Final Audit Report of the 

Commission on the Tennessee 

Republican Party Federal 

Election Account 

January 1, 2005 - December 31, 2006 

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. 

About the Committee (p. 2) 

The Tennessee Republican Party Federal Election Account is a 

state party committee headquartered in Nashville, Tennessee. For 

more information, see the chart on the Committee Organization, 

p. 2. 

Financial Activity (p. 2) 

• Receipts 

o Contributions from Individuals $ 3,483,766 

o Contributions from Other Political 367,326 

Committees 

o Transfers from Affiliated/Other 2,743,200 

Party Committees 

o Transfers from Non-federal Account 555,805 

o All Other Receipts 22,980 

Total Receipts $ 7,173,077 

Disbursements 

o Operating Disbursements $ 6,686,254 

o All Other Disbursements 406,753 

Total Disbursements $ 7,093,007 

Commission Findings (p. 3) 

• Misstatement of Financial Activity (Finding 1) 

• Contributions from Unregistered Political Organizations 

(Finding 2) 

• Disclosure of Expenditures for Salary and Wages (Finding 3) 

Additional Issue (p. 12) 

• Expenditures Related to Bob Corker for Senate 

2 U.S.C. §438(b). 
Final Audit Report of the 

Commission on the 

Tennessee Republican Party Federal 

Election Account 

January 1, 2005 - December 31, 2006 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 1 

Scope of Audit 1 

Changes to the Law 1 

Part II. Overview of Committee 

Committee Organization 2 

Overview of Financial Activity 2 

Part III. Summaries 

Commission Findings 3 

Part IV. Commission Findings 

Finding I. Misstatement of Financial Activity 4 

Finding 2. Contributions from Unregistered Political Organizations 7 

Finding 3. Disclosure of Expenditures for Salary and Wages 9 

Part V. Additional Issue 

Expenditures Related to Bob Corker for Senate 12 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Tennessee Republican Party Federal Election 

Account (TRP), 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: 

1. The receipt of excessive contributions and loans. 

2. The receipt of contributions from prohibited sources. 

3. The disclosure of contributions and other receipts. 

4. The disclosure of disbursements, debts and obligations. 

5. The disclosure of expenses allocated between federal and non-federal accounts. 

6. The consistency between reported figures and bank records. 

7. The completeness of records. 

8. Other committee operations necessary to the review. 

Changes to the Law 

On December 1,2005, following the decision of the U.S. Court of Appeals for the 

Disteict of Columbia in Shays v. FEC, 337 F. Supp. 2d 28 (D.D.C. 2004), aff'd, 414 F.3d 

76 (D.C. Cir. 2005), the Commission amended its rules to revise the method by which 

state, district and local party committees may pay the salaries, wages and fringe benefits 

of employees who spend 25 percent or less of their compensated time in a month on 

federal election activity (FEA) or activity in connection with a federal election ("covered 

employees"). The revised rule became effective on January 19,2006. (See Finding 3, 

Disclosure of Expenditures for Salary and Wages). 
Part II 

Overview of Committee 

Committee Organization 

Important Dates Tennessee Republican Party Federal 

Election Account 

• Date of Registration October 23,1975 

• Audit Coverage January 1,2005 - December 31,2006 

Headquarters Nashville, Tennessee 

Bank Information 

• Bank Depositories Three 

• Bank Accounts 12 Federal and 6 Non-federal accounts 

Treasurer 

• Treasurer When Audit Was Conducted Ed Roberson 

• Treasurer During Period Covered by Audit Joe R. Arnold (thru 2/17/05) 

Ed Roberson (2/18/05 to 5/26/09) 

Management Information 

• Attended Commission Campaign Finance 

Seminar 

Yes 

• Used Commonly Available Campaign 

Management Software Package 

Yes 

• Who Handled Accounting and 

Recordkeeping Tasks 

Paid staff 

Overview of Financial Activity 

(Audited Amounts) 

Cash on hand ® January 1,2005 S 5,973 

Receipts 

o Contributions from Individuals $ 3,483,766 

o Contributions from Other Political Committees 367,326 

o Transfers from Affiliated/Other Party Committees 2,743,200 

o Transfers from Non-federal Account 555,805 

o All Other Receipts 22,980 

Total Receipts $ 7,173,077 

Disbursements 

o Operating Disbursements $ 6.686,254 

o All Other Disbursements 406,753 

Total Disbursements $ 7,093,007 

Cash on hand @ December 31,2006 $ 86,043 
Part III 

Summaries 

Commission Findings 

Finding 1. Misstatement of Financial Activity 

On its reports as originally filed with the Commission, TRP underreported receipts by $2,227,811 

and disbursements by $1,440,129 for calendar year 2006. In addition, a comparison of TRP's 

amended reports to bank records revealed a misstatement of receipts, disbursements and cash on 

hand in both 2005 and 2006. For 2005, TRP overstated beginning cash on hand by $33,780, 

understated receipts by $117,371, understated disbursements by $77,948 and understated ending cash 

on hand by $5,643. In 2006, receipts were understated by $459,936, disbursements understated by 

$159,582 and ending cash on hand was understated by $294,475. In response to the Interim Audit 

Report recommendation, TRP amended its reports to materially correct the misstatements noted 

above. The Commission approved this finding. (For more detail, see p. 4) 

Finding 2. Contributions from Unregistered Political Organizations 

During audit field work, the Audit staffs review of contributions from unregistered political 

organizations identified $114,395 in contributions that may not have been made with permissible 

funds. TRP refunded $38,125 of these, but not in a timely manner. In response to the Interim Audit 

Report recommendation, TRP provided copies of the front and back of the negotiated contribution 

ref\ind checks totaling $71,845 and provided six check stubs for refunds, totaling $4,325, issued but 

not yet negotiated. TRP's response did not address $100 of these contributions. TRP materially 

complied with the Interim Audit Report's recommendation. The Commission approved this finding. 

(For more detail, see p. 7) 

Finding 3. Disclosure of Expenditures for Salary and Wages 

TRP did not maintain monthly logs, time sheets or affidavits for its employees. In response to the 

Interim Audit Report recommendations, TRP provided some additional affidavits which stated that 

the covered employees did not spend more than 25% of their compensated time on federal election 

activities and amended its reports to reflect the remaining salary and payroll tax payments as wholly 

federal expenditures, which materially corrected the disclosure of the salaries. The Commission 

approved this finding. (For more detail, see p. 9) 

Additional Issue 

Expenditures Related to Bob Corker for Senate 

TRP disclosed disbursements totaling $721,093 as either federal election activity or federally funded 

operating disbursements in connection with numerous mail pieces in support of Bob Corker for 

Senate or in opposition to his opponent. Congressman Harold Ford, Jr. In response to the Interim 

Audit Report recommendations, TRP provided a description of the procedure used for handling a 

mail program by volunteers. The Report of the Audit Division (Draft Final Audit Report) stated that 

TRP's procedure did not qualify for the volunteer materials exemption and therefore resulted in an 

excessive coordinated contribution to Bob Corker for Senate, but recommended no further corrective 

action. In light of the lack of clarity regarding the amount of volunteer involvement need to qualify 

for the volunteer materials exemption, the Commission did not approve the Audit staff's 

recommended finding by the required four votes. Pursuant to Commission Directive 70, this matter 

is discussed in this "Additional Issue" section. (For more detail, see p. 12) 
Part IV 

Commission Findings 

I Finding 1. Misstatement of Financial Activity 

Summary 

On its reports as originally filed with the Commission, TRP underreported receipts by 

$2,227,811 and disbursements by $1,440,129 for calendar year 2006. In addition, a comparison 

of TRP's amended reports to bank records revealed a misstatement of receipts, disbursements 

and cash on hand in both 2005 and 2006. For 2005, TRP overstated beginning cash on hand by 

$33,780, understated receipts by $117,371, understated disbursements by $77,948 and 

understated ending cash on hand by $5,643. In 2006, receipts were understated by $459,936, 

disbursements understated by $159,582 and ending cash on hand was understated by $294,475. 

In response to the Interim Audit Report recommendation, TRP amended its reports to materially 

correct the misstatements noted above. 

The Commission approved this finding. 

Legal Standard 

Contents of Reports. Each report must disclose: 

• 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 

• Certain transactions that require itemization on Schedule A (Itemized Receipts) or Schedule 

B (Itemized Disbursements). 2 U.S.C. §434(b)(l), (2), (3), (4) and (5). 

Facts and Analysis 

A. Originally Reported Activity for 2006 

1. Facts 

As illustrated below, on the original disclosure reports filed with the Commission, TRP 

underreported receipts and disbursements for calendar year 2006. 

Comparison of Originally Reported 2006 Activity to Reconcilec Bank Totals 

Reported Bank Records Discrepancy 

Receipts $3,463,205 $5,691,016 $2,227,811 

understated 

Disbursements $4,274,905 $5,715,034 $1,440,129 

understated 

TRP subsequently amended its reports between 20 and 75 days after the original reports, 

showing an increase in financial activity. The amended reports partially corrected the errors. 

Prior to the Interim Audit Report stage, the Audit staff discussed the increased activity issue with 

the TRP Controller. In his written response, the Controller agreed that the figures originally 
reported by TRP were understated; nevertheless, he did not believe this finding was warranted. 

The Controller explained that he attended an FEC conference in Florida in the summer of 2006 

and inquired about what committees should do if, due to time constraints, they are unable to file 

the reports timely and accurately. The response was similar to the feedback he received from the 

Reports Analysis Division (RAD)^ later that year. According to the Controller, he was again told 

to file the report on time and submit an amended report with the correct figures on a later date. 

2. Interim Audit Report & Audit Division Recommendation 

In the Interim Audit Report, the Audit staff recommended TRP provide any additional 

information or comments considered relevant to the misstatement of its original reports filed for 

2006 and amend its reports to correct the misstatements for 2005 and 2006. The Interim Audit 

Report also recommended that TRP amend its most recently filed report to correct the cash on 

hand balance with an explanation that the change resulted from a prior period audit adjustment 

and that TRP reconcile the cash balance of its most recent report to identify any subsequent 

discrepancies that may have affected the $294,475 adjustment recommended by the Audit staff. 

3. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report, TRP amended its reports to materially correct the 

misstatements noted below. Its response did not provide any additional comments on the 

misstatement of its reports as originally filed. TRP also indicated that it will amend its most 

current report to correct the cash on hand balance. 

Commission Conclusion 

The Commission approved this finding. 

B. (Amended) Reoorted Activity for 2005 & 2006 

1. Facts 

The Audit staff reconciled (amended) reported activity to bank records for calendar years 2005 

and 2006. The following charts outline the discrepancies for the beginning cash balances, 

receipts, disbursements, and the ending cash balances. The succeeding paragraphs explain why 

the differences occurred, if known. 

2005 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1,2005 

$39,753 $5,973 $33,780 

Overstated 

Receipts $1,364,689 $1,482,060 $117,371 

Understated 

Disbursements $1,300,024 $1,377,972 $77,948 

Understated 

Ending Cash Balance @ 

December 31,2005 

$104,418 $110,061 $5,643 

Understated 

When committees call for guidance on what to do when they are unable to file a complete report timely, RAD 

advises them to file as complete a report as possible by the deadline, and then to file an amended report as soon 

as possible with any omitted information. 
The beginning cash on hand was overstated by $33,780 and is unexplained, but likely resulted 

from prior period discrepancies. 

The understatement of receipts was the result of the following: 

• Receipts from the Republican National Committee (RNC) not reported 

• Transfer from the non-federal account not reported 

• Receipt from an individual not reported^ 

• Unexplained difference 

Net understatement of receipts 

The understatement of disbursements was the result of the following: 

• Transfers to non-federal account not reported^ 

• Unexplained difference 

Net understatement of disbursements 

20,300 

5,000 

100,000 

(7.929) 

$ 117.371 

$ 91,864 

(13.916) 

$ 77.948 

The $5,643 understatement of closing cash on hand was the result of the misstatements 

described above. 

2006 Committee Activity 

Reported Bank Records Discrepancy 

Beginning Cash Balance 

@ January 1,2006 

$104,418 $110,061 $5,643 

Understated 

Receipts $5,231,080 $5,691,016 $459,936 

Understated 

Disbursements $5,555,452 $5,715,034 $159,582 

Understated 

Ending Cash Balance @ 

December 31,2006 

-$208,432' $86,043 $294,475 

Understated 

$ 

The understatement of receipts resulted from the following: 

• Receipts from other (mostiy unregistered) political committees not reported 

• Receipts from the RNC not reported 

• Transfers from the non-federal account not reported 

• The total on Schedule A for itemized contributions from individuals 

exceeded the amount reported on the Detailed Summary Page for the 

Post-General Report 

• Unexplained difference 

Understatement of receipts $ 459.936 

49,000 

183,900 

128,949 

10,000 

88.087 

The excessive portion of this contribution ($90,000) was timely resolved by transfer to the non-federal account. 

This amount includes the $90,000 transfer to the non-federal account resolving the excessive contribution 

discussed in footnote 3. 

The negative cash balance resulted from reporting errors; the balance in the bank was never negative. This 

column does not total correctly as a result of a discrepancy between the reported ending cash on one report and 

the beginning cash on the succeeding report (an $11,522 understatement). On March 26,2007, after the Audit 

Notification Letter, TRP amended this report and corrected the cash on hand balance. 
The understatement of disbursements resulted from the following: 

• Transfers to non-federal account not reported $ 14,050 

• Net errors in reporting of disbursements to various vendors 75,523 

• Unexplained difference 70.009 

Understatement of disbursements $ 159.582 

The $294,475 understatement of the closing cash on hand was the result of the misstatements 

described above. 

The Audit staff discussed the misstatements for 2005 and 2006 with TRP's representatives 

during the exit conference and presented them with copies of relevant workpapers. TRP 

representatives stated that amended reports would be filed. 

2. Interim Audit Report and Audit Division Recommendation 

The Interim Audit Report recommended TRP provided any additional information or written 

comments considered relevant to the misstatement of its original reports filed for 2006 and 

amend its reports to correct the misstatements for 2005 and 2006. The Interim Audit Report also 

recommended that TRP amend its most recently filed report to correct the cash on hand balance 

with an explanation that the change resulted from a prior period audit adjustment and that TRP 

reconcile the cash balance of its most recent report to identify any subsequent discrepancies that 

may have affected the $294,475 adjustment recommended by the Audit staff. 

3. Committee Response to Interim Audit Report 

In response to the Interim Audit Report, TRP amended its reports to materially correct the 

misstatements noted above. Its response did not provide any additional comments on the 

misstatements of its reports as originally filed. TllP also indicated that it will amend its most 

current report to correct the cash on hand balance. 

Commission Conclusion 

The Commission approved this finding. 

Finding 2. Contributions from Unregistered Political 

Organizations 

Summary 

During audit field work, the Audit staff's review of contributions from unregistered political 

organizations identified $114,395 in contributions that may not have been made with permissible 

funds. TRP refunded $38,125 of these, but not in a timely manner. In response to the Interim 

Audit Report recommendation, TRP provided copies of the front and back of the negotiated 

contribution refund checks totaling $71,845 and provided six check stubs for refunds, totaling 

$4,325, issued but not yet negotiated. TRP's response did not address $100 of these 

contributions. TRP materially complied with the Interim Audit Report's recommendation. 

The Commission approved this finding. 
Legal Standard 

A. Party Committee Limits. A party committee may not receive more than a total of $10,000 

per year from any person except that a multicandidate political committee may not contribute 

more than $5,000. 2 U.S.C. §441a(a)(l)(D) and 11 CFR §§110.1(a) and (c)(5), 110.2(d) and 

110.9. 

B. Handling Contributions That Appear Impermissible or Excessive. If a committee 

receives a contribution that appears to be impermissible or excessive, the committee must either: 

1. Return the questionable check to the donor; or 

2. Deposit the check into its federal account and: 

• Keep enough money in the account to cover all potential refunds; 

• Keep a written record explaining why the contribution may be illegal; 

Include this explanation on Schedule A if the contribution has to be itemized before 

its legality is established. 11 CFR §103.3(b)(3), (4) and (5). 

Facts and Analysis 

A. Facts 

During audit field work, the Audit Staff's review of contributions from unregistered political 

organizations identified $114,395 in contributions that may not have been made with permissible 

funds. Of this amount, $38,125 was refunded but not in a timely manner. TRP did not have any 

records available to show that these contributions were made with permissible funds. For 

example, one of the unregistered political organizations (Republican Governors Association 

Federal PAC) contributed $50,225 to TRP and therefore would have exceeded the $10,000 

contribution limit by $40,225 if the contribution was determined to have been made with 

permissible funds. TRP did refund $225 of this contribution, but not timely. 

The Audit staff discussed this matter with TRP's representatives during the exit conference and 

presented them with copies of relevant workpapers. TRP representatives stated that they would 

review the schedules and take corrective action accordingly. 

B. Interim Audit Report & Audit Division Recommendation 

The Interim Audit Report recommended TRP provide evidence demonstrating that the 

contributions in question were made with permissible funds and that they were not excessive. 

Alternatively, the Interim Audit Report recommended that TRP refund the impermissible and/or 

excessive contributions and provide evidence of such refunds (copies of the front and back of the 

negotiated refund checks). If funds were not available to make the necessary refunds, TRP was 

to disclose the refunds due on Schedule D (Debts and Obligations) until funds became available. 

C. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendation, TRP provided copies of the front and 

back of negotiated contribution refund checks totaling $71,845. In addition, it provided six 

check stubs for contribution refunds, totaling $4,325, issued but not yet negotiated. TRP did not 

address $100 of these contributions. TRP materially complied with the Interim Audit Report's 

recommendation. 
Commission Conclusion 

The Commission approved this finding. 

Finding 3. Disclosure of ESxpenditures for Salary and Wages 

Summary 

TRP did not maintain monthly logs, time sheets or affidavits for its employees. In response to 

the Interim Audit Report recommendations, TRP provided additional affidavits which stated that 

the employees did not spend more than 25% of their compensated time on federal election 

activities and amended its reports to reflect the remaining salary and payroll tax payments as 

wholly federal expenditures, which materially corrected the disclosure of the salaries. 

The Commission approved this finding. 

Legal Standard 

A. Accounts for Federal and Non-federal Activity. A party committee that finances political 

activity in connection with both federal and non-federal elections shall establish two accounts 

(federal and non-federal) and allocate shared expenses 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)(l)(i). 

B. Reporting Allocable Expenses. A state, district or local 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 (Disbursements for Allocated Federal/NonFederal 

Activity). 11 CFR § 104.17(b)(3). 

C. Costs for salaries and wages paid by State party committees prior to January 19,2006. 

State party committees may pay salaries and wages from funds that comply with State law for 

employees who spend 25% or less of their time in any given month on federal election activity. 

11 CFR §106.7(c)(l). 

D. Costs for salaries and wages paid by State party committees on or after January 19, 

2006). State party committees must pay salaries, wages, and fringe benefits for employees who 

spend 25% or less of their time in a given month on Federal election activity or activity in 

connection with a Federal election with funds from their Federal account, or with a combination 

of funds from their federal and non-federal accounts. 11 CFR § 106.7(c)(1), as amended January 

19,2006. 

E. Allocation Ratios and Record-Keeping for Administrative Expenses. The percentages 

used for such allocations vary based on whether a Presidential and/or a Senate candidate appears, 

or does not appear, on the ballot in any even numbered year. For the period 2005-2006, an 

election cycle in which a Senate candidate, but no Presidential candidate, appeared on the ballot, 

a Committee must allocate at least 21% of administrative expenses to its Federal account. 11 

CFR § 106.7(2)(iii). A Committee must keep a monthly log of the percentage of time each 

employee spends in connection with a Federal election. 11 CFR § 106.7(d)(1). 
10 

Facts and Analysis 

A. Facts 

During audit field work, the Audit Staffs review of payroll records identified that TRP did not 

maintain monthly logs or time sheets for its employees. Therefore, based on the regulatory 

change effective January 19,2006 (See page 1, Changes to the Law), the Audit staff applied the 

following to assess salary expenditures: 

1. For salary and payroll tax payments made before January 19,2006: 

If there is a monthly log, time sheet or affidavit which states that: 

• the time spent on federal election activity or activity in connection with a Federal 

election is less than or equal to 25%, the payment can be made from the nonfederal account; or 

• the time spent on federal election activity or activity in connection with a Federal 

election exceeds 25%, or for which there is no documentation indicating a lesser 

percentage, the federal committee must disclose these payments on Schedule B, 

Line 30b, as non-allocable Federal Election Activity (FEA). 

2. For salary and payroll tax payments made on or after January 19,2006: 

If there is monthly log, time sheet or affidavit which states that: 

• the time spent on federal election activity or activity in connection with a Federal 

election each month is none, the payment may be made by the non-federal 

account; or 

• the time spent on federal election activity or activity in connection with a Federal 

election is greater than 0% but less than or equal to 25%; the payment must be 

made from the federal account and disclosed by the federal committee on 

Schedule H4 as an allocable federal/non-federal administrative expense for which 

reimbursement of the non-federal share may be sought; or 

• the time spent on federal election activity or activity in connection with a Federal 

election exceeds 25%, or there is no documentation indicating a lesser percentage, 

the federal committee must disclose these payments on Schedule B, Line 30b, as 

non-allocable FEA activity. 

The results of the Audit staffs review of salary and payroll taxes, to include consideration of 

affidavits provided to date, are as follows: 

1. Salary and payroll tax payments made from the non-federal account: 

• With respect to salary payments from this account totaling $23,114, TRP 

provided affidavits which stated that four individuals spent less than or equal to 

25% of their time per month on federal election activity or activity in connection 

with a Federal election during the period on or after January 19,2006. In 

addition, there were payroll tax payments of $6,096 related to these salary 

payments. 

• TRP failed to provide documentation detailing the time spent on federal election 

activity or election in connection with a Federal election for employees whose 
11 

earnings totaled $207,048 for the period before January 19, 2006 and $37,792 for 

the period on or after January 19,2006. In addition, there were payroll tax 

payments of $53,198 and $9,968 respectively, associated with these salary 

payments. 

2. Salary and payroll tax payments made from the federal account: 

• TRP failed to provide supporting documentation detailing the time spent on 

federal election activity or election in connection with a Federal election for 

employees whose earnings totaled $23,194 for the period before January 19,2006 

and $665,209 for the period on or after January 19,2006. In addition, there were 

payroll tax payments of $2,314 and $161,923, respectively, associated with these 

salary payments. TRP reported these salary and tax payments as allocable 

expenses on Schedule H4. Absent the supporting documentation, TRP should 

have disclosed these salary and tax payments on Schedule B, Line 30b for both 

periods. 

The Audit staff examined reimbursements received from the non-federal account for its share of 

allocable activity and made necessary adjustments. This analysis showed there was no funding 

of federal activity by the non-federal accounts as a result of the activity discussed above. 

The Audit staff discussed this matter with TRP's representatives during the exit conference, and 

presented them with copies of relevant workpapers. TRP representatives stated that they would 

review the schedules and amend TRP's reports accordingly. 

B. Interim Audit Report & Audit Division Recommendation 

The Interim Audit Report recommended TRP provide monthly logs or time sheets for each 

employee attesting to the time spent by the employee for the period employed by TRP, or 

affidavits from each employee which provide information similar to a monthly log of employee 

activities, and amend its disclosure reports accordingly. The Interim Audit Report further 

recommended that TRP amend its disclosure reports if no additional documentation was 

provided. 

C. Committee Response to the Interim Audit Report 

In response to the Interim Audit Report recommendations, TRP provided some additional 

affidavits which stated that the covered employees did not spend more than 25% of their 

compensated time on federal election activities and amended its reports as recommended for the 

remaining salaries and payroll taxes, which materially corrected the disclosure of the salaries. 

Commission Conclusion 

The Commission approved this finding. 
12 

Part V 

Additional Issue 

I Expenditures Related to Bob Corker for Senate 

Summary 

TRP disclosed disbursements totaling $721,093 as either federal election activity or federally 

funded operating disbursements in connection with numerous mail pieces in support of Bob 

Corker for Senate or in opposition to his opponent. Congressman Harold Ford, Jr. In response to 

the Interim Audit Report recommendations, TRP provided a description of the procedure used 

for handling a mail program by volunteers. 

The Report of the Audit Division (Draft Final Audit Report) stated that TRP's procedure did not 

qualify for the volunteer materials exemption and therefore resulted in an excessive coordinated 

contribution to Bob Corker for Senate, but recommended no further corrective action. 

In light of the lack of clarity regarding the amount of volunteer involvement need to qualify for 

the volunteer materials exemption, the Commission did not approve the Audit staffs 

recommended finding by the required four votes. Pursuant to Commission Directive 70,^ this 

matter is discussed in this "Additional Issue" section. 

Legal Standard 

A. Limits on Contributions Made by State and Local Party Committees. 

State and local party committees must comply with the contribution limits below: 

o $5,000 per election to a Federal campaign if the contributing committee has qualified 

as a multicandidate committee (see below), 

o $2,100 per election to a Federal campaign if the contributing committee has not 

qualified as a multicandidate committee, 

o $5,000 per year to a separate segregated fund (corporate or labor PAC) or a 

nonconnected committee, 

o Unlimited transfers to other party committees. 2 U.S.C. §441a(a). 

B. Coordinated Party Expenditures. National party committees and state party committees 

are permitted to purchase goods and services on behalf of candidates in the general election— 

over and above the contributions that are subject to contribution limits described above. Such 

purchases are referred to as "coordinated party expenditures." They are subject to the following 

rules: 

• The amount spent on "coordinated party expenditures" is limited by statutory formulas 

that are based on the Cost of Living Adjustment (COLA) and the voting age population. 

• Party committees are permitted to coordinate the spending with the candidate 

committees. 

• The parties may make these expenditures only in connection with the general election. 

' Available at http://www.fec.gov/directives/directive_70.pdf. 
13 

• The party committees—^not the candidates—are responsible for reporting these 

expenditures. 

• If the party committee exceeds the limits on coordinated party expenditures, the excess 

amount is considered an in-kind contribution, subject to the contribution limits described 

above. 

• A national or state party committee may assign all or part of its coordinated party 

spending authority to another party committee. 2 U.S.C. §441a(d) and 11 CFR 

§§109.32(b) and 109.33(a). 

C. Coordinated Communication. A communication is coordinated with a candidate, an 

authorized committee, a political party committee, or an agent of any of the foregoing when the 

communication: 

1. Is paid for by a person other than that candidate, authorized committee, political party 

committee, or agent of any of the foregoing. 

2. Satisfies at least one of the four content standards; and . 

3. Satisfies at least one of the conduct standards. 11 CFR §109.21 (a)(1), (2) and (3), (c)(4), 

and (d)(4). 

D. Volunteer Activity. The payment by a state committee of a political party of the costs of 

campaign materials (such as pins, bumper stickers, handbills, brochures, posters, party tabloids 

or newsletters, and yard signs) used by such committee in connection with volunteer activities on 

behalf of any nominee(s) of such party is not a contribution or disbursement, provided that the 

following conditions are met: 

1. Such payment is not for the cost incurred in connection with any broadcasting, 

newspaper, magazine, bill board, direct mail, or similar type of general public 

communication. The term direct mail means any mailing(s) by a commercial vendor or 

any mailing(s) made from commercial lists. 

2. The portion of the payment allocable to federal candidates must be paid with federal 

funds. 

3. Such payment is not made from contributions designated by the donor to be spent on 

behalf of a particular candidate for Federal office. 

4. Such materials are distributed by volunteers and not by commercial or for profit 

operations. 

5. If made by a political committee such payments shall be reported by the political 

committee as a disbursement. 

6. The exemption is not applicable to campaign materials purchased by the national party 

committees. 11 CFR §100.87 (a), (b), (c), (d), (e) and (g) and 11 CFR §100.147 (a), (b), 

(c),(d),(e)and(g). 

Facts and Analysis 

A. Facts 

TRP disclosed disbursements to Creative Direct, LLC for numerous mail pieces in support of 

Bob Corker for Senate or in opposition to his opponent. Congressman Harold Ford, Jr. TRP 

disclosed these disbursements either as federal election activity or federally funded operating 

disbursements. These disbursements totaled $721,093 and were incurred during the period 
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September through November of 2006. Both the Corker campaign and the NRSC used this same 

vendor for direct mail disbursements. 

During audit field work, the Audit staff reviewed disbursements related to various forms of 

media to determine whether there was evidence of coordination with the candidate. For the 

coordinated expenditure standard to apply, two conditions must be met: content and conduct. In 

the view of the Audit staff, TRP appeared to have met the content standard and the conduct 

standard of the coordinated communications regulation. At the exit conference, the Audit staff 

discussed this matter with TRP's representatives, who stated they would review their records. 

Afterwards, the Audit staff provided a schedule of the $721,093 possible coordinated 

expenditures for their review.^ In subsequent correspondence, TRP and Creative Direct, LLC 

indicated that they considered the direct mailings to be exempt volunteer activities. 

B. Interim Audit Report & Audit Division Recommendation 

The Interim Audit Report recommended TRP provide evidence of volunteer involvement or 

other evidence to support that no coordination existed between TRP and Bob Corker for Senate. 

The Interim Audit Report further recommended that TRP seek reimbursement from the 

candidate in the amount of $716,093 if neither demonstration could be made. 

C. Committee Response to Interim Audit Report 

In response to the Interim Audit Report recommendations, TRP provided a description of the 

procedure used for handling the mail program during the fall of 2006. The response noted that 

volunteers at the Victory Field office were recruited by TN GOP Victory staff and organized to 

complete the following tasks: 

• Volunteers unloaded the boxes of unstamped and unaddressed mail from wrapped 

pallets, taking them into the Victory office. 

• Volunteers stacked the boxes inside the office. 

• Volunteer Team Leader opened boxes and stacked the unmarked mail on a series of 

tables for volunteers to stamp. 

• Volunteers sitting at the tables applied the Tennessee Republican Party indicia or stamp 

to each piece of mail with a hand operated ink stamp. 

• Volunteers placed the mail pieces back into boxes after they had been hand stamped with 

the Tennessee Republican Party's indicia. 

• Volunteers stacked the boxes of stamped mail near the door. 

• Volunteers loaded the boxes back onto the truck for delivery to the mail house to address 

the mail pieces. 

The coordinated party expenditure limit for the state of Tennessee in the 2006 cycle for a Senate 

candidate was $362,200. By a letter dated September 1,2006, the Tennessee Republican Party 

assigned its limit to the National Republican Senatorial Committee (NRSC) giving the NRSC a limit 

of $724,400. NRSC spent $714,630 of the combined limit on behalf of Bob Corker for Senate. Thus, 

the Audit staff stated that if these disbursements were considered not to have met the volunteer 

exemption, and were found to have been coordinated, then TRP would have made an excessive 

contribution to Bob Corker for Senate in the amount of $716,093 (because TRP did not contribute to 

Bob Corker for Senate the amount of the potential excessive contribution was $716,093 ($721,093-

$5,000)). 
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The response stated that during this process a volunteer physically touched each piece of mail to 

apply the hand operated ink stamp that was used to apply the non-profit indicia for postage used 

by the TRP. 

D. The Report of the Audit Division (Draft Final Audit Report)" 

The Report of the Audit Division (Draft Final Audit Report) stated that the limited participation 

by volunteers as detailed by TRP did not appear to meet the requirement of the volunteer 

materials exemption, but recommended no further corrective action. 

Commission Conclusion 

In light of the lack of clarity regarding the amount of volunteer involvement need to qualify for 

the volunteer materials exemption, the Commission did not approve the Audit staffs 

recommended finding by the required four votes. Pursuant to Commission Directive 70, the 

discussion of this matter was moved to the "Additional Issue" section of the audit report. TRP is 

not required to take further action with respect to these disbursements. 

" Pursuant to Commission Directive 70, the Report of the Audit Division has been renamed as the Draft Final Audit 

Report for future audits.