Page 18 of 19 Approved 11:22/02



B. DETERMINATION OF NET OUTSTANDING CAMPAIGN OBLIGATIONS

Section 9034.5(a) of Title 11 of the Code of Federal Regulations requires
that within 15 calendar days after the candidate’s date of ineligibility, the candidate shall
submit a statement of net outstanding campaign obligations which reflects the total of all
outstanding obligations for qualified campaign expenses plus estimated necessary
winding down costs.

The Candidate’s date of ineligibility (DOI) was August 11, 2000. The
Audit staff reviewed BRI’s financial activity through September 30, 2002; analyzed
projections of estimated winding down costs; and, prepared the Statement of Net
Outstanding Campaign Obligations that appears below:

Page 1] of 19 Approved 11.22/02


MISSTATEMENT OF FINANCIAL ACTIVITY - 2 U.S:C. §434(b)(1), (2) and (4) and
11CFR §104.18(f). BRI’s reported activity for calendar year 2000 was misstated. BRI
filed amended reports to correct the public record.

APPARENT NON-QUALIFIED CAMPAIGN EXPENSES — 26 U.S.C. §9032(9): 11CFR
§9033.11(a) and (b); §9034.4(a)(3)(iii), (b)(3) and (e)(3); §9038.2(b)(2)(i) and (iii). BRI
made 59 apparent non-qualified campaign expenditures totaling $251,756. Forty-two of
these disbursements ($211,217) were considered inadequately documented and the
remaining 17 disbursements ($40,539). although adequately documented, could not be
identified as having been made in connection with the primary or the general election. In
response to the preliminary audit report. BR] provided documentation in support of all the
expenditures in question and, as such. no repayment was warranted.

Page 2 of 19 Approved 11 22:02



CHRONOLOGY

BUCHANAN REFORM, INC.

Audit Fieldwork
Exit Conference

Preliminary Audit Report to
the Committee

Response Received to the
Preliminary Audit Report

Final Audit Report Approved

7/15/01 - 4/19/02

423/02

7/17/02

9/19/02

11/22/02

Page 19 of 19 Approved 11/22'02


Memorandum to Robert J..Costa
Proposed Audit Report

Buchanan Reform, Inc. (LRA #614)

Page 2 -

other contemporaneous memoranda. The Proposed Report notes that the Audit staff reviewed
disbursements made by the Committee post-date of ineligibility, August 11, 2000 through
December 31, 2001. Since Buchanan was a candidate in the general election. the auditors
questioned whether the expenses were related to the general election. In its response to the
Preliminary Audit Report, the Committee provided the Audit staff with documentation to
demonstrate that the disbursements in question were pnmary related qualified campaign
expenditures. As a result, the Audit staff 1s not recommending a repayment

Expenses incurred after the candidate's date of ineligibility are limited to winding down
expenses. 1] C.F.R. § 9034.4(a)(3). In addition. for purposes of the expenditure limitations set
forth in 11 C.F.R. § 9035.1, those candidates who run ina general election must wait until the
end of the expenditure report period before they may treat 100° of salary, overhead and
computer expenses as exempt legal and accounting compliance expenses. 1] C.F.R.

§ 9034.4(a)(3)(iii). It is our understanding that the disbursements in question were related to the
primary campaign and incurred prior to the date of ineligibility, August 11, 2000, but not paid by
the Committee until after the date of ineligibility. Nevertheless. the Proposed Report does not
include an explanation of this fact. Therefore. the Office of General Counsel recommends that
the Audit Division revise the Proposed Report to clanfy the fact that, although some of the
disbursements were made after the date of ineligibility, they were actually incurred prior to the
date of ineligibility in connection with seeking the nomination

Page 160f 19 Approved 1122 02


once, rather than using an ongoing system that would ensure that excessive contributions
were timely refunded as required by Section 103.3(b)(3) of Title 11 of the Code of
Federal Regulations. As a result, over half of all refunds issued by BRI were issued
untimely. It appears that the difficulties BR] was experiencing with aggregation, not only
contributed to the itemization of contributions as noted at Finding I].A.. but also
contributed to it’s difficulties in monitoring contributions aggregating in excess of
$1,000. The Audit staff notes that 351 of the 356 untimely contribution refunds involved
contributions that were less than, but aggregated more than, $1,000.

At the exit conference, BRI was informed that a material number of refund
checks issued to resolve excessive contributions were refunded untimely.

In the preliminary audit report, the Audit staff recommended that BRI
provide documentation to demonstrate that the untimely refunds did not represent
excessive contributions or that the contnbutions were refunded in a timely manner. BRI
did not respond to this finding.

Cc. MISSTATEMENT OF FINANCIAL ACTIVITY

Sections 434(b)(1), (2) and (4) of Title 2 of the United States Code state,
in relevant part, that each report shall disclose the amount of cash on hand at the
beginning of each reporting period and the total amount of all receipts and all
disbursements for the reporting period and the calendar vear.

Section 104.18(f) of Title 11 of the Code of Federal Regulations states, in
part, if a committee files an amendment to a report that was filed electronically, it shall
also submit the amendment in an electronic format. The committee shall submit a
complete version of the report as amended. rather than just those portions of the report
that are being amended.

The Audit staffs reconciliation of BRI’s reported activity to its bank
activity revealed material misstatements with respect to reported receipts and
disbursements for calendar year 2000. This 1s the result of not reporting activity
associated with a “Convention 2000" account opened June 2. 2000. Based on our review
of available records, BRI used this account to process reservations for an event package
and hotel rooms for the Reform Party convention

BRI reported receipts of $§.$17.016 and should have reported receipts of
$9,091,638. This net understatement of $274.622 was due pnmarily to BRI not reporting
the $289,744 deposited in to the Convention 2000 account. Similarly, BR] reported
disbursements of $9,157,761. and should have reported disbursements of $9.436.093
The $278,932 net understatement resulted mainly from BRI’s failure to repon
disbursements of $288,877 from the Convention 2000 account.

Page 7 of 19 Approved 11 22 02


Buchanan (the Candidate), a candidate for the Republican Party’s nomination for the
office of President of the United States. On November 4, 1999, an amended statement of
organization was filed which indicated a name change to Buchanan Reform. Inc. and
which indicated that Patrick J. Buchanan was a candidate for the Reform Party's
nomination for the office of President of the United States

During the audit period, BRI maintained its headquarters in Vienna.
Virginia and moved to McLean, Virginia in January of 2001. The Treasurer for BR] was
Robert Bowes from inception until November 30, 1999, at which time the current
Treasurer, Angela M. Buchanan, assumed the position.

BRI maintained depositories in McLean and Vienna, Virginia,
Washington, DC; Woodland Hills. CA: Toronto. OH: Des Moines, LA; and. Manchester,
NH. To handle its financial activity, BRI used 22 bank accounts. From these accounts,
BRI made approximately 3,800 disbursements. In addition, BRI received contributions
totaling $7,099,143 from approximately 83,000 contributors. It also received three loans
from the Candidate totaling $41,000, advances from a revolving line of credit of
$3,334,000, and offsets to expenditures of $510.278

BRI received $4,509,673 from the United States Treasury. This amount
represents 27% of the $16,890,000 maximum entitlement that any candidate could
receive. For matching fund purposes, the Commission determined that Mr. Buchanan’s
candidacy ended on August 11, 2000. the date he received the Nomination from the
Reform Party. On April 2, 2001, BRI received its final matching fund payment to defray
expenses and to help defray the cost of winding down the campaign.

BRI also maintained a bank account to handle activity related to the
Reform Party convention. BRI deposited receipts totaling $289,744 into this account and
made disbursements totaling $288,877. None of the activity related to this account was
initially reported by BRI (See Finding II.C.)

D. AUDIT SCOPE AND PROCEDURES

In addition to a review of expenditures made by BRI to determine if they
were qualified or non-qualified campaign expenses. the audit covered the follow ing
general categories:

1. the receipt of contnbunons trom prohibited sources. such as those
from corporations o: labor organizations.

Nv

the receipt of contnbutions or loans in excess of the statutory
limitations (see Finding 1I.B.).

3. proper disclosure of contributions from individuals, political
committees and other entities. to include the itemization of
contributions when required, as well as, the completeness and accuracy
of the information disclosed (see Finding II.A.);

Page 4 of 19 Approved 11 22/02


FEDERAL ELECTION COMMISSION

WASHINGTON, Dude

REPORT OF THE AUDIT DIVISION
ON
BUCHANAN REFORM, INC.

L BACKGROUND
A. AUDIT AUTHORITY

This report is based on an audit of Buchanan Reform, Inc. (BRI). The
audit is mandated by Section 9038(a) of Title 26 of the United States Code. That section
states, “After each matching payment period, the Commission shall conduct a thorough
examination and audit of the qualified campaign expenses of every candidate and his
authorized committees who received payments under Section 9037.” Also, Section
9039(b) of Title 26 of the United States Code and section 9038.1(a)(2) of the
Commission’s Regulations state that the Commission may conduct other examinations
and audits from time to time, as it deems necessary.

In addition to examining the receipt and use of Federal funds, the audit
seeks to determine if the campaign has materially complied with the limitations,
prohibitions, and disclosure requirements of the Federal Election Campaign Act of 1971
(FECA), as amended.

B. AUDIT COVERAGE

The audit covered the penod from BRI’s inception, March 2. 1999.
through December 31, 2001. BRI reported an opening cash balance of $-0-: total receipts
of $15,609,033; total disbursements of $15.697.707. and a closing cash balance of
$1,746.’ In addition, the Audit staff conducted a iimited review of reported activity
through September 30, 2002.

Cc. CAMPAIGN ORGANIZATION

Buchanan 2000. Inc. registered with the Federal Election Commission (the
Commission) on March 2, 1999, as the principal campaign committee for Patrick J

‘The amounts do not foot as the result of errors in carrying forward the ending cash on hand

balance from one report to the beginning cash on hand balance of the next report. The correct
ending cash balance was determined to be $1.710

Page 3 of 19 Approved 11 22 02


FEDERAL ELECTION COMMISSION
WASHINGTON. DC 24h +

December 4, 2002

Angela Buchanan, Treasurer
Buchanan Reform, Inc.

115 Rowell Court

Falls Church, VA 22046

Dear Ms. Buchanan:

Attached please find the Report of the Audit Division on Buchanan Reform, Inc.
The Commission approved the report on November 22. 2002. As noted in the report. the
Commission may pursue any of the matters discussed in an enforcement action

The Commission approved report will be placed on the public record on December
10, 2002. Should you have any questions regarding the public release of the report, please
contact the Commission's Press Office at (202) 694-1220.

Any questions you have related to matters covered during the audit or in the report
should be directed to Terry O’Brien or Alex Boniewicz of the Audit Division at (202) 694-
1200 or toll free at (800) 424-9530.

Sincerely,
/ /
—_— f ,
=>
oo Tn
eh Nhe?

Joseph F. Stoltz
Assistant Staff Director
Audit Division

Attachment as stated

ce: John J. Duffy, Esq.

Page 17 of 19 Approved 11 22.02


that are being amended.

The Audit staff reviewed all contributions from individuals and
determined that BRI did not itemize 4,820 such contributions on Schedules A-P (Itemized
Receipts) as required. The majority of the errors (4.575) were contributions in amounts
less than or equal to $200 that, when aggregated with earlier contributions from the same
contributors, exceeded $200, thus requiring itemization. The remaining 245 errors were
contributions that exceeded $200 on their face. The Audit staff was unable to determine.
and BRI representatives could not explain, why these contributions were not itemized

At the exit conference, the Audit staff advised BRI representatives of the
above matter and provided a list of the contributions not itemized. BRI representatives
indicated that they would file amended reports to correct the public record.

In the preliminary audit repon, the Audit staff recommended that BRI file
complete amended reports itemizing the contributions from individuals discussed above.
BRI responded by filing the requested amendments.

B. EXCESSIVE CONTRIBUTIONS RESOLVED UNTIMELY

Section 441a(a)(1)(A) of Title 2 of the United States Code states that no
person shall make contributions to any candidate and his authorized political committees
with respect to any election for Federal office, which in the aggregate exceed $1,000.

Section 103.3(b)(3) of Title 11 of the Code of Federal Regulations states,
in relevant part, that the treasurer shall be responsible for examining all contributions
received for ascertaining whether contributions received, when aggregated with other
contributions from the same contributor, exceed the contribution limitation of 11 CFR
110.1. Contributions which on their face exceed the contribution limitations set forth at
11 CFR 110.1 and contributions which do not appear to be excessive on their face, but
which exceed the contribution limits set forth in 11 CFR 110.1 when aggregated, may be
either deposited into a campaign depository under 1] CFR 103.3(a) or returned to the
contributor. If any such contribution is deposited. the treasurer may request redesignation
or reattribution of the contribution by the contributor in accordance with 11 CFR | 10.1(b)
or 110.1(k). If a redesignation or reattribution 1s not obtained. the treasurer shall. within
sixty days of the treasurer's receipt of the contribution. refund the contribution to the
contributor.

The Audit staff reviewed al! refunds of contributions made by BRI and
identified 356 instances where BRI's refunds of excessive contributions occurred
unumely. These untimely refunds amounted to $136.909 and were made from 94 days to
608 days after deposit of the contribution

The majority of these refund checks were issued during or after December
2000. It appears that BRI attempted to resolve most of its excessive contributions all at

Page 6 of 19 Approved 11/22/02


Chron

FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 20463

December 11, 2002
MEMORANDUM

TO: Ron M. Harris
Press Officer
Press Office

FROM: Joseph F. Stoltz , (Y
Assistant Staff Director
Audit Division

SUBJECT: Public Issuance of the Final Audit Report on Buchanan Reform, Inc.

Attached please find a copy of the final audit report and related documents on
Buchanan Reform, Inc. that was approved by the Commission on November 22, 2002.

All parties involved have received informational copies of the report and the
report may be released to the public.

Attachment as stated

ce: Office of General Counsel
Office of Public Disclosure
Reports Analysis Division
FEC Library


Section 9034.4(b)(3) of Title 11 of the Code of Federal Regulations states.
in part, that any expenses incurred after a candidate's date of ineligibility under 11 CFR
9033.5, are not qualified campaign expenses except to the extent permitted under 11 CFR
9034.4(a)(3).

Section 9034.4(a)(3)(iii) of Title 11 of the Code of Federal Regulations
provides, in relevant part, that candidates who receive public funding for the general
election must wait until the end of the expenditure report period described in 11 CFR
9002.12 before costs associated with the termination of political activity, such as the costs
of complying with the post election requirements of the Act and other necessary
administrative costs associated with winding down the campaign, including office space
rental, staff salaries and office supplies, shall be considered exempt legal and accounting
expenses.

Section 9034.4(e)(3) of Title 11 of the Code of Federal Regulations
addresses the attribution of expenditures between the primary and the general election
spending limits for costs associated with state or national campaign offices. It provides,
in relevant part, that prior to the date of the last primary election in a Presidential election
year, overhead and salary costs incurred in connection with state or national campaign
offices shall be attributed to the primary election. With regard to overhead and salary
costs incurred on or after June 1 of the Presidential election year, but before or on the date
of nomination, the committee may attribute to the general election an amount not to
exceed 15% of the limitation on primary-election expenditures set forth at 11 CFR
110.8(a)(1). Overhead and payroll costs associated with winding down the campaign and
compliance activities shall be governed by paragraph (a)(3) of this section.

Sections 9038.2(b)(2)(i) and (iii) of Title 11 of the Code of Federal
Regulations state, in part, that the Commission may determine that amount(s) of any
payments made to a candidate from the matching payment account were used for
purposes other than to defray qualified campaign expenses. The amount of any
repayment under this section shall bear the same ratio to the total amount determined to
have been used for non-qualified campaign expenses as the amount of matching funds
certified to the candidate bears to total deposits. as of 9% days after the candidate's date of
ineligibility.

The Audit staff reviewed al! disbursements made by BRI post date of
ineligibility (8-11-00) through December 31. 2001. and noted 59 apparent non-qualified
campaign expenditures totaling $251.756 Forty-two (42) of these disbursements.
totaling $211.217, were considered inadequately documented as BR] maintained only a
cancelled check that did not provide sufficient information to establish that the expenses
were in connection with the campaign for nomination For the remaining 17
disbursements ($40,539), although adequately documented. the Audit staff wus unable to
determine whether they were made in connection with the pnmary or the general election

A further breakdown of the 59 disbursements shows that two were
payments to Buchanan Foster, Inc. (the Candidate's general election committee) totaling

Page 9 of 19 Approved 1] 22°02


The Audit staff determined the correct ending cash balance on December
31, 2000, to be $27,440. BRI reported an ending cash balance of $31,741, an
overstatement of $4,301, which resulted from the activity of the Convention account and
other minor discrepancies.

The Audit staff discussed this account with BRI representatives at the exit
conference. BRI representatives were subsequently provided a copy of our bank
reconciliation and informed that amended reports would be requested.

In the preliminary audit report. the Audit staff recommended that BRI file
amended electronic reports. BRI filed amended reports to correct the public record.

Ill. FINDINGS AND RECOMMENDATIONS —- AMOUNTS DUE TO THE U.S.
TREASURY

A. APPARENT NON-QUALIFIED CAMPAIGN EXPENSES

Section 9032(9) of Title 26 of the United States Code defines. in part. the
term “qualified campaign expense” as a purchase or payment incurred by a candidate, or
by his authorized committee, in connection with his campaign for nomination. and neither
the incurring nor payment of which constitutes a violation of any law of the United States
or of the State in which the expense is incurred or paid.

Section 9033.11(a) of Title 11 of the Code of Federal Regulations states,
in part, that each candidate shall have the burden of proving that disbursements made by
the candidate or his authorized committee(s) or persons authorized to make expenditures
on behalf of the candidate or authorized committee(s) are qualified campaign expenses.

Section 9033.11(b) of Title 11 of the Code of Federal Regulations states,
in part, that for disbursements in excess of $200 to a payee. the candidate shall present a
canceled check negotiated by the payee and either a receipted bill from the payee that
states the purpose of the disbursement or a bill. invoice or voucher from the payee that
states the purpose of the disbursement. Where the documents specified above are not
available, the candidate or committee may provide a voucher or contemporaneous
memorandum that states the purpose of the disbursement. Where the supporting
documentation required above is not available, the candidate or committee may present
collateral evidence to document the qualified campaign expense. Such collateral!
evidence may include, but is not limited to. evidence demonstrating that expenditure 1s
part of an identifiable program or proiec: which 1s otherwise sufficiently documented or
evidence that the disbursement is covered by a pre-established written campaign
committee policy, such as a daily travel expense policy. If the purpose of the
disbursement is not stated in the accompanying documentation, it must be indicated on
the canceled check negotiated by the payee. Purpose means the full name and mailing
address of the payee, the date and amount of the disbursement. and a bref description of
the goods and services purchased.

Page 8 of 19 Approved 1] 22 02


4. proper disclosure of disbursements including the itemization of
disbursements when required. as well as, the completeness and
accuracy of the information disclosed;

5. proper disclosure of debts and obligations;

6. accuracy of total reported receipts, disbursements and cash balances as
compared to bank records (see Finding II.C.);

7. adequate recordkeeping for transactions (see Finding IT.A.);

8. accuracy of the Statement of Net Outstanding Campaign Obligations
filed by BRI to disclose its financial position (see Finding III.B.):

9. compliance with spending limitations: and,
10. other audit procedures that were deemed necessary in the situation.

As part of the Commission's standard audit process, an inventory of
records was conducted prior to the audit fieldwork to determine if BRI’s records were
materially complete and in an auditable state. The records were found to be matenally
complete and the audit fieldwork commenced immediately.

Unless specifically discussed below, no matenal non-compliance was
detected. It should be noted that the Commission may pursue further any of the matters
discussed in this report in an enforcement action

Il. FINDINGS AND RECOMMENDATIONS - NON-REPAYMENT
MATTERS

A. ITEMIZATION OF RECEIPTS

Section 434(b)(3)(A) of Title 2 of the United States Code states. in part,
that each report under this section shall disclose the identification of each person who
makes a contribution to the reporting committee during the reporting penod. whose
contribution or contributions have an gate umount or value in excess of $200 within
the calendar year’, together with the date and amount of any such contnbuuion

Section 104.18(f) of Title 11 of the Code of Federal Regulations states. in
part, if a committee files an amendment to u report that was filed electronically. 11 shall
also submit the amendment in an electronic format. The committee shall submit a
complete version of the report as amended. rather than just those portions of the report

* This was changed to “election cycleTM in the case of an authorized committee of a candidate tor
Federal office, effective for reporting periods beginning atter December 31, 2000 {amended
by section 641 of the Treasury and General Government Appropriations Act, 2000, Pub Law
No. 106-58, signed into law on September 29. 1999}

Page Sof 19 Approved 1] 22 02


FEDERAL ELECTION COMMISSION
WASHINGTON DO Joan

REPORT OF THE AUDIT DIVISION
ON
BUCHANAN REFORM, INC.

EXECUTIVE SUMMARY

Buchanan 2000, Inc. registered with the Federal Election Commission on March
2, 1999, as the principal campaign committee for Patrick J. Buchanan, a candidate for the
Republican Party’s nomination for the office of President of the United States.'

The audit is mandated by Section 9007(a) of Title 26 of the United States Code.
which requires the Commission to audit committees authorized by candidates of each
political party for President and Vice President.

The findings of the audit were presented to Buchanan Reform, Inc. at the exit
conference held on April 23, 2002, and in the preliminary audit report. BRI’s responses
to the findings are contained in the audit report.

The following is an overview of the findings contained in the audit report.

ITEMIZATION OF RECEIPTS — 2 U.S.C. §434(b)(3)(A) and 11 CFR §104.18(f).
BRI did not itemize 4,820 contributions on Schedule A-P as required. BRI filed amended
electronic reports itemizing the contributions as requested.

EXCESSIVE CONTRIBUTIONS RESOLVED UNTIMELY — 2 U.S.C. §44]a(a)(1)(A)
and 11CFR §103.3(b)(3). There were 356 instances where BRI's refunds of excessive
contributions occurred untimely. These unumely retunds amounted to $136.909 and
were made from 94 days to 608 days after deposit of the contribution. The Audit staff
noted that 351 of the 356 untimely contribution refunds involved contributions that were
less than. but aggregated more than. $1.000. BRI did not respond to this finding

On November 4, 1999, an amended statement of organizauion was filed which indicated a name
change to Buchanan Reform. Inc. (BRI) and which indicated that Pamick J. Buchanan was a
candidate for the Reform Party's nomination for the office of President of the United States.

Page 1 of 19 Approved 11.22/02


(a)

(b)

(c)

(dy

(e

BUCHANAN REFORM, INC.
STATEMENT OF NET OLTSTANDING CAMPAIGN OBLIGATIONS
As of August 11, 2000
As Determined at September 30. 2002

ASSETS
Cash in Bank $(3.601) (a)
Accounts Receivable 492.264
Amounts Due from Buchanan Foster, Inc. 261,968 (b)
Total Assets $750.631
OBLIGATIONS
Accounts Payable $1,050,891 (c)
Accounts Payable outstanding at 9/30/02 117,842 (d)
Amounts Due to Buchanan Foster, Inc 350,097 (e)
General Election expenses paid by BRI after 8'1] 2000 151,277
Winding Down Costs:
Aug 12, 2000 to Dec 7, 2000 95,281
Dec 8, 2000 to Sep 30, 2002: Actual 30,821
Oct 1, 2002 to Dec 31, 2004: Estimated 30.800 (f)
Total Obligations 1,827,009
NET OUTSTANDING CAMPAIGN OBLIGATIONS - DEFICIT ($1,076,378)

FOOTNOTES TO NOCO

This amount 1s negative due to checks that were written prior 10 August !2. 24011 that had not yet been cashed. but
exceeded the amount of cash available at that ume

This amount includes all of the winding down costs ($45.28!) pais os BRI the period August 12. 2000 through
December 7. 2000, and. half ($15.410) of the $30.§2! in wi cests paid by the BRI for the period December §
2000. through September 30. 2002. In addition. this amount: 1 277 Jor general election expenses paid by BRI
after August 11, 2000

This amount represents disbursements paid during 2 dugh September 30. 2002 tor yuods
andor services received prior to August 12. 2000 4 unde de after August |). 2000
BRI's disciosure reports indicate outstanding debts or Seotemney 3! eo SET 832

» Buchanan Foster, Inc for tne periud December
J un apparent overpayment ($147.496) tor

Finding 1N.B i sang ar overpay
adjustments based or now tnese

This amount includes $196,178 for half of the wind:n
8, 2000. through September 30. 2002. In addition tne Au
the purchase of a mailing list (see the Final Audit Repu
($6,423) for equipment and health msurance The Aue 5
overpayments are resolved

The Audit staff will review BRI's disclosure reports and records to compare actual! figures with the estimates und prepare
adjustments as necessary

Page 12 of 19 Approved 11 22 02



FEDERAL ELECTION COMMISSION

Novemper 7, 2002

MEMORANDUM

TO: Robert J. Costa
Assistant Staff Director
Audit Division

THROUGH: James Pehrkon
Staff Director

FROM: Lawrence ton
General Counsel “£

Gregory R. Bake 47
Acting Associate General Counsel

Lorenzo Holloway (Si
Assistant General Couns:

Kimberly p-Hachl

Attomey

SUBJECT: Audit Report on Buchanan Reform. Inc (LRA =614)

1. INTRODUCTION

The Office of General Counsel reviewed tne propose Audit Report (“Proposed Repon”)

The

ice on October
posed Repon. G
provided the foliow

8, please comiuc: KI

on Buchanan Reform, Inc. (“CommitteeTM
following memorandum summanzes ou
concur with the findings in the Proposec
on one issue. If you have any questions
Hart. the attorney assigned to this audi:

Il. APPARENT NON-QUALIFIED CAMPAIGN EXPENSES (Finding IHI.A.)

otaling $252.75 tor wmich

pills. invoices. voucners o:

The Preliminary Audit Report ide
the Committee did not maintain document

consider this docume! session
ssciosure See 1] CF

The Office of General Counsel recomm:
since the Proposed Repon does not include man:

Page 15 of 19 Approved 11 22:02

WASHINGTON. DC usr WN -7 Pou: fu


TABLE OF CONTENTS

BUCHANAN REFORM. INC.

Executive Summary
Final Audit Report
Background
Findings
Legal Analysis
Transmittal to Committee

Chronology

Page

)

we

wy

15

17


REPORT OF THE AUDIT DIVISION
ON

BUCHANAN REFORM, INC.

Approved November 22. 2002

FEDERAL ELECTION COMMISSION
999 E STREET. N.W.
WASHINGTON. D.C.



$47,837. These payments were reported by BRI as direct mailing costs. In addition.
there were four other payments totaling $11.213 for postage or mailing for which
supporting documentation was not available to determine the nature of the materials that
were involved in the mailings. There were 1] disbursements, totaling $64,837, that were
identified as legal fees or legal retainers, either by the memo line on the canceled check or
the purpose disclosed on BRI’s reports. Other inadequately documented payments
included: two disbursements ($6,143) to consultants, seven disbursements ($21.907) for
telecommunications, eight disbursements ($39,850) for expense reimbursements. and two
disbursements ($4,034) for convention expenses. In addition, there were 23 other
disbursements totaling $55,936 that had no identifiable purpose. In all cases, adequate
documentation was not available to determine the exact nature of these payments, nor
whether they pertained to the primary or general election campaign.

At the time of the preliminary audit repon, it was the Audit staff's opinion
that these payments ($251,756) were non-qualified campaign expenses subject to pro-rata
repayment to the United States Treasury.

At the exit conference held subsequent to the completion of fieldwork. the
Audit staff advised BRI representatives of the above matter. BRI representatives, who
were provided a list of the non-qualified campaign expenses, indicated that they would
provide the needed documentation.

The preliminary audit report recommended that BRI provide, for the
undocumented disbursements noted above, documentation such as, but not limited to,
receipted bills, invoices or vouchers from the payees that state the purpose of the
disbursement or other collateral evidence to support these disbursements as qualified
campaign expenses. It was noted that absent such evidence, the Audit staff would
recommend that the Commission determine that a pro rata repayment of $96,516

($251,756 multiplied by the repayment ratio of 383371") was payable to the United
States Treasury.

In response to the preliminary audit report. BRI provided documentation in
support of all the expenditures in question The Audit staff's review of this
documentation indicated that expenditures of $50,102 were for qualified accounts payable
relative to BRI. In addition, expenditures of $SU.317 were determined to be for pnmary-
related fundraising expenses. Finally. the Audit staff determined that the remaining
expenditures of $151,277 were for general election expenses and that this amount 1s due
from Buchanan Foster, Inc. The Statement of Net Outstanding Campaign Obligations
presented at page 10 has been revised to reflect those tems. As a result no repayment 1s
warranted.

This figure (.383371) represents BRI's repayment ratio as calculated pursuant to
11 CFR §9038.2(b)(2)(iii).

Page 10 of 19 Approved 1] 22'02


The Statement of Net Outstanding Campaign Obligations presented above
Teflects a deficit of $1,076,378. Shown below are adjustments for funds received after
August 11, 2000, based on the most current financial information available:

Net Outstanding Campaign ($1,076,378)
Obligations (Deficit) as determined 9/30/02

Net Private Contributions 383,304
Received 8/12/00 to 9/30/02

Other Receipts/Income Received 5,098
8/12/00 to 9/30/02
Matching Funds Received 487.501
8/12/00 to 9/30/02
Remaining Net Outstanding Campaign ($200,375)

Obligations (Deficit)

As presented above, BRI has not received matching fund payments in
excess of its entitlement.

IV. SUMMARY OF AMOUNTS DUE TO THE UNITED STATES TREASURY

As a result of the Audit staffs analysis of BRI’s response, there are no
amounts due to the United States Treasury.

Page 13 of 19 Approved 11 2202