FEDERAL EL£CTJC)' C()\1~\ISSIO~

\\ -\'II".{ It I' : 1 \ _' .....

June 19. 1996

MEMQRAtNDl:~1

TO:

FRO\1'

ROJ" ~t HARRIS

PRESS OJ FICER

PRESS OFFICE

ROBERTlCOSTA

ASSIST.~1':T ST..o\FF DIRECTOR

AlTDIT DIVISIO~

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SI}BJECT: PUBLIC ISSl·.~~CE OF THE FI!',\L AUDIT REPORT ON

SAl' BERN}\RDI~OCOl'?,TY REPUBLICAN CENTRAL

CO~1MITIEE

Attached please find a copy ofthe tinal audit repon and related docume~ts on the

San Bernardino County Republican Central Committee \\ilich \\-as appro'·ed by the

Commission on June 10. 1996

Infonnational copies ofthe repon have hcen recei\:ed b~' all panies involved and

the report may be released to the public.

:\tt3chmen! as st3!c:d

cc: Office of General Counsel

Office of Public Dlsc)osun:

Reports AnalysIs 01\ ISlon

FEe Librar:
REPORT OF THE AUDIT DIVISION

ON

San Bernardino County Republican

Central Committee

Approved June 10. 1996

FEDERAl.. ELECTIO' CO~11\1ISSI0~

999 E STREET. S.. \\·..

\\°t\SHIS(;TO'. D..C.
TABLE OF CONTENTS

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SAN BERNARDINO COUNTY REPUBLICAN CENTRAL CO~~fiTTEE

Page

Executive Summary

Final Audit Repon ...

.J

Background 3

Findings 4

Transmittal to Comrnihee 11

Chronology 13
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FEDER~L ELECTIC)i\. C()~" "SSI()~

FINAL AUDIT REPORT

ON THE

SAN BERNARDINO COUNT\' REPUBLICAN CENTRAL COMMI1TEE

EXECtTTr\'l: SlJl\t!\tAR\'

The San Bernardino County Republican Central Committee (the Committee)

registered with the Federal Election Commission on March 23, 1977

The audit was conducted pursuant to 2 t..:.S-C §438(b), which states that the

Commission may conduct audits of any political committee whose repons fail to meet the

threshold level of compliance set by the Commission

The findings ofthe audit "'ere presented to the Committee at an exit conference

held at the completion offield\\'ork on November 6. 1995. and later in an interim audit

report The Committee·s r~....,,,,:lse to those findings are included in this final audit repon.

The following is an oven,;e\\' ofthe findings contained in the final audit repon.

APPARENT OVER-ru~1)INCBY THE NON-FEDERAL ACCOl1l'T - I J CFR

§§ 10:.5(a) and 106 5 The Audit staffreviewed expenses paid from federal and nonfederal accounts and identified S13.374 in federal expenses that had impermissibly been

paid by the non-federal account between January 1. 1993 and December 31 11 1994.

Ofthis amount. $4.241 represented transfers from the non-federal account to the

federal account which exceeded the non-federal share of expenses initially paid by the

federal account The remainder. S9. J33 represented the federal accounfs share of

allocable "oter registration expenses paid by the non-federal account

The Committee did not dispute thiS finding but due to lack offunds was unable to

make a payment to the non-federal account The CommIttee did file amendments to its

onglnal repons to clarify the public record, and also reponed a debt. in the amount of

$) 3.374. owed to the non-federal account on Its April 15. 1996 quanerly repan

PROHIBITED I~-KI~D CO',.RIBl,.10'iS - : L' S C ~441 b(a). II CFR

§§ 104 13(a) and 100 S( a) .~lIocable In-kind contribUtions. totaling $1 :;.578. were

identified from corporations Involving donated office space and pnntlng services Of this

amount. S:.36) represented the federal account' 5 allocable share
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Since the federal account did not either (1) pay the non..ftderaJ account in advance

or on receipt for its allocable ~hare ofthe goods and services or (2J transfer sufficient

funds to the non-federal account in advance to pay for its share~ the Committee did not

satisfy either ofthe conditions set forth in Advisory Opinion 1992-33

The Committee did make a refund ofS1 000 prior to receipt ofthe interim repon~

and, in response to that report. pro~ided infonnation indicating that the remaining $1 781

was refunded to the corporations

l\1ISSTATEf\.11::\T OF FI~ANCI4L ACTIVITY - :! V.S.C §§434(b)( l)~ (2) and (4)

In repons covering 1993 acti\1ty. the Committee's totals for receiptc an~ ~isbursements

were understated by approximately S I 1.000 and $6.600~ respect!",..:::,. . ;leginning and

ending cash balances were also materiaJly misstated. With respect. ) :~ports covering

1994, receIpts ,",'ere understated by $22,230 (net) and disbursements bv $9.808, ,"ith

beginning and ending cash also misstated .

Anlendments were filed. in response to the interim audit report, which corrected

o the public record

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Pa~e 2, Approved 6/10/96
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AK FAR6I3/96

AR1I95·91

FEDERAL ElECTI()' CO~'I\'ISSIOi"

REPORT OF THE AUDIT DIVlSIO/V

ON

THE SrA_"" BERNARDINO COlrf\lT}~ REPUBLICAl\· CENTRAL

COlttt./lTTEE

I. BACKGROUND

A. AUDIT AL'THORln'

This repon is based on an audit ofthe San Bernardino County Republican

Central Committee (the Committee). undenaken by the Audit Division ofthe Federal

Election Commission in accordance ";th the provisions ofthe Federal Election Campaign

Act of 1971. as amended (the Act) The audit was conducted pursuant to section 438(b) of

Title:! ofthe Linited States Code which states. in pan. that the Commission may conduct

audits and investigations of any political committee required to file a repon under section

434 ofthis title Prior to conducting any audit under this subsectioa the Commission shall

perform an internal review ofrepons filed by selected committees to detennine ifthe

repons filed by a panicular committee meet the threshold requirements for substantia)

compliance with the Act

B. AUDIT COVERACE

The audit covered the period January J. 1993 through December 31, 1994.

During this period. the Committee reponed a beginning cash balance ofS7.661: total

receipts for the period ofS143.210. total disbursements for the period of$158.095: and an

ending cash balance ofS169.1

c. CO\1\1ITTEE ORGASI1.ATIO'

The Committee registered "1th the Federal Election Commission on ~1arch

:3. IQ77 and maintaIns us headquaners in Rancho Cucamonga. California The Treasurer

ofthe Committee dunng the audit penod \\'as ~1s Deborah Hagar The present Treasurer

ofthe Committee is ~1s Nancy ~1cLaln The Committee is affiliated \\;th the Republican

State Central Commlttee ofCahfornla

All amounts presented In lhl~ rcpon arc rounded to the nearest \\ hole dollar The reponed totals

do not (oot (sec Flndln~ II Bl

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To manage its financial aetivityot the Committee used two bank accounts~ a

federal account and a non-federal account. The Comminee received contributions from

individuals and transfers from its non-federal account

D. AUDIT SCOPE AND PROCEDURES

The audit included testing ofthe following general categories

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

:2 The receipt of contributions from prohibited sources (see Finding II C).

3 Proper disclosure of contributions from individualSot political committees and

other entitiesot to include the itemization of contributions when required, as

well as. the completeness accuracy ofthe information disclosed~

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Proper disclosure of disbursements including the itemization of

disbursements when required. as well as. the completeness and accuracy of

the infonnation disclosed.

Proper disclosure of campaign debts and obligations~

The accuracy oftotal reponed receipts. disbursements and cash balances as

compared to bank records (see Finding II.B}ot

Adequate recorci~eeping of campaign transactions.

Proper reponing and funding of allocable expenditures (see Findings I1.A.1

and II A 2). and.

Other audit procedures that were deemed necessary under the

cIrcumstances

Unles~ specifically discussed belo,...', no material non-compliance was

detected It should be noted that the Commission may pursue any ofthe matters discussed

in this repon In an enforcement action

II. AlTDIT FINDISGS .~ND RECO!\1!\1[~DATIO~S

A. SHARED FEDERAL "'''iD 'O~-rEDERAlAcrl\'ITIES

Background

Our reVle,... encompassed actlvlty related to t,...·o bank accounts, one was a

federal account and the other ""'as conSIdered a non-federal account i\S provided at 11

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CFR l06.S(gXl)(i) and 102.5(a)(I), the Committee initially paid for expenses allocable

between federal and non-federal activities from the federal account.. except as discussed

below. Transfers into the federal account were received from the non-federal account. The

sources offunds deposited in the non-federal account included receipts from corporations

which would not be permissil'e contributions under the Act.

A.pparent Over-fundIng by the Non-federal Account

Section lOb 5(g)(] )(1) ofTitle 11 ofthe Code of Federal R~gulationS'

states, in relevant pan. that a committee shall pay the entire amount of an allocable expense

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

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

Section 106 5(g)(2)(ii)(A) ofTitle 11 ofthe Code ofFederal

Re£ulations states. in relevant pan. that for each transfer offunds from a committee's

non-federal account to its federal account. the committee must itemize in its repons the

allocable acti"ities for which the transferred funds are intended to pay

The Audit staff rc,iewed all disbursements from the federal and

non-federal accounts. including the transactions disclosed on Schedule H-4" to determine if

the Committee's federal account paid its allocable amount ofshared expenditures during the

period January 1.. 1993 through December 3l.. 1994. The Committee reponed that the

non-federal amount ofshared expenditures for the audit period totaled $68..984. Although

the Committee disclosed vaf)ing allocation ratios on Schedule H-l (Method of AJlocation

for Shared Federal and Non-federal Administrative Expenses and Generic Voter Drive

Costs) and Schedule H-2 (Allocation Ratios for Individual Fundraising Event~ Exempt

.-\cti,ities. and Shared Direct Candidate Suppon) throughout the audit period. a ratio of

5~<o./5~o \\"as used by the Committee to allocate all expenditures involving shared activity.

The Audu statT calculated. based on correct allocation ratios"

S116.809 to be the non-federal amount ofshared expenditures liowever. an analysis ofthe

federal and non-federal accounts identified S121,050 in transfers actually made. Therefore.

transfers from the non-federal account exceeded the non-federal share of expenditures by

$4.:!4 1 ($ I 1.050 - SI 16.809)

:\t an lntenm conference and at the exit conference the .~ud!! staff

prOVided to the Committee schedules detaihng the above findIng :\t the exit conference.

the Treasurer indIcated that the Committee dId not dIspute the findIng and no additional

information "'as available In resolution ofthe finding During a conference the Committee's

treasurer commented that she recently attended traIning In reponing shared activity

presented by the Republ:can National Committee whIch "'ould help her to prepare

dIsclosure repons In the future

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In the interim audit repon. the Audit staffrecommended tbat the

Committee demonstrate that the non-federal account did not over-fund the federal account

or refund the excess funding from the federal account to the non-federal accoum and

provide evidence that such refund was made (i.e.• a copy ofthe front and back ofthe

negotiated refund check) It was funher recommended that the refund be itemized on

Schedule H-4 as a disbursement to the non-federal account for the purpose ofmaking an

adjustment. and. 100'!,o ofthe expenditure be allocated to the federal share

In a response to the intenm audit report. the Committee stated that it

did not dispute this finding The Committee also asserted that funds were not available at

the time ofthe response to repay the non..federal account However. on its disclosure

report for the period 1/1/96 through 3/31/96. the Committee reported a debt to the nonfederal account in the amount of $4.241.

2 AJlocable Voter Registration Expenses Paid bv the Non-federal

Account

Section 106 5(a)(2)(iv) ofTitle 11 ofthe Code of FederaJ

Regulations states. in relevant pan. that committees making disbursements in connection

with federal and non-federal elections shall allocate expenses related to generic voter drives~

including voter identification. voter registration.. and get-out-the-vote drives~ or any other

activities that urge the general public to register. vote or suppon candidates ofa panicular

pany without mentioni!lg a specific candidate

Section 106.5(g)(1 )(i) ofT~!le 11 ofthe Code ofFederal Regulations

states.. in relevant pan. that a committee shall pay the entire amount of an allocable expense

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

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

During the period January 1" 1993 through December 31. 1994 the

non-federal account paid for allocable voter regIstration expenses totaling 541.512 None

ofthis acti"ity was dIsclosed on Schedule H-4 ofthe Committee's repons. Based on a

ballot composition ratio of ~~%. the Audit staff detennined that 59.133 ofthese

expenditures were allocable to the federal accou~~

At an intenm conference and at the exit conference the Audit staff

provided to the Committee schedules detaihng the above findIng .~t the exit conference.

the Treasurer indicated that the Committee did not dispute the finding and no additional

Infonnation was available in resolution ofthe finding

In the Interim audit repon it \\"as recommended that the Committee

refund an amount equal to the federal share of allocable voter registration expenses to the

non-federal account and provide e\;dence that such refund v.·as made (i e . a copy ofthe

front and back ofthe negotiated refund check) It v. as funher recommended that the

Committee file memo Schedules H-4 for 1993 and 19Q4 Itemizing all shared voter

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registration expenditures made from the non-federal account. including their respective

allocation ratios

•., response to the interim audit repon. the Committee stated that it

did not dispute this finding. The Committee also asserted that funds were not available at

the time ofthe response to repay the non-federal account However. on its disclosure

repon for the period 1/1/96 through 3/31/96. the C01iHn~nee reponed a debt to the nonfederal account in the amount ofS9.l33 Included in the Committee's response were

comprehensive amended disclosure reports for 1993 and 190 4 \\'hich complied \\ith the

latter part of the re<.: ,1:nrnendation described above

B. 1\1 ISSTATEME!'I'T or FI~~~CIALACTIVITY

Sections 434(b)( 1). (2) and (4) ofTitle : ofthe United States Code state. in

relevant pan. that each repon shall dIsclose the amount of cash on hand at the beginning of

each reporting period. the total amount of all receipts. and the total amount of all

disbursements for the reponln~ penod and calendar year

The Audit staffs reconciliation ofthe Committee's reponed acti\ity to its

bank activity revealed that matenaJ misstatements occurred \\;th respect to reports filed

covering calendar years 1993 and 1994

a Receipts

The Audit staff detemuned that the Committee's reponed

receipts were understated by SI 1. 155 The understatement was the result of unreponed

deposits totaling $3.388 and unreponed In-kind contributions ofS7.767

b Disbursements

C . The Committee's reponed disbursements were understated bv

a net amount of $6.6~4 t\1ost ofthe understatement "·as the result of unreponed .

dIsbursements totaling $4.3~8 and unreponed In-kind contnbut1on~ of S:.~36

c Cash on Hand

The Committee's reponed beginning cash on hand at January

L 1993 \.\as overstated by $6.7:- The o\'er~t.~~eme::! \\'as earned over from ending cash as

disclosed on the Committee's year end 199: repon

The Commutee's reponed ending cash on hand at December

31. 1993 ~as overstated b~ a net amount of S3. ~~_,~ The o';erstatement resulted from the

discrepancIes In beg.lnnlng cash. receipts. and disbursements descnbed abo.. e

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2 1994

a Receipts

The Committee's reponed receipts were understated by a net

amount ofS22.230 Most ofthe understatement was the result of unreported receipts

totaling $3.914. unreported transfers from the non-federal account totaling $16.850. and

unreported in-kind contributions of S1.506

b DIsbursements

The Committee's reponed disbursements were understated by

a net amount of$9.808 The understatement resulted from unreponed disbursements

totaling $10.221 and unreported in-kind contributions of $872, and a net total of(Sl,285)

in miscellaneous reponing errors or omissions

c Cash on Hand

The Committee's reponed beginning cash on hand at January

1. 1994 was overstated by $6.820 The overstatement resulted from a $3,565

overstatement in 1993 ending cash. described above. Also, there was an difference of

S3.:!55 between reported ending cash on hand at December 31, 1993 and reponed

beginning cash at January 1. 1994 The Audit staffwas unable to determine any reason for

this discrepancy

The Comminee's reponed ending cash on hand at December

3 J. J994 ",·as understated by a net amount ofS2.833 The understatement was a resuh of

differences identified in reponed cash. receipts. and disbursements. noted above, and a

mathematical error of S:!.769.2

At an Intenm conference and at the exit conference. the Audit

staff explained the causes ofthe mIsstatements discussed above Copies ofschedules

detailing the errors "'ere pro\1ded to the Committee The Treasurer indicated that the

Committee did not dIspute the finding and no additional infonnation was available in

resolution oft he finding Also. she agreed to file comprehensive amended reports for

calendar years 1993 and J994

In the lntenm audit repon it was recommended that the

Commlttee file comprehenSive amended repons for calendar years 1993 and 1994 with

supporting Schedules H-l. H-:. H-3. H-4. A.. and B to correct the misstatements described

above

Ending cash on hand. as reponed. c,cccdcd bcgmmng cash plus total receIpts less total

disbursements a~ reponed on the I 9<)1 summ.1~ pages. b\ S~. i6<J •

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Included in the Committee's response were comprehensive

amended reports for 1993 and 1994 which corrected the misstatements noted above.

c. PRomBITED IN-KIND CONTRIBUTIONS

Section 441b(a) ofTitle 2 ofthe United States Code states.. in pan.

that it is unlawful for any corporation to rnake a contribution or expenditure in connection

with any federa! election. or for any political committee to knowingly accept or receive any

contribution prohibited by this section

Section 104 13(a)(2) ofTitle 11 ofthe Code ofFederal Regulations

states. in pan. that each in-kind contribution shan also be reponed as an expenditure at the

same usual and normal value and reponed on the appropriate expenditure schedule

Sections 106 5(a)(2)(i) and (it) ofTitle 11 ofthe Code ofFederal

Regulations state. in pan. that committees that make disbursements in connection with

federal and non-federal elections shall allocate administrative expenses including rent and

the direct costs of a fundraising event where federal and non-federal funds are collected by

the Committee through such event

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Advisory Opinion 1992-33 states. in pan. that a national pany

committee may accept corporate in-kind donations in connection with fundraising activities,

but only if one oftwo conditions is met (1) the amount ofthe federal share ofgoods or

sen.ices is paid to the non-federal account in advance or on receipt: or (2) sufficient funds

to pay for the federal share of goods or services have been transferred to a non-federal

account in advance

Our revi~· of vendor invoices for the period January J.. 1993

th:"' ..cgh December 3I. 1994 identified allocable in-kind contributions from corporationsJ

totaling S11.578 The Audit staff determined that the federal share ofthe corporate in-kind

contributions totaled S~. 781 Donated office space". an administrative expense. accounted

for S:!.361 ofthe amount allocable to the federal account. whereas donated printing services

for fundraising events accounted for the remaining $4:!O

Dunng the audit period. the federal account did not make any

disbursements to the non-federal account Therefore. the Committee did not satisfy either

ofthe conditions set fonh In .-\dvlsory OpInIon 199:-33 \\1th respect to the corporate

in-kind contributions The pre..,ous Treasurer made a panial refund ofS1.000 to one ofthe

contributing corporations. ho\\ever. thIS payment "-as not timely As of November 6. 1995.

J The current Incorporancd stalUS or contnbulors "3S \cnflcd \\uh Cahfoml3'S Sccrcl3~ ofSl3te or

through other sources.

On ItS disclosure repon~ the Committee IOcorrccll~ :lunbutcd the In-kmd contnbutlon of officc

sp.1ce to an offlccr of the corporalIon •

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the date ofthe exit conference. a balance of51.781 ($2,781 - SI,ooo) had not been

refunded by the Committee

At an interim conference and at the exir cOl"~erence the Audit staff

provided to the Committee schedules detailing the above finding. At the exit conference.

the Treasurer indicated that the Committee did not dispute the finding and no additional

information was available in resolution ofthe finding

In the interim audtt repon 11 was recommended that the Conunittee

refund the federal share ($1.781) of the In-kind contributions to the contributors from the

federal account and provide evidence ofsuch refunds. i.e., copies ofthe front and back of

the negotiated refund checks

Included in the Committee's response to the interim audit report were

copies ofrefund checks totaling $1.781 A front and back copy ofone ofthe checks for

S237 demonstrated that it had been negotiated The Committee asserted that the remaining

checks had not cleared the bank in time to be included with the response

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June 1:. 1QQ(\

\ls 'ancy ~1cLain. Treasurer

San BernardIno ('ounty Repuhlican

('entral (ommJttee

":"3("~ Carnc1tan Avenue. SUltC 1~~

Ran~h('\ (liCalnon~a. (".\ 'l' -" t

·\ttachcd please find the Final ·\udn Reron on the San Bernardino County

RCr~IHI~11ll Central \Om,nlth.'C" The C(lnunl~~I(\n appro\'cd the fepO" on June 10. 1()C)6

J h\.' ( l \1111111"IUn ~'PJ'f( \\ cd I IIl.tl \ulin I{c'lon \\.11 he: placl.'d on the puo;., rc~ord on

June 1'). 1<)96 Should Y(lU ha\C an~ (tuc~ltOll" regarding the public release ofthe repan.

rlea~e cc'ntact the ConlmIS~U\n's Press Office al (202) 19-4155 or toll-free at (800)

~:..t.C)~ .,(1 .·\n~ question~ ~'llU ha\c related tC' matters covered during the audit or in the

rt,-l'f'f: .... tH'uld ~(' directed If' n(,~ S,nlnl(ln~ or \\ anda Thonlas of the Audit Division at c:~O~)

: ! l.~. -:!,f\r at the ahn\ l· (pH rr,,~ nutllhcr

Sincerel\"_

A-/fl%:-

Rl \hl'rt J .C (\~t ;)

\ ...."'I;lnt "fatr I)rn..'~tor

·\udll 1)1\ ISlnn

.. .• '- .. ...~" '" It\."'~·;

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Page 12, Approved 6/10/96
CHRONOLOG't'

SAN BERNARDINO COU~'TY REPUBLICAN CE~TTRAL COMMITTEE

Audit Fieldwork

Interim Audit Repon to

the Committee

Response Received to the

Interim Audit Repon

Final Audit Repon Approved

9/18/95 - 9/29/95

3/11/96

5/15/96

6/10/96

Page 13, Approved 6/10/96