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MEMORANDUM

TO:

FROM:

SUBJECT:

TXl/04lS88

FEDERAL ELECTION COMMISSION

WASHINGTON. 0 C 204&3

A8S-l8

April 1S, 1988

FRED EILAND

CHIEF, PRESS OFFICE --A~~~

ROBERT J. COSTA

ASSISTANT STAFF

AUDIT DIVISION

PUBLIC ISSUANCE OF FINAL AUDIT REPORT - TEXAS REPUBLICAN CONGRESSIONAL COMMITTEE

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f Attached please find a copy of the final audit report

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0 Texas RepUblican Congressional Committee which was approved , by the Commission on April 5, 1988.

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 ~ffice of Public Disclosure

Reports Analysis Division "

FEC Libr~ry

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'1'11/030888

WASHINCTON. DC 2046)

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fEDERAL ELECTION COMMISSION A8S-18

REPORT or 'IRE AUDIT DIVISION

ON 'IRE ~E~S REPUBLICAN CONGRESSIONAL COMMI'1"1'IE

J. BackgrouneS

A. Overview

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'Ibis report Is based on an audit of the Texas

.epublican Congressional Committee (-tbe Committee-) undertaken

tbe A~lt Division of tbe reaeral Blection Commission In

accordance witb tbo Commission's audit policy to determine

wbetber tbere bes been compliance with the provision. of tbe

Federal Election Campaign Act of 1971, a. amendeeS (-the ActW ) •

The audit was conductea pursuent to Section 438(b) of Title 2 of ,..., tbe Unitea States Code whicb .tate., in part, tbat tbe Commission

.ay conduct audits ana fiela investigations of any political q.ommittee required to file a report unaer Section 434 of this ,~ itle. Prior to conaucting any audit under this aectlon, the

ommission shall perform an internal review of reports fil.a by -- aelected committees to determine If the reports flIed by a

particular committee meet tbe threshola requirements for

aUbstantial compliance witb the Act.

The Cammittee registerea with tbe reaeral Blection

Commission on September 8, 1981, and lIlaintains Its heaaquarters in Austin, Texas.

Tbe audit coverea the period January 1, 1983, through December 31, 1984. The Commi ttee reported a beginning cash

balance on January 1, 1983, of $144.44, total receipts for the

period of $4,719,686.21, total disbursements for the period of

'.,711,032.36, and an enaing cash balance on December 31, 19B4, of $8,79B.29.

This report is based on documents and workpapers supporting eacb of its factual statements. They form part of tbe

recoreS upon wbicb tbe Commission baseeS its decisions on the

matters in this report and were available to Commissioners and

appropriate staff for review.

B. Key Personnel

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The Treasurers of the Committee aurlng the period overed by the audit were Mr. Robert MCCaig from January 1, 1983

through December 12, 1983, and Mr. John Nolan from December 12,

1983 througb December 31, 1984. The curren t Treasurer is Mr.

Benry Santamaria.
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c. Scope

Tbe audit Incluaed sucb teat. 8. verification of total

reportea receipts and disbursement. and Individual trenaactlons,

review of re~lr.d aupportlng documentation, analy.la of

Committee debts ana obligation., and lucb other audit procedure• • s deemed necessary under tbe clrcumstance8, execpt tbat a large portion of tbe Committee'. contribution records vere not . available for our revl.... .'

JI. Auait Plnalngs end Recommendations

A. Joint Pundralslng Activity

Tbe Regulations, at 11 C.r.R. S 102.17, describe tbe

procedures wbicb govern joint fundr.islng activity Involving botb

political committees and unregllterea political organizations.

Tbe Audit staff noted a joint fundrailing event

Involving tbe Committee, a Senate candidate, • county Republican organi zation, and tbe National Republican Senatorl al Committee as

,"" participants. The event was called tbe ·Presidential Ncnination

roakfast Ball- and was held on August 23, 1984.

A Committee consultant atated that the Senate

candidate's authorized committee served al the fundraising representative for the event end tranaferrod to the Committee Its

ahare of funds in accordance with tbe Regulatlona. Bowever, the

Committee lacked 8ufficient records In the form of photocopies of

contributor checks, response devices, or otber contributorgenerated documentation for contributions and therefore tbe Audit

staff could not verify the transfer of proceeds relative to the

joint fundraising event.

In the Interim Report, the Audit Gtaff recommended that

tbe Committee supply a copy of tbo joint fundraislng agreement and any other documentation tbat 8UP~.~t. tbe Committee'a .bare

of receipts and expenditures, or any additional receipts and

oxpenditures anticipated, related to tbe avant lncluaing Dupport for the lDemo ScbeduleD A disclosed by the Committoe.

In tbeir response the Committee provided a copy of the

joint fundraising agreement, solicitation material, bank

atatements, and a reconciliation of roceipt., expenditure., and

amounts allocated to the participants. In the opinion of the

Audit staff, tbls Information supported the entries disclosed on

FEe reports and demonstrated the Committee's compliance with 11 ••F. R. S 102.17.

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Recommenl5ation

~he A~it ataff recommenl5a no further action with re.pect to

thia event.

B. ~ranafera to Pel5eral Candidatel

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~he Act, at 2 U.S.C. S .41a(a) (2) (A), prohibitl a

.ulticanl5idate committee from making contributionl to any candidate and hil authorized political committee. with respect to

any election for Federal office which, in the aggregate, exceed

'5,000. ~he Regulationl, at 11 C.P.R. I 110.1(a) (2)!/, define

·with respect to any election· to mean, in the ca•• of • contribution designated In writing for a particular election, but

.ade after that election, ahall be made only to the extent that

the contribution does not exc••d net debts outltanl5ing from luch

election.

~he A~it ataff noted that the Committee made 16

contributions ·totaling $60,000 to five candidate committees after ~~ their Primary and 2nd primary (run-off) elections. The Committee . dilclosed 11 of these contributions totaling $40,000 for the

'_rimaryand/or 2nd Primary elections of the c3ndidates. The

.0 emaining contributions ($20,000) were dilclosed by the Committee

I General election contributions to four of these aame

committees.

~he Primary election was held May 5, 1984, the 2nd

Primary (or run-off) on June 2, 1984. The Primary contributions

were made by the Committee between June 22, 1984 and August 10,

1984, 2nd Primary contributions were made on September 10, 1984. ~he contributions disclosed by the Committee relating to the

General election were mal5e between August 10, 1984 and October 5,

1984.

During fieldwork, the A~it ataff reviewed dilclolure

reportl filed by the Committee and the Candidates' authorized

committees, as well as the cancellel5 contribution checks

.aintained by the Committee. Although the Committee indicated on

its FEC diaclolure reporta the election for which the

contribution wa••ade, the Committee could not provide ~ocumentation to demonstrate that the candidates were informed of

the designations at the time the contributions were .ade.

Moreover, one candidate committee did not disclose the election

to which a $2,000 ·primary· contribution applied.

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Citations from Parts 100, 102, 103, 104, and 110 of the Code

of Federal Regulations refer to RegUlations in effect prior

to the April 8, 1987 amendments to 11 C.F.R. 5S 100, 102,

103, 104, 110.
The Audit staff recommends no further action on this matter.

C. Allocation of Administrative Expenses

The Regulations at 11 C.P.R. 5 102.5(a) (1) (1) require a

state party committee financing political activity in connection

with both federal and non-federal elections that chooses to

establish a separate federal account in accordanc~ with 11 C.F.R.

Part 103 to allocate administrative expenses pursuant to 11

C.F.R. Part 106 between federal end non-federal accounts.

The Audit staff reviewed Committee expenditures and

noted that the Committee made payments'totaling $910,728.97 to

its non-Federal account for administrative expenses and paid $17,588 in administrative cost. directly to vendors.

A Committee consultant s.id It appeared the Committee

used a 33' rate to allocate administrative expenses, but could

not find any workpapers or other documentation to justify the use

of this percentage. Bowever, it did appear that the Committee

vas applying this rate in allocating administrative expenses.

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In the Interim Report, the Audit staff recommended that

e Committee (among other alternatives) supply documentation

emonstrating that the expenses already paid represant a

reasonable portion of administrative expenses allocable to both

the Pederal and non-Federal accounts.

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Bence, during fieldwork it appeared that the Committee

did not properly designate these contributions. The apparent lack of adequate designation inaicated that excessive

contributions totaling $35,000 Bay have been made to the five

candidates. In the Interim Report, the Audit staff recommended

that the Committee provide evidence that the contributions vere

not excessive. Such evidence should have included documentation

to show that the recipient committees were Infor~ed of the

Commi ttee' 8 election designation at the time of ·t;he contrl bution,

as well am evidence that the contributions designated for the

primary or 2nd primary (run-off) elections were made to candidate

committees who had primary debts at the time of the contribution.

Alternatively, the Audit staff recommended that the Committee

attempt to obtain refunds of the excessive contributions.

In response to the Interim Report, a former Committee

political director provided an affidavit in which he stated that

both oral and written designations occurred at the time of the

contributions. It is the Committee's position that the

candidates were properly notified of the appropriate election

designation.

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In It. response to the Interim Report, the Committee

.upplied an affidavit from It. former Executive Director in which

&0 76-72 i. cited a••upport for the Committee'. allocation of

admlni.tratlve expen••••

The &0 cited u.e. a weighted ballot approach to .upport

a 1/3 federal and 2/3 non-federal allocation ratio. The Audit

.taff note. that In Texa. during the 1984 cycl., voter. cho.e a

Pre.ident, u.s. Senator, U.S. Representative., State legl.lator.,

many .tate official. including judge., .ducation official., and ~ailroad commi.sioner, and numerous county and municipal official. depending on the location. Based on the general principles contained in the AO, It I. the opinion of the Audit

ataff that the Committee'. 1/3 f.deral, 2/3 non-federal

allocation appear. reasonable.

Recommendati on

The Audit .taff recommend. no further action on this matter.

D. Mattera Referred to Office of General Coun.el

- • Certain other matters noted during the audit have been ..\) eferred to the Offi ce of General Counsel.

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