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I fIJI I{AI I Lf CT ION C(),\1~1I~SI(JN

Octol)('r 3, 1980

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• I I ()I RAL I l.1- ell( ) <:().\\1\, ISS I< )N

'flIHESlIOLD l\UDI'r REPORT OF 'fIlE AUDIT D:rVISION

ON

GEOHCE nUSH FOR PRESIDEN'I' COMMIT'rEE

1\. Overvic\v

This report covers an ~udit of the George Bush Par

President committee (lithe Committee"), to determine whether

there has been compliance with the provisions of the Fed<.'ra1

Election Campaiqn Act of 1971, .:lS amended ("the Act"). ')'he

a ud i twas conJ uc ted pu r S llant to Sec t i on 90 39 (b) 0 f 'ri t 1 L) 26

of the United States Code \vhich states, in part, that. the

Con@ission is authorized to prescribe rules and regulations

in accordance with the provisions of suLscction (c), to conduct

examinations and audits (in addition to c:·:aminations and audits

required by Sec tion 9038 (a) ), to conduct inv("stigation5, and to

require the kcc!)inU and submission of an~ books, records, and

information, \vhich it det.(~l:-minQs to be necessary to carry out

its responsibilitic~~ undC'r the chuptcr.

I n add i t. inn, St..: L t ion 9 0 3 3. 1 (1)) 0 f TiL10 11 0 f the

c'ode of Fcdcrctl H01.;ul~t ions st3L(~s, th~t t.he Commission may

conduct other o:·:amlnLltions (lnd au~i its fl.-or."L time to time as it

deems neccss(lr~' to carr~' out the pro\'i~ions of this sulJchapter.

The Com::li t t.oo r(~q iste' !-t.:~d wi th the Federal LIce t ion

Commission on L.1(lnU~lry 5, 1979. The COli'..!';littec maintLlins its

financ i a 1 he Lidq u ~l t l~ rsin II 0 us to11, Te x a sand its n Ll t iona 1

1'01 i t ieal h(~~Hh:t4Ci~-LL' i~S i n ~\ le:·:~nd 1" ia, Virq inia.

1.'hc ~lU~: i~. co'.'e r\:~J t ht..' PL) r ioll :- ~O::1 i~Cl)Pt ion th rough

DcccmbC'1- 31, 197~}. '~hL' Co:'..::~iL::'t'L! rcpor:..cd Llurinq th(~ .J.udit

pt'riod an openi!1~: c,lsn D:11,1:1Ct.: ()f $-0-, t.ot.:l1 rl"l~l"ipts of

$·1 ,4S5, 097.9·1, t():~l (~xl'(~n.~l tUl-CS of ~.+, :.,), "jlJO. 1:;, and .-:t

c losinq cash ;.; ,1 1 :l:~ c ;. : 0 f ~~ ',' J , 3 O~· • -; C) •

• '..:n1C:1 :,U:)!101-t ,,'\.1_-':: .):- iLs :-~t~l;Lll stat-~~~~~L":1:'S.

0:- the r0col-\.1 ~l~)O:~ '.d1 i C:1 ::1<~ L,-l:-:'.r:ll.ssion based

ll"lc' In.:.ltt','l'G in t=~':3 Lt:POC:" Ll:1d ·"·:,--~r-2 a~:~1ilab1l'

:l:1d .1 ; )p 1" C'!' !- i ,1 t • ) S:' ,1 :-:- rU l' --2 ': i 0 ".": •

Thc'y forn purt

its decisions on

to Comr.:i s s ione r:;
-2-

•

B. Kc'/ Pe rsonne 1

rrlH~ principal officers of the Committee during the

~ludit were: ~lr. James A. Baker, III, Chairman, from January

~l, ]97<) throuqh DL\Cember 31, 1979; Mr. Hobert Visser, Treasurer

from ~January S, 197<) un l.i.l Apri 1 S, 1 ~79; and ~1r. Thomas M.

Hoberts, Tre\lSllr,-\l- from ,\pri1 S, 1979 throuqh December 31, 1979.

c. ~_cope

Thl.~ iludiL incl \ldl~d such test~; ~~j verification of

total reportcc.1 rec,-,.i.pt~; .1t1<..l expenditure:~ ztnd individual

transactions; reVil"\'1 or t-c.'quired supporlin<j documentation and

analysis of Commitlec ch\ld~; and olJliyationSi review of

con tribu t ion .J.nd l.:~:·:pcnd i t u l.-l~ 1. imi La tions; LUll1 such other

auJi t proc(~dures as deeml'd necessary under the circumstances.

M

C'

I I • Audit Findinqs and H.t,lcornrnendations . ,------,---

1\. Introduction to Findinqs --------_.. -.-----------

•••

r:

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The: olJjl'cti\'c u! th(\ th~-l~sholl1 audit is to review

the Comr::ittcc~'~; ~lccountin,; pol1ci~s Llnd prcceclures in order to

determine not ()nl~' their CU1~rent lJut .:lIsa their future ability

to compl~' \·:it:1 'l'itl(~ 2 of t bt' tJnit~d States Code and Title 26

oftIll) 1 n t crn.:l ] H~~ \.ell U L \ l,\ )( !" " d 11J to vcri i" ~. the ace u r ac y 0 f

reports and stdtc'r.1L'nl~3 fi 1,~d dUl-inq the' audit period.

'rhc· rc~p()rt con t ,tins l \\'0 types of rccomme:1d.:itions.

UnL' typ0 in\'ol',:t:s rl:lt~~rL1L dol1dt' v(llu~~~~ which rC(lUe~~t immcJiatc

s pee i [" i c 1C t .i() n by t h l ' ('()m:: I LttL:'.." S \l C II c..1 r (\ a 11 0 cat:'0 n G ,

.ulll\nc1mcnts, or rL\fand~:;. Till.' oth\.\l.- tYF(' involves pr'ocedur~l

rL"commen(~atio~s \\'hich .11-1..' dl'sjqt1t.~'Ll to i~provc the Co::-:mittcc's

.:1bility to cO::lply with Lht' l~C'quircm(~nts of the Act.

On i\uqusl (;, I t)BO, the Committ.ee's It:!{J<.ll co~nscl

: u: )!1l i L t 0 d .ll~ L t I ' 1- l!l l-l . ; i )()! 1SP to t 11 C' f 0 1 1ovri n (J :11.: :1 i t findin9 s

,1Ihi rL'cO~~:~:L\~lti,l:'i(~n~; t,·::lt·t-,·in rhl" ('ornr~liLlt~t..: dis~l~;n"t~d ':lith the

1:1.1 it)}: i t \' 0:: L:lc "l"l'()I;~::1 'Ii, Ll~' i t)ns ~ont.:linc\.i in the' rr~ :.;0 !~t. In

f',lrt icui .. tr, th," l\)l::::lilt 1.'1' I,,(-jok. i~;su(' \vith audi t. L"L'c~rr(r:'Lendations

l~()Ih~t,~r~1i!1\.: :':11..-' \111t,)C~1l 1\\:1 o~ e:,~pl:nlliturcs to sldtl'~'; and the

L~(ln~:iti LtCL\';',: : l-~lL·tiCt· O~ .i11'JcJ.tin\: (·;'::)l~n\.iitllrt\~~ lo c:,:empt leqal

,1l1li \tCCou:lt,i::; C.ltl.\(:U(j~\~;, :lnc1 rl"!~h,\~tcd 11 I:.t,t·t-inl: ·\vith

l"l'::::·li.~;~~i,-}:l !-,_::.!'l'~:;I.·nt dt i\',\.; t () : I..-":i·.~\'; the ~-,'Cllldl ':-lnd lClJal

:::.l!: t.·l'~; CC!1t-'''~':1i:~,: L:l".;V : i:lt:i:1 ::;. Cou:1:,)L'1 .ll~~o st.:lt.cJ,

:1()'.·:,· ':c.: 1', t.:~~~:. i:1 ,l:~ .1 ttl '::1: . ! (I . 'oo:)t:' r ..1 tt" '.\. i l:l tht.: COI:.::1i s s ion,

t:11! LO::~:::Lt ::','t.! :'!'-l:~:lt..·d Lt) .id 11l:;t t-~l'\ dcco'.~:1ti:~.l t"t~cords and filL\

• t:1" lll·c·,'~~~~,i~·'.' .1:';I.·:-:,::::·'nt.~ ,1.: \~,lll~',-! :~Ol- in tlh~ :Hhli::. r-cpcrt.
•

-3-

1•

S('ct ions 441 a (b) (1 ) (1\), and 441(1 (c) of rri t 1«' 2

of the· tltl it (·d St.Zltcs Code providc'~; that no candidate for t-hf~

()f~-icc' fJ.1 1'1'('~idcnt of the United States who has received

m,ttehi 11'1 ! llll(l~~ mdY make cxpcndi till-f'~.~ in any on(' state aqqrpq~tinq

i n C'XCt·~;:; ()f the' l]rp(ltc'r of lC C4'llt:; multipli(~d by the stdt (~

~J() t i nq dql' ;Jnpul;\ tj 1111 or $ 0 0, 00 (). 00, lld i ustcd by the Con~·~ timer

II t" icc I n d .. ;.: •

St~ct i un lOG. 2 (,.t) ()f 'l'i tIc 11 of the Code of

1·..... ,,,1L... l-al 1'~I"1I11dtion~~ :;l.dt\.'S thdt 4·:':!ll;nditut-(... s H1r1do by II

r1~t"'sid(~nt iolt CClIHlid,1tt"S ,tuthoriz4,rj committe{' which seck tn

in~"lueIH"(' fllP nomin,ltion nf lhl' ('.lrtclidatc' in rI pl1rticular

st,lte :;}I,I I I he' ~lttr i butccl ttl t.hdt ~;t:ate. 'l'hi:; sc:.ction furthc'r

rcc::'lir(':: ! h,1t thL' ,111oc':lt i()~1 (':- '':-:: "nditul-("'S ~:h.!11 be rcportc(]

r)n FEe !'rt,m ~Pc.

T Ih ' :"\ U <.1 i t -; t, 1 (f 1- f • .' i I •We c1 l :.:pen S t-,' r C' i mbII r s c'me n t s

to l:1di\:j :·.Lll~; dlh! t'::pC'nditu!-(";-; !ll.ll!" to ot1t~-;irJ(' VC\n<lol-~-; ,1nd

('T:l!"" lo)'c\();: tnd d i ~),.·l)\·('rc'd t 11,1 t ~~ 1 ():', (J·l7 • OG h,ld n(lt bt'('n properl:/

,111ncZlt(·(; Lq 3l ~~t.lt\,·S. '!':li~~ dIll'.'lrd rC'pr('~L)nt~~ 3·l.·1" of the

tl.,t,11 aI1lC,·::lt.: th~lt :~~1C)uld hI.' ,lll(J' ·,!f(·d to stat(~~;. 'I'll,' undC'r-

,lll()c,lti,)::~: ~:J('r\" 1.·,l~l~~('d b,:.' !)()11,··.· 1!I'C1Sl(,)I1S Lli;': :lC','ollntinq

: ' 1- , 1C t jet . : . I : (i I I ; C 1" 11)I,d 1)(' 1(')\\' :

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• 1 • E~:p.~'.!_1~1:i ~_11.~~"~~~. ~)_1 !".('( ,! 1'/ ),3()_1 d. t l~!._~O_ ._.?_pcc_~_~ i c_

St,llC's

I. Th,' ,'c':n:nit h.'\.' dl11,(',11 I,d t-n ~:;t,lt\.~S only the nc·t

;~.11 ,11-i t);'~ rJ!- •.. IilpJ I)''''_'l':: \dl<) \..;C'j-}:I..-'d i:l '::lr i ou~·; ~;t : tt.'~~. Deduct i c'r~~·~

,:11(; (·i1l:.:1{,·,',·r's Sil,1!"~' ("~ t~l:-:\.·~'· t" I :11 inl~ ::;()/,:·~q(·.S8 we're not·

:lll()C~lt,"",: tl) Ie) ~--;t,:tl.·;:;. L'()n~:l1itt,,·· ,,:'fici,ll:~ ;-~,1~...1 LhL,Ll-

\, • r )i' I: ' u t: C' 1" : '.: : ; t f ,m \0: ~1 :1cd {,: .- 1: ). I h 1t' f;' ,,1 1n c .1 tinn (\ =.:r c' n d i t u r ('

,lr::I,:~q 111<)!",.' than :-~i:: ((1) ~:;t:1t(··~;. ';'L·'\,' :urthcr :;t:ltcd thClt.

t ::,-,': dil] :l]()(;:lLl.' :\1'1,.: li~lmi~:~hjl-,-' : I'.:t·'·'ll d("lducli0n~--; <lnd t~tXc.·~

L· ": H.l:~\'· ~-:l :It· i:-; t i>.' l-)]V~ ~~ t:1 Lc ',,:1!-· t ,. hc'y L~XPl:C ~>'·1.1 t () b0 C 1() ;"'.'

t ') L:11..' I':':: .' 11' : i t 111-,' 1 j mit:; •

. I>: , ::, ~.' :-(·i :~~:" tl !- :; - ;.;. .: 1 + : t- () i nc1 i .: i \, :1· 1 1:; \.;C' r (,

!·.···i\.)\·:\·.. d!v1 it ','::1:' ,:,·.tl'l-mi::··,~ t:l:! :~:~1 ,U;)l.CJ.; '.':1:~ not propcl-l',;'

,11 'lL:itt": bl ·/.:!~il;"'J ~~L,ltl'>~. ~.~:: ':, (l: t::1i~~ :lffi(JU:".: r,'\l,lt('~; to

·;-i: ::1.:':1' !~ .. th.· ,';;;:i,Llt,' in j'I!-1',' ~,1:1'::, 19-;~-' .--~h{)!-tly dft.l~r

1,~::·)ti!:I·!: : :;i;~ CI: .. ~; :!l.. ~.... • ,:":~1i'~'" o:-:-ici~11:~ ~~'!jd thdt thl"l

.. ,-~i:'-;i('·1 ...... :.; :!~dl:'--' :. ~!, dl: ),',1:' f;;,,;--;\,! ::n(H~nts tc> st~lte~~

.:ii. f ·" i~ '::::~ ,~1 !1.~~':·'·:Ll1 t~'i~ \·;i~:. :;dt-in!:,11 :j:,_~.~~~-; dIld not

:11": .• , ': '-1 r .l:~·.' .': "~'i~: :l' ~~':,i·-·_"" . I:':' li,~:.... T:-:l~ ::.1LlnC"t'\ of Lht-'

" : .. 1 "(... : . ,i ~.~: :: " ::\t ) : -; ..... '-' ...

: ~. .

.- 'll :- ;" '. . .... ,',

: '~l I!· ~- . . .;"

....

. -:.:: 't' r: \ i t. 1 : t" t ' it',.:, 1~; 1H ) t I. .... ,

. ", ':~ \.:. '1"1 \ :H't' :111 nC,l t'l 'll

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staLL's in relation to the tot~l work time, and estimated

$SS,148.0l in sal~rics should be allocated to specific states.

Committee officiuls stated thllt most of the individuals were

l1dLional campaiqn offjcials and although they may do some work

all state campaiqns \vhen they visit a particulilr state, they

~lI'L\ mainly concl'rned with coordinating the total national

e.llnpaiqn and thL't"'l'forp no portion of their salaries should

bt.' alloca ted to s t~lles.

4. j\ rcvi ew of the Commi ttec' s vendo}· ledger and

expcnditure~~ meidL' at f leld offices relating to Clctivity in

a number of stlltL\~; revP.:.11c~d that (lxpenditures totallinq

$21,548.~G were not al located as required. Most of these

items related to the pn::t announcpment trip discussed in

it-pm 2.

5. Amounts IJdid to media consultants for TV

dnd radio advcrtisinq time \oJas protJcrly charged to states.

lIowever, it was found that $19,034.35 in conunissions paid

Lo consultants for Duyinc; the time was not allocat0d to

the five (5) states whcl:e th(~ ~ds ..Jcrc broadcast.

6. E:~pcn<.litu res rnadc~ to other pol i tical c.;ommi t tees

for services used in connection \\'ith the campLli"jn were: reviewed and it \-JClS dcterr.lin~"li that.: $2379.10 vlas not properly

allocated to st~tcs. Of thj~~ ,-U:l0U:1t., $2240 was for

expense rl~imburseI:k~nt~:> to a l'on'.3l"l.'ssion.:ll c.:lndidatc \vho worke,:1

for the Bus 11 c amp Cl i q n d lll- i:l I. t 11 L' ~.) 0:j Lann 0 U n c c me n t t rip.

7. ~~~), f)B7. (lU ~j,..ii.l.: fo:..' :':"uduction c:- 'lIV corml1crci.:l]

filnK"d c:·:I-:lusiVt-..l'.: fot' hr():h1(·,l~'::'. j:l ~~('\': !l;li:"':':;:1i1"~ was not ch.:lr,;t.·ti

to ~l.'\oJ l!a:':~J~~~lil-L' .

In .. l.dd it. iun to ~h(l s t.J. tCI:'.cn ts ..1:1d conuni t tet."'

rcspon:;l'~~ not('d Clbo~/l_" t.~l\"/ also c:':pl-Qsscd the belief that tho

.:l11(ll~,-ltio:1 (:rror~~ :"or I.1n~· ant....: st.:lte 3rc i~~..:ltc:.ial because

thl~ cOll1mi l tcc~ dol.:~; not ll:'~PI:ct total expelllii t~rcs to reach

the limi t.:.ltions in ;.:ost ~>t_.J.t\.::.3. In.:l state such ~s No\oJ HaIr.!:;,shi~l~· I

..:ll\'rl~ th\· \.:;o:~~;r~i:"tv~·· v:·:pt l \':":; :"':.J L·~ C'lu~;c~ to +.=.:10 limitat.ion, t:~(;·:"

;;.1 id thl~':: ~1,1.":C' L,t~~;':l lllt., ..x)n.;c·~:-':.:lti':0 LlP!)rG.J.C~l .J.nd h~ve ch.:l~~ ..:c-~i

"\'l'r':thi~~,: :l!)!)li~.... i;·l\' to ~':l",·: ;::1~1:·~~hirl~. C():~~I:1i:.tel\ officials

,11 ~~o st~ltl.'l.~ t:ld t

_ l: i:~ n()t" ·..,·o:~:;. ~J~(~ bL'nl..~~its I..l'..\rivt.'d to ~CCO~::1t

:' t 'I t" .:11] t :It :11 l" \.::1 :.- i 011:; : I. 'I:'~:-: i b l~' •

I:1 1<.J7:, t:lc 1.~I,"):·::li:"~l:L' ~~i,.i not ,·:·:..:c~ed state s!)cndinl:

1 i :~li t:ll io::~; i:1 d n ':' 0:1("' .:.~ :-tt I.' • ; :~_"";l'-' ':. 1", inc .c.~ ..1 •.il..~d acti v ity

d~l:-i:hj 1;.1.~': ::.-1'/ C ...1'..~~\·· ~;(,~.~, .;' ....i:..\. :.i.~:.i:.~ La ;';'~ ·~:·:c\.~0<.1ed if

(~l)!:lI~~it.:-L)~ =;~oa..:)C··I,~'~~~... ,. ,~lr.. ·~~ :~\.)t_ '-.. ~.,~=~,:,~~~_: •
•

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-5-

Recommendation

The Audit staff recommends that the committee adjust their

~ccounting records for 1979 to properly reflect the amounts

allocable to each state and within 30 days of receipt of this

report file comprehensive amc~ndments for 1979 to reflect these

adjustments on their reports. In addition, it is recommc~n<.h'\d

that the committee revise their accounting policies and procedures to properly allocate t.~:":penditures to stutes, as follows:

1. 1\11 camplliyn rcla ted trave 1 (except inte r~; Late)

and subsistence expenses should be allocated to the appropriate

state .

2. Salaries of indi\"idlldls who work in a particular

~;tate campa.i\Jn should be proportiolldlly allocated for time worked

1.n those states.

3. Payroll deduction::; dnei employers taxes related

to salaries allocatL~d to ~~tatcs shuuld also bc.:! allocated.

b. l::·:pcr:.d i turl:S AtL1' i lHltablc to '1'\-/0 or Hare States

•

In addition t.o rC):1\llations mentioned abo\·c,

~-~ ,:.; c t ion 10 6 • 2 (c) 0 f Tit1 C· 1. 1 0 f t!l CoJe 0 f Fed c~ r a 1 Rc 9 U 1.:1 t ions

requires that an expenditure by d Presidential Candidate for usc

in two or mor~ st.:ltcs, which C.:lI1I1ut be attrilJutcd in specific

Clr.l0unts to Ouch st.:lte, 511:111 be· dLLr-ibuted to each state based

~'n the votinq ClS!e POpullltj on in t'deb state \-Jhich can reasonClbl~'

: '\.' expected to be infJ ucnc\.~d D~: :;llCh an expl~nd i ture.

Durinc; the cour~-;l.· 0 t Lhe audi t, i t \..;a~ determined

that the Com;nittcc c:-:penl..icd $:2;':;~},or,().38 for political items and

~3l ' r vice s u ~.; edin V.:lrious s t:llc c ~1 Ill! ).. i q n s \V11 i c 11 \\' l r c no taIl0 c a ted

~-o states. Of this amount, :; ..1.1,<)JI}.OO related to production of

r:,\~ conlme rc i.'11s ::or usc in t\·;o or mo r-(~ 5 tatos; $ 61 , 000 rc lated to

u. media consultant \·;ho orq~lnizcd thc~ media facL"ts of the campaiqn;

$118,30S.13 rcl.=ltcc1 t:o D.:ldqt..:s, bumrJt't" stickers, brochures and

ot:1er itL~ms u~)ol..i i~l aLl. ~)tdt(: C...l::1p ...liqn~;; and SG3,806.2S related

'. () costs of !~u;)l.ishi.:lJ ~lI~,-i mai.1.i:l,j nl)\·:slctters to supporters and

'::)l·-'rs across t;1'.~ n:l::ion. \'::l('n di~;l:ussing the 1:1.:.lttcr, Committee

i.)~·:-ici~ls notcc~ that· II '.·:oulJ no:- be \-/orth Lhc: accounting C[f01At.;

:"·.?Ct~ss.J.ry t.o il~~\rl::i r".:· th~"\ St:~ltc~ to -..:hlch thc~sc~ c:·:ppns()s ~pplj'.

'::l~~:" ~lso S~ti-.1 L;Llt. usin,~ '."OLi.:>; ~qC~ p()pul~\ti<)n is :1 difficult

::,-tS~: since t":1t> 1 :- cr.'::.;;ULI-'l" ~;'..'sto::~ l".lll onl~' .:tlluCJLt" to si:-: (6)

'-~:':-:-I..)r(~nL ~'Lat~'.; :)'~'r l::,:~~t'nL~i.L~l~-t·. Tht~y also sdil..i th.:lt the amouIlL~;

',';:-::C:1 ·.":ould r"~';-;ll1 :\.)1' \.~,11..":1 .~t .t:'\' .It'l~ i!:,,~:.ltt~l"i~ll t:s!)(~cially

....; ::~,."\..\ :~ ...,..: lI~1;:::'.::41 ;',. i:.> :1,--' o:-:~ '.:" .;~ .. ~tt~ '.'y'hL!l"t,~ t1h~Y ·.~:·:t),~ctL'd to be'

,-' . '- \.: t,) l () t 11 t t •:":: •• : ~' : i L'..1 t-\ \ 1 i ::~ i :..
•

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Tn 1979, the COlnmittce did not exceed sp(~lhling

1 imit.tt i()ll~-; in any state. However, increased activity d\ll:ing

1980 ('(1I1Id CLlUS(' some stale limits to bc exceeded if pro('L'dures

llre ll< d ch,lnqed.

l{c cantHI( ·ll( I d t ion

1'lH~ Aud itsta [f reconullcnd~; tha t expcnSQS for i tem~; ~;\ll"h as

media production, campaiqn mat(~l- iaIs, and newsletters wh i eh

are USL~d in two or morc ~l.._lt(.:S ~;hould l..)(~ <lllocated to dll states

\.;hich CZln re~sondlJ1y be eXlJl'ct(~(1 to be in f 1ucnccd by Sll( 'Il ,-111

expenditure. Furthermore', in those circllI::stanccs wher(' it is

unrc()~j()ll~l1Jle to keep an accur,l t t' r<..~cord (;;: c:,penditures llkh~C to

influc'nc0 ~n eleclion in t):lrt. i (:ular state, such cxpendi tures

should b(~ attributed to each ~;t dt l.~ which can reasonably be

(~XpCCl('d to be influenced by ~;lI('h expenditures on the basis of

t-clative votin<J a<Jc population. 'rho auditors suyqest th~t the

\'C1tinq ,Hl(~ popu] ation allocat i()11 he done: on Zl report by report

b,lSi~.) instcCld of for cLich incLi\'idual cXIA:~ncli:.ure. In other \vords,

0xpcndi lures for these i tems ~;llI.)\.1 1.,,1 be dCc~.l~,"..llated and allocated

to s t ll tl~S on the: 1as t clay 0 f t Ii,' rl_~por t i :-1': I-e r iou on tb(: b.:1S is 0 f

the rc~l:ltivc sh.:.1r'~ of voti:l.. ; d'lt' populaLi():'~ ::or l~10SC st~ltcs

involved. -.

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-- . E:':i)C nei j t u rl'~; ?d t t' i btl tu.b 1 '.' Lr) r.::·:t_'l:lp l LoS; a 1

~i-!1~i :\ccounfT!1"~f .Ill;: Fundrz1 (:;ln~:-- -..------

•

s(\C t i O!'1 ~l -11 .. 1 l b" ( I ) (A) ~u 1l .; -~ 1.:1 (c ) o!~ Tit 1(: :: 0 f

I, : ll' I i 11 i t l •d L~l Ll..: S L~ 0 d c~ s t. Zt Ll._\ ~, i rip,,"" t~ l, :.. z·~.J. t no P ~~ s i ue n i .J. 1

\',tndi .. L1LL' who is l_\li'JilJl ...., L\.) !I'("'i.\~~ l:l ..lt.C::i~:~; :-u:1I..1 pilyr.:C:1tS

:';~li' m':'lk~ l.·;·:pl.~n.. liturC's i~1 (~:-:c,--\~:.: (I: $ll),OJO,OOO C1~; ,1djusb..~~: by

t.he COnSl1IilC'r Pricl' l.nd(~:·:) ,-lu~-i::,; d Cdl~lt'.:i:'·=:1 :()~- nomination.

Duri n q t 11 (. ! 't. r i \/'! C) f LIll.· :1 :.:J i :., Sec t i 0 :1 ·1.3 1 . :-)

(·1) (.j) o1~ Title 2 0::- {];1it~d ~~l.tt,·;; Code: s:'':::''0d, in part, t:"'..:lt

th(~ tel-!11 "l!:·:nenLii LU1-O" L1oc~; !"'.ct i llCludl~ t.~1L~ :~...l':::~t_'1nt for 10,,:31

or accoun tin;j Sl~rv iCL\~'; r\..·nl..lL' 1-' "! t () or or~ be;1~1 f 0 f a po 1 .i t ic~]

("()i~.:-:i t- t- '- '\' ~;() 1cd '/ (L) 1- tIle p tll-:-"( ; .. :,' ()!. \~n~; 11 r i :1 .. : CO;:::) 1 iancc \v i t:1

Tit.1.·..! \)( th(~ l:;;il(ld ~t~lt.t..::; C\\,~I' ()1- l'~L·::-'-,-..:r:: ~.~) :lIld 96 o:~ :::1C'

l;d:'L~J'lLll i·~(~'.'I...... n'...h,..: C(~!_~l..."" of 1'~:)·1. ;"·.lthuu~;:: :':-'-..:': ::~~~.;! !)o rL)~)c~:"L:d,

l:1C':--:" C"(';:~::lianc·'1 t·:·:l·._'i~I.~i:.'..l~~l'~; ,U"\' t_·:·:t'\r.~:):" :-;'-"..J:~'. ~:." li~it.:lLic:1s

i.;;:i-0:";I'd ~)'/ :~('Ct..L/.. I:l ·l·~l..l\:)) ~l~ 1,.\) 0: 'l'jL!'_~ : :.:' ~:~l' T-:nite~~ ':;::u.:-l.-:'S

, 'l"I,,: '•.: •

i <: :-i.:'.. ::: ,--' :»' t.' j \ \': 0 ~- t 11 t " , 1:.: '. .:. :.::, ~, . l ' _ion ,l J 1 :- )

,.~} ill ,': ';'1 t:-l~' :~, ··:;~:,_\.'d :·~,"1:.t.·.~ LO,_~t.', d: ..: "':t.!-::...i.uIl 110. d ~c, (:2,

<..): :1: :_~,\ 1 i, ~.'('.:.: .):- :\·...~L::-~l: .. d~lti0;~.~ .~·:..J ... ·~·,i, 1:1 Ihlrt, ··.:1..Jt.

:·_~;~\.:(·,li~;i:1{: c... ():~~.;; ,-l=-t 1 :~ot. ~;ll;__··)~~ ~·o t-!1·-· '::·:;.I·,:;:\.ii~llr(;) li:::i~·..l·_lO!l

l): ·;·~1~:\;:) f)" ;':~.I,'.2, .. :::t... ·· .. i "t,it·,~~ <...'0,:\_ .~=-.~·:s.~ t~-:c';' ,_~:,:C( .. ,:: 20_

\': ·.:~,lL 1 ~:::i ~_-.ll: i.~)·l ()~ .. "L"L',,:;"" ·•·.. 1::: i.:l 6~8 ,"!'-~~·a-; ;~:~ :l :)ri;:~~l:-~· L!1··~;·__ 1.~)!1,

1_·(;~1·..,··a;:· :\':1, (.1:- c.... l~:'.. ··~.·.

-... : ~. ':." i :1 . 1 .. .I .. \ : .. i :~ .. ... .:

..~'.':' .. ", ':-, .;ll~ll DC

._ . , "_':1i:
•

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a. Allocation of Overhead to Exempt Legal

~~countinq and Fundraisinq

1\ reVil\W of allocation of overhead costs to

l\>~empt legal and accotlntincj and fundraising rev'ealed that

:~35, 159.64 had bCl~n j Iltpropcrly charged to exempt fundraisinlJ,

and $9,646.52 had bl\t'll improperly charged to exempt legal

and accountinq.

rrhe COlllIll i l tcc~' s practice is to charge a percentage of overhead co~;t s rl.!] ated to operation 0: their IIou~)Lon

and Alexandria, Virqinl,-1 of r ices to exempt categories based on

the proportionate shure of net payroll relating to the exempt

functions (17.24'6 for fundraising and 4. 73(~ for legal and accounting

in 1979). Of the $818,172.80 in overhead expenses charged to

the Houston and i\lcxandri<:.l offices, it \Vas deter~ined that

only $614,229.43 (consistinq of payroll, postage, phones, office

supplies, coffee, petty cash, printing, equipment. rentals, and

cleaning) were actual overhead expenses. The aujitors determined

that the balance ($203,943.37) which was charged to overhead

anL1 then applicJ to c:-:empt c.:.d~l 'qori os, rcprl~sonto... costs which

d .-e not overhoCiJ expense's. Thl'~';L~ costs include t;1~ Culldidnte I s

pc rsonal sccrc t~ry, t.r~1\'C1, po Ii l leal cons u1 t~n t s, poll. tical

postal..le, and pClyroll taxc)s. Us i nq the pa~'roll liollar pl.~rcent<.1qcs

mcntioneJ abo~I.·L>, the Lluditor~J dl,tprmincc1 thut onl~' $105,893.15

of ovcrhcall should bL~ ch..J.rq\.~d to c:-:cmpt fundrc:lisi.:1g and only

$29,053.0S 0: o\"cJ:hcad should bc' charged to CXCf.1~,t legal c:lnd

ilccountinq.

To SllI;mklri::,', Lh·--, Cor.:r.litt(;·~· ch~~-\.:~:::i ~~l·ll,OS2. 79

to l'XL"!1li)t fundl~ai~inq WhC:l onl;- $105 ,893.1S ShO"'ll,-~ have been

c h d r~; e d • Ifh e Co1nmittl> C c h Cl r qed $ 3 3 , G9 9 . :, 7 toe;.: C!:"IP t 1c q a 1

\IIH1 accountinCj wh(~n un1'/ ::~2J,O:J3.0" shol.1ld hav0 l:ccn charqcJ.

/\~; a result, in tho opinion o~ the .:\udit staff, t::'c Committee

has undcrst..J.tcd tot~11 (':-:FI.-'1:,Ji lu~_-os sulJjcct to li::-.':':.ation by

~: 4 4 I 80G• 16 •

The C():m!iit~·_:(: rCSlA,'l:1JeJ ~:-l.:lt Zlll 0: these costs

I t I 1.lL0 LO 10.;al ~uld Ll.CL"Ol~!1~_ i nq ,-~r:,-: :~un\.il-'-lisin':.: ;':0:::".J.use they 31'L'

.tll tntc\irated COl:l:::1LL"I' \,;i t-~1 all ... it,·t~~l~tr:-/.:nts i:'::'·-:~rt.~l.:lt,ed.

T~10 .\udit ~-5t~l:-l l.-L~Ct)E;:~c~n"j~~ +-h.::lt th~ CO::.::~it::·.:-:; adju~t thc~ir

LlCCO~~:1::i:1'~ r'_"_'ord:-; for 1~1"7t) to I::orc .:lCC'..l~-:ttl:::ly ~:0:1ect amounts

,1ppli":.:l~1·.> ~~(j '_':-:l~:~l!)t :'U!h.lt-3i;;in,: ~n.:.l It':'--,.::ll 3.nd ac..:~unting .:1n(l

fi le CC':::l)l~t.-':ll·:L:5i'.-c ,t:::L~Ihii;l"":!lt:..; :~01- 1 ~·/9 !..:i t:lin ~C ..23.~'S of rccei~)t

()( this r·.::JorL to l-L):-lc'cl ~-h·~'~t.-' :i...:.~:'1St:::t:~::t3.
•

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In addition, the Audit stuff reconunends that the Conunitt.ce

,ldjust their procc'L111rC's for applying overhead so that only

lh.lministrative e;·:p(~Il:;l~S supporting the exempt legal and accountin(J

lInd fundraisinq t lllH"t ions ~lr("\ applied to the exempt departments.

1). !~:~P.1PL__ .\L'counting E:-:pcndi tures

CommiLt L'(' officials stated that the

Committee'~) polley i~) lo chdrqe all amounts associated with

..lccountinq ~;t' r'.r ic(~~> to tilL) t'~cmpt ca tcgory.

TIll' st\lff advised the Committee that a

l'ol·tion of thc~~_;c' co:~t :.; ~rl' not compliance related, i.e. would

I'l' nccessury Zl1)sent the requirements of the Act, and should

bl' considercJ an opl.·r~lLinq C'xpcnditure subject to the

()veral1 spcndinq 1imi l~tion:

1) maintaininy Cush receipts records;

:2 ) \': r it i:1;j cht~cks, tr,111smi L ting funds

to field \,,'0 l·kt..~!" .-; , r··'(~o rci i. ~l, 1 d i ~31.JU ~scmC11 ts;

3 )

,~ i

\ }

•

(, \ ::-_·t_'~) 1:1: :)d\'l·~.) 11 r0cords, payinu

, .::\p loy t~! (~~.l, ! i 1 L11 \J ... I L it" LI.. ' ~. I ';' p a':-1- () 11 1.v t· urnsancl mCl.k i 11 (j s t .:l t c

,lth.i fcderul p,i':'l-O.ll ck':.'os it:·;; ..ll:.. i

'~') 1- i.1 ir~":.: t ... :·:empt orqani:~ation return

(1120 POL) ',,-;i~ll tilt..:, r:;t~l"l1~ll H\.~\"c:1UC Servic~. Section 527

t'r tho 1 n tCl·n~11 E(~\·('!l11l:· CO ... i0 r0,-::.~ircs th~t .111 unrelated

h\lsi11es~ inC'o~:--' b·. t·.-; 'C)~·:-\..\l~. "(':1~cqucnt1y, tl1t." Committee

l:'.U~t I~l~int.:li:l ;tCC·.-;·_1:1·:'::1,; i-·"\..~~.'~·~:.~ su::~ici.enl to pt'rmit

1.·I..:,mpliancc ~,..·i '_~l L..:i\' : :l·,""~-:~.ll ;\I.\·:-·:lth~ ~)._:r\"icl.· l·t.)~\Ort.i n~j ~n,-i

t'1...cord k t'C' i ' : n I : l'l . L~; : . ':: .. ' :-: .-~ •

. ·.l~ t~., l ....; i.; 0 .:: ~'..: (iI.." t ...l i..lcd :~ 1 o'.·:ch..lr ts 0 f tlH.~

l'o!;Unitt.cL~'~.; ':'i(':~",,)~.::: i:l'; :~·:::~t.\:!:l ':'::.:icatt.\d tn.::lt .:.tnt'1·oximat01': 11-

·'f ftl n \.......J _ _ '- :-. -i"'~ls ',-··1."1· - t'; ',., l_ '_ -,

... " \...'"l"()"')· - \...4 •• \.. :.. •.• ••• '-01-6 ~4CCt~~ .1.. - .... ....~,.) ~.~ ..... .......:>, •• "-'I. "p·)r-oxi"'"'~·-el" l .. '-- .I

3.3· 0:- C'_l~lC:' in:~:~ n' .~.":>; ... ·:n ,l\.·c"",·:~~t...i11t.l for ~)a';'l'C'll cxpcn lit~r('s,

_1::\..~ .tt): 1

4

{':·:i:'Lt:,·1 . :-,l:!\"~~ .. : ••.. l:l~l~lt~'d ::'0 :'h..'C'ounti:1..._: :-or ~111
..

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other expenditures are not compliance related. Applying the

uppropriate percentages to each accounting uepartment employee's

(tross salary resulted in an estimated $8650 (16~) of the

dccountinq payroll expenses which should not be charged to

, '~:emp t l1ccoun t inC] •

UsinlJ the pt'l-cenl':lCJcs of non-compliance re!t1t-l\d

:~ l eps mon tioneL! above, the ..Hl<...li tors estimated that $10, 000 t)t the computer e:-~p('nses (Which totalled $62,618.33 for 197()),

:;hould not be charqL!d to e:·:( 'lIIpl accountin<J. In addi tion,

:;.:~ , 11 B. 71 in othl~ r p~y roll t (~la t.l..'L1 expenses were identified

d ~~ imp .-()r)( \r 1 y c h;lr q t \d tOt..... :.: I 'IllPl .:.lceou n tinCJ cate y 0 l'i c s •

To sllmmariz... ~, ~20,768.7l was overcharged to exempt

dccountinr ;. The CommittcL~ offici.J.ls replied that the efforts

t () detcrminl: the sm~11 pcrcl~ntZl(~t.'\ 0:: accountin(J cxpenditures

which arc not. l':~ompt \vould not l"l~s",ll t in a matl~ri~l amount and

t lll~re[orl~ would not cause" lIlt.) I..'c"':~::~:'::'::~ce to (:xcc~cd its expenditure

I imi t.:.ltions.

Th,> :\thlit ~;l~l;! l~cco!m::,,'IlI.L; :..:~~: tiLL' l:OIllr.1i.t.tec ildjust their

,l,,·,_"ountiil,-: l·t\Ci.)I·"i~j : or .197() t 0 1;~4G:_·~rly l."cflt.'ct t!-:~:: (1mounts

cll Ll)C.:.lb1l: Lo l':'~l~n:i>L clccount i Il·: ~1::,-~ :i ll" c'l COnl!Jl~chonsiv() 3n1cnd-

:::t'lll tL)!4 l:.,)";q ·..;iLhin .30 ,,1...1';':; I;: ~·'··..:~.:i;)t of thi~J ret"ort to

'l"UP!.' 1

4

1. ';' ;3l"Cq-",) q:1 tl t th" ~~ () , "i' d~ •. 1 =- ~~Or:1 1..; Xt;mp t Llccoun t ing •

:" \1 r t lll.\ 4 ~:\. ... r',', t: 1( \ COl: ~::: itt: ~"t .. ~; !1() : : • d.1 jus tit ~.; dec 0 unting pro C C(1\.1 r t " ~;;

;~,,-; thclt \."");11':" ~~,l 0:' dl~l:("'~1:1~ i;ll.: ':~': :lrtlllt.~nt P.::l~·~:oll and computer

·.)~;l~) dl."l' Chcll',~t'd t () ":-:l·::;:)t I~l~:": : i ...:..:-:Cl~ Clnd that" the: perccntaqc

., r t.. 't.. \ \. ,1.1 ',: ll....' d :' t ' I" i I.." : i. \.",1 t . :1 ; ": !,) "-: r:lp i CJ n LJ r 0 I.J ress '."': S •

~;l~l.~~ i',)Il ·l·ild (,1) \:' \~.'"J of Title' .~ of the United

~~'.,ltC·S co ..~(, ~;tdt~~;, Lh':lt ;lU :It'!''~,,):1 s:1a.11 mCl}:f~ contribution~; to

.ttl':" CLlILi.i,:~1Lt_\ dlhi h.i~; ,Hlthuri.::l...)...i ;-,~:itical c()~:~mittc.:(:s \vith

r";;pect too ~!l':" \'l(.'('Linn for F·'\:I-·~·::: ofricl\ \·:lli<."~l, i:1 thQ

.: :,~~-l.'1.::1· ", t.."):·:Ct'l·\.~ :"1 ,Ill),,'.

1~1 d':,:lLl\.':l, ~~ ... :.~:-_ 10.~.3(b) l" 'l'iLl~ 11 of

• :~~~ COO:' u: :\'\.:l'':-:I.1 ~'~I',::~1,,1tl:):~_~, ,:- :'-..'.'S ~n :)\lr·, t:1at contrilJu-

.. :_()!lS ~:::1i.~:: :·l~'~ \_) .. l~- t-~c l)L' i! 1, ·t~ .....~-~ ~. L1. l)l~, ·'.·.·1. :~ Ll1 10 (]3}·S:
•

( l)

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returned to the contributor; or

..."

~.

(2) deposited into a cilmpaiqn depository, reported

1.1nd Wh<"fl L.1 contribution can not be determined to be 10qa1 within

d reaSOIldL ll:' t im<.', be re funded.

Ou r (·;.:amina t. ion 0 f rL'cl'ipts indicated lh~ l the C01ll11l i. t tee

dCCl~ptl~d 1') contributions fl-om six (6) individl1~ls whi(~h aQ9rcgated

in excess of $1,000. 'I'lh' t':·:cess portion of lhL' contribut.ions

Clcccplecl from thl\~;e six (b) jndividuals totc:.lled $2,S9~. \~e also

noted oth~:r contril>utions which appeared e:-:ce~3sive. However,

the commi t. tee was able to d(\termine these other contri butions were

not exces~ive. The Committee informed Lhe auditors that every

effort is Elade to identify and rc~fund excessivc contribut ions by

p<':l-iodically rcvic\-lin\} thl}ir master contributor list and contactinl ,:

contributors. In some Ca~jl':S thc~· retain the c:.lI::..parcnt excessive

contributinn in an attempt to determine if the contribution

was intC'n~i"'d to 1.>c divido(l ,-lIl10nq the contri1.>utor- \,;ho SitjlH..·d the

check and ~~~\mbl't-S of his ~:-Ll::1i.ly. 1. f this folIo'..; u::, work proves

tlH." cont1-i:)lllioIl~'; to ~~ti11 bt' l~xc'·~;:;i\·c, rL~:-und.:.; Qrl..~ made.

T:lt' .:~:.~diL ~jL~ll rl·CO:~~l~.\..·lld~) t:l':lt lhc· COli~~littcc refun\.1 the amOUl::'

o r t 11 l' CO ( " :; +-.: ribII L ion:; .i 11 C :.: L'l ' : : j () ~. t· hl..) $ 1 , aa0 1 i ::1 itat ion tor

t·,H.:h l.'O:lL1-iblllol- 01- olJl;J.in ~h)L~u:::l..:!"ll\.lt"ion inJic.:ltin,:: th.:.lt th0

'·(l:lt-ri.:)'.~~";~·:: hd\'~! not I...':·:':'",>.·\,~l·... i ~":1f~i_l" lir·.it.-:ltion. If thv

\'()::mliLL"l_ ,-.,: '1:1,!:; till' :)("\:-~ ~\):l 0:- "..1"11 ('O:lt rib:lti~n in t.~:·:C'·~ss

,

,) l' $1, () (J ), it.,

t",-'fund t':::· .:~::;

i~; n,·(.:o::.::;"..:~:\..it_·\..i tll.:.l t <:u; I i \..':: ()~- ~-_=10 :1l'.:ociat., >li

( : ron ttln d ~) ~11.' ]: ) b '.' : I l! )11I i t. t l'\J Lot: 0 ."1 U d ito r s .