The understatement of disbursements was the net result of the following:

11

e Investment account management fees not reported $ 11,692
e Payments for CPA services not reported 5,490
e Disbursements not reported 34,587
e Miscellaneous reporting errors (590)
e Unexplained difference 508
Net amount disbursements understated $ 55,687

The overstatement of the ending cash balance on December 31, 1999, was the net result

of the misstatements noted above.

2000 Activity

Reported Bank Records Discrepancy
Cash Balance on 1-1-00 $6,093,219 $5,946,823 $146,396 Overstated
Receipts $1,025,623 $953,345 $72,277 Overstated
Disbursements $769,115 $888,087 $118,973 Understated
Cash Balance on 12-31-00 $6,349,727 $6,012,081 $337,646 Overstated

The overstatement of beginning cash balance on January 1, 2000, was the result of the

discrepancies detailed above for 1999.

The overstatement of receipts was the net result of the following:

¢ Interest underreported on the October 15" quarterly report
September deposits not reported
Net gain on bonds not reported
Refunds/offsets not reported
Net overstatement of interest on the April 15th quarterly report
Receipts overstated on the 30-day post-general report
Interaccount transfers reported
Bank adjustments not reported

Unexplained difference
Net amount receipts overstated

The understatement of disbursements was the net result of the following:
e Investment account management fees not reported
e Disbursements reported twice
e Disbursements not reported
© Miscellaneous reporting errors
e Check amount reported incorrectly

Unexplained difference
Net amount disbursements understated

$ 7,687
45,104
49,664

2,000
(7,000)
(20,386)
(150,000)
(706)
1,360

$ 72,277

$ 11,949
(37,400)
162,355
(13,367)

(4,000)

(564)
$ 118,973


Part II

Overview of Committee

Committee Organization

Important Dates

ILA - COPE

e Date of Registration

July 1, 1982

e Audit Coverage

January 1, 1999 — December 31, 2000

Headquarters New York, NY
Bank Information
e Bank Depositories 3

e Bank Accounts

1 checking & 2 investment accounts

Treasurer

e Treasurer When Audit Was Conducted

Robert E. Gleason

e Treasurer During Period Covered by Audit

Robert E. Gleason

Management Information

e Attended FEC Campaign Finance Seminar | No

¢ Used Commonly Available Campaign Yes
Management Software Package

¢ Who Handled Accounting and Paid Staff

Recordkeeping Tasks

Overview of Financial Activity
(Audited Amounts)

Cash on hand @ January 1, 1999 $ 5,897,544
o Contributions from Individuals 1,232,981
o Other Receipts (Dividends, Interest, etc.) 498,376
o Refunds 2,000

Total Receipts $ 1,733,357
o Contributions to Federal Candidates & Other Political

Committees 697,625
o Other Disbursements 797,269
o Operating Expenditures 122,926
o Refunds 1,000
Total Disbursements $ 1,618,820
Cash on hand @ December 31, 2000 $ 6,012,081


maintains PDA's; and to efficiently make them available for inspection. The response
states letters are being sent to all ILA locals informing them of the importance of, and
legal requirement to, maintain PDAs. The letter further requests that the local:
© Undertake a review of its existing membership and cross-check these lists
against authorization cards in the local’s possession;
e List each member for whom an authorization card cannot be locate; and,
¢ Communicate this list to the national office so that it and the local can work
together to either locate the missing authorization card or arrange for the
member to sign a new authorization card.

Audit Staff's Assessment of Committee Response

ILA-COPE’s response did not demonstrate its compliance with the recordkeeping
requirements; rather, the response questions the Audit staff’s sampling technique and
acknowledges that it needs to improve its recordkeeping for PDAs. ILA-COPE failed to
provide any additional supporting information for transmittals or any additional PDAs.

ILA-COPE’s response indicates either a lack of understanding of the sampling technique
utilized by the Audit staff and/or the results of that testing as presented above. As ILA-
COPE contends, and the Audit staff concedes above, detailed contributor information
was not maintained for about 80% of the $1,265,000 collected via payroll deduction.
That rendered the source of 80% of ILA-COPE’s contributions unverifiable. Thus, any
sampling method utilized would be limited to testing the 20% of the transmittals where
information was available. The sampling technique used by the Audit staff projects a
67% error rate among the 20% of the contributions tested for which contributor
information (contributor name) was available; it does not comment on the remaining 80%
for which no contributor records were provided.

ILA-COPE also notes that given that it is permissible to maintain PDA’s at the various
locals, all with their own filing system, it not surprising that some PDA’s could not be
located. Although ILA-COPE is correct that it is allowable for records to be maintained
in a decentralized fashion, it is still ILA-COPE’s responsibility to assure that the records
are complete and auditable.

Further, ILA-COPE’s position that the sample could be skewed based on the large
number of NYSA sample items selected is without merit. The audit report cites above
that the Audit staff actually located a greater percentage of NYSA PDAs than PDAs for
all other locals. Additionally, the impact of the flood at the national headquarters is also
diminimis. ILA-COPE’s position throughout the audit has been the PDAs were
maintained at the locals and not at the national headquarters; only national staff PDAs
were maintained there. No contributors from the national staff were selected in the
sample. Finally, in both cases sufficient time had passed between the events and the
audit testing for ILA-COPE to have re-established the necessary files.

Although ILA-COPE was unable to produce records to establish that it was in
compliance with the record keeping requirements, it appears to have complied with the
Audit staff’s recommendation to institute policy and procedural changes relative to the


Part IV
Summaries

Findings and Recommendations

Finding 1. Failure to Maintain Contributor Payroll

Deduction Authorizations

Based on a sample of transmittals from union locals and employers for which detailed
contributor information was provided, the Audit staff determined that payroll deduction
authorization forms were not available for about 67% of the contributors sampled. The
interim audit report recommended that ILA-COPE demonstrate its compliance and provide
any other comments it may have relative to these matters. Absent such a demonstration, it
was recommended that ILA-COPE provide a description of policy and procedural changes
implemented to ensure that such authorizations are obtained and maintained in the future,
subject to review by the Audit staff at a later date. In its response, ILA-~COPE did not
demonstrate its compliance; rather, it acknowledges a need to improve its PDA
recordkeeping function and describes steps it is taking to do so. (For more detail, see p. 5)

Finding 2. Untimely Transmittal of Contributions

Based on a sample of transmittals from union locals and employers, it was projected that
$178,321 had not been transmitted timely to ILA-COPE. The interim audit report
recommended that ILA-COPE demonstrate the transmittals were received timely and
provide any other comments it may have relative to this matter. Absent such a
demonstration, it was recommended that ILA-COPE implement changes to its system and
provide a description of such changes, subject to verification by the Audit staff at a later
date, to include sending letters to union locals and employers notifying them of their
requirements under the Act when withholding contributions by payroll deduction and
transmitting contributions to ILA-COPE. In its response, ILA-COPE acknowledges that
several transmittals were not received timely and details its efforts to ensure all
transmittals are received timely. (For more detail, see p. 8)

Finding 3. Misstatement of Financial Activity

When ILA-COPE’s reported activity was compared to its bank records for calendar years
1999 and 2000, the Audit staff found that beginning cash, receipts, disbursements, and
ending cash had been misstated. In response to the interim audit report, ILA-COPE filed
amended disclosure reports that correct these misstatements. ILA-COPE’s narrative
response further notes the hiring of an outside firm to ensure its reports are accurate. (For
more detail, see p. 10)


Part III

Committee Receipt Records

All contributions received by ILA-COPE were made through payroll deduction. Union
locals and employers transmitted these contributions either by pay period, monthly, or
quarterly. Each member was given a check-off form to complete in order to voluntarily
contribute via payroll deduction or to contribute a specific amount. The suggested
contribution was one-tenth of one percent of wages. According to ILA-COPE
representatives, there are about 59,000 union members, an estimated 75% of which
contribute to ILA-COPE. Based on this information, the average contribution would be
about $20 per year per person. According to ILA-COPE representatives, the payroll
deduction authorization forms (PDAs) were not maintained at the national office (with the
exception of those employed at the national office), but rather were maintained by the
union local and/or by the employer. The contributions withheld through payroll deduction
were transmitted to ILA-COPE by check (“‘transmittals”) from the union local or, more
commonly, from the employer. Union locals are not associated with a specific employer.

An initial inventory by the Audit staff indicated that ILA-COPE records for contributions
from individuals were incomplete. Of the approximately 7,000 transmittals, totaling in
excess of $1,265,000, nearly 80% of the amounts transmitted lacked supporting contributor
information, such as the contributor’s name, contribution date, and contribution amount.
Since most transmittals came directly from employers and since an employer is not
associated with a specific union local, it was not possible to determine the identity of the
contributor or even the union local whose members contributed the amount transmitted.
With respect to PDAs, ILA-COPE representatives argued that they were not required to
maintain such records at the national office or centralize them at the audit site and
suggested the Audit staff could visit the locals to review any PDAs. As a result, audit
fieldwork was suspended.

This matter was then considered by the Commission and ILA-Cope was notified that it was
required to:

¢ Maintain PDAs for each member who made contributions via payroll deduction. If
ILA-COPE choose to maintain those records at the various union locals, it was
necessary to assemble the PDAs at a central location and in an auditable state for
Audit staff review; and,

¢ Provide documentation to demonstrate that contributions that were transmitted by
employers and collecting agents were timely transmitted and deposited.

The Commission also advised that failure to comply may necessitate the issuance of
subpoenas and/or the initiation of a compliance action by the Commission. Fieldwork
resumed shortly after expiration of the time permitted for ILA-COPE to gather the
necessary records. ILA-COPE was able to locate supporting contributor information for
some of the transmittals which previously lacked this information. The PDAs gathered by
ILA-COPE were arranged by local, in repetitive alphabetical sequences, making it difficult
to locate a specific contributor’s PDA. PDAs were not provided for all requested locals.


At the exit conference, the Audit staff advised ILA-COPE representatives of this matter.
The representatives indicated they would continue to locate, gather and forward to the
Audit staff missing PDAs.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that ILA-COPE demonstrate its compliance with the
recordkeeping requirements. It was further recommended that ILA-COPE implement
policies and procedures to ensure that PDAs and other records are maintained in an
auditable state. Copies of the procedural instructions were to be submitted with ILA-
COPE’s response and were to include an action plan for implementation of the changes.
Once these procedures are in place, the Audit staff would verify that they are adequate to
assure compliance via follow-up audit work. Although ILA-COPE may choose to
maintain PDA’s at the local level, it was recommended that the national office maintain
copies of PDAs.

ILA-COPE’s response states it does not claim to be able to produce a PDA for every
member who contributed, but it cannot concede the Audit staff’s 67% figure as
Tepresentative of the whole because it believes the transmittals selected were not a
representative sample for determining the total number of PDAs available. ILA-COPE
believes that this particular audit method — providing a specific transaction and requesting
PDAs for each member making up the transaction — proved to be an ineffective way to
gauge the existence of specific PDAs. While acknowledging that it does not fault the
Audit staff for taking this approach, ILA-COPE’s response notes its members are not
tracked by contribution transmittal.

Further, ILA-COPE’s response stated it was impossible to determine for most
transmittals which ILA members were the source of the funds and, therefore, it was not
possible for ILA to track down a particular PDA. The response also points out (as does
the interim audit report) that most transmittals came from employers and since they are
not associated with the local union, it was not possible to determine the identity of the
contributor or the local.

Also, given that PDAs may be maintained at the locals, each with different filing
methods, coupled with 60,000 members, 75% of which contributed, it is not surprising
that some PDAs could not be located. In addition, ILA-COPE notes that it is more likely
than not, that employers will usually not deduct contributions from a member’s paycheck
without a written and signed authorization and that the missing PDAs exist, but merely
cannot be located using the transaction back-up method. The response cites two specific
examples: first, the results could be skewed by the loss of records maintained at the
World Trade Center by NYSA, which accounted for the largest number of sample items;
and, second, a flood at the national headquarters during April, 1999, which destroyed
thousands of pages of documents, including some PDAs.

The response acknowledges ILA-COPE’s responsibility: to maintain PDAs for a period
of at least three years from the member’s last contribution; to help insure each local


FEDERAL ELECTION COMMISSION
Washington, DC 20463

September 30, 2004

MEMORANDUM

TO: ROBERT W. BIERSACK
PRESS OFFICER
PRESS OFFICE

FROM: JOSEPH F. STOLTZ
ASSISTANT STAFF) ‘CTOR
AUDIT DIVISION

SUBJECT: | PUBLIC ISSUANCE OF THE AUDIT REPORT ON THE
INTERNATIONAL LONGSHOREMEN’S ASSOCIATION, AFL-CIO
COMMITTEE ON POLITICAL EDUCATION ILA-COPE (A01-48)

Attached please find a copy of the audit report on the International Longshoremen’s
Association, AFL-CIO Committee on Political Education ILA-COPE (A01-48), which was
approved by the Commission on September 27, 2004.

The report may be released to the public on September 30, 2004.

Attachment as stated

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


Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that ILA-COPE demonstrate that transmittals were
received timely and provide any comments it may have relative to these matters. Absent
such a demonstration, it was recommended that ILA-COPE implement changes to its
procedures and provide a description of such changes to include an action plan for
implementation of the changes. Once these procedures were in place, the Audit staff
would verify that they are adequate to assure compliance via follow-up audit work. The
Audit staff further recommended that ILA-COPE send letters to union locals and
employers notifying them of their requirements under the Act when withholding
contributions from individuals and transmitting contributions to ILA-~-COPE.

In its response to the interim audit report, ILA-COPE stated that the Audit staff reviewed
several dozen transmittals of voluntary contributions and determined that some were not
transmitted within 30 days, as required by federal rules.

The response acknowledges that several transmittals were not made within the 30-day
period and notes that the majority of the late transmittals were made directly to ILA-
COPE from employers and did not pass through any local. ILA-COPE notes that it has
no legal control over the transmittal of contributions by employers because employers are
not “collection agents” for ILA-COPE. Therefore, it can only advise employers of the
potential legal consequences of failing to timely transmit contributions and urge them to
comply with the law.

None the less, ILA-COPE states that it is making specific efforts to ensure that all
transmittals of contributions to ILA-COPE - whether from locals or from employers —
are made in a timely manner. Specifically with regard to ILA locals, ILA-COPE is
sending a letter to all locals explaining the “collecting agent” transmittal rules and
instructing these locals to transmit contributions within the applicable time periods. ILA-
COPE also intends to follow-up with locals that do not provide timely transmittals and to
take increasingly severe steps, as needed, to ensure that transmittals are made on time.

With regard to employers transmitting contributions from members made via payroll
deduction, ILA intends to inform each employer of their responsibilities under federal
law and to urge them to comply with that law. While most employers are made aware of
the federal requirements for the timely transmittal of political contributions as part of the
collective bargaining process, as mentioned above employers are not “collecting agents”
for ILA-COPE, and, thus it has no ability (or right) to legally control their actions.

Audit Staff's Assessment of Committee Response

ILA-COPE’s response did not demonstrate that any of the transmittals discussed above
were made timely. ILA-COPE is correct that the employers of its members are not
collecting agents as defined in 11 CFR 106.2(b). In contrast the union locals that
transmit contributions are collecting agents. In both cases, the proposed actions
described in ILA-COPE’s response to the interim audit report appear to comply with
recommended actions; however, these actions are subject to Audit staff verification.


maintenance of PDAs; however, this remains subject to the Audit staff verifying that they
have in fact been implemented via follow-up audit work.

| Finding 2. Untimely Transmittal of Contributions

Summary

Based on a sample of transmittals from union locals and employers, it was projected that
$178,321 had not been transmitted timely to ILA-COPE. The interim audit report
recommended that ILA-COPE demonstrate the transmittals were received timely and
provide any other comments it may have relative to this matter. Absent such a
demonstration, it was recommended that ILA-COPE implement changes to its system and
provide a description of such changes, subject to verification by the Audit staff at a later
date, to include sending letters to union locals and employers notifying them of their
requirements under the Act when withholding contributions by payroll deduction and
transmitting contributions to ILA-COPE. In its response, ILA-COPE acknowledges that
several transmittals were not received timely and details its efforts to ensure all
transmittals are received timely.

Legal Standard

A. Definition of Collecting Agents. A collecting agent is an organization or committee
that collects and transmits contributions to one or more separate segregated funds to
which the collecting agent is related. 11 CFR §102.6(b)(1).

B. Transmittal of Contributions. The full amount of each contribution collected by a
collecting agent, or any other person, on behalf of a separate segregated fund shall be
transmitted to that fund within 10 days of receipt if the amount of the contribution
exceeds $50; and, within 30 days of receipt if the amount of the contribution is $50 or
less. Finally, date of receipt is the date such person takes possession of the contribution.
11 CFR §§102.6(c)(4) and 102.8(a) & (b).

C. Separate Segregated Fund Responsible for Acts of Collecting Agent. The
separate segregated fund is responsible for ensuring that the recordkeeping, reporting and
transmittal requirements are met and is responsible for the acts of a collecting agent. 11
CFR §102.6(c)(1).

Facts and Analysis

The Audit staff conducted a sample review of approximately 7,000 transmittals totaling
in excess of $1,265,000. The projected value of transmittals that were not forwarded
timely was $178,321. ILA-COPE representatives indicated that this was due in part to
some employers transmitting funds quarterly when they transmitted tax withholdings.
The untimely transmittals in the sample were forwarded from 38 to 343 days late.

At the exit conference, the Audit staff advised ILA-~COPE representatives of these
matters.


Part V
Findings and Recommendations

Finding 1. Failure to Maintain Contributor Payroll
Deduction Authorizations

Summary

Based on a sample of transmittals from union locals and employers for which detailed
contributor information was provided, the Audit staff determined that payroll deduction
authorization forms were not available for about 67% of the contributors sampled. The
interim audit report recommended that ILA-COPE demonstrate its compliance and
provide any other comments it may have relative to these matters. Absent such a
demonstration, it was recommended that ILA-COPE provide a description of policy and
procedural changes implemented to ensure that such authorizations are obtained and
maintained in the future, subject to review by the Audit staff at a later date. In its
response, ILA-COPE did not demonstrate its compliance. Rather, it acknowledges a
need to improve its PDA recordkeeping function and describes steps it is taking to do so.

Legal Standard

Recordkeeping. Each political committee or other person required to file any report or
statement under this subchapter shall maintain all records relevant to such reports and
statements. Records to be maintained with respect to the matters required to be reported,
include bank records, vouchers, worksheets, receipts, bills and accounts, which shall
provide in sufficient detail the necessary information and data from which the filed
reports and statements may be verified, explained, clarified, and checked for accuracy
and completeness. The Commission has determined that, under 11 CFR § 104.14(b)(1),
separate segregated funds established pursuant to Part 114 of the Commission’s rules
must maintain copies of Payroll Deduction Authorizations for each individual who makes
any contribution(s) via automatic payroll deduction. See, e.g. MUR 4955 (Metropolitan
Life). 11 CFR §104.14(b)(1).

Facts and Analysis

As previously noted, approximately 20% of the dollar amount of transmittals was
accompanied by records that allowed the identification of the contributors. Therefore, the
test of the completeness of the associated PDAs was extremely limited. A sample review
of selected transmittals that did identify the contributors revealed that for approximately
67% of the sample items, the related PDAs were not available. ILA-COPE
representatives had stated at the entrance conference that the records for NYSA (New
York Shipping Association, a regional unit for New York City area locals), had its offices
in the World Trade Center, and all records were lost on September 11, 2001. This
regional unit accounted for the largest number of identifiable contributors in the sample.
However, copies of PDA’s were located for 38% of the sample items associated with
NYSA, while only 13% of the PDA’s were located for other local units included in the

testing..


Part I
Background

Authority for Audit

This report is based on an audit of the International Longshoremen’s Association AFL-
CIO Committee on Political Education ILA-COPE (ILA-COPE), undertaken by the
Audit Division of the Federal Election Commission (the Commission) in accordance with
the Federal Election Campaign Act of 1971, as amended (the Act). The Audit Division
conducted the audit pursuant to 2 U.S.C. §438(b), which permits the Commission to
conduct audits and field investigations of any political committee that is required to file a
report under 2 U.S.C. §434. Prior to conducting any audit under this subsection, the
Commission must perform an internal review of reports filed by selected committees to
determine if the reports filed by a particular committee meet the threshold requirements
for substantial compliance with the Act. 2 U.S.C. §438(b).

Scope of Audit

This audit examined:

The receipt of excessive contributions and loans.

The receipt of contributions from prohibited sources.

The disclosure of contributions received.

The disclosure of disbursements, debts, and obligations.
The consistency between reported figures and bank records.
The completeness of records.

Other committee operations necessary to the review.

NAWPYWNE

Changes to the Law

On March 27, 2002, President Bush signed into law the Bipartisan Campaign Reform Act
of 2002 (BCRA). The BCRA contains many substantial and technical changes to the
federal campaign finance law. Most of the changes became effective November 6, 2002.
The period covered by this audit pre-dates these changes. Therefore, the statutory and
regulatory requirements cited in this report are those that were in effect during the audit
period.


12

The overstaterrent of the ending cash balance on December 31, 2000, was the net result
of the misstatements noted above for 1999 and 2000.

During the exit conference, the Audit staff discussed these matters with ILA-COPE
representatives and provided them with schedules detailing the misstatements presented
above. ILA-COPE representatives indicated that amended reports would be filed.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that ILA-COPE file amended reports to correct the
misstatements noted above. In addition, ILA-COPE was to amend all subsequent reports
in order to correct reported cash balances. It was also recommended that ILA-COPE
develop procedures to assure that all bank accounts are reconciled to its accounting
records regularly and that disclosure report totals are reconciled to both bank records and
accounting records.

In its response to the interim audit report, ILA-COPE acknowledged that it
unintentionally made reporting errors during the audit period and filed amended
disclosure reports that corrected these misstatements. The response noted that these
errors resulted from a shortage of staff devoted to reporting and a failure to reconcile its
reported activity to its bank activity. ILA-COPE now employs an outside firm to file its
disclosure reports and believes it has eliminated many of the problems which occurred
during the audit period.


Table of Contents

Page

Part I. Background

Authority for Audit 1

Scope of Audit 1

Changes to the Law 1
Part II. Overview of Committee

Committee Organization 2

Overview of Financial Activity 2
Part III. Committee Receipt Records 3
Part IV. Summaries

Findings and Recommendations 4

Part V. Findings and Recommendations
Finding 1. Failure to Maintain Contributor Payroll Deduction Authorizations 5
Finding 2. Untimely Transmittal of Contributions 8
Finding 3. Misstatement of Financial Activity 10


Report of the

Audit Division on the
International Longshoremen’s
Association AFL-CIO Committee

on Political Education ILA-COPE
January 1, 1999 - December 31, 2000

Why the Audit

Was Done

Federal law permits the
Commission to conduct
audits and field
investigations of any
political committee that is
required to file reports
under the Federal Election
Campaign Act (the Act).
The Commission generally
conducts such audits when
a committee appears not to
have met the threshold
requirements for
substantial compliance
with the Act.' The audit
determines whether the
committee complied with
the limitations,
prohibitions and disclosure
requirements of the Act.

Future Action

The Commission may
initiate an enforcement
action, at a later time, with
respect to any of the
matters discussed in this
report.

About the Committee (p. 2)

The International Longshoremen’s Association AFL-CIO
Committee on Political Education ILA-COPE is a separate
segregated fund of a labor union headquartered in New York,
NY. For more information, see chart on the Committee
Organization, p. 2.

Financial Activity (p. 2)

¢ Receipts
o Contributions from Individuals $ 1,232,981
o Other Receipts 498,376
o Refunds 2,000
o Total Receipts $ 1,733,357

¢ Disbursements

o Contributions to Federal Candidates

and Other Political Committees $ 697,625
o Other Disbursements 797,269
o Operating Expenditures 122,926
o Refunds 1,000
o Total Disbursements $ 1,618,820

Findings and Recommendations (p. 4)
e Failure to Maintain Contributor Payroll Deduction
Authorizations (Finding 1)
Untimely Transmittal of Contributions (Finding 2)
Misstatement of Financial Activity (Finding 3)

' 2 U.S.C. §438(b).


| Finding 3. Misstatement of Financial Activity

Summary

When ILA-COPE’s reported activity was compared to its bank records for calendar years
1999 and 2000, the Audit staff found that beginning cash, receipts, disbursements, and
ending cash had been misstated. In response to the interim audit report, ILA-COPE filed
amended disclosure reports that correct these misstatements. ILA-COPE’s narrative
response further notes the hiring of an outside firm to ensure its reports are accurate.

Legal Standard

Contents of Reports. Each report must disclose:

e The amount of cash on hand at the beginning and end of the reporting period;

© The total amount of receipts for the reporting period and for the calendar year;

e The total amount of disbursements for the reporting period and for the calendar year;

and

e Certain transactions that require itemization on Schedule A or Schedule B.
2 U.S.C. §434(b)(1), (2), (3), (4), (5) and (6).

Facts and Analysis

The Audit staff’s reconciliation of ILA~-COPE’s reported financial activity to its bank
records for the period January 1, 1999, through December 31, 2000, indicated that
beginning cash, receipts, disbursements, and ending cash were misstated. ILA-COPE did
not provide records to explain how the amounts shown on its disclosure reports were
calculated; as such, not all discrepancies could be explained. Charts follow which
present the misstatements for each calendar year and succeeding paragraphs detail the
discrepancies that occurred.

1999 Activity

Reported Bank Records Discrepancy
Cash Balance on 1/1/99 $5,826,899 $5,897,544 $70,645 Understated
Receipts $942,665 $780,012 $162,653 Overstated
Disbursements $675,045 $730,732 $55,687 Understated
Cash Balance on 12/31/99 $6,093,219 $5,946,823 $146,396 Overstated

The $70,645 understatement of beginning cash balance on January 1, 1999, could not be
explained.

The overstatement of receipts was the net result of the following:
Failure to report losses on bond investments ($139,570)
Two deposits made during June 1999 not reported 35,276
Interest earned during June 1999 not reported 39,420
Interaccount transfers reported (90,000)
Bank adjustments not reported 1,779)

Net amount receipts overstated ($162,653)