Part I
Background

Authority for Audit

This report is based on an audit of Chellie Pingree for U.S. Senate, 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 of reports filed by selected committees to
determine if the reports filed by a particular committee meet the threshold requirements
for substantial compliance with the Act. 2 U.S.C. §438(b).

Scope of Audit

Following Commission approved procedures, the Audit staff evaluated various factors
and as a result, this audit examined:

The receipt of excessive contributions and loans.

The receipt of contributions from prohibited sources.

The disclosure of contributions received.

The consistency between reported figures and bank records.

The completeness of records.

Other committee operations necessary to the review.

AYWAYWNe

Changes to the Law

On March 27, 2002, President Bush signed into law the Bipartisan Campaign Reform Act
of 2002 (BCRA). The BCRA contains many substantial and technical changes to the
federal campaign finance law. Most of the changes became effective November 6, 2002.
Except for the period November 7, 2002, through December 31, 2002, the period covered
by this audit pre-dates these changes. Therefore, the statutory and regulatory
requirements cited in this report are those that were in effect prior to November 7, 2002.


National Jewish Democratic Council Political Action Committee ($2,342) and League of
Conservation Voters Action Fund ($5,000).?

This matter was discussed at the exit conference. The CPS representatives related they
utilized FECfile software to aggregate, itemize and report contributions received during
the audit period, but experienced difficulties disclosing the required information relative
to the receipt of earmarked contributions.

Since CPS does not file electronically, the required information may be disclosed on a
spreadsheet that can be attached to amended reports. The spreadsheet for each reporting
period should include the contributor’s full name, the conduit’s full identification, and the
date and amount of the transfer in which the earmarked contribution was received.

Interim Audit Report Recommendation
The Audit staff recommended that CPS file amended reports for every period in which
earmarked contributions were received, and disclose the earmarked contributions, as

follows:

e For all contributions received through a conduit that required itemization on Schedule
A, line 11(a), the description field for the itemized entry should include the following:
“Earmarked contribution. See attached spreadsheet”. The attached spreadsheet for
each reporting period should include the contributor’s last and first name, the
conduit’s full identification, and the date and amount of the transfer in which the
contribution was received’; and,

e On Schedule A, line 11(c), disclose, as memo entries, the name of the conduit, along
with the date and amount of each transfer’.

Committee Response to Recommendation and Audit Staff's
Assessment

In response CPS filed the necessary amended reports that materially corrected the
disclosure errors with respect to the receipt of earmarked contributions. Nevertheless,
Counsel for CPS (Counsel) questions the fairness of penalizing CPS for mistakes because
of inefficiencies in the Commission’s own software; that CPS reasonably relied on advice
from the Reports Analysis Division (RAD) staff in reporting such contributions; and, that
only one Request For Additional Information (RFAI) from the RAD requested an
amendment for earmarked contributions.

2 CPS itemized 4 memo entries on line 1 1(c) totaling $155,906 pertaining to conduit transfers received
from MoveOn.org PAC. Records made available by CPS pertaining to MoveOn.org PAC did not
resolve the overreporting discrepancy of $5,718 ($155,906 - $150,188)

3 Due to the volume of conduit transfers made through Emily’s List and MoveOn.org PAC and the
extensive amendment requirements that will be necessary to comply with this recommendation, CPS
should aggregate the total amount received from each entity by month and disclose this amount on line
11(a) for the appropriate itemized contributions; the date received should be the month and year.

‘For those conduit transfers received from Emily's List and MoveOn.org PAC, CPS should apply the
same procedure as described in footnote 3 above.



Part III
Summaries

Findings and Recommendations

Finding 1. Disclosure of Earmarked Contributions

CPS received earmarked contributions through several conduits. For the most part, CPS
did not disclose all the required information on Schedule A for line 11(a) and (c). In
response to the recommendation in the interim audit report, CPS filed amended
disclosure reports that materially corrected the public record. (For more detail, see p. 4)

Finding 2. Transfers From Maine Senate 2002

CPS participated in a joint fundraising event. CPS incorrectly reported its net share of
the proceeds ($17,561), as contributions received from individuals rather than transfers
from the joint fundraising representative. In response to the recommendation in the
interim audit report, CPS filed amended disclosure reports that corrected the public
record. (For more detail, see p. 6)



Part II
Overview of Campaign

Campaign Organization

Important Dates

Chellie Pingree for U.S. Senate

e Date of Registration

May 15, 2001

e Audit Coverage

April 24, 2001 — December 31, 2002

Headquarters

Portland, Maine

Bank Information

e Bank Depositories 3

e Bank Accounts 3

Treasurer

e Treasurer When Audit Was Conducted Daniel Crewe

e Treasurer During Period Covered by Audit

Daniel Crewe

Management Information

e Attended FEC Campaign Finance Seminar

No

e Used Commonly Available Campaign
Management Software Package

FECFile

e Who Handled Accounting and
Recordkeeping Tasks

Paid Consultants

Overview of Financial Activity

(Audited Amounts)
Cash on hand @ January 1, 2001 $0
o From Individuals 3,463,404
o From Political Party Committees 21,750
o From Other Political Committees 359,687
o Other Receipts 52,993
Total Receipts 3,897,834
o Operating Expenditures & Other 3,827,729
Disbursements
Total Disbursements 3,827,729
Cash on hand @ December 31, 2002 $70,105



Facts and Analysis

The Audit staff’s review of CPS’s receipt records and conduit reports filed with the FEC
indicate that CPS received earmarked contributions from the following sources:

Conduit Name Transferred Amount
Emily’s List $319,995
Council for a Livable World 47,315
Next Generation 20,000
National Jewish Democratic Council Political 2,342
Action Committee

League of Conservation Voters Action Fund 5,000
MoveOn.org PAC $150,188
Total conduit contributions received: $544,840

The disclosure requirements for contributions received through conduits are flexible. The
recipient committee may either:

1. Itemize all transfers received from the conduit on Schedule A, line 11(c)
(Other Political Committees) and include memo entries on Schedule A, line
11(a) (Individuals/Persons Other Than Political Committees) for only those
individual contributions that aggregate greater than $200; or,

2. Report all contributions received through the conduit on Schedule A, line
11(a) (both itemized and unitemized) as contributions from individuals and
provide memo entries on Schedule A, line 11(c) for the amount of the
conduit transfers.

In either case, the disclosure of the itemizable individual contributions on Schedule A,
line 11(a) must include the contributor’s name, full identification, date the contribution
was received by the conduit and the amount. Further, all contributions received from a
conduit and itemized on line 11(a) must also include the identification of the conduit, and
the date and amount of the conduit’s transfer.

CPS elected to report individual contributions on Schedule A, line 11(a) and the conduit
transfers as memo entries on line 11(c). However, CPS failed to disclose any information
relative to the conduit on Schedule A, line 11(a) on its July Quarterly 2002 report. For all
other reporting periods, CPS disclosed the name and address of the conduit on line 11(a),
but did not disclose the date and amount of the conduit’s transfer. Further, of the total
$544,840 in conduit transfers, CPS failed to file memo entries on line 11(c) for $27,775
in transfers received from Emily’s List; $26,829 in transfers received from Council for a
Livable World; and all of the transfers received from Next Generation ($20,000),



FEDERAL ELECTION COMMISSION
WASHINGTON, D.C. 20463

May 19, 2004

MEMORANDUM

TO: ROBERT W. BIERSACK
PRESS OFFICER
PRESS OFFICE

FROM: JOSEPH F. STOLTZ /
ASSISTANT STAFF DIRECTOR
AUDIT DIVISION .

SUBJECT: | PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON
CHELLIE PINGREE FOR U.S. SENATE

Attached please find a copy of the final audit report and related documents on
Chellie Pingree for U.S. Senate, which was approved by the Commission on May 6, 2004.

Informational copies of the report have been received by all parties involved and
the report may be released to the public on May 18, 2004.

Attachment as stated

ce: Office of General Counsel
Office of Public Disclosure
Reports Analysis Division
FEC Library
Web Manager


Maine Senate 2002 and itemized its share of gross receipts ($18,055) as contributions
from the original donors as memo entries on Schedules A.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that CPS file amended Schedules A disclosing the net
proceeds received from Maine Senate 2002 ($17,561) and memo Schedules A itemizing
the gross amount received from each contributor whose contributions aggregate greater
than $200. In response, CPS filed the necessary amended reports to correct the disclosure
errors noted above.



With respect to the Commission’s free electronic filing software, Counsel primarily
complains that it lacks an import feature that would have allowed CPS to file printed
reports more easily. With respect to advice from the RAD staff, they did discuss the
reporting of earmarked contributions with CPS. However, CPS still failed to materially
disclose all of the required information. Counsel’s assertion that CPS reasonably
assumed that its disclosure was adequate given that the issue was raised in only one RFAI
is incorrect. A review of the record shows that five RFAI’s addressed the issue and
requested amended reports. Finally, Counsel argues that MoveOn.org does not meet the
definition of a conduit. However, the Commission considered that issue and concluded
the contrary at the time of the interim audit report.

| Finding 2. Transfers From Maine Senate 2002

Summary

CPS participated in a joint fundraising event. CPS incorrectly reported its net share of
the proceeds ($17,561), as contributions received from individuals rather than transfers
from the joint fundraising representative. In response to the recommendation in the
interim audit report, CPS filed amended disclosure reports that corrected the public

record.

Legal Standard

Itemization Required. Political committees must itemize:

e Any contribution from an individual if it exceeds $200 per calendar year (or per
election cycle in the case of authorized candidate committees) either by itself or when
aggregated with other contributions from the same contributor. 11 CFR
§104.3(A)(4)(D; and

e Every contribution from any political committee, regardless of the amount 2 U.S.C.
§434(b)(3)(A) and (B).

Itemization of Contributions From Joint Fundraising Efforts. Each participating
political committee reports its share of the net proceeds as a transfer-in from the
fundraising representative. Using the records received from the fundraising
representative, a participating committee itemizes its share of gross receipts as
contributions from the original donors on memo entry Schedules A. 11 CFR

§102.17(c)(8)(i)(B).

When itemizing gross contributions, the participant must report the date of receipt as the
day the fundraising representative received the contribution. 11 CFR §102.17(c)(3)(iii).

Facts and Analysis

CPS participated in a joint fundraising event. The joint fundraising representative was
Maine Senate 2002, a registered political committee. CPS received proceeds totaling
$17,561 but incorrectly disclosed this amount as being received from various individual
contributors. CPS should have disclosed this amount ($17,561) as being received from


Part IV
Findings and Recommendations

Finding 1. Disclosure of Earmarked Contributions

Summary
CPS received earmarked contributions through several conduits. For the most part, CPS

did not disclose all the required information on Schedule A [Itemized Receipts] for line
11(a) [Individual/Persons Other Than Political Committee] and (c) [Other Political
Committees]. In response to the recommendation in the interim audit report, CPS filed
amended disclosure reports that materially corrected the public record.

Legal Standard
Definition of a Conduit. Anyone who receives and forwards an earmarked contribution
to a candidate committee is considered a conduit. 11 CFR §110.6(b)(2)

Definition of an Earmarked Contribution. An earmarked contribution is one which
the contributor directs (either orally or in writing) to a clearly identified candidate or his
or her authorized committee through an intermediary or conduit. 11 CFR §110.6(b)(1)

Required Information for Contributions from Individuals Received From a
Conduit. For each itemized contribution from an individual forwarded by a conduit,
the recipient committee must report the following information:

The contributor’s full name and address (including zip code);

The contributor’s occupation and the name of his or her employer;

The date of receipt (the date the conduit received the contribution);

The amount of the contribution;

The election cycle-to-date total of all contributions from the same individual;
The full name and address of the conduit; and

The date and total amount of earmarked contributions received from the conduit
11 CFR §§100.12, 104.3(a)(4), 110.6(c) and 2 U.S.C. §434(b)(3)(A).


Table of Contents

Part I. Background
Authority for Audit
Scope of Audit
Changes to the Law

Part II. Overview of Campaign
Campaign Organization
Overview of Financial Activity

Part III. Summaries
Findings and Recommendations

Part IV. Findings and Recommendations
Finding 1. Disclosure of Earmarked Contributions
Finding 2. Transfers From Maine Senate 2002

Page



Report of the
Audit Division on
Chellie Pingree for U.S. Senate

April 24, 2001 - December 31, 2002



Report of the
Audit Division on

Chellie Pingree for U.S. Senate
April 24, 2001 - December 31, 2002

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.’ The audit
determines whether the
committee complied with
the limitations,
prohibitions and
disclosure requirements
of the Act.

Future Action
The Commission may
initiate an enforcement
action, at a later time,
with respect to any of the
matters discussed in this
report.

' 2U.S.C. §438(b)

About the Campaign (p. 2)

Chellie Pingree for U.S. Senate is the principal campaign
committee of Chellie Pingree, Democratic candidate for the U.S.
Senate from the state of Maine and is headquartered in Portland,
Maine. For more information see chart on the Campaign
Organization, p. 2

Financial Activity (p. 2)

¢ Receipts
$ 3,463,404

o From Individuals

o From Political Party Committees 21,750

o From Other Political Committees 359,687

o Other Receipts 52,993

o Total Receipts $ 3,897,834
Disbursements

o Total Operating Expenditures $ 3,827,729

& Other Disbursements

Findings and Recommendations (p. 3)
¢ Disclosure of Earmarked Contributions (Finding 1)
e Transfers From Maine Senate 2002 (Finding 2)