Part II
Overview of Campaign

Campaign Organization

Important Dates Ted Poe for Congress

¢ Date of Registration November 17, 2003

e Audit Coverage November 6, 2003 - December 31, 2004
Headquarters Humble, TX

Bank Information

e Bank Depositories One

e Bank Account One Checking

Treasurer

e Treasurer When Audit Was Conducted Virgil Poe

e Treasurer During Period Covered by Audit _| Virgil Poe

Management Information

e Attended FEC Campaign Finance Seminar No

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

Recordkeeping Tasks

Overview of Financial Activity

(Audited Amounts)
|
Cash on hand @ November 6, 2003 $0
o Contributions from Individuals $ 1,128,834
o Contributions from Political Committees 441,086
o Transfers from Authorized Committees 196,789
o Offsets to Operating Expenditures 328
Total Receipts $ 1,767,037
o Operating Expenditures $ 1,703,187
o Contribution Refunds 6,050
_Total Disbursements $ 1,709,237
Cash on hand @ December 31, 2004 $57,800



instructions provided by the joint fundraising representatives. TPC also noted that the
proceeds received from joint fundraising activity referenced above were originally
itemized as transfers-in from the fundraising representatives.

| Finding 3. Documentation for Receipts

Summary

The Audit staff reviewed contributions from individuals and determined that 19% were
not properly documented. The errors were all associated with contributions in excess of
$50 for which a copy of the contributor’s check was not retained by TPC. The Audit
staff recommended that TPC provide any additional records that it is able to locate and
provide any other relevant information.

In response, TPC’s counsel stated that its bank keeps copies of contributor checks
received by the committee, which complies with || CFR §102.9(a)(4). TPC also
provided several contributor check copies it had recently obtained from its bank as
samples, but did not provide the majority of the missing records. The Commission voted
to receive this finding, without any determination on the merits of the analysis, or the
facts, or the interpretation of the law contained therein.

Legal Standard

A. Retention of Check Copies. For contributions in excess of $50, committees must
maintain a photocopy or digital image of the check or written instrument. If the check
copies are maintained digitally, the committee must provide the ability to retrieve and
read the images at no cost to the Commission. 11 CFR §102.9(a)(4).

B. Preserving Documents. Committees must preserve these records for 3 years after a
report is filed. 2 U.S.C. §432(d).

Facts and Analysis

The Audit staff reviewed contributions from individuals on a sample basis and
determined that approximately 19% of these items were not properly documented. The
only documentation available for these contributions was the entries in TPC’s electronic
database. The errors were for contributions greater than $50 for which there was no copy
of the check or written instrument.

The Audit staff presented this matter to TPC representatives at the exit conference. TPC
representatives indicated that they would attempt to obtain the necessary documentation
and provide it to the Audit staff.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that TPC provide any additional records that it was able to
locate and any other relevant information. In response, TPC’s counsel stated that its
bank, acting as “an agent authorized by the treasurer,” keeps copies of contributor checks
received by the committee, and TPC is therefore in compliance with 11 CFR
§102.9(a)(4). Also included in the response, were several contributor check copies TPC


Part IV
Findings and Recommendations

| Finding 1. Misstatement of Financial Activity

Summary

A comparison of TPC’s reported figures to bank records revealed that TPC had
materially misstated receipts, disbursements, and the ending cash on hand balances for
calendar years 2003 and 2004. The Audit staff recommended that TPC file amended
reports to correct the misstatements. In response, TPC materially corrected the
misstatements.

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;

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

¢ Certain transactions that require itemization on Schedule A (Itemized Receipts) or
Schedule B (Itemized Disbursements). 2 U.S.C. §434(b)(1), (2), (3), (4) and (5).

Facts and Analysis

The Audit staff reconciled TPC’s reported activity to the bank records and determined
there was a misstatement of cash on hand, receipts, and disbursements for calendar years
2003 and 2004. The following charts details the discrepancies for each year. Succeeding
paragraphs explain, to the extent possible, why the discrepancies occurred.

2003 Activity

|__ Reported Bank Records | Discrepancy
Opening Cash Balance $0 $0 $0

@ November 6, 2003 °
Receipts $106,260 $101,260 $5,000
Overstated
Disbursements $22,856 $24,086 $1,230
Understated
Ending Cash Balance $83,404 $77,174 $6,230
@ December 31, 2003 Overstated

The overstatement of receipts was the result of the following:
¢ Reported contribution from a political committee was returned $5,000
from the bank for insufficient funds (December 2003)
Overstatement $5,000



Part III
Summaries

Findings and Recommendations

Finding 1. Misstatement of Financial Activity

A comparison of TPC’s reported figures to bank records revealed that TPC had
materially misstated receipts, disbursements, and the ending cash on hand balances for
calendar years 2003 and 2004. The Audit staff recommended that TPC file amended
reports to correct the misstatements. In response, TPC materially corrected the
misstatements. (For more detail, see p. 4)

Finding 2. Disclosure of Proceeds from Joint Fundraising
Activity

TPC did not properly disclose the receipt of net proceeds from joint fundraising activity

with the 2004 Joint Candidate Committee II and the Team Texas Committee. The Audit

staff recommended that TPC file amended reports to correctly disclose these receipts. In

response, TPC filed amended reports materially correcting the disclosure of the joint

fundraising proceeds. (For more detail, see p. 6)

Finding 3. Documentation for Receipts

The Audit staff reviewed contributions from individuals and determined that 19% were
not properly documented. The errors were all associated with contributions in excess of
$50 for which a copy of the contributor’s check was not retained by TPC. The Audit
staff recommended that TPC provide any additional records that it is able to locate and
provide any other relevant information.

In response, TPC’s counsel stated that its bank keeps copies of contributor checks
received by the committee, which complies with 11 CFR §102.9(a)(4). TPC also
provided several contributor check copies it had recently obtained from its bank as
samples, but did not provide the majority of the missing records. The Commission voted
to receive this finding, without any determination on the merits of the analysis, or the
facts, or the interpretation of the law contained therein. (For more detail, see p. 7)

Finding 4. Disclosure of Occupation/Name of Employer
TPC did not adequately disclose the occupation and/or name of employer for
approximately 40% of contributions from individuals itemized on its disclosure reports
and no “best efforts” to obtain, maintain, and submit the information was documented.
The Audit staff recommended that TPC provide evidence that it exercised “best efforts”
to obtain the missing information, attempt to contact the contributors to obtain the
necessary information, submit evidence of such efforts and disclose any information
received in amended reports. In response, TPC filed amended reports that materially
disclosed occupation/name of employer information. (For more detail, see p. 8)


Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that TPC file amended reports for calendar years 2003 and
2004. It was further recommended that the most recent report be amended to show the
adjusted cash on hand balance along with an explanation that it resulted from audit
adjustments from a prior period. In response, TPC filed the recommended amended
reports.

Finding 2. Disclosure of Proceeds from Joint Fundraising
Activity

Summary

TPC did not properly disclose the receipt of net proceeds from joint fundraising activity
with the 2004 Joint Candidate Committee II and the Team Texas Committee. The Audit
staff recommended that TPC file amended reports to correctly disclose these receipts. In
response, TPC filed amended reports materially correcting the disclosure of the joint
fundraising proceeds.

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 (Itemized
Receipts) itemizing its share of gross receipts as contributions from the original
contributors to the extent required under 11 CFR 104.3(a). 11 CFR §102.17(c)(8)G)(B).

Facts and Analysis

The Audit staff determined that TPC received a total of $196,789 in net proceeds from
joint fundraising activity; $100,782 from the 2004 Joint Candidate Committee II and
$96,007 from the Team Texas Committee. This activity was properly itemized as
transfers-in from the fundraising representative on Schedules A, however, TPC did not
disclose memo entries on Schedules A itemizing its share of the gross receipts as
contributions from the original contributors. This information was contained in TPC’s
contributions database.

At the exit conference, the Audit staff discussed this matter with TPC representatives.
TPC representatives offered no comments.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that TPC file amended reports to include memo entries on
Schedules A itemizing its share of the gross receipts from the joint fundraising activity as
contributions from the original contributors. In response, TPC filed the recommended
amended reports. TPC stated in its response that it had followed the reporting


FEDERAL ELECTION COMMISSION
Washington, DC 20463

August 9, 2007

MEMORANDUM

To: Robert W. Biersack
Press Officer

From: Joseph F. Stoltz
Assistant Staff ctor
Audit Division

Subject: Public Issuance of the Audit Report on Ted Poe for Congress
Attached please find a copy of the audit report and related documents on Ted Poe
for Congress, which was approved by the Commission on August 1, 2007.

The report may be released to the public.

Attachment as stated

Office of General Counsel
Office of Public Disclosure
Reports Analysis Division
C Library
SDD Website

°
°


contained in the committee’s records or in prior reports that the committee filed
during the same two-year election cycle. 11 CFR §104.7(b).

Facts and Analysis

A sample review of contributions from individuals disclosed on Schedules A (Itemized
Receipts) indicated that TPC failed to disclose the occupation and/or name of employer,
for approximately 40% of the tested contributions. In some instances, the missing
information was maintained in TPC’s records. For those contributors for whom the
information was not in TPC’s records, no evidence was available to demonstrate that
TPC had exercised “best efforts” to obtain, maintain, and submit the information.

The Audit staff presented this matter to TPC representatives at the exit conference. TPC
representatives asked the best way to comply with this recommendation. The Audit staff
responded that TPC should provide evidence of its best efforts to obtain, maintain and
submit the missing contributor information; contact the contributors in an attempt to
obtain this information; and, file amended reports for any information it obtains or
already has in its possession.

Interim Audit Report Recommendation and Committee Response
The Audit staff recommended that TPC take the following action:

e Provide documentation that it exercised best efforts to obtain, maintain and
submit the required contributor information; or

e Make an effort to contact those individuals for whom the required information
was not in TPC files and provide documentation of such efforts (such as copies
of letters to the contributors and/or phone logs); and,

* File amended reports to disclose any information in TPC’s possession as well as
information obtained in response to this recommendation.

In response, TPC filed amended reports that materially disclosed occupation/name of
employer information.


had recently obtained from its bank as samples. TPC did not provide copies of the
majority of the contribution checks that were missing and none of those provided were
among the sample errors. The Commission voted to receive this finding, without any
determination on the merits of the analysis, or the facts, or the interpretation of the law
contained therein.

| Finding 4. Disclosure of Occupation/Name of Employer

Summary

TPC did not adequately disclose the occupation and/or name of employer for
approximately 40% of contributions from individuals itemized on its disclosure reports
and no “best efforts” to obtain, maintain, and submit the information was documented.
The Audit staff recommended that TPC provide evidence that it exercised “best efforts”
to obtain the missing information, attempt to contact the contributors to obtain the
necessary information, submit evidence of such efforts and disclose any information
received in amended reports. In response, TPC filed amended reports that materially
disclosed occupation/name of employer information.

Legal Standard

A. Required Information for Contributions from Individuals. For each itemized

contribution from an individual, the committee must provide the following information:
« The contributor’s full name and address (including zip code);

The contributor’s occupation and the name of his or her employer;

The date of receipt (the date the committee received the contribution);

The amount of the contribution; and

The election cycle-to-date total of all contributions from the same individual. 2

U.S.C. §434(b)(3)(A) and 11 CFR §§100.12 and 104.3(a)(4).

B. Best Efforts Ensures Compliance. When the treasurer of a political committee
shows that the committee used best efforts (see below) to obtain, maintain, and submit
the information required by the Act, the committee’s reports and records will be
considered in compliance with the Act. 2 U.S.C. §432(i).

C. Definition of Best Efforts. The treasurer and the committee will be considered to
have used “best efforts” if the committee satisfied all of the following criteria:

¢ All written solicitations for contributions included:

o Aclear request for the contributor's full name, mailing address, occupation,
and name of employer; and
o The statement that such reporting is required by Federal law.

e Within 30 days after the receipt of the contribution not accompanied by complete
information, the treasurer made at least one effort to obtain the missing
information, via either a written request or a documented oral request.

e The treasurer reported any contributor information that, although not initially
provided by the contributor, was obtained in a follow-up communication or was


The understatement of disbursements was the net result of the following:
¢ Net under reporting of payroll disbursements?
¢ Unreported bank fees
¢ Over reported disbursement
Net understatement

$1,142
90

——(2)
$1,230

The overstatement of ending cash on hand in the amount of $6,230 was the result of the

misstatements noted above.

2004 Activity
|__ Reported Bank Records Discrepancy
Opening Cash Balance $83,404 $77,174 $6,230
@ January 1, 2004 Overstated
Receipts $1,565,264 $1,665,777 $100,513
Understated
Disbursements $1,500,011 $1,685,151 $185,140
Understated
Ending Cash Balance $148,657 $57,800 $90,857
@ December 31, 2004 Overstated
The understatement of receipts was the result of the following:
¢ Contributions from individuals not reported $84,397
¢ Net under reporting of contributions from political committees 15,115
¢ Unexplained difference 1,000
Understatement $100,513
The understatement of disbursements was the net result of the following:
¢ Operating expenditures not reported $316,621
¢ Operating expenditures reported twice (71,738)
¢ Operating expenditures reported but not located in bank records (43,800)
¢ Reported $15,000 disbursement as $1,500 13,500
¢ Unexplained difference (29,443
Net understatement $185,140

The overstatement of ending cash on hand in the amount of $90,857 was the result of the

misstatements noted above.

At the exit conference, the Audit staff provided TPC representatives with

detailing these misstatements. TPC representatives offered no comments.

schedules

* TPC failed to report six payroll disbursements totaling $12.219 while it reported five payroll-related

disbursements totaling $11,076 that could not be traced to bank records.


Part I
Background

Authority for Audit

This report is based on an audit of Ted Poe for Congress (TPC),” 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

This audit examined:

The receipt of excessive contributions and loans.

The receipt of contributions from prohibited sources.

The disclosure of contributions received.

The disclosure of disbursements, debts and obligations.
The consistency between reported figures and bank records.
The completeness of records.

Other committee operations necessary to the review.

on

? Effective February 11, 2005, Ted Poe for Congress changed its name to Poe for Congress.


Table of Contents

Part I. Background
Authority for Audit
Scope of Audit

Part II. Overview of Campaign
Campaign 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
Finding 3. Documentation for Receipts
Finding 4. Disclosure of Occupation/Name of Employer

Page

NN

oe


Report of the
Audit Division on

Ted Poe for Congress
November 6, 2003 — December 31, 2004

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 Campaign (p. 2)

Ted Poe for Congress (TPC) is the principal campaign committee
for Ted Poe, Republican candidate for the U.S. House of
Representatives from the state of Texas, 2TM district. TPC is
headquartered in Humble, Texas. For more information, see
chart on the Campaign Organization, p. 2.

Financial Activity (p. 2)
¢ Receipts

o Contributions from Individuals $ 1,128,834
o Contributions from Political

Committees 441,086
o Transfers from Authorized

Committees 196,789

o Offsets to Operating
Expenditures 328
o Total Receipts $ 1,767,037
« Disbursements
o Operating Expenditures
o Contribution Refunds
o Total Disbursements

$ 1,703,187
6,050
$ 1,709,237

Findings and Recommendations (p. 3)

e Misstatement of Financial Activity (Finding 1)

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

¢ Documentation for Receipts (Finding 3)

« Disclosure of Occupation/Name of Employer (Finding 4)