Final Audit Report of the

Commission on the

AFL-CIO COPE Political

Contributions Committee

January 1, 2005 - December 31, 2006

Why the Audit

Was Done

Federal law permits the

Commission to conduct

audits and field

investigations of any

political committee that is

required to file reports

under the Federal

Election Campaign Act

(the Act). The

Commission generally

conducts such audits

when a committee

appears not to have met

the threshold

requirements for

substantial compliance

with the Act.1 The audit

determines whether the

committee complied with

the limitations,

prohibitions and

disclosure requirements

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.

About the Committee (p. 2)

AFL-CIO COPE Political Contributions Committee is a separate

segregated fund of AFL-CIO and is headquartered in Washington,

DC. For more information, see the chart on the Committee

Organization, p.3.

Financial Activity (p. 2)

• Receipts

o From Individuals

o From Other Political Committees

o Transfers from Affiliated Committees

o Other Receipts

o Total Receipts

• Disbursements

o Contributions to Candidates/Committees

o Other Disbursements

o Total Disbursements

$ 193,546

48,250

1,168,138

8,004

$ 1,417,938

$ 1,304,452

166,520

$ 1,470,972

Commission Finding (p. 4)

• Transfers Received from Separate Segregated Funds (Finding 1)

Additional Issue (p.7)

• Misstatement of Financial Activity (Issue 1)

2 U.S.C. §438(b).
Final Audit Report

of the Commission on the

AFL-CIO COPE Political

Contributions Committee

January 1, 2005 - December 31, 2006
Table of Contents

Page

Part I. Background

Authority for Audit 1

Scope of Audit 1

Part II. Overview of Committee

Committee Organization 2

Overview of Financial Activity 2

Part III. Summaries

Commission Finding and Additional Issue 3

Part IV. Commission Finding

Finding 1. Transfers Received from Separate Segregated Funds 4

Part V. Additional Issue

Issuel. Misstatement of Financial Activity 7
Parti

Background

Authority for Audit

This report is based on an audit of the AFL-CIO COPE Political Contributions

Committee (AFL-CIO COPE), 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:

1. The consistency between reported figures and bank records.

2. The disclosure of individual contributors' occupation and name of employer.

3. The receipt of transfers received from other separate segregated funds.
Part II

Overview of Committee

Committee Organization

Important Dates

• Date of Registration

• Audit Coverage

Headquarters

Bank Information

• Bank Depositories

• Bank Accounts

Treasurer

• Treasurer When Audit Was Conducted

• Treasurer During Period Covered by Audit

Management Information

• Attended FEC Campaign Finance Seminar

• Used Commonly Available Campaign

Management Software Package

• Who Handled Accounting and

Recordkeeping Tasks

AFL-CIO COPE

March 13, 1975

January 1 , 2005 - December 3 1 , 2006

Washington, DC

1

2 (1 Business Account and 1 Business

Money Market Account)

Richard L. Trumka

Richard L. Trumka

Yes

Yes

Paid Staff

Overview of Financial Activity

(Audited Amounts)

Cash on hand @ January 1, 2005

o From Individuals

o From Other Political Committees

o Transfers from Affiliated Committees

o Other Receipts

Total Receipts

o Contributions to Candidates/Committees

o Other Disbursements

Total Disbursements

Cash on hand @ December 31, 2006

$ 122,740

193,546

48,250

1,168,138

8,004

$ 1,417,938

1,304,452

166,520

$ 1,470,972

$ 69,706
Part III

Summaries

Commission Finding

Finding 1. Transfers Received from Separate Segregated

Funds

During the audit period, AFL-CIO COPE received transfers totaling $1,100,000 from two

separate segregated funds. The interim audit report questioned whether AFL-CIO COPE

and the two separate segregated funds, CWA COPE Political Contributions Committee

(CWA COPE) and American Federation of Teachers AFL-CIO Committee on Political

Education (AFT AFL-CIO), were required to meet the transmittal and recordkeeping

requirements for collecting agents. In conjunction with a hearing before the Commission,

counsel for AFL-CIO COPE submitted a 1979 Report of the Audit Division on the AFLCIO COPE which included recommendations that are consistent with AFL-CIO COPE's

longstanding reporting practices for the transfers. Since the Commission has a means of

assuring itself that the contributions received under this practice do not exceed the limits

prescribed by the Act, and considering AFL-CIO's past practice and the approval of this

arrangement in the 1979 audit report, the Commission accepts AFL-CIO COPE's current

reporting practice. (For more detail, see p. 4)

Additional Issue

Issue 1. Misstatement of Financial Activity

A comparison of AFL-CIO COPE's reported activity to bank records revealed a

misstatement of cash on hand and disbursements in years 2005 and 2006. It was

recommended that AFL-CIO COPE file amended reports to correct the misstatement. In

response to the interim audit report, AFL-CIO COPE filed amended reports to correct the

misstatements. AFL-CIO COPE also corrected its cash balance on its September 2009

monthly report. (For more detail, see p. 7)
Part IV

Commission Finding

Finding 1. Transfers Received from Separate Segregated

Funds

Summary

During the audit period, AFL-CIO COPE received transfers totaling $1,100,000 from two

separate segregated funds. The interim audit report questioned whether AFL-CIO COPE

and the two separate segregated funds, CWA COPE Political Contributions Committee

(CWA COPE) and American Federation of Teachers AFL-CIO Committee on Political

Education (AFT AFL-CIO), were required to meet the transmittal and recordkeeping

requirements for collecting agents. In conjunction with a hearing before the Commission,

counsel for AFL-CIO COPE submitted a 1979 Report of the Audit Division on the AFLCIO COPE which included recommendations that are consistent with AFL-CIO COPE's

longstanding reporting practices for the transfers. Since the Commission has a means of

assuring itself that the contributions received under this practice do not exceed the limits

prescribed by the Act, and considering AFL-CIO's past practice and the approval of this

arrangement in the 1979 audit report, the Commission accepts AFL-CIO COPE's current

reporting practice.

Legal Standard

A. Affiliated Definition. Established, financed, maintained or controlled by the same

organization. Affiliated political committees are considered one political committee for

purposes of contribution limits. Committees presumed to be affiliated include those

established, financed, maintained or controlled by a single national or international union

and/or its local unions or other subordinate organizations. Also, committees established

by an organization of national or international unions and/or all its State or local central

bodies are presumed to be affiliated. Affiliation is not presumed between unions and

organizations of national or international unions. 11 CFR §§100.5(g) and 110.3(a).

B. Collecting Agent Definition. A collecting agent is an organization or committee that

collects and transmits contributions to one or more separate segregated funds to which

the collecting agent is related. A collecting agent may be the separate segregated fund's

connected organization or an organization or committee affiliated with the SSF, or a

local, national, or international union collecting contributions on behalf of the separate

segregated fund of any federation with which the local, national, or international union is

affiliated. 11 CFR§102.6(b)(l).

C. Requirements for Collecting Agents. The separate segregated fund (SSF) is

responsible for ensuring that the recordkeeping, reporting, and transmittal requirements

are met.

1. Collecting agent may solicit only those individuals who are eligible for

solicitation under the law, and pay the expenses of soliciting.
2. Collecting agent may include a solicitation for contributions to an SSF in a bill for

another payment.

3. Collecting agent may establish a separate transmittal account solely for the SSF's

contributions or use its own account for the temporary deposit and transmittal of

contributions to the SSF. The agent must keep separate records of all receipts and

deposits that represent contributions to the SSF.

4. Collecting agent must transfer the funds within 10 days for all contributions over

$50 and within 30 days for contributions $50 or less.

5. Collecting agent must forward the required recordkeeping information to the SSF

along with the collected contributions, and maintain records of SSF contribution

deposits and transmittals for three years.

6. The SSF receiving contributions collected by a collecting agent shall report the

full amount of each contribution received as a contribution from the original

contributor to the extent required by 11 CFR §104.3(a). 11 CFR §§102.6(c) and

102.8(b).

Facts and Analysis

During the audit period, AFL-CIO COPE received four transfers from AFT AFL-CIO

totaling $800,000 and four transfers from CWA COPE totaling $300,000. These

transfers were reported by AFL-CIO COPE on Line 12 (Transfers from Affiliated/Other

Party Committees) and described as joint fundraising transfers or as payroll deductions

on its Schedules A (Itemized Receipts).

CWA COPE is the separate segregated fund of the international union Communications

Workers of America (CWA). AFT AFL-CIO is the separate segregated fund of the

international union American Federation of Teachers (AFT). Both CWA and AFT are

members of the federation of unions AFL-CIO. The separate segregated funds of these

unions (CWA COPE, AFT AFL-CIO and AFL-CIO COPE) are not considered

"affiliated" within the meaning of 11 CFR §110.3 and, therefore, are subject to separate

contribution limitations and must independently report their individual contributions.

CWA COPE and AFT AFL-CIO initially receive and report contributions for their

respective committees as well as AFL-CIO COPE. These contributions are often

received from individuals via voluntary payroll deduction. The payroll deduction

authorization cards contain a statement that the contributions will be used in a "joint

fundraising" effort and that a portion of their contributions would go to AFL-CIO COPE.

The contributors do not designate specific or separate contribution amounts for AFL-CIO

COPE. Likewise, the timing and amounts transferred to AFL-CIO COPE were based on

periodic discussions with officers of CWA COPE and AFT AFL-CIO.

At the audit exit conference and in the interim audit report, the Audit staff questioned

whether the AFL-CIO COPE had a collecting agent relationship with CWA COPE and

AFT AFL-CIO and was thus required to follow the collecting agent reporting and

recordkeeping procedures.

In response to the interim audit report, counsel for AFL-CIO COPE stated that it concurs

that both AFT AFL-CIO and CWA COPE may act as collecting agents for AFL-CIO
COPE and that the transfers made complied with the timing requirements of 11 CFR

§102.6(c)(4), although it disagrees that this regulation is applicable to its situation.

Further, counsel disagrees that the separate segregated funds must establish separate

transmittal accounts solely for AFL-CIO COPE contributions, or must maintain

contribution records of the contributions that comprise the transfers. Also, counsel

disagrees that the separate segregated funds are required to forward all recordkeeping

information to AFL-CIO COPE, and that AFL-CIO COPE must report the incoming

transfers on Line 11 (Receipts from Individuals/Persons), itemizing individual

contributions that exceed $200. Counsel explains that the joint fundraising nature makes

the individual attribution to, and reporting by AFL-CIO COPE unnecessary. Counsel

states that the transfers themselves provide the necessary information because individual

CW A/AFL-CIO members authorize all of their contributions to be remitted to CWA

COPE and then delegate to the two separate segregated funds the authority to apportion

the total receipts between them.

Counsel states that the arrangement at issue has been in place for at least 25 years and has

been regularly reported by all participating separate segregated funds. It submits that,

absent a change in the governing regulations, they should be entitled to continue under

the current arrangement and it is manifestly unfair to impose new requirements now.

The Audit staff prepared a Draft Final Audit Report and forwarded that report and

accompanying legal analysis to AFL-CIO COPE with an offer of a hearing before the

Commission.

Audit Hearing

AFL-CIO COPE requested a hearing before the Commission. The request was granted

and the hearing was held on March 4,2010. At the hearing, counsel for AFL-CIO COPE

argued that AFL-CIO COPE has been reporting transfers from separate segregated funds

in the manner in which it was directed by the Commission based upon a previous audit

report approved by the Commission on June 7,1979.

The reporting practices that AFL-CIO COPE has undertaken during the audit period, as

well as those undertaken before the audit period, are consistent with the reporting

recommendations from the 1979 audit report. Because AFT AFL-CIO and CWA COPE

are reporting committees in their own right, contributions received under this practice are

reported to the Commission, and the Commission has a means of assuring itself that the

contributions do not exceed the limits prescribed by the Act. Moreover, due

consideration must be given to the approval of this arrangement in the 1979 audit report

and AFL-CIO's longstanding past practice. Under these circumstances, the Commission

accepts AFL-CIO COPE's current reporting practice.
PartV

Additional Issue

Issue 1. Misstatement of Financial Activity

Legal Standard

Contents of Reports. Each report must disclose:

• The amount of cash on hand at the beginning and end of the reporting period;

• The total amount of receipts for the reporting period and for the calendar year; and

• The total amount of disbursements for the reporting period and for the calendar year;

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

Schedule B (Itemized Disbursements). 2 U.S.C. §434(b)(l), (2) and (4).

Facts and Analysis

A comparison of AFL-CIO COPE's reported activity to bank records revealed a

misstatement of cash on hand and disbursements in years 2005 and 2006. The

majority of the differences were the result of understating disbursements. It was

recommended that AFL-CIO COPE file amended reports to correct the misstatement.

In response to the interim audit report, AFL-CIO COPE filed amended reports to

correct the misstatements. AFL-CIO COPE also corrected its cash balance on its

September 2009 monthly report.

The Commission decided by a vote of 6-0 to move the discussion of this matter to the

Additional Issues section of the audit report.