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Released 1/28/86

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fEDERAL ELECTION COMMISSION

WASHING10N,D.C. 204&3 A8S-7

C"

REPORT OF THE AUDIT DIVISION

ON THE

PHIL SHEA FOR CONGRESS COMMITTEE

I. Background

A. Overview

This report is based on an audit of the ~hil Shea For

Congress Committee ("the Committee"), undertaken by the Audit

Division of the Federal Election Commission in accordance with

the provisions of the Federal Election Campaign Act of 1971, as

amended ("the Act"). The audit was conducted pursuant to Section

438(b) of Title 2 of the United States Code which states, in

part, that the Commission may conduct audits and field

investigations of any political committee required to file a

report under section 434 of this title. Prior to conducting, any

audit under this section, the Commission shall perform an

internal review of reports filed by selected committees to

determine if the reports filed by a particular committee meet the

threshold r~quirements for substantial compliance with the Act.

The Committee registered with the Clerk of the House of

Representatives on April 3, 1984. The Committee maintains its

headquarters in Lowell, Massachusetts. The Audit covered the

period March 27, 1984, the opening date of the first report filed

by the Committee, through December 31, 1984, the closing date for

the latest report which should have been filed at the time the

audit was approved.1/ The Committee reported a cash balance on

March 27, 1984 of $-0-; total receipts of $374,518.06: total

expenditures of $373,478.97; and a cash balance on October 15,

1984 of $1,289.59. ~I

This audit report is based on documents and workpapers which

support each of its factual statements. They form part of the

record upon which the Commission based its decisions on the

matters in the report and were available to the Commissioners and

appropriate staff for review.

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The Committee did not file a disclosure report covering the

period October 16, 1984 through December 1, 1984 (see

Finding II.A.)

The reported totals do not calculate correctly due to

mathematical errors.
B. Key Personnel .

The Treasurer of the Committee during the period

covered by the audit was Francis McDougall.

c. Scope

The Audit included such tests as verification of total

reported receipts and expenditures and individual transactionsJ

review of required supporting documentationJ analysis of

Committee debts and obligationsJ and such other audit procedures

as deemed necessary under the circumstances.

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II. Audit Findings and Recommendations

Committee officials chose not to comment on the findings

discussed at the exit conference, but stated that an official

explanation addressing each of the problem areas would be

included in the Committee's response to the interim audit report.

The Committee did not submit a written response to the findings contained in the interim audit report within the period providedJ

however, amendments were filed as noted in Findings A. and B.

prior to the Committee's receipt of the interim audit report•

. A. Failure to File Reports

• Section 434(a) (2) (A) (iii) of Title 2 of the United

States Code states, in part, that if the political committee is

the princioal campaign committee of a candidate for the House of

Kepresentatives in any calendar year during which there is a

scheduled election for which such candidate is seeking election,

the Treasurpr shall file quarterly reports, which shall be filed

no later than 15 days after the last day of each calendar

r quarter: except that the report for the quarter ending December

31 shall be filed no later than January 31 of the following calendar year.

The Committee did not file a disclosure report for the

period October 16, 1984 through December 31, 1984. Based on the

Audit staff's review of the bank records made available, $44,345

in receipt and $44,537.41 in disbursement activity occurred

during this period.

On September 26, 1985 the Committee filed a disclosure

report covering the period from October 16, 1984 through December

31, 19S~.

Recommendation

The Audit staff recommends no further action on this matter •

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B. . Disclosure of Loans

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Section 431(B)(A)(i) of Title 2 of the united States

Code states, in part, that the term "contribution" includes any

gift, subscription, loan, advance, or deposit of money or

anything of value.

Section 434(b) (3) (E) of Title 2 of the united States

Code requires that each report shall disclose the identification

of each person who makes a loan to the reporting committee during

the reporting perion, together with the identification of any ~ndorser or guarantor of such loan, and date and amount or value

of such loan. °

In addition, 11 C.F.R. § l04.3(d) requires the

disclosure of the amount and nature of outstanding debts and

obligations on Schedule C (Loans) or Schedule D (Debts and

Obligations), as appropriate.

During the review of the Committee's loan activity, it .~ was noted that the Committee reported the receipt of $60,000 in

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loans from the Candidate. An examination of the loan

oocumentation indicated that the Candidate received loans of

$40,000 and $20,000 from a bank. The loans were secured by

_. mortga~es on the Candidate's personal residence. The CandidatLI

in turn, loaned $60,000 to the Committee. However, the Committee

oid not di~~lose the terms of the loan (i.e. ori~inal source,

due cate, collateral, etc.) on Schedule C (Loans Schedule).

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On September 26, 1985, the Committee filed an amended

Schedule C which disclosed the terms of the loan •

_~ec0J.1.!m~ndation

The Audit staff recommends no further action on this matter.

c. Matters Referred to the Office of General Counsel

Certain matters noted during the audit were referred to

the Commission's Office of General Counsel•