Draft Final Audit Report of the 

Audit Division on 

Nader for President 2008 

January 4, 2008 - August 31, 2008 

Why the Audit 

Was Done 

Federal law requires the 

Conunission to audit 

every political conunittee 

established by a candidate 

who receives public funds 

for the primary 

campaign.' The audit 

determines whether the 

candidate was entided to 

all of the matching funds 

received, whether the 

campaign used the 

matdhing fimds in 

accordance with the law, 

whedier die candidate i 

entitled to addidon 

matching funds, 

whether the campaign 

otherwise ci::f:|-'.:c(.: uidi 

the limite£iii:;-t', " • . 

prohibmns, and 

disoroSmiequirements 

of die 

Future Aci^n 

The Coinmission m: 

initiate an enforcemi 

action, at a later time, 

with respect to any of the 

matters discussed m diis 

report. 

About the Campaign (p. 2) 

Nader for President 2008 is die principal campaign committee for 

Ralph Nader, a candidate for theJp^ndent Party's nomination 

for the office of die President^ie United States. The 

committee is headquarteremWy^ington, DC. For more 

information, see the charll^ die^^maign Organization, p. 2. 

Financial 

• Receipts 

o Contrf 

o Matching Fi 

o Candidate C 

o ^fcagg Received 

o ^RBtefiperating Exjr 

Disbur^ronts 

o Oper»|ag ExpenBitures 

o TransfA^Nader General 

FUndrai^PgDisbursements 

>ayments 

o R^Hfids of Contributions 

Total Disbursements 

$1,761,530 

753,535 

40,000 

300,000 

4,339 

$2,859/104 

$2,058,691 

103,408 

85,606 

300,000 

13,485 

$2,561,190 

Findings and Reconunendations (p. 3) 

• Net Outstandmg Campaign ObUgations (Fmdmg 1) 

• Misstatement of Financial Activity (Finding 2) 

• Disclosure of Loans (Findmg 3) 

26U.S.C. §9038(a). 
Draft Final Audit Report of the 

Audit Division on 

Nader for President 2008 

Januaiy 4, 2008 - August 31, 2008 

4 . 

\ • 
Table of Contents 

Part I. Background 

Authority for Audit 

Scope of Audit 

Inventory of Campaign Records 

Part II. Overview of Campaign 

Campaign Organization 

Overview of Financial Activity 

Part m. Summaries 

Findings and Recommendations 

Summary of Amounts Owed to the U.S. 'p;|a.<:ury 

Part IV. Findings and Recommendlf ions 

Fmding I. Net Outstanding CamMgi Obligations ' ^ 

Fmding 2. Misstatement of Finan(^f\ctivity 

Findmg 3. Disclosure of Loans 

Page 

3 

'f 4 

5 

14 

16 
Parti 

Background 

Authority for Audit 

This report is based on an audit of Nader for President 2008 (NFP), undertaken by die 

Audit Division of the Federal Election Commission (the Commission) as 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 diorough examination and 

audit of the qualified campaign expenses of every candidate and^||uthorized 

committees who received [matdimg] payments under section^pvT^Mso, Section 

9039(b) of die United States Code and Section 9038.1(a) (2^l^^ko Commission's 

Regulations state that the Commission may conduct oth^ 

time to time as it deems necessary. 

and audits from 

Scope of Audit 

This audit examined: 

The receipt of excessive contributions and loan's. 

The receipt of contributions from prohibited sources.; 

The receipt of transfers from othSlm^orized comi 

The disclosure of contributions an< 

The disclosure of disbursements, del 

The recordkeeping process and comp! 

7. The consistency between reported figu: 

8. The accuracy of tbe Siiiiviiic)^ of Net' 

9. The campaign^ 

10. Other campaign o] 

received, 

tions. 

liam 

Inven^iy of 

The Ayy staff rout: 

audi^^^^rork. NFP 

immediaS^.. 

xi banlfSi6rds. 

dmg Campaign Obligations. 

idi spendmMmitations. 

pns iii'-ccs«iiry to th^pFiew. 

Records 

yentory of campaign records before it begins the 

brially complete and the fieldwork began 
Part II 

Overview of Campaign 

Campaign Organization 

Important Dates 

• Date of Registration March 4.2008 

• Eligibility Period^ July IS, 2008 - September 4,2008 

• Audit Coverage Januaiy 4.2008 - ^P^^l . 2008 

Headquarters WashinglonjBS^^^ 

Bank Infonnation ••''ilk 

• Bank Depositories 

• Bank Accounts checking accounts "^ft^^ 

Treasurer 

• Treasurer When Audit Was Conducted Carli^l^^ 

• Treasurer During Period Covered by Audiw CarlJ.N^ ^ 

Mamffiement Informadon ^'C* ^ 

• Attended FEC Campaign Finance Seminar % ^ » ^ 

• Who Handled Accounting and Recordkeeping % 

ervieW of FinI 

^l^dited 

lal Activity 

»unt8) 

Cash-on-hai|ra .TanuarM^|p ^Vi ^ ^ $0 

o Conl[idrai||n8 from ]jMlividll|||r^ 1,761,530 

o MatchingB^ Received W 753.535* 

o Candidate C^l^itions 40.000 

o Loans RecelvjiT^^ 300.000 

0 Offsets to Operati^Cxpon^iie- 4.339 

Total Receipts .• jgr $2,859^4 

o Operating Expenditures^^ $2,058,691 

o Transfers to Nader Qerilnal 103.408 

o Fiindraising Disbursements 85.606 

o Loan Repayments 300.000 

o Refunds of Contributions 13.485 

Total Disbursements $2,561,190 

Cash-on-hand @ August 31,2008 $298,214 

' The Candidaie was eligible for matching funds beginning on die date of certification of eligibility and ending on the date the 

Candidate announced his vndidrawal from the can^aign. See 11 CFR §9033. 

' NFP received an additional $127,959 after September 4.2008 for a total of $881,494. This represents four percent of die 

maximum entitlement ($21,025,000) a Presidential candidate was eligible to receive in 2008. 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Net Outstanding Campaign Obligations 

The Audit staffs review of NFP's financial activity duough August 31,2008 and 

estimated winding down costs indicated that die Candidate received matching funds of 

$62,698 m excess of his entidement In the Preliminary Audit R^f t (PAR), the Audit 

staff recommended that NFP provide evidence that the Candi^^cStf^ot receive 

matching fund payments ui excess of entidement. Absent jH^^idence, Audit staff 

stated that it would recommend that the Commission de^g^nlliui S62.698 is repayable 

to the U.S. Treasury. 

In response to the PAR recommendation, NFP 

necessary to the actual wmdmg down costs 

Net Outstanding Campaign Obligations (NOCO) 

necessary adjustments and updated this category 

costs. As a result, the NOCO deficit%ias revised 

el noted diat someffi^stments were 

^prese^Hd by the Auo^feitf in the 

,e Audit sta^made the 

estimated costs with actual 

from $^^^6 to $75,459, resultmg m a 

reduction to the federal funds receiv 

$56,165. NFP Counsel furdier conteni 

party or independent committees such as 

primary-related winding 

incuired $90,479 m 

11 CFR §9032.6 is 

(DOI) being Sep 

later date. 

of entideil^figi^ from $62,698 to 

(d) is not fair to minor 

allow qualified, 

until afteFiWencral election and NFP 

die ConKssion's amit during this period, and (2) 

ader becaut^it results in his Date of Ineligibility 

last day oi^^ast major convention, as opposed to a 

tafffiirllHir' 

andgeni 

will consid 

it fieldwo 

NFP can dociunent a reasonable allocation method 

mg^ri||y6osts incurred after December S, 2008, the 

owmjiriarger primary allocation than the 70 percent agreed 

(For more detail, see p. 5.) 

Finding 2. JHsstrftement of Financial Activity 

A comparison of N^^^orted figures with its bank records revealed that from January 

4,2008 duougih Au^it 31,2008, NFP overstated receipts by $17,106, understated 

disbursements by $74,599 and overstated ending cash by $91,705. The majority of die 

disbursements understatement was due to transfers NFP made to its Oeneral committee, 

that were not rqpoited. The Audit staff reconunended diat NFP amend its disclosiue 

reports to correct die misstatements. In response to die PAR. NFP Counsel stated diat 

clarifications with tfae Audit staff were made for some differences and that NFP filed 

amended reports, correcting the remaming misstatements. The Audit staff notes diat NFP 

representative made some clarifications and diat NFP filed all requested amendments. 

(For more detail, see p. 14.) 
Findings. Disclosure of Loans 

NFP secured a Ime of credit ui die amount of $500,000 on June 25,2008, but did not file 

the required Schedule C-P-1, or a copy of the line of credit agreement, until November 

21,2008, after the Audit staff made NFP officials aware of this omission. The Audit 

staff recommended that NFP provide any relevant comments it has on this issue. In 

response to the PAR, NFP Counsel stated that staff was unaware of the requirement to 

file a Schedule C-P-1 and a copy of the line of credit agreement, in addition to filing a 

Schedule C-P, and that as soon as it was made aware of diis omission, it filed the missing 

items. (For more detail, see p. 16.) 

Summary of Amounts Owed to the U.S. Treasury 

Finding 1 Federal Funds Received in Excess of Ent^pner.i . $56,165 

Total Due U.S. Treasury 

4- y 
Part IV 

Findings and Recommendations 

I Finding 1. Net Outstanding Campaign Obligations 

Summary 

The Audit staffs review of NFP's financial activity through August 31,2008 and 

estimated winding down costs indicated that the Candidate received matching funds of 

$62,698 in excess of his entidement. In the Preliminary Audit ReBort (PAR), the Audit 

staff recommended that NFP provide evidence that the Candida^lna^not receive 

matching fund payments in excess of entitlement. Absent si^^*-"- idence, Audit staff 

stated diat it would reconunend that the Commission de^pu. J !4^$62,698 is repayable 

to the U.S. Treasury. 

In response to the PAR recommendation, NFP 

necessary to the actual windmg down costs 

Net Outstanding Campaign Obligations (NO 

necessary adjustments and updated diis category 

costs. As a result, die NOCO deficit4i[gs revised from 

reduction to the federal funds leceiv 

$56,165. NFP Counsel furdier com 

party or independent committees such as' 

primary-related winding dfMn costs until 

incuired $90,479 m c^girtR^^to die 

11 CFR §9032.6 is iffidr to iflkader becai 

(DOI) bemg Sep 

later date. 

el noted that some i^^istments were 

by the Au^^ ^ in the 

e Audit sta^made the 

estimated costs with actual 

to $75,459, resulting in a 

re from $62,698 to 

(d) is not fair to minor 

allow qualified, 

Eneral election and NFP 

Ission's ailSit during this period, and (2) 

it residts in his Date of Ineligibility 

ss of entitlei 

CFR 

doe 

e last day oms^last major convention, as opposed to a 

lali'fuiil 

and generi 

will consid 

•t:fli' fieldwo 

NFP can document a reasonable allocation method 

sts incurred after December 5,2008, the 

ger primary allocation than the 70 percent agreed 

Legal Standai 

A. Net Outstam^^l^paign Obligations (NOCO). Widim 15 days of die 

candidate's date of i^ngibility (see definition below), the candidate must submit a 

statement of *'net ou^tanding campaign obligations." This statement must contain, 

among other things: 

• the total of all committee assets mcluding cash-on-hand, amounts owed to the 

committee and capital assets listed at their fair market value; 

• the total of all outstanding obligations for qualified campaign expenses; and 

• an estimate of necessary winding-down costs. 11 CFR §9034.S(a). 

B. Date of IneUgibility (DOI). The date of meligibility is whichever of die following 

dates occur first: 

• die day on which the candidate ceases to be active in more dian one state; 
• die 30th day following the second consecutive primary m which the candidate 

receives less than 10 percent of the popular vote; 

• the end of the matchuig payment period, which is generally the day when the 

party nominates its candidate for the general election; or 

• in the case of a candidate whose party does not make its selection at a national 

convention, the last day of the last national convention held by a major party in 

die calendar year. 11 CFR §§9032.6 and 9033.5. 

C. Qualified Campaign Expense. Each of the following expenses is a qualified 

campaign expense. 

• An expense that is: 

o mcurred by or on behalf of the candidate (or his oi 

period beginning on the day the mdividual b 

continuing through the last day of the candii 

§9033.5; 

o made in connection with the candidate! 

o not incuired or paid in violation of 

where die expense was mcurred 

• An expense incurred for the puipose of del 

become a candidate, if that individual subsequi 

regardless of when that expei^|^^aid. 11 

• An expense associated with wm^BjUss^ the cam' 

activity. 11 CFR§9034.4(a)(3). 

aign) during the 

didate and 

under 11 CFR 

ign for noiT^^on; and 

federaljaw or the laww ilic N^te 

.9. 

ither an individual should 

becomes a candidate, 

.4. 

terminating political 

D. Value of Capii 

the total original 

after the date 

received. Acandl 

listing die asset on 

docui 

definedTOier 11 CFR 

payment^^dded dial 

the matchinj 

valuetKl^ital assets is 60 percent of 

, except that assets diat are received 

at their fair market value on the date 

ket value for a capital asset by 

ately and demonstrating, through 

e. 11CFR§9034.5(C)(1). 

ts after Date of Ineligibility. If, on die date of 

has net outstandmg campaign obligations as 

34.5, that candidate may contmue to receive matching 

or she still has net outstanding campaign debts on die day 

made. 11 CFR §9034.1(b). 

F. Allocation of^Hmary and General Election Winding Down Costs. A 

candidate who runs in both die prinuiry and general election may divide wmdmg 

down expenses between his or her primary and gen^ election committees usmg any 

reasonable allocation method. An allocation method is reasonable if it divides the 

total winding down costs between the primary and general election committees and 

residts in no less than one third of total winding down costs allocated to each 

committee. A candidate may demonstrate that an allocation method is reasonable 

even if either the primary or the general election committee is allocated less than one 

diiid of die total winding down costs. 11 CFR §9034.11(c) 
G. Primary Winding Down Costs During tfae General Election Period. A primary 

election candidate who does not run in the general election may receive and use 

matching funds for diese puiposes either after he or she has notified the Commission 

in writmg of his or her withdrawal from die campaign for nommation or after the date 

of the party's nommating convention, if he or she has not withdrawn before the 

convention. A primary election candidate who runs m the general election, regardless 

of whether die candidate receives public funds for the general election, must wait 

until 31 days after the general election before usmg any matchmg funds for wmdmg 

down costs related to the primary election. No expenses incurred by a primary 

election candidate who runs in the general election prior to 31 days after the general 

election shall be considered primary winding down costs. 1 t^H^ §9034.11(d). 

A Facts 

The Candidate registered with the Commission on 

matching funds payment on July 17,2008. The C; 

2008.^ After becoming meligible due to the appli 

Candidate continued to campaign in the general 

NOCO, the Audit staff considered only wini 

2008, the end of the general election expenditure 

general election. In accordance with 11 CFR §9034 

which NFP was eligible to use matchtefunds for wini 

d received his first 

eptember 4, 

,tiie 

on. For purposeslB^^ermining 

cosWicurred after^pimiber 5, 

31 day^^erdie 

date begins the period in 

n costs related to the 

primary election. Wmding down cost 

Committee) and Nader for President 2( 

70/30 ratio, respectively, as agreed upon 

fieldwork. The Audit st^y^wed NFP^ 

analyzed estimated wigfP^^figi costs and^ 

Campaign Obligatiia^jhat ap^Bs on the ne? 

llocated betwmNEP (Primary 

'ommitt^Mader General) using a 

Audit staff during audit 

ciaiUKE^ duough March 31,2011, 

ared thistatement of Net Outstandmg 

age: 

^ This was tfae last day of the last national convention held by a major party. 
Nader for President 2008 

Statement of Net Outstanding Campaign Obligations 

As of September 4,2008 

Prepared on March 31,2011 

Cash-on-Hand 

Cash in Bank 

Accounts Receivable 

Capital Assets 

Inventory - Merchandise 

Total Assets 

Liabilities 

Accounts Payable for Qualified Campaign Expenses 

9/4/08 

Winding Down Costs (9/S/08 -12/4/08) ^ 

Actual Windmg Dovm Costs (12/5/08 - 3/31/f 

Estinuted Wmding Down Costs (4/1/11 - 6/30/1 

Total Liabilities 

Net Outstanding CainiNilKii O! 

[a] 

[b] 

Amount 

$144,520 

Winding do 

must wait until 

costs related to the i 

[c] Estimated winding do 

ted psRV to DOI and dqwsited after DOI. 

wed during this period because a candidate runnbig ui tfae general election 

general election (12/5/08) befbre using any matching funds for winding down 

;tion, pursuant to 11 CFR §9034.11(d). 

will be compared to actual winding down costs and adjusted accordingly. 
Shown below are adjustments for funds received after September 4,2008, through 

December 31,2009, based on die most current financial information available at die close 

of fieldwork: 

Net Outstanding Campaign Obligations (Deficit) as of 9/4/08 ($75,459) 

Private Contributions and Other Receipts Received 9/5/08 

dirough 10/3/08 

3.665 

Matching Fluids Received on 10/3/08 127,959 

Federal Funds Received in Excess of Entitiement $56,165 

As presented above, NFP received matching funds totaling $56,] 

amount to which the Candidate was entitled. 

excess of the 

The Audit staff prepared a Statement of Net Outstandi 

provided it to NFP at the exit conference. In responsj 

takes issue with the NOCO statement because of 

interprets the wmding down rules as applied to 

matching funds and goes on to the general el 

public funding. He noted that the bright line cut 

expenditures, which does not count primary ex; 

the general expenditure report period^^|gecember 5, 

candidate who received primary matcHgtods and who 

hurdles, even after the major parties heU@H|||||^tiiig coi 

that primary-related expenses incurred 

ci:iipai 

election 

when they were incurred,^ 

party candidates rest 

expenditures, bem| 

convention. 

NFP Couns^0R|||i<^ul dii 

responsjdSodie 

time^l^^nsel contem 

coW|dentifv and s 

primary ex||fn^i's, 

;a8 state-del 

ibly prii 

ithe nomuial 

pbligations and 

stated diat NFP 

mmissk 

didate who 

not receive 

g post-DC 

DOI tiuough the end of 

unf au: to a mmor party 

through ballot access 

ons. Counsel added 

solely accordmg to 

s requuements for minor 

related e^^enses, i.e. ballot access 

n date of the last major party to hold its 

ipendi 

imary Committee argued diis issue in its 

Leport, which the Commission rejected in part at the 

iflA|^fhmission were to reconsider its bright line rule, 

nt do^oentation for expenses that should be considered 

)m September 5 through November 4. 

As noted m thel^MSta^E^ section above, die Commission's regulations specify that 

qualified campaig^^^^ses must be mcuired between the date the individual becomes a 

candidate and die la^iay of the candidate's eligibility under 11 CFR §9033.5. In Mr. 

Nader's case, he has been given die benefit of die longest possible primary period 

(26 U.S.C. 9036.2(6)). Therefore, expenses between September 5 and November 4,2008 

cannot be considered primary election expenses. 

Counsel also noted diat NFP followed 11 CFR 9034.11(d), and as a result, did not use 

primary matchmg funds or private monies for any expenses incurred in the "general 

election" period through December 5. However, Coimsel noted, "clearly-identifiable 

primary wmding down expenses were incurred during this period, especially after 

November 4 and through December 5." He stated that even if NFP is not given credit for 

any primary expenses througih November 4, it should be given credit for obvious winding 
10 

down expenses incuned November 5 dirough December 5,2008, and that the expenses 

related to the Commission's audit on NFP's premises from November 13 through 

December 9,2008, were undeniably primary winding down expenses. 

NFP calculated at least $88,137 in wmdmg down expenses from November 5 through 

December 5,2008, which it believes should be considered legitimate winding down 

expenses. Apart from its request for the Commission to reconsider die biigjox line rule in 

NFP's situation, NFP proposed two solutions to adjust the NOCO: 

(1) Apply full credit in the amount of $88,137 for November 5 throu^ December 5, 

2008 for expenses NFP can document as primary winding dowiijj|g|gises, due to die 

timing of the audit. At a minimum, 70 percent, or $61,696, shdimboUlowed. 

(2) If the Commission does not accept the first proposal 

December 5 through termination should be credited 

expenses, as opposed to the 70/30 percent pri: 

enses from 

[icrcent as primary 

NFP Counsel stated diat based on 11 CFR 9i 

9034.11(c)], die Audit staff has die flexibility to 

primary and general to divide windmg down expensi 

using any reasonable allocation meth^sand there is no 

prohibits crediting NFP as having its g 

post-general election period within 31 

regulation solely refers to not usmg pri 

related to the primary el 

The Audit staff no 

Candidates Who 

[not identical to 

lte who runs% both the 

een the primary and general 

11 CFR 9034.11(d) tiiat 

,ection windH^jfig^ costs during the 

eral elo^K^ He added that the 

matpfiS&^riiiuK for winding down costs 

who 

costs or 

stification for 11 CFR 9034.11(d) 

Elections states that: 

election must wait until the day 

ter the general election before usmg matching 

dinf^g^ costs, regardless of whedier the candidate 

for tl;^eneral election. This mle clarifies that no 

ir to 31 days after die general election by candidates 

election may be considered primary winding down 

iuig fimds. 

The Explanation andfl'ustification also notes the following: 

Although this revised mle may result in general election campaigns 

mcuning a small amount of administrative costs related to terminating the 

primary campaign during the general election period, in practice, diese 

expenses are offset by general election start up costs tfaat are incuired and 

paid by the prunary committee prior to die candidate's DOI. This 

approach is also consistent with die Commission's bright line rules for 

allocatuig expenses between primary and general campaigns at 11 CFR 

9034.4(e), which allow some primary related expenses to be paid by the 

general election committee and vice versa. 
11 

Widi respect to the 70 percent primary 30 percent general election allocation ratio, it is 

already less dian the suggested minimum ratio m die regulation and was the allocation 

agreed upon between NFP and the Audit staff during audit fieldwork. The ratio reflects 

that the primary windmg down effoit was the major share of the activity, but also 

recognizes that there was a general election campaign that required attention at the same 

time. 

NFP Counsel's fmal pouit was that **.. .public policy should not penalize a political 

committee dirougih the application of the FEC's regulations for being extraordmarily 

efficient, for being pr^ared for immediate audit, for paying its 

and for being able to termmate quickly." Bodi NFP Counsel 

that applying the regidations as written to NFP's situation 

down costs until December 6,2008, and considering all 

September 4,2008, to be general election expenses 

the NOCO presented above. 

B. Preliminary Audit Report and Ai 

In the prelimmary audit report (PAR), the Audit si 

evidence that it did not receive matching fimd paymel 

such evidence. Audit staff stated diat^|^puld 

determine that $62,698 is repayable to^^^EtS. Treasury. 

a tunely fashion, 

uditste^ agree 

primary winding 

d after 

result shown on 

Recomm^pstion 

ded diat Nw^provide 

excess of entitiement. Absent 

t the Commission 

C. Committee Response to the 

In response to the PAR rggjaBmendation 

necessary for the wi 

these revisions wi 

addition, the Audi 

contamed in tfae PAR 

2011,fro: 

Gnsaicw^itSL ftomlM^As 

$75J|flLThi8 revisicnJ^gdted 

entiS^nAfigure from $n$98 

Report 

adjustments were 

CO. The Audit staff discussed 

c the necessary adjustments. In 

costs total in the NOCO statement 

Is with acmal costs througih March 31, 

ommission and by obtaining updated 

, die NOCO deficit was revised from $68,926 to 

ction to die federal fimds received in excess of 

,165. 

itatives and 

winding 

NFP CouiiseT!|g^ted in ^ written response to die PAR that *'[t]fae Commission sfaould 

not apply die 3 I^kLmleji^ich excludes clearly identified, primary-related winding 

down costs incurrSragpe Committee while the audit was being conducted." He stated 

diat he understands wpursuant to 11 CFR 9034.11(d), die NOCO should not contain 

primary election winding down costs for the 31-day period after the general election, but 

proposed that the Commission should reconsider the '*bright-line" mle in NFP's case. He 

added that of the $252,475 in expenses incurred during this period for both primaiy and 

general expenditures, all were paid with general funds as required by the rule, but that 

$90,479 (36 percent) of this total were actually primary-related costs. 

NFP Counsel contended that the application of this rule resulted ui punishing NFP for 

quickly and efficientiy dealing widi die Commission audit. He pointed out that NFP 

provided preliminary records to the Audit staff in September 2008, and provided space 

for the Audit staff to conduct audit fieldwork between November 17,2()08, and 
12 

December 9,2008. He added diat '*[d]uring bodi die general election period of 

September 4,2008 to November 4,2008 and die post general period fi:om November 5, 

2008 to December 5,2008, the Committee incurred substantial expenses for primary 

election wmdmg down compliance including office space, overhead, phones, fax and 

compliance related personnel, counsel, and support staff expenses." Counsel stated that 

"[i]t is because of the reality diat such primary election winding costs are incurred by a 

general election candidate during the general election campaign that die Commission 

should revisit the mle prohibiting primary winding down expenses until 31 days after the 

general election. It nuikes littie policy sense to prohibit a general election candidate from 

promptiy settiing prinuury matters until 31 days c^er the general election (italics in 

original); such practice merely delays the settlement of primary jogl^j^ issues.' 

NFP Counsel noted diat as die Explanation and Justificati^pl^l CFR 9034.11(d) 

discussed by the Audit staff in the PAR indicates, die re^pf^^|31-day rule is twofold. First, a small amount of administrative costs r^g^b tem^^gg the primary 

campaign during the general election would be of^r^gdieral can^ma start-up costs 

mcurred by tfae primary committee. Second, tfae^lc is consistent with^^kOommission 

bright-line rules for allocating expenses betwjM|||eprinM^and general d^^fugns. He 

fiirther stated that neither of diese applies to the N^h|^^|lmtecause 36 p^cent of the 

total expenditures within the period cannot be characB|Kd as de mmimis administrative 

costs offset by general election start-%|n>sts. And alth^^jhe costs . .may be de 

minimus m the context of a major p 

burdensome proportion of an indepi 

the operation of the rule imposes a mat 

committees." 

diey 

's total c 

NFP Counsel noted 

primary winding 

and that if not given 

this total 

the aud^^i^dworJ 

conchas that. .the 

funds^fedre a repaymi 

ar larger and more 

lign expenditures and 

inoi^party or independent 

ubmitted records in support of $90,479 in 

-day period after the general election 

sfaould at least be given 70 percent of 

diat tfaese expenses were related to 

ore be considered primary-related. If not, he 

be put in the untenable position of havmg to raise 

credited for expeditiously sedkmg to terminate." 

Anotfaer argllll^t put fortlSy NFP Counsel in response to die PAR is tfaat die rule on 

sietting the DOWfeLas theplst day of the last national convention held by a major party 

is unfair to minor^^ypT independent candidates such as Mr. Nader who receive 

primary matching fiiflsand run ui the general election, but do not receive general 

election public fiindmg. He agreed with die DOI date of September 4,2008 but 

contended that this date is unfak because state law imposes continumg ballot access 

hurdles diat last beyond that date. He cited as an example diat seven states faad ballot 

access deadlines of September 5,2(X)8 or later and six more states faad a deadlme of 

September 2,2008. He said it is unfair diat a committee sucfa as NFP incurs primaryrelated ballot access expenses tfaat the DOI rule disqualifies because the major parties' 

conventions are over. He noted that NFP spent almost $4,000 on primary ballot access 

expenses between September 5 and November 4,2008. Counsel referred to Advisory 

Opuiion 1995-45, whicfa treats ballot access expenditures as primary qualified 
13 

expenditures and fae lespectfiilly urges tfae Cominission to establisfa a fairer DOI policy 

that captures a larger percentage of such costs. 

NFP Counsel also contended that primary-related expenses incurred after December 5, 

2008 should be credited 100 percent to die primaiy as opposed to tfae 70 percent primary 

expense allocation agreed upon by NFP and tfae Audit staff during audit fieldwork. He 

agreed tfaat for tfae entire campaign, NFP spent approximately 70 percent of its fimds on 

die primary election, but tfaat tfae $90,479 spent on primary expenses during tfae 31-day 

period after the general eleaion was allocated as general despite being spent on die 

primary because of the 31-day rale. He added that if one applies 70 percent of the 

$301,593 spent by the primary and general committees combinedjfepm November 5, 

2008 forward, the amount allocable to the primary is $211,1 IS^FFHs credited only 

with $132,000 due to die DOI and 31-day rules, whicfa resu|m£nlv 30 percent being 

applied for primary windmg down costs. NFP Counsel wn^^dtfaat in tfae Nader 

2000 Audit Report, all expenditures after June 1,2001^^credilM|^ percent for tfae 

primary because tfae Cominission audit began in ^pp^lOOl and thMfecedent should 

be carried forward to the 2008 situation by allo^mprimary wmding dom||xpeiises 

during November 2008. He added diat any e)^k||^incuim after Decei^^S£^2008 

should therefore be considered prunary winding oRb ctiw^ed on such firecedent. 

The Audit staff notes that 11 CFR § 

who rans ui the general election, regi 

fimds for the general election, must 

before usmg matching fimds for windi 

no expenses mcurred pri< 

primary winding do 

during the 31-day 

$90,479 in costs 

fieldwork had begtm 

$90,479 Wl 

determir^^n oi 

officji^nd die Audii 

offi(3al^h|ue8ted an 

headquaiiSl^[£ tfaey coul 

faolidays. 

.11(d) providi 

whether thi 

folio 

a prunary election candidate 

idate receives general 

le general election 

le primary election and 

bn shall be considered 

primary campaign began 

issue because die majority of the 

ve been incurred even if audit 

staff notes that 66 percent of the 

percent towards headquarters rent. The 

is to begin is agreed upon between committee 

, we agreed to begin fieldwork early after NFP 

members of the NFP staff to shut down dieir 

their respective homes prior to tfae upcoming 

Bodi NFP officialiWy|@g Audit staff agree diat applymg 26 U.S.C. §9032(6) to Mr. 

Nader's situation resiled in a September 4,2008 DOI, the last day of die 2008 

Republican convention, wfaich was die second of die two major conventions held. We 

agree tfaat NFP faad ballot access expenses after die date diat would faave been considered 

primary qualified expenses if diey faad been mcurred prior to DOI, but diat based on diis 

provision; diese costs are not allowed to be treated as primary expenses. 

The Audit staff notes that the treatment of primary windmg down costs was applied 

consistentiy to die Commission audits of Mr. Nader in 2000,2004 and 2008. No prinuu7 

windmg down costs were allowed until 31 days after the general election m all three 

cases. The oidy difference is that die audit fieldwork began widiin 30 days of die general 

election m 2008, radier than in the year followmg die election in the otfaer election cycles. 
14 

If NFP can demonstrate a reasonable allocation metfaod, pursuant to 11 CFR §9034.11(c), 

for winding down costs incuired after December 5,2008, tfaat results in a faigfaer 

percentage tfaan tfae 70 percent primary allocation agreed upon during audit fieldwork, the 

Conunission will consider allowuig a larger wmding down total for NFP. If the total 

primary winding down costs increase, dien adjustments would be made to die NOCO 

statement, whicfa would result in a corresponding decrease to tfae federal fimds received 

m excess of entitiement, and die amount owed to the U.S. Treasury. For example, if an 

80 percent primary allocation is demonstrated by NFP, the NOCO balance woiild go from 

$75,459 to $92,000, resulting in a decrease ofthe amount owed to the U.S. Treasury from 

$56,165 to $39,625. Similarly, if a 90 percent primary allocatiqi^demonstrated by 

NFP, die NOCO balance would be revised to $108,541, resul|£^ui^3,084 owed to the 

U.S. Treasury. 

Documentation sfaould be provided that demonstrat 

percentages. Such documentation could include 

December 5,2008 related to primary wmding 

worked on primary winding down compared 

down, and a list of winduig down costs explainm^ 

radier dian the general. 

fajph staff 

1 winding 

le primary 

I Finding 2. Misstatement 

Summary 

A comparison of NIMS rep 

4,2008 througfa AilipB^. 2 

disbursements by $74i^lHid 

disbursem^m^l^tatei 

diat weregllnS^^^Tne 

reoortgtfconect tfael^feateml 

clari^Srans with the Alwstaff 

amended 

representati' 

ial Acti ity 

T 

bank records revealed diat from January 

ipts by $17,106, understated 

fa by $91,705. The majority of tfae 

brs NFP made to its General committee, 

staff recommended tfaat NFP amend its disclosure 

response to tfae PAR, NFP Counsel stated tfaat 

made for some differences and diat NFP filed e remammg misstatements. The Audit staff notes that NFP 

cations and that NFP filed all requested amendments. 

Legal Standard -

Contents of Reports. I-lach report must disclose: 

• the amount oicasfa on faand at die begmmng and end of tfae reporting period; 

• the total amount of receipts fbr the reporting period and for the calendar year; 

• the total amount of disbursements for the reportmg period and for the calendar 

year; and 

• certain transactions that reqiure itemization on Schedule A (Itemized Receipts) or 

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

A. Facts 

The Audit staff reconciled NI7'8 reported financial activity with its bank records and 

determined that there was a misstatement of cash-on-hand, receipts and disbursements. 
15 

The following chart outiines the discrepancies and succeeding paragrapfas explain, to tfae 

extent possible, the reasons for the misstatements. 

2008 Activity 

Reported Bank Records Discrepancy 

Opening Cash Balance 

©January 4,2008 

$0 $0 $0 

Receipts $2,977,570 $2,960,464 $17,106 

Overstated 

Disbursements $2,587,452 $2.662^jl $74,599 

Understated 

Ending Cash Balance 

® August 31,2008 

$390,118 JP^13 $91,705 

Overstated 

The overstatement of receipts resulted fiom the foil 

• Earmarked contributions double-count 

receipts total 

• Over-reported receipts 

• In-kind contributions not reported on Sdiedulc^^ -X 

• Unexplained difference 

Net Overstatement of Receipl 

The overstatement of disbuisements res 

• Unreported traiis|B|||SLNader 

• Net reported fa^rdeHmustments, 

(voided ch^iiftfpntrib^Kns re 

fimds; stop pavmats: o>cr/utidcr repo: 

U 

It UndersfUFment olMsbuisements 

Tfaeov 

misstatemei 

:ed 

ir insufficient 

terns) 

ledules B 

$ ri7.106^ 

101,391 

(22.213) 

251 

(4.830^ 

lent of end 

rdcscribed 

$ 74.599 

•faand in die amount of $91,705 residted from the 

NFP did not repdiAy^l&rity of transfers of contributions m excess of the limitations it 

made to die Nader committee, totalmg $101,391. These transfers were mamly 

contributions to NFFby contributor who had exhausted diek contribution limitation to 

NFP and the excessive portion of tfae contribution was properly redesignated to the Nader 

General. 

B. Preliminary Audit Report & Audit Division Recommendation 

At die exit conference die Audit staff explamed die misstatements and subsequentiy 

provided NFP representatives with schedules detaUmg these discrepancies. In response, 

the NFP representatives agreed to amend NFP's reports. 
16 

The Audit staff recommended tfaat NFP: 

• amend its 2(X)8 reports to correct the misstatements; and 

• amend the cash balance on its most recentiy filed report with an explanation tfaat 

it resulted from audit adjustments from a prior period. Audit staff fiuther 

recommended that NFP reconcile tfae casfa balance on its most recent report to 

identify any subsequent discrepancies tfaat may impact adjustments 

recommended. 

C. Committee Response to the Preliminary Audit Report 

In response to tfae preliminary audit report, NFP Counsel conecdy noted tfaat 

clarifications witfa tfae Audit staff were made for some differeno^h^NFP filed 

amended reports, correcting the remammg misstatements. hyputicm^NFP amended the 

cash balance on its most recentiy filed report with an expljsffiifn iliat it resulted from 

audit adjustments from a prior period. 

I Finding 3. Disclosure of Lo 

Summary 

NFP secured a line of credit in the amount of $500,i 

the required Schedule C-P-1, or a copB||^elhie of 

21,2008, after the Audit staff made NFlSQbiyLaware 

staff recommended that NFP provide an^lev 

response to the PAR. NFP Counsel statedmat 

file a Schedule C-P-1 

Schedule C-P, and 

items. 

Legal Stf 

Loans. J^en a 

a IcndWinstitution 

throdgW§. it sfaall disci 

tfae foUowi^nformation^ 

of the line* 

it was 

le 25,2008, but did not file 

iment, imtil November 

ission. The Audit 

lents i^has on diis issue. In 

are of the requirement to 

credit agjSlment, in addition to filing a 

ware of this omission, it filed the missmg 

obtams a loan from, or establishes a line of credit at, 

:FR 100.82(a) duough (d) and 100.142(a) 

covering the period when the loan was obtauied, 

iScheiSule C-1 or C-P-1: 

t of tfae loan or Ime of credit; 

d repayment scfaedule of tfae loan, or of each draw on the Ime 

(i) die diS 

(ii) die mtei 

of credit; w 

(iii) the types and value of traditional collateral or other sources of repayment that 

secure the loan or tfae line of credit, and if tfaat security interest is perfected;. 

(iv) an explanation of tfae basis upon wfaich the loan was made or the Ime of credit 

established, if not made on the basis of either traditional collateral or the other 

sources of repayment described mi l CFR 100.82(e)(1) and (2) and 

100.142(e)(1) and (2); and 

(v) a ceitification from the lendmg institution diat the borrower's responses to 

paragraphs (d)(l)(i)-(iv) of diis section are accurate, to die best of die lending 

institution's knowledge; tfaat tfae loan was made or die line of credit establisfaed 

on terms and conditions (uidudmg mterest rate) no more favorable at die time 
17 

tfaan tfaose imposed for similar extensions of credit to other borrowers of 

comparable credit worthiness; and that the lending institution is aware of tfae 

requirement diat a loan or a line of credit must be made on a basis wfaicfa assures 

repayment and tfaat the lendmg institution has complied with Cominission 

regulations at 11 CFR 100.82(a) duough (d) and 100.142(a) duough (d). 

llCFR§104.3(d)(l). 

In addition, a political conunittee shall submit: (1) a copy of the loan or line of credit 

agreement, whicfa describes the terms and conditions of the loan or line of credit wfaen it 

files Schedule C-1 or C-P-1; and, (2) a Schedule C-1 or C-P-1 each time a draw is made 

on a line of credit. 11 CFR §104.3(d)(2) and (3) 

A. Facts 

NFP secured a line of credit totaling $500,000 on June 

stipulated that repayment was due by September 3 

against this line of credit, and disclosed on Schedi 

June 27,2008; $50,000 on July 10,2008; and, $&.UUU o 

tfae first two draws witfa interest on July 18, 

on August 29,2008. 

OOii. -^J^loan agreement 

total^MpO.OOO was drawn 

m amountPB|J200,000 on 

August 22,2uin^ ^ repaid 

ethhd interest 

B. Preliminary Audit Report 

NFP filed Schedules C-P for eacfa of 

required Schedule C-P-1 or a copy of thi 

2008, after die Audit staff made NFP o 

amendments will be necfiS^&giLfor the line 

The Audit staff n 

issue. 

idit Divisi 

rec lines of credi 

a] 

recommendation 

but did not file die 

until November 21, 

ission. Nofiulher 

NFPprovi relevant comments it faad on tfais 

missing 11 

unintentional 

onse-to the Preliminary Audit Report 

Jated tfaat staff was unaware of tfae requirement to 

ipy owe line of credit agreement in addition to fding a 

as ijiwas made aware of tfais omission NFP filed tfae 

that NFP took immediate corrective action to address diis