Part II

Overview of Committee

Committee Organization

Important Dates

Laborers’ Political League

e Date of Registration

May 30, 1972

e Audit Coverage

January 1, 1999 — December 31, 2000

Headquarters

Washington, DC

Bank Information

e Bank Depositories

2

e Bank Accounts

1 Checking and 1 Savings

Treasurer

e Treasurer When Audit Was Conducted

Mr. Armand Sabitoni

e Treasurers During Period Covered by Audit

Mr. Carl E. Booker /Mr. Armand Saitoni

Management Information

e Attended FEC Campaign Finance Seminar | Yes

e 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, 1999 $ 398,510
Receipts

o From Individuals 1,495,078
o From Affiliated Committees 991,293
o Other Receipts 15,504
Total Receipts $ 2,501,875
Disbursements

o Operating Expenditures & Other Disbursements 2,648,644
Total Disbursements $ 2,648,644
Cash on hand @ December 31, 2000 $ 251,741


individual who makes any contribution(s) via automatic payroll deduction. See, e.g.
MUR 4955 (Metropolitan Life). 11 CFR §104.14(b)(1).

Background on Committee Receipt Records

Contributions received by LPL were made through payroll deduction. Union locals and
employers transmitted these contributions either by pay period, monthly, quarterly, or
semi-annually. Some of the semiannual transmittals were from vacation funds and were
therefore properly handled (See Advisory Opinion 1979-60). In some cases the
transmittals did not identify which union contributors were included in the transmittal.
Union members were 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
two cents per hour worked. LPL received $1,371,099 from its union locals with an average
individual contribution of approximately $3 per month. Based on this information, the
average contribution would be about $38 per year per person. According to LPL
Tepresentatives, the contributor’s 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 LPL by checks
(“transmittals”) from the district councils, union locals, and employers. Union locals are
not associated with a specific employer.

Payroll authorization documentation was considered by the Commission and LPL was
notified that it was required to:

¢ Maintain PDAs for each member who made contributions via payroll deduction. If
LPL chose 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.

The Audit staff provided LPL with a list of transmittals and requested that LPL provide
copies of PDA’s for every individual contributor who had one or more contributions
contained in the transmittal. Fieldwork was suspended and LPL was allotted time to gather
the necessary records. Fieldwork resumed shortly after expiration of the allotted time.

Facts and Analysis
After the period provided for LPL to gather PDAs for selected transmittals had expired, a

sample of transmittals was selected for review. Approximately the first quarter of the
sample transmittals were tested to determine whether the associated PDAs had been
located by LPL. It was determined that approximately 93% of those PDAs were not
available. Discussions with LPL representatives during this review indicated that some
PDAs for individual contributors who authorized payroll deductions during calendar year
1999 and 2000 were made available for the Audit staff review; however, for contributors


Part IV
Findings and Recommendations

| Finding 1. Misstatement of Financial Activity

Summary

The Audit staff’s reconciliation of LPL’s reported financial activity to its bank records
revealed that LPL misstated its beginning and ending cash-on-hand in calendar year 1999
and receipts, disbursements, and cash-on-hand in calendar year 2000. In response to the
interim audit report, LPL filed an amended report to correct the misstatements in cash-on-
hand for calendar year 1999 and January 2000. Amended reports for February through
December 2000 have not been filed.

Legal Standard

Contents of Reports. Each report must disclose:

¢ 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; and

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

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

Facts and Analysis

The Audit staff’s reconciliation of LPL’s reported financial activity to its bank records
for the period January 1, 1999, through December 31, 2000, indicated that during
calendar year 1999 beginning and ending cash were misstated, and during calendar year
2000, beginning cash, receipts, disbursements, and ending cash were misstated. For the
most part, these discrepancies were the result of incorrect cash-on-hand prior to 1999 and
the failure to disclose receipts and disbursements for the last three reporting periods of
2000. The following paragraphs explain why the discrepancies occurred.

1999 Activity
Reported Bank Records Discrepancy
Beginning Cash Balance $497,076 $398,510 $98,566
Overstated
Receipts $973,965 $963,814 $10,151
Overstated
Disbursements $1,006,771 $1,006,214 $557
Overstated
Ending Cash Balance $463,979 $356,110 $107,869
Overstated



Part Ili
Summaries

Findings and Recommendations

Finding 1. Misstatement of Financial Activity

The Audit staff’s reconciliation of LPL’s reported financial activity to its bank records
revealed that LPL misstated its beginning and ending cash-on-hand in calendar year 1999
and receipts, disbursements, and cash-on-hand in calendar year 2000. In response to the
interim audit report, LPL filed an amended report to correct the misstatements in cash-on-
hand for calendar year 1999 and January 2000. Amended reports for February through
December 2000 have not been filed. (For more detail, see p. 4)

Finding 2. Failure to Maintain Contributor Payroll
Deduction Authorizations

Based on a sample review of transmittals of funds from union locals and employers, the
Audit staff determined that the payroll deduction authorization forms (PDAs) that
authorize the deduction of contributions from a worker’s salary were incomplete and/or
not available. The Audit staff recommended that LPL demonstrate its compliance and
provide any other comments it may have concerning this issue. Absent such a
demonstration, it was recommended that LPL provide a description of policy and
procedural changes implemented to ensure that authorizations are obtained and
maintained in the future, subject to review by the Audit staff at a later date. In response,
LPL outlined procedures it has initiated to ensure that LPL will have electronic copies of
PDAs for all individual donors and submitted copies of written instructions sent to all
local unions that they must execute new PDAs and provide copies of these to LPL. (For
more detail, see p. 6)

Finding 3. Untimely Transmittal of Contributions

Based on a sample of transmittals from union locals and employers, the Audit staff
projected that contributions totaling $236,515 had not been transmitted timely to LPL.
The Audit staff recommended that LPL demonstrate that the contributions were
forwarded timely or absent such a demonstration, LPL was to implement changes to its
system and provide a description of such changes for Audit staff review. The Audit staff
further recommended that LPL send letters to union locals and employers notifying them
of their requirements under the Act when withholding contributions by payroll deduction
and transmitting contributions to LPL. In response, LPL described changes that it has
initiated and provided the Audit staff with an action plan for implementation. (For more
detail, see p. 9)


Ending Cash on Hand - 2000
The $ 88,954 overstatement of the ending cash on hand at December 31, 2000, was the
net result of the misstatements described above.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that LPL file a comprehensive amended report for calendar
year 1999 to correct beginning and ending cash-on-hand balances. For calendar year
2000, amended electronic reports were recommended for each reporting period, including
amended Schedules A (Itemized Receipts) and Schedules B (Itemized Disbursements).
Also, the most recent report should have been amended to show the adjusted cash-on
hand balance with an explanation that it resulted from audit adjustments from a prior
period.

In response, LPL filed amended reports to correct the misstatements in cash-on hand for
calendar year 1999 and January 2000. They stated that other reports for 2000 will be
filed electronically. To date, amended reports for February through December 2000 have
not been filed.

Finding 2. Failure to Maintain Contributor Payroll
Deduction Authorizations

Summary

Based on a sample review of transmittals of funds from union locals and employers, the
Audit staff determined that the payroll deduction authorization forms (PDAs) that
authorize the deduction of contributions from a worker’s salary were incomplete and/or
not available. The Audit staff recommended that LPL demonstrate its compliance and
provide any other comments it may have concerning this issue. Absent such a
demonstration, it was recommended that LPL provide a description of policy and
procedural changes implemented to ensure that authorizations are obtained and
maintained in the future, subject to review by the Audit staff at a later date. In response,
LPL outlined procedures it has initiated to ensure that LPL will have electronic copies of
PDAs for all individual donors and submitted copies of written instructions sent to all
local unions that they must execute new PDAs and provide copies of these to LPL.

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 Contributor Payroll Deduction Authorizations for each

? LPL did not file reports electronically until 2000.


FEDERAL ELECTION COMMISSION
WASHINGTON, D.C. 20463

October 26, 2004

MEMORANDUM

TO: ROBERT W. BIERSACK
PRESS OFFICER
PRESS OFFICE

FROM: JOSEPH F. STOLTZ,
ASSISTANT STA ‘CTOR
AUDIT DIVISION

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON THE
LABORERS’ POLITICAL LEAGUE

Attached please find a copy of the final audit report on Laborers’ Political League,
which was approved by the Commission on October 12, 2004.

Informational copies of the report have been received by all parties involved and
the report may be released to the public.

Attachment as stated

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


instructions sent to all local unions that, among other things, they must execute new
PDAs and provide copies of these to LPL.

| Finding 3. Untimely Transmittal of Contributions

Summary

Based on a sample of transmittals from union locals and employers, the Audit staff
projected that contributions totaling $236,515 had not been transmitted timely to LPL.
The Audit staff recommended that LPL demonstrate that the contributions were
forwarded timely or absent such a demonstration, LPL was to implement changes to its
system and provide a description of such changes for Audit staff review. The Audit staff
further recommended that LPL send letters to union locals and employers notifying them
of their requirements under the Act when withholding contributions by payroll deduction
and transmitting contributions to LPL. In response, LPL described changes that it has
initiated and provided the Audit staff with an action plan for implementation.

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 transmittals that had sufficient information
to determine when contributions were withheld from members’ salary (78% of the total
sample) for the timely forwarding of contributions by union locals, district offices,
regional offices and/or employer. Due to the lack of records, the test was very limited in
its scope. The portion of the sample for which the necessary information was available
was used to project the dollar value of the untimely transmittals. The projected value of
transmittals that were not forwarded timely was at least $236,515.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that LPL demonstrate that contributions were transmitted
timely and provide any comments it had relative to these matters. Absent such a
demonstration, we recommended that LPL implement changes to its procedures and
provide a description of such changes along with an action plan for implementation of the
changes. After implementation, the policy and procedural changes would be subject to


who authorized payroll deductions prior to 1999 and contributed during the 1999 through
2000 period, the respective PDA’s were not provided. Further, LPL representatives
explained that it would be extremely difficult and time-consuming to provide PDAs
executed by the union members throughout the country because of the large turnover of
union membership and the fact that many union members work for numerous employers
during the course of a year. Given this explanation, along with the large number of
missing PDAs, the review for PDAs was discontinued.

Interim Audit Report Recommendation

The Audit staff recommended that LPL demonstrate its compliance and provide any
comments it had relative to these matters. Absent such a demonstration, it was
recommended that LPL 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 LPL’s response and the response was to include an action plan for
implementation of the changes. Once these procedures are in place, the Audit staff will
verify that they are adequate to assure compliance via follow-up audit work. Although
LPL may choose to maintain PDAs at the local level, it was recommended that the
national office maintain copies.

Committee Response to Recommendation and the Audit Staff's
Assessment

In response to the interim audit report, Counsel for LPL (Counsel) disagreed with the
legal premise on which these findings were based as well as the factual conclusions
reached. He stated that the requirements in this report to maintain PDAs for each
member who made contributions via payroll deduction and make available for audits staff
review are not found in the statute. He further stated that FEC’s regulation “requires a
union or other collecting agent to retain only ‘records of contribution deposits and
transmittals’ and requires a separate segregated fund such as LPL to keep records only of
all transmittals of contributions received from collecting agents.” In addition, regarding
the Commission’s regulation at 11 CFR §104.14(b)(1), (that states, a political committee
that files report with the Commission shall maintain records from which the filed reports
and statements may be verified, explained, clarified, and checked for accuracy and
completeness), Counsel emphasized that PDAs are not necessary to verify, explain, or
clarify any items required to be reported by a separate segregated fund, nor are they
necessary to check any reported items for accuracy and completeness.

Counsel also disagreed that 93% of PDAs were not available for review. He stated that
contrary to the statement in the interim audit report, for the majority of the transfers in the
sample, all authorizations were provided, including authorizations executed prior to the
audit period. According to Counsel, the Audit staff could have reviewed authorizations
for a majority of the transfers.

Nonetheless, aside from having serious reservations about the legal basis for requiring
separate segregated funds to maintain and make available PDAs for all individual
contributors, Counsel outlined procedures LPL has initiated to ensure that it will have
electronic copies of PDAs for all individual donors. Counsel submitted copies of written


Beginning Cash on Hand — 1999

LPL was unable to identify the source of the error for the $98,566 overstatement to its
beginning cash balance on January 1, 1999. However LPL representatives explained that
prior to calendar year 2000, they maintained a manual accounting system. The individual
responsible for preparing the reports was no longer employed by LPL or its connected
organization and they were unable to locate workpapers or any other explanation of the
amounts reported.

Ending Cash on Hand - 1999

The $107,869 overstatement of the ending cash on hand was the result of the
misstatement in beginning cash-on-hand and minor discrepancies in receipts and
disbursements during the year.

2000 Activity
Reported Bank Records Discrepancy
Beginning Cash Balance $463,979 $356,110 $107,869
at 1/1/00 Overstated
Receipts $1,433,506 $1,538,062 $104,556
Understated
Disbursements $1,556,789 $1,642,430 $85,641
Understated
Ending Cash Balance $340,696 $251,741 $88,954
at 12/31/00 Overstated

Receipts — 2000
The understatement of receipts was the net result of the following:

¢ Checking/saving accounts interest not reported $ + 534
e Contributions not reported + 113,024
e Unexplained Difference - 9,002
e Net Understatement $ + 104,556

Disbursements - 2000
The understatement of disbursements was the net result of the following:

¢ Disbursements from Non-federal account reported in error $ - 12,000
e Voided checks reported - 9,500
e Disbursement reported twice but paid once - 2,500
e Wrong amount reported - 2,500
¢ Disbursements totaling $30,000 reported as negative that

should be positive + 60,000
e Replacement check reported as memo entry + 10,000
e Political contributions not reported + 41,985
e Unexplained Difference +156
e Net Understatement $ + 85,641


Part I
Background

Authority for Audit

This report is based on an audit of the Laborers’ Political League (LPL), 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.

NAM YN YE

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.


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. Summaries

Findings and Recommendations 3

Part IV. Findings and Recommendations
Finding 1. Misstatement of Financial Activity 4
Finding 2. Failure to Maintain Contributor Payroll Deduction Authorizations 6
Finding 3. Untimely Transmittal of Contributions 9


Report of the
Audit Division on

Laborers’ Political League
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.

' 2 U.S.C. §438(b).

About the Committee (p. 2)

Laborers’ Political League (LPL) is a Separate Segregated Fund
(SSF) of the Laborers’ International Union of North America
(LIUNA). LIUNA is made up of approximately 9 geographical
tegional offices, 56 district counsels grouped predominantly by
state and 564 local unions that are set up geographically and by
trades. The LPL headquarters is located in Washington, DC. For
more information, see chart on the Committee Organization, p. 2.

Financial Activity (p. 2)
¢ Receipts

o. From Individuals $ 1,495,078
o From Affiliated Committees 991,293
o Other Receipts 15,504
o Total Receipts $ 2,501,875
¢ Disbursements
o Operating Expenditures & Other $ 2,648,644
Disbursements
o Total Disbursements $ 2,648,644

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

Untimely Transmittal of Contributions (Finding 3)

eee


10

review by the Audit staff. The Audit staff further recommended that LPL send letters to
union locals, district offices, regional offices, and employers notifying them of their
requirements under the Act when handling contributions from individuals and
transmitting contributions to LPL. In response to the recommendation, LPL described
changes that it has initiated to its procedures and provided the Audit staff with an action
plan for implementation. In addition, LPL submitted copies of written instructions sent
to all local unions concerning, among other things, the transmittal of payroll deduction
contributions to LPL. No information was sent to employers since LPL contends that
there is no evidence that the problem is related to timely transmittal from the employers
to the union.