11

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that ARMPAC demonstrate the identified disbursements
paid by the non-federal account are not allocable expenses by providing documentation
that the fundraising was solely non-federal in nature, the Audit staff's
administrative/generic get-out-the-vote and fundraising ratios as calculated above are
incorrect, and/or there has been no over funding by the non-federal account. Absent such
a demonstration, it was recommended that ARMPAC:

File a Schedule H1 to correctly disclose the administrative/gotv allocation ratio;
File a Schedule H2 to correctly disclose the fundraising event allocation ratios;
File Schedules H4 disclosing the payments from the non-federal account as memo
entries that include the total amount paid, the federal share, and the non-federal share;
© Footnote each memo entry on Schedule H4 to say “recognize payments of allocable
expenses from the non-federal account”; and
e Use funds from its federal account to reimburse the non-federal account $211,281 and
provide evidence of such reimbursement. If ARMPAC lacked the funds to make the
reimbursement, it should have disclosed the amount owed as a debt on Schedule D
until such time as funds became available to make the reimbursement.

In response to the interim audit report, ARMPAC submitted documentation and filed
amended disclosure reports addressing each of the matters presented above.

With respect to Finding 3.A. above, Incorrect Ratio Used for Administrative and Generic
Get-Qut-the-Vote (GOTV) Expenses, ARMPAC, as part of its response, submitted an
amended Schedule H1 correcting its ratio from the 50% federal/50% non-federal it had
utilized to the 93% federal/7% non-federal calculated by the Audit staff. In addition,
amended Schedules H4 were submitted correcting the disclosure of shared
administrative/GOTV expenditures to reflect the correct ratio and decreasing the non-
federal share by $121,456. The Non-Federal Funding Analysis (the Analysis) on page 12
reflects these corrections.

With respect to Finding 3.B. above, Incorrect Ratio Used for Fundraising Event
Expenses, in response to the interim audit report, ARMPAC provided additional
documentation detailing the receipts collected relative to each of the fundraising events.
The Audit staff reviewed the documentation and revised its fundraising ratios
accordingly. Based on the revised ratios, the Audit staff re-calculated the non-federal
share of expenses associated with these events and determined it had overpaid by $8,205
($126,511 originally reported - $118,306 amended reports), down from the $9,414
calculated in the interim audit report. As part of its response, ARMPAC submitted
amended Schedules H2 to disclose the correct fundraising ratio for each event and
amended Schedules H4 to correct the disclosure of the shared fundraising expenditures
impacted by the revised ratios. The Analysis on page 12 reflects these corrections.

Finally, with respect to Finding 3.C., Federal Share of Allocable Expense Made from the
Non-federal Account, based on the revised fundraising event ratios discussed above, the
Audit staff calculated a revised, simple average federal fundraising ratio. This ratio has
been applied to determine the federal portion of the $418,352 fundraising expenses paid



Part II

Overview of Committee

Committee Organization

Important Dates

ARMPAC

e Date of Registration

April 22, 1994

e Audit Coverage

January 1, 2001 — December 31, 2002

Headquarters

Washington, DC

Bank Information

e Bank Depositories

2

e Bank Accounts

2 Federal and 1 Non-Federal Checking

Accounts

Treasurer

e Treasurer When Audit Was Conducted

Corwin Teltschik

¢ Treasurers During Period Covered by Audit | Corwin Teltschik

Management Information

e Attended FEC Campaign Finance Seminar_| No

e Used Commonly Available Campaign Yes
Management Software Package

e Who Handled Accounting and Paid Staff

Recordkeeping Tasks

Overview of Financial Activity
(Audited Amounts)

Cash on hand @ January 1, 2001 $_ 181,586
o Contributions from Individuals 2,501,934
o Other Political Committees 847,016
o. Transfers from Non-federal Account for Joint Activity 255,758
o Offsets to Expenditures 16,149
o Refund of Contributions Made 8,146
o Other Receipts 2,278
Total Receipts $3,631,281
o Operating Expenditures (including other disbursements) 2,663,757
o Contributions to Federal Candidates/Other Political Committees 1,046,000
Total Disbursements $3,709,757
Cash on hand @ December 31, 2002 $ 103,110


e A debt exceeding $500 must be disclosed in the report that covers the date on which
the debt was incurred. 11 CFR §104.11(b).

Facts and Analysis

Disclosure reports filed during the audit period did not disclose any debts owed by
ARMPAC. The Audit staff reviewed disbursements and identified debts owed to 25
vendors, totaling $322,306, which should have been disclosed on Schedules D (Debts
and Obligations excluding Loans). The majority of the debts were outstanding over
several reporting periods but not reported. In order to derive the total debts not reported,
each outstanding debt was counted only once, even if it was outstanding for several
periods.

ARMPAC’s representative was informed of this matter at the exit conference and
provided a schedule detailing the debts requiring disclosure. She indicated that the
amended Schedules D would be filed.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that ARMPAC amend its reports to disclose the debts and
obligations addressed above on Schedules D as required. In response to the interim audit
report, ARMPAC filed amended reports which included Schedules D that materially
disclosed these debts.

| Finding 3. Non-federal Funding of Federal Activity

Summary

A review of expenditures made from federal and non-federal accounts indicated that the
non-federal account potentially paid more than its share of allocable expenses by
$211,281. Contributing significantly to this result was the allocation ratio for
administrative expenses used by ARMPAC. ARMPAC allocated 50% of its
administrative expenses to the non-federal account, instead of 7%. In addition,
ARMPAC made disbursements that appear to be allocable between the federal and non-
federal accounts from its non-federal account rather than from its federal account. The
Audit staff recommended that ARMPAC either demonstrate there had been no over
funding by the non-federal account or reimburse the non-federal account $211,281 and
correct its disclosure of the expenditures. In response to the interim audit report,
ARMPAC provided additional documentation that reduced the liability to the non-federal
account to $203,483 and amended its disclosure reports to reflect these changes.

Legal Standard

A. Accounts for Federal and Non-federal Activity. A committee that finances political
activity in connection with both federal and non-federal elections must establish two
accounts (federal and non-federal) and allocate shared expenses--those that
simultaneously support federal and non-federal election activity—between the two
accounts. Alternatively, the committee may conduct both federal and non-federal activity
from one bank account, considered a federal account. 11 CFR §102.5(a)(1)(i).


Part IV
Findings and Recommendations

| Finding 1. Misstatement of Financial Activity

Summary

A comparison of ARMPAC’s reported figures to its bank records revealed that receipts
and the ending cash balance had been materially misstated for calendar year 2001 as well
as beginning cash-on-hand, receipts, disbursements and ending cash-on-hand for calendar
year 2002. The Audit staff recommended that ARMPAC amend its disclosure reports to
correct the misstatements. In response to the interim audit report, ARMPAC filed
amended reports that materially corrected the misstatements noted above.

Legal Standard

Contents of Reports. Each report must disclose:

e The amount of cash on hand at the beginning and end of the reporting period;

¢ The total amount of receipts for the reporting period and for the calendar year;

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

e Certain transactions that require itemization on Schedule A (Itemized Receipts);
Schedule B (Itemized Disbursements) or Schedule H4 (Joint Federal/Non-federal
Activity Schedule).
2 U.S.C. §§434(b)(1), (2), and(4).

Facts and Analysis

The Audit staff reconciled reported activity to bank records for calendar years 2001 and
2002. The following charts outline the discrepancies for the beginning cash balance,
receipts, disbursements and the ending cash balance for each year. Succeeding
paragraphs address the reasons for the misstatements.

2001 Committee Activity
Reported Bank Records | Discrepancy

Beginning Cash Balance @ January 1, $184,999 $181,586 $3,413
2001 Overstated
Receipts $1,752,895 $1,688,418 $64,477

Overstated
Disbursements $1,776,718 $1,766,900 $9,818

Overstated
Ending Cash Balance @ December 31, $161,176 $103,104 $58,072
2001 Overstated

The $3,413 overstatement of the beginning cash balance on January 1, 2001 could not be
explained.


Part III
Summaries

Findings and Recommendations

Finding 1. Misstatement of Financial activity

A comparison of ARMPAC’s reported figures to its bank records revealed that receipts
and the ending cash balance had been materially misstated for calendar year 2001 as well
as beginning cash-on-hand, receipts, disbursements and ending cash-on-hand for calendar
year 2002. The Audit staff recommended that ARMPAC amend its disclosure reports to
correct the misstatements. In response to the interim audit report, ARMPAC filed
amended reports that materially corrected the misstatements noted above. (For more
detail, see p. 4)

Finding 2. Reporting of Debts and Obligations

ARMPAC failed to report debts owed to 25 vendors in the amount of $322,306. The
Audit staff recommended that ARMPAC amend its disclosure reports to include these
debts. In response to the interim audit report, ARMPAC filed amended reports that
materially disclosed the debts noted above. (For more detail, see p. 6)

Finding 3. Non-federal Funding of Federal Activity

A review of expenditures made from federal and non-federal accounts indicated that the
non-federal account potentially paid more than its share of allocable expenses by $211,281.
Contributing significantly to this result was the allocation ratio for administrative expenses
used by ARMPAC. ARMPAC allocated 50% of its administrative expenses to the non-
federal account, instead of 7%. In addition, ARMPAC made disbursements that appear to
be allocable between the federal and non-federal accounts from its non-federal account
rather than from its federal account. The Audit staff recommended that ARMPAC either
demonstrate there had been no over funding by the non-federal account or reimburse the
non-federal account $211,281 and correct its disclosure of the expenditures. In response to
the interim audit report, ARMPAC provided additional documentation that reduced the
liability to the non-federal account to $203,483 and amended its disclosure reports to reflect
these changes. (For more detail, see p. 7)


The net understatement of disbursements resulted from the following:

e In-kind contributions not reported +$ 750
e Unreported operating expenditures + 43,997
© Net mathematical error overstating expenditures - 1,000
© Voided expenditure reported in error - 850
e Unexplained difference. -__ 2,273

Total net understatement of disbursements 40,624

As a result of the misstatements detailed above, the ending cash on hand at December 31,
2002 was understated by $27,020.

At the exit conference, the Audit staff explained the misstatements and provided
ARMPAC’s representative with schedules detailing these discrepancies. The
representative stated that she would review the spreadsheets provided and amend reports
accordingly.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that ARMPAC amend its reports to correct the
misstatements noted above; and, in addition, its most recent report should be amended to
show the adjusted cash-on hand balance with an explanation that it resulted from audit
adjustments from a prior period. In response to the interim audit report, ARMPAC filed
amended disclosure reports that materially corrected the misstatements noted above.

| Finding 2. Reporting of Debts and Obligations

Summary

ARMPAC failed to report debts owed to 25 vendors in the amount of $322,306. The
Audit staff recommended that ARMPAC amend its disclosure reports to include these
debts. In response to the interim audit report, ARMPAC filed amended reports that
materially disclosed the debts noted above.

Legal Standard

A. Continuous Reporting Required. A political committee must disclose the amount
and nature of outstanding debts and obligations until those debts are extinguished. 2
U.S.C §434(b)(8) and 11 CFR §§104.3(d) and 104.11(a).

B. Separate Schedules. A political committee must file separate schedules for debts
owed by the committee and debts owed to the committee, together with a statement
explaining the circumstances and conditions under which each debt and obligation was
incurred or extinguished. 11 CFR §104.11(a).

C. Itemizing Debts and Obligations

e A debt of $500 or less must be reported once it has been outstanding 60 days from the
date incurred (the date of the transaction); the committee reports it on the next
regularly scheduled report.


FEDERAL ELECTION COMMISSION
WASHINGTON, D.C. 20463

August 9, 2005

MEMORANDUM
TO: ROBERT W. BIERSACK
PRESS OFFICER
PRESS OFFICE
FROM: JOSEPH F. STOLTZ a
ASSISTANT STAFF PIRECTOR
AUDIT DIVISION
SUBJECT: PUBLIC ISSUANCE OF THE AUDIT REPORT ON

AMERICANS FOR A REPUBLICAN MAJORITY

Attached please find a copy of the audit report on Americans for a Republican
Majority which was approved by the Commission on July 28, 2005.

The audit report may be released to the public on August 9, 2005.

Attachment as stated

cc: Office of General Counsel
Office of Public Disclosure
Reports Analysis Division
FEC Library
Web Manager


A.

B.

Incorrect Ratio Used for Administrative and Generic Get-Out-the-Vote (GOTV)
Expenses

As noted above, ARMPAC paid allocable expenses for administrative and generic
get-out-the-vote expenses from the federal account using a ratio of 50% federal
and 50% non-federal. The Audit staff reviewed direct candidate support by
ARMPAC in order to determine the correct allocation ratio for such expenses.
ARMPAC contributed a total of $1,120,600 directly to candidates; $1,046,000 to
federal candidates and $74,600 to non-federal candidates. Based on this
information, the Audit staff calculated the allocation ratio to be 93% federal
($1,046,000/$1,120,600) and 7% non-federal ($74,600/$1,120,600). ARMPAC
calculated that the non-federal share of administrative and GOTV expenses was
$141,225; the Audit staff's calculation is $19,769 at 7%. Therefore, the non-
federal overpaid its portion of such allocable expenses by $121,456 ($141,225 -
$19,769).

Incorrect Ratio Used for Fundraising Event Expenses

ARMPAC paid allocable expenses for eight fundraising events from the federal
account using estimated ratios of federal and non-federal receipts for each event
and disclosed these ratio on Schedule H2 (Allocation Ratios). The following
schedule shows the ratio reported by ARMPAC and the ratio calculated by the
Audit staff based on available records:

Fundraising Event Ratios

Reported Ratio % Audit Ratio %
Event Name and Federal/Non-federal Federal/Non-federal
Date
Four Streams 2001 20/80 17/83
(7/23/01)
Puerto Rico 2001 15/85 8/92
(9/10/01)
Hackberry 2001 50/50 40/60
(10/24/01)
Orlando 2001 15/85 12/88
(11/2/01)
Puerto Rico 2002 15/85 10/90
(2/25/02)
California 2002 20/80 47/53
(3/26/02)
Four Streams 2002 15/85 28/72
(4/19/02)
New York 2002 40/60 18/82
(6/1/02)



B. Federal vs. Non-federal Account. The federal account may contain only those funds
that are permissible under the federal election law; the non-federal account may contain
funds that are not permitted under the federal law (but are legal under state law), such as
contributions that exceed the limits of the federal law and contributions from prohibited
sources, such as corporations and labor organizations. 11 CFR §102.5(a)(1)(i) and (a)(3).

C. Reporting Allocable Expenses. A political committee that allocates federal/non-
federal expenses must report each disbursement it makes from its federal account (or
separate allocation account) to pay for a shared federal/non-federal expense. Committees
report these kinds of disbursements on Schedule H4 (Joint Federal/Non-federal Activity
Schedule). 11 CFR §104.10(b)(4)

D. Allocation Required for Generic Voter Drives. Nonconnected committees must

allocate all of their costs for generic voter drives. A generic voter drive is an activity that

urges the general public:

e To register to vote;

e To vote; or

e To support candidates of a particular party or candidates who are associated with a
particular issue, without mentioning a specific candidate. 11 CFR §106.6(b)(2)(iii).

E. Determining the Appropriate Allocation Ratio. Nonconnected committees shall
allocate administrative expenses and costs of generic voter drives based on the ratio of
federal expenditures to total federal and non-federal expenditures. The federal and non-
federal expenditures used in this calculation are limited to expenditures made in direct
support of candidates. 11 CFR §106.6(c)(1)

F. Allocation Ratio for Shared Fundraising Expenses. If a committee raises both
federal and non-federal funds through the same fundraising program or event, it must
allocate the direct cost of the fundraising event based upon the ratio of funds received by
the federal account to the total amount raised for the event. 11 CFR §106.5(f)(1).

Facts and Analysis

ARMPAC maintained separate federal and non-federal bank accounts. It paid shared
expenses from the federal account and transferred funds from the non-federal account to
the federal account to cover the non-federal share of those expenses. ARMPAC paid
allocable expenses for administrative and generic get out the vote (GOTV) expenses from
the federal account using a ratio of 50% federal and 50% non-federal and disclosed this
ratio on its Schedules H1 (Method of Allocation for Shared Federal and Non-federal
Administrative Expenses and Generic Voter Drive Costs). The Audit staff reviewed
disbursements from both the federal and non-federal accounts and found that the non-
federal had potentially over funded its share of allocable expenses by $211,281. The
succeeding paragraphs address the issues noted by the Audit staff.


The net overstatement of receipts resulted from the following:
e In-kind contribution disclosed but not included in reported

totals +$ 1,661
e Reported receipts not supported by a deposit - 88,655
e Contribution amount reported incorrectly + 500

© Contributions from individuals and political committees

not reported + 11,800
e Transfers from non-federal account reported incorrectly + 8,238
e Unexplained difference. + 1,979

Total net overstatement of receipts $ (64,477)

The net overstatement of disbursements resulted from the following:

e Reported disbursement paid by Non-federal account - $ 15,711
e In-kind contributions not reported + 3,180
¢ Unreported operating expenditures + 8,569
¢ Reported disbursements subsequently voided but not adjusted = - 4,584
e Unexplained difference. : 1,272

Total net overstatement of disbursements & (9,818)

As a result of the misstatements detailed above, the ending cash on hand was overstated
by $58,072.

2002 Committee Activity
Reported Bank Records | Discrepancy

Beginning Cash Balance @ January 1, $161,176 $103,104 $58,072
2002 Overstated
Receipts $1,817,147 $1,942,863 $125,716

Understated
Disbursements $1,902,233 $1,942,857 $40,624

Understated
Ending Cash Balance @ December $76,090 $103,110 $27,020
31, 2002 Understated

The overstatement of the beginning cash balance on January 1, 2002, was the result of the
discrepancies detailed above for 2001.

The understatement of receipts resulted from the following:
¢ In-kind contributions disclosed as memo and not included in

reported totals +$ 750
e PAC and individual contributions not reported + 66,750
¢ Transfers from non-federal account reported incorrectly + = 19,195
e Unexplained difference. + 39,021

Total understatement of receipts $125,716


Part I
Background

Authority for Audit

This report is based on an audit of the Americans for a Republican Majority (ARMPAC),
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

This audit examined:

The receipt of excessive contributions and loans.

The receipt of contributions from prohibited sources.

The disclosure of contributions and other receipts.

The disclosure of disbursements, debts and obligations.

The disclosure of expenses allocated between federal and non-federal accounts.
The consistency between reported figures and bank records.

The completeness of records.

Other committee operations necessary to the review.

PAAMPYWNS

Scope Limitations

In maintaining its receipt and disbursement records, ARMPAC satisfied the minimum
recordkeeping requirements of 11 CFR §102.9. However, the Audit staff's testing of
contributions from individuals was limited by the lack of external documentation, such as
copies of contributor checks, for about 28% of such contributions selected for review on
a sample basis. This lack of records limited the testing for the disclosure of the
contributors’ name, address, and the date and amount of contribution. The testing of
operating disbursements was similarly limited by the lack of external documentation,
such as copies of vendor invoices, for approximately 33% of the operating disbursements
selected for review on a sample basis.

Changes to the Law

On March 27, 2002, President Bush signed into law the Bipartisan Campaign Reform Act
of 2002 (BCRA). The BCRA contains many substantial and technical changes to the
federal campaign finance law. Most of the changes became effective November 6, 2002.
Except for the period November 6, 2002, through December 31, 2002, the period covered
by this audit pre-dates these changes. Therefore, the statutory and regulatory
requirements cited in this report are primarily those that were in effect prior to November
6, 2002.


12

from the non-federal account to be $87,854 (21% of $418,352). ARMPAC’s response
did not dispute this matter, and included amended Schedules H4 (memo entries) to
disclose these expenditures.

In addition, the federal portion of a $15,710 fundraising expense for a 2001 Puerto Rico
event which was paid directly from the non-federal account was re-calculated using the
revised fundraising ratio for this event as detailed above. The federal portion of this
allocable expenditure is $943, or 6% of $15,710.

The total adjustment for the federal share of allocable expenses made from the non-
federal account on the Analysis is $88,797 ($87,854 + $943).

Based on ARMPAC’s response, the Audit staff prepared the Analysis that appears below.

Non-federal Funding Analysis

Description Finding Index

Net Transfers made from Non-federal $ 252,761
Accounts

Less: Non-federal Portion of Allocable (138,075Y

Expenditures per amended reports filed
by ARMPAC on 06-24-05 in response to
the interim audit report.

Net (Under funding)/Over funding by $ 114,686
the Non-federal Account:

Adjustment:

Federal Share of Allocable Expenses Finding 3. C. $ 88,797

made from the Non-federal Account

Adjusted Amount of Non-federal $ 203,483
OVER Funding of Allocable Expenses

The Analysis indicates that the non-federal account has over funded its share of allocable
expenses by $203,483. ARMPAC amended its Schedule D to reflect this as a debt owed
to “Americans for a Rep. Majority NonFed Acct.”.

2 This figure is the non-federal portion of allocable expenditures originally reported ($267,736) adjusted
for amended reports which reduced the non-federal portion of administrative and generic get-out-to-vote
expenses by $121,456 and fundraising event expenses by $8,205.


Table of Contents

Part I. Background
Authority for Audit
Scope of Audit
Changes to the Law

Part II. Overview of Committee
Committee Organization
Overview of Financial Activity

Part III. Summaries
Findings and Recommendations

Part IV. Findings and Recommendations
Finding 1. Misstatement of Financial Activity
Finding 2. Reporting of Debts and Obligations
Finding 3. Non-federal Funding of Federal Activity

Page

YA


Report of the

Audit Division on
Americans for a Republican
Majority

January 1, 2001- December 31, 2002

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.' The audit
determines whether the
committee complied with
the limitations,
prohibitions and disclosure
requirements of the Act.

Future Action

The Commission may
initiate an enforcement
action, at a later time, with
respect to any of the
matters discussed in this
report.

' 2 U.S.C. §438(b).

About the Committee (p. 2)

Americans for a Republican Majority (ARMPAC) is a non-
connected committee. ARMPAC qualified for multi-candidate
status on October 20, 1994, and is headquartered in Washington,
DC. For more information, see chart on the Committee
Organization, p. 2.

Financial Activity (p. 2)

e Receipts

o Contributions from Individuals $ 2,501,934
o Other Political Committees 847,016
o. Transfers from Non-federal

Account for Joint Activity 255,758
o Offsets to Expenditures 16,149
o Refund of Contributions Made 8,146
o Other Receipts 2,278
o Total Receipts $ 3,631,281

¢ Disbursements
o Operating Expenditures
(including other disbursements) $ 2,663,757
© Contributions to Federal
Candidates/Other Political

Committees 1,046,000
o Total Disbursements $ 3,709,757

Findings and Recommendations (p. 3)
 Misstatement of Financial Activity (Finding 1)

e Reporting of Debts and Obligations (Finding 2)

e Non-federal Funding of Federal Activity (Finding 3)


10

On Schedule H4, ARMPAC reported $126,511 as the non-federal share of
expenses relative to the eight fundraising events. The Audit staff applied it’s
ratios to these fundraising expenses and determined the non-federal portion to be
$117,097. Thus, the non-federal had overpaid its share by $9,414.

C. Federal Share of Allocable Expense Made from the Non-federal Account

The Audit staffs review of non-federal disbursements identified 112 payments
totaling $418,352 to consulting/fundraising vendors for fundraising expenses.
ARMPAC provided contracts and affidavits that describe services provided by
these vendors as non-federal fundraising activity, developing strategies and
objectives for the organization; implementing direct mail and telemarketing
efforts; and providing guidance with respect to the committee’s role in non-
federal races and state party activity. Therefore, ARMPAC contends that these
vendor payments were solely non-federal expenses.

Documentation provided to date does not show a separate non-federal fundraising
activity. On the contrary, the fundraising ratios developed above resulted from
documentation provided by ARMPAC which indicates the events were shared
fundraising efforts for both the federal and non-federal accounts. Further, the
Audit staff notes that some payments were made to these vendors by ARMPAC
and disclosed on Schedules H4 (Joint Federal/Non-federal Activity Schedule) as
shared expenses. As such, the Audit staff considers these payments to be for
shared activity.

In the absence of documentation allowing the Audit staff to associate these
expenses with specific fundraising events, a simple average, federal fundraising
ratio was calculated based on the fundraising event ratios described above in
Finding 3.B. — Incorrect Ratio used for Fundraising Event Expenses. This ratio
has been applied to determine the federal portion of the expense paid from the
non-federal account to be $94,129, or 22.5% of $418,352.

In addition, ARMPAC reported a $15,710 fundraising expense for a 2001 Puerto
Rico event which was paid directly from the non-federal account. The Audit
staff’s calculated fundraising ratio for this event was 8% as described above in
Finding 3.B. — Incorrect Ratio used for Fundraising Event Expenses, therefore the
federal portion of this allocable expenditure was calculated to be $1,257, or 8% of
$15,710.

Therefore, the non-federal had paid the federal’s portion of shared expenses,
which totaled $95,386 ($94,129 + $1,257).

The Audit staff presented this matter at the exit conference and provided ARMPAC’s
representative with schedules detailing the expenditures. The representative expressed a
willingness to review the spreadsheets provided, file amended reports and understood a
payment from the federal account to the non-federal account may be required.