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FEDERAL ELECTION COMMISSION

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ROAR/120887

A87-12

December 8, 1987

WASHINCTON, 0 C 20463

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MEMORANDUM

TO:

PROM:

SUBJECT:

FRED EILAND

:~::: :~::S::FI~ ASSISTANT STAFF D~~ AVO IT DIVIS ION

PUBLIC ISSUANCE OF FINAL AUDIT REPORTROARK FOR CONGRESS COMMITTEE

Attached please find a copy of the final audit report of the

Roark for Congress Committee which was approved by the Commission

on December 2,1987.

Informational copies of the report have been received by all

parties involved and the report may be released to the public.

Attachment as stated

cc: FEe Library

RAD

Public DisclosureVOffice of General Counsel

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ROAR/l10987

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FEDERAL ELECTION COMMISSION

WASHINCTON, D.C. 20463

A87-l2

REPORT OF THE AU> IT DIVISION

ON

ROARK FOR CONGRESS COMMITTEE

I. Backgrounc1

A. Overview

This report is based on an audit of Roark for Congress

Committee (Wthe CommitteeW), 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 2 U.S.C. S 438(b) 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 ~1 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 requirements for substantial compliance with the Act.

- The Committee registered with the Clerk of the House of

Representatives on March 26, 1986, and maintains its headquarters

C' in Shelby, North Carolina. The audit covered the period from

February 4, 1986, the inception date of the bank activity, through December 31, 1986. The Committee reported a cash balance

c on February 1, 1986 of $-O-r total receipts of $199,4 S4. 22 r total

disbursements of $196,442.24, and a cash balance on December 31,

t;t" 1986 of $3,011.98.

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

aatters in the report and were available to the Commissioners and

appropriate staff for review.

B. Rey Personnel

The Treasurer of the Committee during the period

covered by the audit was Terresa T. Bullock •

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The audit included such tests as verification of total

reported receipts and disbursements and individual transactions,

review of required supporting documentation, analysis of

Committee debts and obligationsl and such other audit procedures

as deemed necessary under the circumstances.

II. Audit Findings and Recommendations

A. Misstatement of Financial Activity

Section 434 (b) (1), (2) and (4) of Title 2 of thetJnited

States Code state, in part, that each report shall disclose the

amount of cash on hand at the beginning of the reporting period,

and disclose the total amount of all receipts and disbursements

for the reporting period and the calendar year.

In &ddition, 11 C.F.R. 5 104.l3(a) states, in part, that each in-kind contribution shall be reported as a

contribution and as an expenditure.

• C. Scope

2

A reconciliation between the Committee's reported activity and bank activity for the audit period disclosed that ~. the Committee had understated receipts by $22,549.05, and

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' disbursements by $22,344.05, resulting in an understatement of

ending cash of $205.00. An analysis of the Committee's receipts and disbursements identified the following transactions which had

not been reported.

A loan of $8,000 received on November 7, 1986 from the

candidate was not reported as a receipt.l/ In-kind contributions

totalling $9,854.50 were not reported as receipts or

expenaitures. A $10,000 debit memo/phone transfer was not

reported and a deposit of $1,527.00 credited on September 26,

1986, was not reported. tJnitemized receipts on the Committee's

Year End report were under reported by $1,169.17. In addition,

miscellaneous discrepencies resulted in an understatement of

receipts totalling $1,998.38 and an understatement of

disbursements totalling $2,489.55. A Committee representative

was provided a copy of the $10,000 bank debit memo, a copy of the

unreported deposit slip for $1,527, and a schedule of the

unreported in-kind contributions at the exit conference.

1/ The loan was apparently included in total debts and

obligations on Line 10 of the Commi ttee' s Post General

disclosure report Summary Page: however, Schedule CiS were

not provided. See Finding II.F•

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• The Committee representative stated that he was aware

of the discrepancy between reported activity and bank activity, but had been unable to identify all the specific items causing the understatements.

In the Interim Audit Report the Audit staff recommended

that the Committee file a comprehensive amendment correcting the

receipts, disbursements, and cash on hand figures as noted above.

~he Committee filed an amendment materially correcting the matters noted above.

Recommendation .1 ~he Audit staff recommends no further action.

B. Itemization of E!penditures

Section 434(b) (5) (A) of Title 2 of the United States

Code states that each report shall disclose the name and address

of each person to whom an expendi ture in an aggregate amount or

ce value in excess of $200 within the calendar year is made by the

reporting committee to meet a candidate or committee operating

expense, together with the date, amount, and purpose of such

0":T operating expendi ture.

• During pre-audit review of the Committee's disclosure

reports, it was noted that the Committee's Pre-Runoff report covering the period April 17, 1986, through May 14, 1986, did not

contain any itemized expenditure schedules. A review of the

o Committee's canceled checks for that period disclosed that 32

expenditures, totalling $11,198.79, required itemization.

An analysis of the Committee's expenditure processing

system revealed that, except for the Pre-Runoff report expenditures noted above, all expenditures in excess of $200 were

itemized properly. However, expenditures in amounts less than

$200, but which aggregated in excess of $200 to a person, were

not itemized. A 100% review of these expenditures indicated that

72 expenditures, totalling $7,051.84, were not itemized as

required.

To summarize, expenditures totalling $18,250.63, or

10.1% of expenditures requiring itemization were not itemized.

Schedules of these expenditures were provided to a Committee

representative at the exit conference. These expenditures are in

addition to the in-kind receipts/expenditures totalling $9,854.50

and the $10,000 debit memo requiring disclosure under Finding II.A•

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• . A Committee representative said that an amended report

would be filed.

The Audit staff recommended in the Interim Audit Report that the Committee file, as part of a comprehensive amendment,

schedules itemizing the expenditures noted above.

The Committee filed a comprehensive amendment with

supporting schedules itemizing 1) the expenaitures totalling $18,250.63, 2) the in-kind receipts/expenditures totalling $9,854.50, and 3) the $10,000 debit memo.

Recommendation 12

The Audit staff recommends no further action.

c. Itemization of Contributions Received

from Political Committees

Section 434(b) (3) of Title 2 of the United States Code

cr states, in relevant part, that each report filed by a political committee shall disclose the identification of each political ~I committee which makes a contribution to the r~porting committee

during the reporting period, together with the date and amount of

any such contribution. In addition, Section 104.3(a) (4) (ii) of

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Title 11 of the Code of Federal Regulations states that each

report shall itemize contributions from all committees (including __ political committees and committees which do not qualify as

political committees under the Act) which make contributions to

C) the reporting committee during the reporting period.

A review of the Committee's disclosure reports and

receipts records disclosed that the Committee did not itemize

seven contributions received from political committees and four

contributions received from other committees totalling $6,950.

These contributions account for 12.7' of the dollar amount of

such contributions requiring itemization. A schedule of the

contributions was provided to a Committee representative at the

exit conference.

The Audit staff recommended in the Interim Audit Report that the Committee file a comprehensive amendment itemizing the

contributions noted above.

The Committee filed, as part of a comprehensive amendment, a schedule itemizing the contributions noted above.

Recommendation .3

The Audit staff recommends no further action.

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e D.

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Receipt of Contributions of Currency in Excess

of the Limitation i

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Section 441g of Title 2 of the United States Code

states, in part, that no person shall make contributions of

currency to or for the benefit of any candidate which, in the

aggregate, exceed $100, with respect to any campaign of such

candidate for election to Federal office. Section 110.9(a) of ~it1e 11 of the Code of Federal Regulations states, in part, that

no candidate or political committee shall accept any contribution

of currency in excess of $100.

A review of the Committee's con~ribution and receipts records disclosed that the Committee received $2,100 in currency

contributions in excess of the limitation.

The Audit staff recommended in the Interim Audit Report ~hat the Committee present evidence that the contributions were

not excessive, or make refunds of the excessive portions and

submit evidence of the refunds, including copies of the front and

back of canceled checks to the Audit staff for review.

~, The Committee submitted copies of the front and back of

canceled checks as evidence of the refunds of the excessive ~. portions•

• Recommendation 14

The Audit staff recommends no further action on this matter.

E.

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Omission of Disclosure Information

on Reports of Receipts

Section 434(b) (3) of Title 2 of the United States Code

states, in part, that each report shall disclose the

identification of each person who makes a contribution to the

reporting committee, whose contribution or contributions

aggregate in excess of $200 within the calendar year, together with the date and amount of any such contribution. Section

431(13) of Title 2 of the United States Code defines the term

identification as the name, the mailing address, and the

occupation of such individual, as well as the name of his or her

employer.

Section 104.7 of Title 11 of the Code of Federal

Regulations states that when the treasurer of a political committee shows that best efforts have been used to obtain,

maintain and submit the information required by the Act for the

political committee, any report of such committee shall be

considered in compliance with the Act. The section further

estates that such effort shall consist of a clear request for the
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• in~ormation which informs the contributor that the reporting of

such information is required by law.

A review of the solicitation material provided by the

Committee failed to support best efforts by the Committee to

obtain required information regarding occupation an~ name of

employer. The solicitation material did not request the name of

employer. One solicitation provided space for occupation information. Contribution acknowledgements generated by the

Committee provided space for occupation information only.

A review of the Committee's reports disclosed that

occupation and/or name of employer was missing for 92 out of 195

itemized contributions, or 47\ of the itemized contributions from

individuals. A schedule, detailing the irregularities noted

above, was provided to the Committee at the conclusion of the

audi t f ie1dwor k.

The Committee representative stated that the Committee

would obtain and provide the missing disclosure information on a

comprehensive amendment.

~, The Audit staff recommended in the Interim Audit Report that the Committee obtain the missing information and disclose

.;r the information obtained as part of a comprehensive amendment.

• The Committee filed a comprehensive amendment which

complied materially with the above recommendation.

'=' Recommendation IS

:--... 'l'he Audi t staff recommends no further action.

F. Disclosure of Debts and Obligations

Section 434(b) (8) of Title 2 of the United States Code

states, in part, that each report shall disclose the amount and

nature of outstanding debts and obligations owed by the political committee. In addition, 11 C.F.R. 5 l04.3(d) states, in part, that each report shall, on Schedule C or D as appropriate, disclose the amount and nature of outstanding debts and

obligations owed by the reporting committee. Where such debts

and obligations are settled for less than their reported amount

or value, each report shall contain a statement as to the

circumstances and conditions under which such debts or

obligations were extinguished and the amount paid.

On its 1986 Year End report, the Committee reported $12,192.73 in debts owed~ however, no Schedule C or D was

provided with the report. A review of the Committee's accounts

.payable file identified $4,273.08 in debts owed to 7 vendors and
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• an $8,000 loan owed to the candidate at December 31, 1986. The

loan received from the candidate was not reported when received

as either a contribution on Schedule A or a loan on Schedule C.

In addition, the Committee received, on september 26,

1986, six one-thousand ~ollar loans from six individuals which

were not disclosed on Schedule C. The loans were reported on

Schedules A as contributions when received. Committee records

indicate that three payments, totalling $2,137.00, were made on

the loansJ however, it is not clear to which loans the payments

were applied. The loan agreements state that the maker (the

Committee) was to have credits applied toward the principal balance equal to one-sixth of the expenses incurred by the

Committee for fundraising activities in Watauga County, North

Carolina. In addition, payment of the remaining principal

balance was limited to an amount equal to one-sixth of the total

campaign contributions received from residents of Watauga County, North Carolina. After the credits and payments were applied, any balance would be automatically waived, forgiven, and forfeited as

of November 4, 1986.

Committee records did not indicate how all credits were ~l applied to the loans, or whether the loans were forgiven and, if

:( so, at what amount.

• The Audit staff recommended in the Interim Audit Report that the Committee file a comprehensive amendment including Schedules C and D which disclose the debts owed to the vendors,

the six individuals, and the candidate.

'" In addition, the Audit staff recommended that the

Committee provide for the Audit staff's review, information r- regarding payments or credits, including balances at November 4,

1986, relative to the six one-thousand dollar loans.

The Audit staff further recommended that the

comprehensive amendment should include on Schedule C payments and

credits on these loans and the balances of these loans at

December 31, 1986. If the loans have been forgiven, the

comprehensive amendment should contain an explanation as to the

disposition of the balances.

The Committee materially complied with the Audit staff

recommendation by filing, as part of a comprehensive amendment,

Schedules C and D disclosing the debts and obligations noted

above.

In addition, the Committee explained that of the

original loan of $6,000 from the individuals identified on

Schedule C, $3,408 was forgiven by the individuals. This amount

411Jas transferred to a pro-rata contribution by each of the six
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