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r[OrRAI. EI.[CTION COMI\11SSION

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WA'HINC ION.IlC. ~n4b'

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REPORT OF THE AUDIT DIVISION

ON

THE CITIZENS FOR REAGAN

I. Backeround

This report covers an audit of the Citizens for Reaean

("the Committee") undertaken by the Audit Division to determine

whether there has been compliance \'1ith the provisions of the

Federal Election Campaign Act of 1971, as amended (the Act).

The audit was conducted pursuant to Section 438(a) (8) of the

Act and Section 9038(a) of Chapter 96 of the Internal Revenue

Code of 1954. Section 438(a)(8) of the Act directs the

Commission "to make frofLl time to time audits and field investi- ~ations with respect to reports and statelTLCnts filed under the

provisions of this chapter, and with respect to alle~ed failures

to file any report or statement required under the provisions of

this ch~ptcr, and to eivc priority to auditing and field

investigating of the verification for, and the receipt and use

of, any payments rec~iv0d by a candidate under Chapter 95 or

Chapter 96 of the Internal Revenue Code of 1954." Scction 9038(n)

of Chnptcr 96 states thnt "after each matching payment period,

the Conmlission shall conduct a thoroueh examination and audit

of the qualified campaign expenses of every candidate and

his authorized cOlumittecg \'1ho received payments under Section

-9037 . "

The Comnlittee was ef;tablished as the principal campaign

conuniltee of Governor Ronald Reagan on July 24, 1975. The

principal of(iccrs of the Conlnlitt(~e at the time of the audit

were Senator Paul Laxalt, ChairQnn, and ~r. Henry M. Buchanan,

Treasurer. The Conunittc:~ maintained its headquarters in Washin~ton, D.C.

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On January 27, 1977, the Committee amended its

Registration Form and Statement of Organization to reflect

a change from a singlc-c3ndidate principal campaign committee

to a multicandidate political committee supporting Federal

candidates. The principal officers of this Committee, CitizenB

for the Republic, are Governor Ronald Reagan, Chairman, and

Jack L. Courtemanche, Treasurer. The Committee currently

maintains its headquarters in Santa Monica, California.

The audit covered the period from July 15, 1975 through

March 31, 1977. The Citizens for Reagan's last report covered

the period throu~'.h Decenlber 31, 1976. However, the activity

reported on the Citizens for the Republic April 10, 1977 report

was also examined during the audit. Reported receipts and

expenditures of the Citizens for Reagan and the Citizens for

the Republic r()lntin~ to the Reagan campaien lotal $18,872,017.16

and $17,223,472.9~ respectively. ~/

This audit rvport is based on documents and working

papers supportinp. each of its factual statcrnents. They form

part of the record upon which the Con~ission based its

decision on the matters in this report, and were available

to Commissioners and appropriate staff for review.

II. Findings and Conclusions

A. Disclosure of Bank Depositories

Section 433(b)(9) of the Act states in part that

each ContTUittee's statement of ()rganization include "a listing

of all banks, safety deposit boxes, or other repositories used."

Durine the course of the nudit, it was noted that

the Committee failed to disclose eight (8) depositories in

thr'ce (3) states. The Committee \-1as advised of this situation and, on December 20, 1976, an1(~nJcd it~ statement of

organization to include these accounts.

Recommendation

Based on these facts, it is our recommendation that

no further action on this matter is necessary.

1/ Expenditures subject to limitations of Section 441(b)(1)

(A) of $9,960,930.64.
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Disclosure of Occupation and Principal Place

of Business for P~rsons \'1hose Contributions

Aggregate in Excess of $100.00 During the

Calendar Year

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Section 432(c) (2) requires that thp treasurer of

a political committee keep a detailed and eXdct account of

occupation and principal place of business (if any) of persons

whose contributions aggregate more than $100 lluring the calendar

year, and Section 434(b) (2) requires that the treasurer disclose

this information in reports filed with the Conunission.

During the course of the audit, it was determined

that approximately 40% of the contributions reported did not

contain the required information concerning occupation and

principal place of business. However, the Committee feels

that they have put forth their best efforts to obtain the

required information by sending additional contribution

solicitations to those persons who had previously contributed to the campaign. These solicitations contained a

request for the contributor's occupation and principal

place of business as did the first solicitation, but made

no mention that the information was missing from previous

contributions. No separate contact specifically requesting

occupation and principal place of business information was

attempted .

Recommendation

This matter is under continuing consider~tion subject

to the confidentiality requirements of Section 437g of Title 2

of the United States Code.

c. Allocation of State Expenditures

Section 44la(b) (1) of the Act states:

"No candidate for the Office of President of the

United States who is eligible under Section 9003

of the Internal Revenue Code of 1954 (relating to

condition for eliqibility for payments) or under

9033 of the Internal Revenue Code of 1954 (relating

to eligibility for payments) to rec~ive payments

from the Secretary of the Treasury may make

expenditures in excess of --

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(A) $10,000,000, in the case of a campaign for

nomlnation for election to such office except

the aggregate of expenditures under this subparagraph in anyone state shall not exceed the

greater of 16 cents multiplied by the voting

age population of the State, !/ or $200,000 ••• ~/

Further, Section 441(1(f) states that "No candidate or political

committee shall knowingly ••• make any ('xpenditure in violation

of the provisions of this section. No officer or employee of

it political committee shall knowingly • • . make any expenditure on behalf of a candidate, in violation of any limitation

imposed on ••• expenditures under this section."

The expenditure 1imjt~tion estub1ishcd for the State of

New Hampshire for the 1976 primary election was $218,200.00. ~/

The Committee reported expenditures in thl" State of New

llampshirc in the amount of $219,854.54 for the period from

July 15, 1975 through December 31, 1976. However, during

the course of our audit we determined that the Committee

actually spent $248,485.02 allocable to the State of New

Hampshire, which is $30,285.02 in excess of the state

expenditure limitation.

Section 9032(9) of Title 26 of the United States Code

(26 U.S.C. 9032(9»defincs the term "qualified campaign

expense" to mean a purchase, payment, distribution, loan,

advance, deposit or gift of money or of anything of value -

(A) incurred by a candidate, or by his ~uthorized committee,

in connecti0n with his campaign for nomination for election;

and (B) neither the incurring nor payment of which constitutes

a violation of any law of the United States .••• " Further,

Section 9035(a) states that "no candidate shall knowingly incur

qualified campaign expenses in excess of the expenditure

limitation applicable under Section 441a(b) (1) (A) of Title 2,

United States Code ••••It Finally, Section 9038(b) (2)

rcqcires that "If the Commission determines that any amount

of any payment made to a candidate from the matching payment

account was used for any purpose other th~n -- (A) to defray

the qualified c~mpaign expense with respect to which such

payment was made; ••• it shall notify such candidate of the'

amount so used, and the c~ndidate shall pay to the Secretary

or his delegate an amount equal to such amount."

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Percent change in the Consumer price index (9.1) times

200,000, or $218,200.00. Sec Section 441a(c) of Title 2

of the United States Code.

Voting age population for the State of New Hampshire

was 559,000 times .16, or $89,440.00. Sec Section 44la

(e) of Titl(~ 2 of the United States Code.

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Recommendation

On August 19, 1977, the Commission approved the recommendation that the amount in excess of the expendi.ture limitation,

$30,285.02 spent in the State of New Hampshir~ be considered

non-qualified campaign expenses and repayable in full to the

United States Treasury. See Item D below for repayment.

D. Repayment of Surplus Campaign Funds From the

MatchinB Payment Account

Section 9038(b)(3) of Title 26, United States Code

states in part that "After all obliBations have been liquidated, that portion of any unexpended balance remaining in

the candidate's accounts which bears the sarn~ ratio to the

total unexpended balance as the total amount received from

the matching payment account bears to the total of all

deposits made into the candidate's accounts shall be promptly

repaid to the matching payment account."

On August 13, 1976, the Commission notified Governor

Reagan of hid ineligibility date of August 18, 1976, for

purposes of making qualified campaign expenditures. This

letter further requested the total net outstanding campaign

obligations on August 18, 1976.

Upon review of the Committee's statcnlcnt, we were

able to substantiate that all Committee debts and obligations

were incurred prior to August 18, 1976, and that the Committee

had a net surplus of $1,616,460.51.

Based on the above, the amount of repayment is

calculated as follows:

X $1,616,460.51 = $580,856.87

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... Total Matching Pavmcnts

Total Dcposi~s

$ 5,088.910.66

$14,161, 876-:T8

Recommendation

X Net Surplus = Net Repayment

Based on the above computation, we recommended a repayment of $580,856.87 froln the Conunittee' s net surplus and

$30,285.02 as noted in C above, or a total rCp:lyment of

$611, 141. 89. On Au~us t 19, 1977, the Cor~1!nis~~ion approved

this recommendation and on Novenlber 28, 1977, the Secretary

of the Citizens for the Republic hand delivered a check in

the amount of $611,141.89 dr~1\·m to the order of the Treasurer

of the United Stat(.'s. Therefore, \-le recommend no further

action on this matter .

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III. Auditor's Statement

Except for the matters specifically noted in this

report, the audit disclosed that Citizens for Reagan

conducted their activities in conformity with the Federal

Election Campaign Act of 1971, as amended, and in conformity

with Chapter 96 of Title 26, United States Code, in all

material aspects .

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