AK006369

May 31, 1995

MEMORANDUM

TO:

FROM:

RON M. HARRIS, pp~SS OFFICER

PRESS OFFICE

ROBERT J. COSTA

ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

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SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

THE NORTH CAROLINA DEMOCRATIC VICTORY FUND

Attached please find a copy of the final audit report

and related documents on the North carolina Democratic

Victory Fund which was approved by the CoaDi.ssion on Jfay 23,

1995.

Informational copies of the report have been received by

all parties involved and the report aay be released to the

public.

Attachment as stated

cc: Office of Gener~1.-~ C::'Jnsel

Office of Pub15 -.. ·-: ... 5C":losure

Reports Analys: s _,ivision

FEe Library

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FEDERAL ELECTION COf\,1MISSION

REPORT OF THE AUDIT DIVISION

ON THE

NORTH CAROLINA DEMOCRATIC VICTORY FUND

A~004S36

A89-33

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I. Background

A. Overviww

This report is based on an audit of the North Carolina

Deaocratic Victory Fund ("the Coaaittee") undertaken by the Audit

Division of the rederal Election Coaaission in accordance with

the COBaiasion's audit policy to deter.ine whether there has been

compliance vith the provisions of the Federal Election Caapaign

Act of 1971, as ••ended ("the Act"). The audit vas conducted

pursuant to Section 438{b) of Title 2 of the United States Code

which states, in part, that the Co..ission .ay conduct audita and

field investigations of any political coaaittee required to file

a report under Section 434 of this title. Prior to conducting

any audit under this section, the Coaaission shall perfor. an

internal review of reports filed by selected coaaittees to

deteraine if the reports filed by a particular coaaittee aeet the

threshold require.ents for substantial co.pliance with the Act.

The Coaaittee registered with the Co..ission on

February 24, 1983, and aaintains its headquarters in Raleigh,

North Carolina.

The audit covered the period January 1, 1987, through

Deceaber 31, 1988. The Coaaittee reported a beginning cash

balance on January 1, 1987, of $2,045; total receipts for the

period of $488,214 1/; total disburseaents for the period of

$461,453: and an enoin9 cash balance $28,806.

!/ The sua of the ••ounts reported for each reporting period

totaled $478,214; however, the sum of 1987 and 1988 calendar

year to date totals for disburseaents was $488,214. The

difference ($10,000) resulted from errors in the reporting

and iteaization of receipts froa other political coaaittees

on the 1988 October Quarterly report. The figures cited in

this report are rounded to the nearest dollar.
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This report is based on doeuaents and workpapers

aupporting each of its factual state.ents. They form part of the

record upon Wftich the Co..ission based its decisions on the

.atters in this report and were available to Co.-i.sioners and

appropriate staff for reviev_

B. Key Personnel

The Treaaurers of the Comaittee during the period

covered by the audit vere ftr. Russell Walker, fro. January 1,

1987 through Septeaber 25, 1988, and Mr. Larry Shaw from

Septeaber 26, 1988 through January 31, 1989. The current

Treasurer is Lynda Tippett.

c. Scope

The audit included such tests as verification of total

reported receipts and disburse.ents and individual transactions;

review of required supporting docuaentation; an analysis of

Coaaittee debts and obli9ationsi and such other audit procedures

as deemed nec.ssary under the circumstances; with the exception

that although disburse.ent records appeared to be in coapliance

with the require.ents of 2 u.s.c. S432(c), available supporting

docuaentation allowed for only a liaited analysis of expenditure.

relative to get-out-the-vote and phone bank activities conducted

by the Coaaittee.

II. Audit Findings and Recoaaendations

A. Disclosure of Contributions froa Political

Coaaittees

Section C34(b)(])(B) of Title 2 of the United Stat•• Code statea, in part, that each report under this section ahall

disclose the identification of each political coaaittee which

.ake. a contribution to the reporting co..ittee during the

reporting period, together with the date and ••ount of any such

contribution.

The Audit staff identified three contributions,

totaling $42,965, which were under reported by $32,665.

Also noted vere three contributions, totaling $18,690,

iteaized on Coaaitte. disclosure reports as having been received

fro. three political co..ittees; however, based upon the

available inforaation these transactions did not occur~/.

2/ The Audit staff reviewed disclosure reports filed by these

political coaaittees and noted that no such contributions vere

reported by these coaaittees.

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Finally, the Committee did not ite.ize two $5,000

contributions: one fro. UAW V Cap dated August 18, 1988 and the

other fro. the Committee on Letter Carriers Political Education,

dated July 5, 1988. 80th contributions were deposited on

September 16, 1988.

At the Exit Conference, the Committee was presented a

schedule of the disclosure errors. On May 17, 1990, the

Committee amended its disclosure reports correcting the

disclosure of the contributions noted above.

Recommendation t1

The Audit staff recommends no further action with respect to

this matter.

B. Disclosure of Debts and Obligations

Section 434(b)(S) of Title 2 of the United States Code

requires, in part, that each report under this section shall

disclose the ••ount and nature of outstanding debts and

obli9ations owed by or to such political eo.-ittee.

Section 104.11(b) of Title 11 of the Code of Federal

Regulations states, in part, that any debt or obligation, the

amount of which is over $500 shall be reported as of the tiae of

the transaction.

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1. Loan Payment Not Iteaized

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The Committee signed a loan agree.ent with United

National bank on August 30, 1988 and obtained a $60,000 loan

advance on August 31, 1988 vhich it iteaized properly on Schedule

A. The loan principal was repaid on Septeaber 20, 1988 but

repayaent vas not disclosed on Schedule C or iteaized on Schedule

B as reqUired at that time. The Audit staff notes that the

amount of the repayaent was reported on Line 24 of the Detailed

Suaaary Page on the Coaaittee'. 12 Day Pre-General disclosure

report, and vas reported on Schedule C on the Coaaittee', 30 Day

Post-General disclosure report. The interest payaent vas

itemized properly under operating expenditures.

On Ray 17, 1990 the Coaaittee filed a.ended

Schedules 8 and C to correct the 1rregularities noted above.

2. Disclosure of Debts for Adainistrative Expenses

The Committee reported debts owed to/froa the

North Carolina Democratic Executlve Committee for the non-federal

share of administrative expense& during 1987 and 1988. The Audit

staff reviewed the total administrative expenses for 1987 and
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1988. aased on the Audit staff'. analysis of the shared

equitable payaent for adainistrative expenses, the debt disclo••d

a. owed to the North Carolina Deaoeratic Executive Coaaitt•• do•• not exist. Furtheraore, under 11 C.F.R. S 102.5(a)(1), the

non-federal account is prohibited from reimbursing the

Coaaittee 1/.

On April 18, 1990 the Committee amended its April

15 1990 Quarterly report to reflect that no debts are owed

to/from the North Carolina Democratic Executive Coaaittee for the

non-federal share of administrative expenses.

Recommendation 12

The Audit staff does not reco..end any amending aetion with

respect to the•• transactions; however, the Coaaitta. should

i.ple.ent adequate procedures to assure accurate disclosure in

accordance with the Regulations at 11 c.r.R. Sl04.11(b}.

C. Other Matters

Other matters noted during the audit have been referred

to the Coaaission's Office of General Counsel.

~/ Unless otherwise noted, citations to the Coaai••ion's

Regulations refer to those sections in place during the

period covered by the audit.