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REPORT OF THE AUDIT DIVISION

ON

Darrel Ealum

for

Congress

Approved laDe 11, 1991

PEDERAL ELECrlON COMMISSION

'"E STREET, N.W.

WASBINGTON, D.C.
TABLE OF CONTENTS

DARREL £ALUM FOR CONGRESS

c; Page •

(1 Executive Summary

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7• Final Audit Ileport

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02 B-*sround

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5•2 Fmctings

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10 TI'IDSIDittal to Committee 11 4

Cbronology 13
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FEDERAL ELECTION COMMISSION

Washington, DC 20463

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FINAL AUDITREPORT

ON

DARREL £ALUM FOR CONGRESS

EXECUTIVE SUMMARY

Darrel Ealum for Congress (the Committee) registered with the Federal election

Commission on February 16, 1996 as the principal campaign committee for Darrel Bush

Ealum, Republican Cllldidate for the U.S. House ofRepresematives from Georgia's

Second Congressional District.

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 findings ofthe audit were presented to the Committee at an exit conference

held at the completion offield work on June 26, 1997, and later in an interim audit report.

The Committee's responses to those findings are included in the final audit repone

The following is an overview ofthe findings contained in the final audit repone

Excessive Contributions- 2 U.S.C. Section 441a(a)(1)(A); 11 CFR Sections

110.1(b)(1) and (3), 110.1(bXS)(i) and (u), 110.1(c), I 10.I(d), and 110.1(k). The

Committee received 13 contributions from 11 individuals which exceeded the donors'

limitations by 58,900. The Committee provided negotiated refund checks totaling $6,300

and stated that evidence ofIII additional 51,000 refund would be provided. However, the

Committee response failed to provide any evidence ofrefunds for the remaining 51,600 of

excessive contributiODS.

Failure to ItcnriB Disbursements- 2 U.S.C. Section 434(bXS)(A). During the

audit period the Committee failed to itemize 81 disbursements totaling $71,360. The

Committee filed amended disclosure repons itemizing all 81 disbursements.

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¥"'te!""'I!! ofF'2"DGi'! Actiyjty- 2 U.S.C. SectioD 434(bXl), (2), ad (4). The

_ •.c. ....... 1.-'- r:j1.. forthe _.~ period .1_-':'--.1 that the 1"'--:-- ............IIIIIa J'eCOIIk UItKJD iIUUIl '-NIIUDIl~

uudelleponed its mceipts by SI2,509111d uadcrreponed its disbunemen's by $74,540.

As.result. the Cot",u;n. overstated its eadiDa cub on bamd by $62,031. The

Co",miaee &led amended discIoIuIe reportsfor the audit period which corrected the

mi..atellle"'s.

Flilure to Iwnip Debts epd ObJjptiogs- 2 U.S.C. Section 434(b)(2)(G) and

(3)(E). DuriDs the audit period the Committee failed to itemize 148,954 oflOlDS &om the

Candidate on SChedule A and failed to itemiRd SII,Soo ofloaDsfrom the Candidate on

Schedule C. The Committee IIso failed to itemize $3,200 ofloan repayments to the

Candidate OD ScheduleB and S8~OO on Schedule C.

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FEDERAL ELECTION COMMISSION

WASHINCTOf\,; 0 C 2CM63

REpORTOF THE AUDITDIVISION

ON

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I. BACKGRQIlND

A. AUDIT AVTHOIUT\'

This repon is based on an audit ofDmel Ealum for Congress (the

Committee)~ undertaken by the Audit Division ofthe Fedaal Election Commission in

accordance with the provisions ofthe Federal Election Campailll Act of 1971 as

amended (the Act). The audit was conducted PUJ'SUIDt to Section 438(b) tlfTitle 2 ofthe

United States Code which states. in pan. that the Commission may conduct audits and

field investigations of any political committee required to file a repon under Section 434

ofthis title. Prior to conducting any audit under this subsection. the Commission shall

perform an internal review ofrepons filed by selected committees to determine ifthe

repons filed by a panicular committee meet the threshold requirements for substantial

compliance with the Act.

B. AUDIT COVERACE

The audit covered the period from January 2. 1996, the inception of bank

activity. through December 31 1996. The Committee reponed a beginning cash balance

of$O: total receipts for the period ofS387.3S7 1

; lata) disbursements for the period of

S325.302~ and an ending cash balance of$62.055.

c. CAMPAICN ORCANIZATION

The Committee registered with the Federal Election Commission on

February J6, 1996 as the principal campaign committee for Darrel Bush Ealum~

Republican candidate for the u.s. House ofRepresentatives from the State ofGeorgia for

the Second Disuiet. The Treasurer ofthe Committee since inception is Angie Draper.

The Audit staff'deriYCd the reponed amounts for toeal receipU and lOIal disbursements by adding

up the amounu the Commmee reponed on each dISClosure report. The amoums the Committee

listed as yar-to-date mits rcpon.s did not represent the actual amounts 1he Commmee reponed on

the supponinl schedules.

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The Committee used cmly ODe baDk IICCOUIIt to baadle its fiDanciaI aetivit)·.

The Committee deposited approximetely 5399.866 duriDg the audit period ccmsisrinl of

22 PAC comnDutioDs totaliDg 141,250, 16 1000000CODttibutioDs &om the Candidate

totaIiDI $52,204, aDd the remainder coming &om iDdiviclua1 CODIributOls. The

Committee made approxjnuuely 282 operatiDg expeactiturestotaliDg S391,541 ODe

COIl1ribution refund QfSl00, and 3 loan rep8ymeats totaIiDa $1,200.

D. AUDIT SCOPE AND PROCEDURES

The audit included teSting oftile following Ienera! eauegories:

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The receipt ofcontributions or loans in excess ofthe statut~'

limitations (see Finding D. A);

the receipt ofcontributions &om prohibited sources, such as those

from corporations or labor orpnimjoDS;

proper disclosure ofcontributions &om individuals, political

committees, and other entities. to include the itemization of

conuibutioDS when required, as well as, the completeness and

accuracy ofthe information disclosed;

proper disclosure ofdisbursements including the itemiution of

disbursements when required, as well as, the completeness and

accuracy ofthe information disclosed (see Finding D. B);

s. proper disclosure of campaign debts and obligations(see Finding

II.D.);

6. the accuracy oftotal reponed receipts, disbursements, and cash

balances as compared to campaign bank records (see Finding II.

C);

7. adequate recordkeeping for campaign transactions;

8. other audit procedures that were deemed necessary in :::e situation.

Unless specifically discussed belowt no material DOD-COIDpliaDce was

detected. It should be noted that the Commission may p.nue any oftbe matters

discussed in this report in an enforcement action.

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n. FINDINGS AND BECClMMENDADQNS

It.. ExCESSIYE CONTRIBtmONS

Section 441a(aXl)(A) ofTitle 2 oftbe UDited States Code and Section

110.1(bXl) ofTitle l' ofthe Code ofFedera1 R.egulati0DS state that DO person shall make

contributions to any candidate and his authorized political committees with respect to any

election for Federal office which. in 1he agreg&tC, exceed 51,000.

Section 110.1(b)(S)(i) and (ii) ofTitle 11 oftbe Code ofFederal

Regulations states in pan that the treasUrer ofan authorized political committee rna)'

request a written redesiguation ofa contribution by the contributor to a different election

if:

• the comribution was desipaled in writing for a particular election. and the

contribution, either on its face or when agrepted with other comributions

from the same contributor for the same election, exceeds the limitation on

contributions set forth in 11 CFR.IIO.1(b)(l);

• the contribution was desipaled in writiDg for a particular election and the

contribution was made afterthat election and the contribution cannot be

accepted under the net debts outstanding provisions of 11 CFR

110.1(b)(3);

• the contribution was not c1esipated in writing for a particular election, and

the contribution exceeds the limitation on contributions set-forth in 11

CFR 110.1(b)(1);or

• the contribution was not designated in writing for a particular election. and

the contribution was received after the date ofan election for which there

are net debts outstanding on the date the contribution is received.

Further. a contribution shall be considered to be redesignated for another

election ifthe treasurer ofthe recipient authorized political committee requests that the

contributor provide a written redesignation ofthe contribution and infOl1DS the

contributor that the conttibutor may request the refund ofthe contribution aslID

alternative to providing a written redesignation and within sixty days from the date ofthe

treasurer·5 receipt ofthe comribution. the conuibutor providesthe treasurer with a written

redesignation which is siped by the contributor.

Section IIO.l(k) ofTitle I) oftbe Code ofFederal Regulations _ that

any contribution made by more than one person. except for a COD1ribution made by a

pannership. shall include the signature ofeach contributor on the money order. or

other negotiable instrument or in a separate writing and if a contribution made by more

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thaD one person does not indicate the amount to be attributed to each contributor. the

contribution shall be attributed equally to each contributor.

Ifa contribution to a candidate or political collh~ttee. either on its face or

when aggregated with other contributions from the same comributor, exceeds the

limitations on contributions set forth in II CFR 110.1(b), (c), or (d), as appropriate. the

treasmer ofthe recipient political committee may ask the conaibutor 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 ifthe treasurer of

the recipient political committee asks the contributor whether the contribution is intended

to be a joint contribution by more than one person. and informs the contributor that he or

she may request the return ofthe excessive ponion ofthe conaibution ifit is not intended

to be a joint contribution. and within sixty days from the date ofthe treasurer·s receipt of

the contribution, the contributors provide the treasurer with a reattribution ofthe

contribution, which is signed by each contributor. and which indicates the amount to be

attributed to each contributor ifequal attribution'is not intended.

A review ofthe committee's receipts documentation was conducted. The

Audit staff used copies of conttibutor checks provided by the Committee and compared

these checks and their signatures with amounts listed by individual in the Committee'Is

computer database and on the Committee's disclosure repons. This review indicated that

the Comminee received 58.900 in excessive conttibutions from individuals. In most

cases. the Committee attributed a contribution to both a husband and a wife without

ha\'ing a signature for both individuals. In one case. a conttibutor's check was written

before the Primary Election but the Committee deposited the check after the Primary and

incorrectly designated the contribution for the General Election.

During a meeting with the Candidate the Committee was infonned that the

Audit staff had identified excessive contributions from individuals. The Audit stafftold

the Candidate that the main cause was that the Comminee improperly attributed

contributions to two spouses when only one spouse signed1he check without obtaining a

signed reanribution lener. The Candidate said he knew the contributions came from both

spouses. but he also understood the Commission rule that requires a signature for each

person to whom a contribution is to be attributed. At the exit conference, the Committee

\\'as provided with a schedule ofthe excessive contributions.

In the interim audit repon. the audit staffrecommended that the

Comminee provide documentation to demonstrate that the contributions noted above

were not excessive. Absent such a demonstration the audit staffrecommended that the

Committee refund these contributions and provide evidence ofthe refunds in the fonn of

copies ofthe front and back ofthe negotiated checks. Ifthe Committee did not have the

funds to make these refunds, the audit staffrecommended that the Committee file

amended Schedules D to disclose these items as debts owed by the Committee.

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In response to the interim audit report, the Committee provided

photocopies ofthe fronts and backs ofnegotiated refund checks totaliDg 56.300. All of

the refund checks were dated November J7. 1997. The Committee also provided a

photocopy ofthe front ofa 51.000 refund check which has Dot ~!eared the bank. The

Committee has stated that it will provide evidence ofthis refund once the check clears the

bank. - The Committee s response to the interim audit repon failed to provide any

evidence ofrefunds for $1.600 ofexcessive contributioDS.

B. FAILURE TO ITEMIZE DISBURSEMENTS

Section 434(b)(S)(A) states that each repon shall disclose the name and

address of each person to whom an expenditme in an aggregate amount or value in excess

of$200 within the calendar year is made by the reponing committee to meet a candidate

or committee operating expense, together with the date, amount, and purpose ofsuch

operating expenditure.

A review ofthe Committee's disbursements revealed that 81 items totaling

$71.360 were not itemized as required. It appears that the main cause ofthese errors was

the Comminee's practice ofaggregating by repon period rather than by calendar year.

The Audit staffdiscussed the aggregation procedures with the Committee treasurer and

she acknowledged that she had been aggregating receipts and disbursements by repon

period because she had misunderstood the requirements. Also, during the July Quanerly

and the Pre-General repon periods several disbursements greater than $200 were not

itemized. Further. the Audit staff noted that the Comminee had not included unitemized

disbursements on the summary pages. thus these disbursements were not reponed (see

Finding II.C.).

The Audit staff provided the Committee treasurer with a schedule ofthe

itemization and other errors at the exit conference. She indicated that she would amend

the disclosure repons as needed.

In the interim audit repon. the audit staffrecommended that the

Comminee file amended Schedules B itemizing the 8) disbursement noted above.

In response to the interim audit repone the Committee filed £::nded

Schedules B which itemized all 81 ofthe previously unitemized disbursements noted

above. These amendments materially corrected the public record.

c. MISSTATEMENT OF FINANCIAL ACTlVITV

Sections 434(b)(1). (2). and (4) ofTitle 2 ofthe United States Code state,

in relevant part. that each repon shall disclose the amount ofcash on hand at the

begiMing ofthe reponing period. the total amount ofall receipts, and the total amount of

all disbursements for the period and calendar year.

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The Auditstafrs reconciliation oftbe Committee's reponed activity to

amoUDts reflected in its bank records from inception through December 31t 1996 revealed

the following misstatements offinancial activity.

a) The Committee undmeponed its receipts by 512.509. This

amoUDt coDSists primarily ofan S11,500 understatement ofreceipts

from the Candidate and a failure to report 5263 in interest.

b) The Committee underreponed its disbursements by 574..540. The

bank reconciliation explained·differences totaling 575,162 as

follows: a disbursement of52,071 was reported twice; one

disbursement was underreponed by 512; and, disbursements

totaling 577,221 were Dot reponed.

As a result ofthe above misstatements, ending cash on band was

overstated by 562,031 .

The Committee treasurer was provided a copy ofthe bank reconciliation

that details the misstatements. The treasUrer said she planned to file amended repons.

In the interim audit report. the audit staffrecommended that the

Comminee file a comprehensive amended report for calendar year 1996 including

amended Schedules A and B. and amended Summary and Detailed Summary Pages to

correct the misstatements noted above.

In response to the interim audit repo~ the Committee filed 8JIlended

Schedules A and B.. and amended Summary and Detailed Summary Pages which

corrected the public record with respect to misstatement offinancial activity.

D. FAlLURE TO ITEl\tlZE DEBTS AND OBLIGATIONS

Sections 434(b)(2){G) and (3)(E) state. in relevant pan. that each repon

shall disclose all loans made by or guaranteed by the candidate and the identification of

each person who makes a loan to the Comminee. together with the identification ofany

endorser or guarantor ofsuch loan.. and the date and amount or value ofsuch loan.

The Audit staffidentified loans received by the Committee from the

Candidate totaling 550.104. Oflhis amount. the Comminee only reponed 51.150 on

Schedule A and $38.604 on Schedule C. The Comminee also reported loan receipts from

the candidate of538.604 on the Detailed Summary page.

In addition. the Audit staff identified loan repayments made by the

Comminee totaling 58.200 during the audit period. The Comminee itemized 55.000 of

this amount on Schedule B and none on Schedule C. The Committee was provided with

a schedule containing the details ofthe loan activity.

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ID the iDterim audit report, tile audit staffrecommaded that the

Committee file a comprebeasive 8IDeDded report to iDelude a ScbeduIe C that shows each

loan received &om tile Caadidlte. the amount that WIS paid OD each l~ IDd the

remaining .Iance ofeach loaD.

ID JeP)DSe to the interim audit report, the Committee filed an amended

Schedule C which conectly shows the 81D01IDt of10llDS received fiom the Candidate. the

payments to date on these loans, and the muining balaace ofthe loans. This

amendment materially corrects the public record with respect to loans fiom the

Candidate.

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Page 10, AWJ.'nVed 6/11/98
FEDERAL ELECTION COMMISSION

Washington, DC 20483

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June 17, 1998

Ms. Angie Draper, Treasurer

Darrel Ealum for Congress

521 Honeysuckle Drive

Albany, GA 31705

Dear Ms. Draper:

Attached please find the Final Audit Repon on Darrel Ealum for Congress. The

Commission approved the repon on June 11, 1998.

. The Commission approved Final Audit Report will be placed on the public record

on June 18, 1998. Should you have any questions regarding the public release ofthe

repon, please contact the Commission's Press Office at (202) 694-1220 or toll-free at

(800) 424-9530. Any questions you have related to matters covered during the audit or in

the repon should be directed to Teny O'Brien ofthe Audit Division at (202) 694-1200 or

at the above taU free number.

Robert J. Costa

Assistant StafrDirector

Audit Division

Attachment as stated

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Page 12, Appmved 6/11/98
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CHRONOLOGY

DARREL EALUM FOR CONGRESS

Audit Fieldwork 6/19197 - 6/26/97

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Inteiim Audit Report to

the Committee

Response R.eceived to the

Interim Audit Report

Final Audit Report Approved

9/8/97

11121V97

6/11/98

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