RELEASE DATE: 10/25/89

RNC/l00689

FEDERAL ELECTION CQI'v1MISSiON

·.VASHI ....CTQ:-.. 0 C ~04b3

Report of t~e Audit Division

on the

Arrangements Committee of the

ReDublican National Committee for the

i988 Republican National Convention

I. Sackaround

A. Overview

This report is based on an audit of the Arrangements

Committee of the Republican National Committee for the 1988

Republican National Convention ("the Committee lt ), to determine

whether there has been compliance with the provisions of the

Federal Election Campaign Act of 1971, as amended ("the Act").

The audit was conducted pursuant to Section 9008(g} of Title 26

of t~e United States Code which directs the Commission to conduct

an examination and audit of payments made for Presidential

nominating conventions no later than December 31 of the calendar

year :~ which the convention Nas ~elc.

The Committee :egistered wit~ the Federal Election

Commission on April 3, 1986. ~he Committee maintains its

headqua:ters in Washington, DaC. The audit covered the period

frore April 3, 1986 through September 30, 1988. During t~is

per:8~, :~e Committee reported a begin~ing cash balance of $-0-,

tota: :eceipts of S9,711,658.00, total ~isbursements of

58,929,:70.36, and an endinc cash =alance of 5782,487.64. :~

addition, certain financial-activity has been reviewed t~rouah varc ... '1 .... ••... ..,' _ ..... , , 989 • - -

~he audit reoort is based on documents and workpaoers whic~ support each of its fact~al statements. They form pa~t of

the :ecord upon which the Commission based its decisions on the

matters :n t~is report and were available to t~e Commissioners

and ~ppropriate staff for review.

3. Kev ?ersonnel

The Treasurers of t~e Committee during the period covere~ by t~e audit ~ere: William J. ~cManus from April 3, 1986

thro~g~ ~arch 5, 1987: and Frank DiMondi from March 5, 1987 to

the present.
C. Scooe

The audit included such tests as verification of total

reported receipts and disbursements and individual transactions:

review of required supporting documentation and analysis of

Commi~ee debts and obligations: review of expenditure

limitations: and such other audit procedures as deemed necessary

under the circumstances.

II. Findinas Related to Title 26 of t~e United States Code

A. Convention-Related Exoenses

Section 9008.6(a) (4) of ~itle 11 of t~e Code of Federal

Regulations states that convention expenses include all expenses

incurred by or on behalf of a political party national committee

or convention committee with resoect to and for the purpose of

conducting a presidential nominating convention or conventionrelated activities.

Section 9008.6(a) (4) (iv) of r:'itle 11 of t~e Code of

Federal Regulations further states that convention expenses

incl~de expenses of national committee employees, volunteers or

other similar personnel if those expenses were incurred in the

performance of services for the convention i~ addition to t~e

services normally ~endered to t~e national committee by such

personnel.

After ~~e close of t~e audit :ieldwor~, during a

discussion of the cost of printing and publishing the convention

proceedings, Counsel to the Republican :~ational ':ommittee (RNC)

noted ~~at ~~e Committee ~ad p~esented ~:m with a group of

expenses, :~cluci~g ~~e c~st ~f t~e proceedings, 3eeki~g an

opi~:o~ as to whether :~ey ~ere convention expenses or c~uld ~e

cons:jere~ ~at:onal commi~~ee expenses.

!~ the !nter:~ Audit Report ~~e Commit~ee was ~equested

to s~bmi: a listi~c of a~v excenses ~hich had initiallv been cons:~ered convention exp~nses and were later considered national

committee expenses. Joc~~entation to support each expense was to

be s~bmitted wit~ the list.

!~ response :0 t~e =nteri~ Audit Repor:, :~e Committee

forwarded copies of five checks and t~e correspondina :nvoices

for excend::~res ~ade ~'l the R~C ~hich ~ad ini~iallv~been

cons:dered convention excenses. ~~e documentation provided ~v

the Cammittee i~cl~des: - a c~eck ~avable to Randall-?K. Davis, a

chec~ payable to Myers, ~atteo, ~~bll et aI, a check payable to

the ~ew C=leans Hilton ~owers, a check ~avable to T~avel !~c.,

and 3 c~eck payable to t~e Westi~ Canal-?iace and t~e respective suP?o=ti~g :~voices.

•
3

The check issued to Myers, Matteo, Rabil et al is

supported by an invoice which states "RE: Convention '88." A

spokesperson for the Committee explained that t~is firm was

consultant to then RNC Chairman Frank Fahrenkopf and therefore

the consulting fees for the period October 1 through 31, 1988 are

expenses of the RNC. It should also be noted that this firm was

employed by the Committee as consultants.

The check issued to the New Orleans Hilton Towers is

supported by invoices for accommodations during t~e period August

11 through 20, 1988.

The rooms at the New Orleans Hilton Towers were, for

the most part, in the names of David Norcross, and David Norcross

and Laurie Michel. A spokesperson for the Committee stated that

David Norcross' firm (Myers, Matteo, Rabil, Norcross and

Landgraf) was consultant to t~en RNC Chairman F~ank Fahrenkopf

and thus David ~orcrossl travel costs ~ere exoenses of the RNC.

It should be noted that during t~is period, David ~orcross

received travel reimbursements and per diem from the Committee.

In addition, Myers, ~atteo, Rabil et al received consulting fees

and expense reimbursements from the Committee t~rough September

8, 1988.

The i~voice from ~=avel !~c. ~efer:ed to i~voices

previousl7 issued, ~hic~ were ~ated ~Jl~ :: ~~=~~=~ ~~aus:?

c:oo'Kec::""'o"'~o"" =,....,,.. e r'""lmm~ ... -o~ -"'a"o~ -:'a'" -'-0 .... ,:;; ••• "':;'-'a i '. -...J_ ........ ~"- __ 14 _'-'1M. _ _'-' , .... ...... __ ~t.. \.."'"-"-' _ ... "- _ ........ _".~ .... _ ................. t'Vi. l nose ...

travel ',.,'as covered bv these ::1voices ;..;ere e:nolo',:ed =? t::e R~C and

therefcre t~eir :=av~l costs are expenses of-t~e ~~C~

A portion of the invoices from t~e Nes:i:1 Canal ?lace

cover :~:ee 3?parent c~nvention-:e1ated activities. An invoice

::)r :-:otel::)oms a:id a room 'Jnde~ ~~e !1~ue "~';~i:e ~~use Adminst:" ~as :~fe~=ed :=o~ t~e ~~ite ~ouse and Nas ~aic on a percentage

basis ~hich was i:1tended to reflect t~e "~olitical costs."

Several :~voices cover the costs of a receotion ~eld on August

15, 1988 ~osted ~v "~~. & Mrs. Reaaan." Aiso ~~cl~ded in these

invoices are invoices :or accom~odations f~r ~eagan :amily and

friends :~r :~e period August ~4 t~rough 16, :988.

A Com~:ttee sookesoerson exolained ~~at ~~ese expenses

were i~c~==ed by i~dividuals-~ho ~ere- e~plcyees 0~ ;~ests 0: t~e

R~C and :::us ~:-:ese costs are expenses 8~ ::-:e ?;JC 3.:1d :1ot expenses

of t~e ~~~ittee.

~he A~dit staff =oncl~ces t~at :8ur ::1voi=es totaling

S29,769.9~ are convention-related exoe:1ses a~d :~~S exoenses of

the Co~~:~tee. ~his amount ~as teen~ aaded t~ ~otal :~nvention

Related Expendit~=es as Adjusted ::1 t:-:e Analys:s of ~xpenditures

Subjec~ :~ t~e S?ending Limit3tion.
4

Recommendation !l

The Audit staff recommends t~at t~e Commission determine

that, in the absence of the submission of documentation

demonstrating that four invoices totaling $29,769.91 are not

expenses related to a nominating convention or convention-related

activities, these expenses are convention expenses and therefore

subject to the spending limitation at 11 C.F.R. §9008.3(a).

(See Finding II.C. Reoavment of Excessive Expenditures).

B. Rebates

Secti.on 9008.6 (a) (4) of Ti tIe 11 of the Code of Federal

Regulations states that convention expenses include all expenses

incurred by or on behalf of a political party national committee

or convention committee with respect to and for the purpose of

conducti.ng a presidential nominating convention or conventionrelated activities.

In its 1989 April 10 Quarterly Report and its response

to the Interim Audit Report the Committee disclosed rebates which

included $13,982.93 from four :epublican political organizations;

the RNC, rtepublicans Abroad, ~ational Republican Legislators

Assoc., and the ~ational Federation of Republican Women. These

amounts were not previously shown as Committee receivables.

~~e ~udit staf: =eviewed :~e doc~entati8n ~~ suppo:: eac~ of :~ese :ebates. ~ach c~ec~ Has supported =y 3 ~emo ~ated

Marc~ 1, :989 ::om Joseohine L. Good, :~nsultant, Sub Committee

on Badges and ~ickets, Committee on Ar:anaements. Each of t~e

memos detailed t~e costs of convention badges for t~e members of

the respective organizations. ~he c~ecks of t~ese organizations

bore t~e address: 310 First Street, SE, ~ashington, ~C, 20003,

and all 2: :~e =hecks Here deocsited ~~ t~e Committee O~ ~arch

23, :989. s~o~esoerson for-the Commi:tee stated :hat ~e

ass~~ed :~at :~ere ~as a verbal agreement :egarding t~e badges

made prior :~ ~~e convention and that :~e c~rrent action is the

collection of 2utstandinq reimbursements. He further elaborated

that the badges ordered for the members of these organizations

were different :rom t~ose of other convention attendants and t~at

these i~dividuals were not guests of the convention b~t rather

attended t~e conve~tion because of t~ei: affiliation wit~ t~ese

~epubl:c3n crga~izations.

~he A~dit staff concl~des ~~at :~e cost 8f :~e

, convention 2adges are conventi=n-:elated expenses and t~us

expe~ses 0: ~~e :ommittee. ~~erefore, :~e a~ount ~f t~ese

reimbursements (513,982.93) ~as ~ot ~een off et aoainst :'otal

Conventi8n ~elated Expenditures as ~dj~sted n th~ Analysis of Expendi~~:es S~bject to the Spending ~:~itat on.
5

Recommendation ~2

The Audit staff recommends that:

A. The Commission determine that, in the absence of the

submission of documentation demonstrating that $13,982.93 in

reimbursements for badges for persons associated with these

organizations does not constitute the reimbursement of convention

expenses, these reimbursements are not offsets to convention

expenses. (See Finding II.C. Reoavment of Excessive

Expendi tures) •

B. The Committee, within 30 calendar days of service of

this report, refund to the ~~C, Republicans Abroad, ~ational

Republian Legislators Assoc., and the National Federation of

Republican Women the rebates totaling S13,982.93.

c. The Committee provide t~e Audit staff with copies,

front and back, of the negotiated refund checks.

c. Reoavment of Excessive Exnenditures

Section .9008 (0) (1) of Title 26 of the United

States Code states, i~ relevant part, that the national committee

of a major party may not make expenditures with respect to a

presidential nominating convention which, in the aggregate,

exceed t~e amount of Davrnents ~~ whic~ such commi:tee :5 j::) _n t __i '" ed • -.J~ec~...... _.....J.,., """'n 00-08;--\ •• \; o~.t= """'~~' __ ~4a"-0 -v.... ::. v

,....,..t=__... :... a.e -...,.1' .; ~~_ ..... .:J\.-~~~~s .... '-_ _:~Ge -

states, :~ part, that :he Cc~mlssion s~all ~ave t~e same

aut~ority to requi~e repa~ents from t~e national committee of a

major party as it has wit~ respec~ :0 repayments from any

eligi~le candidate under sect:~n 9007(~).

Section 9008.1J(b) 8: ~::le :: of :~e Code of =ederal

~eoulat:ons states, i~ oart, :~at :: t~e Commission deter~i~es

that :~e national committee or convention committee incurred

convention expenses i~ excess ~: t~e l:~itations under II C.P.R.

§ 9008.7(a), it s~all ~otifv such ~ational committee of t~e

amount of such excessive expe~~:tures, and such national

committee shal: Dav to t~e Secretarv an amount eaual to t~e

amount specified: - -

Sect:on 900S.10(g) (:!) 0: ~:'tle 11 of t~e Code 0:

:ederal ~eoulat:ons states, :~ ~ar~, t~at :~e ~at:onal committee

sha...........

" __"'~oa;/ \-'-' ...... ~""j::) '- .....,,"- ~oc""et:::l""~· , ..h : t ""'Ij, aiD ~ays __ \....I ...... 4: ~\...e r'lO+-l' '- ~o'-""~, ...'-."...,e

amo~nt of t~e repaymen~. -

T~e ~udit staff r~vieNed :~e Committee's ex~encitures

subject :0 t~e spendi~g li~ita::on and prepared t~e f~llowing

analysis. ~he C8mmit:ee's ent::lemen~!spendi~g li~itation ~or

the 1988 nomi~at:ng convent:8~ Nas S9,220,OOO.
6

Analysis of Expenditures Subject

to the Spending Limitation

Amount of Federal Funds

Received by the Committee

(Expenditure Limitation) 4-

Less: Total Convention Related

Expenditures as Adjusted

(Inception to 3/31/89)

Refunds & Rebates Received

(Inception to 3/31/89)

$9,220,000.00

$9,338,674.44

(86, 618. 43)

Winding Down Expenses

Processing of Conv. Proceedingsl/

Contingent LiabilityI/

Total Expenditures Subject to Limitation

Amount !n Excess of t~e Limitation

40,000.00

21,000.00

9,313,056.91

$ 93,056.01

r

As a result of the matters discussed in Findings II.A.

and B. above, t~e amount shown in excess of the spending

limitation in the Interim Audit Report ~as been increased.

! n t ~e :':1 te r:::1 .~ ud i t ~epo r t, :. t. ',.,as :-:oted : ::at

Commi:tee :eprese~~3~:7e ~nd C~unsel :or :~e ~~C ~ad :nfor~ed ~~e

Audit. staf~ ~hat :: is t~eir intention to have t~e RNC ?ay for

the processing of t~e convention proceedings. Counsel for the

RNC t.akes t~e position t~at publishing t~e ?roceedi~gs ~ay be

properly conside~ed eit~er a convention expense or a national

, I

..., I

::-.1

~~is affioun: ~a5 esti~ated ~y t~e C~mmi:tee .

~~e Committee's ~otal Expenditures Subject to t~e Limitation

~as ~een i~c:eased bv $21,000.00 ~endi~a t~e :esolution 0: a

contingent ::ability·of t~at amou;t. ~he Louisiana Host

Committee '38, :~c., in its July 10, :989, quarterly :eport,

renor:ed a debt owed to it bv t~e Committee estimated to be

$2i,coo.oO. ~he explanation·of t~is debt was reported by

the Louisiana ~ost Committee '38, :~c., in its Post

Convent:o~ ~eDort coverina t~e cer:od Seotember 1, 1987

thrcugh 8ctober 3, 1988, ~s follows: "~his amount ~ay ~e

owed ~v t~e Committee on Arranaements to the Host Committee

as :~e-result of coordination 0: volun~eers and youth

services i~ conjunction wit~ the :988 Reoub1ican ~ationa1

Convention. Reconciliation of this amount and t~e

corresoondinc exoenses will ~e made bv the time the next repor:~ is filed by t~e Host 2ommittee". According to the

:ecc:ds of t~e Louisiana Host Committee '88, :nc., it

3ppea:s t~at t~e cbligation ~as :een settled for S12,000:

. t . += • '" is ':; 0 '''';eve r, :-: 0 :::: 0 c t:.'TIen tation :: 0 r : :-: e c e t e : :Tl.1 na 1 0 no.. ... .. :esse~ 3mo~~: :s available.
..

I

ccmmittee exoense and paid bv either. 3e stated t~at ~othing in

Committee byiaws requi~es t~e Committee to pUblish the conv~ntion

proceedings and that the proceedings are distributed to natlonal

committee members and libraries.

In its resoonse to the Interim Audit Report, the Cbmmi~ee made no mention of its plans for the publilhing o~ the

convention proceedings. Likewise, the Committee has not ~aae a

provision for pUblishing the proceedings in its calculation of

Total Convention Related Expenditures Adjusted. In a follow-up

discussion of this issue, a Committee sookesoerson stated that

the project had been started but :s currently "on hold".

Given the nature of t~is expense and that in.both 1980

and 1984 the arrangements committees paid for the pUblishing of

the proceedings, in t~e absence of a definitive statement by the

Committee with regard to the publishing of t~e proceedings and

the costs related thereto, the Audit staff has included t~e cost

esti~ate as a convention expense.

Conclusio:1 =3

On October 18, 1989, the Commission made an initial

dete~ination t~at t~e Committee ~as exceeded t~e $9,220,000.00

spendi~g li~itation for 1988 national ~ominat:ng convent:ons by

$93,056.01 and t~at an equal ~~ount :s repayable to t~e United

States ~:easury pursuant to 11 C.F.R. §9008.1Q.

30 c ~:. 2 ~:- ::: 3.y5 C) f 2 e r v: c e c:: :'::i s : :: x r -:, -:::e :.::i:.:" 3.1..

dete~~:::a~:on ~ill 2e consicered ::nal~

?, e 9a y-::'. en t .; ill0 un t : $ 9 3 , 05 6 • Cl

3ect:'~n 9008. 6(a) (:) 0: :' :'t2.e ' '; '""'~ :::e C8de c: ?ederal

~eg~:a::~:"'..s states, :~ part, :~at 3.ny :~vest~en: c: ~~ol:'c :unds ~-": v ""O!"'lO"'~-O :: .. '": .. _ ::l"'Icorne • " .... .;:;0 - -.or :" .; --~.;:;0 .... 1-..1 ...,.. e ,....!"'Il·· -' • • :: .;::

_ _ ~""e '- ~. • _ ""lc""'''''e •• v... -:':=""'1 v '::""enera~er1 • • - -....

:.s ~sec := cetray conVent:on expe~ses. SUc~ :::come, _ess any ~3X

?al~ ::"'.. ::, ~il: ~e applied agai::st t~e ~at:~nal committee's

?a~e~:.s ~nder :: C.F.R. § 9008.:, or Hhere appropriate, :~e

Com~:S3:C:: ~ay ~eter~:ne t~at :epa~e~t __ :equ::ed O~ ~~e

=a5:3 ~: 3~C~ :~cc~e.

~~e C8illmit~ee ear~ed :~co~e :=o~ :~e :~ves~~en~ ~­

: e r ~:. : :. cat e S 8 -: e ?O s :. : . Aft e r ': a x :::(; c:n e T."; as

S12,:~3.:~ :~ 1987 3.:1C $:2,828.:5 ::1 1988.

:) n :: a. nua r ~y :.?, :. 9 8 9, : :-: e ': ::mmitte e s:.:. ::m i t. ted : :J t e C~~~:32:=~, a c~eck :~ t~e a~oun~ :Jf $:5,066.:8, paya=le :0 t~e

~:1i~e~ =:a:.es ~:easurer ~hic~ :epresent.s a ~e?a:me~~ 8: after ':3X

:1t e: es: ::co~ e .
8

Conclusion ~4

On Jctober 18, 1989, the Commission made an initial

determination that $25,066.00 of after tax investment income is

repayable to the United States Treasury, and has been received,

pursuant to Section 9008.6(a) (5) of Title 11 of the Code of

Fedsral Regulations.

Repayment Amount: $25,066.00

E. Reoavment Summarv

r

Conclusion #3.

Repayment of Excessive Expenditures

Conci usion #4.

Repayment of Invest~ent Income

Total Repayment

$93,056.01

25,066.00

$118,122.01