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REPORT OF THE AUDIT DIVISION

ON THE

NATIONAL UNITY CAMPAIGN FOR JOHN ANDERSON

I. Background

A. OVerview

This report is based on an audit of the National

Unity campaign For John Anderson Committee ("the Committee"),

to determine whether there has been compliance with the

provisions of the Federal Election Campaign Act of 1971, as

amended ("the Act"). The audit was conducted pursuant to

Section 9007(a) of Title 26, United States Code which states

that "after each presidential election, the Commission shall

conduct a thorough examination and audit of the qualified

campaign expenses of the candidates of each political party

for President and Vice President."

- In addition, Section 9007.1 of Title 11, Code of

Federal Regulations states that "after each Presidential

election, the Commission shall conduct a thorough examination

and audit of the receipts, disbursements, debts and obligations

of each candidate, his or her authorized committee(s), and

agents of such candidates or committees. Such examination and

audit shall include, but shall not be limited to, expenses

incurred pursuant to 11 C.F.R. 9003.4 prior to the beginning

of the ex~enditure report pe~iod, contributions to and expendit~res made from the legal and accounting compliance fund

established under 11 C.F.R. 9003.3(a), contributions received

to supplement any payments received from the Fund, and qualified

campaign expenses.

The Committee registered with the Federal Election

Commission as the principal campaign committee for the

Honorable John B. Anderson on April 24, 1980. T~e Committee

maintains its headquarters in Washington, D.C.
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The audit covered the period from the date of inception

through December 31, 1980. 1/ The Committee reported an opening

cash balance of $-0-, total-receipts of $17,055,962.69, total

expenditures of $14,979,141.44, and a closing cash balance of

$2,076,821.25 during this period. ~/

This report is based upon documentation and working

papers which support each of the factual statements. They

form part of the record upon which the Commission based its

decisions on the matters in the report and were available to

Commissioners and appropriate staff for review.

B. Key Personnel

The principal officers (treasurers) of the Committee

during the period audited were: Mr. Francis E. Sheehan, Jr.,

(4/24/80-8/28/80) and Mr. Michael F. ~acLeod (8/29/80 to present).

C. Scope

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The audit included such tests as verification of total

reported receipts, expenditures and individual transactions;

review of required supporting documentation: analysis of Committee

debts and obligations; review of contribution and expenditure

limitations: and such other audit procedures as deemed necessary

under the circumstances.

NIl. Audit Findings and Recommendations

A. Findings Relating to Title 2 of the United States Code

A review of the Committee's bank records and tests

of the receipts and expenditure records revealed that the Committee's reported financial activity was materially misstated as

described below:

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1. Omissions or Misstatements of Financial Activity

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In addition, certain financial activity was reviewed

through June 30, 1981.

See Finding II.A.1, "Omissions or ~isstatement of Financial

Activity", for a discussion of the inaccuracies regarding

these figures.
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a. Unreported Receipts

Section 434(b) (2) and (3) (A) of Title 2,

United States Code state, in part, that each report shall disclose

for the reporting period and the calendar year, the total amount

of all receipts including the identification of each person who

makes a contribution or contributions that have an aggregate

amount or value in excess of $200 within the calendar year,

together with the date and amount of the contribution.

Our reconciliation of the Committee's bank

accounts to the disclosure reports filed revealed that committee

receipts were apparently understated by $581,101.25 (not including

unreported in-kind contributions, see Finding A.l.c.) as follows:

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(1) Unreported anonymous cash April 25-

December 31, 1980

(2) Unreported unitemized contributionsPre-General Election report

(3) Unreported unitemized contributionsYear End 1980 report

(4) Unreported vendor refunds

(5) Unreported interest earned on time

deposits

(6) Unreported contributions deposited

in state bank accounts

(7) Unreported contributions not deposited

in state bank accounts

Total Unreported Receipts

$ 54,306.21

43,088.76

7,155.09

61,757.29

7,468.62

406,005.94

1,319.34

$581,101.25

The unreported anonymous cash and unitemized

contributions apparently resulted from the Committee's practice

of utilizing a derived figure for unitemized individual contributions (Line 17b, FEC Form 3-P) in an attempt to balance their

reported activity with their book figures.

The unreported vendor refund and interest

earned on time deposits appeared to be an oversight on the part

of the Committee.

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The unreported contributions in the state

bank accounts appeared to result from the lack of timely and/

or eomplete information from the Committee's state offices.

Beginning o~ October 13, 1980, the Committee directed its state

office operations to deposit contributions directly into their

state bank accounts in an effort to provide an accelerated

method of funding state office operations during the final

weeks before the election. Prior to October 13, 1980, state

offices were required to forward all contributions received

to committee headquarters in Washington for deposit. Monies

would then be disbursed from headquarters' accounts to fund

the various state operations.

In response to the interim audit report, on July

9, 1981 the Committee filed a comprehensive amendment which covered

the period April 24, 1980 through December 31, 1980 and included

substantially all of the unreported receipts noted above as

adjusted by additional information provided to the Audit staff

during audit work performed at the end of the 30 day response

period to the interim audit report. Also within the amendment,

contributions deposited in the state bank accounts and not previously

disclosed were reflected as contributions on line 17 and as advances

on line 24. The liquidation of these advances/contributions was

reported on the respective Schedule G-P for each affected state

account.

Recommendation

Based on the comprehensive amendment filed by the Committee

on July 9, 1981, the Audit staff recommends no further action

on this matter.

b. Unreported Expenditures

Section 434(b) (4) 01 Title 2, United States

Code requires that each political committee file reports

disclosing the total amount of all disbursements made by the

committee during the reporting period and the calendar year

to date.

Section 434(b) (5) (A) of Title 2, United States

Code states, in part, that each report shall disclose the name

and address of each person to whom an expenditure in an aggregate

amount or value in excess of 5200 within the calendar year is

made by the reporting committee to meet a candidate or committee

operating expense, together with the date, amount, and purpose of

such operating expenditure.
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Our reconciliation of the Committee's bank

accounts to the disclosure reports and our review of expenditure

records revealed that the Committee's reported expenditures were

apparently understated by $606,047.32 (not including unreported

in-kind expenditures, see Finding A.l.c) as follows:

(1) Unreported expenditures to vendors

(2) Unreported wire transfers to state

accounts and former Committee

Treasurer

(3) Unreported expenditures from state

bank accounts

(4) Unreported cash expenditures (no

checks issued) from state

operations

Total Unreported Expenditures

$194,122.04

4,600.00

406,005.94

1,319.34

$606,047.32

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The unreported expenditures to vendors consisted

of $126,522.87 for telephone services, $38,100.00 for mailing

services, and $29,499.17 for payroll related expenses.

The unreported wire transfers to the state

accounts resulted when, due to a bank error in transferring funds,

certain state accounts received funds in error. The Committee

permitted the state accounts to keep the funds but failed to

report the wire transfers as expenditures. The unreported wire

transfers to the former Treasurer were replacements for previous

wires.

It should be noted that the unreported

expenditures from the state bank accounts are directly related

to the unreported contributions deposited/received by the state

accounts (see Finding A.l.a).

As stated in Finding II.A.l.a., the Committee

filed a comprehensive amendment on July 9, 1981. Included within

that amendment were all of the unreported expenditures noted above

as adjusted by additional information provided to the Audit staff

during audit work performed at the end of the 30 day response

period to the interim audit report. Also included in the amendment

were Schedules G-P for expenditures made from the state bank accounts

and not previously reported.
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Recommendation

Based on the comprehensive amendment filed by the Committee

on July 9. 1981, the Audit staff recommends no further action on

this matter.

c. Disclosure of Receipt and Consumption of In-kind Contributions

Section 104.l3(a) of Title 11, Code of Federal

Regulations requires the amount of an in-kind contribution,

equal to the usual and normal value on the date received, be

reported as a contribution in accordance with 11 C.F.R. 104.3(a).

Further, each in-kind contribution shall also be reported as an

expenditure at the same usual and normal value on the appropriate

expenditure schedule, in accordance with 11 C.F.R. 104.3(b).

Our review of Committee records revealed that

approximately 1,128 in-kind contributions, totaling $65,484.18,

were received by the Committee which, as of March 31, 1981, had

not been reported as required. According to the Committee Controller,

workload conditions and late arrival of records from state offices

contributed to this reporting irregularity.

Recommendation

Since the Committee included the appropriate in-kind receipt

and expenditure schedules in the July 9th comprehensive amendment,

the Audit staff recommends no further action.

2. Itemization of Expenditures

Section 434(bl (5) (A) of Title 2, United States

Code states that each report shall disclose the name and address

of each person to whom an expenditure in an aggregate amount or

value in excess of $200 within the calendar year is made by the

reporting committee to meet a candidate or committee operating

expense, together with the date, amount, and purpose of such

operating expenditure.

A review of the Committee's expenditure records

revealed that the following itemization errors or omissions occurred

in the Committee's disclosure reports filed for calendar year 1980.
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expenditures to vendors

or employees not itemized

expenditures incorrectly itemized

ex?enditures from state accounts

not itenized

Total (net) itemization errors

S 495,124.08

(14,188.77)

660,275.43

$1,141,210.74

With respect to the expenditures to vendors or

employees, it was determined that $323,591.93 was for payroll

and payroll related expenses and the remaining $171,532.15

consisted of vendor payments made in ~ay, 1980. The to~al value

of these expenditures was apparently reported as unitemized

expenditures in the respective disclosure reports.

The state account expenditures not itemized, which

totaled $660,275.43, represented 49.16% of the total dollar value

of itemizable expenditures made from the state bank accounts.

On April 1, 1981, the Committee filed amendments to

the disclosure reports itemizing the payroll, and vendor payments

made in May, 1980 (i.e., $323,591.93 and $171,532.15 respectively).

On July 9, 1981, tha Committee filed a comprehensive amendment

itemizing the expenditures incorrectly itemized and expenditures

from state accounts which were not previously itemized.

Recommendation

Based on the comprehensive amendment filed by the Committee

on July 9, 1981, the Audit staff recommends no further action on

this matter.

3. Receipt of Anonymous Cash Contributions

Section 110.4(c) (3) of Title 11 of the Code of

Federal Regulations states that a candidate or committee

receiving an anonymous cash contribution in excess of S50 shall

promptly dispose of the amount over S50. The amount over $50

may be used for any lawful purpose unrelated to any Federal

election, campaign, or candidate.
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During the review of the Committee's contribution

records, the Audit staff noted seven (7) instances where the

$50 limitation on anonymous cash contributions was apparently

exceeded. Six (6} instances were revealed as a result of a

review of a sample of the Committee's daily receipts reconcilation

forms. On six (6) days, the total manual unidentified (apparent

cash) contributions when divided by the number of apparent contributors indicated that the average dollar value per contributor

exceeded the $50 limitation for anonymous contributions as follows:

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Number of

Receipt Total Value Apparent Average E;ccess Over

Date Received Contributors Value Limit

7/24/80 $ 671. 95 1 $671.95 $ 621. 95

8/21/80 933.92 14 66.71 233.92

9/10/80 6,091.74 69 88.29 2,641. 74

10/7/80 3,946.03 54 73.07 1,246.03

10/17/80 2,376.39 39 60.93 426.39

10/18/80

11/21/80 899.88 12 74.99 299.88

Total $14,919.91 $5,469.91

The last instance of anonymous cash received

apparently in excess of the $50 limitation was noted during a

review of the Committee's "SUDlDary of (disclosure) Report"

worksheet for the month of September, 1980. This worksheet

indicated that a manual receipt (i.e., receipts not entered into

c- computerized data base for contributions) entitled "NJ Rally" in

the amount of $5,937.80 was included in the unitemized receipts

total for the September disclosure report. Committee officials

stated that these funds were raised by a "pass-the-hat" method

at a rally in New Jersey: however, no records were available to

support the receipts or number of people involved.

During audit work performed at the end of the 30

day response period, the Committee provided additional documentation

which indicated that the anonymous contributions noted above were

made by a larger number of contributors thereby lowering the average

contribution to below the $50 anonymous cash limitation in all

material aspects.
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The Committee also provided additional records which

indicated that a sufficient number of people attended the "NJ

Rally" to also bring this deposit below the limitation amount.

Recommendation

The Audit staff recommends no further action on this matter.

4 • I tern ". zation of Loan Activity

Section 434{b) (3) (E) of Title 2, United States

Code states that each report shall disclose the identification

of each person who makes a loan to the reporting committee

during the reporting period, together with the identification

of any endorser or guarantor of such loan, and date and amount

of value of such loan.

Section 434tbl (8) of Title 2, United States Code

states, in part, that each report required to be filed shall

disclose the ~nount and nature of outstanding debts and obligations owed, and where such debts are settled for less than their

reported value, a statement as to the circumstances and conditions

under which they were extinguished and the consideration therefor.

Section 104.17(a) of Title 11 of the Code of

Federal Regulations states that for all elections occurring

prior to January 1, 1981, authorized commitees of candidates

for President and Vice President may comply with the requirements of 11 C.F.R. 104.17 in lieu of 11 C.F.R. l04.3(a) and (b).

Section l04.l7(b) (5) (ii) of Title 11 of the Code

of Federal Regulations states that each loan over $100 in value

and made during the reporting period, or less than $100 in value

and the total of the loans from one person is over $100 shall be

reported together with the identification, occupation, and

principal place of business, if any, of each lender, endorser,

or guarantor, as the case may be. The report shall include the

date and amount of the loan. The Committee had the option to ita~ize all loans received from individuals regardless of amount

in lieu of the S100 threshold noted above.

OUr review of loan activity indicated that, during

the period August through November 1980, the Committee solicited

and received 18,759 loans from individuals totaling $1,826,174.79.

Two categories of disclosure errors or omissions were noted with

respect to these loans received from individuals.
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(a) Itemization of Loans Received

The Audit staff conducted a test to determine

proper itemization of loans received on Schedule A-P of the Co~ttee's disclosure reports filed. we noted that the Committee

itemized only those loans in excess of $200 per transaction. The

Committee did not take into consideration other contributions made

by the individual which should have been aggregated with the value

of any loans received and outstanding from the same individual.

The Committee also used a $200 itemization threshold rather than

the $100 threshold contained at 11 C.F.R. 104.l7(b) (S) (ii). This

use of the incorrect itemization threshold was apparently due to

an oversight by the Committee.

(b) Itemization of Debts (Loans)

Owed by the committee

Our review also noted that the Committee

did not file the appropriate schedules of outstanding debts

(loans) at the close of the respective reporting periods.

The Committee has obtained a comprehensive schedule of loans

received which contains the name and address of the lender,

amount, date received, disposition and outstanding balance

as of 12/31/80 with respect to the 18,759 loans received. on

April 1, 1981, the Committee filed an amendment which included

the comprehensive schedule of loans noted above.

RecoDDendation (item 4 (a) and (b»

The Audit staff recommends that no further action is necessary

with regard to the disclosure of the loan activity occurring in

calendar year 1980 since the amendment filed contained the required

disclosure information with respect to both the receipt of loans

and disposition thereof.

5. Matters Referred to the Office of General Counsel

C, Certain matters noted during the audit were referred

to the Commission's Office of General Counsel for consideration on

April 20, and July 17, 1981.

B. ~ndings Relating to Title 26 of The United States Code

1. Undocumented Disbursements

Section 9003.5(a) of Title 11 of the Code of Federal

Regulations sets forth the documentation necessary to determine

a qualified campaign expense for each disbursement exceeding $200

as a receipted bill from the payee which describes the purpose of

the disbursement; or if such a receipted bill is not available, a

cancelled check negotiated by the payee plus either a bill, invoice,

voucher, or contemporaneous memorandum from the payee.
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Where the documents mentioned above are not

available, a voucher or contemporaneous memorandum from the

Committee shall be provided.

If the above specified documentation is not

available, the candidate or committee may present a cancelled

check and collateral evidence to document the purpose of each

qualified campaign expense.

Section 9007.2(a) (4) of Title 11 of the Code of

Federal Regulations states, in part, that a repayment of money

will be required in an amount equal to any amount of any payment

made to the eligible candidates of a political party, which

amount was used for any purpose other than to defray qualified

campaign expense~.

During our review of the Committee's headquarters

and state office disbursement records, the Audit staff determined

that 193 disbursements (or groups of disbursements) totaling $179,658.27 which were made by Committee check, wire transfer,

or cashier's check were not adequately documented as to the

purpose of ~he disbursement or verifiable as qualified campaign

expenses.

In addition, during a review of t~e Committee's

163 state bank accounts, the Audit staff determined that there

were no bank records for eight (8) of the state bank accounts

and only partial records available for 29 other bank accounts.

The Audit staff also identified Committee payments

totaling $183.00 for parking fines assessed during the campaign.

The Audit staff views these payments as non-qualified campaign

expenses, the amount of which is subject to repayment to the

u.s. Treasury.

On June 9, 1981, the Commission made a preliminary

determination that, absent a showing to the contrary within 30 days

of the Committee's receipt of the interim report, the undocumented

expenditures and parking fines would be viewed as non-qualified

campaign expenses and the value repayable to the U.S. Treasury.

Recommendation

In response to the interim report, the Committee submitted

adequate supporting documentation and bank records for the state

accounts which satisfied the documentation requirements noted above

in all material aspects. The Audit staff therefore recommends no

further action on this matter.
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The Audit staff recommends that the Commission determine

the $183.00 in parking fines to be repayable in full, within

30 days of receipt of this report, to the u.s. Treasury. During

the 30 days, the Committee may submit legal and factual materials

to demonstrate that repayment is not required.

2. Interest Earned on Investment of Federal Funds

Section 9004.5 of Title 11 of the Code of Federal Regulation~ et~tes that investment of public funds or any other

use of r'....~::~c tunds to generate income is permissible, provided

that an Cl': ..)\:.r.t equal to all net income derived from such investments, less Federal, State, and local taxes paid on such income,

shall be repaid to the Secretary.

During a review of Committee bank records, the

Audit staff determined that the Committee earned $108,553.80 from

investment of Federal fands. The repayment attributed to that

amount was calculated as follows:

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Total Interest Earned

Less: Applicable Taxes

Total Repayment Amount

$108,553.80·

49,888.75

$ 58,665.05

During audit work performed at the end of the 30

day response period to the interim audit report, the Audit staff

updated the interest earned on investment of Federal funds to the

amounts noted above (i.e., projected through September 30,1981).

on June 9, 1981, the Commission preliminarily determined that a

repayment of $28,531.95 was due to the U.S. Treasury based on

interest earned on investments outstanding as of February 28, 1981.

In its response to the interim audit report, the

COmmittee stated that it reserves the right to keep the matter of

repayment of interest open pending resolution of the question

concerning loans from individuals (see Finding II.B.3.). It is

the Committee's position that not all of the money invested was

Federal funds.

Recommendation

The Audit staff recomm~nds that the Commission determine the

$58,665.05 in estimated net interest income to be repayable in full,

within 30 days of receipt of this report, to the u.S. Treasury.

An adjustment to this figure may be necessary depending upon the

date on which the Committee makes the requested payment. Ouring the

30 days, the Committee may submit legal and factual materials to

demonstrate that repayment is not required.
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3. Determination of Net Outstanding Qualified

Campaign Expenses and Repayment to the

U.S. Treasury

Section 9007(b) (1) states that if the Commission

determines that any portion of the payments made to the eligible

candidates of a political party under Section 9006 was in excess

of the aggregate payments to which candidates were entitled under

Section 9004, it shall so notify such candidates, and such

candidates shall pay to the Secretary of the Treasury an amount

equal to such portion.

On November 13, 1980, the Commission determined

that the Committee was entitled to a payment of $4,164,906.24

in post-general election public funding. These funds were

transferred to the Committee on November 13, 1980. On January

8, 1981, after consideration of the official vote results, the

Commission determined that the Committee was entitled to an

additional payment of $77,397.76 making the total payments

received by the Committee from the Presidential Election Campaign

Fund of $4,242,304.00.

On March 3, 1981, the Committee su~mitted a

Statement of Net Outstanding Qualified Campaign E~2anses (NOQCE)

dated as of December 4, 1980 (see Attachment 1). The NOQCE is

a statement used to determine the net obligations outs~andin9 or

net surplus of assets over obligations as of a certain date.

Included on the NOQCE is detail information concerning assets

such as cash-on-hand and in banks, accounts receiVable, capital

assets, etc., and obligations such as accounts payable and

necessary winding down costs through the Committee's projected

termination date.

During the course of audit fieldwork conducted in

March 1981, the Audit staff verified the items contained on the

December 4, 1980 NOQCE statement and reviewed the related activity

through December 31, 1980, with estimates of accounts receivable,

accounts payable, and winding down costs based on actual receipts

and expenditures through February 28, 1981.

Based on our analysis, we computed the net outstanding

qualified campaign expenses to be a surplus of $587,046.98 versus

the Committee's calculation of a surplus of $131,622.00. T~e

significant factors resulting in the difference are discussed below.
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(a) Cash-on-hand And In Banks/Fundraising Coata

The Audit staff perfo~ed a cash reconciliation

as of December 4, 1980 for all Committee accounts where recorda

were available. In addition, an audit adjustment of $75,610.00

to reconciled cash was made to recognize an expenditure which waa

made on November 24, 1980 relating to a fundraising appeal to occur

after December 4, 1980. The Audit staff did not include the proceeds

from this solicitation (received post December 4, 1980) as an asset

of the Committee in our calculation of the NOQCE position as of

December 4, 1980.

In addition, the Committee included an estimate

of $100,000 for fundraising expenses to be incurred after 12/4/80.

It is the Audit staff's opinion that, since the Committee was in a

surplus position on 12/4/80, these fundraisinq costs may not be

considered as valid winding down costs.

(b) Loans From Individuals

ourinq the campaign, the Committee solicited

and received loans from individuals which were subject to repayment

with interest for the period outstanding. TWo (2) months after

the election, January, 1981, the Committee mailed repayment checks

for the principal amount plus interest to the individual lenders

and included a solicitation requesting the lenders to return all

or a portion of their loan repayment check to the Committee to help

pay the remaining debt of the campaign. ~he solicitation also

included a mon! specific request from the candidate to - just

endorse it on the back to the National Unity Campa~gn and return

it to me.- The loan repayment/solicitation involved approximately

18,340 loans with a total value (including interest payable) of

approximately $1,870,892.46. Per the Committee records through

March 6, 1981, the results of the repayment/solicitation effo~~,

and to a small extent events which occurred in December, 1980,

appear below:

Repayment checks endorsed by lenders to

the Committee and deposited by the

Committee

Repayment checks negotiated (deposited

or cashed) by the lender with the lender

issuing his/her personal check to the

Committee

Repa~ ..t checks returned by the lender to

the Committee and not negotiated (deposited)

by the Committee due to non-negotiability of

the instrument i.e., checks voided, not

properly endorsed, stop payment checks or

checks otherwise rendered non-negotiable

by lenders

Loans forgiven by lenders in December, 1980

Total loans forgiven through

:-tarch 6, 1981

$225,861.18

179,990.56

20,194.16

14,456.22

$440,502.12
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Under 26 U.S.C. section 9004(b) (1), an

eligible candidate of a new party 3hall be entitled to payments

which "shall not exceed an amount equal to the amount of qualified

campaign expenses incurred by such candi~ate••• reduced by the

amount of contributions to defray qualified campaign expenses

received and expended or retained by such eligible candidate ••• "

(emphasis added). As described above, as of March 6, 1981, the

candidate received $440,502.12 in funds either as a forgiv~ness

or recontribution of monies originally loaned to the ~ampaign prior

to the Committee's receipt of public funds. The loans that were

subsequqntly forgiven or recontributed were considered as part of

the Committee's computation of net outstanding qualified campaign

expenses for purposes of calculating the Committee's entitlement

pursuant to 26 U.S.C. Section 9004(b) (1) but were not counted as

contributions which would have correspondingly reduced the amount

of the entitlement. The subsequent forgiveness or recontribution

of monies that were deemed outstanding obligations cannot now be

retained after the Committee received an entitlement based on the

fact that those monies were outstanding campaign debts which would

be repaid with public funds. Thus, those monies which were realized

by the forgiveness or recontribution of those loans which constituted

a basis for entitlement pursuant to 26 U.S.C. Section 9004(b) (1) are

funds in excess of the Committee's entitlement and subject to the

provisions of 26 U.S.C. Section 9007(b) (1).

Other less significant differences on

the NOQCE between Committee and Audit totals were not disputed

by the Committee.

In the interim audit report the Commission

preliminarily determined that, absent a showing to the contrary

within 30 days of receipt of the report, the Committee received

$587,046.98 in payments from the Fund to w:~ich it was not entitled.

The Audit staff also recommended that the Committee obtain a written

independent appraisal as to the fair market value of artwork which

was created on a volunteer basis by various artis~s during the

campaign.

Analysis of che Cornrnitt~e's Response

In its response to the interim audit report, the

Committee addressed the following areas.

(a) Artwork

?he Committee stated that the artwork at issue was

solicited and collected by a New York gallery owner who, because

of problems posed by the receipt and disposition of the artwork,

never transferrred the items collected to the Committee. The

artwork was never received by the Committee and thus is not now

and never was an asset of the Co~ittee.
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(b) Loans From Individuals

The Committee believes that "the Audit staff erred in

finding that over $400,000 in loans were not bona fide loans for

purposes of the qualified campaign debt." They stated in their

response that "the loans were valid campaign debts when made. They

were also still valid campaign debts at the close of the expenditure

report period, the only time when the extent of the Campaign's

qualified expenses are relevant. The loans from individuals who

notified the Committee prior to the close of the expenditure report

period that they intended to forgive the loans were treated by the

Committee as contributions at that time and so reported in the

Committee's books and reporting forms. Because these individuals

had forgiven the debt of the Committee prior to the end of the

expenditure report period, their loans were quite properly excluded

from the Campaign debt and treated as contributions."

"After the receipt of the Federal funds and after

the close 0: the expenditure report period, all the loans then

outstanding were repaid with interest by the Committee. By contrast

to the earlier contributions of the loan monies, the loan repayment

monies which were contributed after the expenditure report period

were treated as contributions which did not in any way alter the

Campaign's total debt on December 4, 1980. That some of the

individual creditors responded to the Committee's solicitation by

making contributions, some by endorsing over the checks to the

Committee, does not alter the sta~~s of th~ loans, when made or

on December 4, 1980, as bona fide campaign debts. The individual

creditors had no obligation to contribute the repayment monies,

and had not informed the Committee that rep~yment was not required.

On December 4, 1980, the Committee was obligated to and then did

repay those loans." According to Committee records, the majority

of the loan repayment checks were mailed on January 19, 1981.

The Committee also stated that "should the Commission

reject the Committee's arguments, the Committee reserves the right

to return the monies at issue to the individuals who contributed

them. The contributions were made because the individuals believed,

as did John Anderson, that the Committee's debt would exceed the

Federal monies received. Those individuals should be repaid from

excess nonies i: the Commission determines that the debt did not

exceed the Federal funds :::-eceived."
....

-17-

For the reasons noted by the Audit st~ff on pages

14 and 15, we believe that the loans from individuals which were

forgiven or recontributed after December 4, 1980, should be

considered as contributions and a reduction to entitlement

acc~rdingly. We also believe that it would be inappropriate to

permit the Committee to refund the amount of the forgiven/

recontributed loans to the contributors in lieu of repayment of

said monies to the u.s. Treasury. In addition, after further

legal analysis by the Office cf General Counsel, the Audit staff

considers the contributions solicited after December 4, 1980 to

be contributions made to defray qualified campaign expenses of

the 1980 campaign and a further reduction to entitlement. The

Audit staff has therefore, in reconciling the cash amount on the

NOQCE, included (i.e., subtracted from the NOQCE cash amount) an

expenditure of $75,610.00 which was made on November 24, 1980

relating to the fundraising appeal which occurred after December

4th. We have also included the amount of the contributions

received ($160,557.96) as an asset of the Committee in our

calculation of the NOQCE position.

In conclusion, as part of our audit work performed

at the end of the 30 day response period to the interim audit report,

we have updated the NOQCE statement ',hrough June 30, 1981 as shown

below.
-18-

NATIONAl. mun CA.'tPAICH FOR JOHN ANl)!UON

STATEKEt."T OF NEt Ot.lSTAmlING QUALIFIED CAMPAIGN EXPENSES

DE~ 4,1980

(Audi~.d S~a~"'D~ Upda~ed Th~ouah Juna 30, 1981)

Cash-an-hand and in b.nka $ 2,562,948.99

I.n

o

, r.

. ,

c

c.

Accounts receivabl.:

Additional public fu~ds entitlement

Pre.. billing.

Refunds

Due frca State bank account.

Accrued interes~ receiv.bIe In~eres~ receivab1e-earned poa~

12/4/80

Priva~e contribu~ions .o11ci~ed

post-12!4/80

Total accounts receivable

Capital , other as.e~.

Total a••ets

Obligations for Qualified CalIpa1p Expans"

Account. payable:

Loana frOll indiViduala

\'eudo't' payables

Income ~axe. pay&ble

Andar.ou for Pra.1clenc Pr1ll&ry

eo-l~~ee

Tocal accounts payable

E.~1lIIa~ad rind11l1 dotolD c:o.~. 7/1181

to 9/30/81 (projec~ed cal'll1DacioD daca) 1/

Payroll

Payroll taea

LeSal feu

Health In.urance

OfUce Rent

Fumi~ure and equ1p1WD~ ~en~al

Telephene

POltage, freight , sbiPP1Dl

Supplies

CO:llputer servic.. Travel

Record shippin. , .toraae

Fundraisina cost.

Office iDsuranca

Staff benafl~s (i.e. coffee, perktDa)

Reserve for S~ate unemplo,.ent ....

Total winding down coata

Total Obligations For Qualifiad Ca8pa!cn Exp~..

Subtotal

Les.: Net interest incoae (ainua tax effect) earned on inve.tment of Fed.r.l funa..

~et Outstanding Qualified CampaiaD Expenae.-Surplua

$ 77,397.76

- 0 - 1/

241.384.24 2/

30,631.09 - 25,247.47

97,808. SO

160,557.96

$1,421,510.52 4/ 5/

965,188.29 61 - 60,729.32 II

l,006.~

$2,448,434.79

$ 28,431.00

11,691.00

30,000.00

900.00

4,000.00

4,500.00

3.600.00

900.00

SOO.OC

10,000.00

5.000.00

3,000.00

- 0 -

1.738.00

1,500.00

2,000.00 !I

$ 107.774.00

633,027.02

-0-

(2.556.208.79)

$ 639,167.22

58,665.05)

$ ~Sl.102.17

* ~ount of Federal funds received ov.r and above tbe aount D.c••••r·· tc .; 1fta, G~alified campaign expen••••
-19-

NOgCE Footnote.

c

...."

!J

1.1

1..1

There va, no ,pecific doc~=entation provided by the Com.ittee

to .upport thi. total. Any pre •• bil1ina' receivable are included in the refund" total ($241,384.24) vhich va.

determined by reviewina all receipt. in the 12/S/80 -

6/30/81 period plu. receiveble. outstandina at 6/30/81.

Included in thi. emount is an $18,000.00 refund due from

• vendor b •• ed upon Com.ittee record. available at the time

of thi. revision to the NOgCE. Thi. amount is subject to

reduction or elimination pendina the receipt of a detailed

accountina of the chara.' from the vendor.

Total intere.t accrued ($25,247.47) and receivable

($97.808.50) totalinl $123,055.97 include. $108.553.80

vhich vas earDed on the investment of public fund ••

The e.ti.ated tax effect is $49.888.75 leaviul a Det

a.ount repayable to th. U.S. Ttea.ury of $58.665.05.

(See Findinl 11.1.2.)

As a re.ult of audit vork parformed at the end of the 30

day re.pon.e period to the interim audit report. the amount.

applicable to the loan repayment/solicitation effort

conducted after December 4, 1980 vere updated throuah June

30. 1981 e. follows:

Repayment check. endor.ed by lenders to

the Committee and dapo.ited by the

COlillittee.

RepaYllent check. neaotiated (depo.ited 184.556.47

or casbed) by ~he lender with ~be lender

i ••ulna hi./her perlonal cbeck ~o the

COIl.ittee •

Repay.ent checks returned by the lender to 21.007.35

the COllmittee and not neaotiated (depo.it.d)

by the Committ.e du. to non-DeaotlabllitT of

the iustrullent I.e •• checkl voided. not

properly endor.ed ••top p.y.en~ checks or

checkl othervi.e rend Ired con-nllotlabl.

by lender••

c::

Loan. foraiveu by lender. in Dec.mblr. 1980

Total loan' forelven

14.456.22

$451.621.65

i/ Allend.ent. to thl Committee'. di.clolure report. may be

necessary d~e to the method u ••d in report ina the

foreiven/recontributed 1980 loanl a. contribution. in 1981.

!/ Excluded froa the tOtal are three (3) expenditure. totallina

$3.S41.97 which were found to not be related either

expenditure. incurred durina the expenditure report period

or quelified windina dovn co.ts.

II Income tax•• paya~le include. $49.888.75 which va. earned

on the iDve.tment of public funds. (Se. Findina lI.I.2.)

!/ Wind ina dovn COlt. are eltlm.te. baled on future

activity projected throuab Septeaber 30. 1981. The ••

estimate. are subject to revi.ion b •• ed upon actual

costs incurred.

!I The reserve for State uneeploy••nt taxes va•••tabli.hed

to cover £uture billinc. fro. State. vhere unemployment

taxes vere not paid for Co ••ittee employeel who vorked

at the State callp.ian office ••
-20-

~'~~~',~,-'-~-~'---·T'f,---"",.....,.".,y~.---""'-~'~"""""'''''''''-'.~'jl\i~,*Il!'!'!.,"",,,'1!l'!'l''''~'':''''\$~_ ~f.*,Il!l!",;;1!'i'!l)f!'!'!.'!'!'l1'"'7""'''''',·,''''''''''''''''' ......,...,'''''·Hl'''''"',"''!'<;'t~.'."l!'l'''''''!!i!!&''ll'!''}i1!:''-,''''':!!:r., ,l'I""e''''!'",,''?'',:,,~'l .......~'JI"'II.W". ..' It\ii!'I'I!'!.t~<,'l'!l;,'',,-';;;;:;I'lI)!JIII ,•.,I!!l!',,!!I".,'-~1

I

1

!

Recommendation

The Audit staff recommends that the Commission determine

that the Committee has received $581,102.17 in payments from the

fund to Nhich it was not entitled and that this amount is repayable

in full within 30 days of receipt of this report, to the U.S.

Treasury. During the 30 days, the Committee may submit legal

and factual materials to demonstrate that repayment is not required.

Summary of Repayments to the U. S. Treasury

Non-qualified campaign expenditures - parking fines (Finding II.B.l.)

Interest received on Federal funds

(Finding II.B.2.)

$ 183.00

58,665.05

c

Federal funds received in excess of

entitlement (Finding II.B.3.)

Total Repayment

581,102.17

$639,950.22
Attachnent 1

wrrY OMPAtQf R)R JaIN AN'DEIS:N

Sl'ATEMENr (R NEt' CUl'S1'»IDING QUALIFIED OMPAYQt EXPENSES

D'EX3oBER 4, 1980

(As Pxesented By '!he camd.ttee March 3, 1981)

Assets

Cash-on-hand and in banks

1v:o:Junts receivable:

Additialal public funds entit.1enent

Press bi1li.ncJs

~funds

'Ibt:.al a.coounts :reoeivable

capital & other assets

$ 77,397.00

22,834.00

134,500.00

$2,651,291.00

$ 234,731.00

- 0 -

Total assets

::OCbligatioos for Qualified canpdgn Expenses

Accounts payable:

-:'- loans fran individuals

C venoor payables

, ,......

. , Total accounts payable

$1,878,000.00

465,000.00

$2,343,000.00

$2,886,022.00

N.stimated winding dam ocst:s 12/5/80 _ to 7/31/81 (projected t:erJDinat.i.a\ date)

Payroll $ 180,000.00

Payroll tues 18,000.00

C I.egal fees 20,000.00

Health Insurance 2,400.00 .......... Office Pent 12,000.00 ...... Furniture and equ:i.pllmt zental 8,000.00 - . Te1epha1e 12,000.00

Postage, freight & shipping 8,000.00 ~lies 4,000.00

carputer services 40,000.00

Travel 4,000.00

Pecord shipping " storage 3,000.00

Fundraising CXlSts 100,000.00

Total winding dam costs $ 411,400.00

Total Q>ligatioos For Qualified eatpai.gn Expenses

~t OUtstanding Qualified Ccmpaign ~s-Surp1us

(2,754,400.00)

$ 131,622.00

•

MEMORANDUM

TO:

FROM:

SUBJECT:

FEDERAL ELECTION COMMISSION

W4.SHINGTO,"" 0 ( ~(l4f,3

July 19, 1983

FRED EILAND

PRESS OFFICER

BOB COSTA

PUBLIC ISSUANCE OF ADDENDUM TO THE

FINAL AUDIT REPORT OF THE NATIONAL

UNITY CAMPAIGN FOR JOHN ANDERSON

,. ....

Attached please find the above mentioned Addendum to the

Final Audit Report of the National Unity Campaign for John

Anderson which was approved by the Commission on July 14, 1983.

Informational copies have been received by all parties ~~ involved and the Addendum may be released to the pUblic as of

today, July 19, 1983.

,...

Attachment as stated

f!"-.

•

cc: FEC Library RAD ,,/'

Public RecordV'
•

AGElIDA IXX!lMENT #83-110

FEDERAL ELECTION COMMISSION

WASHINC10N. 0 C 204&3

I , :_ I • ; _ i . l, •.3 ~~~; = : II [

C v·:: I ' •••;n............-----

83 JUfJ 27 p 4: 4B

June 27, 1983

"=!-. ,~~ 1 T E,! ..

, '0.• :.. • ~.•. •

~,1 ..

·\'t I 1/ I j~i•

THE COMMISSIONERS r:- /i:-J'03

JAMES A. PEHRKONa·t.1~ ACTING STAFF DI~~;£~

BOB COSTA

ADDENDUM TO FINAL AUDIT REPORT ON THE

NATIONAL UNITY CAMPAIGN FOR JOHN ANDERSON

SUBJECT:

FROM:

MEMORANDUM

TO:

THROUGH:

, .... I . Summary of Issues and Recommendations

.. '.

~"

Based on the Audit staff's review of records of the National

unity Campaign For John Anderson ("the Committee") with respect

to the incurrence and payment of non-qualified campaign expenses,

$1,276.66 in expenses for non-campaign related purposes were

noted (see 11 C.F.R. 9007.2(a)(4) (i». This represents an

increase of $1,093.66 from the amount ($183.00) noted in the

final audit report. This amount ($1,276.66) was repaid to the

U.S. Treasury on September 2, 1982. In addition, in accordance

with the Commission's determination of March 10, 1982 (see

discussion at II. below), the amount of interest received (net of

applicable taxes) requiring repayment to the U.S. Treasury

pursuant to 11 C. F. R. 9007.2 (a) (6) is revised from $ 58,'665.05 as

noted on page 12 of the final audit report td $17,415.86. A

check in this amount was delivered to the U.S. Treasury on August

5, 1982.

. As noted on pages 4 and 5 of Exhibit A, the Committee's

proposal to undertake a shared solicitation with the National

Unity Committee with respect to the refund of 17 excessive

contributions would distort the remedial nature of the refund,

and therefore it is recommended that such solicitation not be

permitted.

•

Finally, all monies remaining in the Committee's accounts at

the conclusion of the wind down period which are in excess of

those needed to defray qualified campaign expenses are to be

repaid to the U.S. Treasury in accordance with the Commission's

determination of March 10, 1982.
•

. ,..

•

-2-

II. Background

On October 14, 1981, the Commission approved the final audit

report on the National Unity Campaign For John Anderson which,

pursuant to 26 U.S.C. Section 9007(b), and 11 C.F.R. 9004.5,

required repayment of $639,950.22 comprised of federal funds

received in excess of entitlement, interest received on federal

funds, and non-qualified campaign expenses.

As a result of its consideration of the Committee's response

to the final audit report, the Commission made a determination on

March 10, 1982 to allow the Committee to refund contributions

received after December 4, 1980 (the end of the expenditure

report period), and interest earned thereon to the original

contributors in lieu of repayment to the U.S. Treasury. Al~

funds remaining in Committee accounts (except those necessary for

winding down in accordance with the estimates depicted in the

Statement of Financial Condition attached) after the refund

effort is concluded are to be repaid to the U.S. Treasury.

Subsequent to the above determination, the Committee

proposed that a solicitation on behalf of the National Unity

Committee (lithe PAC")* be included with the reissuance of certain

loan repayment checks. The Committee also suggested the

possibility of both committees sharing the cost of this mailing.

The Committee also proposed that any repay~ent(s)/payrnent(s) to

the U.S. Treasury for non-qualified campaign expenses and/or

civil penalties be permitted to be made from Committee accounts

containing only private contributions. On July 29, 1982, the

Commission approved both proposals with the understanding that

any reimbursement for shared costs by the PAC would occur prior

to the proposed mailing.

In August 1982 and April 1983, the Audit staff performed

follow-up work to obtain an update of the Committee's financial

condition (see Exhibit B). Based on these reviews, the current

status of the refund effort, interest repayment, and nonqualified campaign expenses is discussed below.

* According to the Committee's proposed solicitation letter,

the PAC is a "new political Committee"- which was formed in 1981.

The letter goes on to state: "[Ilt is an entirely separate entity

from the 1980 campaign committee. It has endeavored to maintain

contact with our supporters by publishing a bi-monthly

newsletter, 'An Independent View,' and otherwise continuing to

promote the ideas we ·~spoused in 1980."
•

. ,.-

•••

r",

•

-3- .

A. Contribution Refund Effort

In accordance with the Commission decision of March 10,

1982, the Audit staff calculated the value of the contributor

refund pool. The estimated value, as of March 31, 1983, of the

refund pool is $291,223.00. The total amount originally

contributed was $601,990.50. The Committee at this time

contemplates mailing the refund checks in July. The checks have

a negotiation restriction of 90 days thereby affording a cutoff

of the refund effort in October 1983. At that point, any funds

remaining (other than those necessary to defray winding down

costs as estimated) are to be paid to the U.S. Treasury.

The Committee proposes to include a solicitation with

the refund checks. According to the Committee, the letter

accompanying the refund checks will state that to continue the

activities of the PAC, it would be appreciated if the recipient

of the refund check would consider making a contribution to the

PAC.

The Committee indicated that the PAC would share the

cost of this ma~ling on an equitable basis with the Committee.

Our analysis of the Committee's cost estimates with respect to

the contribution refund effort involving approximately 15,700

contributors revealed that the total estimated cost is $29,181.89

with the PAC's share calculated at $10,116.48. Based on the

assumptions made by the Committee in arriving at the PAC's share

of the costs and after certain adjustments to those figures, it

appears that the Committee's computation of costs to be shared is

consistent with the Commission's July 29, 1982 determination.

The Committee does not intend to commence the mailing until

receipt and deposit of the PAC's share of the cost of this

mailing.

The Committee also proposed a shared solicitation with

the PAC with respect to a mailing of refund cbecks for 17 excessiv~ contributions. This proposal is essentially distinct

from the unique refund/solicitations of surplus funds described

above. For the reason stated in Section I, this shared

solicitation is deemed not to be permissible under the Act.

B. Interest Earned on Federal Funds

The final audit report cited. interest earned on federal

funds in the amount of $108,553.80, minus taxes of $49,888.75

leaving a net amount repayable to the u.s. Treasury of

$58,665.05. As a result of the Commission's determination on

March 10, 1982, which changed the treatment of the interest

earned on contributions received after December 4, 1980, the

interest earned on federal funds changed to $32,251.60, minus

taxes of $14,835.74 leaving a net amount repayable of $17,415.86 • The Committee repaid the amount of $17,415.86 on August 5, 1982.
• C.

-4-

Non-Oualified Campaign Expenses

... ~.

, .

•

The final audit report cited non-qualified campaign

expenses in the amount of $183.00 for parking fines. During

follow-up fieldwork subsequent to the final report, we noted

additional expenses totaling $1,093.66 which are4 also subject to

repayment to the U.S. Treasury pursuant to 26 U.S.C.

9007(b) (4) (A). These items include tax penalties arising from

late payment of unemployment insurance, post election purchase of

office equipment, and other incidental expenses. The Committee

repaid the amount of $1,276.66 on September 2, 1982.

III. Support For the Recommendation

The recommendations are based on the Commission's

determinations of March 10 and July 29, 1982 and review of the

Committee's financial records subsequent to the final audit

report.

IV. Staff Coordination

A copy of this memorandum was furnished to the Office of

General Counsel for their consideration. Their comments are

included at Exhibit A.

Attachments:

Exhibit A: Memorandum from Office of General Counsel re:

Addendum to the Final Audit Report-National Unity

Campaign for John Anderson, 83AR16.

Exhibit B: National Unity Campaign for John Anderson,

Statement of Financial Condition as of 3/31/83 (prepar~d by Audit Division) •
•

Exhibit A

FEDERAL ELECTION COMMISSIO~

\\'ASHINC10N. 0 C. 204&3

June 10, 1983

MEMORANDUM

-. .,

TO

THROUGH:

FROM

SUBJECT:

Robert J. Costa

Assistant Staff Director

Audit DiViSion~

James A. Pehrkon

Acting Staff D" ctor

Charles N. 'Steev(J$/

General Counse~

Addendum to the Final Audit Report - National Unity Campaign for Joh~

Anderson, 83AR16

•

The Audit Division submitted for revie~ the above-referenced

addendum concerning the National Unity Campaign for John Anderson

(the Committee). The addendum reports on the Committee's efforts

to wind do~n its operations, to make repa~~ents to the Treasury

and refunds to contributors in accordance ~ith the Commission's

determinations of March 10, 1982. The cucitors have updated the

Committee's financial statement through March 31, 1983.

AUDIT QUESTION: LEGAL FEES AS

WIND DOWN EXPENSES

Attached to the addendum is a recuest for an o~inion

concerning the amount of legal fees iiclucec in the·calcula~ion

of wind do~n expenSES. In April 1983, cu~ing the latest audit revie~ of the Committee, the auditors found that the Committee

had incurred and paid legal fees totaling $47,658.60. Counsel

for the Committee billed as follows:

-'
•

.. ,....

Memorandum to Robert J. Costa

83ARl6

Page 2

Legal Services

Retainer for remaining

wind dov.'n per iod

Travel expense, telephone,

etc.

TOTAL

$ 30,300.00

12,000.00

5,358.60

S ~7,658.60

•

•

Counsel's bill to the Committee included, in part, services for

consultation concerning day-to-day legal inquiries, review of

financial reports, services concerning MU~ 1452 (Liberal Party) , review of the refunding arrangement, and preparation of responses

to the FEe. The retainer would extend services through the

winding down process (presently estimated to end November 30,

1983). The auditors question the amount of the fees charged,

particularly focusing on the amount of re~aining retainer, in view

of the minimal"activity anticipated before the Committee may

terminate.

11 C.F.R. § 9002.ll(c) (1) states tha~ "Expenses incurred

after the expenditure report period are not qualified campaign

expenses, except for winding down costs .... " [E~phasis added.]

11 C.F.R. § 9004.4(a) (4) allows a ca~ciaate to use public

funds to defray ~·inding do\\'n costs, "prov:.aec thct such costs are

associated with the termination of the ca~dicate's general

election campaign. Examples of such cos~s include, but are not

limited to: The cost of complYing with ~~e cost-election

requirements of the Act, the cost of necessary office space

rental, and payroll costs for necessary personnel." [Emphasis

added. ]

,

The Regulations include "~he cost c~ complying with postelection requirements of the Act" as qual::ieo campaign expenses

in wind· down costs. The legal services i~~~ized by the

Committee's counsel appear to encompass t~e usual functions

associated with the post-election repay~e~t process and

'preparation of responses to a NUR investi~~~ion. The retainer of

S12,000 is the fee estimated to continue :~ese services through

the end of the winding do~n period, now ~:cjected through

November 30, 1983. According to Committ~~ counsel, the retainer

covers "final services for the ...HUR,· the r~funding procedure,

and routine conferences and correspondenc~ ~:t~ c8~ittee

officers...... The Committee is prepared :0 refund and terminate

in due course; there is no auestion of li~ication in the legal

fees estimated to complete the winding cc~~: 7herefore, the legal

services noted by"counsel may be considered part of the valid
•

:

•

Memorandum to Robert J. Costa

83ARl6

Page 3

winding down costs contemplated by the Regulations. As qualified

campaign expenses, these legal services provided to the Committee

will reduce the a~ount available for refund to contributors.

The auditors question the reasonable~ess of Committee

counsel's legal fees. The question po~ed to this Office focuses

on the amount of fees charged and the number of hours expended on

behalf of the Committee. The question aoes not concern whether

the purpose of the fees was for qualified campaign expenses.

As discussed herein, we have reviewed the attorney's bill

which details the valid winding down services rendered. In

addition to this documentation, the attorney provided a breakdown

of fees charged and the number of hours billed for services by two

partners, two associates and a paralegal in the law firm. It

appears that Committee counsel has adequately accounted for the

services in his bill to the Committee. B~sed on our examination

of the documents provided and the analysis of the services as

valid qualified campaign expenses, the Office of General Counsel

concludes that the available information is sufficient in this

case to document the amount of fees charged. Therefore, no

further scrutiny of documentation for the fees is ~arranted in

this particular matter.

A.l. Refund of Surplus Funds

On March 10, 1982, in its decision concerning the response

to the Final Audit Report of the National Unity Campaign for John

Anderson, the Commission determined that the Comffiittee could not

retain surplus campaign funds as it requested. However, in lieu

of repayment ,to the u.S. Treasury, the Co~~i~sion allowed the

Committee to refund to contributors on a cro rata basis all

private 'contributions received after the Ene of the expenditure

report period and all interest earned thereon. Funds remaining

after the refund effort are to be repaid to the u.s. Treasury.

SUbsequently, during consideration of the Committee's method

for refunding the monies, the Commission agreed that the

Committee may include in the refund cover letter a solicitation

of funds for John Anderson's political action co~~ittee, the

National Unity Committee and share the costs of the mailing based

in part on the a~ount allocable to each cc~~itt~e. In addition,

the Commission allowed the Corr~ittee to u~e monies in the

"contribution refune pool" to repay ncn-quclifiee campaign

expenses to the U~S .. Treasury and to pay civil penalties•
•

.. ....

,......

•

.

o • ,.

'.

Memorandum to Robert J. Costa

83AR16

Page 4

In April 1983, the auditors examined the Co~~ittee's records

to recalculate the financial statement t~!ouSh ~~arch 31, 1983,

and to establish the amount of funds available for refund to

contributors. The total available for refund or repayment is

$291,223.00.

The auditors reviewed the Committee's proposed refund scheme

to ensure that the method used to apportion costs of the mailing

between the Committee and the PAC comoort with the Commission's

determination regarding the dual purpose refund/solicitation

mdi1ing. The auditors reviewed recorcs showing that the cost of

the cover letter was shared based on an allocable percentage of

the message content. Other costs associateo with the mailing

(e.g., envelopes for return contributio~s to the PAC) were

attributed to ana v-'ill be paid by the CC:i'.::ittee or PAC as

appropriate. The Committee will receive :he ?hC's share of cos~s

before commencing the mailing. Based o~ :he information from the

Committee and the audit staff, it appears that tte

refund/solicitation method for the re:u~c 0: ~o~ies received

after the end of the expenditure report ?~riod is in keeping with

the Commission's decision of July 29, 1982, ~~ich allowed the

joint effort .

A.2. Refuna of Excessive Contributio~s

The Committee also proposes to sclicit funds for the PAC in

a letter refunding 17 checks representi~9 excessive

contributions. The Committee aid not rai~e the issue of

including a solicitation with the ref~nc cf Excessive

contributions at the time it proposed tte refund/solicitation of

surplus funds. Consequently, the Corn~iss:on has not considered

this particular matter in previous delice:ations about the refund

effort.

ThlS issue is essentiallv distinct f:om the unique

refund/solicitation of surplus funds. Si~nificantly, the refund

of excessive contributions is a remed:al ~eas~re to rectify an

apparent violation of 2 U.S.C. § 441arf) =/ a~c s~ould not be

converted into a fundraising effort bene:itin; a political action

committee. A shared refund and solicitc~:on of excessive

contributions in this case would open. tr.e doo: to similar

1/ The Committee previously attempted t:~ely refunds of these

17 excessive contributions. Because th€ :~:~~C checks remain

outstanding, the Committee will egain rE:~~d the excessive

portions totaling less than $3,000.
•

.. ..,

•

Memorandum to Robert J. Costa

83AR16

Page 5

refund/fundraising schemes. For example, other co~~ittees

receiving excessive contributions may·~is~ to transfer the

excessive funds to an unrelated committee and notify contributors

after the fact.

It is the position of this Office that a co~rnittee receiving

an excessive contribution may not retai~ the excessive portion,

nor may it transfer or solicit contribution refunds for another

unrelated committee. l/ A shared solicitation of funds accepted

in violation of the Act would distort the rerneoial nature of the

refund. The Office of General Counsel recorr~ends against the

Commission placing its imprimatur on cn a~rangernent which allows

an unrelated political committee to profit from contributions

received in apparent violation of the Act.

B. Interest Earned on Federal Funes

11 C.F.R. § 9004.5 permits investmEn~ of public funds to

generate income, provided that all interE~t Earned on such

investments, less applicable income taxES, shall be repaid to the

u.s. Treasury. See 11 C.F.R. § 9007.2(a) (6) .

The final audit report calculated ~he interest earned on

public funds with the interest earned o~ :nvEstment of the

contributions received after the end of t~e Expenditure report

period (December 4, 1980). As a result of the Commission's

subsequent decision to allow a refund of :he contributions in

lieu of repayment, the auditors recalculateo the repayable

interest on public funds, less taxes, o~itting the interest on

contributions which are to be refundec. On August 5, 1982, the,

Committee repaid $17,415.86 to the U.S. T~easury.

c. ,

Non-Qualified CarnpaiQn Expenses

•

The Commission'S repayment deter~i~a:ion of March 10, 1982,

ana the concomitant Statement of Reasons =e~cired repayment of

non-qualified campaign expenses totalins 518;.00. During followup field work, the auditors found add:t:c~al non-qualified

expenses of $1,093.66 which are detaileo :n Section C of the

Final hudit Addendum. On September 2, lSE2, the Committee repaid

$1,276.66, thereby obviating the need fo~ rEne~~d repaymentprocedures for the additional non-quali=i~o expenses.

2/ In contrast, presidential committe~s ~a~~ transferred

excessive portions of contributions to ~~~ir 1~9al and accounting

compliance fund ...:ith- appropriate notice ~o the contributor.
scate_ease

As of 3/31/83

•

". ,.~

"f'>'

..'

•

Assets:

Cash-on-hand and in banks

Accounts Receivable:

Due from Vendors

Investment Income (Estimated)

National Unity Committee's

share of refund effort

Total Accounts Receivable

Total Assets

Liabilities:

Accounts payable

~inding Down Costs 4/1/83-

11/30/83 ~/

Rent & related

Salaries & salary related

Office supplies & misc.

Equipment rental

Telephone

Contributor refund mailing

Total Winding Down Costs

Funds to be refunded to

Contributors

Total Liabilities

Notes

$ 5;,457.11

10,2£6.68 11

10,116.48 11

7,SS8.08

52,163.82

3,400.00

;,5i1.28

£,400.00

;,297.19 §/

291,223.00

$380,515.45

77,860.27 11

$458,375.72

$ 82,732.35 !I

84,420.37

291,223.00 11

$458,375.72

]/

5/

~/

§/

• 1/

'?"'.

1/ Investment income was estirnatec by projecting the interest on funds

invested at current rates th!o~Sh termination. The amount of estimated

taxes payable is included in Accounts Payable.

Reimbursement for costs d:rect1y related to the NUC contribution

solicitation which ~i1l be incluceo in the contribution refund

mailing.

In the future, a receivable ~ay exist relating to recovery of attorney

fees concerning litigation r~c~ntly before the U.S. Supreme Court. The

amount is not determinable at this time and no estimate is i~cluded.

In the future, a payable :ay also exist (see footnote 1/). No estimate

is included.

Winding down costs are e5:i~at~d tr.rough 11/30/83. At the conclusion

of the wind down period, the A~cit staff ~i11 compare estimates

against actual expenses i~ccrr~d.

Total cost of the refund ~aili~g is estimated at $29,181.89 with

$10,116.48 to be paid by SUC a~c $11,505.72 already paid by the

Corr.mittee.

Value of the fund balance ~~ic~, o~rsuant to the Commission's de~ermination, is to be retur~ed to the original contributors.
,-

,.......

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FEDERAL ELECTION COMt\1ISSION

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.... --------.----------~------------- ......-------------

-- Summary of Issue and Recommendation

TO:

THROUGH:

FROM:

SUBJECT:

I.

,

FEDERAL ELECTION COMMISSIOS

\\ ~SHlsCTO'. 0 C 204&3

July 19, 1984

THE COMMISSIONERS

•JOHN C. SURINA .

STAFF DlREC~ .

BOB COSTA - ",Y.'--'

ADDENDUM '2 TO THE FINAL AUDIT REPORT

ON THE NATIONAL UNITY CAMPAIGN FOR

JOHN ANDERSON'

On July 14, 1983, the Commission approved Addendum f1 to the

final audit report on the National Unity Campaign For John . Anderson (tithe Committee"). The Commission approved the return

of approximately $291,000 to Committee.cont~ibutorswhich would

include a solicitation for funds for the National Unity Committee. 1/ Further, all monies remainir~ in the Committee's

accounts at the conclusion of the wind down period (11/30/83)

which are in excess of those needed to defray qualified campaign

expenses are to be repaid to the U.S. Treasury in accordance with

the Commission's determination of March 10, 1982.

Sased on audit fieldwork performed for the period ~pril 1,

1983 through December 14, 1983, the Audit staff calculated the

amount repayable to the U.S. Treasury as S50,905.58. On November

30, and December 22, 1983 the Committee p:esented checks to the

Audit staff, totaling $29,075.06, for delivery to the U.S.

Treasury. As of this date, $21,830.52 has yet to be repaid (see

discussion at II.B.(l».

1/ According to correspondence accompanying a statemen~ of

organization amendment received by the Co~mission on July 28, 1983, the National Unity Committee "has always been

intendec to be the successor to th~ ~atio~al Unity Campaign for John Anderson and the nucleus for a new party. We had

been told that NUCJA could not raise adcitional money until wind-do~n had been approved, nor sho~lc new funds be co~mincled with NUCJA accounts. Aceordi~c:v, the National

Unity Committee was created to permit ~odest fund raising to

suoport the newsletter and other si~ilar activities which

eouid not be undertaken by NUCJA a~d co~ld not be considered

a proper wind-down expense."
t·~E:~ORA!\DUt-1 TO THE COMMISS lONERS

page 2

II. Background

A. The Refund Effort

Pursuant to the Commission's determination of JUly 14,

1983, the Commi~tee sent .refund checks, totaling $290,909.90, to

approximately 15,100 past contributors. "The checks were dated

August 1, 1983 and carried a negotiation restriction of 90 days (i.e., "void after 90 days"). The Aint1"t staff reviewed bank

records and associated documentation pertain~n9 to the refund

effort.

The breakdown ,of 'refund checks is as follows:

(,·1 Value of checks cashed with funds $115,498.51

retained by contributors

G)

Value of checks endorsed to the 116,088.02

National Unity Committee

M Value of checks voided 59,323.37

...c

Total Amount Issued $290,909.90

It should be noted that included in the breakdown are 88 checks

(totaling $1,911.04) which were paid by the bank after October

31, 1983 (the last day a check could have been presented and paid within the language of the negotiation restriction). Of this,

amount, '$958.83 in funds were retained by the contributors and

'$952.21 in checks were endorsed to the National Unity Committee.

B. Amount Repayable to U.S'. Treasurv .

The Audit staff calculated the amount remaining in

Committee accounts in excess of. that necessary to defray qualified 'campaign expenses. At Exhibit A, the financial

position of the Committee as of 12/14/93 is presented. The

Treasurer of the Committee disputes seve~al of the figures used

by the Audit staff in arriving at the amount repayable to the

U.S. Treasury. . '. .

"

.,
I"E!·~ORANDU:·~ TO THE C01'1MISS lONERS

Page 3

(1) Cash in Escrow - $21,830.52

The Treasurer disputes the inclusion of $21,830.52

which was in a Committee account referred to as the non-federal

funds account. 11 The Treasurer stated that since the account

has never contained any federal funds, the monies therein are not

subject to repayment. It is the opinion of the Audit staff that

the Commission's decision with respect to the refund effort

expressly requires the repayment of funds remaining in all

Committee accounts. 1/ ---

(2) in regard to footnotes 11 and 11

The Statement.of Financial position prepared by the Audit staff for inclusion in Addendum ,1 contained footnotes

similar to footnotes 21 and'}1 in the financial statement at

Exhibit A. The Treasurer is of the opinion that the litigation

at issue does not involve the Committee, but rather is on behalf

of the candidate, John B. Anderson, and any funds relative to

awards for attorneys' fees are not sUbject to inclusion in a

financial statement of the Committee. Inclusion by the Audit

staff is predicated upon the fact that monies have already been

expended by the Committee or its agen~ in ?ayment of legal fees

relating to the litigation at hand. Therefore any funds awarded

resulting from a settlement of this case are to be used for the

payment of bona fide legal fees with the surplus being repayable

to the U.S. Treasury.

A letter was sent to the Treasurer of the

Committee on requesting a complete financial

history of the ballot access litigation, including evidence of

all court awards for legal fees or monies awarded over and above

the fees charged. A revised statement 0: financial position will

be prepared, if appropriate, after analysis of information

pertaining to the court awards.

See Agenda Document 82-114 considered on July 29, 1982 for a

discussion of the use of funds in the non-federal funds

accounts to pay civil penalties a~d ~ake repayments to the

U.S. Treasury.

See Addendum ~l to Final Audit Re~ort on the National Unity Ca~?aign For John Anderson, page i.
~1EMOR~~DUM TO THE COMMISSIONERS

Page 4

III. Suc~ort for the Recommendation

The recommendation is based on the Co~~ission's

determinations of March 10, 1982, July 29, 1982 and July 14, 1983

and review of the Committee's financial records subsequent to the

first Addendum to the final audit report.

IV. Staff Coordination

A copy of this memorandum was .~shed to the Commission's

Office of General Counsel for their consideration. Comments

received from the Office of General Counsel are attached.

Attachments as stated

...
Exhibit A

Rational Unity Campaign Por John Anderson

Statement of Pinanalal posltion As of 12/14/83

Assets:

Cash in Escrow

Accounts Receivable

Total Assets

$21,830.52 !I

-0- 1/

$21,830.52

Liabilities:

l~ Accounts payable $ -0- 11

CO Repayment Due

U.S. Treasury 21,830.52

rt) Total Liabilities $21,830.52

-.0

0 Notes

" 11

0

1/

(t)

3/

This amount is being held in escrow by Committee counsel

pending resolution of repayment question.

A receivable may exist relating to recovery of attorney fees

concerning liti9a~ion considered by the U.S.

Supreme Court. No estimate is included.

A payable may also exist (see footnote 2/). No estimate is

included.