BROTHERHOOD OF LOCOMOTIVE ENGINEERS PAC FUND

CHRONOLOGY

Audit Fieldwork

Interim Audit Report to the Committee

August 19, 2002 - August 28. 2002

November 27, 2002

Response Received to the Interim Audit Report January 14, 2003

Final Audit Report to Commission

Final Audit Report Approved

Page 11 of 11

February 20. 2003

February 26, 2003

Approved 2 26'03


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Cc. ITEMIZATION OF CONTRIBUTIONS FROM INDIVIDUALS

Section 434(b)(3)(A) of Title 2 of the United States Code Tequires, in part.
a political committee to report the identification of each person (other than a political
committee) who makes a contribution to the committee in an aggregate amount or value
in excess of $200 per calendar year, together with the date and amount of any such
contnbution.

Section 431(13) of Title 2 of the United States Code defines the term
“identification” to be, in the case of any individual. the name. the mailing address. and
the occupation of such individual, as well as the name of his or her emplover: and, in the
case of any other person, the full name and address of such person

The Audit staff reviewed contributions from individuals on a sample basis
and determined that BOLE did not itemize a significant number of contributions on
Schedules A (Itemized Receipts) as required. All of the identified errors were related to
contributions from individuals received in 1999. BOLE did not itemize any contributions
from individuals during that calendar vear

At the exit conference. the Audit staff presented this matter to BOLE
Tepresentatives who indicated that they would file the necessary Schedules A to correct
this problem. No explanation was provided for the omission of these items

In the interim audit report, the Audit staff recommended that BOLE file
amended Schedules A, by reporting period. to properly disclose contributions received in
1999 that were not itemized as required. In response to the interim audit report, BOLE
filed the recommended schedules, which corrected the public record

D. DISCLOSURE OF CONGRESSIONAL DISTRICT

Section 104.3(b)(3)\v) of Title 11 of the Code of Federal Regulations
states, in relevant part, that a political committee. other than an authorized committee.
shall report each political committee which has received a contribution from the reporting
committee during the reporting period. together with the date and amount of any such
contribution, and, in the case of a contribution to an authorized committee. the
candidate’s name and office sought (including State and Congressional district. if
applicable)

The Audit staff performed a sample review of contributions made by
BOLE to federal candidates/committees and determined that BOLE did not disclose the
State and Congressional district for 27°o of the tems tested All errors noted occurred in
1999.

At the exit conference. the Audit staff presented this matter to BOLE
Tepresentatives who indicated that they recently corrected this problem and agreed to file

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D.

enforcement action.

To manage its financial activity, BOLE used one bank account. From this
account, BOLE made approximately 1,180 disbursements totaling $831,486. BOLE
received contributions from individuals totaling $792,402, the majority of which were
received through payroll deductions. In addition, BOLE earned interest of $1,823 and
received a $500 refund from a federal candidate.” BOLE utilized common accounting
software and campaign management software to prepare and file its reports. Paid staff
performed accounting, recordkeeping, and reporting functions and one staff member
attended several Commission seminars

AUDIT SCOPE AND PROCEDURES

The audit included testing of the following general categories:

1.

The receipt of contributions or loans in excess of the statutory
limitations;
The receipt of contributions from prohibited sources, such as those

from corporations or labor organizations:

Proper disclosure of contributions from individuals, political
committees and other entities, to include the itemization of
contributions when required. as well as the completeness and
accuracy of the information disclosed (see Finding II.C.):

Proper disclosure of disbursements including the itemization of
disbursements when required, as well as the completeness and
accuracy of the information disclosed (see Finding II.D.):

Proper disclosure of debts and obligations, including loans:

The accuracy of total reported receipts. disbursements and cash
balances as compared to bank records:

Adequate recordkeeping for all transactions (see Finding II. A); and

Other audit procedures that were deemed necessary in the situation
(see Findings II B )

Unless specifically discussed below, no material non-compliance with
statutory or regulatory requirements was detected. It should be noted that the
Commission may pursue further any of the matters discussed in this report in an

> The Audit staff noted minor differences between bank activity and reported activity for both receipts and

disbursements

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FEDERAL ELECTION COMMISSION
WASHINGTON DU 205+ A01-45

REPORT OF THE AUDIT DIVISION
ON THE
BROTHERHOOD OF LOCOMOTIVE ENGINEERS PAC FUND

I. BACKGROUND

A. AUDIT AUTHORITY

This report is based on an audit of the Brotherhood of Locomotive
Engineers PAC Fund (BOLE), undertaken by the Audit Division of the Federal Election
Commission (the 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

The audit covered the penod January |. 1999, through December 31.
2000. During this period, BOLE reported a beginning cash balance of $131,932: total
receipts for the period of $794,519: total disbursements for the period of $830.871. and.
an ending cash balance of $95,580

Cc. COMMITTEE ORGANIZATION

BOLE registered with the Clerk of the House of Representatives on July
10, 1978, as the separate segregated fund of the Brotherhood of Locomotive Engineers
union (the Union)'. The treasurer of BOLE during the period covered by the audit was
Mr. Russell W. Bennett. On October 15.2001. Mr William C. Walpert replaced Mr.
Bennett and continues to serve as treasurer. BOLE qualified for multi-candidate status on
January 26, 1979, and maintains its headquarters in Cleveland. Ohio.

' BOLE’s original name, as listed on the Statement of Organization received by the Commission on July

10, 1978. was B. of L. E. Voluntary Political Fund

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contributions to one or more separate segregated funds to which the collecting agent is
related. Further, 11 CFR §102.6(c\ 1) and (4) require that the separate segregated fund
be responsible for ensuring that the recordkeeping. reporting and transmittal requirements
are met. The full amount of each contribution collected by a collecting agent on behalf of
a separate segregated fund shall be transmitted to that fund within 10 or 30 days as
required by 11 CFR §102.8.

Section 102.8(b) of Title 11 of the Code of Federal Regulations states. in
part, that every person who receives a contribution of $50 or less for a political
committee which is not an authorized committee shall forward such contribution to the
treasurer of the political committee no later than 30 days after receipt. Every person who
receives a contribution in excess of $50 for a political committee which is not an
authorized committee shall, no later than 10 days after receipt of the contribution.
forward to the treasurer of the political committee: the contribution; the name and address
of the contributor; and, the date of receipt of the contribution.

BOLE officials provided a copy of wntten procedures that explains how
the Union members’ contributions were transmitted to BOLE. The payroll departments
of the companies where the members work remit the contributions (withheld via payroll
deduction) to the Union by the 7" of each month. The Union’s Compliance Department
then prepares a report that indicates the amount of funds to be transmitted to BOLE

A review of all contributions BOLE received from the Union (the
collecting agent) was performed to determine the number of days between the collection
of contributions by the collecting agent and the transmittal of the contributions to BOLE.
It was determined that 24 of the 25 transmittals of contributions to BOLE made during
the audit period were not made timely. The average length of time for transmittal of the
contributions was 93 days, with one transmittal taking 466 days.*

At the exit conference. the Audit staff presented this matter to BOLE
representatives who indicated that they are in the process of correcting the procedures in
this area.

In the interim audit repon. the Audit staff recommended that BOLE
develop new procedures for the timely transmittal of contributions from its collecting
agent: and, provide a copy or other written description of these procedures to the Audit
staff.

In response to the interim audit repon. BOLE provided the Audit staff
with a copy of written procedures implemented in September 2002. which will ensure
that all contributor authorizations are accounted for and maintained with current
contributor information. Evidence of new procedures set up to ensure that contributions
are transmitted timely to BOLE was also submitted

* This transmittal. in the amount of $33,922. was deposited on May 10. 2000 and was made up entirely of
contributions from December 1998

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FEDERAL ELECTION COMMISSION

WASHINGTON, DC 20464

March 7, 2003
MEMORANDUM
TO: RON M. HARRIS
PRESS OFFICER
PRESS OFFICE
Aa.
7
FROM: JOSEPH F. STOLT: L
ASSISTANT STAFF DIRECTOR
AUDIT DIVISION /
J

SUBJECT: PUBLIC ISSUANCE OF THE FINAL AUDIT REPORT ON THE
BROTHERHOOD OF LOCOMOTIVE ENGINEERS PAC FUND

Attached please find a copy of the final audit report and related documents on the
Brotherhood of Locomotive Engineers PAC Fund that was approved by the Commission
on February 26, 2003.

The report may be released to the public on March 7, 2003.

Attachment as stated

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

CHR

N



AQ1-45

FEDERAL ELECTION COMMISSION

WASHINGTON Dc Jude

February 27, 2003

Mr. William C. Walpert, Treasurer

Brotherhood of Locomotive Engineers PAC Fund
1370 Ontario Street, Standard Bldg.

Cleveland, OH 44113-1702

Dear Mr. Walpert:

Attached please find the Report of the Audit Division on Brotherhood of
Locomotive Engineers PAC Fund (Final Audit Report) The Commission approved the
report on February 26, 2003.

The Commission-approved Final Audit Report will be placed on the public record
on March 7, 2003. Should you have any questions regarding the public release of the
report, please contact the Commission's Press Office at (202) 694-1220. Any questions
you have related to matters covered dunng the audit or in the report should be directed to
Robert Morcomb or Marty Favin of the Audit Division at (202) 694-1200 or toll free at
(800) 424-9530.

veer
/ Fa
FAA A & t

os¢ph F. Stoltz
Assistant Staff Director
. Audit Division

Attachment as stated

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amended Schedules B (Itemized Disbursements) to disclose the missing State and
Congressional district information.

In the interim audit report. the Audit staff recommended that BOLE file
amended Schedules B, by reporting period, to disclose the missing State and
Congressional district information. In response to the interim audit report, BOLE filed
the recommended schedules, which corrected the public record.

Page 8 of 11 Approved 2'26/03


IL. AUDIT FINDINGS AND RECOMMENDATIONS

A. FAILURE TO MAINTAIN CONTRIBUTOR AUTHORIZATIONS

Section 104.14(b)(1) of Title 11 of the Code of Federal Regulations states
that each political committee required to file any report or statement under this
subchapter shall maintain records, including bank records, with respect to the matters
required to be reported, including vouchers, worksheets, receipts, bills and accounts,
which shall provide in sufficient detail the necessary information and data from which the
filed reports and statements may be verified, explained, clarified, and checked for
accuracy and completeness.

Members of the Union fill out written authorizations to have contributions
to BOLE automatically deducted from their paychecks. These authorization forms were
not maintained with the rest of BOLE’s records in Cleveland. Ohio, but rather were kept
in BOLE’s Washington, D.C. office. A review of selected contributors revealed that
approximately 50% of the required forms were not available

The lack of a complete set of contributor authorization cards prevented the
Audit staff from verifying whether some contributions were permissibly received. We
were also unable to fully verify the quality of the data entry of BOLE’s receipts database
or to fully test the disclosure of information included on reports filed with the
Commission. When informed of the missing contribution authorization cards, a BOLE
Tepresentative was unable to provide an explanation.

In the interim audit report. the Audit staff recommended that BOLE locate
the missing contributor authorizations and make them available to the Audit staff. If
unable to locate the missing authorizations, it was further recommended that BOLE
obtain replacement authorizations and implement procedures to ensure that the required
authorizations are obtained and maintained for each contributor. Copies of replacement
authorizations and any written procedures implemented were to be provided to the Audit
staff.

In response to the interim audit report. BOLE provided copies of letters
with new authorization forms attached that were mailed to all contributors identified by
the Audit staff as lacking such forms. Each letter requested that the contributor complete
the contribution authorization form and retum it to BOLE. BOLE provided copies of
such forms. completed by the contributors. for approximately 60% of the forms noted as
missing in the review. Further. BOLE’s response stated that it has instituted procedures
to ensure that contribution authorizations are properly accounted for and maintained with
current contributor information

B. TRANSMITTAL OF CONTRIBUTIONS BY COLLECTING AGENTS
Section 102.6(b)(1) of Title 11 of the Code of Federal Regulations defines

a “collecting agent” as an organization or committee that collects and transmits

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A01-45

FEDERAL ELECTION COMMISSION
Washington, DC 20463

BROTHERHOOD OF LOCOMOTIVE ENGINEERS PAC FUND
EXECUTIVE SUMMARY

Brotherhood of Locomotive Engineers PAC Fund (BOLE) registered with the
Clerk of the House of Representatives on July 10, 1978 as the separate segregated fund of
the Brotherhood of Locomotive Engineers union (the Union).

The audit was conducted pursuant to 2 U.S.C. §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 four findings from the
audit were presented to BOLE at the completion of fieldwork on August 28, 2002 and
later in the interim audit report. The relevant parts of BOLE’s response to these findings
are included in the audit report.

The following is an overview of the findings contained in the audit report.

Failure to Maintain Contributor Authorizations — 11 CFR 104.14(b)(1). A review of the
Union members’ written authorizations to have contributions automatically deducted
from their paychecks revealed that approximately 50°%o of the required forms were not
available. In response to the audit report. BOLE provided copies of letters with new
authorization forms that had been sent to all contributors identified as lacking such
forms, as well as newly completed authorizations for approximately 60% of those
missing such forms. BOLE further indicated that it had instituted new procedures in this
area.

Transmittal of Contributions by Collecting Agents — 11 CFR 102.6(b)(1) and 102.8(b)
A review of the transmittal of contributions BOLE recetved from the Union determined
that 24 of the 25 transmittals were not made timely. In response to the audit repon,
BOLE provided evidence of new procedures set up to ensure timely transmittals

Itemization of Contributions from Individuals --2 U.S.C. §434(b)(3). BOLE did not
itemize a significant number of contributions on Schedules A (Itemized Receipts) as
required. Amended reports were filed which corrected the public record

Disclosure of Congressional District — 1] CFR 104.3(b)(3)(v). BOLE did not disclose
the State and Congressional district for 27%o of its itemized contributions. as required
Amended reports were filed which corrected the public record.

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TABLE OF CONTENTS

BROTHERHOOD OF LOCOMOTIVE ENGINEERS PAC FUND

PAGE
Executive Summary 1
Final Audit Report 3
Background 3
Finding 5
Transmittal to Committee 9

Chronology 11


REPORT OF THE AUDIT DIVISION
ON THE

BROTHERHOOD OF LOCOMOTIVE
ENGINEERS PAC FUND

Approved February 26, 2003

FEDERAL ELECTION COMMISSION
999 E STREET, N.W.
WASHINGTON, D.C.



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