CHRONOLOGY

COMMITTEE TO ELECT LINDSEY GRAHAM

Audit Fieldwork * August 13, 2001 to November 5. 2001

Internm Audit Report to
the Committee June 13, 2002

Response Received to the
Interim Audit Report July 16, 2002

Final Audit Report Approved November 14, 2002

Page 17 of 17. Approved 11.14/02


B. MISSTATEMENT OF FINANCIAL ACTIVITY

Section 434(b)(1) (2) and (4) of Title 2 of the United States Code states. in
part, that a political committee shall disclose the amount of cash on hand at the beginning
of the reporting period, the total amount of all receipts and the total amount of all
disbursements for the reporting period and calendar year.'°

The Audit staff reconciled CELG’s reported financial activity to its bank
records for the period January 1, 1999 through December 31, 2000 and determined that
receipts, disbursements and cash on hand balances were materially misstated. Since
CELG did not maintain records or workpapers that showed the derivation of its reported
figures, the Audit staff was unable to identify all differences between reported and bank
activity.

CELG overstated its beginning cash on hand balance at January 1. 1999 by
$65,526. According to the banks statements and other information, the beginning
balances in CELG’s checking account, investment account, and petty cash account were
$19,768, $31,217, and $8,000 respectively or, $58,985. CELG reported a beginning
balance of $124,511.

The petty cash fund with a balance of $8,000 had apparently been
established in December 1998 (just prior to the period covered by the audit) and
according to the assistant treasurer, no withdrawals from or replenishment to this fund
occurred during 1999-2001. The Audit staff was unaware of this petty cash fund until
after the conclusion of audit fieldwork. After the fieldwork. the assistant treasurer sent a
copy of a deposit ticket, dated January 7, 2002, listing an $8,000 currency deposit. The
copy of the deposit ticket was not validated by the bank. The assistant treasurer explained
that the petty cash fund was initially established to pay the treasurer’s travel expenses,
although apparently not used. She added that CELG had not included the petty cash
balance in its reported cash balances.

The assistant treasurer provided the following explanation for the
overstatement of the 1999 beginning cash balance:

“{iJn 1998, the investment account was opened with $70,000
A total of $40,000 was withdrawn from that account by the
year's end leaving $30.0UU in the investment account. The
total amount of the investment account. however, remained on
our books and this error. coupled with the fact that our data
entry methodology was sub-standard. resulted in the
overstatement of cash on hand. Also, we found that some

‘© This was changed to “election cycle” in the case of an authonzed commuttee of a candidate for Federal
office, effective for reporting periods beginning after December 31, 2000 [amended by section 641 of the
Treasury and General Government Appropriations Act. 2000, Pub. Law No. 106-58. signed into law on
September 29, 1999]

Page 11 of 17 Approved 11'14/02


Page 2 of 17 Approved 11/14/02


A01-09

FEDERAL ELECTION COMMISSION

WASHINGTON DC Jude:

November 14. 2002

Mr. Neal Byerley, Treasurer
Committee to Elect Lindsey Graham
P.O. Box 1155

Seneca, South Carolina 29679

Dear Mr. Byerley:

Attached please find the Report of the Audit Division on Committee to Elect
Lindsey Graham (Final Audit Report). The Commission approved the report on
November 14, 2002.

The Commission approved Final Audit Report will be placed on the public record
on November 21, 2002. Should you have any questions regarding the public release of the
report, please contact the Commission's Press Office at (202) 694-1220. Any questions
you have related to matters covered during the audit or in the report should be directed to
Tom Hintermister or Marty Favin of the Audit Division at (202) 694-1200 or toll free at
(800) 424-9530.

Sincerely.

A

osépn F. Stoltz
Assistant Staff Director

{Audit Division
/

Attachment as stated

Page 15 of 17 Approved 11 14 02



Section 110.9(a) of Title 11 of the Code of Federal Regulations states that
no candidate or political committee shall accept any contribution or make any expenditure
in violation of the provisions of part 110. No officer or employee of a political
committee shall accept a contribution made for the benefit or use of a candidate, or make
any expenditure on behalf of a candidate, in violation of any limitation imposed on
contributions and expenditures under this part 110.

CELG’s contribution records consisted of a database and copies of some of
the contribution checks and bank deposit tickets. Many of the contribution check copies
were not associated with a bank deposit ticket and the dates recorded in the database were
not, in many cases, the deposit date. It was, therefore, difficult to locate a check copy for
items on the database and, in some instances, to match a check copy with a database
entry. These problems were discussed with the CELG assistant treasurer who explained
that:

“[p]reviously, we lacked consistency and used date of the
check, date of deposit, and/or date received. This resulted
in double entries and other mistakes. Also, many of the
actual deposit dates were not in agreement with the date
listed on the deposit tickets. In some cases. deposits were
held in the office and several taken [to the bank] at one
time. This makes it virtually impossible to reconcile
deposits on the bank statements with the database.”

She added that the discrepancies in the receipts database “were created by
a host of malfunctions in our system as well as insufficient follow-through on my part
with verification of data and totals.” She also stated “we have updated our file-keeping
and methodology to meet more than the minimum standards. We have adopted the
suggestions of the audit staff and our campaign is confident that our records, database and
other documents will meet the highest standards.”

The condition of the CELG’s records hindered the testing for excessive
contributions. Nonetheless, the review of contributions from individuals indicated that
CELG accepted excessive contributions totaling $54,401 from 60 individuals ($43.276
related to the Primary election and $11,125 related to the General election). In most
cases, these contributions were excessive because the CELG did not have the required
documentation to support the redesignation or reattmbution of the apparent excessive
contribution.

At the exit conference, the Audit staff provided the CELG assistant
treasurer with a schedule of the apparent excessive contributions. In a written response
she stated the CELG now understands the regulations concerning the proper designation
of contributions’as well as the need to have a clear designation on the check or in other
written form. She further stated that CELG obtained some letters of redesignation or
reattribution but only a small percentage were received within the required sixty day

Page 7 of 17 Approved 11.14/02


N

its treasurer is Mr. Neil Byerley, who also served as Treasurer during the period covered
by the audit.

To manage its financial activity. CELG maintained a checking account, an
investment account and a petty cash fund. From these accounts, approximately 728
disbursements were made, totaling $729.535. CELG’s receipts, as recorded in 1s
contributions database, consisted of approximately 9,174 contributions from individuals.
totaling $805,385 and 327 contributions from political committees, totaling $342.951. In
addition, a petty cash fund with a balance of $8,000 was maintained by the CELG. This
fund appears to have been inactive during the period covered by the audit (see Finding
IL.B.). Accounting and recordkeeping functions were performed by paid campaign staff,
which utilized commonly available campaign management software. The CELG did not
file its disclosure reports electronically during the period covered by the audit.) A CELG
representative attended an FEC reporting seminar several years ago.

D. AUDIT SCOPE AND PROCEDURES

Following Commission approved procedures, the Audit staff evaluated
various risk factors and as a result the scope of the audit included the following general
categories:

1. the receipt of contributions or loans in excess of the statutory
limitations (see Finding II.A.);

2. the receipt of contributions from prohibited sources, such as those
from corporations or labor organizations;

3. proper disclosure of receipts from individuals, political committees
and other entities, to include the itemization of contributions or
other receipts when required. as well as, the completeness and
accuracy of the information disclosed (see Finding II.C.);

4, proper disclosure of disbursements including the itemization of
disbursements when required. as well as, the completeness and
accuracy of the information disclosed;

proper disclosure of debts and obligations;

6. the accuracy of total reported receipts. disbursements and cash
balances as compared to campaign bank records (see Finding
ILB.);

7. adequate recordkeeping for campaign transactions; and

other audit procedures that were deemed necessary in the situation.

3 CELG did file several 48-Hour Notices electronically prior to the 2000 General election

Page 4 of 17 Approved 11 ‘14/02


FEDERAL ELECTION COMMISSION A01-09
WASHINGTON, DC int

REPORT OF THE AUDIT DIVISION
ON
COMMITTEE TO ELECT LINDSEY GRAHAM

I. BACKGROUND

A. AUDIT AUTHORITY

This report is based on an audit of Committee to Elect Lindsey Graham
(CELG), undertaken by the Audit Division of the Federal Election Commission in
accordance with the provisions of the Federal Election Campaign Act of 1971, as
amended (the Act). The audit was conducted pursuant to Section 438(b) of Title 2 of 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 subsection, the Commission shall
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.

B. AUDIT COVERAGE

The audit covered the period from January 1, 1999 through December 31,
2000. CELG reported a beginning cash balance of $124.51 1; total receipts for the audit
period of $1,153,515; total disbursements for the audit period of $750,014; and, an
ending cash balance on December 31. 2000 of $528.015 :

Cc. CAMPAIGN ORGANIZATION

CELG registered with the Federal Election Commission on April 13, 1994
as the principal campaign committee for Mr. Lindsey O. Graham, Republican candidate
for the U.S. House of Representatives from the state of South Carolina. Third
Congressional District.2 CELG maintains its headquaners in Seneca. South Carolina and

' Reported figures do not foot due to minor mathematical discrepancies
? The CELG changed its name from Graham for Congress to the Commuttee to Elect Lindsey Graham on

April 14, 1997. An amended Statement of Organization was not filed to list the new depositones used by
CELG dumng the period covered by the audit as required by 2 U.S.C. §433(c),

Page 3 of 17 Approved 11/14/02


Page 16 of 17 Approved 11/14/02


accepted under the net debts outstanding provisions of 11 CFR
§110.1(b)(3);

° the contribution was not designated in writing for a particular election. and
the contribution exceeds the limitation on contributions set forth in
11 CFR §110.1(b)(1); or

° the contribution was not designated in writing for a particular election. and
the contribution was received after the date of an election for which there
are net debts outstanding on the date the contribution is received

Further, a contribution shall be considered to be redesignated for another
election if the treasurer of the recipient authorized political committee requests that the
contributor provide a written redesignation of the contribution and informs the
contributor that the contributor may request the refund of the contribution as an
alternative to providing a written redesignation and, within sixty days from the date of the
treasurer’s receipt of the contribution, the contributor provides the treasurer with a written
redesignation of the contribution for another election, which is signed by the contributor.

Section 110.1(k) of Title 11 of the Code of Federal Regulations states any
contribution made by more than one person, except for a contribution made by a
partnership, shall include the signature of each contributor on the check, money order, or
other negotiable instrument or in a separate writing and if a contribution made by more
than one person does not indicate the amount to be attributed to each contributor, the
contribution shall be attributed equally to each contributor.

If a contribution to a candidate or political committee, either on its face or
when aggregated with other contributions from the same contributor, exceeds the
limitations on contributions set forth in 11 CFR §110.1(b), (c) or (d), as appropriate, the
treasurer of the recipient political committee may ask the contributor whether the
contribution was intended to be a joint contribution by more than one person. A
contribution shall be considered to be reattributed to another contributor if the treasurer of
the recipient political committee asks the contributor whether the contribution is intended
to be a joint contribution by more than one person. and informs the contributor that he or
she may request the return of the excessive portion of the contribution if it is not intended
to be a joint contribution, and within sixty days from the date of the treasurer's receipt of
the contribution, the contributors provide the treasurer with a written reattribuuion of the
contribution, which is signed by each contributor. and which indicates the amount to be
attributed to each contributor if equa! attribution is not intended.

Section 110.1(1)(5) Of Title 11 of the Code of Federal Regulations states
that if a political committee does not retain the wntten records concerning redesignation
or reattribution, the redesignation or reattribution shall not be effective, and the original
designation or attribution shall control.

Page 6 of 17 Approved 11/14/02



FEDERAL ELECTION COMMISSION
WASHINGTON, DC od63

November 21, 2002

MEMORANDUM
TO: RON M. HARRIS
PRESS OFFICER
PRESS OFFICE a
FROM: JOSEPH F. STOLTZ
ASSISTANT STAFI CTOR
AUDIT DIVISION

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON
COMMITTEE TO ELECT LINDSEY GRAHAM

Attached please find a copy of the final audit report and related documents on
Committee to Elect Lindsey Graham that was approved by the Commission on November
14, 2002.

All parties involved have received informational copies of the report and the
report may be released to the public on November 21, 2002.

Attachment as stated

ec: Office of General Counsel
Office of Public Disclosure
Reports Analysis Division
FEC Library


front and back of the negotiated refund checks). It was also recommended that CELG
itemize the contribution refunds on Schedules B (Itemized Disbursements) supporting
Line 20a of the Detailed Summary Page for the appropriate reporting periods. If any
contributor was not located or the contributor did not cash a refund check, it was
recommended that CELG disburse the funds to the United States Treasury. If funds were
not available to make the necessary refunds. amounts transferred from CELG to the
Lindsey Graham for Senate Committee (Senate Committee) were to be retumed to
CELG, or alternatively, any contribution refunds or payments to the United States
Treasury may be made from the Senate Committee.’ Any such disbursements by the
Senate Committee were to be itemized on its Schedules B with an explanation that the
contribution refunds related to contributions received by CELG.

In response to the interim audit report. CELG submitted documentation or
provided an explanation that addressed all the excessive contributions identified by the

Audit staff.

CELG provided documentation to support that contribution refunds
totaling $44,235 had been issued to 52 individuals.* These contributions refunds were
made after CELG received the interim audit report. As of September 30, 2002, a total of
$18,200 in contribution refunds had cleared the campaign bank account. The Audit staff
notes that the Senate Committee retumed funds to CELG for the purpose of making these
and any future contribution refunds.

For the remaining $10,166 ($54.401 - $44.235), CELG provided
documentation to support that contributions totaling $8,466, from eight individuals, were
properly designated by the contributor and that contributions totaling $1,700 resulted
from discrepancies on CELG’s receipts database

The CELG response to the interim audit report also included several
statements regarding some of the excessive contributions. The assistant treasurer stated
that “[t]his campaign maintains that donor intent is paramount in designating funds ” She
also stated that fundraising mail pieces. donor information cards and/or response cards,
and phone solicitation scripts utilized during the campaign included the $1.000 per
election limit information. She explained that

“The existing FEC regulations regarding the publishing of
giving limits on campaign material is more than sufficient to
inform donors of what their giving limits are. and 1 should be
understood that any amount up to $2.U00 per individual for
each whole election cycle should be designated according 10
the imposed limits. To believe otherwise 1s to make donor

* See foomote #5

® This contribution refund amount includes $810 that was paid to the U.S. Treasury because two
individuals identified as being in excess of the limitation could not be located by CELG

Page 9 of 17 Approved 11 14:02



window. After the audit fieldwork, twenty of these letters were submitted; however. only
one letter was dated. This letter, dated November 16, 2001, was signed beyond sixty days
of receipt of the apparent excessive contribution. The Audit staff did not consider these
letters because the timeliness could not be verified or it was received beyond the allowed
time period.

In addition, the assistant treasurer provided a list of refunds totaling
$5,430* made to 18 contributors, and explained that:

“ [refunds as indicated in this list were not made within the
contribution vears affected [emphasis in original], but were
made following an audit of our records earlier this year [2001]
and more refunds were made in response to these present
findings. While we understand that refunds made this year are
not timely enough to mitigate the audit findings, we do not
want to hold funds that we are not entitled to hold in the
campaign account. Further refunds will be made if deemed
necessary.”

Prior to the interim audit report, no documentation was submitted to
substantiate these refunds and none of the 18 listed refunds were included by CELG on
disclosure reports covering activity through March 31, 2002.° Without evidence that
these refund checks were negotiated by the contributors, the Audit staff considered these

18 items as unresolved.

In summary, CELG accepted excessive contributions totaling $54,401
from 60 individuals. No separate account was maintained by CELG relative to
questionable contributions but the CELG consistently maintained a sufficient balance to
cover the refund of these contributions during the period in question.°

In the interim audit report. the Audit staff recommended that CELG
provide evidence demonstrating that the $54,401 in contributions was not excessive.
Absent such evidence, it was further recommended that CELG refund the excessive
contributions to the contributors and submit evidence of the refunds (photocopies of the

The assistant treasurer stated that three of these retunds. totaling $1,060. were either returned for
insufficient address or the refund check was not cashed by the contributor. No documentation was
provided to verify this statement.

The CELG reported the transfer of all remaining campaign funds to the Lindsey Graham for Senate
Commune on January 10, 2001. After that date. the CELG has disclosed no financial activity on tts FEC
reports. Therefore, the Audit staff also reviewed FEC reports of the Lindsey Graham tor Senate
Commute for the disclosure of the contribution retunds noted above.

Based on an analysis of the contribution and disbursement databases provided by the CELG. the 2000
Primary activity was not funded by contributions designated for the 2000 General.

Page 8o0f 17 Approved 11.14/02


Unless specifically discussed below, no material non-compliance was
detected. It should be noted that the Commission may pursue further any of the matters
discussed in this report in an enforcement action

I. AUDIT FINDINGS AND RECOMMENDATIONS

A. RECEIPT OF CONTRIBUTIONS FROM INDIVIDUALS IN EXCESS OF THE
LIMITATION

Section 441a(a)(1)(A) of Title 2 of the United States Code states, that no
person shall make contributions to any candidate and his authorized political committees
with respect to any election for Federal office which. in the aggregate, exceed $1,000.

Subsection (b)(2) of 11 CFR §110.1 explains that with respect to any:
election means that if the contribution is not designated in writing by the contributor for a
particular election then the contribution applies to the next election for that Federal office
after the contribution is made.

Sections 103.3(b)(3) and (4) of Title 11 of the Code of Federal
Regulations state, in part, that contributions which exceed the contribution limitations
may be deposited into a campaign depository or returned to the contributor. If any such
contribution is deposited, the treasurer may request redesignation or reattribution of the
contribution by the contributor in accordance with 11 CFR 110.1(b) or 110.1{k). Ifa
redesignation or reattribution is not obtained, the treasurer shall, within 60 days of the
treasurer's receipt of the contribution, refund the contribution to the contributor. Further,
any contribution which appears to be illegal under 11 CFR 103.3(b)(3), and which is
deposited into a campaign depository shall not be used for any disbursements by the
political committee until the contribution has been determined to be legal. The political
committee must either establish a separate account in a campaign depository for such
contributions or maintain sufficient funds to make all such refunds.

Section 110.1(b)(5)(i) and (ii) of Title 11 of the Code of Federal
Regulations states, in part, that the treasurer of an authorized poliucal committee may
request a written redesignation of a contribution by the contributor for a different election
if:

° the contribution was designated in writing for a particular election, and the
contribution, either on its face or when aggregated with other contributions
from the same contributor for the same election. exceeds the limitation at
11 CFR §110.1(b)(1):

° the contribution was designated in writing for a particular election and the
contribution was made after that election and the contribution cannot be

Page 5 of 17 Approved 1114/02


FEDERAL ELECTION COMMISSION

WASHINGTON DC 20464

COMMITTEE TO ELECT LINDSEY GRAHAM
EXECUTIVE SUMMARY

The Committee to Elect Lindsey Graham (CELG) registered with the Federal
Election Commission on April 13. 1994 as the principal campaign committee for Lindsey
O. Graham, Republican candidate for the U.S. House of Representatives from the state of
South Carolina, Third Congressional District

The audit was conducted pursuant to 2 U.S.C. §438(b), which states that the
Commission may conduct audits of any political committee whose reports fail to meet
the threshold level of compliance set by the Commission. The findings from the audit
were presented to the Committee at the completion of fieldwork on November 5, 2001
and later in the interim audit report. The relevant parts of the Committee's response to
these findings are included in the audit report

The following is an overview of the findings contained in the audit report.

Receipt of Contributions from Individuals in Excess of the Limitation —

2 U.S.C. §441a(a)(1)(A); 11 CFR 103.3(b). A review of CELG’s receipt records
identified contributions from 60 individuals that were in excess of the limitation by
$54,401. Of this amount, $43,276 related to the 2000 primary election and $11.125
related to the 2000 general election. CELG has attempted to refund $44,235 to 52
individuals and demonstrated the remaining amounts were not excessive. Refund
amounts that have not been cashed by the contributor were forwarded to the U.S
Treasury.

Misstatement of Financial Activity —

2 U.S.C. §434(b)(1) (2) and (4). The reconciliations of CELG’s reported financial
activity to its bank activity indicated that cash on hand balances. disbursements. and
receipts were materially misstated. CELG filed amended reports that matenaliy
corrected these misstatements

Itemization of Receipts from Political Committees —
2 U.S.C. 434(b\(3B). A material number of contributions from political committees

were not itemized on Schedules A (Itemized Receipts) as required. CELG filed amended
Schedules A to disclose the missing information

Page 1 of 17 Approved 11/14/02


10

contributions counted at 1998-year’s end were also counted in
1999 deposits for the year.”

The assistant treasurer's statement does not explain the reported cash
balance discrepancy. Of the $40,000 in withdrawals from the investment account noted
above, $30,000 occurred in December of 1998 and were transfers to the checking account
and petty cash fund. As inter-account transfers, these transactions are not reportable and
do not affect the reported cash balance. In addition, the CELG’s explanation is not
supported by activity disclosed on the 1998 Year End report. Therefore, the cash
discrepancy is the result of other reporting errors in the 1998 Year End Report or earlier
disclosure reports.

The Audit staff notes that these prior period discrepancies (pre-1999)
affected the cash on hand balances for the entire period covered by the audit and since no
workpapers showing the derivation of the report figures were provided, we were unable to
explain the differences.

CELG understated its 1999 reported disbursements by the net amount of
$3,294, primarily due to not reporting disbursements totaling $23,468 (including $1,758
of in-kind contributions) and over-reporting disbursements totaling $20,273. The over
reported disbursements include voided checks and disbursements that were reported
twice. There was also an unexplained understatement of $99. CELG understated its
1999 receipts by the amount of $7,624 (including investment income of $1,584 not
reported).

The beginning cash on hand balance at January 1, 2000, was overstated by
$61,196 primarily due to CELG carrying forward the pre-1999 discrepancies and the
1999 receipt and disbursement differences discussed above. Additionally, CELG
understated its 2000 reported disbursements by the net amount of $14,217, primarily due
to not reporting disbursements totaling $36,707 and over-reporting disbursements totaling
$50,261. The over reported disbursements include voided checks. amounts that should
have been reported as memo entnes, and disbursements made in 200t that were reported
on both the 2000 Year End report and 2001 Mid Year report. There was also an
unexplained overstatement of $663. Finally. 2000 receipts are overstated by $23,691, but
without a record of the derivation of the CELG's reported receipts total, we were unable
to explain the misstatement. Ending cash for the vear was overstated by $70.672

The assistant treasurer was informed of the identified discrepancies
included in reported activity. She submitted a written response that stated that some of
the disbursement reporting errors resulted from combining handwritten figures with
computer-generated figures when the reports were prepared. She added that corrections
would be made to the disbursements database and that amendments to all reports affected
by these mistakes were being prepared. In regards to the reporting of voided checks, the
assistant treasurer stated the errors would have been discovered had the CELG balanced

Page 12 of 17 Approved 11/14/02


12

At the exit conference, the Audit staff provided a list of these contributions
to CELG officials. In a subsequent written response, the assistant treasurer of CELG

stated that:

“{t]he PAC contributions have been matched to their respective
deposit tickets and check copies have been furnished. Many of
these PACs were identified on deposit tickets by “PAC” only,
which makes it difficult at best to match to deposit tickets. In
preparing this response, the most effective method we found to
match checks to deposits was to contact each PAC in question
to obtain the date each check cleared. We then traced the check
to the appropriate deposit.”

Regarding the itemization of these contributions, the CELG stated that:

«_,.,amendments are being prepared to reflect necessary
changes to 1999 and 2000 Summary pages and Schedules A’s.”

The CELG also noted that in some cases the contribution checks were not
received from the political committee in a timely manner and that may have delayed the
CELG’s deposit of the contributions.

In the interim audit report. the Audit staff recommended that CELG file
amended Schedules A and Detailed Summary Pages for each reporting period to correct
the deficiencies noted above. In addition, it was recommended that CELG provide
evidence (i.e., contribution check copies and corresponding bank deposit tickets) showing
if each contribution was included in report totals.

In response to the interim audit report, CELG filed amended Schedules A
that materially corrected the public record for the itemization of contributions received
from other political committees. CELG also provided contribution check copies for the
majority of the contributions questioned and some of the corresponding bank deposit
tickets as verification of its reported totals.

Page 14 of 17 Approved 1114/02



TABLE OF CONTENTS

COMMITTEE TO ELECT LINDSEY GRAHAM

PAGE
Executive Summary 1
Final Audit Report 3
Background 3
Findings 5
Transmittal to Committee 1S

Chronology V7


REPORT OF THE AUDIT DIVISION
ON THE

COMMITTEE TO ELECT
LINDSEY GRAHAM

Approved November 14, 2002

FEDERAL ELECTION COMMISSION
999 E STREET, N.W.
WASHINGTON, D.C.



intent irrelevant and deprives the individual(s) of exercising
his/her right to participate in the political process by
contributing to political campaigns.”

Regarding several other contributions, the assistant treasurer explained
that certain contributors were members of the same family and were adequately notified
of the contribution limitations when the funds were solicited and that the CELG followed
the contributors’ instructions concerning the designation of their contribution.

The Commission’s regulations, as cited above, provide instruction and
documentation requirements for contributions that are to be attributed to more than one
person or to more than one election. CELG's records did not meet those requirements
with respect to the contributions at issue. Since the CELG did not provide documentation
to support the contributors’ election designations, the Audit staff maintains that these
funds are excessive. Contribution refunds were subsequently issued by CELG to these
individuals.

The assistant treasurer also explained a willingness to “...abide by the
audit staff's suggestions” with respect to the final outcome of this matter. She added that
contribution refund checks that are returned to CELG or not cashed by the contributor
within sixty days would be voided and those funds forwarded to the United States
Treasury. CELG included in its response Schedules B supporting Line 20a (Contribution
Refunds) for some of the above-mentioned refunds.

In summary, of the $54,401 in excessive contributions identified by the
Audit staff in the interim audit report, CELG documented that:

° Contributions totaling $44.235 were refunded untimely;”

° Contributions totaling $8.466 were correctly designated by the
contributors to the proper election; and

° Contributions totaling $1.700 were the result of discrepancies in CELG’s
receipts database.

° This figure includes $26,035 in contribution refunds issued by CELG that have not cleared the campaign
account as of September 30, 2002

Page 10 of 17 Approved 11/14/02



oI

monthly bank statements prior to filing reports. She added that in the future CELG would
perform monthly bank reconciliations to identify any necessary report adjustments.

In the interim audit report. the Audit staff recommended that CELG file
amended reports for the appropriate reporting periods in 1999 and 2000 to correct the
misstatements. It was further recommended that these amendments include Summary
and Detailed Summary Pages as well as Schedules B. In addition, it was recommended
that CELG review financial activity for reporting periods prior to 1999, provide an
explanation and documentation for the misstatement of its 1999 beginning cash balance.
and file the amended reports necessary to correct earlier misstatements. Regarding the
petty cash fund, the Audit staff recommended that CELG provide bank documeniation
(validated deposit ticket and bank statement) to ven fv the deposit of $8,000 from the
petty cash fund into the checking account.

In response to the interim audit report. CELG filed amended reports that
materially corrected the misstatements identified in 1999 and 2000. In addition, CELG
filed amendments for 1998 financial activity that corrected the cash balance reported as of
the beginning of 1999. CELG also provided a validated deposit ticket from the bank that
supports the deposit of $8,000 in currency on February 21, 2002.

Cc. ITEMIZATION OF CONTRIBUTIONS FROM OTHER POLITICAL
COMMITTEES

Section 434(b)(3)(B) of Title 2 of the United States Code states that each
report under this section shall disclose the identification of each political committee
which makes a contribution to the reporting committee during the reporting period,
together with the date and amount of any such contribution.

Section 431(13)(B) of Title 2 of the United States Code defines the term
“identification” to be, in the case of a person that is not an individual, the full name and
address of such person.

Section 104.3(a)(4) of Title 1] of the Code of Federal Regulations states,
in part, that the identification of each contnbutor and the aggregate year-to-date total for
such contributor shall be reported for all committees which make contnbutions to the
reporting committee during the reporting period

The Audit staff identified §3 contribuuons totaling $68.755 from political
committees that were not itemized on Schedules A (itermzed Receipts) as required
Many of these contributions couid not be identified on the CELG’s receipts database nor
were contribution check copies available for some of the contributions in quesuon. The
Audit staff identified these items by reconciling contributions made to CELG as reported
by other political committees to CELG’s Schedules A for the period covered by the audit.

Page 13 of 17 Approved 11.1402