FEDERAL ELECTION COMMISSION

August 2. 1996

MEMORANDUrvt

TO:

FRO~\'t:

RON M. HARRlS

PRESS OFFICER

PRESS OFFICE

ROBERTJ.COSTA

ASSISTAXT STAFF D~";;(' Al:DIT DI\!ISI()~

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SUBJECT: PL:BLIC ISSl;..·\NCE OF THE FINAL AUDIT REPORT O~

TliE ID.AHO REPUBLIC&L\N PARTY FEDERAL CAtvIPl\IGN

ACCOL11'T

Attached please find a copy ofthe final audit report and related documents on the

Idaho Republican Part)· Federal Campaign Account which \vas approved by the

Commission on July 25. 1996.

Informational copies ofthe report have been received by all parties invol\~ed and

the report may be released to the public.

Attachment as stated

cc: Oftice of Gener31 Counst:l

Office of Pubiic Disclosurt:

Reports ..\nalysis Di\'ision

FEe Library

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REPORT OF THE AUDIT DIVISION

ON

.Idaho Republican Party

Federal Campaign Account

Approved Ju~· 25, 1996

FEDERAL ElECTIOS CO!\tMISSION

999 E STREET, N.\\'.

\\'ASHI~GTOS, D.C.
l-ABlE OF CONTENTS

IDAHO REPUBLICAN PARTY

FEDERAL CAMPAIGN ACCOUNT

Page

Executive Summary

Final Audit Report 3

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'r Background 3

'0 Findings 5

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Legal Analysis 19 ~.f)

N Transmittal to Comminee 25

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Chronolog)' 27

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FEDERAL ELECTI(), C( ),\'" \I5SI()l\;

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FINAL AUDIT REPORT

ON

ID..\HO REPUBLICAN PART\" FEDERAL ('Al\IPAIGN ACCOlTNT

EXECUTIVE SUl\1MAR\'

The Idaho Republican Pany Federal Campaign Account (the Committee) registered

\\.ith the Federal Election Commission on September 19, 1983 and maintains its

headquaners In Boise. Idaho.

The audit "'as conducted pursuant to 2 U.S.C. Section 438(b). "'hich states that the

Commission may conduct audits of any political comminee \\'hose reports fail to meet the

threshold level of compliance set by the Commission.

The findings ofthe audit "'ere presentt'd to the Comminee at an exit conference

held at the completion offieldwork on September 29, !19S and later in an interim audit

repon. The Comminee's response to those findings are included in this final audit report.

As pan ofits response to the interim audit report, the Comminee provided a

detailed description ofrevised internal procedures intended to avoid the problems

discussed belo,,·.

RECEIPT Of PROIIIBITED CQ:STRIBl'TIO:SS - II CFR Sectio'ls I02.5(a)( I)(i):

106.5(g)( 1)-(2): 100.7(a}( I )

a. Comminee Loan S«ured b~' Prohibited Funds from tbe Non-Federal

Account

The Committee recel\'ed a loan in the amount of $75.000: and. as pan ofthe

loan agreement. established a cenificate of deposit (CO) in the amount of $75.000 to be

used as collateral for the loan. The CD \\as established ,,·ith a transfer from a non-federal

bank account maintained by the Idaho Republican Pany. \\'hich held primarily prohibited

funds.

The Committee recel\ed a prohiblted contribution from its non-federal

account "'hen the CD "'as established Funher. these prohibited funds were then used to

secure a loan

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b. Prohibited Traasfer from NOD-Federal Accouat

On the day the Commit :e repaid the loan. the Committee redeemed the CD

and deposited the funds into its non-federal account thus refunding the impennissible funds

received as described above. Also on that date. the non-federal account transferred

$75..521 to the federal account. Without these transactions.. the federal account \\'ould not

have had the funds available to repay the loan.

This transfer activity bet\\'ccn the federal checking account and non-federal

account resulted in a prohibited contribution from the non-federal account.

In response to the interim audit repon.. a Committee official noted that the

loan guarantee and subsequent transfers \\'ere made as a result oflack of knowledge ofFEe

regulations with regard to the use of non-federal funds and not an attempt to circumvent

Federaz la\\' or FEe regulations.

REPQRTI~G Of D'S8l1BSE"ESTS - 11 CFR Sections 104. 1O(b) and 106.5(g)(3).

The Audit noted disclosure problems on the Schedules H-4 filed by the Committee for

shared expenditures. The Committee's disclosure of 151 disbursements totaling S169..446

either contained inaccurate infonnation or lacked required infonnation.

In response to the interim audit repon.. the Committee filed amended Schedules H-2

and H-4 \\'hich materially corrected its disclosure reports.

I\tISSTATEl\IENT OE flNANOAL A01\'m' - 2 U.S.C. Sections 434(b)(1). (2).. and

(~). Reponed totals for ~eipts and disbursements were understated b~· $46..091 and

$77.458 respectively.. for 1993. Beginning and ending cash were also misstated. For 1994:

reponed totals for receipts were understated by S26O..931: reponed disbursements were

overstated by $69.875: and.. beginning and ending cash \\'ere misstated.

In response to the interim audit report. the Committee filed amended disclosure

reports Y..hich materially corrected the public record.

D.SCLOSl'RE Of CQ:SIRIBrTIQ~SfRQ\II~DI\'IDl4LS - :! U.S.C Sections

434(b)(A)and~31(13)(A);]1 CFR Sections 110.1(k}()land l04.7ta)-(b). The ..\udit

detemllned that there \\'as inadequate disclosure of occupation and name of employer: and.

in additton. the Comminee failed to disclose the correct contributor name for

approxlmatel~ 42°/0 of contributions requiring such disclosure.

In response to the interim audit report. the Committee provided copies of leners it

had sent to contributors requesting occupation and name of employer infonnation: as well

as copies of so :le of the responses It had received.

Pace 2, Approved 7/25/96
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FEDERAL ElECTIO~ CO~'~1ISSI0N

a

REPORT OF THE AUDITDIVISION

ON THE

IDAHO REPUBLICAN PARTY FEDERAL CAMPAIGNACCOUNT

I. BACKGROUND

A. AUDIT AUTHORln'

This repon is based on an audit ofthe Idaho Republican Party Federal

Campaign Account (the Committee) undertaken by the Audit Division ofthe Federal

Election Commission in accordance \\ith the provisions ofthe Federal Election Cmnpaign

Act of 1971. as amended (the Act), The audit was conducted pursuant to Section 438(b) of

Title 2 ofthe United States Code which states. in part. that the Commission may conduct

audits and field investigations of any political comminee required to file a report under

section 434 ofthis title. Prior to conducting any audit under this subsection. the

Commission shall perform an internal revie\\· ofreports filed by selected comminees to

detcnnine ifthe repons filed by a particular committee meet the threshold requirements for

substantial compliance \\ith the Act.

B. AUDIT CO\'ERAGE

The audit covered the period from January I.. 1993 through December 31 ..

199~.1 The Comminee reponed a beginning cash balance at January 1.. 1993 ofS48..467~

total receipts for the period of S688..7~:!: total disbursements for the period of $1 ..078..823:

and an ending cash balance on December 31.. 1994 ofS59..583.2

ActiVity and records outside ofthe audit penod \\ere reviewed as necessary (see Finding II.A.).

All figures In thiS report have been rounded 10 the nearest dollar The amounts do not foot due to

mathematical errors on the Committee's summary pages. Total receipts and total disbursements

were calculated by summang the current penod totals for each reponing period. These amounts

differ from the figures for total receipts and tota: disbursements ($916.589 and S905.473.

respectively) calculated by summing the calendar ~ear·to-date amounts reported for 1993 and 19Q4

(see Fmdlng II C.)

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c. CO!\t!\IIITEE ORGANIZATION

The Comminee registered ,,;th the Federal Election Commission on

September 19. 1983 and maintains its headquaners in Boise. Idaho. The Treasurer during

the period covered by the audit \..'as Mr. Gus Pomeroy. On September 25.. 1995. Mr.

Pomeroy ".as succeeded by ~1r" Richard \\". Jackson. the Comminee's current Treasurer.3

To manage its federal financIal activity. the Comminee maintained four

bank accounts at different times during the audit period. From these accounts the

Comminee made approximatel\" 1.. 500 disbursements. Approximately 13..000

contributions (about $502.000) from indi\'idt,;...lls were received. In addition.. the

Committee received 13 contributions (about S14..000) from other political committees, one

receipt (about $30.000) from the State ofIdaho Election Campaign Fund.. and 23 transfers

(about $418.000) from its non-federal comminee for shared expenses, The Committee also

received approximately $~.OOO in interest on its bank accounts and had a $30.000 bank

loan outstanding as of December 31. 19Q4."

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D. AUDIT SCOPE ASD PROCEDl~RES

The audit covered the follo";ng general categories:

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The receipt of contributions or loans in excess ofthe statutory

limjtations~

the receipt of contributions from prohibited sources.. such as those

from corporations or labor organizations (see Finding ItA.):

proper disclosure of contributions from individuals. political

committees and other entitles. to include the itemization of

contributions \\ hen reqUired. as "'ell as. the completeness and

accurac~ of the infonnation dIsclosed (see Finding 11.0,):

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4. proper disclosure of dIsbursements includIng the itemization of

disbursements ,,"hen reqUITed. as "'ell as. the completeness and

accurac~ of the lnfonnalion disclosed (see Finding II.B.):

Althoug.h an amended Statement of Or~anizatlon "'as not filed until August lQQ~. a Committee

offiCIal stated Ui3t Mr Pomero~ ~came Treasurer In Januar:. I QQ~ All repvr1s filed dUring the

audit penod "ere signed b~ \1:- Pomefo~ An amended Statement of OrgaOlzatlon \\as timely filed

on September 5. 1QQ~ to deSignate '1r Jackson as the current Treasurer of record

As presented at Fmdmg II C the Commmee's repons understated receIpt' and disbursements

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5. proper disclosure ofCommittee debts and obligations;

6. accuracy oftotal reponed receipts~ disbursements and cash balances

as compared to Committee bank records (see Finding II.C.)~

7. adequate recordker.ping for Committee transactions;

8_ proper disclosure ofthe allocation of costs associated with

administrative expenses and activities conducted jointly on behalf of

federal and non-federal elections and candidates (see Finding II.B.);

and

9. other audit procedures that were deemed necessary in the situation.

Unless specifically discussed below" no material non-compliance Y.as

detected. It should be noted that the Commission may pursue further any ofthe matters

discussed in this repon in an enforcement action.

II. AUDIT FINDINGS AND RECOf)tMENDATIONS

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A. RECEIPT OF PROHIBITED COST"'~BL'TIONS

',n Section 102.5(a)(1 )(i) ofTitle 11 ofthe Code of Federal Regulations states..

in pan. that each organization including a pany comminee.. \\'hich finances political

activity in connection "ith both federal and non-federal elections and which qualifies as a

political committee under 11 CFR 100.5 shall establish a separate federal account in a

depository in accordance "ith 11 CFR pan 103. Such account shall be treated as a

separate federal political comminee ",·hich shall comply ",ith the requirements oftbe Act.

Only funds subject to the prohibitions and limitations ofthe Act shall be deposited in such

separate federal account. All disbursements~ contributions~ expenditures and ttansfers by

the comminee in connection \\ith an~' federal election shall be made from its federal

account. No transfers may be made to such federal account from any other account(s)

maintained by such organization for the purpose of financing activity in connection with

non-federal elections. except as provided in 11 CFR 106.5(g) and 106.6(e).

Section 106.5(gX I ) of Title 11 of the Code of Federal Regulations states

that committees that have established separate federal and non-federal accounts under 11

CFR 10~.5(a)(1)(i) shall pay the expenses ofjoint federal and non-federal activities by

choosing one of the follo,,·ing options' pay the entire amount of the allocable expense

from its federal account and transfer funds from its non-federal account to its federal

account solely to cover the non-federal share of that allocable expense~ or~ establish a

separate allocation account into ",-hICh funds from its federal and non-federal accounts are

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deposited solely for paying the allocable expenses ofjoint federal and non-federal

activities. Committees which establish a separate allocation account are further required to

make transfers from its federal and non-federal accounts to its allocation account in

amounts proportionate to the federal or non-federal share of each allocable expense.

S\.:~\:vn 106.5(g)(:!)(ii) and (iii) ofTitle 11 ofthe Code of Federal

Regulations states that funds transferred from a comrninec's non-federal account to its

federal account or its allocation account are subject to the follo\\1n£: for each transfer~ the

comminee must itemize in its repons the allocable activities for \\'hich the transferred

funds are intended to pay as re4uired by 11 CFR 104.10(b)(3): and. such funds may not be

transferred more than 10 days before or more than 60 days after the payments for v/hich

they are designated are made. Any ponion of a transfer from a comminee's non-federal

account to its federal account or its allocation account that does not meet the requirements

of paragraph (g)(2)(ii) ofthis section shall be presumed to be a loan or contribution from

the non-federal account to a federal account. in violation ofthe Act.

Section 100.7(a)( 1) of Title 11 of the Code of Federal Regulations defines

the tenn "contribution" to include all loans received by the Comminee. The term "loan" is

defined to include a guarantee. endorsement. or any other form ofsecurity. The section

further states that for each endorser or guarantor. the loan is deemed a contribution to the

extent that it remains unpaid.

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1. Committee Loan Secured b\" Prohibited Funds from the

NOD-Federal ACCQunt

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On October 1 199~. the Comminee received a six- month loan

from \\"est One Bank of Idaho in the amount ofS75.000. The loan had an interest rate of

5 4°;0 and "·as to be repaid on April ~O. 1993 The loan proceeds "'·ere deposited into the

Committee's federal savings account. ,,"hich made periodic transfers to its federal checking

account for the payment of shared expenses.5

As part of the loan agreement. the Comminee established a

certificate of deposit (CD) \\·1th \\"est One Bank of Idaho in the amount of $75.000 to be

used as collateral for the loan The CD "as estabhshed on October 2 L 1q92 \\'ith a

$75.:50 6 transfer from the Committee's non-federal bank account. and had a maturity

Throughout the audit penod all ('f the CommIUee s ban~ accounts v.ere mamtamed at \\'est One

Ban~ of Idaho The Commtnee u~ed the federal chect..tng account for all federal and shared

e'penses. dunng the ftrst SI\ months of lQQ3 After June 30. IqQ3. the Commmee began paymg Its

shared e'penses as des.cnbed under 1I CFR ~'06 5(g)4 , )( It from thiS account.

6 Of thIs amount. S75.00Q v. as to establtsh the CO and S"50 v. as to pa~ a "prepaid finance charge·'

reqUired b~ "'"est One Ban~ as pan of the loan ag.reement
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date of April 20, 1993 \\ith an interest rate of 3.4~o. Based on the CD being issued to the

Idaho Republican Pany and labeled "Federal Account". the Audit stafftreated the CD as a

federal account and determined that neither the interest earned nor the one transfer to the

non-federal account to close this account had been disclosed in reported activity for 1993

(see Finding II.C.1.).

Campaign finance 13\\' in the state of Idaho allo\\'s committees to

receive (.orporate and labor union contributions for the purpose of funding state election

activity. An examination of the existing balance and of deposits made into the non-federal

account during September and October 199:! revealed that the $75.750 transferred from the

non-federal account to secure the loan v.as composed primarily of prohibited funds. The

major source ofthe prohibited funds ap~ars to have been the National Republican

Congressional Comminee (NRCC). The Comminee deposited a $112.000 check from the

NRCC on September ~5. 199:! in its non-federal account. The check \\'as made payable to

the "Idaho State Central Committee. Non-Federal ACCOlL~t". Reports filed by the NRCC

\\;th the Commission disclose this disbursement as a memo entry originating from the

NRCC's non-federal account. Since the transfer \\'as made from the NRCC's non-federal

account. it seemed likely that the funds were from federally impennissible sources. The

Committee only deposited an additional S5.946 in its non-federal account betv.·een this date

and the date ofthe transfer to establish the rD.

In an April 6. t 994 lener from the Committee to the Comn.is-sion's

Reports Analysis Division. a Committee official \\Tote that it negotiated the loan so that

"the federal account [could pay1its' share and the state accounts share of general

administrative costs". The Committee's Post General and Year End disclosure reports for

1991 revealed that subsequent to the receipt ofthe loan. administrative expenses totaling

approximately S118.000 were incurred: about S59..OOO ofwhich was the non-federal

ponion. The repons also indicate that.. during that same time period. about S95.000 was

transferred from the non-federal account to the federal checking account for shared

acti\'ity.7 Therefore. it appeared that not only \\'as the loan secured ·";th non-federal funds

and then used to pay shared expenses from the federal checking account. but that the

non-federal account also continued to reimburse the federal checking account for its

portIon ofshared expenses

Based on the Audit staffs revie\\' of this transaction. it appeared the

non-federal account. in secunng the loan for the Commlnee. made a prohibited

contribU!lon dunng the period the loan \\'as outstanding. As a result of the transfer from

the non-federal account used to establish the CD. the Comminee converted non-federal

funds into federal funds \\'hlCh is a prohibited contnbutlon under 11 CFR 106.5(g)(2) and

102.5(a) Even if the Commlnee had established the CD as a non-federal account. its use

of the CD as collateral for the loan IS still a prohibited contribution pursuant to 11 CFR

100. 7(a){ 1) and 106.5(g )( )

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i A reVle\\ of the Committee' s dl~' Ic~ure reports for 1QQ 1 and IQ92 did not indicate that the nonfederal account o\erpald Its share of expen~es for the electIOn c~cie

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2. Prohibited Transfer from Non-Federal ACCQunt

The Committee repaid the loan on February 18.. 1993 \\ith money

from its federal checking account. The amount repaid \\'as $76,318 ($75.000 in principal

and S1.318 in interest). The Comminee reponed the loan principal repayment and 5627 of

the interest paid on its Schedules B~ the remaining interest paid ($691) was not reported

(see Finding II.C.I.).

Similarly" on February 18" 1993. the Comminee redeemed the CD

for S75.5~ 1 (principal plus 5839 intere~: less $318 early withdra\\ral fee) and derv<;i~c(.!

these funds into its non-federal account. This transfer offunds from the CO~~·.(~:: Sf

federal (CD) account to its non··f~deral account refunded the impermissible fun\J:." ie~eived

on October 21. 1992 and described above in II.A. 1..

Also on February 18.. 1993.. the non-federal account transferred

S75.521 to the federal savings account. \\'hich in tum transferred 579.457 to the federal

checking account. \Vithout these transactions. the federal checking account "'ould not

have had the funds available to repay the loan. The Comminee reponed the $75.521

transfer from the non-federal account to the federal savings account" but did not report the

575'15:!1 transfer from the federal (CD) account to the non-federal account (see Finding

II.C.l ).

Although the $75.521 transfer from the non-federal account to the

federal savings account ,,-as reported.. it \\-as initially disclosed as a loan repayment. The

Comminee later amended its repons and asserted that the transfer represented a

reimbursement for the non-federal share ofadministrative costs and \\'85 not

reimbursement for the loan repayment.S

The Audit staffs rcvjc\\' ofshared expenses incurred during the

period sixty days prior to. through ten days after February 18. 1993" revealed that the

Comminee \\·as due about 539.000 from the non-federal account.9 Furthermore. it was

determined that. in addition to the S75.5:! 1 transfer on February 18" 1993. the Committee

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Based on thIS assenlon and on ~pons filed b~ the Commlnee. the CommiSSIon's Repons AnalySIS

DIVISion requested the Commtnee transfer S:!6.:! I~ from Its federal accuunt to ItS non-federal

account to refund the apparent o\e."ayment for shared non-federal expenses The Comminee

complied on jul~ 13. IQQ~. but did not repon the transfer (see Finding II.C.)

A limIted reVle'" of payments for shared actl"'I~ dunng the two-year audit penod concluded that

the non-federal account had utt1matet~ underpaid (b~ about (SI40.000~ the federal account for ItS

ponlon of total shared e\penses Our anal~ SIS conSidered the S:!6.:! I overpayment noted at

footnote 8 . ho~e\er. thiS anat~sls did not conSider the Impact ofthe 70 day wando" on such

pa~ments as reqUired b~ 11 eFR 106 5(g l

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had also received four other reimbursements from the non-federal account totaling about

519~OOO within the same 70 day period. Finally.. the Audit staff conducted a limited revie\\'

ofthe Committee's shared activity.. as reported on its disclosure reports for 1991 and 1992.

It \\'85 determined that the non-federal account had underpaid its portion ofshared activity

by approximately $3.000. Thus. the Committee could have transferred approximately

523,000 ($39.000 - $19..000 + $3..000) from its non-federal to its federal account for shared

expenses.

However.. in the .-\udit staffs opinion.. the facts indicate that the

$75.521 transfer from the non-federal account to the federal checking account was related

to the loan transaction and not to shared expenses. It is also the Audit staffs opinion that

this transfer activity between the federal checking account and non-federal account has

resulted in a prohibited contribution from the non-federal account of $75.521.

In summary.. as a result ofthe transactions noted above.. the

Comminee received a prohibited contribution from its non-federal account when the CD

"'as established. Further.. these prohibited funds were then used to secure a loan. Although

the prohibited funds were returned to the non-federal account when the CD was liquidated.

another prohibited contribution resulted when the money ~'as again transferred from the

Comminee's non-federal account to a federal checking account for other than shared

expenses, In addition to the loan secured with prohibited funds that enabled the Committee

to pay shared expenses from the federal checking account.. the non-federal committee

continued to reimburse the allocation account for its share of allocable expenses. As a

result.. the non-federal account paid for both the federal and non-federal share of allocable

expenses,

The Audlt staff advised the Committee's representative ofthese

matters at an interim conference and at the exit conference. The Committee's

representative stated that it would take the necessary steps to comply \\ith the Audit staffs

recommendation,

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c. In the interim audit repone the Audit staff recommended that the

Committee demonstrate ".hy the loan guarantee and subsequent transfers should not be

considered contributions from the non-federal account in violation of 11 CFR §§ 10:!.5 and

100.7, Absent such a demonstration. the Committee \\as asked to submit documentary

evidence identifying each shared expense assOCiated \\'uh the $75.521 non-federal

reimbursement to the allocation account

In response to the Intenm audit report. a Committee official \\Tote:

'·The Idaho Republican Pany loan guarantee and subsequent transfers were made as a

result of lack of kno\\'ledge of FEe regulations \\'lth regard to the use of non-federal funds

The (Committee]. in filing the 1q93 FEe report. \\'as not attempting to circumvent Federal

la\\' or FEe regulations To a\'old an~ future occurrence. [the CommIttee has)

implemented traIning programs and Improved office procedures to avoid future problems."

The ne\\' office procedures \\'ere further outhned In the response.

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Therefore. the Audit staffs opinion remains unchanged. The

Committee's use of non-federal money to secure a loan. as well as the subsequent transfer

offunds from the non-federal account used to repay the loan. resulted in prohibited

contributions from the non-federal account.

B. REPORTI~G OF DISBlIRSEMESTS

Section 104. 1O( b) of Tule 11 of the Code of Federal Regulations states. in

relevant part. that a political committee that has established separate federal and

non-federal accounts under 11 CFR 102.5(a)(1 )(i) shall allocate bet\\reen those accounts its

administrative expenses and its costs for fundraising. e:\~:Tlpt activities. and generic voter

drives according to 11 CFR 106.5 and shall report those allocations. For the reporting of

the allocation of direct fundraising costs. the committee shall assign a unique identifying

title or code to each such program and state the allocation ratio calculated for the program

or activity, The committee shall state the full name and address of each person to whom

the disbursement \\'as made. and the date. amount and purpose of each such disbursement.

Section I06.5(g)(3) ofTitle II of the Code of Federal Regulations provides

that a political committee that transfers funds bet\\'een accounts and pays allocable

expenses according to this section shall report each such transfer and disbursement

pursuant to 11 CFR 104. 1O(b).

During the audit period. the Committee paid shared expenditures from its

federal checking account as required, Shared expenditures \\'ere itemized on Schedules

H~: ho\\'ever. the federal/non-federal shares disclosed for all expenditures were based on

the ratio derived (on Schedule H-l) for administrative/generic voter drive costs (12.50/0

federaV87.5 % non-federall. 1o Separate ratios "'ere not developed for other categories of

expenditures as required. such as fundraislng expenditures or expenditures in direct support

of candidates. Reimbursements from the non-ic:deral account \\'ere made on an irregular

basis. usually \\'hen the federal checkIng account balance \\'as lo\\'. \\'orkpapers were not

available \\'hich detailed those shared expenditures associated \\'ith a particular

reImbursement from the nor.-federal account. Finally. as discussed at Finding I1.C.~ the

Committee failed to disclose some of the reImbursements received from the non-federal

account on Schedules H-3.

Dunng our reVle\\ of dIsbursements. the ,~udlt staff noted disclosure

problems on the Schedules H-4 filed b~ the Committee for shared expenditurps. The

10 In ItS IQQ~ Apnl Quanerl~ report. the Commmee allocated ail of Its shared expenses usmg a 20°/0

federa1'80o 0 non·federal rat 1(' Ho", e\ e~. since the Audit staff S fe\ Ie" of reimbursements from the

non-federal account mdlcated the non·federal account had not reimbursed the Commtnee an excess

of Its pennlsslble share. no COrTectl\e aC~lon IS reqUired

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Committee's disclosure of 151 disbursements totaling S169,446 either contained inaccurate

information or lacked the required infonnation. Each area of concern is discussed below.

1. Disclosure ofSbved FundraisinK Expenditures

The .,",udit statTs reviev.. ofComminee disbursements noted that 90

fundraising expenditures. totahng $140.517. \'·ere not identifled as such on Schedules H-4.

nor \\'ere event codes disclosed asSOCiating each fundraising expenditure ";th a particular

event or activity. Additionally. the Comminee failed to file appropriate Schedules H-.! to

disclose fundraising activitIes and ratios developed for each fundraising activity or event.

As noted. the federal/non-federal portions ofComminee fundraising

expenditures had been disclosed on Schedules H-4 utilizing the ratios dp.rived for

administrative/generic voter drive expenditures. rather than using ratios cit:veloped for each

fundraising activity based on funds received. as required.

The Audit stafT used contributor lists provided by the Committee.

\"hich detailed contributions deposited to the federal checking account and those deposited

to the non-federal account for each fundraising eventlactivit),. to calculate the appropriate

ratios to be used for disclosing the federaVnon-federal portion of each fundraising

expenditure on Schedule H-4. For those fundraising events for "'hich such contributor

information "'as not available. the Audit staffcalculated an average ratio based on the

ratios developed for the other fundraising events. For 1993. the Audit staff de!mnined the

understatement in the disclosure ofthe fedel6ll share offundraising expenditures to be

about S32.000: and. for 1994. the federal share of fundraising expenditures "CiS understated

by about $68.000.

Based on our I'e\'ie\\' ofComminee fundraising activities and

disbursement records. the .,,"udit stafT determined that the Comminee understated the

federal share of 90 fundraising expenditures by $1 ooJ7'.

The Committec's Executive Director "'as provided with "'orkpapers

detailing the ratios calculated by the .-\udn stafT for each event. as well as the information

required to be disclosed on Schedule H':~ for each fundralsing activity or event.

Disclosure of ..\ddress for Pavroll Expendityres

The Audit stan's rC"Ie\\ also noted thaL for all payroll expenditures

(61 Items) reported on Schedules H~ tiled as pan of Its 1993 Year End ($18.105) and

1994 :\pril Quanerly ($1 0.8~~ \ disclosure reports. the Committee failed to provide

addresses as reqUIred.

The AudIt st~fr :.ld\'lsed tht: Commlttee's Executive Director of thes~

matters at the eXit conference The Committee's representative noted that the necessary

amended schedules "ouid be filed

Page 11, Approved 7/25/96
10

In the interim audit repon.. the .~udit staffrecommended that the

Committee file amended Schedules H-4 (for Line 21 a) to correctly disclose the fundraising

expenditures noted above, It was also recommended that the Committee file Schedules

H-2 to disclose each fundraising event and its allocation ratio: and to disclose complete

addresses for payroll transactions discussed above.

In addition. the Audit staff recommended that the Committee detail

in \\Titing. changes it has implemented to comply \\'ith the requirements of 11 CFR

§§ I02,5. 104.10 and 106,5.

in response to the interim audit report.. the Committee filed amended

Schedules H-2 and H-4 \\'hich materially corrected its disclosure reports, In addition.. the

Committee's Executive Director provided a detailed description ofthe procedures it has

since implemented to ensure compliance \\ith the requirements ofthe above cited

regulations.

1

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c. l\1ISSTAT[~t[~T Of F"ASCIAL ACTI\'ITY

c

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Sections 434(b)(1). (:!) and (4) of Title 2 of the United States Code state.. in

relevant part. that each report shall disclose the amount of cash on hand at the beginning of

each reponing period. the total amount of all receipts.. and the total amount of all

disbursements for the reponing perioo and calendar year.

The Audit staffs reconciliation ofreported financial activity to bank. activity

for calendar years 1993 and 19~ Te\'ealed the follo\\ing misstatements:

1. JanuaO 1 J99, tbrQul:b December, 1 1993

a BCi:lMln~ Casb-on-Hand Balance

The Committee reponed a beginning cash balance at January

1. 1993 of $48.467. Utilizing the Committee's financial records. the Audit staff detennined

the correct beginning cash balance to he $87.519. Therefore. the Committee's beginning

cash balance \\'as understated b~ S39.052. The Commlnee did not maintain \\1orkpapers or

other records \\'hich demonstrated ho\\' the reponed amount for beginning cash on hand

"'as obtained. Absent such informatlon. the Audit staff "'as not able to detennine the

reason(s) for thiS misstatement. I I

II As discussed In Finding. II A the Audit stafT noted that the unreported S:5.000 transfer from the

non-federal account to the CD account In 1QQ~ posslbl~ pro\lded a panlal explanatIon for the

misstatement In ~gannang cash on hand

Page
.-Y""......- .."'..-•• ...~.t'~ VI .....U .....1 I O. IIn;n;lun;.. me: \",ORUnIUc:e-S reponea receipts were

understated by 546..091. The understated amount resulted from errors and omissions

occurring primariIy during the first six months of 1993 and \\'85 (.omposed ofthe

follo\\ing:

interest not repon·:,j

transfer from non-federal account under-reported

contributions not reported

Total Understatement

c. Disbursements

$ 866

$ 1..380

$43.845

$46.091

The Cttmminee reported total disbursements of $270.335 for

t 993. Utilizing the Committee's financial records.. the--Audit staffdetermined that the

Comminee should have reponed total disbl!: :Anents of5347.793. Therefore. the

Comminee's reponed disbursements "'-ere understated by a net amount of$77..458.

CD wmsfer to non-federal account not reported

(see Finding II.A.)

Interest paid on loan not reported (see Finding II.A.)

federal (money market) account transfer to non-federal

account not reponed (see Finding ItA.)

CD "Oithdra\\Oal penalty not reponed (see Finding nj'~.)

miscellaneous reconciling adjustments

Total Understatement

d Endlnl: Cash-on-Hand Balance

575..521

S 691

S 845

S 318

S 81

On December 31 .. 1993. the Committee reponed an ending

cash-on-hand balance of S14.709 The Audit staff determined the correct amount to be

S~~.043. ThIs dispanty resulted In a $7.334 net understatement In the Comminee's

Page 13, Approved 7/25/96
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tepOrted ending cash. The understatement was primarily the result ofthe misstatements

described above and a 5350 mathematical error in the Committee's reported figures at

December 31, 1993.

2. January J J994 throueb [)ecember 31 J924

a. Receipts

The Committee reported total receipts of $452.495 for 1994.

Utilizing the Committee's financial records. the Audit staff determined the Committee

should have reported total receipts of5713.426. Therefore" the Committee's receipts were

understated by a net amount of5260.931. This understatement resulted from the

following:

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transfers for shared expenses from the non-federal account not

reponed

interest not reponed

contributions not reponed

miscellaneous reconciling adjustment

Total (net) Understatement

b. [)i$~t$

S 231.959

$ 815

$ 28.550

$ (393)

$ 260.931

The Committee reponed total disbursements of$808.488 for

1994. Based on our revie\\' ofthe Committee's records.. the Audit staff detennined that the

Comminee should have reported total disbursements of $738..613. Therefore. the

Committee's reponed disbursements \\'ere overstated by a net amount of $69.875. This

overstatement resulted from the follo\\ing:

payroll disbursements not reported

transfer to non-federal account not reported

reponed disbursements paid by the non-federal account

math error

disbursements not reponed

Page 14, Approved 7/25/96

$ 61.459

S 26.:!14

$( 16Ll:!6)

S (8..677)
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miscellaneous reconciling adjustment

Total (net) Overstatement

c, Endjoi: Cash-on-Hand Balance

$ 5830

The Conlmittee reported an ending cash on hand balance on

December 31. 1qQ4 of $59.583 This amount ho\\'ever. \\'hen calculated using the

Committee's reported beginning cash. reported receipts. and reportt'd disbursements.

proved to be mathematically incorrect. Based on those figures. ending cash on hand

should have been reported at ($341.241 ).12 The correct ending cash balance as detennined

by the Audit staff based upon the Committee's financial records y;as ($3.. 143), Based on

reported ending cash on hand. this amount ""as overstated by S6:!.726, This overstatement

""as primarily due to the reporting error and to the misstatements noted above.

At an interim conference and at the exit conference. the

'J"> Audit stafT explained the misstatements offinancial activity for 1993 and 1994 to the

Committee's Executive Director. Copies of the bank reconciliations were provided to the

Committee. The Committee's Executive Director agreed to file the amended reports.

The Audit staff.. in its interim audit report.. recommended the

Committee file amended reports for calendar years 1993 and 1994 to correct the

misstatements of financial activity described above. It \\'as further recommended that the

Committee file amended Schedules H-4 for 1994 to disclose the reported non-f~deral

disbursements as memo entries. Finally. the Audit stafT recommended that the Committee

file amended Schedules H-3 to disclose the unreponed transfers from the non-federal

account for "~ared expenses during 1994.

In response to the report. the Comminee filed amended

summary pages. Schedules H-4 and H-3. \\'hich materially corrected its disclosure reports.

'-.-. D. DISCLOSl:RE OF CO'iTRIBl'TIO'S RECEIVED FROl\1INDIVIDliALS

Section 434(b)(3 )(.~) of Tule : of the united States Code requires a

political comminee to report the identification of each person ""ho makes a contribution to

the reporting commlnee In an aggregate amount or \"~lue In excess of S~OO per calendar

year. together ""Ith the date and amount of such contributIon.

L'smg the Comrnmee s calendar ear-t(\-date fIgures. the reponeJ ending cash·on·hand amount of

S59.583 "as calculated cOrTectl~ Ho~e\er. these calendar ~ear·t(\·date amounts were not correct

eIther See footnote ::
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Section 431(13)(A) ofTitle 2 ofthe United States Code defines the term

"identification" to be. in Ule case of any individual. the name. the mailing address., and

occupation of ~~uch individual. as well as the name of his or lter employer.

Section 110.I(k)(I) ofTitle 11 ofthe Code of Federal Regulations states

that any contribution made by more thm one person shall include the signature of each

contributor on the check. money order. or other negotiable instrument. or in a spparate

\\riling.

Sections 104.7(3\ and (b) of Title 11 of the Code of Federal Regulations

state. in part. that when the treasurer of a political comminee sho\\'s that best efforts have

been used to obtain. maintain. and submit the infonnation required by the Act. any report

ofsuch comminee shall be considered in compliance with the Act. The treasurer and the

committee \\;11 only be deemed to have exercised best efforts if all ofthe following are

present: all \\nnen solicitations for contributions include a clear request for the

contributor's full name. mailing address. occupation and name of employer. and include the

statement that such reponing i~ required by Federal la\\': the treasurer makes at least one

effon after the receipt of the contribution. in either a \\nnen request or documented oral

request. \\;thin thirty days of the receipt ofthe contribution. to obtain the infonnation: and

the treasurer repons all contributor information not provided by the contributor. but in the

comminee's possession. including infonnation in contributor records. fundraising records

and previously filed repons. in the same tv.o year election cycle.13

1. Disclosure of Occupatjon!Name ofEmpJQ\'er

The Audit staff revie\\'ed contributions from individuals for

disclosure of occupation and name of employer information on a 100% basis. During this

revie\\" it ""as determined that approximately 90°/0 of the errors occurred after the effective

date of the change to 11 CFR §104.i. Therefore. this finding relates to the contributions

received after that date, The reVle,\' indicated that after rvtarch 31. 1Q94. ofthe 471

contributions requiring itemization. 3 1~o lacked adequate disclosure of occupation and

name of employer.

These errors "ere predominately due to the Comminee disclosing

"Info Requested" \'.·hen the occupation and name of employer infonnation for an individual

\\'as not available, Ho\\'ever. the Committee \\'as unable to produce evidence documenting

that the Infonnatlon had been requested :\ Committee offiCIal stated that Committee

personnel \\'ould sometimes telephone contributors to obtain the Infonnation. Ho\vever. no

\\Tinen record of such telephone calls had heen maintaIned by the Committee.

l

13 The efTectl\ e date of thiS regulation \I, as '1arch ~. IQQ~

Paae If., h;:;?roveC 7/25/9f
'0

C

IS

At the exit conference. the Committee's Executive Director was

advised of this matter and that it appeared the best efforts provisions had not been met.

The Executive Director agreed to file amended Schedules A for the relevant periods

disclosing the missing occupation and name of employer data: and. where the infonnation

could not be obtained, to maintain and submit records of all efforts to acquire it.

In the interim audit report. the Audit staff recommended the

Committee produce documents to demonstrate best efforts had been satisfied: or absent

such a demonstration. make an effort to contact those individuals \"hose contributions

aggregate In excess of S200 in 1994 and ,,'hose occupation and name of employer

infonnation IS incomplete. The Comminee "'as told that the contributors should be

requested to provide the necessary information and should be infonned that Federal 13\\'

requires the Comminee to repon such infonnation, The Committee \\'as requested to

maintain documentation or a \I.-ritten log ofsuch contacts: and file amended Schedules A to

disc lose any occupation andlor name of employer infonnation obtained from those

contacts \\'here the infonnation \\'as requested. but not received.. the Committee \\'35

asked to submit evidence documenting its attempts to obtain the infonnation,

The Committee complied "'jth the i\udit staffs recommendation by

providing copies of letters it had sent to contributors requesting occupation and name of

employer infonnation. All ofthese letters "'ere dated April 18.. 1996, The Committee also

provided a fe"' copies ofresponses it had received prior to the April 18 leners. In a letter

to the Audit Division.. the Committee's Executive Director \\Tote: "The [Committee] \\ill.

in future reponing periods.. enclose an amended memo Schedule A listing all the

contributions for ""hich additional information Vias received or filed, ft

, Disclosure ofContributor Name

During the Audit statTs re\'ie\\' of contributions from individuals. it

"as also dctennined that the Committee failed to disclose the correct contributor name for

approxlmatel~ 4:!~o of contributions requiring such disclosure. This error was a result of

the Committee's practice of attributing contributions received on joint accounts to either

both account holders. or to the account holder \\'ho did not sign the check.. as opposed to

the actual signer..A.ccording to the Committee's representative. only one name per

household \\'3S maintained in the Commlttec's records to avoid sending multiple

fundralslng appeals to the same address The re\'le\\' indIcated that thiS method ofrecording

contnbutlons did not result in the re,elpt of contributlons In excess of the limitations.

:\t the exit conicrcncc the CommIttee's Executive Director \\'as

advised to change 11S system of recordIng and reportIng. contributlons dra\\n on joint

accounts so that contributions "'ere correctl~ attnbuted to the indl\"iduahs) ",'ho made

them The ExecutIve DIrector agr~t:d to make the suggested chang.es to its system.

Pace • , A;:;proveC 7/2S/9E
co

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The Auditstaff. in its interim audit report. recommended that the

Committee provide a detailed description ofchanges it had made to its system to properly

record and disclose contributor infonnation.

In response to the report. the Committee's Executive Director

submitted a narrative describing the design and operation ofits new system for recording

and disclosing contributor information.

Page 18, Approved 7/25/96
1~-4, I+~I

'l1v/?1

FEDER.~l ELECTION COMMISSION

\\'ASHI'GTO~ 0 C ~bJ

July 12, 1996

MEMQRANDUl\1

Roben J. Costa

Assistant Staff Director

Audit Divisi

Kim Brigbt..coleman

Associate fencra1 Counsel

Lorenzo Jolloway -J.. ;~ Assistant General Counsel

FROM:

BY:

TO:

THROUGH: John C. ~.

StaffDi

Abel P. Montez Ll~

Attorney rlY'• •

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SUBJECT' Proposed Final Audit Repon on the Idaho Republican pany Federal

Campaign Account (lRA #499)

I. INTRODUCTION

The Office of General Counsel has reviewed the proposed Final Audit Repon on

the Idaho Republican pany Federal Campaign Account ("~e Comminee") submined to

this Office on f\.1ay 2. 1996. 1 The following memorandum summarizes our comments on

the proposed report. We concur with the findings in the proposed repon which are not

discussed separately in the following memorandum. If you have any questions

concerning our comments, please contact Abel P. Montez.. the anorney assigned to this

audIt.

Because the proposed Final Audit Rel)On does not Include any manen exempt from public

disclosure under II C F R § 24. we recommend that the CommlsslolI'S diSCUSSion of thIs document be

conducted 10 open session

",,,.,, l<\"l lc )D'" " ..... () l( J\,\{ ..Hit )\\

DfDI( "Hit h) ..tHJ.,<.. tH( J'LHll{ "'"J(),o~'\H)

Page 19, Approved 7/25/96
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Memorandum to Robert J. Costa

Final Audit Repon on Idaho Republican Party

federal Campaign Account (LRA "499)

Page 2

II. LOAN SECURED 8\' FUNDS FROM PROHIBITED SOURCES AND

PROIDBITED TRANSFER FROM NON-FEDERAL ACCOUNT TO

FEDERAL ACCOU1'7 (lI.A.!. aDd II.A.2.)

On September 24. 1992. the National Republican Congressional Committee's

(UNRCC") non-federal account issued a S11 :.000 check to the Comminee. which it

deposited into its non-federal account. On October 21, 1992. the Comminee transferred

funds from its non-federal accoWlt" y:hich contained the NRCC funds. to establish a

certificate of deposit (HCD") "ith West One Bank of Idaho C4

West One Bank") in the

amount of 575.000. A review ofthe balance and deposits showed that the funds

transferred from the Comminee's non-federal account included funds derived from

prohibited sources. West One Bank issued the CD to the uldaho Republican PanyFederal ACCOW1~" with a maturity date of April 20. 1993. Because the CD was issued to

the uldaho Republican Party - Federal Account:" the Audit Division treated the CD as a

federal account. On the same date" the Comminee used the CD as collateral for a sixmonth $75,,000 loan from West One Bank. The J:Tomissory note for the loan stated that

the note Vias secured by the CD ·'as described on colleteral (sic) receipt and pledge

agreement." The loan's repayment date was April 20, 1993 - the same date as the CD"s

manJrity date.

The Comminee deposited the $75.000 in Joan proceeds into its federal savings

account. The Committee periodically transferred funds from its federal savings account..

containing the $75.000 in Joan proceeds2 and additional funds totaling approximately

$20,000, into its federal checking account to pay for administrative expenses. The

Comminee"s 1992 Post-General and Vear-End disclosure reports revealed that before

receiving the loan. the Committee's administrative expenses totaled $118.000; the

allocable amount for federal activity was $59,000 and for non-federal activity was

S59.000. The Comminee transferred funds from the non-federal account to the federal

account to pay for the allocable federal and non-federal administrative expenses.

On Februar\' 18. 1993. the Commlnee redeemed the federal account CD for

$75,,521.3 The Co~ml1nee deposued the funds from the CD into its non-federal account.

On the same date. the Commlnee transferred S75,,5~ 1 from Its non-federal account to its

federal savings account. Then the Comminee transferred $79.457 from its federal

savings account to its federal checking account· USing funds from ItS federal checking

----------- In an April 6. 1994 letter from the Commanee to the CommiSSion's Repon AnalySIS Divtslon. a

Commlnee offiCial 'ATOte that It negotlatC'd the loan so that the "federal account Icould pay]llS share and

the state account's shan of general adnunlstrau"e costs ..

11l1s amount lIlcludes $15.000 lpnnclpal) • S83Q (Interest] - S3 18 {early Withdrawal fee)

The Commanee ~poned the S75.5::! I tTansfe!' from the non-federal account to the federal savings

account. but did not ~por1 the S75.5::! I transfer from the federal (CD) account to the non-federal account

Pa:::e 20, Appr~:veC ~, ::S/9t
Memorandum to Robert J. Costa

Final Audit Repon on Idaho Republican Party

Federal Campaign Account (LRA #499)

Page 3

account. the Committee repaid the loan.S ne Committee initially reponed in its

disclosure repons that the transfer of575,521 from its non-federal account to the federul

savings account was for purposes of repaying the loan. Subsequently, the Committee

amended its repons to assen that this transfer was for purposes ofreimbursing its federal

account for the non-federal share of administrative costs.

The Audit Division concludes that the non-federal account. in securing the loan

for the Comminee on October 21. 199~. made d prohibited contribution during the period

the loan \\'as outstanding. The Audit Division also concludes that the transactions on

February 18, 1993 resulted in an additional prohibited contribution because the

Comminee transferred funds from its non-federal account to a federal checking account

for expenses that were not allocable shared expenses under 11 C.F.R. § 106.5. The cover

memorand ~m of the repon directs the Office of General Counsel's attention to these

findings. The Office of General Counsel has reviewed your analysis and concludes that

tv.'o prohibited contributions resulted from the series oftransactions.

A loan made by any person for the purpose of influencing any election for federal

office is a contribution. 2 U.S.C. § 431(8)(A)(i); 11 C.F.R. § 100.7(a)( 1). The term

"Ioan'~ is defined to include a guarantee, endorsement. or (1.11)' other fonn ofsecurity. 11

C.F.R. § 100.7(a)(1 )(i). Idaho law allows candidates or political committees to receive

corporate and labor union contributions for the purpose offunding state election activity.

See IDAHO CODE §§ 67-6601 - 67-6628. (State act governing election campaign

contributions and expenditures by lobbyists does not include a prohibition for corporate

or labor union contributions or expenditures).

A party comminee that finances political activity in connection \\ith both federal

and non-federal elections shall either establish separate federal and non-federal accounts

or estabhsh a political committee. 11 C.F.R. §§ JO:!.5(a)(1 )(i) and (ii). Only funds

subject to the prohibitions and limitatiOns of the Federal Election Campaign Act shall be

deposited in such separate federal accoWlt 6 II C.F.R. §§I02.5(a)(1 )(i) and 106.5(a). A

comminee shall make all disbursements. contributlons. expenditures and transfers in

connection ,,"ith any federal electlon from its federal account. 11 C.F.R. §§ IO:!,5(a)(1 )(i)

and 106.5(g)(i) A comnllnee shall allocate all administrative expenses between the

federal account and any other account matntalned b~ such commlnee for the purpose of

finanCing activity In connection ,,",th non-federal elections. 11 C.F.R. §§ 1O:!.5(a)(1 )(i),

The amount repaid ~as $76.318 CS75.000 lpnnclpalj" S1.318 (mterest], The Committee

reponed the loan pnnclpal repa~ment and S6~7 of the mterest paid on Its Schedule~ B. the remammg

mterest paid (S691 ) ~a.s IH- reponed

Such account shall be treated as a separate federal political committee \4 hach shall compl~ Wltti

the requIrements of tne Act 11 C F R §10: 51a)( 1)4 I)

\

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Memorandum to Roben J. Costa

Final Audit Repon on Idaho Republican Party

Federal Campaign Account (lRA #.499)

Page 4

106.5(a)(2)(i) and (g)(i).' A committee shall pay the entire amount of administrative

expenses from its federal account and transfer funds from its non-federal account to its

federal account solely to cover the non-federal share ofthe expenses. 11 C.F.R.

§ 106.5(g)(1 lei); see also Advisory Opinion ("AO~11992-33 (reponing in-kind

contributions for joint fundraiser).

The Office of General Counsel concurs \\ith the Audit Division's finding that the

securing of the loan to the federal account resulted in a contribution from the non-federal

account to the federal account. Because the CD was used to provide collateral that

enabled the Comminee to secure a loan for its federal account. it appears that the use of

the CD was a form ofsecurin' or something of value that resulted in a contribution from . I

the non-federal account to the federal account. 2 U.S.C. § 431(8)(A)(i) and 11 C.F.R.

§ 100.7(a)(I)~ cf AO 1981-20 (where a state PAC provides funding to a federal PAC to

meet the mlnimun1 requirements to purchase a treasury bill. the state PAC gives a thing

of value to the federal PAC). The non-federal account is prohibited from making

contributions to a federal account.9 11 C.F.R. § 102.5(a)(1 )(i). The original source oftht:

funds used to establish the CD ~'as the NRCC's non-federal account and the Committee's

non-federal account. Because Idaho law pennits corporations and labor organizations to

make contributions. IDAHO CODE §§ 67-6601 - 67-6628, the loan from West One Bank

to the Comminee's federal account may have been secured by funds from prohibited

sources.

IO In fac~ an examination ofthe Committee's non-federal account showed that it

The purpose ofthese allocation rules IS to assure that non-federal funds do not pay for the federal

ponlon ofa shared expense Explanation and Justification of II C.F.R. Pan 106. SS Fed Reg 26058,

26066 (June ~6. 1990)

The Office of General Counsel ag~ With the Audit DivIsion's treatment ofthIS CD as a federal

account.. gIven that the CD. which was non·uansferable and non-negotiable. cenified that the Idaho

Repubhcan pany Federal Account deposited the sum ofS75.0oo anto the CD account It is possible that if

the CD had been estabhshed an the name of Ute Commanee's non-federal account, the bank may not have

made the 104ln to the federal account or changed the conditions and terms of the loan, given that the loan

would have been unsecured

An Issue eXIsts whether tne transaction IS a permIssible transfer under 11 C.F.R

§ t06.5(&)( I) A non-federal account may transfer funds to a federal account for the limned purpose of

payang the non-federal ponl\ln of allocable expenses 11 C F R § §I O~.5(al( 1)(i) and l06.5(g)( 1)

However, tne commlnee must Itemize In Its repons the allocable aCtlVIHeS for which transferred funds are

Intended to pa~ 11 C F.R § 106 5lg)(:!)(II)(A) If the commanee does not itemize the allocable aCtiVItieS,

tne funds transferred will be presumed to be • loan or contnbutlon from the non-federal account to the

federal account II C F.R § 106.5t&)(:!)(III) However. an thiS cat:~. the use of the CD to secure the loan

for the federal commanee ma~ not be consld~d a permissible transfer from the non-federal account to the

federal account because It does not appear to be an allocable non-federal actIvity and the CommIttee did

not itemize It as such

The fact that the Commanee con...rned the funds from the r-.;RCC and Its non-federal account to a

CD does not change the fact the funds ~tTe from a prohibited source The Commanee merely convened

the form of the asset when Il established the CD \0\ Ith \l.- est One Bank
c

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Memorandum to Robert J. Costa

Final Audit Report on Idaho Republican Party

Federal Campaign Account (LRA #499)

Page .s

contained funds from prohibited sources. 2 U.S.C. § 441 b(a). Furthennore. the funds

used to secure the loan as a CD may have contained excessive contributions with respect

to the federal account when aggregated with other contributions to the federal account. 2

U.S.C. § 44la.

This Office also concurs \\ith the Audit Division examination and analysis ofthe

Comminee·s tranSfer activity that occurred on February 18. 1993. The facts reveal that

the transfer activity on that date \\'as for purposes of repaying the loan and not. as the

Committee has claimed. for the payment of allocable administrative expenses. The Audit

Division·s examination reveals tha"C on that date t-'e Comminee redeemed the federal

account CD for $75,521. The Committee then deposited the funds from the CD into its

non-federal account. On the same date, the Comminee transferred $75.521 from its nonfederal accoWlt to its federal savings account. Then the Comminee transferred 579.457

from its federal savings account to its federal checking account. Using funds from its

federal checking account, the Committee repaid the loan.

The tranSactions on February 18. 1993 resulted in an additional prohibited

contribution. The Committee's non-federal account made a transfer to the federal savings

aCCOlL'1t which was then transferred to the federal checking account. 11 C.F.R.

§ 102.5(a). Because the funds from this transfer were then used to pay offthe loan and

not to pay for allocable shared expenses. the transfer was a contribution from the

non-federal account. See 11 C.F.R. § 106.5(g)( 1).
N

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July ~6. 1996

Mr. Richard Jackson. Treasurer

Idaho Republican Pany

Federal Campaign Account

61:! \\". Hays

Boise.ID 83701

Dear ~1r. Jackson:

Attached please find the Final Audit Rcpon on the Idaho Republican Pany Federal

CampaIgn Account. The Commission approved the repon on July :!5. 1996.

The Commission approved Final Audit Repon ~ill be placed on the public record

on August I. 1996. Should you ha\'c any questions regarding the public release ofthe

repon. please contact the COJ1U1lission"s Press Office at (202) 219-4155 or toll-free at (800)

~:!~-9530. Any questions ~'ou ha\"e related to maners covered during the audit or in the

repon should be directed to Melinda t.1adscn or Alex Boniewicz ofthe Audit Division at

(:!O~) 1Q-37::!O or at the abo\"c toll free number.

Roben J. Cos

Assistant Staff Director

Audit Division

l\ttachment as stated

Page 25, Approved 7/25/96
CHRONOLOGY

IDAHO REPUBLICAN PART'~

FEDERAL CAMPAIGN ACCOLTNT

Audit Fieldwork 9/18/95 • 9/29195

if)

Interim Audit Repon to

the Comminee

Response Received to the

Interim Audit Repon

Final Audit Repon Approved

Page 27, ApproveC 7/25/96

1/18/96

4/10/96

7125/96