Part I
Background

Authority for Audit

This report is based on an audit of Northup for Congress (NFC), undertaken by the Audit
Division of the Federal Election Commission (the Commission) in accordance with the Federal
Election Campaign Act of 1971, as amended (the Act). The Audit Division conducted the audit
pursuant to 2 U.S.C. §438(b), which permits the Commission to conduct audits and field
investigations of any political committee that is required to file a report under 2 U.S.C. §434.
Prior to conducting any audit under this subsection, the Commission must perform an internal
review of reports filed by selected committees to determine if the reports filed by a particular
committee meet the threshold requirements for substantial compliance with the Act. 2 U.S.C.
§438(b).

Scope of Audit

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

The receipt of excessive contributions and loans.

The receipt of contributions from prohibited sources.

Disclosure of contributions received.

Consistency between reported figures and bank records.

The completeness of records.

Other committee operations necessary to the review.

AWRwWNE

Changes to the Law

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



Part IV
Findings and Recommendations

| Finding 1. Misstatement of Financial Activity

Summary

A comparison of the NFC’s reported figures to its bank records revealed that the ending cash-on-
hand balance had been misstated for calendar year 2002. In response to the interim audit report,
the NFC amended its most recent disclosure report to correct the misstatement noted above.

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.
2 U.S.C. §434(b)(1), (2) and (4).

Facts and Analysis

A comparison of the NFC’s reported figures to its bank records revealed that the ending cash-on-
hand balance for calendar year 2002 had been understated by $18,662. This understatement
resulted primarily from the reporting of vendor payments that did not clear the bank. The NFC
voided these payments without amending its disclosure reports.

At the exit conference, the Audit staff provided the NFC representatives with schedules
explaining the misstatement. The representatives agreed to amend the appropriate report(s).

Interim Audit Report Recommendation and Committee Response
In response to the recommendation in the interim audit report, the NFC amended its most recent
disclosure report to correct the misstatement noted above.

Finding 2. Disclosure of Proceeds from Joint Fundraising
Activity

Summary

The NFC improperly disclosed the receipt of net proceeds from a joint fundraising activity with
the 2002 Kentucky Republican Victory Committee on its 2002 Pre-General report. In response
to the interim audit report, the NFC correctly amended this disclosure report.


Table of Contents

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

Part II. Overview of Northup for Congress
Committee Organization
Overview of Financial Activity

Part III. Summaries

Findings and Recommendations

Part IV. Findings and Recommendations
Finding 1. Misstatement of Financial Activity
Finding 2. Disclosure of Proceeds from Joint Fundraising Activity

Page

Nw


Part II
Overview of Campaign

Campaign Organization

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Important Dates

© Date of Registration December 11, 2000

© Audit Coverage January 1, 2001 - December 31, 2002
Headquarters Louisville, Kentucky

Bank Information

e Bank Depositories Two

e Bank Accounts Three Accounts

Treasurer

e Treasurer When Audit Was Conducted James L. Meagher

Treasurer During Period Covered by Audit | James L. Meagher

Management Information

¢ Attended FEC Campaign Finance Seminar | No

¢ Used Commonly Available Campaign Yes
Management Software Package
© Who Handled Accounting and Paid Staff

Recordkeeping Tasks

Overview of Financial Activity
(Audited Amounts)

Cash on hand @ January 1, 2001 $ 5,762
© Contributions 2,950,906
o_ Transfers from Authorized Committees 139,510
© Other Receipts 28,535
Total Receipts $ 3,118,951
© Operating Expenditures 3,081,154
o Other Disbursements 15,062
Total Disbursements $ 3,096,216
Cash on hand @ December 31, 2002 $ 28,497


Legal Standard

Itemization of Contributions From Joint Fundraising Efforts. Participating political
committees must report joint fundraising proceeds in accordance with 11 CFR §102.17(c)(8)
when such funds are received from the fundraising representative. 11 CFR §102.17(c)(3)(iii).

Each participating political committee reports its share of the net proceeds as a transfer-in from
the fundraising representative and must also file a memo Schedule A itemizing its share of gross
receipts as contributions from the original contributors to the extent required under 11 CFR
§§104.3(a) and 102.17(c)(8)(i)(B).

Itemization Required. Political committee must itemize:
¢ Every contribution from any political committee, regardless of the amount.
2 U.S.C. §434(b)(3)(A) and (B).

Facts and Analysis

The NFC received net proceeds of $50,177 from the 2002 Kentucky Republican Victory
Committee” joint fundraiser. The NFC, however, failed to disclose the receipt of the net
proceeds on Schedule A, line 12 (Transfers from Other Authorized Committees) accompanied by
memo Schedules A showing the gross amount of the contributions. Instead, the NFC reported
the individual gross contributions of $56,200 from 56 contributors on Schedule A, line 11(a)(i)
of the 2002 Pre-General Report. This action also caused an overstatement of receipts in the
amount of $6,023 ($56,200 - $50,177).

At the exit conference, the Audit staff presented this matter to the NFC representatives. The
Tepresentatives agreed to amend the 2002 Pre-General disclosure report.

Interim Audit Report Recommendation and Committee Response
In response to the recommendation in the interim audit report, the NFC amended Schedule A to
its 2002 Pre-General report to disclose the receipt of net fundraising proceeds.

> The joint fundraising participants were the NFC and the Kentucky State Republican Party.


FEDERAL ELECTION COMMISSION
Washington, DC 20463

November 12, 2003

MEMORANDUM

TO: RON M. HARRIS
PRESS OFFICER
PRESS OFFICE

FROM: JOSEPH F. STOLTZ j
ASSISTANT ST. ‘CTOR
AUDIT DIVISION |

SUBJECT: | PUBLIC ISSUANCE OF THE AUDIT REPORT ON
NORTHUP FOR CONGRESS
Attached please find a copy of the audit report and related documents on Northup

for Congress, which was approved by the Commission on November 4, 2003.

The report may be released to the public on November 13, 2003.

Attachment as stated

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


Part III
Summaries

Findings and Recommendations

Finding 1. Misstatement of Financial Activity

A comparison of the NFC’s reported figures to its bank records revealed that the ending cash-on-
hand balance had been misstated for calendar year 2002. In response to the interim audit Teport,
the NFC amended its most recent disclosure report to correct the misstatement noted above. (For

more detail, see p. 4).

Finding 2. Disclosure of Proceeds from Joint Fundraising
Activity

The NFC improperly disclosed the receipt of net proceeds from a joint fundraising activity with

the 2002 Kentucky Republican Victory Committee on its 2002 Pre-General Teport. In response

to the interim audit report, the NFC correctly amended this disclosure report. (For more detail,

see p. 4).


Report of the
Audit Division on

Northup for Congress
January 1, 2001 - December 31, 2002

Why the Audit
Was Done

Federal law permits the
Commission to conduct
audits and field
investigations of any
political committee that is
required to file reports
under the Federal
Election Campaign Act
(the Act). The
Commission generally
conducts such audits
when a committee
appears not to have met
the threshold
requirements for
substantial compliance
with the Act.' The audit
determines whether the
committee complied with
the limitations,
prohibitions and
disclosure requirements
of the Act.

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

* 2 U.S.C. §438(b).

About the Committee (p. 2)

The Northup for Congress (NFC) is the principal campaign
committee for Anne Northup, Republican candidate for the U.S.
House of Representatives from the state of Kentucky, Third
District. The NFC maintains its headquarters in Louisville,
Kentucky. For more information, see the chart on the Committee
Organization, p. 2.

Financial Activity (p. 2)
« Receipts

o Contributions $ 2,950,906
o Transfers from Authorized

Committees 139,510
o Other Receipts 28,535
o Total Receipts $ 3,118,951

« Disbursements

o Operating Expenditures $ 3,081,154
o Other Disbursements 15,062
o Total Disbursements $ 3,096,216

Findings and Recommendations (p. 3)

© Misstatement of Financial Activity (Finding 1)

¢ Disclosure of Proceeds from Joint Fundraising Activity
(Finding 2)


Report of the
Audit Division on
Northup for Congress

January 1, 2001 - December 31, 2002