUH7KH&):UHSUHVHQWDWLYHVWDWHGWKDW




&):WRRNSURDFWLYHPHDVXUHVWRYHULI\IXQGVUHFHLYHGZHUHIURPIHGHUDOO\SHUPLVVLEOH

VRXUFHVDQGLWVPLVVWDWHPHQWRIWKHDSSOLFDEOHLQGLYLGXDOFRQWULEXWLRQOLPLWDQGRPLVVLRQ

RIVRPHSURKLELWHGVRXUFHVRQQRWLFHVZDVXQLQWHQWLRQDO7KH&):UHSUHVHQWDWLYH

SURYLGHGFRSLHVRIQLQHOHWWHUVRISHUPLVVLELOLW\WRWDOLQJDQGVWDWHGWKDW&):

LV3LQWKHSURFHVVRIUHYLHZLQJDQGFRQILUPLQJWKDWIXQGVUHFHLYHGIURPWKHXQUHJLVWHUHG

SROLWLFDORUJDQL]DWLRQVZHUHIURPIHGHUDOO\SHUPLVVLEOHIXQGV WRGHWHUPLQHDQGGLVJRUJH

DQ\LPSHUPLVVLEOHIXQGVWRWKH867UHDVXU\ ́$EVHQWDGGLWLRQDOGRFXPHQWDWLRQWKH

$XGLWVWDIIPDLQWDLQVWKDW&):KDVQRWGHPRQVWUDWHGWKDWIXQGVUHFHLYHGIURP

XQUHJLVWHUHGQRQIHGHUDOFRPPLWWHHVWRWDOLQJZHUH

PDGHZLWKSHUPLVVLEOHIXQGV

Legal Standard 

A. 

3ULPDU\HOHFWLRQRUDFDXFXVRUFRQYHQWLRQZLWKDXWKRULW\WRQRPLQDWHWKH

6SHFLDOHOHFWLRQ86&DQG&)5MDQG

C. Organizations Not Registered With the Commission. $Q\RUJDQL]DWLRQWKDWPDNHV

FRQWULEXWLRQVDQGH[SHQGLWXUHVEXWWKDWGRHVQRWTXDOLI\DVDSROLWLFDOFRPPLWWHH

XQGHU&)5PXVWNHHSUHFRUGVRIUHFHLSWVDQGGLVEXUVHPHQWVDQGXSRQ

UHTXHVWPXVWPDNHVXFKUHFRUGVDYDLODEOHIRUH[DPLQDWLRQE\WKH&RPPLVVLRQ7KH

RUJDQL]DWLRQPXVWGHPRQVWUDWHWKURXJKDUHDVRQDEOHDFFRXQWLQJPHWKRGWKDW

ZKHQHYHUVXFKDQRUJDQL]DWLRQPDNHVDFRQWULEXWLRQRUH[SHQGLWXUHWKHRUJDQL]DWLRQ

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PDNHVXFKFRQWULEXWLRQRUH[SHQGLWXUH&)5E

Authorized Committee Limits. $QDXWKRUL]HGFRPPLWWHHPD\QRWUHFHLYHPRUH

WKDQDWRWDORISHUHOHFWLRQIURPDQ\RQHSHUVRQRUSHUHOHFWLRQIURPD

PXOWLFDQGLGDWHSROLWLFDOFRPPLWWHH86&DQG&)5

B. Definition of Election.(DFKRIWKHIROORZLQJLVFRQVLGHUHGDVHSDUDWHHOHFWLRQZLWK

DVHSDUDWHOLPLW

x

FDQGLGDWHIRUWKHJHQHUDOHOHFWLRQ

x *HQHUDOHOHFWLRQ

x 5XQRII

x

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D. Questionable Contributions. ,WLVWKH7UHDVXUHU¶VUHVSRQVLELOLW\WRHQVXUHWKDWDOO

FRQWULEXWLRQVDUHODZIXO&)5E,IDFRPPLWWHHUHFHLYHVDFRQWULEXWLRQ

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x 5HWXUQWKHFRQWULEXWLRQWRWKHFRQWULEXWRUZLWKRXWGHSRVLWLQJLWRU

x 'HSRVLWWKHFRQWULEXWLRQDQGIROORZVWHSVEHORZ &)5E

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IXQGVDQGPXVWEHSUHSDUHGWRUHIXQGWKHP,WPXVWWKHUHIRUHPDLQWDLQ

VXIILFLHQWIXQGVWRPDNHWKHUHIXQGVRUHVWDEOLVKDVHSDUDWHDFFRXQWLQD

FDPSDLJQGHSRVLWRU\IRUSRVVLEO\LOOHJDOFRQWULEXWLRQV&)5E 


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$FDQGLGDWHLQGLYLGXDOKROGLQJ)HGHUDORIILFH

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$

%DVHGRQDUHYLHZRIDOOUHFHLSWVDQGGLVEXUVHPHQWVUHODWLQJWRDVODWHEDOORWPDLOHU

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E. Soft Money – Federal Candidates. 

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LQGLUHFWO\HVWDEOLVKHGILQDQFHGPDLQWDLQHGRUFRQWUROOHGE\RUDFWLQJRQEHKDOIRI

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Facts and Analysis 

A. Facts 

IHGHUDOFRPPLWWHHVWKDWFRXOGUHFHLYHIXQGVIURPSURKLELWHGVRXUFHVRULQDPRXQWV

7KHPDLOHUVZHUHSURGXFHGDQGGLVWULEXWHGGXULQJWKHSULPDU\DQGJHQHUDO

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&):UHSUHVHQWHGWR WKH$XGLWVWDIIWKDWHDFKFDQGLGDWHZRXOGEHLQFOXGHGLQWKH

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FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

MEMORANDUM July 12, 2023 

TO: Patricia C. Orrock 

Chief Compliance Officer 

Margaret J. Forman 

Attorney 

Jessica Selinkoff 

Assistant General Counsel, Compliance Advice 

FROM: Neven F. Stipanovic 

Associate General Counsel, Policy Division 

Dayna C. Brown 

Assistant Staff Director, Audit Division 

SUBJECT: Audit Division Recommendation Memorandum on Citizens for Waters 

(LRA 1144) 

Per Directive 70, the Audit Division Recommendation Memorandum (“ADRM”) on 

Citizens for Waters (“CFW”) attaches a copy of the Draft Final Audit Report (“DFAR”) and 

makes recommendations in light of CFW’s response to the DFAR. OGC concurs with the 

ADRM’s recommendations that the Commission make the four findings in the amounts 

identified in the ADRM, which reduced the amount in Finding 1 by $48 and Finding 4 by 

$284,386 from the amounts presented in the DFAR. The analysis below addresses CFW’s 

response to DFAR Findings 3 and 4. 

I. CASH DISBURSEMENTS (FINDING 3) 

CFW made three cash disbursements and issued one check payable to cash, for a total of 

$7,400, all disbursed to Karen Waters; these disbursements exceeded the statutory cash 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

LRA 1144 

ADRM for Citizens for Waters 

Page 2 of 7 

disbursement limit by $7,000.1 In response to the DFAR, CFW asserted that it provided “records 

for a substantial amount of the cash payments.”2 CFW provided a letter signed by Karen Waters 

that lists her four cash receipts and declares that “[t]he cash payments were paid directly to 

canvassers and used to pay for canvass program costs.”3 This letter did not provide any 

information about the cash disbursements to specific canvassers or associate such canvasser 

disbursements to one of the four cash disbursements from CFW to Karen Waters. 

The Federal Election Campaign Act, 52 U.S.C. §§ 30101-45, (the “Act”) and 

Commission regulations specify that all disbursements, other than petty cash disbursements, 

must be made by check and further specify that committees must maintain a written journal of all 

petty cash disbursements (including the name and address of recipient and the date, amount, and 

purpose of disbursement).4

 CFW has previously stated that it does not maintain a petty cash 

fund.5

 To the extent that CFW’s cash disbursements to Karen Waters constitute a de facto petty 

cash fund, CFW has not provided the required documentation for such a fund to explain how 

Karen Waters disbursed the cash she received from CFW. 

The letter from Karen Waters does not verify the cash disbursements to anyone but Karen 

Waters, and such disbursements exceed the cash disbursement limit by $7,000. Furthermore, 

none of the 78 canvasser contracts provided by CFW earlier in the audit process contain the 

information necessary to verify cash disbursements from Karen Waters to those canvassers.6 

The contracts provided by CFW are generally prepared form contracts to perform future 

canvassing work (though there are six handwritten agreements) that do not independently 

confirm that the work was performed or that the contract amount was paid and, if paid, that it 

was paid by the funds Karen Waters received from CFW. Only forty-three of the contracts were 

signed. The prepared contracts have blanks for the dates of performance, though these fields 

were filled in on only three contracts, one of which was not signed and another of which left the 

contractor address blank. The third of these (a contract with “Kyle” to work for $30 on 9/26) 

appears in order and has a handwritten notation “paid 9/26,” though the payment notation does 

not include the amount paid. Though 26 of the contracts include a handwritten “paid” notation, 

none of these indicate the date(s) of work or payment and only 8 include the amount that was 

paid (all stating “cash $50”), though 5 of these contracts were not signed. One of the contracts 

(with “Leroy” with handwritten notation “9/26 Paid”) was executed on 10/24/20, almost a month 

after the handwritten payment date. 

1 See DFAR at 11-13. 

2 DFAR Response at 1 (June 9, 2023). 

3 Id., attachment. Although Karen Waters’ letter is dated April 30, 2023, the Audit Division did not receive 

the letter until CFW attached it to the June 9, 2023, DFAR Response. 

4 52 U.S.C. § 30102(h)(1); 11 C.F.R. §§ 102.10, 102.11. 

5 See DFAR at 12. 

6 The DFAR Legal Analysis incorrectly stated that there were 18 contracts. See OGC DFAR Legal Analysis 

at 3. 
 

 

 

 

 

 

 

 

 

 

LRA 1144 

ADRM for Citizens for Waters 

Page 3 of 7 

The first canvasser contract date is September 19, 2020, which is almost seven months 

after the first cash disbursement to Karen Waters on March 2, 2020, and more than a month 

before CFW’s next three cash disbursements to Karen Waters. 

As previously explained in OGC’s analysis of the DFAR, a committee may be found to 

violate 52 U.S.C. § 30102(h) when it pays staff in cash and does not maintain a “comprehensive 

record of all cash disbursements.”7 CFW argues in its DFAR Response that its facts are 

distinguishable from the facts in MUR 7126 (Michigan Democratic State Central Committee), 

which OGC cited in support of that proposition.8 While it is true that the Commission found 

reason to believe the Michigan Democratic State Central Committee violated more than seven 

different statutory provisions in connection with cash-based bingo fundraisers, and while it is 

true that CFW has not engaged in most of the activity conciliated in MUR 7126 or at the same 

scale, the basic obligations concerning petty cash disbursements described in MUR 7126 are 

indistinguishable. The Commission concluded in MUR 7126 that a committee violates 52 

U.S.C. § 30102(h) if it does not keep comprehensive records regarding its cash disbursements to 

bingo workers. CFW must similarly provide records supporting its cash disbursements to 

canvassers. 

If making cash disbursements to its canvassers, CFW had to keep the information 

specified in 11 C.F.R. § 102.11 (the “comprehensive record” described in MUR 7126) so that the 

Commission can verify the payee, date, amount, and purpose of each disbursement. For the 

reasons stated above, the letter attached to the DFAR Response and the canvasser contracts do 

not satisfy CFW’s obligation to provide a comprehensive record of such disbursements. 

II. CONTRIBUTIONS FROM UNREGISTERED POLITICAL 

ORGANIZATIONS (FINDING 4) 

Finding 4 concerns receipts by CFW from non-federal political organizations that cannot 

be verified as having been made with federal funds.9

 Based on documentation provided by CFW 

in response to the DFAR, the ADRM recommends reducing the amount in Finding 4 by 

$284,386, from $457,500 to $173,114. 

7 OGC DFAR Legal Analysis at 3-4 (citing Conciliation Agreement ¶¶ IV.3, IV.16, V.5, MUR 7126 

(Michigan Democratic State Central Committee) (May 11, 2017) and quoting Factual and Legal Analysis at 11, 

MUR 7126 (Michigan Democratic State Central Committee)). 

8 DFAR Response at 1-2 (asserting that CFW made only four cash disbursements while the Michigan 

Democratic State Central Committee engaged in a larger pattern of such disbursements while “intentionally 

falsifying and concealing its activity”). 

9 See 52 U.S.C. § 30125(e)(1)(A) (requiring that funds received, spent, or disbursed in connection with an 

election for federal office, including for federal election activity, comply with amount limitations, source 

prohibitions, and reporting requirements of the Act); 11 C.F.R. § 300.61 (same). 
 

 

 

 

 

 

 

 

 

 

 

LRA 1144 

ADRM for Citizens for Waters 

Page 4 of 7 

In its DFAR Response, CFW argues that the amount in Finding 4 should be reduced by a 

total of $339,566, as follows: 

(1) $261,866, supported by letters from the unregistered organizations, verifying the 

funds’ permissibility; 

(2) $57,700, supported by: 

a. checks from individuals, rather than the unregistered organizations credited with 

the receipts (subtotaling $3,500); and 

b. organizations’ non-federal campaign finance filings (subtotaling $54,200); and 

(3) $20,000, supported by evidence of timely refunds.10 

Auditors’ review of CFW’s documentation showed that CFW double counted by 

including two refunds in more than one of the three categories. As discussed below, Audit staff 

also could not verify $51,20011 in CFW receipts in category 2(b) for which the submitted 

documentation of permissibility consists of links to the unregistered organizations’ campaign 

finance filings with state or local governments in California. In sum, Audit staff concluded that 

CFW had submitted sufficient documentation to remove $284,386 in receipts from Finding 4, as 

follows: 

(1) $260,88612 for which CFW submitted letters sufficiently verifying the funds’ 

permissibility; 

(2) $3,500 for receipts from individuals credited to unregistered organizations; and 

(3) $20,000 in receipts that had been timely refunded. 

A. Insufficiency of Non-Federal Filings to Document Permissibility of 

Receipts 

Candidates and their authorized committees are prohibited from knowingly accepting 

contributions that exceed the limits of the Act or that are not subject to the prohibitions of the 

Act, including from corporations, labor organizations, federal contractors, and foreign 

nationals.13 Moreover, an unregistered organization that makes a contribution or payment to a 

political committee “must demonstrate through a reasonable accounting method that ...the 

organization has received sufficient funds subject to the limitations and prohibitions of the Act 

10 See DFAR Response at 2. The total of the three categories CFW sets forth in the DFAR Response 

($261,866 + $57,700 + $20,000 = $339,566) when subtracted from the DFAR amount ($457,500) results in a 

revised total of $117,934, although the DFAR Response presents a revised total of $121,914. 

11 Audit staff’s total for category (2)(b) is $3,000 lower than CFW’s due to CFW’s overinclusion of $3,000 

that was refunded (and included in category (3)). 

12 Audit staff’s total for category (1) is $980 lower than CFW’s due to CFW’s overinclusion of $1,000 that 

was refunded (and addressed in category (3)) and under inclusion of $20 in an apparent data entry error in category 

(1). 

13 See 52 U.S.C. §§ 30116(f), 30118(a), 30119, 30121(a). 
 

 

 

 

 

 

 

 

 

 

LRA 1144 

ADRM for Citizens for Waters 

Page 5 of 7 

to make such contribution ...or payment.”14 A political committee’s “treasurer shall be 

responsible for examining all contributions received for evidence of illegality and for 

ascertaining whether contributions received ...exceed the contribution limitations.”15 

Audit staff appropriately concluded that the links to the state and local filings do not 

demonstrate that the unregistered organizations maintained sufficient funds from permissible 

sources equaling the amounts contributed to CFW.16 Because CFW referred Audit staff only to 

raw, non-federal filings, Audit staff has no information to verify the accuracy of the activity 

reported by these nonfederal organizations to the non-federal campaign finance authorities. 

Moreover, as addressed in the ADRM, the state and local filings indicate that, in addition to 

disclosing federally-permissible receipts, the unregistered organizations also disclosed receipts 

from corporations, labor unions, and other non-federal organizations, all of which appear to be 

federally-prohibited sources for authorized committees like CFW. Additionally, Audit staff has 

no information from the non-federal filings that each of the unregistered organizations can 

demonstrate through a reasonable accounting method that only receipts from permissible sources 

which comply with the Act’s contribution limits were used to provide funds to CFW.17 

B. Inapplicability of Advisory Opinion 2004-37 (Waters) 

In response to the Interim Audit Report (“IAR”) and OGC’s legal analysis of the IAR, 

CFW argued that it could rely on Advisory Opinion 2004-37 (Waters) to receive the payments 

from unregistered organizations included in Finding 4, an argument OGC again addressed in 

legal analysis of the DFAR.18 Most of OGC’s DFAR analysis focused on explaining that 

Advisory Opinion 2004-37 was distinguishable from the receipts addressed in Finding 4 because 

Advisory Opinion 2004-37 addressed receipts from federal committees (and explicitly did not 

address non-federal receipts) rather than the receipts from unregistered organizations at issue in 

Finding 4. 

14 11 C.F.R. § 102.5(b)(1) (also requiring that all unregistered organizations who make contributions to 

political committees “must keep records of receipts and disbursements and, upon request, must make such records 

available for examination by the Commission”). 

15 11 C.F.R. § 103.3(b). 

16 See Factual & Legal Analysis (“F&LA”) at 6-7, MUR 8074 (Kim Klacik for Congress) (finding reason to 

believe committee violated 52 U.S.C. § 30118(a) and 11 C.F.R. § 103.3(b) by knowingly accepting a prohibited 

$500 contribution from an unregistered organization); F&LA at 4-5, MUR 7872 (South Dakota Democratic Party) 

(finding reason to believe, after an audit, that a state party committee violated 11 C.F.R. § 103.3(b) by accepting 31 

contributions totaling $23,827 from unregistered organizations without ascertaining whether the underlying funds 

complied with the limitations and prohibitions of the Act). 

17 See supra, n.14 and related text; see also Advisory Opinion 2007-26 (Schock) at 3 (approving of Last In, 

First Out accounting method); Advisory Opinion 2006-38 (Casey State Committee) at 3 (approving of First In, First 

Out and Last In, First Out accounting methods); Advisory Opinion 1997-20 McCarthy) (describing acceptable 

accounting methods under 11 C.F.R. § 104.12 and an alternative approach for determining permissible funds for a 

committee that had cash on hand upon registration after making a contribution). 

18 See DFAR Legal Analysis at 4-6; IAR Response at 2-3 (Feb. 7, 2023); IAR Legal Analysis (Sept. 6, 2022). 
 

 

 

 

 

 

 

 

 

LRA 1144 

ADRM for Citizens for Waters 

Page 6 of 7 

In response to the DFAR, CFW is silent about whether it can rely on Advisory Opinion 

2004-37 but does disagree with one sentence in the DFAR legal analysis that addressed a second 

basis for distinguishing Advisory Opinion 2004-37: that the advisory opinion addressed 

reimbursements, rather than advances, of funds.19 CFW states, in response to the DFAR, that it 

disagrees that it received advance payments and asserts that, although it “did not immediately 

make payments to vendors, the Committee incurred costs associated with the design, production 

and mailing of the slate mailers and are reflected as debts on campaign reports.”20 

In fact, CFW did receive advance payments. Audit staff determined that CFW did not 

make its first brochure mailer disbursement (excluding refunds to unregistered organizations) 

until April 24, 2020. Two and a half months before that disbursement, on February 11, 2020, 

CFW received the first two payments from unregistered organizations, totaling $25,000. CFW’s 

2020 Pre-primary Report, covering the period of these receipts, discloses no outstanding debts 

with a reported purpose of “design,” “production,” or “mailing” of the slate or brochure mailers, 

though it does disclose an outstanding $2,022.15 debt to Karen Waters for “Slate Mailer 

Management Fees” that appears to have been first incurred before the 2018 election.

21 

In the next reporting period (April 2020 Quarterly Report, covering February 13 to March 

31, 2020), CFW received an additional $150,000 in February 2020 and $27,000 in March 2020 

from unregistered organizations, for a to-date total of $202,000. CFW’s April 2020 Report 

discloses one new debt with a reported purpose of “design,” “production,” or “mailing” of the 

slate or brochure mailers — a $4,066.35 debt to Political Data, Inc., for “Mail File for Slate 

Mailer” — in addition to several other slate mailer debts for other purposes: the outstanding 

$2,022.15 debt and a new $63,632.58 debt to Karen Waters for “Slate Mailer Management 

Fees”; a new $11,500 debt to a compliance firm for “Slate Mailer Reporting Services”; and four 

debts for partial refunds to unregistered organizations, totaling $5,000.22 

19 See DFAR Legal Analysis at 4 (stating that “CFW received funds from non-federal committees starting 

months in advance of the first disbursements it made for the associated brochures, a fact that is materially 

distinguishable from the facts presented in Advisory Opinion 2004-37, which addressed reimbursements (rather than 

advances) from federal (rather than non-federal) committees” and citing 52 U.S.C. § 30101(8)(A)(i) and 11 C.F.R. 

§ 100.52 (defining contribution to include advances for the purpose of influencing any election for federal office)). 

20 CFW DFAR Response at 2 (emphasis in original). CFW did not identify the relevant reported debts in its 

response. 

21 See CFW Amended 2020 Pre-Primary Report at 42 (Mar.9, 2023), 

https://docquery.fec.gov/pdf/889/202303099578980889/202303099578980889.pdf; see also CFW Amended 2019 

Year End Report at 125 (Mar. 3, 2023) (disclosing reduction of debt to $2,022.15); CFW Amended Oct. 2019 

Quarterly Report at 110 (Mar. 3, 2023) (disclosing reduction of debt to $47,022.15); CFW Amended July 2019 

Quarterly Report at 98 (Mar. 3, 2023) (disclosing reduction of debt to $103,022.15); CFW Amended Apr. 2019 

Quarterly Report at 74 (Mar. 16, 2023) (disclosing reduction of debt to $133,022.15); CFW Amended 2018 Year 

End Report at 21 (Jan. 15, 2019) (disclosing outstanding debt of $183,022.15); CFW Amended 2018 Post-General 

Report at 93 (Apr. 12, 2019) (disclosing addition to $94,000 debt to new $183,022.15 total). 

22 See CFW Amended Oct. 2020 Quarterly Report at 75-8 (Mar. 3, 2023), 

https://docquery.fec.gov/pdf/931/202303099578980931/202303099578980931.pdf. 
 

 

 

LRA 1144 

ADRM for Citizens for Waters 

Page 7 of 7 

It appears that CFW received funds from unregistered political organizations in advance 

of both its disbursements and debt that it incurred for the program. And by doing so, CFW 

cannot rely on Advisory Opinion 2004-37, which is materially distinguishable by addressing 

only reimbursements and not advance payments. Moreover, Advisory Opinion 2004-37 is also 

distinguishable in that it addresses receipts from only federal committees while, in this audit, 

CFW received funds from unregistered organizations.23 

In its DFAR Response, CFW also asserts that it can demonstrate through reasonable accounting methods 

that CFW had federally permissible funds from which to pay for the brochure mailers, notwithstanding any 

remaining non-federal funds the Commission determines that CFW received. See DFAR Response at 2. Because 

the DFAR and ADRM include a finding for receipt of non-federal funds but no finding regarding the spending of 

non-federal funds, we do not address that argument here. 

23