November 25, 1985

FRED EILAND

PRESS OFFICER ~',

ROBERT J. COSTA , ASS I STANT STAFF DIREC R '" AUDIT DIVISION

PUBLIC ISSUANCE OF FINAL AUDIT REPORT _ FUND FOR A CONVERSATIVE MAJORITY

FEDERAL ELECTION COMMISSION

WASHINCTON. D.C. 20463

MEMORANDUM

TO:

FROM:

SUBJECT:

Attached please find a copy of the final audit report of Fund For A Conservative Majority which was approved by the Commission on November 19, 1985.

Informational copies of the report have been received

by all parties involved and the report may be released to the public.

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Attachment as stated

C

," cc: FEC Library RAD

a: ~ic Record " Office of General Counsel

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FEDERAL ELECTION COMMISSION

WASHINGTON.D.C. ~O~b\

A8'3-83

REPORT or TBB AUDIT DIVISION

ON THE

POND PaR A CONSERVATIVE MAJORITY

I. Background

A. Overview

This report is based on an audit of the rund for a

Conservative Majority (-the Committee-) undertaken by the Audit

Division of the rederal Election Commission to determine whether

there has been compliance with the provisions of the Pederal

Election Campaign Act of 1971, as amended (-the Act-). The audit

was conducted pursuant to Section 438(b) of Title 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 of this

title. Prior to conducting any audit under this subsection, the

Commission shall 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.

The Committee registered with the U.S. Senate and U.S.

House of Representatives on April 17, 1972 as the Young America's

Campaign Committee. On Jahuary 10, 1977, the Commission received

an amended Statement of Organization changing the name to "Fund

for a Conservative Majority-. The Committee maintains its

headquarters in Washington, D.C.

The audit covered the period January 1, 1981 through December 31, 1982. The Committee reported an opening cash

balance on January 1, 1981 of $14,722.42, total receipts for the

period of $2,945,884.88, total disbursements for the period of

$2,950,895.58, and a closing cash balance on December 31, 1982 of $9,711.72.

This audit report is based on documents and workpapers supporting each of its factual statements. They form part of the

record upon which the Commission based its decisions on the

matters in this report and were available to the Commissioners

and appropriate staff for review•
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The Treasurers of the Committee during the period of

audit were Mr. lenneth Boehm, January 1 to October 24, 1981, and

Mr. Robert Heckman from October 24, 1981 through the end of the

period covered by the audit.

C. Scope

The audit included such tests as verification of total

reported receipts, disbursements and individual transactions,

review of required supporting documentation, analysis of

Committee debts and obligations, and such other audit procedures

as deemed necessary under the circumstances. As noted in II.B.

below, the Committee's contribution records were not complete.

II. Audit Findings and Recommendations

A. Matter Referred to the Office of General Counsel

A matter noted during the audit was referred to the

Office of General Counsel.

B. Failure to Retain Contribution Records

Section 432(c) (1) through (3) of Title 2 of the United

States Code states that the treasurer of a political committee

shall keep an account of all contributions received by or on

behalf of such political committee, the name and address of any

person who makes any contribution in excess of $50, together with

the date and amount of such contribution, the identification of

any person who makes a contribution or contributions aggregating

more than $200 during a calendar year, together with the date and

amount of any such contribution.

Section 432(d) of Title 2 of the United States Code

states that the treasurer shall preserve all records required to

be kept by this section and copies of all reports required to be

filed by this subchapter for 3 years after this report is filed.

The Committee's records of contributions from

individuals were stored in an automated file maintained by their

computer firm. In addition, the Committee advised the Audit

staff that the source documents from which the automated file had

been created were stored in a warehouse. The Committee made

available to the Audit staff a magnetic tape of the Committee's

1981 and 1982 contributions. The magnetic tape contained 126,845

contributions totaling $2,580,853.00 (or an average contribution

of $20.35). However, the Committee's disclosure reports for the

same period disclosed total contributions of $2,795,190.46.

Therefore, records for $214,337.46 in reported contributions are
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not contained on the magnetic tape. Inquiries about the

difference were made of both Committee officials and a

representative of the computer firm. The representative of the

coaputer firm suggested that the difference could be related to

the practice of removing a contributor's entire history from the

master file if the Committee requested that an individual be

removed from its mailing list. No explanation was received from

the Committee as a result of that inquiry•

. In an attempt to verify the cause of the difference

between the reported contributions and the automated contribution

file, the Audit staff selected samples of contributor source

documents (contributor cards, etc.) at the Committee's storage facility. Two samples were selected, one of documents in what

appeared to be contribution batches and a second from batches of

documents marked "delete."

In the sample of contribution batches, 8.45' of the'

items were not located in the automated file. It was not

apparent why these items could not be located. However, given the computer firm representative's suggested explanation for the

shortage in the automated file, any of the contributors selected

in the sample who had been deleted from the Committee mailing list would have been removed from the file. Further, it was not

possible to determine whether a specific contribution was

deposited into a Federal or non-Federal account. It was noted

that some of the contributor cards stated that corporate contributions were acceptable, indicating that when such

contributions were received they would be deposited into a nonFederal account. Therefore, this test provided no definite

explanation for the shortage in the automated file.

In the sample of documents selected from "delete"

batches 17.54' of the items were located in the automated

contributor file. However, in the majority of the cases, the

explanation for these "delete" items appearing in the file was

apparent (i.e., the deleted item was undeliverable as addressed,

the deleted item was marked "duplicate," the deleted item was in

a 1981 delete batch and entire contribution history was in 1982,

etc.). Only 1.751 of the sample items were located in the

automated file with no apparent explanation. The results of this

sample support the suggested explanation of the representative of

the Committee's computer firm.

The interim audit report recommended that the Committee

provide an explanation of the difference between the reported

amounts and the amounts in the automated file. The report further .recommended that if contributors who are removed from the

Committee's mailing list are expunged from the master file, a

procedure be instituted to assure that the record of the
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individual'. previous contributions is maintained either in the

automated file or in printed form.

In their October 22, 1985 response to the interia audit

report the Committee explained that the computer firm currently being used for data processing and the maintenance of its donor

file first undertook that responsibility in June, 1983. The

computer firm used prior to that time, including the years 1981

and 1982 is now defunct. As. result, the file known as the

master file had to be converted by the current computer firm to

its particular file maintenance format. Prom the time of that

conversion to the present, the current computer firm has been

responsible for keying all data entry transactions directly to

the PCM donor file. The Committee also noted that the transfer

by FCM of the FCM donor file from the previous computer firm to

the current firm was due, in part, to the recommendations made by the Audit staff following the audit of FCM's records for 1980.!/ . The Committee also states that exhaustive analyses have

been undertaken to determine the reason or reasons why the

automated file for 1981 and 1982 failed to disclose 7.7' of the

contributions received by FCM in those years. The Committee

further states that it has not been possible to identify a

specific reason, because those responsible for the creation of

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During the audit of the Committee's 1980 activity a number

of problems with the Committee's contribution system were

noted:

1. the Committee maintained two contribution files which

"did not cross-aggregate to determine a contributor's " total contributions.

2. The contribution system was capable of storing only 5

contributions per contributor.

3. . The contribution system would not itemize more than one

contribution per contributor per reporting period.

The 1980 interim audit report recommended that in addition

to filing amended reports "that the Committee develop and

implement a method of record maintenance and reporting which

would provide for the proper disclosure of contributions and

ensure the proper recordkeeping and itemization of

contributions in the future."
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the file, e.g., e.ployees of previous computer firm, could not be

located. It appears, however, that the problem may be due to one

or aore of the following factors:

(1) There .ay have been a failure by. the previous firm

to properly key enter all source documents into

the automated file and a failure by that fir. to

find the omissions by not reconciling the keyed transactions.

(2) As a result of the 1980 audit, FeN, at the

recommendation of the Audit staff, had two

contributor files merged into a single .aster

file. That merger took place before June, 1983,

when the master file was transferred to the

current firm. It is possible that some data may

have been lost in that process.

Contributor ~ata on the master file, while it was

in the custody of the previous firm, may have been

lost if a contributor's entire history was

expunged from the file when he or she was removed

from the mailing list. Representatives of the

current computer firm concur with the suggestion by the Audit staff that this was the reason for

the problem.

Some contributor data may have been lost when the

automated file had to be converted to the file

maintenance format used by the current computer firm. This does not appear to be a viable

possibility, however, because the previous firm

reported 137,109 names on the file it delivered to . the current firm which reported 137,101 names on

the file after the conversion.

Some contributor data may have been lost when the

current firm had to reformat its file to the

specifications of the Audit staff. The automated

file used by the Audit staff in producing the

Interim Report was not a mirror image of the

master file, because of technical specifications. Thus, some variation in data could result.

The Committee's response noted that of the factors

listed above, two do not relate to technical problems associated

with automated tape mergers, conversions and reformating. Those

factors are the possible loss of data due to key entry omissions

and errors~ and, the possible expungement of contributor history when a contributor was deleted from a mailing list. The

Committee also states that the procedure followed by the current
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computer fir. in .aintaining the PCM ma.ter file i. de.igned to

prevent the.e proble.s fr~ occurring. In suppOrt of this

state.ent, the Ca.aittee's respon.eincludes a letter fro. the

current coaputer fir. describing the safeguard. built into their

proc.... The.e procedures include a nu.b.r of stepa to verify _the accuracy of data entrYJ and, include a syate. which codes

(and which does not remove or expunge) the hiatory of a

contributor who has been removed fra. the mailing liat. As a

result it appears that the problems id.nt,ifi.d by the Audit staff

are not being repeat.d.

RecolDllendation

Given the above explanation and the small size of the

Committee's average contribution, the Audit staff recommends that

the Commission take no further action on this .atter.

C. Itemization of Contributions

_ Section 434(b) (3) (A) of Title 2 of the United States

Code requires disclosure of the identification of each person 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 of any such contribution.

Section 431(13) (A) of Title 2 of the United States Code states

the term -identification- means, in the case of any individual,

the name, the mailing addess, and the occupation of such

individual, as well as the name of his or her employer.

As noted in Finding II.B. above, -the Committee provideda magnetic tape containing the contributions contained in their

file for 1981 and 1982. Though the contributions contained on

the magnetic tape totaled $214,337.46 less than the reported contributions the automated file was used to test for itemization

of contributions.l/ A sample of contributions requiring itemization was selected and traced to the Committee disclosure

reports. The rate of failure to itemize in the sample was 36.3'~

Analysis of the sample results did not indicate the reason for

the failure to itemize.

The interim audit report recommended that the Committee

file comprehensive amendments to their 1981 and 1982 disclosure

reports itemizing all contributions which aggregate in excess of

$200 for any contributor in a calendar year.

1/ The Committee's disclosure reports contained a total of

1,238 itemized contributions for calendar year 1981 and

1982. The automated contribution file contains 126,845

contributions totaling $2,580,853.00 or an average contribution of $20.35.