FEDERAL ELECTION COMMISSION

WASHINCTON. D.C. 20463

REPORT OF THE AUDIT DIVISION

ON THE

LEAGUE OF CONSERVATION VOTERS

I. Background

A. Overview

This report is based on an audit of the League of

Conservation Voters (lithe Committee"), undertaken by the Audit

Division of the Federal Election Commdssion in accordance with

the Commission's audit policy to dete~inewhether there has been

compliance with the provisions of the· Federal Election C~paign Act ~., of'197l, as amended (lithe Act"). The audit was conducted pursuant r~ to Section 438(b) of Title 20f 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 . section, the Commission shall perform an internal review of reports ..,.filed by selected committees to determine if the reports' filed by a ~articular committee meet the threshold requirements for substantial

compliance with the Act.

The Committee registered with' the Federal Election

Commission on May 18, 1978 and is affiliated with'the League of

Conservation Voters Campaign Fund. The Commdttee maintains its ~~ headquarters in Washington, D.C.

The audit covered the period from January 1, 1980 through'

:'" December 31, 1980. The Committee reported an opening cash balance

of $26,121.26, total receipts of $379,623.87, total expenditures of

$402,031.31, and a closing cash balance of $3,713.82.

This report is based on documents and working papers supporting each of its factual statements. They form part of

the record upon which the Commission based its decisions on

the matters in the report and were available to the Commissioners

and appropriate staff for review.

B. Key Personnel

The principal officers of the Committee during the period

audited were as follows: Mr. Rafe Pomerance, Treasurer, January 1,

1980 through January 31, 1980 and Ms. Marion Edey, Treasurer,

.•anua~:'Y..3l,.1980 through December 31, 1980.
C. Scope

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The audit included such tests as verification ,of total

reported receipts and expenditures1 review of required supporting documentation, and analysis of Committee debts and obliqations1 and such other audit procedures as deemed necessary under the

circumstances. However, although the contribution records provided by the Committee met the recordkeeping requirements of 2 U.S.C. 432(c) and 11 C.F.R. 102.9(a), they did not include any material prepared outside of the Committee. Therefore, no verification of individual

contribution transactions was perfor.med.

II. Audit Findings and Recommendations

A. 'Misstatements of Financial Activity.

Section 434(b) (1) (2) and (4) of Title 2 of the United States

Code states, in part that each report filed by the treasurer

of a political committee shall disclose the amount of cash on' ~~. hand at the beginning of the reporting period1 for the reporting

period and the calendar year, the total amount of all receipts1 and for the reporting period and the calendar year, the total

amount of all disbursements.

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Section 104.l4(b) of Title 11 of the Code of Federal

RegUlations states, in par~; that "Each political committee or

other person required to file any report or statement•••shall

maintain all records relevant to such reports or statements

as follows:

(1) Maintain records, including baDk records, with respect

to the matters required to be reported, inclUding vouchers, worksheets, receipts, bills and accounts, which shall provide in

sufficient detail the necessary infor.mation and data from which

the filed reports and statements may be verified, explained, clarified and checked for accuracy and completeness".

As part of routine audit procedures, the Committee's reported cash at January 1, 1980, and cash receipts and disbursements for

the 'calendar year ending December 31, 1980, were reconciled with

bank statements for the same period. The reconciliation revealed

that beginning cash was overstated by $4,475.26 or 17% of the

reported tota11 cash receipts for the year were understated by $4,460.14 or 1.18% of the'reported total, and cash disbursements

overstated by $824.08 or .2% of the reported total. The net effect

of these misstatements was an understatement of ending cash by $808.96 or 28% of the reported total.
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Section 104.3(d) of Title 11, Code of Federal Regulations

states, in part that each report filed shall, on Schedule "C"

or "0", disclose the amount and nature of outstanding debts

and obligations.

Section 434(b) (3) (E) of Title 2 of the United States Code ~~ states, in part that each report shall disclose the identification

of each person who makes a loan to the reporting committee

during the reporting period, together with the identification

of any endorser or guarantor of such loan, and date and amount

of value of such loan.

Itemization of Debts and Obligations

B~sed on the Committee's implementation of their revised

accounting procedures, the Audit staff recommends that no further

action be taken on this matter.

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tit . A reconciliation of each report to bank activity for each

report period indicated that the committee did not have uniform

procedures for compiling report activity, particularly with regard

to cash receipts. The Audit staff was unable to reconstruct

beginning cash or reported monthly receipts, because the Committee

could not provide working papers showing the compilation of

reported totals, nor were committee personnel able to assure

the Audit staff that a consistent method was used to develop

those totals.

The Committee stated that they had hired a consultant to

develop effective accounting and reporting procedures, and were

researching the use of an 'EDP system for processing receipts.

In the interim audit report, the Audit staff recommended that

the Committee provide evidence of the development of formalized

and uniform procedures to record financial activity, maintain such'

records, and compile FEC reports in compliance with the FECA and

related regulations.

In their November 2, 1981 response to the interim audit

report, the Committee submitted a description of accounting procedures designed by their accounting consultant for compliance with FECA recordkeeping and reporting requirements•

. "aecommendation
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Section 104.11 of Title 11, Code of Federal Regulationa

states, in part, that debts and obligations owed by or to a

political committee which remain outstanding shall be continuously reported until extinguished. Specifically, a debt, obligation

or other promise to make an expenditure, the amount of which is

$500 or less, shall be reported as of the time payment is made or

no later than 60 days after such obligation is incurred, whichever

comes first. Any loan, debt or obligation, the amount of which

is over $500 shall be reported as of the time of the transaction.

In the course of the audit, the Committee's reporting of

debts and obligations was reviewed 100'. A pre-audit review

and subsequent fieldwork indicated that the 1980 30 Day Post

General Election report and' 1980 Year End report misstated

and omitted debts on Schedule nCo (Loans) and Schedule "D" (Debts

and Obligations).

1) 30 Day Post General Election Report

In the post. general report,' Schedule "D" debts totaling $7,916.62 were reported to be outstanding at the beginning of the

period, when they were actually incurred during the period. In

addition, a loan from a political committee for $2,000 on October

22, 1980 was not reported on either Schedule "C" or "D", nor was

the amount included in the total for line 10 and (Debts and

Obligations. Owed by the Committee) of the Summary page •

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2) Year-End Report ..

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In the Year-End Report, loans from individuals totaling $7,200 continuing from a prior period and outstanding at December

31, 1980, were omitted from Schedule "C" and the amount was not

reported in the Schedule "D"total or lirie 10 of the Summary. page.

The loan from a political committee was extinguished but

no activity was reported on either Schedule "c" or "D", the loan

repayment having been reported as a "contribution" to the political committee on Schedule "B".

Debts totaling $3,000 owed to the Committee were not

reported on Schedule "C", altho\1gh the total amount was included

on line 9 (Debts and Obligations Owed to the Committee) of the

Summary page. . . The Commission's Reports Analysis Division forwarded

written requests for additional information dated April 7, June 10,

and July 2, 1981, directed at the 30-Day and Year End reports and

asking for clarification of these matters. Committee responses, however, were inadequate. Committee personnel stated that they did

not understand reporting requirements for debts and obligations, and

were willing to amend reports as required.
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Xn the interim audit report, the Audit staff recommended

that the Committee amend the 1980 30 Day Post General Election

Report and 1980 Year End Report to correct the Schedule "C" and

"D" errors and omissions noted above.

On November 2, 1981, the-Committee submitted amended reports

correcting the Schedule "C" and "D" errors and omissions noted

above.

Recommendation

The Audit staff recommends that no further action be taken

on this matter.,

C. Documentation of Contributions

Section 432(c) of Title 2 of the United States Code states.

in part that·the treasurer of a political committee shall keep

an account of all contributions received by or on behalf of

'such political committeeJ the name and address of any person who

makes any contribution in excess of $50, together with the date

and amount of such contributionJ and 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 102.9(a) of Title 11 of the Code of Federal

Regulations states in part that an account shall be kept by any

reasonable accounting procedure of all contributions received

by or on behalf of the political committee.

The Audit staff's'reviewof Committee fundraising activities

identified two methods by which most contributions were generated:

1) door-to-door canvassing performed by an outside vendorJ

and

2) direct mail fundraising.

Committee records available at the time of the audit fieldwork

disclosed that out of $379,623.87 in contributions reported during the period January 1, 1980 through December 31, 1980, 155 items

totaling $106,700 were identified by the Committee to be greater . than $50, requiring a record to be kept of the contributor name and

address. For the remaining $272,923.87 in receipts, the Committee

provided the following records of activity in 6 Committee depositories:
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1) check registers with deposit entries annotated with

descriptions such as "small" to indicate items of less than $50,

2) bank statements with deposit slips denoting multiple

deposit items of less than $50, and

3) one bank account, accounting for approximately $127,000

in receipts, where the records contained no detail as to the

composition of deposit entries.

In the absence of a compreheasive contributor list, the Audit

staff was unable to test the unidentified contributions for

aggregation or other requirements of the Act. The Committee stated

that they had no formal aggregation procedures, relying on their

ability to recognize repeat contrihutors and the probability that

small contributors would not aggregate more than $200 in contributions in the calendar year.

Although the Audit staff is of the opinion that the maintenance

of a comprehensive contributor list from door-to-door canvassing would be an unreasonable burden for the Committee, some other

documentation is needed to verify that the recordkeeping, disclosure,

and contribution limitation requirements of the Act were met.

However, during the audit fieldwork, the Committee did not

provide records generated by canvassing activity which could verify that collection and recordkeeping were performed in compliance with

the Act, nor did the Committee document any communications between

the Committee and the vendor acknowledgi~g the practice of

accounting procedures and controls directed toward compliance with

the Act.

Regarding records pertaining to contributions generated by direct mail fundraising, the Committee stated that they did not

maintain a, record of individual contributions. However, other

records used by the Committee to manage their mailings, but not

available at the time of the audit fieldwork, may have substantiated Committee statements that formalized aggregation procedures were not necessary.

Therefo're., the Audit staff recommended, in the interim audit·

report, that the Commdttee provide documentation verifying that

contributions generated by door-to-door canvassing and direct

mail solicitation were collected in compliance with the Act's

recordkeeping, disclosure and individual contribution limitation

requirements.