FEDERAL ELECTION COMMISSION

WASHINGTON, DC 20463

December 17, 1999

MEMORANDUM

•

TO:

FROM:

RON M. HARRIS

PRESS OFFICER

PRESS OFFICE

ROBERT J. COSTA ~sc... 6'd l..j~t-\,}' \<..1'1' ''1''1

ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

FIDENDSOFCORRINEBROWN

Attached please find a copy of the final audit report and related documents on

Friends of Conine Brown which was approved by the Commission on December I, 1999.

InfOlmational copies ofthe 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

V Office of Public Disclosure

Reports Analysis Division

FEC Library
REPORT OF THE AUDIT DIVISION

ON

FIDENDS OF COmllNE BROWN

Approved December 1, 1999

FEDERAL ELECTION COMMISSION

999 E STREET, N.W.

WASHINGTON, D.C.
TABLE OF CONTENTS

FRIENDS OF CORRINE BROWN

PAGE

Executive Summary

Final Audit Report -'

Background 3

Findings 5

Transmittal to Committee 11

Chronology 13
A99-02

FEDERAL ELECTION COMMISSION

Washington, DC 20463

FRlliNDSOFCO~EBROWN

EXECUTIVE SUMMARY

Friends ofCorrine Brown (the Committee) registered with the Commission on

July 23, 1992, and on September 29, 1997, the Candidate filed a Statement ofCandidacy

designating the Committee as the principal campaign committee ofCorrine Brown,

Democratic candidate for the U.S. House ofRepresentatives from the state of Florida, 3'd

District, for the 1998 election. 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 of the audit were presented to the Committee at an exit conference

held at the completion offieldwork on July 28, 1999, and later in the interim audit report.

The relevant parts ofthe Committee's response to those findings are included in this

audit report.

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

Misstatement of Financial Activity - 2 U.S.c. §434(b)(I),(2) and (4).

Disclosure reports filed for the period January I, 1997 through December 31, 1998

contained material misstatements. For 1997, reported receipts were understated by

$8,710 while disbursements were understated by about $13,421; cash at December 31,

1997 was overstated by some $6,023. As to calendar 1998, reported receipts were

understated by about $10,347 and disbursements were overstated by $25,556. As a result

of errors identified relative to reports filed for calendar years 1997 and 1998, the cash

figure at December 31, 1998 was understated by approximately $29,880. The Committee

filed amended reports which materially corrected these misstatements.

Contributions Subject to 48 Hour Disclosure Notices - 2 U.S.C. §434(a)(6). The

Audit staff determined that the Committee did not file the required 48 hour notices

relative to 27 contributions, totaling $41,000. In response to the interim audit report, the

Committee stated that they were unable to document that these notices were filed. The

Committee explained that the campaign relied mostly on volunteers as opposed to paid

professionals and that they have recently taken steps to address its internal compliance

procedures.

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2

Disclosure ofOccuoationlName ofEmolover - 2 U.S.C. §§434(b)(3)(A).

431(J3)(A). 432(i) and 11 CFR §104.7(b). The audit identified a material number of

errors regarding the Committee's disclosure ofcontributors' occupation/name of

employer; the Committee was unable to demonstrate that it had exercised best efforts to

obtain this infonnation. The Committee was unable to document that best efforts to

obtain the missing information had been made but stated that it was the Committee's

practice to make such efforts. Copies ofletters, dated October 1, 1999, which requested

the missing information for a material number ofthe reported entries were provided in

response to the interim audit report. On October 21,1999 the Committee filed amended

Schedules A (Itemized Receipts) which included some ofthe missing information. These

amendments did not materially correct the disclosure omissions nor were they filed

timely pursuant to 11 CFR §104.7.

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FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 204&3

A99-02

I.

REPORT OF THE A UDTT DTVTSTON

ON

FRTENDS OF CORRTNE BROWN

BACKGROUND

A. AUDIT AUTHORITY

This report is based on an audit of Friends ofCorrine Brown (the

Commit1ee), undertaken by the Audit Division ofthe Federal Election Commission in

accordance with the provisions ofthe Federal Election Campaign Act of 1971. as

amended (the Act). The audit was conducted pursuant to Section 438(b) ofTitle 2 ofthe

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

ofthis title. Prior to conducting any audit under this subsection, the Commission shall

perfonn an internal review ofreports filed by selected committees to detennine ifthe

reports filed by a particular committee meet the threshold requirements for substantial

compliance with the Act.

B. AUDIT COVERAGE

The audit covered the period January 1. 1997 through December 31. 1998.

The Committee reported a beginning cash balance of$14,765: total receipts for the

period of$509,216: total disbursements for the period of$488,695; and an ending cash

balance of$35,286. 1 - -

C. COMMITTEE ORGANIZATION

The Committee registered with the Federal Election Commission on July

23,1992, as the principal campaign committee for Corrine Brown, Democratic candidate

for the U.S. House ofRepresentatives from the State of Florida, 3rd District, for the 1998

election. The Treasurer ofthe Committee during the period covered by the audit was

Gloria Simmons, who continues to serve in that capacity. The Committee maintains its

headquarters in Laurel, Maryland.

I All figures in this report have been rounded (0 the nearest dollar.

Page 3 of 14 Approved 12/01/99
2

To manage its financial activity, the Committee used one bank account.

In addition, the Committee purchased one certificate of deposit (see Finding II.A.). From

the account, the Committee made approximately 680 disbursements. The Committee

received about 750 contributions from individuals totaling approximately $168,162,

which represented about 32% oftotal receipts. In addition, the Committee received 317

contributions from political action committees (PACs) and other political committees,

such as party committees and candidate committees, totaling about $355,049.

D. AUDIT SCOPE AND PROCEDURES

The audit included such tests as verification oftotal reported receipts and

disbursements; the review ofthe required supporting documentation; and such other

audit procedures as deemed necessary under the circumstances.

The audit included testing of the following general categories:

1. The receipt of contributions or loans in excess ofthe statutory limitations;

2. the receipt of contributions from prohibited sources, such as those from

corporations or labor organizations;

3. proper disclosure of contributions frotTI individuals) political cOlnmittees

and other entities, to include the itemization of contributions when

required, as well as the completeness and accuracy of the information

disclosed (see Findings II. B. and C);

4. proper disclosure of disbursements including the itemization of

disbursements when required, as well as the completeness and accuracy of

the information disclosed;

5. proper disclosure of debts and obligations;

6. the accuracy of total reported receipts, disbursements and cash balances as

compared to the bank records (see Finding II. A.):

7. adequate recordkeeping for transactions:

8. other audit procedures that were deemed necessary in the situation.

Unless specifically discussed below, no material non-compliance was detected. It

should be noted that the Commission may pursue any ofthe matters discussed in this

report in an enforcement action.

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3

n. AUDIT FINDINGS AND RECOMMENDATIONS

A. MISSTATEMENT OF FINANCIAL ACTIVITY

Sections 434(b)(J), (2). and (4) ofTitle 2 ofthe United States Code state,

in part, that a political committee shall disclose the amount of cash on hand at the

beginning ofthe reporting period and the total amount of all receipts and the total

amount of all disbursements for each reporting period and calendar year.

The Audit reconciled the Committee's reported financial activity to its

bank activity for the period January 1, 1997 through December 31,1998 and determined

that material misstatements occurred relative:to both 1997 and 1998.

The Committee understated its 1997 reported receipts by $8,710 primarily

due to the Committee not reporting several contributions from individuals and PACs,

totaling $8,649. The Committee understated its 1997 reported disbursements by $13,421,

primarily due to not reporting several disbursements, totaling $13,758, and reporting six

disbursements, totaling $450, twice. The reported beginning cash on hand balance at

January 1, 1997 was overstated by $1 ,313 due to transactions occurring prior to the

period covered by the audit and the reported ending cash on hand balance at December

31, 1997 was overstated by $6,023 due to the misstatements discussed above.

The Committee understated its 1998 reported receipts by $10,347 primarily

due to not reporting eight in-kind contributions, totaling $8,425; not reporting three

contributions from PACs, totaling $2,000; and, not reporting interest, totaling $687,

relative to a certificate of deposit The Committee overstated its 1998 reported

disbursements by $25,556, primarily due to reporting twenty disbursements totaling

$22,706, twice; reporting two dishursements, totaling $9,250, which were later voided

without any adjustments being disclosed: not reporting six in-kind contributions totaling

$1,293 (included in the eight in-kind contributions not reported as receipts noted above);

and, over reporting unitemized disbursements by a total amount of$381. The reported

beginning cash on hand balance at January 1, 1998 was overstated by $6,023 and the

reported ending cash on hand balance at December 31, 1998 was understated by $29,880

due to these misstatements and because the Committee did not include in its reported

ending cash on hand figure a $50,000 certificate of deposit (CD) purchased2 in May of

1998.

At the exit conference, the Audit staff provided the Committee

representatives with schedules of the misstatements discussed above. Committee

representatives did not provide any relevant information on this matter at that time.

1 The purchase of the CD is not a reportable transaction, rather it is an inter,account transfer of funds.

Page 5 of 14 Approved 12/01/99
4

In the interim audit report. the Audit staff recommended that the

Committee file comprehensive amendments, one each coverin(l; 1997 and 1998 activity,

to correct the misstatements noted above. It was further recommended that these

amendments include revised Summary and Detailed Summary Pages covering activity

from January 1, 1997 through December 31, 1997 and activity from January 1, 1998

through December 31, 1998, as well as the necessary revised Schedules A (Itemized

Receipts) and B (Itemized Disbursements).

In its response to the interim audit report, the Committee filed amended

reports which materially corrected these misstatements.

B. CONTRIBUTIONS SUBJECT TO 48 HOUR DISCLOSURE NOTICES

Section 434(a)(6) of Title 2 ofthe United States Codes requires that each

treasurer of the principal campaign committee of a candidate shall notify the Clerk, the

Secretary. or the Commission. and the Secretary of State, as appropriate, in writing. of

anv contribution of $1.000 or more received by any authorized committee ofsuch

ca~didate after the 20th day, but more than 48 hou~s before, any election. This

notification shall be made within 48 hours after the receipt ofsuch contribution and shall

include the name of the candidate and the office sought by the candidate, the

identification ofthe contributor, and the date ofreceipt and the u/ll()Ulli vI' iht:

contribution. The notification required under this paragraph shall be in addition to all

other reporting requirements under this Act.

A review of contributions by the Audit staff identified four contributions

of $1 ,000 or more totaling, $7,500, deposited between August 13, 1998 and August 29,

1998, for which the required 48 hour notices relative to the primary election held on

September 1, 1998 were not filed. [n addition, the Committee did not tile the required 48

hour notices for twenty-three contributions, totaling $33,500, relative to the general

election held on November 3, 1998

At the exit conference, the Committee representatives were provided with

a schedule of the identified items. Committee representatives did not provide any

relevant information on this matter at that time.

In the interim audit report, the Audit staffrecommended that the

Committee submit evidence that all required 48 hour notices had been filed or submit

any written comments it believed was relevant to this issue.

In its written response to the interim audit report, Counsel to the

Committee stated that the Candidate's " ...campaigns have always emphasized volunteer

and grassroots-based efforts, and her 1998 campaign was no exception. The political

culture of the district requires less emphasis on paid professional staff, and more on help

from volunteers. The Committee's recordkeeping and reporting functions have suffered

somewhat as a result. The Committee has taken significant steps during recent election

Page 6 of 14 Approved 12/01/99
5

cycles to address its internal compliance procedures. Nonetheless, some problems have

persisted, and the Committee has moved to correct them." Counsel further stated that

"[tlhe Committee is unable to document that it filed all required 48-hour notices..."

C. DISCLOSURE OF OCCUPATIONINAME OF EMPLOYER

Section 434(b)(3)(A) ofTitle 2 ofthe United States Code requires, in part,

a political committee to report the identification of each person who makes a

contribution to the committee in an aggregate amount or value in excess of $200 per

calendar year together with the date and amount of any such contribution.

Section 431 (l3)(A) ofTitle 2 ofthe United States Code defines the term

"identification" to be, in the case of any individual, the name, the mailing address, and

the occupation ofsuch individual, as well as the name ofhis or her employer.

Section 432(i) ofTitle 2 ofthe United States Code states, in part, that

when the treasurer of a political committee shows that best efforts have been used to

obtain, maintain, and submit the information required by this Act for the political

committee, any report or any records ofsuch committee shall be considered in

compliance with this Act.

Section 104.7(b)(2) of Title 11 of the Code of Federal Regulations states,

in relevant part, that the treasurer will only be deemed to have exercised best efforts to

obtain, maintain and report the required information if for each contribution received

aggregating in excess of$200 per calendar year which lacks required contributor

infomlation, the treasurer makes at least one effort after the receipt of the contribution to

obtain the missing information. Such effort shall consist of either a written requcst sent

to the contributor or an oral request to the contributor documented in writing. The

written or oral request must be made no later than thirty days after receipt of the

contribution. The written or oral request shall not include material on any other subject

or any additional solicitation, except that it may include language solely thanking the

contributor for the contribution.

In addition, Section 104.7(b)(4)(i) of the Code of Federal Regulations

states that if any ofthe contributor information is received after the contribution has been

disclosed on a regularly scheduled report, the political committee shall either: (A) file

with its next regularly scheduled report, an amended memo Schedule A listing all

contributions for which contributor identifications have been received during the

reporting period covered by the next regularly scheduled report together with the dates

and amounts ofthe contribution(s) and an indication of the previous report(s) to which

the memo Schedule A relates; or (B) file on or before its next regularly scheduled

reporting date, amendments to the reports(s) originally disclosing the contribution(s),

which include the contributor identifications together with the dates and amounts ofthe

contribution(s).

Page 7 of 14 Approved 12/01/99
6

The Audit staff reviewed contributions from individuals on a sample basis

and determined that the minimum requirements for reporting occupation and/or name of

employer were not met for a material number of reported entries. The Audit staff noted

that the Committee sent out written requests for the missing information relative to

contributions disclosed on the 1997 Year End report, covering the second half of 1997,

and that two 1998 solicitation devices also requested the required information. However,

no infonnation was provided which demonstrated that any other requests were made

relative to 1998 contributions.

At the exit conference, the Audit staff presented this matter to the

Committee. Committee representatives did not provide any relevant information on this

matter at that time.

In the interim audit report, the Audit staffrecommended that the

Committee take the following action:

• Provide solicitation materials and "one effort after receipt" materials which

demonstrated that best efforts have been used to obtain. maintain. and submit

the required disclosure information: or

• Absent such a demonstration, make an effort to contact those individuals

whose contributions aggregate in excess of $200 in a calendar year for whieh

required information is missing or incomplete, in accordance with 1I CFR

104.7: and

• Provide documentation of such contacts, such as copies of letters to the

contributors and/or phone logs of oral requests; and

• File amended Schedules A (Itemized Receipts) to disclose anv information

obtained from those contacts. Any new infonnation included on these

Schedules A was to be clearly identified as such.

In its response to the interim audit report, Counsel to the Committee stated

that "[t]he Committee is unable to document that it ... made 'best efforts' for all covered

contributions received during the election cycle. However. it was the Committee's

practice to make such efforts during the cycle." The Committee attached samples of

solicitation materials which they stated "...demonstrate the Committee's practice during

the 1998 cycle ofmaking 'best efforts. '" Counsel further states that "...the Committee

has taken steps to improve internal procedures for meeting these requirements" and that

"they have retained a consulting firm with significant experience in federal election law

compliance who will prepare its reports and oversee its compliance efforts."

Counsel to the Committee also stated that "[t1or contributions continuing

to lack employer and occupation data. the Committee recently sent letters requesting the

necessary information" and that "[a]lthough the Committee in some instances was unable

Page 8 of 14 Approved 12/0 l/99
7

to produce an actual copy of their letters requesting occupation and employer

information, it has always been its contention that these letters were sent out." Counsel

further stated that "...the Committee found that in numerous instances occupation and

employer information that was absent from the original filings is and has been in its

database for some time."

The Audit staff notes that the samples of solicitation devices provided in

the Committee's response request the required information but we were unable to verify

when these devices were used by the Committee. The Committee provided copies of

letters addressed to contributors, dated October L 1999, which requested the missing

information pursuant to 11 CFR §104.7. The Audit staff detennined that these letters

represented a material number ofthe reported entries which, based upon our review of

contributions from individuals, lacked the required occupation and/or name of employer

information. Further, on October 21, 1999, the Committee filed amended Schedules A,

which included occupation and/or name of employer information relative to some

contributions but most ofthe reported entries still contained "Information Requested."

These amended Schedules A were not filed timely pursuant to II CPR § I04.7.

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Page 10 of 14 Approved 12/01/99
FEDERAL ELECTION COMMISSION

WASHINGTON. 0 C 20463

December 10. 1999

Ms. Gloria Simmons, Treasurer

Friends ofCorrine Brown

3109 River Bend Court, #D-102

Laurel, MD 20724

Dear Ms. Simmons:

Attached please find the Report ofthe Audit Division on Friends ofCorrine Brown.

The Commission approved the report on December 1. 1999.

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

on December 17, 1999. Should you have any questions regarding the public release of the

report. olease contact the Commission's Press Office at (202) 694-1220. Anv questions

vou have related to matters covered during the audit or in the report should be directed to

Robert Morcomb or Marty Favin ofthe Audit Division at (202) 694-1200 or toll free at

(800) 424-9530.

Sincerely,

-"

fJ-I- tJCL .C\

FuiL Robert 1. Costa

Assistant Staff Director

Audit Division

Attachment as stated

cc: Brian G. Svoboda, Counsel. Perkins Coie LLP

Diane Evans, Consultant, Evans & Katz LLC

Page I I of 14 Approved 12/01199
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Page 12 of 14 Approved 12/01/99
CHRONOLOGY

FRlENDS OF CORRINE BROWN

Ii

Audit Fieldwork

Interim Audit Report to

the Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

6/14/99-7/28/99

9/01/99

10119/99

12/01/99

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