FEDERAL ELECTION COMMISSION

W"SHINeTON. 0 C 20463

91 r;:"',.,,, PH MJ000367

v .... -.:J 3: It,

(

October 29, 1991

MEMORANDUM

JOHN C.. SU

STAFF DIRE TO

ROBERT J. COS A .

ASSISTANT STltFF D~E!~ AUDIT OIVISI~N

FINAL AUDITj~EPORT - BUSH-QUAYLE '88

AND GEORGE BUSH FOR PRESIDBNT , INC./

COMPLIANCE COMMITTEE

FROM:

SUBJECT:

THROUGH:

TO: THE COMMISSIQJ~~

Attached for your infot••tion is a copy of the subject audit

report.

The changes requested by the Co..i ••ion at the October 24,

1991 aeeting are at page 21, with confor.log adjust.ent. at pages

23, 25 and 27. These adjust.ent. require no chang•• to any

conclusions, recoaaendations or [epayaent a.ounts.

Should you have any questions, pl•••• contact Joe Stoltz at

219-3720.

Attach.ent:

Revised Final Audit Report on Bush-Quayle '88 and George Bush

for President, Inc./Coapliance Coaaittee
FEDERAL ELECTION COMMISSION

\\'ASHINGTON. 0 C 20463

November 6, 1991

IIUOBANDUJIl

TO:

FROII:

SUBJECT:

FRED S. EILAND

PRESS OFFICER

ROBERT J. COSTA fl~ ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

BUSH-QUAYLE 88 AND GEORGE BUSH FOR PRESIDENT

INC.jCOMPLIANCE COMMITTEE

Attached please find a copy of the Final Audit Report on Bush-Quayl~88 and George Bush for President Inc./Coapliance

Coaaittee which was approved by the Co..ission on October 24, ~1991.

Inforaational copies of the report bave been received by

all parties involved and the report aay be rele•••d to the

pUblic.

Attach.ent as stated

cc: Office of General Counsel

Office of Public Diacloaure

Reports Analysis Division

FEe Library
""000350

FEDERAL ELECTION COMMISSION

WASHINCTON, D.C. 2046l

REPORT or THE AUDIT DIVISION

ON THE

BUSH-QUAYLE 88 AND GEORGE BUSH FOR PRESIDENT, INC./

COMPLIANCE COMMITTEE

I. Background

A. Overview

This report is based on an audit of Bush-Ouayle 88

("the GEe") and the George Bush for President, Inc./ Compliance

Co..ittee ("the Coapliance Committee") to determine whether

there has been compliance with the provisions of the Federal

Blection Caapaiqn Act of 1971. as a.ended and the Presidential

Blection caapaiqD Fund Act. The audit was conducted pursuant to

26 u.s.c. 59007(a), which states that after eacb pr.sidential

election, the Co..ission shall conduct a thorough exaaination

aDd audi to~ tl!tt~ ~~l~_~_~~~__ ~~~.._~CJ~__ ~xp.".e. __ (tf _tJ\. <:.n4td~tes

of- each political party for President and Vice President.

In addition, 26 u.s.c. S9009(b) .~.t... in part, that

tbe Ca.-isaion ..y conduct other ex••inationa and audits fro.

ti.. to ti•••s it d.... necessary to carry out the provisions

of this subcbapter.

The GEC re9istered with the Co..i ••ion on April 22,

1988, and the Co.plianee Co..ittee re,iatered with the

Ca.ai••ion on April 17, 1987. The Co..itt•••••tnt.in their

headquarters in Alexandria, virginia.

The GEe audit covered the period fro. the GIC's

inception through March 31, 1990. In addition, certain financial

activity vas reviewed through April 19, 1990. The GBC r.ported ar

opening cash balance, of $-0-; total receipts of $S2,720,402.23~

total expenditure. of $52,703,321.85, and a cloainq cash balance

of $15,660.90.

The audit of the Co.pliance Coaaittee covered the perioe

fro. its inception through Deceaber 31, 1989. The co.plianee

Coaaitt•• reported an opening cash balance of $-0-, total receiptl

of $5,944,811.78, total expenditures of $4,998,841.83, and a

cloainq cash balance of $945,970.05. Under 11 c.r.R.

SS9007.1(b)(3) and 9007.1(e)(4), additional audit work aay be

conducted and addenda to this report issued as nece••ary.
2

This report is based upon documents and workpapers whict.

support each of its factual statements. They fora part of the

record upon which the Coamission based its decisions on the

matter. in the report and were available to Commissioners and

appropriate staff for review.

B. Key Personnel

The Treasurer of the GEe and the Compliance Committee is

J. Stanley Huckaby.

c. Scope

The audit included such tests as verification of total

reported receipts, disbursements and individual transactions;

review of required supporting documentation; analysis of debts and

obligations; review of contribution and expenditure limitations;

and other audit procedures as deemed necessary under the

circumstances ..

II. Findings and Recommendations Related to Title 2 of the

United States Code

A. George Bush for President, Ine./Compliance Coaaittee

1. Individual Contributions in Excess_of Li.itation

Section 441a(a)(1)(A) of Title 2 of the United

States Code states that no person shall'.ake contributions to

any candidate and his authorized political co..ittees with

re.pect to any election for Federal office which in the

aggregate, exceed $1,000.

Section 110.1Ck) of Title 11 of the Code of

Federal Requlations states, in part, that any contribution made

by aore than one person, except for a contribution made by a

partnership, shall include the signature of each contributor on

the check, aoney order, or other negotiable instruaent or in a

separate writing. A contribution made by aore than one person

that doe. not indicate the a.ount to be attributed to each

contributor shall be attributed equally to each contributor. If

a contribution to a candidate on its face or when aggregated

with other contributions fro. the saae contributor exceeds the

li.itationa on contributions, the treasurer may ask the

contributor whether the contribution was intended to be a joint

contribution by more than one person. A contribution shall be

considered to be reattributed to another contributor if the

treasurer of the recipient political coaaittee asks the

contributor whether the contribution is intended to be a joint

contribution by more than one person, and infor•• the

contributor that he or she may request the return of the

excessive portion of the contribution if it is not intended to

be a joint eontributionJ and within sixty days from the date of

the treasurer'S receipt of the contribution, the contributors
3

provide the treasurer with a written reattribution of the

eontribution, whieh is signed by each contributor and which

indicates the a.aunt to be attributed to each contributor if

equal attribution is not intended.

Section l03.3(b)(3} of Title 11 of the Code of

Federal Requiationa states, in part, that contributions which

exceed the contribution limitation may be deposited into a

caapaiqn depository. If any such contribution is depo.ited~ the

tr.asurer may request redesiqnation or reattribution of the

contribution by the contributor in accordance with 11 C.F.R.

SllO.l(b), 110.1(k) or 110.2(b), as appropriate. If a

redesignation or reattribution is not obtained, the treasurer

shall, within 60 days of the treasurer's receipt of the

contribution, refund the contribution to the contributor.

Section 103.3(b)(4) of Title 11 of the Code of

Federal Regulations states, in part, that any contribution which

appears to be illeqal and which is deposited into a campaign

depository shall not be used for any disburseaents by the

political coaaittee until the contribution has been deterained

to be 1e9a1. The political committee must either establish a

separate account in a caapaign depository for such contributions

or aaintain sufficient funds to make such refunds.

Section 441a(f} of Title 2 of the United States - Cad. -states that- -no--eandidate o-r politt-c:al- eo..ittee -sball

knowingly accept any contribution in violation of any liaitation

aD contributions.

During the review of contributions froa

individuals, the Audit staff determined that the Co.pliance

Co..ittee had accepted 29 contributions fro. individuals which

vere in exc••• of the 2 u.s.c. S441a(a)(1)(A) ii.it and had not

been refunded, reattributed or redesignated within the ti•• specified at 11 C.P.R. SllO.l(k). The exc•••ive portion. of

th••• contributions totaled $23,025.00. Twenty-four of the 29

cODtributions, for which the excessive a.ounts totaled $19,525,

vere not refunded in a tl••ly aanner. The average nuaber of

days fro. the Coaaitt••'. date of deposit to the date of refund

va. 113.

The reaaining 5 contributions fro. individuals,

for which the exce.siv. a.aunts totaled $3,500, did not appear

to have been resolved at the tiae of the exit conference.

The Audit staff provided the Coapliance Coaaittee

with a schedule of the excessive contributions at the exit

conference.

Subsequent to the exit conference, the Co.pliance

Coaaitte. indicated that 3 of the 5 contributions, for which no

Coaaittee action had been taken, were refunded on July 2, 1990,
4

and they were searchin9 their files for reattribution letters

for the other two.

Although the Compliance Coaaittee did not

establish a separate account for the deposit of contributions

which were possibly excessive or prohibited, there w•• sufficient cash on hand in the Committee's regular accounts at

all times to make any necessary refunds.

The Audit staff reco...nds no further action with re9ard to

this .atter.

2. Request for Additional Records

Seetions 9003.1 (b)(4) and (5) of Title 11 of the

Code of Federal Regulations provides, in part, that to beco.e

eligible to receive payaents from the presidential El.ction

Caapaiqn Fund, the Presidential and Vice Presidential candidates

of a political party shall aqree that they and their authorized

coaaittee(s) shall keep and furnish to the Coaaission all

docuaentation relating to receipts and di.bur••••nts, and other

infor.ation the Coaaission may request. In addition, they shall

agree that they and their authorized coaaittee(a) shall perait

an audit and ex.aination pursuant to 11 c.r.R. part 9007 of all

receipts and disburse.ents including tho.e made by the

candidate, all authorized coaaittees and any agent or person
s

authorized to make expenditures on behalf of the candidate or

co..ittee{s).

Section l04.14(b)(1) of Title 11 of the Code of

rederal Re9Ulations states, in part, that each political

co.-itt•• or other person required to file any report or

statement under this subchapter shall maintain all records

relevant to such reports or statements, including bank records,

with respect to the matters required to be reported, includinq vouchers, worksh••ts, receipts, bills and accounts, which shall

prOVide, in sufficient detail, the necessary information and

data from which the filed reports and statements may b.

verified, explained, clarified, and checked for accuracy and

completeness.

Durin9 the fieldwork, the Compliance Coaaittee

prOVided worksheets to the Audit staff which contained the

Compliance Committee's allocations to the GEe of the non-exempt

portion of payroll, payroll taxes, overhead, and other costs

which relate to the operations of the accounting office. The

Coapliance Coaaittee apparently selected the Alternative

Allocation of National Caapaign Headquarters payroll and payroll

Taxes in the June 1988 edition of the Financial Control and

Co.pliance Manual for General Election Candidates Receiving

Public Financing which provides for 85' of these costs to be

allocated as ex.apt coapliance. __ The worksheets prov~!i~ci

-t-lidicat.- a 15'- allocation of these costs -to ttle -GEC and cover

the period May 1988 through Deceaber 1988. However, no

infor..tion vaa provided to show the derivation of the totals

contained on the worksheets. Absent such infor.ation, the Audit

staff vas unable to verify the accuracy of the allocations.

At the tiae the worksheets wete presented and

again at the exit conference, the Audit staff requested that

docuaentation in support of the worksheet figures be prOVided.

In the Interia Audit aeport, the Audit staff

r.co...nded that the co.piiance Co..itt•• provide workpapera,

worksheets containing calculations, and any other docuaentation

related to the allocations of payroll, overhead and other

expen.e. to the GBC. It was further noted that after the review

of this infor.atian, the Audit staff could -ake additional

adjust.ents to the GEC expenditures subject to the spending

Ii.itation, if warranted.

In the GEC's response to the Interim Audit

Report, they submitted the requested docu••ntation. The

docuaentation consisted of supportinq schedules which

d••onstrated the derivation of the totals to which the

allocation percentages were applied. Th••e schedules were

prepared by FEC reporting period. The Audit staff verified

these totals and co.pared the. to the worksheets which the

Co.pliance Coaaittee had provided during the fieldwork.
6

Ba.ed on this review, the Audit staff conclude. that this

docuaentation materially agrees with the allocation worksbe.ts

provided by the Compliance Committee. No further adjuat••nts to

the GEe expenditures subject to the spending limitation are

warranted.

aecomaendation 12

The Audit staff reeommends no further action with regard to

this matter ..

B. Bush-Ouayle 88 Committee

1. Press Plane

Sections 9004.6(a) and (b) of Title 11 of the

Code of Federal Requlations state, in part, that if an

authorized committee incurs expenditures for transportation,

ground services and facilities made available to media

personnel, such expenditures will be considered qualified

caapalqn expenses subject to the overall expenditure limitation

at 11 C.F.R. 59003.2(a)(1) and (b}(l). Further, if

r.taburae.ent for such expenditures is received by a co..ittee,

the a.aunt shall not exceed either: the individual's pro rata

share ~f the actual cost of the transportation and service. aade

available, or a reasonable estimate of the individual'8 __p~_e;t ~_ata

- sbareof the actual cost of the-transportation ana-servic•• aade

available. An individual's pro rata share shall be calculated

by dividing the total nuaber of individuals to whoa sucb

transportation and services are aade available into the total

cost of the transportation and services. The total a.cunt of

r.laburs.aents received fro. an individual shall not exc.ed the

actual pro rata cost of the transportation and servic.s aade

available to that person by aore than 10'.

Section 9004.6(d)(1) of Title 11 of the Code of

rederal aequlationa stat••, in part, that tbe coaaitt•• aay

deduct fro. the a.aunt of expenditure. subject to the overall

expenditure li.itation at 11 c.r.R. 59003.2(a)(1) and (b)(l),

the a.aunt of reiabur••••nts received for the actual coat of

transportation and services provided under paragraph (a) of this

section. The coaaittee may also deduct fro. the overall

expenditure limitation an additional a.ount of reiaburae••nt

received equal to 3\ of the actual coat of transportation and

service. provided under this section as the adainistratlve cost

to the coaaittee of providing such services to aedia personnel

and seeking reimburse.ent for the.. If the co..ittee has

incurred higher adainistrative costs in providing the.e

services, the coaaittee must docuaent the total cost incurred

for such service. in order to deduct a higher aaount of reimburse••nts from the overall expenditure li.itation. Aaounts

reimbursed that exceed the a.ount actually paid by the coaaittee
7

for transportation and services provided under paraqraph (a) of

this section plus the a.ount of administrative coata peraitted

by this section shall be repaid to the Treasury.

Also, the Explanation and Justification for the

above regulations (Federal Register, Volume 52, No. 106, paqe

20866) states, that "coaaittees may deduct an additional 3\ of

the direct cost of providing services to the Media if rei.-

bursementa in that amount are received. The additional 3\ is

intended to cover the administrative cost to the caapai9ft of

making media travel arrangements, tracking which media personnel

are accompanying the candidate on each leg of the caapaign, and

billing the media organizations for their share of the expenses.

These administrative costs are not part of the direct cost of

providing media transportation and services and may not be

included in the calculation of direct costs for billing

purposes, whether the committee uses its own staff to perform

these tasks or hires a travel consultant and collection agency."

Further, when discussing the 3% administrative cost allowance,

the Explanation and Justification states that the new provision

would continue to limit the amount billed to 110' of the direct

cost of services. It does not increase the amount a caapaiqn

may bill for providing services. It only increases the size of

the offset if reimburse.ents exceed 100\ of direct cost to the

caapaign.

Beqinninq in August 1988 througn-Noveaber 9,

1988, the GEC provided a plane for .eabers of the Pres. to

accoapany Air Force II. In addition to a.dia persoDnel this

aircraft generally carried two Secret Service 8qents, four GBe

staff a ••igned to the Press travel prograa and on so•• occ.sions

a .aall nuaber of other GEe staff. Also, a ••parate aircraft

was used by Vice President Quayle and his traveling party. Tbis

aircraft generally carried Vice President Quayle, GEe staff

(usually including four persons assigned to the Press travel

prograa), .edia personnel and a nuaber of Secret Service agents.

The GEe deterained the coat of each leg of each

trip and then billed ••abers of the Pre•• for air

transportation. In a separate calculation the GEC billed the

Press for ground transportation and service••

When preparing the billings for air transportation the GEC aade the following calculations. ror GEC staff,

other than those assigned to the Press travel progra., the cost

of the flight was divided by the nuaber of persons on the flight

to determine a pro rata cost. This coat was then multiplied by

the nuaber of GEC passengers on the flight, again excluding the

staff assigned to the Press travel prograa, to deter.ine the GEC

share of the aircraft cost. The rea.inder of the aircraft coat

was divided by the nuaber of Press on the flight to deter.ine

the a.aunt to be billed to the Press. Aa a result, both the

cost attributable to the GEe staff assigned to the Pre•• travel

program-and the Secret Service was billed to the Pres.. Even
8

though the cost of providing air transportation to the Secret

Service was billed to the Press as described above, the Secret

Service was also billed.

The Audit staff reviewed documentation for each

1e9 of each trip to determine the billable amount for the Press.

The pro rata cost was determined by dividing the cost of each

flight by the number of passengers on the fliqht. This a.ount

wa. multiplied by the number of Press on the flight and then

accumulated for all flights. The accumulated amount wa. then

multiplied by 110\, resulting in a billable amount for Press air

transportation of $2,852,818.30. The GEe billed the Press a

total of $3,117,905.00 for air transportation.

The GEC also billed the Press for local ground

costs on various trips. AS a line item on these bills the GEC

included "Daily Staff Expenses." Though no records were located

to allow the Audit staff to calculate the costs covered by this

item, it appears to be the expenses of the GEe personnel that

traveled with the Press. The total amount billed to the Press

for Daily Staff Expenses during the caapaign was $20,211.

In addition, the Press was billed for the total

cost of telephone filing centers. The GEe did not take into

account the refunds of $7,974.86 they received fro. the

telephonecoapanies.

The Audit staff deter.tned that if the GEC had

billed the Press 110' of the cost for air fare, local hu.

transportation and other ground services, total billings would

have been $3,177,130.35. The GEC billed the Press $3,440,920.00

and received reiaburs••ents of $3,536,029.63. For purpo••• of

this analysis, neither the correct billable a.ount for the

Secret Service, nor the a.aunt received by the GEe fro. the

Secret Service is included.

As a result of the billing practice described

above, the Audit staff concluded in the Interia Audit Report

that the GEC has received $358,899.28 ($3,536,029.63 - $3,177,130.35) in exc••• of the aaxiaua billable a.ount (wbich

i. 110' of actual coat).

Since all a.aunts received froa the PreS8 were

reported as offsets to operating expenditures and expenditures

subject to the spending liaitation, the Interim Audit Report

further stated that the GEe's reported total for expenditures

subject to the spending liaitation was understated by

$358,899.28 due to this practice. This a.ount waa added to the

GEC expenditures subject to the li.itation. Also, the Audit

staff included the $358,899.28 on the Stateaent of Net

Outstanding Qualified Caapaign Expenses (NOQCE) as a payable to

the various Press organizations the GEe over billed during the

caapaign.
9

Though the GEe is permitted to receive fro. the

Pr.s. an a.aunt equal to 110\ of the actual cost of transportation service. provided, only an amount equal to 103' of the

actual costs may be offset aqainst the spendinq li.it.tieD

absent a showing of administrative costs in exee•• of three

percent.

In the Interim Audit Report, a total a.aunt of

$202,181.02 was noted as the GEe's receipts in excess of 103\,

but le•• than 110\, of GEe's cost of providing transportation

and other services to the Press. This amount was repayable to

the u.s. Treasury, unless the GEe was able to document

administrative costs equal to 10\ of the direct cost of

providing transportation and services to the Press. This amount

was also included with the GEe's expenditures subject to the

spending limitation since the receipts from the Press were

treated as offsets to such expenditures.

A schedule detailing the above calculations was

provided to the GEe at the exit conference.

In the Interim Audit Report the Audit staff

reco..ended that the GEe provide documentation shoving that they

have not over billed the Press by $358,899.28 and that they

should sub.it docuaentation to deaonstrate tbat the $202,181.02 i~ rec.Jpts fro. the_Press are not in-exce.a-of-coats-incurred

to provide transportation and services to the Pre.s.

It was furtber reco..ended that in the ab••nce of

such docuaentation, the GEe should sub.it evidence that

$358,899.28 had been refunded to the Pr.... Tbis evidence was

to include the calculation of the amount paid to each Pre.s

organization and copies of the front and back of the negotiated refund checks.

In response to the Interi. Audit aeport, the

Treasurer states that ft ••• at no ti•• did Buah-Quayle bill the

Preas aore tban 100' of the cost of the .ervice. provided to the

Press despite the fact that it legally could bave billed for up

to 110' of the cost." The Treasurer states that:

(t)he issue with reqard to the Press Plene

revolves solely around the fact that the

pro rata press travel expenses included the

travel expenses of four caapaign individuals

who travelled: 1) at the request of the

press, 2) with the explicit understanding that they would be paid for by the press, and

3) to provide certain service. requested by

the press, which, had the pre•• not requested

these services, would not have been provided.

Thus, the.e individuals would not have been

on the press plane were it not for the

request of the press.
10

The GEe provided five affidavits, including one

fro. a a.aber of the Press who traveled on the Pre.8 plane, which supports the above stated points made by the GEe (••• Attach••nt 1). The other four affidavits were fro. GIC staff

and outlined their duties as follows: ft ••• to organl•• arrange••nts for ground and air transportation, respond to

special requests of the press (such as additional press seats),

arran98 for proper and acceptable food and supplies of beveraqes requested by the press, and provide additional infora.tian

re9ardin9 the schedule, all in addition to creating and

maintaining passenqer manifests and credit cards payment

facilities for the press."

The Treasurer takes exception to the Audit

staff's treatment of these individuals as "passengers" on the

Press plane. He contends that "these individuals were nat

'passengers' any more than the pilot or navigator were

passengers· and that they were on the plane for the purpose of

facilitating travel by the Press and their costs were borne by

the Press with the full concurrence of the Press. He adds that " ... the Coaaission's own requlations acknowledge that there is

no distinction between the Coaaittee's staffers and independent

contractors for the purposes of determining cost," (11 - c.r.a.S9004.6(d)(2» and that •..• this issue would never have

arisen had the Coaaittee contracted with the air carrier for it

to provide these services_ to the press using airlin•••pl_Qyee$

(aa co...rcial airlines do for most of these services as a

aatter of course)." Tbe Treasurer concludes that the GBe doe.

not ove the Press $358,899.28 in reiabur••••nt. becau•••••• the

pres. was charged the exact costs of travel on the pre•• plane,

nothin9 aore, nothing less."

The Audit staff disagree. with the GEe's

contention that this issue never would have be.n rai.ed if the

GEe had contracted directly with the air carrier to provide

service. to the Press using airline ••ploy.... As the Tr.asurer

notes, Co.-i••ion re9UlatioDs .ake no distinction between baving

caapaign personnel or third party personnel perfora the•• services. The Audit staff concluded that in neither ca.e can

the costs b. included in the direct co.t. for purpose. of

billing persons traveling with the caapaiqn.

The Treasurer's arquaent that the GEe staff who

adainistered the Press travel prograa should not be considered

.s "paaaengers· is not relevant. The requlations at 11 c.r.R. S

9004.6 specify that an individual's pro rata cost shall be

deter.ined by dividing the total nuaber of individuals to whoa

such transportation was made available into the total cost of

the transportation. All GEe staff are covered by the tera

"individual· regardless of their duties.

The Audit staff does not dispute that the GEe

staff persons travelled at the request of the Press, nor does

the Audit staff dispute the Treasurer·s statement that these
11

caapaign staff persons were on the plane for the purpo•• of

facilitating travel for the Press. The Audit staff concluded

that these facts did not establish that costs associated with

the•• staff persons' travel were direct costa for providing

transportation and services to the Press.

The proposed Final Audit Report stated that it

was the opinion of the Audit staff that the services provided by

the GEe staff were adainistrative costs as defined in the

Explanation and Justification (Federal Register, Volume 52, No.

106 page 20866) for 11 C.F.R. SS 9004.6(&) and (b) and

9004.6(d)(1). The Audit staff concurred with the Treasurer's

reference to 11 C.F.R. S9004.6(d)(2) which states that

administrative costs shall include all costs incurred by the

committee for making travel arrangements for media personnel and

for seeking reimbursements, whether performed by committee staff

or independent contractors.

The Committee provided affidavits from four GEe

staff members assigned to the Press travel proqraa which

docuaented their duties (See Attachment 1). Based on the Audit

staff's review of the affidavits, the proposed Final Audit

Report concluded that their duties had been adainistrative in

nature. These staff person's duties, their salary,

transportation and subsistence costs were calculated and

co.pared talO' of the. t<:)~al.~!t'~~_t_c;o.t_oJ_ p.r~vi~_i~g . transportation and services to the Pr.... This analysis

indicated that the GEe bad incurred adalniatrat1ve expenses in

exce•• of 10' of the direct costs of the transportation and

services provided. Tberefore, no repayaent to the u.s. Treasury

va. r.co..ended.

The Final Audit aeport concluded that the GEe

received $358,899.28 in exc••• of the aaxiaua billable a.aunt

fro. the Press (110\ of actual cost). This a.aunt was included

in the GEe expenditure. subject to the spending li.itatioD

(rinding II.B.3.) and on the NOQCK Stat...nt as a payable to the

various Press organizationa which the GEe over billed during the

caapaigD (Finding 111.8.).

On October 3, 1991, the Coaaission deter.ined

that the services provided by the GEe staff who adalnistared the

Pr••• travel pro9raa could be considered the direct costs of the

transportation and services provided to the Press.

The Audit staff made revisions to the above

calculations for air travel and services provided to the Press

baaed on the Coaaissions deter.ination.

The results of these revisions are addressed

separately for each aircraft.
12

8. George Bush Press Plane

The Audit staff determined that the billable

cost for air transportation and services for the Pre•• was

$2,167,245.51. Expenses incurred by the GEC staff who

administered the Press travel program, for travel, salary and

subsistence included in this amount totaled $172,705.81. This

billable cost was then multiplied by 110\, resulting in the

maximum billable amount of $2,383,970.06. The GEe received from

the Press a total of $2,255,178.73 for transportation and

services. Since this amount is less than the maximum ••aunt

that the GEe could have billed the Press for air transportation

and other services, no refund is due the Press.

Though the GEe is permitted to receive from

the Press an amount equal to 110\ of the actual cost of

transportation services provided, only an amount equal to 103%

of the actual costs may be offset against the spending

limitation.l/ Any amount received that is greater than the

direct plus-adainistrative cost but less than the maximum

billable cost is repayable to the u.s. Treasury. Further, this

a.ount is included in the GEe expenditures subject to the

spending liaitation since the reimburse.ents fro. the Press were

treated as offsets to such expenditures. The a.aunt in excess

of the 103' is $22,915.85.

b. Dan Quayle Cbarter

A aiailar analysis va. done to deter.ine the

.axiaua a.ount the GEe could bill the Press for air

transportation and services for the Quayle Charter. The Audit

staff deter.ined that the billable cost vas $1,042,756.61. This

aaount included expenses for travel, salaries and subsistence of

tbe GEe staff who adainistered the Presa travel proqraa which

totaled $148,995.99. The $1,042,756.61 waa aultiplied by 110'

re8ulting in a aaxi8Ua billable a.aunt of $1,147,032.27 for air

transportation and service. to the Pre.s.

The GEe received reiaburs••ents fro. the

Press of $1,280,850.90 which is $133,818.63 in excess of the

aaxiaua billable a.aunt ($1,280,850.90 - 1,147,032.27). The

$133,818.63 has been added to the GEe expenditures subject to

the spending li.itation (Finding I!.8.3.) and has been included

on the NOOCK State.ent as a payable to the various Press

organizations the GEe over billed during the caapaign (rinding III.B.).

!/ If the GEe incurred adainistrative costs in excess of 3\,

they may document the larger a.ount and adjustments will be

lIade.
r-·

....

13

As noted above, the GEe is permitted to

receive from the Press an amount equal to 110\ of the actual

cost of transportation services provided, however, only an

amount equal to 103\ of the actual costs may be offset against

the spending liaitation.2/ The GEC has received payments from

the Press totaling $72,992.96 in excess of 103' but 1••• than

110%, of GEC's cost of providing transportation and other

services to the Press. This amount is repayable to the u.s.

Treasury and has been included in the GEe's expenditures subject

to the spending limitation since the receipts from the Press

were treated as offsets to such expenditures.

c. Recap

In summary, the GEe has received $133,818.63

in excess of the maximum billable amount from the Press (110\ of

actual coat). In addition, amounts which represent the receipts

in excess of 103\, but less than 110\ of the GEe's cost of

providing transportation and other services to the Press, is

repayable to the u.s. Treasury. This totals $95,908.81

($72,992.96 + $22,915.85). Both amounts have been included in

the GEe expenditures subject to the spending limitation (Finding

II.B.3.) and included on the NOQCE Statement as a payable to the

Press organizations (rinding III.B.).

A schedule detailing the above calculations is

provided at Attachment 2.

Finally, the GEC's disclosure reports contain

credits due various Press organizations totaling $106,012.67.

Records provided to the Audit staff indicate that $61,551.67 of

this a.aunt relate to prepayaents received by the GEe that have

not been applied to any billing. Therefore, the.e prepayaents

should be refunded and the a.aunt has been included as a payable

on the NOOCK state.ent (Finding 111.8.) and since the receipts

were considered offsets to operating expenditures, the

$61,557.67 ha. also been added to the GEC expenditures subject

to the spending liaitation (Finding II.B.3.).

Reco...ndation 13

The Audit staff recomaends that the GEC refund to the Press

or9anizations $61,557.67 in unused prepayaents and $133,818.63

in a.aunts received in excess of the maximum billable a.aunt for

Press travel on the Quayle Charter. The GEC should submit

evidence of these refunds, including the resolution of all

credits, the calculation of the amount paid to each Press

~/ If the GEe incurred administrative costs in excess of 3\,

they may document the larger amount and adjustments will be

aade.
14

organization and photocopies of the front and back of the

negotiated refund cheeks. See Finding III.A. for an explanation of the $95,908.81 repayment related to colleetions 1n excess of

103' of billable cost.

2. Air Force II

Section 9004.7 (b)(2) of Title 11 of the Code of

rederal Regulations states, in part, that for a trip which

include. caapaiqn-related and non-caapaign related stopa, that

portion of the cost of the trip allocable to campaign activity shall be determined by calculating what the trip would have cost

fro. the point of ori9in of the trip to the first

caapaiqn-related stop and from that stop through each subsequent

caapaign-related stop to the point of ori9in.

Section 9004.7(b)(3) of Title 11 of the Code of

Federal Regulations states that for each trip, an itinerary

shall be made available for Commission inspection.

Section 9004.7(b)(4) of Title 11 of the Code of

Federal Requlations states, in part, that for trips by

governaent conveyance a list of all pas.engers, along with a

de.ignation of which passengers are and which are not

ca.paigD-related, shall be aade available for Coaaission

inspection.

Section 9004.7{b)(S) of Title 11 of the Code of

rederal .e9Ulations statea that if any individual use.

90vernaent conveyance for caapaiqn-related travel, the

candidate'. authorized co.-ittee shall pay the appropriate

governaent entity an a.ount equal to the first cla.s co..ercial

air fare plus the cost of other services or the co...rcial

charter rate plus the cost of otber service••

The candidate used Air Force II for caapaiqn

travel. The Office of the Vice pr.sident billed the GBe for the

caapaign-related portion of the trip at first class air fare

plus one dollar. Each billing included a aanifest showing the

people that traveled on Air Force II and whether they were

traveling on official or unofficial busine.s. The Audit staff

noted persons who traveled on Air Force II for unofficial

re.son. but whose air fare was not billed to the GEC by the

Office of the Vice President. The GEe was not billed for these

air fares, though the people involved appeared to be traveling

for political reasons. Many of the individuals on the aanifests

were political fiqures. According to GEC records, the costs for

people traveling on Air Force II for unofficial reasons between

Septeaber 13 and October 31, 1988, totaled $14,937.00. Tbe GEC

paid none of these costs.

In the Interim Audit Report, the Audit staff

r.co..ended that the GEC provide additional inforaation about

individuals that traveled on Air Force II for unofficial reasons
15

bu~ who•• air fare was not billed to or paid for by the GSC,

including the reason why the travel waa not related to the

getteral election caapaiqn; the name of the organization that

paid for the trip; and~ the amount paid by the other

organization for each trip.

In the GEe's response to the Interia Audit

Report, the Treasurer states that "the Campaign served .s a

el••rinqhouse for 'political' travel on Air Force II (including

non-caapa1qn related political travel)." Also included is the

following explanation by David Nummy, Comptroller of

Bush-Quayle:

the Campaign would receive requests from

candidates, committees, and federal, state,

and local officeholders requesting the

opportunity to travel on Air Force II •••• Such requests for political travel on Air

Force II were accommodated by the caapaign

for the benefit of such other candidates,

committees, of federal, state and local

officeholders whenever possible, to the

extent that there were seats available onee

the caapaiqn's own travel require••nts were ••t. The travel of these individuals va.

always contingent, however, on the approval 6f the -Officeof---the Vice -Pres-id-ent-~ :-~Tn-~h.-------

instances of non-Bush Caapaign travel by officebolders and others, the coat of tb••• s.~ents was billed directly by the Office of

the Vice President to these individuals

because their travel was not related to the

Bush-Quayle 88 Co..ittee.

The Treasurer adds that "even if an individual on

tbe plane was a 'politician,' there is no reaaon to assua. that

that individual was not on the plane to further his or her own

political objectives, as opposed to the Bush-Quayle caapaign's· and:

even if an individual were on the plane for

'unofficial' (non-qovernmental) busine••, this does not aean that he or she was

necessarily on the plane for 'Bush caapaiqn'

business. "_abers of the Vice President's

faaily, and personal friends, may well travel

on Air Force II for reasons related to

neither government nor campaign business. If

the Vice President had travelled by

coaaercial plane, such costs would have been

paid by other non-public sources. Bowever,

the Vice President of the United States

travels as a aatter of course on Air Force

II, so all personal quests are billed throu9h
16

the United states Government. Since the

billinq was handled throuqh the u.s.

Government, Bush-Quayle is unable to provide

information as to what entity actually paid

for the transportation of the individuals in

que.tion, unless that information is publicly

available.

The GEC researched the Federal Election

Commission disclosure reports and identified 14 individuals who

were members of or candidates for Congress, whose air travel

between September 13 and October 31, 1988, was paid for by their

own committees. This included a candidate's spouse who traveled

on Air Force II for unofficial reasons. In addition, baaed on

the Audit staff's review of FEe disclosure reports, it was

determined that the air fare for a u.s. Senate candidate, and

spouse, was paid for by his committee. The total cost involved.

was $5,305.00. The Audit staff notes that one of the

individuals identified by the GEe was retiring u.s. Senator

Daniel Evans - WA (cost of travel was $794.00) and another was

u.s. Senator Phil Grama - TX who was not up for re-election

until 1990 (cost of travel was $182.00). No adjustment has been

aade for the costs of these two trips ($976.00).

It should also be noted that letters fro. two

additional individuals who traveled on Air Force II, who were

-not included in the Iriteria Audi t -Report--findinq, --s-tated- -that

they were invited by the GEe and therefore should not be billed

for the air travel. These two individuals were apparently billed

at the direction of the GEe. It appears that as a result of

receiving these letters, the GEe paid for these air fare costs.

The GEe states in its response that several

individuals identified as Bush-Quayle staff persons are not

staff persons and that "{e)very Bush-Ouayle staffer or

individual authorized to travel on behalf of Bush-Quayle was

paid for by Bush-Quayle." The Audit staff notes that the n••es

and titles of individuals reflect how they appeared on the Air

rorce II travel manifests. Absent further inforaation, no

adjust.ent to the Interia Audit Report conclusion has been a.de

with re.pect to these individuals.

The GEe failed to provide the requested

information for the reaaining 18 individuals who traveled on Air

rorce II. Air fare for these individuals totaled $9,632.00. In

addition, the Audit staff did not adjust for the trips involving

Senators Evans and Gr... in the amount of $976.00 as discussed

above. Costs totaling $10,608.00 ($9,632.00 + $976.00) are

still questioned as possible caapaign travel related to the GEC.

In su..ary, it appears that 14 individuals

traveled in an unofficial capacity not related to Bush-Ouayle

88. The reaaining individuals (20, involving $10,608.00) may
17

have been traveling on behalf of Bush-Quayle. Bowever, due to

the relatively s••ll a.aunt involved the Co.-i.sion d.~.r.ined

that no further action is warranted.

aeco...ndation .4

Baaed on the Commission's determination, no further action

is necessary with reqard to this matter.

3. Expenditure Limitation

Section 441a(b)(1)(B) and (e) of Title 2 of the

United States code states that no candidate for the office of

President of the United States who is eliqible under seetion

9003 of Title 26 to receive payments from the Secretary of the

Treasury may make expenditures in excess of $20,000,000 as

adjusted for increases in the Consumer Price Index.

The expenditure limitation for the 1988 general

election for the office of President is $46,100,000.

The GEe reported operating expenditures of

$51,308,321.85 and offsets to these expenditures totaling $5,225,402.23. The Audit staff reviewed the reported a.ounts

and made the following adjustments.

a. Offsets-to -Operating Expenditures

Aa noted above, the GEC reported off.ets to

operating expenditure. of $5,225,402.23. Bovever, a

reiabur•••ent fro. the Secret Service for air transportation in

the aaount of $94,209.24 was not included. In addition,

receipts fro. the sale of assets totaling $10,403.00 were not

included in the reported fiqure. The Audit staff also ••d.

aiseel1aneous adjust.ents totaling ($775.99). Finally, an

unexplained difference of $7,080.52 reaains between reported refunda and those identified in the GEC bank records. Adjusted

offsets to operating expenditures was $5,336,319.00.

In the response to the Ioteria Audit aeport, the Treasurer states that the GEC agrees with the adjusted

offsets to operating expenditures total of $5,336,319.00 (but

disagrees with the Audit staff's explanation of the GEC's

failure to include receipts fro. the sale of assets in the

reported figure).

In addition to the above, the Audit staff

reviewed the FEC disclosure reports filed by the GEC which

covered the period April 1, 1990 through June 30, 1991, and as a

r••ult haa included as an offset to operating expenditure. a

refund reported by the GEC in the a.ount of $429.25. The

adjusted total is $5,336,748.25 ($5,336,319.00 + $429.25) and is

subject to audit verification.
18

b. Aaount Due Bush-Quayle 88 from Geor,. Sush

for president, Inc. (prImary coaaitt.e)

The Audit staff has included, as a

receivable to the GEe, $42,519.00 from the Primary Comalttee.

This amount includes $4,140 for equipment

purchased by the GEe from the primary Committee. The GEC paid

for some items which the Primary Committee had previously sold

to the Sununu Committee, but failed to remove the items from the

primary Committee's equipment inventory. Therefore, the GEe

paid a total of $4,140 for equipment that was not in the

possession of the Primary Committee.

The Treasurer states, in the response to the

Interim Audit Report, that the Audit staff had erroneously

relied on an inventory list found in the GEC's records in making

the finding and stated that the GEe appropriately paid the value

of the equipment which it received. The Treasurer explained

that the GEC initially did maintain a list of equipment based on

serial numbers, but the Committee ceased to update this list

with additions or deletions. Equipment bought and sold by the

Coaaittee was accounted for, but not exclusively by serial

nuaber after the early days of the caapaign because it bec••• i.practical to do so. Bush-Quayle did buy equip.ent froa the

priaary Coaaittee accounting for the full purchase prJc, of that

equipaent. The ap-p-ar-entadainistrative discrepancy in the

clerical recording of the serial nuabers does not affect the

a.aunt paid by Bush-Quayle for the equip.ent it did in fact buy

fro. the pri.ary Co..ittee. Finally, an affidavit of a foraer

GBC staff aeaber was subaitted in support of the treasurer's

explanation.

The Audit staff notes that the GEC did not

provide in its response to the Interi. Audit Report any docu- ••ntation to de.onstrat. which equip.ent was transferred to the

GEC froa the primary coaaittee or the value of that equip.ent.

The inventory list found in GEC recorda was, at the ti•• of the

audit, unverifiable. It is noted however, that the inventory

list was the basis on which the amount of the payaent froa the

GEC to the priaary coaaittee for transferred equip.ent w•• determined. Absent the subatssion of more specific information

no change to the Interi. Audit Report conclusion is warranted.

Also, the primary Coaaittee purchased

several insurance policies during the Caapaign. The coverage

dates of the policies carried over into the General Election

period. The GEe reimbursed the primary Coaaitte. in Septeaber,

1988 for their share of the insurance. However, an analysis of

the allocation indicated that the GEC over reiahursed the

Primary Committee by $14,859.
·19

In response to tbe In~.ri. Audit ••port, the

Treasurer states that upon review of ca.aittee recordl,

Busb-Quayle is willin9 to accept the Audit staff's calculations

with regard to this matter, and has accepted an appropriate

refund.

Finally, in response to the Interim Audit

aeport on the George Bush For president Coaaittee, Inc. (primary

Coaaittee) a copy of a check from the Primary Coaaitt•• to the

GEe in the amount of $23,520 was provided. It was explained

that as a result of a recommendation made in that interim report

the GEC had reviewed their records and determined that a charge for an aircraft charter for a flight to the nominatin9

convention on Auqust 16, 1988 had been mistakenly paid by the

GEe.

c. Reporting Errors

An addition of $82,903.76 is made to

operating expenditures. This amount includes payroll checKs

totaling $10,342.66 that GEe failed to report and miscellaneous

adjust.ents made by the Audit staff in the amount of $1,572.57.

An unexplained difference of $70,988.53 remains between what the

GBC reported and the correct reportable a.aunt deterained by the

Audit staff through bank reconciliations. It should be noted

tbat be9inning cash is $-0- and ending cash is materially in

_···qY·.-.....nt·-rendincl- -caslf··as· ·tft.i·en~.a --rtf ·~lltf-GEt:'-s ROQC~ -s·t.·t.aent

aDd the bank reconciliation) and the difrerenc•• in receipts bave been aaterially identified, therefore, the difference in

di.bur••••nts appears to be the result of a reporting error(s)

by the GBC.

The Treasurer explains in the response to

tbe Interia Audit Report that ·off.etting inco•• and expenditure

transactions created ainor discrepancies. Thus, Bush-Quayle

do•• not dispute this finding and will ...nd ita reports accordingly."

d. Accounts payable

An accounts payable total of $15,652.98 is

added to operating expenditures. This aaount includes payables

a. of March 31, 1990, totaling $9,777.82, docuaented by the GEC,

and the inclusion by the Audit staff of other disburse••nts aade

by the GEe after March 31, 1990, totaling $5,875.16.

In response to the Interia Audit aeport the

Treasurer acknowledges that the Audit staff's total for accounts

payable. includes disburse.ents docuaented through March 31,

1990 plus disburse.ents aade after Karch 31, 1990. Bowever, the

Treasurer states that the Coaaitte.'. total as of Karch 15, 1991

is $9,777.82. The GEe's accounts payable figure apparently
20

fails to consider the reported pay.ents after March 31, 1990 not

included in the balance shown on the GEC's NOQCE.

In addition to the above, the Audit staff

has included $3,290.98 as a payable noted during a review of FEe

disclosure reports filed by the GEe coverinq the period April 1,

1990 through June 30, 1991. This amount results in a revised

accounts payable total of $18,943.96. This revised amount is

subject to audit verification.

e. Reimbursements Due Compliance Committee from

GEe

The GEe allocated 5\ of its national

overhead to exempt compliance pursuant to alternative 2 -

Allocation of National Campaign Office Payroll, payroll Taxes

and Overhead Expenses contained in the June 1988 edition of the

Financial Control and Compliance Manual for General Election

Candidates Receiving Public Financing.

During the review of the GEe's allocations

of payroll and overhead expenses, it was determined that

transactions were coded with two similar but not identical

codes. One was apparently used to qen.rate the purpose of the

disburse.ent on the disclosure report schedules B-P while the

other was a general ledqer code which deter.ined it••• to be -included in the payroll and ove-thead c-a~e-90rles. Ail e-i-iilpl-.-- 0-£

the difference in the two codes is a pa,.ent to a telephone

coapany for a press filing center. Tbe disclosure report would

describe the payaent as a telephone expense, generally an

overhead it... However, for general ledger purposes, this

expense would be charged to a national press category and

SUbsequently billed to the media and not included in overhead.

When the GEe was calculating the co.plianee

exeaptian on payroll and overhead expenses, the report

description code, rather than the general ledger code, vaa used

to identify coats eligible for the ex••ption. Tbe Audit staff

corrected this error and deter.ined that an additional

$85,066.62 should be charged to the spending Ii.itation.

In addition, it was noted that payaents to

certain vendors were considered consulting and included in

payroll. The Audit staff deleted the.e payaents froB the

payroll category and therefore, fro. the pool of expenses

eligible for a 5\ coapliance ex.aption. This adjustsent results

in a $40,201.41 increase in expenditures subject to the spending

limitation. (See Attachment 3 for a listing of the vendors.)

The total increase in expenditures subject

to the limitation for the two categories discussed above is

$125,268.03.
21

In the response to the Interia Audit Report,

the Treasurer states that since the $85,066.62 over-allocation

of adainistrative costs will have no net effect on either the

Coaaittee's expenditure li.its or cash flow, the Comaitt•• has

not expended resources to verify the accuracy or inaccuracy of

said amount. The Treasurer states further that this .aount has

been appropriately reflected on the Reconciliation of

Expenditures Subject to the Spending Limitation.

However, in response to the vendors not

considered payroll and not eligible for the 5% compliance

exemption, which resulted in an addition of $40,201.41 to the

spending limitation, the Treasurer states that the Audit staff

chose to consider the payments at issue as payments to vendors

rather than as payments in the payroll category eligible for the

5\ compliance exemption. He also states that the payments were

for the personal services of individuals and therefore

appropriately considered payroll. The Treasurer acknowledged

that in some cases the payments were paid to the individual's

corporate entity. The response also contains portions of

contracts and a telephone listing to demonstrate that in some

cases the services provided were performed in GEC offices.

The Final Audit Report submitted for

Coaaission consideration stated that, in the opinien of the

Audit staff, the entities included in the Interi. Audit aeport

-finding -are elearly- businesses independent fro. the-GEC-~- -The

fact that a business performs services at a custoaerfs offices

does not cause payaents to that business to beeo.. payroll of

the custoa.r. Though the Audit staff did not propose any change

to the Interia Audit aeport conclusion, it was noted that the

GEC could establish that so•• portion of the work of the.e

businesses was related to coapliance with the Federal Election

C.apaiqD Act and therefore, eligible for a co.pliance ex••ptian.

On October 24, 1991, the Coaaission

considered this matter and concluded that these consulting fees

were for the personal services of individuals and were therefore

includable in payroll costs for the purpose of calculating the

5' coapliance ex.aptian.

f. Expenditures that may be Reimbursed by The

coapiiance Coaaittee

The GEC identified expenditures in their

database that were paid by the GEC but could have been paid by

the Compliance Co.-ittee. A review was done by the Audit staff

of these expenditures and it was deter.ined that the total

a.ount of expenditures that may be paid by the co.pliance

Coaaittee is $651,762.73.

In the response to the Interia Audit Report,

the Treasurer states that "Bush-Quayle does not dispute this

finding,· and in fact believes that there was approximately
·22 -

$750,000 in expenditures which were paid by Bush-Quayle wbich

could have be.n paid by the Co.piiance Co..itt••• "

Included with the GEe's response to the

Int.ria Audit aeport is a calculation siailar to that shown

below. Rowever that calculation includes only those adjust.ents

that the GBC accepts. Tbe GEe concluded that in order to avoid

exceeding the expenditure limitation a transfer in the a.aunt of

$34,892.05 was required. A copy of the transfer check was

included in the materials submitted.

Shown below is a summary of the GEe's

reported expenditures subject to the limitation.
23

Bush-Quayle 88, Inc.

Expenditures Subject to the Spending L1aitatiOft

at March 31, 1990

Audit Analysis

1. Reported Operating Expenditures Subject

to Liaitation from Inception through

March 31, 1990

$51,308,321.85

Adjustments to Reported Totals

2. Less: Offsets to Operating Expenditures (5,336,748.25)

(See Finding II.B.3.a.)

3. Less: Aaount Due the GEe from the Primary (42,519.00)

Coaaittee (See Finding II.S.3.b.)

4. Less: Voided Outstanding Checks For Which No (23,657.24)

Obligation Exist (See Finding 111.0.)

s. Less: Non-qualified Campaign Expenses

(Se. Finding III.C.)

6. Add: Reporting Errors (See Finding II.B.3.e.)

- -- -

-- -,. Add: Accounts Payable (See rinding II.B.3.d.)

8. Add: Reiaburse••nts Due the Co.piiance

Co..itt•• fro. the GEC

(See Finding II.B.3.e.)

9. Add: Prepayaents Made by the Press Not Used

or aefunded (See Finding II.B.l.'

10. Add: aefunds Due Press (See Finding II.B.l.)

11. Add: Pre•• Profit Due U.S. Treasury

(Se. rinding III.A.)

12. L•••: Aaount Reimbursed To The GEe Fro.

The Coapliance Co..ittee In ae.ponse

To The Interim Audit Report

SUBTOTAL

(30,101.26)

82,903.76

18,943.96

85,066.62

61,557.67

133,818.63

95,908.81

(34,892.05)

46,318,603.50

13. Less: Expenditures Which May be

aeiaburaed by the Coapliance

Coaaittee at GEC's Option

(See rinding lI.8.3.f.)

14. Total Expenditures Subject to Liait

(218,603.50) (
!I

~I

~/

Footnotes· to

Bxpenditure. Subject to the Spending LiaitatiOft

Tbe Gle accepts $14,859.00 related to insurance ••peftses

and in r••pon•• to the Interim Audit .eport su~itt.d a

copy of a check received froll the priaary co.-it.t... Also,

as explained earlier a check for $23,520.00 to retaburse

the GEe for a pri••ry coaaittee aircraft charter mistakenly paid by the GEe va. provided.

Th~ GEC accepts this adjustment.

The Audit Staff verified expenditures tota1in9 $651,762.73

which may be reiabursed by the Compliance Committee.
25

Ba.ed on the above analysis, the GEe has exceeded the

limitation at 2 u.s.c. S441a(b)(1)(B) in the a.aunt of

$218,603.50 ($46,100,000.00 - $46,318,603.50). However, this

excessive amount may be resolved by a Co.pltance Coaaitt•• reimburse.ent to the GEC for expenditures which could have been

paid by the Coaplianee Coaaittee. It should be noted that the

Compliance Committee is due a $85,066.62 reimbursement from the

GEC (see 18 on page 23). Therefore, the Compliance Comaittee

may reimburse the GEC a net amount of $133,536.88 ($218,603.50 - $85,066.62) to offset the excessive amount noted above.

Recommendation IS

The Audit staff recommends that the Compliance Committee

reimburse the GEe $133,536.88 for expenditures that may be paid

by the Coapliance Committee in order to reduce GEe expenditures

subject to the expenditure limitation. It is further

recommended that a copy of the negotiated check used to effect

the reimbursement be submitted to document the transaction.

C. Matter Referred to the Office of General Counsel

Another matter noted during the audit has been

referred to the Coaaission's Office of General Counsel.

III. Findings and aeco..endations Related to Title 26 of the

United States-Cod.

A. aeiaburseaents for Transportation and Services

Made AvaIlable to Reaia Personnet

Section 9004.6(d)(1) of Title 11 of the Code of

Federal Requlations states that a co..itte. may deduct froa

expenditures subject to the spendiDg li.itatien reiaburs...nts

received for the direct cost of providing air transportation and

ground services to the aedia plus an additional 3' of direct

costs representing adainistrative expen••••••ociated with

providing such services. If the coaaitte. wishes to deduct aore

than 3' for adainistrative expen••• the co..itt•• aust docuaent

the total cost incurred for such .xp.n.... Reiaburseaents

r.ceived in excess of the direct and adainistrative costs are

repayable to the u.s. Treasury.

A. noted above in Finding II.B.l., the GEe received

relahue•••ents fro. the ••dia for air transportation and ground

servic.. that exceeded the aaximua billable a.ount for such

expenses (110' of direct costs of providing th. services) and

as a result, it is recoaaended that the excessive a.aunts be

refunded to the appropriate ••dia organizations. It is also

noted that the difference between the reiaburse.ents equal to

110\ of cost (aaxiaua billable amount) and 103\ of cost (cost

plus a 3\ allowance for adainistrative expenses) is repayable to

the u.s. Treasury. That a.aunt is $95,908.81.
c·

26

Recoaaendation 16

The Audit staff recommends that the Commission make an

initial determination that, absent a showing of administrative

costs in excess of 3\, the GEC repay $95,908.81 to the United

States Treasury.

B. Determination of Net Outstanding Qualified Caacaign

Expenses

Section 9004.9(a) and (b) of Title 11 of the Code of

Federal Re9ulations state, in part, that each candidate shall

submit a statement of net outstanding qualified campaign

expenses no later than 30 calendar days after the end of the

expenditure report period. The candidate's net outstanding

qualified campaign expens~s equal the difference between (1) The

total of: (i) All outstanding obligations for qualified caapaign

expenses; plus (ii) An estimate of the amount of qualified

caapaign expenses that will be incurred by the end of the

expenditure report period; plus (iii) An estimate of necessary

winding down costs; LESS (2) The total of: (i) Cash on hand;

{ill The fair market value of capital assets and other assets on

hand: and (iii) Amounts owed to the caapaiqn in the form of

credits, refunds of deposits, returns, receivables, or rebates

of qualified caapaiqn expenses; or a co..ercially reasonable

a.ount baaed on the collectibility of those credits, returns

receivables or rebates.

In April 1990, the GBC presented a statesent of Net

OUtstanding Qualified Caapaiqn Expenses (WKOQCE-) to the Audit

staff depicting its financial position at April 19, 1990. The

Audit staff reviewed the available books and records to verify

the totals on the NOQCE and developed the statement shown below.
ANALYSIS or BUSB-QUAYLI 88 INC.

STATBHBNT OF MET otrrSTAlDIMG QUALIFIED

CAl4PAIGN UPlRSIS AS or APRIL 19, 1990

AUDIT GIC !!!!! Ga:

ASSBfS

cash on Hand $ 65,817.27 !/ 41,696.77

Accounts Receivable 42,948.25 !!/ -0-

Due fro. the Coapliance 253,495.55 ~I

COfillittee

Capital Assets -0- -0-

......_~ Other Assets -0- -0-

Total Assets $362.261.07 S 41,697.0

.,.-, - -LUBIIJ."D:BS

~:-" Accounts Payable 16,010.60 !!' 9,782.00

Batt_ted Vinci Dovn -0- eI 33,549.00 !'

let.burseHllt due

''''"',.. Coapliuce Fund froa GEe 85,066.62 II ..0-

Tray.l Prepa)'IMtDta Not

Used Due Pru. 61,557.67 -0- T-../"

c ,

Refunds Due Pres. 133,818.63 ..0-

Press Profit Due u.s.

Treasury 95,908.81 -0-

Total Liabilities 392,362.33 43,330.00

Net Outstanding Qualified

Caapaign Expenses (Deficit) <a 1Q,1Q1,26)!' <3 1,633,09:
!!I

£/

!/

~/

!/

It.t00027Q

28

Footnotes to NOQCK

Cash on hand has b.en revised from $42,160.03 to $65,817.27

due to the addition of $23,657.24 in voided outstanding

checks for which no obligations exist. (S.e Finding

III .0.)

This amount includes a $42,519.00 receivable from the

primary Committee. The receivable from the Priaary

Committe. includes $4,140.00 for equipment, plus $14,859

for over allocation of insurance to the primary Co..itt.e,

plus $23,520 submitted by the Primary Committee to

reimburse the GEe for an aircraft charter incurred for

travel to the convention on 8/16/88 mistakenly paid for by

the GEC. The GEe accepted the Audit staff adjustment for

insurance premium. and in response to the interim audit

report submitted a copy of a check from the primary

committee in the amount of $14,859 (See Finding II.B.3.b.).

Also included is a $429.25 refund reported by the GEC in

its year-end 1990 FEe disclosure report.

This a.aunt is a receivable due from the Compliance

Coaaittee to reimburse the GEe for expenditures that CQuld

have been paid by the Compliance Coaaittee. This a.ount

includes $34,892.05 reimbursed in response to the interia

audit report ba.ed on the GEe's calculation using only

those adjust••nts accepted by the GEC. (See Fi~d~~9

II.B.3.'

This a.ount include. payables of $9,777.82, checks

written after 4/19/90 which total $2,941.80, and a

$3,290.98 disburse.ent reported by the GEe in its second

quarter 1991 FEe disclosure report.

During the period 4/1/90 through 6/30/91 the GEC

reported apparent wind down expenses totaling $110,630.26.

The Audit staff do•• not recognize these expenditure. aince

their inclusion vill result in the GEe exce.ding the

expenditure liaitatian. Wind down incurred by the GEe may

be paid by the Coapliance Coaaitt.e.

Given that absent a reiaburseaent fro. the Coapliance

Coaaittee the GEC will exceed the spending li.itatian, it

is assuaed that additional winding down expenses will be

paid by the Co.pliance Coaaittee.

This a.ount represents an over allocation by the Coapliance

Co..ittee for payroll, payroll taxes, and overhead

associated with the National Caapaign Headquarters. (Se.

rinding II.B.3.e.)

Represents amount over billed the Press by the GEC for

travel. (See Finding II.B~l.)

This- a.ount represents non-qualified caapalqn expen••• repayable to the u.s. Treasury pursuant to 11 c.r.R.

S9007.2(b)(2). (s•• rinding III.C.)
29

Conclusion

AS adjusted by the Audit staff, the GEe's NOQCE state••nt

shows a deficit in the amount of $30,101.26 which repre.ents

non-qualified campaign expenses repayable to the United State.

Treasury pursuant to 11 C.F.R. S9007.2(b)(2). (See Finding

III.C.)

c. Non-Qualified Campaign Expense

Section 9003.4(a)(1) of Title 11 of the Code of

Federal Requlations states that a candidate may incur

expenditures before the beginning of the expenditure report

period if such expenditures are for property, services or

facilities which are to be used in connection with his general

election caapaign and which are for use during the expenditure

report period. Such expenditures will be considered qualified

campaign expenses. Examples of such expenditures include but

are not limited to: Expenditures for establishing financial

accounting systems expenditures for orqanizational planning and

expenditures for polling.

Section 9002.12(a) of Title 11 of the Code of Federal

Regulations states that in the case of a major party, the

expenditure report period begins on Septeaber 1 before the

election or on the date on which the major party's pre.icie~~Jal

noainee is chosen whichever is earlier; and the period ends 30

days after the Presidential election.

In the Interia Audit Report the Audit staff included a

receivable fro. George Bush for President, Inc. (Primary

Coaaittee) of $30,101.26. This a.ount was for travel and White

Bouse co..unication costs incurred prior to the party's

convention (Auqust 2, 1988 through August 9, 1988) and paid by

the GEe. These expenses do not meet the require.ents of 11

c.r.R. 59003.4(a)(1) for pre-noaination expenses the GEe could

incur, and therefore were considered a priaary election expense.

In re.ponse to the Interim Audit Report, the Treasurer

states -the President's travel in the week of Auqust 2 through 9

were appropriately charged to the Gle." The Treasurer reasons

that "by the suaaer of 1988 all of the presidential pri.aries

had been coapleted, and Vice President Bush was assured of his

party's noaination. Thus, the campaign properly undertook to

determine whether Vice President Bush's travel during this

poat-priaary period was noaination or general election related.

Expenses were paid by either George Bush for President or

Bush-Quayle 88 in accordance with this determination." The

Ttdasurer states further, that "the Coaaission has previously

permitted qeneral election committees to pay expenses

attributable to the general election which are incurred prior to

the general election period", and the Treasurer refers to

Reagan-Bush Audit of 1984 as support for this statement.
30

The Treasurer's reference to the audit report on the ••a,an-Bush '84 co.-itt•• does not support his contention. In

that ca•• there were two groups of expense. that were diacussed.

The first group included expenses paid by the primary e~ttee

and subsequently reimbursed by the general election co.-ittee.

After the submission of documentation, it was determined that

th••• expenses were for goods or services that met the

require.ents of 11 c.r.R. 5 9003.4. The second group of

expenses included get-out-the-vote and voter registration

expenses incurred in states where the primary election had past

but prior to the date of the nominating convention. Th••• expenses had been paid by the primary committee althouqh they

arquably benefited the general election effort. The Coaaission

determined that these expenses were properly paid by the primary

coaaittee.

The Audit staff does not dispute that by Auqust of

1988 all primaries were over or that the Candidate appeared to

be assured the nomination. In addition, the Audit staff concurs

with the Treasurer that the travel expenses should not be

considered a primary election expense. However, 11 C.r.R. S

9003.4(a)(1) states that only expenses for property, services,

or facilities to be used in connection with the candidate's

general election caapaign during the expenditure report period

may be incurred before the expenditure report period. Bxaaples

of such expenses are expenditures for establishing financial ------aeea-ullt-luq --system. ,--expenditures -£or- organi-zational p-lamrin-g,

and expenditures for polling. In the opinion of the Audit

staff, the travel costs discussed above do not •••t tbe

definition of peraissible pre-expenditure report period expen••• and therefore should be considered a non-qualified eaapaign

expense •

••co..end.tioD .7

The Audit staff reco..ends that the Coaais.ion .ake an

initial deter.ination that $30,101.26 in non-qualified c.-paign

expen••• is repayable to the United States Tre.sury pursuant to

11 c.r.a. S9007.2(b)(2).

D. Stale Dated Co__ittee Checks

Section 9007.6 of Title 11 of the Code of Federal

Regulations states that if the coaaittee has checks outstandinq

to creditors or contributors that have not been cashed, the

coaaittee shall notify the Coaaission. The coaaittee shall

infor. the Coaalasion of its efforts to locate the payee., if

such efforts have been necessary and its efforts to encourage

the payees to cash the outstanding checks. The Coaaitt.e shall

also sub.it a check for the total a.ount of such outstanding

checks, payable to the United States Treasury.
31

The Audit staff performed bank reconciliationa through

March 31, 1990 and deterained that the total a.aunt of

outstanding checks was $70,284.19. Of this amount, $43,349.88

vere for checks dated between AU9ust, 1988 and June, 1989!/.

In the Interia Audit Report, the Audit staff

recoaaended that the GEC present evidence that:

a) the checks are not outstanding (i.e., copies of the

front and back of the negotiated checks) ; or

b) the outstanding checks are void (copies of th. voided

checks with evidence that no GEe obligation exists,

or copies of negotiated replacement checks) ; or

c) the GEe attempted to locate the payees to encourage

to cash the outstanding checks or provide evidence

documenting the GEC's efforts to resolve these items.

The Audit staff added that they would review any

information provided and would recommend that the Coaaission

aake an initial determination that any amounts which re.-in

outstanding are payable to the United States Treasury.

In the GEC's response to the Interi. Audit aeport,

they subaitted docuaentation illustrating the disposition of -- -n3~-6Si-~-24- of- the.e -CheCkS- which -nad-D.-.I\--c-on.-iQeted---s-~al.--

da~ed. A cbeck aade payable to the United States Treasury in

the a80unt of the r...io1og $19,692.64 ($43~349.88 - $23,651.24) was included with the respon•••

In addition, it should be noted that one r...in1ng

contribution refund check, in the a.ount of $500.00, was still

outstanding at the ti.e of the response (S•• rinding II.A.i.).

In su..ary, the Audit staff haa deterained that the

revised total a.ount of stale dated outstanding checks is

$500.00 •

••co..endation 18

The Audit staff recomaends that the Co..ission make an

initial deter.ination that $500.00 be paid to the United states

Treasury pursuant to 11 C.F.R. 59007.6.

!/ The reaaining $26,934.31 in outstanding checks cleared the GBC~s accounts after March 31, 1990.
B. aecap - Aaounts Repayable to the United Stat•• Tre.sury

Pr••ented below is a recap of the amounts reco...nded

by the Audit staff as subject to the repayment provisions of 11

C.F.R. SS9004.6(d)(1), 9007.2(b)(2) and 9007.6.

Profit fro. Press Travel

Non-qualified Campaign Expenses

Outstanding Check

Total Recomaended Repayment

95,908.81

30,101.26

500.00

5126, 519,97
BUSB-QUAYLB 88

PINAL AUDIT REPORT

Vendor Payments Charged to Payroll

IIJ000279

Attach••nt 3

Name

Amount of Consulting

Payments Received

Ailes Coaaunications $ 539,554.16

Coldwater Corporation 115,000.00

,"'""'-- ~;

Market Opinion a•••arch 72,500.00

Margaret Noonan Rahn 50,000.00

Thoapson Bu.in••• - ---- --

r" Service. 17,424.00 "-

c-...... Doug Gallble 9,SSO.00

TOTAL PAYllBR'rS S 8Q.,Q2B,16

.......
BUSS--QUAYLB88

fINAL AUDIT R.!'OaT Attacha8nt 1

page 1 of 21 ...

BBI'ORE TBB FEDERAL ELEC'rION COJaaSS:ION

City of Washington

District of Columbia

)

)

)

Audit. ot Bush-QUayle 88

AFFIDAVIT OF DAVLD BECKWITH

DAVID BECKWITH, first being duly sworn, deposes and

says:

1. I am David Beckwith. I was the White House

correspondent for magazine and was assigned to travel

with the Bush campaign from the start of the campaign in the

fall of 1987 throuqh the end of the 1988 election.

2. For the earlyaonths of the p~~ _c~~ there _

was no press plane. However, as the priJlaria. grew closer,

the preas d8ll8Dds on Air Porce II becuIta tao heavy because

Air Force II can only carry approxt.ately six reporters at a

tble. The C"-.paign responded to this pressure by chartering

a plane for the press.

3. In the early phase of this chartered pre•• plane,

there were few reporters and correspondinq very hiqh costs

for press travel. The press was greatly concerned about the

cost of this travel because no press organization had an

unlimited bUdqet for campaign travel. We were, therefore,

all very aware (even those who traveled periodically, and not

regularly) of the costs of travel on the press charter.

Virtually everyone kept an eye on the costs and was
BUSB-QUAYLE 88

FINAL AUDIT RBPORT

- 2 -

At.tach••nt 1

... Page 2 of 21

interested in thea because we had to justify these cost.. to

our orqanizations.

4. When the press plane began, the travelling pre••

made the decision to have support persons from the Bush

campaign staff (billing, advance, baggage, press) travel on

the press charter with us at our expense. It was the

consensus of the press that it was extremely important to

have these campaign support personnel on the press plane to

service the press. There was no formal decision-making

process for this conclusion but it was the overwhelming

consensus of the travelinq pre... The travelling press held

a--series -of- informal meetinqs and -inforaed the <:aJIPaiCJl\ that

this was our decision. Whenever new press travelen joined

us, they were informed of the fact that the.. support

personnel were traveling with us at our expense and they

overwhelming bad no objection. In fact, the pres. was eager

to have thea. people aboard the plane, ancl wa. therefore

willing to absorb any costs associated with their travel.

5. campaign travel for the press is always Chaotic.

Anything that can smootb the process is financially worth it

to members of the press. Our plane was seldom completely

full and occupancy went up and down considerably depending on

the travel itinerary, the events, the day ot the week, etc.

It was our press plane, it was going anyway, and we were

going to be paying for it anyway. We saw no additional cost
CBUSB-QUAYLI 88

FINAL AUDIT REPoaT

- 3 -

Attachaent i

.a,e 3 of 21 ...

to us, and we regarded .the benefit of th.ese pres. support

personnel as invaluable.

6. The reasons these support personnel were so

important to us members of the traveling press were as

follows:

1) We wanted somebody who could tell us why we were

qoing to one place and not another. It was extremely

important for us to be kept up to date on possible chanqes in

campaign schedules, or other plans. It was useful for us to

have direct access to the caapaiqn for this purpose.

2) W. needed somebody tuned into the advance otfice who

could -tell -us the---na'ture -of--the- -events at th.--day-'-s---s~ops-.

WOUld there be telephones on the ground? Would there be a

fl1inq oftice? What was the schedule -- would there be

enough till. between events to call in our stories and, for

the broadcast press, to file? The•• nuts and bolts of

caapaiqn logistics were treaendously important. to Il81Ibers of

the press because most of us were on deadline. W. needed.

soaeone who could answer these questions promptly, and who

could convey our concerns' and needs to the campaign.

3) The baqqaqe function performed by these support

personnel was also essential. The belly of the plane was

filled with tape machines, spare videos, and tripods, as well

as all of our personal lUCJgage and equipment. SOIle of this

stayed in the baqgage hold until the end of the day but, some
8USR~QUAYLlr '~_~. .. - rXNAL AtJt)tT U1'OIlT

- 4 ..

Atteachae"t 1

'age 4 of 21 ...

of it. had to be off-loaded. at: each s1:op. This va. a vezy

complicated process and we needed somebody from the campaiqn

who knew the equip.ent, and who knew us, to distinguish

between what was to be oft-loaded at a stop and what remalned

in the hold. This was particularly important because time

was often so short at a stop, and we ourselves could not have

done it.

4) The billinq and attendance function was also

particularly important to us. The traveling press is a very

unstructured qroup, with people runninq on and off the plane

at each 1eq. Soaeone needed to take attendance during each

1ecJ--t.o--enaur.---t;ha't~-all~1Ie1Ibers-otth.-~--prus--~riv81Inqon--thi--

plane paid for the 189. There vere jokes abou~ people hiding

in the lavatory while at1:anclaDce was taken, but in fact, it

was important to ensure that all 1IUIbera of 1:11. preas paid

their fair share. This was not a siJlple function because

soa. people would juap on at th. last minute unexpectedly and

others who had planned. to travel would be left at an event

because of their deadlines or a chang_ in timing. The

billing support person also planned ahead for us, obtaining

estimates of expected occupancy of the plane on future days

and using those estimates to plan for the size of the plane

that needed to be chartered. Since the travelinq press is

not a orc.Janized group, the caapaign support p.rson's job was
BUSB-QUAYLE 88

FINAL AUDIT RBPoaT

- 5 -

Attachaent 1

....Pag. 5 of 21

to take our temperature and do this lonq-ranqe piannin; for

us.

5) Finally, we needed accurate bills submitted proaptly

and broken down by person, leg, and daily costs, so that w.

could know for our own bUdgetary purposes how much was being

spent on travel on a day-to-day basis. This enabled us to

determine how much future travel we could afford, and for

broadcasters, whether to send a crew on the plane' or just use,

local personnel.

7. For all these reasons, it was very important to us

to have these cuapaiqn support personnel on our press plane.

--tt qave -us access to them during -the down period in our

coverage which was the IIOS1: efficient way to do it. This

down time was often our only opportunity to di8CUSS our

loqistical concerns with support personnel. It also ensured

control over Who was on the plane, and who qat billed.

Opportunities for abuse would have been very high without

sOIleone there perforaing this function. Accordinqly, the

press eaqerly supported travel by theae support personnel on

the press plane at the press' expense.

8. Only some·ot these functions, such as billing,

could have been performed by campaign staff had they not

actually travelled on the press charter. In the opinion of

the press on the plane, even this function was performed in a
BtJSS-QUAYLI _8e

PINAL AUDIT 'aBPOa.,

- 6 -

Attach.ent 1 ..'898 6 of 21

way more convenient to -us by personnel actually trav811inq

with us.

The above information is true and correct to the best of

my knowledge.

Washington, D.C.

Subscribed to and sworn before me this 15th day of

March, 1991.

~tz Jf&,!Li.(( Notary Public

My--ComLisaion-- Expires:---.1-...-51---95--- -
- BUII1-QUAYLB 88

tl~L AUDIT RZPORT Attachaent 1

,a9. 1 of 21 ...

BEFORE THE FEDERAL ELECTION COm.ISSIOR

City of Washington )

)

District of Columbia )

Audit of Bush-Quayle 88

AFFIDAVIT OF WILBER CLINTON FISHER, III

WILBER CLINTON FISHER, III, first beinq duly. sworn,

deposes and says:

1. I am Wilber Clinton Fisher, III. I served as

a Press Support Staff Person for the Bush-Quayle 88 Ccmait't.ee

__ (hereinafter- -"-the Comaitt';eeR } - durinq -tha--198-a---l,;tifterilElection cmapaiqn.

2. During the general cmapaign, I flew on an

airplane chartered by the Caaaitt.. to transport the pre.s

who covered the campaign. My primary duties were to provide

travel asaistance to the press entourBCJ8 that trav.led with

the Bush-Quayle general election ca-paiqn and to handle the

physical loqistics involved with their presence. One other

press support staff person also travelled on the saa. fliqhts

as my.elf and shared these responsibilities.

3. I was responsible tor the transfer of press

baCJ9age and equipment on and oft the plane. BaCJCJag8 calls

be9an most mornings during the caapaiqn between 4: 30 a.m. and

5:30 a.m., and I ensured that all press baqgage vas collected
BUSB-QUAYLE 88

FINAL AUDIT R!POR~

- 2 -

Attacb••nt 1

page 8 of 21 ...

and transported by van froa the ho1:el and was loaded on the

plane. Each eveninq, it was m.y responsibility to have

luqgage transferred from the plane to the hotel rooms of the

press. When porters or bellhops were not available, I

personally delivered the luggage. The press also contact.d

me in the case of lost luggage, and I would track down the

misplaced baggage and deliver it to their roo•••

4. I also served as a liaison between the press

and the in-flight crew of the chartered air service. On

occasion, I negotiated with the air carrier to arrange for

upqrades in meals, delivery of carry-out food (such aa pizza,

--tacos, -fast£ood, etc.r -and a-variety tilth. manu itBs tor

the press plane, when the press requested it.

5. Lastly, I vas responsible for CrM1:1ncJ a

"Difest (list of pa••enqers) for the plane, calculat.ing the

proportional shares of expenses for the air travel of the

press who travelled with the caJlPaiqn, and charqinq aeabers

of the press for their share of expenses. My dut:i.. in this

regard also included collectinq and returning credit cards to

the press, making credit card imprints for paYJltUlt, and

supervising the physical l:OCJistics for the pr... which

accompanied the campaign.

6. Because I travelled on the pres. plane tor the

purpose ot servicinq the press, my airplane expenses were
.WS:'OUAYLI:88

PINAL AUDl'f- •••08'1'

- 3 -

Attactuaent 1

Page 9 of 21 ...

divid.ed pr:oportioftally~a.on9and paid for by the pre••

persons whoa I served on each trip.

The above infonaation is true and correct to the best of

my knovledqe.

Washington, D.C. <tI

Subscri.1:Had to and. sworn before me this lillY day of

Karch, 1991.

~~~f·'!tA~ My Ctmaission Expires: 1/4'ifi
Attachaeftt 1

.age 10 of 21 ..

BEPORE THE FEDERAL ELECTION COMKISStOH

Cit.y of Washinqton

District of Columbia

)

)

)

Audit of BUSh-Quayle 88

AFFIDAVIT OF DANIEL RANDOLPH Dt ARMOND

DANIEL RANDOLPH D'ARMOND, first being duly sworn,

deposes and says:

1. I am Daniel Randolph 0'Armond. I served. as

Tthe Manager of Press Accounts ReceiVable for the Bush-Quayle 88

"COIIIIittee 'Cherei-nlifter:' -'lith. C01IIai.ttee"} durinq the 1988

General Election caapaiqn.

2. In connection with the 1988 qeneral election

caapaiqn, the committee chartered an airplane solely for the

purpose of transporting the ..81Ibers of the press ent.ourage

that traveled with the Buab.-Quayle general election caapaign.

I flew on the airplane chartered by the Committee for the

press entourage froll AUCjUst until October, 1988, when I

returned to the campaign heaaquarters to concentrate on other

accounts-receivable'responsibilities for air travel.

3. There were always four members of the

committee staff that flew on the press plane tor the purpose

of providing service to the press. Two staff persons ware

designated "press" and two "accounting. II The C01l1littee staff
aUSB-QUAYLE 88

PINAL AUDIT REPORT

- 2 -

Attach••nt 1

paCJe 11 of 21 ...

would not have traveled with the press nor provided. support

services to the press but for the press' request that the

committee provide the.e services.

4. The press staffers serviced the press by

maintaining an advance reservations list for each flight so

that members of the press planning to travel with the Vice

President could be assured of a seat on the plane. Other

responsibilities included, making hotel reservations,

performing clerical tasks for the press (such as copyinq and

distributing press pool reports), and providing logistical

support to the press entourage. These staffers kept the

press infoned -of travel arranqeaents, ho~el and ...1 plans,

and. served as an escort to the preas to and froa public

appearances and photo opportunities.

5. As one of the two accountinCJ support

personnel, my primary duties were to provide travel

assistance to the press entouraqe that traveled with the

Bush-Quayle general election ca-paiqn and to handle the

financial and physical loqistics involved with their

presence. Additionally, I was responsible tor caaputing the

Committee's costs for the airplane providinq transport to the

press who covered the campaign.

6. I was also responsible for the transfer of

press baCJCJaqe and equipment on and off the plane. Bagqaqe

calls began most mornings during the campaign between 4:30 a.m.
BUSB-QUAYLE 88

FtNAL AUnIT RBPoaT

- 3 -

At.tacb••ftt 1

paCJe 12 of 21 ...

and 5:30 a.m., a-nd I ensured. that all pre.s baCJCJaC)e va.

collected and transported by van from the hotel and was

loaded onto the plane. Each evening, it was my

responsibility to have luggage transferred from the plane to

the hotel roollls of the press. When porters or flight crew.

were not available, I personally loaded or delivered the

luggage. The press also contacted me in the case of lost

luggage, and I would track down the misplaced baggage and

deliver it to their rooms.

7. I also served as a liaison between the pres.

and the in-flight crew of the chartered air service. I

--negotiated with the- air carrfer to arraDq. for upgrades in

...ls, delivery of carry-out food (such as pizza, tacos,

tastfood, etc.) and a variety in the beveraq•• and .-nu it...

for the press plane.

8. Lastly, I was responsible for creating a

manifest (list of pas.engers) for the plane, calculating the

proportional shares of expenses for the air travel of the

press who traveled with the caapaign, and facilitating

payments for meabers of the press. My duties in this reqard

included collectinq and returning credit cards to the press,

making credit card imprints for payment, and forwarding the

manifest and credit card imprints to the Committee's offices

for processing.
aUSB-QUAYLI: 8e

'FINAL AUDIT REPoaT

- 4 -

Att.ac:baent 1 ..'age 13 of 21

9 • Because· I 'traveled on the preas plane for ~.

purpose of .ervicinq the pre••, my airplane expenses were

divided proportionally among and paid for by the press

persons whom I served on each trip. As the above description

indicates, the services I provided were similar to those

usually provided by travel agents or airline personnel in

commercial travel situations.

10. I am familiar wit.l;, the payment arrangements

for members of the press traveling in the chartered airplane

which accompanied Air Force TWo during the general election

ca:apaign. The total costs of a single segaant of a fllC)bt

vaa--COlIPuted--anct then -dlvi'ded--by ttl.--nWaber of all persons on

the plane. Then, the per person coata for the four Coaaitt:..

staffers on the plane were spread aJIOD(j the pres. persons on

the plane tor that particular s89IlfUlt of the flight and added

to the travel costs of each aewaber ot the pr••s.

11. The a81lbers of 'the preaa Who flew on the

C01IIIittee-provided press plane were coapletely aware that

they were paying for the air travel expense. of the four

committe. staffers who serviced their air travel and agreed

in advance that they would·be paying for th••• service••

12. In addition, the members of the press were

billed for their own ground transportation and the costs of

establishing filing centers (telephone banks exclusively for

the use of the press from which they could promptly file
= - -,-- -, - --- --_::.~ _. - - - - --

8UI8-OUAn._--~~8~_-- - FINAL AbDI'f Jt.~ll'l

- 5 -

Attachaent 1

Page 14 of 21 ....

their reports with their neva services atter a c-.paiqn

ev.nt).

The above information is true and correct to the best of

my knowledge.

Washington, D.. C.

March,Subscribed to and sworn before me this /#r_ 1991. day of
~~i~~~ -----~-- ~-~~ ~-' ~~_:~- ~~~~0~~l~~~~~f{~:~_~:~~

---'~' ~~8USR-QUAYLB 88

FINAL AUDIT REPORT Attachaent 1

Pate lS of 21 -.

BEFORE THE FEDERAL ELECTION COMMISSION

city of Dallas

state of Texas

)

)

)

Audit of Bush-Quayle 88

AFFIDAVIT OF MICHAEL SCOTT SEARS

MICHAEL SCOTT SEARS, first being duly sworn, deposes and

says:

1. I am Michael Scott Sears. I served as a Press

support Staff Person for the Bush-Quayle 88 co1l1llittee

(hereinafter "the C01llmittee_"Jduring the 198a---~~--­

Election campaign.

2. Durinq the qeneral campaign, I flew on the

airplane provided by the C01IIlittee to transport the press who

covered the campaign. My pri1lary duties were to provide

travel assistance to the press entouraqe that traveled with

the Buah-Quayle general election campaign and to assist the

caapaiqn •s accounting staff so that the press organizations

were billed promptly and appropriately for their

representatives who traveled on the press plane. One other

press support staff person also traveled on the saae flights

as my.elf and shared these responsibilities.

3. I was responsible for the transfer of press

baqqage and equipment on and off the plane. BaCJCJaqe calls

beqan most mornings during tbe campaign at 4:30 a.m., and I
BUSB-QUAYLI 88

FINAL AUDIT .SPORT

- 2 -

Attach.ent 1

page 16 of 21 ...

ensured that. all press ba9CJaqe was collected and transported

by van from the hotel and was loaded on the plane. Each

evening, it was my responsibility to have luqgage transferred

from the plane to the hotel rooms of the press. When portera

or flight craws were not available, the other press support

person and I personally loaded and delivered the luggage.

4. I was also responsible for creating a manifest

(list of passenqers) for each seqment of travel on the press

plane, calculating the proportionate shares of expenses for

the air travel of the press who traveled with the campaign,

and c:bar9ing meabers of the press for their share of

expensu.-My- duties in this reqard included colleC'tinq and

retumincJ credit cards to the press, aalt1nq credit card.

i1Iprints for payment, and forwardinq the manifest and credit

card ilIprinta to the caapaiqn's office tor processinc;• . , s. Because I traveled on the press plane for the

purpose of ••rvicing the press, my airplane expense. were

divided proportionally among and paid for by the pres.

persons whoa I served on each trip. I remember on one

occasion durinq the general campaign, one reporter balked

because his company was being charged for the flight expenses

of myself and the other press-assisting staff who traveled on

the preas plane. At that point, the campaign informed him

that our only role was to assist the press on the plane and

that if he didn't wish to pay for this service, he could make
_- --~~~-:r"- --~~ -

~:c~ltJSR~QuAYLa "18

fINAL AUDIT a.POrt\,

- 3 -

Attactuaent 1 ..'a'8 17 of 21

-"--

hia own arraraqeaenu for hi. lUCJCJaq8 and equipmen<t. Inst.ead,

he requetrt.acl ~t we provide the service, and aqreed to share

the cost of my ~vel expense. along with the other members

of the pr••••

The above information is true and correct to the best of

my knowledqe.

Michael Scott Sears

Dallas, Texas

1 3---- ----day- o-f

Qh

Rotary

)~\~C~ Publ1.c

My c01Iaissian Expires: 4/t9/93
BUSB-QUAY'LI 88

PINAL AUDIT RBPORT Attach.ent 1

Pa98 18 of 21 ...

state

Audit of Bush-Quayle 88 City

BB1'ORE THE FEDERAL ELECTION COMMISSION

.-~

~tt. fl OF-~Jq- Of~S~ )

Of~ _~

~l~

AFFIDAVIT OF MELISSA COMPTON A~SON

MELISSA COMPTON ~SON, first being dUly sworn, deposes

and says:

1. I am Melissa Compton Allison. I served as the

Press Travel Coordinator for the Bush-Quayle 88 Cammittee

(hereinafter "the Committee") during the 19~8 Ge~~r~~_

Election Campaign.

2. In connection with the 1988 general election

campaiqn, the committee chartered an airplane, solely for the

purpose of transporting the m8llbers of the pre•• entourage

that traveled with the Bush-Quayle general election campaign.

As part of my job responsibilities, I flew on the airplane

chartered by the c01IDIittee for the press ent.ourage.

3. As the Press Travel coordinator, my job

responsibilities included creating a list of the press

representatives that anticipated flying on each segment of

air travel by the press plane to insure that the plane was

not overbooked. This manifest was for purposes of advance

planning, as opposed to the final manifest of • .-bers of the

press on any-given flight which was constructed once a flight
BUSB-QUAYLE 88

FINAL AUDIT REPORT

- 2 -

Attachllent 1

paCJe 19 of 21 ...

began by actually walking the aisles of the plane and

recording names.

4. Based on these advance manifests and the

reservations for air travel provided to me by the press, I

also made hotel reservations for overnight accommodations tor

those members of the press on the plane at the end of each

day. The press representatives desiring this service gave me

their credit card numbers which I would telecopy to the

hotels to confirm these reservations and to facilitate their

charging the press accordingly. Because the reporters and

photoqraphers constantly joined on and dropped off the pre••

plane,-it- -was impossible- --to Jiake ~ese-liotel arran9..ents

vi1:hout being on the plane and readjustincJ the reservations

on each s~nt of travel.

5. In addition, I perforaed clerical functions

for the press during their air travel, like COPYin91

collating, and stapling daily itineraries and other

..tarials. For instance, when Vice President Bush made a

curpaign appearance in which all traveling m8Jlbers of the

press were not permitted to attend, a press pool was created

of representatives to cover the event and provide a pool

report. My job was to copy and distribute th••• reports so

that the remaining press members could file news accounts

with their own media orqanizations. These reports were not
IUSB-QUAYLE 88

FINAL AUDIT Ba'ORT

- 3 -

At.tacbaent 1

Pa,_ 20 ot 21 ..

materials prepared by the caapaign, but rather reports

writt.en by the designated members of the press pool.

6. Once the pre.. plane landed, I was .ssigned to

one of the buses (or other ground transportation vehicles) as

a press escort to the Vice President's caapaign event. This

entailed answering the press' questions about meals, the

nature and timing of the event, the facilities provided to

the press for filing their reports, overnight accommodations,

etc.

7. I was also responsible for logistics and

general assistance to the press. For instance, whenever a

press representat.lve -i-ost a briefcase, a coat, an UJlbrella,

81:C., it:. vas my job to rettaca the cuapaiCJ1l trail to various

rutaurants, hotels, or vehicle. for the purpose of

retrieving it.

a• I did not purport to act as a spokesperson

for the ca.paiC)1l or the Vic. President on any issue of

substance in the cuapaign, and that fact was uniforaly

understood by the pre... My role was to acco1lllodate the

press' needs in connection with their travel arranqaaents and

provide assistance with the loqistics ot that travel.

9. Because I traveled on the pre•• plane for the

purpose of servicing the press, my airplane expense. were
BUSH-QUAYLE 88

PINAL AUDIT RBPOR~

- 4 -

Attach••llt 1"

... Page 21 of 21

divided Proportionally aaonq and paid for by the preas

persons whom I Served on each trip.

The above information is true and correct to the beat of

my knowledge.

day of

My Coai.aion Expires:__~""Wtp._.

Melissa

tk~'OR If' _ lju,t:ldrd Da s, T~

Subscribed to and S fore me this March, 1991. /"
IUOOO348

At'bC2IBfr 2

.... 1 of 2

Caleulation of Refunds Due the Press

and ~ts Due tb. U.S. Treasury

BUSH PRESS PLANE

Caleulation of the AlKmnt Due the Press

Air Transportation.

and Ground Costs

Add:

Travel Bxpense-Support

->", Salary Bxpeaae SUpport

Daily Staff Bxpeose SUpport

Total Add!tions

Billable --COSu-ter-AUilt ---

Maxi•• Billable ....t

Mount B.eeelved rrc. Pnss

124,680.84

35,306.97

12,718.00

$1,994,539.70

172,705.81

-- --- 2-,-167-,U5-~-Sr

216,724.55

2,383,970.06

2,255,178.73

-0-

Billable Costs

Billable Cost Plus 3%

Less: Mount Ieee!vecl

Pre- the Pnss

Mount Repayable to U.S. Treasury

$2,167,245.51

65,017.37

s

2,232,262.88

2,255,178.73

22,915.85
Air Transporation

and Ground Costs

Add:

Travel Expense-SUpport

Salary Expens~SUpport

Daily Staff Expense-Support

Total Additions

_, Billable Costs Per Audit

- Add: 10% Mark-up

Maxi•• Billable Mount

'OUIlt Received Prca Press

Calculation of Mount Due the Press

$ 893,760.62

113,334.73

28,168.26

7,493.00

148,995.99

1,042,756.61

104,275.66

1,147,032.27

1,280,850.90

$ 1}1,1!1B,63

Billable Costs

Calculation of .....t !epg!ble to u.s.

$1,042,756.61

Add: 3% Adainistrative Costs

Billable Cost Plus 3%

Less: Maxi.. Billable Mount

Amunt Repayable to U.S. Treasury

31,282.70

1,074,039.31

1,147,032.27

§ 72,922,26
FEDERAL ElECTtON COMMISSION

WASHINCTON, 0 C 20461

June 1" 1992

If ..... "

r ...., ,,'.. •.. ~. ""- - - '- '. " r. . \",". J

TO: The

THROUGH: John C. Sur

Staff Direc

PROW: Lawrence K. N l~ General Couns 1 Int .

Kim L. Brigh -COleman\~ Associate Ge era! c~nsel

Carmen R. JOhnso~J\t Assistant General~nunsel

Mary Tabor .. ~--t"

Attorney l'I\ \

SUBdBCY: Revised Final Repayaent Deter.ination and Revised

Statement of Reasons for President George W. Bush,

Vice President Dan Ouayle, Bush-Quayle '88 and Georqe

Bush, Inc. Co.pliance Coaaittee (LRAI 360)

On June 11, 1992, the Coaaission considered the Office of

General Counsel's recoaaendations that the Coaaission make a

final dete'raination that President Georqe W. Bush, Vice

President Dan ouayle, Bush-Quayle '88 and Georg_ Bush, Inc.

Co.pliance Co.-ittee (the "Coaaittee R ) repay $126,510.07 to the

united State. Treaaury and approve the proposed Statement of

Reasons supporting this determination. Agenda Document 192-75.

The repayaent a.ount was based OD (1) $30,101.26 in nonqualified

caapaign expenses; (2) $95,"908.81 in media reimbu.rseaents; and

(3) a $Soo-.tale-dated committee check.

At the meeting, the Commission directed the Office of

General Counsel to reduce the amount of nonqualified campaign

expenses by $11,368 in travel and White House Com.unication

Agency costs incurred by President Bush in connection with an

August 8, 1988, speech to the Republican Platfor. Coaaittee.

The Committee had argued that all $30,101.26 in travel and

comaunication costs incurred from August 2, 1988, through

August 9, 1968, should be considered permissible pre-expenditure

period expenses for organizational planning_ However, the

Commission concluded that only the expenses incurred on the day
~'%'~~~f5:~';:';:~'"?C~:,,,,,,~~~~,, -'. "': ,"<'v~""'-':-~.'"?",~·Jk';%1,,o{,, 5'»~"c",,5" "'": 'i'::":~;;:"r'~'~'" ,~,,-::c"":;-}"'~~;:;;''''7''.'7':,:1;' :;'t"'<::'!;'l'?",.",'>':C~ '::"";;~--',":c .,",:.";,.~,:"",",,,,o''':' ", " ',": 'Moo'ranllu.',ta ,:tb.:~,'~c6"-t_.ilon,', ' Rev! sed' :tln-alltepay••nt Det.-rmination

Bush-Quayle '88 and George Bush, Inc. Compliance Committee

(LRA 1360)

Page 2

of the platfora committee speech were permissible expenses under

11 c.r.a. S 9003.4(a)(1). The Audit staff had previously

calculated the separate costs associated with the candidate',

August 8, 1988, trip. See Attachment 5 at S.

The Office of General Counsel has made the revisions to

comport with the Commission's determinations and included the

adjusted repayment amount in the proposed Statement of Reasons.

Revisions occur on pages 1, 7, 8 and 18. It should be noted

that the only attachment being recirculated is Attachment 5

(Memorandum from the Audit Division dated March S, 1992).

RECOIUlBMDATIOHS

The Office of General Counsel recommends that the

Commission:

1. Determine that President George W. Bush, Vice

President Dan Quayle, Bush-Ouayle '88 and George Bush, Inc.

Compliance Committee must repay $115,142.07 to the United States

Treasury; and

2. Approve the attached Stateaent of Reasons in support

of the final repayment determination.

AttacbJlent

Proposed state.ent of Reasons
In the Matter of )

)

President George W. Bush, )

Vice President Dan Quayle, }

Bush-Ouayle '88, and )

George Bush, Inc. )

Compliance Committee )

)

Final Repayment Determination )

On June 11, 1992, the Commission made a final

determinat.roD --tha-t -Ptes-iden-t-Oeoy-qe---aush,- -Viee-Pre-stdent-Dan

Quayle, Bush-Ouayle '88, and Georqe Bush, Inc. Coapliance

Comaittee ("the Co..itteeW ) repay $115,142.01 to the unit(d.? j

r\e"\~~ States Treasury pursuant to 26 U.S.C. S 9007(b)(2),

representing: (1) $18,733.26 in nonqualified eaapaigD \

expenses; (2) $95,908.81 in excessive aedia reiaburs•••nts;

and (3) a $500 stale-dated coaaittee check. Th.refor., the

Committee is ordered to repay this amount within 30 days of

receipt of this deter.inaticn pursuant to 11 c.r.R.

S 9007.2(d)(2). The Committee is also ordered to refund

$133,818.63 for receipts in excess of the maximum billable

amount, and $61,557.67 for unused prepayments to the

appropriate media organizations and provide evidence of such

refunds to the Commission, including the calculation of the
- 2'-

aaount paid to each media organization and copies of the

front and back of the negotiated refund checks. This

State.ent sets forth the legal and factual basis for the

Commission's determination in accordance with 11 C:F:R.

S 9007.2(c)(4).

I. OVBRVIn

Bush-Ouayle '88 and George Bush for President, Inc.

compliance Committee are authorized committees of George Bush

and Dan Quayle, the 1988 Republican nominees for president

and vice president, respectively. On November 14, 1990, the

Commission approved the Interim Audit Report on the

Committee. Attachment 1. The Committee responded to the

Interia__A~Qi_t._ ~ep~r_t_ on_ "arch 15, 1991 Attachment 2. On

October 24, 1991, the Commission approved the Final Audit

Report containing the initial determination that the

Coaaittee repay $126,510.07 to the United States Treasury.

, Attach.ent 3. This repayaent represented $30,101.26 in

nonqualified caapaign expenses, $95,908.81 in media

reimburse.enta, and a $500 stale-dated outstanding coaaittee

check. The Final Audit Report also recommended that the

Committee refund to media organizations $133,818.63 for

receipts~ excess of the maximum billable amount, and

$61,557.67 for unused prepayments. The Committee responded

to the report on February 10, 1992. Attachment 4.
- 3- -

II. ROIIQUALIPIBD CAJlPAIGH EXPBHSES

A. Background

Generally, a qualified campaiqn expense must, inter

alia, be incurred within the expenditure report period. which

for this election cycle ran from August 17, 1988 to

December 8, 1988.!1 26 u.s.c. S 9002(11)(8); 11 C.P.R.

S 9002.11(a)(2). However, Commission regulations permit a

candidate to incur expenses before the beginning of an

expenditure report period if such expenditures are for

property, services or facilities which are to be used in

~~ connection with his or her general election caapai9n and

which are for use during the expenditure report period. 11

In the Interia Audit Report, the Coamission included

$30,101.26 as a receivable owed by the Bush pel.ary co..ittee

to the Bush-Quayle general election coaaittee representing

candidate travel and White House Coaaunication Agency costs

incurred fro. August 2 through August 9, 1988. The last

Republican priaary was June 1, 1988, but the Republican

National Convention did not begin until August 15, 1988. The

Interim Audit Report stated that. these expenses did not aeet

the requ~.nts for pre-nomination expenses under 11 C.r.R.

1/ The expenditure report period is defined as the period

beginning on "September 1 before the election or on the date on

which the major party's presidential noainee is chosen,

whichever i~ earlier; and the period ends 30 days after the

[p}residential election." 26 u.s.c. S 9002(12)(A); 11 c.r.R.

S 9002.12(a).
- 4· -

S 9003.4(a)(l). See Attachment 1 at 13. Therefore, the

amount was considered a primary election expense.

In its response to the Interim Audit Report, the

Committee argued that the candidate's travel durinq the first

week in AU9ust of 1988 was appropriately charged to the

general election committee. Attachment 2 at 19. The

Committee contended that because then Vice President Bush was

assured of his party's nomination by the summer of 1988, it

was the campaign's prerogative to determine whether

post-primary expenses should be paid by the primary or

general election committee. Id. The Committee cited the

1984 Rea9an-Bush Audit for the proposition that the

~9~~~s~~n ~as pe~mitted ge~eral election committees to pay

expenses attributable to the general election, incurred prior

to the general election period. See Final Audit Report on

Reaqan-Bush '84 General Election Committee and Reagan-Bush

'84 Coapliance Pund, approved Ray 6, 1987.

In the rinal Audit Report, the Commission acknowledged

that by August of 1988 all the primaries were over and the

candidate appeared to be assured the nomination.

Attach.ent 3 at 31. The Commission determined, however, that

the trav~nd coaaunication costs in question should not be

considered primary election expenses because they bear no

relationship to the operation of the primary campaign.

However, the Commission maintained that these expenses did

not meet the definition of permissible pre-nomination

expenses set forth in 11 C.F.R. S 9003.4(a)(1). Therefore,
- s. -

the Coasission aade an initial determination that the

Committ•• aust repay $30,101.26 in nonqualified campaign

expenses incurred for candidate travel and White House

Communication Aqency costs from August 2 throuyh Auqust 9,

1988.

8. Co..ittee'. Arquaenta

In response to the Final Audit Report, the Committee

provides a narrative explanation of these expenditures

without additional supporting documentation. The Committee

asserts that the candidate's travel expenditures and the

'5 White House communications costs for August 2 through

August 9, 1988 were incurred in connection with

"organizationalaeetin9_S to determine the Republican Party's

platfor. with respect to issues in the upcoming general

election." Attachaent 4 at 3. The Committee further

contends that because the party platform would be George

Bush's position on issues in the general election, these

travel costs qualified as pre-nomination expenditures for

organizational planning under 11 c.r.R. S 9003.4(a)(l). To

support its arguaent, the Committee compares its situation to

the 1984 Mandale-Ferraro audi ts,. in which the COllURission

treated travel expenses incurred by Bert Lance between May

and June of 1984 as qualified campaign expenses for the

general election committee, accepting the Mondale Committee's

explanation that "the ultimate outcome of the trips was that

{Bert Lance] assumed the role of general election caapaign
- 6 -

chairman. w Mondale for President Committee Response to

tnteria Audit Report, dated November 18, 1985.

c. Legal Analysis

The Committee asserts that the Commission should

consider the entire $30,101.26 as qualified campaign expenses

because "the participation of George Bush in these meetings

to determine platform positions for his party in the general

election would not have [been) possible without incurring

these travel and White House communication costs."

Attachment 4 at 3. However, the candidate's itinerary for

August 2 through August 9, 1988 shows only one appearance

related to the party platform. See Attachment 5 at s. On

- -August- &,- 19-8-8 ,President Bush addresse_d th4! Rep~p}.. __i_c_~n

Platfor. Comaittee, but did not stay to personally oversee

the drafting process.~/ The rest of the president'. schedule

for that time period included various campaign speeches,

receptions and a ribbon-cutting ceremony.

Section 9003.4(a)(1) was not intended to cover costs

incurred for qeneral campaign appearances. Rather, this

provision was designed to allow a candidate to set up a basic

2/ According to a media account, "his speech denounced the

Democrats more than it directed the platform framers, who were

about to begin five days of hearings and markup. Not that the

Bush campaign has neglected to guide the platform process.

Dozens of Bush operatives were deployed to bird-dog every detail

of the preliminaries." Bush Urges Platform Writers: Be

Specific, Cong. 0., Aug- 13, 1988, at 2250. The artiCIe stated

that the remainder of Bush's visit was "devoted to photo

opportunities," including a tour of the Louisiana Superdoae and

a brown-bag lunch with the crew building the convention stage.

Id.
- 7.-

caapaign organization before the expenditure report period

be9ina. a.planation and Justification for 11 c.r.R.

I 9003.4(a)(1), 45 Ped. Reg. 43375 (June 27, 1980). The

examples provided in section 9003.4(8)(1) include property,

services or facilities with a direct impact on a general

election committee, such as the establishment of a financial

accounting system, the planning of a campaign organization or

,

early polling. -- Other examples of qualified campaign expenses incurred

before the expenditure report period include those permitted

~l by the Co.-issian in the 1984 Reagan-Bush Audit for telephone

installation, teleaarketing services and postage attributed

to vQt_er __r~gi_._t_I:~~ion ~~dget-_out-the-vot. expenses. See

Final Audit Report on Reagan-Bush '84 General Election

Co.-itte. and Reagan-Bush '84 Coapliance Fund, approved

May 6, 1987. ~dLe\e~\o~

The Co..itte. also stated that "there is no difference

between the.e travel costs and the travel costs of Mr. Bert

Lance, incurred between Ray 20 and early June of 1984,

which were paid for by the Walter Mondale 1984 general

(k,\er". OA1

election coaaittee." AMr. Lance became chairman of the

Mondale ~ittee in aid-July of 1984 and his travel costs

and communication costs incurred for President Bush's

were incurred for the purpose of organizing the general

election campaign, the Kondale Committee stated in its

November 18, 1985 response to the Interim Audit Report.Cds.let.c~ -..

The Commission agrees with the Committee that the travel )

'. ~"'-"'~ ,t
Auqust 8, 1988, trip to New Orleans for the purpose of

addressin9 the aepublican Platform Coaaittee can be

characterized as a permissible pre-expenditure period expen••

under 11 C.F.R. S 9003.4(a)(1). The candidate's contribution

to formulating party issue positions to be used in connection

with and during the general election campaign falls under the

example of organizational planning included in the

regulation.

Consequently, the Commission has deteralned that

category of expenses necessary to set up a general election

-.

However, this regulatory provision permits only a narrow ,

\

\

,

,

campaign to be incurred before the expenditure report period

nonqualified caapaigft expenses because they do not constitute

peraissible pre-noaination expenditure. under .ection

9003.4(&)(1). The Audit staff has calculated that the Auqust

8, 1988, travel and coaaunication costs account for $11,368

of the total $30,101.26 in nonqualified caapaign expenses

included in the initial repayaent deter.in.tion. See

Attach.ent 5 at 5. Therefore, the Commission has .ade a

final deter.ination that t~e Comaittee must repay the United

States Tnnnury $18,733.26, representing nonqualffied

campaign expenditures incurred for candidate travel and

communication costs from August 2 through August 7, 1988 and

on August 9, 1988.
III••••88 PLARB

A. Background

A publicly financed general election committee may incur

expenditures for transportation, including air travel and

ground transportation for media personnel, and such

expenditures are qualified campaign expenses subject to the

expenditure limitation. 11 C.F.R. S 9004.6(a). The

committee may receive reimbursements for such services, but

the reimbursements cannot exceed the actual cost of the

transportation and services by more than 10%. 11 C.F.R.

S 9004.6(b). The amount of reimbursements received for the

actual cost of transportation and services may be deducted

fro. the amount of expenditures subject to the expenditure

liaitation. 11 C.P.R. S 9004.6(d)(1). The coaaittee .ay

deduct an additional 3' for administrative costs of providing

the services. Id. If the co.-ittee has incurred higher

adainistrative costs, it must docuaent the total costs

incurred in order to deduct a higher aaount of reiaburs.aents

received, up to the 10\ liait. Id. Any a.ount reiabursed

that exceeds the actual cost and administrative costs (103\)

but is less than the maximum billable amount (110\) must be

repaid t~. United States Treasury_ Id. Any amount

reimbursed in excess of 110" of the actual costs of providin9

transportation must be refunded to the media. See

Explanation and Justification of 11 C.F.R. S 9004.6(b), 4S

Fed. Reg. 43,376 (June 27, 1980).
- 10 -

In the Interim Audit Report, the Commission determined

that the Coaaittee overbilled media organizations for air

travel by factoring the expenses of Secret Service agents and

campaign staff hired to assist aboard the planes into the

direct COlts of transportation. These direct costs were

divided by the number of reporters aboard to determine their

pro rata share of the actual costs of transportation and

services. The Commission decided that the appropriate method

of calculating the amount the press should be billed would

have been to divide the flight costs by the total number of

i...

--

passengers. See 11 C.F.R. S 9004.6. In the Interia Audit

Report, the Coaaission determined that the Coaaittee should

provide _docuaentatiop th~t t~e campaign did not ~ve~bi~l_

aedia or9anizations in the a.ount of $358,899.28. In

addition, the Co.-ission directed the Coaaitte. to show that

it did not accept $202,181.02 from media organizations in

" excess of 103' of the direct costs of transportation and

ground .ervices provided to the media. Attach.ent 1 at 11.

In the absence of such documentation, the Coaaittee was to

refund $358,899.28 to the press and repay $202,181.02 to the

united States Treasury.

In response to the Interim Audit Report, the

Committee contended that it did not charge the press in

excess of the actual costs of the services provided. Among

these costs were the travel expenses of four caapaign staff

members who, according to the Committee, traveled "(1) at the

request of the press; (2) with the explicit understanding
tt

- 11 -

that they would be paid for by the press; and (3) to provide

certain services requested by the press •

Attachment 2 at 7-8. Therefore, the Committee concluded that

it owed neither a refund to the press nor a repayment to the

united States Treasury.

In the Final Audit Report, the Commission concluded that

services performed by travel managers, such as baggage

handling and collecting press credit card payments on the

plane, were direct costs of providing media transportation.

See 11 C.F.R. S 9004.6. The Final Audit Report included

:~! separate cost determinations for the George Bush Press Plane

and the Dan Quayle Charter.ll Attachment 3 at 13. The actual

costs for air transpo_rtation ancl services for reporters who

c

traveled on the Bush Press Plane was $2,167,245.511 the

aaxiaua billable amount, or 110\ of the actual costs vas

$2,383,970.06 ($2,167,245.51 + $216,724.55). The Coaaittee

received $2,255,178.73 fro. the press for travel aboard the

Bush Press Plane. Because reimburseaents totaled less than

the aaxiaua billable a.ount, the Coaaittee did not owe press

refunds for the Bush Press Plane.

However, the actual costs of providing media

transpor~on and services aboard the Quayle Charter was

$1,042,756.61; multiplied by 110\, the maximum billable cost

3/ The charter for Vice President Dan Quayle included a much

larger contingent of Secret Service agents, who were not

included in "the passenger count. Therefore, the total cost of

each flight was divided by a smaller number of individuals,

which served to inflate the reporters' pro rata shares.
" '

- 12 -

was $1.147,032.27 ($1,042,756.61 + $104,275.66). Media

reiaburae••nts received for the Quayle Charter totaled

$1,280,850.90, or $133,818.63 (1,280,850.90 - $1,147,032.27)

in excess of the maximum billable amount. Therefore, the

Commission determined that the Committee must refund

$133,818.63 to the media personnel who traveled aboard the

Ouayle charter. The Commission also determined that the

Committee should refund to the media $61,551.67 in unused

prepayments for travel.

In addition, the Commission concluded the Committee

received $22,915.85 in excess of the permissible 103' from

reporters who traveled aboard the press plane that

accompanie4- Air l'orce-11~--and an_ excess of _$72~_9_9_2_<l_96 f{Q__

reporters who traveled aboard the Quayle charter. Therefore,

the Coaaission aade an initial deteraination that the

Coaaitt•• aust repay $95,908.81 {$22,91S.85 + $72,992.96}

to the Treasury.

B. Co__itt••'. Argu!!ots

In its response to the Final Audit Report, the Coaaittee

does not aaintain the position it had taken in response to

the Interia Audit Report that it· owed neither a repayment to

the Unit~tates Treasury nor a refund to the press.

Rather, the Committee contends that the auditors made "an

arbitrary and unsupportable distinction" in the rinal Audit

Report by making separate media reimbursement calculations

for the George Bush Press Plane and the Dan Quayle Charter.

Attachment 4 at 1. The Committee points out that the Interim
- l3 -

Audit aeport did not provide separate calculations for eaeh

plane. The Committee further explains that the eaapaigft

maintained a single press travel billing and collection

operation. Id. The Committee notes that many media

organizations had reporters on each plane, but did not

designate their payments for a specific plane. Id. The

campaign practice was to apply such payments to the oldest

outstanding invoice for that media organization without

reference to one plane or the other, according to the

Committee's response. Attachment 4 at 2.

Consequently, the Committee derives its total amount

owed by adding the press rei.burse.ents received fro.

--reporters on- -both --planes a_nd__$ub_~ractin9 the__ total billable

costs for both planes. This method arrived at the saa. total

dollar amount owed as the method used by the Audit staff.!/

However, the Coaaittee believes that it must refund the press

only $5,027.30 and aust repay the Treasury $224,700.15. In

essence, the Coaaitte.'s approach peraits charges of 1•••

than the aaxiaua 110\ billable amount on the Bush plane to

compensate for charges exceeding 110\ on the Quayle charter.

The Committee claims that "[hlad the Audit Division

calculat~press payments based on one operation~ as it

existed in reality, and as was done in the Interim Audit

4/ The Commission's initial determination and the Coaaittee's

calculation actually vary by one cent. The Commission

determined that the Committee must repay and refund a total of

$229,727.44 ($133,818.63 + $95,908.81); the Committee's

calculation totals $229,727.45 ($5,027.30 + $224,700.15).
- 14 -

Report," the Commission would have determined that the

Committe. owed substantially less to the press and aore to

the Treasury. Attachment 4 at 1.

c. Legal Analysis

The Committee erroneously suggests that the Audit

Division's decision to present separate calculations for the

George Bush Press Plane and the Dan Ouayle Charter in the

Final Audit Report was arbitrary. The reason for dividing

the billings between the two planes is related to a change in

the Commission's classification of the campaign's travel

managers. In the Interi. Audit Report, the costs of campaign

travel managers were considered administrative rather than

- --direct cost-s. --- Consequentl-y,- the C01lllliss iQ_n _deter;1Il_if}.4 ~_~_~_~ _

the Committee received more than 110\ of the actual costs for

both planes and presented the combined total of refunds due

in the Interia Audit Report. Attach.ent 1 at 10, 23.

The Coaaittee's response to the Interia Audit Report

argued that the costs of such travel aanagers should not be

considered adainistrative. Attachment 2 at 6-13. Thus, in

the Final Audit Report, the Commission deterained that the

costs of the travel managers were direct costs of providing

transportwt1on. As a result, the Commission found that the

Committee charged reporters on the George Bush Press Plane

less than the maximum billable amount and overbilled only

media representatives who traveled on the Quayle Charter.

Attachment 3 at 13. In the Final Audit Report, the

Commission also found that the Committee received
- 15 -

reiaburse••nts 1n excess of the 3\ administrative allowanee

for botb plan... Therefore, the distinction between the

Interim Audit Report and the Final Audit Report was not

arbitrary, but rather was prompted by the Committee's O~~

rationale.

One purpose of limiting media reimbursements to 110\ of

the actual cost of candidate-supplied transportation is to

prevent media subsidization of presidential campaigns. See

Explanation and Justification of 11 C.F.R. S 9004.6(b), 4S

Fed. Reg. 43,376 (June 27, 1980). Any reimbursements

received in excess of the reporters' pro rata shares are

deemed income to the committee and must be refunded to the

media or9anizations. Id. In this case, the Committee has

overcharged specific media corporations whose reporters

(:'\.

traveled with Vice President Quayle. A repayaent of those

overcharges to the United states Treasury would not

. accoaplish the goal of reiabursing those specific a.ounts to

the aedia firas.

:0 Moreover, the Coaaittee's assertion that .any news

organizations had representatives on each plane and ·were

issued one bill for all press tr,vel with the campaign" is

not pers~iv.. First, the affidavit of Wilber Clinton

risher, one of the Committee's travel managers, states that

he was responsible for calculating the proportional share of

expenses of the reporters and collecting credit card payments

on the plane. Attachment 3 at 41. Thus, it seems in most

situations later billing of media organizations was not
neces8ary. Second, the regulations speak in terms of "an

individual'. pro rata share" not an average charge for

representatives of a particular media outlet. 11 C.F.R.

S 9004 .. 6(b) ..

In regard to the Bush plane, the Committee simply did

not avail itself of the entire 110% of actual costs that

section 9004.6(b) allows committees to collect. However, the

Committee did recover approximately 104\ of its actual costs

for operating the Bush plane. In its response to the Interim

Report, the Committee stated its practice was not to bill in

~, excess of actual costs: "It is important to state explicitly

that at no tiae did Bush-Ouayle bill the press aore than 100\

of _th~ c~s~ of the services p~ovided to the press despite the

fact it legally could have billed for up to 110\ of the

cost." Attachaent 2 at 1. It is inconsistent at this stage

for the Coaaittee to argue it should be allowed to take

~, advantage of the entire 10\ allowance on the Bush Press Plane

by averaging the billings of the two conveyances.

The Coaaission has determined that the Co..ittee owe.

media organizations, which dispatched reporters to travel

with Vice President Ouayle, refunds totaling $133,818.63,

represen~ reimbursements in excess of the maximum 110'

billable amount. We note that determining what is owed to

each media organization may be an arduous task. Since the

Committee charged travelers by customer number, it would have

to reexamine each bill per customer number for every trip

taken, determine the correct amount per trip, and then
- 1-7 -

aggregate the total for each customer number. It is possible

that the Coaaitt•• could determine the refunds in a less

burdenso•••anner, resulting in media organizations receiving

refunds prorated on a basis equai to their payments

originally made to the Committee. To figure one

organization's share of the refund, the Committee would

determine the amount paid by the particular customer number;

divide that number by the total collected from media on the

Ouayle plane; and then multiply the quotient by the total

amount refunded.

The Committee also must repay the United states Treasury

$95,908.81 representing receipts in excess of 103\, but less

than _119\0£ th,_actual costs of prOViding media

transportation.

IV• S'fALB-DA4fBD COlUIlftBE caEca

Under 11 c.r.R. S 9007.6, a co.-ittee shall sub.it a

check to the United States Treasury for the total a.aunt of

checks outstanding to creditors or contributors that have not

been cashed. The Coaaission made an initial deter.ination

that the Co..itte. Bust repay $500 representing the a.ount of

a contribution refund check still outstanding at the time of

the Fina~dit Report. The Committee does not contest this

finding- Therefore, the Commission has made a final

determination that this amount be repaid the Treasury_

v. PINAL REPAYK~ DBTBRRIHATION

Pursuant to 26 u.s.c. S 9007(b)(2) and 11 C.F.R.

S 9007.2(c)(4), the Commission has determined that, for the
2.

- 18 -

fore90 ing rea.ons, President George W. Bush, Vice President

Dan Quayle. Bush-Quayle '88, and George Bush for President

Coaaitt••, Inc. Compliance Committee must repay to the Unit.~

states Treasury $115,142.07. The C01llBli ttee is also orde red "I pe>J\:)e j.. -... to refund $133,818.63 to the appropriate media organizations

for receipts in excess of the maximum billable amount and

$61,551.67 in unused prepayments.

Attacbllenta

1. Interia Audit Report and letter dated November 14, 1990.

Bush-Quayle '88 and George Bush for President, Inc.

Co.pltanee Coaaittee Response to Interia Audit Report,

dated March 15, 1991.

-- --3-. Fi-na-l -Audi-t -Repo-r-t---and__ let_te_t dated NQv_e~e_r~__ 6_1_ J.~~J __

4.

s.

Bush-Quayle '88 and George Bush for President, Inc.

Coapliance Co.-ittee Response to Final Audit Report, dated February 10, 1992.

Audit Division Coaaent. on Coaaittee's Response to Final

Audit Report on 8ush-Quayle '88 and George Bush for

President tnc./Coapliance Co..itt••, dated March S,

1992.
·... ,''''''~'''>C'~!)\"i",n:';-t'",1'~ .->7~1f'c~"'''''~"''~' ••...~c"'.",~J;,.I:~

IIL'001165

FEDERAL ELECTION COl~\:\'\lSSION

TO:

nOll:

1'8BooGB:

c

March 5, 1992

MEJIOltAHDtJII

LAWRENCE M. NOS;TE

GENERAL COUNS~

JOHN C. SUJlItIAIL

STAFr DIRECT...9RJ..Y

ASSISTANT

ROBERT J. COS71.

STAFr DIaECTOR

~­

AUDIT DIVISION

Sua~ECT: AUDIT DIVISIDN COMMENTS ON CORKITTSKS' aSSPONSE

TO FINAL AUDIT REPORT ON BUSB-QUAYLE 81 AND GSORGI:

BUSH FOR PRESIDENT INC./COMPLIAHCI COMKtTTSE

The Audit Division has reviewed the Busb-Quayle 8. ;the

GEe) response to the Final Audit aeport (FAR). OUr c~nts are

presented belove

Press Plane Finding (II.B.l.)

The GEe state. that they :unctioned with one pr••• plane billing and coll.c~ion operation for both the GeO~9••usb Pre•• Plan. and the Dan Quayle Charter and that tbe d1vl.108 between

the cwo as pr•••nted in tbe FAR is uftVarranted. They point out

that no such division is .ade in the Interia Audit .eport

(lAR). The GEe explains that when th. pr••• p.,..ata are

calculated under one operation, the GEC would owe the pr••• 55,027.30 and the United State. Treasury $224,700.15 (Coabined

total of $224,700.15). The GEe .a9:··e. with the Audit staff's

calculation of the total a.aunt involved, but dl••9re•• with the distrib~D of the ._aunts due :he U.s. Trea.ury and the Press

reco...nded in the FAR.

It should be noted that no distinction between :he Georqe

Bush Press Plane and the Dan Ouavle Charter Nas made in the IAR

because at that tim. it had been-determined that the GEe had

overbilled the Pres. and received in 9xcess ~f 110\ of the

actual cost of transportation c~sts f~r ~ct~ planes and

- 1. ...-, ,.. -...... '=' ~j.,.&'ta .... -_ --.

;~. -L
M••oraridua to Lawrence ".Noble IU.h~Qu.yl. I••pon.. to FAR -'a,. 3 of 3

8o~v.r, the ,re.ident'. schedule fo~ August 8, 1988 thowed

hi. trave11ftg fro. , •••• Ara, N8 (Kennebunkport) to Ne. Orl••ns,

LA to .ddr••• the Republican Platfor. Co..itt•• and to attend a

aepublican National Coaaitt•• volunte.r Reception, a Brown'lag Lunch and an Editorial Board Meeting witb the Ti••• Picayun. before return1n9 to Andrews API that sa•• day. Therefore, at

le.at part of the travel costs for this day appear to have b••n

related to platfors buildin9 and or9aniaational plannift9 in

connection with the general election within the definition of

permissible pre-noaination general electian .xp.n.... The

travel and WBCA costs paid for by the GEC for Auqust 8th totaled

$11,368 (Travel - $9,610 and WRCA - $1,758).

If you have any que.tiona, plea•• contact Leroy Clay, Marty

Favin or Joe Stoltz at 219-3720.

Attachaent as stated

ATTA(,!~~~·'!' -_-? ~aFC-~. :s
"'\Iehaent 1 •••• 2 of 2

AU9'lat 4

UDofficl!J1Offlolal

Unofficial

De.tlD.~loa

And rew. An,

MD to Corpus Christi, '1'X

....~. £2!!

Addr... to the

bericaa G.I.

'orUil 40th

National Convention

AugUlt 4

Auqust 5-7

Official

Official

Chiea90 , IL Wake

f/A. Mazo"lki

Andrews Arl, $ 361

"D to P.... (AFII) ArS, NB

(Kennebunkport)

AUCJUlt 8 Unofficial Pea.e Are, NB

to Ne"

Orle.n., LA

New Orl••n.,

LA to

Andre". ArB,

PlD

Addr... to

aepublican

Platfora

Co_itt••

aepublican

National Co•• Volunt••r

Reception

Brown .ag

L\Ulch

$9,610

(ArII)

$1,758

(WHeA)

AUCJUlt 9 unofficial

Unofficial

Unofficial

Andre•• An,

PlD to Erie,

PA

Erie, PA to

Pittabuf9b,

PA

Pittsburc;h,

PA to Phila.,

PA Phila .. ,

PA, to

Andrews AFB, ~D

Editorial

Board Rt.9.

'1/1'1._

Picayune

Addr... 30~h $ 808

Annual Conl. (AFtI)

of PO.

Victory 88

LUDCheoft

Polish Aller.

Ribbon Cutting

Cer••ony

VIP Victory 88

Fit Reception

Victory 88 Gen

Fit Reception

539: 191 ,26
September 16, 1992

TO:

TlIROUGB:

FROM:

FEDERAL ELECTION COMMISSION

W;\SHINCTON DC 204bl

/""""

THE COKMISS~O.5 I '

JOHN c. SUR,t A .

STAFF DIRE T '

ROBERT J. COSl'A

ASSISTANT STAFF DI~~ AUDIT DIVISION

AJ(0r0.J~.9!,. f'" ").. • t

• _ ... ~. 1 J •• t "". • l

SUBJECT: BUSH-QUAYLE!'88 AND GEORGE BUSH? INC. COMPLIANCE

COMMITTEE -~ REPAYMENT CHECK

On August 3. 1992, the Commission received a check from the

Bush-Quayle '88 and George Bush, Inc. Compliance Committee in

the amount of $115,142.07. This payment represents the entire

amount of the Commission's final repay.ent deteraination.

However, the check was drawn on an account of the Bush-Quayle ---- -'--9 2-- Compi ian-ce Commit.tee.-

Attached is the aeaorandum sent to the Office of General

Counsel requesting their guidance as to whether it is

permissible for Bush-OUayle '88 and George Bush, Inc. Coapliance

Committee to make its repayment to the United States Treasury

from contributions solicited for the candidates' 1992 general

election legal and accounting coapliance fund.

In the Office of General Counsel· response it is

reco..ended that the Coaaission per.it the Bush-Quayle '92

Coapliance Coaaittee to .ake the 1988 repayaent. Counsel's

response is included as an attach.ent for your inforaation.

Reco_end.tioD

The Audit staff recommends that the Coaaission accept the

repayment in the a.aunt of $115,142.07 drawn on an account of

the Bush-Ouayle '92 Compliance Committee.

This matter is being circulated on a 72 hour tally vote

basis. If you have any questions, please contact Leroy Clay or

Joe Stoltz at 219-3720.

Attachments:

August 4, 1992 memorandum to the Office of General Counsel

Office of the General Counsel's response
ATTACHMENT-t

Page 1 of 2

MEMORANDUM

TO:

THROUGH:

FROM:

FEDERAL ELECTION COMMISSION

August 4, 1992

LAWRENCE M. NOBLE

GENERAL COUNSEL

JOHN C. SURlNA

STAFF DIRECTOR

ROBERT J. COSTA

ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

SUBJECT: REPAYMENT CHECK RECEIVED FROM THE BUSH/QUAYLE '88

CAMPAIGN

-- On--AuCJUst 3, - -19-92-,----the --Co.-last-on--- rece-iv:e-d--i--repayaent

cbeck fro. the Bush/Quayle 88 c.-paign in the aaount of

$115,142.07. This repre.ents the full a.ount approved in the

stateaent of reasons OD June 11, 1992. It is noted that the

check is drawn on an account of the Bush-Qualye '92 Coapliance

Co..ittee. It is our understanding that this account belongs to

the 1992 general election co.-itt•• 1e9a1 and accounting

coapliance fund.

Section 9003.3(a)(2) of the Co~••ion'. r8vulationa state

that the legal and accounting coapllance fund shall be used only

for the purpos•• enua.rated therein. ODe of tbe per.i.aible

us•• is to .ake repayaents pursuant to 11 cra 9007.2. 8o~v.r,

it does not appear that it was conteaplated that such rep.,..ats

would relate to a prior election cycle. Section

9003.3(a)(2)(iv) state. that contributions to or funds deposited

in the legal and accounting coapll~nc. fund aay not be used to

retire debts re..inin9 froa the Pre.idential priaari••, except

that, if after payaent of all expen••• relating to the qeneral

election, there are excess caapaigD funds, such funds may be

used for any purpose peraitted under 2 U.S.C. 439. and 11 cra

113, including payaent of priaary election debts.

It would appear that the intention was to li.it the

application of co.pliance fund .oneys to previous elections to

those case. where exce.s caapai9n funds exist after the payaent

of all general election expenses. presuaably this would include

any repayaents that ai9ht result fro. the audit of the 1992

caapaign.
ATTACH~'ENT I· ~a("te 2 of 2

Given the abO••• youropinioD is requested concernin, the

peraisaibllity of the Busb/Quayle 88 ea.p.i9~ fro•••kin, the

1988 r.~~"'I'c !=o.·the 1992 coaplia"ce fund ~~;nr ~e the

p3yaent of al~ of the ~992 9.ft.r~1 ~\~ction .xp.n.... 'e.dln,

your quidance on this aatter the repayaent check is being held

in the safe in the Adainistrative Division. .

Your proapt attention to this matter is appreciated. Should you have any questions please contact Joe Stoltz or

myself.

Attachment

cc: Coaaissioners
FEDERAL ELECTION COMMISSION

WASHINGTON 0 C ~6J

AnACHt~ENT II

Page 1 of 4

September 11, 1992

MBIIOllANDUJII

TO: Robert J. Costa

Assistant Staf irector

Audit Divisi

THROUGH:

PRO":

Plary Tabor

Attorney'''''

SUBJECT: Bush-Ouayle '88 and George Bush. Inc. Coapliance

Committee -- Repayaent Check (LBA 1360)

I. IIftItODUCTION

The Office of General Counsel has reviewed the Audit

Division's memorandum dated August 4, 1992, requesting guidance

on whether it is permissible for Bush-Quayle '88 and George

Bush, Inc. Compliance Committee (-the Coaaittee ft ) to .ake its

repayaent to the United States Treasury fro. contributions

solicited for the candidates' 1992 general election legal and

accounting compliance fund. Neither the Presidential Election

Campaign Fund Act nor the Commission's regulations directly

address this question. Thus, we conclude that absent an express

prohibition, the Committee may satisfy its 1988 repayaent

obligations from its 1992 compliance fund.

On July 2, 1992, the Committee received service of the

notice of the Commission's final repayaent deter.ination in the

amount of $115,142.07. The Comaission's regulations require a

candidate to repay to the Treasury the a.ount deter.ined by the
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Busb-Quayle '88 and George Bush, Inc. Co.pit.nce Coaaitt•• (LRA 1360)

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Co.-ission to be repayable within 30 calendar days of such

service of notice. 11 C.P.R. S 9007.2(d)(2). The Coaai.alon

received a check represA"ti~9 the entire rep~yaen~ ~~~unt on

Auqu:;t. 1, 1~9'.; howe·"er t \..~o chee!*: was dL"awn on at. account of

the Bush-O''!'&~lle '92 Compllance Comaittee.!/

II. ANALYSIS OF THE RBPAYJIlBHT ISSUE

Candidates who receive public funding are allowed to

solicit private contributions for a separate account to pay the

costs necessary to comply with the requirements of the F!CA and

the Presidential Election Campaign Fund Act. See Explanation

and Justification for 11 C.F.R. § 9003.3(al(11;-lS Fed. Rag. 43373 (June 27, 1980). Section 9003.3{a)(1) allows-cindi at••

for the office of president and vice president to establish a

legal and accounting compliance fund prior to being nominated by

their political party.2/ However, Commission regulations closely

circumscribe the permissible uses of contributions to the

compliance fund. See generally 11 C.F.R. § 9003.3(a)(2)(i).

One use permitted under 11 C.F.R. § 9003.3(a)(2)(i)(O) is

the making of "repayments" as required by 11 C.F.R. S 9007.2.

The issue is whether "repayments" include obligations incurred

in the previous election cycle. Other provisions suggest that

the Commission does not intend for presidential campaigns to

spend compliance funds outside the- current- el-ection cy-cle---unl.ss---

excess caapaign funds reaain in the account after post-election

obligations are met. Por instance, the regulations expressly

prohibit candidates from using coapliance funds to retire debts

re.aining fro. the presidential pri.aries until all expense.

relating to the general election are paid. See 11 C.F.R.

S 9003.3(a)(2)(iv). However, section 9003.3TiT(2)(i)(D)

contains no language to liait the definition of "repayments· to

those incurred in the current election cycle.l/

1/ In its 1992 July 15th Quarterly Report, the Bush-Quayle '88

Co.piiance Coaaittee, Inc., disclosed $73,894.30 cash-on-hand at

the close of the reporting period. We also note that in the

state.ent of Reasons, the Co__iasion deter.ined that in

addition to the $115,142.07 repayaent to the Treasury, the

Coaaittee aust refund $133,818.63 in excessive reimbursements

and $61,557.67 in unused prepayaents to the appropriate media

organizations. The Audit Division has not yet received

documentation that those refunds have been made.

2/ The Bush-Ouayle '92 Compliance Committee registered with

the Commission on October 24, 1991.

3/ In addition, 11 C.P.R. S 9003.3(a)(2)(i)(C) allows

candidates to use compliance funds to defray any civil or

criminal penalties imposed pursuant to 2 u.s.c. S 437g or 26

U.S.C. S 9012, without restriction to penalties i.posed for

violations occurring during the current election cycle.
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Bush-Quayle '88 and Georqe Bush, Inc. Compliance Co.-itt•• (LRA 1360)

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We recoqnize that the August 3, 1992, payment was ••d.

before the beqinninq of the general elp~ti~~ a~genditure r.~o~t

ue &. iod.·~ / LOIlUll; F siC'''' : ':":. .~: at" Jh~ "')ermi t ct.. L ~Q • uses of the com~l;~~~e fund prio: to the general election expenditure report

period. For example, the compliance fund may be used to aek= a

loan to an account established under 11 C.F.R. § 9003.4 to

defray qualified campaign expenses. 11 C.F.R.

S 9003.3(a)(2}(G). These general election start-up costs auat

be repaid to the compliance fund nfter the beginning of the

expenditure report period. 11 C.F.R. § 9003.4(b)(2). The

regulations do not directly address whether repayments can be

made before the beginning of the expenditure report period.

The Commission regulations also mandate that all

solicitations for contributions to the compliance fund must be

clearly stated as such. Such notification is necessary to

inform contributors of the intended use of their contributions.

Explanation and Justification for 11 C.F.R.

S 9003.3(a)(1)(i)(A), 4S Fed. Reg. 43373 (June 27, 1980).~/ We

do not believe it defeats the expectations of contributors to

the Bush-Quayle '92 Compliance Committee to use their donations

in lieu of the Committee's partially depleted 1988 compliance

fund.6/ We also believe the use of private contributions to t:ep~y-thefederal government aaounts due froll a~-prev-i-eu-s-----­

election cycle is distinct fro. the facts of Advisory Opinion

1988-5, in which the Commission prohibited Democratic

presidential candidate Gary Hart fro. using 1988 federal

matching payaents to retire outstanding debts fro. his 1984

campaign. The situation at hand can also be distinguished fro.

that of a coaaittee subject to the Coaaission's debt settle.ent

4/ The general election expenditure report period for

President Bush and Vice President Quayle began August 19, 1992,

the day the Republican Party noainated its presidential and vice

presidential candidates. 26 U.S.C. S 9002(12)(a).

51 Similarly, revised 11 C.F.R. S 110.3(c)(4) as drafted would

require a contributor to affirmatively authorize the transfer of

funds fro. one federal campaign comaittee to another of the s••• candidate 7 an alternative approach would allow a transfer if the

contributor does not object. See Notice of Proposed Rule••king

on Transfers of Funds Between Federal Campaign Committees, 11

C.F.R. part 110, 57 Fed. Reg. 36023 (August 12, 1992).

6/ Donors to the 1992 compliance fund whose contributions are

used for the 1988 repayment would not be allowed a second

limitation under 2 U.S.C. S 441a(a) for contributions that the

Committee decides to spend on 1992 obligations. Moreover, this

Office would be concerned if the 1992 compliance fund had

specifically solicited funds from donors who had reached their

contribution limitation for the 1988 general election. Rowever,

we have no indication that such specific solicitation occurred.
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that of a co••itte. subject to the Commission's debt settl...nt

[equlations, which prohibit publicly funded presidential

coaaittees from assiqninq their debts to another authorir-~

rt'lt1l\Dl'l.ttee of the Sl'-- ':~:'l~';',:ate utllil 0.\'1::;': ~he ~'~~~\", repay••nc

and enforcement process. ~~planation and Justification for 11

C.F.R. S 116.2(c), SS Fed. Reg. 26381 (June 27, 1989).

If the Commission were to refuse to accept the repayaent

check from the 1992 compliance fund, the Committee could solicit

contributions for the 1988 fund to make the repayment.

Moreover, President Bush and Vice President Quayle could make

the repayment from personal funds. 11 C.F.R. S 9003.2(c)(7).

We do not feel, however, that it is necessary to pursue the•• alternative means of repayment. Because the Commission's

regulations lack an express prohibition, we are persuaded by

other policy interests to permit the Bush-Quayle '92 Compliance

Committee to make the 1988 repayment. First, we believe it is

in the public interest to conclude the 1988 audit process

without further delay. Second, given the 1992 Committee's

ability to raise additional compliance funds, there is little

danger that this expenditure for 1988 will inhibit the

Committee's ability to meet its 1992 obligations. We believe

these interests outweigh any concern that the regulations do not

contemplate such a repayment.

It is our understanding that the Audit Division will

present this question to the Coaaission for a decision whether

to accept the repayaent check as issued by the Bush-Quayle '92

Compliance Coamittee. The Co.-ission's Sunshine Act procedures

provide that the Office of General Counsel make Sunshine

recommendations on issues to be considered by the Coaaission.

Section 2.4(a) of the Coaaission's Sunshine Act regulations

provides for the consideration of aatters in closed session if

they are specifically exeapted fro. disclosure by statute.

Additional bases for closing such aeetings, include when an open

meetinq is likely to result in the disclosure of non-public

audit procedures, policies or investigative techniques or

inforaation the premature disclosure of which would likely have

an adverse effect on the imple.entation of a proposed Coaaission

action. 11 C.F.R. 55 2.4(b)(1) and 2.4(b)(6).

This Office believes that the Commission's discussion of

this situation should be conducted in open session. We see no

statutory or regulatory basis for discussing the repayment check

in closed session.