FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

October 11,2012 

MEMORANDUM 

To: The Commission 

Through: 

From: 

By: 

Alec Palmer 

Staff Director 

Patricia C. Onock ^ 

Chief Compliance Officer 

Thomas Hintemiister 

Assistant Staff Director 

Audit Division 

Alex R. Boniewicz -6>»^ 

Audit Manager 

Subject: Resubmission of the Audit Division Recommendation Memorandum on 

tiie Maine Republican Party (MRP) (A09-09) 

This document, originally circulated September 25,2012, was withdrawn to update 

recommendations to conform to Coinmission Directive No. 70 (FEC Directive on 

Processing Audit Reports). 

Pursuant to Commission Directive No. 70, the Audit staffs recommendations are 

presented below and the findings are discussed in the attached Draft Final Audit Report 

(DFAR). The Office of General Counsel has reviewed this memorandum and concurs 

with the recommendations. 

Finding 1. Misstatement of Financial Activity 

In its response to the Interim Audit Report, MRP stated it had amended its reports 

as requested. However, those amendments did not materially conect the 

misstatements. In response to the DFAR, MRP filed amended reports that were 

materially misstated. MRP indicated that the remaining misstatements will be 

conected and amended reports will be filed. Additional amendments were 

subsequently filed by MRP materially conecting the misstatements. 

The Audit staff recommends that the Commission find that MRP misstated its 

financial activity for calendar years 2007 and 2008. 
Finding 2. Reporting of Debts and Obligations 

In its response to the Interim Audit Report, MRP amended its reports to materially 

conect the disclosure of these debts. MRP's response to the DFAR did not 

address this finding. 

The Audit staff recommends tiiat the Commission find that MRP improperly 

disclosed debts and obligations totaling $103,721. 

Finding 3. Disclosure of Disbursements 

MRP responded to tiiis finding as follows: 

A. Payments from Non-federal Accounts ($94,019) 

• Administrative costs ($48,520): 

In response to the Interim Audit Report, MRP was unable to locate 

documentation to demonstrate these expenditures were solely non-federal 

in nature. Amended reports filed in response to the Interim Audit Report 

did not disclose these expenditures. 

In response to the DFAR, MRP submitted documentation supporting tiie 

non-federal nature for one $200 expenditure addressed in the DFAR. 

MRP's did not disclose the remaining expenditures ($48,320) on amended 

reports filed in response to the DFAR. 

• Payroll & Associated Costs ($14,999): 

Ln response to the Interim Audit Report, MRP was unable to locate 

documentation to demonstrate these expenditures were solely non-federal 

in nature. Amended reports filed in response to the Interim Audit Report 

did not disclose these expenditures. 

Amended reports filed in response to the DFAR did not disclose the payroll 

expenditures. Further, an affidavit submitted by MRP addressed 

individuals already considered non-federal by the Audit staff, but clarified 

none were involved with federal election related activities. 

• Voter Identification ($19,000): 

In response to the Interim Audit Report, MRP amended reports in response 

to the Interim Audit Report to disclose this expenditure. 

• Printed Materials ($11,500): 

In response to the Interim Audit Report, MRP was unable to locate 

documentation to demonstrate these expenditures were solely non-federal 

in nature. Amended reports filed in response to the Interim Audit Report 

did not disclose these expenditures. 

MRP's response to the DFAR did not address these items. 

For $75,019 of tiie $94,019 in expenditures above, tiie Audit staff did not have 

sufficient information to be able to conclude tiiat tiie expenditures, paid entirely 
witii non-federal funds, included a federal component and therefore required 

reporting. However, the Audit staff maintains tiiat MRP should provide the 

records necessary to verify whether these transactions required reporting. Given 

tiie lack of sufficient information for tiiese expenditures, the Audit staff 

recommends that the Commission find these expenditures, paid entirely from the 

non-federal account, not be included in the disclosure finding. With respect to the 

voter identification expense noted above, the Audit staff recommends that the 

Commission find that MRP did not disclose an expenditure for voter identification 

paid from the non-federal account in the amount of $19,000. 

B. Payments from the Federal Account ($531,805) 

• Possible Federal Election Activity (FEA) ($326,688): 

Get'Out-tke-Vote (GOTV)/Public Communications ($183.747): 

In response to the Interim Audit Report, MRP amended its reports 

according to schedules provided by the Audit staff and disclosed payments 

totaling $183,747 for printed materials as FEA. 

MRP's response to the DFAR did not address these expenditures. 

Payroll Expenses ($142.941): 

In response to the Interim Audit Report, MRP amended its reports 

according to schedules provided by the Audit staff. MRP disclosed payroll 

expenses totaling $112,406 as FEA and $22,987 in payroll expenses as 

allocable expenses on Schedule H4. 

MRP's response to tiie DFAR did not address these expenditures. 

• Documentation Insufficient to Determine Nature of Expense ($192,617): 

Consulting Expenses ($20.000): 

In response to tiie Interim Audit Report, MRP amended its reports 

according to schedules provided by the Audit staff and disclosed payments 

for consulting totaling $20,000 as FEA. 

MRP's response to tiie DFAR did not address these expenditures. 

Travel ($38.192) and Per Diem Expenses ($3.050): 

In response to the Interim Audit Report, MRP amended its reports 

according to schedules provided by the Audit staff and disclosed payments 

for travel ($38,041) and per diem expenses ($3,050) as FEA. 

MRP's response to the DFAR did not address these expenditures. 

Equipment ($36.933) and Miscellaneous Costs ($3.702): 

In response to tiie Interim Audit Report, MRP amended its reports 

according to schedules provided by the Audit staff and disclosed payments 

for equipment ($36,933) and miscellaneous costs ($3,702) as FEA. 

MRP's response to the DFAR did not address these expenditures. 
Printed Materials. Copies Not Available ($67.711): 

In response to the Interim Audit Report, MRP amended its reports 

according to schedules provided by the Audit staff and disclosed payments 

for printed materials totaling $49,194 as FEA. 

MRP's response to tiie DFAR did not address these expenditures. 

Telemarketing Expenses ($23.029): 

In response to the Interim Audit Report, MRP amended its reports 

according to schedules provided by the Audit staff and disclosed payments 

for telemarketing totaling $8,355 as FEA. 

MRP's response to the DFAR did not address these expenditures. 

• Payment of Apparent Coordinated Party Expenditures ($12,500): 

In response to the Interim Audit Report, MRP amended its reports to 

disclose payments totaling $12,500 as coordinated expenditures. 

MRP's response to the DFAR did not address these expenditures. 

MRP has materially complied with the Audit staff's recommendation for payments 

from the federal account identified above. 

The Audit staff recommends that the Commission find that MRP improperly 

disclosed disbursements totaling $531,805. 

Finding 4. Failure to File Notices and Properly Disclose Independent 

Expenditures 

In response to the Interim Audit Report, MRP filed amended reports to disclose 

independent expenditures totaling $28,301 ofthe $56,601 in independent 

expenditures identified by the Audit staff. With respect to the remaining $28,300, 

MRP cited software difficulties for not disclosing the remaining amount as 

independent expenditures. 

In response to the DFAR, MRP materially complied with tiie Audit staff's 

recommendation by filing amended reports that disclosed the remaining $28,300 

as independent expenditures. 

The Audit staff recommends that the Commission find that MRP improperly 

disclosed independent expenditures totaling $56,601. 

Additionally, MRP's DFAR response noted that it had hired an outside compliance firm to 

assist with developing and/or revising its intemal controls to handle its accounting 

functions and to assist with its reporting. 

The Committee did not request an audit hearing. 

If tiiis memorandum is approved, a Proposed Final Audit Report will be prepared witiiin 

30 days of the Conunission's vote. 
Should an objection be received. Directive No. 70 states that the Audit Division 

Recommendation Memorandum will be placed on tiie next regularly scheduled open 

session agenda. 

Documents related to tiiis audit report can be viewed in tiie Voting Ballot Matters folder. 

Should you have any questions, please contact Alex Boniewicz at 694-1200. 

Attachment: 

- Draft Final Audit Report of tiie Audit Division on tiie Maine Republican Party 

cc: Office of General Counsel 
Draft Final Audit Report of the 

Audit Division on the 

Maine Republican Party 

January 1, 2007 - December 31, 2008 

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 requirement 

for substantial 

compliance with the 

AcfTheaud^^^,, ^ 

determine^Wether ifie|f|jj>>, 

commitifi.complied 

with tli^^^ations, 

prohibitions^d^ 

disclosure reqtii^inents 

ofthe Act. ^'-1%, 

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. 2j| 

The Maine Republican Party is a s^e,^|^ committee 

headquartered in Augusta, Main^j^or htb|e|^information, see the 

•chart on the Committee OrgaoizSion, p. 2/"^^^-~ 

Financial Activity (p. 2) 

. Receipts 

o Contributions fr6ni:|[ndividiiiils., 

o Contributions from 

Conimittees 

o Con'^^ons from OtheP 

Politii^^teimittees 

mi;,. 

$;-F ,772 

Transfe: 

Account 

All Otiier 

tjtal Receipts'"^ 

3* 

federal 

Disbursements 

'arty Expenditures 

^'^ f ederal Election Activity 

o "^^l^^^^endent Expenditures 

Totaiipisbursements 

778,500 

172,044 

48,381 

887 

$ 1,422,584 

$ 806,455 

12,500 

519,305 

56,601 

$ 1,394,861 

Eflndings and Recommendations (p. 3) 

f^Misstatement of Financial Activity (Finding 1) 

Reporting of Debts and Obligations (Finding 2) 

• Disclosure of Disbursements (Finding 3) 

• Failure to File Notices and Properly Disclose Independent 

Expenditures (Finding 4) 

2 U.S.C. §438(b). 
Draft Final Audit Report of the 

Audit Division on the 

Maine Republican Party 

January 1, 2007 - December 31, 2008 

A ' 

4 # 

... 
Table of Contents 

Part I. Background 

Authority for Audit 

Scope of Audit 

Page 

Part II. Overview of Committee 

Committee Organization 

Overview of Financial Activity 

Part III. Summaries 

Findings and Recommendations 

Part IV. Findings and Recommenda%>ns, 

Finding 1. Misstatement of Financial Activity 

Finding 2. Reporting of Debts and (Dbiigations 

Finding 3. Disclosure of Disbursem^^ 

Finding 4. Failure to File Notices and 

Expenditures 

•'«.-'.".t^. 

4 

6 

7 

12 
Part I 

Background 

Authority for Audit 

This report is based on an audit of the Maine Republican Party (MRP), 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 t^-Cpmmission to 

conduct audits and field investigations of any political commit^^mat isVequired to file a 

report under 2 U.S.C. §434. Prior to conducting any audit UQ|dl^is subsection, the 

Commission must perform an intemal review of reports fj|^|i3'by'^^|ed committees to 

determine if the reports filed by a particular committee^mel^the threshed requirements 

for substantial compliance with the Act. 2 U.S.C. 

Scope of Audit 

Following Commission-approved procedures, the*^^^ 

factors and, as a result, this audit examined: 

1. the disclosure of disbursements, debts and obligatid 

the disclosure of expenses allocati^^etween federal 

the disclosure of individual contril^p^^^upation and 

the consistency between reported fi^es uS|^D|^jecords; 

the completeness of records; and v^;^ 

other committee operations necessary tl^rthe^review. 

federal accounts; 

iftvjjf employer; 

...... 

•«!.«.;Si 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration April 19,1976 

• Audit Coverage January 1, 2007 - December 31, 2008 

^. 

Headquarters Augusta, Maine ..t^^** 

Bank Information 

• Bank Depositories One M 

• Bank Accounts Twp,:J|iKgra1^d Four^Jli^Q^-federal 

Treasurer 

• Treasurer When Audit Was Conducted William Lo#i 

• Treasurer During Period Covered by Audit PhiAp^Ror 

Management Information vl' -^^.. 

• Attended Commission Campaign Finanib^'^^%| 

Seminar '1%, 

• Who Handled Accounting and 

Recordkeeping Tasks ^.jl^g^^ 

^MW^^^ ^ staff and accounting firm 

^ie^ of Fiimncial Activity 

idited Amounts) 

Cash-omblnd ® i^^ . 1,2^^. $ 1,888 

ReceiBfm. ^ ^"m,^-

o Conniptions from Indi^uals W 422,772 

0 Contriffi^ns from Politf^ Party Committees 778,500 

o Contributitffijrom OtherlJ^litical Committees 172.044 

o Transfers froMSon-fedoM Account 48.381 

0 All Other Receip'if^*,#" 887 

Total Receipts W $ 1,422,584 

Disbursements 

o Operating Disbursements 806,455 

o Coordinated Party Expenditures 12,500 

o Federal Election Activity 519.305 

o Independent Expenditures 56.601 

Total Disbursements $ 1,394,861 

Cash-on-hand @ December 31,2008 $ 29,611 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comparison of MRP's reported figures with bank records revealed a 

misstatement of receipts, disbursements and cash-on-hand in both 200^^^d 2008. For 2007, 

MRP overstated beginning cash-on-hand by $5,636, understated rec^$'{s by'$22,461, understated 

disbursements by $29,346 and overstated ending cash-on-hand b!^ffi^,52l. For 2008, MRP 

overstated receipts, disbursements and ending cash-on-hand b^l^^3,^l!|^, $46,985 and $19,263, 

respectively. In its response to the Interim Audit Report, N^R^^tated tha^it^had amended its 

reports as requested. However, those amendments did n^flnfiaterially conSc;|ti^e misstatements. 

(For more detail, see p. 4.) ^^^ ^ 

Finding 2. Reporting of Debts a&dn^UigaplQtns ^|;^' 

During audit fieldwork, the Audit staff noted that MRP Y^^^rarepSrt debts and obligations 

totaling $ 103,721. In its response to thejnterim Audit Re^^^RP amended its reports to 

materially conect the disclosure of these%g^^ (For more d^^^ee p. 6.) 

|0taling $625,824, which 

from a non-federal account 

Finding 3. Disclosure of DisI 

During audit fieldwork, the Audit staff identil 

appeared to be improperly^d^^ed. MRP 

($94,019), which may hje^^^mnature. In action, MRPMid not properly disclose 

coordinated expendity^^on behall^f a federal c&didate ($12,500) and payments for federal 

election activity ($519'^^^^ In its^sponse to the^^enm Audit Report, MRP cited difficulties 

in locating documentation'^|;|[ar|^kth|Siiipn-federa^^ of some expenses, but filed amended 

reports disclosmjC^bursem'^^^ccorSin^ provided by the Audit staff. 

(For more^elail,se 

Finflil^. Failuft%> Fil^otices and Properly Disclose 

Indepe^^nt Expe^|turils 

During audit l^^ork , the i^^it staff reviewed disbursements and noted expenditures for 

printed material^^^ing $5^01, which appeared to be independent expenditures that MRP 

disclosed as operati^^^[^raitures. In its response to the Interim Audit Report, MRP agrees 

that these are independ^t expenditures; however, citing software issues it has been able to 

conect the disclosure oT these payments only partially. To date, MRP has not filed any additional 

amended reports. 

(For more detail, see p. 12.) 
Part IV 

Findings and Recommendations 

I Finding 1. Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of MRP's reported figures with bank records revealed a 

misstatement of receipts, disbursements and cash-on-hand in both 2007^d 2008. For 2007, 

MRP overstated beginning cash-on-hand by $5,636, understated recepi%y^$22,461, understated 

disbursements by $29,346 and overstated ending cash-on-hand b;!^^,521. For 2008, MRP 

overstated receipts, disbursements and ending cash-on-hand b)^^^| , $46,985 and $19,263, 

^ptated m^^had amended its 

at%-ially con^^^e misstatements. 

respectively. In its response to the Interim Audit Report, M 

reports as requested. However, those amendments did ^t^^ 

Legal Standard 

Contents of Reports. Each report must disclosef- *'*^:^^. 

e^orting period;^^ 

The total amount of receipts for the reporting period an^|r the calendar year; 

The total amount of disbursements f6T4!^ reporting perio^^ for the calendar year; and 

Certain transactions that require itemi^^o^n Schedule A {l^^zeid Receipts) or Schedule 

B (Itemized Disbursements). 2 U.S.C.Ifft^ 

Facts and Analysis 

2),(3),(4)WdX5). 

A. Facts 

During audit fieldw/^^^eAudit |8ff reconciled^|£L's reported activity with bank records for 

calendar years 2007 andzl^^ ^^l^^jfi.^^'^S char^^tiine the discrepancies for the beginning 

cash balanceSj^r^eipts, dis^^^me^^^^^mg^ash balances for each year. Succeeding 

paragraph^tlare^^^^sons^^tiie missra^ments, if known. 

^^^Committee jl^^t y ^ 

feLJ — ' 

Reported Bank Records Discrepancy 

Beginiii^Cash Balanc"^© 

January 1/^137 W 

$7,524 $1,888 $5,636 

Overstated 

Receipts '^^^ f $223,515 $245,976 $22,461 

Understated 

Disbursements if $209,782 $239,128 $29,346 

Understated 

Ending Cash Balance @ 

December 31, 2007 

$21,257 $8,736 $12,521 

Overstated 

MRP overstated beginning cash-on-hand by $5,636, and is unexplained, but the overstatement 

likely resulted from prior-period discrepancies. 
The understatement of receipts was the resuh ofthe following: 

• Receipts reported, not supported by a credit or deposit 

• Deposited receipts, not reported 

• Interest from non-federal account reported 

• Unexplained difference 

Net Understatement of Receipts 

The understatement of disbursements was the result of the following: 

• Disbursements not reported 

• Disbursements reported, not supported by check or debit 

• Disbursement from non-federal account reported in error 

• Disbursement amounts inconectiy reported 

• Unexplained difference *' 

Net Understatement of Disbursements .. 

(186) 

22,533 

(28) 

142 

•v;?i:.s. 

$ 22.461 

$ 36,506 

(4,006) 

(3,165) 

227 

(216^ 

$ 29.346 

The $12,521 overstatement of the ending cash-on-haiba was the result of the mnMements 

J "L-J-l : "^m^i-' described above 

2008 Committee Activity 

Bank l^^rds Discrepancy 

Beginning Cash Balance 

(^January 1,2008 

$12,521 

Overstated 

Receipts $1,23^ r''^^:^^6;(508 $53,727 

Overstated 

Disbursements "^f| $1,202,^18 $1,155,732 $46,985 

Overstated 

Ending Cash Balanpli® M.. 

December 31,2008^v.>>^ 

$48,874^1 $29,611 $19,263 

Overstated 

MRP oyjqrs^ted begiS':l|[|^^ash-diji|hgnd by $12,521, a carryover of the 

-on-hand for^§^|. 

The overst^^i^nt of receipdpbsulted from the following: 

• Receipts ^^tted but dep^hed in non-federal account 

• Unexplaine(fi&|rence M 

Overstatement^Bejcl^ts 

The overstatement of (^ursements resulted from the following: 

• Disbursements reported, not supported by check or debit 

• Disbursements not reported 

• Disbursement from non-federal account reported in enor 

• Debit to reverse deposited contribution reported 

• Disbursement reported twice 

• Disbursement amount inconectly reported 

• Unexplained difference 

Net Overstatement of Disbursements 

misstatement of 

52,353 

1.374 

$ 53.727 

$ (32,736) 

26,881 

(42,916) 

(5.000) 

(56) 

(1.200) 

8-042 

S 46.985 
The $19,263 overstatement of the ending cash-on-hand resulted from the misstatements 

described above. 

Prior to the audit, MRP made the Commission aware that an employee ofthe accounting firm it 

used had embezzled $48,000. The individual, who had kept MRP's books for both its federal 

and non-federal accounts, and prepared the.reports to the Commission, pleaded guilty to the 

embezzlement. As of the time ofthe audit, the individual had paid restitution of $39,531 and 

MRP had filed reports disclosing the embezzlement. MRP conducted a fiill audit of its books 

and intemal controls and, as recommended by its auditor, has institutedijigiproved intemal 

controls. In addition, MRP has hired a different accounting firm. 

The Audit staffs 2008 reconciliation included adjustments relaC^io^e embezzlement 

Specifically, the adjustment for unreported disbursements of^p,881 id^udes $5,997 in 

disbursements that were associated with the embezzlemei^^d%ot repoi^ ^ MRP. In 

addition, the adjustment for disbursements reported tha^ere^ot supported^i^^^heck or debit 

($32,736), includes disbursements of $14,316 that w^e associated with the em^zlement. 

B. Interim Audit Report & Audit Division Recomnrei 

The Audit staff discussed the misstatements for 2007 andf^ip with MRP representatives during 

the exit conference and provided copies'o^relevant workpapB^idptailing the misstatements. The 

MRP representatives stated that necessary;'lj|^^ed reports wot 

The Interim Audit Report recommended tiia%IRP:*^^^^ 

• Amend its reports to conect the missta^^ts for'-!2:G^^ppifid 2008 as noted above; and, 

• Amend its most r^1^l£^^ed report to ^^c t the ca^-on-hand balance with an 

explanation tha^e cha^^^sulted from^^prior period audit adjustment. Further, MRP 

should have::rei^iled tiieWsh balance of|^ipost recent report to identify any 

subsequent discr^^gies ti^yggy have aff^ ^ the adjustment recommended by the 

Audit st 

e filed. 

C. Co^lfittee Respi 

In itS::X^c^se to tiie ] 

Howevei^^se amendmenl 

advised M]^m|he addition; 

reports have be^^led. 

Inter^^udit Report 

udit^mj^f MRP stated it had amended its reports as requested. 

Id not ^terially conect the misstatements. The Audit staff has 

onections that need to be made. To date, no additional amended 

Finding 2. Re^rting of Debts and Obligations 

Summary 

During audit fieldwork, the Audit staff noted tiiat MRP failed to report debts and obligations 

totaling $103,721. In its response to the Interim Audit Report, MRP amended its reports to 

materially conect the disclosure of these debts. 
Legal Standard 

A. 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). 

B. Itemizing Debts and Obligations. 

• A debt of $500 or less must be reported once it has been outstanding 60 days from the 

date incuned (the date ofthe transaction); the committee reports it on the next regularly 

scheduled report. 

• A debt exceeding $500 must be disclosed in the report that cov^^^jhe date on which the 

debt was incuned. 11 CFR § 104.11 (b). 

Facts and Analysis ^x.^'" 

A. Facts "'^ka-,. 

During audit fieldwork, the Audit staff identified debtsfo'wed to four vendors'-t^^aling $103,721^ 

tiiat MRP did not report on Schedule D (Debts & Obligations), s.. v 

Although MRP did report debt totaling $45,669 relativl^^ta^'ofthe four vendors during the 

audit period, the reported amounts did not accurately refie^^^outstanding debt. Beginning 

with the 2008 July Quarterly Report, th^d^ reporting for U^^^e e vendors continued to be 

inaccurate for the remainder of2008. MI^^]^ ^ report debt^^^espect to the fourth vendor. 

B. Interim Audit Report Sc Audit Divisiolpieeo^^^^tion 

The Audit staff presented this.matter during tl^exi^^n^^^^fS^ MRP's representatives and 

provided them with worl^l^^^^^ailing the d^p. The repi^ntatives indicated that MRP 

would file the necess^^^end^^iorts. ^ 

The Interim Audit Repo^^^mnimi^e^l that MRP i^ll^mended reports to disclose these debts 

and obiigations^on-Schedul^fe^^^^fe^sg^^^^ 

C. ConlMittee RespH'ii^l^ Inteit^^udit Report 

In itS';f^sj||^se to the Interia|^udit Ke^grt', MRP amended its reports to materially 

disclosur^:of:these debts. i"^* 

conect the 

I Finding 3. flfa^logiire of Disbursements 

Summary ^« 

During audit fieldwork, the Audit staff identified disbursements, totaling $625,824, which 

appeared not to be properly disclosed. MRP made disbursements from a non-federal account 

($94,019), which may be federal in nature. In addition, MRP did not properly disclose 

coordinated expenditures on behalf of a federal candidate ($12,500) and payments for federal 

election activity ($519,305). In its response to the Interim Audit Report, MRP cited difficulties 

^ Each debt in this amount was counted once, even if it required disclosure over multiple reporting periods. In order 

for MRP to file amended reports correctly, the schedule provided included the amount of each debt required to be 

reported for each reporting period. 
in locating documentation to clarify the non-federal nature of some expenses but filed amended 

reports disclosing disbursements according to the schedules provided by the Audit staff. 

Legal Standard 

A. Reporting Allocable Expenses. A political committee that allocates federal/non-federal 

expenses must report each disbursement it makes from its federal account (or separate allocation 

account) to pay for a shared federal/non-federal expense. Committees report these kinds of 

disbursements on Schedule H-4 (Joint Federal/Non-federal Activity Schedule). 11 CFR 

§104.17(b)(3). 

B. Allocation Ratio for Administrative & Non-Candidate Specifi^voU^ Drive Costs. State 

and local party committees must allocate their administrative exp^ ^ and non-candidate 

specific voter drive costs according to the fixed percentage rat^^O^^his method, if a 

Presidential candidate and Senate candidate appear on the bal ^ the comnnittees must allocate at 

least 36 percent of expenses to their federal funds. 11 CI;4l66,7(d)(2)|^d(3)(ii) ] . 

C. Coordinated Party Expenditures. A political imittee that coordinates"^ 

behalf of a federal candidate must report the name^i 

the name of the candidate for which the expenditure is ^^Bl'S.^C. §434(b)(6)l 

i^ndijures on 

ss, datl^i^mount and pui^g^ as well as 

D. Federal Election Activity Expenditures. For each su^^^ursement, the committee must 

report the full name and address, date, an^^t-pd purpose of ^disbursement. Committees 

report these kinds of disbursements on Sclil^uleppiltemized Dis^p^ents), which provides 

space for the disclosure of the candidate's name to^Iu|h4he activi^'relates, if applicable. 11 

CFR §300.36(b)(2). 

E. Salaries and Wa^?:>='^Comm^ 

employee spends in^^^tion wll 

of their compensated ti^^^v^ giv| 

connection with a Federal 

their salaries!!; 

|es must keep^^ monthly tog of the percentage of time each 

|a Federal ele%pn.^ Employees who spend 25 percent or less 

month on Fedi^telection activity or on activities in 

Lthi^^paid only from the Federal account or have 

strativlKw^l 1 CFR §106.7(d)(l). 

Fact^^ d Analysi 

A. Pavml 

Facts '"^gv, 

MRP made pi 

activity that ni 

federal accou; 

ej^, totaling $94,019 (see Chart A), from its non-federal accounts for 

federal in nature. Payments totaling $48,520 from MRP's nonappear to be for allocable administrative expenses that should have been 

paid from a federal account. Also, payments totaling $45,499 were made from the nonfederal account and sufficient records were not available to clarify the nature ofthe 

expense or to demonstrate that the expense was solely non-federal. Below is a discussion 

of these expenses. As calculated at the end of the two-year audit period, MRP did not 

fund federal activity with non-federal funds. 

Administrative Costs: MRP paid expenses totaling $48,520 from a non-federal 

account for postage, consulting, travel reimbursements, printing, and accounting 

fees that appear to be allocable administrative costs. Available documentation 
does not indicate that any of these payments were solely for non-federal activities. 

As allocable administrative expenses, MRP should have paid these from a federal 

account and reported on Schedule H-4 using an allocation ratio of at least 36 

percent federal and 64 percent non-federal in accordance with 11 CFR 

§l06.7(d)(2)(ii) and (3)(ii). MRP should provide documentation to demonstrate 

that these were solely non-federal expenses. 

Payroll and Associated Costs: MRP paid expenses totaling $14,999 from a nonfederal account for payroll and associated costs. MRP has not provided monthly 

logs, timesheets or affidavits demonstrating that costs ^^^solely non-federal in 

nature. It is noted that MRP did provide affidavits f^^^m^^mployees indicating 

no time was spent relative to federal activity. Pa^^^^^nd related costs associated 

with those employees were excluded by the Au^i^^^p^m payroll costs in the 

amounts presented above. MRP should provid^docurrre^^tion to demonstrate 

the payroll and associated expenses of%l^^9 Were solef^dn-federal. 

Voter Identification: MRP's databa^e]|escribed a $19,000 paym^it^to *3^ational 

Republican" on April 25, 2008, as'mar^|or Vot^^^; and, the availp^e invoice 

noted "volunteer connect." Unless MI^^^%£il^yi4<ps l&cumentation td indicate that 

these expenditures are solely non-federal in i^^ire, MRP should disclose these 

transactions on its federal^disclosure reports. 

Printed Materials: MRP dis' 

materials for which copies wi 

expenditures 

activities, 

these exAnses 

00 from 

assei 

to demonstrate 

[uld provide 

2. Interim Audit Re 

At the exit^^^ence, 

identiMni 

thatt)^ would Idoi^^to thes 

federal account for printed 

ss the nature of these 

;se pay^pcts were solely for non-federal 

ricient doQpmentation to clarify the nature of 

Division ^commendation 

i^|^i^|c»§ea this matter and provided a schedule 

estion toMRP representatives. MRP representatives stated 

s aiid send documentation to try to resolve the proper 

qlaS^i^cation of the tf^^tions.^^lHp^ representatives subsequently provided materials, 

includii^g:affidavits addiP|ing tirrfe employees spent on non-federal election activity that 

resolved'S^me of the iten^phat the Audit staff considered in its analysis. 

The Interim Alioi epoi^ecommended that MRP demonstrate that the identified 

disbursements paij^O^ the non-federal account were solely non-federal expenses. MRP 

should have provi^ monthly logs, timesheets or affidavits demonstrating that payroll costs 

were solely non-fdderal in nature. In addition, MRP should have obtained and provided 

samples of printed materials ($ 11,500). As necessary, MRP should have amended its reports 

to disclose, as memo entries, the above disbursements on Schedules B or H-4. 

B. Payments from the Federal Account 

1. Facts 

MRP inconectiy disclosed payments, totaling $531,805 (See Chart B, Page 1), made from 

its federal account. MRP disclosed these payments on FEC reports but they appear to have 
10 

been reported on the inconect line number and itemized on the wrong schedule. These 

payments were for apparent non-allocable FEA ($519,305) or apparent coordinated party 

expenditures ($12,500). As indicated below, in some cases, the Audit staff did not have 

sufficient records to determine the proper classification. It is also noted that for 

approximately $330,000 of these disbursements MRP coded the disbursements on its 

database as FEA. 

Possible Federal Election Activity: MRP reported payments totaling $326,688 

as federal operating expenditures, but they appear to have been made for nonallocable FEA, which should have been reported on Scji^djile B for Line 30(b). A 

discussion of these expenditures by category follow§^^ 

Get-Out-the-Vote (GOTV)/Public Communicat^: "!^^ents totaling $183,747 

were made for printed materials, of which Mld^oded^^^l on its database as 

FEA. The remaining $95,506 was not cq^^g MRP's d^^e as FEA. 

However, an MRP representative statei^iiringTieldwork thar^^ptivity with this 

vendor was FEA on behalf of the R^^lican presidential candi^^|maddition, 

copies of the printed materials sup$o^^^hey for GOTV a^^ty or were 

public communications in support of a ci^^|i^entiiled federal candidate. As 

such, the Audit staff considered all these p^i^ts FEA. (See Chart B, Page 1, 

A.) 

Payroll Expenses: MRP m^e'^^^d^res for pay^^xpenses totaling 

$142,941 from its federal acC^t. Bi^^^^tion ^^ailing the percentage ofthe 

individual's times that related i(^fe^0Ll a^i^^^^s not available; however, 

affidavits .^iS^|%>initted indicatMgthe indivpaals worked solely in coimection 

with fejdfjril electic^l^during 200i^In addition, these individuals received at least 

one pii^m^t that ^^P coded on itsl^^tabase as FEA. As such, the Audit staff 

classifiej^^e exp^^lUires as FE^^^j^RP should explain the discrepancy 

between itsl^^rts'^aWMMMepi^^ricords. (See Chart B, Page I, B.) 

Documlbm|Uon |cient to Determine Nature of Expense: Payments 

totaling $^^.17 wd^repSirted by MRP as federal operating expenditures, but 

documentat^^as insjmicient to determine the nature of these expenses. Most 

:b| these expe^^res were coded on MRP's database as FEA. 

tine Emenses: Although consulting expenses ($20,000) were coded FEA 

on MK£l^^^base, MRP has not provided any affidavit or other documentation. 

The Auq^tafT classified these expenditures as potential FEA since MRP coded 

these e^enditures on its database as FEA. MRP should explain the discrepancy 

between its reports and its internal records. (See Chart B, Page 1, B.) 

Travel and Per Diem Expenses: MRP made expenditures for travel ($38,192) and 

per diem ($3,050). Documentation was not available detailing the activities the 

individuals were involved with and whether these activities were related to a 

clearly identified federal candidate. The Audit staff classified tiiese expenditures 

as potential FEA since MRP coded these expenditures as such on its database. 
11 

MRP should clarify the discrepancy between its reports and its intemal records. 

(See Chart B, Page 2, A. & B.) 

Equipment and Miscellaneous Costs: MRP made expenditures for equipment 

($36,933) and miscellaneous costs ($3,702). MRP's records detailed that, for the 

most part, the equipment consisted of computers and phone equipment, as well as 

copier rental. Documentation detailing how the equipment was used was not 

available. Most of the miscellaneous costs were for shipping, with no indication 

of what was shipped. However, MRP coded these expenditures as FEA in its 

database. The Audit staff considered these potential F^>^penses and 

recommends that MRP clarify the discrepancy betwe^^^ reports and its intemal 

records. (See Chart B, Page 2, C. & D.) 

Printed Materials. Copies Not Available: MRP^ade p^toits totaling $67,711 

for printed materials. Copies of these printc^cl^albrials w^^^^available for 

review by the Audit staff. Of these pa^sr^nts, MRP coded $^^^ as FEA, and 

these payments were for such purpps|s^as Voter jD ($11,228) aiM^Ty 

($13,189). The remaining $43,294 m^iyments %sre for apparent i^(irfV-related 

activities, although none of them were c<^Jd^|'^.' t^ee Chart B, Page 2, E.) 

Telemarketing Expenses:%\ 

telemarketing totaling $23 

FEA. MRP disclosed the 

Voter ID ($3,117), state cam; 

Although MRP.made invoices 

scripts/p 

expeni 

IIP made 

of which we 

**V<:i>: 

to FLS Connect for 

^sded on MRP's database as 

ese expendrt^fas: GOTV ($6,097), 

460}iMid telemarketing ($9,355). 

aUaBle to^'^^^iiKiit staff, copies of 

^help to d^^mine the nature of these 

ee Chart B, Page 2, F.) 

lordinate^arty Expenditures: MRP made payments 

October 30-31, 2008, for a television 

^rs for Congress. The advertisement appears to 

^^j^ „ refers to a clearly identified House candidate and 

was publici^issemii^^Mn the candidate's jurisdiction within 90 days of the 

election. Th^B^didaj^^ppears in the advertisement and the advertisement states 

"''i^^^at it was ap^^ed by the candidate. MRP reported these payments on Schedule 

B^temized Dplursements) as other federal operating expenditures rather than on 

ScnSule F (Ijpsmized Coordinated Party Expenditures) as coordinated party 

expeni|^0^f (See Chart B, Page 3.) 

2. Interim Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff addressed this matter and provided a schedule 

identifying the transactions in question to MRP representatives. MRP representatives stated 

that they would look into these items and send documentation to try to resolve the proper 

classification of the transactions. MRP representatives subsequently provided materials, 

including affidavits addressing time employees spent on federal election activity, which 

resolved some of the items that the Audit staff considered in its above analysis. 
12 

The Interim Audit Report recommended that MRP demonstrate that the payments from the 

federal account were conectly reported as federal operating expenditures. Further 

information was needed for the Audit staff to verify the classification of disbursements 

totaling $192,617. MRP should have explained the discrepancies between expenditures 

coded on its database as FEA and its reporting of those expenditures as operating 

expenditures. In addition, MRP should have obtained and provided monthly logs, 

timesheets or affidavits ($20,000), samples of printed materials ($67,711) and telemarketing 

scripts ($23,029). MRP should have amended its reports to disclose the noted 

disbursements on Schedule B or Schedule F, as necessary. 

C. Committee Response to Interim Audit Report 

In its response to the Interim Audit Report, MRP amended its jj^^rtl^i^isclose one of the 

payments from its non-federal account (Part A above) identif!^|| by th^^^it staff. MRP's 

response stated that they were unable to locate documen^l^i^t^demonsi^^^y of these 

expenditures were solely non-federal in nature, to incl;^'^ the dne payment ^^^e r id that was 

disclosed in its amended reports. With respect to p^^H and associated costs pi^^^^ i nonfederal accounts, MRP explained that no federal ^a^^^s we^ ^ the ballot in and 

therefore the payroll and associated costs were properl^&d^^c^federal disbuiaements; and, 

as such, MRP did not amend its reports to disclose these ^^^tions For payments from its 

federal account (Part B above), MRP fil&j^niended reports ^^^in g disbursements as FEA or 

coordinated party expenditures according^^^^edules proviG^^;^ tbe Audit staff. Although 

MRP has amended its reports, the nature olk^l^l&ursements r^Pii ^ unclear because of a 

lack of documentation. As a result, the Audii^taff 

either the audited reports or the amended repcn^fi 

Finding 4. Fai 

Independent Exp^ 

ave a^basis for determining whether 

e Noticeiiand Properly Disclose 

udit st|^[^iewed disbursements and noted expenditures for 

'^01, wm^appeared to be independent expenditures that MRP 

es. <In its response to the Interim Audit Report, MRP agrees 

ditures; however, citing software issues, it has been able to 

ayments only partially. To date, MRP has not filed any 

Durin^aiidit fieldwork 

print^Q-^'^ials totaling 

disclosed'i^l^ierating expend 

that these are^i^gpendent ex 

conect the disci 

additional amendec 

Legal Standard 

A. Definition of Independent Expenditures. The term "independent expenditure" means an 

expenditure by a person for a communication expressly advocating the election or defeat of a 

clearly identified candidate that is not made in coordination with any candidate or authorized 

committee or agent of a candidate. 11 CFR § 100.16. 

B. Disclosure Requirements - General Guidelines. An independent expenditure shall be 

reported on Schedule E (Itemized Independent Expenditures) if, when added to other 

independent expenditures made to the same payee during the same calendar year, it exceeds 

$200. Independent expenditures made (i.e., publicly disseminated) prior to payment should be 
13 

disclosed as "memo" entries on Schedule E and as a reportable debt on Schedule D. Independent 

expenditures of $200 or less do not need to be itemized, though the committee must report the 

total of those expenditures on line (b) on Schedule E. 11 CFR §§104.3(b)(3)(vii), 104.4(a) and 

104.11. 

C. Last-Minute Independent Expenditure Reports (24-Hour Notices). Any independent 

expenditures aggregating $1,000 or more, with respect to any given election, and made after the 

20"" day but more than 24 hours before the day of an election must be reported and the report 

must be received by the Commission within 24 hours after the expenditure is made. A 24-hour 

notice is required each time additional independent expenditures aggregltp $1,000 or more. The 

e committee must 

hasj in the aggregate, 

f§§l04.4(f) and 

date that a communication is publicly disseminated serves as the 

use to determine whether the total amount of independent expend 

reached or exceeded the threshold reporting amount of $1,000^^^ 

104.5(g)(2). 

D. Last-Minute Independent Expenditure Report^{ff8-Hoiir Notices). ?^^mdependent 

expenditure aggregating $10,000 or more with resp^^ to any given election, a^^^^ijp during a 

calendar year, up to and including the 20th day bdfo^^^election^^must be disclos^^ithin 48 

hours each time the expenditures aggregate $10,000 oi^'MOre. ^"0^^ must be'filed with the 

Commission within 48 hours after the expenditure is madll|M CFR §§104.4(f) and 104.5(g)(1). 

E. Allocation of Expenses Between Cai^^ntes. Expendituf^piade qn behalf of more than 

one clearly identified federal candidate shdyiP^^uted to each^^^vcandidate according to the 

benefit expected to be derived. In the case pu^^t|0Q^Qr broadcast communication, the 

attribution shall be determined by the proportiQii o&^acl^fi^Si.e'^evoted to all candidates. This 

method shall be used to al|^^^g^ments invo1||^ both cl^ly identified federal candidates 

and one or more clearl^entifi^^n-federal cl^idates. 11 CFR § 106.1 (a). 

Facts and Analysi 

A. Facts ^.^^ 

Duringjjiidit fieldwonr^^^Audi^^p^reviewed MRP's disbursements and identified a payment 

of $8^^ for printed ini^^ls rejiM^^al an operating expenditure. Of this amount, it was 

calculatfecijiat $56,601 appqaj^d to b^^parent independent expenditures. A review ofthe 

printed maite^^revealed th^)l lowing: 

• The "Ab^^^Ballop\pplication Self Mailer" invoice billed MRP for two mailers. Both 

mailers picm^^raisKlential candidate Senator John McCain and Vice-Presidential 

candidate Go>^^^ Sarah Palin on a sample absentee ballot with checked boxes below 

their pictures, advocating tiieir election. 

• In addition, one sample mailer also pictured Susan Collins, candidate for the U. S. Senate 

and Charlie Summers, candidate for the U. S. House of Representatives. The other 

sample provided a picture only of Susan Collins, but provided space for a congressional 

candidate. 

• Both mailers had space provided for a state senate candidate and a state house candidate. 

• Above the pictures of the candidates, both samples state "Good Jobs. A Strong Economy. 

Independence from Foreign Oil." In addition, the mailers state, "Help Team Maine 

Today by Signing Up to.. .Canvass a local precinct door to door." 
14 

Since the documents contain a statement of the candidates' positions on several issues and 

include the solicitation of volunteer canvassing, they go beyond the limitations of the slate card 

exemption''. As a result, the Audit staff concluded that a portion of each mailer was an 

independent expenditure that should have been reported as such and that appropriate 24/48-hour 

notices should have been filed. The amount of independent expenditures ($56,601) was 

determined by the space allotted to federal candidates versus non-federal candidates on the 

mailers. The remaining $28,301 ($84,902 - $56,601) should have been reported as FEA. 

B. Interim Audit Report & Audit Division Recommendation 

At an exit conference, the Audit staff addressed this matter, having pr^^^]y provided MRP 

with the materials for discussion. MRP representatives stated tha^j^y would look into this 

matter, examine the materials, and address the "slate card" exemptic^Jn response to the exit 

conference, MRP's Treasurer stated that the materials in questibn wer&i^mte cards and, as such, 

were exempt from independent expenditure rules. 

The Interim Audit Report recommended that MRP 

Provide evidence that would demonstrate that 

expenditures and therefore did not require disclos 

Absent such a demonstration, MMyhould have ame' 

disbursements of $56,601 as inde^^j^^expenditures 

remaining $28,301 on Schedule B II^B 

Submit and implement revised proc^^es 

expenditures, to allow fbr timely filin^f ^ 

!e the follpwing action: 

C. Committee Resp^ 

In its response to th^^l 

"Absentee Ballot Applici 

candidates and,^^|he 

ents were not independent 

such. 

[ts reports to disclose 

edj^le E; and, disclosed the 

d reporting independent 

Biting notices, as required. 

Audit Report 

Leport, MRP ^^^>that the expenditure in question was an 

jailer'' which i^uded at least three federal and non-federal 

rek^r^^pppei^t^ believed this qualified for the "slate card" 

exemptioiL^llef^c^f^ now agrees that the "slate card" exemption 

does notps^ply. MRP n^Wiendra^jbs^repprts to disclose part of these independent expenditures. 

MR]P^.ci^^Jts software's i^^Hty to'^^|^'is the required disclosure infonnation for the 

remainiri'^^^^endent exp^^ltures./MRP data staff is working on the problem. To date, MRP 

has not filec Ijtional amendpaents disclosing the remaining independent expenditures. 

^SeeW C.F.R. §§ 100.80,100.140, Advisory Opinions 2008-06 (Democratic Party of Virginia), 1978-89 (Withers 

for Congress), 1978-9 (Republican State Central Committee of Iowa). 
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