11

Commission Action
This finding was not included in the interim audit report and CWA-COPE has not had an

opportunity to consider the basis for that finding and provide additional records that
might meet the new standards. In light of the change of Commission policy with respect
to documentation for contributions received by payroll deduction, the si ignificant
percentage of the receipts documented under the new policy, and the time and effort
required on the part of both CWA-COPE and the Commission to determine if any further
records exist that would satisfy the revised policy, the Commission decided not to adopt
this finding.


Part II

Overview of Committee

Important Dates

Committee Organization

CWA-COPE Political
Contributions Committee

Date of Registration 04/07/1972

Audit Coverage

January 1, 2001 — December 31, 2002

Headquarters Washington, DC

Bank Information

e Bank Depositories 1

e Bank Accounts 1 Checking & 1 Money Market
Treasurer

e Treasurer When Audit Was Conducted Barbara J. Easterling

e Treasurer During Period Covered by Audit Barbara J. Easterling
Management Information

¢ Attended FEC Campaign Finance Seminar Yes

e Used Commonly Available Campaign Yes

Management Software Package

Who Handled Accounting and Recordkeeping Paid staff

Tasks

Overview of Financial Activity

(Audited Amounts)

Cash on hand @ January 1, 2001 $ 695,629
o Contributions from Individuals 3,827,673
o Refunds of Contributions made to Federal/Other

Political Committees 69,576
o_ Transfers from Affiliates 574,087
o Other Receipts 34,336
Total Receipts $ 4,505,672
o Operating Expenditures 100,162
o. Transfers to Affiliates 38,438
o Contributions to Federal Candidates/Committees 2,027,500
o Independent Expenditures 10,000
o Contribution Refunds 19,183
o Contributions to State/Local Candidates/Committees 1,805,858
o Other Disbursements 8,242
Total Disbursements $ 4,009,383
Cash on hand @ December 31, 2002 $ 1,191,918



Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that CWA-COPE file amended reports to clarify the
inadequate purposes and provide the omitted purposes. As to the omitted purposes,
CWA-COPE acknowledged that it was an error to list disbursements without specifying
any purpose. As to the inadequate purposes, CWA-COPE acknowledged that “HQ” and
“Operating Expenses” are inadequate under the applicable regulation, 11 C.F.R.
§104.3(b)(3)(i)(B). However, CWA-COPE questioned the logic behind some of the
distinctions in the regulations concerning what is, and what is not, an adequate purpose.
Nonetheless, CWA-COPE stated that both the omitted and inadequate purposes were
inadvertent and not a deliberate act and that amended reports will e filed on or about
January 10, 2006. CWA-COPE further stated that although the three year record-keeping
period has expired, they will use their best effort to determine the missing information

from available records.

| Finding 3. Failure to Itemize Transfers

Summary
CWA-COPE failed to itemize a transfer to its non-federal account totaling $9,838 or 26%

of transfers to affiliated committees. The Audit staff recommended that CWA-COPE file
an amended report to disclose the transfer. CWA-COPE responded that the amended

reports will be filed on or about January 10, 2006.

Legal Standard
Itemizing Transfers to Affiliated Committees. Political committees other than

authorized committees must itemize all transfers (i.e., the full name, address, date,
amount, and purpose) regardless of amount to other political committees. 11 CFR

§104.3(b)(3).

Facts and Analysis
A 100% review of disbursements made by CWA-COPE revealed that they failed to

itemize, a wire transfer in the amount of $9,838 to its non-federal account. The transfer
represents approximately 26% of the amount of all transfers to related committees.
CWA-COPE officials had no explanation for this omission.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that CWA-COPE file an amended report to disclose the
transfer. CWA-COPE acknowledged that it failed to itemize the transfer. It was further
stated that the omission was not a deliberate act and an amended report will be filed on or

about January 10, 2006.


conclusion that 12% of the contributions received were not supported by adequate
records. This finding was not included in the interim audit report and CWA-COPE has
not had an opportunity to consider the basis for that finding and provide additional
records that might meet the new standards. Given the significant percentage of the
receipts that were adequately documented under the new policy and the time and effort
required on the part of both CWA-COPE and the Commission to determine if CWA-
COPE possesses more records that would meet the standards of the revised policy, the
Commission decided to simply not approve this finding. (For more detail, see p. 8)


Part III
Summaries

Findings and Recommendations

Finding 1. Misstatement of Financial Activity

A comparison of CWA-COPE’s reported figures with its bank records revealed that it
misstated beginning cash on hand at January 1, 2001. The Audit staff recommended that
CWA-COPE amend its report and subsequent reports to correct the cash on hand balance.
Amended reports were not filed with the response. However, CWA-COPE stated that the
amendments would be filed. (For more details, see p. 5)

Finding 2. Disclosure of Operating Expenditures

Operating expenditures totaling $46,708, or 53% of those itemized on Schedule B,
(Itemized Disbursements), lacked a purpose or had an inadequate purpose for the
expenditure. The Audit staff recommended that CWA-COPE file amended reports to
provide the omitted purposes and to clarify the inadequate purposes. CWA-COPE
responded that the amended reports will be filed on or about January 10, 2006. (For more

detail, see p. 6)

Finding 3. Failure to Itemize Transfers

CWA-COPE failed to itemize a transfer to the non-federal account totaling $9,838 or
26% of transfers to affiliated committees. The Audit staff recommended that CWA-
COPE file an amended report to disclose the transfer. On or about January 10, 2006,
CWA-COPE will file amended reports to itemize the transfer. (For more detail, see p. 7)

Finding 4. Maintenance of Contributor Records for

Contributions Received By Payroll Deduction

The Audit staff conducted a sample review of contributions received by payroll
deduction. Such contributions are received via lump sums transmitted by employers.
The sample included only those transmittals for which detailed contributor information
was available; 88% of the amount contributed by payroll deduction. The Audit staff
determined that Payroll Deduction Authorization forms (PDAs) were not available for
approximately 62% of the contributors sampled. The interim audit report recommended
that CWA-COPE demonstrate that it had maintained the PDAs or provide a description
of policy and procedural changes implemented to ensure that such authorizations are
obtained and maintained in the future. Subsequent to issuing the interim audit report, the
Commission determined that documents other than PDAs can be accepted to verify
contributions received by payroll deduction. The Commission determined that the
contribution listings noted above, provided by the contributors’ employers, satisfy the
requirement to maintain records from which the reports filed may be verified.” There
remains 12% of the contributions received through payroll deduction that are not
adequately documented. CWA-COPE challenged the accuracy of the Audit Division’s

? See “Clarification of Commission Policy Regarding Retention of PDAs” on page 11.


well as reflect the correction in the December 2005 Monthly Report filed on December
20, 2005.

| Finding 2. Disclosure of Operating Expenditures

Summary
Operating expenditures totaling $46,708, or 53% of those itemized on Schedule B

(Itemized Disbursements) lacked a purpose or had an inadequate purpose for the
expenditure. The Audit staff recommended that CWA-COPE file amended reports to
provide the omitted purposes and to clarify the inadequate purposes. CWA-COPE
responded that the amended reports will be filed on or about January 10, 2006.

Legal Standard

A. Reporting Operating Expenditures. When operating expenditures to the same
person exceed $200 in a calendar year, the committee must report the:

Amount;

Date when the expenditures were made;

Name and address of the payee; and

Purpose (a brief description of why the disbursement was made—see below). 2
U.S.C. §434(b)(5)(A) and 11 CFR §104.3(b)(3)(i).

B. Examples of Purpose.

¢ Adequate Descriptions. Examples of adequate descriptions of “purpose” include
the following: dinner expenses, media, salary, polling, travel, party fees, phone
banks, travel expenses, travel expense reimbursement, catering costs, loan
repayment, or contribution refund. 11 CFR §104.3(b)(3)(i)(B).

© Inadequate Descriptions. The following descriptions do not meet the requirement
for reporting “purpose”: advance, Election Day expenses, other expenses,
expense reimbursement, miscellaneous, outside services, get-out-the-vote, and
voter registration. 11 CFR §104.3(b)(3)(i)(B).

Facts and Analysis
A 100% review of operating expenditures itemized on Schedule B revealed that for 40 of

the 60 expenditures, either no purpose was disclosed or the purpose disclosed was
inadequate, such as Voter Registration, Operating Expense or GOTV. The errors
represent 53% of the amount of itemized operating expenditures or $46,708.

At the exit conference, a CWA-COPE staff member stated that the instructions for filling
out Schedule B did not give much help in determining what an adequate or inadequate
purpose was. They requested a list of all the inadequate purposes so that they could
correct them. The Audit staff explained to CWA-COPE that the purposes that were
considered inadequate were those listed in the exit conference outline which was given to
CWA-COPE at the beginning of the meeting.


FEDERAL ELECTION COMMISSION
WASHINGTON, D.C. 20463

May 30, 2006
MEMORANDUM
TO: PRESS OFFICE
FROM: JOSEPH F. STOLTZ:
ASSISTANT STAFF/DIRECTOR
AUDIT DIVISION

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON
CWA COPE POLITICAL CONTRIBUTIONS COMMITTEE A03-51

Attached please find a copy of the final audit report and related documents on
CWA COPE Political Contributions Committee, which was approved by the Commission
on May 18, 2006.

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
FEC Library
Web Manager


9

directly by CWA-COPE or by Union locals which in tum, transmitted the funds to CWA-
COPE. Employers transmitted these contributions either by pay period, monthly, or
quarterly. According to CWA-COPE’s Counsel, the PDAs were not maintained at the
national office (with the exception of national office employees), but rather were
maintained by the union local and/or the employer.

In accordance with Commission policy at the time, the audit notification letter, informed

CWA-COPE that it was required to:

¢ Maintain PDAs for each member who made contributions via payroll deduction. If
CWA-COPE 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 the contributions that were transmitted by
employers and collecting agents were timely transmitted and deposited.

In a letter to the Audit staff, CWA-COPE’s Counsel explained CWA-COPE’s Position
regarding the requirement that they maintain or ensure the maintenance of all PDAs
relating to member contributions that are reflected on its 2001 and 2002 Forms 3X
(Report of Receipts and Disbursements for Other than Authorized Committee). He
stated: “It is our understanding that the applicable law imposes no such requirement.” In
addition, Counsel stated that, while CWA-COPE stood ready to cooperate with the
Commission’s audit, he wished to express concern about any specific request to locate
and provide PDAs. As requested by the Audit staff, CWA-COPE would provide auditors
with access to records that show the sources of all payroll-deducted contributions in 2001
and 2002, including transmittal documents from employers of contributors, the identities
of the contributors, the sums they contributed and the dates they did so.

The Audit staff provided CWA-COPE with a list of individuals and requested that CWA-
COPE provide copies of PDAs for each individual on the list. Fieldwork was suspended
and CWA-COPE was allotted time to gather the necessary records. Fieldwork resumed
shortly after expiration of the allotted time.

Facts and Analysis

CWA-COPE received contributions from individuals totaling $3,827,673. The Audit
staff conducted a sample review of transmittals from employers and local unions received
during the audit period to determine if PDAs were available for contributors whose
contributions were made by payroll deduction. The sample included only those
transmittals supported by contributor lists ($3,384,475). The review indicated that for
approximately 62% of the sample items tested, the related PDAs were not available.

At the exit conference, the Audit staff advised CWA-COPE representatives of this matter.
One CWA-COPE representative stated that the majority of the PDAs were housed with
the locals or employers and the employers are not very cooperative with the unions.
Another CWA-COPE representative stated that it was difficult to get information from
the locals and because CWA-COPE is a communications entity, it is difficult to keep
track of where the PDAs are since there have been a lot of mergers between the
communications entities (i.e. Verizon, Bell Atlantic, etc.).


Finding 4. Maintenance of Contributor Records for
Contributions Received by Payroll Deduction

The Audit staff conducted a sample review of contributions received by payroll
deduction. Such contributions were received via lump sums transmitted by employers.
The sample included only those transmittals for which detailed contributor information
was available; 88% of the amount contributed by payroll deduction. The Audit staff
determined that Payroll Deduction Authorization forms (PDAs) were not available for
approximately 62% of the contributors sampled. The interim audit report recommended
that CWA-COPE demonstrate that it had maintained the PDAs or provide a description
of policy and procedural changes implemented to ensure that such authorizations are
obtained and maintained in the future. Subsequent to issuing the interim audit report, the
Commission determined that documents other than PDAs can be accepted to verify
contributions received by payroll deduction. The Commission determined that the
contribution listings noted above, provided by the contributors’ employers, satisfy the
requirement to maintain records from which the reports filed may be verified. There
remains 12% of the contributions received through payroll deduction that are not
adequately documented. CWA-COPE challenged the accuracy of the Audit Division’s
conclusion that 12% of the contributions received were not supported by adequate
records. This finding was not included in the interim audit report and CWA-COPE has
not had an opportunity to consider the basis for that finding and provide additional
records that might meet the new standards. Given the significant percentage of the
receipts that were adequately documented under the new policy and the time and effort
required on the part of both CWA-COPE and the Commission to determine if CWA-
COPE possesses more records that would meet the standards of the revised policy, the
Commission decided to simply not approve this finding.

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. One form of record for contributions that a separate segregated fund
established pursuant to Part 114 of the Commission’s rules may use is copies of Payroll
Deduction Authorizations (PDA’s) for each individual who makes any contributions(s)
via automatic payroll deduction. See, e.g. MUR 4955 (Metropolitan Life).

Background on Committee Receipt Records

Contributions received by CWA-COPE were made through payroll deduction or one-time
donations from members. According to CWA-COPE’s Counsel there are approximately
2,000 bargaining agreements within CWA and approximately 80% have a payroll
deduction option. The principal methods of transmission of these contributions to CWA-
COPE were by wire transfer or check from employers along with a list of contributors
and the date and amount of contribution. The amounts transmitted were either received


Part IV
Findings and Recommendations

[Finding 1. Misstatement of Financial Activity

Summary

A comparison of CWA-COPE’s reported figures with its bank records revealed that it
misstated beginning cash on hand at January 1, 2001. The Audit staff recommended that
CWA-COPE amend its report and subsequent reports to correct the cash on hand balance.
Amended reports were not filed with the response. However, CWA-COPE stated that the

amendments would be 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 or Schedule B. 2 U.S.C.

§$434(b)(1), (2), (3), (4), and (5).

Facts and Analysis
The Audit staff’s reconciliation of CWA-COPE’s reported financial activity to its bank

records for the period January 1, 2001 through December 31, 2002; indicated their
beginning cash on hand was overstated. The misstatement was apparently a result of
prior period transactions and was carried forward to subsequent reports.

2001 Activity

Reported Bank Records Discrepancy
Opening Cash Balance $834,478 $695,628 $138,850
@ January 1, 2001 Overstated

At the exit conference, CWA-COPE officials had no explanation for the misstatement.
They stated that they would amend the reports as necessary.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that CWA-COPE provide an explanation for the
discrepancy and file amended reports to correct the cash on hand. CWA-COPE
responded that they were unable to determine why the discrepancy occurred and they had
no information to suggest that the error was attributable to anything more than
inadvertence and inadequate accounting system. Amended reports were not filed with
the response. However, CWA-COPE stated that it would amend all reports for the audit
period so that the cash balances conform with the bank records as of January 2, 2001, as



Part I
Background

Authority for Audit

This report is based on an audit of the CWA-COPE Political Contributions Committee
(CWA-COPE), 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.

NAMA E

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.
Except for the period November 6, 2002, through December 31, 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 prior to November 6, 2002.


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 5

Finding 2. Disclosure of Operating Expenditures 6

7

Finding 3. Failure to Itemize Transfers
Finding 4. Maintenance of Contributor Records for Contributions Received by

Payroll Deduction


Report of the Audit Division on
the CWA-COPE Political

Contributions Committee
January 1, 2001 - December 31, 2002

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.

' 2US.C. §438(b).

About the Committee (p. 2)

The CWA-COPE Political Contributions Committee is the separate
segregated fund (SSF) of the Communication Workers of America
Union and is headquartered in Washington, D.C. For more
information, see chart on the Committee Organization, p. 2.

Financial Activity (p. 2)
e Receipts

o Contributions from Individuals $ 3,827,673
o Refunds of Contributions made to

Federal/Other Political Committees 69,576
o Transfers from Affiliates 574,087
o Other Receipts 34,336
o Total Receipts $ 4,505,672

¢ Disbursements

o Operating Expenditures $ 100,162
o Transfers to Affiliates 38,438
o Contributions to Federal

Candidates/Committees 2,027,500
o Independent Expenditures 10,000
o Contribution Refunds 19,183
o Contributions to State/Local

Candidates/Committees 1,805,858
o Other Disbursements 8,242
o Total Disbursements $4,009,383

Findings and Recommendations (p. 3)

¢ Misstatement of Financial Activity (Finding 1)
Disclosure of Operating Expenditures (Finding 2)
Failure to Itemize Transfers (Finding 3)

Maintenance of Contributor Records for Contributions
Received By Payroll Deduction (Finding 4)



10

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that CWA-COPE demonstrate its compliance, provide any
other comments it may have relevant to this matter and provide a description of policy
and procedural changes implemented to ensure that such authorizations are obtained and
maintained in the future. Once these procedures were in place, the Audit staff would
verify that they are adequate to ensure compliance via follow-up fieldwork.

In the response CWA-COPE’s Counsel reiterated his opinion that the law does not
require the national office to maintain the PDAs. Counsel stated that in spite of its
position CWA-COPE did all that was possible to retrieve copies of the requested PDAs
executed by individuals listed in the sample. Counsel stated that CWA-COPE believed
that all of the employees, for whom PDAs were not retrieved, in fact executed proper
authorization at the time that payroll deductions for CWA-COPE were initiated.

Finally Counsel stated that CVA-COPE would send a letter, signed by its Secretary-

Treasurer, who has responsibility for CWA-COPE records and is also the Treasurer of

CWA-COPE, to all CWA-COPE affiliates requesting that they:

© maintain copies of PDAs already in their possession in an accessible file;

© institute a policy of either retaining or seeking from employers copies of newly
executed PDAs, and

¢ make these records available to CWA-COPE upon its request.

The letter would inform them that these records should be maintained indefinitely, except
that, if they wish, they may discard PDAs three years after an employee’s CWA-COPE
payroll deduction ceases. A copy of the letter has been reviewed by the Audit staff and it
covers those matters Counsel advised would be addressed.

Clarification of Commission Policy Regarding Retention of PDAs
Prior to considering this audit report, the Commission reconsidered its policy regarding
records required to be kept by PACs that receive contributions through automatic payroll
deduction and concluded that documents other than PDAs can be used to verify such
contributions. An example of other acceptable documentation is a listing provided to the
PAC by the member’s employer containing the contributors’ names, along with the dates
and amounts of the contributions that are included in the transmittal.

As stated above, CWA-COPE received contributions from individuals totaling
$3,827,673 and had employer generated contributor lists to document contributions
totaling $3,384,475. Therefore, CWA-COPE maintained adequate records for more than
88% ($3,384,475/$3,827,673) of contributions received from individuals. There remains
nearly 12% of contributions that are inadequately documented.