Part I
Background

Authority for Audit

This report is based on an audit of the Jim Gerlach for Congress Committee (GFC),
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

This audit examined:

The receipt of excessive contributions and loans.

The receipt of contributions from prohibited sources.

The disclosure of contributions received.

The disclosure of disbursements, debts and obligations.
The consistency between reported figures and bank records.
The completeness of records.

Other committee operations necessary to the review.

NAMRYONS


on either its 2002 Post General or 2002 Year End disclosure reports. As of November 6,
2002, the date of the general election, the Audit staff calculated that GFC did not have net
debts outstanding.

On March 10, 2003, and March 22, 2003, GFC deposited contributions of $1,000 from
the Wine and Spirits Wholesalers of America Political Action Committee and $4,950
from the NRA-Political Victory Fund, respectively, which were designated for the 2002
General Election. No documentation was found in GFC’s records to indicate that a
redesignation of either contribution had been obtained. Thus, the contributions were
considered excessive to the 2002 General Election.

Excessive Contributions to the 2004 Primary Election:

Partnerships

Partnerships are subject to a per election limitation of $2,000. Additionally, a partnership
contribution must be further allocated among the contributing members of the
partnership. GFC received contributions from three partnerships totaling $19,000 which
exceeded the limitation for the 2004 Primary Election by $13,000 ($19,000 - $6,000).
For two of the partnerships, although a presumptive redesignation of $2,000 each to the
general election could have been made; there was no documentation or other evidence
that GFC availed itself of this option by notifying the contributors of the redesignation
and offering a refund if the redesignation was not acceptable to the contributor.

Individuals

GFC received contributions from eleven individuals, totaling $40,357, prior to the 2004
primary election. Although GFC presumptively reattributed and/or redesignated the
excessive portions of these contributions, it failed to maintain documentation of written
notification to the contributors that also offered a refund. As a result, GFC received
excessive contributions totaling $16,071.

Interim Audit Report Recommendation and Committee Response

The Audit staff recommended that GFC:

¢ Provide evidence that the identified contributions were not excessive or were
applicable to net debt outstanding to a particular election; or,

¢ Refund $35,021 and provide evidence of such refunds (copies of the front and back of
the negotiated checks); or

¢ If funds were not available to make the necessary refunds, GFC should have reported
the amounts to be refunded as debts on Schedule D (Debts and Obligations Excluding
Loans) until funds became available to make the refunds.

In response to the interim audit report, GFC provided copies of checks and letters written
to refund each identified excessive contribution. In a cover letter, GFC stated its
intention to provide copies of the negotiated refund checks once they clear the bank.


Part III
Summary

Finding and Recommendation

Receipt of Excessive Contributions

GFC received $35,021 in excessive contributions. Excessive contributions totaling
$5,950 were received from two political action committees and excessive contributions
totaling $29,071 were received from three partnerships and eleven individuals. In
response to the interim audit report, GFC issued refund checks for each identified
excessive contribution.

(For more detail, see p. 4)


Part II
Overview of Campaign

Campaign Organization

Important Dates

Jim Gerlach for Congress Committee

¢ Date of Registration

January 23, 2002

e Audit Coverage

January 1, 2003 through December 31, 2004

Headquarters

Glenmoore, Pennsylvania

Bank Information

e Bank Depositories

1

e Bank Accounts 1 Checking
Treasurer
e Treasurer When Audit Was Conducted Alan Randzin
e Treasurer During Period Covered by Audit _| Alan Randzin
Management Information
e Attended FEC Campaign Finance Seminar _| No
e Used Commonly Available Campaign Yes
Management Software Package
e Who Handled Accounting, Recordkeeping | Paid Campaign Staff

Tasks and other Day-to-Day Operations

Overview of Financial Activity
(Audited Amounts)

Cash on hand @ January 1, 2003 $ 26,493
Receipts

o From Individuals $ 1,065,871

o From Political Committees 1,131,814

o. Transfers from Joint Fundraisers 137,033

o Offsets to Expenditures 14,106

o Other Receipts TAIT

o Total Receipts $ 2,356,241
Disbursements:

o Operating & Other Disbursements $2,231,566

o Total Disbursements $ 2,231,566

Cash on hand @ December 31, 2004 $ 151,168


D. Determination of Net Debts Outstanding: The treasurer of an authorized political
committee shall calculate net debts outstanding as of the date of the election. Net debts
outstanding is the total amount of unpaid debts and obligations incurred with respect to
an election, including the estimated cost of raising funds to liquidate debts incurred with
respect to the election, less the sum of: total cash on hand available to pay those debts and
obligations, any amounts owed the committee and any loans from the candidate that in
the aggregate exceed $250,000. 11 CFR §§110.1(b)(3)(ii) and 116.11(b)

E. Presumptive Redesignation of Excessive Contributions: An excessive
contribution from an individual or a non-multi-candidate committee to an authorized
political committee may be presumptively redesignated to the general election if the
contribution:

e Is made before that candidate’s primary election;

e Is not designated in writing for a particular election;

e Would be excessive if treated as a primary election contribution; and

e As redesignated, does not cause the contributor to exceed any other contribution

limit.

Also, the excessive portion of an undesignated contribution made after the primary, but
before the general election may be automatically applied to the primary if the campaign’s
net debts outstanding from the primary equal or exceed the amount redesignated. The
committee is required to notify the contributor in writing of the redesignation within 60
days of the treasurer’s receipt of the contribution, and must offer the contributor the
option to receive a refund instead. For this action to be valid, the committee must retain
copies of the notices sent as required. Presumptive redesignations apply only within the
same election cycle. 11 CFR §110.1(b)(5)(ii)(B) & (C) and (1)(4)(ii).

F. Presumptive Reattribution of Excessive Contributions. When a committee
receives an excessive contribution made via a written instrument with more than one
individual’s name imprinted on it, but only one signature, the committee may first
attribute the permissible portion to the signer and then, may make a presumptive
reattribution of the excessive portion to the other individual whose name is imprinted on
the written instrument, without obtaining a second signature, so long as the reattribution
does not cause the contributor to exceed any other contribution limit. The committee is
required to notify the contributor of the reattribution within 60 days of the treasurer’s
receipt of the contribution, and must offer the contributor the option to receive a refund
instead. For this action to be valid, the committee must retain copies of the notices sent
as required. 11 CFR §110.1(k)(3)(ii)(B)and (1)(4)(ii).

Facts and Analysis

The Audit staffs review of contributions indicated GFC received $35,021 in excessive
contributions, as detailed below.

Excessive Contributions to the 2002 General Election:

Following the 2002 General Election, GFC reported all disbursements as attributable to
the 2004 primary election. Further, GFC reported no outstanding campaign obligations


FEDERAL ELECTION COMMISSION
WASHINGTON, D.C. 20463

November 17, 2005

MEMORANDUM

TO: ROBERT W. BIERSACK
PRESS OFFICER
PRESS OFFICE

FROM: JOSEPH F. STOLTZ yh
ASSISTANT STAFF/)1 R
AUDIT DIVISION |

SUBJECT: PUBLIC ISSUANCE OF THE AUDIT REPORT ON
THE JIM GERLACH FOR CONGRESS COMMITTEE

Attached please find a copy of the audit report on the Jim Gerlach for Congress
Committee which was approved by the Commission on November 3, 2005.

All parties involved have received informational copies of the report and the report
may be released to the public.

Attachment as stated

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


Part IV

Finding and Recommendation

| Receipt of Excessive Contributions

Summary

GFC received $35,021 in excessive contributions. Excessive contributions totaling
$5,950 were received from two political action committees and excessive contributions
totaling $29,071 were received from three partnerships and eleven individuals. In
response to the interim audit report, GFC issued refund checks for each identified
excessive contribution.

Legal Standard

A. Authorized Committee Limits: An authorized committee may not receive more
than a total of $2,000 per election from any one person or $5,000 per election from a
multicandidate political committee. 2 U.S.C. §441a(a)(1)(A), (2)(A) and (f); 11 CFR
§§110.1(a) and (b) and 110.9(a).

B. Handling Contributions That Appear Excessive. If a committee receives a
contribution that appears to be excessive, the committee must either:

e Return the questionable check to the donor; or

¢ Deposit the check into its federal account and:

o Keep enough money in the account to cover all potential refunds;

o Keep a written record explaining why the contribution may be illegal;

o Include this explanation on Schedule A if the contribution has to be itemized
before its legality is established;

o Seek a reattribution or a redesignation of the excessive portion, following the
instructions provided in Commission regulations (see below for explanations
of reattribution and redesignation); and

o Ifthe committee does not receive a proper reattribution or redesignation
within 60 days after receiving the excessive contribution, refund the excessive
portion to the donor. 11 CFR §§103.3(b)(3), (4) and (5) and
110.1(k)(3)Gi)(B).

C. Contributions to Retire Debts: If an authorized candidate committee has net debts

outstanding after an election is over, a campaign may accept contributions after the

election to retire the debts provided that:

¢ The contribution is designated for that election (since an undesignated contribution
made after an election counts toward the limit for the candidate’s upcoming election);

¢ The contribution does not exceed the contributor’s limit for the designated election;
and

¢ The campaign has net debts outstanding for the designated election on the day it
receives the contribution. 11 CFR §110.1(b)(3)(i) and (iii).


Table of Contents

Part I. Background
Authority for Audit
Scope of Audit

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

Part III. Summary
Finding and Recommendation

Part IV. Finding and Recommendation
Receipt of Excessive Contributions

Page


Report of the

Audit Division on the
Jim Gerlach for Congress
Committee

January 1, 2003 through December 31, 2004



Report of the Audit Division on
the Jim Gerlach for Congress

Committee
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.' 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.

' 2US.C. §438(b).

About the Campaign (p. 2)

The Jim Gerlach for Congress Committee (GFC) is the principal
campaign committee for Jim Gerlach, Republican candidate for the
U.S. House of Representatives from the state of Pennsylvania,
Sixth District. GFC is headquartered in Glenmoore, PA. For more
information, see the chart on the Campaign Organization, p. 2.

Financial Activity (p. 2)
« Receipts

o From Individuals $ 1,065,871
o From Political Committees 1,131,814
o. Transfers from Joint Fundraisers 137,033
o Offsets to Expenditures 14,106
o Other Receipts TA17
o Total Receipts $ 2,356,241

¢ Disbursements
o Operating & Other Disbursements
o Total Disbursements

$ 2,231,566
$ 2,231,566

Finding and Recommendation (p. 3)
e Receipt of Excessive Contributions