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HFP/062389

FEDERAL ElECTION COMMISSION

WASHINGTON. 0 C 20463

June 28, 1989

MEMORANDUM

TO:

FROM:

SUBJECT:

FRED EILAND

CHIEF, PRESS OFFICE

ROBERT J. COSTA

ASSISTANT STAFF DI~O~ FOR THE AUDIT DIVISION

PUBLIC ISSUANCE OF FINAL AUDIT REPORTHAIG FOR PRESIDENT

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Attached please find a copy of the final audit report on

Haig for President which was approved by the Commission on

June 22, 1989.

Informational copies of the report have been received by all

parties involved and the report may be released to the public.

Attachments as stated

cc: FEC Library

RAD

Public Disclosure

Office of General Counsel
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.. HFP/062289

FEDERAL ELECTION COMMISSION

WASHINGTON. DC 204&3

June 23, 1989

Dominic Saraceno, Treasurer

Haig for President

c/o Kurt Saracen

57 Wells Avenue

Newton Center, MA 02159

Dear Mr. Saraceno:

Attached please find the Final Audit Report on Haig for

President. The Commission approved the report on June 22, 1989.

In accordance with 11 C.F.R. §§9038.2(c) (1) and ~)(1), the

Commission has made an initial determination that the Candidate

is to repay to the Secretary of the Treasury $8,834.14 within 90

days after service of this report (September 23, 1989). Should

the Candidate dispute the Commission's determination that a

repayment is required, Commission regulations at 11 C.F.R.

§9038.2(c)(2) provide the Candidate with an opportunity to submit

in writing, within 30 calendar days after service of the

Commission's notice (July 25, 1989), legal and factual materials

to demonstrate that no repayment, or a lesser repayment, is

required. The Commission will consider any written legal and

factual materials submitted by the Candidate within this 30 day

period in making a final repayment determination. Such materials

may be submitted by counsel if the Candidate so elects. If the

Candidate does not dispute this initial determination within the

30 day period provided, it will be considered final. Should the

Committee wish to file a response to the initial repayment

determination contained in the Final Audit Report, please contact

Kim Bright-Coleman in the Office of General Counsel at (202) 424-

9530, or toll free at (800) 424-9530.

The Commission approved copy of the Final Audit Report will

be placed on the public record within approximately 24 hours.

Should you have any questions regarding the public release of

this report, please contact Mr. Fred S. Eiland of the

Commission's Press Office at (202) 376-3155 or toll free at (800)

424-9530.
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Afty, ~.stions ~u ••y have related to matter. covered during tbe a~41t ~i In ttie,'tepprt should be directed to Valerie Conroy of tbe Aaai~ Division at (202) 376-5320 or toll free at (800)

t24-9,51'0'•. '.'

-?!#;'1t:.~ Assistant staff Director

Audit Division

cc: Lawrence J. Halloran

Kathy MacKenzie
FEDERAL ELECTION COMMISSION

'\,ASHINGTON DC 204£>3

REPORT OF THE AUDIT DIVISION

ON

HAIG FOR PRESIDENT

HAIGl/052289

I. Background

A. Overview

This report is based on an audit of Haig for president

("the Committee") to determine whether there has been compliance

with the provisions of the Federal Election Campaign Act of 1971,

as amended ("the Act") and the Presidential Primary Matching ~ayment Account Act. The audit was conducted pursuant to 26

U.S.C. § 9038(a) which states that "After each matching payment

lPeriod, the Commission shall conduct a thorough examination and ~~udit of the qualified campaign expenses of every candidate and

!his authorized committees who received payments under Section

~037."

-.0 In addition, 26 U.S.C. § 9039(b) and 11 C.F.R.

§ 9038.l(a) (2) state, in relevant part, that the Commission may

c:onduct other examinations and audits from time to time as it ~eems necessary, and to require the keeping and submission of any

nooks, records, and information, which it determines to be ~ecessary to carry out its responsibilities.

The audi t covered the period f rom the Commi ttee' s

inception, December 1986 through March 31, 1988. In addition,

certain other financial activity relating to the Committee's

Statement of Net Outstanding Campaign Obligations was reviewed

through April 21, 1988.

The Committee registered with the Federal Election

kommission on April 2, 1987. The Committee maintains its ~eadquarters in McLean, Virginia.

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The Committee reported an opening cash balance of $-0-,

total receipts of $2,435,178.27, total disbursements of

$2,436,247.30 and a closing cash balance of $63.47~/ on March 31,

1988. Under 11 C.F.R. § 9038.l(e) (4) additional audit work may

be conducted and addenda to this report issued as necessary.

~/ Due to math errors made by the Committee, the totals do not

foot.
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This report is based upon documents and workpapers

which Support each of the 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 Commissioners and

appropriate staff for review.

B. Key Personnel

The Committee Treasurer from April 2, 1987 through July

20, 1987 was Stephen A. Jernigan. Dominic J. Saraceno became

Treasurer July 28, 1987 and remains the Treasurer of record.~/

C. Scope

The audit included such tests as verification of total

reported receipts, disbursements and individual transactions;

review of required supporting documentations; analysis of

Committee debts and obligations; review of contribution and

expenditure limitations; and such other audit procedures as

deemed necessary under the circumstances.

II. Audit Findings and Recommendations Related to Title 2 of the

Uni ted States Code

Introduction

The findings set forth in this report are not complete due

to the Committee's failure to provide certain records requested

in the interim report. Additional findings may be issued in an

addendum to this report following review of these records.

Section 434(b) of Title 2 of the United States Code

states, in part, that each report shall disclose the total of all

receipts and disbursements received or made during the reporting

period and the calendar year. 0:::

A. Misstatement of Financial Activity

The reconciliation of the activity per the Committee's

bank accounts to its disclosure reports filed during calendar

year 1987~/ and reporting periods January 1, 1988 through March

31, 1988 indicated the following differences:

1987

Reported receipts were overstated by

Reported disbursements were understated by

Reported ending cash was overstated by

$20,370.73

$36,384.40

$56,755.13

~/ There was no treasurer of record between July 21, and July

27, 1987.

~/ The Committee's 1986 exploratory account activity was

included in its first report filed during calendar year

1987.
The misstatement of receipts for 1987 was primarily the

net result of the duplicative reporting of $32,632 of individual

contributions on the third quarter disclosure report, the failure

to report $5,025 in refunds of deposits and $10,500 of

contributions received from individuals, the reporting of $119.80

of bank charges as a receipt, and $3,143.93 was unexplained.

The misstatement of disbursements was primarily the

result of unreported expenditures totalling $39,125.91, the

under-reporting of three expenditures by $615.43, and $2,210.59

in disbursements reported and dated January 1, 1988 but which

cleared the Committee's depository on December 31, 1987.

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January 1 - March 31, 1988

Reported receipts were understated by

Reported disbursements were understated by

Reported ending cash was understated by

$62,234.89

$ 2,841.32

$ 1,505.45

The 1988 misstatement of receipts was primarily the

result of an unreported $50,000 line of credit advance and an

unreported $6,600 transfer from the Committee's "General Election"~/ account.

At the exit conference held May 20, 1988, Committee

officials were given copies of audit workpapers which identified

the required adjustments. Committee officials indicated that

comprehensive amendments correcting the misstatement of financial

activity would be filed.

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In the interim audit report, the Audit staff

recommended that the Committee file comprehensive amendments for

1987 and 1988 correcting the aforementioned misstatements. On

December 21, 1988 the Committee filed a comprehensive amendment

correcting the misstated activity.

Recommendation ~l

The Audit staff recommends no further action be taken on

this matter.

B. Itemization of Contributions Received

from Political Committees

Section 434(b) (3) (B) of Title 2 of the United States

Code states, in part, that each report under this section shall

disclose for the reporting period the identification of each

political committee which makes a contribution to the reporting

committee, together with the date and amount of any such

contribution.

~/ The Committee filed a disclosure report designated for the

General Election on October 15, 1987 and maintained a

General Election bank account.
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A review of contributions received from political

committees revealed that two contributions, totalling $1,000,

were not itemized correctly. The committee itemized a $500

contribution from Bake-PAC, PAC of the Independent Bakers

Association (Bake-PAC) as a contribution from an employee of the

Independent Bakers Association; and itemized a $500 contribution

from Lockheed Employees PAC as a contribution from a Corporate

Vice President of Lockheed Corp. The Audit staff noted that

copies of the Bake-PAC and Lockheed PAC contribution checks were

accompanied by solicitation cards referring to the Leadership for

America Reception held June 10, 1987; the individuals mentioned

above were listed as attendees to the event. Committee officials

responded that a comprehensive amendment would be filed.

In the interim audit report, the Audit staff

recommended the Committee file a comprehensive amendment that

correctly itemizes the aforementioned contributions. On December

21, 1988 the Committee filed a comprehensive amendment correcting

the itemization errors.

Recommendation 12

The Audit staff recommends no further action be taken on

this matter.

C. Itemization of Disbursements

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Section 434(b) (5) of Title 2 of the United States Code

states, in part, that each authorized committee shall report the

name and address of each person to whom an expenditure in an

aggregate amount or value in excess of $200.00 within the

calendar year is made, together with the date, amount, and

purpose of such expenditure.

During a review of the activity relative to the

Committee's disbursements made from the New Hampshire bank

account, it was determined that the Committee did not itemize

$12,973.29 in disbursements. At the exit conference, schedules

detailing these disbursements were provided to the Committee.

Committee officials explained that beginning in January

1988 funding transfers from its Riggs Main account to the New

Hampshire bank account were reported rather than the actual

disbursements from the New Hampshire bank account.

The Committee indicated a comprehensive amendment would

be filed in which the above mentioned disbursements would be

i temi zed.

In the interim audit report, the Audit staff

recommended that the Committee file a comprehensive amendment

itemizing all required disbursements. On December 21, 1988 the

Committee filed a comprehensive amendment itemizing all required

dis bur semen ts.
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Recommendation #3

The Audit staff recommends no further action be taken on

this matter.

D. Matters Referred to Office of General Counsel

Certain other matters noted during the audit have been

referred to the Commission's Office of General Counsel.

III. Findings and Recommendations Related to Title 26

of the United States Code

A. Calculation of Repayment Ratio

Section 9038 (b) (2) (A) of Ti tle 26 of the Uni ted States

Code states that if the Commission determines that any amount of

any payment made to a candidate from the matching payment account

was used for any purpose other than to defray the qualified

campaign expenses with respect to which such payment was made it

shall notify such candidate of the amount so used, and the

candidate shall pay to the Secretary an amount equal to such

amount.

The Regulations at 11 C.F.R. § 9038.2(b) (2) (iii) state

that the amount of any repayment sought under this section shall

bear the same ratio to the total amount determined to have been

used for non-qualified campaign expenses as the amount of

matching funds certified to the candidate bears to the total

amount of deposits of contributions and matching funds, as of the

candidate's date of ineligibility.

The formula and the appropriate calculation with

respect to the Committee's receipt activity is as follows:

Total Matching Funds Certified through the Date

of Ineli ibilit - 2/12/88

Numerator plus Prlvate Contributlons Received through 2 12 88

$439,395

$439,385 + $1,252,965 = .259634

Thus, the re2ayment ratio for non-qualified campaign

expenses is 25.9634%.:1

B. Apparent Non-Qualified Campaign Expenses

Section 9032(9) of Title 26 of the United States Code

defines, in part, the term "qualified campaign expense" as a

purchase or payment incurred by or on behalf of a candidate or

~/ This ratio differs slightly from that in the Interim Audit

Report.

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his authorized committee made in connection with his campaign for

nomination which neither the incurring of nor payment of

constitutes a violation of any law of any state in which the

expense is paid.

Section 9033.11 of Title 11 Code of Federal Regulations

states, in part, that each candidate shall have the burden of

proving that disbursements made by the candidate or his

authorized committee are qualified campaign expenses. For

disbursements in excess of $200 to a payee the candidate shall

present one of the following:

A receipted bill from the payee which states

the purpose of the disbursement; a cancelled

check and an invoice generated by payee

stating the purpose of the disbursement, or a

voucher or contemporaneous memorandum from

the candidate or committee which states the

purpose of the disbursement. Where neither a

receipted bill nor supporting documentation

as described previously is available, a

cancelled check negotiated by the payee that

states the purpose of the disbursement is

required. Where a cancelled check stating

purpose is not available the committee may

present a cancelled check and collateral

evidence to document the qualified campaign

expense. Such collateral evidence may

include, but is not limited to, demonstration

that the expenditure is part of an

identifiable program or project which is

otherwise sufficiently documented; evidence

that the disbursement is covered by a preestablished written campaign committee policy.

During a review of the Committee's expenditures it was

noted that 49 expenditures totalling $26,032.10 were not

documented in accordance with 11 C.F.R. § 9033.11.

Committee officials indicated they would attempt to

provide documentation and were provided schedules of the above

expenses at the exit conference.

In the interim audit report, the Audit staff

recommended the Committee submit documentation which demonstrates

the above expenditures are qualified campaign expenditures.

Absent such a demonstration, the Audit staff recommended that the

Commission make an initial determination that the Committee make

a pro rata repayment of $6,759 ($26,032.10 x .259634) to the U.S.

Treasury pursuant to 26 U.S.C. § 9038(b) (2).

On January 23, 1989, the committee submitted

documentation to support $393.37 of the above mentioned

expenditures. In addition, certain documentation made available

during fieldwork was analyzed in conjunction with the Committee's
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response. This review identified 11 disbursements totalling

$2,609.63, as adequately documented.

Conclusion t4

On June 22, 1989 the Commission made an initial

determination that the $23,029.10 ($26,032.10 - $393.37 -

$2,609.63) in undocumented expenditures are non-qualified

campaign expenses and that the Committee make a pro rata

repayment of $5,979.14 ($23,029.10 X .259634) to the u.s.

Treasury pursuant to 26 U.S.C. §9038(b) (2).

C. Repayment of Matching Funds Received

in Excess of Entitlement

Section 9038(b) (1) of Title 26 of the United States

Code states, in part, that if the Commission determines that any

portion of the payments made to a candidate from the matching

payment account was in excess of the aggregate payments to which

such candidate was entitled, it shall notify the candidate, and

the candidate shall pay to the Secretary an amount equal to the

amount of excess payments.

1. Contributions Made Payable to Other Than

Candidate or an Authorized Committee

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Section 102.l7(c) (1) and (2) of Title 11 Code of

Federal Regulations states, in part, that the participants in a

joint fundraising activity shall enter into a written agreement.

The written agreement shall identify the fundraising

representative and shall state a formula for the allocation of

fundraising proceeds. In addition to any notice required by

11 C.F.R. § 110.11, a joint fundraising notice shall be included

with every solicitation for contributions. This notice shall

include the names of all committees participating in the joint

fundraising activity whether or not such committees are political

committees; the allocation formula to be used for distributing

joint fundraising proceeds, a statement informing contributors

that, notwithstanding the stated allocation formula, they may

designate their contributions for a particular participant or

participants, and a statement informing contributors that the

allocation formula may change if a contributor makes a

contribution which would exceed the amount that contributor may

give to any participant. See also 11 C.F.R. § 9034.8.

During May 1987 the Committee participated in a series

of joint fundraising events. A review of proceeds received from

the joint fundraising events indicated that contributions made

payable to or designated by memo to other than the candidate or

the candidate's authorized committee were included in the

Committee's threshold submission. Further review identified 22

contributions totalling $1,222.50 made payable to or designated

to other than the candidate or his authorized committee which

were submitted for matching and subsequently matched for $1,174.
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2. Excessive Portions of Contributions

and Refunded Contributions Which Were

Submitted for Matching

A review of excessive contributions was made with

respect to those contributions submitted for matching. This

review indicated that in 2 instances, the Committee submitted for

matching a contribution that, when aggregated with other

contributions from the same contributor, exceeded in its entirety

the $1,000 limitation. For example, contributor A made a $1,000

contribution to the Committee in January 1987 and a second $1,000

contribution in June 1987. The Committee submitted for matching

the second $1,000 and received matching funds totalling $250.00.

It is the opinion of the Audit staff that the

$1,000 contribution made in June 1987 from contributor A is not

matchable pursuant to 11 C.F.R. § 9034.3(e), which states that

contributions which are made or accepted in violation of 2 U.S.C.

§ 44la are not matchable. In 5 instances the excessive

contributions submitted for matching were refunded to the

contributors.

Matching funds totalling $1,681 were received

relative to the 7 contributions discussed above.

The Audit staff recommended in the interim audit

report that absent a showing to the contrary the Commission make

an initial determination that the Committee make a repayment of

$2,855 ($1,174 + $1,681) to the u.S. Treasury pursuant to 26

U.S.C. §9038 (b) (1).

On December 21, 1988, the Committee stated in its

response to the interim audit report it was unable to provide

additional documentation to support the contributions in

question.

Conclus ion ~5

On June 22, 1989 the Commission made an initial

determination that the Committee make a repayment of $2,855

($1,174 + $1~6Bl) to the U.S. Treasury pursuant to 26 U.S.C.

§903B(b) (1) ._1

~/ Additional recommendations, including potential repayments,

may be forthcoming with respect to matters addressed at

Find i ng I I I •C .
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Repayrnen t Recap

Apparent Non-Qualified

Campaign Expenses

Finding III.B.l.

Matching Funds Received

in Excess of Entitlement

Finding III.C.l.

Finding III.C.2.

Total Repayment Requested

$ 5,979.14

1,174.00

1,681.00

$ 8,834.14*/

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D. Determination of Net Outstanding Campaign Obligations

Section 9034.5(a) of Title 11 Code of Federal

Regulations requires that within 15 days of the candidate's date

of ineligibility, the candidate submit a Statement of Net

Outstanding Campaign Obligations which contains, among other

items, the total of all outstanding obligations for qualified

campaign expenses and an estimate of necessary winding down

costs.

In addition, 11 C.F.R. § 9034.1(b) states, in part,

that if on the date of ineligibility a candidate has net

outstanding campaign obligations as defined under 11 C.F.R.

§ 9034.5, that candidate may continue to receive matching

payments provided that on the date of payment there are remaining

net outstanding campaign obligations.

General Haig's date of ineligibility was February 12,

1988. The Committee filed a Statement of Net Outstanding

Campaign Obligations (NOCO) on February 29, 1988 which reflected

the Committee's estimated NOCO as of February 12, 1988. The

Audit staff reviewed the Committee's financial activity through

April 21, 1988 and estimated the Committee's winding down costs

and made adjustments to the NOCO. The Committee's NOCO as

adjusted by the Audit staff appears below:

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*/ Certain matters referred to at Finding II.D. may also have

repayment consequences. Such repayments will be addressed

in addenda to this report.
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550,379.83 ~j

$112,953.00

88,476.97

33,825.00

$ 168, 61 5. 35 ~/

50,000.00

209,462.51

$ 17,451.43

95,501.57

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$70,934.25

7,542.72

10,000.00

Cash in Bank

Accounts Receivable

Capi tal Assets

Total Assets

Assets

Haig For President

Audit Analysis of February 12, 1988 NOCO Statement

Determined as of April 21, 1988

Obligations

Line of Credit

Candidate Loan

Accounts Payable - Qualified Campaign

Expenses

~ccounts Payable - Contribution Refunds

...f:'

~stimate/d Winding d50/w3nl/88)_~/ costs (2 13/88 -

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~-, aries

: and Office expense _ ... al fees ~otal estimated winding

&own costs

~otal Obligations

CNet outstanding Campaign

Obligation Deficit as of

O'February 12,1988

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($437,426.83)

Shown below is an adjustment for private contributions and matching

funds received for the period February 13, 1988 through March 31, 1988,

the most current financial information available at the close of fieldwork.

~/ Includes advances totalling $28,000 received 2/13/88 - 4/21/88.

b/ Adjustments will be made as necessary.

c/ Since certain estimates were used in computing this amount,

the Audit staff will review the Committee's reports and records

to compare the actual figures with the estimates and prepare

adjustments, as necessary.
The adjusted NOCO has been discussed with the Committee's

Finance Director and she agreed with the adjustment.

In view of the Committee's deficit at February 12, 1988 as

indicated on the NOCO statement, the Committee has not received

matching fund payments in excess of its entitlement.

60,646.07

56,242.05

$ ( 320 , 53 8. 71)

$ (437,426.83)

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Conclusion

Matching Funds Received

Remaining Entitlement as

of April 21, 1988

Net .Outstanding Campaign Obligations (Deficit) as

of February 12, 1988

Private Contributions

Received
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