Part I
Background

Authority for Audit

This report is based on an audit of Fletcher for Congress (FFC), 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

Following Commission approved procedures, the Audit staff evaluated various factors and as a
result, 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.

NAMAaYNS

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. Except for the
period November 7, 2002, through December 31, 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.


Part IV
Findings and Recommendations

| Finding 1. Misstatement of Financial Activity

Summary

A comparison of FFC’s reported figures to its bank records revealed that the ending cash-on-
hand balance had been misstated for calendar year 2002. In response to the interim audit report,
FFC amended its most recent disclosure report to correct the misstatement noted above.

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;

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

e The total amount of disbursements for the reporting period and for the calendar year.
2 U.S.C. §434(b)(1), (2) and (4).

Facts and Analysis

A comparison of FFC’s reported figures to its bank records revealed that the ending cash-on-
hand balance for calendar year 2002 had been understated by $11,814. This understatement
resulted primarily from FFC underreporting its receipts in 2002 by $11,368.

At the exit conference, the Audit staff presented this matter to the FFC representatives. They
were not able to explain this difference but stated that they would amend the appropriate
report(s).

Interim Audit Report Recommendation and Committee Response

In response to the recommendation in the interim audit report, FFC amended its 2002 Year-End
disclosure report to correct the misstatement noted above.

| Finding 2. Reporting of Candidate Loans

Summary

FFC did not itemize the receipt of ten candidate loans on Schedules A (Itemized Receipts) of its
disclosure reports and did not disclose all candidate loan repayments on Schedules C (Loans). In
response to the interim audit report, FFC amended its Schedules A and C to correctly disclose all

candidate loan receipts and repayments.

Legal Standard
Candidate Loan Reporting. An authorized political committee must disclose all loans made or

guaranteed by the candidate, as well as the loan repayments. 2 U.S.C §434(b)(2)(G) and (4)(D).


Table of Contents

Part I. Background
Authority for Audit
Scope of Audit
Changes to the Law

Part II. Overview of Campaign
Campaign Organization
Overview of Financial Activity

Part III. Summaries
Findings and Recommendations

Part IV. Findings and Recommendations
Finding 1. Misstatement of Financial Activity
Finding 2. Reporting of Candidate Loans

Page

remy


Part II

Overview of Campaign

Campaign Organization

Important Dates

Fletcher for Congress

ty

¢ Date of Registration

February 2, 2001

e Audit Coverage

January 1, 2001 —- December 31, 2002

Headquarters

Monroe, Louisiana

Bank Information

e Bank Depositories Four

e Bank Accounts Seven

Treasurer

e Treasurer When Audit Was Conducted Kerry Banks

e Treasurer During Period Covered by Audit _| Kerry Banks

Management Information

e Attended FEC Campaign Finance Seminar _| No

¢ Used Commonly Available Campaign Yes
Management Software Package

e Who Handled Accounting and Paid Staff

Recordkeeping Tasks

Overview of Financial Activity

(Audited Amounts)
Cash on hand @ January 1, 2001 $ 2,600
o Receipts from Individuals 733,128
o Receipts from Political Committees 379,741
o Candidate Loans 372,500
o Offsets to Operating Expenditures 1,496
o Interest 1,297
Total Receipts $ 1,488,162
o Operating Expenditures 1,256,212
o Loan Repayments 197,630
Total Disbursements $ 1,453,842
Cash on hand @ December 31, 2002 $ 36,920



Continuous Reporting Required. A political committee must disclose the amount and nature
of outstanding debts and obligations until those debts are extinguished. 2 U.S.C §434(b)(8) and
11 CFR §§104.3(d) and 104.11(a).

Facts and Analysis

FFC received 14 loans from the candidate totaling $372,500. All of the loan proceeds were
properly itemized on Schedules C (Loans) but the first 10 loans totaling $268,500 were not
itemized on Schedules A (Itemized Receipts).

Also, FFC made 10 loan repayments to the candidate totaling $197,630 during the period
covered by the audit.? All 10 loan repayments were properly itemized on Schedules B (Itemized
Disbursements) but FFC did not report all of the loan repayments on Schedules C. FFC received
several letters from the Commission’s Reports Analysis Division regarding the proper reporting
of these loans. However, no amendments were filed in response.

At the exit conference, the campaign officials stated that their staff encountered problems while
entering candidate loan information. They tried to correct the problem but could not override the
software. The problem was reported to their software vendor who was unable to explain why
this had occurred. After the exit conference, the vendor submitted a letter on FFC’s behalf
stating that FFC had informed them of the candidate loan disclosure problem. The vendor also
stated that in its opinion the FFC campaign staff had attempted to file reports correctly and in a
timely manner.

Interim Audit Report Recommendations and Committee Response

In response to the recommendation in the interim audit report, FFC amended its Schedules A and
C to correctly disclose its candidate loans. FFC also stated that it followed the Commission’s
direct loan reporting instructions but a software error occurred. The error has since been
corrected through the assistance of the software vendor’s technical support department.

? The latest disclosure report filed indicates that FFC still owes the candidate $126,370.


FEDERAL ELECTION COMMISSION
Washington, DC 20463

January 16, 2004

MEMORANDUM

TO: RON M. HARRIS
PRESS OFFICER
PRESS OFFICE

FROM: JOSEPH F. STOLTZ
ASSISTANT STAI ‘CTOR
AUDIT DIVISION i

SUBJECT: | PUBLIC ISSUANCE OF THE AUDIT REPORT ON
FLETCHER FOR CONGRESS

Attached please find a copy of the audit report and related documents on Fletcher
for Congress, which was approved by the Commission on January 7, 2004.

The report may be released to the public on January 16, 2003.

Attachment as stated

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


Part III
Summaries

Findings and Recommendations

Finding 1. Misstatement of Financial Activity

A comparison of FFC’s reported figures to its bank records revealed that the ending cash-on-
hand balance had been misstated for calendar year 2002. In response to the interim audit report,
FFC amended its 2002 Year-End disclosure report to correct the misstatement noted above.
(For more detail, see p. 4)

Finding 2. Reporting of Candidate Loans

FFC did not itemize the receipt of ten candidate loans on Schedules A (Itemized Receipts) of its
disclosure reports and did not disclose all candidate loan repayments on Schedules C (Loans). In
response to the interim audit report, FFC amended its Schedules A and C to correctly disclose all
candidate loan receipts and repayments.

(For more detail, see p. 4)


Report of the
Audit Division on

Fletcher for Congress
January 1, 2001 - December 31, 2002

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.

' 2 U.S.C. §438(b).

About the Committee (p. 2)

Fletcher for Congress (FFC) is the principal campaign committee
for Dewey Lee Fletcher, Republican candidate for the U.S. House
of Representatives from the state of Louisiana, 5th District. FFC
maintains its headquarters in Monroe, Louisiana. For more
information, see the Campaign Organization chart, p. 2.

Financial Activity (p. 2)
¢ Receipts

o Individuals $ 733,128
o Political Committees 379,741
o Candidate Loans 372,500
o Offsets to Operating 1,496
Expenditures
o. Interest 1,297
o Total Receipts $ 1,488,162
¢ Disbursements
o Operating Expenditures $ 1,256,212
o Loan Repayments 197,630
o Total Disbursements $ 1,453,842

Findings and Recommendations (p. 3)
e Misstatement of Financial Activity (Finding 1)
e Reporting of Candidate Loans (Finding 2)


Report of the
Audit Division on
Fletcher for Congress

January 1, 2001 —- December 31, 2002