Draft Final Audit Report of the 

Audit Division on 

New American City, Inc. 

(May 4, 2011 - December 31, 2012) 

Why the Audit 

Was Done 

The Commission audits 

each host committee or 

municipal fund that 

represents a city where a 

publicly financed 

nominating convention 

was held. The audit 

seeks to determine 

whether the committee 

has materially complied 

with the prohibitions and 

disclosure requirements 

of the election law.' 

Future Actioh 

The Commission may 

initiate an«' 

action, at^ 

with r^^t to any o 

mattefs^i d in this 

report. 

About the Committee 

New American City, Inc. 

Carolina, is a committee 

National Convention. For 

Committee Organizatiqi 

red in Charlotte, North 

hosting the 2012 Democratic 

n, see the chart on the 

Financial ivit y ( 

• Receipts 

o Contributior 

%penses 

o Tl om A l 

o Lc 

o Refits, -f Deposits 

0 Othen 

1 • tal Receipts 

1 Convention 

( ^mittees 

$ 19,008,773 

8,783 

1,000,000 

49,669 

950 

S 20,068,175 

4" 

iiisbursemenl 

itig^xpenditures $ 20,056,269 

jursements 10,775 

1 3tal Disbursements $ 20,067,044 

J'indings and Recommendations (p. 3) 

Misstatement of Financial Activity (Finding 1) 

Disclosure of Receipts (Finding 2) 

Disclosure of Disbursements (Finding 3) 

Reporting of Debts and Obligations (Finding 4) 

11 CFR §9008.54. 
Draft Final Audit Report of the 

Audit Division on 

New American City, Inc. 

(May 4, 2011 - December 31, 2012) 

<1. 

ji-
Table of Contents 

Page 

Part I. Background 

Authority for Audit 

Scope of Audit 

Inventory of Committee Records 

Part II. Overview of Committee 

Committee Organization 

Overview of Financial Activity 

Part III. Summaries 

Findings and Reconunendations 

Part IV. Findings and Recommi-iicl.ii in 

Finding 1. Misstatement of Financial Activity 

Finding 2. Disclosure of Receipi 

Finding 3. Disclosure of Disbursd 

Finding 4. Reporting of Debts and 

2 

2 

4 

5 

6 

8 
Parti 

Background 

Authority for Audit 

This report is based on an audit of New American City, Inc. (NAG), undertaken by the 

Audit Division of the Federal Election Commission (the Commission) as mandated by 

Section 9008.54 of Title 11 of the Code of Federal Regulations. That section states that 

the Commission shall conduct an examination and audit of each host committee 

registered under 11 CFR §9008.51. 

Scope of Audit 

This audit examined: 

1. the receipt of contributions from prohibited soi 

the disclosure of contributions and other recei 

the disclosure and nature of disbursemeni 

the disclosure of debts and obligations; 

and the completeness of records; 

the consistency between reported Figures and ban 

2. 

3. 

4. 

5. 

6. 

7. other committee operations necesT review. 

; and 

Inventory of Committee Rernnls 

The Audit staff routinely conducts an inve 

audit fieldwork. NAC i^^i^ 

thereafter. 

records before it begins the 

the fieldwork began 
Part II 

Overview of Committee 

Committee Organization 

Important Dates 

• Date of Registration May 18,2011 ^ 

• Audit Coverage May 4,2011^(ree.mber 31,2012 

Headquarters Charlott^^ Carolina 

Bank Information 

• Bank Depositories Onjg^^ 

• Bank Accounts ^SI^%ccoimts 

Treasurer ^ 

e Treasurer When Audit Was Conducted 

• Treasurer During Period Covered by Audit 

Management Information . 

e Attended Commission Campaign Fin^ 

liel sy.M.D. 

sy, M.D. 

No 

Seminar 

Who Handled Accounting and Recordke^ 

Tasks 

taff 

Q^ciyicw of Fin^gpial Activity 

lAuditvcl A^unts) 

Cash-ouTjti iii>i @ A 1 .1 ^ $ 0 

Receiplf^ ^ 

o Contril .i^to Defray C^^entidfi Expenses 19,008,773 

o Transfers fr^^^iliated Committees 8,783 

o Loans ^ 1,000,000 

o Refunds, Rebates, of Deposits 49,669 

o Other Income W 950 

Total Receipts $ 20,068,175 

Disbursements 

o Convention Expenditures 20,056,269 

o Loan Repayments Made 0 

o Other Disbursements 10,775 

Total Disbursements S 20,067,044 

Cash-on-hand @ December 31,2012 $ 1,131 
Part III 

Summaries 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

During audit fieldwork, a comparison of NAC's reported financial activity with its bank 

records revealed a misstatement of financial activity for disbursements during 2011 

through 2012. The total of the misstated amounts was $2,024,2l^In response to the 

Preliminary Audit Report recommendation, NAC filed amendej^^lgsure reports that 

materially corrected its misstated activity. (For more detail, 4.) 

Finding 2. Disclosure of Receipts 

During audit fieldwork, the Audit staff identified 

were missing or lacked required disclosure info: 

Audit Report recommendation, NAC filed ami 

receipt disclosure errors. (For more detail, see 

tots 

response td 

disclo reports 

^04,569 that 

preliminary 

[the 

Finding 3. Disclosure of^isbursemunli 

The Audit staff identified 653 disburs^^Mt^otaling $4,^ 

or lacked required disclosure informati^iT'l^^&iMnse to th^ 

recommendation, NAC filed amended di^osi^^^istSLthat J 

disbursement disclosure 'or mor^ 

at were either missing 

Iminary Audit Report 

faterially corrected the 

Finding 4. Retorting of Debti%nd Obligations 

The Audit staff identi^^dt ) an equipme^^ntal vendor, in the amount of $25,425, 

that was not itemized on^^< ^ Obligations) as required. In response to 

the Prelimk(l^^^|^epon^om , NAC filed amended disclosure reports to 

prope lemize tn^ Fo^ :ail, see p. 8.) 
Part IV 

Findings and Recommendations 

Finding 1. Misstatement of Financial Activity 

Summary 

During audit fieldwork, a comparison of NAC's reported financial activity with its bank 

records revealed a misstatement of financial activity for disbursements during 2011 

through 2012. The total of the misstated amounts was $2,024,213. In response to the 

Preliminary Audit Report recommendation, NAC filed amended disclosure reports that 

materially corrected its misstated activity. 

Legal Standard 

Contents of Reports. Each report must disclose: 

• the amount of cash on hand at the begi: 

• the total amount of receipts for the report 

• the total amount of disbursements for 

year; and 

• certain transactions that require itemization 

Schedule B (Itemized Disbur^ents). 52 U.S: 

(5) (formerly 2 U.S.C. §434 (^ , (4) 

^ of I ^rting period; 

and for the^fendar year; 

Drtin^eriod and foil^^jalbndar 

ledule A (Itemized Receipts) or 

0104(b)(1), (2), (3), (4) and 

Facts and Anal3rsis 

A. Facts ^ r 

The Audit staff recQSjaled reported a^wity with its bank records and identified a 

misstatement of di^^^ments M 2011 throu^^l2.^ The following chart details the 

discrepancies and succe^ i| n the reasons for the misstatements. 

^ 

201! '•••: ActiviiBeg 

@ May 4, 

Balanc' 

orted 

$0 

Receipts 

Disbursements 

$20,061,878 

$20,035,206 

Bank Records 

$0 

$20,068,175 

$20,067,044 

Discrepancy 

$0 

$6,297 

Understated 

$31,838 

Understated 

Ending Cash Balance 

@ December 31,2012 

$26,672 $1,131 $25,541 

Overstated 

As indicated in the chart above, reported disbursements for 2011 through 2012 were 

understated by $31,838. Furthermore, the Audit staff identified the following 

adjustments that should be made to correct the reporting of disbursements: 

^ NAC's first receipt of funds was on May 4,2011. 
• Salary, payroll taxes, and processing fees under or not reported $ 1,022,043 

• Salary and payroll taxes over reported 884,529 

• Duplicate disbursement transactions reported 72,855 

• Correction to reports for checks that were voided 24;260 

• Disbursement amounts over reported (or not debited by the bank) 11,640 

• Disbursements not reported 5,968 

• Bank corrections erroneously reported as disbursements 2.918 

Sum of Reporting Adjustments S2.024.213 

NAG regularly misreported its payroll and payroll taxes over the entire reporting period 

which resulted in a salary and payroll tax understatement of $1,022,043. This consisted 

of payroll tax understatements totaling $885,609 and salary und^l^tements totaling 

$136,434. Conversely, salary and payroll taxes over reporte^^84,^9, consisted of 

salary payments totaling $872,394 and payroll taxes totali^^^A35. This resulted from 

reporting individual gross salary amounts instead of the n^sal^^ unts. 

B. Preliminary Audit Report & Audit Division^coihmendatioiAt the exit conference, the Audit staff discuss^^nd provided a schei 

amounts to NAC representatives. NAC reprd^^^wes sajpihev would ai 

disclosure reports in response to the Preliminary A^ 

isstated 

;ir 

The Preliminary Audit Report recomn 

correct the misstatements noted above 

C. Committee Response to Prelimina 

In response to the Preliny^^ dit Repoi 

thatNA 

mme 

iirt- III 

disclosure reports tl at^fi x)rrected ii^isstated'^ctivity. 

its disclosure reports to 

, NAC filed amended 

udit lentified 16 receipts totaling $2,704,569 that 

d^closure information. In response to the Preliminary 

NAC filed amended disclosure reports that corrected the 

fitfieldwoi 

were missm lacked 

Audit Repoi ®mmendai 

receipt disclosui^ -s. 

Legal Standani 

Required Information for Contributions. For each itemized contribution, 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 (for individual 

contributors); 

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

• the amount of the contribution; and 

• the calendar year-to-date total of all contributions from the same individual. 

11 CFR §§100.12 and 104.3(a)(4) and 52 U.S.C. §30104(b)(3)(A) (formerly 2 U.S.C. 

§434(b)(3)(A)). 
Facts and Analysis 

A. Facts 

The Audit staff identified 16 receipts reported on Schedule A totaling $2,704,569 

(approximately 13 percent of total receipts) that were missing or lacked the required 

disclosure information. These reporting errors consisted of the following: 

• 15 receipts, from 15 different contributors, for $2,699,394 that did not disclose or 

inadequately disclosed the correct address; and 

• One receipt for $5,175 that incorrectly disclosed the contributor's name. 

B. Preliminary Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed the disclosure i^^with NAG 

representatives and provided a schedule of the receipts disclo^^Moh-ectly. NAG 

representatives said they would amend their disclosure renq^^n resoonse to the 

Preliminary Audit Report. 

The Preliminary Audit Report recommended that 

correctly disclose these receipts on Schedule A ^ 

C. Committee Response to Preliminary Auiln It 

In response to the Preliminary Audit Report recomnil 

disclosure reports that corrected the isclosure 

end its d : reports to 

on, NAG filed amended 

Finding 3. Disclosure of D 

Summary 

The Audit staff idi 

or lE^ked required 

recommendatioH^,NAG 

disburse: 

dard 

$4,188,384 that were either missing 

inse to the Preliminary Audit Report 

reports that materially corrected the 

« 

A. Repcdl^m Expendi-iii •«. Whin expenditures to the same person exceed $200 in a 

calenda^ he comrffittee must report the: 

• amour ^ W 

• date w ^exi^ditures were made; 

• name and ad^^s of the payee; and 

• purpose (a brief description of why the disbursement was made). 52 U.S.G. 

. §30104(b)(5)(A) (formerly 2 U.S.G. §434(b)(5)(A)) and 11 GFR §104.3(b)(3)(i). 

B. Examples of Purpose. 

• Adequate Descriptions. Examples of adequate descriptions of "purpose" include 

the following: dinner expenses, media, salary, polling, travel, party fees, phone 

banks, travel expenses, travel expense reimbursement, catering costs, loan 

repayment, or contribution refund. 11 GFR §104.3 (b)(4)(i)(A). 

• Inadequate Descriptions. The following descriptions do not meet the requirement 

for reporting "purpose": advance, election-day expenses, other expenses, expense 
reimbursement, miscellaneous, outside services, get-out-the-vote and voter 

registration. 11 CFR §104.3 (b)(4)(i)(A). 

C. Reporting Credit Card Transactions. A committee must itemize a payment to a 

credit card company if the payment exceeds the $200 aggregate threshold for 

itemization. The committee must also itemize, as a memo entry, any specific 

transaction charged on a credit card if the payment to the actual vendor exceeds the 

$200 threshold. The memo entry must include the name and address of the vendor, 

the purpose of the disbursement, and the amount of the disbursement. 11 CFR 

§§ 102.9(b)(2) and 104.9. 

D. Reporting Reimbursements to Individuals. When an individ^l who is not acting 

as a vendor advances his or her personal funds (or uses a ^^^Hiredit card) to pay 

for goods or services on behalf of a political committee^jf^i nbursement must be 

reported as follows: 

• Nontravel Advances. Report the individual 

aggregating over $200 to any one vendor 

• Travel and Subsistence Advances. Ifth 

the committee should report the indivjdi 

$500 and payments to any one vendor 

the calendar year, report the individual as pa 

aggregating over $200 to any'^ne vendor as 

memo entry must include the 

amount and purpose of the pa; 

Facts and Analysis 

A. Facts 

The Audit staff idli 

percent of total disburse: 

informatioj 

andp 

a ^rt the payments 

[tries on^^edule B; and 

amount reimburs^ iOO or less, 

payei^f the total ai ff'exceeds 

flenses total« $200 for 

d report the payments 

^^ries on Schedule B. Each 

address oO^^n^r. as well as the date, 

,§104!OTP)(i) and 104.9. 

jrsements ig $4,188,384 (approximately 21 

issing or lacked the required disclosure 

vere related to the reporting of addresses 

?• 

description ^ Number of 

Transactions Dollar Value 

Payments witlf^^issing or . -nplete 

address dlsclosui^^t,. 224 $1,099,179 

Payments missing ot^lj^rigan 

inadequate disclosure ^purpose. 208 $2,671,674 

Credit card payments Tacking memo 

entry disclosures. 71 $268,473 

Other payment disclosure errors.^ 150 $149,058 

Total $4,188,384 

Seventy-one transactions totaling $93,312 had missing or incomplete addresses and inadequate purposes. 

Seventy-nine reimbursements to individuals totaling $55,746 lacked memo entries to the ultimate payee. 

Of these transactions, some also improperly or inadequately disclosed the address and/or purpose of the 

transactions. For the 79 transactions described above, 33 were for employee travel/subsistence expense 

reimbursements exceeding the $500 reporting threshold and 46 were for non-travel reimbursements 

exceeding the $200 aggregate memo reporting threshold. 
8 

B. Preliminary Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff discussed the disclosure items with NAC 

representatives and provided a schedule detailing these items. NAC representatives said 

they would amend their disclosure reports in response to the Preliminary Audit Report. 

The Preliminary Audit Report recommended that NAC amend its disclosure reports to 

correctly disclose these disbursements on Schedule B. 

C. Committee Response to Preliminary Audit Report 

In response to the Preliminary Audit Report recommendation, NAC filed amended 

disclosure reports that materially corrected the disbursement disclosure errors. 

Finding 4, Reporting of Debts and Obi; 

Summary 

The Audit staff identified a debt to an equipment 

that was not itemized on Schedule D (Debts 

the Preliminary Audit Report recommendatioi 

properly itemize the debt. 

Legal Standard ^ 

Reporting of Debts and Obligation^ 

A. Continuous Reporting Required. ^ 

nature of outstanding debts and oblif 

U.S.C §30104(b)(8)^ ' 2 U.S.C^ 

andl04.11(a). 

B. 

idor, in t 

ligations) as 

lledl^ended discloi 

ittee 

Separate Schedi 

owed byJhfe£Qmmit 

explai 

w icurred or 

disclose the amount and 

ms are extinguished. 52 

il CFR§§ 104.3(d) 

committee ^^^t file separate schedules for debts 

e committee, together with a statement 

and conSMbns under which each debt and obligation 

FR §104.11(a). 

:.Debts an 

_J$500 

the 

regularly 

A debt ex( 

which the del 

gation^ 

must be reported once it has been outstanding 60 days from 

(t^date of the transaction); the committee reports it on the next 

report. 

$500 must be disclosed in the report that covers the date on 

was incurred. 11 CFR § 104.11 (b). 

Facts and Analysis 

A. Facts 

The Audit staff identified a debt to an equipment rental vendor, in the amount of $25,425, 

arising from a transaction on August 21,2012 that was outstanding until October 26, 

2012. NAC did not report this amount as an itemized debt Schedule D, as required, for 

both its Post Convention and Year End reports. 
B. Preliminary Audit Report & Audit Division Recommendation 

At the exit conference, the Audit staff provided details and discussed the undisclosed debt 

with NAC representatives. NAC representatives said they would amend their disclosure 

reports in response to the Preliminary Audit Report. 

The Preliminary Audit Report recommended that NAC amend its disclosure reports to 

itemize this debt on Schedule D. 

C. Committee Response to Preliminary Audit Report 

In response to the Preliminary Audit Report recommendation, NAC filed amended 

disclosure reports to properly itemize the debt. 

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V