10

ratio used to allocate the original disbursements. MRFC complied with the Audit staff's
recommendation by filing amended Schedules A, deleting the line 17 entries, and filing
amended Schedules H4 disclosing all the refunds and rebates as negative entries.

Legal Standard

Reporting of Refunds and Rebates of Allocabl. Expenses. If a committee receives a
refund or a rebate of an allocable expense, the refund or rebate must be deposited in the
federal or allocation account. The refund or rebate must then be allocated between the
federal and non-federal accounts according to the same allocation ratio used to allocate
the original disbursement.

The refund or a rebate may be reported in one of two ways:

e The committee may disclose receipt of the refund or rebate and the federal and non-
federal shares on Schedule H4. The amounts are negative entries subtracted from
total shared federal and non-federal disbursements for the reporting period.

¢ The committee may disclose receipt the refund or rebate under the category “Offsets
to Operating Expenditures.” The committee then uses Schedule H4 to disclose the
federal account’s transfer to the non-federal account for the non-federal share.
AO 1995-22.

Facts and Analysis

The Audit staff identified refunds and rebates totaling $52,068 in connection with shared
federal and non-federal activity. Of this amount, refunds and rebates totaling $28,048
were reported on Line 17 (Other Federal Receipts) of MRFC’s disclosure reports. The
remaining refunds and rebates totaling $24,020 were not reported. MRFC should have
reported the refunds and rebates as well as the federal and non-federal shares of these
items on Schedule H4 (as negative entries), according to the same allocation ratio used to
allocate the original disbursements.

Interim Audit Report Recommendation and Committee Response
In response to a recommendation in the interim audit report, MRFC filed amended
reports deleting the Schedule A, line 17 entries ($28,048), and disclosing on Schedules
H4 all the refunds and rebates — including (as negative entries) the total received, the
federal share, and the non-federal share.

Finding 5. Transfers from the 1999-State Victory Fund
(Memo entries not. reported)

Summary

MREC reported $173,061 as its share of net proceeds from a joint fundraiser with the
1999 State Party Victory Fund. MRFC did not, however, tile memo Schedules A
itemizing those contributions that required such disclosure. MRFC complied with the
Audit staff’s recommendation by filing amended Schedules A itemizing (as memo
entries) the individual contributors, representing the transfers received from the 1999
State Party Victory Fund.


Part I
Background

Authority for Audit

This report is based on an audit of the Missouri Republican State Committee — Federal
Committee (MRFC), undertaken by the Audit Division of the Federal Election
Commission (the Commission) in accordance with the Federal Election Campaign Act of
1971, as amended (the Act). The Audit Division conducted the audit pursuant to 2
U.S.C. §438(b), which permits the Commission to conduct audits and field investigations
of any political committee that is required to file a report under 2 US.C. §434. Prior to
conducting any audit under this subsection, the Commission must perform an internal
review of reports filed by selected committees to determine if the reports filed by a
particular committee meet the threshold requirements for substantial compliance with the
Act. 2 U.S.C. §438(b).

Scope of Audit

Following Commission approved procedures, the Audit staff evaluated various factors
and as a result, this audit examined:

The receipt of excessive contributions and loans.

The receipt of contributions from prohibited sources.

The disclosure of contributions and other receipts.

The disclosure of disbursements, debts, and obligations.

The disclosure of expenses allocated between federal and non-federal accounts.
The consistency between reported figures and bank records.

The completeness of records.

Other committee operations necessary to the review.

SNYAWALWN

Changes to the Law

On March 27, 2002, President Bush signed into law the Bipartisan Campaign Reform Act
of 2002 (BCRA). The BCRA contains many substantial and technical changes to the
federal campaign finance law. Most of the changes became effective November 6, 2002.
The period covered by this audit pre-dates these changes. Therefore, the statutory and
regulatory requirements cited in this report are those that were in effect during the audit
period.



Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that MRFC:

e Disclose as memo entries on amended Schedules A contributions, or portions
thereof, which were transferred to the non-federal account and, as memo entries
on amended Schedules B, the subsequent transfers of these amounts to the non-
federal account (Also see Findings | and 3 above).

e File amended reports for each reporting pzriod in calendar years 1999 and 2000
for the remaining misstated transactions. These reports should include the
amended schedules requested in previous findings. Finally, to the extent that
current cash on hand amounts are incorrect, amended reports to correct recent
reports should be filed.

In response MRFC filed amended reports materially correcting the misstatements
discussed above.

14


¢ The reattribution must be signed by both contributors;

¢ The reattribution must be received by the committee within 60 days after the
committee received the original contribution; and

e The contributor may instead request a refund of the excessive amount.
11 CFR §110.1(k)(3). Within 60 days after receiving the excessive contribution, the
committee must either receive the proper reattribution or refund the excessive portion
to the donor. 11 CFR §§103.3(b)(3) and 110.1(k)(3)(Gi)(B). Further, a political
committee must retain written records concerning the reattribution in order for it to be
effective. 11 CFR §110.1(1)(5).

Revised Regulations Applied. The Commission recently adopted new regulations that
allow committees greater latitude to reattribute contributions to joint account holders and
has decided to apply these regulations to current matters. The Audit staff has evaluated
the excessive contributions discussed below using the new regulations.

Facts and Analysis

A review of MRFC’s receipt records identified contributions from individuals that
appeared to exceed the contribution limitations by $103,200. Of this amount, $71,200
was timely transferred to a non-federal account? and a contribution in the amount of
$2,000 was reattributed untimely. The remaining $30,000 in excessive contributions had
not been resolved. MRFC did not deposit any of these excessive contributions ($30,000)
into a separate account but consistently maintained sufficient funds to make refunds.
Finally, MRFC neither disclosed the amounts received in excess of the limitation, nor
disclosed the excessive amounts transferred to the non-federal account’.

At the exit conference, the Audit staff gave MRFC representatives a schedule of the
excessive contributions. In response, MRFC contended that a substantial part of the
contributions were received in connection with events held at the same location and on
the same date as events held by the Republican National Committee (RNC). MRFC
contacted an RNC representative who believed that the RNC may have some or all of the
reattribution letters, which were signed at the time the contributions were received by
MRFC. MRFC expected to provide the documentation in response to the interim audit
report.

Interim Audit Report: Recommendation

The Audit staff recommended:that MRFC:

e Provide evidence demonstrating that the contributions in question were not excessive;
or

MRFC received Requests for Additional Information (RFAI) from the Commission’s Reports Analysis
Division related to apparent excessive contributions. Although a refund of the above described excessive
contributions would normally be warranted, the Commission is not requiring refunds (of $71,200)
because the language in the RFAI letters may not have fully clarified the requirements for transfers of
excessive contributions.

The disclosure of the excessive contributions, or portions thereof, and subsequent transfers to the non-
federal account are addressed at Finding 6.


Part III
Summaries

Findings and Recommendations

Finding 1. Receipt of Contributions That Exceed

Limitations
MREC received contributions from individuals that appeared to exceed the contribution
limitations by $103,200. Of this amount, excessive contributions totaling $73,200 were
either transferred to a non-federal account or reattributed to another individual in an
untimely manner. For the remaining excessive contributions, totaling $30,000, MRFC
complied with the Audit staff’s recommendation by refunding the contributions. (For
more detail, see p. 5)

Finding 2. Shared Federal and Non-Federal Expenses

The Audit staff identified payments totaling $8,860,461 for shared activity related to
issue advocacy media that were not paid out of MRFC’s allocation account. Instead,
payments were issued directly to the vendors from the federal fund (federal) and general
fund (non-federal) accounts. Additionally, MRFC reported only the federal share on
Schedules B, rather than both the federal and non-federal shares on Schedules H4.
MREFC complied with the Audit staff’s recommendation by filing amended Schedules H-
4, disclosing as memo entries the total amount paid, the federal share, and the non-federal
share. (For more detail, see p. 7)

Finding 3. Reporting of Transfers

MREC made transfers totaling $490,517 from its federal accounts to its non-federal
account, but failed to report them. MRFC complied with the Audit staff’s
recommendation by filing amended Schedules B for line 22 (Transfers to Affiliated/Other
Party Committees) disclosing the transfers. (For more detail, see p. 9)

Finding 4. Reporting of Refunds and Rebates Received for

Shared Aetivity-
The Audit staff identified refunds and rebates totaling $52,068 in connection with shared
federal and non-federal activity. MRFC reported $28,048 of these on Line 17 (Other
Federal Receipts) but did not report the remaining $24,020. MRFC should have reported
the entire amount on Schedule H4, as negative entries, according to the same allocation
ratio used to allocate the original disbursements. MRFC complied with the Audit staff's
recommendation by filing amended Schedules A, deleting the line 17 entries, and filing
amended Schedules H4 disclosing all the refunds and rebates as negative entries. (For
more detail, see p. 9)


to

Part II
Overview of Committee

Committee Organization

Important Dates Missouri Republican State Committee - Federal
Committee

e Date of Registration June 16, 1972

e Audit Coverage January 1, 1999 - December 31, 2000

Headquarters Jefferson City, Missouri

Bank Information

e Bank Depositories 1

«Bank Accounts 4 Federal and 1 Non-Federal Account
Treasurers

© Treasurer When Audit Was Conducted Harvey M. Tettlebaum

¢ Treasurer During Period Covered by Audit Harvey M. Tettlebaum

Management Information

¢ Attended FEC Campaign Finance Seminar Yes
¢ Used Commonly Available Campaign Yes
Management Software Package
© Who Handled Accounting and Recordkeeping Paid Staff
Tasks
Overview of Financial Activity
(Audited Amounts)
Cash on hand @ January 1, 1999 $ 57,894
Receipts
© Contributions from Individuals/Other Political Committees $ 1,914,417
© Transfers From Affiliated/Other Party Committees 3,974,806
Transfers from the Non-Federal Account 10,774,542"
e Other Receipts 75,617
Total Receipts $16,739,382
Disbursements
© Operating Expenditures $16,176,520
e Transfers to Affiliated/Other Party Committees 151,300
© Contributions to Candidates/Committees 211,000
© Refunds of Contributions to Individuals 2,250
Total Disbursements $ 16,541,070
Cash on hand @ December 31, 2000 $ 256,206

2 Includes $6,137,541 paid directly to vendors from the non-federal account for the non-federal portion of
allocable expenses; these funds should have been transferred to the allocation account prior to
disbursement to the vendors that provided the goods or services. See Finding 2.



Part IV
Findings and Recommendations

Finding 1. Receipt of Contributions That Exceed
Limitations

Summary

MREC received contributions from individuals that appeared to exceed the contribution
limitations by $103,200. Of this amount, excessive contributions totaling $73,200 were
either transferred to a non-federal account or reattributed to another individual in an
untimely manner. For the remaining excessive contributions, totaling $30,000, MRFC
complied with the Audit staff’s recommendation by refunding the contributions.

Legal Standard

Party Committee Limits. A party committee may not receive more than a total of
$5,000 per year from any one contributor. 2 U.S.C. §441a(a)(1)(C); 11 CFR §§110.1(a)
& (d) and 110.9(a).

Handling Contributions That Appear Excessive. If a committee receives a
contribution that appears to be excessive, the committee must either:
e Return the questionable check to the donor; or
© Deposit the check into its federal account and:
¢ Keep enough money in the account to cover all potential refunds;
¢ Keep a written record explaining why the contribution may be illegal;
Include this explanation on Schedule A if the contribution has to be itemized
before its legality is established;
© Seek a reattribution of the excessive portion, following the instructions provided
in FEC regulations (see below for explanations of reattribution); and
¢ Ifthe committee does not receive a proper reattribution within 60 days after
receiving the excessive contribution, refund the excessive portion to the donor.
11 CFR §§103.3(b)(3), (4) & (5) and 110.1(k)(3)Gi)(B).

Joint Contributions. Any contribution made by more than one person (except for a
contribution made by a partnership) must include the signature of each contributor on the
check or in a separate writing. A joint contribution is attributed equally to each donor
unless a statement indicates that the funds should be divided differently.

11 CFR §110.1(k)(1) and (2).

Reattribution of Excessive Contributions. FEC regulations permit committees to ask
donors of excessive contributions (or contributions that exceed the committee’s net debts
outstanding) whether they had intended their contribution to be a joint contribution from
more than one person and whether they would like to reattribute the excess amount to the
other contributor. The committee must inform the contributor that:


FEDERAL ELECTION COMMISSION
Washington, DC 20463

October 22, 2003

MEMORANDUM

TO:

FROM:

SUBJECT:

RON M. HARRIS
PRESS OFFICER
PRESS OFFICE

JOSEPH F. STOLTZ iG
ASSISTANT STAFF DIRECTOR
AUDIT DIVISION

PUBLIC ISSUANCE OF THE AUDIT REPORT ON THE MISSOURI
REPUBLICAN STATE COMMITTEE —- FEDERAL COMMITTEE

Attached please find a copy of the audit report on the Missouri Republican State
Committee — Federal Committee, which was approved by the Commission on October 9,

2003.

The report may be released to the public on October 22, 2003.

Attachment as stated

ce: Office of General Counsel
Office of Public Disclosure
Reports Analysis Division
FEC Library


e They may establish a separate, federal allocation account into which the committee
deposits funds from both its federal and non-federal accounts solely for the purpose
of paying the allocable expenses of shared federal/non-federal activities.

11 CER §106.5(g)(1)(i) and (ii)(A).

Reporting Allocable Expenses. A political committee that allocates federal/non-federal
expenses must report each disbursement it makes from its federal account (or separate
allocation account) to pay for a shared federal/non-federal expense. Committees report
these kinds of disbursements on Schedule H4. 11 CFR §104.10(b)(4)

Allocation Required for Generic Voter Drives. State and local party committees must

allocate all of their costs for generic voter drives. A generic voter drive is an activity that

urges the general public:

¢ To register to vote;

e To vote; or

¢ To support candidates of a particular party or candidates who are associated with a
particular issue, without mentioning a specific candidate. 11 CFR §106.5(a)(2)(iv).

Facts and Analysis

MRFC established an allocation account pursuant to 11 CFR §102.5(a)(1)(i). As such,
payments for shared activity® should have been paid from its allocation account. The
Audit staff identified payments totaling $8,860,461 for shared activity related to issue
advocacy media that were not paid out of MRFC’s allocation account. MRFC paid
$2,722,920 to six vendors directly from its federal account and $6,137,541 to the same
vendors, for the same services, directly from its non-federal account.

MREC should have: 1) transferred the federal portion of these expenses from its federal
account into its allocation account; 2) transferred the non-federal portion of these
expenses from its non-federal account into its allocation account; and, 3) paid these
vendors from the allocation account.

These payments should have then been reported on both Schedules H4 and on Line 21a
of the Detailed Summary Page. Instead, MRFC reported the federal share ($2,722,920)
on Schedules B and Line 21b (Other Federal Operating Expenditures), but did not report
the non-federal share ($6,137,541).

Interim Audit Report Recommendation and Committee Response
In response to a recommendation in the interim audit report, MRFC filed amended
reports retaining the Schedule B, line 21(b) entries’ and disclosing on Schedule H-4 as
memo entries, the total amount paid, the federal share, and the non-federal share. The

Shared activity refers to activity that relates to both federal and non-federal elections. Committees must
allocate expenses for shared activity between their federal and non-federal accounts. See Legal Standard
above.

The original entries on Schedule B must remain since the Schedule H4 entries must be entirely memo
entries. Electronically filed Schedules H4 may not contain entries that are partially memo and partially
non-memo.


© Refund $30,000 and provide evidence of such refunds (copies of front and back of the
negotiated refund checks). If funds are not available to make the necessary refunds,
disclose those contributions requiring refunds on Schedule D (Debts and Obligations)
until funds become available to make the refunds.

Committee Response to Recommendation and Audit Staff's
Assessment

In response to the interim audit report, MRFC refunded the excessive contributions.
MREFC provided copies of 4 negotiated refund checks totaling $20,000 and copies of 2
outstanding checks (front only) totaling $10,000.°

| Finding 2. Shared Federal and Non-Federal Expenses

Summary

The Audit staff identified payments totaling $8,860,461 for shared activity related to
issue advocacy media that were not paid out of MRFC’s allocation account. Instead,
payments were issued directly to the vendors from the federal fund (federal) and general
fund (non-federal) accounts. Additionally, MRFC reported only the federal share on
Schedules B, rather than both the federal and non-federal shares on Schedules H4.
MRFC complied with the Audit staff's recommendation by filing amended Schedules H-
4, disclosing as memo entries the total amount paid, the federal share, and the non-federal
share.

Legal Standard

Accounts for Federal and Non-Federal Activity. A party committee that finances
political activity in connection with both federal and non-federal elections must establish
two accounts (federal and non-federal) and allocate shared expenses--those that
simultaneously support federal and non-federal election activity—between the two
accounts. Alternatively, the committee may conduct both federal and non-federal activity
from one bank account, considered a federal account. 11 CFR §102.5(a)(1)(i).

Federal vs. Non-Federal Account. The federal account may contain only those funds
that are permissible under the federal election law; the non-federal account may contain
funds that are not permitted under the federal law (but are legal under state law), such as
contributions that exceed the limits of the federal law and contributions from prohibited
sources, such as corporations and labor organizations. 11 CFR §102.5(a)(1)(i) and (a)(3).

Paying for Allocable Expenses. FEC regulations offer party committees two ways to

pay for allocable, shared federal/non-federal expenses.

¢ They may pay the entire amount of the shared expense from the federal account and
transfer funds from the non-federal account to the federal account to cover the non-
federal share of that expense; or

5 For the two outstanding refund checks, MRFC will provide copies of the front and back of the refund
checks once they are negotiated.


Finding 5. Transfers From the 1999 State Victory Fund

(Memo entries not reported)
MRFC reported $173,061 as its share of net proceeds from a joint fundraiser with the
1999 State Party Victory Fund. MRFC did not, however, file memo Schedules A
itemizing those contributions that required such disclosure. MRFC complied with the
Audit staff’s recommendation by filing amended Schedules A itemizing (as memo
entries) the individual contributors, representing the transfers received from the 1999
State Party Victory Fund. (For more detail, see p. 10)

Finding 6. Misstatement of Financial Activity

When MRFC’s reported figures were compared to its bank records, the Audit staff found
that, for calendar years 1999 and 2000, receipts, disbursements, and cash-on-hand
balances had been misstated. MRFC complied with the Audit staff’s recommendation by
filing amended reports for calendar years 1999 and 2000 correcting these misstatements.
To the extent that current cash on hand amounts were incorrect, MRFC will be amending
its reports subsequent to 2000 in the near future. (For more detail, see pg. 11)


Page

iS)

COODNYN

ll

Table of Contents

Part I. Background
Authority for Audit
Scope of Audit

Changes to the Law

Part Il. Overview of Committee
Committee Organization
Overview of Financial Activity

Part III. Summaries
Findings and Recommendations

Part IV. Findings and Recommendations
Finding 1. Receipt of Contributions That Exceed Limitations
Finding 2. Shared Federal and Non-Federal Expenses
Finding 3. Reporting of Transfers
Finding 4. Reporting of Refunds and Rebates Received for Shared Activity
Finding 5. Transfers from the 1999 State Victory Fund
(Memo entries not reported)
Finding 6. Misstatement of Financial Activity



11

Legal Standard

Itemization of Contributions From Joint Fundraising Efforts. Participating political
committees shall report joint fundraising proceeds in accordance with

11 CFR §102.17(c)(8) when such funds are received from the fundraising representative.
11 CFR §102.17(c)(3)(iii).

Each participating political committee reports its share of the net proceeds as a transfer-in
from the fundraising representative and shall also file a memo Schedule A itemizing its
share of gross receipts as contributions from the original contributors to the extent
required under 11 CFR §104.3(a). 11 CFR §102.17(c)(8)@)(B).

Itemization Required. Political committees must itemize:

¢ Any contribution from an individual if it exceeds $200 per calendar ear (or per
election cycle in the case of authorized candidate committees) either by itself or when
aggregated with other contributions from the same contributor.
11 CFR §104.3(a)(4)(i); and

¢ Every contribution from any political committee, regardless of the amount.
2 U.S.C. §434(b)(3)(A) and (B).

Facts and Analysis

MRFC received $173,061 in joint fundraising proceeds from the 1999 State Victory
Fund. MREFC reported these net proceeds as a transfer-in on Schedule A, but did not
itemize its share of gross receipts ($186,496) as contributions from the original donors on
memo entry Schedules A.

The Audit staff noted that MRFC did maintain a listing of the contributors including their
names, addresses, occupations/names of employer, and the date and amount of the
contributions.

Interim Audit Report Recommendation and Committee Response
In response to a recommendation in the interim audit report, MRFC filed amended
Schedules A itemizing, as memo entries, the individual contributors, representing the
transfers received from the 1999 State Party Victory Fund.

| Finding 6. Misstatement of Financial Activity

Summary

When MRFC’s reported figures were compared to its bank records, the Audit staff found
that, for calendar years 1999 and 2000, receipts, disbursements, and cash-on-hand
balances had been misstated. MRFC complied with the Audit staff’s recommendation by
filing amended reports for calendar years 1999 and 2000 correcting these misstatements.
To the extent that current cash on hand amounts were incorrect, MRFC will be amending
its reports subsequent to 2000 in the near future.

° The 1999 State Victory Fund, the joint fundraising representative, is an affiliated committee of MRFC.


e Transfers from the non-federal account reported in error
e Unexplained difference
Net understatement

Disbursements — 1999

The understatement of disbursements was the net result of the
following transactions:

e Transfers to the non-federal account not reported
Disbursements not reported

Disbursement amount reported incorrectly

Miscellaneous disbursement reporting errors

Unexplained difference

Net understatement

Receipts — 2000

The overstatement of receipts was the net result of the following

transactions:

e Transfers from the non-federal account not reported

¢ Contributions not reported

e Republican National Committee transfers not reported
e Refunds, rebates, and other receipts not reported

Unexplained difference
Net overstatement

Disbursements — 2000
The understatement of disbursements was the net result of the
following transactions:
e Transfers to the non-federal account not reported
e Disbursements not reported or under-reported
e Disbursements reported twice
e Disbursement amount reported incorrectly
¢ Unexplained difference
Net understatement
Ending Cash on Hand - December 31, 2000-

The overstatement of the closing cash on hand. was the net

result of the misstatements described above.

National party transfers to the non-federal account reported
Contributions deposited to the non-federal account reported

-4,626
3,415
$ 714:

:

$ 107,792
73,700
48,000
2,055
-359,838
-15,000
-18,045

$ 161,337

$ 454,202
83,574
-275,987
-10,386
4,102

$ 247,301

$-440,480

In addition to the above, MRFC’s reports of receipts and disbursements were understated
by an additional $6,137,541. These payments were made directly to vendors from the
non-federal account. However, since they represented shared activity, such amounts
should have been transferred to the allocation account, disbursed and reported (See

Finding 2).


Report of the

Audit Division on the

Missouri Republican State
Committee - Federal Committee

January 1, 1999 - December 31, 2000



Report of the Audit Division

on the

Missouri Republican State Committee -
Federal Committee

January 1, 1999 - December 31, 2000

Why the Audit

Was Done
Federal law permits
the Commission to
conduct an audit and
field investigation of
any political
committee that is
required to file reports
under the Federal
Election Campaign Act
(the Act). The
Commission generally
conducts such audits
when a committee
appears not to have
met the threshold
requirements for
substantial compliance
with the Act.’ The
audit determines
whether the committee
complied with the
limitations,
prohibitions and
disclosure
requirements of the
Act.

Future Action.
The Commission may
initiate an enforcement
action, at a later time,—
with respect to any of
the matters discussed
in this report:

About the Committee (p. 2)

The Missouri Republican State Committee — Federal Committee is a state
party committee headquartered in Jefferson City, MO. For more
information, see the chart on the Committee Organization, p. 2.

Financial Activity (p. 2)

Receipts

o Contributions from Individuals/Other $ 1,914,417
Political Committees

o Transfers from Affiliated/Other Party 3,974,806
Committees

o Transfers from the Non-Federal Account 10,774,542

o Other Receipts 75,617

o Total Receipts $ 16,739,382

Disbursements

o Operating Expenditures $ 16,176,520

o Transfers to Affiliated/Other Party 151,300
Committees

o Contributions to Candidates/Committees 211,000

o Refund of Contributions to Individuals 2,250

o Total Disbursements $ 16,541,070

Findings and Recommendations (p.3)

Receipt of Contributions That Exceed Limitations (Finding 1)
Shared Federal and Non-Federal Expenses (Finding 2)
Reporting of Transfers (Finding 3)

Reporting of Refunds and Rebates Received for Shared
Activity (Finding 4)

Transfers from the 1999 State Victory Fund (Memo entries
not reported) (Finuing 5)

Misstatement of Financial Activity (Finding 6)

' 2 U.S.C. §438(b).


description on each memo entry on Schedule H-4 stated “to recognize payments from the
non-federal account directly to vendor.”

| Finding 3. Reporting of Transfers

Summary

MRFC made transfers totaling $490,517 from its federal accounts to its non-federal
account, but failed to report them. MRFC complied with the Audit staff's
recommendation by filing amended Schedules B for line 22 (Transfers to Affiliated/Other
Party Committees) disclosing the transfers.

Legal Standard

Itemizing Transfers to Affiliated Committees. Political party committees must itemize
all transfers (i.e., the full name, address, date, amount, and purpose) regardless of amount
to other political party committees. 11 CFR §104.3(b)(3)(ii).

Facts and Analysis

MRFEC transferred $490,517 from its federal accounts to its non-federal account, but
failed to report the transfers. Transfers from the federal fund account, totaling $76,300,
represented the excessive portion of contributions ($71,200), a non-excessive
contribution ($5,000), and a prohibited contribution ($100). Transfers primarily from the
federal allocation account, totaling $414,217, represented adjustments necessary to
reconcile the federal balance in the allocation account.

Interim Audit Report Recommendation

The Audit staff recommended that MRFC file amended Schedules B for line 22
(Transfers to Affiliated/Other Party Committees) to disclose the transfers totaling
$414,217 ($490,517 - $76,300)°.

Committee Response to Recommendation and Audit Staff's

Assessment
In response to the interim audit report, MRFC filed amended Schedules B for line 22

disclosing the transfers, totaling $414,217.

Finding 4. Reporting of Refunds and Rebates Received for
Shared Activity

Summary

The Audit staff identified refunds and rebates totaling $52,068 in connection with shared
federal and non-federal activity. MRFC reported $28,048 of these on Line 17 (Other
Federal Receipts) but did not report the remaining $24,020. MRFC should have reported
the entire amount on Schedule H4, as negative entries, according to the same allocation

5 Transfers of $76,300, representing contributions, or portions thereof, that were not reported, are
addressed in Finding 6.


Legal Standard
Contents of Reports. Each report must disclose:

¢ The amount of cash on hand at the beginning and end of the reporting period;

¢ The total amount of receipts for the reporting period and for the calendar year; and

¢ The total amount of disbursements for the reporting period and for the calendar year.
2 U.S.C. §434(b)(1), (2) and (4).

Facts and Analysis

The following chart details the discrepancies between the totals on MRFC’s disclosure
reports and bank records. The chart lists (a) the amounts MRFC reported, (b) the actual
amounts listed on its bank statements, and (c) the discrepancies between the two figures.
Succeeding paragraphs explain why the discrepancies occurred. MREC did not provide
records to explain how amounts shown on its reports were calculated; as such, not all
discrepancies could be explained.

Comparison of Disclosure Reports and Bank Records

Calendar Year Reported Bank Records Difference
Cash on Hand at $69,181
01/01/99 $127,075 $57,894 Overstated
. $71,453
1999 Receipts $1,295,434 $1,366,887 Understated
2.
1999 Disbursements | $1,280,546 $1,313,306 $32,760
Understated
. $161,337
2000 Receipts $9,396,291 $9,234,954 Overstated
2000 Disbursements | $8,863,716 $9,111,017 $247,301
Understated
Cash on Hand at $440,480
7 5
12/31/00 $696,686 $256,206 Overstated
Explanation of Discrepancies
Beginning Cash on Hand - January 1, 1999
The overstatement of cash on hand was the result of the following
transactions:
e Erroneous adjustment made to beginning cash by MRFC $ -68,821
e Unexplained difference -360
Net overstatement $ -69,18]1
Receipts — 1999
The understatement of receipts was the net result of the following
transactions:
© Contributions and other receipts not reported $ 42,169
e Refunds, rebates, and reimbursements not reported 22,995

e Party committee transfers not reported 7,500