Part I
Background

Authority for Audit

This report is based on an audit of John Sullivan for Congress (JSFC), 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 U.S.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 risk 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 received.

The consistency between reported figures and bank records.

The completeness of records.

Other committee operations necessary to the review.

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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.


¢ Ifthe committee does not receive a proper redesignation within 60 days after
receiving the excessive contribution, refund the excessive portion to the donor.

11 CFR §§103.3(b)(3), (4) and (5) and 110.1(k)(3)Gi)(B).

Unregistered Organizations Financing Federal Political Activity. When any
organization makes a contribution but does not qualify as a political committee’, it must
either:

1. Establish a separate account for permissible funds to make contributions and keep
records of deposits (records must be kept and made available for examination by the
Commission upon request); or

2. Demonstrate through a reasonable accounting method that it has received sufficient
permissible funds to make contributions (records must be kept and made available for
examination by the Commission upon request). 11 CFR §102.5(b)

Facts and Analysis

JSFC received $4,500 in excessive contributions from the Miami Tribe of Oklahoma
Business Development Fund ($3,000 Primary; $1,500 General). This unregistered
organization gave JSFC a total of $6,500 as follows:

e $2,500 on September 25, 2001 for the Primary election;

¢ $1,500 on November 19, 2001 for the Primary election; and

© $2,500 on December 31, 2001 for the General election.

The date of the Primary election was December 11, 2001. The date of the General election
was January 8, 2002.

Under the Act, an unregistered organization (one that has not become a political committee)
may not contribute more than $1,000 per candidate, per election. JSFC refunded the
excessive portion of the contributions in one check ($4,500) on February 19, 2002. This
action occurred too late to cure the two excessive Primary contributions’ but it met the 60-
day requirement for refunds with regard to the December 31, 2001 contribution. JSFC also
consistently maintained a sufficient balance to cover the amounts deposited in excess of the
limitation until just prior to the General election, January 8, 2002. It appears that the Miami
Tribe of Oklahoma Business Development Fund thought that it was a multicandidate
committee and therefore eligible to contribute up to $5,000 per election to JSFC.

At the exit conference the Audit staff presented this matter to JSFC officials. JSFC gave no
response.

3 Political committee means any committee. club. association, or other group of persons which receives
contributions in excess of $1,000 or which makes expenditures in excess of $1,000 during a calendar year. 1
CFR §100.5

* Based on an analysis of the contribution and disbursement databases provided by JSFC, the Primary activity
was not funded by contributions designated for the General.


Overview of Financial Activity

(Audited Amounts)

Cash on band @ April 13, 2001 $ 0
Receipts

© Contributions from individuals $405,454
e Contributions from political committees 210,951
¢ In-kind contributions 16,779
* Loans from candidate 10,000
¢ Contributions from unregistered organizations | 4,919
¢ Other Receipts 1,625
Total Receipts $649,728
Disbursements

¢ Operating Disbursements $611,896
¢ Other Disbursements 12,000
Total Disbursements $623,896
Cash on hand @ March 31, 2002 $ 25,832


Part II
Overview of Campaign

Committee Organization

| John Sullivan for Congress

Important Dates i

¢ Date of Registration June 4, 2001

e Audit Coverage | April 13, 2001 (the date of JSFC’s initial
| deposit) through March 31, 2002

© Special Elections | December 11, 2001 (primary)

January 8, 2002 (general)

T

i
Headquarters ‘ Tulsa, Oklahoma

Bank Information

¢ _ Bank Depositories im

e Bank Accounts [1 Checking Account
i

Treasurers {

e Treasurer When Audit Was Conducted Greggory T. Colpitts

e _ Treasurer During Period Covered by Audit Greggory T. Colpitts

Management Information |

e Attended FEC Campaign Finance Seminar_| No

e Used Commonly Available Campaign | Yes
Management Software Package |
e _ Filed Reports Electronically Yes

@ Who Handled Accounting, Recordkeeping . Volunteer Staff
Tasks and Other Day-to-Day Operations |

© Staff Has Previous Campaign Finance And ; No Previous Campaign Finance
Accounting Experience Experience and Moderate Accounting
Experience


wn

Part IV
Findings and Recommendations

Finding 1. Receipt of Contributions from an Unregistered
Organization

Summary

A review of all contributions from unregistered organizations indicated that JSFC received
$4,500 in excessive contributions from the Miami Tribe of Oklahoma Business
Development Fund. JSFC refunded the excessive amount on February 19, 2002. Since the
Audit Staff recommended that no further action be taken by JSFC, no additional information
was provided relative to this matter.

Legal Standard

Contribution Limits. No individual or group (other than a multicandidate committee) may
contribute more than a total of $1,000, per election, to a federal candidate’s” campaign (the
campaign includes the candidate and his or her agents and authorized committees). 2 U.S.C.
§441a (a)(1)(A).

Definition of Election. Each of the following is considered a separate election, with a

separate limit:

e Primary election or a caucus or convention with authority to nominate the candidate for
the general election.

e General election.

e Runoff.

e Special election.

2 U.S.C. §431(1) and 11 CFR §§100.2, 110.1@)(1), and 1 10.2(i)(1).

Handling Contributions That Appear Excessive. If a committee receives a contribution
that appears to be excessive, the committee must either:
1. Return the questionable check to the donor; or
2. 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:
e Seek a redesignation of the excessive portion, following the instructions provided in
FEC regulations; and

24 federal candidate is one who runs for the U.S. Presidency or for a seat in the U.S. Senate or the U.S. House
of Representatives.


Chav

FEDERAL ELECTION COMMUSSION

WASHINGTON [20 suse

April 2, 2003
MEMORANDUM

TO: RON M. HARRIS
PRESS OFFICER
PRESS OFFICE

j

FROM: JosEPHF. sToLTz/f-
ASSISTANT STAFF DIRECTOR
AUDIT DIVISION |

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON
JOHN SULLIVAN FOR CONGRESS
Attached please find a copy of the final audit report and related documents on

John Sullivan for Congress that was approved by the Commission on March 26, 2003.

The report may be released to the public on April 2, 2003.

Attachment as stated

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


Explanation of Receipts Discrepancy
The understatement of receipts was the result of the following:

e Unreported in-kind contributions $ 1,694
¢ Unreported individual contributions 14,800
© Unreported political committee contribution 100
e Uncorrected math error on detail summary page 250
«© Unexplained difference 2,300

$19,144

At the exit conference the Audit staff informed JSFC officials of these misstatements and
provided them relevant work papers. JSFC stated-that they understood the finding.

Interim Audit Report Recommendations
The Audit staff recommended that JSFC file complete amended electronic reports for each
reporting period to correct the misstatements noted above.

Committee Response to Recommendations and Audit Staff's

Assessment
On March 12, 2003, JSFC filed complete amended electronic reports for the period covered

by the audit. These reports corrected the financial misstatement.


Interim Audit Report Recommendations
The Audit staff recommended that JSFC provide evidence that the excessive contributions
were refunded timely or any additional information or explanation it believed to be relevant.

Otherwise, the Audit staff recommended no further action be taken.

Committee Response to Recommendations and Audit Staff's

Assessment

JSFC submitted a letter that explained that since the Audit Staff recommended that no
further action be taken by JSFC, nothing additional was provided.

Finding 2. Misstatement of Financial Activity

Summary

A comparison of JSFC’s reported financial activity with its bank activity indicated that JSFC
had understated its receipts by $19,144. The Audit staff recommended that JSFC file
amendments to the applicable reports to correct the misstatements. The requested amended

reports were filed.

Legal Standard
Each report must disclose:

e 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

A comparison between JSFC’s reported financial activity and its bank records indicated that
JSFC’s reports understated receipts by $19,144. Disbursements were understated by $7,308,
not considered significant. The Ending Cash Balance was understated by $11,836 as a result

of the discrepancies in receipts and disbursements.

{ Reported | Bank Records _! Discrepancy i
Opening Cash Balance Ss Oo! $ 0 Los 0 i
Receipts 630,584 649,728 | 19.144 understated }
Disbursements 616,588 623,896 \ 7,308 understated |
Ending Cash Balance | $ 13.996 S$ 25.833 |_$11.836 understated |



Part ITI
Summaries

Findings and Recommendations

Finding 1. Receipt of Contributions from Unregistered
Organizations

A review of all contributions from unregistered organizations indicated that JSFC received

$4,500 in excessive contributions from the Miami Tribe of Oklahoma Business

Development Fund. JSFC refunded the excessive amount on February 19, 2002. Since the

Audit Staff recommended that no further action be taken by JSFC, no additional information

was provided relative to this matter. (For more detail, see p. 5)

Finding 2. Misstatement of Financial Activity

A comparison of JSFC’s reported financial activity with its bank activity indicated that
receipts were understated by $19,144. The Audit staff recommended that JSFC file
amendments to the applicable reports to correct the misstatements. The requested amended
reports were filed. (For more detail, see p. 7)


Page

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Table of Contents

Part I. Background
Authority for Audit
Scope of Audit

Changes to the Law

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

Part III. Summaries
Findings and Recommendations

Part IV. Findings and Recommendations
Finding 1. Receipt of Contributions from an Unregistered Organization
Finding 2. Misstatement of Financial Activity


Final Report of the
Audit Division on
John Sullivan for Congress

April 13, 2001 - March 31, 2002



Final Report of the Audit Division
on

John Sullivan for Congress
April 13, 2001 - March 31, 2002

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)

John Sullivan for Congress (JSFC) is the principal campaign
committee for John Sullivan, Republican candidate for the U.S. House
of Representatives from the state of Oklahoma, First District. JSFC is
headquartered in Tulsa, Oklahoma. The Candidate participated in a
special election held on January 8, 2002. For more information, see
chart on the Committee Organization, p. 2.

Financial Activity (p. 3)

e Receipts
o From Individuals $405,454
o From Political Committees 210,951
o From Unregistered Organizations 4919
o Candidate Loans 10,000
o In-kind Contributions 16,779
o Other Receipts 1,625
o Total Receipts $649,728
e Disbursements
o Operating Disbursements $611,896
o Other Disbursements 12,000
o Total Disbursements $623,896

Findings and Recommendations (p. 4)

¢ — Receipt of Contributions from an Unregistered Organization
(Finding 1)

¢ — Misstatement of Financial Activity (Finding 2)

2 U.S.C. §438(b).