FEDERAL ELECTION COMMISSION

WASHINGTON. O.c. 20-&61

AR#9S-74

March 27, 1997

MEMORANDUM

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON THE

NEW HAMPSHIRE DEMOCRATIC STATE COMMITTEE

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TO:

FROM:

RON M. HARRIS

PRESS OFFICER

PRESS OFFICE

ROBERT J. COSTA 1lJ:.<.._ ~tt~ }-1.1-«71

ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

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

New Hampshire Democratic State Committee which was approved by the Commission on

N[arch 19, 1997.

Infonnational copies ofthe report have been received by all parties involved and

the report may be released to the public.

Attachment as stated

cc: Office ofGeneral Counsel

Office ofPublic Disclosure

Reports Analysis Division

FEC Library
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REPORT OF THE AUDIT DIVISION

ON THE

New Hampshire Democratic

State Committee

Appro\·td ~t.n:" 19.1997

FEDERAL ELECTION COMMISSION

999 E STREET, N.W.

WASHINGTON. D.C.
TABLE OF CONTENTS

NEW HAMPSHIRE DEMOCRATIC STATE COMMITIEE

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7 Executive Summary 1

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{} Final Audit Report 3 2

5 Background 3

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3 Findings S

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b Transmittal to Committee 17

C Chronology 19

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FEDERAL ELECTION COMMISSION

\\ >\StUPltC TO' 0 f ~)4h 4

FINAL AUDIT REPORT

ON THE

NEW HAMPSHIRE DEMOCRATIC STATE COMMITTEE

EXECUTI\'E SUMMARY

The New Hampshire Democratic State Committee (the Committee) registered

with the Comptroller General ofthe United States on December 13, 1973.

The audit was conducted pursuant to 2 U.S.C. Section 438(b) which states, that

the Commission may conduct audits ofany political committee whose reports fail to meet

the threshold level ofcompliance set by the Commission.

The findings ofthe audit were presented to the Committee at an exit conference

held at the completion offieldwork and later, in an interim audit report.

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

SoURCE Of CONTRJRtmO!SS - II CFR Section t 10.4(c)(3). The Committee

made seven deposits, totaling $4,026, y,'hich included currency in excess ofthe SSO limit.

Committee records made available contained adequate information to document four

deposits. totaling S1,870. In response to the interim report, the Committee provided a

photocopy ofa Committee check which indicated that 52,006 (the excessive amount of

CUJTency in the other three deposits) was ttansferred to the Committee's non-federal

account This transfer ",'as not made y,ithin the 30 day window provided at 11 CFR

103.3(b).

In additio~ seven sequentially numbered cashier's checks, totaling SI2,000, were

identified. Although there were notations containing a name, address, occupation and/or

name of employer on each ofthe checks, there was no evidence from the named

contributors. In the interim report it \\'85 recommended that the Committee provide

evidence, such as signed statements from the named individuals regarding the source(s)

offunds used to purchase the cashier's checks. Also. a detailed itemization ofall

expenses associated with the event \\'&5 requested.

In response, the Treasurer pro\ided photocopies ofcertified letters addressed to

the named individuals, and photocopies ofrour envelopes stamped "returned to sender."

According to the Treasurer, no responses from the remaining three letters were received,

and he was unable to find any expenses associated with the event.

DISCLOSURE OF SHARED fEQERAL AND NON-fEDERAL ACTIVITIES -II CFR

Sections 104.3(b)(3XiXA). 104.1O(b)(3) and (4), 106.S(a)(2)(ii), (f)(l) and (2), and (g)(l)

and (2). The Committee participated in several federaVnon-federal fundraising activities

and filed Schedules H-2 \\nich listed the activities and related allocation percentages for

The scope ofthe Audit staff's tntlnc rcprdina contributions. disbursements. and debts was

limited in cenain respects. Please refer to Section 1.0. for additional infonnation.

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each. However, during fieldwork we were not able to verify the allocation ratios due to a

lack ofcertain receipt records. In response to the interim report, the Treasmer provided a

list ofcontributions related to eleven fundraising events and filed amended Schedules H-2

to reflect revised allocation ratios.

The Committee disclosed receiving 23 transfers from its non-federal account,

totaling 584,300, during 1993-94. During fieldwork, we were not able to detennine ifthe

transfers were made timely or ifthe amounts were reflective ofthe underlying shared

expenses. In response to the interim repo~ the Committee filed amended Schedules H-3

for 16 ofthe transfers including re\'ised breakdo\\ns ofthe related allocable expenses.

However, no documentation was submitted in support ofthe revisions. It should be noted

that based on audit work perfonned, no o\'er-funding by the non-federal account

occWTed.

The Committee did not itemize properly 528,950 in disbursements on Schedules

H-4. In response to the interim report amended schedules were filed which corrected the

public record.

Finally, although requested in the interim repo~ the Committee did not provide

any evidence to demonstrate that it had implemented procedures to insure compliance

\\ith the regulations governing allocation ofexpenses between federal and non-federal

accounts.

MISSTATEMENT Of fl~A.NOALACI1\lD' - 2 U.S.C. Sections 434(b)(1), (2)

and (4). For calendar year 1993 reponed totals for receipts were understated by S2,353,

reponed totals for disbursements \\'ere O\'crstated b)' SI,I22, and reponed cash at

12131/93 \\115 understated b)' $3.568. The Comminee filed amendments which materially

corrected the reporting errors.

DISCLOSURE Of JOI~"T fl'NDI.4JSI:SC ACTJ\·ITIES AND CONTRIBUTIONS FROM

INDI\'IDUALS - 2 U.S,C. Section 434(b)(3)(A) and 11 CFR Section 102.17(c)(8),

Based on our limited review ofcontributions (rom individuals, we identified

approximately $9.400 in contributions \\bich \\'Ct'e not itemized correctly on repons filed.

Most ofthe errors involved amounts and'or contributor names. The Committee filed

amended repons to correct these erron.

The Committee itemized I uans(cn.. totaling S17,106, received from the

Democratic State Party Victor')' Fund. nlOnt)'S represented the current net income

resulting from ajoint fundraising effort. Although correspondence reviewed indicated

that the Democratic National Committee had (o",vded memo Schedules A, listing

contribution infonnation, for inclusion In the Committee's filings, the memo schedules

had not been filed.

In response to the interim report. the Treasurer stated that he was unable to locate

the schedules and could not \'m()' that the schedules ~'ere ever sent to the Committee;

ho\\'ever, he contacted the Ikmocratic National Committee and requested replacements,

The Treasurer planned to submit the schedules \\'hen available.

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FEDERAL ELECTION COMMISSION AR#9S..74

This repon is based on an audit ofthe New Hampshire Democratic State

Committee (the Committee) undertaken b)' the Audit Division ofthe Federal Election

Commission in accordance \\ith the pro\isions ofthe Federal Election Campaign Act of

1971, as amended (the Act). The audit "'as conducted pursuant to Section 438(b) ofTille 2

ofthe United States Code \\'hich states. in pan. that the Commission may conduct audits

and field investigations of an~' political comminee required to file a report under section

434 ofthis title. Prior to conducting an~' audit under this subsection, the Commission shall

perform an internal review ofthe rqx>ns filed b)· selected committees to determine ifthe

reports filed by a particular comminee m«t 1M threshold requirements for substantial

compliance \\ith the Act.

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REPORTOF THE AUDITDIVISION

ON THE

NEW HAMPSHIRE DEMOCRATICSTATE COMMITTEE

BACKGROUND

A. AUDIT AVTIIORJn'

B. AUDIT CO\~RAG£

The audit CO\'ered the period from January I, 1993 through December 31,

1994. The Committee reponed a begiMing cash balance at January I, 1993 of$7,703;

total reported receipts for the period 0(S31 3.408~ total reported disbursements for the

period of 5318.458 and an ending cash baJanc~ at December 31, 1994 of $2.653.1

C. CA~IPAICN ORCA~IZ.4TIO'

The Committee ~gistered "lib the Comptroller General ofthe United

Stales on December 13, 1973 as the f';e\\ Ilampshire Democratic State Committee. The

Committee maintains its headquarters in Concord. New Hampshire.

I All figum presented in this rtpott ha\f been rounded 10 the nearest dollar.

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The Treasurer ofthe Committee during the period covered by the audit was C.. Mr. Robert Walsh. The current Treasurer ofthe Committee is Mr. Keith Regli. Mr. Regli

became Treasurer on March 29, 1995.

The Committee maintained two bank accounts for its federal activity during

the period covered by the audi~ however, only one ofthese accounts was utilized for

federal receipts and disbursements. The other federal account maintained a minimal

balance and financial activity was limited to interest received and service charges paid.

The Committee received'contributions from individuals and political committees, as wen

as transfers from a non-federal account for sha..red expenses.

D. AUDIT SCOPE AND PROCEDURES

Although the Committee satisfied the minimum recordkeeping requirements

of 11 CFR §102.9 relating to its contribution records, these records were not maintained in

a manner whereby the Audit staffcould perfonn the substantive testing nonnally

undertaken when reviewing contributions from individuals and political committees. The

Committee could not produce a computerized file or a listing of all contributions received

during the audit period and the Committee had no system in place to aggregate

contributions (see Findings II.A.,B., and C.). Contribution records consisted oftwo

notebooks containirjg photocopies ofmost ofthe deposit tick~~ (annotations to indicate the

related fundraising event or mailing \\·ere present for some ofthe contributions), some

photocopies of contributor checks and some photocopies ofsolicitation devices containing

contributor infonnation.

The scope ofthe Audit stafrs testing regarding the Committee's

disbursements;, and the debts owed by the Committee, was also limited. The majority of

records provided were generated by the Committee rather than the payees, and the

Committee had no system (or tracking debts owed. In addition, the Committee's

disbursement lrecords did not contain documentation in support ofthe Committee's

aJJocation ofshared expenses. As a result. the Audit staffwas unable to verify the

Committee's Schedules H reponing. the brcakdO\\l1 ofallocable expenses relative to

transfers from the Committee's non-federal account and whether these transfers were made

in a timely maMer (see Finding 11.0.).

The audit included testing ofthe follo\\;ng general categories:

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

limitations (see Finding II.A.I.);

2. the receipt ofcontributions from prohibited sources, such as those

from corporations or labor organizations;

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proper disclosure ofcontributions from individuals, political

committees and other entities, to include the itemization of

contributions when required, as well as, the

completeness and accuracy ofthe information disclosed (see Finding

11.8. and e.);

4. proper disclosure ofdisbursements including the itemization of

disbursements when required, as well as, the completeness and

acCuracy ofthe infonnation disclosed (see Finding 11.0.3.);

Unless specifically discussed below, no material non-compHance

was detected during the period covered by the audit Itshould be noted that the

Commission may pursue funher any ofthe matters discussed in this report in an

enforcement action.

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proper disclosure ofCommittee debts and obligations;

the accuracy oftotal reponed receipts, disbursements and cash

balances as compared to Committee bank records (see Finding

11.£.);

adequate n:cordkeeping for Committee transactions;

proper reportina and funding ofalJocable expenses (see Finding

11.0.) and,

other audit procedures that were deemed necessary in the situation.

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II. AUDIT DNDINGS AND RECO&JMENDATIONS

A. SoURCE OF CONTIU.V110~S

Section 1JO.4(cX3) orTitle II oftile Code ofFederaJ Regulations states

that a candidate or committee rccei\ina an anonymous cash contribution in excess ofSSO

shall promptly dispose ofthe unount over $50. The amount over SSO may be used for any

lawful purpose unrelated to any Federal election. campaign, or candidate.

1. Receipt QfAnoo)mPUS Contributions Q(CtlD'CDCY in Excess ofthe

Limjtatioo

The Audit S1afrreviewed the Comminee's available receipt

documentation and identified seven deposits, totaling $4.026. which included cash in

excess of550. Recorded on the associated deposit tickets wen: currency totals with no

additional inronnation; other Committee records made available did not contain any

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documentation as to soW'Ce offunds. The excessive portion totaled $3,676 [$4,026 - $350 C

(7 x 550)].

A schedule ofthe aforementioned items was provided to the

Committee at the exit conference. The Committee Treasurer stated that the source ofthe

cash was "pass the hat" collections at various fundraising events. He added that he would

attempt to locate listings ofthe attendees at these events to demonstrate that the cash was

from several individuals and, therefore. not excessive anonymous cash contributions.

The Committee \\'85 afforded 10 business days to submit

documentation related to the matters presented at the exit conference. In this 10 day time

period, the Committee provided listings ofevent attendees, photocopies ofevent

contributor cards and photocopies ofcurrency from a rame event along with the

contributors' names relative to four deposits containing $1,870 in currency. No

information was provided regarding three deposits containing 52,156 in currency.

Therefore. excessive portions. totaling $2.006 [$2,156 ($4,026 - 51,870) - $150 (3 x 550)]

still required documentation or corrective action.

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In the interim audit report. the Audit staffrecommended that the

Committee provide evidence that the funds deposited in excess of550 were not anonymous

cash contributions in excess of$50, such as. information which included evidence ofthe

number ofpersons in attendance at fundraising events; the amounts charged to attend; the

amount ofcash proceeds from particular fundraising events; and, any other information

which clarified the sources of cash deposits. Absent such evidence, it was recommended

that the Committee dispose ofthe excessive portions for any lawful purpose unrelated to

any Federal election. campaign. or candidate. Iffunds were not available to dispose ofthe

amounts in excess ofS50 per deposit. it \\-as further recommended that the Committee

disclose the excessive contributions as debts owed by the Committee on Schedule 0 (Debts

and Obligations).

In the Committee's response to the interim audit report, the

Committee provided a photocopy of a check (front only) written from the federal account

to the NH Democratic State Committee in the amount of52,006. A notation on the memo

line ofthis check s~tes "Transfer excess cash deposits from 199 sic." The Audit staff

notes that this transfer was not made \\ithin 30 days ofreceipt ofthe contributions as

required by II CFR §103.3(b).

2. CMbiC(s Cheeks

During our fC\'ie\\' of contributions from individuals, we noted a

deposit into the Committee's main federal account ofseven sequentially numbered

cashier's checks. totaling S12.000. The sc\'en cashier's checks, all dated November 23,

1993. were dra\\ll on the Interbank of New York. A notation on the deposit documentation

stated "Chris Spirou NY Fundraiser.·

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2 One oflhe named individuals was idmtireed as "Vice President ofInterbank."

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Mr. Papadopoulos· occupation is noted u "contrae:tor'" on the documentation related to the cashier's

check anributed to him. RqK)IUd mtrin for contributions made by. Lakis Papadopoulos to a

Senatorial campaign durina calmdar )Uf 1993 included the (onowing occupations/name of

employers: Business Executive/Promo-Pro Ltd. and RestauraleUllKaryatis Restaurant.

Infonnation made available related to this deposit consisted of: (a) a

photocopy ofthe deposit ticket; (b) photo- copies ofeach ofthe seven cashier's checks; (c)

notations containing the name, address, occupation and/or name ofemployer ofseven

individuals2; (d) a photocopy ofan apparent draft invitation to an event which stated that

the event date was November IS, 1993; and (e) a list of potential invitees to the event

(which contained the name ofone ofthe seven individuals - Lakis Papadopoulos).

The draft invitation noted that an event was to be held at the

Karyatis Restaurant in A~tori~ New York on November IS, 1993 3, to honor Chris Spirou,

the Committee Chainnan at that time, •...for his accomplishments and contributions to the

community." This invitation requested that checks, made payable to "Friends ofChris

Spirou,· be sent to the restaurant to the attention ofLakis Papadopoulos4. The Audit staff

detennined that no committee with the name "Fl'iends ofChris Spirou" was registered with

the Federal Election Commission or \\ith the New Hampshire Secretary ofState at that

time.

A photocopy ofthe deposit ticket listing the seven cashier's checks

in question. \\'85 provided to the Committee at the exit conference. The Audit staff

requested that the Committee obtain and submit documentation as to the source offunds

relative to these seven contributions. The Committee Treasurer stated that he was

unfamiliar with the particulars ofthis e\'en~ but that he would ask the former Treasurer for

infonnation about this event and provide it to the Audit staff.

No other information was made available. It appears that the

cashier's checks were the only funds received from this event and that these individuals

made no other contributions to the Committee during the period covered by the audit. The

S12.ooo received from this event accounted for approximately l00A> oftotal reported

contributions from individuals during the period covered by the audit. No disbursements

associated with this event ,,'ere reponed b)' the Committee.

In the interim audit report. the Audit staffrecommended that the

Committee provide evidence. such as signed statements from the named individuals,

regarding the source(s) offunds used to purchase the seven cashier's checks noted above.

It was further recommended that the Committee provide an itemization ofall expenses

associated with this event. to include for each expense. the name and address ofthe vendor,

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date, amount, and purpose, as well as the identification ofthe person(s) who defrayed these

expenses.

In the Committee's response to the interim audit report, the

Committee Treasurerstated that he was only able to obtain "second and third hand

information" relative to the seven cashier's checks and it appeared that the only Committee

staffconnected with this event was Chris Spirou. the fonner Committee Chairman, who he

has not been able to locate. He added that the checks included the required contributor

infonnation and the treasurer at that time probably conferred with counsel prior to

depositing them.

The Treasurer also provided photocopies ofcertified letters he had

sent to the seven named indi\iduals requesting them to sign a written statement that the

donations were from their personal funds. These letters also requested details about the

event in question and asked the indi\Oiduals to provide infonnation about why cashier's

checks were used. The response included photocopies ofenvelopes stamped "returned to

sender" relative to four ofthe seven letters and the Treasurer added that no responses were

received from the other three. He also stated that he was unable to find any expenses

relative to this event and he assumed the n"ent \\"85 "only coincidental to the party

contributions" because there "'ere so f~' contributions.

The Audit staff notes that a question still remains as to the source of

funds involved.

B. DISCLOSURE OF JOI~T Fl'~DRAISISG ACTIVITIES

Section I02.17(cX8)(B) states. in part. that each committee participating in

a joint fundraising activity. shall repon its share of net proceeds received as a transfer-in

from the fundraising representative and shall also file a memo Schedule A itemizing its

share ofgross receipts as conbibutions from original contributors to the extent required

under 11 CFR 104.3(8).

During the period co\·ercd b)' the audit. the Committee received eight

checks. totaling S17.1 06. dra"n on 1M account ofthe Democratic State Party Victory

Fund. The Committee's deposit records contained a photocopy ofeach check along with a

letter from the chairman ofthe Democratic National Committee (DNe). Each letter stated

that the funds being transfemd rqwnctItcd the current net income Ivailable to the

Committee from the "DNe State Pan)' Dim:1 ~tail Program" and that the check should

have been deposited into the (cdaaJ Kcount. The letter explained that this program was a

joint fundraising effort between the DSC. the 49 State Democratic Committees, and the

DC Democratic Party.

The letter also stated that the funds provided should be reported as a

transfer-in from the ONC. \\i1ich Kted as the fundraising representative, and that the

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Committee should attach the memo Schedules A, already forwarded to the Committee by

the DNe, to the appropriate FEC report.

The Audit staffdetennined that the Committee itemized the eight transfers

on its FEC reports; however the Committee did not file the memo Schedules A. The

contribution records provided to the Audit staffdid not include any ofthese memo

schedules.

In the interim audit repo~ the Audit staffrecommended that the Committee

file memo Schedules A relative to the S17.106 in joint fundraising proceeds received from

theDNC.

In the Committee's response to the interim audit report, the Committee

Treasurer stated that he was unable to locate any memo Schedules A in the Committee's

files and he cannot verify that these schedules were ever sent to the Committee by the

DNe. He contacted the ONe to request photocopies ofthese schedules and stated that he

will submit them when he receives thcm~

c. DISCLOSURE OF COS11UIlTlOSS FROM INDIVIDUALS

Section 434(b)(3)(A) ofTille 2 ofthe United States Code states that each

report shall disclose the identification ofeach person who makes a contribution during the

reponing period. whose contribution or contributions have an aggregate amount or value in

excess of5200 within the calendar )'ear together \\ith the date and amount ofsuch

contribution. Section 431(13)(A) ofTitle 2 ofthe United States Code defines the tenn

"identification" to be, in the case Oran)' indi\iduaJ. the name, the mailing address, and the

occupation ofsuch individual. as well as the name of his or her employer.

The Audit staff performed. limited review of contributions from

individuaJsS. The Committee itemized 206 contributions from individuals, totaling

$76,298, on its disclosure rqx>ns. Based on the Audit staff's review, 27 ofthese

contributions, totaling $9,359, \\'ae disclosed incorrectly (12% ofthe total dollar value).

The majority ofthese errors invoh'ed instances \\here the Committee disclosed incorrect

aggregate year-to-date totals, contribution amounts and contributor names. The treasurer

ofthe Committee during the period cO"m:d b)' the audit stated that the Committee had

maintained a computer file for contributioraS at that time. but that the file no longer existed.

A schedule ofthese contributions \\'85 provided to the Committee at the exit

conference. The Committee did not comment further on this matter. Subsequent to the

exit conference, the Committee filed ammdcd reports which materially corrected these

disclosure errors.

s The Audit suffwas limited 10 tnaana onl)" those individual conaibutions itemized on the

Committee·s disclosul'c I'C'pOfU becauiC the Comminec could not produce a computerized file or a

listing ofan conaibutions received dunna the period covered by the audit.

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In the interim audit repo~ the Audit staffrecommended no further action,

however, the Committee was afforded the oppor1Uni~" to provide any additional

information or explanation. In response to the interim audit report, the Treasurer stated

that the Committee had attempted to correct the disclosure errors noted by the Audit staff.

D. JOINT FEDERAL AND NON-FEDERAL ACTIVITIES

Section 106.S(a)(2)(ii) ofTitle 11 ofthe Code of Federal

Regulations states, in that committees that make disbursements in connection with

federal and non-federal elections shall allocate expenses according to this section for the

direct costs ofa fundraising program or event including disbursements for solicitation of

funds and for planning and administration ofactual fundraising events, where federal and

non-federal funds are collected by one committee through such program or event.

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1. DiscloSUUi o(AllocatiQo Ratios on Schedules "-2 (Allocation

Ratios)

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Section 106.5(f)(1) ofTitJe 11 ofthe Code ofFederal Regulations

states, in that iffederal ,..nd non-federal funds are collected by one committee through

a joint activity, that committee shall allocate its direct costs offundraising, as described in

paragraph (a)(2) ofthis section, according to the funds received method. Under this

method, the committee shall allocate its fundraising costs based on the ratio offunds

received into its federal account to its total receipts from each fundraising program or

event. This ratio shall be estimated prior to each such program or event based upon the

committcc's reasonable prediction ofits federal and non-federal revenue from that program

or event. and shall be noted in the committee's report for the period in which the first

disbursement for such program or event occurred. submitted pursuant to 11 CFR 104.5.

In additio~ Section 106.5(f)(2) ofTitle 11 ofthe Code of Federal

Regulations states, in that the committee shall adjust the allocation ratio for that

program or event to reflect the actual ratio offunds received no later than 60 days after

each fundraising program or evtnt from "iUch both federal and non-federal funds are

collected. Ifthe non-federal account has paid more than its allocable share, the committee

shall transfer funds from its federal to its non-federal accoun~ as necessary, to renect the

adjusted allocation ratio. Ifthe federal account has paid more than its allocable share, the

committee shall make any transfers offunds from its non-federal account to its federal

account to renect the adjusted allocation ratio \\ithin the 6O-day time period established by

this paragraph.

The Audit staffreviewed the Committee's fundraising activities and

noted that the Committee had many joint federal/non-federal events and mailings, during

the period covered by the audit. The Committee filed Schedules H-2 listing these activities

along with the federal and non-federal allocation percentages for each activity.

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The Committcc's deposit records consisted ofthe following: (I)

most ofthe deposit tickets relative to deposits into the federal and non-federal accounts; (2)

some photocopics ofcontributor checks (or currency relative to some cash contributions);

(3) some photocopies ofthe solicitation materials which apparently accompanied the

contributions; and, (4) some annotations to indicate the related fundraising event or

mailing. Since these records were incomplete and no computerized file was available to

the Audit staff, we were unable to verify the allocation ratios disclosed by the Committee.

The fonner Committee treasurer stated that he would be able to tie

the contributions to the fundraising activities based upon the contributors' names and

contribution amounts, as recorded in the deposit records. He added that once he had done

this, the allocation ratios could be recalculated. A listing ofthe fundraising activities or

events, as disclosed by the Committee, was provided to the Treasurer. The Treasurer

stated that he would meet with the fonner treasurer and attempt to reconstruct the

allocation ratios. He added that in aJllikelihood, contributions were deposited into the

federal or non-federal accounts based upon which account needed funds to pay outstanding

bills at a given time.

The Committee was afforded 10 days to submit documentation

related to the matten presented at the exit conference. In this time period, the Committee

provided the Audit staffwith a listing ofmonthly deposit totals into the federal account

and a listing oftransfers (rom the non-federal account to the federal account for the period

covered by the audiL The Audit sWT was unable to verify certain deposit totals provided

on this Jisting~ In addition. the Committee provided no infonnadon relative to the shared

events associated with these deposits. As a result. the Audit staffwu still unable to verify

the allocation ratios for each fundraising event disclosed by the Committee.

2. Disclosure orAlloc:ablc Activities funded By Transrm From the

Non-rcdmJ Accouot on Schedules H-] (Tran$rm from Non-federal

Accounts)

Section 106.S(gXI )(i) ofTille II ofthe Code of FederaJ Regulations

state, in part. that committees that have established separate federal and non-federal

accounts under II CFR I02.S(a)(l)(i) shall pay the entire amount of an allocable expense

from its federal account and shall transfer funds from its non-federal account to its federal

account solely to cover the non-federal share ofthat allocable expense.

Section 104.1O(b)(3) ofTille 11 oCtile Code ofFederal Regulations

states, in part. that a political comminee thai pays allocable expenses in 8CCOfdance with 11

CFR 106.5(1) shall report each transfer offunds from its non-federal account to its federal

account for the purpose of payina such expenses and thai in the report covenna the period

in which the transfer occurred. the committee shall explain in a memo entry the allocable

expenses to which the transfer relales and the date on which the transfer was made.

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Section 106.S(g)(2)(ii) ofTitle 1t ofthe Code ofFederal

Regulations states, in that funds transferred from a committee's non-federal account to

its federal account are subject to the following requirements: (A) for each such transfer,

the committee must itemize in its reports the allocable activities for which the transferred

funds are intended to pay as required by 11 CFR t04.IO(b)(3); and (B) such funds may not

be transferred more than 10 days before or more than 60 days after the payments for which

they are designated are made.

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The Audit staffreviewed the disclosure ofall 23 transfers, totaling

584,300, made from the non-federal account to the federal account during the period

covered by the audit. The Committee disclosed these transfers on Schedules H-3 and

characterized the expenses relative to these transfers as AdministrativeNoter Drive. The

Committee's records relative to these transfers did not allow the Audit staffto identify the

category ofallocable expenses associated with each transfer. As a result, the Audit staff

was unable to verify that the amounts transferred for the allocable activity were calculated

correctly by the Committee. In addition. we were unable to test the timing oftransfers to

determine ifthey were made no more than 10 days before or 60 days after the payments

were made to the vendor.

A listina ofthe 23 transfers from the non-federal account to the

federal account noted above was provided to the Committee. The Treasurer made no

comment and no additional infonnation or amended disclosure reports have been provided

to date.

3. DiscloslQ'C of Disbursemcots on Schedules 8-4 (Joint

fcdmllNoo-Fcdcral AWl'in: Schedule)

Sedion 104.IO(b)(4) ofTitle 11 ofthe Code ofFederal Regulations

Slates. in pan. that a political committee that pays aJlocable expenses in accordance with II

CFR 106.S(8) shaU also report each disburKment from its federal account in payment for a

joint federal and non-federal expense or Kti\ity. In the report coverina the period in which

the disbursement occurred. the comminec shall state the full name and address of each

person to v.11om the disbursement is made. and the date, amount and purpose of each such

disbursement. Ifthe disbursement includ~ ra)'ment for the allocable costs ofmore than

one activity. the committee shall itemize Ihe disbursements showing the amounts

designated for payment ofadministrati\'e expenses and generic voter drives, and for each

(undnUsina propam or exempt act;\';I)' U described in 11 CFR 106.5(a)(2). The

Committee shall also repon the lOW amount expended by the committee that year, to date,

(or each cate&ory oflCtivity.,

Section 104.3(b)(3Xi)(A)ofTitJe II ofthe Code ofFederal

ReauJations lUtes. in thaI the tmn -purpose- means a briefstatement or description

ofwhy the disbursement wu made.

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The Committee maintained separate federal and non-federal

accounts and did not utilize.separate allocation accaunt. During the review of

disbunements, the Audit staffnoted that the Committee did not provide adequate

disclosure inConnation on Schedules H-4 for 33 items, totaling 528,950 (IrA. ofthe dollar

total). The majority ofthese erron involved instances where the Committee disclosed

incorrect expense classifications, lump sum totals instead ofsingle en1ries for each

disbursement and incorrect amounts.

In the interim audit report, the Audit staffrecommended that the

Committee take the followina action:

A"schedule detailing the disbursements which were disclosed

incorrecdy was provided to the Comminee at the exit conference. The Committee did not

comment on this matter.. Subsequent to the exit conference, the Committee filed amended

Schedules H-4 relative to the 1993 Year End Report which corrected two ofthe 33 errors

noted above. No additional amendments have been filed to date relative to the remaining

31 erron, totaling $28,681.

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Provide documentation related to all joint federall non-federal fundraising

activities occurrina durina the period covered by the audit, along with a

breakdown by deposit identi(ying the joint activity responsible for the

contributions: and, file amended Schedules H-2 with revised

federal/non-federal allocation ratios. ifdifferent from the original filings

(see Section 11.0.1.).

Provide documentation related to the 23 transfers made from the non-federal

account to the fedcralaccount during the period covered by the audit, which

supports the breakdo\\l1 ofaJlocable expenses associated with the transfers,

u well u the Committee's calculations relative to the amounts transferred;

and. file amended Schedules H-) with revised breakdowns ofthe allocable

expenses relative to these transfers. ifdifferent from the original filings (see

Section II.D.2.).

Ifafter revi~;n8 the transactions discussed above. the non-federal account

over-funded its portion of" shared expe~ it was further recommended that

the federal account refund the o\-er-funded amount to the non-federal

account

File amended Schedules 11-4 to correct the ) t items, totaling $28,68t,

which were disclosed inconectJ)' (sec Section 11.0.3.).

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The Audit staff further recommended that the Committee demonstrate that it

had implemented procedures to insure compliance "ith the regulations related to the

allocation ofexpenses between federal and non-federal activities.

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With respect to Section 11.0.1., the Committee'sresponse to the interim C

audit report included a listing ofcontributions received in 1993 and 1994 from eleven

fundraising events which, for each contribution, identified the following: event name;

contributor's last name; contribution date; contribution amount; and, whether the item was

deposited into the federal or non-federal account. The Audit staffwas unable to verify that

the contributions noted as federal by the Committee were included in deposits to the

federal account.' Approximately 44% ofthe dollar total ofthe listed contributions were

itemized on the Commi~ee's Schedules A (Itemized Receipts).

The Audit staffcompared the dollar total ofcontributions noted on this

listing to the dollar total ofcontributions reported by the Committee on its disclosure

reports; the amounts listed are materially reflected in the reported totals. The Committee

filed amended Schedules H-2 which 1'e\ised the federal/non-federal allocation ratios

accordingly.

As noted in the rarsa parapaph orScctKlft 1.0.• the Audit sufTwas unable 10 perform the substantive

tntinJ normally undertaken when rnwwina contributions from individuals. The Comminee could

not produce I computerized file or • I~anl ofIU contributions received during the ludit period.

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With respect to Section 11.0.2.• the Committee filed amended Schedules

H-3 relative to 16 ofthe 23 transfers made from the non-federal account to the federal

account during the period covered by the audiL These amendments included revised

breakdowns ofthe allocable expenses relati\"C to these 16 transfers. No docwnentation was

submitted in suppon ofthe Commiucc's calculations. The remaining seven transfers were

not revised and are therefore still categorized as Administrative!

Voter Drive.

The Audit staff notes that based on our review ofthe Committee's response

to the interim audit report and amended reports relative to joint federal and non-federal

activities. the non-federal account did not o\~-fund its portion ofshared expenses. As a

resul~ no refund from the federal account to the non-federal account is warranted.

With respect to Section 11.0.3.• the Committee filed amended Schedules

H-4 which materially comc1ed the i~uate disclosure information noted above.

The Committee did nol pro\·idc an)· evidence demonstrating that it has

implemented procedures to ins~ compliance "ith the regulations related to the allocation

ofexpenses bet\\'ccn federal and non·fedc:raJ aeti\ities.

E. MISSTATEI'IENT Of FI~A'CI4L An1\'IT\'

Sections 434(b)(I).(2) and (4) ofTitle 2 ofthe United States Code require a

political committee to disclose the amount ofcash on hand at the beginning ofeach

reponing period and the total amount of all receipts and disbursements for each reporting

period and the calendar year.

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

bank activity for the period January 1t 1993 through December 31 t 1994 and detennined

that material misstatements occUlTed relative to this time period.

1. Calendar)'car 1993

a. Receipts

The Comminee understated reported receipts by 52,353.

This net understatement was primarily due to the Committee not reporting four

contributions from political committees. totaling $4.000 and over reporting three

contributions from individuals. totaling $700.

b. DisJmacrncnts

The Committee's reported disbursements were overstated by

$Iti22. This net overstatement was due to the following: unreported disbursements

totaling $3.541 and over reporting $4.663 in various disbursement transactions.

c. December JI 1993 (ph on Hand

The Commilke reponed an ending cash balance at December

31. 1993 of$9.869; the correct balance is $13.437. This understatement resulted from the

misstatements described abo,·c.

2. Calcod. Year 1994

a. Cub on IJJJ¥f

The Commincc's reponed January I, 1994 cash balance was

understated by $3.568 (see Section I.e. abo,·c). The Comminee reported an ending cash

balance at December 31. 1994 of$2.653. The Audit staffdetennined that the correct

balance was $3.805. This net undasIatc:mcn1 \\'U primarily due to the Committee carrying

forward 1he understated JanU&l')' I. 199.a cash on hand balance and the net under reporting

of various 1994 disbursement transactions.

At 1hc nil eonfamce. the Comminee was provided with

certain infonnation relative 10 these misstatements. The Committee was afforded 10 days

to submit documentation related 10 &he manas presented at the exit conference. During

this time period. the Committcc filed amended reports that materially corrected the

misstatements.

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In the interim audit report, the Audit staffrecommended no further action,

howevert the Committee was afforded the opportunity to provide any additional

infonnation or explanation. The Committee provided no additional comments relative to

this finding"

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''''''' FEDERAL ElECTIO~ COMMISSION

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March 19, 1997

Mr. Keith Regli. Treasurer

New Hampshire Democratic State Comminee

ISO North Main Street

Concord, NH 03301

Dear Mr. Regli:

Attached please find the Final Audit Repon on the New Hampshire Democratic

State Comminee. The Commission appro\'ed the repon on March 19, 1997.

The Commission appro\-ed Final Audit Report will be placed on the public record

on March 27. 1997. Should )'ou ha\'c an~' questions !'elarding the public release ofthe

repon. please contact the Commission's Press Officc at (202) 219-41 SS or toll-free at (800)

424·9530. Any qU~1ions )'ou ha\'c related to mancrs covered during the audit or in the

report should be directed to RieL Halter or 1M Audit Division at (202) 219-3720 or at the

abo"e toll free number.

Sincerely,

Ro .Costa

Assistant StaffDirector

Audit Di"ision

Attachment as stated

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CHRONOLOGY

NEW HAMPSHIRE DEMOCRATIC STATE COMMllTEE

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Audit Fieldwork

Interim Audit Repon to

the Committee

Response Received to the

Interim Audit Report

Final Audit Repon Approved

'aqe 19

2/26196 - 3/8/96

1018196

11/13196

3/19/97
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