FEDERAL ELECTION COMMISSION

WASHINGTON. DC 20463

November 10, 1999

MEMORANDUM

•

TO:

FROM:

RON M. HARRIS

PRESS OFFICER

PRESS OFFICE

ROBERT J. COSTA

ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

j-:.:"

!:) SUBJECT: PUBLIC ISSUANCE OF THE AUDIT REPORT ON

• BENTON FOR CONGRESS

Attached please find a copy ofthe audit report and related documents on

Benton for Congress, which was approved by the Commission on November 2, 1999.

Informational copies ofthe report have been received by all parties involved and

the report may be released to the public.

Attachment as stated

cc: Office ofGeneral Counsel

Office ofPublic Disclosure

Reports Analysis Division

FEC Library
TABLE OF CONTENTS

BENTON FOR CONGRESS

~=n, ..1

•

(d Page

f~"~

1'1 Executive Summary

In=, Final Audit Report

3 fy

1"J ""', Background

3

r--=::

!~ Finding

5

nJ Transmittal to Committee 12 rU

Chronology 13
FEDERAL ELECTION COMMISSION

WASHINGTON, D,C 204b3

REPORT OF THE AUDIT DIVISION

ON

BENTON FOR CONGRESS

EXECUTIVESU~RY

Benton for Congress (BFC) registered with the Federal Election Commission on March

3, 1998, as the principal campaign committee for State Senator Don Benton, Republican

candidate for the U.S. House of Representatives from the state of Washington, Third District.

The audit was conducted pursuant to 2 U.S.c. §438(b), which states that the

Commission may conduct audits of any political committee whose reports fail to meet the

threshold level of compliance set by the Commission.

The findings of the audit were presented to BFC at the completion offieldwork on June

18,1999 and later in the interim audit report. BFC's response to those findings is contained in

the audit report.

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

staffs testing of contributions was limited because the Committee could not produce a

computerized file or other listing of all contributions received during the audit period.

RECEIPT OF CONTRIBUTlONS IN EXCESS OF THE LIMITATION - 2 U.s.C.

§441 a(a)( I). The review of contributions from individuals identified 22 apparent excessive

contributions totaling $13,488. BFC also received two contributions from political committees

which appeared to exceed the contribution limitations by $9,900. No reattribution or

redesignation letters were available for these contributors. In addition, the Committee did not

deposit these excessive contributions into a separate account, nor were there sufficient funds

available after November 18, 1998 with which to refund these contributions.

BFC's response to the Interim Audit Report resolved the excessive contributions from

political committees. However, BFC did not demonstrate that contributions from individuals

totaling $13,488 were not excessive. BFC did not make the required refunds nor disclose these

excessive contributions as debts iffunds were not available to make such refunds.

1
MISSTATEMENT OF FINANCIAL ACTIVITY - 2 US.c. §434(b)(l), (2) and (4). A

reconciliation ofBFC's reported activity to its bank activity revealed that material

misstatements occurred with respect to reports filed for the period from January I, 1998

deposit through December 31, 1998.

BFC filed amended disclosure reports to materially correct the mistatements.

FAILURE TO FILE 48 HOUR NOTlCES- II CFR §104.5(f). BFC did not file required

48 hour notices for 33 contributions totaling $58,000. Two contributions in the amount of

$3,500 related to the primary election, while 31 contributions totaling $54,500 related to the

general election.

In response to the interim audit report, the Candidate stated that he believes that the

majority ofthe contributions in question were received outside ofthe 48 hour reporting period,

and that the BFC staffmade a good faith effort to report every $1,000 or greater contribution

received during the 48 hour reporting period. However, the Candidate could provide

documentation to demonstrate that only one contribution in the amount of$I,500 was received

before the start ofthe 48 hour reporting period for the general election.

2
FEDERAL ELECTION COMMISSION

WASHINGTON. DC 204&3

REPORT OF THE AUDIT DIVISION

ON

BENTON FOR CONGRESS

AR#99-17

I. BACKGROUND

A. AUDIT AUTHORITY

• This report is based on an audit of Benton For Congress (BFC),

undertaken by the Audit Division ofthe Federal Election Commission in accordance with

the provision of the Federal Election Campaign Act of 1971, as amended (the Act). The

audit was conducted pursuant to Section 438(b) ofTitle 2 of the United States Code

which states, in part, that the Commission may conduct audits and field investigations of

any political committee required to file a report under Section 434 ofthis title. Prior to

conducting any audit under this subsection, the Commission shall perform an intemal

review ofreports filed by selected committees to determine ifthe reports filed by a

particular committee meet the threshold requirements for substantial compliance with the

Act.

B. AUDIT COVERAGE

The audit covered the period from BFC's initial bank deposit on

November 21, 1997, through December 31, 1998. I BFC reported a beginning cash

balance of$O, total receipts for the audit period of$804,686; total disbursements for the

audit period of$755,024, and an ending cash balance of$2,007 on December 31, 1998 '.

The figures cited in this report are rounded to the nearest dollar.

The amounts do not foot due to errors made when canying forward ending cash on hand balances

to subsequent reports. Total receipts and disbursements were calculated by summing the current

period totals for each reporting period. These amounts differ from the figures for total receipts and

disbursements ($803,117 and $801,110, respectively) calculated by summing the calendar year-todate amounts reported for 1997 and \998 (see Finding II.B.).

3
C CAMPAIGN ORGANIZATION

BFC registered with the Federal Election Commission on March 3, 1998

as the principal campaign committee for State Senator Don Benton, Republican candidate

for the U.S. House of Representatives from the state of Washington, Third District. The

Treasurer for BFC during the audit period was Mr. Michael Sanders, who continues to

serve in that capacity. BFC maintains its headquarters in Vancouver, WA.

To manage its financial activity, BFC maintained two bank accounts, from

which it made approximately 780 disbursements. Into these accounts BFC deposited

contributions from individuals totaling approximately $374,200, contributions from other

political committees and organizations approximating $440,500, refunds totaling $8,559

and loans totaling $2,000 J.

D. AUDIT SCOPE AND PROCEDURES

The audit included testing ofthe following general categories:

1. The receipt of contributions or loans in excess ofthe statutory

limitations (see Finding Il.A.);

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

from corporations or labor organizations;

3. proper disclosure ofreceipts from individuals, political committees

and other entities, to include the itemization of contributions or

other receipts when required, as well as, the completeness and

accuracy ofthe information disclosed;

4. proper disclosure of disbursements including the itemization of

disbursements when required, as well as, the completeness and

accuracy ofthe information disclosed;

5. proper disclosure ofBFC debts and obligations;

6. the accuracy oftotal reported receipts, disbursements and cash

balances as compared to BFC bank records (see Finding n.B.);

7. adequate recordkeeping for BFC transactions; and

8. other audit procedures that were deemed necessary in the situation.

(see Finding II.C.)

As reported at Finding II.B., BFe's reports understated receipts and disbursements.

4
Unless specifically discussed below, no material non-compliance was

detected. It should be noted that the Commission may pursue further any ofthe matters

discussed in this report in an enforcement action.

II. AUDIT FINDINGS AND RECOMMENDATIONS

Section 441a(a)(I)(A) ofTitle 2 ofthe 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 offide which, in the aggregate, exceed $1,000.

Section 44 1a(a)(2)(A) ofTitle 2 ofthe United States Code states, that no

multicandidate political committee shall make contributions to any candidate and his

authorized political committees with respect to any election for Federal office which, in

the aggregate, exceed $5,000.

A. RECEIPT OF' CONTRIBUTIONS IN EXCESS OF THE

LIMITATION

Subsection (b) of 11 CFR §110.1 explains that with respect to any election

means that ifthe contribution is not designated in writing by the contributor for a

particular election then the contribution applies to the next election for that Federal office

after the contribution is made. A contribution is considered made when the contributor

relinquishes control over the contribution by delivering the contribution to the Candidate,

the political conunittee, or an agent ofthe committee. A contribution mailed is

considered made on the date ofthe postmark.

Section 103.3(b)(3) ofTitle II ofthe Code ofFederal Regulations states,

in part, that contributions which exceed the contribution limitations may be deposited

into a campaign depository or returned to the contributor. If any such contribution is

deposited, the treasurer may request redesignation or reattribution ofthe contribution by

the contributor in accordance with II CFR 11 0.1 (b) or 110.1(k). If a redesignation or

reattribution is not obtained, the treasurer shall, within 60 days ofthe treasurer's receipt of

the contribution, refund the contribution to the contributor.

Section 110.1(b)(S)(i) and (ii) ofTitle 11 ofthe Code of Federal

Regulations states, in part, that the treasurer of an authorized political committee may

request a written redesignation of a contribution by the contributor for a different election

if:

o the contribution was designated in writing for a particular election, and the

contribution, either on its face or when aggregated with other contributions

from the same contributor for the same election, exceeds the limitation at

11 CFR§110.1(b)(1);

5
o

o

the contribution was designated in writing for a particular election and the

contribution was made after that election and the contribution cannot be

accepted under the net debts outstanding provisions of I I CFR

§llO.I(b)(3);

the contribution was not designated in writing for a particular election, and

the contribution exceeds the limitation on contributions set forth in

I I CFR § I 10.1 (b)(I); or

o the contribution was not designated in writing for a particular election,

and the contribution was received after the date of an election for which

there are net debts outstanding on the date the contribution is received.

(

Further, a contribution shall be considered to be redesignated for another

election ifthe treasurer ofthe recipient authorized political committee requests that the

contributor provide a written redesignation ofthe contribution and informs the

contributor that the contributor may request the refund ofthe contribution as an

alternative to providing a written redesignation and, within sixty days from the date ofthe

treasurer's receipt ofthe contribution, the contributor provides the treasurer with a written

redesignation ofthe contribution for another election, which is signed by the contributor.

Section IIO.l(k) ofTitle II of the Code of Federal Regulations states any

contribution made by more than one person, except for a contribution made by a

partnership, shall include the signature of each contributor on the check, money order, or

other negotiable instrument or in a separate writing and if a contribution made by more

than one person does not indicate the amount to be attributed to each contributor, the

contribution shall be attributed equally to each contributor.

If a contribution to a candidate or political committee, either on its face or

when aggregated with other contributions from the same contributor, exceeds the

limitations on contributions set forth in 11 CFR §110.1(b), (c) or (d), as appropriate, the

treasurer ofthe recipient political committee may ask the contributor whether the

contribution was intended to be ajoint contribution by more than one person. A

contribution shall be considered to be reattributed to another contributor ifthe treasurer of

the recipient political committee asks the contributor whether the contribution is intended

to be ajoint contribution by more than one person, and informs the contributor that he or

she may request the return ofthe excessive portion ofthe contribution ifit is not intended

to be ajoint contribution, and within sixty days from the date ofthe treasurer's receipt of

the contribution, the contributors provide the treasurer with a written reattribution ofthe

contribution, which is signed by each contributor, and which indicates the amount to be

attributed to each contributor if equal attribution is not intended.

Section 110.1 (1)(5) Of Title 11 ofthe Code of Federal Regulations states

that if a political committee does not retain the written records concerning redesignation

6
::

or reattribution, the redesignation or reattribution shall not be effective, and the original

designation or attribution shall control.

Section llO.9(a) ofTitle 11 ofthe Code of Federal Regulations states that

no candidate or political committee shall accept any contribution or make any

expenditure in violation ofthe provisions of part 110. No officer or employee ofa

political committee shall accept a contribution made for the benefit or use of a candidate,

or make any expenditure on behalf of a candidate, in violation of any limitation imposed

on contributions and expenditures under this part 110.

Section I03.3(b)(4) ofTitle II ofthe Code of Federal Regulations states,

in relevant part, that any contribution which appears to be illegal under 11 CFR

I03.3(b)(3), and which is deposited into a campaign depository shall not be used for any

disbursements by the political committee urltil the contribution has been determined to be

legal. The political committee must either establish a separate account in a campaign

depository for such contributions or maintain sufficient funds to make all such refunds.

A review ofBFC's receipt records identified 22 contributions from 19

individuals which exceeded the contribution limitations by $13,488. Fourteen excessive

contributions totaling $9,710 related to the primary election, and eight contributions

totaling $3,778 related to the general election. Many ofthese contributions were

attributed to other persons or elections on BFC's disclosure reports. No redesignation or

reattribution letters were available for these contributors.

During the general election, BFC received two contributions from political

committees totaling $9,950 which were designated for primary debt reduction. These

political committees also gave like amounts for the general election. However, at the

time ofthe audit fieldwork the Audit staffs analysis ofBFC's debt position as ofthe date

ofthe primary election revealed that BFC had more cash on hand ($26,823) than its

outstanding debts and obligations ($14, I04), and therefore could not accept these

contributions.

In addition, BFC did not deposit the excessive contributions into a

separate account, nor maintain suHicient funds aftcr Novcmber 18, 1998, to refund these

contributions. BFC's cash balance as of December 31, 1998 was only $474, and was not

sufficient to refund all outstanding excessive contributions.

At the Exit Conference, the Audit staff provided the BFC representative a

schedule ofthe identified excessive contributions. In a written response to the Exit

Conference, the Candidate responded that he had discussed the contribution limit with

every person listed on the excessive contributions from individuals list, and in every case,

the intent was either to designate the additional contribution to the spouse or to allocate

the additional contribution to the general election. The Candidate attached signed

statements from the contributors to confirm their intent. However, these reattribution or

redesignation statements were primarily dated June, 1999, and thus, not accomplished in

7
a timely manner.

The interim audit report recommended that BFC provide evidence

demonstrating that the contributions in question are not excessive, or, absent such

evidence, BFC refund $23,388 ($13,488 from individuals and $9,900 from political

committees) and provide evidence ofsuch refunds (copies ofthe front and back ofthe

negotiated refund checks) for our review. Iffunds are not currently available to make the

necessary refunds, those contributions requiring refunds should be disclosed as debts on

Schedule D (Debts and Obligations) until such time that funds become available to make

the refunds.

In response to the interim audit report, the Candidate stated that the

contributions from individuals should not be considered as excessive contributions, and

argued that every contribution was subsequently reported exactly as discussed with the

donor; the BFC staff was carefully instructed to obtain written redesignation and

reattribution letters, although approximately 19 of these letters had been lost or

misplaced; and the Candidate contacted each donor and obtained signed affidavits4 which

confirmed that the contributions were allocated and designated the way they had

originally instructed.

The Candidate also believed that the contributions from political

committees should not be considered as excessive contributions, and stated that the cash

on hand as calculated by the Audit staff ($26,823) contained $25,480 of contributions that

were designated to the general election, and, after removal of these contributions from the

cash on hand figure, there was sufficient primary debt ($14,104) to justify the two

political party contributions which totaled $9,950. A list of the contributions designated

for the general election was provided.

After reviewing these contributions and recalculating BFC's debt position

as ofthe date of the primary election, it was determined that BFC had sufficient primary

debt and could accept the two contributions from political committees designated for

primary debt retirement.

BFC has not demonstrated that its contributions from individuals were not

in excess ofthe limitations, since it did not retain the written records concerning timely

redesignations as required under II CFR §110.1(I)(5).

No affidavits were submitted in BFe's response to the interim audit report. We believe the

Candidate is referring to signed statements received from the contributors which were addressed

on page 5 of this report.

8
B. MISSTATEMENT OF FINANCIAL ACTIVITY

Sections 434(b)(l), (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, the total amount of all receipts, and the total amount

of all disbursements for the reporting period and calendar year.

Sections 434(b)(3)(A) and (B) ofTitle 2 ofthe United States Code state, in

part, that each report under this section shall disclose the identification of each person

(other than a political committee) who makes a contribution to the reporting committee

during the reporting period, whose contribution or contributions have an aggregate

amount or value in excess of $200 within the calendar year, together with the date and

amount ofsuch contribution; and, the identification of each political committee which

makes a contribution to the reporting committee, together with the date and amount.

Section 434(b)(5)(A) ofTitle 2 of the United States Code states, in part,

that each report under this section shall disclose the name and address of each person to

whom an expenditure in an aggregate amount or value in excess of $200 within the

calendar year is made by the reporting committee to meet a candidate operating expense,

together with the date, amount, and purpose ofsuch operating expenditure.

Section 431 (13) ofTitle 2 of the United States Code states the term

"identification" means, in the case of any individual, the name, the mailing address, and

the occupation ofsuch individual, as well as the name of his or her employer; and, in the

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

The Audit staffs reconciliation of BFC's reported financial activity to its

bank activity, from January 1, 1998, through December 31, 1998, revealed that BFC had

misstated its receipts, disbursements and cash on hand balances. BFC did not provide

workpapers detailing how its reported activity was calculated.

For calendar year 1998, BFC reported total receipts of$793,011. BFC

should have reported total receipts of $813,059. Therefore, receipts were understated by

$20,048. The net understatement ofreceipts resulted primarily from BFC's: failure to

report contributions and a refund from party committees totaling $43,810; the

overstatement of unitemized contributions by $24,210 on the 1998 Post General Election

disclosure report; the reporting of contributions from individuals totaling $5,981 for

which no evidence ofreceipt was found; the failure to report contributions from

individuals totaling $6,000; the failure to report in-kind contributions totaling $901; and

an unexplained difference of $472.

Total reported disbursements were $755,006. BFC should have reported

total disbursements of $824,242. Therefore, disbursements were understated by $69,236.

The understatement stemmed mainly from BFC's failure to report disbursements from

September 16, 1998 through September 30, 1998, resulting in an understatement of

9
$70,874. In addition, BFC incorrectly disclosed the amounts ofsome disbursements

resulting in a net overstatement of$838; reported disbursements totaling $430 which

were not supported by checks or debit memos from BFC's bank accounts; reported a loan

repayment twice resulting in an overstatement of$2,000; failed to report in-kind

contributions totaling $1,119; and understated disbursements by $510 (a discrepancy

which could not be explained).

BFC reported an ending cash on hand balance of $2,007 on December 31,

1998. This amount was overstated by $1,553. The overstatement resulted from the

misstatements detailed above and from discrepancies in reported cash balances between

successive reports. The correct cash balance was determined to be $474.

At the Exit Conference, the BFC representative was provided with

documentation explaining the misstatements. In a written response received subsequent

to the Exit Conference, the Candidate stated\that amendments would be filed.

On August 23, 1999, BFP amended its reports to materially correct the

misstatements noted above.

In the interim audit report, no further action was recommended with

respect to this matter.

C. FAlLURE TO FILE 48 HOUR NOTICES

Section 104.5(f) ofTitle II ofthe Code of Federal Regulations states that

if any contribution of $1 ,000 or more is received by any authorized committee of a

candidate after the 20th day, but more than 48 hours, before 12:0 I a.m. ofthe day of the

election, the principal campaign committee of that candidate shall notify the Commission,

the Secretary ofthe Senate and the Secretary of State, as appropriate, within 48 hours of

receipt ofthe contribution. The notification shall be in writing and shall include the name

of the candidate and office sought by the candidate, the identification of the contributor,

and the date of receipt and amount ofthe contribution. The notification shall be in

addition to the reporting of these contributions on the post-election report.

The Audit staffreviewed all contributions greater than or equal to $1,000

deposited from August 27, 1998 to September 12, 1998 for the primary election, and

deposited from October 15, 1998 to October 31,1998 for the general election.s The

review identified 22 contributions totaling $33,000 that appeared to have been received

within two and twenty days ofthe primary election, held on September IS, 1998, and 99

contributions totaling $179,750 that appeared to have been received within two and

twenty days ofthe general election, held on November 3, 1998.

BFC did not provide records pertaining to the date contributions were received, therefore the Audit

staff could only test for compliance concerning this matter using deposit ticket dates.

10
BFC did not file required 48 hour notices for 33 contributions totaling

$58,000. Two contributions in the amount of $3,500 related to the primary election,

while 31 contributions totaling $54,500 related to the general election.

At the exit conference, the BFC representative was provided with a

schedule ofthese items. In a written response to the Exit Conference, the Candidate

contends that the majority ofthe contributions were received before the beginning of the

reporting periods, and would be exempt from the reporting requirement.

The analysis presented above used the deposit date as the receipt date. No

documentation detailing a different receipt date for the contributions has been provided.

During the pre-general election period, BFC made deposits about every 3 work days.

Also, deposits were made on October 14, 1998, the day prior to the start ofthe 48 hour

reporting period suggesting that there were no undeposited contributions on the 15th • As

such, it is unlikely that the contributions noted above were received prior to October 15,

1998.

In the interim audit report, the Audit staffrecommended that BFC obtain

and submit evidence that all required 48 hour notices were filed or submit evidence that

these contributions were not received within two and twenty days ofthe primary and

general elections.

In response to the interim audit report, the Candidate stated that he

believes that the m<uority ofthe contributions in question were received outside ofthe 48

hour reporting period, and that the BFC staff made a good faith effort to report every

$1,000 or greater contribution received during the 48 hour reporting period, but it is

likely that the staff did not deposit every contribution in the order it was received.

However, the Candidate could provide documentation to demonstrate that only one

contribution in the amount of$I,500 was received before the start ofthe 48 hour

reporting period for the general election. Thus it is concluded that 48 hour notices were

not filed for contributions in the amount of$56,500.

11
FEDERAL ELECTION COMMISSION

WASHINCTON.D.C 20463 A99-17

•

n

=

•

November 3, 1999

Mr. Michael Sanders, Treasurer

Benton For Congress

P.O. Box 5076

Vancouver, WA 98668

Dear Mr. Sanders:

Attached please find the Report ofthe Audit Division on Benton for Congress. The

Commission approved the report on November 2, 1999.

The Commission approved Final Audit Report will be placed on the public record

on November 10, 1999. Should you have any questions regarding the public release of the

report, please contact the Commission's Press Office at (202) 219-4155.

Any questions you have related to matters covered during the audit or in the report

should be directed to Bill Antosz or Alex Boniewicz ofthe Audit Division at (202)

694-1200 or toll free at (800) 424-9530.

s:n~,i&-

o ert 1. Costa t;1-,

Assistant Staff DirectoV

Audit Division

Attachment as stated

12
CHRONOLOGY

BENTON FOR CONGRESS

•

Audit Fieldwork

Interim Audit Report to

the Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

13

6/7/99 - 6/18/99

8/31/99

10/4/99

11/2/99
"

;ii