Attachment ,as stated

March 10, 1982

A8l-l0

FRED EILAND

PRESS OFFIC~~

BOB COSTA ly"-'"

PUBLIC ISSUANCE OF'FINAL AUDIT'REPORT

FUND FOR A CONSERVATIVE MAJORITY

FEDERAL ELECTION COMMISSION

\\ l\"IiINc; lO!'\;, IH' 2tl4h I

MEMORANDUM

FROM:

SUBJECT:

cC:' FEC Library

,;gliC Record

TO:

Attached please find a copy of the final audit report of the Fund For A Conservative Majority which was approved by the Commission,on March 2, 1982.

Informational copies of the report have been received .. by all parties involved and this report may be released

to the public •

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FEDERAL ELECTION COMMISSION

WASHINGH)N. DC 200lbl

A8l-l0

REPORT OF THE AUDIT DIVISION

ON THE

FUND FOR A CONSERV~1IVE MAJORITY

I. Background

A. Overview

This report is based on an audit of the Fund ForA

Conservative Majority ("the Committee"), undertaken by the Audi~

Division of the Federal Election Commission in accordance with

the Commission's audit policy to determine whether there has been.

compliance with the provisions of the.Federal Election Campaign'

Act of 1971, as amended (lithe 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 section, 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.

The Committee registered with the U.S. Senate and U.S.

House of Representatives on April 17, 1972 and is a . multicandidate committee as defined in Section 44la(a) (4) of

Title 2, United States Code. The. Committee maintains its

h.adquarters in Washington, D.C. .

The audit covered the period from January 1, 1980,

through December 31, 1980. The Committee reported a beginning cash balance on January ~~ 1980 of $27,545.87: total receipts for

the period of $2,874,421.32: total expenditures for the period of

$2,887,244.77 and a closing cash balance on December 31, 1980 of

$14,722.42.

This audit report is based on documents and work papers which support each of its factual statements. They form part of

the record upon which the Commission based its decisions on the

matters in the report and were available to Commissioners and'

appropriate staff for review. ..
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B. Key Personnel

The treasurer of the Committee during the period

audited was Mr. Kenneth F. Boehm.

C. Scope

The audit included such tests as verification of total

reported receipts, expenditures, and individual transactions~

review of required supporting documentation~ analysis of

Committee debts and ob1igations~ and such other audit procedures

as deemed necessary under the circumstances. Although the

contribution records provided by the Committee met the

recordkeeping requirements of 2 U.S.C. 432(c) and 11 C.F.R.

102.9(a), they did not include sufficient material prepared outside of the Committee. Therefore, no verification of

individual contribution transactions was performed.

II. Audit Findings and Recommendations

A. Receipt of APparent Corporate Contributions

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Section 44lb(a) of Title 2 of the United States Code

states, in part, that it is unlawful for any corporation to make

a contribution or expenditure in connection with any Federal

election to political office.

During the course of the audit, it was determined that

the Committee received 46 apparent corporate contributions, from

35 business entities, totaling $2,835.00. The review was based

on an analysis of the Committee's receipt system, and our

examination of computerized receipt listings for recording all

contributions. Copies of the contribution instruments were not

available for inspection since the Committee's procedures for

processing receipts do not include photocopying and maintaining the instruments. However, the Audit staff verified the corporate

status of the entities with the appropriate Secretaries of State.

Although the Committee maintained established

procedures for handling possible corporate contributions, 1/ our

review of Committee computerized receipt listings suggested that

those procedures were not adequately followed. Committee

officials stated that there was a slight possibility that source

material might have been commingled occasionally, but have no

reason to believe that this happened at any particular time.

1/ Normally, the Committee deposits apparent corporate

receipts into its State fund (non-federal) account.
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, B. ,,.Disclosure of Contributions

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.Commi ttee, personnel have noted that they were unable to provide,~ the A'udi t, s,taff as yet with copies of cancelled

refund. checks, but will do ,so as soon as they are

made available by the bank.

. ", 3)~. ":Evidence'(coPY of front" oL refund checks 1/) that

it has refunded contributionsj tota1ing.$1,600 to"23 contributors.·· .,'. .

,Sectior( 434(b) (3) of Title 20f the.United;States:coe:fe

states, in part,~that repor~siha11 di~c10sethe,id~ntificati6n 'of each'pe~son who'makes a" contribution duringthe:reporting

period,whosecontiibutiorior contributions have an aggregate

amount ',' in, excess' of $200.00 wi thin ," the, ca1eridar ,year, together 'with,thedateand'amount of any suchcontribution~

The inter1m audi t" report'C recommendedthat~ the'" Commi ttee

refund the $2,835 in apparent corporate contributions and submit

evidence (i.e., front and back of cancelled refund checks) of' . such refunds to the Audi t: staff, or provide evidence that the'

contributions were. not· funded t~roughcorporate sour~~~.

On February 17, 1982, the ,Committee p['ovi~ec3 the Audit ,staff wi th:'

'," 1) "Evidim'cEf thatcontributions. from ,11, contributors,

totaling. $1,205 were n~t~funded through.c?~p~rat~ sources.

2) Evidence that two'contributions (from one

'·contributor) tota1ing~$~~~!er~ deposited into~ non~federa1 account •......

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Our review of the Committee's system to record and

report individual contributions indicated that two separate

computer files used by the Committee did not cross-aggregate individual contributions (i.e., combine an individual's

contributions appearing on both files). Individual contributions

for the Committee's "Citizens For Reagan Project" were recorded

on the "Reagan File" contributor list, whereas, other individual

contributions were recorded on the "Donor File" contributor list.

The system did not cross-aggregate the two lists which resulted

in a failure to itemize between 11% and 25% of the receipts requiring itemization.

Several other deficiencies were noted with the

computerized receipts system which have affected the accuracy of

the contributions recorded'and reported by the Committee. One

deficiency involved the record storage capability of the computer

program, which was limited to maintaining only five records per

contributor. Under this system, a person giving more than five

contributions would have the earliest contribution "dropped" from

the data base and effectively lost for reporting purposes. Another deficiency in the reporting system limited the number of

contributions in any reporting period which could be itemized

from a contributor to only one contribution, regardless of the

number of contributions received from a contributor. In this

situation, the aggregate year to date total on the disclosure

reports would normally reflect all contributions received but

only one contribution would be itemized. Perhaps the most

significant deficiency is the failure of the system to crossaggregate contributor records for persons recorded in both files.

The failure of the system to cross-aggregate, as indicated

previously, means that if two contributions were received from

the same person and each was recorded in the separate file, the

contributions would not "match up" for a complete history. consequently, if the two contributions aggregated in excess of

$200, the contributor/contributions either would not be itemized

on the disclosure reports, or if itemized, the aggregate year-to- date total would be incorrect.

Preliminary tests performed on both files, in addition

to discussions with an official from the Committee's computer

firm, indicated that the contributor records did not crossaggregate between the Donor File and the Reagan File.

Additionally, we determined that the Donor File list of names was

used for at least one fundraising mailing on behalf of the

Committee's Citizens for Reagan Project and contributions

generated from the mailing were recorded on the Reagan File. Our

testing further indicated that approximately 40% of the sample contributions recorded in the Donor File also had one or more

additional contributions from the same listed contributor

recorded in the Reagan File.