FEDERAL ELECTIC)' CC)i\,f\1ISSION

August 7. 1996

MEMQRANDLTi\-1

1·0:

FRO~1:

RON M. HARRIS

PRESS OFFICER

PRESS OFFICE

ROBERT J. COSTA ,A/'_

ASSISTANT STAFF D1RE{J...............

AUDIT DIVISIO!'

" SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

THE REPUBLICAN C.~MPAIGN COMMITIEE OF NE\\' MEXICO

'0

C

'n

c

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

Republican Campaign Comminee orNe\'" ~1exico \\nich \\1JSapproved by the

Commission on July 30 ). 1996.

Informational copies ofthe report have been received by all panies involve.,) and

the report may be released to the public.

c.... Attachment as stated

cc. Office of General Counsel

Office of Public Disclosure

Reports Analysis Di\'islon

FEe Library
TABLE OF CONTENTS

REPUBLICAN CAMPAIGN CO~111TEE

OF NE\\' MEXICO

Page

Executive Summary

Final Audit Repon

Background

Findings

Transmittal to Committee

Chronology

3

3

5

21

23 .
REPORT OF THE AUDIT DIVISION

ON THE

o

Republican Campaign Committee

of

New Mexico

Appro,'ed Jul~' 30. 1996

FEDERAL ELECTIO~ COMI\11SSIOS

999 E STREET. l'i.\\'.

\\'.~SHI~GTOS.D.C.
FEDER.o\l ELECTIO' C()f\,f\1ISSION

FI~l' L AUDIT REPORT

ON THE

REPUBLICAN C.-\l\IPAIGN COMl\1ITTEE OF NEW MEXICO

EXEClrTl\'E SUl\1MAR\!

The Republican Campaign Comminee ofNe"" Mexico. fonnerly known as the

Republican State Central Comminee of Ne\\" Mexico. registered with the Comptroller

General ofthe United States (tn April 19. 1972.

The audit \\'as conducted pursuant to 2 U.S.C. §438(b). which 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 of the audit \\'ere presented to the Committee at an exit conference

held at the completion of field\\"ork on October 6. 1995. and later in an interim audit

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

The follo\\"ing is an o\,ervie\\' ofthe findings contained in the final audit report.

l\1ISSTATE\IEST OF F'''ANCIAL AO]\'ID' - 2 U,S.C. §§434(bXI). (2) and (4).

In 1993 the Committee understated receipts by a net amount of$176.032.. understated

disbursements by a net amount of $158.859. and materially misstated beginning and

ending cash. \\'ithin reports covering 1994 the Comminee understated receipts by a net

amount of$75.674: understated disbursements by a net amount of 594.845: and

overstated ending cash by $1.513. In response to the interim audit repon. the Committee

filed amendments \\'hich corrected the public record.

REPQRTI~G Of RECEIPTS fRO" I~DI\'IPl:ALSASP POLITICAL ORGANIZATIONS

- '2 C.S.C §§434(b)(3) and 431( 13) In 1993 the Comminee failed to report and ite;nize

257 contributions totaling $1 04.65~ from Individuals. and 25 contributions totaling

$9.481 from political organizations In 19Q~ the Committee failed to itemize 120

contributions totaling $53.120 from indl\'iduals and 14 contributions totaling $70.108

from political organizations. The Committee corrected these problems by filing amended

reports. The Committee has also \\Tlttcn procedures and Installed ne\\ computer software

to obViate Similar omissions

.. i ~.. • t .....

Pane 1, Approved 7/30/96
! ,....

- J ,

c

2

REPORTING H-3 TRANSFERS - 1J CFR §§104.10(b)(3) and 106.5(g)(2)(iii).

The Comminee failed to itemize 9 transfers totaling $82.500 from the non-federal to the

federal account in 1993. and 8 such transfers totaling $36.800 in 1994. In addition the

Committee reponed 6 transactions totaling $29.500 improperly as H-3 transfers~ and

reponed a nonexistent transaction in the amount of $9.895 as a non-federal to federal

transfer. The Comminee filed amended Schedules H-3 detailing only the transfers from

the non-federal to the federal account.

REPORTING OF DISBltRSEl\lENTS - l·.S.C. §§434(b)(5)(At and (6)(B)~ 11

CFR §§ 104.1 O(b) and I02.5(a)( 1)( i). In 1993 the Comminee failed to report and itemize

76 disbursements total!ng $155J 8:!. a transfer to the non-federal account for $5.616. and

bank charges totaling $46. In 1994 the Committee failed to report and itemize 12

disbursements totaling SI55.) 82; and reponed but failed to itemize 46 additional

disbursements totaling $74.258. The Committee corrected these problems by filing

amended repons.

USE OF FllNDS fRO" THE NON-FEDERAL ACCOllNT ;\~D DISCLOSURE Of

t~LLOC&BLE (SHARED) Acrl\'ITl -11 CFR §106.5(g)( 1-\. The Comminee

impennissibly made 66 disbursements totaling SI08.965 froln the non-federal account.

HoY-·ever. for the audit period the federal account paid its share of allocable expenses.

The Comminee also calculated and used incorrect percentages for allocation of all shared

(: xpenses. The Comminee responded to the interim audit repon by filing amended

Schedules H-) and H-2 to disclose the correct allocation percentages and filed (Memo)

Schedules H-4 detailing all joint expenses disbursed from the non-federal account. The

Comminee also submined a description ofthe changes it has implemented to assure that..

in the future. no payments for federal activity ~iJl be made from the non-federal account.

REPORUSG Of DEBTS AND OBLIGATIO:SS -~ U.S.C. §434(b)(8) and 11 CFR

§§ I04.3(d) and 104.11(a). The Committee failed to repon debts and obligations totaling

$85.55:. In response to the interim audit report the Comminee filed amended disclosure

repons to correct the public record.

EXCESSIVE CQ:STRIBt"TIQ~SB\ CASH -2 U.S.C. §441 g and II CFR

§1lO.4(c)(3). The Audit staff identified excessive cash contributions totaling $3.350

from indIviduals and l'\<'O anonymous receIpts "'hose excessive ponions totaled $:!.0~5.

In response to the interim audit repon the Committee submitted a check payable to the

l' .S. Treasury for $~.O~5 and submitted copies of non-negotiated refund checks made

payable to the individuals. The Committee has agreed to submit copies of the canceled

refund checks ""hen they are returned from the bank.

,

Pa~E'" t\;::->roved 7/30/9t
AR#95~S

FEDERAL ELECTION CQfvtrvllSSION

c

'()

REPORTOF THE AUDIT DIVISION

ON THE

REPUBLICAN CAMPAIGN COltfMI1TEE OFNEW MEXICO

I. BACKGROUND

A. AlJTHORln·

This repon is based on an audit ofthe Republican Campaign Committee of

Ne\\' Mexico (the Committee).. undenaken by the Audit Division ofthe Federal Election

Commission in accordance with orovisions ofthe Federal Election Campaign Act of

1971. as alrtended (the Aet~ The audit \\'as conducted pursuant to section 438(b) ofTitle 2

ofthe United States Code \\-ilich states. in p;a~. that the Commission may conduct audits

and field investigations ofan~· 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 m."iC"· ofrepons filed by selected committees to determine ifthe

repons fiJed by a panicular committee meet the threshold requirements for substantial

compliance \\ith the Act. 1lte Audit seeks to determine ifthe campaign has materially

complied \\ith the limitations. prohibitions and disclosure requirements ofthe Act.

B.

The audit co\'ered the period JanWll')· 1.1993 through December 31. 1994.

During this period. the Commiutt reports reflect an opening cash balance of $8.053: total

receipts of $801.984: total disbursements ofS766.84~: and a closing cash balance of

$35.768 1

Totals do nO' fOOl due to reponang enors The totals for receipts and disbursements are the sum of

the amounts reponed for each reponmg penod Also. the Committee's reponed receipts and

disbursements are substanuall~ understated (see flndmg II A.) F'gures In thiS repon are rounded to

the nearest dollar

, . '" • I''" tf t" .. I .,."

Pa~e 3, Approved 7/30/96
2

c. COMMIITEE ORGANIZATION

The Republican State Central Committee of New Mexico registered with

the Comptroller General ofthe United States on April 19, 1972 and filed subsequent

amended Statements ofOrganization. On May 1t • 1976. the Comminee filed an amended

Statement ofOrganization to change its name to Republican Campaign Committee ofNe""

Mexico. The Comminee maintains its headquaners in Albuquerque. Ne\\· Mexico.

The Treasurers ofthe Committee during the period covered by the audit

were Mr. Nick Blea from January 9. 1993 through April 17. 1994.. and Ms. Andrea Smith

from April )8, 19942 through the end ofthe audit period. Ms. Smith is the current

Treasurer.

To manage its financial activity. the Committee maintained three bank

accounts. From these accounts the Comminee Inade agproximately 1.. 170 disbursements.

The Comminee's receipts were composed of contributions from individuals ($587.890)..

other political comminees and organizations ($8.490). and transfers from party committees

($111 ..299) and the non-federal account ($346.010).

c

D. AUDIT SCOPE AND PROCEDltRES

The audit included testing ofthe follo\\ing general categories:

c

1.

..,

4.

The receipt of contributions or loans in excess ofthe statutory limitations~

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

corporations or labor organizations;

the receipt of excessive cash contributions (see Finding 1I.D.)~

proper disclosure of contributions from individuals. political committees

and other entities. to include the itemization of contributions \\'hen required.

as \\'ell as. the completeness and accuracy ofthe information disclosed (see

Finding II.A.)~

5. p'roper disclosure of disbursements including the itemization of

disbursements \\·hen requued. as \It·ell as. the completeness and accuracy of

the information disclosed (see Findings II.A. and B.):

The amended Statement of Organlzauon filed indicated that ~1s Smith "as fuifiihng the teon

vacated by Mr Ra~ Ubleta HO\Ae\'er. no Statement of OrgaOlZAtlon "as filed to Install ~1r Ubleta

as Treasurer of the Commit" ee

Page "1, Appr-oveC 7/30/9~
'0

C

3

6. proper disclosure of campaign debts and obligations (see Finding II.C.);

7. the accuracy oftotal reported receipts. disbursements and cash balances as

compared to bank records (see Finding II.A.);

8. adequate recordkeeping of campaign transactions~

9. proper reporting and fundir:g of allocable (shared) expenditures

(see Finding Il.B.)~

10. review of expenditures made on behalf offederal candidates: and.

I1. other audit procedures thai 'Nere deemed necessary in the situation.

Unless specifically discussed belo\\'. no material non-compliance \\'as

detected. The review of compliance \\ith limitations on contributions was limited. The

Committee's receipt records consisted of copies of bank deposits. There was no manual or

automated system \\'hich could be used to aggregate multiple contributions from the same

person and identify a contribution that required itemization or exceeded the limitation. The

Audit staff identified contributions in excess of S200. and aggregated and tested only those

contributions for compliance with the contribution limitation and for proper disclosure. It

should be noted that the Commission may pursue any ofthe matters discussed in this

report in an enforcement action.

II. AUDIT FINDINGS AND RECOMMENDATIONS

A. REPORTING OF RECEIPTS ASO DISBURSEMENTS

1. Back~ound OD Bank Accounts

The Comminee maintained three bank accounts to handle its federal

activity during the audit period. referred to as Allocation. \·ictol')· 94. and

SpeCIal-Individual.

The AllocatIon account \\'as the main operating account and

disbursed funds only for shared expendnures It \\'as funded by interaccount transfers from

the other federal accounts and transfers from the non-federal account to pay the non-federal

ponion of allocable expenses.

The Victory Q4 account received contributions through

telemarketIng and direct mail solicitation and dIsbursed funds for federal activity and for

GOTV programs

Paae S, Ap;:;rcved 7,'30/9c
4

The Special-Individual account was used to receive contributions

related to the Lincoln Day Dinner fundraisers in 1993 and 1994, to make disbursements for

the fundraising e;.\ penditures~ and to receive fees and make exr~nditures related to the

Western States Leadership Conference in 1993,

Although some reponing problems were identified in both the

Allocation and Victory 94 accounts discussed above. no activity - neither receipts "or

disbursements - "'as reponed from the Special-Individual account. The Audit staff notes

that the Comminee maintained a non-federal counterpart to this account known as the

Special-Corporate account for receipt of federally impermissible funds related to the

Lincoln Day Dinners and the Western States Leadership Conference,

2. Misstatement of Financial ActivitY

Sections 434(b)( 1)(2) and (4) ofTitle 2 ofthe United States Code

state. in part. that a political committee shall disclose the amount of cash on hand at the

beginning ofthe reporting period and the total amount of all receipts and all disbursements

for the reponing period and calendar year,

The Audit staffs reconciliation ofthe Committee's reponed activity

to its bank activity revealed that material misstatements occurred with respect to reports

filed covering both calendar years 1993 and 1994.

N

a. J993 Misstatement ofActivity

In 1993. beginning cash on hand was overstated by 52..062;

receipts \\'ere understated by S176.032: disbursements were understated by $158..859; and

ending cash on hand \\'as understated by S11.475.

The Audit staff \\'as unable to explain the difference in

beginning cash on hand because the Committee had no workpapers available to dClermine

ho"' reponed beginning cash on hand \\·as derived. The understatement ofreceipts U'~

caused by the follo"'ing:

c

c

Receipts deposited into

the SpeCIal-Individual

account

ReceIpts deposited Into the

\'ictof! Q~ account and not

reponed

Pace c, ApproveC 7/30/9£

14.296
o

5

Transfer to the Allocation

account from the non-federal

account not reported 3

Total understatemeilt $176032

ofthe following:

The understatement of disbursements wac; caused by the net effects

o

o

Transfer from the Special-Individual

account to non-federal account S 87.377

Bank service charges and all other

reportable disbursements from the

Special-Individual account 67..805

o

o

o

•

Bank service charges and a transfer

from the \'ictory 94 account to

non-federal account not reported

Bank service charges from the

Allocation account not reported

Arithmetic discrepancies and

reconciling items

5.662

117

(2.102)

Total (net) understatement $158.859

The understatement of ending cash on hand ($11.475) was a result

ofthe net reponing errors in receipts and disbursements. the overstatement of beginning

cash on hand. and a S3.636 Committee math error.

b. 19Q4 ~1isstalemeDt of ,"clivit\'

In 1994. the Committee understated beginning cash on hand

by $11.475: underreponed receipts b~ $75.674: understated disbursements by $94.845: and

overstated ending cash on hand b~ $1.513

The understatement of receipts "'as caused by the net effects of the

following:

3 See also Flndang II A 4 Reponang and Itemlutlon of H·) Transfers.
6

'J)

c

""g. ",""*'-A'f!i14y~~""'" !if'?'}"'H~""A41"-~"·"···'" ii

0 Receipts deposited into the

Special-Individual account $ 50.623

0 Receipts deposited into the

Victory 94 account not reported 26.338

0 Transfers from the non-federal

account deposited into Allocation

account not reponed 3/ 36..800

0 In-kind receipt not reported 1..258

0 Transfer deposited into non-federal

account reported 3.1 (4..250)

0 Federal interaccount transfers

reponed 3/ (25..000)

c Non-federal interaccount transfer

reponed 3/ (250)

0 Reponed transfer from the

non-federal account for which no

supporting evidence was found 3.1 (9..895)

0 Miscellaneous and reconciling items_ .5.0

Total net understatement $ 75.674

The underreponing of disbursements was caused by the following:

o

o

o

o

Transfer to non-federal account

fronl the Special-Individual

account

Disbursements from

Special-Individual account

Disbursements from Victory 94

account not reponed

Bank service charges from the

Allocation account not reponed

Pa~e 8, Approved 7/30/96

$ 4..~50

2:!..736

64.787

144
o

o

7

In-kind contribution not reported

as disbursement

Miscellaneous and reconciling items

1.258

Total understatement $94 84'\

The overstatement of ending cash on hand ($1.513) \\"as caused by

the net effect ofthe above reporting errors in receipts and disbursements. the carry-over

overstatement of beginning cash on hand. and a $6.183 Comminee math error.

The current Comminee officials had no explanation for the

misstatements noted above. Neither the Comminee treasurer who signed the repons.. nor

anyone v;ho panicipated in the preparation ofthe reports.. was available for comment.

3. Disclosure and ltemizatioD of Receipts from Indiyiduals and

Political Orl:anjzatjQns

cSection 434(b)(3)(A). (B) and (0) of Title 2 ofthe United States

Code states. in relevant part. that each repon under this section shall disclose the

identification of each person (other than a political comminee) who makes a contribution

to the reporting comminee during the reporting period.. ,,'hose contribution or contributions

have an aggregate amount or value in excess of 5200 \\ithin the calendar year. together

"'ith the date and amount ofany such contribution. Further. each report under this section

shall disclose the identification of each: political comminee \\~hich makes a contribution to

the reponing comminee during the reponing period.. together with the date and amount of

any such contribution: and each affiliated comminee which makes a transfer to the

reponing comminee during the reponing period and.. where the reponing comminee is a

political pany comminee. each transfer of funds to the reponing committee" regardless of

\\'hether such comminees are affiliated. together v.;th the date and amount ofsuch transfer.

Section 431 (13) ofTitle of the United States Code states that the

term ttidentification" means: in the case of any individual. the name. the mailing address~

and the occupation ofsuch indi\'idual. as ",'ell as the name of his or her employer; and in

the case of any other person. the full name and address ofsuch person.

a. Receipts from Indl\'ldya'..s

.~s noted ID secuon I1.A.2. above. the Comminee

underreponed receipts for both 1993 and 1994 The Committee's receipt records consisted

of copies of deposit slips and the associated Items in the deposlt. The Committee had no

system for accumulating multiple contributions from the same person to determine \\'hen a

particular contributlon required itemizatIon As a result. the onl~ contributions \\'hich the

Audit staff identified as requlnng itemization \I.'ere those \\ inct. \\'ere greater than 5200,

Page 9, ~?r(JveC 7:30i9~
a

The Audit staffidentified 257 such contributions totaling

S104.654 in 1993. Ofthese. 247 contributions totaling $98.604 were deposited into the

Special-Individual account and were neither itemized nor reported. Most ofthese

contributions were proceeds from the Lincoln Day Dinner.

In 1994. the Comminee failed to itemize 120 contributions

totaling $53.120 (of 146 totaling $67.670). Of these. 103 totaling $40.500 ";ere deposited

into the Special-Individual account, In addition. it appears that the Comminee included on

Schedules A some receipts that \\'ere not deposit~d into a federal account.

At the exit conference the Comminee was advised ofthe

reporting and itemi?~tion problems for both 1993 and 1994. Subsequent to the exit

conference the Audit staff provided the Comminee \\ith lists ofthe contributions which

required itemization.

b. Receipts from Political 1JutY Committees and Other Political

Committees and 0manizatiQDS

c

. r'

rDuring fieldwork the Audit staffTe\;ewed all receipts

deposjted into the Comminee's accounts and identified 41 contributions totaling $119.789

from pan)' comminees and other political comminees and organizations. During the audit

period. the Committee reported contributions from these organizations totaling 558.325

and of these. itemized only two contributions totaling $40.200.

In 1993 the Comminee failed to report and itemize 25

contributions totaling 59.481 (of26 contributions totaling $9.681). Twenty-four ofthe

omissions totaling $9.381 \\'ere deposited into the Special-Individual account.

In 1994. 14 contributions totaling S70.1 08 (of 15 totaling

S110.108) from political organizations were not itemized and 12 ofthese contributions

totaling S51.983 were not reponed. None ofthese contributions were deposited into the

Special-Individual account. Included \\'ithin the contributions not reponed were three

transfers totaling 550.000 from the National Republican Senatorial Comminee. one in-kind

contribution in the amount of S1.:!58 from the Republican National Committee. and eight

contributions totaling S7:!5 from unregIstered candidate comminees,

At the exit conference the .~udit staff advised the Comminee

that there "'ere reporting problems \\'ith regard to the receipts from political committees

and organizatiOns. The Audit staff provided the Committee \\"ith a listing of the

transactions \\·hich required itemization

4. Repoolnl; and itemization of H·1 Transfers

Section 1O·t 1O( b)( 3) of Title 11 ofthe Code of Federal Regulations

states. In part. that a politlcal committee that pays allocable expenses shall report each

Paa~ 1:, A~FroveC 7!30/9E
c

9

transfer offunds from its non-federal account to its federal account for the purpose of

paying such expenses. In the report covering t,e period in which each transfer occUlTed,

the comminee shall explain in a memo entry tht allocable expenses to which the transfer

relates and the date on which the transfer ":as made. Ifthe transfer includes funds from the

allocable costs of more than one activity, the comminee shall itemize the transfer showing

the amounts designated for administrative expenses and generic voter drives.. and for e~lch

fundraising program or exempt activity. Section 106.5(g)(2)(ii) ofthis Title provides that

such funds may not be transferred more than! 0 days before or more than 60 days after the

payments for ,,·hich they are designated are nlade.

The Commlnee made periodic transfers from its non-federal account

to its federal accounts to pay the non-federal ponion of allocable expenses. Such transfers

are reported on FEe Fonn 3X. Schedule H-3 and are hereinafter referred to as H-3

transfers. For 1QQ3. the Comminee made 21 such transfers which totaled $193..210. For

1994. the CC'mrr.ittec made 19 transfers totaling S152.800.

The Audit stafT revie\\'ed all activity be!'\'een both federal and

non-federal bank accounts and determined that for 1993 the Comminee failed to report 3

transfers totaling $4.710 and failed to itemize 9 transfers totaling $82.500. For 1994. the

Comminee failed to report 8 transfers totaling S36.800. Also.. 5 interaccount transfers

totaling S:!5.:!50 v,'hich should not have been reponed were inciuded as H-3 transfers. In

addition the Comminee reported a federal to non-federal transfer for $4.250 as an H-3

receipt. Finally. a $9..895 H-3 transfer \\'as reported which is not supported by bank

records or other documentation.

At the exit conference the Committee \\'as provided a schedule

v,'hich included the total H-3 actIvity v,'hich should be reported. The Committee appeared

to have no kno\\'ledge about the unsupported H-3 transfer reponed in 1994.

5. Disclosure and itemIzation of Disbursements

Sectlon 434(bHS)(A) of Title ofthe United States Code requires

the reponing commlnee to disclose the name and address of each person to \\"hom an

expenditure in an aggregate amount or value in excess of $200 \\'ithin the calendar year is

made by the reponIng commlnee to meet a comminee operating expense. tog.ether with the

date. amount. and purpose of such operating expenditure Subsection (6)(B)(i) ofthis

Sectlon also requtres that each report shall dIsclose the name and address of each political

commlnee y.'hich has received a contnbutlon from the reporting comminee during the

reponing period. together ""Ith the date and amount of an~ such contribution.

SectIon 104 1O( b. of Title 11 ofthe eode of Federal Regulations

states tn relevant pan tho. : political commIttees that have established separate federal and

non-federal accounts pursua.t to 11 eFR §1O~.5(a)( 1Hi) shall state. for each disbursen,ent

from llS federal account for a -,oInt federal and non-federal expense or activity. the full

Game and address of each person to \\ hom the disbursement \\"as made. and the date.

?3:Je ApproveC 7/30/96
10

amount and purpose of each such disbursement. The committee shall also report the total

amount expended by the comminee that year~ to date. for each category of disbursement.

The disclosure of each disbursement for the direct costs of a fundraising program or an

exempt activity shall include an identifying title or code.

As noted in section II.A.2. abo\'e~ disbursements were underreponed

during the audit period by $:!53~704. In addition. $74.184 ofthe disbursements that were

reported v.·ere not itemized as required. .t\lso. the disclosure ofthe disbursements itemized

v.·as incorrect v.ith regard to the allocation percentages used (see Finding II.B.I.) and was

incomplete for the identification ofspecific fundraising programs or events.

In 1993 the Committee failed to repon and itemize 76 disbursements

totaling $155~ 182 • ali from the Special-Individual account. In addition.. the Committee

failed to report and itemize a transfer to the non-federal account in the amount of $5.616

and bank charges totaling $46 from the Victory 94 account.

In 1994 the Committee failed to report and itemize 12 disbursements

totaling $26.987 - all from the Special-Individual account. The Committee did report but

failed to itemize 36 disbursements totaling S16..859 from the Allocation account and 10

disbursements totaling S57.399 from the Victory 94 account.

Most ofthe disbursements not reported or not itemized during the

audit period \\'ere for allo:able activity and should have been reported on Line 21 a and

itemized on Schedule H-4. Other disbursements. including expenditures for federal

activity. transfers to the non-federal account and a contribution to a federal candidate

require itemization on Schedules B for Lines 21 b. 22 and 23 respectively.

At the exit conference the Audit staff advised the Committee that

there "'as a reponing problem v.·ith regard to disbursements for operating expenses.

transfers to the non-federal account. and a contribution to a federal candidate. Subsequent

to fieldv.ork detailed schedules of all dIsbursements were provided to the Committee.

\\Oith respect to subsections 1 to 5 above. the interim audit report

recommended that the CommIttee file'

c

c

oi\mended reports for calendar years 1Q93 and 1994 to correct the

mIsstatements of financIal aCUvlt~ described above:

Schedules A (for LInc 11 a) to amend Its dIsclosure reports for 1993 and

1994 to itemIze contrihutlons from IndiViduals.

Schedules A (for Lines 11 c and 1~) to itemIze the contributions from

pohucal commIttees and organIzations for 1Q93 and 1994~

PaOE: ..... , h:::Jrsvec i/30/9E
o

o

o

o

o

11

Schedules H-4 (for Line 21a) for 1993 and 1994 to itemize the allocable

activity from the federal account~

Schedules B (for Line 21 b) for 1994 itemizing the wholly federal activity

disbursed from federal accounts;

Schedules B (for Line 22) for 1993 and 19Q4 itemizing the transfers from

the federal account to the non-federal account:

Schedule B (for Line 23) for 1994 itemizing the contribution to the federal

candidate; and

Schedules H-3 (for Line 18) to itemize the transfers from the non-federal

account to the federal account;

c·

The interim audit report also recpmmended that the Committee

provide in \\Titing the current procedures which have been implemented to document and

support each H...3 transfer.. and to provide any documentation or commentary relevant to the

$9..895 transfer for which no records \\'ere found.

In response to the interim audit report the Committee filed amended

repons \\'hich materially disclosed the financial activity for 1993 and 1994 as foliows:

Summary and Detailed Summary Pages which corrected the misstatement offinancial

activity: Schedules A itemizing the contributions from individuals and political

committees: Schedules B itemizing the \I\'holl~' federal activity transfers from the federal

account to the non-federal account~ and the contribution to the federal candidate; Schedules

H-3 detailing the transfers from the non-federal account to the federal account; and

Schedules H-4 itemiziflg all shared activity disbursed from the federal account.

Within the narrative ponlon ofthe response the Comminee outlined

the .,-:\.. :,:ccedures and guidelines it has adopted to document and support each H-3

tn~l":: 7he Conuninee also stated that it has installed ne'" computer software which

id;;'~ I '·,es contributions from political committees and accumulates multiple contributions

frl"Yr t:le samt individual so that all contributions requiring itemization can now be

i(:~'1~1:-i~d and reponed. Committee personnel have also attended FEe seminars conducted

~o:r. to promote an understanding ofthe regulations and to facilitate accurate reponing.

\Vith regard to the S9.895 transfer initially reported on Schedule

H-3.. the Committee "'as unable to provide any additional information.. and agreed that it

did not occur. The amended repons do not include this transaction.

B. RE\'IE\\ OF ALLOC &BLE A,,.I\'JIl

Section 106.5(g)( 1) of Title 1i of the Code of Federal Regulations states. in

pan.. that a comminee that has estabhshed separate federal and non-federal accouni~ under

Paoe 1 - .l.,j , A~roveC 7/30/96
c

12

11 CFR I02.5(a)( 1)(i) shall pay the expenses ofjoint federal and non-federal activities as

follows: (i) pay the entire amount of an allocable expense ofjoint federal and non-federal

(allocable) activities from its federal account and shall transfer funds from its non-federal

account to its federal account solely to cover the non-federal share ofthat allocable

expense: or (ii) establish a separate allocation account into which funds from its federal and

non-federal accounts shall be deposited solely for the purpose of paying the allocable

expenses ofjoint federal and non-federal activities. Once a Committee has established a

separate allocation account for this purpose. all allocable expenses shall be paid from that

account for as long as the account is maintained.

Section l04.10(b)(4) ofTitle 11 of the Code of Federal Regulations states.

in part, a political comminee that pays allocable expenses in accordance with 11 CFR

106.5(g) or 106.6(e) shall also repon each disbursement from its federal account or

separate allocation account in payment for a joint federal and non-federal expense or

activity.

The rules regarding the percentages to be used in the allocation ofshared

expenses for administrative and generic voter drives: exempt activities: and direct costs of

fundraising relevant to this Committee are described respectively under sections 106.5(d).

(e) and (f) ofTitle 11 ofthe Code of Federal Regulations..~dministrativeand voter drive

percentages are calculated on the ratio ofthe federal offices e:-..pected on the ballot to total

federal and non-federal offices expected on the ballot in the next general election to be held

in the comminee's state, Exempt activities are allocated according to the proponion of

time or space devoted to federal candidates or elections as compared to the total time or

space devoted to all federal or non-federal candidates or elections. Fundraising costs shall

be allocated based on the ratio offunds received into its federal account to its total receipts

from each fundraising program or event.

c 1. Revie\\' of Allocation Percenta~ec; lised bv the Comminee

The Audit staff revie\\'ed the allocation percentages used by the

Committee for administrative expenses. generic voter drives. exempt activities. and

fundraising programs. The allocation ratIos calculated by the .~udit staff are materially

different than the ratios used by the Committee.

For administrative expenses and generic voter drive allocation the

Comminee calculated a federal allocation of ~5°/o. The Audit staff determined that the

correct federal allocation during the audit penod \\'as ~~o'o. The miscalculation was made

because the Committee failed to take advantage of the total points allo\\'ed for "Other

State\\'ide Office(s)".

The Committee conducted 13 fundralslng programs or events during

the audit period For most programs the Commlttee reponed the same allocation ratio as

that reponed for Administrative "oter Dn\e (~5~ol. The Committee representatives did

not knov. ho"; the reponed ratios 'A ere denved. and no \\'orkpapers \\'ere available to

Pace 1';, Ap;;roveC 7,'30:9f
c

13

demonstrate their derivation, The Audit staff determined the correct fundraising allocation

ratios and presented to the Comminee a schedule ofthese fundraising allocation ratios at

the exit conference, The Audit staff also explained the difference in the allocation ratio for

Administrative expenses. The Comminee raised no objection to the ratios as calculated by

the Audit staff and only queried on how the\" were derived,

The AuJit staff allocated all shared expenses from both the federal

and non-federal accounts at the ratios \\'e calculated

Summao' of Allocable t\ctivu\' from both Federal and Non-federal

Accounts

The Audit staff revie",'ed disbursements from both the federal and

non-federal accounts during the audit period to evaluate compliance \\;th t t CFR

§ I06,5(g) and to detennine if the federal account paid its share of allocable expenses,

The Comminee maintained an allocation account pursuant to 11

CFR §106,5(g)( 1), Pursuant to subsection (ii) of this regulation. all disbursements were

payments for allocable expenses ofjoint federal and non-federal activities.. and the only

funds deposited were either interaccount transfers from the federal accounts or transfers

from the non-federal account 4, Ho\\'ever. the Audit staff detennined that allocable

disbursements (129 totaling $222.132) "'ere also made from the 1'\\'0 other federal accounts

(Special-Individual and Victory 94),

The revie\\' of disbursements from the two non-federal bank

accounts (Special-Corporate and Finance) determined that the Comminee made 66

disbursements totaling S108..965 from the non-federal account for allocable expenses. The

allocable expenditures included administrative expenses of the \Vestem States Leadership

Conference. Administrative and Voter Drive cos~s. and expenses ft'T several fundraising

programs. The federal share of thIS allocable activity totaled S16..361 for 1993.. and

$46..587 for t 994,

The Audit staff analyzed Comminee records to determine whether

the federal account paid its share of allocable expenses. The non-federal share of expenses

paid by the federal account \\'as offset agaInst both the transfers from the non-federal

account 5 and the federal share of allocable expenses paid by the non-federal account.

\\'lth fe~ exceptions. all transfers from the non-federal account ~ere depoSited IOto thiS account

The Commmee could not pro' Ide "orkpapers te' suppor! the amount of each transfer reponed on

Schedule H-3 The Audit staff re' le"ed all transters to detennme If the amounts transferred were

~Ithm the 10-60 da~ u.lOdo\o\ and concluded that all but one transfer (on \1arch 3,19(3) were full~

supponed b~ allocable expenses pJld from the federal account dunng the compliance wando"

Paae -. A:;::~~'''~ - 38 ' 9f
14

During 1993 the federal account underpaid its share of allocable

expenses by $9.670. This amount includes the non-federal share of allocable

disbursements paid from the federal account ($199..901) less the non-federal transfers

($193,210) less the federal share of allocable disbursements paid from the non-federal

account ($16..361).

During 1994 the federal account paid $84.635 more than required

the result of nening the non-federal share of expenses paid from the federal account

($284.022) less the non-federal transfers ($ 15~.800) less the federal share of expenses paid

from :.he non-federal account ($46.587).

Therefore. for the audit period 'he federal account paid $65.611

more than its required share. This amount is calculated by offsetting the sum ofthe

underpayment for 1QQ3 ($9.670) and a debt reponed for prior periods ($9.354) 6.. by the

balance in 19Q4 ($84.635)

• .--\lthough disbursement of allocable activity from the non-federal

account is prohibited. all these transactions need to be reported on Schedules H-4 (Memo)

to complete the public record.

At the exit conference and subsequent to the close of fieldwork the

Comminee " ..as provided schedules ""hich detailed the allocable disbursements from the

federal and non-federal bank accounts. The Comminee had no explanation for \\·hy the

allocable disbursements ":ere made from the non-federal account and agreed to review the

schedules provided by the Audit staff

The interim audit repon recommended that the Committee

demonstrate that it did not make disbursements from its non-federal account for the

purpose of financing federal activit~. Absent such a demonstration the Committee should

detail in "Titing the changes it has implemented to comply v,'ith the regulations as well as

any other comments and documentatlon It believed relevant to this maner. \Vith respect to

the debt reponed as o"'ed to the non-federal account. the interim repon recommended that

the Comminee offer an explanation or documentation relevant to this issue.

The lntenm audit repon also recommended that the Committee file:

o Schedules H-1 and H-2 for 1993 and 1q94 to disclose the correct allocation

percentages for AdmInIstrative and Voter Dnve and Fundraising costs: and

6 On Janua~~ 1. lQQ3 the Commmee reponed a debt oy.,ed to the non-federal account an the amount of

SQ.35~ On June 30. 1993 the (ommmee reponed an additional amount of$1.:-;7 for a balance

oy.,ed the non-federal account of SI0 631 The Commtnee did not disclose thiS debt on subsequent

reports. and made no disbursement to repa~ the debt to the non-federal account dunng the audit

penod.

Pac€: 1E" Approvee -; " 30 '9E
o

IS

(Memo) Schedules H-4 for 1993 and 1994 which detail all joint expenses

disbursed from the non-federal account

'0

c

. ,-.,.

r-,

....

In response to the interim audit repon the Committee submitted

\\Tinen procedural changes and described internal controls which it has instituted to ensure

that no payments for federal activi~' \\ill be made from the non-federal accounts. The

Comminee stated that it \\'3S unable to support the debt reponed as O\\'ed to the non-federal

account.

The Comminee filed Schedules H-l and Schedules H-2 \\'hich

disclosed the correct allocation percentages used for Administrative and Voter Drive and

Fundraising costs and filed (Memo) Schedu:es H-4 \\·hich itemized the joint expenses

disbursed from the non-federal account.

c. REPORTING OF DEBTS ASD OBLIGATIONS

Section 434(b)(8) ofTitle 2 ofthe United States Code states.. in pan. that

each report under this section shall disclose the amount and nature of outstanding debts and

obligations owed by or to such political comminee.

Section 104.3(d) ofTitle 11 ofthe Code ofFederal Regulations requires that

each report !iled under 11 CFR 104.1 shall disclose on Schedule C (loans) or D

(obligations to vendors) the amount and nature of outstanding debts and obligations owed

by or to the reporting comminee. Section 104.11(a) requires that debts which remain

outstanding shall be continuously reponed until extinguished. Subsection (b) states that a

debt or obligation. including a loan. "Tinen contract., \\Tinen promise or written agreement

to make an expenditure. the amount of\\'hich is 5500 or less.. shall be reponed as ofthe

time payment is made or not later than 60 days after such obligation is incurred. whichever

comes first. A debt or obligation. the amount of which is over 5500 shall be reponed as of

the date on \\'hich the debt or obligation is incurred.

\'/ith the exception of an unsupported debt to the non-federal account. the

Comminee did not report any debts and obligations during the audit period. The Audit

staff revie\\'ed disbursement documentation and determined that the Comminee failed to

repon debts totaling $60.161 o\\'ed to four vendors as ofJanuary 1. 1993, In addition. the

Audit stafT identified obhgations to t\\'O other vendors totaling $:25.391 \\'hich were

incurred during the audit period and required disclosure on Schedule D. According to

available documentation. these debts ""ere liquidated during the audit period and there

\\'ere no apparent outstandIng obligations as of December 31. IQQ4 .

.~t the exit conference the Audit suff recommended that the Committee file

amended dIsclosure repons for 1QQ3 and 19Q~ dIsclOSIng the Incurrence and payment of

Pace ,-. ,
c

c

16

these obligations. The Audit staff discussed with the Committee specific reporting

requirements with respect to disclosure of all debts and obligations. The Committee

agreed to file :lilY necessary amendments.

The interim audit report recommended that the Committee fiIe amended

Schedules D to disclose the obligations to vendors for each reporting period in 1993 and

1994.

In response to the interim audit report the Committee filed. on July 15.. 1996,

amended Schedules 0 \\'hich disclosed the debts and obligations as recommended above.

D. EXCESSIVE COSTRIBl:TIO~SBY CASH

Section 441 g ofTitle:! of the United States Code states that no person shall

make contributions of currency of the United States or currency ofany foreign country to

or for the benefit of any candidate \',·hich. in the aggregate.. exceed $100. \\;th respect to

any campaign of such candidate for nomination for election. or for election. to Federal

office. Section 110.4(c)( 1) of Title 11 of the Code of Federal Regulations includes the

restriction ofthis aggregate cash limitation to any political committee.

Section 11 O.4(c)(3) ofthis Title requires that a committee receiving any

anonymous cash contribution in excess of550 shan promptly dispose ofthe amount over

550. The amount over 550 may be used for any la",'ful purpose unrelated to any Federal

election. campaign. or candidate.

The Audit staff detennined thaI the Committee received seven contributions

from individuals whose aggregate excessive cash contributions totaled $3.350. This

re\'i~' also disclosed two anonymous receipts ""hose excessive portions totaled $2..025.

At the exit conference the Committee sought guidance on the options

available for resolving these matters.

The interim audit report recommended that the Comminee either

demonstrate that the excessive ponlon of cash received from the individuals was refunded

to each contributor or transferred to the non-federal account \\·tthin 30 days of receipt ofthe

contributions or refund the excessIve portions to the contributors and provide proof ofthe

refund (front and back of canceled checksl to the Audit staff for reviev•.

The interim audit report also recommended that the Comminee either

demonstrate that the anonymous cash receipts "'ere not excessive or dispose of the

excessive portIons The report described an acceptable method of disposition as the

issuance of a check payable to the l'.S Treasur) and submitted to the Comrrlission for

deposit.

Paoe 1S, A;:;:roveC 7.' 30,1 9€
'0

o

!f)

c

c.

17

In response to the interim audit report the Committee submitted copies of

checks made payable to the named individuals. The dates on these check copies were

contemporaneous with the submission ofthe response and did not represent negotiated

instruments. In a telephone conversation after receipt ofthe response the Committee stated

that they intend to submit not only the front and back copies ofthe negotiated checks but

also copies ofthe bank statements through which they clear.

The Committee also submitted a check payable to the U.S. Treasury in the

amount ofS2..025 as recommended.

•
FEDERAL ELECTION COf\1MISSION

o

'.()

c

July 31, 1996

~ls. Andrea Smith.. Treasurer

Republican Campaign Comrninee of Ne"" ~1exico

P.O. Box 36900

Albuquerque.. NM 8: 176

Dear Ms. Smith:

1\1 _~led please find the Final Audit Report on the Republican Campaign

Comminee of Ne\\" ~1exico. The Commission approved the Tepon on July 30. 1996.

The Commission approved final audit report \'will be placed on the pubhc record

on Aug.ust 7. 1996. Should you have any questions regarding the public release ofthe

report.. please contact the Commission"s Press Office at (202) 219-4155. Any questions

you have related to the matters covered during the audit or in the report should be

directed to Cornelia Riley or Joe S\\'earingen ofthe Audit Division at (202) 219-3720 or

toll free at (800) 424-9530.

Sincerely. f7/ },~ """-;- /

--,s /~/;;

~:~~

1

1/ obert J. Costa

l' Assistant Staff Director

Audit Division

l

.~ttachmcnt as stated

cc: Ke\'in ~100ma\\. Executl\c Director

.. _' t \

Pa9€ 21, Approved 7/30/96
CHRONOLOGY

REPUBLICAN CAMPAIGN COMMITTEE

OF NEW MEXICO

'.:}

c

Audit Fieldwork

Interim Audit Repon to

the Committee

Response Received to the

Interim Audit Repon

Final Audit Repon Approved

9/18/95 - 10/6/95

4/9/96

6/28/96

7130196

Page 23 t Approved i/30/96