FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

May 27,2009 

MEMORANDUM 

To:	 Judith Ingram 

Press Officer , () 

From: Joseph F. StOlt#~ Assistant Staff ctor
 

Audit Division
 

Subject:	 Public Issuance of the Audit Report on League of Conservation 

Voters Action Fund 

Attached please find a copy of the audit report on League of Conservation 

Voters Action Fund, which was approved by the Commission on May 14,2009. 

All parties involved have received informational copies of the report and 

the report may be released to the public on May 27, 2009. 

Attachment as stated 

cc:	 Office of General Counsel 

Office of Public Disclosure 

Reports Analysis Division 

FEC Library 

lTD Web 
Report of the Audit Division on 

League of Conservation Voters 

Action Fund 

January 1,2005 - December 31,2006 

Why the Audit 

Was Done 

Federal law permits the 

Commission to conduct 

audits and field 

investigations 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. 1 The audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirements 

ofthe 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) 

League of Conservation Voters Action Fund (LCVAF) is the 

separate segregated fund ofthe League of Conservation Voters, 

Inc. (LCV), a non profit corporation organized under the 

provision of 501(c)(4) of the u.s. Tax Code. LCVAF qualified 

for multi-candidate status on April 22, 1992 and is headquartered 

in Washington, DC. For more information, see the chart on 

Committee Organization, p. 2. 

Financial Activity (p. 2) 

•	 Receipts 

o From Individuals	 $ 1,042,346 

o From Political Committees	 13,300 

o Refunds and Offsets	 18,598 

o Other Receipts	 2,984 

o Total Receipts	 $ 1,077,228 

•	 Disbursements 

o	 Operating Expenditures $ 369,270 

o	 Contributions to Federal 

Candidates 146,012 

o	 Independent Expenditures 723,586 

o	 Other Disbursements 10,431 

o	 Total Disbursements $ 1,249,299 

Findings and Recommendations (p. 3) 

•	 Misstatement of Financial Activity (Finding 1) 

•	 Disclosure of Occupation/Name of Employer (Finding 2) 

I 2 U.S.C. §438(b). 
1 

Table of Contents 

Page 

Part I. Background 

Authority for Audit 

Scope of Audit
 

Limitations
 

Part II. Overview of Committee 

1

1
 

Committee Organization 2 

Overview of Financial Activity 2 

Part III. Summaries 

Findings and Recommendations 3 

Part IV. Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 4
 

Finding 2. Disclosure of Occupatio nIName of Employer 7 
Part I 

Background 

Authority for Audit 

This report is based on an audit of League of Conservation Voters Action Fund 

(LCVAF), 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: 

1.	 The disclosure of contributions received from individuals for occupation/name of 

employer. 

2.	 The consistency between reported figures and bank records. 

3.	 A review of independent expenditures. 

4.	 Other committee operations necessary to the review. 

Limitations 

With the audit notification letter mailed on December 21, 2007, and fieldwork not 

beginning until May 19,2008, LCVAF should have had adequate time to assemble the 

records requested and required for the audit. At the outset, the Audit staff determined 

that the disbursement records, contained in a single binder and covering only 2006, were 

insufficient to complete the audit. Work, to the extent possible, proceeded. When 

promised records did not materialize on May 23rd , the Audit staff notified LCVAF that 

they would withdraw from fieldwork. LCVAF was given two weeks to provide the 

missing documentation; fieldwork resumed on June 9th . 

LCVAF in its response to the interim audit report stated its beliefthat the temporary 

delay in field work was a mutual decision of LCVAF and the auditors. LCVAF went on 

to say that this decision was necessitated by an ongoing independent audit of the 

connected organization's financial statements and LCV's chief financial officer's 

preoccupation with that endeavor. 
2 

Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration 

• Audit Coverage 

League of Conservation Voters Action 

Fund 

July 18, 1991 

January 1, 2005 - December 31, 2006 

Headquarters Washington, DC 

Bank Information 

Two 

Two Checking Accounts 

• Bank Depositories 

• Bank Accounts 

Treasurer 

Barbara Gonzalez-McIntosh 

Patrick Collins 

• Treasurer When Audit Was Conducted 

• Treasurer During Period Covered by Audit Gwendolyn M. Sommer (08/12/02 - 10/13/05) 

Mary Jane Gallagher (10/14105 - 01/11/06) 

. Management Information 

Barbara Gonzalez-McIntosh (01/12/06 ­ 07120108) 

Yes 

Yes 

• Attended FEC Campaign Finance Seminar 

• Used Commonly Available Campaign 

Management Software Package 

•	 Who Handled Accounting and Paid staff 

Recordkeeping Tasks 

Overview of Financial Activity 

(Audited Amounts) 

Cash on hand (jiJ January 1,2005 $ 262,189 

0 From Individuals 

0 From Political Committees 

0 Refunds and Offsets 

0 Other Receipts 

Total Receipts 

- $ 1,042,346 

13,300 

18,598 

2,984 

$ 1,077,228 

$ 369,270 

146,012 

723,586 

10,431 

$ 1,249,299 

$ 90,118 

0 Operating Expenditures 

0 Contributions to Federal Candidates 

0 Independent Expenditures 

0 Other Disbursements 

Total Disbursements 

Cash on hand @ December 31,2006 
3
 

Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

A comparison of LCVAF's reported figures to its bank records revealed that receipts, 

disbursements and cash-on-hand balances had been materially misstated for calendar years 2005 

and 2006. For 2005, LCVAF understated beginning cash on hand by $10,585, overstated 

receipts by $5,521, understated disbursements by $2,590 and understated ending cash-on-hand 

by $2,474. In 2006, receipts were overstated by $9,109, disbursements understated by $113,680 

and the ending cash-on-hand was overstated by $120,315. Inresponse to the interim audit report 

recommendation, LCVAF noted that it had taken steps to improve its accounting and reporting 

system, identified reported contributions originally received by LCV for which the funds had not 

been transferred to LCVAF and filed amended reports to materially correct the misstatement. 

(For more detail, see p. 4) 

Finding 2. Disclosure of Occupation/Name of Employer 

For 26% of itemized contributions from individuals, LCVAF failed to adequately disclose the 

occupation and/or the name of the employer. Inmost instances, LCVAF disclosed "information 

requested" or "requested" for occupation and/or name of employer. While there was no 

documentation to support that LCVAF used best efforts to obtain, maintain and submit the 

missing contributor information, an LCVAF representative demonstrated that some missing 

information had been included on reports filed in the subsequent election cycle. Inresponse to 

the interim audit report recommendation, LCVAF filed amendments, which disclosed additional 

occupation and/or name of employer information, materially correcting the public record. (For 

more detail, see p. 7) 
4 

Part IV
 

Findings and Recommendations
 

I Finding 1. Misstatement of Financial Activity 

Summary 

A comparison ofLCVAF's reported figures to its bank records revealed that receipts,
 

disbursements and cash-on-hand balances had been materially misstated for calendar years 2005
 

and 2006. For 2005, LCVAF understated beginning cash on hand by $10,585, overstated
 

receipts by $5,521, understated disbursements by $2,590 and understated ending cash-on-hand
 

by $2,474. In 2006, receipts were overstated by $9,109, disbursements understated by $113,680
 

and the ending cash-on-hand was overstated by $120,315. In response to the interim audit report
 

recommendation, LCVAF noted that it had taken steps to improve its accounting and reporting
 

system, identified reported contributions originally received by LCV for which the funds had not
 

been transferred to LCVAF and filed amended reports to materially correct the misstatements.
 

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; 

•	 The total amount of disbursements for the reporting period and for the calendar year; and 

•	 Certain transactions that require itemization on Schedule A (Itemized Receipts) or Schedule 

B (Itemized Disbursements). 2 U.S.c. §434(b)(l), (2), (3), (4) and (5). 

Facts and Analysis 

The Audit staff reconciled reported activity to bank records for calendar years 2005 and 2006. 

The following charts outline the discrepancies for the beginning cash balances, receipts, 

disbursements, and the ending cash balances. The succeeding paragraphs explain why the 

differences occurred, if known. 

2005 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1,2005 

$251,604 $262,189l _ $10,585l 

Understated 

Receipts $170,092 $164,571 $5,521 

Overstated 

Disbursements $304,486 $307,076l $2,590l 

Understated 

Ending Cash Balance @ 

December 31, 2005 

$117,210 $119,684 $2,474 

Understated 

Subsequent to the issuance of the interim audit report, an LeVAF representative indicated that two unreported 

disbursements were, in fact, the reissue of voided checks. The voided checks represented previously unaccounted 

for outstanding checks at the beginning of2005. This increase to outstanding checks at the beginning of2005 

effectively reduced beginning cash, disbursements and the related discrepancies, each by $2,053. 

2 
5 

The beginning cash was understated by $10,585 and is unexplained, but is likely the result of 

prior period discrepancies. 

The overstatement of receipts was the result of the following: 

• Contributions and receipts not reported	 +$ 14,584 

(consisting of $4,655 itemizable, $800 unitemizable contributions
 

and a $9,129 offset)
 

• Receipts reported but no record of deposit identified	 20,105 

(consisting of $1,000 itemized and $19,105 unitemized contributions)
 

Total Net Overstatement of Receipts -$ 5,521
 

The understatement of disbursements was the result of the following: 

• Disbursements not reported	 +$ 4,655 

•	 Disbursements reported unsupported by negotiated check or debit 1,987 

•	 Over reporting of unitemized disbursements 78

Total Net Understatement of Disbursements +$ 2,590 

The $2,474 understatement of ending cash was the net result of the misstatements described 

above. 

2006 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1, 2006 

$117,210 $119,684 $2,474 

Understated 

Receipts $921,765 $912,656 $9,109 

Overstated 

Disbursements $828,542 $942,222 $113,680 

Understated 

Ending Cash Balance @ 

December 31, 2006 

$210,433 $90,118 $120,315 

Overstated 

The overstatement of receipts was the result ofthe following: 

• Contribution and receipts not reported	 +$ 30,568 

(consisting of $21,000 itemizable, $100 unitemizable contributions
 

and offsets totaling $9,468)
 

• Earned interest not reported	 + 1,552 

• Contribution reported but no record of deposit identified	 5,000 

• Unexplained difference (see explanation on following page)	 36,229 

Total Net Overstatement of Receipts	 -$ 9,109 

The understatement of disbursements was the result ofthe following: 

• Disbursements not reported	 +$ 113,678 

•	 Unexplained difference + 2 

Total Understatement of Disbursements +$ 113,680 

The $120,315 overstatement of ending cash was the result of the misstatements noted above. 
6
 

The Audit staff was able to identify and materially explain differences arising from the 

reconciliation ofthe LCVAF's bank accounts to its reported activity except for the apparent 

overstatement of receipt activity for 2006. 

The $36,229 unexplained overstatement of 2006 receipts suggested that reported receipts 

exceeded the reconciled bank total by $36,229. This difference remained a problem for LCVAF. 

It appeared likely that LCVAF reported and itemized receipts designated to it by contributors 

whose contributions were initially received by but not transferred from LCV. 

LCV received numerous contributions which, in accordance with instructions from the 

contributors, transferred specified amounts to LCVAF. In addition to LCVAF, LCV maintains a 

501(c)(3) entity, the League of Conservation Voters Education Fund (LCVEF) and a League of 

Conservation Voters 527 fund. Throughout the course of the audit, it became apparent to the 

Audit staff that the complexity of this organizational structure created some confusion when it 

came to correctly attributing transactions among the various entities.' 

An LCVAF representative confirmed that a reported $5,000 contribution, noted above in the 

explanation of differences for 2006 receipts, could not be traced to a deposit batch from either of 

LCVAF's bank accounts. Sufficient receipt records were not available to allow the Audit staffto 

trace all itemized receipts to deposit batches and then to the bank. 

At the exit conference, the Audit staff presented this matter to LCVAF representatives and 

provided schedules to support the misstatement. LCVAF representatives acknowledged the 

misstatements and affirmed their willingness to cooperate to resolve this matter. 

Interim Audit Report Recommendation 

The Audit staff recommended that LCVAF: 

•	 Provide any additional information or written comments that it considered relevant to the 

overstatement of receipt activity on its reports filed for 2005 and 2006; 

•	 Explain any steps taken or procedures it had adopted to address the apparent problems 

arising from the complex multi-organizational structure to assure the accurate attribution of 

activity to the appropriate entity; and, 

•	 Amend it reports for the misstatements detailed above for 2005 and 2006. In addition, 

LCVAF should have amended its most recently filed report to correct the cash-on-hand 

balance with an explanation that the change resulted from a prior period audit adjustment. 

Further, LCVAF should have reconciled the cash balance of its most recent report to identify 

subsequent discrepancies that may have impacted the $120,315 adjustment recommended by 

the Audit staff. 

3 An LCVAF expenditure of $110,000 to a media vendor was originally paid by LCV and then reimbursed. An 

independent expenditure of $50,000 from LCV was incorrectly included on an LCVAF 24-hour notice though not 

otherwise reported. Contributions designated for LCVAF, but received by LCV were often transferred months after 

their having been received. 
7 

Committee Response to Recommendation and Audit Staff's Assessment 

In response to the interim audit report, LCVAF explained that it had: 

" ... carefully reviewed the 'unexplained difference' of $36,229 noted in the IAR (pages 

5 and 6) which accounts for a portion of the net overstatement of receipts for 2006. Of 

this amount, $27,500.00 has been identified as contributions from individuals intended 

as contributions to LCV AF which inadvertently were not transferred from the 

connected organization's accounts to LCVAF's account. LCVAF (sic) has transferred 

these contributions to the LCVAF account and will report this transfer as a memo entry 

on the monthly report for January, 2009 with an explanatory note stating that the 

transfer 'per Audit represents the value of PAC contributions initially deposited into the 

account ofthe connected organization but intended for LCVAF, representing the 

names, dates and amounts ofthe contributions to LCVAF as originally reported.t" The 

remaining $8,729.00 [$36,229 - $27,500] of the 'unexplained difference' will be 

reported as a negative adjustment on Schedule A of the amended year end report for 

2006 with an explanatory note stating that the adjustment is 'to reduce total receipts for 

2006 to account for an adjustment per Audit.' We understand that [A]udit staff have 

(sic) approved both ofthese actions." 

To address the systemic problems that contributed to the misstatements, LCVAF's response 

stated that it has restructured its FEC accounting procedures to eliminate the kinds of record 

keeping and reporting difficulties experienced during the audit period. Included in the 

restructuring is: 

•	 additional trained staff (who have or will soon have attended FEC training) to process 

contri butions; 

•	 the engagement of Aristotle, Inc. to manage financial activity (including the 

reconciliation of this activity to reported activity) and file disclosure reports; and, 

•	 mandatory review of disclosure reports by the general counsel and Chief Financial 

Officer prior to their submission. 

The Audit staff reviewed the amended disclosure reports filed by LCVAF for January I, 2005, 

through December 31,2006, and concluded that the public record had been materially corrected. 

IFinding 2. Disclosure of Occupation/Name of Employer 

Summary 

For 26% of itemized contributions from individuals, LCVAF failed to adequately disclose the 

occupation and/or the name of the employer. Inmost instances, LCVAF disclosed "information 

requested" or "requested" for occupation and/or name of employer. While there was no 

documentation to support that LCVAF used best efforts to obtain, maintain and submit the 

missing contributor information, an LCVAF representative demonstrated that some missing 

Although the LeVAF will not file the February monthly report until 02/20109, they have provided a copy of the 

documentation supporting the $27,500 transfer. 

4 
8
 

information had been included on reports filed in the subsequent election cycle. In response to 

the interim audit report recommendation, LCVAF filed amendments, which disclosed additional 

occupation and/or name of employer information, materially correcting the public record. 

Legal Standard 

A. Required Information for Contributions from Individuals. For each itemized 

contribution from an individual, the committee must provide the following information: 

•	 The contributor's full name and address (including zip code); 

•	 The contributor's occupation and the name of his or her employer; 

•	 The date of receipt (the date the committee received the contribution); 

•	 The amount of the contribution; and 

•	 The election cycle-to-date total of all contributions from the same individual. 2 U.s.C. 

§434(b)(3)(A) and 11 CFR §§100.12 and 104.3(a)(4). 

B. Best Efforts Ensures Compliance. When the treasurer of a political committee shows that 

the committee used best efforts (see below) to obtain, maintain, and submit the information 

required by the Act, the committee's reports and records will be considered in compliance with 

the Act. 2 U.S.c. §432(h)(2)(i). 

C. Definition of Best Efforts. The treasurer and the committee will be considered to have used 

"best efforts" if the committee satisfied all of the following criteria: 

•	 All written solicitations for contributions included: 

o	 A clear request for the contributor's full name, mailing address, occupation, and name 

of employer; and 

o	 The statement that such reporting is required by Federal law. 

•	 Within 30 days after the receipt ofthe contribution not accompanied by complete 

information, the treasurer made at least one effort to obtain the missing information, via 

either a written request or a documented oral request. 

•	 The treasurer reported any contributor information that, although not initially provided by 

the contributor, was obtained in a follow-up communication or was contained in the 

committee's records or in prior reports that the committee filed during the same two-year 

election cycle. 11 CFR §104.7(b). 

Facts and Analysis 

Itemized contributions from individuals were reviewed for disclosure of occupation and/or name 

of employer. For itemized individual contributions totaling $326,655 or approximately 26% of 

total contributions ($1,261,433) itemized.i LCVAF failed to adequately disclose occupation 

and/or name of employer (occ/noe). In most instances, LCVAF disclosed "information 

requested" or "requested" for occupation and/or name of employer. 

During audit field work, LCVAF representatives maintained that the required follow up requests 

for missing information had been made. They were, however, unable to provide any copies of 

correspondence requesting the missing information, e-mails or logs of phone calls to document 

LCYAF also functioned as a conduit. Included in the review total of$I,261,433 was $855,142 in itemized 

contributions to LCYAF and itemized memo entries for $406,291 in non-deposited pass through earmarked 

contributions. 

5 
9 

they made these requests." An LCVAF representative did review reports filed for the subsequent 

election cycle and found that a significant number of contributors, whose reported contributions 

had lacked adequate disclosure in the audit period, had reported contributions which included 

adequate or sufficient disclosure of occupation and/or name of employer in the subsequent 

election cycle. The representative further noted that had the reports for the audit period included 

the additional information, the deficiency would have been resolved. 

The Audit staff presented this matter to LCVAF representatives at the exit conference explaining 

that without the documentation supporting best efforts, the matter would appear as a finding in 

the audit report. LCVAF representatives reiterated that documentation supporting follow up 

requests for missing information did exist and that it would be provided as soon as it could be 

found. 

Interim Audit Report Recommendation 

The Audit staff recommended that LCVAF take the following action: 

•	 Provide documentation that it exercised best efforts to obtain, maintain and submit the 

required contributor information; or 

•	 Make an effort to contact those individuals for whom the required information was not 

in LCVAF files and provide documentation ofsuch efforts (such as copies ofletters to 

the contributors and/or phone logs); and, file amended reports to disclose any 

information in LCVAF's possession as well as information obtained in response to this 

recommendation. 

Committee Response to Recommendation and Audit Staff's Assessment 

LCV AF responded by acknowledging the substance of the finding. The response indicated that 

contributions were received through the internet, through events, other high-donor solicitations 

and direct mail. The response pointed out that LCVAF provided documentation showing that all 

solicitations requested the donor's occupation and employer and stated such information was 

requested in accordance with FEC regulations. When necessary, LCVAF development staff 

would attempt to obtain missing information through phone calls, emails or other personal 

contacts. LCVAF also noted that "Unfortunately, the organization's donor database in use at the 

time did not accommodate the inputting of information about such contacts." 

LCVAF believed that because of the procedures in place, most of the missing occ/noe 

information involved contributions received in response to direct mail solicitations which were 

processed by a caging firm it no longer retains. Although LCVAF required the caging firm to 

send an LCVAF prepared letter to all donors lacking occ/noe information, the caging firm "was 

unable to document that it had sent the letters in accordance with LCVAF's instructions." Lastly, 

evidence suggests "that the missing information was obtained for approximately one-third of the 

dollar value of the errors found by [A]udit staff because it appears in the LCVAF database in 

connection with contributions made in 2007-2008 by the same donors." 

LCVAF's response further explained that: 

6 A comparison of original and amended reports revealed no change (improvement) in the reporting of occupation 

and/or name of employer which could have indicated follow up requests had been sent. 
10 

"Although documentation maintained by the organization's vendor was not deemed 

adequate by the [A]udit staff, it is clear that the organization was aware of and tried in 

good faith to comply with the best efforts requirements, and that it believed these 

requirements were being met. In addition, LCVAF has spent significant time and effort 

reviewing its files to obtain the missing information for a large portion of the individual 

donors identified by the [A]udit staff. This information, which appears on the amended 

reports that LCVAF has filed in response to Finding 1, reduces the number of 2005­

2006 contributions for which occ/noe information is missing from the 26% error rate 

noted in the IAR down to about 8 %." 

" ... Furthermore, LCVAF's new caging firm is maintaining copies of all letters sent to
 

obtain missing occ/noe information, as is LCVAF's development staff with respect to
 

their own efforts, so that the documentation problem identified by the [A]udit staff
 

should not recur."
 

The absence of the documentation supporting subsequent requests to contributors for occ/noe 

prevented LCVAF from establishing "best efforts." Establishing "best efforts" became 

unnecessary when a review of the amended reports for the audit period filed in response to the 

interim audit report revealed that LCVAF materially corrected the disclosure of occupation/name 

of employer using information disclosed in the subsequent election cycle.