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May 28, 1981

FRED EILAND

,'", "'E' PRESS :OFFICE ,!PIi' -~ '~O~TA r. ~; t:PU'BLICIS;UANC~OF:FINA.L· AUDIT REPORT

,.' ...., ~tACHINISTS NON-PARTISAN P~LITICALLEA,GUE

'. FEDERAL ElECTIO~ CQM~ISSION

WASHINGTON. D.C 20463

Attachment as stated

~c: FEC Lib~ary

Rl\D

~lic Record

Informational copies of the report have been receiv'ed.

all'~~rties fn~oi~ed and the report may be released to fhe

FROM:

MEMORANDUM

TO:

Attached -please,,- -find a copy of the final-"audit report of.

the Machinists, ,Non-part'fsan Political League which w'asapproved.·

bythe~Commission on May 22~ 1981.

.SUBJECT:
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FEDERAL ELECTION COMMISSION

WASHiNGTON. 0 C. 20463

REPORT OF THE AUDIT DIVISION

ON THE

MACHINISTS NON-PARTISAN POLITICAL LEAGUE

I. Background

A. Overview

This audit report is based on an audit of the Machinists , Non-Partisan Political League (lithe Committee II ), undertaken by ,the

'Audit Division of the Federal Election Commission in accordance

with' the Commission's audit policy to determine whether there has

been compliance with the provisions of the Federal Election

Campaign Act of 1971, as amended (lithe Act"). The audit \'t'as

conducted pursuant to Section 438(a) (8) of Title 2 of the United

States Code which, at the time of the audit, directed the

Commission to make from time to time audits and field investigations

with respect to reports and statements filed under the provisions of the Act. " - -. . ..

The Hachinists Non-Partisan -Political Leaaue (I·l:~PL)

18 the separate segregated fund of the InternationaiAssociation

of Machinists and.Aerospace Workers (IAr~) and registered with-the

United States General Accounting Office on April 17, 1972. The

,Committee maintains. its headquarters in l\'ashington, D.• C.

The audit covei-edthe period from January 1, 19i7 through

February 28, 1979, the f~nal coverage date of the most recent report

filed by the Co~~ittee at the time of the audit.

The Committee reported a beginning cash balance on

January 1, 1977, of $60,538.67: total receipts for the period of

$889,806.39: total expenditures for the period of $683,640.16:

arid a closing cash balance on February 28, 1979 of $266,704.90.
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(2) Ohio State Council of Machinists (OSCM)

Cleveland, Ohio: and

(1) Connecticut State Council of Machinists

(CSC~) New Britain, Connecticut:

'rh·:;: Cor:-:.<itteC! solicits its officers and staff re::jresl?:'ltatives

(r.1c:;\~Crs of the union) undC!r a "Sponsoring mcrnbers;"ip plan"

undC!r which a Guideline is used sucgestinu contrib~tions based

on a prc~or~io; of thC! indiviJual'~ salar~. These

solicitations arc procoss(;d throus.rh IAH' s v.:..rious rC0 ional

o~~iccs a:ld co~tri1)u~ic~:s Ul1d accon~an~·i~g i!l~or::ati0n are

SC11t ciirec.-..:.::/ to tb.c C():::r::ittct..: !lt~~dqu~rtcrs in ~·:a3=-:.i:~~.jton,

D.C .

!/

This audit report is based on documents and ~orking

papers which support each of the factual statements. They form

part of the record upon \'1'hich the Cornmission based its decisions

on the matters in the report and \\'ere available to Co::-::1.issioners

and appropriate staff for review.

The findings resulting fro~ our review of reccr~s at

the field office level are presented following the Cor.mit~ee's

(Headqu~rters) section of this report.

(3) International Association of Machinists - District 15 (Ih:·l-15)

Nev.; York, N. Y•

The International Association of Machinists and Aerospace

Workers is composed of approximately 1,650 local lodges organized

into 150 district lodges. The lAM district.lodges are further

organized into various State Councils. Contributions are solicited

by the' Committee both on a direct mail basis, !! and through

fundraising events and raffles held at the loca~ and district level.

Funds raised at the local and district level are transmitted to the

Committee for use in the support of F~deral candidates. The

Committee provides guidance to local and district officials to assist

them in complying with the Act and Commission Regulations regarding

soli~itation and recordkeeping for. contributions.

Since a significant portion of the Committee's receipts

are raised and recorded at the local, district and state council

level, the Audit staff determined that, in order to test the

Committee's overall compliance with the Act and Commission Regulations regarding solicitation and recordkeeping for contributions,

a review of records maintained at the field level would be necessary.

Accordingly, two (2) I~1 State Councils and one (1) I~1 District

Office were selected for review, based on their relativelY large

proportion of receipts raised for the Committee·. The three (3)

field offices where records were revie\.;ed areas follo~.;s:

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Office Period in Office

Co-Chairman 1/1/77 - 2/28/79

Co-Chairman 1/1/77 - 2/28/79

Co-Chairman 1/1/77 - 6/30/77

Co-Chairman 7/1/77 - 2/28/79

Treasurer 1/1/77 - 2/28/79

National Headquarters Activity

1.

Scope

A.

C.

Our review of the Con~ittee's statement of

organization and amendments thereto disclosed only accounts

maintained b~' the Conuni ttee in \';ashington, D.C. as designated depositories.

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Timely Deposit of Contributions intoCampaig~ Depository

During the period covered by the audit, Section

103.3(a) of Title 11, Code of Federal Regulations required, in

part, that all contributions received by political cornmittee(s)

shall be deposited in a checking account in the appropriate

campaign depository by the treasurer of the committee or his/her

agent, within 10 days of receipt. Subsequent to the audit fieldwork, Section 432(b) (2) of Title 2, United States Code was amended

to require, in part, that contributions be forwarded to the

Committee treasurer within 30 days of receipt, or in the case of

contributions in excess of S50.00, within 10 days of receipt.

Name

Howard F. Dow

William W. Winpisinger

George J. Poulin

Eugene Glover

B. Key Personnel

. The principal officers of the Committee during the

period-audited we~e' the following:

Floyd E. Smith

The audit included such tests as verification of total

reported receipts and expenditures and individual transactions;

review of required supporting documentation and analysis of

Committee debts and obligations; and such other audit procedures

as deemed necessary under the circumstances•

.... II. Audit Findings and Recorr.::1endations

'0
Sectic~ 114.5(a) (2) of Title 11, Code 0= Fe~eral

Regulations, states, in part, that a guideline for con~rib~tions

~~ may be suggested by a labo:: organization, or its separate segregated

fund, provided that t~e person soliciting or the solicitation

informs the persons being solicited:

RecoI'C'lnendation

The Audit staf= reco~~c~~s that the Cc~~ittee distribute the

procedures to the local, state, and district collection acents ana

MNPL officials for i~?lenentation. After completion of this

distribution, no fur~~er action is recommended on this matter.

2. Impro?er Use of Contribution Guidelines

Although records were not available to determine the

exact length of ti~o contributions were held bv

collection age~~s prior to transmittal to the ~iscricc/

state council, tickets were distributed to the collection

agents approxi~3~el~ four (4) months ~rior to tho ra~~le

for. I:"\~·1-l5, t,,.;c (2) !::ond~s ~)rior to the ra:fIe for CS·::·1

aIl cl "':lr""e" (3) .-r·'f· 1

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On April 22~ 1981, the Audit staff received the

Committee' s proposed procedures, and upon completion of ou:: revie\1

of the procedures, cc~cluded that they provide for co~pliance with

the timely deposit requirements.

Our review of the Committee's receipt records

indicated the Committee received at least 114 transmittals of

contributions from .loca1s, districts and state councils, totaling $75,904.47, which were held by these field offices for varying

periods of time and not deposited in the Committee's designated

campaign depository within 10 days of original receipt; Typically,

these receipts were collected at fundraising events conducted by

the field offices and were not forwarded to the Committee until

completion of the events.

As a result of our review of records at field

offices we noted that collections from the sale of raffle tickets

were retained at the district and state'council levels for as

many as 107 days prior to transmittal to the Committee's

headquarters.

In the interim audit report, dated Harcn 11, 1981'·,

the Audit staff reco~mended that the Co~~ittee devise and sub~it

procedures which provide for compliance with the.time17 deposit

requirements as discussed at Section III.a.

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~0 Section 434(b) (1) of Title 2 of the United S~ates

Code states that each report shall disclose the amount of cash

on hand at the beginning of the reporting period.

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(i) that the guidelines are merely 'suggestions;,

and,

(ii) that an individual 1S free to contribute

more or less than' the guidelines' suggest

and that the labor-organization will not

favor or disadvant.age anyone by reason'

of'the amount of--their contribution or

their decision not to contribute. , , ,

During the audit period the Committee raised

approximately 50% of its contributions through' its "sponsoring

membership plan" for IAr-I'officers 'and: staff representatives.

The Committee uses guidelines for, contributions based. on a

'percentage of the solicited: individual',s salary. ,-- However',-

the solicitation. material,:"containing:, ,the ',guidelfries, used: in . co~~e~~ionwith the plan does not include':, t:he requir,ed: notices.

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In the interim audit report, the, Audit. staffrecoIri-,

mended 'that the Committee revise its solicitation procedures-to comply with the requirements set forth. at Section .111. f. 3;" .,

On April 22, 1981, the Auditst.aff received"the

Committee's revised solicitation procedures, and upon completion ot' our revie\-lor the procedures, ,concluded that they provide ' .~ornplia~ce with the solicitation requirements. .

Re cor.u':lendat.ion

The Audit staff recommends that the Committee distribute the

procedures to the local, sta~e, and district collection agents

and M~PL officials for implewentation. After completion of this

distribution, no further action is recommended on this matter.

3. Reporting of Cash on Hand

Our revie",-J of records revealed ,thutthe Committee I s

reports during the audit period did not includ~-approximatcly

$2,185.00 in cash on hand. ,Co~nittee officials stated that although

th'cy had been a,-lare of the c1iccrepunc~· prior to 1976, they ,\'lerenot.

a\'lare that the reports should have been amended. On April 27, 1979,

the Cqmmittec filed amendments correctly reflecting the change in cash on hand.

Recor;.:ncndation

Based on th·::: abo\'c, \~'C rc:co::·.:n~nd no further action on ,this

matter.
...

The Committee officials agreed to file amenced

reports itemizing the transfers.

B. District and State Council Activity

Raffle events may be conducted by a single local, a group

of locals, or a group of locals in concert with their lAB district

or state council of=ices. Records pertaining to the events are

maintained at the field office level sponsoring the event.

Financial infornation and proceeds arc trans::tittcd to Committee

headquarters through the highest field level office sponsoring the

event .

As indicated previously, the Co~mittee raises a significant:

portion of its total contributions through various fundraising

events, mainly raffles, held at the local, district and state cou~cil.

office level. Although the exact dollar amount thus raised cannot

be readily calculated, it is estimated that this type of activity

accounted for at least 39~ of the Committee's total receipts for

the period audited.

On April 27, 1979, the Co~~ittee filed amendments disclosing

this information: therefore, we recommend no further action on

this matter.

It was also determined that the.Committee did not

report three (3) transfers-out to other political committees

totaling $2,500.

Recommendation

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4. Disclosure of Transfers

During the audit, it was determined that the

Committee did not'itemize nine (9) transfers-in totaling $3,241.00

received from affiliated committees at the state and district

level. These transfers represent 89.6% of the total dollar amount

of all transfers received.

During the period covered by the aUdit, Section

434(b) (4) of Title 2 of the United States Code required each

report to contain the name and address.of each political

committee from which the reporting committee received, or to

which that committee made, any transfer of funds, together with

the .amounts and dates of all transfers." .

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As indicated previously, two (2) lAM State Councils and

one (1)0 °IAM District Office were selected for review by' the Audit

staff. Their records pertaining to Committee activity were reviewed

and lAM officials on site were interviewed. The findings resulting

from this review of Committee activity ~t the field office level

are presented below.

1. Notice Required With Solicitations

Section l14.5(a) of Title 11, Code of Federal

Regulations requires, in part, any person soliciting contributions to a separate segregated fund to inform the member of the

political purpose of the fund and that the member may refuse to

contribute without fear of reprisal.

In the case of CSCM, we found no indication that'

members were advised, either verbally or in written solicitation

material, of the political purpose of the fund qr the voluntary

nature of contributions. Solicitation material used by the IAM~15

office for its raffle failed to advise solicitees of the voluntary

nature of contributions. .

2. Solicitation of Non-Members

Section 44lb(b) (4) (A) (ii) of Title 2 of the United

States Code prohibits a separate segregated fund established by a

labor organization fron soliciting contributions to suc~ a fund

from any person other than its rnerr~ers and their families.

During our review, we noted that IAM-lS may have

sold raffle tickets to non-me~~ers. Although records were not

available to determine if non-nembers were solicited, an official

of IArol-1S stated that, "The shop ste\'lards can sell to strangers:

they don't have to be union rne:clJers." t'le also noted that procedures

provided by the CSCM to ticket sellers makes no mention of

restricting solicitations to !A~ members. Indeed, these written

procedures state "Tickets may be sold throughout the State, but

only to individuals."

In the interim audit report, the Audit staff reco~mended that the Co~~ittee revise its solicitation procedures

and/or materials to comply \vith the requirements set fo~th at

Section III.f.l. and 2.

On April 22, 1981, the Audit staff received the

COlUlnittee's revised solioitation procedures, and upon co:npletion

of our review of the proc0dures, concluded that they provide compliance with the solicitation requirements.
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Recommendation

The Audit staff recommends that the Committee dist~ibute the

procedures to the local, state, and district collection agents and

MNPL officials for implementation. After completion of this

distribution, no further action is recommended on this matter.

3. Matters Referred to the Office of General Counsel

Certain other matters noted during the audit were

referred to the Commission's Office of General Counsel on

December 16, 1980.

III. Procedural Recommendations

In general, it is the opinion of the Audit staff that many

of the problems encountered by the Committee can be corrected

through the development of specific guidelines .to be for\.,arded

to all collection agents and IAH officials responsible for H~PL

activity at the local, state, and district levels.

These guidelines should address the following:

a) Deoosit and Trans~ittal of Contributions - All co~tributions shall either be deposited in~o a committee designated

depository, or deposited into a transmittal account to be

forwarded to the treasurer, or used to purchase a cashier's check

or similar inst=ument to forward the contributions without

depositing the contributio~s into any account. Contributio~s

shall be forwarded within 10 days of receipt if in excess of $50,

or within 30 days if the contribution is $50 or less. No disbursements may be nade prior to deposit into a desig~ated campaign

depository. (2 U.S.C. 432(b), (h) and 11 C.F.R. 103.3(a) and

102.6) .

b) Recordkeeping fo= Contributions - The Co~~ittee treasurer

is required to maintain an account of all contributions made to

the Co~~ittee. Con~ittee agents collecting contributions must

forward the contributions r-o the treasurer within the time limits

specified in (a) above, and if in excess of $50, forward the narr.e

and address 0= the person ~aking the contribution along wit~ the

date of receipt. (2 U.S.C. Section 432(b) (2».

c) Curren~ RG~orting - All contributions received, and

expenditures ~ade at the lo~al level, must be disclosed on

reports filed by the Cornnittee covering that period. Speci=ic

inform.:ltion; St:C:1 as th<2 na::1e, date, and amount of the contribution; or payee, date, an~ purpose of expenditure; sh~ll also

be disclosed i~ the contri~~tion or expenditure is in excess of,

or aggrc~~tQs in C~C0SS o~ S200 d~ring the calendar year.

{2 U.S.C. Section 43'; (b) (3), (5» .

... ~."'_••••• _ .0 ••••
'd). Accounting for and Disclosure

of Fundraising Receipts and Expenditures The Committee

treasurer, is required to maintain an accounting of as we1l'as

,report all contributions made '(gross proceeds)-tothe committee.

All fundraising expenditures made from Committee funds, including

the cost 'of raffle prizes and other it'ems sold, must be made from

designated committee depositories and disclosed on committee

repor'ts. '(2 U.S.C. 432 (c) and (h) (1) and 434 (b».

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e) Separation.of Funds - Contributions to the Committee

may not be commingled with personal funds of officers, members,

associates or any other individuals. '(2 U;S.C. Section 432(b)(3)

11 C.F.R. 102.151.

f) Solicitation of Contrlbutions:

1. Union political action committees.may'not solicit

contributions from individuals other than members and their

families. lIr-Iemberll is defined as a person satisfying the requirements for membership in a local, national, or inter-national

labor organization. (2 U.S.C. 44lb(b) (4) (A) (ii) and llC.F.R.

l14.l(e·» •

2. Any person soliciting contributions for the fund

must inform the person ~eing solicited of the political purpose

of the fund at the time of the solicitation and that the solicitee .

has tne right to refuse to so contribute without any reprisal.

(2 U.• S.C. 441b(b) (3) (B) and (C) ).

3. A guideline for contributions may be suggested

provided that the person soliciting or the solicitation (material)

informs the person being solicited that the guidelines are merely

suggestions and that the individual is free to contribute more

or less than the guidelines suggest. (11 C.F.R. l14.5.(a) (2).

In the interim audit report, dated March 11, 1981"

the Audit staff recommended that within 30 days of receipt of the

report, the Committee prepare and submit detailed guidelines,

with emphasis in the above areas, for the purpose of informing

local, state, and district collection agents and MNPL officials of

these requirements of the Act.

On April 22, 1981, the Audit staff received the

Co~~ittee's det~iled guidelines, and upon completion of our review

of these guidelines, concluded that they provide the necessary

guidance to local, state, and district collection agents and M~PL

officials•
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FEDERAL ELECTION COMMISSION

U25 KSIREET N.W.

WASHNCTON.D.C 204&3

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