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• FEDERAL ELECTION COMMISSION

WASHINGTON. 0 C 2(Mbl

A8S-36

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September 22, 1986

MEMORANDUM

TO: FRED EILAND

PRESS OFFICER

FROM: ROBERT J. COSTA

ASSISTANT STAFF ~~~ AUDIT DIVISION

SUBJECT: PUBLIC ISSUANCE OF FINAL AUDIT REPORTGEORGIA DEMOCRATIC ELECTIONS COMMITTEE-FEDERAL

Attached please find a copy of the final report of the

Georgia Democratic Elections Committee-Pedera1 which was approved by the Commission September 9, 1986.

Informational copies of the report have been received by all

parties involved and the report may be released to the public.

Attachment as stated

cc: FEC Library RAD

Public Record

Office of General Counsel
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FEDERAL ELECTION COMMISSION

WASHINCTON. D.C. 20461

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&85-36

..'ORT 0' !BE AUDIT DIVISION

ON

GIORGIA DIMOCRATIC SLBCTIONS COMMI'l'TBB - FEDBRAL

I. Background

A. Overvie.

Thi8 report Is ba.ea on an audit of the aeorgia Democratic Elections Committee - Federal (-the Committee-), undertaken by the Audit Dlvi810n of the Pederal Blection

Commission in accordance with the provi81on8 of the Federal

Election Campaign Act of 1971, a8 amended (Wthe Act"). The au~it

was conducted pur8uant to Section 438(b) of Title 2 of the United

States Code which atate., in part, that the Commi••ion .ay conduct audits and field investigation8 of any political committee required to file a report under section 434 of this

title. Prior to conducting any audit under this section, the

Commission 8hall perform an internal review of reports filed by selected committee. to determine if the reports filed by a

particular committee meet the threshold requirements for

substantial compliance with the Act.

The Committee registered with the Federal Blection

Commission on June 14, 1976, as the Georgia Federal Blections

Committee. On December 5, 1984, the Committee notified the

Commission that it had changed to it8 current name. The

Committee maintains its headquarters in Atlanta, Georgia. The

audit covered the period January 1, 1983 through December 31,

1984. The Committee reported a cash balance on January 1, 1983

of $2,201.78, total receipts of $185,227.80, total disbursements

of $179,939.28, and a cash balance on December 31, 1984 of

$7,490.30.

This audit report is ba8ea on document8 and workpapers which support each of its factual statements. They form part of

the record upon which the Commi.81on basea its decisions on the

matters in the report and were available to the Commi••ioners and

appropriate staff for review•
The Treasurers of the Committee during the period covered by the audit were Mr. Paul Weston from January 1, 19S3

through March 30, 1984, Ms. Carole Dabbs from March 31, 1984

through November 29, 1984 and Mr. Wayne Reece from November 30, 1~84 through the present.

C. Scope

~he audit included such tests as verification of total

reported receipts and disbursements and individual transactions, review of required supporting documentation, analysis of

Committee debts and obligations, and such other audit procedures

as deemed necessary under the circumstances. Altbough the

contribution records provided by the Committee met the

recordkeeping requirements of 2 U.S.C. , 432(c) and 11 C.P.R.

S 102.9(a), the records were not maintained in a manner which

allowed testing for correct aggregate contribution tota18, proper itemization and compliance with the Act's contribution

limitations.

Transfers from Non-Federal Accounts

Audit Findings and Recommendations

A. Prohibited Transfers

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B. ley Personnel

II.

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Section 44lb(a) of Title 2 of the United States Code

prohibits corporations and labor unions from making contributions

or expenditures in connection with elections to any political office, primary election or political convention or caucus held

to select candidates for any political office, or for any political committee knowingly to accept or receive any contribution prohibited by this section.

Section 102.5(8) (1)(1) of Title 11 of the Code of

Federal Regulations states, in part, that when a party committee

establishes a separate federal account no transfers may be made

to such federal account from any other account(s) maintained by

such organization for the purpose of financing activity in

connection with non-Federal elections.

During the period audited, the Committee received two

transfers totaling $7,000 from the Democratic Party of Georgi.'. (the Party) non-Federal accounts. Committee records indicate

that one $2,000 transfer to the Committee was a loan. The loan

was disclosed a8 a debt to the Party on the Committee'.

disclosure reports•
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According to Committe. officia18, the remaining $5,000 transfer was part of a $20,000 contribution from an individual.

Committe. official. had instructed the bank to d8'08it $5,000, a.

de.ignated by the contributor, into the Committ••• account and

depo8it the remaining $15,000 into the 'arty'. non-Pederal

account. Bowever, the entire $20,000 contribution vas deposited into the non-Pederal account and $5,000 vas sub.equently _tcan8ferrea to tbe Committee account.

In the interim auait report, the Audit .taff

recommended that the $2,000 transfer noted above be repaid to the

non-Pederal account. If funds were not available, the Audit

staff recommended that the Committee continue to report the

$2,000 as a debt to the non-Pederal account until funds are

available.

On June 30, 1986, the Committe4 presented the Audit

staff with a copy of • check in the amount of $2,000,

representing the repayment of the aforementioned loan received

from the non-Pederal account.

With respect to the $5,000 transfer from the nonPederal account, the Audit .taff recommenaea that the Committee

present evidence that tbe $5,000 transfer was not made with funds

prohibited by the Act or transfer the $5,000 back to the nonFederal account. If the Committee did not have funds available

to make the transfer, the Audit staff recommended that the amount

($5,000) be disclosed as a debt to the non-Federal account until

such time as funds are available.

In their response to the interim audit report, the

Committee reiterated that it had Winstructed the bank to deposit ($]15,000 in the state account and [$]5,000 in the federal

account. w Instead of following the Committee's instructions, the

bank deposited the entire $20,000 in the state account and then

transferred $5,000 to the federal account. The Committee

provided evidence (copies of Committee bank records and other

Internal records) which confirmed that the $5,000 transfer was

virtually contemporaneous with the $20,000 deposit and, therefore

in the Audit staff's opinion, the transfer was acceptable.

In addition, tbe response to the interim audit report stated that the Committee has Winitiated changes in procedure that will help ensure compliance with federal (and) state

election lawa.- One change involves a plan for eliminating -the

proliferation of bank accounts.-
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Recommendation

The Audit etaff recommends no further action on this matter.

B. Itemization of Contributions from Political Committees

Section 434(b) (3) (8) of ~itle 2 of the United States

-Code states that eacb report under this section shall disclose

the identification of each political committee which makes a

contribution to tbe reporting committee during the reporting period, together with the date and amount of any such

contribution.

~he Committee did not itemize 13 contributions from 13

political committees totaling $3,315.00. ~hi8 represents 45' of

the number and 10' of the amount of contributions received from

political committees.

In the interim report, the Audit staff recommended that

the Committee amend its disclosure reports to itemize these

contributions received from political committees.

On July 29, 1986, tbe Committee submitted an amended

disclosure report which properly itemized the contributions.

The Committee's response to the interim report a180

included a plan for changes to the Committee's recordkeeping procedure which in its opinion, would ensure that necessary contributor information would be collected for federal and state

reports.

Recommendation

The Audit staff recommends no further action on this matter.

c. Allocation of Administrative Expenses

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Section 106.1(e) of Title 11 of the Code of Federal

Regulations states that ·Party committees and other political committees which have established Federal campaign committees

pursuant to 11 CPR 102.5 shall allocate administrative expenses

on a reasonable basis between their Federal and non-Federal

accounts in proportion to the amount of funds expended on Federal

and non-Federal elections, or on another reasonable basis.-
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Although the Committee recognized its obligation to pay administrative expenses, it had no formal syst•• for allocating administrative expenses between the Pederal and non-Pea.ral

accounts. The Audit staff reviewed the Committ•••• di8bursem.nt

records and calculated a ratio for allocating administrative

expenses based on the amount of funds expended on Pederal and

non-Federal elections. The allocation ratio calculated was 16'

--for Pederal and 84' for the non-Pederal portion of administrative

expenses. The Committee'. ahare of administrative expenses for

1984 1/ as calculated by the Audit staff was $24,334.59.

The Committee paid some vendors directly for

administrative expenses. These expenses were split with the

Party's non-Federal account, with the Committee paying 30' and

the non-Federal account(s) paying 70'. In addition, the

Committee made some payments to the Party's non-Federal account

for reimbursement of administrative expenses. Committee

officials had no explanation for how these payment amounts were

calculated. The amount of administrative expenses paid by the

Committee directly to vendors and to the non-Federal account(s) totals $12,644.58. The remaining $11,690.01 in administrative

expenses allocable to the Committee was paid by the Party's nonPedera1 account(s).

In the interim report, the Audit staff recommended that

the Committee reimburse the non-Federal account, $11,690.01

representing the Committee's remaining share of 1984 " administrative expenses paid by the non-Federal account or show

by some reasonable method that that amount of administrative

expenses was not allocable to the Committee. If the Committee

did not have funds available to make the payment, the Audit staff

recommended that the amount ($11,690.01) be disclosed as a debt

to the non-Federal account until such time as funds are

available.

1/ The Party expended no funds in support of the Federal

elections in 1983, therefore no portion of the

administrative expenses in 1983 were allocable to the

Committee•
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In their June 30, 1986 response to the Interim auait

report, the Committee included a copy of a check In the amount of

$11,690.01 payable to the Georgia Democratic 'arty-State Account

for the Committee's remaining share of administrative expense8. The Committee also included a formula for allocating expenses between the federal and state accounts, as well •• procedures for

implementing the formula • ......

Recommendation

~he Audit staff recommends no further action on this matter.

D. Matter Referred to the Office of General Counsel

A matter noted during the auait has been referred to

the Commission's Office of General Counsel•