FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

September 26, 2008 

Sandra Yartin DePoy, Treasurer 

American Resort Development Association 

Resort Owners Coalition PAC 

1201 15th Street NW, Suite 400 

Washington, DC 20005 

Dear Ms. DePoy: 

Attached, please find the Report of the Audit Division on the American Resort 

Development Association Resort Owners Coalition PAC. The Commission approved 

this report on September 24, 2008. 

The Commission approved Final Audit Report will be placed on the public record 

on October 1, 2008. Should you have any questions regarding the public release of this 

report, please contact the Commission's Press Office at (202) 694-1220. 

Any questions you may have related to matters covered during the audit or in the 

report should be directed to Henry Miller or Thomas Hintennister of the Audit Division 

at (202) 694-1200 or toll free at (800) 424-9530. 

Sincerely, 

J1r~Cf~ Wanda J. Thomas 

Acting Assistant Staff Director 

Audit Division 

Attachment as stated 
Report of the Audit Division on the 

American Resort Development 

Association Resort Owners Coalition PAC 

January 1, 2003 - December 31, 2004 

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. 1 The audit 

determines whether the 

committee complied with 

the limitations, 

prohibitions and 

disclosure requirements 

ofthe Act. 

Future Action 

The Commission may 

initiate an enforcement 

action, at a later time, 

with respect to any ofthe 

matters discussed in this 

report. 

About the Committee (p. 2) 

The American Resort Development Association Resort Owners 

Coalition PAC (ARDA-ROC PAC) is a separate segregated fund 

ofthe American Resort Development Association Resort Owners. 

ARDA-ROC PAC qualified for multi-candidate status on June 7, 

2000 and is headquartered in Washington, DC. For more 

information, see the chart on the Committee Organization, p.3 

Financial Activity (p. 2) 

•	 Receipts 

o Contributions from Individuals $ 2,453,210 

o Other Receipts	 113,572 

o Total Receipts	 $ 2,566,782 

•	 Disbursements 

o	 Operating Expenditures $ 1,429,575 

o	 Contributions to Federal 

Political Committees 1,020,179 

o	 Total Disbursements $ 2,449,754 

Findings and Recommendations (p. 4) 

•	 Misstatement of Financial Activity (Finding 1) 

•	 Receipt of Prohibited Contributions (Finding 2) 

•	 Improper Solicitation ofContributions (Finding 3) 

1 2 U.S.c. §438(b). 
Table of Contents 

Page 

Part I. Background 

Authority for Audit 2
 

Scope of Audit 2
 

Limitations 2
 

Part II. Overview of Committee
 

Committee Organization 3
 

Overview of Financial Activity 3
 

Part III. Summaries 

Findings and Recommendations 4
 

Part IV. Findings and Recommendations
 

Finding 1. Misstatement of Financial Activity 5
 

Finding 2. Receipt of Prohibited Contributions 8
 

Finding 3. Improper Solicitation of Contributions 10
 
2
 

Part I 

Background 

Authority for Audit 

This report is based on an audit of the American Resort Development Association Resort Owners 

Coalition PAC (ARDA-ROC PAC), 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 ofreports 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: 

1. The receipt of excessive contributions and loans. 

2. The receipt of contributions from prohibited sources. 

3. The disclosure of contributions received. 

4. The disclosure of disbursements. 

5. The consistency between reported figures and bank records. 

6. The completeness of records. 

7. Other committee operations necessary to the review. 

Limitations 

The Audit staff sampled a limited number of contributions from individuals because ARDAROC PAC does not maintain a single centralized database of contributions from individuals. 

Contributions are not directly collected by ARDA-ROC PAC, rather; contributions are solicited 

and collected by resort management companies through periodic billings to timeshare owners for 

taxes, maintenance, and other services. These companies utilize varying and separate accounting 

systems in the collection ofthese contributions. Most contributions received by ARDA-ROC 

PAC are in amounts under five dollars and do not require itemization on reports. As a result of 

the volume of contributions and the indirect method in which they are collected, ARDA-ROC 

PAC does not maintain detailed records of contributions from individuals. The Audit staffs 

testing was limited for the receipt of possible excessive contributions, prohibited contributions, 

and recordkeeping. The lack of a centralized database or other record of contributions from 

individuals also limited the Audit staffs ability to accurately project the magnitude oftesting 

results. 
3 

Part II 

Overview of Committee 

Committee Organization 

Important Dates ARDA-ROC PAC 

• Date ofRegistration June 7, 2000 

• Audit Coverage January 1,2003 -December 31, 2004 

Headquarters Washington, D.C. 

Bank Information 

• Bank Depositories Three 

• Bank Accounts Two checkingT 

, one investment 

Treasurer 

• Treasurer When Audit Was Conducted Sandra Yartin DePoy 

• Treasurer During Period Covered by Audit Sandra Yartin DePoy 

Management Information 

• Attended FEC Campaign Finance Seminar No 

• Used Commonly Available Campaign 

Management Software Package 

Yes 

•	 Who Handled Accounting and Paid Staff 

Recordkeeping Tasks 

Overview of Financial Activity 

(Audited Amounts) 

-

Cash on hand (iiJ January 1, 2003 $ 969,580 

2,453,210 

113,572 

$ 2,566,782 

0 Contributions 

0 Other Receipts 

Total Receipts 

0 Operating Expenditures 

0 Contributions to Federal Political 

Committees 

Total Disbursements 

1,429,575 

1,020,179 

s 2,449,754 

Cash on hand @ December 31,2004 s 1,086,608 

2 ARDA-ROC PAC maintained a checking account from which a minimal amount of activity occurred. This 

account was closed in October of 2003. 
4 

Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

A comparison ofARDA-ROC PAC's reported activity to bank: records revealed 

misstatements in 2003 and 2004. Reported disbursements were understated by $190,661 in 

2003 and by $394,353 in 2004. Reported receipts were also understated by $1,236,536 in 

2004 and the cash on hand balance was misstated throughout both years. In response to the 

interim audit report, ARDA-ROC PAC amended reports to materially correct the 

misstatements. (For more detail, see p. 5) 

Finding 2. Receipt of Prohibited Contributions 

A limited review of contributions from individual timeshare owners resulted in the 

identification of contributions from apparent prohibited sources totaling $18,323. These 

contributions amounts were typically less than five dollars and were received from apparent 

corporations and foreign nationals. Absent evidence that prohibited contributions were not 

received, the Audit staff recommended that ARDA-ROC PAC refund or disgorge any 

prohibited contribution received in 2003 and 2004. The Audit staff also recommended that 

ARDA-ROC PAC implement new procedures to prevent the acceptance of contributions 

prohibited by the Act. In response to the interim audit report, ARDA-ROC PAC disgorged 

the prohibited contributions totaling $18,323 from apparent corporations and foreign 

nationals to the U.S. Treasury. Further, ARDA-ROC PAC will provide its members with 

additional direction to prevent contributions from individuals with a foreign residence 

address from being transmitted to ARDA-ROC PAC. 

(For more detail, see p. 8) 

Finding 3. Improper Solicitation of Contributions 

Several solicitations associated with contributions from individual timeshare owners did not 

meet the requirement of the Act that contributors be advised that contributions are voluntary. 

The Audit staff recommended that ARDA-ROC PAC provide evidence that solicitations did 

meet this requirement. Absent such a demonstration, it was recommended that ARDA-ROC 

PAC contact contributors to inform them that all contributions are voluntary and offer a 

refund ifthe contributor made such a request. Further, it was recommended that ARDAROC-PAC amend its procedures to assure that all future solicitations meet the requirements 

of the Act. In response to the interim audit report, ARDA-ROC PAC sent letters to 

contributors as recommended. For future compliance, ARDA-ROC PAC indicated that the 

notice requirements would be included on its website, newsletters, association bulletins, and 

would also likely be discussed at its annual meeting of homeowners associations. 

(For more detail, see p. 10) 
5 

Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Summary 

A comparison of ARDA-ROC PAC's reported activity to bank records revealed
 

misstatements in 2003 and 2004. Reported disbursements were understated by $190,661 in
 

2003 and by $394,353 in 2004. Reported receipts were also understated by $1,236,536 in
 

2004 and the cash on hand balance was misstated throughout both years. In response to the
 

interim audit report, ARDA-ROC PAC amended reports to materially correct the
 

misstatements.
 

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; 

•	 Certain transactions that require itemization on Schedule A (Itemized Receipts) or 

Schedule B (Itemized Disbursements). 2 U.S.c. §434(b)(1), (2), (3), (4) and (5). 

Facts and Analysis 

The Audit staff reconciled ARDA-ROC PAC's reported financial activity to its bank records 

for 2003 and 2004. The following charts outline the discrepancies: 

2003 Activity 

Reported Bank Records Discrepancy 

Opening Cash Balance 

@ January 1, 2003 

$ 875,286 

$ 797,501 

$ 580,181 

$ 1,092,606 

$ 969,579 

$ 806,145 

$ 770,842 

$ 1,004,882 

$ 94,293 

Understated 

Receipts $ 8,644 

Understated 

Disbursements $ 190,661 

Understated 

Ending Cash Balance 

@ December 31, 2003 

$ 87,724 

Overstated 

Opening Cash Balance 2003 

The $94,293 understatement for beginning cash on hand was the result of differences from 

prior periods. 
6 

Receipts 2003 

The understatement for receipts in 2003 was due to ARDA-ROC PAC not reporting interest 

earned by the investment account totaling $8,644. 

Disbursements 2003 

The understatement for disbursements in 2003 was a result of the following: 

• Unreported Disbursements ­ ARDA-ROC PAC did not 

report disbursements including $39,500 to non-federal 

political committees, $30,000 to national party 

committees, $29,000 to federal candidate committees, 

$22,500 to other federal political committees, and 

$16,751 for operating expenditures. 

+ $ 137,751 

• Disbursement Reported with Wrong Amount ­

ARDA-ROC PAC reported a disbursement of$75,000 as 

$7,500. 

+ 67,500 

• Over Reported Disbursements ­ ARDA-ROC PAC 

reported contributions made to seven federal candidates 

that did not clear the bank. 

11,817 

• Unexplained difference 2,773 

Net Understatement of Disbursements $ 190,661 

Ending Cash Balance 

The $87,724 overstatement of ending cash on hand resulted from the discrepancies described 

above. 

2004 Activity 

Reported 

$ 1,092,606 

$ 519,028 

$ 1,279,485 

$ 332,149 

Bank Records Discrepancy 

Opening Cash Balance 

@ January 1, 2004 

$ 1,004,882 $ 87,724 

Overstated 

$ 1,236,536 

Understated 

Receipts $ 1,755,564 

Disbursements $ 1,673,838 $ 394,353 

Understated 

Ending Cash Balance 

@2 December 31, 2004 

$ 1,086,608 $ 754,459 

Understated 
7 

Receipts 2004 

The understatement for receipts in 2004 was the result ofthe following: 

•	 Unreported Receipts - ARDA-ROC PAC did not report + $ 1,151,881 

contributions from individuals. These contributions did 

not require itemization and most were received during 

the April Quarterly, July Quarterly, or Year-End 

Reporting periods. 

•	 Unreported Interest - ARDA-ROC PAC did not report + 9,655 

interest received from the investment account. 

• Unreported Refund - ARDA-ROC PAC did not report + 75,000

the receipt of a refund for administrative fees. This
 

amount was mistakenly paid to the parent organization
 

which subsequently returned the same amount to ARDA­


ROC PAC. The receipt ofthis refund should have been
 

reported on line 15 and itemized on Schedule A.
 

Understatement of2004 Receipts $ 1,236,536 

Disbursements 2004 

The understatement in 2004 for disbursements was due to the following: 

•	 Unreported Disbursements - ARDA-ROC PAC did not + $ 591,779 

report disbursements including $126,432 for operating 

expenditures, $122,180 in transfers to the parent 

organization, $100,000 to the Host Committee for 2004 

Democratic National Convention, $80,000 to party 

committees, $79,750 to non-federal political committees, 

$55,417 to other federal political committees, and 

$28,000 to federal candidate committees. 

•	 Disbursement Reported with Wrong Amount­ 180,000 

ARDA-ROC PAC reported a disbursement of$25,000 as 

$205,000. 

•	 Over Reported Disbursements - This amount includes 6,040 

one contribution totaling $5,000 to a non-federal political 

committee. These disbursements did not clear the bank. 

•	 Unexplained Difference 11,386 

Net Understatement of 2004 Disbursements $ 394,353 
8 

Ending Cash Balance 2004 

ARDA-ROC PAC understated the ending cash balance on December 31,2004 by $754,460 

due to the discrepancies noted above. 

The Audit staff discussed the misstatement of financial activity with the ARDA-ROC PAC 

treasurer during fieldwork. The treasurer indicated that reporting errors may have been 

caused by a staff member's inexperience with FEC reporting. At the exit conference, the 

Audit staffprovided schedules detailing the reporting adjustments to ARDA-ROC PAC 

representatives who indicated they would review their disclosure reports and file the 

necessary amendments. 

Interim Audit Report Recommendation and Committee Response 

The Audit staff recommended that, within 30 calendar days of service of this report, ARDAROC PAC amend its reports to correct the misstatements. Also, ARDA-ROC PAC should 

amend the cash balance of its most recent report with an explanation that it resulted from the 

audit adjustments from a prior period. In response to the interim audit report, ARDA-ROC 

PAC filed amended disclosure reports that materially corrected the misstatements noted 

above. 

IFinding 2. Receipt of Prohibited Contributions 

Summary 

A limited review of contributions from individual timeshare owners resulted in the 

identification ofcontributions from apparent prohibited sources totaling $18,323. These 

contributions amounts were typically less than five dollars and were received from apparent 

corporations and foreign nationals. Absent evidence that prohibited contributions were not 

received, the Audit staff recommended that ARDA-ROC PAC refund or disgorge any 

prohibited contribution received in 2003 and 2004. The Audit staff also recommended that 

ARDA-ROC PAC implement new procedures to prevent the acceptance of contributions 

prohibited by the Act. In response to the interim audit report, ARDA-ROC PAC disgorged 

the prohibited contributions totaling $18,323 from apparent corporations and foreign 

nationals to the U.S. Treasury. Further, ARDA-ROC PAC will provide its members with 

additional direction to prevent contributions from individuals with a foreign residence 

. address from being transmitted to ARDA-ROC PAC. 

Legal Standard 

A. Contributions by corporations - Candidates and committees may not accept 

contributions (in the form ofmoney, in-kind contributions or loans) from the treasury funds 

of corporations, this means any incorporated organization, including a non-stock corporation, 

an incorporated membership organization, and an incorporated cooperative. 2 U.S.c. 

§441b(a) 

B. Contributions by Foreign Nationals - It is unlawful for a foreign national to make a 

contribution or donation to a political committee. It is also unlawful for a person to solicit, 

accept, or receive a contribution or donation from a foreign national. 2 U.S.C. §441e(a) 
9 

C. Handling Prohibited Contributions- All contributions must be examined to make sure 

they are not prohibited. Within 10 days ofreceiving a contribution that appears to be 

prohibited, the committee treasurer must either return the contribution or deposit it. 11 CFR 

§103.3(a). If deposited, the treasurer has 30 days from the date of the contributions receipt to 

confirm the legality of the contribution or issue a refund. As evidence of legality, the 

treasurer should obtain a written statement from the contributor explaining why the 

contribution is legal. Alternatively, the treasurer may obtain an oral explanation by 

telephone and keep a record of the conversation. 11 CFR §103.3(b)(1). 

Facts and Analysis 

ARDA-ROC PAC receives its contributions primarily through the property management 

companies who receive the contributions from timeshare owners. The contributions are 

included in the periodic billings for various fees that the timeshare owners pay for taxes, 

maintenance, and other services (See Finding 3. Improper Solicitation of Contribution). The 

contributions are generally three to five dollars per billing. The billing property management 

company then forwards the funds to ARDA-ROC PAC's connected organization without an 

accounting that identifies the contributors. Contributions are then forwarded to ARDA-ROC 

PAC without a record identifying the individual contributors. 

In order to test contributions for permissibility, the Audit staffidentified all homeowner 

associations for which the resort management companies had received and transmitted 

ARDA-ROC PAC contributions totaling more than $5,000 during the audit period. From the 

resulting list of 81 homeowner associations, the Audit staffrandomly selected 15 and 

requested that detailed information be obtained to support the contributions received. In 

response, ARDA-ROC-PAC provided contribution records for 12 homeowner associations. 

These records consisted of approximately 47,715 contributions totaling $235,517. The 

contributions examined account for approximately 10% ofthe total dollar value of 

contributions for the audit period. From this review, the Audit staff identified contributions 

totaling $18,323 (7.8%) that appeared to be either from corporations or from foreign 

nationals:'. This conclusion is based solely on the corporate names and foreign billing 

addresses contained in databases provided by the resort management companies that 

collected the contributions. No other records are available. It was also noted that none of the 

sample billing statements/solicitations contained any advisory that contributions from 

corporations, labor organizations, or foreign nationals are prohibited. 

This matter was presented to ARDA-ROC PAC representatives at the exit conference along 

with related workpapers. ARDA-ROC PAC representatives commented that they would be 

receptive to the recommendations ofthe Audit staff on handling these types ofreceipts in the 

future. 

Interim Audit Report Recommendation and Committee Response 

The Audit staffrecommended that, within 30 calendar days ofservice ofthis report, ARDAROC PAC provide documentation demonstrating that the contributions totaling $18,323 are 

not prohibited. ARDA-ROC PAC should also review all receipts for 2003 and 2004 to 

determine the amount of additional prohibited contributions received. Absent evidence that 

3 Of the $18,323 in prohibited contributions $555 (3.3%) came from a resort located outside ofthe United 

States. The contribution total reviewed for this foreign resort was $39,008. 
10 

the contributions are not prohibited, ARDA-ROC PAC should make refunds to the 

contributors or make a payment to the U.S. Treasury. ARDA-ROC PAC should provide 

evidence of any refunds or disgorgement of contributions (copies of the front and back of 

negotiated checks). Furthermore, the Audit staffrecommended that ARDA-ROC PAC 

implement procedures to prevent the acceptance of contributions prohibited by the Act. 

These measures should include advising potential contributors that corporate and foreign 

national contributions are prohibited and obtaining the records necessary to screen its 

contributions. ARDA-ROC PAC should provide evidence of any corrective action taken or 

improvements made to procedures. In response to the interim audit report, ARDA-ROC 

PAC disgorged apparent prohibited contributions totaling $18,323 to the U.S. Treasury. No 

indication was provided as to any additional prohibited contributions that may have been 

received. ARDA-ROC PAC also stated that it would provide members with additional 

direction so that funds from individuals with a foreign residence address would not be 

transmitted to ARDA-ROC PAC. No further detail was provided as to the specific 

procedures ARDA-ROC PAC would implement to prevent the acceptance of contributions 

prohibited by the Act. 

IFinding 3. Improper Solicitation of Contributions 

Summary 

Several solicitations associated with contributions from individual timeshare owners did not 

meet the requirement of the Act that contributors be advised that contributions are voluntary. 

The Audit staff recommended that ARDA-ROC PAC provide evidence that solicitations did 

meet this requirement. Absent such a demonstration, it was recommended that ARDA-ROC 

PAC contact contributors to inform them that all contributions are voluntary and offer a 

refund ifthe contributor made such a request. Further, it was recommended that ARDAROC-PAC amend its procedures to assure that all future solicitations meet the requirements 

of the Act. In response to the interim audit report, ARDA-ROC PAC provided a draft letter 

for distribution in the beginning of 2008 to those contributors that may have received a 

solicitation that did not meet the notification requirements. In addition, ARDA-ROC PAC 

indicated that the notice requirements would be included on its website, newsletters, and 

association bulletins. 

Legal Standard 

A. Voluntary Contributions - A separate segregated fund is prohibited from making a 

contribution or expenditure by utilizing money or anything of value secured by physical 

force, job discrimination, financial reprisals, or by dues, fees, or by other monies obtained in 

any commercial transaction. 11 CFR §l14.5(a) 

B. Guidelines for Informing the Contributor - A guideline for contributions may be 

suggested by the separate segregated fund provided that the person soliciting or the 

solicitation informs the person being solicited: 

•	 That the guidelines are merely suggestions; and 

•	 That an individual is free to contribute more or less than the guidelines suggest 

and they will not be favored or disadvantaged by reason ofthe amount of their 

contribution or their decision not to contribute; and 

•	 Of the political purposes of the fund at the time of solicitation 
11 

•	 Ofthe right to refuse to contribute without any reprisal. 11 CFR §114.5(a)(2),(3) 

and(4) 

Any written solicitation for a contribution to a separate segregated fund must contain 

all of the above statements. 11 C.P.R §114.5(a)(5). 

Facts and Analysis 

The Audit staff examined examples of solicitation materials provided by ARDA-ROC PAC 

and determined that most of these solicitations did not meet the requirement of the Act that 

contributors be advised that contributions are voluntary. As previously noted, ARDA-ROC 

PAC solicits contributions from timeshare owners through periodic billings for various 

property fees. ARDA-ROC PAC provided examples of solicitations from four major resort 

management companies that collected contributions." Due to the volume of possible 

solicitations involved, the Audit staff requested and reviewed only a sampling of the 

solicitations. Of those solicitation materials made available, only one was determined to 

have met the requirements at 11 CFR §114.5(a)(2),(3) and(4). This solicitation contained the 

specific language that the property owner "may refuse to contribute or contribute more or 

less without reprisal or otherwise affecting [the timeshare owner's] membership rights." This 

solicitation also stated that the contribution is a political contribution. None of the other 

solicitations complied with the regulatory requirements. Also, as noted above, none of the 

solicitations advised timeshare owners that contributions from corporations, labor 

organizations, and foreign nationals are prohibited. 

Interim Audit Report Recommendation and Committee Response 

The Audit staff recommended that, within 30 calendar days of service ofthis report, ARDAROC PAC provide any additional information to indicate that its solicitations meet the 

requirements ofthe regulations concerning voluntary contributions. Absent such a 

demonstration, ARDA-ROC PAC should provide its contributors with the required 

information for voluntary contributions outlined above and provide property owners the 

opportunity to request a refund. Copies of such notifications should be submitted. It is also 

reconunended that ARDA-ROC PAC advise resort management companies that collect its 

contributions of the guidelines for voluntary contributions and the need to inform 

contributors that contributions from corporations, labor organizations and foreign nationals 

are prohibited. In response to the interim audit report, ARDA-ROC PAC provided a draft 

letter for distribution in the beginning of 2008 to those contributors that may have received a 

solicitation that did not meet the notification requirements. The letter does provide property 

owners the opportunity to request a refund. In addition to the letter, ARDA-ROC PAC 

indicated that the notice requirements would be included on its website, newsletters, and 

association bulletins. ARDA-ROC PAC also indicated that contact was made with member 

organizations to ensure the use ofsolicitation materials that met the requirements. 

4 Some of the solicitation material from the audit period was not available. However, ARDA-ROC PAC 

representatives did submit examples of solicitation material used in 2006 and indicated that the solicitation 

materials did not change significantly from prior years.