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MEMORANDUM

TO:

FROM:

SUBJECT:

June 3, 1993

FRED EILAND

CHIEF, PRESS OFFICE

ROBERT J. COSTA

ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

THE UTAH REPUBLICAN PARTY

Aft-a-ched- please find a copy of -the -final -a-udit report onUtah Republican Party which was approved by the Commission on

May 27, 1993.

Informational copies of the report have been received by

all parties involved and the report may be released to the

public.

Attachment as stated

cc~ Office of General Counsel

Office of Public Disclosure

Reports Analysis Divisicn

FEe Library
FEDERA L ElEeT!0" CO!vt\." SSi0 '\i

REPORT OF THE AUDIT DIVISION

ON THE

UTAH REPUBLICAN PARTY

I. Background

A. Overview

This report is based on an audit of the Utah Republican

Party (-the Co..ittee W ), undertaken by the Audit Division of the

__ rederal Election Commission in accordance with the provisions of

the- Federa-l El.etion- -campa-i9n Act -of---1911 a_s •••I)<ie_d ("the Act").

The audit was conducted pursuant to Section 438(b) of- Tftle 2- of

the United States Code which states, in part, that the Commission

aay 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 section, the

Commission shall perform an internal review of reports filed by

selected committees to determine if the reports filed by a

particular committee aeet the threshold requireaents for

substantial compliance with the Act.

The Committee registered with the Federal Election

Commission on March 16, 1978, as a state coaaittee of the Utah

Republican Party. The Committee maintains its headquarters in

Salt take City, Utah.

The audit covered the period from January 1, 1989

through December 31, 1990. The Committee reported a beginning

cash balance of -$38.95; total receipts for the period of

$166,079.59; total disbursements for the period of $165,890.98;

and a closing cash balance on December 31, 1990, of $149.66.

This report is based en documents and workpapers Whl:~

support each ef its factual statements. They form part of the

record upon which the Commission based its decisions on the

matters in the report and ~ere available to the Commissioners a~:

appropriate staff for review.
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B. Ke:t Pe r sonne 1

The Treasurer of the Committee during the period covered

by the audit was Mr. Michael L. Jones. The current Treasurer is

M=. Dan E. James.

c. Scope

The audit included such tests as verification of total

reported receipts and 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.

II. Audit Findings and Recommendations

A. Misstatement of Financial Activity

Sections 434(b}(1), (2) and (4) of Title 2 of the United

States Code states, in part, a committee is required to report the

amount of cash on hand at the beginning of each reporting period

and the total amount of all receipts and disbursements for the

reportin9 period and calendar year.

The Audit staff's reconciliation of the Committee's bank

accounts to its disclosure reports filed during calendar years

1989 and 1990 indicated material differences between a.ounts

reported by the Committee and amounts reflected on their bank

records.

It was noted in the interia audit report that the Audit

staff was unable to perform a reconciliation of the Coamittee's

reported receipts and disbursements through March 16, 1989 due to

the lack of bank documentation. The a~ounts presented covered

Karch 17, 1989 through December 31, 1989, with adjustaents to the

Committee's reported figures for January throu9h Harch 16,

1989. The interia audit report addressed a number of specific

transactions which accounted for the apparent aisstateaents.

However, it was also noted that additional information was needed

to determine the exact nature of these transactions. (see Findinq

II.B.). At the exit conference~ the Treasurer stated that the

Committee was headed by ne~ officers willing to correct the past

problems and comply with the regulations.

In the interim audl~ report it was recommended tha~ ~~~

Committee fi:e comprehensive amended reports for calendar years

1989 and 1990 correcting the apparent misstatements. It was

further recommended that additlonal records be provided to

document the transactions that caused many of the apparent errcrs.

The records provided were to lnclude documentation for

Certificates of Deposit purchased by the Committee, and

documentation for a number cf deposlts and disbursements.

Further, It was recommended that banK records be provided for t~e
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first part of 1989 and amended disclosure reports be filed as

appropriate ..

In its response to this and other findings contained 10

the interim audit report, the Committee supplied most of the

missing records. Using these additional records a revised

reconclliation was prepared between reported and recorded receipts

and disbursements.. ThiS revised reconciliation indicates that the ~ommittee's disclosure reports are materially correct as filed.

Recommendation 11

The Audit staff recoaaends no further action.

B. Recordkeeping

Sections 432(c) and (d) of Title 2 of the United States

Code states, in part, that the treasurer of a political co..ittee

shall keep an account of all contributions received by or on

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

person who aakes any contribution in excels of $SO, together with

the date and amount of such contribution by any person; and, the

idtntificati9n 9f any person who aakes a contribution or

contributions aggregating -.o-r-.- tnan-S20ct- -dur-inq cale-ndar -y-e-ar,

t0gether with the date and amount of any such contribution; the

treasurer shall preserve all records required to be kept by this

••ction and copies of all reports required to be filed by this

subchapter for 3 years after the report is filede

Sections 431(13)(A) and (8) of Title 2 of United States

Code states that the term Widentification" ••ans, in the case of

any individual, the naa., the mailing address, and the occupation,

as well as name of his or her employer; and in the case of any

other person, the full name and address such person.

Section 432(i) of Title 2 of United States Code states

that when a treasurer of a Committee shows that best efforts have

been used to obtain, aaintain, and sub.it the information reqUired

by this Act for the political committee, any report or any records

of such coaaittee shall be considered in compliance with the Act.

As previously mentioned, at the time of the audit

fieldwork, the Committee did not prOVide bank statements for the

period January through March 16, 1989. During that period the

Committee reported an itemized contribution totaling Sl,OOO.l/ The

Committee prOVided bank statements for March 17 through December

!/ The Committee itemized $1,000 l~ receipts for this peclod.

Given the beginning and ending cash for the period January 1

to March 17, 1989, the Committee must have received at least

S1,961.05 in order to make a $2,000 disbursement on February

3, 1989.

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1989. However, for the p@riod January through April 1989 the

Committee did not maintain contributor records. For the period

May 1989 through December 1990, the Committee's contribution

records generally consisted of photocopies of contributor checks

attached to deposit tickets on which the contributors last name

was recorded. The Audit staff's review of the available reco:ds

for ~arch li through December 31, 1989 identified 15 depcsits,

totallng $25,216.88, which were not documented. ror 1990, we

identlfied 5 deposits, totaling $8,061.

In the interim audit report, the Audit staff recommended

that the Committee provide documentation to support the ~ndocumented deposits noted above lncluding a record of each

contributor.

The Committee responded on June 26, and July 30, 1992.

In its response the Committee provided deposit slips and copies of

contributor checks that supported the receipts noted in the

interim audit report.

Recommendation 12

The Audit staff recommends no further action.

c. Disclosure of Loans

Section 434(b){2)(H),(3)(E), and (8) of Title 2 of the

United States Code states, in part, that each report shall

disclose for the reporting period and calendar year, the total

a.ount of all loans; the identification of any endorser or

guarantor of such loan, and date and amount and nature of

outstanding debts and obligations owed by or to such political

cOllJlittee.

The Audit staff's review of the Committee'S loans

indicated that the Committee made payments on four loans during

the audit period. Available records on three of the loans did not

include a copy of the loan agreements but, rather only a record of

payments made fro. the Federal and Non-Federal accounts and in two

cases a loan number. The fourth loan was documented by a copy of

a loan agreement with the First Security Bank of Utah. The ag~eement was dated May 17, 1990 and indicated an unsecured loan

of S10,154.79 at an interest rate of 16\ for 36 months. :~ :~s

Ju~e 30, 1991 disclosure tepor: the Committee ~eported t~:s :~a~

on Schedule C.

According to the loan agreement for this fo~rt~

loan, the loan proceeds were "credited to your debt with us

!account number) 078110505229." Both the Committee'S Federal and

Ncn-Federal accounts made payments on the loan in 1990 totallng

$2,141.90. The Committee reported 1991 payments of $9,915.98, and :~ its 1991 year end report dls~losed that the loan had been pald
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:~ full. No other informatlo~ with respect to lean 078110505229 ~as found in our review of Commlttee records.

~n the interim audit report, it was recommended

~hat for the ~h:ee loans for which no loan agreements were

a~a:lable that the Committee provide copies of the loan agreements

~hat would establlsh the identity of the borrower, the collateral

for the loans, the identlty of any guarantors, the interest rate,

:~e depository lnto which the proceeds were deposited and if the

loans were Federal activity, flle the necessary amended disclosure

reports.

With respect to the fourth loan it was recommended

that the Committee provide documentation with respect to First

Security Bank of Utah loan 0;8110505229, to include a copy of the

loan document that identifies the date and amount of the loan, the

interest rate, any quarantor, the collateral used to obtain the

loan, and the terms of repayment. In addition, the Committee was

to provide documentation for the receipt of the loan proceeds to

include bank records for the depository into which the funds were

deposited, and the disposition of the proceeds. If this loan was

federal activity, the Committee was to file aaended schedules as

appropriate to disclose the loan from its inception until its

disposition.

The Committee responded on June 26 and yuly 3D,

1992. In its June 26, 1992 response the Coaaittee stated that

they had been unable to locate any of the loan agreements or other

documentation requested in the records of the Utah Republican

Party. The Committee stated that they had requ~sted First

Security Bank to r~search their archives and to provide copies of

all documents related to the loans. On July 30, 1992, the

Committee provided loan agreements and associated documentation

relating to the three loans for which no records had been

available at the time of the audit. All three loans had been made

in 1989 and were in the amounts of $1,500 on March 17, 1989,

54,500 on March 24, 1989 and $10,000 on May 12, 1989. In each

case the Committee had purchased a certificate of deposit that was

used to secure the loan and the proceeds were deposited into the

Non-Federal account. For the two smaller loans the Committee made

one interest payaent and the Ncn-Federal account paid the balance.

For the $10,000 loan, the Committee made all of the payments. In

a:l three cases vhen the certificates of deposlt were no longer

needed to secure the loans, they were redeemed a~d the funds ~ere

redeposited into the Ccmmlttee's a=count.

FQr the fourth loan 1:0-81:05055229' ~o additional

information was provided. Therefore, though It was known that ~~e

~oan was satisfied with the proceeds of another loan dated May l~,

1990, on which the Committee made the majority of the payments, l~

was not known ho- much was borro~ed, when the lean was obtained,

the terms of the loan, and whether t~e proceeds of loan

.078110505229 were deposited into the Committee's accounts cr int:

the Non Federal accounts. :f the proceeds were deposited :ntc
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~~~ Committee's accounts, am@nded disclosure reports would be

r~~uired to report the obligation.

To obtain the necessary information, the Commission issued a s~bpcena on March 2, 1993 to the lending institution that made the

:=an. en Apr~l 29, 1993 a response to the subpoena was received. :~pies of the loan documents were provided stating the terms of ~~~ loan and explaining that the proceeds were to be used to pay

y@ar end expenses. Also provided were bank statements for both ~~e Federal and Non-Federal accounts covering the period in WhlCh

the loan proceeds were disbursed. These records document a

5:0,000 loan cosigned by the Party Chairman. The loan documents

were signed on December 28, 1989. On that sa.e date a $10,000

deposit is shown in the Non-Federal account. No similar deposit

:s shown in the Committee'S account.

Given the above, it is concluded that the loan was a

son-Federal loan and that no additional action is required by the

:ommittee.

Recommendation 13

The Audit staff recommends no further action.