MEMORANDU~

FEDERAL ElECTIO~ COMMISSION

May 7, 1996

BEW007231

TO:

FROM:

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RON M. HARRIS

PRESS OFFICER

PRESS OFFICE

ROBERT J. COSTA

ASSISTANT STAFF DIRECTOR

AUDIT DIVISION

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON

FRIENDS OF CONRAD BURNS

Attached please find a copy of the final audit report

and related documents on Friends of Conrad Burns, which was

approved by the Commission on April 24, 1996.

Informational copies of the 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

,Office of Public Disclosure

Reports Analysis Division

FEe Library

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REPORT OF THE AUDIT DIVISION

ON

The Friends of Conrad Bums

Approved April 24. 1996

FEDERAl.. ELF:LIIO~ CO~1!\tISSION

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TABLE OF CONTENTS

FRIENDS OF CONRAD BURNS

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Executive Summary

Final Audit Report

Background

Findings

Transmittal to Committee

Chronology

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FEDERAL ELECTI()' C()~':\"SSIO~

FINAL AUDIT REPORT

ON

THE FRIENDS OF CONRAD BURNS

EXECUTIVE SUMMARY

The Friends of Conrad Burns (the Committee) registered with

the Secretary of the Senate on February 16, 1988 as the principal

campaign committee for Conrad Burns, Republican candidate for the

u.s. Senate from the State of Montana.

The audit was conducted pursuant to 2 U.S.C. Section 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 of field work on August

16, 1995, and later, in an interim audit report.

The following is an overview of the findings contained in the

final audit report.

Apparent Excessive Contributions from Individuals- 2 U.S.C.

Section 441a(a)(1)(A); 11 CFR Sections; l03.3(b)(3) and (4),

110.1(b)(5), 110.1(e), IIO.I(k), 110.1{l)(1), (2), (3), (5) and

(6). The Committee received excessive contributions to the

primary election totaling $20,888 which we~e not tLmely resolved

due either to refunds not made, or redesignations or

reattributions not obtained, within the required sixty days. The

Committee received and failed to document any resolution for

additional excessive contributions totaling $56,305. For $13,215

of the unresolved excessive contributions, the Committee received

inadequate reattribution documentation. For another $3,322 of

contributions, refund checks were prepared and never negotiated.

For the balance, $39,768, no reattribution or redesignation

documentation was prOVided. Pending the final determination wi~h

respect to the unresolved excessive contributions, the Committee,

in its Year End 1995 Disclosure Reports, reported each excessive

contribution as a debt to the contributor.

Apparent Misstatement of Financial Activity- 2 U.S.C. Sections

434(b)(l), (2), and (4). For 1993, the Committee overstated

beginning cash-on-hand by $3,524 and understated disbursements by

$7,436. These misstatements and a small receipts overstatement

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caused a year end cash-on-hand overstatement of $11,062. In 1994,

the Committee carried forward the overstatement fram the previous

period. It also understated receipts by $25,708 and disbursements

by $78,869. Ending cash-cn-hand for 1994 was overstated by

$24,781 as a result of these misstatements and an unexplained

reduction of $39,441 to the beginning cash balance on the

Pre-General Election disclosure report. The Committee filed

amended reports on March 18, 1996 which materially corrected the

misstatements for 1993 and 1994.

Contributions Subject to 48 Hour Disclosure Notices- 11 CFR

Secti~n 104.5(£). For the general election, the Committee failed

to file the required notices for 77 contributions totaling

$119,000. Sixty-eight of the contributions totaling $106,500 for

which notices were not filed were deposited between October 20 and

October 24. The Committee has offered no explanation of its

failure to file the required notices.

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FEDERAL ELECTI()'- C( ).\1t\1ISSION

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REPORT OF THE AUDIT DIVISION

ON

THE FRIENDS OF CONRAD BURNS

I. Background

A. Audit Authority

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This report is based on an audit of The Friends of

Conrad Burns (the Committee) undertaken by the Audit Division of

the Federal Election Commission in accordance with the provisions

of the Federal Election Campaign Act of 1971, as amended (the

Act). The audit was conducted pursuant to Section 438(b) of Title

2 of the 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 of

this title. Prior to conducting any audit under this subsection,

the Commission shall 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.

B. Audit Coverage

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- The audit covered the period from January 1, 1993

through December 31, 1994.!' The Committee reported a beginning

cash balance at January 1, 1993 of $205,240; total receipts for

the period of $3,065,094; total disbursements for the period of

$3,157,088; and an ending cash balance on December 31, 1994 of

$73,804.~/

1/ Contributions received since the prior election were reviewed

for compliance with limitations (see findings II.A.1. and

II.A.2.) .

2/ All figures in this report have been rounded to the nearest

dollar. The amounts do not foot due a discrepancy of $39,441

between the reported ending cash balance at October 20, 1994

and the beginn~ng cash balance at October 21, 1994.

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C. Campaign Organization

The Committee registered with the Secretary of the

Senate on February 16, 1988 as the principal campaign committee

for Conrad Burns, Republican candidate for the u.s. Senate from

the State of Montana. The Committee Treasurer during the audit

period and currently is Mr. Jim Swain. In addition, the Candidate

designated four other authorized committees: Warner-Nickles '93

Committee, Warner-Nickles '94 Committee, The Republican Senate

Victory , 94 Committee and the Senate Vi," tory Fund ' 94. These

committees acted as fundraising represen~atives for joint

fundraising efforts for the Committee and other participating

committees. The Committee maintains its headquarters in Billings,

Montana.

To handle its financial activity, the Committee used

seven bank accounts at various times. From these accounts, the

Committee made 3,112 disbursements totaling $3,243,394.

Approximately 19,300 contributions were received from more than

14,500 persons totaling $1,516,331.~1 These contributions

accounted for 49.1\ of receipts. Approximately 1,180

contributions were received from 711 political committees and

other committees totaling 51,468,877 1/ accounting for an a~citional 47.5\ of receipts. Interest and offsets to operating

exrenditures accounted for the remaining $105,610 (3.4\).

D. Audit Scope and Procedures

The audit included testing of the following general

categories:

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The receipt of contributions or loans in excess of

the statutory limitations (see Finding II.A.);

the receipt of contributions from prohibited

sources, such as those from corporations or labor

organizations;

3. proper disclosure of receipts from individuals,

political committees and other entities, to include

the itemization of contributions or other receipts

when required, as well as, the completeness and

accuracy of the information disclosed (see Finding

II.C.);

3/ Included in these amounts were contributions made through

joint fundraising committees; S32,198 from individuals and

$106,726 from political committees and other committees. The

Committee reported no redesignations of cOfitributions from

the 1988 election cycle to the 1994 cycle. In addition, the

contribution documentation did not indicate that any

contributions designated for 1988 were redesignated.

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4. proper disclosure of disbursements including the

itemization of disbursements when required, as well

as, the completeness and accuracy of the

information disclosed;

s. proper disclosure of campaign debts and

obligations;

6. the accuracy of total reported receipts,

disbursements and cash balances as compared to

campaign bank records (see Finding II.B.);

7. adequate recordkeeping for campaign transactions;

and

8. other audit procedures that were deemed necessary

in the situation.

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This report is based on documents and workpapers which

support each of its factual statements. They form part of the

record upon which the Commission based its decisions on the

matters in the report and were available to the Commissioners and

appropriate staff for review. Unless specifically discussed

below, no material non-compliance W45 detected. It should be

noted that the Commission may pursue further any of the matters

discussed in this report in an enfor~nt action.

II. Audit Findings and Recommendations

A. Apparent Excessive Contributions from Individuals

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Section 441a(a)(1)(A) of Title 2 of the United States

Code and Section 110.1(b)(1) of Title 11 of the Code of Federal

Regulations state, in part, that no person shall make

contributions to any candidate and his authorized political

committees with respect to any election for Federal office which,

in the aggregate, exceed $1000.

Section 103.3(b)(3) of Title 11 of the Code of Federal

Regulations states, in part, that if any contribution which

exceeds the contribution limitations set forth at 11 CFR SllO.l is

deposited, the treasurer may request redesignation or

reattribution of the contribution by the contributor in accordance

with 11 CFR 110.1(b) or 110.l(k) as appropriate. If a

redesignation or reattribution is not obtained, the treasurer

shall, within sixty days of the treasurer's receipt of the

contribution, refund the contribution to the contributor.

Section 110.1(b)(S) of Title 11 of the Code of Federal

Regulations states, in relevant part, that the treasurer of an

authorized political committee may request a written redesignation

of a contribution by the contributor for a different election if

the contribution exceeds the limitation on contributions set forth

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in 11 CFR 110.1(b)(1). A contribution shall be considered to be

redesignated for another election if the treasurer of the

recipient authorized political committee requests that the

contributor provide a written redesignation of the contribution

and informs the contributor that he may request the refund of the

contribution and within sixty days from the date of the

treasurer's receipt of the contribution, the contributor provides

the treasurer with a signed redesignation of the contribution for

another election.

Section 110.1(k) of Title 11 of the Code of Federal

Regulations states, in relevant part, if a contribution to a

candidate either on its face or when aggregated with other

contributions from the same contributor, exceeds the l~itations

on contributions set forth in 11 CFR 110.1(b), the treasurer of

the recipient political committee may ask the contributor whether

the contribution was intended to be a a joint contribution by more

than one person. A contribution shall be considered to be

reattributed to another contributor if the treasurer of the

recipient political committee asks the contributor whether the

contribution is intended to be a joint contribution by more than

one person, and informs the contributor that he or she may request.

the return of the excessive portion of the contribution if it is

not intended to be a joint contribution and within sixty days from

the date of the treasurer's receipt of the contribution, the

contributors provide the treasurer with a w~~tten reattribution of

the contributions which is signed by each contributor, and which

indicates the amount to be attributed to each cvntributor if equal

attribution is not intended.

Sections 110.1(1)(1), (2) and (3) of Title 11 of the

Code of Federal Regulations state, in part, that if a political

committee receives a contribution designated in writing for a

particular election, the treasurer shall retain a copy of the

written designation as required by 11 CFR 110.1(b)(4). If the

written designation is made on a check or other written

instrument, the treasurer shall retain a full-size photocopy of

the check or written instrument. If a political committee

receives a written redesignation of a contribution for a different

election, the treasurer shall retain the written redesignation

provided by the contributor, as required by 11 CFR 110.1(b)(S) and

11 CFR 110. 1 ( k) .

Section 110.1{l)(5) of Title 11 of the Code of Federal

Regulations states, in part, that if a political committee does

not retain the written records concerning redesignations or

reattributions, the redesignation or reattribution shall not be

effective and the original des~gnation or attribution shall

control.

Section 110.1(1)(6) of Title 11 of the Code of Federal

Regulations states, ~n part, that for each written redesignation

or written reattribution of a contribution, the political

committee shall retain documentation demonstrating when the

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written redesignation or written reattribution was received. Such

documentation shall consist of either the postmarked envelope in

which the documentation was received, having the documentation

dated by the contributor or having the documentation dated by the

committee upon receipt.!/

Section 110.1(e) of Title 11 of the Code of Federal

Regulations states, in part, that a contribution by a partnership

shall not exceed the limitations on contributions in 11 CFR

110.1(b).

Section 103.3(b)(4) of Title 11 of the Code of Federal

Regulations states that any contribution which appears to be

illegal under 11 CFR S l03.3(b)(3), and which is deposited into a

campaign depository shall not be used for any disbursements by the

political committee until the contribution has been determined to

be legal. The political committee must either establish a

separate account in a campaign depository for such contributions

or maintain sufficient funds to make all such refunds.

The Audit staff reviewed the Committee'S receipt records

from 1989 through the end of the audit period~1 and initially

identified 112 individuals and two partnerships whose

contributions appeared to exceed the contribution l~itations by

$77,193. Of this total, $56,305 !/ had not been reattributed,

redesignated or refunded and $20,888 had been redesignated or

reattributed but the actions were either unt~ely or undated.

1. Excessive Contributions Resolved Untimely

The Audit staff identified excessive contributions

to the primdry election totaling $20,888 for which either refunds

were made or redesignations or reattributi~ns were obtained, but

not within sixty days. For 511,304 of the total resolved

untimely, the redesignation or reattrihution is not dated and

therefore is considered to be untime:y.

At the exit conference, the Audit staff provided

the Committee a schedule of individuals and their excessive

contributions which were determined to have been resolved

untimely. Committee representatives did not address the matter.

1/ This regulation became effective November 6, 1991.

5/ Senator Burns' previous election was held in 1988 and all

con~ributions received since that time are included in

determining potentially excessive contributions for the audit

per.lod.

6/ Of this excessive amount, 545,303 applied to the primary

ele=t~on and S~1/002 applied to the general election.

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In a response made subsequent to the exit

conference, the Committee raised two issues regarding the untimely

resolved excessive contri!;~~ions. First, the Committee noted that

prior to November 6, 1991, 11 CFR Sl10.1 did not require

reattribution or redesignation doc'umentation to be dated and

therefore any documentation otherwise correct would be sufficient.

The Audit staff reviewed its documentation and found one untimely

resolved excessive contribution of $1,000 for which there was an

undated redesignation made prior to November 6, 19~J. This

resulted in no change, however, because it Wfi~ the Commission's

previous policy to treat undated redesignations and rea-ttributions

as untimely since the requirement that written redesignations and

reattributions be obtained within the sixty day time period was in

effect prior to the November 1991 adjustment to the regulations.

Second, the Committee noted that its computer

database included the date on which reattribution and

redesignation documentation was received. The Audit staff

declined to accept the computer entries as a method of dating the

receipt of redesignation or reattribution documentation because 11

CFR SllO.1(l){6) specifically allows a committee to date

documentation only by either retaining the postmarked envelope in

which the documentation was received, having the documentation

dated by the contributor or dating the documentation themselves

upon receipt.

As a result of the Committee's response, no

adjustments were made. Excessive contributions totaling $20,888

were considered to be resolved untimely (see Attachment 1).

In the interim audit report, the Audit staff

recommended the Committee present evidence that the contributions

were either not excessive, or were reattributed, redesignated or

refunded in a timely manner.

In its response to the interim audit report, the

Committee stated:

• ... in its August 30, 1995, Response the

Committee identified four contributors whose

contributions wer~ made prior to the effective

date of the Commission's changed November 6,

1991, regulations regarding reattributions and

redesignations. The Audit staff acknowledges

that it has a written redesignation for at

least one of these contributors, but did not

change the status of this contribution as

resolved untimely 'because it was the

Commission's previous policy to treat

undesignated[sic] redesignations and

reattributions as untimely s~nce the

requirement that written redesignations and

reattributions be obtained within the sixty

day time period was in effect prior to the

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November 1991 adjustment to the regulations.'

However, there is no cite in the Report

regarding this supposed Commission ·policy,"

nor was that "policy" reflected in the

Commission's previous regulation. Rather,

committees are entitled to rely on the

regulations, and the pre-November 6, 1991,

regulations did not statea Mpolicy" of

requiring written redesignations to be

obtained with in sixty days. Thus, the

Committee could not hav~ violated the

regulation.

"Second, with respect to the remainder of

the written redesignations and reattributions

which the Committee provided to the

Commission, the Interim Audit report notes

that the Committee prOVided computer records

which identify the date of the reattributions

and redesignations. The Audit Division does

not deny that these records are accurate and r~liable, nor does the Audit Division

otherwise allege that the redesignation and

reattributions were not made ina t~ely

manner. In fact, the Audit staff has

acknowledged that the Committee's contribution

records were extremely accurate. These

computer entries therefore conclusively prove

that the Committee received timely

redesignations an~ reattributions.

·Unfortunately, the Audit Division has

not accepted this unrebuttpd evidence solely

on the grounds that this evidence does not

comply with the four corners of thp regulation

found at 11 C.F.R.S 110.1 (1) (6). However,

in this case, the Committee's computer records

operated as the Committee's date stamp for the

purpose of complying with the regulation.

That is, the date of redesignation or

attribution was entered into the computer asa

memo entry providing the Committee and the

Commission both with accurate information

regarding the dates of the reattributions and

redesignations.

"Moreover, even if the were true that the

computer records d~d not comply to the letter

of the regulation, they nonetheless contain

reliable and accurate data regarding the date

of the designations and reallocations which is

not, and cannot be rebutted by the Audit
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Division. This factual data conclusively

proves that the Committee obtained the

redesignations within sixty days as required

by 11 C.F.R. S 110.1."

The Committee at the outset refers to Regulation 11

CFR 5110.1(1)(6) which became effective on November 6, 1991. This

regulation specified how a committee must prove that a

redesignation or reattribution occurred ~ithin sixty days. It

stated that committees should establish evidence of timely

compliance by having the contributor date the written request or

having the committee date the request upon receipt or retain the

postmarked envelope in which the request was received.

Prior to November 6, 1991, all other regulations

regarding reattribution and redesignation were in effect (11 CFR

SS110 . 1 (b) ( 5), ( k), (I ) ( 1 ) , ( 2 ) , ( 3 ) , ( 5 ) ) . Contrary to the

Committee's assertion, the existing regulations required a

commit~ee receiving excessive contributions to redesignate,

reattribute or refund the excessive amounts within the sixty days.

These regulations further required reattribution or redesignation

requests be-made in writing and the committee retain the

contributor's written request in order for the request to remain

effective. If the committee failed to maintain the documentation,

the original designation or attribution controlled. The

Commission's adoption of 1~ CFR S110.1(1)(6) was a clarification

of existing regulations and not a policy change. The Committee

was therefore still required to demonstrate that reattributions

and redesignations were made within sixty days.

The Audit staff did not state in the interim audit

report that dates for the reattribution or redesignation

documentation were listed in the Committee database. We were able

to determine that the committee's receipts database was complete

when compared to bank records. However, the Committee's

non-receipt file which contained reattribution and redesiqnation

information could not be verified and it appears that the

information is incomplete. The Committee did make ninety-four

entries to record actions it apparently took regarding

reattributions and redesignations. Of the thirty-six untimely

resolved excessive contributions identified by the Audit staff,

eleven involved refunds made after sixty days. The remaining

twenty-five items were untimely due to undated documentation.

Only two of these twenty-five had related records in the file

containing reattribution and redesignation information. Thus,

even if the computer dating could be verified as accurate and was

deemed an acceptable method of date stamping, it would only affect

two items totaling $750. Given the incompleteness of the computer

records, the computer entries do not conclusively prove that the

Committee received timely redesignations and reattributions. In

the opinion of the Audit staff, no conclusion can be drawn about

the timeliness of the Committee's redesignations and

reattributions based on related data in the Committee's computer

records.

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The Audit staff made no changes based on the

Committee's response. Accordingly, the Audit staff believes the

Committee had untimely resolved excessive contributions totaling

$20,888.

2. Unresolved Excessive Contributions

Excessive contributions totali~~ $56,305 appeared

to be unresolved. For $13,215, the Committee received

reattribution documentation which was signed only by the person who had signed the check. Without the signature of the additional

contributor, the reattribution is not valid. The unresolved

amount also includes excessive contributions totaling $3,322 for

which ten refund checks were prepared but were never negotiated.

No reattribution or redesignation documentation was provided for

the remaining $39,768.

Included among the contributions for which no

reattribution or redesignation was found are two excessive

contributions from partnerships. Prior to the primary election,

the partnerships contributed $2,500 and $1,500. As a result, one

partnership made a $500 excessive contribution and the other made

a $1,500 excessive contribution. In addition, the partners in

both partnerships were the same three individuals and thus each

partner made contributions totaling $1,333. The Committee

provided redesignation documentation for two of the partners but

did not obtain redesignation documentation for the partnerships;

thus the redesignation documentation from the two partners is not

relevant. The Audit staff is not pursaing the excessive

contributions from the individuals because once the excessive

contributions are refunded to the partnerships, the refunds will

flow to the individual partners.

At the exit conference, the Audit staff gave the

Committee a schedule of the individuals and their excessive

contributions. The Committee's Counsel questioned the inclusion

of the outstanding checks in the unresolved excessive amounts.

Additionally, she stated that the regulations do not obligate the

Committee to tell contributors to cash the checks. Nine of the

ten refund checks which were not negotiated were written on June

30, 1994. All but one check written on that date were refunds and

the only check negotiated was the check written for other than a

refund. Since none of the refund checks were negotiated, it

suggests that the checks were not delivered to the contributors

and thus do not constitute a refund. The Committee should have

made subsequent efforts to refund the contr~butions particularly

with respect to the nine checks writte~ on thE same day. The

Committee is correct that the regu]cticn does not obligate the

Committee "to tell the contributor .hat the refund check must be

cashed,·' however, it also does not dil~w the Committee to retain

and use funds which are not pe~iss_L:~ under the Act. The

Committee still retains and has us: Co- the funds for which the

refund checks were not negot.iated. Triese excessiv~ contributions

are yet to be resolved.

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The Audit staff notes that the committee, to comply

with 11 CFR SI03.3(b)(4), should have either maintained 8 separate

account for contributions appearing to be illegal under 11 CFR

Sl03.3(b)(3) or sufficient funds to make all such refunds. The

Committee did not use a separate account. For the audit period,

the Committee maintained a cash balance in excess of the total for

the outstanding unresolved excessive contributions·11

The Committee stated in a response subsequent to

the exit conference that some of the excessive contribution

amounts were made prior to the audit period. The Audit staff acknowl~dges this but reiterates that all contributions received

since Senator Burns' last election are included in determining

potentially excessive contributions for elections whi.ch occurred

in the audit period.

Additionally, the Committee stated that it was not

required by the Act to maintain documentation for the period

between 1989 and 1992.!1 Thus, the Committee reasoned that, any

redesignation or reattribution which occurred within this period

should be held effective because it was not their policy to take

such actions without the proper documented requests from the

contributors.!1 Although 11 CFR SllO.l (1)(5) requires committees

to maintain reattribution and redesignation documentation in order

for them to be effective, the Audit staff reviewed the Committee's

disclosure reports for the relevant periods to see how ~he

Committee had reported t,he contributions. Of fifteen instances

where the individuals had made excessive contributions prior to

June 1992, five excessive contributions totaling $5,000 were

identified which were reported as either redesignated or

reattributed. These items were removed from the excessive total.

The Audit staff assumes that if the Committee did not report a

contribution as redesignated or reattributed, no documentation was

received and these items were not removed from the total of

excessive contributions.

71 At year end, the Committee had a cash balance of $49,023 and

reported a debt of $151,254.

81 2 U.S.C. S432(d) requires a committee to maintain records for

three years after the report is filed.

91 Although the Committee did not maintain the reattribution or

redesignation documentation for 1989 through 1992, it was

able to provide the Audit staff with substantially complete

receipt records for the same period. Except where noted on

Attachment 1, copies of contributor checks for the excessive

contributions were found.

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The Committee also stated that its computer entries

contradict the Audit staff's unresolved excessive contributions

for sixty-nine individuals in that for these individuals, their

records indicate reattributions or redesignations had been made.

To support the reliability and accuracy of their computer

database, the Committee provided an affidavit from its office

manager who served from the spring of 1992 through November of

1993, which stated:

"As the Office Manager I was responsible

for making sure that the Friends of Conrad

Burns did not receive excessive contributions.

I therefore followed a standard procedure for

dealing with all contributions which either

appeared on their face to be excessive or when

aggregated with other contributions appeared

to create a problem.

"First, I would send the contributor or

contributors a redesignation or reattribution

form, as appropriate, and informe~ the

contributor(s) that they may redesignate the

contribution toward the general election or

reattribute the contribution. All such

letters included a self-addressed stamped

envelope with the request.

-If no response was received, I would

generally send a follow-up letter. If a

contributor (or contributors) failed to

reattribute or redesignate a contribution, the

Committee would .ake an appropriate refund.

-I and the Committee did not unilaterally

redesignate or reattribute contributions.

Rather, these were done at the direction of

the contributors. Furthermore, the Committee

did not enter a contribution into the computer

as a contribution toward the general election

unless so designated by the contributor, nor

were contributions reattributed without the

consent of the contributors.~

As noted previously in II.A.l., the Regulations

require that committees retain written redesignations or

reattributions and absent the written redesignation or

reattribution, 11 CFR SlI0.I(l){S) states that the original

designation or attribution controls. Computer records are not a

substitute for maintaining the required reattribution or

redesignation documentation. A statement that excessive

contributions were redesignated or reattributed according to the

Page 13, Approved 4/24/96
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c

-12-

direction of the contributor does not allow the Audit staff to

independently verify that the documentation was actually obtained

or contained the necessary signatures. The Audit staff's finding

is based on ~he documentation available for review.

The Committee also provided three valid

redesignation instruments which were not previously available.

The Audit staff had also included two individuals with same name

as one excessive contributor. These items resulted in a further

reduction of $1,665 to the unresolved excessive total. As a

result of the adjustments noted above, excessive contributions

totaling $49,640 ($56,305 - $5,000 - $1,665) remained unresolved

(see Attachment 1).

In the interim audit report, the Audit staff

recommended that the Committee present evidence that the

contributions were either not excessive or were reattributed,

redesignated or refunded in a timely manner. Absent such a

demonstration, the Audit staff recommended that the Committee

refund the unresolved excessive contributions ($49,640) and

provide evidence of the refunds (i.e., copies of the front and

back of negotiated refund checks). In lieu of reissuing the

checks which were not negotiated, the Committee could submit a

check to the u.s. Treasury. If the Committee did not have the

funds available to make the refunds, the Audit staff recommended

that it file amended Schedules 0 to report these items as debts

and obligations.

The Committee states in its response to the interim

audit report that:

" ...the Interim Audit report fails to

acknowledge that the Committee was not

required to retain documentation for the

period from 1989 through 1991 as discussed in

the Committee's August 30, 1995, Response.

Thus, the Committee should not be penalized

for not retaining documentation that it is not

required to retain."

The Committee's assertion is inaccurate. As noted

previously,lOI the Audit staff reviewed all excessive contributions

received prior to 1992. Since the Committee was not required to

retain documentation, the Audit staff relied on the Committee's

disclosure reports. If the contributio~s were reported as

reattributed or redesignated, the Audit staff believed it

reasonable to allow the Committee credit for having obtained the

valid documentation. However, such allowances were not made when

the contributions were not reported as reattributed or

101 See discussion at page 10 paragraph 2.

Page 'I •

l., , A;:~roveC ~:' 2~ /9£
'.r>

o

-13-

redesignated. As a result of this review, the Audit staff prior

to the interim audit report reduced the unresolved excessive

contribution total by $5,000.

The Committee further states:

"This same argument applies equally to

those reattributions and redesignations for

which the Committee was unable to locate the

originally signed redesignations or

reattributions (ReCOmmendation 2). The Audit

staff does not suggest that the Committee did

not obtain these redesignations and

reattributions as evidenced by the vast number

of redesignations and reattributions located

and provided to the Audit Division. Rather,

the Interim Audit Report states that Audit

Division was unable to independently verify

that the documentation was obtained. Again,

however, the computer records, in conjunction

with the Affidavit of the Committee's former

Office Manager as provided to the Commission

in the Committee's August 30, 1995,

submission, do provide verification that the

documentation was obtained and thus represent

factual evidence that the Committee met its

obligations under the Act. The Commission

must, therefore, accept this unrefuted

evidence and treat the contributions as

properly redesignated or reattributed."

The Committee's computer records related to

reattribution and redesignation were not complete. With respect

to the excessive contributions of one hundred nine individuals

identified by the Audit staff, only twenty-eight had related

computer records of having made reattributions or redesignations.

Further, the earliest date contained in the computer records for

reattributions or redesignations was December 6, 1993 which was

within the period that written documentation was required to be

retained. Even if the computer records were complete, the

Committee is still required to maintain the written documentation.

The Audit staff reviewed and evaluated the

reattribution and redesignation documentation retained by the

Committee. The Committee was required by 11 CFR S110.1(l)(5) to

retain the written redesignation or reattribution documentation in

order for the action to rema1n effective. The failure to retain

the documentation meant that the original designation or

attribution controlled. Accordingly, when no documentation was

found, the original designation or attribution controlled.

Page ,:. .. -',
c

c

-14-

As a result of the Committee's response, the Audit

staff made no adjustments to this finding and believes the

Committee received excessive contributions which require refunds

totaling $49,640.

On March 18, 1996, the Committee filed an amended

debt schedule for Year End 1995 which listed the excessive

contributions as debts owed to the respective individuals

identified by this finding.

B. Apparent Misst~tement of Financial Activity

Sections 434(b)(1), (2), and (4) of Title 2 of the

United States Code state, in part, that each report shall disclose

the amount of cash on hand at the beginning of each reporting

period and the total amount of all receipts and disbursements for

the report period and the calendar year.

The Audit staff reconciled the Committee's reported

activity to its bank records for the audit period. The following

misstatements for 1993 and 1994 were revealed.

1. 1993 Misstatement

The Committee's beginning cash-on-hand was

overstated by $3,524. In addition, disbursements were understated

by 57,436. These misstatements and a small receipts overstatement

caused ending cash-on-hand to be overstated by $11,062.

Th\:~ Audit staff was unable to determine the cause

of the beginning cash-on-hand overstatement. The disbursements

misstatement was primarily the result of eight disbursements

totaling $8,305 which were not reported and one reported

disbursement of $903 which was apparently voided, and a

reconciling adjustment of 534.

2. 1994 Misstatement

For 1994, the Committee's beginning cash-on-hand

was overstated by $11,062 as a result of the 1993 misstatement

discussed above. The Committee also understated receipts by

525,708 and understated disbursements by $78,869. In addition,

ending cash-on-hand was oversta~ed by $24,781 as a result of these

misstatements and an unexplained reduction of $39,441 to the

beginning cash balance on the Pre-General Election disclosure

report.

The receipts misstatement was primarily the result

of two items. First, 53,000 deposited into one of the Committee's

checking accounts was not reported. Second, the Committee

purchased three automobiles from Frontier Chevrolet on June 7,

1994. The Committee obta~ned bank loans to make the purchase and

as of November 1994, still owed approximately 522,871. The

Committee sold the automobiles back to Frontier Chevrolet for the

Page 1t, Approved 4/24/96
-15-

loan amount outstanding on each vehicle. Two were sold on

Hovember 7 and the third Mas sold on December 20. The proceeds of

the sales in the form of the dealership's payment of the loan

balances were not reported on the disclosure reports. Thu~, the

failure to report the sale of the automobiles, the $3,000 1n

receipts not reported and a reconciling adjustment of $163

accounted for the receipts misstatement.

With respect to disbursements, the misstatement was

the result of fourteen disbursements, including the payment of the

balances of the automobile loans by Frontier Chevrolet, totaling

$85,378 which were not reported and a reconciling adjustment of

$6,029.

Copies of the reconciliations were provided to the

Committee at the exit conference. The Committee agreed to file

amended reports to correct the misstatements.

The Audit staff recommended that within thirty days

of receipt of this report, the Committee file amended Summary and

Detailed Summary pages and Schedule A's and B's as required to

correct the reporting deficiencies in the respective periods.

The Committee filed the requested amended reports

on March 18, 1996 which materially corrected the misstatements for

1993 and 1994.

c

'J) c. Contributions Subject to 48 Hour Disclosure Notices

c

Section 104.5(f) of Title 11 of the Code of Federal

Regulations states, in part, that if any contribution of $1,000 or

more is received by any authorized committee of a candidate after

the 20th day, but more than 48 hours, before 12:01 A.M. of the day

of the election, the principal campaign committee of that

candidate shall notify the Commission and the Secretary of the

Senate within 48 hours of receipt of the contribution. The

notification shall be in writing and shall include the name of the

candidate, the identification of the contributor, and date of

receipt, and the amount of the contribution. The notification

shall be in addition to the reporting of these contributions on

the post-election report.

The Audit staff reviewed contributions of $1,000 and

greater deposited between twenty days and two days prior to the pr~ary and general elections and identified 179 contributions

which were subject to the 48 hour notification reporting

requirements. During the general election reporting period, the

Committee failed to file the required notices for 77 contributions

totaling $119,000 (see Attachment 2). Of the notices not filed,

68 totaling $106,500 were deposited between October 20 and October

24.

Page 1-:, Apt;raved .;/24/96
tn

c

-16-

At the exit conference, a schedule of the contributions

for which the required 48 Hour notices had not been filed was

provided to the Committee. Committee Counsel noted that the

person entrusted with this duty had stated to her that she "filed

them all." An accounting consultant for the Committee suggested

that perhaps there had been a some technical problem since these

no'tices had been filed via facsimile.

In the interim audit report, the Audit staff recommended

that the Committee provide information showing the forty-eight

hour notices were indeed filed (e.g., confirmations of facs~ile

transmissions), not required to be filed or any other information

relevant to this matter.

The Committee said in its response to the interLm audit

report that it -has no additional evidence with respect" to this

finding.

Page 18, Approved 4/24/96
'~~~~~;k!~~'

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The Friends of Conrad au..... Schedule of Contributions RecelYed In Excea of the umltatlon

........... 0-* c.... E..... II••••• ....... ...... - 0- AaDII r.- ...... ,.. DDr:::r.o

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'2~e3 .aooo ,n. 2800

»SeP-83 ...aooo 20)9 200000 1a'\'Iefy ..So'OO W3CW3

01.~" '00000 PRIMARY

JIlf'Of"e :s......to «1000 tI&3 40000

~.2 2000C 2:).1 10000

()I.~'3 «1000 nu '00000

1'·"..,..13 7500 82S '01500

01.Juf'o" 7500 Pf'IMARY

8111aXtT". .aooo 'I" .aooc 13-.....e3 S, .. 31'3 '5'" 12....·83 500«; «XtO 1S1"

ot-.-S3 '0000 -m ,ot, .. 07.Juft." 5'" PRIMARY

.....ww ,......., .aooo 1512 _00 ~, «JO 00 _00 c:Nea CIDOY naI

02~·93 «1000 562 '20000 ur'IIImefy ......., .....S200teG

07.""""",.. 20000 ~IMARY

QI&..~" "SOC I"~ 37500 c-. .".• S200 '"'"' p

29-~" 10:)00 .,. 117$00 Xs caIMd Dy P......., .. 17SOC GENEAAL

8If\Mo.-I 'GOOD H5 .aooo '0-.»91 «JOOD m, 10000 ,,0$..13 '!GOD .n eo00 tn 210--"""'13 '7500 an 112Soo

2O-Aut-13 7500 11M3 '2QOOD

0 01~ 1DDOO PRIMARY

......c:NnI ~13 lSOO ZZS3 ?Sao In 2GD000 221'5 2O?Sao

2J.OK..13 •'GOO 00 '32' ,mao "'*' rwIUnd

0'.....·.. 'CD)OD 23'0 2O?Sao .,.,.., ..-..n'"MIlt.ett..., N ,......... ·'lSOC U. 2tlmao .... 01.~" ,aoooc ?SOD PRIMMY

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:"- 07--""",.. 10000D PRUMMY

.. .. ,aaoao .....S'CD)PIDG._ •

"""" "......... «)00 3Il' '010 GO '-'- .. 41000 PAIMAR¥. GENERAl

....F..c eaoOD .,~ «JOOC

QS..F...13 eaooo !SOl IOOOC ~"",S200IOC;

~13 10000 5113 tlGQOC undid ......,. S800 to c;

07.~" 10000 PRIMARY

c..... war- QI&.....t3 50000 '331 !GO OC

02-AwO-t3 ,aoc GO '.7' '.00 teaesgn dl " to, ,- (" 7Q...... ·UK

o'.o.c..13 50000 '10' J'CD)CIID

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07.~" '0000 PR'MARy

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~·13 '0000 m· ~,,, not ....., OJ K Ogren

C5-.M'o13 2OCOC 2m 7~,"

Page 19, Approved 4/24/96
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The Friends of Conl'lld Bums

Schedule of Contributiona Received In Exc_ of the Umltation

CMO 0.0 £-.. .... ........, ReIoUIon

- D8I AmcuI Nr.aIlIr !JIDD Doctn ee.am.a

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07.~" 10000 PAlMAlltY

...........,., 2,.-,.83 200000 2'21 200000

01·"""",.. '00000 PRIMARY

"'Mrs Peter 2'·~e3 soooc !699 l!aO 00 2 ..

2"'~~ '000 OC' .'... 'ZSOOC 01'JuI'-i\06 15000 PAtMAAy

.....,RonaaG 2O-~i\06 '11' 11 ...... "" '2 F1R $eft,Me VCIc:lty Funo ~~ ,,, '2 GENERA:.

~P.... ''''......10 saooc sao 00 e::twck CCIOY not toune

'2~9' !CO DC 'ODOOD e::twck CCIOY naI tound

,~.., 5ODOC '50000 CNC* ClDPY nat bind

20-......12 ~oo S'''' ,~oo UI'U9Wty WldG fWJlIltI9" S250 to G

"·~13 50000 5699 ~oo

07.~" ?5000 25000 PRIMARY

-.WIMt'rt '9-OcI" 'OCOOC '. tCIIDae lIWty R..-:ft AccDun1 no .....

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tJ) ,..,... '6-OcI·ll .aooc ..'. «'DOD P8I'k ..,...,..T·, ..~t2 .-00 te.5O IGDOO P.-..,...,..T.'

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p"""C ,.... Q).~ll 'oac OC ?I' ., 'GDD CIt

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Page 21, Approved 4/24/96
·~~~~.;- ":~,~,~~~ ... ~;q:~# ~.;;

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Schedule of Con~butionaRec.....exe- ofthe LltftltatJon

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CheC* e-o E.... £: CI ••• ReIaMIcI ........ DIll MIIId ea.r G-. ...... QKD

......wn Q6.Oec.aI «)000 6WS _00

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12....·~ 40000 1s.&3 '10000 18OOtc)~

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27.()c1-13 UJOOO 1106 '70000 wnety ..~anCMCl

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Page 22, Approved 4/24/96
n. , •••, ltageSafl

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The Friends of Connd Bums

Schedule of ContrIbutions Received In Excess of the Umltation

CMO E...-.n EJrcM..... ReIOMIG AaIoIuhon

ffaI 0- AmrIId tWJ.- GmnI ....... Doc.ID

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Page 23, Approved 4/24/96
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,.......... The Friends of Conrad Burna

Schedule of ContrtbutiOM Received In Eacns of the Umttation

CheCk CMca £tMIIDr\ t ...•.... ReIOIWed R........,

0- N.1DII ,..... ,.... PIIDm LIIIDIIw DaIi.tD

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~....,PMnall ~93 100000 3562 '00000

02·~ 50000 3tI.J 50000 Cf**".~"'''''' 01·......... 50000 PRIMARY

IlIcCorrftca RlICMI'a ........' '00000 41'10 '00000 Q).."""" 50000 $W '50000 c::NC* ...oeOOSMO "'6194 07........ _00 PRIMARY

IIIlr:&.ead Garoort ~., ..aooo 41" ~oo

22·N).t2 5000 5162 .scoo 2~"13 3000 .11'1 .-000

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Page 25, Approved 4/24/96
Il.lt.l1

The F....nds of Conrad 8uma

Schedule of Contributions Received In Exc.a ofthe Umltation

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07.~" S, .. 12'301 PRIIIAAY

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Page 26, Approved 4/24/96
:tachment2

:nal Audit Report

~,e Friends of Conrad Bums

~'of2 l

Schedule of Unite\l'ized 48 Hour Contributions

Nam.e...otCootDbutor Check... DeQ....Date Amount

1 American Consulting Engineers PAC 11672 10120/94 1.000.00

2 AT&'r PAC 11710 10120/94 2.000.00

3 Columbia Employees PAC 3170 10120194 1.000.00

4 Consolidated Fretghtways Inc. PAC 1012 10120194 1.000.00

5 Date James 3454 10120194 1.000.00

6 Flowers Industnes PAC 598 10120194 5.000.00

7 Fnends of John Warner 1209 10120194 1.000.00

8 GIPAC 1763 10120194 1.000.00

9 Great West PAC 1056 10120194 1.000.00

10 Grubbs Barb 6443 10120194 1.000.00

11 Hoppel Jack 521 10120194 2.000.00

12 Houghton J.R 4842 10120/94 1.000.00 ~3 KeUyPAC 1126 10120194 1.000.00

_14 Kelsey Van 1655 10120/94 1.000.00

15 KochPAC 1365 10120194 1.000.00

.116 Life Insurance PAC 3619 10120/94 5000.00

17 MCAPAC 1423 10120194 2.000.00

Oa Metnders Herman 3344 10120/94 1.000 00

NatIOnal Screw Machine Product ASSOCI8bOn PAC 498 10120194 2.000.00 I 10 NFIB Safe Trust 1714 10120194 4.000.00 ~1 Republican Maplty Fund 1031 10120194 1.000.00

22 Ryan Wilham 6817 10120194 1.000.00

:.23 Sandoz Argo. Inc Patnot Cmte 1126 10/20194 1.000.00

24 Senate Vetory Fund. PAC 1111 10120194 2.000.00

"25 Snyder Wilham 565 10/20194 1.000.00

~6 Stanley Oavtd 2684 10120194 1.000.00

27 St loulSIans for Bener Government 518 10120194 2.500.00 ~8 Thompson ladetne 4947 10120194 1.500.00

29 Vtetory Amenca 1131 10120194 1.000.00

.:30 Wexler Group PAC 800 10120194 2.500.00

31 Agent for Good Govt 556 10121/94 5.000.00

32 Connolly J W ~23 10121/94 1.000.00

33 De~i)rtte & Touche Federal PAC 478 10/21/94 3.000.00

34 Employees of Pacific Enterpnses 1103 1Ol21194 2.000.00

35 Hope-DavIs Sarahanne '108 10121/94 1.000.00

36 K-Mart Corporation PAC 1777 10121194' , .000.00

37 McClure for US Senator Cmte 333 10121194 1.000.00

38 McDonald K R 18304349 10121194 1.000.00

39 National Repubbcan CongresSIOnal Cmte 12831 10121/94 5.000.00

40 PepsIco Concerned CitIZens Fund 2955 10/21/94 3.000.00

41 Pittston Company PAC 413 10/21/94 1.000.00

42 Shepherd LewiS 1139 10121/94 , .000.00

43 TeresI Joseph 2566 , 0121/94 1.000.00

ARCO PAC 1991 10124194 1.00000

-.J BenPAC Federal 10308 10/24/94 1.00000

46 BOise-Cascade PAC 1275 10/24/94 1.000.00

47 BPAC 1019 10124/94 2.000.00

Page 27, Ar~roved 4/24/96
tblChment 2

:nal Audit Report

The Friends of Conrad Bums

Schedule of Unltemized 48 Hour Contributions

page 2 ~f 2

Name of Contributor CbecU Qep Date Amount

48 CF Industries PAC 1058 10124/94 1.000.00

49 CityPAC 1074 10124194 1.000.00

50 Coopers & Lybrand PAC 1888 10124194 2.500.00

51 Dean VVitter - Discover & Co. PAC 367 10124/94 1.000.00

52 Federal Express PAC 2921 10124194 3.000.00

53 Ford Motor Co. Civic Action Fund 6495 10124/94 1.000.00

54 Garden State PAC 1801 10/24194 1.000.00

55 General Mills. Inc. PAC 2091 10/24/94 1.000.00

56 I.P.H F.H.A.. Inc. PAC 1170 10124194 1.000.00

57 Kemper Corporabon PAC 312 10124194 1.000.00

58 Long Betty 2386 10124194 1.000.00

Momson's PAC 921 10124/94 1.000.00

NBWAPAC '-l 2481 10124/94 2.500.00

61 NCGG 1696 10124194 1.000.00

62 Orthopaedic PAC 2793 10124194 1.000.00 .~~ PfIZer PAC 1413 10124/94 1.000.00

64 SCBA.cOMPAC 2496 10124194 1.000.00

Cis Teco Energy PAC 11n 10/24194 1.000.00 ,~ UPSPAC 11862 10124194 1.000.00

"67 US West PAC 3443 10124194 1.000.00

Yellow Fretght System Inc. of ~rePAC 1812 10124194 1.000.00

69 Smith loren In-Kind 10/26194 1.000.00

:.70 Fcod Marketing 4599 10127194 2.000.00

71 House PAC 1901 10127194 1.000.00

72 Palmer Russ In-Kind 10127194 1.000.00

,:13 Torchmark PAC 2741 10127194 2.500.00

'(4 Amencan Vetennary Medeal Assoc PAC 669 10128194 2.000.00

-..:z,S Dickstein. Shaptro & MJnn PAC 1744 10J28J94 1.000.00

76 Eit lilty & Co. PAC 385 10128194 1.000.00

":17 Bottrell Don 227909 11103/94 1.000,,00

UnftemlZed Total $119.000.00

Page 28, Approved 4/24/96
AK007997

FEDER ·\l EL Eel H ), (( )\\ \ 'I~SI( ),

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April 30, 1996

Mr. Jim Swain, Treasurer

The Friends of Conrad Burns

P.O. Box 3311

Billings, MT 59103

Dear Mr. Swain:

Attached please find the Final Audit Report on The

Friends of Conrad Burns. The Commission approved the report

on April 24, 1996.

The Commission approved final audit report will be

placed on the public record on May 7, 1996. Should you have

any questions regarding the public release of the report,

please contact the Commission's Press Office at (202)

219-4155. Any questions you have related to the matters

covered during the aucit or in the report should be directed

to Marty Kuest or Joe Swearingen of the Audit Division at

(202) 219-3720 or toll free at (800) 424-9530.

Sincerely,

-~~ Robert J . .costa

Assistant Staff Director

Audit Division

Attachment as stated

cc: Carol Laham

..... ,........

Page 29, Approved 4/24/96
o

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Page 30, AFJrave~ 4/24/96
CHRONOLOGY

THE FRIENDS OF CONRAD BURNS

tJ)

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Audit Fieldwork

Interim Audit Report to

the Committee

Response Received to the

Interim Audit Report

Final Audit Report Approved

6/15/95 - 8/16/95

2/13/96

3/18/96

4/24/96

Page 31, Approved 4/24/96