FEDERAL ELECTION COMMISSION

WASHINGTON. 0 C 204&3

September 2S, 1997

MEMORANDUM

SUBJECf: PUBLIC ISSUANCE OF THE AUDIT REPORT ON THE DEMOCRAT,

REPUBLICAN, INDEPENDENT VOTER EDUCATION

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TO:

FROM:

RON M. HARRIS

PRESS OFFICER

PRESS OFFICE

ROBERT J. COSTA -tf1c:.,

ASSISTANT STAFF DIRECTOR

.AUDIT DIVISION

Attached please find a copy ofthe audit report and related documents on the

Democrat, Republican, Independent Voter Education (D.R.I.V"E.) which was approved by

the Commission on September 16, 1997.

Informational copies ofthe report have been received by all parties involved and

the report may be released to the public.

Attachment as stated

· cc:

• Office ofGeneral Counsel

Office ofPublic Disclosure

RePorts Analysis Division

FEC Library

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REPORT OF THE AUDIT DIVISION

ON THE

Democrat, Republican, Independent

Voter Education

(I).R.I.V.E.)

Approved September 16,1997

FEDERAL ELECI10N COMMISSION

999 E STREET, N.W.

WASHINGTON, D.C.

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TABLE OF CONTENTS

DEMOCRAT, REPUBLICAN, INDEPENDENT

VOTER EDUCATION

(D.R.IV.E.)

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Executive Summary

Audit Report

Background

Findings

Transmittal to Committee

Chronology

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FEDERAL ELECTION COMMISSION

WASHINCTON. 0 C 204&3

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REPORT OF THE AUDIT DIVISION

ON THE

DEMOCRAT, REPUBLICAN, INDEPENDENT VOTER EDUCATION

(D.R.I.V.E.)

EXECUTIVE SUMMARY

The Democrat, Republican, Independent Voter Education (the Committee) registered with the Clerk ofthe House ofRepresentatives on April 17, 1972 as the separate segregated fund ofthe

International Brotl)erhood ofTeamsters .

The audit was conducted pursuant to 2 U.S.C. Section 438(b), which states, that the

Commission may conduct audits ofany political committee whose reports fail to meet the

threshold level ofcompliance set by the Commission.

The finding ofthe audit was presented to the Committee at an exit conference held at the

completion offield work on June 17, 1997, and later, in an interim audit report.

The following is an overview ofthe finding contained in the final audit report.

M.SSTATEMENT Of FINANCIAL AC'IWIT)'-2 U.S.C. Section 434(bXl), (2) and (4). The

Committee adjusted cash on hand during the audit period by ($152,570) and explained that cash

on hand had been overstated by approximately that amount going back to 1989 and earlier. The

review ofsubpoenaed Committee records for 1985 through 1988 indicated that cash was not

overstated in these years. Documents for 1989 through 1992 were requested, provided and

reviewed. The review found that, in 1989, the Committee reported receiving contributions which

exceeded by approximately SI55,899 the total deposited into its receipts account for that period.

ThtCommittee, responding to the interim audit report, reviewed its records and detennined that

clerical errors rilade between January and August 1989 resulted in an cumulative overreporting of

cash totaling approximately SI54,512. A comprehensive amended report for 1994 was filed by the

Committee OD September 5, 1997 to correct this adjustment and other reporting enors DOted in the

audit report.

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This report is based on an audit ofthe Democrat, Republican, Independent Voter

Education (the Committee), the separate segregated fund ofthe International Brotherhood of

Teamsters (IBT), undertaken by the Audit Division ofthe Federal Election Commission in

accordance with the provisions ofthe Federal Election Campaign Act of 1971, as amended (the

Act). The audit was conducted pursuant to Section 438(b) ofTitle 2 ofthe United States Code

which states, in part, that the Commission may conduct audits and field investigations of any

political committee required to file a report under section 434 ofthis title. Prior to conducting any

audit under this subsection, the Commission shall perfonn an internal review ofreports filed by

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

requirements for substantial compliance with the Act.

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FEDERAL ELECTION COMMISSION

WASHtNGTO~. 0 ( 204b\

REPORTOF THE AUDITDIVISION

ON THE

DEMOCRAT, REPUBLICAN, INDEPENDENT VOTER EDUCATION

BACKGROUND

A. AUDIT AUTHORITY

B. AUDIT COVERAGE

The audit covered the period from January 1, 1993 through December 31, 1994. The

Committee reported a beginning cash balance of 5293,449; total receipts for the period of

$9,190,624; total disbursements for the period of58,844,538; and an ending cash balance of

$639,535.1

C. COMMITTEE ORGANIZATION

• The Committee registered with the Clerk ofthe House ofRepresentatives on April

17, 1972. At the·beginning ofthe audit peri~ Mr. David A. Sweeney was Treasurer ofthe

Committee. On November 2, 1993, he was succeeded as Treasurer by Mr. Wallace D. Clements.

Mr. William W. Hamilton, Jr. became Treasmer on May 18, 1995. Mr. Tom Sever, the present

Treasurer, succeeded Mr. Hamilton on August 2, 1997. .' ,.

All amounts presented in this report have been rounded to the nearest dollar.

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To bancIIe its federal financial activity, the Committee four bIDk accounts (1

cbeckina IDd 3 savinp). The Committee IDIde approximately 3,800 disbursements totalina about

58,722,000. The Committee received approximately 59,127,000 from more than 100,000

individuals, interest ofSS3,SS81Dd trlDSfers from Iftiliated committees ofapproximately 53,600.

The IBT is composed of41 ChaptersIDd 666 local unioDS. Contributions from the

membership to the Committee are solicited at the local level and collected by payroll deduction.

The funds withheld are then forwarded directly to the Committee by the members' employers.2

With the exception ofthe contributions withheld from the salaries ofemployees ofthe local unions,

the locals are not directly responsible for the collection and transmission ofcontributions to the

Committee. A characteristic ofthe Committee's structure is that all contributor records are

maintained at the national level. Testing conducted during the audit indicated that these records

were materially complete and supported the amounts received from the members' employers. For

this reason and the fact that the local unions have no role in the collection and transmission ofthe

majority ofthe contributions to the Committee, no audits oflocal unions were conducted.

D. AUDIT SCoPE AND PROCEDURES

The audit included testing ofthe following general categories:

1. The receipt ofcontributions or loans in excess ofthe statutory limitations;

2. the receipt ofcontributions from prohibited sources, such as those from corporations

and labor unions; .

3. proper disclosure ofcontributions from individuals, political committees and other

entities, to include the itemization ofcontributions when required, as well as, the

completeness and accuracy ofthe information disclosed;

4. proper disclosure ofdisbursements including the itemization ofdisbursements when

required, as well as, the completeness and accuracy ofthe infonnation disclosed;

S. proper disclosure ofthe Committee debts and obligations;

• 6. the accuracy oftotal reported receipts, disbursements and cash balances as compared

to Committee bank records(see Finding II.A.);

7. adequate recordkeeping for Committee transactions; and .' ".

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8. other audit procedures that were deemed necessary in the situation.

Later, Committee returns. portion offunds collected to the local. committees.

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Unless specifically discussed below, DO material DO~mplilDce with statutory or

replatory requirements was detected. It should be noted that the Commission may pursue any of

the matters discussed in this report in In enforcement action.

D. AIJDIT FINDINGS AND RECOMMENDATIONS

A.. MISSTATEMENT OF FINANCIAL ACTIVITY

Sections 434(bXl)(2) and (4) ofTitle 2 ofthe United States Code state, in part, that

each report shall disclose the amount ofcash on hand at the begiming ofthe reporting period and

C1 the total amount ofall receipts and all disbursements for the reponing period and calendar year.

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9 Agtount ofMiustment to Cash

o The Committee disclosed on an amendment to the 1994 30 Day Post General

2 Election report that its cash on hand had been overstated since 1989. The Committee adjusted the

5 cash on hand balance as ofNovember 28, 1994 by making a disbursement entry and attaching a

• memorandum explaiiUng that the entry was to correct an overstatement ofcash which the

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1 Committee was unable to identify. The adjusting entry was 5152,570. The Audit staffreconciled

8 all bank activity to reported activity for the audit period and detennined that the "adjustment to

2 cash" was materially correct during the audit period.

The Audit staffrequested documentation to support the adjustment, and the

Committee provided copies ofbank reconciliations perfonned at year end for 1989, 1990, 1991 and

1992 which indicated that cash on hand for those periods had been overstated by approximately the

amount ofthe Post General 1994 adjustment. Committee representatives explained that the

correcting entries had not been made earlier because prior to the period when the adjustment was

made, the amounts reported were not compared to the amounts on the bank reconciliations. In

addition, Committee Counsel provided the corresponding year end cash on hand figures derived by

an independently retained outside accountant. This accountant's cash balances materially agreed

with the Committee's cash on hand figures from its year end bank reconciliations.

In the attempt to identify the source, the Audit staffrequested the Office ofGeneral

Coupsel to prepare subpoenas requesting the Committee respond to questions regarding the

adjustment and its possible cause and, seeking records that could establish when the discrepancy

arose.

In response to the subpoena, the Committee explained that early in 1994. ,.

independent certified public accountants under the direction the Committee's counsel, discovered

the discrepancy. The review had been conducted at the direction ofD.R.I.V.E.'s Chairman and

International Brotherhood ofTeamsters General President. The stated purpose ofthe review was

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"to ensure that D.R.I.V.E.'s rtions complied with the letter and sp~t offederal campaign

finance law and regulations.'

With the understanding that the discrepancy had been verified to have existed to the

beginning of 1989, the subpoena requested all available accounting records for periods prior to

1989. Included among the materials provided were internally generated bank reconciliations, copies

ofoutside audit reports, microfiche copies ofdetailed receipts records, canceled check copies, bank

statements, check registers and general ledgers for 1985, 1986, 1987 and 1988.

The review ofthe materials resulted in the following conclusions. Reported and

Committee reconciled cash on hand at year end 1985 materially agreed. Differences for 1986, 1987

and 1988 between reported and Committee reconciled year end cash on hand which indicated an

overreporting ofcash ranging from S55,116 to 513,111 to 579,310 respectively, were not

conclusive. The consequent Audit staffreconciliations ofthe Committee's bank accounts to FEe

reports for 1987 and 1988 indicated cash at year end was under reported by S12,966 and $16,902

respectively. The discrepancy did not exist prior to 1989.

All available accounting materials for the years 1989 through 1992 were

subsequently requested and received. An Audit staffreconciliation of 1989 bank activity to

reported activity confllDled that cash was overreported at year end by 5139,539. Receipts reported

for this period exceeded the total deposited into the Committee's receipts account by 5155,899.

While the records reviewed provided no explanation ofhow or why the Committee over reported

receipts in 1989, the Committee's internally generated bank reconciliations (independently

confirmed as noted above) and the Committee provided indepeDdent audit report materially agreed

with the Audit findings. A review ofreceipts deposited for 1990 through 1992 confinned that

throughout this period receipt amounts reported materially agreed with amounts deposited. The

overstatement ofcash by the Committee continued until the previously noted adjustment was made

in November 1994.

The records reviewed did not establish whether the Committee's reports were

materially correct and the available records were incomplete, or whether the reported receipts were

overstated. Ifthe reported receipts had been overstated, the records did not establish how or why

the overstatement had occurred.

E~cept for the misstatement of cash, the 1993 reports were materially correct. In

1994, in addition to the misstatement ofcash, the Committee made the following errors in its

reporting ofreceipts and disbursements. It failed to report interest ofS2,423, two offsets totaling

530,000 and a receipt ofS375. NSF contribution checks in the amount ofS591 were inCorrectly

reported. Disbursements were overreported by 5124,595. This amount was the net result ofthe

3 The Audit staff notes that according to the subpoena response. this high level review was apparently requested

prior to any indication of a problem or discrepancy.

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adjustment to disbursements for the 30 Day Post General period as discussed above (SI52.570),

other arithmetic discrepancies between scbeduIe and rqxm line totals S34~,

discrepancies in the reporting ofvoided checks totaling ($5,125), the failure to report a

disbursement for S1,000 and an umeconciled adjustment of(S2,400).. -

In the interim audit report, the Audit staffreeommeuded that the Committee explain

how and why receipts reported exceeded the amounts RCORted by the Committee in 1989 and

submit any documentation in support ofthe explaDation.. Also recommended was that the

Committee file amended reports to COJTeCt the deficiencies outlined above..

On August 14, 1997, the Committee respcmded to the interim audit rqxm.. The

Committee reviewed its work papers which supported the FEe reports for 1989 aDd identified the

source ofthe discrepancy between the amounts deposited to itsreceipts account and the amounts

reported. For the first eight months of 1989, interest earned and reported in a preceding month was

included in the Wlitemized contribution total reported in the following month.. The cumulative total

for the duplicate reporting ofinterest was S1S4,512.. The Committee also made all records used in

making this determiDation available for review.

The Audit staffreviewed the Committee's exp1aDation, and requested that the

Committee file a comprehensive amended rqxm for 1994.. To be included in this amendment were

the corrections to receipts and disbursements noted above, the reversal ofthe S152.570 adjustment

to disbursements and the application ofthe S152,570 adjUS1meDt to receipts..

4 The Committee filed

this amendment on September S, 1997 to COJTeCt the public record..

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The November J994 adjusbnent made to disbunemeals bad the desired effect ofcorrecUna die cash balance

but in doinl so. OWIswed disbunemencs and failed to 8ddress die (Wa......ofNCeipIs. Bec...se NCeipIs

had been overs1aIeCI. it was decided dial it was men lppI'opa _ to make Ihe required adjusbnent 10 NCeipIs.

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fEDERAL ElECT'ON COMM'SS'ON

-

- Mr, Tom Sever, Trasum

Demoaat. RepabJ_1ftdependeaI VOl«£4aafioll

25 LouiMana Avenue, H,W..

W~D..C.. 20001

Auacbed pIaN fiad die finIJ Audia RqorI 0Jt11Ie0..",••.,,:M't. Independent Voter Eduafioa.. TIle Coani..."" 'JJPfOW4 ......,...SqfIInJtJJ U.. 1997,

The CommiJIioa owd r ,...,.... on September 25, 1997, Should you JIM MY _II ,...,.,..,tit

the repon. pIaN COJIlId the CoDaiBiods, om."(2Ot)%J J~, Nt1

questions you have"" to die.....,. COt die...., ."."....

be dircceed to Many Kuaaor_Bt..,of*AIdIom...(20%) 2J~J7»;

Aai...StWrOi,.,."

Aadk DititIoJI

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CHRONOLOGY

DEMOCRAT, REPUBLICAN, INDEPENDENT

VOTER BDUCAnON

{D.R.I.V.E.)

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Audit Fieldwork

Interim Audit Report

to the Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

Page 11

4/15/96 - 6/17/97

7/22/97

8/14/97

9/16/97

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