Final Audit Report of the 

Commission on Sheila Jackson 

Lee for Congress 

(January 1, 2019 - December 31, 2020) 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations of any 

political committee that is 

required to file reports 

under the Federal 

Election Campaign Act 

(the Act). The 

Commission generally 

conducts such audits 

when a committee 

appears not to have met 

the threshold 

requirements for 

substantial compliance 

with the Act 1  The audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirements 

of the Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any of the 

matters discussed in this 

report. 

About the Campaign (p. 2) 

Sheila Jackson Lee for Congress is the principal campaign 

committee for Sheila Jackson Lee, Democratic candidate for the 

United States House of Representatives from the state of Texas, 

18th Congressional District, and is headquartered in Houston, 

Texas. For more information, see the Campaign Organization 

chart, p.2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals $ 802,719 

o Contributions from Other 

Political Committees 246,731 

o Offsets to Operating 

Expenditures 16,723 

o Other Receipts 2,042 

Total Receipts $ 1,068,215 

• Disbursements 

o Operating Expenditures $ 849,202 

o Refunds of Contributions to 

Individuals 1,600 

o Other Disbursements 23,909 

Total Disbursements $ 874,711 

Commission Findings (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Receipt of Contributions in Excess of the Limit (Finding 2) 

• Receipt of Apparent Prohibited Contributions (Finding 3) 

1 

 52 U.S.C. §30111(b). 
 

 

Final Audit Report of the 

Commission on 

Sheila Jackson Lee for Congress 

(January 1, 2019 - December 31, 2020) 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Audit Hearing 1 

Part II. Overview of Campaign 

Campaign Organization 2 

Overview of Financial Activity 2 

Part III. Summaries 

Commission Findings 3 

Part IV. Commission Findings 

Finding 1. Misstatement of Financial Activity 5 

Finding 2. Receipt of Contributions in Excess of the Limit 8 

Finding 3. Receipt of Apparent Prohibited Contributions 13 
1 

Part I 

Background 

Authority for Audit 

This report is based on an audit of Sheila Jackson Lee for Congress (SJLC), undertaken 

by the Audit Division of the Federal Election Commission (the Commission) in 

accordance with the Federal Election Campaign Act of 1971, as amended (the Act). The 

Audit Division conducted the audit pursuant to 52 U.S.C. §30111(b), which permits the 

Commission to conduct audits and field investigations of any political committee that is 

required to file a report under 52 U.S.C. §30104. Prior to conducting any audit under this 

subsection, the Commission shall perform an internal review of reports filed by selected 

committees to determine if the reports filed by a particular committee meet the threshold 

requirements for substantial compliance with the Act. 52 U.S.C. §30111(b). 

Scope of Audit 

Following Commission-approved procedures, the Audit staff evaluated various risk 

factors and as a result, this audit examined: 

1. the receipt of excessive contributions; 

2. the receipt of contributions from prohibited sources; 

3. the disclosure of contributions received; 

4. the disclosure of individual contributors’ occupation and name of employer; 

5. the disclosure of unauthorized disbursements; 

6. the consistency between reported figures and bank records; 

7. the completeness of records; and 

8. other committee operations necessary to the review. 

Audit Hearing 

SJLC declined the opportunity for a hearing before the Commission on the matters 

presented in this report. 
 

 

 

 

 

2 

Part II 

Overview of Campaign 

Campaign Organization 

Important Dates 

• Date of Registration January 12, 1994 

• Audit Coverage January 1, 2019 - December 31, 2020 

Headquarters Houston, Texas 

Bank Information 

• Bank Depositories One 

• Bank Accounts Two Checking 

Treasurer 

• Treasurer When Audit Was Conducted Karen Y. Grays 

• Treasurer During Period Covered by Audit Karen Y. Grays 

Management Information 

• Attended FEC Campaign Finance Seminar No 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid and Volunteer Staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash on hand @ January 1, 2019 $ 66,502 

Receipts 

o Contributions from Individuals 802,719 

o Contributions from Other Political 

Committees 246,731 

o Offsets to Operating Expenditures 16,723 

o Other Receipts 2,042 

Total Receipts $ 1,068,215 

Disbursements 

o Operating Expenditures 849,202 

o Refunds of Contributions to Individuals 1,600 

o Other Disbursements 23,909 

Total Disbursements $ 874,711 

Cash on hand @ December 31, 2020 $ 260,006 
 

 

3 

Part III 

Summaries 

Commission Findings 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comparison of SJLC’s reported financial activity with its bank 

records revealed a misstatement of beginning cash on hand, receipts, and disbursements for 

calendar year 2019, as well as a misstatement of receipts, disbursements, and ending cash on 

hand for calendar year 2020. Specifically, for 2019, SJLC overstated beginning cash on hand 

by $16,835, and understated receipts and disbursements by $23,055, and $16,881, 

respectively. For 2020, SJLC understated receipts, disbursements and ending cash on hand 

by $120,605, $19,341, and $92,186, respectively. In response to the Interim Audit Report 

recommendation, SJLC corrected the public record for the respective misstated beginning 

cash on hand, receipts, disbursements, and ending cash on hand by filing amended disclosure 

reports. Additionally, SJLC corrected the public record by amending its cash on hand 

balance on its 2022 July Quarterly Report. In response to the Draft Final Audit Report, SJLC 

did not provide any additional comments. 

The Commission approved a finding that SJLC overstated its reported beginning cash on 

hand by $16,835, and understated receipts and disbursements by $23,055, and $16,881, 

respectively, in calendar year 2019; and understated receipts, disbursements and ending cash 

on hand by $120,605, $19,341, and $92,186, respectively, in calendar year 2020. (For more 

detail, see p. 5.) 

Finding 2. Receipt of Contributions in Excess of the Limit 

During audit fieldwork, the Audit staff reviewed contributions from individuals to determine 

if any exceeded the contribution limit. This review indicated that SJLC received apparent 

excessive contributions totaling $129,600. These errors occurred as a result of SJLC not 

resolving the excessive portions of contributions by forwarding presumptive redesignation or 

reattribution letters to its contributors, obtaining signed reattribution letters from its 

contributors or issuing refunds of the excessive portion of contributions in a timely manner. 

In response to the Interim Audit Report recommendation, SJLC provided copies of 

presumptive redesignation and reattribution letters, resolving excessive contributions totaling 

$87,600, albeit untimely. A list of contributors to whom excessive contributions were 

refunded was also provided in response to the Interim Audit Report. In response to the Draft 

Final Audit Report, SJLC provided an updated list of the refund checks issued, along with 

bank statements and bank transaction activity to support that $42,000 in refund checks issued 

were negotiated, correcting its remaining excessive contributions, albeit untimely. 

The Commission approved a finding that SJLC received excessive contributions from 

individuals totaling $129,600. (For more detail, see p. 8.) 
4 

Finding 3. Receipt of Apparent Prohibited Contributions 

During audit fieldwork, a review of contributions revealed that SJLC received 12 

contributions, totaling $16,050, from apparent prohibited sources. In response to the Interim 

Audit Report recommendation, SJLC stated that it contacted the LLC’s regarding their 

taxation status and issued refunds totaling $10,450. In response to the Draft Final Audit 

Report, SJLC provided an updated list of the refund checks issued, along with bank 

statements to support that $6,950 of the $10,450 in refund checks issued for prohibited 

contributions were negotiated. As such, SJLC materially resolved, albeit untimely, the 

prohibited contributions. 

The Commission approved a finding that SJLC received prohibited contributions totaling 

$10,450. (For more detail, see p. 13.) 
 

 

 

 

 

5 

Part IV 

Commission Findings 

Finding 1. Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of SJLC’s reported financial activity with its bank 

records revealed a misstatement of beginning cash on hand, receipts, and disbursements for 

calendar year 2019, as well as a misstatement of receipts, disbursements, and ending cash on 

hand for calendar year 2020. Specifically, for 2019, SJLC overstated beginning cash on hand 

by $16,835, and understated receipts and disbursements by $23,055, and $16,881, 

respectively. For 2020, SJLC understated receipts, disbursements and ending cash on hand 

by $120,605, $19,341, and $92,186, respectively.2 

 In response to the Interim Audit Report 

recommendation, SJLC corrected the public record for the respective misstated beginning 

cash on hand, receipts, disbursements, and ending cash on hand by filing amended disclosure 

reports. Additionally, SJLC corrected the public record by amending its cash on hand 

balance on its 2022 July Quarterly Report. In response to the Draft Final Audit Report, SJLC 

did not provide any additional comments. 

The Commission approved a finding that SJLC overstated its reported beginning cash on 

hand by $16,835, and understated receipts and disbursements by $23,055, and $16,881, 

respectively, in calendar year 2019; and understated receipts, disbursements and ending cash 

on hand by $120,605, $19,341, and $92,186, respectively, in calendar year 2020. 

Legal Standard 

Contents of Reports. Each report must disclose: 

• The amount of cash on hand at the beginning and end of the reporting period; 

• The total amount of receipts for the reporting period and for the election cycle; 

• The total amount of disbursements for the reporting period and for the election cycle; and 

• Certain transactions that require itemization on Schedule A (Itemized Receipts) or 

Schedule B (Itemized Disbursements). 52 U.S.C. §30104(b)(l), (2), (3), (4), and (5). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff reconciled SJLC’s reported financial activity with its 

bank records for calendars years 2019 and 2020. The reconciliation determined that SJLC 

misstated beginning cash on hand, receipts, and disbursements for 2019. SJLC misstated 

receipts, disbursements, and ending cash on hand for 2020. The succeeding paragraphs 

explain why the discrepancies occurred. 

2 In response to the Interim Audit Report, the SJLC representative noted that the in-kind contributions were 

incorrectly overstated by $75, as such, the Audit staff adjusted the bank and reported receipts and 

disbursements. 
6 

2019 Campaign Activity 

Reported Bank Records Discrepancy 

Beginning Cash on hand @ 

January 1, 2019 

$83,337 $66,502 $16,835 

Overstated 

Receipts $399,208 $422,263 $23,055 

Understated 

Disbursements $122,317 $139,198 $16,881 

Understated 

Ending Cash on hand @ 

December 31, 2019 

$358,6443 $349,567 $9,077 

Overstated 

The beginning cash on hand was overstated by $16,835 and the discrepancy resulted from 

prior period discrepancies. 

The 2019 understatement of receipts resulted from the following: 

• Contributions from individuals not reported $29,272 

• Contributions from political committees not reported 4,500 

• Offsets to operating disbursements not reported 4,441 

• Contributions reported not supported by bank deposits (12,992) 

• Unexplained differences (2,166) 

 Net Understatement of Receipts $23,055 

The 2019 understatement of disbursements resulted from the following: 

• Disbursements not reported $28,180 

• Credit card fees not reported 630 

• Bank fees not reported 210 

• 2018 disbursements reported in 2019 (4,824) 

• Contribution refund not reported 500 

• Disbursements reported twice (166) 

• Disbursements reported but did not clear the bank (6,784) 

• Unexplained differences (865) 

 Net Understatement of Disbursements $16,881 

The $9,077 overstatement of the ending cash on hand was a result of the reporting 

discrepancies described above. 

3 

 The reported 2019 ending cash on hand does not equal beginning cash on hand plus reported receipts minus 

reported disbursements. This was due to a mathematical discrepancy on the 2019 July Quarterly Report and 

on the 2019 October Quarterly Report in which the ending cash on hand was overstated by $1,584. 
7 

2020 Campaign Activity 

Reported Bank Records Discrepancy 

Beginning Cash on hand @ 

January 1, 2020 

$358,644 $349,567 $9,077 

Overstated 

Receipts $525,272 $645,877 $120,605 

Understated 

Disbursements $716,096 $735,437 $19,341 

Understated 

Ending Cash on hand @ 

December 31, 2020 

$167,820 $260,006 $92,186 

Understated 

The 2020 understatement of receipts resulted from the following: 

• Contributions from individuals not reported $129,715 

• Contributions from political committees not reported 6,050 

• Contributions reported not supported by bank deposits (27,664) 

• Offsets to operating disbursements not reported 12,281 

• Receipts under-reported 570 

• In-kind contributions over reported as receipts (75) 

• Unexplained differences (272) 

 Net Understatement of Receipts $120,605 

The 2020 understatement of disbursements resulted from the following: 

• Disbursements not reported $92,287 

• Disbursements under-reported 44,086 

• Credit card fees not reported 869 

• Bank fees not reported 401 

• Contribution refund not reported 1,100 

• Disbursements reported twice (20,755) 

• Disbursements reported but did not clear the bank (97,724) 

• In-kind contributions not reported as disbursements 1981 

• Unexplained differences (2,904) 

 Net Understatement of Disbursements $ 19,341 

The $92,186 understatement of the ending cash on hand was a result of the reporting 

discrepancies described above. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter during the exit conference with the SJLC 

representatives and provided schedules detailing the misstatements of financial activity. 

During the exit conference, SJLC representatives stated that they understood what needed to 

be done. 

SJLC representatives did not provide a formal exit conference response to this finding. 
 

8 

The Interim Audit Report recommended that SJLC amend its disclosure reports or file a 

Form 994 (Miscellaneous Electronic Submission) to correct the misstatements noted above 

and reconcile the cash on hand balance on its most recently filed disclosure report and correct 

any subsequent discrepancies. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, SJLC corrected the public record 

for the respective misstated beginning cash on hand, ending cash on hand, receipts, and 

disbursements for 2019 and 2020 by filing amended disclosure reports. Additionally, SJLC 

corrected the public record by amending its cash on hand balance on its 2022 July Quarterly 

Report. 

D. Draft Final Audit Report 

The Draft Final Audit Report acknowledged that SJLC corrected the public record when it 

filed the amended disclosure reports and amended its cash on hand balance on its 2022 July 

Quarterly Report. 

E. Committee Response to the Draft Final Audit Report 

In response to the Draft Final Audit Report, SJLC did not provide any additional comments. 

Commission Conclusion 

On January 18, 2023, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended that the Commission find that SJLC 

overstated its reported beginning cash on hand by $16,835, and understated receipts and 

disbursements by $23,055, and $16,881, respectively, in calendar year 2019; and understated 

receipts, disbursements and ending cash on hand by $120,605, $19,341, and $92,186, 

respectively, in calendar year 2020. 

The Commission approved the Audit staff’s recommendation. 

Finding 2. Receipt of Contributions in Excess of the Limit 

Summary 

During audit fieldwork, the Audit staff reviewed contributions from individuals to determine 

if any exceeded the contribution limit. This review indicated that SJLC received apparent 

excessive contributions totaling $129,600. These errors occurred as a result of SJLC not 

resolving the excessive portions of contributions by forwarding presumptive redesignation or 

reattribution letters to its contributors, obtaining signed reattribution letters from its 

contributors or issuing refunds of the excessive portion of contributions in a timely manner. 

In response to the Interim Audit Report recommendation, SJLC provided copies of 

presumptive redesignation and reattribution letters, resolving excessive contributions totaling 

$87,600, albeit untimely. A list of contributors to whom excessive contributions were 

refunded was also provided in response to the Interim Audit Report. In response to the Draft 

4 

 SJLC was advised by the Audit staff that if it chose to file a Form 99 instead of amending its disclosure 

reports, the form must contain all pertinent information that is required on the schedule. 
 

9 

Final Audit Report, SJLC provided an updated list of the refund checks issued, along with 

bank statements and bank transaction activity to support that $42,000 in refund checks issued 

were negotiated, correcting its remaining excessive contributions, albeit untimely. 

The Commission approved a finding that SJLC received excessive contributions from 

individuals totaling $129,600. 

Legal Standard 

A. Authorized Committee Limits. For the 2020 election, an authorized committee may not 

receive more than a total of $2,800 per election from any one person or $5,000 per 

election from a multicandidate political committee. 52 U.S.C. §30116 (a)(1)(A), and 

(a)(2)(A); 11 CFR §§110.1(a) and (b) and 110.9. 

B. Handling Contributions That Appear Excessive. If a committee receives a 

contribution that appears to be excessive, the committee must either: 

• Return the questionable check to the donor; or 

• Deposit the check into its federal account and: 

 Keep enough money in the account to cover all potential refunds; 

 Keep a written record explaining why the contribution may be illegal; 

 Include this explanation on Schedule A if the contribution has to be itemized 

before its legality is established; 

 Seek a reattribution or a redesignation of the excessive portion, following the 

instructions provided in the Commission regulations (see below for 

explanations of reattribution and redesignation); and 

 If the committee does not receive a proper reattribution or redesignation 

within 60 days after receiving the excessive contribution, refund the excessive 

portion to the donor. 11 CFR §§103.3(b)(3), (4) and (5) and 

110.1(k)(3)(ii)(B). 

C. Joint Contributions. Any contribution made by more than one person (except for a 

contribution made by a partnership) must include the signature of each contributor on the 

check, money order, or other negotiable instrument or in a separate writing. A joint 

contribution is attributed equally to each donor unless a statement indicates that the funds 

should be divided differently. 11 CFR §110.1(k)(1) and (2). 

D. Reattribution of Excessive Contributions. The Commission regulations permit 

committees to ask donors of excessive contributions (or contributions that exceed the 

committee’s net debts outstanding) whether they had intended their contribution to be a 

joint contribution from more than one person and whether they would like to reattribute 

the excess amount to the other contributor. The committee must inform the contributor 

that: 

• The reattribution must be signed by both contributors; 

• The reattribution must be received by the committee within 60 days after the 

committee received the original contribution; and 

• The contributor may instead request a refund of the excessive amount. 11 CFR 

§110.1(k)(3). 
 

 

10 

Within 60 days after receiving the excessive contribution, the committee must either 

receive the proper reattribution or refund the excessive portion to the donor. 11 CFR 

§§103.3(b)(3) and 110.1(k)(3)(ii)(B). Further, a political committee must retain written 

records concerning the reattribution in order for it to be effective. 11 CFR §110.1(l)(5). 

Notwithstanding the above, any excessive contribution that was made on a written 

instrument that is imprinted with the names of more than one individual may be attributed 

among the individuals listed unless instructed otherwise by the contributor(s). The 

committee must inform each contributor: 

• How the contribution was attributed; and 

• The contributor may instead request a refund of the excessive amount. 11 CFR 

§110.1(k)(3)(B). 

E. Redesignation of Excessive Contributions. When an authorized candidate committee 

receives an excessive contribution (or a contribution that exceeds the committee’s net 

debts outstanding), the committee may ask the contributor to redesignate the excess 

portion of the contribution for use in another election. The committee must inform the 

contributor that: 

• The redesignation must be signed by the contributor; 

• The redesignation must be received by the committee within 60 days after the 

committee received the original contribution; and 

• The contributor may instead request a refund of the excessive amount. 11 CFR 

§110.1(b)(5). 

Within 60 days after receiving the excessive contribution, the committee must either 

receive the proper redesignation or refund the excessive portion to the donor. 11 CFR 

§§103.3(b)(3) and 110.1(b)(5)(ii)(A). Further, a political committee must retain written 

records concerning the redesignation in order for it to be effective. 11 CFR §110.1(l)(5). 

When an individual makes an excessive contribution to a candidate’s authorized 

committee, the campaign may presumptively redesignate the excessive portion to the 

general election if the contribution: 

• Is made before that candidate’s primary election; 

• Is not designated in writing for a particular election; 

• Would be excessive if treated as a primary election contribution; and 

• As redesignated, does not cause the contributor to exceed any other contribution limit. 

11 CFR §110.1(b)(5)(ii)(B)(1)-(4). 

The committee is required to notify the contributor of the redesignation within 60 days of 

the treasurer’s receipt of the contribution and must offer the contributor the option to 

receive a refund instead. 
 

 

11 

Facts and Analysis 

A. Facts 

1. Facts 

During audit fieldwork, the Audit staff conducted a review of contributions to identify 

apparent excessive contributions from individuals, as noted below. 

Excessive Contributions – 100% Review 

Excessive Contribution Amount $129,600 

Total Amount of Excessive Contributions $129,600 

Reason for Excessive Contributions 

Contributions not resolved via presumptive 

letter or refund $87,6005 

Contributions not resolved via signed 

reattribution letter or refund $42,000 

Total Amount of Excessive Contributions $129,600 

2. Additional Information 

SJLC did not maintain a separate account for questionable contributions. However, 

based on its cash on hand balance at the end of the audit period, it appears SJLC did 

maintain a sufficient balance to make refunds of the apparent excessive contributions. 

B. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with the SJLC representatives during the exit 

conference and provided schedules of the apparent excessive contributions. The SJLC 

representatives asked questions regarding the presumptive reattribution and redesignation 

letters that could be sent. The Audit staff explained that presumptive letters sent in response 

to the exit conference, could resolve $87,600 of the apparent excessive contributions, albeit 

untimely. 

The SJLC representatives did not provide a formal exit conference response. 

The Interim Audit Report recommended that, SJLC: 

• Provide evidence demonstrating that the contributions in question were not excessive, 

or if excessive, were resolved in a timely manner. This evidence should have 

included documentation that was not made available to the Audit staff during the 

audit, including copies of solicitation cards completed by the contributors at the time 

of their contribution that clearly informed the contributors of the limitations; timely 

5 

 This total includes two contributions, totaling $5,500, considered ineligible for presumptive resolution in the 

Interim Audit Report. Following consultation with SJLC, the Audit staff determined the two contributions to 

be eligible for presumptive resolution. 
 

 

 

 

 

 

 

 

12 

letters sent to contributors eligible for presumptive redesignation and/or reattribution; 

or timely refunds, redesignations, or reattributions for excessive contributions. 

• Absent such demonstration, SJLC should have reviewed its contributions to 

determine which are excessive and how each can be resolved, and/or offer a refund 

for any remaining excessive amounts. SJLC should have provided evidence of such 

refunds. For a reattribution, both the contributor and the individual to whom a 

contribution was reattributed must be notified. Absent the contributor’s request for a 

refund, these letters would have obviated the need to refund the contributions. 

• If funds were not available to make such refunds, SJLC should have disclosed the 

contributions requiring refunds on Schedule D (Debts and Obligations) until funds 

became available to make the refunds. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, SJLC stated the apparent receipt of 

contributions in excess of the limits fell into two categories. The first category SJLC 

addressed was contributions requiring documentation be provided to the contributor, so that 

SJLC could presumptively redesignate or reattribute the excessive contributions to another 

election or a spouse. SJLC submitted 38 presumptive letters dated June 29, 2022, and one 

letter dated July 14, 2022. The second category SJLC addressed was contributions that 

exceeded the combined election limits and, as such, were required to be refunded to the 

contributor or disgorged to the U.S. Treasury. SJLC provided a list of the refund checks 

issued, totaling $42,000, but did not provide copies of the negotiated checks. 

Corrective Action Taken by Committee – Excessive Contributions 

Apparent Excessive Contributions as of the Interim 

Audit Report $129,600 

Dollar Amount of Presumptive Letters Sent – Untimely $87,600 

Contribution Refunds – Issued $42,000 

Excessive Contributions – Not Resolved $42,000 

The Audit staff concluded that SJLC resolved excessive contributions, totaling $87,600, 

albeit untimely. Absent copies of cancelled checks to the contributors or an acceptable 

alternative, or evidence that any refunds not cashed by the contributors have been disgorged 

to the U.S. Treasury, the remaining $42,000 in excessive contributions were unresolved. 

D. Draft Final Audit Report 

The Draft Final Audit Report acknowledged that SJLC resolved, albeit untimely, excessive 

contributions totaling $87,600. However, the remaining $42,000 in excessive contributions 

were unresolved. 
 

13 

E. Committee Response to the Draft Final Audit Report 

In response to the Draft Final Audit Report, SJLC provided an updated list of the refund 

checks issued, along with bank statements and bank transaction activity to support that 

$42,000 in refund checks issued were negotiated, correcting its remaining excessive 

contributions, albeit untimely. 

Commission Conclusion 

On January 18, 2023, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended that the Commission find that SJLC 

received excessive contributions from individuals totaling $129,600. 

The Commission approved the Audit staff’s recommendation. 

Finding 3. Receipt of Apparent Prohibited Contributions 

Summary 

During audit fieldwork, a review of contributions revealed that SJLC received 12 

contributions, totaling $16,050, from apparent prohibited sources. In response to the Interim 

Audit Report recommendation, SJLC stated that it contacted the LLC’s regarding their 

taxation status and issued refunds totaling $10,450. In response to the Draft Final Audit 

Report, SJLC provided an updated list of the refund checks issued, along with bank 

statements to support that $6,950 of the $10,450 in refund checks issued for prohibited 

contributions were negotiated. As such, SJLC materially resolved, albeit untimely, the 

prohibited contributions. 

The Commission approved a finding that SJLC received prohibited contributions totaling 

$10,450. 

Legal Standard 

A. Receipt of Prohibited Contributions – General Prohibition. Candidates and 

committees may not accept contributions (in the form of money, in-kind contributions or 

loans): 

1. In the name of another; or 

2. From the treasury funds of the following prohibited sources: 

• Corporations (this means any incorporated organization, including a non-stock 

corporation, an incorporated membership organization, and an incorporated 

cooperative); 

• Labor Organizations; or 

• National Banks; 

3. Federal Government Contractors (including partnerships, individuals, and sole 

proprietors who have contracts with the federal government); and 

4. Foreign Nationals (including individuals who are not U.S. citizens and not lawfully 

admitted for permanent residence; foreign governments and foreign political parties; 

and groups organized under the laws of a foreign country or groups whose principal 
14 

place of business is in a foreign country, as defined in 22 U.S.C. §611(b)). 52 U.S.C. 

§§30118, 30119, 30121, and 30122. 

B. Receipt of Prohibited Corporate Contributions. Political campaigns may not accept 

contributions made from the general treasury funds of corporations. This prohibition 

applies to any type of corporation including a non-stock corporation, an incorporated 

membership organization, and an incorporated cooperative. 52 U.S.C. §30118. 

C. Definition of Limited Liability Company. A limited liability company (LLC) is a 

business entity recognized as an LLC under the laws of the state in which it was 

established. 11 CFR §110.1(g)(1). 

D. Application of Limits and Prohibitions to LLC Contributions. A contribution from 

an LLC is subject to contribution limits and prohibitions, depending on several factors, as 

explained below: 

• LLC as Partnership. The contribution is considered a contribution from a partnership 

if the LLC chooses to be treated as a partnership under Internal Revenue Service 

(IRS) tax rules, or if it makes no choice at all about its tax status. A partnership 

contribution may not exceed $2,800 per candidate, per election, and it must be 

attributed to each lawful partner. 11 CFR §110.1(a), (b), (e) and (g)(2). (See 

explanation of Partnership Contributions below.) 

• LLC as Corporation. The contribution is considered a corporate contribution—and is 

barred under the Act—if the LLC chooses to be treated as a corporation under IRS 

rules, or if its shares are traded publicly. 11 CFR §110.1(g)(3). 

• LLC with Single Member. The contribution is considered a contribution from a 

single individual if the LLC is a single-member LLC that has not chosen to be treated 

as a corporation under IRS rules. 11 CFR §110.1(g)(4). 

E. Limited Liability Company’s Responsibility to Notify Recipient Committee. At the 

time it makes a contribution, an LLC must notify the recipient committee: 

• That it is eligible to make the contribution; and 

• In the case of an LLC that considers itself a partnership (for tax purposes), how the 

contribution should be attributed among the LLC’s members. 11 CFR §110.1(g)(5). 

F. Questionable Contributions. If a committee receives a contribution that appears to be 

prohibited (a questionable contribution), it must follow the procedures below: 

1. Within 10 days after the treasurer receives the questionable contribution, the 

committee must either: 

• Return the contribution to the contributor without depositing it; or 

• Deposit the contribution (and follow the steps below). 11 CFR §103.3(b)(1). 

2. If the committee deposits the questionable contribution, it may not spend the funds 

and must be prepared to refund them. It must therefore maintain sufficient funds to 

make the refunds or establish a separate account in a campaign depository for 

possibly illegal contributions. 11 CFR §103.3(b)(4). 
 

 

 

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3. The committee must keep a written record explaining why the contribution may be 

prohibited and must include this information when reporting the receipt of the 

contribution. 11 CFR §103.3(b)(5). 

4. Within 30 days of the treasurer’s receipt of the questionable contribution, the 

committee must make at least one written or oral request for evidence that the 

contribution is legal. Evidence of legality includes, for example, a written statement 

from the contributor explaining why the contribution is legal or an oral explanation 

that is recorded by the committee in a memorandum. 11 CFR §103.3(b)(1). 

5. Within these 30 days, the committee must either: 

• Confirm the legality of the contribution; or 

• Refund the contribution to the contributor and note the refund on the report 

covering the period in which the refund was made. 11 CFR §103.3(b)(1). 

Facts and Analysis 

A. Facts 

During audit fieldwork, the Audit staff identified contributions that appeared to be from 

prohibited sources. The following chart details the source of those receipts. 

Apparent Prohibited Contributions 

Type of Review 100% 

Contributions from Limited Liability Companies $10,100 

Contributions from Corporations $5,950 

Total of Prohibited Contributions $16,050 

B. Additional Information 

For contributions from corporations, the Audit staff verified the corporate status of the 

entities, as of the date of the contributions, with the applicable Secretary of State offices. For 

contributions from Limited Liability Companies (LLCs), SJLC did not provide tax status 

information for contributions totaling $10,100. 

SJLC did not maintain a separate account for questionable contributions. However, SJLC 

did maintain a sufficient cash on hand balance to make refunds of the apparent prohibited 

contributions. 

C. Interim Audit Report & Audit Division Recommendation 

The Audit staff discussed this matter with SJLC representatives during the exit conference 

and provided a schedule of the apparent prohibited contributions identified above. In 

response to the exit conference, SJLC submitted documentation demonstrating that five 

contributions in question, totaling $1,700, were not prohibited, thus these contributions are 

not a part of this finding. Further, SJLC acknowledged that six contributions totaling $5,950 

would need to be refunded. SJLC sent letters to the remaining contributors and awaited a 

response. 
 

 

 

 

 

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The Interim Audit Report recommended that SJLC: 

• Provide evidence that the contributions in question were made from permissible 

funds or were timely resolved; or 

• Refund the impermissible funds and provide evidence of such refunds; or 

• Disgorge any impermissible funds, for which SJLC was unable to process a refund 

for any reason, to the U.S. Treasury and provide evidence of such disgorgement; or 

• If funds were not available to make the necessary refunds or disgorgement, disclose 

the contributions requiring refunds on Schedule D (Debts and Obligations) until 

funds became available to make such refunds. 

D. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendation, SJLC stated that, it contacted five 

LLC’s and received two responses. One LLC confirmed that its two $2,800 contributions, 

totaling $5,600, were made from permissible funds. The other LLC confirmed that it elected 

to file as a corporation for tax purposes or is publicly traded and requested a refund of its 

$500 contribution, which SJLC stated has been issued. The three remaining LLC’s did not 

respond to SJLC’s inquiry and, as a result, SJLC refunded the contributions, totaling $4,000.6 

 

In addition, SJLC issued six contribution refunds totaling $5,950 that were received from 

corporations and provided a list of the checks. 

Corrective Action Taken in Response to the Interim Audit Report 

Total Apparent Prohibited Contributions as of Interim Audit Report $16,050 

Contributions from a Limited Liability Company – Permissibility 

Confirmed $5,600 

Contribution from a Limited Liability Company – Impermissibility 

Confirmed, Refund Requested and Issued $500 

Contributions Refunded to Three Limited Liability Companies $4,000 

Contributions Refunded to Six Corporations $5,950 

Prohibited Contributions – Not Resolved $10,4507 

The Audit staff concluded that SJLC resolved apparent prohibited contributions, totaling 

$5,600, based upon permissibility confirmed via letter. Absent copies of cancelled checks to 

the contributors or an acceptable alternative, or evidence that any refunds not cashed by the 

contributors have been disgorged to the U.S. Treasury, the remaining $10,450 in apparent 

prohibited contributions were unresolved. 

6 SJLC provided copies of the front of the four refund checks to LLC’s totaling $4,500 ($500 + $4,000). 7 $10,450 = $500 + $4,000 + $5,950 
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E. Draft Final Audit Report 

The Draft Final Audit Report acknowledged that SJLC resolved apparent prohibited 

contributions totaling $5,600. However, the remaining $10,450 in apparent prohibited 

contributions were unresolved. 

F. Committee Response to the Draft Final Audit Report 

In response to the Draft Final Audit Report, SJLC provided an updated list of the refund 

checks issued, along with bank statements to support that $6,950 of the $10,450 in refund 

checks issued were negotiated. As such, SJLC materially resolved, albeit untimely, the 

prohibited contributions. Additionally, SJLC stated it made a concerted effort to encourage 

donors to deposit the checks and sent several replacement checks. As of SJLC’s Draft Final 

Audit Report response, two refund checks, totaling $3,500, remained outstanding. 

Commission Conclusion 

On January 18, 2023, the Commission considered the Audit Division Recommendation 

Memorandum in which the Audit staff recommended that the Commission find that SJLC 

received prohibited contributions totaling $10,450. 

The Commission approved the Audit staff’s recommendation.