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1\.!') t- <;IRIII NW.

W"C,IIING ION,D.C. .104h l

FEDERAl. ELECTION COMMISSION

The audit covered the period January 1, 1975 through

December 31, 1977. The Comulittees reported the following

activity for the period covered by the audit:

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••.•,. ,I;' t.

The Keep John Rhodes in Congress Committee regintered

with the Office of the Clerk of the U.S. House of Representativ0s

on April 11, 1972 in support of John J. Rhodes, candidate for

re-election to the office of U.S. Representative from the First

(1st) Congressional district of Arizona. This Committee was

designated by the Candidate as his principal campaign committee

on April 1, 1976. Congressman Rhodes designate~ the Re-Elect

John Rhodes Committee on April 1, 1976 and the: Democrats for

Rhodes on October 13, 1976 as authorized committees to accept

contributions and make expen~itures on his behalf. These Committees registered with the Conunission on October 9, 1975 and

October 18, 1976, respectively.

AND THE

A. Overview

I. Background

THE

RE-ELECT JOlIN RHODES COlo1MITTEE

DEMOCRATS FOR RHODES

REPORT OF THE AUDIT DIVISION

ON THE

KEEP JOliN RHODES IN CONGRESS COMMITTEE

This report is based upon audits of the Keep John . Rhodes in Congress Committee, the Re-Elect John Rhodes Committee

and the Democrats. for Rhodes ("the Committees") 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

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

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

2, United States Code, which directs the COImnission to make

from time to time audits and field investigations with renpect

to reports and statements filed under the provisions of the

Act.

r

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CHAIRMAN TREASURER

Co':'Chairnlcn "

Glenn Gross Mrs. Raul Navarrete

Hayden ,,C. Hayden _'

George Broderick

(9/30/77-close

'of audit), -

Robert D. Buehler, Edward A.McCabe

Wayne E. Legg John W. Witcosky

(1/1/75-12/15/75) (1/1/75-12/15/75)

Robert A. t-lcConne11 Wayne Brown

.(12/16/75-2/15/77) (12/16/75-9/29/77)

ClarenceJ. Felstead Clarence J. Fe1sLead,

(2/16/77-9/29/77) (9/30/77-close :

of audit>-

KEEP JOliN RIIODES IN RE-ELECT JOliN DEMOCRATS CONG R1~SS COMt-lI'l''l'EI'; RIIODI~S COMMI'l'TEE FOR RIIODES

BEGINNING CASII $ 14,380.31 $ -0- $ -0- (1/1/75) (10/6/75) (10/1/76)

'l'OTAL RECEIPTS $242,525.87 $ 38,833.00 $

TOTAL EXPENDITURES $224,747.71 . ,-

$ 38,833.00 $

ENDING CASH $32,158.470 $ -0- $ -0- (12/31/77) (5/24/76) (11/22/76)

B. ~rersonnel

The principal officers of the Committees were:

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This audit report is based on documents and working

papers supporting each of its factual statements. They form

part of the record upon which the Commission based its decisions

on the matters in this report and were available to Conwis~ioners and appropriate staff for review. .

COMMIT'rEE

Keep John Rhodes in

Congress Committee

Democrats for Rhodes

,- c: _.Scope'

The audits included such tests as verificiati~n"of total

reported receipts and expenditures and individual transactions:

review of required supporting doucmentation: analysis of the

Committees' debts and obligat.ions: and, such other audit

procednres as deemed necessary under the. circumstances•.

Re-Elect John: Rhodes

,Conmlittce-

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•

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Recommendation

!I Broken down as follO\'/s: 29 made in 1976, one (1) in 1975,

anu four (4) in 1977.

The Audit staff recon~ends that no action be taken by the

Commission in this matter.

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For the purpose of this finding, expenditures referred to

are operating expenditures which docs not include transfersout made by the committee.

Auditor's statement and Description of Findings

,!I

II.

It is the opinion of the Audit staff, based upon examination

of the reports and statements filed and the records presented,

that, except for the deficiencies noted below, the reports and

statements of the Keep John Rhodes in Congress Committee, the

Re-Elect John Rhodes Committee and Democrats for Rhodes fairly

present the financial activities of the Committees for the period

covered by the audits. Further, except as noted below, no materi3l

problelns in complying with the Federal Election Campaign Act were

discovered during the course of the audits.

1. Keep John Rhodes in Congress Committee

A. Itemization of Expenditures

Our examination of the Committee's expenditure records

'revealed that 34 II expenditures of a total of 324 itemizable

expenditures '(10.49%) were not itemized in the disclosure reports, ~I

The expenditures totalled $1,074.25 (.5l~ of $211,633.86 in itemizable expenditures). 21 Of these 34 expenditures, none were

individually in excess-of $100. .

The Committee utilized a vendor card file for the

purpose of aggregating expenditures. We advised the person who

prepares the Committee's reports that the majority of the 34

expenditures were not entered into the vendor card file which may

account for their omission from the reports. We recommended that

the Co~nittee file a comprehensive amendment for 1976 to itemize

the 29 expenditures and that no amending action was required for

expenditures in 1975 and 1977, given the insignificance of the ' omissions. The requested amendment was filed on March 6, 1978.

Section 434(b) (9) of Title 2, United States Code, in

part, requires that a committee disclose the full name and mailinq

,address of each person to whom expenditures have been made by

such committee or candidate which in the aggregate exceed $100

,'. within a calendar. year, together, with the purpose, amount and . date. of the expenditures.' .

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B. Retention of Supporting Documentation for Expenditures

Section 432(d) of Title 2, united States Code, in part,

requires the treasurer to obtain and keep a receipted bill stating

the particulars, for every expenditure made by or on behalf of a

political committee in excess of $100, or for expenditures aggregating ,in excess of ,$100"to ,the same person within a calendar year.

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Section 44lb(a) of Title 2, united States Code, states,

in part, that it is unlawful for any corporation or labor organizationto make a _c.ontrilmtion or expenditure in connection with

any election to any Federal office, and it is 'unlawfui for' any

Federal candidate, po'li tical ,conuuittee, or ,other pers6nto ,,'

knowingly accept or receive any contribution from a corporation

or labor organization.

C~ Corporate Contributions

,Based on the ,Committee's efforts outlined above, the'Audit

staff recomIucrids that the Commission determine thilt the Conunittee

,has used its bcstefforts to comply with Section 432(d) and that

no further action be taken 011 this miltter.

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,Part'102.9(c) (4) of Title 11, Code of Federal Regulations, ,inpart'~ provides that \'lhen a receipted bill "is not available the

treasurer may keep: ' (i) the cancelled check;' and (ii) the, bill,

,invoice or' other contemporaneous memorandum to support the"

expenditure. ' ' , " , , ,

Our cxaillination, of ,the comniittce's recordsrovcilled that

,it did not maintain supporting documentation ,for 71 (22.61%) of

314 expenditures, each:in exce~sof,or aggregating in excess of

$100., ,These 71' expenditurcs totalled $39,226.47,whi.ch represented

18.74% of thCdollar'amount" ($209,285.54)' ofexpenaitures, requiring .supporting documentation." , ' : ' ' . -, ,,: '

, :",'SubsequenL to our fieldwork, the Contmi ttee ,forwarded sup'portin~l

, documentation for, an additional 52 expenditures.';, The Committee also

provided evidence that they 'hadcontactedien (10) of the remaining

19 vendors/individuals to obtain ,copies of receipted bills or con-

',temporaneous memorilncla.' ,The"19 "undocumented cxpenditur,es(6. 05~ of

:314 expenditures, eilch i~-exccs~ of:o~ aggregating in excess of

'$100) ,total $8,181.11 (3.91'ti of: the $209,285.54 in ,expenditures

:requiring suI5porting'documentation).

RecOInmendation

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A review of the Committee's contribution records

revealed that two (2) contributions, totaling $60.00, were

received from apparent corporations. The Committee was informed

by the Audit staff of the apparent corporate status of the contributions. The contributions were refunded by the committee on

June 7, 1978.

Recommendation

Since the Committee has refunded the apparent corporate

contributions, the Audit staff recommends that the Commission

take no further action on this matter.

D. Itemization of Transfers-In

Section 434(b) (4) of Title 2, United States Code, in

part, requires that a committee itemize the name and address of

each political committee from which the reporting committee or

candidate received ilny transfer of funds, together with the

amounts and dates of all transfers. Further, Section 100.4(a) (4)

of Title 11, Code of Federal Regulations, expands the meaning of

"transfer of funds" to include those received from other political

organizations or similar sources whether or not such organizations

are political committees.

Our review of the contribution records disclosed that

of 168 transfers n!eeived by the Committee, 10 3/ (5.95%) were

not itemized in the Co::"mittee's disclosure reports. These transfers

totaled $795.00 anll represented .77% of the total dollar value

($102,625.00) of trunsfers in. All 10 transfers were in an amount

of $100 or less.

The person \·;ho prepares the Commi Ltee' s reports said

she was not aware that transfers-in were to be itemized regardless

of amount. \'Je recommended that the Committ(!t! itemize the nine (9)

transfers in a comprehensive amendment for 1976 and that no action

need be taken on tIle one (1) transfer in 1977. On March 6, 1978

the Conmlittee filed an amendment itemizing these nine (9) transfers.

Recommendation

The Audit staff recommends that the COnIDlission take no

action in this matter.

l/ Broken down as follows: nine (9) totaling $775 in 1976

and one (1) of $20 in 1977 •

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2. Re-Elect John Rhodes Committee

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A. Disclosure of Earmarked Contributions

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E. Filing of Quarterly Report

The Audit staff recommends that no action be taken by the

Commission on this matter.

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Section 434(a) (1) (C) of Title 2, United States Code, in

part, requires a committee to file a report not later than the 10th

day following the close of any calendar quarter in which the

candidate and his authorized committee received contributions or

made expenditures, or both, the total amount of which, taken

together, exceeds $5,000, in any year in which a candidate is not

on the ballot for election to Federal office.

section 110.6(a) of Title 11, Code of Federal

Regulations, in part, provides that all contributions made by

a person on behalf of or to a candidate, including contributions

\'1hich arc in any way earmarked to the candidate through an

intermediary or conduit, arc contributions from the person to

the canc.1idate. Furthermore, ,Secti0l1 110.6 (c) (3), Code of Federal

Regulations, in part, requires the inten~ed recipient to disc10De

each conduit through which the ,contribution passed.

On October 6, 1977, the Committee filed FEC For.m 3a

certifying that pursuant to 2 U.S.C. 434(a) (1) (C), the Committee

was exempt from reporting receipts and expenditures for the

calendar quarter July 1, 1977 through September 30, 1977. Our

review of the Committee records revealed that it had receipts

and exponditures of $2,283.86 and $2,867.18, respectively, or

total activity of $5,151.04 for the period._

The person-who prepares the Committee's reports stated

that $258.86 in interest on the Committee's two (2) savings accounts

was not included in calculatilHJ the activity for the quarter and

that only the amount of activity through the Committee's checkinq

account was taken intoccinsideration~ Ne advised the Committee Lo

file an FEe Form 3 to amend the n:c Form 3a which had been filed.

On February 6,-1978, the amendment was filed.

Recommendation

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Recommendation

Recommendation

B. Disclosure of Fundraising Event

Broken down as follows: six (6) in 1975 totaling $500 and

six (6) in 1976 totaling $350. !/

The Audit staff reconwends that no action be taken in this

matter.

Our review of the Committee's records disclosed that

the Committee held a reception in honor of Congressman Rhodes

at $100 per reservation on November 19, 1975. No Schedule 0 was

filed to disclose the activity related to this event. The person

who prepares the Committee's reports could not explain why the

Schedule 0 was not filed, but upon our recommendation, agreed to

include one in the comprehensive amendment for 1975. On February

7, 1978, the amendment was filed disclosing this information.

Section 434(b) (6) (A) of Title 2, United states Code,

requires that a committee disclose the total amount of proceeds

from the sale of tickets to each dinner, luncheon, rally, and

other fundraising event.

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The Audit staff recommends that no action be taken on this

matter.

Our review of the Committec's contribution records

revealed that it received 12 transfers 4/ from conunittees which

represented earmarked contributions froin individuals. These

transfers were all in amounts of $100 or less and totaled $850.

The Committee reported all 12 transfers as unitemized contributions;

therefore, the conduit committees were not disclosed. We advised

that the Committee file comprehensivc amendments for 1975 and 1976

to disclose the identity of the 12 conduit committees. On February

7, 1978, the amendment was filed substantially disclosing this

information.

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